High Court of Ireland Decisions

Port of Cork Company v. Commissioner of Valuation [2002] IEHC 106 (30 October 2002)

THE HIGH COURT

2002 177 SS

IN THE MATTER OF SECTION 5 OF THE VALUATION ACT 1988

BETWEEN

PORT OF CORK COMPANY

APPELLANT

AND

THE COMMISSIONER OF VALUATION

RESPONDENT

JUDGMENT of Mr. Justice Kearns delivered the 30th day of October, 2002.

1.      This matter comes before the court by way of case stated from the determination of the Valuation Tribunal made on the 24^th day of October 2001. On that date, the tribunal determined that the hereditaments consisting of the Port of Cork, formerly occupied by Cork Harbour Commissioners, but now owned by the appellant company, were, under and by virtue of the Harbours Act, 1996, no longer exempt from rates under the proviso contained in Section 63 of the Poor Relief (Ireland) Act, 1838. The case was in the nature of a test case, other ports having a similar interest in the eventual outcome, and the opinion of the High Court is sought on the question whether or not the tribunal's determination was correct in law.

2.      The appellant company was incorporated under Section 7 of the Harbours Act 1996, which provides that private companies may be established under the Companies Acts in order to make better provision in relation to the management, control, operation and development of certain harbours within the State. The appellant company was incorporated on the 28^th of February 1997 and the lands formerly vested in the Cork harbour authority became vested in the Port of Cork company. It is common case that prior to the introduction of the Harbours Act 1996, the hereditaments in question were included in the exempt valuation lists.

3.      The issue which the tribunal had to determine therefore was whether the Harbours Act, 1996 effected a change in the law such as would render the hereditaments in question rateable, or effected a change in the character, use and ownership of the hereditaments in such a way as to lose the benefit of the proviso contained in Section 63 of the 1838 Act.

4.      At the outset, the tribunal held that the appeal to the tribunal could only be determined in the light of the existing Valuation Acts and no regard could be had to anything contained in the Valuation Act, 2001, which removed any doubts which may have existed by specifically providing that the hereditaments in question should be rateable.

5.      Exemption from rates, unless specifically provided by other statues, is to be found in the proviso to Section 63 of the Poor Relief (Ireland) Act 1838 which states as follows:-

"provided also, that no church, chapel or other building exclusively dedicated to religious worship, or exclusively used for the education of the poor, nor any burial ground or cemetery, nor any infirmary, hospital, charity school or other building used exclusively for charitable purposes, nor any building, land or hereditament dedicated to or used for public purposes shall be rateable except where any private profit or use shall be directly derived therefrom, in which the case the person deriving such profit or use shall be liable to be rated as an occupier according to the annual value of such profit or use."

6.      Having cited the proviso, the tribunal found as follows at par 5 of its determination:-

"It follows from the above that exemption from rates is a function of the status of the occupier and or the user of the property rather than the nature of the property itself. Consequently a change of occupier and or user can have the immediate effect of making a profit previously exempt from rates liable to rates with immediate effect and, in the opinion of this tribunal, this may happen seamlessly by the operation of the Valuation Acts. In the circumstance of this appeal the tribunal does not accept the contention of the appellant that it was necessary for the Harbours Act 1996 to make express provision for the payment of rates by companies incorporated pursuant to Section 7 and that in the absence thereof the exemption previously enjoyed by the Cork Harbour Commissioners should automatically transfer to the Port of Cork company. Since the company was only incorporated in February 1997 it cannot be successfully argued that the lack of exemption will create a new liability to taxes."

7.      The tribunal went on to consider the concept of "public purposes" citing the following extract from the judgment of Kenny J., in Trinity College -v- Commissioner of Valuation [1919] IR 519:-

"It is sufficient for me to say that in all the authorities where the question of the meaning and application of the words 'use for public purposes' or 'altogether of a public nature' or 'used exclusively for public purposes' has arisen, it has been uniformly determined that the 'user' essential in order to establish the exemption must be available for all the subjects of the realm; the 'purposes' must be purposes in which every member of the community has an interest; and the premises must be used for the public benefit of the whole community and not for the private or exclusive use of any members or any particular class or section of it."

8.      The tribunal went on to consider the various provisions of the Harbours Act 1996, considering as relevant Sections 10, 11, 12, 20, 21, 22, 23, 27, 44, and 96 thereof. Having considered those sections, the tribunal found that the Minister for the Marine had a continuing role in the operation of the company which could be exercised only after consultation with the company in relation to 'policy decisions of a general kind'. The tribunal also found from its review of the sections that the Minister intended to grant to a Section 7 company a large degree of autonomy in the day to day management and operation of its affairs. The Minister for Finance and the Minister for the Marine were sole share holders and had the right to receive all dividends; the Minister for the Marine following consultation with the Minister for Finance, could stipulate the dividends to be paid in certain circumstances. It was further noted that under the memo and articles of association, the appellant company had the powers to sue and to be sued in its own name and "take all proper measures for the management, control, operation and development of its harbour and the approach channels thereto." The appellant company could also appropriate any part of its harbour to the exclusive use of any person for the purpose of any trade or profession in consideration for the payment to it of such charges as the company considered reasonable.

9.      The tribunal found that there was nothing in the 1996 Act or in the memo of association which precluded a Section 7 company from making a profit as such and indeed that the company might invest the funds of the company not immediately required for its business in such manner as might from time to time be determined by the directors. Furthermore, the company might accumulate capital for any of the purposes of the company and appropriate any of the company's assets to specific purposes either conditionally or unconditionally. Subject to such control as the Minister for Marine might exercise, the company was free to conduct its affairs and utilise its assets as it saw fit. Further, the port lands were vested in the sole ownership of the port company which under Section 15 of the Act was empowered to acquire and dispose of any of its lands, subject only to Section 15 (4)(a) which required that the company should have regard to governmental policy or guidelines in relation to the acquisition of land by State enterprises which might for the time being exist.

10.      Critically the tribunal found that while some of the activities of the appellant company, such as the promotion of leisure activities that might be carried on in its harbour or which relate to the marine in general, might be of a public nature, it was clear that the primary and over riding aims of the appellant company were as set out in Article 2 of the memorandum of association:-

(a) to take all proper measures for the management control and operation and development of its harbour and the approach channels thereto

(b) to provide such facilities services accommodation and lands in its harbour for ships goods and passengers as it considers necessary.

11.      The tribunal noted that the company could also impose harbour charges and other charges for a range of services and facilities it might perform or provide to users of the port.

12.      The tribunal concluded its determination in the following terms:-

"From the above it is clear that the objectives of the company are primarily aimed at meeting the needs and demands of the users of the harbour who have to pay the prescribed charges set down by the company. It follows therefore that the main and primary use of the port lands is restricted to this particular section of the community and not those of the public at large and hence do not meet the test of Kenny J., in the Trinity College case 'the purposes must be purposes in which every member of the community has an interest; and the premises must be used for the public benefit of the whole community, and not for the private or exclusive of any members or any particular class or section of it.'

Having regard to the foregoing the tribunal determines that the subject premises should not be distinguished as being exempt by virtue of the proviso contained in Section 63 of the Poor Relief (Ireland) Act 1838."

Submissions of the parties

13.      On behalf of the appellant, it was submitted that there was a long established exemption from rates for harbour authorities on the basis that the user of a port is available to all members of the public, that a port is something in which every member of the community has an interest. Furthermore, it is based on user for the public benefit of the whole community and not for the private or exclusive use or profit of any particular class or section of it. (Belfast Harbour Commissioners -v- Commissioner of Valuation [1897] 2 IR 516 at pp. 529, 536 – 8; Commissioner of Valuation -v- Sligo Harbour Commissioners [1899] 2 IR 214 at pp. 224/228; Guardians of the Londonderry Union -v- Londonderry Bridge Commissioners [1868] IR 2 CL 577 at 583/587/599; Corporation of Cork -v- Commissioner of Valuation [1916] 2 IR 95 at 102, 106/7, 115; Trinity College -v- Commissioner of Valuation [1919] 2 IR 493 at 519-20; County Council of Kerry -v- Commissioner of Valuation [1934] IR 527 at pp. 535, 539; Trustees of Maynooth College -v- Commissioners of Valuation [1956] IR 221 Forbairt -v- Commissioner of Valuation, Appeal No. VA97/4/030).

14.      The Forbairt case had identified six tests, grounded or gleaned from the cited legal authorities, whereby the statutory requirements as to exemption might be satisfied as follows:-

(1) Are the premises prima facie used for public purposes

(2) Are the accounts audited by the Comptroller and Auditor General and presented to the Government and Houses of Oireachtas

(3) Are the premises used for great public utility

(4) Are the premises built by monies provided by parliament

(5) Are the premises maintained by monies provided by parliament

(6) Is the purpose of the occupation governmental

15.      The Forbairt case was cited in conjunction with Plassey Trust Company Ltd -v- Commissioner of Valuation (Appeal No. VA89/0/112 - VA89/0/127) to argue that the interposition of some different management or ownership entity did not destroy the public purposes exemption.

16.      In Plassey the property in question was part of the grounds of the University of Limerick. Plassey Management and Technology Centre had been established by the University to meet a wide variety of continuing education and short course needs. It was accepted that university residences were not essential to a university in the way that theatres, libraries and laboratories are essential to its proper functioning. However, it was held that residences were an integral part of the university. The creation of Plassey Trust Company Limited as the vehicle to acquire lands and construct buildings was not an impediment to exemption.

17.      In Royal Hospital Kilmainham Company -v- Commissioner of Valuation (VA92/1/008), the historic buildings at Kilmainham had been restored during the 1980's as the Museum of Modern Art and used for state occasions. Part of the premises was operated on a commercial basis by a management company. Having regard to this latter consideration, it was argued that the premises should be considered rateable. However, the property was deemed exempt on the basis that the subject premises were prima facie the property of the government and used by the government for the promotion of the arts with an overriding right of government to use the premises for State occasions. The operating company did not hold any lease on the property but simply managed the State's interest in the property. It was thus deemed exempt.

18.      On behalf of the appellants it was submitted that the Harbours Act, 1996, did no more than modernise the management arrangements in relation to the Port of Cork. In the aftermath of the Harbours Act, there had been no change in user, no change in shipping practice. The Act did not purport to create a liability to rates. While the model of a private company had been used, it was in effect a private company in public ownership. In other words, a private company structure had been customised, but the character of the user had remained exactly the same. Given that its shareholders were the Minister for the Marine and the Minister for Finance, the management was now more powerfully controlled as a public undertaking than in the past. No private interest was being protected by the creation of the company set up under Section 7 of the Harbours Act 1996, nor was any private benefit being taken. No private entitlements were created as a result of the Act.

19.      Mr. Gleeson then reviewed the various provisions of the Harbours Act, 1996, together with the memorandum and articles of association of the new company. He submitted it was perfectly clear from this review that the company, although incorporated under the Companies Acts, had been customised as provided for by the Act by reference to its public purposes objectives.

20.      Further, the Harbours Act, 1996, makes no provision at all for the rateability of hereditaments occupied by companies to be incorporated under Section 7 of the Act. Nor does the Act contain a single reference to the Valuation Acts. Had the Oireachtas wished to reverse the long established exemption from rates of harbour authorities under Irish law, it should have done so in express words. Mr. Gleeson pointed out that precedent supported this contention, because Section 69 of the Local Government (Dublin) Act 1930 substituted the equivalent exemption enjoyed by the Dublin Port and Docks Board by a statutory duty to pay a proportion of the rateable valuation (Dublin Corporation -v- Dublin Port and Docks Board [1978] IR 241, 257 – 58). A similar provision was inserted by Section 55 of the Air Navigation and Transport Act 1998 in respect of Aer Rianta. These examples, by inference, supported the appellants case.

21.      He further submitted that three fundamental canons of statutory construction strongly supported the conclusion that the 1996 Act cannot, by mere inference arising from the incorporation of the appellant under Section 7, have abolished the established exemption from rates of the appellant and other affected port authorities. These canons are as follows:-

(a) the requirement that statutes which create new liability to taxes including, rates, should be construed strictly so as to avoid the imposition of liability from being created unfairly by the use of oblique or slack language, let alone by silence or by inference (Inspector of Taxes -v- Kiernan [1981] IR 117; Trustees of Kinsale Yacht Club -v- Commissioner of Valuation [1994] 1 ILRM 457; International Mushrooms -v- Commissioner of Valuation [1994] 2 IRLM 121, 129).

(b) The presumption against oblique or unclear changes in the law (Minister for Industry & Commerce -v- Hales [1967] IR 50)

(c) The presumption against unnecessary or imprecise interferences with property rights (Dunraven Estates Limited -v- Commissioners of Public Works [1974] IR 113; Hussey -v- Irish Land Commission, Supreme Court, 13 December 1984).

22.      It was submitted that in the instant case it would be particularly harsh and absurd to impose a new liability to rates by mere implication in circumstances where Section 15 (5) of the Valuation Act 2001 expressly provides for the first time, for precisely the same liability. The Oireachtas cannot be taken as having legislated for no purpose, and its intervention provides strong support for the conclusion that the provisions of the 1996 Act taken alone did not have the effect of altering the valuation status of harbour authorities incorporated under Section 7 of the 1996 Act.

23.      On behalf of the respondent, it was submitted that there was one central issue in the case, namely, had the 1996 Act so altered the character and structure of ownership of the hereditaments so as to disqualify them from entitlement to the exemption. The Act, Mr. O'Donnell submitted, did not purport to change the law on rateable valuation, but had, by setting up a private company, removed the appellants from the parameters of the statutory exemption.

24.      Mr. O'Donnell submitted that the appellant company was not now precluded from making a "private profit". Cork was now one of 12 commercial ports. Other ports in private ownership, such as Greenore and Rosslare, are rateable, so that there was nothing in the user of a port per se which rendered it exempt from rates.

25.      The 1996 Act did not attempt to change the law on rates, but clearly the Act could be seen from its terms to have reorientated the management of the port of Cork for commercial profit making purposes. In that regard, Mr. O'Donnell relied on Section 11 (1)(d) and (e) of the 1996 Act, Section 12 (1)(b) and Section 44 (1) and (3).

26.      In the Belfast case relied upon by the appellants, there had been no obligation to run that particular company on a commercial footing. Further, the company was obliged to put the profits back into its own enterprise. The appellant company was not obliged by its founding statute to put all profits back in harbour development. The funds generated by the company were thus not incapable of being applied for 'private' purposes.

27.      He quoted from Keane (Law of Local Government in the Republic of Ireland) the following passage:-

"Finally the proviso exempts 'any buildings, lands or hereditament dedicated to or used for public purposes'. This category of exemption has been the subject of more intense judicial discussion than any other portion of a much litigated section. The property is used for public purposes, where and only where:-

(i) it belongs to the governments; or

(ii) each member of the public has an interest in the property

At one stage it had been thought that the exemption also applied to property in which each member of a limited and defined section of the public such as the rate payers of a particular area had an interest. It is now clear that this is not so."

28.      Mr. O'Donnell submitted that the authority for the latter proposition is Kerry County Council -v- Commissioner for Valuation (1934) IR 527, a case which establishes conclusively that local authority property does not come within the public exemption. The author had also noted that, as applied to educational institutions, the series of judicial pronouncements on 'public purposes' in the 1838 Act had, at least insofar as applied to educational institutions, brought about a position of uncertainty whereby technical schools and the constituent colleges of the NUI on the one hand had an exemption, but Trinity College, Dublin and Maynooth College had failed to win exemption.

29.      He also pointed out that various semi state enterprises were rateable, such as Aer Lingus, Aer Rianta, Coillte, An Post and, before privatisation, Telecom. A very real question arose therefore as to where the line now lies which divides rateability from non rateability.

30.      In essence, he submitted, the case turned on the operation of the Act to see whether, in the aftermath of its introduction any particular body was now within the proviso definition. The Act, he said, only contemplates the establishment of private companies for the 12 most important harbours in the State identified in the first schedule. 13 other companies could be made private companies pursuant to Section 87, but also, under Section 88, could be transferred to local authorities. Under Section 88 (3), some smaller ports were automatically transferred to the local authorities in the Dublin area. In such cases, and in the case of any harbour or port transferred to a local authority under Section 88, there is no question but that on becoming the property of a local authority, they would become rateable i.e. they would lose their exemption by simple operation of the Act alone and without reference to the valuation code. If this is correct, Mr. O'Donnell submitted, it would be strange if the Act would swell the rating base by including the less significant ports, but maintain the exemption for the more substantial ports.

31.      He further submitted that any exemption should be construed strictly, since the consequence of exemption is to narrow the rating base and thereby increase the burden on remaining rate payers.

32.      The character of the authority owning or managing the Port of Cork had been significantly altered by the 1996 Act. If it had been intended to simply expand the powers available to the harbour authority or harbour commissioners, that could have been achieved by an amendment to existing legislation. The significance of the 1996 Act was that it was made necessary by a desire to permit the incorporation of a private company which would be obliged to act commercially, the ultimate test of which was that it was obliged, like any other private company, to seek to make a profit.

33.      Under the Act, the property of the relevant harbour authority was to be transferred to and become vested in the company. The company thereupon, under Section 19 (1)(b) was to issue shares to the Minister "equal in nominal value to the sum certified in their certificate" i.e. the value of the property transferred under Section 96. It then became the duty of the company under Section 12 (1)(a)(iii), to remunerate its capital and pay interest on and repay its borrowings. This was an addition to the general duty to conduct its affairs so as to ensure that the revenues of the company were not less than sufficient taking one year with another to meet all charges. These provisions were all new provisions introduced by the Act of 1996. It is true that any dividend payable to the Minister under Section 22 should be paid into or disposed of for the benefit of the Exchequer but this however did not change the character of the profit which the company earned in order to pay the dividend. The object of the Act was to make the harbour companies act commercially and in the same way as Aer Lingus and other such organisations. One of the consequences of this reorganisation must be that it becomes rateable, since otherwise, it would inter alia, be the recipient of unfair State aid, while competing with other private ports. None of these commercial state companies are exempt from rating, precisely because they are private companies which thereby make a private profit. While the ultimate recipient of the profits may be the Minister (if a dividend is declared) that does not convert the profit into a public profit: it is the fundamental principle of company law that the creation of a private company creates a distinction between the company and its shareholders, so that the shareholders do not own or are in any way entitled to the assets (or profits) of the company. It is the character of the person making the profit rather than the possible recipient of any dividend which is critical and in this respect whatever the identity of the particular shareholders, the company itself is a private company and no different in shape, form or function of any other private port company.

CONCLUSION

34.      At the outset I should state that I do not believe that this Court should have regard to the provisions of the Valuation Act, 2001, which was not operative at the time the respondent made its determination.

35.      I am fortified in taking this view by my belief that the various canons of statutory construction relied upon by the appellants have no application in the instant case, because I believe Mr. O'Donnell is correct in his submission that the essential issue which the court has to consider is whether the 1996 Act reorganised the character, management and ownership of the Port of Cork in such a way, or perhaps, more accurately, to such a degree, as to remove it from the statutory exemption.

36.      There is no dispute but that the day to day user of the Port is precisely the same as heretofore, that no organisation or member of the public is denied access thereto, that charges continue to be levied on those using the port in precisely the same way as occurred prior to the introduction of the 1996 Act. It also seems clear that no private interest or benefit is taken under the new statutory arrangements, nor do I find there is any potential for this to occur.

37.      The issue thus becomes whether the interposition of the particular vehicle created by the 1996 Act is such as to disqualify the appellants from the exemption which historically was enjoyed by the Port of Cork.

38.      Mr. O'Donnell's case in a nutshell boils down to this proposition: that by creating a "private" company, a decisive transformation in the character of management and ownership was thereby effected. He submits that the authority of Saloman -v- Saloman [1897] AC 22 established as a fundamental principle that a distinct private entity is brought into existence when a company is created under the provisions of company law. Any 'profit' is thus 'private profit'.

39.      However, as the decision in Plassey Trust Company Limited -v- Commissioner of Valuation makes clear, the fact that ownership vests in those managing the hereditaments by way of private company is not the decisive test. The real test, it seems to me, is to determine if alterations to the structure and management of the undertaking, whether intended for commercial purposes (a concept not necessarily inimical to 'public purposes') or otherwise, introduce the reality or potential for private gain or private profit which is the essential leitmotif of rateability. This is a test of function rather than administrative nomenclature.

40.      While it is true that the appellant does not carry on business entirely without expectation of profit, and indeed it has a general duty under Section 12 (1)(a) of the Act to strive to ensure that its revenues are sufficient to meet its operating costs, the appellant is emphatically not a private profit making company. Its sole shareholders are the Minister for Communications, Marine and Natural Resources and the Minister for Finance and, in the event that they receive dividends or other sums in respect of their shares, they are obliged under Section 22 of the 1996 Act to pay into or dispose of such sums for the benefit of the Exchequer in such manner as they may direct but always in the public interest. Furthermore, under Section 44 (4) of the Act it is clear that any dividend nominally enjoyed by the directors of the company is subject to the power of these Ministers to stipulate the dividends be paid by the company to them.

41.      It is clear to me from a perusal of the Act that the appellant has no beneficial interest in the charges which it may levy, but is bound to administer them and does in fact administer them and devote them to the maintenance of the public harbour. In other words, the appellant is not in business for the purpose of making a profit on its own account, but is bound to seek altruistically the benefit of the public. There can be no suggestion of any private profit being derived from the activities of the appellant.

42.      The present case stands in sharp distinction to the charges that existed in Dublin County Council -v- West Link Toll Bridge Limited [1996] 2 ILRM 232. In that case, toll charges were collected under an arms length with a commercial company conferring a 30 year benefit in the tolls subject to certain conditions. These tolls were themselves found to be a very specific property right constituting a separate privately occupied incorporeal hereditament. In addition, the profits from the tolls, after meeting maintenance and operating costs, belonged to the company and were available to fund its other commercial activities and for distribution to its private shareholders for the duration of the agreement. As the Supreme Court held, the defendant was obviously in business to make a profit, and that is simply not the case here. While a theoretical possibility may have existed that the Minister might have privatised the appellant, I have been told, and this is not in dispute, that this did not occur between the date of incorporation and the date of the express abolition of the appellant's exemption from rates pursuant to Section 15 (5) of the 2001 Act.

43.      I therefore answer the question referred to the High Court "No".