Supreme Court of Ireland Decisions

Judgment Title: Bulmers Limited -v- Commissioner of Valuation

Neutral Citation: [2008] IESC 50

Supreme Court Record Number: 399/05

High Court Record Number: 2001 72 SS

Date of Delivery: 30 July 2008

Court: Supreme Court

“7(1)(a) In making the valuation of any mill or manufactory, or building erected or used for any such purpose, the Commissioner of Valuation shall in each case value the water or other motive power thereof, but shall not take into account the value of any machinery therein, save only such as shall be erected and used for the production of motive power.

Plant is dealt with in section 7(2) of the 1860 Act as substituted by the Valuation Act 1986 section 7 as follows:-
“7(2) The Commissioner of valuation shall value plant falling within any of the categories of plant specified in the schedule to this Act (inserted by the Valuation Act, 1986).”

“All constructions affixed to the premises comprising a mill, manufactory or building (whether on or below the ground) and used for the containment of a substance or for the transmission of a substance or electric current, including any such constructions which are designed or used primarily for storage or containment (whether or not the purpose of such containment is to allow a natural or chemical process to take place), but excluding any such constructions which are designed or used primarily to induce a process of change in the substance contained or transmitted.”

The questions of law referred to the High Court are as follows:-

The High Court answered the questions as follows:-

“As above stated the crucial question, which is one of mixed fact and law, is whether such vessels are designed or used primarily for storage or containment or are so designed or used primarily to induce a process of change in the substance contained therein.”

“(2)(a) The Appellant company, in its business the biggest in Ireland, specialises in the production of cider both for the home and export markets. It has as above stated part of its production plant at Clonmel, both East and West of Dowd’s Lane. This lane on the northern side joins Mitchell Street and the Quay on the southern side. It is narrow in all directions but more so at its northern extremity. The remainder of the appellant’s production plant and its bottling plant is situate at Annerville outside Clonmel.
(b) The hereditament, the subject matter of this appeal, commenced its operation in its original form in 1938 and has developed segmentally since then. The property comprises an old warehouse building which houses the original timber vats used in the production process, together with a filtration area and boiler room. This building is constructed with brick and rubble masonry walls, concrete floor and a combination of roof coverings including slates, corrugated asbestos and metal decking. Eaves height is c.25ft. Immediately adjoining the building are concrete tanks which were installed during the mid 1950s. These vessels are constructed of mass concrete walls, bitumen lined internally, with asphalt covered concrete roof and vary in height from 20 ft to 35 ft. Opposite the original building on the eastern side of Dowd’s Lane is the crushing plant and apple yard, together with a three storey recently constructed building accommodating staff, canteen and toilet facilities. The crushing plant is constructed with concrete walls and steel decking, concrete floor and barrel type corrugated iron roof. The new three storey building immediately fronting the crushing plant is constructed with concrete block walls, concrete floors and asbestos slated roof.
(c) In 1992, on two different occasions, in order to help satisfy the companies stated policy of having a two year stock of cider available, the appellants applied for and subsequently were granted planning permission to erect 20 stainless steel tanks,. These tanks are cylindrical in shape with heights varying from 25 to 40 feet. 11 have outer steel cladding.
(d) In all there are 22 timber vats, 14 concrete tanks (now disused) and as stated 20 stainless steel tanks. For these said tanks/vats the parties have given slightly different capacity figures. The numbers as between the appellant company and the respondent respectively are as to the stainless steel tanks 1.037 million/1.044 million gallons, as to timber vats 382,800 gallons/385,600 gallons and as to the concrete tanks, 789,200 gallons/791,486 gallons. In addition the appeal valuer has also valued some wooden vats described as disused, with a stated capacity of 32,000 gallons.
(e) All of the vessels on site including these tanks are connected by a series of stainless steel pipe work of various diameters which are on both the inside and outside of the buildings and across Dowd’s Lane. The finished product produced in Dowd’s Lane is a high strength 10% alcohol product and is then transported by road in bulk containers to the main Showerings Bottling Plant, located at Annerville on the outskirts of Clonmel, on the main Clonmel/Kilkenny road where it is diluted down to the appropriate alcoholic strength and bottled.
(3) Cider is made from apple juice. The production and supply of apples is seasonal and therefore the vast majority of production has to take place during a short period of time. Essentially, the production process, as given in evidence before us, can be described briefly as follows:-
(a) The cider making season starts in September when the apples are brought into the Dowd’s Lane plant. The apples are first of all washed and then brought by way of water channel to a miller. The apples are then milled (chopped up into very small pieces) and a pre-dosed amount of the milled apples put into what is called the “cheese” i.e. a wooden slat where a hair is put over the slat. This is then built up into eleven wooden slats which then go into a hydraulic press. The hydraulic press will then squeeze the juice from the actual milled apples. There is a second pressing when the cheese is dismantled, the pumice is actually re-milled again and a second cheese built up so as to extract as much juice as possible from the apples. The juice is then pumped to a 10,000 gallon wooden receipt vat. During this process yeast will also be picked up, both fermenting yeast and non-fermenting yeast, from the hairs, from the vat and from the pipe work. The 10,000 gallon receipt vat is used for this purpose. Somax is added at this stage, and the purpose of the Somax is to eliminate undesirable yeast i.e. the non-fermenting type, leaving the fermenting type to carry out the subsequent fermentation. Somax is sulphur dioxide which kills the non fermenting type yeast. The fermenting yeast is generally the saccharomyces cerevisiae type. The juice is allowed to stand in the 10,000 gallon receipt vat for approximately 24 hours to give time for the Somax to actually take effect. The juice is pumped from the receipt vat into another vat which is the fermentation vat. Fermentation then commences due to the yeasts that are present, that have been picked up during the actual crushing stage, during the transfer and by the tanks themselves. At various stages during the fermentation starch hydrolysed, which is really sugar, is added. This brings the gravity back up and allows the appellant to ferment to quite high alcohol, nearly up to 10% alcohol. Starch hydrolysed is added in three or four different additions through the fermentation. At this stage, as well, biopectinase is added. It is an enzyme which will break down pectin because pectin, if not broken down, will cause filtration problems subsequently.
The main purpose of the receipt vats are (a) to obviously pick up yeast and (b) as a measure, because they are 10,000 gallon tanks and (c) for Somax to be added. The main purpose of the fermentation vat is for fermentation to take place, for starch hydrolysed to be added to bring the gravity back up and for biopectinase to be added. Once all the additions have been made, the juice is then transpumped to a stainless steel tank, where the fermentation is ongoing until eventually all the sugar has been converted into alcohol.
Once the fermentation vat is full, with all the various additions made, the fermentation at this stage will have got under way and will be progressing. On a daily basis, samples will be taken for analysis, both sensory analysis and chemical analysis. The chemical analysis is in respect of alcohol, gravity and acidity.
Primary fermentation takes six to eight weeks until eventually all the sugar has been converted into alcohol. It is then “dry” meaning that there is no sugar left. During the fermentation, carbon dioxide is produced and released in the process. In the timber vats there is an electrically operated extractor fan which will remove the carbon dioxide. In the stainless steel vats, where the fermentation is actually finished, there are vent valves which will vent the carbon dioxide produced during fermentation to the atmosphere. In the receipt vats, where the Somax is added and the fermentation vats where the biopectinase is added, there are manways at the top to allow for the addition of the Somax and the biopectinase; Somax to the actual receipt vats and the biopectinase to the fermentation vats. In the fermentation vats there are entry points so that the starch hydrolysed can be pumped in during the fermentation. All these vats have these various accessories which are necessary to allow the process actually to be completed. If the appellant did not have these they would not be able to make these additions and the end result would be an undesirable product.

The cider at this stage is referred to as a green cider. At this stage it would not be organoleptically suitable for obvious cider production, so it is left to mature over a period of approximately 8 to 15 months during which time a process known as malolactic fermentation occurs where malo acid is converted into lactic acid. This reduces the acidity of the cider and gives rise to a more complex flavour. This turns the green cider (i.e. cider just after fermentation) into a more mature cider which is subsequently used to make the bulk blend. Organoleptic analysis is carried out by a trained sensory panel which evaluates the ciders on a monthly basis. The prime purpose is to make sure that the ciders, when they go forward for final packaging, are satisfactory from a sensory point of view, and they are also meant to be able to detect any undesirable change in the cider which will be caused by bacterial action.
If the sensory panel picks up a deterioration of the cider, then a decision has to be made to use that cider by blending with good cider or to remove or mask the off flavour that would be developing. The organoleptic analysis is carried out on a monthly basis to make sure that the cider is consumable at the end of the process.
Aside from malolactic fermentation, there are also other subtle changes taking place that will eventually transform it into a product which is then satisfactory for cider production.
The appellant starts using ciders approximately eight months after fermentation and up to fifteen months thereafter, because there are fermentations coming off all the time. The first fermentations will start in September, so the first ones starting in early September finish some time in October, and so on. So there is always fermentation starting and finishing.
By the time you come to the end of the season, by the time the first fermentations are used, it is approximately eight months after the end of fermentation, going right on to approximately fifteen months at the end of fermentation. Thus, while the average period for secondary fermentation (malolactic fermentation) is four or five months, the whole fermentation process is going on for a period of somewhere between eight to fifteen months.

The product would just be microfiltered once although the microfilter is continuously being concentrated and if there are yeasts in it, will eventually end up as a sludge. But once the product goes through the actual filters themselves, it is then just transferred on as a filtrate into a receipt vat. Microfiltration will remove all yeasts. Subsequently they may pick up some yeast again from storage, from vats, pipes etc., but the numbers will be quite small. There is an actual filtration plant from which the cider is pumped from a tank to the plant and then back to another tank. It is the pump that provides the motor force to move the cider from a vat to a filtration plant and then back to another vat. The process is characterised by constant movement of the material. The microfilter area will always be in action. Once one fermentation has been filtered through, the next fermentation is coming through, followed by the next one. There is constant movement even though the filtration only acts on any one lot of fermentation once. It would be very rare to have to micofilter a given batch again unless there was significant secondary yeast growth.

The same quantity is not being repeatedly subjected to the same process. But there is continuous movement within the plant. There are fermentations moving from the fermentation vats into the stainless steel vats so that the fermentations can be finished, there is racking from one tank to the next, there is movement then of racked product to the balance tank for microfiltration, and then there is movement post microfiltration when the cider is being blended. So there is constant movement.
There are some 375 movements occurring between vessels in the production of the total annual output which varies between 2 million and 2.5 million gallons. The process requires the use of force so in all cases pumps would be used to pump the cider from one tank to another or from the vat to the balance tank prior to microfiltration, and also during the blending operation, obviously, where the product would be pumped into a tank where it is blended with the concentrate.

“They should be slow to interfere with the decision of expert administrative tribunals. When conclusions are based on an identifiable error of law or an unsustainable finding of fact by a tribunal, such conclusions must be corrected. Otherwise, it should be recognised that tribunals which have been given a statutory task to perform and exercise their functions as is now usually the case with a high degree of expertise and provide coherent and balanced judgments on the evidence and arguments heard by them, it should not be necessary for the courts to review their decisions by way of appeal or judicial review.”

“There is no doubt but that the Valuation Tribunal is the type of body which Hamilton CJ had in mind when expressing the views which I have just quoted from his judgment in the Denny case. In the instant appeal, the Tribunal consisted of its Chairman, who is a senior counsel, and two deputy chairmen, one is a barrister and the other is a fellow of the Royal Institute of Chartered Surveyors. This court should be slow to interfere with its decisions. It should only do so on the basis of an identifiable error of law or an unsustainable finding of fact.”

“There is no dispute between the parties but that fermentation takes place naturally. This over a six to eight week period. This results in the production of alcohol and carbon dioxide which is extracted. Sugar is from time to time pumped into the vats. But apart from the extraction of the carbon dioxide and the infill of sugar nothing else is involved in converting apple juice into what is called green cider. To achieve this, it is of course essential to have a structure or vessel or a series of structures/vessels within which the juice is contained. It would appear that the timber vats are more suitable for this than the other vessels. Whatever, can it be said in these circumstances that the process or the process of change which undoubtedly takes place is dependent upon or caused by the vessel being designed or being used primarily to induce that process or is it more accurate to advance the proposition that once containment of the apple juice is achieved then what follows, whether it be a natural or chemical process, is essentially, as a consequence of that containment with little else? In our opinion if this is an acceptable manner of setting up the question, the facts, if accurately outlined, fall far short of satisfying the legal criteria for applying to this fermentation process the proviso contained within Reference No. 1.”

“It seems to us almost inescapable that these vessels are used or designed primarily for storage or containment and not to induce a process of change. If it were otherwise not only would a process of change take place but there would be some means or method inherent in the structure itself which would induce that process”.

“15. In applying the above principles where appropriate to the facts of the instant case we find it necessary to make a distinction between the tanks which hold the raw milk and the tanks which contain the skimmed milk. In respect of the latter three tanks we are perfectly satisfied that what goes into those tanks is skimmed milk and what comes out is likewise the same skimmed milk … To have available skimmed milk is of course necessary for the manufacturing process which in turn means that the company must make available a facility to hold or contain that milk until such time as the process is ready to receive it. Such a holding takes place primarily if not exclusively for storage or containment and certainly not either primarily or at all to induce a process of change. Any activity which takes place within these tanks does so for the purposes of retaining or maintaining the skimmed milk in its original condition … accordingly we hold that these tanks are plant and are rateable as such within Reference No. 1 of the schedule to the 1860 Act.
16. The position in our view is quite different with regard to the five tanks which hold raw or whole milk. As above stated it is crucial to the operations of the appellant company that a certain specification (in terms of fat and protein content) is met whether that specification is customer orientated or required by law. One way or another unless the specification is satisfied the ultimate product is of no use and certainly of no commercial viability … This is but one example of why the mixing and blending of raw milk with the skimmed milk and the processes which take place within these tanks are crucial to the entire manufacturing operations of the appellant company. Whilst it is true to say that milk goes into these five tanks and that milk comes out, that statement without qualification is inaccurate and is certainly an incomplete description of the activity that takes place within. What in fact goes in is raw milk which has a certain ascertainable percentage of fat and protein content and what comes out is not that milk with that content but rather milk with a quite different content of both fat and protein. It is neither raw milk in its natural state or skimmed milk in its natural state. It is a product different from both.
17. Could we test this proposition by rhetorically asking whether or not, if there was no requirement for storage and if the manufacturing process so permitted, could the raw milk as delivered by the four co-operative societies be pumped straight into the manufacturing process and avoid altogether these tanks. From the evidence of Mr. Holland (the appellants production manager) we are quite satisfied that this could not take place. Accordingly it is our view and we so find that in respect of these five tanks the same are designed or used primarily to induce a process of change in the milk contained therein and as such are non rateable plant within the meaning of the aforesaid Reference No. 1.”

3. A fortiori when the substance that comes out, being different from that which goes in, is an essential element in the manufacturing process the purpose of the containment is unlikely to be storage. In the present case what goes in to the vats is milled apples and the substance that comes out is high strength cider that is brought elsewhere for further processing. The vats are not used to store or contain their contents in a particular condition in preparation for the core manufacturing process but rather are a part of the manufacturing process.

“As above stated the crucial question, which is one of mixed fact and law, is whether such vessels are designed or used primarily for storage or containment or are so designed or used primarily to induce a process of change in the substance contained therein.”

“ … can it be said … that the process or the process of change which undoubtedly takes place is dependent upon or caused by the vessel being designed or being used primarily to induce that process or is it more accurate to advance the proposition that once containment of the apple juice is achieved then that what follows, whether it be an actual or chemical process, is essentially as a consequence of that containment with little else …”

“All constructions used for the containment of a substance including such constructions which are used primarily:

containment (whether or not the purpose of such containment is to allow a natural or a chemical process to take place)
but excluding any such constructions which are used primarily to induce a process of change in the substance contained.”

“The fact that tanks or receptacles are fitted with equipment which enables some activity to take place within does not necessarily alter their character as tanks and convert them into machines. To repeat the expression used by McCarthy J. in the Siúcra Éireann case, if the character of the tank ‘predominantly is one for storage purposes’ it is a tank and not a machine.”