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LANDS VALUATION
APPEAL COURT, COURT OF
SESSION
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Lord Justice Clerk
Lord Philip
Lord Kingarth
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[2006] CSIH 60
XA49/06
OPINION OF THE LORD
JUSTICE CLERK
in
THE STATED CASE FROM THE
LANDS TRIBUNAL FOR SCOTLAND
in the Appeal of
UNITED KINGDOM ATOMIC ENERGY AUTHORITY
Appellant;
against
ASSESSOR FOR HIGHLAND AND
WESTERN ISLES VALUATION JOINT BOARD
Respondent:
_______
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For the Appellant: Haddow,
QC;
Morton Fraser
For the Respondent: Doherty, QC; Drummond Miller
22 December 2006
The appeal
[1] This
is an appeal by stated case from a decision of the Lands Tribunal for Scotland dated 8 September 2005.
[2] The
appellants are the owners and occupiers of the Nuclear Installation at
Dounreay, Caithness. Until the 2000 Revaluation, the site was not
in the Valuation Roll. It was subject to
the system of Crown contributions assessed by the Crown Property Unit of the
Valuation Office Agency.
[3] The
assessor entered the subjects in the Valuation Roll at the 2000 Revaluation as
"Premises" at a net annual value and rateable value of £2,100,000. The appellant contended inter alia that the premises should properly be entered in the
Roll as "Premises in the course of decommissioning and demolition"; that the appellant was not in rateable
occupation of them; that, in any event,
it was not in rateable occupation of certain areas referred to by the Tribunal
as the contaminated areas, and that, in any event, the costs of care and
maintenance of the site were such that the subjects should be entered at a nil
value.
[4] The
Tribunal allowed the appeal to the extent of substituting an NAV/RV of
£1,435,000.
The appellant and its functions, powers and duties
[5] The
appellant was established under the Atomic Energy Authority Act 1954 (the 1954
Act) to develop the civil nuclear programme in the United
Kingdom.
The 1954 Act confers on the appellant the power inter alia to produce, use and dispose of atomic energy and carry
out research into any matters connected therewith (s 2(2)(a)); to manufacture or otherwise produce, buy or
otherwise acquire, store and transport any articles which in the opinion of the
[appellant] are, or are likely to be, required for or in connection with the
production or use of atomic energy or such research as aforesaid, and to
dispose of any articles manufactured, produced, bought or acquired by them (s
2(2)(b)); and to manufacture or
otherwise produce, buy or otherwise acquire, treat, store, transport and
dispose of any radioactive substances (s 2(2)(c)).
[6] The
Nuclear Installations Act 1965 (the 1965 Act) provides inter alia as follows
"1(1) Without
prejudice to the requirements of any other Act, no person ... shall use any site
for the purpose of installation or operating -
(a) any
nuclear reactor (other than such a reactor comprised in a means of
transport, whether by land, water or air); or
(b) subject
to subsection (2) of this section, any other installation of such
class or description as may be prescribed, being an
installation designed or adapted for-
(i) the
production or use of atomic energy; or
(ii) the
carrying out of any process which is preparatory or
ancillary to the productions or use of atomic energy
and which involves or is capable of causing the emission of ionising
radiations; or
(iii) the
storage, processing or disposal of nuclear fuel or of bulk
quantities of other radioactive matter, being matter
which has been produced or irradiated in the course of the production or use of
nuclear fuel,
unless a licence so to do ... has been granted in
respect of that site by the [Health and Safety Executive] and is for the time
being in force ...
7(1) ...
where a nuclear site licence has been granted in respect of any site, it shall
be the duty of the licensee to secure that-
(a) no
such occurrence involving nuclear matter as is mentioned in
subsection (2) of this section causes injury to any
person or damage to any property of any person other than the licensee, being
injury or damage arising out of or resulting from the radioactive properties,
or a combination of those and any toxic, explosive or other hazardous
properties, of that nuclear matter; and
(b) no ionising radiations emitted during the period of the
licensee's responsibility-
(i) from
anything caused or suffered by the licensee to be on the
site which is not nuclear matter; or
(ii) from
any waste discharged (in whatever form) on or from the
site;
causing injury to any person or damage to any property
of any person other than the licensee.
(2) The
occurrences referred to in subsection (1)(a) of this section are-
(a) any
occurrence on the licensed site during the period of the licensee's
responsibility, being an occurrence involving
nuclear matter ..."
Since the contraction of the
nuclear research programme in the late 1980s, the appellant's primary role has
become that of decommissioning and environmentally restoring nuclear sites such
as Dounreay.
The valuation hypothesis
[7] Section 6(8) of the Valuation and Rating (Scotland) Act 1954
(the 1954 Act) provides that the net annual value of any lands and heritages
shall be the rent at which the lands and heritages might reasonably be expected
to be let from year to year, on certain assumptions that need not concern
us.
Description of the site
[8] The
site extends to about 137 acres on which there are 309 separate heritable items
consisting of three redundant nuclear reactors, fuel processing and
re-processing plants and stores, offices, laboratories, waste pits, a fire
station and numerous minor facilities such as car parks and bus shelters. The nuclear parts of the site are no longer
in operation as such. They are in the
course of a lengthy decommissioning process.
[9] The
Tribunal has usefully classified the site as at the valuation date into four
categories (para 68). The first (the
ordinary parts) consists of the office, laboratory and other support facilities
that were not affected by contamination.
Some of this category was redundant and was not valued by the assessor;
but much of it was in ordinary use and was agreed to have a positive
value.
[10] The second category (proper storage) consists of the areas that
were designed and were used for storage, whether temporary or permanent, of radioactive
materials. In general, such areas are
agreed to have positive values.
[11] The third category (the contaminated parts) consists of a
variety of buildings, including some of the highly specialised plants such as
reactors, which still contained radioactive fuel or waste that was being
actively decommissioned or was awaiting decommissioning or further
decommissioning processes. These are in
effect buildings whose original purposes had been spent and in which waste was
being contained. The DFR Pond (item
D1120) is an example. It was designed
for the storage of fuel tubes in racks, but was being used mainly for the
containment of contaminated waste or sludge.
[12] The fourth category (the redundant parts) consists of buildings
and plant that no longer contained radioactive materials, but had been part of
the active nuclear processes and therefore still required specialist care and
maintenance and monitoring.
The history of the site
[13] The appellants own and occupy the site. It was chosen in 1954 for the establishment
of a large scale experimental fast breeder reactor. The work at the site was later expanded to
include experimental work in nuclear fuel manufacture and reprocessing and,
later still, research in decommissioning and the safe management of nuclear
waste. The site has throughout been
predominantly experimental in its purpose.
It has never been operated with a view to profit.
[14] The original Dounreay fast reactor ceased to operate in
1977. The Dounreay materials test
reactor (DMTR), which was constructed at the same time, ceased to operate in
1969. The prototype fast reactor (PFR)
ceased to operate in 1994. The
reprocessing of fast reactor fuel ceased in 1996.
[15] For some years before 1998, the Nuclear Installations Inspectorate
(NII) had expressed concerns about safety management at the site. In May 1998 a safety incident occurred in
which power to the fuel cycle area was cut off for an unduly long period. By Direction No 2, dated 11 May 1998, the NII directed the
appellant to shut down all processing activities in the fuel cycle area other
than those operations and activities that were necessary to maintain it in a
safe condition. There was then a major
audit of safety management at the site.
[16] Direction No 2 remained in force at 1 January 2000, the valuation date in this
case. By that date, all processing and
reprocessing of nuclear fuel had ceased.
The primary focus of activity was then on decommissioning and on the
safe management of the site, including the containment of radioactive waste and
the storage or disposal of radioactive materials. At that date it was expected that the
restrictions imposed by the Direction No 2 would be lifted within the course of
2000. The first resumption was not
permitted until February 2000. After
that, other restrictions were lifted in stages.
It was also expected at the valuation date that the Government would
soon decide to refurbish the PFR reprocessing plant for the resumption of fuel
reprocessing; but in June 2001 the Minister announced that no further PFR fuel
would be reprocessed and that limited fuel manufacturing would be continued to
honour existing contracts only.
Following this decision, the DMTR fuel element production facility
restarted in October 2001 and finally closed in March 2004.
Nuclear fuel and waste
[17] There are around 109 tonnes of nuclear fuels and fissile
materials on the site. There is also a
large quantity of radioactive waste.
According to the appellant's inventory, 9,000 cubic metres of radioactive
waste are in storage and 33,000 cubic metres of it have already been disposed
of in facilities on the site. The Low
Level Waste (LLW) has been put into a disposal facility which is now full. LLW is therefore now being stored on
site. The High Level Waste (HLW) and the
Intermediate Level Waste (ILW) are accumulating in stores on site because no
local or national disposal facility is yet available.
[18] The inventory of stored waste covers only classified waste
stores. It does not include radioactive waste
remaining in other areas. There are
significant quantities of such waste.
Records of it exist, but were not produced to the Tribunal. This waste is to be found in parts of the
facilities for which there is no continuing operational use, for example the PFR Irradiated Fuel Cave and
laboratory 33. The Tribunal has found
that 12 specified buildings, though not classified as stores, are used for the
containment and storage of radioactive fuel or waste. When these buildings are demolished, the
demolition material may itself form LLW as a result of radioactive
contamination.
Contamination
[19] Several areas of land are contaminated, or may yet be
contaminated, with radioactive and chemical materials. The non-nuclear contamination is relatively
unimportant. The radioactive
contamination results principally from inadequate containment of materials and
management of operations in the past.
Between 1995 and 2000 the annual costs associated with monitoring,
management and treatment of contaminated land were about £1.155m and rising.
The decommissioning process
[20] Decommissioning is a lengthy process carried out in three
stages; namely, the post-operational
clean out involving the removal of radioactive material and installed
equipment; the dismantling of equipment
such as remote manipulators and glove boxes for the handling of highly
radioactive materials; and the ultimate demolition of the buildings and
restoration of the land. There will be
intervals of several years before the first stage begins and between the
ensuing stages. During these intervals,
and during the decommissioning stages, care and maintenance, including
monitoring and surveillance, is necessary.
Ultimately, all but one or two of the buildings will be demolished and
the majority of the land will be restored to a cleared brown field site.
[21] As a result of the safety audit carried out in 1988, there is
now a Dounreay Site Restoration Plan which sets out a proposed timetable of
decommissioning and restoration extending over 50 to 60 years.
Care and maintenance
[22] The Tribunal has found that because of the paramount importance
of safety and the risks arising from radioactive contamination, considerable
expenditure is required on care and maintenance. This requirement arises formally out of the
provisions of the 1965 Act and the
conditions of the Site Licence. Before
June 1998 two NII improvement notices relevant to care and maintenance had been
issued.
[23] The 1998 safety audit required the appellant to have a
comprehensive programme of care and maintenance for operational buildings and
for redundant buildings that had been exposed to radiation or had been
contaminated with radioactive substances.
This led to further substantial increases in expenditure.
[24] To allow radiation to decay naturally is often the preferred
course. It is safer and it makes the
eventual process of decommissioning less complicated and expensive. There are further financial benefits in
deferring expenditure. The
decommissioning process may include planned "hold-points" up to tens of years
in order to allow radioactivity to decay naturally. Care and maintenance continues during such
periods as well as during the active stages of decommissioning.
Nuclear liabilities and running costs
[25] The appellant's accounts show the estimated cost of "nuclear
liabilities", on a discounted basis, to be just under £3 billion, of which the
Dounreay site accounts for about half.
These liabilities consist of the estimated cost of decommissioning the
nuclear facilities, storing, processing and eventually disposing of radioactive
wastes, and managing nuclear fuels and materials.
[26] In the period 1995 to 2000 the annual operational costs of the
site were in the range £57m to £95m. The
annual costs of care and maintenance were in the range £11m to £25m. The average annual cost was £18.335m. By January 2000, care and maintenance costs
had reached about a quarter of the total running costs of the site.
[27] The radioactive materials in both the designated stores and in de facto storage elsewhere consisted at
the valuation date of radioactive fuels, non-rateable plant and other moveable
radioactive wastes. The parties are
agree that this material was tenant's material for valuation purposes. It is not possible within the total costs of
care and maintenance to distinguish between costs relating to buildings and
rateable plant and other costs such as those of decommissioning and storage.
Valuation method
[28] The parties are agreed that the subjects should be valued on
the contractor's principle. The disputed
questions emerge in the following way.
[29] At stage 1, the parties are agreed on the aggregate value of
the heritable items as at the valuation date.
The only point of dispute at this stage is the appellant's claim for an
allowance for superfluity relating to one area of undeveloped land.
[30] Stage 2
involves the calculation of replacement costs of the buildings and rateable
plant. This raises questions of
obsolescence and superfluity. The
parties are agreed as to the age-related obsolescence. They have applied a standard scale of
allowances. The appellant's claims for
further allowances under the heading of "accelerated depreciation" in respect
of certain items and certain of its claims for superfluity are disputed at this
stage.
[31] At stage 3, the adjusted replacement cost is calculated. In consequence of the items disputed at
stages 1 and 2, this cost is not agreed.
[32] Stage 4 involves the application of the prescribed
decapitalisation rate to the disputed adjusted replacement cost. At this stage the appellant seeks an end
allowance of 15% for locational disadvantages.
This allowance is disputed. The
figures produced at this stage are, on the appellant's valuation, £1,526,760
and, on the assessor's valuation, £3,454,942.
[33] At stage 5 the appellant claims specific allowances of
£10,493,510 for care and maintenance and £1,155,800 for site monitoring. These claims produce a nil value. The assessor disputes both of these
deductions. He contends for an NAV/RV of
£3,454,942, which he has to restrict to the figure that he has entered in the
Roll.
[34] On the view that I have reached on the grounds of appeal, it is
unnecessary for me to go further into the detailed points of valuation on which
the parties differ.
The Tribunal's decision
[35] The Tribunal rejected at the outset the fundamental submission
that the appellant was not in rateable occupation of the subjects. It held that on any view there was such
occupation and actual use of the ordinary parts and the proper storage as to
satisfy the tests for rateable occupation.
It held that such occupation and use of part of the subjects amounted to
rateable occupation of the whole.
[36] The Tribunal considered that the redundant parts no longer
contained radioactive materials that required to be managed, and were to be
regarded as being similar to buildings awaiting, or in the course of,
demolition or for that matter alteration, as in the case of Greenock Corporation v Arbuckle, Smith & Co (1960 SC (HL)
49) and were not in rateable occupation (para 81).
[37] The Tribunal took a different view of the contaminated parts,
since these contained radioactive materials.
It considered that such materials must be treated hypothetically as
being the tenant's materials, and that on that hypothesis the tenant was making
a valuable use of the buildings which he needed for the purpose of keeping the
material safe. The Tribunal considered
that to be a form of storage (paras 14-17; 25; 27). The fact that that had not been the
originally intended use of the buildings in question seemed to it to be
immaterial. The Tribunal was in any
event of the view that it was not necessarily correct to suggest that these
buildings were not designed to keep radioactive material safe. It considered that that must have been an
important part of their original design purpose (para 82). In addition to those items in the valuation
that constituted either proper storage in category 2 or had a recognised and
agreed more active use, there were many other parts in which there remained
radioactive material of one kind or another.
These too, in the Tribunal's view, had a positive use and should be
included in the valuation, subject to certain adjustments. The land itself was in general in positive
use and, apart from a discrete vacant area of 18 acres, there was no suggestion
otherwise (para 83).
[38] The Tribunal next rejected the submission that in any event the
appellant's care and maintenance costs were greater than any positive values
that could be established for individual parts of the site and that therefore
the rateable value was nil. It ascribed
positive values (1) to those parts of the site that consisted of proper storage
or had a recognised and agreed more active use; (2) to those parts in which
there remained radioactive material of one kind or another, whatever their
original purposes had been, and (3) to the land itself. The Tribunal accepted, however, that these
values were subject to adjustment by way of various allowances for superfluity
and technical obsolescence.
[39] The Tribunal then concluded that in the hypothetical
negotiation between landlord and tenant, the tenant would have some success on
the question of care and maintenance liabilities. It held that where there was care and
maintenance expenditure on redundant buildings or plant which qualified as an
expense necessary to maintain the lands and heritages in a state to command the
hypothetical rent, some allowance was appropriate.
[40] There was a major dispute about the amount of the appellant's
care and maintenance expenditure. The
Tribunal concluded that it was not possible to ascertain that figure accurately
(para 95). It accepted the appellant's
starting figure of £18,355,000 (para 96);
but, after a careful review of the evidence, it concluded that the
hypothetical tenant would not have a basis for an allowance under this head of
more than 10% of that figure. It
considered that in the hypothetical negotiation the landlord could point to the
tenant's particular need for the subjects and the fact that the tenant's
operations overall were expensive and fully funded. The landlord could also point to the
uncertainty as to the precise allocation of the tenant's expenditure and to the
overlap with the tenant's own operations at the subjects. The tenant, on the other hand, could point to
the landlord's being relieved of the care and maintenance burden, although that
too was slightly unrealistic since the hypothetical landlord too would be
funded. The Tribunal concluded that it
could see no indication that the appellant, or any other body that might be
conceived to be in the same position, would simply not undertake to pay an
appropriate rent for the subjects (para 89).
In the result, the Tribunal fixed the allowance for care and maintenance
expenditure at just under 10% of the appellant's starting figure, namely
£1,500,000, which in its view, in the uncertain state of the evidence,
reflected adequately the burden that was being transferred to the tenant (paras
103-105).
[41] The Tribunal concluded that Direction No 2 would have had no
material effect on the hypothetical rent as at the valuation date, since the
lifting of the restrictions imposed by it was reasonably imminent in the
circumstances (para 107-111).
[42] The Tribunal then made various stage 2 allowances to individual
items in the valuation on account of superfluity and technical
obsolescence. That brought out a total
adjusted replacement cost of £54,672,211, which, by the application of the decapitalisation
rate, produced a rateable value of £3,094,626.
To this figure the Tribunal then applied the allowance for care and
maintenance of £1,500,000 to which I have referred, which reduced that value to
£1,594,626. The Tribunal then made a
further end allowance of 10% (£159,462) to reflect the disadvantage of the
subjects arising from the impact of the onerous security, safety and regulatory
regimes applicable to the nuclear decommissioning industry at the site (para
121). That produced an RV/NAV of
£1,435,164, rounded to £1,435,000.
Submissions for the appellant
[43] Counsel for the appellant renewed the fundamental submission
that the appellant was not in rateable occupation of the subjects at all. The essence of the submission was that while
the appellant was in possession of the site, it was in possession of it only
for the purposes of decommissioning and demolition. The subjects should be entered in the Roll as
having no occupier. For this submission
counsel relied on Greenock Corporation v
Arbuckle, Smith & Co (supra).
Counsel observed that a case such this had not been considered by the
court hitherto. He referred us to
numerous cases on redundant mills and construction sites, but emphasised that
none gave reliable guidance in this case.
Counsel submitted that, in any event, the appellant was not in rateable
occupation of those parts of the subjects that were not recognised as proper
storage, but where radioactive materials were stored de facto. The Tribunal erred
in treating these materials as materials of the hypothetical tenant. These parts of the subjects fell to be
considered as redundant buildings whose original use had ceased and which were
being prepared for some different use that would be established in due course. Storage of radioactive materials in them was
not of value to the hypothetical tenant.
In any event, the care and maintenance liabilities were such that the
hypothetical tenant would be unwilling to pay any rent to take on the site. The site therefore had a nil value (eg BTC v Hingley, [1961] 2 QB 16; Ron Wood v Ass for Glasgow, [2000] RA
271). In any event, the Tribunal had
erred in ignoring the effect of Direction No 2, which at the valuation date
prohibited an essential part of the decommissioning process. The later lifting of Direction No 2
constituted a material change of circumstances affecting the value of the
subjects. It could not be taken into
account in this valuation (Ass for
Central Region v United Glass Ltd, 1981 SC 389).
[44] Counsel moved us to allow the appeal and fix a nil value; failing which, to allow the appeal in part
and either continue it for parties to seek agreement on valuation matters, or
remit it to the Tribunal for reconsideration.
Submissions for the assessor
[45] Counsel for the assessor submitted that for the contractor's
principle to apply the use of the subjects by the hypothetical tenant need not
be profitable (R v School Board for London, ((1886) 17 QBD
728, Fry LJ at p 742)). The question was
whether the hypothetical tenant could reasonably be expected to take on the
premises, whatever its motive (Ryde,
Rating and the Council Tax, para [192]).
The appellant was performing a useful public purpose by keeping the site
safe and containing the radioactive materials within it. BTC v Hingley
(supra) was distinguishable. That was a case on the revenue principle of
valuation in which the subjects were operated with a view to profit, even
though none was made. The motive of the
hypothetical tenant in this case was not to make profit but to occupy the site
in accordance with its statutory functions and its licence obligations.
[46] The appellant was the occupier and was the only hypothetical
tenant that could be envisaged. There
was a clear motivation for the hypothetical tenant to occupy the site for the
public benefit and to pay rent in order to do so. The hypothetical landlord had incurred great
costs on the site and would look for a rent on that account. The hypothetical tenant could not walk away
from the site. Ultimately in the
negotiations a rent would be paid.
[47] Whether the appellant was in rateable occupation was a question
of fact. The Tribunal's decision on the
matter was warranted on the evidence and was clearly correct.
[48] As to the narrower rateable occupation argument, the case had
proceeded on the basis that the radioactive materials on the site were tenant's
materials (para 29). It was not open to
the appellant now to suggest otherwise (Ass
for Strathclyde v BP Refinery,
Grangemouth, 1983 SC 18, Lord Avonside at p 27; Texstyle
World v Ass for Strathclyde, 1995
SC 588, at pp 590 and 592). In any
event, it was plain in principle that moveable materials in the buildings were
to be treated as being tenant's materials.
The appellant accepted that in the proper stores the materials were part
of the tenant's estate and that the stores had value. There was no difference in principle in
relation to the de facto storage in
other buildings (Stated Case, para 14-17; 25;
27; 82). The appellant required the site to store and
contain its nuclear waste on a long-term basis.
That was a valuable use of the site.
The site was therefore of significant value to the hypothetical
tenant. The appellant recognised that
the proper stores had a valuable use (para 68).
The same applied to the de facto
stores. The Tribunal's factual
conclusion (paras 78-83) could not be disturbed.
[49] The effect of the temporary restriction imposed by Direction No
2 at the valuation date was a matter of degree.
The Tribunal was entitled to treat it as a transient factor, affecting
only part of the subjects, that did not materially affect the hypothetical rent
(Armour, Valuation for Rating, 5th
ed, para 5-55). The hypothetical tenant had it in its power
to put matters right in terms of the Direction.
The Tribunal took account of the overall effects of the regulatory
regime in its final end allowance.
Conclusions
Issue 1 - Rateable occupation
[50] In my view, it is not open to the appellant to argue this point
since is not a ground of appeal. In any
event, I consider that the point is misconceived.
[51] The argument of counsel for the appellant that the principle in
Greenock Corporation v Arbuckle Smith & Co (supra) applies in this case in respect
of the whole site is, in my opinion, fundamentally unsound. In Greenock
Corporation v Arbuckle Smith & Co
(supra), the appellant bought the
premises for the purpose of using them as a bonded warehouse. The customs and excise requirements
necessitated the carrying out of extensive alterations to the premises. Throughout the rating year in question, the
premises had not been authorised for use as a bonded warehouse; they had not
been used for any other commercial purpose and the appellant had not occupied
them at any time. It was held that the
making of alterations to the premises with the intention of carrying on a
business in them when those alterations were completed did not constitute
"actual occupation" of the premises within the meaning of the relevant
legislation and that therefore during the material period the appellant was not
in rateable occupation (cf Viscount Kilmuir LC, at pp 55-56; Lord Reid at p
58).
[52] That is not the situation here.
On its findings in fact, the Tribunal rejected the submission for the
appellant that the site was simply being decommissioned and demolished, all
other uses being merely ancillary and not such as to amount to rateable
occupation (para 75). This was a
conclusion that the Tribunal was entitled to draw, and in my view it was
correct. The appellant is not merely in
possession of redundant buildings that are being prepared for eventual
demolition. The appellant is in positive
occupation of the site for the necessary purpose of storing its materials for
the long-term purposes that I have described.
The quantities involved, in both the proper stores and the de facto stores, are substantial. During the decommissioning period the appellant
is constrained by the site licence, which imposes positive obligations of care
and maintenance, and by its statutory safety obligations. Therefore, in contrast with Greenock Corporation v Arbuckle, Smith &
Co (supra), the buildings in this
case are not in transient occupation during preparation for another profitable
use. They are in long-term occupation
for a purpose that is part of the appellant's statutory functions and duties. The decades-long process of decommissioning
requires that radioactive and radioactively contaminated materials should be
stored on site pending ultimate disposal.
During that period they will be subject to active management in the
interests of safety. Over the entire
decommissioning period, the occupier will incur the high cost of care and
maintenance of these materials, and of the buildings in which they are stored,
as a matter of legal obligation. Large
parts of the site are agreed to be in ordinary use, for example the offices,
laboratories, car parks and stores (para 50), or in use for proper storage. In my opinion, the Tribunal was right in
concluding that the appellant was in rateable occupation of those parts of the
site and that they constituted a substantial part of the whole subjects.
[53] It is not disputed that the subjects should be entered in the
Roll as a unum quid. If the appellant is in rateable occupation of
part of the subjects (Armour, op cit,
para 14-13), it is in rateable occupation of the whole subjects, subject to any
allowances that have to be made in the valuation of individual elements, such
as those parts that are purely redundant.
Issue 2 - Use of the contaminated
parts
[54] Counsel for the appellant submitted that the contaminated parts
no longer serve their original purpose and are occupied solely for the purpose
of preparing the radioactive materials that they contain for long-term
deposition elsewhere and for the eventual demolition of the buildings
themselves. By putting the matter in
this way, counsel for the appellant again invokes, but to a narrower extent,
the principle set out in Greenock
Corporation v Arbuckle, Smith &
Co (supra).
[55] This, in my view, is not the effect of the Tribunal's
findings. In my view, it is not open to
us to disturb the Tribunal's conclusion on the point. In any event, I agree with it. This, in my view, is not a case where there
is merely activity within a redundant site for the purpose of its being adapted
for another profitable use. It is
necessary occupation of them for the purposes of the appellant's statutory
functions. Since the materials that are
stored in the contaminated parts of the site have to be stored as part of the
decommissioning process, it seems to me to make no difference whether those materials
are stored in buildings designed for that purpose or in buildings whose former
purpose is now spent. In either case,
the buildings are in valuable use by
the appellant as stores.
[56] I am also of the view that it is not open to the appellant to
argue that the radioactive materials contained in the de facto stores are not to be treated as materials of the
hypothetical tenant. The appeal has been
conducted from the outset on the agreed footing that they are (cf Stated Case,
para [29]).
Issue 3 - Care and maintenance
costs
[57] This
issue requires us to consider the rating hypothesis under section 6(8) of the
1956 Act (supra). In many cases, the rating hypothesis is
remote from the conditions in the real world.
That is part of the subject's endless appeal. The present case involves us in a hypothesis
that is divorced from all reality.
[58] The relevant factors, in my view, are that the site is not run
for profit, never has been and probably never could be; but that it is required
by the hypothetical tenant for the carrying out of its statutory functions in
accordance with its legal obligations. I
agree with counsel for the parties that the statutory hypothesis in this case should
be applied on the basis that the hypothetical tenant is the appellant.
[59] In my view, there is nothing illogical in the idea that the
hypothetical tenant, although running a not-for-profit enterprise as a public
service and subject to substantial financial liabilities by reason of its
statutory duties, would nonetheless have to find lands and heritages on which
to run its enterprise and would have to pay rent (cf Ryde, op cit, para [192]; Armour, op
cit, para 18-15; London County Council
v Churchwardens etc of Erith, [1893] AC 562; R v School Board for London, supra). In my opinion, BTC v Hingley (supra), on
which counsel for the appellant relied, is distinguishable. That was a case where the subjects were
operated with a view to profit and were of a class of subjects for which the revenue
principle of valuation was recognised to be appropriate (cf BTC v Hingley, supra, Holroyd Pearce LJ at p 36; London County Council v Churchwardens etc of Erith, supra, Lord Herschell LC at p 592).
[60] The Tribunal concluded that in the hypothetical negotiation,
the costs of care and maintenance and eventual decommissioning would be at best
a bargaining factor in the tenant's favour; but that it would not result in
there being no rent paid. That is a
factual conclusion that the Tribunal was entitled to reach. I agree with it. On that view, the obvious means by which to
reflect the effect of the tenant's care and maintenance costs in the assessment
of the hypothetical rent was by the making of an end allowance (eg Ass for Lothian v BAA, 1981 SC 141). Where such an allowance is part of a skilled
valuation exercise, the amount of it is for the professional discretion of the
valuer (JD Wetherspoon PLC v Lothian Ass,
2003 SC 400; Sinclair v Lothian Ass, [2003]
RA 202).
Issue 4 - The effect of Direction
No 2 at the valuation date
[61] In my opinion, this was a question of fact for the
Tribunal. It was entitled to find on the
evidence that at the valuation date the lifting of the Direction would have
been thought to be reasonably imminent.
Looking at the matter more widely, I think that the Tribunal had regard
to the overall effects of the regulatory regime, which may from time to time
involve specific restrictions on the occupier's use of the site. It was entitled to reflect this in an end
allowance, the amount of which was a matter for its expertise.
Disposal
[62] I propose to your
Lordships that we should refuse the appeal.
|
LANDS VALUATION
APPEAL COURT, COURT OF
SESSION
|
Lord Justice Clerk
Lord Philip
Lord Kingarth
|
[2006] CSIH 60
XA49/06
OPINION OF LORD PHILIP
in
THE STATED CASE FROM THE
LANDS TRIBUNAL FOR SCOTLAND
in the Appeal of
UNITED KINGDOM ATOMIC ENERGY AUTHORITY
Appellants;
against
ASSESSOR FOR HIGHLAND AND
WESTERN ISLES VALUATION JOINT BOARD
Respondent:
_______
|
For the Appellant: Haddow,
QC;
Morton Fraser
For the Respondent: Doherty,
QC; Drummond Miller
22 December 2006
[63] I agree that this appeal should be refused. Your Lordship in the Chair has given a full
explanation of the appellants' functions, powers, duties and liabilities and of
the history and present condition of the subjects, as well as setting out the
basis of the Tribunal's decision, all of which I gratefully adopt.
[64] Before this court, counsel for the appellants argued, as he had
done before the Tribunal, that the subjects were no longer an operational
nuclear research reactor facility. All
processing and reprocessing of nuclear fuel had ceased and the premises were in
the course of decommissioning and demolition.
All activity on the site was consequential to those purposes. In pursuance of them the buildings had to be
cleaned out and all radioactive material removed without causing damage by
contamination to persons or the property of others. The decommissioning process would take many
decades to complete, and the costs of care and maintenance of the buildings,
plant and materials during that time would run into many millions of
pounds. The length of time and the
enormous cost involved had created an extraordinary situation which could not
have been in contemplation when the system of rating was introduced. Against that background, counsel argued, the
Tribunal had been wrong to attribute value to certain buildings on the subjects
whose purpose had come to an end, and had placed too high a value on
others. This had arisen because the
Tribunal had made three errors. Firstly, they had held, wrongly, that the
appellants were in rateable occupation of the whole subjects. Secondly, they had held, also wrongly, that
the buildings on site which were awaiting the first step towards demolition,
but had within them contaminated radioactive material, fell to be valued as
stores, when in fact they were redundant and waiting for the work of clearance
to begin. Thirdly, they had ignored the
effect of the Nuclear Installations Inspectorate's Direction No.2 of May 1998
which remained in force at the valuation date and prohibited processes which
were an essential part of the decommissioning process.
[65] I agree with your Lordship that it is not now open to the
appellant to advance the argument that they were not in rateable occupation of
the subjects at all since the point is not made in the grounds of appeal. In any event, I do not consider that the
argument is well founded. It was common
ground that the contractor's principle should be applied and that the subjects
required to be valued as a unum quid. It follows that if the appellants were in
rateable occupation of part of their property they must be taken to have been
in rateable occupation of the whole, factors affecting the value to be placed
on individual buildings being taken into account in the course of the valuation
exercise. The Tribunal found that the
appellants were occupying the subjects for a variety of uses and that premises
such as offices, laboratories, workshops and ambulance stations (the list is
not exhaustive) remained in use for the purposes for which they were
designed. Buildings which had been
designed for the storage of nuclear fuels and waste were still fulfilling that
function. Those findings were, it seems
to me, sufficient to entitle the Tribunal to hold that the appellants were in
rateable occupation of the whole subjects.
[66] The appellants argued that their use of such premises was
simply ancillary to the decommissioning and ultimate demolition of the site,
and they sought support for the proposition that they were consequently not in
rateable occupation in the decision of the House of Lords in Greenock Corporation v Arbuckle, Smith & Co Ltd. In that case, the appellants were held not to
be in rateable occupation of premises which they had acquired with a view to
use as a bonded store, but had not used as such throughout the rating year,
while the premises underwent extensive alteration to bring them up to the
condition required by the HM Customs & Excise regulations. In my view the important feature which distinguishes
the present case from that case and other cases relating to the treatment of
redundant or unprofitable properties cited by counsel for the appellants is
that the regulatory framework within which the appellants operated imposed
duties on them of decommissioning redundant nuclear facilities, managing
resultant wastes safely and promoting alternative uses of the sites. The highly dangerous nature of radioactive
materials renders these duties as important as the appellants' original
functions of developing nuclear power stations and reactors. Moreover, the resources of the appellants
will be engaged just as long in the fulfilment of them as they were in the
fulfilment of the original functions.
The appellants were accordingly occupying the subjects as a public body
for the purpose of performing a public duty.
In that situation the unprofitability of the hypothetical tenancy
diminishes in significance, while the performance of the public duty provides
the motivation for the appellants to take the tenancy. See Ryde
on Rating and the Council Tax, paragraph 192. In these circumstances I do not consider that
the Tribunal erred in law in rejecting the argument that the subjects should be
viewed as redundant and waiting for demolition, and in concluding that the
appellants were in rateable occupation.
[67] The appellants' second argument related to a number of
buildings which were no longer in use for their original purposes but contained
radioactive fuel or waste in one form or another. These materials remained in those buildings
partly because of the developmental research nature of the subjects and partly
because of restrictions on the transporting and disposing of them. Management of these radioactive materials,
either passively or in the course of active decommissioning, is a major part of
the appellants' activity on the subjects, and includes the conditioning,
treatment, packaging, preparation for storage and disposal and storage of the
materials. The ultimate intention is
that these materials will be removed from the site. However, there are two reasons why that
cannot be done in the foreseeable future, so that the appellants face the
prospect of continuing to manage them for many decades to come. Firstly, the material requires to be brought
to a condition in which it can be removed with safety to persons and
property. In some cases this is achieved
by allowing radioactivity to decay naturally, a process which may take many
years. Secondly, no ultimate disposal
facility for radioactive material has been identified by the Government and it
is not known when a decision will be made.
[68] As I have already mentioned, there are buildings on the site
which were originally designed for the storage of nuclear fuels and waste which
continue to be used for that purpose.
The appellants accepted that the stored radioactive material in those
buildings was properly to be regarded as tenants' material, and that the
storage of the material in those buildings was a valuable use. It was further conceded by counsel for the
appellants that, if Dounreay were to become a permanent store for radioactive
waste, that would represent a valuable use of the subjects. Before the Tribunal, both parties presented
their valuation evidence on the basis that the radioactive material fell to be
regarded as tenants' materials. It is
not now open to the appellants to argue otherwise. In all these circumstances, and having regard
to the functions and duties of the appellants which obliged them to undertake
responsibility for the long term decommissioning of the site, I consider that
the Tribunal were entitled to conclude that the appellants were making valuable
use of the buildings which contained the radioactive materials.
[69] Before the Tribunal the appellants also argued that the costs
of the care and maintenance of redundant buildings and plant were so great that
they eliminated what would otherwise be the rental value, so that no
hypothetical tenant would pay a rent.
That argument was rejected by the Tribunal. There is no reference to this aspect of the
Tribunal's decision in the appellants' grounds of appeal, and, insofar as
counsel relied on the same argument before this court, it seems to me that it
was not open to him to do so. Be that as
it may, I consider that the Tribunal's rejection of the argument disclosed no
error of law. After a careful analysis
of the evidence before them they concluded that it was not possible to
ascertain the proportion of the appellants' total expenditure on care and
maintenance attributable to redundant buildings and plant. That conclusion of fact was not
challenged. The Tribunal then took the
view, that the hypothetical landlord would reject the mathematical approach of
deducting the liabilities of the tenant from the rent otherwise arrived
at. Their reasons were the uncertainty
as to the precise allocation of the tenants' expenditure, the tenants' need for
the subjects, and the fact that the tenants' operations as a whole involved
very much greater expenditure all of which was fully funded. Instead the Tribunal chose to make an end
allowance of £1,500,000, which represented something under 10 per cent of the
appellants' average total annual expenditure on care and maintenance. That was an approach which, as an expert
tribunal and on the material available to them (or the lack of it) they were
fully entitled to take.
[70] The appellants sought support for a nil valuation in the
decision in British Transport Commission v
Hingley. In that case the Court of Appeal affirmed a
Lands Tribunal decision assessing the rateable value of Grimsby Docks, part of
the undertaking of the Commission, at nil.
The docks had cost millions of pounds to construct and had been run at a
considerable loss for some years. There
was however no question of their being closed down because the Commission had a
duty to have regard to the needs of the public, agriculture, commerce and
industry in the provision of port facilities.
The only point at issue in the case was whether the revenue principle or
profits basis should be applied to the valuation of the docks. The court having held that it should, no
reasoned alternative figure to the nil valuation was put forward on behalf of
the valuation officer and accordingly the court did not consider the level of
the assessment. In these circumstances
it does not seem to me that the case is of great assistance to us in the
present case. There is a further
distinction in that the Commission were bound to operate the docks with a view
to profit. There is no similar obligation
on the appellants in the present case.
[71] There remains the appellants' argument that the Tribunal
misdirected themselves in their treatment of the Nuclear Installations
Inspectorate Direction No.2 of May 1998 prohibiting certain processes which
were an essential part of the decommissioning process. The Tribunal took the view that the Direction
would not have any material effect on the rent since the lifting of the
restrictions imposed by it was reasonably imminent as at the valuation
date. In my view the Tribunal's approach
to this aspect of the case is not open to criticism. The appellants were engaged in the long-term
decommissioning of the site, a task which would take many decades to
accomplish. The restrictions imposed by
the Direction affected only part of the subjects and were expected to be
removed within the year following the valuation date. The Tribunal were entitled to regard the
effect of the Direction as being in the nature of a transient factor which in
all the circumstances would not affect the level of rent which the hypothetical
tenant would be prepared to pay. In my
view, their approach discloses no error of law.
|
LANDS VALUATION
APPEAL COURT, COURT OF
SESSION
|
Lord Justice Clerk
Lord Philip
Lord Kingarth
|
[2006] CSIH 60
XA49/06
OPINION OF LORD KINGARTH
in
THE STATED CASE FROM THE
LANDS TRIBUNAL FOR SCOTLAND
in the Appeal of
UNITED KINGDOM ATOMIC ENERGY AUTHORITY
Appellant;
against
ASSESSOR FOR HIGHLAND AND
WESTERN ISLES VALUATION JOINT BOARD
Respondent:
_______
|
For the Appellant: Haddow,
QC;
Morton Fraser
For the Respondent: Doherty, QC; Drummond Miller
22 December 2006
[72] The appellant's first contention is that on the facts found it
could not be said to have been in rateable occupation of any part of the
subjects. The basis for that contention
is the submission that the sole, or at any rate main, activity carried out on
site was that of decommissioning and demolition of the heritable subjects. This, it was said, could not be regarded as
actual use of the heritable subjects, following the approach in Greenock Corporation v Arbuckle Smith & Company. Any other activities carried on on site could
be regarded as ancillary to decommissioning and demolition.
[73] It is to be noted at the outset that this apparently
far-reaching argument is not foreshadowed in the grounds of appeal, and it was
not, in the event, it seemed to me, strongly pressed. Given the findings of the Tribunal, that, in
my view, is not surprising.
[74] In the first place it is accepted that the Tribunal (at
paragraph 68 of its decision) reasonably assessed that there were four things
which, very broadly, were happening at the site in 2000. In addition to there being buildings and
plant which were simply redundant, no longer containing radioactive materials
but requiring specialist care and maintenance (the "redundant parts"), and
there being, further, a variety of buildings, including some of the highly
specialised plants such as reactors, which still in some way or another
contained radioactive fuel or waste, either being actively decommissioned, or
awaiting decommissioning or further decommissioning processes (the
"contaminated parts"), the Tribunal found:
"1. There were very considerable areas of
offices, labs and other support
facilities,
not affected by contamination. Some of
this was redundant and not valued by the assessor. Much of it was, however, in 'ordinary' use
and agreed to have, in itself, a positive value. (The 'ordinary parts').
2. There were some other areas designed
and being used for storage,
whether
temporary or permanent, of radioactive materials. Again, in general, such areas were agreed to
have, in themselves, positive values, albeit there were questions about, for
example, the effect of the N.I.I. Direction.
(The 'proper storage')."
Not surprisingly, subject no doubt
to the question of whether the use of the "ordinary parts" and the "proper
storage" could be treated simply as ancillary to the claimed non-use of the
rest of the site, the Tribunal had little difficulty in finding (at paragraph
75) that there was at least such occupation and use of these two last-mentioned
parts as to be sufficient to satisfy the test for rateable occupation, and
that, since the subjects required to be valued as a unum quid, occupation and use of part of the subjects would amount
to rateable occupation of the whole.
[75] As to whether the use of the ordinary parts and proper storage
could be treated as simply ancillary to decommissioning and demolition
activities carried on elsewhere, the Tribunal concluded as a matter of fact -
even before consideration of whether the appellants' use of the contaminated
parts could be said to have been valuable use - that the appropriate characterisation
of the subjects was that they were subjects having a variety of uses, as
opposed to being subjects in the course of decommissioning and demolition with
other uses being merely ancillary (paragraph 75). Having regard to the findings in fact which
were made, I am unable to say that it was not entitled to reach that view. In particular, in paragraph 10,
decommissioning is described as involving broadly three stages - the removal of
radioactive material and installed equipment from buildings, the dismantling of
plant other than the building itself, and the ultimate demolition of the
building and restoration of the land. It
is clear from the findings at paragraph 9 that it was found that the primary
focus of activities was not merely on decommissioning, but also on the safe
management of the whole site, including containing waste from activities
previously carried out there and the storage or disposal of radioactive
materials recovered in the course of decommissioning. It is clear from finding 14 that it was found
that management of radioactive fuels and waste on site included conditioning,
treatment, assaying, packaging, preparation for storage and disposal and
storage of nuclear fuel and radioactive wastes.
In addition it was found that the subjects were a centre of excellence
for research in decommissioning and the safe management of waste, and that the
research work at the subjects resulted in unique opportunities to share
knowledge and experience for the wellbeing of the country and with many other countries.
[76] In any event I am not persuaded that as a matter of law there
is support in any of the authorities to which we were referred for the
proposition that the identified use of the "ordinary parts" and the "proper
storage" could, if regarded as merely ancillary to decommissioning and
demolition, lead to a finding that the appellant was not in rateable occupation
of the subjects. Their Lordships in Greenock Corporation v Arbuckle Smith & Co. did not need to
address the question of whether there would have been rateable occupation if,
for example, offices or storage facilities had been used on site for their
design purposes, albeit secondary to the purpose of making alterations
elsewhere with a view to carrying on a particular business when the alterations
were completed. And, if anything,
although no direct comparisons can be drawn, the so-called contractors' hut
cases to which we were referred (including Ass.
for Dumbarton v L.K. McKenzie &
Partners 1968 SLT 82, Mitchell
Brothers v Assessment Comm,. of
Worksop Union 1905 TLR 62, John Laing
& Son Limited v Assessment Comm.
for Kings Wood Assessment Area 1949 1 KB 344 and London County Council v Wilkins
(Valuation Officer) 1957 AC 362) might be said to point away from the
conclusion which the appellant seeks to draw.
[77] The appellant's second, and ultimately main, submission was
that the Tribunal erred, in its application of the contractor's principle, by
ascribing value to occupation of the contaminated parts. There were essentially two strands to this
submission. It was said that the
Tribunal had erred in treating radioactive fuel and waste kept within the
contaminated parts as being the hypothetical tenant's material (paragraph 82). Secondly, it was submitted that it erred in
treating the containment of that radioactive fuel and waste within the
contaminated parts as storage of value to the hypothetical tenant (paragraphs
82 and 83).
[78] I have considerable doubt as to whether the first of these
strands of argument is now open to the appellant. It seems plain that both it and the
respondent, and all the witnesses, proceeded before the Tribunal on the view
that the relevant material would require to be treated as the hypothetical
tenant's material. It is recorded at
paragraph 29 that "The valuation evidence of both parties proceeded upon the
basis that that material was tenant's material". Counsel for the respondent argued,
persuasively, that the evidence led in relation to the material (in particular
as to its nature and origins and as to why it was where it was) would have been
different, certainly more extensive, had that not been the position. As has been emphasised many times, this court
is not a court of first instance, but a court of review (see e.g. Ass. for Strathclyde Region v B.P. Refinery Grangemouth Ltd. and Texstyle World v Ass. for Strathclyde Region).
In any event, in my view, the appellant's argument is not sound. It was in accordance with ordinary principles
that the Tribunal treated such moveables within the lands and heritages as the
tenant's, and the appellant itself accepted that it was right to do so in
respect of the materials in the so called "proper storage". The fact that it was agreed on all sides that
the only conceivable hypothetical tenant was the actual occupier meant that
there was no need to consider the apparent absurdity of any hypothetical tenant
bringing such radioactive materials or waste to the site, as at some points
appeared to be suggested in argument.
[79] As regards the second strand of argument in support of the
second main submission, although the matter is not straightforward, I have come
to the view that it cannot be said that, on the findings made, the Tribunal was
not entitled to reach the conclusion it did.
This (at para. 82) was that the hypothetical tenant would be
"making a
valuable use of the buildings, which he needs for that necessary purpose of
keeping his material safe ... We do not find it difficult to see that as a form
of storage, as the assessor contended.
The fact that this was not the original intended use of the building
seems to us immaterial to the principle.
We entirely accept that care must be taken in valuing buildings which
are not being used for their original purpose.
Incidentally, it seems to us not necessarily correct to suggest that
these buildings were not designed to keep radioactive material safe; that must have been an important part of
their original design purpose".
Without going into the detail to
which we were referred in argument, it seems to me that counsel for the
respondent was right to stress that in its findings in fact the Tribunal found
that in many of the buildings making up the "contaminated parts" there remained
very substantial quantities of radioactive materials and waste. For example in the Fuel Cycle Area it was
found (at para. 25) that in the Billet Production plant for MTR fuel building
(D1203) approximately 1.3 Te of uranium remained and required constant
monitoring. A large number of 200 litre
steel drums contained active waste which had been allowed to accumulate in the
plant and some of its offices. One area,
known as the amber area, which had been abandoned more than 10 years
previously, was seriously contaminated and had not undergone any decommissioning. A further MTR Repossessing Plant building
(D1204) was found to contain significant radioactive waste requiring constant
monitoring. It is clear from the
findings of the Tribunal that all such contaminated waste required, in many
cases over substantial periods, to be contained safely by the appellants in
accordance with their licensing obligations.
It is difficult, I think, to dispute the conclusion that use of the
buildings for such containment was a valuable use of them, just as containment
in the so-called proper storage was accepted to be by the appellant.
[80] The effect of both of the first two submissions made by the
appellant is, it was argued, that there should have been a nil valuation
(albeit reached by a different route in each case). BTC
v Hingley was cited in support of the
proposition that even where the occupation of subjects could be said to be for
public benefit, and even where it was clear the enterprise in question could be
said to make significant use of "the benefits of sewage and lighting and
education for the children of its employees" (and thus where there was a strong
argument that some contribution to the rate should be made (p. 32)), it was
entirely possible to arrive at a nil valuation.
In that case it was clear that the docks undertaking in question could
be run only at a loss, and the conclusion was reached that the hypothetical
tenant would consider that the loss in operating was such that he would not be
justified in offering anything as rent and that the landlord would accept such
an offer knowing that the docks would be operated and kept in good order. Equally in the present case there could be no
question of the subjects of this appeal being productive of any profit. Instead the appellant's responsibilities
could only be undertaken at very significant cost.
[81] It can of course be said that it was held in that case that the
docks undertaking was, on the basis of the authorities, properly valued on the
profits basis (or revenue principle). By
contrast, in the present case, the parties were agreed that the contractor's
principle was the proper approach to be adopted, and that the occupier, who was
the hypothetical tenant, had significant statutory duties and licensing
obligations in respect of inter alia
containing the radioactive wastes on site.
It has long been recognised that the contractor's principle is often
appropriate in cases where a public authority occupies subjects in accordance
with a public duty in circumstances where no profit is sought, or could be
obtained, from the subjects. As is said
in Ryde on Rating and the Council Tax,
at
paragraph 192:
"If a
public body has to perform a public duty which involves the occupation of land
or buildings, it will give a rent for such land or buildings, even though the
occupation necessarily involves a pecuniary loss. The land has a value, though it produces no
profit ... Nor should it make any difference if the hereditament is occupied not
in the exercise of a statutory duty but only of a statutory power. Such occupation can clearly be beneficial, on
the principle set out above, even though the occupation involves no pecuniary
gain, or even a pecuniary loss. The
benefit lies in the facility afforded by the occupation of the hereditament for
the exercise of the statutory powers".
In addition, BTC v Hingley can be
distinguished on its facts in a number of respects - for example in that case
the statutory duty of the undertaking was to collect a revenue and cover
expenses, and the Transport Commission had no right to reimbursement of losses,
such losses being met by loans.
[82] All of that said, however, it is not easy, on the face of it,
given at least the apparent broad similarity of the two situations, to justify
the marked difference in outcome between the sort of result which can be
obtained in a case like BTC v Hingley, on the basis of the revenue
principle, and the positive value likely to be obtained by application of the
contractor's principle in a case such as the present. Both principles are, after all, different
ways of assessing the rent at which the subjects in question might reasonably
be expected to be let from year to year on the basis of the same statutory
hypothesis. It was recognised, for
example, in BTC v Hingley itself that
"The
contractor's basis has been consistently applied to cases where, for instance,
a local authority has to provide sewage works that could not produce a revenue,
or an educational institution whose object is not the collection of
revenue. It is assumed that the
authority which has to construct the works of the building would as a
hypothetical tenant be prepared to pay as a rent a reasonable percentage on the
costs of the works or building which it would otherwise have to construct (West Kent Main Sewerage Board v Dartford Assessment Committee etc). It is conceded in this case that any
assessment founded on the contractor's basis would produce far too high a
figure owing to the very large cost of constructing these docks, and that the
contractor's basis was inapplicable".
Perhaps all that can be said is
that the contractor's principle may be more likely to recognise the value of
land to an occupier in circumstances where there is a clear public duty to
occupy the subjects. Further it seems
clear from the decision in BTC v Hingley
that the court might have been prepared to modify the nil result obtained on
the profits basis if there had been material available to enable that to be
done, which there was not. It may also
be said that the risk of obtaining too high a value by application of the
contractor's principle can be controlled in a number of ways. In the first place the assumption is
(broadly) that the landlord would be looking for a reasonable return on his
investment, not for everything he could obtain from the hypothetical tenant
who, ex hypothesi, requires, in the
exercise of a duty, to occupy. Secondly,
and perhaps more importantly, the value initially achieved by application of
the principle can be substantially modified by application of end allowances -
such as was done, for example, in Ass.
for Lothian Region v British Airports
Authority (1981 SC 141). In the
present case the Tribunal made end allowances to reflect the additional care
and maintenance burden, and to reflect the disadvantage of the particular
subjects, arising from the impact of the onerous security, safety and
regulatory regime applicable to the nuclear decommissioning industry, and its
assessment of these allowances was not, as such, criticised in this appeal
(albeit it was submitted that the care and maintenance allowance in particular
would necessarily have been substantially greater had the appellant's second
main submission been accepted).
[83] Finally, I deal shortly with the third submission presented by
the appellant, to the effect that the Tribunal erred in its treatment of the
Direction of 11 May
1998, in particular in respect of its conclusion that it would
not have had any material effect on the rent (paragraph 111). On the findings in fact which were made, it
is difficult to say that the Tribunal was not entitled to form that view. In paragraph 20 it was found as a matter of
fact that "As at 1 January
2000, there was an expectation that the restrictions would be
lifted soon, within the year 2000". It
was further noted by the Tribunal, at paragraph 110, that although the restrictions
imposed were extensive, they involved only parts of the subjects and that a
hypothetical tenant would have regard to his own ability to put matters right
in order to have the restrictions lifted.
The assessment of matters of fact, including the transitory or permanent
nature of factors which might affect value, was essentially a matter for the
Tribunal (see e.g. Armour, Valuation for
Rating, Fifth Edition, at paras.
5-53 and 5-55). I am not persuaded that
the Tribunal can be said to have misdirected itself in any way in this respect.
[84] In my opinion the appeal falls to be refused.
