LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Hardie Lord Malcolm	[2010] CSIH 91 OPINION OF THE LORD JUSTICE CLERK in the STATED CASE for the Opinion of the Court in the case ASSESSOR FOR CENTRAL SCOTLAND VALUATION JOINT BOARD Appellant; against BANK OF IRELAND Respondent: (Subjects: ATM, Main Street, Polmont) _______

For appellant: Stuart, QC; Wright Johnston & Mackenzie

For respondent: Connal QC, Solicitor Advocate; McGrigors

10 December 2010

Introduction

[1] This appeal relates to the site of an automated teller machine (ATM) within a Sub Post Office at Main Street, Polmont. On the installation of the machine, the assessor entered the site of it in the Roll at a rateable value of £2,750 with effect from 22 February 2008. The subjects are described in the Roll as "ATM (site of), Post Office, Main Street, Polmont." The Tenant/Occupier is listed as the Bank of Ireland. The Bank appealed against the entry on the ground that the subjects were not in separate rateable occupation. By a decision dated 19 November 2009 the Valuation Appeal Committee for Central Scotland allowed the appeal. The assessor appeals against that decision.

The findings in fact

The contracts

[2] The Post Office and the Bank of Ireland have an Agreement for the Supply of Cash and for the Installation, Operation and Maintenance of ATMs (the Agreement). An individual ATM is installed under a Licence Agreement (the Licence) between the Post Office and the Bank in implementation of the Agreement. Under the Agreement, the Post Office undertakes operational responsibilities for the ATM. It supplies the cash for it and is reimbursed by the Bank.

[3] The Licence gives the Bank the right to install and keep an ATM on the site. It gives the Bank such access to it as it may reasonably require to perform its obligations under the Agreement. The Bank can take this access through the Sub Post Office. The Licence is for a term of eight years.

[4] Where an ATM is installed at a Sub Post Office, the site of it is chosen by agreement among the Post Office, the sub-postmaster and the ATM's owner and operator on behalf of the Bank. The site can be varied by agreement, although this is unlikely in practice.

[5] The obligations of the sub-postmaster are set out in a document called Consolidated Terms and Conditions. Under the Consolidated Terms and Conditions the sub-postmaster is obliged to refill the ATM. He is responsible for first-line maintenance, such as replacing the receipt roll, clearing jams and cleaning, and such other maintenance as the Bank may instruct. He must notify the Bank if the ATM breaks down or requires maintenance by engineers. The sub-postmaster cannot terminate the Licence during its term without the consent of the Post Office. If the outlet is sold, the Consolidated Terms and Conditions oblige him either to ensure the continued operation of the ATM or to pay for its removal and compensate the Post Office.

[6] The Bank pays the Post Office a commission that is partly fixed and partly based on usage. The sub-postmaster is paid a commission by the Post Office. Commission levels are higher for external than for internal ATMs.

[7] The Agreement provides that the Bank must not advertise on the ATM any services that compete with those provided by the Post Office. The Post Office must not advertise its counter services in a manner that would encourage its customers to use those services rather than the ATM.

The ATM and its site

[8] The ATM in this case is bolted to a concrete base on the floor of the sub Post Office. It is entirely within the boundary of the Post Office's property. It projects through the glass frontage of the building. The key pad and the screen are accessible only from outside. Planning permission and building warrant were required since the installation of the ATM necessitated alterations to the building.

[9] The floor area on which the ATM is sited cannot be used for any other purpose. It and the area of frontage occupied by the ATM are dead space so far as the Post Office is concerned. The Post Office and the sub-postmaster have no power to control or use the ATM, and have no control over its external face.

[10] The ATM can be used when the sub Post Office is closed. It is available to Bank customers and cardholders of the LINK organisation 24 hours a day and 365 days a year. At the effective date the Post Office was not a member of LINK.

[11] The parties agree that the ATM is moveable.

The Committee's decision

[12] The Committee held that the appeal subjects were not separately rateable. It gave six reasons. First, the ATM was located in the Post Office. Second, its precise location was fixed by agreement between the sub-postmaster and the ATM owner. Third, while the ATM was entirely within the Post Office, customer access to it was from the pavement outside. Fourth, although planning permission and building warrant had been required, that did not make the ATM separately rateable: for rating purposes it was indistinguishable from a machine to which customers had access inside the building. Fifth, the day to day running of the ATM was dealt with by the sub-postmaster, the Bank being involved only if major repairs were required. Sixth, the ATM was a pertinent of the Post Office, not of the machine owner. Although it was bolted to the floor, it had not become heritable by accession.

Conclusions

[13] In Ass for Lanarkshire VJB v Clydesdale Bank plc and Anr (2005 SLT 167) this court dealt with the question whether in-store ATM sites should be entered in the Valuation Roll as separate lands and heritages. That case concerned two groups of stores, namely Marks and Spencer, a major national retailer, and Botterills, a small local group of convenience stores. On the terms of the agreement between the bank and the retailer in each case and on the findings in fact made by the Lands Tribunal, we held that the sites should not be entered in the Roll, the paramount occupation of them being that of the store operators. Our reasons were in essence that the agreements in those cases did not, expressly or impliedly, confer on the bank any right of occupation of the sites. The agreements, in our view, related to the supply, use and control of an item of moveable property that the bank supplied to the retailer as one of its retail attractions. The bank could not be said to occupy the floorspace in any real sense. We also considered that any right of occupation that the agreements could be thought to confer on the bank was subordinate to that of the retailer.

[14] In this appeal, the Bank takes its stand on the Clydesdale Bank decision. The short but important question is whether the factual differences in this case regarding the siting of the ATM and the use of it, and the contractual relationship between the Bank and the sub-postmaster, point to a different conclusion on the question of rateable occupation.

[15] In my opinion, the crucial difference in this case is that there is no direct link between the ATM site and the operation of the Sub Post Office. The ATM cannot reasonably be said to be one of the retail attractions provided in the Sub Post Office for its customers. Where an ATM is sited within a retail store, it is reasonable to infer that its primary purpose is to provide a facility for shoppers enabling them to access cash in-store in the course of shopping there. It is reasonable also to infer that few users will go to the store solely to obtain cash from the ATM.

[16] In this case, however, although the ATM rests on the floor of the Sub Post Office, the operative part of it from the user's point of view is accessible only from outside. The ATM is therefore not an in-store facility. Within the Sub Post Office the site of it is in effect dead space. The ATM is intentionally provided for the use of general public. For that purpose the building has been altered and adapted by the opening of an aperture in the glass frontage of the building in virtue of a planning permission and a building warrant. Furthermore, the usage of the ATM is entirely unrelated to the opening hours of the Sub Post Office.

[17] The sub-postmaster has no access to the ATM site save for re-filling and for simple first line maintenance, for all of which he receives a commission. Beyond that, he has no rights or duties in relation to the machine.

[18] I conclude that on the facts of this case it is the Bank that is in rateable occupation of the ATM site. The site should therefore be entered separately in the Roll.

Disposal

[19] I propose to your Lordships that we should allow the appeal.

LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Hardie Lord Malcolm	[2010] CSIH 91 OPINION OF LORD HARDIE in the STATED CASE for the Opinion of the Court in the case ASSESSOR FOR CENTRAL SCOTLAND VALUATION JOINT BOARD Appellant; against BANK OF IRELAND Respondent: (Subjects: ATM, Main Street, Polmont) _______

For appellant: Stuart, QC; Wright Johnston & Mackenzie

For respondent: Connal QC, Solicitor Advocate; McGrigors

10 December 2010

[20] I agree that for the reasons given by your Lordship in the chair the circumstances regarding the siting of the ATM and its use as well as the contractual relationship between the bank and the sub-postmaster point to a different conclusion on the question of rateable occupation from that arrived at by the court in the Clydesdale Bank decision. The ATM is provided for the benefit of the general public passing the sub post office. On no view could the ATM be described as a facility primarily for the benefit of the sub-postmaster to assist him in the efficient operation of the sub post office. The involvement of the sub-postmaster in replenishing the machine with cash, replacing stationery and undertaking primary maintenance is, in my opinion, no different from the services provided to banks by security companies in respect of ATMs located at bank branches and elsewhere.

[21] For the reasons given by your Lordship in the chair I respectfully agree that the bank is in rateable occupation of the ATM site and that the site should be entered separately in the Roll. In these circumstances I agree that we should allow the appeal.

LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Hardie Lord Malcolm	[2010] CSIH 91 OPINION OF LORD MALCOLM in the STATED CASE for the Opinion of the Court in the case ASSESSOR FOR CENTRAL SCOTLAND VALUATION JOINT BOARD Appellant; against BANK OF IRELAND Respondent: (Subjects: ATM, Main Street, Polmont) _______

For appellant: Stuart QC, Wright Johnston & Mackenzie

For respondent: Connal, QC; Solicitor Advocate; McGrigors

10 December 2010

[22] I gratefully adopt the summary of the background circumstances set out in the Opinion of your Lordship in the chair. The sole question is whether the Valuation Appeal Committee was correct to conclude that the Bank of Ireland (the bank) is not in rateable occupation of the appeal site. In this context in Assessor for Renfrewshire v Old Consort Co Ltd & Another 1960 SC 226 Lord Guest drew attention to the following considerations: (1) rateability depends upon occupation, not title; (2) rateable occupation must include some actual possession which has some degree of permanency (a clearly defined fixed term can suffice); and (3) in a case where arguably two or more persons are in occupation, the task is to identify whose occupation is paramount and whose is subordinate. In Corporation of Greenock v Arbuckle, Smith & Co Ltd 1960 SC (HL) 49, Lord Keith of Avonholm explained that for rateable occupation there must be such use "as would amount to enjoyment of the beneficial value of the subjects."

The submissions for the assessor

[23] In essence the submission by Mr Stuart, QC on behalf of the assessor and in support of the appeal was that the relevant facts and circumstances, including the contractual arrangements between the bank and the post office, demonstrate that the appeal site is used by the bank for the provision of banking services through its ATM, and that it has the right to occupy the subjects for several years for that purpose, including, where necessary, rights of access to it. Counsel stressed that the usage of the ATM is physically separated from the post office premises themselves. It is so constructed and positioned that it can be used only from the pavement outside. Unlike the post office itself, it is in operation 24 hours a day, seven days a week. It is used solely for banking purposes. While the sub-postmaster services the machine by placing cash in it, and by dealing with minor problems and routine maintenance, that is paid for by the bank through commission and is carried out on behalf of the bank. It was accepted that the post office gains some benefit from the ATM, but that does not alter the basic position that the appeal subjects are used by the bank for its purposes, and occupied by it by virtue of the placement and operation of its ATM. Were the ATM to be removed, work would require to be carried out to reinstate the frontage of the building.

The submissions for the bank

[24] On behalf of the bank, Mr Connal QC, solicitor advocate, submitted that there is no material distinction between the contractual arrangements in the present case and those involved in the decision of this court in Assessor for Lanarkshire Valuation Joint Board v Clydesdale Bank plc 2005 SLT 167. He rehearsed certain parts of the contract between the bank and the post office and submitted that the proper result is no separate rateable occupation of the ATM site by the bank. If there is occupation by the bank, it is subordinate to that of the post office. Echoing phraseology in the Opinion of the Court in the Clydesdale Bank case, it was submitted that the current agreement relates to the operation of a machine placed in the post office premises. The external and 24 hour usage by a different customer base does not alter this. It was stressed that the sub-postmaster services the ATM. The bank will be contacted only if a problem cannot be resolved. Emphasis was placed on the benefits to the post office from the operation of what was described as a "post office facility", namely increased footfall and the payment of commission.

The Clydesdale Bank decision

[25] It is necessary to consider the circumstances behind the Clydesdale Bank decision. The appeal sites under consideration consisted of parts of the floors of retail premises on which ATMs had been placed. Three of the appeals related to Nationwide Building Society ATMs in stores operated by Marks and Spencer plc, and two related to Clydesdale Bank ATMs in Botterills convenience stores. The ATMs were free-standing and were positioned within the trading areas. They benefited the retailers by providing ready cash for customers and, at least in the Botterills' cases, attracting new customers. The ATMs could only be accessed from within the stores during trading hours. The Lands Tribunal had considered it "abundantly clear" that the machines were primarily for the benefit of the retailers to assist them in operating their stores efficiently as trading units. Counsel sought to uphold the Tribunal's decision and resist the assessor's appeals on the basis that the case was about the provision of cash as part of the retail services. The ATMs were merely part of an array of useful services provided by the retailers. They had no set or fixed location, and did not amount to a separate and distinct use of land. In any event, if the issue of occupancy did arise, the retailers retained the predominant right.

[26] In essence this court upheld those submissions. Reference was made to the "trifling areas of floorspace" upon which the machines were placed. Their owners had no right of occupation of a specific and clearly defined site. The agreements simply related to "the supply, use and control of an item of moveable property that the bank supplies to the retailer ... for use by the retailer as one of its retail attractions." It was held that in each case the bank could not be said to occupy the floorspace in any real sense, having at most a right of access to the machine. No question of rateable occupation by the bank arose, but if it did any such right would be subordinate to that of the retailers.

Discussion and Decision

[27] In my opinion the very different circumstances of the present case justify a different conclusion from that reached in the Clydesdale Bank appeal. I refer in particular to the 24 hour and seven days a week external usage of the ATM, and to it being fixed to the frontage of the building in a clearly defined position for at least eight years. Furthermore the premises were altered to accommodate the ATM. In my view the agreement in the present case relates primarily to the provision of banking services to those passing by the post office, though no doubt some of them will also enter the premises. The ATM is not an adjunct to services offered to customers of the post office. It is a separate service provided by the bank to a different customer base. The specific, albeit small site, is exclusively devoted to an ATM owned by the bank, controlled by the bank, and operated for the bank's purposes. The bank pays the post office for the use of the site and for the maintenance services provided by post office personnel. In short, and to use Lord Keith of Avonholm's phraseology, the bank enjoys the beneficial value of the subjects. In my opinion there is sufficient disconnection between the usage and purposes of the ATM site and the rest of the premises to indicate independent uncontrolled occupation of the appeal site by the bank for the purposes of the bank's business. A unum quid valuation would not be appropriate given the separate functions and purposes. In the Clydesdale Bank appeals the ATMs could be regarded as accessory to the retailers' premises and purposes. In the present case it is not only realistic, but in my view correct to regard the appeal site as in the rateable occupation of the owner of the ATM.

[28] While Mr Connal emphasised the services provided by post office staff in the running of the ATM, in my view these are wholly consistent with the above analysis. If the post office is to be seen as exercising some occupation or control over the appeal site, it does not interfere with the full and exclusive enjoyment of the site by the bank, rather it is paid for by the bank on the basis that it facilitates the bank's operation of the ATM. If, contrary to the view reached above, there is an element of shared occupation, no rivalry is involved. The bank's rights are paramount so far as the appeal site is concerned.

[29] For the above reasons I would allow the appeal.