UT Neutral citation number: [2010] UKUT 40 (LC)

LT Case Number: RA/27/2008

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – exemption – agricultural building – stables on farm used for DIY livery – horses grazing land and being fed haylage produced on land – whether buildings used solely in connection with agricultural operations on that land – held they were not – whether building used for keeping livestock – held it was not – Local Government Finance Act 1988 Sch 5 paras 1, 3, 5 and 8

                  IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

                                 MANCHESTER NORTH VALUATION TRIBUNAL

                                                                           BY

                                                                  JILL TUPLIN                                           Appellant

                                                              (Valuation Officer)

                                                         Re: Home Farm Stables,

                                                                Hill End Lane,

                                                                Mottram, Hyde,

                                                                Cheshire, SK14 6JP

                                                           Before: The President

                                  Sitting at 43-45 Bedford Square, London WC1B 3AS

                                                              on 5 February 2010

Daniel Kolinsky instructed by HMRC Solicitor for the appellant.

The following cases are referred to in this decision:

Whitsbury Farm and Stud Ltd v Hemens (VO) [1988] 1 AC 601

Gilmore (VO) v Baker-Carr [1962] 1 WLR 1165

W & J B Eastwood Ltd v Herrod [1971] AC 160

Belmont Farm Ltd v Minister of Housing and Local Government (1962) 13 P & CR 417

The following further cases were referred to in argument:

Bishop v Walker (VO) [1988] RVR 128

Evans v Bailey (VO) [1982] JPL 454

Withers v Dalling [2004] RA 182

Cook (VO) v Ross Poultry Limited [1982] RA 187

Normanton v Giles [1980] WLR 28

                                                                    DECISION

1.           This is an appeal by the valuation officer against a decision of the Manchester North Valuation Tribunal of 12 February 2008 which determined that 17 do-it-yourself livery stables at Home Farm Stables, Hill End, Mottram, Hyde, Cheshire, were agricultural buildings and so exempt from rating under Schedule 5 to the Local Government Finance Act 1988.  The effect of its decision was that the entry in the rating list was altered from “Stables” at £3,500 rateable value to “Manège” at £800, the latter reflecting the value of a manège at the property which was accepted by the ratepayer to be rateable.

2.           The stables form part of a hereditament known as Home Farm, which, besides the stables and the manège, contains 55 acres of agricultural land and a dwellinghouse called The Old Hillend Farmhouse.  They are all in the occupation of the ratepayer, Miss Lesley Cheetham, who occupies under an agricultural tenancy.  The house is domestic property and so not rateable, and the agricultural land is exempt from rating under paragraph 2 of Schedule 5.  The VO, Jill Tuplin IRRV; who said that she had visited the farm and interviewed Miss Cheetham, had signed a witness statement and produced a statement of facts.  I derive from those the facts that are set out below.

3.           Home Farm is situated in a rural village close to the boundary of the High Peak National Park and about 10 miles to the east of the centre of Manchester.  It lies between the villages of Mottram in Longdendale and Broadbottom.  The Old Hillend Farmhouse and the adjacent Home Farm buildings are at the end of a narrow, partially surfaced, track off Hillend Lane.  The track also provides access to a terrace of cottages. 

4.           There are five blocks of stables containing looseboxes.  Stable block A, constructed in brick and slate, contains 5 looseboxes, two of which are for Miss Cheetham’s private use.  Stable block B, which is constructed of concrete block with a corrugated metal mono-pitched roof, contains 3 looseboxes.  These are small and are more suited to ponies.  Stable block C is of timber and brick construction with a profiled mono-pitched roof.  It contains 3 looseboxes.  Stable block D is attached to the dwellinghouse and is of traditional slate and stone construction and contains 6 looseboxes.  It faces an open-sided agricultural barn used, at the time of the VO’s inspection, for the storage of straw.  It is connected by a timber and metal canopy to Block E, which is of engineering brick and slate construction and contains 2 looseboxes, together with an open-sided area used for agricultural storage.  Of the total of 19 looseboxes, therefore, 17 are held available for DIY livery use.

5.           Under the DIY livery system Miss Cheetham provides stabling for horses owned by others.  The horse owner is provided with a loosebox but is responsible for feeding, grooming, mucking out, riding and giving general care to the horse.  At the material day, 1 February 2007, the DIY livery charge for each horse was £24 per week throughout the year, broken down into £15 for stabling, including water and electricity, £6 for use of the manège and £3 for grazing.

6.           Each of the looseboxes contains a partitioned area for the storage of tack and feed.  All of the stables are connected to an electricity supply and light.  Water is provided by a single tap within a shared yard and is taken by bucket or can to the troughs within the looseboxes.  Each of the looseboxes opens onto the communal yard, which is fully surfaced and drained and is fenced by metal railings and gates.  The owners of the horses visit at least once a day to maintain the condition of their horses by providing water, feed, grooming and exercise.  The manège lies to the rear of blocks A, B and C and access to it is by a grassed strip from the communal yard.  It has a sand and rubber surface, is drained and fully fenced.  It is of standard size and is used entirely for the schooling of horses and riders and also for the purposes of exercise.

7.           There are facilities on site for housing four motorised horseboxes for the use of customers in transporting horses to and from shows or for riding elsewhere.  No extra charge is levied for this facility.

8.           About 12 acres out of the total 55 acres of agricultural land are used for the grazing of horses.  It is at the horse owners’ discretion whether to turn the horses out into the fields or to keep them stabled.  In general they are turned out in the summer months from early May to the end of October, depending on the weather conditions.  During this period minimal use is made of the stabling, with activities mainly being limited to grooming, the storage of tack and general maintenance.  From November until April the situation is reversed, with the stables in use for the majority of the time.  During these winter months, if weather conditions permit, horses may be turned out during the day but are stabled at night.

9.           The farm supports other livestock on the land, consisting of about 30 cattle in the summer months and 200 sheep during the winter.  The sheep tend to graze the wetter land, which is unsuitable for horses.  Haylage is cropped annually from 26 acres of the farm, producing between three or four bales an acre.  These sell for between £10 and £15 each.  The quality of haylage is very dependent on weather conditions.  If it reaches an acceptable standard it will be used by the livery business.  Otherwise it is sold to local farmers as animal feed.  The horse manure and straw bedding accumulated from the stables during the winter months is stored, allowed sufficient time to rot and is then spread on the land to fertilise the hay crop.

10.        Apart from the manège Miss Cheetham does not offer any designated riding out areas on the farm.  There are, however, extensive bridleways in the vicinity, as well as horse/bicycle lanes marked on local roads, and easy access to these can be gained directly from the track leading from Home Farm.  Around 80% of the total income from the farm comes from the DIY livery business and without it the farm would not be economically viable. 

11.        The exemption given to agricultural buildings is contained in Schedule 5 of the 1988 Act.  The relevant provisions are these:

“1.     A hereditament is exempt to the extent that it consists of any of the following –

(a)        agricultural land;

(b)        agricultural buildings…

3.           A building is an agricultural building if it is not a dwelling and –

(a)        it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land,…

5.      (1)     A building is an agricultural building if –

(a)     It is used for the keeping or breeding of livestock, …

(2)    Sub-paragraph (1)(a) above does not apply unless –

         (a)     the building is solely used as there mentioned, or

(b)     the building is occupied together with agricultural land and used also in connection with agricultural operations on that land, and that other use together with the use mentioned in sub-paragraph (1)(a) is its sole use.

8.      …

(5)     In paragraphs 5 and 7 above ‘livestock’ includes any mammal or bird kept for the production of food or wool or for the purpose of its use in the farming of land.”

12.        In her proposal Miss Cheetham asserted that –

“The entry is wrong by reason of a decision of the Agricultural Lands Tribunal, Arbitrator T.G. Shearman, appointed under the Agricultural Holdings Act 1948 on 6.05.1981.”

This was the basis of the case that she presented to the valuation tribunal on 12 February 2008.  The facts that the VT’s decision records as having referred to are substantially in accordance with those that I have set out above on the basis of the material provided by the VO for the purposes of the present hearing.  A difference is that Miss Cheetham is recorded as having said that there was “a lack of bridleways in the area”.  It is also to be noted that she said that cross grazing (which I take to be grazing of the same land by animals of different species) benefited pasture grazing and reduced parasites.  Nothing in the event turns on these matters.

13.        The VO’s case before the VT was that the stables were not agricultural buildings because their use for keeping horses was not solely in connection with agricultural operations on the land; and that the horses were not livestock as defined in paragraph 8(5).  Reliance was placed on the House of Lords decision in Whitsbury Farm and Stud Ltd v Hemens (VO) [1988] 1 AC 601.  The VT in its decision said about this:

“…  The tribunal agreed with Miss Cheetham that the appeal property, a Pennine hill farm, was not on all fours with the situation described at the stud farm, the business of breeding horses to produce racehorses.  The tribunal felt that appeal was complicated by the issue of agricultural use.  That case law was not sufficiently comparable with the appeal properly because of inconsistencies with the situation at the subject property.  Therefore the guidance provided by that decision was not given much weight by this tribunal.”

14.        Having referred to certain of the statutory provisions the VT went on:

“The tribunal accepted that horses and ponies satisfied the description of ‘livestock’.  The Agricultural Lands Tribunal had determined that the ‘holding had been used for farming purposes within its own limits …. As the most beneficial use of the holding’.

The buildings were solely used for keeping livestock.

The tribunal noted also that Home Farm Stables did not provide horse owners with the sort of recreational facilities that would be expected at a riding school; no rides within the pastures, no access to a network of local bridleways; the only facility was the earth/sand uncovered ménage used to exercise the horses.  For the majority of the year the horses were turned out to pasture, regularised by rotation to ensure equal grazing and fertilisation.  The agricultural element of the farm was restricted to growing grass for hay and haylage and the horses were a very necessary part of that process.

In consideration of all the factors relevant to this matter the tribunal was satisfied that the stable buildings complied with the regulatory requirements for exemption.  The tribunal therefore determined that the appeal was upheld in full, since Miss Cheetham had already accepted that the ménage should be rated.”

15.        The VO appeals against this decision.  The ratepayer does not respond to the appeal.  For the VO Mr Daniel Kolinsky identifies the hereditament as a composite hereditament consisting of four elements – the farmhouse, which is domestic property; the fields which it is accepted are exempt as agricultural land by virtue of their use as pasture land (under paragraph 2(1)(a) of Schedule 5); the manège, which the ratepayer accepts is rateable; and the stables that are used for DIY livery.  Mr Kolinsky points out that the VT did not decide that the stables were exempt under paragraph 3(a) (ie on the basis that they were occupied together with agricultural and were used solely in connection with that land).  The decision was made on the basis that the stables were livestock buildings so that the exemption in paragraph 5(1)(a) applied.  Mr Kolinsky submits that the stables are not agricultural buildings on either basis, and he explains why by reference to the cases that are relevant to the interpretation and application of the statutory provisions.

16.        I accept these submissions.  In Whitsbury Farm and Stud the House of Lords held that buildings on a stud farm were not exempt under the predecessor provisions of paragraph 3(a).  They were occupied together with contiguous pasture land that was admitted to be agricultural land.  Both the stud buildings and the pasture land were essential for the running of the stud.  The covering of mares brought to the stallions was usually accomplished in the covering yard but sometimes took place outside in the paddocks.  Most of the mares foaled at night in the foaling boxes, but a few did so in the paddocks in the daytime.  All the mares were exercised in the paddocks, and the grass provided essential nourishment for both mares and foals.  Lord Keith of Kinkel, with whose reasoning Lord Brandon of Oakbrook, Lord Griffiths and Lord Oliver of Aylmerton agreed, held that the buildings were not used “in connection with” agricultural operations on the pasture land.  He referred to ([1988] 1 AC 601 at 611E) to the meaning given to these words in an earlier predecessor provision in Gilmore(VO) v Baker-Carr [1962] 1 WLR 1165, where at 1175 Donovan LJ had said:

“But the clear impression which I receive from the statutory language is that the buildings exempted were to be ancillary to the agricultural purpose of the land, and not vice versa.”

Lord Keith then went on (at 611F-612C):

“This passage was approved by Viscount Dilhorne in W & J B Eastwood Ltd v Herrod [1971] AC 160, 181, who said that to come within the statutory definition the buildings must be used as adjuncts to the agricultural operations on the land, and that it was wrong to consider whether the enterprise as a whole, the land and the buildings taken together, was ‘a combined agricultural operation.’  In the same case Lord Reid said, at p.168:

‘Ordinary usage of the English language suggests that the buildings must be subsidiary or ancillary to the agricultural operations …. I do not foresee serious difficulty if ‘used in connection with’ is held to mean consequential on or ancillary to the agricultural operations on the land which is occupied together with the buildings.’

Lord Morris of Borth-y-Gest expressed the view, at p.174, that the buildings must be such as were needed as an adjunct or necessary aid for agricultural operations taking place on agricultural land.  The concept is thus that of principal and accessory.  The use of the agricultural land is contemplated as being the principal use and that of the buildings as being an accessory use.

In the present case the use of the buildings is for all the most important operations concerned with the breeding and rearing and keeping of thoroughbreds.  The use of the agricultural land is for the pasturing of the same horses.  It is that use and nothing else which makes the land agricultural within the definition.  The use of the pasture land serves the purposes for which the buildings are used, namely the breeding, rearing and keeping of thoroughbreds.  The use of the buildings does not serve the purpose for which the pasture land is used.  It is not ancillary to it.  It is an end and purpose in itself.  I would therefore hold that the buildings are not used in connection with agricultural operations on the pasture land, and are certainly not used solely in connection with such operations.”

17.        In the present case a similar analysis applies.  The horses are kept by their owners for recreational use.  The purpose for which the stables are used is to provide a DIY livery service for those owners, enabling them to stable the horses that they keep for recreation.  The use of the agricultural land at Home Farm serves the purpose for which the buildings are used (as well as the purposes of sheep and cattle grazing and the making of haylage), but use of the buildings does not serve the purpose for which the agricultural land is used.  In the words of Lord Keith, it is not ancillary to it but is an end and purpose in itself.  So the buildings are not used in connection with agricultural operations on the land within the meaning of paragraph 3(a) (and certainly not solely in connection with them).

18.        The basis on which the LVT decided the case was that the stables were agricultural buildings under paragraph 5(1)(a) because they were used for the keeping of livestock.  “Livestock” is defined in paragraph 8(5) as including any mammal or bird kept for the production of food or wool or for the purpose of farming the land.  This provision also was the subject of consideration in Whitsbury Farm and Stud.  At 614A-B Lord Keith, having observed that in some cases an “includes” definition, considered with the general context, can have the effect that the ordinary natural meaning of a word or expression is to some extent cut down, said that the context here was agricultural, so that the kinds of mammals and birds mentioned are those one would expect to find on an ordinary farm.  He noted that in Belmont Farm Ltd v Minister of Housing and Local Government (1962) 13 P & CR 417 a Divisional Court had held that a similar definition in section 119(1) of the Town and Country Planning Act 1947 did not cover the breeding and keeping of horses for showjumping, and he concluded that the reasoning of Lord Parker CJ applied equally to the rating provision under consideration.  At 421-2 Lord Parker said:

“It may be that this is rather a matter of first impression, but I confess that I approach it in this way:  Of course, on one view ‘livestock’ can be said to be used in contradiction to dead stock, and to include any animal whatsoever.  In some contexts that might be so, but it seems to me that in the context of agriculture, as here, it has some less extensive meaning.  What exact meaning should be given to it if it stood alone in this agricultural context, I do not propose to determine.  I think that it is sufficient to say that there must be a limitation in that context on what I may call the wide dictionary meaning.  I find it unnecessary to decide what it would mean if it stood alone because it does not stand alone, and the words in brackets that follow assist in determining what is meant by ‘livestock’.  The words are ‘including any creature kept for the production of food, wool, skin or fur.’  Pausing there, that is clearly an extension to cover, no doubt, an argument that, for instance, bees, possibly pheasants and fish are not livestock.  It covers any creature kept for this purpose, and it then goes on to say ‘including any creature kept for the purpose of its use in the farming of land.’  Granting that the word ‘including’ has been used in an extensive sense, it seems to me nonsense for the draftsman to use those words ‘any creature kept for the production of food, wool, skins or fur, or for the purpose of its use in the farming of land, if the word ‘livestock’ was intended to cover the keeping of any creature whether for its use in farming land or not.  It seems to me that those words show a clear intention that ‘livestock,’ however it is interpreted, does not extend to the breeding and keeping of horses unless it is for the purpose of their use in the farming of land.”

19.        In the present case, therefore, the horses kept in the stables for recreational purposes are not livestock.  It is also quite clear in any event that they are not kept “for the purpose of [their] use in the farming of the land”.  They are not kept for the purposes of grazing the pasture land, or consuming the haylage or providing manure for the land.  All those functions are ancillary to the purpose for which they are in fact kept, the recreational enjoyment of their owners.  

20.        The case for the ratepayer before the VT was that a decision about the farm in 1981 by, as it was put, “the Agricultural Lands Tribunal” determined the question of exemption in her favour.  The VO has provided a copy of the decision, which was an award of an agricultural arbitrator appointed under the Agricultural Holdings Act 1948 and the Agricultural Holdings (Notice to Quit) Act 1977 following the service on Miss Cheetham’s predecessors, Messrs L and H Cheetham, of notice to quit the holding.  The facts as found included the fact that approximately 50% of the holding was used for stabling and grazing ponies used solely for recreation by their owners.  The notice to quit alleged that there had been a breach of a covenant in the lease “To use the farm for farming purposes only and not to permit or suffer any part thereof to be used for any other purpose whatsoever or to be cultivated as a market garden”.  The landlords specified two breaches of this covenant: (a) that there were about 30 horses and ponies being grazed on the farm, most not actually belonging to the tenants, and (b) that many of the farm buildings had been converted into stalls and boxes for the housing of horses and ponies.

21.        The arbitrator held that “farming” meant the preparation and use of the land for crops, that grazing and the mowing of grass was such a use, and that the ponies, though used for recreation by their owners, were used for farming purposes by the tenants.  His inspection of the buildings showed that the tenants had installed rails and fronts to form boxes and stalls in most buildings; but these, he said, were mainly of temporary construction and could readily be removed or alternatively used to enclose either ponies or “young beast”.  He concluded that there was no breach of the covenant.

22.        The arbitrator’s award, which the VT found of assistance, is clearly of no application, in my judgment.  It concerned the interpretation and application of a clause in a tenancy agreement which was in quite different terms from the statutory provisions that the VT was called upon to apply, and as the decision of an agricultural arbitrator it could not in any event constitute useful authority before a valuation tribunal.

23.        The appeal is allowed.  The stables are not exempt from rating, and must be entered in the valuation list as “Stables”, as they were prior to the VT’s decision.  I was told that the issue of rateable value remains as yet undecided, so that the proper course is remission to the VT for the determination of that matter.

                                                                                    Dated 10 February 2010

                                                                                    George Bartlett QC, President