UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 391 (LC)

LT Case Number: RA/2/2008

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

RATING – hereditament – ratepayer occupying office building and parts of adjoining office building – whether one hereditament or two – held to be entered as two hereditaments – appeal allowed

 

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

LONDON WEST VALUATION TRIBUNAL

 

 

BETWEEN DAVID CLIVE TRUNKFIELD Appellant

(Valuation Officer)

 

and

 

LONDON BOROUGH OF Respondent

CAMDEN

 

 

Re: 3^rd, 4^th, 5^th & 6^th Floors

Clifton House

83-117 Euston Road,

London NW1 2RA

and

Bidborough House

20 Mabledon Place

London WC1H 9BF

 

 

Before: The President

 

 

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

on 29 September 2010

 

 

 

Daniel Kolinsky instructed by Solicitor to HM Revenue and Customs for the appellant

Jeremy Pike instructed by Drivers Jonas Deloitte, chartered surveyors, under direct professional access, for the respondent

 

The following cases are referred to in this decision:

 

Gilbert (VO) v S Hickinbottom & Sons Ltd [1956] 2 QB

Sussex Caravan Parks Ltd v Richardson (VO) [1961] 1 WLR 561

Slough Heat and Power Ltd v Thompson (VO) [2009] RA 1

Spillers Ltd v Cardiff (Borough) Assessment Committee [1931] 2 KB 21

Rank Xerox (UK) Ltd v Johnson (VO) [1987] RA 139

 

The following further cases were referred to in argument:

 

Trafford Metropolitan Borough Council v Pollard (VO) [2007] RA 49

Burn Stewart Distilleries plc v Lanarkshire Valuation Joint Board [2001] RA 110

Gallagher (VO) v Church of Jesus Christ of Latter-Day Saints [2006] RA 1

Coventry and Solihull Waste Disposal Co Ltd v Russell (VO) [1998] RA 427

 

DECISION

Introduction

1.           This is an appeal against a decision of the London North West Valuation Tribunal given on 25 April 2008 allowing the appeal of the ratepayers and directing the merger of five assessments in the 2005 rating list.  The assessments relate to office premises occupied by the ratepayers, the London Borough of Camden, in two adjoining buildings, Bidborough House, 20 Mabledon Place, and Clifton House, 83-117 Euston Road.  At all relevant times the council owned Bidborough House and occupied it in its entirety, and they occupied the third, fifth and sixth floors and part of the fourth floor of Clifton House, which was in separate ownership.  There were many other tenants of Clifton House.  There was a single assessment for Bidborough House and four separate assessments for each of the floors occupied by the council in Clifton House.  The valuation officer contends that the VT was wrong to order the merger of all five assessments, and he says that there should be two assessments, one for Bidborough House and one for those parts of Clifton House that the council occupied.

2.           The primary facts are agreed.  Bidborough House was built in the early 1960s, of framed and curtain wall construction, and extending from ground to sixth floors plus basement.  The main frontage, 79 m long, is to Bidborough Street, and there is a return frontage to Mabledon Place.  There are entrances on Bidborough Street and Mabledon Place.  Clifton House was built in the 1930s, of framed construction with brick and stone facings and extending from ground to sixth floors.  The principal frontage, 84 m long, is to Euston Road, and there is a return frontage to Mabledon Place.  There are two entrances on Euston Road to the upper floor offices, and the ground floor is largely given over to retail and leisure uses.  At the rear there is an enclosed service yard which provides access to the back of the retail units.  It is approached from Mabledon Place through a ground level entrance under Clifton House.

3.           The two buildings abut each other for about 10 metres from their Mabledon Place frontages.  There is a difference in floor levels between the buildings of approximately half a storey at the third floor levels, the difference gradually reducing towards the sixth floors where the floor and roof levels correspond.  At Bidborough House, adjacent to the external wall abutting Clifton House, there is a lift and staircase serving the ground and the upper floors, and there is a second staircase from the basement to the ground floor.  There are no openings between the two buildings where they abut each other.  Within the service yard at Clifton House and running the full length of the yard is a 2½-3 metre high brick wall forming the boundary with Bidborough House.  The buildings each have their own mechanical and electrical services, which are independent of each other.  There is a data cable running from Bidborough House to each of the floors occupied by the council in Clifton House.

4.           Movement of the council’s personnel between Clifton House and Bidborough House involves leaving by one of the two exits from Clifton House on Euston Road, walking along Euston Road and Mabledon Place, and entering Bidborough House by the entrance on Mabledon Place.  The minimum walking distance along the public highway is about 48 metres. 

5.           With the exception of the third floor in Clifton House, the appeal hereditaments were occupied at the material day (1 April 2005) by the council’s Housing and Adult social Care Directorate (HASC).  The third floor in Clifton House was occupied at the material day by the council’s Culture and Environment Directorate.  Bidborough House is the principal office of HASC, but there are also around six district housing offices within the borough.  The reception for HASC is situated in Bidborough House and serves both buildings.  Clifton House was effectively used as an overspill for HASC staff from Bidborough House when the service expanded.  The sites are treated as one with regard to meeting room bookings.  Members of the public are met in Bidborough House and escorted to Clifton House, or the meeting takes place in Bidborough House. 

6.           The history of Clifton House assessments is as follows.  The third floor formed part of the hereditament known as “Pt 2^nd and 3^rd Floors, Clifton House” and, prior to 1 April 2000, was in Crown Occupation.  On 1 April 2000 it was entered in the local list in the occupation of the Arbitration, Conciliation and Advisory Service.  ACAS vacated on 24 March 2003, and the hereditament remained vacant until a proposal was made by the building owner, Romulus Securities Ltd., to split the assessment following an agreed letting of the 3^rd floor to the council.  The split was effective from 17 November 2004 and the result was to create the two separate hereditaments, one known as “Pt 2^nd Floor” and the other as “3^rd Floor”.  These assessments existed at the material day.

7.           The part of the 4^th floor occupied by the council, together with the 6^th floors formed the hereditament previously known as “4^th-6^th Floors, Clifton House”, which, prior to 1 April 2000, was in Crown Occupation.  On 1 April 2000 the assessment was entered in the local list in the occupation of the Inland Revenue, who vacated on 15 August 2002.  Following a letting to the council of the 5^th floor on 11 March 2003 the assessment was split from this date, the result being to create the three hereditaments existing at the material day.  The part of 4^th floor and the 6^th floor remained vacant until let to the respondent on 7 May 2004.

8.           The council, by a proposal dated 11 May 2006, sought the merger of all the existing assessments into a single assessment, with effect from 1 April 2005.  The VO, whilst happy in principle to merge the assessments within Clifton House, did not agree to the inclusion of Bidborough House in the proposed merger.  By a decision dated 18 December 2007 the London North West Valuation Tribunal allowed the appeal of the council and ordered that all the assessments be merged.  

9.           Values on alternative bases are agreed.  If all the assessments in question at present in the list are to be merged, as the council contend, the rateable value, reflecting quantum, is £1,370,000.  If, as the VO contends, Bidborough House should be shown as one hereditament, and those parts of Clifton House that the council occupy should be shown as another hereditament, the rateable values are £685,000 and £830,000 respectively.

10.        The VT based its conclusion that there should be a merger of the Clifton House and Bidborough House entries in the rating list on the first of the general rules stated by Denning LJ in Gilbert (VO) v S Hickinbottom & Sons Ltd [1956] 2 QB 40 at 48 that “where two or more properties are within the same curtilage or contiguous to one another, and are in the same occupation … they are, as a general rule, to be treated for rating purposes as if they formed parts of a single hereditament.”  It said:

“… The buildings were operated by one occupier for the purpose of conducting its business and they did stand side by side irrespective of the layout which allowed the properties to touch over a 10 metre length only.

The Tribunal noted there were no findings with regard to the issue of the degree of contiguity that is acceptable and no guidelines as to whether only the party walls within the body of a building were acceptable.  The Tribunal therefore considered they must follow precedent cases …”

and, quoting Denning LJ’s words, it said that it found that Clifton House and Bidborough House should be entered as a single hereditament.

11.        At the hearing before me the appellant valuation officer, David Clive Trunkfield MRICS, gave evidence.  He described the general approach adopted by valuation officers in determining whether contiguous buildings in the same occupation should be treated as a single hereditament or as separate hereditaments.  He said that in his view the most striking feature of the case was that the degree of contiguity between Bidborough House and Clifton House in relative terms was not only extremely small but afforded almost no potential for the single occupation of both buildings.  Moreover the merger proposed involved only part of Clifton House – three whole floors and part of the fourth floor.  No part of the ground, first or second floors were proposed to be merged.  The buildings were in separate ownership, were built at different times, and while part of their external walls abutted each other there was no party wall.  They had their own mechanical and electrical services.  No overt acts had taken place which might signify an intention of effecting a single occupation – for example the formation of openings between the buildings. 

12.        Mr Trunkfield said that, in terms of functional connection, the decisive point for the VO was that such functional connection had to be essential.  Mere convenience was not enough.  To consider merger as appropriate a VO would look for strong evidence that the process or processes carried on in both buildings could not continue without joint occupation of both buildings. That might be the case with a manufacturing process.  By contrast here the operations were simply office uses and, although the occupation of the two buildings was no doubt convenient for the council, the degree of convenience would not be less if the two blocks were, say, on opposite sides of Mabledon Place or Bidborough Street.  Finally, Mr Trunkfield said, it was improbable that there would ever be a single lease of Bidborough House and the parts of Clifton House occupied by the council  If they were in the same ownership the landlord would expect to grant separate tenancies.

13.        Robert Murdoch FRICS, a partner in Drivers Jonas and head of rating, provided an expert report in which he gave factual details of the merger of office assessments that he had agreed with valuation officers in central London.  Mr Trunkfield provided a response in which he gave further factual details about the hereditaments referred to by Mr Murdoch.  Julian Crowley BSc, MRICS, a partner in Drivers Jonas, was called to give evidence on behalf of the council.  He had provided an expert report setting out a description of the building and its occupation, and he gave further evidence on the potential for making a connection between the two buildings.  He said that the council had been asked whether they had considered connection, and the response was that they had the fag end of a lease, so that the practical reality was that it was not worth making a connection.  His understanding was that it was physically possible to make a connection.  This could be done on the 6^th floor, but it would be more difficult on the other floors.  He agreed that no costing had been done.  The council saw their occupation of the four floors of Clifton House as short-term accommodation.

14.        For the VO Mr Daniel Kolinsky submitted that the correct approach to be adopted was to be derived from Gilbert v Hickinbottom and, additionally, Sussex Caravan Parks Ltd v Richardson (VO) [1961] 1 WLR 561.  Each of the lords justices in Gilbert v Hickinbottom made clear that whether property was to be assessed as one or two hereditaments was a matter of fact and degree.  The first of Denning LJ’s general rules – that, where two or more properties are within the same curtilage or contiguous to one another and are in the same occupation, they should be treated as a single hereditament – contained within it the concept of contiguity which was a statutory criterion in industrial derating under section 3(3) of the Rating and Valuation (Apportionment) Act 1928.  There could well be circumstances that made it necessary to look beyond the fact that two properties touched each other and place more emphasis on other factors.  Thus in Sussex Caravan Parks the fact that two areas of land in the same occupation were contiguous to each other was not decisive, and its materiality was weighed against other considerations which reflected the underlying reality of the factual position.  In the present case, Mr Kolinsky said, the point at which the buildings touched had nothing to do with connecting the buildings.  In reality the walls where the buildings touched served to separate the two buildings, each of which was a free-standing structure.

15.        Mr Kolinsky identified the factors that, he said, showed that the buildings, though contiguous, were properly to be treated as separate hereditaments.  They had different freeholders.  Clifton House was subject to a number of different tenancies, so that the single hereditament ordered by the VT, which excluded those parts of Clifton House not occupied by the council (the ground, first and second floors and part of the fourth floor) could not be ringed round on a map.  The two buildings had previously been in separate occupation.  They touched in a very minor way.  They were structurally independent.  There were no openings between them.  The adjacent floors were at different levels, except in the case of the sixth floor.  The buildings had different mechanical and electrical services, which were independent of each other.  There was a 2.5-3m high wall within the service yard of Clifton House which acted as a barrier.  It was necessary to walk between the two buildings on the public highway, a distance of 48 metres; and to get from the parts of Clifton House occupied by the council it was necessary first to descend to the ground floor.

16.        For the council Mr Jeremy Pike placed reliance on observations of mine in Slough Heat and Power Ltd v Thompson (VO) [2009] RA 1.  The particular passage on which he relied is in paragraph 17 of the decision and, as set out in his skeleton argument, it is this:

“…it is in my view a good working rule for a tribunal to start off by seeking to apply to the facts of the case Denning LJ’s general rules.  Often the result, where the first rule applies, will be obvious.  If it is not, a judgment will have to be formed on what is a question of fact and degree having regard to the particular features of the case that appear to be significant.  Here, applying Denning LJ’s first general rule, since both pipeline and power station are in the same occupation, the first question is whether the pipeline is contiguous to the property comprising the power station and the network of electricity and steam lines that emanate from it.  It obviously is.  Not only does this pipeline enter the curtilage of the power station itself and connect to the oil storage tank but for the whole of its length it runs alongside steam pipelines that are part of the power station hereditament and it is in contact with them for part of its length; and there is also an electric trace heating system inside the oil pipeline for the whole of its length which is fed with power from electricity supply cubicles situated along its route.  Mr Morshead suggested that it was relevant to consider the degree of contiguity.  I accept that in some cases it may be, and the BP Llandarcy case shows its potential relevance in relation to pipelines.  Here, however, it is plain that the degree of contiguity is considerable, and the contention on behalf of the valuation officer that the pipeline is not contiguous or should not be treated as being contiguous is in my judgment simply unarguable.”

17.        Following that approach, Mr Pike said, it was agreed that Bidborough House and the relevant floors in Clifton House were in the same occupation and they were contiguous.  Whilst the degree of contiguity might conceivably be a relevant consideration, he submitted, it should only be a weighty consideration where two premises were barely contiguous.  In the present case an entire flank wall of Clifton House was contiguous with Bidborough House.  Given this contiguity, therefore, the next question was whether the office space in Clifton House was used for an entirely different purpose from Bidborough House, and the answere was that they were used for the same purpose.  It was therefore unnecessary to consider anything further.

18.        If, however, it was necessary to look to other factors, Mr Pike submitted that a number of matters weighed materially in the council’s favour.  Firstly, the buildings were not merely contiguous, they formed one geographical area.  Secondly, from the council’ point of view as occupier the nature of the work undertaken in each building by it employees was interrelated and consistency and efficiency of service required areas of office space that were adjacent or close to each other.  In addition there was a party wall between the two buildings; the two buildings intercommunicated by means of a data cable; and the uppermost floors in each building were on the same level, and there was no physical impediment to the creation of connecting doorways.

19.        Mr Kolinsky is quite correct in observing that the concept of contiguity applied in the first of Denning LJ’s general rules in Gilbert v Hickinbottom, derived from the provisions in section 3 of the Rating and Valuation (Apportionment) Act 1928.  Indeed the language not only of Denning LJ but of Parker LJ also reflects those provisions and their application in decided cases (for example Spillers Ltd v Cardiff (Borough) Assessment Committee [1931] 2 KB 21).  Under section 1(1) of the 1928 Act industrial hereditaments (and agricultural hereditaments and freight-transport hereditaments) had to be distinguished in every valuation list.  This enabled the subsequent Local Government Act 1929 to apply relief or “de-rating” as it was known to these classes of hereditament.  (In the case of industrial hereditaments the relief was 75% of net annual value).  Section 3(1) defined “industrial hereditament”, and section 3(3) provided:

“(3).  Where two or more properties within the same curtilage, or contiguous to one another, are in the same occupation and, though treated as two or more hereditaments for the purposes of rating and valuation by reason of being situate in different parishes or of having been valued at different times or for any other reason, are used as parts of a single mine, mineral railway, factory, or workshop, then, for the purposes of determining whether the several hereditaments are industrial hereditaments they shall be treated as if they formed parts of a single hereditament comprising all such hereditaments.”

The explanation for the reference to hereditaments “being situate in different parishes” is that valuation lists were made for each parish, so that a building or other land that spanned the boundary between two parishes fell to be entered as two hereditaments.

20.        Denning LJ in Gilbert v Hickinbottom expressed the first of his general rules, derived from “the practice which has prevailed for many years”, as follows:

“First, take the case where two or more properties are within the same curtilage or contiguous to one another, and are in the same occupation.  In that case they are, as a general rule, to be treated for rating purposes as if they formed parts of a single hereditament.  There are, however, exceptional cases where for some special reason they may be treated as two or more hereditaments.  That may happen, for instance, when they are situate in different rating areas, or because they were valued at different times (see section 3(3) of the 1928 Act): or because they were at one time in different occupations (see Spillers Ltd v Cardiff Assessment Committee, per Avory J.) or because one part is used for an entirely different purpose (see North Eastern Railway Co. v Guardians of York Union).

21.        Contiguity is, in most cases, a good starting-point for determining whether property in the same occupation constitutes one or more than one hereditament, and it may well provide the obvious answer on the facts of a particular case: see Slough Heat and Power Ltd v Thompson (VO) [2009] RA 1.  Whether it does or not, however, may depend on the type of hereditament under consideration, and in the passage quoted by Mr Pike from that decision (see paragraph 16 above) the vital opening words – “In a case such as the present” – have been omitted.  It is to be borne in mind that this first of Denning LJ’s rules is derived from a statutory provision relating to industrial, agricultural and freight-transport hereditaments.  It does not seem to me, for reasons that I shall give, that the contiguity between Bidborough House and the floors of Clifton House occupied by the council is of much significance in determining whether they should be treated as a single hereditament.

22.        The judgments of Morris and Parker LJJ in Gilbert v Hickinbottom in my view provide the most helpful guidance in the present case.  Parker LJJ (at 53-4) said this:

“Whether or not premises in one occupation fall to be entered in the valuation list as one or more hereditaments depends upon a number of considerations.  Without attempting an exhaustive list, the following considerations can be mentioned:-

(1)        Whether the premises are in more than one rating area. 

If so, they must be divided into at least the same number of hereditaments as the rating areas in which the premises are situated.

(2)        Whether two or more parts of the premises are capable of being separately let.  If not, then the premises must be entered as a single hereditament.

(3)        Whether the premises form a single geographical unit.

(4)        Whether though forming a single geographical unit the premises by their structure and layout consist of two or more separate parts.

(5)        Whether the occupier finds it necessary or convenient to use the premises as a whole for one purpose, or whether he uses different parts of the premises for different purposes.

Whereas a consideration of questions (1) and (2) will in certain events conclude the matter one way or the other, the same does not, I think, result from a consideration of any one of the other questions alone.  The conclusion, where the considerations of (1) and (2) are not decisive, must depend on the weight to be attached on the facts of each case to the other considerations. 

No doubt the most important of these other considerations is whether the premises form a geographical unit.  Can they be ringed round a map?”

In the present case the fact is that the premises occupied by the council cannot be ringed round on a map.  In Clifton House they only occupy parts of the building.  So this, the “most important”, consideration, points towards separate assessment. 

23.        Morris LJ warned against seeking to prescribe some formula or to adopt a judicial definition of hereditament.  At 52 he said:

“If, as I think, the decision as to whether premises form one hereditament is a question of fact, then I think that it is undesirable to prescribe some formula in words or to seek to define certain considerations as being relevant and to stipulate that others must be excluded.  Parliament has not laid down a definition of a hereditament and difficulties might result if a rigid judicial definition were formulated.  In the great majority of cases there will be no difficulty, after assessing all the considerations which apply according to the weight they command, in deciding whether premises comprise a hereditament.  In the borderline cases where difficulty arises it is better to employ a common-sense assessment of the features of the case than to seek to have recourse to some standard formula.”

24.        Gilbert v Hickinbottom establishes the approach to be adopted in identifying the extent of a hereditament, and it seems to me that little further assistance is for present purposes to be derived from other cases, which are no more than illustrations of the way that the approach has been applied.  Thus in Sussex Caravan Parks the Court of Appeal evidently had no difficulty in accepting that two caravan parks in the same ownership and contiguous but separated from each other by a quarry face and with vehicular accesses half a mile apart were capable of constituting two separate hereditaments.  (The court did not decide that, applying the approach in Gilbert v Hickinbottom, they ought to be separately assessed.  The decision turned on whether a proposal for an entry in the valuation list was properly to be construed as relating to one of the sites or to both of them together.)  In Rank Xerox (UK) Ltd v Johnson (VO) [1987] RA 139 the Lands Tribunal (C R Mallett FRICS) held that two office blocks in the same occupation and linked by a covered walkway were properly assessed as two hereditaments.  Other cases were referred to by counsel, but, as I say, little further assistance is to be derived from them.

25.        I would add that I derive no assistance from the evidence of Mr Murdoch about other office premises and how the VO has dealt with their assessments either as one or as more than one hereditament.  The facts in each case will vary, and even if an examination of the facts were to show some inconsistency in what the VO had done I do not see how this could influence the Tribunal in determining the matter that it must determine within the principles established by the Court of Appeal.  The same, of course, goes for the VT.  I can see that these matters might be raised in discussions between the ratepayer’s agent and the VO, but the pursuit of them in tribunal proceedings is unlikely to illuminate the issues or to be a proportionate use of the tribunal’s time.

26.        What then is the “common-sense assessment of the features of the case” (to quote Morris LJ) that falls to be made?  Of obvious relevance are the facts that Bidborough House and the upper floors of Clifton House that the council occupy do not constitute an entity that can be ringed round a map; and that, although they touch for small parts of their peripheries, they are structurally separate (there is no party wall) and do not intercommunicate.  Nor, it appears has the council ever considered making a connection between them.  In terms of access they are separated by 48 metres of public highway and the lower floors of Clifton House, so that, in relation to their use by the present occupier, they might equally well be located 40m or more apart in the same street or on opposite sides of the street.  Similarly if instead of abutting each other the buildings were separated by a gap of six inches the use and occupation of the council would be unaffected.  A consideration of these features shows that the fact that the buildings are contiguous is of no real significance.

27.        In my judgment the approach adopted by the VO (see paragraphs 11 and 12 above) was correct.  The two buildings are separate buildings and are not in the same curtilage, and the council occupies only parts of Clifton House.  The degree of functional connection between them is no greater than that of any office premises used by the same occupier for a particular purpose but dispersed between separate buildings.  There is no justification for merging the assessments as a single hereditament.  The decision of the LVT, by concentrating on contiguity effectively to the exclusion of other considerations was in my judgment wrong in law, and on a proper assessment of all the factors the premises should be treated as two hereditaments and entered in the list accordingly.

28.        The appeal is allowed.  The list must be amended to show as one entry Bidborough House at £685,000 RV and Clifton House, 3^rd, part 4^th, 5^th and 6^th floors, as another entry at £830,000 RV.

29.        The parties are now invited to make submissions on costs and a letter relating to this accompanies this decision, which will become final when the question of costs has been determined.

Dated 28 October 2010

 

George Bartlett, QC