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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Jamieson (Valuation Officer) v E-ON UK Ltd [2013] UKUT 369 (LC) (08 August 2013)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2013/RA_47_2011.html
Cite as: [2013] UKUT 369 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 369 (LC)
UTLC Case Number: RA/47/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
RATING – alteration of rating list – power station and its gas pipeline – one hereditament or two?
IN THE MATTER OF AN APPEAL AGAINST THE DECISION OF THE VALUATION TRIBUNAL FOR ENGLAND
BETWEEN
ALAN JAMIESON (VALUATION OFFICER) Appellant
and
EON UK PLC Respondent
Re: Enfield Energy Centre
111 Bancroft Way
Enfield
Middlesex EN3 7PL
Before: Sir Keith Lindblom, President
Sitting at: 43-45 Bedford Square, London, WC1B 3AS
on 9 May 2013
Timothy Morshead Q.C., instructed by the Solicitor to HM Revenue and Customs, for the appellant
Daniel Kolinsky, instructed by Gerald Eve LLP, for the respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Edwards (V.O.) v BP Refinery (Llandarcy) [1974] R.A. 1
Slough Heat and Power Ltd. v Thompson (V.O.) [2009] RA 1
Gilbert (V.O.) v S. Hickinbottom & Sons Ltd. [1956] 2 Q.B. 40
Butterley Co. Ltd. v Tasker (V.O.) [1961] 1 W.L.R. 300
Trunkfield (V.O.) v London Borough of Camden Council [2011] RA 1
Woolway (V.O.) v Mazars LLP [2013] EWCA Civ 368
Reeves (Listing Officer) v Northrop [2013] EWCA Civ 362
Vtesse Networks Ltd. v Bradford (V.O.) [2006] EWCA Civ 1339
Spillers Ltd v Cardiff Assessment Committee [1931] 2 K.B. 21
North Eastern Railway Co. v Guardians of York Union [1900] 1 Q.B.733
Trafford Metropolitan Borough Council v Pollard (V.O.) [2007] R.A. 49
Coventry and Solihull Waste Disposal Company Ltd. v Russell (V.O.) [1998] R.A. 427 (C.A.)
Shepherd v Turner [2006] 2 P. & C.R. 28
Jones v First Tier Tribunal [2013] UKSC 19
English Clays Lovering Pochin & Co. Ltd. v Davis (V.O.) [1966] R.A. 475
Gallagher (V.O.) v Church of Jesus Christ of Latter-Day Saints [2006] RA 1
DECISION
Introduction
1. This is an appeal against the decision of the Valuation Tribunal for England (“the VTE”), issued on 1 August 2011, that two hereditaments, the Enfield Power Station (“the Power Station”) and the pipeline that supplies it with gas (“the Pipeline”) were to be entered in the 2005 rating list as a single hereditament. The appellant, Mr Alan Jamieson M.R.I.C.S., of the Valuation Office Agency, is the valuation officer; the respondent, Eon UK Plc, the ratepayer.
2. The appellant was represented at the hearing of the appeal by Mr Timothy Morshead Q.C., the respondent by Mr Daniel Kolinsky.
The issue in the appeal
3. The single issue in the appeal is whether, as the VTE decided and the respondent contends, the Power Station and the Pipeline should be entered in the list together as a single hereditament, or, as the appellant maintains, as two hereditaments.
The facts
4. The parties have produced an agreed statement of facts, in the light of which and the documents before me I find the following facts as the basis for my decision on the appeal.
5. The Power Station and the Pipeline are both occupied by the respondent.
6. The Power Station works by Combined Cycle Generating Technology (“CCGT”). The fuel used to drive its turbines is natural gas. The turbines produce electrical power and steam. The steam is used to generate additional power.
7. Natural gas is supplied to the Power Station by the Pipeline. The Pipeline runs below ground. It has a diameter of 24 inches. It is 7.83 miles (12.6 kilometres) long, extending from the Power Station to the National Transmission System, which it meets in a compound occupied by the respondent and National Grid at Epping Green. It is joined to the Power Station at a control valve inside the boundary fence. About 100 metres of it lies within the site of the Power Station.
8. The Power Station and the Pipeline are contiguous; they touch each other at the point of connection between them to which I have just referred.
9. The Power Station could not function without the supply of natural gas provided to it through the Pipeline.
10. The Pipeline has no useful function other than to supply natural gas to the Power Station.
11. The appellant caused the Power Station to be entered in the 2005 rating list with the description “Power Station and Premises”. The rateable value was initially £1,490,000, with effect from 1 April 2005. On 1 February 2010, following a proposal made by the respondent’s agent, Gerald Eve LLP and by agreement between the parties, the rateable value was reduced to £980,000, again with effect from 1 April 2005.
12. The appellant caused the Pipeline to be entered in the 2005 rating list as follows: “Pipeline and Appurtenances”. The rateable value was initially £350,000, with effect from 1 April 2005. On 26 May 2006 this was reduced by the appellant to £339,000, with effect from 1 April 2005. This reduction reflected an agreed scheme of costs and age-related allowances for use in the valuation of pipelines. Gerald Eve LLP is a party to the agreed scheme.
13. On 8 March 2010, Gerald Eve LLP, on behalf of the respondent, made a proposal to merge the assessments for the Power Station and the Pipeline with effect from 1 April 2005. In Part B of the proposal, “Details of the Proposed List Alteration”, the respondent proposed that “[the] existing entries are merged into one with effect from 1 April 2005”.
14. The appellant thought that the proposal was not well founded, and referred the parties’ disagreement to the VTE as an appeal against his refusal to alter the rating list.
15. On 1 August 2011, following a hearing on 12 April 2011, the VTE issued its decision, giving reasons. It determined as a preliminary issue that the Power Station and the Pipeline ought to be merged and treated as a single hereditament. It directed the parties to agree a rateable value for the merged hereditament or, failing agreement, to return to it for the valuation issues to be considered.
16. The rating status of other power stations and pipelines in various parts of the United Kingdom is as follows:
(1) The Scottish Power gas compression site at Lindholme and the pipeline to Beltoft are described in the rating list as a “Pipeline, Gas Compressor Station and Appurtenances”.
(2) The Petrofac gas terminal at Bacton is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipeline enters the site from the sea and over the beach.
(3) The Perenco gas terminal at Bacton is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipelines enter the site from the sea and over the beach.
(4) The Shell UK Ltd. gas terminal at Bacton is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipelines enter the site from the sea and over the beach.
(5) The BP terminal at Easington Shore is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipelines enter the site from the sea and over the beach.
(6) The BP terminal at Dimlington Shore is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipeline enters the site from the sea and over the beach.
(7) The BP storage terminal at Rough Shore is described in the rating list as a “Gas Processing Plant and Premises”. The connected landfall pipeline enters the site from the sea and over the beach.
(8) British Gas Hydrocarbon Resources Ltd.’s North and South terminals at Rampside in Barrow-in-Furness are described in the rating list as “Gas Processing Plant and Premises”. The pipeline hereditaments are each described in the rating list as “Pipeline and Appurtenances”.
(9) The BP/Amoco plant at Seal Sands in Middlesbrough is described in the rating list as a “Gas Processing Plant and Premises”. The pipeline hereditament is described in the rating list as “Pipeline and Appurtenances”.
(10) The BHP plant at Point-of-Ayr in Talacre is described in the rating list as a “Gas Processing Plant and Premises”. The pipeline hereditament is described in the rating list as “Pipelines and Appurtenances”.
(11) Pipelines from the QE2 Dock to the Eastham refinery at Ellesmere Port are separately assessed pipelines which provide for three different products. The Eastham refinery is described in the rating list as “Oil Refinery and Premises”. The pipeline hereditament is described in the rating list as “Pipeline and Appurtenances”.
(12) The GrowHow UK Fertilizer Works at Ince is described in the rating list as “Oil Refinery and Premises”. The pipeline hereditament is described in the rating list as “Pipeline and Appurtenances”.
17. There are 13 CCGT power stations that have natural gas supply pipelines in the same occupation. There are 19 that have natural gas supply pipelines in separate occupation.
18. The pipelines, chemical works and oil refinery once operated by BP at Llandarcy near Swansea, which were the subject of the Tribunal’s decision in Edwards (V.O.) v BP Refinery (Llandarcy) [1974] R.A. 1, no longer exist.
19. The plant considered by the Tribunal in Slough Heat and Power Ltd. v Thompson (V.O.) [2009] RA 1 has an arrangement of steam pipelines and an electric trace heating system. In this case there are no such arrangements at the Power Station.
The VTE’s decision
20. The VTE described the matter it had to determine as being simply “the unit of assessment” (paragraph 3 of its decision). The issue, it said (ibid.), was “whether the [Power Station] and the [Pipeline] should form one or two hereditaments”. If there were two hereditaments “the current rateable values would remain in force” (paragraph 4), but if there was only one “an interim decision on the substantive issue would be issued and the Parties would agree the level of the assessment or failing agreement would apply to the Panel for a further hearing on the valuation issues to be convened”.
21. In reaching its decision the VTE considered the physical and functional relationship between the Power Station and the Pipeline. It referred to and discussed the case law cited to it – including the decisions of the Court of Appeal in Gilbert (V.O.) v S. Hickinbottom & Sons Ltd. [1956] 2 Q.B. 40 and Butterley Co. Ltd. v Tasker (V.O.) [1961] 1 W.L.R. 300, and the decisions of the Tribunal in Slough Heat and Power Ltd. and Trunkfield (V.O.) v London Borough of Camden Council [2011] RA 1, and Llandarcy.
22. In the light of the Court of Appeal’s decision in Gilbert v Hickinbottom the VTE observed (in paragraph 10 of its decision) that “if properties are within the same curtilage or contiguous to each other they are, as a general rule, to be treated as a single hereditament”.
23. The VTE went on to say (in paragraphs 11 to 13 of its decision):
“11: The Panel found further guidance on this issue from the decision in the case of Slough Heat and Power v Thompson which concerned similar circumstances. The facts in that situation related to a 1,327 metre long oil pipeline which connected a railway siding by which heavy oil was delivered to the power station. Where the facts differ was that the oil supply pipe runs parallel to and was touched in many places by a steam pipe from the power station, the steam pipe formed part of the power station hereditament. The steam heated the fuel oil and helped it to flow more easily. In addition there was an electric trace heating system inside the pipeline for the whole of its length with power provided from the power station. In this case it was held that the degree of contiguity was considerable and therefore the pipeline and power station were held to be a single hereditament.
12: Mr Jamieson contended that in the Slough case an unusual and extremely high degree of contiguity existed in that the steam pipes run side by side with the oil pipe and actually touch it for most of its length. Whereas in the subject case contiguity only existed for the pipeline diameter at the boundary fence and for the short distance to the first control valve within the power station.
13: The Panel, however, noted from the decision that the Slough power station was a multi-fuel facility which could use as its source of power natural gas, heavy oil, biomass or coal so that the pipeline was not an essential functional connection and the matter of contiguity was of much more relevance. Whereas the subject property depended entirely on gas supplied by the associated pipeline.”
24. In paragraphs 14 to 17 of its decision the VTE compared the facts of Trunkfield with those of this case. In Trunkfield, it noted (at paragraph 15) “there was no physical connection between the two office buildings and … the functional connection was minimal”. It went on:
“16: This contrasted with the subject case where a direct physical connection was evident and the evidence further confirmed an essential functional link between the power station and the pipeline.
17: A similar situation arose in the case of Edwards v BP Llandarcy, where the rateability of pipelines connecting an oil refinery to a tank farm and chemical works was under consideration. In that case the decisions of Gilbert v Hickinbottom and Butterley v Tasker were noted.”
25. In paragraphs 19 to 25 of its decision, having referred to the Tribunal’s comments in Llandarcy on the judgments in Gilbert v Hickinbottom and Butterley v Tasker, the VTE said:
“19: It is clear from the above that an essential functional link must be established along with a substantial degree of propinquity (nearness). In the subject appeal the link between the pipeline and the power station are so closely entwined [sic] that one could not exist without the other, no alternative fuel source can be used at the Enfield power station.
20: Evidence was also presented of other pipeline hereditaments where in some situations they were assessed separately and yet others they were included with the associated plant. The established test of defining a hereditament by the ability to draw a line around it on a map was raised by the Valuation Officer. Yet it was accepted that even on its own it would not be possible to ring the pipeline, so this contention could not be used as a test in these circumstances.
21: In arriving at its conclusion the Panel understood from the cases presented that there was not a single test that could be applied, in such cases, to determine the issue of unit of assessment. Each case must be determined on the facts of the case under consideration.
22: The Panel found that a number of factors must be taken into account in establishing the correct unit of assessment, in that the properties:
· Should be contiguous or in the same curtilage
· Should be in the same occupation
· Should be occupied for the same purpose
· Should have an essential functional connection[.]
23: The Panel concluded that the general rule as set out above in [Gilbert v Hickinbottom] applies in these circumstances. Both hereditaments are in the same occupation and they are contiguous as they physically touch and none of the exceptions set out in the decision apply. In addition both elements are operated for the same purpose and a clear and strong functional link existed, as without the pipeline the power station would not exist and without the power station there would be no need for the pipeline.
24: On the basis of the above the Panel determine that a single hereditament exists and directs that the two existing hereditaments be merged to form a single hereditament described as:
Power Station and Premises;
Enfield Energy Centre.
111 Bancroft Way Enfield[.]
25: The rateable value to be agreed by the Parties, or failing agreement to be brought back to the Panel for the valuation issues to be considered.”
The experts’ reports
26. The appellant supported his case in the appeal with his own expert report dated 3 April 2012, and a rebuttal report dated 22 August 2012. The respondent relied on the expert report, dated 3 April 2012, of Mr Keith Norman B.Sc., M.R.I.C.S., a partner in Gerald Eve LLP, and Mr Norman’s rebuttal report dated 12 September 2012.
27. Having agreed the salient facts on which the appeal was to be determined, the parties agreed that neither the appellant nor Mr Norman needed to give any oral evidence to add to what they had said in their reports, or to be cross-examined. I saw no reason to take a different view.
28. Parts of the experts’ reports were relied upon by counsel in their submissions. I shall set out some of the passages to which they referred.
29. Under the heading “Pipelines to other CCGT Power Stations” the appellant said in paragraphs 21 to 26 of his report of 3 April 2012:
“21. There are 32 CCGT power stations in local Rating Lists for England and Wales. These are listed in Appendix 5.
22. 13 stations are served by gas pipelines in the same occupation. The pipelines are currently separately assessed. All of these are the subject of appeals seeking merger. Details are shown in Appendix 5.
23. Eon’s Connah’s Quay CCGT station (item 3 Appendix 5) is served by two gas pipelines. One is in the same occupation and the subject of a proposal seeking merger. The other is in the occupation of a third party, BHP Petroleum. BHP delivers gas to the station via a 26 km pipeline from its gas reception terminal at Point of Ayr in Wales. The gas reception terminal is also a separate hereditament despite being in the same occupation as the pipeline.
24. The other 18 stations are understood to be served by gas pipelines in the occupation of National Grid via the National Gas Transmission System (NTS) – usually by means of short spur pipelines from the main NTS.
25. Great Yarmouth Power Station and the 45km gas supply pipeline are both occupied by Great Yarmouth Power Ltd. The pipeline is operated, inspected and maintained on its behalf by British Pipelines Agency (BPA). (Appendix 6A).
26. BPA is the statutory pipeline “operator” as defined in the Pipelines Safety Regulations 1996. Regulation 2 (1) makes clear that the “operator” has control over the conveyance of fluid in the pipeline. (Appendix 6B).”
30. The appellant also provided evidence about “Pipelines in Local Rating Lists” (in paragraphs 27 to 39 of his report of 3 April 2012):
“27. The local Rating Lists for England and Wales include approximately 160 separately rated pipeline hereditaments.
28. These hereditaments vary in length from 229 metres to 50 km.
29. Appendix 7 gives details of 52 hereditaments where proposals have been made against the valuation of the pipeline and where the issue of unit of assessment has not been raised.
30. Appendix 7 also illustrates that these pipelines are contiguous to and in the same occupation as the property from which or the property to which product is delivered.
31. Following the decision in [Slough Heat and Power Ltd.] proposals were made by MUA Property Services on behalf of three ratepayers seeking a single hereditament for pipelines and the contiguous property in five instances as detailed in Appendix 8A.
32. All of these proposals have been withdrawn. Separate hereditaments for the pipelines continue to exist.
33. A letter from MUA was produced at the Valuation Tribunal for the subject appeal explaining MUA Property Services reasons for withdrawing the proposals. (Appendix 8B).
34. Apart from those proposals withdrawn, the subject proposal and the other 12 relating to CCGT power stations there is no sign that others have sought to resist the principle of separate hereditaments.
35. Gas from wells in the seas around Britain is brought ashore via pipelines which deliver the gas to Gas Processing Plants (GPP) for processing into a useable product.
36. Appendix 9 shows details of the English and Welsh GPPs and their associated landfall gas pipelines.
37. Whilst the pipelines originate far out to sea at the gas production platforms they are rateable for only the short length from low water mark to the first control valve within the GPP.
38. It should be noted that the very short lengths of rateable pipeline are rated with the GPP whereas the longer pipelines are separately rated.
39. All of the GPP assessments shown have been appealed and settled for the 2005 Rating List.”
31. In the “Factual Conclusions” of his report of 3 April 2012 the appellant said (in paragraphs 40 to 46):
“40. The [Pipeline] and [the Power Station] are in the same occupation.
41. [The Pipeline] hereditament and [the Power Station] are contiguous to each other at the point where the [Pipeline] crosses the boundary and for approximately 100 metres to the first control valve located within the pipeline reception compound. Appendix 3 shows the approximate route of [the Pipeline] within the [Power Station].
42. The vast majority of the 12.6 km … length [of the Pipeline] is not in contact with, or touching, the [Power Station] hereditament.
43. The [Pipeline] and [the Power Station] are used for related purposes:
The [Pipeline] supplies gas to be burned in the [Power Station].
The [Power Station] burns the supplied gas to produce electrical power.
44. At 12.6km the … [Pipeline] is relatively long compared to others shown in local Rating Lists.
45. By nature and layout the [Pipeline] and the [Power Station] as units of property are completely different. One is predominantly buildings surrounded by a fence. The other is a buried pipe.
46. The [Pipeline] is capable of separate occupation and indeed it is not unusual to find a CCGT power station supplied by a gas pipeline in separate occupation. I have not been made aware of any fact to suggest that this one could not be occupied separately (although this is not critical to my approach).”
32. In his rebuttal report of 22 August 2012 the appellant mentioned several pipelines serving gas processing plants. He noted (in paragraph 20) that “of 10 landfall pipelines only one has a rateable length of more than 285 metres (1,070 metres)”. He said that in his opinion “these pipelines are correctly rated with the property served” (paragraph 21) because “they are in the nature of short spurs emanating from the dominant hereditament” (paragraph 22). He referred to four pipelines exceeding 2,400 metres in length – two at the British Gas North and South Terminals at Rampside in Barrow-in-Furness, one of which is 4,688 metres long, the other 4,421 metres; one at the BP/Amoco plant at Seal Sands in Middlesbrough, which is 7,800 metres long; and one at the BHP plant at Point-of-Ayr in Talacre, which is 2,459 metres long (paragraph 25). All of these are separately rated from the plant. The appellant went on to say (ibid.):
“In my opinion this is correct because at that length they no longer possess the characteristic of “short spur” pipeline. They are of sufficient length to be rated as separate units of property in their own right.”
33. In paragraph 27 of his rebuttal report the appellant said:
“As I read his report, Mr Norman says that there are some pipelines which are properly rated as separate hereditaments, but that the present facts are not an example of such a case. As I understand his approach, Mr Norman attaches significant weight to the fact that the [Power Station] in the present case is functionally dependent upon the [Pipeline], by contrast with some other examples where he says there is no such dependence. This appears to be a critical part of Mr Norman’s reasoning and I disagree with it. I do not regard functional dependence or “mutual dependence” as a significant factor in determining whether contiguous parcels constitute one or more hereditament.”
34. In paragraph 6.5 of his report of 3 April 2012 Mr Norman described the issue that remained between the parties after they had agreed the rateable value of the Power Station in January 2010:
“ … [This] related to the treatment of power stations which were not fed directly from the NTS and had a separate gas pipeline connection, such as Enfield. By this stage, the decision of the [Tribunal] in [Slough Heat and Power Ltd.] had been given. I considered that the logic of that case applied to the circumstances at Enfield such that the two hereditaments of the [Power Station] and the [Pipeline] at Enfield should be treated as a single hereditament. It therefore … seemed to me that making a proposal to merge the two assessments could address the implications of [Slough Heat and Power Ltd.] and allow for the outstanding valuation issue to be determined in setting the rateable value for the newly merged hereditament.”
35. In section 8 of his rebuttal report Mr Norman commented on some of the authorities relating to pipelines relied on by the respondent:
“Paragraph 61 – I do not agree that the facts of [Slough Heat and Power Ltd.] are materially different to the subject case. I accept that in the subject case there is no equivalent of the steam pipelines or electric trace heating system. In all other material points, the circumstances are, for all intents and purposes the same.
Paragraph 62 – Mr Jamieson comments on the [Llandarcy], which provided some obiter comment on the approach to separate assessment of pipelines. In my view, the essential functional link and substantial degree of propinquity in the subject case accords with the comments of the Lands Tribunal in that case. In their conclusions regarding the main pipe track and AFRD pipe track, the Lands Tribunal commented that they may have a similarity to the road with the buildings at each end of it, referred to in [Butterley v Tasker]. I do not consider that [Butterley v Tasker] is comparable to the issue of pipelines, as it concerned two separate works and offices buildings connected by a road running alongside the two buildings which was part of a wider private road network. On the facts of that case it was determined that the relevant section of road was not contiguous to the separate works and office buildings given that it was a part of a wider network and did not start or finish at the respective buildings. On the facts of the subject case, the pipeline is contiguous to the [Power Station] and dedicated to the provision of fuel gas to the [Power Station].
There was also reference in that case to the Angle Bay pipeline. It should be pointed out that the Angle Bay pipeline was one source of supply of crude oil to the Llandarcy refinery and in addition, as it crossed a number of local authority boundaries, legislation at the time prevented any other treatment than a number of separate assessments.”
36. In the “Conclusions” in section 9 of his rebuttal report Mr Norman said:
“The [Power Station] and the [Pipeline] can be readily ringed around on a map. The pipeline and Eon compound at Epping Green are already assessed, as a single hereditament and by implication … therefore, capable of being ringed around on a map. I see no logical reason why that cannot apply to the compound, [the Pipeline] and [the Power Station].”
The law
The statutory framework
37. Section 41 of the Local Government Finance Act 1988 requires the valuation officer for a billing authority to compile and maintain a local non-domestic rating list for the authority’s area. The list is to be compiled every five years. Section 42 requires that each local non-domestic rating list shows all non-domestic hereditaments. Section 64(1) defines a hereditament as “anything which, by virtue of the definition in section 115(1) of the General Rate Act 1967 [“the 1967 Act”], would have been a hereditament for the purposes of that Act …”. Section 115(1) of the 1967 Act provides that ““hereditament”’ means property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list”. That definition replaced the one that had been provided in section 68 of the Rating and Valuation Act 1925: “… any lands, tenements, hereditaments or property which are or may become liable to any rate in respect of which the valuation list is by this Act made conclusive”. In Woolway (V.O.) v Mazars LLP [2013] EWCA Civ 368 the Court of Appeal held that the definition in section 115 of the 1967 Act did not change the law. Pill L.J., with whom Tomlinson and Kitchin L.JJ. agreed, said (at paragraph 33) that the reference in that definition to a “unit of such property” is “simply a reference to a “separate item” of rateable property shown in the list and does not assist in defining what the separate item is”.
Relevant jurisprudence (1) – general principles
38. In Reeves (Listing Officer) v Northrop [2013] EWCA Civ 362 (at paragraph 9) Sir Alan Ward described the statutory provisions defining a “hereditament” as “legislative gobbledegook”.
39. The statutory scheme offers no self-contained definition of “hereditament”. Giving the leading judgment in Vtesse Networks Ltd. v Bradford (V.O.) [2006] EWCA Civ 1339, Lloyd L.J., with whom Mummery L.J. agreed, observed (at paragraph 14) that “many of the cases about what is a hereditament have focussed on the question of occupation, rather than on the physical characteristics of what is said to be the hereditament”. In his judgment Sedley L.J. said (at paragraph 39) that it was “a matter of concern that liability to business rates can depend so heavily on the uncertain meanings of the two key concepts, hereditaments and rateable occupation”. And he went on to say (at paragraph 40):
40. The leading case on the identification of a hereditament remains Gilbert v Hickinbottom. There the Court of Appeal considered an appeal from the decision of the Tribunal that two premises on opposite sides of a street, one a bakery, the other a depot for the repair and maintenance of delivery vans and the machinery of the bakery were to be regarded as a single hereditament. The court held that this was a question of fact and degree and that the appeal should therefore not be allowed unless in deciding that question the Tribunal had misdirected itself. There was no misdirection in the Tribunal’s decision that the depot was so essential to the proper working of the bakery that the two premises ought to be treated as one hereditament even though they were separated by the road. The Tribunal’s decision was therefore upheld. Each member of the court set out his views as to how a hereditament should be identified. Denning L.J. referred in his judgment (at pp.48 to 50) to three “general rules”:
“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 … : or because they were at one time in different occupations (see Spillers Ltd v Cardiff Assessment Committee [[1931] 2 K.B. 21, per Avory J. at p.47]); or because one part is used for an entirely different purpose (see North Eastern Railway Co. v Guardians of York Union [[1900] 1 Q.B.733]).
Secondly, take the case where the two properties are in the same occupation but are not within the same curtilage nor contiguous to one another. In that case each of the properties must, as a general rule, be treated as a separate hereditament for rating purposes: and this is the case even though they are used by the occupier for the purposes of his one whole business. …
Thirdly, take the case where two properties are separated by a public highway, the surface of which is vested in the highway authority and the soil is vested in the occupier of the two properties. In that case the position in general seems to me to be the same as if the two properties were separated by a canal, a railway or a dwelling-house occupied by somebody else. They are normally to be treated as two separate hereditaments for rating purposes. …
… But this third rule is not inflexible. There are exceptional cases where two properties, separated by a road, may be treated as one single hereditament for rating purposes. That may happen when a nobleman’s park, or a farm (when agricultural land was rated), or a golf course, is bisected by a public road. In such cases the two properties on either side of the road are so essentially one whole – by which I mean, so essential in use the one to another – that they should be regarded as one single hereditament.”
Morris L.J. said (at p.52) that it was “undesirable to prescribe some formula in words or to seek to define certain circumstances as being relevant and to stipulate that others must be excluded”. Parliament had not prescribed a definition of a hereditament, and “difficulties might result if a rigid judicial definition were formulated”. He continued (ibid.):
“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. …”.
Parker L.J. (at pp.54 to 55) listed five considerations, which were not exhaustive and the most important of which in his view was “whether the premises form a geographical unit” – “Can they be ringed round on a map?” He went on (at pp.55 to 56) to consider what he described as the “functional connexion”:
“… If, as is admitted, a functional connexion is a relevant consideration when considering a geographical and structural unit, I fail to see why as a matter of law it cannot be considered at all when there are separate geographical and structural units. Each case must be considered on its particular facts, due weight being given to the degree and nature of the separation on the one hand and the importance of the functional connexion on the other”.
41. The approach indicated in Gilbert v Hickinbottom has generally been followed both by the courts and by the Tribunal. Both have supported a pragmatic view of all the features of the case in hand. Contiguity is one consideration, but unlikely on its own to be decisive. Each case must be decided on its own particular facts.
42. For example, in Trafford Metropolitan Borough Council v Pollard (V.O.) [2007] R.A. 49, a school and adjoining leisure centre were treated as a single hereditament. The Tribunal considered, among other things, the distance between the two developments, whether either was capable of separate occupation, the extent to which parts of the school were used by the general public and the extent to which the sports centre was used by the school, how each was financed and managed and under what statutory powers. In Trunkfield offices in adjoining buildings, which were occupied by one ratepayer, were treated as separate hereditaments; the contiguity of the two buildings did not dictate a different outcome. However, in Woolway v Mazars offices occupied by a ratepayer on different floors in the same building were treated as a single hereditament despite being separated from each other by the storeys in between. Pill L.J. (in paragraph 34 of his judgment) recalled that in Gilbert v Hickinbottom the Court of Appeal had “acknowledged the importance of the fact finding role of the Tribunal”. He noted (ibid.) that the Tribunal had “made important findings of fact”. And he observed (in paragraph 35) that the Tribunal’s decision did not appear to involve a departure from established principles. The Tribunal had “adopted a physical test”, and applied it to the premises it was considering (ibid.). It had eschewed “recourse to some standard formula”, which Morris L.J. had cautioned against in Gilbert v Hickinbottom (paragraph 36). Rather, the Tribunal had made “a common-sense assessment of the features of the case” (ibid.). In the circumstances of that case the test of contiguity was “not decisive” (ibid.).
Relevant jurisprudence (2) – pipeline cases
43. In Llandarcy the Tribunal (J. Stuart Daniel Q.C. and Mr J.H. Emlyn Jones F.R.I.C.S.) considered whether several pipelines serving an oil refinery near Swansea should be treated as separate hereditaments. In its view both the “main pipe track”, which was about 1½ miles (2.4 kilometres) long, and the “aviation fuel reserve depot pipe track”, which was about 1 mile (1.6 kilometres) long, were both to be regarded as separate hereditaments. The Tribunal was invited to give “some guidance on the general principles to be followed in assessing pipe lines either as separate hereditaments or as included in the assessments of other hereditaments” (p.35). It said it was “reluctant” to do this “because the facts must vary materially in different cases” (ibid.). But it said it would “go this far” (ibid.):
“… We can see no reason for departing from the principles already established in law and by authority which would justify applying in the case of pipe lines a method of treatment different from that in general application. So far as the present case is concerned … an answer to this question is not necessary to our findings; and the parties are agreed that a determination of the “hereditament” issue is of no real assistance in deciding what is “situate within a factory” nor vice versa. What we have to say must therefore be considered as obiter.”
The Tribunal then referred to the Court of Appeal’s decisions in Gilbert v Hickinbottom and Butterley v Tasker and, having done so, said this (at pp.37 and 38):
“Consideration of these two cases leads us to the conclusion that two separate properties which are not directly and physically contiguous could not properly be regarded as a single hereditament for rating purposes unless firstly, there is an essential functional link between the two parts and secondly, that there is also a substantial degree of propinquity. One might perhaps consider the analogy of a sparking plug where the gap between the two parts is so small that it can physically be traversed in the course of the functioning of the whole. It might also be true to say that the stronger the spark the greater the gap which can be traversed.
It is in adopting this approach that we incline to the view as we have indicated that the pipe lines connecting the Queen’s Dock and the Transit Site though not within the “factory” … are nevertheless properly regarded as part of a single hereditament within the “factory”. As to the main pipe track and the aviation fuel reserve depot pipe track, it is true that at either end they are immediately contiguous to the installations which they serve, but they have a similarity to the road with buildings at each end of it, referred to by Harman LJ in his judgment in [Butterley v Tasker]. The Angle Bay pipe line is also contiguous at either end to the installations which it serves but no one suggests that it forms part of the same hereditament as the refinery. In the words of Morris LJ in [Gilbert v Hickinbottom], we think it better to employ a common sense assessment of the features of the case and for this reason have indicated that these pipe lines should be separately assessed. As we have indicated, however, these conclusions are in no way necessary to the findings which we have made on the substantive issue of rateability.”
44. In Coventry and Solihull Waste Disposal Company Ltd. v Russell (V.O.) [1998] R.A. 427 (C.A.) the Court of Appeal decided that a waste incinerator and a pipeline used for heat transfer should be listed as a single hereditament. Before the Tribunal (H.H.J. Marder Q.C., President) the parties had agreed that the heat transfer station and pipeline were an “integral part of the original design of the plant”, and heat from the boilers was sold to a works occupied by Peugeot nearby, the pipe leaving the heat transfer station 20 metres from the boundary of the premises and extending 393 metres to the Peugeot works ([1997] R.A. 89, at pp.92 to 94). The Tribunal said (at p.103):
“I do not consider that the plant and the pipeline in this case are used for wholly different purposes in that sense. Mr Honeywell described the enterprise as “a seamless operation”, and it seems to me that although the provision of heat to the Peugeot factory is a by-product of the operation and not its primary function, nevertheless the process of incinerating waste, generating heat and electricity, and conveying the heat and electrical power away to the buyers represent a single composite use by the occupiers of the plant and the pipeline. The pipeline is admittedly contiguous with the plant and in the occupation of the ratepayer company. I see no reason on the agreed facts to depart from what Denning LJ called “the general rule”. In my judgment the pipeline forms part of the single hereditament comprising incinerator plant, generating plant, and pipeline.”
The Court of Appeal rejected the submission that the Tribunal was wrong to conclude that the property including the pipeline constituted a single hereditament. The court confirmed the application of the principles in Gilbert v Hickinbottom to a context involving pipelines. Robert Walker L.J. said (at p.437) that he saw “no error of law in the extension of contiguity so as to include a water main or pipeline which originates on one set of premises and continues as an unbroken link to another set”. In his judgment Hobhouse L.J. said (at p.444):
“… Judge Marder expressly directed himself by reference to what was said by the Court of Appeal in Gilbert v Hickinbottom. The two parcels of land adjoined one another. Therefore it was necessary for the [valuation officer] to show that the pipeline was used for an entirely different purpose to that for which the remainder of the ratepayer company’s land was used. On the evidence and upon the facts found it was clear that the pipeline was not used for an entirely different purpose. It was used as part of the operation being carried on at this waste disposal plant. Just as there had been a roadway for use by the lorries bringing the refuse up to the incinerator and taking away the ash etc, so there also had to be piping to enable the heat produced to be taken away. Without this piping the overall heat production unit could not operate. The piping was a necessary part of the overall operation being carried out by the ratepayer company at this site”.
45. In Slough Heat and Power Ltd. the Tribunal (George Bartlett Q.C., President) considered the appropriate unit of assessment for a combined heat and power station and an oil pipeline running to it from a terminal beside a railway line. The power station used several types of fuel – natural gas, heavy fuel oil, biomass and coal. The pipeline was 1,327 metres long. Counsel for the valuation officer made submissions, recorded in paragraph 12 of the Tribunal’s decision, about the limited functional connection in that case. The Tribunal did not accept those submissions. It decided that there should be a single assessment of the pipeline and the power station. Having reviewed the authorities, it applied the principles set out in Gilbert v Hickinbottom. It said (in paragraphs 17 to 19):
“17. In a case such as at present it is 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 [in Gilbert v Hickinbottom]. Often the result, where the first rule applies, would 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. Counsel for the valuation officer 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.
18. Since the pipeline is contiguous, it next becomes necessary to consider whether it falls within any of the exceptions that would justify its being treated as a separate hereditament. The contention on behalf of the valuation officer is that it was used for “an entirely different purpose” from the power station. This proposition only has to be stated for it to be seen as erroneous. Unlike, for instance, the hotel in North Eastern Railway Co v Guardians of York Union [1900] 1 QB 733, the use of which was clearly quite different from the use of the railway station, the sole function of the pipeline was to serve the electricity and heat generating processes of the power station. There is accordingly no justification for treating the pipeline as a separate hereditament.
19. In some cases the considerations determining whether property in a single occupation should be treated as one hereditament or two may be finely balanced. Trafford Metropolitan Borough Council v Pollard (VO) was such a case. The present case, by contrast, is in my view quite clear; and, although the question, where the authorities are properly applied, is one of fact and degree, I do not think that the valuation officer and the valuation tribunal could, in the light of the authorities, reasonably have treated the pipeline as a separate hereditament. The valuation tribunal fell into error in my judgment in applying a test of mutual dependency. It concluded that, although the pipeline had no function other than to feed the tank at the power station, the power station itself was not dependent on the pipeline and could operate without it; and therefore that it should be treated as a separate hereditament. The question of mutual dependency may well be relevant where the two parcels under consideration are not contiguous, so that Denning LJ’s second and third rules fall to be applied. But to treat this question as not only material but decisive where the two parcels are contiguous is wrong as a matter of law. …”.
Submissions
Submissions for the appellant
46. Mr Morshead submitted:
(1) One of the Tribunal’s functions (under section 4(1) of the Lands Tribunal Act 1949, as amended) is “to promote uniformity of decision” (see Shepherd v Turner [2006] 2 P. & C.R. 28, per Carnwath L.J. (as he then was) at paragraph 23; and Jones v First Tier Tribunal [2013] UKSC 19, per Lord Carnwath at paragraphs 42 and 43).
(2) In paragraphs 21 to 23 of its decision the VTE directed itself that there was “not a single test that could be applied”, but had regard to “the general rule” in Gilbert v Hickinbottom. It seems not to have heeded the guidance given in Llandarcy. And it seems to have given no weight (in paragraph 23 of its decision) to (i) the degree of contiguity between the Pipeline and the Power Station; (ii) the length of the Pipeline as a structure in its own right; and (iii) the other factors mentioned by the appellant in paragraphs 43 to 46 of his witness statement.
(3) The guidance given by the Tribunal in Llandarcy was not superseded by the Court of Appeal’s decision in Coventry and Solihull Waste Disposal Company Ltd.. The decisions in those two cases are consistent. Llandarcy was not cited in Coventry and Solihull Waste Disposal Company Ltd., either before the Tribunal or in the Court of Appeal. The parties must have thought it so different on its facts that the decision need not even be mentioned. If they did they were right. In that case the pipeline was an integral part of the design of the works for transferring heat from the boilers to the Peugeot works, and the pipe was only about 390 metres long. They had to be rated together. It does not follow that the same outcome would be right for pipelines as long as those in Llandarcy and in this case. And in any case the fact that the appeal was rejected means only that the Tribunal’s decision was seen as one it was entitled to reach as a matter of law. It does not follow that the Court of Appeal would have found the opposite conclusion unsound.
(4) The decision in Llandarcy shows – and the Tribunal in Slough Heat and Power Ltd. held – that the degree of contiguity between a pipeline and the property said to be associated with it can be relevant. In this case the Pipeline touches the Power Station at one end, where it connects to reception equipment and a short section of it passes through the curtilage of the Power Station. The contiguity is no more than is necessary to enable the Pipeline to supply gas to the Power Station. For the rest of its length, it is not contiguous with the Power Station. The facts in Slough Heat and Power Ltd. were different. As well as touching the power station at one end, the pipeline in that case was connected to the power station along its entire length, by a system of steam and electric heaters. So it was obvious to the Tribunal that there was sufficient contiguity to justify Denning L.J.’s first general rule in Gilbert v Hickinbottom (see paragraph 17 of the Tribunal’s decision). Otherwise, the degree of contiguity would have been no less exiguous than in Llandarcy.
(5) The common sense of the approach indicated in Llandarcy is reflected in the Tribunal’s endorsement of that decision in Slough Heat and Power Ltd.. It is also reflected in the history of separate rating for long pipelines serving CCGT power stations and other long pipelines. In those cases where the pipeline and the other property are in common occupation the distinctions Mr Norman sought to draw are unconvincing and liable to produce inconsistent decisions. The Tribunal ought to decide this appeal consistently with the established guidance in Llandarcy and Slough Heat and Power Ltd..
(6) The Pipeline in the present case is too long to be regarded as part of the same hereditament as the Power Station. The degree of contiguity between them is too small to justify treating the two as one.
Submissions for the respondent
47. Mr Kolinsky submitted:
(1) In this case there is both contiguity and a strikingly close functional relationship between the Power Station and the Pipeline, which can properly be described as mutual dependence. The result of adopting the approach outlined in Gilbert v Hickinbottom is therefore clear. The Power Station and the Pipeline should be rated together. The VTE’s decision was obviously right.
(2) In determining that there was a single hereditament in this case the VTE understood and followed the relevant jurisprudence, and did not flout any general guidance in any relevant decisions of the Tribunal. The authorities clearly support its conclusion that the Pipeline and the Power Station can and should be entered in the rating list as a single hereditament. It correctly applied Denning L.J.’s first general rule in Gilbert v Hickinbottom. It correctly treated the Power Station and Pipeline as contiguous. And it correctly emphasized the very strong functional connection in the present case, rightly noting that this element was much stronger in the present case than it had been in Slough Heat and Power Ltd.. Only in one respect was the VTE’s analysis wrong. It concluded (in paragraph 20) that Parker L.J.’s test of being able to ring the properties on a map could not be met. But in fact it is just as easy to do that for the Power Station and the Pipeline as to do it for the Pipeline alone.
(3) The appellant seems to want the Tribunal to look at the circumstances of other pipelines rather than to concentrate on the facts of the case before it. But, as the Tribunal is well aware, its task is to apply itself to the case before it, and it is not likely to be greatly assisted by evidence of the approach taken by valuation officers in other cases where the circumstances are different. This case must be decided on its own particular facts.
(4) The appellant seeks to distinguish Slough Heat and Power Ltd. from this case on the basis that the degree of contiguity there was much greater. That is not a good point. The decision in Slough Heat and Power Ltd. did not turn only on the high degree of contiguity. Two properties are either contiguous or they are not. When a pipeline is connected to a power station there is contiguity between them (see English Clays Lovering Pochin & Co. Ltd. v Davis (V.O.) [1966] R.A. 475, at pp.487 and 488). Here that is so. Contiguity is a matter of agreed fact. As the authorities show, it is not always a decisive consideration (see, for example, the decision in Trunkfield). But in this case the fact that the Power Station and the Pipeline touch is no coincidence. The existence and operation of each depend on the existence and operation of the other.
(5) The suggestion that if the properties in question are contiguous one need not consider their functional relationship is misconceived. In Trunkfield contiguity alone was not decisive but the Tribunal went on to consider the strength of the functional connection between the offices in the two buildings. Likewise, the observations made by the Tribunal in Llandarcy suggest that one must look both at the extent of the physical relationship between the properties and at the functional relationship too. The Tribunal clearly accepted that a strong functional connection could overcome a lack of an actual physical connection if there was also “a substantial degree of propinquity” between the two properties.
(6) There is no basis in law for the idea that there is a firm cut-off point somewhere between the length of the pipe in Slough Heat and Power Ltd. – which was 1.3 kilometres – and that of the pipeline in this case – which is 12.6 kilometres. The appellant’s case seems to be that there comes a point, which he does not identify, at which a pipeline cannot be merged for rating purposes with the facility it serves, no matter how strong the functional connection may be. Common sense does not support this idea. Nor do the Tribunal’s general remarks in Llandarcy or what it thought about the Angle Bay pipeline – which was one of several sources of oil for the refinery and not comparable to the Pipeline here. Nor do the observations of Harman L.J. in Butterley v Tasker (at p.307) that nobody would suggest that, if a man owned two buildings at either end of a road, those two buildings would be contiguous. That concept is not analogous to this case. And anyhow the Court of Appeal’s decision in that case was based on the lack of a clear functional connection between the road and the buildings at either end of it (see the judgment of Pearce L.J. at pp.305 and 306).
(7) The notion that the Pipeline, being a unit of property in its own right, ought therefore to be entered in the rating list as a single hereditament is unsound, as the Court of Appeal’s recent decision in Woolway v Mazars confirms.
Discussion
48. As all the relevant jurisprudence and decisions of the Tribunal make plain, the outcome of every case such as this will turn on the particular facts. Deciding whether two properties should be entered in the rating list as one hereditament or two involves what are, quintessentially, matters of fact and degree. This is just as much so in a case concerning a power station and the pipeline or pipelines linked to it as in others.
49. The essential facts of this case are simple and clear and have been fully agreed. I have set them out in paragraphs 5 to 10 above.
50. In the light of those facts I cannot accept Mr Morshead’s argument. In my view Mr Kolinsky’s is sound. The evidence before me and the submissions I have heard leave me in no doubt that the findings and conclusion reached by the VTE were correct. On the facts of this particular case, approaching the matter afresh as I must, I believe that the Power Station and the Pipeline should be entered in the rating list as a single hereditament.
51. I do not think the VTE went wrong in applying the basic principles in the relevant case law to the circumstances of this case. As is clear from paragraph 23 of its decision, it grasped the general rules expressed by Denning L.J. in Gilbert v Hickinbottom. It was, in my view, clearly right to find that the Power Station and the Pipeline are contiguous (in paragraphs 10 to 12 of its decision). It was also right to stress the strong functional relationship between them, and to find that in this case that relationship was much stronger than, for example, in Slough Heat and Power Ltd. (paragraph 13 of the decision).
52. The approach indicated by the Court of Appeal in Gilbert v Hickinbottom is still appropriate, both generally and in cases concerning pipelines. The principles referred to in the three judgments survive, as one can see from the decision of the Court of Appeal in Coventry and Solihull Waste Disposal Company Ltd.. They provide the starting-point for the exercise the Tribunal must undertake in an appeal such as this.
53. In this case both the test of contiguity and the functional test are amply satisfied. There is a physical connection between the Power Station and the Pipeline, and the two are mutually dependent in their functions. If one applies the approach in Gilbert v Hickinbottom, these are powerful considerations. Indeed, in this case I think they are crucial.
54. “Contiguity” is the word that has come to be used in this context to describe the fact that one property or piece of infrastructure touches another, as opposed to the two things merely being adjacent to each other without actually touching. It does not depend on there being more than a single point of contact. It does not require that there should be – as there was in Slough Heat and Power Ltd. – a series of links between one element of the plant and another. It is enough that there is physical contact, which may or may not be necessary to achieve a functional connection as well.
55. The test of contiguity is clearly satisfied here. That the Pipeline is contiguous to the Power Station is not, and cannot be, in dispute. It is not a matter of opinion or judgment; it is simply a matter of fact. It must be so, and is so, because the Pipeline has to be connected to the Power Station to serve it by supplying it with fuel. This much is obvious. If the Pipeline were not connected to the Power Station it would be useless.
56. The test of contiguity and the test of functional relationship or connection are not, in circumstances such as these, divorced from each other. They cannot be. For the test of functional relationship to be met the test of contiguity has to be too. Mr Kolinsky was right, in my view, to describe the functional connection between the Pipeline and Power Station as being one of mutual dependence. The degree of mutual dependence is not lessened by the fact that the Pipeline extends for 12.6 kilometres. Assuming that the Pipeline must follow the route that it does, which does not seem to be contentious, it could not be any shorter than it is to perform the function it must and the only function it has – to supply the Power Station with natural gas. The functional relationship between the Pipeline and the Power Station is no less vital than it would be if the Pipeline were very much shorter than it is, say a half or a third or a much smaller fraction of its actual length. So I do not think that the distance covered by the Pipeline goes against the conclusion that the Power Station and the Pipeline form a single functional unit.
57. I also accept Mr Kolinsky’s submission that the geographical test favoured by Parker L.J. in Gilbert v Hickinbottom, the test of whether the properties concerned can be ringed on a map, can be satisfied in this case. As Mr Kolinsky said, it would be possible to draw a line round the Power Station and the Pipeline on a map of some suitable scale, and no more difficult to do this than to ring the Pipeline on its own. On this point, therefore, I disagree with the VTE’s conclusion in paragraph 20 of its decision. But even if I were wrong about that I would still be sure that the tests of contiguity and functional relationship are met in this case, and that the Power Station and the Pipeline are to be regarded as a single hereditament.
58. As I have said, the result of any case such as this must depend on the particular facts of the industrial premises being considered. In discharging its task as a fact-finding tribunal the VTE – and in turn, on appeal, the Tribunal itself – is unlikely to find much help in information given to it about other cases where one view or another has been reached on a different set of facts. It is neither necessary nor appropriate for the Tribunal to be presented with a large amount of evidence about the approach taken by valuation officers elsewhere (see, for example, Trunkfield, at paragraph 25, and Gallagher (V.O.) v Church of Jesus Christ of Latter-Day Saints [2006] RA 1, at paragraph 49). But I do not think that the evidence given in this appeal about other decisions concerning the rating of pipelines undermines any of the conclusions I have reached on the facts that I have had to consider. Nor do I accept that my analysis in this case offends the principle of consistency in decision-making to which Morshead referred.
59. I do not think Mr Morshead’s argument gains anything from the Tribunal’s decisions in Llandarcy and Slough Heat and Power Ltd..
60. In Llandarcy the Tribunal was not seeking to modify the broad principles stated by the Court of Appeal in Gilbert v Hickinbottom. On the contrary, it sought to use those principles, and to do so with common sense. I do not accept that it was seeking to lay down any firm rules to be applied in cases where the rating status of a refinery, a factory or a power station and any related pipelines has to be determined. It plainly did not want to formulate new tests of its own for resolving whether the plant and its pipeline or pipelines should be rated as one hereditament or more than one. The Tribunal’s reluctance to do that is clear. And what it did say was explicitly obiter (p.35). But the decision itself exemplifies the approach of looking closely at the relationship, both physical and functional, between plant and pipeline. The guidance the Tribunal gave was to the effect that two properties that are not contiguous cannot properly be regarded as a single hereditament unless they are functionally related and also have “a substantial degree of propinquity”. This is to recognize the significance of the functional relationship, which has been emphasized time and time again in the jurisprudence – for example in Trunkfield, where the absence of a strong functional connection between the two buildings weighed heavily in the conclusion that they were two hereditaments not one. What the decision in Llandarcy shows above all is the importance of focusing on the facts of the case in hand.
61. Llandarcy does not suggest that a pipeline of a particular length will always be too long to combine with the plant that it serves in a single hereditament. In that case the pipeline that ran for some 59 miles across country to the ocean terminal at Angle Bay was not the only one that brought oil to the refinery. No one seems to have suggested that it belonged to the same hereditament as the refinery, but this may have been because at that time a single hereditament could not extend from one billing authority’s area into another (as Denning L.J. had noted in Gilbert v Hickinbottom, at p.48). In Slough Heat and Power Ltd. the pipeline was 1.3 kilometres long. It had to be as long as that to do what it must. In this case the Pipeline is 12.6 kilometres long. That is as long as it has to be. Nowhere in relevant decisions of the Tribunal or in relevant judgments of the court can one find an attempt to fix a limit for the length of a pipeline beyond which it automatically becomes a separate hereditament. The Tribunal did not do that in Llandarcy, or in Slough Heat and Power Ltd., nor did the court in Coventry and Solihull Waste Disposal Company Ltd.. The reason is not hard to see. If the issues that arise in cases like this are inevitably matters of fact and degree – which they are – it would not be right for the Tribunal, or the court, to prescribe criteria like that. To do so would be to intrude on the role of the fact-finding tribunal itself.
62. I therefore do not think that the Tribunal’s decision in Llandarcy points to the conclusion that on the facts of this case the Power Station and the Pipeline ought to be entered in the rating list as separate hereditaments.
63. In Slough Heat and Power Ltd. power station and pipeline were integrated in a particular way, which the Tribunal described (in paragraph 17 of its decision) as a considerable degree of contiguity. But if their layout had been different, and the degree of contiguity between them less than considerable, the Tribunal might yet have found that they comprised a single hereditament, so long as their functional relationship was sufficiently strong. To speak of degrees of contiguity might be thought somewhat artificial. Either two properties are contiguous or they are not. As one would expect, however, the relevant case law displays a wide variety of situations in which the nature and extent of the physical connection between one property and another have been considered. No two cases will be exactly the same. But contiguity without a functional connection of some kind is unlikely to be conclusive. One can see this in the Tribunal’s decision in Trunkfield. There the fact that the two buildings adjoined each other did not lead to the ratepayer’s offices in them being regarded as a single hereditament. The Tribunal considered the functional connection between the offices in the two buildings, and found it too weak to sustain the conclusion that there was one hereditament. But that case is quite unlike this. Here, as I have said, the fact that the Power Station and the Pipeline are contiguous is not a matter of chance. It is a matter of deliberate design. Their contiguity is not only essential to the functional relationship between them but also, therefore, to the effectiveness of the Power Station itself in generating power.
64. Nor in my view is the appellant’s case strengthened by the Court of Appeal’s decision in Butterley v Tasker. The facts here do not resemble the imaginary situation referred to by Harman L.J. (at p.307), in which two buildings connected by a road are not to be regarded as contiguous because they are connected in that way. Harman L.J. was contemplating the relationship between the two buildings themselves, not the relationship between either of the buildings and the road. As one can see from the judgment of Pearce L.J. (at p.305), the issue the court was actually considering was the relationship between the road and the buildings. Once again, however, what is paramount is that the issue was one of fact and degree.
65. The fact that the Pipeline is a unit of property in itself does not prevent the conclusion that it ought to be entered into the list together with the Power Station, as a single hereditament. The Court of Appeal’s decision in Woolway v Mazars has dispelled the misconception that the reference in section 115 of the 1967 Act to a “unit of such property” changed the approach to be adopted in identifying a hereditament. The statutory concept of a “unit of such property” equates to the concept of a “separate item” of rateable property, and does not serve to define what that “separate item” actually is.
66. In my view, therefore, the VTE was right to decide that the Power Station and the Pipeline form a single hereditament. On the facts before me, and the submissions made to me, my conclusion is the same.
Conclusion
67. For the reasons I have given this appeal must be dismissed. The VTE’s decision will therefore stand, the Power Station and the Pipeline will be entered in the rating list as a single hereditament, and the rateable value will be determined on that basis.
68. A letter concerning costs accompanies this decision, which will become final when the question of costs is decided.
Dated: 8 August 2013
Sir Keith Lindblom, President
Addendum on costs
69. The respondent has applied for its costs. The appellant does not resist this application. He has indicated that he does not propose to make any submissions on costs.
70. In the circumstances I can see no reason why the respondent, having successfully resisted the appeal, should not have its costs. There was only one main issue in the appeal, which was whether the respondent’s power station and pipeline should be entered in the list as one hereditament or two, and on that issue the respondent has won.
71. The appellant must therefore pay the respondent’s costs, such costs to be the subject of detailed assessment by the Registrar on the standard basis.
Dated: 30 October 2013
Sir Keith Lindblom, President