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Regina v. Central Valuation Officer and another (Respondent) ex parte Edison First Power Limited (Appellants)
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OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Regina v. Central Valuation Officer and another (Respondent) ON THURSDAY 10 APRIL 2003 The Appellate Committee comprised: Lord Bingham of Cornhill Lord Steyn Lord Hoffmann Lord Millett Lord Scott of Foscote HOUSE OF LORDSOPINIONS OF THE LORDS OF APPEAL FOR JUDGMENTIN THE CAUSERegina v. Central Valuation Officer and another (Respondent)ex parte Edison First Power Limited (Appellants)[2003] UKHL 20LORD BINGHAM OF CORNHILL My Lords, 1. I have the misfortune to differ from the majority of the House, and would for my part allow the appeal. Since my opinion cannot affect the outcome, I shall state the reasons for it briefly, adopting the helpful accounts of the facts and the relevant legislative provisions given by Carnwath J at first instance ([2000] RA 1), by the Court of Appeal (Simon Brown, May and Dyson LJJ, [2001] RA 229; [2001] EWCA Civ 1096) and by my noble and learned friend Lord Millett. 2. I take as my starting point what is, I think, a trite proposition of law, that rates are a form of tax imposed on the occupier of a hereditament. In some circumstances rates may also be imposed on an owner, but the potential liability of a non-occupying owner plays no part in this case and can for present purposes be ignored. Unless there are joint occupiers, there can be only one occupier of a hereditament at any one time, and accordingly there can ordinarily be only one party liable to pay rates on that hereditament in relation to a given period. As a general rule of construction it will be presumed that a statute does not intend to tax or rate, or authorise the imposition of a tax or rate, on more than one occupier in relation to occupation of a hereditament during a given period. The juridical basis of this presumption may be open to argument. It may rest, in this context, on the legal nature of rates. But I do not think the existence of the presumption can be doubted. The cases cited by Simon Brown LJ in paragraphs 30-32 of his judgment are good authority for it: Smith & Son v Lambeth Assessment Committee (1882) 9 QBD 585 at 593; Westminster City Council v Southern Railway Co [1936] AC 511 at 565; Brook v National Coal Board [1975] RA 367 at 371. The general presumption against rating two parties in relation to the same hereditament was described by Simon Brown LJ (paragraph 30 of his judgment) as "well-established", and I did not understand the existence of the presumption to be challenged. 3. But it is of course no more than a presumption. It is not conclusive or irrefutable. Parliament is sovereign. Since, however, the presumption exists (like the presumption against double taxation) for the protection of the citizen and operates to curb the power of the state to exact payment from the citizen, the presumption will be displaced only if "sufficiently clear express words are used" or there are "circumstances surrounding the enactment of the particular legislation which lead to an inevitable inference that Parliament intended, in using the words that it did" that the presumption should be displaced. I did not understand either party to question the correctness of the approach indicated in these quotations from the opinion of Lord Oliver of Aylmerton in R v Inland Revenue Commissioners, Ex p Woolwich Equitable Building Society [1990] 1 WLR 1400 at 1412-1413. 4. In the judgments below, and in argument before the House, somewhat differing views were expressed on whether the facts of this case were such as to engage the presumption at all: whether (in other words) it is a case of double recovery. I would for my part adopt both the analysis and the conclusion of Dyson LJ in paragraphs 70-74 of his judgment. It is not in doubt that Edison paid non-domestic local list rates to the two relevant billing authorities in respect of occupation of the two transferred power stations for the period from 19 July 1999 until 31 March 2000. During the same period PowerGen continued to be liable to pay rates on a basis calculated so as to take account of their occupation of the two power stations. The transfer of the power stations did not reduce their liability in any way. Thus in effect the Secretary of State received payment twice, once from PowerGen and once from Edison. It was therefore a case of double recovery. The presumption was engaged. 5. Neither party suggested that the presumption was displaced by sufficiently clear express statutory words. Thus the question is whether the circumstances surrounding the enactment of the particular legislation were such as to raise an inevitable inference (not just a reasonable or a not unlikely inference, but an inevitable inference) that Parliament intended, in using the words that it did, to displace the presumption. But here again the task of interpretation is made easier by the common approach of the parties. The Secretary of State did not contend that the Local Government Finance Act 1988 raised an inevitable inference that Parliament intended there to be double recovery in a situation where a hereditament formerly part of a class of hereditaments included in the central list was transferred mid-year to a non-designated person and so was included in a local list from the date of transfer, obliging that person to pay local list rates. Rather he contended that the 1988 Act raised an inevitable inference that Parliament intended to authorise the Secretary of State to introduce a scheme for central rating which would have that effect. It is this contention which Edison challenges. The answer must be found in the statute, read of course as a whole and in context. 6. Sections 41-51 inclusive of the 1988 Act made provision for the local rating of non-domestic hereditaments not included in a central non-domestic rating list. The fine detail of the scheme is not important for present purposes. It is however clear from sections 43 and 44 that the amount chargeable in rates for each chargeable day was to be reached by multiplying the rateable value shown for the day (calculated in accordance with section 56(1) and Schedule 6) by the non-domestic rating multiplier for the financial year (calculated in accordance with section 56(2) and Schedule 7) and dividing the result by the number of days in the financial year. The product of that calculation, multiplied by the number of days during which the ratepayer has occupied the hereditament during the financial year, will represent the ratepayer's liability: the sum per day times the number of chargeable days. 7. The central rating list scheme established by sections 52-54 of the Act was clearly intended to provide a simple and efficient means of imposing rates on and collecting rates from ubiquitous utilities with hereditaments in numerous local authority areas. So specified hereditaments occupied by designated persons were to be centrally rated en bloc, and instead of specific rateable values applied to individual hereditaments the rateable value of these centrally rated hereditaments was to be shown in the list as a whole (section 53(1)(2) and (3)). By section 54 the chargeable amount for each chargeable day was to be reached by multiplying the rateable value shown for the day in the central list against the ratepayer's name (calculated in accordance with section 56(1) and Schedule 6) by the non-domestic rating multiplier for the financial year (calculated in accordance with section 56(2) and Schedule 7) and dividing the result by the number of days in the financial year. Allowance being made for the aggregation of hereditaments inherent in the scheme of central list valuation, the formula was very similar to the local list formula. It was clearly contemplated that there was some purpose to be served by finding the chargeable amount of rates for each chargeable day. So far, one finds no indication that a designated person was to remain liable to pay the full amount of rates even though a hereditament or hereditaments whose value was included in the aggregated central list value of hereditaments occupied by that person had ceased to be owned or occupied by that person but had become subject to local list rates as a result of its occupation by a person subject to such rates. It is not, as it seems to me, inherent in a scheme for centralised rating en bloc of hereditaments in a certain class that rates should continue to be paid in the same amount even though the hereditaments comprised in the class have significantly changed. 8. Counsel for the Secretary of State placed considerable reliance on section 67(9):
This provision, read on its own, might be thought to warrant the imposition of rates on a designated person in respect of a broadly-defined class of hereditaments whether or not the person ceased to occupy or own them at any stage in the financial year. But this reading is undermined by subsection (9A), which reads:
This would suggest to me that a designated person does not remain liable to pay rates calculated by reference to a valuation insofar as it is based on the valuation of hereditaments he no longer owns or occupies, the more so (given the presumption) where the hereditaments are owned or occupied by another party liable to pay local list rates. 9. The crux of the argument between the parties turned on the proper construction of Schedule 6 to the Act, entitled "Non-Domestic Rating: Valuation". Its effect, as stated in paragraph 1, was to determine the rateable value of non-domestic hereditaments for the purposes of Part III of the Act. Paragraph 2, equally applicable to central list and local list hereditaments, laid down a valuation formula based on annual letting value. Paragaph 2A applied to the valuation of buildings used for the breeding and rearing of horses when the buildings were occupied together with agricultural land. Paragraph 2B made special provision for valuing caravan sites. The Secretary of State's argument rests on paragraph 3(2), but I should quote the whole paragraph:
Paragraph 3(2) makes quite plain that the Secretary of State may make regulations to disapply paragraphs 2 to 2B, so as to depart from the annual letting basis of valuation, and either to specify a rateable value for central list hereditaments or to lay down rules governing the valuation of such hereditaments. What it does not do, as I read it, is authorise the Secretary of State to specify a value or prescribe rules which will permit double recovery of rates. But it is enough to say that no inevitable inference is to be drawn that Parliament intended to authorise the Secretary of State to introduce a scheme which would have that effect. 10. If that conclusion is correct, it is unnecessary to go further. The Secretary of State cannot draw support from the Electricity Supply Industry (Rateable Values) Order 1994 (SI 1994/3282), since it is the power of the Secretary of State to make that order which raises the issue before the House. Little assistance is gained from the Court of Appeal decision in Milford Haven Conservancy Board v Inland Revenue Commissioners [1976] 1 WLR 817, since in that case the court held that the Secretary of State had had express statutory authority to make the relevant orders. If that conclusion was correct, it necessarily followed that the presumption had been overridden. 11. Edison's standing to raise this challenge has not been challenged. It seems to me irrelevant that Edison would have been liable for local list rates only had it not agreed to indemnify PowerGen against PowerGen's liability for central list rates attributable to the two power stations from 19 July 1999 until the end of the financial year: but for that agreement, Edison itself would only have paid once, but there would still in effect have been double recovery. I do not think that consultation, particularly consultation at a time when divestment of hereditaments by designated persons at the behest of the Crown was not in the minds of those consulted, throws any light on the problem of statutory construction before the House. 12. In agreement with Dyson LJ and for very much the same reasons, I would accede to Edison's argument. LORD STEYN My Lords, 13. The Secretary of State received payment of rates twice in respect of the same hereditament. He received payment once from PowerGen and once from Edison. As Dyson LJ explained in his dissenting judgment in the Court of Appeal it was a case of double recovery. Undoubtedly there is a presumption against rating two parties in relation to the same hereditament. The presumption was applicable. So I am tolerably satisfied that the basic approach of Dyson LJ was correct. 14. On the other hand, at the end of oral argument, I felt somewhat reluctantly driven to the conclusion that under the "swings and roundabouts scheme" the presumption was displaced: Edison First Power Ltd v Secretary of State for the Environment, Transport and the Regions [2001] EWCA Civ 1096, per Simon Brown LJ, para 45; May LJ, para 67. 15. On further consideration of the matter, particularly in the light of the arguments presented by counsel for the appellant, the judgment of Dyson LJ and the speech of my noble and learned friend Lord Bingham of Cornhill, I now consider that this was not a satisfactory and principled basis for concluding that the statutory scheme demonstrates clearly that Parliament wished to displace the presumption. The question whether overall the scheme devised by the Secretary of State works fairly is logically distinct from the question whether the Secretary of State was empowered by the enabling legislation to devise a scheme involving double recovery in the first place. On balance it seems to me that the statutory language is susceptible of different interpretations and does not sufficiently clearly authorise a scheme involving double recovery. 16. In the end the problem before the House is one of vires. The text of the statute must be the starting point. The question is how far, on a contextual reading of the statute, the language is capable of stretching. While I accept that all relevant contextual material must be taken into account, not all the material deployed by the Secretary of State can affect the point of statutory construction. Thus while I accept that the consultation process in this case is admissible, it ultimately does not warrant an interpretation which attributes to the language used by Parliament a meaning which displaces the presumption. The objective setting of the statute does not in logic and common sense reveal a Parliamentary intent to override the presumption. 17. I must go back to what I regard as a strong presumption against double recovery. In my view the executive has not shown a displacement of this principle by a clear Parliamentary intent. 18. For the reasons given by Lord Bingham of Cornhill, as well as my brief reasons, I would allow the appeal. LORD HOFFMANN My Lords, 19. PowerGen (UK) Plc ("PowerGen") carries on the business of generating electricity. By an agreement dated 30 April 1999 ("the sale agreement") it agreed to sell two power stations, Fiddlers Ferry and Ferrybridge C, to Edison First Power Limited ("Edison"). The purchase was completed on 19 July 1999, when Edison went into occupation. 20. PowerGen was rated under a special statutory regime by which the aggregate rateable value of the hereditaments which it occupied and used for generating electrical power was prescribed by the Electricity Supply Industry (Rateable Values) Order 1994 (SI 1994/3282) ("the ESI Order") made pursuant to para. 3(2) of Schedule 6 to the Local Government Finance Act 1988. This prescribed a fixed sum (£178,882,300) for the first year (1995-1996) of the quinquennial valuation list subject to annual recalculation according to a formula based on changes in PowerGen's declared net capacity ("DNC") in respect of electricity generation. Changes in the actual hereditaments which it occupied, such as the sale of a power station, had no effect upon the aggregate valuation until the end of the rating year and then only if they resulted in a change in DNC. The result was that PowerGen's liability for rates in the year 1999-2000 was unaffected by the sale. 21. Edison, on the other hand, was rated in the ordinary way by reference to its occupation of the power stations. It was charged rates assessed on the annual value of the power stations for the period from 19 July 1999 until the end of the 1999-2000 rating year on 31 March 2000. 22. By clause 9.3 of the sale agreement, Edison agreed that "accrued charges…payable" in respect of the power stations should be apportioned at the completion date. The clause said that "for the avoidance of doubt" the apportionment should include an apportionment of rates payable by PowerGen in relation to the power stations "which shall be in addition to any…rates…levied on the Buyer as a result of its occupation…from the Completion Date." 23. Pursuant to this clause Edison paid PowerGen £13,517,937. But when it came to its own assessment for rates, Edison protested. It said that it was being made to pay rates twice over in respect of the same hereditaments. But Edison's own liability was hard to challenge. The hereditaments had properly been entered in the local rating lists from 19 July 1999 and it had been the occupier. Liability was clearly imposed by the 1988 Act. So it decided to attack the legality of the PowerGen rating regime. It said that the ESI Order was ultra vires and void so far as it imposed a liability upon PowerGen in respect of the power stations as from 19 July 1999. 24. Para. 3(2)(b) of Schedule 6 to the 1988 Act gave the Secretary of State power to provide by order that the rateable value of PowerGen's hereditaments should be "such as is specified in the order or determined in accordance with prescribed rules". These are very wide words. But Edison say that they do not allow him to prescribe a method of valuation which permits the same hereditaments to be taken into account for the purpose of rating both PowerGen and Edison. In the absence of express words or necessary implication, a statute should not be construed as imposing or allowing double taxation. Edison brought proceedings for judicial review to have the ESI Order and associated statutory instruments quashed so far as necessary as ultra vires. If that application is successful, PowerGen will owe no rates in respect of the power stations as from 19 July 1999 and there will be nothing to apportion to Edison. It will be entitled to ask PowerGen for its money back. But Carnwath J. dismissed the application and his decision was upheld by the Court of Appeal (Simon Brown and May LJJ, Dyson LJ dissenting.) 25. My Lords, the presumption against double taxation is one facet of a wider common sense principle of the construction of statutes by which courts will often imply qualifications into the literal meaning of wide and general words in order to prevent them from having some unreasonable consequence which it is considered that Parliament could not have intended: see Stradling v Morgan (1560) 1 Pl 199 and, for a more recent example, R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] 2 WLR 1299. The strength of the presumption depends upon the degree to which the consequences are unreasonable, the general scheme of the legislation and the background against which it was enacted. 26. The specific presumption against double taxation was considered by the House of Lords in Regina v Inland Revenue Commissioners, ex parte Woolwich Equitable Building Society [1990] 1 WLR 1400. That case also concerned a power in general terms to make regulations; in that case, for the taxation of building society interest. The Society complained that the effect of the regulations was to make it subject to tax in respect of payments of interest which had already been taxed in a previous year and that the statute should not be construed as permitting such double taxation. But the House of Lords held that the background to the enactment of the statute made it clear that this was exactly what Parliament had in mind. Lord Oliver of Aylmerton said (at p 1412-13):
27. In the present case, there was a division of opinion in the Court of Appeal about whether it really was an example of double taxation. The majority said that upon the true construction of the ESI Order and the 1988 Act, PowerGen was not rated in respect of the power stations as from 19 July 1999. It was rated only in respect of the hereditaments that it actually occupied. But the total rateable value of those hereditaments was treated as being the same as it had been when they included the power stations. Dyson LJ said (at p 255) that this was merely a matter of form. In reality, PowerGen continued to pay rates which had been calculated by reference to the DNC of the two power stations. 28. I do not think that it advances the argument to debate whether this is really a case of double taxation or not. The question is whether the Act authorised what actually happened, whatever you choose to call it. The inevitable consequence of the valuation regime created by the ESI Order was to make the sale of the power stations irrelevant to PowerGen's rate liability in the 1999-2000 rating year but to allow the rating authority to claim rates from Edison for the period of its occupation. As the latter is conceded to be lawful, the question is whether a valuation regime which takes no account of the disposal of hereditaments to a rateable occupier in a rating year is so unreasonable, viewed against the scheme of the 1988 Act and the background to its enactment, that Parliament cannot be supposed to have intended paragraph 3(2) of Schedule 6 to authorise it. 29. My Lords, the background is very important and I must therefore spend some time on the methods which had been used to value the hereditaments of public utilities like electricity generating companies before the 1988 Act. 30. Rates are traditionally a local tax assessed upon occupiers of hereditaments in accordance with their annual value. Each local authority makes a rate according to its needs. There are however certain kinds of ratepayers whom it is not very practical to rate by reference to the individual hereditaments which they occupy in each local authority area. They may carry on activities for the purpose of which they occupy hereditaments which are situated in many local authority areas and which are extremely difficult to value separately. The problem emerged in consequence of the creation of canal, harbour, railway, gas, electricity, water and telegraph companies in the nineteenth century. The law insisted that such companies should pay the poor rate and other rates assessed upon them by reference to the annual value of the hereditaments which they occupied within each parish. But how were such values to be determined? The principle, as set out in section 1 of the Parochial Assessments Act 1836, was to estimate "the rent at which the [hereditaments] might reasonably be expected to let from year to year". But, as Viscount Cave LC said in Kingston Union v Metropolitan Water Board [1926] AC 331, 338:
31. The first difficulty, as explained by Viscount Cave, was that piecemeal valuations of the hereditaments in each parish would not necessarily add up to the value of the undertaking as a whole:
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