Factual and Procedural Background
The appeals concern the correct legal approach to rating the site of automated teller machines (ATMs) located in supermarkets, shops, and petrol filling stations. The central question is whether these ATM sites can be considered separate hereditaments and, if so, whether the banks operating the ATMs are in rateable occupation of those sites.
The appeals arise from decisions of the Upper Tribunal (Lands Chamber) which partially allowed appeals against the Valuation Tribunal for England's refusal to alter the 2010 rating list entries that created separate entries for ATM sites. These sites are located in premises owned by several major retailers, with some ATMs operated by banks within the retailers' corporate groups and others by a third-party operator, Company A.
The disputed rating list alterations treated ATM sites as separate hereditaments with individual rateable values, often without reducing the rateable value of the host premises. Eleven lead appeals were dismissed by the Valuation Tribunal for England, which held that the ATM sites were separate hereditaments in rateable occupation by the banks or ATM providers, not the owners of the host premises. Most of these cases were appealed to the Upper Tribunal, which allowed some appeals and dismissed others. Permission to appeal to the Court of Appeal was granted.
Legal Issues Presented
- Did the Upper Tribunal err in its approach to the identification of a hereditament?
- Did the Upper Tribunal err in its approach to the rateable occupation of the ATM sites?
Arguments of the Parties
Appellants' Arguments
- The appellants, including major retailers and Company A, argued that the presence of non-rateable machinery such as ATMs should be disregarded when determining the boundaries of a hereditament. They contended that without the ATM itself, there was no definable separate hereditament.
- They relied on precedent to argue that non-rateable machinery must be ignored for all rating purposes, including defining hereditaments.
- They contended that the retailers retained exclusive possession and control of the premises, including ATM sites, and thus were in paramount occupation, not the banks or ATM operators.
- They argued that the ATM sites were functionally dependent on and inseparable from the host stores, serving the retailers' business purposes jointly with the banks.
- Company A submitted that its occupation was concurrent and complementary with the retailer's, not rivalrous, and that the Tribunal erred in finding it in paramount occupation of the ATM site in the convenience store.
Respondents' Arguments
- The Valuation Officers and respondents submitted that the statutory assumption to disregard the value of ATMs applies only for valuation, not for determining the existence or boundaries of hereditaments.
- They argued that the presence of an ATM site can establish a separate hereditament even absent distinct physical adaptations within the host premises.
- The respondents maintained that the banks or ATM operators had exclusive rights to operate the ATMs, and the purpose of occupation was the provision of banking services, distinct from the retailers' business.
- They contended that the test of rateable occupation focuses on the exclusive use for the occupier's particular purposes, and the banks had such exclusive occupation of the ATM sites.
- The respondents criticized the Tribunal's application of a primary or dominant purpose test, emphasizing that the relevant inquiry is the degree of control and interference with the occupier's use of the premises.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Woolway (Valuation Officer) v Mazars LLP [2015] UKSC 53 |
Geographical test for identifying hereditament; visual or cartographic unity; functional test where use of one part is necessary to enjoyment of another. |
Confirmed the primary test of hereditament identification as geographical and applied it to ATM site boundaries. |
| John Laing & Son Ltd. v Kingswood Assessment Committee [1949] 1 K.B. 344 |
Four ingredients of rateable occupation: actual occupation, exclusivity for possessor's purpose, possession of value, and permanence. |
Applied the principles to determine rateable occupation of ATM sites. |
| Westminster Council v Southern Railway Company Ltd [1936] A.C. 511 |
Paramount and subordinate occupation; landlord-control principle; control as key to rateable occupation. |
Used to assess which party had paramount occupation over ATM sites. |
| London County Council v Wilkins (Valuation Officer) [1957] AC 362 |
Structures placed on land can form separate hereditaments despite remaining chattels; relevance of permanency and attachment. |
Distinguished ATMs as non-rateable machinery but allowed that sites could be hereditaments. |
| Clydesdale Bank Plc v Lanarkshire Valuation Joint Board (2005 S.L.T. 167) |
Free-standing ATMs inside shops are not separate hereditaments absent a right of occupation. |
Applied to reject bank occupation of ATM sites without exclusive rights. |
| Assessor for Central Scotland Joint Valuation Board v Bank of Ireland [2011] RA 195 |
External ATMs accessible 24/7 can be separate hereditaments in rateable occupation of the bank. |
Distinguished from Clydesdale Bank and supported separate occupation by banks. |
| Wimborne District Council v Brayne Construction Co. Ltd. [1985] R.A. 234 |
Purpose of occupation is the object of the activity, not the motive. |
Used to clarify the purpose relevant to rateable occupation of ATM sites. |
| Kennet District Council v British Telecommunications [1983] R.A. 43 |
Non-rateable plant and machinery must be disregarded for valuation and hereditament boundaries. |
Discussed by parties with differing interpretations; tribunal distinguished it. |
| Vtesse Networks Ltd. v Bradford [2006] EWCA Civ 1339 |
Chattels can form hereditaments if rateable property in their own right. |
Distinguished from ATMs which are non-rateable machinery. |
| Case (Valuation Officer) v British Railways Board [1972] R.A. 97 |
Legal question of actual occupation for rateable purposes. |
Referenced regarding the question of retailer's occupation of ATM sites. |
Court's Reasoning and Analysis
The court carefully examined the legal principles governing hereditaments and rateable occupation, particularly focusing on the nature of ATM sites within retail premises. It affirmed that the primary test for identifying a hereditament is geographical, based on visual or cartographic unity, supplemented by a functional test where necessary.
The court accepted that ATMs themselves are non-rateable machinery whose value must be disregarded for valuation, but rejected the appellants' argument that the presence of such machinery should be ignored entirely in determining the existence of a hereditament. The statutory assumption to disregard ATMs applies solely to valuation, not to the identification of hereditaments.
The court distinguished between situations where premises have been specifically designed or adapted to accommodate an ATM, which can create a separate hereditament, and cases where the ATM is free-standing and movable, which do not create separate hereditaments.
Regarding rateable occupation, the court applied established principles emphasizing actual and exclusive occupation for the occupier's particular purposes, with the critical factor being which party has paramount occupation, determined primarily by the degree of control over the premises or site.
The court considered the practical and contractual arrangements governing the ATM sites. It found that for external ATMs accessible to the public at large, the banks or ATM operators were in paramount occupation due to the nature of the occupation, exclusivity, and control over the ATM sites. Conversely, for internal ATMs located within retail areas primarily serving store customers, the retailers were in paramount occupation.
The court rejected the appellants' contention that the retailers retained paramount occupation of all ATM sites, emphasizing that where the ATM site is physically segregated and dedicated for the bank's use, the bank's occupation is exclusive and paramount. The court also noted that the purpose of occupation must be objectively ascertainable and not based on the occupier's motive.
In sum, the court upheld the Upper Tribunal's nuanced approach that recognized separate hereditaments for ATM sites where physical and functional criteria were met, and correctly applied the test of rateable occupation focusing on control and exclusivity relevant to the purpose of occupation.
Holding and Implications
The Court of Appeal UPHELD the decision of the Upper Tribunal (Lands Chamber) with respect to the rating of ATM sites.
The holding confirms that ATM sites can constitute separate hereditaments when the premises have been specifically designed or adapted to accommodate the ATM, and that the banks or ATM operators can be in rateable occupation of such sites where they have exclusive rights and control relevant to their business purpose.
The decision clarifies the application of legal principles concerning hereditaments and rateable occupation in the context of non-rateable machinery and commercial arrangements involving multiple parties occupying shared premises.
No new precedent was established beyond applying and affirming existing principles to the specific facts of ATM sites in retail premises. The direct effect is that certain ATM sites will remain separately rated in the valuation lists, affecting the parties' liabilities accordingly.