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[2003] EWLands RA_75_1998 (15 September 2003)

RA/75/1998

LANDS TRIBUNAL ACT 1949

RATING – exemption – agricultural building – Local Government Finance Act 1988 Sch 5 para 7 – seed warehouse occupied by members co-operative – members themselves co-operatives – agricultural land occupied not by member co-operatives but by their individual members – substantial proportion of seed coming from and going to persons other than member co-operatives and their members – held not exempt

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE

WEST WALES VALUATION TRIBUNAL

by

JOHN ROBERT PYRKE

(Valuation Officer)

Re: Warehouse and Premises

Dyfed Seeds Limited

Old Llangunnor Road

Carmarthen

Dyfed

Before: The President

Sitting at 48/49 Chancery Lane, London WC2A 1JR

on 10 September 2003

Timothy Mould instructed by Solicitor of Inland Revenue for the appellant

The following cases are referred to in this decision:

Farmer (VO) v Hambleton DC [1999] RA 61

Hambleton DC v Buxted Poultry Ltd [1992] 1 WLR 330

Farmer's Machinery Syndicate v Shaw (VO) [1961] 1 WLR 393

The following further case was referred to:

Courtman (VO) v West Devon and North Cornwall Farmers Ltd [1990] RA 17


 


DECISION

1. These two consolidated appeals (relating respectively to the 1990 and 1995 rating lists) concern a hereditament which was entered in each list as "Warehouse and Premises, Dyfed Seeds Ltd, Old Llangunnor Road, Carmarthen, Dyfed" at £23,500 RV (in the 1990 list) and £29,250 RV (in the 1995 list). Following proposals by the ratepayers the West Wales Valuation Tribunal directed that each entry should be deleted as the hereditament was exempt from rates as an agricultural building under para 7 of Schedule 5 to the Local Government Finance Act 1988. Although the ratepayer, Dyfed Seeds Ltd, responded to the appeals by the valuation officer to this Tribunal, by order of the Registrar dated 10 December 2002 permission was granted to the respondent to withdraw from the appeals, which are now therefore unopposed.
2. There is before me a statement of facts, supported by a witness statement by the appellant and documentary evidence. This shows that Dyfed Seeds Ltd is a body corporate with limited liability incorporated on 19 April 1944 under the Industrial and Provident Societies Act 1893. It was established as a federal co-operative society by farmers acting through seed associations and growers, co-operative societies and grower associates. At both material days it was the occupier of the appeal hereditament, but it did not occupy any agricultural land.
3. Although the rules of Dyfed Seeds Ltd permit individuals to be members, all the members were in fact corporate bodies, principally farmers co-operatives and seed growers associations. They numbered 15 on the material day for the 1990 list and 9 on the material day for the 1995 list. The members of the farmers co-operatives and seed growers associations occupied agricultural land, but none of the corporate members of Dyfed Seeds Ltd occupied any agricultural land.
4. The appeal hereditament comprises a warehouse and premises with facilities for the storage of agricultural seeds and secure facilities (accessed through the main bay and partitioned off from the rest of the storage area) for the storage of agricultural chemicals, together with facilities for the processing of seeds. Dyfed Seeds Ltd uses the warehouse to prepare, dress and store seeds for the member co-operatives, and also for the storage of chemicals. Seeds and chemicals are then sold back to members of the member co-operatives as needed and to other farmers who are not members of any of the member co-operatives. Some of the seed that comes into the warehouse has been grown on the farms of members of the member co-operatives, whilst other seed and the agricultural chemicals which are stored there come from other sources. Within the seed store there is no segregation of seed grown on the farms of members of the member co-operatives from seed grown elsewhere. Nor is there any way of determining whether a particular consignment of outgoing seed has come from the farms of members of the member co-operatives or from some other source or sources (save in those instances where all the seed of a particular variety has come from one or the other).
5. The major use of the warehouse is the use for seed preparation and storage. The seeds that pass through the warehouse are predominantly barley, but also include oats, wheat, rye and grass. In the year ended 1 April 1990 (the material day for the 1990 list appeal) seed entering the warehouse consisted of 1,806.9 tonnes of unprocessed barley, of which 1,446.9 tonnes came from agricultural land occupied by members of the member co-operatives and 360 tonnes (19.92% of the total) was purchased from the sources; 88 tonnes of processed barley, 170 tonnes of oats, 78 tonnes of wheat and 90 tonnes of rye, all of which had been purchased from other sources; and 279 tonnes of grass, of which 24 tonnes come from agricultural land occupied by members of the member co-operatives and 255 tonnes (91.4% of the total) was from other sources. In all, therefore, 2511.9 tonnes of entered the warehouse of which 1470.9 tonnes (58.6%) had come from agricultural land occupied by members of the member co-operatives and 1,041 tonnes (41.4%) had come from other sources.
6. Sales in the year to 1 April 1990 were 1,660 tonnes of processed barley (the balancing figure of 234.9 tonnes being accounted for by wastage in the course of the processing), of which 1,057 tonnes sold to members co-operatives or direct to their members and 550 tonnes (33.13%) was sold to non-members; 170 tonnes of oats, 78 tonnes of wheat and 90 tonnes of rye, all of which was sold to members co-operatives or to their members; and 279 tonnes of grass, of which 269 tonnes was sold to member co-operatives or their members and 10 tonnes (3.58%) was sold to non-members. In all, therefore, 2,277 tonnes of seed was sold from the warehouse, of which 1,717 tonnes (75.4%) was sold to member co-operatives or their members and 560 tonnes (or 24.6%) was sold to other purchasers.
7. In the year ended 1 April 1995 (the material day for the 1995 list appeal) seed entering the warehouse consisted of 1,478.14 tonnes of unprocessed barley entered the warehouse, of which 1,273.94 tonnes came from agricultural land occupied by members of the member co-operatives and 204.2 tonnes (13.81%) was purchased from other sources; and 770 tonnes of processed barley, 173 tonnes of oats, 142 tonnes of wheat, 99 tonnes of rye and 225 tonnes of grass, all of which had been purchased from other sources. In all, therefore, 2,887.14 tonnes of seed entered the warehouse, of which 1,273.94 tonnes (44.12%) had come from agricultural land occupied by members of the member co-operatives and 1,613.2 tonnes (55.88%) had come from other sources.
8. Sales in the year to 1 April 1995 comprised 2,056 tonnes of processed barley (the balancing figure of 192.14 tonnes being accounted for by wastage during processing), of which 1,628 tonnes was sold to member co-operatives or their members and 428 tonnes (20.82%) was sold to non-members; all of which was sold to member co-operatives or their members; and 225 tonnes of grass, of which 218 tonnes were sold to member co-operatives or their members and 7 tonnes (3.11%) was sold to non-members. In all, therefore, 2,695 tonnes of seed was sold from the warehouse, of which 2,260 tonnes (83.86%) was sold to member co-operatives or their members and 435 tonnes (16.14%) was sold to other purchasers.
9. Were the appeal hereditament found to be rateable, the parties had agreed that rateable values of £22,500 for the 1990 list and £25,000 for the 1995 list were correct.
10. Under para 1 of Schedule 5 to the 1988 a hereditament is exempt to the extent that it consists of agricultural buildings. Para 7 provides, so far as relevant:

"7 (1) A building is an agricultural building if it is not a dwelling and –

(a) it is used in connection with agricultural operations carried on on agricultural land, and

(b) it is occupied by a body corporate any of whose members are or are together with the body the occupiers of the land.

(6) Sub-paragraph (1) above does not apply unless the use there mentioned….is its sole use."

11. Para 8(3) is also to be noted. It provides:

"8. (3) In determining for the purpose of paragraphs 3 to 7 above whether a building used in any way is solely so used, no account shall be taken of any time during which it is used in any other way, if that time does not amount to a substantial part of the time during which the building is used."

12. The case for the appellant is, firstly, that the hereditament does not fall within para 7(1) because (b) is not satisfied. The warehouse was occupied by a body corporate but none of its members occupied the land referred to in (a). The co-operatives that formed the membership of Dyfed Seeds Ltd did not themselves occupy any agricultural land. It was the members of the member co-operatives that were in occupation. Secondly, it is said, even if (b) were to be treated as satisfied by the fact that the warehouse was used in connection with agricultural operations carried on on the land of the members of the member co-operatives, such use was not its sole use (within sub-paragraph (6)) because substantial proportions of the seed received into the warehouse and sold from it came from or went to non-members.
13. For the appellant Mr Timothy Mould referred, on the first point, to Farmer (VO) v Hambleton DC [1999] RA 61, and in particular to the judgment of Chadwick LJ at 83-85, where he referred to the similar provisions contained in section 26(4) of the General Rate Act 1967 and section 4(1) of the Rating Act 1971. On the second point he referred to Hambleton DC v Buxted Poultry Ltd [1992] 1 WLR 330, which arose under the provisions of the 1971 Act, section 1(2) of which corresponded to paragraph 8(3) in the present case. At 340 F-H Glidewell LJ said:

"As I have already said, since 6 per cent to 8 per cent of the produce of the mill was going to enterprises other than that of Buxted, the mill was not solely used in connection with the operations carried on in the 67 broiler houses unless the 6 per cent to 8 per cent can be disregarded as de minimis. There are two points here. First of all, does this concept apply at all to this particular part of the legislation? In my view it does not. This part of the legislation expressly includes the 'substantial part of the time' provisions in section 1(2). There is no need or room to import the analogous concept of 'de minimis'. But, even if that is wrong, I do not see how 6 per cent to 8 per cent of the production can be regarded as de minimis."

14. There is no doubt in my judgment that this appeal must succeed. On the facts it is at least inferable that the warehouse was used in connection with agricultural operations on agricultural land – the land on which the seed was produced and the land on which it was used after being sold from the warehouse. The warehouse was occupied by a body corporate, Dyfed Seeds Ltd. However none of the members of Dyfed Deeds Ltd – the member co-operatives – occupied any of the agricultural land. It was their members that did. I find it impossible to construe the provision so that it would extend to cover these facts. One would need to read in to para 7(1)(b) after "any of whose members" the words "or, if any of those members is a body corporate, any of the members of such body corporate." I can see no justification for doing this. Since Farmer's Machinery Syndicate v Shaw (VO) [1961] 1 WLR 393 the attention of the legislature has been focussed on the issues raised where buildings and agricultural land are variously occupied by co-operatives and their members. In view of this it can be taken that exemption is intended to apply in the circumstances expressly provided for but not otherwise.
15. That is sufficient to entitle the appellant to succeed. But I also agree with him on the "sole use" point. The proportion of the tonnage received into the warehouse from non-members (41.4% in 1990 and 55.88% in 1995) and the proportion of the tonnage sold (24.6% in 1990 and 16.14% in 1995) clearly show that the sole use of the building was not in connection with agricultural operations on the land of Dyfed Seeds Ltd members (or their members). The appeals succeed. The hereditament must be entered in the 1990 list at a value of £22,500 RV and in the 1995 list at a value of £25,000. There will be no order as to costs.

Dated 15 September 2003

George Bartlett QC, President