Vtesse Networks Ltd, R (on the application of) v North West Wiltshire Magistrates Court

On 20 November 2008 District Judge Cooper, sitting in the North West Wiltshire magistrates court made three liability orders against Vtesse Networks Limited, the Claimant, in relation to unpaid national non-domestic rates for sums totalling £1,710,877.88 in respect of its fibre optic network. The orders were made under part III of the Local Government Finance Act 1988 (the 1988 Act), and the Non-Domestic Ratings (Collection and Enforcement) Local Lists Regulations 1989 (the 1989 Regulations).

Following the making of the liability orders District Judge Cooper was asked by the claimant to state a case for the opinion of the High Court. On 12 February 2009 he declined to do so, expressing the view that no question of law arose for determination by the High Court. The claimant then sought permission judicially to review the refusal to state a case. On 10 June 2009 Collins J gave permission, and directed that the judicial review should not be limited to the decision by which the DJ declined to state a case but, following the approach in Sunworld v Hammersmith and Fulham LBC (2002) AER 837, should address the substantive issues.

The ambit of this hearing

The issues set out in grounds 6(a)(i) and (ii) also arise in the claimant’s appeal to the Court of Appeal against the judgment of the Lands Tribunal dated 12 February 2009 (Bradford v Vtesse Networks Limited Appeal Court Reference No 2009/0513), which relates to an earlier liability for national non-domestic rates, and which is listed for hearing on 14 – 17 December 2009 .

By an application dated 21 October 2009 the claimant sought an adjournment of this hearing and a stay of the claim until final determination of proceedings before the Court of Appeal. On 5 November Collins J refused the application, but indicated that he had in mind to direct that the court would address issues 6(b) and 6(c), with the issues under 6(a) to await the outcome of the appeal. On further reflection, and by an order dated 12 November, he directed that –

“…this claim should be limited to the issues arising under Paragraphs 6(a)(iii), 6(b) and 6(c) of the Grounds. 6(a)(i) and (ii) will await the Court of Appeal”.

That is the basis upon which the claim proceeded before me. Furthermore it seems clear that whatever the outcome of the appeal, it will not be necessary for this court to consider grounds 6(a)(i) and (ii). In a helpful analysis Mr David Matthias QC, who appeared for the Interested Party (IP), pointed out that if the claimant succeeds in his appeal, the Valuation Office Agency (VOA) will have to revisit the rateable valuations of the claimant’s optic fibre network, both for the period in issue before the Court of Appeal and for the period in issue in this claim. Any consequential adjustment of the rateable valuations would have retrospective effect; and the claimant would in consequence be entitled to a repayment if appropriate. Alternatively if the claimant fails in the appeal, the judgment in relation to those issues will be of binding authority; and accordingly no purpose would be served by the matter coming back before this court.

On 30 November solicitors acting for the claimant wrote to the Administrative Court, renewing the application for an adjournment, on the basis that “the real difficulty for the claimant is that there is insufficient time to prepare for the hearing next week”. That application was also refused by Collins J by order dated 2 December. On the following day, 3 December, Mr Aidan Paul, the claimant’s Chief Executive Officer, wrote to Collins J saying that he had now “asked counsel to stand down” for this hearing, and intended himself to appear on behalf of the claimant. I am satisfied that Mr Paul, who is a director of the claimant, has been authorised to act on its behalf.

The statutory scheme

The claimant’s fibre optic network passes through the area of a number of billing authorities. Its valuation for rating purposes is therefore subject to regulation 6 of the Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989, the relevant parts of which are in the following terms -

“6 Cross-boundary property

(1)

This regulation applies to any unit of property ('relevant property') which by virtue of section 64 (1) of the Act comprises separate hereditaments solely by reason of being divided by a boundary between [billing authorities].

(2)

Relevant property shall be treated as one hereditament and, subject to paragraphs (3) and (4), as situated throughout any relevant period in the area of the [billing authority] in whose area is situated that part of the property which would but for this regulation be the hereditament appearing to the relevantvaluation officer ... to have, on the relevant day, the greater or (as the case may be) the greatest rateable value.

The billing authorities are responsible for the collection and recovery of the rates. They issue rate bills calculated by multiplying the rateable values set by the VOA by the rate in the pound set annually by the Secretary of State. Part III of the 1989 Regulations contains enforcement provisions. By regulation 10 a sum which has become payable to a billing authority, but has not been paid, shall be recoverable under a liability order. Regulation 12 makes provision for an application by a billing authority to a magistrates court for a liability order, and regulation 12 (5) provides that “The court shall make an order if it is satisfied that the sum has become payable by the defendant and has not been paid”. Regulation 23 (1) is in the following terms –

“Any matter which could be the subject of an appeal under regulations under section 55 of the Act may not be raised in proceedings under this Part”.

Thus there is a clear division of functions between the VOA, which determines the rateable value of a non-domestic property, and the billing authority which is responsible for the collection and recovery of non-domestic rates. The Magistrates Court has a limited role in making liability orders where a billing authority can demonstrate that a sum assessed by reference to the Local Valuation List, has become payable, but has not been paid.

The factual background

In February 2007 Mr Bradford compiled evidence as to the claimant's fibre optic rental agreements and network routes from statutory requests for information returned by the claimant's fibre providers (landlords), and on 1 March 2007 notified Kennet that he proposed to raise a new rating assessment for the claimant to take effect from 1 April 2005, and to enter it in Kennet’s Local Valuation List. The claimant had failed to respond to statutory requests for information as to its network routes; but on the information available to him Mr Bradford concluded that Kennet’s area probably contained the greatest length of fibre network, and therefore the greatest proportion of value. That was the basis of his decision to enter the network in Kennet's Local Valuation List. His evidence was that in so doing he was acting in accordance with Regulation 6 of the Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989 (see paragraph 9 above). On 14 March 2007 Mr Bradford issued a schedule including assessments for the claimant’s network with an initial rateable value of £945,000, increasing in stages to the current level of £1,200,000.

On 9 November 2007 the claimant lodged proposals for the deletion of the Kennet 2005 rating list assessments on the basis that the list entries should be in another billing authority’s list. The proposals were based on the contention that –

“… the present assessment is incorrect, excessive and wrong in law as the hereditament has been assessed in the wrong Billing Authority Area contrary to the Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989 ... Regulation 6(3), and consequentially should be deleted.”

The VOA disagreed with the proposals; and in consequence they have been referred to the Valuation Tribunal under regulation 13 of the Alteration of Lists and Appeals Regulations 2005. The listing of the appeals is awaiting the outcome of the claimant’s appeal in relation to the 2000 list.

At the date of issue of the summonses by Kennet, the total sum of £1,710,877.88 remained outstanding in relation to rate bills issued by Kennet in respect of the claimant’s fibre optic network for the financial years 2005/6, 2006/7, 2007/8 and 2008/9.

The grounds

Mr Paul submits that the learned District Judge was obliged to apply the relevant European Law, and that had he done so, he would not have made the liability orders in question. He took as his starting point the decision of the European Court in NV Algemene Transport v Netherlands Inland Revenue Administration, case 26 – 62, a judgment on a reference for a preliminary ruling handed down on 5 February 1963. In answer to the questions referred to it the court ruled that “Article 12 of the Treaty establishing the European Economic Community produces direct effects and creates individual rights which national courts must protect.” Mr Paul argues that that principle must apply to the magistrates’ court.

Secondly he referred to the judgment of the European Court in Peterbroeck, Van Campenhout & CIE SCS v Belgian State case C-312/93 European Court reports 1995 page 1 – 04599. He relied in particular upon the following paragraphs:

“12.

… the court has consistently held that, under the principle of co-operation laid down in Article 5 of the Treaty, it is for the Member States to ensure the legal protection which individuals derive from the direct effect from Community Law. In the absence of Community Rules governing a matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from the direct effect of Community Law. However, such rules must not be less favourable than those governing similar domestic actions nor render virtually impossible or excessively difficult the exercise of rights conferred by Community Law … .

21.

The answer to be given to the question submitted by the Cour D’Appel, Brussels, must therefore be that the Community Law precludes application of a domestic procedural rule whose effect, in procedural circumstances such as those in question in the main proceedings, is to prevent the national court, seized of a matter falling within its jurisdiction, from considering of its own motion whether a measure of domestic law is compatible with a provision of community law where the latter provision has not been invoked by the litigant within a certain period.”

Mr Paul argues that regulation 23(1) of the 1989 Regulations, upon which the District Judge relied in rejecting the argument that he should take account of European Competition Law, is a procedural rule that renders ‘virtually impossible or excessively difficult’ the exercise by the claimant of its rights, in particular those under directive 2002/77 EC, one of the group of directives aimed at liberalising aspects of provision of telecommunications services and the establishment of a competitive market in the telecommunications sector. He submits that the District Judge ought to have disregarded regulation 23(1), and to have engaged with the argument that the valuations by the VOA were contrary to European law.

But his argument fails to take account of the statutory framework within which the VOA and local authorities exercise their functions with regard to rating, and within which the magistrates’ court exercises its jurisdiction. In this context Mr Matthias invited my attention to a line of authority both under the previous and the existing legislative regimes. In County and Nimbus Estates Ltd. v Ealing Borough Council [1979] Rating Appeals 63, the Divisional Court considered a case stated by the Willesden Justices which raised the issue of whether the rating authority had power to go behind a rating valuation made by the valuation officer. The judgment of the court was given by Drake J who said at page 66:

“The effect of those sections, it is contended by the Rating Authority and in my judgment rightly contended, is as follows. The Rating Authority are put on a mandatory duty by the provisions of this Act (The General Rate Act 1967) to collect rates on the basis of the valuation list in force, and where an alteration is being made to that list on the basis of the valuation as altered. Under subss (6) and (7) of section 67 the valuation as altered shown in the valuation list is conclusive evidence as to its correctness. Counsel for the ratepayers says that, whilst he must concede that section 87 is a section which prohibits in effect the rating authority from going behind the valuation, that does not debar the magistrates who are called upon to issue or consider the issuing of a distress warrant from going behind the valuation list to see whether the valuation has been properly entered as a result of valid steps taken within the procedure laid down by the Act. In my judgment, that is not a good argument. The magistrates are required to judge the position between the rating authority and the ratepayer, and Parliament has laid down by section 87 of the Act that there is a duty on the rating authority to give effect to directions which may from time to time be given to them by the valuation officer. The effect of that section, coupled with section 67, is, in my judgment, such as to bind the magistrates also not to go behind the valuation as shown in the valuation list and to give effect to it, and to issue a distress warrant where it is shown that the ratepayer has been properly summonsed to appear before the magistrates court and the rate demand is in accordance with the rate as shown on the valuation list.

In my judgment, the passage in Ryde on Rating at page 861 correctly states the position when it says: “… if the rate is good on the face of it, and has been duly made and published, and there is jurisdiction to make a rate on the person charged, the duty of the justices becomes ministerial.””

In R v Thames Magistrates’ Court ex parte. Christie [1979] Rating Appeals 231 the applicants sought orders of mandamus directing justices and a stipendiary magistrate to state cases for the opinion of the High Court on the basis that they had erred in refusing to go behind entries in a valuation list. The Divisional Court refused the relief sought holding that:

“… the refusals of the justices and the stipendiary magistrate to state cases for the opinion of the High Court were justified on the ground that the applications were frivolous because the magistrates’ court could not go behind the valuation list but was bound to give effect to it.”

Both of the above cases were decided under the statutory scheme contained in the General Rate Act 1967; but for present purposes there is no practical distinction between it and the current scheme under the 1988 Act and the 1989 Regulations. In Hackney Borough Council v Mott and Fairman [1994] Rating Appeals 381, Auld J, as he then was, addressed what was essentially the same question in the context of the current legislative scheme. He held that:

“2.

magistrates’ courts had no jurisdiction to determine that an entry in a rating list was invalid but was bound by the entry and could not examine its validity by reference to whether the valuation officer has given proper notice of it to the ratepayer …

…

(4)

the magistrates’ court was bound to make a liability order under Reg 12(5) of the 1989 Regulations once the court was satisfied, as it should have been, from the entry in the list thatthe sum was payable by the respondents and had not been paid.”

Having considered the statutory scheme (and having compared it with the scheme under the General Rate Act 1967) Auld J concluded at page 388 that:

“In my view, the scheme of the 1988 Act and the Regulations made under it is of a piece with that under the General Rate Act 1967, namely that Magistrates’ Courts have no jurisdiction to determine that an entry in a rating list is invalid (see County and Nimbus Estates v Ealing London Borough Council [1979] RA 63 per Drake J at pp 66 and 67; R v Thames Magistrates’ Court ex parte Christie [1979] RA 231 per Ackner J (as he then was); and Pebmarsh Grain Ltd. v Braintree District Council [1980] RA 136, per Roskill LJ (as he then was) at page 140. If there is a challenge to the validity of the entry in the list it can only be made by way of an appeal to a tribunal under section 55 of the 1988 Act, and thereafter, if appropriate, by application for judicial review (see R v Valuation Officer ex parte Hyde Park Investments Ltd. [1987] R v R 84, per Nolan J (as he then was) at page 85). …

It follows that if a magistrates’ court is bound by an entry in the valuation list it cannot examine its validity by reference to whether the valuation officer has given proper notice of it to the ratepayer … Here, the magistrate was bound to make a liability order under regulation 12 (5) of the 1989 Regulations once he was satisfied, as he should have been, from the entry in the list that the sum was payable by the respondents and had not been paid.

Counsel for the council has helpfully identified certain matters, five in all, which, on the authorities, may constitute valid objections before magistrates to the making of a liability order in reliance on an entry in the rating list; they are: (1) where the property is not within the charging authority’s area, Westminster (Mayor of) v Army and Navy Auxiliary Co-operative supply; (2) where the person charged is not the occupier (or the owner in the case of unoccupied premises), Westminster case, Supra; (3) where the rate has not been lawfully demanded, Mansel v Itchin Overseers; (4) where six years have elapsed since the rate became due, China v Harrow District Council; and (5) where the rate has already been paidin full, Shillito v Hinchliffe. A failure to serve a proper notice of an alteration has not been identified as a valid objection. Indeed, the cases to which I have referred, in all of which complaint was made in one way or another, of inadequate notice, are against it. The rationale for that, as counsel for the rating authorities summarised it in argument, is that any failure of the valuation officer to give due notice of an alteration does not go to the entitlement of the rating authority to seek a liability order but to the validity of an entry in the list, which is not a matter of the magistrates.”

Thus it is clear on the authorities that the effect of the legislative scheme is that the magistrates are not able to go behind a valuation made by the VOA when exercising their jurisdiction to make a liability order under the 1988 Act.

Furthermore the scheme makes provision for a challenge to a valuation by way of proposals to the VOA, which if not accepted can be the subject of appeal to the Valuation Tribunal. That is the course that has been adopted both in the case of the valuations the subject of this application which relate to the 2005 list, and in relation to the 2000 list, the subject of the appeal to the Court of Appeal to be heard next week.

The claimant’s appeals to the Valuation Tribunal in relation to the 2005 listing have yet to be listed for hearing because they give rise to the same issues as those that arise in relation to the 2000 list. Regulation 23(1) of the Alteration of Lists and Appeals Regulations 2005 provides that it is the duty of the President of the Valuation Tribunal to make arrangements for such appeals, and regulation 23(3) provides that:

“23(3). Where two or more appeals relating to the same hereditament or hereditaments are referred under regulation 13, the order in which the appeals are dealt with shall be the order in which the alteration in question would, but for the disagreements which occasioned the appeals, have taken effect.”

It is plainly sensible for the appeals in relation to the 2005 list to await the final outcome of the appeals under the 2000 list given that the same issues arise in both.

There are therefore two points to be made in relation to Mr Paul’s submission as to the application of European law. First, and as the European court observed in Peterbroeck at para 12 “it is for the domestic legal system of each Member State to designate the courts and Tribunals having jurisdiction and to lay down the detail procedural rules covering actions for safeguarding rights which individuals derive from the direct effect of Community Law.” Parliament has designated that a challenge to a valuation by the VOA shall be by way of the Tribunals system; and both the Valuation Tribunal and Lands Tribunal are obliged to apply any relevant European law. Accordingly the claimant’s rights under European law will be safeguarded in its challenge to the 2005 listing.

Secondly the assertion that the exercise of its rights under European competition law has been rendered ‘virtually impossible’ or ‘excessively difficult’, is unsustainable in the face of the availability of appeals within the Tribunals system, a procedure that has been utilised by the claimant. Insofar as the claimant seeks to rely upon the fact that listing before the valuation Tribunal is awaiting the outcome of the appeal to the court of appeal, resolution of the issue with regard to the 2000 list must obviously precede the hearing of the appeal in relation to the 2005 list, and in any event is likely to be determinative of the latter appeals.

Ground 6(b)

But Mr Matthias contends that the learned judge erred in addressing the point on the basis that it fell within the list of the potentially valid objections to a liability order identified by Auld J in Hackney v Mott and Fairman (see paragraph 23 above). He submits that on a proper analysis the District Judge did not have jurisdiction to entertain the point for the following reasons.

In deciding to place the valuation of the network on the Kennet Local Valuation List, Mr Bradford was applying regulation 6(2) of the Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989 (see paragraph 9 above). Mr Matthias submits that what matters regarding the validity of a determination by a valuation officer pursuant to regulation 6(2), is not the true position as it may subsequently emerge, but rather the position as it appeared to him on the relevant day, and it was Mr Bradford’s unchallenged evidence that on the material before him, Kennet appeared to be the area in which the claimant’s network had its greatest rateable value. If it subsequently appears that the determination was made on an erroneous basis, then the owner of the rateable property has his remedy under the Alteration of Lists and Appeals Regulations 2005. Furthermore that is the course that has been adopted by the claimant in this case, in that has proposed that the assessments be deleted from Kennet’s list (now the IP’s list) on the basis that the fibre optic network has been assessed in the wrong billing authority area (see paragraph 14 above), proposals that are now before the Valuation Tribunal as a appeal against the VOA’s determination.

In my judgment Mr Matthias’ submission is well founded. I am satisfied that on a proper application of the statutory regime, the District Judge was bound by the entries in Kennet’s Local Valuation List, and did not have jurisdiction to address this issue. The five matters identified by Auld J in the Hackney case have in common that they do not involve a challenge to the validity of the entries in the local rating valuation list. They all go to the question of whether the billing/charging authority in question is entitled to a liability order against the defendant. As Drake J observed in County and Nimbus Estates “the magistrates are required to judge the position between the rating authority and the ratepayer”. Whereas the claimant’s challenge is to the determination by the VOA, and is a matter falling within regulation 23 of the 1989 Regulations as it could be the subject of an appeal under regulations under section 55 of the 1988 Act. That is clear from regulation 4(1)(g) of the Alteration of Lists and Appeals Regulations 2005 which provides that a proposal to alter a Local Valuation List may be made by an interested person inter alia where “the day from which the alteration is shown in the list as having effect is wrong”, or where “a hereditament shown in the list ought not to be shown in that list”.

It follows that in my judgment the District Judge ought not to have engaged with the point, but in any event his conclusion that he felt “unable on this issue to go behind KDC’s decision to make the demand” is unassailable.

Paragraph 6(c)

It follows that the claim fails in relation to each of the grounds argued before me.