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This part of their decision has not been challenged. Ratio |
In the Court of Appeal, the Chancellor (paras 40-46), having found little help in the authorities cited or the legislative history, relied on the usual principles of construction. Ratio |
He agreed substantially with the reasoning of the Upper Tribunal. Ratio |
He thought that, normally at least, manufacturing operations and trade processes would be activities that bring about a transition from one state or condition to another, and would include the creation, completion, repair or improvement of the subject matter of that activity (para 41). Ratio |
He noted also that the relevant sub-clause was an exception, not a proviso, and should be construed quite narrowly (para 42). Ratio |
He thought the display of goods for retail sale was the antithesis of a trade process. Ratio |
He accepted that the process of freezing chickens would probably be a trade process, but not just keeping them frozen to be offered for sale. Ratio |
He also agreed with the tribunal that the fact that the environment appropriate for the methods of a particular retailer requires more substantial and complex equipment than normal does not mean that it is used for a trade process (para 45). Ratio |
The submissions ARG |
In this court, Mr Kolinsky QC for Iceland submitted that the Court of Appeal misunderstood the underlying purpose of the legislation, as disclosed by a study of the legislative history, and adopted an unduly restrictive reading of the provision. ARG |
He identified Icelands trade process as the continuous freezing or refrigeration of goods to preserve them in an artificial condition without which they would be worthless. ARG |
Neither the ordinary use of language nor the case law justified the view that a transition was required from one state to another. ARG |
He relied (as he did in the Court of Appeal) on three authorities which supported a wider approach: i) Union Cold Storage Co Ltd v Southwark Assessment Committee (1932) 16 R & IT 160, relating to the application of the precursor of Class 4 of the 2000 Regulations to cooling chambers in a warehouse used for storing food... |
The case proceeded on the basis (recorded at p 164) that the chambers were admittedly plant on the hereditament for the purpose of manufacturing operations or trade processes. ARG |
ii) Union Cold Storage Co Ltd v Bancroft [1931] AC 446, where the issue was whether, for the purposes of industrial derating, certain refrigeration equipment was for storage purposes or for the purposes of altering or adapting goods for sale. ARG |
Viscount Dunedin described the plant as used as part of an elaborate process involving the use of machinery for the preservation of goods during storage (pp 492-493). ARG |
iii) Assessor for Lothian Region v BP Oil Grangemouth Refinery Ltd (1985) SLT 453, where the Lands Valuation Appeal Court proceeded on the basis that a marine terminal at a petrochemical works, used solely for the purpose of loading refined oil, was premises used in an industrial or trade process (p 459, per Lord Ross)... |
As a further illustration of the practice of the Valuation Office at the time of the Wood Report, he referred to Hays Business Services Ltd v Raley (Valuation Officer) [1986] 1 EGLR 226 (LT) (Emlyn Jones FRICS). ARG |
That concerned a warehouse used for the storage of archival materials including documents, films and audio-magnetic tapes. ARG |
For some items of a sensitive nature, there had been installed specialist items of plant, including heating plant, humidifiers, and fire-protection equipment which utilised Halon gas so as to extinguish fires without damaging the stored items. ARG |
The tribunal recorded that the Solicitor for the Inland Revenue, for the Valuation Officer, had conceded that the specialist heating and humidification equipment were non-rateable (p 227J). ARG |
The tribunal reached the same conclusion in respect of the fire protection plant, which was not rateable because it was on the hereditament primarily to protect the material that is stored there. ARG |
It added: Even if it were to be found that this could only be done by the protection of the building and therefore that that was the main use of the equipment, it would nevertheless not be included within the schedule because it was there expressly for the purpose of the trade process being carried on. ARG |
(p 228E) To similar effect, Mr Kolinsky relied also on the Wood Report, which proceeded on the assumption that an air-conditioning plant installed to facilitate a particular process such as a computer suite, was excepted from rating (see the passage quoted at para 23 above). ARG |
He found more recent support for the same broad approach in Leda Properties Ltd v Howells (Valuation Officer) [2009] RA 165 (LT George Bartlett QC President). ARG |
Although no issue arose under the proviso as such, it was common ground that the sophisticated air handling system of a computer hall, described in the decision (para 3) as provid[ing] the temperature and humidity control necessary for process purposes, was to be left out of account under the regulations (paras 3, 34).... |
Mr Kolinsky (who coincidentally appeared on that occasion for the respondent Valuation Officer) asked us to note that the Valuation Officer, Mr Howells, was described as having had since 1996 a lead role in the valuation of specialist classes of property, including computer centres (para 32). ARG |
We were asked to infer that the common ground reflected the Valuation Offices considered and established position at the time. ARG |
For the Valuation Officer, Mr Morshead supported the reasoning of the Upper Tribunal and the Court of Appeal. ARG |
Like them he submitted that the Class 2 proviso constitutes an exception to the general principle of rateability, and should be narrowly construed. ARG |
The composite phrase manufacturing operations or trade processes must be read as a whole. ARG |
It was not enough that the ratepayers activity could be labelled as a trade and that one or more of its activities could be labelled as a process. ARG |
This was the error made by the tribunal in the Hays case, the reasoning of which was plainly misconceived. ARG |
The Union Cold Storage cases, to the extent that the statutory context was the same, were not necessarily comparable on the facts. ARG |
In so far as they involved the application of a reduction in temperature to turn fresh goods into frozen or chilled ones, it would be uncontentious to describe that activity as a manufacturing operation or trade process. ARG |
He referred also by way of analogy to the Capital Allowances Act 1968 section 7, which defines industrial building as including (inter alia) a building in use for the purposes of a trade which consists in the subjection of goods to any process (section 7(1)(e)). ARG |
In Bestway (Holdings) Ltd v Luff [1998] STC 357, 381, Lightman J had summarised, under heads (1) to (7), the effect of the authorities on the meaning of the expression subjection to process (notably Kilmarnock Equitable Co-operative Society Ltd v Inland Revenue Comrs (1966) 42 TC 675, 1966 SLT 224): (3) Subjection to a... |
Mr Morshead also went further than the Court of Appeal. ARG |
He submitted that Icelands retail activities were wholly outside the scope of the Class 2 proviso, which was directed towards plant serving productive activities in industry, rather than commercial activities more generally. ARG |
He supported that submission by reference to the history, including the reports summarised above, and specifically to the Wood Report (in particular paras 8.8-9 quoted above). ARG |
He read the report as recognising a wide-ranging general rule applicable to commercial hereditaments generally, distinguished from the activities of industry; and as proposing for the latter (in his words) an exemption only in the narrow case of plant which serves a process function in industry. ARG |
Discussion Ratio |
It is appropriate to begin by addressing Mr Morsheads broader submission, not in terms adopted by the Upper Tribunal or the Court of Appeal: that is, that the Class 2 proviso was concerned with productive activities in industry and not with other forms of commercial activity, such as the retail activities of Iceland. R... |
With respect to him, and to those instructing, I find this an impossible contention, both on the wording of the Regulations and against the background of the Wood Report. Ratio |
As to the first, if the draftsman had wished to limit the proviso to industrial activities, it would have been easy to say so. Ratio |
The inclusion of trade processes, as an alternative to manufacturing operations can only be read as designed to widen the scope of the proviso to include other forms of trade and their processes. Ratio |
Trade is a familiar word which naturally extends to Icelands retail activities. Ratio |
Subject to the interpretation of the word process, there is nothing in the proviso or in its context to justify a narrower approach. Ratio |
Further, far from gaining support from the Wood Report, the submission seems to me wholly inconsistent with it. Ratio |
It is true that there were some references in chapter 8 to particular issues affecting industry, but I cannot read those as intended to limit the scope of the recommendations more generally. Ratio |
On the contrary, the emphasis was on the principle of fairness between ratepayers, which was regarded as of paramount importance for the political credibility of the business rating system (para 8.6). Ratio |
Nor was there any such limitation in the general rules proposed at paragraph 8.10, or the specific discussion of Class 2 (paras 9.14-15) (see above). Ratio |
Rule (2) proposed exemption for plant and machinery that can fairly described as the tools of the trade, without any limitation of the nature of the trade. Ratio |
Similarly rule (5) which dealt with the need to draw lines between the service and process functions was expressed in general terms. Ratio |
The submission is even less easy to reconcile with the Scottish legislation, which referred to any trade, business or manufacturing process. Ratio |
As noted above, the report criticised that, not for extending its scope too far, but for not going far enough. Ratio |
Finally, Mr Morshead was unable to explain why, if his submission were correct, the worked examples extended to retail distribution; nor why from 1986 until as recently as 2009 the practice of the Valuation Office had apparently taken a wider view, so as for example to treat air conditioning plant for a computer centre... |
The Hays case (1986) is of course not binding on this court, nor indeed on the Valuation Office. Ratio |
It is unnecessary to decide whether on its facts it was correctly decided. Ratio |
However, if it had been thought in any way controversial at the time of the Wood Report, it would be very surprising for it not to have been addressed. Ratio |
Turning to the reasoning below, the Court of Appeal and the Upper Tribunal both saw the proviso as an exception to a general rule, to be construed narrowly; and as naturally referring to a process designed to bring about a transition from one state to another. Ratio |
The Court of Appeal even saw some significance in the change (between 1925 and 1994) from a proviso to an exception: para 42. Ratio |
In my view this approach pays insufficient regard to the place of the proviso in the scheme of the Regulations as a whole. Ratio |
Whatever word has been used at different times, it is and always was an exception to an exception. Ratio |
As already explained, the classes are themselves exceptions to the general rule of non-rateability; the relevant proviso (or exception) brings items of plant back into the scope of the general rule. Ratio |
The rationale is that, although they may provide a service to the building, they also provide a service to the activities of the trader within it, and the latter is their main or exclusive function. Ratio |
They are therefore more fairly considered for rating purposes as tools of the trade (in the words of the Wood Report) within the general rule of non- rateability. Ratio |
There is certainly nothing in the Wood Report to suggest that the use of the word except or the other changes of language were intended to signal a substantive change. Ratio |
On the contrary, the passages quoted above show that the intention was to retain the law substantially without alteration, while improving the draftsmanship. Ratio |
How this was done (reflecting the language of Wood Report paras 9.11-12) is apparent from a comparison of the wording of the 2000 Regulations with that of its predecessors. Ratio |
An important change was the introduction of the expression services to distinguish the functions of different categories of plant. Ratio |
Thus, it is recognised that plant which is used in connection with services to the hereditament may also be used in connection with services as part of manufacturing operations or trade processes . Ratio |
Viewed in this way, the key distinction lies in the main use to which the services are put: in connection with the hereditament, or with the processes within it. Ratio |
In my view, there is nothing in the word process itself which implies a transition or change. Ratio |
The cases under the Capital Allowances Act 1968 were no doubt coloured by the context, related to industrial buildings, and the need for goods to be subjected to a process. Ratio |
This is apparent in particular from the opinion of Lord Guthrie in the Kilmarnock case (42 TC 675, 681, 1966 SLT 224, 228). Ratio |
He recognised process as a word with various meanings some wider than others, including the widest significance of anything done to the goods or materials; but in conjunction with the word subjection a narrower reading was appropriate. Ratio |
I agree respectfully with that view of the wider meaning of the word process, which is also consistent with the standard dictionary definitions. Ratio |
A trade process is simply a process (in that wide sense) carried on for the purposes of a trade. Ratio |
Mr Kolinsky submits that, in the context of Icelands trade, the word is apt to cover the continuous freezing or refrigeration of goods to preserve them in an artificial condition. Ratio |
I agree. Ratio |
Since the services provided by the relevant plant have been held to be used mainly or exclusively as part of that trade process, they should be left out of account for rating purposes. Ratio |
For these reasons, I would allow the appeal, and, on this issue, restore the decision of the Valuation Tribunal. RPC |
The Scottish Parliament has determined to address health and social consequences which can arise from the consumption of cheap alcohol. FAC |
The mechanism chosen is minimum pricing. FAC |
The Alcohol (Minimum Pricing) (Scotland) Act 2012 (the 2012 Act) will, when in effect, amend Schedule 3 of the Licensing (Scotland) Act 2005 by inserting in the licence which any retail seller of alcohol in Scotland must hold, an additional condition, to the effect that an alcohol product must not be sold at a price be... |
The minimum price is to be set by the Scottish Ministers by secondary legislation. FAC |
The current proposal is that it should be 50 pence per unit of alcohol. FAC |
The Scottish Ministers have undertaken not to bring the 2012 Act into force or to make any order setting a minimum price until final determination of the present proceedings. FAC |
The 2012 Act contains a requirement for the Scottish Ministers to evaluate and report to the Scottish Parliament on the operation and effect of the minimum pricing provisions after five years, and a provision terminating the operation of those provisions automatically after six years, unless the Scottish Ministers by o... |
The proceedings are brought by three petitioners: The Scotch Whisky Association and two Belgian organisations which I can for economy call the European Spirits Organisation and the Comit Europen des Entreprises Vins. FAC |
Their case has been presented by Mr Aidan ONeill QC. FAC |
The respondents are the Lord Advocate representing the Scottish Ministers and the Advocate General for Scotland representing the United Kingdom government. FAC |
In the petitioners submission, the 2012 Act and the proposed system of minimum pricing are contrary to European Union law, and so outside the competence of the Scottish Parliament and the Scottish Ministers by virtue of sections 29(2)(d) and 57(2) of the Scotland Act 1998. FAC |
This (with other objections not now pursued) was rejected by Lord Doherty in the Outer House: [2013] CSOH 70; 2013 SLT 776. FAC |
On appeal to the Inner House, the Extra Division on 3 July 2014 referred six questions to the Court of Justice. FAC |
In response, Advocate General Bot delivered his opinion on 3 September 2015, and the Court of Justice gave its judgment on 23 December 2015: (Case C- 333/14) [2016] 1 WLR 2283. FAC |
On the matter returning to the First Division for determination, the appeal was on 21 October 2016 dismissed for reasons given in a single judgment of the court given by the Lord President, Lord Carloway: [2016] CSIH 77; [2017] 1 CMLR 41. FAC |
The matter now comes to the Supreme Court with permission granted by the First Division. FAC |
There are two limbs to the petitioners challenge under EU law to the 2012 Act and to the principle of minimum pricing. Ratio |
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