Completion Notices

The subject property was a newly constructed office building which was structurally completed in April 1965. It comprised five floors of office space, with a total floor area of 63,000 square feet, and what were described as “access areas”

The office space was constructed without any form of partitioning on any of the floors, but the access areas were finished to the last detail and were decorated. There were power points throughout, but the offices lacked any electrical fittings, and electrical wiring hung loose from the ceiling.

The building remained vacant for over three years, and during the year 1966-67 the rating authority adopted the then discretionary provisions as to the rating of unoccupied property, to come into effect on 1st April 1967. The authority subsequently charged rates of 50% of the full amount to the owners (the developers), in respect of the whole building, for the time from the end of the three month free period on 1st July 1967 until the property was let on 21st December 1967.

The authority did not serve a completion notice and, before the High Court, it was submitted that such action was unnecessary since the building was not a newly erected building within the meaning of Schedule 1 to the 1967 Act and was a completed building at the time the provisions came into force in the area. It was also argued that the building, being already a hereditament and a completed building on 1st April 1967, ranked immediately as an unoccupied relevant hereditament.

The ratepayers’ response was that there was no liability for the charge, since the property was an incomplete building at all times until the eventual lessees carried out works to their own requirements, and since no completion notice had been served. Counsel for the ratepayers went on to say that even if the building were to be regarded as a completed building from April 1965, it was still a newly erected building which ought to have been subject to the completion notice procedure.

Bridge J said that the first issue to be determined was whether, during the period from 1965 to 1967, the building was a completed building. That depended, he said, upon “whether that which was lacking to render the office block — ready for occupation was of such a character that when provided it would — necessarily be part of the hereditament, or whether it could be expected — to be provided in a form and manner which would enable it to be regarded as mere furniture, not part of the hereditament at all”.

The rating authority argued that since it was possible for internal office partitioning to provided in a form which would not make it part of the rateable hereditament, but rather part of the furniture, the absence of partitions did not prevent the building from being complete.

The High Court also considered whether the lack of electrical fixtures and fittings, together with the total absence of partitioning, rendered the building incomplete and not ready for occupation. Bridge J said that the question of the electrical work that needed to be done was a difficult one and, since he had formed an opinion on the question of partitioning, he did not need to deal with that.

It was the opinion of Bridge J that the absence of partitions rendered the building an incomplete building because, as he put it, “it is totally unrealistic to look at a building of this size and character — and contemplate that any ordinary occupier would dream of entering into occupation without a substantial measure of partitioning in the shape of internal walls”.

Having determined that the building was incomplete, judgment was given for the ratepayers, but Bridge J went on to consider whether the building was or was not a newly erected building such that a completion notice ought to have been served.

The rating authority contended that no building could be a newly erected building if it had been completed at a date before the coming into force of the operation of the statutory provisions, but that view was rejected as being an unreasonable construction of the language of the statute.

The authority further argued that since the building was erected in 1965 it could no longer be called a newly erected building in 1967, that “newly erected building” really meant a building under construction, and that the moment a building is complete it ceases to be newly erected. These concepts, too, was rejected as being contrary to the sense and language of the Act, Bridge J preferring, and accepting, the view of counsel for the ratepayers, that a building is and remains a newly erected hereditament from the time of its completion until the time of its first occupation.

It was the finding of the High Court that the building was a newly erected building and was, in consequence, subject to the completion notice procedure.

DRAKE INVESTMENTS LTD. v LEWISHAM LONDON BOROUGH COUNCIL (1983)

The property involved in this case comprised two buildings on the same site, one of which was a reconstruction of an existing building and the other being newly built. The original building was re-assessed at a nominal rateable value during the period of the building works then, upon their completion in 1976, the valuation officer brought both buildings into the valuation list as one hereditament.

The hereditament, which consisted of four floors of unpartitioned office space with a total floor area of 39,430 square feet, and a basement, remained vacant from the time of its construction. It was ultimately sold on 10th December 1979.

The rating authority charged 50% of the full rates on the unoccupied property, under its then discretionary power, for the period from 1st March 1980 to 30th December 1981, and did not consider that it was appropriate to serve a completion notice.

In due course, and in view of the non-payment of an outstanding amount of some £95,000, the authority sought the issue of a distress warrant by the magistrates’ court. The ratepayers then brought an action before the High Court for a declaration that the authority was not empowered to lawfully demand the rates, and the proceedings before the justices were adjourned pending the outcome of that action.

Counsel for the ratepayers contended that the hereditament was not a completed building and, in support of the view that the authority had no power to levy the unoccupied property rate, referred to the judgment in Watford Borough Council v Parcourt Property Investment Co. Ltd. (1971). In that case, the absence of partitioning in newly built offices of some 63,000 square feet was considered to be one critical factor in the decision that the hereditament concerned could not be regarded as being complete.

It was submitted for the rating authority, however, that the fact that the building in the present case was advertised to let as being available as open-plan offices constituted a material difference from the building in the Watford case. Further, it was argued as being relevant that the offices in the Watford case had a greater floor area (63,000 square feet as against 39,430).

Sir Douglas Frank QC determined that the floor area of the offices should be looked at floor by floor,

and not in total, and that the differences in floor area were not significant to the authority’s case. He found that the judgment in the Watford case regarding the absence of partitioning equally applied here, and went on to say that, despite the reference to the availability of the accommodation as open-plan offices, he considered that “no tenant would dream of using the premises without partitioning”.

The second submission for the ratepayers was that before unoccupied property rate could be charged, it was necessary for the rating authority to serve a completion notice under the arrangements then set down in Schedule 1 to the General Rate Act 1967.

Counsel for the rating authority responded by indicating that paragraph 8 of Schedule 1 to the 1967 Act only prescribed that the authority “may serve” such a notice, and asserted that this meant that it was not bound to do so and that this was a matter for its discretion.

Sir Douglas Frank, in considering the question of whether the completion notice procedure was indeed discretionary, agreed that the words “may serve” suggested that the authority was not bound to serve the notice, but he went on to say that if they did not do so they could not recover the rate. He said that it seemed “really beyond argument that on the ordinary construction of this schedule the rating authority are bound to serve a completion notice if they are to charge the unoccupied property rate”.

The High Court accepted both of the submissions made by the ratepayers, and made the declaration sought, that the rating authority was not empowered lawfully to demand the unoccupied property rates because of the absence of partitioning in the office space and because no completion notice had been served.

A distress warrant was issued by the magistrates’ court for arrears of rates due for the period 1st March 1977 to 31st March 1978, in respect of nine newly built warehouses which had remained unoccupied since their construction. The owners of the properties appealed against that decision to the High Court.

A letter had been sent from the council’s rates office to the owners of the warehouses on 29th November 1976, this stating “I consider the following warehouse units to be completed on 1st December 1976”. The letter (which was construed to be a ‘completion notice’) went on to say that an unoccupied rate charge would become due on 1st March 1977 if the premises were still unoccupied on that date.

In the magistrates’ court, the owners said that the letter may not have been received until 3rd December 1976, and they produced a copy of the letter with that date stamped upon it, the contention being that the letter was an invalid notice because it specified a date earlier than the date on which it was received. The magistrates, however, accepted the authority’s evidence that the letter would have been sent on the day that it was typed and dated, and they held that the letter arrived, in effect, on or before 1st December 1996.

A number of issues were pursued by the owners in the High Court, not all of which have any relevance to the systems of local taxation which have since come into effect for non-domestic rates and council tax. Two aspects concerned with the service of completion notices, though, and one dealing with the power to institute recovery proceedings, continue to have present day significance.

On the first point, the High Court acknowledged the fact that the magistrates had accepted that the system in place within the rating authority was such as to satisfy them as to the date of posting of the notice. They had also demonstrated that they were aware that the Interpretation Act 1889 [subsequently the Interpretation Act 1978] provided that service of a notice was to be deemed to have been effected at the time at which it would be delivered in the ordinary course of post, unless the contrary were to be proved.

Eveleigh LJ said that counsel for the appellants recognised that in order to succeed in appealing on this question of fact, it had to be shown that the finding was one which no reasonable bench of justices could arrive at on the evidence before them. He recognised that the magistrates had placed more weight on the evidence of posting than on the evidence of receipt, but he took the view that the magistrates were, on the evidence before them, entitled to come to the conclusion they did.

The second issue dealing with completion notices was the contention that the completion notice was invalid because it should have been specifically authorised by a resolution of the council of the rating authority. The letter was, in fact, sent by the council’s senior rating assistant in accordance with his normal duties.

Schedule 1 to the 1967 Act used the words “Where the rating authority are of the opinion” in relation to the state of completeness of a new building, and these words were argued to mean that the decisions to fix a completion date and to send the appropriate notice could not be delegated by the council to its officer. [NB The equivalent words in paragraph 2(2) and (3) of Schedule 4A to the 1988 Act are “Where --- it appears to the authority”].

Counsel for the appellants referred to section 101(6) of the Local Government Act 1972, which provides that “a local authority’s functions with respect to levying, or issuing a precept for, a rate or borrowing money shall be discharged only by the authority”, and he contended that the decision to send the letter with a date of completion was a function with respect to the levying of a rate.

Eveleigh LJ pointed to section 101(1) of the 1972 Act as being the more relevant, this providing that a local authority may arrange for the discharge of it functions by, among others, an officer. He said that the provisions for determining the date on which the erection of a building is to be treated as being complete were not to be regarded as the levying of a rate in any way.

The appellants also sought to contest the validity of the application for a distress warrant on the grounds that the proceedings were not authorised by a resolution of the council. This contention was rejected because such proceedings are not to be regarded as being the levy of a rate but merely proceedings for the recovery of an amount due in respect of a particular hereditament.

The High Court found against the appellants on all of the points at issue (including those no longer relevant to local taxation law), and the appeal was dismissed.

The appellants in this case were two corporate bodies who were the owners of four newly constructed buildings. These buildings were the subject of 26 completion notices, which were served by the rating authority on 2nd June 1976 for the purposes of unoccupied property rating under the then discretionary provisions of the General Rate Act 1967.

The completion notices comprised copies of a typed form, with spaces which the council’s principal rating assistant had filled in. They bore the facsimile signature of the council’s treasurer, though they were not seen by that officer before they were issued. The notices stated that the buildings were to be treated as completed on 31st August 1976.

Appeal against these notices was made to the county court (as then was the procedure) on 17th June 1976, on the grounds that the buildings could not reasonably be expected to be completed by 31st August 1976. At the hearing, almost two years later, the ratepayers raised the further contention that the notices were invalid because, in their view, the forming of the opinion as to the state of completeness of a building, which was an essential preliminary to the service of a completion notice, could not be lawfully delegated to an officer or, if it could, it had not been lawfully delegated.

The county court judge considered that he had jurisdiction to determine the question of the validity of the notices, albeit that this point had not been referred to in the notice of appeal, and he ultimately decided that the completion notices were indeed invalid. He found

(a) that the forming of an opinion for the purposes of Schedule 1 to the General Rate Act 1967 could not be delegated to an officer;

(b) that if there was power to delegate, no delegation to the treasurer had actually taken place; and

(c) that if there was power to delegate, and if there was a valid delegation to the treasurer, that officer had never formed the requisite opinion for the purposes of the Act.

Having found the completion notices to be invalid, the judge went on to consider the appeals on their merits in case he was wrong in his view. As to the submission that the buildings could not be completed by 31st August 1976, he ultimately determined revised dates of completion of 11th September 1976 for two of the buildings and 1st December 1976 for the other two.

Appeals were taken by the rating authority to the Court of Appeal in respect of  two of the hereditaments concerned, one for each of the owners, against the decision that the completion notices were invalid. The ratepayers cross-appealed against the county court judge’s determination of the revised completion dates.

The Court of Appeal considered that the decision of the county court judge as to the validity of the completion notices was wrong, and accepted the submission of the rating authority that after bringing the unoccupied property rating provisions into effect by resolution (as was then necessary), the implementation of the provisions of Schedule 1 to the 1967 Act “became a matter of machinery and administration, for which no further resolution of the rating authority was required”.

As to the question of whether the principal rating assistant had authority to form the required opinion regarding the state of completeness of the buildings, the Court of Appeal found that section 101(1) of the Local Government Act 1972 , which gives authorities a general power to arrange for the discharge of any of their functions by an officer, was relevant.

Further, section 101(6) of the 1972 Act which imposes a limitation on section 101(1), was distinguished, it being determined that the forming of an opinion as to the completion of a property was not, itself, “a function with respect to levying a rate”. The Court of Appeal decided that the authority had power to delegate this function to an officer.

The Court of Appeal then considered whether the function of “forming an opinion” had actually been delegated to the treasurer, and whether the principal rating assistant had authority to form the opinion. It was, in the event, accepted that the resolution appointing the treasurer as the proper officer for the purposes of section 151 of the 1972 Act was sufficient in the first respect, and that there was enough evidence, in the second, to establish that the principal rating assistant was duly appointed to form the necessary opinion.

The rating authority’s appeal on the validity of the completion notices was allowed by the Court of Appeal and, after considering the ratepayers’ submissions regarding the time necessary to do works after the substantial completion of the buildings, their cross-appeal as to the revised dates determined by the county court judge was dismissed.

The ratepayers appealed to the House of Lords on the question of the validity of the completion notices only. They cited the findings of the county court judge and added that the opinion of the principal rating assistant could not be taken to be that of either the rating authority or of its treasurer, and that there was never any relevant “opinion” of the authority.

The Lords took note of the fact that the authority’s treasurer has been appointed as the ‘proper officer’ for the purposes of section 151 of the Local Government Act 1972 , and observed that section 111(1) of that Act made provision for a local authority to do any thing which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.

Lord Roskill said that the the performance of such duties as fell upon the treasurer could not possibly all be performed by him personally, and that Parliament could not possibly have intended that this should be so. As to the position of the principal rating assistant, he added that he was quite unable to see why that which he did “was not done as part of the proper administration of the rating authority’s financial affairs, namely the collection of rate revenue”.

Lord Roskill said that he could not construe the giving of a completion notice as “making or levying a rate”, such as would require a formal resolution of the authority, but he did draw attention to the possibility of abuse and illegality of a system which involved completing pre-signed forms. He observed that the authority would, if they had not already done so, take steps to see that they did not expose themselves to a possible loss of revenue “because of some administrative failure of the kind suggested against them in this case”.

The House of Lords upheld the validity of the completion notices by a majority of four to one, Lord Bridge of Harwich dissenting, and dismissed the appeals.

A newly erected building is a completed building for the purpose if a completion notice for the unoccupied property rate only when it is ready for occupation and not when it is structurally completed. A 14 storey office block under construction was held to be not completed where vast floors had no partitions installed.

A newly erected building was held to be completed for the purpose of a completion notice for the unoccupied property rate when it was ready for occupation for the purpose for which it was intended, and not only when the furniture and equipment necessary for its actual occupation was installed and normal occupation had commenced. The county court judge was held to have applied the right test and to have been fully justified in finding that a telephone exchange building was completed when, as a building, it was ready for occupation as a telephone exchange although it could not be used as such until further telephone equipment had been installed.

A newly built six-storey office block was partially let, but the owners were experiencing difficulty in letting the ground, first and second floors. The building contractors had left the site in December 1975, and the rating authority served a completion notice on the owners, in respect of the vacant lower floors, on 12th April 1976.

The completion notice stated that the authority was of the opinion that the work remaining to be done on the three floors in question was such that it could reasonably be expected to be completed within three months, and that the erection of that particular hereditament was to be treated as completed on 13th July 1976.

The owners of the building appealed to the county court against the completion notice (as was then the procedure), and claimed that, although the actual work remaining to be done could be completed within two to three months, work could not reasonably be expected to be started until tenants who could indicate the form of partitioning they required could be found.

The unlet lower floors of the building were described in evidence as having ceilings fitted with acoustic tiles and electrical wiring. The ratepayers’ surveyor said that carpets and lighting had only been installed on the first floor, which was used to show the accommodation to prospective tenants, and that there was no partitioning on any of the three floors. He added that he considered that large open plan offices were “not often used these days” and that he could not envisage anyone taking on a floor without any partitioning.

The rating authority accepted that partitioning would need to be installed, and estimated that all the work that needed to be done could be completed within three months. The ratepayers maintained, however, that that work could not be started until tenants were found, since it would be inconvenient if partitioning were put in and it was later found that it was preferred in a different positioning.

The county court judge took the view that what was material was the time that would be taken for the actual work of putting in the partitioning and anything else that still required to be done, and he held that this work was able to be completed within three months. He found that the question of the time taken for finding a tenant was irrelevant, and he dismissed the ratepayers’ appeal.

At further appeal, counsel for the ratepayers contended before the Court of Appeal that paragraph 9 of Schedule 1 to the 1967 Act was directed to excluding unreasonable delay. He cited some matters which he considered must be taken into account, namely time taken for the delivery of goods, time for the preparing of plans and time taken obtaining building regulations consent.

Cairns LJ expressed no opinion on these matters, but he did conclude that it was, in any event, a very different matter to say that time required for carrying out the work could also include the finding of a tenant before the work is started. He said that “it would be a straining of the meaning of the words ‘reasonably required for carrying out the work’ to say that that expression includes the time taken, however reasonably, in finding tenants willing to occupy the building”.

The Court of Appeal confirmed the decision of the county court and dismissed the ratepayers’ appeal.

The appeal related to a new office building that was structurally completed in 1975. Works were then carried out to finish the building to a high standard, and the letting agents advised the rating authority on 25th March 1976 that that stage of the work was, then, completed.

The rating authority served a completion notice on the owners of the building on 7th March 1977, and this stated that, for the purposes of the rating of unoccupied property, it was considered that the work remaining to be done was such that the building could reasonably be expected to be completed within the statutory three months period. The notice went on to state that the erection of the building was to be treated as completed on 30th April 1977.

The ratepayers appealed to the county court, as then was the procedure, and the judge found that, in order to determine the completion date in this case, a period of six months should be allowed from the date of the service of the completion notice, and that the completion date should, accordingly, be 7th September 1977. The rating authority appealed to the Court of Appeal.

The Court of Appeal accepted that work of a kind customarily done after substantial completion remained to be done to the building at the time of the service of the notice, and that this including the installation of partitioning. The judge in the county court had allowed time for this work to be done, and for the obtaining of fire regulation and building regulation approval, but though there was an issue as to what was a proper period to allow in the circumstances, the appeal to the Court of Appeal only proceeded on the question of the date from which such a period of time should begin to run.

It was noted that the rating authority had not served the completion notice until some 12 months after the date given by the letting agents as the date on which the building was “finished to a high standard”. The question to be considered was, nonetheless, whether the county court judge was right to say that time to be added ran from the date of the completion notice, or whether, in fact, it ran from the date of substantial completion.

Counsel for the rating authority contended that the words “beginning with the date of its completion apart from the work” [now paragraph 9(2) of Schedule 4A to the 1988 Act] meant “beginning with the date of its completion apart from the work which remains to be done which is of a kind which is customarily done to a building of this type”. That date, he said, would here be either 25th March 1976, when the agents said the work was done, or even a date earlier than that.

Waller LJ said that it was unnecessary to consider a date earlier than 25th March 1976 because the judge had determined that to be the date of substantial completion, but he found the authority’s construction of the argument to be irresistible and logical. Service of the notice, he said, was a condition precedent to liability, and the date on which liability commences depends on the notice, but the authority is able to “give a little more time to the owner of a building without also having to have added to that time an additional amount of time which, in truth, has already passed”.

It was concluded that the judge in the county court was in error, and the rating authority’s appeal was allowed. The authority’s completion notice was allowed to stand, and the completion date set out in that notice was substituted for that determined in the county court.

The property concerned in this case comprised one part of a group of buildings constructed in accordance with a 1996 development approval for the creation of seven small industrial units on the site of some old farm buildings. Four of the units were built in 1998, and three of these were occupied by the owner as a single workshop.

The main structure of the remaining three units was constructed in 2000 and, following an inspection of the property by an officer of the billing authority on 26th September 2003, a completion notice was served in respect of one of these (the appeal property) that remained unoccupied. The notice stated that the billing authority considered that this unit was completed on that day.

The owner appealed to the valuation tribunal against the issue of the notice, and he contended that the unoccupied unit could not be completed within three months. The tribunal dismissed his appeal and the owner appealed to the Lands Tribunal.

Mr N J Rose FRICS, for the Lands Tribunal, found that electricity sub mains had been installed and that these led from each of the later three units to a meter room which the owner had erected on the site. In March 2000, however, the electricity supplier had indicated that, due to a lack of capacity, it would not be possible to provide an independent electricity supply to the appeal property.

On the day of the billing authority’s last inspection of the appeal property, it was noted that there was a double 13-amp socket outlet which had been provided for the use of the builders while working there, and that there was also a cable used by the builders throughout the site for the provision of hot water. The power for these outlets was taken from one of the original four units.

It was the appellant’s case that the work remaining to be done to the appeal property could not reasonably have been expected to be completed within three months because there was no permanent electricity supply, because there was no electrical wiring, lighting, power trunking, fire alarm, heating or decoration, and because joinery work had not been completed. He also said that the 13-amp electricity supply which had been used by the builders was insufficient to operate a machine shop which, he asserted, required a 100-amp permanent main supply.

The appellant went on to say that it was a statutory requirement for a workshop to be provided with a fire alarm system connected to the electricity mains, and that a building without heating could be closed down on health and safety grounds if the temperature was too low. It was asserted for the billing authority, in response, that the appeal property had been substantially completed when inspected in September 2003, in that it was watertight and the windows and doors had been fitted. Further, it was said that the building satisfied the authority’s own guidelines for deciding whether a property is substantially completed.

It was stressed for the authority that an electricity supply to the appeal property did exist, and it was argued that the issue of the extent of the power that could be obtained from it was an irrelevance. It was conceded that the unit did not necessarily comply with the building regulations, but the test, it was said, was whether it was ready for occupation for rating purposes. It was contended that the three month period referred to in Schedule 4A of the Local Government Finance Act 1988 was sufficient to allow an incoming tenant to make the usual tenant’s internal alterations to meet their own requirements.

Mr Rose said that he approached the appeal by considering whether the work remaining to be done at 26th September 2003, in order to render the property capable of occupation as a self-contained workshop, could reasonably be expected to be competed within three months. In this context, he rejected the appellant’s view that the state of the joinery and the absence of heating and decoration meant that the building could not reasonably have been expected to be completed within three months.

Mr Rose said that the missing joinery could have been provided in a matter of days, and the absence of plastering and painting did not make the property incapable of immediate occupation as a workshop. Further, he said, it would have been possible to provide a form of free-standing heating, independent of the electricity supply, within a few days.

Mr Rose found there to be more force in the appellant’s contention that the lack of electrical wiring and lighting meant that the property was not complete or approaching completion. He said that by the time the completion notice was served it was clear that there was no prospect that an independent electricity supply would be made available to serve the property as an independent unit.

Mr Rose said that only two 100-amp supplies were available for the entire development, and that they had been taken up by other units. There was no wiring for a lighting system, he said, and he found that fact to be conclusive when taken together with the absence of any prospect of an independent electricity supply being provided to the appeal property within the three months.

Mr Rose went on to say that the appeal property had been vacant for several years and that there was no suggestion that the appellant had an operational requirement for it. In the absence of such a requirement, he said, or the possibility of a market letting without an independent supply of electricity, there was no reason to suppose that the necessary wiring would have been provided, as he put it, “within the three month timescale or at all”. In conclusion, Mr Rose said that it was his view that a building without electrical lighting is incapable of occupation as a workshop, and he accepted the owner’s suggestion that the appeal property could not be occupied without a fire alarm system. It was determined that the property was not completed on 26th September 2003 and that it could not reasonably have been expected to be completed within three months of that date.

The appeal was upheld and the completion notice was quashed.

Determined that a period of four months spent in planning fitting out works should be included in the period reasonably required for carrying out the work customarily done after substantial completion

The rating authority served a completion notice in respect of a new 36-storey office building on 21st November 1969. This notice stated that the authority was of the opinion that the work remaining to be done on the building could reasonably be expected to be completed within three months, and that the building was to be treated, for the purposes of unoccupied property rates, as being completed on 20th February 1970.

Discussions then took place between the owners’ agents and officers of the council, and an agreement was ultimately arrived at that the whole of the building with the exception of shops on the lower floors was to be deemed to be completed on 11th September 1970 and that the unoccupied property rate would thus become payable from 11th December 1970. In consequence of this agreement, the completion notice was withdrawn.

The owners let 34 floors of the building in March 1970, and the lessees then sublet 14 floors, together with some basement parking spaces, on 7th December 1970. The parts sub-let, which were ultimately occupied on 12th September 1971, were later assessed by the valuation officer as one hereditament, with the description ‘offices and premises, 20th to 33rd floors’. No assessment for the whole building ever appeared in the valuation list.

In view of the sub-lessees’ failure to pay the unoccupied property rates for the period from 11th December 1970 to 11th September 1971, the rating authority brought proceedings for recovery of the outstanding sum of £64,550. The ratepayers (the sub-lessees) disputed that they were liable, citing that the completion notice, and the agreement subsequently made with the building’s owners, related to the whole building whereas the assessment which ultimately appeared in the valuation list was only in respect of part of that building.

The High Court determined that unoccupied property rates did not become payable by the ratepayers since, it was said, the condition precedent to liability was never complied with in that the completion notice did not relate to the hereditament

in respect of which the rate was claimed. The rating authority appealed to the Court of Appeal against that decision.

Lord Denning, Master of the Rolls, in the Court of Appeal, noted that the judge in the High Court had accepted the proposition of the ratepayers that there had to be a ‘coincidence’ between the hereditament actually created and the hereditament described in the completion notice. He pointed out, however, that no one would know at the time such a notice is served what hereditaments would eventually be carved out of a building.

The Court of Appeal recognised that the difficulty in this case principally arose from a few words in paragraph 8(1) of Schedule 1 to the General Rate Act 1967, these imposing a condition that the building, when completed, be comprised in a ‘relevant hereditament’. These words, it was said, could only be satisfied literally when there was a coincidence between the building and the hereditament.

It was Lord Denning’s view, however, that that requirement gave rise to “such an absurd result that there must be some mistake in drafting”. He went on to say “Such mistakes do occur from time to time: and when they occur, the courts must do what they can to put things right. I think that the courts should correct these words so as to read that the ‘building when completed will be comprised in one or more relevant hereditaments’.”

Lord Denning and Bridge LJ agreed that the important definition was that of ‘hereditament’, which then appeared in section 115 of the General Rate Act 1967 as “a unit of property which is, or would fall to be, shown as a separate item in the valuation list”.

Lord Bridge said that it could properly appear to the authority that the entire building would be, when completed, comprised in a relevant hereditament, because it was a unit of property capable of single occupation and which, if it ever came into single occupation, would fall to be shown as a separate item in the valuation list. But the fact that it never did come into single occupation, and therefore never did fall to be shown as a separate item in any valuation list, was, in his opinion, “quite irrelevant” to the question of the effectiveness of the procedure.

The ratepayers were held to be liable for the unoccupied property rates for the period in question, and the rating authority’s appeal was allowed.