Supreme Court confirms ATM sites in supermarkets and convenience stores not separately rateable

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In a decision which will be of considerable importance to the law of rating, the UK Supreme Court has confirmed that the sites of cash machines in supermarkets and convenience stores are not separate hereditaments for rating purposes, but are instead one with the store in which they are located.

The appeals examined a series of ATMs located in Tesco, Co-op and Sainsbury’s supermarkets, as well as one located in a Londis convenience shop. In each case, the ATM was provided to the store by a third party, but was provided as a part of the store’s retail offering to its customers. The appeals were lead appeals, with some 30,000 additional cases stayed pending the Court’s decision.

At first instance, the Valuation Tribunal for England held that each ATM site was a separate hereditament in the rateable occupation of the ATM operator. The Upper Tribunal held that ATMs accessed from within a store (“internal” ATMs) were not separate hereditaments, but that machines accessible from outside the store (“external” ATMs) were separate hereditaments. The Court of Appeal held that none of the ATMs was a separate hereditament, because though (with one exception) they were capable of separate identification, in all cases they were in fact occupied by the retailer not the ATM operator.

The appeals to the Supreme Court raised two questions. Are the ATM sites capable of being defined as separate hereditaments? And if they are capable of being separate hereditaments, are they rateably occupied by the retailer (in which case they remain as part of the wider store hereditament) or the ATM operator (in which case they are discrete hereditaments)?

The Court’s judgement was given by Lord Carnwath.

Lord Carnwath began his judgment by affirming that, in the context of disputes about the contents of the rating list, the “primary responsibility for reviewing the Valuation Officer’s decision” is vested in the Upper Tribunal (Lands Chamber). The appellate courts should, he said, give particular weight to the Upper Tribunal’s expertise, and should not intervene merely because of a difference in evaluative assessment.

Lord Carnwath held that the principle of equality between ratepayers had a limited role to play in these appeals. It was already established that different ATMs are treated in different ways: an external ATM located in a high street bank is not a separate hereditament from the rest of the bank, for example. Rather than being an issue of principle, the question was where to draw the line in cases where the functions of the ATM and the host store are not wholly disconnected.

He also warned against the dangers of over-analysing authorities. Where courts have attempted to draw together the threads of a range of cases relating to disparate factual situations, some tensions and inconsistencies will inevitably arise. It is therefore potentially misleading to take particular statements from such decisions and treat them as definitive legal propositions (even where those statements are made at the highest judicial level).

On the first of the two main questions in the appeals, the Court was content to adopt the reasoning of the Court of Appeal without restatement. In principle, the presence of an item of non-rateable plant can be taken into account in deciding whether or not a separate hereditament is capable of existing.

On the second question, the Court held that the underlying principle is found in the speech of Lord Herschell LC in the old Halkyn case:  where a person already in possession of premises gives another person possession of part of those premises, the occupier of the part only becomes rateable if his possession of the part is exclusive. The VOs’ analysis, whilst perhaps supported by a strict reading of the Southern Railway decision, sat uneasily with the Halkyn principle. The VOs’ position also conflicted with the example used in Halkyn, that of the landlord and his lodger: a landlord of a lodging house is in rateable occupation of the whole house, including the lodgers’ individual rooms, because the landlord occupies the whole house for the purposes of his business of letting lodgings. The so-called “lodger principle” was not, as the VOs submitted, an exception or an anomaly: Lord Herschell would not have used it as his example if he thought that it did not illustrate the general rule.

Where, as in the case of the ATM sites, the retailer and the operator both derive a direct benefit from the use of the site for the same purpose, and where the retailer had conferred rights on the operator to further the retailer’s own general business purposes, then the retailer retained occupation of the ATM site. That was true for both internal and external ATMs. The position for the ATM sites was in stark contrast to cases where the ATM operator is given independent uncontrolled occupation for its own purposes and where there is no direct link to the host’s own business use of the wider site.

The Supreme Court thus dismissed the VOs’ appeals.

Dan Kolinsky QC and Luke Wilcox acted for Cardtronics.

Tim Mould QC and Guy Williams acted for Tesco.

Richard Drabble QC and Christopher Lewsley acted for Sainsburys.

Tim Mould QC and Christopher Lewsley acted for Co-op.

Tim Morshead QC and Galina Ward acted for the Valuation Officers.

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