Whether Rates Proposal Invalidated by Omission

January 9th, 2019

In Alam v Valuation Officer (2018) UKUT 266 (LC) Mr Alam is the proprietor of the restaurant.  He took a lease of a Property. His agents submitted a proposal to reduce the rateable value of the Property.  In their proposal they stated correctly that Mr Alam was the occupier of the Property but also stated that the Property was “owner/occupied”.  The proposal was completed in that way because of a misunderstanding between Mr Alam and his agents.  As a result, the agents did not include any information in response to the question “if not owner/occupied, is a rent or licence fee paid?” and, in particular, did not state the rent payable, the date it had first become payable and the date of the next rent review. All of this was information required by Regulation 6(3) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (“the 2009 Regulations”).  The issue in Mr Alam’s appeal to the Upper Tribunal (Lands Chamber) concerned the consequence of the mis-statement of the capacity in which Mr Alam occupied the Property and the omission of any information about the rent payable.  The Valuation Tribunal for England (“VTE”) found that the proposal was invalid, explaining:

“… in whatever circumstances to omit the rent from the proposal was a substantial failure to comply with the Regulations.  The panel was therefore persuaded that the error was so fundamental that the proposal could not in any circumstances be treated as valid.”

The Upper Tribunal allowed Mr Alam’s appeal.

The Upper Tribunal set out the relevant statutory provisions. Schedule 6 to the Local Government Finance Act 1988 (“the 1988 Act”) makes provision for valuation for non-domestic rating. Paragraph 2(1) provides that the rateable value of a non-domestic hereditament (none of which consists of domestic property and none of which is exempt from local non-domestic rating) shall be taken to be an amount equal to “the rent at which it is estimated the hereditament might reasonably be expected to let from year to year” on certain assumptions. Section 55 of the 1988 Act empowers the Secretary of State to make regulations regarding the alteration of lists. The regulations may include provision as to the manner and circumstances in which a proposal may be made and may include provision that, where there is a disagreement between a valuation officer (“VO”) and another person making a proposal about the validity of the proposal, an appeal may be made to a Valuation Tribunal.

The relevant Regulations are the 2009 Regulations.  Regulation 4(1) sets out the grounds for making a proposal, which include in paragraph 4(1)(a) that the rateable value shown in the list for a hereditament was inaccurate on the day the list was compiled. By Regulation 4(2)(a) a proposal may be made by an interested person (referred to as an “IP”) who has reason to believe one of the grounds in paragraph 4(1) exists. Regulation 6 states that a proposal shall be made by notice sent to the VO which shall include specified information.
Regulation 8 contained provisions regarding disputes as to the validity of proposals.  By Regulation 8(1), where the Valuation Officer (“VO”) considers a proposal has not been validly made, the VO may serve an Invalidity Notice on the proposer stating the reasons for that opinion, and the effect of paragraphs (6) to (10) which, amongst other things, explain the proposer’s rights to make a further proposal or appeal against the Invalidity Notice.

The Upper Tribunal addressed the proper approach to the validity of proposals. They said:-

“23. This appeal concerns the proper approach to be taken to a failure to comply with the procedure for making a proposal to alter the rating list laid down by regulation 6 of the 2009 Regulations.  Appeals of this type are quite common in a whole range of statutory contexts.  …”
24. The proper approach to be taken to the validity of a proposal is the same approach as is taken by courts and tribunals to the consequence of procedural errors in the other statutory contexts.  There are no special rules for rating.   …

25. In Natt v Osman [2015] 1 WLR 1536 at [24] Etherton C explained that where a statute lays down a process or procedure for the exercise by a person of some right conferred by the statute, and the statute does not expressly state what is the consequence of the failure to comply with that process or procedure, the consequence used to be said to depend on whether the requirement was mandatory or directory. If the requirement was mandatory the failure to comply was said to invalidated everything which followed; if it was directory the failure to comply would not necessarily have that effect. That approach is now regarded as unsatisfactory and has been replaced:
“The modern approach is to determine the consequence of non-compliance as an ordinary issue of statutory interpretation, applying all the usual principles of statutory interpretation. It invariably involves, therefore, among other things according to the context, an assessment of the purpose and importance of the requirement in the context of the statutory scheme as a whole.”

26.       As Etherton C explained at [25]-[29] in cases in which the decision of a public body is challenged or which concern procedural requirements for challsenging a decision (in which category we would place the making of a proposal to alter the rating list), the courts have asked whether the statutory requirement can be fulfilled by “substantial compliance” and, if so, whether on the facts there has been substantial compliance even if not strict compliance.  Among the best known examples of this interpretative approach is the decision of the Court of Appeal in R v. Secretary of State for the Home Department ex p. Jeyeanthan [2000] 1 WLR 354, in which Lord Woolf MR commented, at [11]:

“Because of what can be the very undesirable consequences of a procedural requirement which is made so fundamental that any departure from the requirement makes everything that happens thereafter irreversibly a nullity it is to be hoped that provisions intended to have this effect will be few and far between. ”

27.      At [16] Lord Woolf identified the sort of questions which it is necessary to ask in cases such as this:

“I suggest that the right approach is to regard the question of whether a requirement is directory or mandatory as only at most a first step. In the majority of cases there are other questions which have to be asked which are more likely to be of greater assistance than the application of the mandatory/directory test:

The questions which are likely to arise are as follows:

(a)  Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue even though there has not been strict compliance? (The substantial compliance question.)

(b) “`Is the non-compliance capable of being waived, and if so, has it, or can it and should it be waived in this particular case? (The discretionary question.) I treat the grant of an extension of time for compliance as a waiver.

(c) ““If it is not capable of being waived or is not waived then what is the consequence of the non-compliance? (The consequences question.)”

28.      The same approach has been applied by the VTE in two cases of its own to which we were referred, and which it relied on in determining that the proposal in this case was invalid.   Imperial Tobacco Group Ltd v Alexander (VO) , and Mayday Optical Co Ltd v Kendrick (VO) were decisions of the then President of the VTE, Professor Zellick QC, on 24 April 2012.”

The Upper Tribunal in making its determination said:-

“51. … Like the Tribunal in Kendrick we do not regard it as necessary or desirable that the VTE should consider the legality of a valuation officer’s decision to serve a notice of invalidity or take a validity point at a later stage.  The VTE must of course consider the substantive issue of invalidity if it is raised, but we emphatically disagree that “in all cases” it must ask itself the additional question posed by the President of the VTE in Kendrick “is the VO acting lawfully in asserting invalidity?”

52.          We do not regard it as of any significance in this case that the VO did not serve a notice of invalidity.  The nature of the error in the notice was not apparent on its face, or from information which might readily have been to hand, and the VO was under no duty to investigate whether what the proposer said about his status was correct.

53.            It was common ground in this appeal that the ratepayer need only substantially comply with the requirements of regulation 6 and that not every omission or error will be fatal to its validity.  It would be surprising if an excessively strict or rigid approach were required in this context in view of the fact that the making of proposals is intended to contribute to the maintenance of an accurate rating list.  As we explained in paragraph 9, section 55 of the 1988 Act, gives power to the Secretary of State to make regulations providing for the alteration of rating lists.  Those regulations may make provision as to who (other than a valuation officer) may make a proposal for the alteration of a list “with a view to its being accurately maintained” (s.55 (4)(a)) .  The 2009 Regulations were made under the power conferred by section 55 and in considering whether some failure to comply to the letter with the Regulations is sufficient to invalidate a proposal altogether it is relevant to bear in mind that role of the proposal is to improve the list by enabling it to be made more accurate.

54.      It is also common ground that the 2010 list was inaccurate and that the proposal made on behalf of the appellant correctly identified the cause of the inaccuracy, …

55.          … the question whether a proposal is valid or invalid must be determined in light of the particular proposal and the circumstances in which it was made.  That is clear from statements of the highest authority to which we were referred. …”

“58. We do not accept … that the proper focus is on whether there has been substantial compliance with the requirement to state the passing rent.  In cases such as this it will always be necessary to identify the requirement which has not been complied with and the extent to which information has not been provided, but once that has been done it is necessary to consider whether that degree of compliance was sufficient in the circumstances to amount to substantial compliance with the procedural requirements as a whole.  Were it otherwise a failure to answer a question (as opposed to the provision of an inaccurate answer) would always have fatal consequences, yet in other fields the law does not invariably insist on that level of compliance.  …
There will of course be cases where the consequence of omitting a single piece of information is that substantial compliance has not been achieved, but there may be others where the missing information adds little of importance to what has been provided and where the requirements of regulation 6 have been substantially complied with despite its absence.

59.          We do not consider that the appellant’s description of himself as an “owner/occupier” meant that the proposal failed to comply with the requirements of the 2009 Regulations.  A proposal is not required to be made on the form provided by the VO; regulation 6(1) requires only that it be made by notice to the VO and that it contain certain information.  Regulation 6(3)(a) does not require the proposer to state whether they occupy the hereditament under a lease or licence; it requires only that “where the proposer is the occupier” the proposal must include “the amount payable each year by the occupier, as at the date of the proposal, in respect of the lease, easement or licence to occupy”.  The appellant is the occupier, and he was therefore required to state the amount payable by him each year under his lease.  His proposal was therefore non-compliant because of the omission of that information, but not because of his description of himself as “owner/occupier”.
60. The circumstances in which the proposal was made in this case, and its contents, tend in our judgment to minimise the significance of the passing rent of the Property as a factor of relevance to the maintenance of an accurate list, and therefore to minimise the significance of the appellant’s failure to include it in the proposal.  …

61.          It is also material that the appellant’s proposal was made at the end of the period of the 2010 list.  At the beginning of a list accurate rental information is likely to be of considerable value to the VO, especially if only limited details have been obtained through forms of return issued to ratepayers.  In the expiring days of a list such information is of much less significance, especially if it concerns a rent agreed long after the antecedent valuation date for the list.  Not only will the tone of the list be firmly established, but the details of a rent agreed in 2013 will be of little or no significance to a valuation to be conducted by reference to values in 2008.  The VO was not deprived in this case of valuable information.

62. Additionally, there is no suggestion in this case that the VO was in fact misled, or might have taken a different approach to the proposal if a correct statement of the rent had been supplied. …  Moreover, the appellant did not provide an incorrect figure, he provided no figure at all.  At a different stage of the life of the list that omission might have been fatal, but in the circumstances of this proposal, coming when and where it did, the omission of any rental information was immaterial.

63. As for prejudice to the VO, Miss Lean did not suggest that any had been caused to the VO in the circumstances of this case looked at in isolation.  At this stage of the list at least, we consider that that is the correct perspective.  …  In this case the VO was not being asked to rely on incorrect information capable of justifying a reduction in rateable value; nor was the VO put to additional work in undertaking research to verify information incorrectly provided or omitted, since the missing information was not material to the grounds of the proposal; finally,  because of the timing of the proposal, on the last day for making alterations to the 2010 list, and the nature of the omission, there was no risk that other ratepayers might be misled by inaccurate information into making further proposals.

64. Our conclusion therefore is that the proposal was substantially compliant with the requirement of regulation 6, notwithstanding its failure to state the rent.  The proposal was therefore valid, rather than invalid, and the appeal will be allowed.”

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