Alton Towers’ rating appeal dismissed

The decision of the Upper Tribunal (Lands Chamber) in Merlin Entertainments Group Limited v Cox (VO) (2018) UKUT 0406 (LC) considers what constitutes a “material change of circumstances” for the purposes of Schedule 6 of the Local Government Finance Act 1988. Such “material changes” are significant because they represent circumstances when a ratepayer, or a Valuation Officer, may alter the rating assessment of a property at a time between general revaluations. As well as alterations to the property itself, material changes can include physical changes to the locality in which it is situated, and changes which, whilst they are not physical changes to the locality, are nonetheless “physically manifest” there. The Upper Tribunal’s decision concerns the facts at Alton Towers, but also offers more general guidance on the interpretation of these provisions.

Following a tragic crash on the “Smiler” ride in 2015, visitor numbers to the park fell significantly and the ratepayer made a proposal seeking a reduction in its rating assessment, to reflect this fall. The Valuation Officer considered that the fall in visitor numbers was not a factor falling within the range of “material change of circumstances” set out in the legislation and declined to agree any alteration to the assessment. The appeal was dismissed by the Valuation Tribunal for England and the ratepayer appealed to the Upper Tribunal (Lands Chamber).

The ratepayer produced evidence that visitor numbers had fallen by 35% following the crash and that this fall was reflected in significantly reduced car traffic in the locality, and in reduced queue times at the park. This was contrasted with evidence of some growth in attendances, over the same period, at other visitor attractions, both nationally and in the East Midlands.

In its decision, the Upper Tribunal sets out both the statutory framework of valuation for rating purposes, and the history behind the current definition of “material change of circumstances” following the decisions of, respectively, the Court of Appeal and the House of Lords, in Addis Limited v Clement (VO) which gave rise to the legislation in its current format.

The ratepayer contended that the fall in traffic and in visitor numbers is a matter that is “physically manifest in the locality of the appeal property. The Respondent contended that these changes, in so far as they were observable at all, were not a matter relevant to the essential characteristics of either the hereditament or its locality.

The Upper Tribunal determined that visitor numbers were not an “essential” or relevant characteristic of either the hereditament or its locality. The circumstances upon which the appellant sought to rely were irrelevant because they were simply concerned with the way in which it operated its business on the hereditament and the reaction of potential customers thereto. The appeal failed on this basis, but the Tribunal went on to consider other points that had been argued; doubtless with the aim of offering guidance on this are of the law.

The Tribunal’s decision makes clear that, for the purposes of interpreting these provisions, the “hereditament” (the appeal property) must be treated as separate to the “locality” in which it is situated. The term “locality” in the legislation refers to an area external to the hereditament being valued for rating purposes.

The proposal made by the ratepayer was, in substance, to do with the hereditament rather than the locality. In fact, it was to do with the conduct of the Appellant’s business on the hereditament and therefore did not fall within the grounds of material change on which the Appellant relied, as these related to the locality.

The Respondent submitted that the Appellant’s case was flawed because it breached the principle that all ratepayers should be treated equally. The Upper Tribunal found it impossible, and unnecessary, to reach a conclusion on this point in determining the appeal.

The Appellant submitted that material changes could include economic or intangible matters which result in changes in the locality which are physically manifest there. The decision sets out a detailed analysis of the legislative background to conclude that “the matter relied upon must itself be something which is physically manifest in that area”. If that test is satisfied, there is no requirement to identify a cause to which that matter can be attributed so as to bring it within the class of material changes that can give rise to an alteration in an assessment.

The Tribunal also expressed concern regarding the status of a witness statement made by one of the Appellant’s witnesses and, in particular, whether this was compliant with the Tribunal’s recent decision in Gardiner & Theobald LLP v Jackson [2018] UKUT 253 (LC), concerning the incompatibility of an expert’s remuneration on a contingency or success-related fee basis. The Tribunal commented that: ”as a matter of principle, it seems to us that it cannot be right for an expert to present even purely factual evidence, whether contested or not, without disclosing to the court or tribunal (and to other parties), that he is, or may become, entitled to remuneration dependent on the outcome of the proceedings in which that evidence is given, irrespective of the precise services to which that fee relates”.

The decision also considers whether the evidence put forward actually demonstrated the changes relied upon by the Appellant. The Tribunal concluded that it did not, noting that the Appellant had not shown “anywhere near sufficient evidence to demonstrate that the reduction in the numbers of visitors or their vehicles in the locality of the hereditament is properly attributable to a change in the attitude of members of the public to thrill rides”.

Whilst the decision is founded in the particular fact of the case concerned, the practical guidance given by the Upper Tribunal to surveyors and tribunals, at paragraph 193 of its judgment, will be essential reading for all those concerned with cases of this type.