Court holds Port of Cork Company is rateable as a public body despite corporate form.

THE SUPREME COURT

Keane C.J.

Denham J.

Murray J.

McGuinness J.

Hardiman J.

136/03

BETWEEN

PORT OF CORK COMPANY

APPELLANT/RESPONDENT

AND

THE COMMISSIONER OF VALUATION

RESPONDENT/APPELLANT

JUDGMENT delivered the 28th day of July 2003, by Keane C.J.

At issue in this appeal is the question as to whether the appellant/respondent (hereafter “the respondent”) is exempt from rateability

in respect of its occupation of Cork Harbour. It was resolved in favour of the respondent in the High Court which allowed an appeal

from the decision of the Valuation Tribunal. The respondent/appellant (hereafter “the appellant”) has now appealed to this court from

the judgment of the High Court (Kearns J.).

Prior to the enactment of the Harbours Act, 1996, the owners and occupiers of the Port of Cork were the Cork Harbour Commissioners

(hereafter “the Commissioners”), a body established under a series of private Acts. It was acknowledged on behalf of the appellant

that the Commissioners were exempt from rateability in respect of their occupation of the Port of Cork by virtue of two decisions of

long standing, Belfast Harbour Commissioners –v- Commissioner of Valuation [1897] 2 IR 516 and Commissioner of Valuation –v-

Sligo Harbour Commissioners [1899] 2 IR 214. It was submitted on behalf of the appellant however, that the changes introduced by

the 1996 Act which provided for the formation of the respondent as a private company under the provisions of the Companies Acts

were of such a nature as to deprive the respondent of the exemption from rateability formerly enjoyed by the Commissioners. The

parties were agreed that, with the coming into force of the Valuation Act, 2001, the exemption (if it existed) came to an end.

It had been the law in Ireland since the decision of the Court of Exchequer Chamber in Guardians of Londonderry Union –v-

Londonderry Bridge Commissioners [IR 2 CL 577] that exemption from rateability is to be ascertained by reference to the proviso to

s. 63 of the Poor Relief (Ireland) Act, 1838 (hereafter “the 1838 Act”). That proviso was in the following terms:

“Provided also, that no church, chapel, or other building exclusively dedicated to religious worship, or exclusively used for the

education of the poor, nor any burial ground or cemetery, nor any infirmary, hospital, charity school, or other building used

exclusively for charitable purposes, nor any building, land or hereditament dedicated to or used for public purposes, shall

be rateable, except where any private profit or use shall be directly derived therefrom, in which case the person deriving such

profit or use shall be liable to be rated as an occupier according to the annual value of such profit or use.” (Emphasis added)

Section 2 of the Valuation Act, 1854 required the Commissioner of Valuation in making out the lists or tables of valuation to distinguish

all hereditaments and tenements “of a public nature”. All such hereditaments or tenements were to be deemed exempt from rateability

“so long as they continued to be of a public nature, and occupied for the public service.”

In the Londonderry Bridge case, O’Hagan J. said that the introduction of the words “and occupied for the public service” could not

affect or abridge what he described as “the clear relief from rateability” under the proviso to s. 63 of the 1838 Act. That view of

the law was challenged in McGahan & Ryan –v- Commissioner of Valuation [1934] IR 736, but the Supreme Court of Saorstat Eireann

held that the decision in the Londonderry Bridge case could not be departed from at that stage. Nor has it been challenged in the

present proceedings.

The Londonderry Bridge case is also the authority which was relied on in both the Belfast Harbour case and the Sligo Harbour case

for the holding in each case that the occupation by the Harbour Commissioners of the particular harbour was exempt from rateability.

It had been held by the House of Lords in England in Jones & Ors –v- Mersey Docks and Harbour Board that property capable of

yielding a pecuniary profit to the occupier was rateable, even though the occupation of the property conferred a benefit on the public

and did not result in any private profit to the occupier. The only exception was property in the occupation of the Crown and its

servants, which exemption was derived, not from the actual language of the relevant statute of Elizabeth 1, but from the principle

that the Crown, not having been named in the statute, could not under English law be regarded as affected by its provisions.

In the Londonderry Bridge case, however, a majority of the judges in the Exchequer Chamber reversed the unanimous decision of the

Queens’ Bench Division in the same case and concluded that the Mersey Docks case was not applicable in Ireland, because of the

different wording of the proviso to s. 63 of the 1838 Act, specifically the words “dedicated to or used for public purposes”.

The hereditament sought to be rated in the Londonderry Bridge case was not the bridge itself, but the tolls charged to persons using

the bridge. The Commissioners, in whom the bridge was vested, were obliged by their private Act to apply the tolls inter alia in

maintenance of an existing bridge until the completion of the new structure, then in discharge of the annual interest of the money

borrowed on mortgage of the tolls, next, in forming a sinking fund for repaying that money and, finally in defraying the annual

expenses of the bridge so that it might become toll free. In the view of the majority, the result was that the tolls were “dedicated to

public purposes” was in the meaning of the Act of 1838.

The result was that Irish law in this area diverged sharply from English law: under the latter only property in the actual occupation of

the government or its servants was entitled to exemption from rateability. The decision was unquestionably one which occasioned

considerable controversy at the time. In subsequent decisions, it was held not to be applicable where the property was for the

benefit of a limited category of the public – as in the case of local authority property – as distinct from the public generally: see

Mayor of Limerick –v- Commissioner of Valuation (IR 6 CL 420); Kerry County Council –v- Commissioner of Valuation IR 527.

Although, in the case of a university, any member of the public might be entitled to be admitted as a student on payment of the

appropriate fees, whether that was sufficient to entitle it to exemption from rateability depended on whether the charter or statute

from which it derived its existence could be regarded, in broad terms, as private or public in its general character. Applying those

criteria, University College, Cork, was held to be exempt (University College Cork –v- Commissioner of Valuation [1911] 2 IR 593;

[1912] 2 IR 328), while Trinity College Dublin, in contrast, failed to secure exemption (Trinity College –v- Commissioner of Valuation

[1919] 2 IR 493).

As I have already pointed out, it was acknowledged that the Commissioners in whom the Port of Cork was vested enjoyed exemption

from rateability as a result of the decision in the Belfast Harbour and Sligo Harbour cases. While we were not referred in any detail to

the provisions of the private Acts under which the Commissioners were established, it was agreed that they did not differ in any

significant respect from those which governed the operations of the Commissioners in the Belfast Harbour and Sligo Harbour cases.

The common feature seems to have been that the harbour could be used by any member of the public on paying the appropriate dues

and that the resulting funds would be applied by the Commissioners in maintaining and improving the property held by them, paying

the interest due on the mortgages which had provided the original funds and establishing a sinking fund for the repayment of the

borrowed monies. In no case did the Commissioners themselves derive any profit from their ownership or occupation of the harbour.

The High Court, and this court, were informed that, the present proceedings were in the nature of a test case to determine, whether

during the period between the enactment of the 1996 Act and the coming into force of the Valuation Act, 2001, harbours in respect

of which a company was established pursuant to s. 7 of the 1996 Act were rateable. (Although enacted by the Oireachtas at the

time of the hearing before the Valuation Tribunal, the 2001 Act was not at that stage in force.)

Since the contention on behalf of the appellant was that the effect of the transfer of the ownership of the Port of Cork to the private

company established under s. 7 of the Act was that the property in question was thereafter rateable, having regard to the provisions

of the 1996 Act, it is necessary to consider those provisions in greater detail.

Section 7 provides that the Minister for the Marine (hereafter “the Minister”) may, with the consent of the Minister for Finance, in

respect of the harbours mentioned in column (1) of the First Schedule cause a private company conforming to the conditions laid

down in the Act to be formed and registered under the Companies Acts. Among the harbours referred to was Cork harbour and the

Minister accordingly caused the respondent to be formed as such a company. Section 8(3) provided that the authorised share capital

of the company was not to exceed the total of the value of the property to be transferred to the company pursuant to the Act and

the amount of the working capital of the company at that time.

Section 11(1) provided that

“The principal objects of [a company formed under s. 7] shall be stated in its memorandum of association to be

(a) to take all proper measures for the management, control, operation and development of its harbour and the

approach channels thereto,

(b) to provide such facilities, services, accommodation and lands in its harbour for ships, goods and passengers as it

considers necessary,

(c) to promote investment in its harbour,

(d) to engage in any business activity, either alone or in conjunction with other persons, that it considers to be

advantageous to the development of its harbour,

(e) to utilise and manage the resources available to it in a manner consistent with the objects aforesaid.”

In addition, s. 11 enables such a company to include in its objects all such objects and powers as are reasonably necessary or

incidental to the attainment of the principal objects and are not inconsistent with the Act. Specifically, it may co-operate with other

persons in the efficient operation and management of the harbour, appropriate any part of the harbour for the purposes of any trade

and profession, and, in relation to its functions in respect of the harbour, promote the interests of trade or tourism in the State.

Section 12(1) imposes a general duty on the company

“(a) to conduct its affairs so as to ensure that the revenues of the company are not less than sufficient taking one year with

another to

(i) meet all charges which are properly chargeable to its revenue account,

(ii) generate a reasonable proportion of the capital it requires, and

(iii) remunerate its capital and pay interest on and repay its borrowings,

(b) to conduct its business at all times in a cost effective and efficient manner,

(c) to regulate operations within its harbour,

(d) to have due regard to the consequences of its activities on the environment, the heritage (whether natural or manmade)

relating to its harbour and the amenities generally in the vicinity of its harbour.”

Section 17(2) provides that the articles of association of such a company are to be in such form consistent with the Act as may be

approved of by the Minister with the consent of the Minister for Finance. Section 18 provides that no alteration in the memorandum or

articles is to be valid or effectual unless made with the prior approval of the Minister given with the consent of the Minister for

Finance.

Section 19 deals with the shareholding in the company. The company must issue to the Minister, without payment by him/her, fully

paid up shares in the share capital of the company equal in nominal value to the value of the property transferred under the Act to

the company. The Minister for Finance must also be issued with one share of one pound in the former currency. Neither the Minister

nor the Minister for Finance may transfer or alienate his/her shares in the company. Under s. 22, all amounts representing dividends or

other money received by the Ministers in respect of shares held by him/her are to be paid into or disposed of for the benefit of the

exchequer.

Section 29 requires the carrying out by a suitably qualified person of a performance audit of the company and the resultant audit

must be submitted to the government.

Section 44 of the Act empowers the Minister, after consultation with such a company, to give it a direction in writing requiring it to

comply with policy decisions of a general kind affecting the functions or operations of the company.

The contention advanced on behalf of the appellant can be summarised as follows. Public utility was not the only touchstone by

reference to which, following the Londonderry Bridge case, exemption from rateability was ascertained in Ireland. Other features,

such as a form of public audit and control by parliament, were also important, as was demonstrated by the cases affecting the

universities. While the range of the exemption was difficult to define with precision, it was argued that the degree of judicial dissent

reflected in the authorities was such as to place harbours and bridges, as it was said, “at the very margin of exemption”.

The effect of the changes brought about by the 1996 Act was, it was said, of such a nature as to drive the respondents, so to

speak, across the frontier into rateability. It was pointed out that the 1996 Act was one of a number of Acts passed in recent

decades which enabled operations previously controlled by Departments of State to be transferred to companies incorporated under

the Companies Acts for the specific purpose of carrying on the undertakings in question, which were then required to operate in a

commercial fashion. In this respect, it was said, companies such as the respondents were more akin to fully commercial companies,

such as Aer Lingus, which had always been liable to pay rates. Companies of a similar nature had been established under the Postal

and Telecommunications Act, 1983 (establishing Bord Telecom and An Post as separate companies); the Forestry Act, 1988

(establishing Coillte Teoranta); the Irish Aviation Authority, 1993 (establishing an Aviation Authority in which was vested certain air

navigation functions); the Air Navigation and Transport Act, 1988 (establishing Aer Rianta as a limited company); and the Ordnance

Survey Act, 2001 (disestablishing the Ordnance Survey and creating a company called Ordnance Survey Ireland). In the case of four

of these statutes, there was a provision expressly terminating the exemption from rates on property. The absence of such a provision

from the 1996 Act was, it was said, a wholly insufficient basis for concluding that the Oireachtas had intended to preserve the

precariously based exemption from rateability hitherto enjoyed by harbour authorities. The clear intention of the legislature was that

newly commercialised companies, such as the respondents, were to act in a commercial fashion, which would normally involve their

paying rates and taxes, and to do so, on at least some occasions, in competition with other enterprises which were obliged to pay

rates and taxes.

The appellants also relied on what was said to be the wholly different character in law of the occupation by the appellants when

contrasted with the occupation of the harbour by the Commissioners. In the latter case, the harbour was effectively vested in the

Commissioners in trust for the State. That could no longer be said of the private companies established under the 1996 Act: in

accordance with fundamental principles of company law, the identity of the shareholders had to be disregarded in ascertaining the

legal nature of the occupation of the appellants. The occupation by the respondents of the harbour was now, in law, no more than

that of a private company established for commercial purposes.

Finally, it was submitted on behalf of the appellant that the 1996 Act expressly distinguished between the position of major ports,

such as that in the occupation of the respondents, and certain minor ports which, by virtue of s. 88, could be transferred to local

authorities. It was clear, having regard to the authorities already referred to, that such harbours, when transferred to the local

authorities, would not be exempt from rates and it was argued that the legislature could not have contemplated such an illogical and

anomalous position.

I am satisfied that the contentions advanced on behalf of the appellant are not well founded and that the High Court judge was

correct in so holding. The authorities which I have reviewed make it clear that, in Ireland, exemption from rateability in the case of

bodies such as the Commissioners in whom this harbour was formerly vested, depended on two factors. The first was that the harbour

was open to all members of the public on payment of the appropriate dues. The second was that the Commissioners were a body

established and governed by statute, the functions of which were essentially public in nature. Accordingly, they came within the

same category as university colleges, such as Cork, which were not merely open to all members of the public without distinction (as

was Trinity College) but were also not merely established by statute, but were accountable to parliament and subject to public audit

(in contrast to Trinity College which was held to be an autonomous charitable foundation not accountable to parliamentary control or

audit).

I can find no basis for holding that the exemption thus afforded by the law to the Commissioners was no longer available to the

company established under the 1996 Act. The harbour remained open to all members of the public who were prepared to pay the

necessary dues. Its operations were still governed by a body which, although taking the form of a private company established under

the Companies Acts, is, in the context of valuation and rating law, to be regarded as a body of a public nature. It is owned by

Ministers of the government and, while it is required to operate in accordance with normal commercial criteria, any profits it may make

are to be returned to the exchequer. It is accountable, through that Minister, to the Oireachtas for the manner in which it carries out

its functions, must respond to any directives on policy given by the Minister and is subject to a performance audit to be submitted to

the government. All of these are the plainest possible indicia of a user of the harbour which, in the words of the proviso to s. 63, is

“for public purposes”.

The appellants’ argument derives no support, in my view, from the principle of company law which, in at least some contexts, requires

the courts to treat the company and its body of shareholders as entirely distinct legal entities. In the case of the appellant, its

ownership is determined, not by the original subscription for shares or subsequent transfer of shares in the company, but by the

legislation itself, which expressly provides that, with minor qualifications, the legal ownership of the shareholding is vested in the

Minister and the Minister for Finance. The argument that the Valuation Tribunal, the High Court or this court must avert its eyes from

the ownership of the shares in the respondent, when that ownership has been expressly regulated by parliament and confined to

designated Ministers of State, is, in my view, wholly unsustainable.

It is undoubtedly the case that the omission, for whatever reason, in the 1996 Act to make any provision for rateability led to an

apparently illogical and unjustifiable distinction between the companies formed under this legislation and similar companies formed

under comparable legislation. That no doubt was why the legislature terminated the exemption from rateability when it enacted the

Valuation Act, 2001. But it is not the function of the courts, as has frequently been pointed out, to remedy a casus omissus of that

nature, if that indeed is what it was. That would apply in the construction of any statute, but is a particularly weighty consideration

when one is dealing with an alleged imposition of fiscal liability: see the observations of Henchy J. in Inspector of Taxes –v- Kiernan

[1981] IR 117.

As to the submission that a further anomaly would result from affording exemption to major ports such as that in the occupation of

the respondents, while denying it to the minor ports which could be transferred to local authorities under the 1996 Act, that again is

a legislative choice which cannot be overridden by the courts. It is, however, to be noted that, as acknowledged on behalf of the

appellant, the liability to rateability effected by a transfer to the local authorities would, in any event, be purely theoretical, since the

rateable occupier, in that situation, would also be the body to which the rates were paid.

I would dismiss the appeal and affirm the judgment and order of the High Court.