Supreme Court allows appeal, ruling cider vats are storage tanks, not machinery exempt from rateable valuation.

THE SUPREME COURT

RECORD NO. 399/2005

Fennelly J.

Kearns J.

Finnegan J.

IN THE MATTER OF THE VALUATION ACTS 1852 TO 1998

AND IN THE MATTER OF THE VALUATION OF PREMISES AT MAP REFERENCE 10ab, 11ab, 12ab, 13, 14,

15, 16 DOWD’S LANE (INCLUDING 6a ABBEY and 11b NELSON)

UD: CLONMEL EAST URBAN, CLONMEL, COUNTY TIPPERARY.

BETWEEN:

BULMERS LIMITED (FORMERLY SHOWERINGS (IRELAND) LTD)

APPELLANT

and

THE COMMISSIONER OF VALUATION

RESPONDENT

Judgment of Mr Justice Finnegan delivered on the 30th day of July 2008

This matter comes before the court by way of a Case Stated from the respondent pursuant to the provisions of section 5(2)

of the Valuation Act 1988 upon a request in writing addressed to the Chairman of the Tribunal dated 27th September 2000

by the appellant, it being dissatisfied with the determination of the Tribunal of the 20th September 2000 and having

expressed dissatisfaction to the Tribunal immediately after the determination of the appeal. The appellant being dissatisfied

with the decision of the High Court on the Case Stated brings this appeal.

The Case Stated

In the 1995 Quarterly Revision of Valuation Lists the valuation of the hereditaments mentioned in the title hereof were

amalgamated and a rateable valuation thereof assessed at £1,200. Notice of Appeal to the Commissioner of Valuation was

lodged against this assessment in November 1995 which resulted in the rateable valuation being increased to £1,725. On the

9th December 1996 an appeal by the appellant against this valuation was lodged to the Tribunal.

The hereditament the subject matter of the valuation can be divided into two

sections. The first consists of buildings and ancillary stores including a crushing plant, a boiler room, a filtration area and

physical housing for timber vats and in respect of this there is no dispute. The second consists of fifty six tanks or vats used

by the appellant as part of its cider production plant at Clonmel, Co. Tipperary. The remainder of the appellant’s production

plant is situate some distance outside Clonmel. There are fourteen wooden vats within buildings on the hereditament which

are separately rated. The appeal to the Tribunal relates to twenty two wooden vats, fourteen concrete vats and twenty

stainless steel vats. The appellant’s submission throughout the appeal process up to this appeal was that the valuation is bad

in law and invalid as the vats constitute either machinery or non-rateable plant. Before this court the appellant submitted that

the vats constitute non-rateable plant.

The relevant statutory provisions are as follows. The Annual Revision of Rateable Property (Ireland) Act 1860 section 7 as

substituted by the Valuation Act 1986, section 7 deals with machinery as follows:-

“7(1)(a) In making the valuation of any mill or manufactory, or building erected or used for any such purpose,

the Commissioner of Valuation shall in each case value the water or other motive power thereof, but shall not

take into account the value of any machinery therein, save only such as shall be erected and used for the

production of motive power.

(b) For the purposes of this subsection, machinery erected and used for the production of motive power includes

electrical power connections.”

Plant is dealt with in section 7(2) of the 1860 Act as substituted by the Valuation Act 1986 section 7 as follows:-

“7(2) The Commissioner of valuation shall value plant falling within any of the categories of plant

specified in the schedule to this Act (inserted by the Valuation Act, 1986).”

The relevant category of plant for the purposes of section 7(2) is that in the schedule to the 1860 Act inserted by section 8

of the Valuation Act 1986 at Reference No. 1 which provides as follows:-

“All constructions affixed to the premises comprising a mill, manufactory or building (whether on or below

the ground) and used for the containment of a substance or for the transmission of a substance or electric

current, including any such constructions which are designed or used primarily for storage or containment

(whether or not the purpose of such containment is to allow a natural or chemical process to take place), but

excluding any such constructions which are designed or used primarily to induce a process of change in the

substance contained or transmitted.”

The Tribunal determined:-

(a) that the tanks or vats did not constitute machinery within the meaning of section 7 of the Annual Revision of Rateable

Property (Ireland) Amendment Act 1860 as amended by section 7 of the Valuation Act 1986.

(b) that the tanks or vats did not fall within the proviso in Reference no. 1 in the schedule to the said Act of 1860 inserted

by section 8 of the Valuation Act 1986.

The questions of law referred to the High Court are as follows:-

(i) Whether the findings of fact made in the judgment of the Valuation Tribunal issued on 20th September 2000 are

supported by the evidence.

(ii) Whether the Tribunal erred in law in determining as it did.

The High Court answered the questions as follows:-

(i) Yes.

(ii) No.

The Appeal

The appellant’s Notice of Appeal raises ten grounds. As argued the appeal centres on the decision of the learned High Court

judge to uphold the determination of the Valuation Tribunal that the vats fell within the category of rateable plant created by

Reference No. 1. It is not disputed that the vats are constructions within the meaning of that reference. The issue

accordingly is whether the vats are designed or used primarily for storage or containment or designed or used primarily to

induce a process of change in the substance contained. If the former the vats are rateable and if the latter they are not.

While the vats may be designed or used for more than one purpose there can only be one primary purpose and that is what

will determine their status as rateable or non-rateable. In the present case it is now agreed that design is irrelevant in that the

appellant does not contend that the vats contain any particular design characteristic: the questions raised accordingly are to

be answered in terms of the use to which the vats are put.

The Valuation Tribunal in its judgment issued on the 20th September 2000 fairly stated the issue as follows:-

“As above stated the crucial question, which is one of mixed fact and law, is whether such vessels are

designed or used primarily for storage or containment or are so designed or used primarily to induce a

process of change in the substance contained therein.”

The question is to be answered on the facts as found by the Valuation Tribunal.

The facts as found by the Valuation Tribunal

The Valuation Tribunal set out the facts in the Case Stated as follows:-

“(2)(a) The Appellant company, in its business the biggest in Ireland, specialises in the production of cider

both for the home and export markets. It has as above stated part of its production plant at Clonmel, both East

and West of Dowd’s Lane. This lane on the northern side joins Mitchell Street and the Quay on the southern

side. It is narrow in all directions but more so at its northern extremity. The remainder of the appellant’s

production plant and its bottling plant is situate at Annerville outside Clonmel.

(b) The hereditament, the subject matter of this appeal, commenced its operation in its original form in 1938

and has developed segmentally since then. The property comprises an old warehouse building which houses

the original timber vats used in the production process, together with a filtration area and boiler room. This

building is constructed with brick and rubble masonry walls, concrete floor and a combination of roof

coverings including slates, corrugated asbestos and metal decking. Eaves height is c.25ft. Immediately

adjoining the building are concrete tanks which were installed during the mid 1950s. These vessels are

constructed of mass concrete walls, bitumen lined internally, with asphalt covered concrete roof and vary in

height from 20 ft to 35 ft. Opposite the original building on the eastern side of Dowd’s Lane is the crushing

plant and apple yard, together with a three storey recently constructed building accommodating staff, canteen

and toilet facilities. The crushing plant is constructed with concrete walls and steel decking, concrete floor

and barrel type corrugated iron roof. The new three storey building immediately fronting the crushing plant is

constructed with concrete block walls, concrete floors and asbestos slated roof.

(c) In 1992, on two different occasions, in order to help satisfy the companies stated policy of having a two

year stock of cider available, the appellants applied for and subsequently were granted planning permission to

erect 20 stainless steel tanks,. These tanks are cylindrical in shape with heights varying from 25 to 40 feet. 11

have outer steel cladding.

(d) In all there are 22 timber vats, 14 concrete tanks (now disused) and as stated 20 stainless steel tanks. For

these said tanks/vats the parties have given slightly different capacity figures. The numbers as between the

appellant company and the respondent respectively are as to the stainless steel tanks 1.037 million/1.044

million gallons, as to timber vats 382,800 gallons/385,600 gallons and as to the concrete tanks, 789,200

gallons/791,486 gallons. In addition the appeal valuer has also valued some wooden vats described as disused,

with a stated capacity of 32,000 gallons.

(e) All of the vessels on site including these tanks are connected by a series of stainless steel pipe work of

various diameters which are on both the inside and outside of the buildings and across Dowd’s Lane. The

finished product produced in Dowd’s Lane is a high strength 10% alcohol product and is then transported by

road in bulk containers to the main Showerings Bottling Plant, located at Annerville on the outskirts of

Clonmel, on the main Clonmel/Kilkenny road where it is diluted down to the appropriate alcoholic strength

and bottled.

(3) Cider is made from apple juice. The production and supply of apples is seasonal and therefore the vast

majority of production has to take place during a short period of time. Essentially, the production process, as

given in evidence before us, can be described briefly as follows:-

(a) The cider making season starts in September when the apples are brought into the Dowd’s Lane

plant. The apples are first of all washed and then brought by way of water channel to a miller. The

apples are then milled (chopped up into very small pieces) and a pre-dosed amount of the milled

apples put into what is called the “cheese” i.e. a wooden slat where a hair is put over the slat. This

is then built up into eleven wooden slats which then go into a hydraulic press. The hydraulic press

will then squeeze the juice from the actual milled apples. There is a second pressing when the

cheese is dismantled, the pumice is actually re-milled again and a second cheese built up so as to

extract as much juice as possible from the apples. The juice is then pumped to a 10,000 gallon

wooden receipt vat. During this process yeast will also be picked up, both fermenting yeast and

non-fermenting yeast, from the hairs, from the vat and from the pipe work. The 10,000 gallon

receipt vat is used for this purpose. Somax is added at this stage, and the purpose of the Somax is

to eliminate undesirable yeast i.e. the non-fermenting type, leaving the fermenting type to carry out

the subsequent fermentation. Somax is sulphur dioxide which kills the non fermenting type yeast.

The fermenting yeast is generally the saccharomyces cerevisiae type. The juice is allowed to stand

in the 10,000 gallon receipt vat for approximately 24 hours to give time for the Somax to actually

take effect. The juice is pumped from the receipt vat into another vat which is the fermentation vat.

Fermentation then commences due to the yeasts that are present, that have been picked up during

the actual crushing stage, during the transfer and by the tanks themselves. At various stages during

the fermentation starch hydrolysed, which is really sugar, is added. This brings the gravity back up

and allows the appellant to ferment to quite high alcohol, nearly up to 10% alcohol. Starch

hydrolysed is added in three or four different additions through the fermentation. At this stage, as

well, biopectinase is added. It is an enzyme which will break down pectin because pectin, if not

broken down, will cause filtration problems subsequently.

The main purpose of the receipt vats are (a) to obviously pick up yeast and (b) as a

measure, because they are 10,000 gallon tanks and (c) for Somax to be added. The main

purpose of the fermentation vat is for fermentation to take place, for starch hydrolysed to

be added to bring the gravity back up and for biopectinase to be added. Once all the

additions have been made, the juice is then transpumped to a stainless steel tank, where

the fermentation is ongoing until eventually all the sugar has been converted into

alcohol.

Once the fermentation vat is full, with all the various additions made, the fermentation

at this stage will have got under way and will be progressing. On a daily basis, samples

will be taken for analysis, both sensory analysis and chemical analysis. The chemical

analysis is in respect of alcohol, gravity and acidity.

Primary fermentation takes six to eight weeks until eventually all the sugar has been

converted into alcohol. It is then “dry” meaning that there is no sugar left. During the

fermentation, carbon dioxide is produced and released in the process. In the timber vats

there is an electrically operated extractor fan which will remove the carbon dioxide. In

the stainless steel vats, where the fermentation is actually finished, there are vent valves

which will vent the carbon dioxide produced during fermentation to the atmosphere. In

the receipt vats, where the Somax is added and the fermentation vats where the

biopectinase is added, there are manways at the top to allow for the addition of the

Somax and the biopectinase; Somax to the actual receipt vats and the biopectinase to the

fermentation vats. In the fermentation vats there are entry points so that the starch

hydrolysed can be pumped in during the fermentation. All these vats have these various

accessories which are necessary to allow the process actually to be completed. If the

appellant did not have these they would not be able to make these additions and the end

result would be an undesirable product.

(b) Once the fermentation is finished, the yeast will then settle to the bottom which may take a week or two weeks.

Fermentation is then “racked” i.e. the supernatant is pumped to another vat. One cannot leave the fermentation lying on

yeast. At this stage the yeast cells are dead. If they break open or break up, they provide nutrients for micro-organisms to

grow. The process of racking takes place in January of each year after the period of primary fermentation is complete.

The racking takes place from the stainless steel vat, possibly into other stainless steel vats or possibly even into wooden

vats, depending upon capacity and what is available.

The cider at this stage is referred to as a green cider. At this stage it would not be

organoleptically suitable for obvious cider production, so it is left to mature over a

period of approximately 8 to 15 months during which time a process known as

malolactic fermentation occurs where malo acid is converted into lactic acid. This

reduces the acidity of the cider and gives rise to a more complex flavour. This turns the

green cider (i.e. cider just after fermentation) into a more mature cider which is

subsequently used to make the bulk blend. Organoleptic analysis is carried out by a

trained sensory panel which evaluates the ciders on a monthly basis. The prime purpose

is to make sure that the ciders, when they go forward for final packaging, are

satisfactory from a sensory point of view, and they are also meant to be able to detect

any undesirable change in the cider which will be caused by bacterial action.

If the sensory panel picks up a deterioration of the cider, then a decision has to be made

to use that cider by blending with good cider or to remove or mask the off flavour that

would be developing. The organoleptic analysis is carried out on a monthly basis to

make sure that the cider is consumable at the end of the process.

Aside from malolactic fermentation, there are also other subtle changes taking place that

will eventually transform it into a product which is then satisfactory for cider

production.

The appellant starts using ciders approximately eight months after fermentation and up

to fifteen months thereafter, because there are fermentations coming off all the time. The

first fermentations will start in September, so the first ones starting in early September

finish some time in October, and so on. So there is always fermentation starting and

finishing.

By the time you come to the end of the season, by the time the first fermentations are

used, it is approximately eight months after the end of fermentation, going right on to

approximately fifteen months at the end of fermentation. Thus, while the average period

for secondary fermentation (malolactic fermentation) is four or five months, the whole

fermentation process is going on for a period of somewhere between eight to fifteen

months.

(c) The next step is filtration where the ciders are filtered by microfiltration from one vat to the other. The purpose of

microfiltration is to remove yeast. There will still be quite a lot of yeast left. Even though the product has been racked,

the product will still be hazy, and the only filer that will remove these without clogging is microfiltration, which is a new

type of filtration process. The product is pumped from the vat into a balance tank and it is then pumped from the balance

tank through the actual microfilter. The microfilter is really a concentration process where yeasts are concentrated into a

thick sludge which is then pumped away, and the actual microfiltered product is then transferred to another tank where

the maturation process will continue until such time as the product is ready to be blended. This is approximately eight to

fifteen months after fermentation.

The product would just be microfiltered once although the microfilter is continuously

being concentrated and if there are yeasts in it, will eventually end up as a sludge. But

once the product goes through the actual filters themselves, it is then just transferred on

as a filtrate into a receipt vat. Microfiltration will remove all yeasts. Subsequently they

may pick up some yeast again from storage, from vats, pipes etc., but the numbers will

be quite small. There is an actual filtration plant from which the cider is pumped from a

tank to the plant and then back to another tank. It is the pump that provides the motor

force to move the cider from a vat to a filtration plant and then back to another vat. The

process is characterised by constant movement of the material. The microfilter area will

always be in action. Once one fermentation has been filtered through, the next

fermentation is coming through, followed by the next one. There is constant movement

even though the filtration only acts on any one lot of fermentation once. It would be very

rare to have to micofilter a given batch again unless there was significant secondary

yeast growth.

(d) The next stage is the production of what the appellants call a bulk blend which is fresh juice cider. This is then

blended with a concentrate cider at a ratio of 50/50 and is then brought through another filter, a sheet filter. The purpose

of this is to remove any remaining yeast which may have been picked up during the final maturation process. The

product is then filtered into a stainless steel tank. It is at this stage ready to go forward for the final production of actual

finished cider. Thus, there are two types of filters. There is a microfilter unit and it will only filter through that once

(save for exceptional occasions where it may be microfiltered twice). Thus, the product will be racked once, will be

microfiltered once and will go though the sheet filtration once.

The same quantity is not being repeatedly subjected to the same process. But there is

continuous movement within the plant. There are fermentations moving from the

fermentation vats into the stainless steel vats so that the fermentations can be finished,

there is racking from one tank to the next, there is movement then of racked product to

the balance tank for microfiltration, and then there is movement post microfiltration

when the cider is being blended. So there is constant movement.

There are some 375 movements occurring between vessels in the production of the total

annual output which varies between 2 million and 2.5 million gallons. The process

requires the use of force so in all cases pumps would be used to pump the cider from one

tank to another or from the vat to the balance tank prior to microfiltration, and also

during the blending operation, obviously, where the product would be pumped into a

tank where it is blended with the concentrate.

(e) After the fresh juice fermentation is blended 50/50 with the concentrate fermentation and filtered through a sheet filter

into a stainless steel tank, the product is then transferred to a tanker which brings the product up into the Annerville site,

outside Clonmel, and that is then used to make the various ciders,. The product would be at high strength, 10%, and that

would be diluted down to whatever is the alcoholic strength of the product one is bottling. Thus, it is not at bottling

strength at the stage it leaves Dowd’s Lane and is diluted further in Annerville. The product then goes through a bottling,

canning or kegging process, depending on the nature of the final product.”

The Appeal to the High Court

On the hearing of the Case Stated before the High Court the parties accepted that the approach to be taken to the issues to

be determined is that set out in Henry Denny & Sons (Ireland) Ltd v. Minister for Social Welfare [1998] 1 I.R. 34 and

applied in Premier Perriclase Ltd v. Commissioner of Valuation unreported the High Court Kelly J. 24th February, 1999.

In the former Hamilton CJ set forth the approach which the courts should take when asked to interfere with the decision of

an expert administrative tribunal:-

“They should be slow to interfere with the decision of expert administrative tribunals. When conclusions are

based on an identifiable error of law or an unsustainable finding of fact by a tribunal, such conclusions must

be corrected. Otherwise, it should be recognised that tribunals which have been given a statutory task to

perform and exercise their functions as is now usually the case with a high degree of expertise and provide

coherent and balanced judgments on the evidence and arguments heard by them, it should not be necessary for

the courts to review their decisions by way of appeal or judicial review.”

In the latter Kelly J. at p. 27 said:-

“There is no doubt but that the Valuation Tribunal is the type of body which Hamilton CJ had in mind when

expressing the views which I have just quoted from his judgment in the Denny case. In the instant appeal, the

Tribunal consisted of its Chairman, who is a senior counsel, and two deputy chairmen, one is a barrister and

the other is a fellow of the Royal Institute of Chartered Surveyors. This court should be slow to interfere with

its decisions. It should only do so on the basis of an identifiable error of law or an unsustainable finding of

fact.”

On the issue which arises on this appeal on behalf of the appellants it was submitted that the respondent’s conclusion

comprises a finding of fact which is unsustainable or alternatively a finding of fact which no reasonable Tribunal could have

reached on the evidence. The Tribunal misunderstood the nature of the process of fermentation and it failed to take into

account the various mechanical processes of filtration and the pumping of liquid from one container to the other. The

Tribunal’s conclusion that the vats are used primarily for storage or containment and not to induce a process of change is

unsustainable. The evidence overwhelmingly is that the use of the vats was primarily to induce a process of change in the

apple juice.

The learned trial judge held that it was difficult to accept that there was no evidence before the Tribunal to justify its finding

that the primary use to which the vats are put is for storage or containment notwithstanding that they are also used to induce

a process of change in the substance contained. He held that the finding of the respondent was neither illogical nor irrational.

Insofar as the conclusions of the Tribunal can be classified as inferences to be drawn from primary facts found the appellant

had failed to satisfy the court that those inferences from the findings of fact were such that no reasonable Tribunal could

arrive at. In the alternative if the conclusions of the respondent can be characterised as determinations of law no error of law

had been identified such as would enable the court to interfere with the Tribunal’s decision. The learned trial judge

accordingly answered the questions raised on the case stated as follows:-

1. Yes

2. No

Submissions on the Appeal

1. The Appellants Submissions

The relevant distinction is that between constructions used for the containment of a substance including such as are used

primarily for storage or containment (whether or not the purpose of such containment is to allow a natural or a chemical

process to take place) and constructions used primarily to induce a process of change in the substance contained: more

simply the distinction is between constructions used primarily for storage or containment and constructions used primarily to

induce a process of change in the substance contained therein. This was accepted by the Tribunal. However the question

that the Tribunal ultimately posed for itself and answered was different. Para. 24 the Tribunal’s judgment reads:-

“There is no dispute between the parties but that fermentation takes place naturally. This over a six to eight

week period. This results in the production of alcohol and carbon dioxide which is extracted. Sugar is from

time to time pumped into the vats. But apart from the extraction of the carbon dioxide and the infill of sugar

nothing else is involved in converting apple juice into what is called green cider. To achieve this, it is of

course essential to have a structure or vessel or a series of structures/vessels within which the juice is

contained. It would appear that the timber vats are more suitable for this than the other vessels. Whatever, can

it be said in these circumstances that the process or the process of change which undoubtedly takes place is

dependent upon or caused by the vessel being designed or being used primarily to induce that process or is it

more accurate to advance the proposition that once containment of the apple juice is achieved then what

follows, whether it be a natural or chemical process, is essentially, as a consequence of that containment with

little else? In our opinion if this is an acceptable manner of setting up the question, the facts, if accurately

outlined, fall far short of satisfying the legal criteria for applying to this fermentation process the proviso

contained within Reference No. 1.”

The question is not, it is submitted whether a process of change is caused by the vessel being used primarily to induce the

process. This formulation suggests that there should be something inherent in the design of the construction that brings about

the process of change and there is no such requirement in the wording of the statute. The true construction of Reference

No. 1 is that all structures within the provision whether within the exclusion or not are by definition used for containment:

the question is what is the purpose of that containment. If the purpose is to induce a process of change then the construction

is within the exclusion in this case the purpose was to induce fermentation converting the juice into cider and accordingly the

vats come within the exclusion.

The concentration by the Valuation Tribunal on the design of the vats or their innate characteristics apparent in para. 24 of

the judgment is consistent throughout: in para. 19 the Tribunal stated that it was necessary to look at the design of the plant

in question. In para. 25 it suggested that the removal of residual yeast and bacteria could not change “the character of these

vessels”: in para. 26 it is stated:-

“It seems to us almost inescapable that these vessels are used or designed primarily for storage or

containment and not to induce a process of change. If it were otherwise not only would a process of change

take place but there would be some means or method inherent in the structure itself which would induce that

process”.

It was never suggested by either side that the design or character of the vats is relevant: the issue relates to their use. That

use is containment for the purpose of inducing a process of change. There is no basis in the statute for reading in a further

requirement that the container must possess a special characteristic bringing about the process of change. There is

inducement in that the process is not entirely natural in that Somax, starch hydrolysed and biopectinase are added and the

liquid is repeatedly moved from one tank to another and this is inconsistent with mere storage or containment.

The appellant relied upon Irish Refining plc v Commissioner of Valuation [1995] 2 ILRM 223. That case concerned the

distinction in the 1860 Act between machinery and plant and was not concerned with Reference No. 1 and I do not find it of

assistance. Reliance is also placed on Carberry Milk Products v Commissioner of Valuation (VA 95/4/026) 14th March

1997 where the Valuation Tribunal stated:-

“15. In applying the above principles where appropriate to the facts of the instant case we find it necessary to

make a distinction between the tanks which hold the raw milk and the tanks which contain the skimmed milk.

In respect of the latter three tanks we are perfectly satisfied that what goes into those tanks is skimmed milk

and what comes out is likewise the same skimmed milk … To have available skimmed milk is of course

necessary for the manufacturing process which in turn means that the company must make available a facility

to hold or contain that milk until such time as the process is ready to receive it. Such a holding takes place

primarily if not exclusively for storage or containment and certainly not either primarily or at all to induce a

process of change. Any activity which takes place within these tanks does so for the purposes of retaining or

maintaining the skimmed milk in its original condition … accordingly we hold that these tanks are plant and

are rateable as such within Reference No. 1 of the schedule to the 1860 Act.

16. The position in our view is quite different with regard to the five tanks which hold raw or whole milk. As

above stated it is crucial to the operations of the appellant company that a certain specification (in terms of

fat and protein content) is met whether that specification is customer orientated or required by law. One way

or another unless the specification is satisfied the ultimate product is of no use and certainly of no commercial

viability … This is but one example of why the mixing and blending of raw milk with the skimmed milk and

the processes which take place within these tanks are crucial to the entire manufacturing operations of the

appellant company. Whilst it is true to say that milk goes into these five tanks and that milk comes out, that

statement without qualification is inaccurate and is certainly an incomplete description of the activity that

takes place within. What in fact goes in is raw milk which has a certain ascertainable percentage of fat and

protein content and what comes out is not that milk with that content but rather milk with a quite different

content of both fat and protein. It is neither raw milk in its natural state or skimmed milk in its natural state.

It is a product different from both.

17. Could we test this proposition by rhetorically asking whether or not, if there was no requirement for

storage and if the manufacturing process so permitted, could the raw milk as delivered by the four co-

operative societies be pumped straight into the manufacturing process and avoid altogether these tanks. From

the evidence of Mr. Holland (the appellants production manager) we are quite satisfied that this could not take

place. Accordingly it is our view and we so find that in respect of these five tanks the same are designed or

used primarily to induce a process of change in the milk contained therein and as such are non rateable plant

within the meaning of the aforesaid Reference No. 1.”

The appellant derived the following propositions from the foregoing:-

1. Where the change taking place within a construction is itself a proximate part of the manufacturing process the purpose of

the containment is unlikely to be storage.

2. Where the substance that comes out of the construction is different in character from the substance that goes in it is likely

that the purpose of the containment is to induce a process of change.

3. A fortiori when the substance that comes out, being different from that which goes in, is an essential element in the

manufacturing process the purpose of the containment is unlikely to be storage. In the present case what goes in to the

vats is milled apples and the substance that comes out is high strength cider that is brought elsewhere for further

processing. The vats are not used to store or contain their contents in a particular condition in preparation for the core

manufacturing process but rather are a part of the manufacturing process.

The Respondent’s Submissions

The respondent submits that there is no identifiable error of law or unsustainable finding of fact in the judgment of the

Tribunal.

Irish Refining plc v Commissioner of Valuation was concerned with the interpretation of section 7 in its original version

and not with section 7 as substituted by the Valuation Act 1986 section 7. The original section 7 and section 7 as substituted

differ substantially. The onus is on the appellant to establish that they come within the exclusion: Caribmolasses Limited v

The Commissioner of Valuation [1994] 3 I.R. 189.

At para. 18 of its judgment the Tribunal correctly stated the issue:-

“As above stated the crucial question, which is one of mixed fact and law, is whether such vessels are

designed or used primarily for storage or containment or are so designed or used primarily to induce a

process of change in the substance contained therein.”

While the appellant accepts this as the crucial question it nonetheless seeks to focus on the purpose of the containment

rather than the use. The Valuation Tribunal however makes it clear that if the vats are used primarily for storage or

containment the fact that the purpose of such containment is to allow a natural or a chemical process to take place is

irrelevant. This will not confer an exemption from rateability. The exclusion from rateability arises where the construction is

designed or used primarily to induce a process of change. The Tribunal at para. 24 of its judgment correctly stated the issue.

In this case:-

“ … can it be said … that the process or the process of change which undoubtedly takes place is dependent

upon or caused by the vessel being designed or being used primarily to induce that process or is it more

accurate to advance the proposition that once containment of the apple juice is achieved then that what

follows, whether it be an actual or chemical process, is essentially as a consequence of that containment with

little else …”

The question to be answered is whether the vats are used primarily for storage or containment or primarily to induce the

process of change. On the evidence the primary purpose of the vats is to allow a natural process to take place.

Notwithstanding that additives are used during containment the vats do not induce the process of change in that they are

entirely passive and merely store their contents. While additional yeast is picked up during containment it cannot be said that

the vat is thereby inducing a process of change. The primary use is containment.

In its judgment the Tribunal found:-

1. There is no dispute between the parties but that fermentation takes place naturally over a six to eight week period which

results in the production of alcohol and carbon dioxide, which is extracted. Sugar is from time to time pumped into the vats,

but apart from the extraction of the carbon dioxide and the infill of sugar nothing else is involved in converting apple juice

into what is called green cider.

2. The fact that residual yeast and bacteria are removed cannot change the character of these vessels nor can the fact that

maturing and blending occurs, which incidentally is effected by the passage of time and by the pumping through pipes of

essentially the same product, namely cider.

3. There is no distinction between the design, construction, use and purpose of any of the tanks above mentioned. All are

multi purpose and capable of being freely inter-changed in the production process. That being so it is difficult to conclude

that they were designed or used primarily to induce a process of change in the apple juice contained therein.

4. Given the critical necessity of containing the apple juice, of holding cider until despatch and of storing a sufficient quantity

to accord with the company’s policy of having a two year stock available, it is almost inescapable that these vessels are used

or designed primarily for storage or containment and not to induce a process of change.

These are findings of fact on the evidence available to the Tribunal. There was ample evidence for the Tribunal to conclude

that the vats were not used primarily to induce a process of change in the substance contained but rather were used

primarily for storage or containment.

Discussion

The design of the vats is not in issue and the focus on this appeal is on their use. Having regard to the wording of Reference

No. 1 it seems to me that the issues to be determined can be reduced to the following two questions:-

1. Are the vats used primarily for storage or containment whether or not the purpose of such containment is to allow a

natural or a chemical process to take place?

2. Do the vats fall within the exclusion in Reference No. 1: they will be within the exclusion if they are used primarily to

induce a process of change within the substance contained.

The following matters are not in dispute:-

(a) The vats are plant as defined in section 1 of the Valuation Act 1986.

(b) The vats are constructions for the purposes of Reference No. 1.

(c) The design of the vats is not relevant to the issue to be decided.

In construing Reference No. 1 particular regard must be had to the following words and phrases therein:-

(a) “containment” and “storage”.

(b) “purpose” and “use(d)”.

(c) “allow” and “induce”.

(d) “a natural or chemical process” and “a process of change”.

Bearing the foregoing in mind, applying selective comminution to Reference No. 1 results in its relevant provisions reading

as follows:-

“All constructions used for the containment of a substance including such constructions which are used

primarily:

(a) for storage or

containment (whether or not the purpose of such containment is to allow a natural or a chemical

process to take place)

but excluding any such constructions which are used primarily to induce a process of change in the

substance contained.”

Containment is a category of use and in the absence of any contrary indication is to be given its ordinary meaning. Included

within that category, but without prejudice to the ordinary and more general meaning, are three sub-categories:-

(a) use primarily for storage.

(b) use primarily for containment.

(c) use primarily for containment where the purpose of such containment is to allow a natural or chemical process to take

place.

The effect of section 4 of the 1860 Act and the schedule inserted therein by section 8 of the 1986 Act is to bring plant

within Reference No. 1 and thus liable to a charge to rates unless the plant comes within the exclusion therein. Thus

constructions used primarily to induce a process of change in the substance contained are not liable to a charge for rates as

plant.

Turning now to the words and phrases to which I have indicated particular regard must be had it is clear that the focus is on

use unless the purpose of that use is expressly or by implication made relevant. Containment is a use. The purpose of the

containment is expressly made relevant where the purpose is to allow a natural or chemical process to take place. The

purpose is implicitly relevant in “storage” which in its ordinary meaning connotes containment against future use and in the

present context containment until required for use in the appellant’s production process. If the primary use of the vats is

storage or if the primary use of the vats is containment whether or not for the purpose of allowing a natural process to take

place the vats will be liable to a charge for rates. They will be within the exclusion if they are used primarily, not for

containment, but to induce a process of change in the substance contained. The focus of the inquiry therefore is on use: in

two circumstances the purpose of the use is relevant, firstly in relation to storage and secondly use primarily to induce a

process of change.

“Allow” means to permit and it connotes passivity or the occurring of a process without active intervention. “Induce”

connotes active intervention.

Any process of change induced is relevant for the purposes of the exclusion: only a natural or chemical process allowed to

take place is relevant to the charging provision.

The task of the Tribunal was to find the primary use of the vats. It found, and there was indeed no dispute, that

fermentation takes place naturally. This is a finding of primary fact. Thus whether the vats are used primarily for storage,

for containment or for containment for the purpose of allowing that natural process to take place, the vats will be liable to a

charge to rates. If the vats come within the exclusion as being used primarily to induce a process of change they will not be

liable to a charge to rates as plant.

The evidence is that there is constant movement between vats and that the vats are used interchangeably throughout the

process. The appellant has a policy of storing two years stock within the vats. The total annual output of the plant varies

between 2.0 million and 2.5 million gallons. On the appellant’s figures the total capacity of the stainless steel vats is 1.037

million gallons, of the timber vats 382,800 gallons and the concrete tanks 789,200 gallons. It is stated that the concrete vats

are unused. The total capacity of all three types of vats is approximately 2.2 million gallons or excluding the concrete vats

1.2 million gallons. As there is continuous movement between the vats it cannot be said that any particular vat is used

exclusively for storage. If the stated policy of storing two years supply is observed, even in part, some of the capacity is

used for storage and the remainder used for containment while the natural process of fermentation takes place. It is,

however, not possible on the findings of fact to determine the proportion of capacity used for each of the purposes storage

or containment. The total capacity of the vats in use roughly equates with the total annual production. The process from

receipt of apples involves a period of six to eight weeks for primary fermentation followed by racking to remove yeast after

which the cider is left to mature over a period of eight to fifteen months during which malolactic fermentation occurs. The

product is filtered normally on two occasions but occasionally on a third occasion. The process is continuous. Having regard

to the capacity of the vats actually used and taking an average production period from apple to product suitable for transfer

to the Annerville site and assuming the constant introduction of apples at the start of the process and the drawing off of

product at the end of the process there would appear to be little capacity available for use as pure storage. Accordingly the

vats are used primarily for containment while a natural process of fermentation occurs whether that process is allowed or

induced. This being so the Tribunal, accepting that some of the capacity is used for storage, rightly concentrated on

whether:-

(a) the vats are used primarily for containment for the purpose of allowing the natural process of fermentation to take place

or

(b) used primarily to induce a process of change in the substance contained.

It is clear that a construction may have more than one use. In the present case vats may be used for storage or for

containment while fermentation takes place. The conclusion reached on the evidence by the Tribunal is that the process of

change which takes place is a consequence of the containment with little else and that the vats accordingly are not used

primarily to induce that process. Part of the capacity is used primarily for storage. There was ample evidence before the

Tribunal to support this finding. The process of change takes place over a period of six to eight weeks for primary

fermentation followed by a period of secondary fermentation over a period of eight to fifteen months. During this total

period there are a number of interventions. Somax is added, biopectinase is added and the fermentation vat is racked – the

supernatant is pumped to another vat. These processes consume a minute portion of the total time which the entire process

of change takes. For the rest of that time the use to which the vats are put is that of containment for the purpose of allowing

the natural process to take place. That is the primary use. Even if it could be said that the interventions which I mention

induce a process of change it would be necessary to consider whether the primary use is containment or such inducement.

This would not affect the position as the primary use remains that of containment for the purpose of allowing a natural

process to take place the interventions merely resulting in the product resulting from fermentation being more suitable for the

appellant’s purposes.

The authorities opened to the court are of limited assistance as each case will turn on the findings of fact in that particular

case. Caribmolasses Company Limited v Commissioner of Valuation concerned tanks used for the containment and

blending of molasses and the issue was whether or not they came within the exclusion. The Tribunal held that the tanks

were designed or used primarily to induce a process of change in molasses and so came within the exclusion and on a Case

Stated the High Court upheld that decision. The Supreme Court held that the process within the tanks whereby molasses of

varying viscosity was blended to form a uniform mix is not a process of change: even if it could be said to be a process of

change it is not induced by the tanks which are simply used to contain the molasses while blending is effected. The

judgment is of no assistance in the present case.

Irish Refining Plc v Commissioner of Valuation was concerned with whether sections of plant at the oil refinery at

Whitegate were machinery and therefore exempt from rating. The court was concerned with the law prior to the amendment

of the 1860 Act by the 1986 Act. The decision is, however, of some limited relevance in that it supports the Tribunal’s

approach in determining the primary use of the vats. At p.226 Geoghegan J. said:-

“The fact that tanks or receptacles are fitted with equipment which enables some activity to take place within

does not necessarily alter their character as tanks and convert them into machines. To repeat the expression

used by McCarthy J. in the Siúcra Éireann case, if the character of the tank ‘predominantly is one for storage

purposes’ it is a tank and not a machine.”

Applying that approach in the present case one looks at the process within the vats as a whole and the intervention by the

addition of Somax and biopectinase and the process of racking in the context of the same to determine whether what occurs

within the vats is primarily a natural process which is allowed or a process of change which is induced. It was open to the

Tribunal on the evidence before it to find that the former is the primary use.

I am satisfied that the constructions come within the charging provision being used primarily for storage or containment and

do not come within the exclusion as they are not used primarily to induce a process of change in the substance contained.

There is nothing in the judgments in the foregoing cases to dissuade me from the view which I have formed as to the

construction of Reference No. 1 both in its charging provision and in the exclusion.

Decision

The tanks or vats do not fall within the exclusion in Reference No. 1 in the schedule to the Act of 1860 inserted by section 8

of the Valuation Act 1986. No issue as to whether the vats constitute machinery within the meaning of section 7 of the

Annual Revision of Rateable Property (Ireland) Amendment Act 1860 as amended by section 7 of the Valuation Act 1986

arose before this court. I would therefore answer the questions raised on the Case Stated

(i) Yes.

(ii) No.

Bulmers v The Valution Tribunal