Court allows appeal on toll road valuation, ruling maintenance obligations are integral to the incorporeal hereditament.

THE SUPREME COURT

[Appeal No: 306 & 307/2008]

Fennelly J.

Clarke J.

MacMenamin J.

Between/

Westlink Toll Bridge Limited

Appellant

and

Commissioner of Valuation

Respondent

and

Fingal County Council

Notice Party

and

Between

Celtic Road Group (Dundalk) Limited

Appellant

and

Commissioner of Valuation

Respondent

and

Louth County Council

Notice Party

Judgment of Mr. Justice John MacMenamin, delivered the 23rd day of October, 2013.

1. A number of issues are appealed to this Court on foot of a judgment delivered by the High Court (Charleton J.) on the 11th May,

2008. This was a single judgment, delivered in response to two cases stated by the Valuation Tribunal (“The Tribunal”). The Tribunal

delivered judgments on the 21st December, 2005, on appeals brought by the two appellants (“Westlink” and “Celtic”) against

decisions of the Commissioner of Valuation (“The Commissioner”). Section 39 of the Valuation Act 2001 empowers the Tribunal to

state a case to the High Court. The case stated concerned the rateable valuation of tolls.

2. The first rateable property is the Westlink toll facility in Dublin, where Westlink was the rated occupier. At the relevant time,

Westlink operated the toll bridge on the M50 motorway. The Commissioner revalued the hereditament after a second bridge was built

beside the first one over the River Liffey. Westlink appealed this revaluation to the Tribunal.

3. The second toll derived from a section of the M1 motorway, and approach roads thereto, between Gormanstown Interchange in Co.

Meath and the Monasterboice Interchange in Co. Louth, where Celtic is the rated occupier. Celtic’s appeal relates to an initial rating

by the Commissioner.

The primary issue

4. Under their agreements with the National Roads Authority, the appellants are obliged to pass a proportion of their gross toll

revenue to the Minister for the Environment/National Roads Authority (NRA). These payments are referred to as “royalty payments”

throughout this judgment. The primary question to be determined is the deductibility of these payments in the estimation of the net

annual value of the hereditaments for rating purposes. The Tribunal found that these royalty payments were deductible. However, the

learned trial judge held that the appellants were not entitled to deduct these royalties. This determination is under appeal by the

appellants.

The length of the roadway issue

5. A further issue arises in the Celtic appeal. Under a contract with the NRA, Celtic was placed under an obligation to repair the entire

length of the M1 motorway. However, the tolled section is considerably shorter. The issue then arises as to whether allowance should

have been made for Celtic’s liability to repair the entire length of the roadway, even though the toll related that shorter section of the

road between Gormanstown and Monasterboice. The Tribunal found in favour of Celtic on this point, and this determination was

upheld by the High Court judge. On this, the Commissioner has cross-appealed to this Court.

The Commissioner’s application to amend the cross-appeal

6. At the outset of this hearing, counsel for the Commissioner sought to amend the notice of cross-appeal. The application was heard

first. For reasons set out later in this judgment, this Court declined to allow the amendment. The range of issues in the cross-appeal

can only be understood by reference to the matters more immediately addressed in this judgment to which I now turn.

The primary issue

The relevant statutory provisions

7. Two statutes lie at the centre of this dispute. The first, the Valuation Act 2001 (“the 2001 Act”), provides for the method whereby

the value of a hereditament is to be determined for rating purposes. Section 48(1) of the Valuation Act 2001 provides as follows:

“The value of a relevant property shall be determined under this Act by estimating the net annual value of the property

and the amount so estimated to be the net annual value of the property shall, accordingly, be its value.”

8. Section 48(3) provides for the factors to be taken into account in calculating the net annual value:

“Subject to Section 50, for the purposes of this Act, “net annual value” means, in relation to a property, the rent for

which, one year with another, the property might, in its actual state, be reasonably be expected to let from year to year,

on the assumption that the probable annual cost of repairs, insurance and other expenses (if any) that would be

necessary to maintain the property in that state, and all rates and other taxes and charges (if any) payable by or under

any enactment in respect of the property, are borne by the tenant.” (emphasis added)

The words emphasised in this subsection identify what matters are to be deductible in the calculation of the “net annual value”.

Allowances are made for “repairs”, “insurance”, and other expenses, necessary to maintain the property “in that state”. Allowance is

also to be made for all rates and other taxes and charges payable under any enactment. The primary issue is whether the royalties

are “a charge” within the terms of s. 48(3)?

9. All parties agree that the relevant provision for determining this question is s. 63 of the Roads Act 1993, as amended. This section

provides:

“(1) – Where a toll scheme is adopted by a road authority, the road authority may enter into an agreement with another

person under which, upon such terms and conditions as may be specified in the agreement (including the payment to, or

retention by, the person of all or part of the proceeds of tolls in respect of the toll road the subject of the scheme), the

person agrees to do all or one or more of the following:

(a) to pay some or all of the cost of the construction of the road,

(b) to pay some or all of the costs of the maintenance of the road,

(c) to construct or join or assist in the construction of the road for or with the authority,

(d) to maintain or join or assist in the maintenance of the road with the authority,

(e) to operate and manage (including provide, supervise and operate a system of tolls in respect of the use of the

road) the road for or with the authority,

(f) Such other things connected with or incidental or ancillary to or consequential upon the foregoing as may be

specified in the agreement.

(2) Without prejudice to the generality of subsection (1), an agreement under this section may –

(a) provide for the application of the proceeds of tolls, systems of accounting for tolls collected and the methods

and times of payment of proceeds of tolls to the persons to whom they are to be paid under the terms of the

agreement,

(b) specify the period for which the agreement shall have effect and provide for its termination or suspension and

for matters connected with or incidental or ancillary to or consequent upon the expiration of the agreement or such

termination or suspension, and,

(c) provide for the giving of such security as may be specified therein –

(i) to the road authority by any other party to the agreement, or

(ii) by the road authority by any other party to the agreement,

in relation to the carrying out and observance by that party or authority of the terms and conditions of the

agreement.

(3) A road authority may, enter into an agreement with a party with whom it has entered into a previous agreement under

this section amending the terms or conditions thereof, adding thereto, or deleting therefrom, terms or conditions or

revoking the previous agreement.

(4) Entry into an agreement under this section in relation to a regional road or local road shall be a reserved function.

(5) The parties to an agreement under this section shall carry out the agreement in accordance with its terms and

conditions and a road authority shall have all such powers as may be necessary for that purpose.” (emphasis added)

The ultimate question for determination in respect of the primary issue

10. Are the royalty payments identified in contracts charges payable under the enactments, or are such payments simply payable on

foot of private contractual arrangements entered into between the two companies and the National Roads Authority?

The High Court’s findings on the primary issue

11. In his judgment, the High Court judge focused on the concepts of “a tax” and “a charge”. He pointed out that a “tax” had certain

specific characteristics. He observed at para. 23:

“It is involuntary; it may increase or decrease; it may be abolished, or it may be imposed, at the wish of the legislature;

and it is inescapable once the conditions for taxation are fulfilled. Fundamentally, however, any tax fulfils in law the

characteristic that it is similar to the position of a local authority in law: no tax can be levied, and no other revenue can

be made pursuant to an enactment, unless the nature of the tax, its rate and circumstances under which it applies are

defined by law. Here, in contrast, the division of the toll proceeds is pursuant to an agreement entered into following on

negotiations”. (emphasis added)

12. As a result, the judge held that the royalties were payable under the contract; that they were “private arrangements” and not a

tax; and, therefore, were not deductible in calculating the net annual value.

The parties’ submissions on appeal in summary

13. The appellants contend that the contracts were made under s. 63 of the Act of 1993, and that the provisions of the contracts

actually reflect in large measure the provision of the section. They submit that s. 63(5) creates a statutory duty that the parties to

an agreement to carry out that agreement in accordance with its terms and conditions. Furthermore, they point to the actual usage

by the legislative drafters of the phrase “agreement under this Section” in ss. 63(2) and 63(5). They contend that the trial judge

conflated the consideration of “net annual value” with an entirely separate question of whether the costs imposed amounted to a tax.

14. However, the Commissioner contends that the contracts which were entered into were simply private arrangements and relies on

a number of English authorities to that effect. His counsel points to the fact that the 1993 Act does not specify any statutory

consequences which may arise in the event of non-performance of the obligation. He contends s. 63(5) is to be read as a whole, and

not broken into two parts; the approach which he says is taken by the appellant. Therefore, it is contended that the High Court judge

was correct in determining that the revenue share in respect of the operation of the toll should have been included in calculating the

gross receipts for the purpose of ascertaining the “net annual value” of the relevant authority, through recourse to what is known as

the Receipts and Expenditure Method (REM) of valuation.

The contracts

15. It is necessary to turn next to the provisions of the contracts. To determine whether those contracts are “by or under” an

enactment, is not of course merely a “one way” process of statutory interpretation. It requires also a detailed examination of the

inter-relationship between the terms of the contracts and the relevant statutes. The process requires consideration of the way in

which the very terms “by or under” are deployed in the section. One looks first to the agreements.

The Westlink agreement

16. The Westlink Agreement was entered into between the National Roads Authority and the company on the 7th June, 2001, and

was to last for 30 years. This 2001 agreement referred back to an original agreement dated the 16th October, 1987, in which the

National Road Authority’s predecessor was the County Council of Dublin. For the purposes of discussion, however, the relevant

contract is that of the 7th June, 2001.

17. Westlink were to procure the design, construction, financing, maintenance and operation of the new bridge in accordance with

contract documentation, which was approved in advance by the National Roads Authority. The company bore the entire cost of the

works. The National Roads Authority was relieved of any liability save as was provided for in the contract.

18. Clause 4.1 of the agreement provides that Westlink is “to occupy the Toll Road and shall be required to manage, supervise,

operate, and maintain a system of tolls in accordance with a new toll scheme for traffic using the toll road”. On collection of the toll,

Westlink is obliged under the contract to apply the proceeds of a toll towards meeting its financial obligations. Clause 4.3 of the

agreement sets out the portion of the collected tolls which is to be made payable to the Minister. Where the daily number of vehicles

using the roadway averages between 8,000 and 27,000 vehicles, the sum to be deducted and remitted to the Minister is 30% of the

gross toll revenue. The deduction to be remitted then increases on a sliding scale of percentages. The method of calculation places a

ceiling on the amount which the rate payer may retain so that, when the relevant figure exceeds 45,000 vehicles, the amount

payable to the Minister under the contract is 80%. This “ceiling” is intended to prevent super profits. The method by which tolls are

to be paid is set out in by-laws appended to the contract.

The Celtic Agreement

19. Celtic entered into its agreement with the National Roads Authority on the 5th February, 2004. The contract differs from the

Westlink agreement, both because of the nature of the transaction, and the nature and extent of the maintenance commitments

which the company undertook. Not only were Celtic to provide for the new link roads and associated bridges; but also for the

operation and maintenance of the entirety of the then existing M1 motorway from Hainstown to Gormanstown, again for a period of 30

years. The company also undertook to design, contract, finance, operate and maintain a shorter extension of M1 motorway as part of

the agreement.

20. The toll scheme provided for a system of tolls in respect of the 21.74 km section of the motorway from Gormanstown, Co. Meath

to Monasterboice, Co. Louth. The scheme involved approved roads, linking the motorway with the existing local road network,

identifying where toll collection facilities were to be placed. Celtic is required to provide for a satisfactory residual life of the entire

54.7 km after the end of the 30 year period. The Celtic agreement also provides for the share of gross toll revenue to be paid out of

receipts.

Matters of agreement regarding valuation

21. The submissions of counsel revealed that there were significant areas of agreement between the parties. It is common ground

that the property to be valued must be assumed to be owned by a hypothetical landlord, who wishes to let it; and that there is a

hypothetical potential tenant who is willing to pay rent in order to occupy it. The property is assumed to be “vacant” and “to let”.

The object of the valuation is to ascertain the rent which would be paid for the subject property in accordance with the statutory

requirements of s. 48 of the Act of 2001. The property must be valued at the relevant valuation date; and as it stands.

22. What is the legal status of these royalty payments under the 2001 Act? I now turn to consider the principles applicable in

interpreting the 2001 Act.

The proper approach to interpreting the Valuation Act 2001

23. The High Court judgment in Nangles Nurseries v Commissioner of Valuation [2008] IEHC 73, seeks to summarise principles

applicable to the interpretation of a statute such as the Valuation Act 2001. The judgment referred to the decisions of the former

Supreme Court in Revenue Commissioners v Doorley [1933] I.R. 750; and of this Court in Inspector of Taxes v Kiernan [1981] I.R. 117.

The principles enunciated can be found at para. 39 of Nangles:

“1. While the Act of 2001 is not to be seen in precisely the same light as a penal or taxation statute, the same principles

are applicable;

2 The Act is to be strictly interpreted.

3. Impositions are to be construed strictly in favour of the rate payer;

4. Exemptions or relieving provisions are to be interpreted strictly against the rate payer;

5. Ambiguities, if they are to be found in an exemption or to be interpreted against the rate payer;

6. If however there is a new imposition of liability, looseness or ambiguity is to be interpreted strictly to prevent the

imposition of liability from being created unfairly by the use of oblique or slack language;

7. In the case of ambiguity the court must have resort to the strict and literal interpretation of the Act, to the statutory

pattern of the Act, and by reference to other provisions of the statute or other statutes expressed to be considered with

it.”

The definition of “charge” in s. 48

24. Counsel for the Commissioner argues that the interpretative principle “noscitur a sociis” is applicable in this context and therefore,

the term “charge” is to be understood in the context in which it appears (see the judgment of Hamilton P. in United States Tobacco

International Inc v Ireland [1993] I.R. 241). He argues that the word “other” in s. 48(3) distributes to both “taxes” and “charges” in

accordance with normal drafting practice; thus it is said the expression “charges” is intended to include other charges imposed in a

similar manner to rates and other taxes on property. Counsel contends the expression “by or under any enactment” cannot have one

meaning with reference to rates and taxes and a different meaning with reference to charges. He submits that rates are payable “by

or under” acts, and there is no role for private agreement to impose “rates” within the meaning of s. 48(3), or indeed generally. A

fortiori, it is said, the “other charges” must be payable by or under any enactment, and it cannot be suggested the legislative

intendment was that “other charges” within the meaning of s. 48(3) could arise or come into existence by agreement. This submission

lacks nothing in sophistication, but I am unable to agree. I now explain my reasons for this conclusion.

25. The Valuation Act 2001 is a rating statute. Section 48(3) of that Act contains the criteria under which the “net annual value” is

to be identified. It is to be established by reference to the rent for which, one year with another, the property might, in its actual

state, be reasonably expected to be let from year to year. The section goes on to provide that this definition is dependent upon an

assumption that the probable “annual cost of repairs insurance and other expenses (if any) that will be necessary to maintain the

property in that state, and all rates and other taxes and charges … are borne by the tenant”. The entire section sets out the

definition of net annual value. It identifies net annual value taking into account what matters are to be “borne by the tenant”.

However, that cannot be read as creating an exemption; rather it forms part of the definition itself.

26. Furthermore, I do not think that the concept of “charges … by or under enactment in respect of the property” is to be governed

by the characteristics identified by the learned trial judge when defining what constitutes a tax. Charges can be specific to a

particular property and/or owner. They need not be quantified in advance. A clear example is presented in those charges that can be

levied by a statutory authority where there is a failure by a landowner to take steps to remedy an unlawful state of affairs, and the

relevant authority has to take appropriate remedial measures, the cost of which are to be recouped from the defaulting owner.

Recoupment may be facilitated by a statute deeming that the amount in question is recoverable as a simple contract debt (see for

example Derelict Sites Act 1990, s. 11(5); Roads Act 1993, s. 70(10); Waste Management Act 1996, s. 56(2). In my view, such a

statutory obligation to pay cannot be classified as a tax, but can be readily described as a charge “payable by or under enactment in

respect of the property”.

27. The term “charge” is a broad one. English authorities provide guidance on the interpretation of clauses in leases requiring the

lessee to pay or indemnify the lessor in respect of charges imposed on the demised property where a local authority pursuant to

statutory powers as described above, sought to recover a portion of the cost of doing specific works from the lessor.

28. In Hartley v Hudson (1879) 4 CPD 367, there was a covenant which required a lessee to pay:

“all rates, taxes, charges and assessments whatsoever which now are or may be charged or assessed upon the said

premises or any part thereof, or upon any person or persons in respect thereof”.

Pursuant to the United Kingdom Public Health Act 1848, Stockport Corporation directed the lessor to pave and lay sewers under the

street abutting the premises. When he failed to do so, it carried out the works and required him to pay a proportion of the cost. The

judge observed that both limbs of the covenant were satisfied as it affected both the premises and the lessor personally. He held:

“Now, these expenses paid by the plaintiff were incurred in respect of the demised premises, and by the terms of the

above section were a charge upon the premises until payment. The fact of the plaintiff paying them because he was

compellable by law to do so, does not make them any the less a charge on the premises within the meaning of the

covenant in the lease; and hence I am of opinion that the plaintiff is on this ground entitled to recover. (see also, to the

same effect, Smith v Robinson [1893] 2 Q.B. 53).

29. Outlining the principles of construction outlined earlier, it is not necessary to go so far as to contend that the terms deployed by

the legislators in s. 48(3) of the Act of 2001 are ambiguous when it comes to the usage of the word “charges”. A strong case can be

made that they are in fact ambiguous. It is unnecessary, however, to go that far. One turns next to the connection between the

statute and the contracts.

Comparison between the statute and the contracts

30. An examination of the terms of the two contracts demonstrates the extraordinarily close linkage between them and the provisions

of s. 63 of the 1993 Act. I do not think this can be a coincidence. Section 63(1) provides that the “road authority may enter into an

agreement with another person”. What are these but agreements entered into with such a person, that is to say the appellants? The

“agreements” referred to in the Statute must set out the terms and conditions of the contract. They do so. The conditions are to

include provision as to “the payment to or retention by the person of all part or proceeds of tolls” in respect of the toll roads. That

“provision” is made. Under “an agreement” referred to in the section, the proferee may do any or all of the following:

(a) pay some or all of the cost of the construction of the road;

(b) pay some or all of the cost of maintenance of the road;

(c) construct or join or assist in the construction of the road for or with the authority;

(d) maintain or join or assist in the maintenance for or with the authority;

(e) provide, manage and operate a system of tolls in respect of the use of the road for or with the authority;

(f) Such other things connected with or incidental or ancillary to or consequential upon the foregoing as maybe specified

in the agreement.

All of these potential options were provided for in the respective agreements.

31. Were all this not sufficient, s. 63(2) provides that:

“Without prejudice to the generality of subsection (1) an agreement… may –

(a) provide for the application of the proceeds of tolls, systems of accounting for tolls collected and the methods

and times of payments of proceeds of tolls to the persons to whom to they are to be paid under the terms of the

agreement”

What can the agreement be, other than an agreement entered into “under” the section? In my view, this allows for only one answer.

The agreements in question were made under s. 63 of the Roads Act 1993. The conclusion is further supported when one comes to s.

63(5). There, it is provided:

“The parties to an agreement under this Section shall carry out the agreement in accordance with its terms and

conditions and a road authority shall have all such powers as may be necessary for that purpose.”

Again, it will be noted the phrase “agreement under this Section” is deployed. The duties are imposed on both parties to comply with

the agreement. I do not think it can be said this provision is otiose. Nor do I think it can simply be seen as been an enabling provision

conferring vires on the National Road Authority. It goes much further. It imposes a statutory duty on both parties to an agreement

made “under” the section.

The United Kingdom legislation

32. In his careful and thoughtful judgment, the learned trial judge refers to passages from Ryde on Rating and the Council Tax, Issue

44 (London, Butterworths, 2008) relating to the term “all usual rates and taxes”. This formulation is to be found contained in Schedule

6, para. 2(1) of the United Kingdom Local Government Finance Act 1988. This provision provided:

“The rateable value of an non-domestic hereditament 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 if the tenant undertook to pay all usual

tenants rates and taxes and to bear the cost of the repairs and insurance and other expenses (if any) necessary to

maintain the hereditament in a state to command that rent.”

The observations which are contained in that learned text must be interpreted as being referable, and referable only to the United

Kingdom provision, which is not the same as s. 48(3) of the Valuation Act 2001 on this point. I am unable to agree that the terms of

the English Act simply had a “slightly different wording” from the Irish provision. It seems to me that the distinction between the two

provisions is fundamental on the very point upon which this case hinges; that is the use of the words “all rates and other taxes and

charges (if any) payable by or under enactment in respect of the property”.

Conclusion on the primary issue

33. It follows from the above analysis that I must conclude that learned trial judge misdirected himself in law on this point. This

conclusion is, in itself, sufficient to be determinative on this aspect of the appeal. Accordingly, as was found by the Valuation

Tribunal, I am of the view that the revenue share falls to be regarded as a charge “payable by or under any enactment in respect of

the property” within the meaning of s. 48 of the 2001 Act; and is properly deductible in the calculation of the “net annual value” of

the relevant properties in question. It also follows, therefore, that I do not consider that the contracts are simply a restrictive

covenant or a private arrangement.

Some additional observations on the primary issue

34. I would wish to add one or two observations however. The Valuation Tribunal had reached separate and independent

determinations on two discrete issues. The Tribunal held:

“(a) Under the relevant principles of rating law the revenue shares should not have been included when calculating

Westlink’s gross receipts for the purpose of ascertaining (through recourse to the Receipts and Expenditure Method of

Valuation) “the net annual value” of the relevant property; and

(b) In any event the revenue share is a charge payable by or under an enactment within the meaning of Section 48 of

the Valuation Act 2001 which must be deducted when calculating the “net annual value”.

Thus far, this judgment has addressed the latter of those determinations, that is (b) above. The appellants contend that the learned

trial judge did not approach or decide these issues separately but fused his analysis, as a consequence of which they contend he fell

into error.

35. While the issue did not arise in the instant case, it is important to point that the learned authors of Ryde point out at para. E.622

that any restriction on the profit making capacity of a particular property imposed by law does have to be taken into account; but

where the restriction arises by means of a private arrangement it is not to be taken into account in rating calculations. The authors

states:

“Where an undertaking is occupied in order to earn profits, those profits may be said to be limited by statute in two ways:

vis (1) by a limitation of the charges which the trading occupier can make as between him and the public; (2) by an

appropriation of the whole (or part) of the profits when earned to particular objects. It is clear from the cases above

cited [in particular Port of London Authority -v- Orsett Union Assessment Committee (1920) AC 273] that limitations of

the former kind must be taken into account, but limitations of the latter kind must not”

36. In support of these observations, the learned authors cite two cases; (1) Rhymney Railway Company (1869) L.R. 4 Q.B. 276 and

Brecon Markets Company v St. Mary’s Brecon (1877) 36 L.T. 109. While the question did not fall for determination in the appeal, it is

arguable that, by reference to the statutes and to the contract, the provisions fall within the definition of a limitation of profits clause

which the trading occupier is entitled to make as between him and the “public”. Consequently, it might be said that limitations of this

type may be taken into account. I express no concluded view on this question however.

37. The second observation must be prefaced by the acknowledgement that the identification of the most appropriate method of

determining “the net annual value” is a question of fact and not a question of law (see Mersey Docks and Harbour Board v Birkenhead

Assessment Committee [1901] AC 175 180; Roadstone v Commissioner of Valuation [1961] I.R. 239; and Eastlink Limited v

Commissioner of Valuation VA 4/93/015, 11th May 1998 paragraph 12.) It is an established principle that no particular method of

determination should be used to the exclusion of other methods – the determination can be reached in whatever way is most suitable

to achieve a fair, balanced and equitable result (see Commissioner of Valuation v Dundalk Gas Company [1929] I.R. 155; Roadstone v

Commissioner of Valuation [1961] I.R. 239.) In the exercise, regard should be had to common sense and economic considerations (the

Roadstone case cited earlier; and Irish Management Institute v Commissioner of Valuation [1990] 2 I.R. 409). Finally, profit earning

ability is the basic element in determining the net annual value and it is based not on actual profits but on what the prospective

tenant would anticipate would be his profits (Rosses Point Hotel v Commissioner of Valuation [1987] 512, at 515 cited in Eastlink

paragraph 13).

38. In Eastlink, the Tribunal held that the tolls, or the proceeds of tolls, are in effect a flow of income, that these are the

hereditaments to be valued, and the most appropriate method to be used in this case was one that is based on income and

expenditure. Hence, the Tribunal’s preference for “the profits method”.

39. This method, well established in rating law, necessitates firstly ascertaining the relevant gross income; second, ensuring that both

the proper costs of purchases and the expenses of earning the gross income are then deducted, leaving one with an operating surplus

or balance. That balance is then said to be available for the allocation of tenant’s share, for the payment of rates and for the

payment of rent, adjusted for the appropriate year. This becomes the “net annual value”.

40. Whatever percentage might be appropriate as the tenant’s share, is intended to cover interest on the tenant’s capital;

remuneration for his industry; and compensation for his risk. Its level must be sufficient to induce the tenant to take the tenancy of

the hereditament in the first instance. In this appeal, but not at the Tribunal, counsel for the Commissioner contended it would be

absurd for the exercise to be carried out without “the rent” being added back. He contended to do so would be to “double count” the

rent at two places in the exercise.

41. In line with decided authority, referred to above, I do not consider it is open to this court, save in exceptional circumstances, to

interfere with the decision of the Tribunal on issues of fact. No such exceptional circumstances are identifiable in these two appeals. I

raise the matter as it may be relevant in other, future cases. I should add that, at the Tribunal, the method of calculation was

accepted both by the valuer for the Commissioner and the rate payer’s valuers. As the method of calculation was not an issue raised

in the case stated, I take the view that the Court is debarred from considering the point at this stage. It was not argued before the

Tribunal and it cannot be argued now. I further explain my reason for this conclusion later in the judgment in the discussion on arguing

new grounds on appeal to this Court. My reasons are the same in each instance. This question is not an issue of law “arising on the

case” and this Court is not empowered to consider the issue now.

The cross-appeal and the application to amend

42. As briefly outlined earlier, the Commissioner appealed against the finding of the trial judge that the costs in maintaining the entire

length (54.7km of road) of the M1 were deductible in the calculation of the net annual value, instead of the cost of maintaining the

tolled stretch of the M1 motorway from Gormanstown, Co. Meath to Monasterboice, Co. Louth (a distance of 21.74 km). Having

outlined the facts, Charleton J. stated at para. 37:

“I find it very difficult to come to the conclusion that as there is a necessity to maintain the whole of the relevant

property, only the portion of it which offers the certainty of generating a toll should be subject to the statutory

allowance in respect of maintenance. As to what is, and what is not “ the property in that state” for the purpose of s. 48

of the Valuation Act 2001 is a both a question of fact and a question of law. No argument has been put before me that

convinces me that the Valuation Tribunal is incorrect on this last point”.

43. The Commissioner filed a notice of cross appeal on the 6th October, 2008. This sought:

“an order determining that it is the tolls in relation to the stretch of the M1 motorway from Gormanstown, Co. Meath to

Monasterboice, Co. Louth which is “relevant property” for purposes of the deduction for maintenance provided by s. 48(3)

of the Valuation Act 2001 and that, accordingly, it is only expenditure and maintenance on the stretch of the M1

motorway comprising the toll which is available for deduction under s. 48(3) of the Valuation Act 2001”.

However, in a notice of motion, flagged beforehand but made returnable for the hearing, the Commissioner sought to argue the

following grounds of appeal in substitution for that identified just above:

“An order determining that it is the tolls which is the relevant property for the purposes of s. 48(3) of the Valuation Act

2001 and that accordingly the maintenance costs on the M1 motorway are not available for deduction under s. 48(3) of

the Valuation Act 2001; and in the alternative, if some maintenance costs for the M1 motorway are allowable under s.

48(3) then it is only expenditure on maintenance of the stretch of the M1 motorway from Gormanstown, Co. Meath to

Monasterboice, Co. Louth.”

44. It can be immediately seen that the basis which the Commissioner was seeking to argue in the Supreme Court was, at least as

regards the first part of the amended or substituted ground of appeal, entirely different from the case put before the High Court. In

essence, he was seeking to argue that no part of the expenditure on maintenance on any part of the motorway was available for

deduction under s. 48(3) of the Valuation Act 2001, although, as a fallback, arguing for deduction on the basis of part only of the

motorway. This new argument was never advanced to the Tribunal. The Commissioner did not depart from this stance during oral

argument before the High Court. Counsel for the appellant argues strongly that had that case been made before the Tribunal, it would

have been necessary to call quite different evidence, and address quite different issues before the Tribunal itself, and thus, there

would be significant prejudice in allowing the amendment.

Raising new arguments on appeal

45. For the purposes of this judgment, it is necessary only briefly to re-iterate the jurisprudence of the court regarding new

arguments on appeal. In Movie News Limited v Galway County Council (Unreported, Supreme Court, 25th July 1977) Henchy J. (with

whom Griffin and Parke JJ. concurred) observed on behalf of this court in the context of an application by the defendant County

Council to contend, for the first time, on appeal that the power to make an order was contained in s. 10 of the Local Government

(Ireland) Act 1898;

“If the Court were to accede to this last-minute and informal application for leave to rely on this new ground, the Court

would be unjustifiably turning its back on everything that has happened so far in this case. It would in effect be deciding

this new point as of first instance. However, save for matters specifically committed to it by the Constitution or by

statute, this Court has only an appellate jurisdiction. It should not - except for exceptional reasons which do not exist in

this case - under the guise of an appeal, enter on the trial of a matter as of first instance and thereby deprive the party

aggrieved with its decision of the constitutional right of appeal which he would have if that matter had been decided in

the High Court.”

46. The principle has been reiterated in subsequent cases. In K.D. (otherwise C.) v M. C. [1985] I.R. 697, Finlay C.J. (with whom

Henchy, Griffin and McMahon JJ. concurred) observed:

“It is a fundamental principle, arising from the exclusively appellate jurisdiction of this Court in cases such as this that,

save in the most exceptional circumstances, the Court should not hear and determine an issue which has not been tried

and decided in the High Court. To that fundamental rule or principle there may be exceptions, but they must be clearly

required in the interests of justice. This case can not, in my view, however, provide such an exception.”

Part of the rationale for the decision in K.D. was because of the “run of case”, and the nature of the evidence which had actually

been adduced on the issues put before the High Court. The same is true here.

47. In I. v The Minister for Justice Equality and Law Reform [2003] IESC 42, Keane C.J. (Denham, Murray, McGuinness and Hardiman

JJ. concurring) similarly deprecated the possibility that the court should be asked in effect to act as a court of first instance and to

deal with issues where it has not had “the benefit of a reasoned considered judgment by a High Court judge in dealing with the point

which is now sought to be advanced for the first time”.

48. More recently, in Lough Swilly Shellfish Growers Co-Operative Society Ltd and anor v. Bradley and anor, [2013] IESC 16, O’Donnell

J. considered the circumstances in which the argument of an amended ground of appeal might be permissible in accordance with the

provisions of the Constitution. At para. 27 of that judgment, he said:

“There is a spectrum of cases in which a new issue is sought to be argued on appeal. At one extreme lie cases such as

those where argument of the point would necessarily involve new evidence, and with a consequent effect on the

evidence already given (as in K.D. for example); or where a party seeks to make an argument which was actually

abandoned in the High Court (as in Movie News); or, for example where a party sought to make an argument which was

diametrically opposed to that which had been advanced in the High Court and on the basis of which the High Court case

had been argued, and perhaps evidence adduced. In such cases leave would not be granted to argue a new point of

appeal. At the other end of the continuum lie cases where a new formulation of argument was made in relation to a point

advanced in the High Court, or where new materials were submitted, or perhaps where a new legal argument was sought

to be advanced which was closely related to arguments already made in the High Court, or a refinement of them, and

which was not in any way dependent upon the evidence adduced. In such cases, while a court might impose terms as to

costs, the Court nevertheless retained the power in appropriate cases to permit the argument to be made.”

49. It is noteworthy, however, that O’Donnell J. added:

“The question whether the Supreme Court is precluded from exercising such a jurisdiction either by the terms of the

Constitution or the weight of authority, is however a matter which it is not necessary to resolve in this case, since I

would not extend time for the appeal and the point which it was sought to argue on this appeal, is misconceived.”

I am not of the view that Lough Swilly radically alters the established jurisprudence. When one applies the test as posited in Lough

Swilly, one can discern the application was doomed to failure. What was being sought to be argued had not been put before the

Tribunal or the High Court. The case then was quite different. Moreover, the evidence adduced was quite different also. The

testimony would not, and could not have addressed the issues which were sought to be advanced in this Court by the Commissioner.

50. To permit the amendment would have been inconsistent with this courts purely appellate function as laid down in long-established

jurisprudence. The application, in the view of the court, fell short of any exceptions to the principle, which are founded in the

interests of justice. The incongruity of the Commissioner’s position is best demonstrated by the fact that, at the Tribunal, the

Commissioner’s valuer was actually prepared to make allowance for monies spent on repairs, insurance and other expenses of the

public road as “expenses” when valuing the relevant property, albeit only in respect of 21.74 km of the public roadway. The position

he sought to adopt in this Court would have been the polar opposite.

51. Moreover, I think that the position of the Commissioner was circumscribed in another way. This was an appeal by way of case

stated from the Tribunal as provided for in s. 39 of the Valuation Act 2001. The appeal does not proceed by way of an automatic re-

hearing. The jurisdiction of the High Court is defined by s. 39(5) of the Act, which provides:

“The High Court shall hear and determine any question or questions of law arising on the case, and shall reverse, affirm or amend the

determination in respect of which the case has been stated, or shall remit the matter to the Tribunal with the opinion of the Court

thereon, or may make such other order in relation to the matter as the Court thinks fit.” (emphasis added)

52. The jurisdiction of this Court is in turn delimited by s. 39(7), which provides an appeal shall lie to the Supreme Court from the

decision of the High Court. In my view, the Tribunal was not asked to make a decision on the argument sought to be raised by the

Commissioner. The case stated did not address the issue. The new matter did not arise “on the case”. Thus, neither the High Court,

nor this Court, could embark upon a consideration of that point, whether to reverse, affirm or amend the determination. The point is a

simply one of jurisdiction. Neither this Court, nor the High Court would have had jurisdiction to entertain the point as, quite simply, it

did not come within the terms of s. 39(5) of the Act of 2001. There had been no “determination” on the issue in the case stated. This

court had no jurisdiction to entertain the point on appeal.

The remaining cross-appeal

53. It now remains to determine whether the Tribunal, and the High Court, were correct in determining that the costs of maintaining

the whole of the M1 were deductible for the purposes of calculating its “net annual value”. Again, this matter turns on the

interpretation of ss. 48(1) and 48(3) of the 2001 Act, which have been cited earlier in paras. 7 and 8 of this judgment. Central to this

issue is the concept of “relevant property” in s. 48(1) of the 2001 Act.

Further relevant statutory provisions

54. Section 3 of the 2001 Act provides that “relevant property” shall be construed in accordance with the Schedule 3 to that Act.

That schedule states:

“Property (of whatever estate or tenure) which falls within any of the following categories and complies with the condition

referred to in paragraph 2 of this schedule shall be relevant property for the purposes of this Act …” (emphasis added)

Below, as one of the categories is to be found:

“(h) tolls”

55. Paragraph 2 of Schedule 3 provides:

“The condition mentioned in paragraph 1 of this Schedule is that the property concerned—

(a) is occupied and the nature of that occupation is such as to constitute rateable occupation of the property, that

is to say, occupation of the nature which, under the enactments in force immediately before the commencement of

this Act (whether repealed enactments or not), was a prerequisite for the making of a rate in respect of occupied

property, or

(b) is unoccupied but capable of being the subject of rateable occupation by the owner of the property.” (emphasis

added)

Submissions of the Commissioner

56. Counsel for the Commissioner contends that subparagraph (a) (above) is applicable here, and that, therefore, “occupation of the

property” means occupation, the nature of which, under the enactments in force immediately before the commencement of the 2001

Act (whether or not repealed), was a prerequisite for the making of a rate in respect of occupied property.

57. Counsel argued that the occupied property here is both the tolls and associated toll roads, and that the Tribunal and High Court

transformed the definition of “tolls” to mean “tolls and the public road associated with those tolls”. In support of this contention,

counsel points out that the Tribunal findings refer to the property concerned in these appeals as being “the tolls arising from that

section of the M1 motorway and approach roads between Gormanstown Interchange in Co. Meath and the Monasterboice Interchange

in Co. Louth, together with the ancillary buildings in connection therewith”. It is submitted that this interpretation accords with the

decision of this Court in Dublin City Council v Westlink Toll Bridge Limited [1996] 1 I.R. 487. The effect of this submission would be

that allowance would be made only for the shorter section of the motorway – not its entirety.

Corporeal and incorporeal property

58. I am unable to accept this submission. What is fundamental here is the principles of interpretation to be applied. They have been

summarised earlier and apply here also. Applying those appropriate principles of construction, nowhere does s. 48(1) seek to

differentiate between corporeal and incorporeal property. Instead, the all-encompassing term "relevant property" is deployed; the

subsection provides that the value of that property is to be determined by estimating the net annual value of the property; the

amount so estimated is to be its “value”. Section 48(3) draws no distinction between corporeal and incorporeal property either. That

subsection provides that the "net annual value" is to mean, in relation to a property, the rent for which, one year with another, the

property might in its actual state be reasonably expected to let from year to year on the assumption that the probable annual costs

of repairs, insurance and other expenses (if any) would be necessary to maintain the property…". The terms “in its actual state” and

“repairs” are to my mind determinative.

59. In my view, the contention advanced by the Commissioner depends on a process of reasoning which entails reaching the

conclusion that the annual costs of “repairs” is not properly allowable in determining "net annual value" of the toll. The Oireachtas did

not lay down any such rule, whether for tolls, or any other form of incorporeal property listed in para. 1 of Schedule 3. Moreover, the

wording of s. 48(3) does not allow for such a conclusion.

60. Each term of s. 48(3) is highly relevant. It provides that the average annual cost of repairs which the tenant must bear is "that

which would be necessary to maintain the property in that state”. The phrase “in that state” must be referable back to the term

“actual state”, also used in s. 48(3), which is to be seen as part of the premise on which the yearly rent is based. I consider that the

terms “in that state”, and “actual state”, must both be construed as referring to both the corporeal and incorporeal property. It

means in real terms: that which is necessary to maintain the status quo. No alternative interpretation is allowed for within the terms

of the Act. Accordingly, I am forced to conclude that the term “actual state” cannot simply mean that one is limited to assessing the

physical condition of the corporeal property seen in isolation from its incorporeal dimension.

61. It is of course true that “incorporeal property” is necessarily a legal construct. In Imperial Tobacco Company (of Great Britain and

Ireland) Ltd v Pierson [1961] 1 A.C. 463, a majority of the House of Lords held that a right to fix an advertising sign on a building was

to be valued by reference to that incorporeal right without regard to the physical work to be carried out on foot of it. Viscount

Simonds explained that the right, which for rating purposes is deemed to be a separate one, is the right to “use any land” in its

extended meaning for the purpose of exhibiting advertisements which is let out or reserved. To ascertain what that right was,

necessitated looking at the terms of the document by which the grant was made or reserved and that the value was to be "the value

of the rights so granted or reserved". He cites at p. 472, a sentence from the rating tribunal in that case:

“While it is, of course, that the value must be ascertained as of the date of the proposal, it is the value of the grant and

not of some other grant. The grant has its value irrespective of whether it is in fact exercised and it is a grant which is

the rateable hereditament, not the exercise of the grant"

62. Later, he expanded on this point saying:

“…the appellants are not for rating purposes in occupation of a hereditament consisting of a structure. Whether there is a

structure there or not, they are rateable in respect of a right which is deemed to be a separate hereditament in their

occupation.” (emphasis added)

63. Lord Reid in his speech at p. 474 observed, to similar effect:

“… what has to be valued is not land but the appellants' right to use land. The only right to use land which is let out or

reserved to the appellants is that given to them by their agreement with the corporation, and therefore it appears to me

that the sole question is what is the value of that right.”

He explained pithily:

“In valuing corporeal hereditaments, land, one takes the land as one finds it. So, also, in valuing an incorporeal

hereditament, a right, one must take the right as one finds it.”

64. In my view, the situation here is that one must look to is what is provided for in s. 48(3) of the Act of 2001. What is necessary to

maintain the property in that state? This necessitates looking to what is necessary in order to continue the appellant’s incorporeal

hereditament in legal existence. Its continuance in being hinges on the repairs being carried out on the entire road.

65. In my view, it matters not whether one is speaking here of an incorporeal or corporeal hereditament. What is essential to the

definition is what flows from the provisions of Celtic’s agreement with The National Roads Authority, which stipulated that the

Authority had the right to terminate the agreement, in the event of Celtic’s non-compliance. Thus, Celtic's incorporeal right to collect

the tolls would lapse, or be terminated, in the event that it failed to comply with the maintenance obligations. This contractual duty is

critical in defining what is "necessary to maintain the property in that state”. Celtic's entitlement to collect the toll is solely a product

of the agreement. Going with the corporeal hereditament, there is an obligation to maintain the entirety of the toll road; failure of

compliance with that legal duty would have the consequence of the failure of the incorporeal hereditament - Celtic would be liable to

lose the right to collect the toll. Thus, I conclude Celtic’s entitlement to collect the toll, and thus to "occupy" the property, was (and

is) entirely dependent upon compliance with the maintenance obligations in relation to the entire motorway.

66. I do not think any distinction in principle can be drawn between the observations of Viscount Simonds and Lord Reid in Imperial

Tobacco, and the situation which obtains here. Moreover, the proposition that the obligation can be ignored in valuing the right runs

counter to the terms of the contract. The proposition relies upon a view as to the position of a hypothetical tenant, which, in my

view, is entirely divorced from the considerations that such hypothetical tenant would engage in, when carrying out the process of

valuation. In real terms, it would be unthinkable that a hypothetical tenant would not take the entirety of the duties and the rights

into consideration.

The 1996 Westlink case

67. It might be said that in Dublin County Council v Westlink Toll Bridge Ltd [1996] 1 I.R. 487, tolls were recognised by this Court as

being incorporeal hereditaments. The Court noted that the toll bridge operator itself argued that the toll was an incorporeal

hereditament. A passage from that decision must be seen in its true context. At p. 493 of the judgment O’Flaherty J. stated that the

“property” was “the tolls”. He stated:

“We are concerned exclusively with the rateability of the tolls. The rateability of the buildings and other structures, (other

than the structure at which the tolls are collected) is not an issue”.

68. When the judge stated that the Court was concerned exclusively with the rateability of the tolls, and that the rateability of the

buildings and other structures was not in issue, he was not speaking of the broader context which is in issue here. Here, it is the

contracts which render the right and duty an incorporeal hereditament, a concept which is broader in nature than the narrow

question of the rateability of the “tolls”, used in quite a different sense in Westlink. Again applying the principles of interpretation

referred to earlier, one must identify what there must be in order to maintain Celtic’s “property”, both corporeal and incorporeal, in

“that state”. This necessitates a consideration, not just of the physical element, or simply the right to receive money, but the

entirety of the contractual arrangement. The right gives rise to a duty which devolves upon the rate payer, without which the rate

payer would be deprived of the right to collect tolls. In my view therefore, the views of the learned High Court judge on this issue

should be upheld; allowance should be made for Celtic’s liability to repair the entire length of the roadway.

Conclusion

69. In summary, therefore, I would allow the appeal against the decision of the learned High Court judge on the “primary issue” as set

out in para. 33; and dismiss the appeal against his decision as set out in para. 68 of this judgment.