Supreme Court allows Commissioner's appeal, ruling industrial plant equipment is rateable under Valuation Act 2001.

SUPREME COURT

155 & 156/2011

O’Donnell J.

Clarke J.

O’Malley J.

IN THE MATTER OF THE VALUATION ACT, 2001, AND IN THE MATTER OF A VALUATION OF THE FOLLOWING PREMISES:

Property No. 451450, Quarry at Ballinascorney Upper, Brittas, County Dublin; Appeal No: VA08/5/187

Property No. 464562, Concrete Works at Tallaght By-Pass, Oldbawn, Tallaght, County Dublin; Appeal No: VA08/5/188

Between

Kilsaran Concrete

Plaintiff/Respondent

AND

Commissioner of Valuation

Defendant/Appellant

Judgment of Mr. Justice O’Donnell delivered the 26th of October 2016

1 This is an appeal by the Commissioner for Valuation from the judgment of Hedigan J. of the 7th December, 2010, which dealt with

two linked appeals from decisions of the Valuation Tribunal, both delivered on the 2nd of September, 2009. The appeals raised a single

issue in relation to the interpretation of the Valuation Act 2001, and in particular the determination of what constitutes rateable plant

for the purposes of Section 55(1) of that Act. The specific issue raised in both appeals is whether, in circumstances where it is

acknowledged that a process of change was induced in the course of a manufacturing process, the Commissioner of Valuation was

obliged to treat all the containers equipment and pipe work involved in that manufacturing process as being non-rateable plant and

thus entitled to exemption, (as the High Court found), or whether the exemption is limited to the particular vessel within which the

process of change occurred and was induced (as the Tribunal had found). I conclude that the decision of the Tribunal was correct,

and would accordingly allow the Commissioner’s appeal.

2 The facts in both cases are relatively complex but can be reduced for present purposes to the following limited account.

Valuation Appeal VAO8/5/187 Quarry at Ballinascorney: The Asphalt Plant

3 Kilsaran Concrete Limited (Kilsaran) is the owner and occupier of a large stone quarry comprising a site of 157.7 hectares about

three miles south of Tallaght, close to the Dublin/Wicklow border. The property contains both the PSH engineering screening

processing plant and the Benninghoven TB 240 Asphalt Plant which is the subject matter of this appeal.

4 The valuation of the entire property was fixed after a section 30 appeal at €436,000. Kilsaran appealed to the Valuation Tribunal. At

that hearing counsel sought leave, and was permitted, to argue a new point, and with which this case is now exclusively concerned,

namely that the entirety of the asphalt production plant was entitled to exemption from rating.

5 The production of asphalt involves a process of mixing precise quantities of bitumen, aggregate, sand and filler (a fine calcium

carbonate). Stone and sand are fed by front end loader into a hopper from which desired quantities are weighed and dispatched to a

rotary drier. The aggregate is then heated and water driven off by steam. The dried “stone” is then lifted by a bucket elevator to the

top of a mixing platform. It is there sorted into differing sizes by vibrating screens and dispatched to different bins depending on size.

Bitumen is an organic material made up of a mixture of heavy crude oils remaining after the distillation of oils for the transport and

energy sectors. It is a brown to black semi-solid or solid. Bitumen is pumped from insulated silos to weighing vessels where it is

dispatched to a mixing pan where it is mixed with measured quantities of stone and filler to form asphalt. Once mixed, asphalt is either

loaded direct onto lorries and delivered on site, or is held in heated storage bins. Asphalt is primarily used for road construction.

Valuation Appeal VAO8/5/188: The Concrete Plant

6 Kilsaran is also the occupier of the Ready Mix Concrete plant which occupies a prominent location at the junction of the M50 on the

Tallaght Bypass in County Dublin.

7 The manufacture of concrete involves a mixing of predetermined quantities of cement, aggregate, and water in a carefully

controlled process. Concrete in its final form is used in all types of construction. The manufacturing process involves the storage of

the constituents and their mixing. The plant in question consists of 12 aggregate bins mounted on a grid and fitted with vibrators to

ensure discharge of all matter on to a conveyor belt. The material is then transported to a weigh bin and is weighed and transported

to a second bin where it is held briefly, seconds before being discharged out on to a cross-conveyor and brought to a large batch

conveyor. The material is brought to a holding bin and then dispatched to a pan mixer through a guillotine type door. Cement is

delivered on site and fed under pressure by pipes into storage silos. The silos are fitted with electrically operated controlled devices

which monitor the amount of cement and with filters to prevent dust escaping into the atmosphere. Where required, the cement is

conveyed from the silo to a weigh hopper and then to the mixing pan by an electrically powered screw mechanism assisted by aerator

pads. In the mixing pans, cement and aggregates are mixed with water pumped from a holding tank which is weighed before

discharge. The pan mixer is a drum like container fitted with paddles which are electrically operated. It is fitted with a pneumatic door

at the top and two hydraulically operated discharge doors deliver the mixed concrete into waiting trucks for onward delivery. The

trucks themselves are fitted with cylinders which rotate to prevent the concrete from setting until arrival at the site. The entire

process is mechanised and precisely controlled.

8 While the processes are distinct and the products different, both plants involve the production of important products made by

mixing ingredients held on site in a large mixing pan. In the case of asphalt, bitumen, aggregate, sand and filler are mixed, and in the

case of concrete, cement, water, and aggregate. In each case the individual components are delivered to the mixing pan by a

carefully controlled integrated mechanical process. It is not in dispute for the purpose of this case, that the mixing pan in each case

is an item of plant which is a construction affixed to relevant property and used for the containment of substance and designed and

used primarily to induce a process of change in the substance contained, and therefore entitled to exemption from valuation. What is

in issue however, is whether the entire process in each case involving all silos, hoppers, conveyor belts etc., can be said to be plant

which is designed to induce a process of change and therefore entitled to exemption.

The Determination of the Valuation Tribunal

9 In the case of the asphalt plant, the Tribunal considered that Kilsaran was arguing for exemption on the grounds that the plant

constituted a “single installation structure wherein a process of change is induced”. The Tribunal rejected this argument concluding:

“The Tribunal finds on the facts, and on interpretation and evaluation of the authorities opened to it in the course of the

hearing, that there is no case for blanket exemption in respect of the installation under appeal. It is clear from the

evidence ...... that no physical or chemical change in the constituent elements that make up bitumen occurs until they

are brought together in the mixing pan. The process of change, once initiated, is irreversible and continues for some time

after the bitumen, in its still molten state, is laid in its final position in the roadway.

On the other hand, the Tribunal is of the view that the said installation must be seen as the totality of individual items of

plant, of which some may qualify for exemption from rateability and others will not, dependent on whether a process of

change is induced in the substance contained therein. In the circumstances, the Tribunal finds that the rateable element

of the asphalt plant is that agreed by the parties on a without prejudice basis i.e. a net annual value of €63,000.”

10 The Tribunal reached a similar conclusion in the case of the concrete plant. It said:

“The Tribunal finds on the facts and on interpretation and evaluation of the authorities opened to it in the course of the

hearing that there is no case for blanket exemption in respect of the installations under appeal. It is clear from the expert

evidence that no physical or chemical change occurs in any of the constituent elements which together make up

concrete, until such time as they are delivered to the mixing pan where they are mixed in accordance with the

appropriate recipe to meet individual customer demands for concrete of specific type and use.

On the other hand, the Tribunal is of the view that the said installation must be seen as the totality of individual items of

plant, of which some may qualify for exemption from rateability, and others will not, dependent on whether a process of

change is induced in the substance contained therein or are used to transport material from one section of the plant to

the other in order to facilitate the concrete manufacturing process which takes place in the mixing pan.”

Judgment of the High Court

11 Kilsaran expressed dissatisfaction with these determinations and sought a case stated to the High Court. The judgment of the High

Court set out the relevant law and the submissions of the parties which were similar to those made in this Court, and which will be

addressed below. The High Court concluded that the Tribunal had erred. The essence of the High Court’s conclusion appears to be

found in two portions of the judgment. First, at paragraph 53, it is stated:

“It seems to me that the valuation tribunal has essentially deconstructed a plant which is by its very nature a unit. The

tribunal considers the whole plant to be a totality of individual items and refuses to consider some of the items as being

used to transport material from one section of the plant to another. So it is at the one time both considering the plant as

a unit and as a totality of different parts. If this is an inference to be drawn from the agreed facts then it seems an

unreasonable one to me. However, I consider it is a mixture of fact and law and in my view the tribunal has misdirected

itself in law in its interpretation of Schedule 5(1) to the Valuation Act 2001.”

12 Subsequently at paragraph 56, the judgment continued:

“It seems to me to come down to the meaning of ‘inducing a process of change’. As this phrase is not defined in the Act

it must be given its ordinary meaning. The Oxford English Dictionary defines ‘induce’ as ‘bring about, produce, gives rise

to’. It further defines ‘process’ most closely to the context herein as ‘a systematic series of actions or operations directed

to some end, as in manufacturing…’ The meaning of the phrase seems, therefore, to comprehend a series of actions

leading to and from the mixing pan in order to produce or manufacture asphalt or concrete. To deconstruct the

installation so as to focus solely on the one part of it where the change actually occurs seems to me to misinterpret the

provision because it does not include the series of actions leading to that point. It seems to me that the logical

interpretation of the Schedule is that the constructions excluded from rateability includes all those parts of the plant

immediately involved in the process leading to the change that occurs in the mixing pan. This means from the silos into

which the ingredients are placed at the outset of the process through to the transmission from the mixing pan into

containers ready to take off site the manufactured asphalt or concrete ready and fit for use. In short, it seems to me

that the use of the phrase ‘process of change’ means the legislature intended to include in exemption from rateability all

parts of the plant directly and immediately involved in that process.”

The Submissions on this Appeal

13 The submissions made in this case focus to a very large extent on two propositions which counsel for the Commissioner contended

could be drawn from the decision of this Court in the case of Caribmolasses v. Commissioner of Valuation [1994] 3 I.R. 189, and

which he argued were fatal to Kilsaran’s case . First it was asserted that the Supreme Court had determined in that case that in order

to benefit from exemption, any process of change had to occur and be induced within the item of plant. Second, it was asserted that

the decision in Caribmolasses meant that the earlier decision in Beamish and Crawford v. Commissioner of Valuation [1980] I.L.R.M.

149 that items of equipment could be looked at as a single unit engaged in a continuous process for the purposes of considering

entitlement to exemption as non- motive power machinery under the Annual Revision of Property Act 1860, was of no assistance in

the consideration of rateable and non-rateable plant introduced for the first time by the 1986 Act, and re-enacted in the 2001 Act .

14 It is fair to say that counsel for Kilsaran also sought to put forward a broader argument that the introduction of the concept of

plant for the first time in the 1986 Act was intended to restore the position of exemption for manufacturing processes which had

always existed prior to the expansion of the law in the Beamish and Crawford case, and akin to the well-established regime for

manufacturing relief from corporation tax which had been available as part of the industrial policy of the State. There is however no

indication that the changes effected in 1986 were as well structured and coherent as this argument might suggest. On the contrary,

the development of the law in this area has been characterised by a haphazard mixture of outdated Victorian concepts, sporadic

developments in the case law, and piecemeal statutory amendments, themselves the product of compromise between interest groups.

15 In order to understand the provisions of the 2001 Act and to apply them to the facts of this case, it is necessary to understand

the development of the law in this area, particularly in the latter part of the 20th century. It is indeed remarkable that a consideration

of the essential outline of the case law which applies sometimes very considerable local taxation to sophisticated modern

manufacturing processes was laid down almost 200 years ago, in an economic, administrative and technological context almost

unrecognisable today. The Valuation Act 1836 is often taken as a convenient starting point in the development of the law, although it

was itself a consolidation of the law applying to rating. That Act contemplated the valuation of lands and houses and the

appurtenances thereto, and crucially for the first time, included mills and factories, or in the language of the time “manufactories”. In

the words of Davitt P. in Cement Ltd v. Commissioner for Valuation [1960] I.R. 283, at p.299:

“It contemplated the valuation of lands, houses with their appurtenances, and also, for the first time, took cognisance of

mills and factories. By s. 13 it enacted that all flour, corn, flax, or other mills or buildings erected for manufacturing or

other purposes, should be included in the valuation to be made under the Act; provided that the water power of any such

mill or manufactory should be valued only so far as it might be actually used; and that such valuation should not extend

to or include the value of any machinery contained within such mill or manufactory”.

Initially what was to be valued, and presumably what was considered valuable, was land and buildings. However, the 1836 Act, taking

account of industrialisation, recognised no doubt that manufacturing businesses were capable of being substantial and valuable

developments which should be included in the valuation code. However, it was decided that non-motive power machinery would not

be included in the valuation. In making the distinction between what should and should not be rateable in any factory the statute

ignored one possible line of demarcation already available in the law: the established distinction between landlord and tenants

fixtures. If the concept of valuation of land had been pursued to its logical conclusion, it might have been thought that those items of

equipment which were so attached to the land as to be considered landlords fixtures, might have been included in valuation and other

items not, although that is not to suggest that this was an easy or clear cut distinction in every case. Significantly however, the

1836 Act did not take this course, and instead considered that machinery, however substantial, and however affixed to the land was

to be exempt from valuation. In the context of property used for industrial purposes, the distinction was made between land buildings

and motive power machinery on the one hand, which were to be valued, and all other machinery, which was not. In the early

Victorian era, this might have seemed a relatively clear cut distinction to apply in fact. However, as industry developed so too did

industrial design. Form followed function, and as premises were explicitly designed as part of the industrial process, it became more

difficult to draw clear distinctions between a building which was constructed and rateable and machinery which though it might be

built, was not.

16 The basic distinction between industrial buildings and machinery was maintained in the Valuation (Ireland) Act 1852. That Act

provided for the uniform valuation of lands and tenements. Section 12 listed rateable hereditaments and to some extent reflected the

growing industrialisation of the economy: it provided for the valuation of lands and buildings as before, but also canals, railways,

mines and other incorporeal hereditaments. The exemption from machinery was however continued, and repeated eight years later in

the Annual Revision of Rateable Property (Ireland) Act 1860.

17 This basic classification held sway for almost 100 years after the 1860Act. Increasingly however, the 20th century courts were

required to apply this Victorian catalogue of rateable hereditaments to a developing economy. In particular, as already discussed the

distinction between a factory building and machinery contained in it, became blurred. In consequence, there was an increasing

tendency to include items of equipment, sometimes very large, in the concept of machinery and therefore exempt with a consequent

narrowing of the rating base, and an increased burden on other rate payers. In Cement Limited v. Commissioner of Valuation [1960]

I.R. 283, a divisional court of the High Court had to consider the rateability of extremely large rotary kilns and concluded that

rateability was not determined by size or the extent to which they were affixed to the building or the land, and that in principle the

rotary kilns were machinery and entitled to exemption. This conclusion might be said to have been reached almost by a process of

elimination: the kilns could not easily be said to be either land or buildings and therefore within the catalogue of rateable

hereditaments, accordingly they were to be treated as machinery.

18 Beamish and Crawford v. Commissioner of Valuation [1980] I.L.R.M. 149 was a decision almost 20 years later which followed the

logic of the Cement Limited decision and resulted in a significant expansion of the area of exemption. The case involved tanks and

vessels used on the rate payer’s premises for the purposes of brewing beer. The tanks were described as either F.V.s (fermentation

vessels) or C.V.s which I understand to mean containment vessels. The process of brewing involved the addition of yeast to a

quantity of wort which was an extract of malt boiled with hops, in a F.V. where fermentation was achieved by the control of

temperature. Cooling was then achieved by pumping chilled alcohol through the insulated jackets around the F.V. The contents were

then pumped to a C.V., which was kept under pressure and cool, the contents were clarified and established and the gas content

adjusted. Blending was achieved by pumping from one C.V. to another and finally to a storage C.V

19 The judgment of the Supreme Court (O’Higgins C.J.; Henchy, Griffin, Kenny, and Parke JJ. concurring) stated at p.152:

“The entire process necessitates both the F.V.s and C.V.s being connected by pipes and the whole interconnected

system being controlled and actuated by pumps operating through pipes which not only move the contents when the

process so requires but also achieve temperature control. This general description of the vessels and of the part they

play in the process of brewing indicates to me that that the different stages form part of one continuous process.

Throughout this process the original mixture is subject to control and movement at the instance of the brewer from the

original F.V. through different C.V.s until finally the bottling stage is reached. Specifically in the case stated it is stated as

follows:

17. The brewing process is not completed in the F.V.s but continues in the C.V.s and there is no particular point in

the transition of the liquid through the F.V.s and C.V.s where it can be said that the brewing has ceased.

It seems to me that this process requires the use of force by mechanical means for the achievement of a specified

purpose which is the brewing of beer. Each of the vessels plays an integral part in this process and this applies to the

first F.V. that receives the original mixture and to each of the C.V.s through which it subsequently passes before it

eventually reaches the storing vessel prior to bottling.”

20 It is also noteworthy, that the same conclusion had been reached in the High Court by the Finlay P., as he then was. He

considered that ‘machinery’ connoted apparatus by means of which force was applied, modified or used by mechanical means for a

specific purpose, whether such apparatus is moving or fixed; and in determining whether the apparatus so qualified, the component

should not merely be regarded separately or piecemeal but as integral parts of the process in which they were used. This test was

approved by the Supreme Court. Finlay P. also added two other considerations, namely that it should be relevant, though not a

determining factor, that the equipment be used in actual processing and that it should not be excluded merely by reason of the fact

that it is for part of the time used for storage only. In the Supreme Court O’Higgins C.J. agreed that these considerations were

proper, although he considered they were probably included in the general rule already stated.

21 This judgment marked the high point in the process of the expansion of the exemption from rating for industrial premises, which

prompted pressure for statutory reform. If ‘machinery’ included anything whether fixed to the realty or not, in which force was

applied, and if moreover any individual component had to be viewed as part of an integrated process, then the scope for exemption

from rates, and thus local taxation, was considerable. After all, most industrial premises were designed to produce a product by

equipment deployed in an integrated process in which force was applied.

The Valuation Act 1986

22 The Valuation Act 1986 was clearly a response to these cases and other developments in the case law which had occurred in the

period since 1860. The Act refers for example to fixed furnaces, boilers ovens, kilns, ponds and reservoirs, all of which had been the

subject of decisions in the preceding decades. The background to the Act is well described in the annotations to the Act by O’Caoimh

in the Irish Current Law Statutes series. However, the Act did not seek to achieve a comprehensive reorganisation of the Valuation

Code to accord with modern conceptions of an appropriate level of valuation of industrial premises. Nor did it seek to amend the

definition of machinery which had been so contentious. Instead it introduced a new concept of “plant” which was in general to be

rateable although containing its own exemption, namely plant involved in inducing a process of change. The language of the Act in its

reference to “storage” and “containment” and the distinction made between “inducing” and “permitting” a process of change, was

clearly directed to the type of installation that had been involved in the Beamish & Crawford case. That language, it might be

observed, is not so readily applied to industrial manufacturing processes such as that involved here.

23 The basic provisions of the 1986 Act in this regard were re-enacted in the provision of the Valuation Act 2001in almost identical

terms. By s.3 “plant” was defined as meaning:

“(a) any fixture or structure so attached or secured to, or integrated with, premises compromising any mill, factory, or

building erected or used for any such purpose as to be of a permanent or semi-permanent nature, or

(b) any fixture or structure associated with such premises that, although free-standing, is of such size, weight and

construction as to be of a permanent or semi-permanent nature.”

24 This general definition of plant was, it seems, clearly influenced by the decisions in cases such as Cement Limited and succeeding

cases. However, all such plant is not per se rateable. Rateability is determined by s.51 which provides:

“(1) In determining, under any provision of this Act, the value of a relevant property, the following shall be valued and

taken account of in such determination—

(a) any plant in or on the property, being plant specified in Schedule 5,

(b) the water or other motive power (if any) of the property, and

(c) all cables, pipelines and conduits (whether underground, on the surface or overhead and including all pylons, supports

and other constructions which pertain to them) that form part of the property.”

25 Notably s.51 maintained the exemption for non-motive power machinery, thus subparagraphs (3) and (4) provided as follows:

“(3) Nothing in paragraph (b) of subsection (1) shall be construed as permitting the value of any machinery in or on the

property concerned (not being machinery that constitutes plant specified in Schedule 5) to be taken account of under

that subsection unless it is machinery erected and used for the production of the motive power concerned.

(4) In subsection (3) the reference to machinery erected and used for the production of motive power includes a

reference to electrical power connections.”

Subparagraph 5 contained a further qualification:

“ (5) Notwithstanding anything in paragraph (a) of subsection (1), a part of any plant referred to in that paragraph which

is capable of being moved by mechanical or electrical means, other than a telescopic container, shall not be valued or

taken account of in the determination of the value of the property to which it relates.”

26 It follows from that only such equipment as satisfies the definition of plant and is specified in Schedule 5, (and not exempted by

subsection 5, of s.51), is capable of being rated. Schedule 5 provides as follows:

“Plant referred to in s.51

(1) All constructions affixed to the relevant property (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.

(2) All fixed furnaces boilers ovens and kilns.

(3) All ponds and reservoirs.”

27 It is worth pausing, to consider, even in broad terms, the intended effect of these rather complex provisions, as provided for in

1986 and re-enacted in 2001, insomuch as that may be gleaned from the language and structure of the Act. It seems relatively clear

that the statutory provision was a response to the development of case law including the Cement Limited case and the Beamish &

Crawford cases in the Supreme Court, and also a number of important High Court cases involving kilns, furnaces, ponds, reservoirs

and large constructions which had been found to be machinery for the purposes of the 1860 Act. Second, it also seems plain that the

purpose of the legislation was to restrict somewhat the impact of those decisions. The thrust of the legislation was to attempt to

bring some items of plant within the scope of valuation. Third, it seems clear that the alteration was intended to be nuanced and

balanced. It does not appear that a comprehensive reversal of all the decisions was intended. Indeed, the statute does not address

the definition of machinery arrived at by the courts. Instead it sought to introduce a new category of plant between land and

buildings on the one hand, and machinery on the other, the impact of which was however to reduce the field of application of the

exemption for machinery. Finally, as already observed, while the language is clearly influenced by and patterned upon the prior

decisions of the Superior Courts, and may therefore be applied with some clarity to similar fact situations, it is not so readily adapted

to other areas of industrialisation. Thus for example, in the immediate aftermath of the 1986 Act, many cases were heard by the

Valuation Tribunal relating to large installations often in the agri-business sector which were similar to the type of plant which was at

issue in the Beamish & Crawford case. These cases were not without their difficulty, but the difficulty is of a different magnitude

when the statutory language of containment and process of change is sought to be applied to other industrial processes such as

those involved in the two cases the subject matter of this appeal.

28 One early case on the interpretation of the changes introduced by the 1986 Act was the decision of the Supreme Court in

Caribmolasses Company Ltd. v. The Commissioner of Valuation [1994] 3 I.R. 189. The respondent company owned two tanks used

for the holding, containing and blending of crude molasses. Once outside the tanks, hot water was added to the crude molasses to

produce standardised molasses. Prima facie it was agreed that the tanks were plant under the definition introduced by s.8 of the

Valuation Act 1986, and therefore rateable hereditaments unless they could be said to be “designed or used primarily to induce a

process of change in the substance contained in the tanks”. A valuation of £400 was placed on the tanks by the Commissioner of

Valuation. That valuation was appealed, and the Valuation Tribunal held that the tanks were non-rateable plant. However, the

Tribunal also stated a case for the opinion of the High Court, and that Court (Gannon J.) affirmed the Valuation Tribunal’s decision. It

is significant therefore, that when it was appealed to the Supreme Court, that Court (Blayney J; Egan and Denham JJ. concurring)

unanimously allowed the appeal and held that the tanks were rateable plant. The argument of counsel is recorded succinctly. It

appears that counsel for Caribmolasses cited Cement Limited and Beamish & Crawford, and contended that the tanks were entitled

to an exemption both as “machinery” and as “non-rateable plant”. Counsel for the Commissioner argued that the blending of crude

molasses in the tanks did not change the molasses:

“The change occurred after the molasses left the tank and were mixed with water. The tanks were not to be treated as

an integral part of a whole but to be treated as separate from the other plant as the respondent’s premises and

accordingly were rateable plant.” (p.190)

29 In a short judgment, Blayney J. accepted the arguments of the Commissioner of Valuation. Because of the precise focus on this

case in the course of this appeal, it is necessary to consider that relatively short judgment in some detail. Significantly, Blayney J.

recorded the argument of counsel for the rate payer as relying on the judgment of O’Higgins C.J. in Beamish & Crawford for the

proposition that the individual tanks had to be considered as part of one apparatus in which a continuous process was going on. At

page 195, he recorded that argument as follows:

“For the respondent it was submitted by Mr Cooke that the containment of the molasses in the tanks was part of a

continuous process, and once this was the position, there could not be the element of containment envisaged in the

schedule. The tanks were part of one apparatus in which a continuous process was going on. Reliance was placed on the

decision in Beamish & Crawford v. The Commissioner of Valuation [1980] I.L.R.M. 149.”

30 It is clear from this formulation of the argument that the contention of the rate payer that the tanks form part of a continuous

process, was not limited to the argument that the tanks were to be considered exempt machinery. On the contrary it is clear from the

passage of the judgment outlined above, that the “continuous process” argument was relevant to both the machinery and the plant

issue in this case. That is clear not least because it had been argued that the tanks were part of a continuous process and therefore

“there could not be the element of containment envisaged in the schedule”. Containment , it should be noted is only relevant to the

statutory definition of plant and the reference to schedule is plainly to the schedule introduced by the 1986 Act. At page 196,

Blayney J. continued:

“What do the facts found tell us about the tanks? It appears from sub-paras. 2, 3 and 7 in para. 3 of the case stated

that the tanks have steam coils on their floors and that these may be heated by steam produced by an oil fired burner

outside the tanks, but in practice the steam coils are not used. There is clearly no evidence here of the tanks being

designed or used primarily to induce a process of change in the molasses. The only inference one could draw is that the

purpose of the heating coils is to raise, if necessary, the temperature of the molasses but there is no finding that this

would induce a process of change in the molasses.”

Again, it is noteworthy that the principal focus of the case was whether the tanks were rateable plant within the schedule to the

1986 Act. Indeed, the judgment does not refer to the alternative argument that the tanks were entitled to exemption as machinery,

from which I infer that that aspect of the argument did not loom large in the Supreme Court.

31 Blayney J. rejected the argument that the tanks were entitled to exemption as non-rateable plant. At page 197 he said:

“The only finding . . . on which the respondents can rely is that the tanks, in addition to being used for holding and

containment, as found expressly in sub-para. 5, are also used for blending, but in my opinion it is clear from the nature of

the blending, and the manner in which it is effected, that the tanks are not being used primarily to induce a process of

change in the molasses. Firstly, no process of change is induced. The molasses remain molasses. What happens is that

the different types of molasses, instead of forming a mass of irregular composition, are mixed so as to form a homogenous

whole. Secondly, even if there were a process of change induced in the molasses, it is not induced by the tanks. They

are simply used to contain the molasses while the blending is effected by the molasses being pumped from one tank to

the other.

Finally, it appears from subparas. 8 and 10 of the findings in the case stated that in so far as any change takes place in

the molasses, this occurs after the molasses has left the tanks. The final sentence in subparagraph 10 makes this clear:-

“The primary change takes place at the pumps by the injection of hot water as described above after the molasses

has left the tanks.”

It is this latter passage upon which counsel for the Commissioner relies upon for the proposition that the process of change must take

place within the tanks or other items alleged, to constitute non-rateable plant.

32 The second proposition on which counsel for the Commissioner relies upon is deduced from the immediately succeeding passage at

197:

“Mr. Cooke’s principal submission was that the facts in this case were analogous to those in Beamish & Crawford v. The

Commissioner for Valuation . . . and that the Court should accordingly look at the respondent’s installation as a single

unit engaged in a continuous process and if that approach were adopted, the Court must find the tanks were non-

rateable plant. I am unable to agree. The present case is wholly distinguishable from the Beamish & Crawford case where

the issue was whether tanks used in the process of brewing beer constituted machinery. Here the issue is not whether

the tanks constitute machinery. The sole issue is whether they come within the exception of the schedule and that has

to be determined by construing and applying the wording used in the schedule. The decision in the Beamish & Crawford

case is of no assistance in doing this.”

33 Counsel for the Commissioner argued, that Caribmolasses was clear authority for the proposition that the ‘single unit engaged in a

continuous process’ argument accepted in Beamish & Crawford when considering machinery was not relevant when considering

whether items of plant are rateable or non-rateable pursuant to the schedule to the 2001 Act, and indeed its 1986 predecessor.

Discussion

34 In an area as complex as the law of rating, where practitioners are required to address outdated Victorian concepts which have

become encrusted with a succession of judicial decisions, themselves overlaid by subsequent statutory amendments, which is both

detailed and obscure, there is an inevitable tendency to reduce the law to a series of rules of thumb. Thus for example the question

of whether there is a process of change is often addressed by applying a “what goes in/ what goes out” test, and as was asserted

here, the test was whether any process of change occurred inside or outside the item of plant. Similarly, Caribmolasses is asserted to

be a rejection in the context of plant, of any concept of an integrated process which had been developed in relation to the historic

exemption afforded to non-motive power machinery.

35 Rules of thumb are very useful because they are understood to encapsulate in a simple form sometimes complex propositions which

are both difficult and time consuming to establish from first principles. But it may however be necessary to check in any particular

case, whether the rule of thumb precisely and accurately expresses all aspects of the underlying proposition. In this case, counsel for

the rate payer, subjected the twin propositions advanced by the Commissioner for Valuation to forceful scrutiny. Counsel for the rate

payer concedes that the passage already cited in the judgment of Blayney J. and Caribmolasses does seem to endorse counsel for

the Commissioner’s argument that the process of change must take place in the plant for which the exemption is sought. Yet counsel

for the rate payer contends first, that this was not a necessary part of the ratio decidendi of Caribmolasses since the Court had

already concluded that no process of change took place and second, that the test is a gloss which has been placed on statutory

language, which on examination does not contain any such requirement.

36 The focus of the 1986 amendment, re-enacted in 2001, at least in respect of this type of plant, is on, first, whether a process of

change occurs, and second, whether it is permitted or induced. It is only if a process of change is induced, that any item of plant is

entitled to exemption. As a matter of practicality and probability, I would expect that in nearly all cases in which a statutory test is

held to be satisfied, the process of change induced will occur in the plant for which exemption is sought. However, I agree with

counsel for the rate payer that this is not an absolute requirement of the statute. Instead, what the schedule requires is that a

process of change take place in the substance contained or transmitted, it being recalled that the introductory words of the

schedule refer to “constructions affixed to a relevant property … and used for the containment of a substance or for the transmission

of a substance”.

37 It is, I suppose theoretically possible that a construction can be designed or used primarily to induce a process of change in the

substance, even though that change occurs outside the construction, although induced by it. It is for example, theoretically possible

that a substance which in its raw state is inert, may, when heated to a certain point, or blended merely by agitation to a certain

refinement, be capable of reacting with air to produce a useful and valuable product. In that case it might be said that the

construction was used for containment or transmission of a substance, and that the construction was designed and used to induce a

process of change in that substance even though the change did not take place in the construction. In other words, the statutory

definition is concerned less with the location than with the chemistry that is the process of change. In almost every case there will

be no difference in outcome, as in most if not all cases the change in chemistry i.e. in the substance contained transmitted, will occur

in the same place, that is within the construction used for containment or transmission. I would also add that to this limited extent, it

may be appropriate to look at what occurs outside any individual item of plant.

38 However, even if this refinement of the test is applied to this case it would not in my view lead to any different conclusion. The

process of change occurs here in the mixing pans in each case and it cannot be said of any individual conveyor belt, hopper or

container that it is designed or used to induce a process of change in the item contained or.

39 This brings us to the second proposition challenged by counsel for the rate payer. It was argued that the decision of Blayney J. in

Caribmolasses cannot be understood as meaning that each individual item in an industrial installation must be viewed in isolation in

applying the statutory criterion. Instead it was argued, and it appears the High Court accepted, that the entire process must be

considered as a whole. The language in Caribmolasses cannot be understood as rejecting this argument, because it was addressing

an argument, misguidedly put forward by counsel for the rate payer in that case (Caribmolasses) and which related to the exemption

for machinery, which as Blayney J. made clear, was not relevant to this case.

40 I had some difficulty in following this argument which I consider was somewhat convoluted, even though forcefully advanced. It

seems to me beyond argument that Blayney J. emphatically rejected the single ‘integral part of one continuous process’ argument

explicitly derived from the judgment in Beamish & Crawford. It is true that he did so because, inter alia, he considered that Beamish &

Crawford was a case related to the machinery exemption, and therefore was not relevant to the question of whether any structure

was plant for the purposes of the 1986 Act. But this does not in any way reduce the force of the reasoning in that case. It was

clearly argued that the approach taken in Beamish & Crawford to machinery could be properly applied to the question of non-rateable

and rateable plant under the 1986 Act. Indeed it appears that was a central argument in the case. It was squarely rejected by

Blayney J. Furthermore, this judgment has been understood in these terms, for some time. Thus, the judgment of the Valuation

Tribunal on the 14th of March, 1997 in the case of Carbery Milk Products v. Commissioner of Valuation (VA 95/4/026) is a case in

point. The Chairman of the Tribunal, Liam McKechnie S.C. (as he then was) reviewed the decision in the following terms:

“Apart from the specific facts of this Caribmolasses case, it appears to us that in the judgment above referred to, the

Supreme Court considered these tanks in isolation one from the other, and certainly in isolation from the attached pipe

work. It treated each tank as a distinct and separate unit. Furthermore it held that the “part of the integral process”

approach did not apply and was not available where the issue of rateability fell to be determined under Reference No. 1 of

the Schedule to the 1860 Act [that is the definition of plant inserted by the 1986 Act]. Effectively it declined to extend

the reasoning in the Beamish & Crawford case (supra) to a case where the issue or rateability was not argued under s.7

of the 1860 Act [machinery] but rather under the aforesaid Reference No. 1 [plant].”

This is a very clear analysis which is in my view correct.

41 Finally, and in any event, I consider that this conclusion follows from the precise language used in the 1986 and 2001 statutory

provisions. It is to be recalled that plant is given a very broad general definition as a fixture or structure attached, secured,

integrated with or associated with premises as to be of a permanent or semi- permanent nature. This in itself at least prima facie

directs attention to individual structures. However, such plant is not itself rateable. Pursuant to s.51 of the 2001 Act, only plant

specified in schedule 5 is to be valued. This subcategory of plant is defined in terms as:

“All constructions affixed to the relevant property (whether on or below the ground) and used for 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 a

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.”

Again, prima facie, this directs attention to the individual item. Furthermore the distinction between containment or storage allowing

a process to take place, and a construction designed or used to induce a process of change, again tends to focus on the individual

item of construction. However, when this language is read, as in my view it must be, against the background of the decision in

Beamish & Crawford, and the approach in Caribmolasses it is I think inescapable that the statute, insomuch as it dealt with plant was

intended to depart from the blanket “continuous process” approach in that case and was intended to mandate an approach under

which only some of the vessels would continue to be exempt, on the grounds that a process of change was induced therein. Indeed

the 2001 Act must be taken to be drafted in the light of the interpretation applied in Caribmolasses to the same words used in the

1986 Act.

42 It appears possible that the High Court decision was influenced by a consideration of whether the installation in each case could

be said to be a process within the dictionary meaning of that word. However the question here was whether the construction under

consideration induced a process of change in a substance contained or transmitted, which is a different issue. The subtlety and

refinement of the law in this regard, where more than a century of case law is sandwiched between two complex pieces of legislation,

is reduced somewhat by the use of the word “primarily” in the schedule. That allows valuers, and in due course a tribunal, to take a

more broad and common sense approach than might be the case if limited to the specific issue of containment and transmission and

the distinction between allowing a change and inducing a process of change. This legislation is after all intended to apply to industrial

processes. Each such process has a purpose, normally the manufacture of a product (in these cases asphalt and concrete), and in

almost every case the resulting product can be said to be something different from its original constituent parts. But in my view it is

not necessary to engage in too much metaphysical debate about the process, and the concept of change. There is no doubt that

each item of equipment in issue here is designed and used with a view to the ultimate production of either asphalt or concrete, a

product which in each case can be said to be different to, and changed from, its original constituent elements. Furthermore, it can be

said that each of the items of equipment in these cases is designed to play a part in producing that result. However, the individual

silos, hoppers and conveyor belts, to take one example, are primarily used for the storage and transmission of aggregate and its

sizing. They are not constructions designed or used primarily to induce a process of change in the substance contained or

transmitted being aggregates and any process of change is primarily induced when these individual items are mixed. The issue

however is not whether this Court would conclude that the particular items in issue in this case (other than the mixing pan in each

case) cannot be considered individually or collectively as items of plant primarily used for the inducement of a process of change in

the matter contained or transmitted, but rather whether the Valuation Tribunal was entitled to so conclude. For the reasons set out

above I consider that the Tribunal was so entitled, and accordingly I would reverse the decision of the High Court, and answer the

question of law posed in each case as follows:

(1)The Tribunal was correct in law in finding that the asphalt manufacturing plant in VAO8/5/187 was not exempt from

rateability by virtue of the exclusion contained in paragraph 1 of schedule 5 of the Valuation Act 2001; and

(2)The Valuation Tribunal was correct in law in finding that the concrete manufacturing plant in VAO8/5/188 was not

exempt from rateability by virtue of the exclusion contained in paragraph 1 of schedule 5 of the Valuation Act 2001.