Coventry and Solihull Waste Disposal Company Ltd v. Russell

The House of Lords considered whether a waste‑incineration hereditament with an electricity generating plant fell to be valued under the Electricity Generators (Rateable Values) Order 1989 by application of the statutory formula. The court construed article 3(2)(a)(ii) of the 1989 Order (as amended) and held that the provision requires the primary function of the hereditament to be its use in connection with a combined heat and power scheme, not merely that that use be connected in some ancillary way to another primary function. Having regard to the amendment history, context in Schedule 6 to the Local Government Finance Act 1988 and the purpose of the Order, the appeal was dismissed and the formula valuation did not apply to the hereditament in question.

The appellant owned and operated the Coventry Waste Reduction Unit, a hereditament whose principal original function was incineration of local authority waste and which, after works in 1992–1993, included a steam‑driven turbine generating electricity, most of which was exported. There were two entries in the non‑domestic rating list (a refuse destructor and a pipeline). The Valuation Tribunal declined to merge the assessments; the Lands Tribunal merged them and applied the Electricity Generators (Rateable Values) Order 1989 (as amended) formula to fix a reduced rateable value; the Court of Appeal upheld the merger but by majority held the 1989 Order did not apply and set a higher rateable value. The appellant appealed to the House of Lords on the single issue whether the hereditament fell within article 3(2)(a)(ii) of the 1989 Order.

Relief sought: a formula valuation under the Electricity Generators (Rateable Values) Order 1989 (as amended), producing a substantially lower rateable value than the valuation by the contractor's method.

Issues framed: (i) the proper construction of article 3(2)(a)(ii) of the 1989 Order (as amended) and in particular whether the phrase "its primary function is in connection with a scheme for the production for sale of both electrical power and heat" is satisfied where the hereditament's primary function (refuse destruction) merely has a functional or ancillary connection to a CHP scheme; (ii) whether, on the correct construction, the appellant's hereditament qualifies for formula valuation.

Reasoning and decision: the Lords analysed the amended wording introduced by the 1991 amendment and its explanatory note, reading the phrase in the context of article 3 as a whole and Schedule 6 to the Local Government Finance Act 1988. They concluded the amendment was intended to restrict qualification to cases where the primary function of the hereditament is to serve a CHP scheme (providing symmetry with article 3(2)(a)(i)). The appellant's construction (that any substantial connection suffices) would produce anomalous and unfair results by depriving valuation of significant elements of value and would allow non‑electricity‑primarily used hereditaments to obtain formula treatment. Having regard to legislative history, purpose and practical consequences, the House dismissed the appeal and held that the formula did not apply.

Appeal dismissed. The House of Lords held that article 3(2)(a)(ii) of the Electricity Generators (Rateable Values) Order 1989 (as amended) requires that a hereditament's primary function must be its use in connection with a combined heat and power scheme in order to qualify for formula valuation; an ancillary or incidental connection to a CHP scheme while the primary function is otherwise (here refuse destruction) is insufficient.

Valuation Officer made two entries in the 1990 rating list. The Valuation Tribunal refused to merge the entries and left valuation substantially unaltered. The Lands Tribunal (President H.H. Judge Bernard Marder Q.C.) allowed the appellant's appeal: merged the entries into a single hereditament and applied the 1989 Order formula, giving a reduced rateable value (Lands Tribunal figure: £143,034 with effect from 26 February 1993). The respondent appealed to the Court of Appeal by case stated under section 3(4) of the Lands Tribunal Act 1949; the Court of Appeal upheld the merger but by majority held the 1989 Order did not apply and the agreed rateable value was £928,500. The appellant appealed to the House of Lords on the question whether the hereditament fell to be valued under the 1989 Order; the House dismissed the appeal.