Vtesse Networks Ltd v Valuation Officer

A telecommunications network may constitute a single rateable hereditament even though it comprises minute fibres, extends over a long distance and includes fibres owned and maintained by third parties. Its physical characteristics, connections, use and the contractual rights governing it are all relevant.

Rateable occupation depends on the nature of the hereditament. A person may actually and exclusively occupy optical fibres where that person alone may activate and use them for their only intended purpose. Physical access and ownership are unnecessary. A provider’s rights to allocate, maintain or substitute fibres do not establish paramount occupation where the provider has no control over the customer’s use.

Whether interconnected property forms one hereditament is a question of fact and degree for the specialist tribunal. Its conclusion stands unless affected by an error of law.

Vtesse Networks Ltd operated a lit fibre-optic telecommunications network connecting its customers’ premises. About 4 kilometres of the network used Vtesse’s own cables and ducts, while approximately 143 kilometres used particular fibres supplied under exclusive-use agreements with other network operators.

The valuation officer proposed that the entire network be entered in the Slough rating list as one hereditament occupied by Vtesse. The Berkshire Valuation Tribunal upheld Vtesse’s objection. On two appeals arising from the original network and a later extension, the President of the Lands Tribunal decided that the leased fibres and Vtesse’s own-build fibres formed one hereditament in Vtesse’s rateable occupation.

Vtesse appealed. The preliminary issue was whether, under domestic law, the network or any part of it should be entered as a hereditament in the rating list.

1. Appeal dismissed. The President of the Lands Tribunal was entitled to find that the lit network was a single hereditament in Vtesse’s rateable occupation. His decision disclosed no error of law or perverse factual finding.

2. A chattel is not incapable of rating merely because it remains a chattel. Conducting media such as pipes, wires and cables may be rateable property when their presence and use amount to occupation of land. The network’s small cross-section, length and incorporation within third-party cables did not prevent it from being a unit of property. Its physical connections and functional use were relevant, as were the agreements governing the fibres. Ownership was not decisive.

3. Whether interconnected elements form one hereditament is a question of fact and degree. The President considered both the network’s physical features and its use. He was entitled to conclude that the fibres supplied by third parties, once connected to Vtesse’s own-build fibres and its customers’ premises, formed part of one operational network. The Court of Appeal could not substitute another factual conclusion in the absence of legal misdirection.

4. The four ingredients of rateable occupation are actual occupation, exclusivity for the occupier’s particular purposes, beneficial value and sufficient permanence. The disputed requirements were actuality and exclusivity. Those requirements had to be assessed by reference to the nature of the hereditament.

5. Vtesse alone could activate and use the leased fibres for their only useful purpose. It therefore could properly be found in actual occupation despite lacking physical access. Its occupation was exclusive because the providers had no control over its use. Their allocation, access, maintenance and limited substitution rights did not make their occupation paramount or Vtesse’s subordinate.

6. Sedley LJ agreed that the President’s decision could not be overturned. He considered that a hereditament must logically be identified before occupation is assessed and rejected the analogy with a lodger, whose treatment in rating law was exceptional and based on practical considerations. Mummery LJ agreed with Lloyd LJ’s reasons and the dismissal of the appeal.

1. Court of Appeal (Civil Division): The appeal was dismissed. The Lands Tribunal had committed no error of law in treating the lit network as one hereditament occupied by Vtesse.

2. Lands Tribunal: The valuation officer’s two appeals were allowed. The President decided that Vtesse’s own-build and leased fibres formed one hereditament in Vtesse’s rateable occupation.

3. Berkshire Valuation Tribunal: Vtesse’s objections were upheld on the basis that it lacked paramount control of the fibres supplied by third parties.