Tunnel Tech Ltd v Reeves (Valuation Officer)

For rating exemption, a market garden is distinguished from nursery ground by the nature of the produce leaving the hereditament. It must be an article suitable and intended for direct or indirect public consumption. It is insufficient that the activity contributes to an eventual consumer product after further cultivation elsewhere. The classification is fact-sensitive. The separate statutory treatment of agricultural land and agricultural buildings means that the words “anything which consists of” in paragraph 2(1)(d) do not make a nursery operated wholly in buildings exempt. Paragraph 3(b) provides the relevant building exemption for market gardens, not nurseries. Modern production methods do not justify removing that statutory distinction.

Tunnel Tech operated a mushroom production hereditament comprising land, buildings, plant and associated structures. Its processes produced compost and mushroom mycelium, which were transferred to other mushroom farms for further cultivation and harvesting.

The Valuation Tribunal for England held that the hereditament was a market garden and removed it from the non-domestic rating lists. The Upper Tribunal (Lands Chamber), in a decision dated 7 April 2014, allowed the valuation officer’s appeal and held that the hereditament was nursery ground. The appeal concerned whether the hereditament was a market garden and, alternatively, whether nursery operations carried on wholly in buildings qualified for exemption under Schedule 5.

The appeal was dismissed. The Chancellor of the High Court gave the leading judgment, with which Lady Justice Rafferty and Lady Justice King agreed.

1. Market garden and nursery ground. The distinction is one of fact and degree. A market garden produces articles such as fruit, vegetables or flowers for sale and direct or indirect consumption by the public. Nursery ground produces something unsuitable for, or not intended for, public consumption without a further process. The authorities, including Purser v the Local Board of Health for the District of Worthing (1877) XVIII QBD 818, Grewar v Moncur's Curator Bonis [1916] SC 764, Watters v Hunter [1927] SC 310, Twygen v Assessor for Tayside Region [1991] SC 98 and Darlington & Sons v Langridge [1973] RA 207, supported that distinction.
2. The Phase III material leaving the hereditament was neither consumable nor intended for sale directly or indirectly to the public. It required further processes on different hereditaments before mushrooms could be consumed. The Upper Tribunal was therefore correct to classify the hereditament as nursery ground.
3. The expression “anything which consists of” in paragraph 2(1)(d) of Schedule 5 to the Local Government Finance Act 1988 did not abolish the statutory distinction between agricultural land and agricultural buildings. Paragraph 3(b) separately exempts buildings that are or form part of a market garden. It does not extend that exemption to nursery grounds whose agricultural operations are wholly carried on in buildings.
4. The principle that legislation may accommodate contemporary developments did not justify an interpretation making rating liability depend on speculative future processes, properties or occupiers. The statutory categories remained controlling. The court also accepted, as supporting reasoning, that preparation and pasteurisation of mushroom compost could be an agricultural operation, but the comparator sites relied on by Tunnel Tech were of no assistance on statutory construction.

• Court of Appeal (Civil Division) dismissed Tunnel Tech’s appeal and upheld the Upper Tribunal’s decision.
• Upper Tribunal (Lands Chamber) allowed the valuation officer’s appeal from the Valuation Tribunal for England on 7 April 2014 and held that the hereditament was nursery ground.
• Valuation Tribunal for England held on 11 December 2012 that the hereditament was a market garden and ordered its removal from the 2005 and 2010 non-domestic rating lists from 1 April 2005.