Shell-Mex and B P Ltd Ltd v Clayton (Valuation Officer) and Anor

[1956] 3 All ER 185

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(Judgment by: Viscount Simonds)

Between: Shell-Mex and B P Ltd Ltd
And: Clayton (Valuation Officer) and Anor

Court:

Judges:
Viscount SimondsLord Oaksey
Lord Morton of Henryton
Lord Tucker
Lord Keith of Avonholm

Subject References:
LOCAL GOVERNMENT
RATES
De-rating
Freight-transport hereditament
Installations for unshipping and storing oil
Ratepayer selling agent for oil companies
Use of hereditament for dock purposes
Occupation and use of hereditament as part of a dock undertaking
Oil 'intended for the use of' the ratepayer

Legislative References:
Rating and Valuation (Apportionment) Act 1928 - (18 & 19 Geo 5 c 44), s 5(1) (c), (3), s 6(3)(b)

Case References:
Clyde Navigation Trustees v Inland Revenue, Inland Revenue v Kirkwall Assessor - [1930] SC 454; Digest Supp
Clyde Navigation Trustees v Glasgow Assessor - [1931] SC 400; Digest Supp

Hearing date: 26-28 June 1956
Judgment date: 25 July 1956

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Judgment by:
Viscount Simonds

My Lords, this appeal raises a question which I have found great difficulty in deciding. It comes before your Lordships on appeal from the Court of Appeal, which unanimously dismissed an appeal by the appellants, Shell-Mex and BP Ltd on a Case Stated by the Lands Tribunal under s 3(4) and (11) of the Lands Tribunal Act 1949. By its decision the Lands Tribunal had dismissed an appeal by the appellants from a decision of a local valuation court that the assessment of a certain hereditament occupied by the appellants should be confirmed.

The problem is whether or not the hereditament in question is a "freight-transport hereditament" within the meaning of the Rating and Valuation (Apportionment) Act 1928, which I will call the Act of 1928, and whether the hereditament is or is not entitled accordingly to the benefit of de-rating. "Freight-transport hereditament" is defined by s 5(1) of the Act of 1928 to mean, inter alia,

"(c) A hereditament occupied and used wholly or partly for dock purposes as part of a dock undertaking being an undertaking whereof a substantial proportion of the volume of business is concerned with the shipping and unshipping of merchandise not belonging to or intended for the use of the undertakers."

By sub-s (2) of the same section, "transport purposes" is defined to mean (inter alia)

"(c)'dock purposes', that is to say, all purposes connected with the shipping or unshipping at a dock ... of merchandise ..."

And by sub-s (3), the expression "dock" includes any harbour, wharf, pier, jetty or other works in or at which vessels can ship or unship merchandise, "dock undertaking" means an undertaking carried on by a dock authority, but also includes any other undertaking comprising as part thereof a dock in so far only as its business is carried on at or in connection with that dock, and "dock authority" means any person or body of persons whether incorporated or not who are authorised to construct or are owners or lessees of any dock authorised by or under any Act. It is necessary also to refer to s 6 of the Act of 1928. That section, which provides for entries in the valuation lists of freight-transport hereditaments, enacts by a proviso to sub-s (3) that no part of a freight-transport hereditament which is so let out as to be capable of separate assessment shall be deemed to be occupied and used for transport purposes unless it is actually so used and occupied. This proviso is called in aid by the appellants for the purpose of interpreting the expression "freight-transport hereditament" in the preceding section.

It was common ground between the parties, and has been accepted by the Court of Appeal, that the appellants could only establish that the hereditament in question was a freight-transport hereditament if they satisfied three conditions (i) that it was occupied wholly or partly for dock purposes, (ii) that it was so occupied and used as part of a dock undertaking, and (iii) that such dock undertaking was one whereof a substantial proportion of the volume of business was concerned with the shipping and unshipping of merchandise not belonging to or intended for the use of the undertakers.

I must now state the relevant facts about the hereditament in question. It comprises three parcels of land at Salt End on the banks of the River Humber with an aggregate area of 51 1/2 acres which are held on separate leases from the British Transport Commission or their predecessors in title at a total ground rent of £4,195 per annum. Pursuant to their obligations in the several leases, the appellants or their predecessors in title have built and maintained on the land offices, stores, garages, filling sheds, pump houses, a boiler house, tanks and ancillary buildings. In addition, the appellants own and occupy a so-called "barge berth" which has been erected on part of the foreshore at a distance of about one thousand feet from the hereditament and is connected with it by means of pipe lines exclusively owned, used and occupied by the appellants. From the south-west corner of the land two jetties, the property of the British Transport Commission, run out into the river. Number 1 jetty is used jointly by the appellants and three other companies, but the appellants have their own pipe lines, twelve in number, which run along the jetty and are connected with the pump houses and tanks on the land. Number 2 jetty is used jointly by the appellants and one other company; the pipe lines on this jetty are for a certain distance common to both users.

Oil is brought to the jetties in ocean-going tankers of an average capacity of ten thousand to twelve thousand tons and unloaded there, bills of lading being made out in the name of "Shell-Mex and BP" or in the name of the consignor. In every case delivery is taken by the appellants at the ship's rail. The tankers are unloaded at the jetties by means of pipes, which are coupled to the ends of the pipe lines which I have already mentioned, and the oil is pumped through the pipe lines to tanks on the hereditament. The nature of the appellants' business demands that they should have at a terminal depot such as that at Salt End a tankage capacity in excess of what would be required to meet the day-to-day requirements of the subsidiary depots, because it must correlate the intake of oil to the movements of tankers. It is the function of terminal depots to supply the subsidiary internal depots which in turn supply consumers. The total tankage capacity at the hereditament is 211,781 tons, and the tanks habitually contain stocks of the order of one hundred thousand to one hundred and fifty thousand tons. A substantial quantity of oil is also supplied from the tanks to the barge berth, of which I have spoken, where it is used for bunkering ships. Other parts of the oil are otherwise disposed of. I take as typical the appellants' operations for the year 1951 which are thus set out in the Case Stated by the Lands Tribunal:

"21.

During the calendar year 1951 the total tonnage of oil handled at the hereditament was approximately 1,320,000 tons. This tonnage was dealt with approximately as follows:-

540,000 tons sent to dependent depots of the appellant company.

160,000 tons sent to other petrol companies.

277,000 tons sold direct to customers from the hereditament.

290,000 tons ships bunkering.

53,000 tons supplies to Air Ministry and for export, together with a tonnage of approximately 2,250 tons representing fuel for the appellant company's road vehicles and like purposes used and paid for by the appellant company.

totalling 1,320,000 tons

"The ships bunkered were tankers chartered by the consigning companies (approximately 105,000 tons) and vessels, such as trawlers, owned by other persons (approximately 185,000 tons).

"22.

Of the 540,000 tons delivered to the dependent depots about 316,000 tons were sent on by water. Of this 316,000 tons 260,000 tons were shipped from the said barge berth. In addition, 82,000 tons of National Benzole product were also shipped from the said berth, making a total of 342,000 tons shipped from the barge berth during 1951."

The whole of the hereditament is a bonded warehouse, about a quarter of the oil which passes through the installation being dutiable.

It is necessary now to refer briefly to the relations between the appellants and the companies from which they receive consignments of oil. This is relevant only to the third of the conditions to which I have referred. These relations are determined by an agreement made on 31 December 1931 between Shell Marketing Co Ltd of the first part, Eagle Oil and Shipping Co Ltd of the second part, Anglo-Persian Oil Co Ltd of the third part and the appellants of the fourth part, the companies of the first three parts being referred to as "the consigning companies".

By cl 5 of this agreement, it was provided that each of the consigning companies would, during its continuance, employ the appellants as its sole and exclusive consignee and agent for the sale and distribution of oil for consumption within the area therein mentioned, and that the appellants would use their best endeavours to promote the interests of the consigning companies and would not knowingly sell oil for resale outside that area, (by cl 7) that the appellants might at any time purchase on their own account any oil for resale on their own account but only for consumption in the said area and subject to the further conditions therein laid down, (by cl 8) that delivery of the oil required by the appellants should be made to the appellants cif such ports in the area as the appellants might direct, (by cl 9) that the appellants, as agents for sale, should have the fullest liberty in respect of the sale of oil delivered to them and might sell the same in their own name or otherwise and in such manner and at such prices and on such terms and conditions as they might think advisable, (by cl 11) that the commission payable to the appellants for their services should be such as might from time to time be agreed between the parties or determined as therein mentioned, (by cl 15) that each of the consigning companies should bear its due proportion of all shortages or losses by leakage or otherwise as therein mentioned, and (by cl 19) that the stocks left at the end of each year should be ascertained and allocated to the respective parties who had delivered them to the appellants in the proportions therein mentioned. The commission payable under this agreement was fixed at eight per cent except in respect of a small quantity (0.17 per cent) used by the appellants themselves for which they paid an agreed price.

I have now stated what appear to be the relevant facts, which can be supplemented if necessary by reference to the Case Stated, and return to the three conditions which the appellants must satisfy.

First, is the hereditament used wholly or partly for "dock purposes"? Your Lordships are relieved of the necessity of discussing this. The Court of Appeal has answered the question in the affirmative, and learned counsel for the respondents have been content to accept their decision, but have properly reserved their right to claim an apportionment if the other conditions should be held to be satisfied.

Secondly, is the hereditament used and occupied for dock purposes as part of a dock undertaking? I find this a very difficult question to answer. The appellants' contention is twofold: originally it had a third limb but that has been broken off. Now they say, first, that the hereditament is so used as part of a dock undertaking carried on by the British Transport Commission at the Port of Hull; but, if that fails them, they turn to the second part of the definition of dock undertaking and say that the hereditament is so used by them as part of the dock undertaking carried on by them at their own dock, namely, the barge berth. It is clearly more advantageous to them to succeed on the first alternative claim, for thus they avoid any difficulty on the third condition, since it could not be contended that their merchandise, the oil, belongs to or is intended for the use of the undertakers, viz, the British Transport Commission.

I ask first, then, whether the hereditament is used and occupied for dock purposes by the appellants as part of the dock undertaking carried on by the Transport Commission. This question has been answered in the negative by the Court of Appeal. They say ([1955] 3 All ER at p 115):

"To hold the contrary would involve the conclusion that the tenants of every industrial site let by the commission in the vicinity of the Port of Hull would be occupying and using their respective sites as part of the commission's dock undertaking if their leases or tenancy agreements allowed them the use for their own private purposes of the dock facilities provided by the commission."

I agree that this conclusion would be involved and I do not think that learned counsel for the appellants shrank from it. Relying on the terms of the leases to which I have referred, he said that the development of the dock undertaking was effected by just such agreements as these whereby dock facilities were created for the benefit of individual tenants or lessees, and that it was immaterial that, in regard to any particular site, those facilities were private and exclusive. The dock undertaking of the commission, he said, was as truly "carried on" by these means as it would be if they themselves provided the installation and all the machinery of shipment and unshipment. To this the answer given by the respondents and accepted by the Court of Appeal is that, as soon as the hereditament is leased to and exclusively occupied by the appellants for the purpose of its own business of importing and distributing oil, it is segregated from, and no longer forms part of, the commission's dock undertaking. The point is a narrow one, but I have come to the conclusion that the decision of the Court of Appeal should be affirmed. The present interest of the commission in the hereditament is to receive the rent reserved by the leases and to enforce, so far as necessary, the lessees' obligations therein contained. I do not think that it can fairly be said that it is the consequence or corollary of this that the appellants occupy and use the hereditament as part of a dock undertaking carried on by the commission. It might well be otherwise if the appellants could themselves be said to be dock undertakers in the sense that they provided docking facilities for others, but it is clear that they do not do so. Their undertaking is the importation and distribution of oil, and for its purposes they need docking facilities. The use of those facilities does not appear to me to convert their undertaking into part of a dock undertaking carried on by the British Transport Commission.

I have so far ignored the proviso (a) to s 6(3), on which the appellants rely as an aid to the interpretation of s 5. It is a proviso to a sub-section dealing with a hereditament which is assumed to be a freight-transport hereditament. It can, I think, throw little light on the question what constitutes such a hereditament. Two Scottish cases have been referred to, in which the matter has been discussed, viz, Clyde Navigation Trustees v Inland Revenue (1930 SC 454), and Clyde Navigation Trustees v Glasgow Assessor (1931 SC 400). In these cases different conclusions were reached. I would with respect adopt the view expressed by Lord Fleming in the second of the two cases (ibid, at p 406), which was cited by the Court of Appeal, that the proviso

"seems ... to imply that subjects which would otherwise be entitled to be regarded as freight-transport lands and heritages are not to be deprived of the benefits of de-rating merely because they have been let to and are occupied by some person other than the dock authority."

I do not doubt that a dock authority may let a hereditament which forms part of its undertaking without its losing its character as a freight-transport hereditament. But it must have that character before it can lose it.

I turn then to the alternative contention of the appellants in regard to the second condition. As I have pointed out, "dock undertaking" includes any other undertaking comprising as part thereof a dock in so far only as its business is carried on at and in connection with that dock. The appellants operate an undertaking and they own a dock, the barge berth, which is connected with the hereditament by the pipe lines which I have mentioned. From these premises the conclusion is drawn that the appellants occupy and use the hereditament as part of a dock undertaking. This contention also has been rejected by the Court of Appeal and, as I think, rightly. For it appears to me a plain misuse of language to say that, in respect of the barge berth, the appellants are carrying on a dock undertaking of which the hereditament forms part, and this misuse is expressly averted by the qualifying words "in so far as its business is carried on at and in connection with that dock". In my opinion, the use and occupation of the hereditament is not "business carried on at and in connection with" the barge berth. Your Lordships were invited to consider the use and occupation of the hereditament in what were called their geographical and functional aspects. These are refinements which I do not find it easy to follow. It is enough for me to say that, in any aspect, the limitation in the definition is fatal to the appellants' contention.

There remains the third condition and, as I have pointed out, this is clearly satisfied if the appellants succeed in their contention that the hereditament is occupied and used as part of the British Transport Commission's undertaking; but, if they succeed not on this but on their alternative contention, then they must establish that the dock undertaking carried on by them at the barge berth is one whereof a substantial proportion of the volume of business is concerned with the shipping and unshipping of merchandise not belonging to them or intended for their use. In my opinion, they do not satisfy this condition. The merchandise, the oil, which is unloaded at the ship's rail, is from the moment of unloading in their possession. No one, not even the consigning companies, can dispute it, for they have an uncontrolled power of disposition. They are under a contractual obligation to account for the proceeds of sale and they might, no doubt, be liable in damages if they broke other terms of the contract. But neither this fact nor the fact that the property in the oil is not in the full legal sense vested in them makes it inapposite to describe the oil as "belonging to them". If it does not "belong to them", it is at least intended for their use. It would, in my opinion, be in its context placing too narrow a meaning on "use" to confine it to use by consumption. It may and, I think, does include such use as a trader makes of his stock in trade, that is, by selling it. In this sense, the oil is intended for the use of the appellants and is, in fact, so used by them.

On the whole case, therefore, I am of opinion that the appellants fail to satisfy two of the three prescribed conditions and that their appeal must be dismissed.