Eurolink Motorway Operation Ltd v Commissioner of Valuation

• Jurisdiction: Ireland
• Judge: Mr. Justice Haughton
• Judgment Date: 10 March 2023
• Neutral Citation: [2023] IECA 54
• Court: Court of Appeal (Ireland)
• Docket Number: Record Number: 2021/98

Between/

Eurolink Motorway Operation Limited

Appellant

and

Commissioner of Valuation

Respondent

[2023] IECA 54

Barniville P.

Collins J.

Haughton J.

Record Number: 2021/98

High Court Record Number: 2020/943SS

THE COURT OF APPEAL

Valuation – Case stated – Valuation Act 2001 s. 48(3) – Appellant appealing from the judgment and order dismissing its appeal by way of case stated – Whether the Valuation Tribunal was correct in determining that the “Revenue Share” handed over by the appellant to Transport Infrastructure Ireland was not deductible when valuing the subject property in accordance with s. 48 of the Valuation Act 2001

Facts: The appellant, Eurolink Motorway Operation Ltd (Eurolink), was the occupier of two toll franchises on the M4 motorway under and pursuant to contract with Transport Infrastructure Ireland (TII), made on 24 March 2003 (the PPP Agreement). It was not contested that the toll franchises were rateable property and that that rateable property was ‘occupied’ by Eurolink for the purposes of the Valuation Act 2001, as amended. Under the PPP Agreement there were detailed provisions for calculating “the Revenue Share” which Eurolink must pay to TII. Eurolink appealed to the Court of Appeal from the judgment of the High Court (Owens J) delivered on 8 February 2021 and the perfected order of 24 March 2021, dismissing Eurolink’s appeal by way of case stated pursuant to s. 39 of the 2001 Act in respect of two judgments of the Valuation Tribunal. The question of law posed in the case stated for the opinion of the High Court was: “Whether on the basis of the facts agreed or proved, the evidence and submissions of the parties, the Valuation Tribunal was correct in determining that the Revenue Share handed over by the appellant to TII is not deductible when valuing the subject property in accordance with section 48 of the Valuation Act, 2001 (as amended).” The two issues argued by the appellant in the High Court and in the Court of Appeal were as follows: (a) whether a proper application of the receipts and expenditure method of valuation (the R&E method) requires the deduction of the Revenue Share from Eurolink’s gross receipts because it is not “within the grasp of Eurolink”; and/or (b) whether Eurolink’s obligation to hand over the Revenue Share is a statutory obligation and/or a restriction on the monies that it can derive from the collection of tolls from the public and, thus, a limitation on the profitmaking ability of the right to collect the toll as property. Eurolink, therefore, contended that the Revenue Share should be deducted from gross receipts when calculating the “Net Annual Value” for the purposes of s. 48(3) of the 2001 Act. Both of those arguments were rejected by the Valuation Tribunal, and by the High Court.

Held by Haughton J that Eurolink’s arguments had not persuaded him inter alia: (i) that the PPP Agreement the Revenue Share was intrinsic/integral to the right to collect the tolls; (ii) that the Revenue Share was not “within its grasp”; (iii) that the purpose of the Revenue Share was to prevent Eurolink making “superprofits”, or (if it was), that that would be a relevant consideration under the rating construct in s. 48(3) of the 2001 Act; (iv) that Eurolink must pay the Revenue Share in order to maintain the right to tolls to avoid contractual and statutory default (under the PPP Agreement and s. 63(5) of the Roads Act 1993, as amended, respectively), and that on this account the Revenue Share was deductible; (v) that the duty to pay the Revenue Share was a statutory restriction on the capacity of Eurolink to generate income/profits from the tolls, whether between Eurolink and public who pay the tolls, or at all; and (vi) that the Revenue Share was deductible as a payment necessary to maintain the tolls or that it was otherwise deductible from gross receipts under the R&E method.

Haughton J dismissed the appeal. As TII was entirely successful in opposing the appeal, Haughton J held that it should be entitled to its costs of the appeal to be paid by Eurolink, such costs to be adjudicated by a Legal Costs Adjudicator in default of agreement.

Appeal dismissed.

UNAPPROVED

JUDGMENT of Mr. Justice Haughton delivered electronically on 10 ^th day of March, 2023

Introduction

1 . The appellant (“ Eurolink”) is the occupier of two toll franchises on the M4 motorway under and pursuant to contract with the National Roads Authority (“ NRA”), now Transport Infrastructure Ireland (“ TII”), made on 24 March 2003 (“ the PPP Agreement”).

2 . It is of significance that it is not contested that the toll franchises are rateable property and that that rateable property is ‘ occupied’ by Eurolink for the purposes of the Valuation Act 2001, as amended (“ the 2001 Act”).

3 . Under the PPP Agreement there are detailed provisions for calculating what is known as “ the Revenue Share” (“ the Revenue Share”) which Eurolink must pay to TII. The nature of this “Revenue Share” and the manner in which it falls to be calculated is explained in detail below.

4 . This appeal arises out of the judgment of the High Court (Owens J.) delivered on 8 February 2021 and the perfected order of 24 March 2021, dismissing Eurolink's appeal by way of Case Stated pursuant to s. 39 of the 2001 Act in respect of two judgments of the Valuation Tribunal. The question of law posed in the Case Stated for the opinion of the High Court was:-

“… Whether on the basis of the facts agreed or proved, the evidence and submissions of the parties, the Valuation Tribunal was correct in determining that the Revenue Share handed over by the appellant to TII is not deductible when valuing the subject property in accordance with section 48 of the Valuation Act, 2001 (as amended).”

5 . The two issues argued by the appellant in the High Court and in this court may be summarised as follows:-

• (a) Whether a proper application of the receipts and expenditure method of valuation (the “ R & E Method”) requires the deduction of the Revenue Share from Eurolink's gross receipts because it is not “ within the grasp of Eurolink”; and/or

• (b) Whether Eurolink's obligation to hand over the Revenue Share is a statutory obligation and/or a restriction on the monies that it can derive from the collection of tolls from the public and, thus, a limitation on the profit making ability of the right to collect the toll as property.

6 . Eurolink, therefore, contends that the Revenue Share should be deducted from gross receipts when calculating the “ Net Annual Value” (“ NAV”) for the purposes of s. 48(3) of the 2001 Act. Both these arguments were rejected by the Valuation Tribunal, and by the High Court.

Relevant statutory provisions

7 . It is convenient to set out the relevant statutory provisions at this point in order to better understand the arguments and the decision of the High Court.

8 . Section 3 of the 2001 Act has the following definition:-

“‘Relevant property’ shall be construed in accordance with Schedule 3.”

Schedule 3 of the 2001 Act, as amended by the Valuation (Amendment) Act 2015 sets out “ relevant property” and states: –

“Property (of whatever estate or tenure) which falls within any of the following categories and complies with the condition referred to in paragraph 2 of this Schedule shall be relevant property for the purposes of this Act:

(a) …

(b) Tolls, …”

Paragraph 2 provides: –

“The condition mentioned in paragraph 1 of this Schedule is that the property concerned –

• (a) is occupied and the nature of that occupation is such as to constitute rateable occupation of the property, that is to say, occupation of the nature which, under the enactments in force immediately before the commencement of this Act (whether repealed enactments or not), was a prerequisite for the making of a rate in respect of occupied property, or

• (b) is unoccupied but capable of being the subject of rateable valuation by the owner of the property.”

9 . Other relevant definitions in s. 3 of the 2001 Act are:-

“‘Occupier’ means, in relation to property (whether corporeal or incorporeal), every person in the immediate use or enjoyment of the property;”

Section 13 of the 2001 Act provides that the Commissioner of Valuation (“ the Commissioner”) “ shall provide for the determination of the value of all relevant properties (other than relevant properties specified in Schedule 4) in accordance with the provisions of this Act.”

10 . Section 48(1) of the 2001 Act provides: –

“The value of a relevant property shall be determined under this Act by estimating the net annual value of the property and the amount so estimated to be the net annual value of the property shall, accordingly, be its value.”

I shall refer to the ‘net annual value’ as “NAV”.

11 . Critical to the issues raised in this appeal is s. 48(3) of the 2001 Act, as amended by the Valuation (Amendment) Act 2015, which provides:-

“Subject to section 50, for the purposes of this Act, ‘net annual value’ means, in relation to a property, the rent for which, one year with another, the property might, in its actual state, be reasonably expected to let from year to year, on the assumption that the probable average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that state, and all rates and other taxes in respect of the property, are borne by the tenant.”

This definition of NAV is often referred to as ‘ the statutory construct’. It is based on the hypothetical rent that a tenant/occupier “ might” pay, on certain “ assumptions” as to “ probable” expenditure “ necessary to maintain the property in that state”, and on the assumption that the tenant will bear the rates.

12 . It should be noted, because it is relevant to a decision of the Supreme Court relied upon by Eurolink 1, that prior to amendment in 2015 s. 48(3) included, after the words “ and all...