Rating Manual section 8: litigation

Part 5: arbitration of rating appeals

The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.

1. Introduction

Provision is made in England by regulation 4 of the Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 for referral of an appeal to arbitration:

Arbitration

4.—(1) Where the persons mentioned in paragraph (2) agree in writing that a matter falling within the VTE’s jurisdiction is to be referred to arbitration, the matter shall be so referred(a).

(2) The persons are those who, if the matter were to be the subject of an appeal to the VTE, would be the parties to the appeal.

(3) Unless the VTE considers that there is good reason not to do so, where at any time before the determination of an appeal by the VTE, the parties to the proceedings on an appeal agree in writing that any matter arising in the proceedings is to be referred to arbitration, the matter shall be so referred.

(4) In any arbitration under this regulation the award may include any order which could have been made by the VTE in relation to the matter; and paragraph 9 of Schedule 11 to the 1988 Act shall apply to such an order as it applies to an order recorded under these Regulations.

And in Wales by regulation 38 of the Non-Domestic Rating (Alterations of Lists and Appeals) (Wales) Regulations 2005 for referral of an appeal to arbitration:

Arbitration

38. – (1) Where at any time before the beginning of a hearing or the consideration by a valuation tribunal of written representations it is so agreed in writing between the persons who, if a dispute were to be the subject of an appeal to the tribunal, would be the parties to the appeal, the question shall be referred to arbitration.

(2) In any arbitration in pursuance of this regulation the award may include any order which could have been made by a valuation tribunal in relation to the question; and paragraph 9 of Schedule 11 to the Act shall apply to such an order as it applies to an order recorded in pursuance of these Regulations.”

The Agency’s policy on when the VO would agree to such a referral as required by 38(1) above is set out below. The provision is not widely known and cases where ratepayers or their agents have sought VO agreement to referral are few. Any request for referral of an appeal to arbitration must be referred to CEO Rating for consideration.

2. Background

The facility to refer an appeal to arbitration originated under Section 50 of the Local Government Act 1948 which became S.78 of the General Rate Act 1967 and which is now contained in regulation 48 of the Appeal Regulations made under authority granted by Paragraph 4 of Schedule 11 to The Local Government Finance Act 1988. Despite various changes to the relevant statutes and regulations there has been no fundamental change in the facility to refer an appeal to arbitration.

Neither the VOA nor the then Department of the Environment wished to see the option removed despite its relative lack of use.

In 1990, a question from the Minister, Christopher Chope, prompted the following explanation of why the VO make little or no use of arbitration:

“I understand that the VO prefer a single system for the handling of all appeals, so that consistency in treatment can be maintained throughout, decisions – and the reasons for these – recorded and published in a standard manner, and unresolved disputes settled by the Lands Tribunal/Court of Appeal system. In their view there would not necessarily be a saving in time, relative to the VCCT once a case is listed for hearing, and unlike the VCCT system, the costs of the arbitration would necessarily fall on the parties to the case; moreover there is in effect little or no appeal from an arbitrator’s decision.”

3. VOA policy

The VOA policy is to resist reference of an appeal to arbitration other than under the exceptional circumstances set out below at paragraph 4.

The key considerations, which frame the VOA policy, are the following factors:

1. Costs

Valuation Tribunal costs are not subject to award, and whilst they may be extensive in some cases, are generally small for both parties. In the event that a referral to arbitration is agreed to, in addition to the Arbitrators fee the VOA would require HM Revenue and Customs Solicitor to draw up the Arbitration Agreement, which would add to costs considerably.

2. Choice of arbitrator

The VOA would be unlikely, for reasons of consistency, to agree to an Arbitrator other than the Lands Chamber of the Upper Tribunal. This would effectively by-pass the established court of first instance and is therefore not a good precedent. The VT Hearing often performs a useful purpose in clearing up matters of fact and crystallising the real issue(s).

3. Reasons

Reasons for the decision may be limited, giving no real guidance for other cases, or if the Arbitration is conducted in camera, no precedent at all.

4. Conduct

Arbitration would be conducted under the provisions of the Arbitration Act 1996 and S.94 provides that Part I of the Act will apply. This governs the conduct and procedure of the arbitration subject to the preparation of an arbitration agreement by the parties. This in itself may prove difficult to achieve and does not ensure consistency in the treatment of appeals.

5. Speed

The procedure is unlikely to be quicker than following the VT route. A VT decision can satisfy all parties, sometimes unexpectedly, or at least enable them to consider their position in the light of the strength of the opposition case before proceeding to Lands Chamber of the Upper Tribunal.

6. Appeal

There is no appeal from an Arbitrator’s award except where the Arbitrator has misdirected himself on a point of law or there has been a serious irregularity in the conduct of the arbitration (SS.67, 68 & 69 Arbitration Act 1996). As a matter of principle the VOA would not want generally to limit it’s appeal rights in this way.

4. Instances where arbitration is considered appropriate

Exceptional cases where a reference to the Lands Chamber of the Upper Tribunal for arbitration might be acceptable to the VOA are

1) Receipts and Expenditure method of valuation is involved and questions of trade-sensitive information would be revealed in VT. On it’s own this would not be grounds for reference to arbitration as the VT has the power to order the conduct of a hearing in camera where a party applies for it to do so under regulation 30(3) of the of the Non-Domestic Rating (Alterations of Lists and Appeals) (Wales) Regulations 2005 or regulation 31(3) of the Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009. A VT is only likely to decline to make such an order where the circumstances do not warrant such privacy and consequently a reference to arbitration solely on these grounds would be similarly unnecessary.

2) Complex questions of law are involved where the lay members of the VT are unlikely to resolve the dispute and a reference to the Lands Chamber of the Upper Tribunal would ensue.

5. Action on receipt of a request to agree to arbitration

For the reasons discussed above, VOA policy is to decline reference to an Arbitrator other than in exceptional circumstances. These are considered to be confined to:

1) Appeals involving the possible disclosure of profits of trade.

2) Appeals involving matters of complex law.

It is not possible to prescribe the circumstances that would warrant inclusion of an appeal in either of the above categories but where an appeal clearly involves neither issue a request for a reference to arbitration may be declined for the reasons set out above.

Where one of these issues is involved, the VO feels that other circumstances warrant agreement or the appeal party challenges the VO reasons for declining the request, the matter must be referred to CEO via the Technical Advisor. Under no circumstances should a reference to arbitration under regulation 4 or regulation 38 be agreed to without prior approval from the Director of Rating.