Dissenting view that toll sharing payments are not deductible charges under the Valuation Act 2001.

THE SUPREME COURT

[Appeal No: 306 & 307/2008]

Fennelly J.

Clarke J.

MacMenamin J.

Between/

Westlink Toll Bridge Limited

Appellant

and

Commissioner of Valuation

Respondent

and

Fingal County Council

Notice Party

and

Between

Celtic Road Group (Dundalk) Limited

Appellant

and

Commissioner of Valuation

Respondent

and

Louth County Council

Notice Party

JUDGMENT of Mr. Justice Fennelly delivered the 23rd day of October 2013

1. I regret that I find myself unable to agree with the judgment which is about to be delivered by MacMenamin J and with which

Clarke J agrees on one point only. That is on the question whether payments made by the appellants to the National Roads Authority

pursuant to agreements with that body are deductible when calculating “net annual value” pursuant to s. 48(3) of the Valuation Act,

2001. This being a dissenting judgment on that point, I can express myself briefly.

2. I agree with the judgment of MacMenamin J on the other question, namely the appellant in the second case mentioned above

(Celtic Road Group (Dundalk) Limited] is entitled to deduct the costs of repair and maintenance, incurred by it, of the entire length of

road (54.7 kilometres), thus not limited to the cost of maintaining the tolled stretch of the M1 motorway from Gormanstown, Co.

Meath to Monasterboice, Co. Louth (a distance of 21.74 km).

3. The first question at issue is whether the “royalty” payment made to the National Roads Authority by each of the appellants from

the tolls collected by it falls within the scope of the expression “all rates and other taxes and charges (if any) payable by or under

any enactment in respect of the property…”

4. In my view, the royalty payment is not a “charge” and is certainly not “payable by or under any enactment.”

5. What used to be called a “rateable hereditament” has become since the passing of the Valuation Act, 2001 “relevant property.”

(see s. 3 and Schedule 3 of the Act).

6. The Local Government (Toll Roads) Act, 1979 introduced the regime for charging tolls on new highways. The relevant legislation is

now found in the Roads Act, 1993.

7. There are three relevant sets of provisions. Firstly, there is a power to make schemes. Section 57(1) of the Act of 1993 empowers

a road authority to “make a scheme (“a toll scheme”) for the establishment of a system of tolls in respect of the use of a public

road.” Section 57(1)(d) provides that such a toll scheme shall “include an estimate of the amounts of the tolls that it is proposed to

charge in respect of the use of the toll road by such vehicles and road users..”

8. Secondly, road authorities are given power to charge tolls and to make bye-laws. Section 59 of the Act provides “that a road

authority may charge and collect tolls of such amounts as may be specified for the time being in bye-laws made by it under section

61 in respect of the use of a toll road.” Section 61 empowers the road authority to make such bye-laws “as it considers expedient for

the purposes of the operation and management of a toll road.”

9. Thirdly, road authorities are given power to enter into agreements. Section 63 is the provision most relevant to the present appeal.

It should be quoted in full:

(1) Where a toll scheme is approved by the Minister, a road authority may, with the consent of the Minister, enter into an

agreement with another person under which, upon such terms and conditions as may be specified in the agreement

(including the payment to, or retention by, the person of all or part of the proceeds of tolls in respect of the toll road the

subject of the scheme), the person agrees to do all or one or more of the following:

(a) to pay some or all of the cost of the construction of the road,

(b) to pay some or all of the cost of the maintenance of the road,

(c) to construct or join or assist in the construction of the road for or with the authority,

(d) to maintain or join or assist in the maintenance of the road for or with the authority,

(e) to operate and manage (including provide, supervise and operate a system of tolls in respect of the use of the

road) the road for or with the authority,

(f) such other things connected with or incidental or ancillary to or consequential upon the foregoing as may be

specified in the agreement.

(2) Without prejudice to the generality of subsection (1), an agreement under this section may—

(a) provide for the application of the proceeds of tolls, systems of accounting for tolls collected and the methods

and times of payment of proceeds of tolls to the persons to whom they are to be paid under the terms of the

agreement,

(b) specify the period for which the agreement shall have effect and provide for its termination or suspension and

for matters connected with or incidental or ancillary to or consequent upon the expiration of the agreement or such

termination or suspension, and

(c) provide for the giving of such security as may be specified therein—

(i) to the road authority by any other party to the agreement, or

(ii) by the road authority to any other party to the agreement,

in relation to the carrying out and observance by that party or authority of the terms and conditions of the

agreement.

(3) A road authority may, with the consent of the Minister, enter into an agreement with a party with whom it has

entered into a previous agreement under this section amending the terms or conditions thereof, adding thereto, or

deleting therefrom, terms or conditions or revoking the previous agreement

(4) Entry into an agreement under this section in relation to a regional road or a local road shall be a reserved function.

(5) The parties to an agreement under this section shall carry out the agreement in accordance with its terms and

conditions and a road authority shall have all such powers as may be necessary for that purpose.

10. It should be noted that sub-section (1) expressly provides that an agreement may provide for “the payment to, or retention by,

the person of all or part of the proceeds of tolls in respect of the toll road the subject of the scheme.” That is precisely what is

achieved by the agreements made between the two appellants and the National Roads Authority.

11. This Court, in Dublin County Council v Westlink Toll Bridge Ltd [1996] 1 I.R. 487 held that tolls collected under the statutory

regime are rateable. It was dealing with the old rating legislation, but it is not suggested that the Act of 2001 affects that

determination. The appellant in that case (as it happens, the first-named appellant in these appeals) claimed that the toll was not a

“rateable hereditament” for the purposes of s. 63 the Poor Relief (Ireland) Act, 1838, which listed “tolls.” The appellant was, in the

view of this Court, in occupation of the tolls as a result of an agreement with Dublin County Council. O’Flaherty J, with whom Hamilton

C.J. and Barrington J agreed, approved the holding of Geoghegan J in the High Court that “when an agreement under s. 9 of the Act

of 1979 [in effect, the predecessor of s. 63 of the Act of 1993], that agreement may have the effect of ousting for a particular

period the power of the Council to collect tolls and conferring it instead on the other party to the agreement.” Geoghegan J had held

that this had happened in the instant case. The Court did not, of course, have to consider the point which arises here, which relates

to the calculation of the “net annual value” of the property, and, thus, the amount which will have to be paid in rates.

12. The Valuation Act, 2001 deals with the question of “net annual value.” Section 48(1) 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.”

13. The issue in this case turns entirely on the wording of s. 48(3) 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 and charges (if any) payable by or under

any enactment in respect of the property, are borne by the tenant.”

14. The National Roads Authority adopted schemes pursuant to the Act of 1993 in respect of each of the tolls in issue.

15. There are agreements in existence between the National Roads Authority and the appellant in each of the appeals before the

Court. The effect of these agreements is summarised in the judgment delivered today by MacMenamin J. The general effect of the

agreements is that the toll operator (each of the appellants) collects tolls from road users in accordance with the scheme adopted by

the authority. In the words used in Dublin County Council v Westlink Toll Bridge Ltd, the effect of the agreement is that the power of

the operators “ousted” the power to the National Roads Authority to collect tolls.

16. Most materially for present purposes, the agreements require each operator to pay over to the Authority a specified share of the

proceeds of the toll-collecting activity. This is variously described as a “royalty” or a “revenue share.” It is designed to enable the

Authority to participate in the benefits of the road project as a whole.

17. The key point, in my view, is that these matters are all provided for and governed in detail by an agreement freely entered into

between each operator and the Authority.

18. In my view the expression used in s. 48(3), “rates and other taxes and charges (if any) payable by or under any enactment in

respect of the property,” is not capable of applying to the payments made by each of the appellants under each agreement for the

simple reason that they are not rates, taxes or charges.

19. Firstly, I consider the expression, “rates and other taxes and charges.” The appellants rightly do not claim that the payments are

either a form of rates or taxes. Clearly, they are not. Neither, however, is the word, charges, even taken on its own, apt to describe

the payments. The word charge, in its ordinary or primary meaning, suggests a payment made under compulsion. However, the most

compelling point is that, in context, the word charges is used in close association with both rates and taxes. The respondent invokes

the principle of interpretation, noscitur a sociis. Words must be interpreted in the context in which they appear. This is an obvious

case for application of the more particular aspect of that principle, the ejusdem generis rule of interpretation. A word with a wider or

more general meaning will be treated as limited by the more precise words preceding it. The section draws a distinction between the

“average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that

state” on the one hand and “rates and other taxes and charges,” on the other. The second category establishes a genus, permitting

deduction of deduction of payments made to the State or public authorities by way primarily of taxation. It extends to “rates,”

generally understood as referring to payments made to local authorities to support the provision of services. The term “charges” must

be interpreted in the light of the two preceding subjects.

20. In my view, the payments made by the operators under the agreement are so different in their nature from any of the three

subjects of payment “rates and other taxes and charges” that, in my view, it does violence to the language and intention of the

provision to treat them as amounting to a charge. They are computed in order to arrive at a sharing of the proceeds of the tolls. One

share is retained by the toll authority. The other share is paid to the National Roads Authority.

21. Secondly, I am also satisfied that the payments are not made “by or under any enactment in respect of the property.” No

enactment provides for their payment. They are not paid “in respect of the property.” The payments are made pursuant to

agreements freely entered into. They are made in particular by virtue of the provision of s. 63(1) which permits the Authority to enter

into agreements for “the payment to, or retention by, the person of all or part of the proceeds of tolls in respect of the toll road the

subject of the scheme...” The appellants relied at the hearing on s. 63(5) which provides that “[t]he parties to an agreement under

this section shall carry out the agreement in accordance with its terms and conditions and a road authority shall have all such powers

as may be necessary for that purpose.” In my view, that provision does not alter the fact that the payments are made under the

agreement. Indeed, it tends, if anything to emphasise that fact.

22. For these reasons, I would dismiss the appeal from that part of the judgment of Charleton J which held that the payments of

parts of the tolls collected by them made by the respective appellants under the agreements were deductible pursuant to s. 48(3).