Aer Rianta cpt (applicant/appellant) v The Commissioner of Valuation (respondent) and Tedcastles Aviation Fuels Ltd and the County Council of the County of Clare (notice parties).
Rates Premises Occupation Aviation facility Tedcastles entitled to go on to facility and perform duties thereon Whether Tedcastles were in occupation of aviation facility Terms of agreement between Minister and Tedcastles Interpretation Whether agreement was such that Tedcastles were akin to employees Control of facility Whether Minister remained in occupation Poor Relief (Ireland) Act 1838 (1 & 2 Vict, c.56), sections 61 and 124.
The Supreme Court (the Chief Justice Mr Justice Hamilton, Mr Justice Barrington and Mr Justice Murphy) judgment delivered 6 November 1996.
WHERE the Valuation Tribunal had found that Tedcastles were not in rateable occupation of an aviation facility at Shannon airport, the issue would be resolved by examining the deed and agreement between the Minister and Tedcastles by which Tedcastles were involved at the facility in storing and distributing aviation fuel. On the terms of the agreement relating to the question, of employment and occupation, Tedcastles were merely serving the Minister's purposes in going on to the facility and performing functions and were no more than akin to employees retained to go on premises for rendering services for reward. The control and use of the facility was prescribed and dictated by the Minister as a fundamental term of the agreement and, therefore, the Minister continued to occupy the facility by using it for his purposes.
The Supreme Court so held in determining that Tedcastles were not in rateable occupation of the facility thereby allowing an appeal from a judgment of the High Court in answering questions posed by the Valuation Tribunal by way of case stated.
Richard N. Cooke SC and Marcus F. Daly BL for the appellant, Aindrias O Caoimh SC and Doirbhile Flanagan BL for the respondent, Andrew Bradley SC and Patrick Quinn BL for Clare County Council.
MR JUSTICE MURPHY said that this was an appeal from a judgment of the High Court answering certain questions posed by the Valuation Tribunal in a case stated pursuant to section 5 of the Valuation Act 1988. The High Court found that Tedcastles Aviation Fuels Ltd ("Tedcastles") were in the immediate use and enjoyment of property comprising a fuel depot, tanks, offices, stores and yard at Rineana South, Cleanagh, County Clare ("the aviation facility") and were, as such, liable to rates in respect thereof.
The Valuation Tribunal had concluded that Tedcastles were not in occupation of the facility, that the said facilities remained in the occupation of the State and were used for public services and were, accordingly, exempt from rating. The case stated sought the opinion of the High Court as to whether the Tribunal was correct in law in so finding.
By indenture dated 22 December 1983 ("the 1983 deed") made between the Minister for Transport of the one part and Tedcastles of the other part,
Tedcastles were designated as "the licensee" and the Minister granted licence and permission to Tedcastles "to the sole and exclusive use of the Aviation Fuels Facilities constructed and provided by the Minister on a fully serviced site at the Minister's sole cost at Shannon Airport for the period of 5 years with effect from the date that the Aviation Fuels Facility becomes operational."
Mr Justice Murphy then summarised the findings of the Tribunal as set out in the case stated. In 1937 Aer Rianta was set up as the holding company for Aer Lingus and its main function, outlined in section 80 of the Air Navigation and Transport Act 1936, was to provide finance for Aer Lingus with the agreement of the Minister for Finance. In 1940 Aer Rianta was asked to manage Dublin Airport on behalf of the Minister for Industry and Commerce and that arrangement lasted until 1950 when, by Act, Aer Rianta was appointed as agent. The Air Companies Act 1966 separated the functions of Aer Rianta and Aer Lingus and transferred the shares held in Aer Lingus to the Minister for Finance. As a result, Aer Rianta's main responsibility was in the management of Dublin Airport as the Minister's agent.
On 10 May 1968 Aer Rianta was given responsibility for the management of Shannon and Cork airports on the same basis as it then managed Dublin Airport but this decision was not embodied in any statute and was implemented as an administrative arrangement. All the assets at the airports continued to be vested in the Minister for Transport and Tourism and under the Air Navigation and Transport Acts 1936-1965 and the 1966 Act, the Minister retained full power and authority over the operation of the airports. The agency relationship with Aer Rianta did not affect any of the Minister's powers. While Aer Rianta was a limited company it did not own the assets which it managed and all revenue collected by Aer Rianta from whatever source at the airports was due to the Minister.
The primary role of Shannon Airport was as a refuelling airport for transatlantic flights due to its strategic location. In the 1950s and 1960s longer ranged aircraft were able to fly non stop limiting demand for en route fuel stops to long haul flights where route distances exceeded aircraft range. Aer Rianta, as agent of the Minister, had responsibility for the development of traffic refuelling at Shannon which accounted for approximately 50 per cent of the airport's operational activity. Shannon competed for business with airports on both sides of the Atlantic, namely, Prestwick, Gatwick, Amsterdam, Brussels and Paris in Europe and Gander and Bangor across the Atlantic. Shannon's capacity to retain and develop its business was complicated by the fuel crisis in 1973 and deteriorated further with the subsequent crisis of 1979 when development of new business was impossible as fuel supplies were limited.
In 1977 Shannon lost Aeroflot's technical transit traffic, some 200 flights per year, to Gander as it was more economic for Aeroflot to fly the additional 1,700 miles to Gander with low cost Russian fuel than to purchase fuel at Shannon for the remainder of the flight to Havana. Aer Rianta devised and the Minister implemented a scheme to recover this traffic. A "fuel farm" with capacity for four million gallons was erected at Shannon and Aeroflot arranged for tankers to deliver fuel to a discharge point on a jetty at the airport and the fuel was then pumped to the storage tanks and from there into Aeroflot aircraft. The fuel was owned by Aeroflot, the farm was owned by the Minister and Tedcastles were employed by the Minister as an independent contractor to perform certain functions in the fuel farm.
The aviation facility was commissioned in 1980 and thereafter Aeroflot flights increased at Shannon. In 1983, because Aeroflot was unable to pay for landing fees and catering charges in hard currency, Aer Rianta on behalf of the Minister, negotiated for bartering of a limited quantity of Soviet fuel in exchange for these services. Since 1983 Aer Rianta, on behalf of the Minister, marketed Soviet fuel and also handled over 20 million gallons of fuel for Aeroflot and Pan Am flights.
The fuel farm was built and funded by the Minister for Tourism and Transport from funds provided by the Exchequer at a cost of £1 million to enable Aeroflot store fuel. The terms on which Tedcastles operated the aviation facility were set out in the 1983 deed and the agreements supplemental to or extending the same.
Mr Justice Murphy said that the case stated also set out the circumstances in which the dispute had first arisen. The matter came before the Valuation Tribunal on 2 December 1988 by way of an appeal by Aer Rianta against a determination of the commissioner. At the first hearing the commissioner conceded that Aer Rianta was not the correct rated occupier and the commissioner took steps to, have Tedcastles notified of his intention to rate them as occupier. The issue which then arose was "whether Tedcastles were in rated occupation" of the aviation facility and if not, whether the Minister for Transport and Tourism was in rateable occupation and if so, whether the hereditament was exempt as being used for public purposes.
Mr Justice Murphy said that there was no significant dispute between the parties as to the correct approach to be adopted and the principles to be applied in determining whether Tedcastles were in rateable occupation. Section 61 of the Poor Relief (Ireland) Act 1838 provided that rates were to be made and levied "on every occupier of rateable hereditaments" and section 124 defined "occupiers" as including "every person in the immediate use or enjoyment of any hereditaments rateable".
Mr Justice Murphy said that it had long been held that the concept of "use and enjoyment" in the Irish legislation was comparable to that of "occupation" in the UK legislation. A crucial principle reiterated in Westminster Council v Southern Railway and others [1936] AC 511 was that it was the fact of occupation which was decisive and that ratability did not depend on title to occupy but on the fact of occupation.
Mr Justice Murphy said that it was agreed that the 1983 deed not merely created rights which Tedcastles were entitled to exercise in respect of the aviation facility but in its terms represented the rights duties and functions actually exercised by Tedcastles, the Minister and Aer Rianta and all parties accepted that the liability to rates fell to be determined by a careful analysis of the 1983 deed. Mr Justice Murphy accepted the caveat entered on behalf of the commissioner that the deed must be interpreted in accordance with its terms and not by reference to any object it may have sought to achieve.
The parties drew attention to particular provisions supporting their respective arguments. However, Mr Justice Murphy said that many of the provisions were capable of supporting conflicting arguments. For example, the obligation on Tedcastles by clause 2 was relied on by Tedcastles to show that they were mere servants of the Minister and by the other parties to establish a different conclusion. That obligation was that "the licensee shall serve the Minister in the role of an independent contractor...". Tedcastles stressed the words "shall serve the Minister" to establish their role as employees, whereas the other parties focused on the words "independent contractor" to establish that the relationship of master and servant did not exist.
Mr Justice Murphy said that there was much in the deed to support the inference that Tedcastles did have the immediate use and enjoyment of the aviation facility and indeed exclusive occupation thereof. The operative parts of the deed referred to the grant of a "licence and permission" to Tedcastles of "the sole and exclusive use" of the facility.
Having considered such provisions as the requirement that Tedcastles permit the Minister and his agents to enter on the aviation facility and examine the state of repair, Mr Justice Murphy went on to say that it seemed that the terms of the agreement which were decisive in the question of enjoyment and occupation were few but critical. Clause 2 provided that "(Tedcastles) shall order fuels from the Carrier (Aeroflot) as required by the Minister and shall take same into delivery on behalf of the Minister." Clause 3 specified the means of such delivery from, the jetty through a fixed pipeline to the storage tanks at the facility and therefrom into aircraft service through the installation. Clause 6 required Tedcastles to carry out certain sampling and to maintain the quality of the fuel in storage and clause 7 provided that Tedcastles provide fuel servicing to Aeroflot and users to the reasonable satisfaction of the Minister.
Mr Justice Murphy said that these terms made it clear that the essential duty of Tedcastles under the 1983 deed was to accept fuel from a supplier nominated by the Minister through equipment designated by him and to store the same in tanks built and owned by him, and, as and when required, to deliver the fuel to a customer designated by the Minister. This arrangement did not require the exercise of any business initiative by Tedcastles as their duties were fully prescribed by the document under which they were appointed and their remuneration was stipulated in clause 8.
Mr Justice Murphy said that, undoubtedly, Tedcastles were permitted to go on, to enter into and make use of the facility to perform those functions, but whatever term was used, it was clear that they were performing a task on behalf of the Minister. Their use of the equipment and plant in achieving that purpose did not confer on them any benefit from the equipment or plant but entitled them to the agreed remuneration for the services which they rendered. Mr Justice Murphy said that, notwithstanding any indications to the contrary in the peripheral clauses of the deed, the right of Tedcastles to go on and use the facility was no more than that of an employee or independent contractor. The Minister never withdrew from possession of the aviation facility and continued to occupy it by using it for his purpose and in the manner in which he determined those purposes would best be achieved.
It was argued on behalf of Clare County Council that Tedcastles were not under the control of the Minister as to how they performed their functions, and while this submission might have been correct in so far as it related to the immediate supervision of the daily tasks performed, Mr Justice Murphy said that what was clear was that the control and use of the aviation facility was prescribed and dictated by the Minister as a fundamental term of the 1983 deed and the facility was a crucial part of the business of the Minister in attracting and retaining customers at Shannon.
Mr Justice Murphy said that one could readily envisage a situation in which an airport authority would directly or indirectly carry on a business ancillary to its core activities and the question might well arise as to whether it was doing so by itself or whether it had made the premises available to a third party for that purpose. Mr Justice Murphy said that, clearly, one would be more reluctant to infer that an airport authority had "hived off" an intrinsic part of its core business and in the present case there was little to suggest that that was intended or occurred.
The undisputed facts of the present case did not, in the final analysis, permit of the inference that Tedcastles were in rateable occupation of the hereditament and, in the circumstances, Mr Justice Murphy said that the appeal was allowed and the judgment and order of the High Court, in so far as it decided otherwise, was set aside.
THE CHIEF JUSTICE and MR JUSTICE BARRINGTON agreed with the judgment of Mr Justice Murphy.
Solicitors Byrne Collins
Moran (Dublin) for Aer Rianta Chief State Solicitor for the Commissioner of Valuation Kennedy McGonigle Ballagh (Dublin) for Tedcastles' Michael P Houlihan (Ennis) for Clare County Council.