ZIELINSKI BAKER & PARTNERS LIMITED v COMMISSIONERS OF CUSTOMS & EXCISE [2002] EWCA Civ 692

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR JUSTICE ETHERTON
[2002] EWCA Civ 692Case No Case No: A3/2001/1003Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
ZIELINSKI BAKER & PARTNERS LIMITEDAppellantCOMMISSIONERS OF CUSTOMS & EXCISERespondent
Before
Lord Justice AldousLord Justice TuckeyLord Justice RixMr John Walters QC and Mr Philip Brunt (instructed by Wallace & Partners) for the AppellantMr Paul Lasok QC and Mr Paul Harris (instructed by Solicitors for Customs & Excise) for the RespondentDate 17 May 2002

Lord Justice Aldous:

The

[1]appellant Zielinski Baker & Partners Limited appeal with leave of this Court against the order of Etherton J of 9th May 2001 which allowed the Commissioners of Customs & Excise’s appeal against the decision of the Birmingham VAT and Duties Tribunal of 4th July 2000.[2]The dispute arises from part of an assessment for VAT raised by the Commissioners amounting in total to £32,639.31. The appellants appealed against that assessment contending that the relevant work was zero-rated as it constituted approved alterations to a listed building.[3]The factual background to the dispute can be derived from the facts as found by the Tribunal. “6. Mere Court (“the House”) was erected in about 1830 as a dower house for a much large[r] estate. It is a listed building. It is a large two storied house facing west. The front and the north and the south facing sides are built of red brick and are covered with stucco, the back of the house being built of sandstone. Slate and timber are also used throughout the construction. The northern side of the house (i.e. the left as one faces it) incorporated a wing for servants, now occupied as separate dwellings. 7. To the rear of the house and touching the east/south corner is the beginning of a wall, approximately 9 feet high and 15 feet long. The wall runs eastwards, i.e. directly away from and at right angles to the back of the house. The wall was built at the same time as the house and was also built of sandstone. The far end of the wall touched into the outbuilding which is central to this dispute. The wall does not have and indeed never did have any structural purpose and was described by Mr Dutton in his evidence as aesthetic. 8. The outbuilding was also built of sandstone at the same time as the house. It was in essence a long narrow building, its long sides facing east and west and the wall therefore linked into the corner between the long west wall and the short northern wall. I was shown an extract from an 1885 ordinance survey map. This clearly showed the house, the wall and the out building and there was also pointed out to me another outbuilding since demolished because it was unsafe which had been built directly behind the house and parallel to it, the short southerly wall of which ran along side the northern wall of the disputed outbuilding. There was therefore in effect a courtyard at the back of the house formed by the back wall of the house, the back of the servants’ quarters on its left, the now demolished outbuilding at the top and the wall on its right-hand side. 9. In 1945 Mr Dutton’s father, Mr Arrowsmith, took over the tenancy of Mere House and from it farmed about 1,800 acres. He purchased the house in 1954 and continued to live there with his wife and family until his death. After his death, Mrs Arrowsmith continued to live in the house which was eventually sub-divided into three self contained units of which she occupied the largest and the other two were tenanted. The tenancies fell in and in 1984 Mr and Mrs Dutton purchased the property from Mrs Arrowsmith and the house was returned to one single residential unit, Mrs Arrowsmith moving out to the newly constructed bungalow in the grounds when it was ready for her occupation. 10. The outbuilding appears to have had various uses over the years. In its early years it was used as a tack room, it stabled the family’s horses and housed the family’s carriage. It also housed the scullery. In 1945 for about 12 months, a Romanian refugee lived in the scullery until he met and married an English girl and this is the only known residential use of the building. At the time of the Dutton’s purchase, the outbuilding was divided up. A part of it was used as a garage in which Mrs Arrowsmith garaged her car, a part of it was a tack room which I understand was used for storage and the old scullery was used as a laundry and to house her freezer. There was also a potting shed attached. 11. As far as Mr Dutton knew mains water and electricity had been run to the outbuilding ever since they were introduced to the house and from the same common supply. Gas had not been supplied to the outbuilding until recently when it was supplied as part of the conversion. Before mains water was available the house and outbuildings were both supplied from a series of wells. 12. When the Duttons purchased the property, application was made on their behalf by the Appellants for permission, inter alia, to construct an indoor swimming pool and convert the outbuilding into changing and games facilities. Because the swimming pool was going to extend quite extensively beyond the outbuilding, permission was also sought and granted to take down two trees which had been situated immediately behind the scullery. Because the house was a listed building and the outbuilding was within its curtilage, listed building consent was necessary for the proposed works and this was granted on the 30th August 1995, consent being given to “construction of indoor swimming pool and conversion of existing barn into changing and games facilities together with detached garage at The Mere, Bedford Road, Little Houghton.” 13. I was shown a plan of the new complex which is a two storey structure consisting of a billiard room, plant room and changing room on the ground floor with a games room overhead. Attached is a single-storey area housing the swimming pool. 14. The linking wall between the house and the building remained, as it had always stood, although some renovation to it has had to be done, and specifically what had been just an opening in the wall in 1994 had a gate inserted into it. It should be noted that the opening did not go to the top of the wall and did not form any break in it. A cornice was also added over the gateway to match the house.”[4]It was not in dispute that the House was a listed house and that what was called the “outbuilding” fell within its curtilage such that it was protected under the Planning (Listed Buildings and Conservation Areas) Act 1990. The basic contention of the appellants was and is that in those circumstances the cost of the work done on the outbuilding was zero-rated having regard to section 30 of the Value Added Tax Act 1994 as amended. That submission found favour with the Tribunal, but was rejected by the judge.[5]Section 30 of the Act provides that where supplies, goods or services are zero-rated, no VAT shall be charged. Subsection (2) states that a supply of goods or services is zero-rated if the goods or services are of a description specified in schedule 8.[6]Schedule 8 contains 8 Groups of which Group 6 relates to protected buildings. The relevant parts of that Group are in these terms. “GROUP 6 - PROTECTED BUILDINGS Item No 1 The first grant by a person substantially reconstructing a protected building, of a major interest in, or in any part of, the building or its site. 2 The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity. 3 The supply of building materials to a person to whom the supplier is supplying services within item 2 of this Group which include the incorporation of the materials into the building( or its site) in question. Notes:(1) “Protected building” means a building which is designed to remain as or become a dwelling or a number of dwellings ( as defined in Note(2) below) or is intended for use solely for a relevant residential purpose or a relevant charitable purpose after the reconstruction or alteration and which, in either case, is- (a) a listed building, within the meaning of- (i) the Planning (Listed Buildings and Conservation Areas) Act 1990; or (ii) ... (iii) ... (b) a scheduled monument, within the meaning of – (i) the Ancient Monuments of Archaeological Areas Act 1990; or (ii) …. (2) A building is designed to remain as or become a dwelling or number of dwellings where in relation to each dwelling the following conditions are satisfied- (a) the dwelling consists of self-contained living accommodation; (b) there is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling; (c) the separate use, or disposal of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar provision, and includes a garage (occupied together with a dwelling) either constructed at the same time as the building or where the building has been substantially reconstructed at the same time as that reconstruction.(3) Notes (1), (4), (6), (12), to (14) and (22) to (24) of Group 5 apply in relation to this Group as they apply in relation to that Group but subject to any appropriate modifications.(4) .....(5) .....(6) “Approved alteration” means- (a) ... (b) ... (c) in any other case, works of alteration which may not, or but for the existence of a Crown interest or Duchy interest could not, be carried out unless authorised under, or under any provision of- (i) Part 1 of the Planning (Listed Buildings and Conservation Areas) Act 1990, (ii) ... (ii) ... (iv) ... and for which, except in the case of a Crown interest or a Duchy interest, consent has been obtained under any provision of that Part, but does not include any works of repair or maintenance, or any incidental alteration to the fabric of a building which results from the carrying out of repairs, or maintenance work.(7) ....(8) ....(9) ....(10) For the purposes of item 2 the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building.(11) ....”[7]The relevant part of the Planning (Listed Buildings and Conservation Areas) Act 1990 is section 1. It sets out the meaning of a listed building in these terms:
“Listing of buildings of special architectural or historic interest 1.(1) For the purposes of this Act and with a view to the guidance of local planning authorities in the performance of their functions under this Act and the principal Act in relation to buildings of special architectural or historic interest, the Secretary of State shall compile lists of such buildings, or approve, with or without modifications, such lists compiled by the Historic Buildings and Monuments Commission for England ...or by other persons or bodies of persons, and may amend any list so compiled or approved. (2)... (3).... (4) .... (5) In this Act “listed building” means a building which is for the time being included in a list compiled or approved by the Secretary of State under this section; and for the purposes of this Act- (a) any object or structure fixed to the building; (b) any object or structure within the curtilage of the building which, although not fixed to the building, forms part of the land and has done so since before 1st July 1948, shall be treated as part of the building. (6) ....”
[8]Item No. 2 of Group 6 provided that a supply will be zero rated provided that it is “in the course of an approved alteration of a protected building …” It is accepted that the word “approved” relates to listing building approval and that the alterations to the outbuilding had such approval. Thus the relevant services would be zero rated if they were alterations to a “protected building”.[9]So far as relevant to this case, “protected building” is defined in note (1) of Group 6 as a building. It must be either: (A) a building which is designed to remain as or become a dwelling or a number of dwellings; or (B) a building which is intended for use solely for a relevant residential purpose; or (C) a building intended for use solely for a relevant charitable purpose and which (D) is “a listed building within the meaning of” the 1990 Act or a scheduled monument.[10]In the cross-appeal, the Commissioners contend that the outbuilding is not a listed building within the meaning of the 1990 Act. But the main dispute turns upon whether the alterations were alterations of a protected building and in particular whether they fell within (A), (B) and (D) above; (C) does not apply.[11]The submissions before us were not identical to those advanced before the judge. His analysis of the issues of construction was as follows:
“ Analysis 28. Despite the skill and clarity with which Mr. Brunt put his case, and the careful analysis of Mrs. Mitting, I have reached the conclusion that, on the proper construction of Group 6, a protected building must be a single building which comprises one or more dwellings each of which consists of self-contained living accommodation. 29. The starting point is, as Mr. Brunt has said, the provisions of the Interpretation Act 1978. Section 6 of that Act expressly provides that the rule of statutory interpretation that the singular includes the plural is subject to any contrary intention appearing in the relevant statute. In my judgment, the 1994 Act contains a number of contrary indications in relation to the definition of “protected building” in Group 6 of Schedule 8. 30. Firstly, the draftsman has in several places expressly referred to the plural, presumably for the purposes of clarification. The most pertinent example in Group 6 is in the expression “a dwelling or number of dwellings” in Notes (1) and (2). Elsewhere in the Act, where the draftsman has wished to refer to a situation where a number of buildings are intended to be used together as a residential unit, he has expressly said so. Thus, in Note (5) of Group 5, he has made express provision for the situation “Where a number of buildings are … intended to be used together as a unit solely for a relevant residential purpose”. 31. Secondly, the express provision in Note (2) that a building which is designed to remain as or become a dwelling includes a garage (occupied together with a dwelling) is a strong indication that the draftsman considered that a separate garage might not otherwise qualify as part of a protected building. On the Respondents’ interpretation of “protected building” this provision is entirely redundant. Mr. Brunt explained that the provision must have been inserted for the avoidance of doubt. On the Respondents’ construction of “protected building”, however, there could not be a clearer case of a secondary building forming part of a dwelling than a garage occupied together with a house. More important, however, and to my mind highly damaging to the Respondents’ case, is the qualification in Note (2) that a garage only qualifies as part of a dwelling, and hence a protected building, if it was either constructed at the same time as the other building or, where the building has been substantially reconstructed, at the same time as that reconstruction. That qualification is inconsistent with an interpretation of “protected building” which would embrace any separate structure within the curtilage of a listed building erected at any time prior to 1 st July 1948. Mr. Brunt was unable to suggest any reason why a garage should be the only secondary building which, on the Respondents’ construction, has been selected by the draftsman for this unfavourable treatment. 32. Thirdly, the emphasis and requirement in Note (2) of Group 6 that “each” dwelling must consist of “self-contained living accommodation” does not sit easily with the notion that the draftsman contemplated, as so obvious that he need provide no further clarification, that a “protected building” could comprise several structurally distinct buildings among which the various facilities of a single dwelling are spread. 33. So far as concerns Note (10) of Group 6, I am unable to draw any helpful inferences from this provision for the purposes of this appeal. The Note provides that the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building. I find it impossible to understand what purpose the draftsman thought was served by this Note, since such a new secondary building could never qualify as a protected building. It will have been constructed after 1 st July 1948 and so would fall outside the provisions of sub-section 1(5) of the 1990 Act.”

The judge concluded:

“38. For the reasons set out in paragraphs 29 to 33 above, even if a strict approach to construction is not taken, I would conclude that, on a proper interpretation of Group 6, a building does not qualify as a protected building if it does not contain within itself one or more dwellings with self-contained living accommodation. A strict construction, in accordance with the decisions of the European Court of Justice, makes that conclusion inevitable.”
[13]It is convenient to deal first with the cross-appeal. Mr Lasok QC, who appeared with Mr Harris for the Commissioners, reminded us that zero rating was effectively an exception to the general rule contained in Article 12 of the Sixth VAT Directive. Thus the provisions of Group 6 should be construed strictly. He went on to draw to our attention the structure of section (1)(5) of the 1990 Act. It defined a listed building as being one which was included on the relevant list. It did not include structures such as outbuildings. It followed, he submitted, that the outbuilding was not a listed building and therefore was not a listed building which fell within the requirement of Note (1)(a) of Group 6. The fact that the outbuilding was a structure within the curtilage of the House and therefore was treated under the 1990 Act as being “part of the building” (the House) was irrelevant for two reasons. First the treatment of structures as being part of the main building by section 1(5) was “for the purposes of this Act” and second the scope and purpose of the planning legislation was different from the scope and purpose of the VAT legislation. There was no reason why the deemed incorporation of structures, no doubt introduced so as to preserve the heritage, should have been extended to a provision for zero rating provided to facilitate house ownership.[14]I believe that

the judge rejected this argument for the right reasons when he said:

“35. Mr. Harris also submitted that the words “and for the purposes of this Act” in sub-section 1(5) of the 1990 Act, which introduce an extended meaning of listed building, so as to embrace other structures within the curtilage of a listed building, have the effect that the extended definition does not apply to the 1994 Act. I do not agree. Note (1)(a) of Group 6 provides that an essential feature of a protected building is that it is a listed building “within the meaning of” the 1990 Act. A listed building “within the meaning of” the 1990 Act is a building which falls within the extended definition in sub-clause 1(5) of the 1990 Act.”
[15]I would therefore dismiss the cross appeal and will proceed to consider the main dispute between the parties upon that basis.[16]Mr John Walters QC who appeared for the appellants, submitted that the outbuilding fell within the definition of a protected building in Note (1) of Group 6. He drew our attention to the fact that Group 6 was dealing with protected buildings. Item 2 of Group 6 was concerned with supplies in the course of an approved alteration of a protected building. In the present case the protected building, the building on the list, was the House. It followed that there were two definitions which were relevant to construe Item 2 and Note (1), namely that contained in Note (1) and that contained in section 1(5) of the 1990 Act. Thus a protected building must satisfy the requirement of being a dwelling or used for residential purposes (requirements (A) and (B) above) with the “extent” of what is the building being that laid down in section (1)(5) of the 1990 Act. It followed that in this case the outbuilding was treated as being part of the building (the House). That building satisfied the requirements of Item No. 2. Thus the supplies were zero rated.[17]I reject that submission. It is not right to read into Group 6 any definition from any other Act unless expressly required. Group 6 sets out items which are zero rated. The words used have their normal meaning unless the context requires otherwise.[18]Item No. 2 is concerned with supplies “in the course of an approved alteration of a protected building”. The words “protected building” are given a specific meaning in Note 1 which includes listed buildings and ancient monuments. The word “approved” refers to the approval required by the listing and ancient monuments legislation. The word “alteration” refers to the alterations the subject of the supplies. In this case the alterations were to the outbuilding. It is agreed they were approved. Thus there remains the question of whether the alterations were to a “protected building” namely a building as defined in Note (1).[19]Note (1) has the dwelling house and residential purposes requirements which I have referred to as (A) and (B). It also requires the building to be a listed building within the meaning of the 1990 Act, which I have referred to as (D). The requirements of (A) and (B) are separate to that in (D) in the sense that both have to be met.[20]In the present case the approved alterations were made to a building namely the outbuilding: not the House. The outbuilding was a listed building within the meaning of the 1990 Act. But it was not a dwelling nor was it to be used for residential purposes. It was therefore not within the definition of “protected building” in Note (1) and therefore the supplies were not zero rated. There is nothing in Item No. 2 or Note (1) which imports the idea that alterations to the outbuilding should be deemed to be alterations to the House.[21]I believe that the conclusion reached is to some extent supported by the overall approach adopted in Item No.2 and Note (1). The definition of “protected building” is adopted to cover both listed buildings and scheduled monuments. Scheduled monuments by reason of section 1(11) and section 61(7) of the 1979 Act are monuments which can range from buildings to sites comprising vehicles. The first part of Note (1) confines a “protected building” to a building having certain attributes. That excludes such things as sites with vehicles and outbuildings such as stables, pig sties and the like. The second part of the definition contained in Note (1)(a) and (b) confines the definition to listed buildings and scheduled monuments as defined in the relevant Acts. There is no reason to read into the first part of the definition any requirement as to the extent of what is the building referred to.[22]Both Mr Lasok and Mr Walters sought to bolster their submissions by reference to other parts of the Notes as aids to construction. I did not find them helpful and for that reason will deal with them shortly.[23]Mr Lasok referred us to Group 8A of the Value Added Tax Act 1983 which defined a protected building as one which for relevant purposes fell within the Town and Country Planning Act 1971 or the Ancient Monuments and Archaeological Areas Act 1979. He submitted that it was clear that the change from that to the definition in the 1994 Act was to limit zero rating to satisfy the social purpose of providing tax relief for housing purposes. That being so, it would be wrong to construe Item No. 2 to cover alterations to outbuildings. He is probably right that the change was made for the social purpose he suggests, but that does not solve the dispute as the House was a dwelling house and the alterations were to an outbuilding that was according to the 1990 Act to be treated as part of the main building. Thus the construction proposed by Mr Walters would satisfy the purpose.[24]The judge relied upon the provisions of Note (2). Mr Walters submitted, rightly in my view, that the judge’s comments read too much into the mind of the draughtsman.[25]Mr Walters sought to rely upon Note (10). He submitted that it was probable that this Note was included for the avoidance of doubt to forestall an argument that the outbuilding of a building was within the Note, because it could be said to be an alteration to the land within the curtilage of the listed building and would qualify as an alteration to the listed building by virtue of the definition of section 1(5) of the 1990 Act.[26]For my part I am not able to draw the suggested conclusion as to the purpose of Note (10) dealing as Note (2) does with listed buildings and scheduled monuments. I agree with

the judge when he said in paragraph 33 of his judgment:

“33. So far as concerns Note (10) of Group 6, I am unable to draw any helpful inferences from this provision for the purposes of this appeal. The Note provides that the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building. I find it impossible to understand what purpose the draftsman thought was served by this Note, since such a new secondary building could never qualify as a protected building. It will have been constructed after 1 st July 1948 and so would fall outside the provisions of sub-section 1(5) of the 1990 Act.”
[27]The judge was referred to a number of European authorities. They are not directly relevant. The only one to which we were referred was EC Commission v United Kingdom Case 416/85 [1998] STC 456 where the Court made it clear that an exemption from the need to charge VAT at the standard rate could only be granted “for clearly defined social reasons”. That is important but does not throw light on the construction of Note (1).[28]Conclusion - I would dismiss the appeal and the cross-appeal.

Lord Justice Tuckey:

[29]I have read the judgments of Lord Justice Aldous and Lord Justice Rix which fully set out the statutory provisions and the findings below. By the end of the argument I thought that Item 2 and Note (1) had to be construed step by step as the Commissioners contended. Lord Justice Aldous’ judgment confirmed this view. However, after reading the judgment of Lord Justice Rix, I am persuaded that I was wrong. For the reasons he gives (which I cannot better) I think his suffusive or holistic construction is to be preferred.[30]I would therefore allow this appeal. I agree that the cross-appeal should be dismissed.

Lord Justice Rix:

[31]I regret to find myself disagreeing with Lord Justice Aldous on the outcome of this appeal. I gratefully adopt his setting out of the findings of the Tribunal, the statutory provisions and the reasoning of the judge. I agree with him that the Commissioners’ cross-appeal fails. I can therefore proceed directly to the critical point at issue, which to my mind is: What is the building which must be “protected” for the purposes of this case? Is it the outbuilding or the House? If it is the outbuilding, as the Commissioners assert, then it is common ground that the appeal must fail, for it is accepted by the appellants that the outbuilding is not a dwelling for the purposes of notes (1) or (2). If, however, it is the House, then I can see no answer to the appellants’ submission, accepted by the Tribunal, that the supply of services was within item 2 as being a supply “in the course of an approved alteration of a protected building”.[32]On that critical issue I have found the reasoning of the judge of less assistance than it would otherwise have been, because he was addressing a submission made below which was not pursued by the appellants on this appeal, to the effect that “a building which is designed to remain as or become a dwelling or number of dwellings” within the meaning of notes(1) and(2) should be interpreted to include a reference to “buildings” so designed: see paras 28/30 and 32 of the judgment below, quoted by Lord Justice Aldous at para 11 above. Similarly, I found Mr Lasok’s submissions of less assistance than they might otherwise have been, because he tended to assume that the relevant building was the outbuilding, which of course settled the outcome of the appeal in his favour, rather than to deal with the point of construction as a matter of principle. He responded helpfully to points of construction made by Mr Walters, but otherwise his only positive submissions were (1) that “building” must refer to the outbuilding rather than the listed building, viz the House, because “protected building” covered not only listed buildings but also scheduled monuments and the definition of scheduled monuments in section 61 of the Ancient Monuments and Archaeological Areas Act 1979 included many things other than a building; and (2) that the specific reference to a garage at the end of note (2) militated against the concept that any other building separate from the listed House which did not itself qualify as a self-contained dwelling could be within the definition of “protected building”. In that he was supported by the reasoning of the judge. I shall refer to these points below.[33]In my judgment, however, the essential point in the appeal can only be resolved by considering the language of the statute carefully, without preconception. The problem is: granted a definition of listed building (note 1(a)) which, by reference to section 1(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990 (the “Planning Act”), extends the ambit of a listed building over any separate structure within its curtilage provided it has formed part of the land since before 1 July 1948, how does Group 6 treat such a separate structure when by definition it “shall be treated as part of the building”? By definition such a structure is not to be treated as a separate building but as “part of the building”. In such circumstances, it is not easy, prima facie, to see why the outbuilding should be treated as a separate building which must on its own qualify as a “protected building”. If it is to be treated in that way, one might expect that the language of Group 6 would contain clear pointers to that effect. For these purposes one would want to look carefully, for instance, at or for any provision which talks of part of a building, or which deals with the concept of a separate building within the curtilage of, or at any rate connected with, a protected building.[34]What in my judgment it is not permissible to do, unless a consideration of the statutory language as a whole justifies it, is to determine the question by what the Tribunal called a “step by step” approach. Two citations from the Tribunal’s decision will illustrate the point and the counterpoint:
“29. Mr Harris’s principal submission was that the outbuilding could not be brought within the definition of a protected building because that definition clearly attached to the house and, by virtue of the wording, “a” protected building could not refer to more than a single building. Mr Harris’s contention was that the definition of a protected building contained in Note 1 should be treated as a staged definition. The first stage was to ask whether the outbuilding was “a protected building”
. If yes, the second stage was to go on to ask whether it was “designed to remain as or become a dwelling or a number of dwellings…reconstruction or alteration”. If the answer to that question was also yes then the final question to be addressed was was it a listed building. Before one even considered the listing the tribunal had to be satisfied that the first two hurdles had been negotiated. The consequence of this approach is that no regard could be taken of the definition of a listed building in the Planning (Listed Buildings and Conservation Areas) Act in answering the first question of whether or not the outbuilding was “a building”… “37. I have next to decide how to apply the statutory test of a protected building. Is the approach to be taken a step by step one as argued by Mr Harris or is the definition to be viewed globally as contended by Mr Brunt? I find nothing within the definition itself which suggests a staged approach is necessary and to me this is not how the definition naturally reads. I also know of no authority or rule of construction (and I was referred to none) to support this view. I also believe that to employ such an approach would defeat the intention of the legislation. In my view a protected building was defined by reference to listing quite deliberately because the purpose of the legislation was to alleviate the financial burden on the owners of listed buildings. That financial burden extends to work carried out on structures within the curtilage of the listed structure and when the same premium is payable for all such structures it defies common-sense to allow relief only on the listed structure itself. For these reasons I believe that the correct approach is not that suggested by Mr Harris but to take the totality of the definition and apply it as a whole.”[35]So the question is whether the step by step approach is correct; and to begin by assuming that either approach is correct, is to resolve the issue before the discussion begins. If therefore that step by step approach is to be adopted, it needs to be made good by arguments derived from the statutory text which prevail over any such arguments raised to the opposite effect.[36]Given my concern that the point of entry may run the danger of concluding rather than beginning the process, it is hard to know where to start. I console myself with the thought that wherever one starts, it is important to bear in mind the text as a whole; and also with the thought that a reasonable place to start is with the essential concept of the “protected building” itself. That after all is the title of Group 6 – “Protected Buildings”.[37]The concept of a “protected building” is of course defined in the notes of Group 6, and that definition inter alia requires it to be a dwelling (as itself defined). It was submitted by Mr Lasok, in support of his step by step approach, that note (1) which contains the definition of “protected building” mentions first “a building”, secondly the need for that building to be a dwelling, and only thirdly the need for it to be either a listed building or a scheduled monument. He focused on the words “and which, in either case, is (a) a listed building…[or] (b) a scheduled monument…” as emphasising that one only got to the question of whether the building is listed or scheduled if one had already been able to tick, as it were, boxes marked “(1) Is it a building?” and “(2) Is it a dwelling?” It is true that such a point can be made on the language of note (1). But in my judgment that point loses its power when one considers first, that this submission ignores that the concept of a listed building has already been built into the idea, already mentioned in item 2, of “an approved alteration” (see para 39 below); secondly, that such an approach begs the very question of “Which building?”; and thirdly, that the heading “Protected Buildings” goes back to a time in 1984 when the then new Group 8A, headed “Protected Buildings” covered all listed buildings or scheduled monuments whether or not they were dwellings (see para 47 below). In truth, the whole concept of a “protected building” is suffused with the inherent idea that the building in question is either listed or scheduled. Why else is it called “protected”? The concept of protection is not a VAT concept, it is a concept of listing or scheduling, a heritage concept. This to my mind is an indication of the error of the argument of putting the question of listing off to some later step or stage. It suggests that the definitions contained in Group 6 have to be viewed holistically, as a whole.[38]Item 1 brings with it the first mention after the title of a protected building. The concept of “any part of…the building” is expressly mentioned. Although the appellants’ claim to zero-rating falls under item 2 rather than item 1, item 1 is nevertheless of interest because of its mention of part of a protected building. It is known from the definition of a listed building that even a separate structure within the curtilage of a listed building can be part of that building. Given that the text expressly contemplates the relevance of part of a protected building for the purposes of item 1, the reader is in a sense already prepared for the question: What about a separate building which is nevertheless part of a listed building? One answer, and indeed the only express answer to that question found in the text is in note (10), to which I will come below, albeit that is directed to item 2 and as such is potentially engaged in the present case.[39]Item 2 introduces the concept of an “approved alteration of a protected building”. It is possible to found an important part of reasoning in favour of the Commissioners on the fact that the alteration in this case was in a practical sense to the outbuilding, not to the House (see para 20 above). I am concerned, however, that this is to misstate the legal position. Given that the “approved alteration” in question is an alteration which cannot be carried out unless authorised under the Planning Act (as note (6) confirms) and that that Act is the statute which provides the definition of a listed building as one that includes (in our case) the outbuilding, it is in my judgment more natural to consider that the “approved alteration” is an alteration to the House, which is after all the building which is listed . My view in this respect appears to be confirmed by the “Planning (Listed Buildings and Conservation Areas) Act 1990 Listed Building Consent” contained in the papers. That states the consent as follows:
“CONSTRUCTION OF INDOOR SWIMMING POOL AND CONVERSION OF EXISTING BARN INTO CHANGING AND GAMES FACILITIES TOGETHER WITH DETACHED GARAGE. At THE MERE BEDFORD ROAD LITTLE HOUGHTON”
[40]The reference to the detached garage may be noted. There is no zero rating for the detached garage although it forms part of the approved alteration to the listed building, the Mere, viz the House. This consent is cited as part of the facts of the case in para 12 of the Tribunal’s findings (see para 3 above). Thus in my judgment, although one might well regard the alteration as being to the outbuilding, the “approved alteration” is to the House. The focus of item 2 therefore appears to be on the House, not on the outbuilding. Moreover, the concept of an approved alteration again indicates that one cannot proceed by leaving to last the question “Is it listed?”, and that the definitions contained in Group 6 have to be taken as a whole. After all, unless one starts with an approved alteration of a listed building or a scheduled monument, item 2 is not in play at all.[41]Mr Lasok submitted that one reason why one has to come first to the question or box “Is it a building?” is that while every listed building is a building, not every scheduled monument is a building: see the definition in section 61 of the Ancient Monuments and Archaeological Areas Act 1979, viz – “(7) “Monument” means…(a) any building, structure or work, whether above or below the surface of the land, and any cave or excavation;(b) any site comprising the remains of any such building, structure or work or of any cave or excavation; and(c) any site comprising, or comprising the remains of, any vehicle, vessel, aircraft or other movable structure or part thereof…”[42]It may be therefore that one has to ask, in the case of an ancient monument, Is it a building? Only a scheduled monument that is a building will qualify. But that does not mean that the question has to be asked even before knowing that one is dealing with “an approved alteration” of a scheduled monument; and it certainly does not tell you which building to consider when dealing with a separate part of a listed building.[43]One comes then to note (2). That defines further the requirement that the building be a dwelling. The dwelling must consist of “self-contained living accommodation”. That in itself tells you nothing about which building must be a dwelling, so defined. Prima facie, for reasons set out above, the building (whose approved alteration has been obtained) is the House. It has not been suggested that the House is not a dwelling consisting of self-contained living accommodation. Nevertheless, Mr Lasok submitted, in support of some of the reasoning of the judge, that the provisions of note (2) and in particular what it has to say about a garage, support a conclusion in favour of the Commissioners. Lord Justice Aldous does not agree (para 24 above) and I agree with Lord Justice Aldous.[44]The reference to a garage is nevertheless interesting. Note (2) provides in effect that a garage shall be included in a dwelling provided it has been “constructed at the same time as the building or where the building has been substantially reconstructed at the same time as that reconstruction”. What is “the building”? Whether it is an outbuilding or the main house, the limitation on the inclusion of a garage to one constructed at the same time as “the building” or at the same time as the building’s substantial reconstruction remains. The judge commented (at para 31) that the singling out of a garage as the only “secondary building” subjected to such a qualification needed explanation, and perhaps it does: but it does not seem to me to distinguish between the competing constructions. The judge said that “That qualification is inconsistent with an interpretation of “protected building” which would embrace any separate structure within the curtilage of a listed building erected at any time prior to 1 st July 1948”. But if one thing is plain, an interpretation of “protected building” has to accommodate any such structure, for that is inherent in the definition of listed building in the Planning Act and adopted in note (2).[45]Perhaps it was for this reason that Mr Lasok submitted, for the purpose of his cross-appeal, that the definition of listed building adopted for Group 6 did not include the extended definition found in section 1(5)(a) and (b) of the Planning Act. He submitted that the Planning Act’s definition stopped at the semi-colon found immediately before the words “and for the purposes of this Act”. Only what came before the semi-colon was what a listed building “means”. What came after the semi-colon was a deeming provision limited to “the purposes of this Act”, as though those words prevented that provision being applied in any other statute. The judge rejected that submission (at para 35 of his judgment), and so has Lord Justice Aldous. It is plain from note (10) (as to which see further below) that Group 6 contemplates that the provisions of section 1(5)(b) of the Planning Act relating to buildings separate from but in the curtilage of a protected building are relevant.[46]The judge’s reference in his paragraph 31 to a “secondary building” is therefore thought provoking, for one might have thought, in the light of section 1(5)(b)’s extended meaning of a listed building, that Group 6’s notes would have made specific provision for secondary buildings within the curtilage of a listed building. If such a secondary building, ex hypothesi part of the listed building, is not to be treated as part of a protected building where it is not itself a self-contained dwelling, then one would expect that to be clearly stated. And it is clearly stated in note (10) that the construction of such a secondary building within the curtilage of a protected building “does not constitute an alteration of the protected building”. I will return to note (10) below, for the judge was critical of it as a senseless piece of drafting (at para 33 of his judgment). For the moment it may be noted that the 1984 amendments to VATA 1983 did make specific reference to secondary buildings. This was a matter relied on by the Commissioners at an earlier stage of these proceedings.[47]It is necessary at this point to refer briefly to the legislative background of Groups 5 and 6. Prior to 1984, all construction and alteration of any buildings, commercial or residential, were zero-rated (Group 8 of VATA 1983). There was no special provision for protected buildings. In 1984 VATA 1983 was amended: Group 8 was limited to construction only, excluding alteration, but still applied to all buildings, commercial or residential. A new exception (note (2)(a)) was introduced relating to the construction of a “secondary building” in the grounds of a “main building” used wholly or mainly as a private residence: the supply of services in the course of such construction was excepted from zero-rating save where the secondary building was itself to be so used, or where the secondary building was a garage (subject to other qualifications which it is unnecessary to state). Group 8A, dealing with the substantial reconstruction or alteration of protected buildings for the first time, incorporated by its note (7) Group 8’s note (2) dealing inter alia with the exception relating to secondary and main buildings. However, like Group 8 at that time, Group 8A was not limited to protected buildings which were also dwellings. In 1989 there were further amendments to VATA 1983 to reflect the European Court’s decision in EC Commission v. United Kingdom (Case 146/85) [1988] STC 456 . Thus Group 8 was now limited to the construction of dwellings. The exception relating to secondary and main buildings was deleted presumably because the idea of a secondary building being constructed as a dwelling was in any event within the rationale of Group 6 as a whole; and “dwelling” was defined to include “a garage constructed at the same time as a dwelling for occupation together with it” (note (2)). Group 8A was also now confined to dwellings (by an amendment to note (1)) and also introduced two new notes: note (1A) which applied notes(1) to (8) from Group 8 and thus included Group 8’s note(2) about a garage; and note (6A) which was the precursor of Group 6’s note (10) in the 1994 Act.[48]The combination in the 1989 revision of Group 8A, maintained in the 1994 revision in relation to Group 6, of the dropping of any special provision relating to secondary and main buildings and of the appearance of note (10) is to my mind strongly suggestive. No special provision was made for secondary buildings (other than for garages) even though the draftsman specifically had in mind the special definition of listed buildings in section 1(5)(b) of the Planning Act and went out of his way in note (10) to emphasise that the construction of a separate building within the curtilage of a protected building did not constitute an alteration of the protected building.[49]And so to note (10) itself. I will set it out again:
“For the purposes of item 2 the construction of a building separate from, but in the curtilage of, a protected building does not constitute an alteration of the protected building.”
[50]The judge’s comments on this note are set out by Lord Justice Aldous at para 26 above. The judge was content to ignore the note on the basis that in any event the construction of a new secondary building “could never qualify as a protected building”. But that comment is premised on the idea that it is the secondary building which must qualify as the protected building. One has to keep an open mind about that. It is clear that note (10) has in mind the extended definition of a protected building as including a separate building within its curtilage (provided it was built before 1 July 1948). It is difficult to think that the draftsman ignored or forgot about that temporal qualification, when he was specifically addressing section 1(5)(b) of the Planning Act. The note goes back to the time in 1989 when the previous special provision relating to secondary buildings within the grounds of a main building was dropped. It is not possible to accept Mr Lasok’s submission that it is of less importance because it comes as the last note in the Group far separated from Note (1) or is confined to the concept of “alterations”. On the contrary, it specifically refers back to item 2, which is part of the leading text.[51]Item 2 is concerned with “an approved alteration of a protected building”. So note (10) is telling the reader, by reference to the subject-matter of approved alterations, that the construction of a secondary building cannot constitute an alteration of a protected building. That can only mean that the protected building there referred to is the main building, the building that is actually listed. Of course the construction of a secondary building cannot constitute an alteration of that secondary building: the difficulty of the judge’s reading therefore goes well beyond his criticism that the draftsman was somehow forgetful of the temporal qualification in section 1(5)(b). Note (10) only makes sense if “the protected building” referred to at the end of the note is the main building: “a protected building” in the middle of the note is the main building within whose curtilage a secondary building is spoken of, and “the protected building” at the end of the note is the same building, viz the main building. It is not the secondary building. Why then does the draftsman warn that a new secondary building cannot “For the purposes of item 2” constitute an alteration of the protected building? Because, in my view, although such a new construction does not itself become part of the listed building, having been built after 1 July 1948, nevertheless the construction of it must itself be the subject matter of consent. Just as the “detached garage” was inter alia the subject matter of the Consent in the present case. Thus, even though such a new outbuilding may be “an approved alteration of a protected building”, and even though that building in such a case is a listed dwelling, such construction is not an alteration for the purposes of item 2. In the case of a garage, it may fail for zero-rating under the provisions of note (2) as well, because special provision is made about garages. But if the approved alteration concerns another kind of secondary building which is constructed from new, then it is note (10) which prevents it from acquiring zero-rated status even though it would otherwise fall within item 2. On the judge’s construction and on the logic of Mr Lasok’s submission note (10) is meaningless. This must be a weakness of their approach. In my judgment, however, the language of note (10) supports the holistic approach to construction of the Tribunal and its conclusion that the building whose alteration is under consideration is the main building and not the secondary building. So understood, moreover, note (10) has a valid function.[52]Turning from language to purposive construction, Mr Lasok submits that the appellants’ construction would cover not only the present case, which he obviously regards as bad enough but which at least concerns an outbuilding put to domestic use as part of a home, but also, for instance, the alteration of an Orangery situated some distance from its main house and turned into a café for the use of paying visitors to the house which is used as a dwelling. Any other case would have to be proved on its own merits, but I would not be offended by such an example. Group 6 is obviously designed, by the limited support there given in the way of zero-rating, to encourage the use of listed buildings and scheduled monuments as dwellings. Their repair and maintenance cannot be zero-rated (note (6)), but approved alterations to them may be. Such alterations are the more costly, because they have to be done in approved ways, to blend into the existing buildings. Limited support is therefore given to maintain their use as dwellings and to encourage the preservation of the nation’s heritage. The appearance of such buildings are a pleasure to all. I cannot see why Mr Lasok’s example, albeit chosen as the most extreme which could come to his mind, offends the purpose or rationale of Group 6 in the case of protected buildings as there defined.[53]Mr Lasok also submitted that in the case of doubt the narrower of two possible constructions should be adopted, since zero-rating is an exception to the general VAT regime and can only be supported to the extent that it falls within the rationale of EC Commission v. United Kingdom which requires any such exception to be grounded in “clearly defined social reasons”. The judge was impressed by that submission, but I respectfully agree with Lord Justice Aldous that the European dimension does not throw light on the correct construction in this case. I would consider that the rationale of support for zero-rating indicated by that authority would support either construction.[54]For the reasons developed above, I would therefore conclude that the preferred approach is the holistic approach rather than the step by step approach. The former does better justice to complex provisions which have to be taken as a whole, but also to the essential concept of a “protected” building, ie a building which is protected because it is listed or scheduled albeit it must also be a dwelling within the meaning of that term. Once the holistic approach is adopted, the temptation is avoided of rejecting the appeal on the simple ground that it is the outbuilding that must qualify as the protected building and must therefore be a dwelling in itself. The concept of “an approved alteration of a protected building” supports the view that the building with which the court is concerned is the main building, not the secondary building. So does note (10), which is otherwise turned into a nonsense. The items and notes under Group 6 are careful to deal expressly with all or at any rate most of the essential questions which would clearly arise for the reader. The concept of a protected building is defined. The concept of substantial reconstruction (see item 1) is defined in note (4). An approved alteration is defined. Mere repair and maintenance is put on one side. Can there be apportionment where services are supplied in part for an approved alteration and in part for other purposes? Yes, see note (9). A definition of listed buildings is adopted which renders separate outbuildings part of the listed buildings themselves. In such circumstances, if the draftsman wished again to separate such outbuildings from the listed building for the purpose of requiring that each such outbuilding had to qualify as a dwelling by itself, when it never had to qualify as a listed building by itself but was an integral part of a listed building for all that it was physically separate, then I would have expected the notes to deal expressly with that requirement: just as they had at one time, albeit for different reasons not connected with the section 1(5)(b) definition, made distinctions between main buildings and secondary buildings in the grounds of the former. There is nothing in the rationale of the European jurisprudence nor of Group 6 to require the Commissioners’ approach.[55]In sum, for reasons which to some extent track the reasons of Lord Justice Aldous, but in other respects depart from them, I would respectfully differ from his conclusion and would for my part allow this appeal.

Order

The appeal is allowed and the cross-appeal is dismissed; the costs of the appeal will be paid by the respondents to the appellants, to include the costs of the cross-appeal; the costs in the court below will also be paid by the respondent; permission to appeal to the House of Lords refused. (Order does not form part of the approved judgment)

Cited in 1 later judgment