Cardtronics UK Ltd and others v Sykes and others (Valuation Officers) [2020] UKSC 21

Supermarkets and shops hosted ATMs operated by associated banking companies. The Supreme Court held that the ATM sites were not separately rateable hereditaments from the host stores, as the retailers remained in paramount occupation, dismissing the Valuation Officers' appeals.

Facts

The appeals concerned the rating treatment of automated teller machines (ATMs) located in supermarkets and convenience stores belonging to major retailers including Tesco, Sainsbury’s, the Co-operative, and a Londis store hosting a Cardtronics ATM. In each case, the ATM was installed and operated not directly by the retailer but under contractual arrangements with an associated banking company (separation required for regulatory reasons). The ATMs included ‘external’ machines (typical ‘hole in the wall’ machines accessible 24 hours from outside the store), ‘internal’ machines (accessible only from within during opening hours), and one ‘moveable’ ATM on the first floor of Tesco’s Nottingham store.

The Valuation Tribunal for England had decided that all ATM sites were in separate rateable occupation. The Upper Tribunal (Lands Chamber) upheld this for external machines but not internal ones. The Court of Appeal held that none of the machines, internal or external, were separately rateable. The present appeals were lead appeals, with some 34,000 further appeals stayed pending the outcome.

Issues

Two principal issues arose: (1) whether the sites of the ATMs were properly identifiable as separate hereditaments from the host stores; and (2) if so, who was in rateable occupation – the retailer or the associated bank.

Arguments

Valuation Officers (Appellants)

Mr Morshead QC argued that the Court of Appeal’s approach undermined the principle of equality in rating. Applying the ‘core principle’ from Lord Russell’s speech in Westminster Council v Southern Railway Co [1936] AC 511, he submitted the focus should be on the specific ATM sites and whether the retailer’s control interfered with the bank’s enjoyment of the site for the purpose for which it was occupied. He contended the landlord-lodger example was anomalous and had been absorbed into the Southern Railway principles.

Retailers (Respondents)

The retailers argued that the ATM service was not a distinct business activity but an integral part of the retail store’s business, akin to photo-booths or coin change machines. Mr Kolinsky QC argued that ATMs constituted ‘non-rateable plant’ under the Valuation for Rating (Plant and Machinery) (England) Regulations 2000 and, relying on Kennet District Council v British Telecommunications [1983] RA 43, should be disregarded for all rating purposes, including identifying the hereditament. They also submitted the ATM sites lacked the self-containment required by Woolway v Mazars [2015] UKSC 53.

Judgment

The Supreme Court (Lord Carnwath giving the sole judgment, with whom Lord Reed, Lord Kerr, Lady Black and Lord Kitchin agreed) dismissed the Valuation Officers’ appeals and upheld the Court of Appeal’s order.

Identifying the Hereditament

On the ‘non-rateable plant’ argument, the Court adopted the reasoning of the Upper Tribunal and Court of Appeal, holding that the statutory assumption in the 2000 Regulations applies only for valuation purposes and cannot be applied to the logically prior question of whether a hereditament exists. The presence of an ATM could therefore be taken into account when determining whether a separate hereditament existed.

On self-containment, the Court agreed that once an ATM was installed, the boundaries of a fixed ATM site could be defined with sufficient precision to satisfy the geographic test in Woolway v Mazars. The Upper Tribunal was entitled to distinguish the Nottingham ‘moveable’ ATM on the basis that its ‘essential qualities’ were ‘impermanence and mobility’ – a finding of fact open to them.

Rateable Occupation

On the critical issue of rateable occupation, the Court rejected the Valuation Officers’ analysis. Lord Carnwath considered that Mr Morshead’s approach sat uneasily with Lord Herschell’s formulation in Holywell Union Assessment Committee v Halkyn District Mines Drainage Co [1895] AC 117, particularly the familiar landlord-lodger example, which the Court declined to treat as anomalous.

The Upper Tribunal had found that the retailers had not parted with possession of the ATM sites and retained occupation, sharing actual occupation with the bank, where both parties derived a direct benefit from the use of the site for the same purpose. This finding was sufficient to support the conclusion that the internal ATM sites remained in the occupation of the retailers.

The Court found the Upper Tribunal’s distinction between internal and external ATMs difficult to understand. The factors it identified – wider market availability, 24-hour access, and physical separation from store facilities – did not detract from the finding that the retailer remained in occupation, nor did they suggest the ATM was any less part of the retailer’s overall business. This was in ‘stark contrast’ with the situation in Assessor for Central Scotland Joint Valuation Board v Bank of Ireland [2010] CSIH 91, where there was no direct link between the ATM and the host sub-post office’s function.

Implications

The decision confirms that where a retailer and an associated operator share a common or closely aligned purpose in providing a facility (such as an ATM) within the retailer’s premises, and the retailer retains contractual, physical and functional control, the retailer remains in rateable occupation. The ‘general control’ principle from Westminster Council v Southern Railway Co remains decisive, and there is no further requirement to weigh the ‘dominant’ or ‘primary’ purpose between parties sharing a common purpose.

The judgment clarifies that concepts of ‘rivalry’, ‘control’ and ‘interference’ are of limited assistance where concurrent occupiers derive direct mutual benefit from the same use of the premises. The landlord-lodger analogy remains a legitimate illustration of paramount occupation, not an anomalous exception.

The decision has significant financial implications: it resolves approximately 34,000 stayed appeals and means the sites of ATMs situated within supermarkets and shops – whether internal or external – are not to be treated as separate hereditaments. The decision does not disturb established positions, such as that ATMs in sub-post offices or other premises without a direct functional link with the ATM (as in Bank of Ireland) may remain separately rateable. Nor does it affect the position of ATMs in bank buildings, which form part of the bank’s hereditament.

Lord Carnwath also emphasised the primary responsibility of the Upper Tribunal (Lands Chamber) in reviewing Valuation Officers’ decisions, and warned appellate courts to give particular weight to its specialist expertise, intervening only where something more than a difference of evaluative assessment can be identified.

Verdict: The appeals by the Valuation Officers were dismissed. The Supreme Court upheld the order of the Court of Appeal, confirming that none of the ATM sites in issue (both internal and external) were separately rateable from the host stores, as the retailers remained in paramount rateable occupation.

Source: Cardtronics UK Ltd and others v Sykes and others (Valuation Officers) [2020] UKSC 21