Lands Tribunal for Scotland

OPINION

North of Scotland Water Authority
v
The Assessor for the Highland Mid Western Isles
Valuation Joint Board

These appeals have been brought by the ratepayers against entries in the valuation roll in respect of two office buildings at Beechwood Business Park, Inverness. One is Cairngorm House which has been entered in the valuation roll at a net annual value of £150,000 effective from 21 October 1996, the date it was completed and occupied. The other is Torridon House which has been entered in the valuation roll at a net annual value of £85,000 effective from 1 April 1996. That is the date the North of Scotland Water Authority (hereinafter referred to as the 'North Authority') was established.

In terms of Article 3 of the Water Undertakings (Rateable Values) (Scotland) (No. 2) Order (SI 1995 No. 3252), (hereinafter "the Order") the Secretary of State prescribed a class of lands and heritages, In the Order the Secretary of State also prescribed the aggregate amount of the rateable values of the prescribed class and apportioned the aggregate amount among the relevant local authorities. The assessor was required to and did enter in the valuation roll the prescribed apportioned amount relevant to Highland Council for the year commencing 1 April 1996. The ratepayers contend that neither Cairngorm House or Torridon House should be separately entered in the valuation roll on the basis that they are within the prescribed class under the Order.

Article 3 of the Order defines the 'Prescribed class of lands and heritages' as follows:- 'The following class of lands and heritages is hereby prescribed for the purposes of section 6(1) of the 1975 Act, namely any lands and heritages in Scotland occupied by an authority and wholly or mainly used for the purposes of the undertaking for the supply of water carried on by that authority.' The appellants claim the subjects of appeal are so used. It was not disputed that the Order was properly made under the provisions of the said 1975 Act, namely, section 6(1) of the Local Government (Scotland) Act 1975 as substituted and amended. It was agreed that in terms of Article 2 of the Order the appellants were "an authority" within the meaning of Article 3.

This is the first appeal to be heard by the tribunal which concerns the interpretation of Article 3. It was heard as the first of two simultaneous appeals by ratepayers in respect of such prescribed lands and heritages. The other appeal was by the East of Scotland Water Authority against the Lothian Assessor and related to offices in Edinburgh and Livingston. In each case the grounds of appeal were the same and in each case the ratepayers were represented by Mr C S Haddow QC and the assessor by Mr J H Doherty QC. Although the appeals in respect of the two different authorities were dealt with individually, the greater part of the argument was the same in each case. To avoid unnecessary repetition the submissions in respect of the North Authority properties were accordingly adopted, mutatis mutandis, for the East of Scotland Water Authority appeals.

Evidence for the North Authority was given by Mr James M C Johnstone a Chartered Engineer with 34 years experience in the water industry in both technical and managerial roles. In 1996 he was appointed Director of Capital Procurement to the newly formed North Authority. No evidence was led on behalf of the assessor nor did he dispute any of the factual information provided by the ratepayers' witness.

Cairngorm House is the head office of the North Authority: they own the property and took occupancy on 21 October 1996. It is a three storey detached office block of steel frame construction with facing brick outer elevations and a pitched roof covered with concrete tiles. The gross internal area of the offices was not specified but on the basis of the evidence there is something in the region of 6,000 square feet (557 square metres) at each level, a total of 18,000 square feet (1,672 square metres).

The open-plan floor space at each of the three levels has been partitioned as necessary for the management and administration of the authority's undertaking. There is a good standard of finish with double glazing, gas fired heating and an air extraction/ventilation system. A lift serves the upper floors. A tarmacadam car park provides 69 parking spaces and there is also a brick built three bay garage.

Torridon House is a regional office for the North Authority; the other regional offices are in Dundee, Aberdeen, Kirkwall, Stornoway and Lerwick. The building is held under a lease for a period of 20 years from 13 March 1995. The area of the offices stated in the lease is 10,268 square feet (954 square metres) and the passing rent is £102,680.

The building is a two storey detached office block with facing brick elevations and a pitched roof covered with concrete tiles. The open-plan floor space on both levels has been partitioned as required. The building is double glazed. A tarmacadam car park provides 37 parking spaces.

The North Authority was established under section 62 of the Local Government etc (Scotland) Act 1994 to be, with effect from 1 April 1996, the Water Authority and the Sewerage Authority for the area which covers Orkney, Shetland and the Western Isles and the local government areas of Highland, Moray. Aberdeenshire, Angus, Perth and Kinross (excluding the town) plus the two city councils of Aberdeen and Dundee.

The North Authority's geographical area covers more than 46,50O square kilometres, about 60% of the mainland of Scotland. This area has a population of approximately 1.2 million of which 95% are connected to the public water system and 86% to the public sewerage system. Over 510,000 households and 65,000 business customers are serviced via 22,000 km of water mains and 7,300 km of sewers.

When the North Authority was established on 1 April 1996 it inherited specialised operational assets of £149,265,000. Some 62% of this figure related to water treatment works, storage facilities and pumping stations; the balance of 38% being sewage treatment works, sludge facilities and pumping stations.

Neither Torridon House nor Cairngorm House is adapted to meet any physical operational requirements of the water or waste-water functions of the authority. However, the buildings are exclusively used for administrative activities involved in the proper management and control of these functions.

We were provided with detail of the range of activities required of a rater authority. Reference in particular was made to the Water (Scotland) Act 1980, section 6(1) and section 9; the Water Supply (Water Quality) (Scotland) Regulations 1990 and Water Supply (Water Quality) Scotland Amendment Regulations 1991; and the Local Government Etc (Scotland) Act 1994, sections 65, 74, 83, 89, 106 and 107. A more limited range of duties was incumbent upon the authority under the sewerage (Scotland) Act 1968. We heard no submission by the respondents relative to the detail of the authority's functions under these statutory provisions. We did not understand it to be disputed that the use made of the subjects could properly be described as necessary for management and control of the water and waste water undertakings. As head office, the use of Cairngorm House included the appellants' secretariat, personnel, general accounting1 financial planning and investment and corporate affairs activities. Torridon House is the management operating centre for Highland area and deals with local finance, personnel and support services. Having regard to the nature of the issues focused by the parties' submissions in this case, it is unnecessary for us to deal with the detail of activities carried on as part of the water and waste-water functions. We require however to consider how these activities are divided between water and waste-water functions.

The North Authority employs 1,947 staff of whom 1,040 could be said to be dedicated to the water function of the authority and about 734 dedicated to the waste water function. The remaining 173 have a dual role serving both water and waste water functions.

In the course of his evidence Mr Jobnstone went into a great amount of detail regarding what he termed the 'Occupying Departments and Functional Split' of both Cairngorm House and Torridon House. The purpose of this exercise was to show that, both in terms of usage of office floor space and duties of personnel, the water function of the Worth Authority required more office floor area and more personnel than did the waste water function. As would be expected there was a degree of variation in the different departments. However, each apportionment put before us showed either a 50:50 split between the water and waste water functions or that the water function clearly had the major share. The tribunal is satisfied that in general terms a proportional split, both for floor area and personnel, of the order of 60% water and 40% waste water was established. The assessor did not dispute this apportionment. There was some evidence that the supply of water was perceived generally to be the more important function. This was the view of Mr Johnstone himself. He considered that this was the impression of the staff and that this, in turn, reflected their understanding of the public perception.

Submission for the Appellants

Mr Haddow for the appellants, distinguished two questions: is the office used for the purposes of the authority' s undertaking for the supply of water, and, if so, is the office mainly used for that purpose or for another or other purposes? The first question turned on the extent of the appellants' "undertaking for the supply of water". The appellants had only two undertakings in the sense of businesses or enterprises, namely, their undertaking as water authority and their undertaking as sewerage authority. They had extensive duties in relation to supply of water under the Water (Scotland) Act 1980 and the Water Supply (Water Quality) (Scotland) Regulations 1990 and the Amending Regulations 1991 (SI 1990/119 and SI 1591/ 1333, respectively). Their undertaking as sewerage authority related to domestic sewage, surface water, and trade effluent. He submitted that they had no other "undertakings". Such involvement as they had with water sport was entirely ancillary to the water undertaking. He submitted that the subjects in issue plainly fell within the terms of Article 3.

He supported this submission by consideration of the wording of a range of other similar Rateable Values Orders. The first was the predecessor of the Order in question, namely, the Water undertakings (Rateable Values) (Scotland) Order 1995. This was in terms substantially similar to the Order in question. It had not been a matter of decision by committee or the Tribunal end accordingly he was able to take little from it. He observed that it applied to a time when the "authority" for the purposes of Article 3 was the Local Authority with responsibility for a range of functions including water and sewerage. He referred to the British Railways Board (Rateable Values) (Scotland) Order 1995, SI 1995/930; the British Gas plc (Rateable Values) (Scotland) Order 1995, SI 1995/368; the Electricity Distribution Lands (Rateable Values) (Scotland) Order 1995, SI 1995/373. The wording of these Orders was quite different from the present. The British Railways Order was expressed in terms of "the purposes of the parts of the undertaking" and "purposes ancillary to those purposes". The exclusion provisions of the relevant Order demonstrated that office premises would have been included but for the express exclusion. The British Gas Order identified the prescribed class by a detailed list of types of subjects and not by reference to the "undertaking as a whole". Similarly, the electricity Order was directed towards subjects used for certain purposes and, expressly, for ancillary purposes, rather than in terms of the purposes of the company's "undertaking". He pointed out the speciality that separate Orders had been made in relation to electricity, distinguishing generation, transmission, and distribution.

In relation to interpretation of these various Rateable Value Orders, Mr Haddow referred to decisions of Valuation Committees. The first could be found within the report in Scottish Nuclear Ltd v Assessor for Lothian Region 1995 SC 3. The opinion of the Court quoted certain findings of the valuation appeal committee but did not express any view, relevant to present purposes, thereon. He also referred to Scottish Nuclear Ltd v Assessor for Lanarkshire Valuation Joint Board 10 September 1997. This case was under appeal to the Lands Valuation Appeal Court. Mr Haddow set out the basis of the appeal. The decision was against him but he submitted that the reasoning was defective. In any event the Regulation in issue was in different terms. He referred to Scottish Power plc v Assessor for Lothian Valuation Joint Board 18 December 1997. Here again the Regulations in issue could be distinguished and the decision was not directly in point.

Mr Haddow also referred to Royal Blind Asylum and School v Lothian Regional Council 1981 SLT 109, and 1982 SLT 89; a decision of Sheriff (now Lord) Caplan upheld on appeal by Sheriff Principal O'Brien. This clearly supported the proposition that "administration" was itself properly to be seen as an integral part of an undertaking. It was not simply ancillary to some part of the undertaking. He referred to the case of Belhaven-Westbourne Church Congregational Board v Glasgow Corporation 1965 SC (HL) (1) quoted in 1581 SLT at 112. In that case a house was held to be occupied for charitable purposes and Sheriff Caplan said of it: "The significance of the case ..... is in showing that in this area of law it may sometimes be legitimate to look at a wider picture than that presented by the actual subjects under review".

Mr Haddow went on to distinguish the cases of CIR v Lambhill Ironworks Ltd 1950 SC 331; Assessor for Edinburgh v SSEB 1969 SLT 46; East Kilbride Sports Council v Assessor for Strathclyde Region 1986 SLT 375.The specific issues in these cases were quite different from the present. The legislation was different. It is not disputed in the present cases that the subjects are properly described as "offices". However that was not the relevant issue under the Order. Anticipating, correctly, the assessor's reliance on Moon v London County Council 1531 AC 151, Mr Haddow took time to go through that decision to demonstrate that it was based on the scheme of wholly different statutory provisions. The reasoning in it, he said, was irrelevant to interpretation of Article 3.

On his second question Mr Haddow submitted that plainly, on the facts, use was weighted towards the water function. That was clear and neither the pleadings nor the cross-examination gave any indication of the assessor taking a contrary position.

He accepted that the Order was arbitrary in its effect because a modest shift in the balance of work would have a significant effect. There was, of course, no provision for apportionment. This could apply not only to offices but, for example, to stores or laboratories. However he submitted that it was clear and well established in practice that the test of "mainly" was satisfied by anything over 50%. This was, or had been common in cases of industrial de-rating. The word "primarily" used in that legislation was treated as meaning the same as "mainly": Lothian Regional Assessor v Heriot Watt University (unreported) 29 May 1998. He referred also to Armour on Valuation for Rating 21-29; 21-30 and to Gilchrist v Assessor for Edinburgh 1942 SC 327.

The tribunal raised with counsel a comment of Lord Morton of Henryton in Fawcett Properties Ltd v Buckingham County council 1961 AC 636 at 669 where he said that: "The word "mainly" at once gives rise to difficulties. Probably it means "more than half"." It was agreed that the word might mean different things in different contexts. The proper approach in the present contest was said to be clear. Anything distinctly over half sufficed.

Submissions for Assessor

For the assessor, Mr Doherty submitted that the essential question was; what are the purposes for which the subjects are used?". This was an Order prescribing how certain lands and heritages were to be valued for rating. It was not an Order providing exemption for rating valuation. It was trite to say that in the context of valuation for rating the test to be applied was the actual and existing use. It was therefore essential to identify the existing use of the lands and heritages in dispute. Plainly the premises were not used for supply of water but as an office. An "undertaking for supply of water" would be equivalent to land actually and directly so used: in other words, "operational land". It was well established, he submitted, that the test of rateable occupation did not permit reference to the business purposes beyond the boundaries of the subjects: Moon, supra. There were many examples of the application of this principle. He referred to Bogie v Assessor for Edinburgh 1939 SC 262 and Total Oil Marine Ltd v Assessor for Grampian Region 1981 SC 125. Plainly the use here was as "offices". That was the only conclusion possible applying the test set out in Assessor for Lothian Regional v Edinburgh District Council 1989 SC 267 where the emphasis was entirely on physical characteristics and functions.

Only limited assistance could be obtained from other statutory provisions in different terms, Where there was express reference to "ancillary purposes" Mr Doherty accepted that this could include office purposes. He recognised that it would be necessary to look beyond the physical characteristics and function to see what the purpose of the office use was before a test of "ancillary purpose" could be applied.

He submitted that it was well established that "use" required to be determined by "existing use". That was a general principle in the context of valuation for rating. It was of wide application. An example was East Kilbride Sports Club v Assessor for Strathclyde Region 1986 SLT 379 and the opinion of Lord Robertson at 384 e-f.

The decision in the Royal Blind Asylum and School supra was, he submitted of no assistance. That case could be distinguished on 4 grounds: (1) the case was dealing with rating not valuation; (2) it was a different statutory provision and different considerations apply to rating compared with valuation for rating; (3) it was a decision in relation to charitable purposes which required a broader approach; and (4) the observations were obiter because the Court had decided the case on another ground.

He stressed that use of office premises was use as an office. In answer to the tribunal he distinguished a store or laboratory. It was essential to look at the direct purposes. A laboratory or store would be actually and directly used for the purposes of the undertaking for the supply of water. An office was not directly used for operational purposes. As there was no reference to ancillary purposes in the Order, use for purposes of an office did not fall within the Order.

For completeness, Mr Doherty drew our attention to the English provisions of the Central Rating List Regulations 1994 (SI 1994/3121) as amended by SI 1996/620. In relation to Water Authorities the relevant hereditaments were defined in part 6 of the Schedule as those used wholly or mainly for the purposes of a water undertaker (sic) … or for ancillary purposes". This supported his submission that separate provision was required to include "ancillary purposes". Had such provision appeared in the Scottish Orders the offices would be included. However he observed that under part 8 offices were expressly excluded from the definition. He commented that although the Orders in England were quite different it would be surprising if a water authority's office on non-operational land in England was outwith the block figure and yet within the Scottish equivalent figure.

On the second question, the interpretation of "mainly", he submitted that the test was inevitably one of impression. There could be two uses, neither being a main use. There had to be an identifiable main use for the purposes of the Order. It was for the tribunal to be satisfied that on any sensible view water could be said to be the main use.

It would be possible, he concluded, to distinguish between the Head Office and the Regional Office. The Head Office uses were far removed from the direct work of water supply. The Regional Office might possibly be said to be more operational. The primary submission1 however, was that neither fell within the Order.

Decision

We have no difficulty in accepting that where subjects are used as a base for the control and administration of an undertaking they can, in accordance with the normal meaning and ordinary use of language, properly be said to be used for the purposes of the undertaking. We reach that conclusion without difficulty and without need for authority. The Royal Blind Asylum and School, supra and the passage from United Grange Lodge v Holborn Borough Council 1937 3 All ER 281 at 2831 referred to by Sheriff Caplan, are examples of this interpretation, we find nothing in the direct context of the Order to lead to a different conclusion.

We accept Mr Haddow's submission that our view of the plain meaning of the words used is consistent with the effect of similar language used in the various Orders to which he referred dealing with railways, gas and electricity respectively. If authority was required for the proposition that administration is part of an undertaking it may be found in the Royal Blind Asylum and School supra. We discuss below the cases dealing with industrial de-rating. We have found nothing in the other cases cited to us to be of persuasive weight either for or against this interpretation. We accept the need to look carefully at the different language and different context of superficially similar legislation. However unless there is something about the language and context which plainly demonstrates an intention to use words with a special meaning derived from prior usage, we must look only at the ordinary meaning of the words in their present context.

We consider it appropriate and helpful to have regard to the origins of the Order as lying in the previous Order SI 1995/367. Article 3 of that Order was in the following terms: "The following class of lands and heritages is hereby prescribed for the purposes of section 6 (1) of the 1975 Act, namely any lands and heritages in Scotland occupied by a water authority and used wholly or mainly for the purposes of the water undertaking carried on by that authority." The explanation for the apparent minor differences in terminology can be found in Article 2 of that Order. This defined "water undertaking" as "an undertaking for the supply of water carried on by a water authority". Article 2 also defined "water authority" by reference to section 109(1) of the Water (Scotland) Act 1980. The significance of this Order as casting light on the effect of the Order currently in issue, is that the water authority prior to 1 April 1996 was simply the Regional or Islands Council for the appropriate area: Water (Scotland) Act 1980 section 3. The original Article 3 accordingly had the effect of distinguishing the undertaking for the supply of water from the whole range of undertakings then carried out by Regional or Island Council respectively. In that context it is, we think, clearer that the terminology used in Article 3 was intended to distinguish the water supply function of the authority from its other functions. Understood in that context there is, we think, no justification for assuming a further intention to distinguish parts of the water function which have a direct and immediate physical connection with the supply of water from those whose connection is administrative. It is plain that the terminology of the current Order faithfully reflects that of the previous one and that no change in intention can be implied from the minor changes in layout.

We observe, too, the earlier history of use of prescribed valuation for water authorities. The original enabling provisions of section 6 of the Local Government (Scotland) Act 1975 in relation to water undertakings, reflected, and in part adopted, the similar provisions of the Local Government (Scotland) Act 1966. Section 16 and Schedule 2, paragraph 1, of that Act provided for prescribed cumulo valuation of "lands and heritages occupied for the purposes of a water undertaking" with the express exception of "dwellinghouses or lands and heritages held by a local water authority under a lease for a period not exceeding 21 years". The first of these exceptions may have been influenced by the decision in the BelhavenWestbourne Church case, supra, to which we return below, In the present context it is enough to say that the express exceptions indicate that the expression "lands and heritages occupied for the purposes of a water undertaking" was recognised as wide in scope. The current reference to (our emphasis) lands and heritages" so occupied1 is not to be seen as more restricted.

Mr Doherty's submission turned, in effect, on the proposition that the expression "used for the purposes" was one with an established meaning in the context of valuation for rating. This derived from the use of similar terms in the Rating and Valuation (Apportionment) Act 1928 and was governed by the interpretation of that Act in Moon, supra. The application of that decision had led to a proliferation of dicta to the effect that the purpose of actual use of heritage must be derived from the use to which the hereditament itself is put rather than the use to which the work done there and its products is going to be put elsewhere: see Lord Robertson in Total Oil Marine, supra, at page 136; Lord Ross page 138.

We are satisfied that the dicta in the industrial do-rating cases can properly be seen to turn on the particular context and scheme of the 1928 Act. The relevant portion of the Act (set out in Moon, supra page 165) was in the following terms:

“In this Act the expression "industrial hereditament" means a hereditament (not being a freight transport hereditament) occupied and used as a mine or mineral railway or, subject as hereinafter provided, as a factory or workshop.

Provided that the expression industrial hereditament does not include a hereditament occupied and used as a factory or workshop if it is primarily occupied and used for the following purposes or for any combination of such purposes, that is to say: -

(a) the purposes of a dwellinghouse;

(b) the purposes of a retail shop;

(c) the purposes of distributive wholesale business;

(d) the purposes of storage;

(e) the purposes of a public supply undertaking;

(f) any other purposes, whether or not similar to any of the foregoing, which are not those of a factory or workshop”.

Various observations of their Lordships in Moon support the conclusion that they turn on the particular context of the Act. Lord Euckmaster at page 158 said: "It appears to be that running through the statute is the idea of exempting particular premises described throughout as hereditaments and that it is the use to which those premises are put that must be considered and not what may ultimately be done with whatever commodity they create. Examination of the earlier branches of the section which were relied upon by the revenue to my mind only strengthens the view I have expressed". Lord Dunedin at page 165 started by considering "the scheme of the Act" and, at page 167 said: "But be it observed that in each and all of the sentences (a), (b), etc, the nominative is a hereditament which is described as being used and occupied primarily for a specific purpose which is not a factory purpose. The truth is that "for the purposes of" might perfectly well be expressed by the one little word "as". All this has nothing to do and could have nothing to do with the product of the factory itself. That is, of course, quite apparent in the earlier sentences. No factory makes dwellinghouses retail or wholesale shops, or storage." Later, on page 169 he described the idea of having regard to the purpose to which the product of the factory would be put as "quite fantastic" because this would "suddenly change the whole scheme". Lord Warrington of Clyffe said "It is, I think, reasonably clear that in this Act (our emphasis) the purposes for which the hereditament itself is occupied and used and those alone determine the question whether it is an industrial hereditament or not." His further analysis of the provision in the context of the Act reinforces this view.

We accordingly accept Mr Haddow's submission that these dicta do not govern interpretation of the Order now before us.

The question then is whether interpretation established for one set of words in the contest of de-rating can throw light on the meaning to be given to somewhat similar words in the related context of valuation for rating. If such interpretation could be seen to fit comfortably in the context currently in issue, it might be persuasive. However, we consider that, in fact, application of a direct physical test does not fit the needs of Article 3. It is immediately apparent that the expression "used for the purposes of the undertaking" cannot easily be replaced by Lord Dunedin's suggestion of "used as the undertaking". We understood Mr Doherty to suggest that "undertaking for the supply of water" was equivalent to identification of physical use in the same sense as "operational land". We do not accept this suggestion which was not explored in any detail. The concept of an "undertaking" is not a corporeal one. It is quite distinct from essentially physical concepts used in the 1928 Act such as "dwellinghouse", "retail shop", "factory" or "workshop". Although the expression "wholesale business" is capable of an incorporeal sense it can, without difficulty, be seen to be used in section 3 (1) (c) of that Act as a description of physical subjects. We do not consider that dicta deriving from these provisions can be relied upon in relation to the provision now in issue.

If the assessor's contention was correct, its implications would not be limited to subjects which could be described as "offices". Mr Doherty submitted that use as "offices" was too remote from actual supply of water to fall within the terms of Article 3. However it appears to us that this introduces a further test which substantially weakens his reliance on the dicta in Moon. He accepted that a test of actual physical use could lead to subjects being categorised as "stores"; as a "laboratory"; etc. We could extend the list to include use as "workshops"; use as "garages"; and, indeed, use as "waterworks". All of these are classes of use which, if applied to identifiable units of occupancy would, but for the Order, have required to be entered separately in the Roll. The fact that they could have been identified and valued as units by regard to their existing physical use, is in no way inconsistent with a quite different approach under the Order. On any view, the purpose of the Order was to effect a change in the way water undertakings were dealt with. It appears to us, accordingly, that emphasis on the "normal" approach is misplaced.

It was submitted that in the case of, say, a store or a laboratory, the close connection with the direct supply of water would bring such subjects within the scope of Article 3. However we see no basis in the Order for such a distinction between, say, "offices" and "stores". If it is permissible to Look beyond the physical classification of subjects as, store, workshop, or whatever, to see whether they are used for the purposes of the undertaking, we see no reason why a similar approach should not be taken to an office. It may be observed that stores, workshops, and garages, like offices, could all be physically remote from any water - except, of course, their piped consumer supply.

It was conceded on behalf of the assessor that, if the Order had referred to the purposes of the undertaking and to "ancillary purposes" this would have encompassed use as an office. We consider that this concession is fatal to the main argument. We see no reason to treat the expression "purposes of the undertaking for the supply of water" as too narrow to include activities reasonably incidental to the main purpose. A fortiori, we have no doubt that it includes activities necessary for the achievement of the main purpose and that management and administration fall under that head.

We accept Mr Haddow's submission that a distinction can be drawn between legislation which proceeds by reference to an "undertaking" for a particular purpose such as supply of water, and legislation which proceeds by reference to specific purposes, such as the distribution of electricity or to the purposes of particular parts of an undertaking such as carriage of goods by rail. In the latter case, the identification of specific parts of an overall undertaking necessarily implies exclusion of some other parts of that undertaking. The express inclusion of "purposes ancillary to" the specified purposes might be considered necessary to avoid interpretation restricted strictly to the specified parts. However the expression "undertaking" in our view carries with it all activities reasonably incidental to the main purpose and, in particular, carries with it the activities of management and administration of that purpose.

It may be observed that in the Bellhaven-Westbourne Church case, supra, the substantive issue was whether a house was "occupied" (within the meaning of the Local Government (Financial Provisions etc) (Scotland) Act 1962, Section 4), by the resident Church Officer or by his employers, the Congregational Board. Once it was held that the latter were "occupiers", the question was whether they used it wholly or mainly for charitable purposes. The contention that they used it as a residence was rejected. Lord Reid said that it was too narrow a view simply to see whether any charitable activity was carried on in the house. He illustrated the matter by reference to a hospital where provision of accommodation for medical staff could be regarded as "wholly ancillary to the charitable purpose of the hospital". It is evident that he treated the expression "charitable purposes" as including "ancillary" activities where these were "directly to facilitate the carrying out of the main charitable purpose".

We do not consider it an ancillary purpose of a business to run an office as such. Office purposes cannot be said to be ancillary without determining what is done in the office. If an express inclusion of "ancillary purposes" would cover the particular use of the subjects in the present case this can only be on the basis of a move from consideration of the occupation and use of the heritable subjects as such, to consideration of the purpose which they serve within the undertaking.

For the above reasons we are satisfied that the subjects are used for the purposes of the undertaking for the supply of water and we turn to the question of whether they are "mainly" used for those purposes.

Application of that word is not free from difficulty and we consider that proper interpretation may vary with context. There a single body has two functions to carry out and neither is truly subordinate to the other, there is clearly a sense in which it is inappropriate to say that one is the main purpose. However, in the present context, the reasons for distinguishing between water and waste water for valuation purposes is not plain to us. The term "mainly" accordingly acquires no colour from its context. We consider that we are free to apply a practical approach satisfied by a test of a clear majority. We have noted Lord Morton of Henryton's comment in Fawcett Properties Ltd, supra, and his acceptance of a test of "more than half". We consider is consistent with all the authorities to which we were referred. The word "mainly" has been treated as equivalent to "primarily" or "principally": Moon, supra, page 166; Gilchrist, supra, page 337; Lothian Region Assessor v Heriot Watt University. supra, where Lord Milligan referred to, "'main', or 'predominant', use criterion, without provision for apportionment. a situation well established in rating law".

We consider that for the purposes of Article 3 we need look no further than a clearly defined major share of use. There will, of course, be cases where assessment of the share of use requires a difficult exercise in balancing diverse factors which may ultimately have to be resolved as a matter of impression. We are satisfied, however, that this is not such a case. By any obvious measurable standard, the preponderance of use of the subjects related to the supply of water rather than the waste water function. The margin was not large but it was clear in relation not only to the occupation of the majority of persons employed but by reference to floor space occupied, value of assets supervised and, indeed public perception of importance of the two functions.

It is accordingly quite proper to describe the subjects as mainly used for the undertaking for the supply of water.

In the event, although we see no reason for the purposes of valuation for a distinction between water and waste water functions and have some reservations as to whether it was the deliberate intention of the Secretary of State to include office blocks in business parks within the cumulo valuation prescribed by the Order, we are satisfied that the appeals should be upheld. We accordingly determine that the entries in the relevant Valuation Roll in respect of the offices at Cairngorm House and Torridon should be deleted.