BLAIR V UPPER HUTT CITY COUNCIL HC WN CIV-2005-485-1961

BLAIR V UPPER HUTT CITY COUNCIL HC WN CIV-2005-485-1961 8 May 2007IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2005-485-1961UNDER the Land Valuation Proceedings Act 1948 IN THE MATTER OF a decision of the Land Valuation Tribunal at Wellington dated 9 September 2005 BETWEEN NEVILLE ALBERT BLAIR Appellant AND UPPER HUTT CITY COUNCIL Respondent Hearing: 30 October 2006 Coram: Clifford J Mr Peter Young (Lay Member) Appearances: G D S Taylor for Appellant N Levy for Respondent Judgment: 8 May 2007 at 10 am8 May 2007 at 10.00 amJUDGMENT OF THE COURTThis judgment was delivered by Justice Clifford on 8 May 2007 at 10 am, pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Date: 8 May 2007Counsel: G D S Taylor P O Box 5294, 6145 Wellington 6011 for the Appellant N Levy P O Box 10433 The Terrace Wellington for the Respondent Copies To: John Gwilliam and Co P O Box 40457 Upper Hutt Wellington B R Dodson City Solicitor Upper Hutt City Council Private Bag 907 Upper Hutt[1] This is an appeal from a decision of the Land Valuation Tribunal ("the Tribunal"). The appellant, Mr Blair, is a trustee and beneficiary of the family trust ("the Nibbles Family Trust" or "the Trust") that owns a large, Chapman Taylor house in Upper Hutt known as Brentwood Manor. Brentwood Manor is, in fact, Mr Blair's permanent home and is described by him and other members of his family as "the family home". Mr Blair also runs a home stay operation at Brentwood Manor. [2] References in this decision to Mr Blair are generally to him acting as a trustee, and for and on behalf of his fellow trustees.Background[3] On 10 September 2001 the Upper Hutt City Council ("the Council") wrote to Mr Blair advising him that it had decided that Brentwood Manor was to be rated in the "commercial category" of the Council's differential rating system. At the time, that system had no such category. This was apparently a reference to the Business Category of that system. This decision was described as being "due to the change of use", reflecting the fact that Mr Blair had recently been granted certain resource consents relating to Brentwood Manor. Our understanding is that this decision would have resulted, at the time, in an increase of approximately $2,800 in Brentwood Manor's annual rates bill, from $1,600 to $4,400. The correctness or otherwise of that understanding is not relevant to our decision. [4] Mr Blair objected, by a letter dated 28 September 2001, in general terms to that decision. He wrote subsequently, formally objecting under s 116(e) of the Rating Powers Act 1988 to the rating classification to which the property had been allocated. At the same time, he pointed to s 105(4) of that Act. Mr Blair said that s 105 required an apportionment of the rateable value of Brentwood Manor and that the Council could not charge a business rate on the entire property. [5] The Council replied to Mr Blair on 27 November 2001. In that letter the Council:a) Acknowledged Mr Blair's formal objection under s 116(1)(e), but advised in conclusion that the Council considered that Brentwood Manor was "being rated correctly under the business category as its prime use". Reliance was again placed on the resource consents granted. b) Agreed, as regards s 105(4), that a special valuation apportionment should be arranged to determine that portion of the property "that is used exclusively for private 'residential' use as opposed to the 'business' portion". [6] Quotable Value duly carried out an inspection of the property in May 2002, and issued an initial apportionment. Quotable Value divided the total valuation of $480,000 into $335,000 commercial and $145,000 residential. That is, Quotable Value apportioned the total valuation on a 70:30 basis. Mr Blair objected, in effect relying on s 202 of the Rating Powers Act and, in turn, s 32 of the Rating Valuations Act 1998. [7] Quotable Value re-inspected the property on 6 August 2002, and on 14 August advised it had, in terms of s 34 of the Rating Valuations Act, reviewed its original decision, and revised the apportionment to 65% commercial ($310,000) and 35% residential ($120,000). [8] On 3 September, Mr Blair objected to that revised apportionment, requiring the matter to be referred to the Tribunal as provided for by s 36 of the Rating Valuations Act. The matter finally came before the Tribunal in March, June and October of 2004. A decision was handed down in September 2005, upholding the second apportionment undertaken by Quotable Value. [9] Mr Blair commenced these proceedings against that background. [10] At the same time, in CIV-2005-485-2268 ("the Review Proceedings"), Mr Blair and his fellow trustee owners of Brentwood Manor have applied as plaintiffs to judicially review the relevant decisions of the Council and ofQuotable Value as second defendants, and have also claimed damages in negligence and for misfeasance in public office from the Council and for damages in negligence from Quotable Value. [11] In responding to the Review Proceedings both the Council and Quotable Value have applied, on various grounds, to strike out the plaintiffs' claims. [12] On Monday 29 May 2006 I heard an application for directions as to the order in which these proceedings and the Review Proceedings should be heard. [13] I directed that these proceedings were to be heard and determined prior to the hearing of the Review and Damages Proceedings, including the defendants' strike out applications. [14] It was on that basis that on 30 October 2006 this Court heard Mr Blair's appeal against the Tribunal's decision. [15] The Rating Powers Act was repealed on 1 July 2003 and replaced by the Local Government (Rating) Act 2002. Reference will be made to that later legislation where appropriate.The Tribunal's decision[16] The hearing before the Tribunal would appear to have considered, although not necessarily decided, two principal issues: a) The validity of the Council's original decision in September 2001 to allocate Brentwood Manor to the "commercial category" ("the Allocation Decision"). b) The subsequent decision of Quotable Value on the apportionment of Brentwood Manor between business and residential use ("the Apportionment Decision").[17] The opening two paragraphs of the Tribunal's decision reflect this dual focus:[1] This is an objection to a notice of an apportionment of rateable value under s 116 of the Rating Powers Act 1988 and s 32 of the Rating Valuations Act 1998. Section 105 of the Rating Powers Act authorises apportionment and s 202 of that Act provides for objection to the apportionment as if it were a valuation. The apportionment is an alteration in the district valuation roll and must be notified to the ratepayer under s 17 of the Rating Valuations Act. A question of incorrect notification arises in the course of argument on this objection. [2] The objection concerns a historic property at Upper Hutt which Mr Blair claims to use as a residence and also for bed and breakfast accommodation. The property was zoned residential and rated in the residential differential until 2001. In September 2001, the Council maintains that an amendment to the valuation roll changed the rating category of the property to the business differential. Mr Blair objects on the ground that the property is principally used for residential purposes. This large and attractive property provides superior accommodation and amenities. The decision requires the Tribunal to address the manner in which principal use should be determined.[18] In para 1, the Tribunal characterises the issues before it as relating to its Apportionment Decision. At the same time, in para 2, the Tribunal saw itself as seized of the Council's Allocation Decision. That the Tribunal saw itself as seized of both issues is reflected in the way it summarised, at paras 64 and 65 of its decision, the submissions made for the appellant and for the respondent. It did so in the following terms:[64] Mr Taylor for the objector identified the following as the objector's issues: (1) The legal validity of the original allocation of 5 Brentwood Street to the "business" category of Upper Hutt's differential rating scheme, including a question of the legal authority of Mr McCarthy to make the allocation, (2) The time at which the allocation or apportionment took effect, (3) The process and basis of apportionment where the premises are not physically structured so that separate parts are practicably available only for business and non-business use, (4) The factual apportionment adopted, (5) The "knock-on" effect of invalidity in the original allocation, when no new decisions were made in later years, but the original decision was simply rolled over to the next year each year,(6) Failure of the council to act consistently. [65] Ms Levy accepted that the letter of 10 September notifying a change of rating category due to the change of use of the property for the 2001-02 rating year did not give proper notice of a change in the District Valuation Roll under s 17 of the Rating Valuations Act 1998. Ms Levy did not actually concede that it was ineffective for any purpose. She accepted that Council should have recognised the need for apportionment due to more than one use, and commissioned the apportionment eventually carried out by QVNZ in May 2002. However, once undertaken, the QVNZ notice of apportionment was proper notice of both the change in use and the residential/commercial apportionment.[19] The decision of the Tribunal, set out in para 82, reads however as follows:We find no reason to apply a different apportionment to any of the years in question, because the floor area calculation was appropriate and uniform over all years. We determined the objection on the basis that the correct apportionment from 1 July 2001 under s 105 of the Rating Powers Act was 65% business use and 35% residential use. The effect is to amend the valuation role from 1 July 2001 accordingly.[20] The focus there is very much on the Apportionment Decision, and not the Allocation Decision. [21] It would appear that shift in focus may be attributable to the fact that, during the period the matter was under consideration by the Tribunal, the Court of Appeal's decision in Telecom New Zealand Ltd v Christchurch City Council CA25/04 7 March 2005 was delivered. That decision clarified the relatively limited nature of the jurisdiction of the Tribunal. Put simply, the Court of Appeal held that the Tribunal's jurisdiction under the Rating Valuations Act 1998 was limited to valuing land. In particular, the Tribunal was not competent (in the legal sense) to undertake the sort of analysis which a High Court Judge would undertake on an application for review under the Judicature Amendment Act 1972. The Tribunal did not have power to make declarations. Nor did it have power to order that valuations of local authorities were invalid or nullities. The Tribunal was not sitting in an appellate role. Still less was the Tribunal sitting as a quasi High Court. The Tribunal's function was simply to assess the value of assets, where objections to the valuation of those assets had been referred to it. [22] In a section of its decision headed "Jurisdiction" the Tribunal explicitly considered what was the proper scope of its decision. In light of the Telecom vChristchurch City Council decision, the Tribunal found, correctly in our view, that it did not have jurisdiction to address the validity of the Allocation Decision, as Mr Taylor had argued it should. This conclusion is reflected in a number of passages. [23] The Tribunal noted in para 70 of its decision that Mr Taylor had advanced a challenge to the Council's decision based on "various defects as to the lack of delegation of power to amend the roll, and failure to notify the ratepayer under s 17". The Tribunal concluded (at para 71), having referred to Telecom v Christchurch City Council:With the benefit of that authority, we take the view that we do not have the power to decide whether decisions made by Mr McCarthy [the relevant Council officer] were invalid by reason of absence of effective delegation.[24] In para 73 of its decision, the Tribunal briefly summarised Mr Taylor's objections to the validity of the original decision by the Council to allocate Brentwood Manor to the "commercial" category and concluded that it could not address those questions. The Tribunal went on to note the availability of judicial review, commenting that "if the Tribunal reaches the conclusion that the apportionment of value was correct, that does not validate any improper course that was taken by the Council". [25] In para 77 and following, the Tribunal discussed Mr Blair's objection under s 116 of the Rating Powers Act, and the jurisdiction under s 118 to correct rates records. It concluded "the argument has some merit, but in the appropriate jurisdiction". [26] In paras 80 and 81 the Tribunal recognised Mr Blair's argument that the original notification by the Council moving Brentwood Manor from the residential category was ineffective on its face (referring to a non-existent commercial category instead of the business differential), and was not notified under s 17. Mr Blair, commented the Tribunal, probably objected to an invalid notice. That invalidity was not a matter confined to the review jurisdiction of the High Court. Rather, it was possible that it could be successfully raised in resisting proceedings to an assessment. However:The Tribunal's function in this case is simply to deal with the correctness or otherwise of the Council's apportionment of the roll value, as a valuation question. We consider that the Tribunal cannot relieve the objector of liability until the point where a valid notice was given. That is also a matter for another jurisdiction.[27] The Tribunal expressed its overall conclusion in the following manner in para 82:We find no reason to apply a different apportionment to any of the years in question, because the floor area calculation was appropriate and uniform over all years. We determine the objection on the basis that the correct apportionment from 1 July 2001 under s 105 of the Rating Powers Act was 65% business use and 35% residential use. The effect is to amend the valuation roll from 1 July 2001 accordingly.[28] On that basis, and as we read the Tribunal's decision, that decision was limited to Mr Blair's objection, under s 202 of the Rating Powers Act and s 36 of the Rating Valuations Act, to the Apportionment Decision. Furthermore, that decision affected the valuation roll, not the wider category of documents which constitute the Council's rating records. [29] Both parties, however, approached these proceedings on the basis that Mr Blair's appeal from the Tribunal's decision was, in effect, capable of resolving the parties' dispute as to both the Allocation Decision and the Apportionment Decision. They did so in slightly different terms. [30] Mr Taylor expressed the relief he sought as being that the decision of the Tribunal should be reversed and that this Court should substitute a decision that 5 Brentwood Street, Upper Hutt is not used principally as a business. This would, he submitted:Be sufficient to amend the district valuation rolls for 30 June 2001-2004 to show 5 Brentwood Street as in the residential differential. It is understood that all the excess rates paid and penalties will forthwith be refunded by the Council.[31] Ms Levy expressed her client's position as being that Brentwood Manor had met the criteria for rating in the commercial differential for the relevant years. That was supported by the findings of the Tribunal. Therefore, if this Court found that the wording of s 105(4) precluded apportionment on the facts of this case, then therespondent agreed with the appellant that the rates payable by the appellant for the relevant years would be 100% commercial. If the apportionment was permitted (and therefore required) by s 105(4) then the respondent supported the apportionment of 65:35 determined by the Tribunal. [32] We raised with counsel during the hearing the question of the basis on which they considered the Allocation Decision, as well as the Apportionment Decision, was a matter for the Tribunal, and therefore subject to this appeal. Counsel were not able to direct the Court to any particular statutory or other basis upon which the Allocation Decision could come within the Tribunal's jurisdiction, and therefore be a matter for consideration in this appeal. Nevertheless, both counsel emphasised that, in their view, the parties had proceeded on the basis that both matters had been live issues before the Tribunal, and had been determined by it. The Court was, we understood, encouraged to approach this matter accordingly. On reflection, what perhaps was being suggested was that: a) if the Apportionment Decision was upheld then the Council could legally and validly have made the Allocation Decision; and b) whether that in fact had been done was a matter for the Review Proceedings. [33] A proposition in those or equivalent terms was not, however, explicitly put to the Court.The reasons for the Tribunal's decision[34] In upholding the apportionment decision made by Quotable Value, the Tribunal referred in detail to the evidence given by Mr Blucher, an employee of Quotable Value, who had undertaken the apportionment. Mr Blucher, and the Tribunal in turn, relied principally on an apportionment undertaken by Mr Blucher based on what the Tribunal described as a floor area approach; that is, an approach which pro rated the total valuation between the two uses based on the respective building floor areas used by each operation. Mr Blucher made certain assumptionsregarding the number of rooms and supporting facilities required to be set aside for the use of the home stay operation. This allowed for the balance of the area of the property to be attributed to personal use. He pro rated the land on the same basis. This was the principal basis for the 65:35 split decided on. [35] At the same time, the Tribunal considered that evidence provided by Mr Blair based on his accounts supported that allocation. This included some derived figures for average occupancy of the home stay business, relative to the use by family members of the property. The Tribunal noted that a Mr Ellison, a registered valuer called in support of Mr Blair's position, agreed that a floor area calculation was appropriate: the debate was as to the result of that calculation. [36] The Tribunal considered its conclusions in this regard were supported by its inspection of the property, and by financial information which indicated that the average number of guests per night was 3.2, which the Tribunal found was greater than any equivalent calculation of family use. [37] The Tribunal noted that the question of the profitability, or other success, of the business was not an issue, as that would be reflected in the valuation itself. Here, the question was of apportionment. [38] Overall, the Tribunal accepted that the floor area calculation conducted by Quotable Value was appropriate and uniform over all the years, and that accordingly the correct apportionment from 1 July 2001 under s 105 of the Rating Powers Act 1988 was 65% business use and 35% residential use.Grounds of appeal[39] Six grounds of appeal were advanced for Mr Blair. In summary, these were that the Tribunal erred in fact and law in the following matters: a) By apportioning between business and residential purposes, where the areas so notionally apportioned could be variously used for business and residential purposes without modification to the building.b) By using availability of bedrooms for home stay guests as the test for apportioning floor area, rather than bedrooms set aside. c) In regarding as relevant figures for deductions in tax returns, and not adequately considering the submissions made for Mr Blair in that regard. d) In finding that because the purchase of the property could not have been made without income from the property by way of home stay, the home stay was intended to be a business. e) In finding that to have the average number of persons staying Mr Blair had to have available six bedrooms. f) In finding that where on average there were fewer family members resident than home stay guests, the principal use of the property was for home stay guests and, in particular, doing so without adequate evidence of the total use of the property. [40] Considering those grounds of appeal overall, at the hearing Mr Taylor submitted that the principal issue was whether a building could be apportioned under s 105(4) where areas within the building could be variously used for business and residential purposes, without any modification of the building, furnishing or equipment. In other words, his submission was that for apportionment by reference to use to be possible, there needed to be separately identifiable and distinct parts of the rating unit allocated to each relevant use. [41] For the respondent, Ms Levy suggested that the proper approach to the issues raised by the appeal was to consider matters in the following order: a) Was Brentwood Manor used principally for a business purpose? b) If it was, did s 105(4) allow or require apportionment of the part or parts used for business and residential on the facts of this case?c) If apportionment was allowed or required, what was the proper apportionment on the facts of this case? [42] Ms Levy concluded that the question, "Is Brentwood Manor principally used for a business purpose?" was easily answered "yes" on all the evidence. The Council, she submitted, also supported the additional flexibility achieved by allowing apportionment when a property has a mixed use. If, however, such apportionment was not allowed then the outcome was that Brentwood Manor should be rated solely within the business category. [43] The Court's jurisdiction on appeal from the Land Valuation Tribunal is set out in s 26 of the Land Valuation Proceedings Act 1948, which permits any person affected by a final order of the Tribunal to appeal to the Court. Subsection (1) provides that an appeal shall be by way of rehearing. Accordingly, although the appeal proceeds on the basis of the record from the Tribunal, the Court is required to decide for itself the issues which were determined at the original hearing. The appeal is not limited to questions of law and the Court is entitled to take a different view of the facts than that taken by the Tribunal, but must bear in mind any advantages the Tribunal had in seeing and hearing the witnesses. The onus is on the appellant to show that the decision of the Tribunal was wrong, but the Court is not required to exercise restraint in interfering with the Tribunal's decision, unless that decision is properly characterised as a discretionary one. That is not the case here. See: Wright v Powell [1982] 1 NZLR 473; Shotover Gorge Jet Boats v Jamieson[1987] 1 NZLR 437; Chief Executive, Dept of Work and Income v Arbuthnot CA 256/05 3 October 2006.Discussion[44] Mr Taylor's principal submission was that where areas within a rating unit can be and are used variously for business and residential purposes, without any modification of the building, furnishings or equipment to reflect those various uses, then the building cannot be apportioned between differing rating classifications. Thus, in his submission, apportionment of Brentwood Manor was not possible.Furthermore, the wrong approach was taken in the Apportionment Decision, which – by implication – also impugned the Allocation Decision as to principal use. [45] In our view, the most convenient way to consider the various issues raised by this appeal is to begin with the provisions in the Rating Powers Act which, at the time of the Allocation Decision, and the Apportionment Decision, provided for differential rating schemes. We will then go on to consider the approach under the new Local Government (Rating) Act. In turn and in that context, we will consider the questions of the allocation of properties and the apportionment of valuations for differential rating purposes.Differential rating and apportionment under the Rating Powers Act[46] Section 80 of the Rating Powers Act provided that a local authority might, by special order, decide to adopt a system of rating on a differential basis so that "the rates made and levied in respect of any one or more specified types or groups of property may vary from those rates made and levied in respect of another specified type or group of property". [47] Section 81 allowed the local authority to establish types or groups of property to which differential rating could then be applied. As relevant, that section stated:81 Types or groups of property for differential rating purposes(1) For the purposes of section 80 of this Act, a type or group of property may be determined according to one or more of the following criteria: (a) The use or uses to which a property is put: (b) The activities that are permitted, controlled, or discretionary activities for the area in which the property is situated, and the rules to which the property is subject under an operative district plan under the Resource Management Act 1991: (c) The activities that are proposed to be permitted, controlled, or discretionary, and the proposed rules for the area in which the property is situated under a proposed district plan under the Resource Management Act 1991 that has been publicly notified under that Act; but only if— (i) No submissions have been made by any person under clause 6 of the Schedule 1 to that Act concerning theactivities proposed to be permitted in the area in which the property is situated, and the time for making of such submissions has expired; or (ii) All such submissions have been determined by the local authority. (d) The area of the land comprising a property: (e) The situation of the land in any specified part of the district or any special rating area: (f) Such other distinctions in relation to the characteristics of a property as the local authority thinks fit. (4) Where types of groups of property are determined in terms of this section by a local authority for the purposes of any rate for land drainage or water race purposes or for any Catchment Board or pest destruction rate, the local authority may, if it considers it desirable to do so, place any part or parts of a separately rateable property into different types or groups of property from other part or parts of that separately rateable property.[48] Section 84 of the Rating Powers Act set out the requirements for the special order promulgated to introduce a differential rating scheme. Sections 85 to 87 provided for the alteration and revocation of a differential rating scheme. The power to levy rates on a differential basis, within the terms of an existing differential rating scheme, was provided for in s 89. Section 91 set a maximum limit on the rating revenue derived under a differential scheme, stating that the proceeds derived from the rate levied differentially should not exceed the proceeds derivable from the maximum rate if it was levied on a uniform basis, notwithstanding that the rate levied on any individual rateable property might exceed the maximum. [49] There were a number of aspects of the legislative scheme that are worthy of note. [50] Although the power to allocate a particular rateable property to a rating differential was not expressly provided for in the legislation, it must follow as a necessary incidence of the power in s 81 to establish types or groups of property for the purposes of differential rating. Sections 113(1) and (2) reflected this, providing:113 Rate records(1) Every local authority deriving revenue from rates shall maintain in respect of every rateable property in the district such rate records as will show in a clear manner the state of the rate account of any person liable for the payment of rates on that property. (2) Notwithstanding anything in subsection (1) of this section, the rate records shall show the allocation of the property to any type or group of property under any system of differential rating adopted under Part V of this Act.[51] The power to establish a differential rating scheme was stated in very broad terms. This was commented on by the Court of Appeal in Wellington City Council v Woolworths New Zealand Ltd (No 2) [1996] 2 NZLR 537. The Court observed that the Act's purpose was to authorise a local authority to determine what in its judgment was the appropriate means of sharing the rates burden amongst different classes of property. The legislative scheme did not establish any special considerations governing the exercise of the power to make a differential rate. The power was conferred in the broadest terms and without any direction as to purposes or factors for consideration. The Court said:The legislation proceeds on the premise that the wider substantive judgments are made by the popularly elected representatives exercising a broad political assessment[52] The Council was required to introduce the scheme by way of special order, and was bound to exercise its powers in accordance with the special order introducing the rating scheme. There were few substantive limits on the terms of that special order. Relevantly, the Council could only differentiate between properties or groups of properties in terms of the criteria set out in s 81(1) (see para [47] above). That subsection did not specify the types or groups of property permissible, merely the bases upon which the differentiation between types and groups might be effected. [53] Section 105 of the Rating Powers Act provided for apportionment:105 Valuation rolls(1) For the purposes of this Act, the district valuation roll current for the district of any territorial authority under the Rating Valuations Act 1998 is the valuation roll for the district.(2) For the purposes of this Act, the district valuation rolls current under the Rating Valuations Act 1998 for the districts of its constituent territorial authorities are the valuation roll for the district of a regional council. (3) For the purposes of the making and levying of an area rate under this Act, the areas appearing on the valuation roll as corrected from the district valuation roll up to the end of the financial year preceding the date of the rate are sufficient evidence of these areas in the absence of proof to the contrary. (4) Where land is differentially rated, the relevant local authority must ensure that, in each case where parts of a separately rateable property are allocated to different types or groups of property,— (a) The area of the part in each type or group of property is specified in the district valuation roll maintained under the Rating Valuations Act 1998, if the land is or is proposed to be rated on an area system; and (b) The rateable value of the property is apportioned among its different parts, and is so specified in the roll, under the Rating Valuations Act 1998, if the land is or is proposed to be rated on the land value, capital value, or annual value system; and (c) Any such specification or apportionment is made in accordance with any relevant rules made under the Rating Valuations Act 1998. (5) Section 202 applies to any apportionment under subsection (4)(b) of this section.[54] We note that the obligation to apportion followed on from a prior act of allocation, and further that it was not s 105(4)(b) that itself required that act of allocation. Rather, allocation was to already have occurred. Thus s 105(4) applied "where parts of a separately rateable property are allocated to different types or groups of property". [55] Where apportionment was necessary, section 202 of the Rating Powers Act provided for the manner in which that apportionment was to be conducted:202 Apportionment of rateable values between parts of property(1) Where it is necessary to apportion the rateable value of any rateable property between 2 or more portions of the property, the rateable value shall be apportioned so that the rateable value of each portion, when added to the rateable value of the remaining portion or portions of the property shall equal the rateable value of the whole property. (2) Each such occupier may object to such apportionment as if it were a valuation, and the provisions of the Rating Valuations Act 1998 relatingto objections, as far as they are applicable and with the necessary modifications, shall apply accordingly. (3) Notwithstanding anything in the foregoing provisions of this section, where the occupier of a portion of any rateable property is the lessee or licensee under a lease or licence or has entered into an agreement with the owner, and the lease or licence or agreement specifies the portion of the rates in respect of the whole property that are to be paid by that occupier, the rateable value of that portion of the property shall be the sum which bears to the rateable value of the whole property the same proportion that the portion of the rates payable by the occupier pursuant to the lease or licence or agreement bears to the total amount of the rates payable in respect of the whole property.[56] In this case, the basis relied on for apportionment was s 105(4). [57] The correspondence between the parties indicates that Mr Blair first suggested that, if Brentwood Manor was properly allocated to the business category, then because of the multiple uses to which the property was put an apportionment between those uses was necessary. In its response, the Council accepted that position, and began the process of apportionment which culminated in this appeal. The Tribunal, at para 28, noted the acknowledgement of both parties that an apportionment was required. Both the parties, and the Tribunal, therefore read s 105(4) as requiring an apportionment to be conducted wherever a property subject to differential rating was used for a number of purposes, each of which fell within a separate type or group of property within the differential rating scheme. [58] However, subsection (4), which dealt with apportionment, began "Where land is differentially rated, the relevant local authority must ensure that, in each case where parts of a separately rated property are allocated to different types or groups of property " [emphasis added]. As already noted, an apportionment under s 105(4) was therefore predicated on a prior decision of the local authority to allocate various parts of a separately rateable property to a number of different types or groups of property. Where a separately rateable property was allocated to a single differential there was no need to effect an apportionment under s 105(4). The effect of this is that in our view it did not follow automatically from the fact that Brentwood Manor was used for a number of purposes that an apportionment between those uses was necessary or authorised under s 105(4). An apportionment wouldonly have been authorised in circumstances where the Council had properly allocated Brentwood Manor to multiple differentials. [59] It is to that issue that we now turn. [60] Issues relating to apportionment, and its place in the scheme of the Rating Powers Act, have been considered in two cases. These cases are helpful to understand, in turn, the provisions in the Rating Powers Act which refer to allocation. [61] In Auckland City Council v The Big Fresh Food Co Ltd HC AK M-165/194 6 July 1995, Fisher J considered a lease providing for a reapportionment of rates – among a group of lessees whose leasehold premises had a common lessor – on a particular basis (in that case pro rata lettable area rather than annual value). The question Fisher J was called upon to decide was whether s 202(3) required the Council to apportion and levy rates in accordance with the provisions of the lease, notwithstanding the result that might otherwise have occurred on a direct rating basis. [62] Fisher J answered that question in the negative, holding that s 202(1) does not create any power to apportion where none already exists. He pointed to s 105(4) as one such example. He commented as follows:For present purposes the point is that where two or more classes of differential rating apply to the same property the necessity for apportionment is derived from s 105, not from s 202. Section 202 is confined to consequential procedures and methods once an apportionment has become necessary for some other reason.[63] What Fisher J did not do, however, in the Big Fresh Food Co decision was determine in what circumstances allocation was required, and therefore under s 105(4) apportionment as well. To the extent that his observations, referred to above, may be seen as having done so they would appear to be – strictly speaking – not necessary for his decision. In our view, it is not s 105(4) which of itself required apportionment but rather the prior allocation properly made by a local authority under a differential rating scheme decision.[64] Apportionment was considered again, relatively recently, by the Privy Council in the important decision Rodney District Council v Attorney-General[2003] 3 NZLR 721. The question there was the meaning to be given to the expression "separate property" in the context of s 8 of the Valuation of Land Act 1951. Prior to that case, the general practice adopted by the Valuer-General was to equate separate property in s 8 with property as defined by a certificate of title, rather than by a unit of occupation. In order to align valuation records with units of occupation, the further practice that was adopted was to apportion – as between occupiers and units of occupation – the assessed value of a separate property and to enter those apportionments on to district valuation rolls, relying on s 202 of the Rating Powers Act for that purpose. [65] Their Lordships agreed with the approach taken by Fisher J in Big Fresh Food Co. They concluded that s 202 did not itself create a power of apportionment when none already existed. They commented in the following terms:[43] It is to be noted from the opening words of the subsection that the power to apportion in s 202(1) applied only where apportionment was "necessary". The context for that expression was provided by the following provisions elsewhere in the RPA which require an apportionment of the rateable value to be made between parts of the property: (a) Sections 4(4) and 6(2) required this to be done where part of a separately rateable property was deemed not to be rateable property. In that situation the rateable value of the whole had to be apportioned in order to determine the part of the rateable value for which the occupier of the part which was rateable was primarily liable. Sections 4(4) and 6(2) provided that in that event s 202 was to apply in relation to the apportionment. (b) Section 105(4)(b) provided that where land was differentially rated the rateable value of the property was to be apportioned among its different parts. Here again it was necessary for this to be done in order to identify the extent of the liability of the occupier of each part. Section 105(5) provided that s 202 was to apply to any apportionment under s 105(5)(b). (c) Section 120(1), to which reference has already been made, enabled the same exercise to be carried out where, during the rating year but before the making of a rate in that year, there was a sale or transfer of part only of a separate property. (d) Section 179(1) gave power to a local authority to remit or postpone the payment of any rates in respect of certain typesof land, and s 179(2) directed a local authority to remit half of the payment of any rates and any uniform annual charges in respect of land of certain other types. Section 179(5) provided that, where in any case part only of any separately rateable property fell within these types, s 202 was to apply. [44] The reason why these provisions required an apportionment to be made was to enable the rates liability of each part of a separately rateable property to be identified in situations where the liability of each part was different. The purpose of s 202 appears then to have been to lay down the methods by which the apportionment was to be done where this was required elsewhere in the Act. Section 202(2) gave a right of objection to an apportionment by the Valuer–General to each occupier.[66] The Rodney District Council decision, in terms of the issue before us, is helpful in the following respects. [67] In terms of ss 4(4), 6(2), 120(1) and 179(1) of the Rating Powers Act, it seems fairly clear that references to part of a separately rateable property were references to a separately identifiable and physically discrete part of that property. Thus, in terms of the Privy Council's analysis: a) Sections 4(4) and 6(2) required apportionment between that part of a separately rateable property which constituted land to be regarded as Crown land, and more particularly enumerated in s 5(1) or Part I of the First Schedule, and therefore not rateable, and the balance of the land comprising the rateable property. In our view, the application of those provisions required the identification of physically discrete parts of the rateable property in question. b) Section 120(1), depending as it did on there having been a sale or transfer of part only of a separate property, by definition involved the same interpretation of the word "part". c) Similarly, s 179(1), applying as it did to allow for the remission of rate payment obligations in respect of certain types of land listed in Part I of the Second Schedule to the Act – described in general terms by reference to the words "land owned or occupied" and morespecifically as "land set aside or classified", also involved a similar approach to the meaning of the term "part". [68] In our view, therefore, it is appropriate to approach the reference to different parts in s 105(4)(b) as being a reference to separately identifiable discrete physical parts of the property in question. That this is what the Privy Council had in mind is, in our view, reflected in their comment as regards s 105(4)(b):Here again it was necessary for this to be done in order to identify the extent of the liability of the occupier of each part.[69] The reference to "the liability of the occupier of each part" also envisages separately identifiable physically discrete parts of the property in question. [70] The Privy Council did not refer to apportionment consequent upon a decision under s 81(4). In our view, however, s 81(4) suggested a consistent approach to the concept of parts. This conclusion derives from the direction in s 81(4) which allowed a local authority, if it considered it desirable to do so, to place any part or parts of a separately rateable property into different types or groups of property from other part or parts of that separately rateable property for certain rating purposes. As regards the "types" or "groups" of property referred to in s 81(4), they are "types" or "groups" that were determined by reference to the statutory criteria. What the subsection appears to have contemplated was that where one part of a property was determined as being subject to a particular differential rating criterion, and another part was determined to be subject to another criterion, then for the purposes of land drainage rates or water race rates purposes, or for any Catchment Board or pest destruction rate, apportionment might be desirable. By reference to the type of rates involved, it seems reasonably obvious that discrete parts of a property would be identified as part of the apportionment process. [71] With reference to s 81(4), and the need for allocation in the context of differential rating schemes, there is in our view at least an argument that when s 105(4)(b) used the phrase "where parts of a separately rateable property are allocated to different types or groups of property" it was doing no more than referring back to the allocation allowed for by s 81(4). There was no generalauthority in the Rating Powers Act requiring or allowing Councils to allocate separately rateable property amongst differential rating classes. By specifically providing for such allocation in s 81(4) in a limited set of circumstances, the legislation can be argued by implication (to include one is to exclude others) to have allowed for allocation in those circumstances only. [72] This is not the way this case proceeded before us, and these points were not argued before us. We are content, therefore, to do no more than refer to this possibility, and to proceed on the basis that the Rating Powers Act implicitly allowed generally for allocation between parts where a differential rating system provided for that allocation. [73] In our view, where a differential scheme provided for an allocation, a two- step process was required. [74] The first step was for the local authority in question to place – that is allocate – the part or parts of the property into the different types or groups of property from other part or parts of the property for the purpose of the differential rating scheme. This involved, by necessity in our view, the identification by the local authority of the relevant separately identifiable and physically discrete part or parts. The applicable types or groups of property were those provided for in the special order establishing the differential rating scheme, as provided for in s 81(1) of the Act. The allocation accordingly had to be effected with reference to the criteria and tests set out in the special order establishing the scheme. [75] Section 105(4) then operated to require apportionment of the rateable value: in effect the identification by the valuer of the value of the respective parts identified by the Council in its allocation decision. [76] Those matters having been determined as between the local authority and the ratepayer, it was then open to the ratepayer to object to the apportionment of value which flowed from the division into parts. Where, for example, a business occupied more than half of the total property, but that part of the property had a lesser value – on a pro rata basis – then it would be in the interests of the ratepayer to assert that theapportionment should be other than on an area basis, and should accurately reflect the separate values of the different parts. [77] It follows, however, that it was not sufficient to simply make an allocation to multiple differentials in general terms and then look to the valuer to determine exactly which parts of the property fell into which differential as part of the apportionment decision. The allocation decision had to specify the allocation of particular physically discrete parts to particular types or groups of property. The role of the valuer, then, was to determine what portion of the overall rateable value was represented by each part. [78] This division of functions reflects, in our view, the proper role of valuers and in turn the Tribunal, as being simply to value assets. If a valuer, and in turn the Tribunal, were themselves required to decide on the apportionment where a local authority had done no more than identify that a separately rateable property fell within two different categories of a differential rating system, then the decision to be made was not one of valuation, but rather – as is evident from the considerations of the valuer and the Tribunal in this instance – of a different character. What, in fact, the valuer was called to do by the Council, in this instance, was in effect to make the Allocation Decision. That is, it determined – as it understood it had been asked to do – the relative proportions of the property itself which might fairly be said to be allocated to the respective categories, and the valuation was simply an apportionment based on that pro rata allocation. [79] The initial Council decision was made in terms of the Council's rating scheme enacted under the Rating Powers Act. Subsequent assessments, discussed in the Tribunal's decision and part of the initial dispute, were also made under that Act. The last two assessments so disputed and discussed, those for the 2003-2004 and 2004-2005 years, were made under new legislation – the Local Government (Rating) Act 2002. Although we were not addressed on the provisions of that Act, given the way we are approaching these matters we turn now to consider these issues under that legislation.Differential rating and apportionment under the Local Government (Rating) Act 2002[80] The Local Government (Rating) Act 2002, by s 2 of that Act and subject to certain exceptions, entered into force on 1 July 2003. The Rating Powers Act was repealed by s 138 of that Act, which states further that the Rating Powers Act continues in force only to the extent necessary to levy and collect rates made for the financial year ending 30 June 2003. [81] The effect of this is that the rates set for the financial years from 1 July 2003 and onwards fall for consideration under the terms of the new legislation. [82] Like the old legislation, the Local Government (Rating) Act provides for the setting of a general rate on either a uniform basis or a differential basis, under s 13(2)(b). Section 14 provides that differential rates must be set for categories of rateable land identified in the authority's funding impact statement and defined in terms of the matters listed in Schedule 2. Those matters substantially replicate the criteria for defining types or groups of property listed in s 81 of the Rating Powers Act, but with several new additions. [83] Pursuant to s 23 of the Local Government (Rating) Act rates must be set by resolution of the local authority. The rates set by resolution must relate to a particular financial year or part thereof and be set in accordance with the relevant provisions of the local authority's long-term council community plan and funding impact statement for that financial year. [84] The terms "long-term council community plan" and "funding impact statement" are defined elsewhere in the legislation governing the activities of local authorities. Those definitions are not material for our purposes. As to differential rating the funding impact statement must include:(c) if the [financing] mechanisms include a general rate,- (iv) a statement as to whether the general rate is to be set differentially, and, if so,-(A) the categories of rateable land, within the meaning of s 14 of the local Government (Rating) Act 2002, to be used; and (B) the objectives of the differential rate, in terms of the total revenue sought from each category of rateable land or of the relationship between the rates set on rateable land in each category; and [85] In order to levy ("assess" under the new terminology) a rate, the local authority must deliver a notice of rates assessment to the ratepayer under s 44. Under s 45, that assessment must include a statement of the relevant matters in Schedule 2 that are required to determine the category, if any, to which the rating unit belongs for the purposes of setting general rates differentially under s 13(2)(b). Pursuant to s 45(3) and (4), the rates assessment may be in two or more parts to identify for rating purposes the different treatment of different parts of a rating unit. That is a reference, inter alia, to the possibility of allocating parts of a single rating unit to multiple differentials. Support for that proposition can be found in s 27, which sets out the requirements for rating information databases, and provides in subsections (4) and (5):(4) The database must include, in relation to each rating unit within the local authority's district,- all information that relates to the unit that is included in the district valuation roll for the district; and all information that relates to the unit that is required to- (i) determine the category (if any) to which the unit belongs for setting a general rate in accordance with section 13(2)(b); or (5) The information in subsection (4) may be recorded separately for different parts of a rating unit if separate records are necessary because of different rating treatment of each part resulting from: (a) the inclusion of different parts in different categories under subsection (4)(b)(i) or (ii) [86] As outlined above, s 13(2)(b) is the provision authorising differential rating. Therefore it is clear from s 27(4)-(5) that the Local Government (Rating) Act envisions, as at least one means of achieving different rating treatment for different parts of a rating unit, the possibility of allocating parts of a single rating unit to different categories of property under a differential rating scheme. We note that this appears to clarify, at least as regards the new legislation, the point we have previously raised at paras [71] and [72]. [87] The setting and assessing of rates on a differential basis is therefore not substantially different from the framework that operated under the old Rating Powers Act. If anything, we think the statutory language makes clearer what we consider to be the correct approach under the old legislation to the question of allocation. [88] Turning now to apportionment, we note that there is no equivalent in the Local Government (Rating) Act to ss 105 or 202 of the Rating Powers Act. There is, in fact, no express mention of apportionment, or how that is to be effected, anywhere in the Local Government (Rating) Act. [89] In our view, however, it must be the case that the rateable value of a rating unit can be apportioned amongst its various parts where those parts are allocated to different categories in accordance with s 14 and s 27 of the Local Government (Rating) Act. That is because rates under a differential rating system are set in the dollar of rateable value for different categories of rateable land. Hence, it must be possible to apportion the rateable value of a rating unit amongst its parts, where those parts are allocated to different categories, otherwise it would be impossible to calculate the overall rate liability of the ratepayer. [90] The issue then becomes the relative jurisdictions of the local authority and the Tribunal in that process. [91] In our view, the approach to allocation and apportionment is the same under the new legislation as it was under the old. We say this for three reasons.[92] First, there is nothing in the new legislation to suggest that any different approach should be taken. [93] Secondly, and in terms of the first stage of the two-stage approach we outlined at paras [73] to [78], the new legislation envisions the local authority making the decision to identify separate parts of a single rating unit and allocate them to different categories under the differential rating scheme. We find support for that in s 27 of the Local Government (Rating) Act, which casts an obligation on the local authority to keep and maintain a rating information database. The database records all the information required for setting and assessing rates. [94] The information relating to allocation of a rating unit, either in whole or in parts, to particular differentials is expressly distinguished in subsections (4) and (5) from that information that derives from the district valuation roll. That suggests that, whereas the Land Valuation Tribunal has jurisdiction in respect of those matters that are recorded on the district valuation roll (by virtue of the Rating Valuations Act 1998), it is the local authority that has jurisdiction over the additional matters that are included on the rating information database. The effect of that conclusion is that the local authority is responsible for making the decision to allocate a rating unit, either in whole or in parts, to a differential or differentials, and recording those matters on the rating information database. The combination of that information with the information derived from the district valuation roll allows the local authority to assess the rates liability of any given ratepayer. [95] Finally, as regards the second stage of the two-stage approach, we think the Tribunal continues to have jurisdiction to consider the issue of apportionment of rateable value once the local authority has made the decision to identify and allocate parts of a single rating unit to different categories. Apportionment has always been considered a valuation question, and therefore appropriately within the bounds of the Tribunal's expertise. That is consistent with the Court of Appeal's view of the proper role of the Tribunal in Telecom v Christchurch City Council. The Court there emphasised that the Tribunal's function is to value land. Apportionment, as conceived in terms of our two-stage approach, is straightforwardly a valuation question and therefore properly within the bounds of the Tribunal's function.[96] We therefore conclude that the two-stage approach we have outlined above at paras [73] to [78] applies equally in the case of the new legislation. [97] We now turn to the situation involving the Upper Hutt City Council, Brentwood Manor and Mr Blair.Differential rating in the years in dispute[98] The Upper Hutt City Council operated a differential rating scheme for all the years in question. The terms of that scheme evolved over time. We summarise that scheme and its evolution on the basis of the material before us. We comment explicitly that our understanding of the evolution of the scheme is based on reasonably limited materials provided to us. These were referred to by Mr Taylor in his written submissions (at para 22) by reference to various copy materials provided in the common bundle of documents. We note that the pages referred to were not complete copies of documents, and we have taken it that they are accurate and not affected by other material we may not have seen. [99] Prior to 1 July 2002, the special order establishing the differential rating scheme placed in the Business Category, all separately rated properties "used for a commercial purpose, regardless of zoning". It did so in the context of a scheme that identified a number of "types or groups of property", and provided for the allocation of all properties into two categories, Residential Category and Business Category. [100] The types or groups of properties that were to be allocated to the Residential Category included: a) all separately rateable properties situated in either of the city's Residential Zones (other than properties included in the Business Category); b) properties in certain other zones; andc) properties "used primarily for residential purposes" situated in any Commercial, Service or Industrial Zones. [101] The types or groups of properties that were to be allocated to the Business Category included: a) all separately rateable properties in the Commercial or Service Zones (other than properties eligible to be allocated to the Residential Category); and b) all properties used for a variety of other purposes, including a commercial purpose, regardless of zoning. [102] As can be seen, therefore, the types or groups of properties were identified primarily by reference to the underlying zoning of various areas of the city. Those types or groups were supplemented by types or groups based on various uses, particularly: a) where a property was used for "principally a residential purpose" in a Commercial, Service or Industrial Zone; and b) if used for a commercial purpose – regardless of zoning. [103] As regards Brentwood Manor, the relevant "type or group" relied on by the Council was "(b) if used for a commercial purpose, regarding of zoning". [104] A new system of differential rating was adopted as from 1 July 2002. It created four categories, Residential, Business, Rural and Utilities. As before, properties were divided between the various categories by reference either to their situation in a particular zone, or to – in general terms – the principal use to which they were being put, where that use did not (for the purposes of the scheme) conform to the general nature of uses provided for in the relevant zones.[105] As relevant for these purposes, the relevant "type or group" was described as "all separately rateable properties in the city principally used for a business purpose of any kind regardless of zoning". [106] The 2003-2004 year was the first that fell under the Local Government (Rating) Act. The only evidence we have of the rating scheme operated for that year is a partial document in the bundle provided by Mr Taylor listed in the index as "Draft rating resolution (undated)". That was referred to us in Mr Taylor's submissions as evidence of the scheme operated for the 2003-2004 year. That is hardly ideal, but no objection was taken to it by opposing counsel. [107] The scheme for 2003-2004 retained the principal use test from the previous year but added a reference to s 27 of the Local Government (Rating) Act in the following terms:The rating unit may be divided between business and other rating categories if there is more than one category that is significant. This is in accordance with section 27(5) of the Local Government (Rating) Act.[108] For the 2004-2005 year, the scheme was amended again. It retained the four general categories of Residential, Business, Rural and Utilities. Within those categories it modified in various ways the "types or groups" of properties, but retained the overall structure of description either by reference to zoning or use. [109] As particularly relevant to Brentwood Manor, and residential properties used for business purposes, the test was changed again, as follows:All separate rating units that are a business: (b) Situated in the residential, rural or open space zones and not allocated to the utilities category, that are principally used for a business purpose.[110] Additionally, the scheme introduced the following new provision:The rating unit may be divided between business and other rating categories when the business activity is regarded as significant. This is in accordance with section 27(5) of the Local Government (Rating) Act 2002. Division will only occur where the business has a capital value of $50,000 or greater.[111] Overall, therefore, at all relevant times the Council's differential rating scheme differentiated between types or groups of property either by reference to zoning or in terms of the use to which the property is put. It is similarly clear that over time the differential rating scheme was refined. The 2004–2005 version was more sophisticated than that in effect for the year ended 1 July 2002. Until 1 July 2002, the test was simply whether the property was "used for a commercial purpose". After that date, the Council introduced a principal use test. Finally, with the advent of the new legislation, in 2003–2004 and 2004-2005 the Council introduced a policy which appears to have specifically provided for apportionment between categories. [112] Based on the foregoing discussion and analysis, we think separate conclusions need to be drawn as regards the period from July 2001 until July 2003, and in the period from July 2003 onwards. [113] In terms of s 105(4), the opportunity to allocate the property between its various uses did not arise under the scheme that applied from July 2001 until 2003. Prior to 1 July 2002, it was sufficient for rating in the business differential that the property was "used for a commercial purpose". Subsequent to that, the principal use test applied. The special orders in force for those years did not provide for the possibility of allocating a separately rateable property to multiple differentials, and therefore there was, in our view, no authority to apportion under s 105(4). Indeed, the principal use test applied from 2002 to 2003 by its very nature precluded an apportionment decision between multiple uses. The reference to 'principal' use presumes that the property will be used for other purposes, and that that fact will not prevent it from being allocated to a single differential. The "used for a commercial purpose test" is not explicitly based on the principal use concept. The policy the Council took, however, was to adopt a principal use test. That policy does not necessarily reflect the words of the scheme as they define the category in question. It is in our view at least arguable that "a commercial purpose" means some exclusive use. At this point, however, it is sufficient to note that the scheme in place from July 2001 to July 2002, which was the scheme under which the Council's original decision was made, did not provide for allocation either.[114] Mr Blair's objections to the manner of the apportionment do not arise in respect of the years from 2001 to 2003, as the allocation to different types or groups of property was not authorised in the first place. Only once the July 2003 scheme came into effect did the possibility of allocation of parts of the property to different types or groups of property, and therefore apportionment of rateable value amongst those parts, arise. Prior to that date, the special orders establishing the differential rating scheme did not provide for multiple allocations. The ultimate result of this analysis is that the Tribunal erred in entering into the apportionment inquiry in the first place. The apportionment was not required under the scheme in force. The Tribunal therefore should have declined to enter into the inquiry. Indeed, the problems experienced by the Tribunal, and by counsel before the Tribunal, largely flow from the fact that the Tribunal was asked to determine an allocation in the guise of an apportionment. In the absence of a prior decision by the Council allocating discrete parts of Brentwood Manor to different types or groups of property, the process of apportionment was both unauthorised, and, with reference to the proper functions of the valuer and the Tribunal, impossible. [115] In the context of the scheme that operated from July 2003 onwards, it is necessary to have regard to our foregoing discussion as to the meaning of the term "part" in the statutory scheme. In our view, this means a separately identifiable and physically discrete part of a property, which a local authority may allocate to a relevant type or group of property under the differential rating scheme in force. Accordingly, in our view where a scheme provides for allocation – and accepting that the 2003/2004 and 2004/2005 schemes by their reference to division "between business and other rating categories" do so – it is necessary for the Council to identify to which types or groups of property the various parts of the rateable property should be allocated. This the Council would not appear ever to have done. [116] Our overall conclusion is that the appeal is allowed to the extent that the decision of the Tribunal apportioning the rateable value of Brentwood Manor is quashed. However, as our decision is that the Tribunal erred by undertaking the process of apportionment in the first place, the result is that the Council's original decision allocating Brentwood Manor entirely to the business category remains. That is the position at the conclusion of this appeal.[117] That conclusion obviously places Mr Blair in a worse position than if he had not brought this appeal, but it follows necessarily from our view of the scheme of the Rating Powers Act and the division of functions between the Council, the valuer and the Tribunal. Somewhat paradoxically, our analysis of the Allocation Decision calls for an approach to the identification of parts which, while not the same as, is not dissimilar to that argued for by Mr Taylor in his challenge to the Apportionment Decision. That is, one can only apportion where allocation has occurred (or, in Mr Taylor's case, is possible). The result is that Mr Blair's remaining quarrel is with the decision of the Council to allocate Brentwood Manor to the business differential, and the process by which that decision was made. That is the subject of the Review Proceedings. [118] As we have noted, both counsel approached this appeal on the basis that the Court could address the question of the substantive correctness of the Council's allocation decision. Whilst we do not agree that that is the case, nevertheless, in light of the way the matter was argued before us, we will express some observations on that issue. In doing so we will not, however, go as far as counsel invited us, and come to concluded views on the status of the Council's allocation decision. [119] Section 81(1) of the Rating Powers Act sets out the bases upon which differentiation may be effected. Relevantly, the first of those is the use or uses to which a property is put. In this case, at all times, use was the basis of the Council's differential rating scheme. It follows from that that, where the Council seeks to allocate a rateable property to a given differential, it must assess that property in terms of the use (or uses, where multiple allocations are authorised) to which it is put. The degree of positive investigation that is required to make that assessment will differ with the circumstances of the case. What is important is that the Council satisfies itself as to the factual question of the use to which the property is put. In most cases the use to which a given property is put will be evident from a cursory examination. In many cases also, the occupier will be able to inform the Council as to use. It is only in a small number of cases that the Council will actually be required to undertake a detailed examination of, and inquiry into, the property in order to make the use assessment. But the overall point is that the Council must dothat which is required by the circumstances of the case to satisfy itself as to the use to which the property is put. [120] The converse of that is, where use is the basis of the differential rating scheme, it is not permissible for the Council to have recourse to other criteria for assessing the appropriate type or group to which a given property should be allocated. The Council may only consider those criteria under s 81(1) which are incorporated into the differential rating scheme by means of the special order. [121] The intent of any positive inquiry into use made by the Council is not clear to us. In fact, it appears that the Council may have had regard to criteria other than use. We refer to the evidence of the Council's officer Mr McCarthy at paras 9 – 11 of his affidavit, where he stated:9. I believe that the way in which Brentwood Manor was advertising came to the attention of a Rating Officer. There were then discussions within the office, including about the Resource Consents issued in respect of the property. The result was my determination that the property was principally used for a business purpose. 10. Upper Hutt is a city of 36,400 people, with 14,355 rateable properties. It is not possible to have a positive-enquiry system for the review of rating differentials. The informal process described above is the norm. At present 631 properties are rated in the Business differential. 11. Sometimes the need for a change in differential becomes apparent when a resident seeks Resource Consents which indicate a change to principal use as a business, sometimes Council is made aware of changes by other ratepayers or residents, and sometimes changes are initiated by Council staff becoming aware of the use of property as occurred in this case.[122] In the absence of an appropriate use inquiry, and noting that in our view it is not sufficient to rely on resource consents or other similar matters, it is arguable that that initial decision was invalid. We note immediately, as we have already said, that we simply make that observation based on the materials before us at the present time, and in response to counsels' invitation to us to consider the validity of that decision of the Council. [123] It is also clear, in our view, that subsequent unauthorised apportionment decisions cannot validate the Council's initial Allocation Decision.[124] If there has not been an appropriate use inquiry, then the position would be that there has been no valid allocation of Brentwood Manor to the Business Category. It would remain open for the Council to make such an allocation decision based on an appropriate actual use enquiry. Furthermore, there would then be rights of objection and the ability to both invoke and challenge a valuer's apportionment decision. [125] We can only hope these remarks may provide the parties with some assistance to move forward from the somewhat unfortunate situation that has developed since this matter first arose in 2001, acknowledging that both parties are dealing with difficult and complex legislation. [126] We make comment on one further matter. [127] Clifford J, sitting alone, had earlier heard an interlocutory application on the question of the order in which these proceedings and the Review Proceedings should be heard. His understanding at the time – as counsel contended for before us but as we decided is not the case – was that these proceedings could resolve questions of the substantive validity of the Allocation Decision, in terms of principal use, as well as the valuation questions involved in the Apportionment Decision. That understanding is reflected in the following extract from his judgment of 21 June 2006:a) If the appellant's appeal against the Land Valuation Tribunal decision is dismissed, and the first and second defendants' decisions upheld to that extent, the scope for judicial review and damages actions would appear to be, at least potentially, significantly affected. The rating merits – for want of a better phrase – of those decisions have been upheld, the plaintiffs would perhaps seek to focus their challenge on the procedural and other legal irregularities they allege in the decision-making processes.[128] As matters have transpired, these proceedings have not been capable of resolving issues relating to the Allocation Decision. [129] We recognise that, subject to our encouragement to the parties to seek a resolution of this matter without further legal proceedings between them, that leaves all aspects of the Allocation Decision to be resolved pursuant to the ReviewProceedings, which was not the expectation of the parties or of Clifford J at the time of that interlocutory decision. [130] In these circumstances, we have given consideration to whether we could go further than we have, and in some way endeavour to resolve those issues by reference to the enquiries made, first by Valuation New Zealand and then by the Tribunal, for the purposes of what was essentially the use analysis they carried out to arrive at a pro rata apportionment of the valuation. We have concluded that it would not be appropriate for us to go further than we have. We make these comments to demonstrate that we are not unaware that these proceedings have not resulted in the degree of resolution that the parties may have hoped for. [131] We turn to the question of costs. [132] As matters have transpired, Mr Blair's appeal has technically succeeded, at least to the extent that the apportionment decision of the Tribunal is quashed. However, the effect of our decision is that, pending the outcome of the Review Proceedings, the Council's original decision to allocate Brentwood Manor wholly to the business differential stands. Moreover, we have in reaching our conclusion adopted an interpretation of the legislation that was not explicitly argued for by either party, although Ms Levy for the Council anticipated this as a possible outcome. We recognise that this is not the result that Mr Blair would have desired. We also note that this appeal has not, in and of itself, provided either party with the degree of resolution of their dispute that they might have hoped for. On this basis, we think that these are appropriate circumstances in which costs should lie where they fall, and we so order. "Clifford J" For the Court