The Whitby Harbour case primarily concerned the extent of land owned by the Council, the statutory harbour authority, forming part of the harbour undertaking and the accounting treatment of income and expenditure in respect of car parks situated on alleged ‘harbour land’. The case highlights the importance of statutory harbour authorities complying with their local harbour legislation.
This article is of particular interests to local authorities running municipal ports and harbours, but is also of wider relevance to all types of statutory harbour authorities.
Whitby Harbour is a local authority run harbour, also known as a ‘municipal port’, and is a key part of the Whitby's economy, which relies heavily on tourism. There was a disagreement about the extent of land owned by the Council that was ‘harbour land’, i.e. held as part of the harbour undertaking in the Council’s capacity as statutory harbour authority, and the treatment of income received from activities on that land.
As a result in 2015, and each subsequent year, a local person raised an objection against the accuracy of Council’s general accounts under the Local Audit and Accountability Act 2014. Following years of consideration, the Council’s auditors gave a statutory recommendation that the Council should seek a declaration from Court as to which land was ‘harbour land’ and the correct interpretation of the local harbour legislation regarding revenue from that land and accounting practices.
By the time of the Court proceedings a limited number of plots of land remained in dispute, but situated on them were carparks from which substantial revenue was generated. During the proceedings over 200 years of historic records were considered in depth. The Court agreed with the local person who had objected and held that all of the disputed land was ‘harbour land’.
The Court also needed to determine the proper accounting treatment of income and expenditure in respect of use of those car parks by the general public. It was the Council’s position that only income directly related to harbour operations should be included in the harbour account and other income could be placed in the council’s general fund account. As such, where car parking was provided for the general public, that income was placed into the general fund.
The local person objected to this treatment of income on the basis that the land had not ceased to be held for harbour purposes. She argued that the Council, in providing the car parking on harbour land, was acting as statutory harbour authority, and within its powers as such. The revenue was therefore required to be credited entirely to the separate account that should be maintained by the council as harbour authority under its local harbour authority legislation.
The dispute centred around the interpretation of the Whitby Urban District Council Act 1905 with the main sections under consideration being:
Section 16: which provides a list of purposes to which revenue from the harbour undertaking may be applied.
Section 62: provides that “[t]he Council shall keep separate accounts of their receipts and expenditure from or in respect of the harbour undertaking on capital and revenue account…”.
The particular questions arising were:
What [land] constitutes the harbour undertaking.
Whether income from the car parks is “from or in respect of the harbour undertaking” within the meaning of section 62 of the Whitby Urban District Council Act 1905.
Whether the Whitby Urban District Council Act 1905 requires a segregation of the capital assets and liabilities pertaining to the harbour.
The Council argued that 'harbour undertaking' is defined by the activities and usage authorised by harbour legislation and is essentially economic in nature.
The income and expenditure that should be included in the separate harbour account are those arising from activities and uses authorised by the harbour legislation. The council argued that there was no power for a harbour authority to provide parking for the general public, as that power could only be exercised by a local authority under road traffic legislation.
The Council further submitted that where the harbour undertaking is being carried on by a local authority with additional broader functions, an intra vires activity i.e. an activity within the council’s powers, carried on, within or near to the harbour limits will not necessarily be part of the harbour undertaking. It had been the Council’s approach, where harbour land was leased or licensed, to consider the particular uses/activities carried on by the tenants and licences in relation to those interests, in order to decide whether the revenue generated was harbour revenue or could be placed in its general fund.
The Council then argued that while section 62 of the Whitby Urban District Council Act 1905 requires a separate account of the harbour's income and expenditure, including capital expenditure and receipts, it does not require a segregation of the assets and liabilities. The Council’s submission was that the requirement for separate accounting is to allow for analysis of income and expenditure, not to create a distinct entity with segregated funds as that was not explicitly provided for in the legislation.
The consequence of the Council’s approach is that not all income from land acquired for harbour purposes is automatically to be considered as revenue of the harbour undertaking. This means that car parking provided for the general public and some commercial rental income, had not been regarded, as falling into the category of harbour income.
The local person focused on the original purpose for which the land was acquired. She argued that where land was acquired for harbour purposes by the council or its predecessors acting as a harbour authority - and has not ceased to be held for those purposes - any revenue generated from activities on that land should be credited to the harbour account.
It is only necessary to consider whether the council is acting intra vires as the statutory harbour authority, and so lawfully carrying on the use of the land as authorised by statute or, in a way which is incidental to its use. The income generated is then necessarily from the harbour undertaking.
The local person argued that providing public car parking is a use that is fairly incidental to the operation of the harbour, intra vires for the harbour authority, and so should be considered part of the harbour undertaking.
Equally the income derived from leases and licences, granted intra vires the Council as a harbour authority, on harbour land is also revenue from the harbour undertaking; the nature of the use of the land by a tenant or licensee being irrelevant for this purpose. She argued that these incidental powers all derived from express powers including those allowing the harbour authority to charge dues and mooring fees and to sell and lease land and, as was accepted by the Council, to provide parking for harbour users. For example:
The harbour hosts businesses, such as fishing trip boats and sightseeing vessels, which rely on visitors who are likely to arrive by car - the provision of parking facilities directly supports these businesses, which in turn generates revenue for the harbour authority through passenger and ship dues, as well as licensing fees.
The Council exercises the power as harbour authority to lease and license retail and leisure premises - without adequate parking, the viability of these leased premises, and the ability to let them commercially, would be significantly diminished.
The harbour is a tourist attraction - providing parking facilities encourages visits, which in turn stimulates economic activity within the harbour, benefiting both businesses and the harbour authority.
The local person argued that the Whitby Urban District Council Act 1905 does require a segregation of capital assets and liabilities, as the purpose of section 62 is to ring-fence the finances of the harbour undertaking from the council's other accounts. The harbour undertaking should be treated as a wholly distinct entity for capital and revenue accounting purposes
The consequence of these arguments is that the Council has no discretion to allocate income from car parks or occupational interests to its general fund. The use of the revenue is then ring-fenced so it cannot be applied for other purposes i.e. cross-subsidy of other council services.
It was held that a statutory harbour is significantly more than an economic enterprise. Whilst economic activities are part of a harbour’s function, its governance is fundamentally shaped by statutory duties and responsibilities that prioritise maintenance, safety and public benefit.
The provision of public car parking is not a separate, unrelated activity, but an integral part of the harbour's function and operations, supporting the harbour's commercial, tourist, and operational functions, and contributing to the harbour’s overall viability. Likewise, revenue from lawfully exploiting a harbour asset such as leasing land or granting a licence is inherently harbour revenue.
It was further held that section 62 of the Whitby Urban District Council Act 1905 requires harbour revenue to be kept in a separate account. The statutory purpose is to promote the harbour itself, implying a segregation of funds and their use for the harbour.
It was considered that it would be incongruous if Parliament had imposed strict controls on revenue application under sections 16 and 62 but allowed, for example, capital from the sale of harbour land to be treated as a capital receipt which could be used by the council for its general purposes.
All income from car parking facilities on harbour land should, therefore, be credited to the separate revenue account.
This case serves as an important reminder to statutory harbour authorities to review, understand and comply with their core statutory duties. If harbour land is used to generate revenue, that revenue is harbour revenue – in the absence of express statutory provisions to the contrary, it should be ring-fenced and used only for the benefit of the harbour.
During the court proceedings, the judge also considered the first defendant’s extensive factual investigation into what land was harbour land. As such, local authorities should be clear on the basis by which they hold the land, which may include looking at how they historically acquired the land.
Ashfords has extensive experience in relation to disagreement. For more information, please contact Lara Moore or Ione McGregor.
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