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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Haggart v. Leith Assessor [1911] ScotLR 163 (14 December 1911)
URL: http://www.bailii.org/scot/cases/ScotCS/1911/49SLR0163.html
Cite as: [1911] ScotLR 163, [1911] SLR 163
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SCOTTISH_SLR_Court_of_Session
Page: 163↓
Court of Session Inner House First Division.
(Before
v.
Facts:
As the result of an agreement between the assessor and a representative of the licensed traders of a burgh, with a view to securing uniformity in the valuation of public-houses in the burgh which were in the occupation of the
Page: 164↓
proprietors, the assessor valued a large number of such premises on the basis of annual turnover, by taking seven per cent. thereof as the yearly value in each case. In about sixty cases the valuations thus brought out were acquiesced in, but the owner of one public-house, whose valuation had been thereby increased, appealed. Held that, in the circumstances, the assessor's valuation should be upheld.
At the Burgh of Leith Valuation Court held at Leith on Tuesday, 12th September 1911, James Haggart, wine and spirit merchant, 156–158 Albert Street, Leith, appealed against the following entry in the valuation roll of the burgh for the year ending Whitsunday 1912—
Description.
Situation.
Proprietor.
Occupier.
Yearly Rent or Value.
Shop & Cellar
156–158 Albert Street
James Haggart
James Haggart
£210
and craved that £80 be substituted for £210.
The Committee, after evidence had been led, determined that the subject should be entered in the roll at £175, whereupon the appellant craved a Case.
The Case gave the following facts—“1. The premises in question are situated at 156–158 Albert Street, Leith, and are occupied as a licensed public-house. The appellant has been owner and occupier of the premises since the year 1894. The shop is a corner one, with an area of about 1062 square yards, has about 63 feet of frontage, and is situated in a populous locality. The premises have a large bar and suitable cellarage, and are well adapted for carrying on an extensive business.
2. From 1900 to 1910 the yearly rent or value as appearing in the valuation roll was £80. In 1910, in consequence of the increase of licence duty imposed by the Finance Act 1909–10, representations were made to the assessor by many of the licence-holders in Leith, including the appellant, for a reduction of the valuation of their premises. The appellant also lodged an appeal against the valuation of his premises at £80, and craved that it should be reduced to £60; but by agreement between his agent and the assessor the rental was allowed to remain at £80 for another year, as it was anticipated that some general principle of fixing assessable rentals for public-houses might be laid down by the next Lands Valuation Court.
3. At meetings which the assessor had in 1910 with Mr Garden, S.S.C., secretary and agent of the Leith Wine, Spirit, and Beer Trade Association, who represented the majority of the licence-holders within the burgh, including the present appellant, there were for the first time furnished to the assessor, at his request, returns of the spirit turn-over per permit books, the beer turn-over, also notes as to the weekly and annual drawings of various public-houses the assessable rentals of which were under consideration by the assessor. After consideration and discussion, Mr Garden and the assessor agreed that, after taking into account various elements, including situation, extent of premises, and the character of the business, a fair basis of rental and equitable principle of assessment would be reached by taking a certain fixed percentage of the annual turn over of each shop. On this basis, accordingly, the Assessor adjusted with Mr Garden a great number of assessed rentals of licensed premises, the result being that (including additional outgoings in respect of the increased licence duty) seven per cent. or thereby of the gross turn-over was fixed as the assessable rental in these cases. On the foregoing basis, in 1910–11 a number of the rents of licensed premises were reduced, and in one case increased. In other cases, including the appellant's, the fixing of the assessed rental was held over in the expectation, as above explained, that some general principle of assessing the rentals of public-houses might be laid down at the next Lands Valuation Judges' Court.
4. In five public-house appeals decided by the Valuation Judges last year, in which turn-over was an element in the case, the resultant rental, after making allowance for half the increased licence duty, varied from six to ten per cent. of the gross turnover from three weeks to five and a quarter weeks average weekly drawings, and from 17 to 29
per cent. of the gross profit. The appellant's turn-over of spirits has been as follows—1900–1, 2383 proof gallons; 1908–9, 1778 proof gallons; 1900–10, 1218 proof gallons; 1910–11, 1367 proof gallons. The appellant's turn over in beer amounted in 1900 to £1087, in 1909 to £689, and in 1910 to £758, 12s. His total turn-over in 1900 was £4179, in 1909 £2983, and in 1910 £3058; equal in the last-mentioned year to £58, 16s. per week. Under the Finance Act 1909–10 the appellant's licence duty has been increased from £21, 18s. 6d. to £34, 5s. 9d. on the basis of an assessed rental of £80, and will be £70, 14s. 5d. on the assessed rental of £175 now fixed by the Court. 1 2 5. The average rate of profit in Leith from public-house businesses is about 33
per cent.—equal to 6s. 8d. per £ of the gross turn-over—but as a considerable part of the appellant's business is a family trade (that is, in liquor sold for consumption off the premises) the gross profit on his turn-over is only 5s. 7 1 3 d. per £. 1 3 “The assessor, following out the principle of arriving at a fair assessable rental by taking a percentage of the turn-over, fixed the assessable rental of the appellant's premises at £210, being 7 per cent. on the turn-over for the year 1910–11.”
In his evidence the assessor stated that in the case of about sixty public-houses occupied by the proprietors, he had fixed the yearly value by agreement on the same principle as he proposed to apply to the appellant's premises.
The Committee were of opinion that the said principle adopted by the assessor was fair and equitable. They, however, in view of the fact that a considerable part of appellant's trade was for consumption off the premises, and that consequently his profits were below the average of public-houses in general, decided to reduce the assessor's valuation appealed against by
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one-sixth, making it £175, which they considered to be in the whole circumstances a fair yearly rent for the appellant's premises, conditioned as the fair annual value thereof without grassum or consideration other than rent.” The contentions of the appellant were, inter alia, stated as follows:—“1. That the average weekly drawings have decreased from £80 in 1900 to £58 in 1911.
2. That the annual turnover has gone down from £4179 in 1900 to £3239, 0s. 3d. for the year to 31st March 1909; to £3058, 12s. 6d. for the year to 31st March 1911.
3. That sales have gone down. The gallons of proof spirits as per permit book are as follows1900–1, 2383; 1901–2, 2137; 1902–3, 2615; 1903–4, 2287; 1904–5, 2299; 1905–6, 2335; 1906–7, 2040; 1907–8, 2247; 1908–9, 1778; 1909–10, 1218; 1910–11, 1367.
4. That the Finance Act of 1910 imposed a new duty on spirits equal to 3s. 9d. per gallon, only 2s. 8d. per gallon of which was recovered from the customers of the business or the wholesale trader. There was no change in the quality of spirits supplied.
5. The valuation of the shop has been £80 since 1900 till the present year. The old licence duty on this rental was £21, 8s. 6d., and the newlicence duty £34, 5s, 9d., an increase of £12, 17s. 3d. With the rental assessed at the figure of £175, the new licence duty will be £70, 14s. 5d., or an increase of £49, 7s. 11. of annual burden on the business, no part of which is transferred to the customers.
6. That owing to the general slump in licensed property, due to depression in trade and other causes, several businesses for sale cannot find purchasers.…
8. That according to expert evidence for the appellant, to which there was no counter evidence, the highest rent which the premises and business would likely secure if let to a tenant in the open market would be £80.
9. That the appellant in 1910, after furnishing the assessor with the details of his drawings for the previous ten years, withdrew his appeal for reduction from £80 to £60, the assessor agreeing that the former figure was the true value of the premises, and that without any reservation.
10. That the method adopted by the assessor of valuing by adding a widely varying number of weeks' drawings is entirely wanting in principle and is arbitrary and unjust in its incidence.”
The assessor's contention in answer was thus stated—“Hitherto there has been great inequality in assessment of public-houses and consequent inequality in the relative incidence of rates. This has arisen from the absence of any fundamental guiding principle, from the arbitrary allocation of sums paid for goodwill, and from the lack of data as to the value of goodwill in the case of premises in the possession of an occupying owner.
“Last year, consequent on the increase of the licence duty under the Finance Act 1909 10, numerous requests for reduction of assessed rentals were made by owners and occupants of licensed premises in Leith of previous years' valuation of their premises. As the result of many meetings which the assessor had with the secretary of the Leith Wine and Beer Trade Association, who also acted for owners and occupiers and others licence-holders not connected with the association, he and they and the assessor agreed that an equitable basis of assessment would be—after taking into account the situation and extent of the premises and character of the business—a rental based on actual turn-over, and on this basis the said secretary and the assessor adjusted valuations in a considerable number of cases, the figure adopted being 7 per cent. of the gross turn-over or 20 per cent. of the gross profits. The result of applying this principle was to reduce rents in certain cases and to increase them in one case. By agreement with the appellant's agent in the case under appeal and in some other cases the previous year's rentals were allowed to remain pending the decision of cases which, it was anticipated, would be submitted to the Lands Valuation Judges from other burghs.
In assessing the appellant's premises at £210 for the present year the assessor was only carrying out the agreement provisionally made with the secretary and agent for the trade the previous year. The decisions of the Appeal Judges, however, did not expressly deal with a general principle of fixing assessable rentals on the basis of annual turnover or weekly drawings.
The former rental of the appellant's premises was adjusted in 1901 at £80 per annum. When that rental was fixed the turnover was not known to the assessor, and therefore could not be taken into account. Though it is conceded that in common with almost every public-house in the burgh the turnover of this house has decreased, it is obvious that on the basis of turnover or on any other fair basis these premises, which are owned and occupied by the appellant, were inadequately assessed.
Since 1901 there have been extensive building operations and an increase of population in the district. There is also an open space, which is used at New Year time as a carnival and in the summer time for shows. These attract a large number of people to the district and increase the custom of the public-house.
Applying the principle which the assessor in a large number of cases adopted last year, with the concurrence of the representative of the trade in Leith and other licence-holders, the assessor in order to bring the appellant's rental into equality with the rental of other licensed premises—arrived at on the basis of turnover—increased the valuation of the appellant's premises from £80 to £210, which is equal to 7 per cent. of the annual turnover or three and two-third weeks' drawings.”
Argued for the appellant—Hitherto the recognised rule had been to value this class of property by comparison with other similar premises— Noble v. Leith Assessor,
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February 16, 1879, 1 F. 584, 36 S.L.R. 599. The annual turnover of the business might be considered as an element in determining the question, but it was incompetent to take it as the sole criterion of value. In England the proposed principle of valuation on the basis of drawings had been applied to a limited extent, only, however, where it was found impossible to proceed by comparison— Dodds v. South Shields Assessment Committee, L.R., 1895, 2 Q.B. 133; Cartwright v. Sculcoats Union (1st report), L.R., 1899, 1 Q.B. 667. The proposed principle was unfair, because it ignored the personal element which went far to build up a good business. Counsel also referred to Hughes v. Stirling Assessor, March 2, 1892, 19 R. 840, 29 S.L.R. 625. Argued for the assessor—Annual turnover afforded the best general basis for fixing the fair rent in the case of licensed premises which enjoyed a quasi-monopoly, although this might not be true in the case of an ordinary trader— Cartwright v. Sculcoates Union, 1900 AC 150; Oakbank Oil Company v. Midlothian Assessor, March 15, 1902, 4 F. 520, 39 S.L.R. 581. That principle might no doubt in particular cases have to yield to other considerations, but in the present case all the circumstances were in favour of its adoption.
At advising—
The case for the assessor is that the premises have been very much undervalued in the past, and that he only discovered this when he ascertained from the appellant himself what were his annual drawings. The present valuation has been admittedly made on the basis of these annual drawings. The assessor's original valuation was £210, which represents 7 per cent. on last year's drawings, or approximately three and a half times the weekly drawings.
One of the grounds of the appeal is that in September 1910 the valuation of the appellant's premises was settled by agreement between him and the assessor at the former figure of £80. This arrangement, however, was and could only be binding for one year, and at the time when it was made the assessor had not the particulars with regard to the appellant's business on which he has since proceeded. I attach no importance, therefore, to this so-called settlement.
The ordinary way in which the assessable value of a public-house in the owner's occupation has been hitherto ascertained is by comparison with other public-houses in the neighbourhood which are let under bona-fide leases. In the absence of information as to the extent and character of the business conducted in a particular public-house this is probably the only way open to the assessor, but the application of this method must often be difficult, and in many cases I think it is likely to lead to very inequitable results. The actual size of the premises affords no safe criterion of the value of the business conducted within them, nor can the amount of custom be accurately gauged from the situation of a particular public-house, although situation is perhaps the most important factor in the value of licensed premises. Two shops of equal size situated at a short distance from each other in the same thoroughfare may have a very unequal turnover, and yet this inequality may not be due in any degree to the personal qualities of the licence-holder, but to some reasons which are more or less occult. The assessor here was of opinion, and the valuation committee have agreed with him, that when he has reliable information as to the drawings of a particular shop, these drawings afford the very best basis upon which to estimate the rental which one year with another a tenant would pay for the premises.
There is high authority in support of the assessor's view. In the case of Cartwright (A.C. 1900, p. 150) Lord Macnaghten said—“It appears to me that the volume of business done in a public-house as apparent to the man in the street, if I may use such an expression, is the very first thing that a tenant proposing to make an offer for such a house would take into consideration … That is clearly one of the circumstances which would influence persons bargaining about the rent of such a house as this.” Lord Morris expressed the same view; and added that “the best way of ascertaining what the trade was which was going on would be the production of the books of the then tenant”; and the other judges concurred. Now in this case the assessor in making his valuation had before him the actual volume of trade that the appellant was doing. It may very well be that he could not have compelled him to have furnished the information; but the appellant cannot complain if the figures which he himself has furnished of his own free will should be used against him. His object in furnishing them no doubt was to show that his business had diminished and so to secure a reduction of his assessed rental. He may be entitled to refuse similar information in future; and in a case where the assessor has no information as to the actual volume of business done in a particular house, he may, as Lord Morris expressed it, be “obliged to forage about for the purpose of ascertaining in the best way he can under those
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The particular percentage which it would be right to apply to an ascertained turnover must, however, be justified on grounds which are consistent with the Valuation Act. There is no reason a priori why 7 per cent. of the drawings of a public-house should be presumed to represent its fair rental; and it may well be that the percentage will vary in different localities. But if in a particular burgh it were ascertained as matter of fact that tenants for public-houses could always be obtained apart from certain circumstances at a rental which worked out at 7 per cent. of the turnover, that would go a long way towards solving the problem what a hypothetical tenant would give in the case of a particular public-house. The peculiarity of this case is that neither the appellant nor the assessor had adduced any evidence based upon actual lets of public-houses in Leith. What the assessor, however, proved was that in the case of sixty publicans who occupied their own premises he had assessed their rentals by agreement with their agent on the same basis which he proposed to apply to the appellant. It is not to be assumed that these sixty traders agreed to have their premises assessed on a rental which they could not obtain if they were compelled to let them; and there is therefore a sufficiently large body of evidence to the effect that the rental of an ordinary public-house in Leith may fairly be taken as representing 7 per cent. of the gross drawings. I do not find that there is any evidence for the appellant which displaces the prima facie case so established. He has indeed led evidence to the effect that the ratio of profits which he makes in his particular business is less than that which is made in public-houses as a whole, and the valuation committee have made full allowance for this peculiarity; but he has not led any evidence of actual lets which work out at a less ratio, and which, after comparison of these premises with his own, as regards accommodation and situation show that he has been over assessed. He has indeed nothing to rely upon but the fact that the assessor since 1900 has allowed his premises to be entered in the valuation roll at the yearly value of £80—a fact which is of very small importance when it is ascertained that the valuation was made in entire ignorance of the extent of the business which was done in them.
I have therefore come to the conclusion that there is no ground for disturbing the determination of the valuation committee. I desire to say, however, that in reaching this conclusion I am not laying down any rule that in any particular locality the rent of a public-house may be fixed on the principle of taking 7 per cent. of the turnover; and it will be quite open for the appellant to lead evidence next year to show that the sixty publicans who were willing to be assessed on that footing in Leith had entirely misapprehended their true rights, and that on comparison with actual bona fide lets it would be found that a tenant would not pay so large a rent. In the present case we are presented with the alternative of either accepting the valuation of the Court below or of reducing the hypothetical rent to £80 for no other reason than that that figure had been fixed by the assessor in 1900. There are no materials on which we could fix any intermediate figure. I have no difficulty in preferring the former alternative, which has at least the merit of being supported by prima facie evidence of a cogent kind, and also of placing the appellant on the same footing quoad his contribution to the public taxes as sixty of his brother publicans in Leith.
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I must also add that I am doubtful whether a safe guide in this case can be found in the alleged agreement between sixty publicans in Leith and the assessor, as we have no knowledge of the circumstances or the footing on which it was made or of its result as a satisfactory basis for valuation.
With this protest I concur in disposing of the present appeal as your Lordships propose.
The Court were of opinion that the determination of the valuation committee was right.
Counsel for the Appellant— J. Wilson, K.C— Macquisten. Agents— Garden & Robertson, S.S.C.
Counsel for the Assessor— M'Clure, K.C.— Lippe. Agent— R. H. Miller, S.S.C.