Scottish Court of Session Decisions

Belhaven Brewery Group Plc v. Glasgow City Assessor [2003] ScotCS 52 (27 February 2003)

LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Philip Lord Kingarth	XA49/02 OPINION of THE LORD JUSTICE CLERK in STATED CASE in the appeal by BELHAVEN BREWERY GROUP plc Appellant; against GLASGOW CITY ASSESSOR Respondent: _______

 

 

 

Act: Haddow QC; Drummond Miller WS

Alt: S.I. Stuart; Simpson and Marwick WS

27 February 2003

1. This is an appeal against a decision of the Valuation Appeal Committee at Glasgow dated 30 May 2001 relating to the appellant's public house at 140 Queen Street, Glasgow. The subjects were entered in the Valuation Roll at a net annual value and a rateable value of £47,000. The entry was made as part of the 2000 Revaluation which came into force on 1 April 2000. The tone date for that

revaluation was 1 April 1998. The appellant appealed against this entry and contended for a NAV/RV of £33,250. The Committee allowed the appeal to the extent of substituting a NAV/RV of £41,250.

2. In 1998 the appellant acquired the existing lease of the subjects on payment of a grassum of £105,000. At that time, a rent review was under negotiation. In 1999 the appellant and the landlord agreed that the rent should be revised to £38,250 per annum with effect from 15 May 1998 and that on payment of £750 the lease would be extended for one year. The rent passing for that year was accordingly £39,000. These negotiations were conducted on both sides by professional agents.
3. At the 2000 Revaluation, public houses were valued under a scheme drawn up by the Scottish Assessors' Association. This scheme was similar in its essentials to the scheme used at the 1995 Revaluation, but with certain amendments which are significant in this case. Under the 2000 scheme, value was based on turnover adjusted in respect of certain items of income and expenditure. To the adjusted turnover a percentage rate was applied to produce net annual value. As a measure of performance and as a basis for comparison, the adjusted turnover was expressed at a rate per square metre by reference to the "reduced floor area," which in effect represented the trading floorspace. The main difference between the 1995 and 200 schemes, so far as this appeal is concerned, was in the treatment of entertainment costs and income from machines.
4. Since no return had been made to the Assessor by the previous tenant of the appeal subjects in the course of the Assessor's pre-revaluation survey, the Assessor estimated an adjusted turnover in terms of the 2000 scheme from evidence of comparable subjects. His comparisons suggested a turnover per square metre of £3500. On a reduced floor area of 145.20 square metres, that produced an adopted adjusted turnover of £508,200 which, the Assessor argued, was achievable by a hypothetical tenant. At the agreed rate of 8.5%, that produced a NAV/RV of £43,200.
5. The appellant's surveyor submitted that the valuation should be based on the actual turnover of the subjects in the year ended March 1998, which the appellant disclosed after the appeal was lodged. However, he contended that, since the 2000 scheme had not been adequately explained by the Assessor, actual turnover should be adjusted in respect of entertainment costs and machine income in accordance with the 1995 scheme. That produced an adjusted turnover of £391,000 and a NAV of £33,250.
6. The Assessor submitted that the appellant's proposed valuation was unsound since it produced a NAV that was less than the actual rent passing and that the turnover on which it was based was unduly low when compared with those of other comparable subjects. He tendered evidence relating to five public houses in the vicinity of the appeal subjects, all of them valued under the scheme. All of these valuations had been agreed with the Assessor by professional agents. For three of these he had figures for actual turnover. For the other two he had made estimates. On the basis of that evidence he submitted that his valuation was based on an achievable level of turnover on which the hypothetical rent of the subjects would be based.
7. The Committee found that the closest comparisons were two public houses in Queen Street, namely Strata and O'Neill's. In the case of Strata the adjusted turnover was based on an estimate, there having been no return of turnover to the Assessor. Strata, which was larger than the appeal subjects, had a reduced floor area of 175 square metres, an "adopted" adjusted turnover of £600,000 and a NAV of £51,000. That represented a turnover per square metre of £3429. In the case of O'Neill's, the adjusted turnover was derived from the actual turnover disclosed by the ratepayer. O'Neill's, which was smaller than the appeal subjects, had a reduced floor area of 116 square metres, an adjusted turnover of £467,034 and a NAV of £39,500. That represented a turnover per square metre of £4026.
8. The Committee rejected the appellant's proposed valuation for two reasons, namely that the rent payable by the appellant, negotiated professionally with effect from a date close to the tone date, was substantially greater than the appellant's proposed NAV and that in terms of turnover the appeal subjects were significantly under-performing. However, it considered that the Assessor's estimate of achievable turnover was excessive. It decided that a "fair level of hypothetical achievable turnover" for the appeal subjects would be £485,000 which, at the agreed factor of 8.5%, produced an NAV/RV, rounded off, of £41,250. The appellant has appealed against that decision on the basis that the Committee should have upheld the appellant's proposed valuation of £33,250.
9. If we had had only the stated case to go on, we would have had to return the case to the Committee for amplification. However, to avoid delay and expense, counsel have drawn up an agreed statement which deals with all of the essential matters on which the stated case is deficient. We have some sympathy with the Clerk to the Committee, who drafted the stated case. Mr Peter Henry FRICS, who conducted the appeal before the Committee, submitted 36 representations against the draft. Some of them were lengthy. Some were repetitive. Some consisted of officious comments on the draft. Mr Henry submitted 19 grounds of appeal, but counsel for the appellant has confined the appeal to the only two issues that could properly be put forward.
10. The two issues are whether the Committee should have applied the appellant's proposed valuation based on actual turnover adjusted in terms of the 1995 scheme in respect of entertainment costs and machine income; and whether the Committee was entitled to value the subjects on a higher rate of adjusted turnover on the basis of a finding in fact that the subjects were under-performing.
11. Counsel for the appellant accepted that the methodology proposed before the Committee and before the Court produced a hybrid valuation; but he submitted that that was justified by the failure of the Assessor properly to explain the changes made to the treatment of entertainment costs and machine income in the 2000 scheme. The Committee had no proper basis for the conclusion that the subjects were under-performing. The Committee had adopted only one comparison that was based on actual turnover, namely O'Neill's. It was not entitled to conclude that the higher rate of turnover in O'Neill's meant that the appeal subjects were under-performing. It could equally be the case that O'Neill's was over-performing.
12. In both parts of his submission counsel for the appellant submitted that the Assessor's evidence on the 2000 scheme adjustments to turnover and on the turnovers of his comparisons was inadequate. The onus on both matters lay with the Assessor (Dunfermline Corporation v. Assessor for Fife 1962 SC 321, Lord Patrick at p. 329; Drybrough & Co. Ltd v. Assessor for Strathclyde 1982 SLT 426, Lord Avonside at pp. 427-428; Armour, Valuation for Rating, 5th ed., paras. 5-25; 5-26; 5-30).
13. Counsel for the Assessor submitted that the Assessor's conclusion on the performance of the appeal subjects was based on the evidence of all of the comparisons taken as a whole. These showed a range of turnovers from which the turnover of the appeal subjects stood apart.
14. The first submission for the appellant is that in the face of decisions such as Drybrough & Co. Ltd v Assessor for Strathclyde (supra), the Assessor failed to explain his valuation, and in particular failed properly to explain the 2000 scheme. In my opinion, that is not the case. The 1995 scheme was known to the appellant's advisers. The material changes in the 2000 scheme related to entertainment costs and machine income. It seems clear, and was not seriously disputed, that the appellant's adviser would have known, or had the means at hand to find out, what changes the 2000 scheme had made in relation to the disputed items and on what basis those changes had been made; but that hardly matters in this case because the changes made in the 2000 scheme were, in my view, adequately explained to the Committee on all material points by the Assessor's witness. In any event, if the explanation of the treatment of machine income was deficient, as counsel for the appellant suggested, that was not material because the amount of that element in the valuation was trivial and was lost in the rounding-off exercise.
15. Counsel for the appellant also submitted that the Assessor had withheld information as to the turnovers of other subjects. On the uncontradicted representation of counsel for the Assessor, I accept that the information requested by the appellant's representative related to the turnovers of a large number of licensed premises in Glasgow, all of them derived from the Assessor's survey returns. The Assessor refused that request, quite rightly, because that information was confidential. But it seems that there was no difficulty about disclosure of the turnovers, so far as they were known, of the comparison subjects. That information was before the Committee.
16. Even if the Assessor had failed adequately to explain the scheme, and therefore his valuation method, or had failed to disclose necessary information, that would not have justified the substitution of the appellant's proposed valuation. That valuation is contrary to principle. Schemes of valuation for specific kinds of lands and heritages have to be revised at every revaluation in the light of changing circumstances. It is obvious in this case that the amended treatment of entertainment costs and machine income in the 2000 scheme must have reflected changes in the pattern of public house trade in the preceding five years. In circumstances in which the 2000 scheme had been widely accepted by private practice surveyors having expertise in this area of valuation, the idea that a 2000 revaluation should be based in part on the 2000 scheme and in part on the 1995 scheme is illogical. That approach is contrary to the basic principle that when a revaluation brings in a new scheme, the effect of that is that there is a fresh start.
17. In my opinion, the Committee's conclusion on turnover performance was justified on the evidence. That conclusion was a matter for the Committee and not for this court. The evidence about the five comparison subjects, for three of which there were figures for actual turnover, gave the Committee at least an adequate basis for its conclusion that the appeal subjects were under-performing to a material degree. The Committee was therefore entitled to conclude that the hypothetical tenant would base his offer of rent on the potential of the appeal subjects for a significantly greater turnover. The extent of the hypothetical achievable turnover was for the Committee to assess. It was not a matter for precise calculation. It cannot be said, in my opinion, that the Committee's decision on the point was unreasonable.
18. I propose that we should refuse the appeal.



LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Philip Lord Kingarth	XA49/02 OPINION of LORD PHILIP in STATED CASE in the appeal by BELHAVEN BREWERY GROUP plc Appellant; against GLASGOW CITY ASSESSOR Respondent: _______

 

 

Act: Haddow QC; Peter Henry FRICS

Alt: S.I. Stuart; Simpson and Marwick WS

27 February 2003

I agree that the appeal should be refused for the reasons stated by your Lordship in the chair.



LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Philip Lord Kingarth	XA49/02 OPINION of LORD KINGARTH in STATED CASE in the appeal by BELHAVEN BREWERY GROUP plc Appellant; against GLASGOW CITY ASSESSOR Respondent: _______

 

 

Act: Haddow QC; Peter Henry FRICS

Alt: S.I. Stuart; Simpson and Marwick WS

27 February 2003

I agree with your Lordship in the chair.