Scottish Court of Session Decisions

Sinclair v. Assessor Lothian [2003] ScotCS 53 (27 February 2003)

LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Philip Lord Kingarth	XA150/02 OPINION of THE LORD JUSTICE CLERK in STATED CASE in the appeal by COLIN McLEAN SINCLAIR Appellant; against ASSESSOR FOR LOTHIAN Respondent: _______

 

 

 

Act: Haddow, QC; Simpson & Marwick WS

Alt: Doherty, QC; Drummond Miller WS

27 February 2003

1. This is an appeal against a decision of the Valuation Appeal Committee at Linlithgow dated 20 June 2002 relating to the appellant's public house at 111 High Street, Linlithgow, known as The Football and Cricketers Arms. The subjects were entered in the Valuation Roll at the 2000 Revaluation at a net annual value and rateable value of £29,250. The appellant appealed against the entry and sought a

reduction of the valuation to a figure of £21,650. At the hearing before the Committee the Assessor restricted his valuation to £27,600. The Committee allowed the appeal to the extent of substituting a NAV/RV of £25,600.

2. The Assessor's valuation was based on the 2000 Revaluation scheme for licensed premises. His valuation proceeded from a starting figure for turnover of £328,667, adjusted in terms of the scheme to £325,556, to which was applied an agreed factor of 8.5% to produce a NAV/RV of £27,600.
3. The appellant's representative valued the subjects on the basis of the 2000 scheme. He too began with a turnover figure of £328,667; but his application of the scheme produced an adjusted figure of £318,576. From this, however, he deducted an end allowance of 20% for the "celebrity status" of the appellant and his manager, Mr Alex Gardner. That brought out a final adjusted turnover figure of £254,860, to which he applied the factor of 8.5% to produce a NAV/RV of £21,663 rounded to £21,650. The end allowance was based on the contention that the turnover of the appeal subjects was enhanced by the personal qualities and associations of the appellant and Mr Gardner. The appellant's evidence on the point was to the effect that as former players for the local football team, Linlithgow Rose, and in the appellant's case as a former manager and then vice-president, the appellant and Mr. Gardner had generated a special clientele of fans of the team whose preferred topic of conversation within the premises was football. It was plain from the appellant's evidence that these were not premises in which cricket was much discussed.
4. Celebrity status is an expression that is used in the 2000 scheme to describe a factor that may enhance the turnover of licensed premises beyond the hypothetical achievable turnover on which the valuation is based. To demonstrate the effect of celebrity status in this case, the appellant's representative founded on the turnover performance of three comparison public houses estimated on the basis of their agreed valuations. One was a public house on the edge of town and, by a matter of 30 yards, in a different valuation area. It had a turnover per square metre of £145.18. The other two comparisons were public houses on the Assessor's list, both on the High Street and both close to the appeal subjects. These, with the Assessor's figures for floor space corrected, had turnovers per square metre of £227.57 and £204.83 respectively. These were to be contrasted with the turnover per square metre of the appeal subjects, on the Assessor's restricted valuation, of £326.24.
5. The Assessor argued that there should be no end allowance. He founded on eight comparisons of licensed premises in Linlithgow, six of them situated in the High Street. Two of his comparisons were hotels. In the case of the appeal subjects and two of the comparison public houses in the High Street, the Assessor's figures for floor space were found by the Committee to be inaccurate.
6. The Committee was not impressed with the approach of the Assessor's witness, Mrs Fiona McKelvie, to the use of hotels as comparisons or to the idea of an end allowance. Its conclusion was as follows:

"It appeared to the Committee that the Assessor had not given enough information about those two subjects (sc. the hotels) for them to disregard Mr Henry's claim that they are not really comparable because they are hotels. Ms McKelvie claimed to have extracted from higher NAV for both of them the element attributable to the public bar areas when entering the figures on Assessor 1/4 (sc the Assessor's comparison analysis) but the Committee was not given details and was not impressed really. The Committee was not generally convinced by Ms McKelvie's arguments. It was thought that as a public official she could be expected to take a detached view of a matter such as this but she was not, in fact, prepared to properly consider another point of view. The Committee could not imagine her accepting an argument for over performance due to celebrity status readily in any circumstances."

On the question of the end allowance, the Committee made the following finding in fact:

"6. The subjects have had an association with football for over 50 years. In 1967 they were a very busy pub. The appellant bought the public house in 1980. At the time the appellant acquired the subjects trade was quiet. The appellant worked hard to build the trade back up. He developed the subjects. He carried out a fairly major refurbishment. The premises are kept in a very clean condition, and have an attractive ambience. The appellant has been involved in running successful public houses since 1980. In addition to the appeal subjects he owns the Bridge Inn and he formerly operated the West Port Hotel and the Carriers Quarters, Bo'ness. The appeal subjects are an attractive proposition and have attracted several unsolicited good offers to purchase, the most recent being from a brewer. The appellant indicated that if he sold the subjects and he and Mr Gardner left he thought there would be an impact on turnover after a while but that it would be difficult to quantify. He and his manager for sixteen years, Mr Gardner, not only operate the business effectively but attract personal goodwill, particularly from customers interested in the local Football Club, with which they have been associated over many years. A hypothetical tenant would probably not expect to benefit fully from that goodwill on taking over the business. An end allowance of 71/2% would properly reflect that factor."

7. The Committee gave effect to this conclusion by taking the Assessor's valuation of £27,600 and reducing it by 7.5% to produce a net annual value and rateable value, rounded off, of £25,600.
8. Finding in fact 6 shows that while the appellant's and his manager's personal following and their associations with Linlithgow Rose had a material bearing on turnover, other relevant factors were at work none of which were personal to them; for example, the attractiveness of the premises and the fact that they had a long-standing football tradition. In my view, the finding in fact on this question could have been less favourable to the appellant's contention if the Committee had adopted as a finding the undisputed evidence of the appellant himself that satellite football was one of the attractions on the premises and that the supporters of Linlithgow Rose had their own social club elsewhere in the town. However, even on the finding as set out in the stated case, it is plain that the so-called celebrity status element was not the sole factor explaining the appellant's level of turnover and, in my interpretation of the finding, not even the major factor.
9. On this occasion, the appellant's representative, Mr Peter Henry FRICS, has tabled only twelve grounds of appeal; but counsel for the appellant reduced them to the short point that, in failing to give an end allowance of 20%, the Committee erred in law. The Assessor no longer maintained that an end allowance should not have been made. His answer to the appeal was that the decision, being one that the Committee was entitled on the evidence to reach, should be upheld.
10. Counsel for the appellant submitted that in terms of the 2000 scheme the Assessor, and on appeal the Committee, should have excluded the excess turnover attributable to celebrity status in order to reach the "hypothetical achievable turnover." The Committee had failed to do this. Instead, it had asked itself a question that was not based on the rating hypothesis, namely what discount a hypothetical tenant taking over these subjects would get from the landlord on account of his not enjoying fully the goodwill that was enjoyed by the present appellant. That was the wrong question. On the evidence, it was plain that the entire difference between the turnover of the appeal subjects and those of the two nearest comparables was attributable to celebrity status. The Committee should therefore have given the full 20% allowance.
11. Counsel for the Assessor submitted that while the turnover per square metre of the appeal subjects was significantly higher than those of the relevant comparisons, the Committee had accepted that this performance was referable, in part, to personal goodwill. It was fallacious to assume that that was the only explanation. Finding in fact 6 showed that there were other factors at work. If a 20% end allowance were applied, the resulting valuation would reflect a turnover per square metre of £260.00. That was plainly unreasonable. The assessment of the personal goodwill element was difficult and imprecise. It was a matter for the judgment of the Committee (Assessor for Lothian v BAA, 1981 SC 141). The Committee had concluded that 7.5% reasonably reflected the element of special goodwill. The Committee had not misdirected itself. It had accepted the appellant's case in principle but restricted it in application. It could not be said that the Committee had arrived at a decision so unreasonable as to be erroneous in law.
12. In my opinion, this appeal is groundless. It is accepted on both sides that where turnover is enhanced by the personality or the personal associations of the proprietor it may be appropriate to make some allowance for that in the valuation of the subjects. The extent to which such an allowance should be made will in all cases depend on the facts and circumstances. It will be a judgment within the discretion of the Committee.
13. The error that underlies this appeal is similar, I think, to the error in the appellant's submission in JD Wetherspoon plc v Lothian Regional Assessor (LVAC, February 2003) It lies in the contention that the higher turnover performance of the appeal subjects is referable solely to the personal factor on which the appellant relies. Where such a factor is found to affect turnover performance, the valuer must not overlook other favourable factors that may also be at work. I have in mind factors such as the location, layout, design and ambience of the subjects; amenities such as televised sport; and the enterprise and hard work of the proprietor.
14. In my opinion, the use of the expression "celebrity status" narrows the issue unnecessarily. The question raised in this case is simply an aspect of a more general question raised in cases such as Belhaven Brewery Group plc v Glasgow Assessor (LVAC, February 2003) and JD Wetherspoon plc v Lothian Assessor (supra), namely whether the turnover performance of the subjects is significantly affected, for better or worse, by a factor that would not affect the hypothetical transaction on which the valuation is based. Perhaps the expression "abnormal turnover performance" best conveys the underlying idea. Where such a factor affects the actual turnover of the subjects, the valuation should be adjusted on that account. That is a matter for valuation expertise. In my view, an end allowance is a reasonable way of taking that element into account.
15. Furthermore, the appellant's approach is contrary to the facts found by the Committee. Finding in fact 6 indicates that this public house has had an association with football for over fifty years. It was a busy public house many years earlier. The appellant's achievement has been to retrieve trade that it had lost in the years before he bought it. He has since refurbished it. The premises are clean and attractive. These are all factors tending to enhance turnover; but they are factors referable to the enterprise, hard work and skill of the appellant. They are factors for which no discount should be made in the valuation.
16. In my opinion, the stated case read as a whole shows that the Committee correctly grasped the issue. The Committee was entitled to hold as it did that the personal associations of the appellant and his manager only partly explained the turnover performance of the appeal subjects. The amount of the allowance to be given in respect of that factor was within the discretion of the Committee. It cannot be said that the Committee's allowance was unreasonable.
17. I propose that we should refuse the appeal.



LANDS VALUATION APPEAL COURT, COURT OF SESSION
Lord Justice Clerk Lord Philip Lord Kingarth	XA150/02 OPINION of LORD PHILIP in STATED CASE in the appeal by COLIN McLEAN SINCLAIR Appellant; against ASSESSOR FOR LOTHIAN Respondent: _______

 

 

Act: Haddow, QC; Simpson & Marwick WS

Alt: Doherty, QC; Drummond Miller 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	XA150/02 OPINION of LORD KINGARTH in STATED CASE in the appeal by COLIN McLEAN SINCLAIR Appellant; against ASSESSOR FOR LOTHIAN Respondent: _______

 

 

Act: Haddow, QC; Simpson & Marwick WS

Alt: Doherty, QC; Drummond Miller WS

27 February 2003

I agree with your Lordship in the chair.