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LANDS VALUATION APPEAL COURT, COURT OF SESSION
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Lord Justice Clerk
Lord Philip
Lord Kingarth
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[2007] CSIH 41
XA50/06
OPINION OF THE LORD
JUSTICE CLERK
in the Appeal by
FISHERS BISTRO
Appellants;
against
LOTHIAN ASSESSOR
Respondent:
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For the Appellants: Haddow, QC; Shield and Kyd
For the Respondent: Doherty, QC; Drummond Miller, WS
5 June 2007
Introduction
[1] This
is an appeal from a decision of the Lothian Valuation Appeal Committee (the
VAC) dated 5 December 2005
and revised by a decision dated 8
January 2007. It relates to
an entry in the Valuation Roll made at the 2000 Revaluation in which the
subjects at 1 The Shore, Edinburgh
were described as a "Public House" and valued at a net annual value and
rateable value of £60,000.
The subjects
[2] The subjects are a listed building situated at the north end
of The Shore, Leith, at its corner with Tower
Street. Until
1991 they had been operated as a traditional public house for over a
century. In 1991 the then owner shifted
the emphasis to the service of food. The
appellants acquired the subjects in 1992.
Since then, they have maintained a continuing emphasis on meals. They have taken steps "to discourage serious
drinkers" (finding 2). The subjects have
an impressive bar area. Food is
available from noon until 10.30 pm.
The premises remain open until midnight
or 1 am. They are busy at lunch time and dinner
time. Customers can have a drink only,
although most are there for meals. Some
have a drink with a sandwich or a snack at lunch time. Customers also have drinks before and after
meals. The Committee was satisfied that
the subjects have a high reputation for food.
[3] In the bar area there are four tables but little standing
space. In the dining area there are
eight tables. There is capacity for six
persons at the bar, 20 in the bar area and up to 30 in the dining area. There are two chefs at each working shift, up
to five dishwashers, three waiters and one bartender. There is also an area outside for tables and
seating for about 20 people. It is used
intermittently between May and October.
Planning and licensing status
[4] The
Committee found that the subjects had planning permission for use as a public
house. They were acquired with and
continued to have a public house licence.
A public house licence was more valuable and attractive than a
restaurant or a refreshment licence. It
gave the licensee greater flexibility in the use of the premises and had the
benefit to the licensee that persons having a drink at the bar had the
opportunity to see the restaurant and to decide to have a meal.
Changes in the pattern of public house trade
[5] The
Committee found that in the last 10 to 15 years the range of public houses
within Edinburgh had broadened
considerably. Throughout Edinburgh,
and within the locality of the appeal subjects, there was a wide range of
public houses catering for different types of customer, from traditional pubs
to those featuring meals. There were
many similar public houses in the immediate locality where there was
considerable emphasis on food, and several where the sale of food was
predominant (finding 5).
The Revaluation Scheme
[6] In
the 2000 Revaluation, licensed premises were valued in accordance with the
relevant Scheme of the Scottish Assessors' Association (SAA). Under the Scheme, subjects with a public
house licence were valued by reference to a hypothetical achievable turnover
derived from evidence of turnover in 1998.
[7] In
the Lothian valuation area, the 2000 Scheme was supplemented by an Instruction
issued to staff by the assessor (Valuation
of Restaurants, VP/C/7) which envisaged that certain factors other than
turnover could be taken into account in the valuation of licensed
restaurants.
The assessor's valuation
[8] The
assessor valued the subjects under the Scheme as a public house on an adjusted turnover
basis. In 1998, the adjusted turnover was
£581,181, split between £243,621 liquor and £337,560 food. The valuation of £60,000 that was entered in
the Roll made no allowance for over-performance. It produced a rate per square metre of
£894. Before the Committee the assessor
presented the following revised valuation.
Hypothetical Achievable Turnover:
Liquor £280,000 @
100% £280000
Food £500,000 - £15,000
@ 80% £388000
Tobacco
£668024
Less 13% over-performance £ 86843
£581181
@ 9%
£52,306
NAV/RV Say £52,000
According to the assessor's
witness, the allowance for over-performance was the highest given in the 2000
Revaluation. On a floor area of 67.1 sm,
the revised rate was £774.96 psm.
The appellants' valuation
[9] Mr
Peter Henry FRICS valued the subjects as a restaurant with a public house
licence at an NAV/RV of £19,650. The assessor
accepts that if the subjects are not to be valued solely on hypothetical
achievable turnover, that should be the substituted value.
[10] Mr Henry's alternative submission was that if the subjects were
to be valued as a public house, an end allowance for over-performance of 25% or
even 331/3% would be
appropriate.
Comparison subjects
[11] The Committee had comparison evidence about nearby public
houses and restaurants. In its decision
of 5 December 2005 (infra) it held that two of them were similar
in character and in location, namely The Waterfront Wine Bar and Bistro (The
Waterfront) and Skippers Bistro (Skippers).
The valuations of both had been settled with the assessor by
professional agents.
[12] The Waterfront was entered in the Roll as a public house and
had been valued as such under the Scheme.
It had a total turnover of £575,000.
According to the undisputed evidence for the assessor, the turnover
split was £267,000 liquor and £308,000 food.
The ratio of liquor to food was similar to that of the appeal
subjects. The NAV/RV was £52,000. On a floor area of 86.8 sm, that represented
£588.08 psm.
[13] Skippers was entered in the Roll as a restaurant and had
planning permission for use as such. In
its decision of 5 December 2005,
the Committee found, erroneously, that it had a public house licence. It had been valued as a public house under
the Scheme. Its turnover was only
£417,881, split between £153,000 liquor and £264,881 food. The NAV/RV was £35,500. On a floor area of 65.103 sm, that
represented £545.06 psm. Its floor area
was similar to that of the appeal subjects.
It had only a small bar servery.
It was closed during the middle of the day. In 1998
a slightly higher proportion of turnover was generated from food than at
the appeal subjects.
The decision of the Committee
The
decision of 5 December 2005
[14] The Committee found that the appeal subjects were correctly
entered in the Roll as a public house. It
held that in the real world landlords and tenants arriving at the rental value
of licensed premises would attach more importance to turnover than to floor
area. Turnover was a better indicator of
annual value. Analysis of the rateable
value per square metre could in some cases provide a useful check on turnover
valuations; but it was not the best indicator.
The check exercises of both parties demonstrated that there was no
consistent relationship between turnover and floor area. The appellants' primary valuation produced a
value that was below what any landlord in the real world would have agreed as a
rent for the subjects at the relevant date.
[15] In giving its reasons the Committee said
"The Committee considered that
most members of the public would think of the premises as being restaurant
premises but for valuation purposes the categorisation to bring the Scheme ...
into play took greater account of public house licence as opposed to restaurant
or refreshment licence, planning permission, the extent of liquor sales in
proportion to food sales and general matters of character. The Committee was not satisfied that there
was an error in classifying these subjects as a public house and that
classification was consistent with a number of comparables which might also be
regarded by members of the public as being more akin to restaurants than
traditional pubs ... "
[16] Having found that both The Waterfront and Skippers had public
house licences, the Committee held that they were comparable with the appeal
subjects in character and type of business and were the best comparisons, no
matter whether the appeal subjects were classified as a public house or as a
restaurant. Of the two, The Waterfront
was the better comparison. The Committee
rejected eight other proposed comparisons for reasons that are not challenged (finding
7).
[17] It therefore rejected the appellants' proposed valuation method
and their proposed valuation. It
accepted the assessor's valuation, except in relation to the end
allowance. It considered that the end
allowance for over-performance should be 25%.
Beyond that, it considered that the high turnover was attributable to
factors such as location, layout and atmosphere. It therefore allowed the appeal to the extent
of reducing the NAV/RV to £45,000.
The revised decision of 8 January
2007
[19] When it reconvened, the Committee rightly rejected Mr Henry's attempt
to widen the scope of the hearing. It
heard further submissions on the matter remitted to it. It decided to revise its finding 7, but
otherwise to adhere to its decision. Its
revised finding 7, so far as relevant to this appeal, is in the following
terms.
"7 Appellant's production 2A provides information about public
house and restaurant premises with which comparison may be made and information
about these premises is also provided in tabular form on Assessor's production
3. Skippers is described in the
Valuation Roll as a restaurant. Its
planning use is as a restaurant. It has
a Restaurant Licence. At the time of the
2000 Revaluation the Assessor believed it to have a Public House Licence. It was valued in the same way as the public
houses serving food in the vicinity such as the Waterfront. Had she been aware that it had only a
Restaurant Licence, the Assessor would have valued it by comparison with
restaurants in Commercial Quay. The
original valuation of Fishers Bistro (before the 13% was allowed for
over-performance) of £60,000 produced a rate per square metre of £894, very
seriously in excess of any of the other comparable subjects. It had, however, been modified by the 13%
allowance to £774 ... The Waterfront Wine Bar and Bistro achieved a total
turnover of £575,000 compared to Fishers £581,181 but because its area is
86.8 square metres, whereas Fishers has an area of 67.1, the analysis of
the rate per square metre showed £599.08 for The Waterfront compared to £774.96
for Fishers. Skippers Bistro has a
similar area of 65.13 square metres but achieved a much lower turnover of
£417,881 in total. Its rate per square
metre was £545.06 and since later concession by the Assessor of error the
equivalent of £279. Skippers has a small
bar servery with dining tables right up against it. It opens for lunch and dinner but closes in
the middle of the day. It is a
restaurant with Class 3 planning consent.
The Waterfront is comparable to Fishers Bistro in character and type of
business. The Waterfront's ratio of food
to liquor sold in 1998 was similar to the appeal subjects. At Skippers a slightly higher proportion of
turnover was generated from food than at the appeal subjects. The Waterfront is the best comparison for the
appeal subjects. That was the position
no matter whether the subjects were classified as a public house or a
restaurant. The Waterfront was the best
comparison."
Submissions for the appellant
[20] Counsel for the appellant submitted that the Committee
misdirected itself in classifying the subjects as a public house in accordance
with their planning and licensing status rather than their actual use (Armour, Valuation for Rating, 5th ed, paras
18-09, 18-10; Ass for Stirlingshire v Myles and Binnie, 1962 SC 530; Woodrow
v Ass for Lothian Region, 2002 SC 530).
In its revised finding 7 (supra),
it repeated the error. In view of its findings
as to the use made of the subjects, and in particular the finding that only a
minority of the customers had a drink without food, and in view of the documentary
evidence, such as the appellant's menus, newspaper restaurant reviews and
photographs of the subjects, the Committee erred in holding that the premises
were run as a public house. That was
confirmed by its statement of reasons (supra). Its findings showed that the actual use of
Skippers was not significantly different from that of the subjects. Its finding that the appellants' proposed
valuation was below what any landlord in the real world would have agreed as a
rent for the subjects at the valuation date followed from its initial error The subjects should be classified as a
restaurant and valued on the same basis as Skippers. Alternatively, if the Committee was right in
upholding the assessor's methodology, the end allowance was inadequate. The resulting NAV of £45,000 produced a rate per
square metre (£671) that was out of line with the rates produced by the
valuations of The Waterfront (£599) and Skippers when valued as public house
(£545). The end allowance should have
been 33⅓%. That would reduce the NAV to £40,000, representing £596
psm.
Submissions for the assessor
[21] Counsel for the assessor submitted that the Committee had
valued the subjects in their actual use, which involved the appellants' taking full
advantage of the benefits of the public house licence. The Committee recognised that there was now a
broad range of premises that held public house licences. It was entitled on its findings to hold that
the subjects were a public house in character.
The licence facilitated all-day opening, with service of drinks
unrelated to the service of food. The
premises remained open until as late as 1am
after the service of food ceased. Sales
of liquor were substantial. They were
£243,621 in the tone year. From all of
this, the Committee was entitled to hold that for premises of this kind,
turnover was the best indicator of value, as the SAA Scheme envisaged. The Committee found that the best comparison
was The Waterfront, whether it was classified as a public house or as a
restaurant. It found that Skippers had a
different character. That judgment was
for the Committee. In the light of the new
evidence about the licensing status of Skippers, the Committee was entitled to
conclude that it was no longer a valid comparison. The submission that the end allowance should
have been greater was not foreshadowed in the grounds of appeal. In any event, the amount of an end allowance
was a matter for the Committee.
Conclusions
Classification
[22] The Committee was not satisfied that the
classification of the subjects as a public house was erroneous. By clear implication, it decided that the
predominant character of the premises was that of a public house. That decision was essentially one of
fact.
[23] Counsel for the appellants submitted that
the similarities between the subjects and Skippers were such that the subjects
should have been valued as a restaurant at a similar value; but the Committee
was of the view that the differences between the two were decisive in valuation
terms. The essential difference was that
the appellants made full use of their advantage in holding a public house
licence. They sold drink throughout the
day unrelated to the service of food and sold drink late at night after the
service of food had ceased. The subjects
had an impressive bar area, in contrast with that of Skippers. They were operated with a different trading
pattern from that of Skippers and achieved significantly greater turnover from
liquor sales. On these findings, the
Committee was entitled to conclude that the subjects should be classified as a
public house, and therefore that the assessor's valuation method was
appropriate.
[24] In my view, the Committee would have been
entitled to hold that the trading pattern and the performance of the appeal subjects
were such that they should be valued solely on turnover, whatever description
was given to them in the Roll
Comparisons
[25] The Committee's original judgment that The Waterfront and
Skippers were the only valid comparisons was based on the evidence that it then
had about each. It decided that The
Waterfront was the better comparison of the two. It was entered as a public house and, like
the appeal subjects, was valued as such on turnover in accordance with the Scheme. The Committee was entitled to make that
judgment on the facts.
[26] In its revised finding 7, the Committee has put right its original
finding as to the licensing status of Skippers.
It has found that if the assessor had known that Skippers had only a
restaurant licence, she would have valued it by comparison with the restaurants
in Commercial Quay. It has also recorded
what seems to have been agreed evidence that in the 2005 Revaluation the assessor
has valued Skippers as a restaurant at a significantly lower value and that
Skippers has received a refund of part of the rates paid under the 2000 Revaluation. In the result the Committee no longer regards
Skippers as being a valid comparison. This
too is a judgment that it was entitled to make on the facts.
[27] But the point that matters, in my opinion, is that the Committee
has throughout been of the view that The Waterfront is the best comparison of
all, no matter whether the subjects are classified as a public house or a
restaurant. That view is warranted by its
findings. In my opinion, the decision appealed
against cannot be faulted so far as it is founded on that comparison
alone.
End allowance
[28] In my view, we should not entertain the submission for the
appellants on the amount of the end allowance since the appellants have not
given fair notice of it in their grounds of appeal. But there is nothing in the point anyhow. Since it was conceded that over-performance
should be reflected in the valuation by way of an end allowance (cf Sinclair v Lothian Assessor, [2003] RA
202), the decision as to the amount of the allowance was a matter for the
discretion of the Committee (JD
Wetherspoon plc v Lothian Regional Assessor, 2003 SC 400). A decision of that nature does not raise a proper
issue for this court.
Disposal
[29] I propose to your Lordships that we should refuse the
appeal.
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LANDS VALUATION APPEAL COURT, COURT OF SESSION
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|
Lord Justice Clerk
Lord Philip
Lord Kingarth
|
[2007] CSIH 41
XA50/06
OPINION OF LORD
PHILIP
in the Appeal by
FISHERS BISTRO
Appellants;
against
LOTHIAN ASSESSOR
Respondent:
_______
|
For the Appellants: Haddow, QC; Shield and Kyd
For the Respondent: Doherty, QC; Drummond Miller, WS
5 June 2007
[30] I agree that Lothian Valuation Appeal Committee were entitled
to conclude on the facts stated, as highlighted by your Lordship in the chair,
that the subjects at 1 Shore, Leith, Edinburgh fell to be classified as a
public house, and that as such they should be valued on the basis of a
hypothetical achievable turnover derived from evidence of actual turnover in
1998. I also agree that on the facts
stated the Committee were wholly justified in regarding The Waterfront as the
most appropriate comparison.
[31] In relation to the end allowance for over performance, the
amount of the allowance was essentially a matter for the Committee as the fact
finding tribunal. In the event, they applied
an allowance of 25 per cent, substantially higher than any other allowance
applied in the valuation of any subjects in the 2000 Revaluation. No grounds were advanced on behalf of the
appellants which would justify our interfering with the Committee's exercise of
their discretion in this regard.
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LANDS VALUATION APPEAL COURT, COURT OF SESSION
|
|
Lord Justice Clerk
Lord Philip
Lord Kingarth
|
[2007] CSIH 41
XA50/06
OPINION OF LORD
KINGARTH
in the Appeal by
FISHERS BISTRO
Appellants;
against
LOTHIAN ASSESSOR
Respondent:
_______
|
For the Appellants: Haddow, QC; Shield and Kyd
For the Respondent: Doherty, QC; Drummond Miller, WS
5 June 2007
[31] For the reasons given by your Lordship in the chair I agree
that this appeal should be refused.
