Scottish Court of Session Decisions

LANDS VALUATION APPEAL COURT

[2014] CSIH 86

XA104/14

Lord President

Lady Dorrian

Lord Malcolm

OPINION OF THE LORD PRESIDENT

in the appeal by

SUBURBAN TAVERNS LIMITED

Appellant;

against

THE GLASGOW ASSESSOR

Respondent:

 

For the appellant:  MacIver;  TLT LLP

For the assessor:  Clarke QC;  Corporate Services, Glasgow City Council

 

28 October 2014

Introduction
[1]        This is an appeal against a decision of the Valuation Appeal Committee at Glasgow dated 9 October 2013.  It relates to four of the appellant’s public houses in Glasgow; namely Beechings, 34 Clarkston Road;  Neesons, 165 Allison Street;  Lea Rig, 703 Alexandra Parade; and Garvale Inn, 187 Reidvale Street. 

[2]        At the 2010 Revaluation the appellant appealed against the entries in the Valuation Roll for each of these premises.  In negotiations with the assessor and in the presentation of the appeals the appellants were represented by Mr Peter Henry.  After sundry procedure that I shall describe, the Committee dismissed all four appeals.  That is the decision appealed against. 

 

Changes in the pattern of trading in public houses

[3]        Before the modern changes in licensing law, off-sales of liquor accounted for a significant part of public house turnover.  The growth of liquor sales through off-licences, supermarkets and superstores, often at discounted prices, has greatly reduced the off-sales turnover of public houses.  Since off-sales from a public house have become unlawful after 10pm, the amount of off-sales turnover has been further reduced.  Over the counter tobacco sales have also decreased significantly since smoking in public places became unlawful. 

 

Valuation of licensed premises
[4]        The Scottish Assessors Association’s valuation scheme for licensed premises at the 2010 Revaluation, Practice Note 17, employs a methodology based on adjusted turnover.  Turnover from liquor sales is invariably taken at 100%.  Some other income streams are discounted.  Practice Note No 17, gives the following guidance for the adjustment of turnover in relation to off-sales and tobacco sales.

“4.2      Income from liquor off-sales

Take at 100% except in the case of the minority of public houses which do have identifiable and significant levels of off-sales (say in excess of 10% of total turnover), where it can be shown that there is a low level of profitability, and it may be considered appropriate at the valuation stage to reduce these sales by up to 50%.  Such instances should, however, be the exception rather than the rule.”

 

4.3        Income from cross-counter tobacco sales

Where a breakdown of turnover has been provided, and these sales can be clearly identified, the relevant income should be taken at 20%.

The purpose of this discounting is to reflect the relative value to the operator of these tobacco sales in comparison with liquor sales, and to bring this element of income to parity with liquor sales, before application of the appropriate percentage to NAV.”

 

The assessor’s survey returns

[5]        Section 7 of the Lands Valuation (Scotland) Act 1854 (the 1854 Act), as amended, provides as follows:

“It shall be lawful for any assessor acting under this Act to call upon any person, being a proprietor or reputed proprietor or tenant or occupier within his area for a return containing such particulars as may be reasonably required for the purpose of enabling him to value the lands and heritages of which such person is proprietor or reputed proprietor or tenant or occupier, and if any such person shall, without reasonable excuse, fail to furnish such written statement to such assessor within fourteen days after he shall be called upon in writing to do so, he shall be liable on summary conviction to pay a penalty not exceeding level 3 on the standard scale, and if any such person shall present or cause to be presented to such assessor any false statement in such return knowing the same to be false, he shall be liable on summary conviction to pay a penalty not exceeding level 3 on the standard scale.”

 

[6]        The assessor alleges that when a new Roll is being prepared Mr Henry’s practice is to refuse to submit returns of his clients’ turnovers. 

 

The factual issue

[7]        On 7 March 2011, after the appeals were lodged, Mr Henry submitted to the assessor turnover figures for each of the public houses.  These figures were written in manuscript on duplicate return forms and were signed by Mr Matthew Reilly, a director of the appellant.  None of these constituted a statutory return.  The turnover figures showed inter alia off-sales and tobacco sales in each of the five years before the tone date that were a significant percentage of the total sales of liquor.  For example, in the year ending 30 September 2008 the turnover shown from off-sales at Neesons was 28% of the income from liquor sales. 

[8]        The assessor alleges that the manageress of Neesons told a member of his staff that off-sales seldom occurred; and that an employee of Beechings said that off-sales were “very unusual.”  The assessor maintains that the leases of the Lea Rig and the Garvale Inn require the tenant to produce quarterly management accounts and financial year certified accounts and entitle the landlord’s stock-taker to access to all records of the tenant.  The assessor has produced email evidence that when a member of his staff asked the appellant’s accountants to provide certified accounts for each of the public houses, he was told that, after discussions with the appellant’s directors, they were not authorised to release the information.  It has throughout been the contention of the assessor that modern tills in public houses produce detailed financial and product information that would provide accurate turnover figures. 

[9]        The assessor also contends that on 5 October 2011 in an appeal to the Glasgow Committee relating to the Station Bar, Mr Henry gave evidence that the Bar had over the counter tobacco sales of £8,851 and off-sales of £20,000.  The assessor’s witness said that the manager and the manageress of the Station Bar had told her that since they took over the premises in 2006 there had been no tobacco sales and virtually no off-sales.  The Committee dismissed the appeal. 

[10]      These contentions are unproved, but they indicate why the assessor is sceptical about the appellant’s figures. 

 

The hearings on 2 May and 6 November 2012
[11]      On 2 May 2012 there was a hearing in these appeals.  Mr Henry put forward the turnover figures that he had given to the assessor.  He said that full audited accounts for the premises were not available.  Counsel for the assessor objected that these figures were not vouched and were not supported by any relevant evidence from responsible officials of the appellant or by representatives of the appellant’s accountants or auditors. 

[12]      The Committee adjourned the hearing.  In a letter to Mr Henry dated 3 May 2012 the clerk to the Committee said inter alia

“The Committee decided as you know that it requires to hear the evidence of Mr Reilly and also the evidence of the individual within the Auditor’s firm who prepared the relevant accounts.”

 

[13]      On 6 November 2012, at the adjourned hearing, Mr Henry was accompanied by Mr Reilly.  It appears that Mr Reilly confirmed Mr Henry’s statement that full audited accounts did not exist.  Mr Reilly agreed to provide management accounts.

[14]      The assessor tendered a specification of documents in the following terms:

“Vouching of the business of running a public house in the appeal subjects (consisting of audited or certified accounts, or books or records generated by the business whether in paper form or electronically held) for the period commencing with the accounting year end of the business for 2005/06 and ending with the accounting year end of the business for 2007/08 in order to show the following:-

 

1          The amount of on sales achieved.

2          The amount of off sales achieved.

3          The amount of food sales not included in 1 as on sales, achieved.

4          The amount of cross counter tobacco sales achieved.

5          The amount of commission from tobacco machines received.

6          The amount of net machine income achieved.

7          Entertainment costs in respect of

(a)        Karaoke.

(b)        Musicians or the playing of recorded music.

(c)        Quiz nights.

(d)        Sky television.”

 

[15]      The Committee approved the specification and made an appropriate order.  The clerk to the Committee communicated the order to the appellant by letter dated 14 November 2013 sent by recorded delivery post.  The letter set out the specification ad longum.  The order required that the documents called for should be produced separately for each of the four premises, and should be produced to the assessor within 28 days from the date of letter.  

 

The hearing on 9 October 2013

[16]      When the present cases were called, neither Mr Reilly nor any other representative of the appellant was present.  No auditor was present.  No audited and certificated accounts were produced. 

[17]      Mr Henry said that in response to the order he had produced management accounts for Beechings and Neesons, and had provided as much information as could be obtained for the two tenanted public houses.  He said that the appellant had complied with the order of 14 November 2012 to the extent that it could.  Mr Reilly had explained that full audited accounts of the appellant company had been produced to the assessor, but full audited accounts were not available for the individual public houses.  There was no person from the accountants to speak to full audited accounts for each public house as these had never been prepared.  Mr Henry did not move for a further adjournment. 

[18]      The Committee dismissed the appeals.

 

The Committee’s reasons
[19]      The Committee considered that Mr Henry, who was to be the appellant’s only witness, could not speak to the figures in the accounts.  Those who were responsible for the figures were not available to speak to them.  The Committee’s view was that it required the evidence of Mr Reilly and of the individual in the auditor’s firm who had prepared the relevant accounts.  The Committee decided that if it were simply to hear from Mr Henry it would effectively be back where it had been in May 2012.

 

Grounds of appeal

[20]      The grounds of appeal are (1) that the Committee erred in law in refusing to hear the evidence for the appellant because it had failed to comply with its order; and (2) that having failed to hear any evidence for the appellant it could not form a view as to the weight to be given to it. 

[21]      In the written submission for the appellant it is said that Mr Henry duly made a return to the assessor for each of the four public houses in this case.  Documents 7 to 10 are said to be the relevant returns.  They are not returns at all.  Although the turnover information is written on statutory return forms, the returns were withheld from the assessor until a year after the valuation roll came into force.  The information consists of nothing more than some manuscript figures none of which are vouched. 

 

Conclusions
[22]      Counsel for the appellant relied inter alia on Whitbread plc v Ass for Central (1993 SC 552) in which this court held that a committee had erred in dismissing an appeal on the ground that the appellant had failed to comply with a procedural order.  That is not what happened in these cases.  As the Secretary to the Committee told Mr Henry in a letter dated 16 October 2013, the Committee decided that it would not be appropriate that the appeals should be dismissed on the ground of non-compliance with its order to produce documents.  The Committee dismissed these appeals on the straightforward ground that since the only evidence in the case was to come from Mr Henry, the appeals would fail.  That, however, involved the Committee in drawing a conclusion on the merits of these cases without having heard any evidence at all.

[23]      I can understand the Committee’s frustration when its order was not complied with for what may have appeared to it to be unconvincing reasons.  Nevertheless, I consider that in dismissing the appeals without having heard Mr Henry’s evidence, the Committee went too far too soon.  In my view, it should not have made assumptions as to the evidence that Mr Henry would give and should not have drawn a conclusion of fact having in effect excluded the appellant from leading such evidence as it could provide. 

 

Mr Henry’s professional standards

Witness statements

[24]      Mr Henry is a Fellow of the Royal Institution of Chartered Surveyors.  In all of the many appeals that he conducts he puts himself forward as an expert witness.  It is not his practice to submit a formal witness statement.  He merely produces an alternative valuation printed on his own notepaper.  We know this from reading the productions and the transcripts in the numerous appeals that he has brought to this court.  In my opinion, when tendering himself as an expert witness Mr Henry owes it to the committee to prepare a statement in accordance with the standards of practice of the RICS in Scotland (cf Surveyors Acting as Expert Witnesses, RICS Practice Statement (3rd edition).  By doing so, Mr Henry could give the committee a clear account of his involvement in the case and of the reasoning on which his proposed valuation was based.  He would also assist the committee by making one or more of the customary written declarations as to compliance with RICS practice requirements, as to any conflicts of interest and as to any financial interest that he might have in the outcome of the appeal. 

 

Disclosure of turnover information

[25]      In this case the assessor has made the serious accusation that Mr Henry’s practice is to withhold his clients’ turnover information when the assessor is preparing for a revaluation.  Senior counsel for the assessor represented to us that Mr Henry has pursued the same strategy in other valuation areas. 

[26]      We cannot and should not make a finding in fact on this matter.  If the assessor’s allegation were to be proved, it would raise the question whether Mr Henry was engaged in the commission of offences under section 7 of the 1854 Act.  That question lies outside this court’s remit.  However, it should be recorded that in these appeals, as counsel for the appellant had to accept, none of the survey forms sent to the appellant were duly returned to the assessor; and that turnover figures for all four premises were not submitted to the assessor until 7 March 2011, nearly a year after the Revaluation came into force. 

 

Disposal
[27]      I propose to your Ladyship and your Lordship that we should allow the appeal, recall the decision of the Committee and return the case to the Committee so that it can hear the evidence for the appellant, and any evidence that the assessor may wish to lead. 

 

LANDS VALUATION APPEAL COURT

[2014] CSIH 86

XA104/14

Lord President

Lady Dorrian

Lord Malcolm

OPINION OF LADY DORRIAN

in the appeal by

SUBURBAN TAVERNS LIMITED

Appellant;

against

THE GLASGOW ASSESSOR

Respondent:

 

For the appellant:  MacIver;  TLT LLP

For the assessor:  Clarke QC;  Corporate Services, Glasgow City Council

 

28 October 2014

[28]      I agree with the reasons given by your Lordship in the chair that the appeal should be allowed.

LANDS VALUATION APPEAL COURT

[2014] CSIH 86

XA104/14

Lord President

Lady Dorrian

Lord Malcolm

OPINION OF LORD MALCOLM

in the appeal by

SUBURBAN TAVERNS LIMITED

Appellant;

against

THE GLASGOW ASSESSOR

Respondent:

For the appellant:  MacIver;  TLT LLP

For the assessor:  Clarke QC;  Corporate Services, Glasgow City Council

 

28 October 2014

[29]      For the reasons given by his Lordship in the chair, I agree that the appeal should be allowed.  I have nothing further to add.