UT Neutral citation number: [2010] UKUT 132 (LC)

LT Case Number: RA/61/2008

RA/62/2008

(Heard together)

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – valuation – shops – 2005 rating list – disturbance to trade by roadworks agreed to have affected value – extent of rateable value reduction to reflect such disturbance – appeals allowed

IN THE MATTER OF TWO APPEALS AGAINST DECISIONS OF THE

CENTRAL LONDON VALUATION TRIBUNAL

BETWEEN                           MICHAEL DELL (Valuation Officer)                        Appellant

                                                                           and

(1)     SHIRAZ DAYA (RA/61/2008)

(2)     P SINGH BHAGAT  (RA/62/2008)     

Respondents

                                                       Re: 31 Westbourne Grove,

London W2 4UA

and

10 Westbourne Grove,

London W2 5RA

Before: A J Trott FRICS

Sitting at:  43-45 Bedford Square, London WC1B 3AS

On 30 April 2010

The Appellant Valuation Officer in person, with the permission of the Tribunal

The Respondents did not appear and were not represented

The following case is referred to in this decision:

Arrowdell Limited v Coniston Court (North) Hove Limited [2007] RVR 39

                                                                    DECISION

Introduction

1.           These are two appeals by the Valuation Officer, heard together under the simplified procedure, against decisions of the Central London Valuation Tribunal dated 24 October 2008 allowing a temporary reduction in the rateable value of two shops in Westbourne Grove, London W2, at a rate of 50%, in respect of roadworks that were carried out between 8 January 2008 and 22 August 2008.  The material day in each appeal is 8 January 2008.

2.           The respondents are:

(i)         Mr Shiraz Daya, the lessee of the basement and ground floor shop and premises at 31 Westbourne Grove, London W2 4UA (RA/61/2008); and

(ii)       Mr P Singh Bhagat, the lessee of the shop and premises at 10 Westbourne Grove, London W2 5RA (RA/62/2008).

3.           The appeal hereditaments are shops in Westbourne Grove, a busy shopping street between Chepstow Road to the west and Queensway to the east.  No.10 is a small electrical store on the north side of the road between Hatherley Grove and Queensway.  At the time of the VT hearing No.31 was a coffee shop selling cakes and light snacks, but now trades (possibly under new ownership) as the Mooca Café.  It is located on the south side of the road in the middle of a long parade of shops between Kensington Gardens Square and Queensway.

4.           From 8 January 2008 until 22 August 2008 Thames Water plc replaced a sewer under Westbourne Grove.  This involved closing parts of the road and erecting hoardings around two worksites near the junctions with Queensway (to the east) and Monmouth Road (to the west).  Pedestrian access to the shops was maintained at all times but buses (and other vehicular traffic) were unable to pass along the length of Westbourne Grove and had to be diverted to the north.

5.           The respondents both made proposals to alter the 2005 rating list.  Mr Daya said that:

“…access to traffic has been suspended which is having [a] drastic effect on my business already.”

At the VT hearing he said that his trade had been reduced by 75% and that he had lost business to other coffee shops.  Mr Bhagat said that due to the works the locality had become “extremely noisy” and was subject to “dust [and] movement of heavy goods vehicles”.  He said that his business had declined by over 80%.

6.           The VO accepted that there had been a material change of circumstances as a result of the roadworks but he maintained that the VT’s award of a temporary reduction of 50% was excessive and not supported by the evidence.  He relied on settlements agreed with ratepayers in Westbourne Grove which allowed a temporary reduction of 20% or 23% where a property was also directly affected by the erection of hoardings.  A 20% reduction was in line with the VT’s determination of eight conjoined appeals in respect of a temporary reduction in the rateable value of shops in Queensway due to the closure of the nearby Queensway station in 2005-06.

7.           The VO appealed against both decisions of the VT on 13 November 2008.  Although Mr Daya served a notice of intention to respond on 18 February 2009 he did not respond to the subsequent direction of the Tribunal to serve a reply to the appellant’s statement of case that was served on 25 March 2009.  On 15 October 2009 Mr Daya was directed by the Registrar that unless he responded within 10 days he would “be debarred from filing any evidence without further notice to you.”  No such response was received and the terms of the Registrar’s unless order therefore took effect.

8.           Mr Bhagat served a notice of intention to respond on 10 March 2009.  The appellant served his statement of case on 25 March 2009 and Mr Bhagat served a reply on 22 June 2009.  This reply ended by saying:

“We are a small company trying to make ends meet and therefore we have decided not to pursue the matter further as we do not have time or resources to carry on.”

Consequently Mr Bhagat did not attend, and was not represented at, the hearing.

9.           Mr Michael Dell FRICS was authorised to appear on behalf of the Valuation Officer and did so with the leave of the Tribunal.

10.        I made an unaccompanied visit to the two appeal properties and the surrounding area on 28 April 2010.

The decisions of the Valuation Tribunal

11.        The two decisions of the VT, issued on the same day, are almost identical.  In reaching its decisions the VT said:

“The Tribunal took into account the Queensway decision, which in brief referred to the closure of the Queensway tube station and the impact of the loss of 18,000 commuters a day from the area, but noted that there was a fundamental difference between the two situations, in that the work undertaken at Queensway was concentrated underground with the actual surface streets still readily accessible.  The loss of footfall in Queensway was not considered comparable to that in Westbourne Grove as the one was due to the loss of tube facilities which could be substituted with other means of transport into the area whereas the closure of Westbourne Grove road caused severe obstruction, disruption and general financial hardship to those businesses in the Westbourne Grove area.  The issue of dust, dirt and mud was more extreme in Westbourne Grove because it was all above ground and therefore unavoidable at the time.”

The Tribunal acknowledged the VO’s arguments but was not satisfied that a 20% reduction adequately reflected the effect on local businesses. The Tribunal concluded:

“…the 20% in general [23% in the case of No.10] was not an adequate reflection of the disability suffered by Mr Daya [and Mr Bhagat], or indeed by all retailers in the immediate area of these works and [the Tribunal] considered that a single rate of 50% was more appropriate.  The Tribunal makes no distinction between those businesses affected by hoardings and those not so affected, because in its view the work in Westbourne Grove materially affected all of the businesses to a significant degree.”

The case for the appellant

12.         Mr Dell accepted that the roadworks in Westbourne Grove constituted a material change of circumstances that justified a temporary reduction in the rateable value of both the appeal properties.  But he did not accept the VT’s determination that there should be a 50% reduction because this was inconsistent with the evidence.  The rateable value of a shop was determined by the rental values prevailing in the locality and not upon an individual ratepayer’s turnover figures.  The respondents had both argued that their turnover had been reduced significantly as a result of the works but the statutory assumption for the determination of rateable value required one to consider a shop that was vacant and to let from year to year with a reasonable prospect of continuance.  It was not a part of that assumption to consider the particular type of shop under appeal, nor the particular trading circumstances of the ratepayer.

13.          Since there was no rental evidence that would assist in establishing the appropriate level of a temporary reduction in rateable value, Mr Dell had considered alternative evidence.  He relied upon two sources.  Firstly, a decision of the Central London Valuation Tribunal dated 13 October 2006 concerning the joint hearing of eight appeals into the temporary reduction in the rateable value between 8 May 2005 and 12 June 2006 of shops between Bayswater and Queensway underground stations.  During that period Queensway station had been closed resulting in the loss of over 18,000 passenger movements per day.  The VT determined that there should be a temporary reduction in the rateable value of 20%.  Secondly, and in the light of the VT’s decision at Queensway, Mr Dell had reached agreement with 46 shop occupiers in Westbourne Grove where appeals had been made for a temporary reduction in rateable value due to the roadworks.  The settlements were agreed on the basis of a 20% reduction in rateable value, or 23% where hoardings had been erected outside the property.  The majority of the ratepayers had been professionally represented. 

14.        The VT found that loss of footfall was a significant factor at Westbourne Grove during the period of the works and it sought to distinguish that situation from the loss of footfall arising from the closure of Queensway station.  Mr Dell said that there was no evidence about the effect of the works on pedestrian movements in the street.  The pavements had remained open at all times and the pedestrian flow had not been impeded significantly.  The existence of the two worksites had led to the closure of Westbourne Grove to buses but these had been diverted along routes in the vicinity and they still served the area.

15.        Mr Dell concluded that the rateable value of No.31 Westbourne Grove should be temporarily reduced by 20% and that of No.10 by 23%, in both cases between 8 January and 22 August 2008.

The case for the respondents

16.         Neither of the respondents attended, or was represented at, the hearing.  Mr Daya did not submit a reply to the appellant’s statement of case.  In his proposal to alter the 2005 rating list he blamed the works and the suspension of traffic access for the “drastic effect” on his business.  He proposed that the rateable value should be altered to £11,375 (a reduction of 50%) with effect from 6 January 2008.

17.        In his proposal to alter the 2005 rating list Mr Bhagat said that the rateable value should be reduced to nil with effect from 6 January 2008 because of the:

“closure of Westbourne Grove… extremely noisy, dust, movement of heavy goods vehicles.  Business down by over 80%.”

Mr Bhagat submitted a reply to the appellant’s statement of case in which he said that the reduction of 50% awarded by the VT was not enough when compared to the loss of his business.  He reiterated that his business had “suffered enormously” because of the roadworks.

Conclusions

18.        There is no rental evidence upon which to judge the effect of the roadworks on the appeal properties and therefore Mr Dell has relied upon the previous decision of the VT concerning the conjoined appeals at Queensway station and the subsequent settlements at Westbourne Grove.  In my opinion the evidence of the earlier VT decision should be treated with caution.  The Tribunal has stated, in the context of leasehold enfranchisement valuations, that reliance upon the mere percentage figure of relativity adopted by a leasehold valuation tribunal, while admissible, is of no evidential value.  In Arrowdell Limited v Coniston Court (North) Hove Limited [2007] RVR 39 the Tribunal, the President and Mr N J Rose FRICS, said at 45 [37]:

“The reason for this is that each tribunal decision is dependent on the evidence before it, and thus, in order to determine how much weight should be attached to the figure adopted in a decision, it would be necessary to investigate what evidence the leasehold valuation tribunal had before it and how it had treated it.  Such a process of investigation is potentially lengthy, and it is inherently undesirable that leasehold valuation tribunal hearings should resolve themselves into rehearings of earlier determinations.”

This is analogous to the situation in the present appeals where the VT considered, and distinguished, the percentage reduction determined in its earlier decision in the Queensway appeals.  The VT focused upon a comparison between the two sites and in doing so, in my opinion, reached conclusions that were not supported by the evidence.

19.        For instance, while it was agreed that the closure of Queensway station led to a loss of over 18,000 passenger movements per day there was apparently no evidence before the VT about the alternative travel arrangements that these passengers made and what the net effect of the station closure had been in terms of the number of shoppers visiting the appeal properties in Queensway.  The VT in the current appeals appears to have relied upon a statement of the appellants’ representative in the Queensway appeals in which he contended that:

 “…the closure of Queensway station resulted in the dispersal of the 6.7 million passengers [per annum] to other locations or other forms of transport.”

The VT in the Queensway appeals did not appear to accept that the loss of those passengers whose destination was the Queensway shops had been ameliorated by the transfer of some of them onto other modes of transport.  Instead the VT concluded:

“The Tribunal…has accepted that there had been a severe reduction in footfall during the period of the [Queensway station] closure.” 

20.         In the present appeals there is no quantitative evidence of the reduction, if any, in the number of people visiting Westbourne Grove during the period of the works.  Nor is there any evidence about the effect of the bus diversions on pedestrian movements in Westbourne Grove.  I therefore do not accept the VT’s conclusion that:

“The loss of footfall in Queensway was not considered comparable to that in Westbourne Grove”.

The implication of that statement is that the loss of footfall in Queensway was less significant than it was in Westbourne Grove. I have seen no evidence to support that assertion.

21.        Furthermore the VT in the present appeals said that the works at Queensway station were less disruptive than those in Westbourne Grove because they were concentrated within the station building.  The VT in the Queensway appeals said:

“The Tribunal has heard from two of the individual occupiers, Mr Graham and Mr Atar, about the nuisance with lorries reversing etc…”

It is evident from this statement, and from Mr Dell’s oral evidence at the hearing, that there was at least some disruption from surface activities. 

22.        I therefore place no weight on the decision of the VT at Queensway.  I turn instead to the settlement of the other appeals in Westbourne Grove upon which Mr Dell relies.  In Arrowdell the Tribunal said at 45 [39]:

“If no assistance is to be derived from earlier leasehold valuation tribunal decisions for the reasons we have just given, the same will go for settlements that have themselves been based on such decisions.”

I have therefore considered the extent to which the settlements at Westbourne Grove may have been based on the VT decision at Queensway.

23.        46 appeals in Westbourne Grove (between Chepstow Road and Queensway) were settled by agreement, in 35 of which (76%) the ratepayer was professionally represented.  A total of 10 professional firms were instructed to act for the ratepayers.  30 of the appeals were agreed at a reduction of 20% and 14 of them were agreed at 23%.  At the hearing I pointed out to Mr Dell that the remaining two appeals, both of which concerned properties affected by the hoardings around the western worksite, appeared to have been agreed at higher percentage reductions; No.52 Westbourne Grove showed a 27% reduction and No.72 showed a 26% reduction.  In fact the VO had allowed a 23% reduction in both cases, the difference being attributable to changes in the measured area of the properties that were unrelated to the temporary works.

24.        Two of the professional firms that acted at Westbourne Grove had also acted at Queensway and from Mr Dell’s oral evidence I consider that the previous VT decision was a factor in at least some of the negotiations of the Westbourne Grove appeals.  However, I am satisfied that it would be wrong to describe the settlements that were reached as having been based upon that decision.  Mr Dell visited the Westbourne Grove worksites with agents and considered the impact of the works by specific reference to the facts as they were in that location in 2008.  Eight of the professional firms, acting for 16 ratepayers at Westbourne Grove, had not been instructed at Queensway.  There were also significant differences between the two sites in terms of the nature of the works (such as the absence of intrusive hoardings at Queensway) and their duration (those at Queensway lasting 13 months compared to 7 months at Westbourne Grove).  In my opinion the settlements at Westbourne Grove were based upon an objective consideration of all the relevant factors by a significant number of professional firms.  I attach weight to these settlements which are the best evidence available. 

25.        I consider that a temporary reduction in the rateable value of 20% is appropriate to reflect the roadworks in Westbourne Grove.  I do not accept the VT’s decision that there should be no distinction between those properties affected by the hoardings and those which were remote from them.  In my opinion the former were more severely affected and this is reflected in the settlements agreed at Westbourne Grove.  The hoardings outside No.10 undoubtedly created an additional problem because they masked the view of that property from all sides and because they indicated the presence and extent of the eastern working site, proximity to which inevitably led to greater problems of noise, dust and fumes.  But this was allowed for by a 3% increase in the discount, a figure that was accepted, on professional advice, by all the other appellants so affected in Westbourne Grove.  There was no suggestion that servicing arrangements had been adversely or differentially affected and there is nothing about the effect of the works on the appeal properties that would justify the award of a higher discount than those agreed in respect of adjoining and nearby properties. 

Determination

26.        I allow the appeal and I determine that the rateable value of the appeal properties in the 2005 rating list be reduced for the period 8 January 2008 to 22 August 2008 (inclusive), in the case of 10 Westbourne Grove by 23% to £12,000 and in the case of 31 Westbourne Grove by 20% to £18,250.

27.        The appeal was heard under the simplified procedure which is, in general, a no costs regime.  In my opinion there are no exceptional circumstances in these appeals and I therefore make no award as to costs.

Dated 7 May 2010

A J Trott FRICS