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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Goulborn v Cowell (Valuation Officer) [2011] UKUT 417 (LC) (17 July 2012)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2012/RA_27_2011.html
Cite as: [2011] UKUT 417 (LC)
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2011] UKUT 417 (LC)
UTLC Case Number: RA/27/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
RATING – valuation – shop – compiled list inaccuracy – material change of circumstances – valuation officer making single alteration to list – effective date – held different effective dates applied – appeal allowed in part – decision set aside in part following application by respondent – further hearing held – original decision reversed – held originating proposal did not challenge effective date – appeal dismissed
IN THE MATTER OF AN APPEAL
BETWEEN WILLIAM BRUCE GOULBORN Appellant
and
OWAIN WYNN COWELL (VALUATION OFFICER) Respondent
Re: 4 Sussex Street,
Rhyl,
Denbighshire,
LL18 1SG
Before: A J Trott FRICS
Sitting at Chester Civil Justice Centre, Trident House, Little St John Street,
Chester CH1 1SN
on 24 August 2011
and at 43-45 Bedford Square, London WC1B 3AS
on 5 July 2012
First hearing:
William Goulborn, in person, for the appellant
Owain Wynn Cowell, in person, for the respondent
Second hearing:
William Goulborn, in person, for the appellant
Daniel Kolinsky, instructed by HMRC Solicitors Office, for the respondent
The following cases are referred to in this decision:
Lotus and Delta v Culverwell (VO) and Leicester City Council [1976] RA 141
Futures London Limited v Stratford (VO) [2006] RA 75
Mainstream Ventures Ltd v Woolway (Valuation Officer) [2000] RA 395 (LT)
Re The Appeal of Kendrick (Valuation Officer) [2009] RA 145 (LT)
Chilton-Merryweather (LO) v Hunt [2008] EWCA Civ 1025, [2008] RA 357
Davey (VO) v O’Kelly [1999] RA 245.
R v Nottinghamshire Local Valuation Court and Others ex-parte Anglian Water Authority [1990] RA 93
O’Brien v Clark (VO) [2006] RA 403).
The following case was also referred to in argument:
Galgate Cricket Club v Doyle (VO) [2001] RA 21
DECISION
Introduction
2. The respondent is Mr Owain Wynn Cowell BSc, MRICS, the duly authorised valuation officer.
3. Both parties appeared in person.
4. The appeal was heard under the simplified procedure.
Facts
Rating history of the appeal hereditament
The case for the appellant
16. The Valuation Office Agency had previously said that the increase in value was only due to the material change of circumstances. The appellant in the appeal at 18 Sussex Street stated in written evidence:
“I have been told by Valuation Officer Sarah Nash, that the only justification for this rise [from £145 per m2 to £200 per m2 Zone A] is because of the Peacock Chainstore opening at the bottom of Sussex Street in March 2006, where once independent shops traded and the Indoor Market was located.”
Mr Goulborn also referred to a letter received from his MP, Mr Chris Ruane, dated 8 April 2011 in which Mr Ruane said:
“From my recollection of the meetings we held three or four years ago the Valuation Office’s justification for increasing rates at that time was because of the improvements brought about [by] Peacocks locating to the area and the subsequent ‘increase in footfall’ that this apparently created.”
18. Mr Goulborn referred to the Valuation Office Agency’s Rating Manual (Volume 2, section 5) for guidance about material changes of circumstance. He cited paragraph 9.45:
“A useful working rule is for the valuer to envisage the hypothetical landlord and tenant inspecting the hereditament to be valued and consider what would impress them as physically observable or physically manifest features in the locality of the hereditament. These might include…pedestrian flow or footfall…
If any of these change to a degree which would be perceptible as between the date of compilation of the list and the material day, then there is a MCC.”
19. Mr Goulborn said that there had been no change in pedestrian flows since the new shops had been opened at 8 and 10-12 Sussex Street. But the number of transactions in shops in Sussex Street had fallen between April 2005 and April 2006. He had undertaken a survey of retailers in the street. He asked them:
“Can you please let me know what % change, if any, there was in the number of transactions you had in April 2006 compared to the month of April 2005.”
He received four responses each of which showed a decrease in transactions. These ranged from 2.7 to 3.2%. The number of transactions undertaken by Rhyl Coin and Stamp Centre, the trading name of the occupier at the appeal hereditament, declined by 1.3%. The new shops had had a negative effect rather than a nominal positive effect as found by the VTW. There had been no material change of circumstances that could justify a substantial increase in rateable value.
20. On 16 November 2006 Ms Zammit-Willson of the Valuation Office Agency wrote to Mr Goulborn to say that the:
“original level of value of £165/m2 … [was] too low…I think the revaluation should have resulted in a value of £180/m2 being adopted. However, I have no power to increase rateable values from 1 April 2005 due to an error, any increase would be restricted to the date I altered the rating list.”
Taking these values to apply to the appeal hereditament Mr Goulborn argued that the error made by the Valuation Office Agency when compiling the 2005 list was £15 per m2, ie £180 less £165. Applying this figure to the area of 4 Sussex Street gave an increase in rateable value of £483 or 9% compared with the 54.7% rise awarded by the VTW, which determined the Zone A value at £255 per m2. This figure must have included the error made by the Valuation Office Agency, identified by them at £15 per m2. So the amount allowed by the VTW in respect of the material change of circumstances was actually £255 less £180, or £75 per m2. And yet it said in its decisions in the appeals on both 6-8 and 18 Sussex Street that the “positive impact [of the material change of circumstances] would be nominal.” £75 per m2 (or 41.7% of £180 per m2) could not properly be described as “nominal”. The correct rateable value, reflecting both the error in the compiled list and the absence of any value effect caused by the material change of circumstances, was £5,798 per m2 (£180 per m2 multiplied by 32.21 m2).
The case for the respondent
21. Mr Wynn Cowell said that there were two issues to be determined:
(i) Whether the redevelopment of the Old Market was a material change of circumstances, and
(ii) Whether the valuation officer is required to correct errors in the compiled list as they become known or whether he must wait until a new list is compiled.
22. Mr Wynn Cowell reviewed the statutory basis for a material change of circumstances. This was contained in paragraph 2(6) and (7) of Schedule 6 to the Local Government Finance Act 1988. Where the rateable value is determined with a view to making an alteration to a list which has been compiled the matters mentioned in sub-paragraph 2(7) shall be taken as they are assumed to be on the material day. In so far as relevant to this appeal those matters are:
“2(7)(d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and
(e) the use or occupation of other premises situated in the locality of the hereditament.”
If these matters had changed then there was a material change of circumstances and the material day was the date when the change occurred. The rateable value was the value based upon the physical circumstances as at the material day but applying the levels of value that existed on the antecedent valuation date (1 April 2003).
28 When considering the rental evidence Mr Wynn Cowell had regard to the established propositions set out by the Lands Tribunal in Lotus and Delta v Culverwell (VO) and Leicester City Council [1976] RA 141 and began his consideration of the rental evidence by examining the actual letting of the appeal hereditament. The property was let from 7 January 2005 at £15,000 per annum. Adjusting for the landlord’s responsibility for external repairs gave a net rental value, on FRI terms, of £14,250 per annum. This was a new letting between unconnected parties and as such was at the top of the “hierarchy of evidence.” Mr Wynn Cowell acknowledged that the appellant had been forced to leave his previous premises at 12A Sussex Street (one of the kiosk units taken over as part of the Old Market redevelopment) and that he may not have been in a strong negotiating position when taking the new lease at No. 4. Nor was there any specific evidence of rental trends in secondary retailing positions between the antecedent valuation date (AVD) and January 2005. But he thought on balance that any adjustment to the actual letting value of £442.41 per m2 Zone A would not bring it below the applied tone of £255 per m2.
29 6-8 Sussex Street, the property adjoining the appeal hereditament to the west, was subject to a rent review in January 1997 at £215.32 per m2 Zone A. In July 2005 the lease was renewed at £238.53 per m2. Both leases were on FRI terms. Although No. 6-8 was larger in terms of Zone A than the appeal hereditament it was smaller overall because it lacked the advantage of a rear work room. The rental evidence also preceded the re-development of the Old Market.
30. Mr Wynn Cowell then analysed the lettings of the two new shops at 8 (Savers) and 10-12 (Peacocks) Sussex Street. Both lettings required adjustments. At No. 8 the landlord paid a reverse premium while at No. 10-12 the landlord contributed to the fitting out costs. The results of the rental analysis showed a rental value of £606.11 per m2 at No. 8 and £412.32 per m2 at No. 10-12. The dates of the lettings were February and January 2006 respectively, nearly three years after the AVD. Mr Wynn Cowell felt that the presence of these strong multiples (Savers being in the same group of companies as Superdrug and the Perfume Shop and Peacocks being in the same group of companies as Bon Marche) would act as a magnet to draw trade southwards down Sussex Street from the High Street to the benefit of the appeal hereditament.
31. Mr Wynn Cowell attached little weight to the rental evidence from 14A Sussex Street because of doubts about the consistency of the information shown on the two forms of return. In addition the letting took place in February 2005, shortly before work on the redevelopment of the Old Market commenced, the potential disruption from which may have influenced the negotiations.
32. No weight was given to lettings at 14B and 18 Sussex Street since they were both transactions between connected persons.
33. The final letting considered by Mr Wynn Cowell was a new lease of 28 Sussex Street from 1 April 2004 at an adjusted Zone A rent of £191.51 per m2. Mr Wynn Cowell attached some weight to this transaction but thought it was of little assistance because No. 28 was located at the far end of Sussex Street close to its junction with Queen Street and away from the primary retail area of the High Street.
34. Based upon his analysis Mr Wynn Cowell was satisfied that there was no evidence to support a lower figure than the applied tone of £255 per m2. He said that this tone had now become established in accordance with the decision of the Lands Tribunal in Futures London Limited v Stratford (VO) [2006] RA 75. Applying the figure of £255 per m2 to the agreed area of the appeal hereditament in terms of Zone A gave a rateable value of £8,214 which he rounded down to £8,200.
Conclusions
35. Under section 41(1) of the Local Government Act 1988 the valuation officer “shall compile, and then maintain, lists for the [Billing] Authority.” This imposes a duty upon the valuation officer which extends under section 41(4) “to take such steps as are reasonably practical to ensure that [the list] is accurately compiled on 1 April concerned.”
36. Ryde on Rating notes at paragraph F [116] that while there is no express power conferred on valuation officers to alter local non-domestic rating lists on their own initiative, such a power is implicit in the duty imposed on valuation officers under section 41(1) of the 1988 Act to maintain local rating lists once they have been compiled. Although the valuation officer must take all reasonably practical steps to ensure the accuracy of the compiled list at its commencement, in my opinion that does not preclude the valuation officer from altering that list on his own initiative where the list is shown to be inaccurate because of errors in an original assessment. This ability is reflected in paragraph 14(6) of the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2005 (the “Regulations”) – see paragraph 41 et seq below.
37 In this appeal the valuation officer altered the list in respect of the appeal hereditament on 25 September 2007, immediately following the VTW’s decisions in the appeals on 6-8 and 18 Sussex Street. The VTW said of the valuation officer’s evidence in those two appeals that:
“…really a two element increase was being pursued in that it was contended that the ‘2005 compiled list’ entries from 1 April 2005 were too low, then a further increase was appropriate consequent on the opening of Peacocks/Savers: which had enhanced the rental levels in Sussex Street.”
In both appeals the VTW said that the valuation officer had placed too much reliance on the rents payable by Peacocks and Savers and that:
“The Tribunal felt the bigger picture showed that the positive impact would be nominal.”
The VTW in the present appeal accepted that the value of £255 per m2, as determined in respect of the appeal on 6-8 Sussex Street, was fair and reasonable on the evidence.
38. In his reply to the appellant’s statement of case in this appeal the valuation officer said:
“The respondent accepts ‘that the main reason for the increase was understatement of the 2005 valuation’ that is to say the Zone A value in the list on the day it was compiled was insufficient. The quantum of increase in Zone A value was partly attributable to the correction of the error in the compiled list and partly due to the opening of the re-developed shops.”
39 The position therefore appears to be that the valuation officer made a single alteration to the list, the main reason for which was to correct an inaccuracy in the compiled list but which was conflated with another reason, namely that of a material change of circumstances (the re-development of the Old Market). The alteration was, in effect, a compound of these two reasons as the VTW noted.
40. The valuation officer did not distinguish the value effect of the two circumstances that gave rise to his single alteration of the list. The VTW said in their decisions on the appeals at 6-8 and 18 Sussex Street that the positive impact of the opening of Peacocks and Savers would be nominal, although they did not specify what this meant in monetary terms.
41. The conflation of two reasons for making a single alteration causes procedural, as well as valuation, difficulties. Regulation 14 of the Regulations deals with the time from which an alteration is to have effect in the 2005 and subsequent lists. Regulation 14(2) deals with the effective date in respect of material changes of circumstance:
“… where an alteration is made to correct any inaccuracy in the list on or after the day it is compiled, the alteration shall have effect from the day on which the circumstances giving rise to the alteration first occurred.”
Applying this regulation in the present appeal means that the alteration to correct the list to reflect the material change of circumstances said by the valuation officer to have occurred following the redevelopment of the Old Market has effect from 23 March 2006, the date when the two new shops opened.
42. Regulation 14(6) deals with the effective date where there is an inaccuracy in the list as compiled:
“An alteration made to correct an inaccuracy (other than one which has arisen by reason of an error or default on the part of a ratepayer) –
(a) in the list on the day it was compiled, or
(b) which arose in the course of making a previous alteration in connection with the matters mentioned in the foregoing paragraphs,
which increases the rateable value shown in the list for the hereditament to which the inaccuracy relates, shall have effect from the day on which the alteration is made.”
Applying this regulation in the present appeal means that the correction of the initial inaccuracy in the compiled list should have effect from 25 September 2007 which is the day that the valuation officer made the alteration.
43. Mr Wynn Cowell explained his interpretation of these regulations in his expert report:
“28. Regulation 14…concerns the effective date to be applied to any list alteration. The general rule is that the effective date is the day on which the circumstances giving rise to the alteration first occurred. Where an MCC has occurred the alteration is backdated to the material day of that MCC as per regulation 14(2). The material day being the day the change occurred.
29. Where an alteration simply corrects an inaccuracy without an MCC and that alteration increases the rateable value, the effective date is the day on which the alteration is made. The alteration is not backdated under these circumstances as per regulation 14(6)(b).” (Emphasis added)
Mr Wynn Cowell’s interpretation of the Regulations leads him to take the effective date in this appeal as 23 March 2006, which is the material day when the material change of circumstances occurred, notwithstanding that he did not alter the list until 25 September 2007.
44. Where an interested person makes a composite proposal on ground (a) (initial inaccuracy of the compiled list) and ground (b) (material change of circumstances) as set out in regulation 4(1) of the Regulations, then regulation 4(3) applies. This states:
“No proposal may be made –
(a) by reference to more than one ground unless for each of the grounds relied upon, the material day and the effective date are the same:
…”
This Regulation precludes a single proposal being made by an interested party which is based on grounds (a) and (b) since, as explained above, these grounds do not have the same effective date.
45. Mr Goulborn’s proposal dated 29 March 2010 (received by the valuation officer on the 30th) reflected the valuation officer’s double reason for altering the list. In Part C of the proposal form, identifying the grounds for the proposed list alteration, Mr Goulborn relied upon grounds A and B. Ground A is that the rateable value in the rating list on 1 April 2005 was inaccurate. Ground B is that the rateable value shown in the list by reason of an alteration made by the valuation officer on 26 (sic) September 2007 was inaccurate. Although Mr Goulborn did not tick the box against ground C he did complete the date box in the question. Ground C is that the effective date of the alteration made by the valuation officer on 23 March 2006 is inaccurate. Mr Goulborn proposed that the rateable value should be altered to £5,500 with effect from 23 March 2006. The proposal was therefore made (ostensibly) on three grounds.
46. The valuation officer did not serve an invalidity notice on the proposer (Mr Goulborn) under regulation 8 of the Regulations. But regulation 8(11) states that nothing done under regulation 8 shall be construed as preventing any party to an appeal under regulation 13 (disagreement as to a proposed alteration) from contending for the purposes of that appeal that the proposal to which the appeal relates was not validly made. So, following the decision in Mainstream Ventures Ltd v Woolway (Valuation Officer) [2000] RA 395 (LT), it might have been possible for the valuation officer to challenge the validity of the proposal in the present appeal even though he had not done so by way of an invalidity notice. However, Mr Wynn Cowell made no such challenge and therefore the respondent consistently accepted that the proposal was validly made.
47. The VTW has the power to direct the date upon which an alteration to the list is to take effect since, under regulation 4(1)(f) of the Regulations, it is a ground for making a proposal that the day from which an alteration is shown in the list as having effect is wrong (ground C of Mr Goulborn’s proposal).
48. Under regulation 37(5) of the Regulations the Upper Tribunal (Lands Chamber):
“…may confirm, vary, set aside, revoke or remit the decision or order of the Valuation Tribunal for Wales, and may make any order the tribunal could have made.”
49. Having described the statutory background I now consider its consequences in this appeal in relation to the effective date. In dismissing the appeal the VTW accepted the valuation officer’s opinion that the effective date was 23 March 2006. I think that they were wrong to do so. The proposal was accepted as valid by the valuation officer despite it being based upon grounds which, for the reasons given above, involved different effective dates. I infer from the emphasised passage in paragraph 29 of Mr Wynn Cowell’s expert report (see paragraph 43 above) that where an inaccuracy in the compiled list has been identified and a material change of circumstances has occurred Mr Wynn Cowell takes the effective date for both matters as being the material day for the material change of circumstances. In doing so he refers to regulation 14(6)(b) of the Regulations. But regulation 14 (6), whether paragraph (a) or (b) applies (and in my opinion it is the former), states that an alteration shall have effect from the day on which the alteration is made. I can see no justification for taking the effective date for the alteration regarding the inaccuracy in the list on the day it was compiled as being the day on which the material change of circumstances occurred.
50. In my opinion, given that the validity of the appellant’s proposal was not challenged, there are two effective dates to be determined in this appeal; one in respect of the correction to the inaccurately compiled list (25 September 2007, per regulation 14(6)(a)) and one in respect of the material change of circumstances (23 March 2006, per regulation 14(2)).
51. The consequence of my decision is that it is necessary to determine what increase in rateable value, if any, is attributable to the inaccurately compiled list and what increase is attributable to the material change of circumstances.
52. The VTW said in its decisions on the appeals at Nos. 6-8 and 18 Sussex Street that the material change of circumstances would have a “nominal” positive impact, but they did not express a view as to what this meant in monetary terms. Mr Goulborn argues that a nominal impact on value cannot, by definition, be caused by a material change of circumstances. Mr Wynn Cowell does not distinguish between the increase due to the material change of circumstances and that due to the inaccurately compiled list. He considers them together.
53. A “material change of circumstances” is defined in regulation 3(1) of the Regulations as meaning, in relation to a hereditament:
“a change in any of the matters mentioned in paragraph 2(7) of Schedule 6 to the Act”
Such a change does not itself have to be material; it is sufficient that it is perceptible and observable “on the ground” (see Re The Appeal of Kendrick (Valuation Officer) [2009] RA 145 (LT) and Chilton-Merryweather (LO) v Hunt [2008] EWCA Civ 1025, [2008] RA 357). I accept Mr Wynn Cowell’s view that the redevelopment of the Old Market and the opening of the two new shops was a perceptible change that constituted a material change of circumstances under paragraph 2(7)(d) and (e).
54. Mr Goulborn sought to show that the new shops had not had any beneficial impact upon trade in the locality by referring to the results of a (rudimentary) survey questionnaire that he had sent to local traders. I accept Mr Wynn Cowell’s criticism of these results, namely that they referred to transactions rather than to (or at least as well as) turnover and compared months (April 2005 and April 2006) that were differentially affected by the Easter holidays. Nor was there a control survey to establish any difference in transactions for retailers in Rhyl who were not affected by the new shops. I attach no weight to this survey.
55. Mr Wynn Cowell considers comparable evidence to derive a rateable value that both corrects the inaccuracy of the compiled list and which takes account of the material change of circumstances, effective from the date of the latter. While he does not separately identify the value effect of these two matters he accepts in his reply to the appellant’s statement of case that the main reason for the increase in the rateable value was due to the understatement of value in the compiled list. He also says in paragraph 59 of his expert report that:
“My own analysis of zone A values differs to that presented by the valuation officer’s previous representatives.”
This is presumably a reference to Ms Zammit-Willson’s view in November 2006 that, firstly, the correct rateable value of the appeal hereditament was £180 per m2 at the date the list was compiled, based upon rents agreed at or around the AVD; and, secondly, that the lettings of 8 and 10-12 Sussex Street in early 2006 averaged £408 per m2 compared with Mr Wynn Cowell’s figure of £509 per m2.
56. Ms Zammit-Willson based her view of the correct value of the hereditament at the AVD upon four comparables, only one of which, No.28, was subsequently referred to by Mr Wynn Cowell, although he found it to be of little assistance (see paragraph 33 above). Two of Ms Zammit-Willson’s other comparables, at Nos. 13 and 27 Sussex Street, are on the north side of the street (which Mr Wynn Cowell does not consider comparable). 27 Sussex Street is considerably further south, beyond the junction of that street with Queen Street. The remaining comparable is at 12 Sussex Street, one of the units that adjoined the entrance to the Old Market. According to the schedule attached to a letter to the appellant from Ms Zammit-Willson dated 1 November 2006 the property was in fact occupied by Rhyl Coin and Stamp Centre, the appellant’s business. The rent commencement date was 3 April 2003 which is within two days of the AVD. Mr Wynn Cowell does not refer to this comparable. Ms Zammit-Willson does not say whether the rents she relies upon are new lettings, rent reviews or lease renewals. The average of her four comparables is £176 per m2 which Ms Zammit-Willson rounds to £180 per m2.
57. I agree with Mr Wynn Cowell’s rejection of the comparables at 27 and 28 Sussex Street. Both these properties are considerably further away from the High Street than the appeal hereditament. The rental evidence from No.13, a shop and premises on the south side of the entrance to Queens Market on the opposite side of the street to the new shop at No. 10-12, refers to a transaction that took place two years before the AVD and is therefore historic. I also accept Mr Wynn Cowell’s view that properties on the north side of Sussex Street are less valuable than those to the south. The rental evidence from 12 Sussex Street does appear to be relevant and has the advantage of being a transaction that occurred at the AVD. It is surprising that Mr Wynn Cowell does not at least refer to it in his expert report. He says in that report that “I have not discovered any rents immediately around the AVD” despite Ms Zammit-Willson’s letters to the appellant dated 1 and 16 November 2006 in which reference is made to No.12. Ms Zammit-Willson’s analysis of No.12 shows a (rounded) value of £185 per m2 adjusted from a rent payable of £166 per m2. I have no details of the transaction, or the reasons for the (unexpected) upward adjustment of the rent. I also note that the appeal hereditament has a total area which is 3.5 times that of No.12 and an area in terms of Zone A which is nearly twice as large. I place little weight upon No.12 as a comparable.
58. A schedule of comparables, prepared by Mr Wynn Cowell, is attached to the statement of agreed facts. The analysis of those comparables provided by Mr Wynn Cowell in his expert report, and as explained at the hearing, is, in my opinion, reasonable and carefully considered. I accept the results. The difficulty with this comparable evidence is that, with the exception of No.28 which Mr Wynn Cowell rejects, it is either historic (and not relied upon) or postdates the AVD by some two to three years. Mr Wynn Cowell refers in general terms to market movements in the intervening period and relies upon “Focus” town reports for Rhyl and other centres to establish that prime shop rents were stable in Rhyl between 2001 and 2005, rising by some 9% to June 2006 before falling by 25% over the next three years. Mr Wynn Cowell acknowledges that the Focus reports are only concerned with prime property and that the appeal hereditament does not fall into that category. He says:
“I am of the opinion that this research, derived from aggregated information, is insufficiently specific to be regarded as direct evidence for this valuation.”
No other evidence was adduced about the change in values, if any, between the AVD and the dates of the comparable transactions.
59. Mr Wynn Cowell relies mainly upon five comparables. Excluding No.8 (Savers) and 10-12 (Peacocks) for the purposes of considering the accuracy of the list as compiled, leaves No.4 (the appeal hereditament), No. 6-8 and 14A. Of these three, the analysis of the new letting of No.4 shows that the rent was much higher (£442.41 per m2, January 2005) than either No.6-8 (£238.53 per m2, January 2005) or No.14A (£179.15 per m2, February 2005). It is worth noting that No.4 and No.14A are very similar in area, both in terms of the total floorspace and in terms of Zone A. Mr Wynn Cowell explains the high value of No.4 by saying that its new tenant was relocating from No.12A (or No.12 according to Ms Zammit-Willson) which was being lost as part of the redevelopment of the Old Market. He also says that the tenant at No.14A would have been aware of the forthcoming redevelopment and may have negotiated a lower rent to reflect the prospective disruption due to the building works immediately next door. I agree with Mr Wynn Cowell on these points. (It might also be argued that the rent at No.6-8 was similarly low since that property also adjoined the redevelopment site. However there was a small gap between No.6-8 and the redevelopment site which meant that it was not so directly affected.)
60. I conclude from this review of the evidence that Ms Zammit-Willson’s estimate of £180 per m2 as being the correct value of the appeal hereditament at the AVD was an underestimate, based as it was on comparables on the opposite side of Sussex Street and further to the south; in all instances further away from the High Street than the appeal hereditament. No.12 was on the same side of the road but was very much smaller and again further to the south. Adjusting the rents to reflect these disadvantages and taking account of the subsequent evidence in 2005 (albeit to a limited extent given the lack of detailed objective evidence of market movements in the intervening period for this type of shop) I consider that the correct value in the compiled list, before any material change of circumstances, should have been £220 per m2.
61. I am satisfied that the redevelopment of the Old Market was a material change of circumstances that has helped to consolidate the trading position of the appeal hereditament and revitalised what had become a tired trading format. The presence of Savers and Peacocks in close proximity to No.4 strengthens its retail location. I am not persuaded by the VTW’s comment that the impact on values will only be nominally positive. In my opinion that impact would be at least 15%. The figure of £255 per m2 determined by the VTW as the value of the appeal hereditament following the material change of circumstances represents an increase of approximately 16% and is supported by the evidence.
62. The effect of my conclusions is as follows:
(i) The effective date for the alteration of the list for the material change of circumstances is 23 March 2006.
(ii) The effective date for the alteration to correct the inaccuracy in the compiled list is 25 September 2007.
(iii) I determine the rateable value as £6,100 with effect from 23 March 2006, being the value in the compiled list (£5,300) increased by 16% to reflect the effect of the material change in circumstances.
(iv) I determine the rateable value as £8,200 with effect from 25 September 2007, being the corrected value in the compiled list (£220 per m2) adjusted to reflect the effect of the material change in circumstances (32.21 m2 at £255 per m2).
The appeal therefore succeeds in part.
63. At the hearing the appellant asked for his costs. He said that the circumstances of the case were exceptional. The respondent had originally said that the alteration to the list was exclusively due to a material change in circumstances and not to any inaccuracy in the compiled list. The true position had only been revealed in subsequent correspondence when it became clear that the valuation officer had used a material change of circumstances to justify correcting a substantial error in the compiled list. It had not been possible to reach any agreement about the reason for the alteration with the respondent and because of the uncertain approach of the respondent Mr Goulborn had incurred costs in arranging meetings with traders, his MP and the valuation officer.
64. The respondent said that he would not make an application for costs.
65. The appeal was heard under the simplified procedure. Practice direction 12.8 of the Lands Chamber’s Practice Directions issued on 29 November 2010 states:
“Where proceedings are determined in accordance with the simplified procedure…, costs will only be awarded if there has been an unreasonable failure on the part of the claimant to accept an offer to settle, or if either party has behaved otherwise unreasonably, or the circumstances are in some other respect exceptional.”
I do not consider the respondent’s behaviour in this appeal to have been unreasonable and I do not consider that Mr Goulborn’s arguments have established that the circumstances surrounding the appeal were an exception justifying the award of costs. I therefore make no award of costs.
Dated 28 November, 2011
A J Trott FRICS
Addendum following a further hearing
Introduction
66. Following the Tribunal’s decision dated 28 November 2011 the respondent applied for permission to appeal to the Court of Appeal. As an alternative to granting permission to appeal the respondent invited the Tribunal to set aside its decision under rule 54 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.
67. The respondent submitted that it was in the interests of justice for the implications of the argument as to the validity of a single proposal contending for two different effective dates (and the implications of such an approach for ascertaining rateable value) to be determined following full argument in the Tribunal. No issue had been taken by the respondent as to the validity of the appellant’s proposal to alter the rating list because the valuation officer had understood that proposal as being simply a complaint about the rateable value with effect from 23 March 2006, the date of the material change of circumstances. Consequently the Tribunal did not have the benefit of submissions as to the correctness of the multi-stage approach that it adopted in paragraphs 60-62 of its decision. The respondent submitted that it was in the public interest for this issue to be determined, after full argument, within the specialist Tribunal jurisdiction before being considered, if necessary, by the Court of Appeal.
68. On 17 January 2012 I set aside in part the decision dated 28 November 2011 under rule 54(1) and 54(2)(d). I did so because I had decided the appeal on a basis that had not been argued before me and reached my conclusions without indicating to the parties the course I was minded to take and without giving them the opportunity to address me on the issue. I did not set aside that part of my conclusions (paragraphs 53-61) that dealt with the material change of circumstances and the analysis of comparable evidence, both of which issues were fully argued at the hearing.
69. In my order setting aside the decision in part I identified four issues upon which further submissions were invited:
(i) The scope of the ratepayer’s proposal;
(ii) Whether, where the valuation officer altered the list after a material change of circumstances and, at the same time, corrected an inaccuracy in the originally compiled list, there was a single effective date for that combined alteration which was the date of the material change of circumstances;
(iii) Whether, in the event that the combined alteration had separate effective dates, the effective date for the correction of the inaccuracy in the originally compiled list should be 8 August 2006 or 25 September 2007; and
(iv) Whether the approach adopted in paragraph 62 of the decision dated 28 November 2011 was correct.
70. Following the receipt of written submissions on these issues from the parties a further hearing was held on 5 July 2012. Mr William Goulborn appeared in person for the appellant and Mr Daniel Kolinsky of counsel appeared for the respondent.
The case for the appellant
71. Mr Goulborn submitted that an analysis of the non-domestic rating lists between 1990 and 2005 showed that the original inaccuracy in the list in respect of the appeal hereditament occurred when the 2000 list was compiled. The 2000 list was not dead because the 2005 list depended upon it. He accepted the Tribunal’s decision that there should be two effective dates – 23 March 2006 in respect of the material change of circumstances and 25 September 2007 in respect of the correction to the inaccurately compiled list – but submitted that the increase in rateable value determined by the Tribunal to take effect from the latter date was unlawful by virtue of “the statute of limitations”.
72. The appellant’s proposal had been marked as valid and had been accepted by the valuation officer as such throughout. The proposal was clear to the respondent and consisted of a challenge to the accuracy of the originally compiled list (per the answer to question 15A of the proposal form) and also a challenge to the alleged material change of circumstances (per the answer to question 15B of the proposal form). The proposal had been accepted as valid despite it being made on grounds involving different effective dates. Regulation 4(3) had not been applied by the respondent. There was no justification for taking a single effective date with effect from the date of the material change of circumstances.
73. Mr Goulborn submitted that the rateable value should be £6,100 with effect from 23 March 2006. The alteration that corrected the inaccurately compiled list was not made until 25 September 2007. The earlier alteration made on 8 August 2006 was wrong and that date should not be used as the effective date for the correction of the compiled list entry. But the effective date of 25 September 2007 was unlawful because of the statute of limitations and therefore the rateable value of £6,100 as determined by the Tribunal should remain in force for the duration of the 2005 list.
The case for the respondent
74. Mr Kolinsky submitted that the key problem with the decision was the insertion of a rateable value (£6,100) in the list between 23 March 2006 and 25 September 2007 that was known to be incorrect. That was not a step which was required or authorised by the statutory scheme. There had been a material change of circumstances on 23 March 2006; that was accepted by the Tribunal and that part of its decision had not been set aside. Therefore an alteration to the list was required which took effect from that date. The only way to assess the rateable value was by reference to Schedule 6 to the 1988 Act. The only outcome that was authorised was to enter the correct rateable value at that date. That outcome was not precluded by the provisions of regulation 14(6) regarding an alteration to correct an inaccuracy in the list on the day it was compiled.
75. The respondent contended that a proper analysis of the appellant’s proposal showed that he sought to alter the rateable value with effect from 23 March 2006. That conclusion was supported by:
(i) the wording of the proposal in which reference was made three times to 23 March 2006 as being the effective date (questions 13A, 15C and 16);
(ii) reference to the introduction of Peacocks and Savers in the appellant’s answer to question 16, that being the relevant material change of circumstances;
(iii) the list entry under challenge which was made on 25 September 2007 and which had an effective date of 23 March 2006; and
(iv) the (unchallenged) prior alteration made on 8 August 2006 which also had an effective date of 23 March 2006.
76. Regulation 4(3) prohibited proposals being made by reference to more than one ground unless the effective dates were the same for each ground. The Tribunal therefore did not have the power to alter the list to give effect to alternate effective dates. Its powers were limited by the wording of the proposal (which indicated a single effective date) and, under regulation 14(7), it is not now possible to alter the 2005 list other than in pursuance of a proposal.
77. Mr Kolinsky said that the respondent was not arguing that the proposal was invalid (a course which he said the Tribunal should be slow to adopt) but that a proper analysis of the proposal showed it to be a challenge to the rateable value of the hereditament with effect from the single date of 23 March 2006. This was not a case where regulation 14(6) applied. That regulation was a protective measure designed to assist the ratepayer where the sole purpose of an alteration was to correct (and increase) an inaccurately compiled list. The present case did not involve an alteration to correct an inaccuracy in the list but instead was an alteration made to give effect to a material change of circumstances; a case where regulation 14(2) applied. The upshot of that alteration was an increase to the rateable value in line with the statutory scheme. The valuation officer had to rely upon Schedule 6; there was nothing else he could do.
78. In reply to a question from the Tribunal Mr Kolinsky said that it would be wrong to take the effective date as the date when the respondent altered the list rather than the (earlier) date of the material change of circumstances. To do so would mean that the valuation officer would avoid his duty to maintain an accurate list by failing to alter the list at the date the material change of circumstances occurred.
79. It would have been open to the appellant to have submitted two proposals; one to dispute the rateable value entered into the list following the material change of circumstances, and one to challenge the date of the material change of circumstances as being the effective date for the alteration to correct an inaccuracy in the compiled list. But the outcome would have been the same; the valuation officer’s duty to maintain an accurate list required him to assess the rateable value according to Schedule 6 with effect from the date of the material change of circumstances. Regulation 14(6) was not relevant in that situation.
80. On the second issue Mr Kolinsky submitted that there had to be a single effective date. In making a new entry to the list the valuation officer had to determine the rateable value in accordance with the provisions of Schedule 6 to the 1988 Act. If the compiled list entry was inaccurate then this would have to be corrected in the statutory process of determining the new rateable value which took effect from the material change of circumstances. Regulation 14(6) prevented alterations to the compiled list taking place retrospectively where the entry in the list was increased but it did not prevent the valuation officer from entering the correct rateable value into the list where there had been a material change of circumstances. Nor did it require a valuation officer to make a new inaccurate entry to the list, which was the effect of the Tribunal’s decision to have separate effective dates.
81. On the third issue Mr Kolinsky strongly submitted that neither date was correct because the respondent disputed the premise of the question. He contended that it made no sense for there to be separate effective dates as this inevitably led to an erroneous alteration being made to the list contrary to the statutory scheme. The mischief lay in the Tribunal’s assessment of £6,100 as an operative entry for the rateable value between 23 March 2006 and 25 September 2007. This value could not be discovered in any valuation required by Schedule 6.
82. On the final issue Mr Kolinsky submitted that the effect of paragraph 62 of the decision was to create a rateable value in the list that was derived from an artificial exercise that was not in accordance with Schedule 6 to the 1988 Act. It reflected an erroneous process of increasing the incorrect compiled list entry to give a figure that was itself incorrect as at the date of the material change of circumstances. The Tribunal’s approach would require valuation officers to make inaccurate entries to the rating list and, in any event, would be unworkable in practice.
83. Mr Kolinsky said that if, contrary to the respondent’s primary contention, the Tribunal was correct to limit any increase in the rateable value attributable to an inaccuracy in the original compiled list entry by reference to regulation 14(6) then the correct date for any such limitation should be 8 August 2006, the date on which the valuation officer first increased the rateable value and not 25 September 2007 which was the date of the valuation officer’s second alteration.
84. Mr Kolinsky submitted that the 2005 compiled list entry had been correctly altered to show a rateable value of £8,200 with effect from 23 March 2006 and that the appeal should be dismissed.
Conclusions
85. The scope of an appeal to this Tribunal is limited by the wording of the originating proposal; see Davey (VO) v O’Kelly [1999] RA 245. The test, following the Court of Appeal’s decision in R v Nottinghamshire Local Valuation Court and Others ex-parte Anglian Water Authority [1990] RA 93, is how would the proposal be reasonably understood by those on whom it was served, disregarding any extrinsic material. The validity of the proposal was not in dispute; the valuation officer did not serve an invalidity notice under regulation 8 or contend before the VTW or this Tribunal that the proposal was not validly made. Mr Kolinsky submitted that this was because the respondent had reasonably understood that the proposal sought to alter the rateable value with effect from 23 March 2006. The valuation officer had not understood the proposal to be challenging that effective date or that there should be two effective dates.
86. In my opinion the proposal form that was completed by the appellant on 29 March 2010 should be considered in conjunction with the guidance notes to which that form refers. The proposal form states:
“Please read the Guidance Notes which give full advice on completing all questions on this form (some questions on this form also display a corresponding Guidance Note number: “GN” number, shown in brackets next to the question.”
87. From the answers to Part A of the proposal form it is evident that the appellant was making a proposal to challenge the rateable value of £8,200 which had an effective date of 23 March 2006. This was the second alteration made by the valuation officer and was made on 25 September 2007.
88. Part B of the form provides details of the proposed list alteration. The appellant only completed question 13A and proposed that the rateable value should be altered to £5,500 with effect from 23 March 2006. The guidance notes say the following about question 13:
“If you are proposing an alteration to the rateable value, then in addition to ticking box A, you must show the amount of rateable value you consider appropriate, and the date you believe this should have been effective from. If you wish only to dispute the ‘effective date’ of an alteration the valuation officer made, complete E.
If the change you wish to make is not described in 13A-E or 14 please use the ‘other changes’ box in 13F, stating exactly what change you propose. Please also state the date from which you consider the proposed change should take effect. We have given some examples below to help you complete this part of the form.
Example 1
If you consider that the rateable value shown in the rating list on 1 April 2005 is excessive you should tick box A, include the value you think is correct in the next box, and insert “01-04-2005” in the last box in the row.
…
If you are seeking to make more than one alteration to a rating list, such as where each proposed alteration relates to different events in time, please use a separate proposal form for each event. …”
89. The appellant did not complete box E. If the appellant had wished to challenge both the rateable value and the effective date (which Mr Goulborn said was the case at the further hearing) then he should have inserted the proposed effective date in the answer to question 13A. But the effective date that Mr Goulborn inserted was that adopted by the respondent. The appellant made no entry in box 13F and only submitted one proposal. It was reasonable for the valuation officer to have understood from Part B of the form that the appellant was only challenging the rateable value in the alteration made on 25 September 2007 and not the effective date.
90. Part C of the proposal form deals with the grounds for making the proposed list alteration. The appellant ticked boxes 15A and B. In box B Mr Goulborn entered the date of the second alteration (albeit that he referred to 26 rather than 25 September 2007). The appellant did not tick box 15C but did insert a date, 23 March 2006, in the space that the question contains. From the appellant’s answers to Part C the valuation officer could reasonably have understood that the appellant was challenging the accuracy of the compiled list (box A) and the accuracy of the rateable value contained in the second alteration (box B). The appellant’s answer to question 15C was unclear. Mr Goulborn did not tick the box and his answer read as follows:
“The effective date of the alteration made by the valuation officer on 23 March 2006 is inaccurate”.
The date which has been inserted is the date from which the alteration took effect rather than the date upon which the alteration was made (25 September 2007). The note next to question 15 on the proposal form says that detailed reasons for believing grounds A or D-K are applicable should be given at question 16. Mr Goulborn made the following statement in answer to question 16:
“The valuation list alterations made effective from 23 March 2006, through the introduction of Peacocks and Savers, were made totally without foundation.”
This comment appears to relate to the material change of circumstances and not to any inaccuracy in the compiled list. It does not challenge the effective date specified by the respondent in his second alteration and does not identify any alternative such date.
91. The guidance notes for Part C state the following about the tick-box options that are available:
“Please select only ONE statement which best describes why you are proposing the alteration you have shown in Part B. You may select two or more grounds under certain circumstances – please contact the valuation officer for advice if you wish to do this.
… Please select one of the following:
Box A if you think the rateable value(s) in a rating list on 1 April 2005 is (are) inaccurate. Do not select this ground if the relevant entry was inserted in the rating list after 1 April 2005 even if it had effect from that day, select box B instead.
Box B if you dispute the accuracy of the rateable value of an entry following an alteration made by the valuation officer. Please also enter the date the alteration was made. … (if you also disagree with the effective date of the alteration please also tick box C and state the date you believe is appropriate in box 16).
Box C if you are not disputing the accuracy of an assessment made by the valuation officer but disagree with its effective date and wish to replace it with the one you have shown at Part B, section 13E. Please also enter the date the alteration was made by the valuation officer.”
92. Mr Goulborn confirmed at the hearing that he had not sought advice from the valuation officer when completing the proposal form even though he had completed more than one ground for his proposed alteration. Nor did he state an alternative effective date in box 16 or in Part B, section 13E. The appellant did not state anywhere on the proposal form or on a separate sheet of paper what he considered the alternative effective date or dates should be. Under these circumstances, and being reluctant to find that the proposal was invalid, the respondent valuation officer concluded that the appellant’s proposal did not seek to challenge the effective date but was limited on its wording to contesting the rateable value of £8,200. Mr Goulborn did not suggest at the initial hearing that it was part of the appellant’s case that there should be two effective dates. Had the valuation officer interpreted the proposal to be made on that basis (as he might have done given the appellant’s completion of both boxes 15A and B) then he would have been obliged to find that the proposal was invalid given the provisions of regulation 4(3)(a).
93. The Tribunal has commented in previous appeals about the problems that can arise when using the proposal form issued by the Valuation Office Agency (see, for instance, O’Brien v Clark (VO) [2006] RA 403). In the present appeal the form was completed by a lay person and it is understandable that the proposal as worded did not give effect to the intention of its author as described by Mr Goulborn at the further hearing. But having now had the advantage of hearing a fully reasoned argument on the point, and with the benefit of the guidance notes that accompanied the proposal form, I conclude that the valuation officer’s understanding of the completed proposal form was reasonable on its wording and that it did not constitute a challenge to the effective date of the second alteration made on 25 September 2007. That being so, and given that I have not set aside my conclusions about the material change of circumstances having taken place or my acceptance of the correctness of the respondent’s valuation of £8,200, the appeal must fail.
94. It is therefore not necessary for me to consider in detail the other issues that were identified in my order setting aside in part my previous decision and which are set out in paragraph 69 above. I make the following summary observations:
(i) I am satisfied that where there is a composite alteration to an entry in the list that involves both the material change of circumstances and a correction of an inaccuracy in the originally compiled list the appropriate effective date should be the date of the material change of circumstances according to Regulation 14(2). I accept the respondent’s submission that when giving effect to such a material change of circumstances the valuation officer, given his duty to maintain an accurate list under section 41 of the 1988 Act, must value the hereditament in accordance with the provisions of Schedule 6 of that Act, namely a value that will also correct any inaccuracy that existed in the original compiled list entry.
(ii) I suggested at the further hearing that if there is to be a single effective date for such a composite alteration it would be equally logical to adopt the later date under regulation 14(6) (correction to an inaccurate entry in the originally compiled list) rather than the earlier date under regulation 14(2) (material change of circumstances). The adoption of the later date was justified in the present appeal because, by the respondent’s own admission, the greatest part of the alteration was attributable to the inaccurate entry in the original list. Mr Kolinsky submitted that although this was preferable to my original decision to adopt two effective dates it failed to resolve the mischief of not giving effect to the material change of circumstances at the correct date. I disagree with Mr Kolinsky’s submission that the second alteration was initiated because of a material change of circumstances. It is clear from the evidence, and stated in terms in the respondent’s reply to the appellant’s statement of case, that it was made for two reasons: to correct the inaccuracy in the originally compiled list and to reflect a material change of circumstances. But for the reasons given in the preceding sub-paragraph I consider on balance that the respondent’s argument on this point is correct and had the proposal challenged the effective date I would have upheld the respondent’s adoption of the earlier effective date under regulation 14(2).
(iii) The correct date to adopt in respect of an alteration to correct an inaccuracy in the originally compiled list under regulation 14(6) is 8 August 2006 and not, as I said in my original decision, 25 September 2007. This is because regulation 14(6) applies to an alteration “which increases the rateable value”. The second alteration decreased the rateable value from £9,600 to £8,200. It was the first alteration to correct the list inaccuracy made on 8 August 2006 that increased the rateable value and therefore that is the date from which any alteration should have effect. In the event the point is not relevant given my conclusion in sub paragraph (ii) above.
(iv) There is no merit in Mr Goulborn’s argument that the error in the 2005 list was first made under the 2000 list and that consequentially the respondent is debarred from altering the 2005 list due to the “statute of limitations”. It is not sought to correct the 2000 list. That list is closed. It is possible to correct the rateable value under the 2005 list as a result of a valid proposal being made. The valuation officer was entitled to alter the list in August 2006 and again in September 2007, just as the appellant was entitled in March 2010 to make a proposal against the second alteration.
95. The appeal is dismissed and I confirm that the appeal hereditament shall be entered in the 2005 local non-domestic rating list at a rateable value of £8,200 with effect from 23 March 2006.
96. The further hearing was conducted under the simplified procedure and I make no award of costs in respect of it. At the hearing the respondent confirmed that it would, very fairly in my opinion, reimburse the appellant’s second class return rail fare and reasonable hotel costs for one night’s accommodation in return for holding the further hearing in London. I confirm that no fee shall be charged by the Tribunal in respect of the further hearing held on 5 July 2012.
Dated 17 July 2012
A J Trott FRICS