ASSESSOR for CENTRAL REGION v UNITED GLASS Ltd
| Jurisdiction | Scotland |
| Judgment Date | 10 July 1981 |
| Date | 10 July 1981 |
| Docket Number | No. 42. |
| Court | Court of Session |
SC
L.V.A.C. Lords Robertson, Ross, Allanbridge.
Valuation—Value—Contractor's principle—Statutory hypothetical tenancy with tenant bearing cost of repairs—Particular subjects—Glass furnaces—Fabric of furnaces deteriorated during operation—Impracticable to effect repairs until end of furnaces' working lives—Calculation of effective capital value—Whether subjects to be assumed to be in reasonable repair—Valuation and Eating (Scotland) Act 1956 (cap. 60), sec. 6 (8).
Glass furnaces were used in "campaigns" lasting up to seven years. During the course of a campaign a furnace received only minor maintenance. It was not possible to effect repairs because to do so would involve closing down and cooling the furnace so that it would be out of use for a considerable time. In the course of a campaign the fabric of a furnace deteriorated, and at the end of the campaign the furnace was dismantled so far as necessary for repairs. The furnace was then rebuilt using a substantial amount of new material, amounting to more than half of the total fabric of the furnace and 65 to 85 per cent of its replacement capital value.
The proprietors of subjects containing glass furnaces at varying stages of their campaigns contended that, in fixing the effective capital value of the subjects, the Assessor should make suitable allowance for the condition of each furnace at the valuation date and for the costs of replacement at the end of its campaign. The Assessor contended that no such allowance should be made because the subjects had to be valued on the assumption that the obligation to repair them was being undertaken and fulfilled by the tenant.
Held (1) that the glass furnaces should be valued on the basis of their actual state of repair.
(2) (By Lord Robertson and Lord Ross) that the normal rule of valuation was that the effective capital value of subjects which were no longer new was their value at the date of valuation: the actual state of the subjects had to be looked to and deductions made for depreciation and obsolescence in relation to industrial subjects such as those glass furnaces valued under sec. 6 (8) of the Valuation and Rating (Scotland) Act 1956. Subjects falling under sec. 6 (2) of the 1956 Act were the exception to this rule because they were valued upon the assumption that the landlord had undertaken the cost of repairs; but sec. 6 (8) of the 1956 Act was not the mirror image of sec. 6 (2) for the assumption made under sec. 6 (8) was that the tenant had undertaken the cost of repairs. It would not be reasonable to assume that a tenant would be prepared to pay the rent appropriate for the subjects in a repaired state if they were not in such a state and if the hypothesis was that the tenant had undertaken the cost of repairs.
Dicta of Lord Kyllachy in Oakbank Oil Co. v. Assessor for MidlothianUNK (1902) 4 F. 520, 523; British Aluminium Co. v. Assessor for Inverness-shireSC1937 S.C. 566followed; MacMurchie v. Assessor for DundeeUNK1962 S.L.T. 195 distinguished.
(3) (By Lord Ross and Lord Allanbridge) thatMacMurchiesupra, was distinguishable on its facts. The subjects there were temporarily in a state of disrepair and the defects were remediable. In this case it was not practicable to effect repairs.
MacMurchie v. Assessor for DundeeUNK 1962 S.L.T. 195distinguished.
Central Region case
At a meeting of the valuation appeal committee for the Central Region, United Glass Limited appealed against an entry in the valuation roll for the year 1978–79. The entry was for a glass works in Alloa for which the Assessor had entered the net annual value of £927,500 and a rateable value of £463,750. The appellants contended that the net annual value should be £831,300. The glass works contained four furnaces and the appellants contended that their valuations were too high.
The valuation appeal committee allowed the appeal and, at the request of the Assessor, stated a case for the opinion of the Lands Valuation Appeal Court.
The following facts were admitted or held to be proved or within the knowledge of the committee:—"2. That the furnaces are used in campaigns which last up to seven years. After commencement of a campaign the furnace has no more attention or should have no more attention to it than normal maintenance of odd minor holes forming and the like. The refractory bricks and steel are all chosen for a five to seven year life. It is not possible to effect repairs to the furnace during the course of a campaign, because to do so would involve closing down and cooling the furnace so that it would be out of use for a considerable time. The necessary repairs to the brickwork and steelwork are carried out at the end of a campaign. The repairs include the replacing of bricks and parts whose life has been designed for the period of the campaign and which require replacing at the end of the campaign. Minor items of steelwork may also require replacement but in the main, steelworks should last for two or three campaigns. 3. That the furnaces are built of refracting and insulating blocks and bricks within a steel structure of buckstays and tierods to restrain movement. Some of the bricks are bonded to each other, and others are not. In the course of a campaign the fabric of the furnace deteriorates and at the end of a campaign the furnace is dismantled so far as necessary for repairs, and this involves the destruction of further fabric. The furnace is then rebuilt using a substantial amount of new material. 4. That the new material used in rebuilding would represent more than half of the total fabric of the furnace. The cost would be approximately 65 per cent to 70 per cent of the replacement capital value of the furnace. In the case of an older furnace it might be as much as 85 per cent. Up to 80 per cent by value of the brickwork is normally replaced with new bricks. 5. That at the valuation date the furnaces were at various stages of campaigns as follows:—Furnace 81 had two years to run of a seven year campaign. Furnace 82 had three years to run of a seven year campaign. Furnace 84 had four months to run of a seven year campaign. Furnace 85 had five years to run of a seven year campaign. 6. That the date when repair, renewal or rebuilding would be required is nearer on some furnaces than on others. The effective capital value of these furnaces is lower the nearer the furnace is to the end of its campaign. It was agreed that, if modification of the replacement value was appropriate in order to reach effective capital value, the deductions suggested by the ratepayers would be correct. These deductions reflected the period of campaign remaining in each case and the actual state of each furnace at the valuation date. The effective capital value would in that case be £1,345,000. 7. That the actual state of the furnaces should be based on the length of the campaign still to run and it therefore differed from furnace to furnace at the date of valuation. 8. That a prospective tenant would not be prepared to pay the same rental for a furnace with a short time to run to the end of the campaign as he would with a furnace with a longer time to run. 9. In the past, old furnaces have been valued with an allowance from replacement capital value to reach effective capital value. 10. It was agreed that a decapitalisation rate of 10 per cent on the effective capital value was appropriate."
The reasons for the decision of the Central Region committee were as follows:—"1. The effective capital value of the furnaces is the value current at the valuation date. 2. At the valuation date, certain furnaces were nearer the end of the campaigns than others. At the end of campaigns, furnaces were substantially rebuilt. The rent which might reasonably be expected from a tenant would be lower if a furnace was near the end of a campaign and shortly requiring substantial capital expenditure. 3. The figures for effective capital value proposed by the Assessor did not make sufficient allowance for depreciation and obsolescence. The figures for effective capital value proposed by United Glass did make sufficient allowance and these figures were therefore appropriate. 4. The effective capital value of the furnaces was £1,345,000. 5. A decapitalisation rate of 10 per cent was appropriate and the N.A.V. was therefore £134,500. 6. The rebuilding of a furnace after the end of a campaign might represent a material change in circumstances sufficient to justify a revaluation."
Fife Region case
At a meeting of the valuation appeal committee for Fife Region, United Glass Containers Limited appealed against an entry in the valuation roll for 1978. The entry was for a bottle works in Kinghorn for which the Assessor had entered a net annual value of £69,000 and a rateable value of £34,500. The appellants contended that the values proposed by the Assessor were excessive.
The valuation appeal committee refused the appeal and, at the request of the appellants, stated a case for...
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