ASSESSOR for FIFE REGION v DISTILLERS Company (BOTTLING SERVICES) Ltd
| Jurisdiction | Scotland |
| Judgment Date | 21 July 1988 |
| Date | 21 July 1988 |
| Docket Number | No. 46. |
| Court | Court of Session |
SC
L.V.A.C. Lords Clyde, Prosser and Coulsfield.
ValuationContractor's principleMethod of calculating effective capital value of unusually large subjectsMethod of calculating appropriate decapitalisation allowanceWhether evidence of returns to investors best guideWhether position of hypothetical tenant relevant.
The assessor entered subjects comprising a whisky blending and bottling complex on the valuation roll for 198586 at a net annual value of 3,409,000 and rateable value of 2,045,400, the subjects having the benefit of industrial derating. Parties were agreed that the subjects fell to be valued on the contractor's principle, but were in dispute as to the effective capital value of certain warehouses and the decapitalisation rate to be applied, the assessor proposing eight per cent for land and buildings and nine per cent for plant and machinery while the ratepayers argued that the respective rates should be seven and six per cent. On appeal to the Lands Tribunal the ratepayers' calculations were preferred and net annual value was determined to be 2,500,000 and the rateable value 1,500,000, applying decapitalisation rates of seven and eight per cent.
The assessor appealed arguing that the figure of 118 per square metre accepted by the tribunal as representing the cost of the warehouses was unsupported by evidence and that they had erred in reducing the decapitalisation rate as his figures were supported by clear evidence as to the rates of return obtained by investors in industrial property. The ratepayers cross-appealed contending that the decapitalisation rate should be reduced further to reflect the rate at which they as tenants would be able to borrow money on the open market.
Held (1) that there was no reason to interfere with the tribunal's conclusions on effective capital value which were clearly supported by the facts found, the tribunal having considered relative rates in the area and accepted a quantum allowance in respect of the unusual size of the subjects to bring the value into line therewith; (2) that evidence of returns to investors should not be regarded as a sole and sufficient guide to effective capital value and the tribunal did not fall into any error of principle in considering comparative evidence as a cross check when fixing the decapitalisation rate; (3) that the ability of a hypothetical tenant to borrow advantageously was not necessarily irrelevant in all circumstances in determining the decapitalisation rate, but the positions of both hypothetical landlord and hypothetical tenant had to be considered and, where the subjects were used for a commercial purpose, the ordinary commercial return should, as a general rule, be expected; and appeal and cross-appealrefused.
The Distillers Co. (Bottling Services) Ltd. appealed against the following entry in the valuation roll for the region of Fife:
Description and Situation |
Appellant |
Assessor's Values |
|
N.A.V. |
R.V. |
||
Bottling Works, Banbeath, Leven |
Distillers Co. (Bottling Services) Ltd. |
3,409,000 |
2,045,400 |
The valuation appeal committee allowed a joint reference by the ratepayers and the assessor to the Lands Tribunal for Scotland under sec. 12 of the Rating and Valuation (Amendment) (Scotland) Act 1984. On 26th August 1987 the Lands Tribunal allowed the appeal, determined that the N.A.V. be 2,500,000 and the R.V. be 1,500,000:see Distillers Co. (Bottling Services) Ltd. v. Assessor for Fife Region 1988 S.L.T. (Lands Tr.) 49.
The assessor thereafter appealed to the Lands Valuation Appeal Court; the ratepayers cross-appealed on the question of the proper decapitalisation rate applicable to the subjects.
The grounds of appeal for the assessor were in the following terms:"(1) The decision of the tribunal being unsound in law and not in accordance with the evidence led should be reversed. (2) The tribunal having found that a decapitalisation rate of 8 per cent was reasonable and in accordance with the evidence of money market and borrowing rates, modified this percentage erroneously. (3) The tribunal's findings for a rate per square metre of capital value of 118 for the duty free warehouses, being unsupported by the evidence led should be reversed and replaced with a cost per square metre of 138 being the actual cost as supplied to the tribunal of the duty free warehouses built in 198384 at Broxburn. (4) The application of a rate of 7 per cent to a capital value of 118 per square metre in the duty free warehouses at Banbeath produces a rate per square metre to net annual value for those buildings which is out of accord with rates applied to similar buildings valued on the comparative principle. (5) The tribunal's decision is not justified by the evidence led before them and any reliance placed on the evidence pertaining to large properties such as Cameron Iron Works is misdirected in so far as the Lands Tribunal accepted the evidence from atypical and particular valuations as being of general application."
The grounds of appeal for the ratepayers were in the following terms:"(1) The decision of the tribunal so far as sustaining the ratepayers' appeal being sound in law upon the evidence led, should be sustained. (2) The tribunal being entitled to hold upon the evidence before them that the 1983 national construction cost rate per square metre for the duty free warehouses at the subjects of appeal was 118 their finding on the effective capital value of the warehouses should be sustained. (3) The tribunal having properly used data relating to other subjects, valued on the comparative principle, in their valuation of the subjects of appeal as a whole, the assessor's appeal should be refused. (4) The tribunal being entitled to hold upon the evidence before them that the assessor's proposed decapitalisation rate was excessive and that a reduction therefrom of 1 per cent was justified, their decision thereon should be sustained. (5)Separatim, the tribunal's decision that the nature of the covenant of the hypothetical tenants of the subjects of appeal did not justify fixing the decapitalisation rate below 7 per cent being unsound, and further and in any event, the tribunal having inadequately reflected their proper recognition of the evidence relating to the larger properties such as the Cameron Iron Works at Livingston in their decision, the decapitalisation rate should be further reduced to 6 per cent as contended for by the ratepayers."
The cause came before the Lands Valuation Appeal Court, comprising Lord Clyde, Lord Prosser and Lord Coulsfield, for a hearing thereon.
At advising on 21st July 1988;
LORD CLYDE.This is the first case to come to this court from the Lands Tribunal. By virtue of sec. 12 of the Rating and Valuation (Amendment) (Scotland) Act 1984 the Lands Tribunal for Scotland may now determine any appeal or complaint referred to it by a valuation appeal committee. This case was so referred. While the Lands Tribunal have their own procedural rules for the conduct of the case before them it appears from the way in which Parliament has equated the Lands Tribunal with a valuation appeal committee for the purposes of any further appeal to this court that the intention is that there should be no difference in principle in the scope of an appeal from either body. Accordingly the jurisdiction of this court and the circumstances in which it may interfere with a decision of the Lands Tribunal remain the same in principle as in the case of an appeal from a valuation appeal committee.
The present appeal concerns the valuation of a bottling works at Banbeath, Leven. It is agreed that the subjects fall to be valued on the contractor's principle. The areas of dispute are two in number, one relating to the calculation of effective capital value and the other relating to the calculation of the decapitalisation rate. The subjects are very extensive and comprise a considerable number of different elements. So far as the effective capital value is concerned the values of the blending and bottling buildings, the site services, the land, and the plant and machinery were all agreed. The only item which was not agreed was the effective capital value of the duty free warehouses. The ratepayers proposed a rate per square metre of 118. This was based upon the figure used for the purposes of the revaluation in 1978 updated to 1983 and was supported by a comparison with the cost of other warehouses at Broxburn. This rate of 118 was upheld by the Lands Tribunal. They preferred the calculation in that regard presented by the appellants to the different calculation produced by the assessor. The Lands Tribunal found the figure of 118 to be in keeping with costs of other warehouses. In the course of the various calculations of capital costs involved in the case both sides before the Lands Tribunal required to apply indices to their figures in order to relate them to the valuation date of 1st July 1983. Before the Lands Tribunal there was a dispute between the parties as to the index which should be used for that purpose. The Lands Tribunal have held that the one supported by the ratepayers, namely the tender price index of the building cost information service (abbreviated to T.P.I.) should be preferred. This matter was not reopened before us and the calculations have proceeded under reference to that index.
The assessor had tabled a ground of appeal to the effect that the rate of 118 was unsupported by the evidence led and that a rate of 138 should be preferred, but at the outset of the argument counsel for the assessor stated that that ground was not going to be argued and that the sole ground related to the matter of effective capital value was ground (4) which is in the following terms:[his Lordship quoted the assessor's ground (4) and continued]. The argument under this ground of appeal was directed to suggesting that when the rate of 118 is decapitalised at...
To continue reading
Request your trial
-
ASSESSOR for LOTHIAN REGION v B.P. PETROLEUM DEVELOPMENT Ltd
...Assessor for East Lothian 1964 S.L.T. (Notes) 77, commented upon. Assessor for Fife Region v. Distillers Co. (Bottling Services) Ltd.SC 1988 S.C. 359, followed. B.P. Petroleum Development Ltd. and B.P. Oil (Grangemouth) (Refinery) Ltd. appealed to the Lands Tribunal for Scotland against the......