Assessor for Grampian v Anderson, Anderson and Brown LLP
| Jurisdiction | Scotland |
| Judgment Date | 15 March 2018 |
| Neutral Citation | [2018] CSIH 15 |
| Date | 15 March 2018 |
| Docket Number | No 19 |
| Court | Court of Session (Inner House) |
[2018] CSIH 15
Lands Valuation Appeal Court
Valuation Joint Board
Argos Distributors Ltd v Assessor for Fife [2010] CSIH 92; 2011 SC 272; [2011] RA 259; 2011 GWD 1–53
Dunbartonshire and Argyll & Bute (Assessor for) v Akram and Ali [2011] CSIH 79; 2012 SC 235; [2012] RA 137; 2012 GWD 1–6
Edinburgh (Assessor for) v Hertz Rent-A-Car Co Ltd [1968] RA 735
Fife (Assessor for) v Baxter 1970 RICS 137
Fife (Assessor for) v Guthrie 1969 RICS 167
Fife (Assessor for) v Ruggi 1960 RICS 51
Glasgow (Assessor for) v Schuh Ltd [2012] CSIH 40; 2012 SLT 903; [2012] RA 245
Grampian (Assessor for) v CDS (Superstores International) Ltd [2018] CSIH 13; 2018 GWD 8–108
Lanarkshire (Assessor for) v Macdonald and ors 1975 SLT (Notes) 83
Lothian (Assessor for) v H & M Hennes and Mauritz UK Ltd [2010] CSIH 60; 2010 SC 753; [2010] RA 536; 2010 GWD 27–556
Lothian (Assessor for) v Ministry of Defence, Army Careers Office [2009] CSIH 89; [2010] RA 55; 2010 GWD 11–203
Lothian Region (Assessor for) v Wilson 1979 SC 341; 1979 SLT 93
Myles and anr v Dundee Assessor 1967 RICS 53
Scammell v Assessor for Highland and Western Isles Valuation Joint Board 1997 GWD 29–1495
Schuh Ltd v Assessor for Glasgow [2013] CSIH 93; 2014 SLT 184; [2014] RVR 62
Scottish Natural Heritage v Assessor for Highland and Western Isle [2009] CSIH 91; [2010] RA 63; 2010 GWD 2–32
Tesco Stores Ltd v Assessor for Fife [2010] CSIH 95; 2011 SC 316; [2011] RA 236
WAP Fyfe v Assessor for Fife [2011] CSIH 78
Armour, SB, Valuation for Rating (5th Haddow and Docherty ed, W Green, Edinburgh, 1985), paras 3.18, 5.47–5.49
Valuation — Business rates — Office premises — Whether exceptional economic downturn brought about material change in circumstances — Whether change of circumstances affecting the value of the subjects — Local Government (Scotland) Act 1975 (cap 30), sec 37(1)
Words and phrases — “value” — Local Government (Scotland) Act 1975 (cap 30), sec 37(1)
The Assessor for Grampian appealed to the Lands Valuation Appeal Court against decisions of the valuation appeal committee for the City of Aberdeen following an appeal hearing relating to numerous office premises. Anderson, Anderson and Brown LLP and several other ratepayers cross-appealed against the decision and entered appearance as respondents.
Section 37(1) of the Local Government (Scotland) Act 1975 (cap 30) (‘the 1975 Act’) provides that a material change in circumstances in relation to any lands and heritages is defined as being one that affects their value.
Ratepayers sought a reduction in respect of office premises in the city of Aberdeen and appealed to the valuation appeal committee (‘VAC’) on the basis that there had been a material change of circumstances brought about by an exceptional downturn in the economy of the northeast of Scotland. They sought a reduction of 20 per cent in respect of the year from 1 April 2015 and 40 per cent from 1 April 2016.
The VAC rejected the claims in respect of the first period, but upheld the appeal in respect of the second period at a reduction of 16.5 per cent. It based its reasoning on there having been a significant reduction in rental values from 2016, although the reduction had not been to levels below those applicable on 1 April 2008 (‘tone date’ for the 2010 valuation roll). The VAC concluded that the drop in values was not due to an increase in the availability of new build offices, but rather the economic downturn in the oil and gas industry which had affected all sectors of industry in the Aberdeen area and which was such an extraordinary and exceptional crisis as to amount to a material change of circumstances. The VAC rejected the ratepayers’ suggestion that the retail prices index might be used to discount the prevailing rental values to arrive at a value at the tone date and instead used figures said to have been extrapolated from the evidence given for the assessor. It was only by that exercise of adjustment that the committee was able to conclude that 2016 rental levels had fallen below the tone levels. The unadjusted 2016 rental levels had not fallen below tone levels. The appellant appealed against that decision to the Lands Valuation Appeal Court and the respondent cross-appealed.
Counsel for the appellant submitted that a material change of circumstance based on a generalised fall in rental values could only succeed where a fall below tone level was established. The analysis required to be carried out differently than in relation to one based on specific changes and the starting point must be rental evidence which demonstrated that rental values generally remained above tone level.
Counsel for the respondent conceded that the methodology by which the VAC had selected the figure of 16.5 per cent could not be supported. He submitted that the drop in rental value during the periods 2015 and 2016 compared to 2014, being 20 and 40 per cent respectively, were a change affecting the value of the subjects constituting a material change of circumstances caused by the downturn in the oil industry in 2014. The fact that general levels of rent in 2014 represented a peak and that they did not drop below tone levels thereafter was not relevant.
Held that the word “value” in sec 37 of the 1975 Act meant the value at which the subjects had been entered in the valuation roll, rather than a more recent level of rental value, so that a material change in circumstances could not be constituted by a fall in rental values where these had not dropped below the value entered in the roll (paras 32, 33, 49, 51, 52, 57, 65); and appeals allowed and cross-appeals dismissed.
Observations as to the proper form of a stated case in an appeal to the Lands Valuation Appeal Court (per Lord Justice-Clerk (Dorrian), paras 45–47, Lord Doherty, paras 73–75).
Assessor for Glasgow v Schuh Ltd 2012 SLT 903 and Schuh Ltd v Assessor for Glasgow2014 SLT 184followed.
The cause called before the Lands Valuation Appeal Court, comprising the Lord Justice-Clerk (Dorrian), Lord Malcolm and Lord Doherty, for a hearing, on 23 January 2018.
At advising, on 15 March 2018—
Lord Justice-Clerk (Dorrian)—
[1] These appeals in relation to numerous office premises in the city of Aberdeen proceeded before the valuation appeal committee (‘VAC’) on the argument that there had been a material change of circumstances (‘MCC’) brought about by an exceptional downturn in the economy of the northeast of Scotland. The ratepayers sought a reduction of 20 per cent for the year from 1 April 2015 and a reduction from 1 April 2016 of 40 per cent. The VAC rejected the claims in respect of the first period, but concluded that there had been an MCC for the later period, and applied a reduction of 16.5 per cent. The assessor has appealed against the latter decision, the ratepayers against the finding that the reduction was limited to 16.5 per cent.
[2] Section 37 of the Local Government (Scotland) Act 1975 (cap 30) (‘the 1975 Act’) defines an MCC as meaning ‘in relation to any lands and heritages a change of circumstances affecting their value’. It is not enough for there simply to have been a change of circumstances — to be material the change of circumstances must be shown to have affected the value of the subjects. Both parties recognised that a distinction requires to be made between changes resulting from the normal fluctuations or variations which may occur from time to time in any business venture, or general fluctuations in the economy, which do not constitute an MCC; and those which result from some abnormal economic crisis which do. The key distinction is between the normal processes of change and those resulting from some abnormal or unusual situation (Assessor for Glasgow v Schuh Ltd (‘Schuh 1’), Lord Justice-Clerk (Gill), paras 30–34). The onus of establishing that there has been a change of circumstances affecting value rests on the party so asserting.
[3] In giving its reasons, the VAC explained that it had regard to the questions identified in Schuh 1 (para 36) as relevant to an appeal such as this, namely whether there had been a material fall in rental values since the entries were made; if so, what caused it; whether the cause(s) constituted a material change of circumstances; and if multiple causes, to what extent the fall in value was caused by the material change of circumstances.
[4] On the question whether there had been a fall in rental values, the VAC considered that there was weak evidence to show a ‘dip in rental values’ during 2015, but that the evidence was ‘sufficiently robust’ to conclude that there had then been a significant reduction in rental value from 2016, ‘in some few cases to figures below those at the tone date of 1 April 2008.’ It rejected the assessor's argument that rents would in general have to have fallen below tone value before an MCC based on a general fall in rental values could be made out, ‘especially as the fall was claimed to have taken place in these cases seven and eight years after the date when the tone value was set’.
[5] On the basis of an analysis comparing the average proportion of new built as to established office premises available between the years 2008 and 2016 with that in 2016, the VAC concluded that an increase in the availability of newly built offices (which would not have constituted an MCC) was not a factor contributing to the drop in values. Rather, the cause of the fall in rental values was an economic downturn in the oil and gas industry which had affected all sectors of industry in the Aberdeen area and was such an extra-ordinary and exceptional economic crisis for the northeast as to amount to an MCC.
[6] The VAC considered that the 2016 rental figures had to be adjusted to the value which would have applied at tone date. Rejecting the ratepayers’ suggestion that...
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