The Assessor For Tayside Valuation Joint Board Against Old Faskally Farming Company And Others
| Jurisdiction | Scotland |
| Judge | Lord Malcolm,Lord Woolman,Lady Dorrian |
| Judgment Date | 03 February 2016 |
| Neutral Citation | [2016] CSIH 8 |
| Court | Court of Session |
| Date | 03 February 2016 |
| Published date | 03 February 2016 |
| Docket Number | XA57/15 |
LANDS VALUATION APPEAL COURT
[2016] CSIH 8
XA57/15
Lady Dorrian
Lord Malcolm
Lord Woolman
OPINION OF LADY DORRIAN
in the cause
by
THE ASSESSOR FOR TAYSIDE VALUATION JOINT BOARD
Appellant;
against
OLD FASKALLY FARMING COMPANY AND OTHERS
Respondents:
Act: Stuart, QC; Clyde & Co
Alt: MacIver; Davidson Chalmers LLP
3 February 2016
[1] This case involves appeals concerning the valuation of 6 “Run of the River” Hydro Electric Schemes. Appeals 1 to 5 were revaluation appeals. Appeal 6 was a running role appeal, the subjects not having existed at the tone date of 1 April 2008. The assessor contended that in the revaluation appeals the schemes should be valued on a Receipts and Expenditure (R & E) basis. By contrast, the ratepayers argued for valuation on a comparative basis, using rental evidence in relation to the subjects and adding an allowance for the rateable value of the turbine house in each case. The subjects of Appeal 6, being new, could not be valued on an R & E basis and were valued by the assessor under reference to SAA Practice Note 3, by analysing 2010 revaluation values and making a comparison with other sites producing similar volumes. The ratepayers valued these subjects on the basis of the calculation of a notional turnover at tone date, to which the percentages used in the revaluation appeals were then applied.
[2] The committee proceeded on the basis that the most appropriate method of valuation, where suitable evidence was available, was the comparative basis. All of the assessor’s witnesses considered that valuation on that basis was the preferred option. Their position was simply that insufficient comparative material existed, making it necessary to adopt an R&E valuation. At the beginning of the revaluation process, the assessor had issued a total of 35 questionnaires to independent conventional hydro operators. He received 26 returns. These were not produced, but the assessor considered that the information so provided did not establish a basis for the operation of a comparative valuation. The ratepayers produced a schedule of rental from comparable subjects in different areas of Scotland, which the committee accepted as sufficient for the purpose. In the present appeal, the assessor challenges the committee’s decision. He has lodged detailed grounds of appeal which in many cases constitute an attack on the committee’s interpretation of the evidence. I do not require to go into the detail of the nature of this attack. It is sufficient to observe that the assessor renews his argument that there was insufficient comparative information before the committee to enable it to conclude that it was properly comparing like for like.
[3] A critical aspect of the committee’s reasoning lay in its treatment of plant and machinery, which rested in turn on its interpretation of the Valuation for Rating (Plant and Machinery) (Scotland) Regulations 2000 (“the 2000 regulations”). The committee’s interpretation of the 2000 regulations meant that, in general, the plant and machinery was not rateable. In reaching that conclusion the committee rejected the assessor’s argument that all civil engineering works, including dams, intake chambers, supports, thrust blocks, ducts or chambers under a turbine and the like should all be treated as rateable for the purpose of the regulations. In consequence the committee clearly considered that it was not necessary for them to examine in detail the extent to which the appeal subjects might differ from each other or from the comparator rental subjects. The committee summarised its approach as follows:
“52. If the plant and machinery is excluded from rating, all that remains to be valued is the rent for the land and the water extraction rights and the shell structure of the turbine building.”
The committee determined that the turbine building required to be assessed as a “shell” for this purpose:
“63. The turbine building is a shell for rating purposes. Most of the plant and equipment and their accessories within the turbine building are non-rateable.”
Since it concluded that the turbine building was merely a shell, the committee accepted that its rateability should be assessed by applying a small uplift to the rental value of the subjects based on turnover. As to the remaining issue of the valuation of the right to extract water and the use of the land, the committee noted that these matters were included in the comparison evidence:
“51. In the rental comparisons provided by the respondents, all plant and machinery is excluded from value in fixing rents. The rent is for the right to extract water and for the use of the land.”
The committee considered that the comparison evidence showed a consistent average level of 9% of turnover for the value of the land and the water extraction rights. In each case they applied an upward adjustment of 10% of the rental figure to reflect the value of the turbine building.
[4] From this it will be seen that the proper approach to be taken to plant and machinery was central to the committee’s whole approach, and in particular to the questions: (a) whether the assessor’s approach should be rejected; (b) whether the comparison evidence was sufficient; and (c) whether the turbine station was effectively a shell. If its interpretation of the 2000 regulations was wrong in law, its decision cannot stand. As Appeal 6 was decided on the basis of the percentages used in the revaluation appeals, the decision in that case and the valuation in that case also stand or falls on the interpretation point.
[5] For reasons which I am about to explain, I consider that the committee did indeed err in law in its interpretation of the 2000 regulations and that the appeal must therefore succeed.
[6] The 2000 regulations prescribe classes of plant and machinery for the purposes of the definition of “lands and heritages” in section 42 of the Lands Valuation (Scotland) Act 1854. Schedule 1 to the regulations sets out four classes.
[7] Class 1 relates to:
“Plant and machinery (except to the extent that plant and machinery has microgeneration capacity and excluding excepted plant and machinery) specified in table 1 below (together with any of the appliances and structures accessory to such plant or machinery and specified in the list of accessories set out below) which is used or intended to be used mainly or exclusively in connection with a generation, storage, primary transformation of power or main transmission of power in or on the lands and heritages”.
The definition of “excepted plant and machinery” includes:
“…plant and machinery on the lands and heritages used or intended to be used for generation, storage transformation or transmission of power where …
(i) the power is mainly or exclusively for distribution for sale to consumers; …”
Table 1 identifies specific plant and equipment commonly involved in the generation of electricity, for example, cables and conductors; switchboards; distribution boards; water turbines; governor engines; penstock; and conduits.
[8] Class 2 relates to plant and machinery used or intended to be used in connection with services to the lands and heritages, or part of them, except where their use is in connection with services mainly or exclusively as part of manufacturing operations or trade processes. The exception noted in class 1 in relation to plant and machinery which has microgeneration capacity is repeated.
[9] That same exception applies in class 3, under which the prescribed items include:
“(c) cables, wires and conductors (or any system of such items) –
(i) situated in or on lands and heritages used or intended to be used in connection with the transmission, distribution, or supply of electricity, and
(ii) used or intended to be used in connection with such transmission, distribution or supply, other than such items or part of such items which are, or are comprised in equipment which is used or intended to be used mainly or exclusively for switching or transforming electricity;
(d) poles, posts, pylons, towers, pipes, ducts, conduits, meters and any associated supports and foundations, used or intended to be used in connection with any of the items included in paragraph (c) above;”
[10] In class 4 the exception in relation to microgeneration capacity is again repeated. The items which may be included in this class are set out in tables 3 and 4. They include dams; fixed cranes and gantries; conduits and ducts; foundations; supports; turbines and generators; chambers and vessels. In each case the items are excepted if they are neither a building or structure nor in the nature of a building or structure. There is also an exception in relation to items listed in table 4 where the cubic capacity does not exceed a certain amount and where the item is readily capable of being moved and re-erected in its original state without the substantial demolition of any surrounding structure.
[11] It was not disputed that for the purposes of class 1 the power generated at all the appeal subjects is mainly or exclusively for distribution for sale to consumers. The committee accepted that the plant and machinery at the appeal subjects were properly and fully covered under class 1 and constituted excepted plant and machinery for the purposes of valuation for rating. It further concluded that where...
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The Assessor For Tayside Valuation Joint Board Against Old Faskally Farming Co Ltd And Others
...rateable in terms of Classes 2, 3 or 4. The first appeal [24] In Assessor for Tayside Valuation Joint Board v Old Faskally Farming Co Ltd 2016 SC 447, 2016 SLT 333, [2016] RA 273, this court held that the committee erred in its interpretation of the 2000 Regulations. On a proper constructio......