In The Appeal By Belhaven Brewery Company Limited Against The Assessor For Ayrshire Valuation Joint Board
| Jurisdiction | Scotland |
| Judge | Lady Dorrian,Lord Doherty,Lord Malcolm |
| Neutral Citation | [2014] CSIH 89 |
| Court | Court of Session |
| Date | 04 November 2014 |
| Published date | 04 November 2014 |
| Docket Number | XA72/14 |
| Year | 2014 |
LANDS VALUATION APPEAL COURT, COURT OF SESSION
[2014] CSIH 89
XA72/14
Lady Dorrian
Lord Malcolm
Lord Doherty
OPINION OF LADY DORRIAN
in the Appeal by
by
BELHAVEN BREWERY COMPANY LIMITED
Appellant;
against
THE ASSESSOR FOR AYRSHIRE VALUATION JOINT BOARD
Respondents:
Act: MacIver; TLT LLP
Alt: Gill; Simpson & Marwick
4 November 2014
[1] I have had the advantage of reading the opinion prepared by Lord Doherty and I am in complete agreement that the appeal should be refused for the reasons given by his Lordship.
LANDS VALUATION APPEAL COURT, COURT OF SESSION
[2014] CSIH 89
XA72/14
Lady Dorrian
Lord Malcolm
Lord Doherty
OPINION OF LORD MALCOLM
in the Appeal by
by
BELHAVEN BREWERY COMPANY LIMITED
Appellant;
against
THE ASSESSOR FOR AYRSHIRE VALUATION JOINT BOARD
Respondent:
Act: MacIver; TLT LLP
Alt: Gill; Simpson & Marwick
4 November 2014
[2] For the reasons given by Lord Doherty, I agree that this appeal should be refused.
LANDS VALUATION APPEAL COURT, COURT OF SESSION
[2014] CSIH 89
XA72/14
Lady Dorrian
Lord Malcolm
Lord Doherty
OPINION OF LORD DOHERTY
in the Appeal by
by
BELHAVEN BREWERY COMPANY LIMITED
Appellant;
against
THE ASSESSOR FOR AYRSHIRE VALUATION JOINT BOARD
Respondents:
Act: MacIver; TLT LLP
Alt: Gill; Simpson & Marwick
4 November 2014
Introduction
[3] The appeal subjects are a public house at 112-114 High Street, Irvine. At the 2010 revaluation the assessor entered them in the valuation roll with an NAV of £26,890. At that time they traded as the Eglinton Arms Hotel. Shortly thereafter the subjects underwent major reconstruction and modernisation. As a result, between 9 July 2010 and 3 December 2010 their NAV was reduced to nil. The reconstructed subjects began trading as The Carrick on 3 December 2010. With effect from that date the subjects were entered in the roll with an NAV of £86,500. The appellant appealed against that valuation to the Valuation Appeal Committee.
Parties’ positions before the Committee
[4] Before the Committee the appellant was represented by a chartered surveyor, Mr Peter Henry, and the assessor was represented by Mr Gill. It was common ground that the reconstructed subjects were a different beast from the previous subjects, and that the turnover of the latter subjects was of no assistance in determining the value of the reconstructed subjects.
[5] The Carrick’s manageress had disclosed to the assessor’s staff that during the period 3 December 2010 to 4 March 2011 turnover had been between £22,000 and £23,000 per week, split 70% for liquor and 30% for food. She had indicated that the figures had been “as forecast and as expected”. No other turnover figures had been disclosed to the assessor by the appellant.
[6] Mr Henry’s position before the Committee was that it was impermissible for the assessor or the committee to base the valuation of the subjects on the turnover evidence for the period 3 December 2010 to 4 March 2011. He submitted that it would be an error of law to do so. He relied on Suburban Taverns (Glasgow) Ltd v Assessor for Glasgow 2008 SC 298 which he suggested was authority for the proposition that post-tone date rental or turnover evidence was irrelevant and inadmissible. The approach he commended was to start by calculating the NAV and turnover rates per square metre of each of thirteen suggested comparable subjects. The NAV per square metre of those ranged from £362 to £83 and the turnover rate per square metre ranged from £952 to £4,136. From this he had judged that £180 would be an appropriate NAV rate for the appeal subjects (giving a turnover rate of £2,057). He had applied that rate to the reduced area of the appeal subjects and had arrived at his proposed NAV of £42,750. He suggested that at least some support for his approach could be derived from paragraphs 5.2 and 5.3 of Scottish Assessors Association Practice Note 17 for the Valuation of Licensed Premises.
[7] The assessor led a valuation witness, Miss McConville, who explained that taking the lower figure of £22,000 per week would result in an annual turnover of £1,144,000. She had adjusted that figure back to the tone date (1 April 2008) by using the Retail Price Index (RPI). That had resulted in a turnover of £1,053, 019 which she had rounded down to £1,040,000. She had taken £728,000 of that as representing liquor and £312,000 as representing food. Using those figures she had applied the adjustments and percentages recommended in Practice Note 17 and had arrived at the NAV of £86,500. As a cross-check she had looked to what she considered to be the two best comparisons for the appeal subjects having regard to their location, the nature of the operation conducted (which was food led), and their turnover. Those comparisons were the Ship Inn and the Kings Arms. Her value for the appeal subjects fell between the NAVs of those subjects (being greater than the Kings Arms but less than the Ship Inn). That is what she would have expected. The other comparisons relied upon by Mr Henry were not good comparisons. Some were in different localities. Some served no or little food. Some had a completely different order of turnover. In any event it was not appropriate to divide the net annual value of comparisons by their reduced area in order to arrive at an NAV rate per square metre. The comparisons had been valued on the basis of their turnover not on the basis of their area. There was no direct relationship between turnover and floor area.
[8] Mr Gill had submitted that Suburban Taverns (Glasgow) Ltd v Assessor for Glasgow did not support the proposition put forward by Mr Henry. On the contrary, the Opinions delivered supported the proposition that, in the absence of tone date turnover or rental information, post-tone date information could be used. The turnover information had been adjusted to take account of the fact that it was for a period after the tone date. It had been cross-checked by reference to the two best comparisons. The appellant’s approach ignored the best evidence. Other than the Ship Inn, the comparisons the appellant relied upon were not good comparisons. It was generally recognised that turnover per square metre was not a reliable guide to the valuation of licensed premises (Assessor for Lothian v Belhaven Brewery Company Limited 2009 SC 120 per the Lord Justice Clerk at paragraph 8).
The Committee’s decision
[9] The Committee refused the appeal. They rejected the contention that it was not open to them to rely on the post-tone turnover evidence. They agreed with the assessor’s approach on each of the contentious issues.
The appellant’s argument
[10] Mr MacIver’s principal submission was that the Committee had not been entitled to proceed on the basis of the post-tone turnover information. Turnover during initial trading could be higher or lower than subsequent turnover. While the appellant had not been prepared to produce turnover evidence to the Committee it was now prepared to produce such information for 2010 to 2014 if the Court required it. More fundamentally, the turnover information which the assessor relied upon would not have been available to the hypothetical landlord and hypothetical tenant at the tone date. Mr MacIver maintained that the observations in Suburban Taverns supported the view that the post-tone evidence here was inadmissible. It was notable that in Magell Ltd v Dumfries and Galloway Regional Assessor 2006 SC 627 it had been proved that the rental market had not moved significantly between the tone date and the date the rent was struck (Suburban Taverns, supra, per the Lord Justice Clerk at paragraph 16). That had not been proved here. Mr MacIver suggested that it was within judicial knowledge that the period 2008 to 2010 had been a turbulent period.
[11] Mr MacIver acknowledged that it is generally recognised that turnover per square metre is not a reliable guide to the valuation of licensed premises. Nonetheless, he submitted that paragraphs 5.2 and 5.3 of Practice Note 17 provided some limited support for Mr Henry’s approach. The Committee ought not to have “dismissed it out of hand”. If he was right that the post-tone date turnover ought not to have been used, the Court ought to remit the case to the Committee to make specific findings in relation to the comparisons which had been relied upon by each of the parties.
The assessor’s argument
[12] Mr Gill submitted that the Committee had made no error of law. It was well established that turnover was the most reliable indication of a public house’s value. The appellant’s principal submission was based on a misreading of Suburban Taverns. It was plain from the Opinions of the Lord Justice Clerk (paragraph 16) and Lord Hodge (paragraph 22) that post-tone date evidence could be used in appropriate circumstances. Unlike the position in Suburban Taverns, here there was no relevant tone date evidence of turnover for the (reconstructed) subjects. The post-tone date evidence was the best evidence of value. The weight to be given to that evidence was a matter for the Committee (see e.g. Magell Ltd v Assessor for Dumfries and Galloway 2005 SLT 453 per Lord Nimmo Smith at page 456H; Segama NV v Penny Le Roy Ltd [1984] 1 EGLR 109 at page 112A-C). The admissibility of post-tone evidence did not depend on establishing that rental or turnover levels had been static between the tone date and the subsequent date. It would often be possible to adjust post-tone rents and turnovers to reflect changes since the tone date. Miss McConville had given unchallenged evidence that the appropriate way to adjust the turnover evidence to take account of the passage of time since the tone date was by use of the RPI index. It was not open to the appellant to seek to attack...
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