Lochaber Power Company v Assessor for Inverness-shire
| Jurisdiction | Scotland |
| Judgment Date | 15 March 1946 |
| Date | 15 March 1946 |
| Docket Number | No. 27.,No. 29. |
| Court | Lands Valuation Appeal Court (Scotland) |
Lands Valuation Appeal Court.
Ld. Jamieson. Lord Russell. Lord Keith.
Valuation—Value—Subjects in owners' possession—Hydro-electric undertaking—Method of valuation—Contractor's principle—Works completed by several stages—War-time rise in cost of construction—Deductions—Civil engineering works—Pier and pier railway.
The hydro-electric undertaking of the Lochaber Power Company was completed in three stages. The first two stages, which involved erection of dams and the conveyance of impounded water by a main tunnel under Ben Nevis to the company's power station, were completed by 1934, the work on the third being carried out between 1940 and 1944.
In his Roll for the year to Whitsunday 1946, the Assessor adopted the method of valuation approved by the Valuation Appeal Court when the completed undertaking was revalued in 1945. He valued the undertaking on the contractor's principle, taking as the basis of valuation the actual cost of the work in the different stages, but, as regarded the third stage, he made a deduction of 33 1/3 per cent in respect of the increased cost of construction occasioned by the war. To the figures thus ascertained he applied in the case of civil engineering works, such as the main tunnel, a percentage rate of 5 per cent. His valuation included, as part of the undertaking, a pier and pier railway, which had been erected to accommodate heavy traffic while the main tunnel and accessory works were in process of construction, and to this he applied a percentage rate of 7 per cent.
In an appeal to the Lands Valuation Appeal Court, the company contended that, in accordance with an alleged rule of practice followed by the Court since 1918, a general deduction of 20 per cent should have been made from the cost of construction of the works comprised in each stage, this deduction being applied in the third stage in addition to the initial deduction of 33 1/3 per cent, and that the percentage rate for civil engineering works should have been 4 and not 5 per cent.
Held that no such general rule of practice as the appellants contended for had been laid down or sanctioned by the Court, and that a departure from the approved percentage rate of 5 per cent was not justified; but that, in view of the fact that, with the adoption of the contractor's principle, current costs fell to be taken as the basis of valuation subject to suitable deductions when circumstances rendered this expedient, the costs upon which the Assessor proceeded should be altered by the allowance of a deduction of 20 per cent on the capital cost of the main tunnel, and a 50 per cent deduction on the capital cost of the pier and the pier railway, which were now to a large extent redundant to the undertaking.
At a meeting of the Valuation Committee for the Lochaber District of Inverness-shire, the Lochaber Power Company appealed against entries in the Roll for the year ending Whitsunday 1946 of the following subjects of which they were the proprietors and occupiers, viz., (1) Parish of Kilmonivaig, Hydro-Electric Power Works, comprising tunnel, pipe line, power house, tail race and pier railway, (2) Parish of Kilmallie, pier and part of pier railway, Fort-William, and (3) Parish of Laggan, Hydro-Electric Power Works (part), at a total gross annual value of £218,472 and a total rateable value of £51,204, 5s. They craved that these entries of gross and rateable value should be reduced to £141,533 and £33,172 respectively. The Valuation Committee sustained the Assessor's valuations, and, at the request of the company, stated a case on appeal to the Lands Valuation Appeal Court.[Cases 795.]
The stated case set forth that the following facts were admitted, or held by the Committee to be proved or within the knowledge of the Committee:—"(1) The main works of the company are as follows, and were constructed in three stages:—The first stage consisted of the impounding of the waters of Loch Treig and conveying them by means of a main tunnel to the company's power house, where the electricity generated is almost wholly supplied to the North British Aluminium Company's factory, which is adjacently situated. The second stage consisted of the erection of the Treig and Laggan dams, and the connecting of the Loch Laggan waters with those of Loch Treig by means of a tunnel. The additional water thus secured flows down into the main tunnel from Loch Treig. The third stage consisted of the impounding of the head waters of the River Spey by the erection of a dam at Crathie, and conveying these waters by tunnel to Loch Laggan, whence they flow into Loch Treig, and finally into the main tunnel above referred to. (2) The first and second stages were completed by the end of 1934, the total capital expenditure being £3,376,069. The third stage was completed recently and the capital expenditure was approximately £550,000. (3) The total capital expenditure of the Lochaber Power Company's undertaking, including the above works and other works which fell to be included for purposes of the valuation of the undertaking, is £4,442,699. The total capital expenditure incurred up to December 1939 amounted to £3,826,108, and the expenditure subsequent to that date to £616,591. The Assessor reduced this latter figure by 33 1/3 per cent on account of the increase in construction costs which had taken place as a result of the war, resulting in a net figure of £411,061. Thus, for purposes of the current year's valuation the total capital cost of the whole undertaking is calculated at £4,237,169. This figure is allocated to the various types of works as follows:—Land £102,235; Civil Engineering Works £3,831,627; Buildings £193,683; Machinery £109,624; and the valuation as brought out for the current year amounts to £218,472 gross and £51,204, 5s. rateable. (4) The undertaking was first valued by the Assessor on the contractor's principle in 1935. The valuation at first proposed by him then was arrived at by ascertaining the capital costs, reducing these by 20 per cent and applying the following percentages to the various types of heritage:—Land 5 per cent; Buildings (including Civil Engineering Works) 7 per cent; Machinery 7½ per cent. During the hearing of the case and after he had accepted the appellants' evidence to the effect that two-thirds of the works then constructed were unproductive the Assessor agreed to an overall percentage of 4 per cent on the unreduced capital cost of the undertaking. The valuation so brought out was sustained by the Lands Valuation Appeal Court in that year [1936 S. C. 288]. The Assessor continued this basis of valuation, viz., 4 per cent of the capital cost of the undertaking until last year, 1944–1945, when the undertaking became fully completed and was in full production. He then revalued the undertaking and applied the following percentages to the capital costs:—Land 5 per cent; Civil Engineering Works 5 per cent; Buildings 7 per cent; Machinery 7½ per cent. No reduction in the capital costs was allowed by the Assessor or requested by the appellants except in regard to expenditure incurred during the war period from 1940 to 1944, which expenditure by agreement between the parties was subject to a reduction of 33 1/3 per cent. The valuation as brought out by the Assessor was sustained by the Valuation Committee and upheld by the Lands Valuation Appeal Court, as reported in 1945 S. C. p. 223. There has been no change in circumstances since the valuation was fixed in 1944–1945, and in the current year the Assessor has not altered the basis of valuation. At no time has a reduction of 20 per cent been applied to the capital costs of the undertaking in the determination of the valuation which has finally entered the Valuation Roll. (5) There are no hydroelectric works in existence of a similar nature to those belonging to the appellants and with which the appellants are in competition. (6) The civil engineering works forming part of the undertaking consist for the most part of a main tunnel, concrete dams, aqueducts, pipe lines and tail race. The total expenditure on such works included for purposes of valuation amounts to £3,831,627. The principal work is the main tunnel which accounted for an expenditure of £1,853,949. This cost was estimated by the appellants to be 110 per cent in excess of the cost of similar work in 1914. This tunnel runs through the Ben Nevis range for a distance of 15 miles, and its length was necessitated by the fact that the only suitable reservoir storage is situated at that distance from the only suitable site for a power house. In its construction considerable expenditure was incurred in workmen's camps and light railways, and such expenditure was estimated by the appellants' civil engineer to have amounted to £245,000. In making his calculation of capital costs for the 1935 valuation and subsequently for the 1944–1945 valuation, the Assessor reduced the total costs by £300,000, to allow for unremunerative expenditure. The appellants, in estimating the capital costs of the undertaking prior to its construction, were aware of the amount which would require to be spent in the construction of the tunnel, and the expenditure so incurred was not unforeseen expenditure. There was no evidence that any of the expenditure thereon was in any way superfluous or unproductive. (7) Apart from the tunnel the civil engineering works of the appellants were in no way different from other such works of the County of Inverness at Foyers and Kinlochleven which form part of the hydro-electric undertakings at these places. There was no reason to assume that the cost of repair or the length of life of the tunnel varied in any way from the remainder of the civil engineering works belonging to the appellants. The Foyers and Kinlochleven undertakings were revalued by the Assessor in 1936, and a rate of 5 per cent was applied to the capital cost of the civil engineering...
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