Post Office v Assessors for Fife and Lothian
| Jurisdiction | Scotland |
| Judgment Date | 29 May 1981 |
| Date | 29 May 1981 |
| Docket Number | No. 23. |
| Court | Lands Valuation Appeal Court (Scotland) |
L.V.A.C.
Lords Avonside, Robertson, Allanbridge.
ValuationSubjectsTelephone exchangesValueMethod of valuationContractor's principleDecapitalisation rateCommercial rate, public building rate or intermediate rateFactors justifying reduction from full commercial rate"Hybrid" nature of telephone exchanges.
Telephone exchanges in Fife and East Lothian were assessed on the contractor's principle by the Assessors and were valued on the commercial decapitalisation rate of 11%. The ratepayers contended that an appropriate decapitalisation rate was 6%, or at most the public building rate of 7%. This contention was based upon the unusual nature of telephone exchanges. They were very expensive to build; often located where ordinary commercial subjects would not be placed; and they would not be marketable if offered for sale. The ratepayers were the only likely hypothetical tenant. The ratepayers were bound under the Post Office Act 1969 to exercise their powers so as to meet the social, industrial and commercial needs of the British Islands and were restricted in their borrowing powers. They were also under a duty to exercise their powers so as to ensure that revenue was not less than sufficient to meet all charges.
The Fife Valuation Appeal Committee set the decapitalisation rate at 9% to G.A.V.; the Lothian Valuation Appeal Committee set the decapitalisation rate at 11% to G.A.V.
The Fife Assessor appealed against the 9% rate contending for 11%; the ratepayers cross-appealed, contending for 7% or 6percnt;. The ratepayers appealed against the Lothian Committee's decision of 11% and contended for 7% or 6%.
Held (1) that the telephone exchanges were properly valued on the contractor's principle.
(2) That in applying the contractor's principle the position of the hypothetical tenant had to be considered as well as that of the hypothetical landlord because the hypothetical tenant would not necessarily be prepared to pay the rent which the hypothetical landlord was seeking as a return upon his capital expenditure.
Dicta of Lord Jamieson in Lochaber Power Co. v. Assessor for InvernessshireSC1946 S.C. 272, 282, and of Lord Ross in Lothian Regional Assessor v. British Airports AuthoritySC1981 S.C. 141, 149, approved.
(3) That, owing to the nature of telephone exchanges and the statutory duties incumbent upon the ratepayers, a decapitalisation rate less than the commercial rate of 11% was appropriate because the subjects could not be assessed on a strictly commercial basis.B.B.C. v. Assessor for Moray and NairnUNK 1975 S.L.T. 34distinguished.
(4) That the extent of the reduction from the commercial rate was a matter of degree and the rate of 9% was justified in the Fife case.
(5) That, in the interests of uniformity which should be achieved where the factors involving telephone exchanges were the same throughout the country, the appropriate rate for the Lothian subjects of appeals was also 9percnt;; and ratepayers' appealallowed to that extent.
Observations per Lord Robertson on the factors which would justify a reduction from the commercial decapitalisation rate.
(Post Office v. Assessor For Fife Region)
At a meeting of the Valuation Appeal Committee for Fife Region the Post Office appealed against entries by the Assessor for Fife Region in the valuation roll for 1978, being 33 telephone exchanges. The Assessor valued the subjects on the contractor's principle. The committee considered the appeal in relation to one exchange, the same principles applying to all the others.
The following facts were held to be admitted or proved or within the knowledge of the Committee:"(1) The subject of appeal is a good quality well built structure, built of standard building materials, providing well served and well finished open floor space for the accommodation of telephone apparatus. It was constructed as a telephone exchange with special features including a cable chamber under the floor. The subject was built in 1972 and is part one storey, part two storey with single concrete panels with insulation. The subjects have a flat felted roof. There is a single storey apparatus room with cable loft, vinyl tiled concrete floor, walls of plaster board with taped joints, P.V.C. faced fibreglass ceiling and fluorescent lighting, with underfloor heating. The two storey part has power and battery rooms on the ground floor, with offices and staff facilities on the first floor. The power and battery rooms have quarry tiled floors, plastered walls, P.V.C. faced fibreglass ceiling and fluorescent lighting, while the offices and staff accommodation have vinyl tiled floors. There is a small one storey entrance hall with quarry tiled floor, plastered ceiling and glazed panels. The total overall area is 596.10 square metres. In addition there is a 1,000 gallon underground fuel tank. Because the telephone apparatus is operated automatically the subject is normally left unattended. (2) Telephone exchanges are never let; for many years the Assessor, along with other Assessors in Scotland, has valued such subjects on the contractor's principle and no lets of comparable subjects are found. (3) The use to which the subjects of appeal are put and the equipment contained within them is different from that of a warehouse, store, garage or sorting office. The subjects with which the ratepayers sought to compare the subjects of appeal are not similar in their present state or use, comprising as they do garages, warehouse, post office, engineering department and sorting office. (4) The subject of appeal in its actual state and use is a telephone exchange, whereas the purpose of a garage and workshop is for the repair of vehicles and a sorting office for the sorting of letters and housing of apparatus connected therewith. A sorting office or garage could not be used as a telephone exchange without substantial alterations and in particular without making provision for the bringing of cables into it and ducting connected therewith. (5) It would be necessary to make alterations to a sorting office before it could be used as a telephone exchange. Such alterations would be material. Warehouses and multi purpose buildings could be used as a sorting office without substantial alterations. Most warehouses, like telephone exchanges, require to have a floor strong enough to bear the weight of stores or equipment. No more heating or lighting is required for a telephone exchange than for a warehouse and less accommodation is required for the fewer staff employed therein. (6) Although there are some areas of comparability these were not such as to make the subjects of appeal truly comparable with those put forward by the ratepayers. Sorting office requirements in terms of the Offices, Shops and Railway Premises Acts are different from those of a telephone exchange which could not be used as a fully staffed office without alterations to welfare facilities including toilets for staff. No alterations to the cable ducting would be required. (7) In a telephone exchange it is necessary to construct a cable trench about 10 wide and sloping from 18 to 6 or 7 and stretching the length of the apparatus room to enable telephone cables to be laid between the room and the outside of the building. This requires the digging of a pit and lining it with concrete, with further work for drainage. A significant difference between a telephone exchange and the other subjects put forward by the ratepayers lies in the formation of this cable trench. (8) Although there are building materials common to the subjects of appeal and warehouses, garages and sorting offices, nevertheless the purported comparisons as put forward by the ratepayers in Production DHQ1 all required additions, deductions and alterations from their actual use and state to make them comparable, so that a satisfactory comparison could not be made for valuation purposes between telephone exchanges on the one hand and the aforementioned subjects as put forward by the ratepayers on the other. (9) The ratepayers' valuation included the sum of 100 in respect of the cable trench as put forward in production DHQ/3, does not appear appropriate. The cable trench is of substantial dimensions and costs a substantial amount to construct. (10) There is considerable difference between the unit cost of construction of advance standard factories and a telephone exchange. In 1978 the cost of a standard factory unit was in the region of 90 per square metre, a telephone exchange double that. Telephone exchanges in Fife are valued in the same way and at the same level as elsewhere in Scotland. (11) The Committee considered that 11% to Gross Annual Value was appropriate as a decapitalisation rate for commercial subjects and had previously approved it (in particular the Committee had approved of this rate in the contractor's principle case involving the subjects D.C.L. Bottling and Blending Plant at Bandeath in 1980). The public building rate had been used inter alia in subjects at Victoria Hospital, Kirkcaldy, valued by the Treasury Valuer and demonstrating a rate of 7%, and previously approved by the Committee. Fife House, Glenrothes is a public building which by its nature may be used as a commercial office and is valued at 11% of Effective Capital Value to Gross Annual Value. An observation platform in the Eden estuary of which there is no possibility of let, is valued at 11% to Gross Annual Value. A hospital building is a public building providing a service. (12) The subjects as detailed in production DHQ/4 for the ratepayers are subjects valued on the comparative principle, being Post Office heritages including sorting offices. The valuations as shown on DHQ/4 were not arrived at by applying a decapitalisation rate. They were arrived at by an analysis of annual values. There are no Fife subjects in production DHQ/4 nor are there any telephone exchanges. The subjects contained in...
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