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LANDS VALUATION
APPEAL COURT, COURT OF SESSION
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Lord
Justice Clerk
Lord
Kingarth
Lord
Clarke
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[2008] CSIH 61
XA96/08
OPINION OF THE LORD JUSTICE CLERK
on the STATED CASE
in the appeal by
THE ASSESSOR FOR LOTHIAN
Appellant;
against
BBW LEISURE LIMITED
Respondent:
______
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For the appellant: Clarke; Simpson & Marwick
For the respondent: No appearance
11 November 2008
Introduction
[1] This is an appeal by the assessor against a decision of the
Valuation Appeal Committee at Edinburgh dated 28 February 2008 relating to the
respondent's licensed premises at 47 Buckstone Terrace, Edinburgh. The subjects were entered in the Valuation
Roll at the 2005 Revaluation at a net annual value and rateable value of
£84,700. The respondent appealed against
the entry. The Committee allowed the
appeal to the extent of substituting a NAV/RV of £81,000.
The subjects
[2] The subjects consist of a restaurant, the Tusitala, and a
public bar, the Pavilion. I shall refer
to them as the Tusitala. The
respondent's shareholders are Mr and Mrs James Wilkie. The respondent built the subjects in
1987. In 2001 it acquired two-thirds of
an acre to the rear, on which it built a new restaurant and laid out 46 parking
spaces. The restaurant was fitted out to
a high standard and with attention to detail.
These works cost about £800,000.
They increased the restaurant capacity from 35 to 80 covers and created
a private dining area for 30 covers. In
the ten months after the reopening in June 2001 food sales increased from
£194,000 to £471,000 and liquor sales increased from £345,000 to £465,000.
[3] The Committee found that the Tusitala was comparable with
restaurants in the city centre, but was unusual in providing good quality and
high standards of service in a suburban setting. It was in a good location on a main arterial
route leading into the city and had good views to the Pentlands. The surge in turnover after the alterations
in 2001 was attributable to Mr and Mrs Wilkie's hard work, experience and
planning, and their commitment to create a superior establishment.
The valuations
[4] The assessor valued the subjects in accordance with the
Scottish Assessors Association (SAA) scheme for the valuation of licensed
premises in the 2005 Revaluation (cf Ass
for Lothian v Belhaven Brewery Co Ltd,
[2008] CSIH 60; Suburban Taverns (Glasgow) Ltd v Ass for Glasgow, 2008 SC
299). That produced the value entered in
the Roll. At the hearing she reduced it
to £84,500 to remove a minor issue.
[5] The respondent's representative, Mr Peter Henry FRICS,
started from the agreed turnover but, relying on a point that the Committee
rejected, took only 75% of the food turnover in excess of £35,000. He applied the scheme percentage to his
adjusted turnover and deducted an end allowance of 10% on the basis that there
was over-performance attributable to the personal qualities, local knowledge, skill
and hard work of Mr and Mrs Wilkie.
The decision of the Committee
[6] The Committee found that, of the comparisons submitted to it,
the only restaurant that out-performed the Tusitala was the Steading, a smaller
and more traditional type of public house/restaurant. It was a managed operation. It targeted a more traditional market and was
operated differently. It held that the
Hunter's Tryst, the Balmwell and the Fairmile Inn were all "approximately
comparable," but achieved significantly lower turnovers than the Tusitala. Of these, the closest competitor was the
Hunter's Tryst, but it did not match the Tusitala in quality of design and
operation or in turnover. The Committee
made no findings about the Balmwell in relation to any features of possible
comparability. It found that the
Fairmile Inn had closed by then, having been failing for some time.
[7] The Committee found that the turnover of the Tusitala was
"high by comparison with some other competitor businesses in the area," and
that the knowledge and skill of Mr and Mrs Wilkie was and had been a major
factor in the achievement of it. This
was its conclusion.
"On the second issue [sc over-performance] the Committee
accepted that Mr and Mrs Wilkie are very hard working and that they developed a
great deal of experience which they used to good effect in the design and
fitting out of the public house/restaurant building. It is a very good building in a very good
location. The alterations down to
reopening in June 2001 were very well thought out and effective and food
turnover, in particular, immediately surged achieving £471,000 over ten months
compared to £194,000 in the year before.
Liquor turnover also improved.
The Committee accepted that a lot of hard work and reorganization of
staff and working arrangements was required.
They had a good staff in the main although some changes had to be
made. It was thought that this property
with that record would achieve a high rent.
A hypothetical tenant would be able to use the advantages of the
building and the methods. He might doubt
whether he would match the Wilkies' turnover, at least in an initial period,
but an allowance of 10% against rent seemed unlikely. The Committee initially was minded to allow
21/2% deducting £2,112.50, reducing the figure to £82,387.50 rounded to £82,300
but came to the conclusion that somewhat more than that would be looked for in
a negotiation with a hypothetical tenant and they rounded the figure further to
£81,000, which they considered a reasonable reflection of the doubt that there
might be about matching the performance."
Conclusions
[8] In my
opinion, the Committee misdirected itself in two respects. The first was in its treatment of the
comparisons. It found that the turnover
of the Tusitala was high by comparison with some other competitor businesses in
the area. That finding, whether it
refers to actual turnover or turnover per square metre, tells us nothing. The Committee rejected the Steading as a
valid comparison. It found that the
Hunter's Tryst, the Balmwell and the former Fairmile Inn were all
"approximately comparable" but achieved a significantly lower turnover. There is no finding that any of these
comparisons had the advantages of the Tusitala or was run in a similar
way. On the contrary, the findings show
that none was truly comparable at all.
One was run in a different way, another had been a commercial failure
and there was no relevant finding about the third. The Committee therefore had no proper basis
for its finding that the lower turnovers of these comparisons indicated
over-performance at the Tusitala.
[9] On the
Committee's findings, the success of the Tusitala is easily understood. It is a modern, up-market restaurant and bar
in a well-located, quality building, run in a highly professional way by
skilled and committed operators who know their market and who deliver a high
quality service.
[10] In my opinion,
the Committee also misdirected itself in its application of the valuation
hypothesis. It said that the Tusitala
"would achieve a high rent" and that the hypothetical tenant would be able to
use the advantages of the building and Mr and Mrs Wilkie's methods. Both points are indisputable. But it then said that the hypothetical tenant
"might" doubt whether he could match the Wilkies' turnover, "at least in the
initial period." On that account it made
the end allowance. That, in my opinion,
was not a correct application of the statutory test (Valuation and Rating
(Scotland) Act 1956, s 6(8)). The issue
is at what rent the subjects would be let on the statutory hypothesis. It is to be assumed that that letting takes
place in an open market. The open market
includes prospective tenants who would recognise the advantages of the Tusitala
and could operate it as successfully as the respondent. The Committee therefore had no reason to make
an end allowance (cf Ass for Lothian v Belhaven
Brewery Co Ltd, supra).
[11] If the
Committee had been entitled to make an end allowance, it would not have been
entitled to calculate it as it did. The
Committee was at first minded to deduct 21/2%.
That produced a figure of £82,387.50, which it rounded down to £82,300;
but it then concluded that "somewhat more than that would be looked for in a
negotiation with a hypothetical tenant."
On that account it made a further deduction of £1,300. That sum appears to be little more than a
random figure. It produces an end
allowance of 4.142%. I can find no
proper basis for this further deduction.
Disposal
[12] I propose to
your Lordships that we should allow the appeal.
The assessor's revised valuation should be substituted for the figure
that was entered in the Roll.
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LANDS VALUATION APPEAL
COURT, COURT OF SESSION
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|
Lord
Justice Clerk
Lord
Kingarth
Lord
Clarke
|
[2008] CSIH 61
XA96/08
OPINION OF LORD KINGARTH
in the STATED CASE
in the appeal by
THE ASSESSOR FOR LOTHIAN
Appellant;
against
BBW LEISURE LIMITED
Respondent:
______
|
For the appellant: Clarke;
Simpson & Marwick
For the respondent: No appearance
11 November 2008
[13] For the
reasons given by your Lordship in the chair I agree that this appeal should be
allowed and that the Assessor's revised valuation should be substituted for the
figure which was entered in the Roll.
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LANDS VALUATION
APPEAL COURT, COURT OF SESSION
|
|
Lord
Justice Clerk
Lord
Kingarth
Lord
Clarke
|
[2008] CSIH 61
XA96/08
OPINION OF LORD CLARKE
in the STATED CASE
in the appeal by
THE ASSESSOR FOR LOTHIAN
Appellant;
against
BBW LEISURE LIMITED
Respondent:
______
|
For the appellant: Clarke;
Simpson & Marwick
For the respondent: No appearance
11 November 2008
[14] For the
reasons set out fully by your Lordship in the chair, and to which there is
nothing I can usefully add, I agree that this appeal should be allowed.
