Lands Tribunal for Scotland

OPINION

Freshbright Cemeteries Limited
v
The City Of Edinburgh Council

Introduction

This is an application made by Freshbright Cemeteries Limited having a registered office at 22, Ainslie Place, Edinburgh, (“the claimants”) for an award of compensation following the compulsory acquisition of two cemeteries by The City of Edinburgh Council (“the acquiring authority”).

The heritable subjects to which the application relates are Corstorphine Hill Cemetery, Drum Brae South, Edinburgh, extending to some 3.4184 hectares (8.447 acres) and Saughton Cemetery, Chesser Loan, Edinburgh, extending to some 3.7231 hectares (9.200 acres); hereinafter referred to collectively as “the subjects”.

At the hearing on 7 and 8 January and continued on 25, 26 and 29 January 1999 Freshbright Limited were represented by Mr R Anderson, Advocate, who led in evidence Mr Michael R Sharp FRICS, a chartered surveyor, Mr Brian Swift M Inst BCA, a consultant on the operation and management of cemeteries and crematoria, and Mr Walter F Parker FFAS AMIBM, a director of the Parker Group of Companies and formerly a director of Freshbright Limited.

The City of Edinburgh Council were represented by Mr S Stuart, Advocate, who led in evidence Mr George Bell, an Officer of Bereavement Services in the Department of Environmental and Consumer Services of the Council, Mr David Cownie FRICS, Principal Estates Surveyor of the Council and Mr Duncan McCallum F. Inst. BCA a technical adviser to the Institute of Burial and Cremation Administration and author of their report to the Council.

The tribunal also had available to it as a production a report prepared by Messrs Robson Rhodes, chartered accountants, which details the assumptions made in the calculations by Messrs Sharp and Swift.

The Issue

The subjects were compulsory acquired by the acquiring authority’s predecessors, the City of Edinburgh District Council, under powers contained in the Town and Country Planning Acts 1972 to 1977. Powers of acquisition were granted under The Edinburgh Corstorphine Hill Cemetery Compulsory Purchase Order 1991 and The Edinburgh Saughton Cemetery Compulsory Purchase Order 1991, both approved by the Secretary of State for Scotland on 14 February 1994 and both recorded in the General Register of Sasines (County of Midlothian) on 5 April 1994. The compulsory purchases were implemented by means of General Vesting Declarations both made on 20 April 1994 with vesting dates of 27 May 1994.

Parties are agreed that the valuation date for the purpose of assessing compensation for each of the subjects is 27 May 1994.

The dispute relates to value of the land acquired and to claims for disturbance arising out of the acquisition in terms of section 12 of the Land Compensation (Scotland) Act 1963.

The claim for the loss of land is: -
Corstorphine Hill Cemetery £200,000
Saughton Cemetery £180,000
£380,000
Other heads of claim:- £ 35,801
The total claim is:- £415,801

The acquiring authority aver that the subjects do not have value as commercial enterprises and only have value as open space which is agreed to be at a rate of £500 per acre (£1,235.50 per hectare) affording a value of the land taken, as follows:-

Corstorphine Hill Cemetery £4,224
Saughton Cemetery £4,600
£8,824

The acquiring authority dispute the claims made for disturbance as being inadequately vouched and as relating to subjects not now before the Tribunal.

Background

The broad background as admitted or established in evidence can be summarised as follows. The original reference to the tribunal had been for claims of compensation for four cemeteries including those at Comely Bank and Warriston, also in Edinburgh and also subject to compulsory purchase orders. In the event agreement has been reached between the parties on the amounts of compensation payable for these two cemeteries. Two other cemeteries owned by the claimants were sold to the City of Edinburgh District Council in 1993.

In 1991 all of these cemeteries were in a poor and deteriorating condition because of the neglect of the existing owners. The acquiring authority issued compulsory purchase orders in respect of them in that year.

The cemeteries were then in the hands of the receivers in respect of Edinburgh and Essex Property Management Limited; that company being in the process of liquidation. Because of the poor condition of all of these cemeteries when Edinburgh and Essex went into liquidation in 1991 Mr Cownie conducted negotiations with the liquidator to purchase the cemeteries for the council. He believed that he had reached agreement with the liquidator to purchase six cemeteries at seven hundred and fifty pounds each, or a sum of £4,500.

The liquidator accepted an alternative offer from the claimants. The sum paid by Freshbright in April 1992 for all of the cemeteries, extending to 33 acres (13.35 hectares), was £3,000. At that time Freshbright hoped to be able to implement a scheme of communal re-interment which would free land for housing development. The purchase agreement provided for the payment of an additional £350,000 to the receivers in the event that development value was realised after acquisition. Possession of the subjects was obtained on 14 July 1992.

Following the purchase the acquiring authority took the view that the new owners should be given an opportunity to improve the condition of the cemeteries. They also agreed that a Public Local Inquiry in respect of the compulsory purchase orders, scheduled for 12 October 1992, should be postponed. They reserved the right to enforce the compulsory purchase orders at a later date should the condition of the cemeteries not be improved.

Both Corstorphine Hill and Saughton cemeteries have been in operation since about1928. By at least the late 1980s they had become largely disused, overgrown and run down. Many memorial stones had fallen. After taking possession of the subjects the claimants undertook work including the cutting of grass to a height of 4 inches, the scarifying of pathways and the re-erection of fallen monuments.

In the autumn and early winter of 1992 discussions were entered into between Mr Parker on behalf of the claimants and Mr Cownie on behalf of the acquiring authority regarding the sale of the cemeteries to the authority. At that stage Mr Parker had expressed the view that these cemeteries had development value. Mr Cownie did not accept the assumptions on which Mr Parker's calculations were based and had suggested a figure of £5,000 per cemetery as a nominal sum.

In 1993 Mr Parker prepared a business plan. The stated objectives of the business plan were to embark on the restoration of the cemeteries, to identify areas of non-operational land which would be transferred to an independent company Edinburgh Cemeteries Limited, and to investigate the possibilities of alternative land usage. The cemeteries of Newington, North Merchiston and the southern part of Warriston were identified as being non-operational. These were sold to the acquiring authority on 18 June 1993.

Necropolis Limited, specialists in works of re-interment, were engaged to give advice on a programme of relocating the remains in all non-operational areas within a common grave extending to approximately 15 acres in a landscaped garden of remembrance. Parkers Limited, architectural design consultants, together with Pieda plc, economic and planning consultants, were engaged to prepare indicative plans for the development of the cemeteries with housing and a landscaped memorial garden. A crematorium was considered for Saughton Cemetery but no firm proposal was formulated.

These proposed developments met with opposition from the public from among whom a Cemeteries Action Group was set up. The Group was concerned not only with the claimants’ plans for development of the cemeteries with housing, and re-interment of the displaced remains, but also with the poor condition of the cemeteries. The Group actively pursued its concerns through the media and put pressure on the local authority. No planning application for the development of any of the cemeteries was made and the claimants abandoned their development proposals.

The acquiring authority meantime considered that nothing had happened to alleviate their concern regarding what they considered to be the unsatisfactory condition of the cemeteries including the subjects. Discussions with the claimants were conducted over the period from November 1993 to January 1994 but no agreement was reached. Because the acquiring authority remained unhappy about the state of the subjects the General Vesting Declarations were made in April 1994.

The sales of lairs and the number of interments at both Corstorphine Hill Cemetery and Saughton Cemetery during the claimants’ ownership were very few. After the making of the General Vesting Declarations trading ceased.

After taking possession of the subjects the acquiring authority strimmed the grass and finished it with a mower to height of 2 inches. At Corstorphine Hill the trees were ‘crown lifted’ in order to enable maintenance to be more easily carried out. The surfaces of the roadways were scraped free of vegetation and patched as necessary. A private contractor was hired to re-erect memorial stones. Sunken graves were brought up to ground level. At Corstorphine Hill a considerable amount of rubbish and 100 tons of rubble were removed from a large area of ground which is now used for woodland burial. At Saughton minor works of maintenance were carried out to the entrance gates.

The number of lairs available in each cemetery has been agreed on alternative bases. There is disagreement as to the appropriate size of lair to be used in future. This, of course, determines the number of lairs available at each cemetery and hence the potential income from each. However, parties were agreed as to availability of lairs on the alternative assumptions as to size as follows: -

Cemetery Lair size
9ft x 3ft 10ft x 4ft
Corstorphine Hill 3743 2527
Saughton 3119 2105
Total 6862 4632

Despite some confusion in the evidence it is also agreed that the number of lairs sold in Edinburgh is in the range of 400 to 500 per annum. It is agreed that this level of sales would not change significantly although it was part of the claimants’ case that if the availability of lairs was seen to be running out sales might increase due to lairs being bought in advance of need.

The Basis of the Claims

It was not in dispute that the proper approach to the claims for compensation made in this case was to attempt to determine the open market value of the subjects, in terms of section 12(2) of the Land Compensation (Scotland) Act 1963, in their existing use as cemeteries as at 27 May 1994.

Mr Sharp, for the claimants, considered that the evidence available to him of sales of land elsewhere for use as cemeteries was not suitable to use for comparative purposes as a means of estimating the current market value of the subjects at the vesting date. He therefore proceeded on the basis of a form of profits method of valuation. That basis of valuation is a means of establishing the rent which an occupier of land will pay after calculating his income and deducting from it all items of expense to the business. The information employed is drawn from the accounts of the particular business occupying the property.

Mr Sharp had no direct experience of the operation of cemeteries. For the detailed costings he relied on information provided to him by Mr Swift. He had previously required to provide an asset valuation for the internal purposes of a company, Great Southern Group. This company had acquired various cemeteries. However, it had no established track record of deriving income from such cemeteries.

The profit and loss accounts for Freshbright Cemeteries Limited for the years ending April 1993 and September 1994 show losses of £76,297 and £59,966 respectively, £136,263 in total, for the four cemeteries which they then operated. The turnover for the twelve months to April 1993 was £9,334 while the turnover for the 17 months to September 1994 was £24,797, with most, if not all of this, attributable to the period to the vesting date. It was thought that only one lair was sold in the whole of the accounting period although the records had been damaged by fire and were incomplete. Virtually the only source of income during the whole period was from the receipt of annual maintenance charges. From his consideration of the profits and loss accounts Mr Sharp concluded that the business was not operating fully. He therefore had not attempted to prepare a valuation based on Freshbright’s actual trading performance. Instead he considered what a competitor operator might do in these circumstances.

He adopted the method of valuation of a kind that he had used to value the assets, for accounting purposes, of the Great Southern Group, in Aberdeen and Dundee. This was carried out with reference to the profit and loss accounts of that firm. The assets included crematoria and cemetery land. The exercise was carried out in his capacity as an independent valuer and not with the direct experience of a cemetery operator which, as has been said, Mr Sharp does not claim. He believed that this asset valuation was based on the same principles as the profits method of valuation. It required him to make various assumptions about certain factors in a projection of future income and expenditure over a 20-year period.

Although Mr Sharp noted that there had not been an active market for the subjects when the liquidators sold them he attributed this to their poor image, which was the legacy of the previous owners. He prepared his valuation on the basisthat there would be parties, such as funeral undertakers and other private cemetery operators, who would be interested in acquiring them. He based the trading characteristics of the business on his own assumptions although he admitted his lack of direct knowledge of running cemetery operations.

Mr Sharp spoke to the detail of his valuation. He had prepared alternative sets based on either a 10ft by 4ft or a 9ft by 3ft lair size for both Corstorphine Hill and Saughton cemeteries. His valuation for both subjects, assuming 6862 lairs to be available, can be summarised for present purposes as follows.

He calculated income at £175 per lair sale and £165 per interment, which were the local authority’s rates in 1994. (Private charges were significantly higher and it is not disputed that these figures are conservative). He added £58 for the fee for permission to erect a headstone and said he had allowed for 6800 headstones, as most but not all people would wish them. Second interments were also priced at an interment fee of £165 and he had assumed 3000 over the 20-year period with 50 per annum in the first decade and 100 per annum in the second at each cemetery. The total income from these sources, is £3,222,480, over the 20-year period Mr Sharp calculated it would take to exhaust the lairs at his projected level of sales.

Using Mr Swift’s calculations he estimated annual expenditure amounting in cumulo to £1,793,600 at the end of the 20-year period. He had five heads of expenditure namely, salary costs; plant and equipment costs; maintenance costs; head office and site service costs; and site improvement costs; the respective figures being £939,00, £438,000, £182,000, £134,600 and £100,000. These figures were all based on equal annual outlays over twenty years except in relation to site improvement costs where the basis was an annual sum of £10,000, over the first ten years only. The difference between total income and expenditure, as accumulated at the end of 20 years from 1994, produced a net income of £1,428,880. He had calculated the present value in 1994 of that amount as £380,000 using a discount rate of 7% which he considered appropriate to an income from land. This was, he said, a conservative approach as it deferred receipt of all of the income to the end of the whole period, although the income flows received within the twenty-year period would have a higher present value. However, he accepted that in the initial years there would be accumulating losses.

As will appear, the main challenge to the calculation related to the assumption that the available lairs would be able to be sold within the projected 20 years or at any rate within a sufficiently short period to allow income to exceed the inevitable costs. The broad picture as to expenditure was not disputed but there was challenge on various items which, it was contended, had either been omitted or significantly understated. One aspect of this challenge was that the procedure adopted did not allow for the cost of servicing the accumulating debt. It also failed to distinguish between return on land and return by way of profits on the business itself.

The critical assumption made as to sales was that over the full 20-year period no other land, aside from that presently used as cemeteries, would become available for such use.

This assumption enabled Mr Sharp to project an increase in sales over the twenty years as the supply of lairs in other cemeteries decreased, so that in the eleventh year of projected sales 400 lairs would be sold rising to 475 by year twenty as the two cemeteries enjoyed an increasingly monopolistic control of supply. Indeed the assumption limits the projection of sales to 20 years since, by that time, all the lairs in the subjects would be sold. The assumption also enabled Mr Sharp to envisage an increase in total lair sales per annum in Edinburgh from 500 to 600 during the three years before the eleventh year because he believed that during that period graves would be bought in advance due to a perception of scarcity when the availability of lairs at Mortonhall neared exhaustion.

Mr Sharp’s valuation, based on cumulo income and expenditure figures over 20 years, did not rely on a precise pattern of annual sales. The essential feature of the assumption was that all the available layers would be sold within about 20 years.

It was accepted by Mr Sharp, and by Mr Anderson in his submissions, that the critical issue in this case was the view a prospective purchaser in May 1994 would have taken as to the prospects of the Local Authority failing to obtain and have in place a suitable replacement cemetery before the last lairs in the existing Mortonhall Cemetery were sold. In other words, can Mr Sharp’s main assumption be treated as well founded?

Theassumption is crucial to Mr Sharp’s approach and thus to the whole claim presented to us on behalf of the claimants. If a replacement cemetery for Mortonhall could reasonably have been expected before the available space there was exhausted cemetery operations at the subjects could never have been expected to be profitable. This is essentially because, without the assumed monopoly, annual income levels would never be likely to be in excess of inevitable expenditure and, in any event, would be insufficient in later years to meet the undisputed losses in the early years. As will be noted, Mr Parker’s assumption was not the same as that used by Mr Sharp. It is not for us to speculate as to how Mr Sharp’s figures came to be presented as the basis of the claimant’s case when, as he admitted, he was proceeding largely on the basis of information provided to him whereas the evidence from Mr Parker plainly is based on different information. The claimants did not depart from Mr Sharp’s approach as the fundamental basis of their claim. However, Mr Anderson did submit that it was simply a basis for assessment by the tribunal and that it might require to be modified in light of the whole evidence. As will be seen, we do not consider that the more limited assumption spoken to by Mr Parker is well founded or that it would provide a more secure basis for assessment.

It is accordingly appropriate for us to deal first with the material bearing on Mr Sharp’s assumption as to the prospects of the acquiring authority obtaining a replacement for Mortonhall cemetery. We shall return to deal briefly with Mr Sharp’s assumptions as to supply and sales of lairs, and to various other disputed issues of fact although these issues are in effect superseded by the view we reach on the main issue.

The Assumption as to Replacement of Mortonhall

Evidence

Mr Sharp gave evidence to the effect that there would be no possibility of any increase in supply through the actions of the local authority before the twenty year period was up. He did not give evidence of making any direct investigation of the position of the local authority in relation to this matter either by way of direct inquiry or by investigation of independent sources familiar with the situation in Edinburgh. As we have observed his evidence did not reflect the views of Mr Parker. It appeared that his view was grounded partly on the considerable length of time that he believed was necessary to implement such a proposal, based on the time it had taken to realise a new cemetery in Bearsden. It was reinforced by his opinion that since Corstorphine Hill and Saughton would be available for the sale of graves within the time period, and with sufficient space to meet demand, it would be unnecessary for the local authority to proceed with the acquisition of another cemetery within that period. Accordingly, although Mortonhall would run out of available graves in about 10 years from 1994, the continuing demand could and would be adequately met by the subjects. The subjects would become the only source of graves in Edinburgh, and this enabled him to allocate all sales in Edinburgh to them. The sale of graves would be supported by reducing their prices to the level of that of the public provider.

Mr Parker appeared to subscribe to the same theoretical model of a tendency in favour of the subjects, but took a more pragmatic view of the likely actions of the local authority. His calculations had, he said, proceeded on the basis that, provided the average annual uptake was maintained, the local authority could only be capable of providing new lairs for a period of between 5 and 7 years. He told us that the company had deliberately formulated a policy of high charges to drive custom away, in order to accelerate the depletion of land at competing cemeteries, principally at Mortonhall. He recognised, he said, that the local authority would have to seek additional land to meet their statutory requirements; but considered that it would take at least 4-5 years for a new public cemetery to come on stream. He appeared to assume that there would be no attempt to acquire such an alternative until the existing one was nearly empty, although he did not dispute that he had been aware in 1993 that the matter was in contemplation by the acquiring authority.

He contemplated a period of monopoly of cemetery provision with Freshbright’s price levels reducing to figures only marginally, rather than widely, above those charged by the local authority.

His main reason for the assumption that sales of graves would continue to be diverted to the subjects was because any site for public development would likely be outside the city and therefore relatively inaccessible to the general public. He also contended that, by that time, Freshbright (as the continuing operator within the city) would have established itself as the provider of first choice with cemeteries in strategically placed locations.

His analysis of the long term commercial potential of the subjects was therefore one that did not depend on a long term monopoly position for the subjects but rather one that envisaged competition between the public and private sectors with Freshbright’s cemeteries the more attractive to a public having choice, even where the charges would be somewhat higher than those in the public sector.

Mr Cownie’s evidence was that Mortonhall had 10 to 12 years expectation of continuing use as a cemetery. Although there is no urgency to replace Mortonhall, negotiations are at an advanced stage. The acquiring authority intend to replace the cemeteries of Mortonhall and South Queensferry. The new South Queensferry cemetery is expected to serve a local need and is not considered likely to affect the position in the city. In about 1991 or 1992 the Environmental Services Department of the acquiring authority made a decision to replace Mortonhall. In 1993 the acquiring authority made capital budgeting provision for the acquisition of the necessary land. In 1994 the acquiring authority were seeking a site from a number of options all of which were to the south of the city and virtually all in the green belt.

For the past 18 months to two years the acquiring authority have been in negotiation for the purchase of land at Broomhill Farm in Frogston Road on the Mortonhall Estate. Although there is no formal contract to purchase, there is agreement by the owner to sell and discussions are currently being held on the price to be paid. The method of valuation has been agreed and involves assessment of the “hope value” of planning permission becoming available for change of use from the present agricultural use to residential use. The land is at present within the green belt. There was no suggestion that there would be any difficulty in obtaining planning permission for use as a cemetery.

The Burial Grounds (Scotland) Act 1855 provides in section 10 that whenever a burial ground is closed the [local authority] shall provide a suitable replacement. Section 13 of the Act provides for the powers contained in the Lands Clauses Consolidation (Scotland) Act 1845 to be incorporated thus allowing for the acquisition of land for use as a cemetery by compulsion if necessary.

In these circumstances Mr Cownie was very firmly of the view that there would never be need of the subjects as a replacement for Mortonhall. This would have been obvious to any interested party in 1994. The acquiring authority’s policy was open and would have been easily ascertained by any enquirer. Indeed, he said that Mr Parker had never contended, in their discussions in 1993, that the subjects would ever be in the position of monopoly providers.

In any case Mr Cownie’s evidence was that an assumption that the subjects would adequately function as a replacement was unfounded because the facilities which were found at a modern cemetery were not in place or allowed for at the subjects. Modern cemeteries such as Mortonhall provide chapels, offices and toilets, none of which was to be found at older cemeteries such as the subjects.

Mr McCallum gave evidence as to practice. His practice would be to keep a view of the need for cemetery provision ten years ahead and give warning to his council at that stage of any need to obtain new ground. He was confident that such a time would give ample opportunity to provide a replacement.

Submissions

On behalf of the Claimants Mr Anderson submitted that while the lair sales contained in the valuation were an estimate, and while varying estimates are possible, the fact remained that Corstorphine Hill and Saughton would require to be used after Mortonhall became exhausted within the first 10 year period. This was so because the local authority has a finite number of lairs to supply and there is a demand that is manifest at a constant burial rate per annum.

A company acquiring in the market would take a similar view to that taken by Freshbright. The decision to buy would depend on the information available. While the need to obtain further cemetery space had been identified by the local authority in 1991, as at 1994 there was no sign of any replacement for Mortonhall. No contract to acquire land had been entered into at that time, and no such contract has been entered into at the present time. What is relevant is what the prudent investor would discover in 1994. In his evidence Mr Sharp had spoken of the considerable timescale involved in the acquisition and realisation of new land for cemetery use and had given an example of this. Also, in 1994 the local authority did not have a timescale for such development, it simply hoped that things would work out in their favour.

Mr Anderson submitted that although, in the absence of a willing seller, the local authority could have resort to compulsory purchase powers, this was a "grey area". Section 14 (a) of the Acquisition of Land Authorisation Procedure (Scotland) Act 1947 expressly omitted the exercise of such power in relation to burial ground. The Burial Act of 1855 is cumbersome. Section 10 provides for a Sheriff to identify land for burial. There appears to be a limited right of appeal and the decision could be subject to Judicial Review. However, he conceded that the effect was that a local authority did have compulsory purchase powers.

He submitted that it was not enough to speculate that in 1994 the local authority could realise its objective of obtaining additional cemetery ground before space at Mortonhall ran out. Even if the tribunal was satisfied in this regard that would not be determinative of the matter since a prudent investor might not reach the same view in 1994. He would not be in possession of the degree of detail present before this tribunal.

Accordingly such an investor might have been willing to take the risk. The statements by the acquiring authority officials should be treated with caution. Little detail was available as to what had been done. It was said that a site had been identified in the last 18 months but that was almost five years after the relevant date and there was still no real commitment in place.

For the acquiring authority Mr Stuart submitted that there was no basis for the level of projection of sales by the claimants. That projection left out of account the determination of the local authority to open a new cemetery. The replacement of Mortonhall is a matter for the acquiring authority. The acquiring authority is committed to finding a new replacement. Section 10 of the 1855 Act puts an obligation on a local authority to make such burial ground available. Section 9 makes it possible for local taxpayers to require the local authority to designate such land, although that land then still had to be acquired. Although the 1947 Act procedure does not apply, because the Burial Act is excluded, section 13 of the 1855 Act provides that the Land Clauses (Scotland) Act 1845 shall be incorporated. It was not disputed that there was power of compulsory purchase. It did not matter that it might be clumsy in operation.

While there is no contract extant regarding the acquisition of land for burial purposes, nothing had been raised in the evidence to suggest that the acquisition will not take place. At best it is said that the process could take some time. The matter was not yet urgent. In this case capital budgeting provision was made in the financial year 1992/93, prior to the compulsory purchase orders, and it is a substantial site that is proposed. Therefore the position of the acquiring authority, with statutory responsibilities to replace used up burial ground, must be taken into account in making the projection of future supply of such land in 1994. What has been done was consistent with Mr McCallum’s evidence of proper practice.

The approach of Freshbright does not face up to this central question of the replacement of local authority burial ground stock. It assumes that the subjects will be required to take up the demand. There is however no basis for that assumption. Mr Cownie had pointed out that a prudent investor would ascertain whether a local authority considered that they would make provision for replacement and he would also ascertain whether the subjects would themselves be suitable as a replacement.

He submitted that it had been crystal clear to Freshbright from day one that the acquiring authority's policy and strategy was for the replacement of burial ground on the outskirts of the City. In his evidence Mr Parker had said that he was well aware of that being the council's position at that time.

Tribunal’s Finding

Mr Parker was, in 1993, in a good position to assess the intentions of the acquiring authority. He had been in discussions with them about the proposed sale of the subjects to them and was made aware of their intentions, previously formulated as policy and provided for in its accounts, to establish a new cemetery to replace Mortonhall. We consider that any prudent investor would have been able and likely to put himself in the same position. We accept the acquiring authority’s submission that a prudent investor would have recognised the need for the local authority to provide a replacement for Mortonhall and would have assumed that this would be done. He might have been alert to the possibility that all would not go smoothly for the authority but not that they would fail to obtain a suitable site within the required period. We consider that there is nothing in the evidence to suggest that a potential purchaser in 1994 would have seen a realistic prospect of the acquiring authority failing to be able to have alternative facilities in place before the land at the existing Mortonhall cemetery was exhausted.

We appreciate the point made in submission for the claimants that a prudent investor would not have had the benefit of all the detail that has come before this tribunal on this question. It could also be said that a prudent investor might not have had such ready access to information as Mr Parker obtained in his discussions with the acquiring authority when dealing with them on the matter of selling the cemeteries to them. However, for the purpose of considering the open market value of the subjects we have to imagine a hypothetical purchaser preparing a best bid for the land and undertaking an appraisal of its exploitative potential.

Such a hypothetical purchaser would necessarily have to seek information on competing cemeteries, existing and planned, if he were to depend on a commercial decision based on assumptions as to future events. Any enquiry would readily find that in 1994 there was published intention by the acquiring authority to develop a replacement cemetery for Mortonhall, and that would require an estimation of the probability of the event being realised in a certain time scale. We are satisfied that such a commercial operator would then take theview that a replacement cemetery for Mortonhall would be available before lair space there was exhausted.

Accordingly we reject Mr Sharp’s assumption that a replacement public cemetery would not materialise within a twenty-year period from the date of vesting. On the contrary we find that a hypothetical purchaser would have contemplated the replacement of Mortonhall by about the tenth year of operation of the business.

Our conclusion on this point is fatal to the success of the claims on the basis submitted. The consequences are that the subjects would not enjoy the monopoly of supply necessary for the level of sales to be met to produce the profits needed to cancel out the early losses and provide for profit in the longer term This would have been clear to any potential investor in May 1994. Faced with the certainty of long term liability for maintenance and no evidence of any reasonable certainty of ever being profitable we do not consider that the subjects would have an open market value other than for amenity.

Other Issues

For completeness, and in recognition of the amount of evidence provided and the extent of submissions made, we go on to examine the other matters of dispute. If we were in the position of making adjustments to the claimants’ valuation, based on our findings on each of the variables within their calculation, we would have required to deal with these variables comprehensively since there is an inter-dependency between them. However, in light of our finding on the main issue and our view that it is fatal to the claim, we can conveniently express our views on the other matters individually.

Size of Lair

Evidence

As we have observed, the size of lair that a purchaser would expect to be able to use in future is important in determining the potential sales available from the remaining space. The parties agreed alternative figures for the two subject cemeteries dependant on whether a “10 by 4” or a “9 by 3” lair size is adopted.

The subjects have been operated on a practice of opening graves of the dimension 9 feet long by 3 feet wide (2.4m by 900mm). That practice adopts a method of grave digging which is often carried out by hand, and which uses timber shoring. It provides a relatively narrow midfeather (a wall of undisturbed ground) between the graves and a relatively small column of undisturbed ground for the erection of a headstone.

Most, but not all local authority cemeteries in Scotland are operated on a 10 ft by 4 ft grave size. The reasons given for excavating a grave to those dimensions are that it allows for a wider midfeather and larger headstone area, thus reducing the risk of grave wall collapse at an initial burial or at a subsequent interment after a headstone is in place. It also permits mechanical excavation of a grave and the deployment of hydraulic shore supports, thus further contributing to safety while increasing efficiency. That system is one that is used at the acquiring authority’s cemeteries including their principal cemetery at Mortonhall.

Mr Swift’s evidence on this issue was that, since conditions vary, an assessment of the risk of ground collapse would always have been undertaken over the whole of the lives of these two cemeteries when 9ft by 3ft lairs were excavated. There was no evidence of danger. The requirements of the Management of Health and Safety at Work Regulations 1992, that a hazard risk assessment is made, are met and always have been met. He rejected the proposition put to him that the practice of excavating 10ft by 4ft lairs had been adopted for safety reasons, and he disagreed that it was a safer working system. He considered that it was primarily to allow mechanical systems of excavation.

In his assessment of the operation of the subjects he has allowed for two operators at each cemetery during digging operations. The second operator would maintain a safety watch while shovelling soil away from the lair edge. The greatest volume of undisturbed soil can be left by digging a coffin-shaped lair. By that means a 10 inch midfeather can be achieved. He had allowed for a rubber tracked mini-excavator, working from a platform, to remove bulk soil so that it was only necessary for the edges to be finished by hand.

Mr Swift was also concerned that the imposition of 10ft by 4ft lairs in a cemetery already developed with 9ft by 3ft lairs could cause problems through the invasion of pathways with the risk of causing damage to drains. He was of the view that on the occasion when a lair was needed to accommodate a larger coffin or casket then space could be found around the edges of the cemetery for these special needs.

Mr Bell’s evidence was that the acquiring authority would not use the 9ft by 3ft lair size for reasons of safety. He mentioned two occasions in Greenock and Edinburgh where the walls of graves had collapsed. The safety of workers and mourners was a paramount consideration in electing to use the 10ft by 4ft lair size even although it reduced by a third the number of graves which could be accommodated. A greater midfeather was maintained and hydraulic shoring could be deployed. It also allowed for 2 feet of undisturbed soil at the head of the lair for a memorial stone and plants. It also made the use of mechanical equipment for excavation more efficient and thus reduced the need for excavation by hand. In any case it was increasingly necessary to have a larger lair opening because the population is becoming taller and coffin sizes are becoming larger.

Mr McCallum said that when he was a cemetery manager with Kyle and Carrick District Council he had changed the operation from one of 9ft by 3ft lairs to one of 10ft by 4ft lairs, albeit that they continued to be hand dug, in the interests of the safety of the staff. He had also introduced a system of shoring right to the top of the grave so that there was no risk of the grave crumbling.

In cross-examination he agreed that there was no statutory requirement for the larger lair size and that some local authorities continued to use the smaller size. But he felt that he would be responsible if an accident occurred and he had not used what he considered to be the safest procedure. He also fairly admitted that there never had been a problem regarding safety with the smaller sized lair but that after the new size had come into operation his staff would not go down into the lair without hydraulic shoring.

While he agreed that an operator was free to choose the 9ft by 3ft lair size the increasing size of coffins and the increased use of caskets made a practical case for the larger size of lair.

Submissions

For the claimants it was submitted that the evidence of Mr Swift should be preferred. There was no statutory requirement for a lair size and no evidence that the larger lair size was safer than the smaller. There was nothing to suggest that the duty of care exercised by an operator using a 9ft by 3ft lair size was any less than using the larger size.

For the acquiring authority it was submitted that although there is no statutory objection to a 9ft by 3ft lair size it is no longer acceptable as modern practice as the 10ft by 4ft lair size is safer particularly when used with hydraulic shoring. The 10ft by 4ft size is used in the majority of cemeteries, and although admittedly he may be free to do so it would be difficult to find that the 9ft by 3ft lair size being adopted now by any operator.

Tribunal’s Finding

It is clear that the difference that exists between the experts on the question of lair size is rooted in the factor of safety. There is no doubt that an operator of a cemetery can use the 9 ft by 3 ft lair size if he wishes. While it is said by the witnesses on behalf of the acquiring authority that the 10 ft by 4 ft lair size is safer, because the midfeather is wider and the shoring preferable, there is no specific evidence that a lair the size of 9 ft by 3 ft has proved to be less safe. Although many local authorities choose to use the system they do not use it universally. Since one-third of the potential grave space requires to be sacrificed for the alleged benefits of a 10 ft by 4 ft lair, there is no reason why a private operator should forsake the income from these lost lairs for a system that is not demonstrably safer.

There is no history of accidents at the subjects offered as evidence. Since these are old cemeteries it is perhaps understandable that a continuation of the 9 ft by 3 ft system should be preferred, particularly where infilling of graves spaces between existing graves has to occur. It is obvious that second and other interments will in any case take place in existing 9 ft by 3 ft lairs.

We consider that in 1994, a prospective purchaser might very well have assumed that he would be able to operate on a 9 ft by 3 ft lair. He might have applied a modest discount to his bid price in recognition of the risk that for reasons of safety he might at some time have to change to the larger size.

Increase in Lair Sales

We have of course dealt with the main evidence bearing on this in relation to the replacement of Mortonhall. There was a separate contention that an increase of lair sales could be achieved for other reasons.

Evidence

The total number of interments per year carried out in Edinburgh is approximately 900 to 1,000: the Council carry out 600 to 700 of these; the remaining 200 to 300 are carried out by private cemetery operators. It is conceded that 400 to 500 of these interments are new lair sales. There is some annual variation. The highest sales recorded were in 1996 when 418 graves were known to be sold. On average 381 graves per annum were sold. The evidence of Messrs Swift and Bell, and accepted by Mr Sharp, is that there is in the long run a static level of demand.

Mr Sharp has proceeded on an estimate of 500 lair sales per annum in Edinburgh rising to 600 after nine years and falling to 475 after 15 years. The rise was based on the view that as it became apparent that the supply at Mortonhall was running out there would be an increased tendency to buy lairs in advance. Little turns on this and we need make no specific finding about it. There was no direct evidence to support it.

Regarding the sales projected to be achieved at the two cemeteries Mr Sharp’s calculation envisages a rate of sales commencing in 1994 at 100 compared to a maximum of three in the eight previous years. In his opinion the sales could be stimulated through the activities of a director of the company acting in the capacity of sales executive to persuade Funeral Directors of the merits of the subjects and thus influence the choice of the public. He explained that these activities could be conducted without any expense additional to the operating expenses already allowed for in his valuation. He also thought that sales could be stimulated by a pricing policy which adopted the local authority’s charges rather than the higher sums typically charged by private cemeteries.

He envisaged sales increasing steadily from 100 to over 300 by the tenth year. By that year the effects of the reduction in alternative lairs would further increase use of the subjects. Mortonhall would be full and he made no allowance for sales at other private cemeteries. The sales would increase from 400 to 475 during the second decade as the subjects enjoyed a monopoly as sole providers of cemetery facilities in the city. We have, of course, already dealt with this aspect.

The evidence of Messrs Bell and McCallum is that it is not possible to influence demand from the public for graves in the way assumed in Mr Sharp’s analysis. There is perceived to be a difference in communicating information to intermediaries such as undertakers as to the availability of lairs at any location. Their evidence is that undertakers themselves are resistant to more direct promotion of a cemetery since they are reluctant, in their own business interest, to be seen to be interfering with family preferences in the matter. The family, or the individual, are the decision-makers as to where a burial will occur, and it has never been the practice of any cemetery operator to appeal directly to the public by means of self-promotion.

After having carried out improvements to the subjects in 1994, the local authority have marginally increased sales above a long term average of three per annum at each cemetery. There have been 31 sales of graves over the four years 1994 to 1998 inclusive. Woodland sales at Corstorphine Hill are a modern and special form of burial that has attracted custom from well outside the normal catchment area of the City. This form of burial is not allowed for in the Claimant’s projections since it prohibits second interments.

In his evidence Mr McCallum expressed the opinion that the figures available showed that there is no demand to use the subjects other than to carry out burial in existing family graves because of historical family association with these cemeteries. That is the main factor driving selection of specific cemeteries. Otherwise the choice was made by undertakers who would advise their customers of the advantages of the convenience of modern facilities such as chapels and waiting rooms with toilets.

Submissions

For the Claimants it was submitted that the level of sales of graves in Edinburgh is a fact that has been conceded in the pleadings at a range of 400 to 500 per annum. Mr Sharp’s projected level of sales per annum was therefore justified. Even if the level of sales in the first few years was optimistic that would not alter the conclusion of the valuation exercise, it would only alter its timing. If the subjects ended up with an effective monopoly, it would not matter that income was delayed by a year or two.

For the acquiring authority it was accepted that lair sales would continue in the range of 400 to 500 per annum. However, there was no support whatever for Mr Sharp’s projected level of sales at the subjects. No supporting information was available. Mr Sharp’s projections were not based on any experience he had with other cemeteries. Mr Swift, who did have experience of other cemeteries, did not give evidence as to the demand for graves. The starting figure for sales at 100 was inconsistent with the historical evidence regarding lair sales either at the subjects or generally. The picture was of declining demand at certain cemeteries, but of overall static sales since 1994. There had been no restriction on sales at the subjects since the local authority had acquired them. Prices at local authority cemeteries were standard. The level of sales over that period did not support any reason for any significant change.

Mr Stuart pointed out that although Mr Sharp had said that a hypothetical purchaser would conduct a marketing exercise to achieve its targets using the skills of a director as a sales executive, Mr Swift’s evidence was that effective marketing would go no further than a brochure to local undertakers. The evidence of what had happened and the evidence of Mr McCallum pointed strongly against any likelihood of increase. Mr Sharp had accepted that if there were other reasons why the public would prefer Mortonhall or other cemeteries that would erode his projections. Such evidence was clear.

However, the evidence of Mr McCallum and Mr Bell, both of whom were directly involved in the commercial aspects of cemetery operations was that the selection of a cemetery was determined as a matter of choice by the individual or the family and was not influenced by undertakers. The reason for the majority of sales in Edinburgh being at Mortonhall was that it was perceived by the public as being well located within the City and that it provided facilities which were attractive to the public. There was no question of the local authority directing the public to Mortonhall as had been suggested. Mr Bell and Mr McCallum had both dismissed the notion of marketing cemeteries, such an activity was not carried out. If it were effective it would already have been done.

On the other hand the facilities at the subjects were minimal and at best they only retained a family connection to support continuing business. Even although the subjects had been improved after acquisition in 1994 no significant upturn in demand occurred. There was no reason to assume any change in the pattern of demand for graves in Edinburgh.

Tribunal’s Finding

As the figures produced are known not to be comprehensive a figure of over 400 per annum is not an unreasonable one upon which to base an assessment of continuing annual demand for lair sales in the whole of Edinburgh. Sales of about 400 per annum have been usual in the period from 1994 to the present.

Mr Sharp’s starting point of 500 is at the limit of the range specified by the acquiring authority in their Answers. It does not fit well with the direct evidence but it is not wholly unreasonable and for the purposes of the present exercise it can be accepted on the basis of the apparent concession made in the pleadings.

However, we are of the opinion that the sales projected to be achieved at the subjects, as a proportion of that demand, are not supportable. In particular we find it impossible to accept a figure of 100 lair sales in the first year of operation. Mr Sharp does not have any direct experience of the operation of cemeteries. He did not profess to have any experience of Edinburgh cemeteries. As we understood his evidence, his belief is that if other cemeteries such as Mortonhall and Mount Vernon could obtain sales in three figures per annum there was no theoretical barrier to a high level of sales at the subjects. But it is necessary for us to know that there is some evidential basis for translating that theory into reality. The evidence which is available to us from those witnesses with direct experience in these matters is that there are reasons which distinguish these cemeteries from the subjects and that there is no reason for supposing that sales at the subjects could match them or be greater than them. Sales of 100 in the first year would have required a sudden and dramatic shift of lair sales from Mortonhall to the subjects when there was no reason for this to happen.

In addition, Mr Parker accepted that whatever the reasons for the public disquiet with Freshbright’s proposals for the cemeteries, the resultant adverse publicity had, at the date of vesting, blighted the business to the extent that he saw no prospect of it continuing. Faced with that situation we do not consider that a hypothetical purchaser could at that date have contemplated such a dramatic reversal of trading conditions as Mr Sharp has proposed. While a hypothetical purchaser might, in all the circumstances obtaining, have had some expectation of being able to improve the existing situation we are satisfied on the evidence before us that the anticipated level of sales would be modest, both initially and in the longer term.

We note that while the environment within the cemeteries has been improved and that there is no discouragement to the public to acquire lairs, sales remain at very low numbers. In our opinion a more realistic estimate of ongoing sales made at 1994 would be of the order of 20 per annum at Corstorphine Hill and 10 per annum at Saughton as proposed by Mr McCallum.

Even that level would be achieved only over some years if by careful operation, new confidence could be established. Good management and maintenance of a cemetery is, on the evidence, a prerequisite for the restoration of such confidence. Only then would the subjects commend themselves as possible locations for burial notwithstanding their lack of facilities in comparison with other cemeteries in the city. However, for present purposes, given the size of the numbers involved, it is not unreasonable to project that level of sales as effective from 1994. This would mean that even if a purchaser were persuaded that there was a chance of at least a period of effective monopoly he would have to face much lower income until the period of effective monopoly arrived. Mr Sharp, at his comparatively high level of sales, assumed losses until after four years; and then only modest returns until the eleventh year when sales were anticipated to increase. At the much lower level of sales that we find to be realistic, the enterprise would operate at a substantial loss for at least ten years.

Memorial Fees

Evidence

In his valuation Mr Sharp has assumed that there will be a memorial fee in respect of 99% of grave sales. He expected, without any direct working knowledge, that the majority of those purchasing a grave would wish to have a headstone erected. In cross-examination he accepted that a lower figure such as 80% was possible. Mr Bell offered a rough estimate of 70% from his experience.

Tribunal’s Finding

In the circumstances we think it reasonable to accept 80% as an appropriate figure for the purpose of estimating income form this source.

Expenses of the Operation

Evidence

The claimants estimate the expenses of the operation on an annualised basis to be £84,680 while the acquiring authority calculates that the overheads of a hypothetical purchaser of the cemeteries would be an annual amount of £126,317. There is therefore a difference between them of £41,637.

The dispute as to the expenses of the operation, as allowed for in Mr Sharp’s analysis, is limited to the two areas of staffing and premises which together account for almost all of that difference. The difference between them on these two items is £37,405 calculated as follows:-

  Claimants     Acq. Auth.  
Staff Costs
(‘Employees’) £46,950
(‘Salary Costs’) £77,155
Premises Costs
(‘Other premises expenses’) £2,800
(‘Premises expenses’) £10,000
Total £49,750 £87,155
Difference £37,405

Staff Costs

Mr Sharp has included in his valuation, staff costs estimated by Mr. Swift in a schedule that he had prepared of possible expenditure based on 1994 prices.

Mr Swift’s estimate of the staff complement required is based on a job evaluation exercise that he had been concerned with at a 21-acre cemetery. He had not considered the number of interments assumed by Mr Sharp in his analysis but nevertheless claimed that he had worked out the amount of grave digging needed in each cemetery. Three operatives and one working supervisor would be appropriate for the safe and efficient operation of both cemeteries. In particular that would allow for two operatives to dig the graves with one acting as a lookout for safety purposes. He considered that this level of staffing would accommodate changes of duties between summer and winter with higher burial and maintenance activity respectively. He did not consider that the supervisor could deal with public enquiries, nor has he made any allowance for telephone expenses. He has assumed that these functions can be catered for in an off-site company back office from where their other operations would be conducted. In Robson Rhodes Report Schedule 2 section 5 allowance is made for the costs of ‘Support Services’. Under that heading, Para. 5.1 ‘Audit and Accountancy Fees’ an assumption is made that regular writing up of invoices and cash books would have been the responsibility of the supervisor. It then makes provision for an annual cost of £5,000 to “reflect the cost of the preparation of the payroll, periodic management accounts, annual accounts and auditing thereof”. Mr Swift agreed that the clerical function required was not explicitly covered in that description but expressed the belief that the figure of £5,000 represented one half of a full-time employee who would be available to cover the necessary duties.

Mr Bell’s evidence was that four operatives would be required on the reckoning that three would be constantly engaged on maintenance while the fourth would be needed for opening graves. The maintenance work involves the back-filling of sunken graves, the raking of leaves in wooded areas, edge cutting and general grave maintenance. A supervisor is allowed for. His estimates for staff are based on local authority standards for these types of jobs.

He has also allowed for a clerical assistant who would be able to deal with matters which the supervisor would be unable to deal with such as instructions from funeral directors, the maintenance of a register of interments, the keeping of accounts and issuing of receipts and dealing with the increasing volume of enquiries from genealogists carrying out searches. In his experience there were 5 or 6 calls associated with every burial and a telephone and informed person to answer it were necessary for the proper functioning of a cemetery. Given the level of activity specified in Mr Sharp’s projections then such a full-time person would be necessary. He observed that the former Edinburgh and Essex Property Management Limited the previous owners to Freshbright, had employed a clerk in an office as well as a supervisor.

Mr McCallum’s evidence was that Mr Swift’s estimate of the number of employees required was short of at least one gravedigger bearing in mind the volume of business in the subjects assumed in Mr Sharp’s valuation. At a rate of 7.5 grave openings per week the time needed for hand digging a 9ft by 3ft grave would be one and half days each for two men plus two hours attendance at the funeral and two hours back-filling. Therefore one and a half to two days would be required for each funeral which made the realisation of the anticipated number of burials per week impossible at the staffing levels proposed by the claimants. On the other hand an extra gravedigger allowed for the possibility of two graves being dug at the same time.

He also expressed the view that given the number of burials, interments and memorial applications assumed in Mr Sharp’s projections the employment of a clerical assistant would be necessary. He considered this to be not a general office function but specialist task for a well-informed person in a situation where it is important not to make mistakes. It should not be left to the supervising operative.

Submissions

For the claimants it was submitted that Mr Swift, whose experience of cemetery management covers a period of 38 years, should be preferred in his evidence of the necessary staffing levels to that of Mr McCallum who, although an independent witness, was rigid and inflexible on these matters. Because of its hierarchical structure a local authority might well require to have more staff than a private operator does.

For the acquiring authority it was submitted that given that hand-dug 9ft by 3ft graves were in contemplation by the claimants then more manual labour would be required and four operatives, as justified by the evidence of Messrs Bell and McCallum, would be necessary for the volume of work anticipated. It was significant that Mr Swift had initially indicated that he had not looked at Mr Sharp’s turnover figures when assessing the expenditure required to service the operations.

Mr Swift had made no provision for a clerical system for the operation, arguing that it was allowed for in the overheads of the operation, but that assumption was not supported by the accountants’ report. Nevertheless Mr Swift had accepted the need for such a service the cost of which should be taken into account.

Tribunal’s Finding

Although the suggestion was made by the Claimants that the level of local authority standards for staffing spoken to by Mr Bell and Mr McCallum may be rigid and unnecessary we accept that there would be a need for four operatives to manage the volume of business anticipated by Mr Sharp in his projections. That level of activity is high and although Mr Swift from his experience may have considered the needs of a similar sized cemetery under normal operation he had not taken into account the proposed scale of these operations. In addition, at the claimants’ own insistence, the subjects are to be developed with 9ft by 3ft graves which, even allowing for the removal of bulk material where practicable by mechanical means, implies a more intensive use of manual labour.

It is obvious that the level of staff is related to the number of burials expected to be carried out. Given the high number of projected sales and burials assumed by the claimants we accept the staffing levels proposed by the acquiring authority as necessary. On the alternative basis that the sales and burials assumed by the claimants are unrealisable we would have considered it safe to accept their staffing levels for grave digging and maintenance but basing this on the number of interments we have found to be feasible.

Regarding the requirement for a clerical system for the operation, there is no disagreement between the qualified experts that such a system is needed. We do not accept that the required clerical function, and associated telephone costs, is allowed for in the Robson Rhodes Report and it is therefore not allowed for in Mr Swift’s estimate of staffing costs. We accept the acquiring authority’s estimate of the cost of a full-time clerical assistant in the annual sum of £11,280 would have been required to meet the claimants’ projected sales. As the level of business would in our view be considerably less, a part-time employee, at half that cost would have been appropriate.

We therefore find that the staffing complement and related costs to meet the claimant’s projected level of sales should be £87,155 as estimated by the acquiring authority. On the alternative basis that the cemeteries would operate at the much lower level of activity we have found we would have been prepared to accept the claimants’ estimate of staff costs but including for clerical costs, as follows:

Staff Costs £
Supervisor 15,000
Three operatives @ £9,300 27,900
Employee’s N.I. contribution 3,650
Protective clothing 400
Part time clerical assistant 5,640
52,590

Premises Costs

Evidence

Mr Swift has allowed for an annual cost to the operation of £2,800 in respect of ‘other premises costs’. In Robson Rhodes’ Report, in Schedule 2 under ‘Premises’, allowance is made for ‘Other Premises Expenses’ in the amount of £2,800. £2,600 of that amount is in respect of the cost at £50 per week of two ‘high-security jackleg storage containers’ each approximately 10m x 3m. One of these would be fitted out as a mess room and washroom and the other would be used for the storage of equipment. The remaining £200 is in respect of the annual cost of providing a locked and attended yard for the grave-digging machine and a small lorry.

Mr Swift’s evidence is that this would be adequate provision for the cemetery operation. It would permit washing and toilet facilities and would be acceptable accommodation both as a rest room and as an office. While he accepted that these facilities were in the nature of temporary accommodation he nevertheless felt confident that planning permission would not be a difficulty. He postulated a series of temporary planning permissions.

In his evidence Mr Cownie gave his calculation of the necessary annual premises costs, as follows:-

Office 500 sq ft @ £5/sq ft 2,500
Store 1500 sq ft @ £2/sq ft 3,000
Yard 300 sq yds @ £1.5/sq yd 450
Rates 2,800
Electricity 500
Maintenance 1,000
Total 10,250
Called £10,000

These estimates do not allow for a mess room.

Mr Cownie was of the opinion that there was no suitable site for these buildings at either cemetery. No allowance had been made in the agreed calculation of available lairs for space for buildings. It was unlikely that planning consent would be available for use of steel containers on a long term basis as office facilities at a cemetery.

Mr Bell did not consider a container to be of an appropriate style for an office at a cemetery. He was concerned that the records of the cemetery should be secure and free from any risk of damp or fire damage. He was of the opinion that the provision of an office would be a necessary initial outlay and that it should be properly equipped with toilets and a safe and suitable storage space for cemetery plans. He was of the opinion that the claimant’s proposal for a mess room was inadequate. Proper mess room accommodation was required with a toilet, washing facilities and a clothes drier. He was further of the opinion that the provision for the storage of machinery was inadequate. The vehicle and grave-digging machine would require to be garaged and the legal requirements for the storage of fuel would have to be met. Mr McCallum shared these views.

Mr Bell also felt that the office should be separate from the operational facilities of the cemetery. He was not aware of a suitable location for these facilities and believed that there would be a problem with planning permission.

Mr McCallum supported the need for an office on site as a point of contact for the public and for funeral directors. It would also be needed to house the register in a fireproof safe.

Submissions

For the claimants it was submitted that the acquiring authority’s views on the provision of office accommodation was one way of dealing with that aspect of the business, but it was not the only way and the private operator was free to choose his own way.

For the acquiring authority it was submitted that although the claimants had not made provision for clerical back up Mr Swift had nevertheless accepted the need for it. The proposal of two containers within which to house the various necessary functions of the operation of the cemeteries was clearly inadequate. It was also clear that although these facilities had been treated in the appraisal as annual costs the provision of adequate premises was in fact a substantial initial cost.

Tribunal’s Finding

There are a number of aspects of the claimants’ proposals that appear to be unsatisfactory. Mr. Parker’s stated intention was to make the subjects the cemeteries of ‘first choice’. However, the facilities to be provided and to which the public will have resort are to be housed in metal containers. No site has been selected for them and no space has been provided for them in either of the cemeteries. No provision has been made in the costs for the installation of a water supply or foul water drainage at these cemeteries. It is assumed that planning permission will be forthcoming, for structures that Mr Swift thought temporary in nature, over the whole twenty-year period.

The position here is similar to that of staffing costs where we are of the opinion that the acquiring authority’s proposals for suitable permanent buildings are more realistic in the light of the scale of operation envisaged by the claimants. The basic facilities proposed by the claimants might have been acceptable for the more modest amount of business which we accept as established in this case.

Initial Costs

Evidence

It is a feature of the claimants’ appraisal of the worth of the land forming the subjects that all costs, of whatever nature, are expressed as an annual outgoing. They make no provision for any initial costs at the commencement of the trading period of twenty years.

The acquiring authority maintains that substantial costs would have been necessary at an early stage in the operation in respect both of buildings and works to restore the condition of the cemeteries, including repairs to the entrances.

There is no allowance for any initial expenditure in Mr Sharp’s analysis. Mr Swift agreed that upgrading work did need to be done to the cemeteries but felt that this could be done gradually. He has made an allowance of £10,000 a year expenditure over a period of 10 years for ‘site improvement costs’. These he said were tree planting and the upgrading of roadways and fencing. There is a separate allowance in ‘maintenance costs’ for the ongoing repair of signboards and roadways.

There was a good deal of confusion in the acquiring authority’s evidence of work actually carried out by them when they took over the cemeteries. It was impossible to have any confidence in the overall figures put forward which did not distinguish clearly between the four cemeteries. Vouching was available for maintenance work at specific cemeteries but such items fell far short of the amounts contended for in the Answers. Mr Cownie accepted that not all of the works that the local authority had carried out would be categorised as necessary, but he nevertheless believed that about £40,000 should be allowed for each cemetery. He would annualise that amount over 20 years at 8% allowing for repayment of the capital sum.

Submissions

For the claimants it was submitted that the costs initially incurred by the acquiring authority were never vouched for and appeared excessive. In any case it is not clear that all of these works were actually necessary. The acquiring authority’s way of doing things was laudable but was not the only way of doing them. The works that they had undertaken were not relevant to the needs of a private undertaking.

For the acquiring authority it was submitted that there were significant costs incurred to upgrade the cemeteries when they were taken over. These works had been justified in Mr Bell’s evidence, but had not been allowed for in Mr Swift’s estimates. Although Mr Swift had not accepted all of the items of initial expenditure as necessary he had agreed that upgrading was necessary. As to the supposition that such expenditure could be deferred Mr Bell’s evidence was that it was an initial expense necessary to attract business back to these cemeteries. The tribunal should prefer the costing made by Mr Cownie.

Tribunal’s Finding

Because of the nature of Mr Sharp’s appraisal, where there is no capital expenditure but only annualised costs, it is necessary to compare like for like. Mr Swift’s estimate of £10,000 per annum for site improvements over ten years equates, at the 7% used in Mr Sharp’s analysis, to a present value of £70,236. In the second ten years no allowance is made for any such expenditure. Mr Cownie’s initial cost, having been incurred at the outset has a present value of £80,000. At his rate of 8% (to include for repayment) over a term of 20 years, this equates to an annual amount of £8,148. That amount would be made up, in the first year, of repayment of interest at £6,400 and repayment of capital at £1,748.

If the initial costs of £80,000 were annualised over 10 years, to make direct comparison with Mr Sharp’s figure, then the payment per annum would be £11,922, to account for both principal and interest.

Expressed in these terms there is insufficient difference for us to find a need to make any adjustment to the claimants’ estimate of annual costs for improvements, especially where the somewhat greater amount allowed for by the acquiring authority is disputed as being unnecessary. We find therefore that the claimants’ allowance for site improvements is acceptable.

However, we understand that the acquiring authority’s criticism in respect of initial costs is principally directed at the procedure used in Mr Sharp’s valuation in that it fails to deal with costs at the time when they occur and does not make provision for amortisation for the repayment of capital.

These concerns were not pursued in any detail. It is sufficient to observe here that the present value of initial costs allowed for in Mr Sharp’s valuation is calculated on the payments made at periodic intervals over ten years being accumulated to a total of £100,000 at year twenty and discounted from that future time. On that basis, at his discount rate of 7%, the present value of the periodic payments made in respect of improvements is the very much smaller sum of £25,842. That can be compared with the acquiring authority’s £80,000. This example is illustrative of the concerns of the acquiring authority regarding the procedure employed in formulating the claim. We now go on to examine these concerns.

Valuation Procedure

Although Mr Anderson submitted that therewas no dispute as to the basis adopted by Mr Sharp as an appropriate method of approach to assessment of market value of the subjects, it became clear that there was a dispute over fundamental aspects of the way the exercise had been carried out in addition to the challenge to the quantum of various items included. The difficulties exemplified under the last head may be seen as symptomatic of such dispute. We deal with this under reference to the “procedure” adopted.

Evidence

Mr Sharp’s method is one that capitalises a right to an income over a period of twenty years by averaging annual net income over the period, cumulating it at year twenty and deriving the present value by discounting from that cumulative amount. He expressly accepted that it could be treated as a profits method of assessment of the value of the land. That method was apparently one that he had employed in valuing the assets of the Great Southern Group. In this case he had added to the present value of that future amount of income a figure for the value of the land of the subjects at a rate of £500 per acre as at the date of the valuation. He accepted that this figure would not be relevant until the end of the 20-year period and that it too should be discounted.

Mr Sharp was happy to acknowledge that his approach was a simplified one. He considered that that had avoided the need to account for any capital costs by converting all expenses to their annual equivalent. He had not attempted to estimate changes in income or expenses over time. By discounting net income over the full twenty-year period he had reduced the net present value. His reason for doing so was that he wished to take a conservative approach to the valuation of the land forming the subjects.

He agreed that he had not attempted to make any allowance for a return of profit to the business; and that he had not allowed for any repayment of the capital which would be required to sustain the losses, which his figures revealed were due to be experienced in the first four years of trading, but which were not explicit in his appraisal. As we have discussed above, if there was no material increase in lair sales until the start of the assumed monopoly, much larger losses would be incurred over ten years. Mr Parker explained that such losses would be met from the funds of companies associated with Freshbright Cemeteries and that they would require to be accounted for.

In his evidence, Mr Cownie pointed out that although Mr Sharp’s valuation was based on the principle of the profits method all of the net income was attributed to the land and no allowance had been made for any profit to the operator of the cemeteries. In his experience ground rent returns varied from 10 to 20% of the rack rent depending on whether the use was moveable and on the degree of goodwill attaching to the operation. In the case of these cemeteries, where the operation was tied to the land, he would have used a rate of return of 17%. On that basis the value of the land would be a small proportion of the value of the whole enterprise.

Mr Cownie also contended that in Mr Sharp’s valuation the income from the cemeteries had been capitalised using too low a rate of return given that the income derived was from the operation of a business. He would prefer a rate of 15%. He had calculated that by applying that rate and apportioning the majority of the net present value to the operation, the value of the land of each cemetery would be reduced to less than £5,000.

He also disagreed with the addition of the value of the land £500 per acre even at year twenty when the trading operation ceases. In his view a completely exhausted cemetery would be a burden on the owner because expenditure would still require to be met for maintenance, while income would disappear. In cross-examination Mr Swift had agreed that maintenance costs would continue to be incurred after the cemetery was exhausted and that he should perhaps have allowed for that in his calculations.

Submissions

We have referred briefly to specific parts of the submissions in dealing with the individual factual issues in dispute. When considering the procedure of assessment some of this material is relevant and a degree of repetition inevitable.

For the claimants, Mr Anderson submitted that the acquiring authority’s approach to the value of the subjects was flawed because they considered that the question of valuation was entirely internal to the existing operation. They were blinded by their own aspirations and experience, and were incapable of considering how a private operator might proceed.

Mr Sharp on the other hand had not valued the existing business but had valued the land on which the business depended. In doing so he had proceeded on a worst case scenario. It was a very conservative approach. From the evidence that had been given it could be seen that there had been a huge increase in fees since 1994, but he had taken income and expenses at fixed rates for the whole twenty year term.

The private sector would look at the two cemeteries, with graves available, as an asset. The fact that the acquiring authority considered these assets to be less desirable than their own cemetery at Mortonhall was irrelevant. The comparable transaction to which they had referred such as the purchase of Morningside at £5,000, and Comely Bank and Warriston Cemeteries at £10,000 each, were not relevant because Morningside was closed and there was an unresolved dispute at the other two as to the number of graves available.

Given that there was agreement here as to the number of lairs available it was impossible simply to value the assets at Corstorphine Hill and Saughton at figures of £5,000 each. While it is acknowledged that there is a difference between the cost of new cemeteries and their value in use there is nevertheless a correlation between them. On the basis of cost per acre, of those cemeteries cited by the Claimants as comparables, the average figure is £73,250. On the basis that there were 6,862 graves available at the subjects, occupying an area of 6.86 acres then the cost of the land might be expected to be £502,495; at 4,632 graves and 4.63 acres then the cost of the land might be expected to be £339,147. These amounts had a relationship to the values attributed by the claimants for the subjects. That being so the acquiring authority’s approach was simply untenable.

He stressed that the claimants had set out the full detail of their calculations and the tribunal had the benefit of Mr Sharp’s valuation. The acquiring authority had criticised it but the tribunal had not been provided with any calculation they could use to test their criticisms. While the tribunal might take a view as to the quantification of any of the assumptions that Mr Sharp had made, which were admittedly indicative, and might not accept all his actual figures, the claimants’ basis of valuation should be adopted with such variation as the tribunal thought fit.

For the acquiring authority Mr Stuart submitted that Mr Sharp’s valuation had made no allowance for any profit going to those operating the business and there had been no attempt to apportion profit between the land and the business. Such an apportionment required to be made. In considering the appropriate rate of return the tribunal should accept Mr Cownie’s 15% as a rate of return to a business, in preference to Mr Sharp’s 7%.

He submitted that there was no evidence of a market for the subjects to justify the values attributed to them by the claimants as at 1994. Mr Sharp’s evidence as to the condition of the market for cemetery land in Edinburgh and the potential purchasers who may be interested was all speculative and had not been supported by evidence. In fact there was no evidence of there being anyone in the market in 1994. Mr Sharp had supposed that funeral directors might be interested but Mr McCallum had said that it was highly unlikely that they would want to be involved.

The fact was that there had been an opportunity to purchase the subjects in 1992. The claimants then acquired all six cemeteries for £3,000 together with an agreement to share in development profits. It was clear from the missives that the business, and its liabilities, had not been acquired. Suggestions that the true price paid included such liabilities were not well founded. The liquidator had rejected a higher offer from the acquiring authority in favour of a lower land price together with a share of development value. That scarcely suggested that the claimants were then interested in the cemeteries as cemeteries. He submitted that in his attempt to persuade the tribunal that there was a market Mr Sharp had made extravagant assessments of the returns to be expected. He had considered all four cemeteries including the subjects to be worth £460,000, based on much greater lair sales rates than £165, so that it is difficult to see how he could now support a higher valuation for the two subject cemeteries at a rate of £165 per lair. It was clear from the evidence that the cemeteries were bought by the claimants for development and not as cemeteries. There is only Mr Parker’s suggestion that the liquidator did not properly market the cemeteries. Since he is a former director of the claimant company which stands to gain from an award of compensation the tribunal should be slow to accept his evidence.

We have already dealt with Mr Stuart’s submission that the claimants’ figures were vitiated by being based on the assumption that they would have an effective monopoly. Mr Stuart also pointed out that Mr Sharp had accepted that the subjects were not commercially sustainable at the present state of business. There was no adequate evidence that there would be any market for the subjects as commercial cemeteries. The expenses would always exceed the returns.

On that part of the claim that sought to add amenity value to the supposed commercial value of the cemeteries, Mr Stuart submitted that there was no evidence that they had additional value as amenity open space. The land had to be valued now either with reference to profit or with reference to its worth as open space, but not both. He further submitted that there was no basis upon which the cost of acquiring a green field site could be used to value the subjects. Cost does not necessarily equal value and the only value of the cemeteries is as open space in the absence of any value on a commercial basis.

Tribunal’s Findings

The differences between the parties in respect of the procedure of valuation arise in part out of the nature of the subjects themselves. The operation of a cemetery as a business is one where the land upon which it depends for its operation is not normally traded. The evidence in the case is that when new land is acquired for cemetery use then the purchase price is not established from the use itself but from an alternative and perhaps higher use for which planning permission might be expected. The land being acquired for the replacement of Mortonhall is agreed to be valued on the basis that there exists the hope that at some future time housing development may be permitted albeit that it is currently part of Edinburgh’s Green Belt.

Parties agree that it is not possible to compare the land value of an existing cemetery directly with that of land newly acquired for that purpose. We think this entirely realistic. The competing use values in the latter case may well be much higher.

Faced with an absence of data from comparable transactions, and with the evidence of Freshbright’s loss making, Mr Sharp has valued the income of the subjects, in use as a cemetery in the hands of a vigorous private operator. He has capitalised that income to establish open market value. However, he has then been faced with the difficulty that the income can not be capitalised in perpetuity since the source from which it is derived is in the nature of a wasting asset. For that reason he has projected the income to terminate at the end of a twenty-year period; that term arising as a result of the exhaustion of the cemeteries at his assumed rates of depletion.

The difficulty with using a valuation based on the performance of a hypothetical occupier and not the actual occupier, is that the inputs into the valuation have then to be derived from comparative market information. As the acquiring authority submit, and as we have already determined in relation to certain of these inputs, the assumptions that have been made are not supported by the evidence available.

Mr Sharp had used this method in preparing an asset valuation for the Great Southern Group. Taking the object of an asset valuation to be the amount that it would be reasonable for a company to spend to acquire the asset in that financial year then the purposes of both methods would appear to be similar. However, the purpose of an asset valuation is not one that necessarily meets the open market value criteria of section 12(2) of the 1963 Act. It should also be noted that while Mr Sharp conducted his asset valuation for the Great Southern Group, as part of the accounts of that company and on the basis of information supplied by the company, the present valuation is conducted disregarding entirely the actual circumstances of the trading carried out at the subjects prior to the date of valuation.

We are of the view that the valuation procedure has obscured certain factors that would be of importance to any prospective purchaser of the lands forming these cemeteries. Firstly the method obscures the fact that losses are to be made in at least the first four years of operation even although no initial capital is invested in improvements. No servicing of the capital, which would have to be borrowed to meet these losses, is accounted for. On the evidence in this case, it would be difficult to convince a purchaser of the land that the net present value of the less certain future incomes after four years was a figure that would recoup the certainty of these initial losses.

Secondly, the net income which accrues over the twenty-year period and which is discounted back to 1994, is treated entirely as if it was rent attributable to the land. The income has therefore been treated in a different way from the income from other property such as a farm, or office block, or quarry where the rent or royalty which is used to capitalise the value of the interest in land is distinct from the income earned by the business which occupies the property and which is the reward for the risks associated with that enterprise for which the land is a factor of production.

Mr Sharp has analysed the net present value on the basis of the returns to the business but he has used a capitalisation rate of 7% on the basis that this is an appropriate rate for such a business because its income derives directly from the land. We accept that it may be possible to derive the capital value of the land direct from a method of determining the present value of the sum of the flow of net income. A percentage might have been selected which reflected not only the risk factors pertaining to the operation of the business but also the appropriate return to the land. It was, however, clear from Mr Sharp’s evidence that his selection of 7% was intended as his choice of discount factor to reflect his assessment of the business as a whole. We accordingly consider that in seeking to adjust his figures in the circumstances of this case, it is appropriate to select what we consider to be a suitable discount rate to reflect the risk involved in the business as a whole and then to consider what proportion of the resulting amount might be attributable to the value of the land.

Mr Cownie thought that 15% applied to the net income calculated in Mr Sharp’s valuation would be more appropriate, because that was a return appropriate to the whole business and not the land. Mr Parker said that the commercial return for operation of the cemeteries which Freshbright worked to was about 15 to 20% and that the return he had calculated from his business plan was 20%. That percentage seems a safe one to employ for a return on the cemetery operations at the subjects as a business.

The effect of applying a rate of return of 20%, to Mr Sharp’s capitalised net income (for both cemeteries) of £1,428,880 is to reduce that figure to a net present value of £37,270. We consider that 20% would have been a reasonable risk figure in 1994. However, as we have noted, the contention of the acquiring authority is simply that 15% would be more appropriate than 7% and, for the present purposes, we proceed on the basis of 15% which produces a present value of £ 87,304.

As has been said, Mr Sharp’s capitalised net income makes no allowance for profit. The net present value on the basis of his figures therefore includes the value in 1994 of both the right to extract profits for twenty years and the value of the land. There was no evidence as to how the assessed present value might best be divided between the two elements. Mr Cownie suggested that in the circumstances the land would attract the lower weighting. We accept this and consider that this evidence might reasonably be reflected to allocate 40% to the land and 60% to the goodwill of the operation. Accordingly, if all Mr Sharp’s assumptions as to fact had been sound, the necessary corrections to his calculations to reflect our view of the risk and profit elements would produce a figure of the order of £35000 as the value attributable to the land in respect of which compensation is to be assessed. However, as we have said we do not accept the assumptions for the critical variables upon which that valuation is based.

Finally, we do not accept Mr Sharp’s insistence that the land has an additional residual value over and above that as an operating cemetery and agree with the acquiring authority that the cost of maintaining the subjects after they were exhausted would effectively cause them to have a negative value.

We find therefore that, on the evidence, the calculations carried out to justify the claims made in this case do not support the proposition that the subjects have a value other than as open space as claimed by the acquiring authority. This is supported by the direct evidence to the effect that there was no market for these subjects as cemeteries in 1994. The acquiring authority were not seeking to purchase them as cemeteries. Their preference remains that which they are pursuing, that is, the opening of a new cemetery with modern facilities. The primary purpose for which the acquiring authority bought the subjects, following public pressure, was as public open space. They will continue to operate them as cemeteries but plainly the income they derive does not allow this to be seen as a commercial enterprise. We are satisfied that the claimants themselves did not buy them as cemeteries but as sites for development. We did not find persuasive the evidence of Mr Parker that he had acquired the various cemeteries with a view either to development of them or to operation of them as cemeteries. Had the latter been seriously in contemplation, the compulsory purchase procedure could have been resisted. There would have been no justification for acquisition by the acquiring authority if the claimants were to operate the subjects as cemeteries, maintaining them in good condition while doing so. Mr Parker said that they had not opposed the compulsory purchase orders because of hostile public opinion. However, if he had indeed intended a positive strategy of discouraging use of the subjects until they had a monopoly position, there would have been no need for positive public approval at the outset. They would have had ample time to acquire public approval by demonstrating the sincerity of their intentions. If it is true that the public hostility made it impossible to operate the subjects commercially by the valuation date, that, of course, would tend to lead to the same conclusion as we have already reached that the land had no value in use as cemeteries.

We are satisfied that the probable availability of a replacement cemetery before space at Mortonhall was exhausted would have precluded any commercial interest in the subjects in May 1994. Even if a potential purchaser had considered this particular factor sufficiently uncertain to be worth a commercial gamble, we are satisfied that on a realistic assessment of the other disputed issues in the case, there was no identifiable prospect of sufficient gain to attract an investor to take any gamble.

We, accordingly, find that the value of the subjects as calculated by the claimants is unsupported. We accept the figures, amounting to £8,824, proposed by the respondents in respect of the value of the subjects.

Other Heads of Claim

The Claimants presented a separate claim in respect of extinction of the business. The schedule in support of this listed nine separate headings but the detail available in support was somewhat exiguous. Various vouchers were produced. We accept that, unless challenged, productions can be accepted at face value as being what they bear to be. However, it was not entirely clear what all the vouchers bore to be. Mr Parker commented briefly on some of them. In cross examination he accepted that he was really only advancing the first and second claims and the others “to some extent” .

It was expressly accepted by Mr Stuart that claims arising from total extinguishment of the business were open to the claimants in addition to their main claim based on the whole value of the subjects. A question of compatibility with the main claim might have arisen but would not arise if the subjects were accepted as having nothing but amenity value. In the circumstances no issue of principle arises.

The first head was in respect of “Plant, machinery and motor vehicles – Book value written off”. This was put at £3275 and was supported by a page from the annual accounts showing this figure as the total cost of equipment. The accounts also showed the same figure under the heading of “disposals” on 1st May 1994. What the real value was and what became of the items was not established. We heard specifically of a van written down to £800 which then had to be written off. It was not established that this was due to the compulsory acquisition and we are not clear why it might have been. It is clear that the claimants acquired old equipment when they took over the subjects and there is simply no basis upon which we could reasonably attempt to assess the actual loss.

A figure of £1615 was claimed under the heading “R.Gill redundancy payment and Industrial Tribunal expenses”. It is reasonable to assume that as a consequence of the acquisition there would be a need to make redundancy payments of some sort. The claimed figure appeared, on the material put before us, to relate mainly to expenses of disputed proceedings. We accept that circumstances might well arise where that would be a good head of claim. However, the Tribunal will always have to consider whether a claimed expense was incurred reasonably and as a direct consequence of compulsory acquisition. We cannot begin to carry out that exercise without proper information as to the circumstances in which the expense was incurred. There may be situations where, as matter of common sense, it is possible to proceed on a presumption that professional fees incurred have been incurred reasonably if it can be shown that they are causally related to the compulsory purchase. However, it was not suggested that we could take that approach in relation to this item. It is plain that the claimants were unsuccessful in the litigation. Mr Parker’s evidence made no real attempt to persuade us that this was an item for which the respondents should be liable. It was only in cross-examination that it emerged that the issue before the Industrial Tribunal had related to continuity of employment.No attempt was made to demonstrate that the point was a reasonable one to dispute. The productions do show that a cheque for £600 was paid to the employee’s solicitor. It was not altogether clear whether this was in respect of the redundancy payment found due or the solicitor’s expenses but it is clear that a redundancy payment had, eventually, to be made and we accept that the £600 was probably in respect of this. We think it unnecessary to attempt to apportion this in any way to reflect the fact that there were initially six cemeteries. His claim would only arise when the last of them was sold and it is plain that the present subjects were most likely to continue.

We accordingly assess £600 as the appropriate award in respect of claims 1 and 2.

The other items on the schedule totalled about £30,000. Six were listed under headings purporting to show payments in respect of legal fees, valuation and consultancy fees, accountants’ fees and geophysical survey fees. The final item was headed “Sundry expenses including travelling expenses”. The detail these productions provided was very limited.

We think that some confusion has arisen from the grouping of these various claims under the heading of claims for extinction of the business. In cross-examination, Mr Parker accepted, for example, not only that the accounts from Gerald Eve and Henry Butcher & Co involved some duplication but also that they were not related to cessation of the business: they were, he said, “just advice”. Following his evidence, Mr Anderson, in submission, made no positive attempt to support the claims under heads 4,5,6,8 and 9. He made submissions only in respect of heads 3 and 7. Mr Stuart made a general submission in reply dealing not only with the absence of proper detail but stressing that the claims admittedly covered all four cemeteries and that no attempt had been made to identify fees appropriate to the present subjects. He dealt expressly only with the said heads 3 and 7.

However, Mr Anderson did not expressly abandon his claims for professional fees. He explained the difficulties encountered in finalising matters in respect of the claims for the other two cemeteries. We understood that there was a dispute as to whether professional fees were included. He suggested that it might be necessary to return to the tribunal. On consideration of this matter it appears clear to us that this submission is inconsistent with complete abandonment of the claims 4, 5, and 6. Mr Stuart plainly assumed that he did not have to deal with these heads. This was a reasonable assumption based on the approach taken by the claimants. We have come to the conclusion, however, that there was a genuine element of confusion which, unfortunately, was not apparent at the time.

The issue of professional fees does cause confusion in relation to claims for compensation. Although the theoretical basis may be open to discussion, it is well established that the reasonable cost or expense of professional advisors assisting in matters related directly to “disturbance” or to the formulation of an appropriate claim can properly be taken into account as an element of compensation. This is often done, at the end of a submission, almost as matter of rote, by a request to add surveyors’ fees “on the Ryde scale”. The distinction between such an element being added to the compensation and being part of a claim for expenses may sometimes be overlooked. The statutory provision in relation to claims under the Land Compensation (Scotland) Act 1973 for compensation for depreciation caused by public works may also tend to blur the general distinction. Under section 3 (5) reasonable legal or valuation expenses are payable “in addition to the compensation” but without prejudice to expenses of proceedings before the tribunal.

There may, of course, be an overlap between outlays by way of professional advisors fees which could fall to be dealt with as part of the compensation, and those which could be expenses of proceedings before the Tribunal, falling to be taxed as part of the expenses of process. However, it is necessary to draw a distinction. The total awarded as part of the claim for compensation may itself have consequences in expenses.

It is plain that the items “vouched” in the present case, if recoverable at all, fall into the former category. They must be dealt with now as part of our determination of compensation. Because of the real risk of prejudice to parties as a result of what we see as a genuine confusion over heads 4,5 and 6 we have decided that we should give parties a further opportunity to make submissions in relation to these heads before determining whether any part of them should be allowed and if so, what part. For the avoidance of doubt, we make it clear that we continue only for submissions: not for further evidence. However, as Mr Anderson did raise the issue of the other settlements we would be prepared to take account of representations or documentary information as to what, if anything, had been done in these cases by way of allowance for professional fees.

We heard submissions on head 3 and 7 and consider it appropriate to determine these claims in the ordinary way and on the basis of the information now available. The invoice of 26 October 1995 from Bishop and Robertson Chalmers is for the period 1November 1994 to 25 October 1995 and bears to be in respect of fees in connection with the disposal of the claimants assets by compulsory purchase order; discussing the possibility of voluntary settlement; and investigating claims for compensation. The total, exclusive of VAT, is £3750. We are satisfied that this is potentially a good head of claim.

However, when a claim is made for outlays in respect of professional advice incurred as a consequence of a compulsory purchase, it is not sufficient that the fees were incurred. It is necessary that the Tribunal is satisfied that the fees charged were reasonably incurred and that they were reasonable. There can be no doubt that assessment of compensation in this case presented difficulties. We are satisfied that the claimants were entitled to take legal advice. Although we have little or no express material to judge the reasonableness of the fees charged, in light of our knowledge of the whole potential issues in the case, the fee of £3750 does not seem unreasonable for the activities it purports to cover. The claim made was inclusive of Value Added Tax. We are aware that in many cases a claimant is likely to be registered for VAT and will have no loss in respect of such tax on in-puts. However, that is not invariably so and it may well be that the nature of the present claimants’ business did not allow any set-off. As we heard no challenge to this, we consider that this element must be allowed.

There is no doubt that the fees were incurred in respect of more than the subject cemeteries. Two of the original six had been disposed of before the period covered by this fee but plainly it related to all the remaining four. The underlying thrust of the acquiring authority’s case was that this was fatal to the claims as presented. We do not accept this. This is not a case where the other items covered are wholly unknown and where it is impossible to make any realistic assessment of the element in the fee which is foreign to the claim. We are satisfied that the nature of the dispute was such that the bulk of the fee would probably have been unrelated to the precise number of cemeteries in dispute. In other words, the major part of the fee would have been incurred in respect of claims for the two subject cemeteries had they stood alone. Nevertheless, the onus is on the claimant. We have nothing to show precise proportions and accordingly consider it appropriate to allow 50% of the £4406.25 claimed.

We are told that there is a dispute as to professional fees in relation to the settlements already reached. The fact that the parties were in contention over these items in the present case makes it clear that no agreement was reached on this item as a whole. Had any allowance been made it would have been relevant to the present claim to avoid risk of double counting. We consider it reasonable to proceed on the basis that either no such payment was made or that it did not exceed 50% of the fee charged. Accordingly no further adjustment is necessary.

In respect of head 3 two further vouchers were produced: an invoice for £837 bearing to be in respect of a Sheriff Court action at the instance of Edinburgh District Council against the claimants, and a fee to counsel apparently in respect of this same action. No attempt was made to insist in these claims and it is plain that they have not been established as causally related to the compulsory acquisition. We reject these two items.

Head 7 was in respect of two fee notes from Robson Rhodes, totalling £7500, and each bearing simply to be in respect of “Expert witness report on ‘Extinguishment of Business’ claims resulting from Compulsory Purchase Orders”. The invoices were dated 27.10.95 and 31.01.96. Mr Parker explained that this firm had been instructed to carry out an “arms length” valuation in preference to using their own accountants. No expert report bearing to have been produced in 1995 or bearing the above title was produced or referred to in evidence before us. Nothing in the evidence was available to demonstrate how fees of £7500 came to be incurred under this head. We have no material to allow us to say whether it was reasonable to employ an independent expert in preference to accountants already familiar with the business and who might accordingly have been able to advise on this head without significant expense.

We are aware of course that a report was prepared in 1998 by Robson Rhodes and used as part of the evidence of Mr Sharp. As noted below a motion was made in respect of that report as part of the expenses in the cause. There may have been an overlap between the work done in 1995 and the work in 1998. Indeed it may be that the report referred to in the invoice was simply updated. The name given to it in 1995 may have been misleading. However, although views have been expressed suggesting that the Tribunal’s jurisdiction in matters of compensation require us positively to investigate potential claims which are unclear on the evidence presented to us, we do not accept that as a duty. Our task is to determine disputed claims. Parties must present cases to us. While there may be situations when we would consider it essential in the interests of justice to make or permit further enquiries to be made these will be rare. In absence of special circumstances we must decide on the material presented to us. We are not able to supplement the gaps in this case by any reasonable clear inference. We are not satisfied that any reasonable inferences can be made which would allow us to accept the work done in 1995 as arising directly as a result of the acquisition far less that it was reasonably incurred and reasonable in amount. Accordingly we reject the claim made in respect of fees to Robson Rhodes as an element in our assessment of compensation.

The item headed“Geophysical survey fees” was a letter instructing survey in 1996. There was no evidence that this had been carried out. The final head was a claim for £2690 supported only by a voucher from Parkers Ltd dated 5th January 1995 for £915 in respect of a “Business trip to Edinburgh”, no detail of the purpose. These two heads were not insisted in and we reject both.

The effect of our present decision is that compensation in respect of the “other heads of claim” is that there is an interim assessment of £2803.13 to be added to the said sum of £8824. If any award is made in respect of the heads 4, 5, and 6, this will, of course be in addition.

Parties were agreed that expenses should be reserved. They were also agreed that Mr Sharp and Mr Swift be certified as expert witnesses for the claimants and Mr McCallum for the acquiring authority. Mr Anderson also asked that the author of the Robson Rhodes report be certified as an expert witness. It was submitted that the test was whether he made a special examination to fit himself to give evidence. It was not necessary that he actually gave evidence as a witness. He agreed that this was a matter where the Tribunal might have to examine the law for itself. In the event, however, our investigations have left us uncertain as to the appropriate approach. We consider it desirable to follow practice in the ordinary courts where possible or at least to be confident that we understand that practice and can properly consider whether the particular circumstances of Tribunal procedure justify a variation. The expenses of experts may be recoverable without certification. We have, of course, rejected a claim for compensation based on a report made in or about 1995. It would in any event be for the auditor to determine to what extent work carried out by them was properly a chargeable expense. If parties cannot resolve this matter and are unable to reach agreement in respect of the outstanding heads, we shall make arrangements to hear further submissions either along with or prior to any submissions on expenses.

· · · Interim Decision Issued: 24 May 1999 · · ·

Following the issue of our interim decision in May 1999, the application was continued to allow parties time to make any further submissions in relation to heads of claim 4, 5 and 6. These heads related to various professional valuation and legal fees and there had been some confusion over whether the claimants were intending to pursue such heads of claim in the light of settlement of the claims pertaining to Warriston North and Comely Bank Cemeteries.

Before any submissions were lodged, however, the Tribunal’s Interim Decision was appealed by the claimants to the Court of Session and on 17 October 2000 the Court dismissed the appeal. In the intervening period the claimant company went into liquidation.

The Clerk to the Tribunal has now received formal notification from the solicitors acting for the appointed liquidator that the reference to the Tribunal is not to proceed. Similar confirmation was forwarded to the respondents. We are therefore not required to make any decision on heads 4, 5 and 6 and must regard them as not being insisted upon. Accordingly we are able to pronounce a final order determining that the total amount of compensation payable is in the sum of £11,627.13.

Beyond sanctioning the case as appropriate for the employment of Counsel, the question of expenses has been reserved. Written submissions from parties are invited on this matter.