Lands Tribunal for Scotland

OPINION

Burn Stewart Distillers plc
v
Assessor for Lanarkshire Valuation Joint Board

At 1 April 1995, the revaluation date, the assessor made an entry in the valuation roll in respect of subjects described as a Bonded Store at 16 West Mains Road, East Kilbride, (hereinafter the "Westmains subjects"), showing the appellants, Burn Stewart Distillers plc (hereinafter Burn Stewart), as the owner/occupier. As a result of negotiations between the parties, the net annual value was agreed at £212,000.

At the revaluation date the assessor had also made eight separate entries in the valuation roll in respect of a range of units at numbers 2-16 Milton Road, East Kilbride (hereinafter the "Milton subjects"). East Kilbride District Council were shown in the roll as owners of each of the eight units but occupiers of only one, number 16.

Effective from 16 February 1996 Burn Stewart leased the units 2-14 Milton Road from the District Council: the assessor entered these subjects in the roll as a single entry at net annual value £97,000 with the District Council shown as proprietor and the appellants as occupier. A short time later, on 1 April 1996, Burn Stewart also leased the unit at number 16 Milton Road and the assessor amended the valuation roll entry, now in respect of 2-16 Milton Road, to net annual value £110,000.

At the hearing on 19 and 20 December 2000 the appellants were represented by Mr Christopher Haddow, QC and the respondents by Mr John Wright, QC. For the appellants evidence was led from James C M Stirrat, Commercial Director and Company Secretary of Burn Stewart, Douglas G Smith, the company's Operations Manager and Colin W Hunter FRICS, a Director of James Barr, Chartered Surveyors. Mr Wright led evidence from Joan M Hewton BSc, FRICS, the Head of Non Domestic Service in the Lanarkshire assessor's office. The Tribunal carried out an accompanied site inspection on 9 January 2001.

The initial appeals lodged on behalf of the ratepayers related to a number of issues but prior to the hearing parties had intimated that the only issue remaining for determination by the Tribunal was the question of whether the premises at the two addresses should form a single entry in the valuation roll or remain as two separate entries. At the outset of the hearing there was brief discussion about the formal withdrawal of the appeal relative to the Westmains subjects, the wording of which, suggested that there was no longer an appeal outstanding against those subjects. However it was readily agreed by the parties that our determination of the outstanding 'unum quid' issue should not be impeded by any technicality of procedure.

Parties put before us a brief statement of the main arguments bearing on the dispute and also detailing the agreed net annual values consequent on our decision on the points in issue as follows:

(a)   If the subjects should be valued unum quid:
  Effective date: 1 April 1995 16 February 1996 1 April 1996
  Whole subjects: £212,000 £293,000 £304,500
    (16 West Mains Road) (16 West Mains Road and 2/14 Milton Road) (16 West Mains Road and 2/16 Milton Road)
(b)   If the subjects should be valued separately (effective dates as above):
  16 Westmains Road £212,000 £212,000 £212,000
  Milton Road - £97,000 £110,000
      (numbers 2/14) (numbers 2/16)

As can be seen from the above, the unum quid valuation as at 16 February 1996 is net annual value £293,000 whereas the separate valuations of the same physical subjects have a total net annual value of £309,000. The relevant figures at 1 April 1996 are £304,500 and £322,000. Mr Hunter told the Tribunal that the scheme of valuation adopted by assessors and private practioners incorporates end allowances in respect of, inter alia, quantum and layout. Accordingly, the unum quid assessments noted above reflect an increased quantum allowance and a deduction for the fact that the subjects of valuation are split by a public road.

It was apparent that a good deal of work, on both sides, had gone into preparation of material for the Tribunal. In addition to their own productions parties lodged a set of joint productions which set out much factual detail about the two sets of premises. The appellants had lodged a list of some 66 comparisons being sets of subjects throughout Scotland valued on a unum quid basis for the purposes of the 1995 revaluation. The parties had been able to agree certain details relative to each of these subjects. Although Mrs Hewton had expressed some reservation as to the value of trying to reach such agreement, pointing out that the Tribunal would, in any event, have to hear all material led about the various subjects, it is clear that there had been full co-operation in discussion and the agreement reached allowed the comparables to be dealt with expeditiously at the hearing before us. We wish to record our appreciation of the efforts of parties in their preparation for the hearing.

The following material was either agreed or established in evidence.

The subjects of appeal are situated in College Milton, which is an industrial estate located in the west end of East Kilbride. They lie on the west and east sides of Milton Road, respectively, at its junction with Glenburn Road. Access to the Westmains subjects was formerly taken on their east side from West Mains Road. However the subjects now operate from Milton Road. The postal address of the Milton subjects is 8 Milton Road and that of Westmains is 1A Milton Road. (We note however that the address in the valuation roll remains as 16 West Mains Road).

Viewed from Milton Road the subjects are quite distinct in appearance. The Milton subjects are visible over a low brick wall and have the appearance of a substantial office block with a car park in front. The storage areas, described below, lie behind the office and are not visible from Milton Road or from any part of the Westmains subjects. These subjects are partially screened from the road by a fence and a thick hedge. Access to the Westmains subjects is restricted and controlled by staff manning the gate-house. Although the Westmains subjects are described in the valuation roll as a "Bonded Store" they can more accurately be described as a bottling and distribution plant. The various office and canteen facilities in the Westmains subjects all have the appearance of being ancillary to that function.

The Milton subjects are part of a row of units known as numbers 2-22 Milton Road, constructed by the former East Kilbride Development Corporation in 1961 for the purpose of letting each unit on an individual basis to various occupiers who required relatively small, advanced nest-factory units. Units 2-16 were initially occupied by the Corporation's Direct Works Department and later by East Kilbride District Council, the statutory successor to the Development Corporation. As constructed the subjects consisted of eight self-contained units physically separated from each other by solid walls with no inter-connection. The front part of each unit was of two storeys with a larger single storey level to the rear. Each unit was entered separately in the valuation roll.

In 1995, Burn Stewart entered into an agreement to lease the units 2-16. In terms of the agreement the landlord was to carry out alterations and refurbishment of the subjects to meet the lessee's requirements. The work included slapping of openings in the walls of the rear single storey section of each unit to allow free internal movement of goods and personnel between the various units; removing walls at ground and first floor levels in the front two storey sections to allow corridors to run the length of the units at both levels, creating an inter-linked suite of offices; and creating a main entrance and reception area at the former unit 8. The internal walls in the warehouse were flush pointed and painted and the walls and ceilings in the office area were plastered and painted. The external appearance was enhanced by the creation of a glass fronted extension at the main entrance and the front elevation was clad with facing brick on ground floor level and glazed panels at first floor.

In terms of the lease unit 16 was sub-let to East Kilbride District Council from 1 April 1995 to 31 March 1996. The refurbishment of the other units, numbers 2-14, took place over the period from 1 April 1995 to 16 February 1996 when the appellants took occupation. They have occupied all the Milton subjects, numbers 2-16, since 1 April 1996. Accordingly, these Milton subjects as now occupied consist of a two-storey office building along the entire length of the units facing Milton Road with inter- connected single storey storage extensions to the rear. The total frontage to Milton Road extends to some 139 metres. Between the buildings and the road the ground is lined-out and utilised for car parking. This area is bounded by a low brick wall with vehicular access opposite the main entrance. The distance from the centre of the carriageway of Milton Road to the east face of the buildings is almost 20 metres.

The Milton subjects are of steel portal frame construction with cavity brick walling, rough-cast externally to the side and rear. The roof of the warehouse is multi-pitched with north lights and is clad with asbestos sheeting with natural light provided by translucent light panels. The roof is supported on metal trusses and has an eaves height of 3.8 metres. The roof of the front office section is flat and covered with a felt and chip finish. The flooring throughout is concrete. The services provided include warm air heating, telecom, data line and CCTV.

The Milton subjects provide the appellants with 39,000 square feet of dry goods warehousing and 14,150 square feet (over two floors) of offices. These subjects accommodate the Burn Stewart directors, namely, the Chairman, Group Managing Director, Finance Director, Managing Director (Operations) and Commercial Director. They also accommodate administrative and clerical staff dealing with visitor reception, UK and export sales, marketing, customer services, bond administration, information technology, company secretariat, personnel, secretarial and finance, payroll etc. About 30 persons are employed at the Milton subjects. The staff now accommodated there were formerly located in premises in Barrhead, Glasgow, Airdrie, and Deanston. Most of the staff of the Customer Services Department were formerly located in the Westmains subjects.

The staff of the customer services department includes the head of customer services, customer services manager, four administrators and a secretary. Their work involves liaison with the despatch warehouse on the Westmains subjects. The staff of the customer services department spend some of their time in the Westmains premises. The customer services department maintains a database on all bond movements. One member of the Westmains staff requires to update this on a daily basis. The database is used for compilation of monthly returns which require to be signed and authorised by the operations manager who is based in offices on the Westmains subjects.

The assistant company secretary who is responsible for the personnel administration of salaried staff is located in the Milton subjects. However the personnel office is within the Westmains subjects. This employee, accordingly, requires to make regular visits to the Westmains subjects. The staff of the UK and Export Sales Department number about six, including two secretaries. Their offices are located at the Milton subjects but their work requires close contact with all areas of operations and about four of these employees require, from time to time, to attend the Westmains site.

The staff of the secretarial, accounting and cash departments are based in the Milton subjects. Their work requires close contact with all areas of operation on the east side of the street and about two of the eleven employees require, from time to time, to visit the Westmains premises.

The Managing Director (Operations) is based in the Milton subjects. His responsibilities require him to visit the Westmains site on a regular basis. The Operations Manager on the Westmains site has frequent meetings with him in the offices on the Milton subjects. Operational staff are often required, at short notice, to attend meetings in the office premises. Four staff of the IT Department are situated in offices on the Milton subjects. Their work requires close contact with all areas of operation on the east side of the street. They regularly visit the Westmains subjects. Two staff in the Wages Department require to check, on a weekly basis, the Time Clock cards of employees in the Westmains subjects. They attend Westmains twice weekly to deal with pay queries.

The warehousing facilities at the Milton subjects are used as part of the chain of supply of packaging material. All the material stored there is eventually used on the Westmains subjects. The former unit 16 is maintained as a separate secure unit for storage of special promotional materials such as glasses and small gifts. These are then packed as required with the cases of spirits or liqueurs for supply at point of sale. These items are perceived to be of higher value than routine packaging material and are kept comparatively securely until needed. Such items are, accordingly, transferred to the Westmains subjects only for relevant production runs. During such runs they are held with the other packaging material at the Westmains subjects.

The movement of materials between the Milton subjects and the Westmains subjects involves the use of fork-lift trucks which, of course, must traverse the public road. We were told the company has 8 such trucks and that up to 20 return trips per day might be required.

The appeal subjects at 16 Westmains Road were formerly part of a much larger complex comprising 16-20 Westmains Road which was a purpose built factory erected in 1970 by the Development Corporation for a knitwear company. In 1989 that factory was subdivided into three separate units and in 1990 the unit at number 16 Westmains Road was purchased by Burn Stewart. The property purchased has frontages to West Mains Road on the east, Glenburn Road on the north and, on the west, to Milton Road opposite the Milton appeal subjects.

The Westmains subjects consist mainly of ground floor area with additional accommodation at lower ground floor level. As the subjects are on a sloping site both the ground floor and the lower ground floor have access to the main yard areas at the front and rear of the building. At the north-west corner of the main block there is a two storey office building and at the north-east corner there is another two storey projection.

The main building is of metal portal frame construction infilled with cavity brick/block and facing brick externally. The roof is multi-pitched and clad with profile sheeting with small northlight roof panels all supported on light steel trusses. The flooring throughout is concrete. The walls of the two storey office building are dry-dash rendered externally and the flat roof is of concrete.

The lower ground floor of the main building provides the appellants with just over 36,000 square feet of floor space having a ceiling height of 3 metres. The bulk of the area is used for the storage of cased goods but a relatively small proportion is office and cloakroom space and there are two goods hoists to the main ground floor. Approximately half of the storage area relates to the storage of cased goods being held in bond until the duty due is paid. The extension at the north east gable houses a boiler house and a despatch area with loading bay. The services provided include warm air heating, sprinklers, data line, telecom and CCTV.

The ground floor of the main building extends to fully 72,000 square feet and has an eaves height of 5.3 metres. This floor is occupied in part by a Vat Room with associated chilling plant and about one-quarter of the area is used as the Bottling Hall. The remainder is occupied for the storage of dry and cased goods and includes a Bonded storage area behind an angle iron and wire mesh enclosure. At this level the building at the north-east corner is a canteen with associated office, store and kitchen facilities.

The canteen provides facilities for staff from both subjects. The manageress of the canteen is also responsible for provision of lunches for Directors at the Milton subjects where there is a small kitchen. Staff are deployed between the canteen and the kitchen as required. Supplies of tea, coffee etc are maintained in the restroom area on the Milton subjects by canteen staff.

The Westmains subjects have a tarmac yard on all four sides of the building allowing vehicles to circulate the building. The yard is lined out for car parking to the front and rear. At the south-west corner of the main building is a gatehouse/office which is the obvious point of contact for delivery vehicles and others having business in the Westmains subjects. The distance from the centre of the carriageway of Milton Road to the west face of the building is fully 30 metres.

The Westmains subjects can be described as comprising of a whisky bottling complex and distribution plant with warehousing for packaging material referred to as "dry goods" and bottles, and bonded warehousing for cased products. Activities there include receipt and preparation of spirits and liqueurs, engineering services, purchasing and planning, materials control, whisky stock and quality controls, general and stationery stores, security, first-aid, restroom, canteen and staff shop. At any particular time there are between 80 and 110 persons employed at the Westmains subjects.

The appellants obtain some of the whisky required for the operations at Westmains from two distilleries owned and operated by them. These supplies are carried by tanker deliveries to the Westmains subjects. The distilleries are administered locally. These distilleries are operated by a minimum number of personnel of about 37. Raw whiskies are casked at the distilleries and then held to the appellants' order in warehouse facilities at the distilleries or elsewhere for maturation. The Westmains subjects are also supplied with spirit from the appellants' blending plant at Airdrie. The appellants buy about 60% of their required whisky stocks from third parties.

Burn Stewart originally operated a bottling plant at Barrhead and had office premises there. The bottling plant became inadequate for their purposes and they required to find another site. They moved to the Westmains subjects and started bottling there in 1992. It became apparent that it was inefficient to continue operating from the office at Barrhead and a decision was taken to sell the whole Barrhead subjects and move to East Kilbride. The appellants actively investigated development of the Westmains site to accommodate the necessary additional office premises. However no satisfactory arrangement could be found. They considered other properties adjacent to the Westmains site but these were either too expensive or too large. The local council became aware of their desire to bring their activities together in East Kilbride and suggested a lease of the various units at the Milton site. As the small units were, individually, no use for the purpose, the council undertook to carry out alteration and refurbishment work to convert the former several office units to one unified suite of offices with a central main door and reception area. They created various openings linking the rear premises to create open storage space. The appellants now lease these premises. There is provision in the lease for them to terminate it on one month's notice with related provision for them to make substantial payments on early termination, designed to compensate the landlord for the expenditure on refurbishment.

The appellants' intention in leasing the Milton subjects was to provide additional warehousing space and to concentrate and integrate their corporate, finance, sales and administrative forces in one location.

Prior to taking entry to the Milton subjects the appellants arranged for construction of a two channel concrete conduit linking the two subjects. This conduit measures six hundred millimetres wide and six hundred millimetres deep. It runs under the road and is appropriately surfaced. The appellants have exclusive occupation of this conduit. It is used for communications links between the two subjects. Internal telecommunication is by way of fibre optic links and computer and CCTV security systems are also connected. The switchboard for the external telephone system is situated in the Milton subjects. There are private extensions, through the conduit, to all buildings in the Westmains subjects. This installation was laid and is maintained by British Telecom. An internal telephone system was installed and is maintained for the appellants by British Telecom. The switchboard for this system is situated in the reception area at the main entrance to the Milton subjects. There are extensions through the conduit to all offices on the east or Westmains side. If no such link existed significant costs would be incurred by the company if they required to use normal BT services. There is an extensive network of underground communication systems which could enable premises throughout East Kilbride to communicate with each other using BT services.

The CCTV security system covers both subjects. The main control and supervision centre for this system is near the gatehouse office on the Westmains subjects. The system is connected to the reception area at the Milton subjects.

To the south of the Westmains subjects and formerly part, with these subjects, of the said property complex constructed as a knitwear factory, are what are now two separate units. In very broad terms each is similar in size to the Westmains subjects. The southernmost unit ("the Stakis site") was given active consideration by the appellants before they took a lease of the Milton subjects. It could have been operated along with the Westmains subjects in the same way as the Milton subjects are now operated. However, this would not have been as convenient as the current operation.

Although Milton Road is a cul-de-sac, it is a busy road with a regular flow of vehicles passing the appeal subjects. The Westmains subjects are approached by a bellmouth opening off Milton Road over which the appellants have rights of access. This bellmouth is also regularly used by large vehicles manoeuvring in and out of the adjacent property to the south.

The appellants operate two distilleries, one on the mainland and the other on Mull. They also have a substantial blending and maturing facility at Airdrie. These operations are controlled from the Milton subjects. The appellants also buy-in spirit from other suppliers. They have storage facilities in warehouses occupied by such suppliers. Some 60% of the maturing whisky held for ultimate bottling at the Westmains subjects is held in third party premises. The appellants have trading links with other companies. They are involved in the marketing and distribution of spirits and liqueurs for other companies, particularly in the United States. Control of their worldwide operations is exercised from the Milton subjects.

Comparative evidence

The appellants lodged details of some 66 properties throughout Scotland which they relied on by way of comparison as justifying a unum quid valuation. The parties had agreed certain details in relation to each. Plans of each were agreed from which it was clear that the listed subjects shared the characteristic of having a road between separate buildings. Beyond that there was little by way of identifiable common characteristic other than that the separate properties were, in each case, in the same occupation and used in connection with the occupier's business.

We did not attempt to carry out inspection of each and had only broad detail of the nature of the activities carried out at each comparative subject.
The appellants placed greatest substantive weight on the comparison of their subjects with the facts revealed by the decision of the Lands Valuation Appeal Court in the case of Assessor for the City and Royal Burgh of Glasgow v White Horse Distillers Limited in 1973 (unreported). We refer to that case in more detail below and, in our later examination of Mr Hunter's overall approach we discuss the detail of some of the comparisons relied on by him.

It can be said that many of the appellants' examples related to the type of physical unit which has long been accepted as possessing the characteristics of a unum quid. The list included several distilleries, factories and shipyards. It included a large chemical plant with both a river and a public road running through it.

Mrs Hewton made it clear that she did not regard the various factual comparisons as relevant to the issue faced by the Tribunal. However, in response, she produced a list of some 16 sets of subjects in single occupation but separated by public roads, and in some cases also by intervening buildings. These could also be considered as examples of an assessor's attitude to adjacent subjects in common occupancy but geographically distinct. Mrs Hewton explained that it had been difficult to find examples of relevant separate entries in the time available because such entries were the norm. She thought Mr Hunter had been able to compile his list because it was more unusual and the examples stood out. Mr Hunter's evidence tended to confirm this. It is clear that there was no available "data bank" which would have allowed a full range of examples to be considered. Mrs Hewton relied on her examples as demonstrating simply that any impression of an apparently consistent practice of assessors in Scotland accepting a broad functional test as sufficient to justify a unum quid entry was not a well founded impression. It is unnecessary for us to go through the detail of the assessor's examples. They covered a range of subjects and, in some, the grounds for separate assessment were apparently clearer than in any of the appellants' examples. On the other hand her list included some cases which, on a superficial view, might have provided more material for unum quid assessment than at least some of the appellants' examples. We heard of subjects in Kilsyth where a small manufacturing unit in an industrial estate was situated directly across a public road from a much larger manufacturing unit in the same occupancy. Units of production moved back and forth in course of the manufacturing process. Clearly the two subjects were used together as part of one manufacturing process. There was, however, no evidence that proximity was a necessary element in that process. The items being manufactured were comparatively small. Another similar situation was illustrated in Glasgow where a colour printers business was operated from opposite sides of a road in an industrial estate. Phones, computers and flexi-time monitoring systems were interlinked. The bulk of the items produced in the smaller unit were passed across the road for the next stage in the manufacturing process. Here again, it was clear that one business was operated from adjacent premises separated only by a public road. There was clear functional inter-connection. We also had evidence of a fish processing firm at Bellshill which carried out processing, packaging and freezing of fish at one unit on an industrial estate and fish packaging at an adjacent unit. The units were situated at the head of a cul-de-sac. One unit in separate occupation lay between the two. We had no direct evidence of functional inter-connection but the use of the two units in close proximity for similar purposes as part of one business may be thought to speak for itself in that regard. In each of these examples two separate entries had been agreed.

Views of witnesses

Although it is unnecessary to set out the views of witnesses as to the weight to be attached to the various features of the present subjects it is, we think, helpful to have regard to the contrasting approaches of Mr Hunter and Mrs Hewton. Mr Hunter gave evidence of his extensive career as a rating surveyor spanning some 32 years. He was familiar with numerous subjects throughout Scotland in which unum quid valuations had been accepted. He set out the various factors relied on by him as justifying his conclusion that the two subjects of appeal should properly be valued as unum quid. He stressed that the subjects were physically connected by the conduit under Milton Road and was satisfied on the evidence available to him that the operations on both sides of the road were integrated. Both subjects were operated as one functional entity. His comparisons demonstrated many similar properties where unum quid valuations had been agreed. He accepted that his approach, essentially, was to see whether subjects which were close together and in the same occupation, were occupied as part of an integrated business. He agreed that it was necessary to take "a fair approach". It would not be fair to treat all subjects which were operated as part of one business as a unum quid merely because they were in the same vicinity. It depended on the nature of third party property coming between the two subjects in question. He agreed that if the appellants had acquired the southmost of the three parts into which the original property 16-20 Westmains Road had been divided, it might have operated very similarly to the present operation. He would, however, have accepted that it would not be reasonable to contend that such two subjects were a unum quid. Because of the intervening third party interests the business integration would have been divided. He said it would not have been "fair" to contend that a unum quid existed.

He considered that business integration was an important feature. It was his view that the assessor should routinely make full enquiry into the nature of the business organisation when making up the roll.

In answer to the Tribunal he accepted that there would be some types of units which would not fall to be valued as unum quid even if operated by the same occupier as part of an integrated business. Adjacent shop units would be valued separately unless some physical interconnection was established. It was a matter of circumstances. The question was whether the subjects were "operated as one entity".

Mrs Hewton set out in detail the nature of the considerations which had informed her approach to the subjects. She dealt first with the valuation of the units now forming the Milton subjects after the alteration and refurbishment. To determine what entries should be made, she posed for herself a series of questions: were the subjects within the same common curtilage and were they geographically contiguous; were the premises structurally severed one from another; were the premises capable of separate let; was there internal communications; and were any of the eight units a necessary accessory or appurtenance of the other? Her answers left her in no doubt that the former units should be shown under a single entry. She posed the same questions in relation to the issue of whether the Milton subjects should be entered with the Westmains subjects as a unum quid. She concluded that the premises were clearly geographically separate. She understood that test to be paramount when considering the unit of valuation in absence of exceptional and compelling other circumstances. She concluded that there were no circumstances of that nature in this case. Accordingly it was, in her view, inappropriate to make a single entry.

Submissions

Mr Haddow submitted that the question of whether two or more buildings should be valued as a unum quid was a question of fact to be determined with guidance from judicial reasoning, decided cases and valuation practice. He stressed the importance for fairness of a consistent approach. His submissions were supported by various references to Armour on Valuation for Rating, Chapter 10.

The issue was one of occupancy not ownership. There were no imperative rules. It was agreed, however, that the primary test was the geographical one: University Court of the University of Glasgow v Assessor for Glasgow 1952 SC 504. Another test was the functional one. The evidence supported the view that the subjects were used as a whole and operated as one unit. The history of the development of the two buildings supported this. The units had been adapted to suit a single occupier. Another test was the capability of the different buildings being separately let in their existing state. It should not simply be assumed that the buildings in the present case were fit for separate occupation. It was clear that, because of the changes made the various units comprising the Milton subjects were now a unum quid. They would not revert to their status as individual units if the appellants ceased to occupy these subjects. Milton had been adapted to fit the needs of the Westmains subjects. The subjects were linked by the conduit. Changes would be required if they were to be let separately. This was another factor to consider.

Mr Haddow said that assistance as to the proper general approach to the matter could be found in a variety of cases and he carried out a helpful examination of the essential features of John Leng & Co v Assessor for Dundee 1929 SC 315; Rootes Motors (Scotland) Ltd v Assessor for Renfrewshire 1971 SLT 67; Edinburgh Merchant Company Education Board v Assessor for Lothian Region 1982 SC 129; Select Service Partner Limited v Glasgow Assessor 2000 RA 264; and Assessor for the City and Royal Burgh of Glasgow v White Horse Distillers Limited (an unreported decision of the Lands Valuation Appeal Court dated 6 August 1973). He concluded that when considering buildings interrupted only by a public road it was perhaps a matter of impression whether buildings were so positioned and operated as to be a unum quid or, despite some connection, there was sufficient reason for them to remain as separate entries. In the present case the only separation was the road. It was bridged by the duct and by the very evident connection of function.

The appellants laid considerable weight on the decision in the White Horse Distillers case. They had produced an itemised list of findings in fact derived from that case with a list of comparative facts established in the present case. Mr Haddow suggested that the parallels were remarkable. In particular he noted the stress placed by Lord Fraser on the connection between the subjects by conduit. There was no good reason for a different result to be reached in the present case. To the findings in that case could be added the appellants' whole list of comparisons. These illustrated the practice of negotiating and agreeing unum quid entries throughout Scotland, covering a variety of subjects. In some, the case for unum quid assessment might seem stronger than the present but in many others it was weaker. This was important evidence of valuation practice and the Tribunal should not depart from it without good reason.

Mr Haddow concluded his submission by reference to the following cases from the assessor's list of potential authorities: Fife Assessor v Royal Insurance Co Ltd 1969 RA 454; Gilbert v Hickinbottom & Sons Ltd 1956 2 QB 40; Harris Graphics Ltd v Williams (VO) 1989 RA 211; and MacHarg Rennie & Lindsay Ltd, Glasgow v A.C. (2 July 1998).

Mr Wright, for the assessor, submitted that the two separate entries had been correctly made. The issue was not one to be determined at common law but by reference to the Lands Valuation (Scotland) Act 1854, section 42 with such guidance as was provided by judicial authority. It was, in other words, a question of mixed fact and law. He, too, referred to Armour, supra, Chapter 10 and took us through the detail of that chapter. It may be noted that he accepted that it was the unit of occupation and not of ownership that was in question: 10.03. He referred to the following cases in addition to those mentioned above: Fife Assessor v NCB 1963 SC 84; Rank Xerox (UK) Ltd v Johnson 1987 RA 139; and Barratt Multi-Ownership & Hotels Ltd v Cenrtal Region Assessor.1987 RA 44. His reference to the latter was simply for completeness as it had been on the appellants' list of authorities.

He submitted that it was necessary to be careful in the use of dicta from "derating" cases. In such cases function was always an important underlying element and observations made in that context might be misleading as to the weight to be given to it. That was the significance of the observations of Lord Keith in the Glasgow University case (at page 508).

Mr Wright stressed the primary significance of the geographical test. It was not definitive but it was very important. Reference to functional criteria could not be pressed too far. Examples of acceptance by the Court of reliance by committees on a functional test should not be seen as giving weight to the decisions on their facts. These decisions were of significance only in indicating acceptance that function could be relevant. There was no doubt that a functional test could be used to exclude parts of what would otherwise be a unum quid. The actings and intentions of ratepayers had been accepted as relevant but reported examples involving these factors related to intention as an element in the identification of separate occupation rather than as uniting geographically separate units. Counsel stressed that inability of subjects to be let separately was a useful subsidiary guide. That explained many unum quid assessments particularly in rural areas.

Mr Wright set out the detail of his analysis of various factors bearing on the issue of unum quid and how these factors were reflected in the facts of the present case. He dealt briefly with the list of subjects founded on by the appellants as demonstrating a practice of acceptance of a unum quid in situations where subjects were separated by roads. He stressed that these were not properly to be seen as comparables. They were in no sense authoritative. There could be a variety of justifications for the particular entries. Some could be clearly seen to be justified because of structural connections. In some, one part was relatively very small and more likely to be accepted as dependent on the other. Some subjects could be described as necessary appurtenances. In several cases the roads could be seen as being, to all intents and purposes, private roads serving only the subjects. In some examples, it was clear that the buildings had been conceived and constructed as one unit divided only because the need for space required extension over a road. Rural examples such as distilleries might be based on a variety of these reasons. It might be clear that the individual parts would not be lettable on their own.

Although it did seem that some of the appellants' examples were based on purely functional connection, there was, he submitted, insufficient material before the Tribunal to permit proper assessment of the nature of that connection. He also pointed to changes in some of the comparable subjects which meant they could no longer be used as reliable guides. Further, he suggested that if the difference between separate entries or a unum quid entry had no significant impact on value in a particular case, agreement reached in respect of such subjects might have been arrived at on a purely pragmatic basis. He accepted, of course, that the assessor had a duty to compile an accurate roll but in narrow cases a pragmatic approach would be justified.

We have not attempted to set out the detail of the submissions by counsel on the facts of the present case. It should, however, be noted that both provided full submissions which we have found helpful in our assessment. It should also be noted that parties were agreed that the separate ownership of the two subjects was irrelevant to the identification of the unit of assessment. The test was now solely one of occupation. We have accepted that approach in the present case and we have not required to consider the comment of Lord Fraser in the White Horse Distillers case to the effect that if the two properties had belonged to different owners that might have prevented the Court from holding that the properties formed a unum quid. We are satisfied that separate ownership would not itself lead to such a result. Without further argument, it is unnecessary to express any view as to whether, in a borderline case, issues of ownership could be of relevance.

Consideration of the authorities cited

In the Edinburgh Merchant Company case, supra, Lord Avonside observed: "The question of proper treatment of a unum quid claim is one of mixed fact and law and, perhaps, impression. There are a vast number of judicial dicta and it seems to me quite impossible to set out rules which could be regarded as satisfactory, and binding on this Court". It may be thought to follow from this comment that there is little purpose in detailed analysis of authority. However we consider that some such analysis is necessary in the present case to avoid the risk of placing undue weight on the "comparable" evidence. Our aim must be to give proper effect to the available body of judicial guidance rather than to achieve consistency with an apparent practice which may, or may not, fully reflect that guidance.

Both parties started their consideration of authorities by reference to the decision in Glasgow University v Assessor for Glasgow, supra. The university operated from a number of buildings adjacent to the main university but separated from it by streets or other premises. One such building was the reading room, purpose built for the university and situated directly across a public street. Use of the reading room was an integral part of the students' university work. Other buildings were used for a variety of purposes, all part of the essential function of the university. Lord Keith at the outset of his opinion said that the question raised was capable of fairly easy answer and this observation is, itself, entitled to some weight. After dealing with the possible confusion arising from reference to cases involving industrial derating, he said geographical contiguity or discontiguity sometimes played an important part in determining whether or not derating should be allowed, but the first and main approach to the case was the functional approach, to determine whether the premises were truly ancillary to industrial premises. It is plain that he intended to contrast that with the ordinary case where derating issues were not involved. In such a case "the question whether separate buildings, or parts of buildings should be entered in the Roll as unum quid falls to be decided primarily from the geographical standpoint". In his assessment of the facts in that case he concluded: "Apart from the functional test, which plays little part in this question, (our emphasis) other tests viz., - structural and geographical separation, capability of being separately let, and the dispersion of the subjects among the buildings of other proprietors, all require the subjects of appeal to be entered as separate land and heritages in the Valuation Roll."

It is clear that certain of the buildings in question in the Glasgow University case could not have been treated as unum quid with the university without ignoring the geographical test in favour of a purely functional one. However the reading room stands out as an example of separation solely by a public road where the functional connection was clear. It was, however, a clearly identified separate unit which could have been separately let.

Both counsel referred to dicta in John Leng, supra but were in dispute over the weight to be attached to such dicta. Mr Wright observed that, as the case was a "derating" one, dicta relating to identification of a unum quid had to be regarded with care. Mr Haddow, on the other hand, contended that the dicta on which he founded were expressly based on the "common law" approach by way of contrast with the "derating" approach.

Before looking further at the case it is appropriate to say a little about the "derating context". In terms of the Rating (Scotland) Act 1926 a certain deduction from gross annual value fell to be made in the case of: "mills, manufactories, works or premises of a similar character used wholly or mainly for industrial purposes". It was contended in Leng for the ratepayers "that the question was not whether the units in question formed structurally a unum quid with the manfactory, but whether they and the manufactory formed an industrial unit". The contention for the assessor as noted in the report was that the units in question were only entitled to the deduction if they formed an integral part of the factory and that depended upon whether they were within what had been described as the "curtilage" of the factory. It is clear that there is a danger in applying dicta which, in essence, relate to the application of one statutory provision to a situation which requires consideration of a quite distinct statutory provision. The observations of Lord Keith in the Glasgow University case were to that effect. However the conflict between counsel as to the effect of the dicta seems to us more apparent than real.

Lord Hunter did use the term "unum quid" and he observed that he did not think, "that the mere circumstance that a road divides the premises prevents this from being treated as a unum quid". We do not consider that more can be taken from this observation than that presence of a public road is not conclusive as a factor preventing two parts of an identifiable unit being treated as one. However, apart from the use of the expression "unum quid" we find nothing in his opinion to suggest that he was drawing any distinction between a proper approach to identification of a unum quid for the purposes of the 1854 Act and the test to be applied by the 1926 Act. His observations must accordingly be read subject to the caveat expressed by Lord Keith. supra.

Lord Sands in the opening lines of his opening paragraph makes it clear that his observations are directed to "the interpretation of the novel provisions of the Act of 1926". However, he continued; "Two principles in relation to valuation of works were, I think, laid down last year: (1) where there is a co-terminus group of buildings devoted to the conduct of one business, which group, apart from this legislation, might have been valued as a unit, the subjects fall to be valued as a unum quid … (2) Where buildings are not co-terminus and would not, under ordinary practice and without disregard of the ordinary geographical arrangement followed in making up the valuation-roll be included in one entry, they are not to be entered as a unum quid to the effect of giving to the less important buildings the character of the main group and thus, it may be, bestowing upon them, or, it may be, depriving them of, the benefit of the abatement. Each building locally isolated must be entered separately and valued in relation to the particular purposes to which it is devoted".

We see no particular difficulty in accepting that this passage had in mind the traditional approach to identification of a unum quid for purposes of rating. Where there is "a co-terminus group of buildings", the overall business purpose prevails and it is inappropriate to isolate individual buildings because they have a distinct purpose. It seems to us that head (2) must be read in context as intended to apply to a situation where there is a group of buildings devoted to the conduct of one business but not co-terminus. Lord Sands appears to be drawing the distinction that they would not under ordinary practice and without disregard of the ordinary geographical arrangement followed in making up the valuation roll, be included in one entry. They, accordingly, are not to be entered as a unum quid so as to give them the character of the main group.

On the face of it this is simply re-affirmation of the importance of "ordinary geographical arrangements". Lord Sands, of course, goes on to show that there may be circumstances in which the fact that buildings are not co-terminus does not prevent identification as a unum quid. His selection as an example of a Cathedral Close with "a passage running through it", simply serves to reinforce the need for a clear impression of a unum quid before the intersecting road can be ignored. Similarly, his observation that "Smith's Mills are Smith's Mill though intersected by a road" must either be a reference to actual subjects assumed to be well known at the time or, more probably, a self-defining example of a group of buildings functioning together as a mill. Neither reference does more than show acceptance that there can be circumstances in which a passage or an intersecting road does not, by itself, prevent identification of a unum quid. Taken as a whole, there is nothing to suggest that his Lordship was in any way casting doubt on the importance of the ordinary geographical arrangement.

Mr Haddow contended that the dicta in that case, taken with its facts, showed an acceptance of the importance of a test of function. We find nothing to justify the conclusion that the Court was supporting a test of function as a test of a "common law" unum quid. Lord Hunter appears to apply a two, or even three, stage test to cases arising under the 1926 Act: "It may, however, be said that, if a store, warehouse or other subject is associated with a factory, serves purposes connected with the business therein conducted, and is not so separated in distance from the work or factory that it cannot reasonably be treated as forming a unum quid with the work or factory, the deduction ought to be allowed". A similar approach, putting the order in the other way, may be found in the opinion of Lord Fleming at the foot of page 324: "It is not possible to lay down a universal criterion, but as a general rule I do not think that premises can be held to form a unum quid unless the component parts are in a reasonable sense in close proximity to one another. As regards the use to which the premises are put, I think it is now settled … that it must be shown that the use made of the subjects for which the privileges conferred by the Schedule are sought, is ancillary to a business which is entitled to these privileges and which is carried on in premises of which the subjects form a part".

We consider that, taken as a whole, the decision in Leng can properly be regarded as illustrating an emphasis on physical characteristics as the basis for identification of a unum quid and a discussion of how reference to purpose may be necessary for application of the provisions of the 1926 Act.

Rootes Motors (Scotland) Ltd was referred to by Mr Haddow as an example of a case where the Court had accepted that what had been three separate factory units had properly been treated as a unum quid as a result of changes in the way they were operated. It is plain that the three units came to be operated together as one factory. A conveyer had been installed to carry car shells from the north of a dual carriageway for completion within buildings situated on the south. It appears that, even in that situation, the assessor had initially resisted the conclusion that the subjects should be treated as a unum quid. However the real issue before the Court was the relevance of this as a change of circumstances. The dicta must accordingly be read with care. We do not accept that Lord Hunter's reference to "changes in occupation and function" can be seen as placing weight on a functional test. On the face of it, he is doing no more than recording that the issue was hardly disputed. Lord Fraser does express a positive view that "on the facts stated in the case, the subjects do form a unum quid". It is not clear what weight he placed on the manufacturing process moving from one side of the road to another with an obvious physical link. In our view that was plainly important as was the overall characteristic of the ratepayers' combined unit being perceived as one "works" with the dual carriageway described as "running through their factory". The case does support the view that the mere presence of a public road between two buildings does not, by itself, prevent identification of a factory as a unum quid. We consider it unsafe to try to take more from it. For completeness, however, it may be noted that in the Select Service case, supra, Lord Prosser made the comment that, "premises which are physically separate can properly be treated as unum quid, on the basis of their functional relationship, as in Rootes Motors". This might support the view that he accepted the overall function as one factory as being of greater significance than the physical link. On the other hand he may have regarded the link as an important factor leading to the conclusion that the "separate" subjects functioned as one.

The Edinburgh Merchant Company Education Board v Assessor for Lothian Region, supra, case can be referred to conveniently as the "St George's School" case. Two schools had come to be occupied as one. The building which had been the westerly school was situated on a public street. The other school was situated on the east side of the street at a distance of about 300 metres from the street. A private path led from it to the street. The two were used as one school with staff and pupils frequently crossing between them for academic and sporting purposes. In their reasons for accepting a unum quid, the committee said that the subjects would be capable of being let separately but said that they were occupied together as a functional unit, they were very nearly adjacent being separated only by a road, and that their situation was properly comparable with other schools which had received unum quid treatment.

Lord Avonside dealt succinctly with the matter. He contrasted the style and appearance of the former schools. He found that to move from one set of buildings to the other required an appreciable time interval. He observed that he was unable to encompass both subjects in one boundary. There was no geographical unum quid. He referred to the purpose of the acquisition of one school by the other as not being a compelling reason in a unum quid question. He made no express reference to the functional unity which existed when the subjects were in fact operated together as a single school. He did not think it helpful to have regard to other schools where different facts applied. He concluded: "Where there is no geographical unum quid, the fact that each subject could be separately let is of some significance, especially in the background of separate existence". This also supports the view that the issue must be approached primarily from a geographic point and that while function may be a factor it is not an important one.

Lord Wylie was to a similar effect: "In a marginal case the question as to whether or not the geographical unity test is satisfied could be a matter of impression, and in such a case the Court would be reluctant to interfere with the Committee's decision, on a question of a mixed fact and law. In this instance, however, the physical separation of the subjects, as demonstrated by the plans which have been produced, makes it clear to me that they fall short of satisfying such a test and in my view treatment on a unum quid basis is precluded. Although for administrative purposes they are operated as a single unit, the functional test has little part to play in this question".

We think this case must be read as giving important support to the proposition that the geographical test is the primary one and that it is misleading to approach the matter from the viewpoint of function. It may be relevant to have regard to function where the geographical test does not clearly resolve the question but it is not normally a factor of much weight.

We are not persuaded that any useful guidance can be derived from the decision in Select Service Partner Ltd. This case concerned two separate groups of shop units each group situated within a station concourse. In both cases the shop units were operated together. Except where there was internal connection and sharing of facilities between adjacent units, the committee found no unum quid although, certain other units were immediately adjacent to each other and were occupied for the purpose of the sale of food and drink for immediate consumption by the public. The facts are far removed from the present case and there was no discussion of principle.

We turn to look at the decision in the White Horse Distillers case. The appellants founded strongly on comparison of the facts in that case with the present. It was, however, a comparison based on factual similarity rather than an analysis of any points of principle emerging from the opinion of Lord Fraser. We accept that on a comparison of points of detail there is an apparent correspondence between the facts in that case and in the present. However, the mechanical exercise of direct comparison of written detail leaves out of account the element of appearance and of general impression. We also consider that an important distinction is that the function of the Milton subjects was not simply to operate as an office in connection with the activities in the Westmains subjects. It was a head office controlling not only the adjacent bottling plant subjects but also a similar unit at Airdrie; two distilleries; and the marketing of products worldwide, including products manufactured by others. The White Horse case must be recognised as a decision on its own facts by a local Valuation Appeal Committee. In considering the appeal by the assessor to the Lands Valuation Appeal Court, Lord Fraser described the case as a very narrow one. He observed that it was exceptional for subjects bisected by a public road to be valued as unum quid. Although he drew attention to the communications link between the subjects as a matter of some importance he went on to say: "From the geographical point of view, the premises on the west of the road are separated from those on the east by the public street, although the separation is reduced to some extent by the existence of the conduit". He then went on to refer to the fact that from a functional point of view the premises on the west were closely related to those on the east. He concluded: "As the existence of the public road between the two premises is not an absolute bar to unum quid treatment, the importance to be attached to its existence becomes, in my opinion, a matter of degree and therefore of fact for the committee and I have reached the opinion that the decision of the committee is one that they were entitled to arrive at upon the facts". Some weight can be attached to his concluding observation that he regarded the case in much the same light as the Court of Appeal in England regarded the decision of the Lands Tribunal in Gilbert v Hickenbottom & Sons Ltd to which we return below.

We are satisfied that Lord Fraser cannot be treated as giving positive approval to the decision of the committee. It was simply a decision they were entitled to arrive at upon the facts. Like the Gilbert decision it may have turned on impression. The papers show no record of a site visit but the Stated Case refers to facts being within the knowledge of the committee. The actual decision of the committee makes no attempt to weigh the functional connection against the physical separation. We are not obliged to follow the Committee's decision and see no reason to do so.

For the assessor reference was made to Assessor for Fife v NCB supra. This was a case which supported the proposition that the geographical test was not to be the sole determinant. There was scope for reference to function. Mr Wright stressed, however, that the case illustrated a situation where the reference to function was used to exclude or "carve out" part of what might otherwise have seemed a clear geographical unit. The subjects were a group of contiguous buildings forming an area headquarters. It was not in dispute that, geographically, they constituted a unum quid. The different buildings had different purposes including offices, stores, a canteen and workshops. A question arose as to whether the workshops which, taken by themselves, could be seen to be used for an industrial purpose, were nevertheless part of the headquarter complex taken as a whole. The committee had reached the conclusion that a separate entry should be made for the workshop.

The case, as we have observed, was concerned with the question of whether reference to function could justify "carving out" a part of what would otherwise have been treated as a unum quid. Nothing in the case deals positively with the use of a functional test in the opposite direction. What is clear is that the Court emphasised the importance of the geographical element. Lord Sorn, under reference to the Glasgow University case, supra, said: "The case stresses the importance of the geographical element, but, notwithstanding this, it is plain to me that the Committee have paid insufficient regard to that element; and I have an uncomfortable feeling that they may have been led to do so by a passage in the judgement of the Court which, taken in isolation, might tend to mislead". He went on to refer to the possibility that the Committee had allowed consideration of "derating" issues to lead them to a false conclusion.

We, of course, accept on the authority of the White Horse case that regard can be had to funtional links in considering whether two apparently separate subjects should be treated as one. However, it is not clear that this is a necessary corollary of the relevance of a functional test to determine whether two apparently united subjects should be treated as separate. Dicta in the "carving out" context cannot simply be assumed to apply to the case where physical separation is clear. If a primary feature of the geographical test is physical separation, it may be easily accepted that inter-position of a physical feature such as another building, a river, road, railway or the like, by itself creates sufficient separation. This is quite a different situation from one where there is an apparent physical unity which, on examination, appears to require some form of further division. Units within a building may or may not be seen as separate units of occupation. Where the physical divisions are uncertain it may well be relevant to have regard to elements such as use, or intention, to support the view that a relevant division does indeed exist. It does not automatically follow that such factors are relevant in a case where the physical division is clear.

Another Scottish case to which reference was made was Fife Assessor v Royal Insurance Co Ltd, supra. The case concerned an office block where there were identifiably separate lockfast suites of offices sharing common facilities. The separate suites were planned for, and capable of, separate letting. It was held that vacant units being advertised for letting were properly to be entered separately in the roll. Lord Hunter after analysing the facts concluded: "Thus there are added to a degree of geographical separation and to the capacity of being separately let, elements of planning and intention which had, before the valuation date, been carried into effect by positive action". Mr Haddow took support from this case for the proposition that evidence of intention of parties to operate buildings as separate units had been accepted as relevant. In the present case the evidence of intention to operate the buildings as a single entity was, he submitted, also relevant. We are satisfied that the main thrust of the dicta in the case is to emphasise the importance of the geographical test but Lord Hunter's observation may also be taken to place some significance on the capacity for separate letting. While evidence of intention to treat subjects as separate units of occupation may be relevant to identify separate parts of what would otherwise be seen as a unum quid, we do not accept that exactly the same approach applies to the converse situation. By occupying two subjects as part of their business it can no doubt always be contended that there was an intention to "occupy the subjects together". That does not, by itself, merit an inference that the occupiers intended the subjects to be treated as a unum quid, far less that the subjects should be treated as such.

It seems to us that the Scottish cases all reflect a very clear understanding that in attempting to define appropriate units for entry in the valuation roll in accordance with the relevant statutory provisions, a clear geographical separation ought to receive effect unless there are physical characteristics which allow an observer to say, as a matter of impression, that the subjects are part of one larger identifiable unit. In narrow cases other factors such as a functional inter-relationship may help tip the balance one way or another. The cases give no support for the view that such other factors should be taken into consideration unless the geographical test is incapable of providing a clear result. In other words we consider that the overall tenor of the Scottish authorities does not support an approach placing emphasis on whether separate subjects are in the same occupation and occupied as part of an integrated business.

We turn now to consider the various English authorities to which we were referred. The most important of these is the decision of the Court of Appeal in Gilbert v Hickenbottom & Sons Ltd, supra. It may be observed at the outset that it was a "derating" case and accordingly subject to the caveat expressed by Lord Keith in the Glasgow University case. Hickenbottom and Sons owned and occupied premises on opposite sides of a street. A bakery on the south made bread on the "continuous belt" system, operating 16 hours a day. It was essential that facilities were to hand to enable repairs to be carried out without delay. The premises on the north were a repair depot primarily used for repair and maintenance of a fleet of commercial vehicles but also containing the necessary facilities for repairs to the plant and machinery of the bakery. (It is not clear whether the vehicles were engaged in delivery of goods from the bakery). The Lands Tribunal held that the subjects should be assessed as a single hereditament. There was some discussion of the weight to be given to the views of Lord Keith in the Glasgow University case and reference to the difficulty faced by an English lawyer in determining to what extent Lord Keith was stating a principle of law. Lord Denning (at page 47) pointed out that while Lord Keith had said the functional test was of small weight, the Tribunal had clearly attached the greatest weight to it. Lord Denning set out some "general rules", one of which was in the following terms: "Thirdly, take the case where two properties are separated by a public highway, the surface of which is vested in the highway authority and the soil is vested in the occupier of the two properties. In that case the position in general seems to me the same as if the two properties were separated by a canal, a railway, or a dwellinghouse occupied by somebody else. They are normally to be treated as two hereditaments for rating purposes. He later said: "But this third rule is not inflexible. There are exceptional cases where two properties, separated by a road, may be treated as one single hereditament for rating purposes. That may happen when a nobleman's park, or a farm, or a golf course, is bisected by a public road. In such cases the two properties on either side are so essentially one whole - by which I mean so essential in use to one another, that they should be regarded as one single hereditament". We consider these examples are instructive and provide a clear indication of his Lordship's general support for the weight to be given to the third general rule. He made plain his support for cases quoted to the Court where the Tribunal of fact had held that two properties on opposite sides of the road were two separate hereditaments although used as parts of one single undertaking. One of these cases was the Glasgow University case. He continued: "Those cases commend themselves to my mind and I confess that I find it very difficult to distinguish our present case from those on the facts; but there must be some distinction because the Chairman of the Lands Tribunal had those cases well in mind; and he had the advantage of a view, which we have not. We can only reverse his decision if it was one to which he could not reasonably come. I am not prepared to go so far."

Morris L. J. (at page 52) said: "There can be no doubt that ordinarily very great weight will be placed upon what may be termed the geographical test. But the question is always one of fact and degree". Parker L. J. at page 54-55 said: "The appellants' contention, however is that though the functional test may justify treating a geographical unit as two hereditaments it is wholly inapplicable where the premises occupied are geographically and structurally separate. There is little doubt, I think, that in the latter case little weight will ordinarily be given to any functional connection, but it is another thing to say that it is irrelevant. If, as is admitted, a functional connection is a relevant consideration when considering a geographical and structural unit, I fail to see why as a matter of law it cannot be considered at all when there are separate geographical and structural units. Each case must be considered on its particular facts, due weight being given to the degree and nature of the separation on the one hand and the importance of the functional connection on the other … It is to be observed, however, that while saying that the functional test played little part in the question, Lord Keith did not suggest that it was not a relevant test".

Although we do not accept that a straightforward comparison can be made between use of a functional test in relation to division of a geographical and structural unit and use of such a test when considering two apparently separate units, we accept, as discussed above, that function is a relevant factor in assessing the character of any heritable subjects. We find nothing in the Gilbert decision to support the view that it should be accorded any great weight.

The other English cases to which we were referred were decisions of the Lands Tribunal with Mr C R Mallett, FRICS, sitting as a single member. In Harris Graphics Ltd v Williams (VO) it was held that two factory premises separated by a single factory unit occupied by an entirely unrelated company should be treated as a single hereditament because of the degree of functional interdependence between the two units. The findings disclosed a regular flow of materials from one set of premises to the other, with work being carried out on the materials at each stage as part of the manufacturing process. In the judgement the Tribunal referred to a series of English cases and quoted extensively from the decision in Gilbert v Hickenbottom & Sons Ltd, supra. The conclusion reached was that it was possible to find that two premises which were geographically separated were in fact one hereditament but that the decisions confirmed the extreme difficulty in establishing, on the facts of each case, that a functional connection was indeed sufficiently strong to overcome geographical separation.

There is an obvious risk in attempting over meticulous scrutiny of decisions which turn on their own facts. The decision in Harris Graphics Ltd started with a finding in fact that the two premises were occupied by the same occupier "as a single factory" for the purpose of manufacturing certain machinery. It went on to refer to the "to and fro flow of material assemblies and personnel between the two premises". This link, however, was said to be insufficient to show that there was a single hereditament. There had to be interdependence. In that case the Tribunal found that the degree of interdependence considered with the facts of the geographical separation established that there was a strong enough link to form a single hereditament. We accept Mr Wright's submission that on its facts the case was quite different from the present. Each unit was unambiguously a factory. In other words, the whole subjects had the same physical characteristics. They operated as one factory. The same could not be said of the subjects in the present case. There was no label which could be applied to cover both sets of premises.

In Rank Xerox, supra, Mr Mallett had to consider two office blocks forming part of a town centre scheme which included shops, other offices, car parks, two blocks of flats and another similar office block. The office blocks had separate entrances at ground floor but were linked by a covered walkway at second floor level. The two blocks came to be occupied by one company and were used for inter-related office purposes. The Tribunal referred to an earlier Lands Tribunal case BP Refinery (Llandarcy) Ltd in which it had been said: "Consideration of these two cases leads us to the conclusion that two separate properties which are not directly and physically contiguous could not properly be regarded as a single hereditament for rating purposes unless, firstly, there is an essential functional link between the two parts and secondly there is also a substantial degree of propinquity". At first sight this may be thought to run contrary to the approach of the Scottish cases based on the dictum of Lord Keith. It is apparent that it would not be consistent with Scottish authority to approach the matter by having regard firstly to the question of essential functional link. Some explanation for the difference of approach may be found in the citation of "derating" cases without apparent acknowledgement that they may tend to suggest a different approach. We see that in the emphasis, as a first stage, on the statutory test of physical contiguity. In the Rank Xerox case the first submission for the ratepayers was that the existence of a common walkway linking the two blocks was sufficient to bring them within the statutory category of contiguous subjects.

Whatever the explanation of the difference of approach we think that the fact that there is an apparent difference requires the English cases to be approached with a degree of caution. Mr Mallett supported the use of the concept of the essential functional link by reference to the words of Lord Denning, already quoted, "so essential in use the one to the other - that they should be regarded as one single hereditament". He went on to apply the test in the following terms: "It seems to me that the test in these cases is whether the occupation and use of the two buildings are essential one to the other and whether there is a sufficient degree of propinquity to forge a link between the two, by means of the covered walkway, so that in reality there is a single hereditament. This is essentially a matter of fact". He determined that on the facts, the subjects did not meet the test. It is apparent, however, that his formulation moves the word "link" from being part of the functional test to part of the test of propinquity. We accept, of course, that if, to the test of propinquity, there can be added a physical link like a covered walkway, the case for treating subjects as one may be stronger, without any need to look at function as an independent test.

Mr Wright referred to a decision of the Valuation Appeal Committee in a case of MacHarg v Assessor for Glasgow (1 July 1997). He introduced it as an example of acceptance by a committee that communication links were not, in themselves, sufficient to overcome the geographical test. In that case a garage carried on business from opposite sides of a public road. The main garage subjects lay on the north. On the south there was an internal and external stock yard, valeting facilities, a parts department and a car hire business. The subjects had started as two entirely separate sets of premises and the committee was not persuaded that because one business was carried out from the two sets of premises they could form a unum quid when divided by a public road. It appears from the decision letter that the subjects were connected by the installation of ducting to carry communication links. The committee observed: "The telephone and communication links did not really add very much to the argument in the view of the committee. It is quite common now for business to have branches in different towns which may have exclusive telephone or computer inter-office links, but that would not mean that the situation was one of unum quid."

The approach of the expert witnesses

The differences between the approach of counsel was largely one of emphasis. However the evidence of Mr Hunter and Mrs Hewton, respectively, appear to us to reveal a more fundamental difference. We are satisfied that Mrs Hewton's general approach is soundly based on Scottish authority and consistent with English authority. On the other hand, Mr Hunter's submission that, broadly speaking, where subjects were reasonably close and were occupied together for the purposes of one business, they should, in accordance with normal practice, be entered as a unum quid, seems to us to elevate the test of function to a level which cannot be supported by authority nor by reference to the underlying purpose of the legislation. We accept that it appears to be supported by reference to the various examples he founded on. For reasons given above, however, we think it appropriate to attempt to base our decision on the guidance provided by judicial authority.

It may be indicative of the weight of Mr Hunter's emphasis on the importance of subjects being occupied together for the purposes of one business that his first "comparable" example related to two training centres on opposite sides of a street in Coatbridge. (It should be said, for completeness, that the order of his examples was based on location rather than their significance in relation to the present case). In evidence he said that he was unaware of any particular operational links between the two buildings. His statement said simply: "James Barr agreed a unum quid valuation with Lanarkshire Valuation Joint Board, on the basis that both properties were in the same occupation". This can be taken as direct evidence than an assessor accepted a unum quid entry in respect of two heritable subjects separated by a public street simply on the basis of common occupancy. We do not know whether that simple approach played any part in relation to the other cases on the list. For example, the fourth case listed related to an engineering company where a unum quid entry under the headings "Workshop etc" had been made in respect of units on opposite sides of a public road in an industrial estate at Newhouse. Mr Hunter could not provide further details of this but said that the justification for the entry was probably based on "integrated function". Both these examples suggest a simplistic approach which does not appear to us to be supported by the weight of authority.

Of the comparisons in the appellants' list, eight related to subjects interlinked by railway lines and ten by either under-passes or over-passes. It must be recognised that the very presence of such links has a bearing not only on the physical separation but on the nature of the reliance of the two subjects on each other. Some form of effluent pipeline was said to provide a link in four of the cases. It is not clear whether this was relied on as establishing a relevant physical link or whether it was treated as evidence of some form of integrated function. It may be said that the latter inference would not readily be drawn simply from evidence of shared means of removal of waste.

In 13 cases the subjects shared telecommunication or computer links. We had no evidence as to the significance attached to such link in any individual case. One example was a private school where classrooms on the opposite side of a terrace from the main school were accepted as part of the school. To what extent the telephone and computer links played a part in that decision is unknown.

The danger of placing undue weight on factual examples without full examination of the circumstances was well illustrated by Mr Hunter's reference to a case where bar and restaurant facilities at an equestrian centre located 300 metres from a hotel and on the opposite side of a public road from it, were accepted, with the hotel, as a unum quid. Mr Hunter's written evidence was that this was "because of its links in terms of management control". He accepted in cross-examination that the hotel was recognised as having extensive policies. The equestrian centre fell within the established hotel grounds. It may be assumed that this factor played a part in the assessor's thinking. We do not know what weight was, in fact, given to "management control".

Apart from demonstrating the need to be aware of all the factual details before being able to draw an inference from these examples, Mr Hunter's use of the example is in itself indicative of his approach. The example was put forward as an illustration of "management control" being used to justify a unum quid assessment for subjects of quite distinct individual character, 300 metres apart and separated by a public road. This must be understood as being proffered with a view to illustration of current valuation practice. That can be compared with the conclusions we draw from examination of relevant judicial authority.

We have referred to the detail of certain of the comparative examples proferred by Mrs Hewton and noted her position that factual comparisons were not a sound basis for our deliberations. It is perhaps unnecessary to say that we place no reliance on the particular examples on their merits. We consider, however, that they tend to show that the evidence does not support a clear picture of uniform practice across Scotland.

Decision

We consider that the emphasis on the geographical test is an aspect of recognition that lands and heritages are physical subjects. The underlying purpose is to provide a proper basis for a tax on property, not a tax on persons or businesses. Where the subjects share characteristics of function which, in a robust practical sense, support the use of a single term to describe the physical subjects, they can be treated as one unit. The examples of a Cathedral Close, "Smiths Mills" and a golf course give a clear indication of the proper approach. Other examples are "shipyards", "distilleries" and "factories". All these terms tend to share the characteristic of referring to a physical identity. It is impossible to lay down clear rules which will apply in all cases. A school might be thought of as a physical entity more readily than a university but the use of a term apt to describe a physical unit will not, in itself, suffice to unite two physically disparate subjects. On the other hand, we are satisfied that the fact that certain heritable subjects function together as one business will, by itself, be insufficient to demonstrate that they are to be regarded as a unum quid in any physical sense.

A "business" is not a concept based on physical or heritable factors. Entry in the roll is based on identification of heritable subjects. The fact that one business may need to occupy two separate physical subjects does not change the character of the subjects. It is clear that undue emphasis on a business connection as evidence of functional connection between subjects could lead to a distinction for rating purposes between a business whose operating units were in close proximity and those whose operating units were, perhaps only slightly, more remote. There is no basis in legislation for such a distinction. We see no basis in fairness for it. We are not persuaded that there is a consistent practice which would lead to that result. If there is, we see no need to follow it.

As it happens the point can be well illustrated in relation to the present case by reference to the fact that if the appellants had been able to obtain the Stakis building on acceptable terms, they would have been able to carry out their operations from there. It would not have been quite as convenient as having the premises directly across the road. Mr Hunter accepted that he would not have contended that the Stakis building should be valued with the Westmains subjects as a unum quid because of the presence of the intervening building. However, we heard nothing to suggest that a cable linkage between the two buildings could not have been installed and the difference in functional terms between crossing a public road and travelling a short distance along it is one of minor degree.

In the present case there is a clear physical separation of the two subjects. They each have a clear curtilage and these curtilages are separated by a public road and pavements. Movement between the subjects also requires the crossing of the bellmouth area which is shared by the adjacent proprietor. We were struck by the use being made of the shared bellmouth area by manoeuvring lorries taking access to the adjacent premises. Although, in a sense, little different from the interposition of a public road, the fact that the appellants do not have exclusive occupation of the land which provides their access to that public road and the intermittent presence at their gate of large, slow moving vehicles belonging to another occupier, tends to enhance the impression of separation of the two subjects.

A test based on appearance and impression may properly be treated as part of the geographical test. The two subjects have no unifying visual characteristics. There is nothing to indicate that they are operated together, far less that the physical presence of one is essential to the function of the other. We accept, of course, that the visual impression does not take account of the duct beneath the road. However, awareness of this does not change the overall impression. Their physical characteristic as two distinct subjects is supported by the consideration that there is no real doubt that the subjects could be let separately. Although Mr Haddow, in submission, suggested that the Milton subjects might not be readily let because of the conversion to one unit for the purposes of letting to the appellants, the direct evidence was that they were capable of separate let. We do not regard the need to remove or disconnect the cables as a significant impediment.

In considering the matter of separation we place no weight on the submission by Mr Wright that the subjects were historically separate. That does not, in itself, add to the fact that they are physically separate at the present date. It is, in any event, misleading. The Milton subjects as they now exist were created specially for the use of the appellants and must not be confused with the row of individual units which were on the site in the past.

As the subjects can clearly be seen to be two distinct subjects and the geographical test points to separate entries, we consider that it is appropriate to approach the question by considering whether there are special circumstances which could justify treating them as one for the purposes of the valuation roll.

The main factor relied on as countering the geographical test was the functional link between the subjects. We accept that one business is operated from the two subjects. Plainly there are extensive links between the activities carried out on the two sides of the road. It might be fair to say that the functional links between the activities in the two buildings are strong. This does not, however, demonstrate the necessity of having one heritable unit in proximity to the other. We are not satisfied that the evidence of a link between office management staff in the Milton subjects and production staff on the Westmains subjects is of any significance in this context. The office plainly has a larger role in the life of the company. It performs a head office function supervising the other properties occupied by the appellants and their worldwide activities. Of greater potential significance was the use of the large storage area now provided by the Milton subjects. This was used for packaging materials. There is no doubt that such materials are a necessary part of the output of the bottling and production plant on the other side of the road.

There was some dispute as to whether the warehousing facility at the Milton subjects was used mainly as a "back up" or as part of the "primary materials feed". We understood the distinction to be that "back up" stores would not be used as matter of routine but would be kept in reserve. We are satisfied that the materials held at the Milton subjects are held for use as and when required. Sometimes a production run will require an order of packaging material or bottles which is substantially in excess of the needs of that particular run. Surplus bottles or boxes will be held at the Milton subjects until a further production run of the same product takes place. For more regular production, packing materials will be held on both sites with material from the Milton subjects replacing the material at Westmains as it is used up. We do not think that anything turns on the precise description of the storage. Plainly the Milton subjects are used for the purposes of holding packaging material which will be used in the Westmains operation.

However, while it may be convenient to have these items stored in close proximity to the Westmains subjects, there was nothing to suggest that this is in any way necessary for efficient production. We heard no evidence that there was any limitation of space preventing the Westmains subjects from holding adequate quantities of packing and related material to maintain a full output. In any event there was nothing to suggest that even a few hours delay in transporting such material from a separate store to the bottling plant would have any significant effect on production and despatch. In short, we are not satisfied that the evidence demonstrates any functional interdependence between the buildings. The nature of the use of the subjects does not point to a functional identity in the sense that evidence of function could allow the two separate subjects to be viewed as part of one shipyard, mill, distillery, factory or the like. Mr Wright made the telling point that the witnesses were unable to suggest any form of description which would accurately describe the combined units. This in itself might not have been of significance had there been any physical elements pointing to unity but we think that the absence of descriptive term adds to the difficulty in identifying any special circumstance to displace the geographical test.

We accept that the duct is a factor which must be considered. Any physical link between two units would have an important part to play in proper application of a geographical test of separation. It might also help demonstrate a functional dependence between two units, such as parts of a factory. Indeed a physical link carrying units of work from one area to another might be regarded as important in relation to both the geographical and functional tests and to the issue of separate lettability. However we agree with the submission that the duct itself is, in the present case, only of significance insofar as it permits the passage of communication cables. We do not think that this is of any real significance in relation to the issue of physical separation. The need for the cables helps demonstrate a link between the activities carried out in the separate buildings. However, we consider that it plays little part in establishing any essential functional connection between the buildings as such. We accept the evidence of Mrs Hewton that links to remote sites for purposes of security or communication are now common. Such links do not depend on physical proximity.

Availability of a canteen facility is no doubt convenient for employees on both sites. It is not, however, evidence of a functional connection between the activities in the two buildings.

We have already indicated that we see a danger in attempting to rely on guidance from examples of other factual situations in preference to guidance from judicial authority. It would not be appropriate for us to attempt to express a view on individual examples from the list of comparable subjects relied on by the appellants. The occupiers of such subjects have had no opportunity to present argument and no full examination of the facts relating to their particular subjects has taken place. Assessors familiar with the individual subjects may well have had reasons, which are not apparent to us, for acceptance of a unum quid approach in each of the examples founded on. Taken as a whole, however, the "comparables" cannot be said to reflect the "extreme difficulty" in establishing a functional connection sufficiently strong to overcome geographical situation which Mr Mallett took to be the approach established by English authority. They appear collectively to place a weight on function which might be inconsistent with the express views of Lord Keith and Lord Avonside, supra, that function has little part to play in this connection.

For completeness it should, perhaps, be observed that although we have referred to the aim of fairness in the context of whether we should attempt to be consistent with the approach said to be illustrated by the comparative examples, we are not concerned in this case with fairness in terms of outcome. A business fortunate enough to be able to expand into adjacent premises will enjoy the operational advantages of proximity. There is no reason why such business should not also enjoy any rating benefit which may follow, in the same way as a business which is able to find premises large enough for it to function entirely under one roof.

On the whole evidence, including our impression of the subjects on inspection, we are satisfied that the subjects have been correctly entered in the valuation roll as two separate entries. It was a matter of agreement that if we reached that conclusion the values to be shown should be as follows. The Westmains subjects should be shown at net annual £212,000. The Milton subjects should be shown from 16 February 1996 at net annual value £97,000 and from 1 April 1996 at net annual value £110,000.