The appeal subjects have been assessed by reference to a Scheme prepared by Scottish Assessors for valuation of hotels by reference to turnover. That Scheme has been derived from analysis of passing rents of some fifty hotels. It has received almost total acceptance. However the applicants contend that it cannot be applied to the appeal subjects, because of their unique characteristics.
The hotel can be distinguished from other hotels by reference to the extensive range of facilities it provides for guests, including, for example, golf courses; and by reference to the unusual overheads it incurs by virtue of its situation. It requires, for example, to provide private sewage facilities and extensive staff accommodation. Other hotels may share one or other of these features. None have the same overall range of special features.
Of the fifty hotels whose rates were analysed for the scheme the closest comparison was said to be derived from seventeen, four-star, city centre hotels. It was not suggested that any had features similar to the range to be found at Gleneagles.
For the appellants it is contented that the points of difference are so significant that the scheme does not provide a well-founded starting point for comparison. Assessment should, accordingly, be by reference to receipts and expenditure. For the assessor it is contended, in essence, that although significant points of difference exist, they are capable of being dealt with by comparison. The scheme is said to provide a robust basis against which due allowance can be made.
It is plain that this case will require thorough analysis of the basis of the Scheme. Without proper understanding of all the assumptions which have gone into it, proper comparison cannot begin. It will then be necessary to have analysis of the nature of the appellants’ operations at Gleneagles. We cannot at this stage deal with the detail of comparison. However it may be noted that the Scheme depends upon analysis of drawings under the headings: Accommodation, Catering and Liquor. For obvious reasons, there is no separate breakdown for Golf Department Profitability, Country Club Department Profitability or Retail Profitability and, of course, no explicit way of making allowance for any “drag” on profits these operations may create. It will be necessary to examine these different aspects of the appellants’ operation to see what influence they have on total turnover. It is not yet clear how these elements are to be compared with hotels which operate without them.
Analysis of the basis of the Scheme and of the nature of the appellants’ operations at Gleneagles will be necessary, in the first place, to determine whether the nature of the various differences is such as to be capable of being accommodated by adjustment of the Scheme. If so, the appropriate level of adjustment in respect of each significant difference will require to be assessed and reflected in an overall adjustment figure. Having regard to the nature of the Scheme itself and the information available to us as to the nature of the various aspects of the hotel operation at Gleneagles, we are satisfied that this would involve a complicated balancing exercise.
If, as a result of the first exercise, it is concluded that the attempt to make a meaningful comparison is wholly unrealistic, another basis of valuation would be required. This would require analysis of the appellants’ enterprise as a whole to determine accurately the levels of free profit available to a hypothetical tenant. This in itself might not be a difficult exercise. However, we must have regard to the fact that at the stage of leading evidence this exercise will require to be carried out along with the comparative exercise discussed above. There may be significant differences in emphasis in relation to accounting evidence depending on whether it is used for the first stage or the second.
It seems clear that parties are apart, not only in their approach to use of the Scheme for the subjects of appeal but on the reliability of the Scheme as applied to five-star hotels generally. The applicants contend that it is well recognised that luxury five-star hotels are less profitable than four-star hotels, measuring profitability as a percentage of turnover. However the Assessors’ Scheme consistently applies the highest figures to five-star hotels. We invited Counsel for the assessor to explain in the broadest terms how the assessor had gone about the comparison of the luxury five-star establishments with the material available from the let hotels to produce a figure higher than was applied to these hotels. He was unable to say more than that it was a valuation judgement. It appears that other five-star hotels have accepted the result.
We do not wish to make much of this particular reply. Our question was not pressed and Counsel was plainly responding on the basis of the limited material he had available to him although he had the advice of the depute assessor, sitting with him. It can, however be taken as an illustration of a feature common in appeals under Section 1(3BA). The appellants have pointed to a good deal of hard factual material which will have to be analysed and assessed in making the necessary comparisons. The assessor says simply that this is just a routine exercise of judgement well within the scope of a Committee.
As presented to us, we had no reason to think that any of the matters to be determined on analysis of the evidence would be in any way beyond the expertise of a typical committee. The problem, however, is not just one of difficulty but of complexity. We recognise that many cases involve analysis of a good deal of material. Sheer volume will not, of itself, be sufficient to justify the label of “complex” in the context of commercial rating. Where the detail is itself straightforward it can be assumed that parties will ultimately be able to agree most matters and we cannot approach assessment of complexity by assuming that all material will have to be presented to the Committee in raw form. In the present case, however, much of the material will be of direct importance to the issue of comparison and scope for agreement may be limited in the context of the essential dispute.
We must also be careful not to allow reference to irrelevant material to be allowed to create an impression of complexity which will disappear when matters are properly analysed. With some hesitation, we take an example from the appellants’ submissions. When the relevant four-star leased hotels used as the basis of the Scheme were identified at the hearing, the appellants were able to use their special knowledge of one of the leases to explain why the rent was not a reliable indicator of open market rent. It was suggested that all comparative figures would require similar analysis, increasing the complexity of the case. We have placed no weight on this element. The appellants’ case, as we understand it, lies in distinguishing their hotel from the vast majority of hotels which have accepted the Scheme. It does not require attack on the basis of the Scheme itself. What the Committee or Tribunal would have to know would be how the assessors analysed the available rental evidence to create the Scheme. It is unlikely that the reliability or otherwise of the base information would be relevant to the present appeal. Our hesitation arises from recognition of the fact that we have not heard submission on this point and we do not exclude the possibility that such analysis might be of relevance.
Having considered all these matters, we have concluded that the facts of this case can properly be regarded as complex within the meaning of Regulation 5(1)(a). It is unnecessary for us to deal with the other heads relied on by the appellants and no purpose will be served by our doing so. It should be observed, however, that we do not accept that complexity of fact is necessarily related to complexity of expert opinion. Complicated facts may have to be explained by employees who know about them as part of their daily work. It can be added that we are not satisfied that Regulation 5(1)(d) is wide enough to cover a decision in relation to particular subjects being used as a guide to valuation of the same subjects at a future valuation.