IKEA v Assessor for Lothian Valuation Joint Board

This is an appeal under the provisions of regulation 6(1) of the Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995 against the refusal of the Valuation Appeal Committee to refer to the Tribunal and appeal in respect of an entry in the valuation roll relating to the IKEA store at Straiton south of Edinburgh. At the hearing on 17 June 2013 Mr Haddow, QC appeared for the appellants and Mr N Chapman, Head of Valuation Services, at Lothian Valuation Joint Board for the Assessor. The subjects can be described as a large retail warehouse. They are some 20,000m² in area and, as such, very much larger than any other retail facility in Scotland. Their configuration is unusual in that they are on two floors with the main entrance leading customers direct to the first floor. There are no subjects of similar size and configuration in Scotland except an IKEA store at Braehead in Glasgow. This is also subject to appeal. An application has been made to the local Committee for that case to be referred to the Tribunal.

Put shortly, the appellants contended that the subjects could, and should, be valued by reference to depot warehouses in Scotland. They sought to rely on head (c) and (d) of the said Regulations, namely: that “(c) the law applicable to the case is uncertain or difficult to apply; or (d) the case raises a fundamental or general issue likely to be used as a precedent in other cases”. The Assessor contended that because there were no stores of similar size in Scotland it was appropriate to rely on the entries made in respect of a number of IKEA stores in England.


Mr Chapman challenged the competency of the appeal on the basis that the appellants’ appeal letter to the Tribunal of 14th of April 2013 did not comply with the provisions of regulation 6 (3) as it did not specify the grounds on which it was based. He referred to dicta in Assessor for Lanark v J Norman and others 2012 CSIH 50 for the proposition that we should not lightly excuse a failure to comply with statutory provisions. In response, Mr Haddow pointed out that the letter had enclosed the original application. As the appeal to the Tribunal would require a hearing of the matter de novo, he submitted that there was no need for any further ground to be stated.

We accept that where an appeal is to take the form of a hearing de novo all that would be required in practical terms by way of statement of grounds of appeal would be an assertion that the Committee decision was wrong. We think it can properly be said that this was clearly implicit in the very fact of the appeal. We are satisfied that this ground of challenge to competency fails.

Mr Chapman also advanced a subsidiary argument that, in any event, it was not competent for us to have regard to submissions advanced under reference to regulation 5(1)(c). The application for referral was governed by the regulations. Regulation 4(2) provided that an application to the Committee seeking a referral ”shall include representations by the applicant as to which of the criteria set out in the sub- paragraphs (a) to (e) of regulation 5 (1) apply to the appeal”. The application in this case had referred only to sub-para (d).

There is plainly some substance in this submission. The proceedings are all creatures of statute. We are dealing with an appeal against a decision of the Committee. That decision related to an application made only under reference to head (d). However, there is a difficulty in the present case in that we now recognise, from our notes, that the Tribunal interrupted Mr Haddow in his submissions on this issue to seek clarification of his position on the different issue raised by reference to regulation 6(3). We have not noted any full submission on the regulation 4(2) point and have a concern that counsel may have been misled by the nature of the interruption. He did make reference to this particular challenge coming very late. The Assessor had not responded to the opportunity given by the Tribunal to lodge written submissions before the hearing. There had been no warning of this challenge. An argument might have been presented to the effect that it is too narrow an approach to look at the decision of the Committee as one relating only to the material before it and that the decision under challenge is simply the decision not to refer.

We do have concerns that any practice of allowing fresh grounds of appeal after an application has been considered could undermine the important role of the Committees. As will be seen later in this opinion we have concluded that the application on head (c) does not succeed on its merits and we do not require to reach a concluded view on competency. However, it is plainly important that when an application is made to a Committee under regulation 4(1) all available material is put before the Committee. Otherwise the Committee stage is devalued and undermined. We do not intend to criticise the appellants in the present case. Their application was comparatively full and their selection of head (d) showed that more thought had gone into the matter than we see in some cases, where the first four heads may be referred to almost as a matter of routine. We would hope that care will normally be taken to identify the proper grounds when an application is first made. If this issue arises again we would wish to make a more extensive examination of the arguments before accepting that it was competent to introduce new grounds at this stage.


It was not disputed that head (d) required something more than a decision which might cast helpful light on other cases. It was necessary that some issue be identified that could properly be regarded as a precedent. Ultimately, this case will have to turn on a proper comparative exercise seeking to identify a rental value of the IKEA subjects by appropriate adjustment of evidence purporting to show rental values of other subjects with relevant comparative characteristics. This would be a typical valuation exercise. It was not said to give rise to complex or highly technical issues. However, we have come to the view that the dispute over the use of sec 15 of the Local Government (Financial Provisions) (Scotland) Act 1963 as amended by sec 19 of the Rating and Valuation (Amendment) (Scotland) Act 1984 raises issues which justify referral to the Tribunal.

Sub-sec (1A) of sec 15 provides as follows: “It shall be competent to found, by way of comparison, on hereditaments in England and Wales only if –

(a) there is no evidence available as to lands and heritages in Scotland comparable to those which are the subject of the proceedings; or

(b) such evidence as is available in that regard is not adequate to enable the Committee or, as the case may be, the lands Tribunal for Scotland to draw conclusions as to the rent at which they lands and heritages which are the subject of the proceedings might reasonably be expected to let from year to year in the circumstances mentioned in … (ascertainment of values by reference to expected rent).”

For the Assessor it was contended that the case fell clearly under sub-sec (1A)(a) as there was no evidence available as to lands and heritages in Scotland comparable to the subjects. It was not disputed that the Assessor’s starting point was to rely on the entries made in respect of the IKEA stores in England. However, we do not accept that ‘comparable’ in this provision means ‘very similar’ far less ‘identical’. The contrast between (a) and (b) in the preceding paragraph shows that the legislature had regard to a situation where there was comparable material but it was wholly inadequate. For present purposes, it is enough to say that what appears to be envisaged in (a) is material on the basis of which a proper comparative valuation exercise can be carried out. This will always give rise to questions of degree. Mr Chapman accepted that he was not able to go so far as to contend that it would be impossible to derive a value from the Scottish material. Before relying on (a), the determining body will have to decide whether there is no Scottish material which could properly be described as comparable to the subjects. We do not at this stage, attempt to provide any further elucidation of the statutory language. We recognise, however, that any decision to allow reference to English material based on examination of specific facts is likely to provide some further guidance on the proper application of subsec (1A)(a).

In proceedings before a Committee or before the Tribunal the start point will have to be consideration of material alleged to be comparable. At some stage, a decision will have to be made as to whether subsec (1A)(a) applies. If it can properly be said that none of the material put forward is comparable in any meaningful sense, the way will be open to use of material from hereditaments in England. If the Committee or Tribunal comes to the view that comparable evidence is available but that such evidence as is available is not adequate to enable them to draw conclusions as to the rent for the subjects the case will fall under (b). The proper application of this provision is not free from difficulty. There may, for example, be a question as to whether the adequacy of the Scottish material can properly be tested by reference to potentially “better” evidence from England.

The appellants seek to rely solely on the Scottish material and plainly dispute the applicability of sub-sec (1A). The inferences to be drawn from the Assessor’s list of comparable subjects are less clear. The list contains 15 IKEA stores in England, one in Scotland (Braehead) and one in Northern Ireland – it was not suggested that anything turned on this last. The list also includes three supermarkets in Scotland and about thirty warehouses in Scotland, several close to the Straiton subjects.

It is perhaps paradoxical that the English entries upon which the Assessor seeks to rely appear to face the same difficulty as is now faced in relation to the IKEA stores in Scotland. There is no reference to hereditaments in England other than IKEA stores. It was not suggested that these would provide direct rental evidence as they are not tenanted subjects. Although the Valuation Office Agency must, presumably, have based their valuations on some comparative material available in England the Assessor does not seek to rely directly on such material. We were informed that none of the entries had been agreed. All were subject to challenge. The Assessor’s position may ultimately come to be that the Scottish valuation of IKEA subjects, instead of being based on a complicated exercise of adjustment of smaller Scottish comparables, should be based an English valuation derived from a complicated exercise of adjustment of smaller English comparables.

On any view of the matter, the decision in the present case would be likely to give clear guidance as to the proper valuation of the IKEA subjects at Braehead. Mr Chapman pointed to use of the plural “cases” in this head (d), but in terms of sec 6 of the Interpretation Act 1978 - or its Scottish equivalent -words in the plural include the singular unless a contrary intention appears. Mr Chapman did not attempt to point to any speciality of the provision which would justify a conclusion that the plural was intended to exclude the singular in the present case. In other words it would be sufficient to justify referral to the Tribunal if it can be said a distinct issue of significant weight requires to be resolved for the purposes of valuation of the present subjects because that will be a precedent for use at Braehead. The analysis of comparables may also throw light on the proper approach to be taken to a IKEA subjects in other jurisdictions but we are not satisfied that this is a relevant consideration.

We were not persuaded that the appellants identified a fundamental issue in their written submissions. The matter was expressed in very broad terms: “how is this IKEA (and the Braehead IKEA) and any other subjects of a ‘similar character’ over 15,000 m² to be valued in Scotland in the absence of rents on the statutory bases and of agreed valuations, whether in Scotland or in England and Wales?”. However, in course of the discussion greater emphasis was placed on the difficulties likely to arise in relation to use of English material.

We are not aware of other Scottish subjects where out and out reliance has had to be placed on English material in a valuation based on the comparative principle. We are satisfied that determination of the proper approach to English material is likely to give rise to significant difficulty and that the matter does raise a general issue of sufficient importance to be described as a precedent which will have a bearing at least on the valuation of Braehead. The particular problem is not simply an example of a typical exercise of valuation judgement on the basis of meagre comparative material. It raises the separate question of when poor material simply cannot be regarded as a basis for a comparable valuation. If we understand the Assessor’s position correctly it will require identification of a particular stage at which reference to English material can properly be made in terms of subsec (1A).

It may be added that difficulties may also arise as to the proper application of subsec (1B). Some such difficulties were discussed in Assessor for Lothian v BP Petroleum Development 1990 SLT 59. Some were resolved but the precise scope for analysis of the English valuations will have to be addressed. We did not hear detailed submissions on this and it is enough simply to note it as an additional area where guidance can be expected from any decision of the Tribunal.

In written submissions in relation to head (c) the appellants contended that the difficulty of applying the law to the circumstances of the appeal subjects were illustrated in part by the approach to the valuation in Practice Notes issued by the SAA. At the 2005 revaluation a revised Practice Note in relation to valuation of retail warehouses said: “this Practice Note should not be used for the valuation of depot warehouses. The depot concept, whilst relatively new, is becoming increasingly common and is often around 10,000m². These depot warehouses will be valued on their own rental evidence.” At the 2010 revaluation the SAA issued two separate Practice Notes one dealing with retail warehouses and one with depot warehouses. The latter said that it was to be applied to “large retail warehouses between 8000m² and 15,000m², which should be valued by reference to their level of rents prevailing for such subjects. Paragraph 1.2 of the note excluded subjects in excess of 15,000m² “operating as large regional destination retail warehouses” and provided that such subjects should be valued “in line with comparable subjects of a similar character”. It was contended that there was rental evidence for “normal” retail warehouses and some such evidence for “depot” warehouses of 8000 m² to 15,000m², sufficient to allow agreed values for such subjects. There was no direct rental evidence, at least in Scotland, on the statutory terms relating to retail warehouses of the size of the two Scottish IKEAs. However, another very large subject, Tesco’s distribution centre at Livingston, had already been referred to the Lands Tribunal. One of the reasons for this referral was said to be the absence of direct rental evidence and the consequent uncertainties in law and difficulties in applying the law. These written submissions were augmented in the discussion before us. It appeared that, essentially, the issue of law upon which the appellants sought to rely for the purposes of head (c) was the problem of proper characterisation or description of the subjects. They referred to the special features these subjects being on two floors with, effectively, a first floor main entrance.

We are not satisfied that the appellants have identified any issue of law. Their fundamental approach was that a proper valuation of the subjects could be derived by reference to comparative material available in Scotland. It was recognised that this might be a difficult exercise but it was said to be one within the competence of valuers.

It may be added that we heard some brief discussion of the practical implications of reliance on the English material relating to IKEA stores. The figures were still subject to challenge. It was agreed by Mr Chapman that if Scottish values were to be assessed by reference to the current English entries it would not be a relevant material change of circumstances if these entries were subsequently changed either by agreement or following formal resolution procedures. We understood it to be agreed that the only practical course, if the English material was to be relied on, would be to sist proceedings to await final determination of the English figures. We were given no indication of the likely timetable for this if agreement could not be reached. We did not hear discussion of the potential difficulties which would face the ratepayers if the matter was left to the Committee. There is, of course, a time limit for disposal of proceedings before the Committee. The statutory provisions are not wide enough to allow the Tribunal to exercise a general discretion to accept a referral to meet specific difficult circumstances, and it is clear that mere pressure on Committee time could not in itself be an appropriate justification for involvement of the Tribunal. However, it will be an incidental benefit of bringing the matter to the Tribunal that it will, if necessary, allow procedures to be adopted to allow proper use to be made of English material without undue time constraints.


For the reasons discussed above we conclude that the appeal should be allowed.

Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 21 June 2013

Neil M Tainsh – Clerk to the Tribunal