Garage and petrol filling station at Glasgow–Basis of valuation–Tribunal adopts average overall rate per sq ft for buildings to reflect adjacent open land used for display and parking–Rate per 1,000 gallons of petrol throughput–No deduction made for likely recovery of business on alternative site–District valuer’s submission of analogy with licensed premises not accepted–‘Friendly Bar’ decision distinguished
Mr W I Stewart
QC (instructed by Bird, Semple & Crawford Herron, of Glasgow) appeared for
the claimants, and Mr W D Cullen QC (instructed by the town clerk of Glasgow)
represented the acquiring authority.
Giving their
decision THE TRIBUNAL said: This voluntary reference was agreed to be solely in
respect of a claim under ‘Rule (2)’ ie section 12 (2) of the Land Compensation
(Scotland) Act 1963. We have already rejected the acquiring authority’s
contention that the claim for disturbance should be heard at the same time.
The subjects
at 69 Dumbreck Road, Glasgow, consist of a garage with showroom and workshops
together with a petrol filling station. The total site area is agreed to be
7,206 sq yds, with the buildings themselves having an area of 21,418 sq ft. The
petrol throughput in the filling station for the year ended September 1974 is
agreed as being 397,420 gallons. The claimants are still in occupation: it is
agreed, however, that the date of the hearing is the valuation date. The
claimants claim a sum of £208,000, against the acquiring authority’s valuation
of £135,660.
Mr Lachlan
McNeill FRICS [partner of Murray & Muir, of Glasgow] gave evidence in
support of the claim and his valuation was as follows:
|
Buildings with land: 21,418 sq ft @ £6 |
£128,508 |
|
Petrol filling station: 400,000 gallons @ £200 per 1,000 |
£80,000 |
|
£208,508 |
|
|
say |
£208,000 |
Mr Hugh Rooney ARICS, District Valuer Glasgow 1, gave evidence in
support of his figure of £135,660 and his valuation was as follows:
|
Showroom, office and toilet |
|
|
|||||
|
3,487 sq ft @ £4.50 per sq ft |
£15,692 |
|
|||||
|
Workshops: lean-to |
|
|
|||||
|
3,691 sq ft @ £3.00 per sq ft |
£11,073 |
|
|||||
|
Remainder |
|
|
|||||
|
14,240 sq ft @ £3.50 per sq ft |
£49,840 |
|
|||||
|
21,418 |
|
£76,605 |
|
||||
|
(average rate per sq ft £3.57) |
|
|
|||||
|
Open parking: 2,045 sq yds @ £3.00 per sq yd |
£6,135 |
|
|||||
|
Total for garage buildings and ground |
|
£82,740 |
|||||
|
Petrol filling station |
|
|
|||||
|
Throughput of petrol for the years ended: |
|
|
|||||
|
September 1971 299,000 gallons |
|
|
|||||
|
September 1972 308,000 gallons |
|
|
|||||
|
September 1973 322,000 gallons |
|
|
|||||
|
September 1974 397,420 gallons |
|
|
|||||
|
Adopt 1973 throughput as firmly maintainable, ie 322,000 @ |
£48,300 |
|
|||||
|
Balance of throughput in 1974–75,400 @ £75 per 1,000 |
£5,660 |
|
|||||
|
|
£53,960 |
||||||
|
(Equivalent to 360,000 gallons @ £150 per 1,000 gallons) |
|
£136,700 |
|||||
|
Less ground burdens £153 × |
|
£1,040 |
|||||
|
Value of garage and petrol filling station complete with |
|
£135,660 |
|||||
Both valuers prepared their valuation on a similar method, namely by
adopting a capital rate per sq ft for the buildings and applying a rate per
1,000 gallons to the petrol throughput.
land attached to the garage, whereas Mr Rooney applied rates per sq ft for
various buildings and parts thereof and a separate rate for the land used for
open parking.
It was agreed
by both valuers that it was important to have unbuilt-on land adjacent to
garage buildings for display and parking purposes. Mr McNeill had regard to
this important aspect, in analysing transactions and in valuing, by determining
a rate per sq ft for the buildings to reflect the fact that sufficient land was
available for such display and parking purposes. He also considered it to be
the appropriate way of analysing sales, particularly as it was not possible to
have a detailed survey of buildings in every garage transaction. Mr Rooney, on
the other hand, analysed transactions by applying separate rates to the various
qualities of buildings and to the land. In the hands of experienced valuers
both methods are valid. We can see merit in Mr McNeill’s approach of taking a
rate to reflect the adjacent land, particularly as it is agreed by both valuers
that the availability of open ground makes a garage considerably more
attractive to purchasers. Such open ground would be vital to any larger
company. This is borne out by the developments, which we have seen, being
carried out by the large companies in and around Glasgow.
Transactions
of garages were produced by both valuers to support their opinions and are as
follows:
Claimants’
Valuer’s Main Comparisons
Mr McNeill
referred us to two new garage complexes, one at Royston Road and one at Crow
Road, both in Glasgow. In both cases the total site area was some three times
the size of the actual buildings. He had ascertained the cost of building and
the cost of the land acquisition and then expressed the costs at the time when
they were incurred in 1972 as a rate per sq ft applied to the buildings. This
produced a rate of £5.80 and £7.20 respectively. In the same category of new
complexes he referred to a sale in October 1973 of 1900 Great Western Road,
where the site area is about two-and-a-half times the building area. This sale
appeared to be part of a leaseback arrangement. Mr McNeill’s analysis of the
Great Western Road sale was £5.70 per sq ft for the building and £150 per 1,000
gallons for the petrol filling station. Mr McNeill explained that in this
station incentives were given which increased the throughput. Incentives in the
form of price reductions or trading stamps are given in some stations to
attract trade. It is necessary, therefore, to ascertain whether incentives are
given and what they amount to before analysing sales or making valuations. No
incentives were given at 69 Dumbreck Road.
He also
referred to the value determined in connection with the acquisition by Glasgow
Corporation of 894/906 Maryhill Road, Glasgow, at £40,000. There was no open
land at this site and his analysis was £3.80 per sq ft.
There were
also two transactions in the Edinburgh area to which he referred us. The first
one was at Windyvale Garage, Meadowplace Road, in May 1973 which, on Mr
McNeill’s analysis, represented £4.00 per sq ft and £150 per 1,000 gallons. Mr
McNeill had apportioned the price of £82,000 as follows:
|
Buildings |
£28,000 |
— 6,960 sq ft @ £4 per sq ft |
|
House and garden |
£7,000 |
|
|
Lock-ups |
£2,000 |
|
|
Filling station |
£45,000 |
— 300,000 gallons @ £150 per thousand |
He considered the garage was not as well laid out as 69 Dumbreck
Road and stated that the roof of the main building was poor. According to his
notes the lock-ups were timber–our inspection revealed that they were brick. He
had not included the automatic washbays and he accepted the district valuer’s
apportionment of £3,000 for these. He disputed the district valuer’s
apportionment of £13,450 on the house, which figure had been agreed with the
seller for capital gains purposes.
The second
comparison was at Musselburgh, where the area of the site was just over five
times the building area. His analysis of the alleged sale figure at December
1974 was £8 per sq ft and £200 per 1,000 gallons. The sale price was involved
in the acquisition of a company and was indicated by letter as a range of price
forming the basis of acquiring the share capital.
Mr McNeill
also relied on the purchase price of 47 Haggs Road, Glasgow, the property which
is to be redeveloped by the claimants as alternative premises. An analysis of
the price paid in May 1973 represents on his method a rate of £4.16 per sq ft.
He stated that it was estimated in September 1974 that a sum of £60,500 would
have to be spent to adapt it for the claimants’ use, including £26,000 for the
forecourt.
Part of Haggs
Road was subsequently sold to an adjoining proprietor and the sale of that
particular building with ground attached analysed at £5.50 per sq ft. The other
two comparisons did not appear to be relied upon at the end of the day.
District
Valuer’s Main Comparisons
Mr Rooney
produced a list of transactions of which three were considered by him to be the
most comparable.
Firstly, there
was the purchase by the claimants of 60 Tantallon Road, Glasgow, in June 1973
at £53,000. He had no information about petrol throughput but had placed an
estimate of £13,000 on the forecourt, which left £40,000 on the building,
analysing at a rate of £2.16 per sq ft. It had no open ground attached to it.
Secondly,
there was the sale of Macarthur’s Garage, Stevenson Road, Edinburgh, in March
1975 at £56,000, which he considered was the most comparable from the
petrol-filling-station point of view. His analysis of that sale represented
£3.40 per sq ft on the buildings, £7.00 per sq yd on the unbuilt-on land and
£138 per 1,000 gallons applied to a throughput of 250,000 gallons. He thought
that with the road improvements the throughput could be increased to 300,000
gallons. The importance of this sale is that it is the most recent transaction.
Thirdly, he
had considered the sale of Sighthill Garage, Calder Road, Edinburgh, at £65,000
in September 1973. It consisted of a modern building but with no open parking
ground other than a small open strip at the rear. The building internally is on
two floors with ramps. He analysed it by placing £20,000 on the forecourt, ie
his estimate of 160,000 gallons at £125 per 1,000 gallons, which left the
building analysis at £2.64 per sq ft.
Tribunal’s
Views on Comparisons and Conclusions on Value of Buildings and Land
We have
inspected the comparisons which we have been referred to and while we find no
comparison which is the same as 69 Dumbreck Road they do assist us in a general
way to come to a decision.
The garage at
69 Dumbreck Road is different from the comparisons in that it falls between the
large modern complexes at Crow Road and Royston Road and the smaller garages
such as Tantallon Road and Stevenson Road. It has the advantage of having some
open ground, although the layout to some extent limits the full use of it. The
complexes at Crow Road and Royston Road demonstrate the level of costs which
companies are prepared to invest, but it does not necessarily follow that large
companies would purchase Dumbreck Road at a price which is necessarily related
to the cost of new buildings.
The
Musselburgh and Great Western Road transactions are of interest. The tribunal
would have preferred more reliable direct evidence of the Musselburgh price, as
it is a comparison which both parties agree was a good one. Evidence about this
sale price was indirect and there is
could not be tested by cross-examination. The Great Western Road sale appears
to be a sale involving a leaseback transaction, which again dilutes its
importance as an open-market sale. Nevertheless, there was a measure of
consistency in the analyses which indicates a general level in prices which is
considered appropriate by those involved in the motor industry. The Maryhill
Road, Tantallon Road and Sighthill garages have no land attached to them and
therefore their use as comparisons is limited on that account.
The two
remaining garages in Edinburgh, namely at Meadowplace Road and Stevenson Road,
are of some assistance, particularly now that the garden ground at Meadowplace
Road appears to be used in connection with the garage. We can understand the
allocation of the purchase price put forward by the sellers, particularly when
it was in their interest to establish a value for the house for capital gains
tax purposes. Having regard, however, to the present use of the garden we
consider that the allocation of the price by Mr McNeill, looking at it from the
purchaser’s point of view, is arguable. If we accept his £7,000 for the house and
make adjustments for the brick lock-ups and wash bays in a total figure of,
say, £6,000, this leaves £69,000 to be divided between the filling station and
buildings. If Mr McNeill is correct in his £28,000 (ie at £4 per sq ft)
apportionment to the buildings, then his rate per 1,000 gallons is £136. If the
value of the house is higher, then of course the rate per 1,000 gallons would
be reduced. Mr Rooney, on the other hand, took £120 per 1,000 gallons at
Meadowplace Road, although he conceded that it is difficult to judge
incentives. If the value of the house is taken at Mr McNeill’s £7,000, then
there would be little between the valuers on the rate per 1,000 gallons.
Stevenson Road
was Mr Rooney’s main comparable for a filling station. His view, however, that
the rear land could be sold separately to adjacent proprietors rather
conflicted with his view that garage proprietors require land for the parking
of vehicles. The land at the rear of the garage is used for car storage
awaiting repairs, and as the forecourt appears to be partially used as an
access to adjacent premises, it would seem essential to retain the land at the
back for garage use. This garage appears to be substantially a filling station
with repair facilities and an accessory showroom. Mr Rooney analyses the
filling station at 250,000 gallons at £138, equalling £34,500. If the
availability of the land at the back is taken into account, then the rate for
the building is £21,500 divided by 4,200 sq ft, which represents £5.11 per sq
ft. Mr McNeill, on the other hand, indicated that the filling station should be
at £174 per 1,000 gallons, which gives £43,400, leaving the value of the
building with land analysed at £3.00 per sq ft. We consider this low and
therefore Mr McNeill’s rate per thousand gallons is high. His alternative
analysis was, in our view, much too low on the building.
So far as
Haggs Road is concerned both valuers analysed this sale. We have shown Mr
McNeill’s analysis, but Mr Rooney divided it into open land and buildings,
although we did not get the complete details of his analysis. The price paid
was £130,000 and Mr Rooney’s deduction for the part sold to the adjoining
proprietor was £13,160. This leaves about £117,000 for the remainder of the
property. He had allocated £4,500 to the house and garden, leaving £112,500 as
the net cost. The remaining buildings appear to have an area of 27,120 sq ft,
which on Mr McNeill’s basis, with land included, represents an average rate of
£4.14 per sq ft. We had evidence that the cost of adapting the property for a
garage use similar to Dumbreck Road would be in the region of £70,000, giving a
total cost of just over £180,000. With more open land available Haggs Road
would appear to have an advantage over Dumbreck Road in that respect. We have looked
at the location and doubt whether in the normal way there would be much
competition for it for a petrol filling station. There is a petrol filling
station on the same traffic route fairly close by in Pollokshaws Road. Just
before the Haggs Road site there is a railway bridge with a considerable dip in
the road which would adversely affect the prominence and entrance to the petrol
filling station. The levels of the front plot at the part where a filling
station would have to be erected will make it a relatively expensive site to
develop. Traffic proceeding south along Haggs Road would have difficulty
crossing the traffic lanes.
As we have
indicated, we see the merit in Mr McNeill’s method of valuing at a rate per sq
ft on the buildings, reflecting the fact that there is land for display and
parking purposes. On the other hand Mr Rooney’s detailed analysis of each
building and land where all the facts are available is equally appropriate, but
it does cause difficulty when, in some cases in his own analyses, he did not
provide sufficient details. In this case, particularly where we, as a tribunal,
do not have facilities to examine in detail all the comparable properties, we
consider that an average overall rate is the best way of dealing with the
valuation. The allocation of separate rates to unbuilt land are to a certain
extent arbitrary and, depending on the rate adopted, can alter the building
rate in an analysis. We therefore on balance prefer the way in which Mr McNeill
has approached the matter and will decide our valuation on this basis.
We have
studied the analysis of the various transactions. Having regard to the quality
of the buildings and the availability of land we determine that the rate for 69
Dumbreck Road should be an average one of £5 per sq ft, reflecting the
unbuilt-on land. This gives a value of buildings with land at £107,090.
Value of
Petrol Filling Station
So far as the
petrol throughput is concerned the evidence establishes that at the date of
valuation throughput in the region of 400,000 gallons is established. Mr Rooney
has taken the 1973 throughput of 322,000 gallons as being maintainable and
considered that the balance of approximately 76,000 in 1974 was at risk. He
eventually dealt with this part by adopting half rate. There is no doubt that
the disruption of deliveries in 1974 has confused the pattern of throughput;
but looking at the trend of the present gallonage it would appear to us that
the 400,000 gallons is a figure which a purchaser would consider could be
attained. Evidence was given that for the six months from October 1974 to March
1975 the throughput was 205,000 gallons and is at a time of the year when the
petrol sales were normally at a lower level. This, however, included the peaks
at November and December 1974. At March 1975 the level was under 8,000 gallons
per week and, according to the graph produced, just slightly above the levels
at the end of March 1973 and March 1974. We are informed that this petrol
filling station opens 24 hours each day, and it was suggested by the acquiring
authority that the cost of running such a station would be more than for a
station which opened normal hours. We accept that this is likely, although we
have no detailed evidence to establish the extent of this compared with other
stations.
Mr McNeill’s
view is that £200 per 1,000 gallons is the appropriate multiplier, although
this is supported only by the Musselburgh analysis. He had taken £150 (possibly
modified to £136) at Meadowplace Road and £150 per 1,000 gallons at Great
Western Road, in both of which there are incentives involved, although no
details of the incentives were given. It was suggested for the claimants that
the higher the throughput the higher should be the rate and Mr Rooney appeared
to agree. Mr Rooney stated that if £138 was right for 250,000 gallons at
Stevenson Road, then £150 would be appropriate for 400,000 gallons. Some doubt
has been thrown on the Musselburgh transaction and figures between £165,000 and
£200,000 have been indicated. It is perhaps of interest to note that if
£165,000 was the correct figure and Mr McNeill’s analysis of the buildings at
£8 per sq ft is correct, then this would leave £25,800 for the filling station,
which would be just over £100 per 1,000 gallons. If the price was £180,000,
then the rate would be £170 per 1,000 gallons. It will be seen, therefore, that
a relatively small difference in the purchase price can dramatically affect the
rate per 1,000 gallons.
Having regard
to the comparisons, the full throughput and the 24 hours’ opening we determine
that the appropriate rate for Dumbreck Road is £160 per 1,000 gallons and if
this is applied to 400,000 gallons the value of the petrol filling station is
£64,000.
Mr Rooney has
deducted the capitalised ground burdens of £153 at £1,040. Mr McNeill
considered that there had been no adjustments for ground burdens in any of the
comparisons, and accordingly the rates determined by analysis and for valuation
should not be subject to a deduction. We had no information as to whether there
were ground burdens or not over the various properties. We do know, however,
that there are substantial ground burdens of £153 in this case and we consider
that a purchaser would take them into account. We accordingly follow the normal
practice of deducting the capitalised ground burdens at the £1,040 proposed by
Mr Rooney.
The valuation
which we determine therefore is as follows:
|
Building with land: 21,418 sq ft @ £5 |
£107,090 |
|
Petrol filling station: 400,000 gallons @ £160 per 1,000 |
£64,000 |
|
Value of |
£171,090 |
|
Less ground burdens £153 |
£1,040 |
|
Value of |
£170,050 |
|
say |
£170,000 |
Deduction from Petrol Filling Station Valuation for Recovery of
Business
As this
reference is concerned only with section 12 (2), the valuation arrived at would
normally be the determination, but the acquiring authority claim that a
deduction for the petrol-filling-station business capable of transfer to the
alternative site at Haggs Road should be made. Mr Ronald Grant, managing
director of the company, conceded that he hoped to retain some of his credit
petrol business.
Counsel for
the acquiring authority stated that the value determined for the petrol filling
station was the value on the basis of a going concern and that it was in effect
a revenue calculation based on a throughput of petrol. An analogy to licensed
premises was drawn in that the property was bought and sold relative to the
established revenue. It was said that purchasers would have regard to the fact
that the trade done will continue and would pay a price on the guarantee that
the same level would continue. It was further stated that if customers were
retained then a deduction had to be made to reflect this. Otherwise the
claimants would receive more compensation than their loss. A calculation
produced by Mr Rooney giving effect to these views was as follows:
|
Going-concern value of filling station |
|
£53,960 |
|
Deduct |
|
|
|
Value of site–estimated at |
£22,500 |
|
|
Petrol pump |
£6,200 |
|
|
Canopy |
£3,000 |
|
|
Tarmac and concrete area |
£3,000 |
|
|
|
£34,700 |
|
|
Balance |
|
£19,260 |
|
Whereof say |
|
£6,420 |
Counsel for the claimants, on the other hand, argued that what has
to be established in this reference is the market value of the property. If
there is any goodwill involved in this transaction, he argued that it is
heritable in nature. He also contended that a petrol filling station is
different from licensed premises, where a monopoly is created by the grant of a
licence and where movable goodwill can sometimes be distinguished. Planning
permission was all that was necessary and such decisions would be made on the
basis of need, traffic and amenity considerations.
Counsel for
the claimants further contended that the case of The Friendly Bar Ltd v City
of Glasgow [1972] RVR 475 relied upon by the acquiring authority was
distinguishable because the parties themselves had presented valuations to the
tribunal drawing a distinction between heritage and goodwill; and furthermore
because the tribunal had been able on the evidence so presented to decide that
part of the goodwill was rendered movable by the granting of a substitute
licence in the same vicinity. Counsel also referred us to the case of D McEwing
& Sons Ltd v Renfrew County Council 1960 SC 53 in support of the
proposition that the value of land reflects the price which a purchaser will
pay for the profits he anticipates he will make from its development.
Counsel for
the acquiring authority, on the other hand, in his closing submission contended
that the valuation of petrol filling stations (viewed here as a separate entity
from the garage showrooms and workshops) was really calculated on the revenue
principle; the principle of equivalence, therefore, required that a suitable
deduction should be made for any expected recovery of business. Otherwise the
claimants would be compensated for more than they had actually lost. In support
of this proposition counsel founded strongly upon the tribunal’s own decision
in The Friendly Bar case supra. He contended that there was no
material distinction involved between the valuation of petrol stations based on
throughput and the valuation of public houses based on gross turnover. In the
case of The Friendly Bar the tribunal had made a deduction in respect of
an estimated 25 per cent recovery of business; and they should therefore make a
similar deduction in the present case–but along the lines calculated by the
district valuer.
At first sight
this argument appears to have considerable force, although we cannot agree that
the valuation of petrol filling stations (or, for that matter, public houses)
is strictly made on the revenue principle. A detailed analysis of sales of
petrol filling stations was made by both valuers in the present case by
comparing petrol throughputs, where known. This is the accepted method for
comparison purposes. A valuation is then arrived at for the reference subjects
by using the comparative method, rate per throughput of 1,000 gallons being
merely the unit of comparison. In the case of public house sales the
comparative method is also used; and a multiplier derived from gross turnover
then becomes the unit of comparison.
Valuation of
Licensed Premises Distinguished
However, there
is, in the tribunal’s view, a material distinction between the valuation of
public houses and petrol filling stations–resulting from the licensing system.
This can lead to different consequences when assessing compensation on
compulsory purchase. In the present case no real evidence was placed before the
tribunal by the acquiring authority regarding the likely level of business
recovery; nor any justification, on the principle of equivalence, of why the
claimants would be compensated for more than they had actually lost–if no
deduction was made.
In the case of
licensed premises the goodwill concerned is usually part of, and therefore
simply an enhancement in value of, the heritage. In Graham v Graham’s
Trustees (1904) 6 F 1015 at page 1020 Lord McLaren said:
‘It is
perfectly clear that the goodwill would be valueless when separated from the
licensed premises in which the business had
business depends entirely on the premises and the licence taken together.’
See also Mrs
Coles Executors v Inland Revenue [1973] RVR 356. But this need not
always be so and the question of whether the goodwill of licensed premises is
heritable or movable is always a question of circumstances: Hughes v Assessor
for Stirlingshire (1892) 19 R 840 and Muirhead v Muirhead
Trustees (1905) 7 F 496. In exceptional circumstances (such as prevailed in
The Friendly Bar) the goodwill may become partly detached from the
heritage and so rendered movable by the very fact of compulsory purchase
coupled with a policy of relocation of licensed premises in the same vicinity.
When licences in suspense were in existence their value therefore required to
be deducted in any computation for loss of business or goodwill–thus
emphasising that their value had become detached from the premises and that the
goodwill involved was at least partly movable. See Tull’s Personal
Representatives v Secretary of State for Air [1957] 2 WLR 346.
In The
Friendly Bar case the tribunal were able to hold on the evidence that part
of the goodwill had become movable with the expectation of relocation in the
vicinity under a substitute licence; and that this factor should be taken into
account if the claimants were not to receive in compensation more than they had
actually lost. It is to be noted, moreover, that it was the very fact of
dispossession on compulsory purchase which gave the claimants the necessary
leverage to obtain the substitute licence with a renewed monopoly in the same
vicinity.
The tribunal’s
decision in that case was appealed and upheld in an unreported decision of the
First Division, The Friendly Bar Ltd v Glasgow Corporation, March
26 1974. It was not, however, disputed on appeal that the tribunal were
entitled, in calculating the compensation to be paid, to have regard to a
continuance of goodwill and to make due allowance therefor, if justified on the
facts. The court held that on the facts the tribunal were justified in making a
deduction based upon a 25 per cent recovery of business.
We do not
consider, however, that there is any real parallel in the present case between
the quasi-monopoly resulting from liquor licences granted for particular
licensed premises and grants of planning permission for petrol filling
stations. The latter are granted on general planning grounds and do not
necessarily imply a local monopoly. A better analogy would be a grant of
planning permission for a change of use of premises to a public house, which
does not in itself imply any quasi-monopoly.
No Movable Goodwill
There are also
other distinctions from The Friendly Bar. The evidence in this case is
that the value of the heritable property (ie the petrol filling station) is the
same as the value of the going concern and that there is no movable goodwill
which can be separately identified. In The Friendly Bar both sides
collaborated in enabling such a distinction to be drawn. If we examine Mr
Rooney’s calculations relative to the petrol filling station designed to show
the business capable of being transferred, we find that he shows a figure of
£19,260, which he describes as ‘balance.’
In reply to questions from the tribunal he said that he was not prepared
to describe this balance as goodwill. He had, in that calculation, estimated
the value of the site at £22,500 but was unable to explain to our satisfaction
how that figure was arrived at.
As the value
of a petrol filling station is properly calculated by considering the
throughput of petrol, then the value of the site should be related here to the
actual throughput of 400,000 gallons and not to some lesser figure. In our view
Mr Rooney’s ‘balance’ of £19,260 is really an enhancement of the value of the
site due to the 400,000 gallons of petrol throughput; and therefore is part of
the open-market value of the land.
The matter may
be tested in another way by considering the market price likely to be paid for
a site not already being used as a petrol filling station–but intended to be
used for that purpose. A purchaser of such a site for development would assess
the price he would pay for it by estimating the potential throughput, apply a
rate per 1,000 gallons and have regard to the cost of creating the station (Oxshott
Garages Ltd v Esher UDC (1964) 189 EG 1093). Using Mr Rooney’s own
calculations for the purpose–but on the basis of a 400,000 gallons
throughput–the value of the site could be expressed as follows:
|
400,000 gallons @, say, £135 per 1,000 gallons |
£53,960 |
|
Deduct |
|
|
Cost of tanks, etc |
£12,200 |
|
Value |
£41,760 |
There is no
separate goodwill in that figure, although Mr Rooney, as already mentioned,
divides it:
|
Site value |
£22,500 |
|
Balance |
£19,260 |
|
£41,760 |
The above exercise therefore helps to confirm our view that the
figure of £19,260 is really part of the value of the petrol filling station.
It is also
pertinent to note that the sales prices, which both parties referred to as
comparisons, were for the land and were as recorded in the dispositions. There
was no evidence that any apportionment of those prices was made to show
separate figures for goodwill.
On the
evidence before us, we also doubt whether in any event the acquiring authority
have really proved that the claimant would be compensated for more than his
loss if the deduction claimed is not made. Mr Grant did, indeed, frankly state
that he hoped to retain part of his credit sales on moving to Haggs Road; but
it is difficult for us to assess what that retention (if any) will be. The new
site is over one mile away on a route which will not necessarily carry the same
traffic as the present site. The new station, as we have said, has difficulties
which make it far from certain how much of the old business will be retained.
Having regard to the capital risks involved, it certainly seems unlikely,
however, that a decision would have been taken to move to the alternative site
unless it was hoped to retain some of the business. But there is lacking here
the fairly detailed evidence the tribunal had before them in The Friendly
Bar (relating to other liquor licences and catchment areas, etc) which
enabled them to calculate a 25 per cent recovery. To make any assessment here
would be pure guesswork. But if, for the sake of argument, say one-third of the
throughput (133,000 gallons) was retained and no other throughput obtained, the
capital expenditure of at least £26,000 spoken to by Mr McNeill necessary to
create a petrol filling station on the new site would hardly be justified. Mr
McNeill said that no substantial price was paid for the forecourt area at Haggs
Road, which would indicate that the sellers’ professional advisers did not
consider that in itself the site was one with a high potential as a petrol
filling station. Mr Rooney apportioned £12,500 of the purchase price of Haggs
Road to the forecourt site–but this, of course, was his own estimate. Nevertheless,
if the cost of £26,000 is correct this would mean that the cost of producing a
filling station would in his estimate be at least £38,500. Applying his £150
per 1,000 gallons this would mean a throughput of at least 250,000 gallons to
justify the expenditure alone.
We were able
to explore the above matters upon concrete evidence led. In The Friendly Bar
there was no real evidence on this aspect and it was a different but related
point which was raised on appeal. The appeal, however, was refused on
this point, too, in the unreported decision of the First Division already
referred to. On page 3 of his judgment the Lord President said:
‘The essence
of the appellants’ submission on the third question of law was that the award
should have included part of the likely expenditure on the new public house
premises which was referable to continuance of part of the goodwill and
otherwise unremunerative. It was agreed by respondent’s counsel that there may
be circumstances in which such unremunerative expenditure which was incurred in
connection with new premises could be a relevant item of claim. An example was
expenditure which was incurred solely to retain goodwill wholly or partially,
and which was not referable to the increased value of the new premises or the increased
returns therefrom. The submission for the respondent was that such an item
could not be included in this award because there were no facts on which it
could be calculated. In our opinion this latter submission was justified.’
No such claim,
of course, was made in the present case and we are merely utilising certain
figures brought out in evidence to illustrate our doubts whether, without the
deduction claimed, the claimants will in fact be compensated for more than they
have actually lost.
For all the
reasons given we do not consider that any deduction in respect of a likely
recovery of business should be made in the present case. We therefore determine
the compensation payable in the sum of £170,000.
At an earlier
stage in the proceedings we refused a motion by the acquiring authority that we
should decline to hear this voluntary reference relating only to the valuation
of the heritage until we also had before us a separate reference of a claim for
disturbance–if such claim was not otherwise agreed. This motion was refused. We
were requested meantime to reserve all questions of expenses.
