Breanagh Catering Ltd v Commissioner of Valuation

• Jurisdiction: Ireland
• Judge: Mr. Justice Robert Haughton
• Judgment Date: 08 March 2024
• Neutral Citation: [2024] IECA 53
• Docket Number: Record Number: 2021/278
• Court: Court of Appeal (Ireland)

In the Matter of the Valuation Act, 2001

Between/

Breanagh Catering Limited

Appellant

and

Commissioner of Valuation

Respondent

[2024] IECA 53

Haughton J.

Pilkington J.

Butler J.

Record Number: 2021/278

High Court Record Number: 2020/1959SS

THE COURT OF APPEAL

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Robert Haughton delivered electronically on the 8 ^th day of March, 2024

Introduction

1 . This is an appeal from the decision of the High Court (Heslin J.) delivered on 1 October 2021 and the perfected order dated 14 October 2021, on an appeal by way of Case Stated from a decision dated 18 January 2016 of the Valuation Tribunal ( “the Tribunal Decision”) to the High Court pursuant to s. 39 of the Valuation Act, 2001 ( “the 2001 Act”) at the request of the Commissioner of Valuation.

2 . In an effort to provide clarity due to the changing positions of the parties before the Tribunal, the High Court and before this court, the appellant Breanagh Catering Limited will be referred to as “Breanagh” and the Commissioner of Valuation as “the Commissioner”.

3 . The Case Stated raises questions concerning the approach that should be taken to establishing the nett annual value ( “NAV”) for rating purposes of the Jackson Court Hotel, with particular reference to the “door and cloakroom” receipts of the hotel's successful nightclub, Copper Face Jacks. However the focus of argument in the High Court and this court was whether the Tribunal had provided adequate reasons for its decision.

4 . Section 48 of the 2001 Act sets out the basis upon which the NAV of a relevant property is to be determined:-

“48.—(1) The value of a relevant property shall be determined under this Act by estimating the net annual value of the property and the amount so estimated to be the net annual value of the property shall, accordingly, be its value.

(2) Subsection (1) is without prejudice to section 49.

(3) Subject to section 50, for the purposes of this Act, “net annual value” means, in relation to a property, the rent for which, one year with another, the property might, in its actual state, be reasonably expected to let from year to year, on the assumption that the probable average annual cost of repairs, insurance and other expenses (if any) that would be necessary to maintain the property in that state, and all rates and other taxes in respect of the property, are borne by the tenant.”

Section 49 and s. 50 are not germane to this appeal.

The Tribunal Decision

5 . The Tribunal Decision concerned the rateable valuation determined by the Commissioner in respect of property known as the Jackson Court Hotel, a hotel in the centre of Dublin situated on the west side of Harcourt Street and comprising two inter-linked four story over basement mid terrace Georgian buildings, with an agreed gross floor area of 2,547 square metres ( “the Property”). More especially, as this is where the contention lay, it concerned the correct approach to the valuation of the door and cloakroom receipts of a constituent part of the Property comprising the well-known night club Copper Face Jacks. This valuation was conducted during a revaluation of all commercial properties within the Rating Authority area of Dublin City Council, pursuant to s. 19 of the 2001 Act, with a statutory revaluation date of 7 April 2011.

6 . A proposed Valuation Certificate was issued by the Commissioner pursuant to s. 24 of the 2001 Act, indicating a valuation of €1,750,000.00. This valuation was upheld following representations made on behalf of Breanagh. The final Valuation Certificate was issued on 16 December 2013 and Breanagh pursued a first appeal to the Commissioner pursuant to s. 30 of the 2001 Act. That first appeal was disallowed by the Commissioner's appeal manager.

7 . By Notice of Appeal to the Tribunal received on 4 September 2014, Breanagh appealed the Commissioner's determination, on the grounds that NAV applied was excessive, and proposed a NAV of €620,000. The appeal proceeded to an oral hearing which was held at the offices of the Tribunal on 9 November 2015. Breanagh was represented by Mr. Desmond Byrne of Bannon Chartered Surveyors ( “Mr. Byrne”/“Breanagh's Valuer”) who at the hearing proposed a revised NAV of €840,000. The Commissioner was represented by Mr. Alan Sweeney, ( “Mr. Sweeney”/“the Commissioner's Valuer”). Neither party was legally represented. Pursuant to the Rules of the Tribunal, the parties duly exchanged their précis of evidence and submitted same to the Tribunal prior to the hearing.

8 . Schedule 2 of the 2001 Act governs the composition and functions of the Tribunal, and importantly article 4(3) provides:-

“(3) The Tribunal shall issue a written judgment setting forth the reasons for its determination in each appeal.”

9 . The Tribunal Decision, in which Breanagh was appellant and the Commissioner respondent, issued on 18 January 2016 and is set out below, verbatim:-

“ In relation to the issue of Quantum of Valuation in respect of:

Property No. 814473, Hotel, Night Club / Discotheque, The Jackson Court Hotel, 29–31 Harcourt Street, County Borough of Dublin.

JUDGMENT OF THE VALUATION TRIBUNAL

ISSUED ON THE 18TH DAY OF JANUARY 2016

BEFORE:

Barry Smyth – FRICS, FSCSI, MCI, Arb Deputy Chairperson

Michael Lyng – Valuer Member

Brian Larkin – BL Member

By Notice of Appeal received on the 4 ^th September 2014 the Appellant appealed against the determination of the Commissioner of Valuation in fixing a net annual value of €1,750,000 on the above described relevant property on the grounds as set out in the Notice of Appeal, a copy of which is attached to this judgment at Appendix 1.

The Appellant proposed a NAV of €840,000 based on two approaches, namely 1) a hypothetical tenant estimate of Fair Maintainable Trade 1 and 2) the actual trade with an end allowance to reflect the skills of the exceptional operator. The Respondent based his opinion of NAV on the actual turnover with an end allowance to reflect the skills of the exceptional operator.

The Tribunal having examined the property details; having confirmed the valuation history; having heard and examined both the Appellant's and the Respondent's evidence; having considered the evidence adduced and submissions made at a hearing at the Tribunal offices at Holbrook House, Holles Street, Dublin 2 on the 9 ^th day of November 2015, by Mr Desmond Byrne of Bannon Chartered Surveyors for the Appellant and by Mr Alan Sweeney of the Valuation Office for the Respondent,

DETERMINES

That the net annual value of the subject property be as set out below:

€1,155,000

This is arrived at as follows:-

Estimated	FMT Revenue	NAV %	NAV
Hotel Rooms	€ 390,000	@ 13%	€ 50,700
Food	€ 850,000	@ 7%	€ 59,500
Beverage	€ 8,150,000	@ 11%	€ 896,500
Door & Cloakroom	€ 3,200,000	@ 11%	€ 352,000
TOTAL:	€12,590,000		€ 1,358,700
Less:
15% End Allowance to reflect exceptional expertise of the occupier	€ 203,805
		€ 1,154,895
		Say: € 1,155,000

The reasons being as follows:

• 1. The floor areas and turnover associated with the subject property, The Jackson Court Hotel, are not in dispute.

• 2. It is agreed that the shortened Method of Valuation as used by both the Appellant and the Respondent is appropriate in this instance.

• 3. The Tribunal prefers to consider this appeal on the basis of the actual turnover levels as reflected in the statutory accounts rather than attempt an assessment on what a hypothetical tenant might achieve. This data is more tangible.

• 4. It is clear that the operator of the premises has an exceptional acumen for the trade. Indeed, this was not disputed at the Hearing and was furthermore reflected in the application of a 12.5% end allowance by the Valuation Office before arriving at the NAV. Its performance is in sharp contrast to the neighbouring Russell Court and Harcourt Hotels which are larger properties and have a greater number of bedrooms.

• 5. The percentages applied to the individual categories viz rooms; food and beverage at 13%, 7% and 11% are not in dispute between the parties.

• 6. A significant gulf exists however between the parties and this is down to the totality and treatment of door/cloakroom receipts associated with Copper Face Jack's night club located in the basement of the Hotel premises and operated in conjunction with the ground floor bar. The Respondent suggested that a NAV of €990,000 arises from that activity, while the Appellant contended for alternative NAVs of €18,000 based on purported receipts of €90,000 at 20% based on turnover that a reasonably competent hypothetical tenant might hope to achieve or €51,000 2 on the basis of the actual turnover with the first €600,000 at 0%, the next €400,000 at 10% and the balance of €2,200,000 at 5%.

• 7. The Tribunal in particular noted that the Respondent applied a factor of 11% to the first €1,000,000 of door/cloakroom receipts and 40% to the balance above €1,000,000 for NAV purposes. However, no evidence was adduced to support this methodology or as to how the 40% was arrived at. By the same token the Tribunal also noted that the Appellant, in arriving at a NAV based on the door/cloakroom receipts effectively had applied a factor of just 1.6% 3 on receipts of €3.2 million. This element of the total NAV was unsupported by documentation and seems very low.

  However, it was common case between the parties that there were many operators in the trade who either included door and cloakroom receipts in their turnover figures or waived such charges and charged more for the beverages. So there was greater transparency at least in this case to identify the door/cloakroom receipts.

  Taking all the above into consideration the Tribunal is of the view that...