GPS (Great Britain) Ltd v Bird (VO) [2013] UKUT 0527 (LC)

IN THE MATTER OF SEVEN APPEALS AGAINST A DECISION
UT Neutral citation number: [2013] UKUT 527 (LC)Venue OF THE VALUATION TRIBUNAL FOR ENGLAND, BETWEEN (1) GPS (GREAT BRITAIN) LIMITED, (2) NEW LOOK RETAILERS LIMITED, (3) W H SMITH HIGH STREET LIMITED, (4) NEXT GROUP PLC, (5) BOOTS THE CHEMIST LIMITED (EAST REGION), (6) RIVER ISLAND CLOTHING CO LIMITED, (7) BHS LIMITED Appellants, and, SAMUEL CHARLES DAVID BIRD, (Valuation Officer) Respondent, Re: Units 2,5,6,7B,8,10 and A, Fosse Park Avenue, Enderby, Leicester, LE19 2BS, Before: N J Rose FRICS and P D McCrea FRICS, Sitting at 43-45 Bedford Square, London WC1B 3AS, Daniel Kolinsky , instructed by DMH Stallard, solicitors of Crawley, for the appellants, Rupert Warren QC , instructed by HMRC solicitor, for the respondent, The following cases are referred to in this decision:, Barlow & Sons Ltd v Wellingborough Borough Council (1980) 255 EG 461; [1984] JPL 48, Berrill (trading as Cobweb Antiques) v Hill (VO) [2000] RA 194, Land Securities Plc v Westminster City Council [1993] 1 WLR 286, Vines Ltd v De Mauny (VO) [2010] UKUT 322 (LC), Robinson Brothers (Brewers) Limited v Houghton and Chester Le Street Assessment Committee [1937] 2 KB 455, Marsh v Weston (VO) (1985) 25 RVR 128, Lidl (UK) GmbH v Janet Ryder (VO) [2013] UKUT 348 (LC), Dolling-Baker v Merrett [1990] 1 WLR 1205, The following cases were also cited:, Thorn EMI Cinemas v Harrison (VO) [1986] RA 125, Harrods v Baker (VO) [2007] RA 247, Tesco Stores Ltd v Fife Assessor [2010] CSIH 95, DECISION, Introduction
Between
GPS (Great Britain) LtdBird (VO)
Date 9 October 2013
[1]These are seven consolidated appeals against a decision of the Valuation Tribunal for England (VT) They concern seven retail units (the appeal hereditaments) at Fosse Park Avenue, Enderby (Fosse Park), an out of town retail park 4.3 miles south west of Leicester city centre. The various proposals which culminated in the appeals sought to alter the 2005 rating list with effect from 4 September 2008, when the Highcross shopping centre (Highcross) in Leicester city centre opened for trade. Highcross was a £350 million extension to the original Shires shopping centre. The redevelopment added 55,750 m 2 of new space as well as refurbishing the 46,500 m 2 of the original centre.[2]The appellant ratepayers contended that the opening of Highcross constituted a material change of circumstances (MCC) pursuant to Paragraph 2(7)(d) of Schedule 6 to the Local Government Finance Act 1988 and Regulation 4(1)(b) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009. The respondent valuation officer (VO), Mr Samuel Bird MRICS, did not accept that the proposals were well founded and referred the dispute to the VT under regulation 13(1) of the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 2005. On 1 March 2011 the VT dismissed the ratepayers’ appeals against the VO’s refusal to alter the list. The hearing was originally listed for hearing commencing on 22 May 2013 but was adjourned by agreement of the parties.[3]Details of the seven appellants, the reduced assessments proposed for each of the appeal hereditaments and the respective material days are set out in the attached table (Appendix 1). In each case the antecedent valuation date (AVD) is 1 April 2003. It is agreed that the differing material days do not affect the valuation of each appeal hereditament.[4]Mr Daniel Kolinsky of counsel appeared for the appellants. He called expert evidence from Mr Leonard Newton BSc, MRICS, a business rates director at G L Hearn, and currently head of his firm’s north east regional office in Sunderland (on behalf of GPS (Great Britain) Ltd, New Look Retailers Ltd, WH Smith High Street Ltd and Next Group Plc); Mr Philip Long, a consultant to G L Hearn (on behalf of BhS Ltd); Ms Alexandra Joseph BSc, MRICS, a director of GVA (on behalf of River Island Clothing Co Ltd); and Mr Alan Hampton BSc, MRICS, a partner and head of the Birmingham office of Gerald Eve LLP (on behalf of Boots The Chemist Ltd (East Region)).[5]Counsel for the respondent VO, Mr Rupert Warren QC, called Mr Bird to give expert evidence.[6]We inspected Highcross on the morning of 15 October 2013, accompanied by Mr Bird and Mr Long. We then proceeded to visit Fosse Park and two other shopping centres in or close to Birmingham which had been adduced as comparable evidence by the appellants, namely The Bullring and The Fort. Facts[7]In the light of an agreed statement and the evidence we find the following facts.[8]The appeal hereditaments are each occupied as retail warehouses and premises and described as such in the rating list. Fosse Park is located just off junction 21 of the M1 motorway which intersects with the M69 motorway, being accessed from the A5460 and Narborough Road South, the B4114, south west of Leicester city centre.[9]Fosse Park opened in 1989 and comprised approximately 26,058 m 2 of retail space with approximately 835.7 m 2 of Food Court. The development is L shaped with 14 terraced retail warehouses anchored by Marks and Spencer. There is a fast food takeaway/restaurant and a small retail warehouse separated from the main development. There is a bulky goods development to the rear of the appeal hereditaments, known as Fosse Park South, which contains 11,768 m 2 of additional retail space. There are 2,500 free car parking spaces for the use of shoppers.[10]When Fosse Park was developed, the original occupiers were bulky goods, electrical and toy retailers. Over the intervening years, however, the park has obtained an open class A1 retail use which has attracted high street retailers, especially fashion retailers, and is regarded as the best and most valuable such scheme in England.[11]The Shires shopping centre was built in 1991 and comprised 46,500 m 2 . It was a two level scheme, providing a significant fashion retail offer with stores such as Next, River Island, Oasis and Monsoon. It had two anchor department stores, Debenhams and House of Fraser, and a significant number of car parking spaces.[12]Highcross is a 55,750 m 2 extension to the original Shires shopping centre. It opened for trade on 4 September 2008 and cost £350 million to develop. The shopping centre now comprises over 100,000 m 2 of retail space arranged on two floors. A new multi-storey car park has been fully integrated into the scheme, providing 3,000 car parking spaces in total for which a parking fee is levied. It was modernised and refurbished during the development works. The redevelopment substantially increased the amount of available car parking previously available.[13]Highcross is anchored by a four level John Lewis department store of approximately 22,000 m 2 in addition to the existing Debenhams and House of Fraser stores. There is a 12 screen multiplex cinema and two new public squares surrounded by 15 new cafes and restaurants. A number of major national multiple retailers are represented within the new development, which also includes 120 residential apartments.[14]There are significant physical differences between the former Shires units and the newly created units in the extension. All the main units situated on the prime pitch upper level of the new extension have two storey double height glazing and the extension is dominated by larger retail units. Excluding the three anchor stores there are nine stores each with an area in excess of 900 m 2 . Only three of these stores are located within the former Shires, and they are each below 1,000 m 2 . The six larger units are all within the new extension, as follows: Zara (1,612 m 2 ), New Look (2,085 m 2 ), Next (4,387 m 2 ); H & M (2,045 m 2 ); Topman (1,354 m 2 ); and River Island (1,118 m 2 ).[15]The floor areas of the appeal hereditaments are as follows: Unit Ground floor Mezzanine Sales ( m 2 ) ( m 2 ) 5 945.30 485.90 (sales) A 1,104.70 376.50 (storage) 10 940.50 300.20 (storage) 6 1,401.40 1,033.20 (sales) 324.00 (storage) 2 2,306.50 400.10 (storage) 7B 808.70 398.00 (sales) 292.00 (storage) 8 2,906.40 672.90 (sales) The Statutory Framework[16]Section 56 of the Local Government Finance Act 1988 gives effect to Schedule 6 to the 1988 Act which sets out the statutory basis on which the rateable value of a hereditament is determined. Rateable value is taken to be equal to the rent at which the hereditament might reasonably be expected to let from year to year on certain statutory assumptions.[17]Those statutory assumptions are set out in paragraph 2(1) of Schedule 6, as follows:
“The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non-domestic rating shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on these three assumptions – (a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made; (b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from the assumption any repairs which a reasonable landlord would consider uneconomic; (c) the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above.”
[18]Section 55 of the 1988 Act empowers the Secretary of State to make regulations relating to the alteration of the rating list. The material regulation for present purposes is regulation 4(1)(b) of the Non-Domestic Regulations (Alteration of List and Appeals) (England) Regulations 1999 which provides that a proposal to alter the rating list may be made on the ground that:
“the rateable value shown in the list for a hereditament is inaccurate by reason of a material change of circumstances which occurred on or after the date on which the list was compiled.”
[19]Paragraph 2(6) of Schedule 6 to the 1988 Act provides that where the rateable value is to be determined with a view to making an alteration to the list which has been compiled, the matters specified in sub-paragraph (7) shall be taken to be as they are assumed to be on the material day.[20]The matters specified in sub-paragraph (7) include:
“(d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there.”
The issues[21]It is common ground that the opening of Highcross is capable of constituting an MCC. The issues between the parties are(a) whether the effect of the opening is such as to justify a reduction in the rateable values of the appeal hereditaments within the terms of the rating hypothesis and(b) if such an allowance is justified, the amount of such allowance.[22]The appellants contend that the assessments of the appeal hereditaments should all be reduced by 10 per cent. The VO’s case is that no reduction is justified. Evidence for the appellants Mr Newton[23]In his expert report dated 25 May 2012, Mr Newton gave a short history of Fosse Park, from its inception as a “bulky goods” retail park with original tenants including Toys R Us, Do it All, Comet and Habitat, to the present - open A1 - planning use with fashion retailers prominent. Mr Newton considered that owing to Fosse Park’s reputation as the most valuable park of its type in England, commanding the highest rents per m 2 , each occupier would regard its unit as being a flagship store, being managed and staffed by its employees of the highest calibre. He anticipated that the performance of each store would be closely monitored by senior management.[24]Mr Newton indicated that the opening of Highcross redefined the retail offer available in the immediate catchment area of Leicester and to potential shoppers from outside the area. He drew on his experience of dealing with hundreds of MCC appeals, saying that it was normal practice to consider the trade of an impacted store, before and after the material event, in order to ascertain the level and degree to which any new competition impacted on the property in question. The VOA normally requested “trade” for a minimum of 12 months before and after the material event. He attached to his report a copy of a draft VOA internal guidance note on this topic. This document was dated March 2011. In his evidence in chief Mr Newton said – and Mr Bird subsequently agreed – that the guidance had been issued to the VOA network in July 2011.[25]The Guidance document included the following; “MCC appeals in respect of a permanent event should not be programmed until a time when the effect of the event itself can properly be assessed; a minimum of one year before a start date is fixed to enable a full year’s trade figures to be considered”[26]Mr Newton said that in accordance with this guidance he had provided Mr Bird with details of each of his clients’ trade following the opening of Highcross. He summarised this trade evidence as follows. The trade of New Look at unit A showed a decline of 4.73% between the period of 12 months before and 12 months after the opening of Highcross. As a company, New Look showed a 1.4% increase nationally over the same period. At unit 10, WH Smith showed a decline of 17.43% during the same period, compared with a 6.4% national decrease (it was subsequently agreed that the latter figure related to the company’s business in high streets, shopping centres and retail parks across the UK and Eire). Next plc, at unit 6, suffered a 16.58% decrease compared with a decrease of 2.19% nationally. Gap enjoyed an increase of 1.18% during the same period, but Mr Newton said that this could be explained by the fact that Gap closed their store in Leicester city centre on 30 July 2008, before the opening of Highcross, which left them with only the Fosse Park unit. No national data was available for Gap to aid comparison.[27]Mr Newton noted that, with the exception of Gap, the trading performance of each Fosse Park unit was significantly inferior to each of the respective companies’ national performance. He contended that this was due to the impact of Highcross on Fosse Park. Mr Newton considered Mr Bird’s approach – to reject trade data on the basis that it was impossible to strip out the effect of the change in general economic conditions – was mistaken, since it was possible to reach an informed valuation judgement by comparing the performance of the Fosse Park stores with the national trends of the retailer’s trade during the same period.[28]Mr Newton drew comparison between the subject appeals and the effect on The Fort Retail Park, Birmingham as a result of the redevelopment of The Bullring shopping centre in Birmingham city centre – the distance between these two locations being similar to that between Fosse Park and Highcross.[29]The redevelopment of The Bullring centre created 125,326 m 2 of retail space over four floors, anchored by Selfridges and Debenhams, and with 3,100 car parking spaces that had a similar daily tariff to that at Highcross. Mr Newton said that The Bullring reopened on 4 September 2003, and that from this date the rating assessments of Birmingham city centre shops were reduced by 15% - the same as in Leicester.[30]Mr Newton thought that a valid comparison could be drawn between the two, in that a substantial new development of retail space in Birmingham city centre was found to have a material impact on The Fort – which provided a very similar retail offer to Fosse Park – and where rateable values were reduced by agreement by 10%.[31]He also commented upon the Westfield Centre in Stratford, East London, which opened on 13 September 2011 and which at 175,000 m 2 was one of the largest urban shopping centres in Europe, and the third largest in the UK. The Westfield Centre had 5,000 car parking spaces that were free for the first two hours and then subject to a daily tariff, and was anchored by John Lewis and Marks and Spencer.[32]Mr Newton said that Gallions Reach, 7.9 miles and 16 minutes drive time from Westfield, was an out of town retail development with occupiers including Next, Arcadia, Sports Direct, Boots, WH Smith, C & J Clark (Clarks) and River Island, all of whom were occupiers at Fosse Park. The VO served notices on 31 October 2011 to reduce rating assessments of the retail premises at Gallions Reach by 5%, without waiting for 12 months’ trade data.[33]Mr Newton also referred to the reduction of rateable values at The Brewery Centre in Romford, 11.8 miles and 22 minutes drive-time from Westfield. In his evidence in chief, Mr Newton said that there the VO had reduced assessments by 15%.[34]In both of these cases he presumed that the VO had made a valuer’s judgement to reduce the rateable values within two months of the Westfield Centre opening, without rental evidence or trade data. He considered that the VO had not had to follow the internal VOA guidance, which recommended waiting for 12 months’ data, because an informed valuation judgement was capable of being made without having to wait for a particular form of evidence.[35]Referring to the withdrawal of MCC appeals in respect of retail properties at Oadby and Wigston, Mr Newton said that he did not consider them comparable as they were primarily convenience type outlets in suburban locations – a description with which Mr Bird subsequently agreed in cross examination.[36]Mr Newton placed reliance upon two documents prepared for Leicester City Council by CACI and Scott Wilson, specialist retail consultants, as part of its Local Development Framework Planning process. The first, dated November 2007, was entitled the “Leicester City Centre Health Checks”. It stated that at that time there was an under provision of clothing and accessory retailers, a gap in the market for “upper” premium clothing retailers, and a need for supporting cultural, educational and leisure facilities in the city centre. At paragraph 3.64, the report stated that:
“The Highcross Quarter development will address the need for additional Clothing and Accessory Retailers and bring a new multiplex cinema to the city”
[37]The second document was entitled “Leicester City Retail Capacity Study 2007” and dated 17 April 2008. At paragraphs 2.7 and 2.8 the report said:
“2.7 In determining current and future shopping flows, this study has taken into account all centres retailing in comparison goods, which include the out-of-town motorway retail parks of Fosse Park and Grove Farm Triangle Retail Park, and St Georges Retail Park located on the edge of Leicester City Centre. In this way, we have been able to assess the capacity for the city centre, Beaumont Leys town centre, Hamilton and the four district centres. 2.8 It is worthy to note that in modelling future shopper flows, we have modelled the change in shopper flows due to the opening of the extended Highcross Quarter in 2008, but have not accounted for any increased provision at out-of-town retail parks. In this way our modelling reflects the preferred direction of national policy to refuse applications for further comparison goods retailing at out-of-town locations. It is worthy to note that we estimate these out-of-town retail parks will be according[ly] impacted by development in the city centre, subsequently impacting on any future ‘need’ for retailing in these areas. Fosse Park will be impacted by 12%, Grove Farm Triangle will be impacted by 27% and St Georges Retail Park will be impacted by 14%”
[38]In cross-examination, Mr Newton said that he assumed that the figure of 12% related to the reduction in shopper flow count at Fosse Park.[39]Mr Newton considered that these reports supported his valuation judgement that the opening of Highcross would have been a material factor and would have influenced the negotiations between the hypothetical parties as to the level of rent payable under the statutory hypothesis. Mr Long[40]Mr Long’s expert report dated 25 May 2012 concurred with and followed that of Mr Newton. He provided evidence in respect of the trading performance of BhS. Mr Long said that, in comparison with that for the period August 2007 to August 2008, the trade for the subsequent 12 months fell by 7.3%.[41]He compared the trade of the Fosse Park store with that of BhS at St Peter’s Street, Derby to ensure that the fall in trade was not attributable to economic circumstances as opposed to the opening of Highcross. He said that in the same two periods, trade at Derby had increased by 3.4%. In a subsequent agreed document, Mr Long and Mr Bird noted that the VO had, after some temporary reductions, made a permanent reduction in the rateable value of the BhS St Peter’s Street unit of 15% with effect from 9 October 2007 – the date the adjoining Westfield Centre in Derby opened.[42]In respect of Birmingham, Mr Long said that he was chairman of the British Retail Consortium Committee that dealt with appeals in and around the city centre following the re-opening of the refurbished Bullring shopping centre. At The Fort Retail Park, the March 2007 rent review of the BhS unit was agreed at £1,018,680, an increase from the 2002 rent which was £922,000. He pointed out that despite the fact that the rent increased during that period, the VO agreed the 10% reduction in RV as a result of The Bullring reopening. In Mr Long’s view rents at The Fort would have increased to a greater extent had The Bullring not been developed in 2003.[43]During the course of his examination in chief, Mr Long said that there was no doubt in his mind that Highcross was in direct competition with Fosse Park. In respect of turnover information, he said that he had dealt with a large number of MCC appeals, and that the first thing the VO did was request trading information. He indicated that it could take some time for a material change in circumstances to manifest itself in a change in trading information. At another site he had dealt with, developed by Peel Holdings, it had taken 7 years for a new shopping centre to establish itself fully.[44]At our request Mr Long subsequently produced e-mail correspondence between him and various VOs regarding trade information in respect of MCC appeals. In an e-mail dated 7 October 2010 concerning the BhS unit at Jameson Street , Hull, the VO said; “Obviously the period concerned covers the ‘recession’ so falling receipts perhaps not surprising. How does the fall compare with BhS nationally and with sales over the same period for other BhS stores nearby – is anything nearby to Hull in say North Lincolnshire, East North and West Yorkshire. Could you get this info please. As you appreciate we have to strip out any fall which relates to economic factors. In cross-examination Mr Long accepted that trade evidence should be treated with a degree of caution as a number of factors could affect the level of turnover. Ms Joseph[45]The original expert report and subsequent rebuttal report on behalf of River Island had been submitted by Mr Wright of GVA. Since he was unable to attend the hearing Ms Joseph, a director of GVA specialising in rating appeals, submitted her own expert report dated 12 September 2013.[46]Ms Joseph accepted that whilst she had inspected Highcross and Fosse Park, she did not have Mr Wright’s first hand knowledge of the area. She agreed with Mr Wright’s contention that it was appropriate and well adopted practice for the VO to consider trade evidence when dealing with MCC appeals. She amended the River Island trade data submitted by Mr Wright by removing the figures for the year 2006/07 as they did not relate to the comparables referred to, which both opened for trading during 2007. In the cases of both the Derby and Northampton units, River Island had relocated to newer stores within the town.[47]At the Fosse Park unit the turnover for the year ending September 2009 fell by 12.84% by comparison with the previous 12 month period. This compared, during the same periods, with a fall of 4.45% for the store at Abington Street, Northampton, and a fall of 4.76% for the store at Albion Street, Derby.[48]Ms Joseph agreed with Mr Wright’s opinion that the sales figures indicated that something greater than a worsening economic climate had impacted on the units at Fosse Park. Mr Hampton[49]In Mr Hampton’s expert report of 25 May 2012, he concurred with Mr Newton’s report. He said that the opening of Highcross had had a direct impact upon the profitability of the Fosse Park occupiers, thereby affecting their ability to pay the rental levels previously sustainable.[50]Mr Hampton considered that the reduction in RVs made by the VO following the opening of The Bullring and the Westfield Centre at Stratford supported the making of a reduction in the present case.[51]He said that this was further supported by the VT decision to reduce the RVs of the Leicester town centre units by 15% following the opening of Highcross (a reduction which was subsequently extended by Mr Bird to cover all the town centre shops), and the fact that Highcross was four miles and 10 minutes drive time from Fosse Park.[52]Mr Hampton considered that the hypothetical tenant would have had regard to the increased competition when making his rental bid, and that the presence of such a large concentration of prime retail space in a competitor location would have had a material bearing on the amount that the hypothetical tenant would have been prepared to bid for the appeal hereditament. He referred to Barlow & Sons Ltd v Wellingborough Borough Council (1980) 255 EG 461; [1984] JPL 48 in this regard.[53]In respect of Boots, Mr Hampton compared trade at the Fosse Park unit with 16 other “flagship” peer stores across the region. The trade information was presented in a slightly different format from that of the other appellants, in that it was on a “moving annual total” basis. Mr Hampton presented the data graphically for the period from October 2004 to just after October 2010. He said that, before Highcross opened, the Boots turnover at Fosse Park was about 5% above its peers on a consistent and steady growth line, but post Highcross the relationship had effectively been reversed. Evidence for the valuation officer Mr Bird[54]Mr Bird has been employed by the VOA since September 2003. From September 2004 onwards he has been a settlement caseworker at the VOA’s Leicester office. He has lived in or around Leicester for the last eight years and knows the city, its layout and retail offer very well.[55]In his expert report dated 22 May 2012 Mr Bird said that, when identifying the hypothetical tenant for the purpose of his valuation, he bore in mind that the tenant could be trading at Fosse Park alone or it could be trading both at Fosse Park and in the city centre. If it was already trading in the city centre it would be competing against itself should it secure the tenancy and begin operating at Fosse Park. When a business operated against itself by opening a new store close to an existing equivalent store, it was not the new store per se that caused trade at the existing site to fall, but the fact that the business was competing against itself for its own customers. Because in such circumstances such a retailer was also competing for representation with those who were not located nearby, any reduction in trade resulting from the opening of an additional branch would not necessarily be reflected in the tenant’s bid. Mr Bird considered that this phenomenon illustrated the unreliability of trade figures as measures for determining changes in RV.[56]Mr Bird commented as follows on what he identified as the nine issues in the appeals. First, he considered that the appellants’ reliance on trade figures was unreliable. There was no necessary connection between the trading performance of a company and the RV of any hereditament that it occupied. That was because the hereditament was assumed to be vacant and to let to a hypothetical tenant and therefore the trade of the actual occupier was not relevant. In this connection he relied on the Lands Tribunal decision in Berrill (trading as Cobweb Antiques) v Hill (VO) [2000] RA 194.[57]Trade figures could reflect many variables; for example how well a business was being run, some businesses may be more susceptible to changes in the economic climate, some retailers may be more sensitive to competition from other similar businesses than others and some retailers may benefit from competing offers around them. Fluctuations in trade may relate to the state of the economy, changes in company policy, personnel, or the changing desirability of the merchandise. Opening more branches might reduce turnover of existing stores while increasing those of the company as a whole.[58]For example Clarks and Gap were not represented in Highcross but River Island, New Look, Boots and Next were. The trade evidence for Gap appeared to show that there had been no impact on trade. Accordingly the trade evidence in totality did not establish a trend to show a causative link with the opening of Highcross. Clarks were not represented in Highcross and paid a record rent when they took a new lease at Fosse Park in September 2008.[59]Moreover, to establish true competition, turnover should be viewed over a longer period to demonstrate trends at the existing sites before and after any new entrants into the market. A longer view might show that an existing site was already declining before a new opening. Therefore historically there might have been some other factors at work within existing locations and it was impossible to distinguish these from the effect of the new competition.[60]There was also no correlation between a fall in turnover and a fall in profitability; and there was no necessary correlation between a fall in the profitability of the appeal hereditaments as they were operated by the appellants and the amount of rent that would be agreed in the hypothetical transaction. The hypothetical letting took place in a market that was open to all. The market might include retailers whose trading strategy was fundamentally different from that of the appellants. One retailer might choose to operate a low turnover and high profit margin business model and another a high turnover and low profit margin model, yet both might enjoy the same net profit.[61]Mr Bird considered that, taken as a whole, the trade information provided demonstrated that some stores had improving trade after Highcross opened, some had declining trade before it opened and some apparently had declining trade in relation to other stores in different geographical locations. There was no consistent trend that demonstrated a causative link between trade performance at Fosse Park and the opening of Highcross. Bearing in mind the economic climate which provided the backdrop to these figures it was not possible to prove from this evidence that the opening of Highcross affected the trading patterns at Fosse Park. In any event, even if the Highcross opening did cause a drop in trade, it did not necessarily follow that rents would decrease as a result; the appellants had provided no rental evidence.[62]In his rebuttal dated 29 October 2012 Mr Bird said that, based upon all the indices provided by Mr Newton, there was no evidence to prove that the trade of WH Smith had been affected by the opening of Highcross. That was because the period January 2008 to August 2008 – before the opening of Highcross – showed a decline in sales of 1.25% when compared to the same period in 2007. In cross examination Mr Bird accepted that this conclusion was based on an exercise (trial bundle page 703) which assumed that trade had fallen by 19.36% between 2007 and 2008, whereas the true fall had been only 1.25%. It was put to Mr Bird that the true position was the opposite of that which he had assumed. Rather than there having been a very significant decline in trade before the opening of Highcross the figures in fact showed a significant decline in trade afterwards. Mr Bird replied that there had still been a fall in trade prior to September 2008. He agreed that the exercise he had carried out in his rebuttal relating to the WH Smith figures had been his only attempt to draw a conclusion from the trade figures submitted by any of the appellants and that at no stage had he requested any other trading information. Mr Bird also accepted that the level of potential turnover was a relevant factor which would be considered by a tenant when deciding what rent to bid and that the seven appellants represented a good sample of the range of potential tenants for the appeal hereditaments.[63]The second issue identified in Mr Bird’s original expert report was a schedule of 126 comparators reflecting alterations to RVs resulting from the opening of competitor premises. Mr Bird did not consider that these details had any probative value in the context of the current appeals. In his opening skeleton argument Mr Kolinsky accepted that they were not comparators and that the Tribunal was not being asked to investigate the circumstances of these many instances.[64]Thirdly, Mr Bird considered that there was no comparative value in the 10% allowances at The Fort retail park in Birmingham following the opening of The Bullring shopping centre. The two cases were markedly different. Geographically Fosse Park occupied a superior position in terms of its proximity to the strategic road network. It was situated within ½ mile of junction 21 of the M1 which was also the northern terminus of the M69 motorway connecting with Junction 1 of the M6 motorway, bringing large areas of the West Midlands into its catchment area. In contrast The Fort retail park was located next to only one motorway, the M6, and therefore did not enjoy access to such a wide catchment area.[65]The city centre schemes, The Bullring and Highcross, whilst now comparable in terms of total size, had evolved in a completely different fashion. The Bullring opened in 2003, the old 1960’s centre it replaced having been demolished in 2000. When it opened it arrived onto the market as 1,349,000 ft 2 of new retail space within the city and represented completely new competition for The Fort retail park. In contrast Highcross was a circa 600,000 ft 2 extension and rebranding of the existing Shires shopping centre, which already contained the peak level of value in the city centre of Leicester.[66]Mr Bird thought it was clear that the relative trading strengths of Fosse Park and The Fort were substantially different and the impact of the opening of The Bullring was also materially different from that of the opening of Highcross.[67]The fourth issue, said Mr Bird, was whether the VT decision dated 19 February 2010, which related to an allowance made to the RVs of other retail units in Leicester city centre following the opening of Highcross, was of relevance to the current appeals. Mr Bird said that in his professional judgment an allowance of 15% was appropriate to reflect the effect of the opening of Highcross on the shops in Gallowtree Gate, Humberstone Gate and Haymarket shopping centres. The VT decision effectively extended this deduction to all city centre shops. That judgment was made against a background of void units in the locality, falling rents and reduced trading levels and upon reflection Mr Bird agreed with it. At Fosse Park during the same period there were no void units and rental levels continued to increase; indeed a record rent was agreed.[68]The fifth issue was what Mr Bird described as the purported proximity of Fosse Park and the appeal hereditaments to Leicester city centre. Mr Bird did not consider that this distance was material to the RVs at Fosse Park, which he said was a highly successful out of town retail park with extensive free surface level parking, situated close to the strategic road network. Mr Bird said that he lived in the suburbs of Leicester and regularly visited the city centre and Fosse Park professionally and socially. He considered that the appellants’ suggested drive time of 12 minutes between Highcross and Fosse Park was not achievable in any traffic conditions. He estimated that an average drive time, considering all traffic conditions, would be in excess of 20 minutes. He added that he had never driven to the city centre and then on to Fosse Park for comparison shopping, because he considered the distance between the two destinations to be prohibitive (we timed the journey during our visit and found that it took 13 minutes).[69]Highcross and Fosse Park catered for different shopping needs. Because of its location within half a mile of junction 21 of the M1, Fosse Park was accessible from large areas of the West Midlands, either as a destination in its own right or for shoppers en route to Leicester city centre. Moreover there were some shops, such as Gap and Clarks, which were not in Highcross. This, coupled with the extensive free parking at and the close proximity of the Asda and Sainsbury’s supermarkets to Fosse Park, differentiated the two locations as retail offers catering for different types of shopping trips.[70]In cross examination Mr Bird accepted that, if he lived south of Leicester city centre, he could choose between shopping in Highcross or Fosse Park and that, if he wanted to see a range of fashion stores, he could do so in either centre.[71]The sixth issue considered by Mr Bird was rental evidence which, he said, did not accord with the proposition that the opening of Highcross in September 2008 caused rents to fall. The first such evidence was the letting of unit 3A to Clarks on 15 August 2008. That letting was achieved against the background of a marketing campaign to raise the profile of the imminent opening of Highcross with both retailers and the public. Mr Bird said that the immediate prospect of the alleged MCC did not prevent an open market letting of unit 3A at a record rent for Fosse Park.[72]Moreover, two rent review arbitrations in respect of unit 8 (BhS) in September 2008 and unit 5 (Gap) in June 2009 both resulted in increases in the passing rent. The BhS rent review related to the largest unit on the retail park and the rent payable by Gap increased despite the continued deterioration in the economic situation after Highcross opened. Mr Bird said that he had been unable to find any similar evidence of rental growth in the city centre, whether on rent reviews or open market lettings.[73]Mr Bird acknowledged that less weight should be placed on arbitration awards than on open market lettings. Nevertheless he said, in two instances nine months apart, on different sized units, arbitrators had not been provided with evidence to persuade them that there should be a nil increase despite the economic situation and the opening of Highcross.[74]In oral evidence in chief Mr Bird accepted that the levels of rent awarded at the two arbitrations were not admissible as evidence (see Land Securities Plc v Westminster City Council [1993] 1 WLR 286 and Vines Ltd v De Mauny (VO) [2010] UKUT 322 LC) .[75]The seventh issue arose from the fact that no Highcross MCC appeals were outstanding outside the inner ring road of Leicester city centre apart from those at Fosse Park, and no reduced assessments were agreed anywhere apart from Leicester city centre. All Highcross MCC appeals that were submitted outside the city centre had been withdrawn. Whilst this by itself was not conclusive (for example, the reasons for the ratepayers’ decisions not to continue with their appeals were not known), Mr Bird considered that it was relevant contextual evidence suggesting that the effect of the Highcross opening on rents might not have been felt outside Leicester city centre.[76]The eighth issue was the weight to be attached to an e-mail Mr Bird received from Mr Richard Ashcroft, the arbitrator for the BhS review dated 8 October 2010. The e-mail read as follows:
“Never believe anything that you read in the press! I was approached by the press to disclose the Award that I made. I explained that the dispute was private between landlord and tenant and I was therefore not able to disclose any information. I hope that you will understand that even applies to Government Officers! As you will appreciate as an Arbitrator I can only make an Award based upon the representations made to me. In other words, as I am not acting as an Independent Expert, the figure may not actually represent my own opinion of value. However, what I can tell you is that I was not asked, nor did I give a figure, for the rent on the mezzanine floor. All I can tell you is that the Parties were represented by CT Mocatta of Savills (landlord) and Mrs M Busfield of Mason & Partners (tenant). If you want their contact details I am happy to provide them. What I think I can tell you is that there was not a great debate about the effect of Highcross Shopping centre on the scheme. My own opinion is that the two developments are mutually exclusive serving different shopping patterns and needs. Furthermore, there are so few examples of rents being paid on mezzanines that the case is not proven. I would argue that when you took a lease on a retail warehouse you rented the cube as well as the ground floor slab. How you decide to trade that space is up to you. You only have to look at the racking in an IKEA store to realise that it is not dissimilar to a distribution warehouse and I am sure that rents on warehouse space do not differ if the tenant racks or not. I have to say that is my own theory and not tested in the Courts! I also act for John Lewis if you look at my web site. I understand that they are not trading as well as they expected in Leicester. As I do not know the Highcross scheme itself, I do not know if that is because of the nature of the scheme itself or because the demographics of the trading area are not up to expectations or whether indeed Fosse Park has established such a dominant role that people find it more convenient to go there than travel into the centre. Only time will tell. What did become apparent to me at Fosse is that high rental values were being ‘engineered’ by subdivision of larger units culminating in the letting to Clarks. I am not a great believer in the theory expounded by some valuers that you can value larger units merely by adopting the formula that multiples of 1,000 ft 2 represents multiples of 1% deduction. The argument goes that if you let a unit of 5,000 ft 2 , then a unit of 30,000 ft 2 should reflect a 25% reduction on the rent psf. It is a convenient analysis by some commentators but very often those people have never let property in their lives and have no knowledge of the other factors that have to be taken into account. I hope this assists but the answer that I can give is that no rent was applied to the mezz!” (Emphasis added).
[77]Mr Bird considered that the highlighted words were significant because, at the review date, the imminent opening of Highcross would have been widely known; voids were appearing in the city centre, where a drop in rental levels was occurring. Bearing in mind that the submissions to the arbitrator were made after Highcross opened, details of any impact of that opening on Fosse Park would have been available to the representatives of the landlord and tenant at the arbitration. A professional judgment could have been made as to the likely impact of the opening on the rent to be agreed under the terms of the rent review clause.[78]The ninth and final issue was the conclusion to be drawn by the Tribunal on causation in the light of the economic circumstances prevailing between September 2008 and the material days. Mr Bird produced a schedule showing the economic events in the eight months following the opening of Highcross. It started on 15 September 2008 when Lehman Brothers filed for Chapter 11 bankruptcy and the base rate was 5%, continued to 2 March 2009 (base rate reduced to 0.5%) and finished on 22 April 2009 with the Chancellor’s announcement that he expected the UK economy to shrink by 3.5% in 2009.[79]Mr Bird considered that, quite apart from the flaws in the trade evidence presented by the appellants, it was impossible to prove conclusively that any adverse trade results at Fosse Park were related solely to the opening of Highcross rather than to the impact of the global economic situation. Discussion[80]Mr Bird accepted that all the evidence produced by the appellants’ experts comprising turnover data; the agreed RV reductions following the provision of additional retail competition in London, Birmingham and Leicester city centre; and contemporaneous external reports on retail capacity prepared for Leicester City Council, should be weighed in the balance when deciding whether rental values at Fosse Park were detrimentally affected by the opening of Highcross. He did not consider, however, that such evidence demonstrated that there had been any such detriment. In particular, he felt that the reputation of Fosse Park as the leading retail park in the country was sufficiently robust to withstand the indirect competition of Highcross and that this view was supported by the rental evidence upon which he relied. As he put it in paragraph 64 of his rebuttal, when commenting upon the Leicester City Centre Health Checks 2007: “this document should not be given any significant weight as evidence of whether the opening of Highcross affected the hypothetical rent of the appeal hereditaments – certainly it should never “trump” clear rental evidence which suggests the opening was not value significant.” (original emphasis)[81]The appellants agreed that the valuer should always start by considering the available rental evidence before deciding what conclusion should be drawn from all the evidence in these appeals. We shall adopt that approach.[82]In his initial report Mr Bird relied upon two arbitration awards in respect of units occupied by BhS, just before the alleged MCC, and GAP, nine months afterwards which both showed increases in the rents previously payable. He subsequently accepted, rightly in our view in the light of Land Securities and Vine, that these rents, determined by an arbitrator, were not admissible as evidence of value in these appeals. At the hearing, Mr Bird placed considerable reliance on the letting of the Clarks unit. The agreement for lease of that unit was signed on 15 August 2008, when the fact that Highcross would soon be trading was widely known. Despite knowing that Fosse Park would soon be facing such competition, Clarks agreed to pay a rent equivalent to £1,092.99 per m 2 for the 531.70 m 2 unit. That was higher than the previous highest rents at Fosse Park, namely those paid by River Island for unit 7B (£1,010.55 per m 2 for an 808.00 m 2 unit with effect from 24 June 2006) and by Monsoon for unit 7A (£1,002.51 per m 2 for an 824.90 m 2 unit with effect from 7 November 2006).[83]The appellants’ experts did not consider that the Clarks rent was helpful. Mr Newton said that it may well be impossible for rental evidence to exist which would precisely indicate what effect the change in circumstances would have had on the hypothetical tenant’s bid in the economic conditions at the AVD. In the present case there had been a gap of over 5 years between the AVD and the date of the change of circumstances, in which there was a clear change in economic conditions. Mr Long said he had agreed a 10% reduction in RV for the BhS unit at The Fort with effect from September 2003, even though the rent agreed in March 2002 increased by 10.5% five years later. Also, the VO had granted allowances of 7.5% on retail units at Merry Hill to reflect the opening of The Bullring in September 2003, despite the fact that the rent payable by BhS at Merry Hill increased by 30% between 1999 and 2004. Mr Hampton criticised Mr Bird’s reliance on the Clarks rent, on the grounds that he had failed to refer to the agreed fact that the rent payable by Boots at Fosse Park did not increase following the 5 yearly rent review with effect from 1 October 2009.[84]We do not attach any weight to the Boots rent review in 2009. With a ground floor sales area of 2,306 m 2 , unit 2 was nearly three times the size of the two units (7A and 7B) in respect of which admissible rental evidence was adduced. In answer to a question from Mr McCrea, Mr Bird said that the rating assessments at Fosse Park reflected the fact that the largest units (of which Boots was one) were proportionately less valuable than those of a more standard size. We accept that evidence. In our judgment the only rent with which the Boots rent might legitimately be compared is that awarded in respect of the BhS unit (ground floor sales 2,906.4 m 2 ), but it is now common ground that the latter is not admissible as evidence in these appeals.[85]We have reached the conclusion that only limited weight can be attached to the Clarks rent. It is true that it was higher pro rata than the rents agreed for units 7B and 7A with effect from 24 June 2006 and 7 November 2006 respectively. However, it demonstrated an increase in value at the rate of about 3.6% per annum compared with 7B and 4.9% per annum compared with 7A. There was no evidence to show the rate at which rents at other out of town retail parks changed between 2006 and 2008. There is therefore significant force in the appellants’ submission that it is not possible to exclude the possibility that Clarks would have paid a higher rent if Highcross had not been about to open.[86]We consider that more weight should be attached to the reports prepared for Leicester City Council by their retail consultants in November 2007 and April 2008 as evidence of what a hypothetical tenant would have considered would be the result of the opening of Highcross. The first report identified that in the city centre there was an under provision of clothing and accessory retailers and a gap in the market for “upper” premium clothing retailers. The opening of Highcross remedied these deficiencies in the retail offer in the city centre. Prior to September 2008 Fosse Park was a successful retail park with a concentration of clothing retailers. It follows, in our view, that the opening of Highcross adversely affected the extent to which such retailers could successfully trade at Fosse Park.[87]Mr Newton concluded from paragraph 2.8 of the report dated 17 April 2008 that Leicester City Council’s retail consultants considered that the opening of Highcross would reduce shopper flows at Fosse Park by 12%. Mr Bird, who is not a retail expert, was not sure whether the figure of 12% related to shopper flows or to a reduction in the future development of retail accommodation. Rather surprisingly, instead of approaching the city council or its consultants in an attempt to resolve the apparent ambiguity, he thought it appropriate to disregard the consultants’ conclusions entirely.[88]In our judgment there was no ambiguity in paragraph 2.8. It meant that, assuming no increased provision at out-of-town retail parks – an assumption that proved to be well-founded – the opening of Highcross would reduce shopper flows at Fosse Park by 12%. We consider that the two reports submitted to Leicester City Council shortly before the opening of Highcross both point to the conclusion that well advised retailers would have anticipated that there would be a significant decline in the turnover to be achieved at Fosse Park.[89]Mr Bird also relied strongly on the e-mail from Mr Ashworth (para 76 above) which said that, at the BhS rent review arbitration, there had not been a great debate about the effect of Highcross on trading at Fosse Park. Mr Kolinsky submitted that reliance on this award (and contentions as to what was and was not the basis of the award) was contrary to Land Securities and Vines . Moreover, the disclosure of the information in the e-mail was incompatible with the arbitrator’s duty of confidentiality. In this connection Mr Kolinsky relied on Dolling-Baker v Merrett [1990] 1 WLR 1205 and Bernstein’s Handbook of Arbitration and Dispute Resolution [para 2-813].[90]Mr Warren responded that the reference to the limited discussion about the effect of Highcross was nothing to do with the award and was not contrary to the objection to the admissibility of arbitration awards referred to in Land Securities in that it did not invite collateral enquiry into the correctness of the rent set. Moreover, it self-evidently did not breach the duty of confidentiality because Mr Ashworth could hardly be taken to task for recording what the parties did not say . Mr Warren submitted that the fact that, in August 2008, the parties to the BhS arbitration were not concerned with the effect on rents of the impending Highcross opening was striking and provided an echo of the Clarks rental deal.[91]We are satisfied that Mr Kolinsky’s submissions on this legal issue are correct. Evidence of the views of an arbitrator and his informal comments on what was or was not argued in the arbitration, on which neither party has had an opportunity to cross examine, are inadmissible. In any event, we are satisfied that Mr Ashworth’s e-mail is of no assistance in resolving the dispute in these appeals. The review date under the BhS lease was 3 August 2008, 12 days before the agreement for the Clarks lease was signed. By then, the fact that Fosse Park would shortly be facing increased competition from Highcross would have been known to properly advised potential tenants at Fosse Park. There was therefore no need for the parties to the arbitration to make more than passing reference to Highcross. To the extent that its opening would have had an adverse effect on rental values on 3 August 2008, that would have been reflected in the rent which Clarks agreed to pay 12 days later.[92]BhS occupied the largest unit at Fosse Park after Marks and Spencer. As Mr Bird explained, the rental value of the largest units incorporated a quantum reduction compared with units such as Clarks, which was less than one fifth the size of BhS. Against that background we consider it likely that an important focus of the BhS arbitration debate would have been the appropriate discount for quantity to reflect this considerable size disparity. It may be that the penultimate paragraph of Mr Ashworth’s e-mail was a reference to that debate.[93]We turn to the trade data produced by the appellants. Mr Kolinsky submitted that this showed that in the case of six of the seven appellant retailers an identifiable deterioration in the trading performance of the Fosse Park stores occurred following the Highcross extension. The exception to this was Gap, but this was explained by the closure of its store in Leicester city centre.[94]Mr Kolinsky submitted that Mr Bird was wrong to suggest that Berrill established a general principle that evidence of turnover could not inform an assessment of RV. Such a proposition would be inconsistent with:(a) the valuer’s duty as expressed in Robinson Brothers (Brewers) Ltd v Houghton and Chester Le Street Assessment Committee [1937] 2 KB 455 (per Scott LJ at 471) to have regard to all relevant evidence;(b) the decision of the Lands Chamber in Lidl (UK) GmbH v Ryder (VO) [2013] UKUT 348 (LC) that “details of the catchment and competition are required if a reliable estimate of value is to be produced” and the fact that in that case the Member (Mr N J Rose FRICS) requested details of Lidl’s turnover;(c) the links in the real world between turnover (and potential to achieve turnover) and rents; and(d) the widespread use of turnover by both VOs and rating surveyors in assessing amongst other things the impact of MCCs, as reflected in the VOA’s guidance note (para 25 above).[95]Mr Kolinsky contended that turnover information was an important part of the overall evidential picture and it should inform the valuation exercise. It could not be dismissed as irrelevant. Suggestions that it was unreliable because of the state of the economy at that time did not engage with the fact that the data presented sought to compare the performance of the Fosse Park stores with an appropriate benchmark of other stores within the same period of time, so that trading fluctuations within the calendar year and general economic conditions were common to both the Fosse Park data and the benchmark data in each case.[96]Mr Warren submitted that Berrill made clear that the rating question was concerned not with turnover but with what the hypothetical tenant was prepared to pay in terms of rent, and made it plain that there was no direct connection between turnover and rents. Trade data would obviously be affected, to an unknown degree, by the recession, and should be approached with caution. It may not be possible to discern what the attitude towards rental levels would be, even for those retailers whose trade data was presented in these appeals, since that was a commercial question judged by weighing the uniquely strong trading locations at Fosse Park against other factors over the lifetime of the rental term.[97]The trade figures in these appeals were unreliable because they did not permit a clear picture to be formed of whether rental levels at Fosse Park were affected by the opening of Highcross. Attempts to benchmark the performance of Fosse Park units were hindered by the opacity of the trade figures – which with one exception were indexed figures only – and by the likelihood that the suggested comparators were skewed by national influences, such as London and the South East, changes to the store or contexts involved, and differential effects of the recession as it unfolded.[98]We do not agree that Berrill established that turnover is irrelevant to RV. Berrill was an appeal against the 1995 list assessment by the occupier of a shop in Church Street, Croydon. Mr Berrill argued that the 30% reduction offered by the VO to reflect the effect of works to construct the Croydon Tramlink through the centre of the town was inadequate. In support of a larger reduction he said that his turnover had fallen as a result of the works from £142,251 in 1995 to £116,911 in 1996 to £88,860 in 1997 to £76,571 in 1998 and £50,000 (estimated) in 1999. The VO’s case was that, apart from Mr Berrill the reduction of 30% had been universally accepted throughout Church Street. He added that “the reductions had regard to turnover and trade …. Other turnover figures provided … were in the range of 4% to 35% during 1997 and 1998.”[99]The Member (Mr P H Clarke FRICS) said that he did not find Mr Berrill’s turnover figures helpful for three reasons:
“First, in the rating hypothesis the appeal property must be assessed to be vacant and to let to a hypothetical tenant and therefore the trade of the actual occupier is not relevant ( Marsh v Weston (VO)). Secondly, the measure of rateable value (and any reduction in that value) is rental value and not turnover. There is no direct correlation between turnover and rent. Thirdly, the ratepayer’s turnover started to fall before the start of the Tramlink works. There is no evidence to show that the continued fall was wholly or partly caused by the works.”
[100]Although the Member suggested that Marsh was authority for the proposition that the trade of the actual occupier was not relevant, the Tribunal in that case (Mr C R Mallett FRICS) was reported (1985) (25 RVR 128) to have held that the assessment under appeal must be confirmed because:
“(1) the appeal premises must be assessed as a shop capable of being occupied by a retail trader not confined to the particular trade of the ratepayers, and not necessarily restricted to the volume of trade that they had experienced; and (2) the low turnover was not universal.” (Emphasis added).
[101]Furthermore, nowhere in Berrill did the Member suggest that the VO had been wrong to arrive at his 30% reduction “having regard to turnover and trade.”[102]It is true that, since a hereditament is to be valued vacant and to let, it is not usually helpful for the valuer to base his valuation simply on the turnover of the occupier. That is because other potential tenants might be able to trade more profitably and to afford a higher rent. But the appellants in these appeals do not rely on a single set of turnover figures. They have produced details of turnover at 50% of the terraced retail units at Fosse Park. These figures have been prepared in a variety of ways, but they show a consistent picture, namely that turnover performed less well after the opening of Highcross. Although the turnover of one unit increased slightly, that did not detract from the general picture because its trade benefited from the closure of the occupier’s other shop in the city centre.[103]We accept Mr Kolinsky’s submission that, since they compare turnover at Fosse Park with that in other locations over the same period of time, the appellants’ figures have not been artificially distorted by the recession. That evidence would have been more robust if it had covered a number of years before and after Highcross opened and (apart from the case of River Island) if it had consisted of actual, rather than indexed figures. Moreover, certain other criticisms of the evidence made by Mr Bird and Mr Warren are not devoid of merit. Taking such deficiencies into account (and bearing in mind, on the other hand, that one of the two River Island trade data comparables was with a shop in Derby which had itself suffered from an MCC and yet still performed better than Fosse Park) we consider that the turnover evidence tends to add support to the predictions made by the city council’s retail consultants, shortly before September 2008, namely that trading at Fosse Park was likely to suffer significantly following the opening of Highcross. We would add that both the appellants’ trade figures and the retail consultants’ reports would have reflected Fosse Park’s exceptionally large catchment area.[104]We consider that the advice contained in the retail consultants’ reports is good evidence of what the hypothetical tenant would have concluded would be the impact of Highcross on turnover at Fosse Park. We further consider that the actual trade information produced by the appellants indicates that such conclusions would have been correct.[105]We can deal shortly with other reductions in RV granted to reflect MCCs in Leicester and elsewhere. We do not obtain any material assistance from these agreements. We agree with Mr Bird that the differences between the circumstances at Fosse Park compared with those at shopping centres in the general vicinity of Birmingham and Stratford, and those in Leicester city centre, mean that no meaningful comparisons can be made.[106]We also accept Mr Newton’s opinion that the fact that MCC appeals were withdrawn in respect of Oadby and Wigston is not relevant, as those shops are occupied primarily by convenience type operators, quite different from the much larger open A1 units at Fosse Park. Conclusion[107]In the light of the opinions in the reports by Scott Wilson and CACI, and the trade data submitted by the appellants, we conclude that a hypothetical tenant of the units at Fosse Park would have considered that the opening of Highcross would reduce turnover at Fosse Park by between 10% and 12%. We bear in mind that there is no direct relationship between turnover and rent, but we are satisfied that the hypothetical tenant would reduce his rental bid significantly as a result of the proposed fall in trade. We consider that the reduction of 10% in RV suggested by the appellants is reasonable in all the circumstances.[108]The appeals are allowed. We direct that the assessments in the 2005 non-domestic rating list be altered as follows, with an effective date of 4 September 2008: Appeal No Unit RV £ RA/20/2011 5 733,500 RA/21/2011 A 850,500 RA/22/2011 10 724,500 RA/23/2011 6 1,071,000 RA/24/2011 2 1,287,000 RA/25/2011 7B 634,500 RA/26/2011 8 1,638,000 108. A letter concerning costs accompanies this decision, which will become final when the question of costs has been determined. Dated: 21 November 2013 N J Rose FRICS P D McCrea FRICS Appendix 1 Appeal Number Hereditament Occupier Material day (i.e. date of proposal) 2005 Compiled List RV Appellants’ proposed RV RA/20/2011 UNIT 5, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 2BS GPS (Great Britain) Limited t/a Gap 27 Nov 2009 £815,000 wef 01-Dec-06 £733,500 RA/21/2011 UNIT A, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 2BS New Look Retailers Limited 27 Nov 2009 £945,000 wef 01-Dec-06 £850,500 RA/22/2011 UNIT 10, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 2BS WH Smith High Street Limited 27 Nov 2009 £805,000 wef 01-Dec-06 £724,500 RA/23/2011 UNIT 6, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 1HX Next Group PLC 27 Nov 2009 £1,190,000 wef 01-Dec-06 £1,071,000 RA/24/2011 UNIT 2, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 1HJ Boots The Chemist Limited (East Region) 2 Dec 2008 £1,430,000 wef 01-Dec-06 £1,287,000 RA/25/2011 UNIT 7B, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 2BS River Island Clothing Co Ltd 29 Sep 2008 £705,000 wef 29-Sep-06 £634,500 RA/26/2011 UNIT 8, FOSSE PARK AVENUE, ENDERBY, LEICESTER LE19 2BS BhS Limited 29 Sep 2008 £1,820,000 wef 01-Dec-06 £1,638,000

Cited in 3 later judgments