UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2014] UKUT 0164 (LC)
UTLC Case Number: RA/9/2011
	
	TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – Method of Valuation –contractors test – modern substitute – end allowances – INTERIM DECISION

IN THE MATTER OF CONSOLIDATED APPEALS FROM A DECISION OF THE VALUATION TRIBUNAL FOR ENGLAND 

BETWEEN	BRITISH CAR AUCTIONS LTD
(t/a BLACKBUSHE AIRPORT LTD)
Appellant

	and

	KEN HAZELL
(Valuation Officer)
	  Respondent		

re: Blackbushe Airport, Blackwater, Camberley, 
Surrey, GU17 9LG

	Before: HH David Mole QC (sitting as a Deputy Judge of the Upper Tribunal)
& Paul Francis FRICS

	Sitting at: 43-45 Bedford Square, London WC1B 3AS 
on  
18, 19 & 20 February 2014

Richard Glover QC and Daniel Robinson, instructed by Daniel Watney LLP, solicitors of London EC4A 2DW, for the appellant 
Cain Ormandroyd  instructed by the solicitor to HMRC, for the respondent VO

The following cases are referred to in this decision:
Dawkins (VO) v Royal Leamington Spa Corporation (1961) 8 RRC 241.
Monsanto Plc v Farris (VO) (1998) RA 107
Civil Aviation Authority v Assessor for Strathclyde [1990] SLT 378

DECISION
Introduction
1.	These are consolidated appeals against the decision dated 7 January 2011 of the Valuation Tribunal for England (VTE). The appeals arose in the following way. The appeal hereditament, known as Blackbushe airport, was entered in the 2005 rating list with a rateable value of £42,500 from 1 April 2005. However this rateable value was increased by a Valuation Office notice to £100,000 with effect from the 23 December 2005. A correction was made to remove from the hereditament the flying club offices and café, which were separately rated, but the rateable value was not changed. The appellant's agents then made proposals which were not accepted by the Valuation Officer (VO) and were pursued to the Valuation Tribunal. On 7 January 2011 the VTE allowed the appeal, reducing the assessment to a rateable value of £90,000. Both parties appealed to the Upper Tribunal (Lands Chamber) and the actions were consolidated, with British Car Auctions Ltd as the appellant and the VO as the respondent. British Car Auctions Ltd (hereafter BCA) occupies the appeal hereditament trading as Blackbushe Airport Ltd (hereafter BAL) and is the appellant in this matter. The respondent, Mr Ken Hazell, is the Valuation Officer for the Hart Rating District.
2.	Mr Richard Glover QC and Mr Daniel Robinson of counsel appeared  for the appellant and called Mr Mick Lambert, Manager of Blackbushe Airport, who gave evidence of fact, and Mr Thomas Michael Dixon RD BSc (Est Man) FRICS IRRV (Hons), a rating and valuation consultant at Daniel Watney LLP, of London EC4 who gave expert valuation evidence.  
3.	Mr Cain Ormandroyd of counsel appeared for the respondent VO and called Mr Kenneth Ian Hazell BSc (Hons) MRICS, Valuation Officer, who gave expert valuation evidence.
Facts
4.	The parties helpfully produced statements of agreed facts and issues from which, together with the evidence and the assistance received from counsels’ skeleton arguments and closing submissions, and our accompanied inspection of the hereditament and surrounding area on 17th February 2014, we find the following facts.
5.	The material day for the appeals is 1 April 2005 with an effective date of 23 December 2005.
6.	The appeal hereditament, Blackbushe Airport, is described in the rating list as "airport building and premises" and is made up of an airfield, runway, taxiways, a fire engine garage and a control tower with offices which are currently used partly for the administrative control of the airport by BAL and partly by a user of the field operating an air-taxi and charter service with the Cessna Citation very light jet (VLJ). The whole site amounts to about 75 ha, of which about 45 ha are operational. The airfield was originally built on common land by the Royal Air Force in 1942 to standard RAF Grade A specification (capable of accepting the planned USAF  B29 Superfortress bomber)  with three large runways and a number of other taxiways and dispersal points. After the war it was used for a number of other purposes until it was finally opened with only one runway as a smaller general aviation airfield in October 1962.  BCA acquired the whole land of the original airfield in 1984. Not included in the hereditament are a substantial hangar occupied by Premiair Aviation Services and reached from the western end of the runway by taxiway J, and at the eastern end, overlooked by the control tower, a small conglomeration of Portakabin style buildings which house a café and the offices of two flying schools and club. BCA uses a substantial area formerly part of the airfield as a car auction site and a further area, west of the Premiair hangar, is used as a Sunday market.  
7.	On 1 July 1985 an agreement was made under section 52 of the Town and Country Planning Act 1971 between BCA and BAL on the one hand and Hampshire County Council and the Hart District Council on the other regulating the development and use of the airfield. This agreement requires, amongst other things, that there shall be no aircraft movements between the hours of 10 pm and 7 am, and that minimum noise procedures will be followed. There are a number of other restrictions about the running of engines at unsocial hours. Certain specified aircraft, particularly early jets, are excluded from landing. (We comment that these do not seem to us to be particularly onerous limitations, some of which are now of little consequence.) It has been said that the s52 agreement prevents the erection of any further permanent buildings. We cannot find that in the agreement. (We do note that clause 12 says that buildings may not be used for industrial or commercial purposes except for the maintenance and repair of aircraft, aircraft engines or equipment.) It may be that the local planning authority regard the former use as common land as an impediment to further building, although we have no evidence on that point.
8.	The airfield has a large and well maintained asphalt runway 1,335 m long and 46 m wide, aligned 07/25. It is licensed by the CAA and lies just north of the A30 to the south west of Yateley and between Blackwater and Hartley Wintney, all of which aircraft are instructed to avoid. It is a few minutes north of junction 4A on the M3. Farnborough airfield lies about 5 or 6 miles to the south east and its aerodrome traffic zone (ATZ) abuts and limits that of Blackbushe along the line of the M3. RAF Odiham is 8 miles to the south west. The Blackbushe circuit pattern, at least for the larger aircraft, penetrates the Odiham Military Aerodrome Traffic Zone (MATZ) at the south-western corner. The extensive London control area (CTR) Class A airspace starts about 5 miles to the north east. The airfield offers a radio Flight Information Service but has no instrument landing system.
9.	There used to be a 500 m grass runway to the south of the main runway. It was probably decommissioned by the material day. There was certainly very little evidence of it at the time of our site visit although we were told that area of grass is used for helicopter training. The parties agreed at the hearing that it is of no significance to the task we have to accomplish so we do not consider it further.
10.	A bridleway (Yateley B16) crosses the hereditament, including the runway, roughly from the control tower to the corner of the Premiair hanger, where it stops. It appears to be a dead-end. It was suggested that footpath Y47 also crossed the airfield but examination of definitive map (AG5) appears to show that it runs outside the airfield boundary fence to the east.
11.	There are a number of paved areas and taxiways, some of which, such as taxiway A, are used for access to the runway or, like the apron and taxiway B, are used for manoeuvring and parking aircraft. Taxiway E joins the apron and the western end of the runway on its southern side.
Valuation – The Contractor’s Basis 
12.	Before turning to the issues it would be helpful to set out the agreement between the parties about the way that the valuation should be approached. It is agreed, and was accepted by the VT, that the contractor’s basis offers the most promising method for assessing the value of the hereditament.
13.	The rateable value of the hereditament is "to be taken to be the amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year" on the assumptions that the hypothetical tenancy starts on the material day, the hereditament is in a state of reasonable repair and the tenant is responsible for the usual attendance rates and taxes and the cost of repairs and insurance sufficient to maintain the hereditament in the state to command the rent. (See Local Government Finance Act 1988, Schedule 6, paragraph 2 (1)).  By "the hereditament" is meant the actual hereditament as its circumstances stand at the material day. The contractor’s basis is useful where a hereditament is of a kind that is rarely let from year to year and rented comparables are unlikely to be found. Airfields have traditionally been regarded as such hereditaments, as is recognised in the extracts from the Valuation Office Rating Manual put before us.
14.	 The classic statement of the principles underlying the contractor's basis is to be found in the decision of the Lands Tribunal (Sir William Fitzgerald, President, and John Watson Esq) in Dawkins (VO) v Royal Leamington Spa Corporation (1961) 8 RRC 241.  At page 251 the Tribunal said:
“The use of the contractor's basis, last resort or not, is amply supported by the authorities. In his opening the Solicitor-General pointed to its logic in words we cannot hope to improve upon: ‘As I understand it, the argument is that the hypothetical tenant has an alternative to leasing the hereditament and paying rent for it he can build a precisely similar building himself. He could borrow the money, on which he would have to pay interest; or use his own capital on which he would have to forego interest to put up a similar building for his owner-occupation rather than rent it, and he will do that rather than pay what he would regard as an excessive rent -- that is, a rent which is greater than the interest he forgoes by using his own capital to build the building himself. The argument is that he will therefore be unwilling to pay more as an annual rent for a hereditament than it would cost him in the way of annual interest on the capital sum necessary to build a similar hereditament. On the other hand, if the annual rent demanded is fixed marginally below what it would cost him in the way of annual interest on the capital sum necessary to build a similar hereditament, it will be in his interest to rent the hereditament rather than build it’.”
The Tribunal continued:
“The peg which supports the contractor's basis is the cost of construction which, if not known, can be estimated without difficulty. But cost is not necessarily market value, and the next step in the exercise is to estimate by how much the cost should be discounted to allow for uneconomic planning, architectural embellishments, and extravagances, surplus accommodation, and those other factors which explain the difference between cost and value. Then the site has to be valued and a decision taken upon the rate of interest to be applied to the effective capital values. All these operations demand the skill of the valuer and there is plenty of room for error.”
15.	Mr Glover QC also helpfully reminded us of the analysis in Monsanto Plc v Farris (VO) (1998) RA 107, at page 141, in which the Lands Tribunal said it “inclined” towards counsel for the ratepayer's submissions.
16.	The first stage is thus to establish a capital value for the hereditament. This is to be done by estimating the cost of constructing the premises of the hereditament, allowing where necessary for the substitution of up to date methods of achieving the same accommodation as the original hereditament. This is “the tenants alternative.”  At stage 2 that cost is adjusted by making allowance for age, obsolescence and redundancy. An alternative way of proceeding in cases where there may be a substantial difference between the cost of constructing the original hereditament and the sort of hereditament that a modern hypothetical tenant would pay rent for, is to cost a modern equivalent hereditament. That is the approach which the appellant argues for in this case and, indeed, which the VO does not challenge in principle. Such an approach runs stages 1 and 2 together but it has the advantage that, if done properly, what would otherwise have to be calculated as an allowance may be more accurately measured as part of a modern cost. However, care must be taken that the hereditament is still being valued according to its facts and circumstances at the material day (rebus sic stantibus) and that the notional modernisation involved in the exercise does not extend to turning it into something different.
17.	The land cost is included at stage 3. Stage 4 is to apply the statutory decapitalisation rate. Finally, at stage 5, allowance needs to be made for any disabilities or adjustments that the hypothetical parties would agree should be reflected in the rent and which have not already been dealt with. 
18.	As Lord Clyde said in Civil Aviation Authority v Assessor for Strathclyde [1990] SLT 378, “the unreliability of any strict application of the principle calls for careful consideration of its result and if possible the checking of the result by such comparable material as may be available. This part of the exercise may then call for a correction of some part of the earlier calculation or the making of some end of allowance to achieve a reasonable result.” 
19.	The Rating Manual reflects the same thought when it says: 
“6.16 At this stage, allowance should be made for disabilities affecting the rental value of the airport as a whole and not accounted for elsewhere. 
6.17 It will be appropriate at this stage to make comparison with the RVs of similar airports. Airports can be compared on volume of business, or turnover, or passenger or aircraft movement numbers, to assess the relationship between RV and value to the occupier. Any allowances given should however be related to identifiable disabilities which give rise to the under performance. If such disabilities do not exist, the under performance may be attributable to other factors, not related to the value of land and buildings for which an allowance would not be appropriate.” 
And then: 
“6.19 Disabilities frequently encountered include: 
	Flying restrictions, limiting the operation of operational hours, or the nature of aircraft using the airport. This is frequently related to proximity of housing. 
	The remote location, or distance from population centres, reducing demand for passenger flights or club membership. 
	Access problems, including poor local road network, poor signage, distance from motorways etc. 
	Competition from larger local airports. 
	Generally poor layout, design etc not reflected at stage 2.
	Abnormally high maintenance costs.
6.20 It should be noted that, particularly in the case of minor and privately owned airports, the Contractor's Basis may produce an apparently high RV at stage 4, and an objective but sympathetic use of stage 5 allowances, requiring a knowledge of the circumstances of the operation of the airport, may be needed to produce an RV compatible with the level of activity of which the airport is capable.” 
20.	Perhaps, in the light of submissions made to us, we should make it clear that we entirely recognise that the Rating Manual is merely guidance, not the law, but we quote it because we consider the above passages to be a reasonable and interesting general application of the principles applying to airfields.
Issues
21.	The issues that remain to be determined by us can be summarised as follows:
(1)	The dimensions of a "modern equivalent" runway.
(2)	The number and dimensions of taxiways.
(3)	The size of car park
(4)	The external works
(5)	The undeveloped land
(6)	The value of land under buildings
(7)	Stage five: the allowances and other evidence:
(8)	Rental evidence from White Waltham;
(9)	The profit and loss figures from BAL;
(10)	Comparables.
The Appellant’s case 
22.	For the appellant, Mr Mick Lambert told us that he had been the manager of Blackbushe Airport for approximately 7 years. He set out some of the airfield's history and referred to the restrictions imposed by the 1985 section 52 Planning Agreement. He explained the proximity of other airfields and constraints on airspace and said the airfield offered a somewhat restricted flying environment and more complicated air-traffic integration with Farnborough than its number of air traffic movements might suggest. This, he believed, led some potential students to decide to find somewhere easier to learn to fly. He presented a schedule of air-traffic movements for the years 2003, 2004 and 2005 which he divided up according to the various classes of use. He said that Aero-club and training school aircraft were by far the largest proportion of air movements followed by non-commercial flights by private operators, which tended to be aircraft similar in nature to the training aircraft. Positioning flights, usually with larger commercial aircraft but flown empty of passengers, made up about 9% of movements. There were some public transport flights but they were limited by the lack of passenger and customs facilities and the absence of an instrument landing system. He was pressed in cross-examination about the number of jet flights and said he thought it was probably about 10%. He was cautious about  the precise figure due to a possible misunderstanding to do with the class of aircraft he was including but concluded that the proportion was still of that order. He also sought to draw conclusions by setting the actual usage against a theoretical maximum capacity, an exercise also undertaken to a degree by Mr Dixon. As Mr Lambert explained to us, the theoretical maximum capacity was calculated on the basis that there would be one landing and one take-off every 6 minutes from 08.00 to 18.00, every day of the year except Christmas day, regardless of wind, weather, visibility, daylight or any other possible impediment. Regrettably we find a theoretical capacity calculated in that manner so far from the reality of operations on a General Aviation airfield like Blackbushe that we get no assistance from it.
23.	Mr Lambert explained that there were occasions when walkers insisted on using the public bridleway, despite the fact that it was a dead-end.  He had never seen anyone on a horse. He thought it might happen once or twice a year. When it did the visitor had to be escorted all the way over and all the way back and the runway was shut for up to an hour. He was not sure when it had last been necessary to do that; he thought perhaps last year or the year before. He did not know how it came to be that the Premiair hangar had apparently been built over the bridleway without objection or diversion.
24.	Mr Lambert was of the opinion that the airfield could operate adequately with simply a control tower and administration offices, fire and rescue, an area of car park, taxiway A, the apron, and a runway of no greater than 800 m length and 18 m width. However, he agreed in cross-examination that it would be used differently in that event. He said that although the airfield was marketed as a centre of private, business and executive aviation, in reality it was significantly constrained by the physical factors of the airfield, the lack of facilities and the quality of its competitors. The main competition came from the much more sophisticated and larger facilities at Farnborough, only 6 miles away, but the other competitors included Denham, Booker (Wycombe Air Park), Elstree, White Waltham, and Thruxton. On the other hand he acknowledged that the proximity to Farnborough also offered advantages, given Blackbushe’s long runway and much lower charges. He agreed that the ability to handle business traffic, including jets, at a lower cost was a particular advantage offered by Blackbushe airfield, compared with its competitors.
25.	In his evidence Mr Dixon relied upon the account of the use of the airfield given by Mr Lambert.  He regarded the airfield as presenting unusual challenges in valuation terms.  While accepting that, in principle, the contractor's test was the appropriate route to a valuation, he considered that it needed to be applied with extreme caution.  It was complex.  He emphasised that in his view the methodology was not being applied to the use for which the hereditament was constructed, namely a wartime heavy bomber station, but to a completely different mode and category of occupation, namely that of a local airfield used almost exclusively for flying club and flying school purposes.  For this reason, he said, the current mode and category of occupation needed to be reflected by a simple modern substitute hereditament.  He commented upon negotiations with the previous valuation officer and of what he believed his approach to have been.  He also noted the relevant parts of the Valuation Office Rating Manual concerning civil airports, particularly stressing the requirement that, at stage five, there should be an objective but sympathetic use of allowances, requiring a knowledge of the circumstances of the operation of the airport because otherwise a strict application of the contractor's basis might produce an unrealistically high rateable value for large airports operated on a non-commercial use, such as for flying clubs.
26.	Mr Dixon took stages one and two of the test together.  There was no dispute about the area or construction cost of the few buildings within the hereditament, but there was about the appropriate adjustment for age and obsolescence.  He applied 30% to allow for the improvements to the buildings and 20% to the rather newer Portakabins.  The major point of disagreement with the VO was the size of the modern substitute main runway.  In Mr Dixon's view, in the light of Mr Lambert's evidence, a runway 800 m long and 18 m wide was the appropriate size for the modern substitute.  This would accord with the VO Manual for a Category B-2 (essentially non-commercial) airport. He agreed in cross-examination that if it were more correctly categorised as a B-1 (commercial) airfield, the appropriate dimensions would be 1200 m by 30 m.  
27.	His attention was drawn to paragraph 6.8 of the VO Manual and the proposition that a facility should not be considered surplus if it were used relatively infrequently as long as it was necessary for the operation of the airport.  He confirmed that he agreed with that, as a general statement.  However, the movements by jet aircraft, including positioning flights, carried very few paying passengers.  The jets, lightly laden, could land and take off in 800 m and turn within a runway width of 18 m, thus obviating the need for taxiway E.  He referred to the analysis of air movements and the comparatively low number of movements compared with the airfield's calculated capacity.  In his view, the VO also included too many unnecessary taxiways.  Mr Dixon noted that adding in ‘external works’ was intended to reflect infrastructure costs such as roads and car parks and drainage not otherwise taken into account. Given the limited accommodation in the actual airfield buildings and the separate treatment of the car park he did not believe that any external works addition was warranted and included none.  In cross-examination he pointed out that at the material day there was no CCTV at the gates and he thought there was little lighting.
28.	At stage three there was a difference of opinion between the VO and Mr Dixon about the amount of undeveloped land that should be allowed for.  Mr Dixon included 19 ha which he believed reflected the space required for his modern substitute and was consistent with the majority of his comparables. He said this area was calculated in accordance with the requirements of the CAA as set out in CAP168.  Elstree airfield had a similar area.
29.	The next significant difference between Mr Dixon and the VO arose at stage five.  Mr Dixon felt that a substantial adjustment had to be made to the costs produced by the contractor's test in order to arrive at an accurate valuation.  He felt that there were a number of unusual restrictions that applied to the hereditament which would adversely affect the bid of a hypothetical tenant.  He particularly pointed to lack of income-generating buildings within the hereditament, the absence of passenger handling facilities, and the fact that there was little or no prospect of erecting any further permanent buildings.  Restrictions on use of the airfield, the public bridleway, and the liability to maintain unused areas were other unusual constraints.  There were restrictions on the use of the surrounding airspace.  Finally he felt there was a lack of financial viability demonstrated by the accounts and that did not apply to the comparables to the same degree. He confirmed in cross-examination that this was an important plank in his argument.  
30.	He developed all these points by reference to a number of other airfields that he found to be comparable in one way or another.  He drew particular attention to White Waltham where there is a rent passing, which was analysed in relation to the various elements of the airfield.  He compared that rating assessment to Blackbushe and derived a broad brush estimate of value that he felt supported his end adjustment of 55%.  He referred to his spreadsheet TMD-K as an exercise in comparison with 17 other airfields.  He explained in cross-examination that the comparison was simply to see what happened when the facilities that were not available at Blackbushe were taken out.  He did not agree it was a meaningless exercise; he felt it gave a useful context despite the differences between the airfields.
31.	In conclusion he valued Blackbushe Airport for the 2005 rating list at a rateable value of £35,000.
The Respondent VO’s case
32.	Mr Hazell, the valuation officer, gave evidence of the circumstances that led to his forming the view that the original entry, with a rateable value of £42,500, did not properly reflect the features of the hereditament. He summarised the service of notices, the lodging of appeals and the hearing before the VTE.  He noted that there was agreement that the appropriate method of valuation was the contractor's method and that, given the deficiencies in the actual hereditament, adjustment could be made in applying the method, both in terms of considering a modern substitute hereditament and end allowances. Where the parties differed was in the choice of a modern substitute and the extent of the allowances.
33.	Considering the size of runway, Mr Hazell acknowledged that at the VTE hearing he had argued for a runway of 820 m long and 23 m wide. Since then he had undertaken further research into the length of runway necessary to accommodate jet aircraft and had concluded that the full length of the existing runway, namely 1,335 m, and a width of 30 m was the appropriate modern substitute. However, he considered that an allowance was then warranted to reflect the comparatively minor use of the runway made by jet aircraft and that the substantial majority of flights could operate from a smaller runway.  In cross-examination he accepted that if it were not necessary to accommodate jets it would probably not be necessary to have a paved surface at all, but he said he believed that there was a strong commercial advantage to be gained by operating jets.  The jets would need a paved surface and whereas they could, in most conditions, land in under 800 m they would often need more than this in order to take off.  He did not think that jet operations could sensibly be undertaken on a runway of only 800 m x 18 m.  As for his end allowance, he agreed that his 50% allowance at stage two was a broad value judgement but he felt that it was favourable to the rate payer.
34.	He had taken 47 ha, the approximate size of the actual operational airfield, as the figure that he felt was reasonably required to allow sufficient landing space for the different types of aircraft and to ensure that standards were not compromised.  He produced a list of airfield rating agreements in the south-east of England to show that all those airfields were larger than the 19 ha suggested by the appellant. To that area he had applied a price of £600,000 per hectare for the land under the buildings. The land under the pavements, about 7.5 ha, he had valued at 10% of that price and the remainder of the site, 39.5 ha, he had valued at prevailing agricultural values of £4,000 per hectare. Those values are not in dispute. The pavements themselves (the runway, taxiways and apron) he had valued at £36 per square metre.
35.	Mr Hazell included taxiways A, E, F, and G in his valuation. The inclusion of taxiway E is at issue between the parties. Taxiways B and C are used as hard standing for the parking of aircraft. In his evidence in chief Mr Hazell included the cost of the grass runway at £1 per square metre to which he applied a 50% stage two allowance, but in cross-examination he agreed that the grass runway was neither here nor there in the overall context of the valuation. At stage two Mr Hazell allowed percentages for age and obsolescence. He considered the allowances Mr Dixon wished to apply to be excessive. The terminal building had been extensively refurbished in about 1992 and provided comparatively pleasant modern office accommodation. The steel framed, metal clad control tower appeared to be a new, purpose-built structure in 1992, rather than a refurbishment, and there was no justification for a reduction of 30% to reflect age and obsolescence, as proposed by Mr Dixon.
36.	Mr Hazell added 5% of his valuation in respect of "externals", being the costs of providing services to the hereditament not included elsewhere in the valuation. He suggested that would include service connections, fencing, gates, CCTV and external lighting. Since there was little or no information about the detail on this point he said it was common practice to add a percentage.
37.	Finally, at stage five, Mr Hazell made an overall end allowance of 30%.  He said that this was to reflect the restrictions imposed upon the use of the airfield by the section 52 Agreement, the fact that part of the hereditament was within Yateley Common and that a public bridleway crosses the airfield. He thought the end allowance suggested by Mr Dixon at 55%, was excessive and ill founded. Mr Hazell’s valuation was set out in detail in the spreadsheet he produced as appendix Q (page 420). 
38.	Mr Hazell said that did not accept that Mr Dixon's exercise of looking at other airfields and that attempting to ‘strip out’ hangars was useful.  Hangarage was separately valued, as were the flying clubs and café at Blackbushe.  He feared that there would be an element of double counting if hangars were taken into account.  The relevance of viability was put to him in cross-examination.  He was not saying that it should not be considered in principle but he did think that it was irrelevant in this case. He was asked to consider a number of other airfields as comparables, particularly Denham, Thruxton, Elstree and Shoreham. He agreed that in principle the rateable values ought to be comparable from airfield to airfield, making proper allowances, but he maintained that his valuation was right for the location of Blackbushe.
Submissions on behalf of the Appellant. 
39.	Counsel for both parties were good enough to submit their closing submissions in writing by the agreed date of 14 March 2014, for which we are grateful.
40.	Apart, possibly, for one point, to which we return later, there does not appear to be any difference between the parties about the principles of law and the requirements of the contractor's test.  Mr Glover's criticisms of Mr Hazell's valuation were rather that he appeared to have misunderstood the method that he claimed to apply because he was discounting evidence that was germane. He had failed to identify the yardsticks that he used to measure the extent of adjustments; for example he did not show why he thought 50% to be the appropriate adjustment to apply to the modern substitute runway he adopted.  He had wrongly assumed that the value of land under the administration building on an airfield on common land could be measured by the value of local undeveloped industrial serviced land. He had not attempted to compare his £12,500 per hectare with £10,000 for Denham, £2,000 to Thruxton or the £4,500 for Shoreham. His end allowance of 30% had not taken into account real considerations; for example, as he agreed, he had not considered the actual occupier’s performance, the lack of buildings, nor the absence of passenger handling facilities. This amounted to a failure to take into account the circumstances of the operation of the airport, contrary to the advice of the VOA Manual. Mr Glover suggested that the initial valuation of Mr Ellam (Mr Hazell's predecessor as VO) was not mistaken and deserved proper weight, which it had not been given.
41.	The submissions then addressed each of the main issues. Mr Glover said that the evidence of Mr Lambert showed that an 800 m long runway would accommodate the great majority of the movements that are actually achieved at Blackbushe, and this was a pragmatic way for Mr Dixon to apply the guidance of the Rating Manual.  The same approach supported leaving taxiway E out of account. It was better in principle to go for a rather smaller modern substitute to value, than to cost the construction of a larger substitute and then make a large but unexplained end allowance. Furthermore if Mr Hazell's approach were to be adopted there could be no justification for agreeing a substantial allowance for the paved surfaces but making no allowance on the undeveloped land.
42.	Mr Hazell's addition for external work was criticised. It was noted that there had been a substantial increase after Mr Hazell's initial valuation. Mr Dixon's position should be preferred: there was very little lighting, roads or CCTV to take into account and any addition would be de minimis.
43.	Mr Glover acknowledged that there were difficulties in the contractor's method and its aim of getting from cost to value, but he argued that the valuer would be assisted at stage five by the rental evidence from White Waltham, the commercial performance of the actual operator and a comparison with the rateable values of comparable hereditaments. Mr Hazell had failed to take those considerations into account and failed to explain important elements of his valuation adequately. He submitted that the valuation of Mr Dixon should be preferred.
Submissions on behalf of the Respondent VO.
44.	Mr Ormondroyd agreed that the contractor’s basis was the appropriate valuation method and submitted that it followed that receipts and expenditure valuations and comparative rental valuations were not appropriate. In practice, little or no weight can be given to Mr Dixon's attempts at a rental valuation based upon the comparables and still less to the use of the accounts. He submitted that it also appeared to be agreed that the actual functionality of the hereditament as it was used had to be reflected in any modern substitute. The exercise of costing a modern substitute must be based upon the actual use of the hereditament and its facts and circumstances, not some different or lesser use.
45.	Turning to the specific issues, it was submitted that a key point was the degree to which the airfield was used by business jets.  Mr Ormondroyd set out his reasons why the figure of 10%, from which he submitted Mr Lambert did not resile, was a fair figure. It was also clear from the table (A10) that the jets would not be able to use an 800 m runway if close to maximum take-off weight or in challenging conditions. The limited length and width of the appellant's proposed modern substitute would significantly reduce the attraction of Blackbushe to the business jet market and would not properly reflect the actual use of the hereditament. The same was true of taxiway E, which is used and does increase capacity at peak times.
46.	However, having adopted a longer and wider runway, it was still appropriate for the VO to apply a substantial allowance to reflect the limited level of use of its full potential at stage two.
47.	Mr Ormondroyd accepted that the issue about the size of the car park, whether to attribute 3000 or 4000 m² of parking to the airfield hereditament, “verges on triviality” and that because the grass runway would make no realistic difference to the end valuation nothing further need be said about that either.
48.	Externals needed to be reflected as they would have been an important part of any modern substitute. Lighting, fencing and gates clearly did exist at Blackbushe. Reference was made to Mr Lambert's evidence that the control tower was indeed totally rebuilt in 1992 and in the light of that, said Mr Ormondroyd, there was no justification for Mr Dixon's 30% allowance. Nor was the control tower in any way disadvantaged by being attached to the terminal building.
49.	The land area, at stage three, was far too small at 19 ha particularly if the submissions about the appropriate proportions of the runway and taxiway were accepted.
50.	It was submitted that Mr Dixon's 50% allowance to reflect the difference between the value of the developed land on an industrial location on the one hand and an airfield location on the other could not be justified. The Rating Manual suggested that the industrial land values be used without further allowance. This was reasonable, he said, and not excessive in the context of this case.
51.	The stage five end allowance is the source of much of the difference in value between the valuers, and it was submitted that the question was how severe the identified disabilities at Blackbushe were, and what effect would they have on value. The lack of income generating buildings or passenger handling facilities might be relevant so far as they could generate traffic but the matter needed to be looked at in the round, and the movement numbers did not merit an end allowance.  The restrictions on the use of the airfield and surrounding airspace were not unusual or onerous for an airfield within the proximity of London. The section 52 agreement restrictions and obligations, including the maintenance of the SSSI are either largely outdated and/or unsupported by any evidence and in either case of little significance.  Neither was the public right of access much of an impediment. Mr Dixon's 55% was excessive and unjustified, Mr Hazell's 30% was fair.
52.	As for the comparables advanced by Mr Dixon, they all had major differences from Blackbushe which meant that they were not truly comparable. Instead, we were invited to consider Denham, Bembridge, Booker, Thruxton and Shoreham. 
Consideration and conclusions.
53.	We consider that the contractor's test, for all its difficulties, is the appropriate way to arrive at a rateable value for Blackbushe airfield. This is common ground between the parties and there is little more to be said. There is however one point that we think is worth emphasis. The starting point for assessing the rateable value of a hereditament is, as we have set out above, taken to be the rent at which it is estimated the actual hereditament might be let from year to year taking all its facts and circumstances as they stand at the material day (Rebus sic stantibus). At the first stage of the contractor's test, when the parties are contemplating the construction of a modern substitute, it is important that the modern substitute chosen must reflect the use of the actual hereditament that has to be valued. The modern substitute chosen should be able to do the same basic job that the actual hereditament does. The choice of a modern substitute is not the opportunity to adopt a new business model. We understand the force in the submission of counsel for the appellant that if a modern substitute requires a large end allowance it may be a sign that it is the wrong modern substitute, but in our judgment the exercise must always start by identifying a modern substitute that stays as close to the use of the actual hereditament as it can. If such a modern substitute can be accurately identified then, in principle, the application of the test should be based upon it even if, for sound reasons, substantial end allowances become necessary.
54.	It will be convenient to start by considering the appropriate dimensions of the runway as the decision on this aspect has important consequences for other matters.
55.	The hypothetical tenant and the hypothetical landlord, negotiating about the rent for Blackbushe airfield, will be keenly aware of those particular attributes that would make a rent for Blackbushe worth paying.  Blackbushe is well located near to London, its population and its markets.  It is close to a major motorway and has comparatively good communications. These are valuable attributes. They are attributes shared around the western half of London by Fairoaks airfield, White Waltham airfield, Denham airfield, Wycombe Air Park (formerly Booker airfield) and Elstree airfield.  Like those airfields the nearness of controlled air space is a constraint. Fairoaks, White Waltham and Denham ATZs are partially under the London CTR and Elstree and Booker are very close to it.  What, in our view, is special about Blackbushe is firstly that it has a well maintained, long and wide hard runway. Of the others, only Fairoaks, at 813 m, has a hard runway longer than 800 m. The other runways are all shorter. (Denham 775 m; Booker 735 m and Elstree 650 m).  The runways at White Waltham are long but all grass. Secondly, Blackbushe is close to Farnborough airfield. Farnborough is in a different class.  Its hard runway is nearly twice as long as that at Blackbushe, it has extensive facilities, including sophisticated maintenance and air-related training and other businesses. It offers an ILS, and is extremely busy. It is an internationally favoured place for business aviation including business jets of most sizes. Its charges are proportionately expensive.
56.	We have no doubt that a hypothetical tenant would reflect that Blackbushe is ideally placed to pick up crumbs that fall from Farnborough's table, offering the opportunity to park and, to a limited degree, operate lighter business aircraft, particularly VLJs and helicopters, close to Farnborough but at a fraction of the cost.  Mr Lambert told us that there were not many such crumbs, but there plainly are some and they are likely to be worth having.
57.	Having listened carefully to the evidence, we are not persuaded that an 800m runway would be attractive to business jets. Whilst we accept that most lightly laden VLJs would probably be able to land and take-off in favourable conditions, it seems to us that they would have little margin for difficult or challenging circumstances. To take only one example of such challenges, as Mr Lambert confirmed, a wet or frosty runway surface adds significantly to the length needed for safe operation. That would not be an unusual occurrence. The current runway, or something of similar dimensions, gives a business operator the confidence that his expensive jet can land and take off from Blackbushe without being forced into an expensive and inconvenient diversion to Farnborough or Biggin Hill.  In our judgment an 800 m runway would be likely to throw away the value obtained from Blackbushe's two distinctive advantages. Of course it could continue to operate with the flying club and flying school traffic that makes up most of the movements, but then its use would be something different from, and as the accounts suggest less valuable than, its use at the material day. So we find that the modern substitute runway cost should be based on a runway of the existing length, 1335m and a reduced width of 30m.
58.	Given a runway of the existing length, for similar reasons to those set out above, we conclude that taxiway E would add attractive flexibility to business operations at Blackbushe. We accept that VLJs could backtrack runway 25, and probably would continue to do so when it was not too active, as would the club and flying schools’ traffic, but there would be a real prospect of significant and expensive delays if all that mixed traffic had no choice but to backtrack, even at busy times. The hypothetical tenant would, we think, be prepared to pay for runway E as part of a modern substitute. The position on the other taxiways is, we think, effectively agreed. Taxiway A and taxiway G are included. Taxiways B, C and D are excluded by Mr Dixon and included but given a 100% allowance by the VO on the draft Scott schedule, which amounts to the same thing. Taxiway H is agreed to be excluded. (Taxiway J, which connects to the Premiair hangar is not part of the hereditament.)
59.	In our judgment, comparing the operational area (originally said to be 47ha but shown as rounded down in the most recent schedule as 45ha) shown on the maps at pages 364 and 365 of volume 4 of the bundle, with either the 19 ha area shown within the operational airfield on page 413 of the bundle, or the very indistinct map, labelled "Blackbushe airport -- site area showing appellant's substitute site area" (at page 414), it is clear that a 19 ha operational airfield would be too small to accommodate a 1335m long and 30m wide runway and taxiway E.  This is not, perhaps, very surprising, given that the evidence is that Elstree, with a runway half the size of Blackbushe and a narrow grass taxiway is said to have an operational area of 20ha. We conclude that a 45 ha operational airfield is a fair element to include at the first stage of the contractor's test.  
60.	Mr Dixon valued the operational land of his 19 ha substitute at £10,000 per hectare (TMD-V1, Vol 2, page 164.) Mr Hazel attributed a cost of £12,500 per hectare overall in his spreadsheet Apx Q ( at Vol 4, page 420). He reached that figure by valuing 7.5 ha land under pavements at £60,000 per ha  (10% of an industrial land value of £600,000) and 39.5 ha open land at £4,000 per ha, figures he said were agreed and derived in accordance with the methodology of the Rating Manual (Hazell, vol 4, p315, para 7.6.).  In fact the £60,000 was not agreed. In closing Mr Glover submitted that it was too high by comparison with the comparables and that Mr Dixon’s figure could also be achieved within the constraints of the manual.  In closing Mr Ormandroyd invited us to form our own view on the correct figure. We follow the broad logic of Mr Hazell’s calculation and accept his overall figure of £12,500 per ha. (However we are not sure exactly how much land under pavements ought to be included in the light of our conclusions above. This is a matter upon which we seek further input below - see para 73.) 
61.	In any event Mr Glover made another point in closing. He recalled that Mr Hazell uses a greater area of undeveloped land than Mr Dixon because he takes a different view about the size of runway and taxiway needed. He submitted that if the approach is to cost a larger area and then to adjust for superfluity in the case of the paved area, the same approach should be taken in the case of the undeveloped land. We believe this point has considerable force. The 45 ha open land is necessary to accommodate sensibly the larger runway and taxiway E.  If the area of the larger runway and taxiway E get a 50% discount for superfluity, as the VO agrees it should, then we think it must follow that the same allowance should be applied to the open land that is also larger than it might otherwise be because of that bigger runway and taxiway E. While the appellant is right to point out in respect of this stage 2 allowance that the VO does not offer any particular justification for the percentage of 50%, that percentage seems to us to be fair. We accept that it can only be a rather broad judgment.
The Car Park
62.	The size of the car park is a comparatively small matter and it has been left to us to decide simply as a matter of impression.  In the course of our site visit we did our best to gauge the various degrees of business in the cafe, flying club and flying schools and administrative offices on a Monday. We made allowances for the fact that on a rather cold and blustery Monday morning there was likely to be more activity in the terminal building than in the café, club or schools. Our broad impression is that the majority of the car parking should be attributed to the café, club and schools and the lesser area to the hereditament. We therefore determine the parking area to be 3,000 m².
The external works
63.	There is little actual evidence of external works but we accept the VO's argument that there must have been fences and gates and some lighting even if there were no CCTV, at the material day. In principle we see no reason to disagree with 5% as a fair percentage allowance and do not ignore it as “de minimis”.  As for the value of land under buildings, we prefer the VO's approach which seems to us perfectly fair.
Allowance for Disabilities at Stage 5
64.	We now turn to the appropriate allowance for disabilities at Stage 5. There is no doubt that such an allowance is appropriate and we bear in mind the list of possible disabilities found in the Rating Manual, which we have quoted above although none of those seem to be particularly apt. There are constraints upon flying due to the proximity of the Farnborough ATZ, the Odiham MATZ and to a lesser extent the London CTR but, as we have noted, such constraints are neither unusual near London nor do they appear to be more onerous than those affecting other nearby airfields.  We observed from the notice on the flying club notice board that there are sensible and easy to follow procedures designed to avoid conflicts. The section 52 Agreement imposes some limitations upon flying but these are comparatively mild, compared with some of the neighbouring airfields. Would-be pupils who wished to learn at a significantly less controlled environment would have a long way to go.  In short, this does not seem to us to amount to much of a disability. There is, no doubt, competition from Farnborough but it seems to us that it is outweighed firstly by the advantages that fall to Blackbushe as a result of the presence of that airport, and secondly by the fact that Blackbushe could not perform the same function as Farnborough, even if Farnborough were not there. We conclude that under those headings no disability allowance at Stage 5 is appropriate.
65.	It was then argued by the appellant that Blackbushe airfield was exceptionally constrained in its ability to construct additional hangars or passenger facilities, at least in comparatively permanent structures.    The first issue for us to ponder is whether it is factually correct that Blackbushe airfield is constrained in that way. Both parties seem to have accepted without much investigation that the Section 52 Agreement was the source of constraint. The statement of agreed facts, paragraph 13, said the Section 52 Agreement restricted “the use of the airfield site and the types and sizes of aircraft which may use the airfield.” That broad statement is accurate so far as it goes but we searched in vain for anything specific in that or any other document before us to justify a specific prohibition on further building. We asked for further assistance from the parties to clarify the point but found nothing of substance in their responses. We were told that the reference in the recitals to an earlier agreement and consent has been taken by the parties as prohibiting further construction on the site although we were also told that neither the local planning authority nor the appellant have any copies of the earlier agreement or consent. There is nothing before us from the Local Planning Authority about its position and no records of any attempt to explore with the LPA, what, if anything, by way of structures might be acceptable. We have in mind that the airfield was built on common land 70 years ago but see no obvious reason why it should not continue for another 70. We do not know whether or not the Premiair hangar was built on common land. Such a lack of challenge or even investigation might be thought surprising, if the lack of further buildings is as much of a disadvantage as was claimed. In short, it is not evident that Blackbushe airfield does actually suffer from that claimed disability. 
66.	What is clear from the evidence, however, is that Mr Lambert, BAL and the VO believe that the disability exists. The airfield is particularly short of hangar space. On our site visit we were shown eight small temporary hangars (which were not there at the material day). It is often difficult to get planning permission to erect hangars and other buildings on airfields, for a variety of reasons. Although we think that the obstacles in the way of further buildings at Blackbushe have been exaggerated, or possibly misunderstood, we do not suppose that the hypothetical tenant, considering his bid in the knowledge of the history, would be other than pessimistic about the chances of adding hangars or other buildings and would be disinclined to add much for the prospect of extra building, on or off the hereditament. For that reason we are prepared to accept the parties’ apparent agreement that this disability is real.
67.	The VO argued that it would be wrong in principle to take any such hangars or facilities into account because they would probably be separately rated. Once separately rated premises, such as the Premiair hangar and the flying schools and café, were removed from the hereditament that was the end of it. To take them into account in any way further would involve double counting. The appellant countered that Blackbushe was at a disadvantage compared with other airfields in the south east of England because of its very limited access to hangars. An airfield that had the potential to attract extra traffic on-hereditament because of businesses off-hereditament would be more likely to be an attractive business proposition to a hypothetical tenant than an airfield that had no such potential. There is thus no double counting. 
68.	We conclude that the businesses that are likely to use an airfield at the material day are part of the facts and circumstances that need to be taken into account when valuing it. That is true whether they are part of the hereditament or separately rated.  There is no double counting. The possibility of extra hangars would be a fact adding value to the airfield; the near impossibility of it, a disability. 
69.	We agree that the existence of the bridleway is a disability as it has the potential to interrupt the operation of the airfield unpredictably and for a significant length of time.  In fact it seems that recently it has not caused much trouble.  It may also be true that if, in the future, it were to cause problems, it would not be difficult to take effective steps to block or divert the bridleway.  It is surprising that the Premiair hangar appears to have been built across it without, so far as we were told, any procedures to close or divert it.  However any hypothetical tenant would justifiably see the existence of the bridleway as a matter of concern and a reason for reducing his bid.
70.	Under the heading of end allowances, the appellant asked us to consider the accounts presented to us relating to the operation of the airfield. Again, we think that the appellant is right in principle to say that, at this stage, we are entitled to consider those accounts as possible evidence of disabilities that ought to be reflected in an allowance. The accounts show that the airfield made a profit taking into account the contribution from the separately assessed Premiair hangar, the flying club and flying schools, but a loss leaving those factors out of account.  But if we were to put any weight on the BAL profit and loss account, we consider that it would be wrong to leave that income stream out of account for similar reasons to those explained above; the existence of the opportunity to derive profit from those sources, albeit they are separately rated, is something a hypothetical tenant would have in mind when considering the rent he would pay. We have therefore considered the accounts but find them inconclusive as to any particular disability and put no weight on them.
71.	Both sides urged us to take into account a variety of airfields that were said to be comparable in one way or another. It happens that the Members of the Tribunal are familiar with many of the comparables, and one or other of us has flown into and out of most of them.  We have also been assisted with much information on them in the form of schedules, extracts from the guides and photographs.  In our judgment, none of the suggested comparables are very helpful as they are all significantly different in one important way or another. When airfields are otherwise broadly similar to Blackbushe they are in a location that is so completely different that no comparisons could be reliable (like Shobdon and Dunkeswell), and when they are in a comparable location there is some material factor that distinguishes them (like Elstree and Denham). We were urged to look at White Waltham, on which there was a passing rent, and where there are a number of hangars, some of no little antiquity. But this airfield has grass runways only and the use made of it strongly reflects that fact. It has several unusual features. We find it impossible to draw any useful conclusions about hangars or anything else from White Waltham that could be related to the quite different circumstances and issues at Blackbushe. Indeed some of the comparables, for example Sandown, Isle of Wight, are as different from Blackbushe as one might possibly imagine.  Sandown is an unlicensed airfield with a (rather bumpy) grass runway, used mostly by microlights. It has few facilities, no fuel, and is in a comparatively rural area next to Sandown, a holiday and retirement town, in the south of the Isle of Wight. The only possible similarity with Blackbushe is that the runway is crossed at approximately the halfway mark by an actively used footpath, which is, however, uncontrolled.
72.	Mr Dixon argued for a 50% allowance at Stage 5. The VO defended an allowance of 30%. We take into account Mr Glover’s criticisms of Mr Hazell’s approach, compared with that of Mr Ellams, but we do not find them particularly persuasive on this point. For the reasons we have given we do not find the BAL accounts or the comparables very much help either. On the question of Stage 5 allowances therefore, in what must be another broad judgement, we find that an allowance of 30% is appropriate.
Calculation of Rateable Value
73.	We have determined the issues between the parties which establish the basis upon which the rateable value must be calculated. However the calculation itself is complex and there remain one or two points upon which we are unclear and remain to be worked out, for example the amount of land under pavements that ought to be included in the operational land calculation (see paragraph 61 above.) We know that the parties have a spreadsheet to do the calculation at their disposal and we would like them to put in the parameters set by our decision and use it to calculate the rateable value. The parties are to agree the inputs within 14 days of the date of this decision and to submit to the Tribunal within 14 days thereafter a legible (ie at least 10 point) copy of the calculation which clearly shows how each point of the Tribunal's decision has been worked through; in default of agreement on any point they are, within 21 days, to submit submissions in writing on every such point.
74.	This is an interim decision of the Tribunal, and will not become final until the calculations referred to above have been submitted and, if agreed, incorporated into the decision and the question of costs is determined.   
					
								DATED: 28 April 2014 					

								HH David Mole QC
							
								P R Francis FRICS