085-NLR-NLR-V-36-MALALASEKERE-v.-MUNICIPAL-COUNCIL-,COLOMBO.pdf
1934
MACDONETjL CJ.—Malalasekere v. Municipal Council, Colombo. 409
Present: Macdonell CJ.
MALALASEKERE v. MUNICIPAL COUNCIL, COLOMBO.
24—C. R. Colombo, 90,688
Municipal rates—Premises of art society—Art gallery not a school building—Annual value—Method of ascertaining—Value of building—Criterionof rent—Municipal Councils Ordinance, No. 6 of 1910, 115 (I).
Where premises occupied by the Ceylon Society of Arts, a voluntaryassociation formed for the purpose of exhibiting pictures and promptingart, were housed in a building erected out of public subscriptions collectedfrom the members of the society, and the -building was assessed by theColombo Municipal Council for rates,—
Held, that the annual value of the building should be determined byascertaining what is a reasonable rent which the society would have topay for the building if the society had to obtain it for displaying itspictures.
The capital sum spent on the building would be a criterion by whichthe rent may be estimated.
The art gallery of the society is not a school building within themeaning of the proviso to section 115 (1) of the Ordinance.
^^PPEAL from a judgment of the Commissioner of Requests, Colombo.
A. E. Keuneman (with him E. F. N. Gratiaen), for defendant, appellant.
H. V. Perera (with him F. C. W. van Geyzel)_, for plaintiff, respondent.
October 30, 1934. Macdonell C.J.—
In this case the plaintiff is the Secretary of the Ceylon Society of Artsand the defendant is the Municipal Council of Colombo. The defendant,in accordance with the powers conferred upon it by the Municipal CouncilsOrdinance, 1910, assessed the annual value of the premises of the plaintiffsociety at Rs. 1,500 for the year 1933. The plaintiff society contendedthat this assessment was excessive and took action in the Court of Requestsas provided by section 124 (1) of the Ordinance. The amount claimedas rates, Rs. 300, is within the jurisdiction of such a Court. In its actionthe plaintiff society asked for a declaration that its property was a“ school building ” within section 115 (1) of the Ordinance and shouldtherefore be exempted from being rated. In the alternative it askedfor a declaration that the true annual value of the building it occupiesis Rs. 500 and not Rs. 1,500. Judgment passed for the plaintiff societyon both these contentions, and from that judgment the Municipal Council,defendant, brings this appeal.
The facts seem to be that the plaintiff society is a voluntary associationfor the exhibiting of pictures and the promotion of art generally, inColombo. It collected subscriptions from its members and erected abuilding about midway between the Municipal .Council buildings and theMuseum at a total cost of Rs. 58,273. It charges an entrance fee of 25cents for each person, but this source of revenue is probably verysmall. It has a collection of pictures, including a number of copies ofOld Masters, and the artificial lighting in the building is so arranged
410 MACDONELL C.J.—Malalasekere v. Municipal Council, Colombo.
that it would fall on the pictures so exhibited but would not light upthe main body of the building. It is not connected with the electricmain, so it can only be opened during daylight. We are specially toldin evidence that it has no drainage. There is evidence that studentsstudy the pictures exhibited and copy them, and that, under the auspicesof the society, lectures are given by people of authority on art but thatthey are not given in the art gallery building, but elsewhere. There isalso evidence that professional artists and Technical College teachers taketheir pupils from time to time to study the pictures there.
I will deal first with the claim of the plaintiff society that its artgallery is a “ school building ” within section 115 (1) of the Ordinance.On the evidence given in this case it clearly has no claim to that title.The case of Dr. Coudert v. Municipal Council of Colombo' decided that onlythose buildings of a school are exempt from being rated which “ are usedas class rooms where the classes meet for tuition and private study”.On the evidence in this case there are no classes which meet in the plaintiffsociety’s building for tuition or private study. The definition of a schoolis given in the Concise Oxford Dictionary as “ An institution for educatingchildren or giving instruction usually of a more elementary or technicalkind than that given in universities On the evidence this is not“ an institution for education or giving instruction so to hold, itwould be necessary to strain these words beyond their normal meaning.I do not think that it can seriously be argued that the art gallery of theplaintiff society is a “ school building ” within section 115 (1) of theOrdinance, and the judgment below declaring the art gallery to beexempt under section 115 (1) of the Ordinance must be set aside.
The other question in this case is the annual value of these premises.Annual value is defined in section 3 of the Ordinance as follows: —
“ Annual value ” means the annual rent which a tenant mightreasonably be expected, taking one year with another, to pay forany house, building, land, or tenement if the tenant undertookto pay all public rates and taxes, and if the landlord undertookto bear the cost of repairs, maintenance, and upkeep, if any,necessary to maintain the house, building, land, or tenement in astate to command that rent.
It is argued that the plaintiff society, having spent on this building andthe pictures it contains all the money that it has accumulated, would beunable to pay any rent at all or at most a very small one. . The buildingit owns brings in no profit, consequently it is claimed that no tenant couldbe found who would be willing to pay as rent the annual value, Rs. 1,500,at which the defendant Council has assessed this property of the plaintiffsociety. The law requires us to find what rent a tenant would pay forthe property to be rated and to consider the actual occupier of the propertyas himself a possible tenant; per Esher M. R. in Regina v. School Board forLondon*—“ The directions given by the Act are equivalent to saying thatwe must look at all possible tenants, and the phraseology does not excludean owner who himself occupies the premises ” ; and see London CountyCouncil v. Erith*. If we keep this in mind, that the actual occupier must» S JV, L. R. 338.a 17 Q. B. D. 738.
3 (1893) A. G. MS.
MACDONELL C.J.—Malalasekere v. Municipal Council, Colombo. 411
he considered as a possible tenant, then the difficulties disappear. Wemust suppose that the plaintiff society is not the owner of this building butthat somebody else is the owner of it, who therefore has put up and paidfor the building. It is not disputed that what the building cost, namelyRs. 58,273, was a fair and reasonable price. The position of the plaintiffsociety, as hypothetical tenant, would be this. It needs an art galleryin which to house and show its pictures and, if there is in existence thepresent art gallery owned by someone else, it will then have to ask itselfthe question, what is a reasonable ^ent for it to pay to obtain this buildingwherein to house and display its pictures. In effect, the assessment atRs. 1,500 asks it to pay a rent of a little more than 2£ per cent, on the cdstof that building, and the plaintiff society, as' possible tenant, has toconsider whether an annual rent of a little over 2£ per cent, of the cost ofputting up the building would be a reasonable rent for it to pay to obtainhousing for its pictures in that building. The question answers itself.It would not only be a reasonable rent but a very small one. This shortstatement of the problem really disposes of the case. If the plaintiffsociety is a hypothetical tenant, then, by that hypothesis, not it but theowner would have paid for the building, the society would have its capitalRs. 58,273 intact and the rent it would pay would not exhaust the earningcapacity of its capital, it would be able to get some income on that capitalafter payment of the rent for the building. The fact that the rent on thecapital cost of the building is considerably less than what that capitalwould earn if it had been otherwise used, is strong evidence that theassessment complained of is neither unreasonable nor excessive. It maybe added that the evidence in the case shows it to be a more indulgentassessment than that imposed on other neighbouring buildings.
The method adopted by the defendant Council in rating this buildinghas been an application of what is known as the contractor’s principle andthe conditions under which it can be applied to a hypothetical tenantare authoritatively and clearly given by A. L. Smith L.J. in LiverpoolCorporation v. Llanfyllin Assessment Committee “ It is familiar law
that, where a hereditament can be compared with other hereditaments ofa like nature which are the subject of letting, its rateable value may bearrived at by showing what rent tenants from year to year will in factgive for such hereditaments; but a difficulty in rating law arises withregard to hereditaments which cannot be compared with other similarhereditaments so as to ascertain the rent which a tenant willactually give for them. Therefore, inasmuch as a rateable hereditamentcannot be allowed to escape from being rated because no such comparisoncan be made, in such cases it has come to be a recognized position that therent which a hypothetical tenant would give for the hereditament must beestimated in some other way. In a case like the present, where no profitsare earned in the parish by the use of the hereditament, a rough way ofarriving at the rateable value by rule of thumb, there being no other wayavailable, is to see what the site and the construction of the works cost,and take a percentage on the capital amount so expended as representingthe rent which a tenant would give. The problem with regard to the modeof estimating the rateable value in a case of this kind has been simplified
i (1809) 2 Q. B. at p. 20.
412 MACDONELL C.J.—Malalasekere v. Municipal Council, Colombo.
by the introduction some years ago, in the case of Reg. v. School Board forLondon1, of the principle that the occupying owner of the hereditamentmay be considered as a possible tenant. If a person buys a piece of land,and spends so much in erecting a building upon it, the amount so expendedby him forms some criterion of the rent which he would give, if he had torent the hereditament so created. I agree that a certain rate of intereston the capital expended in creating the hereditament is by no means to betaken as necessarily equivalent to th^rent which a hypothetical tenantwould give; but I think the amount of capital expended is admissible inevidence as a criterion by which to estimate that rent in the case of workslike these which are incapable of being compared with other hereditaments-which form the subject of letting. ” This passage is in point in referenceto the present case.
There are no similar buildings available for comparison with the plaintiffsociety *s building, and so nothing to ascertain what rent tenants doactually give, for such a building, therefore is it impossible to apply thattest. None the less it is a rateable building, so cannot escape being rated.It makes no profit, so it is impossible to rate it on what is known as the.revenue or profits principle, then the only way— “ there being no otherway available ”—is to see what the building cost and take a percentage onthat cost “ as representing the rent which a tenant would give ”. It is nota conclusive test but it is at any rate ‘ some criterion ’ of what rent a tenantwould give, and here a very reasonable criterion, since there is no suggestionthat the plaintiff society was overcharged or undercharged for having itsbuilding erected. The percentage actually taken has been a very low one.
It is part of the case of the plaintiff society that it makes no profits andhas unfortunately small prospect of making any, and at one time the factthat the occupier of a building or other rateable subject made no profit byit was urged as an argument for its not being rateable at all. Such anargument would be unsound, for the question is not whether an occupiermakes profit by what he occupies but whether he has beneficialoccupation of it. that is, an occupation which is value to him. One ofthe best proofs that such an occupation is beneficial is that the occupiercontinues to occupy ; the property must be of value to him or he wouldnot continue to occupy it.
The passage from the judgment in the Liverpool Corporation Case quotedabove says that “ a rateable hereditament cannot be allowed to escapefrom being rated”. The theory of a local rate is this. A certain sum isrequired each year and its payment must be divided among the occupiersof rateable property each according to the annual value of the bit ofrateable property which he occupies ; the sum required is fixed and theactual occupiers are ascertained persons. Then if one of these escapespaying his share, the burden of paying that share necessarily falls on thoseothers who do not escape having to pay. It is claimed in the present casethat since the plaintiff society earns, and can earn, little or nothing fromits rateable property, then it should be rated at a very low figure if at all.To this the other occupiers paying rates can answer perfectly fairly andlogically, * Why must we suffer by paying more, namely your share, becauseyou use your property in such a manner as to earn nothing by it ? How
1 (1886) 17 Q. B. D. 788.
KOCH A.J.—Annamalay Chetty v. Thornhill.
413
you use your property, is your concern. But it is not right that youshould be allowed that freedom and claim as a consequence of beingallowed it, to put your burden on our shoulders
If it is right or advisable to exempt the plaintiff society from beingrated, this is a matter for the legislature, which can alter the law if itthinks fit to do so.
For the reasons given above I am of opinion that the plaintiff society is-not exempt under section 115 (1) of the Ordinance from being rated inrespect of its building, and that it has not proved the defendant Council’sassessment of the annual value of that building at Rs. 1,500 for the year1933 to be unreasonable or excessive.
This appeal must be allowed with costs here and below and the plaintiffsociety’s action must be dismissed.
Appeal allowed.