PERERA (G. A. N. W. P.) ,Appellant ,and FERNANDO et al ,Respondent

028-NLR-NLR-V-51-PERERA-G.-A.-N.-W.-P.-Appellant-and-FERNANDO-et-al-Respondent.pdf


Perera (Q. A., N. H P.) t. Fernanda
121
1^49Present: Dias J. and Windham J.PERERA (G. A., N. \ P.), Appellant, and FERNANDO et <il,Respondents
S. C. 68—D. C. Kurunegala, 4,192
Land acquisition—Coconut estate in 1947—Compensation payable—Market
value-—Method of calculation—Payment of JO per cent, on market
value—Discretionary—Land Acquisition Ordinance [Cap. 203), ss. 21,
38.
A contact was entered into between the Governments of Ceylon andthe United Kingdom for the sale to the United Kingdom, at a guaranteedprice, of the entire exportable surplus of copra and coconut oil producedin Ceylon. This contract was originally entered into in 1942 for a periodof three years expiring on 31st December, 1945, and was renewed fora further period of five years from 1st January, 1946, to 31st December,1950. . The contract was, however, confined to copra and coconut oiland there was nothing in the contract to prevent the owner of a coconutestate from selling fresh coconuts or desiccated coconut wheresoeverho wished, whether in Ceylon or outside it, and at whatsoever price hecould fetch. Nor was there any evidence adduced that tho price guaran-teed under the contract was a higher price than an owner might expectfor copra or oil sold internally, or for fresh or desiccated coconuts soldinternally or externally, during the period of the contract.
Held, that the market value in May, 1947, of coconut estates ingeneral was not governed entirely by the price guaranteed for copraunder the contract.
Held, further : (i) In deciding upon the market value of propertycompulsorily acquired evidence of recent sales in the vicinity is animportant test, provided that such sales were of property similarlysituated and are shown to have been by a willing seller to a willingbuyer.
In order to obtain the market value of coconut proj>erty in Ceylonthe court can assess the annual profits of the land on the footing of theprice current at the date of valuation and multiply it by the “ yean;'purchase*’, a “years’ purchase” being 100 divided by the rate percent, which a reasonable purchaser might expect as annual profit fromthe land.
Market value of property is the price which a willing vendormight be expected to obtain in the open market from a .willing purchaser,and the price will be estimated having in view the future potentialitiesof the property.
Section 38 of the Land Acquisition Ordinance confers upon theGovernment Agent a discretion, not a duty, to award an additionalten per cent, on the market value of the property finally awarded.Neither the District Court nor the Supreme Court, in appeal, liasjurisdiction to award the ten per cent, or to order the GovernmentAgent to pay it .
_/_PPEAL from a judgment of the District Judge, Kuruuegaia.
R.R. Cro88ette Thambiak, Solicitor-General, with H. Dekeragoda, GrownCounsel, and B. C. F. Jayaratne, Crown Counsel, for plaintiff appellant,dealt with the facts.
Li.
1T. N. A 93568—1,041 (11/49)
122
Perera (O. A., N. W. P.) v. Fernando
Price of oopra was fixed for 3j years at the time of the acquisitionThereafter price was uncertain. Hence, the proper method of valuationis that adopted by the Government Valuer, Mr. Orr. The net incomeis capitalised for the years at the known figures. Thereafter, estimatedfigures are capitalised by multiplying net profit by the multiplier obtainedfrom Parry’s Valuation Tables. The multiplier for the 3$-year periodis also obtained from Parry’s Tables. See Parry’s Tables oh Valuation,page 54. The learned District- Judge failed to appreciate the applicationof this method of valuation to the circumstances of this case. Theusual method of multiplying net income by ten years’ purchase is herewrong. The buyer buys income in perpetuity, but the income foryears is fixed; thereafter it is variable. Hence, in capitalising, twoperiods must be taken, a limited income for 3£ years, and a variableincome in perpetuity. Therefore, Mr. Orr’smethod is the proper method.
Mr. Orr’s results arc supported by PI 1, the list of salos. Pll wasadmitted at the trial without any contest. Pll shows prices of ooconutlands both before and after the date of this acquisition. The rate peracre In no case exceeds Rs. 1,200. The learned Judge failed to takeaccount of Pll in arriving at his judgment .
In regard to the documents 1>7 and 1)12, valuation reports of Mr-Sehokman, it is submitted that Mr. Schokman not having been calledas a witness, these documents wero wrongly admitted by the Judge.It was also agreed that they would not be considered unless Mr. Schokmanwas called. Farther, D 12 was also privileged. They wore made useof by the Court in its judgment. See sections 114 and 154 of Civil Pro-cedure Code, Siyadorisv. Danorisetal.1, Silva v. Kinder shy 2, Duncanv. Cammell, Laird db Co. *.
On market value of the property see Stevens v. Munasingke et al. *,Government Agent v. Perera5, Frenchman v. Assistant Collector, Baveli •.
On future utility of acquired property see Rajendra Nath Banerjeev. Secretary of State for India 7.
H. V. Perera, K.C., with AT. E. Weerasooria, K.C., and N. M. de Silva,for defendants and added defendants, respondents.—The contract pricerepresents a guaranteed minimum and not the maximum price. Wecannot say that there is a limited period of 34 years. The future pros-pects of tho coconut industry are good, according to the witnesses lor thedefendants. Mr. Orr’s method cannot apply here. See Cripps onCompensation, pages 172, 182 and 187. Mr. Orr’s method does notapply in this case. This is like a fee simple in peipetuity and the propermethod is to multiply the net income by the 10 years' purchase. Thisis the method always adopted in Ceylon.
D7 and D12 have been marked and put in evidence. It is submittedthat they were not wrongly admitted. In any event, the defendants donot rely on these documents for their case, and, even if wrongly admitted,there was no prejudice. See section 167 of Evidence Ordinance andAbdul Rahim v. Emperor
1 {1041) 42 N. L. ft. 311.»(1914) IS .V. L. R. 85.
* (1948) A. C. 624.
1 38 Calcutta 343.
•A. /. R. (1946), {P. C.) 82.
*A. 1. R. (1988) Bombay 399.
*(1903) 7 N. L. R. 313.
* (1941) 42 X. L. R. 446.
Perera (0. A., N. W. P.) v. Fernando
123
Pll is of no value. No evidence was led as to the contents of Pll.The mere production of Pll is not sufficient to show how the propertiesin Pll compare with the property acquired. The learned Judge rightlydid not aot on Pll.
Dll is no support for Mr. Orr’s valuation. It is both belated anduseless.
In regard to the cross-appeal, section 38 of the Land AcquisitionOrdinance casts on the G. A. a duty to pay the 10 per cent, for compulsoryacquisition. This is not a matter of discretion. Section 38 providesthat the Government Agent shall pay the amount awarded and thepercentage with interest on both. “ Shall ” governs both. No operativedecision of the G. A. is necessary to give any legal right to any one todemand the percentage. “ May" in section 38 means shall. SeeJulius v.''Bishop of Oxfordl.
C, F. Jayaratne, Crown Counsel.—In regard to the cross-appeal,“May” here can only mean “may” and not ‘'shall”. There is nothing toindicate that the normal meaning should not be given to the word” may ”,The payment is entirely discretionary. Compare for instance section23 of the Indian Land Acquisition Act where payment of the percentageis imperative. Our Ordinance is modelled on the Indian Ordinance butwe have departed in section 38 from the imperative termB of section 23of that Ordinance. The whole purpose of our Ordinance too is to providefor compulsory acquisition. Hence, it is hardly likely that the paymentof the 10 per cent, in consideration of the compulsory nature of theacquisition, would have been left in a doubtful state where “may”might mean “ shall If the intention was to make the 10 per cent,payment obligatory nothing would have been simpler than to haveprovided for it in section 21 where provision might have been made forits determination upon determining market value. Section 38 only pro-vides for payment of the percentage if and when it is awarded by theG. A. The case of Julius v. Bishop of Oxford onlysets out circumstancesin which power conferred on one person gives a legal right to anotherto demand the exercise of that power by the person on whom it is con-ferred. No such circumstances exist here giving a legal right to anyone to the 10 per cent. The 10 per cent, is determined only after thecompensation has been finally awarded. The District Court itself hasno jurisdiction in this matter, nor has the Supreme Court such powerin appeal. See Dias V: Ellis 2, Government Agent, W. P. v. Stork et al.8,Julius v. Bishop of OxfordMaxwell on Interpretation of Statutes,pages 246, 247 and 252.
H. V. Perera, K.C., replied briefly on the cross-appeal.
H. R. Crosselte Thambiah, Solicitor-General, replied briefly on the appeal.
Car. adv. vult.
'H1880) 5 A. C. 814 at 228.
• (1903) 7 iV. L. B. 112.
9 .S'. C. 135 D. C., Colombo 2121. S. C. Minute* oj November 14, 1898.
9 (M0) 5 A. C. 214 at 244.
124
WINDHAM J.—Pwem {O. A , .V. IF. P.) t Fernando
November 30, 1940. Windham J,—
This is an appeal under section 26 of the Land Acquisition Ordinance(Cap. 203) against an award of compensation ordered by the DistrictCourt to be paid to the defendant-respondents by the plaintifF-appellant(the Government Agent of the North-Western Province) in respect ofthe compulsory acquisition of certain lands known as Arampola Estatehaving ft total area of 804 acres, 2 roods and 5 perches. The estateconsisted of coconut, rubber and paddy lands, and also a small percentageof plantain and waste land ; but more than three quarters of it, namely,670 acres, 1 rood and 20 perches, was coconut land, and this appeal isconfined to the figure awarded in respect of this coconut land, with whichwas included a further one acre and nineteen porches occupied by estateroads. The compensation awarded by the court in respect of this land,after a very lengthy trial and in a l6ng and carefully considered judgment ,was Hs. 1,802 per acre, the figure representing the market value of theland on May 7, 1947, which it was agreed was the relevant date. Theplaintiff appeals against this award, alleging that the figure is excessive.
The defendant-respondents have cross-appealed, contending that thelearned judge erred in not awarding, or ordering the plaintiff to pay,an additional 10 per cent, on the market value assessed as compensation,arguing that the provisions of section 38 of the Ordinance (Cap. 203)with regard to the payment of an additional 10 per cent, arc mandatoryand not merely discretionary.
Though the appeal was argued at great length, the grounds advancedby the learned Solicitor-General for disturbing the findings and conclusionof the District Court reduced themselves in effect to three, and may besummarized briefly as follows. First, it is urged that in assessing thecompensation the court erred in failing to appreciate and apply themethod of calculation expounded by the plaintiff's expert witness, theChief Valuer, Mr. Orr, who upon those calculations arrived at the figureof Rs. 1,200 per acre as the proper compensation payable for the landin dispute. Secondly, it is contended that the learned District Judgewrongly admitted in evidence certain documents, D7 and D12, whichset out the valuation of a witness not called, and that these documentsmaterially influenced him in rejecting the evidence of Mr. Orr. Thirdly,it is contended that in estimating the market value of the land the courtwrongly ignored a document, Pll, which set out a list of prices said tohave been paid for other coconut estates at recent sales in the neighbour-hood.
Mr. Orr was a valuer with the highest qualifications, reputation andexperience in valuing town properties, though he admitted to knowinglittle or nothing about coconut estates. The method of calculationapplied by Mr. Orr was the method commonly and rightly applied inestimating the present value of a land in a case where its owner willfor a limited defined period be able and entitled to receive from the pro-perty an annual income of an amount less than that which he will expectto receive when that period has come to an end. This method is employedin oases where the property is, for the defined period, subject to a leaseholdor to an annuity in favour of the landlord, followed by a reversion of the
WINDHAM J.~ ptrera (<?. A., N. W. P.) v. Fernanda
125
freehold to the landlord whercundor the annual yield of the propertyto him will become unfettered. In such oases the annual yield of the pro-perty to him during the period of the lease or annuity will be limited tothe amount of the rental under the lease or the amount of the annuity,and such amount will constitute the maximum income derivable by himfrom the property during the limited period, after which the deferredincome, being the highest annual value which he might expect to obtain,will become the criterion upon which the market value of the land willbe computed. In such a case, the present value, to the owner, of thelimited annual income (i.e., maximum obtainable income) for the definedperiod is added to the present value of the reversion in perpetuity, basedon the highest annual value of the land which he will expect to obtainon the reversion to him of the freehold at the end of the defined period.The result will be the present value of the land. These actuarial values,which may be worked out mathematically if somewhat laboriously, areinstantly ascertainable by reference to Parry’s Tables, once given theamount of the maximum annual yield during the defined period and thehighest annual value expected to be thereafter obtained during thereversionary period.
Applying tho above method to the present case, Mr. Orr arrived at afigure of Rs. 1,200*81, as the present value per acre of the coconut landin dispute. But in my view, mathematically correct as Mr. Orr’s calcu-lations may have been, he was wrong in applying the above methodto the present case. In applying it, ho took as the defined period oflimited and maximum income (corresponding to the term of the leasein the example that we have been considering) the period of 3£ years.This he did by reason of a contract which was entered into between theGovernments of Ceylon and of the United Kingdom for the sale to theUnited Kingdom, at a guaranteed price, of the entire exportable surplusof copra and coconut oil produced in Covlon. This contract was originallyentered into in 1942 for a period of three years expiring on 31st December,1945 ; but it was renewed for a further period of five years from 1stJanuary, 1946, to 31st December, 1950. The period of 3$ years wastaken by Mr. Orr beoause that was approximately the period from 7thMay, 1947, as at which date the value of the land had to be calculated,and 31st December, 1950, whon the United Kingdom contract was dueto expire. Under this contract tho price guaranteed by the UnitedKingdom for copra sold to them under the contract was at the relevantdate (7th May, 1947) Rs. 125 per candy. It was not disputed at thetrial that this Rs. 125 would represent a price to the producer, ex-estate,of Rs. 120 per candy, and it was this price of Rs. 120 per candy whichMr. Orr adopted, in his calculations, as being the maximum price obtain-able during the remaining 3£ yoars (approximately) which the UnitedKingdom contract had to run. Upon this assumption, and makinguse of Parry’s Tables to ascertain the “ yearly purchase ” figure, he madehis calculation of the present value of the coconut estate for that 3|-yearperiod, which worked out to Rs. 446*42 per acre, taking the annualprofit per candy as Rs. 60, i.e., Rs. 120 guaranteed price, less Rs. 60, costof production. He then calculated the present value of the “ rever-sionary ” interest in perpetuity, i.e., the interest as from the expiry of
m
WINDHAM J.—Perera {0. .4., A'. IT. P.) v. Fernando
the Unitod Kingdom contract in (approximately) 3£ years’ time. Forthis purpose he assumed (upon inadequate grounds as I shall show) thatfrom that time onwards the annual profit per candy would be onlyRs. 40 ; that is to say, he assumed that the price of copra would dropconsiderably after the expiry of the Unitod Kingdom contract. Calcu-lating on this basis he worked out the present value of the “ reversionary ”interest at Rs. 754*39 per acre. Adding this to tbo Rs. 446*42 per acrealready calculated for the 3^-year period of the contract, he reachedthe result of Rs. 1,200*81 as the present value of the property per acre.
Now this method of calculating the present market value of propertyby dividing perpetuity into two periods, namely, (a) an initial definedperiod of fixed diminished income, and (6) the reversionary period, i.e.,perpetuity minus that defined period, was, as I have said, wronglyapplied in my view to the present case: and for this reason—that itsapplication was based ou a fabaoy. The fallacy was the wrongfulassumption that the annual income which could be derived from a coconutestate during the 3J years for which the United Kingdom contract hadto run was limited to and governed entirely by the price guaranteedfor copra under that contract. And so it would have been if the contracthad applied to all produce of the coconut property, whether in the formof copra or otherwise, and if the owner had been prohibited from sellingany such produce to any ot her person, at any other price, than to theUnited Kingdom (through the Government of Ceylon) at the priceguaranteed for copra and coconut oil in the United Kingdom contract.Had such berm the case, then it may well be (though I do not decidethe point) that Mr. Orris method of calculation would have been theappropriate one. For there would then, during the 3$ years, have beena fixed maximum price for the produce of the land. And it is of theessenoe of this method of calculation that during the limited period thereshould be a fixed maximum annua) return from the properly, as therewould be if the landlord were during that period entitled to receivenothing more than a rental from the land or an annuity charged on it.This is made clear from a perusal of Cripps on Compensation, 8th edition,at page 188, where the method is explained. Whether sueh fixed maxi*mum return is at tho same time a fixed minimum return, as it would beiu the case of a rental or annuity, is immaterial.
The position, however, is very different in tho present ruse. Forthere was nothing in the contract between the Governments of Ceylonand the United Kingdom, nor any prohibitive legislation, to preventthe owner of a coconut estate from selling fresh coconuts or desiccatedcoconut wheresoever he wished, whether in Ceylon or outside it, and atwhatsoever price ho could fetch, subject lo obtaining a formal licenceto do so, since the contract was confined to copra and coconut oil. Norwas there even any obligation on an owner to sell his copra or coconutoil to the Government of Ceylon for export to the United Kingdom atthe guaranteed price ; for there was no legislation compelling him tosell copra to the Government of Ceylon at all, and tho United Kingdomcontract provided merely for the sale to the United Kingdom of allexportable surplus of copra or coconut oil. Nor was there any evidenceadduced that the price guaranteed under the contract was a higher
WINDHAM J.—Perera (G. A., N. W. P-) v. Fernando
127
price than an.owner might expect for copra or oil sold internally, orfor fresh or desiccated coconuts sold internally or externally, duringthe period of the contract-.
In short, the United Kingdom contract was not the only factor regula-ting or relevant to the annual yield which might be expected from thecoc onut property while it remained in force, and the price for copra fixedunder it was a guaranteed minimum price for the produce of the landrather than a fixed, maximum. For this reason alone 1 consider that themethod of calculation applied by Mr. Orr was wrongly applied, and thatthe learned judge did not err in declining to adopt the valuation figure,Rs. 1,200 per acre, calculated by it. The same objection attaches tothe evidence and calculations of Mr. Spencer Schrader, the other expertcalled by the plaintiff, who likewise assessed on the basis of an initial3 £-year period, upon the assumption that the guaranteed price for copraunder the United Kingdom contract was the maximum price obtainablefor the produce of t he property during that period, and that prices wouldfall thereafter. His estimate was Rs. 1,300 per acre.
There were other erroneous assumptions made by Mr. Orr in workinghis calculations which likewise made them of dubious value, for examplehis assumption, which I havo already mentioned, that the price of coprawould drop upon the expiry of the United Kingdom contract, whichopinion was based on what he (who admittedly knew nothing aboutcoconuts) had been told by persons who were not called as witnesses,thereby not only depriving it of the weight which might have beenattached to it as expert opinion, but rendering it objectionable as hearsay.But the earlier fallacy was alone sufficient to justify the learned judgein rejecting his method of calculation.
It has been contended by the learned Solicitor-General that the trialin the District Court was conducted throughout on the footing that themarket value in May, 1947, of coconut estates in general, and of theArampola Estate in particular, was governed entirely by the price guaran-teed for copra under the United Kingdom contract; and certainly therepeated reference in questions put by counsel, and in all the evidence,to prices “ per candy ” (a copra measure), and the absence from Counsel’squestions, witnesses’ evidence, and from tho judgment itself, of anyreference to the price obtainable for fresh or desiccated coconuts, wouldseem to indicate that such may have been the case. But if so, then theCrown was in error in assuming this wrong basis for its calculations.And if tho calculations of the Crown’s export were unacceptable (as theywore) because he overlooked certain important factors, of which the chiefwas the fresh and desiccated coconut market, the fact that everybodyelse had overlooked those factors would not make the calculations anyle3S unacceptable, and would not render the trial judge’s rejection ofthorn a wrongful rejection. Moreover it would in my view be inequitableto allow the Crown, after the exceedingly protracted and expensive trialin the District Court, and now that it has felt the pinch of t he case, tosucceed through its own lack of competence in presenting its case below,in having the re-trial which it seeks, thereby enabling it in a secondattempt to present its case more adequately and upon a proper basis.
126
WINDHAM J.—Perevn (G. A.. .V. IF. /’.) v. Fernando
That renders it unnecessary to consider at any length the second mainground of the appeal as argued before us, which was that the learnedjudge erred in admitting in evidence a written valuation report, 1)7,valuing the land in dispute as at the 18th September, 1946, and a letter,D14, confirming that report. Both were written by a Mr. Schoknian,Mr. Orr’s assistant as Government Valuer, who was not called as a witness,and who has since died. It was agreed by the parties and by the courtthat, while the documents should be marked, they should not be admittedor relied on as evidence unless Mr. Schokman was called. On a carefulperusal of the judgment I am satisfied that the learned judge did notrely on the substance of Mr. Schokman’s valuation in arriving at hisown assessment of compensation, but that it was one of the factors whichinfluenced him in rejecting Mr. Orr’s evidence and valuation. Since,however, Mr. Orr’s method of valuation in any case fails on its owndemerits, as I have shown, and not merely through any comparison withthat, of Mr. Schokman, I hold that although those documents D7 andD12 were wrongly admitted in evidence, ns in my view' they were byreason of the non-calling of Mr. Schokman, thoir admission is not suchas will afford a ground of appeal, in view of the provisions of section 167of the Evidence Ordinance. For the burden is now' on the Crown toshow that Mr. Orr’s valuation ought to Imvc been accepted, and It isnot sufficient merely to show that it was rejected for wrong or inadmissiblereasons.
The third ground of appeal which has been pressed by the learnedSolicitor-General is that, in deciding upon the present market value ofthe coconut property, the court erred in not taking into consideration,as admittedly it did not take into consideration, a document producedby Mr. Orr, t?ll, which set out a list of prices said to have boon paid forother coconut ostatos at contemporary or near-contemporary sales inthe neighbourhood, none of which prices was more than about Rs. 1,200per acre. Now it is well settled law that evidence of recent salcw in thevicinity, if proporly adduced, is an important test in deciding upon themarket value, provided that such sales wore of property similarly'situated;soe Government Agent, Southern Province v. Silva1, GovernmentAgent v. Perera2, Stevens v. Munasinghe3. To this I wouldadd that the sales must bo shown to have been by a willing sellerto a willing buyer, and that in the case certainly of coconut estates theother properties must be shown to be, at leaxt approximately, in the samecondition and state of preservation, and plunted with coconuts to thesame percentage of their area, as the property in question, in order thatthe prices which they fetched should be any indication of the fair marketprice for the property in question.
In the present case, however, the list PI l was produced by Mr. Orrwithout his giving any explanation of the sources from which he derivedthe particulars which it contained. In producing it he merely said—“ I produce a statement marked Pll giving sales of cooonut propertiesover 100 acres in extent ”. It is true that there was no objection to itsproduction on the part, of Counsel for the defence ; but that cannot be»3 X. L. H. 235.• {1903) 7 X. L. R. 313.
8 {1941) 42 N. L, R. 446
WINDHAM J.— I’erera {G. A., N, IF. IJ.) v, h'emctrulo
129
taken as an admission that the sales wore free and that the condition andthe other above-mentioned particulars of tho properties to which itrelated were approximately the same as those of tho Arampola propertyin the present case ; for the list itself contained nothing to indicatethese things. Tho list PI l did, it is true, set out that this same Arampolaproperty had been sold on a previous occasion for only Rs. 612 per aero;but oven if the entire contents of Pll had not been pure hearsay, thisitem would have been of little value as a test for the present marketprice, for it contained no particulars to show whether that sale was afroe one, and tho sale had taken place in April, 1944, more than threeyears before May, 1947, at a time when on uncontradicted evidencecoconut properties wero fetching far less. Indeed, from the very widedivergence of prices per acre for the various properties set out in thelist it would appear rather that the circumstances of those sales, or thecondition of the properties, differed considerably from one another,and therefore could not all have been the same as in the present case.
Not only did Mr. Orr, who admitted that he knew nothing whateverabout coconuts himself, produce this list Pll “ out of the blue ”, butneither he nor any other witness gave any first-hand evidence withregard to the sale of the properties to which it related, nor was anywitness called who had even inspected those properties. Such evidenceought to have boon called by the Crown if they sought to place anyreliance on Pll as affording evidence of neighbouring sales by whichtho present market prioe Bhould bo tested. As was observed in In reDhanjibhoy Bomanjil, cited in Donogh’s Land Acquisition and Compensa-tion, 2nd ed. at page 96.—“ The proper way to deal with a number ofinstances of sales is to pick out those which relate to land approximatelysimilar to tho land to be valued, and then carefully sift the circumstancessurrounding each instance ”. In the present case the circumstanceswere not oven adduced, still less sifted. For these reasons 1 hold that thelearned trial judge rightly ignored the contents of the document Pllin arriving at his estimate of the market value of the property in dispute.And to remit the case in order to onable the Crown to prove properlythe contents of Pll and the nature of the sales and of tho propertiesto which it relates, would be open to the same objections as I have setout earlier when considering the question of remitting after the pinchof the case has been felt. I would observe finally that not tho leastunsatisfactory feature of Mr. Orr’s estimate of the market value of theArampola Estate in May, 1947, was his admission in evidence that “ thedata on Pll was also of assistance to me in my valuation”; thoughperhaps the fault was not so much his in relying on it as the Crown'sin failing properly to strove it or test its value as evidence.
Having now dealt with the grounds on which it is contended that thelearned trial judge, in assessing the market value of the coconut property,wrongly failed to act on certain ovidence tendered by tho Crown, I willturn to consider briefly whether the estimate which he did reach oughtto be interfered with. In brief, the learned judge, rejecting Mr. Orr’smethod of making separate valuations for a 3$-year period and a rever-sionary period, adopted tho method which has, it would seem, always1 10 Bom. b. R. p. 712.
»•—J.H. AMMSUIMW
130
WINDHAM J.—Ptrtru ii. A., A. 11'. IJ.) r. Fernando
been applied in Ceylon hitherto in the valuation of coconut estates ;that is to say, he assessed the annual profits of the land on the footing ofthe price current at the date of valuation (May, 1947) and multipliedit by the “ years’ purchase ” in order to obtain the market value of theland. A “ years’ purchase ” being 100 divided by the rate per eont.which a reasonable purchaser might expect as annual profit from theland, and it being agreed that U) per cent, was that rate, the “years’purchase ” amounted to 10. rrhis method was in my view the correctone, since for the reasons I have given earlier there was no special principleof assessment to bo applied in the present case, such as Mr. Orr soughtto apply. It is stated in Cripps on Compensation, 8th ed. at page 187,that—“ Whore no special principle has to be applied, the purchase-money payable to an owner of an ostate in fee simple, for lands of whichhe is in possession, is ascertained by multiplying the highest annualvalue which ho might oxpect to obtain from such land by the numberof years’ purchase which the special circumstances require ”.
The loomed trial judge, upon evidence and calculations with whichI see no grounds to interfere, estimated that the property would yield1,707 candies of copra per year, and that, at the current price of Rs. 125per candy (i.o., under the UnitcdKingdom contract) the producer wouldreceive a nett profit of Rs. 68:50 per candy. Having ascertained thesefigures he simply multiplied 1,767 by 68*50 to get the annual profits,and then multiplied this by 10 (the “ years’ purchase ’’ figure) to arriveat the market value of the land, which came to Rs. 1,210,895. Thisworked out at the Rs. 1,802 j»er acre which is the rate of compensationagainst which the plaintiff appeals.
The learned judge summarized his conclusions, and indicated thereliance which he placed upon the evidence of various witnesses regardingthe future prospects of coconut properties, in the following passage fromhis judgment“ When the price of copra has been fixed by agreementat Rs. 125 as in this case till the. end of 1950, I sec no reason why thesame formula” (i.o., multiplying the present estimates! annual profitsby 10) “ should not be adopted unless there be some definite evidencebefore court to show that price would vary and vary considerably. Fromthe expert evideuceof Mr. idoyd, which I accept, it appears to be highlyprobable that the price is not likely to come down below* Rs. 125 till atleast 1956. Dr. Child, the Crown export, is unable to give the coconutprice after 1950. Mr. Wilkins, a proprietary planter of repute againstwhoso integrity nothing has been said, is confident of the future of coprathat the price will keep to over Rs. 125 even long after the oxpiry of thecontract. Mr. Steuarttoois of t he name opinion. It is only Mr. Schraderwho has got a very pessimistic view of tho future. I reject his prophecyof tho future and hold that it is fairer to calculate the value of tho coconutarea on tho footing of tho present price as the prosj>ects are, if anything,only brighter in the future. Though Mr. Steuart has calculated 12 yearsprofits as tho purchase price, on account of tho substantial nature of thebuildings on this land, I think I would rather accept the JO.yenr principleand fix the price of tho coconut area at Rs. 1,210,395, i.e., 1,767 x 68*50X 10”.
WINDHAM J.—Percra (<?. A., -V. IF. P.) «. Fernando
131
I am unable to hold that the above estimates and conclusions of thelearned judge were wrong. Compensation under the Land AcquisitionOrdinance must be based on the market value of the property, and•• market value ” has been held by the Privy Council to be “ the pricewhich a willing vendor might be expected to obtain in the open marketfrom a willing purchaser.” : Municipal Council of Colombo o. K. M. N. S.
P.Letchiman ChettiarL And tho price will be estimated havingin view the future potentialities of the land: South Eastern Rail Co.u. London County Council2 ; that is to say, the present value ofthe future prospects of the laud should be taken into account. Whatthoso future prospects arc cannot, of course, be more than a matterof opinion. But the learned judge was in my view quite justified inaccepting the opinions of those witnesses who were optimistic aboutthe price of copra after 1950, in particular that of Mr. Lloyd, who asManaging Director of Lever Brothers, Coylou, Ltd., was highly qualifiedto speak on the prospects of the world market in vegetable oils, and inrejecting the opinion of the more pessimistic Mr. Schrader. It may bethat a “ willing purchaser ” should be a prudent one ; but prudence isnot always to be identified with pessimism. If the carefully reasonedanticipations of an expert like Mr. Lloyd led to optimism, a prudentpurchaser might well act on them, and might well assume that priceswould not fall even after 1956, which was the latest year to whichMr. Lloyd could prophesy with confidence. In short the learned judgewas justified in basing his whole assessment on the 1947 “ peak ” priceguaranteed for copra, upon the view of an expert that that peak pricewould be maintained at least until 1956, or even exceeded. This viewwas corroborated by the exports Galled for the defence, Mr. Wilkins andMr. Steuart, long-headed planters both of them, with practical experienceof valuing coconut properties and of the coconut market. Their ownassessments of the market value of the property in dispute, it may boobserved, were respectively Rs. 2,128 and Rs. 2,392 per acre, estimatesconsiderably in excess of the Rs. 1,802 awarded by the court. It is alsqto be observed that the figures estimated by the plaintiff’s and the defen-dants’ assessors, respectively, before the trial, were Rs. 1,840 and Rs. 1,894per acre, figures likewise in excess of that arrived at by the court..
The court itself, in assessing the market value, appears to have hadin view only the copra market, and not the market for fresh or desiccatedcoconut; indeed no evidence was tendered regarding the latter. Sincehowever, the guaranteed price of Rs. 125 per candy in the export copramarket (which price was held not to he likely to fall after the lapse of thoguarantee) was always available for all the produce of the property, itrepresented a guaranteed minimum, so that the learned judge’s estimatecould not have been leas, and might have been more, had there beenbefore him evidence regarding tho present price and future prospects offresh and desiccated coconut and had he taken such evidence into account.The plaintiff’s appeal, which alleges the assessment of the court to betoo high, cannot therefore be allowed on this ground, which I havealready touched upon earlier in this judgment; and the defendant doesnot in his cross-appeal allege that the figure is too low.
1 (1947) 48 N. L. It, !)7*{1915) Z Oh. 252.
WINDHAM J.—Fe.ma (0. A., X. !l'. P.) r. Fernando
For all those reasons the appeal must be dismissed.
It remains to consider the cross*appeal. The point advanced by thedefendants in the cross-appeal is that, the learned District Judge erredin not awarding to the defendants, or ordering the plain! iff (GovernmentAgent) to pay to thorn, 10 per cent, of the market value assessed by thecourt as compensation, thoir contention being that the provisions ofsection 38 of the Land Acquisition Ordinance (Cap. 203) with regard tothe payment of an additional 10 per cent, are mandatory and not merelydiscretionary. Section 38 reads as follows :—
“ 38. In addition to the amount of compensation finally awarded,the Government Agent may, in consideration of the compulsorynature of the acquisition, pay ten per centum of the market valuementioned in section 21. When the amount of such compensationis not paid either to the persons interested or into court on takingpossession, the Government Agent- shall pay the amount awarded andthe said percentage with interest on such amount and percentage atthe rate of six per centum per annum from the time of so takingpossession:
Provided, however, that the costs (if any) payable to the GovernmentAgent by the person interested shall be deducted from such amountand percentage;
Provided also that in cases where the decision of the District Courtis liable to appeal, the Government Agent shall not pay the amountof compensation or the percentage, or any part thereof, until thetime for appealing against such decision has expired and no appealshall have been presented against such decision, or until any suchappeal shall have been disposed of ”,
Now prima facie, the word “ may ” in the second lino of section 38 meanswhat it says, namely that the Government Agent shall have a discretionwhether or not to award an additional ten per cent. ; otherwise theword “ shall” would have been used, as (significantly) it was used inGhe Indian legislation upon which section 38 was modelled. Learnedcounsel for the defendants, however, points to the ensuing words ‘‘ inconsideration of the compulsory nature of the acquisition ”, and to theprovision a little further on that where the compensation is not paidupon the Government’s taking possession the Government Agent “ shallpay the amount awarded and the. mid percentage ”. These words, heargues, coupled with the absenco of the words “ if any” after the words“ the said percentage ”, or after the word “percentage ” in the firstand second provisos to the section, rebut the presumption that the word“ may ” is discrotionary only. If the word confers a discretion only,and not a duty, then the effect of the section, he contends, would be tocreate a liability to pay interest on the ten per cent, as from the date oftaking possession, although the Government Agent need not exercisebis discretion to pay the ten por cent, at all until long after that' date.Certainly the section is not too happily drafted, and the amendmentsconsequential upon the substitution of “ may ” for the “shall” appear-ing in the Indian model do not .appear to have been too well thought out.Nevertheless I cannot find anything iu it which would be sufficient toxebut- the presumption that “may” means “may”. Clearly, in the
WINDHAM J.—Ptrera ((7. .4., N. IF. P.) v. Fernando
133
context of the section, the words “ if any ” <uo to bo implied after alltho later references to the percentage, Nor do I find anything in theOrdinance which would justify the construing.of the expression “ may ”as conferring a power coupled with a duty on any of the grounds uponwhich it was held in Julius v. Lord Bishop of Oxford1 that such anexpression may properly be so construed. In particular, no right isconferred upon the defendants elsewhere in. tho Ordinance to claim thefen per cent, on the compensation, such as is conferred upon them toclaim the compensation itself, and such as might have necessitated thoprovision of section 38 being construed to confer on t he Government'Agent a power coupled with a duty.
I read section 38 as conferring upon the Government Agent a discretion,not a duty, to award an additional ten per cent, on tho market valueof the property finally awarded; though like all discretions, it shouldnot be oxerciscd arbitrarily or capriciously. In the present case thoGovernment Agent did offer to the defendants an additional ten per cent,on tho sum which ho offered as compensation, provided they acceptedthat sum and did not bring the matter to court. The defendants refusedthe compensation offered, and the matter came to court. It followsthat whore the Government Agent and the claimants cannot agree uponthe compensation out of court, the ten per cent, cannot be awarded—because the compensation itself will not be Anally awarded—until theDistrict Court, oi in the ovent of an appeal the Supreme Court, or eveuthe Privy Council, has fixed the compensation see .Ellis v, Fernando2.Furthermore, since under section 38 it is only the GovernmentAgent who is empowered to award the additional ten per cent, on thecompensation, such power being nowhere conferred upon the DistrictCourt, I agree with the learned District Judge when he held in the presentcase that he had no jurisdiction to award the ten per cent, or to orderthe Government Agent, to pay it. No more, therefore, would this Courthave such power, upon an appeal from u judgment of the District Court.This point was so decided in an unreported two-judge decision (Bonser
J. presiding) Government Agent, W. P, v. Stork and another, recordedin the Supreme Court Minutes dated 14th November, 1898, with whichI respectfully concur,
The interpretation which I have placed upon the word “ may ” insection 38 has also the authority of precedent. It was held in Dias r.Elli,a, after consideration of some of the arguments advanced before us,that section 38 confers npon the Government Agent a discretion only,and not a duty, with regard to the payment of the ten per cent, of themarket price. The same view was taken in Government Agent, Kandy, v.Marikar Saibo4, in a judgment which was overruled by the Privy Councilbut not on that, point. I think tho matter can admit of no reasonabledoubt.
The cross-appeal is accordingly dismissed. In the result, both theappeal and the cross-appeal having failed, there will be no order for costsin the hearing before us. The judgment of the District Court is affirmed.Dfas J.—I entirely agree and have nothing to add.
Appeal and cross-appeal dismiss >1.
1-5 App.j Cast*, 214.
8 (jm) o a. l. r. m.
2 (VJ05) 7 X. L. R. 1! !.
4 (P>U) n s. j). ;u:,