T. V. SIRIWARDENA, Appellant, and Mrs. WIJENAIKE and another, Respondents

058-NLR-NLR-V-75-T.-V.-SIRIWARDENA-Appellant-and-Mrs.-WIJENAIKE-and-another-Respondents.pdf


WIJAYATILAKE, J.—Siriwardena v. Wijenaike827
1972Present: Wijayatilake, J.
T.V. SIRIWARDENA, Appellant, and Mrs. WIJENAIKEand another, Respondents
S. C. 186/67—C. R. Ealutara, 5927
Landlord and tenant—Annual value of premises let—Method or methods for computationof it—Urban Councils Ordinance (Cap. 255), s. 66—Municipal CouncilsOrdinance (Cap. 252), es.- 233, 253-243, 327.
At a time when there was a phenomenal and temporary scarcity of premisesas a result of the demolition of many buildings in an Urban Council area forroad expansion, a tenant agreed to pay a sum of Be. 300 as the monthly rentalfor certain premises in the locality for a period of three years commencing on1st January, 1664. Admittedly the rent was exorbitant and the tenant wascompelled to pay it owing to his dire need.
Held, that, in assessing for the year 1B64 the annual value of the premisesin terms of the definition of “ annual value ” in Bection 327 of the MunicipalCouncils Ordinance, the dire circumstances in which an imaginary tenant wasplaced could be taken into consideration. Accordingly the annual valueshould be assessed on the basis of the rental which an imaginary tenantwould reasonably agree to pay. In the present case the rental of Rs. 300 permonth was reasonable.
A.PPEAL from a judgment of the Court of Requests, Kalutara.
O.Ranganathan, Q.C., with L. T. Andradi, for the 2nd defendant-appellant.
W. Jayewariene, Q.C., with L. C. Seneviratne and Sen Eliyatamby,for the plaintiff-respondent.
1st defendant-respondent absent and unrepresented.
Cur. adv. vuU.
February 9, 1972. Wijayatilake, J.—
In this action the question arose with regard to the annual value ofpremises No. 593 Main Street, Kalutara, which had been finally fixed bythe Urban Council at Rs. 1,858/- in the year 1964. The plaintiff aventhat the Urban Council has under-assessed the annual value. The U. C.had in 1964 originally assessed the annual value at Rs. 2,123/- and theplaintiff had objected to this assessment on the grounds set out in P 4dated 10.12.64 and prayed for an increase in the value to at leastRs. 3,300/-. The grounds set out are as follows:—
These premises constitute portion of a new building constructed
at a very high cost.
Floor-area nearly 1,000 square, feet, provided with an arcade.
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WIJAYATILAKE, J.—Siriwardenu v. Wijenaike
Provision of water service, drainage and shower baths. Well
and electric motor.
Permanent fixtures at the instance of the 2nd defendant tenant—
such as show cases, iron-leaf shutters.
Premises taken on rent by the 2nd defendant at Rs. 300/- per
month.
Premises in the heart of the town, on the main Colombo-Galle
Road opposite the bus stand and Court premises.
The 2nd defendant-appellant who is the tenant of these premises setout his objections in 2D1 of 2.12.64. He submits that the annual valueof Rs. 2,123/- has been fixed on an estimated monthly rent of Rs. 200/-which is exorbitant and excessive when compared to the rents prevailingin the Kalutara Bazaar. Premises No. 595 which adjoins the shop hasbeen assessed on an estimated rent of Rs. 135/- per month. The floorarea of No. 593 is larger than No. 595 by only a few square feet. Bothpremises have the same amenities. In comparison a fair rental forNo. 593 would be Rs. 150/- per month,—also taking into considerationother premises in the vicinity—such as Milton Bake House (No. 611/A),West End Shop (No. 632), Cigar boutique (Nos. 604 & 653), CityPharmacy (No. 764) all at Main Street. He accordingly prays that theestimated rental be reduced from Rs. 200/- to Rs. 150/- a month.The U. C. inquired into these objections and reduced the annual value toRs. 1,858/-. The plaintiff filed the present action to have this order setaside and that an order he made that the annual value for 1964 shouldnot in any event be less than Rs. 2,123/-. The learned Commissioner ofRequests set aside the order of the U. C. and declared the assessment forthe year 1964 to be Rs. 3,240/-. Only the 2nd defendant who is thetenant of these premises has presented the instant appeal.
Mr. Ranganathan Q.C., submits that the learned Commissioner has failedto appreciate the relevant methods of valuation and he has summarilyrejected the expert findings of the valuers called by the appellant whoare familiar with the area in question and conversant with the variousmethods of valuation adopted in situations such as this. The plaintiffhas failed to call a single valuer in support. It may be noted that the
U.C. has not called any evidence at all.
The burden of the appellant’s theme is that the Commissioner hasrejected as irrelevant the “ dire need ” of the appellant at a time whenthere was a phenomenal and temporary scarcity of premises as a resultof the demolition of all the buildings abutting the entire Eastern side ofthe Colombo-Galle road. It is submitted that owing to his dire needthe appellant was compelled to pay as much as Rs. 300/-'rent per monthwhen he got into occupation of these premises as all the buildings on theEastern side of the road in this area were demolished ; but he contendsthat this was only an unexpected and temporary scarcity as new buildingssprang up with equal speed after the road widening and at the time ofthis valuation in 1964 the rental of premises in this area had come down
WIJAYATILAKE, J.—Siriwnrdtna v. Wijenaike
329
to its normal level. He accordingly pleads that the exorbitant rent ofRs. 300/- paid by him when he took over the premises should not formthe basis of the valuation—the dire need being of a temporary character.
It is common ground that a number of buildings situated on theEastern side of the Colombo-Galle road at Kalutara bazaar area weredemolished for road expansion and in consequence a number of peoplegot dehoused. The appellant is a trader in motor spare parts, iron ware,etc. He had started his business in 1941 on the Eastern side of theColombo-Galle road in the Bazaar area. These premises were acquiredfor road widening and had to be demolished. He had to vacate thepremises in 1901. He had no suitable alternative accommodation andhe had to find shelter in an unauthorised temporary shed of galvanisedsheet at Adams Street. The Chairman U. C. had threatened to prosecutehim. He had his stores partly at home and partly in this shed. At thisstage the plaintiff was putting up the premises No. 593 in question. Hewas in such dire need for accommodation that he was prepared to payany rent as he had no place to go to. He had accordingly arrangedwith the plaintiff to rent her premises for Rs. 300/- per month and wentinto occupation of the same. He even entered into an agreementP2, 28.11.63 by which he has rented out the premises on these terms fora period of 3 years commencing 1.1.64. According to P2 a sum ofRe. 900/- being 3 months’ rent had been paid at the execution of P2.Although this agreement provides for the tenancy to commence on
1.64 the appellant had got into occupation as soon as the plaintiff hadapproved of the arrangement.. He has also stated that he paid oneyear’s rent in advance as he was in such a desperate position.
The appellant is a man who has fared well in business and admittedlyin affluent circumstances, being the owner of a number of houses atKalutara. He has said that any place in Kalutara town would havebeen suitable for liis business! If so it is difficult to understand whyhe had made such a big sacrifice to the advantage of the plaintiff. Thereis nothing to show that he uas seeking to confer a favour on the plaintiff.Being a seasoned business man he was seeking his own advantage andobviously he had persuaded the plaintiff to rent out these premises asthey were in a prominent business area.
Mr. Ranganathan has very strenuously submitted that the shortageof premises in this area was for a brief period and it being of a temporarycharacter the “dire need” of this tenant is a relevant factor, the quantumof the rent paid by him being occasioned by this extraordinary situationhe had got into. He accordingly submits that the rental of Rs. 300/-cannot form-a standard for computation of the annual value and thereforethe valuers were correct in availing themselves of other methods ofcomputation in the peculiar circumstances of this case.
At this stage it would be appropriate to examine the statutory provisionunder our Law to ascertain whether any method or methods for thecomputation of the annual value have been set out. My attention has27 – Volume LXXV
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WIJAYATTLAKE, J.—Siriwardena v. Wijenaike
been drawn to section 166 of the Urban Councils Ordinance Vol. 9 Chapter255 which provides that the assessment of rates shall, with the necessarymodification be made in manner prescribed by section 235 of theMunicipal Councils Ordinance (Chapter 252) read with sections 233 and236 to 243 of the said Ordinance. In the latter Ordinance at section 327“Annual value” has been defined as follows:—
‘ ‘ In this Ordinance, unless the context otherwise requires—
"annual value ” means the annual rent which a tenant mightreasonably be expected, taking one year with another, to payfor any house, building, land, or tenement if the tenant under-took to pay all public rates and taxes and if the landlordundertook to bear the cost of repairs, maintenance andupkeep, if any, necessary to maintain the house, building,land, or tenement in a state to command that rent.”
In the light of the above provision the question does arise whetherwe could adopt any other standard for the computation of the annualvalue. Mr. Jayewardene, Q.C., submits that the learned Commissionerof Requests was quite correct when he held that the valuers had erredin adopting methods not contemplated in section 327. I am inclinedto agree with this view. However, I might state that in applying thestandard set out here one has to visualise what “ a tenant might reasonablybe expected, taking one year with another, to pay for any house, etc.” andthe U. C. is not precluded from taking into consideration any othermethods which may appear reasonable, in the circumstances, to ascertainwhat an imaginary tenant is likely to pay. But # entirely agree thatthe principal basis is the “annual rent”. Mr. Jayewardene furthersubmits that it is the annual rental which “atenant” might reasonablybe expected to pay and not what the particular tenant has in fact paid;so that the dire circumstances of the tenant in occupation would not berelevant. I am inclined to agree with this submission as the definitionin section 327 clearly speaks of an imaginary tenant. Otherwise, taxingauthorities will have to launch on voyages of discovery as to the respectivecircumstances of the tenants in occupation. This can lead to chaosnot to speak of corruption. The further question arises whether thedire circumstances in which an imaginary tenant seeks to rent outpremises are relevant. For instance, as in the instant case where awhole row of buildings had been demolished and several traders dehousedand perhaps driven to seek shelter on the pavements. I have givenmy anxious consideration to this vital question and I am of the viewthat such dire circumstances could be taken into consideration in assessingthe annual rental an imaginary tenant would reasonably agree to pay.
However, in the instant case although the buildings had been demolishednew buildings had sprung up with equal speed and there is nothing toshow that there was such a surplus of buildings that the demand had inany way lessened. Far from it, with tho widening of the road in thisbazaar area one could visualise even a greater demand by traders for
WIJAYATILAKE, J.—Siriwardena v. Wijenaike
331
premises. I am not at all satisfied that the demand for the new buildingswas only for a short period. Evidence has been led with regard to someof the other new buildings in the vicinity but as the learned Commissionerhas correctly pointed out those are all except No. 595 occupied by theowners themselves and therefore of little relevance as the owners couldhave set out a fictitious rental with a view to mitigating the rates. Asfor No. 595 the question of annual rent is in suit and pending adjudication.
One has to keep in mind the conspicuous fact that this is a commercialarea in a principal town in the Island and with the ever increasingpopulation the demand for business premises has shot up very' high.In the circumstances, the appellant should consider himself fortunateto have been able to persuade the plaintiff to select him as her firsttenant. Moreover, having come into occupation on a certain basis hieconduct in questioning the quantum of the rent seems to me lacking ingood faith and his evidence has to be assessed in this light. Furthermore,here is a wealthy trader with a number of houses in Kalutara and he hasadmitted that he could very well carry on this particular business ofselling motor car spare parts and iron ware in any other part of Kalutara.In the circumstances, I entirely agree with the Commissioner in hisassessment of the annual value on the basis of the monthly rental atRs. 300 per month which appears to me to be quite reasonable consideringall the amenities provided by the landlady at considerable expense toher, particularly in these times when the cost of building constructionis so high. The fact that the appellant entered into a 3 year agreementis very pertinent in this context. Surely, if it was only a temporarypredicament a businessman of the appellant’s experience would hardlyhave been a party to this agreement.
In coming to the above conclusions I have been mindful of the principlesset out in the following cases relied on by learned counsel :—
Bank of Cheltinad v. Municipal Council of Colombo, 55 N.L.R. 361 ;
Abeysekera v. The Colombo Municipality, 42 N.L.R. 237 ;
Kundanmals Ltd. v. The Municipal Council of Colombo, 71 N.L.R. 313 ;
Robinson Brothers (Brewers) Ltd. v. Houghton and Chester-le-StreetAssessment Committee, 2 A.E.R. (H.L.) (1938) 79 ; 2 A.E.R.(C.A.) 298;
Consett Iron Co. Ltd. v. Durham (Noiih-Westem Area) AssessmentCommittee, A.E.R. (1931 reprint) (H.L.) 62 ;
The Metropolitan Board of Works v. The Overseers of Westham, L.R.(Q.B.D.) Vol. VI (1870-71) 193 ;
SheR-Mex tfc B. P. Ltd. v. Langley (Valuation officer), A.E.R. Vol. 3(1962) C.A. 433;
and Halsbury’s Laws of England (Simonds), Vol. 32, page 67.The relevant passages in Halsbury are at paragraphs 94 : “Althoughthe tenant is assumed to take the hereditament only from year to year,he is Buppcsed to have a reasonable prospect of continuing in occupation”,and 96 ; “ The hypothetical tenant includes all persons who might possibly
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vVIJAYATILAKE, J.—Siriwardena v. Wijenaike
take the hereditament, including the person actually in occupation,even though he happens to be the owner of the hereditament. Therent is that which he will pay in the “higgling of the market”, takinginto account all existing circumstances and relevant future needs. Ifthe hereditament affords the opportunity for the carrying on of a gainfultrade, that fact must be taken into account. If the occupier is the onlyhypothetical tenant, hiB ability to .pay iB a relevant consideration.”
In Bank of Chettinad v. Municipal Council of Colombo (supra) Gratiaen
J.and Gunasekara J. held that, “when the annual value of a house isassessed for rating purposes, the owner may, under section 236 (1) of theMunicipal Councils Ordinance, institute an action against the MunicipalCouncil to have the annual value increased so that the premises may betaken outside the scope of the Rent Restriction Act.” In the instantcase too the object of the plaintiff landlady is obviously to take thepremises outside the Act and the object of the 2nd defendant-tenantto bring the premises within the Act. Therefore in assessing the evidencein this case one has to keep this constantly in mind.
Gratiaen J. and Gunasekara J. in the above case further held that,“ in assessing the annual value of premises which, at the time of assessment,are not rent-controlled, the proper test of ' annual value ’ as defined insection 325 (1) of the Municipal Councils Ordinance is what a man ofordinary prudence and foresight, who has duly advised himself as to thestate of the market existing at the relevant time, would offer to pay asrental for the premises rather than fail to obtain the tenancy. The testprescribed is concerned only with the reasonableness of the expectationthat a certain rent would be obtained in a commercial transaction ; the‘fairness’ of the bargain is irrelevant.”
In Abeysekera v. The Colombo Municipality (supra) Howard C.J. heldthat, “the value of property for purposes of assessment, where theowner and occupier are one, must be ascertained by determining therent a hypothetical tenant would give for the property. The burden ison the owner by the application of the profits’ or contractor’s basis ofassessment or by a comparison of his property with properties of a likenature to establish the annual value he claims to put upon the property.The ‘ profits ’ basis of assessment presupposes a calculation of the rentwhich would commend itself to a tenant upon an estimate of the profitsresulting from the occupation of the premises. The ‘ contractor’s ’ basisof assessment presupposes an estimate of the rent by references to theinterest which a contractor would expect for the money he had expendedin buying this land and erecting the buildings of which the premisesconsist.”
I approve of the assessment of the annual value on the basis of therental at Rs. 300 per month. Therefore, as the Commissioner has held,the annual value for 1964 should have been Rs. 300×12 less 10% fortaxes which wiil amount to Rs. 3,240.
I dismiss the Appeal with costs in favour of the plaintiff-respondent.
Appeal 4*smiseed,