THE CEYLON TURF CLUB v. THE COLOMBO MUNICIPAL COUNCIL

087-NLR-NLR-V-37-THE-CEYLON-TURF-CLUB-v.-THE-COLOMBO-MUNICIPAL-COUNCIL.pdf


Ceylon Turf Club v. Colombo Municipal Council.
393
1934
Present: Macdonell C.J. and Drieberg J.
THE CEYLON TURF CLUB v. THE COLOMBOMUNICIPAL COUNCIL.
144—D. C. Colombo, 36,953.
Assessment—Premises of Ceylon Turf Club—Basis of assessment—Value ofpremises to a hypothetical tenant as a racecourse—Revenue or profitbasis—Objection to assessment—Sufficiency—Ordinance No. 6 of 1910,s. 117 (2).
Where the plaintiff, the Ceylon Turf Club, lodged a written objectionto an assessment under section 117 (4) of the Municipal Councils Ordi-nance, viz., that the annual value was excessive and should be a specifiedlower amount,—
Held, the objection was sufficient to comply with the requirements ofsections 117 and 124 of the Ordinance,
The annual value of the premises of the Ceylon Turf Club should bedetermined on the basis that the property to be rated is a racecourseas a going concern and on what a hypothetical tenant would pay asrent for the property, intending to use it as a racecourse.
Anything necessary for the repair, maintenance, and upkeep of theracecourse it would be the landlord’s duty to provide as part of itsequipment and would be part of the property to be rated.
The property would have to be rated on the revenue or profits basis.The plaintiff Club would have to be considered as itself a possibletenant of its own enterprise in estimating what rent a tenant would pay.
In computing the rent, allowance must be made for rates and taxesdue by the tenant, interest on capital required by him, and the profitswhich he may expect to realize on the undertaking.
HE plaintiffs, as trustees of the Ceylon Turf Club, instituted this
X action against the defendant, the Municipal Council, Colombo,praying that the annual value of the Club’s premises be reduced fromRs. 364,000 to Rs. 295,000. Under the Municipal Councils Ordinance thedefendant caused the premises of the Club to be assessed for the year 1929at an annual value of Rs. 370,000 and gave notice of the assessment toplaintiffs on February 7, 1929. The plaintiffs on March 4, 1929, furnishedto the defendant a statement in writing of their grounds of objection, viz.,that the assessment was excessive and that the annual value should beRs. 265,500. The Chairman of the Council held an inquiry under section117 (6) of the Ordinance and as a result reduced the annual value toRs. 364,000.
The learned District Judge dismissed the action on a preliminaryobjection that the plaintiffs had not furnished adequate grounds ofobjection under section 117 of the Ordinance. He also held that thevaluation was not excessive and that the action should be dismissed onthat ground too.
H. V. Perera (with him J. R. V. Ferdinands).—The District Judgewas wrong in dismissing the action on the preliminary point that theaction was not maintainable as the plaintiff had not lodged a sufficient“ written objection to the assessment ” The Club did not merely object
T
394
Ceylon Turf Club v. Colombo Municipal Council.
simpliciter; the Club stated the ground of its objection, to wit, “on theground of its being excessive and not in accordance with the actual annualvalue thereof”; that is a sufficient specific ground susceptible of onemeaning only. The District Judge has confused “ grounds for objections ”and “ reasons for the grounds of objection to say that the assessmentis “excessive” is “ a ground of objection"; if the objection proceededto add that the rental of the premises was only so many rupees then hewould be giving a reason, a fact to support his “ ground of objection
Both parties are agreed that the tenement in question is to be ratedon the revenue or profits basis and the problem then is to try to ascertainthe rent which a hypothetical tenant would pay, having regard to thedefinition of the term “ annual value ” in the Ordinance. The respondentseeks to maintain that the tenement to be rated is the racecourse as agoing concern intended to be used as a racecourse and contend on theauthority of Kirby’s Case 1 that all “ necessary adjuncts ” to the businessof rating must be taken into account as increasing the rateable value ofthe tenement.
Kirby’s Case (supra) is a peculiar case and has a very limited application;it cannot and does not lay down any general principle of rating lawbecause, if it did, then it must follow that as furniture is a necessaryadjunct to a residential house, the furniture should be taken into accounton ascertaining the rateable value of the house; we know that this is notthe case. It is not cited or referred to in any of the new editions of therecognized text-books, e.g., Ryde on Rating and Karstam on Rating, andRyde in his 5th Edition devotes many pages to examining and criticising thedicta in the case.
The words “ maintenance and upkeep ” in the Ordinance do notcontemplate or include, as the respondent would appear to contend,daily running expenditure of the racecourse, e.g., rolling of the course.Having regard to the evidence in the case, it would be absurd to expectthe hypothetical landlord of the racecourse to come on to the premisesday by day to keep the tract in condition, i.e., watered, rolled mowed, &c.,any more so than it would be for the landlord of a dwelling house to haveto give the normal daily attention to the garden, the tennis court, &c.All running expenses are tenant’s expenditure and should not be soughtto be allocated to the landlord as “maintenance or upkeep”. Could itbe suggested that polishing the floor, polishing the brass door, and windowfittings, &c., in a house fall on the landlord?
The whole of the expenditure incurred on the Nuwara Eliya courseshould be deducted because it is necessary to continue and have theNuwara Eliya course if the profits earned on the Colombo course are to bemaintained. The tenant must be prepared to make a loss on the NuwaraEliya course and the rent he will be prepared to pay for the Colombocourse must be influenced by the amount of money he will have to expendon the Nuwara Eliya course and the loss he' will make there. The factthat the Nuwara Eliya course.is separately rated is beside the point; theonly question is whether it will enter into the question of the amount ahypothetical tenant will be willing to offer for the Colombo racecourse.
i (190G) A. C. 43.
Ceylon Turf Club v. Colombo Municipal Council.
395
A. E. Keuneman (with him F. C. W. van Geyzel), for defendant, re-spondent.—It was not contended for the defendant Council in the Courtbelow nor is it now contended that the action was not maintainable forwant of a sufficient “ written objection to the assessment ” and we do notseek to support the judgment on that ground.
Annual value, as contemplated by Ordinance No. 6 of 1910, places onthe hypothetical landlord the burden of the cost of “ repairs, maintenance,and unkeep of the premises ” in a state to command the rent, and theperiod of the hyothetical tenancy is a year with a reasonable expectationof a renewal. It follows, then, that on the landlord must fall the expensesnecessary to keep the “ premises ” throughout the year in the conditionin which it was let. The “ premises ” in the present case is the Colomboracecourse fully equipped as a going concern intended to be used as suchand containing everything which makes it more fit for the purpose forwhich it is let—" rebus sic stantibus ”, The Queen v. Fletton'—and if inthe course of its normal user repairs, maintenance, and upkeep becomenecessary their cost must be borne by the landlord.
It is admitted that in rating the Colombo racecourse the correct methodto employ is the “ revenue ” or “ profits ” method—Regina v. V err all2Crawford v. Municipal Council of Colombo2. According to this methodannual value is assessed in relation to nett assessable profits and to arriveat these a deduction from gross income must be made for expenditurewhich legitimately falls on the tenant. No expenditure incurred by himfor repairs, maintenance, and upkeep can be deducted for that is preciselyexpenditure which the Ordinance says shall be bom by the landlord, andit matters not at all that in actual practice a landlord would not do it orthat the plaintiff would not take the tenancy under such conditions. Itis a principal of rating law that even the owner or the actual occupiermust be regarded as a hypothetical tenant willing to take the premisesunder the conditions of the statutory defintion—Regina v. School Board ofLondon ", London County Council v. Erith*. In the present case theplaintiffs’ claim is largely based on including in the allowable expenditureitems which are, statutorily, a landlord’s charge, e.g., repairing the trackafter racing or gallops, rolling, and cutting the turf.
The definition of annual value in the Ordinance is substantially thesame as that in section 4 of The Valuation of Property (Metropolis) Act,1869 *, and in section 1 of the Parochial Assessment Act, 1836, and the effectof the English cases on assessments under those Acts is that everything onthe premises which makes them more suitable for the purposes for whichthey are let enhances the rateable value and has to be repaired andmaintained by the landlord—The Tyne Boiler Works Case ’, Kirby v.Hunslet Union Assessment Committee ’—and it is submitted that wherea local Ordinance is substantially the same as an English Act our Courtswill follow the decisions of the Court of Appeal in England interpretingthe English Act—Trimble v. Hill". The fact that Kirby’s case is notreferred to in new editions of text-books on Rating is due to changesintroduced by theRatingandValuatipn Act. of 1925.
i (1861) 3 E. and E. 450 at465.*17 Q. B~ D. 738.7(1886)18Q. B. D. 81.
* (1875) 1 Q. B. D. 9.*(1893) A. C. 562.»(1906)A.C. 43.
3 14 N. L. R. 449.•32 A 33 Viet. C. 67.8(1879)5 A. C. 342.
396 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
The Nuwara Eliya course should not be considered at all in assessingthe Colombo course although the defendant -Council's Assessor has in factgiven the plaintiff allowances in respect of it. Assuming, however, thatit can be taken into account that can only be on the footing that withoutit the profits earned in Colombo would be diminished. This is purely aquestion of fact and on the evidence it is impossible to come to such aconclusion. The plaintiff’s claim on account of Nuwara Eliya is largelyfor capital expenditure which it is unreasonable to suppose would ever beundertaken by a tenant, for a year, of the Colombo course. It is sub-mitted that if the Nuwara Eliya course has to be taken into the reckoningthe plaintiff must be treated as taking it on the basis of the tenancy■contemplated by the Ordinance and entitled to the appropriate tenant’sallowances only and in fact these have already been made by the defendantin the assessment which is the subject of this appeal.
H. V. Perera, in reply.
Cur. adv. vult.
November 5, 1934. Macdonell C.J.—
The plaintiffs-appellant in this case are the trustees of the Ceylon TurfClub and the defendant-respondent is the Municipal Council of Colombo,acting in its capacity as the rating authority of Colombo under the powersgiven to it by the Municipal Councils Ordinance, No. 6 of 1910, Part X.
Under that Ordinance the defendant-respondent caused the premisesof the Colombo Turf Club to be assessed for the year 1929 at an annualvalue of Rs. 370,000 and caused notice of that assessment to be served'on the plaintiffs-appellant on February 7, 1929. The plaintiffs-appellanton March 4, 1929, that is within the month allowed them by section 117 (4)of the Ordinance, furnished to the defendent-respondent a statement inwriting of their grounds of objection to the assessment, to wit, that theassessment was excessive and that the annual value should be Rs. 265,500.Pursuant to this objection, the Chairman of the respondent Council heldan inquiry under section 117 (6) at which the plaintiffs-appellants wereduly represented, and as a result of the inquiry reduced the annual valueto Rs. 364,000. Thereupon the plaintiffs-appellant as trustees of theTurf Club instituted on March 3, 1930, the present action, praying that theannual value of the Club’s premises be reduced from Rs. 364,000 toRs. 295,000. It will be seen that by their prayer the plaintiffs admittedthat the annual value should be Rs. 30,000 more than they had at firstsaid that it should be. On or about January 16, 1931, the plaintiffs, atthe request of the defendant Council, furnished detailed statementsshowing how they arrived at the sum of Rs. 295,000. The defendantCouncil likewise furnished a detailed statement, P 15, showing how ithad arrived at the revised assessment of Rs. 364,000.
Plaint was filed on March 3, 1930, and answer on July 28, 1930. Thecase was tried in 1931, on February 13 and 14 and on March 10 and 11,and in 1932 on July 27 and 28 on August 31 and September 1. Noreason appears from the record why these intermissions were necessaryand they cannot have helped the persons concerned in the task of keepingfresh in their minds the complicated details of this case. Judgment wasdelivered on March 6, 1933, and the present appeal filed on March 16, 1933.
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council 397
In that judgment the learned District Judge dismissed plaintiff’s actionon a preliminary objection that the plaintiffs had not, as they should havedone under section 117, furnished adequate grounds of objection to theassessment, and that as section 124 (2) prevents a plaintiff from adducing“ evidence of any ground of objection which is not stated in his writtenobjection fo the Chairman ”, there was not, and could not be, any properground of objection before the Court which must dismiss the actionaccordingly. It is true, that the District Judge did thereafter in hisjudgment examine in detail the respective contentions of the parties andthat he concluded that the defendant’s valuation had not been excessiveand that consequently plaintiff’s action could be dismissed on that groundalso, but it was on the preliminary objection that he did actually dismissthe action.
It is necessary then to examine the preliminary objection under whichthe action was dismissed. The defendant’s task was to discover theannual value of the premises to be rated. “ Annual value ” is defined insection 3 of the Ordinance No. 6 of 1910, as follows: —
“ * Annual value ’ means the annual rent which a tenant mightreasonably be expected, taking one year with another, to pay for anyhouse, building, land, or tenement if the tenant undertook to pay allpublic rates and taxes, and if the landlord undertook to bear the costof repairs, maintenance, and upkeep, if any, necessary to maintainthe house, building, land, or tenement in a state to command thatrent. Provided that in the computation and assessment of annualvalue no allowance or reduction shall be made for any period ofnon-tenancy whatsoever.”
The defendants calculated the annual value and then furnished to theplaintiffs the form of notice of assessment in schedule E to the Ordinance,stating that the “ annual value as assessed ” was Rs. 370,000, thusgiving precisely the information and notice required by law, no more noless. By section 117 (4) of the Ordinance “ written objections to theassessment ” may be lodged within one month of date of service of the'notice, and within that time the plaintiffs did, as has been stated, lodgea written objection to the assessment in the following terms:—“Theyobject to the assessment on the ground of its being excessive and not inaccordance with the actual annual value thereof. The actual value ofthe said premises is Rs. 265,500 ”. The Ordinance confines an objectorin any action that he may take under section 124 against his assessmentto the grounds of objection which he has lodged under section 117 (4), for,as has been stated, section 124 (2) does not allow him to adduce evidenceof any ground of objection which is not stated in his written objection, tothe Chairman. The judgment before us holds that the grounds ofobjection which were lodged under section 117 (4) were insufficient, andat an earlier stage of the case, namely, on March 10, 1931, the learnedDistrict Judge had already given his opinion “that the ground of objec-tion is insufficient and the details should have been furnished in time, andthat the vague objection that the assessment is excessive is irregular andthat this action is therefore not in order”, and he expressed the sameopinion in the judgment itself of March 6, 1933. I think, with alldeference, that this opinion was wrong.
37/29
398 MACD ONE LL CJ.—Ceylon Turf Club v. Colombo Municipal Council.
Section 117 of the Ordinance provides for notice of assessment to beserved on the occupier in the form in schedule E, for written objectionsto be filed within one month of such assessment, for inquiry on suchobjections by the Chairman and for his giving decision on those objectionsand section 124 gives to any person aggrieved by the Chairman’s decisionthe right to institute action objecting to such decision by the Chairman,to be brought in the District Court if the annual value of the premises. exceeds Rs. 300, and in that action the occupier is confined, as has beenstated, to the objections which he lodged in writing with the Chairman.
What is an “ assessment ”? It is a tax, called a rate, on the annualvalue of “ all houses and buildings of any description and of all lands andtenements whatsoever within the town”, section 115 (1). It is necessarythen to discover what is meant by “ annual value ”, and this term isdefined in section 3, quoted above. Put shortly, the annual value is theannual rent which a tenant could reasonably be expected to pay if heundertook to pay rates and taxes, and the landlord undertook to payfor repairs, maintenance, and upkeep. Consequently, when the writtenobjection to an assessment is that the annual value is excessive and shouldbe a specified lower amount, that objection is susceptible, semble, of onemeaning and that a precise meaning; the annual value is greater by somuch than the rent which a tenant liable to rates and taxes but absolvedfrom the liability to repairs, might reasonably be expected to pay. Ifthen an objection that an assessment is excessive and that it should beso much less is susceptible of a precise meaning, and of one meaning only,as it certainly seems to be, for it can be excessive only in relation to onething, annual value, a matter defined by section 3 of the Ordinance, thenan objection that the assessment is excessive and should be a specifiedlower amount, seems to be sufficient modo et forma. It contains a groundof objection and not merely the fact that the person raising it objects,it is precise in meaning and therefore tending to raise a definite issue,and if so, it can hardly be vague or insufficient.
We can test its sufficiency by~ supposing other possible objections.For instance, an occupier might object under section 121 (1) that hispremises were untenantable and untenanted by reason of alterations, oruntenanted for reasons other than those in sub-section (1) and might askfor partial remission accordingly, but then an objection excessive byso much ” would be inapt to raise such points. Objections under section'121 are not that the annual value on which assessment has been made isexcessive but that for a portion of the year there has been from one causeor another, no annual value at all. A fortiori, an objection that the personassessed was not liable at all could not be raised under the ground of theassessment being excessive. Such denial of liability might be becausethe premises were beyond the Municipal limits or that they were exemptunder the first proviso to section 115, or that before the assessment felldue the objector had ceased to be occupier of the premises assessed.“ Excessive by so much ” laid as ground of objection seems to have asingle precise meaning. It contains impliedly an admission of beingoccupier and therefore of liability to pay some rates, but of liability topay a named amount less than the amount of the assessment, becausethat assessment is greater than the annual rent the premises could
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 399
reasonably be expected to fetch. The ground of objection may be briefand concisely expressed but it has as precise and unambiguous a meaningas had under the old system of pleading in England such as a plea as “ notguilty”; each has a clear and unmistakable meaning, each would tendto raise a definite issue, consequently I cannot see that the ground ofobjection raised in this case should be rejected.
The judgment appealed from says that the plaintiffs could haveobtained from the defendant Council details as to how it arrived at theoriginal assessment of Rs. 370,000 and says “as a matter of practice Ibelieve the details are regularly supplied ”. But there is nothing in thelaw to require the Municipal Council to supply these details and, whileit was doing so, the month allowed to the objector under section 117 (4)would be running on, and the suggestion that the objector should ask fordetails before lodging his ground of objections would, it seems to me, bea needles complication.
If these considerations are correct, then the preliminary point raisedby the learned trial Judge—it was not raised by defendants, was indeeddisclaimed by them—and held by him against the plaintiffs, must bedecided the other way, and it must be declared that the ground of objec-tion lodged by the plaintiffs, namely, that the assessment was excessiveand should have been Rs. 265,500 was sufficient to comply with sections117 and 124. With all due deference the mistake in this ruling is toregard grounds for objections, and reasons for those grounds of objection,as synonymous terms. If a sufficient “ground of objection” has beenassigned, and I think it has, then the plaintiffs were not required also tostate reasons on which that ground was to be supported. The groundassigned was that the assessment was excessive by a named figure, andthe reasons they would have adduced would be particulars in supportof a general averment
In argument the plaintiffs cited to us the Union Assessment CommitteeAct, 1862, section 18. That section allows a person rated to object to avaluation list on the ground of “ unfairness ” or “ incorrectness ” and inGateshead Union v. Redheugh Colliery1 it was held that the notice ofobjection is sufficient if it Specifies as the ground of objection all or anyof the grounds referred to in section 18 of the Act of 1862, such as unfair-ness or incorrectness in the valuation of a specified hereditament oromission …. and it is not necessary that the objector should inhis notice inform the Committee of the reasons upon which he bases hisobjection or the arguments upon which he proposes to support it”.There the objector was following the words of a Statute, whereas ^Ordi-nance No. 6 of 1910 has no corresponding clause specifying what aregrounds of objection, but the principle would seem to be the same. Allthat the assessing authority under the Ordinance gives, or is required togive, to the rate-paying occupier is the sum at which he is assessed but notany indications as to how that sum is arrived at. Then, all that theobjector can say is that the sum assessed is excessive and should be anamed smaller figure.
1 (1925) A. C. 304.
400 MACDONE LL C.J.—Ceylon Turf Club t>. Colombo Municipal Council.
On the above view it is unnecessary to determine the effect of section124 (2) or to say whether its provisions that “ the plaintiff shall not beallowed to adduce evidence of any ground of objection which is not statedin his written objection to the Chairman ”, is merely a matter of procedure,something which the other side can waive, or whether it goes to thejurisdiction and so disables the Court from entertaining any groundsother than those stated in the written objection to the Chairman. Itseems to me that the plaintiffs here have complied with section 117 instating a ground of objection and, as they stated to the District Court thesame ground as that which they stated to the Chairman, they havecomplied with section 124 also.
It should be understood that this objection was not raised by thedefendants at any time. They were content both below and on appealwith the grounds of objection that the plaintiffs had lodged, and the pointthat those grounds were insufficient was raised by the Court belowproprio motu. But as the point was raised and as the case below wasformally decided on that point, the defendant now seeks a ruling thereon.
In actual fact no embarrassment to either side seems likely to arisefrom grounds of objection such as those here. When the objectorargues his grounds of objection before the Chairman under section 117,he will obviously have to adduce his reasons for saying that the assess-ment is excessive by so much, for the onus is on him to prove that con-clusion. This clearly was done at the Chairman’s inquiry under section117 in the present case, as appears from the summary of plaintiffs’contention given in D 3. Then the Municipality will reply to thosearguments, again as appears from D 3 to have been done at the inquiryin the present case, and will adduce its reasons for putting the assessmentat a certain figure and not less. The Chairman, then, having the reasonsand arguments for both sides before him, will give his decision undersection 117 (7). This is how, following out section 117, the matter will inpractice be determined, even on a concise ground of objection such as inthe present case, and it is difficult to see how it will cause embarrassmentto either side.
For the foregoing reasons, that portion of the judgment below declaringthat the plaintiffs’ action must be dismissed because they had not statedsufficient grounds of objection as required by section 117, must be setaside. It will remain therefore to determine the plaintiffs’ appeal onthe merits.
The parties went to trial on the single issue “ what was the annual valueof the premises in question for the year 1929? ” To answer this questionthey considered in detail the expenditure and receipt of the three previousyears 1926, 1927, 1928, taking, as was admitted to be a fair method, theaverage of those three years. The issue propounded involves two things,the principles which should be applied so as to discover how the annualvalue of the plaintiffs’ undertaking should be arrived at, and the amountwhich the application of those principles would arrive at.
The plaintiffs, the Ceylon Turf Club, are lessees from the Crown at theannual rental of Rs. 203 of a large space of ground in Colombo which theyhave completely equipped for racing and where they hold races on some
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 401
26 days in the year. The Club is stated to have a membership of some750 and is an institution of high standing in the racing world. It isaffiliated to the Jockey Club in England, to the Royal Calcutta Turf Club,and to other turf clubs of high standing. The members elect a committeeof 15 which has the control of the whole of the Club property. Thiscommittee is unpaid. The Club also appoints stewards, 5 to 7 in number,unpaid likewise, who manage and are responsible for the racing itself,including the control over the stands and enclosure, the granting oflicences to jockeys, trainers, and officials, the determination of disputesarising with regard to racing, and the exercise of disciplinary powers—for instance, that of finding jockeys and warning people off the course. Inaddition to these unpaid stewards there is a stipendiary-steward who ispaid and devotes all his time to duties connected with the Club. Thereare likewise, we are told, a paid handicapper and a paid starter. TheClub has a secretary who is a paid and devotes all his time to the Club andwho under the committee is practically the manager. The Club makes,or did make during the three years prior to 1929, large profits and doesnot pay or profess to pay any dividend to its members. It devotes thoseprofits to the encouragement of racing, in Colombo by holding race meetson some 26 days in the year, by giving valuable prizes to be raced for, byimporting horses from time to time, and by the like activities for thepromotion of racing. It also gives donations to other race Clubs, thoseof Kandy, Radella, and Kelani Valley, and particularly Nuwara Eliya.The evidence is that in the years in question races were occassionally heldon the Kandy, Radella, and Kelani Valley courses and that there were tworace meets every year at Nuwara Eliya. The evidence is that all theserace meets at a distance from Colombo showed a loss and that withoutsupport from the Turf Club out of the money which it makes in Colombothese other clubs could not be carried on. The Ceylon Turf Club there-for gives contributions, in the case of Nuwara Eliya very considerable ones,for their support. But it is also claimed that the support of the NuwaraEliya Club is essential to the earning by plaintiffs of the profits that theyearn in Colombo itself. In the hot months of the early part of the year,there is no racing in Colombo itself and the track is thereby allowed torecover. The Nuwara Eliya course provides a sanatorium for horseswho would, we are told, lose condition completely if they were conti-nuously kept in the hotter climate at sea level. The races at NuwaraEliya are claimed to be an encouragement to up-country owners tocontinue to keep and race horses, and it was put to us as an essentialpart of the plaintiffs’ case that for all the Nuwara Eliya racing showeda continuous loss, it was none the less necessary to support thatcourse and the races there, because otherwise the Turf Club would losesupport from a section of its members and would in the end actually losesome of the profit that it now makes in Colombo if it ceased to spendmoney on racing at Nuwara Eliya and on the course there. Theconclusions which plaintiffs asked us to draw from this argument arediscussed later.
This being how the Turf Club is constitutecl and managed, the nextthing is to consider the law under which a rent is imposed. As our Statutesivery close in its wording to two English Statutes, it will be as well to
402 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
set out the relevant portions of these. The Parochial Assessment Act,1836, section 1, is as follows:
“No rate for the relief of the poor in England and Wales shall beallowed by any justices, or be of any force, which shall not be madeupon an estimate of the net annual value of the several hereditamentsrated thereunto; that is to say, of the rent at which the same mightreasonably be expected to let from year to year, free of all usual tenant’srates and taxes, and tithe commutation, rent charge, if any, anddeducting therefrom the probable average annual cost of the repairs,insurance, and other expenses, if any, necessary to maintain them in avtate to command such rent ”.
This is the section which until the recent Rating Act of 1925 governedthe whole of England with regard to rating, except London. London wasprovided for by The Valuation (Metropolis) Act, 1869, the definitionclause of which, section 4, contains the following:—“The term ‘grossvalue ’ means the annual rent which a tenant might reasonably beexpected, taking one year with another, to pay for an hereditament, if thetenant undertook to pay all usual tenant’s rates and taxes, and tithecommutation, rent charge, if any, and if the landlord undertook to bearthe cost of the repairs and insurance, and the other expenses, if any,necessary to maintain the hereditament in a state to command that rent ”:
(Ryde, p. 914). It will be seen that the wording of these two enactmentsis very similar to that of Ceylon on the matter of annual value. It hasalways been taken that the phrase in the Act of 1836, section 1, “ free ofall usual tenant’s rates and taxes ’’ assumes that the tenant pays these.It will be seen that the English Acts speak of “repairs, insurance, andother expenses, if any, necessary ” to maintain the premises in a state tocommand the rent, whereas our Ordinance speaks of the “ repairs,maintenance and upkeep, if any, necessary ” for the same purpose; bothdeal with the same idea and probably the difference between them is onlyverbal. The two English Statutes quoted, and the Ceylon Ordinance,propound the same three separate factors—the rates and taxes, the rentthat may reasonably be expected, and the repairs and maintenance.The English Acts contemplate a net value arrived at by deducting fromthe rent that may reasonably be expected the cost of the repairs andmaintenance. The Ceylon Ordinance does not contemplate such areduction; the Ceylon tenant in offering a rent has to assume that hisrepairs and maintenance are provided by the landlord and so can offer ahigher rent than the tenant under the English Acts. Putting this in theconcrete; if in each jurisdiction the rate were 20 per cent.—4 shillingsin the pound, 20 cents in the rupee—of the annual value (called annualvalue in Ceylon, nett annual value in England), the Ceylon tenant wouldpay more rates than a tenant under the English Statutes, or putting itthe other way round, to get the same sum as rates in each jurisdiction itwould be sufficient to fix in Ceylon a lower percentage payable on theannual value as rates. But making allowance for this fact, that theEnglish Statutes contemplate a substraction sum to arrive at the assessedvalue while the Ceylon Ordinance does not, the English decisions can beapplied in a rating case with us for the respective Statutes deal with thesame three factors—rates and taxes, the rent that; may reasonably be
MACDONELL CJ.—Ceylon Turf Club v. Colombo Municipal Council. 40S
expected, and the cost of repairs and maintenance—and require thateach of those three factors should be considered and estimated. Inactual fact, English decisions have been relied on and followed by ourCourts in cases on rating, see Ismail v. Colombo Municipal Council
The Ordinance No. 6 of 1910 speaks of “ house, building, land, ortenement The English Statutes use the phrase “ hereditament ”. Itwas argued to us that the thing to be rated in England the heredita-ment, was something wider than the things to be rated with us, but thisseems to me very doubtful. It is clear that the draftsman of our Ordi-nance had the English Statutes before him and as they contained the wordhereditament, a term of art unknown to our law, I think we may assumethat he was endeavouring to find suitable words as the equivalent of thatterm. He specifies house, building, land, and then seems in his effort tomake rateable everything that in England would be rateable under the*term hereditament, to have used the word “ tenement ” to make up anydeficiency that there might be. Goodeve’s Law of Real Property, p. 10,says:“ The word tenement in its strict legal significance is something
which may be holden, that is, be the subject of tenure, but popularly it isoften applied to designating houses or other buildings. Thus a house iscommonly described in a deed -as ‘ all that messuage or tenement ’ ”.With us the word tenement is in common use to mean “ house or otherbuilding ” though it may never have received precise definition. I cannotbut conclude that the draftsman was trying to make the definition ofrateable property with us as wide as the definition is under the Englishsection. But it was argued that movables—chattels as they are calledin English law—cannot be rateable since the word “ tenement ” is not wideenough to comprise-them. It must be noticed, though, that there is inEngland .what we have not got, an Act, that of 1840 (3 & 4 Vic. C. 89)expressly exempting chattels from being rated. Notoriously they havebeen rated in England and that in spite of the fact that English Acts onlydeal with hereditaments, a term which has never been held to includechattels. If then, in spite of the Act of 1840, the rating of chattels hascome to be in England, though the thing to be rated is called a here-ditament, it would be difficult to argue that with us movables cannot berated, where the thing to be rated is the undefined yet easily intelligible.“ tenement ”.
A rate, be it noted, is not strictly something imposed on property buton a person as occupier of that property. Here the occupier is theplaintiff, the Turf Club, and the property to be rated is the racecourseas it stands, a phrase to be discussed later. The problem then in a ratingcase is to find the annual rent which a tenant might reasonably be expectedto pay taking one year with another, if he paid the rates and taxes and ifthe landlord paid the costs of repairs, maintenance, and upkeep, sufficientto maintain the property to be rated in a state to command that rent, i.e.,the rent for that purpose for which the property is let.
The tenant taking at a rent the property to be rated may be an actualtenant in which case the rent he actually pays is evidence, though notconclusive evidence of the rent he may reasonably be expected to pay.But the property to be rated-here has no actual tenant paying such & rent
J 33 N. L. R. 187.
404 MACDONEL.L. C.J.—Ceylon Turf Club v. Colombo Municipal Council.
—for that paid by the plaintiffs, the Turf Club, is purely nominal—conse-quently the tenant to be sought for is a hypothetical tenant, a phraseconsecrated by -usage and convenience, and this hypothetical tenantwould occupy the property only for the sake of the profits he could makeout of it. There are two bases on which a property may be rated; thecontractor’s basis where you take a percentage of the value of the landand the same of the buildings erected upon it, and the revenue or profitsbasis, but the latter is the one that must be applied when rating a race-course (Regina v. Verralll), that is, to ascertain the rent the hypotheticaltenant of a racecourse would pay you must take into account the profitswhich that property can make. This basis has been adopted here withoutquestion from either side. In ascertaining what profit can be made youmust find out what profits have been made recently. The assessmenthere is for the year 1929 and the defendants’ assessor took an average ofprofits for the three preceding years—1926, 1927, 1928—which was con-sidered by both parties^ro be a.fair method. The owner or occupierhimself must be considered as a hypothetical tenant (Regina v, SchoolBoard for London ‘), and to this principle later cases have given the widestpossible meaning, thus the actual owner or occupier may be legallydebarred, say by statute or the terms of a- trust deed, from letting theproprety at all, yet none the less he must be considered a possible tenant(London County Council v. Erith*). In actual fact, the possible tenantshere are pretty much narrowed down to a syndicate of racing men which,if the Turf Club property was offered at a rent, might come into existenceto take it at a rent for the profit it would expect to make, and the plaintiffs,the Turf Club itself. In either case it would be necessary to ask what isthe profit such syndicate or the Turf Club could make to enable us todiscover the rent which the hypothetical tenant would pay. The factthat the Turf Club does not profess to make profits is immaterial. Theconditions of the problem are to find the rent a tenant might reasonablybe expected to pay, and to discover' that rent it is necessary to try anddiscover what profits he can make. The law requires us to consider theplaintiffs, the Turf Club, as a possible tenant, obliged to pay not as nowa nominal rent, but an economic rent, and that rent can best beascertained by ascertaining what profits it could make; the fact that itdoes not now attempt to make profits is immaterial to the problembefore us.
It was argued to us that there were practical difficulties in the way ofregarding the Turf Club as a hypothetical tenant. The present trusteesin whom the Turf Club property is vested are ready to take certainresponsibilities because having practically no rent to pay they are safefrom loss, but (it was argued) it is not so certain that they would undertakethat responsibility if they had to pay an economic rent and earn profitswherewith to pay it. It was also argued that there might be difficulties,though it was not stated what difficulties, in the Turf Club becoming alimited liability company with a view to being the tenant of its ownenterprise. Now the decided cases are perfectly clear that the actualoccupier is to be considered a hypothetical tenant even though he may» (1875) 1 Q. B. D. 9.* 17 Q. B. D. 738.
’ (1893) A. G. 562.
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 405
legally be prohibited from becoming a tenant. If you look at the actualfacts of the case, namely, a very profitable undertaking which is in thenature of a monopoly, for confessedly Colombo would not support morethan one racecourse, it is pretty certain that if the enterprise of the TurfClub were offered at an economic rent the Turf Club itself would be thefirst to come forward as a possible tenant. Any practical difficultiesthere might be in adapting the constitution of the Club to the changedconditions would have very small weight in determining the Club to comeforward as a tenant. Decided cases require you to consider the TurfClub as a possible tenant and the circumstances of the matter enable youto say that the Turf Club would be a tenant, and in all probability awilling tenant, of its present enterprise if it had to pay an economic rentfor the same.
We can now take the problem a stage further. The hypothetical tenanthaving to pay rates and taxes would deduct them from the rent he offers,and as the landlord has to pay the cost of repairs and maintenance thetenant will add that sum to the rent that he offers. He will not offersuch a rent as will leave him to profit; per Wood Renton J. in Crawfordv. Municipal Council of Colombo1—“ I do rot believe for a moment thatany voluntary association even would set on foot such an undertaking asa Turf Club without having regard to the amount of profits that can bemade by it ”. Then it must be decided what profit he should be allowedto expect and to make this he must be supposed to have the capitalwherewith to pay working expenses, otherwise he could not earn theprofit expected. The arithmetical equation to be arrived at will allowhim as one of its factors a certain sum as capital and this must be deductedto arrive at the rent he might reasonably be expected to pay. The tenantthen has to be allowed deductions under two heads, one for rates and taxesand the other for the capital allowed him. Naturally then the largerthese deductions the less the rent he will reasonably be expected to pay,and so the less his annual value and the less the rate he will have to paythereon. Conversely, the larger the amount that can rightly be broughtunder the heading of repairs and maintenance, the more the tenant mustadd to the rent he may reasonably be expected to pay, and therefore thegreater the annual value at which he will be assessed and the rate pay-able thereon. Consequently the contest will be, the tenant trying toincrease the amount he can deduct, in other words to increase the amountof capital allowed him, and the rating authority trying to increase theamount to be allocated to maintenance and repairs which being borne bythe landlord must be added to the rent a tenant can reasonably beexpected to pay. It was round these points that the present appeal wasmainly contested, the plaintiffs urging that certain increases should beallowed the hypothetical tenant for his capital and, as part of that con-tention, that the amount allocated to repairs and maintenance should bediminished by certain matters claimed by them as necessarily tenant’sexpenses, that is, to be provided for by the capital found by him the tenant,and the defendants urging that these diminutions of the amount allocatedto repairs and maintenance should not be made. In the concrete, it wasa claim by plaintiffs that the hypothetical tenant should be supposed to
• 14 N. L. R. at 451.
406 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
provide certain matters—adjuncts and activities—now in fact provided,by the Turf Club at its Colombo racecourse, and that he should be allowed,to charge himself with a large portion—in the argument in appeal thewhole—of the expenses of a kindred enterprise, the Nuwara Eliya race-course. To give details: the plaintiffs argued that the hypotheticaltenant would have to pay for, and should therefore be allowed, such itemsas the upkeep of the Colombo course and the capital cost of the NuwaraEliya course, whereby the rent such hypothetical tenant might reasonablybe expected to pay would be diminished pro tanto. This leads to twoquestions which must be considered and determined before coming to thedetails of the case before us, namely, what exactly would be let to thehypothetical tenant at Colombo and what exactly are the facts and thelaw, as affecting the plaintiffs in regard to the Nuwara Eliya racecourse.
First then, we must ask what exactly would be let to a hypotheticaltenant of the Colombo racecourse, and the answer would seem to be,the enterprise of the Turf Club at Colombo as it stands as a means ofcarrying on racing—as a going concern, in fact. The principle seems tobe contained in the words of Denman C.J. in Regina v. Everist,' “ Nothingcan be more unreasonable than to rate land occupied in one mode as ifit were occupied in another”; or as Lord Buckmaster said in PoplarAssessment Committee v. Roberts=, “ Although the tenant is imaginary,the conditions in which his rent is to be determined cannot be imaginary.They are the actual conditions affecting the hereditament at the timewhen the valuation is made ”. This is a racecourse for carrying on racing.Per -Lord Esher M.R. in Dodds v. South Shields2—“ The case of a race-course is an exceptional case, and therefore it is necessary to inquire whatthe tenant of a racecourse, intending to use it as a racecourse, couldafford to give, in order" to find out what he would be likely to give. . . . ”, in other words, what profits he can make; and see Regina v.Verrall (supra), ‘Intending to use is as a racecourse’; how in fact do theplaintiffs, the Turf Club, use their tenement in Colombo? They use it asa racecourse. That means that they do not supply to persons who racehorses, or to the public which watches and speculates on those horses, abare piece of ground, or that piece of ground with certain defined tracksthereon, or that piece of ground and its tracks with certain buildings andenclosures for the use of those horses and the public, but something beyondthis, an enterprise completely equipped for the business of racing from thepoint of view of racing owners and of the public. If this be so, then thatenterprise will not be completely equipped if the plaintiffs having madedefined tracks for horses to run on yet fail to keep them in order, for thiswill entail danger to the horses running whereby their owners will not runthem, or if having provided stands from which the public can view theraces they yet fail to provide seats on those stands for the comfort of thepublic whereby the members of the public coming to view the races willcome in smaller numbers. The plaintiffs do provide in actual' fact anenterprise fully equipped for racing, using those words in their widestsense, and it would cease to be so equipped if they did.not so maintain it.The plaintiffs’ witness Mr. Eastman says the same in his evidence, though,» 10 Q. B. 178.3 (1922) 2 A. C. 93. ■.
a (1895) 2 Q. B. at 136.
MACDONELL. C.J.—Ceylon Turf Club v. Colombo Municipal Council. 40V
of course, his admissions will not be conclusive against the plaintiffs unlessthey agree with the law on the matter:—“The racecourse would be inthe nature of a monopoly and in assessing a racecourse I would take intoconsideration everything that was necessary for the business of racing.Similarly a hypothetical tenant would also take into considerationeverything that was necessary for the business of racing. I would alsoassess the business of the Turf Club as I actually found it on January 1,1329. I would have to consider it as it was then actually occupied andused. One of the first essentials for the business of racing is a course.It should be a properly laid out course, including a properly preparedtrack or tracks; likewise there should be ditches or drains and whateveris necessary for proper drainage . . . It would be necessaryfor the purpose of the business of racing that the grandstands should befully equipped with furniture, giving sufficient accommodation for thepublic. It would be necessary for the business of racing that the machi-nery to do with the question of betting has to be supplied. There shouldbe properly equipped paddocks and other buildings which are necessaryfor racing purposes. The hypothetical tenant would not only look at thebuildings, but would look at the grounds including the course. If theracecourse was fully equipped with chattels of the furniture type, hewould pay a higher rent for the premises. But it would be necessary forthe business of racing that those things must be there ”. Then theproperty to be rated is a racecourse as a going concern and this is whatthe hypothetical landlord would provide, as also the repairs, maintenance,and upkeep necessary to maintain the property in a state to commandthe rent a tenant might reasonably be expected to pay for this property“ intending to use it as a racecourse ”.
It was argued to us very strongly, particularly at the commencementof this appeal, that certain of the things now owned and used by theTurf Club are chattels merely which the tenant would have to purchaseor hire himself, and that consequently allowance should be made to himfor these. As to this argument generally—it will be discussed in detaillater—I would point out that the defendants have made a very consider-able allowance to the tenant under this head, but testing the question" byprinciple, you would repeat that a hypothetical tenant implies a hypo-thetical landlord anxious to get the best rent he can, and would askfurther whether that hypothetical landlord would not get a better rentby offering the racecourse as it stands, chattels and all, than by offeringthe racecourse minus certain indispensable chattels which the tenantwould therefore have to supply. Now a good many of these chattels asI have called them, things detached from the soil, seem to be of such anature that if the hypothetical landlord did not include them in thesomething, which he was letting to the hypothetical tenant he would beunlikely to get a tenant of or a purchaser for them elsewhere. They areexpensive things and some of them so adapted to the racecourse that theywould have little use apart from it. Then surely a hypothetical lanlordin his own interest would include these things, chattels though they, be,in what he was offering at a rent to the hypothetical tenant. As has been
408 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
said, there has been give and take in the defendant’s estimate and allow-ance, the whole or a percentage, has been made to the tenant. But itcertainly would seem to be in the landlord’s own interest to offer to thetenant at a rent everything that is actually now used on the racecourseto fit it for the purpose of racing. If these considerations are correct, oneis then perhaps strengthened in one’s conclusion that the property to beassessed is the racecourse as a going concern, intended to be used as aracecourse.
If this is so, namely that what is here to be rated is a fully equippedracecourse as a going concern, then it will perhaps be unnecessary todetermine the precise authority in the present case of Kirby v. HunsletUnion Assessment Committee1 and the cases leading up to it. These caseswere in the main, though not wholly as will be shown, cases where therateable value was determinable on the contractor’s principle and not onthe revenue or profits principle applicable to the present case. Theywere mainly concerned with the question, what machinery on the rate-able premises was to be taken into account as contributing to the value ofthose premises and so increasing the rates on them, and the latest of them(Kirby’s Case, supra) decided (in effect) that all machinery on the premisesmust be taken into account as increasing the value of the premises andso the rates on them, whether the machinery were actually suppliedby the landlord or by the tenant. Since the determination of that casein 1906 the Rating and Valuation Act, 1925, has been passed inEngland, section 24 (10) of which is as follows: —
“ (10) Nothing in this section shall affect the law or practice withregard to the valuation of hereditaments the value of which is ascer-tained by reference to the accounts, receipts or profits of an undertakingcarried on therein, or be taken to extend the class of property which isunder the law and practice as in force at the commencement of this Actdeemed to be provided by the occupier and to form part of his capital.”
This section then only affects property the value of which for rating isdetermined, not by reference to accounts, receipts and profits but on theother principle, that is the contractor’s principle. Then, in terms thesection would not apply to a case such as the present. The section dealsthen with properties rateable otherwise than on the profits basis and as tothem determines, in its other sub-sections, that the machinery on themshall be taken into account for the purposes of rating on a principleentirely different to that adopted in Kirby’s Case and in the cases leadingup to it; in fact as to machinery on property rateable otherwise than onthe profits basis, it gets rid of Kirby’s Case altogether. The Statute doesnot of course affect us, and is of importance only because of its bearing onKirby’s Case. It was argued to us that this section 24 (10) might betaken as indicating that Kirby’s Case was not good law at the time thatsection was enacted, but that it and not Kirby’s Case contained the correctlaw on the matter. But this cannot be admitted; the Statute is notdeclaratory of the law but claims to be an alteration of it; it describesitself as “ an Act …. to amend the law with respect to the valu-ation of machinery and certain other classes of property”. Argumentfor the plaintiffs proceeded further however:—‘ Kirby’s Case and those
» (1006) A. C. 43.
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 409
leading up to it did not profess to be of universal application in ratingquestions, for they were confined to properties rated on the contractor’sprinciple. Then they never could have applied to such a case as thepresent which is to be determined on the profits principle. AssumingKirby’s Case to be as good law now as it may have been prior to the Actof 1925 and so to be considered and followed by this Court in accordancewith the principle of Trimble v. Hill’, where the Privy Council said thatwhere there is a decision of a Court of Appeal in England on a like enact-ment to that in force in the particular Colony the Colonial Courts shouldalso govern themselves by it, still as it applies exclusively to rating casesdetermined on a principle other than that on which admittedly this casemust be determined, it will be of no application to this case. In its ownambit Kirby’s Case may have been good law in* England up to the Actof 1925, but that ambit is not that of the present case but distinctfrom it ’.
This argument as to the restricted ambit of Kirby’s Case and thoseleading up to it, is not altogether consonant with the facts, for those casesdo not exclude the profits principle. The first of them all, Rex v. St.Nicholas, Gloucester’, was a case where the rent was fixed by looking atthe profits made. Another of these cases (Rex. v. Liverpool Exchange *)was a case in which the profits basis was held not to be applicable to theparticular facts, but there is nothing in the judgment suggesting that thecase being one determinable on the contractor’s basis therefore theprofits basis could not be argued. In Regina v. Southampton Dock Co.’,another of the cases leading up to Kirby’s Case, again the profits basis wasargued for. In that case the Company to be rated wished to deduct fromthe profits which it made by a certain steam tug, the expenses of main-taining that steam tug, and it was held that it was entitled to do so. Weremind ourselves that this is the point upon which the English Statutesdiffer from our own. The person to be rated under them can deduct thecost of repairs from the gross annual value, and it is the difference onlyupon which he is rated. But as I understand that case, the Courtcertainly considered the profits made as an element to be considered inarriving at the rate. It seems, therefore, that Kirby’s Case and the casesleading up to it were not restricted wholly to the contractor’s principle.It may well be that the later cases of the series, particularly Regina v.Lee’, the Tyne Boiler Works Case’, and Kirby’s Case itself, were casesdetermined purely on the contractor’s principle, but it is difficult todiscover in that series of cases anything which, prior to the Act of 1925,would have prevented the principle therein laid down, namely, thatwhatever is used on the premises by the occupier may be taken intoaccount in rating those premises, from being applicable to a rating casedetermined on the profits basis. Those cases seem then to be of a widerapplication than was contended for on behalf of the plaintiffs.
Perhaps, however, it is not necessary to pronounce on this argument, forthe question, what is the property to be rated here, can be answered inde-pendently of it; Verall’s Case (supra), Dodd’s Case ’. But if it is necessary
i 5 A. C. 342.* 14. Q. B. 587; 117 E. R. 297.
‘IT. B. 723 n.3 1 L.- R. Q. B. 241.
3 1 A. 4 E. 4$o, 110 E. R. 1235.« (1886) 16 Q. B. D. 81.
3 (1895) 2 9. B. 133.
410 MACDONELL, C.J.-—Ceylon Turf Club v. Colombo Municipal Council.
to distinguish the cases culminating in Kirby’s Case from the present,you would point out that they deal with pieces of machinery, and thequestion asked in them was, does this or that piece of machinery thoughnot a part of the freehold or attached to it, yet make the premises morefit for the manufacturing purposes for which they are used. The questionbefore us may be similar in some respects yet seems really to be anotherand a different question; is this adjunct, or this furniture, or this activity,necessary to a fully equipped racecourse “ intended to be used as aracecourse ” without which it would not be a fully equipped racecourse?The question asked in Kirby’s Case and in most of the cases leading up toit seems to have been one as to accessories—separable accidents, if you will—did they make the premises let more fit for their ostensible purpose?Here the question goes not to accessories but to the substance of the thing,something wanting which it would not be that thing, namely, a racecoursefully equipped “ intended to be used as a racecourse If you can showthat a particular furniture, or adjunct, or activity is something in separablefrom the' thing being rated, a racecourse fully equipped intended to beused as a racecourse, then that furniture, adjunct, or activity is somethingwhich must be repaired, maintained, and kept up to enable the propertyto obtain the rent the hypothetical tenant would give for it as suchproperty. Authority—Verrall’s Case, Dodd’s Case (supra)—seems to saythis, and common sense exercising itself on the facts of the matter seemsto say the same. But if it is something that must be repaired, main-tained, or kept up, then the expenditure therefor is something that fallson the landlord and cannot be allowed to the tenant, by the very words ofthe Ordinance.
If then the property to be rated in 1929 was the racecourse at Colomboin its then—admittedly complete—state of equipment “ intended to beused as a racecourse ”, then whatever would be necessary to repair,maintain, or keep up its then state of equipment would be the landlord’sduty, and it will only remain to ascertain what were those things, adjuncts,or activities, which were necessary for that purpose. The details of thatquestion will be discussed later, it is sufficient for the moment to state thequestion itself.
It will now be convenient to discuss the other large question of principleargued to us, namely, that of the Nuwara Eliya racecourse and of theallowance which should be made to the plaintiffs in respect thereof. Itwill be remembered that this is a claim by the plaintiffs to charge them-selves with, and so be allowed, a portion of the costs of that racecourse,or—as put on appeal—with the whole of that cost. Here it must bepointed out that the claim to be allowed, the Nuwara Eliya capital expendi-ture, was not raised in evidence below—the documents to be discussedlater, P 4 to P 11, on which plaintiffs largely relied do not mention it—orsemble in argument, for it is not dealt with in the judgment, but withoutdeciding whether it is really permissible for the plaintiffs now to makethe claim, I will deal with it since a full and acute arguments was addressedto us upon it.
It was not made very clear to us what are the exact legal relations ofthe plaintiffs, the Turf Club, and the Nuwara Eliya racecourse. But it
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 411
seems that the latter is a separate legal entity since it is spoken of as the“ Nuwara Eliya Club ”, whereas the plaintiffs are called the Turf Club ofCeylon. The plaintiffs support this Nuwara Eliya Club with money, andargue that without such support the Nuwara Eliya Club could not becarried on since the expenditure on it always greatly exceeds its income,that it loses money in fact. Mr. Eastman, a witness for the plaintiffs,says it is necessary for the hypothetical tenant of Colombo to conductthe various races at Nuwara Eliya at least once a year and therefore it isa legitimate expense for him to meet; “ I do not think the hypotheticaltenant would cut Nuwara Eliya out because I consider it is advisablefor him to have a meeting at Nuwara Eliya”. Mr. Corbett, a formerSecretary of the Turf Club, says: “ We support the Nuwara EliyaClub …. It is done because it is absolutely necessary to closedown our racecourse for two or three months every year after a heavyseason that it may recover, and horses must go somewhere and it is a verygood change for the horses to go to a good climate for a few months.Most of our horses are thoroughbreds and they need a change or theysuffer from a disease which is known as non-sweating which renders themunfit to race …. It is not because we have too much moneythat we give these donations, it is excellent for racing to have these out-station meetings. It is a great encouragement to up-country owners;we do it for the business of horse-racing and we think it is an incentive toup-country owners to keep horses. To have good racing we must havehorse owners and an additional reason is that Nuwara Eliya and Kandy
are places which serve as a sanatorium too for horsesWe
keep accounts in our books for Nuwara Eliya, separate accounts. If wewere running it as a commercial undertaking we would not give that upbecause it is a great benefit to the Club although it is a loss of money.The racing depends on a large number of horses; without Nuwara Eliyawe would have fewer horses and less entries here, therefore we gain moreby keeping Nuwara Eliya than by closing it. Our losses on NuwaraEliya are not very large when we consider the profits we make in Colombo.I would not admit that it is kept on from a sentimental point of view.We must have racing there or owners would not be able to send theirhorses there ”. This last sentence does not seem very cogent, for NuwaraEliya could be used as a sanatorium for horses, you would think, withoutit being necessary to hold races there. This witness, Mr. Corbett, seemsto say that in the years prior to 1929 there might be three to five daysracing each year at Nuwara Eliya.
Now the defendants’ assessor has in fact allowed the plaintiffs certainitems of their Nuwara Eliya expenditure which will be discussed in detailin due place. For the moment it is best to deal with the general argu-ment for the plaintiffs on their claim to deduct the Nuwara Eliyaexpenditure as a whole. The Nuwara Eliya Club is, it seems, a separateentity from the plaintiffs, but it is they who pay the money and conse-quently the master word lies with them what shall be spent on NuwaraEliya and how many days racing shall be held there. The argument forthe plaintiff was put to us thus: —‘ If you could allocate some definiteportion of the profits made by the Turf Club at Colombo to the influenceof the Nuwara Eliya course, then the correct method would be to deduct
412 MACDONELL, C.J.—Ceylon Turf Club v. Colombo Municipal Council.
the profits attributable to Nuwara Eliya and only take into account theprofits earnable at Colombo without Nuwara Eliya. We admit that it isnot possible to allocate to Nuwara Eliya any definite amount in money ofthe Colombo profits, we cannot show the exact echo in the Colomboprofits of the Nuwara Eliya expenditure, still if those Colombo profitsare influenced by the Nuwara Eliya course then the hypothetical tenantwould say, I will take on the Nuwara Eliya course although I lose moneyby it so as to make sure of my Colombo profits, and he would reduce hisColombo rent by the amount of his Nuwara Eliya losses. Such a reduc-tion is sanctioned by what is known as the “ parochial principle ” inassessing railway systems in England. The proportion of income receivedat Colombo due to the course at Nuwara Eliya may be uncertain but thereis a necessary connection between them and there is evidence that theColombo course is dependent for some of its profits on Nuwara Eliya,particularly the fact that although Nuwara Eliya by itself makes noprofit, still the Turf Club keeps it up and has races there, which fact canonly be explained by the Nuwara Eliya course being a factor affecting theearnings of Colombo. Unless the gain at Colombo from keeping upNuwara Eliya were greater than the loss on Nuwara Eliya, the Turf Clubwould not keep Nuwara Eliya on, as however it does. Then it will followthat in the assessment you must allow the expenditure upon NuwaraEliya, not merely the running expenses but the capital expenditure also,and you must reduce the rent that the tenant will pay accordingly ’.
On this argument my brother Drieberg pointed out that this was takingthe case into the realm of conjecture, and, as I understood, this was notdissented from by learned Counsel. The argument then proceeded todiscuss what expenses at Nuwara Eliya should be included in diminutionof the rent that the Colombo tenant would pay, and it was urged that thehypothetical tenant need only be postulated as far as Colombo wasconcerned. If that hypothetical tenant decided to take on NuwaraEliya, he would put on the expenditure side all the expenses actuallyincurred by him. It would be wrong to postulate a similar hypotheticaltenant of Nuwara Eliya, and we must suppose an actual occupier ofNuwara Eliya who would have to pay the expenses actually incurred (bythe plaintiffs for Nuwara Eliya.
This argument admittedly involved using the word “ tenant ” in twodifferent senses, a hypothetical tenant for the Colombo course, an actualtenant for the Nuwara Eliya one, but learned Counsel did not shrink fromthis conclusion.
On this argument no case in point was cited to us. It was urged thatthe plaintiffs should be allowed their Nuwara Eliya expenditure on theprinciple of the “ parochial principle ” in the rating of a railway company.But the first observation to make is that this parochial principle is appliedto parts of an enterprise which is one legal entity owned by one legalpersona, the railway company to be rated. In the rare cases where thebit of line in question is the property of more railway companies than one,still it has no legal existence or persona of its own. But here the legalPersopae seem to be two, the plaintiffs the Turf Club, and the NuwaraEliya Club, and though the former may control the latter the two are not
MACDONELL, CJ.—Ceylon Turf Club v. Colombo. Municipal Council. 413
identical. For all that appears to the contrary the Nuwara Eliya Clubmight file its petition of insolvency without any legal effect on the TurfCluh, or it might sell or offer to sell its enterprise to a third person withoutthe Turf Club having any legal right to interfere. The case thereforeof the plaintiffs with regard to the Nuwara Eliya Club and that of a.railway with regard to a branch line or link line are dissimilar on anessential point.
It is well to know what the parochial principle means and it is sum-marized as follows by Lord Cave L.C. in Kingston Union v. MetropolitanWater Board—“ Rating surveyors …. began to assess water-works and other like concerns, such as railways, canals, gasworks, &c.,upon the basis of the profits earned by the whole undertaking. Fromthe gross receipts of the undertakers for the preceding year, they deductedworking expenses, an allowance for tenant’s profits, and the cost of repairsand other statutable deductions, and treated the balance remaining(which would presumably represent the rent which a tenant would bewilling to pay for the undertaking) as the rateable value of the entireconcern. It was then necessary to distribute this rateable value amongthe various parishes into which the undertaking extended, and this waseffected by dividing the hereditaments in each parish into indirectlyproductive assets (such as intakes, filter-beds, reservoirs, pumping stationsand carrying or pumping mains) and directly productive assets (such asthe service pipes which actually carried the water to the consumers),and by allowing to the parish a percentage on the structural (or con-tractor’s) value of property of the former class contained in the parish,and a proportion of the remainder based on the water revenue arising there.Thus, a series of assessments was reached which, while giving to eachindividual parish a fair proportion, based upon the hereditaments whichit contained and the revenue which it produced, of the total rateablevalue, did not in the aggregate exceed the rental which the undertakersor any other possible tenants might be expected to pay for the wholeundertaking in any year ”. How the parochial principle applies inpractice can be seen in Regina v. West Middlesex Waterworks’, the-judg-ment in which has uniformily been followed and is cited with approval inthe House of Lords case just quoted. Wightman J. says as follows in1 E. & E. at p. 723, and we can adapt his words to the present case: —
“ Supposing, then, the apparatus to be apportioned to several tenantsaccording to the parts in several parishes, the tenants of the parts directlyearning net profits in a parish ”—in this case the Turf Club in Colombo—“would be rated by that parish, for all the profits earned therein”—that is in Colombo—“this being the'parochial principle of apportionmentwhich has been unanimously upheld hitherto in respect of all canals,railways, water companies, gas companies and bridges,. But the tenantsof parts directly earning no profit”—in this case the Nuwar Eliya Club^-“ would not be liable to be rated in respect of any rent in the ordinarysense, which is, profit remaining after all deductions have been takenfrom the receipts. But, as these parts of the apparatus, directly earningnothing, but indirectly conducing to such earnings elsewhere, are assumed
i (1926) A. C.~at p. 339.2 1 E. <f E. 716; 120 E. R. 1078.37/30
414 MACDONELX. C.J.—Ceylon Turf Club v. Colombo Municipal Council.
to continue in operation, the company, to whose interest such continuedoperation is essential ”—the Turf Club in Colombo—“ must be assumedto pay adequate remuneration to a contractor for land and fixed capitalvested therein, together with the labour and skill requisite for the effectivecontinuance of such operation ; and this contractor with the companywould stand in the relation of occupying tenant to the parish, and thepart within the parish would be the rateable subject”—in this case thecourse at Nuwara Eliya—“ and the local rateable value would be suchsum as would pay the rent of the land and the profit on fixed capitaltherein Noting that the words “ profit on fixed capital therein ”,should really be “ interest on fixed capital therein ”, you can apply thisrule to the present case. The Colombo part of the enterprise—if theenterprise were really one and owned by one legal persona—would beassessed on the rent its tenant could offer, which rent would be determinedby the profits it makes in Colombo, and the Nuwara Eliya part of theenterprise would be assessed “ at such sum as v/ould pay the rent of theland and the interest on fixed capital therein But if the argument ofplaintiffs’ Counsel is correct, the principle ought to be different and “ thetenant of the part directly earning a net profit in the parish would berated ” not “ for all profits earned therein ”, but for a portion of themonly, with the corollary surely that the tenant of the part earning noprofit, would be rated for the other portion of the profit earned by thepart that did earn it—provided only, of course, that the occupier of the“ apparatus ” as Wightman J. calls it, is not “ rated beyond the rateablevalue of the whole apparatus taken together ”. No rating case that Ican discover suggests any such method, namely, that when the part ofan enterprise or apparatus in parish A makes a profit while the part of itin parish B makes none, then the rates to be charged it in parish A mustbe reduced while the rates charged it in parish B must be increased by theamount of that reduction. I repeat, I can find no rating case suggestingany such principle, and none was cited to us in argument.
It certainly looks as if the. plaintiffs were asking us to accept theconverse of the “ contributory ” principle disapproved by the House ofLords in the Great Central Railway v. Banbury Union1 and in GreatWestern Failway v. Kensingtona. The contributive principle in the caseof a railway seems to be this. A part, branch line or loop line, earns noprofits itself, but shows a loss. None the less it “ contributes ” to theprofits of other sections of the railway, and if so is to be rated at a higheramount; its valuation must be increased because, though it makes noprofits itself, it contributes to profits made elsewhere. The presentargument asks us to affirm the converse of this and to say that as the'Nuwara Eliya course “contributes” to the profit made by the Colombocourse, some of that profit must be deducted from the Colombo assessmentso that the annual value of the Colombo course, and the rates it pays,may be lessened pro tanto. If the contributory Principle is unsound, itsconverse would seem to be unsound also. Besides, what is to be done"with the profit made at Colombo, yet “contributed ” by Nuwara Eliya,.and to be deducted from the annual value of Colombo accordingly ?
• (1909) A. C. 78.
* (1916) 1 A. C. 93.
MACDONELL CJ.—Ceylon Tut/ Club v. Colombo Municipal Council.4IS
The truth is that this argument for the plaintiffs lacks the necessarylegal basis, namely, that there must be the same ownership of the twoenterprises, Colombo and Nuwara Eliya. If there is one and the sameowner of two or more enterprises, or rather of one enterprise with severalbranches, then the rating of it can be treated as a whole, so much to.beadded here, so much to be deducted there, and a right result can bearrived at, namely, that each part of the enterprise in each rating areashall be assessed to that area in the correct amount but so that theseparate amounts so assessed shall not, when added together, exceed thecorrect assessment of the whole enterprise taken as a whole. Aparteven from the lack of the necessary legal basis, namely, identity of owner-ship, we have not in the present case the power to give effect to thisargument for the plaintiffs. If some of the profit made at Colombo werededucted from its annual value a-, having been made or contributed byNuwara Eliya, the amount so reduced should be added to the annualvalue at Nuwara Eliya. But we are not trying the assessment of NuwaraEliya, it is not before us, so the part deducted would not, and could not,go to help the Nuwara Eliya rates, it would be a gift pure and simple tothe plaintiff Club. This practically is what the argument for the plaintiffsasks of this Court.
It has been said that no case is discoverable which supports this con-tention of the plaintiffs, and my own impression is that the argument putforward is not sound in law. But I prefer not to decide it on a legalground since I think that this claim to have the annual value of theColombo course reduced by the portion of its profits contributed byNuwara Eliya can be better decided on the facts.
piis Lordship after discussing the facts proceeds : —]
The contention then of the plaintiffs that they should be allowed thewhole of the Nuwara Eliya losses is not sustainable on the evidence.
To recapitulate—two important matters can now be considered asestablished : one a question of principle, that the thing to be rated is theColombo racecourse as it stands, and the other a question of detail, butthe most important detail in the case, that the plaintiffs cannot beallowed the Nuwara Eliya capital expenditure.
The next matter to be determined is the amount to be allowed astenant’s capital and the profit eamable by him thereon. The problem isthis. No hypothetical tenant would pay such a rent as would leave himno profit. An estimate is necessary then of the profit to be allowed aseajmable by him, but to earn this profit he must have capital in handwhen he starts his tenancy so as to meet current expenses including rentand taxes as these fall due, for there will have to be expenditure by himbefore the earnings come in that will constitute his profit. The defend-ant’s assessor allowed for the profit to be earned, 10 per cent, for dividends,6 per cent, for interest on capital, and 4 per cent, for contingencies, in all20 per cent. It was suggested for the plaintiffs that 25 per cent, should
418 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
be allowed but the evidence is that 17J per cent, is what is allowed prettyuniformily in England—it was the per centage allowed, seemingly withoutobjection, in Crawford v. Municipal Council of Colombo1—and that 20per cent, was allowed in the case of the Rangoon Turf Club. A list wasput in of local companies paying in the year 1929, 25 per cent, and more,but in the absence of a statement that their shares were purchaseable inthat year at par and no more, the list was not very helpful. It wasargued that the business of racing would be uncertain and speculative tothe hypothetical tenant but it was not shown in what way it would bemore uncertain than other businesses. Clearly it would be more certainthan the business of racing in England which is liable to fog, snow andfrost as well as rain, and the evidence of the plaintiffs’ witnesses is thatin regard to racing in Ceylon the weather can practically be left out ofaccount. That racing was not speculative or uncertain in the year ofassessment 1929 is shown by the profits made in the three previous years—indeed as Mr. Orr the defendants’ assessor said, “ even a child knowsthat racing pays ”. The figure of 20 per cent, allowed for profit seems areasonable one and no special circumstances were proved requiring it tobe increased.
What then was the capital that should be allowed to the hypotheticaltenant to earn this 20 per cent? The evidence was that for the first 7months of the year the Turf Club is paying out a good deal and receivinglittle, since its main profits come from the August race meeting. Althoughthere is no racing at all at Colombo for the first four months of the yearand only minor race meetings up to the end of July, still the course hasto be kept up and general expenses have to be met including rates pay-able every three months, with a month’s grace for payment, and thehypothetical tenant would have to pay a monthly rent as – well. Profiton a large scale would therefore only begin to be made in August. There-for for the first seven months of the year the tenant must be prepared tosee his capital going out with not enough coming in to replace what doesgo out. The assessor, therefore, knowing from the accounts the averageassessable profits for the three years prior to 1929, took an average of theannual allowable expenditure—what expenditure would be allowable willbe discussed later—over the last three years, and allowed two-thirds ofthat, i.e., eight months out of twelve, for the tenant’s working expensesand two-thirds of the rent payable—a simple equation problem enablesthis unknown figure to be arrived at—and 20 per cent, of this eight months’rent being the rates for two-thirds of the year, the total of the three itemsbeing tenant’s capital. Profits must be allowed the tenant, namely, 20per cent, of his capital so arrived at, and would be subtracted from theaverage assessable profit, the remainder representing rent and rates.Substract from that remainder the right percentage, 16 2/3rds, and you willhave the amount of rate payable, the remainder being the annual valuewhich the Ordinance requires the defendants to assess as the sum on whichthe rate is payable.
No objection was taken to this method, the dispute being as to theamounts that should be allowed as tenant’s expenditure and tenant’s
* 14 N: L. R. 449.
MACDONELL CJ.—Ceylon Turf Club v. Colombo Municipal Council. 417
capital. We are for the moment discussing the latter. The plain tiffsclaimed that the tenant would have to purchase or hire certain furnitureand plant and would require capital for this byond that allowed him bythe defendants’ assessor. But this claim overlooked the fact that whatthe tenant would be taking at a rent would be a fully equipped race-course intended to be used as a racecourse, and this being so, much of thefurniture and plant, allowance for which was claimed, would be suppliedhim as part of the equipment of the racecourse, though the defendants’assessor conceded and allowed him certain other furniture and plantdetails of which can best be discussed later. For the most part thecontroversy on tenant’s capital was as to the amount of cash the tenantwould have to have in hand for the first seven and a half months. Itwas urged that he would require a considerable amount of money tofinance the totalizator, the machine that takes in the betting money andpays out those who have won from the same, and that it was impossibleto pay out from the totalizator the same day money which had been paidinto it. Attention was also drawn to the custom of cashing member’scheques to enable them to bet—in fine; the hypothetical tenant wouldrequire always to have at least a lakh in hand, which lakh must be allowedhim over and above his capital required to meet working expenses, rentand rates. This, and the scheme of tenant's capital generally, put up bythe plaintiffs, overlooked the facts that even in the barren first sevenmonths of the year when it is mainly outgoings, still there would beincomings as well, subscriptions which have to be paid before a membercan have the benefit of the Club and which on the evidence are mainlypaid by the end of January, and the monsoon races which bring each ofthem a profit. Also, the plaintiffs’ case failed to prove that the hypo-thetical tenant would always have to have his lakh in hand—indeed thefacts seem to be that it would be sufficient if he had it in hand for a fewdays before and after each race day. When after a race day he bankedhis takings from the totalizator, the over-draft or accommodation hewould have required to finance the totalizator for that race day wouldautomatically disappear. It was impossible then to hold on the factsthat the hypothetical tenant would always need this extra lakh in hand,all he would need would be the use of it for a few days from time to time. •Nor was it proved that money paid into the totalizator would be unavail-able, any of it, for paying out of it the same day, for the witnesses speakwith an uncertain voice as to this. It is not proved then that the defend-ant's estimate of tenant’s capital was wrong in omitting this extra, thelakh to be always in hand.
The other differences of opinion as to tenant’s capital wcye mainlywith regard to the expenditure to he allowed him; what things hewould have to provide, what he would have to pay out. These differenceshave in the end grouped themselves under a few headings. Introductoryto their discussion something must be said as to how they were brought,out- in evidence. The document P 15 produced by defendant’s assessorat the request of the plaintiffs on February 19, 1930, showed how hearrived at the annual value, Rs. 364,000. Mr. Eastman, the first witnessfor the plaintiffs, produced in the box certaft documents, P 4 to P 11
418 MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council.
(hereinafter referred to as P 4), which were not a counter-estimate ofannual value to that contained in P 15 but a criticism of some of thefigures in P 15 and a statement of what he claimed they should have been.This was not a very fortunate method. The defendant’s P 15 waswrong, and wrong in the plaintiff’s favour, on one important item, theinterest, Rs. 19,800, on certain debentures issued by the plaintiffs in 1923.That interest was clearly landlord’s expenditure and not tenant’s, andP 15 was, as was afterwards admitted by both sides, mistaken in con-ceding it to the tenant, and P 4 if it claimed to be of weight, should havebeen candid enough to point this out and deduct the item Rs. 19,800 fromwhat it claimed that the plaintiffs should be allowed. Reported ratingcases seem to show that it is usual for the party rated to produce anestimate of his own, made according to the principle which he claimsshould be applied but otherwise debiting himself correctly. The failureof P 4 to debit the plaintiffs with this debenture interest went far todeprive it of weight.
When the defendant’s assessor, Mr. Orr, went into the box, he produceddocuments D 5 to D 9 (hereinafter referred to as D 5) which were a revisedestimate and which showed, that making certain' allowances to theplaintiffs in accordance with the figures in P 4 which allowances had notbeen made in P 15, and withdrawing certain items, the debenture interestamong them, mistakenly conceded to the plaintiffs in P 15, the annualvalue would come out not at Rs. 364,000 at which plaintiffs’ propertyhad been assessed, but at Rs. 386,000. The defendant’s assessor wasnot claiming to increase the annual value by this Rs. 22,000 or at all; hecould not do so. He was only, as I understand him, claiming to showthat he could have brought out a larger annual value from the beginning.To this the plaintiffs, as I understand them, reply, “ if you claim thatyour estimate should have been as in D 5, then we claim the whole of theexpenditure at Nuwara Eliya in diminution of the profits we could earn,and so of the rent we could reasonably be expected to pay ”. Whetherthis is permissible may be doubted as has been said. If in reply to theacademic contention of D 5 that the annual value might have beenRs. 386,000, the plaintiffs raise the contention, equally academic, thatthey might have claimed all the capital expenditure on Nuwara Eliya,then the two arguments meet on the same basis, that of hypothesis. Butin claiming to be allowed the Nuwara Eliya expenditure they shift thatbasis. It may be, however, that I have misapprehended the purpose forwhich D 5 was produced and that this was to enable the defendants toargue that if certain figures in their estimate of Rs. 364,000 were wrongwhereby the estimate of Rs. 364,000 would have to be reduced, still theycould support that estimate by the revised figures of D 5 ; " provided Ican prove that the estimate ought not to be below Rs. 364,000, then Ihave proved my case and it does not matter by what particular figures Iarrive at the Rs. 364,000 ”. If that is so, and if the defendant does putforward D 5 as a substantive alternative to its original P 15, thencertainly the plaintiffs might claim that they were entitled to be allowedthe capital expenditure on Nuwara Eliya as a substantive alternative tothe case that they originally propounded in P 4. On this assumption the
MACDONELL CJ.—Ceylon Turf Club v. Colombo Municipal Council. 419
Nuwara Eliya capital expenditure has been dealj; with at length earlierin this judgment and the opinion has been expressed that it cannot beallowed.
[His Lordship after dealing with the allowable item of expenditureproceeds as follows : —]
Having discussed the more particular disputed items affecting both theColombo racecourse and that of Nuwara Eliya, we can now come to (hemore general headings that are in dispute. The first of these is, “ Generalexpenses less taxes”. On this the defendants’ original estimate P 15allowed Rs. 81,385.21 and plaintiffs in their P 4 accepted this, but in D 5the defendants reduced it to Rs. 79,821.18, deductihg legal expensesRs. 481.71 and insurance Rs. 1,082.28. Insurance as being a safeguardto the buildings and other equipment of the racecourse is in the nature ofmaintenance, and so landlord’s expenditure. The legal expenses aresaid to have been incurred in connection with the re-aligning of the coursewhich would be a matter for the landlord. «
The next general item in dispute is, “ Debenture interest ”, Rs. 19,800.This was allowed by the defendants in P 15 and the allowance wasaccepted by the plaintiffs in P 4 without comment. As to this thedefendants’ assessor says, “ these debentures are for the purpose ofmaking new buildings and that would be owner’s expenditure ….If the owner had to provide occasionally for new buildings he would haveto pay the interest and not the tenant …. Originally I allowedit (i.e., the debenture interest) as I did not know* what the debentureinterest was for”. In argument to this Court learned Counsel for theplaintiffs expressly abandoned any claim to include this debentureinterest in tenant’s expenditure, since beyond question it is landlord’sexpenditure and the inclusion of this item in P 4 goes far to deprive thatdocument of weight, as has been said before.
The next item is, “ Depreciation of plant ”, Rs. 2,525. This item wasput forward by plaintiffs in P 4 and as to this Mr. Orr says, “ the questionagain arises as to what they meant by plant. The majority of the itemswould be depreciation to grandstand and buildings and therefore Idisallowed that. It is not really an expenditure but a reserve put by fordepreciation”. This evidence does not perhaps conclude the matter inview of the discussion to us by Mr. Keuneman of P 5, one af the plaintiffs’documents put in along with P 4. This document P 5 is called a list offurniture and plant. Mr. Keuneman went through the list, -admittingthat certain of the articles mentioned would have to be supplied by thetenant and if so, would be tenant’s expenditure, for instance “ paper for thetotalizator ”, Rs. 231, “ lawn mowers ”, Rs. 369, “ motor lawn mower ”,Rs. 2,181, “ trailer pump ”, Rs. 7,656, “ motor roller ”, Rs. 7,934, and“ motor lorry ”, Rs. 2,867. The total of these articles of plant whichMr. Keuneman very candidly admitted were tenants’ expenditure comes,on addition, to Rs. 22,162. On this the plaintiffs in P 5 claim deprecia-tion at 7£ per cent, which would be Rs. 1,662. If .1 understood theargument for the defendants correctly, it was an admission that thisRs. 1,662 for depreciation should be allowed to the plaintiffs.
420 ^ MACDONELL C.S^—Ceylon Turf Club v. Colombo Municipal Council.
f~r- rr »
The next item is, “ Depreciation of furniture ”, Rs. 784, to be found in'the same document P 5.. Mr. Orr claims that the eightjponfchs workingexpenses which he has allowed covers depreciation** The questiondepends on whether the particular furniture is part of the equipment of aracecourse intended to be used as a racecourse. Some furniture, forinstance, garden seats, it was conceded, would be tenant’s expenditure,but pretty certainly not the whole, so that this item Rs. 784 would haveto be considerably reduced, it is not easy to say to what extent. In anycase the item is a small one.
It will be observed that the Rs. 1,662 which would be the allowance fordepreciation on the “ plant ” in P 5 conceded to the tenant’s expenditure,is just 50 per cent, of the whole amount claimed by plaintiffs in P 5 fordepreciation, i.e., Rs. 2,525 and Rs. 784 or Rs. 3,309 in all.
The next item is, “ Stewards ”. For these Rs. 42,000 was allowed inP 15 and is still allowed in D 5. This figure is arrived at by allowing fofcseven paid stewards at° Rs. 500 a month, reckoning the year at twelvemonths although in actual fact racing is carried on only for about eightor nine months. In P 4 the plaintiffs claimed to double this sum andasked to be allowed Rs. 84,000, that is to say, stewards at Rs. 1,000 amonth. The actual position is, as has been said, that there is a stipen-diary steward and five to seven honorary stewards unpaid. The argumentfor the plaintiffs, as I understand it, is that if the enterprise of the TurfClub were taken over by a hypothetical tenant to be run with a view to aprofit, it would be impossible to obtain the same admittedly high type ofman as is at present obtainable as a steward and that it would be necessaryto pay your stewards. Mr. Eastman says, “ I do not know whether theywould work for a commercial concern. I do not think the right type ofman would be associated with this racecourse in Colombo if it were runpurely as a business enterprise …. You could get men but youcould not get the right men. I think they, i.e., the right men, would beassociated with a commercial concern if they were paid an adequatesalary ”. Mr. Corbett says, “ the stewards are as a rule wealthy men andmen of standing. I should say very much of standing. I would notadmit that they are men who would not need a salary. They are not sowealthy that they would not be pleased if something were paid to them ”.Mr. Orr on the other hand maintains that men who are keen enough onracing to take on the position of steward would do so whether they werepaid or not. He made the allowance Rs. 42,000, not because he thoughtthat the item ought really to be allowed, but because of the decision of theBurmese Courts allowing a similar item to the Rangoon Turf Club. It isnot very easy to understand the argument for the plaintiffs, since to saythat men of the standing and integrity required would take up the post ofsteward of the Turf Club run as a commercial concern if they were paida high salary, but not if they were paid a small one, does not seem veryconvincing. At the present moment the Turf Club with its high repu-tation can get men of the necessary position who carry the entire“confidence of the public. These men are willing to take on the duty withall the responsibility involved and they are willing to do it for nothing.Why necessarily would they demand pay if the Turf Club were run as a
MACDONELL C.J.—Ceylon Turf Club v. Colombo Municipal Council. 421
commercial concern? It might be argued the other way, that it wouldnow be all the more necessary to give the public confidence in such aconcern, mjd that nothing would be better adapted to establish thatconfidence jhan to have a body of stewards of high standing, unpaid.The matter is taken so much into the realm of conjecture that it iscertainly difficult to say that the plaintiffs have made out their case fordoubling the (you would say) quite liberal amount of Rs. 42,000 a yearallowed by the defendants in their original P 15 and in their revised D 5.Perhaps the matter is concluded by the evidence of Mr. Corbett, theplaintiffs’ Secretary, where he says, “in England there are many race-courses owned by limited companies and run for a profit. In thosecases they have had no difficulty in obtaining the services of honoraryunpaid stewards. If racecourses are rim for private profit or not,they get honorary unpaid stewards but I cannot be positive, that is myimpression ”.
The last item is, “ Tenant’s services ”, for which the plaintiffs in theirP 4 claim Rs. 24,000. The defendants’ P 15 and D 5 allow them nothingon this head. The present position is this. There is an unpaid committeeof the Turf Club and the evidence seems unanimous that if the enterprisewere in the hands of a hypothetical tenant he would have no committeeat all; a committee would only hamper him in making the 20 per cent,profit that is allowed him. There is also at present a paid secretary atRs. 2,250 a month. It was argued for the plaintiffs that the hypotheticaltenant would keep on this secretary but do a great deal of work himselfand would be entitled to pay for his services. He would credit himselfwith so much as a salary for those services and have to be allowed it astenants’ expenditure. He would be his own paid manager in fact. Onthe other hand there is evidence that the present paid secretary ispractically the manager of the Club. Mr. Corbett says, “ I as secretarymanage the Club under the control of the committee ”, and he hints thathe would have an easier time if he managed the Club without that com-mittee. But that surely is what the hypothetical tenant would do. Hewould have no committee and by being his own manager would savehimself the salary, Rs. 27,000, of a highly paid secretary. It. is in evidencethat at present the stipendiary steward does the work of assistant secretaryand receives Rs. 250 a month for the work as such, extra to his pay asstipendiary steward. It is interesting to notice that this Rs. 250 a monthor Rs. 3,000 a year, is exactly the difference between what Mr. Corbettwas getting as secretary in 1928-29, namely, Rs. 27,000, and the itemclaimed on P 4 for tenant’s services Rs. 24,000. The position certainlyseems to be that the hypothetical tenant would be his own manager, inother words, that he would save himself the Rs. 27,000 or thereby,which at present the Turf Club pays a secretary and is allowed for. Ifa certain amount extra were allowed him additional to the salary of theassistant secretary, this would really be all that a hypothetical tenantcould fairly claim to be allowed additional to the salaries bill which theTurf Club in actual fact now pays. The evidence does not, however, giveany figures on which this extra amount could be arrived at.
422 MACDONEL.il C.J.—Ceylon Turf Club v. Colombo Municipal Council.
It is now possible to summarize the position disclosed by the threeestimates—defendants’ P 15,- plaintiffs’ P 4, and defendants’ revision D 5.You are again faced with the difficulty, what exactly do the parties admitto be the powers of the Court with regard to these documents ? Thedefendants cannot increase their original estimate of Rs. 364,000. Thatis conceded and the defendants have not attempted to do so. If theplaintiffs argue that the defendants by the very fact of putting in D 5admit their original estimate of Rs. 364,000 to have been wrong wherevercorrected by D 5 and that the original estimate of Rs. 364,000 should bereduced pro tanto, whereby they would claim that this appeal should bedetermined in their favour—with costs I suppose to follow the event—there would be a very obvious answer, that if you look at D 5 for onepurpose, namely, to reduce the original estimate, you must look at it in itsentirety and find out whether it does really reduce the original estimate.It will be seen later that it does not. If, however, the plaintiffs’ claim isthat their estimate P 4 must be accepted in its entirety as confutingdefendants’ original estimate P 15, the answer is that it does not seem onan analysis of the claims in P 4—they have been discussed in detail above—that the plaintiffs have made good the position that they took up inP 4. A large r. umber of the items which they claim have been shown byevidence and argument which you feel compelled to accept, to be land-lord’s expenditure and not tenant’s expenditure at all, and if that is so,P 4, quite apart from the question of debenture interests, cannot claim tobe established. The items of its claim have been discussed in detailand it is unnecessary to repeat that discussion. As, however, all threedocuments were argued before us without, as I understand, seriousobjection on either side, it will certainly be useful to show how far thedefendant’s original P 15 had been modified by their revised estimate D 5.To do this it will be necessary to add together first the items which thedefendants omitted in their original estimate P 15 but which they nowadmit must be credited, to the tenant, and then to add together the itemswhich they originally on P 15 allowed to the tenant but now claim shouldnot be allowed. The difference between these two totals will be someguide as to whether the annual value as estimated, namely, Rs. 364,000was reasonable or the reverse. Now the items which were omitted fromP 15 but which the defendants by D 5 admit should have been allowed tothe plaintiffs, are three in number—“ Upkeep of course ”, including“ Upkeep of buildings Rs. 5,475; “ Upkeep of buildings ” at NuwaraEliya, Rs. 511.95, “Upkeep of course, &c. ”, at Nuwara Eliya, Rs. 1,720.62,making a total of Rs. 7,707.57. The amounts which the defendants byP 15 originally allowed the plaintiffs but which now by D 5 they say theywere mistaken in allowing and therefore deduct, are as follows : —Fencesand hedges, Rs. 3,250.32 (i.e., they had cut out 80 per cent, of whatthey originally allowed on P 15), hire of fans, Rs. 1,740.64, totalizatormaintenance, Rs. 3,006.84 (i.e., what was originally allowed by P 15 hasbeen reduced by that amount), upkeep of course at Nuwara Eliya,Rs. 899.82 (i.e., cutting out insurance from what they orginally allowedon P 15), hedges, fences, &c., at Nuwara Eliya, Rs. 1,093.87 (i.e., they
MACDONELL C-J.—Ceylon Turf Club v. Colombo Municipal Council. 423
have cut out 80 per cent, of what they originally allowed on P 15), generalexpenses, Rs. 1,564.03 (i.e., legal expenses deducted). These six itemsadded together come to Rs. 11,555.52. This total represents amountswhich the defendants originally allowed to the plaintiffs but which theyclaim on a proper application of the law should not have been allowed.If the Rs. 7,707.57 which the defendants now admit should have beenallowed in the first instance, is deducted from this total, Rs. 11,555.52,there will be a difference against the plaintiffs of Rs. 3,847.95, or in otherwords the defendants could, had they been so minded, have added thatamount to the original estimate of Rs. 364.000. It will be observed thatthese figures have not included the debenture figures Rs. 19,800 whichconfessedly should never have been allowed to the tenant, and the nettresult, if the defendants’ arguments and figures are correct, is that theassessed annual value of Rs. 364,000 was some Rs. 22,000 less than itcould have been. Even if something further be allowed to the tenant onthe two items which are left doubtful, namely, depreciation of plant andfurniture and something for tenant’s services or rather for an extra clerkto assist him in his work as manager, still it seems perfectly clear that theassessed annual value of Rs. 364,000 cannot be called excessive but seemsrather to have erred on the other side and to have let the plaintiffs offtoo lightly.
This judgment has perforce been lengthy both from the number ofpoints in dispute and from the many details involved. Its conclusionsmay thus be summarized. The grounds of objection to the assessmentassigned by the plaintiffs were sufficient under section 117 and section 124of the Ordinance, and the order .dismissing the action because thosegrounds were insufficient must be set aside. The subject to be ratedwas the enterprise of the plaintiffs, the racecourse at Colombo as it stood,as a going concern, intended to be used as a racecourse. Anythingnecessary for the repair, maintenance, or upkeep of that enterprise wouldbe part of the equipment of that racecourse intended to be used as such,and so would be part of the subject to be rated, and this whatever be theexact ambit of Kirby’s Case and the cases leading up to it. That subjectwould have to be rated on the revenue or profits basis. The plaintiffClub would have to be considered as itself a possible tenant of its ownenterprise in estimating what rent a tenant would pay therefore. Theallowances to be made the tenant would not include the capital expendi-ture on the Nuwara Eliya course, certainly on the facts, probably as aquestion of law also. The profit which the defendants allowed the tenanton the capital he would need was 20 per cent, and this allowance was notshown to us to be wrong. The defendants had used a correct method inarriving at the annual value of the subject to be rated and so of the ratesthereon, and the amount they had allowed the tenant as capital was notshown to us to be insufficient. Nor was it shown to us that there hadbeen any error as to the amount allowed by them for tenant’s expenses.The assessment of Rs. 364,000 could not be proved to be excessive butwas if anything rather less than what might have been imposed. Theappeal of the plaintiff Club therfore fails.
424 MACDONELL. CJ.—Ceylon Turf Club v. Colombo Municipal Council.
The action below was actually dismissed because the Court held thegrounds of objection to be insufficient but the reversal of this conclusioncannot have any effects on costs, since the defendants never contendedeither below or to this Court that the grounds of objection wereinsufficient/
The appeal must be dismissed with costs.
Drieberg J.—I agree.
Appeal dismissed.