Sri Lanka Law Reports(1998) 2 Sri L.R.
SUPREME COURTDHEERARATNE, J.,WIJETUNGA, J.,BANDARANAYAKE, J.
S.C. (AP). NO. 52/97S.C. Spl. LA 156/96
A. (AP). NO. 765/88 (F)
C. HORANA NO. 2612/REJUNE 01 AND JULY 31 1998
Rent Act, No. 7 of 1972 – Business premises – Excepted premises – Regulation3 – Premises assessed twice as three separate units and twice as a singleconsolidated unit – Applicable annual value.
Wakkumbura v. Nandawathie
The respondent was the tenant in respect of 3 adjacent premises Nos. 83, 81,83/1, during the period 1958 – 1987. The premises were subject to 4 assessments,twice as three separate units and twice as a single consolidated unit.
The plaintiff-appellant instituted action against the defendant-respondent to haveher ejected from business premises formerly bearing assessment Nos. 83, 81and 83/1, and presently assessment No. 81. It was contended by the plaintiffthat the premises No. 81 is a business premises, that it was first assessed asNo. 81 in 1983, and the said premises are excepted premises. The defendant'sposition was that the first assessment of the premises as a single' unit and thatas business premises was in 1970, and therefore the premises are not exceptedpremises.
The District Court held that, the premises are not excepted premises which wasaffirmed by the Court of Appeal.
For the purpose of the existence of a new premises it is essential thatsome kind of physical alteration to the premises was carried out. In asituation where there is a physical alteration to a premises the extent andsignificance of that physical alteration would certainly have to be takeninto consideration.
The premises are business premises. The first time the premises wereassessed as one unit as business premises after January, 1968, was in1970. There is no evidence of substantial physical alteration to the buildingthereafter; in this circumstances, it cannot be said that a new premiseshave come into existence and therefore the assessment in 1970 willcontinue to govern the premises.
APPEAL from the judgment of the Court of Appeal.
Cases referred to:
Ramya Gunawardena v. Pieris – 1995 – 2 S.LR 225.
Ansar v. Hussain – 1986 1 CALR Vol. I- Part 3365.
Hewavitharana v. Ratnapala – 1988 – 1S.LR 240.
Weerasena v. Perera – 1991 – 1 S.LR121.
Chettinad Corporation Ud. v. Gamage -62 N.LR86.
Sally Mohamed v. Seyd. – 64 N.LR 486.
Premadasa v. Atapattu – 71 N.LR 62.
A. K. Premadasa, P.C., with C. E. de Silva for appellant.
T. B. Dillimuni with Tissa Bandara for respondent..
Cur. adv. vult.
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July 31. 1998
SHIRANI BANDARANAYAKE, J.
The plaintiff instituted this action on 03.01.1985 against the defendant,her tenant, to have her ejected from premises formerly bearingassessment Nos. 83, 81 and 83/1 and presently bearing assessmentNo. 81, Anguruwatota Road, Horana. Admittedly, the premises inquestion are business premises situated within the Urban Council limitsof Horana. The main question in dispute at the trial was whether thepremises are excepted premises or not within the meaning of regu-lation 3 of the Schedule to the Rent Act, No. 7 of 1972. The learnedtrial Judge held in favour of the defendant that the premises in questionare not excepted premises. The Court of Appeal affirmed the judgmentof the learned District Judge and the plaintiff has now appealed.
The facts leading to the filing of this action are briefly as follows:
The respondent had been a tenant of the appellant in respect of3 adjacent premises, viz Nos. 83, 81 and 83/1, Anguruwatota Road,Horana. According to the Assessment Register of the Urban Council,Horana, during the period 1958 to 1987 the premises in suit weresubject to 4 assessments, twice as three separate units and twiceas a single consolidated unit (S1).
A. 1958 to 1969 – assessed under 3 units of assessment.
83- tiled textile shop and land
73/12 – tiled tenament and land83/1/1 – tiled studio and land
1970 to 1976 – the three sub divisions were consolidated asone unit of assessment No. 83, described asupstair study and dispensary. The annual valueof 1970 consolidated assessment wasRs. 1,222/-.
1977 to 1982 – there was a sub division of the assessmentinto three units as assessment numbers 83,81 and 83/1:
No. 83 was assessed as tiled textile shopand land at an annual value of Rs. 556/-.
SCWakkumbura v. Nandawathie (Shirani Bandaranayake, J.)157
No. 81 was assessed as tiled upstair photostudio at an annual value of Rs. 444/-.
No. 83/1 was assessed as tiled small houseand land at an annual value of Rs. 222/-.
1983 to 1987 – the three premises were assessed together asassessment No. 81 and described as tiledboutique and land at an annual value ofRs. 2,348/-.
It was the contention of learned President's Counsel for theappellant that, the premises No. 81 is a business premises, that itwas first assessed as No. 81 in 1983 at an annual value ofRs. 2,348/- and that for this reason the said premises are exceptedpremises in terms of regulation 3 of the Schedule to the Rent Act.Learned President's Counsel further contended that the question atissue is the fact of assessment of the premises and not the structuralalterations. Learned counsel for the respondent on the other handcontended that the first assessment of the premises in suit as a singleunit and that as business premises was in 1970. Regulation 3 of theSchedule to the Rent Act, No. 7 of 1972, reads as follows:
Any business premises .. . situated in any area specified in Column1 hereunder shall be excepted premises for the purpose of thisAct if the annual value thereof as specified in the assessment madeas business premises for the purposes of any rates levied by anylocal authority under any written law and in force on the first dayof January, 1968, or, where the assessment of the annual valuethereof as business premises is made for the first time after thefirst day of January, 1968, the annual value as specified in suchassessment exceeds the amount ..specified in the correspondingentry in column II.
Town within the meaning of the Rs. 2,000Urban Councils Ordinance
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Clearly the assessment in force as at January, 1968, could notbe applied because what existed then were 3 premises 2 of whichwere business premises while the other was residential premises. Theassessment made in 1977 too could not be applied for the samereason.
The question at issue then is whether for the purpose of regulation3 of the Schedule to the Rent Act, No. 7 of 1972, the annual valueassessed in 1970 is applicable or whether the annual value assessedin 1983 is applicable.
Several authorities were relied upon by Mr. Premadasa, learnedPresident's Counsel for the petitioner and Mr. Dillimuni, learned counselfor the respondent.
Learned President's Counsel for the appellant, submitted that threeunits which existed from 1977 to 1982 were formally consolidated anda new unit, namely, No. 81 carrie into being on 01.01.1983. This wasassessed at an annual value of Rs. 2,348/- and entered in theAssessment Register. His position was that on this basis, the newunit should be regarded as excepted premises. Learned President'sCounsel for the appellant, submitted that one of the 3 units of as-sessment that existed immediately prior to the 1983 assessment hasbeen described as a small house (qjas sou). His submission was.that when this assessment is combined with the assessment of theremaining two units of business premises that co-existed in 1982, theconsolidated premises in 1983 should be considered as a new premises.
Mr. Premadasa relied on the decision of the Court of Appeal inRamya Goonewardene v. Peirisf'K In that case 3 units were let to thetenant which were consolidated under a single assessment number318, in October, 1980. The premises No. 318 was assessed for thefirst time at an annual value of Rsi 3,750/- thus falling within the ambitof excepted premises. The landlord sued the respondent-tenant forejectment. The appellant-landlord relied upon the entries in the relevantAssessment Register. The learned District Judge relied on certainletters written by the Acting Chief Assessor to the Chairman, UrbanCouncil, Panadura, pointing out that the assessment was made byerror and dismissed the action,. Grero, J. was of the view that toascertain whether the premises are excepted premises, recourse shouldbe had not only to the Rent Act, No. 7 of 1972, but also to the
Wakkumbura v. Nandawathie (Shirani Bandaranayake, J.)
provisions of sections 233, 235 and 237 of the Municipal CouncilsOrdinance. He went on to state that:
I am of the view that a consolidation effected under section 233
to any existing house, buildings etc., need not have physicalalterations as contemplated in section 237 (1) of the MunicipalCouncils Ordinance. Once such assessment is made in respectof consolidated premises and the annual value is entered in theRegister, unless it is amended according to the procedure laid downin section 235 of the Municipal Councils Ordinance, the annualvalue remains in force. On the basis of such annual value ratesare calculated and entered in the Assessment Book (Register).
To follow Ramya Goonewardene (supra) in effect would be to takethe law back to the time when the regulation regarding the exceptedpremises read as “the annual value thereof as assessed for thepurposes of any rates levied for the time being by any local authorityunder any written law exceeds . . . (see 1956 LE chapter 274,schedule).
Learned counsel for the respondent on the other hand relied onAnsar v. Hussain1s>, Hewavitharana v. Ratnapa!al3> and Weerasena v.Perera<4>, where it has been consistently and repeatedly upheld thata subsequent assessment cannot be considered as a first assessmentof a premises unless there is cogent evidence to show that there weresubstantial alterations and additions to the premises. In Ansar v.Hussain (supra) the plaintiff instituted action for ejectment of defendantpn the ground that the rents were in arrears for more than one monthin terms of section 22 of the Rent Act. The premises used as businesspremises were rent controlled and governed by the provisions of theRent Act. They had undergone changes by way of subdivision andconsolidation. After a careful consideration of a series of cases,Wanasundera, J. was of the view that:
It would be observed that all these judgments deal with varyingactual situations and such situations can be multifarious. A singleassessed unit may be subdivided into two or more units and eachseparately assessed; two or more separately assessed units maybe consolidated into one. Separately assessed units may be joinedto adjacent units already under assessment. Portions of suchadjacent units may simultaneously undergo changes by division or
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other consolidations. There is no limit to the permutations andcombinations that are possible in this regard. It would be extremelydifficult to work out any kind of general theory to cover all suchsituations some of which are known, but there may be others whichmay be beyond contemplation and arise in the future.
This decision was followed in Hewavitharana v. Ratnapala (supra),where Dheeraratne, J. after a careful consideration of all availableauthorities held that the 1968 assessment is applicable to the premisesin question for the purpose of regulation 3 and that it does not becomeexcepted premises as a result of the assessment made in 1975. Inthis case two adjacent business premises Nos. 350 and 356, admit-tedly governed by the provisions of the Rent Act upto October, 1975,were occupied by one tenant under the same landlord. The tenanthad connected the two premises by an inter communication door. Atthe request of the landlord in October, 1975, the Municipal Councilgave one assessment number to both premises and fixed the annualvalue at Rs. 8,310/- by addition of the two previous annual valuesincreased by Rs. 10/-. The landlord filed action against the tenantfor ejectment on the basis that the premises were excepted premises.The question arose as to whether for the purpose of regulation No.3 as to excepted premises, the annual value of January, 1968 or theannual value fixed in October, 1975, should be applied.
This question was discussed again in Weerasena v. Perera (supra).In this case the plaintiff let to the defendant premises bearingassessment No. 97A, Stanley Tillekeratne Mawatha, Nugegoda in1972 and the premises being business premises assessed for the firsttime at an annual value of over Rs. 2,000/- was admittedly exceptedpremises within the meaning of regulation 3 of the schedule to theRent Act. The rear portion of the premises, a storeroom was laterseparately assessed as 97B. The plaintiff's action for ejectment failedas premises No. 97B was alleged to be covered by the Rent Actand there being no valid termination of the tenancy. The Court ofAppeal reversed the judgment and directed ejectment from the fullpremises. The Supreme Court held that applying the test in Ansarv. Hussain (supra) in the absence of any physical alteration to thepremises 97B, it cannot be said that a new premises has come intoexistence. After a careful consideration of the question before him,Dheeraratne, J. stated that:
Wakkumbura v. Nandawathie (Shirani Bandaranayake, J.)
The problem may also be approached differently by examining theapplication of regulation No. 3 of the schedule to the Rent Actto premises No. 97B. It may be asked whether the assessmentof the annual value in force in January, 1968 or the assessmentmade in July, 1972, is applicable. On this question, it appears tome that the decided authorities have taken three differentapproaches. The first, was to give prominance to the originalassessment, paying little attention to the transformation the premiseshas undergone subsequently attracting separate new assessments.This approach is reflected in the cases of Chettinad CorporationLtd. v. damage® and Sally Mohamed v. Seycf6>. The second wasto grant almost absolute sanctity to a new assessment made byrating authorities and to treat that as giving birth to new premisesin place of the old as reflected in the case of Premadasa v.Atapattu(7>. The third, is that reflected in the judgment ofWanasundera, J. in Ansar v. Hussain (supra), a via media throughwhich the Court will not only look at the mere fact of a separateassessment, but also, at the extent and significance of the changeinvolved and the impact of that change on the valuation andassessment. This last approach, commends itself to me as asafeguard both against capricious assessments made by ratingauthorities affecting rights of parties to the letting and also againstpossible manipulations of the assessments by interested partieswith intent to give undue advantages either to landlords or totenants (see for example Hewavitharana v. Ratnapala) . . .Considering the absence of any physical alterations whatsoevermade to premises No. 97B, I am unable to hold that new premiseshave come into existence. The original assessment in force as atJanuary, 1968, will continue to govern the entire premises.
I am in complete agreement with the view expressed by Dheeraratne,J. in Weerasena v. Perera (supra) that the mere fact of a separateassessment alone is not sufficient to hold that a new premises hascome into existence. For the purpose of the existence of a newpremises it is essential that some kind of physical alteration to thepremises was carried out. In a situation where there is physicalalteration to a premises, the extent and significance of that physicalalteration would certainly have to be taken into consideration.
It is common ground that the premises in question are businesspremises. The first time the premises were assessed in one unit asbusiness premises after January, 1968, was in 1970. There is no
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evidence of substantial physical alteration to the buildings thereafter.In the circumstances, I am unable to hold that new premises havecome into existence and therefore the assessment in 1970 will continueto govern the premises in question. For the above reasons, the appealis dismissed and the judgment of the Court of Appeal is affirmed.There will be no costs.
DHEERARATNE, J. – I agree.
WIJETUNGA, J. – I agree.