[1950] EACA 388

# H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (President), BRIGGS and BACON, Justices of Appeal

### (1) SHEIK ALI MOHAMED OMER BAZARA, (2) SHEIK AHMED OMER BAZARA. (3) SHEIK ABDULRHEMAN M. O. BAZARA. Appellants (Original Appellants)

# VALUATION COMMITTEE, ADEN MUNICIPAL COUNCIL, Respondents (Original Respondents)

# Civil Appeal No. 74 of 1956

(Appeal from the decision of H. M. Supreme Court of Aden, Knox-Mawer, J.)

Rating valuation—Whether rent paid by tenant or sub-tenant criterion for valuation—Aden Municipal Ordinance (Laws of Aden, 1955, Cap. 102), section 50 (1) and (2)—Aden Rent Restriction Ordinance.

The appellant owned a property in Aden the ground floor of which, comprising a small shop and a suite of offices, were let to $X$ Co, at a monthly rental of Sh. 112/50. X Co. sublet the ground floor suite, together with other premises, to Y Co. at a rent, which for the first 20 months of occupation averaged Sh. 3,164/74 per month, and was apportioned by the Municipality as to threefifths to the suite and two-fifths to the other premises comprised in the sub-lease. The rating valuation was based on the rent paid by $Y$ Co. to $X$ Co. and not on that paid by $X$ Co. to the appellants. The Supreme Court dismissed an appeal from the assessment.

On appeal it was submitted that the "gross value" on the true construction of section 50 of the Municipal Ordinance must, so far as the ground floor offices were concerned, be based on the rent paid to the appellants.

*Held* $(14-12-56)$ .—(1) Sub-sections (1) and (2) of section 50 of the Municipal Ordinance provide for an assessment of the gross value of any given rateable property upon one or other of two bases, namely where the property is not "let for its full rental value", its value<br>for rating purposes is to be the notional rent prescribed by sub-section (1); but where the property is so let, its value for such purposes is to be the actual rent.

(2) In this case, sub-section (2) applied and the value was properly fixed by reference to the rent paid by $Y$ . Co. and not that paid to the appellants.

Appeal dismissed.

Cases referred to: Churchward v. Ford, (1857) 2 H. and N. 450; Thompson v. Commissioners of Inland Revenue, Tax Cases, Vol. XX, part 5, 319.

[Editorial note.—The Court gave a warning as to the scope of this decision. Where by reason of the existence of sub-tenancies more sums than one may represent the rent actually paid for certain premises, it is reasonable to presume in the absence of other<br>evidence that the highest of those sums represents the full rental value and therefore to apply sub-section (2). But the presumption that the highest, or any, rent actually paid<br>represents the full rental value may be displaced by showing from other evidence that<br>it is either abnormally low or even abnormally h England all rating proceeds on the basis of notional value. There is no immediate relation, as under sub-section (2) between the actual rent and the gross value. For this reason English authorities on rating must be treated with some caution.]

Joshi and Handa for appellants. Nunn for respondent.

JUDGMENT (prepared by Bacon, J. A.).—This appeal arose out of an objection by the appellants to the valuation for rating purposes of their premises situated in Aden and described as No. 32, H Section, Tawahi. The annual valuation, that is to say the "gross value" within the meaning of section 50 of the Municipal Ordinance (Cap. 102 of the Laws of Aden, 1955, to which we shall refer as "the Ordinance") was fixed at Sh. 32,388. On objection to that figure being taken before the respondent Committee pursuant to section 55 of the Ordinance, the figure was maintained by a decision of the Committee which is recorded in a letter from the Municipal Secretary to the first appellant dated 2nd May, 1956. The appellants thereupon appealed to the Supreme Court of Aden under section 56. The Supreme Court dismissed that first appeal with costs. The appellants then brought a second appeal, which we likewise dismissed with costs. We now give our reasons for so doing.

The material facts are as follows. The property concerned is owned by the appellants jointly. The first appellant is also a partner in the Arab Navigation and Transport Company (which we shall call "the firm"). The property consists of a suite of offices and a small shop on the ground floor, and another suite of offices on the first floor. A number of years ago the ground floor suite was let by the appellants to the firm at a monthly rental of Sh. 112/50, and the firm accordingly used that suite as its place of business. There is no evidence as to whether, and if so to what extent, that rental was restricted by the Rent Restrictions Ordinance. On 24th October, 1952, the firm made an agreement in writing with Ethiopian Airlines Incorporated whereby the latter were granted the right of exclusive occupation of a specified office and godown on Aidroos Road Crater, and the ground floor suite of offices in the premises concerned in consideration of a sum. payable quarterly, equal to 2 per cent of their "total sales of transportation of passengers and freight made in Aden". The agreement was to run for five years, subject to extension by mutual consent. The Airlines duly entered into possession and paid to the firm the stipulated consideration from time to time, amounting to Sh. 63,294/83 for the period 1st November, 1952, to 30th June, 1954-20 months at an average of Sh. 3,164/74 per month. The rating valuation of the whole of the Tawahi premises was arrived at on the footing, inter alia, that the "gross value" of the ground floor offices was to be fixed by reference to the consideration paid therefor by the Airlines to the firm, and not to the rent paid by the firm to the appellants as owners. The consideration paid by the Airlines was apportioned by the Municipality, as to three-fifths to the offices occupied by them in the Tawahi premises, and as to two-fifths to the office and godown in Crater. No objection was ever taken to that apportionment.

The learned Acting Chief Justice held that the agreement between the firm and the Airlines was a sub-lease of the ground floor offices. Indeed, in ground 2 of the grounds of appeal to the Supreme Court the consideration paid by the Airlines was described by the appellants themselves as "the rent paid... by the sub-tenants to the tenants". In our view, there is no doubt but that the Airlines were sub-lessees of those offices as from 24th October, 1952. The appellants did not contend otherwise before us.

Up to the moment when the hearing of this second appeal commenced there was only one real dispute between the parties on either appeal, namely whether the appellants were right in their contention that upon the true construction and application of section 50 of the Ordinance the "gross value" for rating purposes must, so far as the ground floor offices were concerned, be the rent paid by the firm to the appellants and not the rent paid by the Airlines to the firm. But at the outset of the hearing before us Mr. Joshi, for the appellants, sought leave to add the following ground of appeal: —

"2. The learned Acting Judge did not consider that the annual valuation of Sh. 32,388... was erroneous and arbitrary and could not have been properly arrived at in view of the evidence on the record."

When asking leave, Mr. Joshi stated that he wished to argue that the figure Sh. 32,388 must be wrong on any view of the evidence. It appeared to us that any such argument, if permitted, might involve the contention that the "gross" value" should in all the circumstances have been fixed neither by reference to Sh. 112/50 per month nor by reference to Sh. 3,164/74 per month but on the footing of some intervening figure which represented the true (though notional) rent for the purpose of section 50 (1). As we have said, no such point had been taken below—at any stage, so far as we were aware—and certainly not on the first appeal. Moreover, no evidence had been led by the appellants which might support it. Thus the argument, if put forward before us, would not be on a point of law arising out of the judgment of the Supreme Court but on a question of fact now raised for the first time before the third tribunal which had been called upon to deal with the case. On the other hand, Mr. Joshi's application might be taken in the limited sense of a request for leave to argue that, on the ascertained figures of sums paid by the Airlines to the firm, the valuation of the premises was demonstrably based on an arithmetical miscalculation.

We ruled that the application should be granted in this latter sense alone. To admit the proposed argument in its wider form would have been, in effect, to allow the appellants to present at that very late stage an entirely new alternative case by way of an attempt to save themselves from the wreck of the real case upon which they had relied throughout. We thought that it would clearly be wrong to allow that.

The theory of an arithmetical error was soon exploded. We invited Mr. Nunn. who appeared for the respondent Committee, to explain the figures. It is, we think unnecessary to say more than that he showed how the annual valuation at Sh. 32,388 had indeed been arrived at on the footing of the rent paid by the Airlines for their offices together with the other relevant factors relating to the remainder of the Tawahi premises. Mr. Joshi professed neither assent to nor dissent from the calculation, but then contended that the whole matter should be remitted to the respondent Committee with a view to their showing how they had reached their figure. We thought that there was no good reason for thus prolonging the proceedings since the result was a foregone conclusion. No more was heard before us of any alleged arithmetical error and the appeal proceeded as regards the memorandum in its original form.

The material parts of section 50 of the Ordinance are sub-sections (1) and (2) thereof, excluding the provisos to the latter. Those sub-sections are in the following terms:-

(1) The gross value of all rateable property valued under the provisions of this Ordinance shall be the rent at which such property might reasonably be expected to let from year to year on the basis that the owner thereof bears the cost of all rates, repairs, insurance and any other expenses, if any, necessary to maintain such property in a state to command that rent.

(2) Notwithstanding the provisions of sub-section (1) of this section where a rateable property is let for its full rental value, the gross value thereof shall be the amount of the annual rent for such property paid by the tenant to the landlord."

$\mathcal{L}$

Mr. Joshi propounded a number of questions which, he submitted, arose out of the language there used. In our view the sub-sections plainly provide for an assessment of the gross value of any given rateable property upon one or other

of two bases: where the property is not "let for its full rental value", its value for rating purposes is to be the notional rent prescribed by sub-section (1); but, where the property is so let, its value for such purposes is to be the actual rent. The expression "the annual rent... paid by the tenant to the landlord" which appears in sub-section (2) includes rent paid by a sub-lessee or other sub-tenant to his landlord, viz. the sub-lessor or other inferior grantor from whom the former holds the property; in the absence of any definition in the Ordinance of the term "landlord" or of the term "tenant", those terms are to be given their respective meanings as generally understood in their normal legal significance. As Bramwell, B., said in *Churchward v. Ford*, (1857) 2 H. & N. at p. 450, "The word 'landlord' does not mean the lord of the soil, but the person between whom and the tenant the relation of landlord and tenant exists". See also Thompson v. Commissioners of Inland Revenue, Tax Cases, Vol. XX, part 5, 319.

Incidentally, although it does not directly affect the present decision, the term "owner", which term is used in sub-section (1), is by section 2 of the Ordinance defined as including-

"any person, other than Her Majesty, receiving the rents or profits of any lands or premises from any tenant or occupier thereof or who would receive such rent or profits if such land or premises were let".

That definition shows that, where sub-section (1) of section 50 applies, the reasonable expectation of a sub-letting by a tenant of the premises concerned may be taken by the rating authority as the basis for fixing the "gross value".

In the instant case we therefore took the view that it was sub-section (2) which governed the "gross value" of the Tawahi premises, the whole of which were, in fact, let to tenants or to sub-tenants, and that as regards the ground floor offices that value was properly fixed by reference to the rent paid by the Airlines to the firm. For there was no evidence, apart from the agreement of 24th October, 1952, itself, as to what figure represented the "full rental value" of those offices, and in those circumstances the figure at which they were in fact let must be taken to be not merely prima facie, but conclusive evidence of the "full rental value". It was suggested for the appellants that the moneys paid by the Airlines might include a consideration for something other than the mere occupation of their offices; but, there being no evidence whatever of any such intention of fact—indeed, no evidence as to whether the Airlines were paying more or perhaps even less than other commercial concerns would be prepared to pay for offices on that particular site—we felt that no weight could be given to that suggestion.

Nor was there, in our view, any force in the contention that a sum calculated by reference to the business turnover of the occupying tenant should not be regarded as rent for present purposes. The appellants relied on $R$ . v. Westbrook, (1847) 10 Q. B. 178; there the tenant operated a brickfield on the land concerned and the rent was in the nature of royalties on output. It was observed that the royalties paid in the past on bricks actually made were at least prima facie evidence of what a tenant might reasonably be expected to pay in the future and were certainly better evidence than a notional figure calculated on the maximum number of bricks which the equipment was capable of producing, since the latter criterion might be rendered worthless by reason of strikes or similar causes. That decision is thus no authority for the proposition that the rent which is reasonably to be expected should not be calculated by reference to the proved turnover of an occupier; indeed, it supportd the contrary view, which is analogous to the view adopted by the respondent Committee in the instant case.

For these reasons we thought that the construction put upon section 50 of the Ordinance both by the respondent Committee and by the learned Acting

Chief Justice was correct and that accordingly it was right to fix the gross value of the premises in question by reference to the actual rentals paid by the various occupiers.

We would add some words of warning as to the scope of this decision. Where by reason of the existence of sub-tenancies more sums than one may represent the rent actually paid for certain premises, it is reasonable to presume in the absence of other evidence that the highest of those sums represents the full rental value and, therefore, to apply sub-section (2) to that sum. But the presumption that the highest, or any, rent actually paid corresponds with the full rental value may be displaced by showing from other evidence that it is either abnormally low or even abnormally high. An example of the former would be a tenancy of valuable premises given by a father to his son at a tenth of their normal commercial value in order to set him up in business. An example of the latter would be a tenancy of almost valueless property owned by a poor widow and representing her only source of livelihood. A rich man might take a tenancy at ten times the "full rental value" as a somewhat delicate act of charity. But such cases will always be unusual, and the essence of them is that it must be shown that the rent is not truly a commercial rent. Where parties deal at arm's length and purely on a commercial basis it will be difficult, if not impossible, to prove that a rent is of more than the full rental value. Mr. Joshi's attempt to do so in this case failed at the outset for there was no evidence whatever to support it. If the rent obtainable is limited by law, as under the Rent Restrictions Ordinance, and only that limited rent is paid, it will represent the "full rental value", although, apart from the restriction, a much higher rent could be obtained. If, however, such a restriction were imposed by law, but the tenant chose, for reasons of his own, to pay a larger sum by way of rent, different considerations might apply. It is not impossible that evidence could have been led to show that that was in truth the position in this case, but evidence was not so led. Accordingly, the question whether such a rent would be in excess of "full rental value" does not arise here and we express no opinion on it. Similarly, we express no opinion on the situation which would arise in Aden if, for some reason, a landlord was in a position lawfully to exact, and did exact, a wholly unreasonable rent for premises having a special importance to a single commercial tenant, such as a link between two other properties of the tenant. Finally, we wish to stress that in England all rating proceeds on the basis of notional value. There is no immediate relation, as under sub-section (2), between the actual rent and the gross value. For this reason, English authorities must here be treated with some caution.