1. This is a reference from the Resident at Aden in an appeal in Suit No. 113 of 1914 filed in the Court of the Resident requesting the opinion of the High Court under Section 8 of the Aden Act II of 1864 on certain questions relating to an assessment to property and sanitary tax prayed by the plaintiffs in the suit to be set aside.
2. It appears that in 1909 the firm of Abdullabhoy and Joomabhoy Lalji, whom I shall hereafter call the plaintiff's, obtained from Government a lease of certain lands in the Sheikh Othman District of Aden for the purpose of constructing saltworks thereon at an annual rent of Rs. 7,000 for the land and a royalty of eight annas per ton of salt exported. The plaintiffs proceeded to erect a factory for crushing salt on the land. The works first commenced to yield salt in the official year 1911-12.
3. The defendants are the assessing authority for the Aden Settlement under two Notifications dated 26th March 1909 levying certain taxes and laying down rules for the assessment and collection of these taxes. The Notifications were issued by the Political Resident with the previous sanction of Government and in exercise of powers conferred upon him by the Settlement Regulation VII of 1900.
4. For the years before 1911-12 the defendants had, under the powers conferred upon them under the Notifications, assessed the plaintiffs in the annual rent of 7,000 payable by them under the lease. In the year 1911-12, howevev, when the works commenced to produce salt, the Executive Committee adopted a different basis of assessment. They assessed the plaintiffs on the basis of half the produce of the works less ten per cent, landlord's deductions. In order to arrive at this figure they took the value of the salt crushed and uncrushed per ton F.O.B. Aden at Rs. 5-8 and Es. 5 respectively.
5. Apparently the Committee were induced to adopt this method of assessment upon a consideration of what they under- stood was the method of valuation for salt-pans in Bombay supported by counsel's opinion so far back as 1881 as to the propriety of such a method of assessment in regard to salt-pans in Bombay on that date. They had also obtained a decision in their favour from the Resident's Court in 1909 in respect of certain other salt-works at Aden known as the Aden or Italian salt-works. It is to be noted that the Italian works had disputed this method of assessment. Fortified by this authority the defendants applied the same method of assessment to the plaintiffs' salt-works.
6. The plaintiffs appealed against the assessment for the year 1911-12 to the Court of the Resident but the judgment of that Court was against them.
7. The plaintiffs were assessed on the same method for the years 1912-13 and 1913-14. Feeling aggrieved by this the plaintiffs have filed the present suit No. 113 of 1914 in the Court of the Resident at Aden against the assessment. The Aden Court considered it had no jurisdiction to entertain the suit but on a reference to the High Court the suit was remanded for trial on the merits. The High Court's judgment is reported in Abdullabhai Lalljee v. The Executive Committee, Aden (1016) 13 Bom. L.R. 296.
8. It appears from the judgment of the Assistant Resident that he now considers the method of assessment unusual. He does not consider it legally objectionable although the method adopted did not follow any regular rules of rating. He also considers it 'somewhat arbitrary' and says that the hypothetical tenant principle 'would have been more accurate for the reason that by that principle the premises would have been rated, whereas by the present method all those considerations go by the board and' plaintiffs are being assessed on the net out-put of each preceding year.
9. The plaintiffs appealed to the Resident who disposed of the appeal in much the same terms but made his judgment contingent on the opinion of the High Court on the questions which are now before us for consideration. They are :-
1. Whether the findings of the lower Court on issues 1 and 8 were not erroneous ?
(Issue 1). Whether the mode of assessment adopted by the defendants in assessing taxes for the years 1911-12, 1912-13 and 1013-14 is not wrong and illegal ?
(Issue 8). Whether the defendants did not not illegally and on a wrong principle in adopting for the plaintiffs' salt-works in Aden a mode of assessment alleged to have been adopted in Bombay in 1883 in respect of salt-pans worked without machinery and paying no rent or royalty V
2. Whether the learned Judge ought not to have found on issue 3 in favour of the plaintiffs ?
(Issue 3). Whether the defendants ought not to have taken the rent and royalty payable by the plaintiffs under the lease dated 25th January 1909 as the rateable value of the plaintiffs' works ?
3. Whether the learned Judge's findings on issues 4, 5, 6 and 7 are not incomplete and wrong and whether he ought not to have found, on those issues in favour of the plaintiffs ?
(Issue 4). 'Whether the mode of assessment adopted by the defendants is the basis in use in Aden on which tenants of salt-works similar to plaintiffs' salt-works calculate the rent they are-willing to pay for the same V
(Issue 5). Whether the said mode is the basis in use in Bombay in calculating what a tenant would pay as rent for salt-works ?
(Issue 6). Whether salt-pans are not let at a fixed sum per annum in Bombay Presidency '.'
(Issue 7). Whether in any event the defendants ought not to have basedtheir assessment on the value of uncrushed salt at the salt-works instead of on the value of salt F.O.B ?
4. Whether the learned Judge was not wrong in dismissing the plaintiffs' suit And
5. Whether the learned Judge ought not to have granted the declaration prayed for in prayer B of the plaint and made the order prayed for in prayer C of the plaint ?
10. Now what is it that the Executive Committee have to consider in deciding the assessment of these particular salt works The Notification of the Government of Bombay No. 1618 in the General Department dated 26th March 1909 directs the preparation of an assessment list of all buildings or lands or buildings and lands in the settlement District when a rate on buildings or lauds or both is imposed. This list is to contain, inter alia, the annual letting value or other valuation on which the property is assessed. The question, therefore, is, how is this valuation to be arrived at I think the principles on which property is assessed to the rates are so well-known as scarcely to require reiteration. First amongst them is the principle that in assessing any particular property the assessing authority must consider what a tenant from year to year with a reasonable prospect of the continuation of his lease would give for the premises. In considering this, the assessing authority must regard the then occupier as a likely tenant (The Queen v. School Board for London (1886) 17 Q.B.D 738 : London County Council v. Churchwardens etc. of Parish of Erith and Assessment Committee of Dartford Union (1893) A.C. 562. I do not mean by this that the highest rent that can be extorted from the occupier, i. e., that he would pay rather than be turned out, is to be regarded as the rent which the hypothetical tenant from year to year would pay (Great Central Railway v. Banbury Union (1909) A.C. 78); per Lord Loreburn L.C. and Lord Dunedin); but that the assessment is to be fixed on the highest rent that such a hypothetical tenant might reasonably be supposed to be willing to give (Davies v. Seisdon Union (1908) A.C. 315, per Lord Collins).
11. Another cardinal principle is that the premises must be valued for rateable purposes rebus sic stantibus, i.e., as they exist at the date of the valuation (The Queen v. Fiction (1861) 3 E. & E. 450, per Cockburn C.J. at p. 465).
12. In a case in which the question was whether certain machinery on the premises should be disregarded in the assessment the Earl of Halsbury described the overseer on the premises. This is what he said (Kirby v. Hunslet Assessment Committe (1906) A.C. 43:-
The overseer has a comparatively simple problem to solve, although it is difficult enough sometimes; he sees the place being conducted as a brewery, or un iron foundry, or what not; he looks at the premises, he looks at the furniture which is necessary for carrying on the business as a brewery or foundry; he does not in his own mind analyze, and to my mind he ought not to analyze, what would be likely to be the initial arrangements between the intended brewer and the owner of the freehold, to see who should provide this or that engine or what not, but he looks at the premises as they are, as they are being occupied, and as they are being used, and he says to himself, 'Well, looking at the whole of the place, such and such is the rent which would probably be paid by a tenant from year to year for such an establishment as this.' And in that he does not and ought not to scrip the whole of the place of everything but the four walls which contain the whole system of manufacture therein contained, and simply value either the ground upon which the building is placed, or the four walls and roof which are the containing elements of all the manufacture that goes on in it.
13. I have given the passage in full not only because it illustrates the valuation rebus sic stantibus but also in the hope that it may be of some assistance to the Executive Committee when they next assess these premises in suit.
14. Bearing these principles in mind the problem presents a simple question of fact but where confusion is likely to ensue is in considering what evidence should be regarded in applying one or other of the various recognized methods of valuation- called by Lord Watson in North and South Western Junction Railway Co. v. Assessment Committee of the Brentford Union, (1888) 13 App. Cas. 592 ' formulae' for valuation. So long as the assessing Court applies one of the recognized modes of valuation and in doing so does not take into consideration evidence which it should not take into consideration and does not exclude evidence which it should take into consideration it is left to that Court to select its particular 'formula' and it is no objection to the valuation to say that it should have adopted some other ''formula' (Mersey Docks and Harbour Board v. Birkenhead Assessment Committee (1901) A.C. 175, per Earl of Halsbury L.C; London United Tramways v. Brentford Union 2 Konstam's Rating Appeals 410, C.A. per Cozens Hardy M.E.).
15. These cases appropriately lay down the limits within which an Appeal Court will revise the decision of the assessing Court-in England, in general, Quarter Sessions; in Bombay, the Chief Judge of the Small Cause Court.
16. When, therefore, we are asked by the Referring Court to state whether in our opinion the plaintiff's premises have been rightly assessed we have to turn to the judgment of the assessing Court to see whether it has correctly applied the principles above enunciated.
17. I am of opinion that the judgment of the assessing Court shows clearly that it has not considered what the hypothetical tenant would pay for these premises. No doubt the Court had that question before it-indeed it was the subject matter of the inquiry-but the judgment shows that what the Court did was to adopt for the plaintiffs' salt-works a method of valuation, which was not even one of the recognized methods of valuation, which it understood had been applied to salt-pans in Bombay and which it had itself applied in spite of protest to one other salt-works at Aden. Because the Court considered this method had been applied to such cases of assessment of salt-pans as were within its knowledge it assumed that it must ipso facto be applied to the plaintiff's salt-works which were different in character and situation as well as in date of construction to the works to which the method had been applied, The Court, therefore, made no attempt to value these particular salt-works or to say whether the method it applied was such as to result in the assessment that the hypothetical tenant of these premises would pay for them.
18. One has only to turn to the judgment of the assessing Court and the judgment on the Reference to see that the principle underlying both decisions was not what the hypothetical tenant would pay but that the assessment was not oppressive. The judgments comment on the fact that in the opinion of the Courts the assessment ' although unusual and somewhat arbitrary,' 'peculiar to Aden,' 'novel,' was nevertheless not 'illegal' or 'oppressive.' Then there is the admission in the judgment of the assessing Court that the effect of the adoption of this mode of assessment was that the premises were not really rated at all. Clearly, the Courts have lost sight of the real principle-was the rateable valuation such as a tenant from year to year with a reasonable prospect of the continuation of his lease would have paid for the premises
19. Even the defendants' own architect, Mr. Mirams, testified that the assessment was not such as a hypothetical tenant would pay for these premises and I confess I am somewhat surprised at the hardihood of the defendants who venture to support the valuation in the face of the opinion of their own expert.
20. There are, however, other objections to the assessment. It appears to have been based on a method of valuation considered to have been in vogue for salt-pans in Bombay in 1883. Opinion of counsel in the year 1881 was invoked in support of this and a reference made to what appears to be a very doubtful fact, viz. that this was the method adopted by the rating Court in Bombay-the Chief Judge of the Small Cause Court. No instances of any assessment on any such basis by that authority have been adduced and if, as appears, such considerations as I have just alluded to influenced the Aden Court in coming to the conclusion it did then obviously here was a clear instance of evidence being admitted which should not have been admitted which would warrant the Appeal Court in requiring the assessing Court to revise its decision. But it appears, further, that not only were the salt-pans in Bombay in the year 1883 not worked by machinery but they did not pay any rent or royalty. Indeed, Mr. Inverarity for the plaintiff points out that the method adopted was not even in vogue for the Bombay salt-pans in that year.
21. There is the further objection that the method adopted is no real method of valuation at all and is objectionable on that ground. No doubt the volume of business done by the works may be a factor for consideration. So may the rent and royalty reserved by the lease, the actual yearly receipts with the usual deductions, the value of the land and the factory and any other buildings on the premises. Any or all of these are factors which would assist the Court in determining the mode of assessment to be applied to these works but it is no recognized method of assessment to take the output of the works at so much a ton and assess the plaintiffs at half that figure less landlord's deductions.
22. I am unaware of the existence of any such arbitrary method, nor, as I have shown, do the judgments of the Aden Courts show that the result obtained by a valuation on this basis was what our hypothetical tenant would have given for the premises.
23. Under the circumstances, I am of opinion, that the assessment is wrong and should be quashed and the Executive Committee should consider what a tenant from year to year with a reasonable prospect of the continuation of his lease would give for these particular premises and that is the way in which I would answer question 1.
24. As we have no particulars of the plaintiff's salt-works it is impossible for us to say what rent a hypothetical tenant would pay for them. We must, therefore, decline to answer the other questions referred to us but we must not be taken as implying that because we have answered question 1 in the way we have, therefore the defendants are compelled to assess the premises on the basis of the rent and royalty reserved by the lease. That is a point which depends on the answer to the question- what would the hypothetical tenant pay for these premises rebus sic stantibus ?
25. The question of the refund of any excess paid over and above the proper assessment is one which will have to be answered by the Aden Court when it determines the proper assessment of these premises.
26. We accordingly return the case for disposal in accordance with this opinion. Costs, costs in the suit.
Stanley Batchelor, Kt. Acting C.J.
1. I am of the same opinion.
2. The question for our decision is as to the legality of the assessment fixed upon the plaintiff's premises by the rating authority, the Exequtive Committee of Aden.
3. Now the question, what rate shall be levied upon any particular premises, is a question of fact, which must be answered by the rating authority. With their decision on this question, as a question of fact, we should ordinarily have no power, and certainly no inclination, to interfere. But their decision becomes open to revision as on a point of law where instead of doing what the law has directed them to do, they ' have thought proper either to include something which by law ought not to be included, or to exclude something which ought to have been included'. This citation is from a passage in the speech of the Earl of Halsbury L.C. in Mersey Docks and Harbour Board v. Birkenhead Assessment Committee (1001) A.C. 175,, an authority which I would commend to the attention of the Aden Committee as containing, if I may be permitted to say so, the clearest possible exposition of the whole law on this topic.
4. Thus the question which we have to answer is whether the Aden Committee, in imposing this rate, have included any consideration which by law they should have excluded, or have excluded a consideration which by law they should have included. On the facts on the record I cannot doubt that the question must be answered against the Committee. To quote again from the same judgment of the Lord Chancellor's, 'the thing to be done is to answer a plain question of fact, namely, What is the rent which a tenant might reasonably be expected to give for the premises the tenant being of course supposed to have some reasonable assurance of the continuance of his lease. But I must hold on the facts that the Aden Committee never proposed to themselves this question at all, but only proposed to themselves and answered a totally different question, namely, upon what basis do we find that other salt-works have been assessed at other times and in another place In answer to this question they found, or thought they found-it matters not which-that in 1883 certain salt-works in Bombay wore rated according to an arbitrary arithmetical formula and, without more, they forthwith applied this formula to these salt-works as existing in Aden in 1912-13. That clearly is not a method of rating the Aden premises, rebus sic stantibus, that is to say, rating these particular premises in the condition in which they stood at that particular time. And by the mechanical application of this abstract formula without more, it is, I think, plain that the Committee excluded from consideration a whole series of matters which they ought to have considered, namely, all those matters which arise for consideration on the putting of the true question, what would a hypothetical tenant pay for the premises as they then stood In these circumstances, it seems to me, that we have no option but to set aside the rate as illegal, for the Committee have not considered the matters which by law they were bound to consider.
5. We cannot do more than that. We cannot find a legal rate for the Committee, for the duty of doing that is cast upon the Committee. It is for them, not for us, to answer the question of fact as to the rent which a tenant might be reasonably expected to pay, and it is open to them to select any one of the several recognised methods of valuation. 'I am not aware', says the Earl of Halsbury, speaking of another rating Committee, ' of any rule of law or any statute which has limited them as to the mode in which they shall arrive at the value'. But the thing valued must be these particular premises as at the material time, and all lawful, and no unlawful, considerations must be weighed.
6. On these grounds I agree that the assessment now in question must be set aside, and it must be left to the rating authority to fix a new rate in accordance with law.
7. Under Section 13 of the Aden Act, costs of this reference will be costs in the suit. The plaintiffs do not press for any present refund of any sum paid in excess, and it is clear that we are not now in a position to make any such order, seeing that we do not yet know what a legal assessment would be.
8. Copies of these judgments will be forwarded to the Resident, who under Section 12 of the Aden Act will dispose of the case confomably to this decision.