Scottish Court of Session Decisions

In making up the valuation roll for the year ending at Whitsunday 1886, the assessor of railways and canals under the Valuation Act 1854 (17 and 18 Vict. cap. 91) assessed the sum of £113, 188, 2s. 5d. as the yearly rent or value of the undertaking of the Corporation Gasworks, a portion of which is situated within the City Parish of Glasgow. In doing so he allowed deduction (1) of the whole of the salaries paid in the treasurer's, engineer's, and clerk's departments, amounting to £8402, 17s.; and (2) deduction of the wages paid to inspectors, clerks, and other servants, and amount spent on causewaying, amounting to £13, 187, 8s. 7d. He further allowed (3) the whole of the rates and taxes, amounting to £9225, 2s. 8d., and (4) structural alterations, maintenance, and repairs, being £5692, 11s. In thus stating the valuation the assessor was guided, as regarded the 1st, 2d, and 4th of these items, by the opinion of Lord Kinnear in the case between the assessor and the Corporation of Glasgow and Others, Oct. 1, 1884, 22 S.L.R. 10, where his Lordship held the claim for deduction of working charges and expenses for maintenance to be well founded, and “that a deduction should be allowed from the gross revenue of all necessary outlays for management, maintenance, and repairs which are not properly chargeable against revenue, and not merely a proportion of such charges.”

The Inspector of Poor of the City Parish appealed to the Lord Ordinary on the Bills ( Trayner) against this valuation, contending (1), with regard to the salaries of treasurer's office, etc., that the deduction should only be £6202, 17s. as the just proportion falling on the Corporation as tenants or occupiers, while the other £2000 was truly applicable to the duties of the officials in the interest of the Corporation as proprietors; (2), with regard to the deduction of wages, that only the half (£6693, 14s. 3d.) should be allowed, the remainder of the wages being for work done in the interest of the Corporation as proprietors; (3) that only half the rates and taxes should be allowed, and not the whole; (4) that the cost of the repairs and alterations were payable by the Corporation as proprietors. He submitted that giving effect to these contentions (and certain contentions on minor points) the true valuation should be, not £113, 188, 12s. 5d., but £132, 275, 6s. 1d.

He further appealed against the allocation by the assessor of the cumulo valuation among the parishes in which the lands and heritages were situated, in respect that the principle the assessor had adopted of making it in proportion to the structural cost in each parish was erroneous, and that the true principle was to apportion the cumulo valuation among the parishes in which the area of distribution was situated, that area being the only profit-distributing part of the undertaking, “or otherwise to hold the value of the portions of the undertaking outwith the area of distribution to be the value of the land occupied, as compared with the same extent of land in the immediate neighbourhood, together with four per centum on the cost of the structural works erected thereon, and to apportion the remainder of the cumulo valuation among the parishes in which the area of distribution, being the profit-producing part of the undertaking, is situated.” The result,

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he contended, was that instead of there being allocated to the City Parish £20, 000 or thereby, only £11, 476 was allocated.

In making the valuation he had made the assessor had followed the Dundee case, Dec. 21, 1883, 21 S.L.R. 261; and also the decision of Lord Kinnear in the case quoted supra.

A similar appeal was taken by the City Parish in the valuation of the Gasworks of the Corporation. This appeal also involved the correctness of a deduction by the assessor of £449, 13s. 2d., for law and parliamentary charges.

The Corporation of Glasgow were owners of both the Gasworks and the Waterworks under a statutory disability to make profit.

The appellant (the City Parish of Glasgow) founded on section 37 of the Poor Law Act of 1845, which provides that the annual value shall be rent at which lands, &c., might be expected to let from year to year, “under deduction of the probable annual average cost of the repairs, insurance, and other expenses, if any, necessary to maintain such lands and heritages in their actual state, and all rates, taxes, and public charges payable in respect of the same,” while the subsequent Act of 1854 enacts that it shall be the rent at which they would let from year to year, and leaves out the proviso as to deductions. It must be taken that there was a purpose in leaving out the proviso as to deductions. That argument was not before Lord Kinnear in the case of the previous year. He also founded on Dundee Gas Commissioners, January 12, 1881, 9 R. 1240, where the decision of Lord Curriehill and Craighill was inconsistent with that of Lord Kinnear; and was not quoted to him. The practice, therefore, and the balance of authority, favoured the appellant, and the weight of argument was also on his side.

No argument was offered on the question as to the principle of allocation.

The assessor maintained the valuation on the authority of Lord Kinnear's decision.

The Lord Ordinary pronounced these interlocutors:—I. In the Waterworks Case.—“The Lord Ordinary having considered the appeal and heard counsel, Finds that in fixing the annual rent or value of the lands and heritages in question deduction should only be allowed of a proportion of the rates and taxes paid in respect of such heritages, being the proportions payable by a tenant: Finds that the amount to be now deducted in respect of such proportion of rates and taxes is the sum of £4612, 11s. 4d., sterling, being one-half of the whole amount of the rates and taxes paid or payable in respect of said heritages; to this extent and effect sustains the appeal: Quoad ultra dismisses the appeal, and remits to the assessor to amend the valuation in accordance with this interlocutor.

“Note.—It was argued for the appellant that the assessor had erroneously allowed deduction of the whole expenses of management and maintenance on the ground (1) that a proportion at least of these would necessarily fall upon the landlord, and (2) that in valuing heritages the gross rental received by the landlord should enter the valuation roll without any deduction, on account of the expense he had been put to on account of management and maintenance. I should not hesitate to give effect to this argument in the ordinary case of landlord and tenant. But this is not the ordinary case; it is the case of landlord and tenant in one person, prohibited from making any profit by his enterprise or business. In these circumstances there is considerable difficulty in reaching the standard of valuation given by the Valuation Act, viz., ‘the rent at which one year with another such lands and heritages might in their actual state be reasonably expected to let from year to year.’ It is not impossible, however, to apply that standard to the present case. A tenant would scarcely be found to enter upon the works in question at a loss to himself, but a tenant might be found to carry them on without gain. The corporation is in fact its own tenant on these terms. What a tenant in such case could reasonably be expected to give as rent is just what he received, less the cost of management and maintenance; and what the tenant paid and the landlord received under such an arrangement would be the gross rent. I would agree in the opinion of Lord Fraser and Lord Kinnear that the yearly rent or value of the works in question is the income derived from the rates after all necessary outlays have been met. Rates and taxes, however, stand in a different position—these are imposed on landlord and tenant in a certain proportion. That which is imposed on, and may be directly recovered from the landlord as such, cannot be said in any view to be the tenant's expenditure, and cannot, in my opinion, be allowed as deduction from year's rent. I have allowed therefore, as a deduction, one-half of the amount paid or payable as rates or taxes in respect of the heritages in question, the assessor informing me that that is the amount fairly chargeable against the tenant.”

II. In the Gasworks Case.—“The Lord Ordinary having considered the appeal and heard counsel, Finds (1st) that in fixing the annual rent or value of the lands and heritages in question deduction should only be allowed of a proportion of the rates and taxes paid in respect of such heritages, being the proportion payable by a tenant: Finds (2d) that the amount to be deducted in respect of such proportion of rates and taxes is the sum of £14, 371, 15s. 7d. sterling, being three-fourths of the whole amount of the rates and taxes paid or payable in respect of said heritages: Finds (3d) that the deduction of £449, 13s. 2d. on account of law and parliamentary charges should not be made: To this extent and effect sustains the appeal: Quoad ultra dismisses the same, and remits to the assessor to amend the valuation in accordance with the interlocutor.

“Note.—No explanation was offered as to the circumstances under which, or the purposes for which, the charge for law and parliamentary expenses was incurred. Prima facie these are landlord's not tenant's charges, and I disallow them as deductions in ascertaining the yearly rent or value of the subjects in question. As regards the other deductions which form the subject of appeal, I refer to the note appended to my interlocutor on the appeal relative to the Glasgow Waterworks, adding only that in fixing the amount to be allowed as deduction in respect of taxes I have proceeded on the information of the assessor, who had satisfied himself that about one-fourth of the taxes was all that could be regarded as the landlord's proportion.”