Scottish Court of Session Decisions

The Assessor of Railways and Canals fixed the valuation of the Caledonian Canal for the year ending Whitsunday 1887 at the sum of £1537, 6s. 3d.

The Commissioners of the Caledonian Canal appealed to the Lord Ordinary on the Bills, maintaining that the valuation should be nil.

They stated that the Assessor, whose duty was to ascertain the yearly value or rent of the canal, being the rent at which, one year with another,

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it might be reasonably expected to let from year to year, had based his valuation upon the revenue drawn by them, deducting nothing for maintenance and repairs, but proceeding upon the footing that the canal would fetch that revenue as rent, provided the appellants as proprietors upheld the undertaking by themselves, disbursing all the expenses for maintenance and repairs; further, that the Assessor had allowed as deductions only three-fourths of the cost of management, three-fourths of the charges for lock and bridge-keepers, and one-half of the secretary's salary and of the allowance to the cashier and of the agent's account.

They maintained that this valuation was wrong; that as the canal could not possibly be let no rent could be got for it, and the valuation should be nil; or even if the canal were liable to valuation, yet as they had made no profit—according to their Act—and their revenue from tolls did not even meet their annual outlay for maintenance, repair, and working charges, there was thus a deficit. They claimed to have right to deduct from their revenue (1) the whole cost of maintenance and repairs, £2299, 12s. 8d.; (2) the whole cost of management; (3) the whole cost of lock-keepers' and bridge-keepers' charges, instead of three-fourths; (4) the whole secretary's salary, cashier's allowance, and agent's account.

After hearing counsel the Lord Ordinary ( Lord Kinnear) pronounced the following interlocutor:—“Finds that the appeal, in so far as the items of secretary's salary and disbursements, Mr Hope's allowance as cashier, and the business account are concerned, is not now insisted in: Quoad ultra finds that in fixing the annual rent or value of the lands and heritages belonging to the appellants, a deduction should be allowed from the gross revenue of all necessary outlays for management, maintenance, and repairs, which are properly chargeable against revenue, and not merely of a proportion of such charges: To this extent and effect sustains the appeal, and remits to the assessor to amend the valuation in accordance with this interlocutor.

“ Note.—It is not disputed that the heritable subjects in question must be entered in the valuation roll, notwithstanding that they are maintained under the provisions of an Act of Parliament which precludes the Commissioners or their tenants from making any profit by their occupation of the canal. The principle on which the annual value of property in this position should be ascertained has been considered in a variety of cases both in England and Scotland, and the rule which appears to have been generally approved is, that the actual revenue must be taken, under deduction of the cost of management, working charges, cost of maintenance, and repairs necessary in order to command that revenue.

“This was the course followed in the cases of the Glasgow Corporation v. Dodds, 2 Poor Law Magazine, 589; The Local Authority of Dalbeattie, 10 It. 23; The Mersey Docks Company, L.R., 9 Q.B. 84; and Peterborough, 31 Weekly Reporter 949.

“The rule appears to me to be just and reasonable, and I think it should be followed in the present case.

“It is said that no allowance should be made for the cost of maintenance or for the landlord's share of the cost of management, because according to the settled rules of valuation these items are not to be taken into account in estimating the rent which a tenant may reasonably be expected to give. But the ordinary rule for the allocation of burdens as between landlord and tenant appears to me inapplicable to a case where in consequence of statutory restrictions neither tenant or landlord can make a profit of his occupation.

“The considerations which, in the case of an ordinary trading company, an intending tenant would take into account in estimating the rent he could afford to give are necessarily excluded by the provisions of the statute.

“The Valuation Act, however, requires that the yearly value of the subjects shall be taken to be the rent at which they might be reasonably expected to let from year to year. The rule pre-supposes a lease upon ordinary conditions for the beneficial enjoyment of the heritable subject. It cannot be strictly applied where a lease would mean nothing in practical effect but a transference in their entirety of the rights and duties of a statutory commission to other administrators. But if it be necessary to suppose a lease it does not appear to me that the supposed tenant could be reasonably expected to give more by way of rent than the entire revenue derivable from his occupation, under deduction of the entire cost of earning and collecting such revenue. I think that if the entire revenue be taken as the rent, the appellants are entitled to such deductions as are necessary for maintaining their works in a condition that will enable them to earn the rent.

“It does not affect the argument that the appellants are authorised by their statute to lease the canal, for the lessee would be subject to the same restriction both as to the amounts and the application of the rates as the present Commissioners. It is to be observed that the Commissioners are authorised to lease ‘with or without any annual return.’ If it be the case that one year with another the rates are not more than sufficient to meet the cost of management and maintenance it does not appear to me that any annual return could be expected.”