Scottish Court of Session Decisions

The Motherwell Burgh Extension and Sewage Purification Act 1908 (8 Edw. VII, cap. lix), section 17, enacts that “section

50 of the Local Government (Scotland) Act 1889, as applied by section 96 of the Burgh Police (Scotland) Act 1903, shall apply and have effect on the extension of the boundaries of the burgh by this Act.”

The Local Government (Scotland) Act 1889 (52 and 53 Vict., cap. 50), section 50, enacts—“(1) Any councils and other authorities affected by this Act, or by any order, or other thing made or done in pursuance of this Act, may from time to time make agreements for the purpose of adjusting any property, income, debts, liabilities, and expenses of the parties to the agreement, so far as affected by this Act, or such Order, or thing, and the agreement, and any other agreement authorised by this Act to be made for the purpose of the adjustment of any property, debts, liabilities, or financial relations, may provide for the transfer or retention of any property, debts, and liabilities, with or without any conditions, and for the joint use of any property, and for the transfer of any duties, and for payment by either party to the agreement in respect of property, debts, duties, and liabilities so transferred or retained, or of such joint use, and in respect of the salary, remuneration, or compensation payable to any officer or person, and that either by way of a capital sum or of an annual payment. (2) In default of an agreement as to any matter requiring adjustment for the purposes of this Act, then, if no other mode of making such adjustment is provided by this Act, such adjustment may be made or determined by the Commissioners. (3) The Commissioners when making an adjustment under this Act shall be deemed to be a single arbiter within the meaning of the Lands Clauses Consolidation (Scotland) Act 1845, and the Acts amending the same, and the provisions of those Acts with respect to an arbitration shall apply accordingly; and, further, the Commissioners may state a Special Case on any question of law for the opinion of either Division of the Inner House of the Court of Session, who are hereby authorised finally to determine the same along with any question of expenses.…”

The Burgh Police (Scotland) Act 1903 (3 Edw. VII. cap. 33), section 96, enacts—“On the formation of any new burgh or extension of the boundaries of any existing burgh, section 50 of the Local Government (Scotland) Act 1889, relating to the adjustment of property and liabilities consequential on an alteration of boundaries, shall apply as if in lieu of that Act, and the Boundary Commissioners, the Burgh Police Acts, and the Sheriff (not being a Sheriff-Substitute) were respectively mentioned therein.…”

This was a Special Case, under section 96 of the Burgh Police (Scotland) Act 1903, stated by the Sheriff of Lanarkshire in an arbitration, consequent on the extension of the burgh of Motherwell, between the County Council of the County of Lanark, claimants, and the Provost, Magistrates, and Councillors of the Burgh of Mother-well, respondents.

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The Case stated—“By the Motherwell Burgh Extension and Sewage Purification Act 1908 (8 Edw. VII, cap. lix) certain extensions of the burgh of Motherwell were authorised. The areas thus added to the burgh formed part of the Middle Ward of the County of Lanark, and as such were administered by the County Council of the County of Lanark and the District Committee of the Middle Ward of said county. These areas were also partly comprehended within certain special districts for drainage, lighting, and scavenging. The area annexed to the burgh extends to 436 acres, while the extent of the remanent area of the county is 551,727 acres. The valuation of the annexed area at the date of the annexation was £21,765, and the valuation of the remanent area of the county was £1,917,089… .

“The County Council of the County of Lanark (hereinafter called ‘the claimants’) having made certain claims against the Provost, Magistrates, and Councillors of the Burgh of Motherwell (hereinafter called ‘the respondents’) … and the parties having failed to agree as to the same, the claimants made an application to me as single arbiter … in order that adjustment of the indebtedness between them and the respondents might be made or determined by me, and answers thereto were lodged by the respondents.

By their said application the claimants asked me to adjust the indebtedness by ordaining the respondents to pay to the claimants—I. The capital sum of £6399, 13s. 8d., with interest at 3 1 2 per cent. per annum from 1st August 1908 till paid. II. The annual sum of £525, 11s. for sixteen years as from 1st August 1908, or, alternatively, the capital sum of £6570; and III. The capital sum of £1347, 6s. 8d.

“1st August 1908 was the date as at which the extension of boundaries took effect under the private Act.

I. First Head of Claim.

This head of claim relates to capital debts incurred by the claimants prior to and outstanding at the date of annexation, and the claimants propose that they should remain liable therefor, and that the respondents should pay to them in respect thereof the capital sum of £6399, 13s. 8d., with interest at 3 1 2 per cent. from 1st August 1908 until payment.

This claim is framed upon the footing of taking the rateable value of the total area which was liable to be rated in respect of the particular debt immediately prior to the date of annexation, and apportioning the debt upon the portion of such area annexed to the burgh according to the rateable value of such annexed area. The sums thus brought out in each case amount to the sum claimed under this head.

The claimants, in the second place, proposed that the property such as administrative offices, hospitals, drainage works, &c., which prior to the annexation were common to the undivided areas, fell to be allocated by me as arbiter foresaid either to the claimants or respondents, subject to payment in respect of the property so transferred or retained of such sum, if any, as I should adjust in terms of section 50 of the said Act of 1889, and that the basis of the adjustment should be the relative rateable valuations of the transferred area and the remaining county area as at the date of transfer, which should be taken as the measure of the respective use of the property by the transferred and remaining areas prior to the date of transfer.

The respondents, on the other hand, object to the method of apportionment proposed by the claimants, and maintain that this claim falls to be adjusted on the basis of payment by them to the claimants ( a) of any debt existing at the date of the annexation due by the claimants in respect of property under the various heads detailed only so far as such property has been taken over by the respondents; ( b) of a sum in respect of the debt on buildings and property outside of the area annexed, which are in excess of the requirements of the diminished county, middle ward, or special district respectively, and were built and acquired for the use of the whole area previous to the annexation; and ( c) of the value of the hydrants or other property which have been directly taken over by the respondents.

II. Second Head of Claim.

This claim relates to standing charges and other continuing expenditure of the claimants, including the salaries of permanent officials.

This claim is framed on the footing of an apportionment of the amount of such salaries, charges, and expenditure, according to rateable value on the same lines as proposed in the first head of claim, and of payment by the respondents in respect of the claimants' retention of such liabilities of a sum equivalent to the capitalised value (at 12 1 2 years) of the net proportion of such liabilities (after deducting the proportion of expenditure unnecessary consequent on annexation) as effeirs to the annexed area.

“The respondents object to this proposed method of adjustment, and maintain that such adjustment should proceed on the basis of a payment by them to the claimants in respect of said salaries, charges, and expenditure, in so far only as they are unnecessary for the present management of the affairs of the county, middle ward, or special district respectively, and that only in respect of such period as may be necessary for readjustment of such salaries, charges, and expenditure.

III. Third Head of Claim.

This claim arises in the following circumstances, viz.—By the Lanarkshire Tramways Order Confirmation Act 1903 (3 Edw. VII, cap. cliii) the Lanarkshire Tramways Company were authorised to construct certain tramways, inter alia, within the county of Lanark. Section 16 of the said Act provides as follows, viz.—‘If in any year ending on the 31st day of December the net profits of the undertaking of the company authorised by the Act of 1900 and this Order available for payment of dividends on the share capital of

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the company shall be sufficient to pay a dividend at the rate of 5 per centum on such share capital, the company shall pay to the county authorities a sum calculated at the rate of £50 for every mile of highway, road, or street on which any part of the tramways by this Order authorised is laid within the jurisdiction of the county authorities, and after every additional £1 per centum of dividend beyond 5 per centum on the said share capital, an additional sum of £50 per mile calculated as aforesaid.’ …

“Of the tramway lines authorised by the said Order 53·9 chains were authorised to be laid down within the area now annexed to the respondents' burgh. In the event of that portion of line being laid, and upon the footing that the net profits of the Tramways Company will be sufficient to pay dividends at the rate of 6 per cent. per annum, an annual payment of £67, 7s. 4d. would have been payable to the claimants by the Lanarkshire Tramways Company, but the claimants have lost said contingent right in consequence of the annexation of said area to the burgh.

The claimants maintain that said contingent right was ‘property’ affected by the Motherwell Burgh Extension Order within the meaning of section 50 of the Local Government (Scotland) Act 1889, and that they are entitled to a payment in respect of the transfer thereof.

The respondents deny that this claim forms any part of the ‘property’ of the claimants in the sense of the said section.

The parties concurred in asking me to consider and decide the principles on which the adjustment of the various heads of indebtedness should proceed before inquiring into the details of each item, as once the principles were decided the parties might be able thereupon to settle matters between themselves and thus avoid the necessity for such a detailed inquiry.

After hearing parties I issued proposed findings, against which representations were lodged by the claimants and answers to the latter were lodged by the respondents. After hearing parties thereon I issued the following findings, viz.—‘ Glasgow, 14th February 1910.—The Sheriff having heard counsel for the parties and considered the representations and whole cause, Finds under the first head of the claim that the respondents are not liable to make payment to the petitioners of a share of the debts of the county at the time of annexation in the proportion of the rateable value of the area annexed to the rateable value of the whole county, but are liable ( first) to make payment to the county of any debt at present existing due by the county in respect of property under the various heads detailed, which has been taken over by the burgh along with the area annexed; ( second) a sum in respect of the debt on buildings and property outside of the area annexed which are in excess of the requirements of the county and were built and acquired for the use of its whole area previous to the annexation; and ( third) for a sum in respect of value of the hydrants or other property which has been directly taken over by the burgh: Finds under head two of the claim that the respondents are not liable for any sum in connection with the maintenance of the establishment under the various heads which are detailed except to the extent that these are unnecessary for the present management of the affairs of the county, and that the respondents are only liable for their share of the cost of that proportion of the establishment which is unnecessary until that part of it can be readjusted: Finds that the third head of the claim is irrelevant and falls to be dismissed: Under reference to these findings, allows to both parties a proof of their averments, to proceed on a date to be afterwards fixed.’

My opinion on the questions at issue between the parties is given in the notes to the interlocutors pronounced by me on 8th December 1909 and 14th February 1910.

The notes were as follows:—

Note appended to interlocutor of 8th December 1909, continuing the cause for further hearing—At the last hearing of this case it became apparent that the parties were not in agreement with regard to the facts of the particular claims which are enumerated in the proposals by the County Council for adjustment of indebtedness. Both parties agreed in asking me to decide the general questions of law which were raised in the debate, and once they had the opinion of the Court upon these matters, the questions of detail necessary for the final decision of the case might be arranged between them so that a final interlocutor should be issued. As this is an arbitration under the Act, I have avoided pronouncing any finding which would be binding on the Court, in order that the parties might have an opportunity of representing against the views which are expressed in this note.

“The questions that are raised depend upon the meaning of section 50 of the Local Government Act 1889, as applied by section 96 of the Burgh Police (Scotland) Act 1903 to the extension of the boundaries of the burgh of Motherwell. Section 96 of the Police Act says that on the extension of the boundaries of any existing burgh section 50 of the Local Government (Scotland) Act 1889, relating to the adjustment of property and liabilities consequential on the alteration of boundaries, shall apply, and section 50 of the Local Government Act says that any councils and other authorities affected by this Act, &c., may from time to time make agreements for the purpose of adjusting any property, income, debts, liabilities, and expenses of the parties to the agreement so far as affected by this Act, and sub-section 2 provides that in default of an agreement as to any matter requiring adjustment, then the adjustment may be made by the Commissioners. The question therefore is whether the claims and the proposals made by the pursuers fall under the terms property, income, debts, liabilities, and expenses. I think it is clear that these words refer to the

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period when the extension of the boundaries of the existing burgh takes place, and that they do not refer to any property, income, debts, liabilities, and expenses which may emerge to either of the parties to the case subsequent to that date. It is to be observed that the word used is not compensation but adjustment, and I think it is clear from the decisions in the House of Lords in the cases of Urban District Council of Caterham v. Rural District Council of Godstone, [1901] A.C. 171, and Mayor, &c., of West Hartlepool v. The Council of Durham, [1907] AC 246, that no compensation can be granted for the loss of assessable area for contribution to future rates. I think it is also clear that so far as possible all the property within the area annexed to the burgh which is necessary for the use of the inhabitants there and which formerly belonged to the county authority should be transferred to the burgh under the obligation of making such payment to the county as would relieve the county of the existing debt in connection therewith; and in the same way that the property in the county area should be free from any claim on the part of the inhabitants in the annexed area or of the burgh of which they now form part. The statute does not seem to contemplate that either the county or the burgh should have control or the right to interfere with the property which is outside their boundaries. Of course that necessarily implies that the authority to which property is transferred should relieve the other of any debt in connection with the property transferred.

Turning now to the proposals by the County Council for adjustment of indebtedness in which the particular claims are set forth, I propose very generally to state the views with regard to them which in applying the principles above explained I have come to entertain.

The first head is for debts effeiring to the added area prior to annexation. Under this head, the first claim is for highways and new district offices. With regard to new roads and bridges, in so far as the County Council can prove that that debt is for roads and bridges within the annexed area I think that the County Council would have a good claim. But if the debt is for roads and bridges outside of the annexed area, which are now the sole property of the county, I think this claim falls to be dismissed. With regard to district offices, these will in future belong to the County Council. The facts with regard to these offices were disputed, and I find it very difficult in the present state of the case to come to a decision, but it seems to me that if these offices or any considerable part of them were erected with a view to the administration of the district now annexed, and would not have been erected if the annexed area had not at the time been part of the county, then it would be unfair to saddle the county with the whole burden of the debt, and that the burgh must relieve the county of such portion as can be proved to be unnecessary for the present administration of the present county area. The same principle applies to the public health offices at Hamilton, the Inebriate Reformatory at East Kilbride, and hospitals and public slaughter-houses. With regard to the drainage works, I think the rule which has been already laid down with regard to the new roads and bridges also applies to them. With regard to the lamps and lamp pillars, the defenders admit their liability for the lamps and lamp pillars within their district. With regard to the stables for Dalziel and Netherton scavenging district, I think they fall under the same rule as the new district offices, hospitals, &c. There is also a claim for fire hydrants within the area which has been annexed. The possession of these hydrants was a matter of dispute. The pursuers maintained that these in future would be under the control and management of the defenders, while the defenders stated that they will remain under the authority of the pursuers, as being the authority for water supply. I think this is a matter for inquiry, and if it turns out that they are under the control of the burgh, then the property in them should be transferred to it, and their cost should be paid by it to the county.

“With regard to the second head of pursuers' claim, namely, standing charges and other continuing expenditure, if these charges mean the future cost for salaries, wages, &c. in connection with the maintenance of the establishment under the various heads which are detailed, I think they must be disallowed under the ruling in the cases of Caterham and West Hartlepool, supra. Lord Atkinson in the latter case says—‘The whole scheme of the statute, however, is that when administrative urban areas, whether county burghs or not, are created, they shall have power to tax themselves to the extent necessary for carrying out the duties imposed upon them, and shall not be called upon to contribute to the cost of the services rendered outside their respective areas by which they are not directly benefited. According to that view the burgh is to tax itself for the payment of all services which are rendered within its boundary, and they are not to be liable for the payment of any services which are rendered outwith the area. Moreover, it seems to me that this is not a liability which existed at the time of the annexation except to this restricted extent, viz., the county cannot be expected to discharge its officers at once on the occurrence of the annexation. If they can show that their establishment, therefore, was greater than was necessary for their own area, it may be that they would be entitled to a payment of such extra charges as might be necessary until an adjustment could be made. That seems to me to be a liability on the county at the time when the annexation took place which they may call upon the burgh to share.

The third claim is in respect of the annual payment by the Lanarkshire Tramway Company. The position of this matter is that under the Lanarkshire Tramways

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Act, sections 16 and 17, the Tramway Company are bound in the event of their constructing a tramway within the county, and the profits of their undertaking being sufficient to pay 5 per cent. on the share capital, the company shall pay to the county authorities a sum calculated at the rate of £50 for every mile of highway, road, or street on which any part of the tramways is laid, and the same provision is made in favour of burghs. It seems, under the Act, that the Tramway Company have power to lay a line extending to 53.9 chains within the area annexed. No part of this line has been laid. The county claim, however, twenty years' purchase of the annual payment which, in the event narrated, will be due by the Tramway Company to the burgh. I think this claim must be disallowed entirely. The Act seems to contemplate that when the tramway line passes through the territory of the county, the county authorities should receive the sum specified from the company, and that if it passes through a burgh the burgh authority should receive the specified sum in the same way. It is difficult to say what is the exact reason for this payment, and counsel for the pursuers said that it was in respect of the county withdrawing its opposition to the Tramway Company's Act. It seems to me that the more probable explanation is that if the Tramway Company enters upon property of the local authority, as it does when it makes use of the highways and streets, then Parliament thought that the local authority should receive some return for that use after a fair profit had been made by the Tramway Company. That is rendered more probable because by interference with the highway a burden might be placed on the local authority in providing for the passage of the public consequent on the Tramway Company's operations. As no part of this line has been made, it was not income transferred to the burgh at the time of the annexation. For this reason I think the claim should be disallowed.

Having expressed these opinions, I think it is proper to put out the case for further hearing so that the future procedure may be determined on.”

Note appended to interlocutor of 14 th February 1910 ( vide supra)—At the debate upon the re-hearing, it became apparent that the petitioners' position was that the whole debt of the county at the time of the annexation was proportionally the debt of the part which had been taken from the county and added to the burgh. Therefore the burgh in taking the annexed part took it with its debt, and in the adjustment of the debt with the county they were bound to make payment to the county of the due proportion. It seems to me that there is a fallacy here in thinking that the debt is a debt of each particular part of the county and is not a debt of the county as a whole for which it can assess the whole district within its area. If that be so, then the burgh in taking over the annexed part does not take over any part of the debt which remains with the county. To hold otherwise I think would be inequitable, for it would compel the burgh to pay for improvements and property for which neither it nor the part annexed to it could ever make any use. At the same time I think that under the powers given by the section the arbiter has a power to adjust the debt so as to work out an equitable result. Accordingly I think he is entitled to call upon the burgh to make provision for the debt in respect of the property which is transferred to it. It would seem inequitable that the county should go on discharging debt for an improvement which was within the annexed part, and accordingly had become part of the burgh's property. Further, I think that the burgh are bound to make payment for any property such as hydrants which has been transferred to it. The same principle applies to the second head of the claim, which is in connection with the management and administration of roads, &c. If these are outside the limits of the district annexed, I think the expense of management and administration fall upon the county except in so far as the county authorities can prove that they undertook expenditure—in view of the annexed part remaining part of the county—which was now unnecessary. With regard to the third claim, which was still maintained, I am still of opinion that it is irrelevant, and I have nothing to add to what I have already said.”

The questions of law submitted by the arbiter were as follows—“1. As regards the first head of the claim—(1) Is the arbiter bound to adjust said claim on the basis of ( a) an apportionment of the debt existing at the date of the annexation between the annexed area or so much thereof as at the date of annexation formed part of the county, middle ward, or special district respectively, and the remanent portion of the said county, middle ward, or special district respectively, according to the rateable value of said annexed area or part thereof and county, middle ward, or special district as at the date of annexation; ( b) a payment by the respondents to the claimants of the proportion of said debt effeiring to said annexed area or part thereof, and retained by the claimants; and ( c) an adjustment of the properties and of the payments, if any, to be made in respect of the transfer or retention thereof? or (2) Is the arbiter entitled to adjust said claim on the basis of payment to the claimants by the respondents, ( a) of any debt at present existing due by the claimants in respect of property under the various heads detailed which has been taken over by the respondents along with the area annexed; ( b) of a sum in respect of the debt on buildings and property outside of the area annexed, which are in excess of the requirements of the county, middle ward, or special district, and were built and acquired for the use of the whole area previous to the annexation; and ( c) of the value of the hydrants or other property which have been directly taken over

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by the respondents? 2. As regards the second head of claim, so far as relating to salaries of permanent officials, liability for which existed at the date of annexation—(1) Is the arbiter bound to make an adjustment of such liabilities on the basis of ( a) an apportionment of such salaries according to rateable value on the same lines as the apportionment referred to in question (1); ( b) payment by the respondents to the claimants in respect of such liabilities of a sum equivalent to the capitalised value of the proportion of such liabilities effeiring to the annexed area, and of a sum to cover the period of necessary readjustment of the salaries in the remaining area? or (2) Is the arbiter entitled to make such adjustment, on the basis of a payment by the respondents to the claimants in respect of said salaries, in so far only as they are unnecessary for the present management of the affairs of the county, middle ward, or special district respectively, and on the footing that the respondents are only liable for the cost of that proportion of the establishment which is unnecessary until that part of it can be readjusted? 3. Is the subject-matter of the third head of claim ‘property’ within the meaning of section 50 of the Local Government (Scotland) Act 1889, and falling to be the subject of adjustment under and in terms of said section?”

On the case appearing in the short roll counsel for the respondents objected to the competency of the Special Case on the ground that the Sheriff's decision was final. He argued—A stated case was only competent while the arbitration was pending. Here it was not pending, for the arbiter had issued findings. The Case was therefore too late— Johnston's Trustees v. Glasgow Corporation, 1912 S.C. 300, 49 S.L.R. 269: in re Knight and Tabernacle Permanent Building Society, [1892] 2 QB 613.

Counsel for the claimants were not called on.