Assessor for Leith, February 5, 1886, 13 R. 540, 23 S.L.R. 385. That portion of the goodwill was just a forehand payment of rent. When that was divided up among the years of the lease it represented, along with the stipulated rent, the true rent, which was conclusive of the annual value during the currency of the lease. Counsel

referred to Assessor for Lanark v. Selkirk, March 9, 1887, 14 R. 579; Dundee Harbour Trustees v. Assessor for Dundee, March 19, 1886, 13 R. 829, 23 S.L.R. 607; Wilson, May 20, 1884, 21 S.L.R. 545.

At advising

LORD SALVESEN-These two cases raise an important question of law which has not hitherto been made the subject of direct decision in the Valuation Court. The facts are somewhat similar in each case and admit of being shortly stated[His Lordship here narrated the facts, v. sup.].

The method so followed by the Assessor was approved of in this Court so far back as 1888 in the case of Drummond, 13 R. 540, and has been more or less consistently applied in similar cases since that date. In the subsequent case of Hughes, 19 R. 840, where the Assessor had taken the whole sum paid for goodwill, and had added to the rent in the lease the quotient of this sum divided by the years of the lease, on the footing that the whole amount paid for goodwill was to be treated as heritable, the Court held that the Valuation Committee in accepting this principle had erred; and on the appellant offering one-half of the goodwill as pertaining to heritage and spreading it over the years of the lease, they reduced the annual value as he proposed. The case is mainly important because of the exhaustive enumeration by Lord Kyllachy of the elements which may be included in the goodwill of a publican's business, some of which fall to be treated as heritable and others as moveable. In the ordinary case, and apart from specialties, the main element in the goodwill which adheres to the premises is derived from the fact that they are the seat of an established business to which customers are in the habit of resorting. The main element which falls to be treated as moveable is the consent of the seller to an immediate transfer of the licence to the buyer and the recommendation of the buyer by the seller to the Licensing Courts. It is impossible to value these elements separately, and for practical purposes I think it is a useful rule to assume that, apart from specialties, they may be treated as of equal value. It was on this principle that the Assessor raised the rental in both cases with which I am now dealing, and I think that while the transactions were recent he was justified in so doing.

It does not, however, follow that the value so fixed must continue to be entered year by year in the valuation roll until the termination of the lease. This is the view upon which the Valuation Committee have obviously proceeded, and which was vigorously defended on behalf of the

Assessor. The argument was that the case was precisely the same as if a written lease had been entered into, stipulating for payment of the rent at which the subjects had been assessed on the principle above described; and just as such a lease would have fixed the annual value to be entered in the valuation roll during the whole period of its duration, however circumstances might in the meantime change, so it was said that the valuation fixed by an addition to the stipulated rent of a proportion of the sum paid to the landlord in name of goodwill ought to be equally incapable of alteration. In my opinion this argument falls to be rejected. The roll has to be made up annually, and each year the value of every property falls to be entered at the figure at which it might be expected to let from year to year. The only case in which the Assessor is not entitled to apply his mind to the true yearly value is where lands have been bona fide let for a yearly rent "conditioned as the fair annual value thereof, without grassum or consideration other than the rent." In such a case, although the annual value may either have been greatly diminished or greatly increased, the property falls to be entered as of the annual value expressed in the lease. In every other case the Assessor is entitled to revise his valuation year by year, although it is needless to say that if a fair value has once been fixed it should continue to apply to the premises, unless either party is able to establish a material change of circumstances. In the two cases with which we are dealing it is common ground that the rent stipulated in the lease is not conclusive, because the lease was not granted without consideration other than rent. The logical result is that the lease falls to be disregarded, and that the value must be fixed in some other way. This was well expressed by Lord Kyllachy in the case of Hughes in the following passage- "Now what is the result of all this? In my opinion the result is that whenever it appears in any lease that there is a consideration other than the rent, and materials do not exist within the lease for correcting the rent, the valuation authority is thrown back on the general rule of the statute, viz., that the annual value is to be estimated at the sum for which the premises might be reasonably expected to let from year to year. The Assessor must just perform in such a case the same operation which he performs when he has to value some established inn or public-house which has always been occupied by the owner and has never been let so as to yield a rent."

There is nothing in the subsequent cases to which we were referred which I think conflicts with the principles laid down in the case of Hughes. In Crawford (23 R. 685) it was held that the rule of practice of taking one-half of the sum paid for goodwill as effeiring to the house as a heritable subject, and spreading it over the period of the lease, was not an inflexible rule; and that in an appropriate case there should be

taken into consideration not merely the sum paid for goodwill, but also the rents or values of similar licensed premises in the neighbourhood. The decision, however, had no practical result, for the Valuation Committee, to whom it was remitted back, after professing to consider the whole circumstances as directed by the Appeal Court, adhered to their former decision, and the Valuation Court decided that they could not interfere with it. In the case of Annan v. Assessor for Leith (February 16, 1899, 1 F. 586, 36 S.L.R. 600) the consideration other than rent which was held to displace the lease was an obligation on the part of the tenant to take part of his supplies of liquor from firms in which the landlord was a partner; and it was held that the magistrate had rightly ascertained the value by reference to the rents of similar premises, and by forming their own judgment as to the probable rent which the public-house would fetch in the open market. The decision in Clark v. Assessor for Lanarkshire (February 13, 1901, 3 F. 455, 38 S. L. R. 489) was on similar lines. In the case of Paton (1 F. 588) it was observed by Lord Stormonth Darling that where there was a consideration other than the rent, the amount of that consideration was not necessarily to be taken as conclusive. I entirely agree with this view, although it may be that in many cases where the transaction is of recent date the addition of such consideration to the stipulated rent may fairly be taken as fixing the annual value where no material change of circumstances has meantime occurred. This I think is the explanation of the decision in Shiel v. Assessor for Hawick, for when the valuation was fixed by this Court the transaction had just been completed, and the rent contained in the lease, plus an aliquot part of the consideration other than rent, represented the fair market value of the premises at the time.

There remains the practical application of the principles above enunciated to the two cases before us. In the case of Scott there has been admittedly no alteration on the premises since they were let to the appellant, and there is no evidence that the drawings have diminished. The one important factor is the passing of the Finance Act and the increased licence duty which has thereby been thrown on the licence-holder. We have already held that in the absence of other evidence, where the proprietor of the premises is also occupier of them, this additional burden may reasonably be distributed between the landlord and the tenant, and I think the entry in the valuation roll ought to be reduced accordingly by one-half of the increased licence duty. I think the same result should be arrived at in the case of Mark, because there has not been such a material reduction in the drawings as may not be explained by temporary causes, and because the appellant's counsel frankly stated that he did not see himself in a position to ask more than an abatement from the annual value corresponding to the increased licence duty. I should only

like to add further, with regard both to an increase or a diminution of drawings which cannot be traced to some external cause of a presumably permanent kind, that it does not afford any ground for a revision of the annual rental which has been otherwise fairly arrived at. On the other hand, I can quite understand that the annual value of a public-house may be improved by such causes as the extinction of licences in its neighbourhood or the establishment of public works in close proximity, leading to a great extension of its custom. In such a case I see no reason why the Assessor should not revise the annual value where the rent is not fixed in a bona fide lease, just as I think the tenant is entitled to a revision in his favour when adverse legislation or any other cause of a presumably permanent kind has greatly lessened, or it may be, even destroyed, the goodwill which he acquired. It would be most unjust in the latter case if the tenant should have to pay taxes on an assumed rental, reached on the footing that the goodwill, for which he had paid some years before to his landlord, still subsisted when in fact it may have been wholly destroyed. It would be as reasonable to continue assessing the proprietor of a house on the basis of the rent which it might have yielded at the time when he acquired it, when in fact it could be demonstrated that the property had greatly depreciated, and was not capable of being let at more than half the sum. It would be all the more anomalous that we should refuse to grant any relief to a tenant in the circumstances I have figured when the law admittedly places no obstacle in the way of our revising the valuation of a licensed property in cases where the owner is himself occupier. It was suggested that if these views were pushed to their logical conclusion the result might be that in cases which might be figured, the tenant would be entitled to have the annual value of the premises entered at a lower rent than that which he was actually paying to his landlord. Such a case would,

think, be of very exceptional occurrence, and may well be left to be dealt with when it arises; but it is noteworthy that Lord Moncreiff and Lord Kyllachy, in the case of Hughes, contemplated the possibility of its occurrence, and expressed opinions to the effect that the rent actually payable to the landlord would fall to be entered as the minimum value of the subjects for assessment purposes. I do not wish to commit myself to a final opinion on this point, but in practice I think this may be assumed to be the ordinary result.

LORD CULLEN-Mark's Case-The subject of valuation in this case is a public house at No. 165 Pleasance, Edinburgh, belonging to Donald Fisher, and let by him to the appellant under a lease dated 24th April 1906 for a period of 14 years from Martinmas 1905. The annual rent payable under the lease is £130. On his entry the appellant paid to the said Donald Fisher £4250 in name of goodwill and fittings. The appellant further obliged himself to

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take at current market prices the whole of his supply of spirits from Mr Fisher.

There are thus two considerations other than the annual rent of £130, viz.—(1) the payment for goodwill, and (2) the obligation to take supplies from the landlord. In presence of these considerations the fixed rent in the lease does not rule the valuation. Moreover, as the second of them is of indefinite value, the rule which is in use to be followed in cases where consideration other than rent is of ascertained amount, viz., of spreading that amount over the years of the lease by way of addition to the fixed rent, is not binding on the Assessor.

The appellant's contention that the premises must be entered at the annual value of £130, because that is the amount of the fixed rent in the lease, falls accordingly to be negatived.

The Assessor's valuation, which the Committee have upheld, is £260. It is arrived at by deducting from the £4250 paid for goodwill, £500 for fittings, leaving £3750, and taking one haif of this, or £1875, as the presumable share of the good will paid to Mr Fisher as owner of the premises, and spreading the amount over the whole years of the lease by way of additional rent.

Now, in respect that the public-house is a tied house, as already mentioned, the Assessor was not limited to this mode of arriving at the annual value. He might have proceeded outside of the lease, say, by way of comparison with other licensed premises, and, had the facts justified him, have reached an annual value in excess of £260. If this be so, it seems to me that the tenant must be conceded a corresponding right to show if he can that the true annual value is less than £260, as he maintains it is; on this footing the first ground for reduction which he urges is the recent increase in the licence duty. In accordance with the decision in the case of Deards, the appellant will be entitled to a reduction amounting to one-half of the increase of duty.

The appellant next contends that there should be a further reduction of the valuation in respect of a falling off in hisdrawings. Now when a falling off in drawings is appealed to in this way, it appears to me that it must be shown that the fall is not of a temporary nature, or possibly due to the want of efficiency in the management of the business, but is due to some permanent change in the external conditions influencing the amount of custom at the premises. A decrease in the amount of the drawings if continued long enough may perhaps ground a fair inference of such a change, but in most cases it must be possible to assign some cause for the decrease, such as, for example, withdrawal of population from the neighbourhood. To vary the valuation in accordance with fluctuations in the amount of business done not shown to be other than temporary is, I think, out of the question. The facts as to the drawings here are that during the year to October 1906 they were,

in round figures, £58 per week, that in the year to October 1907 they rose to £59, that the two following years they fell to £54 and £50 respectively, and that "from October 1909 to July 1910" they were £42. It is not clear how many months are intended in this last period. Now the facts stated in the case offer no explanation of the causes to which this falling off is to be ascribed. It is not said, for example, that there has been any change in the character of the neighbourhood leading to decreased possibilities of custom. In these circumstances I am unable from the mere statement of the decrease in drawings during the period in question to draw the inference that there has been any fall in the value at which the premises might be expected to let from year to year. I do not think it can be assumed that a landlord would, on the statement of these drawings alone, without reference to other considerations bearing on the question, be prepared to grant a reduction of rent to a tenant holding from year to year.

I am accordingly of opinion that the appellant is not entitled to have the valuation of £260 reduced further than by the amount of one-half of the increase of the licence duty.

Scott's Case.-The subject of valuation in this case is a public-house situated at No. 202 Rose Street, Edinburgh, belonging to George Keddie, and let by him to the appellant Henry Scott under a lease for ten years from Whitsunday 1906. The annual rent payable under the lease is £85. At entry the appellant paid to the said George Keddie the sum of £2800 in name of goodwill and fittings, whereof £200 may be taken as the value of the fittings, leaving £2600 for goodwill.

The Assessor in making his valuation took one-half of this sum, £1300, as having been presumably paid to Keddie as owner of the licensed premises, and spread the amount over the ten years of the lease at the rate of £130 per annum, which, added to the fixed rent of £85, brought out an annual value of £215, at which figure the subjects have been entered in the roll since 1907.

I think that the Assessor, when he made his valuation in 1907, was justified by the authorities and by the practice in taking one-half of the sum paid for goodwill as presumably representing a definite amount paid to the landlord as such as consideration for the lease in addition to the annual rent, and in treating the sum so ascertained by spreading it over the whole years of the lease by way of additional rent.

The appellant, however, maintains that the Assessor's process represents only one method of valuation applicable to such a case as this where the fixed rent under the lease is displaced by the presence of a consideration other than rent, of defined amount; that this method does not represent a rule binding on the Assessor, and that it is always competent in such a case to disregard the considerations actually given for the lease altogether, and to show on

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extraneous grounds that the annual value is greater or less than the actual return to the landlord which these represent.

It has to be kept in view that this is not a case of a consideration other than rent of undefined value. In such a case the method of spreading the amount of the consideration over the years of the lease by way of additional rent is not practicable, and the Assessor is entitled to go outside the lease, and the tenant to meet him on that ground.

Here the consideration other than rent paid to the landlord is one of ascertained amount. It and the fixed rent combined represent what the landlord de facto gets for his lease. Whether this combined return is to control the valuation for the whole years of the lease in the same way as does a bona fide rent fixed without grassum or other consideration is a question not ruled by the terms of the statute. I am of opinion, however, that a definite answer to the question is returned by the decision in the case of Shiel v. Assessor for Hawick, 25 R. 592. In that case the lease stipulated for an annual rent of £14. The tenant, however, obliged himself to execute certain alterations. The cost of these was ascertained to be £30, 16s. This was a consideration other than the rent. In respect of it the Assessor proceeded to disregard the lease, and fixed the annual value, by comparison with other subjects, at £30. The tenant challenged his method on the ground that, as the consideration other than rent was of definite amount, the only proper method of valuation on the authorities and on the practice following on them was to spread that amount over the whole years of the lease as additional rent. This Court, then composed of Lord Kyllachy and Lord Stormonth Darling, affirmed the tenant's view, which was held to represent a definitely fixed method of valuation in such cases. Lord Kyllachy, after referring to the desirability of adhering to a rule of valuation once fixed by practice, and explaining that if the consideration other than rent is indefinite in amount or value there is nothing for it but to value the subjects as if unlet, said "On the other hand, if the obligation is to pay or spend a definite sum of money, or a sum which has been, or is capable of being, ascertained, the practice is, and I think always has been, to take the sum in question and spread it over the whole period of the lease. That has, I think, hitherto been the practice, and whether obligatory or not under the statute, it is, I think, a quite lawful and just practice." Lord Stormonth Darling said "Now if the question were open, I am not sure that I should differ from his (the Assessor's) decision. But I am satisfied by what your Lordship has said that the question is not open, and I do not wish to be held as dissenting from the rule that when a fixed sum is to be expended on improvements by a tenant, that sum must, for purposes of valuation, be spread over the years for which the lease is granted. Now that is the rule for which the appellant

contends, and I agree that his contention must be sustained.'

As no distinction can be drawn for the purposes of the present question between a definite sum expended under obligation on alterations on the premises and an ascertained sum paid for goodwill to the landlord at the inception of the lease as part of the consideration therefor, the question which these learned Judges held to be no longer open appears to me to be the very question which is raised here, and their decision directly applies to the present case. I am unable to read it as meaning that the rule of valuation which it enforces is one which is to be binding only at the beginning of a lease, and which may be discarded during its subsequent currency. If extraneous circumstances are to be admitted in such a case to control the amount of the actual return to the landlord, they must be entitled to consideration in any year of the lease in which they are presented, whether at the beginning of the lease or subsequently.

If I am right in regarding this decision as applying to the present case, I humbly think that we should follow it. It purports to enforce a well-fixed rule of valuation. While it may not be technically res judicata, I do not think that we should be justified in departing from it unless convinced that it is clearly contrary to the true intent of the statute. Now it seems to me that the rule which it adopts is one which is consistent with the policy of the statutes. Under the Act of 1854 it is an absolute rule of valuation that a rent payable under a bona fide lease which is conditioned as the fair annual value of the subjects, without grassum or other consideration, shall be taken as the annual value thereof during the whole period of the lease. In such a case the conditions affecting the subjects may materially change during the lease so as to make the actual lettable value, considered apart from the lease, greater or less than the amount of the rent under the lease. Nevertheless the rent under the lease continues, vi statuti, to rule the valuation. The reason no doubt is that the rent under the lease is the actual return received by the landlord from his tenant under the contract between them. In cases where, in addition to a fixed annual rent, there is paid to the landlord by the tenant at the inception of the lease a grassum or other consideration for the lease of ascertained amount, this statutory rule does not literally apply. But the difference between the two cases is one of form rather than of substance. Because it is apparent that by combining the annual rent with the sum of the grassum or other consideration spread over the years of the lease the total actual return to the landlord for the lease is arrived at as satisfactorily as if the landlord, instead of accepting the latter sum, had correspondingly increased the annual rent to be paid to him. This being so, it seems to me to be consistent with the true intent of the statute to adopt, in the one case as in the other, the principle, which the