Kundi v Swedish Products Co. (Civil Appeal No. 1202 of 1951) [1952] EACA 295 (1 January 1952)

### APPELLATE CIVIE

## Before Runn. J.

### TARA SINGH KUNDI, Appellant (Landtord)

$\mathbf{v}$

# SWEDISH PRODUCTS CO., Respondent (Tenants)

## Civil Appeal No. 1202 of 1951

(Appeal from the decision of the Central Rent Control Board-Nairobi)

Landlord and Tenant—Increase of Rent (Restriction) Ordinance—Assessment of standard rent—Market cost of construction—Board's powers.

The landlord-appellant applied to the Rent Control Board for assessment of the standard rent of a building occupied in February, 1949.

The Board assessed the market cost of construction taking into account the cost of another house recently before the Board, and after assessing at a figure for such cost assessed the standard rent at less than 10 per cent of the combined market cost of construction and value of land.

Held (1-2-52).—(1) A Board can use its general knowledge derived from its day to day activities but there is danger in relying on one particular instance.

(2) It is not the minimum cost of construction that is the criterion but the market cost.

(3) The Board has power to assess the standard rent at less than 10 per cent of the combined market cost of construction and value of the land provided reasons are given for the reduction. The reasons given in the present case that the construction was<br>unnecessarily strong to permit of a further building being superimposed later and the<br>internal structure and finish was not particula allowed.

## D. N. Khanna for appellant.

## Couldrey for respondent.

JUDGMENT.—This is an appeal from the decision of the Central Rent Control Board. The applicant is the owner of land on which he built a two-storey building. The ground floor is used as a workshop by the owner and the upper floor is divided in offices which are let to a company which divided the premises into two and sublet them to two sub-tenants as business offices.

At the hearing of the appeal but not at the proceedings before the Board it was suggested that the construction of the upper floor was commenced after 1st January, 1949, and consequently that they were not controlled by the Ordinance.

At first I thought that there might be some substance in this point and I went so far as to make a ruling remitting the matter to the Board for evidence on the point but as the hearing proceeded on other grounds it became clear from the evidence that there was evidence that the two floors were constructed on what I may call one building project which was commenced in 1948 and in short all the evidence before the Board was to the effect that the operations were started in 1948 and tenants were in occupation in February, 1949. In the circumstances there is no substance in this point as the Board had ample material to justify a finding that the premises in question and the upper storey were commenced in

1948. A main part of the appellant's case was the cost of construction in 1948 which he said was a peak year as regards building work. The ruling was therefore rescinded before the rising of the Court and the parties advocates were so informed.

The whole building was constructed upon a scale which was unnecessarily strong for a two-storey building in order that up to two further storeys could be added later and in fact the foundations and main structure of the two storeys that were built were designed and built on a basis of ultimately a four storey building being erected. The finish of the work was not of a particularly high standard.

Mr. Barber a member of a firm of valuers put the construction cost in 1948 at Sh. 55 a sq. ft. on the basis as I understand the evidence of Sh. 40 a sq. ft. as the ordinary cost plus Sh. 15 a sq. ft. for the cost of a canopy and projection on the ground floor and for the extra foundation for additional floor.

The consulting engineer who prepared the calculations for the reinforced concrete of the building put the extra cost of the Canopy at Sh. 8 to Sh. 10 a sq. ft. and said that while the foundation of a single storey building would be 10 to 15 per cent of the total cost, those of a two-storey building would be 15 per cent and for two additional storeys another £500 would be needed. He said: "I think this building cost about $£2$ a sq. ft. in 1948. Although this witness did not supervise the erection he did check the reinforcements once or twice."

Mr. Vigar, one of the sub-tenants was a building contractor and he said "I think the outside figure for this building would be Sh. 35 to Sh. 40 (a sq. ft.) at the most," and that he would quote Sh. 40 to Sh. 45 a ft. to-day for a building of this type, but with better partitions.

The Board's assessment officer put the top cost of the building at Sh. 30 a sq. ft. but this was on the basis of the look of the building without apparently. considering the specification or ratio of cement and steel in the foundations. He put the cost of the slab which I take it is what was called a canopy by other witnesses at "Sh. 13,000 or so" on the basis of Sh. 5 to Sh. 7 a square foot.

In the result the Board put the market value of the land at the prescribed date at £1,000 which was not contested. The extra cost for added reinforcement £1,000 which was a rather arbitrary sum and the cost of construction at Sh. 30 a sq. ft. £8,100, making a total of £10,100 on which they said they allowed $8\frac{1}{2}$ per cent, but in fact allowed £858.

I would not allow an appeal on the assessment of the market cost of construction merely because I was inclined to disagree with the decision arrived at by the Board. I would have to be satisfied that the Board's decision was wrong before I would allow such an appeal. In this case I am satisfied that the decision was wrong and that on the evidence the market cost of construction should be at least Sh. 40 a sq. ft. including the extra strengthening that is to say Sh. $216,000$ or £10,800.

The Board's valuer put it at Sh. 30 a ft. but does not appear to have allowed anything for the foundations. Mr. Sehmi, who was the only engineer who had anything to do with the actual construction, put the cost at Sh. 45. This is not seriously inconsistent with Vigar's evidence, which is not likely to be unduly generous to the appellant and is, of course, less than Barber's estimate.

The Board took into account the building cost of another house that recently came before them, but although a Board can use its general knowledge derived from its day to day activities there is a danger in relying on one particular instance. It is not the minimum cost of construction that is the criterion, but the market cost and an individual may build a house for less than the market cost by making savings such as acting as his own contractor, or architect or clerk of works and so on.

In the present case it seems to me that on the evidence of the witnesses who are concerned in building the market cost of construction was about Sh. 40 a sq. ft. and not less.

I allow the appeal to the extent that the market cost of construction should be £10,800 not £9,100 with the result that the combined market cost of construction and value of the land on the prescribed day is £11,800 not £10,100.

On the other points raised I see no objection to the Board inspecting the premises in question and I do not find that this was wrong or irregular in the present case.

I consider that the Board has power to assess the standard rent at less than 10 per cent of the combined market cost of construction and value of the land but where they do that reasons should be given for the reduction. In the present appeal reasons are given which would justify such a reduction namely that the building was made quite unnecessarily strong for its present state with a view to further building being superimposed later and also the fact that internal structure and finish was not particularly high for the cost of construction in relation to the present state. I think the figure of $8\frac{1}{2}$ per cent is probably justified.

I alter the assessment of the standard rent of the ground floor to Sh. 930 per month and of the upper floor to Sh. 740 per month.

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