SUPREME COURT

Dominion, Volume 13, Issue 47, 19 November 1919, Page 2

SUPREME COURT

HOTEL LEASE

GOODWILL AND FURNITURE In the Supreme Court yesterday morning His Honour Mr. Justice Edwards heard the case of. William M'Lennan, of Taihape, farmer, v. Waller Julius Jorgoiisen, of Wellington, hotclkeeper. Mr. A. W. Blair appeared ior tho plaintiff and Mr. A. Gray, K.C., with him..Mr. V. Willis appeared ior tke defendant. \ j , According to the statement of claim, the plaintiff leased from the defendant on August 16, I!US, the Gretuii Hotel : at Tnihape,' for a term of fivo years, subject to the payment of, rent and üb- ' servance of. the covenants of the"lease. The plaintiff paid to the defendant as ■■i bonus or premium tor the giant of the lease the sum of .£IO,OOO, which also included payment for the furniture and cil'cets,' which were alleged to have been valued at .1822. The pinintifl' thus boejinie a lessee of licensed premises within the meaning of the Liquor Restriction Act, 1917, and in exercise of the rights conferred upon him thereby he. gave to the defendant, the lessor, notio rc(|iiiring him to reduce the rent. Thdefendant elected to accept a surrende' of the lease in preference to the rental. On the acceptance of .ho surrender there was paya.b!e by lie lessor a proportionate part of theboius or premium paid by the lessee on v he grant of the lease. At the time tint Joi'gcnseu resumed possession of the premises, it was agreed that the proportion of the term tor which goodwill was piya.ble was two years and 151 days, and for the purposes of settlement the amount paid for the goodwill was assumed to have been J;7500; the sum therefore payable to the plaintiff on this assumed basis was JC3620 10s. lid., and this it was claimed was duly paid. It wa.s further set out that the gross sum on which Roodwill should be calculated \va< the sum of .£IO,OOO, less JCB22 for furniture nnd ell'ects, and the proportion of Kcodwill should be calculated on JJ9178 instead of .175(10. Plainlilf, therefore, claimed the sum of ,£Blo—the difference between .1:4130 11s. 10d., and .£3620 10s. lid., actually paid. The defence was that the agreement arrived ;it between the parties fixed tho value of the furniture and effects at VC23CfI, and therefore the amount paid for goodwill was .£7500. the proper basis , on which the proportion repayable on J sill-rendering the lease should be eal-, , culated. v '; Air.. Blair, in opening, ssiid that Jorgensen, the defendant, was the owner 1 of the freehold of the Gretim Hotel, containing about 55 rooms. In July, 1915. tho plaintiff, who had for some time been' concerned i|i the management of I the hotel, hearing that a leaso of the hotel was for sale, approached Jorgen- ; seii. and it was arranged that plaintiff ! should have a lease of the hotel for five \ years, tho goodwill'nnd furniture and ; effects'to be purchased for i'lfl.OOO.' No- ' tiling was then said about the value of. the furniture. After the lease .had.been 1 in existence about i% years, tho C o'clock closing Act was passed. Under this Act ' the tenant of a hotel had the right-to J call upon his landlord to-reduce the 1 rental to the exlent of the reduction ot business due to the legislation. Jorgen'"6Mi. however, decided to accept a sur- | render of the lease, and Joi-gensen took 1 possession of the hotel in March, 1918. I Then airose tho question as to how 1 much of the .tlO.flCO was to be assessed ■ as the value of the furniture, and how ' much to the goodwill. A valuation of 1 the furniture was made by two valuers. • who valued the whole of the furniture ' in. the hotel at .£822 odd. , The plaintiff was willing to take the valuation of the ■ furniture as valued by the valuers. The 'other side' contended that the furniture v.-ns valued o.t ,<-25CU. '" WKliam jt'Lonnan, tlio" plaintiff, in giving ov'dence, confirmod the statements made by his counsel. In cross'-cxair.iiiMlion, witness, said Iliat ■: in making up his income-tax returns tjio i furniture was- rallied /it .G-500 ami the I Rcudwill at , ,£7500.' Tho valuation oftlio fiirn'tuic' for ■•income tax purposes was Ji.'.'iOO, an'd that valuation was maintained for the two and a half years. •A. J. Loiiglinan, solicitor, who prepared .the lease, and .I'. W. Somerville who ■valued thn furniture, uUo save evidence. Mr. Gray briefly opened for the <le- , dehce, and indirated- the nature "i tlie evidence'lie would ca'l. , ■ Walter J. Jorgensi'ii, the defendant in . the c;l. ; i>, sn-iil'that a valuafon of the ' . furniture was iiiiul: , in lilis, and the value. . ! wa.-r placed at X'iV.KI. The valuation was . [ miide ' by Mr. Tiiomas Dwnn. Witness j (Hid the plaintiff met Mr. Grant in WeiI j lington, ami dismisted the matter of tha .'income lax retiii-iw. Jlr.-Gra'it was to ; I niuke ) the returns of both parties. It I j was agreed between them ;if that inler- ! view that the value cl' the.' furn.turo I ; -should- ba taken at <i2T>Cfl and the giiodwill at £7SQU, the f'.Mi aiiuiunts nuking up I tin; •£■lo,ooo paid by M'Lennan for the ; Kiicdivik of Die lease ami furniture. Wien , the leas? was surrendered kust yeav, wit- . neis \a-x'A the rofumi of the. proportion J 'of goodwill cm ■ .£7500. iir. E. Ju'instoii . I valued the iurnitiiec when tho hotel was . i fiiirendereJ and'placecl tile value at X 522..-- , j ilis Honour:' The furniture must, havo , j been in very ljiul condit.on to have lost; t . two-ihirds of its value in two and a half , years. , Wilncfs: Ye.-, Your lionuur. ; His Honour: Nolwilhslaiidiiig the rise . in prices. < Witness: Yes; Vonr Honour. , . . Oonl'imi.n.?, witness siiid he cndeaviniret • to buy buck the furniture at ;is low a [ valuation as possible. To iir. Blair: Two years before, leasing (lie properly.to M'Leuiian lie bought Hie , 'iK-huid tor .!!22,20(), and he, reckoned tlio , ! furniture was.worth J2. r )00. Ho coukl not I Kiy whether the furnilare was 15 years , I (.id <ir not. He iiau added £109 or 'XSIA ■ wdrtii of furniture since buying tiie furui- ! tiire for }:Ht] fro.ii M'Lennan. The f'urni- - ! lure iiad .since been injured for .£2425. iJe did not 101 l the underwriteis t:nj I vf.lu? of the furaiture. When ho got the fiiniiture at .ib'i-' lie got a very good ! liargain. The underwriters inspected the ; fiirnitiire before they accepted the risk. i.H'o did not place the value of the furniI ture at .1:2500 foi income, tax purposes I in order to put the burden on M'Lenuan. j The queston of the income tax returns . J v;is discussed on two occasions with . J .M'l.eiinati, once in the hotel at. Taihape ; nnd i-ome time later in the Hotel Cecil, •' Wellington. This discussion arose because . Mr. Grant wanted to make up the returns, and M'Lennan also wanted Grant to make up his returns. Thomas JJwan, hotel-broker and value*, sai(! he ;o!d the Gretnn Hotel, Ta.'hape, to Jorgensen for UJ22.500; of this the approximate value of the furniture was J;2SCO. I J. N. Grant, Wellington, who prepared j thovincomo tax returns for both the do- ■ fendant and plaintiff, gave evidence cor- . l'olibrnting the statements of the defend- ; ant with respect to the valuations placed i on the goodwill and tho furniture respco- , lively. j His Honour, in addressing iho jury, said that they had only one question to ' answer, anil that, was w'hat was the value of the furniture at the time tho lease was executed. His Honour then sifted ■ Ihc evidence. The jury, after «i short retirement, decided in favour of tho plaintiff, and awarded him the full amount claimed, i J£JO. His Honour entered jmlgment aoi cordingly, with costs according-to scale.