LEASE OF HOTEL

Hokitika Guardian, 28 March 1933, Page 2

LEASE OF HOTEL

INTERESTING APPEAL CASE.

POINT OF NAT. EXPENDITURE ACT.

(Per Presa Association- Copyright

WELLINGTON, March 27

A point arising out of the National ; Expenditure Adjustment Act, 1932, occupied the attention of the Court of : Appeal to-day. The. appellant was Ernest Charles Heel, of Auckland, the'' owner in fee simple, of the Railway Hotel, l’nglewodo. In 1925 he leased it to Mrs Bridget O’Neill for four years at a yearly rental of £624. Mrs O’Neill, in addition, paid Heel £3,000 down. On November 25, 1929, the appellant executed a further lease to Mrs O’Neill for a term of four years at a yearly rental of. £624; Mrs O’Neill, ill 1 addition, paying £3OOO down. On November 25. 1929, the appellant executed a further lease to Mrs O’Neill for a team of four years as from February 1, 1930, at a rental of £650 per annum, Mrs O’Neill once again paying a further sum of £3,000 down, which, as expressed in the lease, was to be paid l for goodwill. On August 14, 1931, Mr s O’Neill having died, her executors transferred the lease to Leo Patrick O’Neill, who is the present respondent. In May, 1932, the National Expenditure Adjustment Act came into operation. Section 31 of which provided for a 20 per cent, reduction in all rents payable in respect of land, nr of any interest in land. The question then arose as to whether the respondent was entitled to any allowance under that Act in respect of the last sum of £3,000 that wa* paid by Mrs O’Neill, he contending that the £3,000 should be considered as a premium paid for the lease, which, under Section 29 of the Act, was deemed to be rent accruing from day to day, and, hence, was reducible in accordance with Section 31.

The appellant denied the allowance, and contended that the sum in question was paid as a purchase price for goodwill, and not as a premium for lease.

Appropriate proceedings having been taken, Mr Justice MacGregor on August 2-5, 1932, held that- the payment .had been by way of premium, and that consequently O’Neill was entitled to a 20 per cent, reduction of a proportionate part of the said sum calculated from April 1, 1932, from which date the National Expenditure Act operated, to January 31,. 1934, the date of the expiration of the lease.

On the bench were Chief Justice Myers, Justices Reed, Ostler and Smith. Mr Weston, counsel for appellant, said the' question was whether the sum paid by a hotel lessee for goodwill in a hotel business could be held to he rent paid in respect of land

withip s thq, Reaping ,6t. Section *31% or whether if was paid under a contract in force at the time, of the passing of

the Act. Appellant leased promises to the respondent, and, independently, had sold the right to use the goodwill fqr a period of four years, The parties, he said, by their agreement, had separated the goodwill from the rental, and had fixed a price for the use if it, The Expenditure Apt would not convert into rent what was not in the rent before its enactment, The court adjourned.