HOTEL LEASE.

Auckland Star, Volume LXIV, Issue 73, 28 March 1933, Page 9

HOTEL LEASE.

GOODWILL OR PREMIUM ? CASE IN APPEAL COURT. (By Telegraph.—Press Association.) WELLINGTON, Monday. A case arising out of the National Expenditure Adjustment Act, 1932, occupied the attention of the Court of Appeal to-day. It related to a payment in connection with the lease of a hotel. The appellant, Ernest Charles Heel, of Auckland, owner of the fee simple of the Railway Hotel, Inglewood* in 192., leased it to Bridget O'Neill for tour years at a yearly rental of £024, Mrs. O'Neill in addition paying £3000 down On November 25, 1029, the «-PP«"f n1 ; executed a further lease to Mrs. O Neill for a term of four years from February 1 1930, at a rental of £050 a year, Mrs O'Neill again paying a further sum of £3000 down, which was expressed in the lease to be paid for goodwill. On •Vu-nist 14, 1931, Mrs. O'Neill having died, the executors transferred the lease to Leo Patrick. O'Neill, the present •esponclent. 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 or any interest in land. The question then arose whether the respondent was entitled to any allowance under that Act in respect of the last £3000 paid by Mrs. O'Neill. He contended that the £3000 should be considered ae a premium paid for ths leaee, which* under section 29 of the Act, was deemed to be rent accruing from day to day and hence reducible in accordance with section 31. Appellant denied the allowance and contended that the sum in question was paid as purchase price for goodwill and not as premium for the lease. Appropriate proceedings having been taken, Mr. Justice MacGregor, on August 25, 1932,- held that the payment had been by way of premium and consequently O'Neill was entitled to a 20 per cent reduction of a proportionate part of the sum calculated from April 1, 1932, from which date the National Expenditure Act operated, to January 31, 1934, the date of expiration of the lease. The appeal was from that decision. On the Bench were the Chief Juetice, Sir Michael Myers, Mr. Justice Reed, Mr. Justice Ostler and Mr. Justice Smith. Mr. Weston, counsel for appellant, said the question was whether the sum paid by the hotel lessee for goodwill of the hotel business could be held to be rent paid in respect of land within the meaning of section 31, or whether it wae paid under a contract in force at the time of the passing of the Act. Appellant leased the premises to respondent and independently had sold the right to use the goodwill for a period of four years. The parties by their agreement had separated the goodwill from the rental and fixed a price for the use of it. The Expenditure Act could not convert into rent what was not in the nature of rent before its enactment. The hearing wae not concluded.