SUPREME COURT

Press, Volume LXXXVII, Issue 26393, 11 April 1951, Page 9

SUPREME COURT

MAGISTRATE’S DECISION* UPHELD An appeal against a decision given by Mr R. M. Grant, S.M., in the Magistrate's Court at Chriatchurch on December 15, 1950, was dismissed by Mr Justice Northcroft in the Supreme Court yesterday, and the Magistrate's decision was upheld. The appellants were Ronald Arthur Bassett McClurg and Ronald Louia Dumergue, restaurateurs, for whom Mr K. J. McMenamin appeared. The respondents, both restaurateurs, were Malcolm Arnaud Scandrett, represented by Mr E. B. E. Taylor, and Edward Pierce Lutton, represented by Mr E. S. Bowie. The Magistrate, in his decision, gave judgment for McClurg and Dumergue for £5O against Scandrett and Lutton on a claim for £5OO as liquidated damages for alleged breach of a covenant between the parties. The Magistrate held that it was a penalty and not liquidated damages. It was on this point that the appeal was heard yesterday, Mr McMenamln saying it was a question of whether it was a penalty or liquidated damages. He submitted that the appellants were entitled to the full amount of the claim. Early in 1947, the respondents sold 1250 ordinary £1 shares in Armagh Tea Rooms, Ltd., to the appellants for £4lOO. A deed of covenant was signed on April 22, 1947, by which the respondents covenanted to pay the appellants £5OO if the respondents should be interested directly or indirectly in a similar business within a radius of one mile of Armagh Tea Rooms within four years. Scandrett began to carry on the business of a grill room at 191 Manchester street in June, 1950, that olace being within a mile of the appellants' tea rooms. Mr McMenamin said that the appellants paid £ 1100 for goodwill and, in view of that, the sum claimed was not uncmionable. A covenant must be judged in the light of the circumstances in which it was entered into. The respondents would say that the breach of covenant occurred three years after, and the effect of the breach was negligible. It was Irrelevant to say that the loss sustained towards the end of the period was negligible. If the covenant was reasonable at. the beginning, it was still reasonable at the end. He submitted that the Magistrate was wrong in holding it to be a penalty and not liquidated damages.

Counsel for Respondents Mr Taylor said that the respondents bought 'the business in February, 1948, for £3250, and spent £6OO in equipment, making their total investment £3850. They sold it to the appellants in 1947 for £4lOO, and their net profit, after paying commission, was £l2O. Counsel submitted that the £5OO in the covenant was not a genuine pre-estimate of the damage, but fell within the category of a penalty. There were so many ways in which the covenant could be breached that it was really a series of covenants operating from day to day. As time went on, the Significance of a breach faded until it reached a point where the damages, if any, were negligible. He submitted that the Magistrate was right in holding the £5OO to be a penalty and not liquidated damages.

Mr Bowie also led legal argument in support of the contention that it was % penalty and not liquidated damages. His Honour said that, in his opinion the appeal must fail. This was a covenant involving a variety of circumstances for which one sum of money was entirely inappropriate. Thisf made it a penalty and not liquidated damages.

The inpeal would be dismissed and the judgment of the Magistrate’s Court upheld. Costs were given against the appellants.