STADIUM CASE

Evening Post, Volume CXXV, Issue 71, 25 March 1938, Page 12

STADIUM CASE

RENEWAL OF LEASE

A CONDITIONAL ORDER

FINANCIAL ASPECT

A conditional order granting Wellington Speedways, Ltd., a renewal of the lease of Kilbirnie Stadium from Association Football Grounds, Ltd., was made by the Chief Justice (Sir Michael Myers) in a reserved judgment delivered today in the Supreme Court. The action was one in which the plaintiff company sought renewal of the lease for a further ten years and relief against forfeiture of the lease. Association Football Grounds, Ltd., in refusing the right of renewal, alleged breaches of covenant. After dealing with argument raised by counsel for both parties regarding breaches of covenant and waivers claimed by the plaintiff, his Honour proceeded:— 'I confess that for a time during the hearing I was very much inclined to think that the plaintiff's conduct should be regarded as precluding it from being entitled to relief. It, seemed to me that in paying its shareholders a dividend in one year (1930), equal to 55 per cent, on the paid-up capital as well as by its conduct in other respects and its several breaches of covenant, the plaintiff had completely ignored its obligations under the lease and forfeited any right to the favourable consideration •of the Court. But on reflection I do not think that that would be altogther a just conclusion, although in view (inter alia) of the plaintiff's position in 1936, as cvi- j denced by the minutes of its meeting of September 9 of that year and of its present lack of actual cash, I doubt its ability to comply with the conditions that will be imposed. A NEW BUSINESS. "One has to remember," said his Honour, "that the business which the plaintiff company was conducting on the leased premises was a new business which, up to the time of the payment, of the dividend referred to, had been quite prosperous, and no doubt the directors considered themselves justified in believing that that prosperity would continue, and to as great an extent. In deciding a matter of this kind, one must be careful to avoid what has been referred to by Judges as 'the easy but fallacious standard of subsequent events.' "Even supposing it can be said that in the earlier years the directors of the plaintiff company should have paid only a moderate dividend and retained a considerable portion of the company's profits to meet the contingencies of subsequent years, the evidence satisfies me that, if the plaintiff had retained a very substantial amount and had continued its operations on the' leased property during the years 1932-1933 and 1933-1934, the business could not have been carried on at a profit, and in such circumstances the defendant under the terms of the lease would have' received no rental, and I think that the same position would have obtained during that porton of the later period when the plaintiff company was not operating. On the other 'hand, the plaintiff has expended upon the property a sum of about £8500 in the construction of a 'dirt-track' and a stadium and works incidental thereto. ADVANTAGE TO LESSOR. "According to t,he evidence of Mr. Mitchell, an architect called for the defendant, the present-day value of the stands, based on their cost in 1929, is £5620, but he says that, if the value is assessed at-replacement cost today, the value would be £7560. It has been suggested, on the other hand, on behalf of the defendant, that the stands, in their present condition, at all events, would be not an asset but a liability, to the defendant. I cannot accept that suggestion, but, even if it be correct, the grant of a renewal of the lease, subject to certain conditions which I propose to make, should be a great ad.vantage to the defendant. "It may be that the value given by Mr. Mitchell, though I- have no doubt as to the honesty of his evidence, is somewhat exaggerated. But, even | assuming that to be so, the position is that in all the circumstances, especially having regard to the conditions that I intend to impose, the defendant will have been caused no real financial loss by the plaintiff's breaches of covenant, while, on the other hand, the refusal to grant relief to the plaintiff would mean a loss to that company of property worth several thousand pounds which was erected or established not merely upon the basis of the original • period of ten years, but upon the assumption that that term would be twice renewed in accordance with the conditions of the lease. . . . PROSPECT OF SERIOUS LOSS. "On the whole," concluded his Honj our, "I have come to the conclusion, having regard to all the circumstances of the case, and particularly to the fact that there is no loss in respect of past breaches which will not be remedied by the conditions which I propose to impose, and to the fact that there should be no loss of profit to the defendant in the future if the renewed lease is granted and the plaintiff carries out the terms of the lease, and to the fact that unless relief is granted the plaintiff company will ■. suffer a very serious loss, that relief should be granted and an order made that the defendant shall grant to the plaintiff as lessee a renewal of the lease on the same terms and conditions in all respects as if all the covenants, conditions, and agreements in the lease had been duly observed and fulfilled.' But, as I 1 have already indicated, such order must be conditional and the conditions to be imposed, if complied with, will certainly go far to overcome Mr. Virtue's' objection that the plaintiff is in a moribund condition and is seeking to deprive the defendant of the use of its ground without the assurance of any return."

The conditions imposed arc that the plaintiff must within two months give security by bond, with one satisfactory surety approved by the Registrar of the Court to the amount of £1150 to undertake specified repairs and strengthening work to the stand. The work is to be commenced as soon as practicable, and is to be carried out in all respects to the satisfaction of the City Engineer. It is to be comDleted by October 31, 1938. The plaintiff is to pay to the defendant within one month any unpaid proportion of past insurance premiums or rates for which it is liable under the original lease, and also to pay within two months the defendant's costs on the proceedings before the Court. If the conditions are not complied with, then both action and motion brought by the plaintiff will be dismissed with costs 120 guineas. At the hearing Mr. P. B. Cooke, K.C., with him Mr. W. Perry, appeared for the plaintiff, and Mr. D. W. Virtue, with him Mr. J. Meltzer, for the defendant.