Blackball Hotel Sale Value Reduced to £7031

Grey River Argus, 20 May 1947, Page 2

Blackball Hotel Sale Value Reduced to £7031

In a written judgment, received at Ircvmouth yesterday, the Land Sales Jourt. dismissed an appeal against the /sown in connection with the sale of ■lie Dominion Hotel at Blackball by A. C. Bruhn and A. McDonald to Ronald Gardiner at a price of £7754. Consent to sale was granted at this- figure by the Westland Land Sales Committee, whereas the vendors sought a nrlce of £B5OO, a substantial increase on the price paid for the property by them in 1945. The Court, which comprised Mr Justice Archer and Mr W. Stewart, after hearing the appeals of both Crown and vendor on May 8, approved of the sale, subject to a reduction in price to £7031/ , Messrs J. W. Hannan and C. K. McGinley appeared for the vendors .tiring the court proceedings, and the /rewn was represented by Mr V. Kay, Wellington. In its written judgment, the Court fates inter alia: — “The principles to be adopted in -.sluing hotels under the Land Sales Act have been fully set out in Mcun.ncy to Young, 1946, G.L.R' 424 in several other written decisions of the Court which are available for the perusual of interested parties. Nothing in the present case loads us to vary these principles in any way and our concern is therefore to apply them to the facts now before us.” •‘‘Messrs Bruhn and McDonald’s accounts indicate a substantial increase in turnover and an inciease m the average net profit to between £l6OO and £l7OO. On the face of these accounts it would seem that the business has very substantially increased during the occupancy of the venders and that a substantial increase in the value of the goodwill is therefore justified. ‘■'The method adopted by the committee of assessing an increase in goodwill by reference to two years increase on the net profits differ: substantially from the rrfethods applied by the court in Mountney to Young and does not appeal to us as a satisfactory or reliable method of assessing the increased value of a hotel on its resale. The committee’s decision is based on the view which, indeed, is supported by uncritical examination of the accounts that Messrs Bruhn and McDonald have succeeded in increasing the average net profit of the hotel from £5OO to £l4OO per annum. This, however, is not borne out by the evidence. “We are of the opinion that as in the case of Mountney to Young we must attempt to assess the present value of the hotel by reference to its presen earning capacity as disclosed by Messrs Bruhn and McDonalds accounts, which appear to us to be much more reliable than the earlier accounts of Mrs Campbell. After reviewing the evidence given by the valuers for the vendors, Messrs Kettle and O’Donnell, - the judgment states: —‘‘We are forced to the conclusion that the valuation of £9500 placed on the hotel by Messrs Kettle and O’Donnell represent no more than their personal opinion, unsupported by the trading accounts of the hotel or by any cogent reasoning Passed on proved facts . . . The Court is in agreement with the committee as to the unconvincing character of the evidence in question and that the value of the hotel must be sought from a critical analysis of the vendor’s trading accounts. In applying to these accounts the methods adopted in Mountney to Young we find that, the condition of the business in 1947 was so closely similar to that in 1946 that we are satisf-ed that justice will he done to the vendors if we adopt as a basis for our computation the net profit shown by the accounts for the year ending March 31. 1946.” The Court (hen makes certain adjustments, and concludes:“The result of the foregoing adjustments is as follows:—Net profit shown by the accounts £1624, less adjustments and management reward (£850) equals £6lB. Capital value therefore is £6lB capitalised at eight per cent, which equals £7725. The figure so determined is the value of the hotel as a going concern, including the furniture which has been valued by the parties at £694. This must be deducted, leaving the basic value of the hotel for the nurnose of the Land ‘lales Act as ££7031. ‘‘This amount represent in our opinion an increase over the price paid by the vendors amply sufficient to covei’ their improvements and the increase in the value of the business during their occupancy and the basic value is fixed at £7031 accordingly. “The Crown appeal will therefore be allowed and consent will be granted to the sale subjeet to a reduction in price to £7031 together with the value of the stock and furniture which, which we are informed, has been agreed on by the parties at a total of £872. The appeal of the vendors is dismissed.”