VALUE OF GOODWILL

Otago Daily Times, Issue 25455, 9 February 1944, Page 4

VALUE OF GOODWILL

CITY HOTEL PROPERTY CASE BEFORE LAND COMMITTEE The sale of the Oriental Hotel, Dunedin, to Ellen Niall and George Philip Miller by Thomas Clark Muir and Mary Frances Muir at the consideration of £2750 for the land and buildings, and £19,250 for the licence or goodwill, carne before the Otago Land Sales Committee yesterday. The members of the committee present were Messrs E. J. Anderson (chairman), D. J. Ross, and Neil McNamara.

For the Crown, Mr W. J. Mathers said he would not contest the price asked for the land and improvements. He felt that the question of goodwill was one for the committee to decide. Mr G. W. Ferens, who appeared for the vendor, said that in 1928 the hotel changed hands at £20,000. Business deteriorated, however, and the mortgagees had the hotel on their hands in 1936, and in that year it was sold to Mr and Mrs Muir. They were experienced hotel-keepers, and in their first year the takings increased substantially. The Oriental Hotel was leased in September, 1938, to Mr D. P. Wilson, and when Mr Wilson took over the Crown Hotel, Mr and Mrs Muir again entered into possession. They were again successful in increasing the turnover. “This is a perfect example,” counsel said, “of an experienced hotel-keeper taking over an hotel that was at a low ebb and adding considerably to its value by increasing the takings.” . Mr Ferens said that he did not intend calling evidence relating to goodwill. “So far as the value of the hotel is concerned,” counsel added, " I can only say that it rises or falls m direct ratio to the takings. If the takings drop, then the price must drop. Evidence was given by E. R. Grace, public accountant, of the takings over a period of years. These were made up almost entirely from the sale of liquor. The building was of brick and was about 60 years old. Witness said that he had no way of arriving at any basis for calculating goodwill. Decision was reserved. Reduction In Price

Approval was sought for the sale of a dwelling house by the Industrial Spray Company, Ltd., to Margaret Jean Lee, the purchase price being £9OO. The vendor was represented by Mr J. Brun*°Evidence was given by the manager of the Industrial Spray Company., Ltd., Allan Jackson Munro. that he was not aware of the age of the property when he purchased it for the company, but he thought it was about 30 years old. Alterations amounting to £275 18s 7d had been carried out. including £6O for painting and £3O for papering. The total outlay on the property was £BSO 18s 7d. The difference between that -sum and the price asked represented his company’s profit as well as book-keeping and other. expenses. The property had previously been on the market for £650, but his company s offer of £575 had been accepted. Thomas Stewart, builder and contractor, said that the alterations had been carried out in a satisfactory manner. He thought the place was about 40 years old, It had been added to at various times. For the Crown, evidence was given by David Anderson Swann, builder and contractor, who said that he had looked up the records of the Valuation Department and he found that the house was 65 years old. Witness considered that the work could have been carried out for a sum under £l2O. The scullery had not been constructed in accordance with the city by-laws. Some houses just as old were in quite good order, but this place had been neglected.. Mr Brunton said the property was not bought for speculation in the usual way, but for the purpose of doing up by the vendor company. Mr Mathers said that the case for the Crown rested on the valuation, submitted by the Government valuer, which was £675. The sale was approved, provided the price was reduced to £7OO. Wanaka Case Mr J. N. Thompson represented the vendor, Wanaka Stoves, Ltd., in an. application for the approval of the sale of the premises at present occupied by the company at Wanaka, to Mark Davis,, on behalf of a company to be formed. The consideration was ~.£2500 for land and improvements, and £SOO for goodwill. - Counsel said that the vendors had agreed not to open a similar business within a radius of 15 miles'of Wanaka. He submitted that this was worth the sum asked in respect of goodwill. The application was granted. ... Sales Approved

The following sales were approved:— Robert and Georgina Coulter to Helen Collins, dwelling house, allotments 9 and 10, Township of Forbury; purchase price, £I2OO. Jenny McLaren to lan Alfred Welsh, dwelling house, allotment 3, Township of Broughton; purchase price, £ISOO. William Stewart Stronsay Smith, to Maxwell Milton and Alice Lillian Gillick, dwelling house, allotment -19, block I, Township of Tainui; purchase price, £1065. Edward and Matilda Hewitt to Herbert John and Jean Nelson Wilson, poultry farm, part section 32 block 11, Otepopo district, going concern; purchase price, £llOO. ,

Ellen Curran to John Charles White, dwelling house, part sections 41 and 42, block XXIV, Dunedin; purchase price, £2500 (land £2250. chattels £250). Alfred James Rutherford to Donald Reid and Co., Ltd., business premises, section 39, block LV, Dunedin; purchase price, £3300. Estate R. J. McDonald to Lionel Counsel Stephens, dwelling house, section 16, block XXV, Dunedin; purchase price. £I4OO.

Francis Gordon Bell to John Carew Eccles. dwelling house, allotment 3. Dunedin; purchase price, £3750.