Clause 1 of the lease provided that the quarterly rent should be the higher of: (a) the amount payable by the landlord as interest on certain borrowings; and (b) 10% of the Club’s gross receipts as defined. The question arose as to treatment of season ticket payments as accruals: ‘The typical payment which raises a question of time apportionment is the purchase of a season ticket. Everyone buys their season tickets at the beginning of the season. The ticket entitles the holder to admission to matches held during the whole season, covering more than one quarter. Is the whole payment to be brought into the calculation for the quarter in which it is made, or is it apportioned according to the quarters in which the matches take place?
Clause 1(2) provides for the correct sum payable to be certified by an auditor. One would expect him to do so in accordance with normal accounting principles. It is a basic principle of accounting, called ‘the accruals concept’, that the accounting period in which a receipt is recognised should be matched against the period in which the corresponding expenditure is incurred. In other words, a payment in the September quarter to attend a match in the March quarter should be apportioned to the March quarter, when the cost of putting on that match will be incurred. The fact that this lease uses quarterly accounting periods whereas the accruals concept is usually used in relation to annual periods is irrelevant.
This principle is so well established that I would expect it to be applied unless there was clear language to exclude it. Mr Scrivener says that there is. The clause speaks of ‘gross receipts for the use of the demised premises received by the Tenant ( . . ) in such quarter’. That is said to show clearly that what matters is the quarter in which the payment is received. I agree that ‘in such quarter’ would, as a matter of good English, most naturally apply to the immediate antecedent ‘received by the Tenant’, even though they are separated by a long parenthesis. But the words are also capable of referring back to ‘for the use of the demised premises’ and from a commercial point of view, that seems to me the more sensible construction. I therefore hold that receipts must be time apportioned by reference to the quarters in which the matches to which they relate are played.’
Judges:
Hoffmann J
Citations:
Unreported, 6 November 1990
Jurisdiction:
England and Wales
Cited by:
Distinguished – Altonwood Ltd v Crystal Palace FC (2000) Ltd ChD 7-Mar-2005
The landlord claimed arrears of rent and other payments due under the lease of the football ground occupied by the club. A licence had been granted for the accomodation to be shared with Wimbledon Football Club. The rent varied with the gate . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Updated: 27 June 2022; Ref: scu.223842