[2015] HCATrans 101
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S58 of 2015
B e t w e e n -
JACEK GNYCH
First Appellant
SYLWIA GNYCH
Second Appellant
and
POLISH CLUB LIMITED ACN 000469385
Respondent
FRENCH CJ
KIEFEL J
GAGELER J
KEANE J
NETTLE J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 5 MAY 2015, AT 10.15 AM
Copyright in the High Court of Australia
MR G.O’L. REYNOLDS, SC: May it please the Court, in this matter, I appear for the appellants with my learned friends, MR G.P. SEGAL and MR M.A. FRIEDGUT. (instructed by Drexler Litigation & Compensation Lawyers)
MR P.R. CLAY, SC: May it please the Court, I appear with my learned friends, MS J.M. McKELVEY and MR A. ISAACS, for the respondent. (instructed by Strathfield Law)
FRENCH CJ: Yes, Mr Reynolds.
MR REYNOLDS: If the Court pleases, your Honours should have a copy of our outline of argument. Would your Honours like a moment to peruse that?
FRENCH CJ: Yes, Mr Reynolds.
MR REYNOLDS: As your Honours will be aware, this case swings primarily on a single paragraph in the Liquor Act 2007 (NSW). The relevant provision is set out – and there are a lot of books your Honours will have, but the relevant one is the second supplementary legislative materials and second reading speeches. The provision is set out at page 72 of that book; about halfway down the page, your Honours will see that an offence is created because, under section 92(1):
A licensee . . . must not:
. . .
(d) lease –
we can forget “sublease” –
any other part of the licensed premises except with the approval of the Authority.
Now, that is obviously connected with the previous paragraph, that is, one has to look to eliminate parts of the licensed premises on which liquor is ordinarily sold or supplied for consumption and parts on which approved gaming machines are ordinarily kept, used or operated. But, subject to that subtraction, this provision makes it an offence to lease all parts of the licensed premises except with the approval of the authority.
Now, the primary question I am going to suggest in due course, but just to anticipate things, is whether it is the intention of the legislature that that provision render any lease which contravenes its terms unenforceable and that that issue will be resolved primarily by trying to glean what the intention of the legislature is from various sources which your Honours will have seen referred to in the written submissions.
Before I get to the detail of the submissions, focusing on that primary proposition, I would like to deal with one aspect of this case which may, if I do not explain it, cause some confusion. Your Honours will know from the case law – and a good example, if I can take your Honours to it, is the decision of Equuscorp v Haxton (2012) 246 CLR 498. Your Honours will see, for example, from paragraph 23 of that judgment that the usual judicial approach to what I will call a question of statutory illegality is, in effect, to ask into which category of illegality does this case fall, then to formulate the relevant proposition or test of law relevantly to see if the provision, the relevant provision is unenforceable or the relevant contract is unenforceable. They are the three categories traditionally pointed to.
In this particular case we submit that it is tolerably clear – and I will give your Honours the references in a moment – that looking at paragraph 23 of Equuscorp the Court of Appeal treated this case as a case falling within the third category. That is clear, we submit, although it is not stated expressly, from a number of portions of the judgment under appeal.
For example, starting at page 836 of the second appeal book – if I can just give your Honours some references – page 836, the principles relating to the third category are mentioned at about line 18 and following. Then, again, page 836 at about line 41, page 837 at about line 38, page 837 at about line 40 and following. Those are all statements of principle clearly relating to the third category. We will be coming, in due course, if your Honours go to page 840 to paragraphs 79 and 81, it is clear that the formulations that are used there, particularly at page 840, line 12 “frustrate the . . . legislative purpose”. And at line 39:
when one considers the legislative purpose –
and policy et cetera, it is clear that the Court of Appeal is directing itself to a third category case although I can see there is no specific statement made that it is a third category case.
Now, your Honours will have seen some allusion in the written arguments to the possibility of this case being, in truth, characterised as a first category case. That, in theory, would create a difficulty for me ab initio, in the sense that at the beginning of my argument I would have to deal with the question as to whether or not this is, in truth, a first category or a third category case. There is not a notice of contention. My learned friends are agreed that that is how the Court of Appeal interpreted it. But, more importantly, I want to submit that the distinction in this particular case between those two sorts of category of illegality will not make any practical difference.
FRENCH CJ: I was wondering about that, whether whichever category ‑ the categories essentially set out the circumstances in which illegality may lead to unenforceability.
MR REYNOLDS: Yes, that is right.
FRENCH CJ: They do not necessarily identify sufficient circumstances or conditions for that.
MR REYNOLDS: No.
FRENCH CJ: Can I just ask you to perhaps take a step back and identify from the facts of the case what was the conduct of the licensee that contravened section 92(1)(d)? I do not think it is an issue that there was a contravention. The question is what was the conduct?
MR REYNOLDS: No, there is not. That is because there is an agreement that at some level there was a leasing by the licensee of this portion of the licensed premises.
FRENCH CJ: The conduct is not defined by reference to consequences attached by section 127 of the Conveyancing Act or by sections 8 and 16 of the Retail Leases Act.
MR REYNOLDS: No.
FRENCH CJ: It is anterior to that, is it not?
MR REYNOLDS: It is, and it is not something which is abundantly clear from the judgments, but we would submit that what I will call the initial leasing of the portion of the licensed premises at the beginning of what I will call the term ‑ ‑ ‑
FRENCH CJ: Letting into possession?
MR REYNOLDS: Letting into possession, taking rent on the basis that there was exclusive possession; that will constitute the leasing of the ‑ ‑ ‑
FRENCH CJ: That creates the common law tenancy.
MR REYNOLDS: Yes. So, there is not any dispute about that. The possible issue that I am raising swings on what amounts to, in effect, a matter of metaphysics because under this Retail Leases Act, after the tenant has been in possession, I think it is for a year, the tenant is entitled to make an election to ‑ or they are entitled to make an election to bring themselves under the Retail Leases Act.
So why we say, if it is necessary to determine it, this is a third category rather than a first category case, is because we say that the lease which now obtains is a lease under the Retail Leases Act that that was not a leasing within the meaning of section 92(1)(d) but rather a different statutory creature which is triggered by the election of the tenants under the Retail Leases Act to have a lease under the Retail Leases Act, albeit that the effect of that election is that there is a relation back so as to make the whole of the lease ab initio a lease under the Retail Leases Act.
Now, as I have put that to your Honours, I think your Honours can see why it is perhaps undesirable, unless necessary, to have to engage in a precise characterisation as to whether this is ‑ or categorisation, a category 1 or category 3 case. As I say, we submit, if it is necessary to draw that distinction, we submit it is a category 3 case, for the reason I have just mentioned, that being the finding by the Court of Appeal, in substance, and that that is not disputed, as I understand it, by my learned friends. But can I indicate why ‑ ‑ ‑
FRENCH CJ: Can I just say, a necessary condition of your client’s rights, the rights which you assert under the Retail Leases Act, is the entry into the lease at common law which was done in contravention of 92(1)(d) on the ‑ contravention on the part of the licensee.
MR REYNOLDS: Yes. So, whichever way one approaches it, there is no issue that there was a breach of 92(1)(d). I will make that clear.
NETTLE J: Breach by the licensee?
MR REYNOLDS: That is right.
NETTLE J: Not by lessee?
MR REYNOLDS: No, because section 92(1)(d) bites on – and this is a point we are going to make something of. It is a unilateral provision, that is, it is directed at the licensee and it says thou shalt not lease. So that is how it bites.
GAGELER J: Is it possible to aid and abet a breach of section 92(1)(d)?
MR REYNOLDS: The answer is that might be possible as long as the intention of the legislature was consistent with that. It is not an issue I have gone into in any detail but we would submit that it is implicit in the way the section is constructed that the legislature is directing itself to the conduct of one actor rather than a multiplicity of actors. But, your Honour, I cannot eliminate the possibility that ‑ ‑ ‑
NETTLE J: But it was not contended below that you had aided and abetted, was it?
MR REYNOLDS: No, no – or conspired is another possibility. I will be taking your Honours to the cases on that issue in a moment, but if I can return briefly to the point I was attempting to make about whether it is necessary to engage in this categorisation. I say it will not be here in essence because of the way that I am approaching things and I explained that, I hope, clearly.
A category three case - your Honours will see from Equuscorp paragraph 23(iii) deals with contracts which are associated with an illegality. In this particular case I will be submitting that if 92(1)(d) – if on its construction it makes contracts or leases caught directly by its terms unenforceable, if that is how 92(1)(d) is construed, then I concede one, that the lease which we have is one which is relevantly associated with that lease, and, two, picking up, for example – there are, with respect, other tests but taking the test articulated by your Honours the Chief Justice and Justice Kiefel in Equuscorp at paragraph 23 – I would also concede that the scope and purpose of 92(1)(d) will mean that the legislative purpose will only be fulfilled if our associated contract is unenforceable.
So the fundamental, I submit, issue here is what one might call the anterior question of the construction of 92(1)(d). I cannot imagine that my learned friend is going to submit that if 92(1)(d) does not make any contract contrary to its provisions unenforceable that he has any argument based on the policy of the Act that would render associated contracts unenforceable, notwithstanding, that the primary contract is, on that construction, enforceable.
As we say, at the end of the day, I have started with a proposition that this case will be determined as a matter of the construction of section 92(1)(d), and that is what I am going to focus on. That is, if your Honours like, I am going to treat this case notionally as a category 1 case.
FRENCH CJ: Well, I find it hard to see why one needs to go past category 1. This is an agreement – putting to one side any question of the consequences, just the identification of the type – which is prohibited unless you have the approval of the authority.
MR REYNOLDS: Your Honour, I concede that there is a very open view that this is a category 1 case. But your Honours can see, given the way ‑ ‑ ‑
KIEFEL J: You are trying to deal with the Court of Appeal’s approach. Is that why ‑ ‑ ‑
MR REYNOLDS: I am sorry?
KIEFEL J: You are approaching it in this way because you are attempting to deal with the reasoning of the Court of Appeal?
MR REYNOLDS: Yes, and my learned friend is seeking to uphold it. He has got no notice of contention. He does not dispute that that is how it should be construed. I am not trying to be formalistic about this; I start with the formalistic approach, but just to deal with what your Honour the Chief Justice says, the effect of my submissions – the substance of them will be to treat it as a category 1 case so that, therefore, if your Honour is interested in drawing a distinction, relevantly on the circumstances of this case between the two categories, then everything that I have to say will, I hope, assist your Honour in determining the issues in this case, even as a category 1 case.
That is how I am proposing to deal with what is, for me as an advocate, a practical difficulty at the start of the submissions, is to say I acknowledge the possibility of those two categorisations. I start with a formalistic approach that the categorisation of it as a third category is not in issue. I concede categorisation under the first category is an open categorisation, but I will be putting submissions which can be treated by your Honours, in effect, as either category 1 or category 3 submissions depending on your Honours’ views, if your Honours wish to draw that distinction in due course in the judgment.
KIEFEL J: Could I just take you back, Mr Reynolds, to what you said at the outset? I might have misunderstood the part of the premises that you said (1)(d) applies to. I thought you had said it applies to any part of the licensed premises. I thought I must have misunderstood you, because it only applies to what is left over after ‑ ‑ ‑
MR REYNOLDS: It applies to the residue after ‑ ‑ ‑
KIEFEL J: After (c), in particular.
MR REYNOLDS: ‑ ‑ ‑the subtraction in paragraph (c); that is right.
KIEFEL J: Yes, thank you.
MR REYNOLDS: I am sorry, your Honour, if I did not make that clear.
KIEFEL J: No, it is probably my misunderstanding. But does that assume the limited operation of (d) applying to parts of the licensed premises other than where liquor is sold or supplied? Does that assume any relevance in relation to the purposes of the legislation?
MR REYNOLDS: To this extent, it is a small but not insignificant aspect. That is that when one looks at the approach of this legislation its primary focus, not surprisingly, is with the regulation of alcohol‑related aspects of licensed premises and to that extent if one comes within – if there is a lease that comes within paragraph (d), then it is a portion of the premises that are only affected by, if I can put it, alcohol aspects of the licensed premises, indirectly, and probably only because it is possible for alcoholic beverages to be taken onto the leased premises and consumed. So, it is caught incidentally by the main purpose of the Act. It is not the main purpose of the Act.
Now, I have said that I am going to concentrate on what I have called the primary question and that, in substance, is whether it is the intention of the legislature that any lease which contravenes section 92(1)(d) is rendered unenforceable. What I would like to do at this stage is draw your Honours’ attention very briefly to the relevant passages in this Court on similar forms of statutory prohibition. I will not be very long about this and I am just going to take your Honours to a few relevant pages.
The first case that I would like to take – and I indicate that this is basically leading to two things. First, the formulation of a test which is really just looking at the intention of the legislature and whether it is the intention of the legislature that all contracts which breach the section are unenforceable; that is the first test. Secondly, your Honours will see, when I take your Honours to the cases, that there is some articulation of relevant factors in order to determine that question. So, the next few minutes will simply be indicating cases which may support, first of all, that test and, secondly, which articulates some relevant factors.
The first is a case called the Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 and, as your Honours will see from the headnote in that case, this involved a section of the Australian Broadcasting Corporation Act which stated that:
(1) The Corporation shall not, without the approval of the Minister –
(a) enter into a ‑
certain sort of contract. It is not identical to the current provision because it does not penalise that, it does not create an offence, but the majority – the Chief Justice and Justices Deane and Gaudron dealt with the relevant test to determine whether any such contract, that is any contract in breach of the provision, was unenforceable, towards the bottom of page 457, about 10 lines from the bottom where they say:
If the statutory direction to the A.B.C. not to enter into a contract of the specified kind without the approval of the Minister has the effect either of confining the actual powers of the A.B.C. –
that is the ultra vires argument ‑
or of invalidating any –
I would ask your Honours to underscore the word “any” because I will be coming back to that in due course ‑
contract with an innocent outsider entered into otherwise than in compliance with its terms, it must be by reason of a legislative intent to be discerned in the words of the sub‑section construed in the context of the Act as a whole.
So that is one authority which, subject to the caveat I indicated, we would submit is relevant. The next – and there are only three of these cases that I am going to, as your Honours will see in paragraph 4 of our submissions – the next decision is the case of the Australian Competition and Consumer Commission v Baxter Healthcare. The relevant portion of that judgment of the five Justices, five of the seven Justices of the Court, is to be found at paragraphs 45 and 46.
FRENCH CJ: Page?
MR REYNOLDS: Page 29 of the judgment – I am sorry, your Honour. It is an important passage so I will focus on it briefly. The majority there go back to the well‑known decision of Sir Anthony Mason in the Yango Pastoral Case. What Sir Anthony said relevantly was that:
“The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognised that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question.”
That passage was cited by Kerr LJ . . . where his Lordship said that when a statute contains a unilateral prohibition on entry into a contract, it does not follow that the contract is void. Whether or not the statute has this effect depends upon the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations.
They refer to a case and they say where -
the Act is far from being silent upon the question of the consequences of illegality, but, rather, contains elaborate provisions.
I am sorry, I have misstated that. They refer to this Act and they say it -
is far from being silent upon the question of the consequences of illegality –
So they are important and there are elaborate provisions.
That is not to say that the express provisions of the Act answer all questions that may arise, but they answer many of them, and set the context in which others are to be resolved.
That particular passage was adopted in another case – and I am nearly finished, your Honours - which is on our list called Master EducationServices v Ketchell (2008) 236 CLR 101. There is only one passage I want to take your Honours to and that is – and I will not read it – paragraph 11 where that passage from the Baxter Healthcare Case was said to be – and this is perhaps the only bit – the “correct approach” to such a question, that is, dealing with what has been described as a unilateral prohibition.
FRENCH CJ: When it is described as a question of statutory construction – let us say we do not have a statute, and we do not have in this statute a provision which expressly renders such a contract entered into in contravention of a statute invalid, I suppose one could have an implied effect as a matter of statutory construction, but absent implication into the statute itself there remains a question is it right, of whether or not as a matter of common law the purposes of the statute so compromised, if you like, if the common law renders the contract enforceable that the common law will decline to do so.
MR REYNOLDS: That is the approach which your Honour took in the Equuscorp Case; if I can just give you the reference. We picked up this question in paragraph 25 – this, of course, is a third category case – and said effectively what your Honour the Chief Justice has just said to me in that particular context. So I agree with that.
What I am focusing on, as I said at the outset, is that unless the respondent can demonstrate that a lease directly in contravention of section 92(1)(d) is intended by the legislature to be unenforceable, then it is going to be, I would submit, impossible to show that the intention of the legislature is to render unenforceable some other contract which is not directly caught by the legislation – I have put that badly, let me start again.
FRENCH CJ: The intention is a conclusionary finding, is it not? One looks to text, context, purpose – purpose in particular and in the end one makes a statement about legislative intention. I think we said something about that in Lacey and Zheng v Cai and so forth; not that that changes the logic of the approach at all.
MR REYNOLDS: No. In the end, I am going to submit that this case comes down to what is a fairly humdrum inquiry of two aspects. One is, first of all, looking at the very short reasoning of the Court of Appeal on the point and, second of all, looking at some other factors, some of which I have pointed to from these cases I have just taken your Honours to, which indicate that it was not the intention of the legislature that any contract which contravened section 92(1)(d) was unenforceable.
FRENCH CJ: Well, your primary proposition must be, must it not, that the enforceability of a lease or sublease granted in contravention of 92(1)(d) by the licensee at the instance of the innocent lessee does not conflict with or stultify the purposes of the statute in relation to that prohibition?
MR REYNOLDS: At the end of the day, yes, treating this as a third category case.
FRENCH CJ: Well, it does not matter much which category it is, I do not think, but that ‑ ‑ ‑
MR REYNOLDS: Yes, your Honour, I am sorry. I am not trying to be pernickety about it, but there is a very similar, perhaps identical, inquiry simply based on what the intention of the legislature is. Now, there perhaps may not be a great deal of difference between those two inquiries and I am sorry if I am appearing to be taking a point of construction. Can I deal then ‑ ‑ ‑
GAGELER J: Conceptually, there is a big difference. It may not be big in practice but there is a big difference between the construction of the statute and asking what is the statutory effect of breaching the prohibition; that is question 1. Question 2 is asking whether there is room for the operation of a common law rule which is a matter of public policy or the policy of the law would prevent the performance or enforcement of a particular contract in light of the statute. They are different questions conceptually.
MR REYNOLDS: I certainly would not dispute the first proposition. Would your Honour bear with me? Could I have the second one again?
GAGELER J: Perhaps the third category of case being referred to in Equuscorp is a category where what is involved is not the interpretation or construction of the statute but a question of whether a common law rule based on a notion of the policy of the law or public policy applies to prevent enforcement of the contract.
MR REYNOLDS: Yes, I would agree with that, but the point that I am making ‑ I am sorry, attempting to make, is that there will be little, if any, room for such a holding where it is not the intention of the legislature that, what I will call, a primary lease caught expressly by the terms of the section is not itself unenforceable or intended to be rendered unenforceable by the legislature but in theory, with respect, I agree. In practice, certainly dealing with the case that we are dealing with, I submit that possibility is in this case more theoretical than real but I am not in any way suggesting that what your Honour puts to me is wrong as a matter of principle.
Could I attempt to deal with the reasoning of the Court of Appeal which is mercifully brief and contained at the second appeal book at paragraph 79, really on page 840, and paragraph 81, and Justice Tobias speaking for the court says that in his view:
any sanction short of the prohibited lease being rendered unenforceable and void would frustrate the implementation of the legislative purpose inherent in the statutory prohibition. In this respect it is noteworthy that the prohibition only applies to a lease or sub‑lease which, by definition as it were, entitles the lessee or sub‑lessee to exclusive possession and, therefore, the right to exclude the licensee (or its manager) from the leased or sub‑leased premises.
Importantly –
That cannot serve the purpose or policy of the statute and, in particular, the overarching responsibility of the licensee to personally supervise and manage the conduct of the business of the licensed premises.
And the first sentence of paragraph 81 is also important:
In my view, when one considers the legislative purpose of the relevant provisions of the Liquor Act as well as the policy behind the subject prohibitions, then it follows that the prohibition stated expressly in the statutory test of s 92 requires the conclusion that any lease caught by that provision is not to be enforced by the courts.
Well, just pausing there, those last few words really treat this as a category 1 case, your Honour the Chief Justice would say to me. The first line on that page:
any sanction short of the prohibited lease –
also suggests that even though this is category 3 case law and category 3 reasoning, for example, at line 11 and 12 on 840, there is also what might be called a bit of category 1 thrown into the mix there. I want to try and break down the logic of this, that is, of these paragraphs and I would like to suggest one can break it down into a number of points. What I would like to do is take your Honours to the relevant portion of the paragraph to indicate what I am saying because basically it comes down to about six things here. We agree with most of them but not with two of them. The first is at page 840 at line 20 it says that – suggests that various portions of the Act require the licensee to “supervise and manage” the whole of the licensed premises. Just pausing there, we do not dispute that. Secondly, if one goes a little bit higher on the page at about line 17, it is said that if a lease is granted then, as it is said, “by definition as it were” that means that the lessee will have “exclusive possession”. We do not disagree with that.
If your Honours go just a little further to line 18 it says, thirdly, that exclusive possession gives the lessee a “right to exclude” the lessor, and we do not disagree with that. At the same point it says that, therefore, any lease of part of these licensed premises has a “right to exclude the licensee” from the leased area. I do not dispute that. The problem is with the last few lines of the paragraph with what I will call the fifth and sixth points. First of all ‑ this is at point number 5 at line 20 ‑ it is said that if the lessee has a “right to exclude the licensee” from the leased area then that will conflict with the “policy of the statute”. I will come back to that. We do not agree with that.
Finally, it is said that the reason why there is that conflict with the statute is that if the lessee has a “right to exclude the licensee” then that will impinge upon or prevent the licensee from performing his statutory responsibility to “supervise and manage the conduct of the business of the licensed premises”. So, it is those last two points which we do not agree with and can I attempt to indicate, I hope clearly, what our problem is with that end bit of the reasoning in the paragraph.
FRENCH CJ: To what extent is it something of a distraction that prohibition would not draw a distinction between a lease which had an express provision allowing entry and inspection by the licensee at any reasonable time and a lease which simply relied upon an implied right of re‑entry?
MR REYNOLDS: Yes. Put another way – and this is the second point I was going to make – is that the logic of it is directed to the proposition that all leases of a portion of the licensed premises should be unenforceable. Why: because the licensee will not be able, by definition, to get onto the leased area in order to supervise and manage that leased area as a portion of the whole of the licensed premises.
KEANE J: Section 92(1)(d) contemplates precisely that situation, does it not?
MR REYNOLDS: We would submit that the law of leases – and this is the first point I would like to make – namely, the right of entry, notwithstanding the existence of exclusive possession, will contemplate that in most – I am going to submit, probably all cases, there will be that right of entry to comply with the requirements of the Liquor Act, notwithstanding that because it is a lease there must be, as Justice Tobias says by definition, exclusive possession. The short jury point is this is mixing up these notions of exclusive possession and right of entry and treating them, as it were, as if they are coterminous.
KIEFEL J: You mean that one would expect there to be a right of re‑entry provided for expressly in the lease in order to comply with the licensing requirements?
MR REYNOLDS: I do wish to say that.
KIEFEL J: If not, it would be a condition imposed by the authority most likely.
MR REYNOLDS: It would be, or if it is not express – I appreciate that to some extent this submission is illegitimate, but I do say that those of your Honours who have dealt with a lot of leases over the years would have seen a lot of provisions about rights of entry. It would be absurd for counsel dealing with such a relationship to say “That can’t be a lease. There is a right of entry”. That is, with respect, absurd as a matter of bread and butter leasing law. Plenty of leases contain express rights of entry. They are still leases notwithstanding that those rights of entry exist under the lease.
There are four things I would like to focus on here, and it is in our notes at paragraph 6(i) to (iv). First of all, there will often be an express term or, put more accurately, there may well be an express term conferring a right of entry on the licensee in order to perform its statutory requirements. That right of entry will exist notwithstanding the existence of the exclusive possession, or to put it another way, the existence of such an express right of entry will not convert this into something other than a lease.
Second of all - I am mindful of the late Justice Starke’s injunction that this is not a place for the citation of trite law; I will not list the various requirements of an implied term, but I would submit that they would usually be complied with if one was going to suggest that there was an implied term that the licensee would have, or the lessee – I will put it more generally – would have a right of entry in order to perform any statutory requirement imposed upon him or her. That would usually, if not always, be the case. The third thing is we have referred to the existence, in section 85 of the Conveyancing Act, which ‑ ‑ ‑
KIEFEL J: Would the expressed or implied term of re‑entry be much different from a lessor’s right to inspect?
MR REYNOLDS: It would be a bit more because one way of answering your Honour’s question may be to go to the text of section 85(1) because there is a sort of draft term in there – implied term. Section 85(1)(c) – this is located at page 317 of the gloriously named “Second Supplementary Legislative Materials and Secondary Reading Speeches”. Section 85(1)(c) – this can be excluded – but it says about four lines down – section 85(1)(c):
That the lessor . . . may, at all reasonable times during the term . . . enter upon the demised premises or any part thereof, for the purpose of complying with the terms of any present or future legislation affecting the said premises –
I will not read the rest of the provision but the existence of such an implied statutory term does not mean that what would otherwise be a lease is converted into something other than a lease. The final point that I would like to make ‑ ‑ ‑
FRENCH CJ: Does this really amount to proposition - or support a proposition that the array of circumstances – possible leases, subleases could be entered into in contravention of 92(1)(d) and associated with that diversity the differing levels of conflict, if you like, with the policy and purposes of the legislation, militate against any general rule of unenforceability?
MR REYNOLDS: Yes, your Honour, I would embrace that.
FRENCH CJ: I just want to know where your argument is going on this.
MR REYNOLDS: I am sorry, your Honour, implicit in what your Honour says to me is that I am not being clear. Let me try and answer it correctly. I really say two things: first of all, exactly what your Honour has just put to me. The second thing I say is that, for a reason I am about to attempt to make clear, it is probably the case that all – I repeat all leases in relation to such a portion of licensed premises will contain a right of entry for the licensee in order to satisfy the requirements of the Liquor Act.
Now, the three points that I have put so far do not get me to that proposition. They get me to a lesser proposition which is that it is likely that some – perhaps many, perhaps most – leases will include an express term or a term implied by statute or in fact. But I would submit that unless – it is probably the case that unless there is a provision which would expressly oust this right of entry in order to comply with the requirements of the Act, that there would probably be an implied term.
The fourth point is this, that if there was a term dealing very specifically with this issue and the term in the lease said that the licensee is not permitted to enter the demised premises in order to comply with the requirements of the Liquor Act, that would do it as a matter of specificity.
Can I indicate before I come to my point that commonsense would suggest that such a term is a most unlikely term to be the subject of agreement. In other words, why would a licensee of licensed premises agree to a term like that and why, frankly, would a lessee even ask for it. But, leaving that to one side, the provisions of the Liquor Act in section 11(2) and (3) – if I could go to those, your Honours, this creates an offence in section 11(2) and it says that:
A licensee must comply with any conditions to which the licence is subject.
Then it prescribes a penalty. Importantly, there is, in effect, a definition in subsection (3) and it says that:
a condition to which a licence is subject –
that is in the previous subsection ‑
includes any provision of this Act that imposes a requirement or restriction . . . on or in relation to the licence, licensee or licensed premises concerned.
So, if a licensee does not comply with a requirement of the Liquor Act on or in relation to the licence, licensee or licensed premises concerned, that is an offence. Rather ironically, the point that I am trying to make is if we go back, for example, conveniently, to the Equuscorp Case at paragraph 23, if there was a provision which specifically said – this is in the lease, that the licensee cannot enter the premises in order to comply with the requirements of the Liquor Act and, as I have said before, we would probably need to be that specific in order to deal with that situation. The problem is that if we go to paragraph 23 of Equuscorp and look at what is called the category 2 situation, that is the making of the agreement is impliedly prohibited by statute. Your Honour the Chief Justice and Justice Kiefel say:
A particular case . . .
in other words, an example of that –
arises where the agreement is to do an act the doing of which is prohibited by the statute.
I would add to that and another example is where the agreement is not to do a thing which is required by statute on pain of committing a criminal offence. In other words, a provision to that effect would probably be illegal or perhaps certainly illegal and it would probably be severed out of the contract depending on the construction of the particular contract. If it could not be severed then there is a risk that the whole contract would be invalid.
So when one looks at these four points that I am trying to make, and getting back to what your Honour the Chief Justice put to me, then one can either say that all – I repeat, all – of these leases would include a right of entry in order to satisfy the requirements of the Liquor Act, or that some, many, most, or a great many of the – and this is the fall‑back – such leases would contain a right of entry permitting that to occur.
I underlined, I hope your Honours will not think pedantically, the word “any” in the Redmore Case. That is the relevance of the second argument; it is very difficult to say that “any”, which I understand to mean “all”, leases are unenforceable when some, most, or a great many of them would contain a right of entry. Just pausing there, this is the big point, as I understand it, against us – the only point against us, really, in the Court of Appeal’s judgment – and I would submit that although it is superficially attractive, it will not withstand detailed examination in the light of what is fairly trite law, the law of landlord and tenant.
Could I just stress that there is a second problem – I have already put this, but I just repeat it for clarity – and that is that this is reasoning which would be fairly directed to the notion that any lease should be unenforceable. Why? Because of this notion of exclusive possession, not as a reason why a lease without approval should be unenforceable. In other words, it is directed to the consequences not of a lease without approval, but it says by definition any lease must have exclusive possession, therefore, the intention of the legislature must be to render all leases unenforceable. That, subject to the premises, would be logical, but if we are trying to determine what the intention of the legislature is and whether leases without approval are to be unenforceable, then the reasoning here, the logic of it, does not advance that proposition rather than the separate proposition of whether all leases altogether should be enforceable. That is the second problem.
KEANE J: Is what you are saying, or perhaps another way of saying what you are saying, that when one looks at lines 19 to 23 on page 840, and it is said that:
the purpose or policy of the statute [is] . . . the overarching responsibility of the licensee to personally supervise and manage the conduct of the business of the licensed premises –
that cannot be the policy that informs 92(1)(d) because it expressly contemplates, albeit with the approval of the authority, that there will be cases. So, it is really that there has been an overstatement, or a misstatement if you like, as to what the policy informing 92(1)(d) is.
MR REYNOLDS: My learned juniors are nodding because that is the way they have been putting it to me and I have disappointed them because I have not put it with the clarity that your Honour has put it to me, but that is what I am trying to say.
KEANE J: But insofar as the policy of the statute – the policy of 92(1)(d) is not that licensees must have constant uninterrupted control over the licensed premises because 92(1)(d) contemplates that part of them will be leased to someone else. The control mechanism is really the approval of the authority. So, if there is a breach of 92(1)(d) by a lease without approval, then the question that arises immediately is what happens to the licence. Now, the provisions of the Act are pretty clear, that whether or not the licence gets cancelled is up to the authority.
MR REYNOLDS: That is right. That is my next point. I am sorry, have I interrupted you?
KEANE J: No.
MR REYNOLDS: That is the next point I want to develop, which is there is a lot of case law that says if you have got a detailed regime dealing practically and, I would say, ad hoc and bespoke with particular licences and the consequences of a breach of the Act, then that is a very clear indication of legislative intention that it is in the legislature’s mind to render any lease made without approval automatically unenforceable.
KEANE J: Well, perhaps even a little stronger than that, that where the legislature indicates that the question is one for action by ‑ and the authority can take no action if it chooses, but where the question is one for action by the authority it is actually inconsistent with that to take a broad sword to the arrangements and to strike them down.
MR REYNOLDS: Exactly, and if it is convenient I would like to develop what your Honour has just put to me as the next point. Perhaps if I can just say one more thing on the first issue which is this, that this is, as I understand it, the only argument on the Court of Appeal’s reasoning, and there is no notice of contention, which has been put against me on the issue of unenforceability. But can I proceed to pick up what your Honour Justice Keane has just put to me and make as briefly as is mete the point that here there is a very detailed legislative regime which will cope with and deals with the consequences of breaches of the Act and that is implicitly a very good pointer to the legislature not intending, as your Honour Justice Keane has put to me, that any lease or all leases which breach section 92(1)(d) are unenforceable.
Can I briefly indicate what the authorities are and they should be in our note of argument at paragraph 7? I might start with a slightly different order ‑ and Chief Justice, I will be very brief with the authorities here ‑ with the Ketchell Case, that is, Master Education Services v Ketchell.
FRENCH CJ: What is the proposition for which you are taking us to?
MR REYNOLDS: The proposition is contained at paragraph 38. In essence is it this. I suppose there are two things: one, that if the Act provides for – I withdraw that. It is probably just one proposition. The more detailed the provisions in the Act which deal with the consequences of a breach of the Act, the less likely it is that the legislature will have intended that an act in breach of the Act is unenforceable. I probably put that badly. But the proposition is put at paragraph 38 where it is said that:
The detailed provision by the Act for the consequences of non‑compliance . . . does not support a conclusion that it was intended that the harsh consequences provided by the common law –
that is, unenforceability –
were to follow upon contravention of s 51AD.
There is a similar statement in the Nelson Case – that is Nelson v Nelson.
FRENCH CJ: None of these measures which the authority may take are directed, are they, specifically to the contravention in 92(1)(d)? They are application to arrange a possible contravention. Is that right?
MR REYNOLDS: They include 92(1)(d). They are not confined ‑ ‑ ‑
FRENCH CJ: No, no, but they are of general application, are they not?
MR REYNOLDS: Yes, they are.
FRENCH CJ: So to that extent, maybe less weight can be attached to their existence than if there were some specific measure in the statute for dealing with a contravention of say 92(1)(c) and (d).
MR REYNOLDS: Yes, that might be a bit stronger, your Honour. We would submit that where you have all of these provisions, which I will come to in a moment – can I just finish with the case references, which I will be brief on - which deal with the regulatory responses, if you like, to a breach of the Act. Nelson v Nelson (1995) 184 CLR 538 ‑ ‑ ‑
FRENCH CJ: Sorry, just before you leave Ketchell, was Ketchell concerned with the availability of a measure that went directly to non‑compliance with an industry code?
KIEFEL J: It was non‑compliance with the code, generally, was it not?
MR REYNOLDS: Yes, it was.
KIEFEL J: The point made at paragraph 30 on page 113 was that because it made provision for the remedial consequences of a breach of the code, it stood in contrast to other statutory regimes where it was completely silent as to the consequences.
MR REYNOLDS: Yes, that is right. It was also discussed – if I can go to Nelson v Nelson at page 613 where there is a paragraph, beginning at about point 2:
the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct –
I will not read the whole paragraph but it is important, particularly the last three lines -
the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation.
There is a similar passage in the Fitzgerald Case - Fitzgerald v Leonhardt (1997) 189 CLR 215. The relevant passage is at page 230, particularly about a third of the way down the page where Justice McHugh who is being quoted there, talks about:
the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.”
There is a slightly different point made in the Redmore Case - Redmore v ABC (1989) 166 CLR at the bottom of page 459 where the majority refer, at the bottom of the page, to the possibility of “disciplinary proceedings”. Now, they are referred to there as disciplinary proceedings under the Act so their Honours took that into account in determining the issue in that case as well.
One of the provisions that we refer to in the Act - again I will try and be brief with this, but Part 9 of the Act starting at section 137 provides for disciplinary action, just picking up what I have just taken your Honours to in the Redmore Case, and can I refer your Honours briefly to section 139(3), in particular paragraph (a), a licensee is “convicted of an offence” but what is more important is (d), failure:
to comply with any other requirement under this Act –
and also perhaps (g) and (h). Section 141(2), there are a range of sanctions that may be imposed including, as your Honour Justice Keane put to me, the possibility of doing nothing because there may be fairly obvious situations where nothing need be done but there is ‑ ‑ ‑
KEANE J: Well, specifically, if the authority is content that the people who are occupying the part of the premises that has been leased are observing the Act.
MR REYNOLDS: Yes, well, there might be a situation where approval has been sought 10 times and on another occasion they just waited for it, but my learned friends say no, that is wholly unenforceable, every single time, every time.
KIEFEL J: Is there a distinction to be drawn between the Court of Appeal’s approach here, which is that the courts must necessarily regard the contract as void and unenforceable, and the situation which would pertain if the licensee was seeking to specific performance of the lease which was absent the authority’s consent, that is to say, is the Court of Appeal really addressing the latter situation and not the former?
MR REYNOLDS: In this case, your Honour?
KIEFEL J: Yes, underlying its reasoning is that the court cannot be party to requiring – the reverse of requiring performance, I suppose. It cannot be seeking to give effect to a contract, whereas that is not really the question. The question is whether or not it is ab initio void.
MR REYNOLDS: Exactly, exactly. I will be coming to something similar to that at the end of the argument which is about the imposition of terms. Here, equitable relief is the only relief sought, both declaratory and injunctive. We would submit that even if I am wrong in relation to the Court of Appeal’s reasoning that the approach of equity is sufficiently flexible in this situation ‑ ‑ ‑
KIEFEL J: What could have been the order if your clients had succeeded in the Court of Appeal, given that the matter has not been before the authority for consent? What are the terms of the order?
MR REYNOLDS: I will be coming to that, if I may, in due course, your Honour. If you direct me to deal with it now, I will. I prefer to deal with it at the tail end if I may, but I will certainly be dealing with it. Can I also refer to sections 142 and 144? I do not wish to add anything more. Section 148 provides for some – let me go back, if I may, before I finish with disciplinary action and it is just to develop briefly something that I have already put to your Honour Justice Keane.
One of the important things about the flexibility of the authority’s approach that may be taken, anything from doing nought to other action, is that the flexibility of such an approach and the practical nature of it is – it comes squarely within one of the express objects of the Act, that is, in section 3(1)(b), if I can take your Honours to that which provides that the objects of the Act are relevantly:
to facilitate the balanced development, in the public interest, of the liquor industry, through a flexible and practical regulatory system with minimal formality and technicality –
We are, after all, talking about pubs and clubs here. The sort of person one wants handling these issues on the authority is more someone who has been in that industry his whole life rather than someone adopting the sort of approach that Baron Parke would take to the construction of these – or to dealing with these various problems. A practical approach is what is required but no, my learned friends say no, it has got to be wholly unenforceable, every single time.
Can I refer briefly then to “additional penalties”, which is in section 148? I will not, in the interests of time, go through this in any detail. Next, to section 53, which is about the imposition varying or evoking of licence conditions, which is available, for example, if the Act was breached and, similarly, in section 54 to the Director‑General imposing conditions.
There are only two further points that I want to make in my submissions, your Honours. The first is one that is dealt with – if I may, I make the submission which is in paragraph 8 of our outline, just to close off that last point. There are only two more points that I want to make, and they are the points that are made in paragraphs 9 and 10. The first point – I will probably deal with it in a slightly different order – is that there are other provisions in the Act which show that the intention of the legislature was not to render any lease in breach of section 92(1)(d) wholly invalid.
In the Baxter Case – your Honours probably do not need to pick it up again – it referred in paragraph 46 to a number of relevant factors, and then said “any other relevant” factors. What I am picking up there are both some factors – that is, under this heading – that have been referred to in the cases, but also some other relevant factors in terms of legislative intention. The first, I have already touched on, which is the objects of the Act, that is, section 3, and to the flexibility which is the object of the Act which is inconsistent with unenforceability of any lease. Can I give your Honours also a reference to the Ketchell Case, that is, Master Education v Ketchell (2008) 236 CLR 101, paragraph 39.
FRENCH CJ: This is at page 117, I think.
MR REYNOLDS: Yes, on page 117. At paragraph 39, about five lines from the bottom, or six or seven actually, it refers to:
A preferable result, and one for which the Act provides, is to permit a franchisee to seek such relief as is appropriate to the circumstances of the case.
That is just a small reference on that point. The next point is also referred to in – it is (iii), that it:
Gives [the] wrongdoer –
here the licensee –
[the] opportunity to avoid [his] obligations –
That is referred to in Ketchell at paragraph 39. Thirdly, although this is (ii) in my document, there are references there to two other cases ‑ I will not take you to them – which talk about the:
consequences for the innocent party –
if the lease is unenforceable. These are pretty obvious, but just to spend 10 seconds on them, they would include the possibility of having to pay out employees who can no longer be employed and losses associated with the destruction of the business the subject of the lease, although – I concede this – it may be possible that some of those losses could be recouped from the licensee because it might be said that there is a breach by the licensee of the licensee’s duty to seek approval.
Can I give your Honours a reference there to the Fitzgerald v Leonhardt Case at page 219 where two of the Judges of this Court talked about this kind of situation and said that there would be an obligation, an implied obligation on the, relevantly here, the licensee to try and seek the relevant approvals if I can call it off its own bat.
I have mentioned, also, at (vi) – I am sorry for dealing with it in slightly wrong order – about the consequences for third parties. What I mean is people other than the licensee or the lessee. There is not a case that I have found on this but I do submit it would be relevant to the legislature’s intention - people like, most obviously, employees of the lessee who may lose their jobs as a result of a lease being rendered unenforceable.
We have said also in (iv) that the illegality here is not serious and the sanction of unenforceability of all contracts would be disproportionate. We have referred to the Nelson Case and the Fitzgerald Case in the relevant passages there for that proposition. Those passages make it clear that you need to look to the statute to see whether the legislature regards the offence as serious.
Now, the starting point, as the cases say, is the legislation. Section 92(1)(d) provides that the maximum penalty there is 50 penalty points. I do not think there is any dispute about this but that comes to an amount of $550. There are two routes to get there. Chief Justice, what I wanted to propose is that we give your Honours a note on that. If your Honours would like me to take you through the ‑ ‑ ‑
KIEFEL J: Is it disputed?
MR REYNOLDS: One hundred and ten dollars times – I do not think it is disputed but if your Honours would like a note, I have at least one junior who is very eager to lay out ‑ ‑ ‑
NETTLE J: It is 5,000, is it not? It is approximately $100 for a point and you have 50 points.
FRENCH CJ: I think you can probably work it out.
NETTLE J: Anyway, it is pretty small. Five thousand or 500 is still small.
MR REYNOLDS: If your Honours would like a note, I will ‑ ‑ ‑
FRENCH CJ: Maybe we do not need a note. Maybe you can work out something before the end of the argument.
MR REYNOLDS: Maybe we can agree it over lunch. The final point is that there is a reference in the Nelson Case to whether the imposition of the sanction of enforceability of any contract which contravenes section 92(1)(d) is not necessary to protect the objects or policies of the Act. The important word there is “necessary”. I think it is implicit, probably explicit in most, if not all, of what I have said that it is not necessary.
The final point, though, is this question of terms. I submit that your Honours are not going to need – certainly if my earlier submissions are accepted – to get into this, but the point here is that the court may, on the authority’s imposed terms, in order to ensure that the relevant policy of the relevant Act is satisfied in the individual case. I have noted the relief sought is equitable relief and can I refer very briefly to the decision of Nelson v Nelson where Justice ‑ ‑ ‑
KIEFEL J: What is being pursued now is damages ‑ ‑ ‑
FRENCH CJ: And the reinstatement of the orders made by Justice Ball.
MR REYNOLDS: It is the reinstatement of the orders at first instance, which were only declaratory and injunctive. Now, what has happened is that, notwithstanding that my client has won at first instance, the Court of Appeal obviously rejected their case and effectively rescinded the orders made at first instance. My clients sought a stay to enable them to go back into possession of the property and run the business again, pending their appeal to this Court. That application for a stay was rejected upon the basis that a claim for damages could be pursued in due course if your Honours were minded to allow our appeal.
Now, I submit in order to get to the only relief I am presently seeking is a reinstatement of the declaratory relief made at first instance, the injunctive relief made at first instance and a remitter in substance to a primary judge in order to see if any claim for damages might be pursued.
NETTLE J: The original injunction was prohibitive though. It was not mandatory, was it?
MR REYNOLDS: No, it was prohibitive. Yes, restraining ‑ ‑ ‑
NETTLE J: So it is useless now. You are out of possession, are you not, or do you seek a mandatory injunction to get back in or what, prohibitive, to stop them from restraining you getting back in. I suppose you do it that way.
MR REYNOLDS: Well, we seek a declaration that we have an enforceable lease. We would then be entitled to resume possession.
NETTLE J: Yes. To restrain them from prohibiting you going in.
MR REYNOLDS: But we submit that there are sufficient previous acts of threatening our possession to justify in futuro an injunction directed towards preserving our right of possession which would mean that we are still entitled to the injunction put at first instance. I think I have probably put that very badly but I am sure your Honour, or I hope your Honour understands the substance of what I have said.
KIEFEL J: When I was talking to you before about what would have been the appropriate remedy it was in the context of your substantive argument. So even though we will need, for the terms of any final remedy, if any, to be given, to consider Justice Ball’s declarations in any event I would have thought that we must necessarily turn our minds to those in relation to the substantive argument.
MR REYNOLDS: Quite.
KIEFEL J: Is there not a missing premise, that the declarations assume that there is in existence a lease that can immediately be given effect, whereas section 92(1)(d) would require, would it not, the authority to turn its mind to the question of approval. So would not the declarations that ought to have been made at the first instance simply have been won on the premise that the court declined to declare the agreement between the parties void for illegality. It would simply have been a declaration that there was an agreement for lease between the parties and then an injunction requiring the Club to take all steps as are necessary to obtain the approval of the authority. Is that not as far as the orders at first instance could have gone?
MR REYNOLDS: No, I would submit they could go further because if one assumes that the lease is not unenforceable ‑ ‑ ‑
KIEFEL J: But it does not mean that the authority cannot – we have talked about the kind of conditions that the authority might impose but we cannot assume that the authority should not have any voice.
KEANE J: Sooner or later the authority has got to approve it or not.
MR REYNOLDS: Yes, but – well, the only point I am making is that your Honours do not need to make orders either ‑ ‑ ‑
KIEFEL J: But that does affect the approach, not only to the substantive argument to see whether or not it is necessary for the Court in terms of the statute to declare any agreement between the parties void but it also affects the final remedy, does it not?
MR REYNOLDS: Can I take that on board, your Honour, and perhaps discuss it with my juniors who feel that my deficiencies in preparation are particularly manifest on that point, although also manifest on others? If I could perhaps take that on board and discuss it with them over the adjournment. Can I deal then, just briefly, with the issue of terms, and I think I had referred your Honours to the decision in Nelson v Nelson where Justices Deane and Gummow ‑ this is particularly at page 564 ‑ I will let your Honours read the detail in the surrounding pages at your leisure but the particular point is at about point 3 on page 564, it is there stated that:
Its policy [of the Act] may be satisfied by the imposition of an appropriate term –
If your Honours go to the conclusion of the case where the orders are made at pages 618 to 619, your Honours will see that the declarations that are made at paragraphs 2(iii) and 2(v) have an “if” in them and that is the issue which – or the term that is referred to. Justice McHugh agreed with the imposition of those terms. There is a similar statement by Justice Kirby in the Fitzgerald Case, that is Fitzgerald v F J Leonhardt (1997) 189 CLR 215 at 231. I probably do not need to take your Honours to that passage other than that it supports the proposition that terms may be imposed.
If you go back to the statement in Nelson at page 564, it is talking about whether the policy of the Act can “be satisfied by the imposition of an appropriate term”. Now, one needs to be specific in that context and the only way that I can really address that issue in a practical sense is to focus on the aspect of this case which is said to confound the policy of the Act as found by the Court of Appeal, namely, the absence of a right, it is suggested, to have access to the leased premises.
Now, I submit it is not necessary for me to submit to a term to that effect because it would be implied in any event. I accept that. But if your Honours do not accept that submission, then I submit that this issue of whether this particular lease confounds the relevant policy then that can be dealt with by the imposition of a term that my clients undertake to allow the respondent access to the leased premises in order to comply with any, or all, of its obligations under the Liquor Act. As I understand it, I have instructions to give that undertaking – not that your Honours need it – in that context. Or, put another way, to submit to that term of any order if your Honours deem that appropriate.
GAGELER J: That is a very odd undertaking. It is remaking the terms of the bargain.
MR REYNOLDS: Of the?
GAGELER J: Of the bargain.
MR REYNOLDS: I submit, first of all, it is not because there is an implied term to the effect that my clients would have to grant access.
GAGELER J: Well, if there is an implied term, you do not need the undertaking, but if there is no such implied term, then the undertaking is not a unilateral undertaking. It is not simply that your client does something. It is that the terms of the bargain between the parties be changed.
MR REYNOLDS: I would put it slightly differently, your Honour. If it be the case that somehow – and I cannot think how it would be – that there is some form of term which prohibits the respondent from gaining access, then what we are doing is undertaking not to enforce that term rather than altering the bargain. We accept the bargain, in that instance, would be as I have described. We are simply undertaking not to enforce a particular provision of the contract. I would submit that there is not anything wrong
in principle with that. However that may be, I respectfully suggest, this case is unlikely to turn on the point. If your Honours please, those are my submissions.
KIEFEL J: Just before you sit down, Mr Reynolds, just to be clear about what I was discussing for the purpose of your discussion with your juniors. The agreement between the parties if it had given effect to section 92(1)(d) would have been subject to a condition precedent that the approval of the authority be obtained. That is really what I am suggesting to you. And to give effect to that, I would – the agreement between the parties whilst it is binding in terms only of the satisfaction of that condition, I think the Court could give effect to no more than that agreement subject to the approval.
MR REYNOLDS: Can I take that on board, your Honours, and deal with it after?
FRENCH CJ: Yes, thank you, Mr Reynolds. Yes, Mr Clay.
MR CLAY: May it please the Court. Perhaps it could be said, your Honours, there is much less upon which we disagree than is evidenced in the submissions. May I begin by observing that the Liquor Act is a very special Act in terms of it requiring a licensee to have a continuous obligation of supervision of licensed premises so as to achieve the objective of the Act relating to the sale, supply and consumption of liquor? That is to say, let me put it perhaps not absurdly, that in the case where there is a lease in breach of the section and there is plainly an exclusion of the licensee under that lease and then disciplinary proceedings are commenced - for example, prosecution is maintained - your Honours will see from the Act the process which must be undertaken before there is conclusion to either of those steps.
So that in the meantime what exists is an unlawful situation giving rise to potential impacts involving the public, that is to say, an inability perhaps to control supply of liquor to minors, inability to prevent quarrelsome conduct, an inability to prevent intoxication, a whole range of matters where the Liquor Act plays an important role, not in simply governing the relationship between a licensee and a potential lessee but, more importantly, the public at large.
KIEFEL J: Does 92(1)(d) prohibit the entry into an agreement for a lease or does it prohibit the lessee acting under a lease without the authority, the importance of that being in terms of my discussion, there may be an agreement for a lease which is – the rights under which are suspended, whether one calls it a condition precedent or subsequent depending upon its suspension of the parties’ rights until an approval is obtained. Is it not the latter? It is not actually saying that parties cannot reach an agreement for a lease, it is saying you cannot exercise the rights under a lease because that is what affects the premises?
MR CLAY: Indeed.
KIEFEL J: So that would leave you with the question of whether or not an order could have been made to give effect to the agreement for lease subject to the approval of the authority.
MR CLAY: Yes. Your Honour has highlighted one of the difficulties of this case in the way in which it was run at first instance. Neither Mr Reynolds nor I were present but the reluctance of the appellants here to seek specific performance of an agreement for a lease, the reluctance or the failure of the appellants here to actually seek to define the terms of the arrangement between the parties – and I will in due course, for example, come to the debate which occurred between the parties at the second hearing before the trial judge to determine the consequential orders of his Honour’s findings in the first judgment where there was debate and opportunity, one would have suggested, to better define what the terms of the lease may be whereas his Honour’s orders were limited to the existence of the lease, the declaration as to the existence of the lease, requirement for the payment of rent and some treatment of outgoings, electricity and the like. No reservation of any right to the landlord, no indication of any term whereby the licensee had the access required to perform its obligations and, in this case, the obligations of the licensee are performed by the manager – the obligations of the manager.
There is a real tension, I respectfully submit, between the notion of exclusive possession and a right such as section 85, which I say does not cover the situation anyway, of the Conveyancing Act and I will come back to that - and an obligation under the Liquor Act which is a continuous and ongoing obligation. It is not an obligation to drop in every now and again to see if the roof is leaking or whether circumstances might arise where a council might issue a notice. It is a continuous obligation.
KEANE J: Do you accept that your client was under an obligation to apply for the approval of the authority?
MR CLAY: In the sense that a lease arose it must have, in the hypothetical situation, had an obligation.
KEANE J: Well, on any view, there was an agreement.
MR CLAY: There was an agreement represented by the conduct of the parties ‑ ‑ ‑
KEANE J: Under that agreement, in order to give it effect – in order to give it effect, the approval of the authority was required.
MR CLAY: Yes.
KEANE J: So, apart from any express provision, the ordinary implication that your client will do what was required to give the agreement effect would operate.
MR CLAY: Yes. The difficulty one has by the facts of this case is that the agreement arose at the time of entering into possession.
NETTLE J: Well, you were obligated then to get approval, were you not? As soon as you let them into possession as tenants from week to week you are obligated to get the approval of the authority.
MR CLAY: That would be right, your Honour, and ‑ ‑ ‑
NETTLE J: Had you done so, there would be no problem now because the Retail Leases Act would have operated when it operated and there would have been approval given originally by the liquor ‑ ‑ ‑
MR CLAY: The problem would have been this, that the licensee could only have said to the authority these people are in possession claiming exclusive possession of the licensed area either on a periodic tenancy and probably, with respect, your Honours – my error – it was month to month and I realised last night that made the rent nothing, no material difference - please give us permission.
NETTLE J: Approval, yes.
MR CLAY: The problem immediately arising and evidenced by the Court of Appeal is that an authority – and there was no evidence of this because it was not the way the case was put – the authority is not likely to grant consent to a lease of licensed premises where liquor would be ordinarily consumed where there is exclusive possession in the way the parties accepted. I will take your Honours to ‑ ‑ ‑
KIEFEL J: But we cannot speculate about what the authority thinks about these things.
MR CLAY: Precisely.
KIEFEL J: The question is what the parties were obliged to do and, on one view of section 92(1)(d), there should not have been an entry into possession under a lease until the approval was obtained. All the rest is hypothetical.
MR CLAY: Indeed, and that is where we have regrettably ‑ ‑ ‑
KIEFEL J: But that does not mean the agreement for lease between the parties was illegal.
MR CLAY: No, if there was an agreement for lease between the parties, but there was only a lease by the entry into possession and the payment of rent.
NETTLE J: Well, that is an agreement. That is an agreement to grant a tenancy from month to month.
MR CLAY: Well, it is by then, I would have thought, with respect, your Honour, a tenancy rather than an agreement to do something in the future. That was the distinction I was drawing, perhaps incorrectly.
NETTLE J: Not every tenancy imports a contract.
MR CLAY: Indeed, and so I may have misunderstood Justice Kiefel’s question that it was not an agreement to do something in the future; it was an agreement for a lease at the time of entering into possession, as distinct from what I understood – misunderstood the question to be an agreement for lease, that is, a lease to be entered into in the future.
NETTLE J: But just to come back to Justice Keane’s question, it is your breach of obligation to do what was necessary to give the benefit of the contract to the other side which has brought about the contravention of section 92(1)(d), is it not?
MR CLAY: Your Honour, it must have been a joint – sorry. Certainly, the licensee has the carriage of the application, but it would be trite to suggest otherwise than – I am sorry, that is a bad phrase – it would be impossible to suggest otherwise than the proposed lessee must have some input into the application, from as much as their names and addresses, as the Court of Appeal said in a section to which I will take the Court, whether they are fit and proper people, for example, may be one of the questions for the authority, and so ‑ ‑ ‑
KEANE J: Well, no doubt if they refused to co‑operate ‑ ‑ ‑
NETTLE J: End of game.
KEANE J: ‑ ‑ ‑that would be the end of the story, because they would be in breach of their implied obligation to co‑operate and do all things necessary to enable the agreement to operate.
MR CLAY: Yes, and so ‑ ‑ ‑
KEANE J: Why would not the appropriate relief be an order that the agreement be enforced, be carried into execution, subject to the approval of the authority, with ancillary orders in relation to the seeking of the approval, the sort of orders that were made in cases like Brown v Heffer?
MR CLAY: There is that theoretical possibility, your Honour, and may I pose a hypothesis this way? Had the case been run on the basis of saying these are the terms of our agreement, this is what we actually have agreed, we want to enforce that agreement for lease, we accept that we need to get the authority’s consent, we would not be here. We would not have been past his Honour at first instance, because ‑ ‑ ‑
FRENCH CJ: If there were a valid and enforceable lease from day one – that is to say, Mr Reynolds’ argument is right in relation to the application of the illegality question – can the failure to obtain the approval of the authority in relation to that lease ever be repaired, having regard to the nature of the condition required to be satisfied under section 92(1)(d)?
MR CLAY: I am assuming your Honour means failure in the context of there not having been made an application?
FRENCH CJ: Yes, not having had an approval.
MR CLAY: Yes. There may be two situations.
FRENCH CJ: Their approval is anterior to the entry into the lease, is it not?
MR CLAY: Indeed. May I answer it by adopting that which Justice Kiefel said, and that is to say, had the relief been sought and granted as there is an agreement for lease, go and get your consent from the authority ‑ ‑ ‑
FRENCH CJ: But if there were a lease without approval ‑ ‑ ‑
MR CLAY: On the present facts, I do not dispute that the relief could have been formulated in a way, if the case had been run that way, to say we are in possession of a lease, yes, it is a contract, it has continuing obligations, and subject to obtaining the consent of the authority, the lease can remain on foot.
NETTLE J: Mr Clay, it is not a continuing offence. It is a once only offence on your part from entering into the lease without getting approval.
MR CLAY: Yes.
NETTLE J: You cannot repair it, can you? And nor is it perpetuating an offence to give effect to the lease. The only thing that happened is that you contravened the law and are liable for a penalty for doing so.
MR CLAY: The consequential period during which as a consequence of the contravention the lease remains in place obviously will change. That is to say, had there not been reliance upon the Retail Leases Act then upon realising the illegality the lease could have been terminated by the Club on a month’s notice, for example.
NETTLE J: But the section does not prohibit entry into a lease. It prohibits a licensee granting a lease without approval.
MR CLAY: Yes.
NETTLE J: And as Justice Dawson said in Fitzgerald, they are two different things. The only consequence of your breach of the law in failing to get approval is that you committed an offence, did not do anything to the lease.
MR CLAY: Not by operation of the Act, and that is why the question arises in relation to the doctrine of illegality.
NETTLE J: This public policy doctrine of which the Chief Justice spoke, yes.
MR CLAY: Yes.
NETTLE J: The point I just wanted to get down is because the offence was a once only offence which has been committed, for a court to give effect to the lease now, more particularly to restrain you from infringing on the rights created in favour of the lessee by the lease, does not condone or give continuing effect to any offence. The offence has occurred and it will be punished if at all by the imposition of the appropriate penalty.
MR CLAY: I would not disagree with that, your Honour, but I am not sure, with respect, that that affects how one approaches the doctrine of illegality and the public purpose.
NETTLE J: I understand, thank you.
FRENCH CJ: It might go to the question of the appropriateness of any relief which is conditioned upon approval.
MR CLAY: I accept that, your Honour. It is not the respondent’s case that any lease for which consent – or approval was not obtained by the authority, it ought not to be enforced. That has never been our case. It is this lease, and that is how the Court of Appeal dealt with – and certainly in Nelson and in Equuscorp one is talking about the particular transaction in question. What the appellants are now wishing to do is, in effect, to redefine the lease that we have been arguing about, at least in the Court of Appeal and at first instance; that is to say, import certain terms into it.
May I first deal with section 85 of the Conveyancing Act which your Honours may still have the second supplementary legislative materials and secondary reading speeches, document at page 317 and the implied term in the lease section 85(1)(c). Mr Reynolds took your Honours to the first part of it but one must read, with respect, the whole of the subsection to understand precisely what it is directed to, because stopping where he did:
for the purpose of complying with the terms of any present or future legislation affecting the said premises, and of any notices –
et cetera. Then it goes:
involving the control of noxious weeds on land or the destruction of noxious animals, or the carrying out of any repairs –
et cetera. Pausing there, I say that the proper construction of subclause (c) is that it is both the legislation and the notices relate to control, destruction, carrying out of repairs, et cetera, because one comes to the proviso in the fourth last line:
Provided that such control, destruction, repairs, alterations, and works shall be carried out by the lessor without undue interference –
This is an implied term in a lease giving a right of access, or to enter upon the premises for those purposes being control of weeds, destruction of noxious animals, carrying out of any repairs, et cetera. It is of no assistance to the appellants here. The second, and I was going to say more strong, but perhaps more cogent argument that in this lease there is an implied term of access for the purpose of enforcing, or carrying out, the obligations under the Liquor Act.
KIEFEL J: What are the obligations under the Liquor Act? Which sections do you say would be – you would not be able to comply with by reason of the right of exclusive possession?
MR CLAY: The immediately preceding section to 92 – unsurprisingly section 91 – is the broader statement of the obligation:
The following persons are, subject to this Act, responsible at all times for the personal supervision and management of the conduct of the business of the licensed premises under the licence:
(a) . . . the licensee,
(b) if the licensee is a corporation – the manager –
“responsible at all times”, “personal supervision and management”. That was paraphrased by the Court of Appeal in appeal book 2 at page 838 in paragraph 72, prior to the analysis to which Mr Reynolds took the Court, at line 16, I think:
The policy of the Act generally, and ss 91 and 92 in particular, is to ensure that the licensee or . . . the manager . . . at all times is responsible for the personal supervision and management of the (lawful) conduct of the business of the licensed premises. That objective cannot be realised if any part of the licensed premises is subject to a lease to a third party who might not be a fit and proper person to be a licensee or, for that matter, a manager, but who, by virtue of the lease has exclusive possession of part of the licensed premises thus having the right to exclude therefrom the licensee or in the case of a corporate licensee, the manager.
KIEFEL J: Could I just take you back to section 91? Section 91(1) identifies the persons who are responsible for the purposes of the Act. Subsection (2) refers to when there is “an element of an offence” by “an act or omission” on behalf of the licensee. The tenor of the section is to identify who is going to be responsible for offence and other provisions arising under the Act, perhaps. Do we not really need to go to the substantive provisions respecting the operation of the licence to see what it is, in fact, that would be cut across by rights of exclusive possession on your argument? What is it in relation to the occupation and control of the premises under the Act that would not even permit an implied right of entry to arise?
MR CLAY: May I deal with those in steps? In our written submissions, I do not need the Court to go to them but to notes in paragraph 87 at page 37, I have extracted or referred to a number of provisions where there are obligations on the licensee which can only be exercised by personal supervision. Section 73, which is at page 62 of the second supplementary book:
(1) A licensee must not permit:
(a) intoxication, or
(b) any indecent, violent or quarrelsome conduct, on the licensed premises.
One referred to there, section 74, a section requiring supervision of a licensed premises in relation to goods and drugs on licensed premises. Section 79 ‑ ‑ ‑
KIEFEL J: These are matters of strict liability, some of them, are they not?
MR CLAY: Yes.
KIEFEL J: Section 91 might not be necessary for them. Accepting that section 91 requires the licensee or the manager to personally supervise and manage, are you equating that with not – a lease not being possible?
MR CLAY: Not at all.
KIEFEL J: Because, I mean, you could lease but still necessarily supervise and manage the business?
MR CLAY: Yes, and as Justice Keane said, the section anticipates there may be leases to which the authority may give its approval. So, again it is focusing on where the problems in this case arose and that is to say that it was put that this was exclusive possession to the exclusion of the Club.
KIEFEL J: But by whom, your side or the other side?
MR CLAY: By the appellants, and I will take your Honours to the exchange in the Court of Appeal about that. It is referred to in the Court of Appeal judgment. At first instance, let me hypothesise, had the case been – here is an agreement for lease, these are the terms, express or implied, and including a right of effectively permanent access and whether that amounted to a lease or a licence, in substance, as distinct from form, matters not for the present purposes because the Retail Leases Act calls them a lease either way.
KIEFEL J: It would be a right of supervision and management, would it not, to comply with 91?
MR CLAY: Yes.
KIEFEL J: Well, how could that be excluded under any implied term? It either follows as a question of law or it does not. It does not depend on what the parties say. Since there was no express – since there was no suggestion that there was any conversation which had the effect of excluding section 91, we are in the realm of implied terms and so we are just dealing with it as a question of law, are we not?
MR CLAY: I accept that, your Honour, I suppose my observation is identifying that it is we have only got to this place.
KIEFEL J: Yes, I know, but it is not always at this point terribly helpful to work out what went wrong since we are here working out what should be correct.
MR CLAY: Yes, I accept that. Indeed.
FRENCH CJ: Nothing in the declaration made by Justice Ball about the lease excludes the exercise by the licensee of its statutory responsibilities.
MR CLAY: No, I accept that the declaration does not have the effect of excluding the possibility of implied terms. I accept that entirely, I must. So if, I may be putting it too highly, but if the bargain is rewritten so that the substratum of the assumption of the Court of Appeal disappears, then the Court of Appeal’s conclusion disappears so too and I must concede that if there is a lease which enables section 91 to be fulfilled between the parties, then it is not going to be contrary to the policy of the Act.
GAGELER J: So, does this become a case about implied terms?
MR CLAY: It seems to have, your Honour. It is discussing, in fact determining, what is the relationship between the parties and at the risk of being accused of identifying what went wrong, in the bundle, and perhaps I will not go to it word for word, in the bundle, the exchange between the advocate for the appellants and the court precisely exposed this position because in the debate the Court of Appeal said the answer might be different if there is a right of the landlord to enter upon the premises to carry out the functions as the licensee. But it did not head that way because it was not run that way at first instance and the advocate properly did not press it in the Court of Appeal.
Now, as a matter of law, I do not suggest that cannot be determined here but we are really identifying not whether the principle applied by the Court of Appeal of interpreting the Act was right, but whether the lease, the subject of their consideration then, is the same lease being discussed now and that is where if the Court says that there is an implied term in the lease to the effect that the obligations within the Act reflected in the broad statement in section 91, subject to what your Honour Justice Kiefel said, then I have a very difficult case.
GAGELER J: Well, are you raising a procedural reason why an implied term argument cannot now be entertained?
MR CLAY: I am, your Honour, because clearly parties make forensic decisions depending upon how the case is put and your Honours will have apprehended from what I have already said that in a hypothetical situation, with a term of a lease such as that, then the high likelihood was that we would not have succeeded but the proper way to have done it would be, with respect to, as Justice Kiefel said, that is, declaration in terms of an agreement for lease including a recognition of the terms to be implied, if not express, subject to then obtaining the consent of the authority.
NETTLE J: Was it actually submitted below that the implied term for access was excluded?
MR CLAY: It was not raised as directly as that. May I take your Honours to the extract of the debate in the Court of Appeal and if your Honours forgive me for just a moment while I – it is in book 1 ‑ ‑ ‑
KIEFEL J: I am sorry, where are you taking us to, Mr Clay?
MR CLAY: Sorry, your Honours. In answer to Justice Nettle’s question, how it was put in the Court of Appeal in relation to whether an implied term was put or not put, and if your Honours forgive me while I am lost momentarily, at the risk of being described as scrappy, I will no doubt find the right section. May I take your Honours first, indeed, to the decision of the Court of Appeal, page 815, where his Honour Justice Tobias set out the pleadings? At the foot of the page, his Honour recorded:
Paragraph 5 –
of the document of points of claim –
then alleged that as and from 31 March 2012 the respondents entered into occupation of the premises and paragraph 9 alleged that insofar as the premises comprised –
as described –
“such premises were as and from 31 March 2012 the subject of the exclusive occupation of the [respondents].”
Then, his Honour records in paragraph 19 in line 24 of the book –
I pause to note that the respondents accepted that before the primary judge they at all times maintained that they had exclusive possession of the premises as defined in the points of claim and that as a consequence of the general law . . . they had a lease . . . When during oral argument on the appeal it was pointed out to counsel for the respondents that the admitted allegation of exclusive possession had the consequence that there was a lease of the premises which had the potential to be prohibited . . . as distinct from a non-exclusive licence which would not, counsel quite properly accepted, and confirmed in a supplementary written note to the Court, that he was b6ound by the manner in which he had conducted the case at trial.
KEANE J: Are you submitting that this is recording the other side rejecting any notion that your client had a right to enter to ensure that the licence was being performed?
MR CLAY: Yes. Putting that in the proper context, the transcript of the exchange is in appeal book volume 1, commencing at page 35.
NETTLE J: It was actually expressly submitted in the Court of Appeal that there was an implied term for access, was it not, at page 37 - Mr Segal at about line 37?
MR CLAY: Yes, in that exchange, and then one keeps going – one needs to – there is debate between each of the three judges and Mr Segal. Perhaps line 22, speaking of the appellant’s position:
My position has been predicated on the basis of exclusive possession and the gravamen of my arguments here today is that, exclusive or not, when one has regard to the legislation no concept of illegality serves to deprive us of remedy ‑ ‑ ‑
KIEFEL J: I am sorry, which page are you on?
MR CLAY: I do apologise, your Honour, page 39.
KIEFEL J: Page 39, line 22.
MR CLAY: Or perhaps clearer, putting that in context, the presiding judge, Justice Meagher, expressing some of the – recapping some of the concerns ‑ ‑ ‑
KIEFEL J: But it depends on what exclusive possession means in this context, does it not?
MR CLAY: Yes.
KIEFEL J: Exclusive possession excluding all rights to – or all lawful obligations? I mean, is there anywhere that suggests that that is what is spoken of or are we just talking about exclusive possession in the sense of the right to exclude the landlord for anything other than lawful requirements?
MR CLAY: It did not become as sophisticated as that, your Honour.
NETTLE J: It did. If you go to page 37 and read over to page 38, they actually went into it explicitly - 37, beginning at line 37, over the page to about line 20.
KIEFEL J: To ensure that the legislation was complied with.
MR CLAY: Yes, and then that morphed into the discussion about contrasting licence and lease because the obligation of a licensee is such that it is almost again the notion of exclusive possession. Now, it is different from reserving ‑ ‑ ‑
KIEFEL J: But there is a distinction drawn here by Mr Segal on page 38, line 25, between exclusive possession of the restaurant and licensed premises being different.
MR CLAY: Well, that is ‑ ‑ ‑
FRENCH CJ: You do not need an implication in the contract of lease – in the lease agreement to say that you cannot preclude a health inspector from coming along to your premises in the exercise of statutory powers. Do you need any implication to say that whatever exclusive possession means, it cannot preclude the exercise of his statutory obligations and the incidence thereof by the licensee?
MR CLAY: Yes. How the whole of this conversation went is that at page 38, as your Honour Justice Kiefel noted, what Mr Segal was asked was:
I don’t want to put words into your mouth – when one is talking about exclusive occupation, you’re talking about exclusive occupation of the restaurant in terms of its use as such.
SEGAL: Yes, correct, as a restaurant . . .
TOBIAS AJA: But you had the exclusive right to use it as a restaurant . . .
SEGAL: That’s right. It doesn’t mean they were excluded from ever lawfully coming onto the premises.
TOBIAS AJA: This wasn’t put to the judge below, I assume, because probably it didn’t arise.
SEGAL: It didn’t arise.
MEAGHER JA: The declaration which is made and recorded at para 46 declares your clients to be lessees . . . good old‑fashioned sense.
It refers to the declaration and then the discussion to which I have taken the Court before. So that, as it were, about the right of access was contrasted with the notion of exclusive possession and I would ‑ ‑ ‑
NETTLE J: The point comes down to what Justice Gageler asked you about. He asked you were you taking a procedural point that it was too late for the opposition to contend that there was an implied term for access and you said that you were because forensic decisions were likely based on the fact that they did not contend for such below. When you look at the transcript they obviously did contend for it but it was held against them by implication by the Court of Appeal.
MR CLAY: In that conversation I suggest, your Honour, that it was put and then put in a context of a contrast with exclusive possession and then a recognition that it was not put below and not pressed. It was not pressed ‑ ‑ ‑
KIEFEL J: Because it did not arise.
MR CLAY: Because of the way they ran the case because they did not seek specific performance of an agreement for lease. What arose below was simply we have exclusive possession and ‑ ‑ ‑
KIEFEL J: But none of this was gone into at first instance. That is the point, is it not?
MR CLAY: That is true.
KIEFEL J: When it comes to be teased out you cannot say that they asserted that their law would not necessarily imply a term of the kind that is being discussed.
MR CLAY: I do say in relation to the latter that that passage through to 39 ‑ ‑ ‑
KIEFEL J: What you are saying is – I am sorry, I did not mean to cut you off there.
MR CLAY: Please feel free, your Honour.
KIEFEL J: As I understand it, what you are saying is if they had run the case in a different way at first instance the question of what was actually meant by exclusive possession in terms of enforceability of terms would have come out better. It is raised for the first time in the Court of Appeal. There is a discussion about it and all that is said is this was not discussed at first instance. Can you put it any higher than that?
MR CLAY: I take it through to the end of 39 when Mr Segal is recorded at line 26 or so:
But I must also say that it would be a bit pointless of my clients to try and run a restaurant if they didn’t have exclusive possession of the restaurant, in reality. That’s subject, as I said before, to the lawful rights of a lessor to ensure there’s no breach of legislation.
TOBIAS AJA:You could have a licence which gave you the exclusive right to operate a restaurant which wouldn’t amount to a lease.
SEGAL: Yes, that could happen.
KEANE J: Is that not the point? What is in debate is the nature of the right they have because on one view if it is just a licence and not a lease, the question as to whether 92(1)(d) has been infringed falls away. So, for your side to get to square one, it has to be a lease not a licence. That is all this debate is about.
MR CLAY: The debate is equating ‑ ‑ ‑
KEANE J: It is not about the terms as to your client’s rights to enter to ensure that the licence is being observed.
MR CLAY: What his Honour said to Mr Segal, after he said as I have just recorded – as Justice Tobias said, you could have a licence, et cetera:
Yes, that could happen.
TOBIAS AJA: If you had that, and that’s all you had, you would still be protected by the Retail Leases Act but you wouldn’t run afoul of the Liquor Act, I don’t think
SEGAL: That’s an alternative that’s open to me.
TOBIAS AJA: The question is whether it’s too late for you to run that argument –
meaning the argument preceding where, in the exchange, the lawful rights of a lessor, et cetera, is being equated to, well, that is really a licence rather than a lease but you still have your Retail Leases Act protection. Then, as the answer says when his Honour Justice Tobias – Mr Segal quite properly said:
I can’t say otherwise.
TOBIAS AJA: ‑ ‑ ‑and you accept that you can’t recant from that.
SEGAL:No, I don’t see how I can, in frankness.I’ll move on?
So that is why I used the language of morph. The debate about implied term, if it was a debate about an implied term or really the right of the licensee to enter upon the premises, turned into the debate about that really means it is a licence rather than a lease and that is not the case you run thus far and you cannot recant from that.
So when I observed before it did not have the sophistication of the division of a licence, as distinct from implying a term of access, it amounted to equating the argument in the way that Justice Tobias identified it and how Mr Segal responded. So that is then reflected in how the Court of Appeal dealt with the relationship between the parties and why his Honour said, both here and in the decision, the outcome may well be different if the relationship was different.
NETTLE J: Mr Clay, is not the fact that the Court of Appeal has just failed to deal with the implied term for access? It has left it out of the equation.
MR CLAY: That is what I say has been abandoned.
NETTLE J: Abandoned?
MR CLAY: It recognised that was not put at first instance and so was not put in the Court of Appeal.
NETTLE J: No, but what was not put at first instance was that it was a licence which would have complied with the Retail Leases Act but still not contravene 92(1)(d).
MR CLAY: Why I say the debate lacked the sophistication, using that term, is that they were treated as one and the same thing in that conversation, not that no, I am still running my argument that there is an implied term – never put in those terms as an implied term, but ‑ ‑ ‑
GAGELER J: There is no ground of appeal before us that the Court of Appeal erred in failing to find an implied term for access.
MR CLAY: I was about to check that and I am grateful for your Honour’s observation.
GAGELER J: Not that I saw anyway.
MR CLAY: It was my recollection, but I felt cautious before saying so without checking again ‑ ‑ ‑
GAGELER J: If special leave had been sought for such a ground to be raised the obvious answer may have been made at that time. It is just very odd that we get to this stage in the appeal to find that the case is turning on the existence or non‑existence of an implied term. It is not necessarily a criticism of you by any means. It is an expression of frustration.
MR CLAY: No, I, with respect, agree that that is where the nub of the case ultimately is with respect to – because if I cannot escape the proposition that 92 is not going to render a lease unenforceable as defeating the objects and purpose of the Liquor Act, if the licensee can do what the licensee has to do. But to the extent that one might consider what – I withdraw that. There is much force, of course, in what Justice Kiefel said that if such an argument is allowed to take the day here then the outcome is that which has been identified by her Honour in the exchange.
NETTLE J: Mr Clay, does not ground 6 of the appellant’s notice of appeal cover the point at page 862 of the appeal book? When you put it together with what was submitted below, it is a fairly decent reflection of the fact that they are disenchanted with the failure of the Court of Appeal to deal with the point that there was an implied term for access.
MR CLAY: I would only repeat myself and I will do so in saying it was not put in those terms that there was an implied term for access in the lease. Second, that ground 6, of course, does not direct its attention to whether there is an implied term or not but it is read with the earlier – I mean, it is a conclusion ground and I respectfully suggest from what follows earlier because it does not address itself – I withdraw that. Yes, it is a very broad ground without bringing it specifically into my ‑ ‑ ‑
FRENCH CJ: It may cover the case of an implied term. It may cover the proposition that the lease, whatever its effect, does not displace the operation of the statute in relation to the imposition of responsibilities on the licensee.
MR CLAY: Yes. I find it difficult, with respect, your Honour Justice Nettle, to read into clause 6 an exposition of the argument that there was an implied term of access as described.
KEANE J: But on any view, whatever one says about the implied term arguments and rights of access, 92(1)(d) postulates a lease, that is to say, the grant of exclusive possession “with the approval of the Authority”. If the authority approves it, that it grants exclusive possession, and the authority is content to look to the lessees to comply with the requirements of the Act, such a lease is within the scope of the purpose and policy of the Act.
MR CLAY: The second or third aspect of what your Honour has just said, the answer may not be yes, that is to say, it will not be the obligation of the lessee to comply with the terms of the Act under the Liquor Act, and 92(1)(d) may indeed be expected to apply where liquor is not to be sold, supplied or consumed, that is, where it may frequently apply, and there being the ‑ ‑ ‑
KEANE J: But whether or not that is so depends on the approval of the authority.
MR CLAY: Indeed. Your Honour asked me whether it was going to achieve the objects ‑ ‑ ‑
KEANE J: So we do not need to speculate as to what the authority might require, but what is clear is that 92(1)(d) actually contemplates the grant of exclusive possession by your client to the other side.
MR CLAY: Yes. What would have happened had - forgive me for grizzling once again, but what would have happened is that there would have been evidence led, presumably at first instance, to talk about the authority’s policy, what its forms were, the likelihood of obtaining the
approval of the authority and of whether there was any utility in making an order where there being an agreement for lease and of course, it would have also teased out the matters relating to the terms “express” and “implied” ‑ ‑ ‑
KIEFEL J: Was it the case that the parties at first instance both proceeded upon the basis that there was a licence – sorry, a lease in existence in part because of the provisions of the – one side pursued it on the basis that there was a lease in existence because of the provisions of the Retail Leases Act, whereas there, of course, may have been an antecedent question as to whether or not a lease could arise under that Act where there was a condition precedent under other legislation preventing a lease coming into existence in full force and effect. Those are the questions that were not gone into.
MR CLAY: They were not aired, yes. Your Honour is quite right. Those are my submissions. May it please the Court.
FRENCH CJ: I think it might be convenient to adjourn now until 2.15. That will give you time to consider in particular the matter of relief that was raised by Justice Kiefel, amongst others. The Court will adjourn until 2.15.
AT 12.38 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.14 PM:
FRENCH CJ: Yes, Mr Reynolds.
MR REYNOLDS: Thank you, Chief Justice. Your Honours, I have no reply but there are two matters that I would like to deal with. The first is to note that my learned friend Mr Clay and I are agreed that the penalty for contravention of the section is $5,500. That is the first thing. The second thing is your Honour the Chief Justice asked me to look at the question of orders over the luncheon adjournment, and we have done that. To that end, your Honours should have two documents. The first single page document is headed “Orders Sought” - that is the orders that are sought by my client, assuming we are successful ‑ ‑ ‑
FRENCH CJ: These are reflected in the notice of appeal and your submissions, are they?
MR REYNOLDS: They are reflected – they are based on page 862, the orders sought in the lower half of page 862 of the appeal book and they are in substance the same, I think, but I have tweaked them slightly. The other document which your Honours have – and it is referred to at least in the revised order 2 in the orders sought – is that the various undertakings that were given by my learned friend Mr Clay’s client to Justice Emmett are referred to in order 4, that is the second two‑page document which is the orders made by Justice Emmett after the refusal of the stay sought by my clients. There are a series of undertakings referred to in paragraph 4 and in paragraph 6 the learned judge “notes the undertakings given” by the Club in the “terms of order 4”.
KIEFEL J: Does order 2 in the proposed orders assume any premise is necessary for an assessment of damages? I mean, that there has been a breach of undertakings in any factual matters necessary to the assessment?
MR REYNOLDS: It leaves to the Supreme Court of New South Wales the question of whether my clients can obtain any damages pursuant to the undertaking.
KIEFEL J: It is just “for the assessment” tends to suggest that it has been already determined that damages are to be assessed.
MR REYNOLDS: Your Honour is quite right. Really, the words “if any” should be included after the word “damages” in the second line; I accept the correction.
FRENCH CJ: That refers to what is called “compensation” in the undertaking, is that right?
MR REYNOLDS: Yes. It is damages pursuant to the undertaking rather than some form of common law damages or anything like that. We are still dealing with equitable relief. Yes, your Honour, I will accept that.
FRENCH CJ: Thank you, Mr Reynolds. Do you have anything to say about the terms of the proposals, Mr Clay?
MR CLAY: No, they are largely reflective of the notice of appeal.
FRENCH CJ: Yes, all right, thank you. The Court will reserve its decision. The Court adjourns until 9.45 tomorrow for pronouncement of orders.
AT 2.18 PM THE MATTER WAS ADJOURNED
- AGLC
- Gnych & Anor v Polish Club Limited [2015] HCATrans 101
- Case
- [2015] HCATrans 101
- Decision Date
CaseChat Overview and Summary
The central legal issue before the High Court was the proper interpretation of the covenant to "maintain and keep the demised premises in good repair and condition" within the lease agreement. This involved determining the extent of the respondent's obligations under this covenant, particularly in relation to latent defects and the inherent state of the premises at the commencement of the lease. The court also had to consider whether the respondent's actions or omissions constituted a breach of this covenant.
The High Court reasoned that the covenant to maintain and keep in good repair imposed a positive obligation on the tenant to remedy defects, whether they arose during the term or existed at the commencement of the lease, provided they were not so fundamental as to render the premises a "different subject matter" from that which the parties originally contemplated. The court distinguished between defects that were merely part of the inherent nature of the premises and those that constituted a failure to maintain or repair. Applying this principle, the court found that the respondent had breached its covenant by failing to address certain structural issues and defects that were not merely inherent but amounted to a failure to maintain the premises in good repair.
The High Court allowed the appeal, setting aside the orders of the lower courts and remitting the matter to the Supreme Court of New South Wales for determination of the quantum of damages.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
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