Bayview Hotel Batemans Pty Ltd v Enima Pty Ltd
[2013] NSWSC 221
•25 March 2013
Supreme Court
New South Wales
Medium Neutral Citation: Bayview Hotel Batemans Pty Ltd & Anor v Enima Pty Ltd [2013] NSWSC 221 Hearing dates: 26.02.13 Decision date: 25 March 2013 Before: Nicholas J Decision: Pars 44-45
Catchwords: LEASE - hotel lease - construction of term "Licence" as defined in the lease - whether definition of "Licence" extends to gaming machine entitlements - whether lessee entitled to sell, transfer, remove or otherwise deal with gaming machine entitlements without lessor's consent Legislation Cited: Gaming Machines Act 2001
Liquor Act 1982Cases Cited: Alliance Engineering Pty Ltd v Yarraburn Nominees Pty Ltd [2011] NSWCA 301
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Boreland v Docker [2007] NSWCA 94; [2007] Aust Contract Reports 90-256,
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468
Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184
Jabetin v Benwine Pty Ltd [2005] NSWCA 92; (2005) 63 NSWLR 602
Jabetin Pty Ltd v Liquor Administration Board [2005] NSWCA 92; (2005) 63 NSWLR 602
Turvern Pty Ltd v Jemwire Pty Ltd [2008] NSWSC 420
Wonall Pty Ltd v Clarence Property Corporation Ltd [2003] NSWSC 497; (2003) 58 NSWLR 23Category: Principal judgment Parties: Bayview Hotel Batemans Bay Pty Ltd - first plaintiff
Michael John O'Brien - second plaintiff
Enima Pty Ltd - defendantRepresentation: Counsel:
M J Leeming SC/J K Taylor - plaintiffs
J J Garnsey QC/T Lynch - defendant
Solicitors:
JDK Legal - plaintiffs
Back Schwartz Vaughan - defendant
File Number(s): 12/228762
Judgment
His Honour: The first plaintiff is the lessee of the premises at which the business of the Bay View Hotel (the hotel) at Batemans Bay is conducted pursuant to a hotel licence (the licence) issued under the Liquor Act 1982 (the Liquor Act). The second plaintiff is the licensee. The defendant is the lessor. The lease, registered no. 178043, is for a term of 20 years commencing 25 July 1994 and terminating on 24 July 2014. Since about 9 December 2005 there have been 17 poker machine entitlements (PMEs), now called gaming machine entitlements (GMEs) allocated in respect of the licence under the Gaming Machines Act 2001 (the GM Act). Henceforth I refer to these entitlements as GMEs.
In these proceedings, the plaintiffs seek a declaration that, upon the proper construction of the lease, they are entitled, to the exclusion of the defendant, subject to the statutory procedures, to sell, transfer, remove, or otherwise deal with or dispose of the GMEs. The defendant denies the claim and, based on the terms of the lease, pleads an estoppel.
By its cross-claim, the defendant sought a declaration that it has a financial interest in the licence for the purpose of s 19 GM Act, and orders that the plaintiffs be restrained from selling or transferring the GMEs without its consent, and that, upon expiry of the lease, the first plaintiff cause to be transferred to the defendant the licence and the 17 GMEs.
It is convenient to dispose of the cross-claim at the outset. The procedure for the transfer of GMEs is provided for by s 19 GM Act. Under 19(3)(c) an application for the approval of the statutory authority must demonstrate that the proposed transfer is supported by each person who, in the opinion of the authority, has a financial interest in the licence. Section 19(5) provides:
"(5) For the purposes of subsection (3) (c), a person is taken to have a financial interest in a hotel licence if the person is entitled to receive any income derived from the business carried on under the authority of the licence or any other financial benefit or financial advantage from the carrying on of the business (whether the entitlement arises at law or in equity or otherwise)."
The defendant maintains that its contractual rights under the lease are sufficient to establish a financial interest in the licence within the meaning of s 19(5). However, in these proceedings it was accepted that, following the decision of the Court of Appeal in Jabetin Pty Ltd v Liquor Administration Board [2005] NSWCA 92; (2005) 63 NSWLR 602, the issue was not open for determination at first instance. The defendant formally submitted that the Court of Appeal's interpretation of s 19(5) was wrong, and reserved its position should there be an appeal. It did not press for the declaration, and agreed (T p 22) that the cross-claim should be dismissed.
The licence, no. 116012, in respect of the premises was granted under the Liquor Act on 4 November 1958, at which time there were no PMEs. On about 19 April 2001 the Liquor Administration Board allocated 15 PMEs in respect of the licence, and on about 19 December 2005 allocated two more. It is common ground that under the amendments of 2011 to the GM Act the 17 PMEs have been converted to GMEs.
The plaintiffs' claim turns on the proper construction of the lease, the relevant provisions of which are the following:
"ANNEXURE A
...
PART 1. ADDITIONAL PARTICULARS
...
1.14 Permitted User Subject to paragraph 2.2 of the Operational Covenants Schedule a licensed hotel.
1.15 Additional Rights Nil.
...
PART 1A. HOTEL AND LICENCE CONDITIONS
Additional Definitions
1A.1 In this Lease, references to clauses include clauses in the Memorandum and, unless there is a contrary intention:
...
'Business' means the hotel business to be carried on by the Tenant upon the Premises.
...
'Hotel Name' means 'Bayview Hotel', being the name by which the Premises are known.
'Licence' means the hotelier's licence issued under the Liquor Act, 1982 authorising the sale of liquor on the Premises and includes any renewal of that licence and any licence issued in substitution for or in addition to that licence.
'Licensee' means the holder from time to time of the Licence.
...
Additional Covenants Relating to Liquor Licence
1A.4 The Tenant acknowledges that the Licence is the absolute property of the Landlord and the Tenant covenants with the Landlord as follows:
(a) to make application for and do all other things (and to procure the Licensee to make application for and do all other things) necessary to obtain and renew the Licence and all other licences that are, or may be, necessary for keeping open the Premises as duly licensed for the sale and consumption (whether on or off the Premises) of liquor by retail.
(b) During the Term, not to do or permit or suffer any act, matter or thing in, on or about the Premises whereby the Licence may be, or become, liable to be forfeited or the renewal thereof refused.
...
(d) To keep the Premises open, and to procure that the same are kept open, for the sale of liquor at all times during such hours as shall be required by law.
(e) To manage and conduct the Business at all times in a proper and orderly manner.
(f) At the expiration of the Term, to procure the Licensee to transfer and assign, and do all acts and things necessary for transferring and assigning, the Licence to the Landlord or to whomsoever it may nominate.
(g) Not to make, or allow to be made, at any time, any application for the surrender of the Licence.
Power of Attorney
1A.5 For the more effectual preservation of the Licence and the Premises as licensed premises, the Tenant hereby nominates ...and irrevocably appoints the Landlord ...the ... attorney of the Tenant ... to do any or all of the following:
(a) to transfer, or cause to be transferred, the Licence and any interest in the Licence to any person whomsoever the Landlord may nominate and to apply for any renewal or removal of the Licence and to sign all notices, transfers and documents for the purpose of that transfer, renewal or removal.
...
(d) generally to do and perform all such further acts, matters and things as shall be necessary or expedient to enable the landlord or his nominee to obtain the reinstatement of the Licence or to transfer the Licence and to carry on and conduct the business of a licensed hotel on the Premises and to serve (or employ any person to serve in the name of the Licensee) liquor to customers and the Tenant hereby ratifies, allows and confirms and agrees to ratify, allow and confirm all and whatsoever the attorney or attorneys shall lawfully do or cause to be done under or by virtue of these presents and to pay to the landlord and indemnify the landlord, against, all costs and expenses in connection therewith."
Clause 2.2 of the Operational Covenants Schedule dealt with the lessee's use of the premises. Clause 2.1 prevented use of the premises for any purpose other than a purpose permitted by the "Planning Acts" or for another purpose with the lessor's consent. In clause 2.15 of the Memorandum to the lease "Planning Acts" were defined to mean "... all legislation, rules, orders, requirements, or directions of any competent authority relating to the use of Premises or the erection or installation of any building, structure or improvement on or within the Premises".
The essence of the dispute in these proceedings concerns the meaning to be given to the term "Licence" as defined in clause 1A.1 of the lease. The plaintiffs contend that, in context, its meaning should be confined to a licence issued under the Liquor Act authorising the sale of liquor, and should not be understood to include GMEs allocated under the GM Act. The defendant's primary argument was that the phrase "... and any licence issued ... in addition to that licence" in the definition should be understood to include GMEs. It contends that as the PMEs were allocated in respect of the licence they (now GMEs) are, in substance, incidents of a licence and, accordingly, may not be sold or transferred by the plaintiffs without the defendant's consent.
The statutory regime under which GMEs are established and regulated has been analysed and explained in recent cases (Wonall Pty Ltd v Clarence Property Corporation Ltd [2003] NSWSC 497; (2003) 58 NSWLR 23; Jabetinv Benwine Pty Ltd [2005] NSWCA 92; (2005) 63 NSWLR 602; Boreland v Docker [2007] NSWCA 94; [2007] Aust Contract Reports 90-256, Alliance Engineering Pty Ltd v Yarraburn Nominees Pty Ltd [2011] NSWCA 301). For present purposes, it is sufficient to provide some background, much of which is gratefully taken from the following overview provided by Sackville AJA (Macfarlan, Whealy JJA agreeing), in Alliance:
"The Liquor Act Regime
23 At the time the Lease was entered into in 2000, the Liquor Act governed the sale and consumption of liquor at hotel premises. The Liquor Act also governed the operation of " approved gaming devices ", including poker machines, on the premises.
24 The Licensing Court was empowered to grant a licence to a licensee to sell liquor on premises specified in the licence (s 18(1)). In particular, the Licensing Court could grant a hotelier's licence, which authorised the licensee to sell liquor by retail on hotel premises, subject to the conditions of the licence (s 18(2)(a)).
25 A hotelier's licence was subject to such conditions as might be imposed by the Licensing Act, the Licensing Court or the Liquor Administration Board (s 20(2)). A licence was subject to " any conditions imposed under this Act in relation to an approved gaming device ... " (s 20(2)(c1)). It was lawful to keep, use and operate an approved gaming device in a hotel, subject to the conditions of the hotelier's licence (s 160).
26 The Liquor Administration Board was empowered, on the application of a hotelier, to impose a condition on the hotelier's licence authorising the licensee to acquire, keep and permit the use of not more than 30 approved gambling devices (s 161(1)). A hotelier's licence was subject to a statutory condition that not more than 15 poker machines could be kept, used and operated, unless the licensee held a permit from the Minister for additional machines (s 182C(1)).
The Gaming Machines Act Regime
27 Prior to the enactment of the Gaming Machines Act, a " freeze " was imposed by regulation and, later, by legislation on the number and location of poker machines in the State. The Gaming Machines Act was designed to maintain the freeze and, as the Minister explained in his Second Reading Speech, to ensure that in the future hotels would only be able to acquire additional machines by purchasing the right to keep the machines from other premises: see Wonall, at 27-31 [17], [18].
28 The Gaming Machines Act repeals the key provisions of the Liquor Act relating to gaming devices and poker machines. In their place, it establishes a tradeable PME scheme in respect of poker machines in hotels and registered clubs. The scheme operates within the framework of an overall State cap on the number of poker machines (s 14(1)).
29 The initial allocation of PMEs is governed by s 15 of the Gaming Machine Act, which provides as follows:
'(1) On the commencement of this section, one poker machine entitlement is to be allocated by the Board:
(a) for each approved poker machine that comprises the frozen number of approved poker machines for a hotel, and
(b) ...
(2) The poker machine entitlements are to be allocated:
(a) in the case of a hotel - in respect of the hotelier's licence, or
(b) ...
and are to be allocated in accordance with such arrangements as may be approved by the Director-General.
(3) For the purposes of subsection (1) (a), the ' frozen number ' of approved poker machines for a hotel is the number that is determined by the Board after taking into account:
(a) the number of poker machines authorised to be kept in the hotel under the Liquor Act 1982 as at 19 April 2001, and ...
30 A PME allocated in respect of a hotel licence is transferable (s 19(1)), but the transfer does not have effect until approved by the Authority (s 19(2)). An application for approval of a transfer of a PME must demonstrate, among other things, that the proposed transfer is supported by all those with a financial interest in the hotel licence (s 19(3)(c)). However, the owner of a hotel is not, as such, a person who has a financial interest in the licence (s 19(6)). PMEs allocated in respect of a hotel licence may be transferred only to another hotel licence (s 20(1)).
31 Part 5 of the Gaming Machines Act imposes controls in respect of gaming machines. A hotelier must not keep or dispose of an approved gaming machine unless the keeping or disposal of the machine is authorised by the Authority (s 56(1)(a)). The total number of machines that the Authority may authorise to be kept in a hotel from time to time consists of:
'the number of approved poker machines that corresponds to the number of [PMEs] allocated for the time being in accordance with this Act in respect of the hotel licence." (s 56(4)(a)).'
...
Hotelier's Licence
33 As has been seen, s 15(2) of the Gaming Machines Act provides that, in the case of a hotel, PMEs are allocated " in respect of the hotelier's licence ". As originally enacted, the Gaming Machines Act stated (s 4(1)) that " hotelier " and " hotelier's licence " had the same meaning as in the Liquor Act 1982. Those meanings were as follows (s 4):
'hotelier means the holder of a hotelier's licence.
hotelier's licence means a licence that, subject to this Act and the conditions of the licence, authorises the licensee to sell liquor by retail on the licensed premises, whether or not for consumption on those premises, being a licence that is granted as a hotelier's licence.'
34 The Liquor Act 1982 was repealed by the Liquor Act 2007 as from 1 July 2008. The Miscellaneous Acts (Casino, Liquor and Gaming) Amendment Act 2007, Sch 3, omits the definition of " hotel ", " hotelier " and " hotelier's licence " in the Gaming Machine Act and substitutes new definitions as follows:
'hotel means the premises to which a hotel licence relates.
hotelier means the holder of a hotel licence under this Act.'
35 Section 14(1) of the Liquor Act 2007 provides as follows:
'A hotel licence authorises the licensee to sell liquor by retail on the licensed premises for consumption on or away from the licensed premises.'
36 The transitional provisions of the Liquor Act 2007 provide that an existing licence is taken to be a licence of the corresponding kind. A reference in any Act, instrument or document to an existing liquor licence of any kind is to be read as a reference to a licence of the corresponding kind. The corresponding licence for an existing hotelier's licence is a hotel licence: Sch 1, Div 2, cll 3(1), (5), 4(1).
...
66 Under the legislative scheme, the allocation of a PME in respect of a licence was a prerequisite to the grant of an authorisation by the Authority to keep a poker machine on hotel premises. That was because the total number of approved gaming machines that the Authority could authorise to be kept in a hotel from time to time had to correspond to the number of PMEs allocated for the time being in respect of the hotelier's licence. In other words, the number of poker machines kept at a hotel could not exceed the PMEs in force from time to time in respect of the hotelier's licence.
67 It follows that at any given time the Hotel could keep only that number of poker machines for which the licensee had PMEs and authorisation from the Authority. Once the Authority granted authorisation for a poker machine (or a particular number of poker machines) to be kept at the Hotel, the lessee had the necessary ongoing permission to keep and operate the machine on the premises, provided that it did so in accordance with the statutory requirements.
68 Alliance, immediately before the transfer of the PME, had permission to keep two poker machines at the Hotel. That permission comprised two statutory elements, both of which were essential for the permission to be operative: two PMEs allocated in respect of the hotelier's licence and authorisation from the Authority, based on the two PMEs, to keep two poker machines on the Hotel premises. It is true that the allocation of a PME in respect of a licence and the grant of an authorisation by the Authority to keep a machine on the premises were two separate acts and came about under different provisions of the Gaming Machines Act. But Alliance could not keep (or operate) two poker machines at the Hotel unless it had two PMEs allocated to the hotelier's licence and authorisation from the Authority to keep both machines on the premises.
69 It is a conventional use of language to describe Alliance as having a licence to keep and operate two poker machines at the Hotel ..."
In Wonall (pars 40, 41) Campbell J concluded that when the GM Act says that PMEs are to be allocated "in respect of a hotelier's licence" the legislature said no more than there was to be a link or connection between the PME and the hotelier's licence. The legislation maintains the distinction between a hotelier's licence under the Liquor Act for the sale of liquor and the authorisation under s 56(2) GM Act to keep and operate poker machines on the premises. Such an authorisation is not a permit under the relevant liquor licence (Turvern Pty Ltd v Jemwire Pty Ltd [2008] NSWSC 420, pars 13, 15).
Whatever the statutory features of GMEs may be, the rights and obligations of the parties under a lease of a licensed hotel relating to them must be governed by the terms and conditions of the lease. For example, in Alliance, Sackville AJA (par 58) emphasised the necessity to consider the specific language of the terms, rather than to reason from the construction given to different provisions in other cases. In Boreland, Beazley JA (Mason P, Ipp JA agreeing) explained:
"126 ... that poker machine entitlements are property and carry with them all the usual incidents of property, including the right of disposal, save only that the exercise of such rights must be in accordance with the legislation. Accordingly, any disposition of the entitlements would need to be made in accordance with ss 19 and 20 of the Gaming Machines Act. It may also be that in a given case there are contractual or other restrictions on the right of disposal, subject, of course, to the operation of the Act.
127 The right to deal with the property rights inherent in the entitlements, including the right of disposal, may be affected by contractual rights, such as by the terms of a lease. Thus, it may be that in a particular case the terms of the lease for a hotel may restrict a lessee/licencee's right to transfer the entitlements. But if the lease does not deal with the matter, then the lessee/licencee may dispose of the entitlements in conformity with the Gaming Machines Act."
The authorities (eg Alliance, Boreland) say that it is apt to describe a GME as a licence. Whether or not it is a licence to which the covenants of a lease apply will depend upon the construction of the covenants in the particular case. Sometimes other cases afford helpful, but not determinative, guidance for the approach to be taken. In the end, the question is one of interpretation of the words of the provisions in context, and to the surrounding circumstances.
The principles of construction were encapsulated in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 by Bathurst CJ (Macfarlan, Meagher JJA agreeing) who said:
"52 The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphafarm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Limited v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45; (2011) 282 ALR 604."
In the present case the legislation creating PMEs had not been enacted when the lease commenced. Since PMEs did not come into existence until after the lease commenced they were not incidents which attached to the hotelier's licence at the date of commencement of the lease (Alliance par 57). At the commencement of the lease (and, for that matter, throughout the lease) the only licence required for the sale and consumption of liquor at the hotel was a hotelier's licence (subsequently renamed a hotel licence) (Alliance par 60).
Submissions
I turn first to the plaintiff's primary submission that the definition of licence does not extend to GMEs. It was submitted that the lease was entered into before GMEs came into existence. It was put that, in its natural and ordinary meaning, the term "Licence" as defined in clause 1A.1 means what it says, namely, the hotelier's licence issued under the Liquor Act for the sale of liquor on the premises, and the only licences included in the definition are any renewal, or any issued in substitution for or in addition to "that licence". It was put that the language demonstrated that any such licence was intended by the parties to refer to one issued under the Liquor Act authorising the sale of liquor on the premises. It was put that, in terms, the definition did not extend to GMEs or to permits or authorities for keeping and operating GMEs, an activity not contemplated at the time the lease was entered into, nor did it extend to licences for the conduct of any activity other than for the sale and consumption of liquor. Furthermore, it was put that there was nothing in the terms of the lease taken as a whole which indicated that the parties contemplated or intended that any activity other than the sale and consumption of liquor would be undertaken at the premises. In short, it was put that the phrase "authorising the sale of liquor on the Premises" so operated as to confine the meaning of licence to a licence for that purpose. Accordingly, it was put that GMEs were outside the definition.
The plaintiffs argued that this construction was consistent with, and supported by, the language of the provisions of clause 1A.4 described under the subheading as "Additional Covenants Relating to Liquor Licence". For example, reference was made to subclauses (a) and (b) which required the lessee to keep the premises open for the sale and consumption of liquor. Further support was sought from clause 1A.5(d) whereby the defendant was authorised under power of attorney to carry on the business of a licensed hotel on the premises and to serve liquor to customers.
Thus it was put that as the keeping and operating of GMEs was an activity different from the sale of liquor, and authorised under the GM Act, a GME was not a licence in addition to the liquor licence within the definition.
As an additional ground for contending that a GME was outside the definition, the plaintiffs argued that it was a species of property and therefore, as a matter of construction, it did not answer the description of a licence in addition to the hotelier's liquor licence.
For the defendant it was submitted that because GMEs are incidents of, and are effectively tied to, the liquor licence, the sale and transfer of GMEs by the plaintiffs without the consent of the defendant would be in breach of their obligations under the lease, particularly under clauses 1A.4(a), (b), and (f).
The defendant accepted that the issue turned on the construction of the definition, giving the words their natural and ordinary meaning. In this case, it was put that the expression "in addition to that licence" in the definition was substantially similar to the expression "any other licences" in clause 4.10 of the covenants in the lease considered by Sackville AJA in Alliance, and should be given the same interpretation, which was said to be determinative of these proceedings in favour of the defendant. The relevant covenants in Alliance provided:
"37 Clause 4 of the Lease contained covenants by the lessee as follows:
"4.1 ... the lessee will not use the premises otherwise than as an hotel;
4.2 and also shall and will annually cause application to be made and use his best endeavours to obtain all such licences at his own expense as are or may be necessary for keeping open the said premises as an hotel duly licensed for the sale and consumption thereof of spirituous and fermented liquors by retail;
4.3 and shall not do or suffer any act, matter or thing in or about the said premises during the said term whereby the said licence may be or become liable to be forfeited or the removal thereof refused;
...
4.10 and shall and will at the expiration of the term hereby [g]ranted or sooner determination thereof transfer and assign and do all acts necessary for transferring and assigning unto the lessor or to such other persons as the lessors may appoint for that purpose the hotelier's licence and any other licences of the said premises for the then current year .
4.11 And that the Lessee will not without the previous consent of the Lessor duly obtained in writing make any application for removal of the license or licenses of the said Hotel."
Sackville AJA (pars 59-61) rejected the lessee's (Alliance's) submission that clause 4.10 should be construed by reference to clause 4.2 so that the expression "other licences" in 4.10 was confined to other licences for the sale of liquor, and did not include licences for other permitted activities. He held that clause 4.10 imposed an obligation on the lessee to transfer the hotelier's licence "and any other licence" of the premises for the current year, being an obligation not confined, as was clause 4.2, to licences for the sale and consumption of liquor on the premises. He concluded:
"60 Thirdly, cl 4.10 imposes an obligation on the lessee to transfer the hotelier's licence 'and any other licences of the said premises for the current year '. It is not confined, as is cl 4.2, to licences for the sale and consumption of liquor on the premises. Moreover, at the commencement of the Lease (and, for that matter, throughout the Lease), the only licence required for the sale and consumption of liquor at the Hotel was a hotelier's licence (subsequently renamed a hotel licence). In these circumstances, the reference to 'any other licences' cannot have been intended to be confined to licences for the sale and consumption of liquor at the Hotel."
In these circumstances he proceeded to hold (par 69) that it was apt to describe Alliance's ongoing permission to keep and operate poker machines as a "licence" within the meaning of clause 4.10 and clause 4.11.
Similar submissions were advanced by the defendant in respect of the conclusion of Beazley JA in Boreland concerning the application of the terms of a lease, the relevant provision of which was clause 7.2 as follows:
"7.2 The Lessee will keep current all licences and permits and registrations required for the Permitted Use and where any such licence or permit or registration has been transferred to the Lessee or its nominee by the Lessor or the transfer thereof has been procured by the Lessor, upon the expiration of this Lease or its earlier termination, the Lessee will transfer or cause to be transferred each such licence or permit or registration to the Lessor or its nominee at not cost to the Lessor."
Her Honour's conclusion on the issue of construction was:
"129 As I have already explained, the statutory entitlements are allocated to the hotelier's licence. Once the permitted use includes the operation of the poker machines, the poker machine entitlements, in my view, are encompassed by the expression in cl 7.2, 'each such licence'."
The defendant also submitted that the acknowledgment in clause 1A.4 that "... the Licence is the absolute property of the Landlord" is indicative of the common intention that the lessee's obligations in relation to licences should be given a wide meaning which would include the liquor licence and any other licence. It was put that further support for the defendant's construction derives from clause 1A.1 in which the term "Business" is defined to mean "the hotel business to be carried on by the Tenant on the Premises" which, in terms, is not confined to activity under the liquor licence, and would include the operation of poker machines. A similar submission was put with regard to the obligation in clause 1A.4(e) "... to manage and conduct the Business at all times in a proper and orderly manner".
Determination
The plaintiffs seek a declaration that they are entitled to sell or transfer the GMEs held in respect of the licence. The defendant contends that GMEs are licenses within the definition of clause 1A.1, being licenses issued in addition to the licence and, accordingly, attract the application in the covenants in the lease which prevent the plaintiffs from dealing with them without the defendant's consent. The question is whether the plaintiffs' narrow construction which excludes a GME as a licence should be preferred to the defendant's construction which allows for its inclusion as a licence. In my opinion, the answer turns not on the legal characterisation of a GME, but on whether the words "and includes .... any licence issued ... in addition to that licence" extends to any licence other than one issued under the Liquor Act.
The definition provides:
"'Licence' means the hotelier's licence issued under the Liquor Act, 1982 authorising the sale of liquor on the Premises and includes any renewal of that licence and any licence issued in substitution for or in addition to that licence."
The language of the definition is unambiguous. In my opinion the type or category of licence for inclusion which is described as a licence issued in substitution for or in addition to a hotelier's licence means a licence issued for the sale and consumption of liquor. That such a meaning was intended by the parties at the time the lease was entered into emerges from the terms of the definition as a whole, and is congruent with the terms of other covenants to which I will refer.
The primary meaning of "Licence" is the hotelier's licence issued under the Liquor Act authorising the sale of liquor on the premises. Included in that meaning is any renewal of that licence and any licence issued in substitution for or in addition to it. The Liquor Act is identified as the only statute under which a licence may be issued; the underlying activity to be authorised by the licence is the sale of liquor. The definition, taken as a whole, is descriptive of a liquor licence. In my judgment, the meaning of the words "any licence issued ... in addition to" is affected by the fact that they do not appear in isolation, but as part of the phrase "... and includes ... any licence issued in substitution for or in addition to (the liquor licence)". The concept of inclusion is further indication of an intention that any licence issued in addition to the liquor licence was one issued under the Liquor Act.
Nothing in the definition indicates that a different type of licence was to be included; for example, unlike the case in Alliance there is no use of the word "other" to indicate a distinction. The wide language of clause 7.2 considered in Boreland provides no assistance.
Support for this interpretation is found in other provisions. Clause 1A.4 includes additional covenants relating to "Liquor Licence". They relate to the conduct of the business and the exercise of the licence by the licensee. Under subclause (a) the lessee is obliged to "... obtain and renew the Licence and all other licenses ... necessary for keeping open the Premises as duly licensed for the sale and consumption ... of liquor". Under subclause (d) the licensee is obliged to keep the premises open for the sale of liquor at all required times. Under subclause (e) the lessee is required to manage and conduct the "Business" at all times in a proper and orderly manner. Under clause 1A.5(d) for the "more effectual preservation of the Licence and the Premises as licensed premises ..." the landlord is empowered, inter alia, "... to carry on and conduct the business of a licensed hotel on the Premises and to serve ... liquor to customers".
In my opinion these provisions demonstrate that at the time the lease was entered into the parties intended to confine their agreement to the conduct of a hotel business for the sale and consumption of liquor. There is nothing in the lease which indicates otherwise. Had the parties contemplated or intended that the business would involve some activity for which a licence was required other than, or different from, the sale of liquor, it is reasonable to assume that an appropriate provision would have been included, or that the obligations under clause 1A.4 would not be confined to the sale and consumption of liquor. These considerations, in my opinion, point strongly to the conclusion that the additional licence described in the definition refers to one relating to the sale of liquor. I find no support for the conclusion that the meaning of a licence issued in addition to the liquor licence encompasses a licence authorising the carrying on of a business or activity of a kind different to the sale and consumption of liquor.
In short, I find that the lease evidences the intention of the parties to operate the hotel under the Liquor Act in accordance with licences required for the sale of liquor. I am also satisfied that the lease says nothing concerning gaming, or the operation of poker machines, which would justify the inclusion of GMEs allocated under the GM Act within the definition of "Licence".
In light of this conclusion it is unnecessary to decide the plaintiffs' alternative submission that a GME was not a licence but a species of property, and therefore outside the definition. It is sufficient to say that the issue necessarily turns on the construction of the relevant terms of the lease, irrespective of the legal characterisation of a GME, with regard to the view expressed in Alliance and Boreland that a GME may be taken to be a form of licence.
I have not overlooked the defendant's alternative argument on construction based on the provisions of cl 8, Sch 1 GM Act as discussed by Sackville AJA in Alliance (pars 73-77). It is unnecessary to set out the provisions of cl 8, the application of which was considered by his Honour with regard to the terms of clause 4.10 and clause 4.11 of the lease to which I have earlier referred. He said:
"76 It seems clear enough that cl 8 was intended to authorise a lessee (or an assignee of a lease) to whom PMEs were allocated (or transferred) to keep approved gaming machines at the premises, subject to the restrictions imposed by the Act or the Authority. It is difficult to see how the authorisation so conferred by the legislation could be regarded as anything other than a " licence of the ... premises " for the purposes of cll 4.10 and 4.11."
His Honour's conclusion turned on the construction of these provisions. For the reasons given for rejecting the construction of the definition of "Licence" for which the defendant contended in this case, its alternative submission must also be rejected.
The defendant also contended an estoppel by deed operated to prevent the plaintiffs from dealing with the GMEs without its consent. It was submitted that the registered lease was a deed in which, under clause 1A.4, the lessee acknowledged that the licence, as defined, is the "absolute property" of the landlord. It was put that the statement set out and represented the assumption and basis on which the parties contracted and intended to deal with each other during the lease, and thus operated as an estoppel by deed, or by conduct, or representation. Senior Counsel for the defendant submitted as follows (T p 56, l 50 - p 57 l 1 - 4; and l 9 - l 15):
"GARNSEY: The estoppel would only be necessary if your Honour found that despite giving the definition of licence the full scope for which we contend, the clauses on which we rely to prevent the lessee dealing with the poker machine entitlements did not, in terms, apply.
...
If your Honour, having accepted as to the width of the definition but somehow we submit your Honour should not have in the light of the authorities, decides the clauses on which we rely don't stop the lessee dealing with the poker machine entitlements during the term of the lease, then we say that estoppel from that phrase, prevents the lessee from dealing with them because it's a statement in the deed. And it's a representation and a representation of intention on which we acted. We entered into the deed."
As the defendant failed to establish that the GMEs were within the definition, it is unnecessary to deal further with the estoppel issue.
An additional alternative submission of the defendant was that the GMEs were licences issued in substitution for the licence and, hence, within the definition. It was put that prior to enactment of the GM Act approved amusement devises had been kept at the hotel and thereafter converted to poker machines and kept under a condition of the liquor licence. It was put that under the GME a new regime for PMEs/GMEs "replaced and was substituted for" the regime under the Liquor Act which had been repealed. Thus it was put that it was apt to describe GMEs held under the GM Act as licences substituted for the licence under the Liquor Act and thus within the definition of "Licence".
In reply, the plaintiffs pointed out that, as the relevant hotelier's licence (no. 116012 issued on 4 November 1958) remains in existence the defendant's submissions (whatever else may have been said about them) were doomed to failure. I agree. No licence has been issued in substitution for it. The submission is rejected.
A further submission of the defendant was that relief should be refused on the ground that the disposal of the GMEs without its consent would be in breach of an implied term of the lease which operated as a negative covenant to prevent the plaintiffs from destroying, or detrimentally affecting the goodwill of the hotel business. It was put that the term was implied in law based upon clause 1A.4, particularly subclauses (b), (e), (f) and (g), the terms of which are set out above. Also relied upon were clauses 5.6.1, 5.6.2, and 5.6.3 which, in short, require the lessee to comply with statutory obligations and all lawful requirements relating to the conduct of the business on the premises, and not to do, or fail to do, anything which might expose the landlord to liability for any penalty, damages, or charges. It was argued that on the assumption that the operation of gaming machines contributed to the goodwill of the hotel business, the disposal of the GMEs which authorised such activity would damage the goodwill. It followed that disposal of the GMEs would put the plaintiffs in breach of the implied term which justified refusal of relief.
It was put that these provisions supported the implication of the term as a matter of necessity, alternatively, to give business efficacy to the lease. The defendant invoked the principles discussed in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468, pp 487-489, and in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, pp 122-125.
In my opinion, the submission should be rejected. Having found that the licence, as defined, does not include GMEs, it cannot be said that it was the contractual intention of the parties that the lessee could not deal with licences, authorities, or permissions which were outside the definition. It is evident from the provisions in clause 1A.4 and clause 1A.5 that the parties spelt out comprehensively the lessee's obligations relating to the liquor licence, and to the conduct and operation of the hotel business under it. The effect of these provisions is to require the lessee during the lease to maintain and renew the licence for the sale and consumption of liquor, and (clause 1A.4(f)) upon its expiry to transfer and assign the licence to the landlord or its nominees. The lease is silent as to other categories or types of licences, authorities, or permissions which may be issued during the lease for the operation of business activities other than the sale and consumption of liquor.
The effect of the term for which the defendant contends would be to prevent the lessee from dealing with licences, authorities or permissions not included in the definition. Having regard to the terms of the agreement as incorporated in the lease, and to the principles considered in Castlemaine Tooheys and Australis, I see no justification on the ground of necessity, business efficacy, or otherwise for the implication of a term which would operate to do so.
Conclusion
As I have found that the GMEs are outside the definition of "Licence", it follows that the terms of the lease do not prevent the plaintiffs from dealing with the GMEs without the defendant's consent. The plaintiffs are entitled to the declaratory relief they seek in these proceedings. As earlier explained, the cross-claim should be dismissed.
As for the question of costs, my present view is there should be an order that the defendant pay the plaintiffs' costs of the proceedings. However, failing agreement, I will afford the parties the opportunity to address me on this issue. In any event, I direct the plaintiffs to bring in short minutes to give effect to these conclusions. Arrangements should be made with my associate by 16 April 2013 for the re-listing of the matter.
**********
Decision last updated: 25 March 2013
0
9
2