Goodearth Hotels Aust (Gold Coast) P/L v SPHC Aust Ltd
[2001] QCA 545
•30 November 2001
SUPREME COURT OF QUEENSLAND
CITATION: Goodearth Hotels Aust (Gold Coast) P/L v SPHC Aust Ltd & Anor [2001] QCA 545 PARTIES: GOODEARTH HOTELS AUSTRALIA (GOLD COAST) PTY LTD ACN 087 844 666
(applicant/appellant)
SPHC AUSTRALIA LIMITED ARBN 050 577 252
(first respondent/first respondent)
SUN AUSTRALIA PTY LIMITED ACN 003 584 398
(in liq)
(second respondent/second respondent)FILE NO/S: Appeal No 2412 of 2001
SC No 9674 of 2000DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane
DELIVERED ON: 30 November 2001 DELIVERED AT: Brisbane HEARING DATE: 22 October 2001 JUDGES: McMurdo P, Davies and Thomas JJA
Separate reasons for judgment of each member of the Court; each concurring as to the orders madeORDER: Appeal dismissed with costs CATCHWORDS: CONTRACT - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - TERMS ESSENTIAL TO ENABLE PERFORMANCE - where deed of covenant entered into between appellant purchaser, vendor of hotel and manager of hotel by which management agreement was assigned to purchaser and purchaser covenanted to be bound by the management agreement - where fundamental implied term of agreement was that the purchaser would take such steps as were necessary to enable manager lawfully to manage hotel - where failure to perform fundamental implied term
CONTRACT - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS - CONTRACTS ILLEGAL BY STATUTE - PARTICULAR STATUTES - whether assignment of management agreement illegal by force of s 149 and s 153 of the Liquor Act 1992 - whether breach of s 149 - where licensee permitted licensed premises to be in the keeping of a person other than the licensee - meaning of "keeping"
CORPORATIONS - CONSTITUTION AND LEGAL CAPACITY - EXTERNAL LITIGATION - IN GENERAL - whether proceedings could be instituted against company being wound up in insolvency - where appellant did not seek leave to proceed against the company pursuant to s 471B
Corporations Law, s 471B
Liquor Act 1992 (Qld), s 149, s 153Alcoa of Austral Ltd v Petmar Pty Ltd & Ors (unreported, SCWA No 1705 of 1994, 29 July 1994), referred to
Bell Group Ltd (in liq) & Ors v Westpac Banking Corporation & Ors (2000) 173 ALR 427, referred to
Civil & Civic Pty Ltd v R W Bass Pty Ltd (1996) 20 ASCR 16; 14 ACLC 1015, referred to
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, followed
Vagrand Pty Ltd (in liq) v Fielding (1993) 11 ACLC 411, 416, referred to
COUNSEL: P A Keane QC with J B Rolls for appellant
S L Doyle SC with R I Lilley for first respondent
No appearance for second respondentSOLICITORS: Short Punch & Greatorix (Gold Coast) for appellant
Deacons for first respondent
No appearance for second respondent
McMURDO P: I agree with the reasons for judgment of Davies JA and only wish to add the following brief observations.
It may also be that the appellant could have complied with both its obligations to the first respondent under the management agreement and its obligations under s 149 Liquor Act 1992 (Qld) by nominating a nominee under s 109 Liquor Act who was a director or officer of the first respondent and who would ordinarily be able to comply with the requirements of s 149 Liquor Act. Under sub-s 109(6) Liquor Act the nominee is subject to the obligations imposed by the Liquor Act on the licensee. It seems to me at least arguable that the licensee would then be acting through his nominated agent under the Liquor Act, would itself be keeping the licensed premises and would not be infringing sub-s 149(b)(i) Liquor Act. In the absence of considered argument, it is unnecessary and undesirable to express a concluded view on this issue but, in any case, there is no evidence or even suggestion that the appellant's nominee was someone who met these requirements.
The appeal should be dismissed with costs and it is therefore unnecessary to deal with the first respondent's notice of contention. I agree with the order proposed by Davies JA.
DAVIES JA: This is an appeal from a judgment in the Trial Division of this Court on 15 February 2001 dismissing an application by the appellant for declarations:
1. that a deed of covenant on assignment of management agreement made 31 August 1999 between the appellant and the respondents was an agreement made illegal by force of s 149 of the Liquor Act 1992 and/or s 153 of the Liquor Act 1992 and is, was and remains unenforceable; and
2. that the management agreement dated 13 September 1989 (as varied) between the first respondent and the second respondent is not binding on the appellant.
The first respondent opposed that application. The second respondent, which was by then in liquidation, took no part in the proceedings and takes no part in these proceedings. The learned primary judge ordered that the appellant be at liberty to proceed with the proceeding against the second respondent pursuant to s 471B of the Corporations Law. As this appeal is also a proceeding against that company a similar order is necessary and should have been sought before it was instituted. The section prohibits the beginning of a proceeding against a company being wound up in insolvency (as the second respondent was) without leave. Although there is authority supporting the proposition that leave may be granted nunc pro tunc,[1] it is clear that application must be made to the court for such leave to be granted and upon the hearing of that application, the party seeking leave must persuade the court that the claim has at least a solid foundation and gives rise to a serious dispute.[2] Leave was not sought by the appellant, nor was any basis for the granting of leave put forward. It seems to me that the proper course in the circumstances is to dismiss the appeal against the second respondent. This has little or no bearing on the substantive appeal, however, as the effective respondent is and always was the first respondent.
[1]See, for example, Civil & Civic Pty Ltd v R W Bass Pty Ltd (1996) 20 ACSR 16; 14 ACLC 1015; Alcoa of Australia Ltd v Petmar Pty Ltd & Ors (unreported, SCWA No 1705 of 1994, 29 July 1994); Bell Group Ltd (in liq) & Ors v Westpac Banking Corporation & Ors (2000) 173 ALR 427.
[2]Vagrand Pty Ltd (in liq) v Fielding (1993) 11 ACLC 411, 416.
Prior to the events giving rise to these proceedings the second respondent was the owner of a hotel at the Gold Coast and the first respondent was the manager of that hotel pursuant to a management agreement between them dated 13 September 1989 originally made between the second respondent and a predecessor of the first respondent. The first respondent held a liquor licence for the hotel under the Liquor Act. Then by an agreement for sale between the second respondent as vendor and the appellant as purchaser dated 2 June 1999 the second respondent sold the hotel to the appellant.
By cl 23.1 of the sale agreement the appellant covenanted to enter into and execute a covenant in favour of the first respondent by which the appellant agreed to be bound by the provisions of the management agreement. Pursuant to that obligation a document described as a deed of covenant on assignment of management agreement dated 31 August 1999 was executed by all three parties. It contained only two operative provisions. By the first the second respondent assigned to the appellant absolutely all the rights and benefit of the second respondent pursuant to the management agreement for the unexpired residue of term from the date of completion. And by the second the appellant covenanted with the second respondent and the first respondent that it would be bound by the provisions of the management agreement from the date of completion of the sale agreement.
It was common ground below and before this Court that, were it not for the arguments advanced by the appellant below and in this Court, the operating term of the management agreement would extend for some years beyond the present date and that consequently the management agreement would be a valuable asset of the first respondent.
The management agreement, by cl 2.3, obliged the owner to allow the manager as its agent to operate the hotel during the operating term and to grant to the manager such rights in relation to the hotel as were necessary and reasonably incidental to the performance by the manager of its obligations under that agreement. And by cl 2.2 the owner undertook not to allow a position to arise where it was no longer capable of permitting the manager to operate the hotel. It is plain that these became obligations of the appellant upon its execution of the deed of covenant.
Three other provisions of the management agreement were relied on in this Court by the appellant. The first was cl 4.1, headed "STANDARDS", which imposed certain standards by which the manager was obliged to conduct the hotel during the period in which it managed it. Paragraph 2 of that clause, which the appellant relied on, provides:
"Subject to the terms of this Agreement, the Manager shall have absolute control and discretion in the operation of the Hotel and that control and discretion by the Manager shall include, but shall not be limited to, the use of the Hotel for all customary purposes, terms of admittance, charges for rooms, food and beverages, industrial relations (including wage rates, the hiring and discharging of employees), and all phases of promotion and publicity relating to the Hotel."
The second clause relied on by the appellant is cl 4.5 headed "LIQUOR LICENCE". That provides:
"The Manager undertakes to comply with any conditions set out in any liquor licenses and at all times to operate and manage the Hotel in accordance with those conditions and any other legal requirements from time to time."
And the third was cl 15.2 headed "ASSIGNMENT BY THE OWNER" which provides:
"The Owner shall only assign this Agreement or sell, convey or transfer the Hotel to a prospective purchaser capable of receiving approvals as required pursuant to the Gaming Machine Act 1991 and the Liquor Act 1992 and shall acquire from the assignee or purchaser a covenant in favour of the Manager by which the assignee or purchaser agrees to be bound by provisions of this Agreement and the Owner pays to the Manager its costs and disbursements of and incidental to the preparation of such a covenant."
Before the learned primary judge the appellant relied on s 149 and s 153 of the Liquor Act 1992 for its contentions that the deed of covenant was made illegal and was therefore unenforceable and that the management agreement was not binding on the appellant. Those sections are materially in the following terms:
"149. A licensee -
(a) must not be absent from the management and supervision of business conducted under authority of the licence for a continuous period longer than 28 days without the chief executive's prior approval; and
(b) must not permit the licensed premises to be in the keeping of a person who is not -
(i) a licensee of the premises; or
(ii) an employee of the licensee; and
(c) except with the chief executive's prior approval, must not knowingly permit to be employed on the licensee's behalf on the licensed premises a person who, because of misconduct or bad character -
(i) has had a licence, permit or other authority relating to the sale or supply of liquor cancelled; or
(ii) has been refused a licence, permit or other authority relating to the sale or supply of liquor;
under this Act or a corresponding previous enactment or under a corresponding law of another State or Territory.
Maximum penalty - 100 penalty units."
"153(1) A licensee must not, without the chief executive's approval -
(a) let or sublet any of the licensed premises; or(b) enter into a franchise or management agreement for all of the licensed premises.
Maximum penalty - 40 penalty units.
(2) A licensee must not -
(a) let or sublet part of the licensed premises; or(b) enter into a franchise or management agreement for part of the licensed premises.
Maximum penalty - 40 penalty units."
Section 149 appears to have been primarily relied on for the first declaration sought and s 153 for the second declaration sought. However before this Court the appellant sought relief only on the basis of a breach of s 149, although Mr Keane QC who appeared with Mr Rolls for the appellant submitted that the evident intention of those sections, read together, is that a licensee must not permit licensed premises to be in the keeping of a person who is not a licensee unless that person keeps the premises pursuant to a management agreement approved by the chief executive.
As appears from what I said earlier, upon its execution of the deed of covenant the appellant became subject to the obligations contained in cl 2.3 and cl 2.2 of the management agreement. In order to allow the first respondent, as its manager, to operate the hotel during the operating term, as required by cl 2.3, and to do so lawfully, given that it was plainly the intention of all parties that the hotel be operated as licensed premises under the Liquor Act, the appellant was obliged to procure a licence in the name of the first respondent. That is because it is a necessary implication from those terms that the appellant would do all that was necessary to ensure that the first respondent would have the benefit of that agreement; and that included the lawful management of the hotel.[3]
[3]Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607.
Only if the appellant had procured a licence in the name of the first respondent would it have done what was necessary on its part to ensure that the licensed premises would be in the keeping of a licensee of the premises in compliance with s 149.[4] The first respondent submitted that, under the management agreement the hotel did not come within the "keeping" of the first respondent. Mr Doyle SC, who with Mr Lilley appeared for that respondent, submitted that the section draws a distinction between "management" of the "business" in subs (a) and "keeping" of the "premises" in subs (b) and pointed to cl 4.9 of the management agreement which states that the employees of the hotel are employees of the owner, though they are, by that clause, plainly under the management of the manager. It is true that keeping of premises may have a meaning different from management of the business (for example, the hotel may be capable of being kept by someone, such as a caretaker, when it is not being operated) but, in my opinion, management under this management agreement included keeping the hotel. Paragraph 2 of cl 4.1, set out in [10] of these reasons makes that abundantly clear.
[4]If it matters, it could not have done so by appointing the first respondent as nominee pursuant to s 109. On the one hand that section would not have thereby made the first respondent a licensee. And, on the other, as the first respondent had, as against the appellant, the "absolute control … in the operation of the Hotel", it was, in no sense, its servant or agent for that purpose and consequently for its keeping.
As the appellant does not, in this Court, seek relief on the basis of a breach of s 153 it is unnecessary to consider it further beyond saying that it does not envisage a case, such as this, where the intention is that the keeping of licensed premises be in the hands of a person who is neither the owner nor an employee of the owner.
The agreement for sale between the second respondent as vendor and the appellant as purchaser was conditional upon the approval of the Liquor Licensing Authority to the transfer of the liquor licence to the appellant or its nominee with effect from the date of completion. It is plain from this agreement that the appellant had the power to determine whether the licence was transferred to it or remained with the first respondent. It chose to accept a transfer or, possibly, the issue of a new licence to itself.[5] By doing so it permitted the licensed premises to be in the management, and consequently the keeping, of a person other than the licensee.
[5]The deed of covenant was dated 31 August 1999 and the licence was issued to the appellant on 1 September 1999.
The appellant contended that it was for the first respondent, not the appellant, to procure a licence in its own name, relying on cl 4.1 and cl 4.5 referred to earlier. But the powers conferred and obligation imposed by those clauses assumes that the manager will first be placed in a position in which it can lawfully exercise those powers and perform that obligation.
Alternatively the appellant contended that, by cl 15.2 of the management agreement, the assignment was subject to the consent of the manager and that, by so consenting, the first respondent "had its fate in its own hands". However that clause, in its amended form, did not make the assignment subject to the consent of the first respondent. There is therefore no substance in that contention.
By procuring the issue of a licence in its own name rather than leaving the existing licence in the name of the first respondent, the appellant was in breach of a fundamental implied term of both the deed of covenant and the management agreement which required the appellant to comply with s 149 in order to enable the first respondent to manage the hotel. In breach of its obligations under those agreements, the appellant failed to take such steps as were necessary to enable the first respondent lawfully to manage the hotel.
It was therefore not the entry into of the deed of covenant, and consequently the management agreement by the appellant and the first respondent which was a breach of s 149. It was a failure by the appellant to perform a fundamental implied term of that agreement which constituted the breach. It follows that the appellant is not entitled to either of the declarations which it seeks.
The appeal should be dismissed with costs.
THOMAS JA: I agree with the reasons for judgment of Davies JA and with the orders that he proposes.
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