Lanshan Pty Ltd v F3 Enterprises Pty Ltd

SUPREME COURT OF VICTORIA COURT OF APPEAL
S EAPCI 2022 0117
LANSHAN PTY LTD (ACN 159 606 818)	Applicant
v
F3 ENTERPRISES PTY LTD (ACN 163 104 578)	Respondent

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JUDGES:	KENNEDY, WALKER and MACAULAY JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	15 March 2024
DATE OF JUDGMENT:	11 April 2024
MEDIUM NEUTRAL CITATION:	[2024] VSCA 59
JUDGMENT APPEALED FROM:	[2022] VCC 1850 (Judge Marks)

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PROPERTY – LEASE – LICENCE – Agreement granting use ‘to the exclusion of all others’ of car parking spaces and facilities for a 99-year period – Whether judge erred in construing agreement as a lease rather than a licence – Meaning of ‘facilities’ not to encompass driveways between car parking spaces – Lessor not excluded from using driveways to gain access to retained land – Agreement granted a lease of car parking spaces.

PRACTICE AND PROCEDURE – Where new matter raised for first time in oral submissions on application for leave to appeal – Further evidence might have been adduced to address new point – Applicant not permitted to raise new argument.

CONTRACT – Default notice – Alleged failure to maintain required public liability insurance – Reasonable person would not understand what default was alleged – Notice defective – Leave to appeal granted – Appeal dismissed.

Radaich v Smith (1959) 101 CLR 209; Water Board v Moustakas (1988) 180 CLR 491; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340; Diploma Constructions Pty Ltd v Marula Pty Ltd [2009] WASCA 229; Yan v Zhang [2018] VSC 694, applied.

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Counsel
Applicant:		Mr S Hopper
Respondent:		Mr E Gisonda
Solicitors
Applicant:	Mahons with Yuncken & Yuncken Lawyers
Respondent:	Merton Lawyers

KENNEDY JA
WALKER JA
MACAULAY JA:

The applicant owns property on which a motel is situated (the ‘Motel Property’). That property includes a car parking area. The respondent owns an adjacent property on which a restaurant operates (the ‘Adjacent Property’). By a written agreement the applicant granted the respondent exclusive rights to use 105 ‘car parking spaces and facilities’ located on the Motel Property (the ‘Licence Agreement’). A dispute has since arisen as to whether the Licence Agreement grants a lease over the relevant property, or merely a licence, and whether it has been validly terminated.
The judge found that the Licence Agreement granted exclusive possession of the car parking spaces and facilities to the respondent and was therefore a lease.[1] She considered that the ‘facilities’ encompassed the roadway between the ‘car parking spaces’. She also found that the Licence Agreement had not been terminated.
[1]The applicant had also sought declaratory relief to the effect that it was not bound by the Licence Agreement (because it was not a party to the original Licence Agreement). The judge found that the Licence Agreement bound the parties. That issue is not being pursued on the application for leave to appeal.
The judge dismissed the applicant’s claim (order 2), gave judgment on the counterclaim (order 1), and made costs orders in favour of the respondent (order 3). She also made declarations that:
4.The instrument annexed to this Order and marked “A” (Lease) is a lease of the “car parking spaces” referenced therein.
5.The plaintiff / defendant by counterclaim (Lanshan) and the defendant / plaintiff by counterclaim (F3) were at all material times since 13 June 2013 parties to the Lease and remain parties to the Lease.
6.The Lease is to be read as though the “Licensor” is defined as Lanshan, and the “Licensee” is defined as F3.
The applicant alleges that the judge erred in finding that the Licence Agreement constitutes a lease (proposed ground 1) and that she also erred in failing to find that the Licence Agreement had been terminated (proposed grounds 2 and 3). It thereby seeks orders, inter alia, to set aside the judge’s declaration 4 that the Licence Agreement constitutes a lease, as well as a declaration that the Licence Agreement is terminated.
We agree with the judge that the Licence Agreement constitutes a lease of the ‘car parking spaces and facilities,’[2] although we have adopted a different construction of the term ‘facilities’ from her Honour. The judge was therefore correct to make declaration 4, above. We also consider that her Honour was correct to find that the Licence Agreement was not terminated. It follows that the proposed grounds are unsustainable. Although we will grant leave to appeal, the appeal will be dismissed.
[2]Although the declaration made by the judge in para 4 only expressly referred to the ‘car parking spaces’, the respondent did not seek any amendment of the order.

PART A: BACKGROUND

As already noted, the applicant owns the Motel Property and the respondent owns the Adjacent Property. The Adjacent Property was formerly used as a reception centre (also referred to as reception rooms). The Adjacent Property does not have sufficient car parking spaces to support its use as a restaurant or reception centre.
In 1997, the Hume City Council issued a planning permit relating to the two properties. The permit allowed for the development and use of the Adjacent Property for the purpose of reception rooms. This was on the condition that, prior to such use, there must first be a ‘Licence Agreement’ entered into by the owner of the Adjacent Property and the owner of the Motel Property ‘for the use of the carparking facilities at the western end of the property, and the right of ingress at [sic] egress over the [Motel Property] for a period of ninety-nine years.’
On 27 September 2001, the Licence Agreement was entered into. It was executed as a deed by the then Adjacent Property owner, Joseph Digby (described in the Licence Agreement as ‘the Licensee’) and the then Motel Property owner, Tullamarine Pty Ltd (described in the Licence Agreement as ‘the Licensor’).
Given the significance of the Licence Agreement it is necessary to set it out in full:
WHEREAS the Licensor is the registered proprietor of the property known as 265 Mickleham Road, Tullamarine being the land more particularly described in Certificate of Title Volume 5768 Folio 498 (“the Property”) AND WHEREAS the Licensee is the registered proprietor of 267 Mickleham Road, Tullamarine being the land more particularly described in Certificate of Title Volume 9485 Folio 992 upon which is constructed a building known as Bella Vista Reception Centre AND WHEREAS the Licensor desires to allocate to the Licensee subject to the terms of this Agreement certain car parking facilities on the Property of the Licensor and the right of ingress and egress over the Property of the Licensor for the use and benefit of the Licensee and his patrons and guests.
NOW THIS AGREEMENT WITNESSES:
1.The Licensor hereby grants to the Licensee at all times during the continuance of this licence and authorises the Licensee to permit his guests and patrons to use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property identified on the plan annexed to this licence. The Licensor hereby licenses to the Licensee to permit the patrons and guests of the Licensee the right of ingress and egress over the driveways of the Property for the purpose of accessing the said car parking facilities as identified on the said plan.
2.The Licensor grants this licence to the Licensee for a period of ninety‑nine years and the Licensee undertakes and agrees during the continuance of this agreement to pay to the Licensor the sum of $1.00 per annum.
3.The Licensee shall maintain the carparking spaces in good order and condition and shall indemnify the Licensor for any damage done to the car parking spaces including damage to any adjacent fencing either by himself or by his patrons or guests or any other person using the said car parking spaces with his consent.
4.The Licensee shall maintain a public liability insurance policy with respect to the car parking area to a sum not less than $10 million.
5.The Licensee shall not be called upon to contribute to any levies with respect to the Property by way of rates or taxes.
6.The licence hereby created shall cease and be determined if the Licensee is in default of any of the terms of this licence and the Licensor has served a written notice on the Licensee identifying the default and the Licensor’s intention to determine the licence unless the default is remedied within fourteen days of the service of any notice and the Licensee fails to comply with that notice.
7.This Licence does not confer or constitute possession or occupation of the Property within the meaning of the Sale of Land Act 1962.
8.Any notice required to be served or delivered may be so served by being personally delivered or posted to the party to whom the notice is addressed at the address appearing in this Licence Agreement.
9.The Licensor and the Licensee acknowledge and agree that this Licence shall enure for the benefit of the Licensee and his assigns. It is further agreed that the Licensor shall not raise any objection to the transfer or assignment of this Licence. The Licensor and the Licensee shall forthwith execute all documents as may be required to transfer or assign this Licence.
10.The Licensor and the Licensee acknowledge and agree that time shall be of the essence of this Licence and that in the event of any dispute between the parties this agreement shall be determined and interpreted pursuant to the laws of the State of Victoria.
…
A plan is annexed to the Licence Agreement (see Appendix 1 to these reasons).[3] Three matters are noteworthy:
(a)the plan shows an area of car parking spaces at the western end of the Motel Property designated by a number of rectangular boxes. The notation: ‘CARPARK SIZES 2600 x 5000 TOTAL. 105 CARPARKS.’ is also included;
(b)there are a number of driveways marked, both adjacent to the motel buildings, and also located between the rectangular boxes designated as car parks at the western end of the Property; and
(c)there is a section of land (the ‘retained land’) at the far western end of the Motel Property. It was common ground that there is no access point to this part of the Motel Property apart from entry via the section of the Property containing the 105 car parks as described already.
[3]The judge found that a clearer, higher definition copy of the plan was annexed to the original Licence Agreement executed by Tullamarine Pty Ltd and Joseph Digby. However, ‘PROPOSED RECEPTION’ (and ‘PROPOSED RECEPTION ROOMS’) were changed to ‘PROPOSED RESTAURANT’: Lanshan Pty Ltd v F3 Enterprises Pty Ltd [2022] VCC 1850 (Judge Marks), [155] (‘Reasons’). That copy is attached herein in Appendix 1, although it should be noted that there is some deterioration in quality of print when attaching it to these reasons.
Over the years, there have been transfers of the ownership of both properties. Relevantly, in 2012, the Motel Property was transferred to the applicant, and in 2013, the respondent purchased the Adjacent Property. At trial there was considerable argument devoted to whether the applicant and respondent were parties to the Licence Agreement or otherwise bound by its terms. However, as indicated already, the judge decided that they were (as reflected in declarations 5 and 6 above) and those orders are not the subject of this application.
On 6 September 2019, the applicant’s lawyers sent an email to the respondent’s lawyers, which attached a default notice dated 5 September 2019 (the ‘default notice’). The default notice alleged a number of breaches and will be set out in more detail, below. However, one of the breaches alleged was that the licensee had ‘during the Licence Period, failed to maintain the requisite PL Insurance’.[4]
[4]‘PL Insurance’ is a shorthand reference to ‘public liability insurance’.
On 3 October 2019, the applicant’s lawyer sent a further letter to the respondent, advising that, as 14 days had elapsed since receipt of the default notice without any attempt to remedy the alleged ongoing breaches, the licence was terminated on 20 September 2019.

PART B: GROUNDS OF APPEAL

The applicant seeks leave to appeal on the following proposed grounds:
Ground 1.[The judge] erred in construing the document styled Licence Agreement as a lease and should have held that the Licence Agreement was a bare contractual licence.
Ground 2.[The judge] erred in finding that the respondent had maintained public liability insurance with respect to the car parking area and should have held that the public liability insurance held by the respondent was with respect to the respondent’s business activities and not with respect to the car parking area as required by clause 4 of the Licence Agreement.
Ground 3.[The judge] erred in finding that the applicant’s default notice dated 5 September 2019 was defective because it did not contain sufficient particulars of the respondent’s breach of clause 4 of the Licence Agreement and should have held that the Licence Agreement was properly terminated.
It is convenient to consider proposed ground 1 first, which concerns the question of characterisation of the Licence Agreement.
Proposed grounds 2 and 3, which concern the issue of termination, will then be considered together. The applicant conceded that it would need to be successful in respect of both proposed grounds 2 and 3 in order to be entitled to a declaration that the Licence Agreement is terminated.

PART C: WHETHER LICENCE AGREEMENT CONSTITUTES A LEASE (PROPOSED GROUND 1)

(1) The judge’s reasons

The judge held that the Licence Agreement was properly characterised as a lease in relation to the ‘car parking area’.[5] She identified that there was no dispute that the Licence Agreement also provided for a (separate) licence ‘so far as ingress and egress over driveways on the Motel Property is concerned’.[6]
[5]Ibid [125].
[6]Ibid [124].
The judge recorded that the parties agreed that the correct way to interpret the first part of clause 1 is to read it as if the parentheses included below were inserted:
The Licensor hereby grants to the Licensee at all times during the continuance of this licence (and authorises the Licensee to permit his guests and patrons to) use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property …[7]
[7]Ibid [128].
The judge observed that the defining feature of a lease is exclusive possession, and that this is ‘irrespective of the fact that an agreement may not necessarily include the words “lease”, “lessor” or “lessee” within its terms; but rather, use[s] terminology more traditionally deployed in a licence agreement’.[8] She was satisfied that the Licence Agreement conferred exclusive possession ‘at all times during the continuation’ of the Licence Agreement for three key reasons.
[8]Ibid [130], citing Radaich v Smith (1959) 101 CLR 209, 214 (McTiernan J); 217–8 (Taylor J), 220 (Menzies J), 222–3 (Windeyer J).
First, she relied on clause 1, stating:
I am satisfied that the Licence Agreement confers exclusive possession of the car parking area (the car parking spaces at the western end of the Motel Property and the car parking facilities), to the licensee ‘at all times during the continuation’ of the Licence Agreement (see clause 1). The licensee has ‘use to the exclusion of all others’: what else can that mean, but exclusive possession?[9]
[9]Ibid [131].
Second, she considered that her conclusion was supported by other clauses of the Licence Agreement, including clauses 3 and 4.[10]
[10]Ibid [132].
Third, the judge considered that the reasoning of Davies J in Federal Airports Corporation v Makucha Developments Pty Ltd (‘Makucha’)[11] was applicable. In that case the relevant agreement was between the Federal Airports Corporation (‘FAC’) and a commercial entity which had established a public car park on the relevant land. Although the agreement contained express terms that the rights created were contractual only, Davies J found that the licence agreement granted an interest in the nature of a lease. This was because, read in context, the overriding intent and operation of the agreement was to give the licensee an exclusive right to use and occupy the land for the purposes of a car park. The judge found that in the present case ‘[t]he language conferring exclusive possession was express. The objective intention of such language is that the grant is to operate to the exclusion (or virtual exclusion) of any other use.’[12]
[11](1993) 115 ALR 679.
[12]Reasons, [135].
The judge also rejected the applicant’s argument that clause 7 supports the proposition that exclusive possession is not granted by the Licence Agreement. The judge considered that clause 7 is directed, not just to the parking area, but to the entirety of the Motel Property (as per the definition of ‘Property’ in the Recitals). As such, its objective intention is to make clear that the Licence Agreement does not provide for possession or occupation of the whole of the Motel Property, within the meaning of those words in the Sale of Land Act 1962 (‘SLA’). Under that Act (at the relevant time[13]) ‘terms contract’ was relevantly defined to mean ‘an executory contract for the sale and purchase of any land under which the purchaser is … entitled to possession or occupation of the land before he becomes entitled to a conveyance or transfer of the land’.[14] The judge accepted the submission of the respondent that the intention of clause 7 is to foreclose any argument that, in the event that the Property is sold to the licensee, the contract of sale will be classified as a ‘terms contract.’[15]
[13]Being 27 September 2001, when the Licence Agreement was entered into.
[14]SLA, s 2(1) (definition of ‘terms contract’).
[15]Reasons, [139].
The judge therefore found that the Licence Agreement constituted a lease and made the declaration that the agreement is a ‘lease of the “car parking spaces”’, as set out earlier.
The judge went on to find that the Licence Agreement was not void for uncertainty, in particular, she rejected an argument that the description of the lots which were the subject of the licence was vague and illusory.[16] Although that issue is not raised as an independent ground in this application, the judge had cause to consider the meaning of the term ‘facilities’, as used in clause 1, in the course of considering the uncertainty argument. She ultimately considered that this term referred to ‘the roadway between the car parking spaces’, stating:
Clause 1 provides for use of the car parking spaces and facilities, and access to the driveways of the Property ‘for the purpose of accessing the said car parking facilities’. Clause 4 requires the licensee to maintain a public liability insurance with respect to the ‘car parking area’. I consider that the ‘car parking area’ is a reference to both the car parking spaces, and the ‘facilities’ (the ‘facilities’ being the roadway between the car parking spaces). It is the area marked in red by F3's counsel on the image below …[17]
[16]Ibid [151]–[152].
[17]Ibid [158] (emphasis in original, emphasis added). The area marked in red on the image at [158] encompasses the car parking spaces and the driveways in between those car parking spaces, at the western end of the Property.

(2) Submissions

In written submissions, the applicant placed particular reliance on the following matters in support of its contention that the judge erred in characterising the Licence Agreement as a lease:
(a)the parties’ own characterisation of their rights;
(b)that the description of the subject land is imprecise;
(c)relevant (but unidentified) ‘surrounding circumstances’;
(d)that clause 7 was, properly construed, an indication that the parties did not intend for the Licence Agreement to be a grant of exclusive possession of any of the Property, including the shaded area (being the area shaded red in the image at [158] of the Reasons);
(e)that the requirement in clause 9 supports the conclusion that the Licence Agreement was a licence given it allows for an assignment even though leases are of their own nature assignable; and
(f)that the judge should have concluded that clauses 3 and 4 are ‘neutral’ and do not assist in the characterisation of the Licence Agreement as either a lease or a licence.

In oral submissions, the applicant placed significant reliance on the following matters:
(a)the use of the terms ‘Licence Agreement’, ‘Licence’, ‘Licensor,’ and ‘Licensee’;
(b)the use of the term ‘agreement,’ rather than words such as ‘demise’ or ‘lease’ ie words denoting the grant of an estate in land;
(c)the consideration is not described as ‘rent’ in clause 2 and was for a ‘peppercorn’ amount of $1 a year;
(d)that clause 7 suggested that the agreement was only a licence, by excluding possession or occupation (within the meaning of the common law) of the property including the car parking spaces; and
(e)that clause 9 favoured the applicant’s construction, because a lease is generally assignable, so if the agreement were a lease this clause would be unnecessary.
The applicant submitted that the phrase, ‘to the exclusion of all others’, in clause 1 should be read as the exclusive ability to park in the parking spaces, but should not be elevated to exclusive possession of the car park as a whole. In so submitting, counsel highlighted that it was common in commercial car parks for persons to be allocated a specific identified parking space without obtaining a leasehold interest.
Counsel also submitted that the decision in Makucha was distinguishable. In particular, he submitted that it concerned a commercial car park, which inherently requires exclusive possession in order to control and charge for use of the car park. He highlighted that the FAC had no ongoing concurrent use for the land. It was a statutory corporation that only reserved a right of entry to perform its supervisory responsibilities as owner of Mascot Airport.
The applicant also submitted that the judge failed to have regard to the retained land which the applicant owns. The applicant contended that, if the respondent has exclusive possession of the car parking spaces (as found by the judge), then this would restrict the applicant’s ability to access the retained land.
In contrast, the respondent submitted that the judge was correct to find that the Licence Agreement conferred exclusive possession according to the principles in Radaich v Smith (‘Radaich’).[18]
[18](1959) 101 CLR 209; [1959] HCA 45.
The respondent also highlighted that the use of the retained land was not the subject of evidence at trial and was not an agreed issue. Also not explored was whether the applicant might have the benefit of an implied right of way or easement of necessity over the retained land.
In oral submissions the respondent submitted that, having regard to the permit given, it was clearly intended that the respondent be provided with onsite car parking for up to 150 guests for lengthy periods of time. Thus, exclusive possession was necessary so that the 105 car parking spots were free and available as and when needed.

(3) Consideration

In considering this proposed ground, two issues arise for consideration.
First, there is a construction issue as to what constitutes the subject matter of the Licence Agreement. More particularly, it is necessary to consider the meaning of the concept of ‘facilities’, which are part of the subject of the ‘grant’ in clause 1 of the Licence Agreement, having regard to the words, context and purpose of the Licence Agreement.[19] Thus, if, as the judge found, that term constitutes ‘the roadway between the car parking spaces’, then the applicant may be denied access to its retained land in the event of a finding that there is a lease (unless there is an implied easement or other right of access). This is because, by the first part of clause 1, the licensee will have the right to use both the car parking spaces and the facilities to the exclusion of all others (including the owner).
[19]Visser v The King (2023) 68 VR 188, 219 [100] (Emerton P, Priest, McLeish, T Forrest and Kennedy JJA); [2023] VSCA 10, citing R v A2 (2019) 269 CLR 507, 520–2 [32]–[37] (Kiefel CJ and Keane J), 545 [124] (Bell and Gageler JJ); [2019] HCA 35.
Second, it is then necessary to construe whether the Licence Agreement constitutes a lease.

(a) What is comprised by ‘facilities’?

As indicated already, the judge considered that the concept of ‘facilities’ encompassed the ‘roadway between the car parking spaces.’
The respondent’s primary position was that the judge was correct in her construction. It submitted that, if it did not have exclusive possession of the driveways[20] between the car parking spaces, then the licensor could use those driveways for its own purpose, for example, for storing goods. Further, the respondent submitted that it was important that it have free access to and from the bays to the exclusion of all others.
[20]The respondent indicated that it was appropriate to refer to ‘driveways’ in this context.
However, the respondent essentially had a ‘fall-back position’, because it accepted that all it needed in order to comply with the permit was exclusive use of the 105 car parking bays. To this end, it accepted that there were two ways of reading clause 1 and that, for example, car parking ‘facilities’ might include the kerbs, and not the driveways.
We do not consider that the matters raised by the respondent support the judge’s construction. The storage of goods on the driveways would likely put the licensor in breach of clause 1. In particular, such conduct would potentially breach both the promise to provide exclusive use of the car parking spaces, as well as the licence to permit the right of ingress and egress over the driveways. The factual context is also important given that the car park is located behind a private property and is not a public car park. Although the applicant needs to be able to access the car parking spaces, there is no apparent reason as to why the access — as opposed to the spaces themselves — should be exclusive.
Returning then to the words, context and purpose of the Licence Agreement, we do not consider that the concept of ‘facilities’ is intended to encompass the driveways between the car parking spaces.
First, the drafter has expressly chosen to use the word ‘facilities’, rather than ‘driveways’, in the first part of clause 1. This is despite the fact that the express word, ‘driveways’ is used in the second part of the same clause (where the separate licence is granted). If the parties had really intended that ‘facilities’ should mean ‘driveways’ the latter word could have been readily chosen. The express references to ‘facilities’ suggests that something different from ‘driveways’ was intended.
Second, consistently with the plan made available to the parties at the time of signing the Licence Agreement, it was not in dispute that the retained land is located on the far western side of the car parking spaces. In such circumstances, if ‘facilities’ is construed so broadly that it includes the driveways next to the car parks then, as the applicant contends, the owner might be excluded from having access to its retained land. A reasonable person would consider that this was neither necessary or desirable absent some clearly expressed intention to do so.
Third, as accepted by the respondent, the evident purpose of the Licence Agreement, consistently with the permit, was to ensure that the respondent was entitled to use the 105 car parking spaces. Such a purpose can still be met provided the respondent has a licence to ‘ingress and egress over the driveways’ for the purpose of accessing those spaces. Such a licence is expressly granted by the second part of clause 1. It is unnecessary for the owner to also be excluded from the driveways so as to give effect to that purpose.
Overall, then, we disagree with the judge that the concept of ‘facilities’ means the driveways between the car parking spaces. In circumstances where it was not disputed that the second part of clause 1 constituted only a licence over the driveways (and not a lease), it follows that the owner is not excluded from also using the driveways to gain access to the retained land.
It remains to consider the characterisation question in the light of this construction.
(b) Lease or licence of car parking spaces
It may be accepted that the use of the terms, ‘Licence’, ‘Licensor’, and ‘Licensee’, weighs against the Licence Agreement being a lease. However, the use of such terms is not conclusive.[21]
[21]Radaich (1959) 101 CLR 209, 214 (McTiernan J); [1959] HCA 45.
A number of other clauses were also of limited assistance in the characterisation process. Hence:
(a)one might expect that there would be a condition to maintain whether there is a licence or a lease (clause 3);
(b)the requirement that the licensee maintain a public insurance policy (clause 4) might suggest that the licensor had surrendered any interest in the car parking area, however such an obligation might also be considered appropriate even if there was only a licence; and
(c)although a lease might be unilaterally assigned without consent (which might suggest a licence rather than a lease), clause 9 makes plain that such a right is absolute and unconditional and ensures that the licensor is to cooperate with any assignment — that could have real work to do in the context of a lease.
The inclusion of clause 7 is in a different category. The statement that the licence does not confer ‘possession or occupation of the Property’ tends to weigh against the agreement being characterised as a lease.
However, clause 7 is ambiguous and open to at least three possible constructions.
(a)The first possible construction, which was adopted by the judge, is that the parties were attempting to make it clear that the Licence Agreement does not have the result that any sale of the Property would constitute a ‘terms contract’ within the meaning of the SLA. That was said to follow from the fact that the only place that ‘possession and occupation’ is used in the SLA is in the definition of a ‘terms contract’.
(b)The second possible construction is that the licensor was not intended to have ‘possession or occupation’ of the entire ‘Property’, even though there was an intention to confer exclusive possession of the car parking spaces and facilities.
(c)The third possible construction is that the licence does not confer or constitute possession or occupation of any part of the Property, including the car parking spaces. This was the construction for which the applicant contended.
There are difficulties with each of these possible constructions.
(a)In relation to the first possible construction, any such attempt to avert the operation of the SLA would appear to be unnecessary given that any entitlement to possession ‘under’ the Licence Agreement would be irrelevant to whether there was a terms contract. This is because a contract would only be a ‘terms contract’ under the definition in the SLA if the entitlement to ‘possession or occupation’ was given ‘under’ the sales contract.
(b)In relation to the second possible construction, a literal reading of the clause might include the car parking spaces and facilities given they are included in the concept of ‘Property’ as described in the Recitals.
(c)In relation to the third possible construction, it appears to directly conflict with the clear and express words of clause 1 that the licensee be granted exclusive use of the car parking spaces and facilities.
We consider that construction (c) must be rejected. This is because, when the Licence Agreement is considered as a whole, a reasonable person would readily understand that the applicant was intended to obtain possession and occupation of the car parking spaces and facilities. Clause 7 does not purport to exclude ‘exclusive possession’ or ‘exclusive occupation’ — it purports to exclude any possession or occupation of the Property. But plainly clause 1 of the Licence Agreement confers, at least, a right to occupy the car parking spaces. Thus clause 7 cannot be understood as denying the operation and effect of clause 1; it must have some other operation.
As to the remaining possible constructions, we consider that construction (b) is preferable, given that there was no real possibility that the Licence Agreement could have resulted in a terms contract under the SLA. But ultimately this does not matter; because on either of these two constructions, clause 7 does not deny that clause 1 conferred exclusive possession of the car parking spaces and facilities.
Ultimately, as accepted by both parties, the key characteristic of a lease is that exclusive possession is conferred upon the putative lessee.[22] In this respect, reference to other cases is of limited utility. Rather, it is critical to focus on the rights which the particular agreement confers, as well as whether it is inherent in the effective use of those rights that there be exclusive possession.
[22]Ibid. See also 217–18 (Taylor J); 220 (Menzies J); 222–3 (Windeyer J).
As indicated already, clause 1 contains two parts.
(a)First, it ‘grants’ to the licensee ‘at all times during the continuance of this licence’ (and authorises him to permit his guests and patrons) a particular right, namely, the right to ‘use to the exclusion of all others’ the car parking spaces and facilities.
(b)Second, it ‘licenses’ to the licensee (to permit his patrons and guests) the right of ‘ingress and egress over the driveways’ for the purpose of accessing the car parking facilities.
There are a number of features of this clause which suggest that the parties intended to create a lease of the car parking spaces and facilities.
First, the phrase, ‘use to the exclusion of all others’ is highly significant. Although the word ‘possession’ is not used, there appears to be no substantive difference between exclusive ‘use’ or ‘possession’ in respect of a car parking space. The right given is intended to be enforceable against third parties or ‘all others’, consistent with the grant of a proprietary right.
Second, there is a clear and significant contrast in the language used in the two parts of clause 1. While the first part uses the word ‘grant’ (consistent with the demise of a proprietary interest), the second part expressly ‘licenses’ a right. The choice of language should be given some effect. It suggests that the parties intended to do something more than ‘license’ the licensee in respect of the car parking spaces and facilities.
Third, there is the fact that the grant is made ‘at all times’ during the licence which is a period of ninety-nine years (clause 2). As conceded by the applicant’s counsel, such a lengthy time frame tends toward characterisation as a lease. It is consistent with the grant of a more permanent proprietary right, rather than a personal right exercisable from time to time.
Fourth, there is the subject matter of the ‘Licence’, namely 105 car parking spaces and facilities, involving the grant of rights to a substantial part of the Property.
The latter two features also serve to distinguish the Licence Agreement from the example cited by the applicant whereby an individual might be allocated a car parking space in a commercial car park from time to time. Although the allocation of an individual car parking space in return for a fee might be unlikely to constitute a lease, the situation under the Licence Agreement is very different. Consistent with the purpose cited earlier, it involves the grant of exclusive rights over a ‘block’ of 105 spaces for ninety-nine years.
Fifth, we observe that the Licence Agreement was executed as a deed. This is consistent with the conferral of a proprietary right, as the applicant accepted.
Finally, the purpose of the Licence Agreement supports the conclusion that it was intended to confer exclusive possession on the respondent. The Adjacent Property was a hospitality venue which lacked a car park for those attending events at the reception centre. The Adjacent Property owner obtained a permit so as to operate as a hospitality venue, but only on the condition that it enter an agreement for the use of the relevant car parking facilities for ninety-nine years.[23] In order to further such purpose, and ensure the business could operate, the Licence Agreement was intended to ensure that the owner and operator of the venue would be assured that its customers would have ready access to the car parking spaces over the course of the ninety-nine years. Such a purpose would be undermined if others were also entitled to access those spaces. In contrast, such a purpose would be furthered by the grant of exclusive possession.
[23]Reasons, [171].
Having regard to the all of the above matters, then, we consider that the judge was correct to make the declaration that the Licence Agreement constituted a lease of the car parking spaces.
Proposed ground 1 thus fails.

PART D: WHETHER ERROR IN RELATION TO PUBLIC LIABILITY INSURANCE (PROPOSED GROUND 2)

Proposed ground 2 alleged that the judge erred in finding that the respondent had maintained public liability insurance with respect to the car parking area and should have held that the insurance ‘held by the respondent’ was ‘with respect to the respondent’s business activities’ and not ‘with respect to the car parking area’ as required by clause 4.
Consistent with this formulation, para 29 of the applicant’s written case read:
The Court should have concluded that:
(a)clause 4 of the Licence Agreement required the respondent to obtain public liability insurance that extended to all activities on the car parking area;
(b)the respondent’s public liability insurance was limited to the respondent’s activities and did not extend to all activities on the car parking area;
(c)accordingly, the respondent’s public liability insurance did not comply with clause 4 of the Licence Agreement.
The complaint was therefore that the insurance held by the respondent was not extensive enough.
However, in oral argument the applicant sought to ‘extend’ proposed ground 2. It ultimately sought to amend its written case so as to add the matters italicised below, with the result that para 29 read as follows:
The Court should have concluded that:
(a)clause 4 of the Licence Agreement required the respondent to obtain public liability insurance that extended to all activities on the car parking area by including the applicant as an insured;
(b)the respondent’s public liability insurance was limited to the respondent’s activities and did not extend to all activities on the car parking area as it did not extend to insuring the applicant;
(c)accordingly, the respondent’s public liability insurance did not comply with clause 4 of the Licence Agreement.
The applicant thereby alleged that it ought to have been the insured, or one of the insureds, named in the relevant policy. Further, it submitted that, although the applicant was identified as an ‘interested party’ in the liability section of the policy, this was insufficient given that only the respondent was identified as the ‘insured’ party.
The applicant submitted that this ‘extension’ was encompassed within the existing proposed ground 2, as enunciated in the written case, because it had alleged that the respondent’s policy did not cover things that might happen in the car park that had nothing to do with the respondent’s business.
The applicant also accepted that this extended complaint was now the sole basis for this proposed ground and that it was no longer alleging that the insurance for any liability of the respondent was inadequate.
Leaving aside the merits of the matter raised, two immediate issues arise for consideration. First, whether the applicant was raising a fresh argument; second, if it was, whether it ought to be given leave to raise such a new argument.

(1) Whether a new argument on appeal

In order to assess whether the applicant’s point is new it is relevant to consider the various ways the applicant has made complaint about an alleged breach of clause 4.

Thus, as highlighted by the judge, the applicant’s complaints have ‘evolved’:[24]
(a)initially it contended that there was no relevant insurance at all at the relevant time;[25]
(b)later, although conceding that some insurance was maintained, it alleged instead that the insurance obtained did not amount to ‘public liability insurance’ with respect to the car parking area;[26]
(c)further, it submitted that, because the phrase ‘car parking area’ is vague and uncertain, it was not possible to determine whether the policy provides coverage ‘with respect to the car parking area’;[27] and
(d)finally, that because the coverage is limited to liability arising from the respondent’s business, it does not comply with clause 4.[28]
[24]Reasons, [288].
[25]Ibid.
[26]Ibid [289].
[27]Ibid [328].
[28]Ibid [330].
It is this last argument which was clearly intended by proposed ground 2, when read with the applicant’s written case. As indicated already, it is a complaint about the scope of the insurance held in the name of the respondent. If the applicant had instead wished to make the different complaint that the policy should have been in its name, it could easily have done so by simply alleging that the policy ‘did not extend to insuring the applicant’ — as it now seeks to do.
Accordingly, the argument raised constitutes a new matter raised for the first time in oral submissions on the application for leave to appeal without explanation.

(2) Whether the applicant should be permitted to raise the new argument

(a) Submissions

The respondent submitted[29] that the applicant should not be permitted to amend proposed ground 2 so as to raise the new argument given that:
(a)there was no evidence about whether it was possible for one party to take out public liability insurance that covered the liability of an unrelated third party;
(b)if the new argument is permitted, the respondent will be denied the opportunity to rely on and lead evidence in support of an estoppel claim; and
(c)if the new argument is permitted, the respondent will be denied the opportunity to argue that the reference to the applicant as an ‘interested party’ means that the applicant’s liability is covered in any event — in particular, the respondent was denied the opportunity to explore this issue with a witness called in the matter, Mr Joseph Xuereb, the respondent’s insurance broker.
[29]The respondent was given leave to file, and did file, written submissions dated 20 March 2024.
In respect of the second matter, the respondent produced correspondence (which was led at trial, but directed to a different issue) as follows:
(a)a letter dated 19 July 2013, in which the respondent’s solicitor, VM Roccisano, provided the applicant’s solicitors, PSMF Lawyers & Consultants, with a certificate of public liability insurance that identified the policy holder as the respondent, with the applicant identified as an ‘interested part[y]’. The letter asked the solicitors to confirm that the cover was ‘in order’;
(b)a responsive email dated 23 July 2013 from PSMF Lawyers & Consultants to VM Roccisano, which identified two errors in the certificate provided. One of the errors identified was that the name of the applicant as an ‘Interest[ed] Part[y]’ should be ‘Lanshan Pty Ltd’, not ‘Lansham Pty Ltd’. However, the email otherwise made no complaint about the applicant’s status; in particular, it did not allege that the applicant ought to be named as the policy holder or as an insured party; and
(c)a letter from VM Roccisano to PSMF Lawyers & Consultants dated 16 August 2013, which enclosed the amended certificate and which again named the respondent as the policy holder and the applicant as an interested party.
The respondent submitted that there would have been a basis to plead an estoppel claim ‘and to seek to marshal any further evidence in support of the claim.’
The applicant maintained that it ought to be permitted to advance the proposed ground ‘as developed orally.’ In response to the matters raised by the respondent, it submitted as follows:[30]
(a)first, the court does not require evidence of the availability of a policy since difficulties with obtaining a policy says nothing about the intentions of a party to that contract. It asserted that contracts requiring a party to obtain insurance for the benefit of another are ‘commonplace’;
(b)second, the nature of the estoppel raised is unclear. At best it could be said that the parties were ignorant of the operation of clause 4, but it was unclear how ignorance could give rise to an estoppel; and
(c)third, the new argument went solely to the construction of contracts, which is not a matter for expert evidence.

(b) Consideration

[30]The applicant was given leave to file, and did file, written submissions dated 22 March 2024.

A party will not be permitted to rely on an argument on appeal that was not put before the judge at first instance if the argument might have been met by calling evidence below. This was explained by Mason CJ, Wilson, Brennan and Dawson JJ in Water Board v Moustakas as follows:[31]
More than once it has been held by this Court that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied.[32]
[31](1988) 180 CLR 491, 497; [1988] HCA 12. Also cited in Sambucco v Sambucco [2023] VSCA 199, [30] (McLeish, Walker JJA and Gorton AJA).
[32]See Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 438; University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481, 483; 60 ALR 68, 71; Coulton v Holcombe (1986) 162 CLR 1, 7–8; O’Brien v Komesaroff (1982) 150 CLR 310, 319.
In the present case, the respondent submitted that there is a basis to plead an estoppel claim, and that it might have also wished to adduce further evidence in support of this claim. The correspondence cited provides some basis for an estoppel claim, given the applicant’s apparent failure to raise its current complaint to the effect that the applicant ought be a named insured, and not just an interested party. We are not in a position to say that all of the elements of an estoppel (equitable or by convention)[33] would necessarily be satisfied. Indeed, further evidence would undoubtedly have been required to make good the element of reliance. That reinforces the point that the new argument could have been met by an allegation of, and further evidence in support of, an estoppel claim. This is sufficient to require that leave to rely on the new argument be refused.
[33]See GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1, 105–6 [426] (Finn J); [2003] FCA 50.
Furthermore, although not specifically raised in submissions on the appeal, it also appears to us that there could potentially be some uncertainty about the legal significance of the applicant’s status as an ‘interested party’, as recorded on the policy. Even accepting that the applicant is not, strictly, a party to the contract for the purposes of the common law doctrine of privity of contract, there are exceptions to this doctrine.[34] For example, a court may infer that the benefit of a contractual promise is held on trust for a third party.[35] Significantly, s 48 of the Insurance Contracts Act1984 (Cth) (having undergone important amendments in 2013)[36] has, at all relevant times, extended insurance coverage to persons specified, or referred to, in a contract of general insurance, by name or otherwise, as a person to whom the cover extended, even if the person was not a party. Whether s 48 or any common law exception could apply may also have necessitated the adducing of further evidence so as to examine the precise relationship and intentions of the parties to the insurance policy. Proper consideration of these issues would certainly have necessitated far more attention by way of submissions and reference to legislation and authority than either the judge or this Court was favoured with.
[34]See, eg, Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; [1988] HCA 44.
[35]Hobart International Airport Pty Ltd v Clarence City Council (2022) 399 ALR 214, 231 [59] (Gageler and Gleeson JJ); [2022] HCA 5.
[36]See Insurance Contracts Amendment Act2013 (Cth), sch 6.
Given that further evidence might have been adduced to address the new point, we therefore consider that the applicant ought not be permitted to raise it. Because the applicant no longer pursued its earlier arguments about clause 4, it follows that proposed ground 2 cannot succeed.
It is unnecessary to go further. However, there appears to be little merit in the argument in any event. The plain words of clause 4 place the onus on ‘[t]he Licensee’ to maintain the relevant policy. If the parties had intended the licensee to maintain a policy ‘in the name of’, or ‘on behalf of’, the licensor, this could easily have been said.
Proposed ground 2 is without merit.

PART E: WHETHER ERROR TO FIND THAT DEFAULT NOTICE DEFECTIVE (PROPOSED GROUND 3)

Given that the applicant has failed to establish proposed ground 2, it is not entitled to a declaration that the Licence Agreement is terminated. It is therefore unnecessary to consider proposed ground 3. However, we will provide a brief summary of our views.
Paragraph 4 of the default notice recited the terms of the licence, which relevantly included:
(f)the Licensee shall maintain a public liability insurance policy with respect to the car parking area to a sum not less than $10 million (PL Insurance);
At para 5(v), the default notice then relevantly alleged that ‘[w]rongfully, and in breach of the terms of the Licence (Wrongful Conduct),’ the licensee or its agents, contractors or servants have ‘during the Licence Period, failed to maintain the requisite PL Insurance’.
The notice went on to say that the licensee had repudiated the Licence Agreement, which repudiation was accepted. ‘Alternatively’, if the licence was not terminated, it demanded that, in order to remedy the breaches, the licensee must:
(d)provide evidence satisfactory to the Licensor that during the Licence Period the Licensee has: …
(ii) effected and maintained the PL Insurance; …

(1) The judge’s reasons

The judge noted that, given her earlier conclusions, it was strictly unnecessary for her to consider whether the applicant was entitled to terminate the Licence Agreement. However, she stated that she would have found that the applicant was not entitled to terminate the Licence Agreement relying on the default notice.[37]
[37]Reasons, [354].
The judge identified relevant principles in construing the default notice, which are not in dispute, as follows:
·the construction of a default notice must be approached objectively, from the standpoint of what reasonable persons in the same circumstances and with the same knowledge as the actual parties would have had in mind (FPM Constructions [Pty Ltd] v Council of the [City of] Blue Mountains [2005] NSWCA 340, [151] (Basten JA, Beazley JA agreeing) (FPM); Yan & Anor v Zhang [2018] VSC 694, [111] (Yan);
·it is important that a notice identify the applicable clause of the contract said to be breach[ed] (Yan, [112]);
·each case ultimately turns on what the particular contractual provisions relating to what the default notices require (Diploma Construction Pty Ltd v Marula Pty Ltd [2009] WASCA 229, [71] (Newnes JA) (Diploma); FPM, [151] (Basten JA, Beazley JA agreeing); Yan, [113]));
·the default notice must bring to the attention of the recipient what the default is alleged to be (Diploma, [77] (Newnes JA); FPM, [151] (Basten JA, Beazley JA agreeing); and
·‘… it cannot be left to the [recipient] to winkle out an alleged default from an equivocal, vague or imprecise notice’ (Diploma, [79] (Newnes JA)).[38]
[38]Ibid [364] (emphasis in original).
The judge considered that the applicant’s failure to identify the particular clause said to be breached was not prohibitive to a finding that the notice was valid. This is particularly so given the length of the Licence Agreement.[39] However, she considered that the applicant’s failure to particularise the alleged breach in the default notice was the real issue in this case, stating:
I do not consider that identifying an alleged failure to maintain ‘the requisite PL insurance’ would adequately bring to the attention of someone, in the shoes of and with the knowledge of [the respondent], what the default is alleged to be.
The point of a default notice is to be given the chance to fix the problem, within the specified time period.
Plainly, that could not happen in circumstances where [the applicant] only clearly identified the alleged problem with the insurance [the respondent] took out, long after sending the Notice of Default. ([The applicant] says in submissions dated 5 April 2022 that it had to issue subpoenas to see the relevant insurance documents and these returned information just before the trial, and that ‘it was in the context of the trial having properly commenced that the plaintiff sought to understand how the terms operated’. Regardless of why it identified the alleged defects once the trial had ‘properly commenced’, the fact remains it had not identified them when the Notice of Default was sent).
I consider that [the applicant’s] letter of 5 September 2019 was not a valid default notice in relation to the insurance issue. It did not give sufficient information to enable [the respondent] to remedy the alleged default (for example, by detailing as it did during this trial that the type of insurance taken out was inadequate to answer the requirements of clause 4, and why).
In those circumstances, [the applicant] was not entitled to terminate the Licence Agreement relying on the default notice.[40]
[39]Ibid [366].
[40]Ibid [369]–[373] (citations omitted).

(2) Submissions

The applicant submitted that the applicant’s default notice provided sufficient particularity of the alleged breach, and that the respondent cannot be heard to complain about a lack of particularity in the default notice when it did not provide the applicant with a copy of the policy within the period of the notice of default.
In oral submissions counsel submitted that it was impossible for the applicant to provide particulars of the breach, given that the respondent had not provided it with a copy of the policy.

(3) Consideration

Clause 6 of the Licence Agreement requires the applicant to serve a notice on the respondent ‘identifying the default’, and the applicant’s intention to determine the licence unless the default is remedied within 14 days. The evident purpose of the clause is to provide sufficient notice such that the respondent might be able to remedy the default if it wishes and is able to.
In this case it was simply asserted that ‘during the Licence Period, [the respondent] failed to maintain the requisite PL Insurance’. However, consistent with the ‘evolving’ claims made by the applicant in this case, there are a wide range of possible defaults which might be encompassed by this assertion, including that:
(a)insurance was not maintained at all during the whole period;
(b)insurance was not maintained during part of the relevant period;
(c)the insurance maintained was not to a sum of $10 million or more;
(d)the insurance maintained was not ‘public liability’ insurance;
(e)the insurance maintained was not ‘with respect to the car parking area’ because it was limited to the respondent’s business activities; and
(f)the insurance maintained did not insure the liability of the applicant (as the applicant now submits).
The default notice clearly therefore did not comply with clause 6. A reasonable recipient standing in the shoes of the respondent would not have understood what the alleged default was.
Insofar as it was suggested that the respondent should have supplied a copy of the policy to the applicant, the appropriate approach was for the applicant to request a copy of the policy prior to making any assertion that there was a default, entitling it to terminate.
The judge was thus correct to find that the default notice was defective.

PART F: CONCLUSION

Although our reasons differ to some extent from those given by the judge, we agree with the judge’s conclusions that the Licence Agreement constitutes a lease of the car parking spaces and that the lease was not terminated.
We will therefore grant leave to appeal, but will dismiss the appeal.
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APPENDIX 1

[2024] VSCA 59

11 April 2024