Tooheys Limited v Municipal Council of Sydney

Tooheys Limited (the appellant) appealed to the High Court of Australia from an order of the Supreme Court of New South Wales that struck the appellant's declaration off the file. The appellant, a mortgagee in possession of leasehold premises, sought to recover from the Municipal Council of Sydney (the respondent), the head landlord, a sum equivalent to two-fifths of licence fees paid by a tenant of the appellant. This claim was based on the combined operation of section 21(2) of the Liquor Act 1912-1937 (N.S.W.) and section 64 of the Real Property Act 1900-1940 (N.S.W.). The Supreme Court had taken the view that the declaration contained misleading allegations regarding the tenancies.

The legal issues before the High Court were whether section 21(2) of the Liquor Act, when read in conjunction with section 64 of the Real Property Act, conferred upon a mortgagee in possession of leasehold land the right to recover from the head landlord a proportion of licence fees paid by a tenant of the mortgagee. Specifically, the court had to determine if the appellant, as a mortgagee in possession, occupied a legal position analogous to that of a lessee or lessor for the purposes of the Liquor Act, and if section 64 of the Real Property Act created the necessary link to enable such a recovery.

The High Court, in allowing the appeal and setting aside the Supreme Court's order, held that the appellant's claim failed. The court reasoned that section 21(2) of the Liquor Act provided a mechanism for passing on a proportion of licence fees through a chain of lessors and lessees, ultimately to rest with the owner. However, the appellant, as a mortgagee in possession, did not fit within this statutory chain. While section 64 of the Real Property Act imposed liabilities on a mortgagee in possession towards the lessor, it did not confer upon the mortgagee the affirmative statutory rights of action that section 21(2) of the Liquor Act provided to a lessee or lessor. The court found that the appellant was neither a lessee nor a lessor in the sense required by the Liquor Act, and section 64 did not create the necessary legal relationship or transfer the requisite rights to enable the appellant to recover the licence fee proportion from the head landlord.

The High Court set aside the order of the Supreme Court and allowed the demurrer to the declaration, finding that the declaration disclosed no cause of action at law. The appellant was ordered to pay the costs of the proceedings in the Supreme Court and the appeal.