Bayview Hotel Batemans Pty Ltd & Anor v Enima Pty Ltd

Submissions 16I 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. 17The 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. 18Thus 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. 19As 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. 20For 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). 21The 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." 22Sackville 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. 23Similar 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'." 24The 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 25The 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. 26The 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." 27The 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. 28The 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. 29Nothing 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. 30Support 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". 31In 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. 32In 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". 33In 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. 34I 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." 35His 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. 36The 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." 37As the defendant failed to establish that the GMEs were within the definition, it is unnecessary to deal further with the estoppel issue. 38An 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". 39In 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. 40A 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. 41It 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. 42In 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. 43The 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 44As 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. 45As 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.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 March 2013