HEARD : 18 JUNE 2010 (LAST SUBMISSIONS RECEIVED 1 JULY 2010)

BETWEEN : BROADWATER HOSPITALITY MANAGEMENT PTY LTD

PRIMEWEST (LOT 4 DAVIDSON STREET KALGOORLIE) PTY LTD

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : PRIMEWEST (LOT 4 DAVIDSON STREET KALGOORLIE) PTY LTD -v- BROADWATER HOSPITALITY MANAGEMENT PTY LTD [2009] WASC 304

Liquor licensing - Licensee (appellant) carried or licensed business on leased premises - Additional Rent payable by reference to proceeds of licensed business - Approval granted for lessor to participate in proceeds of business - Section 104 Liquor Control Act 1988 (WA) - Lessor sold premises to respondent - Whether respondent required approval under s 104 to receive Additional Rent

Liquor Control Act 1988 (WA), s 104(1)(b), s 104(2), s 104(3)

Property Law Act 1969 (WA), s 77

Friary Holroyd and Healey's Breweries Limited v Singleton [1899] 1 Ch 86

PP Consultants Pty Ltd v Finance Sector Union [2000] HCA 59; (2009) 201 CLR 648

Primewest v Broadwater [2009] WASC 304

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

1 JUDGMENT OF THE COURT: This appeal concerns the operation of s 104 of the Liquor Control Act 1988 (WA) (the Act). That section provides, in effect, that it is an offence for a licensee to enter into any 'agreement or arrangement' under which another person may participate in the proceeds of the business carried on under the licence, unless the agreement or arrangement has been approved by the Director of Liquor Licensing (the Director) under s 104(3) of the Act. The other person also commits an offence by entering into the agreement or arrangement.

2 In the present case, the appellant was the lessee of premises on which it carried on business under a licence granted under the Act. The approval of the Director was obtained in respect of a provision in the lease by which the then lessor was to receive a portion of the rent, described in the lease as 'Additional Rent', calculated by reference to the amount of the proceeds of the lessee's business. Some time later, the respondent purchased the premises from the original lessor and, by virtue of s 77 of the Property Law Act 1969 (WA) (the PLA), the respondent, as lessor, took the benefit of, amongst others, the 'Additional Rent' provision. The question has arisen whether the appellant and the respondent were in breach of s 104, on the basis that the approval of the Director had not been obtained for the respondent to receive the Additional Rent.

3 In a judgment delivered on 13 October 2009, McKechnie J held that the approval of the Director was not required as the respondent did not become entitled to receive the Additional Rent pursuant to an 'agreement or arrangement' entered into with the appellant, but simply by virtue of the operation of s 77 of the PLA. The appellant appeals against that decision.

4 The appeal arises out of a lease dated 23 September 2002, pursuant to which Kareelya Investments Ltd (Kareelya) leased to the appellant a property in Kalgoorlie on which a hotel had been erected. The term of the lease was a period of five years with an option to renew the term for two further periods of five years each. The commencement date of the lease is not contained in the copy of the lease in the appeal papers. It appears, however, that the initial term expired on 31 July 2008.

5 Clause 3 of the lease provided for the payment by the appellant of rental and other charges. The effect of cl 3.1 was to require the appellant to pay an annual rental of $800,000, by equal consecutive monthly instalments, from the commencement of the lease. Clause 3.2 provided for annual rent reviews. The appellant was also required to pay the rates, taxes and utility charges levied in respect of the leased premises and to reimburse Kareelya for the cost of certain insurance cover: cl 3.4 - cl 3.6. Relevantly for present purposes, cl 3.8 of the lease provided for the payment by the appellant of 'Additional Rent', as described in that clause. It is the requirement to pay Additional Rent that is in dispute between the parties.

6 The effect of cl 3.8 was that, in addition to the annual rent, the appellant was required, in each financial year during the term, to pay a rent calculated as any excess of the 'net operating profit' for the appellant's business (calculated in accordance with cl 1.1 of the lease) over the amount of $50,000 for the initial term, and thereafter as adjusted pursuant to cl 3.8(b) of the lease.

7 Within 30 days after the end of each calendar month during the term of the lease, the appellant was required to furnish to Kareelya a statement of the net operating profit during that month: cl 3.10. Within 120 days after the end of each year of the term, the appellant was required to deliver to Kareelya an audited profit and loss statement showing the result of operations at the premises during that year: cl 7.6. Those audited accounts had to include a certificate of the auditors certifying the net operating profit for that year: cl 3.11.

8 The lease was conditional upon the grant of a liquor licence for the premises on or before 31 December 2003.

9 Subsequently, the parties entered into a variation of the lease. The evidence did not reveal when that occurred but it was common ground that it occurred prior to 27 June 2003. The variations to the lease included the substitution of a new cl 3.8. The new cl 3.8 provided, in effect, for the calculation of the Additional Rent by reference to the gross operating profit of the business conducted by the appellant on the premises.

10 The original lease and the variation were submitted to the Department of Racing Gaming and Liquor on 27 June 2003 for approval pursuant to s 104(3) of the Act. The Director subsequently granted to the appellant a special facility licence under the Act, on which the approval under s 104(3) was endorsed. The special facility licence produced in evidence at the trial was for the period commencing May 2008, but it was common ground that it was in identical terms to the original licence. The approval endorsed on it was as follows:

SECTION 104 APPROVAL

Pursuant to section 104(3) of the Act, the [appellant] is authorised to enter into an Agreement/Arrangement with Kareelya Investments Limited as set out in the lease document lodged with the Department of Racing, Gaming and Liquor on 27 June 2003.

11 After it obtained the special facility licence, the appellant carried on the hotel business on the premises as the licensee under the Act. That business involved the sale of liquor under the terms of the licence. It was common ground that the Additional Rent payable under cl 3.8 involved the participation of Kareelya (as the Lessor) in the proceeds of the business carried on under the licence within the meaning of s 104(1).

12 It seems that no issue arose in relation to the payment of Additional Rent while Kareelya remained the Lessor. The current dispute arose after Kareelya sold the premises to the respondent in or about June 2007.

13 The point at which that dispute occurred is not clear from the material before us. It seems, however, that the appellant did not exercise its option to renew the lease and vacated the premises upon the expiration of the initial term on 31 July 2008. Up to that point it had paid, in addition to other rent, an amount of $76,503 by way of Additional Rent.

14 Subsequently, the respondent required the appellant to provide audited accounts for the financial year ended 30 June 2008, pursuant to cl 7.6 of the lease, to enable outstanding Additional Rent to be calculated. The appellant declined to do so. It contended that cl 3.8 of the lease was unenforceable by the respondent on the ground that receipt of the Additional Rent by the respondent would be contrary to s 104 of the Act, the respondent not having obtained the approval of the Director to participate in the proceeds of the hotel business. The appellant argued that as the provision of the audited accounts under cl 7.6 was only for the purposes of calculating Additional Rent under cl 3.8 and, as it was not liable to pay Additional Rent, it was not required to produce the audited accounts.

15 The respondent accepted that cl 7.6 existed solely for the purpose of enabling the calculation of Additional Rent, but maintained that it was entitled to receive the Additional Rent. The respondent argued that the approval of the Director was unnecessary because it had not entered into any agreement or arrangement with the appellant within the meaning of s 104 of the Act. The arrangement or agreement contained in cl 3.8 of the lease agreement had been approved by the Director and, as the registered proprietor, the respondent had simply taken the benefit of the provisions of the lease, including the provision as to Additional Rent, as successor in title to Kareelya, pursuant to s 77 of the PLA.

16 The respondent commenced proceedings against the appellant claiming, amongst other things, orders that the appellant provide it with the audited accounts and that the appellant pay on demand any Additional Rent found owing by reference to the audited accounts.

17 The respondent subsequently applied for summary judgment under O 14 of the Rules of the Supreme Court 1971 (WA) on the ground that the appellant had no arguable defence to the claim. The appellant in turn applied for summary judgment pursuant to O 16 on the basis that the respondent's claim disclosed no reasonable cause of action.

18 Those applications came before Master Sanderson on 13 August 2009. At that point it was apparently determined that the most appropriate course was to set the matter down for trial. At the hearing on 13 August 2009 orders were made that the matter be entered for trial and the respective applications for summary judgment be adjourned sine die. Although no defence had been filed by the appellant, it seems to have been accepted by the parties that the substantive issue to be determined at the trial was whether, as between the appellant and the respondent, the provision in the lease for the payment of Additional Rent contravened s 104(1) of the Act and was unenforceable by the respondent.

19 The trial of the action took place on 9 September 2009. In reasons for decision delivered on 13 October 2009, the primary judge held that the respondent was entitled to recover the Additional Rent: Primewest (Lot 4 Davidson Street Kalgoorlie) Pty Ltd v Broadwater Hospitality Management Pty Ltd [2009] WASC 304. His Honour concluded, in substance, that where an agreement or arrangement for a person other than the licensee to participate in the proceeds of the business had been approved under s 104 of the Act, it was enforceable by a subsequent lessor who took the benefit of the relevant provision under the lease pursuant to s 77 of the PLA. The primary judge found that the respondent was simply taking the benefit of an approved agreement or arrangement, not entering into a new agreement or arrangement. Accordingly, the approval of the Director under s 104(3) was not required.

20 His Honour made a declaration that the appellant was required to pay Additional Rent owing pursuant to the lease for the period 7 September 2007 to 30 June 2008, calculated by reference to the audited accounts of the appellant. He ordered, amongst other things, that the appellant deliver the audited accounts to the respondent by no later than 30 November 2009.

21 On 4 December 2009, the appellant was granted a stay of the enforcement of the orders of the primary judge pending the determination of the appeal.

22 It is unnecessary to set out the grounds of appeal relied on by the appellant. In substance, the issue on the appeal was whether the primary judge had erred in finding that the respondent had not entered into an agreement or arrangement with the appellant to participate in the proceeds of the business of the appellant carried on under the special facility licence, within the meaning of s 104(1)(b) of the Act.

23 So far as it is relevant, s 104 of the Act provides as follows:

(a) enters into partnership with another person in relation to the business carried on under the licence;

(b) enters into any agreement or arrangement under which another person may participate in the proceeds of the business carried on under the licence; or

(c) remunerates another person by reference to the proceeds or profits obtained from the business carried on under the licence or by reference to the quantity of liquor sold,

the licensee and that other person each commit an offence.

(2) Subsection (1) does not apply to or in relation to any agreement or arrangement in respect to -

any other agreement or arrangement that is entered into with the approval of the licensing authority ...

(a) on the application of an interested person, approve an agreement or arrangement ...

24 Section 50(2)(b) of the Interpretation Act 1984 (WA) provides, relevantly, that where under a statute a person has power to grant approval, the power includes a power to impose reasonable conditions subject to which the approval may be granted. A power to grant approval also includes the power to withdraw the approval: s 50(2)(c).

25 It was not in issue between the parties that the benefit of each of cl 3.8 and cl 7.6 of the lease passed with the land under s 77 of the PLA.

26 The question on the appeal was whether, upon or following the sale of the premises, the appellant had 'enter[ed] into any agreement or arrangement under which [the respondent] may participate in the proceeds of the business carried on under the licence', within the meaning of s 104(1). As we have mentioned, it was common ground that cl 3.8 of the lease constituted an agreement or arrangement of that kind. The essential issue, therefore, was whether the appellant had 'entered into' an agreement or arrangement with the respondent to pay Additional Rent pursuant to cl 3.8.

27 It was submitted on behalf of the appellant that s 104 fell to be construed having regard to the objects and purpose of the Act and, in particular, to the object of the Act 'to provide adequate controls over, and over the persons directly or indirectly involved in, the sale, disposal and consumption of liquor': s 5(2)(d). The clear intention of the legislature, it was submitted, was to prevent the participation, direct or indirect, of undesirable persons in such a business or the proceeds of it.

28 Counsel argued that, consistent with that object, there are strict controls on the grant and transfer of licences under the Act and on the persons who may be involved in such a business. Thus, under s 33, the licensing authority has an absolute discretion to grant or refuse an application for a licence under the Act, whether or not the application meets the requirements of the Act. Pursuant to s 37, on an application for the grant or transfer of a licence the licensing authority must be satisfied, among other things, that the applicant or transferee, and where that is a corporation, each person who occupies a position of authority in it, is a fit and proper person, and that each person directly or indirectly interested in the application or the business, or its profits or proceeds, is a fit and proper person to be so interested.

29 Counsel for the appellant argued that the interpretation of s 104 found by the primary judge would defeat the object and purpose of the Act and is one which could not have been intended by the legislature. It would mean that, notwithstanding that on the grant or transfer of a licence it must be established that a person who is to participate in the proceeds of the business was a fit and proper person to do so, once an approval had been granted any person - even a person who would not have been approved by the Director - could become entitled to share in the proceeds of the business simply by the assignment to them of the approved person's contractual entitlement to receive the proceeds.

30 Counsel for the appellant submitted (ts 38, 56) that, construed in that context, the words 'enters into any agreement or arrangement' in s 104 should be given a wide meaning to include the situation where the 'entry' into the agreement or arrangement by the licensee is involuntary or passive. It was argued that on the proper construction of s 104(1)(b), the appellant 'entered into' an arrangement to share the proceeds of the business with the respondent at the point at which Kareelya assigned the reversion to the respondent. Alternatively, if it is necessary to find that it involved a consensual element on the part of the appellant, that is to be found in what amounted to the standing consent of the appellant, through the lease, to an assignment of Kareelya's interest in the lease. The breach of s 104 occurred when any specific assignee took the benefit of the Additional Rent provision without that assignee having obtained approval under s 104 (ts 75). As a further alternative, it was submitted that the appellant entered into an arrangement to share the proceeds of the business with the respondent when it acknowledged its obligation under cl 3.8 by paying Additional Rent to the respondent.

31 In our view, none of those contentions is sustainable.

32 The general principles of statutory construction are well-established. A statutory provision is to be construed so as to give it the meaning the legislature is taken to have intended it to have. Ordinarily, the words of a statutory provision are to be construed according to their literal or grammatical meaning, but that principle is not to be applied inflexibly. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute, or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning: see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [78]. A construction of the statute which would promote its purpose and objects is to be preferred to a construction that would not: s 18 Interpretation Act 1984 (WA).

33 The primary objects of the Act are set out in s 5(1) and are as follows:

(a) to regulate the sale, supply and consumption of liquor; and

(b) to minimise harm or ill-health caused to people, or to any group of people, due to the use of liquor; and

(c) to cater for the requirements of consumers for liquor and related services, with regard to the proper development of the liquor industry, the tourism industry and other hospitality industries in the State.

34 Section 5(2) provides that in carrying out its functions under the Act the licensing authority is to have regard to the primary objects of the Act and also to certain secondary objects, one of which, as mentioned above, is 'to provide adequate controls over, and over the persons directly or indirectly involved in, the sale, disposal and consumption of liquor': s 5(2)(d).

35 To give effect to its objects, the Act establishes a system of licensing persons who are permitted to sell liquor and imposes conditions as to the manner and circumstances in which a licence holder may sell liquor. It is an offence for a person to sell liquor except in accordance with a licence or permit issued under the Act: s 109.

36 Part 2 of the Act establishes the licensing authority, consisting of the Liquor Commission and the Director, and sets out the nature and form of proceedings before them. The Director is responsible for the administration of the Act and for determining applications made under the Act, except to the extent that that is reserved to the Commission: s 13.

37 Part 3 deals with the various types of licenses which may be issued under the Act. A licence issued under the Act vests personally in the licensee and is not capable of being vested in any other person except in accordance with the Act: s 30A. Under s 33, the licensing authority has an absolute discretion to grant or refuse an application under the Act on any ground, or for any reason, that it considers in the public interest, and an application may be refused even if it meets all the requirements of the Act. The licensing authority cannot grant an application for a licence, or grant approval to the transfer of a licence, unless it is satisfied, amongst other things, that the applicant or transferee (and where that is a corporation, each person who occupies a position of authority in the corporation) is a fit and proper person, and that each person directly or indirectly interested in the application or the business, or its profits or proceeds, is a fit and proper person to be so interested: s 37(1), s 82, s 84(4). In determining whether a person is a fit and proper person, the licensing authority is required to consider various matters including the creditworthiness, character and reputation of the person, and may consider the character and reputation of anyone suspected by the licensing authority of being associated with the person: s 33(6), s 33(6a). Under s 91, the Director may suspend the operation of a licence if the Director considers it in the public interest to do so.

38 Part 3 also deals with the disciplinary powers of the Liquor Commission under the Act. Under s 95, the Commission may take disciplinary action on a complaint by the Director or the Commissioner of Police in a wide range of circumstances including where a licensee is, or becomes, an unsuitable person to hold a licence under the Act: s 95(4)(g); or where a person holding a position of authority in a body corporate that holds a licence, or who is interested in the business or the profits or proceeds of the business, is or becomes not a fit and proper person to hold the position or be so interested: s 95(4)(h). Under s 96, where a proper cause for disciplinary action is made out the Commission has extensive powers, including the power to cancel, suspend or impose a condition on a licence, or disqualify a person from holding a position of authority in a body corporate that holds a licence, or from being interested in a business, or the profits or proceeds of a business, carried on under a licence.

39 The conduct of a business under a licence is dealt with in pt 4. It provides, amongst other things, that the conduct of the business is the responsibility of the licensee and must always be supervised by a natural person who, where a licensee is a natural person, shall be the licensee, and otherwise shall be a person approved by the Director under s 35B as a fit and proper person to manage licensed premises: s 100. Where a licence has been granted to a corporation, s 102 imposes controls on any change in management or control of the corporation. Under s 102, a person who, without the authority of the licensing authority, assumes a position of authority in a corporate licensee, or a shareholder who (except in certain specified circumstances) increases or decreases their shareholding, commits an offence. Under s 103, a person who becomes an owner of licensed premises must give notice in writing to the Director within seven days of acquiring an interest in the premises. As mentioned above, s 104(1)(b) provides that it is an offence for a licensee to enter into an agreement or arrangement under which another person may participate in the proceeds of the business carried on under a licence, without the approval of the Director.

40 Turning then to s 104(1)(b), the ordinary meaning of 'enter into' is (relevantly) to 'take upon oneself (a commitment, duty, relationship etc); bind oneself by, subscribe to, (an agreement)': The New Shorter Oxford English Dictionary. That is, what is 'entered into' is taken upon or assumed by, not imposed outside the control of, the person concerned. Moreover, in construing s 104(1) it is significant that a licensee who 'enters into' the specified agreement or arrangement without the approval of the Director commits an offence.

41 On the sale of the land to the respondent by Kareelya, the effect of s 77 of the PLA was that the appellant became liable by operation of law to pay the Additional Rent to the respondent. There is no suggestion that the appellant played any part in the sale of the land, but rather that it occurred independently of the appellant and was entirely outside the appellant's control. The liability of the appellant to pay Additional Rent to the respondent under cl 3.8 was simply a legal consequence of the sale of the land by Kareelya to the respondent. In our view, on the ordinary meaning of s 104 it cannot be said that the appellant thereby 'entered into' an agreement or arrangement with the respondent within the meaning of s 104.

42 Nor do we accept that on the ordinary meaning of s 104 the appellant entered into an agreement or arrangement in contravention of s 104(1)(b) simply by reason of the appellant entering into the lease on terms which permitted the assignment of the reversion. No contravention would arise by virtue of such a term in an 'agreement or arrangement' if, under s 104(2), it was entered into with the approval of the licensing authority. For the reasons in [50] - [59] below, the appellant's entry into the lease, containing those terms, was expressly approved by the Director under s 104(2). Nor, in our view, can it be said that the appellant 'entered into' such an agreement or arrangement when it acknowledged an obligation under cl 3.8 by the payment of Additional Rent. It is clear that the payment was made pursuant to the terms of the lease. The payment of the Additional Rent simply reflected that existing agreement or arrangement. The appellant did not enter into any further agreement or arrangement by the payment of the Additional Rent.

43 We do not accept the appellant's submission that it would defeat the object and purpose of the Act if s 104 were construed in that way.

44 There are clearly stringent restrictions in the Act concerning the grant and transfer of licences, directed to ensuring that the holder of a licence, who is charged with responsibility for the proper conduct of the business carried on under the licence, is a fit and proper person to be a licensee. But we do not discern in the Act an intention that an approval granted under s 104 is limited in the manner contended for by the appellant. Section 104 clearly must be read in light of the object of the Act to provide adequate controls over the persons directly or indirectly involved in the sale, disposal and consumption of liquor. The evident purpose is to prevent undesirable persons from being in a position to influence or affect the conduct of a business conducted under a licence through their participation in the proceeds of the business.

45 It is obvious, however, that agreements or arrangements by which a third party may participate in the proceeds of a business may differ greatly in their nature and effect and, in particular, in their capacity to enable the person who is to participate in the proceeds to influence or affect the conduct of the business carried on under the licence. What is necessary in order to ensure adequate control over the persons who are entitled to participate in the proceeds of the business will vary according to the nature of the agreement in question. In any particular case, it is plainly open to the Director to refuse an application for approval of an agreement or arrangement under s 104 unless satisfied that the person who is to participate in the proceeds of the business is a fit and proper person for that purpose. It is also open to the Director to limit an approval granted under s 104 to a specified person or persons, or, in the case of a corporation, while it remains under the control of specified persons, if the Director considers it appropriate to do so. Whether or not the Director considers some such restriction or limitation is necessary in order to provide adequate controls over persons who will be involved in the sale of liquor will no doubt depend upon, amongst other things, the nature of the agreement or arrangement under consideration and the capacity it provides for the person who is to participate in the proceeds to influence or affect the conduct of the business.

46 In that context, it is notable that while s 102 of the Act requires any change of control or shareholding in a corporate licence holder to be first approved by the Director, the legislature has imposed no such requirement in relation to a corporation which participates in the proceeds of the business on the basis of an approval granted under s 104. In the course of argument on the appeal, counsel for the appellant appeared to accept that the approval of the Director under s 104(3) would not have been required if the respondent, rather than acquiring the freehold title in the land, had instead simply acquired the shares (or a controlling interest) in Kareelya. It was submitted that the latter simply reveals a lacuna in the Act. We do not accept that submission. The fact that no such restriction exists in the latter case reflects, in our view, a recognition that the stringent conditions which apply in respect of a licence may not be necessary or appropriate in respect of an arrangement or agreement under s 104.

47 We do not, therefore, consider there is any reason to read s 104 other than its ordinary meaning and in our view there is good reason why it should not be construed in the manner contended for by the appellant. To construe s 104 as contended for by the appellant would mean that in circumstances such as the present case the sale of the land by the lessor during the term of the lease - an event over which ordinarily the lessee would have no control and of which the lessee may even have no knowledge - would result in an offence being committed by the lessee. Such a result could not have been intended by the legislature.

48 In our opinion, the primary judge was correct to conclude that the respondent did not enter into any agreement or arrangement within s 104(1)(b) and therefore the entitlement of the respondent to recover the Additional Rent is not affected by that provision.

49 There is, in any event, a further basis upon which we consider that it was unnecessary for the respondent to seek approval under s 104(3). In our opinion, the participation of the respondent in the proceeds of the business fell within the terms of the original approval granted by the Director under s 104.

50 We have previously set out the terms of the approval granted by the Director, but it is convenient to repeat them. They were as follows:

Pursuant to section 104(3) of the Act, the [respondent] is authorised to enter into an Agreement/Arrangements with Kareelya Investments Limited as set out in the lease document lodged with the Department of Racing, Gaming and Liquor on 27 June 2003.

51 What, therefore, was approved by the Director was the agreement or arrangement between the appellant and Kareelya 'as set out in the lease document'.

52 By cl 3.8 of the lease, Kareelya and the appellant agreed (relevantly) that 'the Lessee will pay to the Lessor additional rent calculated in accordance with paragraph (b) of this clause 3.8 ('Additional Rent')'. The 'Lessor' and the 'Lessee' are each defined terms. In cl 1.1 of the lease 'Lessor' is defined to mean Kareelya and (relevantly) its 'successors ... and ... assigns'. The agreement, therefore, between Kareelya and the appellant, as set out in the lease, included the agreement in cl 3.8 that the appellant would pay Additional Rent to Kareelya, its successors and assigns.

53 In short, on a plain reading of its terms the approval granted by the Director was approval for Kareelya and its successors and assigns to participate in the proceeds of the business.

54 Counsel for the appellant argued that on the proper construction of s 104 an approval under that provision is not simply approval of the arrangement or agreement concerned but also of the actual persons who are the parties to that arrangement or agreement. That, it was submitted, is consistent with the object of the Act to prevent undesirable people having an interest in a business carried on under a licence. In this case, the approval was limited to Kareelya and the appellant. Counsel submitted that it was not to the point that under the lease the payment of Additional Rent under cl 3.8 was to be made to the 'Lessor', which was defined to include successors and assigns of Kareelya. It was submitted that the approval, insofar as it might relate to successors and assigns, was not approval in respect of any actual person, so that when an arrangement with an actual person as a successor and assign crystallised the approval of the Director was required. We do not accept that submission.

55 It was open to the Director to refuse to grant approval while the lease document was in that form, or to grant approval under s 104 subject to a condition or conditions which precluded any successor or assign of Kareelya from receiving Additional Rent pursuant to the approval, if the Director considered that such a restriction was necessary or appropriate. The Director did not do either.

56 It is clear from the terms of s 104 that the Director may approve an agreement or arrangement in which a person, other than the other party to the agreement or arrangement with the licensee, is to participate in the proceeds of the business. There is no reason the Director could not approve such participation by a person in the future by reference to the capacity in which they may became entitled to participate, whether it be, for example, as personal representative, administrator, assign or successor. Whether or not that is appropriate in any case will no doubt depend upon the particular circumstances. That is a matter for the discretion of the Director.

57 In our view, the approval granted by the Director included a person who was a successor or assign of Kareelya under cl 1.1 of the lease.

58 The question then is whether the respondent falls within that description. In PP Consultants Pty Ltd v Finance Sector Union [2000] HCA 59; (2009) 201 CLR 648, the High Court pointed out that decisions on the meaning of 'successor' and 'assigns' in other factual situations are of little assistance. The meaning must be determined having regard to the context in which the term is used.

59 In the present context, we do not think any difficulty arises in that respect. In the lease, 'successors and assigns' plainly includes a person who takes a transfer of the fee simple in the land from Kareelya and thereby becomes entitled to the benefit of the covenants entered into between the Lessee and the Lessor. See, for example, Friary Holroyd and Healey's Breweries Limited v Singleton [1899] 1 Ch 86, 90. The effect of s 77 of the PLA is that upon becoming registered proprietor of the land, the respondent became entitled to the benefits of the Lessee's covenants under the lease. In our view, the entitlement of the respondent to receive the Additional Rent under cl 3.8 was within the terms of the approval given by the Director.

60 Finally, in the course of argument on the appeal the court raised the question of the effect of a contravention of s 104, should that be made out. For reasons that do not appear to be entirely clear, the issue of whether the effect of a contravention of s 104 rendered cl 3.8 void or unenforceable for illegality was not an issue argued before the primary judge. The appellant argued that the respondent had effectively conceded before the primary judge that if s 104 had been contravened cl 3.8 would be unenforceable. The respondent did not accept that any such concession had been made and asserted that cl 3.8 would nevertheless remain enforceable by the respondent.

61 In light of his Honour's conclusion that there had been no such contravention, it was strictly speaking unnecessary for any finding to be made on the issue at trial and his Honour made no finding on it. The issue was not raised in the appeal papers. Following oral argument on the appeal, the parties filed written submissions on the issue. The appellant submitted that the effect of a contravention of s 104 would be to render cl 3.8 void or unenforceable by the respondent. The respondent submitted to the contrary, arguing that a contravention would render the parties liable to the penalty prescribed in s 104 but would not affect the enforceability of cl 3.8.

62 In light of the decision we have reached, it is not necessary to determine the point and, in circumstances where this court has not had the benefit either of the opinion of the primary judge or oral argument on it, we consider the appropriate course is to put it aside.