Murray & Anor v Tovock Enterprises Pty Ltd [2005] NSWSC 377 | Case summary

2568/05 Wayne Michael MURRAY & Anor v TOVOCK ENTERPRISES PTY LIMITED JUDGMENT 1 HIS HONOUR: The defendant is the owner of land and premises known as The Commercial Hotel, Warialda (the Hotel). The plaintiffs are the lessees of the Hotel. The lease expires on Saturday 23 April 2005. 2 There is in force in relation to the premises an hotelier's licence (No 121393) under the Liquor Act 1982. The first plaintiff is the licensee under that licence. As Gavan Duffy CJ and Starke and Dixon JJ said in Slatter v Railway Commissioners (NSW) (1931) 45 CLR 68 at 78-79 (in respect of an antecedent version of the Liquor Act), the first plaintiff's position as licensee entitles him to exercise the rights given by the licence for the benefit of the plaintiffs so long as they are entitled to possession of the Hotel. Once that possession ceases, the first plaintiff can no longer exercise the licence. Both by the terms of the Act (s 42) and by the terms of the lease, the licence then enures, in the ordinary course of events, for the benefit of the defendant. The likelihood is that the defendant or its nominee will become the transferee of the licence after the expiry of the lease. 3 There are five poker machine entitlements, under the Gaming Machines Act 2001, allocated "in respect of" - in effect, appurtenant to - the hotelier's licence. Those entitlements are transferable. The plaintiffs say that those entitlements were allocated pursuant to their efforts and that they are entitled to dispose of them and to receive the proceeds for their own benefit. They say that they have agreed to sell three of those entitlements. The sale is subject to the approval of the Liquor Administration Board under s 19 of the Gaming Machines Act. 4 By their summons filed in Court today, the plaintiffs claim declaratory and injunctive relief. They claim a declaration that they have a legal interest in the poker machine entitlements to which I have referred, and a declaration that they will retain an equitable interest in those entitlements after termination of the lease. Further, they claim a declaration that the defendant is in breach of its duty (alleged) to act in good faith under the lease because it has not consented to, or provided its support for, the transfer of those entitlements and has not recognised those entitlements. 5 In substance, the case that the plaintiffs seek to make out (as it appears from the necessarily limited materials before me) is that the defendant, by wrongful means, has impeded the sale and approval. The wrongful means relied upon are an assertion by the defendant of a financial interest in the poker machine entitlements, that, the plaintiffs say, it does not have. 6 Next, the plaintiffs say, the sale will fall through if the Liquor Administration Board does not approve it prior to expiry of the lease. That will happen because the first plaintiff will cease to be licensee, or entitled to the benefit of the hotelier's licence, in respect of which the entitlements have been allocated. 7 Thus, the plaintiffs say, they will lose the benefit of their alleged interest in the entitlements. 8 The plaintiffs today seek interlocutory relief to maintain the first plaintiff's status as licensee pending consideration of and approval by the Board to a transfer of the entitlements. For the reasons explained in Slatter, that means that the plaintiffs must remain in possession of the hotel premises. 9 I am prepared to accept, for the purposes of this application, that the sale of the entitlements will fall through if approval be not given prior to expiry of the lease, and that the plaintiffs will thereby lose the benefit of their alleged interest in the entitlements. However, on the evidence, I do not think that it can be said that the defendant has, wrongfully or otherwise, impeded the sale and approval process. 10 The plaintiffs did not exercise their option for renewal under the lease. They knew, at all material times, that the lease would come to an end on 23 April 2005. They must have known, therefore, that if they were to remain in possession of the premises, it could only be by a holding over under clause 12.02 of the lease. They knew by 16 March 2005 that the defendant would not consent to any holding over. But the plaintiffs did not sell their entitlements until about 1 April 2005. 11 I was informed from the bar table that the sale was delayed (and that at least 30 other sales have been delayed) pending the decision of the Court of Appeal in Jabetin Pty Ltd v Liquor Administration Board [2005] NSWCA 92. That decision dealt with two questions. One was whether the owner of hotel premises had a financial interest in an hotelier's licence for the purposes of s 19(3)(c) of the Gaming Machines Act - the provision dealing with transfer of entitlements. The other question was whether the licensee of hotel premises had an interest pursuant to a constructive trust in poker machine entitlements or their proceeds of sales. The Court of Appeal dealt with the first question by saying that the owner of hotel premises was not, by virtue of that ownership, a person having a financial interest for the purposes of s19(3)(c). They dealt with the second question by saying that, in the circumstances of the particular case, there was no interest as beneficiary, and nothing unconscionable in the position of the owner in asserting its entitlement to the benefit of the poker machine entitlements upon termination of the lease. The former decision is of general importance; the latter, although important, depends on the circumstances of the particular case. 12 I was also informed from the bar table that the Liquor Administration Board froze all applications for consent pending the decision in Jabetin. 13 Mr Rich of counsel, who appeared for the plaintiffs, indicated that his instructing solicitor (who apparently has expertise in these matters) could give evidence of them. I am prepared to proceed on the basis that both matters to which I have referred as having been propounded from the bar table could have been made the subject of evidence and would have been accepted for the purposes of an interlocutory hearing. 14 However, I do not think that these considerations could be regarded as decisive. If the delay in selling is explained by reference to the decision in Jabetin, then it merely confirms that the position in which the plaintiffs now find themselves cannot be laid at the feet of the defendant; it cannot be said that the defendant was in any way responsible for such delay as there may have been (and, with respect, there does not have appear to have been any) in handing down that decision. 15 I therefore conclude that even if - as would appear to be the case, having regard to the decision in Jabetin - the defendant does not have a financial interest in the hotelier's licence for the purposes of s 19(3)(c) of the Gaming Machines Act, the conduct alleged against the defendant cannot be said to have impeded in any relevant way the sale or approval process. 16 The plaintiffs put their case in two ways. The first was based upon clause 12.02 of the lease. The second, as I have indicated, was based on the alleged unconscionable conduct, or breach of implied term, on the part of the defendant; alternatively on what was said to be the wrongful withholding of support pursuant to s 19(3)(c). 17 Clause 12.02 of the lease deals with holding over. The first sentence reads: "In the event of the lessees holding over after the expiration or determination of the term hereby granted with the consent of the lessors the lessees shall become a monthly tenant only of the lessors."

The balance of the clause deals with rent and other matters during the period of any holding over. 18 The clause should be considered also in conjunction with clause 18.01. That clause reads: "At the expiration or other sooner determination of the term: (1) the lessee will peaceably surrender an [sic] yield up to the lessor, the Hotel in good and substantial repair and condition in all respects to the extent of the lessee's covenant herein contained. ... (3) the lessees or licensee will cause to be transferred to assigned to [sic] the lessor, or its nominee, the licence and will do all such other acts or things necessary to effect such transfer. ..." 19 The plaintiffs submitted that the requirement for consent under clause 12.02 only arises where they hold over after "the sooner determination of the term hereby granted". 20 I do not agree. Even though this is an interlocutory application, the question of construction, being a question of law, is one that should be decided on its merits unless, for good reason, it is not possible to do so. In the present case, there is no good reason not to do so; and, I think, every good reason to do so. 21 Clause 12.02 concerns holding over after the term of the lease has come to an end. The term may come to an end for a number of reasons. It may come to an end by effluxion of time. Or it may come to end, before the term granted has expired, for circumstances such as resumption, damage or destruction (see clause 4.01). This list is not intended to be exhaustive. 22 Where the term comes to an end, then the defendant is entitled to possession. Clause 18.01 makes that clear. It makes it clear, further, that the defendant's right to possession at the end of the term of the lease arises whether the lease expires by effluxion of time or whether it expires, for some other cause, ahead of time. 23 The right to possession accrues unless there is a holding over. There is no basis for the interception of the right to be dependent on consent in one class of termination (early determination) but not the other (effluxion of time). In either case, I think, the clear intention of the parties is that the contractual (and, I would add, general law) right of the defendant to possession at the end of the lease is only to be intercepted if the defendant consents. 24 In my judgment, it is clear in clause 12.02 that the words "with the consent of the lessors" qualify the words "In the event of the lessees holding over". The intervening words, "after the expiration or sooner determination of the term hereby granted" are intended to show that clause 12.02 may be engaged for whatever reason the term comes to an end. I see no basis for construing the words "with the consent of the lessors" as applying not to the obvious thing - a holding over that would be in breach of the lessor's contractual and general law right to possession - but to one only, of a multitude, of causes for the term to come to an end. 25 I therefore reject the first basis on which the plaintiffs put their case. 26 I turn now to the second basis. I have already indicated the very serious concerns that I have, as matter of fact, with the way in which this aspect of the case is put. In my judgment, even considering the matter at the level of whether there is a serious question to be tried, this aspect of the way in which the case is put is not supported by the evidence. There is no evidence to support even a tentative conclusion that the defendant's conduct - be it wrongful or otherwise - may have impeded the process of sale and approval so that it cannot be completed by 23 April 2005. Indeed, accepting as having been proved, sufficiently for present purposes, what was put to me from the bar table, it would appear that the real reason why the defendants are likely to lose their rights is that the availability and extent of those rights did not become apparent until the Court of Appeal gave its decision in Jabetin. As I have already indicated, that is not something attributable to the defendants. 27 Even if I were wrong in this, I do not see that the matters relied upon could give rise to any equity to have the lease extended. It was put that an extension of the lease, presumably pursuant to the holding over clause, was necessary to enable the plaintiffs to enjoy the benefit of the rights that, the decision in Jabetin indicates, they have. It may very well be that, having been given those rights (as it were) by the decision, the rights will be taken away by expiry of time. But I do not see in that any unconscionability on the part of the defendant sufficient to enable me to conclude that its withholding of consent under clause 12.02 is of such an unconscionable character that, regardless of any question of consent, I should enforce a holding over. 28 There is a third reason why, I think, the second basis on which the case is put does not support the application for interlocutory relief. That is because if, contrary to my view, the defendant has perpetrated some legal wrong and if, again contrary to my view, that legal wrong has caused or will cause the plaintiffs loss or damage, the damages are readily calculable and damages would, overall, be an adequate remedy. On the plaintiffs' case, the amount of their loss would be the net sale price. I do not know what that amount is. But no submission was put that the defendant could not meet the amount if called upon to do so. 29 Whether the sale would be completed, so that the plaintiffs would receive the proceeds, depends of course on whether the plaintiffs could get the approval of the Liquor Administration Board. The damages are, therefore, subject to some assessment of the probability of that occurrence. But this does not mean that they are not an adequate remedy. The courts every day assess possibilities, or probabilities, in calculating entitlement to damages - see (by way of example only) Malec v JC Hutton Pty Ltd (1990) 169 CLR 638. 30 Mr Rich submitted that it was for the Board, and not this Court, to determine applications for approval on their merits. He relied on the decision of Campbell J in Wonall Pty Limited v Clarence Property Corporation Ltd (2003) 58 NSWLR 23. That is undoubtedly correct. Where the question of approval is concerned, it is the Board that bears the task of deciding it and the role of this Court is limited to its supervisory jurisdiction under s 69 of the Supreme Court Act 1970. 31 But this does not mean that in an action for damages this, or another, court could not assess, having regard to the statutory scheme and the material that would have been put before the Board, the prospects of success. It does not mean that damages are so difficult of calculation that they could not provide an adequate remedy. True it is that the question of approval is given to the Board in its discretion. True it is that the question of approval depends in several respects, as s 19(3) makes clear, on the Board's forming certain opinions. But it is to be presumed that the Board will act reasonably, and in accordance with law. There is no reason why a Judge of this, or another, Court could not assess the likelihood of someone in the position of the Board acting reasonably and in accordance with law in reaching a particular conclusion on the basis of particular material. 32 What I have said is sufficient to dispose of the application for interlocutory relief. There is, however, one other matter I wish to mention. Mr Rich put that what was sought was merely to "hold the status quo." I do not agree. On the evidence, the relief sought would change the status quo by forcing on the defendant tenants that (it has said consistently) it does not further want. 33 But there is another, and more serious, reason why the application, is successful, would not merely hold the status quo. It would, I think, change it in a fundamental way. It would do so by giving the plaintiffs a chance to enjoy rights that, through the events that have happened which cannot be attributed to any act or default or other wrongful conduct on the part of the defendant, they are at risk of losing. In other words, not only would relief of the kind sought force on the defendant tenants that, apparently, it does not want; it would alter in a substantial, and irretrievable, way the nature of the benefits and entitlements that, under the statutory schemes in place, will accrue to it on termination of the lease. 34 I therefore dismiss the application for interlocutory relief. 35 I stand the proceedings over to the Registrar's list at 9:30 am on Tuesday, 26 April 2005. 36 I reserve the costs of this application. **********

Murray & Anor v Tovock Enterprises Pty Ltd

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