Polish Club Limited v Gnych

Judgment 1THE COURT: On 16 September 2014 the Court published its reasons in this matter (the principal judgment). It made orders, relevantly, allowing the appeal in part and setting aside Declarations 1 and 2.4 and Orders 4 and 5 made by the primary judge, Ball J, on 30 September 2013: Polish Club Limited v Gnych [2014] NSWCA 321. The Declarations and Orders made by the primary judge are set out at [7] of the principal judgment. For convenience we shall adopt in this judgment the shorthand expressions used in the principal judgment. 2The effect of this Court's orders was that the respondents' lease described in Declaration 1 made by the primary judge was held to be void and unenforceable. However, the Club's challenge to the validity of the respondents' licence of the area known as the "mirror hall" and which is the subject of Declaration 2 and Order 3 made by the primary judge, remained unaffected. An issue therefore arose as to whether that Declaration and Order should remain with appropriate amendments or whether they should also be set aside. The Court directed the parties to file written submissions with respect to this issue which they have provided. 3It was common ground that if the Declaration and Order with respect to the licence of the mirror hall were to be retained then Declaration 2.2 should be deleted and the following substituted: "The licence to subsist for a term of five years as and from 31 March 2012." This amendment would be necessary to reflect the fact that the term of the licence the subject of Declaration 2.2 as made by the primary judge was linked to the currency of the lease referred to in Declaration 1, which this Court set aside. 4The respondents submitted that the primary judge's Declaration 2 and Order 3, subject to appropriate amendments to accommodate the fact that the Declaration with respect to the lease of the restaurant area has been set aside, should be retained on the basis that the licence agreement was a different and separate agreement from that which constituted the lease of the restaurant area and, therefore, is capable of standing alone, particularly as its validity was confirmed in the primary judgment. Although the respondents' primary position was that there should be no fee payable for the licence, they accepted in the alternative that Declaration 2.4 would need to be deleted and a declaration substituted to the effect that the respondents should pay a licence fee in respect of the mirror hall, such licence fee to be determined in accordance with an appropriate valuation. 5It was further submitted that there was utility in Declaration 2 and Order 3 being retained as the licence remained valuable and useful to the respondents even if diminished as a consequence of their inability to access the restaurant and the kitchen for the purpose of servicing functions in the mirror hall. Nevertheless, it was contended that the mirror hall could be used by the respondents for function purposes independently of the restaurant and kitchen and that, in particular, there was no necessity for the kitchen to be used for the purpose of servicing such functions as they could be serviced by outside caterers. 6As to access to the mirror hall, it was submitted that in order to give commercial efficacy to the licence agreement it would be implied that the respondents, their employees and invitees are entitled to a right of access to the mirror hall, in common with the Club, its servants, agents and invitees, via the main entry to the Club on the ground floor and by use of the stairs leading to the mirror hall on the first floor as well as access to the toilets on that floor. 7The Club submitted that there was no utility in Declaration 2 and Order 3 being retained in circumstances where it was never intended that the mirror hall should be used independently of the restaurant. It is apparent that, in particular, the kitchen was intended to service both the mirror hall and the restaurant. It was submitted that Declaration 2 as made by the primary judge did not make provision for the lawful ingress or egress to the mirror hall of the respondents as a result of which, if Declaration 2 was to remain in its present form, the respondents would have a non-exclusive licence to a space in the Club in respect of which they had no right of access through other parts of the premises and, therefore, it would be of no practical use. 8A number of authorities were referred to in support of the proposition that the making of Declaration 2 and Order 3 involved an exercise of the primary judge's discretion; that the setting aside of Declaration 1 required that discretion to be re-exercised by this Court but that that discretion should not, in the present circumstances, be exercised where no good purpose would be served by retaining Declaration 2 and Order 3. This is particularly so as it would now be necessary for there to be a determination of an appropriate licence fee as well as an express right granted to the respondents, their employees and invitees to utilise those parts of the premises necessary to provide access to the mirror hall as well as a right to their use of the toilets on the first level. 9In our view it is plain from the negotiations that preceded as well as succeeded the initial occupation by the respondents of both the restaurant area and the mirror hall, that their licence to use the latter was interdependent with their lease of the restaurant area. This is made plain by Declarations 2.2 and 2.4 as made by the primary judge. Although Declaration 2.2 could be amended to accommodate the present situation, any amendment to Declaration 2.4, which the respondents concede would need to be made, would require determination of an appropriate licence fee which inevitably will lead to further disputes between the parties whose relationship is now toxic. That this is so is made clear by the Club's response to the possibility referred to at [91] of the principal judgment that it may be that the respondents would be able to negotiate a licence of the restaurant area which they can then use in conjunction with their licence of the mirror hall. That response was that the Club did not intend to enter into an agreement with the respondents which would enable them to utilise the restaurant or kitchen adjacent to the mirror hall. 10In our view the interdependence of the licence of the mirror hall with the lease of the restaurant area is such that once the respondents are deprived of the latter that deprivation undermines any relevant utility in their retention of the licence to use the mirror hall even on the limited basis which the primary judge had accepted and which is reflected in Declaration 2.3. For these reasons in our view Declaration 2 and Order 3 should also be set aside upon the basis that absent any lease of the restaurant area, no good purpose would be served by retaining that Declaration and Order. There could be no relative certainty that the parties could agree on an appropriate licence fee for the use of the mirror hall as a consequence of which it would be necessary for such a fee to be determined by a third party which would be inconsistent with the intention of the parties as reflected in Declaration 2.4 as made by the primary judge. 11Notwithstanding that the Club has now had total success in the appeal, its success with respect to the setting aside of Declaration 2 and Order 3 is not as a consequence of its contentions at the hearing of the appeal in support of its argument that the licence of the mirror hall was invalid, a contention which was rejected. In these circumstances we see no reason to alter Orders 6 and 7 made by the Court on 16 September 2014 with respect to the costs of both the trial and the appeal. 12Accordingly, the Court makes the following further orders: