Screen v J B Sullivan Pty Ltd

NCAT Appeal Panel|2021-05-31

Introduction

The appellant appeals a decision of the Tribunal made on 26 February 2021 which dismissed the appellant's claims that his restaurant lease was void and that there was unconscionable conduct contrary to s 62B of the Retail Leases Act 1994 (NSW) on the part of the respondent as lessor.

Is an extension of time required to bring the appeal?

The Tribunal decision under review was delivered on 26 February 2021. Clause 25(4)(c) of the Civil and Administrative Tribunal Rules 2014 (NSW) requires that an appeal be lodged within 28 days of the day on which the appellant was notified of the decision or given reasons for the decision, whichever is later. However, an extension of time may be permitted under s 41(1) of the Civil and Administrative Tribunal Act 2013 (NSW) ("the NCAT Act").
The Appeal Panel noted that the Notice of Appeal signed on 26 March 2021 was received by the Sydney Registry on 29 March 2021, namely outside the 28-day period provided for the institution of an appeal. Initially, the Appeal Panel considered that an extension of time was required under s 41(1) of the NCAT Act. However, upon further inquiry it appears that the Notice of Appeal was received by the Newcastle Registry on 26 March 2021, namely within the 28-day period, and the date stamp of 29 March 2021 denoted the date that the Notice of Appeal was received by the Sydney Registry. Accordingly, no extension of time is required. Nevertheless, even if the appeal had been lodged out of time, the Appeal Panel would have granted an extension of time in view of the negligible delay and the lack of prejudice to the respondent.

Facts

J B Sullivan Pty Ltd (the lessor) is the owner of the Regent Hotel in Kurri Kurri. Such premises contained a restaurant area. By contract for the sale of business dated 8 August 2017 the lessor sold the restaurant business to the appellant for consideration of $35,000. Further, a lease was entered into in respect of the restaurant for a two-year period, together with options for renewal, at the rent specified in the lease. Neither the commencement date nor the expiry date is specified in the lease, but it seems the appellant commenced occupying the restaurant premises on 16 August 2017.
The appellant thereafter conducted the business of a restaurant at the premises. However, due to alleged non-payment of rent and for other reasons, the lessor took possession of the premises by re-entry on 28 October 2017. As a consequence, the appellant claimed damages including the contract price paid, the replacement value of equipment not returned, legal fees and cash register receipts in the amount of $1,256.36 (though the last mentioned claim was abandoned).
The appellant alleged that he was unlawfully excluded and, in the alternative, the lease was void for illegality because the restaurant comprised part of the licensed premises subject to the hotel's liquor licence. As such, a lease, without the approval of the Independent Liquor and Gaming Authority (as defined in s 4 of the Liquor Act 2007 (NSW)), was prohibited by s 92(2) of the Liquor Act. The appellant also claimed that the lessor engaged in unconscionable conduct.

Tribunal findings

The Tribunal found that the restaurant was part of the licensed premises but that liquor was not ordinarily sold or supplied for consumption in the restaurant. The appellant was aware that he was not entitled to sell alcohol in the restaurant without a separate liquor licence. The Tribunal accepted that it was the intention of the parties that alcohol purchased in the hotel could be taken into the restaurant but no alcohol was to be sold or supplied for consumption in the restaurant.
The Tribunal did not accept that the appellant was denied access on 28 October 2017 as alleged. The Tribunal found that a meeting was held on that day, when rent was 14 days in arrears. The Tribunal found that in accordance with an oral agreement reached between the parties at that meeting, the appellant surrendered possession on that day and that the appellant was provided the opportunity to sell the business in the ensuing three months.
The appellant claimed that the landlord was required, pursuant to s 92(2) of the Liquor Act, to obtain the consent of the Authority to the grant of the lease. The lessor had not done so and accordingly the lease was void or otherwise unenforceable.
The Tribunal found that the factual circumstances of the appellant's lease were akin to those considered by the High Court of Australia in Gnych v Polish Club Ltd [2015] HCA 23 ("Gnych"). In that case, the High Court found that although a licensee or related corporation was prohibited from entering into a lease or sublease of part of the licensed premises without the approval of the Authority, the failure to obtain such authority did not render such lease invalid. Such failure exposed the lessor to a fine, but did not impact upon relations between the lessor and the lessee. The decision of the High Court overruled the decision of the New South Wales Court of Appeal in Polish Club Ltd v Gnych [2014] NSWCA 321 ("Polish Club").
The Tribunal found that whereas the decision in Gnych involved a consideration of the application of s 92(1) of the Liquor Act, which requires a licensee or a related corporation of the licensee to obtain the approval of the Authority to a lease or sublease, and s 92(2) requires the owner of licensed premises to obtain the requisite consent, the same principle should apply. Accordingly, the lease between the appellant and the lessor was a valid lease. It is this finding which is the issue for determination on this appeal.
The Tribunal made other factual findings which are not relevant for the purposes of this appeal. It should be noted that the Tribunal did not find any unconscionable conduct on the part of the lessor.

Issue on appeal

The appellant's submissions can be summarised as follows: 1. The decision of the High Court in Gnych does not relate to the present circumstances; that decision is only applicable with respect to s 92(1) (d) of the Liquor Act and has no application to s 92(2)(b); 2. The Tribunal is bound by the decision of the Court of Appeal in Polish Club in relation to ss 92(1)(a), (b) and (c) and 92(2)(a) and (b); the High Court decision only related to s 92(1)(d) and is "irrelevant and otiose" to the present appeal; 3. The decision of the Court of Appeal in Polish Club remains valid law in respect of s 92(2); it follows that the subject lease was an illegal contract as was the interdependent sale of business contract; it was open to the Tribunal to hold on public policy grounds that entry into the lease was prohibited; 4. In consequence of such illegality, the appellant sustained damages in the amount paid for the business, namely $25,000.

New issue

The appellant sought to raise a new issue on appeal, namely whether the lessor breached the provisions of the Fair Trading Act 1987 (NSW) and the Australian Consumer Law (ACL). The appellant sought to argue that the business contract contained a representation that the vendor (the lessor) had complied with "all requirements under legislation relating to the business". The respondent allegedly did not have authority to enter into the business contract in the absence of approval from the Authority. The appellant claims that the business contract was, accordingly, illegal and void.
The amendment sought to be raised for the first time involved construction of the sale agreement rather than the lease. Such issue would almost certainly have required fresh evidence and a new hearing. The application to raise the new issue on appeal was opposed by the respondent.
No explanation was proffered as to why the new issue was not raised before the Tribunal, other than the fact that the appellant did not realise that the decision of the Court of Appeal in Polish Club had been overruled by the High Court. The appellant had ample opportunity to raise such issue before the Tribunal. Irrespective, a claim under the Fair Trading Act and the ACL could have been raised as separate issues.
There is no "right" to amend: see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [96], and at [98] where the plurality (Gummow, Hayne, Crennan, Kiefel and Bell JJ) said: "… It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs".
At [102] their Honours said: "… There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. …"
Quite separate from the above principle is another matter which the Appeal Panel observes, namely the likely prospects of success of any such new issue. Since the Appeal Panel has heard no submissions on the question, nor on the evidence, the Appeal Panel points out the following: 1. The Tribunal does not have jurisdiction under the ACL with respect to retail tenancy disputes: only with respect to consumer claims: see ss 79E, 79I and 79J of the Fair Trading Act; 2. It has been held that a claim of misleading and deceptive conduct under the Fair Trading Act (as it was before the introduction of the ACL) could not be brought in association with a retail tenancy dispute under the Retail Leases Act: see Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd [1999] NSWSC 186 at [35] and Lyons Road Pty Ltd v The Owners Strata Plan 38722 (RLD) [2008] NSWADTAP 28 at [41]; 3. It would be incumbent on the appellant to demonstrate a necessary connection between the claim for breach of the sale contract, and one that can be brought as a retail tenancy dispute or an unconscionable conduct dispute under the Retail Leases Act. Such issue turns on the definition of retail tenancy dispute in s 63 of the Retail Leases Act and the requirement in s 62B that unconscionable conduct be in connection with a retail shop lease.
The Appeal Panel raises such matters to show that pursuing the foreshadowed claim referred to as the "new issue" would require considerable legal argument and potentially evidence.
As the Appeal Panel considered that the proposed new issue was distinct from the issues to be determined by the Appeal Panel, and would introduce new dimensions which had not been considered at first instance, the Appeal Panel did not grant leave. To do so, especially in view of the fact that a further hearing would be required if leave granted and potentially further evidence, would have been contrary to the guiding principle as stated in s 36(1) of the Civil and Administrative Tribunal Act, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

Submissions

The appellant submitted that the Tribunal erred in finding that the High Court's decision in Gnych was correctly applied to the present circumstances and that its application should be confined solely to the construction of s 92(1) of the Liquor Act. Further, the appellant submits that the Tribunal should have followed the reasoning in the decision of the Court of Appeal in Polish Club. Although the decision in that matter was set aside by the High Court, nevertheless the appellant claims that the reasoning of the Court of Appeal should be adopted in relation to the interpretation of s 92(2) of the Liquor Act. The Court of Appeal found that because the approval of the Authority had not been obtained in relation to a lease of a restaurant area within a club, as required by s 92(1), the lease was unenforceable. The Court of Appeal set aside orders made by the primary judge, who found that the failure to obtain authority did not render the lease unenforceable.
The lessor submitted that the reasoning of the Tribunal was correct and that it was not an error to apply the decision of the High Court in Gnych to the circumstances where the lessor was both the owner and licensee of the licensed premises.

Findings

The relevant section of the Liquor Act provides as follows: 92 Control of business conducted on licensed premises (1) A licensee or a related corporation of the licensee must not - (a) if the licensee is an individual - allow any person to have the personal supervision and management of the conduct of the business under the licence for a longer continuous period than 6 weeks except with the approval of the Authority, or (b) lease or sublease the right to sell liquor on the licensed premises, or (c) lease or sublease any part of the licensed premises on which liquor is ordinarily sold or supplied for consumption on the premises or on which approved gaming machines are ordinarily kept, used or operated, or (d) lease or sublease any other part of the licensed premises except with the approval of the Authority. Maximum penalty - 50 penalty units. (2) The owner of licensed premises must not - (a) lease or sublease any part of the premises on which liquor is ordinarily sold or supplied for consumption on the premises, or on which an approved gaming machine is ordinarily kept, used or operated, to any person other than the licensee or a related corporation of the licensee, or (b) except with the approval of the Authority, lease or sublease any other part of the licensed premises to any person other than the licensee or a related corporation of the licensee. Maximum penalty - 50 penalty units. …
The decisions of both the Court of Appeal in Polish Club and the High Court of Australia in Gnych did not refer to s 92(2) as it was not relevant. In comparing the requirements of each of subsections (1) and (2), it is obvious that the only difference is whether the entity granting the lease is a licensee or related corporation of the licensee (s 92(1)) or the owner (s 92(2)). Otherwise the substance of the two subsections is the same. The legislative intent is clearly that either the licensee or the owner must not lease or sublease a part of the premises where liquor is ordinarily sold or supplied without first obtaining the approval of the Authority.
It should be observed that in the present circumstances there are two different considerations to the facts in Gnych. Firstly, in Gnych the lessor was a licensee, and accordingly the requirements of s 92(1) applied. In the present circumstances, the lessor is both a licensee and an owner of the premises. Accordingly, both ss 92(1) and (2) prima facie have application. As a consequence, the decision of the High Court in Gnych would be applicable.
A second consideration is that while s 92 applies to a sublease or lease of any part of the premises "on which liquor is ordinarily sold or supplied for consumption on the premises", it is not clear that the requirements of the subsections (s 92(1)(c) and s 92(2)(a)) are applicable in view of the agreed fact that liquor was not sold or supplied for consumption in the restaurant.
However, the Tribunal (at [16]) expressly found that the restaurant was part of the licensed premises, thereby satisfying the requirements of s 92(1) (d) and s 92(2)(b), so that there can be no doubt that both subsections applied in the circumstances of this case.
Irrespective of these differences, the Appeal Panel considers that the overriding consideration is, as the High Court observed, the intention of Parliament. As was observed by the majority of the High Court (French CJ, Kiefel, Keane and Nettle JJ) at [40]: "Accordingly, the scope of the prohibition in s 92(1)(d) of the Liquor Act and the consequences of a contravention of the prohibition are to be determined by the language of s 92(1)(d) of the Liquor Act construed in the context of the Liquor Act as a whole". (Footnotes omitted.)
At [48] their Honours observed that there is support for the proposition that "a statute which prohibits the doing of an act under a penalty does not necessarily sterilise a legal relationship associated with that act."
At [51] their Honours explained the error in the reasoning of the Court of Appeal as follows: "… Accordingly, the vesting of exclusive possession of part of licensed premises in a person other than a licensee cannot be said to be contrary to the purpose and policy of the statute: the statute contemplates that precisely that state of affairs may be brought about by a grant by the licensee. True it is that a grant may lawfully be made only with the approval of the Authority, but the circumstance that s 92(1)(d) acknowledges that a person other than the licensee may enjoy exclusive possession is inconsistent with the Court of Appeal's understanding of the purpose and policy of the Act in this respect."
At [52] their Honours continue: "The second flaw in this aspect of the reasoning of the Court of Appeal lies in the failure to recognise the important role assigned by the Liquor Act to the Authority in relation to the supervision and management of licensed premises. That role is inconsistent with the view that the regime established by the Liquor Act for the control of licensed premises requires that a contravention by a licensee of 92(1)(d) automatically renders the lease which is granted void and unenforceable."
At [55] their Honours observed: "Finally, it is distinctly possible that, in a case where the Authority has granted its approval to a lease of part of the licensed premises, the lessee may later cause the licensee to fail to observe the requirements of the Liquor Act relating to the licence or the licensed premises. It may be accepted that such a lessee should not have the power to exclude the licensee from the leased part of the licensed premises. The Act does not provide that the lease shall be void and unenforceable in those circumstances. It deals with that possibility by arming the Authority with the regulatory powers already referred to. Accepting that the policy of the section is to guard against the possibility that a lessee may exclude the licensee from the leased part of the licensed premises in such circumstances, there is no more reason to suppose that the Act necessitates avoidance of a lease entered into without approval than that it necessitates avoidance of a lease entered into with approval."
At [64] Gageler J said: "… What was once a strong presumption of statutory interpretation that a purported agreement made in breach of a statutory prohibition "is not only illegal, but void because illegal, unless the statute indicates a contrary intention" has, since Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; [1978] HCA 42, given way to an acceptance that "[t]he question whether a statute, on its proper construction, intends to vitiate a contract made in breach of its provisions, is one which must be determined in accordance with the ordinary principles that govern the construction of statutes". (Footnotes omitted.)
At [70] His Honour continues: "Where a statute expressly or impliedly denies legal operation to an agreement, it is the statute itself which operates to render that agreement incapable of enforcement at common law."
And at [81]: "Given the evident public interest protected by the licensing regime of which those sections form part, I find it difficult to place much emphasis on the potential for implied statutory nullification of a lease as a result of a breach of s 92(1)(d) to cause hardship to an innocent lessee. A potential lessee of a part of licensed premises is not within the class of persons sought to be protected by the licensing regime. Any potential lessee could reasonably be expected to be aware at least of the existence of a licensing regime and to have the means of becoming aware of its details before entering into any agreement for lease." (Footnotes omitted.)
The Appeal Panel considers that the interpretation urged by the appellant is unduly narrow in his contention that the decision of the High Court is only applicable with respect to s 92(1) of the Liquor Act. The High Court held that the failure to obtain the requisite authority referred to in s 92(1) does not lead to the consequence that a lease between a licensee as lessor and a lessee is rendered void. The Appeal Panel considers that the same principle applies by analogy to leases, as in the present circumstances, where s 92 (2) is, subject to the observations contained in the following paragraph, applicable. The Appeal Panel sees no justification for reading the decision in Gnych down, as submitted by the appellant, to be applicable only in respect of s 92(1). The Appeal Panel also considers there is no basis for asserting that public policy considerations would render the lease invalid.
Even if, contrary to this finding, the decision in Gnych was only relevant to s 92(1), it would apply to the subject lease because the respondent lessee was both licensee and owner of the subject premises. On this basis, the respondent qualified as a licensee under s 92(1).
The Appeal Panel does not agree with the submission of the appellant that the decision of the Court of Appeal remains valid in its application to s 92(2) of the Liquor Act. Such decision related to the application of s 92(1): it did not refer to s 92(2). The decision of the Court of Appeal was overturned by the subsequent decision of the High Court and the principle established by the High Court applies by analogy to s 92(2).
It follows that the appeal does not succeed and must be dismissed.

Orders 1. The Appeal Panel orders that the appeal be dismissed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 28 June 2021

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