[2015] HCATrans 062

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
		Sydney			No S266 of 2014

B e t w e e n -

JACEK GNYCH

First Applicant

SYLWIA GNYCH

Second Applicant

and

POLISH CLUB LIMITED ACN 000469385

Respondent

Application for special leave to appeal

HAYNE J
NETTLE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MARCH 2015, AT 1.26 PM

Copyright in the High Court of Australia

MR G.P. SEGAL:   If it please the Court, I appear with my learned friend, MR M.A. FREIDGUT, for the applicants.  (instructed by Drexler Litigation & Compensation Lawyers)

MR P.R. CLAY, SC:   May it please the Court, I appear with my learned friend, MR A. ISAACS, for the respondent.  (instructed by Strathfield Law)

HAYNE J:   Yes, Mr Segal.

MR SEGAL:   If your Honours please.  The importance of this case, if I can address that issue first to your Honours, it is trite to say there are numerous licensed premises around this State and the country, and it further, of course, should be appreciated that many of them have a variety of arrangements that may exist concerning the way in which they may have other persons or entities conduct restaurants in their organisations.  It is a situation which happens around the country, may I say, all of the time.  Some of those arrangements might be formal; some might be informal.  Therefore, it is important, in our respectful submission, that there be clarity as to what might flow depending upon the view the law takes when, as happened in this case, there has been a breach of one of the statutory provisions.

	It is in the context of that important question that the proper construction of section 92(1)(d) arises.  That is a particular provision, your Honours will appreciate, which gave rise to the illegality that ultimately emerged as being that upon which the Court of Appeal acted.  The decision is not, of course – if it were to stand in the Court of Appeal, it would not only affect section 92(1)(d); it would also affect 92(1)(c) and (d); it would also affect 92(2).  In other words, the consequence of the Court of Appeal’s decision transcends the particular provision that we are concerned with that occurred in this case.

	The present case arises in circumstances of the subject, this having been deemed to have come into effect.  That arises because of the relationship between the Liquor Act and the Retail Leases Act, your Honours will have appreciated from the material.  The point I want to make when it comes to the importance of this case is that the decision of the Court of Appeal, if allowed to stand, transcends that relationship.  In other words, if the Court of Appeal is correct, whether the lease arose per force of that statute or otherwise, the consequence is likely to be the same or at least understood by lower courts to be the same.  The judgment of the Court of Appeal is expressed most generally in this regard and does not turn on that distinction.  For those reasons, there is a significant consequence that flows from the decision of the Court of Appeal.

	The law in this regard, in our respectful submission, is somewhat unsettled.  There is a very important question as to the circumstances in which a court ought to declare void a contract or a title, with the consequence that proprietary rights are thereby extinguished when there has been a contravention of legislative provision, notwithstanding the legislature did not say there should be such a consequence but instead provided a whole range of consequences that could result from the contravention that better serve the object of the Act.  I will come to that in more detail but, in our respectful submission, that becomes a very critical criticism, with respect, of the Court of Appeal’s decision.

HAYNE J:   The point of, perhaps, more general application in the case is what is a court to make of a prohibition like 92(1)(d), a licensee must not lease when another statute provides that an agreement under which there is a grant for value of a right of occupation, whether or not exclusive, is to be taken to be a lease in a ‑ ‑ ‑

MR SEGAL:   Absolutely – sorry, I did not mean to interrupt your Honour.

HAYNE J:   No, no.  There is either a point of general application there, or there is not, is it not?

MR SEGAL:   There is there, in our respectful submission, certainly.  What I am putting is that beyond that, even so – and I am not minimising the significance of what fell from your Honour just now – it is also important when one goes to the broader context because it affects other provisions as well.

HAYNE J:   We might be assisted, I think, by hearing at this point from Mr Clay.  Mr Clay.

MR CLAY:   If the Court pleases.

HAYNE J:   What do we do when the legislature is speaking in two voices?

MR CLAY:   It is not altogether uncommon that there may be a conflict of laws – there are subjects at university about it – but, nevertheless, the fact remains that the court needed to come to grips with the concept of a breach of the Liquor Act in circumstances, first, where at general law, there was a lease, because the discussion that arose in the Court of Appeal was that the applicants here, having gone into exclusive possession, at general law a lease arose at that point, notwithstanding the provisions of the Retail Leases Act.

	What the Retail Leases Act would say, upon notice being given by the applicants of claiming a right under section 16, the term of that lease became a period of five years.  At first blush, the conflict is, in fact, in relation to the general law proposition of a lease having arisen by the entry into possession – exclusive in nature, as it transpires – and because the applicants put it at all times as exclusive possession, a lease at general law arose.

HAYNE J:   Then the question becomes acutely, does the licensee who has acted in breach of law by granting to someone else an interest in land – can that person say, there we are, that was unlawful, the grant I made is of no value?

MR CLAY:   That is what the Court has said effectively in Equuscorp, following Nelson and Miller, to say we have gone beyond the Bowmakers principle of saying if one looks at who created the illegality – and there is issues in the facts of this case about that – and looking at whether the transaction is intended to remain valid, or is void or illegal having regard to the scope/purpose/objects of the legislation.  That logically being how the law has developed since Bowmakers, saying it is not so important anymore as to who relies upon the illegality, in fact, that is not important at all, cases should not be determined by reference to the pleading, but rather what is the intention of the Act which had rendered the contract illegal and determined whether in fact the Act intended that it have no effect and be unenforceable.

	That does not ignore the fact that other rights may arise as between parties, because in this particular case there were no alternative claims by the applicants at first instance or since, it should not disguise the fact that there may be rights between parties arising out of the transaction which are not affected by the illegality; that is to say, the lease may come to an end, but a person in the position of the applicants here may have had other rights under consumer legislation, although they did not assert a contract in any sense.  They may have asserted in the alternative a contract and a breach by my client, the Club.

	One should not assume that because the particular facts of this situation meant that all the eggs of the applicants are in one basket that a finding that a contract which is inconsistent with the object purpose of the legislation, and therefore tainted with that illegality and is unenforceable means that the so‑called innocent party is bereft of all remedy.  One must factor that in with respect to the broader proposition.

	This is truly not a case of the intersection ‑ although that word was used in our submissions – of the Retail Leases Act and the Liquor Act.  It is a conventional analysis applying settled principles, post‑Bowmakers, about whether or not a transaction should be set aside as being in breach of, in this case, the Liquor Act.

	As I say, that is quite settled law, and the Court of Appeal asked itself the right question, looked at the right provisions of the Act and came necessarily to the conclusion, perhaps unsurprisingly, that where a contract, at least in this case, the consequence of which is the person with responsibility under the Liquor Act for the conduct of the licensed premises is excluded from those premises, then it is contrary to the object purpose of the Act and, therefore, that should not be permitted to remain on foot.

	That was a logical and straightforward analysis applying settled principle.  There is no national application; each statute will be dealt with on its own merits.  There is no error in the approach to construction.  It was put by the applicants that there is an obligation to treat a penal provision as prima facie a proposition that it does not render, in this case, the lease illegal.  That, of course, is the wrong approach to statutory construction.  Alcan, if nothing else, made that entirely clear, that one simply looks at the legislation and construes it.  The fact that there is a penal provision, of course, is a relevant consideration – part of the context for its assessment, the question – but there is no prima facie position to be displaced in the approach to the construction.

NETTLE J:   Mr Clay, it is clear, is it, that this case has no application potentially in other States or Territories?

MR CLAY:   There is a similar provision in other States as to the permission of the commission or the authority, as the case may be.  I have not analysed the entirety of the relevant Liquor Acts in other States to see if the remaining provisions are identical – nor, I gather, has Mr Segal – but there is no question, I accept entirely, that there are similar provisions of section 92 in other States; no question about that.

NETTLE J:   Thank you.

MR CLAY:   Those are my submissions, may it please the Court.

HAYNE J:   Thank you, Mr Clay.  Mr Segal, we will not trouble you.  There will be a grant of special leave to appeal in this matter.  How long do counsel estimate the case will take?

MR SEGAL:   I would think a day, your Honour.

HAYNE J:   Do you agree with that, Mr Clay?

MR CLAY:   Yes, no more than that, your Honour.

HAYNE J:   It will be fixed as a day case.  Again, counsel will have heard me say that the timetable will be given to their instructors, and the timetable is one that will have to be complied with, I regret to tell you, scrupulously.

MR SEGAL:   Understood, your Honours.

MR CLAY:   May I be so bold as to inquire of your Honours as to whether the question put from the Bench is the question for the grant of special leave, or whether there needs to be some amendment to the draft notice of appeal in that regard?

HAYNE J:   That question simply provokes a question in reply, Mr Clay; what do you say is the deficiency in the notice of appeal?  You may be right – I am not saying that you are not – but if there is a deficiency or difficulty, what is it?

MR CLAY:   Not so much addressing a deficiency as a more plentiful document, your Honour, than one might ‑ ‑ ‑

HAYNE J:   What page are we at in the application book?

MR CLAY:   Page 85.

HAYNE J:   Thank you.  A possible point of view would be that the document is unduly discursive.  A possible point of view would be that it would benefit from a little tightening.  I am not minded though, Mr Clay, to embark on a drafting exercise at once, but counsel for the applicant will have heard the minatory words I have uttered.

MR CLAY:   I can ask for no more, may it please the Court.

HAYNE J:   There will be a grant of leave on the basis that I have indicated.  The Court will adjourn to Wednesday, 8 April, in Canberra.

AT 1.41 PM THE MATTER WAS CONCLUDED