The High Court has unanimously allowed an appeal from a decision of the NSW Court of Appeal on the validity and enforcement of leases in licensed and club premises. The Gnyches operated a restaurant in part of the Polish Club’s premises, although there was no written lease. After the Polish Club gave the Gnyches notice to leave, the Gnyches asserted that they had a five year lease under the Retail Leases Act 1994 (NSW). Although this claim was successful at trial, the Polish Club  appealed on the basis that any lease was contrary to ss 92(1)(c) and 92(1)(d) of the Liquor Act 2007 (NSW), which prohibit grants of leases over licensed premises in some circumstances, and s41J of the Registered Clubs Act 1976 (NSW), which prescribes a process for the disposal of a registered club’s core property. The NSW Court of Appeal held that s 92(1)(d) (which requires the approval of the Independent Gaming and Liquor Authority for leases in premises where alcohol was not served), but not the other statutory provisions, rendered any lease between the Gnyches and the Polish Club unenforceable.

The Court (French CJ, Kiefel, Keane and Nettle JJ, Gageler J agreeing) held that s 92(1)(d) is directed to the conduct of the licensee, rather than the relationship between the licensee and a third party ([43]). Although the Polish Club breached s 92(1)(d) when it gave the Gnyches possession of the restaurant area of the premises, that did not affect the lease. The provision of a statutory penalty for this breach meant that there was no need to prevent the lease, and the Court of Appeal erred in holding otherwise, as s 92(1)  contemplated that a lease over licensed premises can be effective, it was possible that the Authority would discharge its responsibility by maintaining the status quo, and the Authority had regulatory powers to deal with behaviour by a lessee that caused a breach of the licence ([51], [52] and [55].) In a concurrence, Gageler J agreed, observing (at [76]) that contrary public policy concerns did not arise, because the Gnyches did not know of the breach of s 92(1)(d), and that the Court of Appeal’s otherwise compelling interpretation of that section was vitiated by the Act’s object of flexible and practical scheme with minimal formality and the wide range of discretionary powers available to the authority ([82] and [83].)