The High Court, in a recent decision (Gnych v Polish Club Limited  HCA 23), considered the question whether a contract prohibited by statute is void. The case involved a lease over parts of licensed premises granted without approval of the Independent Liquor and Gaming Authority in breach of section 91(1)(d) of the Liquor Act 2007 (NSW).
The question was whether the lease granted in breach of that section would be void and unenforceable. The message from the decision for Landlords, is that the mere fact of a lease being prohibited by statute may not mean the lease is void or unenforceable by a tenant.
Briefly, the facts involved the grant of a lease by the Polish Club to the appellant.Relations between the appellant and the Club deteriorated over time despite the successful operation of the restaurant, the subject of the lease. Eventually the solicitors for the Club wrote to the appellants’ solicitors stating that section 92(1) of the Liquor Act overrides any rights the appellants may otherwise have under the Retail Leases Act with the effect that the appellants had no lease over the restaurant area.
In this matter the Court of Appeal held that the purpose of section 92 of the Liquor Act is to ensure that licensees do not enter into arrangements with others whereby the regulation of the use of licensed premises under the Liquor Act might be compromised. The view taken by the Court of Appeal of the purpose and policy of the Liquor Act required the conclusion that any lease caught by section 92(1)(d) is not to be enforced by the courts.
The appellants were granted special leave to appeal to the High Court.
In an interesting decision, it was held by the High Court that the Court of Appeal had erred in its conclusion that the policy or purposes of the Liquor Act could not be served by any sanction short of holding the lease void. The conclusion that a breach of section 92(1)(d) automatically voids the lease would pre-empt the effect of the Authority’s decision in this regard. That outcome would not be consistent with the supervisory role entrusted to the authority by the Liquor Act.
The offence created by section 92(1)(d) was committed by the Club when the Club granted the appellant’s possession of the restaurant area. The offence was committed at that time once and for all and the continuation of the lease was not a continuing offence. The Club’s breach of the Act meant that the Authority was empowered to cancel the Club’s licence should it decide to do so. Whether the licence should be cancelled was not a matter for the Authority.
The decision is of interest to both landlords and tenants in that it supports the argument that a contract prohibited by statute will not necessarily be void or unenforceable. It can depend on the mischief which the statute is intending to prevent.