Radaich v Smith
101 CLR 209(Decision by: McTiernan J)
Radaich v Smith
Court:
Judges:
Dixon CJ
McTiernan JTaylor J
Menzies J
Windeyer J
Subject References:
Leases and tenancies
Lease or licence
Test
Exclusive possession
Judgment date: 20 August 1959
SYDNEY
Decision by:
McTiernan J
McTIERNAN J. Maria Radaich appeals to this Court from the finding of the Supreme Court of New South Wales upon a case stated by a magistrate of the Fair Rents Board. The magistrate found that a deed, made between the appellant and the respondents (George William Edward Smith and Ada Smith), constituted a lease and that he therefore had jurisdiction to determine a fair rental for the premises specified therein. Brereton J., exercising the jurisdiction of the Supreme Court over the case stated, held that the deed created no lease but a mere licence, and, consequently, that the Fair Rents Board had no jurisdiction in the matter.
Neither party denies that all the terms of the agreement are embodied in their deed. The deed contains ten clauses. In form and matter, it resembles an ordinary lease; it contains, inter alia, a covenant that the "licensors" shall not unreasonably disallow an assignment of the "licence". Another clause, cl. 9, confers an option of renewal. The words "lease", "lessor" and "lessee", however, are entirely excluded from the document, and the term "licence", and its appropriate mutations, are sedulously applied to the rights purported to be created. This fact is, of course, far from conclusive in favour of the respondents. It is the substance of the deed that matters. As Denning L.J. said in Facchini v Bryson [F1] "...the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label they choose to put on it" [F2] . The true test of a supposed lease is whether exclusive possession is conferred upon the putative lessee. The validity of this test is confirmed by the judgment of the Court of Appeal in Addiscombe Garden Estates Ltd v Crabbe [F3] where Jenkins L.J. states: "We were also referred by Mr. Blundell to Errington v Errington and Woods [F4] . In that case it was held that in very unusual circumstances a lady was a licensee, and entitled to remain in occupation of premises so long as she paid the instalments on a certain mortgage; and in the course of his judgment, Denning L.J. said: `The test of exclusive possession is by no means decisive'. [F5] . I think that wide statement must be treated as qualified by his observations in Facchini v Bryson [F6] ; and it seems to me that, save in exceptional cases of the kind mentioned by Denning L.J. in that case, the law remains that the fact of exclusive possession, if not decisive against the view that there is a mere licence, as distinct from a tenancy, is at all events a consideration of the first importance." [F7] .
It certainly appears that the "exclusive possession" test has survived intact the criticism it received in Errington v Errington and Woods [F8] . Parker and Pearce L.J.J. concurred in the judgment of Jenkins L.J., which is cited in part above.
What kind of possession did the present deed confer? Clause 5 is in these terms: "Upon the expiration or sooner determination of this licence the Licensee shall immediately give up possession of the said building occupied by her for the purpose of the said business and will execute and do all such assurances and things as may be requisite for transferring to or vesting in the Licensors or any person whom they may nominate any existing license or licenses in payment only of the proper proportion of the sum or sums paid for same."
The preamble recites that the respondents are "to carry on the business of a milk bar" in the subject premises. I think that such a business could only be carried on in reasonable convenience by persons having the exclusive possession of the premises. Nothing in the deed suggests that the parties did not recognize this as an implication of their agreement embodied therein. The premises, it appears, constituted what is often called a "lock-up shop". On several of the rent receipts given by the respondents, and which are in evidence, is the notation: "All window, door keys, locks, etc., lost or broken, shall be paid for by the tenant". The agreement contemplates that the so-called "licensee" is to have control of the premises, and of the persons entering them, during business hours and, indeed, at all other times.
I am satisfied that what was granted by this deed was an interest in the premises, therein described, which amounts in truth and in substance to a lease. Accordingly, these premises are subject to the determinations of the Fair Rents Board, under the provisions of the Landlord and Tenant (Amendment) Act 1948-1954. The question in the stated case should be answered "No".