Radaich v Smith

Judges: Dixon CJ
McTiernan J
Taylor J
Menzies J

Windeyer J

Subject References:
Leases and tenancies
Lease or licence
Test
Exclusive possession

Judgment date: 20 August 1959

SYDNEY

Decision by:
Windeyer J

WINDEYER J. The distinction between a lease and a licence is clear. "A dispensation or licence properly passeth no interest, nor alters or transfers property in anything but only makes an action lawful which without it had been unlawful": Thomas v Sorrell ^[F32] . Whether when one man is allowed to enter upon the land of another pursuant to a contract he does so as licensee or as tenant must, it has been said, "be in the last resort a question of intention", per Lord Greene M.R. in Booker v Palmer ^[F33] . But intention to do what?-Not to give the transaction one label rather than another.-Not to escape the legal consequences of one relationship by professing that it is another. Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the person entering upon the land shall have in relation to the land. When they have put their transaction in writing this intention is to be ascertained by seeing what, in accordance with ordinary principles of interpretation, are the rights that the instrument creates. If those rights be the rights of a tenant, it does not avail either party to say that a tenancy was not intended. And conversely if a man be given only the rights of a licensee, it does not matter that he be called a tenant; he is a licensee. What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. And he cannot be other than a tenant, because a legal right of exclusive possession is a tenancy and the creation of such a right is a demise. To say that a man who has, by agreement with a landlord, a right of exclusive possession of land for a term is not a tenant is simply to contradict the first proposition by the second. A right of exclusive possession is secured by the right of a lessee to maintain ejectment and, after his entry, trespass. A reservation to the landlord, either by contract or statute, of a limited right of entry, as for example to view or repair, is, of course, not inconsistent with a grant of exclusive possession. Subject to such reservations, a tenant for a term or from year to year or for a life or lives can exclude his landlord as well as strangers from the demised premises. All this is long-established law: see Cole on Ejectment (1857) pp. 72, 73, 287, 458.

Recently some transactions from which in the past tenancies at will would have been inferred have been somewhat readily treated as creating only licences. And it has been said-especially in connection with family relationships, charity or hospitality-that allowing a person to have the exclusive possession of premises does not necessarily indicate a tenancy as distinct from a licence. These decisions are largely a by-product of rent restriction statutes and other legislation here and in England. They are all explicable if they mean, as I think they all do, that persons who are allowed to enjoy sole occupation in fact are not necessarily to be taken to have been given a right of exclusive possession in law. If there be any decision which goes further and states positively that a person legally entitled to exclusive possession for a term is a licensee and not a tenant, it should be disregarded, for it is self-contradictory and meaningless. We are not here concerned with the way in which a court of equity would control the parties in the exercise of legal rights, but with the simple question whether at law this document created a lease or a licence. And the proper touchstone still is: did it give the so-called licensee a legal right to the exclusive possession of the premises during the term? The question must of course, be resolved by considering the terms of the deed. But they are to be read in relation to the relevant surrounding circumstances, in particular the nature of the premises; for this deed, like any other instrument, is to be interpreted having regard to its subject matter. Here the subject premises are in fact a lock-up shop at The Spit, Mosman. It was said that the stated case does not expressly state this to be so. This is true, and the learned judge who heard the appeal in the Supreme Court may have been some-what hampered because the case stated by the magistrate did not fully describe the subject premises. But it is stated that they are No. 83 Parriwi Road, Mosman; and from the deed itself it appears that this is a separate part of a larger holding held by the respondents-the so-called licensors-under a special lease from the Crown, a form of tenure under the Crown Lands Acts of New South Wales. From the deed itself it is also a reasonable inference that the subject premises are a lock-up shop used as a refreshment room and milk bar and adjacent to another shop where fish foods are sold. And the notice of appeal to this court referred, as one of the grounds of appeal, to matter stated in the affidavit sworn on the application for special leave to appeal. So far as that affidavit sought to explain why the document took the form it does it must be entirely disregarded; for the parties have reduced their agreement to writing and cannot by parol evidence explain their deed. But the fact stated in the affidavit that the subject premises are a lock-up shop is clearly relevant; and so I think is the fact that the appellant had bought from the respondents the business carried on upon the premises and that it was in connection with this transaction that the deed in question was executed. Turning then to its terms: its opening operative clause is expressed to be a grant for a five-year term of "the sole and exclusive license and privilege to supply refreshment to the public admitted to premises situate at 81-83 Parriwi Road, The Spit, Mosman, and to carry on the business of a milk bar therein in such rooms as are shown in the sketch contained in Schedule one annexed hereto and the right to use of toilet at rear and passage thereto." These words, standing by themselves, would create only an exclusive licence to supply refreshments, which is essentially different from an exclusive right to possession. But these opening words are not at all appropriate to the actual circumstances-and they do not stand by themselves. To describe the lock-up shop as "such rooms as are shown in sketch" is inapt, for one room, the shop, is what is shown by the sketch. And it is inapt to speak of a right to supply refreshments "to the public admitted to premises 81-83". And several of the later provisions are not only not appropriate to a mere licence to sell refreshments on the landlord's premises, but clearly suppose a grant of possession of specific premises to the appellant so that she can carry on a business there. It was argued that the deed follows an accepted precedent for the grant of a licence, having been taken from the form given in Evatt and Beckenham's Conveyancing Precedents, 2nd ed. (1938) p. 542, which in turn is taken from a form in The Conveyancer vol. 10, p. 485. We have to decide what is the result of the words used by the parties, not what is the result which the draftsman of a form thought they would have. But what has happened is simply that the form has been used in circumstances for which it was never intended. In The Conveyancer it is described as a "Licence for the Exclusive Right of Supplying Refreshments within a Railway Station or Building"; and in Evatt and Beckenham's Precedents as "Licence for the Exclusive Right of Supplying Refreshments within a Building". Whether all its clauses are really appropriate to a licence to sell refreshments at a stall on a railway station or in the foyer of a theatre to persons admitted to such premises need not be considered. It is inapt to create a licence of a lock-up milk bar at The Spit. References in the deed to the licensee "giving up possession of the said building occupied by her", and to "that part of the premises occupied by her", are consistent with a tenancy, and in their setting are not really consistent with the supposed licence. The appellant is required to keep her business open during business hours. Clearly she could shut it at other times. I imagine all concerned would have been astounded if they had been told that the appellant had no right to exclude persons from her shop; that the respondent might, if he wished, license other people to carry on any activity there other than the sale of refreshments, provided their presence did not prevent her selling refreshments or conducting the milk bar; and that, although she might lock the shop up at night and on holidays, the respondents could not only enter it themselves whenever they wished but could admit as many persons as they chose, provide them with keys and license them to use the premises in the absence of the appellant for any purpose of pleasure or business they liked, provided only that they did not sell refreshments. If the matter is to be tested by the apparent intention of the parties arising from the circumstances, that clearly was not their intention. If it is to be tested, as I consider it is, by their intention as reflected in the words of their deed with knowledge of the nature of the subject premises, then, in the words of Blackburn J. (as he then was) in Roads v Overseers of Trumpington ^[F34] "the whole nature of the agreement shews that the appellant was intended to have exclusive possession of the land" ^[F35] . The use in what purports to be the principal provision of the deed of words taken from a precedent designed for another purpose cannot outweigh its total effect.

The final clause of the deed may, I think, be ignored. In the Supreme Court the learned judge thought that the word "not" must have been dropped out. But whether the clause be read with "not" in or out, makes, I think, no difference. Such a provision could not make the deed a lease if it were not one, and it cannot prevent it being a lease if it be one.

The magistrate was right. The deed created a lease of the part of the building shown in the sketch annexed to it, that is that shop, and a licence in relation to the part described as "the toilet at rear and passage thereto". The question in the stated case should be answered accordingly.