MOLODYSKY v LANSTEL PTY LIMITED [1989] NSWCA 147

MOLODYSKY v LANSTEL PTY LIMITED SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

KirBY P, MAHONEY JA and Hope AJA 10 October 1989, 22 November 1989

[1989] NSWCA 147

LICENSES — nature of — agreement between parties agreement that license be transferred to a future purchaser of private "hospital" if requested by one party — whether "hospital" in that context means the physical buildings or the business or both — held: (Hope AJA, Kirby P and Mahoney JA concurring) It means the right to conduct the business — appeal (from McLelland J) dismissed.

Jack v Smail (1905) 2 CLR 684; Slatter v Railway Commissioners for New South Wales (1931) 45 CLR 68; Mullen v Hood (1935-36) 54 CLR 35; Dougan v Ley (1946) 71 CLR 142. Metropolitan theatres Limited v Harris (1935) 35 SR (NSW) 228; and Ex Parte Berry; Re Kessell (1936) 36 SR (NSW) 485.

CONTRACT - meaning of expression in - ambiguity - intention of parties - proper approach to - Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1981-82) 149 CLR 337, 352 applied.

PUBLIC HEALTH - private hospital - license of - whether corporation might hold having regard to provisions of Private Hospital Act 1908 - held: (Hope AJA; Kirby P and Mahoney JA reserving the point) It might not.

WORDS and PHRASES - "hospital".

Private Hospitals Act 1908, s2, s6, s7, s8, s9, s9A, s9B, s10.

ORDER Appeal dismissed with costs.

Kirby P Like Mahoney JA, I would reserve the question, which was debated in this appeal, whether it is possible, under the Private Hospitals Act 1908 for a license to be held by a corporate body. Otherwise, I agree for the reasons stated by Hope AJA, that the appeal should be dismissed with costs. With his Honour, I would decline to resolve the issues remaining between the parties. They should be dealt with in the Equity Division.

Mahoney JA I agree with the judgment of Hope AJA and in general with his Honour's reasons.

I would, for myself, reserve the question whether, under the relevant legislation, it was possible for a licence to be held by a corporate body.

As Hope AJA has indicated, the essential question for determination is the meaning of the words in CL15 of the parties' agreement: "Furthermore that the licence would be transferred to a future purchaser of the Hospital if required by Dr Wenkart." Hope AJA has outlined the factual and legal context in which the agreement was made. In some contexts and, perhaps, ordinarily, the phrase "the Hospital" means the physical structure and the land on which it is erected. But, in the present context, the phrase does not, I think, denote merely the land and the structure. Under the arrangements which the parties had set up and against the background of which this clause was to operate, the land and the structure were vested in a different person. That person could conceivably transfer the land and the structure, eg, on a sale or on a financing transaction. It was, I think, not the

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intention of CL15 that, if that happened, Dr Wenkart could require that the licence be transferred to the transferee of the land and structure.

Therefore, in substance, that which, under CL15, is to give rise to Dr Wenkart's right to require transfer of the licence must be either the transfer of, as I shall describe it, the right to conduct the hospital business alone, or that right coupled with the land and the structure. These are the two alternatives which, in argument, were canvassed. (I put aside the question whether the purchase of the former, viz, the right to carry on the business alone, would be possible or practical without, eg, the transfer of a lease of the land and structure. Nothing has been urged in this appeal to turn upon that matter).

The phrase "the Hospital" may appropriately mean either a business of this kind or the combination of the land, the structure and the business. Each of these is, I think, one of the ordinary meanings of the phrase. It is necessary to determine which of these meanings was used in CL15. Clearly the relevant provision envisaged that Dr Wenkart's right to require a transfer of the licence would not arise unless, in the transaction, there was a transfer of the right to conduct the business: as Hope AJA has pointed out, the legislation does not require that the owner of the land and structure in the nature of a hospital have a licence; a licence is required only where, in the relevant sense, the business of a hospital is carried on. Therefore, the question is whether the clause was to operate only when the right to carry on the hospital was transferred or whether Dr Wenkart's right arose only if that right was transferred together with the transfer of the land and structure. In the context in which CL15 was to operate, there was, I think, little purpose to be served by restricting Dr Wenkart's right to require a transfer of the licence to a case where the land and structure as well as the business was transferred. The arrangements set up by the parties enabled and, I think, contemplated that the business could be transferred separately from the land and structure and there is no functional reason, or at least sufficient functional reason, to limit Dr Wenkart's right to have the licence transferred to a purchaser to the case only where the purchaser took not merely the business but the lan d and structure as well.

I agree with the orders proposed by Hope AJA.

Hope AJA In 1981 Gedd Pty Limited (Gedd) owned a building at Summer Hill in which the business of a private hospital was carried on under the name "United Gardens Private Hospital". On 3 April 1981 Gedd entered into an agreement with a company controlled by Dr Molodysky under which it acquired an option for itself or its nominee or nominees to purchase from Gedd both the land and buildings and the business of the hospital. Discussions then took place between Dr Molodysky and Dr Wenkart directed to their acquiring and carrying on the hospital as a joint enterprise. They acquired two shelf companies, Lanstel Pty Limited (Lanstel) and Bayswood Pty Limited (Bayswood) in which they held one share each. Pursuant to the option granted to Dr Molodysky's company, Lanstel then, on 15 May 1981, contracted with Gedd for the purchase of the land and buildings. On the same day Bayswood entered into a contract with Gedd for the purchase of the hospital business. Each contract contained a term that Gedd would transfer to the purchaser under the contract the licence to carry on the business of a private hospital in the building which was held by Drs Ross, Reitburger and Muller under the provisions of the Private Hospitals Act 1908 as amended, those doctors apparently having an interest in Gedd. Both purchases were completed on 15 June 1981. Unfortunately disputes arose between Dr Molodysky and Dr Wenkart with the result that a petition was filed for the

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 3

winding up of Bayswood on 30 June 1981, fifteen days after the completion of the purchases, and a provisional liquidator of that company was appointed. There has been more or less continuous litigation ever since.

At the relevant times the carrying on of private hospitals was regulated by the provisions of the Private Hospitals Act 1908 as amended. This Act included these provisions:

"2. In this Act, unless the context or subject matter otherwise indicates or requires

'Private hospital' means a building established or used or intended to be established or used for the treatment for fee or reward of patients [with certain presently immaterial exceptions]...

6. (1) No private hospital shall be carried on, used, or conducted, except under the authority of a license granted by the Commission.

(2) Every person who commits a breach of this section shall be liable to a fine...

9. (1) Subject to this section, every license (other than an interim license) shall continue in force until revoked.

9A. (1) Where a license is granted to two or more persons jointly or in common and any of such persons dies, the license shall, subject to this Act, continue in force and shall have effect as if granted to the survivors or survivor of such person.

(2)(a) Where a licensee, who is either the sole licensee or the last survivor of any two or more licensees who held the license jointly or in common, dies, the license shall, subject to this Act, continue in force and shall have effect as if granted to the executor or administrator of such licensee.

(b) The Commission may revoke any license continued in force by the operation of paragraph (a) unless within two months after the death of the licensee or within such further period as the Commission may allow the license is transferred.

9B.(1) A license may be transferred by the Commission.

(3) Where a license is transferred it shall have effect as if granted to the transferee.

10. (1) In this section, 'establishment' means private hospital or nursing home.

(2) The licensee of an establishment is guilty of an offence against this Act unless

(a) there is a person who carries out the duties of chief nurse of the establishment and who is responsible for the conduct of the establishment; and

(b) that person is a registered nurse and holds the prescribed qualifications that are applicable to the chief nurse of the establishment.

10A.(1) The licensee of a private hospital... shall conduct and manage such private hospital... or cause such private hospital to be conducted and managed in an efficient manner.

(2) The licensee of a private hospital... shall ensure that a registered nurse is on duty in the private hospital or nursing home at all times."

A question discussed during the course of the proceedings was whether it was possible under this Act for a corporation to be a licensee. The parties appear to have assumed it could not be. In my opinion their assumption was correct. S7(1) provided that every application for a licence shall state the full name, place of abode and occupation of the applicant. In its context "place of abode" meant in

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my opinion a house, a home or place of habitation, a concept inconsistent with a corporate licensee even though for some purposes the corporation is deemed to have a place of residence. S8(2) provided that before granting a licence the Commission should satisfy itself as to the character and fitness of the applicant. Perhaps a corporation could be regarded as fit to hold a licence, but in my opinion the concept of "character" as used in this provision was quite inconsistent with a licensee being a corporation. Again s9A dealt with what happened when one of two or more licensees of the same hospital died or where the sole or last surviving of any two or more licensees of the same hospital died. Again these provisions contemplated, in my opinion, that licensees be natural persons, and they were inconsistent with a licensee being a corporation. I shall accordingly deal with the matter on the basis that a corporation could not be a licensee under the Act.

Apparently acting on the assumption - rightly as I have indicated - that a licence could not be held by a corporation, the existing licensees made an application for the transfer of the licence in respect of the hospital to Dr Molodysky and Dr Wenkart. The premises were then inspected by officers of the Health Commission and on 12 June 1981 a notice was issued requiring a considerable amount of work to be carried out, coupled with a notice that it would be a condition precedent to the transfer of the licence that the transferee furnish the Commission with a letter of undertaking agreeing to implement all the items enumerated in the letter and to meet the present and future requirements of the Board of Fire Commissioners. The appropriate document was signed and presumably forwarded to the Health Commission by Dr Molodysky and Dr Wenkart on 30 March 1982. On 13 April 1982 the Health Commission issued an instrument licensing Dr Molodysky and Dr Wenkart in respect of the private hospital known as "United Gardens" and situated at 11A Moonbie Street, Summer Hill.

After his appointment the provisional liquidator of Bayswood received offers for the purchase of the hospital business from both Dr Molodysky and Ultera Pty Limited (Ultera), a company controlled by Dr Wenkart. Each offer referred to the transfer of the hospital licence, that by Dr Molodysky being conditional on the transfer of the licence to the purchaser and that by Ultera being subject to a condition that the provisional liquidator would use his best endeavours to transfer the licence to Ultera or its nominees. On 27 July 1981 a written agreement was entered into between the provisional liquidator and Ultera under which all the assets of Bayswood were sold to Ultera for $90,000. This sale was unsuccessfully challenged by Dr Molodysky in an application in the winding up proceedings which was heard by Needham J on 21 August 1981. One of the terms of the sale was: "The provisional liquidator is to use his best endeavours to transfer the hospital license, together with all rights and benefits associated with that license, to Ultera Pty Ltd or its nominees...".

It does not appear what the provisional liquidator did in relation to the licence but Drs Molodysky and Wenkart remained the transferees and in due course became the holders of the licence, and were still the holders at the time of the hearing of these proceedings.

From about August 1981 the hospital business was carried on by Ultera although, so far as the evidence goes, with no clear security of title in respect of its occupation of the building. There had been a proposal that Lanstel should grant Bayswood a lease but that lease was never executed. Bayswood was itself wound up on 31 August 1981.

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 5

Early in 1982 there were discussions between Dr Molodysky and Dr Wenkart and their representatives in relation to the disputes between the parties. On 3 February 1982 Dr Wenkart sent a letter to Dr Molodysky setting out a number of "agreed points" and asking Dr Molodysky to indicate his assent to the points by signing a copy of the letter. The scheme proposed in the letter involved a continuing joint participation by both Dr Molodysky and Dr Wenkart in the ownership and control of Lanstel, with Dr Wenkart holding a majority interest as had always been contemplated, the continuing conduct of the hospital business by Ultera, the provision of certain services to Ultera by a company which employed Dr Molodysky and the future acquisition by Dr Molodysky of a minority interest in Ultera.

The letter contained the following provisions:

"1.5 HOSPITAL LICENCE

The hospital licence will be held jointly by Dr TR Wenkart and Dr E Molodysky.

A separate agreement will be executed between Dr TR Wenkart and Dr Molodysky stating that the licence is held by Dr Molodysky on behalf of Dr TR Wenkart and that the licence can only be transferred with the consent of Dr Wenkart. That Dr Molodysky will not cancel or return the licence and will continue in the event of Dr TR Wenkart's death on behalf of Dr TR Wenkart's interests as long as necessary.

2.6 DISPOSAL OF BUSINESS If the business or shares in the business are to be disposed of the Appointee or its nominees is to have the right of first refusal and to enter in or exchange contracts within 30 days. If the sale to the Appointee is not proceeded with, another purchaser can acquire the business but on terms no more favourable than offered to the Appointee."

Dr Molodysky refused to agree to the terms of the letter, one of his objections being the reference in CL15 to the licence being "held by Dr Molodysky on behalf of Dr TR Wenkart".

On 8 April 1982 Dr Wenkart sent another letter to Dr Molodysky containing what he described as Heads of Agreement. This document was accepted by Dr Molodysky, was signed by all relevant parties and is agreed by all parties to the present proceedings to be a binding agreement between them. Introductory paragraphs specified alterations that were to be made to the articles of association of Lanstel which would ensure that, although Dr Wenkart or his nominee was to hold 72.86 per cent of its issued shares and Dr Molodysky 27.14 per cent of those shares, Dr Molodysky and his interests were protected. They also provided that the licence - by which term the private hospital licence was described - of United Gardens Private Hospital was to be dealt with as indicated in the points thereafter listed.

There then followed a number of points under the heading "Lanstel Pty Limited". These provisions dealt firstly with matters particular to Lanstel including a provision that this company's surplus funds were to be used for repairing or replacing existing assets and the second of which was to building or constructing of purchasing additional assets for the land and buildings to be rented as a private hospital. They also provided under the heading "Lease of Premises" the following:

"The Directors will instruct solicitors to draft a lease for a 5 year period under which the Lessee will pay all outgoings, up-keep, interest and any other costs that may be incurred from time to time by the company. The lease payments will be paid quarterly on the Ist day of January/April/July and October. The rental will

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be an amount mutually agreed by the Lessor and Lessee prior to the execution of the lease, but in no event shall this amount be less than the total of items referred to in paragraph 1 of this clause. The lease will be guaranteed by Ultera Pty Limited.

The terms of the lease referred to above can not be altered. Dr Wenkart undertakes to obtain the consent and execution of the Lessee to the terms and conditions of the lease."

I should here interpolate that, although this lease was never executed, there was agreement as to the rent which was the amount of the outgoings referred to in the first of these paragraphs plus one dollar. There then followed: "1.5 Hospital Licence The hospital licence will be held jointly by Dr Wenkart and Dr Molodysky. A separate agreement will be executed between Dr Wenkart and Dr Molodysky stating that Dr Molodysky has the right to resign as a licensee at any time and that the licence can only be transferred with the consent of Dr Wenkart. Furthermore that the licence would be transferred to a future purchaser of the Hospital if required by Dr Wenkart. Also Dr Wenkart will give Dr Molodysky a personal guarantee indemnifying him against any claims of whatsoever nature which may be made against him as a result of him holding the licence. On the death of either Dr Wenkart or Dr Molodysky the deceased person's interest in the licence will be transferred to his legal personal representative and/or beneficiaries on the same terms as those referred to above. Dr Molodysky will in the event of the death of Dr Wenkart, continue to hold the licence in his name and not resign or terminate the licence for a period of twelve months unless with the consent of Dr Wenkart's legal representatives."

This is the critical clause in the present proceedings, the question being whether the hospital referred to in the second line of the second paragraph was the building and grounds or the building and grounds and business or was simply the business. Dr Molodysky contends for the first construction; Dr Wenkart for the second.

Next followed, still under the general heading "Lanstel Pty Limited", a number of provisions some of which have nothing to do with Lanstel but concern the other parties, including companies, involved in the disputes.

There were then a number of provisions under the heading "Ultera Pty Limited - as Trustee for the United Gardens Private Hospital Unit Trust". The first paragraph of this part of the letter referred to Ultera as being the company conducting the business at the United Gardens Private Hospital and also referred to the agreement for Summer Hill Private Hospital (Summer Hill), a company controlled by Dr Molodysky, to provide certain services to Ultera and to the benefits which Summer Hill was to derive for providing those services. In this part of the letter Ultera was referred to as "the Appointor" and Summer Hill as "the Appointee". It was provided that the appointment of the Appointee was to be for an indefinite period commencing | July 1982 until terminated as provided thereafter. There followed provision for cancellation of the appointment in the month of July in any year where the annual occupancy fell below the agreed lower range of the budget rate during the previous year ended 30 June, and that if not so cancelled the appointment would be automatically renewed for another twelve months. There was also provision for termination for serious or repeated or continued breaches and like circumstances.

CL28 then provided:

"Disposal of Business

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 7

If the business of United Gardens Private Hospital, and/or shares or units in the entity operating the business are disposed of or if the Appointor goes into liquidation, the Appointor will notify the Appointee in writing and the Appointee or its nominee will have the first right of refusal to purchase the business within 60 days of such notice. If not accepted, the sale will not proceed with another purchaser on terms more favourable that offered to the Appointee.

Any entity that is directly or indirectly associated with Dr Wenkart that becomes the owner of the business operating in the United Gardens Private Hospital, is bound to continue with the Appointee on the same terms and conditions as set out in the Heads of Agreement between Ultera Pty Limited and other parties. This clause can only be altered by mutual agreement by both parties."

Paragraph 2.12 provided:

"Rights of Purchase

The Appointee and/or its nominee shall have the right to purchase 19/70ths of the entity or entities owning the business of United Gardens Private Hospital both in law and in equity and upon the Appointee's request for acquisition such entity will forthwith enter into an agreement and implement such agreement with consequential modifications in accordance with the heads of the first agreement of this date dealing with Lanstel Pty Limited.

The above right to purchase may be taken up on 3 years from the date of this agreement or at any time before that date when the occupancy has reached an average rate of 80% over the previous 12 months."

CL213 provided for an indemnity by Ultera to Summer Hill against all claims, actions, costs, expenses, demands, etc, of whatsoever nature which may be made against Summer Hill not due to negligence in the running of United Gardens Private Hospital and Summer Hill's involvement therewith prior to CL212 becoming operative.

In his reasons McLelland J, before whom the proceedings came at first instance, dealt with these claims as preliminary questions pursuant, he said, to an agreement between the parties:

"Claim by the Plaintiff

5A A declaration that on the true construction of CL15 of the agreement contained in the letter dated 8 April 1982 to which the plaintiff and the defendants are parties, the expression 'Hospital' in the second paragraph of CL15 denotes

(a) the interest then held by the first defendant in the property known as United Gardens Private Hospital, or alternatively

(b) that interest together with the business known as United Gardens Private Hospital then being carried on by the third defendant."

Claim by Cross-claimant

"SA An order that the agreement contained in the letter dated 8 April 1982 be rectified by omitting from paragraph 2 of CL15 thereof the word 'Hospital' and substituting the words 'the business known as United Gardens Private Hospital'."

5B Alternatively, a declaration that on the true construction of the said agreement the expression 'Hospital' denotes the business known as United Gardens Private Hospital."

During the hearing of the appeal both parties asked that the Court also deal with the issues raised by the following claims in the plaintiff's claim: "4. A declaration that the plaintiff and the second defendant hold a private hospital licence on behalf of the first defendant in respect of the United Gardens Private Hospital to the exclusion of any other party.

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5. In the alternative a Declaration that the plaintiff and the second defendant hold a private hospital licence in respect of the United Gardens Private Hospital in equal shares."

and with the following claims in the defendants' cross-claim:

"2. A declaration that in the events which have occurred the Cross-Defendant holds the benefit of the licence as bare trustee for the first Cross-Claimant.

5.A. An order that the agreement contained in the letter dated 8th April, 1982 be rectified by omitting from paragraph 2 of CL15 thereof the word 'Hospital' and substituting the words 'the business known as United Gardens Private Hospital'.

5.B. Alternatively, a declaration that on the true construction of the said agreement the expression 'Hospital' denotes the business known as United Gardens Private Hospital."

McLelland J dealt only with the question of the construction of CLIA of the agreement of 8 April 1982. His Honour held that the expression "Hospital" in CLI15 denoted the business known as "United Gardens Private Hospital", and that the expression "future purchaser" in that clause did not include any entity that was "directly or indirectly associated with Dr Wenkart" within the meaning of CL28 of the agreement. The defendants had in the alternative cross-claimed for rectification of CL15 but, in the light of his construction of that clause, his Honour did not deal with this issue. He ordered that the remaining issues under the summons and cross-claim be defined by pleadings and thereafter dealt with as directed. The plaintiff has appealed against his Honour's construction of the words 'Hospital' and 'future purchaser' in CL15. No notice of contention in relation to rectification was filed by the defendants, but it is agreed by the parties that if the appeal were to be allowed that issue would have to be returned to the Equity Division to be dealt with there.

In order to understand the problem to be solved in the present case it is necessary to look at the provisions of the Private Hospitals Act and to understand something of the nature of the licences which are granted pursuant to its provisions and the rights and obligations of their holders. Although a private hospital is defined in s5 to mean a building established or used for certain purposes, the Act does not impose a requirement to hold a licence merely because a building exists which is suitable or indeed intended for the purpose of carrying on the business of a private hospital. What the statute primarily proscribes is the carrying on, using or conducting of a private hospital except under the authority of a licence granted pursuant to the provisions of the Act. The licensee is not required personally to conduct and use the hospital; he can cause it to be conducted and managed by somebody else provided that, whether he conducts it himself or causes somebody else to conduct it, it is conducted and managed in an efficient manner. However a number of obligations are imposed directly on the licensee which he must carry out. Thus he must ensure that a registered nurse is on duty in the hospital at all times. Again he commits an offence unless there is a person who carries out the duties and has the prescribed qualifications of chief nurse and is responsible for the conduct of the hospital. Other requirements imposed on the licensee include a duty to report damage by fire to the hospital or to anything in it to the Commission in writing as soon as practicable after the occurrence: s10A(4).

Looking at these and other provisions of the Act, it is apparent that, although the owner of a private hospital building, if a natural person, may be the licensee, the licensee may be a lessee or may have no interest in the building at all.

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 9

However the carrying on of the business of a private hospital is only lawful if carried on under the authority of the licence which he holds, and he must retain sufficient direct personal control of the running of the business to enable him to carry out the various duties imposed directly upon him by the provisions of the Act.

There appear to be no reported decisions as to contractual fiduciary or other obligations which may be imposed upon licensees under the Act. Subject however to any qualification which may be necessary because of the provisions of the Act and the duties which it imposes upon licensees, the general considerations which have been expressed in relation to licences under liquor legislation would seem to be applicable to licences under the Act.

The first decision of the High Court on the question appears to have been Jack v Smail (1905) 2 CLR 684 where the nature of a grocer's licence under the Victorian Licensing Act 1890 was considered. The licensee becoming bankrupt, the question of the right of the trustee of his estate had to be resolved. At 705 Griffith CJ said that the licence was not property; it was a personal right of the licensee to carry on business in the particular place under conditions prescribed by law. He concluded that the licence was not a chattel in the possession, order or disposition of the insolvent. It could not be a chattel because it was not property.

In Slatter v Railway Commissioners for New South Wales (1931) 45 CLR 68 a lease of licensed premises contained a provision that the lessee and his assigns should not do or suffer any act whereby the licence might be forfeited or become void or suppressed in any manner, or its removal withheld or refused, and should take all necessary steps from time to time to obtain the renewal of the licence.

The lease also contained a power of attorney whereby the lessors were irrevocably appointed the attorneys of the lessee with power to transfer the licence to a nominee chosen by the lessors, to apply for the renewal and removal of the licence, and in the name of the lessee or his assigns to sign all necessary documents in connection therewith. The lessee claiming that before the end of his lease that he was entitled to apply to the Licensing Court at the end of the tenancy to remove the licence to other premises, he was restrained by injunction of the New South Wales Supreme Court from doing so. This decision was upheld by the High Court. In their joint judgment Gavan Duffy CJ, Starke and Dixon JJ, having recited these provisions, said at 78-79:

"We can see no reason whatever for confining the operation of this clause to the duration of the tenancy.... It is an irrevocable authority for the advantage of the persons authorized. Any act on the part of the appellant which would destroy the authority or impair its operation must be a breach of the conditions necessarily implied in granting an irrevocable authority exercisable exclusively for the benefit of the persons authorized. An attempt to secure the removal of the licence to other premises... appears to us to be designed to impair if not destroy the authority irrevocably appointing the respondents attorney for the purpose of transferring or removing the licence, and accordingly to be a violation of the conditions necessarily imported in the grant of the authority. We think the evident purpose of the provisions incorporated in the tenancy agreement was to preserve the licence for the benefit of the premises, and at the end of the term to enable the landlords to ensure that it was available to the person who next occupied the premises under them."

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The position of these licensees was later considered by Jordan CJ in Metropolitan Theatres Limited v Harris (1935) 35 SR (NSW) 228. At 234-235 his Honour pointed out that there was nothing in the Liquor Act that made it necessary that an applicant for a licence should have any particular title to or interest in the premises in respect to which he applied for a new licence but that since a licence could not be granted for a house unless the building complied with certain statutory requirements as to accommodation the provision of which involved considerable expenditure, no one was likely to apply for a licence for premises unless he, or the person on whose behalf he was applying, had some security of tenure. His Honour went on to describe how persons other than an owner or someone acting for the owner might be a licensee. He pointed out that although a licensee might have an agreement with the owner of premises as to the transfer, renewal or other actions in relation to the licence, it was a mistake to assume that an owner of licensed premises has any inherent right, as such, with respect to the licence held for the premises. He concluded at 236:

"Tf the licensee holds the license unfettered by any agreement, trust or other obligation which gives the owner some interest in it, I can see no reason why any regard should be paid to the wishes of the owner as to the survival or disposition of the license."

The matter was further considered by Jordan CJ in Ex parte Berry; Re Kessell (1936) 36 SR (NSW) 485. At 488 his Honour again discussed the nature of liquor licences and having quoted observations in Jack v Smail said that the right constituted by a licence might be regarded as a right of property in the sense that it had, or in a particular case might have, a substantial pecuniary or material value but that it created no right of property in the place in which it was exercisable, being a personal licence exercisable only by the licensee not transferable by him unless the licensor or someone in the position of the licensor having lawful authority so to do, by consenting to a transfer, in effect granted a substituted licence to the transferee. Dealing with contractual and other rights in respect of licences his Honour said at 488-489:

"Tf the licensee is not the owner of the licensed premises, he may enter into any arrangement that he pleases with the owner with respect to the license, so long as the arrangement is not unlawful; and if the arrangement is one that gives rise to legal or equitable rights or duties, each party may be able to enforce the rights so created in the ordinary courts, so far as those courts may be able to give effect to them. But it does not follow that licensing tribunals are bound by, or called upon to give effect to, any such arrangement. To ascertain whether a license of itself confers any right on anyone other than the licensee, and whether a licensing tribunal is required or entitled to have regard to rights in other people which are alleged to have come into existence by virtue of transactions to which the licensee has been a party, it is necessary to refer to the Act."

As Jordan CJ pointed out in his reasons the majority of the High Court in their joint judgment in Mullen v Hood 54 CLR 35 at 45 referred to liquor licences as "a valuable piece of intangible property".

With this background it is necessary to go to the legislation and the circumstances of the present case. In May 1981 when Lanstel bought the building and Bayswood bought the business, the building and business had theretofore been owned by the same entity, Gedd. Drs Molodysky and Wenkart decided to sever building and business and organised the purchase of each by a separate company. Unfortunately the relevant documents provided for a transfer of the licence to each purchaser, a position patently impossible.

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 11

However it is clear that it was not Lanstel but Bayswood that was intended to use the building for the purposes of carrying on the business of a private hospital, and it would have to do so under the authority of a licence. It had been the intention, in the event not carried through, that Bayswood should be a lessee, and this arrangement would have made the effect of the severance more apparent. However when Drs Molodysky and Wenkart acquired the licence, they must have intended that Bayswood would carry on the business of a private hospital in the premises under its authority. Moreover, their obligations as licensees would require them to have a quite close relationship with Bayswood. There is no evidence of any express contractual arrangement having been entered into by the parties in respect of the matter, but as it seems to me it can and should be inferred that the intention of the parties, when arranging these transactions and in particular the transfer of the licence, must at least initially have been that the licence should be held for the benefit of Bayswood in order to enable Bayswood to carry on the business of a private hospital on the building. It may be that on the analogy of the principles developed in relation to liquor licences, and indeed other statutory licences which have a special value (see, eg, as to taxi cab licences Dougan v Ley (1946) 71 CLR 142) licences under the Private Hospitals Act can be subjected to contractual controls in relation to some of the powers of licensees, and in particular in relation to the disposition, renewal or surrender of licences.

There is little material in the present proceedings to establish a special value for these licences but the Private Hospitals Regulations limit the number of licences that can be granted by reference to distances from other licensed premises: reg6A, and it does not seem to be an issue between the parties that they do have a special value. It may be that in some circumstances the existence of a contract can be inferred, and it may be that a licensee can become subject to equitable obligations, whether in the nature of a trust or otherwise, in respect of the licence of which he is the holder. However I will put these questions to one side for the time being, and conclude only that the business having been severed from the building in the sense in which I have indicated, the purpose of obtaining the licence was to enable the business of a private hospital to be carried on in the building, the agreement being that it would be carried on by Bayswood.

When the business was sold by the provisional liquidator of Bayswood, the parties were aware of the problem about the license, and the contract merely provided that the provisional liquidator would use his best endeavours to have the license transferred to Ultera or its nominees. Nothing appears to have been done but in fact Ultera carried on the business in the building, clearly with the consent of both Dr Molodysky and Dr Wenkart. It is to be assumed that they were carrying out their obligations as licensees and that, for example, they were causing the private hospital to be conducted and managed in an efficient manner by having it conducted and managed by Ultera. Here again there is no evidence of any express agreement and the existence of any contractual or equitable rights in Ultera in relation to the licence would depend upon inference.

This was the position holding when the agreement of 8 April 1982 was entered into. Absent any implied contractual or equitable obligations, Dr Molodysky and Dr Wenkart held the licence beneficially, although it was only of use to them to enable someone to carry on the hospital business in the building. In the first draft of Dr Wenkart's "Agreed Points" sent to Dr Molodysky on 3 February 1982, the proposed CL15 provided that an agreement would be executed by Dr Wenkart and Dr Molodysky stating that the licence was held by Dr Molodysky on behalf of Dr Wenkart. Assuming that there was some contractual or equitable

12 UNREPORTED JUDGMENTS

obligations imposed on Dr Molodysky and Dr Wenkart in respect of the licence, they certainly did not create any trust for Dr Wenkart. It is certainly arguable that there were rights in Lanstel or in Ultera, but this is not what the draft referred to. Since there was no basis for such a proposition, it would seem merely to have been a proposal by Dr Wenkart for the future, a proposal which Dr Molodysky rejected.

The terms of the letter of 8 April 1982 provided that the licence was to be dealt with as indicated in the points listed in the letter, but there is no general statement as to beneficial interests in the licence. The document dealt with some aspects of the disposition of the licence, and in particular did so in CL1S. It has been submitted for the appellant that this change in the form of CL15 is of significance in relation to the meaning to be given to the word "Hospital".

Reliance is placed for this purpose on a statement in the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 at 352. Mason J was there considering to what matters regard may be had in determining which of two or more possible meanings is to be given to a contractual provision. Having said that, apart from the terms of the contract itself, it is to the objective framework of facts within which the contract came into existence and to the parties' presumed intention in this setting that regard is to be had and not the actual intentions of the parties, his Honour said at 352 that there might be one situation in which evidence of actual intention should be allowed to prevail over presumed intention. "If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal."

It is not claimed for the respondents that the licensees held the licence in trust for Dr Wenkart so the case does not fall within the possible exception referred to by Mason J. However I do not think that the rejection by Dr Molodysky of the earlier form of CL15 throws any light on the construction'of the clause in its ultimate form.

Reliance was also placed upon the circumstance that CL15 appears in that part of the document of 8 April 1982 which is under the heading of "Lanstel Pty Limited". I agree with the conclusion of McLelland J that this circumstance does not have any definitive effect on the construction of CL15. As his Honour pointed out, the agreement was not carefully drawn and there were provisions under that heading which dealt with matters not concerning the affairs of Lanstel. Likewise there were to be found in other parts of the agreement some matters which did affect Lanstel. I would agree with his Honour that the agreement is to be construed as a whole and that consideration is to be given to the whole arrangement between the various parties which it makes.

As Ihave already described, the agreement provided for a lease to Ultera; that is to say, it contemplated that the business of a private hospital would be carried on in the building by an entity other than Lanstel. Moreover this arrangement was of importance to Dr Molodysky because Dr Molodysky was given both an opportunity to purchase an interest in Ultera, and a right of first refusal in the event of the sale of the business or of shares in Ultera, a right not to be defeated by "any entity that is directly or indirectly associated with Dr Wenkart" becoming the owner of the business. In addition Summer Hill, a company controlled by Dr Molodysky, was to have contractual rights to provide substantial services in the carrying on of the hospital. These provisions not only emphasised the distinction in the minds of the parties between the building land the business; they also

URJ MOLODYSKY v LANSTEL PTY LIMITED (Hope AJA) 13

emphasised the interests which Dr Molodysky was given by the agreement in or in respect of the business, interests which could only exist if the entity carrying on the business, that is Ultera, did so under the licence held by Dr Molodysky and Dr Wenkart.

It will be seen that considerable attention was given by the agreement to the protection of Dr Molodysky in relation to the business. However it also contemplated that Dr Molodysky might not exercise his right to buy when the business was put up for sale. This would leave Dr Wenkart in the position that, although Dr Molodysky had been given every opportunity to acquire the business, which the agreement undoubtedly contemplated would still be carried on, he would not be in a position to transfer the licence which authorised the carrying on of the business to the purchaser or a nominee of the purchaser unless Dr Molodysky agreed.

McLelland J concluded that in these circumstances the hospital referred to in the second line of the second paragraph of CL15 was the hospital business and not the building. I would respectfully agree with his Honour's conclusion, and also with his conclusion that that purchaser was a purchaser of the kind contemplated by CL28. Such a purchaser would not be an "entity that is directly or indirectly associated with Dr Wenkart'; it was a purchaser to whom the first paragraph of CL28 referred.

This construction would give Dr Wenkart the necessary protection he required in the event of a sale of the business after Dr Molodysky had failed to exercise his right of purchase. It is a right which sits comfortably with the provisions of CL28 while the omission of such a provision could frustrate the sale of the business which the parties agreed could quite properly occur. Moreover it is difficult to see why the provision in question would have been included if it merely applied to the building. Lanstel owned the building and Dr Molodysky would have to join with Dr Wenkart in any sale of it. Problems about the licence did not relate to the building as such but to the carrying on of the business of a private hospital in the building. Dr Molodysky and Dr Wenkart would have similar interests in transferring the licence to a purchaser of the building if that purchaser was also buying the business. If the building were sold without the business, Ultera remaining in possession as lessee or otherwise, it is not to be imagined that Dr Wenkart would agree to the transfer of the licence to the purchaser of the building It would only be in relation to a transfer of the business that the transfer of the licence would be relevant, and in my opinion it was to this position that the relevant provision of CL15 was directed.

It follows that in my opinion the appeal should be dismissed. The parties have asked, although McLelland J did not deal with the matter, that this Court should resolve the issues raised in the proceedings as to whether the licence is held upon trust and if so for whom. I do not think it would be appropriate for this Court to deal with the question in the present appeal. His Honour was dealing with what he regarded as the preliminary point which the parties had agreed to argue and he has not further investigated or made findings in respect of other issues. Since the question with which he did deal can be resolved without going to these further questions, this Court in my opinion should not attempt to resolve them.

The appeal should be dismissed with costs. Counsel for Appellant: D Bennett QC with J Kinross Solicitors for Appellant: McCabes

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Counsel for Respondent: D Officer QC with M Skinner

Solicitors for Respondent: Klinger Johnstone