In Western Australia, the short answer to this question is yes,
provided the profit sharing arrangements have previously been
approved by the Director of Liquor Licensing
(Director). This question was posed to McKechnie J
in the case of Primewest (Lot 4 Davidson Street Kalgoorlie) Pty
Ltd v Broadwater Hospitality Management Pty Ltd  WASC
304, heard in the Supreme Court of Western Australia on 9 September
The defendant in the case was a tenant under a lease of licensed
premises of which the principal purpose was to provide a formula
for the calculation of the rent payable based on profit. The profit
sharing arrangements under the lease were approved by the Director
under section 104 of the Liquor Control Act 1988 (WA)
The licensed premises were later sold and the new landlord
claimed all benefits under the lease in accordance with section 77
of the Property Law Act 1969 (WA) (Property
Act). The tenant, however, refused to pay the new landlord
any additional rent in accordance with the profit sharing
arrangements under the lease arguing predominantly that the
Director had not approved any direct agreement between the tenant
and the new landlord and therefore the profit sharing arrangement
What you need to know
Justice McKechnie rejected the tenant's argument and agreed
with the new landlord's argument that under section 104 of the
Act, an offence occurs on entry into any profit sharing agreement
or arrangement and that the new landlord has not 'entered'
into an agreement with the tenant (and has therefore not breached
section 104 of the Act), but rather the new landlord claims the
benefit, by virtue of section 77 of the Property Act, of the
approved agreement between the tenant and original landlord and is
therefore entitled to enforce the lease against the tenant.
Justice McKechnie held that the concurrent operation of section
104 of the Act and section 77 of the Property Act does not have the
effect of reducing the control of liquor as there must be in
existence an approved profit sharing arrangement before a new owner
can take any benefits under it.
It is important to note, however, that McKechnie J stated that
if the new landlord sought to vary the terms of the lease, the new
arrangement would require the Director's approval.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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