10 July, 2017
The Victorian Court of Appeal has today confirmed the increased scope of the Retail Leases Act 2003 (Vic) (RLA) by dismissing an appeal of the decision of Croft J in CB Cold Storage Pty Ltd v. IMCC Group (Australia) Pty Ltd [2017] VSC 23. For our alert on the trial decision click here.
Background
As a recap, CB Cold Storage (Tenant) leased a cold storage facility from IMCC Group (Australia) Pty Ltd (Landlord) under a written lease entered into in 2012. A dispute arose between the parties and CB Cold Storage commenced an action against the Landlord in the Victorian Civil & Administrative Tribunal (VCAT) that depended on it proving the premises were retail premises. At first instance in the VCAT, the Tribunal found that the cold storage facility was not a retail premises. This decision was overturned by Justice Croft in the Supreme Court primarily on the basis that services provided by the Tenant from the cold storage facility were ultimately consumed by the Tenant's business customers.
Appeal decision
On appeal,1 Warren CJ, Ferguson and Kaye JJA affirmed the reasoning of Croft J in respect of the interpretation of the phrase 'retail premises' under the RLA. The Court of Appeal found that the "ultimate consumer test" was a key indicia to determine whether premises are retail premises (ie, are the goods or services being provided to the ultimate consumer or an intermediary).2However, in applying that test it is necessary for courts to undertake a thorough examination of the nature of the goods or services being provided. The Court of Appeal summarised its reasoning as follows:
"the concept of the 'retail provision of services' in the Retail Leases Act and its predecessor legislation […] involves close consideration of the service that is offered, whether a fee is paid, whether it is a service that is generally available to anyone who is willing to pay the fee and whether the persons who use the service are the 'ultimate consumer'. On one view, to talk of an ultimate consumer of services may appear strained. Most services that are purchased are not susceptible to being passed on to a third person. This may be contrasted with a sale of goods where the difference between wholesale and retail is easily discernible. Nevertheless, the authorities that apply an ultimate consumer test as one indicia of the retail provision of services, are of long standing."3
Further, the Court of Appeal expressly rejected the submission by the Landlord that retail premises should be limited to premises from which a tenant supplies goods or services to "non-commercial" users.4
The Court of Appeal applied these principles to an analysis of the use of the premises by the Tenant in operating its cold storage facility. The Court of Appeal noted the following aspects of the business of the Tenant that supported the finding that the cold storage facility were retail premises:
- the services were used by the Tenant’s customers who paid a fee;
- any person could purchase the services if the fee was paid;
- the Tenant's business was open during normal business hours; and
- the Tenant's customers have not passed on the services to anyone else. They were the ultimate consumers of the Tenant's services.5
Accordingly, the appeal was dismissed. This decision reaffirms the key take away points from our original alert, which are summarised below for convenience.
For Landlords
Landlords should review their leases to consider whether the premises are subject to the RLA, identify potential breaches of the RLA and potential exposure to claims by tenants arising as a result.
For new leases being negotiated, Landlords should be vigilant in understanding whether the proposed tenant is operating a "retail" business. Landlords should consider whether they need additional warranties from a tenant in respect of this issue.
For Tenants
Tenants should consider whether they have additional rights under the RLA. This will require a consideration of the nature of their customers to determine whether those customers are the ultimate consumers of their goods or services. Potentially, tenants may seek reimbursement of any sums mistakenly paid to the landlord, including any outgoings which the landlord was not entitled to pass on or seek reimbursement from a retail tenant including, significantly, land tax.
1 IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178
2 Ibid, [3].
3 Ibid, [23].
4 Ibid, [44].
5 Ibid, [50].
For further information, please contact:
Dora Stilianos, Partner, Baker McKenzie
dora.stilianos@bakermckenzie.com
