When is a lease for business-to-business services governed by the Retail Leases Act 2003 (Vic)? Part 2

November 14, 2016

Property / leasing

The recent trend in retail leasing cases has seen a gradual broadening of leases that fall within the definition of “retail” under the Retail Leases Act 2003 (Vic) (RLA 2003).

Many commentators, myself included, have suggested that all businesses that wholly or predominantly supply services will be considered retail, whether or not these services are supplied to the public or business-to-business (see here.)

In the recent case of CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2016] VCAT 1866, Senior Member Walker expressed a different view, stating that:

[30]     Mr Hay provided me with an extract from … [Retail Leases Victoria]. Mr Hay is one of the authors of the book and he adopted the following statement that is to be found at paragraph 20,005 concerning … [the Fitzroy Dental] decision: 


“The consequence of Fitzroy Dental Pty Ltd v. Metropole Management Pty Ltd is that the provision of any service is likely to constitute the retail provision of services and therefore the 2003 act will apply.”

[31]     I do not accept the correctness of this proposition. The learned judge does not go that far in the case referred to. For example, in paragraph 18, when he talks about the “on-supply” of goods and services, he talks about the possible characterisation of the first person to whom the goods or services are supplied as being an ultimate consumer. He does not say that that conclusion is inevitable in regard to services.

In that case, the Senior Member considered a business that provided cold storage facilities and could also arrange refrigerated transportation. He reviewed the authorities and held that:

[62]     In all of these cases the goods or services are rendered to persons variously described as members of the public or the ultimate consumer. The term “consumer” is nowhere defined … [and] dictionary definitions are unhelpful but in the sense in which it has been used in the cases I think it means the person who uses the goods or services to satisfy his own personal needs rather than for some business or other purpose. The other characteristic is that the supply in each instance is usually in small quantities for use or consumption by the person to whom they are directly supplied.

[63]     That accords with the way I think the word “retail” is used in normal speech. As was pointed out in some of the cases, it is possible for a company or business to be involved in a retail supply of goods or services. For example, a company officer might purchase stationary at a local newsagency and that would be a retail supply. However if the company acquired a large quantity of stationery for on-supply to various purchases in smaller quantities, that would generally be regarded as a wholesale supply. 


[64]     The situation is more difficult to categorise in regard to services where one cannot talk about retail or wholesale quantities. Nevertheless, most people would have no difficulty in categorising a particular supply of services as retail if such were the case. 


[65]     For example, if a mining company, wishing to sell coal to a power station in India, dispatched a large shipment of coal by rail to a port, the rail operator would be providing a service of transport to the mining company but that service would not generally be regarded, in normal parlance, as being provided on a retail basis. Similarly, when the coal is loaded onto a ship by the Port authority, that again is a service rendered to the mining company but again, that would not generally be regarded as being provided on a retail basis. The same can be said of the services provided by the shipowner. In each case, the service that is provided is a necessary step in a supply chain of a commodity to a commercial customer, being the power station in India, and neither the mining company nor the customer can be regarded as an “ultimate consumer” or “a member of the public” in the sense in which those words appear to have been used in the authorities referred to. One does not get to an “ultimate consumer” or a “member of the public” until the coal is burnt to produce electricity which is then supplied to the power company’s customers in India. 


            …

[66]    I do not accept Mr Hay’ submission that, virtually any supply of services will fall within section 4. The definition is not simply the provision of services but rather, the retail provision of services. Parliament has limited the application of the definition by the addition of the word “retail” and that word must have some meaning. 


[67]     In applying the definition one must look carefully at the facts of the particular case and decide as a matter of mixed fact and law whether, under the lease, the predominant use of the premises is, or is to be, the retail provision of services. The starting point will be to examine the lease to see what the permitted use of the premises in question is …

[68]     In the present case the use is that of cold and cool storage warehouse and transport facility, involving the receipt, storage and trans-shipment of goods for producers, manufacturers, distributors, importers and exporters. The customers to which the Tenant provides these services range from large primary production enterprises to very small owner operated businesses. Mr Clarke submitted that there was nothing about the provision of these services that would give it a retail character and I think that is right. That is not the ordinary meaning of “retail”. The Tenant’s services to those customers cannot sensibly be regarded as being a retail supply of services. Indeed, such an interpretation would give the word “retail” in the section no meeting at all. 


On one view, this case represents a shift away from the broad interpretation of ‘retail’ that has been adopted by many in the leasing community and suggests that less leases will be treated by the Tribunal as retail than had previously been expected, particularly leases for the sale of goods or the supply of services between businesses.

 

 

About Sam Hopper

Sam is a property and insolvency barrister.

View all posts by Sam Hopper

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2 Comments on “When is a lease for business-to-business services governed by the Retail Leases Act 2003 (Vic)? Part 2”

  1. Vanessa Flax Says:

    shocking spelling errors in this judgment…

    Reply

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