When is a lease for business-to-business services governed by the Retail Leases Act 2003 (Vic)? Part 3

February 10, 2017

Uncategorized

An earlier blog post here discussed the recent decision of CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2016] VCAT 1866, in which Senior Member Walker held that a lease of a premises used to provide cold storage and logistics services to other businesses was not a retail premises under the Retail Leases Act 2003 (Vic).

The decision was overturned this week in an appeal heard by Croft J in the Supreme Court of Victoria, who found that the premises were retail premises under the RLA 2003.

An excellent summary of the decision is available on my colleague Robert Hay QC’s blog here.

A copy of Croft J’s the decision is available here.

The main points to draw from the decision are:

  • the test to determine whether the sale of goods or supply of services is retail for the purposes of the RLA 2003 remains the ‘ultimate consumer’ test from Wellington Union Life Insurance Society Limited [1991] 1 VR 333;
  • the RLA 2003 can apply to premises from which goods or services are supplied business-to-business, provided that those goods or services are supplied to the ultimate consumer of those services. This may apply to services supplied to business-to-business, provided that the services are not on-supplied (see more below), or to goods that are supplied business-to-business and that are used as an input in the second person’s business (such as a pen in a solicitor’s practice or a bolt used in the manufacture of a car);
  • unless another statutory exclusion applies, warehousing and logistics businesses are likely to be treated as retail premises;
  • the reach of the ‘ultimate consumer’ test is broader than most people expect. The words of Member Rowland in Global Tiger Logistics Pty Ltd v Chapel Street Trust (unreported, VCAT, Member L Rowland, 8 November 2012) remain relevant:

[17]   Given the ultimate consumer test I find it difficult to conceive of any sale of a service which would be other than retail. …

  • the ‘ultimate consumer’ test applies also to the supply of goods business-to-business, provided that the goods are used as an input into the second business, rather than re-supplied.

Importantly, there are likely to be a significant number of leases in the community that are regulated by the RLA 2003 without the parties knowing.

This could have a number of effects. The most significant is likely to be the prohibition on the recovery of land tax as an outgoing in a retail premises lease under s 50 of the RLA 2003. Recent VCAT authority suggests that a tenant of retail premises is entitled to recover from its landlord land tax mistakenly paid as an outgoing (see here).

Similar arguments may also apply to payment of certain repair and maintenance costs (see here).

Practitioners acting for tenants should consider reviewing their client’s non-retail leases to determine whether:

  • their leases are in fact leases of retail premises under the ‘ultimate consumer’ test;  and
  • land tax or other outgoings mistakenly paid may be recoverable from the landlord.

Practitioners acting for landlords should be aware of the breadth of the ‘ultimate consumer’ test and advise their clients accordingly when preparing their leases. If there is any doubt, it is prudent to treat the lease as a lease of retail premises to avoid the risk of losses to the landlord down the track.

About Sam Hopper

Sam is a property and insolvency barrister.

View all posts by Sam Hopper

Subscribe

Subscribe to our RSS feed and social profiles to receive updates.

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: