CB COLD STORAGE
1. This case arose
out of a lease (“the Lease”) of premises between CB Cold Storage P/L (the
tenant) and IMCC Group (Australia) P/L (the landlord).
2. The tenant
conducted the business of a cold and cool storage warehouse from the premises
which accorded with the permitted use under the lease. The tenant’s customers
ranged from large primary production enterprises to very small owner operated
businesses.
3. Clause 4(a)(i)
and (ii) of the Lease provided as follows (emphasis added):
4. The lessee hereby covenants with the lessor
that the lessee will:
(a) (i) not use or permit to be used
the Demised Premises or any part thereof for any purpose other than as set out
in item 11 of the reference schedule or for any residential purpose whether
temporary or permanent or as retail premises (as defined in the Retail
Tenancies Reform Act 1998) nor permit or suffer any storage space
forming part of the Demised Premises to be used for any purpose other than
storage.
(ii) use the Demised Premises solely for the
purpose of conducting the business or businesses permitted under this Lease.
Item 11 of the
schedule states next to the words “Use of Premises”:
“Cold and cool storage warehouse and transport
facility”
4. Despite the wording
of that term, the tenant issued a proceeding in VCAT, seeking to recover
various sums that it had paid to the Landlord on the ground that, because the
Premises are, it asserted, retail premises, those moneys are not payable.
5. The prohibition
on the tenant operating the premises as “retail premises” was irrelevant
because the landlord agreed that that the tenant’s actual use of the premises
accorded with the permitted use; this meant that the only question was whether the
premises should be characterised as “retail premises” under the Retail Leases Act 2003.
6. The term “retail
Premises” is defined in section 4 of the Retail Leases Act 2003. The relevant part of that section is
subsection (1)(a), which is as follows:
(1) In this Act, Retail Premises means
Premises, not including any area intended for use as a residence, that under
the terms of the lease relating to the Premises are used, or are to be used,
wholly or predominantly for—
(a) the sale or hire of goods by retail or the
retail provision of services;
7. There was no
suggestion that the Premises were ever to be used under the terms of the Lease
for the sale or hire of goods. The issue was whether, under the terms of the
Lease, they were used or to be used wholly or predominantly for the retail
provision of services.
8. VCAT listed a
preliminary question for hearing before the substantial proceeding itself,
namely:
Are the subject
Premises retail Premises under the Retail
Leases Act 2003?
9. Senior Member R Walker
of VCAT dealt with this case at first instance (see CB Cold Storage Pty Ltd
v IMCC Group (Australia) Pty Ltd [2016] VCAT 1866).
10. In reaching his decision, the Senior Member had to determine who was
the ultimate consumer, in order to determine whether the premises in question
were retail premises.
11. At paragraph 55 and following, the Senior Member noted:
55. The phrase “...the retail provision of services...” is not defined in
the Act and those words have no special meaning. The words bear their ordinary
meaning as English words and the word “retail” in the section must be taken to
bear the meaning that it is commonly understood to have.
56. The word retail is defined in the Macquarie Dictionary as:
n. 1. the sale of
commodities to household or ultimate consumers, usually in small quantities
(opposed to wholesale), adj. 2. Pertaining to, connected with, or
engaged on sale at retail
57. In the concise Oxford dictionary it is defined as:
sale of goods in small quantities at a time and usually not for resale
58. In the Collins Dictionary and Thesaurus it is defined as:
n. 1. The sale of goods individually or in small quantities to consumers.
59. In applying the definition the courts and the tribunal have looked to
various indicia of “retail”, such as “ultimate consumer” and “open to the
public” and these have been found to provide a valuable guide. However no
indicium can be substituted for the words of the Act. In each case it is a
mixed question of fact and law whether the predominant use of the premises
under the lease is such that the Act applies. The question must be answered
afresh each time.
12. After analysing the various cases on point, he concluded (at paragraphs
66 and following):
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. In Humphries
& Cooke the permitted use was that of an aircraft hangar and the
tribunal said that there was nothing at all in that use about the retail
provision of goods or services to anyone. Similarly, in Sofos v. Coburn the
use was wholesale and export fish supply and Nathan J said that there was
nothing in that use relating to the retail provision of goods or services.
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.
69. I therefore find that the Premises are not retail premises under the
Act.
Supreme
Court appeal - CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017]
VSC 23
13. Being unhappy with the Tribunal’s determination, the tenant appealed to the
Supreme Court of Victoria on a question of law (pursuant to section 148 of the VCAT Act) early in 2017.
14. Croft J heard
the appeal in the Supreme Court of Victoria. He held that the Tribunal made two
errors of law.
15. The first was
contained in the following passage from the Tribunal’s reasons:
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” ... in the
sense in which it has been used in the cases I think... 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.
16. Croft J
conducted his own analysis of the authorities, and decided that they did not
support the Tribunal’s conclusion that a person who uses a service for a
business or a purpose other than for personal needs cannot be a ‘consumer.’
17. The Honourable
Justice Croft observed that the proper approach was to precisely identify and
characterize the ‘service’ that is being provided at the premises. He stated at paragraph 31:
… I am of the opinion that the Tribunal erred
in holding that customers that used a tenant’s service for a business purpose
are not ultimate consumers of the service. The service was, in conformity with
the permitted use provisions of the Lease, to which reference has been made,
provided to those persons—whether corporations or individuals—at the Premises
and in terms of that particular service “ultimately consumed” by those persons
as and when the goods stored at the Premises were removed. In my view, the
Defendant’s submissions that these circumstances did not involve “consumption”
of the services provided by the Plaintiff at the Premises should not be
accepted; both on the basis of the authorities already considered and the clear
analogy in this context in the use of the word “consumption”, with “use” or
other synonyms which might be thought appropriate with respect to the provision
of services. Moreover, as the services were “consumed” at the Premises, there
was nothing for the recipients of these services to “resupply”.
18. Croft J then
addressed the argument that on his analysis, the word ‘retail’ with respect to
‘services’ had little work to do. He reasoned (at paragraphs 32 to 33):
Finally, it
should be observed that it does not follow that this analysis, on the basis of
the provisions of the Act and the authorities, is at odds with general principles
of statutory interpretation because it may leave the word “retail” with respect
to “services” in s 4(1) of the Act with little work—or little active work—to
do. That it may be difficult to contemplate circumstances where the provision
of services would be other than “retail” is no basis for an interpretation of
these provisions of the Act at odds with the considerations discussed in these
reasons and in the authorities which, in my view, indicate strongly the
applicability of the “ultimate consumer” test with respect to the provision of
“services”; where the nature of such services is precisely analysed.
Additionally, this is consistent with the principles of statutory
interpretation that words used in legislation are presumed to be used
consistently. Though this presumption is rebuttable, there seems little doubt
that the word “retail” as used in s 4(1) of the Act is intended to bear the
same meaning with respect to both goods and services.
Concluding this discussion reference should be
made to submissions on the part of the Defendant which would apply a different
approach to the interpretation of the word “retail” with respect to services in
s 4(1) of the Act on the basis, broadly speaking, that this would give the word
“retail” a meaning—work to do—with respect to the provision of “services”. The
approach advanced would consider how the premises were used by “invitees”—the
tenant’s customers or service users—and on this basis, it appears, characterise
the services as “retail” or not depending on whether the “invitee” was a
wholesaler or, put another way, whether the services are “domestic or are they
business”. It follows the Defendant submits, that the “ultimate consumer” test
has no application to services. The problem with these submissions and this
advocating a different approach to the meaning of the word “retail” with
respect to services is that there is no basis for it in the language of s 4(1)
of the Act. Rather, the language of these provisions requires, in my view, a
consistent approach with respect to the meaning of “retail” as applied to both
goods and services; a position which is also consistent with the general
presumption that words in a statute are used consistently. This different
approach is also inconsistent with both authorities, a number of which have
been considered in detail, and also the language of these provisions of the
Act. For these reasons I reject these submissions and, in particular, reaffirm
the “ultimate consumer” test with respect to both goods and services.
19. The second error
of law identified by Justice Croft was that the Tribunal had failed to hold
that the Tenant’s customers were the ‘ultimate consumers’ of the service it
provided. He noted (at
paragraph 36):
If the Tribunal had correctly found that the
Plaintiff’s customers were the ultimate consumers of the Plaintiff’s service,
it would also have found that the Premises were “retail premises” within the
meaning of the Act because:
(a) the Tribunal
was satisfied of all other matters necessary to support a conclusion that the
Premises were “retail premises”; and
(b) the Tribunal made no other findings that
could support a conclusion that the Premises were not “retail premises”.
20. Justice Croft allowed
the appeal and ordered that the preliminary issue ‘Are the subject premises
retail premises under the Retail Leases
Act 2003?’ be determined ‘Yes’.
The Court
of Appeal
21.
This time, the landlord was unhappy, and as a
result, it appealed from the decision of Croft J to the Court of Appeal. Their decision
is to be found at (IMCC Group (Australia)
Pty Ltd v CB Cold Storage P/L [2017] VSAC 178. Warren
CJ, Ferguson and Kaye JJA upheld Croft J’s decision.
22.
In
summary the Court of Appeal found (at paragraphs 3 to 5):
3. … In summary, the phrase ‘retail provision of services’ has long been
interpreted by reference (at least in part) to an ultimate consumer test; that
is, are the services used by the person to whom they are sold or are the
services passed on by the purchaser in an unaltered state to some third person?
No distinction has been drawn between commercial and non-commercial users of
the service. The Court should be slow to depart from the interpretation of the
phrase given to it by the Court over many years. It would only be appropriate
to do so if the interpretation was clearly wrong; but that is not the case.
Moreover, the legislature has made amendments to the legislation, but has not
made any change to the phrase ‘retail provision of services.’ Consequently, and
while not conclusive, the Court may presume that the legislature adopted the
interpretation consistently given to the phrase by the Court in the past.
4 Other relevant considerations that inform whether the service is
‘retail’ in nature include the type of service that is provided and whether it
is generally available to any person for a fee.
5 Here, there is nothing in the nature of the services provided that
would exclude them from being considered retail services. The services were
used by the Tenant’s customers who paid a fee. Any person may purchase the
services if the fee is paid. The Tenant’s customers do not pass on the services
to anyone else. They are the ultimate consumers of the Tenant’s services.
23. In
paragraph 17, the Court quoted Nathan J in Wellington v Norwich Union Life
Insurance Society Ltd [1991] 1 VR 333 (at page 336):
The essential
feature of retailing, is to my mind, the provision of an item or service to the
ultimate consumer for fee or reward. The end user may be a member of the
public, but not necessarily so.
24. The Court noted
(at paragraphs 23 to 27):
23 What can be seen from the authorities is
that the concept of the ‘retail provision of services’ in the Retail Leases Act and its
predecessor legislation is that it 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.
24 The phrase ‘retail provision of services’
has remained constant in the legislation. It appeared in the Retail Tenancies Act 1986. It was
retained when that legislation was repealed and replaced by the Retail Tenancies Reform Act 1998. It
appears in the current legislation. Re-enactment of a legislative provision in
the same terms after it has been the subject of judicial consideration may not
indicate that Parliament intended the provision to have the meaning ascribed to
it by a court. But here, when
enacting the Retail Leases Act (which
replaced the Retail Tenancies Reform Act)
the Parliament altered the definition of ‘retail premises’ to remove the
restriction that once applied to exclude premises where the floor size exceeded
1000m² but it did not remove or alter the phrase ‘retail provision of
services’. Taking that into account and given the pivotal role that the term
‘retail premises’ plays in the legislation and the attention that its
definition (which incorporates the phrase ‘retail provision of services’) has
attracted over many years, the legislature may be taken to have adopted its
judicially settled meaning.
25 This conclusion is more easily reached when
account is taken of the fact that the legislature has made amendments to the
definition of ‘retail premises’ in the current legislation (Retail Leases Act), but again has not
made any change to the phrase ‘retail provision of services’ which appears in
the definition. In this regard, the definition of ‘retail premises’ was amended
in 2005 to include the words ‘not including any area intended for use as a
residence.’ But the definition was not amended to
alter the phrase ‘retail provision of services.’ Moreover, the 2005 amendments
also gave the Minister power to determine that certain kinds of premises be
excluded as retail premises. The Minister has subsequently made a number
of such determinations including in respect of premises leased by a barrister from
Barristers’ Chambers Limited. The Minister has not made any determination
that would exclude from the definition of retail premises the kind of premises
that are the subject of this case.
26 Finally, for many years, tenants and
landlords have been able to proceed on the assumption that whether premises are
retail premises will be affected by whether the ultimate consumer test is
satisfied.
27 In the circumstances, the Court should
exercise caution before discarding the interpretation that has been applied for
so many years. A change in
interpretation may be warranted if the earlier meaning given to the section
were clearly wrong. But we are not persuaded that it is. Consequently, and
while not conclusive, we would approach the task by presuming that the legislature
adopted the interpretation consistently given to the phrase by the Court in the
past.
25. The Court of
Appeal noted that in all cases it is necessary to consider whether the premises
are “open to the public” – that is there are no restrictions on access to
the service and who can use it.
26. The
characteristics of the user – that is whether the use is an individual or a
business is not relevant.
27. At paragraph
[50] the Court of Appeal said:
In summary, 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. The Tenant’s customers have not passed on the
services to anyone else. They were the ultimate consumers of the Tenant’s services.
In isolation, none of these features would suffice to constitute the premises
as retail premises. Conversely, the absence of one or more of them, would not
necessarily result in a finding that the premises were not retail premises.
However, in the circumstances of this case, when all of those features are
taken together, the conclusion must be that the premises are retail premises.
28. As a result, the
premises were held to be subject to the provisions of the Retail Leases Act 2003.
29. The High Court
of Australia refused the landlord’s application for special leave to appeal.
Conclusion
30. The main points
to draw from the decision are:
(a) The test to
determine whether the sale of goods or supply of services is retail for the
purposes of the Retail Leases Act 2003 remains
the ‘ultimate consumer’ test (discussed in the decision of Nathan J in Wellington
Union Life Insurance Society Limited [1991] 1 VR 333);
(b) The Retail Leases Act 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.
(c) Unless another
statutory exclusion applies, warehousing and logistics businesses are likely to
be treated as retail premises;
(d) The reach of the
‘ultimate consumer’ test is very broad; and
(e) 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.
31. There are likely
to be a significant number of leases in the community that are regulated by the
Retail Leases Act 2003 despite the
parties belief that they are not.
32. The most
significant effect of the application of the Retail Leases Act 2003 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 Retail Leases Act 2003. No doubt,
practitioners will recall VCAT authority that suggests that a tenant of retail
premises is entitled to recover from its landlord land tax mistakenly paid as
an outgoing (see Richmond Football Club Limited v Verraty Pty Ltd (Retail
Tenancies) [2011] VCAT 2104 – but only for the six year statute of limitations
period).
33. Another
significant factor will be the repair provisions (and the ability to pass on those
costs) in sections 41 and 52 of the Retail
Leases Act 2003. In a commercial lease, a tenant is likely to be responsible
for repairs to the leased premises, even if they are capital in nature. However,
in a retail premises lease, a landlord can have a significant liability for
repairs, to bring premises up to standard, under section 52, and cannot pass on
the cost of those repairs if they are capital in nature (under section 49).
34. Practitioners
acting for tenants should consider reviewing their client’s non-retail leases
to determine whether:
(a) Their leases are
in fact leases of retail premises under the ‘ultimate consumer’ test;
and
(b) Land tax or
other outgoings, and capital repair costs mistakenly paid may be recoverable
from the landlord.
35. Practitioners
acting for landlords should be aware of the breadth of the ‘ultimate
consumer’ test and advise their clients accordingly when preparing their
leases.
36. If there is
doubt about the status of a lease, 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.
Hayden Starke Chambers