PROPERTY ALERT: CONFIRMED INTERPRETATION OF THE RETAIL PREMISES DEFINITION

In summary:

• The Supreme Court of Victoria has recently confirmed its position with respect to the interpretation of what constitutes a Retail Premises under the Retail Leases Act 2003 (Vic) (the Act). In the recent case of Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd & Anor [2013] VSC 344 (Fitzroy Dental) the court confirmed a broad interpretation of the definition of a Retail Premises as set out in section 4 of the Act.

• The Supreme Court has reminded those entities that are subject to the Act that their disputes are to be raised in the jurisdiction of VCAT as set out in part 10 of the Act.

The case of Fitzroy Dental dealt with the question of whether the premises in question were, under the terms of the lease, “used predominately for … the sale or hire of goods by retail, or for the retail provision of services.” (1) The Supreme Court in this case clarified its position on the interpretation of what is a Retail Premises by testing if the services or goods that are supplied by the tenant are supplied to the “ultimate consumer”.

Facts and Decision in Fitzroy Dental

As noted above the case was centred on the interpretation of what is a Retail Premises and if the premises subject to the dispute fell under this definition. The motive behind determining if the premises were a Retail Premises for the purposes of the Act was that the Plaintiff, being the Landlord, had five (5) years prior to the dispute arising taken possession of the title to the premises and also had been assigned the lease agreement with the First Defendant from the previous landlord. The lease was at some later time assigned from the First Defendant to the Second Defendant following the appointment of an administrator of the First Defendant. The Plaintiff, in separate proceedings in the Supreme Court, had sought for an order for possession of the premises (amongst other orders).

The First and Second Defendants made an application to the Supreme Court for a declaration that the lease was a Retail Leases Act lease and as such that the dispute is a retail tenancy dispute and it should be dealt with by VCAT and not the Supreme Court where the Plaintiff had made the application for possession.

The permitted use for the premises was a conference centre, cafe/restaurant area and associated office and storage space. There was no dispute between the parties regarding the permitted use of the premises, the only dispute regarding the premises was if it was a Retail premises or not.

The court found, after consideration of several precedents, rules and an application of the premises’ permitted and actual use to those precedents and rules that the premises were a Retail Premises as defined by the Act. The reasons for the court’s conclusion are as discussed below.

What is a Retail Premises?

A Retail Premises as defined by section 4 of the Act is a 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; or

When applying the ‘ultimate consumer’ test the ultimate consumer must be a person that does not use the service as a resupply of service or product as this would be wholesale. If the services of the conference centre in Fitzroy Dental are provided to the ‘ultimate consumer’ then it would be a retail provision of services, which it was found to be due to it being an input into providing a subsequent, different service.

His Honour stated that there “are two transactions involving the retail provision of services – first the provision of services to the conference or function provider … and then the provision of different services to the attendee.”(2)

The fact that a general passerby could not walk in off the street and use the conference centre (as booking was essential) is immaterial. Nor does it matter if an accounting firm, for instance, hired out the venue to provide a conference for its clients. The accounting firm would be the ‘ultimate consumer’ in the eyes of the conference centre and the attendee’s at the conference would be the ‘ultimate consumers’ of the advice or presentation provided at the conference by the accounting firm.

In adopting a previous decisions regarding a caravan park held to be a Retail Premises (3) Croft J applied that decision to Fitzroy Dental by the following reasoning:

“Foreshadowing discussion of the issue whether services are available to members of the public I observe that a caravan park is closer on the spectrum to the type of premises the subject of this application (the conference centre) in that, unlike a “shop”, whether it be a cabaret, discotheque or nightclub, it is not premises necessarily open and inviting to a casual passerby as may be the case with an ordinary shop. Rather it may be necessary to make a booking and, as the facilities are finite, the desired booking may not be fulfilled.” (4)

Further in his Honour’s judgement, he explained that there is no basis in the provisions of the Act or the authorities for constraining the concept of “open to the public”. As in the instance of a conference centre, it would not affect its retail ability if it were not open to those walking on the street as the ordinary course of that type of business would be to make a booking over the phone or by email.

Conclusion

The findings in the most recent case focusing on the definition of what is a Retail Premises provide the following guides to what would likely be considered a Retail Premises for the purposes of the Act.

For the purposes of section 4(a) of the Act a leased premises is likely to be a Retail Premises if:
– The premises is used for the provision of goods or services for retail; and
– The goods or services are sold or provided to an ‘ultimate consumer’ (ie a consumer that does not on sell the goods or services in the same state that they bought them in).

If your leased premises fall within the above definition then it is more than likely that the Act will apply to that lease. It is important to remember this as there are some onerous provisions of the Act that will apply. We recommend that you seek our advice if you are unsure about the characterisation of your property or leased premises.

For further information, or if you have any queries relating to this area, please contact Ted Vlahos, David Mazzeo or Brigid O’Dwyer of our office on 03 9614 7707.

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(1) Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd & Anor [2013] VSC 344 at 12
(2) [2013] VSC 344 at 49
(3) FP Shine (Vic) Pty Ltd v Gothic Lodge Pty Ltd [1994] 1 VR 194
(4) [2013] VSC 344