An important consideration to make when considering the rights and obligations of parties in a lease for a business is whether the relevant retail leasing legislation applies. The simple answer is that where the premises is a retail business or is inside a retail shopping centre, then the Retail Leasing legislation will apply. The reality, is however, far less straightforward and a recent case in the Supreme Court of Victoria has further broadened what can be considered a "retail shop".
There are a number of surprising exceptions and inclusions regarding what counts as retail premises across the various retail leasing Acts for the states and territories. For instance, the retail leasing legislation in Victoria, Western Australia and Northern Territory do not apply where the lessee is a listed corporation or a subsidiary of such a corporation and it may not be immediately apparent to a landlord when they are dealing with the latter entity. Queensland and the Australian Capital Territory similarly exclude leases to listed corporations or subsidiaries thereof, but only where the premises is of a certain size. To further complicate matters, certain types of businesses are exempt, such as cinemas and bowling alleys in New South Wales and Tasmania whilst the ACT excludes art galleries and gardening supply centres. Clearly, a lease requires closer examination in order to determine whether the significant matters contained within retail legislation are to apply.
In the recent case of CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSC 23, the Supreme Court of Victoria considered whether a large refrigerated storage warehouse that stored products for their commercial customers could be characterised as a retail premises. At first instance in the Victorian Civil and Administrative Tribunal (VCAT) it was found not be a retail premises after applying the "ultimate consumer" test. It found that those business customers of CB Cold Storage Pty Ltd were not the "ultimate consumers" but rather the members of the public who would purchase the goods from those business customers.
CB Cold Storage Pty Ltd appealed this decision and was successful in the Supreme Court. Croft J found that VCAT had applied the "ultimate consumer" test too narrowly. It was noted that the fact that goods or services provided is an "input" for a business providing to another person will not prevent that business from being an "ultimate consumer" of that good or service. The key factor is that the good or service being provided is not of the same character as that which the business then goes on to provide their customers. In this case, the service provided was "cold and cool storage services" to business customers who would in turn provide to their customers a good or service of a different character (i.e. whatever product they were keeping in cold storage). As such, that service was appropriate to describe as "retail" in character.
What does this decision mean in determining whether a lease is of retail character? In Victoria, it seems that the definition is significantly broadened and that one needs to consider what specifically is being provided by the business and where that sits on the supply chain. How other jurisdictions may respond will vary considerably; New South Wales, for instance, does not have the same broad definition of retail premises as Victoria but rather provides an extensive list of what is and is not considered "retail".
Perhaps the best lesson here is that one should never assume at first glance what the situation is with a lease and that good advice at an early stage can make things much clearer later on.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
