Leases that may have previously been considered not
subject to the Retail Leases Act 2003 ("the
Act") may now be so due to recent court
This means new protections for tenants and increased obligations
for landlords. The impact of this change needs to be considered by
both when negotiating leases or managing disputes.
CB Cold Storage Pty Ltd v Morgan Street Investments Pty Ltd
(Retail Tenancies)  VCAT 773
Morgan Street Investments Pty Ltd
("Morgan") applied to strike out part of
CB Cold Storage Pty Ltd's ("CB")
claim that the lease was governed by the Act. Morgan argued that
the premises were not 'retail premises' because:
CB's use of the premises did not constitute 'the
provision of retail services'; and
the provision of retail services was not a permitted use of the
premises under the lease.
Section 4 of the Act defines "retail premises" as
premises used or to be used wholly or predominantly for
"the sale or hire of goods by retail or the retail
provision of services".
Item 15 of the Schedule to the lease stated the permitted use of
the premises was:
"the use in connection with the conduct of a cold
storage business, office, warehouse, transport facility and food
processing plant by the Tenant".
THE ULTIMATE CONSUMER TEST
The 'ultimate consumer' test is used to determine if
premises are 'retail premises'. The basic premise is that
retailing requires that an item or service is provided 'to an
ultimate consumer for a fee or reward' (per Justice Nathan in
Wellington v Norwich Union Life Insurance Society Limited
 VR 333).
Counsel for CB submitted that 'use in connection with the
conduct of a cold storage business' could only be interpreted
to mean use of the premises for a retail purpose, following the
case of Fitzroy Dental v Metropole Management Pty Ltd
[2013[ VSC 344.
In Fitzroy Dental, Justice Croft determined that the
provision of a conference centre by a tenant to function companies
– who used the centre to host functions and conferences to
others under separate arrangements – was use for a retail
purpose. The function companies were the 'ultimate
consumer' of the services provided by the tenant, even though
those services were then 'input' into other services
provided by the function companies to function attendants. On this
basis, Justice Croft found the lease was governed by the Act.
'The fact that a good or service is provided to a person
who uses the good or service as an 'input' in that
person's business for the purpose of providing or producing a
different good or service to another person does not detract from
the possible characterisation of the first person ... as the
'ultimate consumer' of the original good or
VCAT agreed with CB that the actual use of the premises was the
provision of a cold storage facility to consumers. Morgan's
application raised the question whether this use was permitted by
VCAT accepted Morgan's submission that actual use of the
premises for retail services could not bring the lease within the
ambit of the Act if that use was not a permitted use under the
lease. Whether or not the parties knew the permitted use may
involve the retail provisions of services would not have bearing on
the application of the Act.
There were inconsistencies in the lease, which brought into
question whether use of the premises to provide retail services was
VCAT refused Morgan's strike out application as it
considered that the question could not be resolved at the
interlocutory (or preliminary) stage.
IMPACT OF THE DECISION
Following CB Cold Storage and Fitzroy Dental,
it appears that the Act will apply to most leases where a tenant
provides any type of service, subject to that use being within the
permitted use of the premises in the lease.
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.
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Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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