Archive for October, 2012

More on essential safety measures and cost recovery

Last week I presented a paper at the Leo Cussen Centre for Law’s Property Law Conference entitled “Essential Services and the Recovery of Expenses”. The paper can be found here: Leo Cussen paper (October 2012)

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Land area of no consequence in determining whether premises are “retail premises”

Occasionally I am asked whether premises are “retail premises” under s 4(1) of the Retail Leases Act 2003 where a retail business is conducted on a small piece of a substantial area of leased land. This issue arose in Bretair Pty Ltd v Cave [2012] VCAT 1039.  The premises were used as a service station and road house restaurant business. The landlord contended that the premises were not “retail premises” because the leased land comprised 7.5 acres only part of which was used by the businesses conducted there. The Tribunal rejected the landlord’s claim holding that “The RLA does not distinguish between retail and non-retail premises based on the size of the land demised”.  The Senior Member said:

 ….the fact that the buildings, canopies and driveways are surrounded by 7½ acres of land is of no consequence in deciding whether the RLA applies to the current lease agreement between the parties because there is no evidence that the surrounding land is used for any specific purpose other than it is simply being part of the leasehold interest.

 The Senior Member also held that even if he were wrong, VCAT had jurisdiction to hear and determine the matter as a “consumer and trader dispute” under the Fair Trading Act 1999 or the Australian Consumer and Fair Trading Act 2012.


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No easy answers to whether premises are “retail premises”

It is often difficult to determine whether premises are “retail premises” within the meaning of s 4 of the Retail Leases Act 2003 Act. Section 4(1) provides that “retail premises” means premises 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.”

One difficulty that arises is that the definition excludes premises that are “intended for use as a residence” with the result that it is not always clear  whether premises such as motels, serviced apartments and caravan parks are “retail premises”.  In the recent decision of String v Gilandos Pty Ltd [2012] VSC 361 Croft J highlighted that there are no easy or broad brush answers: in each case the terms of the lease and the nature of the premises needs to be examined carefully.

His Honour was required to decide whether leases by owners of units in an apartment/resort  complex to the operator of the resort were “retail premises leases” within the meaning of the Retail Tenancies Act 1986, the Retail Tenancies Reform Act 1998 and the 2003 Act. The operator paid rent to the owners and rented the units to members of the public. The units were used as “serviced apartments” and the members of the public did not know who the owners were. From at least 2007 to January 2012, no member of the public had stayed at the units on a permanent or semi-permanent basis and members of the public had only occupied the units for a day or few days at a time. His Honour determined (at [42]) that the units were used for short-term holiday accommodation in a manner difficult to distinguish in any meaningful way from the manner in which motel and hotel rooms were used.

At [47] His Honour considered the meaning of “serviced apartments” and said:

The term or description “serviced apartments” seems to be a relatively modern one; which probably accounts for the lack of assistance from dictionaries. Thus it cannot be assumed that this term or description has any settled meaning. Consequently it is only a term or description that derives meaning – other than in a very general sense – from the particular circumstances in which it is used; and, in most cases with respect to particular premises. This is, in my view, clear from the cases in which the term or description has been considered.

After reviewing the authorities, Croft J said at [52]:

Thus these cases indicate that there may be very fine distinctions between use of premises as a motel on the one hand or as a serviced apartment or serviced apartment complex on the other hand. The observations by the various courts and tribunals with respect to motels and serviced apartments indicate that the characteristics of both types of premises can overlap, thus adding to difficulties in characterising the mode of usage. A clear example is to be found in St Kilda City Council v Perplat Investments Pty Ltd [(1990) 72 LGRA 378] where Young CJ observed that, while it was open to the Tribunal to make a finding of fact based on the evidence before it that the proposed building would be used as serviced apartments, in his view, the proposed buildings looked more to be a motel.

Following Wellington v Norwich Uniton Life Insurance Society Limited [1991] 1 VR 333 and similar cases (at [58]), His Honour held that that the “ultimate consumer” test was the “touchstone of retailing, whether goods or services” and (at [65]) that members of the public were ultimate consumers for fee or reward (being fees paid for accommodation) and the units were used “wholly or predominantly for the carrying on of a business involving the sale or hire of goods by retail or the retail provision of services”.  Thus, each of the leases were “retail premises leases”.

At [65] His Honour said:

Motels, hotels or resort complexes, generally speaking, provide retail services for fee or reward, including the hiring out of rooms. They may also sell food, liquor and other beverages, by retail, at any restaurant faculty provided. In any event, the hiring out of rooms or units for fee or reward to members of the public clearly constitutes the provison of retail services.

His Honour stressed that in each case the nature of the premises had to be analysed together with the manner in which the occupancy was provided. His Honour said at [68]:

I should, however, sound a note of caution in relation to this finding by emphasising that whether or not premises described as “serviced apartments” is to be characterised as “retail premises” depends upon the particular circumstances, including the nature of the premises, the manner in which occupancy is provided and the nature of that occupancy (see Meerkin v 24 Redan Street Pty Ltd [2007] VCAT 2182 (Deputy President Macnamara); though see Bradfield & Ors v QOB Tenancy Pty Ltd (Retail Tenancies) [2012] VCAT 755 (Senior Member Davis) where the parties took the common view that the serviced apartments ought to be considered as retail premises for the purposes of the 2003 Act (see paragraph [82]) .  As I have said, the term or description, “serviced apartments”, is not a term of art. Rather, it is a term or description of premises which connotes a range of possibilities. At one end of the range one would find premises managed and occupied in a manner indistinguishable from a motel or hotel and at the other end premises indistinguishable from long term residential accommodation, separately let but with the attribute of being serviced. In the former case it would be expected that the Acts would apply on the basis that the premises are “retail premises” and in the latter case they would not, any more than they would to any block of residential units. In between there are a range of possibilities each of which may have different consequences in terms of the application of the Acts.

As to the exclusion from the definition of “any area intended for use as a residence”, His Honour said at [64]:

For the sake of completeness I observe that the Retail Leases (Amendment) Act 2005 amended the 2003 Act to include the words “not including any area intended for use as a residence” in the provisions defining the meaning of “retail premises”. In my view, the expression residential accommodation connotes accommodation of this type which is occupied with a degree of permanence. I observe that, consistent with this view, the Full Federal Court of Australia said, in Marana Holdings Pty Ltd v Commissioner of Taxation (2004) 141 FCR; 214 ALR 190; [2004] FCAC 307 (“Marana Holdings”) that: [citation omitted]

“It may be that the expression “residential accommodation” is sometimes used to describe short-term accommodation in an hotel or a motel. We are not sure that any such usage is as common in Australia as the Court of Appeal in Owen v Elliott [(Inspector of Taxes) [1900] 1 Ch 786] considered it to be in England. We would have thought that such accommodation is more often described as “temporary accommodation”, “holiday accommodation” or perhaps as “hotel accommodation” or “motel accommodation””.

Although Marana Holdings was not a retail leases case this statement is, in my view, one of general application. In the present case the agreed facts are that the Plaintiffs’ Units have been used as only temporary accommodation by its occupants,[citation omitted] so no issue arises with respect to the possibility of residential use.

The agency exception

His Honour also considered a claim by the operator the units were not “retail premises” because the employee or agency exception applied. Section 4(2)(b) of the 2003 Act exempts premises where the tenant is “carrying on” a business “on behalf of the landlord as the landlord’s employee or agent”. After a comprehensive consideration of the terms of the leases His Honour at [69] – [95] rejected the operator’s claim that it was carrying on a business as the landlord’s agent.  Helpfully, His Honour at [94] said:

….in my view, the agency exception only applies if the tenant and landlord relationship is merely incidental to the agency relationship. So even if I am wrong in finding that there is no agency relationship, it cannot be said that the landlord and tenant relationship between the Plaintiffs and the Defendant is incidental to the agency relationship.

(italics added)

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Tenant seeks to overturn VCAT’s exclusive jurisidiction

In Ireland v Subway Systems Australia Pty Ltd and Subway Realty Pty Ltd [2012] VCAT 1061 a tenant contended if an agreement (which it contended was a licence) was held to be a lease then the dispute had to be determined by an arbitrator pursuant to an arbitration clause and not by VCAT.  The arbitration clause was contained in the a document separate from the lease. VCAT held that the agreement was a lease and therefore there was a “retail tenancy dispute” which, subject to the tenant’s argument about the Commercial Arbitration Act, would be governed by the dispute provisions of the RLA. If the tenant’s application had succeeded the whole regime of the dispute resolutions provisions in the RLA would have been displaced. The tenant argued that the arbitration clause should be given effect to because s 10 of the Commercial Arbitration Act 2011 was pronounced after the commencement of the 2003 Act and, by implication, repealed the provisions of the RLA that gave exclusive jurisdiction  concerning retail tenancy disputes to VCAT.  The tenant contended that the word “court”  in s 10 of the Commercial Arbitration Act included the Tribunal. At [45] the Tribunal accepted that there was authority supporting the proposition that, in some cases, the reference to a “court” will include the Tribunal. The tenant contended that to construe the word “court” in the Commercial Arbitration Act to include the Tribunal would not create inconsistency between that Act and the RLA because the Commercial Arbitration Act was a later Act of Parliament which would, by implication repeal the inconsistent provisions of the RLA.  In rejecting the tenant’s contentions the Tribunal said:

 [50]       I do not accept that submission. In Goodwin v Phillips (1908) 7 CLR 1 at 10, Barton J adopted the following statement from Hardcastle on Statutory Law:

The court must be satisfied that the two enactments are so inconsistent or repugnant that they cannot stand together, before they can from the language of the later imply the repeal of an express prior enactment, i.e., the repeal must, if not express flow from the necessary implication.

[51]       Further, in Saraswati v R (1991) 100 ALR 193 Gaudron J stated the following;

It is a basic rule of construction that, in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless an intention to that effect is necessarily to be implied. There must be very strong grounds to support the implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other (at 204)

[53]         In my view, limiting the word court in s 10 of the Commercial Arbitration Act 2011 to mean the Magistrates’ Court, County Court or Supreme Court would not lead to any inconsistency between the two Acts and is a construction that is to be adopted, having regard to the authorities cited above. Accordingly, I do not accept the submission that the word court in the Commercial Arbitration Act 2011 includes the Tribunal. It simply cannot be the case that Parliament intended that the Commercial Arbitration Act 2011 and the RLA were to cover the same field of operation. The RLA is expressed elaborately and specifically details how retail tenancy disputes are to be resolved. The Commercial Arbitration Act 2011 says nothing about resolving retail tenancy disputes and is expressed in a general manner. In my view, that is another factor weighing against a finding that Parliament intended the provisions of the Commercial Arbitration Act 2011 to take precedence over the dispute resolution provisions of the RLA. Accordingly, I find that the word court in the Commercial Arbitration Act 2011 does not include the Tribunal and as a consequence, the Commercial Arbitration Act 2011 has no application in determining the present dispute.



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