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The Victorian Supreme Court of Appeal recently handed down their decision in CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2016] VCAT 1866 (CB Cold Storage); highlighting the importance of:

  • identifying the nature of the service being provided under a Lease
  • identifying whether the service is in accordance with the permitted use and
  • determining who is the user or consumer of the service and if the service is provided at a fee.

These factors considered as a whole will determine whether a business-to-business services lease (Lease) is governed by the Retail Leases Act 2003 (the Act).

This case has significant implications for Landlords, as it confirms a previous decision which potentially extended the reach of the Act to what had been considered by many as non-retail use, especially for service provider tenants.

The Case

CB Cold Storage was about the provision of a service of cold and cool storage warehouse and transport facilities; including the receipt, storage and trans-shipment of goods for producers, manufacturers, distributors, importers and exporters.

On first instance, Senior Member Walker narrowed the interpretation of ‘retail’ suggesting the supply of services cannot sensibly be regarded as a retail supply of services if they do not maintain a retail character. Here, it was held there was nothing about the provision of services that would give it a retail character. Furthermore, the Lease could not be governed by the Act as a retail ‘consumer’ was found to be a person who will use goods or services to satisfy personal needs rather than a business purpose.

This decision was overturned by Croft J in the Supreme Court of Victoria and upheld on Appeal. The Court on both instances found the premises were in fact retail premises under the Act. In his findings Croft J held the Act should apply to premises from which goods or services are supplied to the ‘ultimate consumer’. The customers to which the Tenant provides their services range from large primary production enterprises to very small owner operated businesses.

The Court adopted the interpretation of ‘ultimate consumer’ from Member Rowland’s decision in Global Tiger Logistics Pty Ltd v Chapel Street Trust (unreported, VCAT, 8 November 2012). Member Rowland contended the essential feature of a lease being retail in nature is the provision of the service must be provided to the ultimate consumer. That is, are the services provided by the Tenant supplied at a fee, during usual business hours and not on-supplied to others? Given such a test, it is difficult to conceive any sale of a service being anything other than retail. In particular, there is nothing in the nature of the services provided in CB Cold Storage that would exclude them from being considered retail services as the above factors were all satisfied.

What does this mean for each party?

Landlords should be conscious that application of the broad ‘ultimate consumer’ test may result in Leases previously considered non-retail will now be governed  by the Act. One primary implication is Landlords will be prohibited from recovering land tax from tenants of a retail premises lease pursuant to section 50 the Act.

For more information about these changes or to find out if you are affected, please contact us.

This article was written by Amelia Santilli, Lawyer – Litigation and Dispute Resolution. 

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When is a lease for business-to-business services governed by the Retail Leases Act 2003 (VIC)

19 July 2018
amelia santilli

The Victorian Supreme Court of Appeal recently handed down their decision in CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2016] VCAT 1866 (CB Cold Storage); highlighting the importance of:

  • identifying the nature of the service being provided under a Lease
  • identifying whether the service is in accordance with the permitted use and
  • determining who is the user or consumer of the service and if the service is provided at a fee.

These factors considered as a whole will determine whether a business-to-business services lease (Lease) is governed by the Retail Leases Act 2003 (the Act).

This case has significant implications for Landlords, as it confirms a previous decision which potentially extended the reach of the Act to what had been considered by many as non-retail use, especially for service provider tenants.

The Case

CB Cold Storage was about the provision of a service of cold and cool storage warehouse and transport facilities; including the receipt, storage and trans-shipment of goods for producers, manufacturers, distributors, importers and exporters.

On first instance, Senior Member Walker narrowed the interpretation of ‘retail’ suggesting the supply of services cannot sensibly be regarded as a retail supply of services if they do not maintain a retail character. Here, it was held there was nothing about the provision of services that would give it a retail character. Furthermore, the Lease could not be governed by the Act as a retail ‘consumer’ was found to be a person who will use goods or services to satisfy personal needs rather than a business purpose.

This decision was overturned by Croft J in the Supreme Court of Victoria and upheld on Appeal. The Court on both instances found the premises were in fact retail premises under the Act. In his findings Croft J held the Act should apply to premises from which goods or services are supplied to the ‘ultimate consumer’. The customers to which the Tenant provides their services range from large primary production enterprises to very small owner operated businesses.

The Court adopted the interpretation of ‘ultimate consumer’ from Member Rowland’s decision in Global Tiger Logistics Pty Ltd v Chapel Street Trust (unreported, VCAT, 8 November 2012). Member Rowland contended the essential feature of a lease being retail in nature is the provision of the service must be provided to the ultimate consumer. That is, are the services provided by the Tenant supplied at a fee, during usual business hours and not on-supplied to others? Given such a test, it is difficult to conceive any sale of a service being anything other than retail. In particular, there is nothing in the nature of the services provided in CB Cold Storage that would exclude them from being considered retail services as the above factors were all satisfied.

What does this mean for each party?

Landlords should be conscious that application of the broad ‘ultimate consumer’ test may result in Leases previously considered non-retail will now be governed  by the Act. One primary implication is Landlords will be prohibited from recovering land tax from tenants of a retail premises lease pursuant to section 50 the Act.

For more information about these changes or to find out if you are affected, please contact us.

This article was written by Amelia Santilli, Lawyer – Litigation and Dispute Resolution.