This is the second post in a series that I am publishing on the application of the RLA 2003 and the ultimate consumer test since the CB Cold Storage appeal.
In Bulk Powders Pty Ltd v Seicon Pty Ltd (Building and Property) [2018] VCAT 2000 from December 2018, Senior Member Forde at VCAT considered a lease with the following permitted use:
- Use of the premises: PRODUCTION, PACKAGING AND STORAGE OF HEALTH SUPPLEMENTS (NOT RETAIL). By executing this lease you acknowledge that your use of the premises is not predominantly retail and therefore does not invoke the Retail Leases Act (2003).
The tenant’s business was the supply of powdered food and nutritional supplements for weight-lifters, body builders and other athletes.
The tenant argued that its business was retail because its supplies satisfied the ‘ultimate consumer’ test – most of its customers directly consumed its products (there was some evidence of a very small amount of wholesaling, but not enough to prevent the test from being satisfied).
However, the tenant also gave evidence that:
- virtually all of its business was conducted online;
- members of the public were not allowed to access the premises (in part because the premises of one of its competitors was burned down in what the evidence suggested might have been an arson attack); and
- a small number of well-known customers were allowed to access the property by invitation only.
The Senior Member’s primary finding was that the leased premises was not ‘open to the public’, so not a retail premises. She held that:
[20] In order to answer the first issue it is necessary to determine whether the premises are used or are to be used, wholly or predominantly by the tenant under the terms of the lease for the sale or hire of goods by retail or the retail provision of services.
[21] Mr Supple submitted that the Act does not discriminate against different types of sale by retail or retailing provision of services. Whether the sales are provided to the ultimate consumer from the premises via face, phone, email, ecommerce, conducted electronically or via the internet, the meaning of retail premises is not affected.
[22] I do not accept Mr Supple’s submission. The classification of premises as retail premises under the Act is affected by whether sales are face to face with the consumer or by other means.
[23] It is not disputed that the tenant has established on the evidence that it supplies goods to the ultimate consumer of those goods. Accordingly, one [of the] indicia of retail recognised by the authorities, being the requirement that a retail supply involves a supply of goods or services to the ultimate consumer, is satisfied.
[24] Another indicium of retail recognised by the authorities is whether the premises are open to the public.
…
[29] In this case, the evidence is that the premises are not open to the public. In particular:
- There is no signage at the premises identifying it to the public as being the premises of the tenant;
- Mr Supple gave evidence that only customers with a long-term trading history are permitted to enter the premises by appointment.
- Mr Supple gave evidence that the tenant did not want its location to be publicly known in part due to suspicious fires occurring at a nearby competitor’s premises, for the safety of its female staff and for commercial reasons;
[30] The respondent carries on a business of selling certain products, with sales predominantly on line. Whilst that activity might be considered to be “retail”, in my view that does not make the premises retail premises. It is clear on the evidence that the premises are used predominantly for production and storage of product. The fact that product sold on line is shipped from the storage facility does not, in my view, make the storage facility retail premises.
The Senior Member also made the following finding about the permitted use (emphasis added):
[31] The use of the premises for production and storage of product is consistent with the express permitted use of the premises under the lease. And for the purpose of determining whether premises are retail premises, it is the use permitted under the lease that is relevant.
[32] I find that the premises are not retail premises. …
So far as I am aware, this is the first example of a premises being held not to be retail because of it not being ‘open to the public’.
The case also suggests that the permitted use remains relevant to determining the application of the RLA 2003 to the lease, but must also be read with Croft J’s remarks in the Koga case, discussed here.
This post originally appeared on https://samhopperbarrister.com/
