Is your business to business lease governed by the Retail Leases Act 2003 (Vic)?

By Evelyn Marcou, Senior Associate, MST Lawyers

Many commentators and barristers have suggested that all businesses that wholly or predominantly supply services will be considered retail, whether or not these services are supplied to the public or business-to-business.

In CB Cold Storage Pty Ltd v IMCC Group Pty Ltd [2017] VSC 23 Croft J had to consider whether rented premises were “retail premises”.

• The tenant conducted the business of a cold and cool storage warehouse storage from the premises which accorded with the permitted use under the lease. The tenant’s customers ranged from large primary production enterprises to very small owner operated businesses.
• VCAT held that the tenant’s rented premises were not “retail premises” on the basis that a “consumer” was a person who used goods or services to satisfy personal needs rather than for a business purpose and therefore the tenant’s customers were not consumers of the tenant’s services.
• The tenant appealed VCAT’s decision. Croft J allowed the appeal and held that the premises were “retail premises”.
• Croft J held that the Tribunal erred in holding that customers that used a tenant’s service for a business purpose were not “ultimate consumers”. The Tribunal treated the services provided at the premises as an “input” into the tenant’s customer’s business arrangements with the consequence that the tenant’s customers were not the ultimate consumers of the tenant’s services.
• The matter was not remitted to VCAT because the Tribunal had been satisfied of all other matters necessary to support a conclusion that the premises were “retail premises”, the premises were being used in accordance with the lease, were “open to the public” and there were no findings to support a conclusion that the premises were not “retail premises”.

CB Cold Storage highlights the importance of identifying the nature of the service being provided and the user or consumer of that service. In most cases the provision of a service will be “retail”.

Important points to note from this decision

• The test to determine whether the sale of goods or supply of services is retail for the purposes of the RLA 2003 remains the ‘ultimate consumer’test from Wellington Union Life Insurance Society Limited [1991] 1 VR 333.

• The RLA can apply to premises from which goods or services are supplied business-to-business, provided that those goods or services are supplied to the ultimate consumer of those services. This may apply to services supplied to business-to-business, provided that the services are not on-supplied, or to goods that are supplied business-to-business and that are used as an input in the second person’s business.

• Unless another statutory exclusion applies, warehousing and logistics businesses are likely to be treated as retail premises.

• The reach of the ‘ultimate consumer’test is broader than most people expect.

• The ‘ultimate consumer’test applies also to the supply of goods business-to-business, provided that the goods are used as an input into the second business, rather than re-supplied.

Landlords should consider reviewing their  non-retail leases to determine whether:

• their leases are in fact leases of retail premises under the ‘ultimate consumer’ test;  and

• land tax or other outgoings mistakenly paid may be recoverable from the landlord.

There are likely to be a significant number of leases in the community that are regulated by the RLA without the parties knowing. If there is any doubt, it is prudent to treat the lease as a lease of retail premises to avoid the risk of losses to the landlord down the track.

For further information, please contact our Property & Leasing team by email property@mst.com.au or by telephone Ph: +61 3 8540 0200.