The big freeze - wespokelaw

Like other states and territories, the Retail Leases Act 2003 (Vic) (Act) applies to the retail sale of goods. Its further application to the provision of retail services vastly extends the types of premises that fall under the operation of the Act and can sometimes create confusion. Following the decision of Cold Storage,^[1] a number of writers have claimed that the case was a breakthrough decision, changing the way retail premises were determined.

But what did the Cold Storage case actually change?

What are you keeping behind there?

In Cold Storage, a tenant (CB Cold Storage Pty Ltd) leased premises which were used for freezer warehouses and related facilities built on the property. The tenant offered these cold storage services to any customer who paid a fee to the tenant. Although most of the tenant’s customers were companies involved in the food industry, anyone could access these services. The tenant claimed that the premises were retail premises, and sought to reclaim money paid to the landlord (IMCC Group (Australia) Pty Ltd) that would not have been payable under the Act.

At first instance, VCAT held that the premises were not used for ‘the retail provision of services’,^[2] and therefore did not fall under the application of the Act. On appeal to the Supreme Court of Victoria, the decision was overturned and despite further appeal by the landlord, the Full Court of the Supreme Court affirmed this later decision.

It was held that the premises were ‘retail premises’ in accordance with section 4 of the Act, on the basis that the services being offered by the tenant were:

not passed on to anyone else to be consumed;
available to the general public; and
of a type that could be offered in return for a fee.

The Court applied the following 3 tests but noted that the tests applied in isolation would not be determinative of the final outcome. In this instance, the Court considered that, applying the 3 tests, each was answered in the affirmative and so it ‘must be that the premises are retail premises’.

A. The ultimate consumer test

The ‘ultimate consumer test’:

looks at who actually uses the services offered by the tenant;

isn’t a question of what type of user is involved: it doesn’t matter if their use is of a commercial or personal nature. It is simply a question of whether the services being supplied by the tenant are used by the person or entity with whom the tenant engages, as opposed to being passed on, unaltered to a third party.

In Cold Storage, the ultimate consumers were the entities who paid a fee to use the cold storage services. The services were that of cold storage spaces, and it was therefore, irrelevant what actual goods were being stored at the premises.

B. Availability of services test

This is a question of whether access to the services are generally available to the public. The characteristics of the user are irrelevant. Instead, the Court considers whether the services offered are restricted to certain users. In Cold Storage, the services were not so restricted, rather, it was accepted that the tenant ‘would accept clients off the street if they so wished’.

The Full Court:

drew attention to the numerous authorities that have focused on this line of reasoning; and

concluded that in the circumstances, the unrestrictive access in Cold Storage was an element indicative of retail services.

C. Paid services test

A clear indication of whether services provided are of a retail nature is if the services are of a type that may be provided in return for a fee. This is a critical element which has arisen in case law time and time again in relation to the relevant query. In Cold Storage, this was not in dispute. Consequently, and in addition to the above tests, this led to the decision that the cold storage services fell under the definition of retail services.

Go ahead – venture into the cold

The question of whether premises are subject to the application of the Act as retail premises may appear to be tricky, but in applying the above tests the process is, in fact, straightforward. Despite what some will have you think, the decision of Cold Storage did not substantively depart from previous authority but reaffirmed it. Nevertheless, the amount of interest and commentary on Cold Storage clearly reflects the importance of this characterisation, and the confusion that surrounds this integral aspect of retail leasing law.

Indeed, the issue of whether the Act applies to a lease invariably has significant financial implications on both parties to a lease, and therefore should certainly not be ignored or pushed into the ‘too hard’ basket. Issues such as:

a tenant’s obligation to pay land tax;

and repair and maintenance obligations,

are only some of the many factors that hinge on the application of the Act.

If you are unsure whether your premises are governed by the Act, do yourself a favour and seek legal assistance before the lease is set in stone and you are left out in the cold.

^[1]IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178.
^[2]Retail Leases Act 2003 (Vic) s 4(1)(a).

^{Is my lease a retail lease?}
^{Retail leasing: do your homework.}
^{Safety is free – for tenants.}