Adirel Finance Pty Ltd v Massada Nominees Pty Ltd [2001] VCAT 658 (31 March 2001)

Retail Tenancies List; Petrol station tenancy; definition of "a retail premises"; Section 3(1) Retail Tenancies Reform Act 1998; Section 3(5) Retail Tenancies Reform Act 1998; Guidelines issued in Victorian Government Gazette S67 dated 1 July 1998 as to measurement of floor area for the purposes of Retail Tenancies Reform Act 1998

Respondent Massada Nominees Pty Ltd (ACN 004 995 573)

(a) the lease dated 11 November 1998 between the applicant as tenant and the respondent as landlord is a lease of a retail premises;

(b) the premises the subject matter of the lease, has a floor area less than 1,000sq m; and

(c) the Retail Tenancies Reform Act 1998 applies to the lease

For the Applicant: Mr M.S. Osborne of Counsel, instructed by McGrath Carey Katz

For the Respondent: Mr M.A. Strang of Counsel, instructed by F.L.A. Partners.

1. This is yet another dispute as to the application of the 1,000sq m floor area limit for the application of the Retail Tenancies Reform Act 1998 (see the first exclusion paragraph (a) in the definition of "a retail premises" in Section 3 of the Act). A similar exclusion, namely of premises with a floor area exceeding 1,000sq m is to be found in the definition of "retail premises" in Section 3(1) of the Retail Tenancies Act 1986. This issue attracted the attention of the Supreme Court on at least five occasions under the 1986 Act (decisions which were in some respects difficult to reconcile with one another) and finally, the Court of Appeal.

2. Adirel Finance Pty Ltd is tenant of premises at 24 Hopkins Street Footscray under a lease from Massada Nominees Pty Ltd pursuant to a Deed of Lease dated 11 November 1998. The lease provides for a term of three years commencing 10 December 1998 and reserves two options for further terms of three years each. The lease provides for the premises to be used as a "garage and service station".

3. Adirel Finance Pty Ltd, the tenant under the lease, filed an application in the Tribunal on 14 December last, seeking some 12 different items of relief including a declaration that the Retail Tenancies Reform Act 1998 applies to the lease and further, since the landlord did not give a disclosure statement in accordance with the terms of that statute, that the landlord be required to "repay all rent paid to it to-date by the tenant, the amount being $117,000 plus interest thereon". The tenant also sought an order "that costs and charges of $1,788 recovered by the landlord or its solicitors from the tenant for the landlord's legal costs and expenses in relation to the preparation of the lease be reimbursed together with interest".

4. On 15 January 2001 I ordered that the proceeding be set down for hearing "to determine whether the premises at 24 Hopkins Street Footscray are `retail premises' within the meaning of the Retail Tenancies Reform Act 1998".

5. It is common ground that the total area of the demised premises is 1,128sq m. The landlord contends that therefore the premises are excluded from the operation of the Retail Tenancies Reform Act 1998. Because they are not retail premises therefore, says the landlord, it was under no obligation to provide a disclosure statement and was entitled to require its costs and disbursements for the preparation of the lease to be paid by the tenant. According to the landlord there is therefore no entitlement for the tenant to recover the rent which it has paid.

6. According to the tenant, a proper measurement of the floor area for the purposes of the definition of "retail premises" and therefore the application of the Retail Tenancies Reform Act 1998 would exclude all areas in the service station with the exception of a shop and storage area and the canopied area over the petrol bowsers. This would yield an area well within the 1,000sq m limit stipulated by the definition.

7. It would be seen that the resolution of he dispute before me today depends upon determining the status of the forecourt for the purposes of measuring the "floor area" of the tenancy.

8. Mr M.S. Osborne of Counsel appeared on behalf of the tenant. He referred first to Section 3(5) of the Retail Tenancies Reform Act 1998 which provides that in determining the floor area of premises for the purposes of the Act "regard shall be had to the guidelines for measurement of lettable area issued by the Minister and notified in the Government Gazette". He stressed the mandatory affect of the word "shall". He noted that guidelines were published in Victorian Government Gazette No. S67, 1 July 1998 which were repealed and replaced by a further set of guidelines published in the Gazette of 19 August 1999. According to Mr Osborne this lease which was entered into and took affect in November/December 1998 is governed by the 1998 guidelines and that the 1999 guidelines were not retrospective. He referred to one of my own decisions in Lylecash Pty Ltd v Mayfly Pty Ltd [2000] VCAT 397; [2000] VConvR 58-542.

9. Mr Osborne relied upon the evidence of a surveyor Mr Halliburton who said that applying the 1998 guidelines, the floor area of the tenancy was 131sq m. Mr Halliburton reached this conclusion by excluding all areas except the sales area and garage.

10. According to Mr Osborne the petrol station was properly to be measured in accordance with the guidelines because it could be regarded as either "commercial buildings" or "shop". He referred to a number of definitions of "commercial" to be found in the Shorter Oxford Dictionary as follows:

"1. Engaged in commerce; trading 2. Off or relating to commerce or trade 3. Such as passers current in the transaction of commerce 4. Viewed as a matter of profit or loss."

11. He also referred to a number of definitions of "shop" in the Shorter Oxford Dictionary as follows:

"1. A house or building where goods are made or prepared for sale and sold 2. A building or room set apart for the sale of merchandise 3. A building or room set apart and fitted up for the carrying on of some particular kind of handiwork or mechanical industry; a workshop now often, a building or room in a factory appropriated to some particular department or stage of the work carried on there."

12. Mr Osborne submitted that if contrary to his primary submission, the guidelines do not apply, an application of the general principles considered by the Court of Appeal in Sorbara v D.J. & A.J. McCallum Pty Ltd [1998] VSCA 71; [1999] 2 VR 1 would measure the floor area at less than 1,000sq m. He referred to the remarks of Kenny JA as (Her Honour then was) in Sorbara's case where she said:

"The expression `floor area' in the definition of retail premises in S.3(1) of the RTA is, I think, used in this activity-related sense to signify the lower surface of each level of the premises (first identified in the definition of retail premises) used, to be used, or designed and available for use in the retail business carried on on the premises." [1992] VicRp 52; [1992] 2 VR 1, 15 at [35]

13. He said the business carried on on the premises

"Involves the dispensing of petrol, the dispensing of small convenience goods and the effecting of mechanical repairs. All of those activities are carried out at either the retail shop area, under the canopy area of in the garage area, with miscellaneous matters relating to the use of the garage business contained in the storage shed."

14. Application of this test would he said, bring in for measurement:

This was still he said, well below the 1,000sq m limit.

15. He said that whilst the Court of Appeal in Sorbara had seen fit to include the whole area of the demise relative to a motel property. In Sorbara's case, the areas surrounding a building like a motel are all part of the total experience for which customers pay. There is no such consideration, according to Mr Osborne in the case of a petrol station.

16. He relied upon a decision of Mr George Golvan QC, sitting as an Arbitrator under the Retail Tenancies Act 1986 in M.F.D. Nominees Pty Ltd v Uysal Investments Pty Ltd (1997) VconvR 58-525. Mr Osborne concluded that his client's business involved:

The driveways were merely a means of access and egress. Finally Mr Osborne referred to Clause 6(j) of the lease "which contains a prohibition on the display or signage or advertisement on the exterior of the premises without the landlord's consent - such a reference to exterior can only mean the shop area and garage area - and also with Section 14(d) which contemplates part of the demised premises being used as a car parking area".

17. Mr Strang on behalf of the landlord submitted that the 1998 guidelines issued by the Minister, according to their term were to be

* strip shops, freestanding shops, semi-detached or terrace type shops in suburban streets."

He said that retail tenancy areas in commercial buildings must mean office space. These premises were not in a commercial building. He said the further provision in Part 2 for measuring gross lettable areas in

18. In Mr Strang's submission the 1999 guidelines have no application.

19. He submitted that the 1999 guidelines could not retrospectively affect the lease. The 1998 guidelines were repealed and therefore of no effect. He referred to Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261, 267 per Dixon CJ and Pearce and Argument Delegated Legislation in Australia (Second Edition) 288; Victorian Stevedoring v Dignan [1931] HCA 34; (1931) 46 CLR 73. He referred to a number of passages from Sorbara's case.

20. In Mr Strang's submission the evidence showed that the whole floor area was used for the purposes of the business. Mr Flinkier, the principal of the landlord, made a statement in which he said that he had observed the forecourt being used for a number of purposes associated with the conduct of the petrol station, including customer's vehicles queuing until they could approach the bowsers, petrol wholesaler's tankers attending to refill the underground tanks which serve the bowsers. Mr Flinkier noted that cars sometimes line up alongside the LP gas tank to refill their tanks and at the west end of the forecourt "there is a facility for checking tyre pressures, with space available for vehicles alongside".

21. Mr Strang concluded by submitting that the proceedings should be summarily dismissed pursuant to Section 75 of the Victorian Civil and Administrative Tribunal Act 1998 in accordance with the practice adopted in Malthall v Illiopolous v Bevendale Pty Ltd (1998) VConvR 58-527; Lylecash Pty Ltd v Mayfly Pty Ltd [2,000] VConvR 58-542.

22. Mr Osborne did not contend that the demised premises here could be regarded as:

Accordingly, I can put Part 2 of the 1998 guidelines to one side. He placed reliance, as previously noted, on Part 1 which deals with:

* strip shops, freestanding shops, semi-detached or terrace type shops in suburban streets.

The surveyor Mr Halliburton excluded the forecourt and driveway areas by reference to Clause 1.3.2 of the guidelines which excludes from measurement:

"areas set aside as public spaces, thoroughfares or accessways for use by service vehicles and for delivery of goods, where such areas are not for the exclusive use of occupiers of the tenancy."

23. Mr Strang correctly submitted that that sub-clause had no application to the present case. There is nothing in the lease which excludes the usual rule that the tenant has a right to exclusive possession of he entire demise. Mr Bajayo, a director of the applicant, notes in his statement:

"The driveways are not exclusively used by customers of the garage and service station. It is not unknown for cars to pass through the premises via the driveways without purchasing petrol, or making purchases at the shop or having repairs done in the workshop area."

24. One imagines that this class of visitor is merely taking a short-cut across the site. This phenomenon however cannot alter the tenant's legal right to exclusive possession of the entire demise. A person with a dwelling house on a street corner without a front fence is no less the owner of the front garden merely because passers-by sometimes cut across the garden as a short-cut around the corner. Accordingly, even if one assumes that the 1998 measurement guidelines apply generally to the present case, that particular excluder has no application here. The tenant is entitled to exclusive possession of the forecourt.

25. Putting Clause 1.3.2 to one side, Part 1 of the 1998 guidelines appear to deal solely with built forms and the exclusion of such areas as recess doorways, cupboards, toilets and so forth but including areas such as window mullions, window frames and structural columns. They simply do not contemplate premises such as a service station.

26. In my view the very wide meaning of "commercial" contended for by Mr Osborne cannot be accepted in this context. If the word "commercial" in the phrase "commercial buildings" was of that width, why is there a separate chapter dealing with "warehouses, industrial buildings, freestanding supermarkets and showrooms" all of which are commercial in the general sense contended for by Mr Osborne? Moreover, shops, whether in shopping centres or strips, are "commercial". All of the references to other classes of buildings would be unnecessary if "commercial" bears wide meaning contended for by Mr Osborne. Further, in a press release dated 20 August 1999 on behalf of the then Minister in association with the 1999 guidelines, it was stated "hotels have been brought under the Retail Tenancies Reform Act 1998 following gazetted changes to the Act this week" (see Lylecash at paragraph 22). Hotels and motels are clearly commercial in the wide sense.

27. Sorbara's case was concerned with the application of measurement rules to determine whether a motel constituted "a retail premises" within the meaning of the definition within the 1986 Act. There were no gazetted guidelines which were relevant to the matter. However, Kenny JA noted after the 1998 statute had been passed by Parliament and came into force and the 1998 guidelines had been adopted. She noted that none of the guidelines "is expressed to apply, directly at least, to motels, caravan parks and like premises". This approach is again inconsistent with the view that the concept of "commercial buildings" in the guidelines is of the width contended for by Mr Osborne. With some hesitation I adopt the same view which I did in the Lylecash case where at paragraph 22 I observed:

"There is no definition in the guidelines themselves to indicate what a "commercial building" might be. So one is left to consider what its popular meaning may be. In my view it is more likely that commercial buildings are office buildings."

28. I do not doubt that at least part of the petrol station could be described as a "shop". According to Mr Bajayo:

"Customers use the premises for the purpose of buying petrol, purchasing miscellaneous goods at the store, or having mechanical repairs effected at the garage. All payments are made in the store."

29. I am inclined to doubt however that the station as a whole would be described as a "shop" in the popular sense. There is no definition of "shop" in the 1998 guidelines. The station is certainly not a strip shop, a semi-detached shop or a terrace type of shop. There might be some argument to describe it as a "freestanding shop". Clause 1.4 of the 1998 guidelines requires the exclusion from tenancy area calculations of "covered areas". This might be a ground, if the guidelines are regarded as applying, for excluding the canopied area in which fuel is dispensed from petrol bowsers.

30. In my view Mr Strang was correct when he submitted that the entire premise for the operation of the 1998 guidelines in so far as they purported to apply to various classes of shops was that the business of the shop was conducted within a built area, whether enclosed by walls or a roof. Apart from Clause 1.3.2 and the passage which I have quoted from Clause 1.4 which is headed "treatment of balconies, verandahs etc" open areas are not mentioned at all. An important part and perhaps the most important part of the business of a petrol station is, as Mr Strang observed, conducted out of doors. He submitted that safety considerations in the dispensing of petroleum products amongst other things dictated that arrangement. I was not taken to any particular provisions of any statute such as the Dangerous Goods Act but this suggestion has a measure of plausibility. Even although as Mr Bajayo's statement notes payment is made inside the building or "shop", the substantially important part of the station's business, dispensing petrol - perhaps the most important part takes place outside.

31. In my view the 1998 guidelines have no application to the present case. Even if they had, given the conclusion that I have reached that Clause 1.3.2 has no application, there is nothing in the 1998 guidelines which distinctly excludes the forecourt areas from measurement. This is in stark contrast to the 1999 guidelines which include the following:

"Lettable areas only include the part or parts of retail premises that have:

(d) a surface which may be locked and secured by means of permanent structures."

32. It follows that the application of the floor area criterion of the definition of retail premises must be resolved by reference to the general considerations dealt with by the Court of Appeal in Sorbara's case. In Sorbara the Court unanimously concluded that the whole area of the demise of a motel had to be brought to account. Areas occupied by the "core business" were equally to be counted as those which were merely incidental including lawns and garden beds, swimming pools, the manager's residence and so forth.

33. It is one thing to say as Mr Osborne does that the area surrounding a motel are a vital part of its ambience and that there is no similar role for a petrol station forecourt to play. Nevertheless the forecourt is no less vital to the service station business. As Mr Flinkier noted, this forecourt is used for vehicles parked and awaiting petrol filing or mechanical repairs or the dispensing of LP gas or the use of the compressed air tyre pump. In Sorbara's case Phillips JA considered that a fenced paddock, part of the demised premises and adjacent to the motel, could be excluded from the floor area, particularly if it was sub-let for agistment. He observed:

"The paddock would be excluded, not directly because the business was not being carried on there, but because the nature of the ground surface was such that it was foreign to what could reasonably be regarded as "floor area" even in the context of a motel business." [1998] VSCA 71; [1999] 2 VR 1, 9 at [17]

34. The photographs given by Mr Flinkier show this site as being a fairly typical service station. The entire area has a hard surface (though Mr Bajayo notes that the surface has deteriorated in some places). That hard surface is particularly constructed to facilitate motor vehicle traffic. Maintenance and filling of motor vehicles is the very purpose of a service station. The forecourt is in no way "foreign to what could reasonably be regarded as `floor area' ..." in the context of a petrol station business. It is an integral part of it. Again, I was not taken to any particular provisions of any planning scheme as to what the planning requirements may be for a petrol station. The fact however that petrol stations typically have very wide forecourts is so notorious that in my view a Judge would be entitled to take judicial notice of it. My power under Section 98 of the Victorian Civil and Administrative Tribunal Act 1998 is to inform myself in such fashion as I see fit. This suggests that my power to "notice" this fact is no less extensive and probably more extensive than a judge's would be. Why, one may ask, are these forecourts invariably provided for service stations if they are not to be regarded as an integral part of the entire complex and necessary for their proper operation?

35. In my view the application for declaration that the premises at 24 Hopkins Street Footscray, are "retail premises" within the meaning of the Retail Tenancies Reform Act 1998 should be dismissed. I do not however accept the submission made by Mr Strang that these proceedings should be dismissed pursuant to Section 75 of the Victorian Civil and Administrative Tribunal Act 1998. The dispute between the parties which goes beyond the Retail Tenancies Reform Act 1998 to include such matters as compliance with a Health Notice issued by the City of Maribyrnong for repair and reinstatement of the toilet is properly to be regarded as a "fair trading dispute" within the meaning of Section 107 of the Fair Trading Act 1999. The definition of "services" to be found in Section 3 of that Act includes and extends to the grant of interests in real estate. The lease was entered into prior to the commencement of the Fair Trading Act 1999, nevertheless according to Beach J. in Vamot Pty Ltd v Tempacoe Pty Ltd the grant of jurisdiction under Section 108 of the Fair Trading Act 1999 is retrospective. [2000] VSC 251 at [12]

36. The written submission on behalf of the respondents made an application for costs but this was not dealt with in oral argument and I have heard no submission from the applicant in that regard. In the circumstances therefore, I will dismiss the application for declaration that these premises are retail premises; reserve the question of costs and reserve liberty to apply should the parties desire to take this proceeding any further within the Tribunal.