Appellant v Respondent

1 On 29 July 2005, the Victorian Civil and Administrative Tribunal ("the Tribunal") granted an application by the respondent ("Westvale") for an injunction restraining the appellant ("Brimbank") from re-entering premises at 45 Kings Road, Kings Park, ("the premises") under the terms of a lease made between the parties on 7 May 2004 ("the lease"). The Master granted Brimbank leave to appeal, under s 148(1)(b) of the Victorian Civil and Administrative Tribunal Act 1998, from the Tribunal's determination that it had jurisdiction under the Retail Leases Act 2003 ("the Act") and from the orders made.

2 The affidavit of Carol Julian, affirmed on 26 August 2005 in support of the appeal, sets out the relevant facts.

Background

3 Brimbank owns more than 100 properties which are used for a wide range of purposes. A small number of the properties are put to what Ms Julian describes as "commercial uses" for which a "commercial rental" is charged. The remainder are used for "community welfare or community benefit purposes": to meet community needs in relation to childcare, health and education, leisure and recreation and the like. The rent charged in relation to those properties is nominal and Brimbank also provides assistance in respect of such matters as building insurance and maintenance.

The lease

4 The lease was executed as a deed made on 7 May 2004 and entitled "Neighbourhood House Lease Agreement". It provides for a nominal annual rental of $100.00 and for a leasehold term of five years from the commencement date.

5 Clause 2.1 of the lease provides that the premises may be used "only for the Permitted Purpose". Clause 8 of Schedule A to the lease describes the Permitted Purpose as :

"Neighbourhood House activities as defined in the Brimbank Neighbourhood House Policy."

6 Clause 4 of the lease also relevantly provides:

"4. COMMUNITY USE

In recognition of the Council's grant of this Lease to the Lessee, it must promote and maximise the occasional community use of the Premises by offering them to the Brimbank Municipal Community at a cost consistent with the cost of those facilities to the Lessee whether in conjunction with the Council or not and otherwise on the terms and conditions of this Lease."

The Brimbank Neighbourhood House Policy

7 The "Brimbank Neighbourhood House Policy", dated December 2002 defines Neighbourhood House activities as follows:

"The activities provided by a Neighbourhood House are a mixture of individual or family support or strengthening services, social and skills development, information and referral services, and community organisation activity."

The Brimbank Neighbourhood House Agreement

8 The lease was entered into pursuant to a written "Neighbourhood House Agreement", dated 7 May 2004 ("the agreement"). The purpose of the agreement is set out clause 1 as being:

"... to specify the relationship between the Council and the Association directed to maximise the opportunities for the Neighbourhood House located at [the premises]."

9 The agreement provides, in clause 13, that the agreement and the lease are to be interdependent, a breach of one being deemed to be a breach of the other and termination of one operating to terminate the other.

10 Under clause 15 of the agreement, Brimbank is to assist Westvale in the context of its "level of self-sufficiency including its ability to attract funds from other sources, and raise its own funds", by leasing the premises for a nominal rent, assisting in maintenance and repairs and by making pecuniary grants, after Westvale has submitted a business plan. Dispute resolution procedures are also set out.

The use of the premises

11 Westvale has used the premises, before and after the lease commenced on 1 April 2004. It has conducted "Work for the Dole" programs and provided computer, literacy, numeracy and arts education for various groups (including groups of mentally and physically challenged people), as well as childcare. The premises have served as a location for playgroups, a mental health support group, an Alcoholics Anonymous group and Toast Masters and Toast Mistresses groups, amongst many others. Cultural and recreational activities, such as folkloric dancing have also taken place there. A fee has been charged in relation to the provision of each service.

12 Although there was reference in the submissions to authority relating to the meaning of the expression "under the terms of the lease" in s 4(1)[1], the meaning does not appear to have been in dispute. It also appears to be common ground that the use to which the premises are, and have been, put is permitted under the lease.

The Act

13 Section 1 of the Act provides that its main purpose is to replace the scheme under the Retail Tenancies Reform Act 1998 with a new scheme:

(a) the certainty and fairness of retail leasing arrangements between landlords and tenants; and

(b) the mechanisms available to resolve disputes concerning leases of retail premises."

14 The Tribunal's jurisdiction is the subject of s 89 of the Act which provides:

"89. Jurisdiction of Tribunal

(1) the Tribunal has jurisdiction to hear and determine an application by a landlord or tenant under a retail premises lease, ... seeking resolution of a retail tenancy dispute."

15 A "retail tenancy dispute" is defined under s 81(1)(a)(i) as a dispute in relation to a "retail premises lease" to which the Act applies, under its Part 3. Section 11(1)(a) of Part 3 provides that the Act applies to a retail premises lease entered into after 1 May 2003 (when s 11 commenced). There does not appear to be a specific definition of a "retail premises lease" in the Act. However, a "lease" is defined, in s 3, as including a written lease. "Retail premises" are defined in s 4.

16 At all relevant times s 4(1) of the Act defined "retail premises" as follows:

(1) In this Act, "retail premises" means premises, or a part of premises that under the terms of the lease relating to the premises or part are used, or are to be used, wholly or predominantly for-

(a) the sale or hire of goods by retail or the retail provision of services; or

(b) the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies.

(2) However, "retail premises" does not include the following premises-

(a) premises in respect of which the occupancy costs (as defined in sub-section (3)) under the lease concerned is more than the amount prescribed by the regulations for the purposes of this paragraph;

(b) premises that are used wholly or predominantly for the carrying on of a business by a tenant on behalf of the landlord as the landlord's employee or agent;

(i) a listed corporation (as defined in section 9 of the Corporations Act); or

(ii) a subsidiary (as defined in section 9 of the Corporations Act) of such a corporation;

(i) a body corporate whose securities are included in an official list of a stock market (as defined in section 9 of the Corporations Act) outside Australia and the external Territories, or

(ii) a subsidiary (as defined in section 9 of the Corporations Act) of such a body corporate;...

(e) premises used wholly or predominantly for the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies;

(f) premises of a kind that the Minister determines under section 5 are premises to which this paragraph applies."

17 Section 5(1) of the Act specified the matters about which the Minister could make a determination:

(1) The Minister may, by notice published in the Government Gazette-

(a) determine that a business is a business or a kind of business to which section 4(1)(b) applies; or

(b) determine that a business is a business or a kind of business to which section 4(2)(e) applies; or

(c) determine that a kind of premises are premises to which section 4(2)(f) applies."

18 Since the deed of lease was made, s 4(1) of the Act has been amended[2] to exclude premises intended for use as a residence from the definition of retail premises. Significantly, the following sub-sections have also been added[3] to s 4(2), excluding from the definition of retail premises :

"(g) premises the tenant of which is a kind of tenant that the Minister determines under section 5 is a tenant to which this paragraph applies;"

"(h) premises the lease relating to which is a kind of lease that the Minister determines under section 5 is a lease to which this paragraph applies."

19 Section 5(1) has also been amended[4], by the insertion of s 5(1)(d) and (e) which empower the Minister to make the foreshadowed determinations.

The Tribunal's decision as to jurisdiction

20 The Tribunal identified the question for its consideration as being :

"... whether in the events that have been described and under the arrangements that have been entered into, under the terms of the lease relating to the premises, the premises are used wholly or predominantly for the retail provision of services."

21 The Tribunal noted that the definition of "retail premises" in the Act's statutory predecessors, the Retail Tenancies Act 1986 and the Retail Tenancies Reform Act 1998, differed from that in s 4 because it did not refer to the business carried on at the subject premises. Each relevantly defined "retail premises" as:

"any premises that under the terms of the lease relating to them are used, or are to be used, wholly or predominantly for the carrying on of a business involving the sale or hire of goods by retail or the retail provision of services" (emphasis added).[5]

22 The Tribunal accepted the submission of counsel then appearing for Westvale to the effect that there was under the Act (in contradistinction to its antecedents) no requirement that the provision of services by retail should be in the course of a business. As a result, the Tribunal concluded that the "non-commercial" nature of charges levied for services provided at the premises did not deprive the premises of their "retail" character under s 4 of the Act.

The questions of law

23 The questions for determination in the appeal are set out in order 4 of the orders of the Master, made on 15 September 2005, as follows:

"4.1 What is the meaning of the definition of retail premises in section 4 of the Retail Leases Act 2003: 'premises, or a part of premises, that under the terms of the lease relating to the premises or part are used, or are to be used, wholly or predominantly for the sale or hire of goods by retail or the provision of services ...'?

4.2 Are the premises held pursuant to the lease granted by [Brimbank] to [Westvale] (a non-profit organisation) at a peppercorn rent for community purposes, (retail premises) within the meaning of [the Act] if the tenant charges any fees for services or goods supplied from the premises?

4.3 Is the use of the premises permitted under the terms of the lease properly to be characterised as wholly or predominantly for the carrying on of a business involving the sale of goods by retail or the retail provision of services?

4.4 Did the Tribunal err in considering the use to which the premises were actually put rather than the use permitted under the lease in determining that they were retail premises?"

24 Question 4.1 is expressed widely and, in the circumstances, is to be answered by reference to the answers to the remaining questions. I will address question 4.2 on the basis that it enquires as to the situation in which a charge is made for the provision of each service supplied from the premises. I also note that counsel for Brimbank did not appear to urge the Court that the Tribunal erred in the manner envisaged by question 4.4.

The submissions

Brimbank

25 Counsel for Brimbank submit that the Tribunal did not have jurisdiction to grant the injunction because there was no "retail tenancy dispute" in relation to a lease of "retail premises".

26 Counsel for Brimbank rely upon the definition of the adjective "retail" in the second edition of the Oxford English Dictionary as "the sale of commodities in small quantities"[6]. They submit that the definition encompasses some element of commerciality, contending that, in contrast, the permitted purpose under the lease was expressed in vague, but non-commercial, terms.

27 They refer to the meaning given to "retail" by Nathan, J in Wellington v Norwich Union Life Insurance Society[7] when his Honour said:

"[T]he essential feature of retailing, is to my mind, the provision of an item or service to the ultimate consumer for fee or reward. The end user may be a member of the public, but not necessarily so. In support of this conclusion, I call in aid not only commonsense but the Macquarie Australian Dictionary which defines retail as being a sale to an ultimate consumer, usually in small quantities. When the verb is used in the transitive form, it is to sell directly to the consumer."[8]

28 They also refer to Nathan, J's reference to the commercial nature of business activity when his Honour said:

"In my view, the carrying on of a business is any commercial activity undertaken individually or by corporate bodies for fee or reward, usually for profit, not usually of a casual kind, but involving the creation, distribution or supply of goods and/or services".[9]

29 They call in aid the references to the carrying on of a business by Phillips, J in Sorbara v DJ and AJ McCallum Pty Ltd[10] when his Honour said:

... any premises that under the terms of the lease relating to them are used, or are to be used, wholly or predominantly for the carrying on of a business involving the sale or hire of goods by retail or the retail provision of services ...

Although the definition is concerned with the carrying on of a business consisting of retail trade in goods or services, premises which are "retail premises" by virtue of the foregoing need not be wholly devoted to the carrying on of that business. It is sufficient if the premises are used, or to be used, "wholly or predominantly" for the carrying on of the business. Thus, mixed uses do not per se make the definition inapplicable; some use other than for retail purposes is still possible, even, I should have thought, if that other was not ancillary or incidental to the carrying on of the retail business."[11]

30 Counsel for Brimbank argue that, notwithstanding the absence from s 4(1)(a) of any reference to a business, the Court should conclude that the legislature intended there to be a continuing requirement for an element of commerciality. They refer to the following statements by the Minister in his second reading speech in relation to the Retail Leases Bill:

"The purpose of the bill is to establish a new regulatory framework for retail tenancies that promotes greater certainty, fairness and clarity in the commercial relationship between landlords and tenants of retail premises.

Before detailing the key elements of the bill, I wish to briefly outline the broader context within which the legislation has been developed.

Retailing is a vital part of the Victorian economy. The industry is comprised of over 30,000 retailers, which are mostly small businesses. It employs over 330,000 Victorians, half of whom are young people. Victoria has a diverse and vibrant retail industry, ranging from world-class shopping centres to specialist outlets in laneways. The strong presence of small businesses in the industry underpins Melbourne's reputation as the shopping capital of Australia. With most retailers choosing to lease a premises rather than buy a shop, the rent payable and other terms of a lease have a major impact on a tenant's business."[12]

31 They rely upon the subsequent comment by the Minister that :

"[t]he bill maintains existing provisions regarding the type of retail activity that is covered by the legislation."[13]

32 Alternatively, they submit that, even if the suggested element of commerciality is not required, the charges for the subsidised provision of the services are only "incidental" to their provision, being imposed to defray costs in order to make the services available to the community, rather than to sell them. They refer to the provisions of clause 4 of the lease requiring Westvale to make the premises available at a cost "consistent with the cost of those facilities to [Westvale]".

33 Essentially, counsel for Brimbank contend that the premises were not retail premises because the permitted use under the terms of the lease was not of a commercial character, not being intended by Westvale to generate a profit.[14]

Westvale

34 Counsel for Westvale responds that the Tribunal did not err in finding that the premises were "retail premises". He submits that the provision of the services was properly characterised as "retail", in accordance with the meaning recognised by the Court in Wellington. He also relies upon Ashley, J's description, in F P Shine Pty Ltd v Gothic Lodge Pty Ltd[15], of a business involving the provision of serviced caravan sites as having :

" a retail characteristic, being provision of services to members of the public wishing to avail themselves of the services in return for payment of money."

35 Counsel for Westvale submits that the non-commercial rate of rent, Brimbank's policies and the extraneous material relied upon are all irrelevant to the construction of the permitted use covenants in the lease. He argues that neither the requirements of clause 4 nor the references to the Brimbank community as the consumers of the services prevent the premises from being properly characterised as "retail premises".

36 He contends that it is not necessary that the services be provided to the general public, as opposed to a more restricted group. He refers, in this regard, to the decision the Full Court of the Federal Court in Collector of Customs v Chemark Services Pty Ltd[16], in which it was held that a sale was a retail sale, even though the ultimate consumers of the product were professional horticulturists, rather than what the court described as "ordinary gardeners" [17].

37 As to the charging of fees on a cost recovery basis, counsel submits that there was no requirement in the Act that any fee charged be directed at the making of a profit or be set at commercial rates or on any other basis than for the recovery of costs. The quantum of the fee should be disregarded. The fact of the fee or charge is sufficient. The services are not provided without charge or on a fully subsidised basis.

38 Counsel for Westvale also argues that Brimbank's characterisation of the use as "the provision of community services" is irrelevant and does not prevent that use also being characterised as "the retail provision of services" under the Act.

39 I note that it is not contended by Westvale that it did carry on business at the premises. Indeed counsel for Westvale, in his written submissions, concedes that "it is straining language in the extreme" to describe a neighbourhood house as a business. This, he argues, is not to the point.

Conclusions

40 In Project Blue Sky v Australian Broadcasting Authority[18] the Court's duty in relation to the interpretation of legislation was described as follows:

"... the duty of a Court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction ... may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."[19]

41 There is no express reference in the Act to a requirement of an intention to make a profit. Further, there is no express reference to the carrying on of a business in the relevant part of the definition of retail premises in s 4(1)(a). Nevertheless, at the relevant time, s 4 did contain references to businesses elsewhere : in s 4(1)(b) and s 4(2)(b) and (e). Indeed the Minister had power under s 5(1)(b) to make a determination to exclude premises from the ambit of the definition on the basis of the kind of business carried on at the premises.

42 At the same time, the Minister had a separate power, under s 5(1)(c) to make a determination to exclude premises of a kind determined by him. The Act, as it presently stands, now also empowers the Minister to exclude premises on the basis of the identity of the tenant[20] or the kind of lease[21] involved.

43 The interpretation contended for by Brimbank would have the result that the applicability of the Act would be uncertain. The Tribunal or a court would be obliged to determine, on a case by case basis, the intent with which services were provided for a fee. An analysis of the adequacy of a charge made by a provider, generally providing services in the course of business conducted with a view to profit, might be required. Even in the case of a "not for profit" service provider, an analysis of specific intent would seem necessary, where a service was provided at the premises for a fee, because there might be cross-subsidisation of other activities by the profitable provision of that service.

44 Such an outcome would not, in my view, further the stated legislative objective of replacing the former scheme with another to enhance the certainty and fairness of retail leasing arrangements and the mechanisms for dispute resolution between them.

45 I consider that the legislative objective is more likely to be achieved if the word "retail" in s 4(1)(a) of the Act is given the meaning attributed to it, in the context of the Retail Tenancies Act 1986, by Nathan, J in Wellington and Ashley, J in F P Shine. The passages of the Minister's Second Reading speech do not persuade me that the scheme was not intended to apply in the context in which there is no intent to profit from the provision of services.

46 Although the Minister did refer to the "commercial relationship between landlords and tenants of retail premises", I am not persuaded that the quantum of rental should be determinative of the issue as to whether premises are "retail premises" under s 4 of the Act. Any characterisation based of the adequacy of rent would involve a similar, case by case, analysis, militating against the achievement of the statutory objective of certainty. In the absence of any express reference in the statutory definition to the quantum of the rent, I am not persuaded that the meaning of the word "retail" should be interpreted so as to exclude premises in relation to which a nominal rent is charged.

47 The Act has at all relevant times given the Minister the option of specifically excluding particular premises from the definition of "retail premises". Such express reference to certain kinds of premises satisfies the statutory objective, stated in s 1, of giving certainty to landlords and tenants as to the application of the Act and, as a result, enhances "the certainty and fairness of retail leasing arrangements" between them.

48 In the circumstances, I am satisfied that the Tribunal correctly characterised decided that the premises, at which Westvale provides the "Neighbourhood House" services, permitted under the lease, for a fee to their ultimate consumers, were "retail premises" under s 4(1)(a) of the Act. In my view, the Tribunal had the jurisdiction to make the orders sought. The appeal should be dismissed. The questions of law should be answered as follows:

Question 4.1 : By reference to the answers to questions 4.2, 4.3 and 4.4.

Question 4.2 : Yes.

Question 4.3: No.

Question 4.4: No.

[1] Victoria v Tymbook Pty Ltd [2005] VSC 267.

[2] By s 5(1) of the Retail Leases (Amendment) Act 2005.

[3] By s 5(5) of the Retail Leases (Amendment) Act 2005.

[4] By s 6(2) of the Retail Leases (Amendment) Act 2005.

[5] See : s 3(1) of the Retail Tenancies Act 1996; s 3(1) of the Retail Tenancies Reform Act 1998.

[6] Oxford English Dictionary (2nd Ed.) Oxford University Press 1989 p 767.

[7] [1991] VicRp 27; [1991] 1 VR 333.

[8] Ibid at 336.

[9] Ibid at 335.

[10] [1992] VicRp 52; [1992] 2 VR 1.

[11] Ibid at 6.

[12] Hansard, 27 February 2003 Legislative Assembly p 230.

[13] Ibid.

[14] See : T29 lines 16-20.

[15] [1994] VicRp 11; [1994] 1 VR 194 at 198.

[16] [1993] FCA 291; (1993) 114 ALR 531.

[17] Ibid at 537 per Spender, Einfeld and Lee, JJ.

[18] [1998] HCA 28; (1998) 194 CLR 355.

[19] At 384 [78] per McHugh, Gummow, Kirby and Hayne, JJ.

[20] In s 4(2)(g) and s 5(1)(d).

[21] In s 4(2)(h) and s 5(1)(e).