Determination of jurisdiction - Multiple businesses run from leased premises - Whether the definition of "retail shop" applies - Insufficient evidence to satisfy definition of "retail shop"

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3, s 3(1), s 3(3)(b), s 15, s 15(1), s 15(2), s 16

State Administrative Tribunal Act 2004 (WA), s 32, s 35, s 87(1), s 87(2)

1 The applicants leased premises from the respondents on or about 29 December 2005.

2 The applicants have been in possession of the premises since 25 January 2006. A dispute arose between the parties as to the lease, following attempts by the respondents to terminate the lease.

3 As a result of the application by the applicants to this Tribunal, a preliminary issue arose as to whether the lease constituted a "retail shop" and a "retail shop lease" under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).

4 A hearing to determine this preliminary issue was held on 30 April 2007 and 1 May 2007.

5 The applicants conduct three businesses at the premises.

6 The determination of the preliminary issue involved characterisation of the use of the premises by each of the three businesses in order to ascertain whether the premises as a whole were used wholly or predominantly for the carrying on of a business involving the sale of goods by retail.

7 The Tribunal found that only one of the businesses conducted upon the premises by the applicants was involved in the sale of goods by retail.

8 A comparative analysis of the financial information of each of the three businesses resulted in a finding that only one of the applicants' three businesses conducted retail sales of goods from the premises.

9 It was left, therefore, to consider whether on a comparative analysis of the physical use to which the premises were put by each of the three businesses the definition of "retail shop" was fulfilled.

10 The Tribunal found that it could not be satisfied upon the evidence of physical use that the definition of retail shop had been met.

11 It also considered the evidence relating to the construction of the lease, intention of the parties, estoppel and variation of the lease, unhelpful in determining this matter.

13 The dispute in this matter relates to an agreement to lease business premises at 1072 Beaufort Street, Bedford (premises).

15 On or about 29 December 2005, the parties signed a document in respect to the premises entitled "Contract to Lease Commercial/Industrial Premises by Offer and Acceptance (Other Than Retail Premises)" (Offer and Acceptance). In that document, the lessees were described as "Neil Blunt and Vesna Blunt trading as Courtesy Pest Control WA Pty Ltd, DancePro and National Show Promotions Pty Ltd". The initial term of the lease was for 12 months. The Offer and Acceptance required the applicants to execute a lease recording the terms agreed to in the Offer and Acceptance, upon preparation by the respondents' solicitors.

16 The applicants took possession of the premises in or about 25 January 2006. They have been in possession of the subject premises since that time. A lease recording the terms set out in the Offer and Acceptance has never been signed by the applicants. For the purposes of this application, both parties agree that the Offer and Acceptance constitutes the lease (lease).

17 Although there was some attempt by the applicants following taking possession to pay rent, the applicants have not paid rent for the entire period they have been in possession of the premises.

18 A dispute arose between the parties as to the characterisation of the lease following attempts by the respondents to terminate the lease. By 21 June 2006, the applicants made application to this Tribunal for relief under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act).

19 As a result of that application, a jurisdictional question arose as to whether the lease was a "retail shop lease" and a "retail shop" under the Act. This jurisdictional question was the subject of preliminary hearings on 30 April 2007 and 1 May 2007.

20 Section 16 provides as follows:

Subject to section 11(5), a party to a retail shop lease may refer to the Tribunal any question between the parties which he believes to be a question arising under the lease and the Tribunal shall -

(a) determine whether or not the question referred to the Tribunal is a question arising under the lease; and

(b) if it is such a question, hear the question with a view to achieving a solution acceptable to the parties to the lease.

The matter for determination referred to in subsection (1)(a) -

(a) may be determined by the Tribunal in such manner as it thinks fit, subject to each party being given an opportunity to make a written submission_;_ and

(b) for the purposes of section 27, is deemed to be a question referred to the Tribunal.

Nothing in this section prevents a matter or question from being dealt with through a compulsory conference or mediation process under the State Administrative Tribunal Act 2004."

21 Section 3(1) of the Act includes the following key definitions:

any premises situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business_;_ and

any premises not situated in a retail shopping centre that are used wholly or predominantly for the carrying on of -

(i) a business involving the sale of goods by retail; or

but does not include premises used wholly or partly for the carrying on of a business involving the retail sale of petrol or diesel to be used to propel vehicles on public roads, other than premises used for that purpose by a tenant under a lease from a landlord who is not a party to a franchise agreement within the meaning of that expression in the Petroleum Retail Marketing Franchise Act 1980 of the Parliament of the Commonwealth;

'retail shop lease' means a lease that provides for the occupation of a retail shop other than where -

the total retail floor area to which that lease applies (including, in the case of a building with 2 or more floor levels, the area of every floor level or part thereof to which that lease applies) exceeds 1000 square metres, or

the lease is held by a corporation (within the meaning of the Corporations Act 2001 of the Commonwealth) that would not be eligible to be incorporated as a proprietary company, or that is held by a subsidiary of such a corporation;

'retail shopping centre' means a cluster of premises -

5 or more of which are used wholly or predominantly for the carrying on of -

(i) a business involving the sale of goods by retail; or

(i) have, or upon being leased would have, a common head lessor; or

(ii) comprise lots on a single strata plan under the Strata Titles Act 1985,

whether the premises are in a single storey building or a multi-level building;

..."

22 Section 15 provides as follows:

Any provision of a retail shop lease that purports to -

(a) exclude the application of any provision of this Act; or

(b) limit the right of a party to the lease to refer any question arising under the lease to the Tribunal,

A provision of a retail shop lease, to the extent that it is contrary to or inconsistent with anything in this Act or with anything that by this Act the lease is taken to provide, is void."

23 The Tribunal is not bound by the rules of evidence: s 32 of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The evidence in this matter constituted the witness statements and documents filed by each party. Oral evidence was also given by Mr and Mrs Blunt, Mrs Pal and Mr Rawle.

24 A summary of the evidence relevant to the characterisation of the lease follows. That evidence constitutes that given by Mr and Mrs Blunt. The evidence given by Mrs Pal and Mr Rawle on use of the premises, since occupation, was of limited value. Mrs Pal confirmed she has not been in the premises since the applicants took possession. Similarly, Mr Rawle has not inspected the premises since January 2006. The applicants' evidence in chief was for the most part set out in witness statements filed with this Tribunal on 24 April 2007 with cross-references to the documents relied upon by the applicants. Mr and Mrs Blunt's witness statements largely mirrored that of each other. A summary of the evidence, as set out in their witness statements, is set out as follows:

• The dispute involves three businesses run by Mrs Vesna Blunt and her husband, Mr Neil Trevor Blunt.
• Those businesses are DancePro, National Show Promotions Pty Ltd (National Show Promotions) and Courtesy Pest Control WA Pty Ltd (Courtesy Pest Control).
• DancePro sells dancewear and accessories to the public by retail. It is a business registered in Mrs Blunt's name and has been a registered business since 2004.
• National Show Promotions a company incorporated since 25 September 2000. Both Mr and Mrs Blunt have been directors of that company since incorporation. It sells novelty items such as wigs, hair pieces and extensions, show-bag items, costume jewellery, mainly through mobile show vans visiting various royal and agricultural shows around Australia.
• Courtesy Pest Control is a company incorporated since 29 August 2003, and engages in the business of mobile pest control and extermination. Mr Blunt has been the sole director of that business since incorporation. Mrs Blunt holds 100 fully paid shares in the company. It occupies around 40 square metres of the premises. Vehicles and related equipment are taken home after each day by the operators and were not stored on the premises.
• Mrs Blunt assists in the business of Courtesy Pest Control by answering phones and handling paperwork on the premises.
• By mid-2005, Mr and Mrs Blunt started looking for new business premises to rent for all three businesses. Prior to moving to the premises, they had operated some of their businesses from a factory unit. They wanted to expand their businesses, particularly DancePro and National Show Promotions. Highly visible premises were required, preferably on a main road so that they could advertise and be easily accessible to the public. The premises also needed to be big enough for all three businesses to enable sales, administrative functions, storage of stock and the storage of their show vans. As they were family businesses, they needed premises that could fit all three businesses but could afford them the opportunity to build the businesses of DancePro and National Show Promotions.
• By mid-December 2005, Mr Blunt noticed the respondents' premises advertised for lease on the internet.
• On 16 December 2005, Mr and Mrs Blunt made contact with the respondents' real estate agent, Mr Rawle. On the same date he met them at the premises for an inspection. One of their concerns was to ensure that the premises provided sufficient room to operate the three businesses, including space to store the show vans.
• The premises is a two storey building and basement located at 1072 Beaufort Street, Bedford. Access to the ground floor is through glass double doors. Access to the first floor is through a glass door on the far left hand side of the front of the premises. The basement access is through the front side gate and down the driveway to concertina doors under the building or down the back stairs to the rear yard area. Each level of the premises is around 120 square metres. There is also the rear yard and front parking area.
• On 29 December 2005, Mr and Mrs Blunt signed the lease (Offer and Acceptance), although Mrs Blunt says she raised concerns with Mr Rawle as to the wording of the lease.
• On 25 January 2006, Mr and Mrs Blunt picked up the keys to the premises.
• On 3 March 2006, Mr Rawle came to the premises and gave the Blunts a lease document to sign on the spot. They looked through the document and did not consider that it accorded with the lease they had signed and was not properly characterised; they did not sign the document.
• Since moving to the premises, the Blunts say that the ground floor of the premises is wholly devoted to the display and sale of items by DancePro and National Show Promotions and some storage of stock for those businesses. Mrs Blunt explains that the photographs of the premises were taken by her in February/March 2006 and February 2007. Some of the photographs show the ground floor area.
• About 40 square metres of the first floor is used for administration of Courtesy Pest Control. The rest of the first floor comprises a kitchen, toilet and bathroom, and several other rooms which are used for storing stock for DancePro and National Show Promotions. The stock is for sale through the shop on the ground floor.
• The basement is used to store equipment for DancePro and National Show Promotions, such as clothes racks, mannequins, old furniture, shop fittings and other equipment. Stock for National Show Promotions (around 70%) and DancePro (around 30%) is also stored in the basement. All of the DancePro stock is available for sale on the premises and the stock for National Show Promotions is both for sale on the premises and for sale at shows.
• The financial documents relating to the three businesses were cross-referenced in each witness statement.
• The profit and loss statement for the 2005/2006 financial year for Courtesy Pest Control showed income by way of gross receipts of $92 453. However, after accounting for expenses, it recorded a loss of $32 528.
• The business activity statements (BAS statements) for Courtesy Pest Control for the period 1 July 2006 to 30 March 2007 showed income by sales of $65 929. However, after accounting for expenses, it recorded a profit of $3492.
• The profit and loss statement for National Show Promotions for the 2005/2006 financial year showed income as $52 205 and expenses of $52 106, resulting in a loss of $99.
• The BAS statements for National Show Promotions for the period 1 July 2006 to 30 March 2007 show income from sales as $88 650 and non-capital purchases of $61 359. The applicants state this business recorded for that period a loss of $27 291.
• Mrs Blunt's income tax return for the financial year 2005/2006 shows income from DancePro as $14 623 and a net loss of $13 501.
• The BAS statements for DancePro for the period 1 July 2006 to 30 March 2007 show income from sales as $36 573 and, after accounting for purchase of stock by DancePro in the sum of $83 721, it had a net loss of $47 148.
• Both Mr and Mrs Blunt say that the businesses of DancePro and National Show Promotions have grown since running the businesses from the premises and that the financial information reflects this growth.

25 The relevant evidence from Mrs Blunt's cross-examination can be summarised as follows:

• That she had been unable to afford to pay for an accountant to provide a breakdown of any sales that had taken place at the premises of National Show Promotions stock.
• She indicated that a ledger existed which showed a record of the retail sales made at the premises. She said that this was used by her accountant at the end of the financial year to justify the sales between the businesses. She conceded in cross-examination that on the documentation that the applicants had provided in this matter, it did not indicate any retail sales by National Show Promotions at the premises.
• She could not give a percentage of sales made by National Show Promotions that were made from shows, but stated that the majority of income for National Show Promotions from retail sales was from the Royal Show.
• That Courtesy Pest Control was the main business bringing in income. Courtesy Pest Control did not store chemicals upon the premises.
• For National Show Promotions, she conceded the BAS statements for the period January to March 2007 showed zero sales.

26 The relevant evidence from Mr Blunt's cross-examination and re-examination can be summarised as follows:

• Courtesy Pest Control does not store chemicals upon the premises.
• That the rear yard of the premises is about 150 square metres and is large enough to store the show vans used for National Show Promotions.
• None of the stock stored on the first floor for National Show Promotions was sold outside of royal shows.
• That 90% of the stock stored on the first floor was DancePro's stock.
• When looking at the plan of the premises provided by the respondents and attached to Mr Rawle's witness statement, GTR 1, Mr Blunt stated that the workshop area on the ground floor has desks and some clothes and shoes, and that some of the basement area is used to store stock for DancePro.
• He also conceded that he could have provided a precise inventory of DancePro's stock but it would have taken him and his wife months to do so.
• He conceded that he had not provided any profit and loss statements for DancePro and said that that was in the hands of his accountant. Mr Blunt also accepted that the BAS statements for DancePro for the period 1 July 2006 to 31 March 2007 reveal DancePro purchased in that same period $83 721 worth of stock. He explained that this was paid for by an increase in their home mortgage which, in his witness statement, he said was taken out in 2005 and 2006. On questioning from the Tribunal as to why in the period from 1 July 2006 to 31 March 2007 he would purchase such a significant amount of stock when for the financial year 2005/2006 DancePro's income was $14 000, Mr Blunt indicated that this was necessary because he was unable to buy stock other than in bulk from China.
• That he did have a cheque account for National Show Promotions. The Tribunal notes, however, that the applicants have not discovered all of the statements for that account for the relevant period.
• That in the period 1 October 2006 to 31 December 2006, the BAS statements for National Show Promotions show an income of $71 790. The cheque account statement for the period 28 September 2006 to 27 October 2006 showed only one credit of $71 740, which Mr Blunt conceded was from earnings from the Royal Show. He also conceded that on comparison between the BAS statements for the period 1 October 2006 to 31 December 2006, there has only been one sale worth $50 by National Show Promotions in that period other than the sales at the Royal Show. However, in re-examination he indicated that although he wasn't sure of the exact figures in respect to the sales by National Show Promotions from the premises, he thought it would be more than $50. He also said, on questioning from the Tribunal, that any sales by National Show Promotions at the premises were written in a book and an ongoing tally was kept. The Tribunal notes however that this book was not produced by the Blunts.
• He also conceded that he hadn't provided anywhere by way of a separate account for the rent that hasn't been paid to date. He maintained however that if he needed to pay the rent, his family would find the money.

27 The applicants also provided a table summarising the financial information for each of the three businesses, which is set out at Appendix A. Likewise, the respondents also provided such a table, which is set out at Appendix B.

b) Evidence and findings as to the issues concerning construction of the lease, estoppel and variation of the lease

28 Both parties led evidence concerning the construction of the lease, which constituted evidence concerning the negotiations leading up to the signing of the lease and to some extent, following the applicants taking possession.

29 The evidence led by both parties on these topics was diametrically opposed. This evidence was led without objection by either party. However, in light of the authority of Sharp v O'Driscoll (Unreported; WASC, Ful34/96; BC 9700941; 21 March 1997), that ultimately it is only the use put to the premises that is relevant in determining such a matter, the Tribunal sought clarification as to why such evidence was being led. It did not consider either party gave a satisfactory explanation. This evidence may have been relevant in light of the applicants' written submissions which asserted an estoppel and variation of lease. By these submissions the applicants contended that the respondents were prevented from relying on the operation of the words:

"Contract to lease Commercial/Industrial Premises by Offer and Acceptance (Other Main Retail Premises)"

in the heading of the lease, to assert, that the Act did not apply to the lease.

30 It is also presumed that the applicants relied on the contractual negotiations to assert that they had been misled and the lease should be varied.

31 In the result, neither counsel placed significant emphasis on these issues or this evidence, as it became apparent on the basis of Sharp v O'Driscoll that the determining factor related to actual, rather than intended use. The Tribunal's decision is based, therefore, only upon actual use of the premises.

32 Accordingly the evidence relating to the factual dispute as to the parties' intentions and pre-contractual negotiations is not set out in these reasons.

33 The applicants filed an outline of written submissions on the preliminary issue on 28 February 2007. Oral submissions were also made by applicants' counsel following the hearing, which are summarised as follows:

• The preliminary issue requires determining whether the lease is a retail shop lease under the Act.
• The lease provided for the three businesses of Courtesy Pest Control, DancePro and National Show Promotions. As an amalgam, the premises were used by the three businesses, wholly or predominantly for the carrying on of a business involving the sale of goods by retail.
• The phrase "wholly or predominantly" applies to the retail character of the businesses.
• There are three businesses and the fact that one of them, Courtesy Pest Control, is not a retail business does not preclude a finding that, as an amalgam, they constitute a retail shop.
• When determining the preliminary issue, regard must primarily be had to the comparative uses of the premises as well as the financial data: Sharp v O'Driscoll.
• Courtesy Pest Control is a non-retail business.
• Courtesy Pest Control has a purely administrative presence at the premises. It does not store chemicals, stock or equipment at the premises. Its income is not derived through business activities carried out at the premises
• DancePro and National Show Promotions are retail businesses; they sell retail goods direct to the public.
• The photographs show the set up of the businesses. There are racks of clothes on display and a counter accepting cash payments. There are also advertisements that show they keep regular shop hours. Further, the taxation documents describe the nature of both these businesses as retail.
• DancePro is purely retail. It is a newly established business and the reason the applicants moved to the premises was to ensure greater exposure for this business than previously, when it operated out of a warehouse.
• National Show Promotions is a retail business and engages in sales over the counter by each business at the premises and at royal shows. As the businesses are a family concern, the sales over the counter are not separately catalogued. Although National Show Promotions conducts retail sales at the premises, this is done by reconciliation by the applicants' accountant at the end of the financial year. The majority of its sales occur at royal shows but some take place at the premises.
• Mixed use of the premises by each of the three businesses is not precluded, even if the non-retail use is not incidental or ancillary to the retail use: Sorbara v DJ & AJ McCallum Pty Ltd [1998] VSCA 71.
• In relation to the comparative uses of the premises, the applicants' counsel submitted the premises are open to the public, there is advertising of all three businesses, stock is displayed on the ground floor, the main area is accessible to the public, 90% of the premises is dedicated to the retail businesses, 30% of the stock in the basement is DancePro's and 70% of the stock in the basement is National Show Promotions.
• In relation to the financial information, the applicants provided a table of comparative financial data for all three businesses, set out at Appendix A. The applicants' counsel argued the situation in this case is different to that in Sharp v O'Driscoll. In that case, there were multiple uses which had not really changed and the Court was able to rely on financial data, as a snapshot in time, of those uses. Whereas in this case, the applicants argue, the financial data must be viewed in an ongoing context. In this case, the applicants submit that DancePro is an expanding business, and its income is going to be low at the beginning and over time will increase as the business grows. The applicants argue that as they have engaged in significant personal borrowings secured against their home for the business of DancePro, they are dedicated to growing the DancePro business. In respect to the financial information the applicants also submit that if National Show Promotions earnings are found to have occupied off-site, then more earnings cannot be taken into account in any comparison to DancePro's earnings and similarly, Courtesy Pest Control's earnings should be disregarded in any such comparison as in earnings are a result of off-site activities.
• The applicants also maintain that another factor that should be taken into account is the amount of stock on hand, as the applicants are required to buy in bulk and keep it on the premises.
• The decision of Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376 was cited by the applicants' counsel for the proposition that, in accordance with the objectives of retail tenancies legislation, it should be interpreted in such a way to be inclusive rather than restrictive. So, if that principle is applied in this matter, the true character of the businesses carried out at the premises is predominantly retail sales and therefore the lease falls within the Act.
• In summary, in respect to the characterisation, the applicants maintain that the premises are used predominantly for the businesses of DancePro and National Show Promotions which sell retail goods from the premises to the public.
• The remainder of the applicants' submissions dealt with construction of the lease. The applicants maintain that they always intended to use the premises for their three businesses - two of which they allege are involved in the retail sale of goods from the premises.
• Finally, the applicants' counsel also referred to some additional points regarding the incorporation of the terms "estoppel" and "variation of lease". As previously stated, these submissions were not greatly emphasised by either party and the Tribunal's findings on these issues is as set out at par [28 - 32] above.

34 The respondents filed written preliminary submissions on 21 March 2007. Following the hearing, the respondents counsel submitted in summary as follows:

• The respondents' counsel reiterated that the starting point is jurisdiction, and that it is common ground between the parties that if the Tribunal determines the lease does not constitute a retail shop for the purpose of the Act, the Tribunal does not have jurisdiction to deal with the dispute. In that regard, the respondents submitted that they had no objection to the Tribunal inquiring into the facts for the purposes of determining whether or not it had jurisdiction.
• The starting point, the respondents say, is s 3 of the Act and the definition of retail shop. The respondents' counsel maintains that the definition refers to a thing or place as opposed to a business. The respondents rely on Sharp v O'Driscoll at page 21 where Malcolm CJ stated as follows:

"In the end, the question is one of characterisation. As was submitted by counsel for the respondents, the test is to determine the true nature of the business carried on at the premises."

• As to the three businesses, the respondents say that Courtesy Pest Control is not a retail business.
• National Show Promotions is engaged in selling goods off the premises at the relevant time. The use of the premises by that business is for the purpose of storage. The financial evidence at best only supports in the period three months to December 2006 that National Show Promotions made, in addition to retail sales at the Royal Show, a sale of $50. The respondents maintain that there is insufficient evidence to prove where that sale was made. The respondents' counsel says that he does not understand how, as alleged by the applicants, there can be some reckoning at the end of the financial year to determine the extent to which sales being made at the premises are attributable to National Show Promotions. The respondents point out that if, as alleged, there is some journal kept at the time each transaction is made at the premises, it has not been produced. Further, given the evidence that there is some reconciling by the applicants' accountant of the accounts of the three businesses at the end of the financial year, that is really a matter of commercial convenience as there has been no documentary evidence provided by the applicants to demonstrate how the applicants identify or track the sales which are made over the counter in the premises by National Show Promotions. The correct question the respondents' counsel submits is to ask to what extent retail sales of National Show Promotions occur on the premises.
• In respect to DancePro - the respondents' counsel conceded that at present and shortly after taking possession, the premises were being used to some extent on the ground floor for the purpose of retail sales. Nonetheless, the respondents argue that the premises must be looked at as a whole. The floor plan of the premises, shows it is broken down into the first floor, ground floor, basement and rear yard. In respect to the use of the premises, the respondents point out that the applicants have not provided by photographic evidence or inventory evidence of location the use of the premises as a whole by each of the three businesses. In that regard, the respondents' counsel referred to the respondents' submissions filed 21 March 2007. He said this placed the applicants on notice that in their view the applicants had provided insufficient evidence on the preliminary issue. Despite being on notice, the applicants failed to rectify the situation.
• In respect to the financial information, the respondents also provided a comparative schedule of the financial activities of the three businesses, which is set out at Appendix B.
• The respondents rely on that data to show that on a comparative basis, as National Show Promotions cannot establish that it conducts retail sales from the premises and as Courtesy Pest Control is not a retail business, the premises are not being used wholly or predominantly for the carrying on of a business involving the sale of goods by retail.
• In summary, the respondents submit the test which this Tribunal must apply is whether, as a matter of characterisation, the premises are being used for the purpose of a retail shop and that requires having regard to the use of the premises as a whole, having regard to the use of the premises by the three businesses and having regard to the extent to which the financial information shows the use of those premises by the businesses. Even accepting the applicants' case at its highest, a proper characterisation means that the premises are not being used wholly or predominantly for the sale of goods by retail.

35 There is no dispute between the parties that this Tribunal has jurisdiction to determine such a dispute. Section 16 of the Act gives this Tribunal power to determine a question arising under a lease. Section 3(3)(b) of the Act makes clear that a reference in the Act to a question arising under a retail shop lease includes a reference to a question whether or not a lease is or was a retail shop lease.

36 The relevant definitions of "retail shop lease" and "retail shop" under the Act apply.

37 The dispute relates to the premises being a three storey building at 1072 Beaufort Street, Bedford. The building consists of a basement, ground floor, first floor, front car park and rear yard. There is no dispute that the total floor area of the premises is less than 1000 square meters.

38 On or about 29 December 2005, a standard REIWA document entitled "Contract to Lease Commercial/Industrial Premises by Offer and Acceptance (Other Than Retail Premises)", which referred to the subject premises, was signed by both parties.

39 The applicants took possession of the subject premises in or about 25 January 2006. They have been in possession of the premises since that time. Although there was some attempt at the outset to pay rent, it appears the applicants have not paid any rent for the premises for the entire period they have been in possession.

40 Since taking possession, the premises have been used by the applicants to operate three businesses being:

1. Courtesy Pest Control;
2. National Show Promotions; and
3. DancePro.

41 The applicants do not submit that the business of Courtesy Pest Control is involved in the sale of goods by retail. However, the applicants claim that the premises are used to operate the businesses of National Show Promotions and DancePro, which they allege are involved in the sale of goods by retail. The applicants submit that DancePro has used a major area of the premises to conduct retails sales at the premises. In respect to National Show Promotions, the applicants maintain that although the majority of sales by that business were made elsewhere (such as the Perth Royal Show and the Queensland Show), some retail sales of goods sold by National Show Promotions were sold at the premises. Further, the applicants contend that a large proportion of the premises has been used to store National Show Promotions' stock, which has been available for sale at the premises, at any time. Accordingly, the applicants maintain that, as an amalgam, the premises are used wholly or predominantly for the carrying on of businesses involving the sale of goods by retail.

42 The meaning to be given to the definition of "retail shop" under the Act was dealt with in the decision of Sharp v O'Driscoll. The following passages from pages 7, 20 and 21, of the judgment of Malcolm CJ are relevant:

"In my view, the words 'wholly or predominantly' in that expression relate to the sale of goods by retail. The alternative is that 'wholly or predominantly' would relate to the carrying on of a business which involved any element of sale of goods by retail however small or incidental. The adoption of the latter construction would not seem calculated to fulfil the purposes of the legislation. The problem is one of characterisation. The primary object of the Act is to characterise as a 'retail shop' premises of which the sole or predominant use is for the retail sale of goods. ...

In my opinion, in the Western Australian Act the emphasis seems to be more on the use of the premises. In any event, it would seem to me that both the comparative uses of the premises as well as the volume of retail sales and the income derived from them as compared with other activities are relevant. ...

I reject the submission on behalf of the respondents that on the definition of 'retail shop' in s 3(1)(b)(i) of the Act, it was only necessary to find that the premises were used wholly or predominantly for the carrying on of a business in the sense that the words 'wholly or predominantly' applied only to the word 'business' and not to the word 'retail'. ...

In the end, the question is one of characterisation. As was submitted by counsel for the respondents, the test is to determine the true nature of the business carried on at the premises. The fact that a portion of the premises are used for other purposes will not necessarily affect the characterisation."

43 Therefore, to come within the definition of a retail shop under the Act, it is necessary to show that the sole or predominant use of the premises is for businesses involved in the retail sale of goods. It involves a question of characterisation. The fact that a portion of the premises is used for purposes other than the sale of goods by retail will not necessarily preclude it from coming within the definition of a retail shop. However, the sole or predominant purpose of the use of the premises must be by businesses involved in the sale of goods by retail. The emphasis is not on the premises being used wholly or predominantly to run a business that may be involved in retail sales, to some, even minor, extent. Rather, the case of Sharp v O'Driscoll makes plain that to come within the definition of retail shop under the Act, it must be premises which are used wholly or predominantly by businesses for the purpose of sale of goods by retail.

44 Accordingly, the definition of retail shop under the Act allows for the possibility of a portion of the premises being used for a purpose other than the sale of goods by retail.

45 So, in this case, the fact that Courtesy Pest Control was run from the premises along with other businesses, which the applicants allege are involved in the sale of goods by retail from the premises, does not preclude the possibility of the definition of "retail shop" applying.

46 As stated, the matter involves characterisation of use. This requires an examination of the comparative physical use of the premises by each of the three businesses. It also involves analysing the financial information of each of the three businesses as to the volume of retail sales and the income derived from retail sales as compared with other activities.

47 The Tribunal considers it appropriate to examine the evidence relevant to the entire period the applicants have been in possession, as the Act does not set any time limit for the examination of this issue.

48 DancePro is a business registered in Mrs Blunt's name and has been a registered business since February 2004. Prior to operating that business at the premises, it was operated by the applicants at warehouse premises at 7 Wardleys Court, Bayswater. It was explained that this was a factory unit with no real street exposure. The applicants gave evidence that DancePro sells dancewear to the public. The reason the applicants wished to move to the new premises was to expand DancePro and they considered that the premises would allow them greater street exposure. Initially there was a dispute between the parties as to the extent to which DancePro was a wholesale or retail business. Although there was some evidence that this business was described in the Yellow Pages telephone directory and in the business name extract as a wholesale business, the Tribunal was satisfied with the explanations given by both Mr and Mrs Blunt in respect to the use of the word "wholesale" to describe this business. Mrs Blunt explained that the yellow pages often gave free listings under a number of categories, which in this case included "wholesale". She explained, therefore, that DancePro was listed under a variety of categories, which included "wholesale". Mr Blunt also gave evidence that when completing the business name registration forms for both DancePro and National Show Promotions, he didn't want to limit the opportunities of either business and chose as wide description for the businesses as possible. However, both Mr and Mrs Blunt have maintained that at no time did either DancePro or National Show Promotions engage in the business of manufacture or wholesale. They both stated that DancePro was engaged in the sale of dancewear to the general public from the premises. That evidence was not contradicted and is accepted.

49 The financial records provided by the applicants in respect to their businesses were extremely limited and not as detailed as would be expected. The bank statements were not provided for the business cheque account for DancePro, or any of their other businesses, for the entire period of possession, nor have the till receipts for the takings by DancePro for the entire period of possession been provided. More importantly, despite both Mr and Mrs Blunt stating to the Tribunal that a general ledger was kept recording the sales that were taken on the premises for DancePro and National Show Promotions, that general ledger was not produced.

50 Nonetheless, there were some BAS statements for DancePro for the period 1 July 2006 to 31 March 2007 showing earnings from sales for those periods. In addition, there were some Eftpos receipts for DancePro for the period 13 March 2006 and 16 March 2007.

51 Further, in closing submissions, the respondents' counsel accepted that at the time of hearing and shortly after possession, DancePro were using part of the premises to conduct retail sales.

52 The Tribunal is satisfied therefore that since taking possession, DancePro has used part of the premises for the business of sale of goods by retail.

2. How are the premises physically used by DancePro?

53 A plan of the three levels of the premises was provided by the respondents showing a basement, ground floor and first floor.

54 Mr and Mrs Blunt stated that each level of the premises is 120 square metres.

55 The basement comprises a store room, garage and rear yard. Mr Blunt gave evidence that the rear yard was 150 square metres. He said that he measured the yard on one of the initial inspections of the premises and ascertained that the yard was large enough to fit the vans used for National Show Promotions.

56 The ground floor comprises two areas shown on the plan as a shop show room and a rear workshop.

57 The first floor area comprises three bedrooms, study, lounge, dining, kitchen and balcony.

58 Mr and Mrs Blunt gave evidence that the ground floor of the premises was wholly devoted to display and sales of items by DancePro and National Show Promotions. Photographs provided by the applicants show the exterior of the street frontage of the premises. There are two signs on the building, one at roof level stating "Courtesy Pest Control" and one across the first floor balcony stating "DancePro Factory Direct Dancewear". Photographs of the interior of the ground floor have also been provided which show racks and shelving of dancewear and accessories. Mr Blunt stated that currently some of the basement storage area, ground floor workshop area and some of the first floor are being used to store DancePro's stock and shop fittings.

59 However, the precise floor area of the premises used by DancePro was not provided either by detailed photographic evidence of each level of the premises. Nor was any plan of the premises provided which indicated exactly what parts of the premises were used by DancePro. Nor was an inventory schedule provided revealing the extent of DancePro's stock and where it was located on the premises.

60 Accordingly, the Tribunal is not satisfied as to the extent of the use made by DancePro of the premises.

61 As indicated above, the financial information provided by the applicants for the business of DancePro was less than adequate. The applicants have only provided two pages of DancePro's business cheque account for the period from 29 June 2005 to 29 July 2005 and for the period 29 November 2006 to 29 December 2006. Only the BAS statements for DancePro for the period 1 July 2006 to 1 March 2007 showing sales of $36 573 were provided. Additionally, only Eftpos receipts for DancePro for the period 16 March 2006 and 13 March 2007 were provided. Mrs Blunt's 2005/2006 income tax return shows income for that year for DancePro, was $14 623. Obviously the applicants were only in possession of the premises in that financial year for approximately six months and so not all of that income is relevant.

62 The Tribunal has not been provided with either the cash register rolls or what Mrs Blunt described as a journal in which she stated she noted every sale made either by DancePro or National Show promotions. Further, no profit and loss statement for DancePro has been provided, nor did the applicants see fit to arrange for their accountant to attend to give evidence in respect to the financial information concerning each business.

1. What is the nature of National Show Promotions' business?

63 There is no dispute that National Show Promotions is a business involved in the sale of goods by retail. The dispute is whether the premises are being used by National Show Promotions to sell goods by retail from the premises. It is a company incorporated since 2000 and both applicants have been directors since incorporation. It sells novelty items by retail to the public. National Show Promotions has mobile show vans which are taken to various royal and agricultural shows around Australia. Mr and Mrs Blunt stated that the majority of sales by National Show Promotions are made at these shows. The applicants maintained that despite the majority of sales for National Show Promotions taking place off-site, some sales of National Show Promotions stock did take place at the premises. However, due to the reasons set out later, the Tribunal was not satisfied that it could be shown that anything other than nominal sales were made by National Show Promotions upon the premises.

2. How are the premises physically used by National Show Promotions?

64 The evidence as to how the premises were physically used by this business was very limited.

65 Again, no detailed plan was provided by Mr and Mrs Blunt setting out what precise floor areas of the premises was used by National Show Promotions. There was no photographic evidence showing exactly what part of the premises were used by National Show Promotions or inventory schedule revealing the extent of its stock and where such stock was stored on the premises.

66 The basement rear yard area of approximately 150 square metres is used entirely to store National Show Promotions vans.

67 Stock and equipment for National Show Promotions is stored on the premises. The majority is stored in the basement. From time to time, some stock is stored on the ground and first floors. Mr Blunt made clear, however, that none of National Show Promotions' stock that is stored on the first floor is available for sale at the premises. He stated that 90% of stock stored on the first floor is DancePro's. Mr Blunt did maintain the stock for National Show Promotions stored elsewhere on the premises, was available for sale from the premises. However, as found later in these reasons, the applicants have provided no detailed financial records to verify the extent of sales of National Show Promotions' stock that take place from the premises.

3. Financial information concerning National Show Promotions

68 Again, the applicants provided very little financial information in respect to this business. A complete set of National Show Promotions' bank statements for the entire period in question was not provided.

69 The profit and loss statement for National Show Promotions for the financial year 2005/2006 showed that it had sales of $88 582 and after accounting for expenses showed a profit of $99.

70 BAS statements for the period 1 July 2006 to 1 March 2007 have been provided in the name of Hot Trends. The applicants explained this was National Show Promotions. The earnings from sales for that period was $88 650. From an examination of the BAS statements, $71 790 was earned by National Show Promotions in the period from 1 October 2006 to 31 December 2006. In cross-examination, Mr Blunt confirmed by reference to a Westpac Bank cheque account statement for National Show Promotions, for the period 28 September 2006 to 27 October 2006, National Show Promotions earned $71 740. He said this was from sales from the Perth Royal Show. He conceded in cross-examination that the only earnings for National Show Promotions, other than from sales from the Perth Royal Show, for the period from 1 October 2006 to 31 December 2006 was therefore $50.

71 The BAS statements for the period from 1 January 2007 to 31 March 2007 show there have been no sales by National Show Promotions.

72 Although both Mr and Mrs Blunt suggested that there had been sales from the premises of National Show Promotions' stock, they have produced no specific financial records which can verify this is the case. Mrs Blunt suggested that she kept a record of sales made in a journal each day. Further, Mr Blunt stated that every time an item was sold at the premises, it was written in a book which records what item was sold and to what business the stock relates. The applicants did not produce that journal. Further, neither Mr or Mrs Blunt could state how much of the sales of National Show Promotions' stock took place at the premises.

73 In all the circumstances, the Tribunal cannot be satisfied on the evidence provided by Mr and Mrs Blunt that anything other than nominal sales of National Show Promotions' stock was sold at the premises. Accordingly, the Tribunal finds that the majority, if not all of, National Show Promotions' income result from sales off-site.

1. What is the nature of the business of Courtesy Pest Control?

74 This business engages in the business of mobile pest control and extermination off-site. Mr Blunt is the sole director of the company. There was no attempt by the applicants to suggest that this business is involved in retail sales. The administration of the business however does take place at the premises. It can be implied therefore that as a result of the very nature of its business - Courtesy Pest Controls' income is derived from off-site.

2. How are the premises physically used by Courtesy Pest Control?

75 The applicants advised the Tribunal that 40 square metres of the premises is used to operate this business. It is operated from the first floor, which contains a desk, telephone, facsimile and filing cabinet. The applicants refuted in cross-examination that any part of the premises, including the external areas, are used for storage of chemicals or vehicles by Courtesy Pest Control. Again however, the applicants provided no photographs to show how the premises are used by Courtesy Pest Control. Nor was a plan provided depicting the floor area of the premises used by Courtesy Pest Control

3. Financial information concerning Courtesy Pest Control

76 The profit and loss statement for Courtesy Pest Control for the years 2005/2006 shows gross receipts of $92 231.

77 The BAS statements for this business for the period 1 July 2006 to 31 March 2007 indicate earnings of $65 929.

78 To determine the preliminary issue, it is necessary to analyse, by comparison, the above information in respect to each business.

79 The applicants took possession of the premises in or about January 2006. The relevant comparative financial information is for the years 2005 to 2006 and 2006 to March 2007.

80 A table showing comparison of sales/earnings of each business operated at the premises for the tax years 2005/2006 and 2006/2007 and the percentage that those sales/earnings represent when compared to the sales/earnings of all three businesses is set out below.

(i) 2005/2006 % of Sales/Earnings of all three businesses

(q) 2006/2007 % of Sales/Earnings of all three businesses

81 Courtesy Pest Control is not involved in the sale of goods by retail. As previously stated, the applicants have provided insufficient evidence to satisfy the Tribunal of the extent of retail sales carried out by National Show Promotions from the premises. Mr Blunt conceded that only $50 could be shown by National Show Promotions other than from sales from the Perth Royal Show. Such a sum, if it can be said to represent sales from the premises, is so insignificant, it can be ignored. The majority, if not all of National Show Promotions' income, is derived from sales off-site. DancePro is the only business therefore that conducts all of its retail sales at the premises. A comparison of DancePro's earnings to that of National Show Promotions and Courtesy Pest Control reveal low percentages.

82 The respondents rely on these low percentages to suggest that on a financial analysis, as DancePro is the only business involved in retail sales, theses percentages show that the premises are not used "wholly or predominantly" by a business involved in the retail sale of goods.

83 At first blush, this argument is appealing. However, in truth the premises have a mixed use. This use involves storage for National Show Promotions, office administration for all three businesses and retail sales for DancePro. By income, DancePro is the smallest of the business operations.

84 To determine the preliminary issue, therefore, we are left only with the evidence as to how each of the three businesses use the premises. To succeed, we must be satisfied that DancePro, being the only business which uses the premises for retail sale of goods, wholly or predominantly physically uses the premises.

85 The premises are made up of a basement ground floor, first floor, rear yard and front car park. Each level of the premises is 120 square metres. This does not include the rear yard which is 150 square metres. National Show Promotions uses the entire rear yard to store their show vans. The real difficulty is ascertaining how the remainder of the premises is physically used by each of the three businesses. The applicants' counsel submitted that 90% of the premises are dedicated to the retail businesses of DancePro and National Show Promotions. However, we are not satisfied on the basis of the evidence provided by the applicants how this figure was arrived at by the applicants' counsel. The applicants have not provided by plan, photographic evidence or inventory schedule how the remainder of the premises are physically used by DancePro. To determine this issue, we are left only with the evidence given by Mr and Mrs Blunt. In respect to the first floor, both stated that around 40 square metres of the first floor is used by Courtesy Pest Control. As to the use put to the remainder of the first floor, Mr and Mrs Blunt's witness statements said as follows:

"The rest of the first floor comprises a kitchen, toilet and bathroom, and several other rooms which are used for storing stock for DancePro and National Show Promotions Pty Ltd."

86 However, it is not clear from that statement whether the entire rest of the first floor is devoted to storing stock for DancePro and National Show Promotions or whether it is only the rooms shown on the plan as bedrooms, study, dining room and lounge. Mr Blunt gave evidence that 90% of DancePro's stock was stored on the first floor. However, neither he, nor Mrs Blunt stated precisely how much floor space on the first floor is used to store DancePro's stock and how much is used to store National Show Promotions' stock.

87 Equally, there is insufficient evidence in respect to how the basement level by each business is used. In their witness statements, the applicants stated as follows:

"The basement is used to store equipment for DancePro and National Show Promotions Pty Ltd, such as clothes rack, mannequins, old furniture, shop fittings and other equipment. We also store stock for National Show Promotions Pty Ltd (around 70%) and DancePro (around 30%). All of this DancePro stock is for sale on the Premises. The stock for National Show Promotions in the basement is both for sale on the Premises and for sale at shows."

88 It is not clear from that statement, when the plan of the premises is examined, whether the garage, store and tools area is being referred to when the applicants refer to the basement. Further, it is not clear as to the extent of the floor space that is being used for the storage of DancePro's stock and how much floor space in the basement is being used for National Show Promotions' stock.

89 The respondents' counsel did concede that the majority of the ground floor was used by DancePro.

1. 150 square metres of the rear yard is used by National Show Promotions for storage of show vans.
2. That the majority of the ground floor, that is, approximately 120 square metres, is used by DancePro.

1. That only a small portion of the first floor, 40 square metres, is used by Courtesy Pest Control.

1. As to the remainder of the premises, being the basement and first floor, the applicants provided no specific evidence as to the amount of floor space that was used by DancePro.

91 DancePro is the only business involved in the retail sale of goods. All the evidence as to physical use of the premises was evidence within the applicants' knowledge. In circumstances in which evidence is peculiarly within the knowledge of one party, it is to be weighed according to the proof which it was in the power of one side to produce, and in the power of the other to have contradicted: R v Kakelo [1923] 2 KB 793 at 795.

92 Without this information we cannot be satisfied as to the extent to which the premises is used by each of the three businesses to ascertain whether on a comparative basis this shows that the premises are being used wholly or predominantly by DancePro, the only business involved in the retail sale of goods. The evidence as to space allocated to the businesses does not enable any view to be found as to which business occupies the greater area of the premises.

93 Accordingly, in respect to the preliminary issue, the application fails.

94 The Tribunal therefore does not consider it has jurisdiction and the applications are dismissed.

95 The final issue then relates to the question of costs. The respondents sought costs in respect to the applicants' s 35 application under the SAT Act.

96 The applicants had sought discovery of a variety of documents from Mr Rawle, the respondents' real estate agent. As a result of receiving a draft affidavit from Mr Rawle, the applicants' counsel conceded the application should be dismissed. Following dismissal, the Tribunal ordered the applicants pay Mr Rawle's costs, to be fixed if not agreed. The Tribunal considered that such costs were appropriate as Mr Rawle was not a party to the proceedings. Section 87(2) of the SAT Act allows the Tribunal to award costs to a third party under s 35.

97 The respondents also sought costs for the s 35 application, which were reserved.

98 The Tribunal has a discretion under s 87(2) of the SAT Act to award costs. However, that discretion must be read in the context of s 87(1) of the SAT Act which provides that:

Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal."

99 As a result of s 87(1) of the SAT Act, costs do not necessarily follow the event. (See: Bilek and Vata Investments Pty Ltd [2005] WASAT 153; Quah & Anor and AMP Life Limited [2005] WASAT [169]). Given the time involved and the nature of the s 35 application, we do not consider there is any reason to displace the general rule in s 87(1) of the SAT Act and therefore dismiss the respondents' application for costs on the s 35 application.

100 As to the question of costs generally, this was not raised by the parties. In case they might be advised, despite the principles referred to above, to seek costs, leave to pursue such an application will be granted for a limited period pursuant to the orders that follow:

1. The applicants' applications are dismissed.
2. There is no award for costs to the respondent in respect to the applicants' application under s 35 of the State Administrative Tribunal Act 2004.
3. Within 14 days either party may file with this Tribunal and serve on the other party;

(a) an application for costs generally, supported by affidavit, detailing the amount sought and the basis upon which costs are claimed; and

(b) an outline of written submissions in support of such application.

1. Within 14 days of a party being served with the documents referred to in order 3 above, that party may file with this Tribunal and give to the other party:

1. Unless otherwise ordered, any such application for costs referred to in order 3 above shall be determined upon the documents.

I certify that this and the preceding [100] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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