Diamond Certification Laboratories Pty Ltd v The Trust Company Ltd

NCAT Consumer and Commercial|2015-10-20

Background

On 29 May 2015 Diamond Certification Laboratories Pty Ltd (DCLA) commenced proceedings against the Trust Company Ltd (the Trust Company) for compensation under the Retail Leases Act 1994 (NSW) (the Act).
The Trust Company made an application that the Tribunal hear the question of jurisdiction as a preliminary issue. This application was heard on 30 June 2015. It was refused.
By Notice of Appeal filed 22 July 2015, the Trust Company appealed this decision. The Appeal Panel upheld the appeal, set aside the decision and remitted the matter to the Consumer and Commercial Division for hearing of the preliminary issue, with the directions that the Tribunal, sitting as the Consumer and Commercial Division, be constituted by the same Members as those who constituted the Appeal Panel. The Appeal Panel also directed that the evidence and submissions before the Appeal Panel in relation to jurisdiction should be evidence and submissions in the remitted proceedings.
The only issue to be determined is whether the Tribunal has jurisdiction to determine the application by DCLA under the Act. The Tribunal, constituted by two members, now provides its reasons.
For convenience, the moving party on the application for a preliminary hearing on the question of jurisdiction shall be referred to as the landlord or the Trust Company, and the tenant will be referred to as DCLA.

Issues

The first question which arises is whether the premises which were the subject of the lease comprised a retail shop lease or a lease of commercial premises.
The second issue arising is whether the premises are located in an office tower which form part of a retail shopping centre within the meaning of s 5(d) of the Act; and if so, whether it follows that the premises are excluded from the operation of the Act in accordance with such subsection.
A third question arises namely whether the claim by DCLA is not a retail tenancy claim or unconscionable conduct claim within the meaning of the Act but rather is a claim for damages for loss suffered by another entity. The Tribunal does not consider that this issue should be considered in this application, but rather should be considered on the merits hearing, if applicable.

Statutory Definitions

Section 5 of the Act relevantly provides: "This act does not apply to any of the following retail shops: … (d) any premises in an office tower that forms part of a retail shopping centre, …"
Section 3 of the Act defines "retail shop" as follows: "retail shop" means premises that: (a) are used, or proposed to be used, wholly or predominantly for the carrying out of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre. Note 1. Section 5 limits the retail shops to which this Act applies. Note 2. Clause 17 of Schedule 3 provides that the businesses specified I Schedule 1 are taken to be prescribed for the purposes of paragraph (a) of this definition until regulations prescribing businesses and repealing Schedule 1 are made."
The definition of "retail shopping centre" contained in the Act is as follows: "retail shopping centre means a cluster of premises that has all of the following attributes: (a) at least 5 of the premises are used wholly or predominantly for the carrying on of one or more listed businesses; (b) the premises are all owned by the same person, or have (or would if leased have) the same lessor or the same head lessor, or comprise lots within a single strata plan under the Strata Scheme (Freehold Development) Act 1973 or the Strata Scheme (Leasehold Development) Act 1966; (c) the premises are located in the one building or in 2 or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the retail shops; (d) the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade."
Section 3 of the Act contains a definition of "retail shop lease" as follows: "retail shop lease" or "lease" means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop: (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied; and (c) whether the agreement is oral or in writing or partly oral and partly in writing. Note: Sections 6, 6A and 84B limit the retail shop leases to which this Act applies."

Submissions of DCLA

DCLA relies upon several factors which it submits justifies the conclusion that its business comprises a retail shop. They are: 1. an early plan obtained by it from the Sydney City Council created for planning approval records the leased area as "existing retail space;" 2. the same premises had previously been leased for many years to a retail jeweller known as "Germani;" 3. two companies associated with DCLA, namely the Gold Company Pty Ltd and Gold Converters Pty Ltd also operated from the subject premises. At all relevant times; pawnbroker's licences issued under the Pawnbrokers and Second-Hand Dealers Act 1996 (NSW) were held by DCLA's associated companies; 4. the main business of DCLA consisted of purchase and sale of second-hand goods for which DCLA or its associated firms and entities held in the following licences; 5. Second Hand Dealers Licence No 2PS04832 (held by Gold Converters); licence 2PS/4954 (held by the Gold Company); Second Hand Dealers licence 2PS04809 (held by DCLA) were current; 6. DCLA's business included both buying and selling of gold jewellery, gold bullion, gold watches, gold rings, platinum, silver, silverware, and similar precious items ("the merchandise"); 7. although the use prescribed in the subject lease was commercial office, after DCLA's occupation the use gradually altered to that of a gold buying business, as was known by, and acquiesced in, by the landlord; 8. the landlord promoted DCLA's business by providing banners and directional signage which advertised DCLA's business. At the top of the stairway from the ground floor Pitt Street entrance, a banner, 2.5mx4m was displayed in red and black (the atrium banner); 9. such advertising was provided in prominent locations with the retail shopping forecourt on the ground floor at the Pitt Street entrance; and on large cylindrical pillars in the retail shopping plaza at level 1 (pillar signage); 10. at some stage an electronic directory containing the names of retail businesses, including the business of DCLA, was displayed at the Pitt Street entrance of the ground floor forecourt (the Piccadilly Arcade directory); the business of DCLA was promoted by the landlord with other businesses operating in the retail areas, in retail magazines, on a printed retail shopping centre directory, and in promotional material; 11. clients of DCLA's business would usually access its premises by the Pitt Street entrance of the Piccadilly Plaza, then via escalator to level 1; 12. the business was promoted on the landlord's website, in pamphlets promoting the centre and in marketing activities, including a monthly newsletter; 13. the email correspondence between DCLA and the landlord shows that the landlord was actually engaged in promoting the business of DCLA.
Based upon the above, DCLA submits that its business constitutes either a pawnbroking shop or a second-hand goods shop, as identified in the list of shops contained in Schedule 1 to the Act.

Landlord's submissions

The landlord submits that the use of the premises, as stipulated in the subject lease, is conclusive evidence of the use. The Reference Schedule, Item 11 defines the permissible use as "Commercial Offices."
The landlord relies upon the following factors as establishing that the subject premises are not a retail shop: 1. Location of the subject premises which are separated from the retail area: access from the retail area is via a corridor which provides access to six lifts, three on each side, which serve the office tower above, and which pass to the ground floor; 2. No shop front exists; 3. Access to the premises is by a glass-swing door, which is only opened by activating a doorbell. Access is confined to a reception area; 4. The premises inside were set up with desks and chairs; 5. No goods were displayed for sale; or at all 6. A glass-security door closes between the retail shopping area and the lift corridor: the door is opened between 8am and 6pm on weekdays only, and outside of those hours, and at weekends and public holidays, there is no access without a security pass to the premises from the retail shopping area. The premises are effectively isolated from the public when the glass doors are closed. In this period, the only access is via the tower lifts; 7. The premises do not qualify for the description of a pawnshop: any pawnbroking activity should be disregarded; 8. The premises do not qualify for the description of second-hand goods shop: the true characterisation of the business conducted in the premises was a diamond certification and gold buying business; 9. The definition of "shop" in the Macquarie Dictionary, (5th ed), is inter alia, as follows: "a building where goods are sold retail."
The landlord has drawn our attention to the authority of Bateman Television Ltd v Coleridge Services Pty Ltd [1969] NZLR 794 at [815] as authority for the proposition that "retail" "necessarily involves the notion of sale to members of the public."

Characterisation of the premises

The first question for consideration in this application is to determine the correct characterisation of the premises. Item 11 of the subject lease schedule defined the Permitted Use of the premises as "commercial offices." Clause 6 of the subject lease stipulated that the lessee was to use the premises only for the permitted use.
The evidence establishes that the premises were configured as a commercial office. It was necessary to activate a doorbell to gain entry through an outer door to the premises. Once inside there is a reception area. There was also located a work area where employees sat at desks. There was a conference table. There were no products or items for sale displayed anywhere on the premises.
Mr Dan Novick, the manager of DCLA, referred the Tribunal to the fact that the business conducted in the premises had its origins as a business known as Germani. That business, according to the evidence, establishes that Germani was a retailer of fine jewellery, specialising in producing jewellery designs to suit client orders, including bridal orders.
Germani commenced retailing in the premises in 1991 and ceased operating on 1 February 2002. The current business now being conducted in the premises commenced after occupancy of another tenant. The critical fact to be considered, however, is the characterisation of the business conducted in the premises by DCLA.
The list of prescribed businesses is set out in Schedules 1 and 2 of the Act. Neither the Act nor its Schedules define the physical characteristics of a retail shop. Rather, as provided by the definition of "retail shop" in s 3 of the Act, the critical question for consideration is the actual use to which the premises are put.

Finding: Shop as defined in s 3(a) of the Act

In determining the actual use of premises (as distinct from the use authorised by the lease), said to comprise a "shop," attention is to be directed to "what the ordinary person would reasonably think may well be included in a shop from which [the relevant] described business is being carried out": see Tringas v Quach [2007] NSW ADT 24, as quoted in Honings Bakery Pty Ltd v Cerialis Pty Ltd [2014] NSW CATCD 87 at [64]. That is, interpretation is to be arrived at having regard to "their usage, as composite expressions, in everyday speech": see [64].
The landlord submitted that the permitted use, as prescribed by the lease, was pivotal and determinative, as referred to in Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376. However, the context in the present circumstances is quite different. In Moweno, the issue was whether a restaurant comprised a "shop" for the purposes of determining the permissible use.
The critical question is, irrespective of the nominated permissible use as contained in the lease, whether the operation of the Act results in the conclusion that, at law, for the purpose of the issue to be now determined, the business actually conducted is that of a shop, as defined in s 3 of the Act.
The facts weigh heavily in favour of the conclusion that the subject premises constitute a business, rather than a retail shop, as defined in the dictionary for the following reasons: 1. The permissible use of the subject premises was "commercial offices". Further, by cl.6 of the Lease, DCLA was required to use the premises for the permitted use only; 2. The subject premises were not configured as a conventional shop. No shop front existed, only a glass entry door which was opened after activation of a doorbell. Access was therefore restricted to a reception area, through which access was by another door to the operational area of the business. 3. The solicitor for the landlord, Mr A Stephen Phillip Pallavicini, in his affidavit sworn 22 July 2015, describes his visit to the subject premises whilst DCLA was occupying them: "I recall that to gain entry into the Premises, one had to ring the doorbell on the outside of the door. I recall that as I walked through the entrance, the Premises were shaped like a horse shoe and the reception area was on the right hand side with a counter. I recall that after going through an entrance way past reception, on the left hand side of the Premises, was a work area where people sat at desks with computers. There was some equipment on some desks and although I cannot now recall who said these words, I do recall that a person inside of the Premises said to me to the following effect: 'Those machines are for weighing gold'. I also recall there was a television and a water cooler and in the middle of the Premises, there was a conference table. I did not see any products or items for sale displayed anywhere in the Premises." 1. The business involved the purchase of merchandise. However, the evidence of retail sales is virtually non-existent; 2. The landlord had actively promoted the business by placing advertising signs in the retail area of Piccadilly Plaza. Pillar signage and Atrium signage in Piccadilly Plaza referred to the business as one engaged in the purchase and buying gold items, bullion, gold jewellery; Further, the landlord has, by virtue of the electronic directory, by allowing or arranging for promotional signage and by its promotion for Piccadilly Plaza in pamphlets promoted the business of DCLA. 3. Despite such promotion, no such advertising refers to the business of DCLA as "a shop." All of the landlord's promotion of DCLA was consistent with promotion of DCLA's business. None of the material relied upon can be relied upon as promotion of a "shop". 4. The layout of the subject premises does not accord with the layout and presentation of a retail shop. 5. There is no real evidence of retail sales from the subject premises. No articles were displayed for sale, and the premises were not configured for retail sales.
The definition of "pawnbroker" in Macquarie Dictionary, (5th ed), is "someone who lends money at interest on pledged personal property." There is no evidence of any activities of a pawnbroker conducted by DCLA or its associated entities..
The reliance upon "Germani" does not assist DCLA for the following reasons: 1. There is no evidence of the permissible use applicable to Germani's lease. It is known that Germani occupied space simultaneously in Suite 1.01 of Piccadilly Tower and directly below on the ground floor. 2. Photographs (if they were in fact of suite 1.01 of the Piccadilly Tower and not ground floor premises which were also occupied by Germani) suggest the layout of the interior was very different to the layout whilst the premises were occupied by DCLA. Germani's layout suggests it was more open, with facilities such as would be typically found in a fine jewellery store; 3. Germani occupied Suite 1.01 apparently whilst there existed a public staircase leading from the Castlereagh Street entrance directly to level 1 and actually led into Suite 1.01. Accordingly, there has been a physical change to the structure before DCLA occupied the subject premises.
Taking the above considerations into account, the Tribunal determines that the subject premises do not constitute either a pawnshop or a shop dealing in second-hand goods, each of which are businesses listed in Schedule 1 to the Act, and which were claimed to be so by DCLA. Accordingly, the Tribunal concludes that subject premises are not a "shop" as defined in s 3(a), or a "shop" at all.

Are the premises in a retail shopping centre: s 3(b) of the Act

The Appeal Panel has concluded that the DCLA business was not conducted in a retail shopping centre for the following reasons: 1. The subject premises are separated physically from the retail area because of the lift foyer on level 1; 2. the separation by the glass door from the retail zone, and the restricted hours has the consequence that the subject premises were treated differently to shop premises in the retail area; 3. whilst the Council plan shows that the subject premises were, at some early stage, treated as "existing retail" for the purpose of the requisite statutory local government development approval, the physical layout has changed. At that time a staircase existed from the ground floor at the Castlereagh Street entrance. It provided access to the subject premises and to the retail shopping area on level 1. However, the staircase has been removed. Accordingly, physical access from the Castlereagh Street entrance to the subject premises is thereafter only via the tower lifts, or from the Pitt Street entrance. This alteration has removed street access to the retail area from Castlereagh Street; 4. Clients of DCLA could only gain access after normal business hours to DCLA either via the tower lift, or through the sliding-glass door if escorted by representatives of DCLA who held security passes. Access to the retail area had no such restrictions. 5. Unlike other shops in the retail zone, the subject premises have no indicia of a "shop". Particularly 1. there was no shop front; 2. no goods were displayed; 3. no goods were displayed for sale; 4. access to the subject premises was restricted, as already referred to; 1. a client needed to pass through a door from a petitioned reception area before arriving at the central operational space.
It follows from our findings that DCLA's submissions on the issue of "shop" as defined in the Act, do not succeed.

Operation of section 5(d) of the Act

In view of the Appeal Panel's findings, it is not necessary to deal with the operation of this section. However, the Appeal Panel nevertheless provides its findings on this issue.
DCLA submits the premises are not contained in Piccadilly Tower. Certainly, the Council plan of the Piccadilly Tower showed that the subject premises were contained within the complex that was originally constructed as part of a shopping centre and tower complex; that the premises are on the lowest levels of the Piccadilly Tower; and that if one compares the location of the subject premises with the footprint of the tower above, the imprint is not wholly above the premises, but only extends over a portion thereof.
DCLA has referred the Tribunal to a draft bill, which would have, if enacted, amended the Act to clarify the status of retail premises in office towers. However, the Tribunal is required to determine this matter based upon enacted law. For this reason, the draft bill is of no consequence.
The Tribunal conducted a view of the location of the subject premises to better understand the material placed before the Tribunal, and before the Appeal Panel. It was clear from the view and the Council plan that the subject premises are substantially within the footprint of the tower above, they are adjacent to the lifts which form part of the tower and they are immediately above the foyer area below, being the main entry into the Piccadilly Tower.
The landlord submits that the intention of s 5(d) of Parliament was to exclude from the operation of the Act, shop premises where an office tower comprises part of the retail shopping centre being placed contiguous the shopping centre and physically linked to the tower.
The landlord relies upon the fact that the premises are contained within a complex which comprises two office towers, linked together and which incorporate a shopping arcade. The landlord relies upon these facts to show that they correspond to the circumstances Robertson Shanahan v Servcorp MLC [2005] NSWCTTT 595, in which the Tribunal upheld a claim that a shop was in an office tower.

Consideration

Section 5(d) does not require that the shop must be "within the office tower" as submitted by DCLA. Rather it merely requires that such premises be 'in an office tower' and form part of a retail shopping centre.
DCLA referred to a 1908 definition of office tower as "any tall building containing only offices." However, the more recent definition of "tower" contained in the Macquarie dictionary, (5th ed), is: "a building or structure high in proportion to its lateral dimensions, either isolated or forming part of any building."
The Tribunal concludes that the subject premises are located "in an office tower" for the following reasons: 1. the lease describes the subject premises as "Suite 1.01 Piccadilly Tower"; 2. the plans provided by the parties show that the subject premises are physically contained if not wholly within the "footprint of the tower" are within lateral extensions or widened base of Piccadilly Tower; 3. the ground floor entrance foyer of Piccadilly Tower, being the Castlereagh Street frontage contains a bank of lifts. Such lifts serve all floors of the Tower, including level 1 of the Tower where the subject premises are located; 4. for all practical purposes, the premises are in the tower. Access can only be gained both after hours and at weekends through the lobby entrance to the tower; 5. the physical location of the Tower lobby, and the proximity of the subject premises to it, being adjacent to the lifts, shows its incorporation in Piccadilly Tower, rather than in the retail complex.
In summary, the Tribunal concludes 1. the subject premises do not comprise a "shop" as defined; 2. that the subject premises do not form part of the retail shopping area of the Piccadilly Tower; 3. the fact that the business conducted by DCLA is located in a separate portion of the first level to the retail area leads to the conclusion that the premises are not within a retail shopping complex; 4. the original Council plan obtained from the Council records the premises as "existing retail." But the plan is not conclusive, and structural alterations by the removal of a staircase providing access to level 1 from Castlereagh Street has largely isolated the subject premises.
For these reasons, the Tribunal is satisfied that s 5(d) excludes the premises from consideration under the Act, since the "shop" as defined in s 3(b) of the Act, comprises "premises in an office tower which forms part of a retail shopping centre."
DCLA has the burden of proof that this Tribunal has such jurisdiction: see Valuer General v Fivex Pty Ltd [2015] NSWCA 53. The Tribunal concludes however the Tribunal does not possess jurisdiction to entertain DCLA's claim: it is a commercial claim and not one which comprises a claim under the Retail Leases Act 1994 (NSW). Accordingly the claim must be dismissed.

Orders

The Tribunal orders: 1. That the application in proceedings COM 15/35789 be dismissed. 2. Costs reserved. The Tribunal notes that since it has no jurisdiction to determine this application, it may follow that it has no jurisdiction to award costs. 3. Should either party wish to apply for costs, written submissions be provided within 14 days of delivery of this decision. In this event, the other party or parties may respond in written submissions within 14 days thereafter. 4. In the event that costs are sought by any party, and submissions are provided by either party, that party or both parties are to state whether an oral hearing on costs is required, otherwise the Tribunal will determine costs on the submissions provided.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 02 December 2015 - to correct typing errors DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 December 2015

Retail Lease Act 1994(NSW)

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Judgment (14 paragraphs)

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