Humphries & Cooke Ltd v Essendon Airport Limited [2001] VCAT 2439 (30 November 2001)

Retail Tenancies List; Application for Interlocutory Injunction; Fair Trading Act 1999 Section 7 and 8; Whether Refusal to Renew Lease Can Amount to Unconscionable Conduct; Whether Aircraft Hangar Used to Store Aircraft and Building Materials for Construction Company are "Retail Premises"

Medium Neutral Citation [2001] VCAT 2439

1. Adjourned to directions hearing at 9.30 am on 19 December 2001.

1. In 1996 the applicant in this proceeding, Humphries and Cooke Pty Ltd as it is now called, owned an aircraft which was operated from an airstrip in Coldstream. The aircraft was stored in the open air and therefore the facilities of Coldstream were for that and perhaps other reasons found to be unsatisfactory. I have been told by Mr Humphries a director of Humphries and Cooke Pty Ltd that it is a leading or perhaps the leading alpine constructor in Victoria and it has undertaken large scale projects including the Dinner Plain development in the Victorian Alpine area. It also has interests in central Queensland. The aircraft that was stored or parked at Coldstream was used amongst other things to enable company officers to call at the company's operations in central Queensland.

2. Being dissatisfied with the facilities at Coldstream the company made enquiries of the then management of Essendon Airport Limited. It appeared that a satisfactory hangar site was available and at a rental which was satisfactory to the company, though very much larger than the rental which it was paying at Coldstream. The company was told however, by the landlord, Essendon Airport Limited, that because of the uncertainty as to the airport's future, only a two year lease could be made available. That lease was entered into and at the expiry of its term negotiations ensued for the grant of a further lease term. Once again, the landlord management company said that it was not possible to grant other than a short-term lease because of continuing uncertainty as to the airport's future. When that uncertainty was resolved it might be possible to grant a longer term lease.

3. A review to market was undertaken with respect to the rental. The rental was found as reviewed to be somewhat high by the tenant and after further negotiations the increase of rent was brought in gradually, half in the first year and the entirety of it in the second year. That lease entered into for the second term had a commencement date of the 1st of December 1999, has an expiry date mistakenly described as the 31st of November 2001. Mr Humphries gave evidence that the company was told once again that a longer term lease was not available. Nevertheless, the form of lease includes in Clause 37 a provision as to the grant of further terms. Section 37.3(b) says:

"The term of each new lease will be the appropriate further term referred to in Item 15."

4. When one turns to Item 15 of the schedule with a heading "Further Term" we find the words "not applicable". The inclusion is part of a standard form of the provisions for an option to renew and the inclusion in the relevant item in the schedule of not applicable is consistent with what Mr Humphries said as to the commercial understanding between the parties, namely that there was no option to renew.

5. Some couple of months ago correspondence commenced as to the fate of the tenancy at the expiration of the current lease. In a letter dated the 17th of October this year Mr Cooke of Humphries and Cooke Pty Ltd said:

"We notice that our current lease comes up for renewal on the 30th of November 2001 and we have not to date received any formal notification of an offer to renew. We hereby formally apply for the renewal of our lease. The term as previously is a two year lease and we would like to enter into a longer arrangement and would suggest a 5 x 5 option would be more appropriate if this were possible. We intend expanding our building operation back into the country areas of Victoria and our base at Essendon Airport is central to that expansion. We have a good tenancy record with the corporation and would expect a favourable hearing to our request. We look forward to your offer."

6. By letter dated 25th October 2001 over the signature of Mr Tim Anderson for Essendon Airport Limited, an offer as sought was dispatched. The term was as requested, namely an initial term of five years with an option for a further term of five years. However, the rental as stipulated was not at all acceptable to the tenant. It represented, it has been said, a 340 percent increase over the rental which had been payable under the expiring lease.

7. By letter dated the 5th of November 2001, once again over the signature of Mr Cooke on behalf of Humphries and Cooke, the tenant conveyed to Essendon Airport Limited that whilst the term offered was quite satisfactory, the rent was quite unsatisfactory. The letter stated, inter alia:

"However there is no way the corporation can justify a 340 percent increase in the ground rent for the above site. Is the corporation including a sinking fund element in the rental to pay as for the cost of the building at the end of the lease if so what costings would they assume. Has the corporation sought independent valuer's advice on site rentals? If so can we have a copy of the valuation."

8. The letter concluded suggesting that there be a review to market. No agreement has been reached between the parties and the tenant now finds itself with no apparent entitlement to remain in possession of the premises and invited to depart.

9. The tenant says that it has spent some $60,000 on the erection of a hanger to suit its purpose and that the hanger was erected not only to suit its purpose but to a degree at the urging of Essendon Airport Limited. The Airport it was said was in a somewhat stagnant state due to the uncertainty surrounding it and it was advantageous to the landlord that a new hanger be erected to give a more prosperous aspect to the airport.

10. Whilst the tenant concedes that Section 28 of the Landlord and Tenant Act 1958 gives it an entitlement to remove the hangar, that would be a most costly and unsatisfactory process. Moreover, in the short-term there is no alternative site to which the hangar can be removed. The tenant seeks interlocutory or interim relief restraining the landlord from requiring it to yield up possession.

11. This application is put on a number of basies including the Fair Trading Act 1999 and the Retail Tenancies Reform Act 1998. In that regard there was some challenge to jurisdiction by Mr Nicholls a director of the landlord company who appeared representing it. Mr Nicholls said that he was required to leave an unconnected meeting earlier in the afternoon and he has come direct to this hearing without having the opportunity of any but the most perfunctory telephone consultation with other officers of the landlord company, without the opportunity to take proper legal advice and without the opportunity to bring the company's file of correspondence on this tenancy.

12. It appears that Sections 107 and 108 of the Fair Trading Act 1999 bestow a general landlord and tenant jurisdiction on this Tribunal. They give the Tribunal power to determine fair trading disputes which are defined as disputes between the suppliers and purchasers of goods and services. Services are defined in Section 3 of the Act to include interests in real or personal property, and supply is defined to include grant. It follows in my view that whether or not the Retail Tenancies Reform Act applies to these premises the Tribunal has jurisdiction in a general sense to deal with a dispute between the landlord and tenant in the present circumstances.

13. It is convenient therefore to turn to the first of the basies upon which relief was sought and that is based upon Section 7 of the Fair Trading Act 1999. That section provides:

"(1) A person must not, in trade or commerce, engage in conduct which is unconscionable, within the meaning of the unwritten law, from time to time.

(2) This section does not apply to conduct that is prohibited by Section 8."

14. Section 8 of the statute deals in a more specific way with allegedly unconscionable conduct and gives particular and more extensive powers to the Tribunal than are contained in what Section 7 describes as the unwritten law.

15. Section 8 however renders these additional powers to override contractual entitlements applicable only to matters relating to the supply or possible supply of goods or services of the kind ordinarily used for personal household or domestic purposes.

16. Mr Willis who appeared on behalf of the tenant did not as I understood it contend that Section 8 was attracted, this tenancy being a purely commercial one. In the circumstances therefore he was limited in his reliance to Section 7. The somewhat unusual expression "the unwritten law", has been held by French J in his recent determination in the matter ACCC v C.G. Berbatis [1999] FCA 1151; (1999) 167 ALR 303 to mean "the Common Law of Australia".

17. What then in the circumstances that I have described can it be said constitutes unconscionable conduct? In my view there is nothing that can be said to be unconscionable conduct within the meaning of the unwritten law and the decision of the Full Federal Court of Australia on appeal from French J's judgment which appeal decision is known as C.G. Berbatis v Australian Competition and Consumer Commission [2001] FCA 757, 27 June [2001] FCA 757; 2001 (2001) ATPR 41-826 is a clear guide. In Berbatis' case the landlord was in dispute with a number of tenants at its shopping centre. One of the tenants desired to sell its business but could do so only if a new lease were granted to it. The tenant had no option and therefore no contractual or statutory entitlement to a new lease. The landlord expressed a willingness to grant the new lease but only upon terms that the tenant release all its claims against the landlord in proceedings in which the Australian Consumer and Competition Commission had intervened. The Full Court reversing French J held that a tenant in the position of the tenant just described was not a person under a disability and that the landlord in merely exercising or refusing to exercise its contractual entitlement except on certain terms was not to be regarded as having engaged in unconscionable conduct.

18. For reasons already given I do not believe that there is any contractual option to renew here. I reached this conclusion based both upon the text of the lease itself and upon the viva voce evidence given by Mr Humphries. Since therefore the tenant had no contractual entitlement to a new lease the tenant cannot complain if the landlord is agreeable to grant a new lease only upon terms which the tenant finds unacceptable. To the extent therefore that the application for relief is based upon an allegation of unconscionable conduct I conclude that there is no serious issue to be tried demonstrated and therefore it can be no basis for the grant of any interlocutory relief.

19. I was also taken to some paragraphs in the points of claim filed by the tenant which rely upon certain alleged contractual entitlements to a further lease by way of oral agreement or term to be implied through business ethicacy through transactions. I was told that the basis for these alleged agreements was to be found in discussions between Mr Cooke of the tenant and officers of the landlord company. Mr Cooke is not available to give evidence and has sworn no affidavit. Mr Humphries has given evidence but in the circumstances has been unable to shed any light on these matters. Not only can he give no direct evidence but he was unable to give evidence even on the basis of knowledge, information and relief. Whatever view one might have taken of these matters had the evidence been forthcoming, the absence of evidence even in the attenuated form of an oath given on the basis of knowledge, information and belief means that there cannot be any serious question to be tried shown to exist as things now stand based on those matters.

20. I turn finally then to the Retail Tenancies Reform Act which might be thought to be regarded as the principal basis for the present application and the one which at least on the face of it provides the application with its greatest chance of success.

21. Mr Willis submitted that in the circumstances the landlord was to be regarded as being in breach either of Section 16 of the Retail Tenancies Reform Act or Section 18 of that statute. It is unnecessary for me to go in detail to those provisions beyond merely indicating what their general effect is at least so far as they might be regarded as relevant to the present dispute.

22. Section 16 provides that where there is no option to renew a retail tenancies lease a landlord is obliged to give notice of that fact to the tenant. If the landlord does not give that notice the tenant enjoys the statutory extension of his tenancy for the period until three months elapse after the giving of the notice.

23. Section 18 deals with options to renew and again requires a landlord under a retail tenancies lease to give special notice to the tenant of the time period within which an option may be renewed. Failure to give that notice, once again, gives the tenant a statutory extension of the contractual terms of his retail tenancies lease to the period three months after the giving of the notice.

24. In light of the findings that I have made already, at least for the purposes of this interlocutory injunction application that is it has not been shown that there is a serious question to be tried as to the existence of an option to renew this lease, I can put Section 18 to one side immediately. That leaves us with Section 16; but of course the anterior question that must be answered before one considers the operation of Section 16 in these circumstances is whether the Retail Tenancies Reform Act applies to this lease and this dispute at all.

25. A retail premises lease, is to state the obvious, a lease of retail premises. Section 3 of the Act says that the lease must be one having a term of not less than one year and includes an agreement for lease and a sub-lease. Here, the lease in question which is on the point of expiry has a term of two years and so it is a lease within the meaning of the Retail Tenancies Reform Act. The more difficult question is whether in the circumstances the premises to which it relates are to be regarded as retail premises. The definition here states:

" "retail premises" means 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"

26. The definition then proceeds with a series of express exclusions which in the circumstances are irrelevant. Accordingly it is that primary and opening paragraph of the definition which will prove vital. The evidence which Mr Humphries gave as to the actual use of these premises was that his company used the aircraft which is stored there to carry company officers around on the company's business, obviously to visit the company's interests in central Queensland, to fly to alpine areas, at least during the summer season and observe and supervise construction in those areas and also the hanger was used for the purpose of storage of construction materials that would be used in the company's construction business. Mr Humphries did not descend to details as to the precise nature of the company's alpine construction business and was not asked to do so either by Mr Willis, Mr Nicholls on behalf of the landlord or by me. He referred to the company as having an involvement in major developments such as the Dinner Plain development, construction of commercial and retail premises in the alpine areas and also residential premises for ordinary consumers. In the circumstances therefore, can it be said that these premises are used wholly or predominantly for the carrying on a business involving the sale or hire of goods by retail or the retail provision of services?

27. The flavour of the evidence given by Mr Humphries was as it seemed to me that the developments and buildings constructed by the company were predominantly commercial. In the brief opportunity I had while this matter was stood down, I consulted some authorities, the expression "retail" and "sale by retail". It is used in a number of different contexts and the various authorities have varying relevancies. There is at least some authority for the view that a good or service can be regarded as being sold by retail and sold to an ultimate consumer even if that ultimate consumer is itself a business or somebody engaged in business. I have not had the opportunity to go to those authorities in any detail but it seems to me that at least at this interlocutory stage it would be wrong to conclude that the mere fact, if it be the fact, that the tenants customers are predominantly businesses (though not for resupply) rather than private individuals would disqualify from being regarded as carrying on a business involving the sale or hire of goods by retail or the retail provision of services [Collector of Customs v Chemark Services Pty Ltd [1993] FCA 291; (1993) 42 FCR 585; 114 ALR 531]. Certainly the paradigm retail premises are a shop where ordinary consumers walk in the door and make their purchases or attend perhaps an accountant's office to obtain the account's services, a lawyer's office to obtain legal advice and so forth; but the authorities both in this Tribunal and in the Supreme Court demonstrate that the concept of retailing is more extensive than that .

28. In Hi Tech Pathology v Bankberg (1999) V ConvR 58-536 I concluded that premises used by a pathology service could be regarded as retail premises within the meaning of the statute even although the patients whose samples were being analysed at the laboratory by and large did not attend there in person but rather used a series of despatch services principally through the surgeries of general practitioners and allied health professionals.

29. In Wellington v Norwich Union Life Insurance Limited [1991] VicRp 27; [1991] 1 VR 333 Nathan J concluded that the definition was satisfied by an office used by a firm of patent attorneys who communicated with their clients, largely or almost exclusively by telephone, mail and facsimile.

30. Accordingly the fact that there are it seems no customers of Humphries and Cooke Pty Ltd attending at the hangar of Essendon Airport does not in itself exclude the possibility that the hangar might be regarded as used wholly or predominantly for the carrying on of the business involving the sale or hire of goods by retail. How would one characterise the use of this hangar? It seems to me that if a single word were to be used to characterise it, it would be a depot. The hangar is a depot for the company's aircraft and also a depot in the sense of a storage area for its building materials.

31. I put a hypothetical question to Mr Willis, Counsel for the applicant. I asked if a family concern having a number of shops, perhaps constituting a chain throughout the metropolis had a separate tenancy which was in effect a depot where it stored stock perhaps or other items and stored a van, would those premises be regarded as retail premises for the purpose of the statute, assuming that none of the excluders which form part of the definition which are at present irrelevant here was not effective? He answered this question in the affirmative. I am unaware of any decision of the Tribunal or the Supreme Court that would go so far. Indeed it seems to me that premises are not to be regarded as being used in the appropriate manner to attract the definition unless they are in some fashion either directly as a shop or indirectly as a pathology laboratory in the Hi Tech Pathology case or patent attorney's office was in Wellington's case involved in the despatch of goods and services to the ultimate consumers. Here the purpose of this hangar is storage and in my view it does not enjoy the necessary use which the definition requires to render it retail premises. If I were wrong in that there is another element of the definition which in my view is sufficient in itself to exclude these premises from the purview of the definition. The premises to be within the definition must be used in the relevant manner, not merely used simpliciter but so used "under the terms of the lease relating to them". The permitted use which we find expressed in the present lease is "aircraft hangar". There is nothing at all about the retail provision of goods and services to anyone. The potential operation of that excluder was noted by Nathan J in the matter of Sofos v Coburn (1992) V ConvR 54-439. In that case the permitted use of the premises was wholesale and export fish supplies. His Honour said those words were clear and incontrovertible and therefore the premises did not fall within the definition. "Wholesale" is of course an expression customarily used as the antonym for retail. It might be thought therefore that the present case is not quite as clear a case as Sofos' case. On the other hand in my belief the concept of an aircraft hangar is sufficiently remote from the core concept of retailing that the permitted use as shown in the lease is as effective to exclude the premises from the operation of the as was the permitted use in Sofos' case.

32. It follows therefore that no reliance can be placed upon Section 14 of the Retail Tenancies Reform Act 1998 and the fact, if it be the fact, that the notice which that section requires in appropriate circumstances to be given, was not given, does not affect any statutory extension of the contractual term of the lease. Accepting as I do that the applicant finds itself in a difficult position in being unable conveniently to recover the expenditure that it has made on these premises except by committing to pay rent which it believes is an inappropriate and excessive rent, nevertheless I cannot persuade myself that there is a serious issue to be tried as to any of the matters that have been urged before me. That being the case I do not even have to consider the balance of convenience. In the circumstances therefore I refuse granting the interlocutory relief.