Nicolaou v Zeus & Ra Pty Ltd [2002] VSC 302

Supreme Court of Victoria|2002-08-09|Before: Byrne J

LANDLORD and Tenant - Retail Tenancies - Meaning of "Retail Premises" - Floor area exceeding 1000m2 - Ministerial guidelines. Retail Tenancies Reform Act 1998 s. 3(1) and (5)

The plaintiff, Jim Nicolaou ("the Landlord"), is the proprietor of premises situate at and known as 35-41 Hoddle Street, Richmond. In early 2002 he granted to the defendant, Zeus & Ra Pty Ltd ("the Tenant"), a lease over the premises for four years commencing on 1 February 2002. The permitted user pursuant to cl. 5.1 of the lease is that of "car wash, car detailing, café and automotive repairs". For reasons which are of no present concern there has arisen between the Landlord and the Tenant the question whether the premises are "retail premises" within the definition of that term in s. 3(1) of the 1998. In particular, the question is whether the premises are excluded from that definition by reason of the fact that they "have a floor area that exceeds 1000 square metres".

The statutory definition of retail premises in s. 3(1), insofar as it concerns the present case, is as follows:

`"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, but does not include - (a) premises that have a floor area that exceeds 1000 square metres; or...'

`(5) In determining the floor area of premises for the purposes of this Act, regard shall be had to the guidelines for the measurement of lettable area issued by the Minister and notified in the Government Gazette.'

The demised premises have a total area of 1366m2. There is erected on the land an enclosed building comprising an office and workshop which covers an area of 170m2. Otherwise, it is entirely paved with concrete. There is no barrier or fence around the perimeter and no other structure on the land. There are in evidence photographs showing the land and these buildings.

By originating motion filed on 1 July 2002, the Landlord seeks a declaration that the floor area of the demised premises exceeds 1000m2 and that they are, therefore, not retail premises so that the lease is not subject to the requirements of the Retail Tenancies Reform Act 1998.

Parliament directs in s. 3(5) that, in determining the floor area of premises, regard must be had to Ministerial guidelines. In fact two sets of guidelines have been published in the Gazette, on 23 June 1998 and 19 August 1999. Although the 1999 Guidelines do not in terms repeal and replace those of 1998, it must be taken that they do so, for they deal with much the same matters but in different terms. Their application for present purposes must overcome the initial difficulty that they are addressed to a concept, "lettable area" which is not necessarily identical with "floor area" in sub-s. 3(1). The nexus between these concepts, however, is to be found in cl. 1 of the 1999 Guidelines which provides that "Lettable area as measured by these guidelines, is to be taken to be Floor Area for the purposes of section 3(1)(a) of the Retail Tenancies Reform Act 1998". This, if effective, represents an executive amendment to s. 3(5) which simply requires that, in determining floor area, regard shall be had to the guidelines for the measurement of lettable area.

The 1999 Guidelines go on to make the following general observation:

"The lettable area of any retail premises is the sum of the lettable area of the following internal parts of the retail premises calculated in accordance with the provisions of the chapters of these guidelines as applicable to particular types of retail premises. Lettable area only includes the part or parts of retail premises that have: (a) a durable or permanent surface; (b) a surface capable of being cleaned; (c) a surface which has a roof; and (d) a surface which may be locked and secured by means of permanent structures."

The Guidelines then provide a regime for measuring three broad categories of lettable area: "Gross Lettable Area Retail", which comprises shopping centres, commercial buildings and shops of various specified types; "Gross Lettable Area" which comprises warehouses, industrial buildings, freestanding supermarkets and show rooms; and "Lettable Area - Hotels and Motels" which comprises motels, hotels, residential hotels and taverns.

It was submitted on behalf of the Tenant that the demised premises in the present case fall within the description, "commercial buildings" and should, therefore, be measured under Chapter 2 as a Gross Lettable Area Retail. I think not. The demised premises in the present case are, for the most part, paved vacant land on some small part of which is erected a building. See as a whole, it is difficult to see these premises falling within the expression "commercial buildings". In any event, each of the premises mentioned in each of the three descriptions under Chapter 2 could be considered as "commercial buildings" in the broad and general sense of that expression. This means that the expression must have some narrower meaning. To this extent at least I accept the approach adopted by the Victorian Civil and Administrative Tribunal in Adirel Finance Pty Ltd v Massada Nominees Pty Ltd[1]. I note, too, but do not rely upon it for my conclusion, the opinion of the Tribunal that it is "more likely that commercial buildings are office buildings"[2]. Whatever the meaning the expression might have, I do not see it as an appropriate description of the demised premises in this case as they presently stand or as they might stand when the intended works are carried out. I conclude that none of the methods of measurement in Chapters 2, 3 or 4 of the Guidelines is apposite for present purposes.

What, then, is to be made of the general description of lettable areas in Chapter 1 of the Guidelines which I have set out in [6] above? It is clear enough that the whole of the demised premises satisfies requirements (a) and (b) of this general description, for they have a surface which is durable and capable of being cleaned. It may be, too, that they may be in the future locked and secured by a permanent fence as is required by paragraph (d) although that has not yet happened. The premises would not, however, on any basis satisfy requirement (c) that there be a roof over a sufficient area. To my mind, however, the guidance provided by this general requirement is of no assistance in the present case because the quoted provision makes it clear that this general description is to be applied only when the provisions of Chapters 2, 3 or 4 are applicable. Since they are not applicable, I conclude that the Guidelines themselves cannot be of assistance in determining the present case. I must, therefore, return to the definition in s. 3(1).

This conclusion relieves me of the need to consider the further submissions put on behalf of the Landlord that the Guidelines were ineffective because the statute did not empower the Minister to make them[3] and that, in their role of defining retail premises, they had or may have the effect of affecting the jurisdiction of the court contrary to s. 85(5) of the Constitution Act. It relieves me, too, of the burden of seeking to apply to the facts of this case guidelines which appear to be directed to present user whereas the definition of retail premises is directed to present and future user of the premises.

I return, then, to the definition of retail premises in s. 3(1) which I have set out at [2] above. In considering this matter I have the benefit of the authoritative decision of the Court of Appeal in Sorbara v DJ & AJ McCallum Pty Ltd[4]. I start by identifying the nature of the retail business for which, under the terms of the lease, the premises are or are to be used. This is the washing and detailing of cars and automotive repairs and the conduct of a café. These activities comprise the retail selling of goods and the supply of retail services.

Next, is to identify the premises which are to be used wholly or predominantly for the carrying on of these commercial activities. In the present case where these activities have not yet commenced, it is necessary to predict how they might be carried on. The café will presumably be used for the convenience of patrons of the other activities or other persons. Conventionally, a café business in Melbourne is usually, but not always, carried on indoors. The proposed layout plan[5] shows that there is to be an indoors and outdoors serving area. The patrons of the café must be able to obtain access to the café area and to park their cars while they refresh themselves. These areas, too, serve the purpose of the café business, for without them the café business could not be carried on[6]. The car detailing and automotive repairs will usually, but not always, be carried on in an enclosed and lockable workshop. Again, the layout plan shows this to be the intention of the Tenant and also that these activities are to be carried out partly under an open canopy. Car washing and associated cleaning activities, likewise, will often be carried out under an open canopy as appears to be the intention here. With respect to these automotive activities, the paved area is an area which is to be used also for storing cars and moving them as well as providing access to the work areas. I conclude that, in terms of the statutory definition, most, if not all, of the demised premises, are "premises that under the terms of the lease... are to be used, wholly or predominantly for the carrying on" of the permitted commercial activities.

What then is the floor area of these premises? Dr Croft in his useful work on this topic[7] raises the interesting question as to the time as at which the question of retail premises is to be determined. He notes that this question, insofar as it concerns floor area,[8] has not been expressly dealt with in decisions of this Court and opines that the relevant time is that of the commencement of the proceeding. This is important because on 1 July 2002 when this proceeding was commenced, no part of the demised premises was being used for the permitted user. The premises were then being used only for the parking of cars. Accordingly, at the relevant time, it might be said that the floor area of the retail business to be conducted on the premises is nil. I say, "might be said" because no argument was addressed on this matter by either party. To my mind counsel were correct in so doing for the cases upon which Dr Croft relies[9] make it clear that, at least inasmuch as exclusion (a) is concerned, the enquiry is as to the then floor area of the premises which otherwise satisfied the requirements of the definition, including a requirement which includes future use. In the present case, where the whole area of the demised premises is paved or built upon, it is this area which is to be measured provided it otherwise satisfies the requirements of the definition and is the floor area of the retail business to be conducted on the demised premises.

The answer to the question what is the floor area of the premises[10] is obvious enough. Putting to one side the possibility that some part of the demised premises might be set aside in the future for some other purpose, the whole of the paved and built on area is to be seen as the floor area. This area clearly exceeds 1000m2 so that exclusion (a) must apply.

It follows from this that the demised premises in the present case are not retail premises within the meaning of the Retail Tenancies Reform Act 1998 and the lease of them is not a retail tenancies lease.

[2] Lylecash Pty Ltd v Mayfly Pty Ltd (2000) V Conv R 68,219 at 68,224.

[3] But, as to this, see, The Minister for Immigration and Ethnic Affairs v Mayer [1985] HCA 70; (1985) 157 CLR 290 at 302-3, per Mason, Deane and Dawson JJ.

[6] Sorbara v DJ & AJ McCallum Pty Ltd [1998] VSCA 71; [1999] 2 VR 1 at 16 [39], per Kenny JA.

[7] Croft, Retail Tenancies, 3rd ed, par B 2.11.8.

[8] Towercom Pty Ltd v Strathfield Group Ltd [2000] VSC 370 at [33], per O'Bryan J.

[9] Vanda W Holdings Pty Ltd v G & L Tierney Pty Ltd (1997) V Conv R 58-526, and on appeal Tierney Pty Ltd v Vanda W Holdings Pty Ltd (1997) V Conv R 54-570, per Eames J.

[10] The premises here are the same premises as those earlier mentioned in the statutory definition: Sorbara v DJ & AJ McCallum Pty Ltd [1998] VSCA 71; [1999] 2 VR 1 at 17 [41], per Kenny JA.

Retail Tenancies Reform Act 1998

At a glance

Court

Decision date

Before

Source

Judgment (28 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (1)