Plaintiffs v Defendant [2012] VSC 361 | Case summary

Supreme Court of Victoria|2012-08-23|Before: CROFT J

LANDLORD AND TENANT - Whether retail premises lease - Meaning of "retail premises" - Whether premises used as motel or serviced apartments - Whether premises used as "retailed premises" - Whether the tenant also an agent of the landlords - Whether the agency exception - Retail Tenancies Act 1986 ss 3(1) and 4_, Retail Tenancies Reform Act 1998_ ss 3(1) and 4_, Retail Leases Act 2003_ (Vic) ss 3 and 4

2 In considering the preliminary questions,[4] I have been assisted by:

(a) the parties' joint statement of agreed facts dated 30 May 2012 ("the Statement of Agreed Facts");[5]

(b) the further affidavit of Mr Michael Francis O'Sullivan sworn 16 May 2012 ("the Second O'Sullivan Affidavit"); and

3 At the hearing of the preliminary questions, the parties agreed that the Statement of Agreed Facts and the Second O'Sullivan Affidavit included all the factual background necessary for the determination of the preliminary questions.[7]

4 The premises the subject of this proceeding is situated at 113 Delaney Avenue, Bright, which are currently operated as part of an apartment/resort complex known as "The Bright Chalet" ("the TBC"). Gilandos Pty Ltd ("the Defendant") is a company incorporated under the Corporations Act 2001 (Cth) ("the Corporations Act") and has since 1988 operated the TBC.

5 The TBC comprises 28 strata units or apartments ("the Units"), some of which are owned by the Defendant and associated entities, and 23 of which are owned by third parties, including those owned by the first to eighth plaintiffs ("the Plaintiffs") ("the Plaintiffs' Units").

6 The first plaintiff, Wendy Stringer ("Stringer"), is the registered proprietor of Unit 5, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 246, and comprising 23.25 square metres ("the Stringer Unit"). Stringer entered into a lease agreement with the Defendant on 11 August 1998 ("the Stringer Lease").

7 The second plaintiff, Brendan Terrance Woodman ("Woodman"), is the registered proprietor of Unit 6, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 247, and comprising 23.25 square metres ("the Woodman Unit"). Woodman entered into a lease agreement with the Defendant on 11 August 1998 ("the Woodman Lease").

8 The third plaintiff, John Robert Bell and Gwendoline Beatrice Bell ("Bell"), is the registered proprietor of Unit 108, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 252, and comprising 20.5 square metres ("the Bell Unit"). Bell entered into a lease agreement with the Defendant on 14 October 1998 ("the Bell Lease").

9 The fourth plaintiff, Harold Edward Powell ("Powell"), is the registered proprietor of Unit 109, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 253, and comprising 20.5 square metres ("the Powell Unit"). Powell entered in a lease agreement with the Defendant on 11 August 1998 ("the Powell Lease").

10 The fifth plaintiff, NLKM Pty Ltd ("NLKM"), is a company incorporated under the Corporations Act and is the registered proprietor of Unit 111, 113 Delaney Avenue, Bright being the land described in Certificate of Title Volume 10338 Folio 255, and comprising 19.5 square metres ("the NLKM Unit"). NLKM entered into a lease agreement with the Defendant on 31 July 1998 ("the NLKM Lease").

11 The sixth plaintiff, Andrew John Peter ("Peterson"), is the registered proprietor of Unit 113, 113 Delaney Avenue, Bright, being the land described in Certificate of Title 10338 Folio 257, and comprising 19.5 square metres ("the Peterson Unit"). Peterson entered into a lease agreement with the Defendant on 28 May 1998 ("the Peterson Lease").

12 The seventh plaintiff, Dennis Michael Nassau and Peter Frank Nassau ("Nassau"), is the registered proprietor of Unit 114, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 258, and comprising 19.5 square metres ("the Nassau Unit"). Nassau entered into a lease agreement with the Defendant on 14 April 1998 ("the Nassau Lease").

13 The eight plaintiff, Rywal Pty Ltd ("Rywal"), is a company incorporated under the Corporations Act and is the registered proprietor of Unit 118, 113 Delaney Avenue, Bright, being the land described in Certificate of Title Volume 10338 Folio 262, and comprising 19.5 square metres ("the Rywal Unit"). Rywal entered in a lease agreement with the Defendant on 25 May 1998 ("the Rywal Lease").

14 For the sake of convenience, these leases are collectively referred to as "the Leases".

15 The Plaintiffs and the Defendant entered into the Leases on the following general terms:[8]

(a) The Plaintiffs lease the Plaintiffs' Units to the Defendant pursuant to the terms of the Leases (clause 1).

(b) The Plaintiffs agree to pay "owners payments" as defined in clause 4.2(2) of the Leases.

(d) The Plaintiffs agree to promptly effect all repairs to the Plaintiffs' Units of a structural nature of which they are notified by the Defendant other than repairs brought about by the act or neglect of the Defendant or its use or misuse of the Plaintiffs' Units (clause 9.5).

(e) There is provision for two Further Terms of five years each after the expiry of the initial Term of ten years (item 6 of the Schedule).

(f) The Plaintiffs agree to renew the Leases for the next of the Further Terms specified in item 6 of the Schedule if the Defendant gives them a written request for renewal not more than twelve months nor less than three months before the Leases expire (clause 14.1).

(g) The Leases provide that in the event of the Plaintiffs' Unit being sold, the sale would be subject to the rights of the Defendant under the Leases (clause 16.1).

16 Although the Leases were entered into on different dates, the parties accepted that the provisions of the Leases, more or less, mirror one another.[9] Accordingly, at the hearing, the parties, in making their submissions, made reference to the relevant provisions of the Stringer Lease only, on the basis that the Stringer Lease was the "typical" lease, and that any observations or findings with respect to the Stringer Lease would apply with respect to all the other Leases.

17 The TBC also provides various facilities for use by occupants of the Units, including a restaurant, reception area, toilets, swimming pool, tennis court, bar, ski-hire facilities, conference centre, and gardens ("the Facilities"), all of which are owned by the Defendant. Members of the public occupying the Plaintiffs' Units and the other Units are entitled to use the Facilities. During the hearing I asked the parties what constituted any reception area of the TBC. I have subsequently received a further statement of facts from each of the Plaintiffs and the Defendant. It appears from the statements that the parties disagree on a number of matters but do agree that there is a reception area, part of which is located on land owned by the Defendant and part of which is located on common property.[10] It is not necessary to make a finding in relation to matters on which the parties do not agree as these matters do not affect the determination of the preliminary questions.

18 The Defendant also leases the Common Areas (as defined in the Leases) of the TBC from Body Corporate No PS 400 799 S (as defined in the Leases), which is also a party to each of the Leases (see clause 21 of the Leases).

19 Apart from being a tenant of each of the Plaintiffs' Units under the Leases, the Defendant also:

(a) undertakes day-to-day management of the TBC and the Plaintiffs' Units;

(b) performs house-keeping services (or causes them to be performed);

(d) pays rent in respect of the Plaintiffs' Units as determined and calculated in clause 3 of the Leases.

20 In the Plaintiffs' Units, and for purposes of the Defendant making them available to members of the public, there are both owner's fixtures fittings and equipment and manager's fixtures fittings and equipment (as defined in the Leases).

21 Clause 5.1 of the Leases then contains a permitted use covenant:

The Manager must not use or allow the use of the Unit for any purpose other than as resort accommodation, hotel, motel or serviced apartments and in particular must not:

(1) carry on or allow to be carried on in the Unit any noisome, noxious or offensive activity, nor use or allow the use of the Unit for any illegal or immoral purpose;

(2) do or allow to be done in the Unit anything which causes or may cause nuisance, disturbance or damage to occupiers or owners of any adjacent premise; and

(3) without the Body Corporate's prior written approval erect or affix to the exterior of the Unit any signs or advertisements save as is reasonably necessary for the conduct of the Chalet.

The Manager shall use the Unit as a resort accommodation facility subject to the Manager first obtaining the Owner's written consent and all necessary permits, approvals and consents. The Owner's consent is hereby given."

23 The Defendant currently remains in possession of the Plaintiffs' Units.

24 On 30 May 2011, the Plaintiffs each gave notice to the Defendant that they terminated their respective Leases and demanded that the Defendant vacate each of the Plaintiffs' Units. The entitlement of the parties to possession of the Plaintiffs' Units may be affected depending on whether the Leases are "retail premises leases" for the purposes of any of the Acts, the issue to which the preliminary questions are directed.

History of the proceedings and the preliminary questions

25 These proceedings were commenced by the Plaintiffs on 6 September 2011 under Order 53 (summary proceeding for recovery of land) of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules") seeking to reclaim possession of the Plaintiffs' Units. Associate Justice Mukhtar then made orders dated 21 October 2011 that the proceeding be treated as if it had been commenced by writ and would be conducted with pleadings. At this stage, the following pleadings have been filed with the Court:

(a) an amended statement of claim dated 8 March 2012;

(d) a response to the request for particulars dated 9 March 2012; and

26 The Pleadings indicate that these proceedings raise a number of issues (including those relating to notices). However, before some of those issues can be ventilated, there is the preliminary question whether this Court has the jurisdiction to entertain those issues or whether they are within the exclusive jurisdiction of the Victorian Civil and Administrative Tribunal ("VCAT") in the event that any of the Acts apply and, consequently, the jurisdictional provisions of Part 10 - Dispute Resolution of the 2003 Act.[12] Section 89 of the 2003 Act confers on VCAT the jurisdiction to hear and determine "a retail tenancy dispute". Section 81 then defines "retail tenancy dispute" to mean:[13]

(1) In this Part, retail tenancy dispute means a dispute between a landlord and tenant-

(a) arising under or in relation to a retail premises lease to which-

(i) this Act applies or applied because of Part 3; or

(ii) the Retail Tenancies Reform Act 1998 or the Retail Tenancies Act 1986 applies or applied; or

(b) arising under a provision of the Retail Tenancies Reform Act 1998 or the Retail Tenancies Act 1986 in relation to a lease to which that Act applies or applied; or

(c) arising under a lease that provides for the occupation of retail premises in Victoria to which none of those Acts apply or applied-

despite anything to the contrary in this Act (apart from subsection (2) and section 119(2)). Note If proceedings were in progress under the Retail Tenancies Reform Act 1998 when this Act commenced, see section 119(2) (general transitional and savings).

(2) However, retail tenancy dispute does not include a dispute solely relating to the payment of rent or a dispute that is capable of being determined by a specialist retail valuer under section 34, 35 or 37 of this Act or under section 12A or 13A of the Retail Tenancies Reform Act 1998 or section 10 or 11A of the Retail Tenancies Act 1986."

The breadth of VCAT's jurisdiction was commented on by Byrne J in State of Victoria v Tymbook Pty Ltd:[14]

"[11] The scheme of the 2003 Act appears to be that the dispute resolution procedures of Part 10 have a far wider application than the rest of the Act. Accepting that section 11 limits the application of the Act generally to certain leases entered into after 1 May 2003, the wide definition of 'retail tenancy dispute' in section 81 clearly extends to disputes arising under other leases and to retail premises other than premises referred to in section 11(2) [the concluding words of section 82(1) serve to dispel any suggestion that section 11 could be read to detract from this conclusion. See also section 119(1)]. The jurisdiction of the Tribunal under section 89(1), which depends upon an application seeking the resolution of a retail tenancy dispute, is similarly extensive.

The consequences of this, having regard to section 89(4) is that, subject to the stipulated exceptions, such a dispute is not justiciable in this Court [or a tribunal other than VCAT or a person acting judicially within the meaning of the Evidence Act.].

[12] It is true that this creates a certain terminological awkwardness in the Act. For example, the undefined expressions 'retail premises lease' or 'lease of retail premises' in Part 10 may have a meaning different from those words in the rest of the Act [see also section 82]. Furthermore, the conclusion which I have preferred means that the whole of section 11 should be qualified so as not to apply to Part 10. It may be thought surprising, therefore, that the introductory qualification in section 11(2) was not located before subsection (1) and sections 1 and 2 were prefaced by 'except as provided by Part 10'. But these difficulties cannot detract from the extensive terms of section 81(1)."

It follows that if the Leases are "retail premises leases" then the VCAT jurisdiction is attracted to the exclusion of this Court save the extent that its jurisdiction is preserved under the 2003 Act.[15]

27 Accordingly, on 22 March 2012, Associate Justice Mukhtar made orders, inter alia, that permitted any of the parties to issue and serve a summons seeking a trial of a preliminary issue under Rule 47.04 of the Rules, which the Plaintiffs did on 14 April 2012. Subsequently, on 25 June 2012, the Plaintiffs filed an amended summons ("the Amended Summons") pursuant to the Orders of Associate Justice Mukhtar dated 31 May 2012. The Amended Summons set out a number of questions for determination ("the preliminary questions"), namely:

"1. Are each of the leases referred to in paragraphs 12, 13, 15, 16, 18, 21, 22 and 25 of the Statement of Claim as admitted in paragraphs 12, 13, 14, 15, 16, 17, 18, 20, 21, 22, 24 and 25 of the Defence in respect of the respective Plaintiffs' units in the resort apartment complex situate [sic] at 113 Delaney Avenue, Bright ("TBC") described in paragraph 3(e) of the Defence ("the Plaintiffs' Units"), leases to which the provisions of the Retail Tenancies Act 1986 (Vic) ("the RT Act"), the Retail Tenancies Reform Act 1998 (Vic) "the RTR Act") and/or the Retail Leases Act 2003 ("the RL Act") apply?

2. Is the Defendant in performing the activities as alleged in paragraph 3(f) of the Defence using the Plaintiffs' Units, for the retail provision of services to members of the public as contemplated in the RT Act, the RTR Act and/or the RL Act?

3. Is the dispute the subject of this proceeding in respect of the Defendant's tenancy of each of the Plaintiffs' Units a retail tenancy dispute and to be determined by the Victorian Civil and Administrative Tribunal as alleged in paragraphs 34(b), 36(b), 38(b), 40(b), 42(b), 44(b), 46(b) and 49(b) of the Defence."

28 The preliminary questions contained in the Amended Summons clearly overlap with one another. Ultimately, the critical question is whether the Leases are "retail premises leases" so as to fall under the scope of the 1986 Act, 1998 Act or the 2003 Act. An affirmative answer means that this Court lacks the jurisdiction to hear critical issues raised in the Pleadings as they would be within the exclusive jurisdiction of VCAT. It has, however, long been held in the present context that the Court does have jurisdiction to determine whether the Acts apply.[16]

29 Given that the Leases were entered into on various different dates, I asked the parties whether it was necessary for me to determine which of the Acts applied to the various Leases for the purposes of determining the preliminary questions.

30 The parties shared the common view that the relevant provisions contained in the Acts, and which affect the preliminary questions, are effectively the same.[17] It therefore follows that it is unnecessary for me to consider and make a finding as to which of the Acts apply to which of the Leases, and nor is it necessary to determine the consequences of a finding that the Leases are subject to the Acts.

31 The 1986 Act and the 1998 Act both define "retail premises" to mean:[18]

"retail premises means any premises that under the terms of the lease relating to them are used, or 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 provisions of services, but does not include

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

32 The 2003 Act contains a similar definition of "retail premises":[19]

(1) In this Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for-

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

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

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

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

33 In light of these provisions, the Plaintiffs submitted that the Leases cannot be governed by the Acts for two reasons. First, the use of the Plaintiffs' Units as "serviced apartments" cannot fall under the definition of "retail premises". Secondly, the Defendant has used and is using the Plaintiffs' Units wholly or predominantly for the purposes of carrying on a business as an agent of the Plaintiffs in respect to each of the Plaintiffs' Units.

34 In reply, the Defendant argued that the Plaintiffs' Units have been used consistently as "retail premises" as defined in these provisions and that there is no agency relationship between the Defendant and the Plaintiffs. There is no suggestion of any employment relationship.

Have the Plaintiffs' Units been used as "retail premises"

35 Item 5 of the Schedule to the Leases[20] provides for the use of the Plaintiffs' Units as "Serviced Apartment".

36 Clause 5.1 of the Leases does, however, appear to widen the scope of the permitted use of the Plaintiffs' Units:

"The Manager [the Defendant] must not use or allow the use of Unit for any purpose other than as resort accommodation, hotel, motel or serviced apartments..."

"The Manager shall use the Unit as a resort accommodation facility subject to the Manager first obtaining the Owner's [the Plaintiffs'] written consent and all necessary permits approvals and consents. The Owner's consent is hereby given." (emphasis added)

As has been observed previously,[21] the "Use of Unit" provisions contained in Item 5 of the Schedule of the Leases were possibly intended to contain a reference to clause 5.1 of the Leases but, nevertheless, contain an erroneous reference to clause 4.1; and, in any event, clause 5.1 makes no reference to Item 5. Having regard to these drafting difficulties and potential inconsistency between these provisions I am of the view that the reasonable construction which harmonises these provisions is to read the permitted use provisions of the Leases as providing for use as a "serviced apartment" as part of a "resort accommodation facility".[22]

37 Although the Plaintiffs acknowledged that there is some tension between Item 5 of the Schedule and clause 5.1,[23] the Plaintiffs contended that the Plaintiffs' Units have, in fact, been used as, which is not within the meaning of the definition of "retail premises" for the serviced apartments purposes of the Acts.[24] Conversely, the Defendant contended that the permitted use as well as the actual use of the Plaintiffs' Units demonstrate that the units are used to provide retail services.[25]

38 Accordingly, two points need to be addressed in relation to this first point of dispute. First, how have the Plaintiffs' Units been used? Secondly, have the Plaintiffs' Units been used within the meaning of the definition "retail premises" for the purposes of the Acts?

39 The parties did not refer specifically to the discussion in a number of cases of the effect of the words "under the terms of the lease relating to the premises used, or are to be used..." in the provisions of the Acts defining "retail premises".[26] Although potential inconsistency between clause 5.1 and Item 5 of the Schedule to the Leases might be said to produce a divergence between the ambit of actual use and permitted use, I am of the opinion that it does not in any relevant sense, on the basis of my view as to the proper construction of these provisions. On this basis and given it is common ground that the Units are used as serviced apartments it is not necessary to consider the effect of this part of the "retail premises" definition further for present purposes.

40 Although it is common ground that the Plaintiffs' Units are used as "serviced apartments" as this expression is not a form of art it is necessary to give the expression meaning in the present circumstances by reference to actual usage according to the agreed facts and the provisions of the Leases.

41 The Statement of Agreed Facts and the Second O'Sullivan Affidavit are relevant to actual use of the Plaintiffs' Units in the following respects:

(a) The Plaintiffs' Units form part of a resort apartment complex known as the TBC.[27]

(b) The TBC was constructed in accordance with Planning Permit No 86/181 of the Shire of Bright[28] pursuant to the Planning Scheme 1983, which was issued for the purpose of a ski lodge.[29]

(c) The TBC is situated in an area zoned as Residential 1 Zone and requires a Planning Permit as the TBC has been used for "Accommodation (other than Dependent person's unit, Dwelling and Residential)".[30]

(d) The TBC includes facilities such as a restaurant, reception area, toilets, swimming pool, tennis court, bar, ski-hire facilities, conference centre, and gardens which are owned by the Defendant,[31] which members of the public staying at the TBC are entitled to use.[32]

(e) The Defendant has held a copy of Certificate of Registration Prescribed Accommodation issued under section 74 of the Public Health and Wellbeing Act 2008 (or its predecessor). The current Certificate of Registration Prescribe Accommodation (No 0290/02) describes the TBC as "Prescribed Accommodation - Hotel or Motel".[33]

(f) At all material times, the Defendant held a Certificate of Registration issued under the Food Act 1984, and the current Certificate of Registration lists the TBC as "Restaurant (motel) - Class 2".[34] In this regard, it is also noted that the Plaintiffs' Units do not have any kitchen facilities as would be required for residential premises.[35]

(g) The Defendant was granted a liquor licence, number 33120582, issued under the Liquor Control Reform Act 1998 (or its predecessor) in respect of the TBC, and the area is defined to incorporate all Units, including the Plaintiffs' Units, within the licensed area.[36]

(h) Members of the public do not know who the owners are when occupying the Plaintiffs' Units.[37]

(i) From, at least, 2007 to January 2012, no member of the public has stayed at the Plaintiffs' Units on a permanent or semi-permanent basis, as the Defendant' records indicate that members of the public have only occupied the Plaintiffs' Units for a day or a few days at a time.[38]

(j) Until 2007, the Defendant conducted the business of the TBC under a Star rating from the Royal Automobile Club of Victoria (RACV). The TBC had been assessed on the basis of the Units and the TBC building as a whole, noting that the Star rating could not apply to residential properties.[39]

42 Having regard to these matters it is, in my view, clear as a matter of fact that the Plaintiffs' Units form part of a resort complex (which is consistent with clause of 5.1 of the Leases) and that they are used for short-term holiday accommodation in a manner difficult to distinguish in any meaningful way from the manner in which motel and hotel rooms are used. I turn now to consider the nature of motel and hotel accommodation in the context of my reasons for this view.

43 Although the term or description "serviced apartment" is not a term of art and does not appear from dictionaries to have any settled meaning in ordinary English usage, the meaning of "motel" and "hotel" is more settled. Thus the Macquarie Dictionary (4th Edition) (the "Macquarie") and the Oxford English Dictionary (2nd Edition) (the "OED") contain some helpful definitions.[40] The Macquarie defines a "hotel" to mean "a building in which accommodation and food, and sometimes other facilities, are available" and "motel" to mean "a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles". Similarly, the OED similarly defines a "hotel" to mean a "a house for the entertainment of strangers and travellers, an inn; esp. one that is, or claims to be, of a superior kind" and "motel" to mean "a hotel catering primarily for motorists; spec. one comprising self-contained accommodation with adjacent parking space."

44 I also note that the Alpine Planning Scheme defines "hotel", "residential hotel" and "motel" to mean:[41]

"Hotel - Land used to sell liquor for consumption on and off the premises. It may include accommodation, food for consumption on the premises, entertainment, dancing, amusement machines, and gambling.

Residential Hotel - Land used to provide accommodation in serviced rooms for persons away from their normal place of residence. If it has at least 20 bedrooms, it may include the sale of liquor for consumption on, or off, the premises, function or conference rooms, entertainment, dancing, amusement machines, and gambling.

Motel - Land used to provide accommodation in serviced rooms for persons away from their normal place of residence, and where provision is made for parking guests' vehicles convenient to the rooms."

45 Some further guidance is also provided by the observations of Gillard J in Holidaywise Koala Pty Ltd v Queenslodge Pty Ltd:[42]

"The word "motel" is a word which apparently originated in the United States of America in relation to accommodating motor car travellers. In Webster's Collegiate Dictionary (1971 ed.) the word is defined as "a building or group of buildings used as a hotel in which the rooms are directly accessible from an outdoor parking area". This last definition rather accords with one's own experience in travelling in this State. The further characteristic of a motel, that of being a structure by the wayside, has disappeared with the passage of time. Today, there are many motels built in towns and cities in this State which are not by the wayside. It might be, therefore, said that the features of a "motel" are twofold. First, accommodation is provided for motorists in units or suites of a hotel character. Accordingly, the neologism "motel", combining the word "motor" with the word "hotel", was intended to mean new structures for motorists as distinct from existing hotels. The second feature is that not only is the motorist accommodated but provision is also made for the motorist to park his vehicle conveniently close to his suite."

46 Additionally, one could hardly resist making reference to the description of a "typical" Victorian motel by Nathan J in Robert v Besford:[43]

"The motel is a typical Victorian one, a characterless structure consisting of three parts standing in a bland garden setting. First are the accommodation units, reception and restaurant areas. These parts of the structure are surrounded by four walls. They have floors and roofs. The second part are passageways which link the accommodation units to the service areas. They are roofed and have a permanent floor, but are open to the weather at least on one side. Included in this area is an open porchway into which vehicles are driven so as to gain access to the reception area. Cars must pass this porchway to get to the accommodation units. The porchway is also roofed and has a permanent floor but is open to the weather on two sides. The third area are the car-parking spaces specifically assigned to the accommodation units and the driveways which link them together. These areas are permanently paved but open to the weather."

47 The term or description "serviced apartments" seems to be a relatively modern one; which probably accounts for the lack of assistance from dictionaries. Thus it cannot be assumed that this term or description has any settled meaning. Consequently it is only a term or description that derives meaning - other than in a very general sense - from the particular circumstances in which it is used; and, in most cases with respect to particular premises. This is, in my view, clear from the cases in which the term or description has been considered.

48 In Oaks Hotels & Resorts (NSW) (No 2) Pty Ltd v Council of the City of Sydney,[44] Commissioner Murrell of the Land and Environment Court of New South Wales ("the NSWLEC") took the view, in determining whether development of serviced apartments would conflict with the amenity for residential apartments that:[45]

"serviced apartments are not a form of housing and do not provide for greater housing choice, as serviced apartments generally provide short-term accommodation, not regarded as permanent residential accommodation."

49 In Presrod Pty Limited v Wollongong City Council[46] Commissioner Brown of the NSWLEC noted the definition contained in the Wollongong Local Environmental Plan 2009:[47]

"Serviced apartment means a building or part of a building providing self-contained tourist and visitor accommodation that is regularly serviced or cleaned by the owner or manager of the building or part of the building or the owner's or manager's agents."

50 In the case of Bowler v Hilda Pty Ltd (in liq)[48] the Full Court of the Federal Court was asked to consider between the difference between "serviced apartments" and "residential apartments". Drummond J said:[49]

"In my opinion, both involve use for habitation, but use for residential units comprehends "a significant degree of permanency of habitation or occupancy" while use for "serviced apartments" connotes a significantly lesser degree of permanency of habitation or occupancy. Compare North Sydney Municipal Council v Sydney Serviced Apartments Pty Ltd (1990) 21 NSWLR 532 ; 71 LGRA 432 in which the use of units as serviced apartments was held to be in breach of the development consent permitting the building to be used as a residential flat building."

"... it seems that the case has been previously conducted upon the basis that the two uses (residential units and serviced apartments) are capable of precise definition and are mutually exclusive. The approach taken by the cross-appellants (and apparently accepted by the cross-respondents) appears at para 4.24 of the cross-appellants' written submissions as follows:

"The Leader companies submit that, in the units plan, a residential unit is one which the owner may occupy and live in or one which the owner may directly lease out to a tenant for terms which might vary but which are longer than a night, a few days or even a week or two. A serviced apartment, on the other hand, is a unit which is habitually hired out for short periods (a day, a few days, a week or two) and which is serviced regularly by a manager in a similar fashion to a hotel."

51 Finally, some assistance is provided by the decision of St Kilda City Council v Perplat Investments Pty Ltd[51] where the Full Court (Young CJ, Crockett and Southwell JJ) considered an appeal from a decision of the Administrative Appeals Tribunal ("the AAT") with respect to a planning permit. The Court ultimately decided that it was open to the AAT to find, based on the evidence before it, that the proposed building in question would be used as serviced apartments rather than a motel. The Court summarised the AAT's findings as follows:[52]

"In concluding that the proposed use was for "Serviced apartments" the Tribunal appears to have relied upon the evidence of a Mr TW. Biles who read a report to the Tribunal supporting the grant of a permit. But apparently Mr Biles also gave viva voce evidence to the Tribunal because the following passage appears in the Tribunal's Reasons for Decision: "In his evidence Mr Biles explained the concept of "Serviced Apartments" which was a relatively new one in providing short term accommodation. He pointed to the developments carried out by the 'Oakford' Group as providing examples of such a concept. Mr Biles went on to explain that the type of accommodation was in demand in order to provide accommodation particularly for the corporate sector for employees who were required to visit Melbourne from the country, interstate or overseas and also in cases of marriage break down to provide temporary accommodation during that period. He gave evidence that the users of such accommodation did not usually drive cars but relied on taxis and other forms of transport. (per Young CJ)

The essential distinction which it appears that the tribunal considered set the two uses apart was that service apartments catered for visitors not usually travelling by cars (cf. the evidence of one Biles called for the respondent) whereas motel $ provided accommodation for persons travelling by car (see definition).

With respect to this question the submission of the appellant was that the finding by the tribunal that the proposal was not a motel was not reasonably open on the evidence. It was said that all the features of the proposal had the hallmarks of a motel. These were a reception area on the ground floor, a lift lobby on each of the first, second and third floors, the great majority of rooms having a bathroom and toilet as their only services and a cafe as part of the overall complex. I consider the submission has considerable cogency. However, after some hesitation I have reached the conclusion that on the evidence it was open to the tribunal to reach the conclusion that it did. The evidence, if accepted by the tribunal as it was, enabled it to reach the conclusion that the proposed use was for the purpose of serviced apartments by reason of the distinction to which I have referred.

The witness Biles is a town planning consultant. The material evidence given by him might, at least as to part, be considered to be opinion evidence. However, no objection was taken to its reception and, once admitted, it could be acted upon. This the tribunal chose to do. Indeed, the evidence appears not to have been challenged. In substance, what the witness said was that the concept of serviced apartments was comparatively new. It involved the provision of short term accommodation. The demand for which it catered came from the Corporate sector for employees of companies required to travel on business and who were from out of Melbourne. It also came from partners to marriages that had broken down so creating a need for temporary accommodation during the period of domestic re-adjustment. The users of such accommodation the witness said - as already indicated - did not usually drive cars but relied on taxis or other forms of transport. (per Crockett J)"

52 Thus these cases indicate that there may be very fine distinctions between use of premises as a motel on the one hand or as a serviced apartment or serviced apartment complex on the other hand. The observations by the various courts and tribunals with respect to motels and serviced apartments indicate that the characteristics of both types of premises can overlap, thus adding to difficulties in characterising the mode of usage. A clear example is to be found in St Kilda City Council v Perplat Investments Pty Ltd[53] where Young CJ observed that, while it was open to the Tribunal to make a finding of fact based on the evidence before it that the proposed building would be used as serviced apartments, in his view, the proposed buildings looked more to be a motel.

53 In any event it is not necessary for present purposes to decide whether the TBC is a motel or whether the Plaintiffs' Units are being used as motel units. Rather, the purpose of considering the meaning of these terms or descriptions, "motel" and "serviced apartments", is to provide some content and meaning to the use of the latter term or description in the present circumstances by analogy and to consider whether there is any meaningful and critical distinction between the use of the Plaintiffs' Units and the generally accepted use of motel units, a use which the authorities have accepted as "retail" for the purposes of the Acts.[54] In my view, the agreed facts indicate that, with reference to the dictionary definitions of a motel and the observations by Gillard J in Holidaywise Koala Pty Ltd v Queenslodge Pty Ltd[55] and Nathan J in Robert v Besford,[56] particularly, no meaningful critical distinction can be drawn.[57] In particular I note that the TBC and the Plaintiffs' Units:

(a) have been used for primarily short-term accommodation;

(b) are located by the "wayside" (that is on Delaney Avenue which forms part of the Great Alpine Road), and are generally accessible to users who have reached the TBC by way of automobile transportation; and

54 The Plaintiffs also contended that the TBC is not the subject of a conventional motel lease whereby the entire land is demised pursuant to the terms of the lease.[58] Instead, the Units within the TBC are variously and separately owned by the Defendant and other third parties (including the Plaintiffs).[59] Nevertheless, I do not think that this detracts from the fact that the TBC still retains the critical characteristics of a motel or a hotel, of which the Plaintiffs' Units form part. Indeed, the Leases clearly contemplated that the Plaintiffs' Units would form part of the TBC. Clause 22(a) of the Leases provides:

"Subject to these provisions, the Manager shall be permitted to:

(a) conduct the business of the operation of the Bright Chalet from the Unit and common property including all ancillary functions, and the operation of a restaurant, bar and entertainment amenities."

55 Moreover, the Defendant submitted that members of the public who seek accommodation at the TBC would be unaware of the identity of the owner of any particular Units.[60] Implied from the Defendant's submissions and the Second O'Sullivan Affidavit is that if they ever turned their mind to ownership of the Units they would, it seems, most likely assume ownership by the Defendant or some other entity. Thus, for a user of the TBC, the business would appear to be a motel or hotel, in a resort type complex. Further, the cases do not indicate that it is critical to the characterisation of premises as a motel that it be operated pursuant to a "conventional" motel lease (i.e. where the entire land is demised pursuant to a single lease). Rather, the cases approach the characterisation on the basis of the appearance of the business to the potential consumer, the public, and in terms of services and facilities provided. Naturally the business structures underlying a motel, or a hotel for that matter, may differ from one motel or hotel to another, and I do not think the fact that premises may be separately owned, unit by unit, or on some other division would affect the characterisation of premises as a motel or a hotel if that would be the characterisation with "simple" ownership. Thus in the present circumstances, separate ownership of the Plaintiffs' Units is not, in my view, a decisive factor.

Have the Plaintiffs' Units been used consistently with the definition of "retail premises"?

56 The expression "retail premises" has been extensively considered.[61] In 536 Swanston Street Pty Ltd v Habrut Pty Ltd,[62] Kaye J said, as to the meaning of "retail":

"I have been referred to several definitions by authorities of what is described as retail shop and retail trade. Perhaps the most succinct statement from which assistance is to be derived is from that made by Viscount Dunedin in his speech in Turpin v Middlesbrough Assessment Committee and Kaye & Eyre Brothers Ltd [1931] AC 451 at 474. His Lordship then said, referring to buildings, that they were buildings to which the public can resort for the purpose of having particular wants supplied and services rendered to them. It is, in my view, clear that the demised premises fall within that description of being available to members of the public for the purposes of having their food and drink requirements supplied and services of discotheque entertainment provided to them. Accordingly, in my view, the demised premises are retail premises within the meaning of the Act."

57 In Wellington v Norwich Union Life Insurance Society Limited,[63] with respect to retailing, Nathan J emphasised the significance of the "ultimate consumer" with respect to retailing:[64]

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

58 The "ultimate consumer" test as the touchstone of retailing, whether of goods or services, has also been emphasised in many other cases in a variety of circumstances.[65]

59 There are also a number of cases in which consideration has been given to the application of the "retail premises" definition as it appears in one or other of the Acts (or corresponding legislation) to hotel premises. In the present context these cases illustrate and emphasise that the approach of the courts has been to characterise the provision of short-term accommodation to the public as the retail provision of services.

60 In Sharp v O'Driscoll[66] Franklin J of the Full Court of the West Australian Supreme Court considered the corresponding provisions in the West Australian legislation:[67]

"Para 7 of the schedule to the lease defines the business to be carried on the demised premises as that of "licensed hotel". Cl 5 of the lease requires that the premises be used only for the purpose of carrying on that business. It is the nature of that business which identifies, in the words of Nathan J in Robert v Besford [1991] 1 VR 600 (quoted by the learned trial Judge and Ipp J in Monaco), "the retail services for which the premises are dedicated". By reason of the provisions of the Liquor Licensing Act (s 41 and 98), those retail services necessarily include the sale of goods in the form of liquor and meals by retail. ... It follows, in my view, that the hotel premises are used, in the words of the statutory definition of "retail shop", "wholly or predominantly for the carrying on of a business involving the sale of goods by retail" and so constitute a retail shop for the purposes of the Act." (emphasis added)

61 In Gillett v Burke[68] Tadgell J sitting in the Appeal Division, said:[69]

"It is common ground that the hotel constitutes "retail premises" within the meaning of the [1986] Act..."

62 Similarly in Lylecash Pty Ltd & Ors v Mayfly Pty Ltd[70] Deputy President Macnamara of VCAT commented, without demur that:[71]

"It is common ground in a general sense that the Hotel Nicholas does constitute retail premises for the purposes of both definitions [of the 1986 Act and the 1998 Act]."

63 More relevantly, with respect to motels, is the decision of Sorbara v D J and A J McCallum Pty Ltd[72] where Ormiston JA commented, again without demur, that:[73]

"It was common ground, I think, that the carrying on of the Paruna Motel as it stood (especially in view of the terms of the lease) constituted the carrying on of a retail premises falling within the words of inclusion in the definition."

64 For the sake of completeness I observe that the Retail Leases (Amendment) Act 2005 amended the 2003 Act to include the words "not including any area intended for use as a residence" in the provisions defining the meaning of "retail premises". In my view, the expression residential accommodation connotes accommodation of this type which is occupied with a degree of permanence. I observe that, consistent with this view, the Full Federal Court of Australia said, in Marana Holdings Pty Ltd v Commissioner of Taxation[74] ("Marana Holdings") that:[75]

"It may be that the expression "residential accommodation" is sometimes used to describe short-term accommodation in an hotel or a motel. We are not sure that any such usage is as common in Australia as the Court of Appeal in Owen v Elliott [(Inspector of Taxes) [1990] 1 Ch 786] considered it to be in England. We would have thought that such accommodation is more often described as "temporary accommodation", "holiday accommodation" or perhaps as "hotel accommodation" or "motel accommodation"."

Although Marana Holdings was not a retail leases case this statement is, in my view, one of general application. In the present case the agreed facts are that the Plaintiffs' Units have been used as only temporary accommodation by its occupants,[76] so no issue arises with respect to the possibility of residential use.

65 It is clear from the Statement of Agreed Facts that the Plaintiffs' Units were available for occupation by members of the public, ultimate consumers for fee or reward (being fees paid for accommodation).[77] The Plaintiffs' Units were, in my view, 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. There was no evidence as to the precise nature of the goods and services provided by the Defendant apart from accommodation. I only note that the parties agree that the Defendant operates the TBC business which provides for the Facilities. Motels, hotels or resort complexes, generally speaking, provide retail services for fee or reward, including the hiring out of the rooms. They may also sell food, liquor and other beverages, by retail, at any restaurant faculty provided.[78] In any event, the hiring out of rooms or units for fee or reward to members of the public clearly constitutes the provision of retail services.[79] Indeed, I note that in Robert v Besford,[80] Nathan J treated motels as providing "retail services".[81]

66 This position is, in my opinion, reinforced by the decision of Ashley J (as he then was) in FP Shine (Vic) Pty Ltd v Gothic Lodge Pty Ltd[82] ("FP Shine") where a caravan park was held to be retail premises for the purposes of the 1986 Act.[83] In reviewing some of the then recent authorities, Ashley J said:[84]

"In 536 Swanston Street, Kaye J had to consider a lease of premises used as a restaurant, cabaret and discotheque. Members of the public could enter the premises upon payment of an admission fee. Having paid that fee, any such person could enjoy music and entertainment provided and could use the facilities for dancing and so on. In addition, food and drink could be purchased.

His Honour held that: (1) the premises were used wholly or predominantly for carrying on a business - that is, the business of provision of entertainment; (2) the business included both sale of goods (that is, sale of food and drink) and provision of services (that is, the services of the discotheque); and (3) that the provision of goods and services were properly characterised as "retail".

In my respectful opinion his Honour's conclusions were correct and may be applied to the facts now under consideration. In the present situation the business involving the retail provision of services is the provision of serviced caravan sites with necessary ancillaries of kiosk, amenities block and recreation room. It has a retail characteristic, being provision of services to members of the public wishing to avail themselves of the services in return for payment of money. It is no less retail provision of services because they are provided by way of site hire. No doubt, by analogy, the admission to the discotheque in 536 Swanston Street was only for some limited period.

536 Swanston Street is, in my opinion, the clearest guide to the resolution of the present issue. But I should briefly refer to other authorities cited in this context. In Hall v Joyworth Pty Ltd [(1993) V ConvR 54-461], it was common ground that a caravan park and ancillary milk bar were being used wholly or predominantly for the carrying out of a business involving the sale or hire of goods or the retail provision of services. But it was contended for the lessor that the Act did not apply at all to an entity such as a caravan park; or, if it did, that the "floor area" was the whole subject matter of the lease. It was, then, not in issue that the definition of "retail premises" could literally apply. But it was contended that the definition did not fit the situation because a (caravan) park is altogether different in nature from premises having a "floor area" - which implies that the premises are a building or some such. His Honour rejected this submission. He said this, at 65,405:

"It is obvious that the Act is indeed concerned with buildings containing retail premises and perhaps primarily so concerned. Nor is that surprising because they doubtless comprise by far the most common case of retail premises. But I find there is nothing in the Act which serves to exclude the caravan park, the used car yard, the nursery and the like. All of these may be conducted in the main in an area which is open to the elements, but nothing in the Act, either expressly or by implication, seems to me to exclude them from the ambit of the Act altogether. As defined, 'retail premises' means 'any premises that under the terms of the lease relating to them are used or to be used' wholly or predominantly for the purposes specified and, if this stood alone, I cannot see any way in which it might be restricted to mean only premises which are either wholly or substantially within buildings. In context, the word 'premises' is used in its conveyancing sense to mean the subject matter of the demise."

FP Shine was one of the series of "floor area" cases which addressed the meaning of the 1000 square metres floor area exception to the "retail premises" definition under the 1986 Act and needs to be viewed from this perspective. Consequently issues arise in these cases as to which area or areas were relevant with respect to the sale or hire of goods by retail or the retail provision of services, hence the reference to ancillary facilities in FP Shine. In the present circumstances this issue does not arise as, in my opinion, the Units themselves are being used for the provision of services by retail. The fact that other areas of the TBC are also available to guests staying in the Units and goods or services by retail may be provided to those guests in those other areas does not affect this position.

67 Having found that no meaningful or significant distinction can be drawn between the TBC and a "motel" in the sense that term is understood, both as a matter of ordinary English usage and in the cases considered, it follows that the TBC is "retail premises" for the purposes of the Acts. Consequently, it follows that each of the Leases are governed by either the 1986 Act, the 1998 Act or the 2003 Act.

68 I should, however, sound a note of caution in relation to this finding by emphasising that whether or not premises described as "serviced apartments" is to be characterised as "retail premises" depends upon the particular circumstances, including the nature of the premises, the manner of in which occupancy is provided and the nature of that occupancy.[85] As I have said, the term or description, "serviced apartments", is not a term of art. Rather, it is a term or description of premises which connotes a range of possibilities. At one end of the range one would find premises managed and occupied in a manner indistinguishable from a motel or hotel and at the other end premises indistinguishable from long term residential accommodation, separately let but with the attribute of being serviced. In the former case it would be expected that the Acts would apply on the basis that the premises are "retail premises" and in the latter case they would not, any more than they would to any block of residential units. In between there are a range of possibilities each of which may have different consequences in terms of the application of the Acts.

69 The Plaintiffs also contended, in the alternative, that the Defendant, acting in its capacity as the "Manager", has been acting as agent for the Plaintiffs thereby attracting the "agency" exception to the "retail premises" definition provisions under the Acts.[8]

70 The "employee or agency" exception is contained in subsection 4(2)(b) of the 2003 Act in the following terms:

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

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

Subsections 3(1)(c) of the 1986 Act and 1998 Act similar provide that:

""retail premises means any premises that under the terms of the lease relating to them are used, or 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 provisions of services, but does not include

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

71 The employee or agency is discussed in commentary on the legislation:[87]

"The elements of this exception are that the premises are used 'wholly or predominantly' for the carrying on of the relevant business, that the business be carried on by the tenant and, finally, that it be carried on by the tenant on behalf of the landlord as the landlord's employee or agent. The nature and purpose of this exemption seems reasonably clear and to indicate that it was not intended by parliament that the Act should impose its regulatory regime in circumstances where the landlord and tenant relationship was merely incidental to another legal relationship between the parties, namely that of employer and employee or principal and agent. Issues also arise as to the time at which the existence or otherwise of an employee or agency relationship is to be determined. It is, of course, a question of mixed fact and law as to whether or not either of these relationships does exist at a particular time: see Retail Tenancies Award No 17 - Vanda W Holdings Pty Ltd v G & L Tierney Pty Ltd (1997) V ConvR 58-526; and on appeal in Tierney Pty Ltd v Vanda W Holdings Pty Ltd (1997) V ConvR 54-570; BC9705005 (per Eames J)."

72 The exception applies where the tenant is an "employee or agent" of the landlord. It is not entirely clear whether the Acts are drawing a distinction between the words "employee" and "agent". In this regard, I refer to the following commentary:[88]

"Although on occasion judges refer to employees as being agents [see, for example, Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1299] per Gillard J] - and indeed United States law treats employment as a class of agency - there is no identity in Australian law between agency and employment, just as there is arguably no identity between employment and fiduciary duties. Yet in each case there is an overlap. An employee may or may not be an agent of his or her employer. An employee may or may not owe fiduciary duties, and even those that do may not necessarily be agents, although there is likely to be some correlation so far as the latter is concerned..." (citations omitted)

73 Whilst the use of the disjunctive, "or",[89] would generally be taken as creating a distinction with respect to an employee on the one hand and an agent on the other, this is not an issue that I need to consider further in the present circumstances. The Plaintiffs submitted that the Defendant was and is an agent of the Plaintiffs;[90] there was no suggestion from the Plaintiffs' written and oral submissions that the Defendant has been an employee of the Plaintiffs.

74 It is clear that an agency relationship can arise in a number of ways, including:[91]

"(1) the express or implied agreement (whether contractual or otherwise) of principal and agent whereby the agent consents so to act;

(2) subsequent ratification by the principal of the agent's acts done on his or her behalf;

(3) operation of law, as in the case of agency by necessity, or pursuant to statute; or

(4) estoppel under the doctrine of apparent or ostensible authority."

75 Generally speaking, there are two key elements to an agency relationship. First, there must be consent of both principal and agent. This element demonstrates that the agency relationship can only be created if the principal intended that the agent act for him or for her with the agent intending to accept such authority.[92] In determining whether there is consent (or assent, as it is sometimes put), one must look to what the parties said and did at the time the agency relationship was purportedly created.[93] However, the Court is also permitted to look at the subsequent conduct to establish the existence of the agency.[94] Of course, it is accepted that there can be instances of implied agency.[95] The second element is one of authority; that is the authority given to the agent to act on the principal's behalf.[96] In considering this authority, it is useful to ask for whose benefit or in whose interest it was intended that conduct should be done.[97]

76 My understanding of the Plaintiffs' submissions is that significance should be attached to the fact that the Defendant is described under the Leases as the "Manager" and receives a "Management Fee".[98] The Plaintiffs also referred to and sought to attach significance to Recital D of the Leases which provides that "[t]he Manager has agreed to manage the Bright Chalet and lease Units in the plan of subdivision from the Owners, an the Owner has agreed to grant the lease to the Manager of the Unit on the terms and conditions which follow."[99] The Plaintiffs contended that the Defendant is, at best, a management or service company,[100] as the tasks undertaken by the Defendant are "not the hallmarks of a retail premises lease" and "are the indicia of at best a management or service company in which such managerial tasks or services are performed by [the Defendant] on behalf of each of the Plaintiffs".[101]

77 The Plaintiffs also argued that the rent regime under the Leases indicated an agency relationship. The Plaintiffs contended that the Leases are uniquely drafted documents in the sense that the rent regime contains a "complex formula" which makes it a distinguishing characteristic from a conventional retail lease.[102] The Plaintiffs highlighted the operation of clause 3 of the Leases, which is helpfully set out in full:

The Manager shall pay the rent to the Managing Agent or if a Managing Agent is not appointed, then to the Owner, without demand or deduction.

The rent shall be comprised of the Percentage Rent and the Shared Rent.

(a) Percentage Rent: For the first three years of the term from the Commencement Date (but not thereafter), the Manager shall pay rent (the Percentage Rent) equal to 7% percentum per annum of the purchase price of the Unit nominated in Item 9 of the Schedule. The Percentage Rent shall be paid to the owner monthly in advance;

(b) Shared Rent: During the term, from the Commencement Date, the Manager shall pay rent (the Shared Rent) equal to a proportion of the net income, which the lot (unit) entitlement for the unit, bears to the total lot (unit) entitlement for the Plan of Sub-Division. The Shared Rent shall be computed by the Manager and within 30 days after the expiration of each quarter paid to the owner quarterly in arrears.

In computing and paying the Shared Rent payable to the Owner:

(i) During the first three years of Term of the Percentage Rent paid to the Owner as Shared Rent;

(ii) The Shared Rent paid shall be deemed a provisional payment pending a reconciliation undertaken by the Manager within 60 days of the expiration of the 12 month period to the 30th day of June in each year of the Term (or in year 1 any lesser period), when (so soon thereafter as is practicable) the actual net income for the period shall be determined by the Manager and adjustments made to or in favour of the party entitled to or from the next rental payment due thereafter (or if the quantum of the adjustment exceeds the rental payment, then from such of each next consecutive payments until the adjustment is effected).

(iii) In computing the net income the Manager shall deduct from the income and pay or cause to be paid to it, the housekeeping fee, the management fee, all approved expenses for payment (or reimbursement) as the case may be, including electricity, gas, insurance, costs or expenses and other deductions authorised by the body corporate, payment to the maintenance fund of the maintenance fee, the Owner's rates and any land tax payable by the Owner for the unit on a single holding basis (if applicable).

(iv) The Manager may direct the Managing Agent to make such of the above deductions and effect payments as the Manager requests.

(v) The housekeeping fee shall be deducted from each receipt for accommodation and paid to the Manager, save that the Manager may permit the Managing Agent to accumulate the housekeeping fee and pay the same to it monthly or as the Manager requests.

(vi) The Management Fee shall be deducted from each receipt for accommodation and paid to the Manager, or the Manager may permit the Managing Agent to accumulate the Management Fee and pay the same to it monthly or as the Manager requests.

(vii) The Maintenance Fund Provision shall be received by the Manager, or if the Manager requires, then by the Managing Agent on behalf of the Owners and paid to a Maintenance Fund Account from which the Manager or Managing Agent (as the case may be) shall pay such maintenance as the Manager from time to time deems necessary for the units or the Chalet to discharge those obligations for upkeep as are the responsibility of the Owner or Owners of the Units. Payment to the Maintenance Fund Account shall be deemed to be a levy of the Body Corporate, and accumulated and paid in accordance with the obligations and provisions of the Sub-Division Act 1988.

(viii) All computations undertaken by the Manager shall be the subject of a yearly audit by an independent accountant appointed on behalf of the parties by the Body Corporate, whose fees shall be deducted from the income, and who shall on request, be given full access to the records of accommodation, income, receipts, expenses and payments, bookings register and management records for accommodation for the Bright Chalet."

78 The Plaintiffs contended that sub-clauses 3.2(a) and, in particular, 3.2(b) were central provisions of a rent clause that fixes rent according to income, calculated in accordance with the stipulated formula.[103] This it was said indicates that the Defendant is being reimbursed for, or being paid for, its managerial function.[104] The Plaintiffs contended that the rent regime is different from that found in conventional retail lease provisions where the tenant pays a fixed rent regardless of the turnover that is derived from the carrying on of a relevant business. The Plaintiffs' submitted that the Defendant is, in effect, collecting rent on behalf of the Plaintiffs and remitting that rent to them, minus a deduction for the Defendant's management fee; and that the Defendant is, at best, a management or service company.[105] The Plaintiffs made reference to the following commentary in support for their position:[106]

"Another aspect of the reference to 'under the terms of the lease' is that it would appear to follow from these words and the other parts of the definition of 'retail premises' that if the premises are used for retail purposes they must be used for these purposes by the tenant under the lease. The use of a service company as the tenant may raise issues as to the application of the Act on the basis that the service company tenant does not carry on any retail business. Nevertheless where this occurs on an agreed basis where the parties contemplate retail use the arrangement may be construed in such a way as to fall under the Act: see V & L Li Nominees Pty Ltd v Sandhurst Trustees Ltd [2002] VCAT 391 (Deputy President Macnamara); and see Retail Leases Victoria [30,060]. "

79 Accordingly, the Plaintiffs submitted that their relationship with the Defendant, as provided for under the Leases, attracts the application of the agency exception with respect to the "retail premises" definition provision contained in the Acts.

80 The Defendant did not seek to deny that it was a Manager of the TBC. However, it emphasised that its functions as a Manager did not render it an agent for the Plaintiffs. The Defendant contended that it was significant that the Leases contain references and provisions with respect to both a "Manager" and a "Managing Agent"; and that those roles are separate and distinct from one another. The Defendant emphasised that at the time the Leases were entered into, it was the "Manager" for the purposes of the Leases and that the "Managing Agent" was another entity, initially Bright Chalet Property Ltd (BCPPL).[107] The Defendant acknowledged while it is currently both the "Manager" and the "Managing Agent" the position remains that, under the provisions of the Leases, the roles of the "Manager" and the "Managing Agent" remain separate and distinct from one another.[108] The Defendant contended that if there is an agent then it was the "Managing Agent".[109] In support of this contention reference was made to various provisions of the Leases:

(a) Under clause 3.1, the Manager must pay the rent to the Managing Agent or the Owners.[110]

(b) The Owners are to pay the Manager, amongst other things, a Housekeeping Fee and a Management Fee pursuant to clause 2.1.[111]

Plaintiffs v Defendant

At a glance

Court

Decision date

Before

Source

Judgment (343 paragraphs)

Parties

Legislation Cited (72)

Cases Cited (12)