Targeted Property Investments Pty Ltd v Look Up Technologies Pty Ltd

Summary of the Decision

1. At [1] of the Decision the Tribunal described the key features of the lease. It was for an initial term of five years, concluding on 17 April 2019, with three five year options. The first option has been exercised and the current term of the lease runs until April 2023. The rent was initially $75,000 per annum plus GST and from the first renewal was $90,367.45 plus GST. The subject premises are at Rockdale, a suburb of Sydney, and consist of three zones, one zone being a warehouse.
2. At [3] the Tribunal recorded that in the applications the Respondent described the premises as constituting a retail shop for retail and repair of computers and associated products. The application stated that the premises are set up with a showroom "to showcase technology solutions". It also stated that retail clients come to the showroom and that the premises are also used to train clients.
3. The Decision recorded the evidence and submissions of both parties. The Respondent's contention was that the evidence demonstrated that the premises were used for the retail sale of computer systems. The Appellant's contention was that the Respondent's evidence did not establish what was the predominant use of the premises. Specifically, the Appellant's contention was that the premises were the subject of multiple uses but there was no way of knowing which was the predominant use based on activity or space [12].
4. The Tribunal's jurisdiction is dependent upon their being a lease with respect to a retail shop (a term defined in the RL Act). Essentially that means premises that are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of the definition. Businesses specified in Schedule 1 of the RL Act are taken to be prescribed. In this case the Respondent's contention was that the relevant use contained in schedule 1 was the following: "Shops selling or renting any one or more of the following goods: telecommunication (mobile phones or services), televisions, videos, home entertainment systems, software, electronic games, computer or computer products or household appliances", and "Office equipment shops" [9].
5. At [16] of the Decision the Tribunal stated that the jurisdictional requirements had been set out in the case of Hanave PL v Wine Nomad PL [2022] NSWCATAP 153 at [122], [126]-[135]. The Tribunal stated that it is necessary to first look at the permitted or agreed use of the premises to see if that use fits within one of the uses in Schedule 1 of the RL Act. If the use covers a number of different types of businesses, some of which are, or may be, within Schedule 1, then an analysis is required of the actual use or uses of the premises to determine whether the predominant use or uses falls within one or more of the businesses prescribed in Schedule 1.
6. At [17] the Tribunal referred to the decision in Robin Raju & Associates PL v Kaplan Investments PL [2021] NSWCATCD 90 in which it was said that the "predominant" use means the "most conspicuous or effective portion of the use" and that a specific percentage figure is not determinative other than the use must be more than 50% to predominate.
7. At [18] the Tribunal recorded the permitted use of the premises as recorded in the lease, namely: "Retail and general offices for computers and associated products, Repairs, general offices, storage and warehousing of computers and associated products."
8. At [20] the Tribunal stated that the above words went beyond the reference to computers and office equipment in Schedule 1 of the RL Act and that accordingly one must look at the evidence to determine the predominant actual use.
9. At [21] the Tribunal found that the evidence supports the Tribunal having jurisdiction on the basis that the premises were being used as a retail shop within the meaning of the RL Act without the need to consider percentages of use. The Tribunal then gave reasons for this conclusion.
10. The first reason was that there is "nothing that prevents adaption or customisation of a computer system, including its software, hardware modules or peripherals, for the needs of a particular customer as part of the sale of that computer."
11. The second reason was that it was "common ground that the lessee was not a wholesaler, and there was no indication that the customised computers were sold other than by retail".
12. The third reason was that there was a showroom and that "other activities and spaces in the premises" were consistent with being ancillary to retail computer sales. The Tribunal referred to the presence of a consulting area, management and administration areas, and warehousing, and described these areas as, in effect, supportive of the conduct of retail computer sales.
13. The fourth reason was the Tribunal stated that the fact that customised retail sales may not be to individuals, but may be bulk orders to end retail customers does not detract from the three reasons earlier given.
14. The fifth reason was that the evidence of open plan consulting desks or flexible space where sales take place may bear resemblance to operations such as occur in spaces used by other IT businesses but that a "traditional" "counter sales" model is not prescriptive".
15. The sixth reason was that there was no indication that the Respondent's website was "other than complementary to the business on the premises and, to the extent (if any), this is relevant, was administered from the premises".
16. The seventh reason the Tribunal referred to was signage which referred to repairs and recovery (after referring to sales) and described such services as not negating the other matters already referred to.
17. The Tribunal concluded that "services related to supply were the majority (predominant) activity rather than standalone services."
18. The CEO of the Respondent provided evidence in the form of a number of statements and the Decision records that neither party sought to cross-examine the CEO or other witnesses on the evidence. At [24] the Tribunal referred to some of the activities undertaken at the premises as recorded in the CEO's witness statement and found that "such descriptions indicate an operation that was geared to the retail sale of computer systems - hardware, software and peripherals - including multiple computers to large end users, with promotional, support and training services ancillary to that primary role of retail sale".
19. At [25] the Decision records that the CEO's evidence was that the majority of new business comes from visitors to the showroom.
20. At [29] the Tribunal referred to the fact that some space had been sublet and found that "it appears from communications with the managing director's assistance" that the subletting of space "does not detract from the foregoing conclusion". The foregoing conclusion was that the "evidential onus" had shifted to the Appellant if the Appellant wished to challenge the Respondent's evidence concerning the usage of the premises within the lettable area of 644 square metres.
21. At [30] the Tribunal found that the Tribunal had jurisdiction to determine the Respondent's claim for final relief.
22. At [32] the Tribunal stated that it would "preserve the status quo" by again making an interim order in the terms of the order made on 4 May 2022. The orders made were to the following effect: 1. A declaration that the Tribunal has jurisdiction (order 1). 2. A direction that the application be adjourned for a hearing for a subsequent directions hearing (order 2). 3. An order that costs be reserved for the purposes of being considered after delivery of the final determination of the application (order 3). 4. An order until further order that the Appellant by its officers, servants and agents is not to interfere with the quiet enjoyment of the subject premises by the Respondent and its officers, servants, agents and customers (order 4)

Notice of Appeal

1. A Notice of Appeal was lodged on 27 July 2022. The grounds of appeal may be summarised as follows: 1. The Tribunal erred in failing to determine in accordance with the principles identified at paragraphs 16 and 17 of the Decision whether the Respondent had established that the predominant use of the premises was as a retail shop. 2. The Tribunal erred in determining that the premises were used for a retail shop purpose. 3. The Tribunal erred in declaring that the Tribunal had jurisdiction. 4. The Tribunal erred in failing to consider the Appellant's submissions on the continuance of the interim order. 5. The Tribunal erred in making order 4. 6. The Tribunal erred in failing to provide reasons or adequate reasons for order 4.
2. The Notice of Appeal contends that the declaration recorded in order 1 raises a question of law and leave to appeal is not required. The appeal with respect to the restraint recorded in order 4 is an appeal from an interlocutory decision and therefore leave is required.
3. The Respondent filed a Reply to Appeal which may be summarised as follows: 1. the Respondent opposes the appeal and the application for leave to appeal. To the extent that leave is required the criteria for granting leave have not been met. 2. Whether the premises are a "retail shop" is a question of fact and is a matter of common experience rather than any absolute test. Floor space usage may be a factor, but is not determinative. The amount of sales the business makes to customers who do not visit the showroom cannot be determinative. The ratio of sales from customers attending premises against online or phone sales cannot be determinative of whether the premises are a retail shop.

Appellant's Submissions

1. The Appellant does not dispute that the Tribunal was required in the circumstances to determine the predominant use of the premises because the lease specified multiple uses some of which were and some of which were not retail lease purposes.
2. However, the Appellant submits the Tribunal failed to determine the predominant use and instead concluded that the premises were a retail shop within the meaning of the RL Act (ground 1) The Appellant submitted that although the Tribunal does not need to determine a precise percentage of use for which the premises are used for a retail purpose, the Tribunal must determine that the retail use is for more than 50% (see Hardcore Gym Pty Ltd v Police Citizens Youth Club Ltd [2014] NSWCATCD 249 at [15]-[17]). The Tribunal did not embark on this task and did not find the predominant use of the premises. Rather the Tribunal found that all of the uses were geared towards one retail purpose.
3. With respect to ground 2 the Appellant submits that the Tribunal did not consider whether the premises were being used as a "shop" such that it was a "retail shop" within the meaning of the RL Act. Each of the uses described in schedule 1 to the RL Act require the business to be a "shop". The Tribunal gave no consideration to this requirement. The Appellant referred to a video that had been tendered in evidence which the Appellant contended showed that the subject premises were not being used to physically sell goods from the premises on a retail basis, as distinct from other commercial activities which were distinct from the operation of a "retail shop".
4. The Appellant contends that the Tribunal's finding that the premises were a "retail shop" was against the weight of evidence and manifestly unreasonable. The first witness statement of Mr Kantarelis (the Respondent's CEO) contained no evidence as to what the use of the premises was. The second statement contain mere assertions as to what use occurred with no reference to what proportion those uses occurred. The third statement contained further mere assertions and attached some advertisements and photos apparently evidencing retail. Some of the advertisements do not include a date and others included a date in 2013 and 2015.
5. The Appellant's submissions assert that the photos provided by the Respondent do not contain evidence of retail sales.
6. Ground 3 contends that for the above reasons the Tribunal erred in finding that it had jurisdiction.
7. Grounds 4 to 6 concern the order continuing the restraint imposed upon the Appellant not to interfere with the Respondent's quiet possession of the premises. The Decision stated that the Tribunal called for submissions as to whether the restraint should continue, but that none were received. The Appellant contends that it did submit written submissions as directed and the Tribunal thereby failed to consider relevant material, committing an error of law. Further the Appellant contends that the Tribunal failed to give adequate reasons for continuing the restraint and only indicated that it would continue the status quo as no evidence had changed the position.
8. The Appellant contends that even if the Appeal Panel finds that the Tribunal has jurisdiction, it ought to set aside the interim restraint order. Leave ought to be granted as the finding of the Tribunal is an error which is plain and readily apparent and, accordingly, it would be unjust to allow the finding to stand.
9. At the hearing of the appeal, the Appellant elaborated on the above submissions and what follows is a summary of those oral submissions.
10. The facts found disclosed a mixture of purposes some of which were uses that were within the confines of the RL Act and others were outside the Act. The onus rested upon the Respondent to show what uses were within the Act.
11. The Appellant submitted that the evidence of Mr Kantarelis referred to the existence of a showroom but there was no evidence of the presence of a retail shop. The judgment of Diamond Certification Laboratories Pty Ltd v The Trust Company Ltd (2015) NSWCATCD 122 at [35]-[41] dealt with what is the indicia for a shop. This included a shopfront, and goods on display for sale. The Appellant referred to and relied upon the meaning of "shop" contained in the Macquarie Dictionary, 3rd edition. There it is stated that a shop is a building where goods are sold retail.
12. In Lane Cove 83 Pty Ltd v Vodafone Network Pty Ltd [2017] NSWCATCD 13 the Tribunal considered the meaning of retail shop in s 3 of the RL Act. The definition of "retail shop" in the RL Act states that it means "premises" that meet the description that then follows. Counsel contended that it is necessary to show that goods are sold and that retail sales are the predominant use of the premises. In this case, there was an absence of evidence of actual sales.
13. The Appellant also made submissions concerning the area of the leased premises. The area, the subject of the lease was approximately 650 square metres. The evidence of Mr Kantarelis was that there was 200 square metres of surplus area and that from his evidence it was reasonable to infer that about 100 square metres was sublet. Taking into account the warehouse area of approximately 150 square metres was not being used for retail premises there was about 300 square metres not being used for retail. That is a significant issue which was not addressed by the Tribunal at first instance.
14. The Appellant referred to the second statement of Mr Kantarelis and to photographs which the Appellant contended were not at all persuasive in establishing the existence of retail sales. The Appellant's position is that the evidence was such that it was impossible to make a finding that determined whether the "backroom activities supported the retail shop". In support the Appellant referred to a video taken by the Appellant's employee showing the inside of the premises and demonstrating no apparent appearance of the presence of retail sales. The fact that there may have been some retail sales does not mean that the premises constituted a retail shop.
15. The Appellant submitted that the Tribunal should have had regard to the decision of the Administrative Decisions Tribunal in Mi-Ok Ltd v Shaul [2011] NSWADT282 where the Tribunal said the fact that visitors came to the premises to inspect items on display did not demonstrate that there were subsequent sales to retail customers. The Tribunal also said that the evidence in that case showed that the premises were not presented or configured for retail activity.

Respondent's Submissions

1. The Respondent submits that the appeal is misconceived and is a result of a misunderstanding of the Decision. At [21] of the Decision the Tribunal stated that the premises were being used as a retail shop within the meaning of the RL Act "without the need to consider percentages of use or their absence, for the following reasons". The Tribunal then gives seven reasons why there was no "need to consider percentages of use or their absence".
2. At [21(3)] the Tribunal stated that the other activity and spaces in the premises apart from the front of shop area or showroom were consistent with "being ancillary to retail computer sales". The Tribunal determined that the premises were being used as a retail shop and the other "activities and spaces were auxiliary to retail computer sales". In short there were not multiple uses to consider.
3. The Respondent submits that the Tribunal was correct in identifying the three-stage process taken from the Hanave case. First, one looks at the lease to see what is the permitted or agreed use of the premises. Second, if the lease clearly defines the agreed use, then the question is whether or not the premises are a retail shop under s 3 of the RL Act and this is to be determined by whether or not that use appears within Schedule 1. Thirdly, if the permitted or agreed use is not clear or the use covers a number of different types of businesses, some of which are or may be, within Schedule 1 then an analysis is required of the actual use of the premises to determine whether the predominant use or uses falls within one or more of the businesses prescribed in Schedule 1.
4. The Respondent submits that when considering whether the premises are used as a retail shop, a common sense approach is required.

Consideration

1. Section 71 of the RL Act provides that a party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy application in respect of the lease with the Tribunal for determination of the claim. A retail tenancy claim is defined in s 70 and in summary it means a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned.
2. Section 72 of the RL Act sets out the powers of the Tribunal in proceedings for a retail tenancy claim. Those powers include a power to make an order for the payment of money by way of debt, damages or restitution or refund, and a power to provide relief against forfeiture. There is also a power to make an interim order pending final determination of a claim.
3. The question in these proceedings is whether the Respondent is a party to a "retail shop lease". That phrase is defined in s 3 as follows: "retail shop lease" or "lease" means any agreement under which a person grants to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop-- (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing.
4. It can be seen that the above definition of retail shop lease or lease involves the relevant premises having the purpose of being used as a retail shop. Retail shop is defined in section 3 as follows: "retail shop" means premises that- (a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre. Note 1: Sections 5 and 6B limit the retail shops to which this Act applies. Note 2: Clause 17 of Schedule 3 provides that the businesses specified in Schedule 1 are taken to be prescribed for the purposes of paragraph (a) of this definition until regulations prescribing businesses and repealing Schedule 1 are made.
5. The definition of retail shop contains reference in note 2 to clause 17 of schedule 3 which provides that the businesses specified in Schedule 1 are taken to be prescribed for the purposes of paragraph (a) of the definition.
6. This introduction explains the background to the key issue in these proceedings, namely whether the premises were being used as a retail shop and, in particular, whether having regard to the explanation in note 2 the premises in this case were being wholly or predominantly used for the purpose earlier set out: see [11] of this decision.
7. The jurisdiction of the Tribunal depended on the Tribunal making findings of fact that the Respondent was a party to a retail lease. Accordingly, it is necessary to consider the findings of fact found at first instance and the evidence available to support those findings.
8. The decision records how the Tribunal approached the question of jurisdiction by referring to the Hanave case. We agree that that approach is the correct approach and neither of the parties to this appeal contended otherwise.
9. A number of findings of fact were relevant to the Tribunal's conclusion that it had jurisdiction to determine the dispute. Those findings of fact may be summarised as follows: 1. Customised computers were sold and there was no indication that they were sold other than by retail. It was common ground that the lessee (the Respondent) was not a wholesaler [21(2)]. There was a "front of shop area or showroom" and other activity was ancillary to retail computer sales. This included a consulting area office and management space and a warehouse for storage of computers in their "customised or pre-customised form". The other activity and spaces were consistent with being ancillary to retail computer sales [21(3)]. 2. The presence of open plan consulting desks and flexible space where "sales took place" at [21(5)] confirms that the Tribunal found that there were sales. The Tribunal also found that a traditional "counter sales" model is not prescriptive. We take this to mean that the Tribunal found that it was not necessary to find the presence of a counter or the fact that the sales took place at such a counter. 3. There was signage which referred to "sales" and the signage that referred to "repairs" and "recovery" was cognate with (ie. connected with) the signage concerning sales [21(7)]. The Tribunal's finding that there was a "strong inference from the other factors described above" that "services related to supply were the majority (predominant) activity rather than standalone services" we take to mean that the Tribunal found that the supply of repairs was related to the supply of computers by retail sales. 4. At [23] the Tribunal referred to the evidence of the Respondent's CEO which outlined the operations of the Respondent. This included sales to retail clients. At [24] the Tribunal made the finding that the CEO's descriptions indicate an operation "that was geared to the retail sale of computer systems - hardware, software and peripherals". It is clear from [25] of the Decision that the Tribunal relied not only upon the first statement of the Respondent's CEO for the above findings of fact, but also upon the later statements of the CEO. The Tribunal noted that the CEO was not cross-examined. The Tribunal referred to, and implicitly accepted as a fact, the CEO's evidence that the majority of new business comes from visitors to the showroom [25].
10. One of submissions of the Appellant was that although there was evidence of the existence of a showroom, there was insufficient evidence of the existence of a shop at which sales occurred.
11. An examination of the three witness statements of the Respondent CEO demonstrates to our satisfaction that the findings of fact made by the Tribunal were open to be made. For example, in the first statement, the CEO states that at the premises a number of activities take place, including sales - see [42] of the statement. At [44] he says that retail clients come to the showroom. At [48] he states that the value of stock held can be in excess of $300,000. That permits an inference to be drawn that the volume of sales is not insignificant.
12. The CEO's second statement states that the Respondent sells retail computer and information technology hardware and software from the premises - see [2]. At [3] he describes the opening hours. At [5] he says that the majority of new business comes from persons who come to the showroom. At [6] he refers to the sale of software solutions. At [11] he refers to after sales service in the form of repairs.
13. The third statement of the CEO appears to be a response to an affidavit provided by a representative of the Appellant. At [4] of that statement the CEO refers to retail items which are said to be sold over the counter and were apparently missed by the Appellant's representative when taking a video of the activities at the premises. At [8] he gives further particulars of sales to customers.
14. In our view, the statements of the CEO contained evidence which were sufficient to enable the Tribunal to have made the findings of fact earlier referred to.
15. Accordingly, it is our view that the Appellant has failed to demonstrate to our satisfaction that the Tribunal either erred in identifying the correct principles of law to be applied or in the application of those principles to the found facts. Furthermore, as we have earlier stated, the findings of fact were based upon the evidence of the Respondent's CEO and were open to be made.
16. The Appellant placed some emphasis on the fact a portion of the premises was regarded by the CEO as surplus to requirements and that a portion had been sublet, for the purpose of submitting that the Tribunal erred in not taking those facts into account when determining the predominant use of the premises. Even assuming that that area constituted a significant percentage of the leased area which was not used for retail shop purposes the fact remains that that area appears to be less than fifty percent of the total leased area. The presence of a surplus area and a subleased area does not conflict with the findings of fact made by the Tribunal or its conclusion that the premises were being used as a retail shop within the meaning of the RL Act.
17. It follows from our conclusions that grounds 1 to 3 of the appeal are rejected.
18. Grounds 4, 5 and 6 concern the making of the interim order.
19. Clearly, in the light of our conclusion with respect to grounds 1 to 3 the Tribunal has jurisdiction to make the interim order. Accordingly, grounds 4 and 5 are also rejected.
20. Ground 6 is to the effect that the Tribunal erred in failing to provide reasons or adequate reasons for order 4. The reasons given are brief. They are to the effect that the Tribunal thought it appropriate to "preserve the status quo and that there was no evidence that modified the position established in previous evidence". There was reference to the evidence considered in support of the interim order, which had been made on 4 May 2022. We were informed that there were no reasons given for the orders made on 4 May. That being the case, ground 6 has substance but for the matters expressed in the following paragraph.
21. The appeal against order 4 is moot in the sense that at the hearing of the appeal we required the Respondent to make an application as to whether the interim order should continue. The Appellant opposed the making of such an order. We decided to make an order (in substance constituting a continuation of the pre-existing interim order) and gave oral reasons for so doing. Accordingly, the interim order made by the Tribunal, and which is the subject of this appeal, no longer has any practical utility. It has been superseded by the order we made at the hearing of this appeal.
22. As a result of the above reasoning appeal ground 6 is also rejected.
23. Therefore the appeal must be dismissed.

ORDERS

1. We make the following orders: 1. Appeal dismissed. 2. If the Respondent seeks costs of the appeal, it should file and serve written submissions within 14 days of the publication of these orders. 3. Within 14 days thereafter the Appellant has leave to file and serve submissions in response to the Respondent's submissions. 4. The parties' submissions on costs of the appeal should include submissions as to whether the Tribunal may decide costs on the papers by making an order dispensing with a further hearing.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 October 2022