CB Cold Storage

The Victorian Court of Appeal has now confirmed Croft J’s decision in CB Cold Storage Pty Ltd v IMCC Group Pty Ltd [2017] VSC 23 that a lease of a wholesale cold storage facility is a “retail premises lease” caught by the provisions of the Retail Leases Act (RLA), dismissing an appeal by the landlord in that case. Our summary of that original decision can be found here.

The Court of Appeal again confirmed that the “ultimate consumer test” is one of the key indicia of whether there is a retail provision of goods or services. Other relevant factors include whether there are restrictions on access to the service and who could use it.

The Landlord had argued that a ‘consumer’ was restricted to the consumer who purchases goods or services for personal use. However, the Court of Appeal found Croft J had correctly applied the authorities which have consistently endorsed as a relevant consideration whether the user of the service is the ultimate consumer of that service:

… the phrase ‘retail provision of services’ has long been interpreted by reference (at least in part) to an ultimate consumer test; that is, are the services used by the person to whom they are sold or are the services passed on by the purchaser in an unaltered state to some third person? No distinction has been drawn between commercial and non-commercial users of the service. The Court should be slow to depart from the interpretation of the phrase given to it by the Court over many years. It would only be appropriate to do so if the interpretation was clearly wrong; but that is not the case. Moreover, the legislature has made amendments to the legislation, but has not made any change to the phrase ‘retail provision of services.’ Consequently, and while not conclusive, the Court may presume that the legislature adopted the interpretation consistently given to the phrase by the Court in the past.

Here, the tenant’s customers used services for a fee, there was no restriction on access to those services and the tenant’s customers did not pass those services on to anyone else. As such, it was irrelevant that the services were consumed by wholesalers of goods and that only a limited number of people could use the service (because they need to use large trucks to transport the good to be stored) because “[it] is not a question of consumption of the goods. Rather, the focus must be on the service that is provided by the tenant“.

Consequences of the Decision

Landlords may now find that the RLA applies to leases previously assumed to be exempt such as leases to industrial or warehousing tenants in Victoria. Some consequences that flow from the application of the RLA include:

• prohibition on the recovery of land tax (even though expressly permitted under the lease),
• market rent reviews that do not allow for rent decreases will be void, and
• on assignment, tenants and their guarantors may be released from their ongoing obligations.

Recommendations for Landlords

Landlords should now review all existing leases where a tenant provides services from leased premises which were previously thought to have been industrial or commercial, but may now be caught by the RLA having regard to the CB Cold Storage decision. If so, breaches of the RLA may give rise to potential claims from those tenants.

The potential application of the RLA should now be a critical consideration during lease negotiations where the tenant will be:

• providing a service to its customers;
• that service is available to the public for a fee;
• the tenant’s business will be open during normal business hours; and
• the tenant’s customers will not pass on those services to anyone else.

For more information please contact Andrew Kennedy or Lui Scipioni.