Application of the RLA

Just when you thought navigating Victoria’s retail legislation couldn’t get any more complicated. A recent decision of the Victorian Civil and Administrative Tribunal (VCAT) in Bulk Powders Pty Ltd v Seicon Pty Ltd (Building and Property) [2018] VCAT 2000 bucks the trend when it comes to determining the application of the Retail Leases Act 2003 (Vic) (RLA).

A number of notable judgments in recent years have followed a general theme of broadening the application of the RLA. We have seen the following business services premises fall within the RLA: a patent attorney’s office (with extremely limited clientele), serviced apartments, conference centre lease where the tenant on sold space to function providers who in turn on sold space to delegates, blood testing services where blood was collected from other sites and only tested from the premises and of course a cold storage facility in the middle of an industrial park. Most judicial commentary suggests that a sale of a service from a premises will bring the lease within the ambit of the RLA.

In Bulk Powders Pty Ltd v Seicon Pty Ltd (Building and Property) [2018] VCAT 2000 the Tribunal dismissed the Tenant’s claim that their leased premises were retail premises for the purposes of the RLA.

The leased premises were situated in an industrial zone in Braeside. The Tenant used the premises for the production, packaging and storage of health supplements and sold its products predominately through online sales. The Tenant also offered a service of picking / packing products and offering product advice to its customers. On occasion, the Tenant would permit its regular customers to attend the premises to collect products, however the Tenant deliberately minimised face to face sales at the premises and customers could only collect products from the premises by prior appointment.

The Tenant claimed that its premises were ‘retail premises’ and that it was entitled to recover just short of $30,000 that it had paid to the Landlord on account of outgoings (including land tax) by reason of the Landlord failing to provide annual outgoings estimates. To support its claim that the premises were retail premises, the Tenant argued that there is no distinction between online and face to face sales and that the RLA does not discriminate against different methods of sale by retail or the retail provision of services.

VCAT ultimately rejected the Tenant’s submissions and found that while selling products online might be considered ‘retail’, it did not follow that the premises from where the online orders were shipped constitute ‘retail premises’ for the purposes of the RLA. VCAT referred to a line of authorities that have considered the characteristics of what constitute ‘retail premises’.

In this case, VCAT gave particular weight to the evidence given that the premises were not ‘open to the public’ in finding that the premises were not retail premises. The fact that there was no signage on the premises identifying the business to the public, the Tenant deliberately limited face to face sales and only regular customers of the Tenant were permitted to attend the premises were all important features of premises not constituting retail premises.

VCAT’s decision seems to go against the recent trend, and highlights the difficulties faced by parties trying to establish whether the RLA applies. The VCAT decision seems to depart from recent judicial cases most notably the Victorian Court of Appeal in IMCC Group Australia Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178 which held that a cold storage facility was a ‘retail premises’.

The decision also highlights the importance (and difficulty) for both Landlords and Tenants to carefully consider the application of the RLA before entering into a lease. Given the continual uncertainty, we recommend the conservative approach be taken which assumes the RLA will apply.

Authored by:

Lui Scipioni, Partner
Michael Mercier, Associate