Pasta manufacturer not ‘retail premises’ under the Retail Leases Act 2003

In the recent decision of A. G. & F. Italiano Pty Ltd v Rovigo Pty Ltd[1] the Tribunal considered whether a premises which sells pre-packaged Italian produce predominately via online and telephone sales is a ‘retail premises’ used wholly or predominantly for the sale of goods by retail as defined by the Retail Leases Act 2003 (Vic) (Act). Senior Member Forde considered the ‘ultimate consumer test’ as raised in Wellington v Norwich Union Life Insurance Society Law[2] finding that the Premises are not a ‘retail premises’ within the meaning under the Act.

Facts

• The Applicant, A.G. & F. Italiano Pty Ltd , trading under the name ‘Maria’s Pasta’ entered into a lease with Rovigo Pty Ltd and Paese Nostro Pty Ltd (collectively, Respondents) in respect of 667-669 Nicholson Street, North Carlton (Premises) in November 2009.
• In late December 2013, the parties entered into a Deed of Variation and Extension.
• The permitted use under the Lease is the ‘manufacture and distribution and sale of pasta and associated products’.
• The Applicant argued that the premises are ‘retail premises’ within the meaning of section 4 of the Act. That is that they are premises which are ‘used or are to be used, wholly or predominantly for the sale or hire of goods by retail or the retail provision of services’.
• The Respondents denied that was the case having regard to the ‘ultimate consumer’ test.

The ‘Ultimate Consumer’ Test

• The evidence, which was largely not in dispute between the parties, showed that some sales were made from the front shop at the Premises and some via online or telephone sales with customers ranging from one-off sales to supermarkets and restaurants.
• Where the parties diverged was in regard to how those sales should be classified and who the ‘ultimate consumer’ is.
• In considering whether the Premises were retail both parties relied upon the ‘ultimate consumer test’ established in the decision of Wellingtons and approved by the Court of Appeal in IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd[3]. In Wellingtons the Court held that:

“the essential retailing, is to my mind, the provision of an item or service to the ultimate consumer for a fee or reward. The end user may be a member of the public but not necessarily so”[4].

• Both parties also relied upon the reasoning decision of Justice Croft in Fitzroy Dental Pty Ltd v Metropole Management (Group) Pty Ltd[5] where His Honour in applying the ‘ultimate consumer’ test said that that:

“the fact that a good or a service is provided to a person who uses the good or service as an ‘input’ in that person’s business for the purpose of producing or providing a different good or service to another person does not detract from the possible characterisation of the first person (and perhaps also the second person, depending on all the circumstances) as the ‘ultimate consumer’ of the original good or service”.

• The Respondents also relied upon the decision of Senior Member Walker in Melbourne Gourmet Foods Pty Ltd v Lawther[6] in which the tenant sold frozen and chilled foods and pre-packaged meals to cafes and takeaway businesses for them to cook and prepare food for sale to the public. The tenant also sold those products to supermarkets and delicatessens. In that case, Senior Member Walker identified the ‘ultimate consumer’ as the person who ate the food and held that the premises were not ‘retail premises’ because the supply of goods to the ‘ultimate consumer’ took place at the retail premises of the tenant’s customer, not at the leased premises.
• Both parties also sought to rely upon the recent decision of Senior Member Forde in Bulk Powders Pty Ltd v Seicon Pty Ltd[7] in which the Senior Member found that where the predominant use was for the production and storage of products, the use was not ‘retail’ and even though sales were made online from the premises that did not in itself make the premises retail.

Predominant Use

• The Applicants submitted that it was important to characterise the goods being sold from the Premises and to consider the purpose of the occupation of the Premises.
• The Respondents argued that for the Premises to be retail, the use of retail must be the predominant use where the Applicant has the burden of proving that:
  • the use of the Premises is for sale ‘by retail’; and
  • the Premises is ‘predominantly’ used for sale ‘by retail’.

Decision

• Senior Member Forde, in drawing on Justice Croft’s language in Fitzroy Dental, considered the characterisation of the sales and any ‘conversion’ of the product being sold. Senior Member Forde found that if the products were being acquired for resupply, they are not sales to the ‘ultimate consumer’.
• Similarly, Senior Member Forde found that products which were sold to restaurants to cook and serve were not sales to the ‘ultimate consumer’ because they cease to exist in the same form as when they are purchased and the person who ultimately consumes that product is the ‘ultimate consumer’ of the product.
• Senior Member Forde also found that even if all goods sold from the Premises were for personal consumption and not for resupply, on the evidence, this would not be indicative of the predominant sales for the periods referred and the Premises would not be ‘retail premises’ within the meaning of the Act.

For more information please contact our team.

Authored by:

Jasmina Bradonjic, Special Counsel
Stephanie Rawlinson, Associate

[1] (Building and Property) [2020] VCAT 1390.

[2] [1991] 1VR 333 (‘Wellington’).

[3] [2017] VSCA 178, [17].

[4]Wellingtons, 336.

[5] [2013] VSC 344, [17]–[18] (‘Fitzroy Dental’).

[6] [2016] VCAT 160 (‘Melbourne Gourmet’).

[7] [2018] VCAT 2000 (‘Bulk Powders’).