The undefined phrase, “the retail provision of services”, used in the Retail Leases Act 2003 (Vic) (Act) has again been interpreted by the courts, this time in Horgan v Equi Ventures Pty Ltd.
The court used the “ultimate consumer test” to determine that an equine business operated by a tenant was “the retail provision of services” and the lease was a retail lease for the purposes of the Act.
This case is the latest in a series of decisions over recent years that have confirmed the broad application of the Act. The Act can apply to premises in relation to the sale or hire of goods by retail or the retail provision of services.
From a wholesale cold storage facility, a premises for the “the manufacture and sale of steel gates”, another one used for “warehousing and distribution of general freight”, a conference centre, and now an equestrian centre, the Act is something that must be considered by parties in more detail than just adequately scoping the permitted use in a lease.
Background – Studying the Form
The tenant leased an equestrian centre. The tenant’s main business was providing, training and grooming horses for horse-riding lessons, polo lessons and instructional polo to fee paying clients. The tenant predominantly operated its business of providing horses offsite at different locations. The tenant also operated a polo livery lease business, which is the accommodation of horses, and a full-service polo livery business, which involves the feeding, grooming and tacking up the horse (ie equipping it) for use in polo games.
The landlord initiated the proceedings in the County Court on the basis that the lease was a commercial lease only. The landlord submitted that the premises were not used wholly or predominantly for the sale or hire of goods by retail or the retail provision of services. The landlord argued that the tenant used the premises primarily to care for and accommodate horses, which was not a retail use as there was a lack of a connection with the services provided to the ultimate consumer, being the horse-riding lessons, polo lessons and polo games. The landlord noted that the tenant’s business income came primarily from the services provided by the tenant offsite and not from the premises.
The landlord agreed that the tenant did undertake some retail services at the premises. However, the retail services:
- were only a small part of the tenant's buisness,
- were undertaken on only a small part of the premises, and
- took the tenant only a small amount of time to operate, compared to the amount of time the tenant spent caring for the horses
The tenant submitted that the premises were retail premises and therefore, the dispute was a retail tenancy dispute. The upshot of the tenant’s contention was that, given that the Act applied, the dispute was required to be heard at the Victorian Civil and Administrative Tribunal.
Consideration and Decision – the Main Event
The court referred to several decisions as to the ultimate consumer test. Justice Robertson referred to additional relevant factors, including the opening hours of the business, the percentage of floor space used for the repair purpose, the dollar amount of sales, the service being available to anyone who agrees to pay, members of the public being able to access the premises and/or being able to book services online and that the storage of goods can be retail and the provision of services offsite can be retail.
Turning to the equine business operated by the tenant, the court noted that such businesses typically require a large area of land to accommodate the horses. Justice Robertson held that it would be “artificial” to separate this part of the land from the part of land used by the tenant in providing the actual retail services (such as the arena for the polo and horse-riding lessons and the office for the administration of the business) in determining whether the premises were used wholly or predominantly retail purposes.
Provided there is a nexus with the business being conducted, the fact that many of the services were provided offsite rather than directly at the premises was not determinative.
The court ultimately held that there was a sufficient nexus between the tenant caring for and accommodating the horses at the premises and the tenant’s business in hiring out the horses for the premises to be considered retail premises. The services or the sale of goods do not need to occur only at the premises for the premises to be considered retail premises.
In this case, even though there was a typographical error in the lease, a provision in the lease stating that the Act does not apply was not determinative. Rather, the court looked to the intended use of the land. Unfortunately for the landlord, the agistment Ministerial Determination was not relevant, and the Act therefore applied to this lease.
Action
Landlords and tenants should be considering the implications of the Act before entering into leases. Keeping with the equestrian theme, whether your proposed lease is a lease to which the Act will apply is anything but a sure bet! Your preparation and training will put you in good stead for the main competition, so ensure that these aspects are checked before you enter into a lease.
We are here to help
Don't leave your leasing agreements to chance. It is important for landlords and tenants to understand the implications for their leases. Russell Kennedy’s leasing team has the experience and expertise to assist. For further leasing advice in relation to the above, please contact Mark McKinley, Emma Dunlevie, Stella Wild or Caroline Snaidr.
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