Banfield and Ors and Frank And Niki BEVERWIJK Pty Ltd - [2012] WASAT 240

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)

CITATION: BANFIELD & ORS and FRANK AND NIKI BEVERWIJK PTY LTD [2012] WASAT 240

MEMBER: MS NATASHA OWEN-CONWAY (MEMBER)

HEARD: 26 NOVEMBER 2012

DELIVERED : 11 DECEMBER 2012

FILE NO/S: CC 1386 of 2012

BETWEEN: IAN ROSS BANFIELD
DIANE FRANCES BANFIELD
NOLA MAY BANFIELD
PETER GEOFFREY WILLS
TADEK PTY LTD
Applicants
AND
FRANK AND NIKI BEVERWIJK PTY LTD
Respondent

Catchwords:

Retail shop lease whether business is a retail shop Whether business involved sale of goods and whether sales of goods were retail sales of goods Whether business involved supply of services in conjunction and separately from sales of goods Nature of a sale of goods Nature of a retail sale of goods Evidence required to establish retail sales of goods and whether a business wholly or predominantly involves sale of goods by retail

Legislation:

City of Canning Town Planning Scheme No 40
Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA), s 4(2), s 12(1f), s 16, s 25C, s 25D
Sale of Goods Act 1891 (WA), s 1(1), s 60
State Administrative Tribunal Act 2004 (WA), s 47(1)(a)

Result:

Application dismissed

Summary of Tribunal's decision:

The applicants operated a business selling towing motor vehicle accessories to the general public. The evidence established that the applicants made sales of goods from orders issued by email, telephone and over the counter. The applicants delivered goods to customers off site as well as over the counter and had the capacity to fit supplied goods off site. The applicants did not lead evidence to establish that the business was wholly or predominately involved in the sale of goods by retail. The Tribunal concluded that the sale of moveable property in the vehicle accessories constituted the sale of goods and the sales did not lose that character because the applicants also supplied the service, in some instances, of fitting the goods sold. The Tribunal concluded that on the facts of this matter, the applicants' service of fitting the goods sold was ancillary to the main object of the transaction between the applicants and their customers the sale of the vehicle accessory. The Tribunal concluded that there was insufficient evidence to establish that the sale of goods were retail sales of goods and there was evidence and admissions by the applicants that some sales were to buyers who intended to resell those goods in the course of the buyers' businesses, such as car dealers, trailer retailers and caravan retailers. The Tribunal dismissed the application as the applicants were not using the leased premises in the conduct of a business that fell within the definition of a 'retail shop' and the lease was not a 'retail shop lease'. The application was dismissed upon the basis that it was misconceived pursuant to s 47(1)(a) of the State Administrative Tribunal Act 2004 (WA).

Category: B

Representation:

Counsel:

Applicants: Ms S Peploe (Acting as Agent)
Respondent: Mr B Porter (Acting as Agent)

Solicitors:

Applicants: N/A
Respondent: N/A

Case(s) referred to in decision(s):

Formstar Holdings Pty Ltd and Top Notch Roofing Pty Ltd [2007] WASAT 208
Sharp v O'Driscoll Supreme Court of Western Australia unreported; SCt of WA; Lib No 970111

REASONS FOR DECISION OF THE TRIBUNAL:

The application

On 29 August 2012, the applicants sought an order from the Tribunal that the Tribunal declare that:
1)The lease in question 'falls under' the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act).
2)Management fees are not recoverable by the landlord (respondent) from the applicants.
The questions in dispute between the parties are referred to as:
1)Is the lease between the parties a 'retail lease'?
2)If the answer to 1) is 'yes', should management fees be recovered?
The grounds for the orders sought by the applicants are identified as follows:
1)The applicants derive 'most of [their] profit from the sale of goods by retail'.
2)The leased premises are less than 1,000 square metres.

Section 25C and s 25D of the CTRSA Act certificate

On 30 August 2012, the Small Business Development Corporation issued a certificate pursuant to s 25C of the CTRSA Act and the application may proceed in the Tribunal (s 25C and 25D of the CTRSA Act).

The preliminary issue in dispute

The dispute between the parties concerns whether the applicants are obliged to pay the respondent a sum of money in respect of outgoings relating to management fees as agreed and provided for in the lease between them. The applicants assert that the lease of the respondent's premises is a 'retail shop lease' within the meaning of that expression provided for in the CTRSA Act. The applicants consequently assert that the lease between the applicants and the respondent is regulated by the CTRSA Act. Section 12(1f) of the CTRSA Act provides that the respondent is not obliged to make any payment in respect of management fees and that the applicants are entitled to bring this application to the Tribunal pursuant to s 16 of the CTRSA Act.
The preliminary issue is, as in many of these proceedings, whether the lease in question is a 'retail shop lease'. If it is not, two things follow:
1)the CTRSA Act has no application to the lease between the applicants and the respondent; and
2)the applicants' application to the Tribunal pursuant to s 16 of the CTRSA Act is misconceived.
If, however, the lease between the applicants and the respondent is a 'retail shop lease', the Tribunal has jurisdiction to determine the question whether the money in dispute is attributable to management fees and whether s 12(1f) of the CTRSA Act applies to the facts of this dispute. In that case, the subsequent issue of whether the fees are management fees or are due owing and payable pursuant to another clause of the lease between the parties will be determined at a later date. For this reason, the preliminary issue of whether the lease in question is a 'retail shop lease' for the purposes of the CTRSA Act was listed for a hearing.

Background

The applicants took a demise of premises situated at No 27 Welshpool Road, Welshpool on 1 March 2012. The commencement date of the term of the demise is listed as being 1 May 2012 for a term of 48 months and four years therefrom, at a rate of $80,000 per annum and subject to review as provided for in the lease dated 1 March 2012. Clause 3.2 of that lease provides that the applicants 'will pay' to the respondent the outgoings within 10 business days of the respondent's invoice for the same. The outgoings are identified and defined by cl 1 and item 17 of the particulars of the lease, and include:
(m)Property Management Fees.
The applicants' agreement to pay such fees, as outgoings, is recorded by the application of an 'x' in the column headed 'The Lessee Agrees to Pay (Denote with x) in the row applicable in item 17 of the particulars of lease'.
Although originally in dispute, it has been agreed between the parties that the area comprised by the demised premises is, in fact, 894.5 square metres. That agreement was reached early in the proceedings and was recorded by the Tribunal in the orders for directions made on 27 September 2012.
Prior to the term commencement date of 1 May 2012 and prior to the execution of the lease on 1 March 2012, the applicants assert they were informed by the respondent that the outgoings for the premises were expected to be $18,500 per annum. On 2 May 2012, and one day after the commencement of the term of the lease, the respondent informed the applicants that expected outgoings were revised to $26,438.40 per annum. The inclusion of property management fees accounts for the increase in the forward estimate, according to the applicants.
The applicants have refused to pay the revised variable outgoings, and the parties remain in dispute over this issue.

Statutory framework

Section 4(2) of the CTRSA Act provides that s 16 of the CTRSA Act applies in relation to a 'retail shop lease'. A 'retail shop lease' is, relevantly, defined to mean a lease:
that provides for the occupation of a retail shop other than where the total floor area to which the lease applies exceeds 1,000 square metres.
Whether the lease provides for occupation of a 'retail shop' turns, in this case, upon the definition of 'retail shop'. That term is, relevantly, defined to mean:
any premises … that are used wholly or predominantly for the carrying on of
(i)a business involving the sale of goods by retail[.]
In Sharp v O'Driscoll Supreme Court of Western Australia unreported; SCt of WA; Lib No 970111 (Sharp), the Full Court of the Supreme Court of Western Australia held, by majority, the following:
a)the words 'wholly or predominantly' in that phrase relates to the sale of goods by retail;
b)the primary object of the CTRSA Act is regulation of leases of premises that are used to operate businesses that wholly or predominantly involve the retail sale of goods;
c)a business wholly or predominantly involved in the supply of services by retail is not a 'retail shop' within the meaning of the CTRSA Act, unless it is part of a retail shopping centre or a prescribed business;
d)the sale of goods by retail is not a term or phrase defined by the CTRSA Act;
e)the sale of goods involves the transfer of property in goods to a buyer for a money consideration (price) as provided for by the Sale of Goods Act 1891 (WA) (SG Act) (s 1(1));
f)by implication, it is immaterial whether the sales of goods (in that case, beverages) comprise the sale of comestibles or other items to be consumed or used on the leased premises or to be delivered or taken away for consumption or used elsewhere;
g)the expression 'retail' generally refers to the sale of goods in small quantities to individual purchasers as distinct from the sale of goods in bulk, as in the case of goods by wholesale (Shorter Oxford English Dictionary);
h)the expression 'retail' may also apply to the provision of services directly to ultimate consumers rather than to buyers who resell those goods;
i)s 60 of the SG Act identifies goods as including all moveable property;
j)if the transaction involves a transfer of moveable property in exchange for a price, it is a sale of goods transaction;
k)the sale of goods may also be associated with the supply of services, and may be made in combination with the supply of a range of services, such as in a restaurant or a bar;
l)a 'retail shop' for the purposes of the CTRSA Act may not equate to what would be regarded as a 'shop' in common parlance;
m)much depends on the relevant statutory definition;
n)the term 'involves' means 'including';
o)a transaction in which goods and services are both provided to the ultimate consumer in exchange for a price is a transaction that involves both the sale of goods by retail and the provision of services by retail as part of a retail business;
p)the CTRSA Act emphasis seems to be more upon the use of premises rather than the amount of space isolated for retail trade or the relative income gained by the different activities conducted on the one premises;
q)the words 'wholly or predominantly' apply not to the word 'business' but rather the retail sale of goods nature of the business, so that not every business or every retail business will fall within the definition;
r)it is relevant to consider all of the uses of the leased premises involved in the conduct of the business; and
s)the test is to determine the true nature of the business carried on at the leased premises.

The facts

It is common ground or not disputed that:
1)the total area leased by the applicants is less than 1,000 square metres;
2)the applicants occupy premises, under lease from the respondent, trading as Westcott Towbars;
3)the applicants' business is not a prescribed business; and
4)the applicants' business is not conducted in a retail shopping centre as defined by the CTRSA Act.
The respondent contends the following:
a)the applicants are engaged in the business of warehousing goods and delivering goods to the customer which is not a sale of goods at all and in any event not a retail sale of goods;
b)the applicants operate a mobile service to supply and fit goods, and that supply of goods and services does not constitute a retail sale of goods;
c)the taking of orders by internet, telephone, mail or email or as a consequence of email and the ensuing transaction is not a retail sale;
d)the applicants' predominant use of the leased premises is to fit the goods it supplies and such transaction therefore loses the quality of a sale of goods transaction;
e)if the service of fitment of goods is supplied by the applicants with the sale of the goods so fitted, the sale ceases to be a sale of goods transaction;
f)the applicants sell as wholesalers to others who retail the products to the end consumer and those sales are not a sale of goods by retail;
g)the predominant use of the leased premises is for the business of warehousing of goods, the delivery of goods off site and the service of the fitment of goods supplied by the applicants, which business does not involve the retail sale of goods.
The Tribunal does not accept each of the respondent's contentions in a) e) inclusive and g). The Tribunal accepts that the nature of a wholesale of goods is as described in f).
Initially the respondent also contended that the zoning of the leased premises does not permit the retail sale of goods and therefore it must follow that the applicants' business does not wholly or predominantly involve (that is, include) the sale of goods by retail. This contention was really abandoned at the hearing.
The Tribunal is satisfied that the area in which the leased premises is situated is zoned General Industrial within the meaning of the City of Canning Town Planning Scheme No 40 (TPS 40) and does permit the leased premises to be used for retail sales. Further, the definitions of 'retail', 'shop' and 'showroom' in TPS 40 are not relevant to the questions of whether, on the facts in this case, the applicants' use of the leased premises falls within the definition of a 'retail shop' and the lease is a 'retail shop lease' for the purposes of the CTRSA Act.
The respondent also refers to the fact that the purpose of the business, as identified in the lease and in the applicants' planning approval, is 'vehicle workshop', and that suggests, so the respondent contends, that the applicants' business is not one wholly or predominantly involved in the sale of goods by retail. The Tribunal notes, however, that the lease also refers, in the special conditions, to the fact that the applicants' business trading name is 'Westcott Towbars', which is not consistent with conducting a vehicle workshop and is more consistent with a business involved in the sale of goods. The Tribunal considers that statements in the lease generally do not assist the Tribunal, one way or the other, to determine whether the applicants' business and the use of the leased premises amounts to the business being a 'retail shop' for the purposes of the CTRSA Act.
The applicants failed to adduce any cogent evidence of the trading nature of the applicants' business conducted from the leased premises. The applicants produced a letter from Butler Settineri, accountant, dated 23 October 2012. The propositions advanced on behalf of the applicants by Mr Settineri in that letter are unclear and inconclusive in respect of the nature of the applicants' business. Having noted that Butler Settineri has, in the past, received from the applicants the applicants' annual financial statements from which he, or the firm of accountants, has prepared past tax returns for the applicants (which the Tribunal infers are the applicants' past profit and loss and balance sheet statements), Mr Settineri does not rely on or use such documents in order to make any assessment as to whether the business is involved wholly, predominantly, or at all, in the sale of goods by retail.
Nor, it seems, are the statements by Mr Settineri based on a review of the applicants' complete sales records for any specific period.
Mr Settineri's statements in his letter of 23 October 2012 are based on a seemingly random selection of invoice books for an unidentified period or periods, and he concludes that the invoices scanned and considered by him support the following conclusions in respect of the nature of the applicants' business operated from the leased premises:
1)the supply of goods alone (which the Tribunal infers is a reference to the sales of goods) amounts to 72% of the number of invoices issued and sales made in the applicants' business, and 64% of total turnover of the applicants' business;
2)the supply and fitment of the goods supplied (which the Tribunal infers is a reference to the sale of goods and the service of the fitment of those goods) amounts to 28% of invoices issued and sales made in the applicants' business, and 36% of total turnover of the applicants' business.
Mr Settineri's final letter of 23 October 2012 states:
Therefore, from the information supplied and the accounting processes reviewed, we note that the majority of sales are from retail.
The Tribunal does not accept that conclusion and, in fact, the Tribunal finds that, to the extent that the letter dated 23 October 2012 is of any weight at all, it does not address the issue of the dichotomy between retail sales of goods and nonretail or wholesale sale of goods by the applicants from the premises, or at all. It is concerned with the dichotomy between the sale of goods and the supply of services.
The applicants also rely upon an undated document, the author of which is not known, headed 'Westcott Towbars 2011 Tax Year'. This document indicates that:
1)sales of goods amounts to 81% of the applicants' gross profit;
2)sales of fitting services amounts to 11.32% of the applicants' gross profit, and
3)sales of custom made goods (sale of goods) amounts to 7.35% of the applicants' gross profit.
Again, this document, setting aside its obvious lack of weight, does not concern itself with the dichotomy between the retail sale of goods and the wholesale sale of goods. Rather, it is concerned with the dichotomy between the sales of goods and the supply of services.
At the hearing, the applicants produced to the Tribunal a letter by Butler Settineri dated 23 November 2012. The applicants adduced this letter to the Tribunal to 'clarify' the statements made by Mr Settineri in his letter dated 23 October 2012 and in response to some queries by the respondent. As stated above, the Tribunal does not accept the respondent's contentions about what is a retail sale of goods and how and when it 'loses' that character (save for as stated in g)). Any queries by the respondent going to those issues are unhelpful to the Tribunal.
The Tribunal finds that the letter dated 23 November 2012 is of no value and adds further confusion to the proceeding. It states, contrary to the earlier letter by the same author, that for the months of July and December 2010 and June 2011, the percentage of sales by the applicants' business is as follows:
•sale of goods and services of fitment 64.59%;
•sale of goods alone 32.75%;
•sale of custom made goods (that is, sale of goods) 5.44%; and
•sale of the service of fitment alone 1.22%.
It also identifies periods in respect of which invoices were considered, being 8 February 9 March 2011, 16 April 11 May 2011 and April June 2011 in respect of customers 'A', 'B' and 'C' respectively. This statement is not consistent with the statement earlier in the letter that the invoice books were considered for July and December 2010 and June 2011 when referring to the letter dated 23 October 2012. Further, the percentage of sales for each classification from those invoices in July and December 2010 and June 2011 do not support the conclusion made in the earlier letter dated 23 October 2012 that the sale of goods alone accounted for 72% of the invoices issued and sales made in the applicants' business and 60% of total turnover of the applicants' businesses, and that the sale of goods and the sale of the service of fitment of those goods accounted for 28% of total invoices issued and sales made in the applicants' business and 36% of total turnover of the applicants' business. The two letters appear, at first blush, to be inconsistent. Further the reference to customers 'A', 'B' and 'C' for the specific periods of 8 February 9 March 2011, 16 April 11 May 2011 and April June 2011 tend to suggest that customers 'A', 'B' and 'C' are wholesale customers.

The applicants produced advertising material in newspapers, the internet and directories. Each advertisement indicated that the applicants' business, conducted from the leased premises or to be conducted from the leased premises, involved the sale of goods by retail (that is, in small quantities to the ultimate consumer) with or without the service of fitment of those goods; the sale of goods by wholesale (that is, to car dealers, caravan retailers and trailer retailers) with or without the service of fitment; and the sale of the service of fitment of goods produced by the customer. There is nothing in the advertising material that the Tribunal can identify or that was identified by the applicants that can persuade the Tribunal that the applicants' business conducted from the leased premises wholly or predominantly involves the sale of goods by retail.
The Tribunal finds that:
1)The applicants carry on business involving the sale of goods, being certain automated accessories. In all probability, only a small percentage of sales by the applicants relate to fitment of customer supplied goods alone; that is, where a customer brings a product to the applicants' premises and asks only that the applicants fit that product to the customer's vehicle.
2)The applicants' business involves the sale of goods by retail.
3)The applicants do sell goods by wholesale by selling goods to 'towbar fitting businesses', vehicle repairs businesses and car dealerships which is a fact that has been admitted by the applicants.
4)The applicants sell goods to buyers who, in turn, resell those goods to the end consumers (see Macquarie Dictionary and Shorter Oxford English Dictionary definitions of 'wholesale').
5)The applicants do sell goods to the public direct, being the ultimate consumers, and are active in that role in terms of advertising in the Yellow Pages, various other directories and newspapers and the internet.
6)There are car parking bays at the leased premises so customers may buy goods and leave with the goods purchased, and to buy goods and leave their vehicles for a period of time to have the goods fitted to their vehicles.
7)The premises are utilised in a way that the applicants store stock ready for purchase or for purchase and fit.
8)The applicants advertise as retail sellers of certain goods with or without fitting the goods.
9)The applicants advertise as wholesalers of certain goods whether with or without fitment.
For the reasons expressed above, the Tribunal concludes that there is insufficient evidence to establish that the applicants' business wholly or predominantly involves the sale of goods by retail. This fact is not proved.

Tribunal's consideration

The Tribunal concludes that the applicants have failed to produce cogent evidence of any kind to persuade the Tribunal that the applicants' business, conducted from the leased premises, is wholly or predominantly involved in the retail sale of goods. The Tribunal finds on the balance of probabilities that, notwithstanding the poor weight to be attributed to the material provided by the applicants, the applicants' business is predominantly involved in the sale of goods and that the sale of the services of fitment are subsidiary to the sale of goods by the applicants' business. However, that is not sufficient to establish the applicants' use of the leased premises as a 'retail shop' and the lease of the same as a 'retail shop lease'.
There is no evidence to show, and no way of knowing from the information that has been put to the Tribunal, whether the applicants' business, conducted from the leased premises, at least predominantly involves the sale of goods by retail.
The Tribunal concludes that the sale of motor vehicle accessories is a sale of goods by retail, regardless of whether the offer to purchase is made on the internet, by or as a result of an email, telephone call, over the counter or from a mobile van. The sale of such goods to an ultimate consumer in small quantities is a retail sale of those goods, notwithstanding the fact that the applicants have provided a service as well. The fact that the applicants deliver the goods off site, or fit the goods sold on site or off site, is not relevant to the nature of the transaction and whether it is by nature a sale of goods or a retail sale of goods.
The respondent sought to persuade the Tribunal that the business of the applicants was as a distributor of goods. The Tribunal rejects that contention and finds that the applicants' business conducted from the leased premises does involve the sale of goods. How much space a business requires to store stock is not relevant for the purposes of this enquiry as long as the business wholly or predominantly involves the sale of goods by retail. It is obvious that, in order to sell the goods, a seller must be able to have access to those goods, whether by warehousing them on site or warehousing them on another site. Where the stock is stored or held is not relevant to the nature of the sale that takes place.
The method of delivery of the goods to the buyer (that is, whether the person takes the goods away from the leased premises or the seller delivers them to the customer) is not relevant to whether the transaction is a sale of goods transaction or not. The means of passing of possession of the goods by way of delivery is not relevant to the nature of the transaction in this matter.
The Tribunal considers these submissions to be irrelevant to the ultimate issue. The fact that the applicants also fit the goods to the customer's vehicle does not mean that the sale loses its character as a sale of goods or changes the nature of the sale from a sale of goods. Unlike the situation in Formstar Holdings Pty Ltd and Top Notch Roofing Pty Ltd [2007] WASAT 208 where the goods supplied were part and parcel of, and ancillary to, the vehicle service which was the subject of the contract between the business proprietor and the customer, in this situation, the service is ancillary to the sale of goods. This is similar to the situation as found in the Full Court in Sharp. Ultimately in Sharp, the subject of the sale was a measure of beverage (or, in the hypothetical case of a restaurant, a plate of food) notwithstanding the fact that some services (pouring and the use of a glass) had been utilised and paid for by the ultimate customer to have the goods delivered to the customer for the customer's consumption.
Having concluded that there is insufficient evidence to establish that the applicants' business wholly or predominantly involves the sale of goods by retail the applicants' business' use of the leased premises cannot fall within the definition of a 'retail shop' and its lease of the same from the respondent cannot fall within the definition of a 'retail shop lease' for the purposes of the CTRSA Act.
For this reason, the applicants have no entitlement to make any application to the Tribunal pursuant to s 16 of the CTRSA Act, and that Act has no application to the rights and liabilities of the applicants and the respondent in respect of the lease of the leased premises at all. That being the Tribunal's finding and conclusion, the applicants' application must be dismissed pursuant to s 47(1)(a) of the State Administrative Tribunal Act2004 (WA).

Order

1.The applicants' application made pursuant to s 16 of the Commercial Tenancy (Retail Shops Agreements) Act 1985 (WA) is dismissed pursuant to s 47(1)(a) of the State Administrative Tribunal Act 2004 (WA).

I certify that this and the preceding [41] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MS N OWEN-CONWAY, MEMBER