DACHEVA and SUPERFLASH PTY LTD
[2017] WASAT 77
•26 MAY 2017
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: DACHEVA and SUPERFLASH PTY LTD [2017] WASAT 77
MEMBER: DR B DE VILLIERS (MEMBER)
DELIVERED : 22 MAY 2017
PUBLISHED : 26 MAY 2017
FILE NO/S: CC 1970 of 2016
BETWEEN: MARINA YORDANOVA DACHEVA
Applicant
AND
SUPERFLASH PTY LTD
Respondent
Catchwords:
Leases and tenancies - Commercial tenancy - Agreement to lease - Whether a regulated commercial tenancy under Commercial Tenancy (Retail Shops) Act 1985 (WA) - 'Retail shop' - Whether a cafe is a 'retail shop' - Whether premises used 'wholly or predominantly' for carrying on a business involving sale of goods by retail - Is the selling of coffee, cake and meals a 'good' as required by Act - Held to be wholly or predominantly a business for the supply of goods by retail
Legislation:
Commercial Tenancy (Retail Shops) Act 1985 (WA), s 3
Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA), reg 3A
Result:
Order made that the cafe is a 'retail shop'
Summary of Tribunal's decision:
A question arose in this proceeding as to whether the Tribunal had the jurisdiction to determine a dispute pursuant to the Commercial Tenancy (Retail Shops) Act 1985 (WA). The tenancy involved constituted a café that principally sells coffee, cake and meals for consumption on site and takeaway. The respondent said that the premises was not used wholly or predominantly for the carrying out of a retail business since only a small percentage of all goods sold are not in the form of pre-prepared drinks and meals. The applicant said that the selling of drinks and meals for consumption on site or for takeaway constituted the selling of goods by retail.
The Tribunal found that the business conducted at the café met the definition of a retail business, namely a business that wholly or predominantly involves the sale of goods by retail. The fact that the majority of business is comprised of the selling of prepared meals, drinks and cakes does not alter the definition of selling goods by retail to the public.
It was therefore found that the Tribunal had jurisdiction since the café constituted a 'retail shop' and therefore the Tribunal can determine the remaining issues.
Category: B
Representation:
Counsel:
Applicant: Self Represented
Respondent: Self Represented
Solicitors:
Applicant: 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
R v Radio Authority; ex parte Bull [1997] 2 All ER 561
Randi Wix Pty Ltd and Pokana Pty Ltd (2002) NSWADT 205
Sharp v O Driscoll (unreported, WASC, Library No 9700111, 25 March 1997)
REASONS FOR DECISION OF THE TRIBUNAL:
Background
This dispute concerns several issues but before those general disputes can be addressed the respondent has raised two preliminary issues. Both relate to the jurisdiction of this Tribunal to hear and to determine the principal disputes. These reasons dispose of the preliminary issues. If it is found that the application falls outside the jurisdiction of the Tribunal it must be dismissed, but if it falls within the jurisdiction, then further programming orders will be made in regard to the main items of the dispute.
The tenancy involves a café that principally sells coffee, cake and meals for consumption on site and takeaway. The question is, whether the tenancy constitutes a 'retail shop' that wholly or predominantly involves the sale of goods by retail to the public.
Preliminary issues
Two preliminary issues have been raised by the respondent namely:
a)Is the licence by which the applicant operates a 'lease' pursuant to the Commercial Tenancy (Retail Shops) Act 1985 (WA) (CT Act) and if so;
b)Is the tenancy in question a retail shop pursuant to the CT Act?
Description of the premises
The premises is situated at Lot 439, 2/160 Scarborough Beach Road, Scarborough. The premises, a café, is subleased from the respondent by an instrument that is signed but undated. It is agreed that the instrument, called a Licence Agreement, was executed around 1 December 2014 (Licence). The premises which is located in a building which also houses a laundromat, does not form part of a retail shopping centre. The premises comprise a kitchen where food is produced and a dining/sitting area.
It is not disputed that the applicant subleases from the respondent. The respondent is the head tenant who subleases a part of the building to the applicant. The tenancy of the respondent comprises a combined laundromat, coffee shop, children's play area and storage and toilet facilities. The area the subject of the sublease is the coffee shop although clients may also use the toilets. The tenancy is less than 1000m2. The principal business of the applicant is to sell coffee, cake and other foods to the public for consumption on site and for takeaway. It is agreed by the parties that the idea behind the venture was that clients to the laundromat would be able to enjoy a coffee or a meal at the café, while persons who drop in for a coffee or a meal may decide to use the laundromat.
A dispute has arisen between the applicant and respondent. Before the Tribunal can determine the dispute it must first be satisfied that the Tribunal is vested with jurisdiction.
Statutory framework
The statutory framework against which jurisdiction is determined is, relevantly, defined in s 3 of the CT Act as follows:
Does the agreement constitute a 'lease'?
landlord, in relation to a lease, means
(a)the person who, under the lease, grants or is to grant to the tenant the entitlement to occupy the premises the subject of the lease; or
(b)a person who obtains a reversionary interest in those premises,
but does not include a person who assigns his interest as tenant under the lease;
lease means any lease, licence, or agreement, whether in writing or not, that provides for the occupation of premises situated within the State whether for a term or by way of a periodic tenancy or a tenancy at will, and whether or not the lease, licence, or agreement is entered into outside the State or purports to be governed by any law other than the law of the State but does not include a licence or agreement relating to the common area of a retail shopping centre by reason only that it provides for a person to use a portion of the common area the continued use of which as a portion of the common area is not intended to be otherwise precluded.
Does the café constitute a 'retail shop'?
retail business means
(a)a business that wholly or predominantly involves the sale of goods by retail; or
(b)a specified business;
retail shop means
(a)any premises situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business; or
(b)any premises not situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a retail business,
but does not include any premises excluded by regulation;
retail shop lease means a lease that provides for the occupation of a retail shop, unless
(a)the retail shop
(i)has a lettable area that exceeds 1 000 square metres; and
(ii)is not of a kind prescribed by the regulations for the purposes of this definition[.]
A 'specified business' is defined or specified under reg 3A of the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA) as any of the following businesses:
(a)drycleaning;
(b)hairdressing;
(c)beauty therapy … ;
(d)shoe repair … ;
(e)sale or rental of video tapes[.]
It is agreed that the café is not a 'specified business' and that the laundromat is not part of the tenancy the subject of this proceeding.
Contentions
The parties contend as follows in regard to the two preliminary issues:
The respondent says that the Licence does not:
a)constitute a lease under the CT Act since it merely provides for a licence for the applicant to use the area of tenancy on a non-exclusive basis as a sub-tenant of the respondent; and
(b)the business activity that takes place on the tenancy is not a retail shop since it only sells coffee and meals for consumption and does not predominantly sell goods by retail to the public.
The applicant says that the Licence:
a)constitutes a lease under the CT Act since a sublease is included in the definitions of a lease for purposes of the CT Act; and
b)the predominant business activity of the café is to sell goods by retail since the drinks, meals and cakes sold fall within the definition of 'retail'.
Consideration
Each of the preliminary questions will be dealt with separately.
Is the agreement a 'lease'?
The Tribunal is satisfied that the Licence for the reasons that follow constitutes a 'lease' pursuant to s 3 of the CT Act:
i)Although the instrument refers to a 'Licence Agreement' the Tribunal must ascertain the substance of the agreement to determine whether it falls within the CT Act. If the totality of the Licence is considered, the Tribunal is satisfied that it constitutes a 'lease' under the CT Act;
ii)The CT Act provides that 'lease' includes a licence for the occupation of a premises (s 3). In this matter the agreement of the parties is that the applicant has the benefit of the use of the premises for the conduct of the business for a period of four years. This falls within the definition of a 'lease' pursuant to the CT Act.
iii)The Licence provides (clause 3.7) that a Disclosure Statement as required by the CT Act had to be given to the applicant and the applicant in turn confirmed that it had received a copy of the Disclosure Statement.
iv)The respondent is, for purposes of the License, a 'landlord' pursuant to the CT Act (s 3) who is entitled to grant to the applicant the entitlement to occupy the premises the subject of the Licence.
v)Although the Licence provides that the applicant shall 'not be entitled to exclusive possession' of the premises, it was conceded by the respondent during the hearing that for all practical purposes the applicant does have exclusive possession of the premises since the applicant is solely responsible for the maintenance of the premises and all equipment; the applicant may close the door that links the laundromat and the café; and the applicant can require from persons who use the dining/sitting area to order an item from the menu provided by the applicant.
The Tribunal therefore finds that the Licence is a 'lease' for purposes of the CT Act.
Is the tenancy a retail shop?
In regard to the second preliminary question the Tribunal finds for the reasons that follow that the café is a retail shop for purposes of the CT Act:
i)There is agreement between the parties that the tenancy is used almost exclusively for the sale of coffee, cakes and foods that are consumed on site or are taken away by purchasers or more recently by Ubereats. This is according to the Tribunal the 'sale of goods' within the ambit of the CT Act. The applicant is the owner of the goods and the applicant sells the goods to a buyer at an agreed price. The buyer does not onsell the goods like a wholesaler would, but consumes it as what is generally known as the 'ultimate consumer'. It is not material for determining what constitutes 'goods' whether the tenant has made or added value through labour to the goods, for example by making a cup of coffee or preparing a meal. It is not the 'service’ that is being sold, but a product. In this regard the Tribunal adopts the approach that has been taken in the matter of Sharp v O Driscoll (unreported, WASC, Library No 9700111, 25 March 1997) at page 11 (Sharp) when it was said that:
There can be no doubt that a transaction by which liquor is supplied for consumption on the premises of a hotel or restaurant in exchange for a price involves a sale of goods. The transaction involves a transfer of property in goods in exchange for a price[.]
In the Sharp matter the question was even more nuanced than is the question before the Tribunal. In Sharp there was a mix of services and goods for sale in a hotel, which in its ordinary meaning did not constitute a 'shop', but as a result of the predominant activity which involved selling of liquor, it was determined that the hotel did constitute a retail shop for purposes of the CT Act. It was found that in a place in which 'goods and services are both provided to ultimate consumers in exchange for a price, the business clearly involved both the sale of goods by retail and the provision of services by retail as part of a retail business' (Sharp at page 16).
ii)Although there is scant evidence of the applicant selling anything but pre-prepared meals, cakes and drinks to the public, it is not material to the outcome of this matter. The respondent says that, as far as he could see, the entire business comprises a coffee shop and takeaway or preprepared meals. He says there is no exhibition of goods for sale but only a menu with drinks and food available. The applicant gave the following estimated breakdown of activity during her evidence:
a)Fifty percent of drinks and meals prepared are consumed on site by clients; and
b)Of the remaining 50%, around 70% comprises the taking away of drinks, meals and food that had been prepared on site, and 30% comprises goods in the form of sealed coffee or tea bags.
Based on the evidence before the Tribunal, it is concluded that the predominant activity on the premises is selling of drinks and food for consumption on site or takeaway.
iii)It should be taken into account that the CT Act is intended to provide protection of retail shop tenants in their interaction with landlords. The beneficial intent of the legislation is a relevant factor in considering what the meaning of the words 'retail shop' and 'goods' entail. An unnecessary restrictive approach would bring uncertainty to landlords and tenants in retail shops since the protection intended to be afforded may be eroded and parties could become entangled into disputes as to what exactly the nature of the commercial activity is and how it ought to be broken down into fine minutia. The use of the words 'wholly and predominantly' by the CT Act (s 3) requires that the totality of the commercial activity be taken into account and that an objective assessment be undertaken. 'Predominantly' should be taken in its ordinary meaning according to Randi Wix Pty Ltd and Pokana Pty Ltd (2002) NSWADT 205 at [12], namely being the main or strongest element of the commercial activity. It is an objective test which must be based on the actual trading figures of a tenancy and not merely on the terms of the lease or what the parties believe the case to be. In this matter before the Tribunal there is no dispute between the parties that the predominant activity is the selling of food and drinks for consumption on site or for takeaway.
iv)Although there is some ambiguity in what ultimately constitutes 'wholly or predominantly', it was found in R v Radio Authority; ex parte Bull [1997] 2 All ER 561 Lord Woolf MR, that at page 570:
Wholly or mainly' is a phrase the meaning of which is not free from ambiguity. Clearly it requires a proportion which is more than half. But how much more? 51% or 99% and anything between are candidates … In view of [the restriction under the statute under consideration] the ambiguous words 'wholly or mainly' should be construed restrictively. … This corresponds with the Shorter Oxford English Dictionary meaning of 'mainly' as being 'For the most part; chiefly, principally'. Certainly a body [affected by the restriction] to fall within the provision must be at least midway between the two percentages I have identified ie more than 75%.
In the matter before the Tribunal there is no ambiguity that the predominant activity conducted from the premises is the sale of goods in the forms of meals, cakes and drinks.
v)No single factor is conclusive to determine whether the predominant use of a tenancy is as 'retail shop'. All information must be taken into account. In this case the tenancy is described as a 'café' and in practice is operated as a coffee shop with the main services on offer being the selling of drinks, juices and food for consumption on site; a takeaway element which comprises mainly coffee, cake and soft drinks; and Ubermeals yet to be fully implemented.
vi)The 'service' that is provided by the applicant in the form of preparing drinks, cakes or meals does not negate the fundamental nature of the goods that are sold. It was emphasised in Sharp that the listing of certain businesses by regulation reinforces the view that a business that wholly or predominantly comprises the supply of a service by retail is not a 'retail shop' for purposes of the CT Act. In this matter the applicant may add to her asking price a charge for the service of making a meal or a coffee, but it does not diminish the fact that goods are ultimately sold at a price constituting a retail transaction. The selling of goods in the matter before the Tribunal can be distinguished from Formstar Holdings Pty Ltd and Top Notch Roofing Pty Ltd [2007] WASAT 208 at [44] in which it was found the 'service' component was so substantial that a vehicle repair and maintenance shop did not constitute a 'retail shop'.
The Tribunal therefore concludes that the dispute falls within the jurisdiction of the Tribunal since the premises is used wholly or predominantly for the carrying out of a retail business, which in turn involves the sale of goods by retail.
For these reasons the application may proceed to the next phase during which the principal issues in dispute shall be determined.
Orders
1.The Licence Agreement entered into between the parties is a 'lease' for purposes of s 3 of the Commercial Tenancy (Retail Shops) Agreement Act 1985.
2.The Café the subject of this proceeding is a 'retail shop' for purposes of section 3 of the Commercial Tenancy (Retail Shops) Agreement Act 1985 since the business conducted on the premises the subject of the lease wholly or predominantly involves the sale of goods by retail.
3.The Tribunal therefore does have jurisdiction to determine the main issues in dispute.
4.There are two main issues in dispute, namely:
(a)Did the respondent act in a misleading and deceptive way towards the applicant in regard to the operating hours of the tenancy; and, if so
(b)What damages if any should be awarded to the applicant.
5.The Tribunal shall first determine the issue in regard to purported misleading and deceptive conduct.
6.The applicant must by not later than 2 June 2017 file and serve any additional submission or material not yet filed upon which she wishes to rely.
7.The respondent must by not later than 9 June 2017 file and serve any additional submission or material not yet filed upon which he wishes to rely.
8.The matter is set down for hearing to commence at 10 am on 19 June 2017.
I certify that this and the preceding [18] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER
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