J&L PROPERTY GROUP PTY LTD and WALTER HOLDINGS PTY LTD - [2011] WASAT 39

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

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

CITATION: J&L PROPERTY GROUP PTY LTD and WALTER HOLDINGS PTY LTD [2011] WASAT 39

MEMBER: MR M SPILLANE (MEMBER)

HEARD: 18 OCTOBER 2010

DELIVERED : 11 MARCH 2011

FILE NO/S: CC 2005 of 2009

BETWEEN: J&L PROPERTY GROUP PTY LTD
Applicant
AND
WALTER HOLDINGS PTY LTD
Respondent

Catchwords:

Landlord and tenant Retail shops Preliminary issue Whether lease is a retail shop lease Whether business conducted at the premises constitutes a retail shop

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3

Result:

The preliminary question is answered in the negative and the application is dismissed

Category: B

Representation:

Counsel:

Applicant: Mr E Scarff
Respondent: Mr J Ludlow

Solicitors:

Applicant: Clement & Co Lawyers
Respondent: AVA Legal

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

Sharp v O'Driscoll (unreported, FCt WASC Library No 970111A-CNS, 21 March 1997)

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The preliminary question before the Tribunal was whether the lease of premises in Mandurah was a retail shop within the meaning of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).
The tenant acknowledged that when the lease was first granted, the premises was used predominantly for motel management, which was not a retail use.
However, it was alleged that over time the mix changed and that at the time of the final assignment of lease in February 2005, the predominant use had become a retail use as the major source of income was derived from the restaurant.
The case turned on the evidence presented by the applicant to support its contention that the restaurant was the predominant use and the Tribunal found that it could not be satisfied on the evidence presented that the restaurant was the predominant use.
In the circumstances, the applicant was unable to show that the lease was a retail shop lease for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985, and accordingly, the preliminary question was answered in the negative and the application was dismissed.

Preliminary issue

In its submissions filed with the Tribunal dated 9 September 2010, the applicant identified the preliminary issue to be determined as follows:
The preliminary issue is whether the lease dated 14 March 2003 ("Lease") is a "retail shop lease" under the Commercial Tenancy (Retail Shops) Agreements Act 1985 ("Act") and therefore whether the Tribunal has jurisdiction. There are two aspects to be determined:
1Whether or not Lot 20 is a "retail shop" under the Act.
2If Lot 20 is a "retail shop" under the Act, is the Lease excluded from the Act because its "total retail floor area" under the Act exceeds 1,000 [square metres].
The respondent in its submissions filed with the Tribunal dated 4 October 2010 stated:
1)The Applicant's submissions correctly identify the preliminary issue. However, the aspects of that issue that need to be determined are not as stated in the submissions.
The respondent then went on to set out the aspects of the issue they thought were relevant and stated:
2)The first aspect is not whether or not 20 is a 'retail shop' under the Act. Rather, it is whether the lease is ' … a lease that provides for the occupation of a retail shop … ' taking into account the meanings of various expressions as defined in the Act. These are different questions. Whereas the applicant's focuses on 20, the true question focuses on the Lease, and on that for which the Lease provides.
3)For much the same reasons, the second aspect is not contingent upon whether Lot 20 is a 'retail shop' as asserted by the Applicant. Rather, the second aspect hinges on whether the Lease ' … provides for the occupation of retail shop … '. Again, the focus here is on the Lease, and on that for which the lease provides.
4)There are also two other aspects. A third aspect is the identification of the date or dates that are relevant for determination of the question whether the Lease is a 'retail shop lease'. A fourth aspect is the relevant burden of proof.
The Tribunal agrees that the preliminary issue is correctly identified by the parties, as being:
Whether the lease dated 14 March 2003 ('Lease') is a 'retail shop lease' under the Commercial Tenancy (Retail Shops) Agreements Act 1985 ('Act') and therefore whether the Tribunal has jurisdiction.
That will be the question that the Tribunal answers.

Background

Although the applicant filed a document headed 'Statement of agreed material facts', it was only signed by the applicant and not by the respondent. However, it became clear at the hearing that there was a factual matrix either agreed or conceded by the parties in respect of the matter which was as follows:
•The respondent is the owner of Lot 20 on Strata Plan 36239 in Certificate of Title Volume 2507 Folio 516 with the address as Unit 20/110 Mandurah Terrace, Mandurah and known as Lot 20 (Lot 20).
•By lease dated 14 March 2003, the respondent leased Lot 20 to Mandurah Resorts Pty Ltd for a term of 10 years.
•The business to be run from the premises was known as 'Mandurah Gates Resort' and the permitted use of the leased premises as described in the schedule to the lease was:
Motel management, guest amenities, restaurant, commercial laundry.
•The Mandurah Gates Resort, comprised 55 strata lots, one of which was the manager's strata lot plus Lot 20 with the remaining 54 strata units owned by individual owners, available for leasing or licensing to the resort manager.
•The 54 strata lots are on two levels in a U shape behind Lot 20, which is the major controlling lot where the resort reception area/office and restaurant is located.
•In December 2004, Mandurah Resorts Pty Ltd assigned the lease of Lot 20 to Mandurah Gates Pty Ltd.
•When Mandurah Gates Pty Ltd took that assignment, there were management agreements with most of the 54 strata lot owners. However, following the assignment there was a dispute between a number of the individual strata lot owners and Mandurah Gates Pty Ltd, resulting in many of the owners terminating their management agreements with Mandurah Gates Pty Ltd.
•In February 2005, Mandurah Gates Pty Ltd sold the resort management and assigned the lease of Lot 20 to the applicant J&L Property Group Pty Ltd.
•In May 2008, the applicant sublet Lot 20 to My Group Holdings Pty Ltd (My Group).
•On 15 September 2009, the respondent gave a default notice to the applicant in respect of Lot 20 and, on 25 September 2009, the respondent reentered into possession of Lot 20.
•On 24 December 2009, the applicant filed an application under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) with the Tribunal seeking, amongst other things confirmation, that the lease dated 14 March 2003 between the respondent and the applicant is a retail shop lease.
•On 8 April 2010, the Tribunal ordered that the preliminary issues as agreed be determined and made orders programming the matter through to hearing.

Submissions and evidence

Both parties were legally represented and each called one witness and made written and oral submissions to the Tribunal.
Mr Jim Vishwa Mitra, a director of the applicant gave evidence on behalf of the applicant, and Mr Eligio Tonino Nanni, a director of the respondent, gave evidence on behalf of the respondent.

Applicant's evidence and submissions

The applicant submitted that Lot 20 is a retail shop for the reasons that:
a)part of its business involved the sale of goods by retail, namely, the operation of a restaurant; and
b)in addition or alternatively, the true nature of the business carried out at Lot 20, or the proper characterisation of Lot 20, is that it is used predominantly for the sale of goods by retail, that is, as a restaurant.
To support its contention, the applicant referred in particular to the leading Supreme Court case dealing with the meaning of 'retail shop' Sharp v O'Driscoll (unreported, FCt WASC Library No 970111A-CNS, 21 March 1997) (Sharp and O'Driscoll) and, at para 1.9 of its submissions of the applicant, quoted from Malcolm CJ in Sharp and O'Driscoll where he said:
In my opinion, in the Western Australian Act the emphasis seems to be more on the use of the premises. In any event, it would seem to me that both the comparative uses of the premises as well as the volume of the retail sales and the income derived from them as compared with the other activities are relevant. Both in terms of the volume of retail sales and in terms of the income derived from the sale of goods, it is apparent that the major part of the income of the Hotel was derived from the sale of liquor and other goods for consumption on the premises.
To deal with the issue of the 'volume of the retail sales and the income derived from them as compared with the other activities' as referred to by Malcolm CJ, the applicant relied on the evidence of Mr Mitra. At paras 13 15 of his statement of evidence, Mr Mitra dealt with the issue of income sources for his business and stated:
When Mandurah Gates Pty Ltd took an assignment of Mandurah Gates Resort in 2004, the income was from two sources:
a.Motel room bookings [and]
b.Restaurant.
When Mandurah Gates Pty Ltd purchased the business in 2003[,] the majority of income (approx 75%) came from the Motel ie. the provision of motel rooms, and 25% came from the restaurant and from guest amenities drinks etc.
When J & L took an assignment from Mandurah Gates Pty Ltd in February 2005[,] that had changed as the rooms available to let were only 15 and the percentage of restaurant to room revenue was at least 50%. J&L held a restricted hotel licence.
In April 2006[,] J & L revamped the restaurant and J & L sponsored two Indian chefs and renamed the restaurant as "The Gates to India Restaurant" selling high[]class authentic Indian food.
From 2005 onwards[,] the percentage of income for J & L and then later My Group from the restaurant increased each year and the motel room revenue decreased. Documents 9 and 10 in the Applicant[']s documents are the balance sheet statements for 2007, 2008 and 2009 which show that the revenue increased each year for the restaurant. The restaurant was the only saving grace which could ultimately enable the project to survive.
As to the quality of evidence that the applicant could put before the Tribunal to support its contention and prove the relevant income, Mr Mitra stated at paras 17 19 of his statement of evidence:
I have had difficulty proving matters in relation to income as when Walter Holdings repudiated the lease, and entered into possession, they seized and destroyed all the financial records held by Mandurah Gates Pty Ltd, J&L and My Group held at the resort.
The 2009 balance sheet for J & L shows gross income of $38,000 but that was only one month because MyGroup took over from J&L at the end of July 2008.
Initially the motel room bookings provided the majority of the income but there was a gradual deterioration as the number of Strata Lot owners who remained with Mandurah Gates Pty Ltd then J&L diminished. At the date of the assignment of the lease of Lot 20 to J & L there were 15 Strata Lots owners who had their Strata Lots managed by J&L.
Due to the findings in Sharp and O'Driscoll as to the correct method of characterising the true nature of the business and the importance of the evidence relating to the volume of retail sales and the income derived from it as compared with other activities, counsel for the respondent took Mr Mitra to the financial documents relied on by the applicant and referred to above.
In particular, Mr Mitra was questioned in respect of a document found at 149A of the applicant's list of documents headed 'J&L Property Group Pty Ltd trading as Mandurah Gates Resort Trading Account' For the year ended 30 June 2009 (T:25, 18.10.10).
Counsel for the respondent put to Mr Mitra:
Mr Mitra, just referring to that document, do you have a copy of it yourself?
Mr Mitra replied:
Yes, I do.
Counsel for the respondent:
It says that the gross profit from trading in the restaurant for 08 was $642,274.70 and in 09 was $16,627.34, right, and those are the figures translated across to the top of 150 of the next page?
Mr Mitra replied:
Correct.
Counsel for the respondent:
Correct. Then the 2008 figures says [sic] that the total income is that figure plus some interest received. So you're saying that no money was earned at all from the accommodation units in the 2008 year?
Mr Mitra:
Yes. Unfortunately[,] I think it may be the income by the accountant had me included into that income of the restaurant, …
Counsel for the respondent:
So you're saying that in fact that income is the whole of the income, not just the restaurant income?
Mr Mitra:
That's correct.
Counsel for the respondent:
There's been a mistake by the accountants?
Mr Mitra replied:
Yes, right.
Counsel for the respondent:
And for that reason[,] you're not able at this stage to give us a breakdown as to how the trading income …?
Mr Mitra:
Trading, no.
Counsel for the respondent:
… the 793799 was generated?
Mr Mitra:
No.
In reexamination, counsel for the applicant brought Mr Mitra back to this particular issue and put to Mr Mitra (T:33, 18.10.10):
… In the infamous page 149A, there's reference there to the restaurant income. So in 2009, how many units do you believe were controlled?
Mr Mitra:
Accommodation?
Counsel for the applicant:
Licensed or controlled by J & L?
Mr Mitra:
The number reduced drastically.
Counsel for applicant:
Very minor?
Mr Mitra:
Yes.
Counsel for applicant:
Initially we said, and your evidence is, there were 15 at the commencement. Did that stay throughout?
Mr Mitra:
No.
Counsel for applicant:
So it, what, lessened?
Mr Mitra:
Yes, it lessened. It decreased.
Counsel for applicant:
Decreased? So[,] say at 2009[,] it's essentially showing, as I read that page 149A, no income?
Mr Mitra:
Yes.
Counsel for applicant:
That doesn't appear to be correct, but how many rooms do you believe you would have controlled?
Mr Mitra:
Controlled in 2009? Five.
Counsel for applicant:
Five rooms? Okay. So[,] in other words, essentially the majority of the income of J [& L was from the restaurant?
Mr Mitra:
That's right.
In respect of the lack of documents to support the applicant's contentions and the alleged destruction of documents referred to by Mr Mitra in para 17 of his witness statement, counsel for the respondent raised the matter with Mr Mitra during the following exchange (T:29 & T:30, 18.10.2010):
Counsel for the respondent:
In the next paragraph, paragraph 17, you allege that "When Walter Holdings repudiated the lease," as you say, "and entered into possession, they seized and destroyed all the financial records"?
Mr Mitra:
That's correct.
Counsel for the respondent:
But you're not actually alleging that you were present at a time when you saw documents being destroyed, are you?
Mr Mitra:
No, all I saw was a bin with all our stuff that had been thrown into it.
Counsel for the respondent:
You're also aware that Mr Nanni denies destroying your documents?
Mr Mitra:
Yes, I saw that.
Counsel for the respondent:
What do you say in response to that?
Mr Mitra:
I've got photo evidence of the bin, so I provided that as evidence to where the documents were thrown into.
Counsel for the respondent:
So you say that documents were thrown into a bin, but you don't know what happened to those documents after that?
Mr Mitra:
We don't have the documents. We were asked.
Counsel for the respondent:
Mr Nanni's witness statement says that he's informed your company several times that the documents are available for collection. What's your response to that?
Mr Mitra replied:
Personally I haven't heard.
Counsel for the respondent:
You haven't heard? All right. But you're aware it's Mr Nanni's case that the documents are available and that your company haven't collected them?
Mr Mitra replied:
I've heard nothing to me directly.
Counsel for the respondent:
But regardless of all this, the simple fact is that the documents haven't been produced to the [T]ribunal, have they?
Mr Mitra replied:
Correct.
During the course of the applicant's closing submissions, the Tribunal raised the issue of the lack of documents on which the applicant relied to prove its contention that following the assignment of the lease in 2005 the main income of the applicant was from the restaurant. The following exchange took place (T:75 & T:78, 18.10.10):
Counsel for the applicant:
Our papers definitely say to you that when this lease commenced the use was probably not a retail shop because probably at the commencement the number of units that were available for leasing or licence would have meant that the predominant income was from motel management but that changed substantially throughout. …
So what you need to look at is the turnover of business for the whole of the time we're talking about[,] and the evidence before you is that day one in 2003, yes probably, you could say, it may not have been a retail shop lease but, as this lease has gone on on each assignment, it's quite clear that the predominant use has changed from motel management to a restaurant.
The Tribunal:
Could I stop you there[?] When you say it's quite clear, can you help me with that?
...
Counsel for the applicant:
Well, okay. The evidence before you is some balance sheet and profit and loss statements which are not perfect but ---
The Tribunal:
And what am I to do in those circumstances. I mean, I need your help here. All right? Clearly and Mr Ludlow obviously has spotted this, all right, and he's picked the point and I can only decide the matter based on the evidence. I can't take a punt or make a best guess or whatever and I'm not trying to be smart. I know you said it's clear but I don't think it's that clear and I do want you now, if you can, to try and clarify for me, and particularly for you, why I should be satisfied.
Counsel for the applicant:
The answer to that is the number of rooms that are available for leasing.
The Tribunal:
I accept that but ---
…
Counsel for the applicant:
Okay. The evidence before you is the balance sheets and the profit and loss account. The evidence of Mr Mitra was that more than 50 per cent of the income was from the restaurant. Indeed, on that page 149A which had been missed, that shows no income from motels. Now, that's obviously clearly – well, would seem to be incorrect. But his evidence when he was questioned on that was that perhaps four rooms at the end were available. Also I could refer you to the 2009 statements. There's one month there and one month of income only.
…
Sir, the difficulty we face is lack of records.
The Tribunal:
I accept that, but in Blunt v Pal we had the same problem, and I'm not this is a real issue. I mean, you see, what you're saying is that on page[s] 149A and 150[,] the 2009 figure is for one month, and then [the] 2008 figure effectively is for 12 months, but it's then infected by the fact that there's no split up between the restaurant and the units, and there are some general statements in paragraph 13 that then rely on a statement in paragraph 15, and it says, "which show that", but they don't show that. I want you to be able to show me kind of, show me the money.
Counsel for the applicant:
Sir, I can only refer to just the witness statement, imperfect as it is, and the balance sheet because we haven't got the source documents to back that up, and why is that? It was because the respondent has, as we say, destroyed the records …
The Tribunal:
Hold on. What about the fact that Mr Nanni in his witness statement says that there were documents available for collection?
Counsel for the applicant:
Sir[,] the documents that we are talking about were, on my submissions, destroyed. The evidence from Mr Mitra was that there was a whole lot of documents that were destroyed and ---
The Tribunal:
What the evidence from Mr Mitra was that there were a group of documents thrown in a bin.
Counsel for the applicant:
Yes.
The Tribunal:
But he couldn't identify individual documents. He doesn't know, for instance, what Mr Nanni has. I mean, he could have copies of everything in those - whatever Mr Nanni has. No inspection of those documents has taken place at all, it would appear. I'm just puzzled by that, and it isn't as if this I mean, if I had been looking for documents and then somebody in [head] office said to me ''Oh, by the way, I have all these documents," and they were crucial, I'd run off and get them. You're putting a proposition. I understand your proposition about that, right.
Counsel for the applicant:
Yes.
The Tribunal:
And you know in order to get me across the line and get yourself across the line, you have to effectively, like in Blunt and Pal, show me the money. In the end[,] paragraphs 13 to 15 is what you're offering; that's your best offer.
Counsel for the applicant:
That's it, sir.

In respect of the other important issue of retail floor area, the applicant submitted at para 2.8 of its submissions:
…
However, we submit that the retail floor area is 505.86 square metres comprising the licensed restaurant premises (383.035 [metres squared]) including the terrace area (63 [metres squared]) plus the conference room (122.825 [metres squared]) but excluding the reception area.
The reception area (78.14 metres squared) comprises a foyer, front office reception and an office behind it. The front office reception deals with motel management issues and the office behind it contained all of the Applicant's records for the restaurant and the motel management.
It is acknowledged that there are two aspects to the foyer reception area that have an ancillary use for the restaurant. Firstly, restaurant patrons must walk through the foyer (but not the office nor [past] the reception desk) to access the toilets. Secondly, the entrance to the restaurant in practice is through the Porte[]Cochere into the foyer.
In our submission[,] the retail floor area of the ground floor inside area is 505.86 [metres squared], ie[,] you exclude the reception area on the basis that it is not designed and available for use in the carrying on of the Applicant's business of a restaurant. However, if you find that these areas are part of the retail shop as they are ancillary to the "purposes of selling goods or serving customers", then we submit that the retail floor area of the ground inside area is 584 [metres squared].
Having gone through all of the areas, the applicant closed by stating at para 2.10 of his submissions:
However, if the reception area of 78.14 [metres squared] and the Porte[]Cochere Area/ hardstand entry of 101.54 [metres squared] are found to be part of the retail floor area, we submit that the total retail floor area is 685.54 [metres squared].
In either case, we submit that the total retail floor area is less than 1,000 [metres squared].
As to which date was the 'relevant date' for the purpose of deciding the true nature of the business carried out on the premises, the applicant submitted, at para 1.17 of its submissions:
It is our submission that the relevant time for comparing uses of Lot 20 and the income and volume of sales from the various uses on Lot 20 is not the commencement of the Lease, but at the assignment of the Lease from the then tenant, Mandurah Gates Pty Ltd to the Applicant on February 2005 {"Assignment Date").

The respondent's submissions and evidence

As outlined earlier, in the first four paragraphs of their submissions, the respondent agreed with the preliminary issue as stated by the applicant but identified different aspects it believed were relevant.
In his opening, counsel for the respondent reiterated the point and stated (T:36, 18.10.10):
… the thrust of the applicant's argument in relation to the first sub-issue is that the question is whether the premises [was] being used as a retail shop.
We disagree with that. We say that the real issue is whether the lease provides for the use of [a] retail shop, and that's a different question, because the focus is on the lease rather than on the shop. …
And later stated (T:37, 18.10.10):
We say the question is what is the most conspicuous or effective use for which the lease provides, and we say that that's the management of the complex as a whole, a complex that is a tourist resort. … So far as the second sub-issue is concerned, the question there is whether the retail floor area is more than 1000 square metres, …
… the thrust of our argument is simply that the retail floor area, which is around – the floor area of lot 20 which is around 2000 square metres is all retail floor area, and we say that on application of the statutory test for retail floor area which has been amended since the case law was created. The statutory test requires inquiry as to what is "available for use for the carrying on of business". The test is not restricted to retail business. …
In its submissions under the heading 'The test for determining whether premises [is] a retail shop', the respondent also referred to Sharp and O'Driscoll and other cases where this Tribunal has applied that decision, and stated, at [20] and [21]:
What does emerge from the case law is that the Tribunal has repeatedly applied the test of Malcolm CJ in determining whether 'premises … [is] [being] used wholly or predominantly for the carrying on of a business involving the sale of goods by retail'. The Tribunal should therefore continue to apply that test, including in the present dispute, unless or until the Court of Appeal directs it to do otherwise.
Under the heading 'The identification of relevant dates', the respondent set out three possibilities at paras 28 and 29 of its written submissions and stated:
…
(a)the relevant date is the date on which the Lease was executed by the then parties, or the date on which it came into effect, namely[,] a date in 2003 and if, as at that date, the Lease provided " … for the occupation of a retail shop", then the Lease was, and has since remained, a lease of that character.
(b)the relevant date is the date on which the rights and obligations of the tenant under the Lease were assigned to the Applicant, or the date on which that assignment came into effect, namely[,] 18 February 2005 (or perhaps a few days later) and if, as at that date, the Lease provided, as at that date " … for the occupation of a retail shop", then the Lease was, and has since remained, a lease of that character.
(c)there is no particular relevant date the Lease can simply 'drift' into or out of the status of lease " … providing for the occupation of a retail shop" at any time, depending upon whether the premises to which it applies [is] being " … used [at that time] wholly or predominantly for the carrying on of a business involving the sale of goods by retail" and the question whether the Lease provides " … for the occupation of a retail shop" at any given moment therefore depends upon whether Lot 20 is a "retail shop" at that moment.
The respondent then set out its arguments in respect of each of those propositions and at para 47 stated:
There are several reasons why the relevant date is the date the lease is created. …
In respect of the permitted uses of Lot 20, the respondent stated at paras 59 to 63 of its written submission:
The parties agree that the permitted uses of Lot 20 under one of the terms of the Lease are "Motel management, guest amenities, restaurant, commercial laundry".
Of these permitted uses, only "restaurant" would be a "sale of goods by retail" use. The other three permitted uses are sales of services. …
When the physical configuration of Lot 20 and the rest of the resort and their intended uses, all as at March 2003, and also the way in which the permitted uses are described and listed in the Lease, are taken into account, it can be seen that the Lease provides for the occupation of premises to be used most conspicuously and effectively for motel management and guest amenity, and not most conspicuously or effectively as a restaurant.
…
Even if, as the Applicant contends, the actual use to which the Applicant later put Lot 20 was the "restaurant" permitted use, that does not alter the character of the Lease as a lease providing for occupancy of premises to be used most conspicuously and effectively for motel management and guest amenity (including at least guest laundry facilities). …
The respondent went into some detail to support its contention that the retail floor area exceeded 1,000 square metres, and argued that, apart from the 505.86 square metres conceded by the applicant as being the 'retail floor area' of Lot 20, in fact, all of the areas of Lot 20 were retail floor area, as they were 'designed and available for use for the carrying on of business' and, therefore, the total retail floor area of Lot 20 exceeded 1,000 square metres and was not subject to the Act.

Consideration

As outlined earlier, the respondent argued that an important aspect in determining the matter was whether the lease was a 'lease that provides for the occupation of a retail shop'. However, to identify whether a lease is, in fact, a 'retail shop lease', a number of steps must be undertaken.
Section 3 of the Act sets out three important definitions, namely:
retail floor area, in relation to a retail shop, means the floor area of the retail shop designed and available for use for the carrying on of business in the retail shop;
retail shop means
(a)any premises situated in a retail shopping centre that [is] used wholly or predominantly for the carrying on of a business; and
(b)any premises not situated in a retail shopping centre that [is] used wholly or predominantly for the carrying on of
(i)a business involving the sale of goods by retail; or
(ii)a specified business,
but does not include premises used wholly or partly for the carrying on of a business involving the retail sale of petrol or diesel to be used to propel vehicles on public roads, other than premises used for that purpose by a tenant under a lease from a landlord who is not a party to a franchise agreement within the meaning of that expression in the Petroleum Retail Marketing Franchise Act 1980⁷ of the Parliament of the Commonwealth;
retail shop lease means a lease that provides for the occupation of a retail shop other than where
(a)the total retail floor area to which that lease applies (including, in the case of a building with 2 or more floor levels, the area of every floor level or part thereof to which that lease applies) exceeds 1 000 square metres; or
(b)the lease is held by a corporation (within the meaning of the Corporations Act 2001 of the Commonwealth) that would not be eligible to be incorporated as a proprietary company, or that is held by a subsidiary of such a corporation;
The definition of 'retail shop lease' states:
retail shop lease means a lease that provides for the occupation of a retail shop …
In the circumstances, to confirm whether a lease provides for the occupation of a retail shop, one must go to the definition of 'retail shop', which states:
retail shop means
(a)any premises situated in a retail shopping centre that [is] used wholly or predominantly for the carrying on of a business; and
(b)any premises not situated in a retail shopping centre that [is] used wholly or predominantly for the carrying on of
(i)a business involving the sale of goods by retail; …
In the present case, para (a) does not apply, as the premises is not situated in a retail shopping centre. One is therefore left with deciding whether or not the premises in question is used wholly or predominantly for the carrying on of a business involving the sale of goods by retail.
This issue was the subject of a decision of the Full Court of Western Australia in the case of Sharp and O'Driscoll, referred to by both parties and which this Tribunal has applied in a number of cases, where Malcolm CJ dealt with the matter in some detail and stated at 24:
The effect of my conclusion in the present case, however, is that a hotel, tavern or restaurant with a floor area of less than 1,000 square metres does constitute a 'retail shop' to which the Act applies.
It is common ground that the permitted uses of Lot 20 under the terms of the lease are motel management, guest amenities, restaurant and commercial laundry.
The applicant conceded that, at the commencement of the lease on 1 April 2003, the majority (that is, 75% of income received by the original tenant, Mandurah Resorts Pty Ltd) would have been for the management of motel room accommodation and that the premises would therefore not be a retail shop at that time.
However, the thrust of the applicant's case was that, over a period of time, that mix changed, and at para 1.24 submitted that:
… at the Assignment Date, the major part of the income for Lot 20 was derived from the sale of goods and liquor for consumption in the restaurant and the sale of goods for consumption away from the restaurant and accordingly, within the analysis of Malcolm CJ, it would be a retail shop lease.
The respondent, on the other hand, contended, at para 63 of its submission, that:
Even if, as the Applicant contends, the actual use to which the Applicant later put Lot 20 was the "restaurant" permitted use, that does not alter the character of the Lease as a lease providing for occupancy of premises to be used most conspicuously and effectively for motel management and guest amenity (including at least guest laundry facilities). ….
During the course of the hearing, the question arose as to whether a lease can become a retail shop lease where a retail shop is a prohibited use or, indeed, a retail shop is not a permitted use.
It is unlikely that merely trading as a retail shop would make a lease something it cannot be, or make lawful something which is prohibited.
However, that is not the case here, as one of the specified permitted uses is 'restaurant' which, depending on the facts of the case, could, as held by Malcolm CJ in Sharp and O'Driscoll 'constitute a retail shop to which the Act applies'.
Before looking at other issues raised, such as whether the retail floor area exceeds 1,000 square metres or what the relevant date might be for determining whether the premises was a retail shop, it is first necessary to decide whether the applicant can satisfy the Tribunal on the evidence put forward, that at any point during the term of the lease, the premises was used wholly or predominantly for the carrying on of a business involving the sale of goods by retail.
The applicant submitted that, from the date of the assignment of the lease from Mandurah Gates Pty Ltd to the applicant on 18 February 2005, the major portion of the income of Lot 20 was derived through the sale of goods and liquor for consumption, both on and away from the restaurant, and that the restaurant use was, in effect, the predominant use and was therefore a retail shop as defined by the Act. Furthermore, as the restaurant use was a permitted use under the lease, the lease would therefore be a retail shop lease under the Act.
To persuade the Tribunal to reach that conclusion, the applicant relied on the evidence of Mr Mitra set out in detail earlier in this decision. However, as noted, Mr Mitra was crossexamined on his evidence and the Tribunal raised the difficulty it saw with the evidence led with counsel for the applicant.
Malcolm CJ in Sharp and O'Driscoll clearly set out the issues that are relevant in attempting to identify the predominant use and stated at 20:
… In my opinion, in the Western Australian Act[,] the emphasis seems to be more on the use of the premises. In any event, it would seem to me that both the comparative uses of the premises as well as the volume of retail sales and the income derived from them as compared with other activities are relevant.
Dealing further with the volume of retail sales and the income derived from them, Malcolm CJ went on to state:
Both in terms of the volume of retail sales and in terms of the income derived from the sale of goods, it is apparent that the major part of the income of the Hotel was derived from the sale of liquor and other goods for consumption on the premises. …
A comparative analysis of the financial information of the various uses conducted on the premises is, therefore, an important element in respect of which the Tribunal must be satisfied.
The principal piece of evidence the applicant sought to rely on to prove that issue was a trading account for the year ended 30 June 2009, a copy of which was contained at 149A of the applicant's documents, which showed sales in the restaurant for the 2008 financial year as being $793,799.02 and for one month of 2009 as being $38,948.58.
However, under crossexamination again, details of which are set out earlier, Mr Mitra clearly accepted that figure was incorrect, as it appeared to include both income from motel accommodation and the restaurant.
The applicant could not point the Tribunal to any evidence that was clear or unequivocal in respect of income from the restaurant and which could be relied on by the Tribunal to reach the conclusion pressed on it by the applicant.
No evidence was called from the applicant's accountant or no evidence given of such things as room rates for the rooms the applicant said were under its control. Further, as confirmed by Mr Mitra, no effort was made to inspect documents which the respondent claims to have in its possession which may have clarified the position and which, it states, were offered to the applicant.
It may well be that the restaurant was the major contributor to the income of the business, but to reach that finding on the evidence before it, the Tribunal would be forced to make an assumption, which is something the Tribunal is neither willing to do, nor should it be required to do.
The applicant bears the burden of proof to show that the premises was used wholly or predominantly for the carrying on of a business involving the sale of goods by retail. It has not, in the Tribunal's view, discharged that burden, and it does not appear to be able to do so, on the present evidence.
In the circumstances, on the evidence put forward by the applicant, the Tribunal is not satisfied, in respect of that part of the test laid down by Malcolm CJ in Sharp and O'Driscoll relating to the volume of retail sales and the income derived therefrom, as compared with other activities.
In respect of the second part of the test set out by Malcolm CJ, being the 'comparative uses of the premises', both parties presented arguments that ran contrary to their interest in respect of such a test.
The total area of Lot 20 is approximately 2,000 square metres and there is an exclusion in the Act for premises with a total retail floor area exceeding 1,000 square metres.
However, the applicant, in order to stay within the jurisdiction of the Act, argued that, at most, between 500 to 700 square metres, depending on what is included, of the total leased area, should be considered as retail floor area. The respondent, on the other hand, while denying that the premises was a retail shop, submitted that, if it was found to be a retail shop, then the total floor area of Lot 20, being approximately 2,000 square metres, should all be considered to be retail floor area.
Malcolm CJ stated at 21 in Sharp and O'Driscoll:
In the end, the question is one of characterisation. … the test is to determine the true nature of the business carried on at the premises. …
To do this, the Tribunal needs to be satisfied on both levels of the test, namely, that the major part of the income of the applicant was derived predominantly from the carrying on of a business involving the sale of goods by retail and as to the comparative uses of the premises.

Conclusion

In the present case, the applicant has been unable to satisfy the Tribunal on the evidence before it that the premises was used wholly or predominantly for the carrying on of a business involving the sale of goods by retail.
As the Tribunal is not satisfied that the premises was used wholly or predominantly for the carrying on of a business involving the sale of goods by retail, the other issues raised by the parties do not need to be dealt with.
For the reasons above, the preliminary question as to whether the lease of Lot 20 is a retail shop lease as defined in the Act is therefore answered in the negative.
In the circumstances, the Tribunal has no jurisdiction to deal with the matter and the application will be dismissed.

Orders

1.The preliminary question is answered in the negative.
2.The application is dismissed.

I certify that this and the preceding [120] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR M SPILLANE, MEMBER