KWIK 'N' KLEEN PTY LTD ACN 116 534 019 and SEARS WAINWRIGHT SUPERANNUATION PTY LTD ACN 093 058 685 - [2009] WASAT 148

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

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

CITATION: KWIK 'N' KLEEN PTY LTD ACN 116 534 019 and SEARS WAINWRIGHT SUPERANNUATION PTY LTD ACN 093 058 685 [2009] WASAT 148

MEMBER: MR T CAREY (MEMBER)

HEARD: DETERMINED ON THE DOCUMENTS

DELIVERED : 5 AUGUST 2009

FILE NO/S: CC 643 of 2009

BETWEEN: KWIK 'N' KLEEN PTY LTD ACN 116 534 019
Applicant
AND
SEARS WAINWRIGHT SUPERANNUATION PTY LTD ACN 093 058 685
Respondent

Catchwords:

Landlord and tenant - Retail shops - Preliminary issue - Whether the lease is a 'retail shop lease' - Whether the business conducted at the premises is a 'retail shop' - Car wash business

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3, s 16
State Administrative Tribunal Act 2005 (WA), s 9(c), s 32(4)

Result:

Application dismissed for want of jurisdiction

Category: B

Representation:

Counsel:

Applicant: N/A
Respondent: N/A

Solicitors:

Applicant: Denning Deane
Respondent: Irdi Legal

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

Blunt and Pal [2007] WASAT 194
Formstar Holdings Pty Ltd and Top Notch Roofing Pty Ltd [2007] WASAT 208
Sharp v O'Driscoll (unreported, WASC, Library No 970111A-C&S, 21 March 1997)
South Veterinary Group Pty Ltd and Sharpe [2006] WASAT 222

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant referred a number of questions arising under its lease with the respondent to the Tribunal. As a precondition of the Tribunal's jurisdiction to determine the questions, it was necessary that the lease was a 'retail shop lease' under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), which turned upon the question of whether the applicant's business, conducted on the leased premises, was a 'retail shop'. This depended, on the facts, on whether or not the premises were used wholly or predominantly for the carrying on of a business involving the sale of goods by retail. The applicant's business conducted at the premises is a car wash business.
The Tribunal considered the construction of the statutory definition by reference to a number of its own earlier decisions and the acknowledged leading Supreme Court authority, Sharp v O'Driscoll (unreported, WASC, Library No 970111A-C&S, 21 March 1997). It highlighted the correct characterisation and true nature of the business as being the critical factor. It noted a divergence on the point of construction between the members of the majority in that case, albeit one of less significance than might have appeared at first glance.
The Tribunal applied what it accepted to be the correctly construed definition to the applicant's business and found that it did not fit within it. Neither the automatic car wash nor the manual car wash bays satisfied the required involvement of the sale of goods by retail, whilst the undoubted complying retail sale via vendor machines at the premises was not an essential part of the business. Lacking the necessary jurisdiction to deal with it, the Tribunal dismissed the application.

Issue

On 21 May 2009, the Tribunal ordered that it shall determine as a preliminary issue whether or not the lease in question is a 'retail shop lease' under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act) and therefore whether it has jurisdiction.

Relevant background to preliminary issue

The applicant leases premises from the respondent located at Lot 1, 1145 Albany Highway, Bentley. The applicant operates a car wash business from the leased premises. As well as being a matter of factual agreement between the parties, this is consistent with the stipulation in the lease dated 1 April 2006 of 'Automatic and manual carwash' as the only permitted use for the demised premises. I will refer to further aspects of the applicant's use of the premises later in these reasons.
The question of whether the applicant's business is a 'retail shop', and therefore whether the lease between the parties as a 'retail shop lease', is the first of a number of questions referred by the applicant to the Tribunal for determination pursuant to s 16 of the CTRSA Act. Even if it were not, it is a question that the Tribunal would have needed to consider in order to determine whether it had jurisdiction to determine the remaining questions.
Although not the subject of explicit agreement, the respondent has not objected to the applicant's assertion that the size of the leased premises is 915 square metres, and I therefore accept the assertion. If the premises were in excess of 1,000 square metres, to the extent that its area comprised retail floor area, it would be excluded from the definition under the CTRSA Act of 'retail shop lease', taking the matter outside the Tribunal's jurisdiction on that basis.
The preliminary issue comes down to whether or not the leased premises qualify as a 'retail shop' within the definition of that expression contained in the CTRSA Act. That definition, which appears in s 3 of the CTRSA Act, is in the following terms:
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; and
(b)any premises not situated in a retail shopping centre that are 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 1980 of the Parliament of the Commonwealth;
The parties are agreed that the leased premises are not situated in a retail shopping centre. Further, it is agreed that the use made of the leased premises is not one of the prescribed specified businesses to which subsection (b)(ii) of the definition refers. Finally, there is no suggestion that the exclusion in the definition relating to the retail sale of petrol or diesel applies.
The preliminary issue is therefore to be distilled down to the narrow question of whether or not the leased premises 'are used wholly or predominantly for the carrying on of a business involving the sale of goods by retail' as that expression is to be understood within the definition of 'retail shop' under the CTRSA Act.
I will proceed by, first, considering the correct construction of the critical expression, and, second, applying that construction to the leased premises in question.

Construction of definition of 'retail shop'

A number of earlier decisions of the Tribunal have dealt with the meaning of the same expression with which I am concerned. They are Formstar Holdings Pty Ltd and Top Notch Roofing Pty Ltd [2007] WASAT 208 (Formstar), Blunt and Pal [2007] WASAT 194 (Blunt and Pal) and South Veterinary Group Pty Ltd and Sharpe [2006] WASAT 222, the latter case dealing with the issue on an interim relief basis. Each decision identified Sharp v O'Driscoll (unreported, WASC, Library No 970111A-C&S, 21 March 1997) (Sharp), as the leading authority on the construction point.
The issue in Sharp was whether leased premises comprising a hotel came within the definition of 'retail shop', and specifically that part of the definition with which I am concerned. Chief Justice Malcolm noted (at A12) that the CTRSA Act contained nothing on the face of it which would suggest that it was intended to apply to a hotel or restaurant, which provided a range of services in the context of which food and drink are supplied in exchange for a price. In the case of a hotel, those services might include waiting services, supply of glasses, seating, tables, food, music and entertainment. However, 'somewhat reluctantly', his Honour felt 'compelled to the conclusion that the proper characterisation of the hotel is that it constituted premises used predominantly for the carrying on of a business involving the sale of goods by retail'.
The primary argument raised by the appellant before the Full Court in Sharp relied upon a comparison between the areas devoted to the sale of goods by retail as compared with the area of the premises used for other purposes, including accommodation. This argument was rejected by Malcolm CJ on the basis that a variety of uses were being put by the lessee to the leased premises, only some of which were for purposes of the business of the hotel. It was only those areas used for hotel business purposes in relation to which an assessment of their predominant use in accordance with the definition of 'retail shop' was necessary.
The then Chief Justice construed the critical expression so the entirety of the composite 'a business involving the sale of goods by retail' was governed by 'wholly or predominantly'; the business being conducted at the subject premises being predominantly, if not wholly, must be the sale of goods by retail. The task of assessing particular businesses was described as follows (at A21):
In the end, the question is one of characterisation. As was submitted by counsel for the respondents, the test is to determine the true nature of the business carried on at the premises.
Having regard to both the physical use made of the premises and the volume of retail sales and income derived from them as compared with other activities conducted upon the premises, his Honour concluded (at A23) 'clearly the predominant use of the premises looked at as a whole was for the retail business of the hotel'.
Franklyn J, who was the second member of the majority in Sharp, provided a separate judgment in which he disagreed that the relevant wording in the 'retail shop' definition required that the business be wholly or predominantly one for the sale of goods by retail. This view was based on his Honour's construction of the definition, and in particular, the use of the word 'involving' in subsection (b)(i) of the definition. As to that, his Honour said (at C7):
In my opinion, the use of the word 'involving' clearly introduces a different concept, that is, that the business need only include as some part of its operations the sale of goods by retail.
Franklyn J considered, at C8, the meaning of 'involving':
The definition of 'involve' provided in the New Shorter Oxford English Dictionary includes the following: 'include, contain, comprehend' and 'include as an essential'. Similar definitions are found in The Macquarie Dictionary. It follows, in my view, that the hotel premises are used, in the words of the statutory definition of 'retail shop', 'wholly or predominantly for the carrying on of a business involving the sale of goods by retail' and so constitute a retail shop for the purposes of the Act.
And, at C9, Pigeon J said:
To the extent that the definitions of 'retail shop' and 'retail shopping centre' are concerned with 'the carrying on of a business involving the sale of goods by retail', they can be seen, again without any strain of language, to be directed to businesses, the carrying on of which necessarily includes the sale of goods by retail, ie, businesses which of their nature include such sale as an essential. This is in conformity with the definition of the word 'involve'.
The latter elaboration by his Honour is significant in the context of the preliminary issue which I have to decide. It indicates that, on the construction of the definition favoured by Franklyn J, the retail sale of goods must constitute a necessary part of the business being carried on at the premises. This is a consequence of the final of the definitions of 'involve' from the New Shorter Oxford English Dictionary cited by his Honour. When this gloss is placed upon the construction of 'retail shop' favoured by his Honour, in my respectful view, the difference in the respective interpretations of the definition of Malcolm CJ and Franklyn J is not so wide as one might have thought at first glance.

Application to premises leased by applicant

It is common ground that the leased premises house one automatic car wash and another four car bays equipped for the manual washing of cars by customers. In addition, three vending machines situated at the rear of the premises facilitate the sale by the applicant to members of the public goods including chamois, air fresheners and other miscellaneous car cleaning products.
The applicant contends the following:
•the correct characterisation of the car wash is that it involves a direct sale of goods that are then consumed by customers on the leased premises;
•the customer pays a fee to hire the machinery to wash the car and to purchase tangible, consumable goods by way of detergents, soaps and water used to wash the car;
•the applicant buys the water, detergents, soaps and machinery used in the process of a car wash at wholesale prices and sells them to consumers at a retail value;
•the applicant does not provide any labour, special knowledge or expertise to consumers otherwise synonymous with a service; and
•alternatively, relying upon the judgment of Franklyn J in Sharp, the definition of 'retail shop' requires only that the business includes, as some part of its operations, the sale of goods by retail.
I will deal first with the contentions regarding the 'correct characterisation and true nature of' the car wash, to which the first four of the listed contentions of the applicant are directed, and then with the argument based upon Franklyn J's decision in Sharp.
By contrast with some of the other cases dealing with whether particular premises fall within the definition of 'retail shop' under the CTRSA Act, this is not a case where it is necessary to determine whether one undoubted use of the premises by way of a retail business among a number of other, non-complying, uses is sufficient (Sharp and Blunt and Pal being examples of this). Further, there is no dispute about the actual use of the leased premises to be considered, as distinct from how that use is to be characterised.
I note that, by contrast with the operation of the manual car wash bays, only minimal information has been provided regarding the operation of the automatic car wash. As I perceive it ‑ although there are no sales or other figures to support this ‑ this is because the majority of activity at the leased premises takes place in the four manual bays rather than the single automatic bay. Whatever the reason, it is convenient for the purposes of my analysis to commence with a consideration of the operation of the automatic facility. I have had no difficulty in informing myself as to that matter on the basis of my own experience of coin-operated automatic car washes, which I am permitted by s 9(c) and s 32(4) of the State Administrative Tribunal Act 2004 (WA) to do.
The automatic car wash involves a single payment by the customer which allows access by the customer's vehicle to the use of the washing equipment (in the applicant's words, 'customers … pay to use the automatic car exterior car wash via the vending consol adjacent to the automatic car wash entry'). The customer remains in the vehicle while the equipment carries out its automated program, which might include initial rinse, one or more wash cycles, final rinse, polish and dry. Each cycle is interdependent on the other cycles in achieving the desired result, a cleaned vehicle. The same can be said for each products used in the program ‑ water, detergents, polish.
In my view, no retail sale of individual products is involved in the automatic car wash side of the applicant's business. By way of illustration, the detergent used in the automated car wash is not, of itself, the subject of any individual 'sale', but is consumed in the course of the automated car wash program as part of the cleaning process. This is to be contrasted with a glass of liquor sold and consumed in a hotel, which Malcolm CJ in Sharp expressly found to involve a sale of goods. The liquor is the subject of a discrete sale to a customer who has attended the hotel for the purpose, or a purpose which includes the purpose, of its consumption.
Turning to the manual car wash bays, the applicant provided the following description of the process:
… [C]ustomers pay the consideration into the wall-mounted vending machine and upon such payment they then proceed to use the washdown bay, consume the soap, water, polish, degreaser, foam brush, rinse and spotfree rinse that may be chosen via a vending unit on each washdown bay wall. Further, a customer chooses from a variety to apply the desired product to wash their car. Upon completion with a clean car exterior, the customer would move forward into a vacuum/drying bay.
…
… [T]he majority of the facilities provided at the Leased Premises do not simply carry out a predetermined function, but are capable of being manipulated by the consumer in such a fashion that the customer has a conscious choice as to the type and quantity of product it will purchase and consume at the Leased Premises.
The question is whether the different features of the manual bays, when compared with the automatic car wash, distinguish that part of the business sufficiently from the automatic wash so as to give rise to the description of a business the sale of goods by retail.
Bearing in mind, as the relevant consideration, the true nature of the business concerned, it is, in my view, wholly artificial to regard each acquisition (to use a neutral term) of a product as a retail sale of a good. In acquiring each good and applying it to his or her vehicle, the customer performs manually the functions of the automatic car wash. Regardless of the fact that the customer provides the labour, and the further fact that the customer exercises control over the type and quantity of product used, the ultimate objective is the same as in the case of the automatic facility ‑ a cleaned vehicle. As was the case with the automatic car wash, no retail sale of, for example, detergent, is involved, because the detergent is acquired purely for the purposes of, and consumed in the course of, the manual car wash.
The applicant's submission to the contrary has parallels with the argument of the applicant in Formstar. There, the applicant conducted an automotive repair and maintenance business in leased premises and argued that a significant part of that business involved the sale of goods by retail. It pointed to the 'sale' of motor vehicle spares, parts and other consumables, wholly or largely in the course of its servicing and repair work on vehicles carried out on the premises.
The Tribunal in Formstar rejected the argument of the applicant. It did so on the basis that (at [44]):
… as a question of objective fact the Tribunal is satisfied that the predominant (and "true") use of the subject premises is for the servicing of motor vehicles. It is a business wholly or predominantly comprising the supply of services by retail. That is the "most conspicuous or effective portion of the use to which the premises are put".
In response to the argument that the business involved a high level of retail sales, the Tribunal said (at [45]):
… Retail sales, to the extent that they can be so characterised at all, are at best an incident - more accurately, a consequence - of the service function offered by the applicant. The use of consumables in the service provided here is not analogous to liquor and similar retail sales.
Here, adopting the reasoning of the Tribunal in Formstar, it might be said that the predominant use or purpose of the leased premises is the washing of vehicles, and either that no retail sales are involved, or to the extent that they are, they are a consequence of the predominant purpose.

The applicant seeks to distinguish the facts in Formstar on the basis that a car wash is not a supply of a service by retail. Based upon the applicant's submissions, this would appear to be because the customer of the manual bays provides the labour, the provision of the washing apparatus cannot be described as a service, or a combination of the two.
It is for the applicant to establish that facts giving rise to the Tribunal having jurisdiction exist. It is therefore necessary for the applicant to show that the car wash business (or at least part of it) conducted at the premises involves the sale of goods by retail to the required extent. My conclusions as to the 'correct characterisation and true nature of' the car wash militate against any possibility of it doing so. However, in deference to the applicant's position, I will deal with the two alternative grounds upon which I have apprehended the applicant seeks to distinguish the Formstar fact situation.
The fact that in Formstar, the labour was provided by the operator of the business, whereas here, the labour was supplied by the customer (although only in the manual bays), no doubt contributes to a clearer characterisation of the business in Formstar as the supply of services by retail than might be the case here. However, the fact that the customer, rather than the applicant, provides the labour necessary to obtain the desired result does not overcome any absence of the sale of goods by retail. Further, it seems to me that the conclusion that no supply of a service by retail occurs in the operation of the car wash is plainly wrong. True though it is that the applicant provides no services by way of labour, this does not mean that whatever is supplied must be in the nature of goods. 'Labour' is not identical to 'service', although the former may be a subset of the latter. The applicant itself referred to the customer paying a fee to hire the machinery to wash the car. This falls within either or both of the second and third of the 26 listed definitions for 'service' in The Macquarie Concise Dictionary, (4th ed, 2006) of, respectively, 'the supplying or supplier of any articles, commodities, activities, etc., required or demanded' and 'the provider or the providing of some facility required by the public, as communication or transport'. The second definition also accommodates the supply of water, detergent, polish and the like as a service. The supply of water fits expressly within the fourth listed definition of 'the supplying or supplier of water, gas, or the like to the public'. In my view, the provision of the manual bay with access to the cleaning apparatus (including the supply of required quantities of detergent and the other goods) is indeed a 'service', as distinct from a 'good'. The same conclusion must necessarily apply to the automatic car wash facility.
I turn, finally, to the applicant's alternative argument, based on what was said by Franklyn J in Sharp, that the definition of 'retail shop' only requires that the business include, as some part of its operations, the sale of goods by retail. Given my findings that neither the automatic car wash nor the manual bays involve any retail sale of goods, the alternative argument must necessarily be grounded in the vending machine sales earlier referred to.
Recalling that Franklyn J appears to accept that the relevant part of the 'retail shop' definition requires not only that the business conducted at the premises 'includes' the sale of goods by retail, but such sale forms an essential part of that business, once again it becomes necessary to consider the true nature or character of the applicant's business. Its business is a car wash business. There is no suggestion that the vending machines supplying, on payment made to the machines, goods such as chamois, air fresheners and car cleaning products forms an essential part of the business. The applicant did not submit as much; rather, it made reference to and relied upon the direct sale of goods via the vending machines as part of its wider submission that the operation of the car wash facilities themselves involved the sale of goods by retail. That being so, no basis exists for finding that the vending machine sales are of such importance to the applicant's business to bring it within the gloss provided by Franklyn J to the definition of 'retail shop'.

Conclusion

For the above reasons, I conclude that the business being conducted by the applicant from the leased premises is not a 'retail shop' and therefore the lease is not a 'retail shop lease', as those terms are defined under the CTRSA Act. The questions sought to be referred to the Tribunal for determination (other than the first question raising the jurisdiction question) are therefore not within the Tribunal's jurisdiction and the application must be dismissed.

Orders

The Tribunal orders:
1.The applicant's lease is not a retail shop lease for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).
2.The application is dismissed for want of jurisdiction.

I certify that this and the preceding [41] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR T CAREY, MEMBER