MISTELLE BICKLEY PTY LTD and SYKES
[2023] WASAT 69
•31 JULY 2023
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: MISTELLE BICKLEY PTY LTD and SYKES [2023] WASAT 69
MEMBER: MS R PETRUCCI, MEMBER
HEARD: 24 APRIL 2023 AND 27 JUNE 2023
DELIVERED : 31 JULY 2023
FILE NO/S: CC 1216 of 2022
BETWEEN: MISTELLE BICKLEY PTY LTD
Applicant
AND
MICHAEL SYKES
First Respondent
LYNETTE SYKES
Second Respondent
Catchwords:
Preliminary issue - Lease - Retail shop - Whether restaurant is a retail shop - Retail shop lease - Whether lease is a retail shop lease - Whether business wholly or predominantly involves sale of goods by retail - Whether premises used wholly or predominantly for the carrying on of a retail business - Whether Tribunal has jurisdiction - Turns on own facts
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985, s 3, s 4(2), s 16, s 16(1), s 25C, s 25D
Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA), reg 3A
Liquor Control Act 1988 (WA)
Rating and Valuation (Apportionment) Act 1928 (UK), s 3(1)
Result:
The preliminary question is answered in the affirmative
Category: B
Representation:
Counsel:
| Applicant | : | In Person |
| First Respondent | : | In Person |
| Second Respondent | : | In Person |
Solicitors:
| Applicant | : | N/A |
| First Respondent | : | N/A |
| Second Respondent | : | N/A |
Case(s) referred to in decision(s):
Banfield & Ors and Frank and Niki Beverwijk Pty Ltd [2012] WASAT 240
Finn v Kerslake [1931] AC 457
Sedgwick v Watney, Combe, Reid & Company Ltd; Grove v Lloyds Testing Company Ltd [1931] AC 446
Sharp v O'Driscoll, unreported; FCt SCt of WA; Library No 970111 21 March 1997
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
Mr Benoit Lasplace and Mrs Chantelle Lasplace met while working in a restaurant. They dreamed of owning their own restaurant, a place where friends and family could meet to spend quality time while enjoying delicious food. That dream was fulfilled when they opened their restaurant, Mistelle, in a vineyard located in the Bickley Valley in the picturesque Perth Hills.[1]
[1] ts 96, 27 June 2023.
Mr and Mrs Lasplace are the directors of the applicant, Mistelle Bickley Pty Ltd (Mistelle Bickley or Tenant). They are in dispute with the respondents, Mr Michael Sykes and Ms Lynette Sykes (Mr and Mrs Sykes or Landlord) about the operating expenses, turnover rent and other issues arising under a document titled 'Commercial Lease Agreement' signed by the parties in about May or June 2020[2] with the date 1 October 2018 (Lease).
[2] ts 73-74, 24 April 2023.
On 12 July 2022, the Small Business Development Corporation issued a certificate under s 25C of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act) to Mistelle Bickley. Having such certificate means the application filed by Mistelle Bickley may commence in the Tribunal (s 25C and 25D of the CTRSA Act).
However, before the issues arising under the Lease can be determined, the preliminary issue, which concerns the jurisdiction of the Tribunal to hear and determine the dispute, must first be decided.
Preliminary issue
The preliminary issue is whether the Lease is a 'retail shop lease' under the CTRSA Act.[3]
[3] Order 1 of the orders made by the Tribunal on 1 December 2022 (Hearing Book (HB) at page 140).
If the Lease is not, then two things follow:
(a)the CTRSA Act has no application to the Lease between Mistelle Bickley and Mr and Mrs Sykes; and
(b)Mistelle Bickley's application to the Tribunal under s 16(1) of the CTRSA Act is misconceived and will be dismissed.
If, however, the Lease is a 'retail shop lease' under the CTRSA Act, that means the Tribunal has jurisdiction to consider Mistelle Bickley's application made under s 16(1) of the CTRSA Act. In that case, the Tribunal shall:
(a)determine whether or not the questions referred to the Tribunal by Mistelle Bickley are questions arising under the Lease; and
(b)if they are such questions, hear and determine the questions.
In ordinary parlance, a restaurant, which provides a range of services in the context of food and drink which are supplied in exchange for a price, would not normally be regarded as a 'shop'. However, much depends on the relevant statutory definitions - in this case the CTRSA Act. For the reasons which follow, in my view, the restaurant operated by Mistelle Bickley is a 'retail shop' and the Lease is a 'retail shop lease' for the purposes of the CTRSA Act. The result is that the preliminary issue is answered in the affirmative and the Tribunal will proceed to program the matter to consider Mistelle Bickley's application made under s 16(1) of the CTRSA Act.
Relevant procedural background and evidence
I heard the preliminary issue over two days on 24 April 2023 and 27 June 2023, following which I reserved my decision.
In accordance with the Tribunal's usual practice in matters of this nature, the hearing was conducted on the basis that all the documents filed with the Tribunal would be regarded as being in evidence,[4] subject to any objection. There was no objection.
[4] Although forming part of the HB (Exhibit 1) prepared by the Tribunal on 17 April 2023 and provided to the parties, the parties' contentions, and submissions in the HB are taken to be submissions, rather than evidence.
I had the benefit of the affirmed oral evidence from Mr Lasplace, who filed his witness statement dated 27 February 2023 and from Mrs Lasplace, who filed her witness statement dated 27 February 2023.
I also had the benefit of the affirmed oral evidence from Mr Sykes, who filed his witness statement dated 26 March 2023 and from Mrs Sykes who filed her witness statement dated 24 March 2023.
Finally, a number of witness statements were filed with the Tribunal by other persons. However, those witness statements made no statements relevant to the determination of the preliminary issue (see above at [5]) and therefore I have not considered them.
Premises
Mistelle Bickley took a demise of a portion of the premises situated in Walnut Road, Bickley (premises).
The commencement date of the demise is recorded as 1 October 2018 in the Lease for a term of four years therefrom at a rate of $3,336 per month and subject to review as provided for in the Lease.
The 'Property' is defined in the Lease as follows:
Café/house building, garden around the house, verandah, deck, pebbled area, lawn area, stage, two outdoor toilets
At the following address:
…Walnut Road
Bickley WA…
Together with the Included Items[.]
The 'Included Items' are a defined list in the Lease of 48 items ranging from indoor wooden tables, chairs, tables, forks, knives, freezer and gas heater.
The 'Permitted Use' of the premises is defined in the Lease as follows:
The tenant is allowed to use the property as a restaurant, bar, alfresco, beer garden, wedding, function and conference centre, residence.
It is first necessary to set out the legislative framework and factual background against which the consideration of the preliminary issue (see above at [5]) must be made.
Legislative framework
CTRSA Act
The long title of the CTRSA Act provides as follows:
An Act to regulate commercial tenancy agreements relating to certain shops, to prohibit unconscionable conduct, or misleading or deceptive conduct, by landlords or tenants in relation to such agreements, to provide for the determination of questions arising under such agreements, and for connected purposes.
It follows that the CTRSA Act regulates certain 'shops'. 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 in s 3 of the CTRSA Act to mean:
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[.]
Whether the lease provides for the occupation of a 'retail shop' turns upon the definition of 'retail shop'. That term is, relevantly, defined in s 3 of the CTRSA Act to mean:
…
(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.
It is common ground that the premises (see above at [14]) in this case are not excluded by the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA) (Regulations).
However, what is hotly contested in this case is whether the Lease is a 'retail shop lease' under the CTRSA Act and whether the premises are 'used wholly or predominantly for the carrying on of a retail business'.
Principles to be applied
In determining whether the premises are a 'retail shop' this Tribunal has over time applied the decision of the Full Court of the Supreme Court in Sharp v O'Driscoll, unreported; FCt SCt of WA; Library No 970111 21 March 1997 (Sharp v Driscoll). There, the Court had to determine whether the business of hoteliers in the Colliefield Hotel in Collie was a retail shop under the CTRSA Act and, if so, whether the premises comprised premises used wholly or predominantly for the carrying on of a business involving the sale of goods by retail. The landlord in that case asserted that the premises were also used to a significant extent for the retail provision of accommodation and ancillary services, function areas and facilities and club rooms/meeting places for local clubs, associations and societies and also for the private residence for the tenant's family who occupied a bedroom, lounge as well as bedrooms 2, 7 and 8.
Malcom CJ stated at 14:
[A] residential hotel may incorporate within it a business which may be characterised as a shop, although the premises as a whole could not be characterised as a shop. Much depends on the relevant statutory definition.
And later at 16:
It follows that a place in which goods and services are both provided to ultimate consumers in exchange for a price, the business clearly involves both the sale of goods by retail and the provision of services by retail as part of the retail business.
Finally at 21:
In the end, the question is one of characterisation … [T]he test is to determine the true nature of the business carried on at the premises. The fact that a portion of the premises are used for other purposes will not necessarily affect the characterisation.
A summary of the Court's decision in Sharp v Driscoll is set out in Banfield & Ors and Frank and Niki Beverwijk Pty Ltd [2012] WASAT 240 at [15] as follows:
…
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.
Finn v Kerslake [1931] AC 457[5] (Finn v Kerslake) concerned premises comprised of a bakehouse at the rear of the premises, living rooms upstairs and the baker's shop. The House of Lords held that although the most substantial portion of the premises was the bakehouse which made goods for sale by retail in the baker's shop, the predominant purpose of the whole business was to sell bakery goods by retail and therefore the premises were held to be a retail shop under s 3(1) of the Rating and Valuation (Apportionment) Act 1928 (UK).
[5] One of several appeals commencing with Sedgwick v Watney, Combe, Reid & Company Ltd; Grove v Lloyds Testing Company Ltd [1931] AC 446 and referred to collectively as The Industrial Hereditaments Cases.
I have applied the decision in Sharp v Driscoll and Finn v Kerslake in my consideration of the preliminary issue in this case.
Factual background
It is common ground or not disputed that:
(a)the total land area owned by Mr and Mrs Sykes in Walnut Road, Bickley is 68,436m² or 6.84 hectares;
(b)Mr and Mrs Sykes leased part of the premises to Mistelle Bickley pursuant to the Lease which is dated 1 October 2018 but was signed by the parties in or about June 2020;
(c)the Lease does not specify the size of the area leased by Mistelle Bickley or include a map or plan of the leased area, however, the total area leased by Mistelle Bickley is less than 1,000m²;[6]
(d)the 'permitted use' is defined in the Lease as:
The tenant is allowed to use the property as a restaurant, bar, alfresco, beer garden, wedding, function and conference centre, and personal residence[.]
(e)On 7 November 2019, under the Liquor Control Act 1988 (WA), (Liquor Act) the Director of Liquor licensing granted a licence to Mistelle Bickley covering the reception, kitchen, private dining, alfresco dining, alfresco deck and toilet area;[7]
(f)Mistelle Bickley does not operate a prescribed business as defined or specified under reg 3A of the Regulations;
(g)Mistelle Bickley does not conduct its business in a retail shopping centre as defined in the CTRSA Act;
(h)Mr and Mrs Sykes, trading as Hainault Vineyard and Winery, use part of their land in Walnut Road, Bickley for a vineyard, cellar door and for their personal residence; and
(i)Mistelle Bickley vacated the premises on or about 30 September 2022.
[6] ts 14 and 39, 24 April 2023.
[7] HB at page 32.
I now turn to consider the preliminary issue.
Consideration of the preliminary issue
It is common ground that the permitted use of the Lease included a restaurant and a residence.
It is also agreed by the parties that there was no Disclosure Statement, but the lettable area of the premises was less than 1,000m².[8] Mr and Mrs Lasplace estimated the size of the lettable area of the premises under three methods which ranged from 267m² to 529m². Mr and Mrs Sykes suggest the licenced area for the restaurant is approximately 480m² of which about 165m² is under the main roof of the house and about 315m² is external,[9] per the diagram (which does not reflect any measurements) issued under the Liquor Act on 7 November 2019.[10]
[8] ts 14 and 39, 24 April 2023.
[9] HB at page 114 (Submissions of Mr and Mrs Sykes).
[10] HB at page 32.
Mr and Mrs Sykes accept that the restaurant operated by Mistelle Bickley is a retail business. However, they strongly reject that the premises qualify as a retail shop on the basis that the premises were not wholly or predominantly used to carry on that retail business. Rather, according to Mr and Mrs Sykes, the premises were used primarily as a private residence by Mr and Mrs Lasplace and their family. To support their position, Mr and Mrs Sykes assert that Mistelle Bickley used less than one half of the leased premises, which they say covered an area of 1,112m²[11] for business purposes on a very part-time basis for about nine or so hours per week plus preparation time out of a total of 168 hours per week. This usage, according to Mr and Mrs Sykes, continued for more than one half of the lease period, or for about two years. Further, during this period, Mr and Mrs Sykes say that Mr and Mrs Lasplace continued to operate and work in their take-away food business, Buns & Co at a nearby local shopping centre in the suburb of Lesmurdie. In addition, Mr and Mrs Sykes submit that when the restaurant was not open, which they say was most of the time, the restaurant area was used as part of Mr and Mrs Lasplace's personal residence as was the kitchen (as there is only one kitchen at the premises), the reception area, the veranda and the pebbled areas.[12]
[11] HB at page 116.
[12] HB at page 116.
The thrust of Mr and Mrs Sykes' case is that the restaurant operated on a very part-time basis and that Mr and Mrs Lasplace used the restaurant area when not open, which was most of the time, as their personal residence.
Mr and Mrs Lasplace assert their restaurant, Mistelle, which is a 'permitted use' of the premises per the Lease is a retail shop under the CTRSA Act. They say that in the first few years of the Lease they had to build a client base and therefore the restaurant was not at full capacity. While building up the restaurant's clientele Mr and Mrs Lasplace said they continued to operate the Bun & Co takeaway food business in the evenings from a nearby shopping centre. Mr and Mrs Lasplace say that they only operated the restaurant, Mistelle, and no other business, from the premises.
It is useful to start by considering the primary object of the CTRSA Act. It is to characterise as a 'retail shop' premises of which the whole or predominant use is for the retail sale of goods. The test as explained by Malcom CJ in Sharp v Driscoll at 21, is to determine the true nature of the business carried on at the leased premises. Importantly, the words 'wholly or predominantly' apply not to the word 'business' but rather to the retail sale of goods nature of the business.
One of the specified permitted uses of the premises per the Lease is 'restaurant' which, depending on the facts of the case could, as held by Malcom CJ in Sharp v Driscoll, constitute a retail shop to which the CTRSA Act applies.
Unlike in Sharp v Driscoll where the hotelier's income was received from a variety of activities including meals, accommodation, games and telephone services, in this case the only income derived from the premises was from the sale of food and drink by way of retail. This is not in dispute. Therefore, in my view, in the circumstances of this case, it is only necessary to consider the comparative uses of the premises. That is, it is not necessary for me to consider the volume of retail sales and the income derived from the sale of food and drinks. In other words, the amount of space isolated for the retail trade of the restaurant as compared to other activities is not the emphasis of the CTRSA Act but rather as explained by Malcom CJ in Sharp v Driscoll, the emphasis is more upon the use of premises.
In Sharp v Driscoll four bedrooms and a lounge were used by the respondents for their private use. In Finn v Kerslake, there were living rooms upstairs. In this case, the premises comprise a former home repurposed as a restaurant and the accommodation quarters. There are no internal walls or doors with locks that securely separate the restaurant from the accommodation quarters. The evidence given by Mr and Mrs Lasplace is that the accommodation quarters were not suitable to carry on the restaurant. This was not contested by Mr and Mrs Sykes.
Mr and Mrs Lasplace gave evidence that they were renting elsewhere, and it was Mr and Mrs Sykes who proposed to them that they lease the whole of the premises and sublease the accommodation quarters to the existing tenant. Whether or not Mr and Mrs Lasplace intended to live at the premises, is not, in my view, relevant to determining the use of the premises.
As held in Finn v Kerslake, the fact that a substantial portion of the premises is used for other purposes will not necessarily affect the characterisation.[13] The House of Lords in that case held that although the most substantial portion of the premises was used as a bakehouse which made goods for sale by retail in the baker's shop, the predominant purpose of the whole business was to sell bakery goods by retail and therefore the premises were held to be a retail shop.
[13] Sharp v Driscoll at 21.
Following the approach to characterisation in Finn v Kerslake, the predominant purpose of the whole business at the premises in this case, in my view, is to sell food and drinks by way of retail. At the start of the Lease, the opening hours of the restaurant were advertised as nine hours per week mainly for lunch which over time increased to 20 hours per week as the restaurant clientele built up. Mr and Mrs Lasplace explained that, on average, the restaurant would have anywhere between 80 to 100 guests per week with an average spend of about $70 per guest for a two or three course lunch menu. In their final month of operation in September 2022, Mr and Mrs Lasplace said they had about 409 guests. By the time Mistelle Bickley finished operation in September 2022, the opening hours for the restaurant matched the opening hours of 21 hours per week that the café Mrs Sykes operated from 2006 to 2016 gave evidence about. In addition to the opening hours, Mr and Mrs Lasplace gave evidence, which I accept, that much preparatory work was required in the kitchen to prepare the sous vide which takes 48 hours to cook. Further, there is administration time to take bookings for the restaurant, to advertise on social media and in the local newspaper as well as general bookkeeping and payroll tasks.
The end result is, in my view, that the premises are a retail shop even though a portion of the premises (like in Finn v Kerslake and in Sharp v Driscoll), the accommodation quarters were used by Mr and Mrs Lasplace as their private residence. The accommodation quarters, in my view, in this case, is an ancillary use of the premises.
Finally, there was much evidence given about the drafting of the Lease. In my view who drafted the Lease is not relevant in determining whether or not there is a retail shop lease under the CTRSA Act.
Conclusion
For the reasons set out above, in this case, I am satisfied that the business, the restaurant, being conducted by Mistelle Bickley from the leased premises is a retail shop and the Lease is a retail shop lease for the purposes of the CTRSA Act. Therefore, the Tribunal has jurisdiction to deal with the application and will proceed to program the matter to consider Mistelle Bickley's application made under s 16(1) of the CTRSA Act.
Orders
The Tribunal orders:
1.The preliminary issue is answered in the affirmative.
2.The applicant's lease titled 'Commercial Lease Agreement' with the date 1 October 2018, is a retail shop lease for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).
3.The matter is adjourned to a directions hearing on a date to be determined.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS R PETRUCCI, MEMBER
31 JULY 2023
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