Sarina Investments Pty Ltd v Brotherhood of St Laurence

[2022] VCC 935

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

Case No. CI-21-03545

SARINA INVESTMENTS PTY LTD	Plaintiff
v
BROTHERHOOD OF ST LAURENCE	Defendant

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	16, 17 May, 20 June 2022
DATE OF JUDGMENT:	27 June 2022
CASE MAY BE CITED AS:	Sarina Investments Pty Ltd v Brotherhood of St Laurence
MEDIUM NEUTRAL CITATION:	[2022] VCC 935

REASONS FOR JUDGMENT
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Subject:Landlord and tenant – retail leases jurisdiction

Catchwords:              Landlord and tenant – allegedly repudiation of lease by tenant – counterclaim by tenant for damages for breach of lease – whether relevant lease a retail tenancies lease within the meaning of Retail Leases Act 2003 – whether dispute within exclusive jurisdiction of Victorian Civil and Administrative Tribunal – Retail Leases Act 2003, ss3, 4, 89 “retail premises” – premises used by charitable organisation to administer programs supported by government grant and private subvention – whether used for the retail supply of services – no fee or reward paid or payable for the services – premises not retail premises

Legislation Cited:      Retail Leases Act 2003; County Court Act 1958

Cases Cited:Brimbank City Council v Wesvale Community Centre Inc [2006] VSC 100; IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178; Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd [2013] VSC 344; Wellington v Norwich Union Life Insurance Society Limited [1991] 1 VR 333; Cambridge Coordinates Pty Ltd v Viking Press Pty Ltd (2001) V Conv R 58-553; Hitech Pathology Pty Ltd v Bankberg Pty Ltd (1999) V Conv R 58-536

Judgment:                  (1) Within 14 days of this day the parties must bring in short Minutes to give effect to these reasons and to restore this proceeding to the list of cases for trial

(2) Costs reserved 

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. L. Virgona	HWL Ebsworth Solicitors
For the Defendant	Mr. B. Petrie	Rigby Cooke Lawyers

HIS HONOUR:

Background

1On 23 August 2021, the plaintiff, Sarina Investments Pty Ltd (“Sarina”), filed the Writ commencing this proceeding against the defendant, the Brotherhood of St Laurence (“the Brotherhood”).

2According to Sarina’s Statement of Claim, it had let the Brotherhood property at Level 1, 219 Johnstone Street, Fitzroy commencing 1 August 2014 for an initial term of four years, with an option to renew the lease for a further period of four years.  According to Sarina, the Brotherhood renewed the lease for a further term of four years on 16 August 2018.

3In 2020, the Brotherhood complained of damage or defects in the premises and ultimately commissioned a report from consulting engineers.  Based on that report, the Brotherhood alleged that Sarina was in breach of the terms of the lease.  Later that year, Sarina said it commenced work to deal with the alleged defects.  Nevertheless, on 3 March 2021, it said the Brotherhood purportedly terminated the lease.  Sarina alleged that termination was invalid and constituted a repudiation by the Brotherhood of its obligations.  It sought damages and consequential relief against the Brotherhood.

4The Brotherhood filed a Defence and Counterclaim contending that its termination was valid.  By way of counterclaim, the Brotherhood sought a series of declarations, including as to the validity of its termination of lease together with damages and consequential relief.

5The proceeding came on for trial before me on 16 May 2022.  At that stage, I raised an issue as to whether the lease between the parties was regulated by the Retail Leases Act 2003, in which case the dispute would be within the sole jurisdiction of the Victorian Civil and Administrative Tribunal (“VCAT”) and be outside this Court’s jurisdiction.

6I raised this issue based on the judgment of Williams J in the Supreme Court of Brimbank City Council v Wesvale Community Centre Inc [2006] VSC 100, where her Honour held that, in certain circumstances, a non-profit use could nevertheless be within the realm of the Retail Leases Act.  Counsel advised that this was a matter which they had not considered.  Its resolution would require, amongst other things, a consideration of the precise nature of the Brotherhood’s activities in the tenanted premises.  Consequentially, the issue as to whether a lease was regulated by the Retail Leases Act was set down for determination as a preliminary or separate issue.

7The Brotherhood filed and served two affidavits from its officers, Ms Melinda Moore, sworn 27 May 2022, and Ms Melinda Illevold, sworn 17 May 2022.  Each counsel filed and served outlines of their submissions with the separate question coming on for determination before me on 20 June 2022.

8In light of the affidavits and their appreciation of the legal position, both Mr Virgona, on behalf of Sarina, and Mr Petrie, on behalf of the Brotherhood, contended that the lease or leases were not governed by the Retail Leases Act, and this Court had jurisdiction to hear and determine the claim and counterclaim.

9This is one of the relatively rare instances in private law where the court is neither required nor justified in treating as established a state of fact or law simply because the parties have agreed that such state of affairs exists.  The Court’s jurisdiction is set out in its constituent statute, the County Court Act 1958, and in other statute law. If these statutes do not bestow jurisdiction on the court, it cannot be acquired by agreement between parties, much less by estoppel.

Statutory provisions

10Section 89(4) of the Retail Leases Act, subject to certain irrelevant exclusions, provides inter alia

“… a retail tenancy dispute …

is not justiciable before any other tribunal [other than VCAT] or a court or person acting judicially within the meaning of the Evidence (Miscellaneous Provisions) Act 1958.”

11Accordingly, if the present dispute is a retail tenancy dispute, it is beyond the jurisdiction of this Court. 

12Section 81(1) defines a retail tenancy dispute for the purposes of s89 as meaning:

“… a dispute between a landlord and tenant—

(a)     arising under or in relation to a retail premises lease to which—

(i)    this Act applies …”

13A retail premises lease is a lease of retail premises, as defined, if the lease is for a term of 12 months or more, or if the lease extends, whether by renewal or otherwise, for a period of 12 months or more (s12).

14The crucial question which will determine the jurisdictional issue raised is whether the relevant premises fall within the definition of “retail premises” in s4(1) of the Act. That definition is as follows:

“In this Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for—

(a)    the sale or hire of goods by retail or the retail provision of services; or

(b)the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies.”

15The further sub-sections of s4 include a series of exceptions to the general definition, none of which is at present relevant.

Use of premises

16Ms Melinda Moore is the Acting Director of the Brotherhood.  According to her affidavit, during the term of its lease of the premises, the Brotherhood used those premises for the purposes of the following programs:

(a)   HIPPY from the commencement of the lease;

(b)   Saver Plus from the commencement of the lease;

(c)   Given the Chance from 2018 when the program commenced operating.

17She said the premises were used primarily “as the national head office for the HIPPY program”. (Moore affidavit, paragraphs 14 and 15)

18She said that the HIPPY program was developed by an international not-for-profit organisation known as “HIPPY International” with the aim of “preparing young children and their parents for school”.  She said that the Brotherhood held “the exclusive licence from HIPPY International for the delivery of the HIPPY program in Australia”. (Ibid, paragraphs 17 and 18)

19The Brotherhood operated the HIPPY program through “64 service providers sub-licenced by [the Brotherhood] to deliver the program across 100 sites around Australia”. (Ibid, paragraph 19)

20The service providers were trained by the Brotherhood and funded by it “under the terms of each HIPPY sub-licence …”.  The family recipients of the HIPPY program were subject to no charge with 4,500 children participating. (Ibid, paragraph 20)  The HIPPY program was funded by grants from the Commonwealth of Australia overseen by its Department of Social Services.  The financial year ending 30 June 2021 saw a $32 million subsidy to the Brotherhood “comprising approximately $5.5 million for the national office operations and $26.5 million for service providers. All funding provided by [the Brotherhood] to the service providers comes from the HIPPY government grant.” (Ibid, paragraph 24)  The government grant is “not for profit” and the government receives no goods and services in exchange for its grant. (Ibid, paragraph 25)

21In the relevant period, children and parents did not attend the premises.  Rather, the premises provided head office administration and training for the sub-licensee, HIPPY, co-ordinators.  At the premises, 24-26 staff were employed by the Brotherhood for the HIPPY program.  Training provided to the sub-licensee co-ordinators was free of charge by the Brotherhood. (Ibid, paragraph 30)

22Curriculum materials were stored at an off-site warehouse with a small number of these items being kept on the premises. (Ibid, paragraphs 32-33)  She said “The curriculum materials and merchandise were sold to service providers at cost and all the funds received by [the Brotherhood] were put back into funding the HIPPY program.” (Ibid, paragraph 35)

23According to Ms Moore, one administrative staff member at the premises was responsible:

“for overseeing the procurement and distribution of the curriculum materials and merchandise for the HIPPY program.  This job principally involved monitoring stock levels, ordering new stock or additional stock and taking orders from service providers.” (Ibid, paragraph 36)

24According to Ms Melinda Illevold, Senior Manager employed by the Brotherhood:

“The Saver Plus program is a financial inclusion program that helps people to develop a budget and save money. The program is delivered with ANZ [Bank] which provides incentive bonuses to participants for meeting their savings targets.” (Illevold affidavit, paragraph 23)”

25The “program is funded by grants from the Department of Social Services and the ANZ”. (Ibid, paragraph 24)   It was nationally coordinated for delivery to 60 sites across Australia from the premises. (Ibid, paragraph 25)  According to Ms Moore, the Commonwealth grant for this program was $7 million. (paragraph 40)

26According to Ms Illevold, the “Given the Chance” program was “a social enterprise that provides training and labour hire to support highly disadvantaged job seekers to get on a pathway to meaningful and sustained employment”. (Ibid, paragraph 26)

27She said the program was “largely funded by partner employer labour hire fees. [The Brotherhood] also receives apprenticeship subsidies and small grants to run the program.  The program is provided free of charge to participating employers.” (Ibid, paragraph 27)

28Ms Moore, in her affidavit, said that the premises were used for head office coordination relative to the Saver Plus program, but were “not used as a service delivery site and participants did not attend the premises”. (Paragraph 46)  She said there were “Typically … 7 staff employed by [the Brotherhood] for the Saver Plus program working from the Premises”. (Ibid, paragraph 47)

29As to the Given the Chance program, she said it was “free of charge for candidates”. (Ibid, paragraph 57)   She said that since 2018, some 7-10 Brotherhood staff were working from the premises as part of the Given the Chance program. (Ibid, paragraph 59)  Candidates, she said, “would regularly visit the premises to meet with recruitment officers”, but the Brotherhood staff would meet prospective employers at their own premises.  Some workshops were conducted at the premises but most were conducted by external providers elsewhere at the Brotherhood’s head office at 67 Brunswick Street, Fitzroy. (Ibid, paragraphs 61-62)

Counsel’s contentions

30As previously noted, both Mr Virgona and Mr Petrie contended that the present dispute is not a retail leases dispute and is not excluded from the court’s jurisdiction by s69 of the Retail Leases Act.

31Mr Virgona, having surveyed the operational history of the premises as disclosed in the affidavits, said it was clear that the Brotherhood received no fee or reward for the services which it had provided.  As to the HIPPY program, it was delivered to its beneficiaries elsewhere, with the premises used for training of sub-licensees.  He said insofar as curriculum materials may have been sold, this supply should be regarded either as occurring off-site or to be merely incidental and certainly not a predominant use of the premises. (Outline, paragraph 13)

32Both counsel referred me to the recent leading decisions on the subject of the proper meaning of the phrase “retail premises” in the Retail Leases Act, namely the decision of the Court of Appeal in IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178 and the decision of Croft J in Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd [2013] VSC 344.

33Mr Petrie noted that, according to Croft J in the Fitzroy Dental case, the “ultimate consumer test” was the “touchstone of retailing”.  Counsel noted that in the CB Cold Storage case, the Court of Appeal at [17] had adopted a statement by Nathan J in Wellington v Norwich Union Life Insurance Society Limited [1991] 1 VR 333, 336, where his Honour said:

“The essential feature of retailing, is to my mind, the provision of an item or service to the ultimate consumer for fee or reward. The end user may be a member of the public, but not necessarily so. In support of this conclusion, I call in aid not only commonsense but the Macquarie Australian Dictionary which defines retail as being a sale to an ultimate consumer, usually in small quantities. When the verb is used in the transitive form, it is to sell directly to the consumer.” ([1991] 1 VR 333 at [17])

34Both counsel agreed that the premises were used for the provision of services to an ultimate consumer.  The training and support services received at the premises by sub-licensees of the HIPPY program were different in kind from any service which they might provide to the ultimate beneficiaries of the program.

35Mr Petrie, on behalf of the Brotherhood, said insofar as the definition of “retail premises” invited attention to the predominant use of the relevant premises, their use for the HIPPY program should be regarded as dwarfing the uses for the other programs or any incidental matters.  He referred to a decision which I had given as the Deputy President of VCAT in Cambridge Coordinates Pty Ltd v Viking Press Pty Ltd (2001) V Conv R 58-553, where I said that typically predominance of use could be determined in the case of business enterprises by reference to the volume of sales measured in dollars.

36In the present case, the cashflows were constituted not by sales volumes but by inputs in the nature of government grants. $32 million was made available by the Commonwealth relative to the HIPPY program.  He said this dwarfed the amounts made available by way of grant for the other two programs, and the use or uses associated with the HIPPY program should be regarded as predominant.

37Both counsel contended that essential to the concept of retailing was a requirement that the goods or services supplied be supplied for fee or reward.  They referred to the extract from the judgment of Nathan J in the Norwich Union case already quoted. 

38Mr Petrie referred to a passage from the judgment of the Court of Appeal in the CB Cold Storage case [2017] VSCA 178 [23], where the court (Warren CJ, Ferguson and Kaye JJA) said:

“What can be seen from the authorities is that the concept of the ‘retail provision of services’ in the Retail Leases Act and its predecessor legislation is that it involves close consideration of the service that is offered, whether a fee is paid, whether it is a service that is generally available to anyone who is willing to pay the fee and whether the persons who use the service are the ‘ultimate consumer’. On one view, to talk of an ultimate consumer of services may appear strained. Most services that are purchased are not susceptible to being passed on to a third person. This may be contrasted with a sale of goods where the difference between wholesale and retail is easily discernible. Nevertheless, the authorities that apply an ultimate consumer test as one indicia of the retail provision of services, are of long standing.” ([2017] VSCA 178, [23])

39Mr Virgona (Outline, paragraph 27) noted that the non-profit use which was held to constitute retailing in Brimbank City Council v Westvale Community Centre Incorporated [2006] VSC 100, entailed the making of charges, albeit less than commercial rates, for the goods and services supplied. ([2006] VSC 100, [11])

40Both counsel agreed that upon the evidence there had been a supply of services to an ultimate consumer or consumers.  According to Mr Virgona:

“The only ‘consumers’ who can be said to receive the services provided at the Premises are the Service Providers who attend the Premises for the purposes of receiving training and education.” (Outline, [43])

41Mr Petrie made the same point at paragraph 42 of his Outline.

42In oral argument, Mr Virgona said that the grant for the HIPPY program from the Commonwealth, and grants paid to the Brotherhood relative to the other two programs, could not be seen as the relevant fee or reward.  He said this case stood in contrast to the decision of VCAT in Hitech Pathology Pty Ltd v Bankberg Pty Ltd (1999) V Conv R 58-536, where VCAT found the relevant premises to be retail premises despite virtually the whole of the cost of the pathology services in question being met by the Commonwealth of Australia under the Medicare scheme. There, he said, the Tribunal made a finding that the primary liability for payment of the services lay with the patient, with the payment from the Commonwealth serving to discharge that liability. Here, in contrast, he said, the grant was a block figure not referrable to any particular individual service, and therefore could not be regarded as a fee or reward in the relevant sense.

Conclusions

43I respectfully accept the views advocated by counsel leading to the conclusion that the lease or leases in question here were not regulated by the Retail Leases Act, and this dispute is not affected by the exclusive jurisdiction over retail tenancy disputes granted to VCAT by the Retail Leases Act, s89.

44For the reasons advanced by Mr Petrie, on behalf of the Brotherhood, the operation and administration of the HIPPY program was the predominant use of the premises under the lease.  This entailed the provision of services to an ultimate consumer or consumers, viz the sub-licensee/service providers who were provided with training at the premises.  These consumers rendered no fee or reward to the Brotherhood.  The government grant relative to the HIPPY program was a block grant and not referrable to any particular service, and therefore cannot be regarded as a “fee or reward” for the purpose of determining whether there is a retail use involved.

45Any sales of curriculum materials which might have taken place were purely incidental and did not affect the predominant use which was, as I have just described, a non-retail use.

46The payment of a fee or reward for services provided is an essential element of retailing, at least so far as retailing of services is concerned.

47For completeness, I should note that a number of the authorities to which counsel took me in the course of the presentation suggested that it was an essential element of retailing, at least relative to services, that the premises or undertaking be open to anyone willing to pay the relevant fee or reward.  This element does not appear to have become the point of decision in any of the court or Tribunal determinations that I am aware of.  As at presently advised, I am sceptical that this “open to all-comers” requirement is essential to the retail provision of services.  A provider of training in sporting endeavours or in the arts could, and likely would, stipulate certain inherent physical capacities or minimum levels of expertise before taking on a pupil.  An organisation providing services associated with high energy activities might have a rule barring those over a particular age on health and safety grounds.  Correspondingly, there may be minimum ages stipulated for customers of certain instructional services.  None of these matters, in my view, would affect the essential nature of what was being done if it is otherwise properly characterised as retailing.

48More generally, antidiscrimination laws are of relatively recent vintage in this country – no more than 50 years old.  Before that date, it was open to a supplier of goods or services to refuse service to anyone whom he, she or it did not want to serve.  The refusal might be on grounds of gender, sectarianism, ethnicity or otherwise.  Even today, subject of course to antidiscrimination laws, it remains open to a person in charge of premises licensed for the service of alcoholic beverages to “bar” anyone.

Disposition

49I will direct the parties to bring in short Minutes to give effect to these reasons and to restore this proceeding to the lists for trial.

Costs

50I have heard no argument on the issue of costs and so I will reserve them.