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Definition of a “retail lease” reviewed

Property Law News | March 2012

Sydney Markets Ltd v Wilson [2011] NSWCA 201

This Court of Appeal decision involved Sydney Markets Ltd, who own and operate Paddy’s Markets, and the occupancy agreement they held with Wilson, a man who operated a stall at those markets selling stationery and gifts. The markets were initially open four days each week, from Thursday through to Sunday, all of which Wilson worked at his stall. On the days Wilson did not work he would leave his stock and furnishings on location.

Sydney Markets Ltd extended their trading hours to an additional day and gave notice to Wilson that should he not wish to operate during the extended hours he would need to remove his stock from the area to allow for casual occupancy. Wilson sought relief under section 61 of the Retail Lease Act 1994 from the Administrative Decisions Tribunal. Wilson claimed that Sydney Markets would be unable to make a change to the trading hours of the markets without the approval of the majority of the stallholders. This approach, approved by the Administrative Decisions Tribunal, included the markets to be within the definition of a ‘shopping centre’ and the occupancy agreement to be included in the definition of ‘retail shop lease’.

Sydney Markets Ltd appealed this decision to the Appeal Panel, claiming that the markets were not a ‘shopping centre’ and that the occupancy agreement was not a ‘retail shop lease’. While the Appeal Panel agreed the markets were not able to be considered a shopping centre under the definition provided they also found that the agreement between Wilson and Sydney Markets Ltd was a retail shop lease. Further the Appeal Panel found that the occupancy agreement itself gave no right to Sydney Markets Ltd to give notice to Wilson to work the extended hours or vacate the premises. This decision was upheld by the Court of Appeal, noting that there was no reason for the stall operated by Wilson to be characterised as anything other than a retail store.

Lytton v North Bondi RSL Club Ltd [2011] NSWADT 86

This case related to whether a retail lease agreement had been entered into between Mr Lytton, who operated Blue Wave Bistro and the North Bondi RSL Club as under the Retail Leases Act 1994 (NSW). In formulating their decision the NSW Administrative Decisions Tribunal considered what defines a “Retail Lease” and in particular in this case where the Applicant occupied a kitchen and serving area in a club.

The Act defines a “retail shop” to be premises that “are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed [by the Act…]” and a “retail shop lease” to be any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:

  1. whether or not the right is a right of exclusive occupation and
  2. whether the agreement is express or implied, and
  3. whether the agreement is oral or in writing, or partly oral and partly in writing."

The parties entered into a “Deed of Licence” for a period of 1 year and the Licence fee was payable on a weekly basis to the Club. Lytton was to provide a food service from the kitchen within the club premises. Lytton was also required under the agreement to pay outgoings including the operating costs of the service, the electricity, gas and water usage, half the cost of cleaning the windows, half the costs of the advertising expenses and a quarter of the capital cost of the garbage compound that was built at the Club. Under section 23 of the Retail Leases Act 1994 (NSW) “capital costs” in respect of the building in which a retail shop is located are not recoverable from the lessee. Therefore Lytton brought these proceedings to obtain a refund of the amounts he had paid to the Club as outgoings for the capital costs of the garbage compound.

The ADT examined the terms of the Licence Agreement and the facts of how the business was actually operating in the Club and found the arrange was a Retail Lease under the Act and as such the money paid by the Lessee to the Club as a contribution for the construction of the garbage compound was recoverable from the Club. The ADT also found that other outgoings were properly paid to the Club by Lytton, even though Lytton complained that the “outgoings” were not properly described in the Agreement as required by the Act. The ADT found that, in this case, the parties had a line of communication between them that properly described how the Club applied the monies for outgoings as paid by Lytton.

This case is important because it helps to demonstrate that a retail shop lease may exist in a situation like a restaurant in a Club, which would not ordinarily appear to be a retail operation and as such the unique provisions of the Retail Leases Act will apply.

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