ByLawyers News and Updates

Retail premises

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The meaning of ‘retail premises’ continues to occupy the attention of the Courts.

The ‘length & breadth’ of the phrase ‘retail premises’ has occupied the Courts on a number of occasions since the introduction of the original retail tenancies legislation in 1986. Indeed, this column considered some of those cases in July 2012, specifically in relation to whether the retail use of the premises was the ‘predominant use’ of the premises as required by the Act.

CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSC 23 decided on 7 February 2017 by Croft J is the latest of these considerations and, in some eyes, continues the widening of the application of the Retail Leases Act 2003 beyond what has been regarded by some as the traditional application of the Act.

Retail sales and services have a colloquial connection with transactions between business as a supplier and members of the public as consumers. The traditional distinction was between a retailer who sold or supplied to the public and a wholesaler who chose to service a more limited clientele and transacted with retailers who then transacted with the public. But the retail leases legislation was never this simplistic and whilst references to ‘dictionary’ meanings were occasionally made, the true meaning of the legislation was more nuanced than this.

As early as Wellington v Norwich Union Life Insurance Society Ltd [1991] VicRp 27 the Courts were considering ‘the ultimate consumer’ as the appropriate test for the application of the Act, rather than any requirement that the consumer be a member of the public. Thus that case held that the office of a patent attorney was retail premises as the business conducted therein was the provision of retail services. That the public could access those services conducted from those premises was a fact, but not a necessary component of the definition of ‘retail premises’. Reviewed in the light of the cases discussed below, the premises would have been retail premises even if the patent attorney excluded the public from the premises and only serviced qualified lawyers or, as appears to have been the case, multinational companies. To regard a multinational company as a ‘consumer’ is perhaps a challenging concept but in the context of the retail tenancy legislation it is the ‘consumption’ of the goods or services that is important, not the identity of the consumer.

Croft J referred to his decision in Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd & Anor [2013] VSC 344, a case involving not the retail supply of dental services as the name might suggest but rather the supply of conference space. The tenant provided conference services, generally to business operators who might use those services for internal consumption or provide services to the public. The landlord appeared to believe that the imposition of a business between the landlord and the public meant that the premises were not ‘retail premises’ but Croft J found to the contrary and that there were, potentially, two transactions involving the retail provision of services – the provision of the premises by the landlord to the tenant and then the provision of conference facilities by the tenant to other businesses or the public. Only the first transaction was subject to the retail tenancies legislation as the second transaction did not involve the provision of retail premises, but rather the provision of retail services. It is the use of the premises as part of the supply by the tenant to the consumer that is the key to determining whether the premises are ‘retail premises’.

In the light of Fitzroy Dental it is perhaps not surprising that Croft J found that the supply by IMCC Pty Ltd of cold storage facilities to CB Cold Storage for the specific purpose of ‘cold and cool storage warehouse and transport facilities’” was the provision of retail premises within the meaning of the Retail Leases Act 2003. The tenant did not, nor was it required to, limit its use of the premises to its own business. Its business was to offer the use of the facilities to third parties, generally other businesses, ranging from large companies to small owner-operators. Whether the premises were available to or accessed by members of the public was not relevant as ‘consumers’ can be ‘persons who use a service for business or a purpose other than personal needs’.

Croft J was cognisant of the intention that the retail tenancy legislation be ‘ameliorating and remedial’ and that the intent was to provide protection to tenants who provide goods and services to ‘consumers’. The fallacy is to equate ‘consumers’ with the general public. Goods and services can be provided for consumption within the meaning of the Act irrespective of the involvement of the general public and if the tenant’s premises form part of that supply then the premises will be ‘retail premises’.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

‘Ultimate consumer’ includes both the general public and other businesses.

Any supply that involves the use of the premises by a third party is likely to be ‘retail premises’.

Deposit release – 2017

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

There has only been one reported decision on deposit release (McEwan v. Theologedis [2004] VSC 244) and that case did not consider the “condition enuring” argument. Aurumstone P/L v Yarra Bank Developments P/L [2017] VSC 503 has now considered that argument.

Section 24 Sale of Land Act provides that the deposit is to be held in stakeholding. This was designed to protect a purchaser from the possibility of the deposit being released to the vendor prior to settlement and the vendor not being able to settle, with the consequent loss to the purchaser of the deposit. However, the Act recognised that the common law had always taken the view that the vendor was entitled to the deposit upon payment and so s.27 provided a mechanism for release of the deposit prior to settlement if certain requirements are satisfied.

One such requirement is that there are “no conditions enuring” for the benefit of the purchaser. But all contacts have “conditions” that continue from the time that the contract is signed until final settlement and if the word “conditions” refers to any condition then deposit release can never occur. Such an outcome cannot have been intended by Parliament when it specifically introduced a release mechanism and so the question to be determined is what sort of condition does the prohibition refer to?

Clearly a condition allowing the purchaser to avoid the contract if a loan is not approved would be the sort of condition that would justify objection to release until satisfied, but a condition that the vendor replace a doorbell prior to settlement would not be such a condition.

The Court approached the problem of defining which conditions in the contract would be “conditions enuring” for the benefit of the purchaser by first drawing a distinction between:

  • contingent conditions; and
  • promissory conditions.

A contingent condition is a condition that does not contain a promise that the condition will be satisfied but rather defines an event or an occurrence the happening of which will mean that the contract is no longer contingent. This includes a loan approval condition that does not promise that a loan will be approved but which means that if the loan is approve then the contract is no longer contingent on loan approval.

The existence of an unsatisfied contingent condition justifies refusal to release the deposit.

Promissory conditions are in turn divided into three categories:

  • essential terms;
  • intermediate terms; and
  • warranties.

An essential term is a term that the parties intend the breach of which will lead to the right to terminate the contract.

An intermediate term gives rise to a non-essential obligation the breach of which may be sufficient to entitle termination if it goes to the root of the contract such as to deprive the injured party of such a substantial part of the benefit of the contract but will otherwise only justify a claim for damages.

A warranty, which is not an essential term, gives rise to a right to damages for breach but no right to terminate.

The relevant condition in Aurumstone was a Special Condition added to the contract by the parties to address the purchaser’s requirement that vacant possession of the property, which was subject to a lease at the time of signing the contract, would be available to the purchaser at settlement or shortly thereafter. The purchaser intended, and the vendor knew of that intention at the time of agreeing to the Special Condition, to demolish the buildings on the property and redevelop the land. The parties therefore agreed that the Special Condition was an essential term and the Court had no hesitation in rejecting the argument that s27 is limited to situations where there is no contingent condition. The existence of a promissory condition that is an essential term will justify a purchaser in refusing to consent to release of the deposit.

However, it follows that the existence of an intermediate term or a warranty may not justify refusal. An intermediate term that goes to the root of the contract may justify refusal but a lesser intermediate term or a warranty, the breach of which merely justifies damages and not avoidance, will not justify refusal to release the deposit.

The General Condition most often relied upon to justify refusal to release is GC 24, which relates to delivery of the property at settlement in the condition it was on the day of sale, fair wear and tear excepted. This is likely to be classified as an intermediate term the breach of which gives a right to damages, but not termination. The condition itself has a mechanism for calculating damages for breach and the purchaser has termination rights for substantial breach of this obligation in s.34 Sale of Land Act. It is therefore a promissory condition that is not essential and does not go to the root of the contract so it does not justify refusal to release the deposit.

It is unlikely that any other of the General Conditions that are promissory in nature justify refusal to release the deposit and so it may be concluded that it is only the contingent loan condition in GC 14, or an essential Special Condition, that justify refusal to consent to deposit release.

Tip Box

  • s.27 Sale of Land Act permits release of deposits
  • a contingent condition or essential term may justify refusal to release
  • other than GC.14, the General Conditions do not justify refusal to release.

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

 

Adjustment of rates

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Adjustment of rates can be particularly difficult for rented properties.

An essential task in a conveyancing transaction is the adjustment, between vendor and purchaser, of liability to pay rates. Whilst this task is never simple, it is even more complicated in a rental situation where the lease may transfer responsibility to pay rates and outgoings to the tenant. Additionally, the entitlement to rent needs to be apportioned.

The first inquiry is to establish who is responsible for payment of the rates pursuant to the lease.

If the landlord/vendor is responsible for payment, then adjustments are made in the normal way:

  • if the rates are paid, the purchaser will allow the prepayment to the landlord;
  • if the rates are unpaid, the purchaser will draw a cheque from the settlement proceeds in payment of the rates and adjust on a ‘rates paid’ basis. By this method the vendor pays the rates up to settlement the purchaser pays from settlement.

If the tenant is responsible for payment:

  • if the rates are paid, no adjustment is required;
  • if the rates are unpaid, the purchaser is entitled to be satisfied that any arrears of rates are paid at settlement.

This conventional way of adjusting on a ‘rates paid’ basis means that the vendor pays pre-settlement rates and the purchaser pays post-settlement rates, but both parties may take the view that they would prefer that the tenant pays.

In respect of arrears of rates, the purchaser is entitled to insist upon deduction and payment of arrears at settlement and it is no answer by the vendor to this contractual entitlement that the tenant is responsible for payment. That is a matter between landlord (the vendor) and tenant and does not reduce the purchaser’s right to adjustment.

In respect of current rates, the purchaser is entitled to adjustment up to settlement day even if the current rates are not due and payable. If adjustment is on a ‘rates paid’ basis the purchaser will effectively pre-pay the rates until the end of the current assessment. Whilst the purchaser will be entitled to recover those rates from the tenant pursuant to the lease, the purchaser might prefer to adjust on an ‘unpaid basis’ where the rates are adjusted to the day of settlement only. This requires the vendor to pay (by deduction) rates until settlement but leaves responsibility for payment of future rates to be determined in accordance with the lease.

The vendor in this situation is exposed to a loss. Pursuant to the sale contract the vendor has had to pay any arrears, including part of any unpaid current assessment by way of adjustment of the purchase price. Whilst the vendor, as landlord, had rights under the lease to recover rates from the tenant, that right passes to the purchaser at settlement – s 141 Property Law Act 1958.

The vendor therefore needs to issue recovery proceedings against the tenant before settlement, or include in the contract of sale a Special Condition addressing this situation. This might be an undertaking by the purchaser to repay to the vendor the amount of current rates deducted by the purchaser when and if, the tenant pays those rates or it might authorise the vendor to issue proceedings against the tenant in the name of the purchaser to recover unpaid rates. That the parties are entitled to contract out of the consequences of s 141 Property Law Act was established by Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R 1.

Great care needs to be exercised in drafting such a Special Condition, as is evidenced by Brinca Property Management Pty Ltd v Yeo & Rambaldi [2015] VMC 35.

Tips

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Rates are usually adjusted on a ‘rates paid’ basis.

Adjustment on a ‘paid basis’ may suit rented properties.

Vendors are exposed to loss and need consider a Special Condition.

Article – Retail Premises on adjustment of rent and dealing with Security Bonds.

Vendor statements and the Australian Consumer Law

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Section 48A of the Sale of Land Act 1962 provides dissatisfied purchasers with an alternative to avoidance for breach of           s 32.

Given the significance of Vendor Statements in the conveyancing process it is surprising that there are not more reported cases relating to the vendor’s obligation to disclose the matters described in s 32 of the Sale of Land Act 1962. Readers will be familiar with Baker v Knight [1994] Vic SC 420 relating to planning permits but there have not been many cases in recent years on the disclosure obligation.

This may be because, until recently, a breach of s 32 was an ‘all or nothing’ situation. Section 32K (and its predecessor) gives the purchaser the right to avoid the contract for breach of s 32, but not a right to damages. Thus the purchaser must decide whether the alleged breach is sufficient to justify avoidance and then whether the purchaser wants to avoid. In a rising market, such as prevails at the moment, purchasers may be reluctant to walk away from a property that is, save for the breach of s 32, to their liking.

Section 48A of the Sale of Land Act is a relatively recent amendment that was designed to align the Act with the wider consumer protection legislation known as the Australian Consumer Law and creates for a purchaser a right to damages for breach of s 32. It has been considered by VCAT on two occasions, both with unrepresented parties and the decisions are of limited significance but perhaps indicative of where the law may be heading.

Wagner v Usatov [2014] VCAT 1198 concerned a breach of s 32 by way of failure to disclose restrictions attached to a planning permit that affected the land. The permit required the vendor to enter into a s 173 agreement with the Council in relation to future use of the land. The vendor entered into that agreement, in relation to the subject land and other land, during the course of the contract so that at settlement the land was subject to a restriction that had not been disclosed as required by s 32. Rather than seek to avoid the contract the purchasers settled and then successfully took action to have the s 173 agreement removed, incurring $5,000 costs in doing so and the VCAT application was an action for damages to recover this amount. VCAT concluded that there was a breach of s 32 and that s 48A adopted the provisions of the ACL for the purpose of allowing a person who suffers loss as a result of a breach of s 32 to recover the amount of that loss.

Importantly, VCAT noted that whilst a claim under the ACL itself will usually require that the transaction was ‘in trade or commerce’ no such restriction applies for a claim made under s 48A – it is sufficient that a loss has been caused by a contravention of s 32. This means that ‘residential’ vendors will be subject to the consumer rights in favour of purchasers in respect of breaches of s 32.

Hobson v Robinson [2017] VCAT 524 also had self-represented parties with the purchaser seeking damages resulting from a breach of s 32. The vendor sold ‘vacant’ land to the purchaser who, after settlement discovered that a house had previously been demolished on the land and complications arising from the demolition resulted in the purchaser incurring additional expenses. The house on the land had burnt down and the vendor’s insurer had arranged for demolition but, as is often the case in such demolitions, the hidden infrastructure such as pipes and connections to services were not adequately terminated. As a result, when the purchaser came to commence building on the vacant land, the purchaser was unable to have electricity connected and incurred $6,000 hire costs of a generator for 3 months. The purchaser claimed this amount from the vendor as damages for breach of s 32.

The first breach alleged was the failure to disclose that a demolition permit had been issued but this was not successful as s 32E requires the disclosure of building permits, not demolition permits, and only in respect of the sale of a residence, not vacant land.

However the purchaser was successful in establishing a breach of the s 32H obligation to disclose services that are NOT connected and was awarded judgment for the cost of the generator hire.

VCAT is designed to offer a costs-free jurisdiction for the resolution of Small Claims such as these cases, but in doing so may be required to consider important questions of law. These cases involved relatively small amounts but the principles discussed will apply equally to claims made by dissatisfied purchasers that may involve far more substantial losses claimed to flow from a vendor’s breach of the s 32 obligations.

Dissatisfied purchasers will no longer be required to take ‘all or nothing’. Instead of having to elect to proceed or withdraw they may now consider the s 48A option of claiming damages in VCAT after settlement and, importantly, that applies equally to residential and commercial sales.

Tip Box

  • Whilst written for Victoria this article has interest and relevance for practitioners in all states.
  • Section 32 allows for avoidance but s 48A may allow for damages as an alternative.
  • Whilst the ACL generally only applies to sales in trade or commerce, s 48A applies to residential sales.

Off the plan duty concessions

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Duty concessions available for off the plan sales need to be understood by both vendors and purchasers.

Vendors selling off the plan properties often emphasise the potential for ‘huge stamp duty savings’ and, indeed, duty is calculated on such transfers at a concessional rate, making them appealing to potential purchasers. But unless the parties understand the extent of the concession the purchaser may be disappointed and the vendor potentially liable for misrepresentation.

The duty concession is available wherever the contract anticipates building work being performed during the course of the contract, on the basis that duty is calculated on the value of the property as at the contract date, and is not payable on the value of any building works constructed between contract and settlement. The concession is available whether the property is a stand-alone home, a unit in a small development or a lot on a multi-storey plan of subdivision. It is also available, on a proportional basis, provided that any construction is to be undertaken, with the full concession available if total construction takes place during the contract, diminishing to no concession if construction was complete as at the contract date.

Calculating duty is an important task for the solicitor for the purchaser but can only be undertaken on the basis of information provided by the vendor in the form of an Off the Plan Statutory Declaration that provides the basis for calculating dutiable value. The vendor’s obligation to provide this document arises from GC 10.1(a)(ii) of the standard contract that requires the vendor to do all things necessary to enable the purchaser to become registered. The purchaser is unable to register the Transfer until duty is assessed and duty cannot be assessed in relation to these transactions without the Declaration.

The vendor may choose to use the Fixed Percentage Method or Alternative Method to calculate the cost of construction. Unless the contract requires the vendor to adopt the Alternative Method, the vendor will generally adopt the simpler Fixed Percentage Method. The percentage of the contract price allocated to construction is:

  • single dwelling 45%
  • multi-dwelling 60%
  • high rise 75%

If construction has not commenced as at the contract date then the concession will be calculated by reducing the contract price by the amount equal to the full construction cost calculated by reference to the Fixed Percentage and then calculating duty on the reduced consideration.

If the contract price is $600,000 and the contract is signed prior to commencement of construction then duty is calculated as follows:

Single dwelling

Contract price $600,000

Less: 45% construction cost $270,000

Dutiable value $330,000

Multi-lot

Contract price $600,000

Less: 60% construction cost $360,000

(up to 3 storey)

Dutiable value $240,000

High rise

Contract price $600,000

Less: 75% construction cost $450,000

(4 storey & above)

Dutiable value $150,000

If construction is 25% complete when the contract is signed then the cost of post contract construction will be reduced to 75% of the construction cost. The deduction from the contract price will therefore be less, resulting in a higher dutiable value and higher duty as the percentage of post contract construction deceases.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Wills, Powers of Attorney and Enduring Guardianship NSW

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Wills, Powers of Attorney and Enduring Guardianship

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER
  • Update to all Power of Attorney precedents – additional explanation of clause 3 Conditions and limitations.
  • Costs Agreement
    • Included reference to time limit for bringing costs assessment included total estimate of legal costs section with provision for variables and included authority to receive money into trust.
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
SEPTEMBER
  • Powers of Attorney and Enduring Guardianship
    • Updated commentary and precedents to refer to Guardianship Regulations 2016.
    • Updated links to Guardianship Regulation 2016 (Schedule 1 and regulation 4) to Austlii consolidated regulation.
JUNE 
  • Content has enriched to now include irrevocable powers, ademption, registration of a power of attorney and land transactions, and also when there is no guardian.
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts.
MARCH
  • Commentaries enriched to include a new section ‘What an attorney can’t do’. Commentaries also enriched to include Instruments made in other states.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Wills, Powers of Attorney & Advance Care Directives SA

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Wills, Powers of Attorney & Advance Care Directives

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER
  • Costs Agreements – Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
SEPTEMBER
  • Powers of Attorney and Advance Care Directives – Update  paragraph on South Australian Civil and Administrative Authority.
JUNE 
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Powers of Attorney Commentary enriched to include a new section ‘What an attorney can’t do’. Commentary also enriched to include Instruments made in other states.
FEBRUARY 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.
  • The Advance Care Directives Kit produced by the South Australian government has been included in the guide. The kit is useful for practitioners who may wish to pass on additional information to their clients. The kit includes:
    • Advance Care Directive Form
    • Information Statement
    • Substitute Decision-Maker Guidelines
    • Information for Witnesses
    • Information for Interpreters

Workers Compensation NSW

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DECEMBER 2016

New precedents were added including an Application for review of work capacity decision and a Work compensation referral sheet

OCTOBER 2016

The commentary and the retainer instructions were updated to reflect the new monetary amounts.

The Costs Agreements were updated to reference the time limit for bringing costs assessment included total estimate of legal costs section with provision for variables and included authority to receive money into trust.

The Disputes section was improved, with fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.

A new precedent was included Application for merit review by SIRA.

SEPTEMBER 2016

Amendments were made to precedents and commentaries to reflect new Workers Compensation Regulation 2016 and updated links to the regulation.

Wills, Powers of Attorney and Advance Health Directives QLD

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Wills, Powers of Attorney and Advance Health Directives

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
JUNE
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Powers of Attorney – Commentary enriched to include a new section ‘What an attorney can’t do’. Commentary also enriched to include Instruments made in other states.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Wills, Powers of Attorney, Guardianship & Advance Health Directives WA

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Wills, Powers of Attorney, Guardianship & Advance Health Directives

DECEMBER 
  • New Commentary on Challenging the validity of a will
    • Challenging a will questions its validity. Contesting a will questions the fairness of its provisions. The circumstances and processes when challenging a will are similar across all the states in legislation and in the common law principles that govern this interesting area of the law. This addition to commentary covers helpful tips for practitioners if they are faced with a client wishing to challenge the validity of a will.
OCTOBER 
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
    • Amended to include reference to scale costs.
JUNE
  • Added new precedent – Individual will creating multiple testamentary discretionary trusts.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Commentary enriched to include a new section ‘What an attorney can’t do’. Commentary also enriched to include Instruments made in other states.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

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