Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Doula Spirit Pty Ltd v Andrew Argyrou [2014] NSWCATCD 251 Hearing dates: On the papers Date of orders: 16 October 2014 Decision date: 16 October 2014 Jurisdiction: Consumer and Commercial Division Before: Jeffery Smith, Senior Member Decision: 1. The Tribunal lacks jurisdiction to hear and determine the application under the Retail Leases Act 1994. 2. The application is dismissed. 3. The issue of costs is reserved. Directions 4. Leave is granted for the parties to raise the issue of costs by way of a request for a short hearing on the issue or by filing and serving a short submission on the issue within 21 days of the date of these orders. 5. Application GEN 14 /39371 will be set down for hearing on a date to be fixed by the Registrar. 6. The parties' attention is drawn to the directions for preparation in GEN 14/39371. Any application for departure from the timetable set by the Tribunal must be made in writing. 7. Leave for the parties to be legally represented in GEN 14/ 39371 is withdrawn. Catchwords: Retail shop lease, whether "doula training" is retail shop, predominant use, jurisdiction Legislation Cited: Retail Leases Act 1994 Cases Cited: Honings Bakery Pty.Ltd. v Cerialis Pty. Ltd. [2014]NSWCATCD 87, Wood and Wilson v Bergman [2003]NSWADT 82, Moweno Pty. Ltd. v Stratis Promotions Pty.Ltd.[2002]NSWSC 1151, Owners of Ship Shin Kobe Maru v Empire Shipping Co. Inc. [1994]CLR 404 Category: Principal judgment Parties: Doula Spirit Pty Ltd (Applicant) Andrew Argyrou (Respondent) Representation: Ms Bashi Hazard of BWLaw for the applicant Mr David Sachs of Sachs Gerace Lawyers for the respondent File Number(s): COM 14/39370 reasons for decision APPLICATION 1. Application COM 14/ 39370 was filed by the applicant in the Commercial list of the Tribunal's Consumer and Commercial Division on 5 August 2014. The application seeks a number of orders set out at para 21 of Annexure "C" to the application. 2. Application GEN 14/ 39371 was also filed by the applicant on 5 August 2014 in the General list of the Consumer and Commercial Division of the Tribunal. 3. Both matters were listed for directions before the Tribunal on 7 August 2014 at which time the respondent raised the issue of whether there was jurisdiction under the Retail Leases Act 1994. Accordingly directions were made for exchange of submissions on that issue. Further directions were subsequently made to enable the parties to file submissions in reply. The parties agreed that the preliminary issue should be dealt with "on the papers". 4. This is the determination of the preliminary issue of whether the Tribunal has jurisdiction to hear the application pursuant to the provisions of the Retail Leases Act 1994. Accordingly, the decision relates only to the application (COM 14/ 39370) filed in the Commercial list. There is no dispute relating jurisdiction of the Tribunal to hear the application filed in the General list (GEN 14/ 39371). JURISDICTION and ISSUE FOR DETERMINATION 1. The Retail Leases Act 1994 (RL Act) provides at s 71 71 Lodging of retail tenancy claims with Tribunal (1) A party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim. (2) A claim may not be lodged more than 3 years after the liability or obligation that is the subject of the claim arose. 1. "Retail shop lease" is defined at s 3 as "retail shop lease" or "lease" means 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: (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing. Sections 6, 6A and 84B limit the retail shop leases to which this Act applies. and "retail shop" is defined as "retail shop" means premises that: (a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre. Section 5 limits the retail shops to which this Act applies. 1. Hence, in order for the Tribunal to have jurisdiction to hear this application as a retail tenancy claim it is necessary to determine whether the business operated by the applicant at Ground Floor, 603 Botany Road Rosebery comes within the definition of a "retail shop". RESPONDENT'S CASE 1. The respondent made relevant submissions to the following effect. 2. The applicant describes its business on its website as 1. "a doula training facility", training women to become practising doulas whilst offering ongoing training and support to experienced doulas. ADC provides up to date information in a relaxed and caring environment through a broad range of groups, classes and sessions. We also can offer some sessions, support and treatments in your home or office", 2. an integrated health care centre providing education, support and continuity of care for women during pregnancy, childbirth and beyond. Through our network of qualified and experienced educators, doulas and practitioners, we can offer a variety of services, treatments and support." 1. Schedule 1 of the RL Act does not provide for maternity services in its definitions of retail shops nor can the applicant's business be readily categorised under any of the definitions provided under Schedule 1. 2. The applicant's profit and loss statement for the year ended June 2013 indicates that more than 85% of revenue for the applicant's business is earned from maternity training, classes and consultation. 3. The respondent further argued that even if the lease is a retail shop lease the proceedings are not properly constituted because mediation has not yet been attempted. (As that issue does not go to jurisdiction and can be otherwise dealt with by the Tribunal it is not considered relevant to this determination). 4. A short submission in reply to the applicant's submission pointed out that the correct test is whether the premises are "wholly or predominantly" for the carrying on of one of the prescribed businesses. 5. It has not been suggested that the premises in question were "wholly" used for any or all of the purposes relied on by the applicant. Further, in order to establish that the premises are "predominantly" for one or more of those purposes it is necessary to show that the retail sales must comprise substantially more than 50% of the applicant's business activities. 6. The applicant has provided no evidence, no signed statement, no independent corroborating documents, or other material to support her assertions. The profit and loss statement provided by the applicant is unexplained and has not been prepared by an accountant and is not for a complete financial year. 7. The Tribunal was invited to draw a Jones v Dunkel inference from the applicant's lack of supporting material. 8. The business is called "Australian Doula College" and the lease entered into between the parties is described as a commercial lease, not a retail lease. The applicant claims to have purchased $68,848 worth of goods for retail sale but no supporting material is provided. The photographs depict a very small quantity of retail stock that could only have been for "ancillary retail sales". 9. Even if the applicant's submission was accepted, the current profit and loss statement provided by the applicant still shows that less than 25% of the business' revenue was obtained from retail sales. More than 75% of the revenue still comes from counselling, training and workshops. APPLICANT'S CASE 1. The applicant made relevant submissions to the following effect. 2. Shops selling or supplying books, beauty products, baby goods, furniture, household goods, clothing, maternity products and beauty and massage services constitute retail businesses listed under Schedule 1. 3. The applicant's business does involve the sale of baby products, nursery furniture, specialty maternity and breastfeeding pillows, birth blankets and books and CDs on birth and parenting. Further, the applicant offers a massage and beauty service directed at pregnant women and new mothers. 4. The applicant provided a list of products offered for sale at the applicant's premises and provided photographs of some of those goods displayed for sale. 5. The applicant's premises had been designed to facilitate the "Australian Doula College" as part of a marketing strategy to bring retail trade to the store. Various events, talks and information sessions at the premises enabled the applicant to promote for sale the goods mentioned. The process was said to be analogous to a bookshop holding readings by authors, children's jewellery parties at jewellery suppliers and wine tastings at liquor stores. 6. The profit and loss statement relied on by the respondent related to a period prior to commencement of the lease in question. 7. The Senior Member who made directions in this matter on 7 August 2014 granted leave on 24 September 2014 for the applicant to file a further submission, in reply, by 3 October 2014. 8. On 3 October 2014 the applicant filed further material that cannot be described as "a submission in reply" but rather is affidavit evidence and documentary material that ought to have been submitted at first instance. Much of the material was relevant to the substantive issues in dispute rather than the preliminary issue of jurisdiction. It was not until the filing of this material that the parties provided the Tribunal with a copy of the subject lease. 9. I have considered that material, to the extent of its relevance, in determining this application. 10. The submission was that the definition of a retail shop contemplates premises that are proposed to be used for one or more of the prescribed purposes. Further, there is no requirement that the leasee be successful in sales in order to attract the jurisdiction of the Tribunal. It takes time for a business to build and the applicant was only in the premises for ten months. Had the business been allowed to continue it was the applicant's submission that the retail sales would have grown. 11. It was the respondent who insisted on the use of a lease styled "commercial". That description does not oust the provisions of the RL Act if they otherwise apply. 12. Stock purchased for re-sale by the applicant was not brought into the premises because of the respondent having locked the applicant out of the premises and therefore is not depicted in the applicant's photographs. The applicant's failure to use its web-site for retail sales was due to the fact that, until recently, it had a retail showroom for that purpose. 13. The current profit and loss statement is quite different to the earlier one relied on by the respondent because the applicant's business model and plan was radically changed to a retail focus. FACTS 1. It was not disputed that the parties entered into a lease for the subject premises commencing on 20 September 2013 and ending on 19 September 2015 with an option to renew for a further period of three years. 2. The rent and other terms and conditions of the lease are not relevant to consideration of the preliminary issue other than to note that the permitted use of the premises specified in the lease was "Doula Coaching and Consultation and sales". 3. There is some considerable dispute between the parties as to the proportion of the revenue of the applicant's business that was derived from sales relating to one or more of those activities that would come within Schedule 1. Nevertheless it is not disputed that retail sales relating to Schedule 1 activities represented a minority of the business activities of the applicant in the period in which the applicant was in occupation of the premises. APPLICATION OF RELEVANT LAW Approach to determining jurisdiction 1. Some of the issues arising for determination in this application have recently been considered by the Tribunal in Honings Bakery Pty. Ltd. v Cerialis Pty. Ltd. [2014]NSWCATCD 87. In that case Senior Member Bluth reviewed the cases relevant to the approach to be taken in determining jurisdiction of the Tribunal and referred to Wood and Wilson v Bergman [2003]NSWADT 82 and Moweno Pty. Ltd. v Stratis Promotions Pty.Ltd.[2002]NSWSC 1151 approved in the Court of Appeal in [2003] NSWCA 376. The Senior Member said, in summary, that the correct approach is 1. Firstly, one looks at the lease to see what is the permitted or agreed use of the premises, 2. If the agreement clearly defines what the use of the premises is to be, then the question as to whether or not the premises are a "retail shop" under s 3 of the Act will be determined by whether or not that use appears within Schedule 1, 3. If the permitted or agreed use is not clear or is uncertain, or the use covers a number of different types of businesses some of which are, or may be, within Schedule 1 described businesses, then an analysis is required of the actual use(s) of the premises to determine whether the predominant uses(s) fall within one or more of the businesses prescribed in Schedule 1. Onus of Proof 1. The High Court held in Owners of Ship Shin Kobe Maru v Empire Shipping Co. Inc. [1994] 181 CLR 404, at 426 "where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of evidence advanced in the proceedings held to determine whether there is jurisdiction" 1. In this case it is the applicant who asserts jurisdiction in the face of a challenge on that issue by the respondent. I am therefore satisfied that it is the applicant who has the burden of establishing, on the balance of probabilities and by probative evidence that there is jurisdiction under the RL Act. CONSIDERATION 1. In this case the lease document provides that the permitted use of the premises is "Doula Coaching and Consultation and sales". The words "and sales" were added and initialled by the parties to the words originally set out in the lease as prepared by the respondent. 2. It appears therefore that "sales" of some products was at least within the contemplation of the parties at the time of commencement of the lease (20 September 2013). However, the lease document does not refer to sale of any specific products and it is noted that retail sales already constituted a minor part of the applicant's business prior to commencement of the lease. 3. That is, the permitted use set out in the lease does not refer specifically to any use that is listed in Schedule 1. 4. Therefore it is necessary to embark on an analysis of the actual uses of the premises to determine whether the predominant uses fall within one or more of the businesses prescribed by Schedule1. 5. The applicant's case was essentially related to establishing its intentions for the business rather than what was the current reality of business activity. As noted above, although retail sales as a proportion of the whole of the business was in dispute, the applicant did not dispute that retail sales did not constitute a majority of the revenue stream of the business. The applicant's submission was that it had radically changed its business plan and that it was intended to use the training and meeting activities of the business to attract retail business activity. It was only due to early termination of the business by the respondent locking the applicant out that had prevented that plan from coming to fruition. 6. Furthermore it was argued, any failure to attract sufficient retail sales to establish that as the predominant use cannot be relied on to deny jurisdiction. 7. I am not satisfied that the applicant is able to maintain that argument. 8. It is true that the definition of "retail shop" includes the words "premises that are used or proposed to be used wholly or predominantly…". However, the test of whether or not it is proposed to use the premises predominantly for a particular purpose must be applied objectively by reference to material that is before the Tribunal. 9. In this case the applicant asserted a radical change of business plan. However, the applicant did not provide a copy of its business plan nor any evidence about how and when it formulated such a business plan. Rather, the Tribunal was asked to infer the existence of such a plan from the fact that the applicant rented what was described as retail premises with shelving provided by the landlord for the purpose of display of stock for retail sale and that it subsequently purchased stock for re-sale in the premises. Further, the applicant's argument necessarily inferred that the business plan was so radically new that it contemplated changing the very nature of the business from one in which the total revenue of $382,048 (mainly from provision of maternity related services) in the year to 30 June 2013 would shift to predominantly retail sales. 10. It is claimed that some $68,000 worth of stock was purchased. No invoices were provided by the applicant showing when and in what quantity the purchases were made. Even if that figure is accepted as accurate the quantity of stock purchased could not possibly generate sales sufficient to make retail sales the predominant use of the premises. 11. The applicant claims, inter alia, that Schedule 1 retail shops include shops engaged in sale of maternity products and massage services. I have not been able to locate any reference in Schedule 1 to either of those activities. However, it is acknowledged that those activities may be an activity in shops predominantly engaged in one or more of the other uses that are specified. 12. On the evidence provided it is clear that the predominant activity of the applicant's business prior to entering into the subject lease was the provision of doula training and support through classes, courses and meetings. That business already included a minor revenue stream from retail sale of books and DVDs. 13. At the time of entering into the lease the lease document itself indicates that the same business activity was to continue. Again, the applicant's own evidence shows that a business model, similar to the one operating prior to entering into the lease did in fact continue. Most of the revenue of the business was generated by the classes, groups, meetings, etc. 14. I reject the proposition that this was analogous to a wine tasting at a liquor shop or author readings at a book shop, both of which would generate little if any revenue. The vast majority of the applicant's business revenue was obtained from the activity that was said to be for promotional purposes. 15. It may well have been in the mind of the director of the applicant company that at some indeterminate time in the future the majority of the applicant's business would possibly be generated from retail sales. However, from objective assessment of the material before the Tribunal I am unable to conclude that the business of the applicant at any time it operated consisted predominantly or wholly of any one or more activity prescribed under Schedule 1. CONCLUSION 1. As a result this application must be dismissed. If the parties wish to agitate the issue of costs I have made directions to deal with that issue. 2. Application GEN 14/ 39371 remains on foot and I have made some directions regarding that application. It should be noted in that regard that unlike a matter under the RL Act, there is no entitlement to legal representation when the matter is next before the Tribunal (Civil and Administrative Tribunal Act 2013, s 45(1)). J Smith Senior Member Civil and Administrative Tribunal of New South Wales 16 October 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 February 2015