Further to our update on the application of the Retail Leases Act 2003 (Vic) (RLA) on 6 March 2017, Justice Croft's decision in CB Cold Storage Pty Ltd v IMCC Group Pty Ltd [2017] VSC 23 was subsequently appealed. The Victorian Court of Appeal then reached its decision in relation to the appeal on 5 July 2017.

The Court of Appeal decision upheld Justice Croft's earlier Supreme Court decision and this means that the risks remain for landlords that the RLA may apply to leases previously assumed to be exempt such as leases to industrial or warehousing tenants in Victoria. As advised in our previous update, this means that businesses that operate and provide services to any person for a fee are likely to be capture by the RLA and therefore land tax will not be recoverable from those tenants, market rent reviews that do not allow for rent decreases will be void, and on assignment, tenants and their guarantors may be released from their ongoing obligations.

The Court of Appeal overwhelmingly supported Justice Croft's earlier Supreme Court decision finding that:

"His Honour correctly applied the legislation (as interpreted in a long line of authorities) to the facts… we would dismiss the appeal."

As with the earlier proceedings, the nature of the 'ultimate consumer' test was in issue. The Court of Appeal approved of the test and authorities cited by Justice Croft, and articulated the "ultimate consumer" test as it applies to the retail provision of services as being whether:

"… the services are used by the person to whom they are sold or are the services passed on by the purchaser in an unaltered state to some third person."

In light of this potential broadening of the RLA's scope, we recommend landlords conduct a review of all leases having regard to the CB Cold Storage decision. As previously advised, whether a lease falls within the scope of the RLA will depend in the individual circumstances of the lease in question.