Mr G. Golvan, QC and Mr M. Borsky of Counsel, instructed by Schetzer Brott & Appel

1 Dagles Trading Pty Ltd sells new and used business and home office furniture. It refurbishes work stations and is a distributor of Space Rack Storage Systems. On 15 August 1996 it took a transfer of a lease of premises being Unit A, 861-865 Princes Highway, Springvale, a unit in a business park subdivision close to the intersection of Springvale Road. The original lease was dated 22 December 1994. The lessor was Macquarie Bank Limited as mortgagee in possession and the lessee was a company called Magnafield Pty Ltd which was permitted by the lease to use the premises for importing, distributing and wholesaling of computer equipment. In due course Skamper Pty Ltd which is respondent in this proceeding purchased the reversion.

2 The Macquarie Bank lease was not one of the standard copyright forms published by bodies such as the Law Institute of Victoria or the Real Estate Institute of Victoria. It granted a lease for a term of four years commencing 15 January 1995 and granted the lessee an option to renew for one further term of four years. Clause 10.1 provided in relatively orthodox terms for the grant of the option to renew with the new term commencing the day following the expiration of the old term:

... at such rental as shall be mutually agreed upon or failing agreement at a rental to be not less than the annual rental payable at the expiration of the term hereby granted and not greater than that annual rent increased by ten percentum and determined by a valuer of the Australia Institute of Valuers and Land Economists (Inc) appointed by the President for the time being of the Institute who shall act as an expert and not an arbitrator and his decision shall be binding on both the Lessor and the Lessee ...

3 Clause 11.1 provided for the rent under this lease to be reviewed annually by reference to the Consumer Price Index (All Groups) Melbourne published by the Australian Statistician.

4 Dagles exercised its option to renew for a further four year term. At about this time Skamper subdivided the other unit in the business park into three units. Mr Freeman, a director of Skamper, approached Mr Israel Rosenfield, the Principal of Dagles asking if his company was interested in leasing or purchasing the whole or part of what had formerly been the other lot in the park. Mr Rosenfield said that his company would be interested in taking a lease of what was then designated as Lot 3, being the allotment adjacent to the premises at Lot A. This allotment known as Unit 3 has roller doors providing a point of communication with Unit A. In due course it was used as a storehouse for stock for Dagles business. Mr Freeman told Mr Rosenfield that Skamper was 're-financing' its ownership of the reversion and would be in a more advantageous position if Dagles were to take a six year lease of its original tenancy at Lot A rather than the four years provided for in the option clause of the initial lease. A further feature of the arrangements then negotiated was a grant to Dagles of the exclusive use of a yard area forming part of the common property at the business park and located behind Lot A and Lot 3. Dagles entered into a licence agreement for this rear area together with six year leases for both Lot A and Lot 3.

5 Mr Rosenfield in his personal capacity subsequently purchased the reversion to Lot 3 and it forms no part of the present proceeding.

6 The lease for Lot A was for a term of six years commencing 1 March 1999. The rental according to the schedule was '$9,720.08 per calendar month for the first year of the term hereby created'. The balance of the paragraphs in the rental section of the schedule were as follows:

2 At the expiration of the first, second and third years of the term hereby created the rental shall be reviewed in accordance with Clause 18 hereof.

3 At the expiration of the fourth year of the term hereby created the rental shall be mutually agreed upon failing which it shall be reviewed in accordance with Clause 11 hereof subject to a maximum increase at the expiration of the fourth year not exceeding 15% over and above the rental payable for the fourth year of the term hereby created.

4 At the expiration of the fifth year of the term hereby created the rental shall be reviewed in accordance with Clause 18 hereof.

7 The words 'mutually agreed upon failing which it shall' were inserted in pen in the typescript and this addition was initialled.

8 Clause 18 provided for the rental to be indexed in accordance with the Consumer Price Index (All Groups) Melbourne as published by the Australian Government Statistician.

9 In Item 18 of the Schedule under the heading 'Further Terms' the following appeared 'one further term of six years'. Item 16 being dates for rental review nominated each February from February 2000 to February 2004.

10 Clause 12 made provision for the option to renew in orthodox terms. Clause 12.2 stated inter alia that a renewed lease resulting from the exercise of the option would have 'a starting rent determined in accordance with Clause 11'. Clause 11 provided for 'rent reviews to market' providing that in default of agreement the review to market would be carried out by a valuer nominated by 'the senior office-bearer of the Australian Property Institute - Victorian Division'. The lease included some five provisions additional to the standard print form. The first of the five was as follows:

1 In the event of the Lessee exercising its option for a further term as herein provided the rental payable during the further period shall be increased annually in accordance with clause 18 hereof.

11 It will be recalled that Clause 18 provided for indexation of rent by reference to the Consumer Price Index. Clause 19 of the printed form under the heading 'Additional provisions' stated:

19.2 if inconsistent with any other provisions of this lease, override them.

12 The lease for Lot 3 was in similar terms save that paragraph 6 of the additional provisions under Item 22 of the Schedule provided a rent free period for the first six weeks. The provisions in the Schedule under the heading 'Item 6 Rent' were to the same effect as those in the schedule to the lease for Lot A except that the initial rent was fixed at $2,800 per calendar month. Paragraphs (c) and (d) although typed into the schedule were struck out and initialled and paragraph (b) provided for rental review under Clause 18 only at the expiration of the third year of the term. References to other years were struck out.

13 Mr Rosenfield in his personal capacity signed a contract of sale to purchase Lot 3 on 25 October 1999. The contract provided for a price of $335,000 and for settlement on 1 February 2000. It was a condition of the contract of sale that Dagles be provided with a Deed of Variation of Lease granting it an option for two additional six year terms according to the same terms and conditions as the existing option to renew with respect to Lot A or Lot 1 as it was then described. Dagles paid a premium of $30,000 for the grant of these additional options to renew.

14 On 30 November 2004 Dagles exercised its option to renew the 1999 lease for a further term of six years. On 9 February 2005 Skamper provided Dagles with a tax invoice for the first twelve month period of the new lease term in the sum of $156,770.40 per annum plus Goods and Services Tax. This tax invoice was on the letterhead of the 'Banco' group of companies of which Skamper was one and was over the signature of Mr M. Iwanoff. The amount invoiced was described as 'being increased by CPI (Melb) as provided for in lease'. The monthly rental was $14,370.62. Dagles paid rent in accordance with that invoice and Skamper accepted and banked rental so paid.

15 Mr Iwanoff prepared a disclosure statement for the new lease term and forwarded it to Skamper's solicitors, Schetzer Brott & Appel. A director of Skamper, Mr Freeman signed the disclosure statement but without reading it according to Mr Iwanoff. Under cover of a letter dated 29 June 2005 Schetzer Brott & Appel couriered the disclosure statement in duplicate together with two copies of the lease and a tenancy brochure. In Section D of this statement the rental is shown at $172,447.47 per annum for year one and characterised as 'fixed rental'. This was the figure inclusive of Goods and Services Tax invoiced by Mr Iwanoff. For each year except year five, the rent was described as 'to be determined ... increased by CPI (Melbourne All Groups)'. For year five the rent was described thus 'to be determined ... increased TO MARKET'.

16 Dagles solicitors, Monahan + Rowell wrote to Schetzer Brott & Appel in a facsimile dated 19 July 2005. In this letter Monahan + Rowell challenged the provision in the disclosure statement asserting that there would be a review to market in year five. They contended that the effect of special condition 1 in Item 22 of the Schedule was that the rental during any renewed term would be adjusted only in accordance with the CPI and Clause 18 of the standard form. In the lease as drawn by Schetzer Brott & Appel, Item 6 was in the same general form as Item 6 in the original lease and provided for a review to market 'at the expiration of the fourth year of the term' viz. for the fifth year, except that the market review was capped to an increase not exceeding '15% over and above the rental payable for the fourth year of the term'. This proviso was not to be found in the disclosure statement as prepared by Mr Iwanoff. The parties could not agree and on 2 August 2005 Monahan + Rowell said:

We have been instructed by our client that unless we can have this matter resolved by 5 pm Friday 5 August 2005 we are to issue appropriate proceedings for a mediation at the Small Business Commissioner.

17 A document styled 'Referral of a Retail Tenancy Dispute' was prepared by the Office of the Small Business Commissioner. The dispute was described as follows:

The landlord has submitted a new lease pursuant to the tenants [sic] right to exercise an option.

The new lease submitted does not correctly state the agreed rental for the term of the new lease.

The landlord has chosen to either refuse, neglect or fail to amend the rental to the correct rental as provided in the former lease for the current term.

A new lease is yet to be executed as a result of the rental being incorrectly stated.

The new lease is to be amended so that the rental is in accordance with that stated in Item 22.1 of the former lease schedule appears as the rental for the new term.

19 The mediation took place on 28 October 2005 but failed to resolve the dispute. It is important to note that the dispute at this stage was as follows: Skamper's solicitors prepared a lease and Skamper's manager prepared a disclosure statement that provided for a review to market (in the case of the lease capped to a maximum increase of 15%). Dagles contended that there was to be no review to market for the fifth year.

20 Immediately following the mediation on 2 November, Schetzer Brott & Appel wrote to Monahan + Rowell stating:

We advise that the lease forwarded to you on the 29th June 2005 was incorrect and will not be relied on by our client.

21 On 12 December Monahan + Rowell on behalf of Dagles filed the application that commenced this proceeding. The application sought declaratory relief to the effect that the rental for the first year of the new term was to be fixed by reference to a CPI indexation from the rental in the final year of the previous lease and that the rental for each subsequent year was to be adjusted by reference to the Consumer Price Index only with the landlord not being entitled to any review to market. Dagles also sought orders that a lease in conformity with these principles be executed.

22 On 3 February 2006 Deputy President Aird made directions for pleadings and discovery. The matter came before me for further directions on 7 April 2006 at which time I extended some of the dates for interlocutory steps and set a revised hearing date of 19 June. On 22 February 2006 Schetzer Brott & Appel on behalf of Skamper filed a defence and counterclaim. The counterclaim sought a declaration that the rental for the first year of the option term commencing 1 March 2005 should be 'the rental as determined pursuant to Clause 11 of the lease, as varied'. That is, by review to market. The review to market has now been sought by Skamper for year one and not year five. In addition, there was no proviso 'capping' any increase to a maximum of 15% over the previous rental. A few days previously, on 15 February 2006, Skamper issued a tax invoice for rental for the period 1 March 2005 to 1 March 2006 for $285,899.96 being rent inclusive of Goods and Services Tax which was described as 'being increase to market as provided for in lease'. The following day a further tax invoice was issued for the period 1 March 2006 to 1 March 2007 for a total rental inclusive of Goods and Services Tax in the sum of $293,608.92 which was described as 'being increase of 2.7% CPI as provided for in lease'. In both cases the invoices were on the letterhead of the 'Banco Group of Companies', signed 'Skamper Pty Ltd' per M. Logiudice, Director.

23 Mr Iwanoff said that in September 2005 he discussed the rental issue with Mr Mario Logiudice. He said Mr Logiudice told him:

That he considered that under the terms of the lease there should be a review to market at the commencement of the new term and at the commencement of each subsequent term.

24 By that time control of the issue had been transferred from Mr Iwanoff to Mr Mario Logiudice. As it was however, no action seems to have been taken to assert Skamper's revised interpretation of the lease until the issue of the revised tax invoice on 15 February 2006. The evidence disclosed no explanation being furnished by Skamper to Dagles or its solicitors as to the change of position. The only hint that something of this sort was on its way seems to have been the Delphic letter of 2 November 2005 from Schetzer Brott & Appeal stating that the lease as submitted 'was incorrect and will not be relied on'.

25 Dagles was represented by Mr Wikrama SC. Mr Wikrama conceded that the standard printed terms of the 1999 lease would require a review to market on the exercise of an option to renew. He submitted however that the special provision in Item 22 of the schedule ousted these provisions and required that the rental be fixed by indexing the rental for the last year of the previous lease by reference to the Consumer Price Index. He noted that by virtue of Clause 19 of the printed standard terms of the lease, the special additional clauses added in Item 22 would override the printed term. This provision ousted the rule in Forbes v Git [1922] 1 AC 256 which would have had the earlier of two repugnant clauses in a deed prevail over the latter. Provisions such as clause 19 of the printed lease are apt to oust the rule in Forbes v Git. He referred to The Word Symphony [1992] 2 Lloyds rep 115 per Butler-Sloss LJ. He also relied upon a further canon of construction that specially negotiated terms would be regarded as prevailing over inconsistent terms in a printed standard form. He referred to Lewison The Interpretation of Contracts (3rd Ed) [9.10] 304. This was another reason, he submitted, for giving paramountcy to the special condition No. 1 and regarding rental reviews as restricted to those made under the Consumer Price Index.

26 Mr Wikrama stressed that the disclosure statement which did not provide for a review to market in year one but rather to a CPI index and fixed rental for the first year was prepared by Mr Iwanoff, a very experienced manager with wide responsibilities in the 'Banco Group' of companies of which Skamper is one. The disclosure statement was signed by a director, Mr Freeman. The tax invoice issued on 9 February 2005 correctly stated the situation for the rental for year one of the renewed term. Mr Wikrama said that Mr Iwanoff's change of position was 'probably due to pressure from his employers'. Mr Wikrama noted that at no stage with respect to any previous lease had Mr Rosenfield as principal of Dagles been prepared to 'write a blank cheque' by putting his company at the mercy of an unqualified market review. Clause 10.1 of the original lease had capped any market review to 10% and the provision for a market review in year five of the 1999 lease included a 15% cap. It was therefore inconceivable, he said, that Dagles would have agreed to a market review without any limit or cap in year one of the renewed lease. There is no distinction, he said, between reviews during the term of a lease and those carried out at the commencement of a lease. The very late appearance of the present contentions of Skamper told against there being the proper interpretation of the lease. According to Mr Wikrama, the contention that there should be a review to market in year one of the renewed lease term appeared for the first time with the issue of the revised tax invoice in February this year. This was only two days before Skamper's defence and counterclaim was due in accordance with directions made by Deputy President Aird. The contention that there should be a market review in year one formed no part of the dispute mediated by the Small Business Commissioner.

27 Mr Golvan QC who appeared with Mr Borsky for Skamper Pty Ltd conceded that by virtue of printed Clause 19 of the lease the additional special clauses in Item 22 of the Schedule overrode any inconsistent provisions in the printed form. They submitted however that there was no operative inconsistency. Special condition 1 provided for CPI rental reviews annually in accordance with printed Clause 18 during the term of the lease, that is, not at the outset of the lease but only after the expiration of the first year. There was they said a distinction to be drawn between reviews of rental taking place during the running of a lease and a review which was intended to fix the initial rental under a lease. This was recognised he said by the Court of Appeal in Antonino Giuseppina Ensabella & Sons Pty Ltd v Players on Down Under Pty Ltd (2000) V Conv R 54-526. In that case one of the issues the Court of Appeal had to consider was the application of Section 12 of the Retail Tenancies Reform Act 1998 to the lease in question which had been entered into in 1999 (that is after the commencement of the 1998 Act) under an option granted in a lease originally commencing in 1994). The section applied to a rental review 'during the term of the lease or under an option to renew the lease'. The question was whether this section applied to the fixation of rent by market review for the first year of the 1999 lease. Phillips JA with whom Ormiston and Charles JJA concurred held that in these circumstances one was not dealing with the review of rent 'under an option to renew' the 1999 lease. He also held that the circumstances did not entail a review 'during the term of the lease' concluding that this phrase applied only to 'a mid-term review' (2000) V Conv R 54-626 [30] 64,485 (column 2).

28 Next they said that no reasonable business person in the position of the parties at the time of execution of the lease:

Would understand the parties to have intended that the lease could be renewed for a period in excess of 20 years without any rent review to market. A construction which provides for such a lengthy period without rent review to market flouts business commonsense and, accordingly, ought to be rejected.

29 They referred to the joint judgment of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 188 [11], 198 [43].

30 They said that the provision for a market review at the outset of the renewed term was consistent with the pattern of previous agreements. When the 1999 lease was entered into it entailed an increase in rental of 10% from the previous lease granted by Macquarie Bank as mortgagee in possession. This they said was reflective of the provision in Clause 10.1 of that lease for a market review capped at 10%.

31 Further the provision for a market review at year five of the 1999 lease was reflective of the fact that the initial entitlement of Dagles was to a four year lease and the 1999 lease was extended to six years in the circumstances described. The provision for going to market subject to a 15% cap was reflective of that original situation.

32 Next they said that acceptance of Dagles contentions would mean:

The provision in Clause 12.2 of the lease fixing the starting rent for a renewed lease would be entirely inoperative, notwithstanding that it is the clause in the lease which clearly identifies how the starting rent is to be determined.

33 They said a construction should be preferred which avoids consigning some part of a written instrument to the status of surplusage. They referred to Dovuro Pty Ltd v Wilkins [2000] FCA 1902; (2000) 105 FCR 476, 517 per Finklestein J. His Honour said that a provision should only be regarded as mere surplusage if it was impossible to reconcile it with other provisions in the lease. They said there was no impossibility of reconciliation:

Clause 12.2 provides that the starting rent for the first year of each option is to be determined by review to market in accordance with Clause 11 and Clause 1 of Item 22 provides that the rent payable for each subsequent year during each option term is to be increased annually be reference to CPI in accordance with Clause 18. Properly construed, that is the parties objective intention that is conveyed by the terms of the lease.

34 They said that no weight should be attached to the tax invoice issued in February 2005. Mr Iwanoff is not legally trained and said that he obtained no legal advice before sending the invoice and nor did he consult the directors. Mr Iwanoff they said operated on a simple misconception. They said the invoice or letter as it was variously described could not form the basis for a waiver. They referred to Craine v Colonial Mutual Life Insurance Co Limited (1920) 28 CLR 305, 326 per Isaacs J (as he then was). Deaves v CML Fire and General Insurance Co Ltd [1979] HCA 12; (1979) 143 CLR 24, 42 per Gibbs ACJ; Commonwealth v Verwayen (1990) 170 CLR 394; AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2004] FCA 1330; (2004) 139 FCR 223, 241 per Heerey J; George v Roach [1942] HCA 22; (1942) 67 CLR 253, 261-2 per Rich J. Mr Iwanoff, they said, had mistakenly purported to exercise a right that was not possessed by Skamper, that is, to a CPI review in the circumstances and therefore his action was ineffective. Had the CPI review led to a purported fixing of rent beyond that which Skamper was contractually entitled to Dagles would be entitled to recover these moneys as moneys paid under mistake. They referred to David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353.

35 Despite a contrary contention in their written outline Mr Golvan and Mr Borsky said that if I found in their favour, the proper course was to refer the matter to a valuer for determination of the proper market rent.

36 At the outset I should note some evidentiary rulings which I gave in the course of the hearing. It is unquestionably the case that in resolving ambiguities in a written instrument it is appropriate to consider all the surrounding circumstances and the matters known to the parties at the time that they contracted. These matters are sometimes described as 'the factual matrix'; but in contractual matters the law seeks the objective intention of the parties as evidenced in their contract not their subjective intentions. Fitzwood Pty Ltd v Unique Gold Pty Ltd [2001] FCA 1628; (2001) 188 ALR 566, 580 [47] per Finkelstein J. In what has become a locus classicus in these matters, Mason J as he then was said in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 353:

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hope to make. They are superceded by, and merged in, the contract itself. The objective of the parol evidence rule is to exclude them, the prior oral agreement of the parties being impermissible in aid of construction, though admissible in an action for rectification.

37 Hence, I excluded various matters which Dagles principally and to a lesser extent Skamper, sought to put into evidence as to the negotiations between the parties. It follows that in so far as Mr Wikrama sought to urge some of these matters in support of his case I likewise put them to one side.

38 Another evidentiary question which arose was the degree to which reliance could be placed for construction purposes on the actions of the parties after the contract was made (in this case the 1999 lease). I stated that FAI Traders Insurance Company Limited v Savoy Plaza Pty Ltd [1993] VicRp 76; [1993] 2 VR 343 was an authoritative precedent of the Full Court of the Supreme Court requiring me to regard these matters as irrelevant. I received certain evidence called by Mr Wikrama as to subsequent actions surrounding the February 2005 tax invoice subject to objection from Mr Golvan and Mr Borsky. Mr Wikrama submitted that there was an exception to the general rule enunciated in the FAI Traders' case where it was necessary to resolve an ambiguity in a written instrument. He also submitted that the February 2005 invoice constituted 'an admission of fact' and could be considered on that basis.

39 The FAI Traders' case concerned a hotel lease and who as between landlord and tenant should bear the burden of certain insurance premiums. The tenant paid those premiums for the first 13 years but then refused to make further payments contending it was under no obligation to do so. The Full Court, Brooking, Nathan and Eames JJ held that on the true construction of the lease the tenant was not obliged to pay the insurance premiums and that the subsequent action of the parties with the landlord demanding and the tenant agreeing to pay the premiums for the first 13 years was not relevant to the interpretation of the contract. The principal judgment was delivered by Brooking J. His Honour examined the authorities on the relevance of post contractual action to the construction of the contract at great length. I find no exception enunciated for cases of ambiguity cf [1993] VicRp 76; [1993] 2 VR 343, 347 ll 5-8. Indeed it is only in the case of an ambiguity patent or latent that anyone would go to the trouble of seeking to pray in aid post contractual action to support a particular construction. If a contract was clear on its face there would be no occasion to attempt to bring in these extrinsic matters. Brooking J observed 'The construction of a written contract is a question of law' [1993] VicRp 76; [1993] 2 VR 343, 351. Therefore, even if Mr Wikrama is correct in saying that the February 2005 tax invoice is an admission of fact, it is difficult to see how it can be of assistance in determining a question of law. In the same passage in his judgment Brooking J was willing to concede that even questions of law may be the subject of admission but he felt such admissions on questions of contractual intention would be of no weight because they would go to subjective intention which according to orthodox analysis is beside the point in reaching an objective interpretation of a contract.

40 Certainly the invoice rendered in February 2005 is in a general sense a great embarrassment to Skamper and I think Mr Iwanoff. It is similarly embarrassing for Skamper that it seems to have taken up its present position only at a relatively late stage in its dispute with Dagles over when and if a market review of rental is required under the term of the relevant lease. As a matter of law and for present purposes however, these embarrassments seem to be beside the point. After all if the tenant in the FAI Traders' case was entitled to insist upon what the Full Court considered was the true construction of the hotel lease after 13 years of inconsistent conduct it is difficult to see why Skamper should not be entitled to rely upon a construction of the 1999 lease if it ultimately proves to be objectively the correct one in spite of approximately one year of inconsistent actions.

41 Since the decision of the High Court of Australia in Commonwealth v Verwayen (1990) 170 CLR 394 it seems difficult to be confident as to anything in the law of waiver and estoppel. Whether or not the appropriate explanation for a contracting party's ability to insist ultimately upon the true construction of the contract despite having acted in an inconsistent way is to be based upon there being no waiver because of a lack of knowledge in accordance with the principles enunciated in Craine's case as Mr Golvan and Mr Borsky contend or for some other reason, I am satisfied that authorities like FAI Traders do give a contracting party that entitlement and that there is no effective waiver.

42 I put the February 2005 invoice and the inconsistent actions of Skampers in drawing the lease and accepting the question posed for the Small Business Commissioner mediation to one side.

43 I am unable to attach much significance to the contention put by Mr Golvan and Mr Borsky that reasonable business people would not be expected to agree to an arrangement which would preclude a review to market for over 20 years. In Barbcraft Pty Ltd v Geobel Pty Ltd [2003] VCAT 1700. I made this very finding in favour of the tenant who as fate would have it was represented by Mr Golvan QC. However, in declining to find that the tenant was acting unconscionably in resisting a market review I found:

In a 1987 inflation environment [when the lease arrangements were first made] with the large increases in Consumer Price Index the parties could reasonably have contemplated that the landlord's interest was adequately protected by a provision for CPI indexation. When the Retail Tenancies Act 1986 was enacted to protect the interests of retail tenants, Parliament obviously regarded indexation as favourable to the interests of landlords and unfairly so, hence the prohibition on the use of indexation in Section 10(2) prior to its repeal in 1991. [2003] VCAT 1700 [89]

44 Similarly I can attach little weight to Mr Wikrama's contention that Mr Rosenfield would never have agreed to the 'blank cheque' of an unqualified review to market. In the past 20 years Victoria has had no less than three comprehensive retail tenancy statutes. All have treated market reviews as the preferred mode of rent fixation for retail tenancies. They have outlawed provisions which would preclude rentals from finding their appropriate market level such as provisions that the rent in one year following review should be no less than the rent for the previous year etc. Section 35(7) of the Retail Leases Act 2003 provides that in default of any other mechanism for rental review, rent is to be fixed by reference to the current market rent as assessed by a specialist retail valuer appointed by the Small Business commissioner. The assumption underlying this provision and its predecessors is that a market rent is for that reason alone a fair rent. Finally there are the warning words of Finkelstein J in Fitzwood's case:

... a judge must be cautious when there is an attempt to sway a case by reference to commercial good sense, because views may easily differ on what is good sense, and in some cases a party is willing to bargain away a good sense result on one aspect of a contract because of a perceived advantage in another.

[2001] FCA 1628; (2001) 188 ALR 566, 580 [47]

45 All this leads me back to the text of the 1999 lease which I have quoted or summarised above. As Mr Wikrama contends and Mr Golvan and Mr Borsky concede, the special condition at Item 22 of the schedule must prevail to the extent that it is inconsistent with the printed terms of the standard form. I accept the submission by Mr Golvan and Mr Borsky however that there is no inconsistency. Clauses 11 and 12 of the printed form deal with one subject matter, namely the renewal of the lease pursuant to the option to renew and the fixation of rent upon that renewal and special condition 1 deals with rental reviews 'during' that renewed term. In accordance with the distinction drawn by Phillips JA in the Ensabella case, reviews 'during' the term of the lease are mid-term reviews not the process of fixation of the initial rental. The words of special condition 1 have their own work to do, that is, to stipulate what rental reviews are to take place during the renewed term and those reviews are annual CPI indexation. The clause has the effect inter alia as Mr Golvan and Mr Borsky conceded of excluding any provision for a market review at the end of year four for year five of the reviewed term. In supposing otherwise and preparing a disclosure statement on that basis Mr Iwanoff made a further mistake as was once again conceded by Messrs Golvan and Borsky on behalf of Skamper. In default of agreement on rent for the first year of the renewed lease term it must be determined by a review to market.

46 Since there may be some debate as to the precise form of the declaration to be made and what consequential orders should be made to place the matter in the hands of the specialist retail valuer I will provide for the parties to bring I short minutes to give effect to these reasons.

47 I have heard no submissions as to costs and so I will reserve that question.