Data Base Corporate Pty Ltd v Strike Australia Pty Ltd

Supreme Court of NSW|2019-03-12|Before: Darke J, Mr P

Introduction

The plaintiff, Data Base Corporate Pty Ltd, is the sub-lessor of certain premises at King Street Wharf. The defendant, Strike Australia Pty Ltd, is an assignee of the sub-lessee. The defendant conducts a business at the premises in accordance with the Permitted Use under the sub-lease, which use is defined to mean "ten pin bowling, bar, ancillary facilities (including electronic and pinball machines [sic] games) in accordance with the development approval" and such other use as the plaintiff may in its absolute discretion approve.
The sub-lease was for a term of 10 years commencing on 24 August 2007 and terminating on 23 August 2017. It contains two options to renew, each for a further term of 5 years. In February 2017 the defendant exercised the first of the options to renew. Clause 11.2(a)(ii) of the sub-lease provides in effect that the rent may be reviewed at the commencement of the Further Term under paragraph 4 of the First Schedule to the sub-lease.
Paragraph 4 of the First Schedule sets out a procedure for the ascertainment of a Market Rent. In certain circumstances, the procedure requires the plaintiff, on behalf of both parties, to request the appointment of a valuer "to determine the Market Rent in accordance with paragraph 4.5". In August 2017, Mr David Anderson, valuer, accepted such an appointment.

The rental determination

The appointment was accepted by Mr Anderson on the basis, inter alia, that the rental was to be determined in accordance with the provisions of the sub-lease, and in particular paragraph 4.5 of the First Schedule. Mr Anderson thereby undertook to determine the rent in accordance with the instructions set out in paragraph 4.5.
Both parties provided written submissions to Mr Anderson. The plaintiff provided a report dated 21 August 2017 prepared by Urbis Valuations Pty Ltd. The defendant provided a report dated 24 August 2017 prepared by Intelligent Property Solutions Pty Ltd. The parties also provided written submissions in response. The plaintiff provided a report dated 29 August 2017 prepared by Gordon Property Advisory Services; and the defendant provided a report dated 30 August 2017 prepared by Intelligent Property Solutions Pty Ltd. I note that the instructions set out in paragraph 4.5 include an instruction to have regard to any written submissions made by or on behalf of either of the parties. It is apparent from Mr Anderson's determination that he did so. It is not necessary to refer at this stage to any aspects of the written submissions.
It is necessary to refer in some detail to the rental determination itself. Mr Anderson's report includes the following: 2.1 Preamble The subject premises are predominantly basement level suite within a Stratum and Strata title mixed use development forming part of the 'King Street Wharf' complex. The premises have been occupied by the current Lessee, Strike Bowling, since commencement of the initial term of the current lease on 24 August 2007, with the rent being reviewed to fixed 3.5% increases over the initial term. This determination is of the market rent at exercise of a five (5) year option term on 24 August 2017. The lease provides for a future market rental review for an additional five (5) year option term from 24 August 2022 and retains fixed 3.5% increases for each interim year. 2.2 Instructions Pursuant to my appointment by the President of The Australian Property Institute, NSW Division (APINSW), I have been instructed to determine the Current Market Rental for the demised premises known as part Lots 10 and 11 in Deposited Plan 1097922 in accordance with the provisions of the lease, as at 24 August 2017… 3.7 Location and neighbourhood The subject property is located on the western side of Lime Street at the intersection with the pedestrian plaza cul-de-sac end of Erskine Street, within the 'King Street Wharf' mixed use complex constructed over four buildings and at the western fringe of the Sydney CBD. Immediately surrounding development is predominantly of multi-storey and high rise mixed retail, office and residential uses, along with purpose built entertainment attractions and progressively constructed over the past 30 years. It is within the Darling Harbour recreation area, which is an established entertainment and recreation precinct attracting large numbers of domestic and international visitors. The area is serviced by bus, rail and ferry public transport, has good access to recreation services and the Sydney CBD is to the east of the Darling Harbour precinct. It lies within an area administered by City of Sydney Council. … 4.2 Demised Premises The demised premises are currently utilised as a bowling alley with associated other bar and internal entertainment areas and has a small outdoor bar area at promenade level. Both parties are aware of the current accommodation and its use and I have therefore only briefly described the premises and parent complex as follows. The premises are within the King Street Wharf 10 retail and commercial complex, built in 2000. The parent complex comprises four, five-storey buildings with retail outlets to The Promenade fronting Darling Harbour and a total of 51 commercial strata units fronting Lime Street. 'Building 4' (21-29 Lime Street) within which the subject is located, comprises two retail levels and 15 commercial strata units. The accommodation is provided over split levels but has been ramped to give access without stairs from the ground floor to the main lower bowling and entertainment level via a long passageway which has been utilised for three 'puzzle' rooms. The lease states that the market rental is to disregard "that the premises may have more than one floor", which is unusual, and I am not entirely sure what was the intended purpose of this provision was and have assessed the rent based on the physical characteristics of the premises, without deduction for areas under stairs etc which may be excluded according to the PCA method of measurement. The permitted use under the lease is for "Ten pin bowling, bar, ancillary facilities (including electronic and pinball machines) in accordance with the development approval." The premises have been extensively fitted by the Lessee for their use and include an additional small outdoor area, part of which I am advised is separately licensed from the Darling Harbour authority. Various male, female and disabled access toilet facilities have been constructed within the premises, along with two bars and a service counter for the bowling customers. Back of house areas include a commercial grade kitchen, a small maintenance workshop, a bowling machine room with extensive machinery for the bowling alley use, storage area, a built-in cool room, bar service washing room, communications room and a plant room. … 4.3 Lettable area Both parties have agreed on the lettable area being in accordance with a survey report prepared by Geoserv, dated 13 August 2017 and provided with my instructions. The survey Gross Lettable Area (GLA) is summarised below. Internal area (Lot 10 and part Lot 11) 1,358.5 Outdoor area 29.6 Total 1,388.1 … According to the Deposited Plan, the subject Lot 11 has a frontage to the promenade area of 5.365 metres, with approximately 6 metre, outdoor, side frontage to the pedestrian plaza area at the end of Erskine Street. All other frontages are either closed walling or sub-surface. 4.4 Development approval précis The premises are approved under City of Sydney Council DA D/2006/37 for a place of public entertainment trading 8am to 12 midnight seven days a week with a one-year trial trading until 2am the following day Monday to Saturdays. I am advised that the trail [sic] period trading hours have been allowed to continue. The development approval permits Patron numbers must be limited to 300 persons at any time. However, the number of patrons can be increased to a maximum of 450 persons at any one time on 20 separate days of any one calendar year. The approval specifically excludes a 'dance floor' or 'nightclub' use under Special condition 4, which would require a separate application. … 4.6 Liquor licence I have been provided by the Lessee with a copy of NSW Liquor Licence no. LIQO624015145 details as at 24 June 2016, which appear to describe the business operation associated with the subject premises and with trading hours aligned with those of the trial period noted in the 2006 development approval. The licence conditions exclude electronic gaming and entertainment machines on the licensed premises. The area under licence is not stated and the associated diagram is not included with the material received, however the description indicates that a majority of the patron area is licenced for liquor sales.
Mr Anderson's assessment is primarily contained in Section 6 of his report. In Section 6.1 the terms of paragraph 4.5 of the First Schedule are set out in full. In Section 6.2 the definition of "Market Rent" contained in the sub-lease is referred to, and it is noted that paragraph 4.5(e) requires the appointed valuer to act as an expert and not as an arbitrator. In Section 6.3, reference is made to the submissions provided by the parties, including the following: The key divergence of view expressed in the submissions and responses between the parties is in what market transactions are deemed to be comparable, and/or applicable, under the market review terms of the lease. Whilst the Lessor contends that premises within the hospitality and entertainment precinct of King Street Wharf and Cockle Bay are the most comparable examples, the Lessee contends that rentals for similar bowling alley use should be used as comparable rents. Mr Lester Alvis of Urbis contends that the 2013 lease for the 'Dockside' bar and restaurant premises in the Cockle Bay Wharf complex provides the best example of a comparable rent. However, the DA approval for the subject which forms a key criteria for the permitted use under the lease, specifically excludes a 'dance floor' or 'nightclub' use and these premises have a notably superior outlook and excellent access to natural light. I am of the view that a substantial discount is warranted for the subject and therefore do not place much weight on the rental put forward by Mr Alvis. Alternatively, Messers Fonteyn and Lei of Intelligent Property Solutions (IPS) have taken a 'zoned' approach to the rental, applying market rates for four separate portions of the premises, to arrive at a blended overall rental. With the somewhat unique nature of the subject premises, I am of the view that this is a suitable approach, in the absence of comparable premises based on similar layout and utility. They have then made a 'check' against occupancy cost as a percentage of revenues with the subject passing rent at a level of 15.28% of 2017 budgeted turnover, although the gross rent varies marginally, and falls within the advised range of bowling alley costs throughout Australia. The review of the Lessee submission was not carried out by Urbis, with Ms Joanna Gordon for the Lessor providing a report that emphasises a potential range of uses for the premises and an error in the description of the outdoor area as "licence area". This may be a misconstruction with the meaning being under liquor licence, however, the lettable area is agreed and includes the outdoor area under title of Lot 11, with a small adjoining area under licence from the Authority administering the harbour foreshore not forming part of this determination. The potential alternate use examples of Ms Gordon are not considered to offer any likely substantial increase in rental income, in my view, and would all require significant alteration to the premises and inducements for a new occupant use. Whilst incentives are not to be considered in this review under the lease, incentives would be required for any of the alternate uses put forward by Ms Gordon and the requirement to ignore incentives supports the existing permitted use being a primary consideration in arriving at the market rent. The review of the Lessor submission was provided by Mr Fonteyn of IPS and continues the theme that alternate uses in the immediate precinct do not provide a reliable guide to rental for the subject and further highlights that bar/restaurant use rents are mainly renewals of fitted out premises with significant Lessee investment. These renewals retain elements of a bi-lateral monopoly situation which may distort the rental that could be achieved on an open market basis. In arriving at my opinion of market rental, I have had regard to both of the above views, however, I have placed more weight on the available rental evidence in relation to the permitted use and physical characteristics of the premises rather than the location, as the subject premises are not considered to be suited to typical restaurant and bar type uses that prevail in King Street Wharf and Cockle Bay, or the immediate surrounding precinct. Further, the permitted use under the lease specifically refers to the current use and the development approval.
Section 6.4, headed "Rental approach", is in the following terms: In assessing the market rental value of the property, in my opinion the most appropriate method of assessment is the Direct Comparison approach on a rate per square metre of lettable area basis. With respect to the type of premises deemed comparable in determining the market rent, I have taken the following view with respect to the review provisions of the lease. Clause 4.5(c)(ii) The primary provision in this clause is the use of "comparable premises", with the secondary provision being "in the vicinity of the premises" and thirdly the more subjective provision that they are "let at their highest and best use". The effect of my structuring this is that comparable premises is the main determinant of usefulness of market evidence, whilst "vicinity" is quite broad in its definition being "the area around a place" according the Cambridge English Dictionary and can extend from curtilage of a property to the same suburb, or territory. If the added descriptor of "immediate" had been used then I would have been more inclined to select examples in the King Street Wharf, Barangaroo, Cockle Bay and Darling Harbour precincts, however the availability of premises that are comparable in terms of physical characteristics would remain limited in this small zone. The other means of arriving at what may be deemed the appropriate "vicinity" would be the potential zone of influence for the current use, which is specialised and would extend some distance from the immediate vicinity. To be let at their highest and best use would be appear to have been achieved for leased premises put forward in the submissions and adopted herein, as the locations are deemed attractive enough and with sufficient demand to be occupied under what would be deemed at, or near, their notional highest and best use. The one example that may not meet this criteria is the Sydney Chamber Orchestra premises at Opera Quays which is likely to have been granted initially with some philanthropic benefit from the original developer of the Bennelong complex. This has been taken into account in this instance. Clause 4.5(c)(iii) The permitted use is quite clearly defined in the lease and further includes reference to a development approval. Whilst Ms Gordon indicates that 'development approval' is not defined, there exists an approval for the current use, granted well before the commencement date and which applies to the subject premises. I have adopted the view that this approval clearly represents the relevant approval referred to under the lease for this tenancy. I have therefore adopted that the permitted and approved use is a key measure of comparability under the lease and whilst the lease allows for altered uses etc, no altered use has been requested or granted since commencement of the lease and therefore the current use is applicable. Clause 4.5(c)(vi) The Landlord has provided me with a summary of works undertaken prior to commencement, including services which are outlined herein. I have taken into consideration the works as advised in my assessment. As with any lease extension, renewal, option exercise, or re-lease, there is a level of attachment to the premises by the sitting tenant that is required to be ignored to the extent that the provisions of the lease do not prevail and also that the Lessor enjoys a history of occupancy performance which limits future income risk. Whilst the review is for exercise of an option term and not a mid-term review, there is an element of bi-lateral monopoly to consider when the investment of the Lessee and the nature of the premises suggest that there are substantial 'cost' factors in vacating the lease. The situation of a bi-lateral monopoly in a mid-term review limits the ability of that reviewed rent becoming a reliable indicator of a 'market' transaction as well. The more appropriate broader market view in micro-economics for premises offering a somewhat limited type of use in the location is a bi-lateral oligopoly, where there are both few potential occupants and few potential landlords requiring and offering the type of space and location required for the subject permitted use. These types of market transactions would be considered most valid, where available.
Section 6.5 contains commentary about the rental evidence. It includes the following: In the course of my investigations, I have had regard to the rental examples put forward in the parties' submissions and a range of leasing transactions including, but not limited to, the following summarised examples, which assist in ascribing market rent to the subject at the relevant date. Rents in the King Street Wharf complex Shop 6, 1-15 Lime Street 09/17 340.3 $1,635g Precinct 3, King Street Wharf Proposal 450.4 $1,378g Sydney … 'Bungalow 8' and 'The Loft' 11/16 885 $1,412g Shop 1, 1-15 Lime Street Market review 1,235(est) $1,012g Precinct 3, King Street Wharf Sydney … 'Beer Deluxe' 02/16 373.1 $1,169g Shop 2, 1-15 Lime Street 518.3 $843g Precinct 3, King Street Wharf Sydney … 'Nick's Bar and Grill' 08/15 543 $1,580g Suites 5 and 6, 31-35 Lime Street 746 $1,052g Precinct 1, King Street Wharf Sydney … Basement level retail rents Basement level 04/17 411 $448g 70 Pitt Street Sydney … Basement Level 2 09/16 1,037 $410g 1 Dixon Street Haymarket … Suites B1 & B2, 01/16 563 $444g 53-55 Liverpool Street Market review Sydney … Woolworths supermarket 12/15 1,438 $661g 'Pacific Bondi Beach' Lot 202, 180 Campbell Parade Bondi Beach … Basement Level, 10/15 300 $350g 815-825 George Street, Sydney … Lower ground floor shop, 04/15 395 $696g 545 Kent Street, Sydney … Woolworths supermarket On completion 2,031 $640g "One Central Park" 10/13 Broadway Chippendale … Bowling Alley rents The Lessee submission includes a number of bowling alley rents which range from $187.97/m2 pa to $389.11/m2 pa gross. I am not able to independently confirm the details of these rents and have accepted the details of passing rent and lettable areas as accurate in my assessment. In addition to the examples cited, I have investigated the following. Kingpin Bowling 09/16 2,748.5 $217g Level 4, 'Harbourside' 8-10 Darling Drive Darling Harbour … Strike Bowling Centre 08/13 1,590 $314g Macquarie Park … AMF Bowling Centre 05/09 1,899 $158n Hornsby $203g … Of interest is the comparison of rents for restaurant bars in King Street Wharf around the commencement date of the subject tenancy. Below are rents analysed by LandMark White as at August 2008. … In comparison to the above, whilst these rents have been subject to annual increases since commencement, the subject premises were initially leased to the current tenant at a rate of $342/m2 over the lettable area of 1,388m2, plus increases in outgoings over the Base Figure attributed to year 1. This history of letting indicates that there has been limited market growth, or falling rent levels, for the premium restaurant/bar premises in King Street Wharf over the period 2008 to 2017. A broad pattern of stagnant rents in the precinct may not be immediately attributable to the specific use of the subject, which over time appears to have attracted substantial business goodwill and created a destination use. However, the Lessee business goodwill that is not attached to the location, or physical characteristics of the premises, should be ignored in a market rent review and is to be disregarded under Clause 4.5(d)(iv) of the first schedule of the lease. This approach allows rent to be ascribed on the basis that the property is vacant and offered for lease under similar terms and for a similar use. The low level of rent at commencement leads me to the opinion that there was limited open marketability for the subject premises when vacant at that time and with a long period of annual 3.5% fixed rent increases to the market review date providing a compounded increase of 36.3% over the initial nine years of reviews, it appears that rental growth has been substantially above the level of increases apparent over the same period for surrounding leases which have either had market reviews, re-leases, renewals or have replaced occupants over the same period.
Section 6.6, headed "Market rental assessment" is in the following terms: In forming my opinion of value I have had regard to various rental evidence, including the examples detailed above. My evidence has been based on various third party sources of information. While I believe the information to be accurate, not all details have been formally verified. I[n] summary, the evidence provides analysed rate ranges as follows: King Street Wharf bar/restaurants $1,169/m2 to $1,635m2 pa gross for 340m2 to 885m2 (excluding licence areas) Basement premises $350/m2 to $696/m2 pa gross for 300m2 to 2,031m2 Bowling Alleys (including Lessee submission examples) $188/m2 to $389/m2 pa gross for 1,286m2 to 2,749m2 The evidence is compared on a gross rental basis where available, as this is the industry standard for a property of this nature and captures the costs of tenancy where variations in outgoings rates are notable, as they are in this instance. Outgoings recoveries are then deducted to arrive at the attributable market rent in accordance with the lease. The broad range reflects the location, size and standard of accommodation of each of the examples analysed with the evidence of most assistance in relation to the subject being the well located basement premises in Sydney CBD retail precincts and the broader rental cost for bowling alley use. The subject property has only narrow frontage to the harbourfront promenade area, but is well located and the entrance has good exposure to pedestrian traffic approaching from the north. The examples which provide the best guide to market rent for the subject at the relevant date are the following: Kingpin Bowling, Darling Harbour 2,748.5m2 @ $217/m2 pa gross This lease is for larger premises on the upper floor of a circa 1988 retail centre located on the opposite side of Darling Harbour in what is considered an inferior position. The centre has limited external signage exposure and has the benefit of being located at the connection point to a large detached commercial car park that services the centre and the broader Darling Harbour tourist area. The premises enjoy expansive Darling Harbour views from the function room areas and have reasonable overall access to natural light for the foyer and function areas. Due to the superior location and smaller size, a significantly higher rental rate is appropriate for the subject. Strike Bowling, Macquarie Park 1,590m2 @ $314/m2 pa gross This lease is for a similar size tenancy with 10 bowling lanes and similar associated entertainment facilities. The premises are located on an upper level of the 'Macquarie Centre' regional shopping centre and opposite an Events cinema complex, which provides agglomerative benefit and shared exposure, however it is not subject to large volumes of passing foot traffic. Parking is available in the centre. Due to the superior location and direct exposure of the premises, a higher rental rate is appropriate for the subject. Basement Level 2, 1 Dixon Street Haymarket 1,037m2 @ $410/m2 pa gross This lease is for a similar size tenancy within a modern retail complex dominated by restaurant uses at the fringe of the popular 'Chinatown' precinct of the CBD which has benefitted from rapidly expanding resident numbers over the past 5 years as well as long established visitor traffic. Lease as an internet and gaming centre which is considered an inferior use to the subject and are smaller premises in a marginally inferior location. Overall, a higher rental rate is appropriate for the subject. Woolworths supermarket, Bondi Beach 1,438m2 @ $661/m2 pa gross This lease is for a lower ground floor supermarket with street level access from the main beachside thoroughfare, however, it is set back within the structure without any direct street frontage. This type of use is usually deemed an anchor tenancy and can be offered what may be deemed a favourable rental rate due to the attraction for associated retail occupants. However, in this location the surrounding occupants are typically fashion, bar and food uses that do not require the anchor supermarket to attract foot traffic. The centre is in a prime beachside location and provides good loading facilities along with basement parking for patrons which is free for a short period. A lower rental rate is appropriate for the subject. I am advised that the passing face rental is $647,376 pa net, plus allowance for outgoings payment of $76,200 pa, which equates to $723,576 pa gross, or $521.27/m2. For the size, position and configuration of the subject premises, this level of rent is considered to be within an acceptable range of current market rents, with regard to the analysed rents above. Based on current market conditions, I would expect that the subject, if offered for lease in the context of the current market, would attract an overall rental rate in the order of $520/m2 gross, providing an overall annual rent as follows: Whole of the premises 1,388.1 $520 $721,812 Adopt $720,000

Relevant principles

The Court was referred to the well-known decision of the Court of Appeal in Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314. In that case, a lessee challenged the binding nature of a rental valuation on the basis that the valuer had made an error concerning the area of the demised premises. The lessee was successful at first instance. However, on appeal, Mahoney JA and Priestley JA, in separate judgments, were not satisfied that any error had been established by the lessee. On the other hand, McHugh JA came to the conclusion (at 330-1) that the valuer had erred in principle in determining the rental value. His Honour thus turned to consider the question whether the mistake was one which "invalidated" the valuation. After an extensive review of the authorities, McHugh JA stated (at 335-6): In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v Kenwood Manufacturing Co Ltd (at 181). A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is "final and binding on the parties". By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah [1974] AC 727; Arenson v Arenson [1977] AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.
The issue was further considered by the Court of Appeal (in the context of a contract embodied in articles of association) in Holt v Cox (1997) 23 ACSR 590. Mason P (with whom Priestley JA agreed) stated (at 597): A close reading of McHugh JA's judgment in Legal & General indicates that his Honour was not propounding the view that a valuation will stand regardless of error. Rather he was making the point that mistake is not itself a ground of vitiation: see also Wamo Pty Ltd v Jewel Food Stores Pty Ltd (1983) ANZ Conv R 50. A valuation may contain factual error or embody consideration of matters which should not have been taken into account, but it does not follow that the result is outside that which the contract contemplated would be within the realm of determination by the valuer. As McHugh JA makes plain, "in each case the critical question must always be: Was the valuation made in accordance with the terms of [the] contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value" (emphasis added). The statement in the next sentence ("Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account") must be read in the same context. His Honour is not saying that these matters are never relevant. Rather he is saying that they are not relevant if the valuation was in accordance with the terms of the contract.
In WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489; [1999] WASCA 10 Ipp J (with whom Kennedy and White JJ agreed) referred at [23]-[26] to the discretionary nature of valuations. At [23] his Honour stated: Valuations may involve making decisions where no fixed or readily available standard criteria exist. There may be several possible methods of assessing value, each giving widely different results, but each being reasonable. Many subsidiary factors relevant to the valuation may be uncertain, many contingencies may have to be taken into account, wide ranges of legitimate decisions may apply, and opinions may legitimately differ as to virtually all of the relevant issues.
Ipp J continued at [35]-[37]: I think it would be helpful at this stage to summarise the principles applicable to the review of discretionary valuations by a third party. I shall then refer to the authorities from which they are derived. Firstly, by the contract, the parties agree to be bound by a valuation made in terms thereof. Therefore, if the valuation complies with the contract, they are bound thereby. Because of the discretionary nature of the valuation, the contract will not require the valuation to be "correct". There will indeed be no uniquely correct valuation. The valuation will merely have to be within the terms of the contract. Secondly, a court will not set aside a valuer's determination merely on the ground that it is "incorrect" or that it reveals errors. The determination will only be interfered with if it is not made in terms of the contract; a mere mistake in the valuation will ordinarily not be a departure from the terms of the contract.
In AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 Nettle JA (with whom Maxwell P and Bongiorno AJA agreed) stated at [51]-[54]: I agree with the judge that the question of whether it is open to review an expert determination on the ground of error is in the first place to be decided according to whether the determination answers the contractual description of what the expert was required to determine. I also agree with the judge that the question of whether an error in determination deprives the determination of compliance with the contractual description of what the expert was required to determine is in the first place to be answered according to whether the error occurred in respect of a task which the contract entrusted to the expert. As Mason, P. explained in Holt v. Cox, although mistake is not itself a ground for vitiation of a final and binding expert determination, a mistake may still be of such a nature that the resultant determination is beyond the realm of contractual contemplation - beyond anything which the parties may be supposed to have intended to be final and binding - and therefore susceptible to review. The situation is analogous to that which faces a court in a cases of judicial review of administrative error. Just as an administrative decision maker has an area within which he or she may make mistakes without relevant consequence, so too an expert appointed under contract has an area within which the contract contemplates that he or she may make mistakes without relevant consequence. Similarly, just as there are some administrative mistakes which amount to jurisdictional error, and so expose a decision to judicial review, those appointed under contracts to make determinations may make errors which are beyond the area of tolerance which it is to be supposed the contract had in view. Therein lies the distinction drawn in some of the authorities, and observed by the judge in this case, between an error in the exercise of a judgment, opinion or discretion entrusted to an expert, and an error which involves objective facts or a mere mechanical or arithmetical exercise. Subject to the contract in question, it is easier to suppose that parties to a contract contemplate that an error of the former kind be beyond the realm of review than it is to think that they intend to be fixed with errors of objective fact or in processes of mechanical calculation. As this case demonstrates, however, matters are likely to be more complex where error occurs in the course of an exercise which is partly comprised of discretion, judgment or opinion and partly constituted of objective fact or mechanical calculation. In some such cases, the overriding discretionary or judgmental character of the exercise may so inform each step in the determination as to put even those steps which are matters of objective fact or mere mechanical calculation beyond the scope of permissible review. In other instances it may appear that, despite the overall character of the exercise, the various steps in the determination are severable, according to whether they are essentially discretionary or judgmental or simply matters of objective fact or mechanical calculation, and that those steps which are of the latter kind are within the scope of permissible review. The question in each case is what the parties should be presumed to have intended, and that is to be determined objectively from the terms of the contract, bearing in mind the context in which it was created. This passage, together with the judgments of McHugh JA in Legal & General Life of Australia Ltd v A Hudson Pty Ltd (supra) and Mason P in Holt v Cox (supra), was cited in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38 at [26].
In Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 Bathurst CJ (with whom Beazley P and McColl JA agreed) stated at [74]-[78]: The parties accepted that the question depended upon whether the determination was made in accordance with the contract: Legal & General Life at 336. As Nettle JA pointed out in AGL Victoria at [44], in one sense, this test is conclusionary. The question of whether the determination is open to review rather depends on whether or not the expert has carried out the task which he or she was contractually required to undertake: AGL Victoria at [51]; Holt v Cox [1997] NSWSC 144; (1997) 23 ACSR 590 at 596-597; Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38; 244 CLR 305 at [26]-[27]. If the expert in fact carried out that task, the fact that he made errors or took irrelevant matters into account would not render the determination challengeable. On the other hand, if the expert had not performed the task contractually conferred on him or her, but rather performed some different task, or carried out his or her task in a way not within the contractual contemplation of the parties, objectively ascertained, then the determination will be liable to be set aside. That is not to say that questions of mixed fact and law, or for that matter, pure questions of law, could not be left for the determination of the expert: Downer Engineering at [79]. Whilst it is a matter of contractual construction in each case, it has been stated in a number of cases that parties are more likely to have left to an expert matters involving discretion or opinion, rather than matters of objective fact: AGL Victoria at [53]; WMC Resources Ltd v Leighton Contractors Pty Ltd [1999] WASCA 10; 20 WAR 489 at 494-497. There will be cases, such as the present case, where the expert, for the purpose of performing his or her task, will be required to consider objective matters, including the construction of a contract. As was pointed out by Allsop P (as his Honour then was) in Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd [2013] NSWCA 27; 85 NSWLR 1 at [61], the objective analysis required by the process of contractual construction can only produce one meaning. It is correct, as Allsop P pointed out in the passage referred to above, that the fact that there is one true meaning does not detract from what his Honour described as "the pervasive reality that a contract will often have potentially more than one meaning ... and that reasonable minds often differ about what is the true meaning". That does not mean that the ascertainment of that meaning was necessarily left to the expert, such that the expert's determination was immune from review by the Court. The position was explained by Hoffmann LJ in his dissenting judgment in the court of Appeal in the Mercury Communications CoA Judgment in the following terms at 1140: "So in questions in which the parties have entrusted the power of decision to a valuer or other decision-maker, the courts will not interfere either before or after the decision. This is because the court's views about the right answer to the question are irrelevant. On the other hand, the court will intervene if the decision-maker has gone outside the limits of his decision-making authority. One must be careful about what is meant by 'the decision-making authority'. By 'decision-making authority' I mean the power to make the wrong decision, in the sense of a decision different from that which the court would have made. Where the decision-maker is asked to decide in accordance with certain principles, he must obviously inform himself of those principles and this may mean having, in a trivial sense, to 'decide' what they mean. It does not follow that the question of what the principles mean is a matter within his decision-making authority in the sense that the parties have agreed to be bound by his views. Even if the language used by the parties is ambiguous, it must (unless void for uncertainty) have a meaning. The parties have agreed to a decision in accordance with this meaning and no other. Accordingly, if the decision-maker has acted upon what in the court's view was the wrong meaning, he has gone outside his decision-making authority. Ambiguity in this sense is different from conceptual imprecision which leaves to the judgment of the decision-maker the question of whether given facts fall within the specified criterion. The distinction is clearly made by Lord Mustill in R v Monopolies and Mergers Commission, ex parte South Yorkshire Transport Ltd [1993] 1 WLR 23 at p. 32." (See also the speech of Lord Slynn on appeal in that case, which I have cited in [25] above).

Determination

It is stipulated in paragraph 4.7 of the First Schedule to the sub-lease that the determination of the Market Rent under paragraph 4 is final and binding on both parties. As McHugh JA stated, by so referring the decision to an expert, the parties agreed to accept the honest and impartial decision of the expert, and be bound by it. However, it is always critical to ask whether the decision was made in accordance with the terms of the contract.
If it is found that the decision was not made in accordance with the contract, properly construed, it is then open to review the decision on the ground that it is erroneous. The enquiry self-evidently involves questions of construction and interpretation of the contract. Where, as here, the contract is a written commercial contract, such questions are to be approached in accordance with the well-established principles that have been stated in cases such as Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]).
The authorities referred to at [15]-[20] above indicate that it is relevant to consider the extent to which the contract contemplates that erroneous decisions of the expert are nonetheless immune from review; or, put another way, it is relevant to consider the extent to which matters are left to the expert in the sense that the expert is empowered to make even wrong decisions. In that context, it has been said that it is easier to suppose that parties to a contract contemplate that an error in the exercise of a judgment, opinion or discretion is beyond review, than is the case with an error which involves objective facts or a mere mechanical arithmetical exercise.
The first complaint made by the plaintiff about Mr Anderson's determination focuses attention upon paragraph 4.5(c)(ii) of the First Schedule. It will be recalled that paragraph 4.5(c) identifies a number of things to which the appointed valuer is instructed to have regard. Paragraph 4.5(c)(ii) is in the following terms: Market rents (excluding rents which have been escalated to a predetermined amount or in accordance with movements in a consumer price index or any other index) at the Market Review Date for comparable premises in the vicinity of the Premises let at their highest and best use including new lettings, lease renewals and rent reviews but must disregard the GST component of any such market rents which include GST;
The provision identifies the nature of the market rents to which the valuer must have regard in determining the Market Rent. The provision is quite detailed in its prescription. Several elements are involved. The market rents must exclude certain rents that have been escalated. The GST component of any market rents must be disregarded (see also paragraph 4.5(d)(viii)). In addition, the market rents must be at the Market Review Date, for comparable premises in the vicinity of the Premises, let at their highest and best use.
The selection of market rents (if any) that fall within the scope of paragraph 4.5(c)(ii) plainly requires the valuer to exercise some discretion, judgment or opinion. For example, the designation of premises as "comparable premises", and the assessment of its market rent, are matters of that character. They call for judgments of a type that valuers make when applying their specialised knowledge.
Other aspects of the process of selection seem to me to be of a different nature. The ascertainment of a Market Review Date, and whether particular premises are "in the vicinity of the Premises", are examples. The Market Review Date is a date that is readily ascertainable from the terms of the sub-lease itself. The expression "in the vicinity of the Premises" employs ordinary words in relation to the defined term "Premises". It was not suggested that the words have any technical or specialised meaning, or a particular meaning in the field of property valuation. The expression has a single meaning, determined objectively in accordance with the principles of contractual construction. A valuer appointed to determine the Market Rent in accordance with paragraph 4.5 of the First Schedule is required to apply that meaning as part of the process of selection of market rents that fall within paragraph 4.5(c)(ii). However, that application does not call for judgments of a type that valuers make when applying their specialised knowledge. That is so even if different valuers might reach different conclusions as to the geographic ambit of the expression.
The selection of market rents for the purposes of paragraph 4.5(c)(ii) is thus an exercise that is only partly comprised of discretion, judgment or opinion (see AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (supra) at [54]).
The question whether particular premises are "in the vicinity of the Premises" within the meaning of paragraph 4.5(c)(ii) is a mixed question of fact and law. As stated by Bathurst CJ in Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (supra) at [76]-[78], there is no reason why parties to a contract cannot leave such a question to be determined by a contractually appointed expert, such that even an erroneous answer is immune from review by the Court. Of course, whether that is so in any particular case ultimately depends upon the presumed intention of the parties.
In my opinion, the parties to the sub-lease should not be presumed to have intended that questions as to whether particular premises are "in the vicinity of the Premises" are to be left to the appointed valuer, in the sense that the valuer is empowered to determine those questions, even erroneously (see Mercury Communications Ltd v Director-General of Telecommunications [1994] CLC 1125 at 1140, cited in Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (supra) at [78]).
Again, the determination of such questions does not require the making of judgments of a type that valuers make when applying their specialised knowledge. Moreover, the expression "in the vicinity of the Premises" evidently introduces an important limitation upon the range of comparable premises for the purposes of paragraph 4.5(c)(ii). Market rents for comparable premises that are not in the vicinity of the Premises simply cannot be included within the market rents selected for the purposes of paragraph 4.5(c)(ii). To my mind, reasonable business persons in the positions of the parties to the sub-lease are unlikely to have intended that if an appointed valuer decided to include, for the purposes of paragraph 4.5(c)(ii), market rents for premises that are not in the vicinity of the Premises, they would nonetheless be bound by that decision of the valuer. In my opinion, an error of that character is not immune from review by the Court.
Mr Anderson specifically addressed the meaning of paragraph 4.5(c)(ii) in Section 6.4 of his report. He did so in the context of his consideration of "the type of premises deemed comparable in determining the market rent". It is evident that Mr Anderson treated the expression "in the vicinity of the Premises" as secondary to the expression "comparable premises". It is also clear that Mr Anderson regarded "vicinity", not qualified by the adjective "immediate", as quite broad; and further, that in circumstances where the availability of premises in the King Street Wharf, Barangaroo, Cockle Bay and Darling Harbour precincts that are comparable in terms of physical characteristics "would remain limited", one means of "arriving at what might be deemed the appropriate vicinity" would be "the potential zone of influence for the current use", which "would extend some distance from the immediate vicinity".
Mr Anderson had stated earlier in Section 6.4 of his report that in his opinion the most appropriate method of assessment was the direct comparison approach on a rate per square metre of lettable area basis. In Section 6.5 of his report, Mr Anderson stated that he had regard to the rental examples put forward in the parties' submissions and a range of leasing transactions including "the following summarised examples". It is apparent from those examples and the submissions received that Mr Anderson had regard not only to rents for premises located in and near the King Street Wharf area but also to rents for premises located outside the King Street Wharf or Darling Harbour areas, and indeed outside the Sydney Central Business District. Mr Anderson specifically referred in his report to certain premises in Bondi Beach, Chippendale, Macquarie Park and Hornsby.
Mr Anderson stated in Section 6.6 of his report that in forming his opinion of value he had regard, amongst other things, to "the examples detailed above". The Bondi Beach and Macquarie Park premises were cited as two of the four examples which provided "the best guide to market rent" for the Premises.
It is clear in my opinion (and I did not understand counsel for the defendant to submit to the contrary), that premises in Macquarie Park or Bondi Beach are not "in the vicinity of the Premises" within the meaning of paragraph 4.5(c)(ii). Even without the adjective "immediate", the ordinary meaning of "in the vicinity of the Premises" suggests a surrounding area that is near to or close to the Premises. The context in which the expression appears does not indicate that a different meaning was intended. Accordingly, it appears that in forming his opinion of Market Rent, Mr Anderson has had regard to rents for premises that are not in the vicinity of the Premises as well as to rents for premises that are in the vicinity of the Premises.
It is my opinion that, in so doing, Mr Anderson has not carried out his determination of the Market Rent in accordance with paragraph 4.5 of the First Schedule to the sub-lease.
As I have sought to explain, questions whether particular premises are "in the vicinity of the Premises" within the meaning of paragraph 4.5(c)(ii) are not ones the parties have left to the appointed valuer; the valuer is not empowered to determine those questions, even erroneously. Errors in that regard are not beyond review by the Court. It seems that Mr Anderson, whether due to his hierarchical approach to the words "comparable premises in the vicinity of the Premises", or for reasons including his view that the number of comparable premises close by was "limited", was prepared to include market rents for premises that are not in the vicinity of the Premises.
Further, as noted earlier, paragraph 4.5(c)(ii) contains a detailed prescription of the nature of the rents to which the valuer must have regard in determining the Market Rent. The provision, which is an instruction to the appointed valuer, should be read as one which identifies the permissible boundaries of the types of rents to which the valuer is to have regard. If it were interpreted otherwise, the evident intention to place limits upon the types of rents to which the valuer must have regard would be undermined. That is to say, paragraph 4.5(c)(ii) requires regard to be had to a particular class of rents, namely, certain market rents at the Market Review Date for comparable premises in the vicinity of the Premises. If the valuer makes a mistake about the meaning of the expression "in the vicinity of the Premises", and thereby has regard to a different, wider class of rents, it is open to the Court to intervene. In those circumstances, the valuer has not had regard to rents as stipulated by paragraph 4.5(c)(ii), but has instead had regard to rents of a different nature. It is not sufficient that the rents taken into account include some rents that fall within paragraph 4.5(c)(ii). This is because the class of rents considered is not that which the contract requires.
Neither is it an answer that the Macquarie Park premises was referred to in a submission made to Mr Anderson by the defendant. The Bondi Beach, Chippendale and Hornsby premises were not the subject of any submission made to Mr Anderson. In any case, I do not think that the fact that a submission refers to premises that are not in the vicinity of the Premises within the meaning of paragraph 4.5(c)(ii) allows the valuer to have regard to rents for those premises. Whilst paragraph 4.5(c)(viii) requires the valuer to have regard to submissions made by the parties, the content of a submission cannot itself alter what is required by other parts of paragraph 4.5, including paragraph 4.5(c)(ii).
The approach taken by Mr Anderson was not in accordance with the requirements of paragraph 4.5 of the First Schedule. He did not have regard to market rents in the manner prescribed by paragraph 4.5(c)(ii). This occurred as a result of his erroneous inclusion of rents for premises that are not "in the vicinity of the Premises" within the meaning of paragraph 4.5(c)(ii).
The second complaint made by the plaintiffs about Mr Anderson's determination is that, contrary to the requirements of paragraph 4.5(d)(ii) of the First Schedule, he failed to disregard the Tenant's Property. The plaintiff submitted that this occurred because Mr Anderson took into account a so-called "zoned" approach to rental, which is itself based upon the manner in which the tenant has actually configured the premises, and otherwise had regard to the physical characteristics of the premises.
Tenant's Property is defined in the sub-lease to mean: …anything installed in, on or for or placed in or on or any improvement or alteration made to the Premises by or for the Tenant and owned or leased by it, including the Tenant's fixtures, fittings, partitions, security system, signs, notices, equipment, wiring, cabling and furnishings.
The provenance of the "zoned" approach to rental is the submission dated 21 August 2017 made by Intelligent Property Solutions Pty Ltd on behalf of the defendant. The submission itself took the form of a rental valuation of the current market rent of the premises. The premises, including the improvements, are described in detail at pages 12 to 20. Figure 6 on page 20 depicts the "Subject Configuration and Layout", and shows four areas, namely, Licensed Area, Main Retail Front Area, Bar Area, and Entertainment, Bowling & BOH [Back-of-House]. On page 22 it is stated: We have ignored any value that attributes [sic] to the Lessee's fit-out or goodwill.
In the Comparable Evidence section of the report it was stated: In the following section of the report, we set out the most relevant evidence of comparable premises investigated in the surrounding precincts. The subject premises is situated in a complimentary entertainment locality featuring predominantly waterfront bars and restaurants, with only one direct competition in close proximity. In order to assess the rental value of the subject premises, we have broken down the subject into three zones and analysed each zone accordingly: the main retail front area, the bar/pool tables area, and the balance of the premises, being the bowling alley, the function rooms and the back of house areas (refer to Figure 5 - Subject Configuration and Layout). (The reference to Figure 5 is erroneous. It is clear that Figure 6 was intended.)
The Valuation Rationale section of the report included the following: Bowling Alleys Bowling alleys in Sydney and CBD areas of other capital cities show a rental range of approximately $190-$350/m2 gross. There is no direct comparable evidence of a recent bowling alley in the Sydney CBD. … Based upon the evidence presented and the factors mentioned above, we are of the view that the gross face rental for bowling and back of house areas of the subject premises would be in the range of $315-330/m2, as reflective of current market value. KSW Precinct Restaurants & Bars The comparables in the KSW precinct show a blended rental range of $925-$1,678/m2 gross. However, after making an allowance for restaurants over multiple levels, the imputed ground floor rent of surrounding bars and restaurants indicate a gross rental range of approximately $1,250-$2,350/m2‑ gross. … Based upon the evidence presented and the factors mentioned above, we are of the view that the gross face rental for the main retail front area of the subject premises would be in the range of $2,100-2,300/m2, as reflective of current market value. Sydney CBD Basement Bars Bars and restaurants in lower ground/basement levels around the Sydney CBD indicate a rental range of $627-$944/m2 gross. … Based upon the evidence presented and the factors mentioned above, we are of the view that the gross face rental for the bar & pool area of the subject premises would be in the range of $800-900/m2, as reflective of current market value. Outdoor Licencing Areas There is a small outdoor licensed area that forms part of the demised premises. We have adopted the Outdoor seating zone 1; Circular Quay, City Centre published by City of Sydney Council as the market value for this space. The rate as at the 2016/2017 Financial Year is $640/m2 per annum. … Valuation We have made the following calculations and allowances: Calculations Area Rate $/m2 Total MAIN RETAIL FRONT AREA 90 $ 2,100 $ 189,000 BAR & POOL AREA 240 $ 850 $ 204,000 BOWLING AND BOH AREAS 1,029 $ 330 $ 339,405 OUTDOOR LICENCE AREA 30 $ 640 $ 18,944 TOTAL 1,359 $ 751,349 Say $ 750,000

Mr Anderson included a description of the premises in Section 4.2 of his report (quoted at [10] above). He also included Figure 6 from the defendant's submission. In Section 6.3 of his report (largely set out at [11] above), Mr Anderson considered the submissions that were made by the parties. After referring to the "zoned" approach taken by Intelligent Property Solutions, Mr Anderson stated: With the somewhat unique nature of the subject premises, I am of the view that this is a suitable approach, in the absence of comparable premises based on similar layout and utility.
In the final paragraph of Section 6.3 Mr Anderson stated: In arriving at my opinion of market rental, I have had regard to both of the above views, however, I have placed more weight on the available rental evidence in relation to the permitted use and physical characteristics of the premises rather than the location, as the subject premises are not considered to be suited to typical restaurant and bar type uses that prevail in King Street Wharf and Cockle Bay, or the immediate surrounding precinct. Further, the permitted use under the lease specifically refers to the current use and the development approval.
Mr Anderson then proceeded to set out his Rental approach in Section 6.4 (quoted at [12] above) and deal with Rental evidence in Section 6.5 (referred to at [13] above). He stated there that in the course of his investigations he had regard to the rental examples put forward in the parties' submissions. In the penultimate paragraph of that section Mr Anderson specifically referred to an approach that "allows rent to be ascribed on the basis that the property is vacant…".
Mr Anderson's Market rental assessment is contained in Section 6.6 of his report (quoted at [14] above). Mr Anderson stated there that in forming his opinion of value he had regard to rental evidence, including the examples detailed in Section 6.5. There is no reference to the "zoned" approach in Section 6.6.
Reading Mr Anderson's determination as a whole, I am unable to accept the plaintiff's submission that he effectively adopted the "zoned" approach such that he failed to disregard the Tenant's Property, contrary to paragraph 4.5(d)(ii). I do not think that Mr Anderson did any more than express a view that the approach taken by Intelligent Property Solutions was in the circumstances a suitable one for them to take. This view was expressed in the context of Mr Anderson's consideration of the submissions made to him. Mr Anderson was required by paragraph 4.5(c)(viii) to have regard to the submissions. In the final paragraph of Section 6.3, Mr Anderson stated that he had regard to the submissions but placed more weight on the rental evidence "in relation to the permitted use and physical characteristics of the premises rather than the location". I do not think that the reference to physical characteristics should be read, in that context, as a reference to the Tenant's Property. Moreover, Sections 6.4 to 6.6 of Mr Anderson's report, which essentially explain his approach to the assessment of Market Rent, cannot be fairly read as an adoption of the "zoned" approach for the purpose of that assessment. For these reasons, the plaintiff has not shown that Mr Anderson acted in a manner contrary to paragraph 4.5(d)(ii) of the First Schedule.
Finally, I should record that the plaintiff adduced expert evidence in support of its case from a practising valuer, Mr Peter Messenger. Objection was taken to the tender of Mr Messenger's report dated 30 August 2018. I rejected the portion of his report that concerned the steps that a reasonably competent and prudent valuer would take to determine Market Rent in accordance with paragraph 4.5, but admitted the balance of the report which was directed to aspects of what Mr Anderson actually did in carrying out his task. Mr Messenger was cross-examined at some length.
I have considered the evidence given by Mr Messenger, but I ultimately found it to be of no real assistance in dealing with the two complaints made by the plaintiff about Mr Anderson's determination. That is not a criticism of Mr Messenger, who I accept expressed his opinions honestly, and without acting as an advocate in the plaintiff's cause (as was submitted by the defendant). Much of Mr Messenger's evidence concerned matters that did not touch upon the two complaints made by the plaintiff. There was evidence, for example, concerning matters that in my view had been left to the appointed valuer, such as whether certain premises were "comparable". To the extent that Mr Messenger's evidence was directed to the two complaints, his views about what was meant by "in the vicinity of the Premises" are not relevant, and his views about whether Mr Anderson failed to disregard the Tenant's Property were really no more than his own interpretation of Mr Anderson's report in that regard.

Conclusion

The plaintiff has established that Mr Anderson's determination of the Market Rent was not carried out in accordance with paragraph 4.5 of the First Schedule to the sub-lease. The erroneous inclusion of rents for premises that are not "in the vicinity of the Premises" within the meaning of paragraph 4.5(c)(ii) meant that Mr Anderson did not have regard to market rents in the manner prescribed by paragraph 4.5(c)(ii). Accordingly, it is open to the Court to intervene, and declare that the determination of the Market Rent is not binding upon the parties to the sub-lease. A declaration to that effect will be made. In these circumstances, paragraph 4.6 of the First Schedule operates so that the plaintiff is required to make another request for a valuer to be appointed to determine the Market Rent in accordance with paragraph 4.5.
The Court will further order that the defendant pay the plaintiff's costs of the proceedings.

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: 26 March 2019

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