Hanave Pty Ltd v Nomad Sydney Pty Ltd

al, Plumbing and Allied Services Union of Australia v Qantas Airways Limited (2020) 282 FCR 130; [2020] FCAFC 205 Corcoran v Far [2020] NSWCA 140 Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; 96 ATR 875 Haritos v Commissioner of Taxation (2015) 233 FCR 315; [2015] FCAFC 92 Hope v Bathurst City Council (1980) 144 CLR 1; [1980] HCA 16 Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 Klein v Minister for Education (2007) 81 ALJR 582; [2007] HCA 2 Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; [2010] HCA 32 Manly Council v Malouf (2004) 61 NSWLR 394; [2004] NSWCA 299 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40 Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 R v PL (2009) 199 A Crim R 199; [2009] NSWCCA 256 Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175; [1988] FCA 119 Category: Principal judgment Parties: Hanave Pty Ltd (plaintiff) Nomad Sydney Pty Ltd (formerly Wine Nomad Pty Ltd) (defendant) Representation: Counsel: Mr JE Lazarus SC with Mr M Sheldon and Ms Y Truong (plaintiff) Mr G Sirtes SC with Mr AL Oakes (defendant) Solicitors: Gilbert Mane Solicitors (plaintiff) Peterson Haines (defendant) File Number(s): 2022/153845 Publication restriction: Nil

Introduction

1. This is an application for leave to appeal a decision of the NSW Civil and Administrative Tribunal, Appeal Panel ('the Appeal Panel') arising out of a dispute between a landlord and tenant under the Retail Leases Act 1994 (NSW) (the 'RL Act').
2. The appeal, brought by the landlord, raises two broad issues - albeit that those two issues have spawned eighteen grounds of appeal.
3. The first issue is whether a valuation performed - in order to determine the fair market rent of the leased premises - was compliant with s 31 of the RL Act and binding upon the parties: the Appeal Panel concluded that the valuation was so compliant, and therefore binding. The second is whether an area the subject of a licence between the landlord and tenant is a 'retail shop lease' within the meaning of the RL Act: the Appeal Panel concluded that it was, with the consequence that the landlord was required to abate the licence fee for the period during which the area the subject of the licence - essentially described as "the disused lift shaft and the loading dock together with part of the roof" - was damaged, and unable to be used, following a fire.
4. The landlord, by its appeal, challenges each conclusion. The tenant takes issue with the manner and form of many - if not most - of the grounds as not identifying any question of law (or, at a minimum, not clearly), and it will be necessary to say something further about this, later in these reasons.
5. The tenant also filed a cross summons seeking leave to appeal, however that cross summons - which dealt with a confined issue relating to the terms of an order made by the Appeal Panel - was not pressed because the issue was subsequently corrected by the Appeal Panel shortly prior to the hearing of this appeal.

Background

1. I will deal with the background matters across three parts. The first part deals with the relationship between the parties, including some of the key provisions of the lease and licence between them. The second part deals with the dispute before the Tribunal, and its disposition. The third part deals with the appeal to the Appeal Panel - and a short summary of what it decided.
2. The nature and extent of the challenge raised by the plaintiff's appeal - and the position taken by each party - means that it is necessary to refer later, in detail, to the findings of the Tribunal and the Appeal Panel across the two issues: the plaintiff argues that the Tribunal was correct, and that the Appeal Panel erroneously concluded otherwise; whereas the defendant argues that the Appeal Panel was fully justified in intervening in the way and manner that it did. The nature and extent of the challenge raised by the plaintiff's appeal also explains the length of this judgment.

The retail lease of the Surry Hills premises

1. Hanave Pty Ltd ('Hanave', or 'the plaintiff') is the landlord of retail premises located at 16-28 Foster Street, Surry Hills, and the tenant is Nomad Sydney Pty Ltd ('Nomad', or 'the defendant'). The premises are a six storey building, and Nomad operates a restaurant and bar from the ground floor of them.
2. On 14 July 2012 the parties entered into a retail lease ('the lease'), registered number AK 318893, for a term of 12 years. The date of the lease was also its commencement date. The lease provided for an option, in favour of the tenant, for a further term of 3 years: cl 17, Schedule Item 10. The use of the premises was specified as 'Restaurant and Bar': cl 7(a)(iv) and Schedule Item 6.
3. The lease was subject to yearly rent increase of 4% (cl 6(a)), as well as a rent review on each fourth anniversary of the lease (cl 6(b)). By cl 6(b) of the lease, on each fourth anniversary of the commencement date the rent for the [premises] shall be agreed by the parties or failing agreement at least 28 days prior to the commencement date the Fair Market Rent shall be determined by a valuer agreed between the parties or failing agreement appointed for such purpose …
4. The lease defined the terms 'Basic Rent' and 'Current Rent', but the term 'Fair Market Rent' was not.
5. Hanave and Nomad also entered into a licence agreement, dated 10 September 2013, in relation to an area described as "the disused lift shaft and the loading dock together with part of the roof". The lift shaft was to be used "for the purposes of installing exhaust outlets" from the leased premises to the roof of the building and the loading dock was to be used for the "loading and unloading of supplies and material for the permitted use of the premises and for installing an air-conditioned coil unit". The licence was for an unspecified term.
6. On 11 September 2019 there was a fire at the premises, following which there was an abatement of rent from that time until 16 April 2020. As a result of the fire, Hanave carried out work to reinstate the premises. Pausing here, to signpost: the issue that appeal ground 7 raises is whether, in line with the lease, there should also have been an abatement of the licence fee payable during this period.
7. After this time a number of disputes arose between the parties in relation to matters such as rental arrears, alleged breach of the licence and other financial and tenancy issues.

The proceedings between the parties before the Tribunal

1. On 25 February 2021 Hanave commenced proceedings in the Tribunal (COM 21/08975). It sought a range of orders, including that Nomad was not entitled to seek a market rent review on the ground that the amount of rent was agreed in the settlement agreement and, alternatively, that a valuation prepared pursuant to the review process was not one that complied with the RL Act.
2. On 19 April 2021 Nomad also commenced proceedings in the Tribunal (COM 21/17178) seeking a refund of licence fees in the amount of $7,571.17. I have earlier outlined the background to why Nomad made that claim: see [13], above.
3. The Tribunal identified the three issues raised by the applications that each party had filed as being: (1) whether "the parties reached an agreement as to the yearly rent as at 14 July 2020 within cl 6(b) of the lease"; (2) if it is found "that Nomad was entitled to a market rent review, whether the [valuation prepared by Mr Hermiz] is a valid valuation"; and (3) whether Nomad "is entitled to a refund of the payment made under the licence attributable to the period from 11 September 2019 to 16 April 2020".
4. The matter was heard by the Tribunal on 18 October 2021, and on 3 November 2021 the Tribunal relevantly made the following orders: 1. An order declaring that the parties did not reach an agreement as to the yearly rent as at 14 July 2020 within cl 6(b) of the lease made on or about 14 July 2012 between Hanave Pty Ltd as the lessor and Wine Nomad Pty Ltd as the lessee, which was registered with the dealing no AK318893 (lease). 2. An order declaring that the valuation dated 11 December 2020 of Michael Hermiz (Mr Hermiz) issued to the parties on 10 February 2021 is not a valid valuation and is not binding on the parties. 3. The parties are required to remit the determination of the current market rent under the lease as at 14 July 2020 to Mr Hermiz to make a redetermination according to law. 4. Proceedings COM 21/17178 are otherwise dismissed.
5. Both Hanave and Nomad appealed the decision to an Appeal Panel, pursuant to the Civil and Administrative Tribunal Act 2013 (NSW) ('the NCAT Act'). That appeal was available "as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds": s 80(2)(b).

The proceedings between the parties before the Appeal Panel

1. Hanave, by its appeal, raised six grounds of appeal. Relevantly, it sought two orders: first, that order 1 made by the Tribunal be set aside and, in lieu thereof, sought a declaration "that on or about 14 July 2020 the parties reached agreement that the yearly rent was $328,982.28 plus GST pa"; secondly, that if the parties were required to remit the determination of the current market rent, that it should be to a different valuer, and not Mr Michel Hermiz (the valuer who undertook the first determination).
2. Nomad, by its appeal, challenged the orders made that declared the valuation undertaken by Mr Hermiz, dated 11 December 2020 (issued to the parties on 10 February 2021) invalid; it sought a refund of the overpayment of rent under the lease from 1 August 2020; and it sought an order that Hanave refund to it the amount of $7,571.17 for monies paid under the licence - which covered the period during which the rent under the lease had abated.
3. The Appeal Panel identified four issues raised by the respective appeals - being (Appeal Panel reasons at [20]): 1. was the Tribunal correct in construing the July agreement and its effect on the rent review clause? (issue 1); 2. was the Tribunal correct in determining that the Hermiz Valuation was invalid and not in accordance with s 31(1)(a) of the RL Act? (issue 2); 3. was the licence a retail lease within the meaning of the RL Act? (issue 3); and 4. if so, was the tenant entitled to a refund of licence fees and the amount of $7,571.17.
4. The appeal was heard by the Appeal Panel on 1 March 2022 and, by reasons delivered on 12 May 2022, the Appeal Panel made the following orders: 1. Order 1: set aside orders 2 and 3 - the orders that declared the valuation of Mr Hermiz to be invalid and requiring him to undertake a redetermination of the current market rent under the lease as at 14 July 2021 in accordance with law - and in lieu thereof ordered: 2. For the purpose of clause 6(b) of the lease between Hanave Pty Ltd and Wine Nomad Pty Ltd dated 14 July 2012, dealing number AK318893, the amount of $252,000 plus GST is declared to be the fair market rent for the period commencing 14 July 2021. 1. Order 2: set aside order 4 - the order that dismissed Nomad's claim for a refund of the licence fee -, and in lieu thereof ordered: 3. The respondent, Hanave Pty Ltd, is to pay the applicant, Wine Nomad Pty Ltd, the sum of $7,571.17.

The decision of the Appeal Panel

1. Although it will be necessary, when dealing with the specific grounds of appeal, to return to the detail of the Appeal Panel's reasons, it is sufficient for present purposes to note the key paragraphs of its reasons.
2. In relation to Hanave's grounds of appeal directed to the challenge alleging that the Tribunal erred in failing to hold that the parties had reached an agreement on or around 14 July 2020 (described by the Appeal Panel as issue 1), the Appeal Panel upheld the conclusion of the Tribunal - to the effect that the settlement agreement was not "an agreement whereby rent was fixed for the purpose of cl 6(b) of the lease, thereby rendering any valuation process unnecessary or ineffective": Appeal Panel reasons at [45] and [46]. As I have earlier noted, that holding is not challenged in the appeal to this Court, and it is unnecessary to refer to it further.
3. In relation to the Tribunal's holding that the valuation was invalid, and not in accordance with s 31(1)(a) of the RL Act (described by the Appeal Panel as issue 2), shortly stated, the essential conclusion of the Tribunal was that the valuation performed failed to have "adequate regard to the provisions of the lease in relation to all the comparable properties" (Appeal Panel reasons at [56]), and for that reason was invalid. The Appeal Panel disagreed with the approach of the Tribunal (Appeal Panel reasons at [96]): The Tribunal was not required or entitled to determine whether the manner in which the factors were considered was "adequate", nor whether the reasons given as to approach or analysis of the data relied upon for the purpose of determining the effective rent were adequate. The imposition of the concept of 'adequate' is to add to the requirement "having regard to" which leads to an examination by the Tribunal of whether the valuer was correct in reaching his opinion, such an approach having the effect of substituting the Tribunal in the role of the valuer.
4. The Appeal Panel further held that the approach so adopted by the Tribunal was "tantamount to a merits review": Appeal Panel reasons at [97]. The Appeal Panel further held: To construe s 31(1)(a) of the RL Act as imposing an obligation to explain or justify the valuer's opinion would render any determination liable to review as to its correctness. There is no provision in s 31 that requires such an approach or gives power to the Tribunal to conduct such a review.

The Retail Leases Act 1994

1. Before dealing with the grounds of appeal, it is necessary to make reference to the RL Act.
2. Section 3 provides definitions. The relevant ones for this appeal are: (1) In this Act - retail shop means premises that - (a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre. retail shop lease or lease means any agreement under which a person grants to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop - (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing.
3. It was accepted that the leased premises were a 'retail shop' and that the lease dated 14 July 2012 was a 'retail shop lease or lease'.
4. Section 7 provides: This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.
5. Section 31 of the RL Act deals with the determination of current market rent - where a retail shop lease provides, relevantly, "for rent to be changed to current market rent". It provides: (1) A retail shop lease that provides for rent to be changed to current market rent or that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect - (a) The current market rent is the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arm's length transaction (where the parties are each acting knowledgeably, prudently and without compulsion), determined on an effective rent basis, having regard to the following matters - (i) the provisions of the lease, (ii) the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease, (iii) the gross rent, less the lessor's outgoings payable by the lessee, (iv) rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops. The current market rent is not to take into account the value of goodwill created by the lessee's occupation or the value of the lessee's fixtures and fittings on the retail shop premises. (b) If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Registrar. (c) The matters set out in paragraph (a) are to be taken into account by a specialist retail valuer appointed under paragraph (b) in determining the amount of the rent. (d) The lessor must, not later than 14 days after being requested to do so by a specialist retail valuer appointed under paragraph (b), supply the valuer with information (where reasonably available to the lessor) requested in a list provided by the valuer to assist the valuer to determine the current market value, including the following information about leases for comparable retail shops in the same building or retail shopping centre - (i) current rental for each lease, (ii) rent free periods or any other form of incentive, (iii) recent or proposed variations of any lease, (iv) outgoings for each lease, and including any other information prescribed by the regulations. (e) A valuation for the purposes of paragraph (b) is to be in writing and to contain detailed reasons for the specialist retail valuer's determination and to specify the matters to which the valuer had regard for the purposes of making his or her determination. (f) The parties to the lease are to pay the costs of a valuation by a specialist retail valuer appointed under paragraph (b) in equal shares. (1A) A party to a lease may apply to the Registrar for the appointment of a specialist retail valuer for the purposes of subsection (1) (b). (1B) A party to a lease may make written submissions to a specialist retail valuer to assist in the valuer's consideration of the valuation, and the valuer must consider any such written submissions. (2) A specialist retail valuer must make a valuation of a current market rent for the purposes referred to in this section not later than 1 month after receiving the information referred to in subsection (1) (d). (3) A specialist retail valuer may apply to the Tribunal under Part 8 for an order that a lessor comply with a request referred to in subsection (1) (d) to supply relevant information about leases for retail shops situated in the same building or retail shopping centre to assist the valuer to determine the rent. (4) The reasons and matters included in a valuation as referred to in subsection (1) (e) must not be set out in a way that discloses information identifying other leases or parties to other leases or relating to the business of parties to other leases. This subsection does not apply to leases between the parties to the lease for which the valuation is made or to leases whose parties consent to the disclosure of the information.

The nature of the appeal to this Court: s 83 of the NCAT Act

1. The appeal to this Court from the Appeal Panel is enabled by s 83 of the NCAT Act - which relevantly provides: 83 Appeals against appealable decisions (1) A party to an external or internal appeal may, with the leave of the Supreme Court, appeal on a question of law to the Court against any decision made by the Tribunal in the proceedings. (2) ... (3) The court hearing the appeal may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) the following - (a) an order affirming, varying or setting aside the decision of the Tribunal, (b) an order remitting the case to be heard and decided again by the Tribunal (either with or without the hearing of further evidence) in accordance with the directions of the court.
2. An 'appealable decision' extends to "any decision made by an Appeal Panel in an internal appeal": s 82(1)(a) of the NCAT Act.
3. Section 83(1) contains two express limitations: the first is the requirement for leave; the second is the existence of a question of law - which is "not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself": TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175, 178; [1988] FCA 119.
4. As to the existence of a question of law, some matters are clear. First, a mixed question of fact and law does not fall within the description of "question of law alone" (Attorney General for NSW v X (2000) 49 NSWLR 653; [2000] NSWCA 199 at [44]), nor is it a question of law: Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220 at [60]. Secondly, it is insufficient to merely assert that the relevant decision-maker "erred in law" so as to satisfy the limited conferral of jurisdiction: Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378; 96 ATR 875 at [6] ('Ferella'); Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 at [13] ('Schwartz'). As the defendant submitted, some of the grounds raised in the plaintiff's summons adopted the formula of asserting that the Appeal Panel "erred in law" without actually identifying how that error occurred and why it amounted to a question of law. Thirdly, a matter that is wholly or partly factual is not converted into legal error (or involve a question of law) merely by using the description "erred in law": "no amount of formulary" will transform something into a legal error if it is not: Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515, 527; [1990] FCA 689. Fourthly, the grounds of appeal are required to explicitly identify the question of law raised: Ferella at [6] and [22]; Schwartz at [13]; Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 at [26]. Finally, although s 83(1) of the NCAT Act confines an appeal to this Court to an appeal "on a question of law", there is no clear test available to define a question of law (Ferella at [4]) - or a test of universal application: Collector of Customs v AGFA-Gevaert Ltd (1996) 186 CLR 389, 394; [1996] HCA 36.

The expert rental valuation report: the approach of the Tribunal and Appeal Panel

1. The principal issue in this Court is the extent to which the expert rental valuation report from Mr Hermiz complies with the terms of s 31(1)(a) of the RL Act. Grounds of appeal 1-6 are directed to this issue.
2. The Tribunal concluded that it did not so comply, declaring that the valuation was not a valid valuation and was not binding upon the parties. The Appeal Panel set aside that order, holding that the report did comply with s 31(1)(a) of the RL Act.
3. Given that the plaintiff seeks reinstatement of the orders of the Tribunal, and the defendant seeks to support the reasoning of it over that of the Appeal Panel, I will start with the findings and conclusions of the Tribunal - with particular attention upon the reasons identifying the grounds for holding that the report was non-compliant with s 31(1)(a) of the RL Act. Thereafter, I will detail how the Appeal Panel determined that there was compliance by the valuer.

The Tribunal's reasons: the expert rental valuation report was invalid and not binding

1. The Tribunal first dealt with the legal principles that applied in order for there to be a valuation that complied with s 31(1)(a) of the RL Act. This part of the Tribunal's reasons is unexceptional, and neither side took issue with the Tribunal's analysis of the relevant principles. Relevantly, that summation of the legal principles was as follows: 1. Section 31(1)(a) of the RL Act is not a 'code'; the matters contained in ss 31(1)(a)(i)-(iv) are not exhaustive, and the expression 'having regard to' should not be interpreted as if it contained the word 'only': Tribunal reasons at [88]. 2. Section 31(1)(a) of the RL Act does not prescribe any particular method of assessment of the current market rent: Tribunal reasons at [89]. 3. The phrase 'having regard to the following matters' in s 31(1)(a) of the RL Act "indicates that the enumerated matters must be considered by the appointed valuer as part of the framework for assessing the market rent for the relevant premises": Tribunal reasons at [89]. 4. The phrase 'having regard to' in s 31(1)(a) of the RL Act means that the valuer, in undertaking a valuation, "is to allow the four factors in s 31(1)(a) of the RL Act such weight (if any) as the valuer thinks they ought to be given": Tribunal reasons at [90]. 5. For a valuation to comply with s 31(1)(a) of the RL Act, it is unnecessary for the valuer to "expressly refer to this paragraph or the four enumerated factors, provided as a matter of substance the valuation determines the current market rent on an effective basis", and otherwise addresses the four factors and excludes the value of the goodwill and the value of the lessee's fixtures and fittings on the premises: Tribunal reasons at [91].
2. Having identified these principles, the Tribunal then undertook an assessment of the valuation undertaken by Mr Hermiz, and found it to be non-compliant with them and the terms of s 31(1)(a) of the RL Act. The key findings and conclusions are contained within the Tribunal reasons at [94]-[101]: 94. Mr Hermiz in the Hermiz valuation has adverted to the factors specified in each of s 31(1)(a)(i)-(iii) of the RL Act in relation to the lease. The provisions of the lease are specified in section 6.0. The terms and relevance of the make good clause and permitted use of the leased premises is discussed in section 1.2 and 6.0. The gross rent and outgoings are specified in section 6.0. Mr Hermiz has not discussed whether "rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops" specified in s 31(1)(a)(iv) of the RL Act is relevant to a market rent review during the term of a lease. 95. In circumstances where Mr Hermiz in the Hermiz valuation used the methodology of calculating the rent per m2 of other comparable leased properties in the locality and applying adjustments to determine the current market rent of the leased premises on an effective rent basis, it is necessary that he have regard to the provisions of the lease, the permitted use, gross rent less outgoings, and provision of rent concessions and other benefits in comparable leased properties to enable a meaningful comparison to be made. 96. I am not satisfied that Mr Hermiz in the Hermiz valuation had adequate regard to the provisions of the lease in relation to all the comparable properties. The leasing details for leased property C and additional details for on the market property 2 contain no reference to the term of the lease and whether it includes an option. The leasing details for leased property D contain an assumption of the term of the lease. If these omitted details were unimportant factors in the determination of the current market rent, then Mr Hermiz has provided no explanation for this opinion. 97. I am satisfied that Mr Hermiz in the Hermiz valuation was entitled to have regard to zoning, location, and particularly proximity to shopping and services, land size, marketability, condition, size, style, layout and functionality of improvements, access, topography and current market conditions in selecting the comparable properties. It is unnecessary that the comparable properties have the same permitted use as in the lease. However, where the comparable properties do not have the same permitted use as in the lease, then it is necessary for Mr Hermiz to explain whether the different permitted use requires any adjustment in determining the current market rent of the leased premises on an effective rent basis. While Mr Hermiz in section 8.0 has not specified the permitted use of leased properties A to E, it appears from the photographs that each of them was not used as a restaurant. He has stated "similar use potential" for on the market properties 1 and 2. So far as leased properties A to E Mr Hermiz did not discuss whether the different uses requires an adjustment in determining the current market rent of the leased premises on an effective rent basis. 98. I am satisfied that Mr Hermiz in the Hermiz valuation had adequate regard to the gross rent, less the lessor's outgoings payable by the lessee in relation to the comparable properties. The leasing details for leased properties A to E include the gross rent. The additional details for on the market properties 1 and 2 include the gross asking rent, and in the case of on the market property 1 the gross rent that will be accepted. Mr Hermiz was entitled to estimate the amount of outgoings for these comparable properties based on his experience. 99. Mr Hermiz in the Hermiz valuation specifies in section 8.0 that there was no incentive for leased property A, does not refer to incentives for leased properties B and C, and specifies the incentives for leased properties D and E. He says the incentive for leased property D, being a 4.5 rent free month period, "is within the typically market range". He makes no comment about the incentive for leased property E, being "a 25% abatement (rent free) clause". In the table in section 9.2 Mr Hermiz only has regard to adjusted rents for leased properties D and E that deduct the incentives. Mr Hermiz provides no explanation for his failure to specify the presence or absence of incentives for leased properties B and C. Further, Mr Hermiz does not specify whether any incentives are available for on the market properties 1 and 2. 100. Taking into account the absence of information and explanations in [96], [97] and [99] above, I am not satisfied that Mr Hermiz in the Hermiz valuation has addressed fully the factors s 31(1)(a)(i), (ii) and (iv) of the RL Act. It follows that the Hermiz valuation in invalid and is not binding on the parties.

The Appeal Panel reasons: the expert rental valuation report was valid and binding

1. The key findings and conclusions of the Appeal Panel were as follows: 1. In relation to the holding that Mr Hermiz had not fully addressed the matters in ss 31(1)(a)(i), (ii) and (iv) of the RL Act (Tribunal reasons at [100]), the Appeal Panel held at [87] that the expression 'the lease', as used in ss 31(1)(a)(i) and (ii) was "a reference to only the lease in respect of the premises", and not otherwise as the Tribunal had concluded. In contrast, s 31(1)(a)(iv) "is a reference to rent concessions and other benefits conferred on prospective lessees in unoccupied retail shops generally. It is not a consideration limited to rent concessions and other benefits that might be conferred in respect of the premises or under the lease …": Appeal Panel reasons at [88]. 2. The task of the Tribunal in the present case "was to decide whether the mandate in s 31(1)(c) of the RL Act was met. 'Adequacy' is not a requirement of s 31(1)(a) of the RL Act. It is not a requirement of s 31(1)(c)": Appeal Panel reasons at [94]. Further, the question was "whether regard was in fact had, not the adequacy of what was done and said by the valuer in his valuation, which is the issue to be determined": Appeal Panel reasons at [95]. As to this, the Appeal Panel said (at [96]): The Tribunal was not required or entitled to determine whether the manner in which the factors were considered was "adequate", nor whether the reasons given as to approach or analysis of the data relied upon for the purpose of determining the effective rent were adequate. The imposition of the concept of "adequate" is to add to the requirement "having regard to" which leads to an examination by the Tribunal of whether the valuer was correct in reaching his opinion, such an approach having the effect of substituting the Tribunal in the role of the valuer. 1. The Appeal Panel considered that "the approach taken by the Tribunal is tantamount to a merits review": Appeal Panel reasons at [97]. 2. The Appeal Panel held that to "construe s 31(1)(a) of the RL Act as imposing an obligation to explain or justify the valuer's opinion would render any determination liable to review as to its correctness. There is no provision in s 31 that requires such an approach or gives power to the Tribunal to conduct such a review": Appeal Panel reasons at [99].
2. In relation to whether regard was had to the "factors in s 31(1)(a) of the RL Act. The use of the expression 'adequate regard' is a finding that regard was had but that it was not 'adequate'. Neither party contended otherwise": Appeal Panel at [102].

Ground 1: finding that the approach taken by the Tribunal was "tantamount to a merits review"

Introduction: the plaintiff's argument

1. This ground of appeal challenges the finding of the Appeal Panel that "the approach taken by the Tribunal is tantamount to a merits review" (Appeal Panel reasons at [97]). Although directed to the dispositive conclusion of the Appeal Panel reasons at that paragraph, it indirectly challenges the Appeal Panel reasons at [96], where the basis for this conclusion was largely set out.
2. The ground of appeal is that the Appeal Panel 'erred in law' where it mischaracterised "the reasoning process adopted by the Tribunal", misapprehended the distinction between merits review "and the requirement to comply with the mandatory provisions of the RL Act", and took into account an irrelevant consideration - being the availability of a separate statutory mechanism to challenge the merits of evaluation, being s 32A of the RL Act.
3. The plaintiff submitted that, rather than committing the error alleged as the Appeal Panel held, the "Tribunal permissibly sought to evaluate the process undertaken by the valuer in preparing the valuation" (plaintiff's submissions at [19]; grounds 1(a) and (b)).
4. The plaintiff also argues that the Appeal Panel "fell into further error by taking into account an irrelevant consideration", being the availability of a merits review of current market rent determinations under s 32A of the RL Act (plaintiff's submissions at [21]; ground 1(c)).

Discussion and consideration

1. The Appeal Panel considered that the Tribunal had undertaken merits review of the valuation by Mr Hermiz, essentially for two reasons. The first was that the Tribunal made express reference, in [96] of its reasons, to whether Mr Hermiz had "adequate regard" to matters being "the provisions of the lease in relation to all the comparable properties". The second was that the Tribunal's erroneous approach was apparent once it was recognised that the terms of s 31(1)(a) had in fact been complied with - upon the very findings made by the Tribunal. The focus of the first reason is the language used by the Tribunal. The focus of the second is the substance of what the Tribunal found.
2. In my respectful view, the Tribunal did not misunderstand the confined nature of its task, and it did not undertake merits review - and to be clear, I do not respectfully agree that by the use of the description "adequate regard" betrays an error of that kind. Focusing upon the use of that expression (as the Appeal Panel did), that is for the following reasons. First, a clear statement of the correct legal principle to be applied is apparent from the Tribunal's reasons: the Tribunal, in [93] of its reasons, identified that the approach taken by the valuer to determine the current market rent, was a "legitimate method", so long as the valuer had "regard to the four enumerated factors two excluded factors, specified in that provision": Tribunal reasons at [93]. See also the Tribunal reasons at [57], [89] and [90] which are to the same effect. It is not, therefore, a situation where there is an erroneous statement of principle, and no correct statement of it. Rather, to my mind, it indicates that the Tribunal was cognisant of the correct legal test, and applied it. I am not prepared to infer error in those circumstances merely by the use of the phrase "adequate regard" appearing in the Tribunal's reasons.
3. Secondly, I do not consider that the Tribunal placed a gloss upon the statutory language by its references to "adequate regard" in its reasons at [96]. Nor did it do so where it referred to that phrase in its reasons at [98] - where the Tribunal made a finding that it was "satisfied that Mr Hermiz … had adequate regard to the gross rent, less the lessor's outgoings payable by the lessee in relation to the comparable properties" (I note no challenge was directed to its use in that paragraph of the Tribunal's reasons, and neither side made reference to it during submissions. Nothing turns on this). In my view the Tribunal, by that expression, was merely using it to describe whether the valuer had considered the matters in question. The Tribunal was not, contrary to what the Appeal Panel held, adding to the statutory language by imposing a requirement of "adequacy" to the requirement of "having regard to", with the effect of substituting the Tribunal into the role of the valuer. That was the essential submission of the plaintiff, which I accept.

Ground 2: concluding that the Tribunal was not required, or entitled, to determine whether the reasons for manner in which factors were considered was 'adequate'

Introduction

1. By this ground of appeal, the plaintiff challenges the conclusion of the Appeal Panel - which was to the effect that the "Tribunal was not required, or entitled, to determine whether the reasons or manner in which the factors were considered was 'adequate'". The ground of appeal referred to the Appeal Panel reasons at [94], [96] and [109(1)]. Collectively, these paragraphs of the Appeal Panel's reasons refer to the concept of "adequacy" not forming part of the statutory test under s 31(1)(a).
2. So understood, this appeal ground is, like the substance of ground 1, directed to the Appeal Panel reasons at [96], which were: The Tribunal was not required or entitled to determine whether the manner in which the factors were considered was "adequate", nor whether the reasons given as to approach or analysis of the data relied upon for the purpose of determining the effective rent were adequate. The imposition of the concept of "adequate" is to add to the requirement "having regard to" which leads to an examination by the Tribunal of whether the valuer was correct in reaching his opinion, such an approach having the effect of substituting the Tribunal in the role of the valuer.
3. This ground of appeal contains three sub-grounds. The plaintiff argued grounds 2(a) and (b) together. The argument was that the "approach" of the Appeal Panel to the phrases "having regard to" (which appears in s 31(1)(a)) and "taken into account" (which appears in s 31(1)(c)) was inconsistent with the ordinary meaning of those phrases (plaintiff's submissions at [27]). It was argued, in furtherance of this ground, that the Tribunal, by its references to "adequate consideration", merely amounted to the Tribunal evaluating the valuer's compliance with the statutory obligations under ss 31(1)(a) and (c) of the RL Act rather than, as the Appeal Panel held, embarking on a task of considering the correctness of it (plaintiff's submissions at [30]).

Discussion and consideration

1. The essential argument in connection with appeal grounds 2(a) and (b) is not materially different to those contained in grounds 1(a) and (b), in my view. My conclusion is therefore the same: see [75], above.
2. The plaintiff raised a number of further arguments in support of this ground, which I will deal with next.
3. The plaintiff argued that the obligation of the Appeal Panel to "have regard" to a particular matter required engagement "in an active intellectual process", would not be discharged "by formalistic reference" and required there to be a "proper, genuine and realistic consideration" of the matters involving a "process of evaluation sufficient to warrant the description of the matters being taken into consideration" (plaintiff's submissions at [28]). The plaintiff cited a range of authorities in support of these epithets.
4. In my view whether - and to what degree - these phrases appropriately describe the task of the valuer is not to the point of this ground; the grounds for invalidity were held by the Tribunal to be omissions by the valuer, not that the valuer failed to meaningfully engage with the requirement to have regard to the matters in ss 31(1)(a)(i)-(iv). On appeal, the Appeal Panel arrived at the opposite conclusion to the one found by the Tribunal, and set aside its decision. Again, it was on the footing that the statutory requirements (being a reference to s 31(1)(1)(a) of the RL Act) had been met. I have determined that the Appeal Panel's conclusion - that the Tribunal's findings established that the valuer complied with the terms of s 31(1)(a) - was erroneous, and the basis for that error has been explained elsewhere in connection with other grounds (notably grounds 1(a) and (b)). But it suffices to say that the error does not have its footing in any of the terminology employed by the plaintiff to support this ground.
5. The plaintiff next argued that the Appeal Panel "erred in law" by "misconstruing or ignoring" the terms of s 31(1)(e) - a provision that required the valuation "to contain detailed reasons for the specialist retail valuer's determination and to specify the matters to which the valuer had regard for the purposes of making his or her determination" (appeal ground 2(c)). This challenge was specifically directed to the findings by the Appeal Panel in their reasons at [96] and [99].

Ground 3: the Appeal Panel finding that the valuer had regard to each of the matters in s 31(1)(a) of the RL Act

Introduction

1. By this ground of appeal, the plaintiff challenges the findings by the Appeal Panel that the valuer had regard to each of the matters in s 31(1)(a) of the RL Act. The plaintiff submitted that the requirement to have "regard to" the matters in s 31(1)(a) and the requirement for those matters "to be taken into account" (s 31(1)(c)) by the valuer in determining the current market rent "requires active intellectual engagement with each of those matters leading to the provision of detailed reasons by the valuer, and is not simply a 'box ticking' exercise" (plaintiff's submissions at [39]).
2. Before dealing with the detail of this ground, the following matters should be noted. First, in my view there is no warrant for, and little purpose in, substituting the statutory language with the language proposed by the plaintiff. Secondly, contrary to what was submitted, I do not consider that the terms of s 31(1)(a) of the RL Act, on its own (or with s 31(1)(c)), require the provision of "detailed reasons": that requirement is clearly imposed by s 31(1)(e) of the RL Act (see [86], above). Thirdly, there is no suggestion here (nor finding) that the valuer engaged in a "box ticking" exercise - albeit the plaintiff argued that the Appeal Panel engaged in this very exercise.

Discussion and consideration

1. This ground of appeal, like the earlier two, also contains three sub-grounds. Much was repetitive of those earlier grounds. Grounds 3(a) and (b) - which alleged that there has been a misconstruction of the phrases "having regard to" and taking "into account" in ss 31(1)(a) and (c) - simply repeat the submissions made in connection with grounds 2(a) and (b), and the submissions in support of those grounds are also repeated. Those grounds, as I pointed out when dealing with them, simply repeated the substance of grounds 1 (a) and (b). It is unnecessary to deal with them a third time. Ground 3(c) - which alleged that the Appeal Panel misconstrued or ignored the requirement in s 31(1)(e) to give "detailed reasons" and to "specify" the matters to which the valuer "had regard" - simply repeat the submissions in support of ground 2(c). It is also unnecessary to deal with that a further time.
2. To the extent that it raised any new matter, this ground was directed to the findings made by the Appeal Panel that the valuer had regard to the matters in s 31(1)(a)(i)-(iv) of the RL Act (plaintiff's submissions at [40]). The ultimate submission that was put was that the Appeal Panel engaged "in a 'box ticking' exercise by selectively referring to various findings made at first instance, without conducting the sort of analysis required under the statutory scheme" (plaintiff's submissions at [44]).
3. The plaintiff drew attention to four findings made by the Appeal Panel, as follows - albeit that it did not necessarily, or at least clearly, challenge each of these findings (plaintiff's submissions at [40]-[41]).
4. The first finding (Appeal Panel reasons at 104) was that the valuer had regard to "the provisions of 'the lease' as required by s 31(1)(a)(i) simply because the valuer had specified the provisions of the Lease in section 6.0". This finding was not challenged.
5. The second finding (Appeal Panel reasons at 104) was that the valuer had regard "to the rent reasonably expected to be paid for the Premises as required by s 31(1)(a)(ii)" by reference to the finding made by the Tribunal at [92]: While the Hermiz valuation contains no reference to "the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arms length transaction (where the parties are each knowledgeably, prudently and without compulsion" required by s 31(1)(a) of the RL Act, the wording of section 1.6 while incorrectly referring to a sale of the leased premises, indicates that Mr Hermiz was alert to these considerations …

Ground 4: the requirement to have regard to the provisions of leases in relation to comparable properties used by the valuer

1. Ground 4, which did not have any sub-grounds, alleged that the Appeal Panel erred by finding, in Appeal Panel reasons at [87], that the reference to "the lease" in s 31(1)(a)(i) of the RL Act "did not require the Valuer to have regard to the provisions of leases in relation to the comparable properties used by the Valuer in determining the current market rent under s 31(1)(a)".
2. The essential point made by the plaintiff was that, as s 31(1)(a) is directed to the determination of 'current market rent', that enquiry necessarily involves consideration of comparable properties including the terms of the leases in place.
3. I confess to finding the materiality of this ground a little difficult to grasp in light of the approach taken by the valuer and the findings made by the Tribunal and the Appeal Panel.
4. Put simply, the valuer was required to provide his opinion on the current market rent of the premises, determined on an effective rent basis - a task that involves the removal of matters that might affect the rent payable such as outgoings payable by the lessee, rent concessions etc: s 31(1)(a) of the RL Act.
5. It was accepted that the adoption of a particular valuation method was for the valuer. In this case the valuer selected the direct comparison method - a process that essentially involves the valuer identifying potentially relevant or comparable lease transactions, making the necessary adjustments to those transactions to reflect any differences - and then arriving at a view, in the exercise of the valuer's discretion, about the "effective rent". The finding of the Tribunal as to the method adopted is contained in its reasons at [95]. That paragraph of the Tribunal's reasons also identifies a specific finding: that in adopting that methodology the use of comparable leased properties meant that it was "necessary that [the valuer] have regard to the provisions of the lease …": Tribunal reasons at [95]. The finding is unexceptional, and the defendant understandably takes no issue with it.
6. The Tribunal then proceeded further, and made findings that the valuation had not had "adequate regard to the provisions of the lease in relation to all the comparable properties": Tribunal reasons at [96]. This particular paragraph of the Tribunal's reasons has earlier been dealt with in a number of other grounds of appeal. For present purposes, it is sufficient simply to note that: (a) the valuer did have regard to the provisions of the leases for the comparable properties considered; (b) the Tribunal agreed that in adopting the direct comparison method, it was necessary to have regard to the provisions of the lease of those comparable properties; and (c) in particular respects, the valuer failed to deal with aspects of the provisions of those leases. It is also pertinent to observe that the Appeal Panel did not conclude that the requirement to consider the provisions of the leases for the comparable properties was irrelevant; on the contrary it accepted that it was required to occur, but disagreed with the Tribunal's conclusion that the valuer had not.

Ground 5: the requirement that comparable premises be "unoccupied" and rented for "the same or substantially similar use"

Introduction

1. This ground of appeal has four sub-grounds. I will explain the background to this ground, before corralling the argument.
2. The focus of this ground of appeal is the finding made by the Appeal Panel in its reasons at 104. There, the Appeal Panel held that, based upon a finding said to have been made by the Tribunal, regard was had by the valuer "to the rent reasonably expected to be paid for the premises as required by s 31(1)(a)(ii)". To recap, a little. This finding formed part of the Appeal Panel's analysis as to whether the valuer had regard to the matters in s 31(1)(a) of the RL Act - and the finding here dealt expressly with the terms of s 31(1)(a)(ii).
3. The Appeal Panel anchored its finding at 104 to a finding made by the Tribunal in its reasons at [92]. The reasons of the Appeal Panel at 104 are: In relation to consideration by the valuer of the factors in s 31(1)(a) it is evident from the findings of the Tribunal that regard was had by the valuer: (2) to the rent reasonably expected to be paid for the Premises as required by s 31(1)(a)(ii). At [92] the Tribunal said: While the Hermiz valuation contains no reference to "the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arms length transaction (where the parties are each knowledgeably, prudently and without compulsion" required by s 31(1)(a) of the RL Act, the wording of section 1.6 while incorrectly referring to a sale of the leased premises, indicates that Mr Hermiz was alert to these considerations;
4. The plaintiff argues that this finding made by the Appeal Panel was erroneous. Shortly stated, the error is said to be that, by paraphrasing s 31(1)(a)(ii), the Appeal Panel "completely ignored" the words of the provision - namely, "if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease". In furtherance of this, the plaintiff argued that: (a) the finding made by the Tribunal at [92] does not support the finding that was made and, in any event, was not a finding that in effect satisfied the terms of s 31(1)(a)(ii); and (b) the Tribunal did make findings in its reasons at [97] that were contrary to the finding that the Appeal Panel made, but were overlooked by the Appeal Panel in their analysis and resolution of this issue.

Discussion and consideration

1. As the ground largely turns on what the Tribunal found at [92], it is necessary to consider them in order to determine what was there found.
2. In my view the Tribunal's reasons at [92] - including the particular part relied upon by the Appeal Panel - identify findings that broadly are directed to the chapeau in s 31(1)(a), and not a finding directed to the terms of s 31(1)(a)(ii). The first finding was that the Tribunal was satisfied that Mr Hermiz "directed his attention to the determination of the current market rent of the leased premises": this finding was necessary because, from the terms of the report itself, there was a suggestion that Mr Hermiz may have misdirected himself by reason of various references to "the sale of the leased premises" and the adoption of the "direct sales comparison approach". The second finding was that whilst the report contained no reference to the terms of s 31(1)(a) - viz., "the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arm's length transaction (where the parties are each acting knowledgeably, prudently and without compulsion)" - the "wording of section 1.6 while incorrectly referring to a sale of the leased premises, indicates that Mr Hermiz was alert to these considerations". These two findings were merely introductory - they dealt with threshold problems which were resolved favourably to the valuer, with the manner in which the report was expressed - and, in my respectful view, neither were directed to the terms of s 31(1)(a)(ii), nor supportive of (or capable of supporting) a finding that there had been compliance with that section.
3. As such, the Tribunal's reasons at [92] provide no basis for the Appeal Panel's finding that s 31(1)(a)(ii) of the RL Act was satisfied. That finding is outside the statutory description, and a contrary decision has been made: Hope at 10; Azzopardi at 156. This error is within appeal grounds 5(b), (c) and (d). In my view, that material was also incapable of supporting the finding made by the Appeal Panel, and that is ultimately a question for judicial decision and also a question of law: Kostas at [91].
4. The plaintiff next submitted that the Tribunal in its reasons at [97] made findings that were contrary to the erroneous one made by the Appeal Panel at 104 of its reasons and those other findings were overlooked by the Appeal Panel. Given the conclusion that I have reached about the error in the finding at , it is strictly unnecessary to consider the Tribunal's findings at [97] simply because the Appeal Panel did not seek to support the finding that it made that the valuer had regard to the matters in s 31(1)(a)(ii) by any other finding made by the Tribunal (other than the finding made by the Tribunal in its reasons at [92]). Nevertheless, I will do so. I will also deal with the other wide ranging arguments advanced under this ground of appeal.

Introduction

1. Appeal ground 6 has three sub-paragraphs. The broad subject matter of the ground relates to s 31(1)(a)(iv) of the RL Act, which concerns "rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops".
2. The plaintiff's argument is that "despite the deficiencies in the valuer's discussion of incentives", the Appeal Panel nevertheless concluded that the requirements of s 31(1)(a)(iv) had been met - and in reaching that conclusion, the plaintiff submitted that the Appeal Panel must "have erred in law": (a) "by misconstruing the expressions 'having regard' and taking 'into account'" - and the plaintiff repeats the submissions directed to this issue raised in connection with grounds 2(a) and (b) (plaintiff's submissions at 73); and (b) misconstruing ss 31(1)(a)(iv) and (1)(c) as not requiring the valuer "to consider the presence or absence of any incentives and any adjustments that need to be made in respect of each comparable property discussed in the valuation" (plaintiff's submissions at 73). These errors are those referred to in appeal ground 6(a).
3. The plaintiff ultimately submitted that there were "clear deficiencies in the information provided by the valuer in section 8.0 of the valuation" that were the subject of findings by the Tribunal at [99] of its reasons, and there was "no justification for the Appeal Panel's failure to find that s 31(1)(a)(iv) and/or s 31(1)(e) were not met and to overturn the Tribunal's findings at [99]" (plaintiff's submissions at [75]). These errors are those referred to in appeal ground 6(b). In relation to this ground, the plaintiff argues that the Appeal Panel erred in law by "concluding that the Tribunal had erred in law in making the finding" at [99] of its reasons (appeal ground 6(c)).

Discussion and consideration

1. The plaintiff's submissions made reference to the Appeal Panel reasons at [88]. In that part of the reasons the Appeal Panel is dealing with a different issue - one of construction, involving the expression "the lease" as used in ss 31(1)(a)(i) and (ii). The written submissions did not otherwise expressly identify the particular paragraphs challenged.
2. The relevant paragraphs where these issues were dealt with by the Appeal Panel at [105]-[108] and [110]. Those paragraphs have earlier been set out, or summarised: see [58]-[59], above.
3. The key conclusion of the Appeal Panel was expressed in its reasons at [108]: In our view, the findings of the Tribunal show that the valuer both had regard to and thought were relevant rent concessions and other benefits offered on other leases. As the findings made by the Tribunal make clear, these matters were taken into account in the valuation process.
4. The Appeal Panel expressed its ultimate conclusion in its reasons at [110] - namely, the findings of the Tribunal "show that regard was had by the valuer to each of the relevant factors in s 31(1)(a) of the RL Act", with the consequence that there was no basis for the declaration made by the Tribunal.
5. Although the plaintiff's submissions - at least in writing - were appreciably more elaborate, in my respectful view the essence of the argument advanced can be reduced to a fairly simple couple of propositions. The first was that for the Appeal Panel to consider that those matters discharged what was required, and reverse the decision of the Tribunal, could only be the product of its erroneous interpretation of what was mandated under s 31(1)(a). The second, a corollary of the first, was that the correct approach was reflected in the findings made by the Tribunal in its reasons at [94] and [99]. I turn now to consider each of them.
6. The Tribunal, when dealing with this issue, made the following findings in its reasons at [99] about what was omitted from the valuation report: 1. In relation to leased properties B and C, the report did not refer to whether there were any incentives for those properties and otherwise did not explain the failure "to specify the presence or absence of incentives for leased properties B and C". 2. In relation to leased property the, the report made "no comment about the incentive … being 'a 25% abatement (rent-free) clause'". 3. In the table in section 9.2 of the report, Mr Hermiz "only has regard to adjusted rents for leased properties D and E that deduct the incentives". 4. Mr Hermiz did not "specify whether any incentives are available for on the market properties 1 and 2".

Introduction

1. Appeal ground 7 contains no sub-grounds. It is in these terms: The Appeal Panel erred in law by concluding that the areas the subject of the licence were a retail shop and that the licence was a retail shop lease within the meaning of the RL Act.
2. It is necessary to refer to some detail in order to understand the argument raised.
3. The issue raised by this ground of appeal is whether the licensed area falls within the definition of 'retail shop', and whether the licence was a 'retail shop lease', within s 3(1)(a) of the RL Act. If it did, then the defendant was entitled to a refund of the payment made under the licence during the period 11 September 2019 to 16 April 2020 (being an amount of $7,571.17) - this being the period when the leased premises were damaged by fire, such that the defendant was unable to conduct its restaurant and bar business at the leased premises and use the licensed areas. In the period in question, the rent under the lease abated whilst the plaintiff reinstated the premises to their unimproved state. Since 17 April 2020, the defendant resumed the conduct of its restaurant and bar business.
4. The plaintiff argued that those parts of the building were not a retail shop, whereas the defendant's position is that the licensed areas were a retail shop.

The Tribunal's decision

1. The Tribunal was not satisfied "that the licensed areas are used wholly or predominantly for the carrying on of its restaurant and bar business"; whilst the evidence described the use of the licensed areas, the evidence did not "state whether the licensed areas are used wholly or predominantly for the carrying on of its restaurant and bar business": Tribunal reasons at [108].
2. Accordingly, the Tribunal concluded that the defendant had "not established that the licensed areas are a retail shop" within the definition provided by s 3(1)(a) - with the consequence that s 36(1) of the RL Act (which, in short, permits the abatement of rent with the premises are damaged and "cannot be used": s 36(1)(a)) did not apply so as to entitle the defendant to an abatement of rent during the period in question: Tribunal reasons at [109].

The Appeal Panel's decision

1. The defendant appealed to the Appeal Panel in connection with this finding by the Tribunal. The Tribunal identified the critical question as: "whether the licence is also a retail shop lease": Appeal Panel reasons at [123]; see also Appeal Panel reasons at 20. The key conclusions of the Appeal Panel are in its reasons at [142]-[145]: 142. Having regard to our construction of the RL Act, possible uses by others of the areas the subject of the Licence were not relevant to determining whether the area in question for use under the Licence fitted within the definition of a retail shop. The evidence of Mr Yazbek at para 8, set out above, made clear the use of these areas by the tenant was for the carrying on of the restaurant and bar business. More particularly, the Licence specified that the use of the licensed areas was only for the purpose of the restaurant and bar business the subject of the Lease. 143. It follows that the licensed areas was [sic] used wholly for carrying on the restaurant and bar business. 144. Finally, even if we are wrong on the construction of the RL Act and the use by third parties of the licensed areas is relevant to determining whether those areas are a retail shop, there was no evidence of other uses which might predominate. Rather, the only evidence was that of Mr Yazbek as to the use the tenant made of those areas. Consequently, there was no evidence to prove that there was another use which predominated the use of under the Licence. 145. Having regard to the above, the Tribunal was in error in concluding the licensed areas were not a retail shop within the meaning of the RL Act and that the Licence was not a retail shop lease.

Discussion and consideration

1. The plaintiff's ground of appeal is expressed in broad terms, and did not precisely identify where the error in the Appeal Panel's reasons was said to lie. The defendant, in its written submissions, argued that the ground of appeal failed to identify a question of law.
2. The defendant also raised a threshold point - being that this point was not raised below. It was argued that the focus of the challenge being to what was described during argument as the concept of "ancillary use", was not argued below. In my view it is sufficiently clear, from the Tribunal reasons at 105 that this point was taken before the Tribunal. Furthermore, the Appeal Panel squarely identify the issue (Appeal Panel reasons at [129]): … Those decisions dealt with the question of whether land, the subject of a licence to occupy, separate to premises the subject of a retail lease on which a retail shop business was being conducted, could be a retail shop for the purpose of the RL Act.
3. I am therefore satisfied that the point was in issue before the Appeal Panel.
4. In the plaintiff's written (and oral) submissions, it appears that the particular error relied upon related to the construction of the definitions 'retail shop' and/or 'retail shop lease' contained within s 3 of the RL Act. The plaintiff's submissions were: (a) the incorrect test was applied by the Appeal Panel, because the Appeal Panel did not pose the test informed by the above definitions contained in s 3 of the RL Act; (b) in furtherance of this, contrary to what was held below, it was critical to determine whether the use of the premises were "wholly or predominantly for the carrying on of one or more of the businesses prescribed" (picking up the definition of 'retail shop' in 3 of the RL Act); and (c) the "critical problem" is that the licensed area was "not used for the restaurant itself, or the licensed premises were not used as a restaurant as the statutory test requires" (T28.38); put another way, there was a requirement that the business, at least in part, must be "carried on" in the relevant area (plaintiff's written submissions at [84]). This error was argued to be an error in the construction of the definition of 'retail shop' in s 3 of the RL Act.
5. The defendant argued that no error of law (and, necessarily no question of law) arose: it was submitted that, in effect, the plaintiff was inviting the Court to make a high-level pronouncement disconnected to the facts found by the Appeal Panel. The defendant further submitted that no question of law arose; rather it was a question of fact or, at least, a mixed question of fact and law.

Remitter: the appointment of a different valuer and the costs of the NCAT proceedings

1. It is, of course, highly desirable for all outstanding issues between the parties, where possible, to be disposed of on appeal in order to quell the dispute. Nevertheless, there are two issues that cannot be determined by this appeal. The first relates to the question of whether the further valuation that is necessary following the orders that I have made should be remitted to Michael Hermiz, or another valuer. The second relates to the costs of the proceedings before the Appeal Panel, and of the proceedings before the Tribunal. I will briefly explain why these issues cannot be resolved, and are required to be remitted.

The appointment of a different valuer

1. The plaintiff submitted that, in the event that it succeeded on appeal in connection with the "valuation" issue, a different valuer should be appointed to undertake a further valuation under s 31 of the RL Act. Order 5 of the amended summons thus sought the remittal of the determination of the current market rent under the lease "to a valuer to be agreed or otherwise appointed in accordance with clause 6(b) of the Lease".
2. The written submissions of the parties did not address this order.
3. As explained during argument, it was said that the Tribunal made the order remitting the matter to Mr Hermiz without hearing from the parties, and the plaintiff appealed to the Appeal Panel from that order. This was identified as appeal ground 5 in the plaintiff's appeal to the Appeal Panel: Appeal Panel reasons at [15]. However, in light of the outcome of the appeal, it was explained - and it is apparent from the reasons of the Appeal Panel - that the Appeal Panel did not need to address that point. The defendant did not contest this outline of events.
4. In my view there is considerable doubt about whether, the Appeal Panel not having determined this matter, it is within the jurisdiction of the Court to deal with the order made by the Tribunal remitting the matter to Mr Hermiz (a matter not addressed by the parties in their oral submissions). That is for two overlapping reasons. First, as I have earlier noted, the jurisdiction of this Court is engaged upon satisfaction of the requirements of s 83(1) of the NCAT Act - viz., identification of a question of law. Absent demonstration of that matter (and, necessarily, a decision on a matter that would give rise to it), there is no jurisdiction to deal with the matter raised. Secondly, because the appeal to this Court is confined to the decision of the Appeal Panel, and not the Tribunal: Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41 at [10]. To the extent that there is any error in what occurred below in connection with the "re-appointment" of Mr Hermiz, it could only arise out of the order made by the Tribunal, and not by the Appeal Panel.
5. Given my reasons, the plaintiff's appeal in connection with the remitter of the valuation to Mr Hermiz now arises for determination by the Appeal Panel. I propose to remit that question to the Appeal Panel for its determination.

Costs before NCAT

1. There were no submissions - written or oral - directed to why I should make, in the event that I granted leave, and allowed the appeal, an order (being appeal order 6) that, on the face of it, involves the defendant paying all the plaintiff's costs of the proceedings before the Tribunal and before the Appeal Panel.
2. It is clear that the appeal to the Appeal Panel involved more than the two (broad) issues that have arisen in the current proceedings. For example, an issue that arose before the Tribunal and the Appeal Panel was whether or not, as the plaintiff argued, the defendant was bound by the settlement agreement: see the overview of the background facts earlier in this judgment. The plaintiff failed - before the Tribunal and the Appeal Panel - in seeking to uphold, as binding, the settlement agreement. Put simply, the plaintiff's success below, even allowing for its success in this Court, is mixed. There may well be other subtleties, and other considerations, relevant to how the costs discretion below should be exercised. In the absence of submissions, it is not appropriate for me to embark upon the task of where, if at all, costs should fall in connection with the proceedings below. The fact that the Appeal Panel will be required to determine whether the valuation is remitted to Mr Hermiz is a further reason why the costs before the Appeal Panel should be remitted to it.
3. The determination of the costs of the proceedings before the Appeal Panel should be determined by the Appeal Panel, and I propose to make an order remitting the question of costs to it.

Orders

1. For the above reasons, I make the following orders: 1. Grant leave to appeal in relation to grounds 1(a), 1(b), 2(a), 2(c), 3(a), 3(b), 3(c), 5(a), 5(c), 5(d), 6(a) and 6(b) of the amended summons seeking leave to appeal filed 9 June 2022. 2. Allow the appeal. 3. Set aside orders 1 and 3 of the Appeal Panel dated 12 May 2022, and in lieu thereof: 1. Order that the defendant's appeal to the Appeal Panel (by its amended notice of appeal filed 3 December 2021), so far as it relates to those orders, be dismissed. 1. Order that the question of whether the determination of the current market rent under the lease as at 14 July 2020 be remitted to Michael Hermiz, or another valuer, is remitted to the Appeal Panel for its determination in accordance with the plaintiff's notice of appeal filed 16 November 2021. 2. Order that the question of costs before the Appeal Panel be remitted to it for its determination. 3. Order the cross summons for leave to appeal filed 20 June 2022 be dismissed. 4. In relation to the cross summons for leave to appeal, make no order as to costs. 5. Order the defendant to pay the plaintiff's costs of the proceedings in this Court. 6. Order that any application to vary the order for costs in order 8, and any evidence in support and written submissions (limited to no more than 2 pages), be filed and served by 31 March 2023, 5pm. 7. In the event that any application to vary the costs order in order 8 is so filed, order that any evidence in reply and written submissions (limited to no more than 2 pages) be filed and served by 6 April 2023, 5pm. 8. I list the matter for argument in connection with costs on a date to be fixed.

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