[2007] NSWSC 730
Attorney General for NSW v X (2000) 49 NSWLR 653
[2000] NSWCA 199
Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515
[2020] FCAFC 50
Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41
Coleman v Power (2004) 220 CLR 1
[2004] HCA 39
Collector of Customs v AGFA-Gevaert Ltd (1996) 186 CLR 389
Source
Original judgment source is linked above.
Catchwords
[2007] NSWSC 730
Attorney General for NSW v X (2000) 49 NSWLR 653[2000] NSWCA 199
Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515[2020] FCAFC 50
Bronze Wing International Pty Ltd v SafeWork NSW [2017] NSWCA 41
Coleman v Power (2004) 220 CLR 1[2004] HCA 39
Collector of Customs v AGFA-Gevaert Ltd (1996) 186 CLR 389[2020] FCAFC 205
Corcoran v Far [2020] NSWCA 140
Ferella v Chief Commissioner of State Revenue [2014] NSWCA 37896 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
Judgment (36 paragraphs)
[1]
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
[2]
Introduction
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').
The appeal, brought by the landlord, raises two broad issues - albeit that those two issues have spawned eighteen grounds of appeal.
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.
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.
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.
[3]
Background
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.
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.
[4]
The retail lease of the Surry Hills premises
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.
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.
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 …
The lease defined the terms 'Basic Rent' and 'Current Rent', but the term 'Fair Market Rent' was not.
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.
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.
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.
[5]
The proceedings between the parties before the Tribunal
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.
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.
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".
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.
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).
[6]
The proceedings between the parties before the Appeal Panel
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).
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.
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.
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.
[7]
The decision of the Appeal Panel
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.
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.
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.
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.
[8]
The Retail Leases Act 1994
Before dealing with the grounds of appeal, it is necessary to make reference to the RL Act.
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.
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'.
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.
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.
[9]
The nature of the appeal to this Court: s 83 of the NCAT Act
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.
An 'appealable decision' extends to "any decision made by an Appeal Panel in an internal appeal": s 82(1)(a) of the NCAT Act.
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.
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.
[10]
The expert rental valuation report: the approach of the Tribunal and Appeal Panel
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.
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.
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.
[11]
The Tribunal's reasons: the expert rental valuation report was invalid and not binding
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].
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.
[12]
The Appeal Panel reasons: the expert rental valuation report was valid and binding
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].
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].
[13]
Ground 1: finding that the approach taken by the Tribunal was "tantamount to a merits review"
[14]
Introduction: the plaintiff's argument
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.
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.
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)).
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)).
[15]
Discussion and consideration
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.
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.
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.
[16]
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'
[17]
Introduction
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).
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.
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]).
[18]
Discussion and consideration
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.
The plaintiff raised a number of further arguments in support of this ground, which I will deal with next.
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.
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.
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].
[19]
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
[20]
Introduction
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]).
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.
[21]
Discussion and consideration
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.
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]).
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]).
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.
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 …
[22]
Ground 4: the requirement to have regard to the provisions of leases in relation to comparable properties used by the valuer
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)".
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.
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.
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.
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.
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.
[23]
Ground 5: the requirement that comparable premises be "unoccupied" and rented for "the same or substantially similar use"
[24]
Introduction
This ground of appeal has four sub-grounds. I will explain the background to this ground, before corralling the argument.
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).
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;
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.
[25]
Discussion and consideration
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.
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.
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].
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.
[26]
Introduction
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".
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).
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)).
[27]
Discussion and consideration
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.
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.
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.
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.
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.
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".
[28]
Introduction
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.
It is necessary to refer to some detail in order to understand the argument raised.
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.
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.
[29]
The Tribunal's decision
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].
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].
[30]
The Appeal Panel's decision
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.
[31]
Discussion and consideration
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.
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.
I am therefore satisfied that the point was in issue before the Appeal Panel.
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.
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.
[32]
Remitter: the appointment of a different valuer and the costs of the NCAT proceedings
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.
[33]
The appointment of a different valuer
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".
The written submissions of the parties did not address this order.
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.
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.
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.
[34]
Costs before NCAT
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.
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.
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.
[35]
Orders
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.
[36]
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: 24 March 2023
In 2020, the lease was subject to rent review (not simply the annual rental increase of 4%) - that year being a fourth anniversary since the inception of the lease (cl 6(b)). The parties were unable to agree upon the rent.
On 14 July 2020, following a mediation between Hanave and Nomad, a settlement agreement was entered between them ('the settlement agreement'). In light of the issues on appeal to this Court, it is unnecessary to refer to the detail of that agreement. However, it was an issue before the Tribunal, and on appeal to the Appeal Panel: Hanave argued that the settlement agreement was an agreement within cl 6(b) of the lease, thereby fixing the ongoing agreed rent for the premises.
On 15 October 2020 Nomad applied to the Office of the Small Business Commissioner for the appointment of a specialist retail valuer, and a valuer was appointed to prepare a valuation in accordance with the RL Act.
On 18 November 2020, Michael Hermiz of Anderson Group Valuers was appointed as the specialist retail valuer to conduct the market rent review for the premises.
On 10 February 2021, Mr Hermiz issued a final version of his valuation report dated 11 December 2020. In that report, Mr Hermiz expressed the opinion that the fair market rent as at 14 July 2020 was $252,000 exclusive of GST.
At this time, the parties remained in dispute - in connection with the settlement agreement, the valuation report from Mr Hermiz and the licence.
The reference in order 1 to 14 July 2021, was a slip: the correct date, amended by subsequent order, was 14 July 2020. To sum up: the effect of the Appeal Panel's orders is that the valuation of Mr Hermiz was binding upon the parties, with the consequence that the fair market rent payable for the period commencing 14 July 2020 was $252,000 plus GST and that Hanave was required to pay Nomad the sum of $7,571.17 for abatement of the licence fee.
In relation to what the Appeal Panel described as issues 3 and 4 - whether the licence was a retail lease, within the meaning of the RL Act and the related question being, if so, whether Nomad was entitled to a refund of the licence fees - the Appeal Panel held that 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" (Appeal Panel reasons at [145]). The Appeal Panel further held that the areas, the subject of the licence, were "part of the building in which the restaurant was located and which was damaged" (Appeal Panel reasons at [147]), and as those areas "could not be 'used under the lease' and/or the use was 'diminished' as those expressions are used in s 36 of the RL Act", the Appeal Panel held that the inability to "use the restaurant and bar" for the permitted purposes entitled Nomad to an abatement of the licence fee in the amount of $7,571.17 (Appeal Panel reasons at [148]).
Part 4 (ss 33-38 of the RL Act) deals with alterations, and other interferences with a retail shop. Section 36 deals with 'Damaged premises', and relevantly provides:
(1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged -
(a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage.
…
(2) A retail shop lease must not contain any provision the effect of which is to limit any liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the shop or the building of which the shop forms part.
(3) Nothing in this section prevents the parties to a lease from terminating the lease by agreement if the shop or the building of which it forms part is damaged or destroyed.
In relation to the requirement for leave, there was no issue about the relevant principles that govern the question of leave. It was accepted that leave to appeal will ordinarily only be granted "concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what being merely arguable": Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; Corcoran v Far [2020] NSWCA 140 at [12].
A further matter should also be noted - namely, 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]. This further limitation on the jurisdiction of the Court is important - particularly in connection with the order that is sought by the plaintiff, in the event that its appeal is successful, that the valuation be remitted to a valuer other than Mr Hermiz. As I will later explain, the fact that the Appeal Panel did not, in the way in which it determined the appeal before it, determine whether that should occur, constrains this Court, in my view, from dealing with that issue - and a remittal is required.
It will be seen from these reasons that there were two broad strands to the Tribunal's conclusion that the valuation report was invalid: first, that the report failed to comply with s 31(1)(a) of the RL Act (Tribunal reasons at [96], [97], [99] and [100]); secondly, Mr Hermiz carried out the valuation as at 11 December 2020, whereas he was tasked with the obligation to assess the fair market rent as at 14 July 2020 - accordingly, in this respect, the Tribunal reasoned that there was a failure to comply with cl 6, when read with item 4 of Part II of the lease (Tribunal reasons at [101]).
In relation to the second basis for invalidity - that the valuation erroneously assessed of the current market rent as at 11 December 2020, rather than as at 14 July 2020 - the plaintiff accepted, before the Appeal Panel, that the Tribunal was in error in making that finding, and that the report was an assessment as at the correct date, being 14 July 2020: Appeal Panel reasons at [81] and [111]. It is unnecessary therefore to refer further to that conclusion. Rather, in what follows, the focus is upon whether the Tribunal itself was in error in declaring that the expert rental valuation failed to comply with the terms of s 31(1)(a) of the RL Act - this being the principal basis of the plaintiff's challenge.
Later, the Appeal Panel added (at [109]):
As we stated above, for the purpose of determining compliance with the mandate in s 31(1)(c) of the RL Act it is not relevant whether:
(1) the regard had by the valuer was 'adequate';
(2) the reasons provided were adequate;
(3) the valuation correctly analysed the data upon which reliance was placed.
Specifically, the Appeal Panel concluded that this last matter - viz., whether the valuation correctly analysed the data upon which reliance was placed - was evident from the following (Appeal Panel reasons at [104]-[108]):
104. 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:
(1) to the provisions of the Lease as required by s 31(1)(a)(i): reasons at [94];
(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;
(3) to the gross rent and outgoings payable by the tenant as required by s 31(1)(a)(iii): reasons at [94].
105. As to the factor in s 31(1)(a)(iv), the Tribunal said at [94] of the reasons:
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 the lease.
106. However, at [99] the Tribunal reviewed the valuer's analysis in section 8.0 of the Hermiz valuation. Relevantly, the Tribunal found in relation to the comparative data recorded in the valuation that:
(1) there was no incentive for lease property A;
(2) the valuer does not refer to incentives for lease properties B and C;
(3) the valuer "specifies the incentives for leased properties D and E" and that the valuer says the incentive for lease property D, being a 4.5 rent free month period, "is within the typically market range";
(4) the valuer "makes no comment about the incentive of lease property E, being 'a 25% abatement (rent-free) clause'".
(5) The valuer in the table in section 9.2 "only has regard to adjusted rents for leased properties D and E that deduct the incentives".
107. Section 9.2 of the Hermiz valuation includes a Table of the comparative rents and calculates the net rent as $252,000 plus GST.
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.
The Appeal Panel thus held that as 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", there was no basis for the declaration made by the Tribunal: Appeal Panel reasons at [110].
Thirdly, it is apparent from the key passages of the Tribunal's reasons at [93]-[99] that the analysis undertaken by the Tribunal was directed to determining whether there had been compliance with the provisions of s 31(1)(a) of the RL Act. The fact that the Tribunal scrutinised the fact finding in order to assess whether the valuation complied with the terms of s 31(1)(a) was a necessary, but conceptually distinct, task from reviewing the correctness of it: Haritos v Commissioner of Taxation (2015) 233 FCR 315; [2015] FCAFC 92 at [194]. It is not evidence of a misapplication of the legal test.
The matter does not end there, of course, because the Appeal Panel undertook an analysis in order to determine whether the valuer had regard to the matters in s 31(1)(a) of the RL Act - concluding that, based upon the very findings made by the Tribunal, it was apparent that "regard was had by the valuer to each of the relevant factors in s 31(1)(a) of the RL Act": Appeal Panel reasons at [110]. The result was that, by finding that the terms of s 31(1)(a) of the RL Act had been complied with, but that the Tribunal had made a declaration to the contrary, confirmed to the Appeal Panel that the Tribunal had adopted the wrong approach. This is what I had earlier termed was the "second reason" for the Appeal Panel overturning the decision of the Tribunal.
The Appeal Panel undertook an analysis of the Tribunal's findings in its reasons at [104]-[108]: those paragraphs of the Appeal Panel's reasons are set out in [58], above. The Appeal Panel ultimately concluded that 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", and subsequently that there was no basis for the declaration made by the Tribunal: Appeal Panel at [110]. The Appeal Panel's holding that the findings of the Tribunal established that the valuer had complied with the terms of s 31(1)(a) inevitably shaped its conclusion that the Tribunal had impermissibly traversed the merits. Plainly - if that occurred - that conclusion would be axiomatic. But I do not respectfully think that the Appeal Panel was correct on this issue either.
At this point, this ground of appeal leads into, or duplicates, other grounds of appeal that challenge this part of the Appeal Panel's reasons - particularly, grounds 3, 5 and 6. In my view, for the reasons expressed in relation to those other grounds, the Appeal Panel was in error in concluding that the Tribunal had made findings that demonstrated compliance with the terms of s 31(1)(a) of the RL Act. It follows, therefore, that the added justification for the Appeal Panel determining that the Tribunal had misdirected itself, and engaged in a merits review, was not demonstrated by "findings" made by the Tribunal; the findings in fact were to the opposite effect, as the Tribunal determined.
The plaintiff next argued that the Appeal Panel took into account an irrelevant consideration - being the availability of merits review under s 32A of the RL Act: it was submitted that "consideration of any irrelevant matter is an error of law" (plaintiff's submissions at [21] and [24]). This challenge (appeal ground 1(c)) is directed to the Appeal Panel reasons at [97], although the written submissions - and oral argument - focused upon the Appeal Panel reasons at [99]-[100]. The critical paragraph of this challenge is the Appeal Panel reasons at [100]:
Further, the statutory mechanism to challenge the merits of a valuation is under s 32A Review of current market rent determinations. It is only under s 32A that the Tribunal is given power to intervene in a merits review and then only "if satisfied that the valuers have manifestly made a fundamental error warranting such an order": RL Act s 32A(12)(a).
The plaintiff argued that the reference to s 32A was irrelevant because: (a) it did not seek merits review of the valuation; (b) the Tribunal did not conduct, nor seek to conduct, merits review; and (c) whether the Tribunal engaged in impermissible merits review was unaffected "by the availability of such a mechanism under the RL Act" (plaintiff's submissions at [23]).
In my view this ground (appeal ground 1(c)) does not add to the conclusion that I have already reached in connection with grounds 1(a) and (b) (and leave to appeal is refused). That is because the reference to the availability of a means to challenge the merits of a valuation, under s 32A of the RL Act, was employed by the Appeal Panel as a means to reinforce that a merits review was not available under s 31(1)(a) of the RL Act - a general conclusion that is undoubtedly correct, and accepted by both parties to be so. Determining the meaning and scope of s 31(1)(a) inevitably extends to a consideration of the provisions that surround it, and the Act as a whole: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]-[71]. The reference to s 32A, therefore, is not, separately, demonstrative of error. To the extent that the Appeal Panel reasons at [99] suggested that there was nothing in the language of s 31(1)(a) - or in s 31 more generally - relating to the requirements under s 31(1)(e) of the RL Act, this is dealt with in connection with appeal ground 2(c): see [83]ff, below.
In my view the Appeal Panel misconstrued and misunderstood the Tribunal's reasons which subsequently led to it overturning the Tribunal's decision. That was an error of law and it raised questions of law, as was essentially argued by the plaintiff. Those questions of law being: (a) whether the Appeal Panel erred in misconstruing the reasons of the Tribunal and finding that it had committed an error of law in determining what it did; and (b) whether the Appeal Panel misunderstood the task of the Tribunal, which was to review the valuer's compliance with the terms of s 31(1)(a), a task that necessarily involves the proper construction of the terms of that section. In connection with both questions, the Appeal Panel subsequently erred in law by finding that the Tribunal had committed an error of law when that was not so. Furthermore, the Appeal Panel found that the findings of the Tribunal demonstrated that the valuation conformed to the requirements of s 31(1)(a) of the RL Act, when those findings did not, and could not, support that conclusion. That too was an error of law: it is an error of law to make a finding of fact for which there is no evidence: Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; [2010] HCA 32 at [90]-[91] ('Kostas'); Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139, 149 and 151 ('Azzopardi'). And, "what amounts to material that could support a factual finding is ultimately a question for judicial decision. It is a question of law": Kostas at [91].
In my view it is appropriate that leave to appeal be granted in connection with grounds 1(a) and (b): it would, on the findings and conclusions made, work a serious injustice upon the plaintiff if the errors were not corrected. I also propose to make an order upholding the appeal based upon these grounds.
In my view the Appeal Panel reasons at [96] (as set out at [77], above) do not betray the particular error covered by appeal ground 2(c). The reasons in this paragraph are dealing with the notion that a superadded element "adequacy" forms part of the requirements under s 31(1)(a) of the RL Act, and whether the Tribunal engaged in merits review. That is apparent from the paragraphs that precede it - [94] and [95] - as well as the one that follows it - [97], which contained its conclusion that "the approach taken by the Tribunal is tantamount to a merits review".
In my view, however, the Appeal Panel reasons at [99] do betray, in substance, the particular error alleged. It is convenient to set out the reasons of the Appeal Panel, before explaining why I consider there to be an error in the approach. The reasons of the Appeal Panel at [99] are:
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.
On its own, it might be said that the first sentence is explicable on the footing that, in substance, it is expressing the idea that s 31(1)(a) of itself does not impose an obligation to explain or justify the valuer's opinion, and to hold otherwise would permit essentially a review of the correctness of the valuation (ie merits review). This was certainly the way that the defendant argued that this sentence, and the paragraph more generally, should be understood. Nevertheless, I do not consider that its meaning can sensibly be divorced from the second sentence. That sentence, in my view, to the extent that it suggests that there is nothing in s 31 that imposes an obligation to explain or justify the valuer's opinion, is erroneous: s 31(1)(e) clearly does that. That section does not, however, authorise a review "as to its correctness", as the passage in the Appeal Panel reasons at [99] appears to assume. Rather, it imposes a requirement to provide reasons, and sets the standard - the report is to be in writing and "contain detailed reasons" - required for the reasons that are provided for the determination by the valuer. The decision in Adwell Holdings Pty Ltd v Bourne (2007) NSW ConvR 56-188; [2007] NSWSC 730 at [26], relied upon by the plaintiff, is consistent with that conclusion. In that limited and specific respect it does permit a consideration of the adequacy of the valuer's consideration of the matters prescribed, or prohibited, by s 31(1)(a) of the RL Act. I emphasise: assessing whether legally adequate reasons have been provided is not concerned with, and is conceptually distinct from, a review of the correctness of the ultimate decision.
The plaintiff argued that in finding "that considerations of adequacy had no role to play in respect of s 31 of the RL Act, the Appeal Panel must have misconstrued … or ignored" s 31(1)(e) altogether (plaintiff's submissions at [37]). The plaintiff argued that this was a misconstruction of s 31(1)(e), and that misconstruction of the statutory provision was "clearly an error of law" (plaintiff's submissions at [38]). In my view it is not correct to characterise what the Appeal Panel did as a misconstruction of s 31(1)(e): no attempt was made to construe it. Further, "adequacy" - as an unrestrained and at large concept - is not part of the test in s 31(1)(a), nor strictly by its terms is s 31(1)(e) directed to at large "considerations of adequacy", as opposed to dealing with requirement that the valuation is to be in writing with "detailed reasons": see [86], above. It was then argued that it was an error of law for a decision-maker to fail to take into account a relevant consideration - citing Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40. The plaintiff argued that as the issue before the Appeal Panel was whether the valuation had complied with s 31 of the RL Act, s 31(1)(e) was "a matter that the Appeal Panel was required to consider. Its failure to do so was an error of law" (plaintiff's submissions at [38]). In my respectful view characterising what occurred as amounting to a failure to take into account a relevant consideration is inapt; the error is one of construction of s 31(1)(a): see [86], above.
There are two further issues to consider in connection with this ground. The first is whether this error is, in fact, material; the second is whether the Court should refuse to grant leave because, as the defendant argued, the question of "reasons" was not argued by the plaintiff below.
I will deal first with whether the issue of "reasons" - and s 31(1)(e) more generally - was argued before the Appeal Panel.
Before the Appeal Panel the issue was identified by the Appeal Panel in these terms: "(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": Appeal Panel reasons at [20]. Similarly, the Appeal Panel reasons at [82] identified the issue in the same way. Furthermore, neither the Tribunal, nor the Appeal Panel, undertook (to express it neutrally) a review of the valuation by reference to the reasons of the valuer informed by the requirement of s 31(1)(e) of the RL Act. Rather, the Tribunal, and the Appeal Panel, focused upon - as the Appeal Panel expressly noted - the validity of the valuation having regard to the terms of s 31(1)(a).
There was a live debate about whether the question of "reasons" featured in how the matter was argued before the Appeal Panel. The defendant argued that the point was not raised and, indeed, submitted that it was specifically eschewed by the plaintiff, upon direct questioning, by the Appeal Panel. The plaintiff on the other hand contested this, pointing out that a reference to the mandatory requirement to provide "detailed reasons" under s 31(1)(e) of the RL Act was contained in its submissions to the Tribunal, as well as in oral submissions to the Tribunal. And, in connection with what transpired before the Appeal Panel, the plaintiff argued:
1. as the appeal was the defendant's appeal, it was "not on [the plaintiff] to raise" s 31(1)(e);
2. that the proper way to understand the "concession" is more limited, and to the effect that the question of adequacy of reasons was not the fundamental basis upon which the valuation was challenged;
3. irrespective of what occurred, to the extent that the Appeal Panel was required to construe s 31(1)(a), s 31(1)(e) "cannot be ignored"; and
4. the Appeal Panel specifically recorded submissions made by the plaintiff that s 31(1)(e), with s 31(1)(a), imposed particular requirements that were required to be complied with by the valuer and, a related submission, that "there was a complete absence of reasons in the valuation on the matters to which regard was to be had …": Appeal Panel reasons at [76]-[77].
In my respectful view, there was a measure of confusion evident in the exchange before the Appeal Panel where s 31(1)(e) was raised and debated. On behalf of the defendant, it was argued that the Tribunal erred, essentially on the footing that there was "an inadequacy of reasoning" but that the challenge to the valuation before the Tribunal was not under s 31(1)(e), but under s 31(1)(a). The defendant further submitted that s 31(1)(e) had not been raised before the Tribunal, and the plaintiff agreed to that proposition when this was raised by the Appeal Panel.
In my assessment, having reviewed what occurred below, the defendant essentially submitted to the Appeal Panel that the plaintiff did not seek to challenge the assessment of the valuer under s 31(1)(e), but that that provision was what, in its submission, the Tribunal had (effectively) employed in order to arrive at the conclusion that it did. (I here add: as I have earlier explained, I do not consider that is what the Tribunal actually did). It was on that footing that the plaintiff accepted that s 31(1)(e) was not raised - and clearly that was not the basis of its challenge. I am, thus, satisfied that there was no concession to the effect that s 31(1)(e) was an irrelevancy, so as to disentitle the plaintiff from raising a complaint about it in this Court.
Furthermore, even if that were not so, I do not consider - subject to any question of procedural fairness (and no such question here arises) - that a court or other body called upon to construe and interpret the terms of a statute is free to ignore the text of other provisions that are relevant to its proper construction merely because a party does not refer to it, or accepts that it is not relevant to the constructional task. That this is so derives from two principles - being: first, that no "party, by its process or arguments can impose on [a court] an incorrect application of the law": Klein v Minister for Education (2007) 81 ALJR 582; [2007] HCA 2 at [38]) - or, as it is sometimes expressed, that the "parties cannot make a concession that would bind [the] Court as to the proper construction of the statutory provisions": Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Qantas Airways Limited (2020) 282 FCR 130; [2020] FCAFC 205 at [25]; and, secondly, that a court "may adopt a construction of legislation that has not been argued by the parties": Coleman v Power (2004) 220 CLR 1; [2004] HCA 39 at [243]. If the proper construction of s 31(1)(a) cannot be arrived at without referring to what other parts of s 31(1) provide for, it would, in my view, be an error to arrive at a construction ignoring what is conceded to be irrelevant.
In my view, therefore, it was not open to the Appeal Panel to confine its approach to the construction of s 31(1)(a) merely to the terms of that provision; s 31(1)(e) was plainly relevant to that interpretative enquiry.
I now return to the question of materiality. Although I have concluded that the Appeal Panel was in error in its reasons at [99] - see [86], above - it is clear that, notwithstanding this constructional error, there was no express finding by the Tribunal, nor by the Appeal Panel (inevitably, in view of its decision), that the reasons of the valuer failed to conform with the requirements of s 31(1)(e) of the RL Act. The finding made by the Tribunal was confined to s 31(1)(a) only. Nevertheless, I am satisfied that the error is material. It formed part of the Appeal Panel's overall analysis, and justification, for overturning the Tribunal's decision. And further, it contains, in my respectful view, clear errors of legal principle - being that there was no requirement in s 31(1) of the RL Act to "justify" a decision, when s 31(1)(e) in substance has that effect and, relatedly, that to so hold would somehow permit a review of the correctness of that decision. The construction issue raised relating to the interplay between ss 31(1)(a) and 31(1)(e) clearly raises a question of law, as the plaintiff argued: Bianco Walling Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union (2020) 275 FCR 385; [2020] FCAFC 50 at [66].
In my view, it is appropriate in light of these errors, to grant leave to appeal on appeal ground 2(c) (in addition to grounds 2(a) and (b)), and to allow the appeal on these grounds.
This finding was challenged by the plaintiff but the substantive argument was advanced through ground 5. In relation to that ground, my conclusion was that the Tribunal was correct in concluding that there had been non-compliance with s 31(1)(a)(iv) of the RL Act, and the Appeal Panel in their reasons at 104 was in error in concluding otherwise: see [122]ff, below. That was an error of law (and involves a question of law) because those findings necessarily establish that the statutory test was not satisfied, and a contrary decision has been reached: Hope v Bathurst City Council (1980) 144 CLR 1, 10; [1980] HCA 16 ('Hope'); Azzopardi at 156.
The third finding (Appeal Panel reasons at 104) was that the valuer had regard "to the gross rent and outgoings payable by the tenant" as required by s 31(1)(a)(iii) by reference to the finding made by the Tribunal at [94] - which the plaintiff paraphrased as a finding that was made "simply because gross rent and outgoings are specified in section 6.0 in respect of the Lease".
The plaintiff's written submissions did not identify why this finding should not have been made, or was otherwise in error. During submissions it was accepted that that finding was "not the subject of challenge": T20.48.
The fourth finding (Appeal Panel reasons at [105]) was that the valuer had regard to "the factor in s 31(1)(a)(iv)" by reason of the finding made by the Tribunal in its reasons at [94]:
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 the lease.
This finding was challenged. The essential complaint made by the plaintiff is that the Appeal Panel deflected itself from the task at hand by confirming that the "adequacy" of the valuer's consideration of the matters in ss 31(1)(a)(i)-(iv) was irrelevant when, so it was argued, the opposite was true. It also argued that, as I have earlier noted, the Appeal Panel engaged in the exercise of "box ticking" by "selectively referring to various findings made at first instance, without conducting the sort of analysis required under the statutory scheme".
I do not accept that the findings of the Appeal Panel can be characterised in the way suggested, nor do I consider that there has been "selective referencing" as the plaintiff has argued. The findings are either capable of support, or they are not.
In relation to the finding in connection with s 31(1)(a)(iv) of the RL Act, this ground of appeal is identical to the challenge that is made in connection with appeal ground 6. In relation to that ground, my conclusion was that the Tribunal was correct in concluding that there had been non-compliance with s 31(1)(a)(iv) of the RL Act, and the Appeal Panel was in error in concluding otherwise: see [149], below. That was an error of law (and involves a question of law) because those findings necessarily establish that the statutory test was not satisfied, and a contrary decision has been reached: Hope at 10; Azzopardi at 156.
I would, therefore, uphold this ground of appeal. Further, it is, in my view appropriate to grant leave to appeal, because there is a demonstrated error (not being one that is merely arguable) and it would occasion a substantial injustice if that error were not corrected.
The plaintiff's argument was that the reference in ss 31(1)(a)(i) and (ii) to "the lease" is not, as the Appeal Panel held, confined to the lease of the premises which is the subject of the rent review, but a broader reference to all leases to comparable properties considered as part of the valuation process.
Returning to the construction argument raised, I am unpersuaded that the approach of the Appeal Panel considered is erroneous. Indeed, I consider it to be correct. To that I would add: once it is recognised that the provisions of s 31(1)(a) are not a code, and the section does not prescribe or proscribe any method of assessment of the current market rent, then there is no difficulty in the construction favoured by the Appeal Panel. The requirement therefore to give consideration to the provisions of other leases in comparable properties would arise for consideration upon the method adopted by the valuer - here by selecting the direct comparison method. The significance of the "provisions" of the leases for those comparable properties would then be a matter for consideration for the valuer, to the extent that they saw fit, subject only to the requirement of s 31(1)(e) of the RL Act.
I return to where I started: namely, the materiality of this ground. At no level of the enquiry - valuer, Tribunal and Appeal Panel - has it been suggested that the valuer was free to ignore the provisions of leases in relation to the comparable properties. It is clear, however, that the valuer did refer to other leases and the critical issue is whether his consideration of them demonstrated compliance with the mandatory requirements of s 31(1)(a)(iv) (an issue that has been covered by grounds 3 and 6). But that is not the subject of this ground of appeal. Once it is recognised that consideration was given to the terms of the provisions of the leases for the comparable properties - and there were findings made about whether that consideration discharged the obligations under s 31(1)(a) - the ground has no practical impact on the plaintiff's case on appeal. I would, therefore, refuse leave to appeal this ground.
I have earlier set out the finding made by the Tribunal at [97] of its reasons. By way of summary, the Tribunal found: (a) the valuer was entitled to have regard to a range of matters "in selecting comparable properties"; (b) it was "unnecessary that the comparable properties have the same permitted use as in the lease"; (c) where the comparable properties do not have the same permitted use as the lease, then it was necessary for the valuer "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"; (d) in relation to properties that were identified as properties "A to E", Mr Hermiz did not specify the permitted use of those premises although, from photographs, the Tribunal found that each of them were not used as a restaurant; and, further, in relation to those properties, 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"; and (e) in relation to properties that were identified as properties "1 and 2", these were simply described as "similar use potential".
The plaintiff also argued that the Appeal Panel "erred in law" in failing to find that the valuation did not comply with s 31(1)(a)(ii) "despite most of the comparable properties relied upon" by the valuer not being "rented for the same or substantially similar use" (appeal ground 5(b)) and "not being unoccupied" (appeal ground 5(c)). This error was said to arise because that section, and s 31(1)(c) of the RL Act, require a valuer to take into account, when determining current market rent, the rent that would reasonably be expected to be paid for the shop if "unoccupied" and offered for rent for "the same or substantially similar use" to which the shop may be put under the lease (plaintiff's submissions at [51]) - whereas here, the valuer failed to conform to these requirements (plaintiff's submissions at [52]). The upshot of these last submissions is that, in the context of comparable property, the absence of such adjustments would mean that no true comparison could be made.
The plaintiff undertook an analysis of the term "unoccupied" and the phrase "the same or a substantially similar use" by reference to the corresponding provision (s 37(2)(b)) of the Retail Leases Act 2003 (Vic), and the decision in Bevendale Pty Ltd v Lucky Eights Pty Ltd [2020] VSCA 312. The ultimate submissions that were made were largely identical. I will illustrate this by reference to the submissions directed to the term "unoccupied".
In relation to the requirement that the comparable property be "unoccupied", the plaintiff drew attention to section 8.0 of the valuation report - which identified that five of the seven comparable properties identified were leased properties - but at no point in the valuer's discussion did the valuer address what adjustments, if any, should be taken into account to reflect that they were "unoccupied". It was, thereafter, submitted that the Appeal Panel fell into error in multiple ways: (a) by misconstruing ss 31(1)(a)(ii) and 31(1)(c) of the RL Act (plaintiff's submissions at 59); (b) by failing to consider "at all the requirement that a valuer must determine current market rent on an 'unoccupied' basis" (plaintiff's submissions at 59; (c) by unreasonably failing to find that the valuation did not accord with s 31(1)(a)(ii), "despite most of the comparable properties relied upon by the valuer being occupied" (plaintiff's submissions at [60]); and (d) there was "no justification for the Appeal Panel's failure to find that the valuation did not accord with s 31(1)(a)(ii)"; and (e) it "was not reasonably open for [the Appeal Panel] to make any other finding" (plaintiff's submissions at [61]). (The corresponding submissions, in connection with the phrase "the same or a substantially similar use", are in the plaintiff's submissions at [68]-[70]).
In my respectful view this analysis - and the challenges made - reads far too much into what the Appeal Panel did, and tended to somewhat overcomplicate it. The Appeal Panel did no more than find - I have concluded erroneously - that the findings of the Tribunal meant that the valuation report satisfied the requirements of s 31(1)(a)(ii) of the RL Act. To suggest that the Appeal Panel, in the approach taken, embarked upon an erroneous construction of the word "unoccupied" and/or the phrase "rented for the same or substantially similar use", and the range of other errors, involves a misunderstanding of what it did. At root level, the Appeal Panel made an erroneous finding based upon an incorrect understanding of what the Tribunal found and, additionally, found that the valuation satisfied the statutory description when the "finding" relied upon by the Appeal Panel was incapable of supporting satisfaction of s 31(1)(a)(ii) of the RL Act.
Leave to appeal should therefore be granted in connection with appeal grounds 5(a), 5(c) and 5(d) because substantial injustice would occur if the errors were not corrected. I would also allow the appeal on these grounds.
The Appeal Panel in [106] of its reasons sought to summarise the findings made by the Tribunal in [99] of its reasons. In that summary, the Appeal Panel made no reference to the findings made by the Tribunal in relation to on the market properties 1 and 2: see [144(4)], above. (No point was taken about this by the plaintiff so I will put it to one side).
Notwithstanding that the valuer had not mentioned the various matters the subject of findings by the Tribunal at [99] of its reasons, the Appeal Panel considered that "the valuer both had regard to and thought were relevant rent concessions and other benefits offered on the other leases", with the consequence that "these matters were taken into account in the valuation process": Appeal Panel reasons at [108]. In my respectful view it is difficult to see how this could be so when the report simply does not deal with the matters that were the subject of findings by the Tribunal in [99] of its reasons. That is, it is difficult to accept the blanket proposition that matters were taken into account (regard was had to them) when they were the subject of omissions by the valuer, as the Tribunal described. In my view, when a matter is omitted, the logical inference - one which the Tribunal drew - is that they were not taken into account. In my view the holding by the Appeal Panel that the matters were taken into account (viz., regard was had to them) in the valuation process was erroneous.
In my view, as the plaintiff submitted, this holding must reflect an erroneous understanding of the requirements of s 31(1)(a) and s 31(1)(a)(iv) in particular: to accept, as the Appeal Panel did, that a reference to rent concessions and other benefits for some of the comparable properties identified, but to omit any reference to the position with respect to other properties identified as comparable, does not conform to the statutory requirements. It may also be viewed in another way, as being an error of law (and question of law) because the "facts" found by the Appeal Panel were not within the statutory description, and a contrary decision has been reached: Hope at 10; Azzopardi at 156. In both respects there has been a misunderstanding of the legal criterion.
In my respectful view the conclusions of the Appeal Panel at [108] and [110] are also erroneous. The practical effect of what has resulted is that, when a valuer undertakes the important process of comparing other properties in order to determine the current market rent for the property in question, it would on the approach adopted by the Appeal Panel be sufficient discharge of the requirements of s 31(1)(a)(iv) of the RL Act, for the valuer simply to consider the incentives for one of the comparable leases but would be free to ignore - and make no reference to - the incentives for those other comparable leases. To require this, as the Tribunal held, is simply to require adherence to the statutory language. It has nothing to do with how the valuer might treat those incentives, or the weight to be given to them: that is plainly a matter for the valuer. The matters are, after all, mandatory considerations, and accepted to be so by the parties.
The Tribunal was therefore correct in concluding that there had been non-compliance with s 31(1)(a)(iv) of the RL Act, and the Appeal Panel was in error in concluding otherwise. The errors that I have identified are within appeal grounds 6(b) and (c).
The genesis of the error can be sourced to the way in which the Appeal Panel approached the issue posed by the appeal to it. The focus became - in my view erroneously - the expression used by the Tribunal "adequate regard" in its reasons at [96]. Fixing upon this, the Appeal Panel noted that "the Tribunal did not suggest regard was not 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 reasons at [102]. It can be seen, by this analysis, that the Appeal Panel clearly favours an approach that, so long as 'regard' is had - at a broad and general level - to the matters in s 31(1)(a) of the RL Act, then there is no basis to challenge the valuation: within the terms of s 31(1)(a), regard has been had to the matters in (i)-(v) and within the terms of s 31(1)(c), the matters set out in paragraph (a) have been "taken into account". Putting to one side the issue about whether or not the Tribunal embarked upon "merits review", the difficulty with what occurred here is that the Appeal Panel made findings that the valuation complied with s 31(1)(a) based upon its erroneous view of findings that had been made by the Tribunal. As the Appeal Panel analysed it, the Tribunal was only interfering because adequate regard had not been had - and not because no regard had been had - to the matters required by s 31(1)(a), and in doing so the Appeal Panel focused upon the wrong question.
In my view leave to appeal should be granted in connection with appeal grounds 6(a) and (b) because it would occasion substantial injustice if these errors were not corrected.
In my view the submission summarised in [162(a)], above does not sufficiently define any particular error, and the same can be said for the submission summarised in [162(b)] above. As to the submission summarised in [162(c)], above, to the extent that it was suggested that there was an error in construction of the definition of "retail shop", again, in my view that does not sufficiently define the particular error that is said to arise.
As to this last matter, ultimately, the question of law was identified by the plaintiff as being whether the definition was satisfied when premises are licensed for the purposes of conducting a restaurant business on separate premises under a separate agreement.
The essential point advanced by the plaintiff is that the findings that were made by the Appeal Panel in its reasons at [137] - which were embraced by the plaintiff - cannot constitute a "carrying on of" the business, being the restaurant. Specifically, it was argued that for the business to be "carried on", it needed to form an "integral part" of the business - however here, the plaintiff argued, that element is absent because "no goods or services are provided from the Licensed Area" (plaintiff's submissions at [80]-[81]).
I will start with the findings, accepted by the plaintiff, as made by the Appeal Panel at [137]:
137. It is clear from the terms of the Licence that the grant is for the purpose of carrying on the restaurant business being conducted on the Premises under the Lease, the use as a restaurant being a use within Schedule 1 of the RL Act. In this regard:
(1) The shaft, which is otherwise described as "unused", is to be used for exhaust ducting and for the passage of gas pipes for air-conditioning for the Premises.
(2) On the roof area is permitted an air-conditioning unit for the Premises.
(3) The loading dock area is for loading and unloading supplies and materials for the permitted use of the Premises, namely, a restaurant and bar.
Although the plaintiff relied upon - indeed embraced - the findings in Appeal Panel reasons at [137], they are not the only relevant findings on this issue. The Appeal Panel also made three further findings which are relevant - being:
1. First, that "the Licence when read in conjunction with the Lease is clearly for the purpose of extending the operation of the restaurant and bar, the subject of the Lease, to those areas the subject of the Licence": Appeal Panel reasons at 139.
2. Secondly, the "sole use permitted by the tenant of the areas the subject of the Licence was for the restaurant and bar being carried out on the Premises": Appeal Panel reasons at [140].
3. Thirdly, the evidence of Mr Yazbek "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": Appeal Panel reasons at [142].
The Appeal Panel then expressed its dispositive conclusion as: "It follows that the licensed areas was (sic) used wholly for carrying on the restaurant and bar business": Appeal Panel reasons at [143].
The plaintiff drew attention to the decision in Manly Council v Malouf (2004) 61 NSWLR 394; [2004] NSWCA 299 at [69] where it was held that a licensed area could form part of premises, and thereby satisfy the statutory definition, if it is an integral part of the business. In that case the relevant area was an outdoor eating area, to which table service from the restaurant was extended. Aside from this authority, no others were drawn to my attention directly relevant to the issue argued.
I am unpersuaded that a question of law is raised rather than, as the defendant argued, a mixed question of fact and law. The findings that I have referred to at [168] - notably the one based upon Mr Yazbek's evidence - are findings that extend beyond those embraced by the plaintiff; the issue cannot therefore be framed in the more limited way argued by the plaintiff. In that situation - the process of 'applying' the statutory test to the facts of a case and any challenge to the application of statutory provisions to the facts of the case - involves a mixed question of fact and law: R v PL (2009) 199 A Crim R 199; [2009] NSWCCA 256 at [26]. A challenge involving a mixed question of fact and law is not a question of law: Orr at [60].
Even if that were not so (and a question of law was raised), in my view this ground of appeal should not be the subject of a grant of leave. The amount in question - $7,571.17 - alone does not justify a grant of leave. Indeed, perhaps ironically, the plaintiff opposed leave being granted before the Appeal Panel on the footing that the amount in question militated against a grant of leave arguing that there was "no matter of commercial importance" and that it "probably costs more to argue the point" in connection with this issue (Appeal Panel transcript T22:900; Hanave submissions to the Appeal Panel dated 22 February 2022 at [28]). The fact that the appeal brought by the plaintiff involves other grounds does not, in my view, significantly alter the position: this is a freestanding, and clearly distinct, ground of appeal. Proportionality of costs is obviously relevant in this respect as well, and stands against the leave sought (s 60 of the Civil Procedure Act 2005 (NSW)). Furthermore, I am unpersuaded that there is any issue of principle, or question of general public importance, raised - as opposed to merely an application of the statutory definitions to the facts as found by the Appeal Panel.