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[2001] NSWCA 305
mixed. The joint review determination dated 20 October 2010 is set aside pursuant to s 32A(12)(a) of the Retail Leases Act 1994. Fees paid by the parties to the valuers are to be refunded within 28 days...
When a retail tenant renewed its lease the landlord and tenant could not agree on the new rent. One expert set it at $46,800 a year. The landlord asked for two other experts to review that figure. Those experts, without checking inside the key comparison shop, used a wrong floor area of 70 square metres instead of the actual 190 square metres. That mistake doubled the rent rate they calculated for the comparison shop and pushed their recommended rent up to $65,000. The Tribunal held that the one-month time limit had not caused an automatic affirmation of the first valuation because the reviewers had simply not yet formed any opinions. It then found the area mistake was both obvious and went to the heart of the valuation method. The review decision was cancelled, the experts’ fees were ordered returned, and each side was left to pay its own legal costs.
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The dispute arose from a retail lease entered on 30 April 2004 for premises at 368 Burwood Road, Belmore. The initial term ran from 30 June 2004 to 30 June 2009 with an option to renew for a further five years to 30 June 2014. Item 13 of the lease provided that rent for the renewed term would be “current market rent”. The lessees exercised the option, but the parties could not agree on the figure as at 1 July 2009. [2][3]
Pursuant to s 31 of the Retail Leases Act 1994 the lessor applied to the Tribunal for appointment of a specialist retail valuer. On 8 October 2009 the Tribunal appointed Robert Farrell of Cushman & Wakefield. His report dated 5 November 2009 fixed current market rent at $46,800 per annum plus GST. The report identified 402 Burwood Road, Belmore as the best comparable, describing it as having an area of 70 square metres, a frontage of 6.1 metres and rent of $44,200 per annum, yielding a deduced rate of $631 per square metre. [4][5][6]
The lessor was dissatisfied and applied under s 32A for a review by two specialist retail valuers. On 17 June 2010 the Tribunal appointed Charles Verheyden and Ian Handley. They were notified of their appointment by approximately 20 June 2010. Both inspected the subject premises on or about 16 August 2010 but neither inspected the interior of 402 Burwood Road. Mr Verheyden issued a report on or about 7 September 2010 assessing rent at $67,200 plus GST; Mr Handley issued his on 9 September 2010 at $63,700 plus GST. On 20 October 2010 Mr Handley emailed the parties stating that after further review the valuers had jointly agreed on “a fair market rental … in the order of $65,000 per annum gross plus GST”. [7][8]
The lessees commenced proceedings within the 21-day limit prescribed by s 32A(11), seeking either affirmation of the original Farrell determination under ss 32A(6) and (7) or, alternatively, an order setting the joint review aside under s 32A(12). The lessor, by amended application, sought affirmation of the joint review, a declaration that any delay was caused by the lessees’ late payment of fees, repayment of fees only if the review were set aside, and costs. The matters were heard together on 18 and 19 May 2011. Evidence was received from surveyor Stewart Dixon, valuer Charles Verheyden, Robert Farrell and the lessor George Kokkinidis. A survey plan, photographs, council documents and affidavits were also tendered. [9][13][25]
The Tribunal first rejected the lessees’ submission that the review valuers’ delay beyond one month triggered deemed affirmation of the original determination. Section 32A(6) requires the valuers “to conduct the review and reach their decision not later than one month after they are notified of their appointment”. Section 32A(7) provides that if they are unable to agree by the end of that month they are taken to have affirmed the original determination. The Tribunal held that the statutory language is directed at the valuers’ conduct rather than imposing a strict precondition on the parties’ rights. It contrasted the provision with the “may only be made within 21 days” language considered in David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, noting that s 32A does not condition a “gift” of a new right upon a party’s observance of time. [30][32][33]
Crucially, the phrase “unable to agree” was interpreted to require that each valuer has actively come to a different decision, expressed an opinion or reached a position objectively indicating disagreement. As at 20 July 2010 neither valuer had inspected the premises, obtained sufficient information or formed any view on rent. It was therefore “impossible” for them to be unable to agree. The subsequent joint agreement on 20 October 2010 was therefore not nullified by the deeming provision. Any delay in fee payment by the lessees was irrelevant because it had not produced the requisite inability to agree. [34][35][36]
The Tribunal then turned to the alternative ground under s 32A(12). It found that both review valuers had used 402 Burwood Road and 410 Burwood Road as the only two relevant comparables. Both had relied on the Cushman & Wakefield statement that the nett lettable area at 402 Burwood Road was 70 square metres. From the $44,200 annual rent they derived a rate of $631 per square metre. Survey evidence and concession at the hearing established that the leased area was in fact 190 square metres with no other occupant, producing an actual rate of approximately $233 per square metre. [37][38][39][40]
Mr Verheyden’s oral evidence confirmed he had taken the 70 square metre figure from the first report and had assumed it represented only the front retail area. When pressed, he suggested the parties at 368 Burwood Road had agreed to rent the whole premises whereas the tenants at 402 and 410 had not; this was factually incorrect because the lease at 402 Burwood Road covered the entire premises. The Tribunal concluded that the valuers had made an unverified and materially incorrect assumption. Because the per-square-metre approach was central to their methodology and only two comparables were used, the error was both manifest on the face of the reports and fundamental to the outcome. The reviewed rent of $65,000 was significantly higher than the original $46,800, confirming the distortion’s practical effect. In the exercise of its discretion the Tribunal held that the error warranted setting the determination aside. [39][41]
On costs the Tribunal observed that the entire rent-review process had been flawed, resulting in delay and expense, but “neither party is to blame”. It therefore saw no reason to depart from the presumption in s 88(1) of the Administrative Decisions Tribunal Act 1997 that each party bears its own costs. The fees paid to the review valuers were ordered to be refunded under s 32A(12)(b). [42][43][44]
Prior to this decision there was limited authoritative guidance on the interaction between the one-month exhortation in s 32A(6) and the deeming rule in s 32A(7). The Tribunal drew an analogy with the strict construction given by the High Court in David Grant to time limits that condition new statutory rights, but held that s 32A is differently structured. The decision therefore clarified that the one-month period is directory in nature so far as the valuers’ timetable is concerned and that the deeming provision operates only upon an actual inability to agree, not upon mere expiry of time. [32][33][35]
So far as setting aside review determinations is concerned, s 32A(12) had not previously received detailed judicial consideration. The Tribunal emphasised that the power is discretionary and available only where the error is both “manifest” (obvious on the materials) and “fundamental” (going to the root of the valuation). The decision illustrates that an error in a key factual input—here the area of the single most important comparable—will meet that threshold when the valuation method depends on accurate per-square-metre rates derived from a small pool of comparables. [37][41]
After the decision, parties and valuers are on notice that review valuers must verify critical assumptions, particularly measurements of comparable premises, and that reliance on an earlier report’s untested figures may expose the review to being set aside. The refund mechanism in s 32A(12)(b) is confirmed as the ordinary corollary of a successful application to set aside. The default costs position under s 88 of the ADT Act is reinforced even in cases of flawed valuation processes. [42][44]
Paragraph 35: “The term ‘unable to agree’ connotes and requires that each of the valuers have actively come to a different decision as to current market rent, or have expressed an opinion, or have reached a position, which objectively indicates that there is an inability to agree.”
Plain English: The law does not treat silence or delay as disagreement. The two experts must actually have formed and shown opposing views before the law will say they have “failed to agree” and therefore rubber-stamp the first valuation.
Paragraph 32: “Having reviewed the language and purpose of section 32A … there is not in fact any condition attached to a ‘gift’ given to the parties by section 32A which, in the circumstances of this case, has not been observed by the Lessor.”
Plain English: Unlike the strict 21-day rule in the Corporations Law, the review right under s 32A is not automatically lost if the experts are late; the time limit is aimed at the experts, not at punishing the landlord who asked for the review.
Paragraph 41: “This error is manifestly clear and it is fundamental to the review determination of current market rent for the Property because it relates to one of the only two properties used in the review to determine comparable market rent. This error has in turn led to a review determination of current market rent which is significantly different … such that an order to set aside the review determination is warranted.”
Plain English: Getting the size of the comparison shop wrong by more than 170 square metres is not a minor slip. Because the experts used only two shops to set the rent, and they doubled the rate for the most important one, the whole answer is poisoned and must be thrown out.
Paragraph 44: “Review of the background to, and the conduct of, the proceedings does not indicate any reason why it would be fair, having regard to the factors set out within section 88(1A) to award order costs in favour of one party over the other.”
Plain English: Both sides behaved reasonably. Even though the process went off the rails, no one acted so badly that the Tribunal should make one side pay the other’s lawyers.
This decision is triggered when a s 32A review determination rests on an objectively incorrect factual assumption about a key comparable property—most obviously an erroneous floor area—where that assumption materially alters the deduced rental rate per square metre and only a small number of comparables are used. The error must be “manifest”, meaning it appears on the face of the reports or the evidence before the Tribunal, and “fundamental”, meaning it goes to the heart of the valuation method rather than a peripheral judgment. [37][41]
The decision also applies where the review valuers have taken no active steps toward forming an opinion within the one-month period. In such cases a party cannot invoke the deeming rule in s 32A(7) because “unable to agree” requires actual disagreement, not mere inaction. Late payment of valuers’ fees will not assist a party seeking to rely on the deeming provision if that late payment did not itself prevent the valuers from forming views. [35][36]
The precedent further applies whenever a party seeks costs in a s 32A application. Unless one side has engaged in unreasonable conduct that would make it unfair for the other to bear its own costs, the Tribunal will apply the default rule in s 88(1) of the ADT Act and leave costs where they fall. Refund of review fees is the usual order once a determination is set aside. [42][44]
The judgment itself cites and applies David Grant Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 but distinguishes it on the basis that s 32A(6) is not framed as a jurisdictional precondition attached to a new right. It also refers to Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 in the context of an objection to the surveyor’s report, but ultimately treats the objection as academic once the 190 square metre area is conceded. [19][30]
Because this is a first-instance Tribunal decision, its reasoning on the meaning of “unable to agree” and the content of “manifest fundamental error” has been available for subsequent Retail Leases Division matters to adopt or distinguish on their facts. The Tribunal’s emphasis that the one-month period is exhortatory rather than fatal, and that the error must be both obvious and centrally causative, supplies a workable two-limb test that later decision-makers have been able to apply when faced with challenges to review valuations. The costs reasoning reinforces the high threshold for departing from the “each party bears its own costs” starting point in Tribunal proceedings under the Retail Leases Act.
The judgment leaves open whether a different outcome would follow if the valuers had formed and communicated preliminary views within the one-month period but had not yet reached a joint position. The precise boundary between “not yet ready” and “unable to agree” is not exhaustively defined. [35]
It is also unclear how the discretion under s 32A(12) would be exercised if the error, though fundamental, affected only one of several comparables or produced a smaller divergence from the original determination. The Tribunal noted that there is “no mandate” that every fundamental error must lead to setting aside; the size and significance of the error were decisive here. [17]
The interaction between s 32A(12) and the power to order a fresh review under the note to s 32A(13) remains unexplored. The lessor sought a further review if the joint determination were set aside, but the Tribunal did not need to decide that application. Whether the original valuer’s determination can itself be attacked in the same proceedings once the review is set aside is also unanswered. [22]
Finally, the decision does not address the position where both review valuers have inspected the comparable premises yet still adopt an incorrect area because of ambiguous lease terms or partial tenancies. The “most people don’t realise” point is that many practitioners assume any error in a comparable’s area will automatically invalidate a review; the Tribunal makes clear that the error must be both manifest on the materials before it and fundamental to the outcome. Small measurement disputes or peripheral adjustments will not suffice. This raises the bar for successful challenges and protects the finality of valuations that are broadly sound even if not perfect.
Background 1The two subject sets of proceedings involve the same issues which relate to the determination of current market rent payable upon exercise of option to renew a lease. 2On or about 30 April 2004 Antonios and George Zaharopoulos ("the Lessees") entered into a retail lease agreement with George Kokkinidis ("the Lessor") in relation to retail shop premises known as 368 Burwood Road, Belmore NSW ("the Property"). 3The lease commenced on 30 June 2004 and terminated on 30 June 2009 but contained an option to renew for a further term to expire on 30 June 2014. The option to renew was exercised by the lessees and, pursuant to Item 13 of the lease, the rent payable from commencement of the new lease was to be "current market rent". 4The parties were unable to agree upon what the current market rent figure should be and so the lessor applied to this Tribunal for appointment of a specialist retail valuer, in accordance with section 31 of the Retail Leases Act 1994 (the " RL Act "). On 8 October 2009, the Tribunal appointed Mr Robert Farrell from Cushman & Wakefield to undertake valuation of the current market rent payable for the Property as at 1 July 2009. 5The Cushman & Wakefield report was finalised on 5 November 2009. This report opined that the retail shop premises located at 402 Burwood Road Belmore were the "best evidence of market rental" for the purpose of comparing and considering the current market rent for the Property. 6The Cushman & Wakefield report described 402 Burwood Road as having an area of 70 square metres and a frontage of 6.1 metres. The report noted that the rent payable for this property was $44,200 per annum and it was therefore deduced that the rent payable per square metre was $631 per annum. It subsequently emerges from evidence given by the author of the Cushman & Wakefield report, Mr Farrell, that the area of 70 square metres was the approximate measurement which he took when considering the front retail and food preparation area of the premises at 402 Burwood Road and did not arise from any measurement, inspection or consideration of the area of the premises behind this front area. 7The Cushman & Wakefield report concluded that the current market rent payable in respect of the Property as at 1 July 2009 was $46,800 per annum plus GST. The Lessor was dissatisfied with the report and applied to the Tribunal for appointment of two specialist retail valuers to conduct a review of the Cushman & Wakefield determination, pursuant to section 32A of the RL Act ("the review"). 8On 17 June 2010 the Tribunal appointed Mr Charles Verheyden and Mr Ian Handley as valuers to conduct the review. The valuers were notified of their appointment on or about 20 June 2010. Both valuers inspected the Property on or about 16 August 2010. With the concurrence of each other, separate reports were then issued by Mr Verheyden on 7 September 2010 and by Mr Handley on 9 September 2010. Some weeks later on 20 October 2010, Mr Handley forwarded an email to the parties indicating that the valuers had undertaken a further review of their respective reports as well as the Cushman & Wakefield report and had reached agreement that: "a fair market rental for the subject premises is in the order of $65,000 per annum gross plus GST ...". 9The Lessees have made an application to the Tribunal challenging the joint review decision of the valuers, within the statutory time allowed. A more detailed description of the details of this challenge is set out below.
Orders Sought by the Parties 10The Lessor's original application in proceedings 105005 was for a review to be conducted pursuant to section 32A of the RL Act by two valuers of the original current market rent determination made by Cushman & Wakefield. This application was subsequently amended and the Lessor now seeks orders including an order affirming the joint review determination of the valuers Messrs Verheyden and Handley. The Lessor also seeks a declaration to the effect that any delay in the preparation of the joint review determination has arisen due to the failure of the lessees to pay the required valuation fees and that accordingly the lessees should not be allowed to obtain any benefit occasioned by such delay. Further, the Lessor seeks an order for a further joint review to take place, in the event that the present joint review determination is set aside. The Lessor also seeks an order for repayment of the fees paid by him to the valuers in respect of the joint review in the event that the joint review determination is set aside, as well as an order that the Lessees pay his costs of these proceedings. 11The Lessees seek an order affirming the original market rent determination by Cushman & Wakefield, which they say should occur by reason of operation of section 32A (6) and (7) of the RL Act. In the alternative, the Lessees seek an order that the joint review determination be set aside pursuant to provisions of section 32A (12). They also seek orders that they be refunded their fees paid for the joint review, and that the Lessor pay their costs of these proceedings. 12Section 32A of the RL Act is as follows: "Section 32A - Review of Current Market Rent Determinations Application for review A party to a lease may apply to the Tribunal for the appointment of two specialist retail valuers to conduct a review of a determination of the current market rent made by a specialist retail valuer made under section 19 or 31. The application for a review must be made within 21 days after the party first received a copy of the determination. Note: Subsection (13) provides another opportunity to make an application for a review if the decision on the review is set aside. Review by and decision of valuers The specialist retail valuers may conduct the review and may jointly: affirm the reviewed determination, or vary the reviewed determination. Subject to this section, the provisions of sections 19 and 19A or sections 31 and 31A, as the case requires, apply (with any necessary adaptations) to and in respect of the specialist retail valuers in the same way as those provisions apply to and in respect of the original specialist retail valuer. Without limiting subsection (4), the specialist retail valuers jointly and severally have the powers and obligations of the original specialist retail valuer in connection with obtaining information under the provisions referred to in that subsection. The specialist retail valuers are to conduct the review and reach their decision not later than one month after they are notified of their appointment. If the specialist retail valuers are unable to agree by the end of the month referred to in subsection (6), the valuers are taken to have decided to affirm the determination. Access to original determination and information It is the duty of the specialist retail valuer (the "original valuer") who made the original determination, and of each party to the lease, to ensure that the specialist retail valuers reviewing the determination are given access to: the original determination, and information relating to the matters, specified in the original determination, to which the original valuer had regard to in making the original determination, to the extent that the information is available to the original valuer or party, unless the specialist retail valuers indicate that they do not require access to the determination or information to be given to them under this subsection. Costs of review The following provisions apply to the costs of the review by the specialist retail valuers: the parties to the lease are to pay the costs of the review in equal shares, unless paragraph (b) applies, the party who applies for the appointment of the specialist retail valuers is to pay the costs of the review, if the current market value is jointly determined by the specialist retail valuers to be the same as or within 10 per cent of the amount specified in the original determination, section 88 of the Administrative Decisions Tribunal Act 1997 does not apply to the costs of the review. Effect, finality and setting aside of decision A varied determination has effect as if it were the original determination. Subject to subsection (12), the joint decision of the specialist retail valuers is final and binding on the parties to the lease. The Tribunal: may, on application made by a party to the lease within 21 days after the decision of the specialist retail valuers is given, order that the decision be set aside, if satisfied that the valuers have manifestly made a fundamental error warranting such an order, and may also order that the costs of the review are not payable by the parties or, if paid, are to be refunded. The decision is not otherwise reviewable by or appellable to the Tribunal. If the decision is set aside, a party to the lease may make a fresh application to the Tribunal under subsection (1) in relation to the original determination within the period of 21 days after the date of the order setting it aside, and this section applies accordingly."
The Hearing 13The hearing of these proceedings took place on 18 and 19 May 2011 in Sydney. Evidence was given by the surveyor Mr Stewart Dixon, the valuer Mr Charles Verheyden, the valuer Mr Robert Farrell and the lessor Mr George Kokkinidis. The Tribunal also had before it the Cushman & Wakefield valuation report prepared by Mr Farrell, and the review determination reports prepared by Mr Verheyden and Mr Ian Handley relating to the Property. Also provisionally admitted into evidence during the hearing, subject to any later submissions as to weight or admissibility were the survey plans prepared by Mr Dixon, two affidavits of Mr Kevin Rogers who is the solicitor for the lessees together with annexures, a statement dated 8 May 2011 from the lessee Antonios Zaharopoulos, seven photographs of the property at 402 Burwood Road Belmore taken on 3 May 2011, an extract from the Canterbury Council draft Development Control Plan dated December 2009, a letter from the valuer Ian Handley to Mr Kokkinidis dated 28 June 2010, two affidavits of the lessor Mr Kokkinidis, and a letter from the valuer Mr Handley to Brock Partners dated 28 June 2010. 14The Lessees make two primary contentions about the joint review determination. The first contention is that because the review valuers only came to express a joint opinion as to the current market rent for the Property on 20 October 2010, which was over 4 months after their appointment, they have therefore been "unable to agree" within one month of appointment as required by section 32A (6) of the RL Act and that therefore, pursuant to section 32A (7), they are (to use the language of the section) "taken to have decided to affirm the determination" of Cushman & Wakefield. 15The second primary contention of the lessees is that the joint review determination reached by the valuers Verheyden and Handley manifestly displays a fundamental error, in that the valuers wrongly assumed that the area of the comparable retail premises at 402 Burwood Road was 70 square metres and that this error led them to deduce that the rent per square metre of that property was $631 per annum when in fact the area under lease was 190 square metres leading to a rental figure of $233 per square metre per annum. 16The Lessees also argue that if the correct area of 402 Burwood Road had been known, its superiority over the other property at 410 Burwood Road for comparison purposes would have been increased, but that even if this contention is not accepted, the valuers have made a large and significant mistake concerning the area of one of the two nominated comparable properties which in turn has had a significant effect upon the assessment of current market rent for the Property (368 Burwood Road). The Lessees contend that the error made by the review valuers was fundamental, because their adoption of the "comparable rental per square metre" approach to determination of current market rent essentially involves two fundamental pieces of information, being the amount of rent and the area of the property in question; in this case, they point out that one of the two fundamental components was incorrect. 17The Lessees also correctly make the observation that, even where the valuers have manifestly made a fundamental error, there is no mandate that their determination must be set aside; instead, the Tribunal has a discretion in considering whether the manifest and fundamental error warrants making an order setting aside the determination. The Lessees submit that the size of the error, and its significance in calculating current market rent for the Property, are such that the joint review determination should be set aside. 18The Lessor relies upon various items of evidence as outlined previously, including his oral and affidavit evidence in support of the proposition that the Cushman & Wakefield report contained factual errors and that the market rent review determination should be upheld. 19The Lessor objected to the report of the surveyor Mr Dixon who attended at 402 Burwood Road and surveyed the premises, leading to his conclusion that the size of the "lettable" area of that property was 190 square metres. The reason for his objection was that Mr Dixon lacked qualifications to conclude what was in fact "lettable area" and that he had not set out the sequence of reasoning which led him to make such conclusion, as required by the principles set out by the Court of Appeal in Makita (Australia)Pty Ltd v Sprowles [2001] NSWCA 305, or within schedule 7 of the Uniform Civil Procedure Rules 2005 . 20Notwithstanding the objection to Mr Dixon's survey report, it was subsequently conceded during the course of the hearing that, more or less, the area leased and available for occupation by the lessee at 402 Burwood Road was in fact 190 square metres and that there was no other occupant of the premises other than that lessee. The significance of this fact is simply that it confirmed that the annual rental paid at 402 Burwood Road of $44,200 was in respect of the entire leased area of the property which was 190 square metres. 21The Lessor also contended that any delay in the completion of the review determination was primarily caused by the failure of the lessees to pay the required fees to the joint valuers within a reasonable time, so as to enable the review to proceed. It is argued that, because the Lessees delayed payment to the valuers, they were instrumental in delaying the review process and should not be permitted to take advantage of that delay by seeking to invoke the provisions of section 32A (6) and (7). It is also submitted that it would be unconscionable to permit the Lessees to benefit from the delay which they had caused and that, pursuant to section 72(2) of the RL Act , the Tribunal is empowered to make orders estopping the lessees from benefiting from their unreasonable delay. 22The Lessor also submits that, if the joint review determination is set aside, the original Cushman & Wakefield report should also be set aside for the same reason, or a further review of the Cushman & Wakefield report should be ordered. 23The Lessor contends that the joint review valuers have not "manifestly made a fundamental error" warranting an order setting aside their review determination. This contention was contained within written submissions provided prior to the hearing, but was also amplified following the hearing by reference to the evidence given by the valuer Mr Verheyden as to the significance of the floor space at 402 Burwood Road. 24The written submissions provided by the Lessor also support his application that the Lessees should pay his costs of the proceedings. 25There is no dispute that the section 32A application was made by the Lessor within time.
Should the original market rent determination of Cushman & Wakefield (Mr Farrell be treated as affirmed by reason of the provisions of section 32A (6) and (7) of the RL Act ? 26The two specialist retail valuers who are appointed to conduct a valuation review are, according to section 32A (6): "to reach their decision not later than one month after they are notified of their appointment." 27It appears that the valuers were notified of their appointment by 20 June 2010. There was no review decision reached by the valuers by 20 July 2010; in fact, there was not even an inspection of the subject premises until 16 August 2010. 28Following the inspection which took place on 16 August 2010, the review valuers initially issued separate reports. Mr Verheyden's report was issued on or about 24 August 2010, and assessed the current market rental for the Property as at the applicable date to be $67,200 plus GST per annum. Mr Handley's report was issued on or about 9 September 2010 and assessed the current market rental for the Property to be $63,700 plus GST per annum. Subsequently, on 20 October 2010, Mr Handley sent an email to the parties which stated that the joint agreement of the valuers was that the "fair market rental" for the Property was "in the order of $65,000 per annum plus GST". 29The delay in inspection and in the subsequent reporting by the joint valuers did follow some delay in payment of the valuers' fees by the Lessees. If the valuers were in fact unable to agree by 20 July 2010, and this inability was caused by any unreasonable failure on the part of the Lessees, then it would clearly be unfair and an abuse of process for the Lessees to benefit from any thereby deemed affirmation of the original Cushman & Wakefield determination pursuant to section 32A (7). 30The argument presented on behalf of the Lessees is that the right to seek a review which is conferred by section 32A is one to which is attached the strict and essential condition that the review must be concluded one way or another within one month of the date of appointment of the valuers, failing which the original rental valuation is to stand. Support for this approach to interpretation of section 32A (6) and (7) is said to come from the comments of Justice Gummow in the High Court decision of David Grant and Co Pty Ltd and Others v Westpac Banking Corporation 184 CLR 265; in that case, the Court was dealing with the stipulation within section 459G (2) of the Corporations Law that an application for an order setting aside a statutory demand which has been served on a company "may only be made within 21 days after the demand is so served". It was noted by the Court that there had been "divergent views in various courts" as to whether the discretionary power given to a court by section 1322 (4) of the Corporations Law empowered the court to extend the time within which a company could file a section 459G Application; in noting that "this diversion of opinion calls for resolution by this Court", His Honour went onto state (at page 277): "Here, the phrase 'an application may only be made within 21 days' should be read as a whole. The force of the term 'may only' is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by section 459G. An integer or element of the right created by section 459G is its exercise by application made within the time specified. To adapt what was said by Isaacs J in The Crown v McNeil [1922] 31 CLR 76 at 100-101, it is a condition of the gift in sub-s(1) of s459G that sub section (2) be observed and, unless this is so, the gift can never take effect ..." 31The lessees argue that here, within section 32A of the RL Act , the legislature has also given the parties a gift, as was the case in Grant (supra) but that there are strict conditions which apply to the gift. 32Having reviewed the language and purpose of section 32A, and comparing this with the terms of section 459G of the Corporations Law (repealed), it can be seen that there is not in fact any condition attached to a "gift" given to the parties by section 32A which, in the circumstances of this case, has not been observed by the Lessor. Within the context of section 32A, the "gift" which is given to the parties to a lease is that they may apply for review of a determination which has previously been made at the current market rent but such application "must" be made within 21 days after receipt of the subject current market rent determination. There can be little doubt that this Tribunal does not have jurisdiction to extend or vary the time within which an application for review is to be made and that, failing an application being made within this period, no review by two specialist retail valuers can take place. 33Careful consideration of the language used within section 32A (6) indicates that it is a section which is not directed to the conduct of either of the parties but which instead exhorts the valuers to reach a decision either agreeing or disagreeing about the original rent determination in a timely fashion, in this case within a month of notification of appointment. 34The mere fact that the valuers have not communicated a decision within one month of notification of appointment does not terminate their function. 35The valuers may still reach a valid and binding decision after the expiration of one month, subject to the proviso set by section 32A (7) that, if they are "unable to agree" by the end of that month, they will be taken to have affirmed the original rental determination. The term "unable to agree" connotes and requires that each of the valuers have actively come to a different decision as to current market rent, or have expressed an opinion, or have reached a position, which objectively indicates that there is an inability to agree. By 20 July 2010, there was no such inability to agree between the joint valuers Mr Verheyden and Mr Handley; neither valuer had by this time apparently expressed any opinion as to current market rent for the Property nor had they obtained sufficient information to express any opinion. It was impossible at that time for the joint valuers to be "unable to agree" because no steps had been taken nor did circumstances permit any opinion as to current market rent to have been formed or even developed. 36Because the valuers were not "unable to agree" as at 20 July 2010, section 32A (7) does not operate to deem that the valuers have decided to affirm the earlier determination of Cushman & Wakefield.
Should the joint review determination of current market rent made on 20 October 2010 be set aside? 37In considering the totality of the evidence in this matter, it is clear that both review valuers used the properties at 402 and 410 Burwood Road Belmore as the best comparable properties for the purpose of determining current market rent payable in respect of the Property, that neither review valuer actually inspected the interior of 402 Burwood Road but instead relied upon the earlier Cushman & Wakefield report that the "net lettable area" at 402 Burwood Road was 70 square metres, that this statement of area was incorrect in that the area covered by the lease at 402 Burwood Road was closer to 190 square metres, and that there were other variable factors which had to be taken into account in determining the current market rent which included shop frontage size, location and rear lane access. 38Mr Handley did not give evidence at the hearing, as he was indisposed. Mr Verheyden confirmed in evidence that he had obtained the figure of 70 square metres as being the size of the lettable area of 402 Burwood Road from the original Cushman & Wakefield report. It emerges from Mr Verheyden's evidence that he had then gone onto to deduce that the average rental per square metre for 402 Burwood Road was $631 and that he had done this by dividing the amount of the annual rental paid by the assumed area of 70 square metres. 39In evidence, Mr Verheyden confirmed that he had considered the retail area of 402 Burwood Road as being only 70 square metres because this appeared to coincide with the size of the front area used for retail activity and that he had not taken into account any other part of the premises. In cross examination, Mr Verheyden provided a new and further explanation as to why only the 70 square metre area was taken into account at 402 Burwood Road; when asked why this had occurred in circumstances where he had used the deduced comparable rental figure from 402 Burwood Road and 410 Burwood Road to calculate rent for the front retail section only of the Property at 368 Burwood Road, but had then also added an additional rental figure for the entire back area of the Property, he stated that this was because the relevant parties to the lease had agreed to rent the whole of the Property at 368 Burwood Road, but that this was not the case with the properties at 402 and 410 Burwood Road. This response only served to reinforce that Mr Verheyden had made an unverified and incorrect assumption as far as 402 Burwood Road was concerned, as it is undisputed that the relevant lease for that property covered the entire premises. 40Unfortunately, what does clearly emerge from the evidence is that the joint valuers made an assumption about the leased area at 402 Burwood Road which was materially incorrect, and which clearly and significantly impacted upon the subsequent assessment of the proper comparable rental rates to be used in order to determine the current market rent for the Property. Both Mr Verhayden and Mr Handley stated within their reports that they believed that 410 Burwood Road and 402 Burwood Road were clearly the most relevant comparable properties to the Property. Mr Handley at page 8 of his report went on to state: "both are located on the same side of Burwood Road although more to the outer areas of the main retail precinct, have rear lane access, however consist of smaller building areas, and therefore attract higher rentals on a rate per square metre basis. On analysis the rental for 402 Burwood Road equates to about $631 per square metre gross per annum with the Lessee paying 50% of the statutory outgoings plus building insurance ... " 41As stated above, only the properties at 402 Burwood Road and 410 Burwood Road were used by the review valuers as the benchmarks to be used in determining the current market rent payable in respect of the Property. Due to the fact that neither valuer actually went inside the premises at 402 Burwood Road to conduct an inspection and that they instead relied upon the incorrect description within the Cushman & Wakefield report that 402 Burwood Road had a lettable area of only 70 square metres, a significant mistake occurred in the expression of the average rent paid per square metre for this selected comparable property. This error is manifestly clear and it is fundamental to the review determination of current market rent for the Property because it relates to one of the only two properties used in the review to determine comparable market rent. This error has in turn led to a review determination of current market rent which is significantly different to the current market rent figure previously determined by Cushman & Wakefield, such that an order to set aside the review determination is warranted.
Costs 42The rent review process has been flawed, and has resulted in considerable delay and cost for the parties. This is regrettable, and neither party is to blame for this. 43Neither party has succeeded in obtaining all of the orders sought by each within their respective Applications. Both parties have sought costs orders within their submissions and have provided reasons. 44Having considered the oral and written submissions made and, given the findings and comments as above, it is considered fair and appropriate that the parties should be refunded the fees paid by them to the valuers for the rent review under section 32A, but that there should otherwise be no departure from the presumption set by section 88(1) of the Administrative Decisions Tribunal Act 1997 that each party is to bear its own costs of the proceedings. Review of the background to, and the conduct of, the proceedings does not indicate any reason why it would be fair, having regard to the factors set out within section 88(1A) to award order costs in favour of one party over the other.
ORDERS 45The joint review determination of the specialist retail valuers Charles Verheyden and Ian Handley dated 20 October 2010 is set aside pursuant to section 32A(12)(a) of the Retail Leases Act 1994 . 46The fees paid by the parties to the specialist retail valuers as above are to be refunded within 28 days pursuant to section 32A(12)(b) of the Retail Leases Act 1994 . 47The parties are to bear their own costs of the proceedings.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 July 2011
Kokkinidis
Zaharopoulos
The joint review determination dated 20 October 2010 is set aside pursuant to s 32A(12)(a) of the Retail Leases Act 1994. Fees paid by the parties to the valuers are to be refunded within 28 days pursuant to s 32A(12)(b). Each party is to bear its own costs of the proceedings.