What happened
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]
Why the court decided this way
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]
Before and after state of the law
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]
Key passages with plain-English translation
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.
What fact patterns trigger this precedent
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]
How later courts have treated it
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.
Still-open questions
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.