1 Direct the parties within 14 days to bring in short minutes to give effect to these reasons.

2 Adjourn to directions hearing 9.30 a.m. 7 July 2004.

Mr Golvan QC and Mr Geoffrey Bloch of Counsel, instructed by Celina Roth, Solicitor

Mr Hopkins of Counsel, instructed by Nunan and Bloom

Mr P. Cawthorn of Counsel, instructed by Phillips Fox

1 Burke Road provides a major through-road link between Ivanhoe in the north and Caulfield in the south, across Melbourne's inner-eastern suburbs. It intersects at Camberwell with Riversdale Road which is a major east-west link from Central Melbourne to the inner and middle eastern suburbs. At that point of intersection, Burke Road is also crossed by Camberwell Road, running from the north-west to the south-east across the intersection of Burke Road and Riversdale Road and joining Burwood Road, Hawthorn at the north-west end with Toorak Road, Hartwell at the south-east end. The crossroads created by these three thoroughfares known as Camberwell Junction has been a centre of commerce and transport in this part of Metropolitan Melbourne for well over 100 years and since the earliest days of settlement. The now long gone public house situated at the Junction gave the locality of Camberwell its name. The Junction is a low point with the ground rising to the east along Riversdale Road and to the north and south along Burke Road itself. The Junction is now the centre of a major complex of strip shopping. To the east, between Riversdale Road and Prospect Hill Road (the next intersecting street running to the east from Burke Road and half-way up the hill to the north) some two blocks of 19th and early 20th Century houses have been demolished to create a large open space on which a supermarket (Safeway) and a discount department store (Target) are erected with a large surrounding car park. Shops line both sides of Burke Road from Riversdale Road north to the top of the hill, past Prospect Hill Road and an intersecting rail line which passes below the road. The shops on the eastern side, between Riversdale Road and Prospect Hill Road command the highest rentals because of their proximity to the large car parking facilities and anchor retailers. There are less extensive off-street car parking complexes to the rear of the shops on the western side of Burke Road. The majority of the shops on the east side of Burke Road in the block from the Junction to Prospect Hill Road have rear accesses letting out onto the large car park.

3 Mr Kurc operates a shop known as Riot Arts and Crafts from 596 Burke Road, Camberwell. The shop is in the block between Camberwell Junction and Prospect Hill Road and therefore in the most sought after area in the Camberwell Junction Shopping Centre. It is somewhat closer to the Junction than it is to Prospect Hill Road. Mr Kurc first commenced business from these premises in 1991. On 27 February 1997 he signed a lease for the premises for a term of six years with the then owner, L.J.S. Developments Pty Ltd. The lease was expressed to commence on the 1st of July 1996 and included an option to renew for a further six year term. The rental for the first year of the lease was $112,500. Clause 9 provided for the rental to escalate at the rate of 5% per year leading to a rent for the final year, viz. the 1st of July 2001 to the 30th of June 2002 in the sum of $143,581.67. Clause 10 of the lease provided for the "further term" and allowed the rental for the further term to be nominated by the landlord. If that nominated rent proved unacceptable and the lessee objected, the rental was to be

determined in writing by a valuer registered under the Valuation of Land Act 1960 and appointed by the parties or, if they are unable to agree on the appointment within seven days, appointed by the President of REIV or by the president of the Australian Institute of Valuers Victoria Division at the request of the Lessor.

4 The clause laid down the following considerations and requirements for the rental determination: the valuer was obliged to:

(a) consider any written submissions made by the parties within 21 days of them being informed of his appointment;

(c) assume that the premises are available for leasing with a sitting tenant for a term equal to the term of this lease, and with any options for renewal;

(d) take into account the terms and conditions of this Lease and the permitted use;

(e) assume that the Lessee's covenants have been fully performed;

(f) ignore any fixtures and fitting which the Lessee has the right to remove from the premises and improvements voluntarily made by the Lessee;

(g) ignore the goodwill of the Lessee's business and any improvements made to the premises by the Lessee;

(h) have regard to current market rentals for comparable premises in the locality;

5 The valuer was required to publish his determination as soon as possible, after the 21 days for making submissions. If the valuer failed to make his determination within 42 days of the parties being notified of his appointment default provisions were made for the appointment of a new valuer.

6 In 1998 Eyecare Pty Ltd, the respondent in this proceeding acquired the reversion to the premises and thereby became the lessor.

7 By letter dated 14 January 2002 Mr Kurc exercised his option to renew the 1997 lease for a further six year term. Eyecare's managing agent, Barry and Matthew Iles Pty Ltd in a letter over the signature of Matthew D. Iles stated that his company had assessed the market rental for the further term

To be $224,975 per annum ($18,747.92 per calendar month) net plus GST.

8 In a letter dated 11 February 2002 Mr Kurc stated his objection to the proposed rental. Mr Iles then approached the President of the REIV requesting the appointment of an independent valuer. The President replied in a letter dated 28 March 2002 stating his willingness to appoint a valuer to determine the rent subject to certain conditions including the completion by lessor and lessee of application forms and the payment of certain fees. The application form styled "Application for Rental Determination" was signed. The form included a requirement that the valuer act as an expert and not as an arbitrator and stipulated that the parties agreed:

To accept the determination of the Valuer as a binding and final determination. (Clause 2)

9 In a letter dated 17 May 2002 the President advised the parties that:

I have appointed Mr Gavin Lethlean, Lethlean Property Consultants, Suite 4, Level 2, 605 Camberwell Road, Camberwell Victoria ... as the valuer to determine the rental for 596 Burke Road Camberwell.

10 In a letter to Mr Iles and Mr Kurc dated 21 August 2002 the appointed valuer, Mr Lethlean stated:

We refer to the above determination and confirm that we

* Have gained access to and measured the premises (21 August 2002),

* Examined the detail (sic) the proposals submitted by both parties,

* Inspected the premises put forward as being appropriate leasing evidence,

* Researched and inspected other leasing evidence.

Mr Lethlean sought an extension of the period to complete his determination to 4.00 p.m., 29 August, to which the parties agreed.

11 By a letter dated 4 June 2002 Mr Iles on behalf of the lessor forwarded "An indicative lease register, which was prepared in conjunction with Mr John Wallace". Mr Wallace is a Registered Valuer who gave evidence in the course of the hearing before me. The Indicative Register was submitted on the basis that the properties referred to in it and the rental were in the view of the lessor and its advisers `comparable'. The Register in the form of an Excel spreadsheet included some eight properties identifying the address, the tenant use, the gross lettable area, the annual rental and the date on which it was set, an analysis of that rental in terms of a square metre/annum figure and the re-expression of that rate as `Rental/m2 PA (Ground Floor Area) as appointed'. The table also included the date of commencement of the lease, the term of the lease, the provision for rent reviews and `O/G' which apparently stands for outgoings. With regard to all eight properties the designation in that final column is `All O/G Inc. GST'. Mr Iles unlike Mr Wallace is not a registered valuer and holds no academic valuer qualification. He is an agent's representative active in the marketing and management of rental properties in the area.

12 Mr Kurc's submission to Mr Lethlean was prepared by Mr Milton Cations of a firm known as Property Dynamics Pty Ltd. Mr Cations is a Valuer of 20 years experience. His list of comparable properties extended to 10 and his submission was in the form of a full scale valuation report. He assessed the rental at $153,000 per annum on the basis that the premises consisted of 315m2 at $540 per square metre, yielding a current market rental for the premises exclusive of Goods and Services Tax of $170,000. Mr Cations noted that Clause 4.1 of the lease and Item 5 of the Schedule limited the use to which the premises could be put to `retail sales of art and craft material and associated products'. Mr Cations concluded that this was not the highest and best use for the premises. He said:

Bearing in mind the greater turnovers of "higher and better use" premises, a lower gross occupancy rate to turnover should apply to the subject premises. Our investigation of shopping centre statistics shows turnover percentages to be as follows:

We have made a deduction for the permitted use consideration as detailed in the rental review clause as 10%.

It was this consideration that reduced the determined rental from $170,000 to $153,000 per annum. Both figures were expressed by Mr Cations to be `exclusive of GST'.

Immediately upon reviewing the Original Determination, I telephoned Mr Lethlean in respect of various major problems I perceived with it. I believe I had a conversation with him on 30 August 2002 in which I mentioned:

(a) His failure to include all the floor space of the Premises; and

(b) His error in assuming that the comparative rentals were increases of GST when the documents I have provided made it clear that they were exclusive of GST.

Mr Iles could not remember the entire content of what Mr Lethlean said to him during that and a number of subsequent conversations. Mr Iles said however `during one of our discussions Mr Lethlean told me he had measured the Premises himself.' Mr Iles said that he probably telephoned Mr Lethlean

on one or two further occasions prior to 10 September 2002 to attempt to discuss with him the errors I believed he had made in the original determination, including the errors set out above and the 10% discount he had allowed by reason of his belief that there was a restriction on the permitted use of the Premises.'

14 Mr Lethlean's rental determination dated 29 August 2002 stated, inter alia:

Mr Lethlean included the following paragraph under the heading `Improvements':

Improvements at the time of entering the lease between the parties comprised a single storey retail shop with an amenities/store room over at the rear, on an allotment of land regular in dimension being:

* 6.100m frontage to Burke Road and width across its rear to the public car park,

* 44.60m depth on the northern and southern boundaries,

At the rear of the allotment was a wide stairway giving access to the rear of the retail area from the rear higher level car park, which left the building area at ground level to be 231m2 approximately.

Above the steps was a Mezzanine store/Amenities area of 59m2 approximately.

With approval from the landlord, the tenant closed the rear access stairway and constructed a small shop having an area of 24m2 approximately, at the rear car park level.

Mr Lethlean noted that at Mr Iles request a meeting was held on 18 June 2003 attended by Mr Lethlean and Mr Iles, the lessor's agent Mr J. Hocking, the principal of the lessor company and Mr M. Cations, the consultant to the lessee. Mr Lethlean noted that Mr Iles' contention for an annual rental of $224,975 was calculated as follows:

Mr Lethlean observed `unstated as to whether it is inclusive or exclusive of GST'. He said that Mr Cations' calculation

`Appears to have based the composite area of 267m2 on the

According to Mr Lethlean since the site was `fully built' and `is 272m2, there is a discrepancy of area in the lessor's agent's calculations, which may be in the corridor/stairs to the store/amenities area.' He noted that Mr Iles had worked on a rate of $821.63 per square metre per annum which he, Mr Lethlean assumed to be inclusive of GST. He said Mr Iles had `taken individual annual rents and divided them by the individual ground floor areas'. It is clear and this is confirmed by Mr Iles within the column of per square metre rentals in the Excel spreadsheet, the one designated `ground floor as appointed' entails ignoring any floor space in the properties other than the ground floor and dividing the total rental by that area. Mr Lethlean observed:

Having previously allowed no weight to the Upper Floor Rentals, the Lessor's Agent has been allowed a rate of $100 m2/a and applied this rent to the area of 56m2 to provide a Upper Floor rent of $5,600/a providing a total annual rent of $224,975. The methodologies applied are inconsistent.

Mr Lethlean summarised the submission made by Mr Cations. He took the properties being 608 Burke Road, Angus and Robertson Bookworld; 610 - 612 Burke Road `Liquorland' and 636 `Surf Dive and Ski' as the most comparable properties. He continued:

If all rents analysed are inclusive of GST, the Rent Rate reflected, exclusive of GST, is 708m2/a.

He says he considered the permitted use `to be an impediment to the lease' and he accepted Mr Cations' submission that the rental value should be discounted by 10% to reflect that. As to the area to form the basis for the rental calculation Mr Lethlean said:

The present lessor altered the rear store access area in June 1999 and, at that time, added 24m2 of Rear Shop and 4m2 of ground floor tenancy area.

As such, the areas for the calculation of rent for this Determination are:

He applied a rate of $708m2/a excluding Goods and Services Tax for the retail floor area, yielding $163,548 and $91m2/a excluding GST for 59m2 of mezzanine store/amenities area, yielding $5,369. This yielded a total of $168,917 which when discounted 10% yielded $152,025 which Mr Lethlean rounded to $152,000 per annum.

15 In a facsimile dated 6 September 2002 Mr Iles told Mr Lethlean:

We confirm on behalf of the Lessor its request co-ordinate a meeting with you to discuss the validity of your decision to remove 24m2 of rear shop area and the toilet area of 5m2 from your current market rent calculation.

We believe this is a fundamental floor (sic) in your determination as is your decision to deduct the GST from the average rent rate.

Please confirm a convenient time to discuss these important issues as soon as possible.

16 On 10 September 2002 Mr Lethlean delivered a revised rental determination. He had had no communication with either Mr Cations or Mr Kurc or anyone else acting for Mr Kurc in the interval between the publication of the original and revised determinations. The revised determination was therefore a bolt from the blue for Mr Kurc. Mr Hocking, the principal of Eyecare who had been in consultation with Mr Iles and was aware that Mr Iles was attempting to demonstrate to Mr Lethlean that the original determination was flawed, nevertheless said that he was flabbergasted when a revised determination was published on 10 September 2002 without warning. Mr Iles denied that he expected the revised determination. He agreed that he hoped that something along those lines would occur. The letter covering the revised determination stated, inter alia:

As a result of advice from the tenants of the comparable rental properties used within the original determination that their rent was exclusive of GST and therefore required no adjustment and discussions with the Lessor's Agent, Matthew Iles in respect to the rental area (refer copy letter attached), it has been necessary to review our Determination.

A copy of the Revised Determination is now enclosed for your perusal and record.

Mr Lethlean included a copy of a response addressed to Mr Iles referring to his facsimile of 6 September `and previous and subsequent telephone conversations' stating:

In the absence of any reply to our offer to meet at 8 am Monday, and in order to expedite the conclusion of this matter, we have taken into account the matters raised by you and now enclose our Revised Determination.

17 In the revised determination Mr Lethlean concluded that the comparable rentals derived from the three properties was $774.00m2/a. This is in contrast to the correspondence of $778m2/a. The revised determination omitted any adjustment to reflect the rent exclusive of GST. Once again, Mr Lethlean allowed a ground floor retail of 231m2/a, yielding $178,794 excluding GST. He allowed $100/m2 for the 59m2 of the mezzanine/store amenities area; $5,900 (the adjustment presumably representing a different treatment of GST) and he added 29m2 as representing stairwell/landing/toilet area at $194/m2/a excluding GST yielding $5,626. This yielded a gross annual rent of $190,320 which when discounted yielded $171,288. Mr Lethlean included an alternative calculation in which he allowed the stairway landing and toilet area as part of the ordinary retail area but reduced the overall per square metre rate to $697/m2 yielding $181,220 per annum with $100/m2 allowed as the annual rental for the mezzanine store/amenities area $5,900 yielding a gross annual rent of $187,120. A 10% discount based on permitted use yielded an annual rent of $168,408. He therefore rounded the two figures to a determination of $170,000.

18 Mr Hocking, the principal of Eyecare, said that his company remained dissatisfied even with the revised determination. On 20 September 2002 Mr Iles sent a facsimile to Mr Lethlean complaining about two telephone messages left by Mr Iles which were not returned. The letter concluded:

We believe that GST should be added to the determined rental if the lessee will not pay GST.

The letter also referred to a meeting between Mr Lethlean and Mr Hocking, the principal of Eyecare, in relation to which `under your instructions [that is Mr Lethlean's instructions] that we [that is Mr Iles] do not attend'. According to Mr Hocking:

On 19 September 2002, Mr Lethlean telephoned me to discuss the ongoing dispute between the applicant [Mr Kurc] and the respondent [Eyecare Pty Ltd] my recollection is that the applicant is challenging the validity of the Revised Determination and Mr Lethlean is obviously aware of this. Mr Lethlean requested the meeting at a coffee shop near the respondent's business premises. However, I suggested that we meet at his office at 10 am on Friday 20 September 2002. When I asked Mr Lethlean the purpose of the meeting, he said it was to offer his help in bringing the parties together.

I met with Mr Lethlean on 20 September 2002. I believe we met at his office as, subsequent to the meeting, (sic) I prepared a note of the meeting and of the earlier two telephone calls.

Mr Hocking had no independent memory of what transpired but proffered a contemporary note which was in the following terms:

Lethlean offered to negotiate between Kurc and Eyecare P/L for the rental of the rear of 596 Burke Road. Some sharing of the rental would occur between the parties which he would negotiate.

His proposed fee was to be 5% of the gross rental received over the period of six years of the lease. Say if Eyecare P/L received $15,000 p.a. then his fee would be $4,500. Lethlean requested a quick response to accepting his services because in his view attitudes on Kurc's side could harden. He preferably wanted to deal with the matter over the coming weekend.

During discussions on other aspects of the determination Lethlean revealed on the original determination he made an omission in excluding any mention of GST and its application. He said after a request from Eyecare P/L that he couldn't include GST on the revised determination because the comparable property rentals did not have GST included.

When questioned regarding the incorrect area of the premises Lethlean responded by saying he made a mistake in the rear area due to a fax he received from the Council being incomplete. The fax claims from the Council showed the building plans before any internal shop fitting and building works was performed by Kurc. Apparently the rear of the building was omitted in the fax leading Lethlean to believe that the rear of the building didn't exist before Kurc rented the premises.

Mr Hocking rejected the proposal and later reported what had occurred to Mr Iles.

19 Mr Kurc's solicitor, Celina Roth, wrote to Mr Hocking's company Eyecare Pty Ltd on 23 September 2002. The letter asserted that the original rental determination was final and binding and could not be revised. It accused Eyecare Pty Ltd and Mr Iles of having acted improperly in approaching Mr Lethlean and making further submissions to him `without advising my client or me of that fact'. The letter stated that failing confirmation that the original determination would be treated as final and binding, proceedings in the Tribunal might be commenced without further notice. The solicitors for Eyecare Pty Ltd responded on behalf of their client stating that rental invoices based upon an annual rent of $170,000 plus Goods and Services Tax would be issued to Mr Kurc `but they would be issued without prejudice to the landlord's right to challenge the correctness of that amount which it regards as mistakenly inadequate to a gross degree'. The letter over the signature of Mr Glen suggested a conference to discuss matters as a whole. In a letter dated 28 October 2002 addressed to Nunan and Bloom, Ms Roth on behalf of Mr Kurc said that he would pay rent at the rate of $170,000 per annum under protest `reserving his right to recover any excess and without prejudice to the right to assert that the original determination made by the determining valuer on the 29th August, 2002 is final and binding between the parties'. Ms Roth denied that Mr Kurc was obliged to pay any Goods and Services Tax. Eyecare Pty Ltd served a Notice of Default dated the 20th of February 2004 with regard to the Goods and Services Tax unpaid, threatening that failure to pay $28,900 Goods and Services Tax back to the commencement of the renewed lease would lead to the forfeiture of that lease. Mr Kurc paid that amount under protest and now continues to pay the Goods and Services Tax under protest.

20 On 30 September 2002 Mr Kurc's solicitor filed the application which commenced the present proceeding. He sought declarations that the original determination was final and binding and that the rent so determined included Goods and Services Tax. The application also sought a declaration that the revised determination has `no effect between the parties'. The application also sought an injunction restraining the landlord from claiming rent over and above what was provided for in the original determination and from claiming Goods and Services Tax beyond the rental determined in the original determination. Finally, the application sought the refund of all rent paid by the tenant over and above the amount shown in the original determination.

21 On 18 December 2002 Eyecare Pty Ltd filed points of defence and counterclaim. This pleading contended that the determination dated 29 August 2002 was not a valid determination at all. The invalidating errors alleged were:

(i) The assumption that the comparative rents relied upon were exclusive of GST [presumably what is intended is that it was assumed they were inclusive of GST].

(ii) That the value of wrongly excluded 29m2 of floor space.

22 Eyecare contended that Mr Lethlean `merely exercised his right (and fulfilled his obligation) to correct his manifest errors and in the result he issued only one determination viz. the revised determination forwarded on 10 September 2002' alternatively Eyecare said that Mr Lethlean `merely exercised his right to correct a slip, in accordance with the slip rule or its equivalent, on the basis that the original determination was manifestly wrong and could not be allowed to stand for that reason'. By way of counterclaim Eyecare sought:

An order that [Mr Lethlean's] manifest mistake or error in omitting to take account of the impact of GST on the real value of the rental to be rectified by increasing the rental of $170,000 per annum by an amount which will impose on [Mr Kurc] the burden of GST as discounted by the tax rate payable from time to time on the income earned by companies or alternatively it is thought an order that Mr Lethlean "will assess the rental to be determined to increase that rental by an amount calculated on the same basis as previously mentioned".

Goods and Services Tax was payable as an outgoing pursuant to Clause 3.2(b) of the renewed lease as constituting a governmental tax, charge, assessment or other outgoing of a like nature charged against or to [Eyecare] as lessee.

A variation of the second rental determination so as to increase it by 11% to correct the unjustified reduction of 10% made by [Mr Lethlean] of the rental value of the leased premises.

23 In his reply filed 30 January 2003 Mr Kurc said that any mistakes that Mr Lethlean made in his original determination were not manifest errors and having delivered the original determination he `ceased to have any power to correct any mistake or error'. Mr Kurc pleaded that there was only one effective determination, namely the original determination and that there was no applicable `slip rule'. Even if there were, such a rule would not apply in the circumstances. The alleged errors were not, he said, such as to invalidate the original determination. Mr Kurc further pleaded that the valuer had no power, right or obligation to correct any mistake or error in the original determination or the revised determination, if it were valid, and that if any variation to a rental determination was to be made by reference to the liability for Goods and Services Tax, the variation should be made to the original determination.

24 On 18 December Eyecare also filed points of claim against Mr Lethlean who had by then been joined as a party to the proceeding. By this pleading it sought an indemnity or contribution in respect of loss of rental and consequent effect on the capital value of the premises at 596 Burke Road, should the Tribunal find that Mr Lethlean's revised determination was not valid and binding. It also sought damages from Mr Lethlean for negligence.

25 Pursuant to leave granted the applicant filed amended points of claim on 8 April 2004. The principal amendment was to include a claim for relief against the amounts paid for Goods and Services Tax under protest. Eyecare filed amended points of defence and counterclaim on 15 April. In that amended pleading it elaborated upon the `mistakes' which it said Mr Lethlean made and which it contended invalidated his original determination. It said that his first mistake was to assume that comparable rentals which served as the basis of his original determination `were inclusive of GST, when, in fact, the comparable rent was for exclusive of GST'. It said his second mistake was to calculate a rent rate of 708m2 based upon the first mistake. The third mistake it said was failing properly to identify the premises by excluding 29m2. The fourth mistake it said was the assumption that the permitted use under the lease could not be changed. It said Clauses 4.1 and 8.9 of the lease allowed such change. The fifth mistake it said was Mr Lethlean's assumption that an inability to change permitted use would affect the rental value of the property. It denied that Mr Lethlean was functus officio after publication of the original determination, saying that he `merely exercised his right (and fulfilled his obligation) to correct some of the mistakes in the original determination' which he had described. Once again, it asserted that Mr Lethlean could rely on some form of `slip rule'. It said that the $152,000 original determination was exclusive of Goods and Services Tax and that in any event Clause 3.2, the outgoings clause, required Mr Kurc to pay the Goods and Services Tax. The prayer for relief sought declarations that neither of Mr Lethlean's determinations was binding on the landlord and a declaration that the current rental for the premises as at 1 July 2002 was $190,320 per annum exclusive of GST or such other figure as the Tribunal might decide. As a fall back position Eyecare sought a declaration that the revised determination was binding but that Mr Kurc was obliged to pay the Goods and Services Tax. Finally, it sought a declaration that both determinations fixed the rent `exclusive of GST'. It also sought orders remitting matters to Mr Lethlean to re-determine the rental upon the basis contended for by Eyecare.

26 On the same day Eyecare filed and served amended points of claim against Mr Lethlean. These amended terms after alleging the background facts as I have already narrated them, asserted that there were terms in Mr Lethlean's retainer to make the rent determination that he would `exercise all the due care and skill of a qualified and registered valuer; reasonably protect the interests of the applicant and the respondent; [and] not act in a manner patently contrary to the interests of the applicant or the respondent'. Eycare alleged that Mr Lethlean knew or ought to have known that his rental determination would effectively fix the rent for the entire term of the lease and if he undervalued the current rent `[Eyecare] would suffer loss and damage' and hence Eyecare was `vulnerable to loss from' Mr Lethlean's conduct in making the determination. Finally it said that Mr Lethlean knew or ought to have known that Eyecare was relying upon him `to properly and accurately determine the market rent of the premises'. The pleading repeated the allegation of five mistakes in the original determination and with some elaboration Eyecare alleged that both determinations `undervalued the current market rent of the premises for the first 12 months of the term of the renewed lease' hence said Eyecare, Mr Lethlean breached the terms of his retainer and was negligent in breach of his duty of care. The points of claim concluded if either of the determinations were found to be binding, Eyecare will suffer loss and damage for which Mr Lethlean is responsible. If the Tribunal were to hold that the tenant is not liable to pay the Goods and Services Tax in addition to the rent, Eyecare also claims this as loss and damage against Mr Lethlean together with any amounts ordered by Eyecare to be repaid to Mr Kurc, the loss of capital value to the premises and any irrecoverable costs of the proceeding. The prayer for relief sought a series of orders to recoup Eyecare for the various heads of loss and damage which it alleged against Mr Lethlean.

27 Solicitors acting for Mr Lethlean foreshadowed an application for summary dismissal pursuant to Section 75 of the Victorian Civil and Administrative Tribunal Act 1998 of the claims against him by Eyecare. The application was listed but when it came on, those acting for Mr Lethlean stated that the application would not proceed.

28 When the proceeding came on for hearing Mr Hopkins, Counsel for Eyecare Pty Ltd gave notice of proposed amendments to his client's points of claim against Mr Lethlean. Mr Hopkins said that Eyecare's measure of damage was according to the contractual rules laid down by Hadley v Baxendale (1854) 9 Ex 351, 354. He then said that Eyecare wished to add allegations that in light of the acquisition of a residence in Toorak by Eyecare's Principal, Mr Hocking, it intended to sell 596 Burke Road. This allegation was made in support of the contention that if successful against Mr Lethlean, Eyecare could recover not only the present value of the rental which it might be deprived of by reason of Mr Lethlean's determination (if it was found to be negligent or in breach of Mr Lethlean's contract with Eyecare) but also for a loss in the capital value of the premises at 596. Since as Mr Hopkins conceded, his client's claim was based on a contractual measure of damages as set out in Hadley v Baxendale and there was no suggestion that any of the particular matters to be alleged with regard to the finances of Eyecare had been made known to Mr Lethlean, the damages which Eyecare could recover upon the establishment of a breach by Mr Lethlean would be limited to the damage flowing naturally or in the ordinary circumstances from a breach of this type (this being the first limb of the rule in Hadley v Baxendale). This meant that the success of the claim for capital loss depended not upon proof that Eyecare in fact intended to sell the premises but rather upon whether a loss on resale is the sort of thing that might flow in the ordinary cause of events from an unduly low rental determination made in breach of the valuer's duty to the landlord. I refused leave to make the amendments alleging Eyecare's intention to sell. I did however grant leave for two other amendments to be made to the counterclaim, the first, specifically alleging the execution by the parties of the `application for rental determination' delivered to the President of the REIV and repayment of the necessary fee and secondly, the addition of a particular damage suffered by Eyecare as a result of Mr Lethlean's alleged negligence:

The difference between the rental that [Mr Lethlean] should have determined had he not acted negligently and/or in breach of contract in delivering this determination and the rental agreement the applicant was obliged to pay the respondent for the renewed term as a result of the proceeding.

29 At the hearing Mr Kurc was represented by Mr Golvan QC and Mr Geoffrey Bloch of Counsel. Eyecare Pty Ltd was represented by Mr Hopkins of Counsel and Mr Lethlean was represented by Mr Cawthorn of Counsel. Counsel for Mr Kurc called evidence from Mr Cations, his valuer representative in the valuation process who gave evidence himself. Mr Hopkins for Eyecare called evidence from its principal Mr Hocking, Mr Matthew Iles, its representative in the valuation process and a valuation expert Mr Wallace. Mr Cawthorn placed a couple of exhibits into evidence but despite a witness statement by Mr Lethlean having been prepared, filed and served, Mr Lethlean did not go into the witness box and so his statement did not go into evidence.

30 Mr Hopkins, Counsel for Eyecare submitted that the following key issues arose for determination:

(a) Is the rental determination made by the joined party (`Lethlean') on 10 September 2002 (`the revised determination') binding on the applicant and the respondent?

(b) If yes, does the revised determination fix a market rent that is inclusive of GST?

(c) If the revised determination is binding on the applicant and respondent, is the applicant required to pay the respondent as outgoings all GST which, as the result of the supply of the premises for the applicant, the respondent is obliged to pay pursuant to A New Tax System (Goods and Services Tax) Act 1999.

(d) If the revised determination is not binding on the applicant and respondent, is the rental determination made by Lethlean on 29 August 2002 (`the original determination') binding on the applicant and the respondent?

(e) If yes, does the original determination fix a market rent that is inclusive of GST?

(f) If the original determination was binding on the applicant and respondent is the applicant required to pay to the respondent as outgoings all GST which, as a result of the supply of premises to the Applicant, the Respondent is obliged to pay pursuant to A New Tax System (Goods and Services Tax) Act 1999?

(g) If neither the original nor revised determinations are binding upon the applicant and the respondent, should the Tribunal fix the market rent, remit the matter to Lethlean or direct a new valuation to be undertaken?

Mr Hopkins submitted that as regard his client's claim against Mr Lethlean the following issues were raised:

(a) Has Lethlean breached the terms of his retainer with the respondent?

(b) Was Lethlean negligent in preparing the original determination and/or revised determination?

(c) Does Lethlean, as an expert, have immunity from suit by the respondent?

(d) What recoverable loss and damage has been suffered by the respondent as the result of Lethlean's breach of contract and/or negligence?

I agree that these key issues arise. It goes without saying that the potential answers to these various questions raise a formidable list of possible permutations and combinations. In my view it is neither necessary nor desirable to attempt to explore every possible permutation or combination. A more appropriate course to keep this determination within some reasonable bounds of length is to choose a particular issue as the starting point and in light of the determination upon that issue, determine all further questions that necessarily flow from the initial determination.

31 In my view a convenient first matter to determine, although it is not one of the key issues identified by Mr Hopkins, is the question whether Mr Lethlean in the circumstances had the power to revisit his original determination.

32 Mr Cawthorn and Mr Hopkins whilst at odds on many issues, agreed upon this one. Mr Hopkins said:

Lethlean is an expert, not a judicial officer and so the concept of functus officio does not apply.

He submitted Mr Lethlean therefore had power to correct his original determination by the publication of the revised one. Mr Cawthorn submitted that as an expert Mr Lethlean could be regarded as in a similar situation to Counsel, asked to advise upon a matter. If Counsel became aware that the opinion which he had provided to his client contained an error he has a right and a duty to correct the opinion. So long as the correction is made before the opinion was acted upon, Counsel thereby avoided any liability for the error in the original opinion (if not embarrassment).

33 I am unable to accept Mr Cawthorn's analogy. His analysis of the situation of Counsel offering an opinion is doubtless correct. Counsel advising a trustee that a particular transaction, for instance the composition of a debt, could be undertaken without breach of trust could effectively recall his opinion if he realised that it was wrong - as long as the trustee had not in fact undertaken the transaction.

34 In the present circumstances however at what point can it be said that Mr Lethlean's original determination had been `acted upon'. In one sense according to material annexed to Mr Kurc's statement the original determination was acted upon within a day. Mr Kurc then paid an amount which readjusted the rent for the renewed lease term back to its commencement in accordance with Mr Lethlean's determination. As Mr Cawthorn rightly observed however, payments in either direction can easily be re-adjusted by refund or set off. No irrevocable step such as the trustee's undertaking the problematic transaction would have occurred. Mr Cawthorn suggested that the rental determination would have been `acted upon' if the reversion had been sold on the basis of that determination. As we know this has not occurred. That view of things leaves open the embarrassing possibility that Mr Lethlean having heard these matters debated elaborately and at length by eminent Counsel could reach an ultimate point of clarity and now publish a further revised rental determination.

35 The parties agreed in the document which the President of the REIV required them to execute that the determination of Mr Lethlean would be `final and binding'. As the authorities to which I will refer later indicate, even without the adoption of those words the very effect of authorising a person to make a determination whether as arbitrator or expert carries with it the conclusion that the determination so made is final and binding. Mr Lethlean was not in the position of Counsel, merely expressing an opinion, he was, albeit in a non-judicial context, making a determination, not in the same way that a judge makes a determination but a determination nonetheless. The determination is effective immediately it is made. There is no interim period before which it is `acted upon'.

36 One may accept that an expert is not required to act judicially and so the doctrine of functus officio which applies to those who do, such as judges, Tribunal members and arbitrators can have no direct application to an expert. Even so, unless the expert is to be at liberty, repeatedly to revisit his determination, the finality of the determination operates in a way analogous to the functus officio doctrine.

37 Mr Golvan and Mr Bloch referred to the position of arbitrators. In the absence of statutory authority, an arbitrator, they said, had no power once he had signed his final award to correct even the most obvious of errors. They referred to the decision of the Court of Appeal in Chancery in Mordue v Palmer (1870) LR 6Ch App 22. Sir George Melish LJ said:

I think the result of the cases at law, is that when an arbitrator signs a document as and for his award, he is functus officio, and he cannot of his own authority remedy any mistake. (1870) LR 6Ch App 22, 31

38 Statute has long since intervened to avoid the inconvenience of this conclusion. See now Section 30 of the Commercial Arbitration Act 1984. This Tribunal has its own statutory power to correct errors in its determinations. Section 119 of the Victorian Civil and Administrative Tribunal Act 1998 states:

(1) The Tribunal may correct an order made by it if the order contains--

(b) an error arising from an accidental slip or omission; or

(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the order; or

(b) on the application of a party in accordance with the rules.

39 Without expressing a view that the power granted by this provision would if available to Mr Lethlean have authorised him to publish his revised determination, one may ask what authority he had to publish it without such authority? The Commonwealth Administrative Appeals Tribunal established pursuant to the Commonwealth Administrative Appeals Tribunal Act 1975 now has powers similar to those given to this Tribunal by Section 119 of our statute. See Section 43AA of the Administrative Appeals Tribunal Act 1975. This provision was inserted by an amending statute in 1995. Prior to the enactment of Section 43AA the Tribunal had to consider what power it had to correct errors in its determinations which came to light. In Pontin v The Repatriation Commission [1991] AATA 38; (1991) 13 AAR 292 Senior Member Dwyer set aside a mistaken dismissal of an application purportedly made by way of a consent order. She concluded that the Tribunal had inherent power to correct such a mistake where the correction was requested by one party and not objected to by the other. She said that the power to correct the order would not necessarily be found in the `slip rule' (as provisions similar to Section 119 are described in Court Rules) `even if that rule is available to this Tribunal' [1991] AATA 38; (1991) 13 AAR 292, 296. The learned Senior Member considered that the Tribunal must have incidental powers such as are necessary for the exercise of its jurisdiction under the Administrative Appeals Tribunal Act [1991] AATA 38; (1991) 13 AAR 292, 300. In Dillon v The Department of Trade (1986) 4 AAR 461 Deputy President Todd considered a request to amend a determination of the Tribunal under the Freedom of Information Act 1982 of the Commonwealth. Mr Todd doubted that the Administrative Appeals Tribunal could simply adopt its own slip rule on the basis of its power to regulate its own procedure in accordance with Section 33 of the Administrative Appeals Tribunal Act because all the powers under that Section were prefaced with the words `in a proceeding'. Mr Todd concluded that correction or amendment of a Tribunal determination could only occur after the proceeding was concluded. Mr Todd concluded that even without a statutory slip rule the Administrative Appeals Tribunal had the following powers of correction:

(a) A clerical mistake (O 29 r 11 High Court Rules/O 35 r 7(4) Federal Court Rules);

(b) An omission resulting from the inadvertence or oversight of a party's legal representative: Shaddock v Parramatta (No 2) [1982] HCA 59; (1982) 151 CLR 590 at 594, where an order was made under O 29 r 11 providing for the payment of interest on the amount of damages for the period between the date of judgment at trial and the date on which the judgment upon the appeal took effect, the original judgment not having made reference to the point and it not having been alluded to by counsel in argument; Commonwealth v McCormack [1984] HCA 57; (1984) 58 ALJR 513, where an order was made directing the respondent to repay the Commonwealth the judgment debt which had been set aside by the High Court, the original judgment not having so ordered and counsel not having raised it at the appeal; Cappucio v Chrysler Australia (Sales) Pty Ltd [1980] FCA 63; (1980) 42 FLR 274, where an interlocutory order omitted to include, and for which no application had been made, a certificate stating that the application in chambers was a proper one for the attendance of counsel;

(c) A decision which does not give effect to the decision-maker's meaning and intention: Arnett v Holloway [1960] VicRp 6; [1960] VR 22, where judgment with costs was awarded to the plaintiff. Four days before delivery of judgment, an amendment to the Rules of the Supreme Court was made having the effect that, unless the judgment specified otherwise, costs were to be calculated according to the County Court scale. The judge was not aware, and had not been made aware, of the amendment. On appeal it was held that the judgment could be amended on the basis that it did not express the real intention of the judge at the first instance, which was to give costs on the basis of the Supreme Court Scale;

(d) A misnomer or misdescription not involving an alteration to the substantive decision: Pearlman v Bartels [1945] 1 WLR 1457 at 1459; Re Mendelson and Commonwealth of Australia (1982) 4 ALN N278;

(e) Ambiguity in expression of an unambiguous decision: R v Crippps, Ex parte Muldoon [1984] 3 WLR 53 at 60-61.

Mr Todd also laid down what he regarded as boundaries for the correction of power giving the following examples of errors which the Tribunal could not correct.

(a) The decision-maker put down what was meant to be put down, did not put in anything which was not intended to be put in, nor omitted anything which was intended to be inserted, but subsequently considered that if more thought had been given to it at the time it would have been put down differently: Sutherland v Hannevig [1921] 1 KB 336 at 341, 343;

(b) The decision itself is ambiguous: R v Cripps, Ex parte Muldoon [1984] 3 WLR 53 at 60-61;

(c) The decision of the Tribunal is wrong in fact or in law: Thynne v Thynne [155] 3 WLR 465 at 490; Re Bracken and Minister of State for Education and Youth Affairs (No 2) [1985] AATA 8; (1984) 7 ALD 243 at 265.

(1986) 4 AAR 461, 464-5

In the proceeding before him Mr Todd concluded that there was no occasion to exercise any power of correction or amendment.

40 In Mendelson v Commonwealth of Australia (1982) 4 ALN N 278 Senior Member J.O. Ballard concluded that while there was no slip rule `as such in this Tribunal ... I think its principles should be applied in such situation'. He substituted `the Commonwealth' for the Australian Postal Commission and changed a reference to $80 per week to $90 per week.

41 What then does all this mean for Mr Lethlean's power to issue a revised determination? The `expert' jurisdiction which he is exercising to determine the market rent between the parties has no statutory basis, hence no recourse can be had to provisions such as Section 30 of the Commercial Arbitration Act 1984 nor can any inherent or implied jurisdiction arise from the terms of any statute as the members of the Administrative Appeals Tribunal of the Commonwealth have variously concluded. In my view, in the absence of a specific contractual authorisation to revise or correct his determination, Mr Lethlean was most likely in the same position as the arbitrator in Mordue v Palmer, incapable of correcting even the most obvious error in his determination. Since the power to make expert determinations derives from a contract it is self evident that if the consent of both parties or perhaps as in Pontin v Repatriation Commission at the request of one party and without opposition from the other party a correction could be made. As previously noted however, not only did Mr Kurc give no assent nor indicate a lack of opposition to the proposed revision, he had no knowledge that it was even in contemplation. He has not consented or indicated a lack of opposition since publication of the revised determination. I will however assume contrary to my own inclination that Mr Lethlean was possessed of the power of revision, correction or amendment along the lines of the power which Mr Todd concluded the Commonwealth Administrative Appeals Tribunal had independently of Section 43AA of its statute.

42 On the basis of those powers was Mr Lethlean entitled to publish his revised determination? Certainly the matters which Mr Lethlean sought to correct arose from no clerical mistake, nor from any omission, inadvertence or oversight of the representatives of either party, nor is there any suggestion that the rental determination made by Mr Lethlean did not give effect to his meaning and intention as that meaning and intention was manifested in the narrative portions of his determination. There is no ambiguity in Mr Lethlean's determination nor was there any misnomer or misdescription. Per contra the corrections made by Mr Lethlean fall within the class of corrections which Mr Todd concluded were impermissible. Mr Lethlean's determination was as he intended it to be. When the further argument was put to him by Mr Iles he changed his mind. His decision was not ambiguous but according to the views expressed in the revised determination, the original determination was wrong in fact or law.

43 The errors which Mr Lethlean sought to correct would not in my view be corrected or amended even under the slip rule (in the Supreme Court and the County Court Rule 36.07). If Mr Lethlean did make errors they were not accidental but the result of deliberate finding Ivanhoe Gold Corp Limited v Symonds [1906] HCA 71; (1906) 4 CLR 642, 669-7; Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206, 210; Williams Civil Procedure Victoria [I 36.07.65] page 4177 (Service 150).

44 Mr Lethlean made a deliberate finding as to the rear areas assessed at 29m2. The further arguments put by Mr Iles gave him second thoughts; but his first conclusion with regard to that area was a deliberate finding. Similarly he concluded that the allegedly comparable rental rates to which he was referred were rental rates inclusive of Goods and Services Tax. To reach a rental exclusive of Goods and Services Tax would require a discount of those rates. This was a finding which constituted an error in fact. It was not however merely an accident but the result of a deliberate finding.

45 That an expert valuer does not generally have a right to revise his determination is confirmed by the evidence of Mr Cations, a valuer of 20 years standing who said that he had never heard of an expert valuation being revised by the valuer without the consent of the party. Mr Cawthorn said that not to permit a valuer to correct errors such as those dealt with in Mr Lethlean's revised determination would be to put him in an intolerable position: liable to be sued for negligence but deprived of the opportunity to correct his errors when they are pointed out to him or he becomes aware of them. This is an over-simplification of the problem. Since an expert such as Mr Lethlean depends for his powers upon the agreement of the parties as a matter of contract whatever form of correction or amendment which may be thought appropriate could be included in the lease. Of course the expert is given no input into the terms of the lease, however as in the present determination as a condition of the President of the REIV's appointment he stipulated that the parties execute a form of agreement. That agreement could have included a `slip rule'. For instance, in the `ACDC expert guidelines' the following appears under the heading `Conduct of expert determination' at Clause 8A(v):

If the determination contains a clerical mistake or an error arising from an accidental slip or omission, or a material miscalculation of figures or a material mistake in the description of any person, thing or matter, or defect in form, the Expert shall correct the determination.

Quoted by Einstein J in the Heart Research Institute Limited v Psiron Limited BC 2002 05034 [2002] NSWSC 646 [15]

46 The REIV application for expert determination contained no such provision. It will be seen that the provision just quoted is a contractual version of the well known `slip rule'. For reasons already given I believe that if contrary to my own inclination Mr Lethlean in the present circumstances had a power equivalent to the slip rule it would still not have authorised him to issue the revised determination which he did. In my view the provision quoted from the ACDC Expert Guidelines would not have provided that authorisation either. In truth it is difficult to conceive that any organisation such as the REIV would propose or that parties to an expert determination would agree to an expert being given power to `second guess' himself or herself. Such a power would be totally subversive of the intention that the rental determination be final and binding.

47 These conclusions dispose of issues (a) to (c) between Mr Kurc and Eyecare as those issues were formulated by Mr Hopkins, Counsel for Eyecare.

48 I turn next to the standing of the original determination. I should add that even if I sustain any of the arguments put to impeach the validity of the original determination, that in itself would not provide a basis for the issue of the revised determination. As Mordue v Palmer showed, a person making a determination is not authorised to revisit it merely because a court (or in the present case a Tribunal) has power to set aside the original.

49 In the pleadings referred to above, Eyecare contended that the original determination contained no less than five errors which would justify its being set aside. In his final submission, Mr Hopkins varied these down to three as follows:

(a) Lethlean failed to value the premises, but instead only valued part of the premises;

(b) Lethlean failed to have regard to the current market rentals or comparable premises in the locality because he wrongly discounted the current market rentals before having regard to them on the erroneous assumption that they were inclusive of GST;

(c) Lethlean failed to take into account the terms and conditions of the lease, because he discounted the rent based upon the incorrect assumption there was no provision within the lease which allowed for a change of permitted use, when clauses 4.1 and 8.1 do allow for such a change.

As to the first alleged error, Mr Hopkins said the exclusion of the 29m2 `goes to the heart of the original determination as, plainly, Lethlean's overriding obligation was to determine "the current market rent of the premises_"_. He said that the premises were the entirety of the premises, therefore he said, there had been an error as to the identity of the property to be valued. Mr Hopkins said that it was not a case where Mr Lethlean took the 29m2 into account but then attributed the rental value of nil. It was a case of deliberate exclusion. Accordingly said Mr Hopkins, Mr Lethlean had wrongly excluded `almost 10% of the floor space of the premises'.

50 The error with regard to the interpretation of the rentals for the comparable properties has already been explained. In making this error said Mr Hopkins, Mr Lethlean did not have regard to the current market rentals for comparable premises in the locality as the rental fixing clause in the lease required him to do. This he said vitiated the determination.

51 As to the issue of permitted use, Mr Hopkins noted that Clause 4.1 stated the restrictions for permitted use in fairly orthodox term providing that no change to user should be made `without the prior consent of the lessor'. He noted however that Clause 8.9 of the lease stated:

In any case where pursuant to these presents the doing or executing of any act, matter or thing by the Lessee is dependent upon the consent or approval of the Lessor such consent or approval shall not be unreasonably withheld except as otherwise expressly herein provided.

Mr Hopkins noted that Mr Lethlean had accepted the submission of Mr Cations on behalf of the tenant but `there is no provision in the lease for a change of use' and then proceeded to the finding `there is no provision in the lease for a change of use. It appears that the lessor's action in refusing an alternative use would substantiate that premise'. Mr Hopkins said that Mr Lethlean had merely accepted Mr Cations' contention. He continued:

An expert is not entitled to do this, he must bring his own skill and judgment to the task.

Whatever view was taken of Clause 8.9 said Mr Hopkins, Mr Lethlean's statement indicates that he did not consider or take into account Clause 8.9. Mr Hopkins was, on this and on many other points, critical of Mr Lethlean's failure to give evidence. He said this strengthened the inferences to which he contended. The terms of the lease, he said, had not been taken into account.

52 The modern authorities upon impeachability of expert determinations commence with a decision of the English Court of Appeal in Campbell v Edwards [1976] 1 All ER 785, a decision of the English Court of Appeal consisting of Lord Denning MR and Geoffrey Lane LJ. Lord Denning MR said:

If two persons agree that the price of property should be fixed by a valuer on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it. If there were fraud or collusion, of course, it would be different. Fraud or collusion unravels everything. [1976] 1 All ER 785, 788

In Legal and General Life of Australia Limited v A. Hudson Pty Ltd (1985) 1 NSWLR 314 the New South Wales Court of Appeal consisting of Mahoney, Priestley and McHugh JJA dealt with a similar issue. In a frequently quoted judgment McHugh JA (as he then was) said:

While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation was not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.

(1985) 1 NSWLR 314, 335-356

Earlier in his judgment, His Honour quoted with approval the conclusion of the Full Court of the Supreme Court of Victoria in Email Limited v Robert Bray (Langwarrin) Pty Ltd [1984] VicRp 2; [1984] VR 16, 21 that parties were bound by a valuation `unless the assessment is vitiated by fraud, collusion or mistake'.

53 In Commonwealth of Australia v Wawbe Pty Ltd [1998] VSC 82 Gillard J considered the Legal and General case and the same lines of authority as had been dealt with by McHugh JA and at [45] said:

In my opinion it follows that the Court should consider three questions:

(i) What do the parties agree to remit to the expert?

(ii) Did the valuer make a mistake and if so what was the nature of the mistake?

(iii) Is the mistake of such of a kind which demonstrates that the valuation was not made in accordance with the terms of the contract and accordingly does not bind the parties?

VALIDITY OF ORIGINAL DETERMINATION - CONCLUSION

54 I will deal with the three alleged errors in reverse order. I turn first then to the contention that in allowing a 10% discount based upon the permitted use for the premises Mr Lethlean made an impeachable error. The first question is, was there an error at all? The gravamen of Mr Hopkins' criticism of Mr Lethlean's determination on this score is that he assumed there was no power to vary the permitted use for the premises, whereas in fact had Mr Kurc requested a variation to the permitted use and then accordance with Clause 8.9 of the lease Eyecare would have been obliged not unreasonably to withhold its consent to that change to permitted use.

55 In Burns Philp Hardware Limited v Howard Chia Pty Ltd (1987) 8 NSWLR 642 the New South Wales Court of Appeal considered a cognate issue. The question for the Court was the proper operation of the rental review clause with respect to a tenancy containing an orthodox permitted use clause prohibiting the use of the demised premises for `any business other than that of a hardware department store or such other business as shall be determined by the lessee and approved by the lessor (such consent not to be unreasonably withheld)'. The resemblance to the current lease is clear enough. The lessor executed two deeds poll, the second of which included the following clause:

The lessor hereby irrevocably declares and covenants that the lessee, its successors, assigns, sub-tenants, licensees and anyone in lawful possession of all or any part of the demised premises (now or in the future) may carry on upon the demised premises or any part thereof any lawful business or any lawful use without seeking or obtaining any further consent of the lessor or its successors or assigns thereto.

56 The Court held that since the lessee disclaimed both the deeds poll including in particular the second they could not have contractual effect. Priestley JA said:

It was said that the terms of the lease whereby the lessee could not use the premises otherwise than as a hardware store without the lessor's consent, for the lessor's benefit only, and the lessor could waive them.

Although I doubt whether the terms here said to be waived are of the kind with which the doctrine invoked has always dealt, I do not put my non-acceptance of the respondent's waiver submission on that basis, but on the basis that as a matter of substance it was to the lessee's interest to have a limited rather than an unqualified right of use of the premises. I do not regard it as a paradox that it is to the lessee's benefit (in one very practical sense) to have limited rather than unlimited rights of user. The limitation of user means that there would be at least a chance that the rent as reviewed would be less than if user were unlimited. The reality of the situation was shown by the very fact of the lessor's having conceived the idea of the deeds poll and seeking to use it is [presumably in] the way that it has. He obviously believes that if this idea is successful the lessee's rights will be enlarged and the possibility of the premises yielding a higher rent will be increased. I think this reasoning is sound and I think it follows from it that the lessor's waiver was not of rights solely for its own benefit in the relevant sense. I think the respondent's waiver argument fails.

(1987) 8 NSWLR 642, 659

His Honour agreed that the existence of the deed poll was indicative of a likelihood that the lessor would consent to any requested change of use. (1987) 8 NSWLR 642, 660

57 The Burns Philp case shows first that the view advanced both on behalf of Mr Lethlean through his Counsel, Mr Cawthorn and on behalf of Mr Kurc by Mr Golvan QC and Mr Bloch that the restriction on permitted use can lead to a discount in the assessed rent is valid. Further, as to the likelihood that this permitted use will be relaxed one has to proceed upon the basis not merely that the landlord would be obliged not unreasonably to withhold his consent to a request for a change to permitted user but also that the tenant would have to make the request and would be entitled, consulting its own interests not to do so. The uncontradicted evidence was that when Mr Kurc sub-let the rear portion of the premises as a small surf shop fronting the car park Eyecare brought Supreme Court proceedings seeking to terminate his lease, based not only upon an allegation that there had been a sub-let without its consent as was required by the lease but also that the establishment of the surf shop constituted an infringement against the permitted use covenant of the lease. Mr Hocking gave no evidence of any willingness or desire to change the permitted use of the premises. Mr Kurc gave no such evidence and there is no evidence that he was interested in enterprises other than the current one. Mr Lethlean proceeded on the footing that the permitted use as shown on the lease should be regarded as `set in stone' for the term of the lease. In the circumstances he was amply justified in so doing.

58 The Burns Philp case and the evidence of Mr Cations supports the view that the existing permitted use is less than the highest and best use for these premises and therefore has a depressing effect upon the rental which they can command. Mr Wallace, giving evidence for Eyecare quarrelled with this approach; but principally upon the basis that the ability of the tenant to request a change of use to a higher and better use, which request could not be unreasonably withheld, should lead a valuer to reject the permitted use as `set in stone'. In my view the Burns Philp case shows the fallacy in this reasoning.

59 Nor in my view is there any justification for the criticism made of Mr Lethlean for accepting Mr Cation's submission as to the 10% discount and not elaborating upon his reasons for that acceptance or explaining what considerations led him to accept the submission. The terms of the lease required Mr Lethlean to receive submissions from the parties. The lease did not require him to give any reasons for his determination. Requiring him to make an expert determination entitles him to rely upon his own expertise and also accept submissions from the party. Mr Hopkins noted that Mr Lethlean had given no evidence as to what matters moved him to this conclusion. It would in my view be an intolerable imposition upon the process of expert determination if an expert was to be treated as having made a fundamental error merely because he stated a conclusion of fact or mixed fact and law without the elaboration and explanation which would be regarded as adequate reasons for a determination made by a Court. Further, it would be intolerable to presume an expert to have ignored a particular matter or to have made no inquiry unless he is willing to go into the witness box leaving himself exposed to unlimited cross-examination, to lay bare his intellectual processes ex post facto.

60 In my view no error is disclosed on Mr Lethlean's part as to the permitted use discount, much less an error which would vitiate his expert determination.

61 I turn next to the use of the comparative rental evidence and the question whether the rentals considered were inclusive or exclusive of GST. There is no doubt that Mr Lethlean made a mistake on this issue. I have explained the nature of his mistake above. In issuing his revised determination he admitted that he had made such a mistake. The question is, is that mistake such as would vitiate the original determination.

62 Mr Hopkins' submission is that in making the mistake Mr Lethlean failed to `have regard to the current market rental for comparable premises in the locality' as the lease required him to do, hence his rental determination was not in accordance with the contract which authorised him to make it. It will be recalled that according to the formulation of McHugh JA (as he then was) in the Legal and General case an error in the application of the principles of valuation will not, without more, amount to a vitiating error. Mr Golvan and Mr Bloch submitted that this error was one made in the process of valuation and not a departure from the valuer's contractual obligations. The valuer was obliged to have regard to comparable rents, consulted them, but misinterpreted them.

63 In Orti-Tullo v Sadek & Anor [2001] NSWSC 855 Bryson J considered an attack upon a rental determination based upon a mistake said to have been made with regard to the incidence of Goods and Services Tax. The premises in question were a service station let to the tenant for the first time in 1995 for a period of six years with an option to renew exercised for a further six year term on the same conditions from 1 July 2001. The valuer assessed the rental at $60,000 per annum. In a follow-up letter to the parties he said he wished to confirm that his rental assessment excluded Goods and Services Tax. The landlords sought to have the rental determination set aside on the basis that the valuer did not consider the operation of the provisions of the lease in the context of the GST regime which then applied. Goods and Services Tax became payable for the first time on 1 August 2000. It was not payable on the old lease but it was payable on the new lease. Bryson J after having referred to the celebrated exposition of the process of valuation in Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418, 441 (per Isaacs J) said at paragraph [33]:

The commercial market in leases can be taken to have been informed about the operation of GST and to have reflected the influence of that operation on market behaviour. It does not in any way follow however that both prudent parties would see it as appropriate to increase what would otherwise have been their agreed rent by 10%. The answer does not lie in speculation about the likely response of hypothetical persons but in market events.

Conceivably GST could have no market impact and the amount of money which lessees generally were prepared to pay for premises may not have changed when lessors came under a new tax system. It would be plainly erroneous to determine what the current market rent was as of 1 August 2000 and then adjust it upwards so as to return that amount net of GST to the lessor. What reasoning the valuer employed is unknown, and it is not shown by the brief statement in his letter of 10 November 2000.

His Honour concluded that the letter of 10 November was no more than a statement of the self evident that the determination was of rent and not of Goods and Services Tax. His Honour concluded that no mistake of the type alleged took place. Even if it had he concluded that it would not have vitiated the rental determination

The supposed mistake would not be analogous to a mistake as to the identity of the property. Failing to have regard to some factual matters which should be regarded, whether the incidence of a tax or otherwise, is not a mistake of the kind on which the Court can act. [36]

64 In Justbake Pty Ltd v Otranto Nominees Pty Ltd [2003] VCAT 1490 Senior Member R. Davis considered an attack upon the validity of a rental fixation. Once again the attack was based upon an alleged failure properly to consider the incidence of Goods and Services Tax. The valuation considered by Mr Davis assessed the annual rental for the relevant property at $47,300. The valuer concluded that the effect of the review to market was to render the lease in question subject to Goods and Services Tax. He said:

I am instructed that the lessor is registered for GST, and the rental determined is inclusive of GST. Schedule "A" to the lease provides for the lessee to pay the GST to the lessor.

Mr Davis upon reading the valuation said at paragraph 28:

... in my view reading the valuation as a whole, the valuer did not come to his determination by calculating the market rental and adding GST to that figure. What he in fact did was to calculate the market rental in accordance with the terms of the lease and then deduct the amount of GST that the landlord would be required to pay. Thus in my view, the mistake that the valuer has made is not the kind of mistake which demonstrates that the valuation was not made in accordance with the terms of the contract. In determining the rental of $47,300 it is probable that the valuer took into account the GST had on "economic behaviour and on current market rental". However, that did not mean that he went outside the terms of the lease because the GST is relevant to "current market rental ...".

65 In my view whilst Mr Lethlean did make an error in the treatment of Goods and Services Tax by discounting the comparable rentals as if they were inclusive of Goods and Services Tax, that was an error in the process of valuation. I accept the submission made by Mr Golvan and Mr Bloch that his determination was in accordance with the lease and the Retail Tenancies Reform Act 1998. Section 12(5). Insofar as he considered the comparable rentals his misunderstanding of them was an error in the process of valuation and not one which would vitiate the rental determination.

66 I turn finally to the allegation that by `excluding' 29m2 at the rear of the premise. Mr Lethlean made a vitiating error by failing to value the correct premises. Mr Lethlean advised the parties that he had himself measured the premises. It is not suggested that he did not undertake that task. He did not simply ignore the 29m2, rather he noted that they consisted of a stairwell and a void giving access to the level which had an entrance at grade to the car park at the rear. Mr Kurc had had some floor space built over the top of this stairway with a much narrower stairway giving access to the upper level. Mr Lethlean had excluded this from consideration on the basis that it constituted tenant's fixtures which in accordance with the lease ought to be excluded. Mr Cations in his witness statement said:

In my opinion, there is no mistake made by the valuer in his determination by not applying the rental value to the areas in question. In my rental valuation submission I did not take into account that the shop area facing the car park at the rear was an improvement made to the premises by the tenant and was required to be ignored under the terms and conditions of the lease. Accordingly, I attributed a rental value to the rear shop in my valuation of $153,000 per annum. If I ignored the rear shop area as the valuer was obliged to, I would not have attributed any rental value to the rear stairway and void under the stairwell because in my opinion they do not have a rental value. The guidelines for the measurement of lettable area issued under the Retail Tenancies Reform Act 1998 on 16 August 1999 expressly exclude from the lettable area of a tenancy, stairs (Section 2.3.1). In addition, it is not normal valuation practice to include in the lettable area of a retail tenancy the area of stairs. Attached ... is a copy of extracts from the relevant guidelines - No. S126. I would have attributed no rental value to the so called "toilet area" of some 5m2 located under the staircase leading to the mezzanine staff amenities area. The area in question is a small narrow void of limited use.

67 I accept Mr Cations' evidence on this point. The guidelines for the measurement of lettable areas to which he referred were issued as Victorian Government Gazette No. S126 dated Thursday 19 August 1999. Under the Retail Tenancies Reform Act the regulating provisions of the Act extended only to a retail premises having a floor area not exceeding 1,000m2. The statute provided for the issue of guidelines by the Minister for the purpose of measuring the floor area of retail premises. The Gazette described was published to give affect to Ministerial guidelines. The guidelines however were adopted from guidelines for the measurement of lettable areas published by the Property Council, something that was conceded by Mr Wallace, the valuation expert who gave evidence for Eyecare Pty Ltd. At Clause 2.3.1 they exclude from the lettable area of each tenancy, inter alia, stairs and toilets. These guidelines, according to the application section, apply to strip shops, free-standing shops, semi-detached or terrace type shops in suburban streets. Mr Wallace resisted this interpretation of things. He said that the guidelines were properly applied only in shopping centres where premises were contiguous with one another not in strip shops where premises adjacent to one another had separate landlords. He also stressed that these were merely guidelines and as such they should be applied flexibly.

68 The guidelines according to their terms apply to strip shops. Accepting that they should be applied flexibly and that one valuer may differ from another as to their proper application I am not persuaded that a proper application of these guidelines would not exclude the very areas which Mr Lethlean excluded.

69 Even if I were wrong, I am of the view that the area if it did exist would be an error in the process of valuation and not a vitiating error. The point is neatly illustrated by the Legal and General case itself. The valuation was prepared upon a calculation of floor space which included an area of a mezzanine floor removed by the lessee at the lessor's consent after the commencement of the lease. The result was to leave a void. McHugh JA said:

I think, however, that the valuer was mistaken in assessing the area of the void at the same rate ($7 per square foot) as the rest of the ground floor. Moreover, the value per square foot of the void was $2.50 more than the value per square foot of the lower ground floor. I do not think that any ordinary lessee would be prepared to pay the same rate for the void as he would for the rest of the ground floor area. Nor is it likely that a lessee, who could make special use of the void, would be prepared to pay the same rate. Quite apart from any other consideration, there is at least an arguable liability to restore the flooring at the termination of the lease: c 11.4. I think, therefore, that the valuer erred in principle in determining the rent of the demised premises.

(1985) 1 NSWLR 314, 330-1

Nevertheless the Court held that this error of principle did not vitiate the valuation. At first instance Waddell J had held that this mistake constituted a mistake as to the subject matter of the valuation. The same argument was put by Mr Hopkins for the present landlord. It was unsuccessful in the Legal and General case and it should fail here likewise.

70 It follows in my view that the original determination is binding upon the parties. This disposes of the questions (d) and (g) posed by Mr Hopkins of the issues in dispute between Mr Kurc and Eycare Pty Ltd and the two numbered (e) and (f) as between Eyecare and Mr Lethlean.

IS THE RENTAL DETERMINED UNDER THE ORIGINAL DETERMINATION INCLUSIVE OF GOODS AND SERVICES TAX?

71 Mr Lethlean's original determination was based as previously noted upon a rental for the retail ground floor and the mezzanine store amenities area totalled and then discounted by reference to permitted use. Both of the primary figures for the ground floor and mezzanine area were expressed to be `excluding GST'. He assumed the comparable rentals were inclusive of GST and made the mistake and adjustments to them to bring them to a `excluding GST' level as he thought. It is clear therefore that the rental determination (I was going to say the original determination but more accurately I suppose I should describe it as the one and only rental determination) determines a rent exclusive of Goods and Services Tax.

72 This brings me then to the final question posed by Mr Hopkins, namely whether Mr Kurc is obliged under the outgoings clause to pay the Goods and Services Tax.

IS MR KURC OBLIGED TO PAY GOODS AND SERVICES TAX AS AN OUTGOING?

73 To answer this question it is necessary to say something as to the nature of Goods and Services Tax itself. As previously noted it was introduced by a complex of legislation and first became payable from 1 August 2000. The rules for the Goods and Services Tax which was levied at the rate of 10 percentum are to be found for the most part in a Commonwealth statute known as `A New Tax System (Goods and Services Tax) Act 1999'. According to Section 7-1 of that statute `GST is payable on taxable supplies ...'. Section 9-5 defines taxable supplies as follows:

(b) the supply is made in the course or furtherance of an enterprise that you carry on; and

(d) you are registered, or required to be registered.

74 Supply is defined in Section 9.10(2)(d) to include `a grant, assignment or surrender of real property'. This therefore includes a commercial lease of land such as the renewed lease dating from 1 July 2002 of which we are here dealing.

The Lessee as and when the same shall respectively become due and payable will bear and punctually pay or reimburse to the Lessor all outgoings in respect of the demised premises and the proportion attributable to the demised premises of all outgoings in respect of the land on which it is erected. The expression "outgoings" shall [the words "without affecting the generality thereof include" are struck out]

(a) all rates and charges payable by the Lessor to any local or government authority;

(b) all Land Tax and other taxes rates charges and assessments and other outgoings of like nature which are at any time during the term charged upon the demised premises or otherwise chargeable against or to the Lessor whether governmental semi-governmental municipal or otherwise;

76 Mr Hopkins submitted that this clause required the tenant to pay the Goods and Services Tax "which is a tax (ie a compulsory payment to raise money for the governmental purposes) and a charge, and an assessment chargeable both upon the capital Premises and against the Respondent being the "supplier" ...'.

77 Section 14 of the transitional provision entitled A New Tax System (Goods and Services Tax Transition) Act 1999 provides in effect that where a lease was entered into before the royal assent was granted to the GST legislation it would remain tax free until the earlier of 1 July 2005 or the occurrence of a `review opportunity' occurring after the royal assent before 1 July 2005. It is unnecessary for me to go to the definition of review opportunity. What it contemplates is the ability to conduct a review renegotiation or alteration of the consideration under the agreement `that takes account of the imposition of the GST'. The Australian Tax Office issued Goods and Services Tax Ruling GSTR 2000/16, inter alia to deal with the issue of review opportunity. At paragraphs 169 to 173 of that ruling the Office refers to two New Zealand decisions, Case A29 before the `TRA' (1989) 11 NZTC 1175 and Smale v Fletcher Homes Limited (1996) 17 NZTC 12662 which gave a wide meaning to traditional outgoings clauses in leases so that the leases in question were regarded as `reviewable' and capable therefore of attracting the New Zealand version of the tax even though entered into prior to its commencement. According to the ruling, the covenant in Case A29 was as follows:

The lessee will pay all rates, taxes, charges, assessments, impositions and outgoings whatsoever which may or which during the said term should be taxed, rated, charged, assessed or imposed on the said premises, or on the landlord or tenant in respect thereof, by authority of Parliament, local authority or otherwise.

The lessee ... pay to the lessor ... any rates, taxes (but excluding the lessor's land tax ... and the lessor's income tax), charges, assessments and outgoings of the lessor ... paid or payable or otherwise incurred in respect of the land.

We take the view that a clause which covers taxes in general, such as an outgoings clause, should not be considered to be a review opportunity unless the wording of the clause clearly evidences the intention by the parties to cover a tax in the nature of a goods and services tax. Whilst it will always depend on the particular agreement whether the supplier has an opportunity to change the consideration for a supply because of the imposition of GST, our view is that the following examples from commercial leases will, in general, not give rise to a review opportunity unless it clearly allows GST to be covered:

* A lease where a building has more than one tenant (for example, a retail shopping centre lease) which requires that the lessor's outgoings are apportioned between lessees on the basis of the floor area occupied but the rent is not apportioned on that basis;

* A lease which states the lessee must pay all rates and taxes either "in respect of", "against" or "on" the leased premises, rather than the supply of or the lessor's use of the premises; and

* A lease which states the lessee must pay future rents and taxes imposed on the premises, rather than a future tax on the supply or the lessor's use of the premises.

Our view is that a clause would have to contemplate a tax in respect of the supply of the premises, and not just a tax in respect of the premises.

78 Mr Golvan and Mr Bloch relied upon this ruling to contend that the existing outgoings clause is not sufficient to render Mr Kurc liable for Goods and Services Tax on the rental. Mr Hopkins observed that the ruling relates to a fundamentally different matter, namely whether a review opportunity has come into existence so as to render a pre-GST lease liable to the tax.

79 I accept Mr Golvan's submissions. The reason that a ` review opportunity' subjects a pre-GST lease to the tax is that it provides an opportunity for a landlord to pass on the impost to the tenant; but the proper construction of a fairly typical outgoings clause such as the one we are dealing with here, raises the same issue in a dispute such as the present as it does in considering whether there is a review opportunity. The Goods and Services Tax as explained is not a tax on the lessor, it is not a tax on the land or even in respect of the land, rather it is a tax upon the supply of the real estate.

80 It follows therefore that Mr Kurc is not liable to pay Goods and Services Tax as an outgoing under the current lease.

81 One matter which Mr Hopkins' formulation did not cater for was the application made by Mr Kurc to recover moneys paid under protest. It will be recalled that as a result of default notices Mr Kurc first paid rental at the higher rate of $170,000 per annum rather than the $152,000 per annum first year's rent fixed by the original determination of Mr Lethlean and secondly, the Goods and Services Tax.

82 Mr Golvan and Mr Bloch said that where money is paid for the purpose of averting a threatened evil and in legal necessity with the intention of preserving the right to dispute the legality of the demand, those moneys were recoverable. They referred to Maskel v Horner [1915] 3 KB 106, 118 per Lord Reading CJ. They referred to the following passage from Halsbury's Laws of Australia Volume 23 para 370-850:

Where pressure, consisting of acts or threats hostile to the person, to property, to economic interests or to other categories of common law or statutory rights, leads to the payment of money or conferral of other benefits, the law provides an appropriate measure of restitution where it deems the pressure improper. This is done to prevent the defendant's unjust enrichment at the plaintiff's expense.

The further passage in the same work and volume, this time at paragraph 370-955 to the following effect:

A threat to break a contract is a form of pressure which, if it amounts to improper pressure and satisfies the appropriate test of causation, may lead to restitution of any benefit conferred. A person under a contractual duty who demands an extra payment for performing it must, if duress is established, repay the excessive money paid.

They also relied upon Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366. The Universe Tankships case was a case of a union `blacking' vessels flying under flags of convenience. In that case a Liberian flag. Lord Diplock speaking of the rationale for granting recovery to a person paying out money under economic duress (in this case the blacking process) said:

It is, however, in my view crucial to the decision of the instant appeal to identify the rationale of this development of the common law. It is not that the party seeking to avoid the contract which he has entered into with another party, or to recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded. The rationale is that his apparent consent was induced by pressure exercised upon him by that other person which the law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind. It is a rationale similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted under colour of office, or under undue influence or in consequence of threats of physical duress.

[1983] 1 AC 366, 384

83 What then is economic duress? According to McHugh JA (as he then was) in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, 46:

The proper approach [to the application of the doctrine of economic duress] is in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that approach went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct.

His Honour's analysis refers to the entering into a contract. This is because that was the issue before the Court in Crescendo. Nevertheless as the Universe Tankships' case shows the doctrine applies equally to support a claim for moneys had and received.

84 The question then is whether the notices which led to the payments under protest went beyond what the law would regard as legitimate. In one sense it is quite clear that they did. They demanded money which I have found was not in truth owing by Mr Kurc and threatened termination of his lease failing payment. The notices therefore included threats of contract breach as did the `blacking' in the Universe Tankships' case. The notice of default with regard to the Goods and Services Tax threatened that the lessor might exercise `its rights under the lease including its right to forfeit the lease and re-enter the whole of the leased premises and thereby determine your estate and interest'. The covering letter dated 23 February 2004 stated that failure to comply would lead to `a claim for an ejectment order' being added to the proceeding in this Tribunal. The demand with regard to the rent was by way of a tax invoice rather than a formal notice of default. Nevertheless, given that there is no bar upon a landlord terminating a lease without default notice in the event that rent is in arrears for 14 days or more (Clause 7.1(a) of the lease) it was perhaps prudent for the tenant to make the payment under protest. The tenant had an alternative course, he could have sought an undertaking from the landlord not to exercise any remedies out of the Tribunal or out of Court, failing which an interim injunction could have been sought from the Tribunal. In the circumstances of the present dispute it seems overwhelmingly likely that the Tribunal would have found that there was a serious question to be tried as to the validity of the demand for increased rent and Goods and Services Tax. We would likely have felt that the balance of convenience lay in favour of granting an injunction without requiring the payment of the extra money demanded. At most the moneys would have been ordered paid into a suspense account to abide the outcome.

85 These considerations leave me troubled as to whether I should regard these demands as in the same category as the Union black band in the Universe Tankship case. The covering letter with regard to the default relative to Goods and Services Tax threatens nothing beyond seeking an adjudication from the Tribunal.

86 With some hesitation I believe I should however accept Mr Kurc's case on these matters and regard this as an instance of economic duress. The threat of a termination of lease is a serious one. It is well established that commencement of proceedings for possession can be treated as the equivalent of a physical re-entry to terminate a lease. As at the date that the two demands were made this Tribunal had no power to grant relief against forfeiture so if the landlord's case had proven correct, the tenant would have been left to go to Court to seek relief against forfeiture. Moreover, the demand at least for the rent goes beyond a bona fide assertion of a legal right which Eyecare believed it had. Eyecare's case before the Tribunal was that both the rental determinations were invalid. Its reliance upon the revised determination was a fall back position. What bona fide demand could it make therefore based upon a rental determination which it contended was invalid?

87 In my view, the applicant's case for the recovery of rental and Goods and Services Tax paid under protest should succeed.

88 It will be recalled that Mr Hopkins posed some four issues which he submitted arose in his client's case against Mr Lethlean. I have quoted them above.

89 I turn initially to the third of the questions posed by Mr Hopkins, namely whether Mr Lethlean's status as an expert bestowed immunity from suit upon him with respect to his expert determination. Mr Cawthorn, Counsel for Mr Lethlean, did not as I understand him, contend for such an immunity from suit. A summary dismissal application based upon the alleged immunity was foreshadowed by the solicitors then acting for Mr Lethlean in the interlocutory stages of the proceeding. That summary dismissal application ultimately was not pressed. In Sutcliffe v Thakcrah [1974] AC 727 and Arenson v Casson Beckman Rutley & Co [1977] AC 405, the House of Lords rejected a contention that an expert valuer acting as an expert (as Mr Lethlean did) and not as an arbitrator was entitled to immunity. This view of the law was accepted as well established by McHugh JA (as he then was) in the Legal and General case (1985) 1 NSWLR 314, 335. After noting that an expert valuer acting as an expert could be sued for negligence, His Honour observed `that as between the parties to the main agreement the valuation can stand even though it was made negligently'. It follows that my finding made earlier in these reasons that the initial determination was final and binding between the parties is not in itself a conclusive answer to a claim for negligence made against Mr Lethlean. Indeed it is the very fact that Mr Lethlean's determination is binding upon the parties which may inflict damage on Eyecare Pty Ltd if the rental determination was negligently prepared and fixed an inappropriately low rent.

90 In paragraph 16 of its points of claim against Mr Lethlean, Eyecare alleged that it was an implied term of Mr Lethlean's retainer that he `would exercise all the due care and skill of a qualified and registered valuer'.

91 I did not understand that allegation to be denied by Mr Lethlean.

92 I have already given my reasons for rejecting all but one of the mistakes alleged by Eyecare. The mistake which Mr Lethlean did make according to my findings was to misinterpret the comparable rental evidence placed before him as being of rentals including Goods and Services Tax whereas the fact was, as he later acknowledged, that the rentals which he was analysing did not include Goods and Services Tax.

93 Mr Cawthorn on behalf of Mr Lethlean submitted that merely to be mistaken was not conclusive evidence of negligence or lack of due care. I accept that submission.

94 The question is whether Mr Lethlean exercising `all the due care and skill of a qualified and registered valuer' could have made the GST mistake. I have already mentioned that the comparable rentals spreadsheet given to Mr Lethlean by Mr Iles on behalf of Eyecare stated with regard to each tenancy that the lease required the tenant to pay all outgoings including Goods and Services Tax. It was in my view a clear indication that for the purposes of the analysis Goods and Services Tax was treated as an outgoing and not as included in the rent. I need not pause to consider the appropriateness of this as a matter of intellectual analysis. That the Goods and Services Tax was dealt with under the heading of `Outgoings' is I think clear on any reading of the spreadsheet. The point is reinforced by the separate information sheets which Mr Iles furnished with the spreadsheet at the request of Mr Lethlean. In each case the sheet prepared by Mr Lethlean asks with regard to a tenancy `What outgoings does the tenant pay?' and in each case the answer is `All outgoings including GST'.

95 In cross-examination Mr Cawthorn put to a number of witnesses that it is reasonable to assume that the rent included the GST. The typical way, he said of collection of GST was the quotation of a gross price for a good or service inclusive of GST. In my view, the basis for this cross-examination was dubious. Whether for tax invoices of more or less than $1,000 it is not necessary to show the Goods and Services Tax separately if the tax invoice for the relevant supply gives the GST inclusive price with a notation on the statement `the total price includes GST for this supply'. See the CCH GST Guide Volume 1 16-100 pages 16,452-3. In my experience rental tax invoices customarily identify the Goods and Services Tax separately.

96 A fair reading of the material put before Mr Lethlean would not lead to the interpretation which he placed upon it. I do not believe that a person using all the care and skill of a registered valuer would have adopted the misinterpretation which he did. As Mr Wallace rightly observed if the valuer found himself uncertain on an issue such as this, he should make further enquiries - which of course is what Mr Lethlean ultimately did prior to the issue of his revised determination.

97 Does establishment of this readily quantifiable breach of duty give Eyecare a right to damages against Mr Lethlean?

98 Mr Cawthorn submitted that it did not. He observed that the only valuation evidence heard in the Tribunal in this proceeding was from Mr Cations. He provided it for the purposes of Mr Lethlean's determination. It was a full reasoned valuation report which according to his sworn evidence in the Tribunal was correct. This valuation was for a rental of $152,000 per year. Mr Cations was under no misapprehension about Goods and Services Tax. The assessment made by Mr Cations was in Mr Cawthorn's submission as close as made no difference to Mr Lethlean's assessment therefore it could not be concluded that Eyecare had suffered any loss of damage by reason of Mr Lethlean's breach of duty.

99 Further, Mr Cawthorn submitted that if the valuation was within 10 or 15% of what was found to be the correct figure no negligence (or presumably breach of duty) was established. He said:

It has been well accepted in the authorities that 10% and possibly a 15% variant is allowed and that anything outside it may be prima facie negligence ... within 10 - 15% one can infer that prima facie the valuation is not tainted by negligence.

He referred to Singer and Friedlander v John D. Wood and Co [1977] EGLR 569; Flemington Properties Pty Ltd v Raine and Horne (1997) 148 ALR 271, 291; Adwell Holdings Pty Ltd v Smith [2002] NSWCA 103; Jackson and Powell Professional Negligence, Fourth Edition page 208. He also referred to evidence in the form of an e-mail from Fitzroys Pty Ltd to the effect that a picture framer at 76 Harold Street, just off Burke Road, Camberwell, near Prospect Hill Road, yielded a rental per square metre of $289.66 `this contrasts with the rental for the instant property of $708 psn (first determination) or $774 psm (revised determination)'.

100 Mr Cations' evidence does not stand alone and in any event he conceded his assessment of rent was on the low side. The revised rental determination prepared by Mr Lethlean itself constitutes an omission by an experienced valuer that the gross annual rent for these premises was $190,320. For reasons already given I do not believe that that figure should include $5,626 for the 29m2 of stairway landings and toilet area. The result then is a gross annual rent of $184,674. When this figure is discounted by 10% having regard to the permitted use under the lease, a 10% discount of $18,467.40 is deducted, leaving a figure of $166,206.60. This figure is within a 10% tolerance of the $152,000 assessed by Mr Lethlean. The question then becomes whether I should find looking at the rental valuation as a whole that being within a 10% tolerance is indicative of no negligence or breach of duty. This issue was dealt with by Meagher JA as a Member of the New South Wales Court of Appeal consisting of himself, Mason P. and Buddin J in Adwell Holdings Pty Ltd v Smith [2003] NSWCA 103. At paragraph [9] His Honour referred to what had been said by Watkins J in Singer and Friedlander v John D. Wood and Co [1977] EGLR 569 where His Lordship noted that:

Two able and experienced men, each confronted with the same task, might come to different conclusions with any one being justified in saying that either of them has lacked competence and reasonable care, still less integrity, in doing his work.

Since then, Judges seem to have taken the figure of 10% (or, in some cases at least, perhaps 15%) of the true figure to constitute an area or bracket, within which, prima facie, the valuation is not negligent. But the importance of that "bracket" notion must not be misunderstood. It is not a statement of some principle that no valuation within the bracket can, as a matter of law, be negligent. That such a valuation can still be negligent is not only a matter of common sense, but has been judicially developed in such cases as Interchase Corp Limited v ACN 010 087573 Pty Ltd (Supreme Court Queensland 520 of 1994) and Lion Nathan Limited v Coca Cola Bottlers Ltd [1996] UKPC 9; [1996] 1 WLR 1438. Once one finds that a valuation is within the "bracket" one can infer that prima facie, but only prima facie, it is not tainted by negligence of course, it may have been arrived at by negligence, but that fact must be proved; one can never say that purely because a figure is within the "bracket", no negligence can be involved; but, on the other hand, if one arrives at a conclusion that a particular valuation is correct, one may turn to the "bracket" test as a check.

101 Applying the approach explained by Meagher JA, I conclude that despite Mr Lethlean's valuation being within the 10% bracket, analysis of it shows that it was prepared negligently and in breach of duty.

102 The next question is what measure of damages is recoverable by Eyecare? Mr Cawthorn submitted that the proper measure of damages is `the present value of the difference between the negligent valuation and the "correct valuation" over the period until the next rent review or expiration of the lease'. He relied on Joyce and Norris Valuers' Liability 2nd Ed page 97. Mr Hopkins submitted that his client should recover this and more. He submitted the effect of an undervaluation was to diminish the capital value of 596 Burke Road, Camberwell and that Eyecare should be compensated for this as well. He referred to the following passage which appears in the first of Mr Wallace's reports:

Properties have been sold on an investment basis within the Burke Road, Glenferrie Road, High Street and Chapel Street precincts within the range of 3.2 to 6% net yields. For the purposes of comparison and assuming that the property was offered for sale with the current sitting tenant and the existing terms and conditions of the lease, a drop in the net rental of $18,712 could be capitalised at a yield of 5% as representing a drop in the capital value (likely realisable price for the asset) at the relevant date of $350,000 to $370,000.

If the earlier determination despite its manifest errors is maintained at $152,000 per annum plus GST, then the difference between this earlier determination and the amended determination being prior to "the impediment of terms and conditions deduction" ($187,120) is a net rental of $35,000 per annum plus GST which capitalised at a yield of 5% represents a likely drop in the capital value (the realisable price of the asset) at the relevant date of between $650,000 and $700,000.

103 In my view, in general terms a capital loss is such as could be recovered as contractual damages in accordance with the first limb of the rule in Hadley v Baxendale. The realisation of an income-producing property by way of sale is something that could well occur in the ordinary course of events during the term of a particular rental fixation, certainly, during the term of one which lasted for some six years as the present one will. Mr Cawthorn however submitted that to allow both the present value of the difference between the `true' rental and the rental as determined together with compensation for a capital loss would entail double compensation. He relied upon the statement from Joyce & Norris and Rajdev v Becketts [1989] 2 EGLR 144. In that case a tenant fought a successful claim against a valuer. The judge, R.A.K. Wright QC sitting as a Deputy Judge of the Chancery Division of the High Court of Justice in England awarded damages based on the value of the tenant's lease with the rent as assessed at £9,250 as compared with the correct rental assessed at which His Lordship found at £7,000. The damages so assessed were agreed to be in the sum of £8,100 but the tenant asked for a further element of compensation for the reduction in the value of his business. His Lordship rejected that part of the claim. He said:

There would be an element of duplication in the reduction of the value of the lease and a reduction in the value of the business. There would also be duplication between the reduction in the value of the lease in the difference between the two rents, as the first limb of the alternative calculation ...

[1989] 2 EGLR 144, 148

104 In my view, there would be an element of duplication in allowing both heads of damages claimed by Eyecare. In addition the evidence given by Mr Wallace does not precisely deal with the situation which I now have to consider in light of the findings that I have made. Finally, even accepting that this is a proper mode of assessment of damages, there are a number of possibilities which remain unexplored, for instance, the possibility that the sale price of the reversion of this property would be based, to some degree on what would be perceived as the reversionary rent rather than the passing rent. The present lease now has four years to run. It has not been suggested that any sale has been contracted, though. The present fixed rent becomes of less central importance as each month goes by. Moreover, the existence of the present Tribunal determination would also tend to diminish the significance of the present rental fixation as the central factor in the sale price of 596. These matters are not gone into in Mr Wallace's report. Even were I satisfied that compensation for loss of capital value were appropriate I do not believe that I have adequate evidence to make a proper finding. The burden to adduce that evidence of course lies upon Eyecare.

105 Eyecare also seeks to have its costs in this proceeding paid by Mr Lethlean. Mr Cawthorn complained that there was no evidence as to what those costs were.

106 The complaint was correct but not really to the point. Until the proceeding is completed the costs cannot be quantified. In so far as Eyecare has incurred costs in prosecuting this proceeding against Mr Lethlean, that is, in my view, a matter of costs and not damages and should be determined in accordance with the costs rules applying to this proceeding. Its costs of defending and counterclaiming in the proceeding against Mr Kurc however are in a different case. Mr Hopkins said that this proceeding was rendered inevitable by Mr Lethlean's action in issuing two inconsistent rental determinations. Therefore, said Mr Hopkins, since the outlays caused by the proceeding were outlays which would follow in the ordinary course of events from Mr Lethlean's breach of retainer, they were properly recovered under the ordinary contractual measure of damages. So much may be granted. Nevertheless, it is open to question whether the entirety of the costs of this proceeding as between Mr Kurc and Eyecare can be attributed to Mr Lethlean. It would have been open to Eyecare to accept the original determination as final and binding as between it and Mr Kurc and then launch proceedings against Mr Lethlean alone seeking compensation for the consequences of the error and breach of duty which I have found with regard to the original determination. Eyecare might fear that this proceeding would fail in the event that the Tribunal or a Court found that the first determination was not final and binding as between a landlord and tenant. This consideration might have led Eyecare to bring proceedings against both Mr Kurc and Mr Lethlean, seeking a determination as against Mr Kurc that the original determination was not final and binding and as against Mr Lethlean that if the determination was final and binding it was made in breach of duty and Eyecare should be compensated. Eyecare took neither of those courses. Through the agency of Mr Iles it conducted an intensive lobbying campaign upon Mr Lethlean. Mr Iles agreed that he made the post-determination representation in the `hope' that something along the lines of the revised determination would result. Whilst Mr Hocking expressed himself as `flabbergasted' at the issue of the revised determination, he did not suggest that he was not well aware of what Mr Iles was doing. The evidence showed that he was. A large part of the complexity of this proceeding can, it may be argued, be placed at the feet of Eyecare.

107 This issue was the subject of at best perfunctory submissions. Clearly since there were so many possible outcomes confronting the parties when I reserved my determination, it was difficult for them to cover every eventuality. The convenient course in my view is to leave it open to Eyecare to make further submissions with regard to this claimed head of damage. Mr Hopkins said that he might seek to call further evidence on damages generally. Mr Cawthorn said that since the matter had been fixed for a final determination upon all issues including damages and he had made his judgement as to how to conduct Mr Lethlean's case based upon the evidence which Eyecare and Mr Kurc had called, he would `strenuously' resist any application to adduce further evidence. Again, the question as to whether any further evidence should now be admitted can be a matter for submissions.

108 Given the complexity of this matter I think it appropriate to publish these reasons and direct the parties within 14 days to bring in short minutes to give effect to these reasons.

109 I have received some submissions on the question of costs but the matter has not been fully argued. In the circumstances I will reserve the costs.