Plaintiff v Defendant

PRACTICE AND PROCEDURE - Appeal from Associate Justice granting leave to appeal decision of Victorian Civil and Administrative Tribunal - Appeal from decision of Victorian Civil and Administrative Appeal Tribunal - Victorian Civil and Administrative Tribunal Act 1998, s 148(1) - Supreme Court (General Civil Procedure) Rules 2005, rr 77.06 and 77.06.9 - Whether question of law - Mixed questions of law and fact.

1 This proceeding might be regarded by some as a procedural paradise involving, as it does, a double layer of leave applications and appeals. In spite of this, this proceeding raises important questions with respect to the interpretation and operation of one of the central provisions of the Retail Leases Act 2003 ("the Act") with respect to the process of determining rent on a rent review based on current market rent pursuant to the provisions of s 37 of the Act, particularly sub-s (2).

2 This proceeding involves two appeals, both of which arise from a decision by Victorian Civil and Administrative Tribunal ("VCAT" or "the Tribunal") Member M. Farrelly who, on 7 February 2014, made orders in Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) ("the Tribunal decision").[1] The principal orders made by the Tribunal Member are:

1. I find and declare that the parties are not bound by the rental determination of Mr Peter Grieve of CBRE Valuations Pty Ltd dated 1 February 2012 in respect of the Epping Hotel, 743 High Street Epping, Victoria.

3 By Originating Motion dated 11 April 2014, the Plaintiff sought orders, inter alia, that it be granted leave under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 ("VCAT Act") to file and serve a notice of appeal and, further, that the time to apply for leave to appeal be extended pursuant to r 4.05 of Chapter II of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules"). The Originating Motion was heard by Mukhtar AsJ who, on 20 October 2014, made orders ("the Orders of Mukhtar AsJ"), inter alia, that:

1. The plaintiff has leave to appeal the order made by the Victorian Civil and Administrative Tribunal in proceeding R113/2013 on 2 April 2014.

4 In summary, the procedural position is that there are two appeals before the Court, first by the Plaintiff, Epping Hotels Pty Ltd ("Epping"), against the Tribunal decision and, second, by the Defendant, Serene Hotels Pty Ltd ("Serene"), against the Orders of Mukhtar AsJ.

5 The Plaintiff presses the following questions in its appeal:

(1) Whether the Tribunal erred in finding that the Act does not allow the methodology employed by the Valuer.[2]

(2) Further or alternatively, whether the Tribunal erred in determining that the Valuer has, contrary to the requirement in s 37(2) of the Act, taken into account the value of the Defendant's fixtures and fittings, and in so doing the Valuer has fundamentally misconstrued his task.

(3) Further or alternatively, whether the Tribunal was made to understand the elements of the methodology applied by the Valuer; that is, whether it was right, without more, to seize upon the language in his report concerning the future application by the Tenant[3] of its owned fixtures and fittings as manifestly demonstrating an approach in violation of the Act.

(4) Whether the Tribunal erred in deciding that it was able to disregard the Valuer's supplementary report dated 18 October 2013 ("the Supplementary Report").

6 The questions of law which the Defendant seeks to rely upon in its appeal from the Orders of Mukhtar AsJ are as follows:

(1) The interpretation of the Valuer's speaking valuation by the Tribunal and, in particular, the Valuer's statement that "the future application by the Tenant of its own[ed] Fixtures & Fittings is included in the rental assessment process", is a question of fact and not, as the Court apparently found, a question of law and therefore the Court should not have granted leave to appeal on that ground.[4]

(2) Whether the Tribunal misunderstood the elements of the methodology applied by the Valuer in making its determination -

(a) is irrelevant to the question of whether or not the Tribunal made an error of law in making its determination;

(b) is not apparent on the face of the Tribunal's reasons for decision or the record and therefore is a matter of speculation;

(c) raises a question of fact and not, as the Court prima facie found, a question of law;

and therefore the Court should not have granted leave to appeal on that ground.[5]

(3) The Tribunal's decision to disregard the so-called "supplementary report" of the Valuer:

(a) was the exercise by the Tribunal of its statutory discretion to exclude evidence;

and therefore the Court should not have granted leave to appeal on that ground.[6]

7 The orders sought by the Plaintiff, as set out in its Notice of Appeal are as follows:

(2) Paragraph 1 of the Orders[7] be set aside and in it[s] place be an order that the proceedings be dismissed.

(3) The ... [Defendant] pay the ... [Plaintiff's] costs of this appeal.

(4) Such further or other order as the Court deems fit.

8 The orders sought by the Defendant, as set out in its Notice of Appeal are as follows:

(1) The Appeal against Order 1 of Associate Justice Mukhtar made and pronounced on 20 October 2014 in proceeding number S CI 2014 01708 is allowed.

(2) Order 1 of Associate Justice Mukhtar made and pronounced on 20 October 2014 in proceeding number S CI 2014 01708 is set aside.

(3) The ... [Plaintiff's] Originating Motion dated 11 April 2014 is dismissed.

(4) The ... [Defendant's] costs of the proceeding before Associate Justice Mukhtar including reserved costs and the costs of the appeal herein including reserved costs be paid by the ... [Plaintiff] on the standard basis.

(1) A party to a proceeding may appeal on a question of law from an order of the Tribunal in the proceeding -

(a) if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others, to the Court of Appeal with leave of the Court of Appeal ; or

(b) in any other case, to the Trial Division of the Supreme Court with leave of the Trial Division.

It follows from these provisions that any appeal is dependent upon two important qualifications. First, that the appeal be on a question of law and second, that the Court gives leave to appeal. The legislative policy underlying these provisions is that "VCAT decisions should not generally be disturbed where cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal".[8] It follows that "[t]his Court is not entitled to enter into the fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal".[9]

10 The leave requirement under s 148(1) is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[10]

The requirement for leave under s 148(1) of the VCAT Act "is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the Court do found the subject matter of the appeal".[11] It also confers a discretion about whether to grant leave[12] which an applicant must persuade the Court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave.[13] It will ordinarily be necessary (in addition to a clearly articulated question of law)[14] for an applicant to make out a prima facie case[15] and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[16]

11 In considering an application of this nature, courts have been concerned to respect the role entrusted by the legislature to the particular tribunal and not, in effect, subvert this position by seeking out error. Thus, Kirby J in Roncevich v Repatriation Commission, said:[17]

Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[18] The focus of attention is on the substance of the decision and whether it has addressed the "real issue" presented by the contest between the parties.

Similarly, in Vegas Nominees Pty Ltd v Werribee Sports & Community Club Inc, Ashley J said:[19]

This Court has said more than once that it should not examine briefly stated reasons by an expert Tribunal in an over-legalistic manner or by the over-zealous drawing of inferences in order to disclose some supposed error; although where unambiguous language is used, the user should be taken to mean what the words say. I should add that the Court is not entitled to interfere with the Tribunal's decision unless it is satisfied that there was in fact a vitiating error of law. It is not enough for the appellant to show that the Tribunal's reasons for its decision are so expressed as to suggest the possibility that it proceeded upon a wrong view of the law. In support of the several propositions that I have just stated I refer to Portland Properties Pty Ltd v Melbourne & Metropolitan Board of Works,[20] Michaelis Bayley (Vic) Pty Ltd v Melbourne & Metropolitan Board of Works[21] and Teston Investments Pty Ltd v Melbourne & Metropolitan Board of Works.[22]

Additionally, "[o]n appeal this Court must recognise the forensic realities of the way in which the case was put to the Tribunal. It is these realities to which a Tribunal must respond in its reasons".[23]

12 Mere want of logic in the reasons given by a tribunal does not, of itself, establish an error of law. Thus, Mason CJ said in Australian Broadcasting Tribunal v Bond:[24]

But it is said that "[t]here is no error of law simply in making a wrong finding of fact": Waterford v The Commonwealth.[25] Similarly, Menzies J observed in Reg. v District Court; Ex parte White:[26]

Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law.

Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.

In the same vein, Batt J, in Roads Corporation v Dacakis, said:[27]

... a finding of fact will only be open to challenge as erroneous in law if there is no probative evidence to support it (and not also if it is not reasonably open on the evidence), whilst an inference will be open to challenge as being erroneous in law if it was not reasonably open on the facts.

But, as the statement of Mason CJ ... [in Bond[29]] shows, there is virtually no difference between the tests.

Batt J continued, quoting the passage from the judgment of Mason CJ in Bond at 356, which is set out above, and concluded:[30]

For the reasons I have given, I consider that I should take that passage as stating the law which I must apply. The ascription of value to a parcel of land or a chattel is, or at least will frequently involve, an inference of a fact. Accordingly, a want of logic in drawing that inference will not by itself constitute error of law. But it may, I consider, sound a warning note and put one on enquiry whether there was indeed any basis for the inference.

This conclusionary statement was made by Batt J after a comprehensive review of the authorities in relation to the nature of a question of law or an error of law.[31]

13 The relevant parts of the Rules with respect to the Defendant's appeal from the Orders of Mukhtar AsJ are contained in the following provisions:

77.06 Appeals generally

Subject to section 17A of the Supreme Court Act 1986 and to Rule 16.5 of Chapter V of the Rules, an appeal from any judgment or order of an Associate Judge made under any Chapter of the Rules lies to the Trial Division constituted by a Judge of the Court, except in any case where an appeal lies to the Court of Appeal.

...

77.06.9 Powers of Judge of the Court hearing appeal

(1) On an appeal under Rule 77.06, a Judge of the Court shall have all the powers of the Court constituted by an Associate Judge.

(2) On an appeal under Rule 77.06, a Judge of the Court shall have power to -

(a) draw inferences of fact; and

(b) give any judgment and make any order which ought to have been given or made; and

(c) make any further or other order as the case may require.

(3) On an appeal under Rule 77.06, a Judge of the Court shall have power to receive further evidence upon questions of fact, whether by oral examination in court, by affidavit, or by deposition taken before an examiner.

(4) The powers of a Judge of the Court under this Rule may be exercised notwithstanding -

(a) that no notice of appeal has been given in respect of any particular part of the judgment or order of the Associate Judge which is the subject of appeal under Rule 77.06 or by any particular party to the proceeding before the Associate Judge; or

(b) that any ground for allowing the appeal or for affirming or varying the judgment or order of the Associate Judge is not specified in the notice of appeal.

14 For the reasons which follow with respect to the substance of matters raised in both appeals and having regard to the broad powers of a judge under r 77.06.9, I am of the opinion that the Orders of Mukhtar AsJ should be affirmed and, accordingly, that the Plaintiff's appeal from the Tribunal decision should be entertained. In relation to this appeal, I am satisfied, for the reasons which follow, that there are matters raised in the Plaintiff's Notice of Appeal which constitute vitiating errors of law on the part of the Tribunal such as would warrant the granting of leave to appeal. Accordingly, I would grant leave to appeal, although this grant is not necessary having regard to the Orders of Mukhtar AsJ.

15 Finally, with respect to the Orders of Mukhtar AsJ and his Honour's Reasons for Judgment,[32] I am satisfied, again for the reasons which follow, that the provisions of r 77.06.9 enable the Court to entertain and hear all matters which the Court now regards as relevant arising under and with respect to the Plaintiff's Notice of Appeal. Accordingly, I propose to address matters in issue with reference to the questions raised in the Plaintiff's Notice of Appeal, questions which, in my view, as answered in the reasons which follow, address the matters raised in the Defendant's Notice of Appeal.

16 The factual background to this proceeding and the substantive issues in dispute, together with the conclusions of the Tribunal on those issues are helpfully set out in the Tribunal decision as follows:[33]

1. The issue in this proceeding is whether the parties are bound by a market rental valuation provided by an independent specialist valuer appointed by the parties. The Applicant tenant says the parties should not be so bound because the valuer, in reaching his determination, failed to apply the criteria set out in s 37 (2) of the Retail Leases Act 2003 ("the Act").
2. By a lease dated 1 February 2007 ("the lease") the Respondent leased premises in Epping to the Applicant for an initial period of 14 years. The Applicant runs its business, known as the Epping Hotel, from the premises. The lease provides for rent to be adjusted on the fifth anniversary of the lease - 1 February 2012 ("the review date") - to a sum which, if not agreed by the lessor and lessee, to be the "then current market rental for the demised premises" as determined by an independent specialist valuer. The lease provides that the valuer's decision is "final and binding".
3. The review date passed and, the parties being unable to reach agreement on an adjusted rental sum, agreed to the appointment of Mr Grieve of "CBRE Hotels" as the independent specialist valuer ("the Valuer"). The Valuer's appointment was confirmed in around November 2012.
4. The Valuer requested certain information from the Applicant including the Applicant's trading accounts for the financial years 2009, 2010 and 2011. Although the requested information was provided, the Applicant communicated to the Valuer the Applicant's view that, having regard to the requirements of s 37(2) of the Act, the Valuer should be cautious in using the Applicant's trading figures and that the Valuer should first consider the rent and conditions of any comparable retail premises. The Applicant also submitted to the Valuer its view that the Valuer should pay no regard to legislative change to the Victorian gaming industry which came into effect on 16 August 2012, six and a half months after the review date.
5. In February 2013 the Valuer provided to the parties his report as to his assessment and determination of the current market rental for the premises applicable from the review date ("the valuation report" and "the rent determination"). It is apparent from the valuation report that in reaching the rent determination the Valuer relied on the Applicant's trading figures and also took into account the legislative changes which came into effect on 16 August 2012.
6. The Applicant says that the Valuer has failed to apply the criteria as required under s 37(2) of the Act.
7. The Respondent says that it is appropriate, and not contrary to the criteria set out in s 37(2) of the Act, that the Valuer place reliance on the Applicant's trading figures. The Respondent says also that it was appropriate that the Valuer consider the effect of the legislative changes effective from 16 August 2012 because, as at the review date, it was common knowledge within the gaming industry that the legislative change was coming.
8. For the reasons discussed below, I find that the Valuer has failed to apply the criteria in s 37(2) of the Act and, as such, the Valuer has misconceived the task required of him by the terms of the lease. For this reason, the parties are not bound by the rent determination.

17 The provisions of the Act which are relevant to the present proceeding are as follows:

(1) A retail premises lease that provides for a rent review to be made on the basis of the current market rent of the premises is taken to provide as set out in subsections (2) to (6).

(2) The current market rent is taken to be the rent obtainable at the time of the review in a free and open market between a willing landlord and willing tenant in an arm's length transaction having regard to these matters -

(a) the provisions of the lease;

(b) the rent that would reasonably be expected to be paid for the premises if they were unoccupied and offered for lease for the same, or a substantially similar, use to which the premises may be put under the lease;

(c) the landlord's outgoings to the extent to which the tenant is liable to contribute to those outgoings;

(d) rent concessions and other benefits offered to prospective tenants of unoccupied retail premises -

but the current market rent is not to take into account the value of goodwill created by the tenant's occupation or the value of the tenant's fixtures and fittings.

(3) If the landlord and tenant do not agree on what the amount of that rent is to be, it is to be determined by a valuation carried out by a specialist retail valuer appointed by -

(a) agreement between the landlord and tenant; or

(b) if there is no agreement, the Small Business Commissioner -

and the landlord and tenant are to pay the costs of the valuation in equal shares.

(4) The landlord must, within 14 days after a request by the specialist retail valuer, supply the valuer with relevant information about leases for retail premises located in the same building or retail shopping centre to assist the valuer to determine the current market rent.

Penalty: 50 penalty units.

(5) In determining the amount of the rent, the specialist retail valuer must take into account the matters set out in subsection (2).

(6) The valuation must -

(a) be in writing; and

(b) contain detailed reasons for the specialist retail valuer's determination; and

(c) specify the matters to which the valuer had regard in making the determination.

(7) The specialist retail valuer -

(a) must carry out the valuation within 45 days after accepting the appointment, or within such longer period as may be agreed between the landlord and tenant, or if there is no agreement, as determined in writing by the Small Business Commissioner; and

(b) may seek to enforce under Part 10 (Dispute Resolution) an obligation of the landlord under subsection (4).

Sub-section (2) is the principal provision the subject of the present proceeding, though sub-ss (3) to (7) provide some further statutory context to the valuation process. Sub-section (1) is also a significant provision, as discussed in the reasons which follow. As discussed in these reasons, these provisions have the effect of treating the provisions of sub-ss (2) to (6) as terms of the relevant lease.

18 As indicated previously, it is most convenient to deal with the issues raised in both the Plaintiff's Notice of Appeal and the Defendant's Notice of Appeal by reference to the questions raised in the Plaintiff's Notice of Appeal.

1. Whether the Tribunal erred in finding that the Act does not allow the methodology employed by the Valuer ("Question 1")

19 As threshold issues in the consideration of Question 1, the Defendant, Serene, submits as follows:

(1) Mukhtar AsJ did not grant leave to appeal on the general issue of whether or not the Tribunal found that the profits method offended s 37 of the Act; and

(2) In any event, the Tribunal decision was based on a factual issue as to what the Valuer considered or failed to consider. Therefore, Serene claims, the Tribunal decision does not raise an issue as to whether the Act allows the methodology employed by the Valuer as a general proposition.[34]

20 With respect to the grant of leave to appeal, and as the Plaintiff, Epping, submits, Order 1 of the Orders of Mukhtar AsJ merely grants leave to appeal and does not settle the questions for appeal.[35]

21 Furthermore, the wording of Question 1 mirrors that of the Tribunal decision where it was found that:[36]

However reasonable the Valuer's methodology may seem, and whether or not it is a method that has in the past been commonly adopted by valuers in the hotel industry, I do not accept that s 37(2) of the Act allows the methodology employed by the Valuer. I am satisfied that the Valuer has, contrary to the requirement in s 37(2) of the Act, taken into account the value of the Applicant's fixtures and fittings, and in so doing the Valuer has fundamentally misconstrued his task. As such, I find that the parties are not bound by the rent determination.

To my mind, this statement makes it patently clear that the Tribunal decision puts the question of whether the Act allows the methodology employed by the Valuer directly in issue. Whether the Tribunal may or may not have erred in considering, and expressing a conclusion on, this issue to begin with does not change the fact that it clearly did so.

22 The Defendant submits that the Tribunal was never concerned with determining whether, as a general proposition, s 37(2) allows a profits based method of determining rent.[37] However, even if I were to accept this point, the fact remains that the Tribunal was essentially concerned with whether s 37(2) allows the methodology actually employed by the Valuer and, in my view, was properly so concerned. The Tribunal was properly concerned to deal with the substance of the matters it was called upon to consider.

23 As a result, the threshold issues raised by the Defendant are resolved and Question 1 is properly entertained by this Court.

24 Whether the Tribunal erred in finding that the Act does not allow the methodology employed by the Valuer depends upon the answer to the following two questions -

(1) What was the methodology employed by the Valuer?

(2) Does the Act allow the methodology employed by the Valuer?

25 The rental determination, dated 1 February 2012, provided by the Valuer, is in the form of a "speaking" valuation ("the Rental Determination" or "the Valuation"). The Valuation does, in terms of its "speaking", expose the Valuer's methodology and reasoning process together with references to the detailed factual matters which, in the Valuer's judgment, are relevant to the particular hotel premises. Moreover, the Rental Determination has not been relevantly criticised as a rental valuation in the context of the issues now raised in this proceeding other than with respect to compliance with the Act. In this latter respect, only the Defendant contends non-compliance.

26 Having regard to the issues raised in this proceeding, it is important to consider the Valuer's methodology and reasoning process in some detail and, for this purpose, reference is made to the following parts of the Rental Determination:[38]

6 Rental Determination Methodology

6.1 Pertinent Matters

...

I refer to the long established valuation practice within the hotel industry which measures worth on the basis of net operating profit/EBIDTAR (earnings before interest, depreciation, taxation, amortisation & rent) whereby private financial arrangements are disregarded as these are not considered direct operating expenses. As a consequence Profit & Loss Statement inclusions such as interest on loans, depreciation, amortisation, leasing charges, hire purchase costs and taxation are excluded from the calculation of EBIDTAR.

The issue in respect to the new gaming structure therefore arises in respect to the appropriate treatment of cost items incurred by the Venue Operator (in this situation the Tenant) which include:

➢ Professional/Consultancy advice in the lead up to the introduction of the new gaming structure;

➢ The cost of the gaming entitlements;

➢ The cost of gaming equipment;

➢ The costs associated with the operations of gaming which have been undertaken by the Gaming Suppliers: Tabcorp and Tattersall's.

In my view the doctrine of EBIDTAR being the basis of value should continue to be observed and that costs and expenses incurred which relate to payments in respect of capital purchases should be disregarded in the assessment of EBIDTA[R], this includes the following items:

➢ Payments in respect to gaming entitlements;

➢ Payments relating to the leasing of gaming equipment;

➢ Payments relating to loans advanced in respect of the new gaming structure.

...

6.3 Overview

Hotel premises are, largely by the nature of their design, specialised improvements. It is my observation over many years that the industry measures value and rental on the basis of trading propensity and operational profitability, assuming good average standard of management. In my view, given this market norm, the current market rent for the Epping Hotel should be assessed on this same basis.

Therefore a significant component of this rental determination is the assessment of a reasonable trading level for the Epping Hotel.

6.4 Trading Overview

The Epping Hotel trades pursuant to Late night general Liquor Licence No. 31915347 which provides for on premises trading from 7am to 7am the following morning daily except for Good Friday & Anzac Day and off premises trading from 7am to 11pm daily except Sunday (10am start) and Good Friday & Anzac Day;

It does trade 7 days per week and offers the following facilities for patrons:

• Lunch and dinner seven days;
• Full bar facilities via three service areas;
• Gaming room with 40 Electronic Gaming Machines;
• Drive in bottle shop.

6.5 Competition

The catchment area of the Epping Hotel is anticipated to be principally derived from its local and outer northern suburb catchment areas within a radius of some 5 to 10 kilometres. The licensed premises which are closest to this venue include the Epping Plaza Hotel, Casa D'abruzzo Club, Epping RSL, Bundoora Hotel, Excelsior Hotel and Plough Hotel. Other venues include the new Highlands Hotel in Craigieburn, Commercial Hotel South Morang, Bridge Inn Hotel Mernda and Whittlesea Hotel. Competition in respect of Off Premises sales is derived principally from the eight packaged licensed venues within Epping including the Dan Murphy's store in Epping Plaza.

6.6 Independent Verification

Independent verification of actual trading results at the Epping Hotel is possible only in relation to gaming revenues, the following information has been sourced from the Victorian Commission for Gaming & Licensing Regulation website.

...

Given the date of preparation of this rental determination many of the VCGLR statistics available as at the date of valuation have been updated to current date. Information derived from the website is detailed as follows.

...

6.7 Adopted Trading

I am aware of my obligation in the assessment of trading to assume a good average standard of management. I advise that my assessment of trading has been undertaken on this basis.

In this respect I have reflected on the following information:

➢ actual trading information provided for the venue;

➢ comments and information provided within the submissions;

➢ comments provided by the Tenant during my inspection of the premises;

➢ my knowledge of trading outcomes of venues which are considered to have some comparability to the Epping Hotel

In my view it is prudent that a five year trading forecast be undertaken to ensure that the full influence of the new gaming structure be incorporated into the assessment of current market rental.

Trading adopted in this Rental Determination is summarised in the following table:

...

7 Rental Determination Rationale

7.1 Overview

Traditionally rental for hotel premises has been assessed in the market on the basis of turnover levels and perceived EBIDTAR levels, it being a basic underlying notion that the business's capacity to pay is a major rental consideration. The trading cash flows assessed for the Epping Hotel reflect, in my view, a level of revenue and profitability forecasts which are reasonable as at the date of this determination.

I refer to Section 37(2) of the Retail Leases Act which directs the Determining Valuer as follows; "....but the current market rent is not to take into account the value of goodwill created by the tenant's occupation or the value of the tenant's fixtures and fittings." It is usual industry practice that the fixtures and fitting used in the operation of the business be held in the ownership of the Tenant and it is the Tenant's responsibility to adequately maintain or if necessary replace such items.

It is also the market norm whereby the negotiation of a new lease agreement would also comprise the Tenant's purchasing the Fixtures & Fittings plus the negotiation of a Rental. My review of transactional evidence suggests the following broad industry parameters have been applied in assessment of rental:

______________________________________________________________

Rental Approach Rental Parameters

______________________________________________________________

By Gross Turnover: Bar Sales: ...

Off Premises Sales: ...

Food Sales: ...

Accommodation Sales: ...

Gaming Commissions: ...

Other Income: ...

______________________________________________________________

By EBIDTAR: EBIDTAR: 38.0% to 40.0%

______________________________________________________________

It is pertinent to note that the future application by the Tenant of its owned Fixtures & Fittings is included in the rental assessment process, the market based rental ratios take this ownership into account so as to avoid double dipping.

In a post 16th August 2012 market environment the operation of the new gaming structure will deliver a new set of trading parameters whereby (assuming constant gaming expenditures) revenues to venues will be increased due to the changed allocation and taxation regimes whilst operational expenses will increase due to the onus of gaming operations being the responsibility of the Venue Operator (not Tabcorp or Tattersall's). Bearing this in mind it is a reasonable expectation that the rental ratio applied to gaming income will alter.

The new gaming structure also delivers market uncertainties which were not present in the prior structure, specifically these relate to perceived risks in regard to:

➢ Life cycle of gaming entitlements is ten years, the cost of future entitlements is an unknown factor;

➢ The Gaming industry is highly regulated, community concerns in regard to problem gambling have in the past regularly resulted in unforseen changes to legislation being enacted with a view to reducing gaming expenditures, this is an ongoing perceived risk;

➢ The growth of internet based gambling is viewed as a significant threat to the hotel gaming industry;

➢ Pre-commitment remains as a stated policy objective in Victoria, it represents a risk to trading within the period to the next market rental review.

On account of these issues I am of the opinion that the rental to EBIDTAR ratio should decrease.

7.2 Rental Evidence

Unlike typical retail premises, hotels are looked upon as a specific asset class. In this respect, I am satisfied that market rental evidence supports the rental ratios indicated earlier in respect of the pre 16th August 2012 period, and, it is the specific characteristics of the Epping Hotel which must be addressed herein. I have done so in the trading adopted.

In the post 16th August 2012 period I restate my view that the rental ratios need to be adjusted to take account of the changed way that gaming will be operated in hotel venues.

7.3 Market Rental Calculation

I have determined to assess the current market rental for the Epping Hotel via the application of a 38.0% rental ratio to the EBIDTAR assessed for the trading period 1st February 2012 to 15th August 2012 and a 34.0% rental ratio to the EBIDTAR assessed for the period post 16th August 2012. My calculations which take into account the annual rental increases are detailed as follows:

...

27 As is clear from the Rental Determination, the Valuer's methodology is best described as an application of the "profits method" of rental valuation. Care must, naturally, be exercised with respect to labelling methods of valuation in such general terms, particularly when it is necessary to have regard to the parameters within which the rental valuation is to be conducted - in other words, the terms of the Valuer's "charter". In this instance, the critical aspects of the Valuer's "charter" are provided by the provisions of s 37(2) of the Act, whether viewed as statutory provisions or contractual, lease, terms mandated by statute as a result of the operation of s 37(1) of the Act. It is implied that any valuation process to which s 37(2) applies must comply with accepted valuation methodology in order to allow the "current market rent" to be determined.

28 It is in the context of the matters to which reference has been made - and keeping in mind the terms of the Valuer's "charter" - that it is helpful to review some of the cases concerning rental valuation of similar premises, particularly with reference to trading history and profits. In some of the cases to which reference is made, the consideration of the relevance of profits and trading figures is considered in the context of a freehold valuation - for rating or other purposes. Nevertheless, the methodology and considerations discussed are, in my view, applicable with respect to rental valuations of similar premises. Moreover, it makes no relevant difference in the present circumstances that the valuation process may be applied in the course of an arbitration rather than an expert determination process, by a valuer.

29 In relation to rating valuations, Halsbury's Laws of England states the position as follows:[39]

The simplest method of valuing a public house would be by ascertaining the rents which are prevalent in the neighbourhood for "free" houses; but as "free" houses are comparatively few, it is rarely possible to apply this test. Evidence of the trade actually done and of the profits made by the actual occupier is admissible in order to ascertain the rental value. An occupier may be compelled to give evidence of the trade done on the licensed premises.

The usual method of valuation of licensed premises when based on trade is to take the profits, actual or estimated, of the last year or over an average of years, together with the tied rent, and to subtract from them the remuneration which the hypothetical tenant would expect for himself, and to apportion the remainder between rent (i.e. gross value) and rates. Another possible method is to take a percentage on gross receipts. Valuation by reference to capital values is not an effective method.

31 More particularly, in Cartwright v The Guardians of the Poor of the Sculcoates Union in Kingston-upon-Hull,[41] Lord Macnaghten said:

What the learned arbitrator has done is to take into consideration the amount of business which this public-house was doing. Was he wrong in that? Surely the very first thing that a tenant who was going to offer for a house of this sort would do would be to consider (roughly if he could not do it accurately) what amount of business the house commanded. It appears to me that the volume of business done in a public-house, as apparent to the man in the street - if I may use the expression - is the very first thing that a tenant proposing to make an offer for such a house would take into consideration.

... it seems to me that such evidence would be admitted as an important element in ascertaining what trade has been done in the house; for really it appears to me that this would be the element of all others which a tenant might be expected to take into view in fixing the rent he ought to give for the premises.

[The arbitrator] asked himself almost the very first question that the hypothetical tenant would ask, namely, is this a house doing a good business or a bad business; is it a house with what is popularly called a roaring business, or is it a house that is going down for some reason or other, such as there being other houses in its neighbourhood?

You have in each case to find out in the best way you can what is the rent which a tenant may reasonably be expected to give, and if the best way under the particular circumstances is to ascertain the use which a tenant might expect to be able to make of the premises, the facility afforded by the premises for the carrying on of a trade appears to me to be a primary and elementary consideration in the case. If you are to take into account the fact that the premises command a trade, you must surely ask what trade. Is it a large trade, or is it a small trade? And I do not know myself any better test of what trade they may be expected to command than the trade which they actually do command. It is not that you rate the profits, it is not that you rate the man's skill and judgment or discretion in the mode of carrying on the business, but you have to ascertain what sort of a trade the hypothetical tenant, as he is called, may reasonably expect to be able to carry on on those premises as an element in determining the rent he would be willing to offer.

And Lord Brampton, emphasising the "market" perspective, said:[45]

How would the landlord himself look at the matter, apart from the tenant altogether? He would say, "I have a house; it is a house capable of enabling a man to earn by diligence and the application of his own personal abilities ₤1,000 a year in that house; he wants to hire it from me. I am not going to let it to him for a mere percentage representing the interest upon what I have laid out in bricks and mortar upon the house; that would not represent what I think the value of the house is; it is upon a spot where custom is attracted to it; if he can make ₤1,000 a year, as I think he can, I must have a suitable proportion - at all events, a bigger rent than I should have if the house were only capable of yielding him a profit of ₤100." My Lords, I will put the case in this way: Supposing in a street which runs at right angles to another street, so as to form in point of fact two streets, two ordinary houses are built, both alike in all their materials and in the accommodation which is provided - they are each licensed: the one house is let at ₤200 a year, but in that house there is very little custom done, but yet there is enough custom there to support a man who pays his ₤200 a year rent, and he is quite satisfied to pay that in that house. The house on the opposite side at the opposite corner of the street is capable of enabling a man to earn ₤1,000 a year. Is it right or reasonable, or good sense, to suppose that the landlord would let the one house for ₤200 a year to a man who could earn by diligence ₤1,000 a year in that house simply because the two houses were like each other? He must take into consideration the capability of the house, the position it is in, and the power it gives to a tenant who properly occupies it to make a very large sum of money for his own profit. It seems to me that common sense would dictate the course I have suggested to the landlord.

32 The approach in Cartwright[46] has been applied in Australia. For example, in R v Devonport; Ex parte Ferrall, Morris CJ said:[47]

It seems perfectly clear from ... [the decision in Cartwright] that if by experience one can say how much profit a proprietor of a licensed premises ought to be able to make on certain purchases, and if it can be said that intending proprietors will pay such rents for the ability to make such profits, that is a perfectly proper way of fixing the annual value.

33 In Harewood Hotels Ltd v Harris,[48] the English Court of Appeal considered whether the tenant's financials were admissible when determining market rent under s 34 of the Landlord and Tenant Act 1954 (UK),[49] which is broadly similar to s 37(2) of the Retail Leases Act 2003. Lord Evershed MR, echoing Lord Brampton in Cartwright, said:[50]

But, in my judgment, it is plainly legitimate for a judge to hear evidence which bears upon the question which he has to decide, namely: what would the particular holding reasonably be expected to be let at in the open market? Plainly, I should have thought, in arriving at a conclusion upon that question, it is legitimate to hear evidence of what similar premises which are being let for a particular purpose (as the one in suit is) can be expected to earn for a potential lessee in the market in the place where the premises are; and, if so, then similar evidence is, in my judgment, admissible for proving the same point about the premises in suit. In other words, if the purpose of the evidence of the figures was for that limited objective, then I think for my part that they were perfectly admissible and that no objection can be made to them.

34 Similarly, in Cooper v City of Perth,[51] Jackson SPJ of the Supreme Court of Western Australia considered an appeal against the valuation of a hotel based on 7 per cent of the annual bar takings. The plaintiff in that case contended that the assessment should be based upon the net profits of the hotel. Neither party contended that the valuer should have adopted a direct comparison method. The Court held as follows:[52]

In the cases of licensed premises I suppose, in the first place, a valuer would seek to base his valuation on actual rent paid or comparable rents in the locality if that information were available. Here it is agreed that the rent paid by the appellant and his wife as tenants to the appellant as owner is not a reliable index of annual value. Apparently comparable rentals also were unavailable. In those circumstances the next best method of arriving at a fair value is to examine the accounts of the hotel and to endeavour to ascertain from them what amount, by way of rental, a hypothetical tenant would be prepared to pay for a letting from year to year. Now I have no doubt that one of the first questions which a prospective tenant would ask would be as to the nature and extent of the business being done at the hotel. But that information is sought not as the ultimate enquiry but as the means whereby the enquirer may satisfy himself as to the likely profits which he should make at the hotel. In the end the hypothetical tenant is concerned about his net profits. When he knows what these are likely to be he can estimate how much rent he can afford to pay. Information as to the business done, that is the gross receipts, is of itself insufficient for that purpose. No doubt a prospective tenant with experience in the hotel trade would be able quickly to estimate from the gross receipts the probable amount of gross profit. He might also, from his experience, be able to take the next step and calculate or estimate the outgoings which he would be required to expend in order to gain that amount of gross profit and thereby he might be able to estimate for himself his probable net profit. But his ultimate concern must be with his net profit, and hence the hypothetical tenant would be vitally interested and concerned to ascertain the net profit actually being made by the present licensee, if those figures were available to him. Of course he would not necessarily regard the current actual net profits as those which he himself might make. On the one hand he might recognize that the present licensee was both popular and experienced, who was able by reason of his own efforts to carry on with a minimum of staff or to reduce outgoings in other directions, and in those circumstances the prospective tenant might contemplate that his own net profits would be lower. On the other hand it is very likely, human nature being what it is, that the hypothetical tenant would think he could run the business somewhat better than the present occupier, increase the gross takings and the gross profits and reduce the outgoings, thus providing on all counts an increased net profit. But I emphasize again the ultimate enquiry in his mind would be to the net profits and not merely to the takings. It follows from this that when a valuation is being made on the basis of the capacity of a hotel business, the actual net profits being made by the present licensee are highly relevant to determine the probable net profits to be made by the hypothetical tenant which in turn is a vital consideration.

35 It is clear from more recent decisions that the use of the "profits method" or of trading figures for the premises is not always appropriate. Thus, in W J Barton Ltd v Long Acre Securities Ltd,[53] the English Court of Appeal held that the tenant's trading figures were not relevant to a determination of the market rent for retail bakers, confectioners and pastry cooks. However, the Court added more general observations, consistent with the authorities to which reference has been made:[54]

Certainly the [Harewood Hotels[55]] decision shows that there may be cases where the production of trading figures may be both relevant and admissible and that where that is so section 34 [of the Landlord and Tenant Act 1954 (UK)] does not inhibit the consideration of such evidence for the narrow limited purpose described even though the exclusion of any consideration of the effect of the tenant's occupation and of goodwill may present the judge with a very difficult task.

It is, we think, clear that there are several types of premises, of which a hotel is only one example, where the ascertainment of an open market rent may depend on an assessment of the likely profitability of the business for which the premises are peculiarly adapted. Other instances might be a petrol-filling station, a theatre or a racecourse, in all of which the market rent may well depend on the average takings. It is both unnecessary and would be unwise to seek to define or limit the categories of premises where such evidence would be relevant for the limited purpose described in the Harewood Hotels case.[56] But that is a far cry from saying that such evidence is always relevant and, in our judgment, considerations of this sort do not apply in the ordinary case of shop premises with no peculiar features in a business area such as that with which the instant case is concerned and where there are plenty of comparable premises from which the open market rents can be deduced.

36 Similarly, in Modick R C Ltd v Mahoney,[57] the New Zealand Court of Appeal considered whether the tenant's trading figures were relevant in determining a reasonable rent for a car dealership. Cooke P said:[58]

The question must be what rent should fairly be paid for the premises during the relevant period by a reasonable motor vehicle dealer. Presumably a reasonable motor vehicle dealer would give prominent regard to potential profitability.

It is conceivable that there is enough evidence of truly comparable transactions to enable the proper rent to be arrived at with sufficient confidence without any consideration of the tenant's accounts. If so, it would be proper for the arbitrator to find that reasonable parties would go no further. But, in the light of the evidence and the questions asked by the arbitrator of the Court, I think that the tenant is entitled to an opportunity of contending before the arbitrator that this case is not in that category.

Even where rent is expressly required to be fixed on an open market basis, evidence of the trading results that have been or can be achieved in the particular premises is relevant unless there is enough other evidence to establish the figure satisfactorily; see, for example, the cases in the English Court of Appeal, Harewood Hotels[59] and WJ Barton Ltd v Long Acre Securities Ltd.[60]

... the arbitrator cannot make his assessment in blinkers or in a vacuum. The profitability of a business for which the site is suitable, and even more the profitability of a business of the only kind that is able to be carried on on the site, may well have a bearing on the value of the property and the rental to be obtained from it. The valuer or arbitrator is unlikely to be an accountant or an expert in business management, and so is likely to look to true, ie contemporary, market rentals of real comparability as a better guide than the lessee's own accounts, for they may reflect factors peculiar to the business rather than factors relevant to the rental value of the property. But in so far as they bear on the latter, they will be relevant.

The relevance of evidence as to profitability must necessarily be limited. The important distinction is between evidence that is related to the rental value of the property as between lessor and lessee on the one hand, and evidence as to the ability or willingness or reluctance of the lessee to pay a particular rent on the other. A recent judgment of Millett J in ARC Ltd v Schofield,[62] is helpful in this respect. Evidence of the latter kind is generally irrelevant, for the underlying assumption to which I have referred must remain. It was subject to this distinction that evidence of the tenant's financial results was admitted in Harewood Hotels. [63] I do not accept Mr Craddock's submission that the case is authority only in a situation where there is no other evidence of value, although as I have said, where there is such other evidence the tenant's profitability may carry little if any weight.

...

Thus it cannot be said in the present case that the profitability of the lessee is necessarily irrelevant to the decision which the arbitrator was required to make.

In my view once Mr Craddock acknowledged, as he was obliged to do in the face of such cases as Harewood Hotels,[65] that in certain circumstances and for limited purposes, the accounts of trading of the business conducted in the premises can be relevant (as where there is no, or inadequate, evidence of truly comparable rents), he must accept that it is for the arbitrator to determine whether in this case such accounts are relevant.

It is for the arbitrator to determine also whether particular evidence of accounts is helpful. It is to be emphasised, however, that the relevance of such accounts is not to establish what the lessee can afford to pay, but to bear upon what would be a reasonable rent over the period for which the rent is to be fixed in all the circumstances and in light of the use restriction in the lease.

37 Some English cases suggest that there is no requirement to disclose trading figures that were not available in the open market as those figures could not have influenced the market.[66] More particularly, in South Tyneside v Wickes Building Supplies Ltd,[67] Gross J, sitting in the Queen's Bench Division, considered an application to set aside a witness summons issued by the defendant tenant seeking production of documents relating to negotiations for the lease of a comparable premises by the tenant's competitor. The Court dismissed the summonses on the grounds that they were too broad, that the documents were not required for the arbitration and the information may have been obtained from elsewhere and that the competitor's confidentiality outweighed the need for the production of the documents. In considering the relevance of the documents sought, the Court considered the authorities in Cardgrange[68] and Lynall[69] and said:[70]

... there is an attractive argument for saying that this reasoning [in Cardgrange and Lynall] is inapplicable to an open market letting of a comparable property, which is relevant because of the inference which may be drawn from the objective fact of the conclusion of such a bargain ... and not because of the knowledge or deemed knowledge of that bargain by the parties to the hypothetical transaction. If right so far, then Lynall is (with respect) similarly distinguishable. All this is, however, a provisional view only and, for the reasons given, academic.

38 It is, however, suggested by Reynolds and Fetherstonhaugh that the English approach may be too restrictive:[71]

In previous editions of this Handbook, the authors have expressed the view that the rule, as expressed in the English authorities, is too restrictive and is, indeed, precisely the opposite of what it should be.

According to the authors' argument, accounts which would have been available to the hypothetical lessee should not be admitted because to do so would fail to give effect to the usual requirement to disregard the effect on rent of the occupation of the tenant. If the tenant had not been in occupation, there would have been no published accounts available to the hypothetical lessee and the disregard requires that any effect which such accounts would have had on the mind of the hypothetical tenant, and thus on the market, must be ignored. Yet the same criticism cannot be made of accounts that were not public and thus could not directly have affected the market. Such accounts should be admitted because, without infringing the disregard, they bear direct relevance to the central question in a notional profits valuation, namely, what is the profit-earning potential of the premises.

The proposition just stated can be illustrated by an example: in the rent review of a casino, both landlord and tenant might adopt the notional profits method. The landlord might allege that a casino of the quality and in the location of the subject premises might be expected to achieve a turnover of ₤40 million per annum. The tenant might assert that a properly-run casino of that size in that location could only be expected to achieve a turnover of ₤10 million. In deciding who is right, surely the arbitrator ought to be entitled to receive evidence as to the actual turnover achieved by the tenant over the previous five years. If he had in fact been turning over some ₤40 million then, in the absence of some good explanation, the arbitrator would be justified in treating the tenant's case with some scepticism.

39 Continuing, Reynolds and Fetherstonhaugh say:[72]

(c) In the light of the dictum of Gross J in the South Tyneside[73] case and the Commonwealth cases, there must be more doubt about the application of the above principle where the trading information is alleged to be relevant because of what it shows about the way certain businesses are conducted, what profit margins can be anticipated, or even whether the demised premises themselves have a particular profit-earning capacity relating to that particular business. It can be argued that the significance of such evidence is not (as Gross J put it) "the knowledge or deemed knowledge" of the trading information by the parties in the hypothetical transaction but rather the "objective facts" which such evidence establishes. If such a distinction is sound, it may justify the admission in evidence of trading accounts even when one or more of the reasons identified above would otherwise require its exclusion.

(d) This distinction may indeed be the basis of the "exception" as to disclosure (but not as to inadmissibility) of trading information described in paragraph 7.7.3 above. Since the party seeking disclosure is trying to ascertain from the accounts "objective facts" which will assist him in preparing his case or damaging that of the other party, disclosure is appropriate according to ordinary principles. Whether the documents thus disclosed will or will not ultimately be admissible will turn (it is suggested) upon the purpose for which they are being tendered in evidence.

40 In my view, the authorities and commentaries which have been discussed provide more than an adequate basis for the view that the Valuer has, in the present circumstances, in conducting a rental valuation of hotel premises, approached his task with a methodology and reasoning process which has a firm foundation in the general law as being appropriate. Moreover, this position is, in my view, further confirmed when consideration is given to the nature of the, so-called, "profits method", as has been applied and endorsed in the authorities and commentaries.[74] The nature and rationale of the "profits method" is concisely stated by Hill and Redman, as follows:[75]

The concept which underlies the profits method of valuation is easy to describe. Essentially, there are three steps in the process.

(a) An estimate is made of the income from the business. In the case of a hotel this will mean that an estimate is made of the likely income from such sources as the letting of rooms, the restaurant and bars and ancillary functions such as holding conferences or running a health club. In the case of a casino an estimate will be made of the amount which members of the club will gamble and how much will be retained by the operators.

(b) An estimate is then made of the various expenses and outgoings involved in the operation of the premises. To take again a hotel as an example there will be staff expenses, purchases of items such as food and drink, and outgoings such as fuel, rates, insurance and advertising.

(c) The difference between the income and the running costs is the net profit. This amount is available for the payment of rent. The final step is therefore to decide what proportion of the net profit should be taken as that which the willing lessee would be willing to pay as rent.

A willing lessee of premises such as a hotel would be likely to be faced with substantial initial expenditure. The rule, explained earlier, that all tenant's fixtures are taken to be removed means that the incoming lessee would have to provide items such as bedroom furniture and equipment for the restaurant and common parts. When a comparables method of valuation is used, it is not usually necessary to do a calculation of initial fitting out costs since the need to fit out the premises will be a factor already taken into account in the rent agreed or determined for the comparables. The use of the profits method entails the cost of fitting out and similar work being brought into the calculations since it is a cost which will be borne by the lessee in order to make a profit. The usual means of paying regard to this aspect of the operation is to estimate the capital cost involved and then to rentalise it over the period of the expected life of the equipment. The annual or rentalised sum will then be an item of expenditure to be put into the notional accounts. A similar process would be necessary if a willing lessee would expect to carry out improvements to the premises.

Does the Act allow the methodology employed by the Valuer?

41 The Tribunal answered this question negatively for the following reasons:[77]

1. In my view, it is very clear from the statements in the valuation report that the rent determination is founded on the Applicant's own trading figures, and that the Valuer has taken into account the value of the Applicant's fixtures and fittings. This is borne out in particular by the Valuer's statement in the valuation report, referred to above, that "It is pertinent to note that the future application by the Tenant of its owned Fixtures & Fittings is included in the rental assessment process...". Section 37(2) of the Act mandates that the Valuer not take into account the value of the Applicant's fixtures and fittings.
2. The Respondent submits that the methodology employed by the Valuer is consistent with the evident purpose of the Act to strike a fair balance between the interests of the Landlord and the Tenant and to secure a fair and reasonable estimate of the rent that would be paid if the premises were let on the open market. The Respondent says that it is reasonable that the Valuer consider the profits which a willing lessee would make in the future assuming average competent management of the same business by a hypothetical willing lessee. The Respondent says that this "profits method" of determining market rent - where the Valuer takes account of the profits generated by the sitting tenant - is common in the hotel industry and not prohibited by s37(2) of the Act.
3. However reasonable the Valuer's methodology may seem, and whether or not it is a method that has in the past been commonly adopted by valuers in the hotel industry, I do not accept that s 37(2) of the Act allows the methodology employed by the Valuer. I am satisfied that the Valuer has, contrary to the requirement in s 37(2) of the Act, taken into account the value of the Applicant's fixtures and fittings, and in so doing the Valuer has fundamentally misconstrued his task. As such, I find that the parties are not bound by the rent determination.

42 As the Tribunal reasons indicate, the critical issue with respect to the Valuer's methodology and reasoning is whether or not he has taken into account the value of the tenant's fixtures and fittings contrary to the requirements of s 37(2) of the Act. For the reasons which follow, I am of the opinion that the Valuer has not done so and, consequently, the Tribunal is in error having misconstrued the requirements of those provisions of the Act. As discussed elsewhere in these reasons, the error is an error of law in this respect. It is not an error flowing from the application of an unambiguous statutory provision in a factual context.[78]

43 Serene submits that the passages from Hill and Redman's Law of Landlord and Tenant set out above indicate that it is necessary to make an express capital cost adjustment when adopting the "profits method".[79] Serene also relies on the decision of Bleby J in Sky City Adelaide Pty Ltd v Valuer-General,[80] in support of its argument that an express capital cost adjustment is required. Sky City is, however, of no assistance in the present circumstances. The legislative context considered in Sky City was significantly different and thus that case is merely an example of Serene's preferred interpretation of the "profits method".

44 As discussed, the authorities to which reference has been made do,[81] in my view, indicate that the Valuer's methodology and reasoning would, as a matter of general law, be regarded as uncontroversial and in conformity with valuation law and practice with respect to hotel premises. Although the "profits method" which the Valuer has applied differs in a number of respects from that described in Hill and Redman's Law of Landlord and Tenant,[82] the differences are merely in the technique or process applied to achieve the same outcome - which is to ensure that the value of the tenant's fixtures and fittings is not taken into account in the calculation of current market rent.

45 As Hill and Redman indicate, this does not mean that the value of fixtures and fittings that may be required for the generation of profit through the conduct of the hotel business are necessarily excluded from the calculations required to estimate the current market rent. What it does mean is that the value is treated in the calculations in such a way that, as between the notional prior and future tenant, the value is in effect "cancelled out" so that the future tenant is not advantaged or disadvantaged in the rental calculation as a result of the prior tenant's expenditure and ownership of the fixtures and fittings. Clearly, in my view, this is the objective and meaning of the provisions of s 37(2) of the Act which are relevant to this proceeding.

46 On this basis, I accept the position as put by the Plaintiff:[83]

1. The Tribunal erred in relation to both of those findings, in that:

(a) s 37(2) of the ... [Act] requires the specialist retail valuer to assume the Premises is unoccupied and to disregard the value of the tenant's fittings and fixtures;

(b) however, s 37(2) also requires the specialist retail valuer to assume that there is a willing tenant bidding on the retail premises. In order to make good that assumption, the specialist retail valuer must posit certain attributes to the hypothetical tenant;

(c) in assessing the market that would bid on the lease, the specialist retail valuer concluded that the hypothetical bidder for the lease would be the operator of a hotel and gaming venue. That conclusion has not been criticised (nor could it be);

(d) the specialist retail valuer considered the sitting tenant's earnings before interest, taxation, depreciation, amortisation and rent (EBITDAR). By using EBITDAR (and not some other figures), the specialist retail valuer excluded the acquisition costs of the sitting tenant's gaming machines and gaming entitlements from the rental determination. It follows that the specialist retail valuer has assumed that the hypothetical tenant is leasing an empty shell and has acquired its own gaming machines and gaming entitlements;

(e) contrary to the Tribunal's findings at para 39, the phrase "[i]t is pertinent to note that the future application by the Tenant of its owned Fixtures and Fittings is included in the rental assessment process ..." does not indicate that the specialist retail valuer has failed to disregard the sitting tenant's fittings and fixtures. That phrase shows that the specialist retail valuer has assumed that the hypothetical tenant will derive its income from fittings and fixtures that it owns, not from the sitting tenant's fittings and fixtures. This is precisely what s 37(2) requires the specialist retail valuer to do, ie to disregard the sitting tenant's fittings and fixtures and assume that the hypothetical tenant will lease a bare shell;

(f) the Tribunal attached significance at paragraphs 43-44 of its reasons to the assumption by the valuer that the hypothetical tenant would acquire the sitting tenant's gaming machine and entitlements. However, this is merely a convenient hypothesis that does not affect the rental determination as the acquisition costs (ie depreciation, amortisation, interest or letting costs) are excluded from the figures that the specialist retail valuer considered. This proposition can be tested by assuming that the hypothetical tenant either:

1. brings its own gaming machines to the leased premises;
2. borrows to buy gaming machines; or
3. leases gaming machines.

Either way, the figures considered by the specialist retail valuer would be the same, that is, the hypothetical tenant's projected EBITDAR. It follows that the specialist retail valuer has both assumed a willing tenant and excluded the value of the tenant's fittings and fixtures;

(g) the steps taken by the specialist retail valuer to exclude the value of the tenant's fittings and fixtures are different to the process suggested in the extracts referred to above from ... [Hill and Redman's Law of Landlord and Tenant].[84] ... [T]he authors suggest that up-front costs would be "rentalised" over the life of the lease ... .[85] The effect of this approach is to spread the tenant's set-up costs across the life of the lease (ie a large cost up front is defrayed over the life of the lease). The same is achieved by the specialist retail valuer in this case by projecting the hypothetical tenant's EBITDAR for the new term. Rather than defraying the costs across the life of the lease, they are simply taken out of the equation altogether. Either way, it is clear that the specialist retail valuer turned his mind to the exclusion of the value of the tenant's fittings and fixtures and completed his task in accordance with the contract; and

(h) by contrast, to examine the sitting tenant's rent as a percentage of its earnings after depreciation, interest and amortisation, and then apply that same percentage to the hypothetical tenant's EBITDAR would inflate the rent payable in the new term and fail to disregard the value of the sitting tenant's fittings and fixtures.

1. Accordingly, the specialist retail valuer disregarded the value of the tenant's fittings and fixtures and properly assumed that the premises was unoccupied.

2. Whether the Tribunal erred in determining that the Valuer has, contrary to the requirement in s 37(2) of the Act, taken into account the value of the Defendant's fixtures and fittings, and in so doing the Valuer has fundamentally misconstrued his task ("Question 2")

47 Moving to the second question raised in the Plaintiff's Notice of Appeal, the Defendant, Serene, again raises threshold issues as to whether Question 2 is properly before this Court. Serene submits that whether or not the Valuer failed to exclude the value of Serene's fixtures and fittings is a question of fact that was determined by the Tribunal.[86] Accordingly, Serene claims, any misinterpretation by the Tribunal of the Rental Determination is not reviewable by this Court.

48 Serene's reasoning is set out in its written submissions as follows:[87]

(1) No issue was raised before the Tribunal as to the construction of any particular term in or part of s 37 of the Act.

(2) Neither party made a submission before the Tribunal which turned on the meaning of s 37.

**(3) The case before the Tribunal was run by both parties on the question as to whether the Valuer in arriving at his opinion as to rent - **

(a) failed to make an assessment on the basis that the premises was unoccupied; and/or

(b) failed to ignore the value of the tenant's fixtures and fittings.

**(4) In essence the Tribunal was required to determine two facts, namely, whether the Valuer determined the rent on the basis that - **

(b) the value of the tenant's fixtures and fittings were to be ignored.

(5) In determining these two facts, the Tribunal was required to do no more than establish (as a factual finding) whether or not the Valuation (being the only evidence before the Tribunal as to the Valuer's opinion) failed to make an assessment on the basis that the premises were unoccupied or failed to ignore the value of the tenant's fixtures and fittings.

49 Epping submits that the proper construction of the Valuation is a question of law and therefore Question 2 is properly before this Court. Epping submits that, while not itself a contract, the Rental Determination is part of a suite of documents that must be construed in order to establish the parties' contractual liabilities (arising from the lease). It is necessary to determine whether the Rental Determination complies with the contract in order to determine what rent Serene is required to pay. As such, Epping submits that the construction of the Rental Determination is a question of law, not of fact.[88]

50 Serene responds by arguing that the Rental Determination is not a contract or document intended to create legal relations, and so it is not necessary to construe its "legal effect". The only issue to determine, Serene claims, is the meaning of the words used in the Valuation, which is a question of fact answerable simply by reading the document.[89] In the same vein, Serene submits that the Valuation is no more than a written expression of the Valuer's opinion as to the value of the rent and therefore any interpretation of what the Valuer meant is a determination of a question of fact.[90]

51 In the alternative, Epping submits that the question of law raised by Question 2 is whether there is evidence to support the Tribunal's finding that the Valuer took into account the value of Serene's fixtures and fittings. Epping claims that, had the Valuer's methodology been properly understood, the only conclusion open to the Tribunal would be that the Valuer excluded the value of the fixtures and fittings.[91]

52 In my view, Question 2 raises a question of law and can be considered by this Court for the following reasons.

53 As is evident from the preceding reasons in response to the threshold issue in addressing Question 1, regardless of whether the parties made express submissions about the construction of s 37 of the Act, the Tribunal's view as to the meaning of that section necessarily underpins the entire Tribunal decision.

54 It is critical to understand that any consideration of whether a valuer has fulfilled the task entrusted to him or her under a lease to which the Act applies necessarily requires an express or implied interpretation of s 37(2). If this were not the case, it would be impossible to determine whether the determination in question complies with the terms of the lease, or in other words, whether it answers the contractual command, or whether it complies with the valuer's "charter".

55 As set out in the Tribunal decision, it has long been accepted that in order to determine whether a valuation is binding upon the parties, it is necessary to consider the terms of the parties' contract - the valuer's "charter" - that is, the terms of the lease.[92] In Legal & General Life of Australia Ltd v A Hudson Pty Ltd,[93] McHugh JA (as his Honour then was) restated the law governing when a valuation will be binding upon the parties. The following passage from his Honour's judgment is very well known but it is nevertheless helpful in the present context to set it out as follows:

In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v Kenwood Manufacturing Co Ltd.[94] A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is "final and binding on the parties". By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah;[95] Arenson v Arenson.[96] But as between the parties to the main agreement the valuation can stand even though it was made negligently. 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 is 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.

56 As McHugh JA makes clear, the central question for determination is: "Was the valuation made in accordance with the contract?" Put differently, but in equally clear language, Nettle JA in AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd[97] said (Maxwell P and Bongiorno AJA agreeing):

I agree with the judge that the question of whether it is open to review an expert determination on the ground of error is in the first place to be decided according to whether the determination answers the contractual description of what the expert was required to determine.

57 In Commonwealth v Wawbe Pty Ltd,[98] Gillard J agreed with McHugh JA's statement of the law in Legal & General before stating that:[99]

In my opinion it follows that the court should consider three questions -

(i) What did 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 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?

58 In answer to the first question, his Honour found that:

The umpire was appointed by the parties in accordance with the terms of the lease. It is plain that he gets his authority from the agreement between the parties and he is obliged to determine the valuation in accordance with the terms of the lease.[100]

Gillard J then went on to set out the terms of the lease in question.[101]

59 As the authorities make clear, the Tribunal's task was to consider whether the Rental Determination answered the contractual description of what the Valuer was required to do. For present purposes, it is sufficient to note that, by virtue of s 37(1) of the Act, sub-s (2) is taken to be a term of the lease, that is, a term of the contract between the parties. Therefore, the Valuer was required to make a determination that accorded with the requirements of that sub-section.

60 Critically, the Valuer was required not to "take into account ... the value of ... [Serene's] fixtures and fittings" in determining the current market rent. Serene submits that these words are clear and therefore whether the Valuation complies with the terms of the lease - as set out in sub-s (2) - can be determined by reading the plain words of the Valuation.[102] I do not agree.

61 As is evident in my reasons for allowing Question 1, the words "take into account" are ambiguous in the context in which they are used in s 37(2) of the Act. The ambiguity arises because these words, as used in the context of these provisions, do not specify with any clarity or particularity the nature and extent of the "disregard", for rental valuation purposes, to be applied with respect to the value of fixtures and fittings. This is not a criticism of the legislation having regard to the varying approaches properly adopted by valuers in varying circumstances with respect to different types of premises. Indeed the authorities to which reference has been made illustrate the importance of this flexibility, and its acceptance and recognition at general law. Thus, as explained in the preceding reasons, these provisions, properly construed, for the reasons indicated, do allow the Valuer to assume the existence of the tenant's fixtures and fittings for the purpose of employing the so-called "profits method", provided that the value of those fixtures and fittings is treated in the calculations in such a way that the value is in effect "cancelled out".

62 As such, it is apparent that the meaning of the words used in s 37(2) is far from clear on their face and, consequently, they must be regarded as ambiguous. The only question that remains then is whether the determination of the meaning of these words is a question of fact or a question of law.

63 A satisfactory test of universal application to distinguish between questions of fact and questions of law remains unformulated,[103] and as French CJ noted in Kostas v HIA Insurance Services Pty Ltd, these questions are "often closely intertwined."[104] Serene relies on two authorities in which the distinction between questions of law and questions of fact was considered. In S v Crimes Compensation Tribunal,[105] Phillips JA said:

What any statutory provision means will be more or less clear, depending upon what words are used, how they are put together and in what context. If the meaning of the relevant statutory description is clear (at least so far as relevant to the claim), no question arises; if the meaning is unclear, what is the proper meaning must be decided, as a matter of construction, and the first question is whether the words are used otherwise than with their ordinary and natural meaning. That is a question of law: Blue-Metal Quarries;[106] Pozzolanic.[107]

If the words are used with their natural and ordinary meaning, no further question of construction arises; for "[t]he common understanding of [the] words is not a question of law but of fact": Broken Hill South.[108] On the other hand, if the words are used in some special or unusual sense or, though used in their natural and ordinary sense, give rise to uncertainty because of, say, the grammar or the context, then the resolution of that problem of construction is a question of law, not fact: Pozzolanic.[109] Further, the words, though otherwise clear as to meaning, may import some legal criterion (such as the relationship between master and servant), and the ascertainment of what is involved in that criterion is obviously a question of law: Mahony;[110] Marshall.[111] Indeed, these tasks of construing the relevant statutory description are surely nothing other than settling the legal criteria (in the sense of the criteria fixed by statute) for the claimant's success or failure in his or her claim, and as such a question of law.

64 In Life Insurance Co of Australia Ltd v Phillips,[112] Isaacs J stated:

A document purporting to be a contract may be ambiguous. But the term "ambiguity" is itself not inflexible. It may arise from doubt as to the construction in their totality of the ordinary and in themselves well-understood English words the parties have employed. That is true construction. Or it may arise from the diversity of subjects to which those words may in the circumstances be applied. That is rather interpretation of terms. Or again, it may arise from obscurity as to the full expression in ordinary language of some abbreviated term or arbitrary form that has been adopted. That again is interpretation of terms. Very different consequences attach according as the ambiguity rests in construction or in interpretation.

65 I respectfully agree with these statements as general propositions.

66 For the preceding reasons and having regard to these statements of high authority, it follows that Question 2 raises a question of law and is properly before this Court. The words "take into account" might be said to bear the natural and ordinary meaning of "to consider". However, in the context of s 37(2) of the Act it is clear, as indicated, that seeking to apply such a natural and ordinary meaning - whether as "to consider" or otherwise - leaves critical matters uncertain and unresolved, resulting in ambiguity in the relevant sense.

67 For the sake of completeness, I note a possible argument that Question 2 raises a mixed question of fact and law. This possibility was raised in passing by the parties but taken no further. This leads me to observe, simply, that it is suggested that the question of whether s 148(1) of the VCAT Act allows appeals on mixed questions of fact and law is unsettled.[113] Had it been necessary to decide this point, I would have been disinclined to curtail the operation of s 148(1) of the VCAT Act by finding that mixed questions of fact and law cannot form grounds of appeal. As the authorities indicate, there is no "bright line" between questions of law and questions of fact and in many cases these questions will not be pure in their elements - law or fact. In the context of the provisions of s 148(1) of the VCAT Act, I do not regard such authorities as transcending the clear language and purpose of these provisions, which is to provide an effective appeal mechanism to this Court to correct errors of law - whether or not arising out of a mixed question of fact and law - without crossing the line into something in the nature of a merits appeal which would, as indicated previously, be at odds with Parliament's intention to establish a specialist tribunal. Moreover, the purpose of s 148(1) of the VCAT Act in providing an effective appeal mechanism with respect to questions of law is likely to be subverted if mixed questions are excluded and wasted time and expense flows from the need to search for a non-existent "bright line" for the purpose of isolating "pure" questions of law.

68 For the preceding reasons with respect to Question 1, Question 2 must also be answered in the affirmative. The Tribunal erred in determining that the Valuer had taken into account the value of Serene's fixtures and fittings because the methodology adopted effectively "cancels out" that value.

3. Whether the Tribunal was made to understand the elements of the methodology applied by the Valuer; that is, whether it was right, without more, to seize upon the language of his report concerning the future application by the Tenant of its owned fixtures and fittings as manifestly demonstrating an approach in violation of the Act ("Question 3")

69 Serene submits that Question 3 is a specific instance of the factual issue raised by Question 2 and is therefore not reviewable by this Court.[114] For the preceding reasons, I am satisfied that Question 3 raises a question of law and is properly before this Court in this proceeding.

70 In my view it is clear from the Tribunal's reasons that in finding that s 37(2) did not allow the methodology applied by the Valuer, the Tribunal was not made to understand the elements of that methodology and appears to have taken certain statements in the Rental Determination out of context. In any event, as indicated in the preceding reasons, the methodology adopted and applied by the Valuer does not offend the Act.

4. Whether the Tribunal erred in deciding that it was able to disregard the Supplementary Report ("Question 4")

71 I now turn to the second umbrella issue raised in the Plaintiff's Notice of Appeal, being the fourth question, namely, whether the Tribunal erred in deciding that it was able to disregard the Supplementary Report.

72 By letter dated 18 October 2013 (being the Supplementary Report referred to in Question 4), the Valuer wrote to the parties, the relevant paragraphs of which state:

I refer to Section 2.2 of the ... [Rental Determination], specifically the first paragraph of Page 9 which states that in undertaking the determination the provisions of Section 37(2) had been applied.

Based upon my experience in the hotel industry I am of the opinion that rent concessions and other benefits are not typically offered to prospective tenants of unoccupied premises. The rental evidence considered as part of the determination process was not, so far as I am aware, affected by concessions or other benefits offered to the prospective tenants.

73 The Supplementary Report was requested by Epping's solicitors, who, on 16 October 2013, wrote to the Valuer requesting:

... further details of your consideration of rent concessions and other benefits offered to prospective tenants of unoccupied premises as required by s 37(2)(d) of the Retail Leases Act 2003.

74 In deciding whether to consider the Supplementary Report (in order to determine whether the Valuer had regard to the matters set out in s 37(2)(d) of the Act), the Tribunal found:[115]

1. In my view there is no hard and fast rule as to whether parties, who have appointed an independent specialist valuer and received his valuation report, are bound to accept supplementary reports or material from the valuer. It depends on the circumstances in each case.
2. There is nothing in the Act or the lease to suggest that the Valuer is limited to providing one document on one occasion.
3. However, having regard to the means by which the supplementary letter was obtained, the date the letter was provided and its contents, I find that it would be unfairly prejudicial to the Applicant to pay any regard to it.
4. It is clear from the terms of the supplementary letter itself that the Valuer has provided the letter in response to a specific request from the Respondent, a request which, in my view, is a blatant prompt to the Valuer to provide further information in respect of a matter which is conspicuously absent in the valuation report.
5. Further, the Respondent's request to the Valuer was made some 8 months after the Valuer provided the valuation report to the parties and some 5 months after the Applicant commenced this proceeding. In my view, once the Applicant commenced this proceeding challenging the valuation report, it became untenable for the Valuer to provide any supplementary report.
6. In all the circumstances, I am satisfied that the supplementary letter should be wholly disregarded.

75 Again, as a threshold issue, Serene submits that Question 4 does not raise a question of law. It is claimed that the Tribunal's treatment of the Supplementary Report was a determination of an issue of fact within the Tribunal's general statutory discretion to exclude or admit evidence and is therefore not reviewable by this Court.[116]

76 I am satisfied that Question 4 does raise a question of law and is properly before this Court. For the reasons that follow, the Tribunal did not have a general statutory discretion to exclude the Supplementary Report because it forms part of the Rental Determination itself. It follows that the failure to have regard to the Supplementary Report raises a question of law in the same way that a failure to have regard to any aspect of the Valuation in the context of compliance or otherwise with the provisions of s 37(2) of the Act in the present circumstances would raise a question of law.

77 Before addressing whether the Tribunal should have had regard to the Supplementary Report, it should be noted that it is not clear, in my view, that the Valuer failed to have regard to those matters set out in s 37(2)(d) of the Act before the preparation of the Supplementary Report in any event.

78 At paragraph 2.2 of the Rental Determination, under the heading "Basis of Determination", the Valuer recites s 37(2) and states that these requirements were complied with in the preparation of the Rental Determination. The matters set out in sub-s (2)(d) are not mentioned elsewhere in the Valuation; however, this is consistent with the Valuer's statement in the Supplementary Report that the rental evidence considered as part of the Valuation was not affected by concessions or other benefits offered to prospective tenants, rather than an indication that these matters were disregarded.

79 Nevertheless, having regard to the requirement in s 37(6)(c) of the Act, that the valuation "specify the matters to which the valuer had regard in making the determination",[117] it may be that a general reference of the kind found in the Rental Determination may in some instances be insufficient. Nevertheless, in the present circumstances a reading of the Rental Determination as a whole would indicate to a reasonable reader that all relevant matters as required by the Act had been addressed. In any event, the fact that Epping requested the Supplementary Report and sought to have it considered by the Tribunal suggests that Epping considered the absence of a specific reference to the matters set out in sub-s (2)(d) might have been, at least, problematic.[118] It is on this basis then that I proceed to determine the question of whether the Tribunal should have had regard to the Supplementary Report.

80 Epping submits that the Supplementary Report forms part of the Valuation and is therefore part of the material to which the Tribunal should have had regard in determining whether s 37(2) was complied with.[119] The following submissions are made as to why the Tribunal erred in disregarding the Supplementary Report:

(1) Nothing in the text of s 37(6) of the Act, or in the terms of the lease, required the Valuer to confine his report to a single document. To require otherwise would (a) render a report invalid and liable to be set aside at significant expense to the parties because of a minor omission, and (b) be inconsistent with the objects of the Act.[120]

(2) English authorities establish that an expert, such as the Valuer, is not obliged to supplement his or her report, but that a court (and so the Tribunal) should have regard to any supplementary material that an expert elects to provide.[121]

(3) Authorities prohibiting the cross-examination of a determining expert are not relevant if the Supplementary Report forms part of the Valuation.[122]

(4) Authorities about functus officio are not relevant because the Valuer was exercising a contractual function.[123]

(5) The Supplementary Report shows that the Valuer had regard to incentives.[124]

81 In response, Serene submits that the Tribunal acted lawfully in excluding the Supplementary Report as a matter of procedural fairness.[125] It is submitted that Serene would have been unfairly prejudiced if the Tribunal were to have considered the Supplementary Report in circumstances where Serene was unable, as a matter of law, to cross-examine the Valuer.[126]

82 Specifically, the Supplementary Report is claimed to be prejudicial to Serene because the Supplementary Report -

(1) was provided by the Valuer with knowledge that the Valuation was the subject of litigation and, in particular, an application that it be vitiated; and

(2) would need to be tested in cross-examination on the grounds that the phrases "[b]ased upon my experience" and "so far as I am aware" are so vague that it is not clear whether the Valuer in fact considered the issue at all at the time of preparing the Valuation.[127]

83 Serene also cited comments made by J Forrest J in Matthews v SPI Electricity Pty Ltd (Ruling No 35), in the context of interpreting s 135 of the Evidence Act 2008, to support the proposition that an inability to cross-examine may result in prejudice to a party.[128]

84 As such, Serene submits that the Tribunal did not err in deciding that it was able to disregard the Supplementary Report because this was an exercise of its discretion to exclude evidence that would be unfairly prejudicial to a party.[129]

Should the Tribunal have had regard to the Supplementary Report?

85 In summary, I accept the Plaintiff's submissions on Question 4 and find that the Tribunal erred in deciding that it was able to disregard the Supplementary Report.

86 In so doing, I accept the Defendant's submission that a speaking, or reasoned, valuation such as that to which this proceeding relates, cannot be impeached or elaborated upon by cross-examination.[130] The words of Yeldham J in Joint Coal Board v Noone Pty Ltd are apt to describe the rationale for this rule in the present circumstances.[131] His Honour noted that:[132]

The parties expressly contracted to accept the valuation of an expert and, there being no error on its face, they are bound to accept it.

Consequently, given that it is not claimed that a mistake is evident on the face of the Valuation or the Supplementary Report, it would not have been permissible for the Valuer to be cross-examined.

87 However, to frame the admissibility of the Supplementary Report as a question of prejudice arising from the impermissibility of cross-examining the Valuer is to misconstrue the issue. In this regard - and in the absence of any Australian authorities specifically on point - a consideration of the relevant English authorities demonstrates that the issue is correctly characterised as a question whether a letter supplementary to an expert's primary report forms part of the determining valuer's report (and is therefore admissible).

88 In Invensys plc v Automotive Sealing Systems Ltd,[133] Thomas J, sitting in the Queen's Bench division, considered an expert determination by an accounting firm of the final consideration payable under a sale agreement. The parties had agreed that the determination would be binding except in the case of manifest error and that the determination would be set out in a written report. Following publication of the report, the purchaser wrote to the expert on two occasions seeking clarification of its reasoning. The expert responded on both occasions and the purchaser then sought to challenge the determination on grounds that it exhibited manifest errors.

89 In deciding that the Court should consider the further reasons provided by the expert, and after noting the lack of authority on this point, Thomas J held:[134]

1. ... If an Expert considers it necessary to amplify or (as in this case) clarify the reasons given, when the terms of reference require reasons, it would not be right to ignore those further reasons in examining the question of manifest error. The documents setting out the further reasons, together with the original reasons, represent the totality of the reasoning and it is that totality that should be examined.

1. Thus, construing this particular agreement for an expert determination where the parties have provided for a reasoned determination which is to be final and binding save for manifest error, it is in my judgment permissible to examine the additional materials that form an essential part of those reasons.

90 In Homespace Ltd v Sita South East Ltd,[135] the English Court of Appeal considered an expert's responses to requests for clarification of his certificate and report prepared in relation to a rent determination. In determining whether the Court should take into account the expert's responses, Lloyd LJ considered relevant authorities, including Invensys, and held:[136]

[I]n the light of the decisions referred to above, and as a matter of general principle, I agree with the judge that it is legitimate to consider ... [the expert's] explanations or clarifications of his reasoning and approach in this subsequent correspondence, as it is also to refer to the body of his report, not just to his certificate, to see whether he undertook the task entrusted to him by the agreement, or some different task. All of that material is "properly before the court"... .

[The expert] need not have responded to the requests for clarification of his certificate and his report. If he had not done so, he could not have been compelled to explain himself. However, since he did so, and thereby made clear the basis on which he had proceeded, it seems to me that the court must look at his explanations when considering what was the reasoning which led him to issue his certificate, and whether it was prepared on the correct basis.

92 In both Invensys and Homespace the supplementary correspondence from the expert was considered on the basis that it formed part of the expert's reasons for making the determination in question. As such, it was proper to have regard to the supplementary correspondence in order to provide a completed picture of the experts' reasoning in each case.

93 In my view, the same reasoning should apply in the present case. The Tribunal should have had regard to the Supplementary Report because it forms - to adopt the phrase used by Thomas J in Invensys - the "totality of the [Valuer's] reasoning".[138] Therefore, the Tribunal was not entitled to disregard the Supplementary Report, in the same way that it would not have been entitled to disregard any other aspect of the Rental Determination.

94 It is revealing to observe that the way in which Serene frames its cross-examination submission impliedly supports the above analysis. As noted above, Serene argues that it would be impermissible to cross-examine the Valuer about the Supplementary Report. In so doing, Serene relies on authorities dealing with the grounds upon which a speaking valuation may be impeached or elaborated upon by cross-examination. As such, Serene's submission assumes that the Supplementary Report is a speaking valuation. Given that it was not put to me that the Valuer produced more than one valuation, Serene's submission impliedly supports the proposition that the Supplementary Report is properly characterised as a part of the Rental Determination.

95 The fact that proceedings had not yet been commenced in either Invensys or Homespace at the time that the supplementary information was provided is not relevant here. In both cases, as in the present case, the determination in question was under attack and one of the parties was making enquiries of the expert.

96 The English approach is also consistent with the provisions of the Act. As submitted by Epping and noted by the Tribunal, nothing in the Act suggests that a specialist retail valuer must confine his or her report to a single document.[139] Moreover, this approach is consistent with the main purpose of the Act to the extent that it embraces timely and cost-effective dispute resolution and avoids the potential for significant costs and delays to the parties if the Rental Determination were set aside; and with the additional possibility of further proceedings following from a further valuation.[140] This approach is both commercial and sensible, and provides a cost-effective way of obtaining a valuer's determination in complete and unambiguous form; which, in turn, enables a new rent to be fixed in circumstances where an omission occurred in, or clarification was required with respect to, the determination.

97 Serene also sought to rely on s 37(7)(a) of the Act which provides:[141]

(7) The specialist retail valuer -

(a) must carry out the valuation within 45 days after accepting the appointment, or within such longer period as may be agreed between the landlord and tenant, or if there is no agreement, as determined in writing by the Small Business Commissioner ... .

98 I am not satisfied that this sub-section precludes the application of the English approach. The Act does not provide for any penalty or other consequence in the event that a valuer fails to carry out the valuation within the specified timeframe. In Dovastand Pty Ltd v Mardasa Nominees Pty Ltd,[142] Marks J considered a landlord's failure to comply with timeframes set by ss 15(1)(b) and (c) of the Retail Tenancies Act 1986 in relation to the provision of estimates and statements of shared operating expenses. Like the Retail Leases Act 2003, the Retail Tenancies Act 1986 was silent on the consequences of non-compliance with these statutory requirements. At 290, Marks J considered the effect of this silence:

The only argument available to the tenant is, I think, that the Act on its proper construction makes a claim under the lease unenforceable where the time frames of the Act have not been met. Of course the Act does not say so. The question is whether it should be so construed.

...

The tenant can only succeed if it is what the statute expressly or by necessary implication provides. In my opinion, it does neither.

As has been emphasised, the Act is silent as to the consequences of non-compliance. This does not mean that the law does not recognise any. But if Parliament intended that as a result of non-compliance there were to be the consequences for which the tenant here contends it is to be expected that it would have said so in clear and unmistakable language.

99 His Honour went on to find that the timeframes in question were directory and not obligatory in nature.[143] In my view, the same may properly be said of the requirements set out in s 37(7)(a) of the Retail Leases Act 2003. There is nothing in the Act to suggest that a failure to carry out the valuation within 45 days vitiates the valuation or any part of the valuation. To find otherwise would be contrary to the purposes of the Act for the reasons set out above. Consequently, s 37(7)(a) does not preclude the application of the English approach, and the Valuer's apparent failure to comply with s 37(7)(a) does not affect the validity of the Rental Determination or any part of the Rental Determination, including the Supplementary Report.

100 This is not to say that a tribunal or a court must have regard to supplementary correspondence, or material provided outside the timeframe set by s 37(7)(a), in every case. Indeed, there may be cases where the supplementary material is provided so late that to consider it would deprive a party of procedural fairness. This is, however, not such a case. I am not satisfied that Serene has suffered any prejudice as a result of the Valuer's delay in furnishing the complete Valuation or the impermissibility of cross-examining the Valuer. In my view, the relevant paragraph in the Supplementary Report is neither ambiguous nor deficient in the context of the Act. This view is supported by counsel for Serene's concession during argument that, had the relevant paragraph been included in the Rental Determination when it was first prepared, it would have been unimpeachable.[144]

101 While the Valuer clearly provided the Supplementary Report in response to a request from Epping, nothing in the request suggests or requires any particular answer. It is an entirely open request - not "leading" in any respect. Indeed, the letter in question simply requests "further details of ... [the Valuer's] consideration of rent concessions and other benefits". There is no suggestion in these words that particular material should be added and there has been no allegation of collusion or fraud.[145] Moreover, the language used in the Supplementary Report does not suggest that the Valuer formed a view on anything other than the information before him at the time he prepared the Rental Determination.

102 The Supplementary Report was provided eight months after the Valuation was first prepared. It is unfortunate that it was not delivered earlier; however, the Supplementary Report was provided before the Tribunal hearing in any event. As such, Serene had the opportunity prior to the Tribunal hearing to consider all of the information which the Valuer considered relevant to the determination of current market rent. The result is that the parties received a complete valuation report (at least to the extent that it addresses all elements of s 37(2) of the Act) and the totality of the Valuer's reasoning was before the Tribunal.

103 Having regard to the preceding reasons, it is not necessary to embark upon consideration of Epping's submission that authorities about funtus officio are not relevant. Serene did not formally renew or press its submissions regarding funtus officio made before the Tribunal, either in its written submissions or in the course of argument, despite making some passing comments about what had been submitted before the Tribunal.[146] In any event, any analysis or approach on this basis would be at odds with the approach taken in the English authorities to which reference has been made.

104 In light of the above, it is also unnecessary to consider Epping's alternative arguments expressed in the event that Question 4 were considered as an evidentiary question.[147]

105 Finally, contrary to Serene's submission, there is no need to remit the proceeding to the Tribunal under s 148(7)(c) of the VCAT Act.[148] The Court has in these reasons determined all the relevant issues and there are no outstanding matters. Moreover, to remit the proceeding to the Tribunal would simply result in unnecessary delay and expense to the parties.

106 For the preceding reasons, I am of the opinion that the Court should make orders which include the following:

(1) The Orders of Associate Justice Mukhtar made on 20 October 2014 in this proceeding be affirmed.

(2) The Defendant's appeal against the Orders of Associate Justice Mukhtar made on 20 October 2014 in this proceeding be dismissed.

(3) The Plaintiff's appeal against the orders of Member M. Farrelly in Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014) be allowed in full.

107 The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties on this issue.

[1] [2014] VCAT 97 (7 February 2014).

[2] Mr Peter Grieve of CBRE Valuations Pty Ltd ("the Valuer").

[3] Serene Hotels Pty Ltd ("the Tenant").

[4] See Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2014] VSC 526 (9 October 2014) [13], [26], [29]-[31].

[5] See Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2014] VSC 526 (9 October 2014) [13], [26], [29]-[31].

[6] See Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2014] VSC 526 (9 October 2014) [54]-[55].

[7] Orders made in Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014).

[8] Commissioner of State Revenue v Frost [2011] VSC 232 (1 June 2011) [5], referring to Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335-6; Myers v Medical Practitioners Board (Vic) [2007] VSCA 163 (23 August 2007) [28].

[9] Boucher v Dandenong Ranges Steiner School Inc [2005] VSC 400 (7 October 2005) [15], referring to Spurling v Development Underwriting (Vic) Pty Ltd [1973] VicRp 1; [1973] VR 1; Whitehorse City Council v Golden Ridge Investments Pty Ltd [2005] VSCA 198 (11 August 2005).

[10] [2011] VSC 232 (1 June 2011) [3].

[11] Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608 (17 December 2010) [10].

[12] Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331; Al-Hakim v Monash University (Unreported, Victorian Supreme Court of Appeal, 28 March 2003); Myers v Medical Practitioners Board (Vic) [2007] VSCA 163 (23 August 2007).

[13] See Morris v R [1987] HCA 50; (1987) 163 CLR 454 at 475.

[14] Osland v Secretary to the Department of Justice [2010] HCA 24; (2010) 241 CLR 320 at 333 [21].

[15] Morris v R [1987] HCA 50; (1987) 163 CLR 454 at 475; Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335.

[16] Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335-6; Commissioner of State Revenue v Challenger Property Nominees Pty Ltd [2006] VSC 203 (6 June 2006) [20], [65].

[17] [2005] HCA 40; (2005) 222 CLR 115 at 136 [64].

[18] Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575, 597. Cf Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 348 [74].

[19] (Unreported, Supreme Court of Victoria, Ashley J, 21 December 1994) at 13.

[20] (1971) 38 LGRA 6 at 18.

[21] (1980) 44 LGRA 65 at 67-8.

[22] (1985) 62 LGRA 346 at 349-50.

[23] The Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442 (9 November 2005) [59].

[24] [1990] HCA 33; (1990) 170 CLR 321 at 356 (emphasis in original) ("Bond") referred to with approval by Osborn J in Lucas v Transport Accident Commission [2003] VSC 97 (31 March 2003) [10].

[25] [1987] HCA 25; (1987) 163 CLR 54 at 77.

[26] [1966] HCA 69; (1966) 116 CLR 644 at 654.

[27] [1995] VicRp 70; [1995] 2 VR 508 at 520 (emphasis in original).

[28] [1995] VicRp 70; [1995] 2 VR 508 at 520.

[29] [1990] HCA 33; (1990) 170 CLR 321 at 360.

[30] [1995] VicRp 70; [1995] 2 VR 508 at 520. See also Tisdall v Webber [2011] FCAFC 76; (2011) 193 FCR 260 at 270-1 [31]-[32], at 296 [126].

[31] See Roads Corporation v Dacakis [1995] VicRp 70; [1995] 2 VR 508 at 517-20.

[32] Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2014] VSC 526 (9 October 2014).

[33] Serene Hotels Pty Ltd v Epping Hotels Pty Ltd [2014] VCAT 97 (7 February 2014) [1]-[8] (emphasis in original).

[34] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [54]-[61]. Transcript, pp 66 to 67.

[35] Plaintiff's Outline of Submissions - Appeal of Leave to Appeal (20 March 2015) [5].

[36] Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014) [41] (emphasis added).

[38] The parts of the Rental Determination which have been deleted are not relevant for the purposes of this proceeding as they relate to gaming matters, which are not now in issue. Deletion of this material does not detract from a clear understanding of the Valuer's methodology and reasoning process.

[39] Halsbury's Laws of England (4th ed) vol 39 (LexisNexis, at 1982) 114 [132] (footnotes omitted).

[40] Halsbury's Laws of England (4th ed) vol 39 (LexisNexis, at 1982) 115 [133] (footnotes omitted).

[41] [1900] AC 150 at 153 ("Cartwright").

[42] Cartwright v The Guardians of the Poor of the Sculcoates Union in Kingston-upon-Hull [1900] AC 150 at 156.

[43] Cartwright v The Guardians of the Poor of the Sculcoates Union in Kingston-upon-Hull [1900] AC 150 at 155.

[44] Cartwright v The Guardians of the Poor of the Sculcoates Union in Kingston-upon-Hull [1900] AC 150 at 159.

[45] Cartwright v The Guardians of the Poor of the Sculcoates Union in Kingston-upon-Hull [1900] AC 150 at 161.

[46] [1900] AC 150 at 153.

[47] [1949] TASStRp 12; [1949] Tas SR 165 at 170.

[48] [1958] 1 WLR 108 ("Harewood Hotels").

[49] The text of s 34 of the Landlord and Tenant Act 1954 (UK) is set out in footnote 1 to the headnote of the report, as follows:

"The rent payable under a tenancy granted by order of the court under this Part of this Act shall be such as may be agreed ... or as, in default of such agreement, may be determined by the court to be that at which, having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably be expected to be let in the open market by a willing lessor, there being disregarded (a) any effect on rent of the fact that the tenant has or his predecessors in title have been in occupation of the holding, (b) any goodwill attached to the holding by reason of the carrying on thereat of the business of the tenant. ... (c) any effect on rent of any improvement carried out by the tenant ..." (d) [relates to licensed premises].

[50] Harewood Hotels Ltd v Harris [1958] 1 WLR 108 at 111. See also the judgment of Romer LJ at 114-6.

[51] (1960) 7 LGRA 369.

[52] Cooper v City of Perth (1960) 7 LGRA 369 at 373.

[53] [1982] 1 WLR 398.

[54] W J Barton Ltd v Long Acre Securities Ltd [1982] 1 WLR 398 at 404. See also Cornwall Coast Country Club v Cardgrange Ltd [1987] 1 EGLR 146 ("Cardgrange"); Temple & Crook Ltd v Capital & Counties Property Co Ltd [1990] 38 EG 118.

[55] [1958] 1 WLR 108.

[56] [1958] 1 WLR 108.

[57] [1992] 1 NZLR 150.

[58] Modick R C Ltd v Mahoney [1992] 1 NZLR 150 at 155.

[59] [1958] 1 WLR 108.

[60] W J Barton Ltd v Long Acre Securities Ltd [1982] 1 WLR 398.

[61] Modick R C Ltd v Mahoney [1992] 1 NZLR 150 at 157.

[62] [1990] 2 EGLR 52.

[63] [1958] 1 WLR 108.

[64] Modick R C Ltd v Mahoney [1992] 1 NZLR 150 at 158.

[65] [1958] 1 WLR 108.

[66] See, eg, ARC Ltd v Schofield [1990] 2 EGLR 52; Cornwall Coast Country Club v Cardgrange Ltd [1987] 1 EGLR 146. See also Duvan Estates Ltd v Rossette Sunshine Savouries Ltd [1982] 1 EGLR 20; Electricity Supply Nominees Ltd v London Clubs Ltd [1988] 2 EGLR 152; Lynall v Inland Revenue Commissioners [1972] AC 680 ("Lynall").

[67] [2004] EWHC 2428 (Comm) (4 November 2004) ("South Tyneside").

[68] Cornwall Coast Country Club v Cardgrange Ltd [1987] 1 EGLR 146.

[69] Lynall v Inland Revenue Commissioners [1972] AC 680.

[70] South Tyneside v Wickes Building Supplies Ltd [2004] EWHC 2428 (Comm) (4 November 2004) [39].

[71] Handbook of Rent Review, vol 1 (Sweet & Maxwell, at Service 60, November 2013) 721 [7.7.4].

[72] Handbook of Rent Review, vol 1 (Sweet & Maxwell, at Service 60, November 2013) 722-3 [7.7.6].

[73] South Tyneside v Wickes Building Supplies Ltd [2004] EWHC 2428 (Comm) (4 November 2004).

[74] See especially Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service) [2382]-[2401]. See also Handbook of Rent Review, vol 1 (Sweet & Maxwell, at Service 60, November 2013) 719-23 [7.7.1]-[7.7.6].

[75] Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service) [2383].

[76] Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service) [2387] (footnotes omitted and emphasis added).

[77] Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014) [39]-[41] (emphasis in original).

[80] [2009] SASC 289 ("Sky City").

[82] Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service) [2382]-[2401].

[83] Plaintiff's Outline of Submissions (24 December 2014) [31]-[32] (emphasis in original).

[84] Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service). See above [40].

[85] Hill and Redman's Law of Landlord and Tenant (LexisNexis, Online Loose-leaf Service) [2387]. See above [40].

[86] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [64]-[65].

[87] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [20].

[88] Plaintiff's Outline of Submissions - Appeal of Leave to Appeal (20 March 2015) [2].

[89] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [25]. Transcript, p 61, lines 17 to 18, p 62, lines 22 to 25.

[90] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [26].

[91] Plaintiff's Outline of Submissions (24 December 2015) [76]-[79].

[92] Serene Hotels Pty Ltd v Epping Hotels Pty Ltd [2014] VCAT 97 (7 February 2014) [15]. See, eg, Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-6; Commonwealth v Wawbe Pty Ltd [1998] VSC 82 (25 September 1998) [22]-[45]; AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 (31 August 2006) [51]-[54]. The terms of the lease in this instance include the provisions of ss 37(2) to (6) of the Act as a result of the operation of the provisions of s 37(1).

[93] (1985) 1 NSWLR 314 at 335-6 (emphasis in original) ("Legal & General").

[94] [1978] 1 Lloyd's Rep 175 at 181.

[95] [1974] AC 727.

[96] [1977] AC 405.

[97] [2006] VSCA 173 (31 August 2006) [51].

[98] [1998] VSC 82 (25 September 1998) [45].

[99] Commonwealth v Wawbe Pty Ltd [1998] VSC 82 (25 September 1998) [45].

[100] Commonwealth v Wawbe Pty Ltd [1998] VSC 82 (25 September 1998) [46].

[101] Commonwealth v Wawbe Pty Ltd [1998] VSC 82 (25 September 1998) [47]-[55].

[103] Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 394.

[104] [2010] HCA 32; (2010) 241 CLR 390 at 399.

[105] [1998] 1 VR 83 at 88 (emphasis in original).

[106] NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation [1956] HCA 80; (1956) 94 CLR 509 at 511-12.

[107] Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287.

[108] Federal Commissioner of Taxation v Broken Hill South Ltd [1941] HCA 33; (1941) 65 CLR 150 at 155. See also Brutus v Cozens [1972] UKHL 6; [1973] AC 854; Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 7; NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation [1956] HCA 80; (1956) 94 CLR 509; Franceschini v Melbourne & Metropolitan Board of Works (1980) 57 LGRA 284 at 290-4; Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; Stanley Alexander de Smith et al, Judicial Review of Administrative Action (1995, 5th ed, Sweet & Maxwell) [5-086].

[109] Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287.

[110] Mahony v Industrial Registrar of New South Wales (1986) 8 NSWLR 1.

[111] Marshall v Whittaker's Building Supply Co [1963] HCA 26; (1963) 109 CLR 210 at 216.

[112] [1925] HCA 18; (1925) 36 CLR 60 at 78.

[113] See Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2014] VSCA 353 (22 December 2014) [52], [171]; Spirovski v Univest Asset Merchants Syndicators Pty Ltd [2013] VSC 728 (20 December 2013) [20]; Nepean Country Club Ltd v Paterson [2009] VSC 436 (1 October 2009) [2]. See also Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608 (17 December 2010) [10].

[114] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [66]-[69].

[115] Serene Hotels Pty Ltd v Epping Hotels Pty Ltd [2014] VCAT 97 (7 February 2014) [61]-[66].

[116] Defendant's Outline of Submissions - Appeal of Leave to Appeal (4 March 2015) [52]-[53], [71]; Defendant's Outline of Submissions (4 March 2015) [61].

[118] As much was acknowledged by counsel for Epping during argument. See Transcript, p 16, lines 11 to 17.

[119] Plaintiff's Outline of Submissions (24 December 2014) [43]; Transcript, p 14, lines 2 to 6.

[120] Plaintiff's Outline of Submissions (24 December 2014) [44]-[48].

[121] Plaintiff's Outline of Submissions (24 December 2014) [49]-[55].

[122] Plaintiff's Outline of Submissions (24 December 2014) [56]-[57].

[123] Plaintiff's Outline of Submissions (24 December 2014) [58]-[61].

[124] Plaintiff's Outline of Submissions (24 December 2014) [62].

[125] Defendant's Outline of Submissions (4 March 2015) [71]-[81]; Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014) [63]-[65].

[126] Defendant's Outline of Submissions (4 March 2015) [71]-[74].

[127] Transcript, p 87, lines 12 to 31, p 88, lines 1 to 3, p 90, lines 13 to 22.

[128] [2014] VSC 59 (27 February 2014) [49], [52]. Section 135(a) of the Evidence Act 2008 provides:

The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might -

[129] Transcript, p 92, lines 10 to 16.

[130] Mayne Nickless Ltd v Solomon [1980] Qd R 171 at 178; Riciardello v Caltex Oil (Australia) Pty Ltd [1991] ANZ ConvR 445. See also Joint Coal Board v Noone Pty Ltd (1984) 3 BPR 9440 at 9451. Cf Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2001] NSWSC 405 (21 May 2001) [61]-[81].

[132] Joint Coal Board v Noone Pty Ltd (1984) 3 BPR 9440 at 9451.

[133] [2001] EWCA Crim 224; [2002] 1 All ER (Comm) 222 ("Invensys").

[134] Invensys plc v Automotive Sealing Systems Ltd [2001] EWCA Crim 224; [2002] 1 All ER (Comm) 222 [19], [22].

[135] [2008] EWCA Civ 1 ("Homespace").

[136] Homespace Ltd v Sita South East Ltd [2008] EWCA Civ 1 [34].

[137] Homespace Ltd v Sita South East Ltd [2008] EWCA Civ 1 [36].

[138] Invensys plc v Automotive Sealing Systems Ltd [2001] EWCA Crim 224; [2002] 1 All ER (Comm) 222, [19].

[139] See Plaintiff's Outline of Submissions (24 December 2014) [45]; Serene Hotels Pty Ltd v Epping Hotels Pty Ltd (Retail Tenancies) [2014] VCAT 97 (7 February 2014) [62].

[140] Retail Leases Act 2003 s 1(b).

[141] Transcript, p 94, lines 13 to 31, p 95, lines 1 to 12.

[142] [1991] VicRp 68; [1991] 2 VR 285.

[143] Dovastand Pty Ltd v Mardasa Nominees Pty Ltd [1991] VicRp 68; [1991] 2 VR 285 at 292.

[145] Plaintiff's Reply Submissions (20 March 2015) [9].

[146] Transcript, p 85, lines 21 to 26, p 94, lines 10 to 31, p 95, lines 1 to 12.

[147] Plaintiff's Outline of Submissions (24 December 2014) [64]-[72].

[148] Defendant's Outline of Submissions (4 March 2015) [82]-[84]; Transcript, p 92, line 17 to 30.