1. The Tenant contends that the Valuation is vitiated by error as it does not comply with the Valuer's Charter. The Tenant raises three separate grounds in support of that contention:

(a) the Valuer has failed to have proper regard to s 52 of the RLA or failed to provide detailed reasons as to why that provision does not apply;

(b) the Valuer has failed to provide detailed reasons as to why he adopted the comparable transaction approach to determine current market rent; and

(c) the Valuer failed to disregard the value of the Tenant's goodwill.

1. It is well-established and not in dispute that the question whether a valuation is binding upon the parties depends upon the terms of the valuer's retainer ('the Charter'), and in the context of retail premises, those provisions of the RLA which are incorporated as express terms of that Charter.
2. Section 37 of the RLA states, in part:

(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.

(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.

1. The express terms of the renewed lease ('the Lease'), which set out the terms of the Charter are largely consistent with s 37 of the RLA. They include:
   1. In determining the current market rental for the hotel the valuer must:

7006.1 consider any written submissions made by the parties within 21 days of their being informed of the valuer's appointment;

7006.3 assume that the hotel is available to be leased on the same condition as those contained in this lease including any option for renewal, but with a tenant in possession;

7006.4 take into account the conditions of this lease including the permitted use;

7006.5 assume that the tenant has met all its obligations under this lease;

7006.6 ignore the goodwill of the Tenant's business;

7006.7 ignore the Tenant's installations and all improvements made by the Tenant to the hotel and to its business;

7006.8 take into account the current market rentals for comparable hotels in the locality.

1. In Legal and General Life of Australia Ltd v A Hudson Pty Ltd,[1] McHugh JA set out the following principles in determining whether a specialist valuation should be set aside:

In my opinion the question whether a valuation is binding on 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. 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 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...

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 the contract? If it is, it is nothing to the point that a 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.[2]

1. In AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd,[3] Nettle JA expressed words of similar effect:
   1. 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. I also agree with the judge that the question of whether the error in determination deprives the determination of compliance with the contractual description of what the expert was required to determine is in the first place to be answered according to whether the error occurred in respect of a task which the contract entrusted to the expert. As Mason, P explained in Holt v Cox, although mistake is not itself a ground for the vitiation of a final and binding expert determination, a mistake may still be of such a nature that the resultant determination is beyond the realm of contractual contemplation - beyond anything which the parties may be supposed to have intended to be final and binding - and therefore susceptible to review.

GROUND 1 - FAILURE TO HAVE REGARD TO S 52 OF THE RLA

1. Mr Hopper submitted that the Valuer has failed to have regard to s 52 of the RLA or has misconstrued its application in valuing current market rent or has failed to provide detailed reasons for not having due regard to that provision. Mr Hopper highlighted various terms of the Lease which he submitted were inconsistent with s 52 of the RLA and should have been highlighted or considered by the Valuer in his expert determination.
2. Section 52 of the RLA states, in part:

(2) The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into -

(a) the structure of, and fixtures in, the retail premises; and

(b) plant and equipment at the retail premises; and

(c) the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

1. Mr Hopper highlighted clauses within the Lease which required the Tenant to maintain in good order and condition all painted and papered portions of the hotel during the term of the Lease or required the Tenant to repaint the interior and exterior at least every five years from the commencement of the first lease. Mr Hopper submitted that these clauses were 'keep in repair' clauses and were contrary to s 52 of the RLA. Mr Hopper drew my attention to the Valuer's summary of the Lease terms, where he stated, in part:
   • Maintain the drains and gardens and all fixtures' fittings and things belonging to the hotel or which in any time during the lease term shall be erected or put into the hotel by the Landlord or by the Tenant with the Landlord's consent fair wear and tear and damage by fire or storm or tempest excepted,
   • Maintain painted surfaces,
   • Paint the interior and exterior of the hotel every 5 years,
   • Paint and/or wallpaper at the end of the lease term,

1. Mr Hopper submitted that those provisions were 'keep in repair' obligations and were contrary to s 52 of the RLA and, by extension, void pursuant to s 94 of the RLA. In other words, by virtue of s 94 of the RLA, those obligations did not, in fact, exist.
2. Mr Hopper submitted that the failure to expressly consider the application of s 52 of the RLA results in the Valuer failing to properly consider the terms of the Lease, as required under s 37(2)(a) of the RLA. Alternatively, the failure to provide detailed reasons as to why s 52 of the RLA did not obviate the Tenant's obligation to carry out non-structural repairs was contrary to s 37(6) of the RLA.

Did the Valuer failed to consider s 52 of the RLA?

1. Mr Hopper referred to several decisions of this Tribunal in support of his submission that the Valuer failed to consider or have regard to s 52 of the RLA.
2. In Josephine Ung Pty Ltd v Jagit Associates Pty Ltd ('Josephine Ung'),[4] the Tribunal considered a similar scenario where the terms of the lease under consideration contained the following clause:
   1. The lease provides in clause 4.2.1:

Except for fair wear and tear and subject to clause 4.2.3, the Tenant must keep the Premises in the same condition as at the later of:

(b) the completion of the installation of the Tenants Fitout Items, and keep the Premises properly repaired and maintained...[5]

65 The landlord developed its argument in this way:

[P]roperly construed, s 52(2) of the RLA 2003 reduces the costs of occupancy paid by the hypothetical tenant, increasing the amount that the hypothetical tenant would be willing to pay as rent for the premises. On the other hand, an obligation placed upon the tenant to maintain the premises increases the tenant occupancy costs and reduces the amount that the hypothetical tenant would be willing to pay to rent the property.

1. The Tribunal observed that:
   1. ... It is evident that s 37(2) does not impose any express obligation on the Valuer to have regard to s 52. However, by operation of s 52(1) a retail premises lease is taken to include the provisions set out in that section. Those provisions, of course, include subsection 52(2).
   2. Given that under s 37(2)(a) the Valuer is obligated to take into account the provisions of the lease, there is an indirect direction to the Valuer to have regard to s 52.
2. In Josephine Ung, Tribunal found that the valuer had failed to take s 52 into account and had erroneously proceeded on the assumption that the tenant was responsible for repairs and maintenance, when in fact that was not the case.
3. Mr Hopper also referred to A J Moussi Pty Ltd v Luxor Corporation Pty Ltd ('Moussi'),[6] another decision of this Tribunal which adopted the observations and findings of the Tribunal in Josephine Ung. In Moussi, the Tribunal stated:
   1. The landlord accepts that this was an error by the Valuer but argues that the nature of the error is not one that ought to result in the Determination being set aside, rather it was a risk that was negligent of the Valuer and one which the parties agreed to accept in their appointment of the Valuer.
   2. I do not accept the landlord's argument. Again, the shifting of the financial burden of the repair and maintenance issues results in the valuation of a different premises from the actual premises which were the subject of the Determination.
   3. Further, the cursory reference to s 52 in the Determination does not mean that the Valuer had regard to that term of the Lease when reaching the Determination.
4. The third authority referred to me was Furnari v Third Try Pty Ltd ('Furnari'),[7] another matter where the tenant was required to comply with 'keep in repair' lease covenants but where the valuer made no mention of s 52 of the RLA. In that case, the Tribunal observed:
   1. The Valuer's obligation is to take into account the provisions of the Lease as modified by the RLA. There is an indirect direction to the Valuer to have regard to s 52 of the RLA.
   2. Simply because the provisions of s 52 of the RLA are implied into the Lease is not a reason for assuming that the Valuer was aware of those provisions and that they override the provisions in clause 4.7 of the lease. More needs to have been done such as referencing how the provision was taken into account.
   3. The Valuer's reference to "other usual building outgoings" in circumstances where the Valuer specifically references s 50 of the RLA and its impact on Land Tax obligations, leaves the reader wondering if the Valuer appreciated the impact of s 52 of the RLA on the Tenant's repair obligations set out in clause 4.7 of the Lease. In other words, why did the Valuer reference the impact of s 50 of the RLA on the Lease and not the impact of s 52? Section 52 has the effect of materially changing an obligation in the Lease. This is significant and something a reader would expect to be addressed in the Determination.
   4. The omission by the Valuer to reference s 52 of the RLA leaves the reader wondering if the Valuer was aware of the provision and whether he took it into account and if so how it was taken into account.
5. The last authority that was referred to me by Mr Hopper was Stricta Pty Ltd v CW Leasing Services Pty Ltd ('Stricta'),[8] where this Tribunal found that the valuer determined market rent on the assumption that the tenant was responsible for non-structural repairs and maintenance costs and for repair costs or maintenance work in respect of an essential safety measure. In Stricta, the Tribunal found that the valuer had erroneously proceeded on the assumption that amendments to the RLA and the Building Act 1993 (Vic) removed the barrier that previously prevented a landlord from requiring a tenant under a retail premises lease to contribute to outgoings for repairs or maintenance work in respect of an essential safety measure, when, in fact, that amendment had not come into effect as at the date when the rental valuation was made.
6. The authorities referred to me by Mr Hopper make clear that the failure to have proper regard to s 52 of the RLA, in circumstances where the lease covenants are inconsistent with that provision, vitiates the rental determination. Essentially, it means that the valuer has valued market rent without regard to the lease covenants, which is contrary to s 37(2)(a) of the RLA, and by extension their charter.
7. However, Mr Virgona submitted that those authorities are distinguishable to what is currently before me. Specifically, Mr Virgona submitted that in Josephine Ung, Furnari and Stricta, the Tribunal found that the valuer had made no reference to s 52(2) in the rental determination. In relation to Moussi, Mr Virgona submitted that it was of limited assistance, even though the valuer made a cursory reference to s 52 of the RLA because the Tribunal's analysis and finding were not based on that fact.
8. I accept that Moussi is distinguishable, given that it was conceded that the valuer had failed to have proper regard to the terms of the lease and that the analysis turned on the question whether the nature of the error (as conceded) was such that it vitiated the rental determination. I also accept that the failure to make any reference to s 52(2) is not what has occurred in this case.
9. Here, the Valuation Report does refer s 52 of the RLA, notwithstanding Mr Hopper's submission that the Valuer has not properly understood the effect of that provision. On page 38 of the Valuation Report, the Valuer expressly refers to the s 52 of the RLA:

The Landlord must maintain in good repair the structure of the building, whilst the Tenant is responsible for all repairs of a non-structural nature. In addition to repainting obligations and removing rubbish and waste. This is consistent with Section 52 of the Act, similar hospitality premises, and the evidence contained herein.

1. The statement that the Tenant is responsible for all repairs of a non-structural nature is inconsistent with s 52 of the RLA.[9] Although some non-structural repairs could be the responsibility of the Tenant, it cannot be said that the Tenant is liable to repair all non-structural elements of the Premises. For example, much will depend upon the condition of the Premises at the time that the Lease commenced or whether the repairs arose because of something that the Tenant did or omitted to do.
2. However, I do not accept that the statement made by the Valuer cited above accurately reflects the Valuer's understanding (or misunderstanding) of the effect of s 52 of the RLA. The paragraph is ambiguous and inconsistent with another paragraph within the Valuation Report. For example, under Section 18.0, of the Valuation Report, the Valuer states:
   • I have had regard to the Landlord's outgoings to the extent to which the tenant is liable to contribute to those outgoings. More particularly it is standard market behaviour for the hospitality sector that rents are negotiated on a net basis and tenants are responsible for outgoings excepting land tax and structural repairs and maintenance...

1. The statement that tenants of premises within the hospitality sector (retail premises) are not liable for "structural repairs and maintenance" is generally consistent with s 52 of the RLA. It illustrates that the Valuer has turned his mind to the effect of s 52 of the RLA.
2. Moreover, the extract of the Valuation Report cited in paragraph 13 above must be read in context with the whole of the Valuation Report. In my view, it is open to read that narrative as an exposition of what is stated in the Lease, rather than what the Valuer understood to be the obligations of the parties under the Lease. Indeed, that narrative is found under the heading Lease Summary, whereas the later commentary cited in paragraph 28 above is found under the heading Decisions of Determining Valuer, indicating that the latter narrative was the basis upon which the Valuer undertook his task.
3. Consequently, I find that there is sufficient indication given within the Valuation Report, when read as a whole, to be satisfied that the Valuer did have regard to s 52 of the RLA.

Did the Valuer misconstrue the meaning of s 52 of the RLA?

1. Mr Hopper further submitted that the terms of the Lease which purported to impose an obligation on the Tenant to paint or re-paint were also contrary to s 52 of the RLA because they were 'keep in repair' obligations. He argued that those clauses should not have been considered as terms of the Lease for the purpose of the Valuation.
2. I do not accept that an obligation to repaint Premises every five years or at some other temporal point necessarily constitutes a keep-in-repair obligation, contrary to s 52 of the RLA. As I observed in Deng and Deng Pty Ltd v McPhee and Anor,[10] a tenant's obligation to repaint or re-carpet may not be contrary to s52 of the RLA:
   1. Unlike clause 8(a)(i) of the Lease, I do not accept that the Painting/Carpet Clause is a keep-in-repair obligation, which may be inconsistent with 52 of the RLA. Where clause 8(a)(i) is directed at repairing or maintaining elements of the premises in good order and condition, the Painting/Carpet Clause is intended to operate irrespective of the condition of the paint or carpet.
   2. In that sense, it is immaterial whether the paint or carpet has deteriorated to a condition which is not commensurate with the condition when the retail premises lease was entered into. In other words, it has no comparator, which appears to be an essential element under s 52 of the RLA.
   3. Unlike clause 8, which is directed at repairing or maintaining an element of the Premises, the obligation to paint at a point in time, irrespective of the condition of the paintwork at the time the lease was entered into; and an obligation to re-carpet at a point in time, again irrespective of the condition of the carpet at the time the Lease was entered into, is more likely to be work of a capital nature. The obligation to repaint and re-carpet did not crystallise in order to maintain the Premises in a condition consistent with their condition when the retail premises lease was entered into, rather the obligation crystallises irrespective of that condition.
3. In my view, the statement made in the Valuation Report that the Lease imposed repainting obligations is not necessarily inconsistent with s 52 of the RLA, especially where the obligation to repaint is linked to some temporal criteria.
4. Consequently, I am not satisfied that the Valuer materially misunderstood the parties' rights and obligations under s 52 of the RLA. Conversely, I find that it is more likely than not that the Valuer understood the meaning or effect of s 52 of the RLA, and by extension, properly had regard to the parties' rights and obligations under that provision.

Did the Valuer give detailed reasons as to the effect or meaning of s 52 of the RLA?

1. Mr Hopper also submitted the Valuation Report did not provide detailed reasons as to why s 52 of the RLA did not obviate the Tenant's obligation to carry out non-structural repairs, such as the obligation to re-paint. In my view, determining whether an obligation to repaint is inconsistent with s 52 of the RLA is legally complex. I do not accept that the requirement to provide detailed reasons requires a specialist retail valuer to descend into fine legalese to explain why, as a matter of law, he or she has accepted that a particular obligation imposed upon a tenant is not inconsistent with s 52 of the RLA.
2. In 756 Glenferrie Road Pty Ltd v Mountford's Shoes Pty Ltd,[11] I made the following observations regarding the level of degree of particularity required to provide detailed reasons:

[39] I do not accept that the requirement to provide detailed reasons as set out in s 37(6) of the RLA requires the determination of a specialist retail valuer to descend into the degree of particularity required of a judicial officer or arbitrator curial proceedings. Inevitably, determinations made by a specialist retail valuer are made on the basis of written submissions from each of the parties which are considered against the background of the valuer's own expertise and investigation.

1. In my view, the Valuation Report adequately described the express terms of the Lease and how those terms intersected with s 52 of the RLA, for the purpose of providing detailed reasons of the Valuation.
2. The reference to the standard market behaviour for the hospitality sector that rents are negotiated on a net basis and tenants are responsible for outgoings excepting land tax and structural repairs and maintenance demonstrates that for the purpose of a comparative market analysis, the Valuer accepted that tenants were not responsible for structural repairs and maintenance.
3. Therefore, I accept Mr Virgona's submission that:
   1. Even if the Valuer's opinion with respect to the operation of s 52 is incorrect as a matter of law, consistent with authority referred to above, a mistake as to the lawful operation of a statutory provision is not of itself vitiating error.
4. I also accept Mr Virgona's submission that:
   1. Where a valuer has stated a particular clause in a lease is consistent with industry standards, and with leases comparable properties, the valuer is then not obliged to explain why and how similar (or even identical, given the operation of s 52 of the RLA) clauses might affect comparable market rent.
   2. Indeed, it would be an absurdity to suggest that an expert valuer must explain why the same clause across a variety of leases may have different (presumably the same) effects on those properties. Put simply every party to a retail lease is subject to s 52 of the RLA. A valuer is not required to explain how that identical obligation across every retail lease affects the rent payable under those leases.
5. In other words, irrespective of the Valuer's interpretation or understanding of the application of s 52 of the RLA, all comparators used in the market appraisal were subject to s 52 of the RLA. Therefore, it is reasonable to assume that the rent for all comparators took into consideration the effects of that provision, as understood by the Valuer. Consequently, where the Valuer adopted a direct comparison method, expounding an incorrect interpretation of s 52 may be of little effect.
6. Consequently, I find this ground did not vitiate the Valuation.

1. The Tenant submitted that the Valuer failed to explain his methodology in applying the comparable transaction method of valuation. Mr Hopper referred to the Tenant's Points of Claim dated 6 September 2024 as setting out the Tenant's challenge to that aspect of the Valuation.
2. Mr Virgona summarised this ground of challenge as follows:

1. The second ground by which the Tenant seeks to impugn the Determination is with respect to the rate per m² adopted by the Valuer. 2. The challenge in this respect relies entirely on s 37(6) of the RLA, with the Tenant arguing the Valuer has failed to provide detailed reasons explaining:

(a) why the Valuer reverted to a Unit of Comparison Approach after earlier stating the Valuer preferred a Comparable Transaction Approach; > > (b) why the Valuer adopted a midpoint of stated range for the Unit of Comparison Approach; and > > (c) why the Valuer persisted with the stated figure based on a Unit of Comparison Approach when that figure was at the bottom of the range identified for the Comparable Transaction Approach.

3. I do not accept the proposition that the Valuer reverted or switched between a Unit of Comparison Approach to a Comparable Transaction Approach without providing detailed reasons for adopting one method over the other.
4. A plain reading of the Valuation Report illustrates that the Valuer utilised units of comparison; namely, $/sqm, as a metric in comparing the comparative premises to the Premises. At page 41 of the Valuation Report, the Valuer states:

19.0 Rental Determination Methodology & Conclusions

I have adopted the Comparative Transactions Method under the IVS Market Approach in the calculation of the Current Market Rent. I have applied this method in two ways, namely on a per unit of comparison basis and on a total quantum of rent basis.

Comparable Transactions Method/Direct Comparison

The comparable transactions Method is a valuation method under the IVS Market Approach. The method utilises information on transactions involving properties that are similar to the subject property, and can use a variety of comparable evidence and units of comparison which form the basis of the comparison. A common unit of comparison used for real property interests is price on a rate per area. Adjustments are analysed and made for any material differences between the comparable transactions in the subject property. Examples of common differences may include but are not limited to: material characteristics (age, size, specifications, etc), relevant restrictions, geographical location, unusual terms in the comparable transactions, prevailing market conditions, ect.

1. In other words, the $/sqm units of measurement are elements of the comparative methodology adopted by the Valuer. It is a measurement that takes annual rent and measures that against the area of the demised premises to give a $/sqm unit of measurement. It is a metric used for comparative purposes, rather than being a separate and distinct approach to determine current market rent.
2. For example, in Section 17.2 of the Valuation Report, the Valuer sets out a table of comparable lease transactions from six comparative hotel premises in the vicinity of the Premises. That table lists the total net rent per annum against the lettable area to calculate a $/sqm metric for each comparative premises. It is a mathematical calculation of total net rent payable per annum divided by the lettable area, to give a comparison between the comparative premises based on rent divided by area.
3. According to that table, the lowest rent per square metre is $217 and the highest is $679. The Valuer then discusses other characteristics of each of the comparative premises before forming the opinion which of the two listed properties are most comparative. He then states:

... Hotel, and $132,859 pa ($233/sqm), provides a similar hotel in an inferior location and is an older leasing transaction and market values and rents subsequently increased post COVID-19 to the date of valuation. The ... Hotel, at $414,726 pa ($679/sqm), is significantly superior to the subject and well above the remaining body of market evidence. Excluding the ... Hotel as out of line, indicates a market rental range of $132,859 to $280,000 pa.

1. The Valuer then compares various characteristics of the comparative premises to the Premises, before forming the opinion that:

Based on these direct comparisons of the evidence with the subject, my conclusions are that the current market rent for the subject premises is higher than $132,859 net pa but less than $173,599 net pa. Accordingly, I would expect my rental determination (using the comparable transaction method) to be greater than $132,859 and less than $173,599 pa.

1. The comparative property with a total net rent per annum of $132,859 has a $/sqm unit of measurement of $233/sqm, that is, the total net rent per annum divided by the lettable area. The comparative property with a total net rent per annum of $173,599 has a $/sqm unit of measurement of $217/sqm. The $/sqm unit of measurement takes into consideration the lettable area as against the total net rent per annum. Without taking that characteristic into consideration, a comparison between premises would be skewed. The Valuer then expresses the opinion, based on a comparison between those two comparative premises that:

I have therefore formed the professional opinion that a rental rate for the subject premises is in the range of $220 and $230 per sqm of lettable area.

1. Accordingly, I do not accept the submission that the Valuer has reverted from one methodology or approach to another without explanation. In my view, expressing the comparative premises by reference to the $/sqm unit of measurement is part of the process of comparison, taking into consideration how much rent is payable per annum against lettable area.
2. The Tenant also criticises the Valuer for adopting the middle ground between the two comparative premises, which he opines are most comparable to the Premises. The Tenant submits that this approach is a "leap to judgment" that fails to give effect to the requirement for detailed reasons.
3. I do not accept that submission. In my view, it was open for the Valuer to opine that the current market rent on a $/sqm was in the middle of the upper and lower rates for the most comparable properties. In so doing, the Valuer explained why those two comparative properties were the most appropriate comparators. Importantly, the Valuer expressed the opinion that the Premises had a higher market rent than the comparative premises with a lower $/sqm of $220/m² but a lower market rent than the comparative premises with a higher $/sqm of $230/m². Determining that the current market rent for the Premises to be the average or medium between those two comparative properties is within the realm of opinion of a specialist retail valuer. The metric of $225/m² when converted back to arrive at a total net rent per annum based upon the total lettable area of 603 m² to be $135,675 (before adding non-recoverable building insurance premium).
4. In Red Gum Developments Pty Ltd v G8 Education Ltd,[12] Nicholas J summarised this proposition in the following terms:
   1. ... Clause 11.1.4 also mandates that the valuer perform that task as an expert, from which requirement it follows that the valuer is entitled (and indeed required) to exercise his or her own judgment and experience in order to form an opinion about what factors should determine or influence the rent obtainable for the property, and what weight should be given to those factors.
5. In my view, an over-pedantic approach in analysing a rental valuation fails to give proper recognition to the fact that the specialist retail valuer is drawing upon their qualifications and experience, which permits some latitude in expressing a concluded opinion without necessarily offending the obligation to give detailed reasons. This proposition is made clear by McHugh JA in the extract of Legal and General Life of Australia Ltd v A Hudson Pty Ltd cited above, where his Honour recognises that a mistake or error is not by itself sufficient to invalidate the decision.
6. Consequently, this ground of challenge is not made out.

GROUND 3 - FAILING TO DISREGARD THE TENANT'S GOODWILL

1. Mr Hopper submitted that the Valuer has either disregarded the value of the Tenant's goodwill or has failed to explain how he has done so. In his written submission, Mr Hopper elaborated as follows:

1. A comparable transactions method will exclude the value of the sitting tenant's goodwill if - but only if - the tenant:

(a) is exercising an option to renew its lease, which invariably means the rent is either negotiated against the backdrop of a possible rental determination, or is in fact determined by a valuer; or > > (b) is negotiating new rent on entry into the leased property (i.e. the tenant is not a sitting tenant and is new to the site).

1. However, a sitting tenant who has no ongoing tenure (i.e. has run out of options) will be negotiating its rent while the landlord has it "over a barrel", in that it must negotiate new rent and the grant of a new lease at the same time or lose the value that it has added to the goodwill of its business. 2. In order to exclude the value of a sitting tenant's goodwill from the rent, the Determining Valuer would need to have identified which of the comparable transactions to which he had regard fall into categories (a) and (b) above. This has not been undertaken (or, at least, has not been explained).
2. In the Valuation Report, the Valuer states, in part:

My rental determination has been assessed pursuant to the definitions and terms of the lease. I refer to clauses 7001 to 7015 of the lease which states, but is not limited to, in determining the Current Market Rent of the premises, the valuer must:

• ...
• Ignore the goodwill of the Tenant's business,

1. The Valuer further states under the heading Decisions of Determining Valuer:
   • ...

• not considered the value of the goodwill created by the Tenant's occupation or the value of the tenant's fixtures and fittings, in determining the Current Market Rent for the premises. Furthermore, I have considered the premises as unoccupied and in the condition at the Commencement Date of the Lease, in line with the terms of the lease and VCAT Order BP557/2018.

1. It is uncontested that ignoring the Tenant's goodwill (if any) is a term of the Valuer's Charter. However, the challenge to the Valuation is premised differently. Mr Hopper submitted that to adequately ignore goodwill, it is necessary to also look at the comparative leases to ensure that the rent payable under those comparable leases has not been artificially inflated because of a desire by the comparative tenant to protect their locational or business goodwill. In other words, the challenge to the Valuation is not that the Valuer failed to ignore the Tenant's goodwill but rather, failed to consider that the rent for the comparative premises might be affected by a comparative tenant's willingness to pay a higher rent to preserve its tenure and protect its locational or business goodwill.
2. Mr Hopper submitted that the Valuation Report provided no information as to what enquiries the Valuer made to take that factor into consideration.
3. I do not accept that the terms of the Valuer's Charter required him to descend into such a granular field of enquiry, even if it was possible to do so. In my view, there will always be undiscernible factors which may influence how much a tenant is willing to pay a landlord to lease premises. For example, it is possible that a tenant who has no further options for renewal may be prepared to pay a higher rent on a new lease to maintain continuous tenure. However, a specialist retail valuer cannot adopt that assumption as universal, as there are many other factors which play a part in influencing how much rent a tenant is willing to pay. For example:

(a) whether there is any goodwill worth preserving;

(b) the degree of importance the tenant places on continuing to trade from the same premises;

(c) whether the tenant has alternative premises that it can relocate to; or

(d) whether the landlord relies on that factor as a negotiating strategy to inflate the asking rent.

1. It would be unsafe for a specialist retail valuer to universally assume that rent will be higher than market rent because a vulnerable tenant wanted to protect its business goodwill. In my view, the Valuer would fall into error if it made that assumption in respect of any of the comparative properties because it would require him to artificially deflate the actual rent payable by reason of that circumstance, if it existed.
2. Importantly, I do not accept that the terms of the Lease or s 37(2) of the RLA require the Valuer to assess whether market rent in respect of any of the comparative properties has been artificially inflated by reason of the comparative tenant having negotiated rent outside of an option for renewal. Indeed, the task is forensically problematic for the reasons set out above. In my view, the Valuer has fulfilled its obligations under the terms of the Lease and s 37(2) of the RLA and has ignored the value of goodwill created by the Tenant's occupation. The step contemplated by the Landlord, to forensically examine whether any of the comparative properties have artificially inflated rent by reason of the tenant having to negotiate market rent outside of an option for renewal, is a step too far.
3. I find that the failure to have done so does not vitiate the valuation.

1. Having regard to my findings set out above, I find that the grounds raised by the Tenant do not vitiate the Valuation and the Valuation remains binding on the parties.
2. The application to set aside the Valuation Report is dismissed.

[1] (1985) 1 NSWLR 314.

[3] [2006] VSCA 173.

[4] (Building and Property) [2017] VCAT 2111, [58] to [85].

[5] Clause 4.2.1 of the relevant lease, referred at [60] of the Reasons.

[6] (Building and Property) [2022] VCAT 434.

[7] [2023] VCAT 1116.

[8] [2023] VCAT 1092.

[10] (Building and Property) [2024 VCAT 1025.

[11] (Retail Tenancies) [2013] VCAT 640.

[12] [2020] VSC 142.