Tringas v Quach [2003] NSWCA 376 | Case summary

REASONS FOR DECISION Issues 1 The Tribunal has been asked to determine three preliminary issues that have arisen arising out of or as a consequence of an application for the appointment of a Specialist Retail Valuer pursuant to Retail Leases Act 1994 Section 31. 2 The three preliminary issues are: i. Does the business conducted from the premises fall within Schedule 1; ii. Do Section 31 and Section 32A apply to the lease; iii. If the sections do apply does the valuation as obtained by the Applicant satisfy those sections. Background Facts 3 The Applicant is the proprietor and lessor of property 164 Bestic Street, Kyeemagh being the whole of the land in Certificate of Title Folio Identifier D/108404 ("the property"). The Applicant acquired the property from a Mr Sant on 14 October 2003 who had already leased the property to the Respondent pursuant to lease 7553873 ("the lease"). 4 The lease was for a term of five years commencing 18 December 2000, terminating 17 December 2005, with two options for renewal each in five year terms, the first from 18/12/2005 - 17/12/2010 and the second from 18/12/2010 to 17/12/2015. Curiously, and in strange contradiction, clause 4.3 of the lease states: "However, the period of tenancy under this lease and under any renewal(s) is, in total, no longer than the maximum period stated in Item 11C in the schedule" and Item 11C states: "Maximum period of tenancy under this lease and permitted renewals: Ten (10) Years." One wonders what was the purpose of the second option period. 5 Clause 5.4 provided, via Item 15, that the rent would be reviewed on each anniversary during the term of the lease by variations in the Consumer Price Index. Clause 5, Item 12, provided that upon the exercise of the first option the rent would be the "Current Market Rent"; similarly upon the exercise of the second option. 6 The Respondent is the tenant of the property and has exercised the first option such that the new lease term commences 18 December 2005 and terminates 17 December 2010. 7 The Respondent's relevant history is that he has owned a bait and tackle business since June 1986 when at that time he purchased a bait and tackle business at 1A Jacobson Avenue, Kyeemagh. He conducted that business from that address until April 1999 when he "transferred" the business to the property and ultimately entered into lease 7553873 commencing 18 December 2000. 8 The lease provides (Clause 6.1.1) that the Respondent as lessee must "use the property for the purpose stated in Item 16 in the schedule and not for any other purpose" and the purpose stated in Item 16 is: "Permitted use: Bait and Tackle Shop." Application 9 The Applicant has applied to the Tribunal for the appointment of a Specialist Retail Valuer pursuant to Retail Leases Act 1994, Section 31. The formal Application notes that the permitted use is "Bait and Tackle Shop", that upon the exercise of the option (Clause 5, Item 12) the rent review upon exercise of option is to "current market rent", that the Respondent does not consent to the making of the application itself (neither to the appointment of a Specialist Retail Valuer) and the Applicant formally objected to a particular valuer (Mr Malcolm Gunning) for reasons that I set out later in this decision. 10 The parties have agreed on a Statement of Agreed Facts and the parties have further agreed that the issues will be determined by the Tribunal "on the papers" and in support of each of their respective contentions the parties have kindly filed formal Submissions. In addition, there are a number of sworn affidavits. 11 The Respondent submitted: i. The Tribunal does not have jurisdiction. ii. That if it does have jurisdiction then the rental determination of the objected valuer Mr Gunning was a valuation carried out by a Specialist Retail Valuer appointed by agreement of the parties and therefore the Application itself for the appointment of a Specialist Retail Valuer pursuant to section 31 should be refused. iii. If the Tribunal finds that the Application should be refused then the Application for the appointment of two Specialist Retail Valuers pursuant to section 32A to conduct a review of the determination of the current market rent made that valuer has been made out of time and should be refused. Jurisdiction 12 The Respondent accepts that the Tribunal will have jurisdiction if it determines that the premises are used wholly or predominantly for the carrying on of one or more of the businesses in Schedule 1 Retail Leases Act 1994. 13 The Retail Leases Act 1994 ("the Act") describes (Section 3) a "retail shop" as being (relevantly) premises that: (a) are used, or are proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre). 14 The prescribed businesses are those set out in Schedule 1 of the Act. That Schedule sets out, in considerable detail, description of businesses which are prescribed by the legislation for the purposes of the definition of "retail shop" such that if a business does not fall within the types of businesses as are set out in Schedule 1 then the premises are not the subject of the Act such that this Tribunal does not have jurisdiction in relation to those premises. The most classic example is probably my decision in Thalassa Pty Limited v. Hawkesbury River Marina Pty Limited [2005] NSWADT 50 - in that case I formed the opinion that "the word "chandlery" (was) so totally different from "hardware" in common use that its non-inclusion in Schedule 1 means that it was not intended to be included in that schedule." I also observed that, after all, "chandleries have been around for hundreds of years and are well known as shops which specifically provide items for marine/boat use." I formed the opinion that the legislature, in its drafting of Schedule 1, "sought to differentiate or specify the types of businesses that are caught by Schedule 1." 15 The differentiation or specificity of the types of business caught by the Schedule is amply illustrated by the fact that the Schedule was substantially amended by the Retail Leases Amendment Act 2005 which deleted from this schedule a number of businesses (eg "Hot bread kitchen shops" and "Television, video equipment and other household appliance shops") and added additional business descriptions (eg "Fairy shops", "Firearms shops", "Internet cafes" and "Nail bars") and varied other business descriptions by altering or amending the descriptions (eg changing "Music shops" to "Music or musical equipment shops" and "Souvenir shops" to "Souvenir, trophy and memorabilia shops"). 16 There is no argument that the business carried on by the Respondent is in accordance with his sworn affidavit 14 November 2006 as comprising "mainly the sale of fishing tackle comprising of (sic) rods and reels, fishing accessories, such as hooks, lines and sinkers and frozen and dry bait. I also sell soft drinks. The turnover of the business is broken down into the following categories: Fishing tackle and accessories 78% Frozen and dry bait 20% Soft drinks 2% 17 His evidence was also to the effect that the on-line Yellow Pages in the telephone book revealed that there are 295 entries for bait and tackle businesses in this State and 185 entries actually containing the words "bait and tackle". Respondent's Submissions on Jurisdiction 18 It is without doubt that the business "bait and tackle" does not appear in Schedule 1 of the Act. The Respondent made detailed submissions in support of his argument that the bait and tackle business conducted from the premises was not a business caught by Schedule 1 of the Act such that, as a consequence, the premises were not the subject of the Act and this Tribunal did not have jurisdiction to determine the dispute. The Respondent relied on a number of propositions. Firstly, he referred to various decisions of this Tribunal which in his submission characterized the businesses specified in Schedule 1 as businesses selected by the Parliament, in a particular and precise way, as being businesses caught by the Act and within the jurisdiction of this Tribunal. He referred to Goodlink Pty Limited v Sing [1999] NSWADT 71 where Donald JM stated [1]: "This matter illustrates the limited and, in my view, overly precise way in which the Retail Leases Act 1994 operates so as not to be available in what I think most ordinary people would consider to be a retail lease environment"; and [7]: "The right to use this Tribunal is circumscribed by the very precise and limiting provisions of (the) definition of "retail shop" in section 3 of the Retail Leases Act which confine the Act to either single retail shops (category (a) within the definition) being those businesses listed in Schedule 1, which Parliament obviously decided would not include real estate agencies (or real estate agencies generally) or, alternatively, under category (b) of the definition the premises must form part of a "retail shopping centre" as separately defined. That definition in section 3 accordingly determines whether the applicant can proceed before this Tribunal or must pursue its rights elsewhere." 19 In Kwon v. Kim [2005] NSWADT 167, Fox JM at [6] quoted the words of Donald JM in Goodlink at [1] and then went on to observe at [7]: "Whilst an Olympian overview maybe taken by High Court when exploring the Constitution ... that seems to me to be entirely inappropriate for the Retail Leases Act, especially in relation to a Schedule of Uses which is very particular and its precise in its descriptions. I am limited by the more mundane rules of interpretation - if there is ambiguity the rule is ejusdem generis, and if there is a lacuna, I am powerless." 20 The Respondent (and the Applicant) further relied on an observation by Hodgson JA in Moweno Pty Limited v. Stratis Promotions Pty Limited [2003] NSWCA 376 at [19]: "In my opinion, the solution to these problems is not to adopt interpretation of the definition of retail shop lease which strains the language of the definitions section; but rather to consider whether the Act discloses and intention to apply". Consequently it was submitted that a bait and tackle business is a distinct and separate business from the businesses described in Schedule 1. There was no intention disclosed in the Act that bait and tackle shops be subject to the Act but rather, because bait and tackle businesses were well known prior to the commencement of the Act in 1994 if Parliament had intended that businesses in this nature be covered by the Act then it would have made specific reference thereto in Schedule 1. Reliance was placed upon my observations in Thalassa Pty Limited v. Hawkesbury River Marina Pty Limited [2005] NSWADT 50 at [37] and [38], quoted below. The Respondent submitted that like chandleries in Thalassa, bait and tackle shops have been around for many years and are well known as shops which specifically provide items for fishing such that the non-inclusion in Schedule 1 of bait and tackle shops means that bait and tackle shops were not intended to be included in that Schedule. [Presumably in addition and because they were not inserted as businesses in the 1999 amendments (which applied from 1 January 2006) similarly the Parliament did not intend them to be caught by the Act]. 21 Secondly, the Respondent submitted that the correct approach is for the Tribunal to place greater emphasis upon the nature of the business operated from the premises rather than the type of goods sold therefrom. The evidence discloses that the predominant use of the premises is for the sale of fishing tackle and fishing accessories such that, contrary to the Applicant's submissions, a bait and tackle shop which predominantly sells fishing tackle and fishing accessories cannot be categorised as a seafood shop, a mixed business shop, a knick-knack shop and novelty shop, or a variety store. 22 Thirdly, the Respondent submitted that a bait and tackle shop which predominantly sells fishing tackle and fishing accessories should not be categorised as a sporting goods shop, fishing tackle and fishing accessories being "not invariably used in sport" in that whilst some users may use fishing tackle and fishing accessories for sporting or recreation purposes, others may use the same equipment for commercial purposes or merely for subsistence. The submission went further: even if it could be asserted that the use of fishing tackle and fishing accessories is always used in a sporting activity Parliament had not intended that shops that predominantly sold fishing tackle and fishing accessories should be categorised as a sporting goods shop. It was submitted that "the general or commonsense meaning of "sporting goods shop" is a shop selling a wide variety of sporting goods (eg Rebel Sports or Mick Simmons), not a shop merely selling specialised items for a single sporting activity." The Respondent supported that submission by referring to a number of business descriptions in Schedule 1 relating to sporting businesses - bicycle accessories shops, bicycle shops, equestrian wear shops, firearms shops, golf equipment shops, martial arts supply shops, surf board shops and surfing accessories shops. In addition, the Respondent submitted that these listed businesses are either exclusively selling sporting goods for one type of shop (eg golf equipment shops and surf board shops) or businesses selling goods that may be used in sporting activities as well as other activities (eg bicycle accessories shops, bicycle shops, equestrian wear shops, firearms shops, martial arts supply shops and surfing accessories shops). 23 The Respondent submitted that as Parliament had included in Schedule 1 businesses which specialised in single sporting activities, then the business of a sporting goods shop must be taken to mean a shop that sells a variety of sporting goods which is the generally accepted meaning of that term. Had Parliament intended otherwise, it would not have included the various other specialised sporting activity businesses in Schedule 1 as there would have been no need so to do. 24 Fourthly, and using the same reasoning, the Respondent submitted that the bait and tackle business could not be classified as a hardware shop or a games or hobby shop. In support of this submission the Respondent referred to my decision in Thalassa Pty Limited v. Hawkesbury Marina Pty Limited [2005] NSWADT 50, in which decision I made the following expressions of opinion: [37] "For reasons only known to the legislature it did not include a general all-encompassing catch-all phrase like "any shop selling food for human consumption", but rather the sought to differentiate or specify the types of businesses that are caught by Schedule 1. It would not have been difficult to have included "chandlery shops" in Schedule 1 if the legislature had regarded that type of business as one that ought to be covered by Schedule 1. After all, chandleries have been around for hundreds of years and are well known as shops which specifically provide items for marine/boat use." And at [38]: "In my opinion the word "chandlery" is so totally different from "hardware" in common use that its non-inclusion in Schedule 1 means that it was not intended to be included in that schedule. By way of aside the word " hardware shops" would certainly not be referrable within the terms of the Act to military hardware or computer hardware - one needs to read down various meanings of a word like "hardware" to fit within the general intent of the Act to cover retail shop leases as specified within Schedule 1 ...". 25 The Respondent drew comfort from those two quoted paragraphs by submitting that a bait and tackle shop is neither a hardware shop nor a games and hobbies shop and that, just like chandleries, bait and tackle shops have been around for many years and are well known as shops which specifically provide items for fishing. He submitted that in common use a bait and tackle shop is neither a hardware shop nor a games and hobbies shop. Consequently, the non-inclusion in Schedule 1 of bait and tackle shops means that bait and tackle shops were not intended to be included in that Schedule. 26 Similarly, and as regards to games and hobbies shops, that phrase related to shops selling both games and hobbies, but not a store selling fishing tackle and accessories. 27 It was submitted that the important principle was, whether the Tribunal in considering this issue takes the approach suggested in the cases cited by taking a restrictive and precise view of Schedule 1 without straining the language or whether, as asserted by the Applicant, the Tribunal should attempt to fit the bait and tackle shop business into one of the other categories in Schedule1; but in any event it was submitted that the end result would be the same in that the non-inclusion by Parliament of bait and tackle shops in Schedule 1 means that they were not intended to be included and that they cannot be categorised as some other kind of business as set out in Schedule 1. 28 Finally, the Respondent noted that the Applicant relied upon Retail Leases Act 1994 Section 78. This section provides that in the interpretation of the Act a court (including this Tribunal) "is to have regard to accepted practices and interpretations within the industry concerning the leasing or retail shops". The Respondent noted that there was no evidence in this regard put forward by the Applicant and the Respondent himself was "not aware of industry practice in relating to the letting of bait and tackle shops". But the important point asserted by the Respondent was that when submitting the lease of the premises to the Respondent's lawyers the Applicant did not provide a Disclosure Statement in accordance with Section 11 of the Act and the Applicant sought to recover his legal costs of preparing the lease "contrary to Section 14 of the Act (such that) the actions of the Applicant (and his solicitors) from the time the Respondent exercised (the first option) to well after the rent had been determined by Mr Gunning "is indicative of the view taken by the Applicant …. that the lease was not subject to the Act." Applicant's Submissions on Jurisdiction 29 The Applicant submitted that the premises were caught by the Act. He accepted that the specific phrase "Bait and Tackle Shop" does not appear in Schedule 1. However, he submitted that such a shop may be correctly categorised as: a. "Sporting goods shops"; b. "Games and hobbies shops"; c. "Hardware shops"; d. "Seafood shops". 30 Furthermore, it was submitted that other businesses specified in Schedule 1 provided general support for a bait and tackle shop being considered to fall within the "general scope" of Schedule 1, namely: e. "Mixed business shops"; f. "Knick-knack shops and novelties shops"; g. "Variety stores". 31 The Applicant relied upon an opinion expressed by Hodgson JA in Moweno Pty Limited v. Stratis Promotions Pty Limited [2003] NSWCA 376 at [19] (set out above at [19] and in the same case Young CJ in Eq stated at [49]: "It follows that his Honour was also correct in being guided by the decision in the High Court in Thompson v. Easterbrook (1951) 83 CLR 467, 481 following the speech of Lord Watson in the House of Lords in Westropp v. Elligot (1884) 9 App Cas 815, that when looking for the purpose of a lease, a court looks to the use reasonably contemplated by the parties when they entered into the lease (except when they have varied that intention). Further, if the lease actually states the use that is conclusive." 32 The Applicant also relied on Bateman Television Limited v. Coleridge Finance Co Ltd [1969] NZLR 794 at 815 where that court stated that at common law "retail" means "necessarily involving sales to the public"; 536 Swanston Street Pty Ltd v. Harbrut Pty Limited [1998] V ConvR 54-323 where Kaye J stated at 64, 088: "I have been referred to several definitions by authorities of what is described as retail shop and retail trade. Perhaps the most succinct statement from which assistance is to be derived is by that made by Viscount Dunedin in his speech in Turpin v. Middlesbrough Assessment Committee and Kaye & Eyre Brothers Ltd [1931] AC 451 at 474. His Lordship then said, referring to buildings, that they were buildings to which the public can resort for the purpose of having particular wants supplied and services rendered to them." 33 And Wellington v. Norwich Union Life Insurance Society Limited [1990] v ConvR 54-387 where Nathan J stated at 64, 753: "The end user maybe a member of the public, but not necessarily so. In support of this conclusion, I called in aid not only common sense but the Macquarie Australian Dictionary which defines retail as being a sale to an ultimate consumer, usually in small quantities." 34 The Applicant submitted that "at the most commonsense level" fishing was either a sporting activity or a leisure/hobby activity, that bait comprises seafood products used in fishing, that tackle comprises hardware, such as fishing rods, nets and associated products used in fishing and that the general catch-all concepts of "knick knack", "variety" and "mixed business" support a wide interpretation of "retail shop'. 35 The Applicant also relied on the Macquarie Australian Dictionary definition of "tackle" as "equipment, apparatus or gear, particularly for fishing"; and "bait" as "food or some substitute used as a lure in fishing, trapping"; and "sport" as "an activity pursued for exercise of all pleasure, including requiring some degree of physical prowess, as hunting, fishing, racing, baseball, tennis, golf, bowling, wrestling, boxing etc", and "a particular form of pastime ...", and "the pastime of hunting, shooting or fishing with reference to the pleasure it achieved." Other definitions were relied upon - in the Little Oxford Dictionary the definition of "fishing" is apparently "an occupation or sport of trying to catch fish"; in the Macquarie Australian Dictionary "sporting" is "engaging in, given to, or interested in open-air or athletic sport"; and "hobby" is "a spare time activity or pastime, etc, used for pleasure or recreation." 36 Reliance was also place upon Section 78 of the Act which refers to industry practice and states: "In the interpretation of this Act, a court (as defined for the purpose of Part 8) is to have regard to have accepted practices and interpretations within the industry concerning the leasing of retail shops." 37 The Applicant went further: he submitted that the marketing nomenclature of a "bait and tackle shop" is not determinative of the characterisation of the retail nature of the premises. He relied on the Section 3 definition of "retail shop" to point out that the definition specifically refers to and contemplates that a retail shop may include one or more of the businesses set out in Schedule 1 and that commonsense dictates that the marketing of such a business combining multiple businesses would not include all of those descriptors, eg Schedule 1 included the broad phrase "variety stores". 38 Reliance was place upon the decision of the learned Deputy President Chesterman ADCJ in Wood & Wilson v. Bergman [2003] NSWADT 82 where his Honour made these observations: [78] "… The Act does not expressly exclude service or petrol stations from the definition of "retail shop". It has nothing at all to say about service or petrol stations as such. So far as the Act is concerned, premises that are used predominantly for the businesses of selling groceries and or automotive parts are "retail shops" within Section 3, irrespective of whether the fact that petrol is sold there also warrants calling the premises a "service station" or a "petrol station"." [79] "The above discussion ([16], [17]) of the meanings of "predominant" and "predominate" indicates that they draw on concepts such as "stronger", "leading", "main", "conspicuous" and "more effective…". Reasoning of the Tribunal on Jurisdiction 39 The arguments advanced on behalf of the Respondent are initially attractive. There is no question that the Parliament has been some trouble to specify with reasonable particularity the types of businesses that it wishes to be caught by the Act provided that the premises in which those businesses are situate are also caught by the Act. The amendments made to Schedule 1 by the Retail Leases Amendment Act 2005 plainly support a strong argument that the Parliament was leaning towards particularity and was plainly of the view that certain types of businesses be not caught by the Act. 40 By way of illustration, following upon Thalassa "Chandler Shops" were included. But, at the same time and on the same logic, notwithstanding the observations of Donald JM in Goodlink, "real estate agencies" were not inserted such that must be presumed that the Parliament has not intended that real estate agencies be a business caught by the Act. 41 I accept the general proposition that the businesses as set out in Schedule 1 are precisely set out with very particular description. I also accept that "bait and tackle shop" is not specified in Schedule 1. I do not accept the submission that a bait and tackle shop would even remotely fall within the description of a "seafood shop", neither does it fall into the category of "mixed business shops", "knick-knack shops and novelties shops", nor into the category of "variety stores". In the circumstances there is no need for me to analyse why that is the case. Suffice it to say, however, that in the case of "seafood shops" the description of the business by the Respondent to the effect that "fishing tackle and accessories" occupy 78% of his turnover then it is plain that "fishing tackle and accessories" is the predominant use of these premises and if it is suggested that somehow or other "frozen and dry bait" fits within the meaning of "seafood shops" then I simply reject that submission (even though it only occupies 20% of the turnover) simply because, in my view, "seafood shops" is intended, in common parlance, to refer to seafood for human consumption, not as bait for the catching of fish. Furthermore, and certainly (in my view) a fishing tackle and accessories business cannot be described as, or fall within the description, "hardware shops" in common parlance. Although it is true that one may find fishing tackle and accessories at a hardware shop, clearly they do not fall within one might commonly describe as a "hardware shop". 42 That leaves remaining two types of businesses submitted by the Respondent as applicable, namely "sporting goods shops" and "games and hobbies shops." It is difficult to know how to address these types of issues. One may trawl through definitions of "games", "hobbies", "sport", "sporting", and even "goods". In my view one needs to look at these matters in a fairly commonsense way and perhaps by asking this question: "If one went into a "games and hobbies shop" what would one expect to find?" In answer to that question, one would expect to find games of various types, primarily board and table games, construction kits, car and railway sets and the like. One may find fishing rods and tackle but, it seems to me, that would be not usual. The Parliament, when describing types of businesses inserted in Schedule 1, would be looking (no doubt) at the usual and common meaning of the words and what the ordinary person would reasonably think may well be included in a shop from which that described business is being carried out. It is for that reason that in Thalassa I formed the view that a chandlery was so significantly different from that of a hardware shop that it was a business not included in Schedule 1. In my view when one goes into a hardware shop one may, but it is unlikely, find therein chandlery items, which are peculiar to marine use. 43 The next and final category relied upon by the Respondent is "sporting goods". When drafting my judgement in Thalassa in made this observation at [38]: "In my opinion the word "chandlery" is so totally different from "hardware" in common use that its non-inclusion in Schedule 1 means that it was not intended to be included in the schedule." 44 I adhere to that view. There are two important points in that statement: Firstly, I used the words "common use" - in my view that is the approach that should be taken to any analysis of whether a business falls within one or more of the Schedule 1 categories. Secondly, I used the words "totally different" - in my view, that is one of the keys to analysis of the same question. I formed the opinion that "chandlery" was "totally different" from "hardware" in common parlance. If that is a correct approach to determining whether a business falls within a Schedule 1 business, how does that analysis apply with regard to the issue now before the Tribunal? 45 In my opinion the answer is not by looking at the words "bait and tackle business" which are the words described in the lease as the permitted use. That is not what the Act says. The Act describes a "retail shop" as meaning, relevantly, "premises that: a. are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed … (in Schedule 1)". Therefore one needs to look at the use of the premises. 46 It has been said, perhaps in reliance upon the statement by Young CJ in Eq in Moweno (quoted above at [30] that in order to determine the use of the premises "if the lease actually states the use that is conclusive." Furthermore in Moweno (2003) NSW ConvR 56-050, Barrett J was of the opinion that the question of whether a retail shop exists in a particular case is not to be approached by proceeding directly to an examination of the actual use and regarding that as the primary matter to be investigated. In his Honour's view, where there is a written lease the question of whether a retail shop lease exists at a particular time will depend on the scope and content of the parties' agreement as it exists at that time. 47 The difficulty with that approach, although endorsed by the Court of Appeal, is simply this: if the premises are described in the lease as business A (being a business not included in Schedule 1) and at all times the business conducted from the premises is business B (being a business within one or more of the descriptions in Schedule 1) how could it be asserted that the premises from which the business is conducted is not actually used wholly or predominantly for business B? Surely the words "are used" mean what they say, ie actual use. It may be different if business A was conducted from the premises at the date of commencement of the lease - in that case a subsequent unilateral change of use would not effect the contractual rights of the parties as to whether the premises are governed by the Act, which are fixed at the commencement date of the lease and simply cannot be varied, absent consent, because there is a change of business use during the term of the lease. Thalassa dealt with whether premises were a "retail shopping centre" and I held that if a building was a retail shopping centre at the commencement of a lease of premises within that building and at some subsequent time during the term of the lease less than five of the premises were used for Schedule 1 businesses, the contractual rights of the property were fixed the commencement date of the lease and could not be varied simply because there was a change of business use of other premises within the building. Similarly, where a building subsequently becomes a retail shopping centre does not affect the contractual rights of those lessees who occupied premises within that centre prior to it becoming a retail shopping centre. One needs therefore to look at, not only the description of the permitted use in the lease (if there is such a description) but also look at the actual consented use to which the premises were put at the commencement of the lease - that use determines the contractual rights of the parties, absent consent variation, as to nature of the business and whether the business falls within the Schedule 1. If the actual consented use is that of a Schedule 1 business then the premises are caught but, so it seems to me, if the actual consented use is not within one of those Schedule 1 categories then the premises are not caught by the Act unless the contracted permitted use is that of a Schedule 1 business. 48 This view is supported, in my very respectful opinion, by the definition of "retail shop" as set out above. One needs to look at the whole or predominant use of the premises within the way in which that has been looked at in the past in, for example, Wood & Wilson v. Bergman, Thalassa and Randi Wixs Pty Limited v. Pokana Pty Limited [2002] NSWADT 205. 49 In my opinion the key to understanding whether or not premises are caught by the Act is a careful analysis of the definition of "retail shop". The words that are important are "are used", "or" and "proposed to be used". "Are" and "used" import present tense, "or" indicates that either can be used, and "proposed to be used" imports the intention of the parties as revealed in the lease. So, in the example in (37) above, if the premises are described in the lease as business A (being a business not included in Schedule 1) then it does not necessarily follow that the premises are not caught by the Act if in fact the premises are "used" for business B (being a business within one or more of the descriptions in Schedule 1). Indeed, the present case is somewhat classic: "bait and tackle" is not a specified business under Schedule 1 such that one needs to look past the description of the business use in the lease to analyse exactly the whole or predominant use of the premises. 50 Using the same principle and now looking at the words "bait and tackle", the permitted use under the lease, one then looks at the words "bait" and "tackle" and then determines, from the evidence, what is the predominant use at the commencement of the lease or at the relevant time for determination of this issue - in this case the exercise of the first option. The evidence in this case is overwhelming: fishing tackle and accessories occupy 78% of the business turnover. It must follow that the fishing tackle and accessories portion of the business conducted from these premises is the predominant use (on the facts as put before the Tribunal in this case). 51 The next question is this: does "fishing tackle and accessories" fall within the description of "sporting goods" within Schedule 1. In my opinion it does. It is not so "totally different" or significantly different from "sporting goods" that one could comfortably form the opinion that such a business was within the contemplation of the Parliament as a business not to be included in Schedule 1. In my view, "fishing tackle and accessories" clearly falls within the concept of "sporting goods" such that where one finds at the relevant time a business of fishing tackle and accessories as its whole or predominant use then such a shop is a "sporting goods shop" within the meaning of that phrase in the Schedule 1. 52 The difficulty (so it seems to me) of identifying the use to which the premises are put by reference only to the permitted use as stated in the lease is that it avoids an analysis of the provisions of the Section 3 definition of "retail shop". The first word that requires attention is "are" - it seems to me that word imports a present use of the premises. Traditionally, the evidence before this Tribunal has been directed towards the use of the premises at the time of the filing of the Application or the relevant time in issue (in this case the exercise of the first option). So, in this case, the evidence (unchallenged) relates to the turnover of the business at "fishing tackle and accessories" 78%, "frozen and dry bait" 20% and "soft drinks" at 2%. How one could possibly work out those percentages at the commencement of the term of a lease is not immediately apparent to me. To simply say as a permitted use "bait and tackle shop" does not tell one whether the premises are used as a bait and tackle shop. 53 Secondly, the use of the words "bait and tackle shop" does not tell one whether the premises "are" … "used" … "wholly or predominantly" for a use within the business uses prescribed in Schedule 1. If that was all that was required then it would be difficult, if not impossible, to draw any conclusion regarding predominant use. Consequently, in my view one needs to go behind the permitted use description to analyse what is the business being conducted from the premises and then determine whether the business is being used wholly or predominantly for a business use within those prescribed in Schedule 1. 54 There are therefore two problems: firstly, at what point of time does one look at the premises to determine whether the business conducted therefrom is wholly or predominantly within one of the one or more of the prescribed businesses; secondly, one then needs to determine what types or categories of business are being carried out and the percentage/proportional use of those businesses to determine whether the premises are being used wholly or predominantly for the carrying on of one or more of the businesses prescribed in Schedule 1. If the business use described in the lease is a use caught by Schedule 1 then the premises are caught by the Act. If the business use as so described is not a defined business under Schedule 1, then one needs to look at the actual use. In this case, it may be quite strongly argued that a bait shop simpliciter is not a sporting goods shop. On the other hand, if it is a "bait and tackle" shop as its proposed use, clearly "bait" would not fall within "sporting goods" and therefore one needs to fall back to "tackle" to determine the business. Clearly the tackle business is not the whole of the business so therefore one needs to examine the actual businesses carried out from the shop to determine the predominant use. Clearly that cannot take place at the date of signing the lease or the date of commencement, simply because there are no available figures from which to draw any useful conclusion, the business only having just commenced. 55 It seems to me distinctly arguable that where in the lease contract the permitted use is clearly one or more of the prescribed businesses then the retail shop would fall within the purview of the Act because of the words "proposed to be used" in the definition. But where it is not clear from the contractual permitted use then one needs to look at the actual use at the relevant time in issue. That would then satisfy that portion of the definition that reads "are used", and from the evidence one could hopefully determine the whole or predominant business(es) being carried out. 56 I am therefore of the opinion that on the facts in the case, this "bait and tackle shop" falls within the description of a "sporting goods" business within Schedule 1 and therefore this Tribunal has jurisdiction with respect to the leased premises. 57 All of this raises an interesting question: if the contractual permitted use is not a business that falls within Schedule 1 but during the course of term of the lease the business changes by agreement or novation to a business that is wholly or predominantly a business within Schedule, how does all this relate to section 16? There is no need for me to express any final view on this save if the nature of the business changes by consent from a business not within Schedule 1 to a business that falls within Schedule 1 then it may well be that the minimum five year term starts from the date of the agreed change or novation. The determination of this question can await another day. 58 There is one final issue: the Respondent submitted that because the Applicant did not provide a disclosure statement (Section 11) and sought to recover the legal costs of preparing the lease contrary to Section 14, this was indicative of the view then taken by the Applicant that the lease was not subject to the Act. That may well be the case, but it goes no further than that. The question is not what the Applicant (or its solicitors) may or may not have done but rather whether the evidence supports, or does not support, the assertion that the business(es) are caught by Schedule 1. Schedule 1 Analysis 59 In my opinion the principles/steps that one should adopt when deciding whether a business falls within one or more of the described businesses in Schedule 1 are consistent with the recent Judgment of Judicial Member Higgins in Lauven Pty Ltd v. Venus Adult Shops Pty Limited [2006] NSW ADT359. In that Judgment the learned Judicial Member distinctly set out principles that should apply. I adopt entirely her reasoning. It seems to me that when one is looking at whether the business carried on from premises falls within one or more of the businesses prescribed in Schedule 1 then the Tribunal needs to carry out the following steps: 1. Firstly, look at the contract, the lease, to see what is the permitted/agreed use. 2. If that use fits within one or more of the businesses described in Schedule 1, then the premises are a "retail shop" within the meaning of the Act (provided the other indicia apply). 3. Thirdly if the permitted/agreed use is not clear, or is uncertain, or is capable of a number of interpretations, or the use covers a number of different types of businesses some of which are, or may be, within the Schedule 1 described businesses, then an analysis is required of the use(s) to determine the actual use(s), to determine the predominant use(s) and if the predominant use(s) falls within one or more of the described businesses then the premises are a "retail shop". 4. Fourthly, if the contracted use, not being a prescribed business, was somehow changed/varied by agreement, express or implied, then an analysis is required of the actual use(s). In the case of a change that would cause the actual use to fall within one or more of the prescribed businesses, then (but not deciding) it is arguable that the premises become "a retail shop" from the time of such change - this may well activate Section 16 such as to create a minimum five year term from the date of such change. Rental Determination 60 The next submission of the Respondent was to the effect that, subject to the finding that the Tribunal did have jurisdiction, the "rental determination of Malcolm Gunning by valuation dated 19 July 2006 was a valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease and accordingly the Application for Original Decision for appoint of a specialist retail valuer pursuant to Section 31 should be refused." 61 The facts in support of this submission are set out in the Statement of Agreed Facts, summarised as follows: (a) On 14 July 2005 the Respondent exercised the option for renewal for a further period of 5 years commencing 18 December 2005. On 14 December 2005 the solicitors for the Applicant prepared a form of lease in registrable form under the Real Property Act to commence on 18 December 2005 with a commencement rental for the initial term of $29,640.00 per annum exclusive of GST. On 17 December 2005 the term of the original lease expired and on 18 December 2005 the term of the lease pursuant to the exercise of the option commenced. (b) On 19 December the solicitors for the Respondent advised that the commencement rental of $29,640.00 per annum referred to in the draft lease was not agreed, it being contended that it was considerably in excess of the current market rent for the premises and an amount of $15,600.00 plus GST was considered to be the correct market rent for the first year of the term of the new lease. The Applicant, on 22 December 2005, nominated Mr Malcolm Gunning of Gunning Commercial Hurstville as an independent valuer, indicated if the Respondent did not agree to his appointment by 9 January 2006 the Applicant would apply to the President of the Law Society of NSW to nominate a valuer for the purpose of determining the current market rent of the premises pursuant to clause 5.16 of the lease. This clause, in conjunction with clauses 5.12 - 5.21, made provision for the ascertainment of the "current market rent" where the lease provided that the rent would be "current market rent" upon inter alia, the exercise of option, and where the parties could not agree on a valuer they could ask the President of the Law Society "to nominate a person who is a licenced valuer to decide the current market rent". 62 It would seem that the President declined to so nominate - on 18 January 2006 the Dispute Resolution Legal Officer for the Law Society drew the attention of the parties to Section19(1)(b) of the Act and noted that the President may only appoint a valuer by express agreement of the parties. 63 By letter 22 February 2006 the Respondent confirmed his agreement that the President appoint a valuer "in accordance with clause 5.16 (of the lease)". By letter 23 February the Applicant advised the President confirming the agreement of both parties to the appointment of a valuer by the President. On 5 April 2006 the President appointed a Mr Dupree as valuer - there was some argument about the fee to be charged by him and the Respondent agreed that Mr Gunning be appointed to conduct the rental determination. The Applicant then wrote to the Respondent 7 June 2006 confirming the agreement of both parties to have Mr Gunning appointed pursuant to lease clause 5.15. Confirmatory instructions were given by the parties to Mr Gunning 23 June 2006 and his valuation is dated 19 July 2006. 64 In these circumstances, the question is: was Mr Gunning appointed by agreement as a specialist retail valuer pursuant to Section 31. 65 The appointment of specialist retail valuers by the Tribunal is a regime that came into operation on 1 January 2006. Before that date the parties had to rely on their contractual rights, in this case an approach to the Law Society President. Section 31 (1)(b) permits the parties to agree on the current market rent and provides that if they do not agree then "the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal." So, firstly, the parties can agree on the actual current market rent; secondly, if they do not agree then they can agree to the appointment of a specialist retail valuer to determine the current market rent; thirdly, if they cannot agree to appoint a specific specialist retail valuer then the Tribunal will step in upon the application of one or both of the parties and itself appoint a specialist retail valuer. 66 Mr Gunning in fact carried out a valuation. His first valuation is dated 19 July 2006. This valuation he subsequently amended, although it remains dated 19 July 2006. Both valuations bring the current market rental value of the property, exclusive of GST, at $17,500.00. I was not taken through either valuation (if they can be properly described as separate valuations) neither was my attention directed to any differences. But doing the best that I can by comparing the original valuation to the amended valuation, on page 12 (paragraph number 14) the gross unit rental rate was stated to be $300 per sqm, whereas in the amended valuation it is stated as being $275 per sqm; the first would seem to be a typographical error because $275 is referred to in the next following numbered paragraph of the valuation and the error does not seem to have affected the ultimate determination of $17,500.00 per annum. Similarly, there is a reference at the foot of page 12 of the original valuation document (paragraph 14) to "net rental value" and this was altered in the amended valuation to read "gross rental value". Whatever be the situation the same result has been reached by Mr Gunning. The Respondent says that Mr Gunning was appointed by agreement of the parties and therefore, whatever be the situation with regard to Section 31, the fact is that the parties did agree to his appointment. 67 The important letter is that dated 4 May 2006 from the solicitors for the Respondent in that letter the solicitors challenged the fee to be charged by Mr Dupre and then said "… our client agrees with your suggestion that Malcolm Gunning of Gunning Commercial be appointed to conduct the rental determination. If your client is agreeable, would you please contact Mr Gunning and inform him that both parties wish to appoint him to determine the current market rental for the above premises." 68 The solicitors for the Applicant responded 7 June 2006 stating, inter alia: "We confirm that the parties have agreed that Malcolm Gunning of Gunning Commercial is to be appointed to conduct the rental determination in accordance with clause 5.15 and following of the lease." 69 It is therefore plain from the correspondence and from the terms of the valuation and amended valuation that the parties agreed to the appointment of Mr Gunning. 70 There is little doubt that Mr Gunning was appointed after the commencement of section 31. The Applicant made numerous submissions to the effect that the original valuation and the amended valuation was not a valuation pursuant to section 31 on a number of bases. Applicant's Submissions on Section 31 71 The Applicant made numerous, unfortunately generally unparticularised, submissions to the effect that the original valuation ("the valuation") and the amended valuation was not a valuation pursuant to Section 31. It is fair to say that the Applicant's submissions limited this Section 31 issue to the amended valuation but, having regard to the Respondent's submissions that the valuation, not the amended valuation, is the correct valuation I have extended the scope of the Applicant's submissions to include both valuation documents. For reasons that I seek to explain later, in my view the valuation is the document that is the appropriate valuation upon which to focus - I have drawn attention above to what I see to be the differences between both valuation documents and I have observed that both valuation documents fix the same rental determination. 72 The submissions of the Applicant were as follows: a) Mr Gunning was appointed pursuant to clause 5.16 of the lease, the letter 23 June 2006 being silent with respect to the Retail Leases Act. b) Therefore, Mr Gunning was not appointed to perform his function in accordance with the criteria set out in Section 31. c) Consequently, Mr Gunning performed his function inconsistent with the criteria with section 31, insofar as in his valuation report: i) did not include any reference to the Retail Leases Act 1994, including his instructions at page 1; ii) took into account fixtures and fittings inconsistently with the requirement of Section 31(1)(a); iii) did not include the Section 31 criteria as matters that he has taken into account; iv) did not include or take into consideration the obligations and constraints that the Retail Leases Act 1994 places on landlords. d) Both valuations were not final valuations as they were conditional upon confirmation of the correct floor area; and the valuations were also not final as there is a dispute about the amount of lettable area and its calculation. e) Accordingly, the Applicant submitted that Mr Gunning was not appointed "for the purposes of a valuation under this Act", so that the valuations were not Section 31 valuations. 73 I do not mean any disrespect by this observation but I have found it difficult, absent particularity and absent comment or traversal by the Respondent, to deal with each of these varying submissions. I am minded of the observations of the Appeal Panel in Khera v. Law Society of NSW (LSD) [2005] NSW ADTAP 29 at [74] where that panel made this observation: "There is an obligation on a fact-finding Tribunal to find facts as proved or otherwise and then reach the appropriate legal conclusions. The Tribunal should have done so here". 74 In my view and notwithstanding the paucity of particularity and the failure of the Respondent to deal with each of the above submissions in detail, it is my job so to do particularly where, as in the case of Khera, the material not dealt with by the Divisional Tribunal was in fact one of the issues before it. Consequently, I propose to deal with each of the submissions seriatim. 75 Before so doing it is necessary to set out the terms of Section 31 as are relevant to this determination: "31(1) A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: (a) The current market rent is the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and willing lessee in an arm's length transaction (where the parties are each acting knowledgably, prudently and without compulsion), determined on an effective rent basis, having regard to the following matters: (i) the provisions of the lease, (ii) the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same of a substantially similar use to which the shop may be put under the lease, (iii) the gross rent, less the lessor's outgoings payable by the lessee, (iv) rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops. The current market rent is not to take into account the value of goodwill created by the lessee's occupation or the value of the lessee's fixtures and fittings on the retail shop premises. b) If the lessor and the lessee do not agree and to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal. c) The matters set out in paragraph (a) are to be taken into account by a specialist retail valuer appointed under paragraph (b) in determining the amount of the rent. d) ... e) A valuation for the purposes of paragraph (b) is to be in writing and to contain detailed reasons for the specialist retail valuer's determination and to specify the matters to which the valuer had regard for the purposes of making his or her determination". 76 In order to determine the submissions made by the Applicant one needs to analyse the valuation. This is consistent with Section 31(1)(e) [above]. 77 I now propose to deal with the various submissions under seriatim headings. Clause 5.16 or Section 31 appointment 78 The primary submission made by the Applicant was to the effect that the appointment was not pursuant to section 31 but rather pursuant to clause 5.16 of the lease and therefore Mr Gunning was not appointed to perform his function in accordance with the section 31 criteria. In my opinion, that contention cannot be supported on the material. It is plain from the letter from the Dispute Resolution Officer for the Law Society 18 February 2006 that the parties, and their legal advisers, were then made aware of the amendments to the Act commencing 1 January 2006 which, by operation of the Act, overrode clause 5.16 of the lease. Although it is true that the Dispute Resolution Legal Officer referred only to section 19(1)(b) of the Act it is plain from the terms her letter that she was drawing the attention of the parties to the amendments to the Act and one of those amendments was the insertion of section 31. 79 It will be remembered from Great Tastes of Australia v Shorty Holdings [2006] NSWADT 253 that section 19 makes provision for the ascertainment of current market rent when the retail shop lease provides for rent to be changed during its term to current market rent, and section 31 deals similarly where the lease provides for an option to renew or extend the lease at current market rent. 80 It is clear that the appointment of Mr Gunning was an appointment made by the parties, by consent, with knowledge of and after the coming into effect of the 1 January 2006 amendments and, notwithstanding the reference to clause 5.15 in the letter of instructions, I find that the parties, being aware of the 1 January 2006 amendments, were in fact making an appointment pursuant to section 31(1)(b) "by agreement of the parties to the lease." The appointment post-dated the Law Society's letter 18 February 2006, the timeline makes it clear that the parties were aware of the 1 January 2006 amendments, the reference to clause 5.16 of the lease is a reference merely to that provision of the lease that permits the parties to "agree upon a valuer" which is permitted, perhaps even encouraged, by Section 31(1)(b), and this opinion is supported by the terms of the letter from the Law Society which notes that the Act "overrides Clause 5.16 of the lease". 81 Furthermore, it is not reasonable to assume that Mr Gunning would not have been aware of the 1 January 2006 amendments, he being an experienced retail lease valuer. 82 I therefore reject the submission that Mr Gunning was not appointed as a specialist retail valuer within the meaning of the Act. Current Market Rent 83 Pausing at this point and although not referred to in the Applicant's submissions, on page 2 of his valuation and his amended valuation Mr Gunning refers to "the (Gross Annual) Market Rental Value of the property", at page 12 the "Total Gross Market Rental Value", and at page 13 "the Gross Market Rental Value of the subject property", each in $17,500. There is (curiously) no reference to "current market rent" which is the rent to be applied upon the exercise of option pursuant to clause 5.12 and Item 11A of the lease. This may well be regarded as a matter of semantics - I do not regard it as such - and although I have found that Mr Gunning was appointed as a specialist retail valuer by agreement pursuant to section 31(1)(b) it seems to me that it is arguable, absent other corroborative material, that Mr Gunning may have failed to determine the current market rent. However, his instructions were to "determine the current market rental value" as set out in those Instructions on page 1, and on the facing page of both valuation documents appears the words: "Purpose of Valuation: Current Market Rent". After all, that was his role and duty, not to determine gross annual market rental value or some other description of the value but simply to determine the "current market rent" in accordance with section 31 and the terms of the lease. 84 However, this point was not taken and in the circumstances of this particular case it seems to me that the use of descriptions other than "current market rental" in the valuation, although confusing, does not affect the valuation as a valuation of the "current market rent" for these premises. In paragraph 2 of his valuation report Mr Gunning expresses the basis of the valuation as being the "Market Rental Value" and in my opinion his valuation is that of "current market rent" within the terms of the lease and within the terms of the Act. No Reference to Retail Leases Act 85 The second submission was to the effect that Mr Gunning did not include any reference in his valuation to the Retail Leases Act 1994, including his instructions on page 1. On page 1 Mr Gunning states his instructions to be: "To determine the current market rental value in accordance with a Market Rental review clause Item 5.15, 5.16, 5.17, 5.18(a) in respect of the Reference Schedule and the Lease Memorandum No:7553873X dated 1 April 2001 that bind the lessor and lessee over the subject premises." In making the above quotation I have been more than a little generous to Mr Gunning because in truth the words are "… clause Item 5.15, 516, 517, 518(a) in respect of the Reference Schedule…". There is indeed a clause 5.15, a clause 5.16, a clause 5.17 and a clause 5.18, but there is no Item 5.15, 5.16 (or 516), nor 5.17 (or 517), nor 5.18 (or 518) and certainly no 5.18(a) nor 518(a). If one now moves to the so called Reference Schedule, I am assuming Mr Gunning is referring to the "Schedule of Items" which appears as part of Annexure "A" to the lease on pages 2, 3 and 4 of the lease and there is certainly no item or items of the nomenclature referred to, but there is an Item 15 which refers to clause 5.4 of the lease which, with the other clauses (5.12-5.21), deal with the determination of "current market rent." These specified "Instructions" as described by Mr Gunning on page 1 of the amended valuation are, to put it mildly, confusing but, upon an analysis of the lease, ascertainable. 86 The Applicant submitted that because the valuer did not include any reference to the Retail Leases Act 1994 then he "performed his function inconsistent with the criteria in Section 31". Although it is true that he made no reference to the Act (at least as far as I can see) I have concluded that Mr Gunning is an experienced retail valuer and would have been aware that at the time of his appointment to carry out a valuation of "current market rent" (per the lease and the Act and as specified in both valuation documents) he would have been acutely aware of the amendments to the Act such that the failure (if it can be categorised as such) to refer to the Act in his valuation is not by any means a failure to comply with Section 31. At the very front of his valuation he states "Purpose of Valuation: Current Market Rent" and that is clearly, not only within the lease terms but also within the terms of Section 31. Fixtures and Fittings 87 Thirdly, the Applicant submitted that Mr Gunning "took into account fixtures and fittings … which is inconsistent with Section 31(1)(a)." The reference to is to be found at page 4 of the valuation under the heading "1.1 Instructions" where Mr Gunning states that "In making the determination the Valuer took into account the following items: (i) … - (vi) … (vii) Any fixtures, fittings, shop front and internal partitions installed by the tenant in the Premises or other tenant's property including any installations by the lessee." 88 Section 31(1)(a) makes it plain that in carrying out a valuation for the purposes of that Section the "current market rent is not to take into account the value of goodwill created by the lessee's occupation or the value of the lessee's fixtures and fittings on the retail shop premises." 89 It seems to me that the key to understanding that prohibition is the word "value". If the valuer takes into account the value of goodwill or the value of lessee's fixtures and fittings then it is distinctly arguable that the consequent valuation is not that of "current market rent" within the terms of Section 31. 90 The Applicant in its written submissions makes no further reference to this point. The Respondent submits that in making his determination although Mr Gunning took into account the Respondent's fixtures and fittings "this does not necessarily mean that the current market rent determined by him took into account the value of the Respondent's fixtures and fittings." My attention has not been drawn to any paragraph or observation in Mr Gunning's valuation that refers to the "value" of the lessee's fixtures and fittings. I have carefully read the valuation and I am unable to see any reference therein to the value of lessee's fixture and fittings - there is a reference to air-conditioning installed by the lessee (page 8, clause 10.1); a further reference to "a wall-mounted air-conditioning unit" at the top of page 9; a reference on page 10, paragraph 11, to "the shop front, air-conditioner and general fit out (being) installed and ... maintained by the tenant"; a reference in clause 13.1 to "Lessee fit out" as being one of many "factors considered as value determinants"; but other than those observations there is no reference to the value of the lessee's fixtures and fittings. In those circumstances it seems to me that, on this point, there is no breach of Section 31. Section 31 Criteria 91 Fourthly, the Applicant submitted that the valuation report "did not include the Section 31 criteria as matters (the valuer) has taken into account". I am not entirely sure precisely what is meant by that submission. If it means that the valuer should recite the provisions of Section 31 and state formally that he/she considered those matters, then in my opinion that submission should be rejected. It is true that Section 31(1)(e) provides that a "valuation for the purposes of (the section) is to be in writing and to contain detailed reasons for the specialist retail valuer's determination and to specify the matters to which the valuer had regard for the purposes of making his or her determination". But a mere recital of the requirements of Section 31(1)(a) in my opinion would not necessarily satisfy the requirements of Section 31 if the recital was simply lip-service to the provisions of that Section. In order to support this type of submission in my view this would require a detailed analysis of the valuation under attack to demonstrate that in its terms it had not satisfied the requirements of Section 31(1)(a). No such detailed submission was made. In addition, I am unable to find anything in the Respondent's submissions in relation to this particular aspect. In my view, absent particularised submissions it is not the job of this Tribunal to trawl through the valuation seeking to pick up references, or apparent references, to the various aspects of Section 31(1)(a), tick them off and then see to which aspects (if any) the valuer has made no reference. However, doing the best that I can from looking through the valuation it would seem that the valuer: a. Took into account the general definition of "current market rent" in Section 31(1)(a) by reference to the Australian Property Institute's definition relating to "Market Rental Value" at page 5, para 2 of the valuation. No argument was put to me to the effect that that definition did not comply with Section 31(1)(a) in its general terms and, absent argument to the contrary, I am not prepared to conclude that it does not. However, I again observe that it is more than a pity that the basis of the valuation is not specified as being within the statutory definition, thus leading one to actually examine the definition to see whether, at least on a prima facie basis, it does comply with the Act. b. The valuer then has to have regard to the provisions of the lease - he refers to the lease at the top of page 4, para 1.1 where he specifies his instructions as "to inspect, report on and assess the (value of the premises) as at 17 December 2005 in accordance with the terms of Lease Memorandum No 7553873X". He then refers to the "current tenancy details" at page 10, para 11 where he sets out the basic terms of the lease, including its permitted use - in those circumstances it seems to me that sub section (1)(a)(i) has been complied with. c. Nextly, he has to have regard to "the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same or substantially similar use to which the shop may be put under the lease." In this regard, at page 1, the valuer describes the premises and the business; on page 4 para 1.1 he takes into account the "gross effective annual rent likely to be payable between hypothetical landlord and tenant…." and the "permitted use of the premises"; at page 5, para 2 he refers to the basis of his valuation; at page 8, para 10.1 he describes the improvements as "a single level shop with full height glass front (installed by tenant), clear open plan retail area with a small toilet, and store area with a ceiling height of approximately four(4) metres….."; at page 9 clause 10.2 he estimates "the gross building area of the main-built improvements occupy an area of 75m2 being the main lettable area" and that for "the purpose of our assessment of value, we have adopted the net lettable area as advised - 63m2" and then he calculates the retail and storage/toilet areas as 60m2 and 3m2 respectively; then at page 10, clause 12 he deals with "marketability" and expresses the opinion "that should the subject property be placed on the open market we would expect a leasing period of six (6) months assuming that this property would be marketed by a suitably qualified and experienced commercial real estate agent in the area" and then expresses the view (on page 11) that "given the surrounding area busy thoroughfare, the shop would have limited appeal to other prospective tenants"; he then carries out what he describes as the "Direct Comparison Method" of valuation methodology which entails "the extrapolation and analysis of rental evidence on a net unit rate per square metre basis for retail premises of a like nature to that under review"; and then carries out a comparison of other nearby rented commercial premises. In these circumstances it seems to me that, although Mr Gunning did not in fact refer to the premises as being "unoccupied" as the basis for rental opinion, having regard to the terms of his valuation that was in fact one of the bases such that it seem to me the provisions of sub section (1)(a)(ii) have also been satisfied. d) Nextly, he is to have regard to "(iii) the gross rent, less the lessor's outgoings payable by the lessee." Clearly, this is what he has done, by reference to the lease (para 11 of the valuation). It was not suggested that any of the details therein set out were incorrect and it is plain that Mr Gunning took those matters into account. e) Nextly, the valuer is to take into account "(iv) rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops." In my opinion it is plain that Mr Gunning took these matters also into account by his detailed references to "Site Particulars" in paragraph 8, his references to "Description of Improvements" in paragraph 10, his references to "Age/Repair" in paragraph 10.3, his references under the heading "Comments" in paragraph 11, his references to "Marketability" in paragraph 12 and perhaps most importantly, his references to "Valuation Approach" in paragraph 13, and finally his reference to "Local Area Rental Overview" in paragraph 14; such that it is plain that he took into account Section 31(1)(a)(iv). 92 Consequently, it seems to me that he has satisfied the requirement of Section 31(1)(c). Constraints 93 Nextly, the Applicant complains that Mr Gunning "did not include or take into consideration the obligations of constraints that the Retail Leases Act 1994 places on landlords …". In am not entirely sure what is precisely meant by that very general complaint. Again, it is unparticularised and, with respect, meaningless in the context of the Act and its application to "retail shop(s)". Section 31 or Clause 5.16 Appointment 94 The next submission was to the effect that "the Respondent agreed to the appointment of Mr Gunning in accordance with Clause 5.16 of the relevant lease and not in accordance with the provisions the Act….". This submission is similar to but not precisely the same as the submission set out at [65-69] above. In support of this submission the Applicant relied upon the letter from the Applicant's solicitors to the Respondent's solicitors 22 February 2006 which, relevantly, stated: "… we confirm our instructions that … the Lessee … has agreed to the President of the Law Society of New South Wales appointing a valuer to determine the current market rental for the property in accordance with clause 5.16 of (the lease) …" Thus, as I understand the argument, the agreement and the appointment was pursuant to the lease and not pursuant to the Act. The difficulty with that argument is that it fails to address the short history of the matter to that point: by letter 27 January 2006 the solicitors for the Applicant wrote to the President of the Law Society seeking an appointment or nomination of "a person who is a licenced valuer to decide the current market rent" and then observed: "the valuer may need to be specialist retail valuer because the use of the premises is a bait and tackle shop and arguable (sic) falls within one of the categories of Schedule 1 of the Retail Leases Act 1994." The use of the words "specialist retail valuer" is clearly a reference to that definition in the 1 January 2006 amendments. The Dispute Resolution Legal Officer replied 18 February 2006 drawing the attention of the solicitor to Section 19(1)(b) of the Act and noting that section overrode Clause 5.16 of the lease. She then went on to observe that the President "may now only appoint a valuer by express agreement with the parties. Accordingly, provided both parties agree and we receive evidence of such an agreement, the President will continue with the appointment of a valuer as requested in this matter." This is arguably consistent with the agreement provisions of Sections 19(1)(b) and 31(1)(b). That letter from the Dispute Resolution Legal Officer was forwarded on to the solicitors for the Respondent on 21 February 2006 and the Applicant then agreed to the President appointing a valuer. There was then a complaint about the fees to be charged by the nominated valuer subsequently appointed by the President and then by letter 7 June 2006 the parties agreed between themselves that Mr Gunning was to be appointed. 95 Section 31(1)(b) makes it absolutely plain that from and after 1 January 2006 the provisions of Section s 19(1)(b) and 31(1)(b) can be activated by the appointment of "a specialist retail valuer appointed by agreement of the parties to the lease". In my opinion it matters not that the appointment was purportedly made under clause 5.16 of the lease because it clearly was not - the appointment was made "by agreement of the parties to the lease" within the sub-section. It may well be that the original proposal/agreement of the parties was that the President of the Law Society appoint a valuer pursuant to clause 5.16 but it is plain to me that after the advice received from the Dispute Resolution Legal Officer the parties "agreed that Malcolm Gunning of Gunning Commercial is to be appointed to conduct the rental determination in accordance with clause 5.15 and following of the lease." Indeed, when one looks at the letter 23 June 2006 from the solicitors for the Applicant to Mr Gunning there is in fact no reference to clause 5.16 but rather reference to clause 5.15 as follows: "The provisions of the lease provide for the rent to be determined by a valuer in the event that the parties cannot agree see clause 5.15. The parties have agreed on your appointment as valuer for that purpose …". Clause 5.15.1 states (relevantly) that if the parties do not agree then "the current market rent will be decided by a valuer appointed under clause 5.16" - if it is submitted that that reference to clause 5.16 somehow negatives the Act then I simply reject that submission. Clause 5.16 is a standard clause that sits comfortably in many leases of this nature and the effect of the 1 January 2006 amendments is to create a regime which applies over and above, and thereby negativing, the appointment of a valuer by the President of the Law Society pursuant to clause 5.16. In all of these circumstances it seems to me that the parties agreed, consistent with the terms of the lease and Section 31(1)(b), to the appointment of Mr Gunning. Final Valuations 96 Nextly, it was submitted that Mr Gunning's valuations "were not final valuations as they were conditional upon confirmation of the correct floor area (63sqm c.f 80sqm)". Again, this submission was not particularised and one needs again to search through the valuations. In paragraph 10.2 Mr Gunning estimated "that the gross building area of the main-built improvements occupy an area of 75m2 being the main lettable area. For the purposes of our assessment of value, we have adopted the net lettable area as advised - 63m2. This being subject to a formal survey being undertaken by a suitably qualified Building Engineer and/or Surveyor in accordance with the guidelines lay down by the Property Council of Australia". 97 Nextly, Mr Gunning made this telling reference: "The gross lettable and net areas as advised were verified by checks measurements taken during our inspection." He then calculated the retail area at 60m2 and the storage/toilet at 3.m2, total 63m2. 98 I am unable to see any error in his methodology. It is not uncommon for valuers to make a reference to "subject to a formal survey" but Mr Gunning has stated that he verified the measurements by "check measurements" and in any event there is not one wit of evidence to indicate that the "check measurement" of 63m2 is incorrect. I accept the submission made on behalf of the Respondent that both parties "had the opportunity to make submissions to Mr Gunning before he concluded his determination. The Applicant did not provide any evidence in relation to the net lettable area of the premises despite having discussions with Mr Gunning after he provided his valuation and despite requesting from Mr Gunning an amended valuation … the applicant failed to provide any survey evidence whether before Mr Gunning's determination or thereafter ..." and in all the circumstances I reject the submission that the valuation is otherwise than a final determination. 99 I also reject the submission that "it is internally inconsistent that the Respondent should consider that the relevant lease is not governed by the (Act), but that the amended valuation was a section 31 valuation." Whether the premises are governed by the Act is a matter of fact and law and I have determined that on the facts before me the premises are governed by the Act. I am also of the clear view that the valuation is a Section 31 valuation. Application of Section 32A 100 The Applicant then submitted that if I determined that the amended valuation was a Section 31 valuation then that valuation "maybe the subject of an order for review by the Tribunal pursuant to Section 32A of the Act." In support of this argument it was submitted that the Applicant received the amended valuation on 21 August 2006, commenced the proceedings in the Tribunal on 4 September 2006, being fourteen days after his receipt and less than 21 days stipulated by Section 32A(2). 101 The relevant sub-section is Section 32A(2). Relevantly, where a party wishes to seek review of a valuation carried out pursuant to Section 31 by seeking the appointment of 2 specialist retail valuers to conduct a review of that determination, any such application for review must be made within 21 days after the party first received a copy of the determination. It seems to me plain that the Application (in fact filed in this Tribunal 5 September 2006) was made within 21 days after the Applicant received the amended valuation on 21 August 2006. Consequently, the Application is within time if the relevant document is the amended valuation and not the original valuation. The real question is: does the time run under the original valuation or under the amended valuation. Both valuations are dated 19 July 2006. The original valuation was received on or shortly after 19 July 2006 (Statement of Agreed Facts, para 21,22). There is little argument that the amended valuation was received on or about 21 August 2006. 102 There is very little difference between the original valuation and the amended valuation. I agree with the general submission of the Respondent to the effect that "there is no material difference between the valuation dated 19 July 2006 and the amended valuation in that the amended valuation merely corrects typographical errors but does not effect any substantive alteration to the valuation." 103 It seems to me unarguable that the original valuation was received by the solicitors for the Applicant on or about 19 July 2006. This is effectively admitted in the Statement of Agreed Facts. It is not clear from the evidence why precisely Mr Gunning issued an amended valuation. In the Applicant's affidavit 11 October 2006 his only reference (paragraph 5) is that "on or about 1 August 2006" he was "having further discussion with (Mr Gunning) in relation to the valuation dated (19 July 2006 and as) a result of my discussions with him I understood that he was to provide an amended valuation and forwarded to my previous solicitors ..." and later he deposes that until he received the amended valuation he "had no specific understanding of what amendments were to be made to the valuation and whether they related to simple amendments of spelling errors or address more fundamental matters of importance in the valuation." 104 The problem with that evidence, and all the evidence, is that there is no evidence of what conversations took place between the Applicant and Mr Gunning or whether the Applicant did in fact make a submission to Mr Gunning that went to "fundamental matters of importance in the valuation" or to "simple amendments of spelling errors" and the like. In fact, there is precious little evidence that would go to why it was that Mr Gunning prepared an amended valuation. 105 However, I can only assume from the paucity of evidence that the parties have elected to put before me that the various issues raised with Mr Gunning that encouraged him to prepare an amended valuation were issues that were not of substance but rather more of form. This view is corroborated by a statement in a letter from the lawyers for the Applicant to those of the Respondent 17 August 2006 at page 3 where they refer to the complaint by the Applicant to Mr Gunning resulting in "a further valuation (dated the same date) addressing a number of spelling and typographical errors …". I have done my best to compare the valuation with the amended valuation and can see very little difference - certainly nothing of substance. For example, the Applicant has complained in this Tribunal about the lettable area but there is no change made in the amended valuation. On page 2 the original valuation apportions "a gross unit rental rate of $300 per sqm" and the amended valuation varies that to "$275 per sqm." However, there is no change to the calculations, neither to the ultimate result. 106 No party has directed my attention to any legal principle that ought to be adopted in these circumstances. The Act is silent in that it makes no reference to any "amended" valuation or determination. But what is clear, in my view, is that the 21 day period runs from the date "the party first received a copy of the determination." The determination was made by Mr Gunning 19 July 2006 and given to the parties on or about that date. In my view, the fact that he subsequently amended that determination at the instance of the Applicant does not affect the plain terms of Section 32A(2) in that the copy of the determination was received by each party on or about 19 July 2006. 107 In support of that conclusion I note that there is no evidence at all that the Respondent sought or agreed to any amendment to that valuation but rather the (inadequate) evidence of the Applicant was that it was he who sought amendment(s) which resulted in an amended valuation which did not in any way, shape or form change the ultimate result. Consequently, in my view the Applicant is simply out of time and is thereby statute barred from making any application for a review. 108 This is an important conclusion because, so it seems to me, there is nothing in Section 32A that directs the Tribunal to what principles should apply when determining an application for review. It would seem that any application for review made within time must be granted, with appropriate cost penalties (sub-section (9)) because the joint decision of the two specialist retail valuers "is final and binding on the parties to the lease" (sub-section (11) provided that if an application is made within 21 days after the joint decision is given and the Tribunal is "satisfied that the valuers have manifestly made a fundamental error warranting" setting aside the decision of the two specialist retail valuers then, and only in those circumstances, the joint decision "is not otherwise reviewable by or appellable to the Tribunal." Thus it seems to me that the scheme of Section 32A is to create an automatic right in either party, provided that the right is exercised within time, to obtain an appointment by the Tribunal of two specialist retail valuers to conduct a review of the original determination of the specialist retail valuer made under Section 31(or Section 19) and then that decision is final and binding and non-appellable unless it is determined, by application again filed with time, that the valuers have manifestly made a fundamental error warranting setting aside the subsequent joint valuation. Section 32A Extension of Time 109 The final submission on Section 32A was to the effect that if the Tribunal determines the application to be out of time, the Applicant sought an extension under Administrative Decision Tribunal Act 1997, Section 44. This Section provides, relevantly in sub-section (1) that "the Tribunal may, on application in writing by an interested person seeking to make a late application, extend the time for the making by that person of an application if the Tribunal is of the opinion that the person has provided a reasonable explanation for the delay in making the application." 110 In my opinion applications under Section 44 ought to be made as part of the application, not as part of Counsel's submissions. If the Applicant believed that he was out of time, or perhaps thought he might have been out of time, then the proper time to have made that application for extension of time was either by separate Motion or as a paragraph in the original Application. 111 But putting this aside, in any event it seems to me that the Applicant has not satisfied Section 44 because the Applicant has not, in the two affidavits filed on his behalf, one of himself 11 October 2006 and the other of his solicitor 13 October 2006, dealt with this particular issue other than paragraph 5 of the Applicant's affidavit 11 October 2006 to which I have made reference above. The difficulty confronting the Applicant, in my opinion, is the plain fact that the original valuation was received by all parties on or about 19 July 2006, there is nothing in the evidence that would lead me to conclude that the amended valuation was made at the request of or with the consent of the Respondent but rather the evidence points to unparticularised discussions between the Applicant and Mr Gunning which ultimately resulted in the amended valuation in circumstances where during the whole of that time, on the material before me, the Respondent was in receipt of the original valuation from or about 19 July 2006 and could reasonably have relied upon the time constraints in Section 32A(2) such that after the expiration of 21 days from 19 July 2006 the Respondent could have reasonably formed the opinion, and acted thereon, that the 21 day period had expired and the issue of valuation was at an end. In any event, and in addition, the amended valuation makes no change at all to the original valuation as to quantum and any prejudice that may have been suffered by the Applicant was prejudice that arose, in my opinion, as at 19 July 2006. In my view the Applicant has not offered a "reasonable explanation for the delay" and I decline to grant any extension under Administrative Decision Tribunal Act 1997 Section 44. Conclusions 112 I have determined, on the facts the parties have elected to put before the Tribunal: (i) The business "bait and tackle" conducted from the premises is, on the evidence, a business within those prescribed by Schedule 1. (ii) That the leased premises are a "retail shop" for the purpose of the Retail Leases Act 1994. (iii) The Tribunal therefore has jurisdiction. (iv) The valuation of Malcolm Gunning is a valuation of a specialist retail valuer within Section 31 of the Act. (v) The Application for the appointment of a specialist retail valuer pursuant to Section 31 is therefore misconceived and should be refused and dismissed. (vi) The application for extension of time to seek an order for review pursuant to Section 32A is refused. 113 Consequently, it must follow that the formal Application must be dismissed. I propose that no order for costs be made unless either party applies to the Tribunal within 28 days. Orders 1. Declare: (i) The business "bait and tackle" conducted from the premises is, on the evidence, a business within those prescribed by Schedule 1. (ii) That the leased premises are a "retail shop" for the purpose of the Retail Leases Act 1994. (iii) The Tribunal therefore has jurisdiction. (iv) The valuation of Malcolm Gunning is a valuation of a specialist retail valuer within Section 31 of the Act. 2. The Application is dismissed. 3. The application for extension of time to seek an order for review pursuant to Section 32A is refused. 4. Leave granted to either party to apply for an order for costs, any such application to be made within 28 days; absent such application there will be no order as to costs.

Tringas v Quach

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