Monday, 16 April 2018

Have there been any recent updates to the Personal Property Securities Register website?

The Australian Financial Services Authority has updated its 9 minute power point presentation on the Personal Property Securities Act. See: https://bit.ly/2IYWNf8

The AFSA claims that this is a handy resource for PPSR practitioners to use when educating clients or new staff about the PPSR and its implications for businesses selling or hiring on terms. 

There is also a PPSR Industry information section on the website, which includes a space for comments, suggestions and improvements to be left. see: https://bit.ly/2HnmEAd

WG Stark 
Hayden Starke Chambers

Friday, 13 April 2018

Can a lease cease to be covered by the Retail Leases Act 2003 during its current term?


William Buck (Vic) Pty Ltd v Motta Holdings Pty Ltd [2018] VCAT 15

1.     This VCAT case (decided by Senior Member Riegler) is important because the Tribunal held a lease could cease to be a “retail premises lease” during its term.

2.     The decision has the potential of narrowing the application of the Retail Leases Act 2003 (Vic) serving as some good news for retail landlords.

Does GST form a part of the occupancy costs?
3.     The first issue that Senior Member Riegler had to decide was whether GST should be taken into account when calculating occupancy costs for leases entered into before 22 April 2013.  He decided yes.

4.     However, that part of the decision is of limited application due to Retail Leases Regulations 2003 which state that any lease which is to commence from 22 April 2013 is to exclude GST from total occupancy costs.

Background
5.     On 19 December 2006, the Tenant originally entered into a written lease in respect of premises located in Hawthorn East. It continued to occupy a part of those premises. The original Lease provided for an initial term of eight years with two further terms of six years each. The parties renegotiated the Tenant’s tenure upon the expiration of the first term. A new lease was entered into, under which the Tenant occupied less floor area than what was originally leased (and with less rent payable). The parties agreed that the Retail Leases Act 2003 (‘the RLA’) governed the current lease.

6.     However, what was in dispute was whether the original Lease was also governed by the RLA.

7.     Under the terms of the original Lease, the Tenant was required to pay land tax. According to the Tenant, it paid $251,234.68 to the Landlord as reimbursement of land tax up until 31 December 2014. However, if the RLA applied to the original Lease, then the clause requiring the Tenant to reimburse the Landlord for land tax is deemed to be void ab initio, pursuant to s 50 of the RLA.

8.     The Tenant claimed that the original Lease was governed by the RLA and as a consequence the payment of land tax was paid under mistake of fact or law and it was entitled to be repaid.

9.     Whether the original Lease fell within the provisions of the RLA depends on the amount of occupancy costs payable under that Lease. Occupancy costs are defined under s 4(3) of the RLA as:
(a) the rent payable under the lease, and
(b) the outgoings, as estimated by the landlord, and
(c) any other costs of prescribed kind

10.  If the occupancy costs were more than $1 million, then under s 4(2)(a) of the RLA and r 6 of the Retail Leases Regulations 2003 the leased premises fall outside of the definition of retail premises and the RLA does not apply.

11.  The starting rent under the original Lease was $802,795, plus GST. Prior to the commencement of the Lease, and pursuant to s 46 of the RLA, the Landlord gave the Tenant an estimate of the outgoings for the first year of the lease term. That document stated that the estimated outgoings in the first year of the first term of the Lease was $150,209 (‘the Estimate of Outgoings’).

12.  Whether this amount is inclusive or exclusive of GST, this document formed the basis upon which occupancy costs were to be calculated, as at the commencement of the Lease.

13.  According to the Tenant, if GST is not counted for the purpose of assessing occupancy costs, then the occupancy costs amount to $953,004 and the RLA applies. That would mean that the clause in the Lease requiring reimbursement of land tax is void ab initio.

14.  According to the Landlord, if GST is added to the starting rent and Estimate of Outgoings, then the occupancy costs amount to $1,048,304.40 and the RLA does not apply. That would mean that there is no prohibition against requiring the Tenant to reimburse the Landlord for land tax.

15.  Senior Member Riegler found that the aggregate occupancy costs at the time when the original Lease was entered into exceeded $1 million and consequently, the RLA did not apply to the original Lease.

16.  He noted (in paragraph 15):
… Where the rent payable under a lease is expressed as a base figure plus GST, it is the aggregate amount that constitutes the consideration for the taxable supply. In other words, expressing the rent as ‘$802,795 (plus GST)’ or simply as $883,074.50 constitutes the same consideration paid by the Tenant (by way of rent) for the taxable supply.
17.  He concluded (at paragraph 16):
Therefore, I am of the opinion that rent payable under the lease means the sum payable by the Tenant to the Landlord for rent, inclusive of GST and irrespective of the fact that some of that payment will create a GST liability upon the Landlord. In other words, even if the Lease expressly distinguishes between the base rent and the amount of GST payable (by using words such as ‘plus GST’) does not mean that the contractual rent payable by the Tenant is limited to the base rent. This is because the Tenant does not pay the GST. GST is paid by the Landlord. Where words such ‘plus GST’ are used to describe the rent payable under a lease, a tenant must pay the base rent plus ten per cent. The aggregate of those amounts then constitutes the contractual rent payable under the lease. Of that sum, the Landlord is liable to pay an amount equal to 10 per cent of the base rent, by way of GST.

18.  He went on to analyse whether the definition of occupancy costs under s 4(3) of the RLA excluded GST from the calculation of the rent payable under the lease, and concluded (at paragraph 20) that the reference to the word taxes, when read with paragraph (b)(ii) of the definition of outgoings must also include GST.

19.  He was reinforced in holding that view by the fact that GST is expressly referred to in s 47(6) of the RLA, which states, in part:
(6) However, the outgoings statement given under subsection (3)(b) need not be accompanied by an auditor’s report if it –
(a) does not relate to any outgoings other than –
(i) GST; and
...

20.  In the Senior Member’s view, the reference to GST as an outgoing in s 47(6) of the RLA indicates Parliament’s intention to treat GST as a component of outgoings.

21.  The relevant regulation was amended in 2013. However, the Senior Member decided that the amending regulation did not clarify what was the case prior to 2013. Rather, it changed the meaning of r 6, as it existed prior to 2013. At that time, the prescribed amount was simply stated as $1 million.

22.  Senior Member Riegler was not persuaded that the words of r 6, as they existed prior to 2013, indicated an intention to assess occupancy costs exclusive of GST. He noted that such an interpretation seemed to be at odds with the definition of outgoings set out in s 3 of the RLA, which includes taxes payable by the landlord.

Can premises cease to be Retail Premises during the term of the lease?
23.  The more noteworthy comments from the decision are those relating to late exit from the RLA.

24.  In that respect, s 11(2) of the RLA states:
(2) Except as provided by Part 10 (Dispute Resolution), this Act only applies to a lease of premises if the premises are retail premises (as defined in section 4) at the time the lease is entered into or renewed.

25.  At paragraph 56, Senior Member Riegler concluded:
Therefore, if leased premises do not fall within the definition of retail premises at the time that the parties entered into the lease (or its renewal), the premises cannot become retail premises later (for example if the occupancy costs reduced to under $1 million during the term of the lease). However, that does not prevent the reverse scenario. For example, if the occupancy costs were under $1 million at the time the parties entered into the lease, then the premises fall within the definition of retail premises. However, if the occupancy costs subsequently increased to over $1 million during the term of the lease, then the premises would no longer fall within the definition of retail premises.

26.  While the opinion is not legally binding, it is likely to persuade other VCAT members until it is confirmed or rejected by the Supreme Court in an appeal from VCAT.

27.  The effect of this decision is that if one of the statutory exemptions to the application of the RLA is triggered during the term of a 'retail' lease (such as the occupancy costs), the lease could then 'exit' the RLA regime.

28.  Therefore, all landlords and tenants should consider this decision during any negotiations relating to the terms of the lease. This is particularly relevant in situations where:
(a)  The occupancy costs at the commencement of a lease fall just below the threshold of $1 million (excluding GST) but will increase above the threshold during the term of the lease as a result of rent reviews;
(b)  The lease may be assigned from a retail tenant to an entity which is listed on a stock exchange (or is a subsidiary of such an entity);
(c)   The existing tenant itself may list on the stock exchange during its tenure, or be bought by a corporation that is so listed; and
(d)  The permitted use of the premises is changed during the term of the lease (by variation or assignment) to a use which does not satisfy the definition of a 'retail premises' (this may not be as relevant after the recent CB Cold Storage decision).

Potential impact
29.  The following issues are different for commercial leases that are not covered by the RLA:
(a)  A landlord is able to recover land tax from a tenant;
(b)  The rent review provisions could include clauses such as the old ratchet provisions, a provision which states that the rent shall not decrease during the tenant’s tenure, or “the higher of …” types of rent review clauses (all of which are not applicable under the RLA);
(c)   Disputes can be heard in courts rather than VCAT;
(d)  The landlord does not have the same onerous disclosure obligations in relation to outgoings for further terms;
(e)  A tenant and a guarantor are not released automatically upon the assignment of a lease; and
(f)   A landlord could include difficult relocation, demolition and repair and maintenance provisions into the lease.

WG Stark
Hayden Starke Chambers

Sunday, 8 April 2018

Can I challenge an expert valuer's rental determination made under section 37 of the Retail Leases Act, 2003?


Rental Determinations
1.     Challenging Rental Determinations made under section 37 of the Retail Leases Act 2003 (RTA) has always been difficult. However, in the last 12 months there have been at least 2 successful VCAT challenges made to a valuer’s rental determination.

Dalmatino Pty Ltd v Creative Laser Pty Ltd
2.     In Dalmatino Pty Ltd v Creative Laser Pty Ltd [2017] VCAT 875, I appeared for the landlord, and Sam Hopper appeared for the tenant. Unusually, it was the landlord who was unhappy with the valuation in that case.

3.     Dalmatino is a well-established restaurant in Bay St, Port Melbourne. One of the 2 brothers that operated the business left the partnership, and the landlord alleged that things went downhill as a result.

4.     Several disputes erupted; the most significant related to what the rent was to be for the period after a new lease term commenced.

5.     The landlord alleged that there was an agreement reached about the rent for the second term of the lease, commencing in 2012, and the parties jointly appointed a valuer to determine the rent for the period commencing in 2015.

6.     The tenant denied the 2102 agreement, and sought to appoint a valuer for 2012 as well, under section 37 of the RTA. The rental determination that was completed concluded that the tenant had been overpaying the rent by thousands of dollars each year. 

7.     In VCAT, one of the main issues for the Tribunal’s determination was whether the 2012 valuation complied with section 37 of the RTA.

8.     The Tribunal rejected the contention that there had been an agreement reached about the rent for the period commencing in 2012. As a result, the rental determination became relevant.

9.     In the event, Member Kincaid found that the determination was flawed, as it did not comply with the requirements of section 37 of the RTA. For the purpose of determining the current market rent in respect of the first year of the third term of the lease, the valuer’s written reasons demonstrate that the valuer had regard to premises “...for the same, or a substantially similar, use to which the premises may be put under the lease” within the meaning of the section. However, the rental determination was still set aside for failure to comply with the requirements of section 37 of the Act.

10.  Section 37 of the Act provides, in part:
Rent reviews based on current market rent
(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)-(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 be reasonably expected to be paid for 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) ...
(d) ...
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...
(5) In determining the amount of the rent, the specialist retail valuer must take into account the matters set out in subsection (2).
(6) The valuation must-
(a) be in writing; and
(b) contain detailed reasons for the specialist retail valuer’s determination; and
(c) specify the matters to which the valuer had regard in making the determination 

Relevant Determination Principles
11.  At paragraphs 43 – 45, Member Kincaid analysed the relevant determination authorities, in the following terms:
In Commonwealth of Australia v Wawbe Pty Ltd and Anor [1998] VSC 82, Justice Gillard adopted the following statement of McHugh JA in Legal and General Life of Australia Ltd v A Hudson Pty Ltd as stating the law concerning challenges to valuation determinations (at [38]-[39]):
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...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 a 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 upon the parties”. By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision.
While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or 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 the valuation may have proceeded on the basis of error or that it represents 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. 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 [emphasis of his Honour].
Justice Gillard went on to say (at [45]):
In my opinion it follows that the court should consider three questions-
1.     What did the parties agree to remit to the expert?
2.     Did the valuer make a mistake and what was the nature of the mistake?
3.     Is the mistake of such a kind that demonstrates that the valuation was not made in accordance with the terms of the contract and accordingly does not bind the parties?

The leading authorities on setting aside a rental determination (including the above extract from Wawbe) were summarised by Croft J in Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2015] VSC 104, when his Honour concluded (at [59]):
As the authorities make clear, the Tribunal’s task was to consider whether the Rental Determination answered the contractual description of what the valuer was required to do. For present purposes, it is sufficient to note that, by virtue of s 37(1) of the Act, sub-s (2) is taken to be a term of the lease, that is, a term of the contract between the parties. Therefore, the valuer was required to make a determination that accorded with the requirements of that sub-section.

12.  Member Kincaid then proceeded to analyse whether the rental determination failed to comply with the provisions of section 37(2)(a) and (b) of the Act.

13.  At paragraph 67 and following, the Member found:
I consider that in order for the valuer to have satisfied himself that he has had regard to “the rent that would be reasonably expected to be paid for 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”, he need only look to the essential use of the premises under consideration. I find, doing as best I can from the valuer’s descriptions given in his table, that the essential use of each of the various premises described in the valuer’s table at numbers 16, 21 and 24-27 on pages 15-17 of the rental determination is that of a “restaurant, not being part of a chain of restaurants”.
I therefore find that the premises described in premises numbers 16, 21 and 24-27 on pages 15-17 of the rental determination are offered for lease for:
a.    the “same” use (to the extent that any of them may have a general liquor license, like the tenant, or even a licence in modified form); or
b.    “substantially similar” use (to the extent that any of them may not have a liquor license)
to which the premises may be put under the lease, within the meaning of section 37(2)(b) of the Act.

14.  Having found that some of the premises referred to by the valuer were within the requirements of section 37, the Member then considered (at paragraph 69 and following) whether  
… the reasons contained in the rental determination are such as to indicate, when read as whole, that when determining the current market rent, the valuer had regard to “the rent that would reasonably be expected to be paid for premises having the same, or substantially similar, use to which the premises may be put under the lease”.

The giving of reasons by an expert serves generally as a means by which a reviewing Court or Tribunal is able to be satisfied that he or she took into account matters required to be taken into account. Section 37(6) of the Act expressly makes it clear that, in the case of a specialist rental valuer appointed under the provisions of the Act, the reasons given by the valuer must not only be “detailed”, but they must “specify the matters to which the valuer had regard in making the determination”. These are, at least, I consider, the matters set out in section 37(2)(a)-(d) of the Act.

15.  Member Kincaid concluded (at paragraph 71) that he could not be satisfied that this was so, and as a result he found that the determination did not comply with section 37. At paragraph 72, he noted that the extent to which the valuer had regard to the requirement set out in section 37(2)(b) of the Act could only gathered from the text of the rental determination. Then, at paragraphs 73 – 75, he noted:
The above extract from the reasons show, in substance, that the valuer first identified a “rental range” between a “low” of $385pm2 per annum (as to which particular premises referred to in the tables contained in the rental determination, it is not clear) and a “high” of $937pm2 per annum. The valuer goes on to state that, in his view, “the most relevant data is in the range of $500 to $570 [psm] per annum net”. It is impossible to determine from this statement the extent to which the valuer considered, if at all, premises having the same, or a substantially similar, use to which the premises may be put under the lease. In particular it is not clear, other than perhaps by supposition, that the valuer had regard to premises 16, 21 and 24-27, being premises that I have found have the same, or substantially similar use as that to which the premises may be put under the lease.

Further, having identified “the most relevant data range of $500 to $570 [psm] per annum net”, there are no particulars provided by the valuer of how he then arrives at a current market rental of $525 per square metre. Having expressly informed the reader about his use of the Direct Comparison Technique which, he states, involves the making of “inevitable adjustments for all factors which influence market rental value”, no particulars are provided as to the adjustments that were presumably applied to the rents payable for other relevant premises to take into account factors applicable to the premises that may “influence the market rental value” of the premises, even at a very general level of description.

Section 37(6)(b) of the Act requires the valuer to give “detailed reasons”. Section 37(6)(c) of the Act requires the valuer to “specify the matters to which the valuer had regard in making the determination” including, I consider, the matters to which the valuer is required to have regard in section 37(2) of the Act. For the reasons set out above, one is largely left to speculate as to how the valuer formed his opinion. This does not, in my view, sufficiently comply with section 37(6) of the Act.

Josephine Ung Pty Ltd v Jagjit Associates Pty Ltd
16.  In Josephine Ung Pty Ltd v Jagjit Associates Pty Ltd [2017] VCAT 2111, Rob Hay QC appeared for the respondent tenant, and Sam Hopper appeared for the applicant landlord.

17.  In that case, Member Edquist concluded that the rental determination undertaken by the valuer was vitiated by error, and was of no effect. The case concerned a rental determination made in relation to a cafe in South Yarra. The applicant landlord, Josephine Ung Pty Ltd (ACN 158 852 487) owned two shops in Claremont Street which it leased to the respondent tenant Jagjit Associates Pty Ltd (ACN 164 331 480) for a term of 10 years commencing 3 February 2012.

18.  The lease provided that the rent should be reviewed on the fourth anniversary of the commencement date. A specialist retail valuer conducted a market review of the rent under the lease for the year commencing 3 February 2016. The Valuer also issued a determination (“the Determination”) on 14 October 2016 and issued a letter supplementing his written reasons in the Determination on 29 November 2016. 

19.  The landlord claimed that the Determination was vitiated by error, and alternatively that the Valuer failed to provide detailed reasons. The tenant denied this.

20.  The landlord’s claim was that there were three related errors:
    1. The Valuer failed to have regard to concessions as required by s 37 (2)(d) of the RLA, or failed to adequately disclose that consideration;
    1. The Valuer did not have regard to the provision by the landlord of certain installations and, in so doing, failed to have regard to the terms of the lease as required by s 37 (2)(a) of the RLA and valued the wrong premises, or his reasons do not adequately disclose the regard given by him to those items; and
    1. The Valuer failed to have regard to the term implied into the lease by s 52(2) of the RLA.

21.  The member discussed several authorities, and then quoted from the decision in Commonwealth v Wawbe Pty Ltd [1998] VSC 82 noted above, where Gillard J agreed with McHugh JA’s statement of the law, and went on to add:
In my opinion it follows that the court should answer three questions-
(i) What did the parties agree to remit to the expert?
(ii) Did the Valuer make a mistake and if so what was the nature of the mistake?
(iii) Is the mistake of such a kind which demonstrates that the valuation was not in made in accordance with the terms of the contract and accordingly does not bind the parties?

22.  The Member noted that his task was to identify the terms of the contract made between the parties, as this will identify the parameters within which the rental determination was to be conducted. In other words I must identify what Croft J described in Epping Hotels as the Valuer’s “charter”. 

23.  With respect to the requirement contained in s 37(6) of the RLA that the Valuer provide “detailed reasons”, both parties referred to the decision of Croft J in Higgins Nine Group Pty Ltd v Ladro Greville St Pty Ltd [2016] VSC 244. Relevantly, his Honour said at paragraph 40:
It is clear that it is not sufficient for a Valuer to “leap to a judgement.” The valuation must disclose the steps of reasoning.

24.  The Member also noted that Croft J went on to note that the position is reinforced by the provisions of s 37(6)(c) of the RLA, which requires the Valuer “to specify the matters to which the Valuer had regard in making the determination”.

25.  The member accepted the landlord’s argument about the first alleged error. The Tribunal noted in paragraph 24:
Although the Valuer expressly confirmed in his Determination that he had had regard to rent concessions and other benefits offered to prospective tenants of unoccupied retail premises in undertaking his task, this is contradicted by the subsequent correspondence. In particular, in his letter of 29 November 2016 the Valuer stated:
My deliberations in this regard have not extended to incorporating a rent free period into my Determination.

Is the mistake a vitiating error?
26.  The Member then noted that this conclusion opened up a new issue: if the Valuer made a mistake, is there a basis for the Tribunal to find that the mistake was of the kind referred to by McHugh JA in Legal & General or Nettle JA in AGL Victoria that would entitle the Tribunal to set the Determination aside?

27.  At paragraph 32, the Tribunal concluded that the Valuer’s error in failing to take into account rent concessions available to prospective tenants in determining current market rent is an error of such magnitude that the Determination has been made outside the Valuer’s charter. The error is of such a nature that it vitiates the Determination.

28.  For the sake of completeness, and in case the Tribunal was wrong in the conclusion about alleged error 1, the Member proceeded to examine the other alleged errors.

29.  The landlord’s principal contention was that the Landlord’s Installations formed part of the leased premises, and yet, in making his Determination, the Valuer did not have regard to those items. Although the Valuer referred to the landlord’s installations in his Determination, the Determination did not identify how the provision of this fitout is taken into account. The Tribunal also accepted these arguments. It found at paragraph 51:
a. In circumstances where the Valuer merely makes the statement that he has had regard to the “Landlord’s provision of installations” but has not given any indication of how he has done this, I think there is a break in his chain of reasoning. It is not apparent that the Valuer has fully appreciated the particular nature of the premises in the present case, that is to say premises already substantially fitted out by the landlord as a commercial kitchen, with associated preparation and service equipment.
b. The landlord’s installation … clearly had value. The fact that a value for the installation was not precisely established did not mean that the landlord’s argument that the installation had to be taken into account was “misconceived”.
c. The landlord’s complaint is that the Valuer did not really base his Determination on comparable values appears to be made out because he did not identify any other restaurant/cafe in his table of comparable properties which had a substantial landlord’s fit out.

30.  The Tribunal specifically found that the Valuer had not demonstrably taken into account the landlord’s installations. In this respect, the Valuer fell into error. By failing to explain  adequately how he had taken the landlord’s installation into account, the Valuer breached s 37(6)(b) and also (c) of the RLA. This error vitiated the Determination as the Valuer had not performed the contract he made with the parties.

31.  Finally, the landlord contended that the Valuer failed to have regard to s 52(2) of RLA, and erroneously had regard to a different repair and maintenance obligation expressed in the lease. The central proposition underpinning the landlord’s complaint is that clause 4.2.1 of the lease is inconsistent with s 52(2) of RLA.

32.  The landlord contended that it was unclear what value had been attributed to the tenant’s (non-existent) obligation to maintain the property.

33.  The landlord also articulated a separate argument arising out of the particular circumstances of this lease, under which the landlord had provided a substantial amount of the fit out, including refrigerators, and ice maker, dishwashers, and extraction system, all floor coverings and certain light globes. The argument was that because sub-sections 52(2)(b) and 52(2)(c) of the RLA respectively extended the landlord’s maintenance obligations to “plant and equipment at the retail premises” and “the appliances, fittings and fixtures provided under the lease by the landlord ...” the hypothetical tenant had been relieved of the cost of maintaining those items. This represented an unusually significant saving to the hypothetical tenant, which would further inflate the rent that he or she would be willing to pay. Accordingly, the landlord argued, either the Valuer did not have regard to the true terms of the lease (as amended by s 52 of the RLA) or his reasons do not disclose the regard to that section that he did have. Either way, it said the Determination is invalid and should be set aside. The Tribunal accepted the landlord’s arguments.

34.  The Tribunal applied the test articulated by Croft J in Higgins Nine Group Pty Ltd v Ladro Greville St Pty Ltd [2016] VSC 244 and noted that the Valuer must disclose the steps of his reasoning. The Tribunal found that there was a failure by the Valuer to give “sufficient” reasons in respect of his consideration of the tenant’s and the landlord’s repair and maintenance obligations. The nature of these errors was such that the Tribunal was satisfied that the Valuer did not discharge the contract he had made with the parties to apply the terms of the lease, including all the terms implied by the RLA. Accordingly, applying the law as set out by McHugh J in Legal and General (1985) 1 NSWLR 314 at 335-336, the Tribunal concluded that the rental determination was vitiated.

Conclusion
35. Both of these cases demonstrate that a valuer, in making a rental determination under section 37 of the RTA, cannot simply open his filing cabinet and review the leases of several premises with which he is familiar and then make his determination based upon that information. The task of a valuer in making a rental determination under section 37 is onerous. The failure by the valuer to provide detailed reasons for the determination, or the failure to consider the specific terms of the lease in question, can lead the valuer into error in making the determination. Once the determination is shown to be in error, it can be set aside by VCAT. 


WG Stark
Hayden Starke Chambers