KELMEA PTY LIMITED v STATE RAIL AUTHORITY OF NEW SOUTH WALES [1988] NSWCA 80

KELMEA PTY LIMITED v STATE RAIL AUTHORITY OF NEW SOUTH WALES

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Hope, MAHONEY and CLARKE JJA 17 December 1987, 29 June 1988

[1988] NSWCA 80

Landlord and Tenant; rent review clause; demised premises; unimproved value of the freehold.

In a lease of commercial premises for the term of 20 years there was provision for annual rent reviews after five years had elapsed. The revised rent was to be the greater of a fixed sum or $7,500 plus 7.5% of the unimproved value of the freehold of the demised premises current on the first day of the tenancy year. Unimproved value was defined as meaning the improved value determined pursuant to the Valuation of Land Act 1916 or if none had been determined the "unimproved value of the premises agreed between the parties or, failing agreement, determined by an arbitrator".

HELD:

1. That the circumstance that the improved value had not been ascertained by the commencement of the tenancy year did not mean that the rent was to be the fixed sum mentioned;

2. The words "unimproved value of the freehold of the demised premises" were to be given their natural ordinary meaning.

Hope JA I agree with Clarke JA.

Mahoney JA The facts are set forth in the judgment of Clarke JA and it is not necessary for me to recapitulate them. Subject to one matter, on which I desire to add some observations of my own, I agree with his Honour's judgment and the reasons which he has given.

The learned trial judge declared that, upon a reference to arbitration in accordance with the relevant provisions of the lease, "the amount of the unimproved value of the freehold of the demised premises is to be determined as at 1 June 1985 according to the ordinary and natural meaning of those words in the lease when applied to the facts".

The term "the unimproved value of land" as used in s6 of the Valuation of Land Act 1916, as it was before the amendments to which Clarke JA has referred, was seen as going to the capital sum which the fee simple of the land might be expected to realise on a proper sale assuming that the improvements on or appertaining to it had not been made: see s6. However, in ascertaining that value, there was to be taken into account, to put the matter compendiously, the potentialities for improvement or otherwise for use of the land.