PERPETUAL TRUSTEE CO LIMITED v CROOKS MICHELL PEACOCK STEWART PTY LTD [1992] NSWCA 185

PERPETUAL TRUSTEE CO LIMITED v CROOKS MICHELL PEACOCK STEWART PTY LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

KIRBY P, PRIESTLEY and CLARKE JJA 9 July 1992, 19 August 1992 [1992] NSWCA 185

CONVEYANCING — leases — rent review clause — ambiguity — rental formula for business premises — artificial assumptions — no reduction for concessions or rent abatement to new lessees — calculation by reference to rent value of comparable premises held: (by maj) Rental value may have regard to concessions and rent abatement. CONVEYANCING — leases — rent review clause — determination of "annual rent" of business premises — construction of formulae in clause — specific requirement in one para that assumption to be made that no reduction allowable on account of any concession required to secure a tenant or any period of rent abatement — provision in another para requiring valuer to have regard to rental value of "comparable premises" — whether by "comparable premises" reference may be made to rental values determined with reference to concessions and abatement — held: (dismissing appeal) (per Priestley JA, Clarke JA concurring; Kirby P dissenting): The true construction of the rent review clause permitted the rental value of comparable premises to be taken into account and therefore imported a consideration of concessions and rent abatement which consideration was also consistent with the determination of the "open market rental of the premises".

Kirby P This appeal from the Equity Division of the Supreme Court (Brownie J) concerns a challenge to the construction given to a rent review clause in a lease of business premises.

Commercial context of rent review clauses Rent review clauses have given rise to a number of disputes. See eg Modifications Pty Ltd v Doyle and Anor (1991) NSW Conv R p55-578 (CA) and Ropart Pty Ltd v Kern Corporation Ltd and Ors (1991) NSW Conv R p55-594 (SC); p55-598 (CA). McCafferty v Queensland Treasury Corporation, noted (1992) 66 ALJ 222 (QFC). Their resolution is usually unrewarding. Their outcome typically depends upon the construction given to ambiguous language by which the parties seek to impose upon an appointed person an obligation to define the rent of premises in future, unforeseeable events by reference to specified circumstances, many of them artificial or hypothetical. The present is a case of that kind.