Alma Constructions Pty Ltd v C. D. Management Group Pty Ltd [2008] NSWADT 3

CITATION: Alma Constructions Pty Ltd v C. D. Management Group Pty Ltd [2008] NSWADT 3

DIVISION: Retail Leases Division

APPLICANT Alma Constructions Pty Ltd PARTIES: RESPONDENT C. D. Management Group Pty Ltd

FILE NUMBER: 075123

HEARING DATES: 30 November 2007

SUBMISSIONS CLOSED: 30 November 2007

DATE OF DECISION: 7 January 2008

BEFORE: Molloy GB - Judicial Member

CATCHWORDS: Appointment of a specialist retail valuer

MATTER FOR DECISION: Prelminary matter

LEGISLATION CITED : Retail Leases Act 1994

Clifton v. Palumbo [1944] All E.R.497 CASES CITED: Great Tastes of Australia Pty Limited v. Shorty Holdings Pty Limited [2006] NSWADT 253 Taylor v. Johnson (151 CLR 422)

APPLICANT G Wright, barrister REPRESENTATION: RESPONDENT A Kardiasmenos, solicitor

1. Declare that there has been no agreement between the parties on a new rent consequent upon the exercise by the Respondent of the option in the lease ORDERS: 2. The Tribunal has jurisdiction to appoint a Specialist Retail Valuer pursuant to section 31 Retail Leases Act 3. Absent any appeal from this decision the Tribunal will appoint a Specialist Retail Valuer 4. No order for costs unless application is made by either party seeking an order for costs within 28 days of the date of this decision.

REASONS FOR DECISION Background 1 The Applicant is the lessor of premises known as Lot 3 in Strata Plan 39526, being a retail shop situate at Shop 3, 52 Simmat Avenue, Condell Park ("the shop"). By Lease dated 23 February 2005 ("the lease") the Applicant leased the shop to the Respondent for a term of 3 years commencing 1 July 2004 and terminating 30 June 2007, which lease contained two options for renewal each for a period of 3 years. The first option, once exercised would renew the lease for 3 years from 1 July 2007 through to 30 June 2010; and the second option, once exercised would renew that lease for 3 years commencing 1 July 2010 to 30 June 2013. 2 It is common ground that: a) the first option has been exercised; b) the method of rent review for the fixing of the rent for the first year of the new term is "current market rent". 3 The lease contains fairly standard clauses relevant to the matter in issue. Those clauses, referring to "current market rent", commence at clause 5.12 and end at clause 5.21. The relevant clauses for the purposes of argument are as follows: 5.12 In this case (referring to current market rent) the rent is to be the current market rent. This can be higher or lower than the rent payable at the rent review date and is the rent that would reasonable be expected to be paid for the property, determined on an effective rent basis, having regard to (a number of specified matters). 5.13 The landlord (the Applicant) or the tenant (the Respondent) can inform the other in writing at least 60 days before the rent review date that the rent that the landlord or tenant thinks will be the current market rent at the review date. 5.14 If the landlord and the tenant agree on a new rent then that rent will be the new rent beginning on the rent review date and the landlord and the tenant must sign a statement saying so. 5.15 If the landlord and the tenant do not agree on the amount of the new rent 30 days before the rent review date the current market rent will be decided by a valuer appointed under clause 5.16. 4 It is common ground that the balance of clause 5 is not relevant simply because the Retail Leases Act 1994 has now provided an overriding regime for the determination of current market rent. 5 It is also common ground that Retail Leases Act 1994 Section 31 provides the law and machinery for the determination of current market rent when the parties are unable to agree, and it is also common ground that the section overrides any contractual term, either to the contrary or providing its own regime, for the determination of current market rent – in other words, the section and the Act apply notwithstanding the terms of the lease contract. 6 There is no need to set out in this Judgment the whole of the terms of Section 31. The relevant sub-sections are as follows: 31(1)(a) …. (b) If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by a valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal (referring to this Tribunal). Note: the parties may agree to appoint a specialist retail valuer nominated by the President of the Australian Property Institute (NSW) or the President of the Real Estate Institute (NSW), or nominated by some other person of the parties' choice. [No party relied on this Notation – there was no agreement that would have fallen within this Notation]. (c) ... (d) ... (e) ... (f) ... Note: The procedure provided by this section can be avoided if the parties can come to an agreement as to what the rent is to be. (1A) A party to a lease may apply to the Tribunal for the appointment of a specialist retail valuer for the purposes of subsection (1)(b). (1B) ... (2) ... (3) ... (4) ... The Application 7 By Application for Original Decision filed 23 July 2007 the Applicant sought the appointment of a specialist retail valuer pursuant to Section 31. The Applicant swore that the "parties have not reached agreement as to whom should be appointed as the specialist retail valuer under s. 31". 8 In support of the Application the Applicant appended to the form of Application a copy of the lease and a short sworn statement setting out the bare facts and asserting that no agreement had been reached. No other documentation was filed. 9 The Respondent filed a sworn affidavit to which was annexed a copy of the lease and, more importantly, a copy of the correspondence that had flowed between the parties and later between their legal advisers. 10 It is the Respondent's contention that there has in fact been an agreement reached such that this Tribunal should dismiss the application and not appoint a specialist retail valuer because the parties have in fact agreed on what is to be the current market rent for the first year of the new term commencing 1 July 2007. Evidence 11 The Applicant has sworn no evidence regarding its intentions or understandings, neither has the Respondent, save that the Respondent has put in evidence the correspondence. Both parties have based their cases upon that correspondence, the Applicant asserting that the correspondence demonstrates no agreement and the Respondent submitting otherwise. Neither party has filed any evidence, nor sought to give oral evidence regarding, as to what their intentions or understandings were in relation to the correspondence. 12 By letter dated 18 May 2007 ("the first letter") the property manager for the Applicant's leasing agent wrote to the Respondent as follows: "We confirm that your lease expires on 1 July 2007. We note that you have exercised your option please find below the new rent and outgoings as at 1 July 2007. Rent to be charged as of 1 July 2007 $2,774.00 Outgoings $550.00 GST $332.40 Per month GROSS $3,656.40 Per Annum GROSS $43,876.90