CITATION: Great Tastes of Australia Pty Ltd v Shorty Holdings Pty Limited [2006] NSWADT 253 DIVISION: Retail Leases Division APPLICANT PARTIES: Great Tastes of Australia Pty Ltd RESPONDENT Shorty Holdings Pty Limited FILE NUMBER: 065080 HEARING DATES: On the papers SUBMISSIONS CLOSED: 06/22/2006 EXTEMPORE DECISION DATE: 07/20/2006 DATE OF DECISION: 09/01/2006 BEFORE: Molloy GB - Judicial Member CATCHWORDS: Appointment of a specialist retail valuer MATTER FOR DECISION: Principal matter LEGISLATION CITED : Commercial Arbitration Act 1984 Retail Leases Act 1994 CASES CITED: Baston Holdings Pty Limited v. Rose [2002] NSWADT 110 Solomon v. Singh (No. 2) [2005] NSWADT 295 APPLICANT B Horton, solicitor REPRESENTATION: RESPONDENT K Gower, solicitor ORDERS: The Tribunal appoints Steven Szalay as specialist retail valuer for the purposes of making a valuation of the current market rent of premises Shops 5 and 6, Three Sisters Plaza, 33-35 Echo Point Road, Katoomba REASONS FOR DECISION Background 1 The Applicant is the lessee of Shops 5 and 6 at the Three Sisters Plaza, 33-35 Echo Point Road, Katoomba pursuant to Retail Leases registered Nos AA67192S and 9765333A. 2 The Respondent is the lessor of those premises. The Respondent purchased the premises from the original lessor (Mr Craig Baldock) in May 2005. 3 Both Leases terminated on 30 March 2006. However, the Applicant exercised the respective options to renew. The leases provide for two options for renewal, one from 31 March 2006 – 30 March 2009 and the second from 31 March 2009 – 30 March 2012. For the period 31 March 2006 to 30 March 2009, if the option is exercised (as it was in this case) the lease provides that the rent from 31 March 2006 to the first review date will be the "current market rent as at 31 March 2006 … being nett rental and GST exclusive and not being less than the annual rental payable for the year commencing 31 March 2005 - subject to the Retail Leases Act provisions". 4 The parties did agree to the appointment a specialist retail valuer nominated by the President of the Law Society of NSW but on or about 29 May 2006 the person nominated declined to accept the appointment. The parties subsequently have been unable to agree on the appointment of a valuer to determine the current market rent of the two demised premises. Application 5 The Applicant seeks an order that the Tribunal "appoints a specialist retail valuer for the purposes of making a valuation of the current market rent of the premises known as Shops 5 and 6, Three Sisters Plaza, 33-35 Echo Point Road, Katoomba". In recent times the President of the Law Society of NSW has declined to make appointments, even though the terms of the lease may contain that requirement, on the basis (as I understand it) that the statutory power to appoint a specialist retail valuer resides in this Tribunal. 6 By amendments made to the Retail Leases Act 1994, commencing 1 January 2006, Sections 19 and 31 were inserted. Section 19 deals with the changing of rent during the currency of the term of a lease to "current market rent" and Section 31 to situations where upon exercise of option to renew or extension of a lease the new rent for any given period is to be "current market rent". In each case the retail shop lease is taken to include provision, inter alia, (Sections 19(1)(b) and 31(1)(b)) that if the "lessor and 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". 7 There is no need to refer to the balance of the provisions relating to the appointment of a valuer except to say that in each of Sections 19 and 31, sub-section (1)(A) provides that a party to a lease may apply to the Tribunal for the appointment of a specialist retail valuer for the purposes of each of the sub-sections (1)(b). 8 The power vested in this Tribunal to make such an appointment is to be found in Retail Leases Act 1994 Section 72 AB. The Tribunal has the requisite power. Sub-section (2) provides that the "appointment of a specialists retail valuer is to be made from separate lists of nominees prepared separately by the persons for the time being holding or acting in the offices of President of the Australian Property Institute (NSW) and President of the Real Estate Institute (NSW)". 9 There is no guidance in the Retail Leases Act 1994 as to what qualifications/ experience any specialist retail valuer has to have to be included on the "separate lists". However, Sub-section (4) provides that the Tribunal "may attach such conditions as it thinks appropriate to the appointment of a specialists retail valuer, including conditions about the fees that may be charged by the valuer in connection with valuations under this Act". 10 One can surmise as to the reasons for empowering the Tribunal to appoint a specialist retail valuer in circumstances where the relevant lease contract between the parties permitted either or both parties to approach the President of the Law Society of NSW or some other agreed person for that purpose. Presumably the answer to this question is to be found in Section 72AB(5) which provides that no "matter or thing done or omitted to be done by a specialist retail valuer appointed by the Tribunal subjects the valuer to any action, liability, claim or demand if the matter or thing was done in good faith for the purposes of a determination of rent by valuation carried out by a specialist retail valuer under section 19, 31 or 32A". Observations 11 The first important point to make is this: in an application to appoint a specialist retail valuer, although the Applicant can be, and in most cases will be, only one of the parties, the application itself cannot be regarded as some form of adversarial litigation. The application is simply an application consistent with the requirements of the particular retail lease and the overriding requirements of the Retail Leases Act 1994. Consequently it is not the subject of argument or debate before the Tribunal but rather is simply an application by one or either or both parties to a lease in circumstances where, to all intents and purposes, the application itself is a consent application requesting the Tribunal to exercise its jurisdiction to appoint a specialist retail valuer. 12 Although it is true that matters generally in this Tribunal are of an adversarial nature (and correctly so having regard to the issues and consequences) and although such is generally particularly so in this Division, in my opinion the exercise of power by this Tribunal under Sections 19 and 31 cannot be regarded as adversarial but rather consistent with the power given in a contract to a particular person or office holder to appoint, for example, an arbitrator under the Commercial Arbitration Act 1984 to resolve a dispute. In this case the dispute is "what is the current market rent of the premises" at a particular time and the power to resolve that dispute vests in an appointed specialist retail valuer appointed by the Tribunal in a similar way to the power utilized formerly by the Law Society President. 13 Any in any event the power given to the Tribunal is limited (if that is the correct word) to the appointment "from separate lists of nominees" pursuant to Section 72AB(2). In other words, it is not the subject of argument, or cross-examination, but rather the proper selection of a specialist retail valuer from the separate lists. 14 The second important point is this: the Tribunal will assume that the persons whose names are included in the relevant lists pursuant to Section 72AB(2) are persons who are appropriately qualified to carry out the retail valuations as required by Sections 19, 31 and/or 32A. The Tribunal itself is not to make its own separate enquiries as to the qualifications and expertise of the various persons who are on the respective lists. Neither the legislation nor common sense would require that investigation. The purpose of Section 72AB is to provide a simple and cost-effective method of resolving the dispute between the parties relating to what is the current market rent at the date specified in their lease contract. 15 The third important point is this: not only does the legislation and practice not require a separate enquiry by the Tribunal as to the qualifications and expertise of the persons on the respective lists but the only legislative guidance is that the Tribunal "may attach such conditions as it may think appropriate to the appointment of a specialist retail valuer, including conditions about the fees that may be charged by the valuer in connection with valuations under this Act" (Section 72AB(4)). So, it seems, the Tribunal has to bear in mind, and as an important point (because the scheme (in my view) is intended to operate as a cost-effective method of resolving this type of dispute without litigation) the fees to be charged by specialist retail valuers whose names are put forward on the respective lists. There may well be other factors as well – after all, the Tribunal "may attach such conditions as it thinks appropriate" to the appointment. But, so it seems to me, absent peculiarities, the Tribunal can assume the qualifications and expertise of the persons whose names appear on the separate lists and should bear in mind as an important factor (but not an overriding factor) the fees that the valuer indicates he/she would charge. Again, that is not to say that there may well be other factors that should be considered in a particular case but it is plain to me that the above are the two important factors that bear upon an appointment by this Tribunal. This Application 16 The Application (filed 6 June 2006) came before me on 22 June 2006 for directions. Ms Gower appeared for the Respondent and mentioned the matter by consent. She indicated that the parties preferred the appointment of a valuer experienced in the Katoomba area if this was at all possible. 17 I observe that the Applicant lessee, through its solicitors, by letter accompanying the Application, asked the Tribunal to "treat this matter as urgent because the original leases expired on 30 March 2006 and our client continues to pay rent at the old rate despite being two months in the "new" lease period". 18 The procedure at that point of time in the Tribunal was that the Registry, at the direction of a Judicial Member, would then approach a number of specialist retail valuers who were put forward on separate lists provided to the Tribunal by the President of the Australian Property Institute (NSW) and the President of the Real Estate Institute (NSW), separate lists provided by both organisations. From those lists a number of valuers, selected by the Judicial Member, would be approached with a view to exploring their availability and fee structure. If any valuer so approached found him/herself in a conflict situation or was otherwise not available then that valuer would not be appointed. On the other hand, those valuers who did positively respond would then be assessed in chambers by a Judicial Member and one of them selected and appointed pursuant to Section 72AB. 19 Spelling it out in more detail in this particular case the letter from the Registry to the valuers was in these terms: "The following parties have applied to the Tribunal to have a specialists retail valuer appointed pursuant to Retail Leases Act 1994 to determine the "current market rent" of the lease. The details of the parties and the lease are attached. If you have: a) no conflict of interest b) the expertise and experience required c) availability to conduct the valuation over the (next) six weeks would you please advise me, by return e-mail, no later than 4-00pm on Wednesday 5 July 2006. Would you also include in that e-mail your fees. If you have any enquiries please contact the Tribunal on 9223 4677." 20 It can be seen from the above that each approached valuer was asked to determine, as a professional person, whether he/she had a conflict of interest, whether he/she had the expertise and experience required and whether he/she had the availability to conduct the valuation over the next following six weeks. 21 It is important to bear in mind that the persons who put their names forward on the respective separate lists are professional persons and as such the Tribunal is entitled (in my view) to rely upon their professionalism and ethics in responding to valuation appointment requests. 22 The Registry approached a number of specialist retail valuers selected by me from the separate lists. One, a Mr Mark Hurst, responded and he had "no conflict of interest and (he had) the expertise and experience required to undertake this assignment". However, he was not available because of current valuation work such that he did not believe he could complete the valuation within the six week period. 23 Mr Steven Szalay was also approached. He also stated that he was "available to undertake the work in that time frame". He then stated he believed that he had "the necessary experience (in compliance with) the definition under the Act, and am familiar with the mountains having lived there for many years". He envisaged his fees to "be in the order of $1,100.00 per shop (GST exclusive) and say $200.00 (GST exclusive) for disbursements, including travel and one night's accommodation in a nearby motel. Total $2,400.00 plus GST." 24 The next valuer who was approached and responded was Mr Adrian Watt. He also stated that he had "no conflict of interest relating to this matter … (and that he had) the expertise and experience required to complete these rental determinations. I have valued the freehold and leasehold interests of many retail and commercial properties within the Blue Mountains townships over the past 15 years, particularly during the last 2-3 years". He indicated he was available to complete the valuation, he sought some additional material and he stated that his "fee for these two retail rental determinations is $9,000.00 (inc GST) recognising that these premises are in the same building and from my recollection comprise adjoining premises". 25 The Registry also approached Mr John Carritt who responded that he was "unable to accept this appointment as I would have a conflict of interest due to the fact that I have already made a rental determination within this building". 26 So, before the Tribunal, there were two positive responses received from qualified specialist retail valuers, one, from Mr Watt and the other from Mr Szalay. In my opinion each of those valuers had the requisite qualifications and experience and also, for what it is worth, by their replies demonstrated experience in the Blue Mountains area. 27 I say "for what it is worth" because in my view that was not a pre-requisite to the appointment of a specialist retail valuer but rather was an expressed desire of both parties which, if it was possible, the Tribunal should endeavour to meet. 28 In Solomon v. Singh (No. 2) [2005] NSWADT 295 I considered at [11]-[19] the expertise of two experts advanced by each party and made this observation at [13]: "The fact that someone does not have any particular experience in a particular area does not of itself disentitle that person from expressing an expert opinion nor does it result in a devaluing of that opinion. As long as the witness has the relevant experience and/or qualifications and has a grasp of the principles (and it was not suggesting that either witness did not have a grasp of the principles) then in my view their expert evidence is admissible and should be given appropriate weight. If this were not the case then it would be difficult, if not impossible, to obtain valuations of remote places. It is a combination of experience, qualifications and a grasp of the principles which in my view establishes a person as an expert". 29 I adhere to that view. Australia is a very large country. NSW is a very large state. Valuations of geographically remote places (ie remote from major metropolitan areas) would be severely hampered (to put it mildly) if the principles that I have set out did not apply across the state. The Tribunal should endeavour to meet the reasonable expectations of the parties if reasonably possible but one should bear in mind that the Tribunal will assume that they themselves have failed to agree, not only on the rent but also on the name of a specialist retail valuer (sub-sections (1)(b) of sections 19 and 31) such that the parties turn to the Tribunal to resolve the impasse. 30 So, on 6 July 2006 I considered the matter. I formed the opinion that both Mr Szalay and Mr Watt were qualified specialist valuers and had the expertise and experience required to undertake the assignment, both met with the desires expressed to the Tribunal by both parties that they be experienced in the Blue Mountains area and, having regard to the provisions of Section 72AB(4) and my opinion that the legislative scheme is intended to create a cost-effective method of resolving this type of dispute, I appointed Steven Szalay as specialist retail valuer. 31 [Subsequent to making the above Order, communication was received enclosing an objection to the appointment of the Specialist Retail Valuer. While mindful that there is some scope for reopening final orders, in the kind of circumstances considered by the High Court in Minister for Immigration and Multicultural Affairs v Bhardwaj [2002]HCA 11, I do not see this as such a situation where further consideration should be given to the objection.] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.