Eastpoint Shopping Village Pty Ltd v Grayson Pty Ltd [2011] NSWADT 68

Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Eastpoint Shopping Village Pty Ltd v Grayson Pty Ltd [2011] NSWADT 68 Hearing dates: 15 March 2011 Decision date: 05 April 2011 Before: P H Molony, Judicial Member Decision: 1.On file number 115019 declare p ursuant to Section 72 (1)(f)(iii) of the Retail Leases Act 1994 , that the parties are not bound by the "current market rental of Ian Handley, dated 22 November 2010 in respect of Shop 1, Eastpoint Shopping Centre, 371 Ballina Road, Goonellabah because it is not a valuation for the purposes of Section 19 of that Act. 2.On file number 105212, the application is dismissed. Catchwords: Retail leases - appointment of specialist retail valuer Legislation Cited: Retail Leases Act 1994 Cases Cited: Adwell Holdings v Bourne (2007) NSWSC 17, (2007) NSW Conv R 56-188 Perri v Exego Pty Limited [2009] NSWADT 170 Richardson v Lockevo Pty Ltd [2010] NSWADT 305 Category: Principal judgment Parties: Eastpoint Shopping Village Pty Ltd (Applicant) Grayson Pty Ltd (Respondent) Representation: Counsel Mr Mackay (Applicant) Mr Guthrie (Respondent) G A Guthrie (Respondent) File Number(s): 105212 and 115019

REASONS FOR DECISION

Introduction 1Eastpoint Shopping Village Pty Ltd (Eastpoint) leased retail shop premises identified at Goonellabah to Grayson Pty Ltd (Grayson) under a registered leased which commenced operation on 25 May 2005. The lease was for an initial term of 10 years, with a further four five year options. The premises were to be operated as a supermarket. The rent at commencement was 2The lease made provision for the annual increases of rent by application of an agreed figure of 3.5% for the first four years. As a result following the 2009 increase, the rental payable was $277,891.67 exclusive of GST. By Item15 of Annexure B to the lease, the rental in the fifth year of the lease is to be reviewed and set using a current market rate method. Cause 15.12 of Annexure B to the lease relevantly provides - "In this case 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 be reasonably be expected to be paid for the property, determined on an effective rent basis, having regard to the following matters - 5.12.1 the provisions of this lease; 5.12.2 the rent that would reasonably be expected to be paid for the property if it were unoccupied and offered for renting for the same or substantially similar use to which the property may be put under this lease; 5.12.13 the gross rent, less the landlords outgoing payable by the tenant. 5.12.14 where the properly is a retail shop, rent concessions and other benefits that are frequently or generally offered to prospective tenants of unoccupied retial shops; and 5.12.5 the value of goodwill created by the tenant's occupation and the value of the tenant's fixtures and fittings are to be ignored." 3When the time came for the rent to be reviewed on a current market rent basis the parties were unable to agree as to a new rent, or on a valuer to be appointed to conduct the valuation upon which the rent could be determined. As a result, application was made to the Tribunal under s19(1A) of the Retail Leases Act 1994 to appoint a specialist retail valuer. On 1 September 2010 the Tribunal appointed Mr Ian Handley. 4Mr Handley took submission from the parties and prepared a rental valuation, dated 22 November 2010, which determined that the current market rental of the premises, at 5 May 2010, was $140,000 gross per anum plus GST. That valuation was forwarded to the parties on 8 December 2010. 5On 22 December 2010 Eastpoint filed an application to appoint two specialist retail valuers to review that determination under s 32A of the Act. 6On 23 December 201 Eastpoint filed a retail tenancy claim in which it sought a declaration that Mr Handley's valuation was not a valuation for the purposes of s 19 of the Act. In so doing Eastpoint relied principally on the decision of the Tribunal in Perri v Exego Pty Limited [2009] NSWADT 170. In that case Molloy JM found that the Tribunal had jurisdiction to make such an order (at [62]), and did make an order declaring that the valuation in issue was not a valuation of current market rent for the purposes of s19. 7Eastpoint's two applications were listed for hearing before me on 15 March 2010. That hearing focussed on the application for a declaration. There was agreement that the Tribunal had jurisdiction to consider that question. 8At the conclusion of the hearing I reserved my decision. It was agreed that should I find that the valuation was a valuation of current market rent under s 19, then I should also make directions progressing Eastpoint's application for the appointment of two specialist valuers to review Mr Handley's determination. Conversely, if I found that the valuation was not a valuation of current market rent for the purposes of s 19, then there was agreement that I should make orders commencing the process for appointment of a new valuer to perform a valuation under s 19.