Supreme Court New South Wales Medium Neutral Citation: Haxglow Pty Ltd v Mirvac Retail Sub SPV Pty Ltd [2020] NSWSC 233 Hearing dates: 4 March 2020 Date of orders: 17 March 2020 Decision date: 17 March 2020 Jurisdiction: Equity Before: Darke J Decision: Valuer's determination of current market rent held to be final and binding. Plaintiff entitled to recover over payment of rent. Defendants' cross-claim is dismissed. Catchwords: VALUATION – expert determination – valuer appointed pursuant to lease to determine current market rent – whether determination carried out in accordance with the terms of the lease – adequacy of reasons given by valuer – whether valuer required to comply with code of professional conduct – whether valuer failed to comply with code – whether valuer failed to disregard goodwill of lessee's business – whether valuer failed to have regard to incentives given to lessees of comparable premises – not shown that determination was not carried out in accordance with the provisions of the lease – determination held to be final and binding on the parties LAND LAW – leases – rent – provision for review of rent – valuer appointed as expert to determine current market rent – whether determination carried out in accordance with the terms of the lease – adequacy of reasons given by valuer – whether valuer required to comply with code of professional conduct – whether valuer failed to comply with code – whether valuer failed to disregard goodwill of lessee's business – whether valuer failed to have regard to incentives given to lessees of comparable premises – not shown that determination was not carried out in accordance with the provisions of the lease – determination held to be final and binding on the parties Cases Cited: AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 Data Base Corporate Pty Ltd v Strike Australia Pty Ltd [2019] NSWSC 271 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; 2017 HCA 12 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Halifax Life Ltd v Equitable Life Assurance Society [2007] 1 Lloyd's Rep 528 Holt v Cox (1997) 23 ACSR 590 Kavinah Holdings Pty Ltd v Holdsworth Properties Pty Ltd (2001) 10 BPR 18,825; [2001] NSWSC 405 Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd (2002) 11 BPR 20,201; [2002] NSWCA 180 Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576 Legal & General Life of Aust Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38 Strike Australia Pty Ltd v Data Base Corporate Pty Ltd [2019] NSWCA 205 Category: Principal judgment Parties: Haxglow Pty Ltd (Plaintiff/Cross-Defendant) Mirvac Retail Sub SPV Pty Ltd (First Defendant/First Cross-Claimant) Perron Investments Pty Ltd (Second Defendant/Second Cross-Claimant) Representation: Counsel: Mr A P Coleman SC with Mr J S Burnett (Plaintiff/Cross-Defendant) Mr A Fernon (Defendants/Cross-Claimants) Solicitors: Clayton Utz (Plaintiff/Cross-Defendant) Holding Redlich (Defendants/Cross-Claimants) File Number(s): 2018/329133 Publication restriction: None Judgment Introduction 1. These proceedings concern a lease of certain premises on the Lower Ground Floor of the Broadway Shopping Centre building in Ultimo. The plaintiff, Haxglow Pty Ltd, is the Lessee. It operates a hotel from the premises. The defendants, Mirvac Retail Sub SPV Pty Ltd and Perron Investments Pty Ltd are the successors in title to the Lessor. The lease is for a 25 year term commencing on 1 December 2006 and terminating on 30 November 2031. The lease contains three options to renew for further terms of 10 years each. 2. The plaintiff commenced these proceedings by filing a Statement of Claim on 26 October 2018. The plaintiff claims that it overpaid rent in the amount of $1,004,318.04, and seeks recovery of that sum, together with interest, as money had and received by the defendants for the plaintiff's use. The alleged overpayment is based on the assumption that the rent under the lease was determined by a binding Rental Determination dated 27 July 2017 that was carried out by Mr Paul Hall of Ray White Advisory ("RWA"). 3. The parties agree that if the Rental Determination is final and binding, the plaintiff is entitled to succeed. The defendants contend, however, that by reason of the matters raised by them in their Cross-Claim, the Rental Determination is not final and binding. 4. By their Further Amended Statement of Cross-Claim, filed in Court on 4 March 2020, the defendants allege that: 1. RWA, in preparing the Rental Determination, was required by cl 7.3.4(f)(ii) of the lease to comply with the Australian Property Institute Code of Professional Conduct ("the Code"); 2. RWA failed to comply with rules 3.1(f) and 6.3 of the Code; 3. RWA, in preparing the Rental Determination, was required to comply with the provisions of cl 7.3.5 of the lease; 4. RWA failed to comply with the requirements of cll 7.3.5(d) and 7.3.5(g) of the lease; and 5. the various failures of RWA have the consequence that the Rental Determination is not final and binding for the purposes of cl 7.3.7(b) of the lease. 1. The plaintiff denies these allegations and maintains that the parties to the lease are bound by Mr Hall's determination of Current Market Rent at $480,000 p.a. plus GST. Accordingly, the plaintiff says that as and from the review date of 1 December 2016 the Minimum Rent is $480,000 p.a. plus GST. Salient provisions of the lease 1. Clause 7.1 provides that, subject to cll 7.2, 7.3 and 7.4, the Lessee must pay the Minimum Rent to the Lessor. Minimum Rent is defined to be $1,083,000 p.a. Clause 7.2 provides for the Minimum Rent to be multiplied by 103.5% on each Fixed Percentage Review Date, which dates are each anniversary of the Commencement Date [1 December 2006] which is not a Market Review Date. 2. Market Review Date is defined to be the tenth and twentieth anniversaries of the Commencement Date, and the commencement of the first year of any option term granted pursuant to cl 25 of the lease. 1 December 2016 was thus the first Market Review Date. 3. Clause 7.3 provides a mechanism for the parties to agree upon the Current Market Rent in relation to a Market Review Date, failing which a valuer nominated by the Australian Property Institute ("API") is to be appointed by the parties jointly pursuant to cl 7.3.3. 4. Clause 7.3.4 provides: A valuer appointed under clause 7.3.3 acts as an expert and not as an arbitrator and must: (a) have been a full member of the Australian Property Institute for the last 5 consecutive years; (b) be a fully qualified, registered valuer; (c) have at least five years' current experience in rental valuations for premises like the Premises; (d) not have acted in providing valuation advice to either party for a period of 12 months before the valuer's appointment; (e) not have any conflict of interest; and (f) be instructed by the parties to: (i) determine the Current Market Rent; (ii) make the determination in accordance with the professional practice standards and guidance notes of the Australian Property Institute (except to the extent that they are inconsistent with the criteria in clause 7.3.5); and (iii) give a determination, with reasons, in writing within 28 days after being appointed. 1. Clause 7.3.5 provides: The parties must instruct the valuer that in determining the Current Market Rent, the valuer must: (a) have regard to the provisions of this lease (other than the Rent) and assume that the Lessee and the Lessor has complied with all those terms; (b) assume the Premises are available for lease for the whole of the Term but commencing on the relevant review date instead of the Commencing Date; (c) (where the Premises comprise more than one floor of the Building) determine the Current Market Rent on a whole floor basis; (d) disregard the goodwill of the Lessee's business, the value of the Lessee's property and any improvements to the Premises or the Building paid for by the Lessee other than improvements the Lessee is obliged to pay for under this lease; (e) disregard any impaired condition of the Premises caused by the Lessee carrying out or not carrying out work on the Premises or from any breach under this lease; (f) disregard any subtenancy in the Premises and not take account of the rent under any subtenancy in the Premises, the Building or any comparable buildings; (g) have regard to any: (i) rent free period; (ii) fitout period; (iii) contribution to fitout; or (iv) other incentive or concession, given to a lessee of comparable premises at the time of the review; and (h) disregard any: (i) rent free period; (ii) fitout period; (iii) contribution to fitout; or (iv) other incentive or concession, given to the Lessee under any agreement for lease to which this lease gives effect, or under this lease. 1. Current Market Rent is defined to mean: The open market rental value of the Premises at the relevant review date between a willing Lessor and a willing Lessee in an arm's length transaction, wherein the parties had acted knowledgeably, prudently and without compulsion, and having regard to the criteria set out in clause 7.3.5. 1. Clause 7.3.7 provides: The valuer's determination on the Current Market Rent: (a) is the Minimum Rent on and from that review date; and (b) is final and binding. The API Code of Professional Conduct ("the Code") 1. The defendants submitted that the Code falls within the ambit of "the professional practice standards and guidance notes of the Australian Property Institute" for the purposes of cl 7.3.4(f)(ii) of the lease. The plaintiff does not accept that is the case. In any event, the plaintiff denies that, upon the true construction of the lease, the valuer's determination of the Current Market Rent must be made in accordance with the Code in order for the determination to satisfy the requirements of the lease and become final and binding on the parties. That question of construction is dealt with later in these reasons. 2. The Preamble to the Code is in the following terms: The Code of Professional Conduct ("the Code") is a public statement of the principles, values and behaviour expected of Members of the Australian Property Institute Limited (API), as determined by the Board. The purpose of the Code is to ensure that high standards of corporate and individual behaviour are observed by all Members. Every Member of the API must comply with the Code. A breach of this Code may constitute Professional Misconduct which may be investigated by the API in accordance with the complaints procedures under the Complaints Policy. In order to maintain public confidence in the professional standards of Members of the API it is essential that those Members exhibit, and are seen to exhibit, professional standards in carrying out their duties. This Code does not attempt to provide a detailed or exhaustive list of what to do in every situation. Instead, the Code represents a framework for professional conduct and aims to provide assistance and clarification. The current Code of Professional Conduct became effective on 15 June 2015. 1. The Code further provides, relevantly for present circumstances: Rule 1: Relations with Clients 0.1 Members must carry out their professional duties ethically, with honesty, competence, and in good faith, without personal bias, and in a manner which upholds the values and reputation of the property and valuation profession. 0.2 Members must comply with the Professional Rules as amended from time to time. 0.3 A Member must act promptly and efficiently in the servicing of the client's instructions. … Rule 2: Conflict of Interest 2.1 A Member must take reasonable steps to identify circumstances that could be construed as a conflict of interest. 2.2 A Member must not, in any dealings with a client allow the interests of the Member or an associate of the Member to conflict with those of the client. … Rule 3: Impartiality 3.1 A Member must maintain the strictest independence and impartiality when making a valuation and/or where the exercise of objective judgement is required. In such circumstances, a Member must not: (a) adopt the role of advocate in a case where their duty is to exercise independence and impartiality; (b) act as an advocate and as an expert in the same matter; (c) act as an advocate in a matter where another member of the same firm as the Member has acted as an expert in that matter; (d) act as an expert in a matter where another member of the same firm has acted as an advocate in that matter; (e) allow the performance of their professional duties to be improperly influenced by the needs or preferences of a client or other party; (f) rely upon critical information supplied by a client without appropriate qualification or confirmation from other sources; or (g) act in any way inconsistent with the duties of independence and impartiality. … Rule 6: Property Valuations 6.1 When undertaking a valuation, except with the written agreement from the client or the client's representative: (a) a Member must personally inspect any property to be valued; and (b) an inspection of the property must be sufficiently comprehensive to enable the Member to complete the valuation in accordance with the accepted valuation practice. 6.2 If the property is not inspected or is only partially inspected, in accordance with the written agreement from the client or the client's representative, the Member must disclose this in the valuation report and state the effect that the failure to conduct an inspection or a complete inspection has on the valuation provided. 6.3 When undertaking a valuation, a Member must take reasonable steps to: (a) gather sufficient relevant data in forming an opinion of value or, in the absence or deficiency of such data, explain in the valuation report the basis on which the opinion of value was formed; and (b) ascertain and verify such relevant facts and information as a prudent valuer would have ascertained or verified in order to provide a professional valuation of a property. 6.4 A Member must include in a valuation report: (a) confirmation that they have personally inspected the property; (b) a statement of all assumptions made in arriving at an opinion of value and all conditions, requirements or limitations arising from the client's instructions or arising due to any other circumstances; (c) where all facts or information have not been ascertained or verified, written disclosure of this, together with a statement of the extent, if any, to which the failure to ascertain or verify the facts or information in question qualifies or affects the valuation provided; (d) the degree of reliance (if any) on professional opinion from outside experts; and (e) where the Member is a co-signatory, the extent of their involvement and the capacity in which they are signing. … Rental Determination 1. The parties failed to agree upon the Current Market Rent in relation to the 1 December 2016 Market Review Date. Mr Hall of RWA was nominated by the API to be the valuer to determine the matter. Mr Hall appears to have been appointed by the parties on or about 30 June 2017. 2. Mr Hall received detailed submissions from valuers retained by the respective parties, namely, from Mr Scott Robertson on behalf of the defendants and from Mr Phil Rennie on behalf of the plaintiff. Mr Hall provided his Rental Determination to the parties on about 27 July 2017. 3. The Rental Determination is divided into eight numbered sections. Section 1, headed "Location" contains the following: As both parties are no doubt very familiar with the demised premises, I do not propose to provide a detailed description other than to place these aspects in context. The Demised Premises operates as the 'Off Broadway Hotel' and is located on the lower ground level of the Broadway Shopping Centre fronting Bay and Grose Streets. Broadway Shopping Centre houses a 500 seat Food Court and Hoyts cinema complex along with major retailers Kmart, Coles, Target, Aldi, JB Hi-Fi, Harvey Norman, Rebel Sport, and over 100 speciality shops. This centre has retained its No 1 ranking in Australia for the fifth consecutive year, winning the 2017 Shopping Centre News, Big Guns Award for 'annual turnover per square metre (MAT/m2)'. Surrounding development includes retail and commercial tenancies as well as low and high density residential developments and both the Sydney University and UTS campuses. This locality has had a significant amount of development occur over the past 5 years including Central Park Precinct (former Carlton United Brewery Site) which is situated approximately 300 metres east of the subject centre. Due to the close proximity to the Sydney CBD and leading Universities this is a popular residential locality, with an increasing population. Ultimo's population according to ABS statistics has increased from 5,546 (2006) to 8,845 (2016). 1. Section 2, headed "Subject Premises", contains a description of the premises the subject of the lease, including the following: As the subject premises is well known to all parties, I have provided below a brief breakdown of the facilities and accommodation. The subject premise has a wide frontage to Bay Street although its street presence is considered poor. This is due to the escalator access to the upper levels that traverses the frontage, combined with the premise being situated on the lower ground. The premise has two main access points being from Bay Street and the corner of Bay & Grose Streets as well as an additional access point from the car park at the rear of the venue. We note the rear car park access point is currently only utilised as an emergency exit. … Lower Ground A comprises the main trading areas of the hotel, with the accommodation including; and gaming room (24 machines), public bar area, TAB facility, bistro and dining areas. These trading areas are serviced by a large dual fronted oval shaped, full dispensing bar servery. The back of house areas including the loading dock and keg and store rooms are located at the rear of the premise in the tenancy area known as Lower Ground B. The functionality of the space is not considered ideal in the current market as there are no smoking solutions, with limited to no ability to create them. Our experience of valuing this asset class leads us to believe that this will have negative impact on the venue's trading potential, especially the gaming component. The hotel was originally used as an entertainment style venue with live music and DJ's, and the floor plan and layout is considered ideally suited for that usage. With the State Governments crack down on alcohol fuelled violence, these styles of venues are less fashionable. A large number have ceased trading, especially in the entertainment precincts of Sydney. We are aware this venue had previously operated as an entertainment style venue although not under the current the [sic] Lessee. Although the space is not considered ideal, this is compounded somewhat by the poor fit-out, which is not conducive to maximising the revenue potential. 1. Section 3, headed "Synopsis of the Lease" set out in tabular form a number of the provisions of the lease, including clause 9.1 which requires the Lessee to use the Premises only for the Permitted Use of: (a) the sale of liquor and light refreshments in accordance with a normal hotelier's licence; (b) gambling; and (c) the sale of packaged liquor. 1. The terms of clause 7.3.4 which are said to outline the valuer's "qualifications and instructions on conduct" are set out, as are the terms of clause 7.3.5. Reference is also made to various other provisions of the lease, including those concerned with outgoings (clause 8), and the Lessee's ownership of the liquor licence and poker machine entitlements and permits (clause 26). 2. In Section 4, headed "Submissions", reference is made to the submissions and respective market assessments received from the parties. There follows (in Sections 4.2 and 4.3) a collation of the main points of the submissions, and then (in Section 4.4) Mr Hall makes various comments about the submissions in the following terms: Mr Robertson's submissions have made reference to and provided analysis of the hotel's State's gaming machine ranking over a 2 year period and compared it to competing hotels within the immediate vicinity. He further indicates that the subject is located within an area associated with a stronger than average gaming demographic, and believes this is a positive feature with regards to the level of profitability within the Lessee's business. He also considers that the gaming revenue component of the business could be easily replicated by another Lessee in the subject premises and therefore this is not Lessee goodwill but locational or site goodwill. Mr Robertson then indicates that the layout is ideal in terms of the Lessee's ability to reduce the operational costs, especially wages. I do consider the layout is labour efficient, however, I consider that the premise/layout is far from ideal as there are no smoking solutions available, with limited to no ability to create a market acceptable smoking solution. Therefore, this would negatively impact on the trading potential of the gaming component of the business, and any leasing decisions of a hypothetical Lessee in the current market. We note that the gaming platform is fair only and therefore there may be potential upside if this was upgraded, however, long term we consider the upgrading of the gaming platform is more likely to maintain the current level of trade rather than increase it. Mr Rennie doesn't comment on the trading potential of the property and indicates the market review must disregard the trading position of the hotel. I don't concur with this view, as publicans (potential Lessees) assess the rental value of a licensed hotel on the turnover and profit they consider the venue can generate and not on a rate per square basis. The rental value for a Hotel it [sic] is generally based on affordability. The Hotel industry accepts two rental scenarios, being a percentage of gross revenue, and a percentage of the Net Operating Profit (EBITDA). The percentage is determined by the nature of the hotels' trade mix, with hotels that generate the majority of their revenue from low GP sales (retail, food and beverage) being at the lower end of the benchmarks, in comparison to hotels that generate the majority of their revenue from gaming and accommodation. This type of revenue generates higher gross profits, and therefore their percentage is at the upper level of benchmarks. These benchmarks are: 8% to 12% of gross revenue. 35% to 45% of Net Operating Profit (EBITDA). As the Lessee is not required to provide their financials, we were not able to assess the affordability of the rent from the hotels' current operation. I have, however, estimated that [sic] the gaming revenue from the hotels gaming rankings and the food and beverage revenue from my enquiries and market knowledge of trade generated from competing hotels. Both submissions document numerous leasing transactions, with Mr Robertson's evidence being licensed hotels and restaurants within Sydney's CBD and inner suburbs, and being typically in line with the permitted use of the subject. Whereas, Mr Rennie's leasing evidence is primarily consisting of retail premises within a 3 kilometre radius of the subject. Both Valuers have indicated that they have taken incentives into account in assessing their rental value, although only Mr Rennie has allowed for an incentive in his calculations. Mr Rennie has allowed an incentive of 20%, which appears above the level of incentives currently being achieved for licensed premises in the market as at the date of the review date. 1. Section 5, headed "Licenced Hotel Rental Market", contains the following: 5.1 Introduction Due to the barriers of entry there are limited new pubs created by either the approval of a new licence or the relocation of a former licence to a new premise. Therefore, the majority of the leasing transactions are established (DA approved) buildings where either a new lease has been struck or a market rent review has been set. The pub market at present is extremely active with strong demand and record prices being achieved. The strong demand is associated with the growth phase gaming revenue is witnessing, with year on year growth recorded for the last 6 years, with double digit growth achieved for the last 3 years state-wide. Additionally, Sydney's food and beverage centric operators have capitalised on continued consumer trend of dining out with increased frequency and seeking valued food propositions especially in Sydney's Eastern Suburbs and Inner West. This has resulted in increased transactions throughout 2016 at close to record levels and yields. Since the lease was entered into, Ultimo and the surrounding suburbs have had significant infill development, which has been primarily mixed use high-rise retail/commercial and residential accommodation. This has resulted in an increase in both the local and work force population for this vicinity. The establishment of 'Small Bars' over recent years has widened the offering available to traditional hotel patrons, especially within Sydney's CBD. Venues throughout the southern end of the Sydney CBD and City Fringe range in size and the subject would be considered toward the upper level in size compared to other licensed premises. 5.2 Market Evidence There have been a number of new leases entered into and rent reviews conducted throughout Sydney's CBD and City Fringe over recent years. Shown following is a list of leasing transactions over the last few years. Many of these transactions were not considered directly comparable due either to location, size, available smoking solutions or potential trade mix. Due to the unique nature of the subject there are no directly comparable leasing transactions, therefore I have been restricted to the following leasing transactions: Licenced Hotels Charlie Chan's Hotel, 631-635 George Street, Sydney Haymarket Hotel, 661 George Street, Sydney Arthouse, 275 Pitt Street, Sydney Office Hotel, 117 Clarence Street, Sydney New Windsor Hotel, 185 Castlereagh Street, Sydney Edinburgh Castle Hotel, 294 Pitt Street, Sydney Petersham Inn, 386 Parramatta Road, Petersham The Prince Hotel, 533-541 Princes Hwy, Kirrawee Taren Point Tavern, 105 Parraweena Road, Taren Point Greenwood Hotel, 36 Blue Street, North Sydney Rentals are a combination of Nett & Gross and generally range from $380 m2 to $1,398 m2, with the higher rentals generally achieved for the hotels with smaller trading areas and where the Landlord owns the Liquor License and gaming authorities. Other Licenced Premises The Club Sydney (Former Hugo's Lounge) 33 Bayswater Road Potts Point Swillhouse, 15 Bligh Street Sydney GKIII Hospitality, 16 O'Connell Street Sydney City Heroes, 505 George Street, Sydney These premises are more comparable in layout although generally smaller in size to the subject and have inferior licencing consents. The rentals for these properties range from $479 m2 gross to $700 m2 gross. I have also taken into account the recent leasing transactions within the Broadway Shopping Centre that were included within Mr Robertson's report. I note that these leases are considered to be located within superior locations within the Centre and are significantly smaller in size. For these reasons, I therefore believe that a lower rate per square metre is considered appropriate for the subject. 1. Section 6 is headed "Determination Rational [sic]". The introductory Section 6.1 contains the following: Considerations I have taken into account whilst undertaking the market review include such things as, but not necessarily limited, to the following: the economic/market conditions at the relevant date of the review, the covenants of the lease, the characteristics of the premises, the location of the premises in relation to its competitive market and the market evidence used in comparison, the details of comparable transactions having regard to specific aspects of those transactions that may or may not be considered in comparison under the "basis of review" In undertaking my assessment, I have considered the rental evidence provided in both submissions as well as other transactions I have sourced. I have considered the applicability of these rental rates having regard to such matters as the location of the tenancies, the quality and configuration of the premises, the date of review and the pattern and type of future reviews, and the ownership [sic] liquor licence and gaming authorities and/or contribution made to the fit out of the premises, if any. I have had regard to the magnitude of the rental in absolute terms in the comparable lettings considered and the rental herein determined. I have had regard to the fact that, with regard to the permitted uses, rental affordability is not necessarily directly related to the size of the premises and therefore is not necessarily related to the application of a rate per square metre from one premise to another, even after adjusting for value affecting criteria. 1. In Section 6.2, Mr Hall states: In determining the Current Market Rent which a hypothetical Lessee would pay for the use of the premises for the permitted use I have primarily had regard to leasing transactions, new lettings and rent reviews of premises for that use stated within the lease. 1. Mr Hall then goes on to identify various matters he took into consideration, under sub-headings "Location", "Property", "Market", "Trading Attributes" and "Lease Terms". 2. Under the sub-heading "Market" it is stated: I have regard to the rental paid for the most comparable premises of those mentioned earlier. Consideration was given to the rental value affecting criteria and in particular those matters that go to determining the potential trade for the permitted use and the ability to pay rental. Differing degrees of weighting were applied to that evidence depending on their perceived degree of comparability. This location is expanding and attracting a growing residential and office/retail population. There is relatively high degree of competition for the permitted use in this area as well as a number of dormant hotelier's licenses that may potentially increase competition further. I have had regard to clause 9.1(b) whereby the Lessor may allow other Lessees in the centre to use other premises in the centre for the same or for a similar use to the subjects' permitted use. I have taken into account any rental incentives offered for the letting of new premises for the permitted use. 1. Under the sub-heading "Lease Terms" it is stated: The lease directs that the rental must disregard the Lessee's goodwill. While the lease does not state that the rental must assume that the premise is vacant, disregarding any goodwill directs the rental assessment not to take the trading performance of the existing Lessee into account. Given that the rental paid for licenced hotel premises has regard to the potential earning potential of a hotel business and therefore the rental economically payable by that business, the question to be answered is, "What would a hypothetical potential Lessee pay in rental given their assumption of likely potential business to be generated from the premises?". As directed by the lease, I have assumed that the premise is available for lease for the whole of the term but commencing on the relevant review date instead of the commencing date. The Liquor Licence including all Poker Machine Entitlements and Permits are owned by the Lessee rather than the Lessor. In most of the referenced pub evidence the Lessor owns these assets. Therefore, the cost of acquiring these assets to undertake the permitted use is required to be accounted for when comparing to that evidence where these items are Lessor owned. 1. In Section 6.3, Mr Hall describes his assessment of market rent in the following terms: Taking into account the preceding considerations, I am of the opinion that, as a bare shell with the Lessor owning the licence and the gaming machine entitlements and permits, a gross rental of $725,000 ($599m2) would be appropriate. From this I have deducted the estimated rental value of the Liquor Licence and Poker Machine Entitlements (18) and Permits (6). As PME's are less expense [sic] than Permits I have assessed the value of all 24 gaming authorities as PME's. Therefore, I have assessed the value of the Licence at $100,000, and the 24 Gaming Authorities (PME's) at $190,000 each, which equates to a total asset value in-situ of $4,660,000. I have allowed a rental of 5.0% of this total asset value, which equates to a rental value of $233,000 per annum. The gross rental value unlicensed is therefore $492,000. From this I have deducted an incentive of 3 months' rent or 2.5% which equates to $12,300, and after deduction reflects a rental value of $479,700 per annum. Say $480,000 per annum plus GST. The assessment was then put into a tabular form. 1. Finally, in Section 7, headed "Determination", Mr Hall states: With due regard to the matters as discussed in this report and also the terms and conditions of the lease I have determined the Current Market Rent of the Demised Premises as at 1 December 2016 to be $480,000 p.a. gross (exclusive of GST). Applicable principles 1. The parties were in agreement that the question whether the Rental Determination was final and binding upon them depended upon whether the expert determination was carried out in accordance with the terms of the contract, in this case the lease. There was no substantial disagreement as to the principles that are to be applied in answering that question. The Court was referred to the well-known authorities in this area, including Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-6, Holt v Cox (1997) 23 ACSR 590 at 597, AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 at [51] and Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 at [74]-[75], as well as to some recent cases where the principles were applied, including Data Base Corporate Pty Ltd v Strike Australia Pty Ltd [2019] NSWSC 271 (affirmed, by majority, in Strike Australia Pty Ltd v Data Base Corporate Pty Ltd [2019] NSWCA 205) and Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576. 2. The Court was also referred to authorities concerned with the giving of reasons by an expert, including the decision of Palmer J in Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd (2001) 10 BPR 18,825; [2001] NSWSC 405 at [110]-[119]. That decision was affirmed on appeal in Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd (2002) 11 BPR 20,201; [2002] NSWCA 180 at [60]-[63], which decision was itself cited with apparent approval in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38 at [26]. Whilst the defendants did not plead that the Rental Determination failed to comply with cl 7.3.4(f)(iii), which refers to the instruction to the valuer to give a determination with reasons, there was some criticism of the adequacy of the reasons given, and the suggested inadequacies were called in aid of showing that there had been failures to comply with the requirements of the lease. 3. Insofar as questions of construction of the lease were raised, the Court will apply the principles applicable to the construction of written commercial agreements. Those principles have been stated in recent times by the High Court in cases such as Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52], and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]. Accordingly, the meaning of the terms of the lease is to be determined objectively, by what a reasonable business person, placed in the position of the parties, would have understood the terms to mean. Summary of submissions 1. The defendants submitted that upon the true construction of the lease, the Rental Determination was required to be made in accordance with the provisions of the Code, at least insofar as the Code was not inconsistent with the criteria set out in cl 7.3.5 of the lease. It was put that this was made clear by the language of cl 7.3.4(f)(ii). It was submitted that just as cl 7.3.5 required the valuer to be instructed to do or not to do certain things in determining the Current Market Rent, cl 7.3.4(f)(ii) required the valuer to be instructed to make the determination in accordance with certain practice standards and guidance notes, including the Code. The defendants submitted that, properly construed, the lease required the valuer to comply with the instructions to be given, and a failure to comply would have the consequence that the Rental Determination was not carried out in accordance with the lease. 2. The defendants submitted that the Rental Determination failed to disclose sufficient detail of the data, facts or information relied upon as the basis of the opinion as to Current Market Rent, such that it could not be concluded that the valuer had complied with rule 6.3 of the Code. It was put that it could not be seen whether Mr Hall obtained and verified relevant information, such as a prudent valuer would have, in order to give his opinion. 3. In relation to rule 3.1(f) of the Code, the defendants submitted that Mr Hall evidently relied upon the information supplied to him by the respective parties (a matter acknowledged by Mr Hall in the covering letter of the Rental Determination) but there was again a failure to disclose sufficient detail to show that he had not relied upon critical information supplied by a client "without appropriate qualification or confirmation from other sources". 4. The defendants submitted that the Rental Determination contravened cl 7.3.5(d) of the lease because Mr Hall failed to disregard the goodwill of the Lessee's business. This failure was said to be shown by Mr Hall's estimation of gaming revenue and food and beverage revenue of the hotel operated at the premises, and the use of the estimated revenue in his consideration of the earning potential of a hotel business at the premises, and what rental a hypothetical potential Lessee may be prepared to pay. It was further submitted, based on evidence given by a valuer called by the defendants, Mr James Whealing, that the requirement to disregard goodwill meant that the premises had to be valued as a shell, suitable for a wide range of retail or commercial uses, but taking into account the Permitted Use under the lease. 5. In relation to cl 7.3.5(g), the defendants submitted that the matter of incentives given to lessees of comparable premises was inadequately dealt with in the Rental Determination. It was submitted that the information which underpinned Mr Hall's deduction of an incentive of 2.5% was not disclosed and it was not known, for example, "how comparable" the information was. 6. The plaintiff submitted that whilst cl 7.3.4(f) requires the valuer to be instructed in a certain fashion, including that the determination be made in accordance with relevant practice standards and guidance notes, it did not follow that a determination would fail to comply with the lease if there was any breach of those standards or notes. It was put that the definition of Current Market Rent did not incorporate such matters, only the criteria set out in cl 7.3.5. The plaintiff submitted that the structure of the lease differentiated between matters which were merely to be the subject of instructions to the valuer, and the mandatory criteria set out in cl 7.3.5. It was submitted that only breaches of the latter would vitiate a determination of the Current Market Rent. The plaintiff further submitted that even if the Code was a relevant practice standard or guidance note within cl 7.3.4(f)(ii), it cannot have been the intention of the parties to the lease that a breach of any of its provisions would have the result that the determination of Current Market Rent would not be final and binding. 7. The plaintiff submitted that in any event no breaches of the Code had been established. In relation to rule 3.1(f), it was put that even if the parties were "clients" within the rule, it is clear that Mr Hall considered the submissions they made to him, and assessed them appropriately in the light of additional information gathered by Mr Hall himself. It was submitted that it was not a case where the valuer simply relied upon information supplied without either appropriate qualification or confirmation from other sources. It was put that there was no rational basis to conclude that Mr Hall approached his task in a manner lacking in impartiality and independence. 8. In relation to rule 6.3, it was submitted by the plaintiff that even if the Rental Determination was a "valuation" within the rule, the suggestion that Mr Hall had failed to take reasonable steps to gather sufficient relevant data or ascertain and verify information was no more than mere speculation. It was submitted that the Rental Determination reveals that Mr Hall had sufficient relevant data to form his opinion, and there was no evidence that other facts or information was required for that purpose. 9. In relation to cl 7.3.5(d), the plaintiff submitted that it was clear that Mr Hall appreciated that the goodwill of the Lessee's business was to be disregarded, and his reasons, properly read, show that he did not have regard to any goodwill of the business. It was submitted that the assessment of what a prospective Lessee might consider the earning potential of a hotel business at the premises to be does not involve goodwill, and is a completely different exercise. 10. In relation to cl 7.3.5(g), the plaintiff submitted that it was clear that Mr Hall took into account the respective submissions of the parties in relation to incentives offered in the market, and expressly stated that he had "taken into account any rental incentives offered for the letting of new premises for the permitted use". Determination 1. Before dealing with the specific complaints made by the defendants about the Rental Determination, it is necessary to say something about the reasons given by Mr Hall for his determination of Current Market Rent. As already noted, the defendants do not allege that there was a failure to comply with the requirement in cl 7.3.4(f)(iii) to give a determination "with reasons", but they nonetheless criticise the adequacy of the reasons given. 2. Had it been necessary to determine whether Mr Hall's Rental Determination was given "with reasons" within the meaning of cl 7.3.4(f)(iii), I would have held that it was. That is to say, I would have concluded that the reasons satisfied the contractual requirement to give reasons. The content of that requirement reflects the nature of the expert determination process, which is neither arbitral nor judicial, and the nature of the issues to be determined (see Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (supra) at [26]). 3. The reasons given by Mr Hall for his determination of the Current Market Rent are to my mind more than adequate to disclose the essence of his method and his reasoning towards his conclusion. The reasons identify the nature of the information considered by Mr Hall (much of which was supplied by the parties to the lease in the form of submissions), and generally how the information was used in the formation of his opinion. The reasons, read as a whole, were adequate in my opinion to allow the parties to reasonably assess whether the determination of Current Market Rent was carried out in accordance with the instructions to the valuer and in accordance with the relevant provisions of the lease. Reasonable persons in the position of those parties would not have understood that a valuer appointed under cl 7.3.3 of the lease would be required to give reasons more extensive than reasons which would enable such an assessment. Of course, it would have been open to Mr Hall to include a host of additional detail in relation to the matters he considered and the way he proceeded towards his conclusion, but this is not ordinarily required in an expert determination such as this (see the decision of Palmer J in Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd (supra) at [115]-[119]). The parties have chosen to be bound by the opinion of an independent expert on a question of valuation. Such questions inherently involve matters of judgment and opinion where exact reasoning may be difficult to expose (see Strike Australia Pty Ltd v Data Base Corporate Pty Ltd (supra) at [9]-[13] per Bell P). 4. In reaching this conclusion I have not overlooked that a valuer appointed under cl 7.3.3 of the lease is to be instructed to make the determination in accordance with the professional practice standards and guidance notes of the API. By their nature, such standards and notes are of wide, general application to the professional activities of valuers who are members of the API. The Code itself is described as representing "a framework for professional conduct and aims to provide assistance and clarification". I do not think that reasonable persons in the position of the parties to the lease would expect that the reasons for the determination would have to include details sufficient to show whether every specific standard or guideline has been complied with. The reasons given by Mr Hall were adequate in the circumstances (see Halifax Life Ltd v Equitable Life Assurance Society [2007] 1 Lloyd's Rep 528 at [85]). 5. I turn now to consider whether Mr Hall, in preparing the Rental Determination, was required by cl 7.3.4 of the lease to comply with the Code. The first question to consider here is whether the Code falls within "the professional practice standards and guidance notes" of the API. In my opinion it does. It is a code of professional conduct, one of the purposes of which is to maintain public confidence in the professional standards of members of the API. It constitutes, or is at least part of, the professional practice standards laid down by the API. 6. The next question to consider is whether, upon the true construction of the lease, a determination of Current Market Rent by a valuer appointed under cl 7.3.3 is required to be made in accordance with the Code (except to the extent that the Code is inconsistent with the criteria in cl 7.3.5), such that a failure to comply with the Code would mean that the determination was not carried out in accordance with the lease. 7. It is true, as pointed out by the plaintiff, that the definition of Current Market Rent refers only to the criteria set out in cl 7.3.5. The central task of the appointed valuer, namely the determination of the Current Market Rent, is thus focused upon those matters. Nevertheless, cl 7.3.4(f), which is directed to the content of the instructions to be given to the valuer, refers not only to the definition of Current Market Rent but also to making the determination in accordance with relevant professional practice standards (which in my view includes the Code). The differentiation between those matters and the cl 7.3.5 criteria, highlighted by the plaintiff in submissions, is thus somewhat blurred within the scope of the instructions to be given to the appointed valuer. It seems to me that cl 7.3.4 of the lease provides that the valuer is required to be instructed (and to accept instructions) not only to determine Current Market Rent, but also to make the determination in accordance with relevant professional practice standards. It seems to me that a demonstrated breach of those standards could lead to the conclusion that the determination of Current Market Rent was not made in accordance with the lease (see Halifax Life Ltd v Equitable Life Assurance Society (supra) at [80]). 8. The defendants contend that Mr Hall breached rules 3.1(f) and 6.3 of the Code. Rule 3.1(f) provides: A Member must maintain the strictest independence and impartiality when making a valuation and/or where the exercise of objective judgment is required. In such circumstances, a Member must not: … (f) rely upon critical information supplied by a client without appropriate qualification or confirmation from other sources; Broadly, the rule can be seen to be a prohibition that applies in certain circumstances in aid of the aim of ensuring that API members maintain "the strictest independence and impartiality". The prohibition is against the reliance upon "critical information" supplied by a client where there is neither appropriate qualification, nor confirmation from other sources. 1. The rule applies where the exercise of objective judgment is required. I consider that it would therefore apply to the carrying out by Mr Hall of the Rental Determination. I further consider that information supplied to Mr Hall by either the plaintiff or the defendants for the purpose of the Rental Determination would be information "supplied by a client" within the meaning of the rule. In my opinion, as both parties jointly instructed the valuer, they should each be regarded as a client of the valuer for the purposes of the rule. 2. The defendants were unable to point to any critical information supplied by either party that was relied upon by Mr Hall without appropriate qualification or confirmation from other sources. The defendants thus resorted to a complaint about Mr Hall's reasons, stating that they were deficient because they did not positively show that Mr Hall had complied with the rule. As I have already said, I do not think that the reasons given for the determination were deficient. The reasons identified the nature of the information considered by Mr Hall and generally how that information was used in the formation of his opinion. The content of the information supplied by the parties to Mr Hall is clear from the submissions of Mr Robertson (for the defendants) and Mr Rennie (for the plaintiff). The reasons enabled the parties to assess whether any of that information was "critical". The parties were also in a position to assess whether any information supplied was such that, absent confirmation from other sources, some appropriate qualification was required. The parties were also in a position to establish whether any information supplied was inaccurate, and thus unable to be confirmed from other sources. The defendants did not seek to demonstrate a breach of rule 3.1(f) in this fashion. In my view, the defendants have failed to establish any breach of the rule. 3. I should add that the manner in which Mr Hall apparently considered and assessed the respective submissions of the parties strongly suggests that he dealt with them diligently and on their merits, accepting some of the arguments but not all, and placing qualifications upon others. He evidently had regard to information in addition to that supplied to him by the parties. There is no good reason to think that Mr Hall simply adopted and relied upon any of the information supplied to him, without appropriate qualification. There is certainly no reason to think that Mr Hall was not acting with independence and impartiality when he carried out the Rental Determination. 4. Rule 6.3 provides: 6.3 When undertaking a valuation, a Member must take reasonable steps to: (a) gather sufficient relevant data in forming an opinion of value or, in the absence or deficiency of such date, explain in the valuation report the basis on which the opinion of value was formed; and (b) ascertain and verify such relevant facts and information as a prudent valuer would have ascertained or verified in order to provide a professional valuation of a property. The rule is plainly directed towards ensuring that a valuer takes reasonable steps so as to have a sufficient factual basis to provide an opinion as to value. 1. I am prepared to assume that in undertaking the Rental Determination, Mr Hall was undertaking a valuation within the meaning of the rule. 2. The defendants did not submit that Mr Hall had insufficient data to form his opinion as to Current Market Rent. Neither did the defendants identify any relevant facts or information that ought to have been ascertained and verified in order that a professional valuation could be provided. This is unsurprising in circumstances where Mr Hall evidently considered information over and above that supplied by the valuers retained by the respective parties, each of whom expressed an opinion as to the market rent of the premises. Further, the defendants did not identify any reasonable steps which Mr Hall should have taken, but failed to take, to gather relevant data or ascertain and verify relevant facts or information. Again, the defendants complained that Mr Hall's reasons were deficient, but I do not accept that to the case. In my view, the defendants have failed to establish any breach of rule 6.3. 3. The next issue to consider is whether the Rental Determination contravened cl 7.3.5(d) of the lease because Mr Hall failed to disregard the goodwill of the Lessee's business. 4. Mr Whealing stated in paragraphs 6.3 to 6.7 of his report: 6.3 In my experience and opinion, to disregard the goodwill of the Lessee's business in conducting the valuation, RWA should have ignored the trading position (ie: food and beverages of the hotel and also the gaming revenue from the poker machine entitlements) as the liquor licence and poker machine entitlements (ie: "licence assets") belong to the Lessee (as stated in Clause 26 of the Lease). Such trading is an integral part of the goodwill of the Lessee's business. 6.4 It is clear from the statement on page 11 of the Report that "I have, however, estimated that the gaming revenue from the hotels gaming rankings and the food and beverage revenue from my enquiries and market knowledge of trade generates from competing hotels" the Valuer has taken into account the trading potential of the Premises. In taking into account the trading of the premises based upon the Lessee's trading, RWA has not disregarded the goodwill of the Lessee's business. 6.5 In my opinion this valuation approach of taking into account the trading potential of the hotel is flawed, as it is in direct opposition to Clause 7.3.5(d) of the Lease. 6.6 RWA was directed by this clause to ignore the Lessee's business / goodwill / Lessee's property / improvements. The above statement is indicative of RWA not doing that. To comply with this clause and ignore the goodwill, in my experience and opinion, RWA should have assessed the Premises as a "shell" and suitable for use / occupation for a wide range of retail or commercial uses, but taking into account the permitted use of the Lease. 6.7 By adopting the approach of estimating the gaming revenue and the food/beverage revenue of the Premises, RWA has prepared its Report in direct opposition to Clause 7.3.5 of the Lease. In my opinion the rental determination is thereby flawed. Mr Whealing's opinion is essentially based upon an interpretation of the quoted portion of the Rental Determination (which portion appears in Section 4.4 – see [22] above). 1. The quoted statement must, of course, be read in the context in which it appears. Earlier in Section 4.4, Mr Hall stated that he did not agree with the view, advanced by Mr Rennie, that the market review "must disregard the trading position of the hotel". Mr Hall explained that this was because "publicans (potential Lessees) assess the rental value of a licensed hotel on the turnover and profit they consider the venue can generate and not on a rate per square basis." In the sentence immediately preceding the quoted statement, Mr Hall noted that in the absence of the Lessee's financial statements it was not possible "to assess the affordability of the rent from hotels' [sic] current operation". Later, in Section 6.2, under the sub-heading "Lease Terms" (see [28] above), Mr Hall stated: "The lease directs that the rental must disregard the Lessee's goodwill. While the lease does not state that the rental must assume that the premise is vacant, disregarding any goodwill directs the rental assessment not to take the trading performance of the existing Lessee into account. Given that the rental paid for licenced hotel premises has regard to the potential earning potential of a hotel business and therefore the rental economically payable by that business, the question to be answered is, "What would a hypothetical potential Lessee pay in rental given their assumption of likely potential business to be generated from the premises?"." 1. In cross-examination, Mr Whealing agreed that goodwill is defined as the benefit or advantage of the good name and reputation of a business. He further agreed that to estimate goodwill it would be necessary to analyse the trading figures of a business over a period of time. Mr Whealing accepted that to assess the amount that a premises could earn, based upon a permitted use at that location, would not be an assessment of goodwill. 2. Later in his cross-examination, when taken to that part of Section 6.2 under the sub-heading "Lease Terms" which concerns the hypothetical potential Lessee, Mr Whealing seemed to agree that likely potential business to be generated from the premises was at least part of what a prudent potential Lessee would consider. Mr Whealing also said, based on the assumption that the permitted use was restricted to hotel and gaming rights, that a prudent potential Lessee would make an assumption about what he could afford based on that use. Mr Whealing accepted that it would thus be important to obtain information from the Liquor and Gaming Authority "about what a hotel premises in that location had made from that permitted use". Finally, Mr Whealing agreed that that would not be an assessment of the goodwill of the Lessee. 3. The concessions made by Mr Whealing in cross-examination, particularly the last, seem to me to undermine the opinions he expressed in his report to the effect that to estimate revenue that might be earned from the Premises by taking into account trading based on the Lessee's trading is to have regard to the goodwill of the Lessee's business. Viewing his evidence overall, there appears to be an acceptance that there is a distinction between an assessment of the goodwill of the Lessee's business on the one hand, and an assessment by a potential Lessee of revenue likely to be earned from the Premises on the other, even if the latter assessment is to some extent at least based on an assessment (or estimate) of the trading of the Lessee's business. 4. The defendants submitted that it was a distinction without a difference. However, for myself, I consider that there is such a distinction, and it is real. An assessment by a potential Lessee of what revenue it may be able to earn in the future from a business at the premises is not an assessment of any goodwill that is attached to the business of the existing Lessee. In my opinion, the mere fact that the assessment is partly based on estimates of the revenue earned by that business does not mean that it involves any consideration of goodwill of the Lessee's business. 5. Accordingly, to take into account what a potential Lessee would pay in rental "given their assumption of likely potential business to be generated from the premises" is not to have regard to (or fail to disregard) the goodwill of the Lessee's business. That is so even if the assumption is informed to an extent by estimates of revenue earned by the Lessee's business. 6. I therefore do not accept the defendants' contention that in determining Current Market Rent Mr Hall failed to disregard the goodwill of the Lessee's business and hence failed to comply with cl 7.3.5(d) of the lease. Mr Hall was plainly aware of the need to disregard the goodwill of the Lessee's business, and by proceeding in the way he did, he did not erroneously fail to do so. 7. I am also unable to accept the defendants' contention that in determining Current Market Rent Mr Hall failed to have regard to incentives given to a lessee of comparable premises and hence failed to comply with cl 7.3.5(g) of the lease. Mr Hall referred to incentives in Sections 4.2 to 4.4 when summarising and commenting upon the submissions he received. He noted that 20% "appears above the level of incentives currently being achieved for licensed premises in the market as at the date of the review date". In Section 6.2, under the sub-heading "Market", Mr Hall expressly stated that he had taken into account any rental incentives offered for the letting of new premises for the permitted use. Those statements, read in the context of the Rental Determination as a whole (which refers to numerous leases of licensed premises, including some not the subject of either submission made to Mr Hall) should be read as referring to comparable licensed premises, even if Mr Hall was of the view that there were no "directly comparable leasing transactions". It is clear that he considered that many premises were comparable to a degree (see, for example, his statement in Section 6.2, under the sub-heading "Market", that he had regard to the rental paid for "the most comparable premises"). Conclusion 1. The defendants have not established that in making the Rental Determination, Mr Hall failed to comply with the Code as alleged. The defendants have also not established that in determining Current Market Rent, Mr Hall failed to comply with either of cll 7.3.5(d) or 7.3.5(g) as alleged. It has not been shown that the Rental Determination was not carried out in accordance with the provisions of the lease. It follows that, pursuant to cl 7.3.7 of the lease, Mr Hall's determination of Current Market Rent at $480,000 p.a. gross (exclusive of GST) became the Minimum Rent on and from 1 December 2016, and the determination is final and binding on the parties. 2. The defendants' Further Amended Statement of Cross-Claim must be dismissed. It is agreed that in these circumstances the plaintiff is entitled to recover an overpayment of rent in the amount of $1,004,318.04. Interest should run on that amount at the rates prescribed by General Practice Note 16 for the purposes of s 100 of the Civil Procedure Act 2005 (NSW). Costs should follow the event so that the defendants/cross-claimants pay the plaintiff/cross-defendant's costs of the proceedings. 3. I direct that the parties confer on the appropriate amount for pre-judgment interest and, if agreement is reached, bring in a form of Consent Orders to give effect to these reasons. If agreement is not reached and a form of Consent Orders is not brought in within 14 days, the matter will be re-listed for further directions. ********** 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. Decision last updated: 17 March 2020