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- GSRK Pty Ltd v Detour Restaurant Pty Ltd[2024] QCAT 95
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GSRK Pty Ltd v Detour Restaurant Pty Ltd[2024] QCAT 95
GSRK Pty Ltd v Detour Restaurant Pty Ltd[2024] QCAT 95
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
CITATION: | GSRK Pty Ltd v Detour Restaurant Pty Ltd [2024] QCAT 95 |
PARTIES: | GSRK PTY LTD (applicant) v DETOUR RESTAURANT PTY LTD (respondent) |
APPLICATION NO/S: | RSL093-22 |
MATTER TYPE: | Retail shop leases matter |
DELIVERED ON: | 29 February 2024 |
HEARING DATE: | On the papers |
HEARD AT: | Brisbane |
DECISION OF: | Member Lumb, Presiding Member Norling Member McBryde |
ORDERS: |
|
CATCHWORDS: | LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – determination of current market rent upon exercise of option to renew – whether determination by specialist retail valuer complied with the requirements of the Retail Shop Leases Act 1994 (Qld) – whether valuer failed to comply with s 29 of the Act – whether lessee failed to provide a copy of its reply submissions to lessor – whether lessee failed to comply with s 28A of the Act – whether determination should be set aside – whether further determination should be made by a different valuer Retail Shop Leases Act 1994 (Qld), s 5A, s 5B, s 5C, s 28, s 28A, s 29, s 30, s 31, s 32, s 63, s 64, s 83, s 97, s 103, s 136, s 145; Retail Shop Leases Regulation 2016 (Qld), s 8, Schedule 1 Annandale Pharmacies (NQ) Pty Ltd trading as Chemmart Annandale v The Angliss Estate (Annandale) Pty Ltd [2017] QCAT 429 Anthony v Coffee Club (Properties) Pty Ltd [2000] QSC 198 Bargain World CQ (Rockhampton) Pty Ltd v AHC Limited [2023] QSC 201 Brisbane Comedy Pty Ltd t/as Albion Comedy Club & Restaurant v Malisano & Ors [2015] QCAT 340 Burinpipat Pty Ltd t/as Chili Coco v FFTOA Pty Ltd [2016] QCAT 100 M and JE Cassidy Pty Ltd t/as Donut World v Escan Pty Limited and Anor [2019] QCAT 365 Silver Jewellery Shop & Piercing Planet v Telado Pty Ltd & G&J Drivas Pty Ltd [2013] QCAT 561 Vesco Nominees Pty Ltd v Stefan Hair Fashions Pty Ltd [2001] QSC 169 |
REPRESENTATION: | |
Applicant: | Colin Biggers & Paisley Lawyers |
Respondent: | Self-represented |
APPEARANCES: | |
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). |
REASONS FOR DECISION
Introduction
- [1]The Applicant (the Lessor) is the lessor of premises situated on the ground level of a building located at Logan Road, Woolloongabba in the State of Queensland, currently operated as a licensed restaurant (the Premises). The Premises are leased by the Lessor to the Respondent (the Lessee) pursuant to a written lease entered into on or about 14 October 2016, for an initial term commencing on 19 December 2016 and expiring on 18 December 2021 (the Lease).
- [2]The Lease provided for two options to renew, each for a period of three years. The Lessee exercised the first option to renew. This triggered a mechanism under the Lease for determining a market review of rent as at the commencement date of year 1 of the further term.
- [3]The Lessor and the Lessee were unable to agree upon a current market rent for the further term of the Lease. On or about 11 February 2022, a specialist retail valuer (the Valuer) was appointed to make a determination of the current market rent of the Premises as at 19 December 2021 (which was the first day of the further term of the Lease).
- [4]By a written determination dated 8 April 2022 (the Determination), the Valuer determined that the current market rent as at 19 December 2021 was $113,400 ‘net effective per annum (GST exclusive)’.
- [5]By an Application for an order to resolve a retail tenancy dispute filed on 29 July 2022 (the Application), the Lessor sought the following orders under the Retail Shop Leases Act 1994 (Qld) (the RSLA):
- A declaration, pursuant to s 83(1) of the Retail Shop Leases Act 1994, that the Queensland and Civil Administrative Tribunal has jurisdiction to hear the dispute.
- Orders, pursuant to s 83(2) of the Retail Shop Leases Act 1994, that:
- the determination of the specialist retail valuer made on 11 April 2022 in relation to the rent payable by Detour Restaurant Pty Ltd (Tenant) to GSRK Pty Ltd as Trustee (Landlord) in respect of the premises situated at Shop G3, 6/11 Logan Road, Woolloongabba (Premises) be set aside; and
- the specialist retail valuer re-determine the market rental for the Premises in accordance with s 29 of the Retail Shop Leases Act 1994.
- [6]The Lessee resists the orders sought.
The issues
- [7]Having regard to the respective submissions of the parties, the issues in dispute involve the following broad issues (further detailed below):
- whether the Tribunal has jurisdiction to hear the dispute the subject of the Application;
- if so:
- whether the Determination failed to comply with s 29 of the RSLA (in two respects);
- whether the Lessee failed to comply with s 28A of the RSLA;
- if there was a failure to comply, whether the Determination should be set aside;
- if so, whether the market rent should be determined by the Valuer or a different specialist retail valuer.
The parties’ material
The Lessor
- [8]The Application included an Annexure (Annexure A) which set out the orders sought and the reasons that the orders should be made. The Application also attached various documentation upon which the Lessor relied.
- [9]The Lessor also filed in this proceeding:
- a statement of Allan Richard Lonergan dated 15 December 2022 (Mr Lonergan’s statement);[1]
- a statement of Allen John Crawford dated 8 March 2023 (Mr Crawford’s statement);[2]
- written submissions entitled ‘Applicant’s Submissions’ filed on 24 April 2023 (Lessor’s primary submissions);
- written submissions entitled ‘Applicant’s Submissions in Reply’ filed on 9 August 2023 (Lessor’s reply).
The Lessee
- [10]The Lessee has filed in this proceeding (leaving aside documents in respect of the Lessor’s application for leave to be represented):
- a response and/or counter-application filed on 13 September 2022;
- a statement of Francis James Manning (Mr Manning) dated 9 December 2022 (including various attachments);[3]
- a further statement of Mr Manning dated 17 March 2023 (including two attachments) (Mr Manning’s March 2023 statement);
- an affidavit of Mr Manning dated 12 May 2023 (which appears to exhibit the material referred to in subparagraph (c) above);
- written submissions entitled ‘Respondent’s Reply’ filed on 12 May 2023 (Lessee’s reply).
Jurisdiction
- [11]
- [12]The Lessee denies that the Tribunal has jurisdiction on the grounds that:[6]
- the Lessor ‘has failed to particularise how the Lease qualifies as a ‘Retail Shop Lease’ as provided for in the RSLA’;
- the Lessor ‘appears to be aggrieved by the amount of rent payable under the Lease, after the Valuer provided his Determination, contrary to s 103(1)(b) of RSLA’;
- ‘the mediator did not refuse to refer the dispute to QCAT because the mediator was of the opinion that the dispute is not within QCAT's jurisdiction, citing s 97 of RSLA where the mediator did not have jurisdiction to consider matters about the amount of rent payable under the Lease’.
- [13]The threshold issue raised by the Lessee is whether the Lease is a ‘retail shop lease’ within the meaning of the RSLA.
Retail shop lease?
- [14]If an option to renew a lease is validly exercised, ‘a new lease is formed between the lessor and lessee (regardless of whether the option is exercised by amendment to the existing lease or the execution of a fresh lease)’.[7]
- [15]The option was exercised on 16 September 2021 and, as noted above, the new term commenced on 19 December 2021. In these circumstances, we consider that a new lease was formed on that date and the applicable Reprint of the RSLA is the one current from 25 May 2020 to 2 May 2022. The following references to the RSLA under this heading (‘Jurisdiction’) are references to that reprint.
- [16]‘Retail shop lease’ is defined by reference to s 5A of the RSLA. Subsection 5A(1) provides that:
A retail shop lease is a lease of a retail shop.
- [17]Subsections 5A(2) and (3) specify various leases which are not a ‘retail shop lease’. The evidence of the parties does not suggest that any of the exceptions applies.
- [18]‘Retail shop’ is defined by reference to s 5B of the RSLA. Section 5B provides:
Retail shop means premises that are —
- situated in a retail shopping centre; or
- used wholly or predominantly for the carrying on of a retail business.
- [19]The question that arises is whether either limb of the definition of ‘retail shop’ is satisfied. In our view, the second limb is satisfied.
- [20]‘Retail business’ is defined by reference to s 5C of the RSLA. Section 5C provides:
Retail business means a business prescribed by regulation as a retail business.
- [21]The regulation referred to in s 5C is the Retail Shop Leases Regulation 2016 (Qld) (the Regulation).
- [22]Section 8 of the Regulation provides:[8]
- For section 5C of the Act, a business is a retail business if —
- it is a business mentioned in schedule 1; or
- its whole or predominant activity is, or is a combination of, the sale, hire or supply of goods or services mentioned in schedule 1.
- The wholesale sale of goods is not a retail business.
- [23]Schedule 1 refers to, relevantly, the category of ‘Dine in retailing’ and makes express reference to ‘restaurant’. The Permitted Use under the Lease is ‘As premises for operation of a licensed restaurant’. There is no dispute that the Premises are conducted for that use. In our view, the Premises were used wholly or predominantly for the carrying on of the retail business of a ‘restaurant’, and the Lease is a ‘retail shop lease’.
- [24]We now turn to the question of whether s 103(2)(a) of the RSLA is engaged.
Is s 103(2)(a) engaged?
- [25]Section 103 of the RSLA provides:[9]
- QCAT has jurisdiction to hear retail tenancy disputes, other than a retail tenancy dispute—
- about an issue between the parties that—
- is the subject of arbitration; or
- has been the subject of an interim or final award in an arbitration proceeding; or
- is before, or has been decided by, a court; or
- about—
- the amount of rent payable under a retail shop lease; or
- the amount of a lessor’s outgoings under a retail shop lease; or
- if the amount, value or damages in dispute is more than the monetary limit within the meaning of the District Court of Queensland Act 1967, section 68; or
- under a retail shop lease for the carrying on of the business of a service station, if the Competition and Consumer (Industry Codes—Oilcode) Regulation 2006 (Cwlth) applies to the carrying on of the business under a fuel re-selling agreement within the meaning of that regulation.
- However, QCAT has jurisdiction to hear a retail tenancy dispute about—
- the procedure for the determination of rent payable under a retail shop lease, but not the actual amount of the rent; or
- the basis on which the lessor’s outgoings are payable by, and the procedure for charging the lessor’s outgoings to, a lessee under a retail shop lease, but not the actual amount of the outgoings; or
- whether an item, or part of an item, of the lessor’s outgoings for the retail shopping centre or leased building in which a leased shop is situated was reasonably incurred in, or directly attributable to, the operations, maintenance or repair of the centre or building.
- For subsection (1)(a)(i), a retail tenancy dispute is only the subject of arbitration if the arbitration proceeding has started.
- [26]The phrase ‘retail tenancy dispute’ is defined in the Schedule to the RSLA to mean:
any dispute under or about a retail shop lease, or about the use or occupation of a leased shop under a retail shop lease, regardless of when the lease was entered into.
- [27]The question is whether the dispute is about the amount of rent payable under a retail shop lease (in which event the Tribunal would not have jurisdiction to hear the matter) or is about the procedure for the determination of rent payable under a retail shop lease (in which event the Tribunal does have jurisdiction). In our view, the dispute falls within the latter category having regard to the following:
- sections 28 to 32 inclusive of the RSLA provide for matters such as the basis upon which the determination is to be carried out, the manner of making submissions to the specialist retail valuer, the matters to be considered by the valuer, and the requirements of the determination. In our view, the RSLA governs the process by which a determination is reached;
- the matters relied upon by the Lessor concerning s 28A and s 29 of the RSLA involve the procedure for the determination of rent payable under the Lease, rather than the actual amount of the rent;
- the view we prefer is consistent with prior decisions of the Tribunal in which similar disputes about specialist retail valuer determinations have been accepted as being within the Tribunal’s jurisdiction by virtue of s 103(2)(a) of the RSLA.[10]
- [28]We find that the Tribunal has jurisdiction to hear the dispute.
Subsection 64(1)(a)(ii) of the RSLA
- [29]Given our finding in respect of s 103(2)(a) of the RSLA, it is strictly unnecessary to consider the Lessor’s alternative reliance upon s 64(1)(a)(ii). However, in light of the Lessor’s submission, we consider it appropriate to address it briefly.
- [30]Section 63 of the RSLA provides:[11]
- This section applies if—
- a retail tenancy dispute is within QCAT’s jurisdiction and—
- the parties can not reach a mediated solution to the dispute; or
- a party to the dispute does not attend the mediation conference for the dispute; or
- the dispute is not settled within 4 months after the dispute notice is lodged; and
Note—
See section 103 for QCAT’s jurisdiction.
- the retail shop lease has not ended (whether by expiry, surrender or termination) more than 1 year before the dispute notice was lodged.
(2) The mediator must—
- refer the dispute, as provided under the QCAT Act, to QCAT; and
- give the commissioner written notice of the referral.
- The party who lodged the notice of the dispute under section 55 is the applicant in the proceeding before QCAT for the dispute.
- [31]Section 64 of the RSLA provides:
- A party to a retail tenancy dispute may apply, as provided under the QCAT Act, to QCAT for an order to resolve the dispute if—
- any of the following provisions apply—
- the party claims that another party to a mediation agreement has not complied with the agreement within the time stated in it or, if no time is stated, within 2 months after the agreement is signed;
- a mediator refuses to refer the dispute to QCAT because the mediator is of the opinion that the dispute is not within QCAT’s jurisdiction;
- a court has ordered that a proceeding started in the court for the dispute be removed to QCAT or another tribunal; and
- the retail shop lease has not ended (whether by expiry, surrender or termination) more than 1 year before the dispute notice was lodged.
- In this section—
mediation agreement includes a mediation agreement under section 26 of the former Act.
- [32]In Burinpipat Pty Ltd t/as Chili Coco v FFTOA Pty Ltd,[12] Senior Member Brown made the following observations in relation to s 63 and s 64 of the RSLA, which observations we respectfully adopt:
The conduct of the pre-proceedings mediation under the RSL Act is, with a limited exception, a procedural step which must be undertaken before a party may commence proceedings in the Tribunal. The RSL Act creates a framework to encourage the pre-proceeding resolution of disputes. That framework is consistent with the objectives of the QCAT Act to deal with matters in ways that are accessible, economical, informal, quick and just. If the legislature had intended a mechanism by which the mediation process could be dispensed with it could have inserted such a mechanism in the Act. That no such mechanism exists is a clear indication that the process is one which must be complied with as provided for in ss 63 and 64 of the RSL Act.
(footnote omitted)
- [33]In our view, s 64(1)(a)(ii) is not an independent source of jurisdiction. Rather, as Senior Member Brown observed, s 64 provides for a procedural step which must be undertaken before a party may commence a proceeding in the Tribunal.
- [34]We will address the Lessor’s arguments in relation to alleged non-compliance with s 29 and s 28A of the RSLA. In this context, a threshold issue arises as to which version of those (and related) provisions of the RSLA applies to the present dispute.
Applicable version of the relevant provisions of the RSLA
- [35]At pages 11-12 of the Determination, the Valuer set out s 28, s 28A and s 29 of the RSLA, current as at 1 July 2015.
- [36]The Retail Shop Leases Amendment Act 2016 (Act No. 21 of 2016) (the 2016 Amendment Act), commenced on 25 November 2016. The 2016 Amendment Act:
- made a minor amendment to s 28;
- replaced s 28A; and
- amended s 29.[13]
- [37]The question is whether those provisions apply as amended by the 2016 Amendment Act or in their form prior to that date, for example, as at the date of entry into the Lease (on or about 14 October 2016). In our view, for the following reasons, those provisions apply as amended by the 2016 Amendment Act.
- [38]Prior to the commencement of the 2016 Amendment Act, the RSLA contained three transitional provisions (s 129, s 134 and s 135). The 2016 Amendment Act introduced a new Division 3 of Part 12 which included further transitional provisions which were applicable to the 2016 Amendment Act.
- [39]Section 136 of the RSLA (introduced by the 2016 Amendment Act) provides:
Definitions for div 3
In this division—
amendment Act means the Retail Shop Leases Amendment Act 2016.
former, in relation to a provision, means the provision as in force immediately before the amendment of the provision under the amendment Act.
new, in relation to a provision, means the provision as in force after the amendment of the provision under the amendment Act.
- [40]Various transitional provisions follow s 136. Some relate to rent review provisions concerning a ‘major lessee’ which is defined to mean ‘the lessee of 5 or more retail shops in Australia’. There is no evidence before the Tribunal that the Lessee is a major lessee as defined.
- [41]Section 145 provides:
- This section applies in relation to a retail shop lease if, before the commencement, a specialist retail valuer is agreed to or nominated under former section 28.
- On and after the commencement, former sections 28A and 29 continue to apply.
- [42]In the present case, the Valuer was not agreed to or nominated under former s 28. Consequently, we consider that s 145 has no application to the present case.
- [43]In our view, the operative date for applying the relevant provisions of the RSLA is 19 January 2022, being one month after the review date in circumstances where the Lessor and the Lessee could not agree on the current market rent (see s 28(1) as set out below).
- [44]As at 19 January 2022, s 28, s 28A, and s 29 of the RSLA provided as follows.
- [45]Section 28 provided:
- This section applies if—
- rent under a retail shop lease is to be reviewed on the basis of the current market rent of the leased shop; and
- the lessor and lessee can not agree on the current market rent within 1 month after the review date.
- The current market rent is to be determined by a specialist retail valuer agreed by the lessor and lessee, or failing agreement, appointed by the chief executive.
- The valuer may carry out the determination only if the valuer is independent of the interests of the lessor and lessee.
- [46]Section 28A provided:
- This section applies if the current market rent under a retail shop lease is to be determined by a specialist retail valuer under section 28.
- The valuer must advise the lessor and lessee that the lessor and lessee may give the valuer a submission about the current market rent of the leased shop by a stated date decided by the valuer (the submission date).
- The submission date must be not less than 14 days after the valuer is agreed to or appointed under section 28.
- If the lessor or lessee does not give a submission to the valuer by the submission date, the lessor or lessee is taken to have not made a submission for the purposes of this section or section 29(1)(c)(ii).
- A lessor or lessee who gives a submission to the valuer must also give a copy of it to the other party by the submission date.
- A lessor or lessee who receives a copy of a submission may give the valuer a written response to it.
- The response must be given by a stated date decided by the valuer (the response date) that is reasonable in the circumstances.
- If the lessor or lessee does not give a response to the valuer by the response date, the lessor or lessee is taken to have not made a response for the purposes of this section or section 29(1)(c)(ii).
- [47]Section 29 provided:
- In making a determination of the current market rent, the specialist retail valuer—
- must determine the rent—
- on the basis of the rent that would be reasonably expected to be paid for the retail shop if it were unoccupied and offered for leasing for the same or a substantially similar use for which the shop may be used under the lease; and
- on the basis of gross rent less lessor’s outgoings payable by the lessee under the lease; and
- on an effective rent basis; and
- must not have regard to the value of the goodwill of the lessee’s business or the lessee’s fixtures and fittings in the retail shop; and
- must have regard to—
- the terms and conditions of the lease; and
- submissions and responses from the lessor and lessee about the market rent of the shop; and
- the other matters prescribed by regulation.
- In this section—
effective rent basis, for the determination of rent under a retail shop lease, means determining the rent on the basis of taking into account all associated advantages and disadvantages under arrangements made between the lessor and lessee that reflect the net consideration from the lessee to the lessor under the lease and associated arrangements.
- [48]We now turn to the Lessor’s contentions in respect of non-compliance with the RSLA.
Non-compliance with s 29 of the RSLA?
- [49]The Lessor submits that the Determination failed to comply with s 29 in two ways:
- first, the Valuer did not take into account the ‘Excluded Licenses’ because ‘the arrangement for financial consideration for these licensed areas is within an agreement external to the lease’;[14]
- second, the Valuer did not address whether the 10 leases comprising the ‘Valuers Evidence’ were new tenancies or leases renegotiated by pre-existing tenants.[15]
- [50]The Lessee submits:[16]
- The Determination outlines the material relied upon by the Valuer and the reasons for the final Determination, which is consistent with Nancy & Albert Pty Ltd v McDonald’s Australia Pty Ltd.
- As to paragraphs 60 to 67 (inclusive) outlines the details of the alleged first noncompliance with s 29 of RSLA in relation to Excluded Licences. In particular, paragraph 62 infers the Respondent has a licence to use an area outside of the Premises and gains a value from this. The Respondent, in relation to Excluded Licences, says:
- There is a carpark which is included in the Lease and the Valuer assigned a value to that in the Determination and is otherwise not considered to be an ‘Excluded Licence’.
- There is a footpath dining but this is an arrangement made directly with Brisbane City Council (over Council owned land) and does not form part of the Lease or any arrangement with the Applicant.
- There is a provision in the Lease for outdoor garden. However, this has never been utilised by the Respondent and is not intended to be used. Accordingly, the Respondent derives no value or benefit from this.
- The Respondent rents a storage cupboard from the Applicant. However, this is an agreement separate to the Lease with its own separate rent to the rent payable under the Lease. In any event, the exclusion would have no material impact on the outcome of the Determination.
- As to the authority Anthony v The Coffee Club (Properties) Pty Ltd, the Respondent has failed to mention that it was common ground in that authority that the licenced area known as the ‘courtyard’ (and whether or not it should form part of the consideration for purposes of s 29(2) of RSLA) was used by the lessee under some arrangement between the parties. Unlike the current circumstances, the Respondent has not used the ‘outdoor area’ mentioned in paragraph 10(c) above.
- As to paragraphs 68 to 78 (inclusive) outlines the details of the second alleged noncompliance with s 29 of RSLA in relation to the evidence relied on by the Valuer. The Respondent believes the evidence the Valuer relied upon was appropriate in the circumstances and further believes was a reasonable and appropriate comparison of market rent. Further, supported by Anthony v The Coffee Club (Properties) Pty Ltd, the Valuer in this instant did take into consideration all of the matters set out in s 29 of RSLA as evident by the Determination.
- The Valuer is otherwise not required to “... recite, chapter and verse, the submissions by the parties and whether the submissions were accepted or rejected”.
(footnotes omitted)
The ‘Excluded Licences’
- [51]The ‘Excluded Licences’ are identified by the Lessor as the ‘licence areas and rental thereto in relation to which [the Lessee] was paying $3,934 per annum to [the Lessor] …’ which the Lessor submits was excluded from consideration by the Valuer.
- [52]The relevant parts of the Determination appear in Section 9 at page 33:
Licence Fees
We have been provided a copy of an email trail between the Lessor and the Lessee dated 24 August 2017 where it is was agreed between the parties to charge an additional rental of $300 plus GST per month for the licenced areas. Whilst the lease refers to these licenced areas (Clauses 22, 23, 24, 25 & 26), the lease does not specify any rental for these licenced areas.
I do however, note that Clause 22(b) says the ‘consideration payable for the rights granted in clause 22(a) (Car Park Licence) is included in the Rent’. I note that within the submission from the Lessor, Mr Crawford has assessed a car park rental of $1,800 per annum.
Given the terms of the lease agreement provide that no additional consideration is payable for the car park licence, as the benefit of this car parking space is to be included within the rental payable for the tenancy, I have not specifically allocated any monetary consideration to the car park licence, but in determining the current market rent, I have considered the benefit of this licenced car parking space.
For the remaining licence areas and rental thereto, as the arrangement for financial consideration for these licenced areas is within an agreement external to the lease, this falls outside the scope of my determination of the current market rent for the premises (as per the terms of the exiting lease agreement). Therefore, since the agreement to charge additional rental for these licenced areas is an agreement outside the current terms of the lease, I have had no regard to the licence fees that may be payable for these areas.
- [53]The ‘licensed areas’ referred to by the Valuer appear to be a reference to the following submissions of the Lessee’s valuer, Mr McConnell, which appear at page 22 of the Determination:
- Mr McConnell notes the lessee has been granted a license over the footpath dining (which he notes is Council owned land), a storage cupboard to the rear (refer below regarding side agreement for this cupboard), the cold room motor room, and an edible garden. These areas do not constitute lettable areas under the lease agreement. Whilst they provide added utility for the lessee, he does not consider any commercial apportionment is applicable.
- Mr McConnell comments there is a side agreement for the licensed areas. He advised he has requested a copy of this side agreement, however one has not been provided. He has been advised the terms of the side agreement which runs concurrently with the lease over the premises and that the passing rent associated with this license is circa $3,934 per annum plus GST (escalated in line with the review structure of the lease over the premises). This agreement was negotiated independently of this lease and has therefore not formed part of his assessment.
- [54]Reading the Determination as a whole including, in particular, the passages cited above, we consider that the reference by the Valuer to the ‘remaining licence areas’ (at page 33) is a reference to the Council owned area of land permitted for footpath dining, a storage cupboard to the rear of the Premises, the cold room motor room, and an edible garden referred to at page 22 of the Determination. Further, we consider that the ‘rental thereto’ referred to at page 33 is the amount of approximately $3,934 per annum plus GST the subject of the ‘side agreement’ of those licensed areas.[17]
- [55]The Valuer expressly states (at page 33) that he has had no regard to the licence fees payable for the licensed areas (other than the car park licence) because the arrangement for financial consideration was ‘within an agreement external to the lease’ and therefore fell outside the scope of the Determination of the current market rent for the Premises.
- [56]In proceeding on this basis, did the Valuer fail to comply with s 29 of the RSLA?
- [57]Section 29 provides that, in making a determination of the current market rent, the specialist retail valuer ‘must’ determine the rent on, relevantly, an ‘effective rent basis’ (s 29(1)(a)(iii)). That phrase is defined in s 29(2)[18] and is extracted above. The Valuer was required to take into account ‘all associated advantages and disadvantages under arrangements made between the [Lessor] and [Lessee] that reflect the net consideration from the [Lessee] to the [Lessor] under the lease and associated arrangements’.
Arrangements caught by s 29
- [58]In Anthony v Coffee Club (Properties) Pty Ltd (Anthony),[19] Atkinson J set aside a determination by a specialist retail valuer because it did not comply with s 29 of the RSLA. That case involved the lease of a cafe or restaurant. There were two areas outside the terms of the lease which the lessee had the use of. The first was a patio area which the lessee had a ‘permit’ to use for certain purposes in consideration of payment on demand made by the lessor in the sum of $1 for each lease year. There was a further courtyard area also the subject of a separate arrangement between the parties. The lessee utilised the courtyard area for seating patrons. The lessee had carried out various improvements as part of the arrangement. Atkinson J found that the valuer in that case had disregarded any rental value attributable to either the rear courtyard or the patio area. Her Honour observed that:[20]
An arrangement, of course, may refer to a contract, a legally binding agreement or contract, but it is a wide word and it clearly contemplates that there may be arrangements which are not enforceable by legal proceedings. It is a word used in the widest possible sense.
- [59]In Vesco Nominees P/L v Stefan Hair Fashions P/L (Vesco),[21] Muir J (as his Honour then was) addressed the meaning of ‘arrangements’ in the definition of ‘effective rent basis’. His Honour said:
[53] Depending on the context in which it appears, the word “arrangement” may include agreements which are legally binding or it may mean something less. In Newton v Federal Commissioner of Taxation, the Privy Council considered the meaning of “arrangement” in section 260 of the Income Tax and Social Services Contribution Assessment Act 1936-1950 which provided –
“Every contract, agreement, or arrangement … entered into, orally or in writing, … shall so far as it has or purports to have the purpose or effect of … (c) … avoiding any … liability imposed on any person by this Act … be absolutely void as against the Commissioner …”.
It was said–
“Their Lordships are of opinion that the word “arrangement” is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons – a plan arranged between them which may not be enforceable at law.”
The word, though, was used in conjunction with “contract” and “agreement”.
[54] In other contexts the word has been described as being “of wide import” and has been held to encompass legally binding agreements. I see no reason why “arrangements” in the definition of “effective rent basis” should be confined to things which fall short of legally binding obligations. No sensible purpose would be served under the Act by taking into account only those “arrangements” which were not legally enforceable.
(footnotes omitted)
- [60]As is evident from the decisions in Anthony and Vesco, the meaning of the term ‘arrangements’ in s 29(2) is very broad. However, in our view, there is one limitation on the operation of s 29(2) which is relevant to the present case.
- [61]Subsection 29(2) refers to arrangements made between the lessor and lessee that reflect the net consideration from the lessee to the lessor under the lease and associated arrangements. In our view, on the proper construction of s 29(2), the ‘associated arrangements’ are arrangements made between a lessor and a lessee (whether formal or informal and whether for consideration or not). We consider that arrangements made between a lessee and a third party (unrelated to the lessor) do not fall within the scope of s 29(2).
Consideration of the Lessee’s contentions
- [62]The Lessee made submissions in relation to the carpark and the three licensed areas. We address each in turn.
- [63]As to the carpark, the Lessee submits:[22]
There is a carpark which is included in the Lease and the Valuer assigned a value to that in the Determination and is otherwise not considered to be an ‘Excluded Licence’.
- [64]The Valuer addressed the carpark licence at page 33 (in the second and third paragraphs under the heading ‘Licence Fees’). The Valuer expressly noted that he considered the benefit of the licensed car parking space in determining the current market rent. We accept the Lessee’s argument that the ‘Excluded Licences’ did not include the licence to use the carpark.
- [65]As to the footpath dining area, the Lessee submits:[23]
There is a footpath dining but this is an arrangement made directly with Brisbane City Council (over Council owned land) and does not form part of the Lease or any arrangement with the Applicant.
- [66]The Lessor did not reply to this submission. The Determination states (at page 22) that Mr McConnell noted that the footpath dining is on Council owned land.
- [67]We accept the Lessee’s argument. We find that the Valuer did not err in ignoring the arrangement between the Council and the Lessee in relation to the area the subject of footpath dining. It was an arrangement between the Lessee and a third party (the Council) unrelated to the Lessor. It is not an associated arrangement for the purposes of s 29.
- [68]As to the ‘outdoor garden’, the Lessee submits:[24]
There is a provision in the Lease for outdoor garden. However, this has never been utilised by the Respondent and is not intended to be used. Accordingly, the Respondent derives no value or benefit from this.
- [69]In its reply, the Lessor submits:[25]
As to paragraph 10(c) of the Respondent’s Submissions, the Applicant:
- says that says that [sic] by clause 26 of the Lease the Respondent has use of the Edible Garden area for the Permitted Use in conjunction with the Premises;
- says further that, whilst the Edible Garden area does not form part of the area of the Premises:
- the opportunity to use the Edible Garden area has value;
- the Respondent’s failure to use Edible Garden area does not render the Edible Garden area without value; and
- the Respondent’s ability to use the Edible Garden area pursuant to clause 26 means that area is not otherwise available for another use by the Landlord (including by its other tenants).
- [70]In our view, the edible garden fell within the scope of the ‘licensed areas’ and was part of an arrangement for the purposes of s 29(2) of the RSLA. We consider that it is not a matter for the Tribunal to resolve the dispute as to the extent, if any, of the value or benefit of the edible garden in the context of a determination of current market rent. In our respectful view, the Valuer was obliged to have regard to this aspect of the arrangement between the Lessor and the Lessee.
- [71]As to the storage cupboard, the Lessee submits:[26]
The Respondent rents a storage cupboard from the Applicant. However, this is an agreement separate to the Lease with its own separate rent to the rent payable under the Lease. In any event, the exclusion would have no material impact on the outcome of the Determination.
- [72]On the Lessee’s own case, there was a separate agreement for the rental of the storage cupboard in respect of which separate rent was payable. In our view, this was an associated agreement for the purposes of s 29(2) of the RSLA. Again, we consider that this was an arrangement which the Valuer was obliged to give consideration to by virtue of s 29 of the RSLA.
- [73]Further, we note that the Lessee’s submissions do not reference the ‘cold room motor room’ referred to by Mr McConnell (in addition to his references to the ‘storage cupboard’ and the ‘edible garden’). The motor room comprises one of the areas referred to by Mr McConnell as the ‘licensed areas’ and which was the subject of the ‘side agreement’. In the Determination, Mr McConnell is recorded (at page 22) as stating that these areas provided ‘added utility’ for the Lessee.
- [74]In our view, applying the reasoning of each of Atkinson J and Muir J identified above:
- the ‘agreement’ or ‘arrangement’ whereby the Lessee paid the Lessor ‘additional rental’ for the areas comprising the storage cupboard, the edible garden and the cold room motor room was an ‘associated arrangement’ within the meaning of s 29(2) of the RSLA;
- the Valuer was obliged, by s 29, to take that arrangement into account in adopting the ‘effective rent basis’, as defined in s 29(2);
- the Valuer erred in disregarding that arrangement in making the Determination.
Was there a failure to address the matters required by s 29(1)(a)(i) of the RSLA?
- [75]Subsection 29(1)(a)(i) of the RSLA required the Valuer to determine the current market rent on the basis of the rent that would be reasonably expected to be paid for the Premises if ‘unoccupied and offered for leasing’ for the same or a substantially similar use for which the Premises may be used under the Lease.
- [76]The Lessor submits:[27]
- The Determination describes 10 premises to which the Valuer had regard in assessing the current market rent. The Valuer appears to place particular reliance on the Valuer’s Evidence in applying a significant incentive amount to its assessment.
- However, the Determination does not address:
- whether the premises were previously unoccupied (that is, whether those rental amounts and incentives reflect the rate expected to be paid for the retail shop if it were unoccupied and offered for leasing as required by s 21(1)(a)); and
- if they were not previously unoccupied, whether the Valuer has adjusted the amounts to bring the values into line with s 21(1)(a) and avoid possibly bringing into account the proscribed considerations in s 21(b).
- The same is true of the nine comparable premises referred to in the submissions of Detour.
- It is not suggested that, if the comparable leases concerned existing tenants, the Valuer was not entitled to take those leases into account. However, if they did, the Valuer was required to set out in the Determination that it had adapted its analysis to ensure that the value ascribed to those leases did not include factors inherent in re-negotiated leases that are excluded by s 29(1)(b), including goodwill and fixtures and fittings installed for the benefit of the existing tenant.
- The Determination does not identify that any such adjustments were made by the Valuer. It seems likely that some, if not all of the comparable leases concerned existing tenants under re-negotiated leases. The failure to state one way or another that the comparable leases were leases of unoccupied premises indicates non-compliance with ss 29 and 31 because the Determination has not set out all relevant matters.
- As such, the tribunal cannot be satisfied that the Determination is compliant with s 29, because there is no indication whether, in relying on the Valuer’s Evidence (and, for that matter, the leases submitted by Detour), the Valuer has based its findings on the value of an unoccupied premises and excluded any reliance on the proscribed matters in s 29(1)(b).
- [77]The Lessee submits:[28]
- As to paragraphs 68 to 78 (inclusive) outlines the details of the second alleged noncompliance with s 29 of RSLA in relation to the evidence relied on by the Valuer. The Respondent believes the evidence the Valuer relied upon was appropriate in the circumstances and further believes was a reasonable and appropriate comparison of market rent. Further, supported by Anthony v The Coffee Club (Properties) Pty Ltd, the Valuer in this instant did take into consideration all of the matters set out in s 29 of RSLA as evident by the Determination.
- The Valuer is otherwise not required to “…recite, chapter and verse, the submissions by the parties and whether the submissions were accepted or rejected”.
- [78]In our respectful view, the Lessee’s submissions do not specifically traverse the Lessor’s core contention that the Determination does not address whether or not the premises the subject of the 10 comparative leases were previously occupied and, if previously occupied, what (if any) adjustments were made by the Valuer, particularly having regard to the matters which must be excluded from consideration as identified in s 29(1)(b) of the RSLA.
- [79]At page 32 of the Determination, the Valuer states that in determining the current market rent of ‘the premises’, he has assumed that ‘the premises are vacant and available for lease’. In our view, the reference to ‘the premises’ is plainly a reference to the Premises.
- [80]At page 35 of the Determination, the Valuer refers to having searched his own leasing evidence of other restaurant style uses within the Brisbane fringe area and referenced 10 leases which he had regard to (as well as considering ‘the overall standard of accommodation and surrounding uses’). The Valuer made no reference to whether or not each of the 10 leases concerned premises previously occupied and, if previously occupied, what (if any) adjustments were made by the Valuer.
- [81]In Brisbane Comedy Pty Ltd t/as Albion Comedy Club & Restaurant v Malisano & Ors (Malisano),[29] the Tribunal said the following:
Whilst the determination refers to the comparable premises as new leases, it is unclear from the comparisons whether the leases referred to were in respect of premises already occupied and from which established businesses were operating and new leases negotiated, or whether the comparable premises were previously unoccupied. The distinction is an important one. The former may involve factors irrelevant to a determination under the RSL Act. If the comparable premises referred to were in fact new leases of premises previously unoccupied by the identified lessees then this is not made clear in the determination.
(citation omitted)
- [82]We consider these observations to be apposite to the present case, particularly in circumstances where the comparative leases in question are not leases identified by the Lessor or the Lessee but were the product of the Valuer’s own research.[30] In Malisano, the Tribunal found that it was not satisfied that the specialist retail valuer had adequately set out the matters he took into consideration in making the determination.
- [83]In our view, on proper analysis, the Lessor’s ground of complaint raises a failure to state detailed reasons for the Determination as required by s 31(1)(d) of the RSLA, rather than express non-compliance with s 29. We consider that the obligation under s 31(1)(d) is informed by s 29. In circumstances where the Valuer relied, in part, on his own leasing evidence, we consider that the obligation imposed on the Valuer under s 31(1)(d) necessitated that the Valuer consider whether or not each of the premises the subject of the comparative leases was previously occupied and, if previously occupied, what (if any) adjustments were made by the Valuer. We consider that this was a material factor to be addressed in making the Determination.
Non-compliance with RSLA s 28A?
- [84]Section 8.4 of the Determination references submissions in response by Mr McConnell of HTW Valuers (engaged by the Lessee) to the Lessor’s submissions.
- [85]The Lessor’s evidence is that it did not receive a copy of the submissions in response until after the Determination was made.[31]
- [86]In response, Mr Manning states:[32]
In support of this allegation the Applicant has lodged 2 documents with QCAT neither of which provide any direct evidence that the covering letter referred to above was not received by the Applicant
- –A Statement by Allan Lonergan (The Solicitor for the Applicant) dated 2 February 2023 that the document was not received by the Applicant. He could have no direct knowledge of this as he was not involved in the valuation process.
- –A Statement by Allen Crawford (the Valuer acting for the Applicant) dated 8 March 2023 that “he did not receive a copy of the letter from Mr McConnell dated 9 March 2022, before the rental determination was made.” All communication including the dissemination of documents by the Specialist Valuer was between him and Richard Kirk (GSRK Pty Ltd) and Damon Amos (Detour Restaurant). Once again Allen Crawford would have no direct knowledge of whether the document was received by Mr Kirk or not. It may have been sent to Mr Kirk who, for whatever reason, failed to pass it on to Mr Crawford.
- [87]This evidence goes no further than speculating that the submissions ‘may have been’ sent to Mr Kirk. The Lessee has adduced no evidence that the submissions were in fact sent to Mr Kirk (or Mr Crawford or Mr Lonergan) prior to the Determination.
- [88]We accept that Mr McConnell’s submissions in response were not provided to the Lessor (or its representatives) prior to the Determination.
- [89]Subsection 28A(5) of the RSLA obliges a lessor or lessee who gives a submission to the valuer to also give a copy of it to the other party. Subsection 28A(6) provides that a lessor or lessee who receives a copy of a submission may give the valuer a written response to it.
- [90]The Lessor submits that it has been ‘denied an important procedural right’ as a result of not being given an opportunity to respond to the submissions.[33] The Lessor relies upon evidence of Mr Lonergan that had Mr Crawford received the Lessee’s response (and had he been given an opportunity to comment on that response before the Determination was made), Mr Crawford would have made submissions in respect of the response.[34] We accept that the Lessor was denied an opportunity to respond as a result of the Lessee’s non-compliance with s 28(5) of the RSLA.
Should the Determination be set aside?
- [91]
It seems to me that, in order to avoid litigation of this type and in order to follow the statutory requirements, specialist retail valuers must be careful to ensure that their determination of the current market rent carefully specifies the matters taken into consideration and that those matters are the matters specified in the Act and each and every one of them.
The question is whether or not the determination complies with those requirements for if it does not, subject to any defences that may arise, the Court ought to give the declaration either in the form sought or in some similar form.
- [92]No positive ‘defence’ as contemplated by Atkinson J has been raised by the Lessee.
- [93]Applying the approach of Atkinson J in Anthony, we consider that the Determination should be set aside on the basis of non-compliance with each of s 29 and s 31 of the RSLA as addressed above.
- [94]With respect to s 29, whilst the agreed payment $3,934.00 per annum paid for the use of the ‘licensed areas’ may reflect in monetary terms the ‘added utility’ provided by the entitlement to use those areas, this may not be case. We consider that that this arrangement was, and is, is a matter for consideration in the application of s 29.
- [95]With respect to s 31, in circumstances where there is a prospect that one or more of the premises the subject of the 10 leases was previously occupied, there is also a prospect that the determination of current market rent may have been materially affected by any failure to assess the rent that would be reasonably expected to be paid for the retail shop if it were unoccupied and offered for leasing.
- [96]In our view, the non-compliance with each of s 29 and s 31 justifies the setting aside of the Determination.
- [97]In these circumstances, it is unnecessary to reach a concluded view as to whether the Lessee’s failure to comply with s 28A would, of itself, justify the setting aside of the Determination. Whilst we accept that the Lessor was denied the opportunity to reply to the Lessee’s response submissions to the Valuer, it is unclear whether the Lessor could have made submissions which may have had a material impact on the Determination.
Should the Determination be carried out by a different specialist retail valuer?
- [98]The Orders sought by the Lessor included an order that the Valuer ‘re-determine’ the market rental for the Premises. However, at paragraph 91(b) of the Lessor’s primary submissions, the Lessor sought an order that a different specialist retail valuer determine the market rental for the Premises.
- [99]Subsection 83(1) of the RSLA provides:
Subject to subsection (3), QCAT may make the orders, including declaratory orders, QCAT considers to be just to resolve a retail tenancy dispute.
- [100]Without limiting subsection (1), s 83(2) sets out various orders that the Tribunal may make including, by s 83(2)(j):
‘if QCAT finds that, in making a determination of current market rent, a specialist retail valuer did not comply with section 29—an order that the determination be set aside and a further determination, in compliance with the section, be made’.
- [101]In some cases, the Tribunal has ordered a further determination be undertaken by a different specialist retail valuer.[36] Such an order is not universal.[37] We consider that the language of s 83(2)(j) does not require that the further determination be undertaken by a different specialist retail valuer; rather, a discretion arises.
- [102]In our view, the nature of the non-compliance with s 29 and with s 31 of the RSLA in the present case was not of such substance as to warrant an order that the further determination be made by a different specialist retail valuer.
- [103]We consider that a further determination should be undertaken by the Valuer and that he be provided with a copy of these Reasons for Decision.
Orders
- [104]For the reasons set out above, we consider the following orders are just to resolve the retail tenancy dispute between the parties:
- It is declared that the determination of current market rent made by written determination dated 8 April 2022 (the Determination) is not a valid determination of current market rent pursuant to the Retail Shop Leases Act 1994 (Qld).
- The Determination is set aside.
- A further determination, in compliance with Part 6, Division 4, Subdivision 2 of the Retail Shop Leases Act 1994 (Qld), be made by the specialist retail valuer who made the Determination.
- The specialist retail valuer is to be provided with a copy of the Reasons for Decision.
Footnotes
[1] Mr Lonergan is a solicitor in the employ of the Lessor’s solicitors.
[2] Mr Crawford is a registered valuer who prepared the Lessor’s submissions to the Valuer in this matter.
[3] Mr Manning is a director of the Lessee.
[4] Lessor’s primary submissions, [19]-[23].
[5] Lessor’s primary submissions, [24].
[6] Lessee’s reply, [6].
[7] Bargain World CQ (Rockhampton) Pty Ltd v AHC Limited [2023] QSC 201, [60] (Sullivan J).
[8] Reprint current from 1 July 2021 to 2 May 2022.
[9] We note that s 103 was last amended on 25 November 2016.
[10] See, for example, M and JE Cassidy Pty Ltd t/as Donut World v Escan Pty Limited and Anor [2019] QCAT 365.
[11] Section 63 of the current reprint refers to the ‘chief executive’ in lieu of the ‘commissioner’.
[12] [2016] QCAT 100, [14].
[13] None of those provisions has been subsequently amended.
[14] Lessor’s primary submissions, [59(a)], [60]-[67].
[15] Lessor’s primary submissions, [59(b)], [68]-[78].
[16] Lessee’s reply, [9]-[13].
[17] Details of the ‘side agreement’ do not form part of the parties’ material.
[18] That definition was previously contained in s 5 of the RSLA.
[19] [2000] QSC 198.
[20] Pages 5-6.
[21] [2001] QSC 169.
[22] Lessee’s reply, [10(a)].
[23] Lessee’s reply, [10(b)].
[24] Lessee’s reply, [10(c)].
[25] Lessor’s reply, [4].
[26] Lessee’s reply, [10(d)].
[27] Lessor’s primary submissions, [73]-[78].
[28] Lessee’s reply, [12]-[13].
[29] [2015] QCAT 340, [36].
[30] The Lessor takes no issue with the Valuer having conducted his own research.
[31] Mr Lonergan’s statement, [15]; Mr Crawford’s statement, [8]-[10].
[32] Mr Manning’s March 2023 statement, [7].
[33] Lessor’s primary submissions, [83].
[34] Mr Lonergan’s statement, [18].
[35] Page 8. The primary declaration sought was, in broad terms, that the purported termination by the valuer was not a valid determination pursuant to s 29 of the RSLA.
[36] For example, Annandale Pharmacies (NQ) Pty Ltd trading as Chemmart Annandale v The Angliss Estate (Annandale) Pty Ltd [2017] QCAT 429.
[37] For example, Silver Jewellery Shop & Piercing Planet v Telado Pty Ltd & G&J Drivas Pty Ltd [2013] QCAT 561.