American Home Assurance Company v Grimes George St Garage Pty Ltd

[2008] NSWCA 318

New South Wales

Court of Appeal

CITATION:	American Home Assurance Company v Grimes George St Garage Pty Ltd [2008] NSWCA 318
HEARING DATE(S):	24 October 2008
JUDGMENT DATE:	4 December 2008
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 2; Macfarlan JA at 8
DECISION:	(a) The appeal be allowed. (b) That the judgment entered and order made below on 7 December 2007 be set aside. (c) With effect from 7 December 2007, judgment be entered for the appellant in the sum of $798,891.13 together with interest on that sum pursuant to s 100 Civil Procedure Act 2005 from 17 July 2006 to the date of judgment. (d) The respondent pay the appellant's costs of this appeal and of the proceedings at first instance.
CATCHWORDS:	CONTRACTS - construction - lease of city premises - whether rental determined pursuant to rent review clause payable only in respect of period commencing once that determination completed
LEGISLATION CITED:	Civil Procedure Act 2005
CATEGORY:	Principal judgment
CASES CITED:	Fitzgerald v Masters (1956) 95 CLR 420 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5
PARTIES:	American Home Assurance Company (Appellant) Grimes George St Garage Pty Ltd (Respondent)
FILE NUMBER(S):	CA 40925/07
COUNSEL:	D H Murr SC (Appellant) S G Finch SC (Respondent)
SOLICITORS:	Minter Ellison (Appellant) Freehills (Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 13515/06
LOWER COURT JUDICIAL OFFICER:	Howie J
LOWER COURT DATE OF DECISION:	7 December 2007
LOWER COURT MEDIUM NEUTRAL CITATION:	American Home Assurance Company v Grimes George St Garage Pty Limited [2007] NSWSC 1400

CA 40925/07
SC 13515/06

BEAZLEY JA
HODGSON JA
MACFARLAN JA

THURSDAY 4 DECEMBER 2008

AMERICAN HOME ASSURANCE COMPANY v GRIMES GEORGE ST GARAGE PTY LTD

Judgment

1 BEAZLEY JA: I agree with Macfarlan JA.

2 HODGSON JA: I agree with the orders proposed by Macfarlan JA, but my reasons vary a little from his.

3 There are difficulties with the construction of cl 13 of the three leases, whatever view is taken. However, in my opinion the preferable construction of cl 13(ii) in each of the leases is that it provides for a single rent review to take effect at the expiry of the term of the lease or any renewal or extension thereof. I think this is supported by the following considerations:

(1) The clause does not in terms provide for a plurality of notices.

(2) The giving of the notice is related in time to the expiration of the term.

(3) The words “at such time” refer most naturally to “the expiration of the term”. The alternative is the time when the notice is given; but this operates oddly if this could be at any time or times from the commencement of the lease up to two months before its expiry.

(4) The reference to “annual rent” tends to suggest something taking effect as at the anniversary of the commencement of the term.

(5) The words “the terms other than rental” have most sensible application to a lease for a definite number of years, either with no provision for rent review or provision for rent reviews at defined times, rather than to an arbitrary residue of a term in respect of which there can be rent reviews at arbitrary times.

(6) The word “thereafter” again most naturally and sensibly operates with reference to “the expiration of the term”.

(7) This approach fits well with cl 14, according to which the rental for a renewal of the lease is to be “at the rental determined in accordance with cl 13”.

4 There are two possible textual indications to the contrary:

(1) Clause 13(i) in the first and second leases made the rent a specified sum “subject to the provisions” of the lease. However, that could simply apply to the provision as to abatement of rent in cl 2(ii).

(2) Clause 13(iii) of the first lease referred to “such increases as may have been made pursuant to any provision of this Lease other than sub-clause (ii) hereof and this sub-clause”, thereby suggesting that increases can be made under cl 13(ii) having effect during the currency of the lease. However, the reference in question is only to exclude any such increase from a ratchet provision, inconsistently with the proviso to cl 13(ii); and in my opinion can reasonably be taken rather as confirming that there should be no mid-term increases. In any event this provision was removed from the second and third leases.

5 Thus I do prefer the view that cl 13(ii) provides only for rent reviews as at the expiration of a term. On this view, cl 14 of the second lease has the effect that there came into existence an agreement for a third lease at a rental determined in accordance with cl 13 of the second lease, that is, a rental operating “thereafter” from the expiration of the second lease. The effect of that agreement is picked up by cl 13(i) of the third lease; but with a further provision that until the determination of the rent pursuant to the rent review procedure, the lessee is to pay the annual rent existing immediately prior to the third lease.

6 This is merely a requirement on the lessee, and is not expressed as an obligation on the lessor to accept the payment in full satisfaction of the lessee’s obligation to pay rent. Upon the determination of the rent review being made, in my opinion it is established that the lessee’s obligation in respect of rent was, from the commencement of the third lease, to pay rent at the reviewed rate; so that the payments in the meantime were merely payments on account.

7 In other respects, I agree with the reasons of Macfarlan JA, and I agree with the orders he proposes.

8 MACFARLAN JA: This is an appeal from a decision of Howie J sitting in the Common Law Division of the Court dismissing a claim for rent made by the appellant lessor against the respondent lessee.

9 The claim was based upon a lease dated 24 July 2003 relating to part of the premises known as 220 George Street Sydney. The issue for resolution was whether an increased monthly rental as determined pursuant to a rent review clause was payable only in respect of the period commencing once that determination had been completed or whether the lessor was entitled to rent at that rate from the date of commencement of the relevant lease, that being an earlier date to which the rent review determination purported to relate back.

10 It is necessary to refer in some detail to the terms of the lease in question and to those of its predecessor leases in respect of the premises. The first of the leases was for a term of 10 years commencing on 22 February 1982, the second for a term of 10 years commencing on 22 February 1992 and the third for a period of 10 years commencing on 22 February 2002. These will be referred to as the first, second and third leases respectively. The issue in the proceedings relates to rent payable in respect of the third of these periods.

The First Lease

11 This lease was entered into by Commercial Union Properties Pty Limited as sublessor of the premises and the present respondent as sublessee. Its 10 year term concluded on 21 February 1992 but to a large extent its provisions were incorporated by reference into the two subsequent leases. It is therefore appropriate to set out certain of its terms.

12 Clauses 13 and 14 which dealt with rent, rent review and renewal were in the following terms:

13 (i) The rent payable by the Lessee to the Lessor for the term hereof shall be subject to the provisions hereof be an annual rental of Two hundred thousand dollars ($200,000.00) payable by equal calendar monthly instalments of Sixteen thousand six hundred and sixty six dollars sixty six cents ($16,666.66) each in advance on the twenty second day of each calendar month whereof the first shall be payable on the twenty second day of February, 1982.


(ii) The Lessor or the Lessee may by notice in writing given not less than two (2) calendar months from the expiration of the term hereof or of any renewal or extension hereof, by notice in writing given to the other of them increase or reduce (subject to the provisions hereof) the annual rent to an amount which would at such time be the current market rent of the demised premises as between a willing landlord and a willing tenant having regard to the premises offered the terms other than rental and any other matter relevant to the determination of such rent and the amount so determined shall be the annual rent thereafter payable by the Lessee PROVIDED THAT the rental so payable by the Lessee shall never be less than the annual rent payable immediately prior to the date of review.


(iii) Any dispute between the Lessor and the Lessee as to such current market rent shall be determined by two Valuers of the Commonwealth Institute of Valuers one appointed by the Lessor and one appointed by the Lessee and the said Valuers shall determine such annual rent which rent the Lessor and the Lessee hereby agree shall never be less than the annual rental payable at the commencement hereof together with such increases as may have been made pursuant to any provision in this Lease other than sub-clause (ii) hereof and this sub-clause. In the event of the Lessor or Lessee failing to appoint a Valuer the President of the Real Estate Institute or his nominee shall be appointed as the Valuer concerned and if the two Valuers cannot agree a third valuer of the Commonwealth Institute of Valuers so qualified shall be appointed by the two Valuers to determine any points of difference between such Valuers and subject as aforesaid the decision of the two Valuers and of a third Valuer if any as to any such points of difference shall be binding on both the Lessor and the Lessee and the costs incurred in the valuations and determination of the annual rent shall be borne by the unsuccessful party or if both parties be partially successful then in proportion to the extent of their respective successes.


(iv) In addition to the annual rental hereinbefore provided the Lessee shall in respect of each year of the Lease other than the first year reimburse and pay to the Lessor the Lessee’s proportion of any increase in the rates and taxes assessed in respect to the Building and/or the land such proportion calculated as follows shall be payable on demand:


(a) the Lessee’s proportion of increased rates and taxes shall be 1/14th of the total increase in rates and taxes of the Building and the land;


(b) the expression “the increase in rates and taxes of the Building and/or the land” shall mean the amount in each year ending 31st December during the term of the Lease by which the total of all rates and taxes (including land tax calculated on the basis that the land on which the Building is erected is the only parcel of land held and liable to land tax) charges assessments duties and fees of any public, Municipal Government or semi-government body authority or Department assessed or payable in respect of the Building and/or the land on which the Building is erected exceeds the total amount of such rates taxes charges assessments duties and fees as at the 31st December in the year in which this Lease commences.


14 It is further agreed and declared that the Lessor and/or the Lessee shall have an option exercisable in writing at least three months prior to the expiration of the said term to a renewal of the said Lease for a further term of ten (10) years at the rental to be determined in accordance with Clause 13 hereof and such further lease for the said further term shall be subject to the same covenants agreements and conditions as are herein contained including this present covenant PROVIDED THAT any lease into which the parties hereto shall enter pursuant to the third exercise of this option shall not contain this present covenant and the term of the lease to be entered into pursuant to such third exercise shall be ten (10) years less seven days and PROVIDED FURTHER that the Lessee shall have duly and diligently paid the rental hereby reserved and duly performed and observed the covenants and agreements by and on the Lessee’s part. (Combined 162-4)

The Second Lease

13 The second lease was entered into by Permanent Trustee Australia Limited as lessor and the present respondent as lessee. It appears that Permanent Trustee Australia Limited acquired ownership of the premises at some stage during the term of the first lease but nothing turns on the details of that acquisition for the purposes of this appeal.

14 As indicated earlier, the term of the second lease was for a period of 10 years commencing on 22 February 1992. Subject to limited amendments, the parties adopted the terms of the first lease.

15 Of relevance to the present issue is the fact that the parties amended clause 13(i) and (iii) in the following manner:

“Clause 13(i), by substitution of the following for that clause:


The rent payable by the Lessee to the Lessor for the term of this Lease shall, subject to the provisions of this Lease, be an annual rental of FOUR HUNDRED AND FIFTY THOUSAND DOLLARS ($450,000.00) payable by equal calendar monthly instalments of THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($37,500.00) each in advance on the TWENTY SECOND (22nd) day of each calendar month. The first instalment shall be payable on 22 February 1992.”


Clause 13(iii):


(1) lines 3 and 17, by the substitution of ‘Australian Institute of
Valuers and Land Economists (Inc.)’ for ‘Commonwealth Institute of Valuers’;


(2) lines 8 to 12, by substitution of ‘immediately prior to the date of review’ for ‘at the commencement hereof …… and this sub-clause’; and


(3) line 14, by the substitution of ‘Australian Institute of Valuers and Land Economists (Inc.)’ for ‘Real Estate Institute’.

16 The parties included the following provision as to amortisation of “back rent”:

9. Amortisation of back rent


(a) The parties acknowledge that in the period from 22 February 1992 to the date of this Lease the Lessee paid rent at the interim rate of $200,000.00 per annum pending determination of the annual rent in accordance with clause 13 of the Previous Lease.


(b) In this clause, ‘Back Rent’ means the back rent for the first 2 years of the Lease, namely $500,000.00.

The Third Lease

17 By notice dated 25 October 2001 the respondent exercised the right which it had under clause 14 of the second lease to renew that lease for a further term of 10 years.

18 Following the exercise of this option, a lease was entered into on 24 July 2003 between American Home Assurance Company (the appellant) as lessor and the respondent as lessee. This was the third lease referred to at the commencement of these reasons. The appellant had apparently purchased the premises during the term of the second lease.

19 The term of the third lease was for a 10 year period commencing on 22 February 2002. Subject to limited amendments, the lease incorporated the provisions of the first lease. It provided that any inconsistency between the first lease and the provisions of the lease document executed on 24 July 2003 should be resolved in favour of the latter.

20 The only amendment to the provisions of the first lease of present relevance is that effected in relation to clause 13(i). In this respect, clause 2 provided for an amendment as follows:

“Clause 13(i), by the substitution of the following for that clause:


The rent payable by the Lessee to the Lessor for the term of this Lease shall, subject to the provisions of this Lease, be an annual rental payable by equal calendar monthly instalments of one-twelfth of the annual rental each in advance on the 22nd day of each calendar month, with the first instalment payable on Commencing Date of this Lease. If the annual rent under this Lease is not the subject of a current market rent review (pursuant to a prior lease giving rise to this Lease) or is the subject of such a rent review which is not determined at Commencing Date of this Lease, then until determination of the annual rental the Lessee shall pay the annual rent payable under clause 13(i), (ii) or (iii), as appropriate of the lease of the demised premises existing immediately prior to this Lease.” (Combined 179)

Steps Taken to Review the Rent

21 On 19 December 2001, the appellant as lessor under the second (and then current) lease gave notice of a rent review. As contemplated by the provisions of clause 13(ii) as incorporated into the second lease, it did this by giving notice in writing that it had made a determination as to current market rental. The notice was given in conformity with the stricture as to time specified in clause 13(ii), that is, “not less than two (2) calendar months from the expiration of the term …”.

22 The notice did not purport to determine the rent as at the date of notice but stated that the current market rent was for “the ensuing ten-year period”. By this stage the lessee had exercised its option to renew the second lease for a further period of 10 years and the lessor’s rent review notice commenced by referring to the lessee’s notice of exercise of the option.

23 The precise steps taken by the parties in relation to the rent review are not of present relevance. Suffice it to say that, as contemplated by clause 13(iii), the parties appointed valuers. The valuers did not agree and as a result they appointed a third valuer to determine the points of difference between them. After determining most of these points of difference on 14 November 2005, the third valuer made a determination on 25 May 2006 which resolved the ultimate question as to what the annual rent was to be. This determination was expressed to be “as at 22 February 2002” (that is, the date of commencement of the new term).

24 One of the assumptions upon which the third valuer made his determination was that the lease did not confer on the lessor a right to review the rent during the course of the 10 year term. As a result he said that he thought that an adjustment or escalation factor was appropriate to be taken into account. He thus saw himself as assessing the rent to be applicable for the whole of the new term, not just that to be applicable at the commencement of the term or that for part of the term.

25 The question of whether mid-term rent reviews are in fact available under the terms of the third lease was the subject of discussion during the course of the hearing of the present appeal. It is however unnecessary for the purpose of resolving the appeal to answer this question.

The Appellant’s Claim for Rent

26 By summons filed in the Common Law Division, the appellant sought the sum of $798,891.13 representing rent said to be due under the lease in respect of the period 22 February 2002 to 21 June 2006, less what had been paid in respect of that period. 21 June 2006 was the first monthly rental payment date occurring after the third valuer’s final determination on 25 May 2006.

27 This claim was made upon the basis that the increased rate of rent determined by the third valuer on 25 May 2006 was applicable from the date of commencement of the third lease and that “back rent” (representing the difference between pre- and post-review rental) up to that determination had become payable. The defence of the respondent was that rental at the increased rate became payable only from 25 May 2006, being the date of determination by the third valuer. Rental at the increased rate had in fact only been paid from 21 June 2006 because, as already indicated, that was the first rental payment date after the determination.

The Decision at First Instance

28 The trial judge found that the respondent lessee’s position was the correct one.

29 The first matter relied upon by his Honour was put in the following way:

“Clause 13(ii) in the head lease speaks of a ‘determination’. On the plaintiff’s reading of the clause “the determination” of the adjusted rent must be the giving of the notice regardless of the attitude of the lessee to the amount stated in the notice. In the present case the amount stated was not in fact the ‘current market rent’ but an amount significantly greater than that determined by the dispute resolution procedures. I do not understand how the service of a notice purporting to state the “current market rent” but not in fact doing so, can amount to a determination of the “current market rent” for the purposes of clause 13(ii) where it is not accepted as such by the lessee.” (Red 24)

30 His Honour went on to say that on the appellant’s case there was “a necessity to infer or presume the concept of an interim arrangement or provisional rent that is not apparent from a plain reading of the provisions. It would substitute the words ‘the amount so notified’ for the words of clause 13(ii), ‘amount so determined’”. (Red 25)

31 His Honour derived some assistance from clause 9 of the second lease relating to the amortisation of back rent. He took the view that the appellant’s arguments, if correct, would achieve much the same result as clause 9 of the second lease despite the fact that the appellant did not have the benefit of such a provision in the third lease.

The Appellant’s Submissions

32 The appellant submitted that the word “thereafter” in the expression “annual rent thereafter payable” in clause 13(ii) referred to the date of service of the lessor’s notice and that clause 13(ii) accordingly provided for reviewed rent to be payable from the date of service of the lessor’s notice, even where the terms of the lessor’s notice were disputed and the determination of the current market rent by valuers took a considerable time.

33 It then said:

“Clause 13(ii) and (iii) are intended for reviews to market rent during the term of a particular lease and can only apply mutatis mutandis to the determination of rent for a new lease. In the latter context, the provision for the determined rent to take effect from the date of the notice cannot meaningfully apply. The commencement of the determined rent is fixed by clause 14, which provides that the lease is renewed for a specified term at the determined rent. This necessarily implies that the determined rent takes effect from the beginning of the term.” (Orange 8)

34 It said further that the concluding words of clause 13(i) of the current lease (which was in different terms than clause 13(i) of the two earlier leases) were to be “construed as an interim arrangement designed to ensure that the lessee must pay something while the rent is being determined, rather than a provision that fixes the rent at that level for the period up to determination”. (Orange 8-9)

The Respondent’s Submissions

35 The respondent placed considerable emphasis on the terms of clause 13(i) in the third lease, submitting that “there is no language on the face of 13(i) to suggest that the rent payable until determination of the rent review is ‘temporary’ or ‘interim’, or that the subsequent determination should relate back to the Commencing Date of the lease”. (Orange 18)

36 It also relied upon clause 14 of the second lease, submitting that “where the parties wished to make provision for “back rent”, they expressly provided for it in the terms of the second lease”(Orange Appeal Book 20). The absence of such a provision in the third lease was therefore said to be significant.

37 It further submitted that the word “thereafter” in clause 13(ii) related back to the expression “the amount so determined” and that this expression was a reference to the determination of the current market rent, in the absence of dispute by the lessee of the lessor’s notice, by the lessor unilaterally or, in the case of such a dispute, by the expert valuers.

Analysis of Lease Provisions

38 It is convenient to discuss the presently relevant lease provisions in turn.

Sub-clause 13(i)

39 Unlike the terms of sub-clause 13(i) in the first and second leases, the terms of sub-clause 13(i) of the third lease do not specify a dollar figure to represent the rent payable by the lessee. Rather, the rent is to be ascertained by reference to the rent payable under the prior lease and the rent review provisions of that lease.

40 As to this, the sub-clause identifies two alternatives.

41 The first is a circumstance where the annual rent is “not the subject of a current market rent review (pursuant to a prior lease giving rise to this Lease)”. This alternative is inapplicable as there was such a review on foot. Indeed, bearing in mind that at the date of the lease, 24 July 2003, the parties had known for at least 18 months that such a review was under way and knew at the date of the lease that it had not been concluded, it is not easy to see why this alternative was included.

42 The other alternative identified is a circumstance where there is such a rent review “which is not determined at the Commencing Date of this Lease”. This alternative was applicable, there being a review on foot which was incomplete at the date specified for commencement of the lease (and also at the date the lease was executed).

43 As a result, this sub-clause relevantly provides that “until determination of the annual rent”, by the rent review, the lessee is to pay rent at the rate applicable under the second lease at the end of that lease. The reference to determination must be to, or at least include, determination by the valuers referred to in clause 13(ii) and (iii) because if the lessor’s rent review notice were not disputed there would be no significant period of time when the review was on foot and undetermined.

44 Contrary to the respondent’s submissions, I regard the closing words of sub-clause 13(i) as constituting a provision for payment of interim rent, subject to adjustment when the valuers have performed their task. The requirement for the lessee to “pay” at a certain rate until “determination of the annual rent” in my view stands in contrast to the words at the commencement of the sub-clause: “the rent payable ... shall … be an annual rental payable …”. That is, the closing words of the sub-clause identify what is to be paid for a limited period rather than state what the annual rental is to be for that period, the latter to be determined by the finding of valuers in the case of a dispute between the parties.

Sub-clause 13(ii) and (iii)

45 I turn to sub-clause 13(ii). This sub-clause, together with sub-clause 13(iii), deals with the rent review procedure which was undertaken in the present case.

46 Sub-clauses 13(ii) and (iii) are relevantly in the same terms in both the second and third leases. It should be noted however that it is those sub-clauses as they appear in the second lease which are presently relevant as it was under the second lease that the lessor’s rent review notice was given and it is to a rent review “pursuant to a prior lease giving rise to this Lease” to which sub-clause 13(i) of the third lease refers.

47 The words “at such time” in the middle of sub-clause 13(ii) are of importance in identifying the date as at which the new rental value is to be determined. On the face of it, they appear clear in identifying the date in question as the date of the rent review notice in writing given by the lessor. Further, the words “shall be the annual rent thereafter” appear to identify the date of the lessor’s rent review notice as the date from which the new rent is payable.

48 In the present case however the lessor’s notice stipulated what the current market rent was to be “for the ensuing ten-year period”. Bearing in mind that clause 14, containing the option to renew, contemplates that the rental for the new term is to be “determined in accordance with clause 13 hereof”, there was some sense in the reference by the lessor to the period of the new lease. It is difficult however to reconcile this approach with the words of clause 13(ii) which do not, at least in terms, contemplate that the rent review period will do other than commence on the date of the lessor’s notice.

49 Nevertheless, neither party in the present case contends that the variation in rent subsequently determined by the valuers was to relate back to the date of the lessor’s notice. Both parties accept that if there is to be any relation back, it is only to be to the date of commencement of the new (that is, the third) lease. It is sufficient to say as to this that there are some cases where words contained in a contract need to be read in a modified form to avoid inconsistency with another part of the contract (Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 426-7; Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 at [28-9]). This is such a case as clause 14 contemplates the utilisation of clause 13 for the determination of the rent payable under a new lease entered into following exercise of the option to renew. The terms of clause 13 cannot be read literally if this purpose is to be achieved.

50 In the present case, where both parties accept that regard should not be had to the date of the notice but to the date of commencement of the new term, sub-clause 13(i) must be taken to indicate that, at least in the absence of dispute by the lessee of the lessor’s “determination” of the new rent, the new rent is payable from the date of commencement of the new term.

51 The critical question which then arises is whether dispute by the lessee of the amount stated in the lessor’s notice has the effect of deferring the date for commencement of the new rental from the commencement of the new term until the dispute has been resolved by the means specified in sub-clause 13(iii).

52 To my mind, the question is answered by clause 14 which in what I regard as clear terms indicates that the rental for the whole of the further term is be “determined in accordance with clause 13 …”. The words “for a further term of ten (10) years at the rental to be determined in accordance with clause 13 hereof” are undoubtedly referring to the whole of the new term.

53 In my view, the process provided for under sub-clause 13(iii) is designed to result in a determination by the valuers of the current market rent for the relevant period which, if a different market rent from that determined by the lessor, will stand in substitution for that determined by the lessor. The words near the beginning of sub-clause 13(iii) referring to the determination of “such annual rent” point to this conclusion. As the rent determined by the lessor is applicable for the whole of the term, so is the substituted rent determined by the valuers.

54 As indicated earlier, the terms of sub-clause 13(i) of the third lease provide for the payment of rent on an interim basis pending completion of a rent review. So understood, they are consistent with and provide support for the above conclusion.

Clause 9 of the Second Lease

55 Another clause which I should mention is clause 9 of the second lease. Whilst in my view it is relevant as part of the factual background known to both parties against which the third lease was entered into, it needs to be borne in mind that the parties to the second lease were not the same as the parties to the third lease, in that the lessor was not the present appellant but its predecessor Permanent Trustee Australia Limited.

56 As pointed out above, the trial judge commented that the outcome of the present appellant’s submissions would seem to be to achieve the same result as clause 9 provided for in the second lease even though there was no such provision in those terms in the third lease.

57 In my view however clause 9 is supportive of the conclusion at which I have arrived. Rather than providing for the payment of “back rent” when it would not otherwise be payable, the clause gives to the lessee time to pay back rent which is assumed to be otherwise payable. Thus, the clause assumes that the provisions of the second lease (largely replicated in the third lease) required the lessee to make an adjusting payment (called “back rent”) where a rent review related in part to a past period during which the lessee paid rent at an interim rate pending completion of the review.

Conclusion and Orders

58 For the reasons I have given, my view is that the appellant’s argument that the increased monthly rental determined by valuers appointed under the rent review clause was payable in respect of the period commencing with the commencing date of the lease and not simply in respect of the period of the lease commencing from the date of the completion of the rent review is correct.

59 I accordingly propose that the following orders be made:

(a) The appeal be allowed.

(b) That the judgment entered and order made below on 7 December 2007 be set aside.

(c) With effect from 7 December 2007, judgment be entered for the appellant in the sum of $798,891.13 together with interest on that sum pursuant to s 100 Civil Procedure Act 2005 from 17 July 2006 to the date of judgment.

(d) The respondent pay the appellant’s costs of this appeal and of the proceedings at first instance.

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