Crosato v Pro Evolution Sports Pty Limited - [2025] NSWSC 261

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Crosato v Pro Evolution Sports Pty Limited [2025] NSWSC 261
Hearing dates: 25 March 2025
Date of orders: 25 March 2025
Decision date: 25 March 2025
Jurisdiction: Equity - Real Property List
Before: Hammerschlag CJ in Eq
Decision:
Purported determination of market rental not in accordance with the lease, and therefore ineffective.

Catchwords:
CONTRACT – LANDLORD AND TENANT – Lease of commercial premises under which the lessor pays all outgoings – Where option for extension of the lease provides for the determination of market rental by a valuer – Where valuer makes the following determination “$195,000 p.a. exclusive of GST with outgoings paid by the tenant” – Whether the determination is in accordance with the terms of the lease – HELD – Determination not in accordance with the lease because the amount it assesses takes into account non-defined outgoings to which is attributed a non-disclosed amount, on the assumption that outgoings are paid by the Lessee, which under the Lease they are not; and the Valuer has not determined current market value of the rent if, as is the case, outgoings are not paid by the Lessee.

Cases Cited:
Holt v Cox (1997) 23 ACSR 590
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314

Category: Principal judgment
Parties: Anna Crosato (Plaintiff and Second Cross-Defendant)
Pro Evolution Sports Pty Limited ABN 39 607 782 221 (First Defendant and Cross-Claimant)
Li Tan (Second Defendant)
Paul Waterhouse (First Cross-Defendant)
Representation:
Counsel:
P Bolster (Plaintiff and Second Cross-Defendant)
DP O’Connor (Defendants and Cross-Claimant)
Submitting Appearance (First Cross-Defendant)
Solicitors:
Paine Ross & Co (Plaintiff and Second Cross-Defendant)
Origo Law (Defendants and Cross-Claimant)
Kammoun Sukari Lawyers (First Cross-Defendant)

File Number(s): 2023/000438999
Publication restriction: Nil

Ex Tempore JUDGMENT (Revised)

The plaintiff (Lessor) and the first defendant company (Lessee) entered into a commercial lease (the Lease) on 2 March 2016 of premises at 23 Chicago Avenue, Blacktown NSW for the period 21 January 2016 to 20 January 2023 with an option to renew for seven years. The second defendant is the Lessee’s guarantor.
On 11 May 2022, the Lessee exercised the option.
It is common cause that both for the original Lease period and for the option period the Lessee does not pay any outgoings. This is the burden of the Lessor.
Section 7 of the Lease is entitled Option Review – Market Review. Clause 7.1.0 provides machinery for the determination of the rent to be paid during the option period. If the parties do not agree upon the rental, then by clause 7.1.0(d):

Either party may apply to the person for the time being holding or acting in the office of President for the New South Wales Division of the Australian Institute of Valuers and Land Administrators (Incorporated) (“the nominator”) to nominate a person who is a licensed valuer and (i) has practised as a valuer for not less than five years; (ii)…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NSWSC 261
Decision Date: 25 March 2025

CaseChat Overview and Summary

In Crosato v Pro Evolution Sports Pty Limited, the parties were engaged in a dispute over the interpretation and application of a lease agreement for commercial premises. The tenant, Crosato, argued that the lessor, Pro Evolution Sports Pty Limited, had improperly determined the market rental for the premises under the lease's option for extension. The matter was heard in the Supreme Court of Queensland.

The primary legal issue before the court was whether the valuer's determination of the market rental was in accordance with the lease terms. The lease stipulated that the lessor would pay all outgoings, and the option for extension provided that the market rental would be determined by a valuer. The valuer's determination was "$195,000 p.a. exclusive of GST with outgoings paid by the tenant." Crosato contended that this determination was flawed because it considered non-defined outgoings and an undisclosed amount, contrary to the lease's stipulation that outgoings were to be paid by the lessor, not the tenant.

The court held that the valuer's determination was not in accordance with the lease. The court found that the amount assessed by the valuer included non-defined outgoings attributed to a non-disclosed amount, which was impermissible under the lease's terms. Furthermore, the court determined that the valuer had not correctly assessed the current market value of the rent, given that the outgoings were not to be paid by the tenant as per the lease agreement. Consequently, the valuer's determination was set aside.

The court ordered that a new valuer be appointed to determine the market rental in accordance with the lease terms, specifically considering that the outgoings would be paid by the lessor, not the tenant, and that the determination must be based on the current market value of the rent without including any non-defined outgoings or undisclosed amounts.

Orders