FREMANTLE MARKETS PTY LTD and VALUER GENERAL

[2015] WASAT 121

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: VALUATION OF LAND ACT 1978 (WA)

CITATION:   FREMANTLE MARKETS PTY LTD and VALUER GENERAL [2015] WASAT 121

MEMBER:   JUDGE D R PARRY (DEPUTY PRESIDENT)

HEARD:   8 SEPTEMBER 2015

DELIVERED          :   28 OCTOBER 2015

FILE NO/S:   DR 5 of 2015

BETWEEN:   FREMANTLE MARKETS PTY LTD

Applicant

AND

VALUER GENERAL
Respondent

Catchwords:

Valuation of land ­ Gross rental value ­ Aggregation method ­ Market stalls ­ Fremantle Markets ­ Land leased by City of Fremantle to applicant for permitted purpose of 'Retail Stall Market' ­ Applicant required under lease to comply with Fremantle Markets Operating Strategy Agreement and to maintain and develop character of Fremantle Markets by operating them in accordance with Fremantle Markets Operating Strategy ­ Object of Operating Strategy is 'to maintain a vibrant and interesting retail market incorporating a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholdings with unique or limited outlet products' ­ Operating Strategy requires applicant to only let stallholdings under the terms and conditions provided for in attached sublease or license agreements, except to the extent that any more favourable terms or conditions are negotiated by a stallholder ­ Stallholders pay rent and outgoings under sublease or sublicense for a particular numbered market stall and may 'access ... and hold the Stall on each Market Day during the Term without interruption by the Landlord [applicant]' and access the stall at other reasonable times as necessary to enable cleaning and stocking the stall ­ Valuer General determined gross rental value of land by aggregating valuations he would have assigned to parts of which the land is comprised (in particular, permanent market stalls) had he been separately valuing each such part (so­called 'aggregation method') ­ Whether aggregation method valid and appropriate ­ Whether aggregation method valid and appropriate where there is a lease of the whole land ­ Whether aggregation method valid and appropriate where occupancy agreements between applicant and market stallholders properly characterised as sublicense rather than sublease

Legislation:

State Administrative Tribunal Act 2004 (WA), s 24, s 27
Valuation of Land Act 1978 (WA), s 4(1), s 18, s 24, s 24(1)(a), s 32(1), s 32(3), s 32(7), s 33(1), s 33(2), Pt III

Result:

Application for review dismissed
Gross rental value of Lot 1380 on Deposited Plan 254153, Lot 1376 on Deposited Plan 40767 and Lot 1693 on Deposited Plan 210453 as at 1 August 2012 of $1,878,643 affirmed

Summary of Tribunal's decision:

The applicant leased the land comprising and known as Fremantle Markets from the City of Fremantle and was obligated by agreement with the City to operate Fremantle Markets as 'a vibrant and interesting retail market incorporating a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.'  The applicant entered into occupancy agreements with permanent stallholders styled 'lease' which, among other provisions, stated that 'The legal right to possession and control over the Stall remains vested in the Landlord ... and this Lease shall not confer upon the Tenant any tenancy or interest whatsoever in or over the Stall or any rights of exclusive occupation of the Stall', but also stated that 'the Tenant may access ... and hold the Stall on each Market Day [Friday, Saturday and Sunday and Monday public holidays] during the Term without interruption by the Landlord' and access the stall at other reasonable times as necessary to clean and stock the stall.

There was uncontested evidence that most permanent stalls had fixed structures or operated within exclusive identified boundaries, had a combination of lockable doors, shutters and mesh screens with padlocks, or canvas roll down blinds that were capable of being padlocked, ensuring that most of the stalls were able to be locked up and left with stock and/or equipment in place 'in reasonably secure circumstances', and that there was considerable longevity in the identity of stallholders.

The applicant sought review of the valuation by the Valuer General of the gross rental value of the land of $1,878,643 as at 1 August 2012.  'Gross rental value' relevantly means 'the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year upon condition that the landlord were liable for all rates, taxes and other charges thereon and the insurance and other outgoings necessary to maintain the value of the land ...' (s 4(1) of the Valuation of Land Act 1978 (WA)). The Valuer General 'may, in his discretion, assign to any land to be valued a valuation obtained ... by aggregating the valuations he would have assigned to any parts of which the land is comprised had he been separately valuing each such part' (s 24(1)(a) of the Valuation of Land Act 1978 (WA)) in accordance with the so­called 'aggregation method' of valuation. The Valuer General determined the gross rental value of the land in this case by aggregating the valuations he would have assigned to the permanent stalls had he been separately valuing each such part. In particular, the Valuer General aggregated the actual annual gross rent paid by each permanent stallholder to the applicant as at the date of valuation and then allowed for other factors.

The applicant contended that the aggregation method of valuation was not valid and appropriate in this case, because the gross rental value must be based on the gross rental it paid to the City under the lease and because, in any case, its occupancy agreements with permanent stallholders were properly characterised as licenses, rather than leases.

It was common ground that if the aggregation method were not applied, then the gross rental value of the land was $830,000, rather than $1,878,643, as at the date of valuation.

The Tribunal determined that the correct and preferable decision in the circumstances of this case is to apply the aggregation method and to affirm the Valuer General's valuation, because the application of the aggregation method was supported by the only valuation expert evidence presented to the Tribunal, has been consistently applied by the Valuer General since 1979 in relation to the valuation of land containing identifiable parts capable of separate long­term occupation, including stalls within markets, was consistent with the Valuer General's adopted policy, and neither of the applicant's two principal contentions demonstrated that it was not valid or appropriate to apply the aggregation method.

As the determination of gross rental value involves a hypothetical exercise and as the aggregation method is an alternative, expanded or supplementary method of ascertaining gross rental value, gross rental value was not required to be based on the lease of the land from the City to the applicant.  The Tribunal determined that it is valid and appropriate to apply the aggregation method, notwithstanding the existence of the lease, because the permanent stalls are parts of which the land is comprised, which can be separately valued, and the lease is intended to facilitate the occupation of the land by multiple stallholders under subleases or licenses granted by the applicant, rather that the applicant itself operating market stalls.

The Tribunal determined that the occupancy agreements between the applicant and the permanent stallholders were probably licenses, rather than leases.  However, the Tribunal also determined that this characterisation does not have the consequence that the aggregation method is not valid and appropriate in the circumstances of the case.  There is no requirement in the legislation that, in order to inform the determination of the gross annual rental that the land (or a part of which the land is comprised) might reasonably be expected to realize if let on a tenancy from year to year, an actual annual gross rental must be under a lease, rather than a licence.  Furthermore, the permanent market stalls utilised in the Valuer General's valuation are each capable of separate long­term occupation and have sufficient elements of exclusive occupation to make it appropriate to apply the aggregation method.

The application for review was dismissed and the Valuer General's valuation of gross rental value was affirmed.

Category:    B

Representation:

Counsel:

Applicant:     Mr MC Hotchkin

Respondent:     Ms CA Ide

Solicitors:

Applicant:     Hotchkin Hanly

Respondent:     State Solicitor's Office

Case(s) referred to in decision(s):

Adbooth Pty Ltd and City of Perth [2007] WASAT 76

Adbooth Pty Ltd v City of Perth [2007] WASC 218

Brimcove Pty Ltd and Director General of the Department of Agriculture and Food Western Australia [2015] WASAT 30

Clive Elliott Jennings & Co Pty Ltd v Western Australian Planning Commission [2002] WASCA 276; (2002) 122 LGERA 433

J B Investments Pty Ltd and Valuer General [2006] WASAT 55

J B Investments Pty Ltd v The Valuer­General [2004] WASCA 307

More and Water and Rivers Commission [2006] WASAT 112

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Vanu Pty Ltd v Valuer­General (1993) 11 SR (WA) 80

Western Australian Meat Marketing Cooperative Limited and Valuer General [2005] WASAT 227

REASONS FOR DECISION OF THE TRIBUNAL: 

Introduction

1. Fremantle Markets Pty Ltd (applicant) seeks review of the valuation by the Valuer General of the gross rental value of $1,878,643 as at 1 August 2012 (date of valuation) of Lot 1380 on Deposited Plan 254153, Lot 1376 on Deposited Plan 40767 and Lot 1693 on Deposited Plan 210453 (land). The land comprises and is known as Fremantle Markets.  It is an irregularly shaped property with a total area of 4,891 square metres and frontages to South Terrace, Henderson Street, Parry Street and William Street, Fremantle.  The valuation the subject of this review came into force on 1 July 2014 and is relevant to rating in the 2014/2015 financial year.

2. Fremantle Markets is the oldest market of its kind in Western Australia and, according to the uncontested evidence of Anthony Charles Gilbert, a licensed valuer called by the Valuer General, 'undoubtedly one of the best and most well­known markets in Western Australia'.  Fremantle Markets operates three days a week (Friday, Saturday and Sunday) and on most public holidays.  As at the date of valuation, there were 110 permanent market stalls and 15 casual market stalls within Fremantle Markets.

3. On 10 March 2008, the City of Fremantle (City), which is the registered proprietor of the land subject to a Crown Grant Trust to use it solely for municipal purposes, leased the land to the applicant for the permitted purpose of 'Retail Stall Market' (lease, although also referred to by the parties in their submissions as the 'head lease').  Under the lease, the applicant is required to pay 'Base Rent' to the City ($647,000 per annum at the date of valuation) as well as rates and taxes in respect of the land.  The lease also requires the applicant to 'comply with the Fremantle Markets Operating Strategy Agreement' and to 'maintain and develop the character of the Markets by operating them in accordance with the Fremantle Markets Operating Strategy'.  The Fremantle Markets Operating Strategy Agreement (Operating Strategy Agreement) requires the applicant to operate Fremantle Markets 'in accordance with' the Fremantle Markets Operating Strategy (Operating Strategy) (clause 3.1) and provides that a failure to operate Fremantle Markets in accordance with the Operating Strategy 'will be a default under the Lease' (clause 3.2).  Clause 4.1 of the Operating Strategy Agreement states that:

   The broad objective of the Strategy must be to promote and maintain a vibrant and interesting retail market incorporating a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.

4. The Operating Strategy, which is attached to the Operating Strategy Agreement, in clause 4.5 requires the applicant to 'only let stallholdings under the terms and conditions provided for in the forms of sub­lease or license agreements for casual and permanent stallholdings which are attached to this Strategy or otherwise approved by the Working Group, except to the extent that any more favourable terms or conditions are negotiated by a stallholder.'  (Other provisions of the Operating Strategy Agreement, Operating Strategy and form of 'sublease' referred to in clause 4.5 of the Operating Strategy are referred to in the next section of these reasons).

5. The Valuer General determined the gross rental value of the land by aggregating the valuations he would have assigned to the 110 permanent market stalls at Fremantle Markets had he been separately valuing each such part, in accordance with the so­called 'aggregation method' of valuation.  The Valuer General arrived at the gross rental value of $1,878,643 under review by analysing the actual annual gross rent (net rental plus GST plus variable outgoings) paid by each of the 110 permanent stallholders to the applicant as at the date of valuation and allowing for other factors, including vacancy rates and 'conservatism'.

6. Mr Gilbert (who was not the valuer who carried out the Valuer General's valuation of gross rental value the subject of this review), the only expert valuer called by either party (and the only witness called by either party) in this proceeding, gave expert opinion evidence that 'in my view it is appropriate to value the subject property by aggregation of individual leases (as rateable hereditaments) within the subject property to determine a gross rental value for the subject property'.  Mr Gilbert's calculation for the purpose of determining gross rental value of the land according to the aggregation method only differed from the Valuer General's original valuation the subject of this review in that Mr Gilbert aggregated the actual annual gross rent paid by only 106 of the 110 permanent stallholders to the applicant as at the date of valuation (as three stalls included by the Valuer General in his original valuation were considered by Mr Gilbert to be casual and a fourth had been divided into two and was therefore excluded from Mr Gilbert's calculation).  However, Mr Gilbert's calculation based on the aggregation of the actual annual gross rent paid for the 106 permanent stalls still supports the gross rental value of the land of $1,878,643.  Mr Gilbert also gave uncontested evidence that the gross rental value of all market stall properties in the Perth metropolitan area as at the date of valuation have been determined by the Valuer General using the same aggregation method and that the gross rental value of the Fremantle Markets land which Mr Gilbert calculated to have an average rate of $1,005 per square metre 'is considered correct and coordinated with [the] comparable properties' of Malaga Markets and Subiaco Markets, which have net lettable area rates ranging from $735 per square metre to $1,056 per square metre.

7. The applicant contends that the aggregation method of valuation is not valid and appropriate for the purpose of determining the gross rental value of the land as at the date of valuation for two principal reasons.  First, the applicant contends that the valuation of gross rental value of the land 'must value the tenancy value as between the Landlord (the City) and its tenant (the Applicant), which is derived by reference to the Lease, not by an aggregation of sub­leases' (which the applicant termed 'the Head Lease Point').  Secondly, the applicant contends that 'the aggregation was misconceived in any event because it took into account monies paid under licenses to occupy, which are not in point of law "tenancies" open to be valued in the aggregation' (which the applicant termed 'the Licenses Point').

8. Although it is Mr Gilbert's expert opinion evidence that 'it is appropriate in the circumstances to value the [gross rental value] of the subject site using the aggregation method', which he assessed at $1,878,643 at the date of valuation, he also assisted the Tribunal by providing an alternative valuation 'should it be determined that [the aggregation method] is not available', in which case he calculated the gross rental value of the land as at the date of valuation to be $830,000.

9. Although the applicant contends that the application of the aggregation method is invalid and inappropriate in the circumstances of this case and that the gross rental value of the land as at the date of valuation should be determined having regard to the base rent, rates and taxes that were payable by it to the City under the lease as at the date of valuation and not having regard to the aggregation of the gross annual rentals payable by the permanent stallholders to it under its occupancy agreements with the stallholders, it did not contest the correctness of Mr Gilbert's calculations.  It is, therefore, common ground between the parties that:

   •if the Tribunal determines that it is valid and appropriate to apply the aggregation method for the determination of gross rental value of the land as at the date of valuation, then the application for review should be dismissed and the gross rental value of $1,878,643 should be affirmed; and

   •if the Tribunal determines that it is invalid or inappropriate to apply the aggregation method to the determination of the gross rental value of the land, then the application for review should be allowed and the gross rental value determined by the Valuer General should be set aside and a gross rental value of $830,000 as at the date of valuation should be substituted for it.

Fremantle Markets

1. As noted earlier, the Valuer General called Mr Gilbert, a licensed valuer, to give evidence. Mr Gilbert was not cross­examined and his evidence was not otherwise challenged by the applicant, other than by asserting its central contention that it is not valid and appropriate in the circumstances of this case to apply the aggregation method. The applicant did not present any evidence at all. On the basis of Mr Gilbert's uncontested evidence and documents attached to his witness statement and included in the Valuer General's bundle of documents filed in accordance with s 24 of the State Administrative Tribunal Act 2004 (WA) (SAT Act), I make the following findings.

2. Fremantle Markets opened in 1898 in a purpose built market hall building designed in the Federation Romanesque style of architecture, which continues to occupy most of the land, with frontages to South Terrace, Parry Street and Henderson Street.  The building was used as a Market Hall until the 1950s and then as a packaging and distribution centre until the 1970s.  In 1975, the building was refurbished and opened as Fremantle Markets with 140 stalls.  In 1993, the Fruit and Vegetable Hall, known as 'The Yard' was constructed at the William Street frontage in the area formerly known as 'Farmers Lane'.  The Hall and The Yard have an approximate area of 4,080 square metres and a net lettable area of approximately 2,000 square metres.  The building on the land is listed on a permanent basis on the Register of Heritage Places under the Heritage of Western Australia Act 1990 (WA).

3. As noted earlier, on 10 March 2008, the City leased the land to the applicant for the permitted purpose of 'Retail Stall Market'.  The term of the lease is until 31 October 2026.  Clause 5(1) of the lease provides that the applicant 'may quietly hold and enjoy the Premises during the Term without any interruption or disturbance from the Lessor or persons lawfully claiming through or under the Lessor.'

4. As also noted earlier, a term of the lease requires the applicant to 'comply with the Fremantle Markets Operating Strategy Agreement' and to 'maintain and develop the character of the Markets by operating them in accordance with the Fremantle Markets Operating Strategy.'  (This provision is not contained in the extracts of the lease in the Valuer General's bundle of documents; however, it is quoted in the recitals to the Operating Strategy Agreement attached to Mr Gilbert's witness statement).

1. The Operating Strategy Agreement refers to the applicant as the 'Market Manager'.  Clause 3.1 of the Operating Strategy Agreement states that '[t]he Market Manager must operate the Fremantle Markets in accordance with the [Operating] Strategy' and clause 3.2 of the Operating Strategy Agreement states that '[a] failure to operate the Fremantle Markets in accordance with the [Operating] Strategy will be a default under the Lease.'

2. Clause 4.1 of the Operating Strategy Agreement states as follows:

   The broad objective of the Strategy must be to promote and maintain a vibrant and interesting retail market incorporating a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.

3. Clause 4.2 of the Operating Strategy Agreement requires that the Operating Strategy 'must identify mechanisms for achieving the broad objective referred to in clause 4.1 and must provide a framework for managing the operation of the Markets that is demonstrably designed to achieve the broad objective by establishing matters such as operating hours, the preferred kinds of stallholdings, mechanisms for maintaining and developing preferred kinds of stallholdings, the mix of permanent and casual stallholdings, the method of selection of any new stallholdings, the terms of stallholding grants, general issues of layout and presentation and other matters considered necessary for achieving the broad objective' (bolding original).

4. Clause 4.3 of the Operating Strategy Agreement states as follows:

   The Market Manager and the City acknowledge that the primary factor in maintaining and developing the character of the Fremantle Markets is the selection, retention and operation of the stallholdings and, without limiting the provisions of clause 4.2 above, the Strategy must include ­

   (a)targets for the number and categories of stallholdings that are considered to best achieve the broad objective;

   (b)minimum conditions for sub­lease or licence agreements for casual and other stallholdings; and

   (c)guidelines for the selection of stall holders.  (Bolding original)

5. Clause 5.2 of the Operating Strategy Agreement refers to the Operating Strategy as 'a living document' which is 'to be kept under constant review' throughout the term of the lease.  Clause 5.3 of the Operating Strategy Agreement states that development and review of the Operating Strategy is to be undertaken by a Working Group made up of two representatives of the City and two representatives of the Market Manager.  The Working Group must meet and review the Operating Strategy at least once each year (clause 5.4) and if it fails to meet at least once each year or if it fails to reach agreement on any of the matters it is required to reach agreement on under the Operating Strategy Agreement or to enable the Operating Strategy to be implemented, either the City or the Market Manager may refer the Operating Strategy to an independent expert for review under clause 6 (clause 5.5).

6. Clauses 4.5 ­ 4.7 of the Operating Strategy, which is attached to the Operating Strategy Agreement, state as follows:

   4.5The Market Manager must only let stallholdings under the terms and conditions provided for in the forms of sub­lease or license agreements for casual and permanent stallholdings which are attached to this Strategy or otherwise approved by the Working Group, except to the extent that any more favourable terms or conditions are negotiated by a stallholder.

   4.6The terms and conditions of sub­leases and license agreements must comply with the Commercial Tenancy (Retail Shops) Agreements Act 1985 ('the Act') and include dispute resolution provisions that refer disputes, subject to section 11(5) of the Act, to the State Administrative Tribunal for resolution

   4.7Rent charged for a stallholding is to be a fair market rent negotiated between the Market Manager and the stallholder and rent review provisions in licence agreements must be capped so that a stallholder's rent cannot increase through a rent review by proportionally more than any increase in the Market Manager's rent under the Lease during the period between the stallholders' rent review and the stallholders' previous rent review.

7. Clause 4.8 of the Operating Strategy requires the applicant as the Market Manager to develop a marketing plan for Fremantle Markets and clause 4.9 requires the applicant to consult stallholders when developing the marketing plan and give consideration to the inclusion in the plan of a market website with capacity for stallholders to advertise their individual product lines.  In fact, as Mr Gilbert said in evidence, 'the Fremantle Markets web­site promotes all [of] the traders and identifies them with a stall number which corresponds with the stall['s] defined location on a map'.

8. The form of 'sublease' referred to in clause 4.5 of the Operating Strategy Agreement which is attached to the Operating Strategy (form of 'sublease') states as follows in clause 1:

   1.Grant of lease

   (a)The Landlord grants a sublease to the Tenant and the Tenant takes a sublease of the Stall for the Term, together with the non­exclusive right for the Tenant in common with the Landlord and all other persons authorised by the Landlord (expressly or otherwise), to use the Common Areas for the purposes designated by the Landlord from time to time, on and subject to the terms of this Lease.

   (b)The Tenant has a personal right of occupation of the Stall on the terms and conditions specified in this Lease and has no interest in the Land.  The legal right to possession and control over the Stall remains vested in the Landlord throughout the Term and the rights herby conferred on the Tenant lie in contract only and this Lease shall not confer upon the Tenant any tenancy or interest whatsoever in or over the Stall or any rights of exclusive occupation of the Stall.

9. Clause 2 of the form of 'sublease' requires the 'Tenant' to pay to the 'Landlord' rent by monthly payments specified in item 7 of the Schedule, the 'Tenant's' proportion of outgoings and 'the marketing levy'.  Clause 5.1 of the form of 'sublease' enables the applicant as the 'Landlord' to consent to the assignment by the 'Tenant' of 'this Lease'.

10. Clause 12 of the form of 'sublease' sets out the 'Landlord's general rights and obligations' including the following obligation in clause 12.1:

    12.1Quiet enjoyment

    If the Tenant complies with the Tenant's obligations under this Lease, the Tenant may access:

    (a)and hold the Stall on each Market Day during the Term without interruption by the Landlord; and

    (b)the Stall at other reasonable times as necessary, as determined by the Landlord acting reasonably, to enable the Tenant to clean and stock the Stall,

    except as otherwise provided in this Lease.

11. Although clause 12.3 of the form of 'sublease' confers a right on the 'Landlord' to enter the Stall to inspect the state of repair and condition of the Stall, to maintain or repair the Markets, to maintain, repair or alter the Services, to carry out structural alterations to the Stall, or to remove harmful substances, in each such case the Landlord must give 'reasonable notice to the Tenant' prior to entry.  In addition, the Landlord may enter 'in an emergency … without notice to the Tenant' and may also 'without prior notice enter the Stall to inspect the goods sold or the services provided by the Tenant in the Stall to ensure compliance with the Permitted Use under [the] Lease'.

12. The term 'Market Day' is defined in clause 28.2 of the form of 'sublease' as follows:

    Market Day means a day on which the Markets are actually open for trade:

    (a)being each Friday, Saturday and Sunday and each public holiday in Western Australia which falls on a Monday, subject to alteration by the Landlord for public holidays or special events; and

    (b)any other day as determined by the Landlord.

13. The Schedule to the form of 'sublease' identifies the Stall the subject of the 'sublease' by a particular stall number in Fremantle Markets and identities the Term of the 'sublease' as the number of 'years commencing on the Commencement Date' to be inserted in the Schedule.  In addition, clause 21.1 of the form of 'sublease' provides that '[t]he Landlord gives the Tenant the option to extend this Lease for the Further Term specified in item 9 of the Details'.

14. As Mr Gilbert said in evidence, the tenancy schedule for 2011­2012 provided by the applicant to the Valuer General identifies each of the stalls at Fremantle Markets with the same stall number as in the promotion of the stall on the Fremantle Markets website and provides a lettable area for each stall.

15. Mr Gilbert gave the following evidence in relation to the operation of permanent market stalls at Fremantle Markets which was not questioned or contradicted and I find as facts the physical characteristics of the permanent stalls to be as described by Mr Gilbert:

    … On my inspection it was observed that most permanent stalls have fixed structures or operate within exclusive identified boundaries.  In the Yard where vendors sell fruit and vegetables, the improvements are movable, however the leased areas are defined by painted lines on the bitumen.  Most stalls are constructed of various materials, and form permanent structures often with fitouts that may include signage, glass display cases and cooking equipment within the leased area.  This demonstrates the stalls are capable of being defined.

16. Having referred to clause 12.1 and clause 12.3 of the form of 'sublease', Mr Gilbert gave the following evidence which was not questioned or contradicted and I find as facts the physical characteristics of the permanent stalls as described by Mr Gilbert and that the vast majority of permanent stallholders did not change between 2013 and May 2015 (when Mr Gilbert reviewed the Fremantle Markets website):

    The stall­holders, through the sub­lease agreement, are granted occupation of the whole of the identified stall.  They do not share occupation of their stall with any other stall­holder.  The permanent stalls have a combination of lockable doors, shutters and mesh screens with pad locks, or hard canvas roll down blinds that are capable of being padlocked.  This ensures that most [of] the stalls are able to be locked up and left with stock and/or equipment in situ, in reasonably secure circumstances.  These factors demonstrate that the stalls are capable of exclusive occupation.  This position is factually similar to the situation in the Vanu case for the Wanneroo Market [Vanu Pty Ltd v Valuer­General (1993) 11 SR (WA) 80].

    The stall­holders are able to trade from their identified stalls during the market trading hours.  This demonstrates that the stalls are capable of beneficial but not necessarily profitable occupation.

    Due to the conditions set out in the Commercial Tenancy (Retail Shops) Agreements Act, as mentioned above, the stall­holdings are capable of being leases for at least a 5 year term. The list of stall holders from 2013 … was compared with a current list found on the Fremantle Market website … . I found that the vast majority of the permanent stalls had not changed over that period of time, which further demonstrated that regardless of whether a licence, or a sub­lease agreement, permanent stallholders occupy their stall on a year to year basis. While some stallholders may be hesitant to sign a long term lease, they still have long term intentions for exclusive occupancy, the fact that these stall­holders are able to sell their business shows the inherent expectation of long term occupancy. We are aware that stalls within the Fremantle Market are offered for sale from time to time. For example, 'Bob' from the Cheese Shop is trying to sell his business on Gumtree.com.au. He is asking $72,000 plus stock and advises that he has recently signed a new 5 year lease. … This demonstrates that the stall­holdings are capable of being occupied, and in fact are being occupied, for not too transient a period.

Legislative framework

1. Section 18 of the Valuation of Land Act 1978 (WA) (VL Act) states as follows:

   For the purposes of a general valuation, the Valuer­General shall determine, or cause to be determined, with respect to rateable land, the gross rental value or the unimproved value, as the case requires, so far as that value is required by a rating or taxing authority for the purpose of assessing any rate or tax or is, in the opinion of the Valuer­General, reasonably likely to be so required before the next general valuation of the land is made.

2. In this case, the Valuer General determined the gross rental value of the land under s 18 of the VL Act for the purposes of a general valuation as at 1 August 2012, because that value is required by the City as the rating authority with effect from 1 July 2014 relevant to the 2014/2015 financial year.

3. The term 'gross rental value' is relevantly defined in s 4(1) of the VL Act as follows:

   gross rental value of land means the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year upon condition that the landlord were liable for all rates, taxes and other charges thereon and the insurance and other outgoings necessary to maintain the value of the land …

4. The term 'land' is defined in s 4(1) of the VL Act as follows:

   land means lands, tenements and hereditaments, and any improvements to land, and includes any interest in land[.]

5. This review turns on whether it is valid and appropriate in the circumstances of this case to determine the gross rental value of the land as at the date of valuation on the basis of the discretion conferred upon the Valuer General (and upon the Tribunal on review) to value the gross rental value of land on the basis of the aggregation method of valuation set out in s 24(1)(a) of the VL Act. Section 24(1) of the VL Act relevantly states as follows:

   … [T]he Valuer­General may, in his discretion, assign to any land to be valued a valuation obtained ­

   (a)by aggregating the valuations he would have assigned to any parts of which the land is comprised had he been separately valuing each such part; …

   but nothing in this subsection limits the means by which the Valuer­General may otherwise make a valuation of the land.

6. In J B Investments Pty Ltd and Valuer General [2006] WASAT 55 (J B and Valuer General), the Tribunal said the following in relation to the aggregation method at [19]:

   The method of valuation referred to in s 24(1)(a) is known as the 'aggregation method'. The aggregation method has been consistently applied by the Valuer General since 1979 in relation to the valuation of land containing identifiable parts capable of separate long­term occupation, which the Valuer General's officers apparently refer to as 'hereditaments'. Examples of land valued by the Valuer General in this way include retirement villages, non­strata titled flats, shopping centres, stalls within markets and boat mooring pens.

7. Section 32(1) of the VL Act enables any person who is liable to pay any rate or tax assessed in respect of land and who is dissatisfied with a valuation of such land made by the Valuer General under Pt III of the VL Act (which includes s 18) to lodge an objection to the valuation. Section 32(3) of the VL Act states that an objection to a valuation may be made 'on the ground that the valuation is not fair or is unjust, inequitable or incorrect, whether by itself or in comparison with other valuations in force under this Act.' In this case, on 29 August 2014, the applicant wrote to the Valuer General lodging objection to the valuation of the gross rental value of the land on the basis that the Valuer General had made an error of law by misconstruing the statutory definition of 'gross rental value' in aggregating rent and outgoings payable by the market stallholders of Fremantle Markets to the applicant.

8. Section 32(7) of the VL Act requires the Valuer General 'with all reasonable despatch, [to] consider any objection' and states that the Valuer General 'may either disallow it or allow it, wholly or in part.' In this case, on 5 December 2014, the Valuer General wholly disallowed the applicant's objection to the valuation.

9. Section 33(1) of the VL Act confers a right of review by the Tribunal upon any person who is dissatisfied with the decision of the Valuer General on an objection by that person by way of a notice requiring the Valuer General to refer the valuation to the Tribunal for a review. In this case, on 18 December 2014, the applicant required the Valuer General to refer the valuation of gross rental value of the land as at the date of valuation to the Tribunal for a review. On 6 January 2015, the Valuer General referred the valuation to the Tribunal for a review under s 33(2) of the VL Act.

10. Finally, s 27 of the SAT Act concerns the nature of review proceedings in the Tribunal and states as follows:

    (1)The review of a reviewable decision is to be by way of a hearing de novo, and it is not confined to matters that were before the decision­maker but may involve the consideration of new material whether or not it existed at the time the decision was made.

    (2)The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review.

    (3)The reasons for decision provided by the decision­maker, or any grounds for review set out in the application, do not limit the Tribunal in conducting a proceeding for the review of a decision.

What is the correct and preferable decision?

1. In my view, the correct and preferable decision in the circumstances of this case is to apply the aggregation method of valuation to the determination of gross rental value of the land as at the date of valuation and to affirm the Valuer General's valuation of gross rental value as at the date of valuation of $1,878,643.  I have come to this decision for the following four reasons.

2. First, Mr Gilbert, a qualified and experienced valuer, gave valuation expert evidence that, in his professional opinion, 'it is appropriate in the circumstances to value the [gross rental value] of the subject site using the aggregation method available pursuant to section 24 of the VL Act.'  Mr Gilbert was not cross­examined and no contradictory expert evidence was presented by the applicant.  Moreover, Mr Gilbert provided a sound basis for his evidence that the aggregation method of valuation is appropriate to determine gross rental value in the circumstances of this case.  Mr Gilbert gave the following evidence:

   In order to undertake the aggregation methodology, I need to identify whether there are any rateable hereditaments within the Fremantle Markets, and I will have regard to the following issues:

   [1]Land must have a fixed location ­ capable of being defined.

   [2]Land must be capable of exclusive occupation. …

   [3]Land must be capable of beneficial but not necessarily profitable occupation.

   [4]Land must be capable of being occupied for not too transient a period.

3. In relation to the first consideration referred to by Mr Gilbert, each of the 106 permanent market stalls the actual annual gross rent of which he aggregated has a specific stall number that corresponds with the stall's defined location on a map on the Fremantle Markets website.  Furthermore, as Mr Gilbert said in evidence, '[o]n my inspection it was observed that most permanent stalls have fixed structures or operate within exclusive identified boundaries' and that even in The Yard where vendors sell fruit and vegetables and the improvements are movable, 'the leased areas are defined by painted lines on the bitumen.'  In addition, as Mr Gilbert said, '[m]ost stalls are constructed of various materials, and form permanent structures often with fitouts that may include signage, glass display cases and cooking equipment within the leased area.'  As Mr Gilbert concluded, '[t]his demonstrates the stalls are capable of being defined.'

1. In relation to Mr Gilbert's second consideration, although I find below that the occupancy agreements between the applicant and permanent stallholders are probably characterised as licences, rather than leases, because clause 1(b) of the form of 'sublease' states that the legal right to 'possession and control' over the stall remains vested in the applicant and that 'this Lease shall not confer upon the Tenant any tenancy or interest whatsoever in or over the Stall or any rights of exclusive occupation of the Stall', nevertheless, other provisions of the form of 'sublease' and physical characteristics of the permanent stalls found earlier have the effect that the permanent stalls are each capable of separate long­term occupation and have sufficient elements of exclusive occupation by the permanent stallholders that it is appropriate in the exercise of discretion under s 24(1)(a) of the VL Act to apply the aggregation method of valuation.

2. Notwithstanding that, under the form of 'sublease', the applicant maintains a legal right to possession and control over each permanent market stall and the stallholder does not have a legal right of exclusive occupation of the stall, nevertheless, and significantly, clause 12.1 of the form of 'sublease' confers a right on the stallholder to 'access … and hold the Stall on each Market Day during the Term without interruption by the Landlord' and also to access the stall at other reasonable times to clean and stock the stall.  Although the stallholder's right to hold the stall without interruption by the applicant is only conferred on market days, the sole use of the land contemplated by the lease, the Operating Strategy Agreement, the Operating Strategy and the form of 'sublease' is as a retail stall market operating on market days.  Furthermore, as Mr Gilbert said in evidence, stallholders do not share occupation of their stall with any other stallholder and the permanent stalls have a combination of lockable doors, shutters and mesh screens with padlocks, or hard canvas roll down blinds that are capable of being padlocked, ensuring that most of the stalls are able to be locked up and left with stock and/or equipment in place 'in reasonably secure circumstances'.

3. Having regard to these physical characteristics of permanent stalls at Fremantle Markets, the rights conferred by clause 12.1 of the form of 'sublease' and that the only use of the land contemplated by the lease between the City and the applicant, the Operating Strategy Agreement between them, the Operating Strategy and the form of 'sublease' is as a retail stall market operating on market days, in my view, the 106 permanent stalls utilised by Mr Gilbert in his valuation are each capable of separate long­term occupation and have sufficient elements of exclusive occupation to make it appropriate to apply the aggregation method.

4. In relation to Mr Gilbert's third consideration, as he said in evidence, the fact that the stallholders are able to trade from their identified stalls during the market trading hours demonstrates that the stalls are capable of beneficial, but not necessarily profitable occupation.

5. In relation to the fourth consideration referred to by Mr Gilbert, the evidence shows that the permanent market stalls are certainly capable of being occupied for not too transient a period.  The form of 'sublease' refers to the Term as the number of 'years commencing on the Commencement Date' to be inserted in the Schedule and clause 21.1 of the form of 'sublease' confers an 'option to extend this Lease' on the 'Tenant'.  Furthermore, Mr Gilbert's evidence demonstrates that there is considerable longevity in the identity of stallholders as the vast majority of the permanent stalls had not changed occupants between 2013 and May 2015 (when Mr Gilbert viewed and copied extracts from the Fremantle Markets website).

6. Secondly, as the Tribunal recognised in J B and Valuer General at [19], the aggregation method 'has been consistently applied by the Valuer General since 1979 in relation to the valuation of land containing identifiable parts capable of separate long­term occupation … [for example,] stalls within markets …'. Mr Gilbert gave evidence to the same effect in this case. In Vanu Pty Ltd v Valuer­General (1993) 11 SR (WA) 80 (Vanu v Valuer­General), the former Land Valuation Tribunal also applied the aggregation method to determine the gross rental value of the land comprising Wanneroo Markets. The factual circumstances of the permanent stalls in that case were similar to the factual circumstances of the permanent stalls in this case, as demonstrated by the Land Valuation Tribunal's recitation of the principal factors upon which it relied at 89 as follows:

   The respective stalls were clearly identifiable, each with their own separate lock up areas, in which the stall holders operated their businesses during trading hours and provided the ability to leave stock in situ in secure circumstances.  It was established that the businesses conducted in those stalls were not transient, that many of them actually exceeded an annual period before changing hands and that even although the tenancy arrangements were for shorter durations such was their permanency and tangibility that goodwill was a factor upon a sale.  The fact that the trading hours may have been relatively limited was not a vital consideration and did not change the exclusive possession aspect of the permanent stalls.  Even in the case of shopping centres few if any of the tenancies operate each day of the week.  Examples were presented in evidence of other types of premises which were not functioning throughout the week or for that matter throughout the year such as beach kiosks and cabaret premises.

7. The principal distinction between the facts of Vanu v Valuer­General and the present case is that in Vanu v Valuer­General the owner of the land entered into the 'Stallholders Agreements' ('which entitle[d] the stallholders to occupy their respective premises as tenants at will': at 81) with each of the permanent stallholders, whereas in this case the owner of the land, the City, has leased the land to the applicant and the applicant has entered into the occupancy agreements in the form of 'sublease' with the permanent stallholders.  However, in my view, this difference is without any relevant legal or practical consequence and simply reflects the way in which the City has chosen to facilitate the operation of Fremantle Markets.  Under the lease between the City and the applicant, the Operating Strategy Agreement and the Operating Strategy, the City has, in effect, contracted the applicant to be, as it is termed in the Operating Strategy Agreement, the 'Market Manager', and to 'maintain and develop the character of the Markets by operating them in accordance with the Fremantle Markets Operating Strategy' (as required by the lease) which has as its broad stated objective in clause 4.1 of the Operating Strategy Agreement 'to promote and maintain a vibrant and interesting retail market' on the land.  In order for the applicant to operate Fremantle Markets in accordance with its agreement with the City, it must enter into occupancy agreements with individual stallholders no less favourable to them than the form of 'sublease' (clause 4.5 of the Operating Strategy).  Whether the occupancy agreements are entered into directly by the landowner (as in Vanu v Valuer­General) or by the lessee/market manager (as in the present case), the permanent stalls in both cases constitute identifiable parts of the land capable of separate long­term occupation.  In both cases, the stalls are clearly identifiable, generally capable of being secured with stock and equipment left in place, the businesses operated at the stalls are not transient, and the trading hours are regular and consistent and reflect the nature of a retail stall market.

8. As the Tribunal held in Western Australian Meat Marketing Cooperative Limited and Valuer General [2005] WASAT 227 at [44], in the context of a particular methodology that had been applied by the Valuer General in all relevant valuations of gross rental value since the commencement of the VL Act in 1979:

   It is in the public interest that consistent valuation methodology and approach is employed, unless the methodology or approach in question is shown to be legally or factually incorrect.

9. Similarly, in this case, it is in the public interest for the aggregation method to be applied to the determination of the gross rental value of the land where that methodology has been consistently applied by the Valuer General since the commencement of the VL Act in 1979 in relation to the valuation of land containing stalls within markets that are capable of separate long­term occupation.  As will be seen from the discussion of the applicant's two principal contentions and supporting submissions below, the aggregation method has not been shown in this case to be legally or factually incorrect and is a valid and appropriate method to adopt in the circumstances of this case.

10. Thirdly, the Valuer General's Valuation Policy 3.103 entitled 'Land ­ The Unit of Valuation, Gross Rental Value' (Gross Rental Value Policy), which commenced on 30 August 2000 and was most recently reviewed on 31 January 2006, states as follows:

    Where there is more than one occupation within a single ownership, individual values are to be determined for each separate occupancy.  The separate values are aggregated and entered into the valuation roll as a single composite value.

11. In this case, although the City has leased the whole of the land to the applicant, it is clear from the lease, the Operating Strategy Agreement and the Operating Strategy that the lease of the land to the applicant is in order to facilitate the sub­leasing or licensing of market stalls within the land to individual stallholders and the operation of the land as the Fremantle Markets on market days.

12. As noted earlier, the Operating Strategy Agreement refers to the applicant as the 'Market Manager' and in clause 4.1 states that the 'broad objective' of the Operating Strategy involves incorporating 'a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.'  As also noted earlier, under clause 3.2 of the Operating Strategy Agreement, a failure by the applicant 'to operate the Fremantle Markets in accordance with the [Operating] Strategy will be a default under the Lease.'

13. In light of the terms of the form of 'sublease' and in particular clause 12.1 and the physical characteristics of the permanent stalls referred to in the evidence of Mr Gilbert, I find that there is 'more than one occupation within a single ownership' at the land, within the meaning of the Valuer General's Gross Rental Value Policy, and in particular that each of the 106 permanent stalls at the date of valuation utilised in Mr Gilbert's valuation constitute a separate 'occupation within a single ownership', within the meaning of the Gross Rental Value Policy.

14. The principles in relation to consideration and application of a policy, such as the Gross Rental Value Policy, adopted by a decision­maker to guide administrative decision­making, were discussed by Barker J in Clive Elliott Jennings & Co Pty Ltd v Western Australian Planning Commission[2002] WASCA 276; (2002) 122 LGERA 433 (Clive Elliott Jennings) at [24] ­ [26]. As Barker J said in Clive Elliott Jennings at [24], such a policy 'is not intended to replace the discretion of the [administrator] in the sense that it is to be inflexibly applied regardless of the merits of the particular case before it.' Indeed, at [25], his Honour observed that 'an administrator exercising discretionary power will be found to have acted ultra vires if the discretion is exercised inflexibly, by application of a policy without regard to the merits of a particular case, as the decision in Falc Pty Ltd v State Planning Commission (1991) 5 WAR 522 illustrates.' Nevertheless, Barker J held in Clive Elliott Jennings at [24] that, as a matter of '[g]ood public administration' and as recognised by the Administrative Appeals Tribunal in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 (Re Drake) (Brennan J, President), 'the relevant consideration in many applications will be why the [adopted policy] should not be applied; why the … principles that find expression in the [adopted policy] are not relevant to the particular application.'  His Honour also referred, at [26], to Brennan J's observations in Re Drake at 644 ­ 645 that departures by the Administrative Appeals Tribunal from government policy would be 'cautious and sparing', occurring only where there were 'cogent reasons' to do so. These principles have been applied by this Tribunal in a variety of administrative review proceedings (such as town planning: Adbooth Pty Ltd and City of Perth [2007] WASAT 76 (leave to appeal refused: Adbooth Pty Ltd v City of Perth [2007] WASC 218); water licensing: More and Water and Rivers Commission [2006] WASAT 112; and biosecurity and agriculture management: Brimcove Pty Ltd and Director General of the Department of Agriculture and Food Western Australia [2015] WASAT 30).

15. The Gross Rental Value Policy serves to guide the exercise of discretion as to whether to apply the aggregation method under s 24(1)(a) of the VL Act. The policy will be departed from where there is a cogent reason to do so. However, for reasons set out below, I am not satisfied by any of the submissions made on behalf of the applicant that there is a cogent reason to depart from the Gross Rental Value Policy in the particular circumstances of this case and in my view it is appropriate for the discretion under s 24(1)(a) of the VL Act to be exercised by the Tribunal on review consistently with the Gross Rental Value Policy.

16. Finally, I do not consider that either of the two principal contentions advanced by the applicant or any of the supporting submissions presented on its behalf demonstrate that it is not valid or appropriate to apply the aggregation method in the circumstances of this case.

17. As noted earlier, the applicant's 'Head Lease Point' is that, under the VL Act, the Valuer General 'must value the tenancy value as between the Landlord (the City) and its tenant (the Applicant), which is derived by reference to the Lease, not by an aggregation of sub­leases'. In support of this contention, the applicant submitted that '[t]here is no basis for aggregating sub­rents under section 24 of the [VL Act] when there is a head lease, because the head lease is the "tenancy" required to establish "gross rental value" [under the definition of that term in s 4(1) of the VL Act]'. Furthermore, the applicant submitted that the Valuer General has erred in law, because s 24(1)(a) of the VL Act 'does not confer any discretion to aggregate rents or monies paid to determine gross sub­rental value', but only gross rental value. The applicant submitted that J B and Valuer General and Vanu v Valuer­General are both distinguishable, because 'they had multiple tenancies, whereas the subject land here has one' and in those cases the absence of a head lease 'necessitat[ed] the aggregation of rents in order to determine gross rental value'.  Furthermore, counsel for the applicant sought to distinguish J B and Valuer General and Vanu v Valuer­General on the basis that the applicant runs a 'complicated business' involving 'a very real cost' in running the markets for the City and managing a State heritage item.  Counsel for the applicant submitted that 'in contrast, the landlords in the other two cases were not answerable to anyone in the way they conducted their businesses'.  Finally, counsel for the applicant submitted that the Valuer General erred in law and fact, because he has not had regard to 'the best evidence' of the gross rental value of the land, namely the Base Rent and other amounts payable by the applicant to the City under the lease.

18. However, the applicant's submission that '[t]here is no basis for aggregating sub­rents under section 24 of the [VL Act] when there is a head lease, because the head lease is the "tenancy" required to establish "gross rental value"' is incorrect for each of two reasons.

19. First, the determination of 'the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year' (emphasis added), within the meaning and for the purposes of the definition of 'gross rental value' in s 4(1) of the VL Act, involves a hypothetical exercise. Contrary to the applicant's submission, the head lease is not the 'tenancy' required to establish 'gross rental value'. The relevant principles and authorities were summarised by Master Newnes (as his Honour then was) in J B Investments Pty Ltd v The Valuer­General [2004] WASCA 307 at [43] as follows:

    It was common ground that, in assessing the gross rental value of land, the land is to be assessed at what a hypothetical tenant might reasonably be expected [to] pay to a hypothetical landlord for a tenancy on the hypothesis that both parties are reasonable, the landlord not being extortionate and the tenant not being under any pressures, and the premises being available to be let:  R v Paddington (Valuation Officer); Ex parte Peachey Property Corporation Ltd [1965] 2 All ER 836 at 848. The rental actually paid by an occupier does not necessarily indicate the rent that a tenant ought reasonably be expected to pay: London County Council v Erith Churchwardens [1891] All ER 577 at 585. While the amount paid may be persuasive evidence of the rental value, it is not decisive and it is only evidence of value: Garton v Hunter (Valuation Officer) [1969] 1 All ER 451; Halsbury's Laws of England, 3rd ed, vol 32, 76 [107].

20. Although, as his Honour recognised in the final sentence of the quotation, the amount of rent paid by an actual tenant of the land 'may be persuasive evidence of the rental value', the actual tenancy of the land in question is not the 'tenancy' referred to in the definition of 'gross rental value'.  Rather, the 'tenancy' referred to in the definition is a hypothetical tenancy.

21. Secondly, the submission is incorrect, because, as the Tribunal held in J B and Valuer General at [75], the aggregation method is an 'alternative, expanded or supplementary method of ascertaining the gross rental value of the land, which if and when applied on a proper basis has certain well­established consequences for the taxpayer.' As the Tribunal then said, s 24(1)(a) of the VL Act 'is not somehow to be isolated, read down or otherwise construed in such a way that its evident purpose is frustrated or defeated.'

22. Thus, provided that there is a proper basis for doing so in the circumstances of the case, gross sub­rents may be aggregated to determine gross rental value under s 24(1)(a) of the VL Act, even in a case where there is a head lease or a single lease of the whole land. In this case, the 106 permanent stalls which Mr Gilbert has utilised in applying the aggregation method are, as he considered in his evidence, 'parts of which the land is comprised', within the meaning of s 24(1)(a) of the VL Act. It is open to determine gross rental value of the land under s 24(1)(a) of the VL Act on the basis that each of those parts is being 'separately valu[ed]'. Furthermore, in my view, it is valid and appropriate to apply the aggregation method, notwithstanding the existence of the lease between the City and the applicant for the whole of the land, because it is plain from the lease, the Operating Strategy Agreement and the Operating Strategy that the lease is intended to facilitate the occupation and use of the land by multiple stallholders under subleases or licences granted by the applicant, rather than the applicant itself operating market stalls. The applicant is the 'Market Manager' of Fremantle Markets and is obligated to operate the markets in accordance with the Operating Strategy, the 'broad objective' of which involves incorporating 'a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.' The evidence of Mr Gilbert shows that the contemplation of the lease and the related documents for multiple occupation of the land by stallholders on market days has been fulfilled.

1. There is, therefore, a clear and proper basis for aggregating actual annual gross sub­rentals, even though there is a 'head lease', on the basis that the land is comprised of parts, namely permanent market stalls, and that the actual annual gross rent paid by the 106 permanent stallholders as at the date of valuation is cogent and persuasive evidence of the gross rental value of each relevant part of which the land is comprised.

2. The applicant's submission that the Valuer General has erred by aggregating rents or monies paid 'to determine gross sub­rental value' is also incorrect. As noted earlier, the determination of 'the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year …' (whether the gross annual rental of the land as a whole or the gross annual rental of the parts of which the land is comprised under the aggregation method in s 24(1)(a) of the VL Act), within the meaning and for the purposes of the definition of 'gross rental value' in s 4(1) of the VL Act, involves a hypothetical exercise. The actual annual gross rent paid by each permanent stallholder to the applicant provides cogent and persuasive evidence of 'the gross annual rental that the [part of the land comprising the relevant permanent stall] might reasonably be expected to realize if let on a tenancy from year to year …', within the meaning and for the purposes of the definition of 'gross rental value' in s 4(1) of the VL Act. Neither the Valuer General in the original valuation the subject of review nor Mr Gilbert in his evidence in this proceeding has aggregated 'rents or monies paid to determine gross sub­rental value'.

3. As found earlier, the factual circumstances of Vanu v Valuer­General are similar to the factual circumstances of the present case.  Whether the occupancy agreements are entered into directly by the landlord (as in Vanu v Valuer­General) or by the lessee/market manager (as in the present case), the permanent stalls in both cases constitute identifiable parts of the land capable of separate long­term occupation.  Furthermore, the applicant is incorrect in its submission that the absence of a head lease in J B and Valuer General and Vanu v Valuer­General 'necessitat[ed] the aggregation of rents in order to determine gross rental value'.  In those cases, as in the present case, the determination of gross rental value involves a hypothetical exercise of determining the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year, whether there is a single lease of the land in place or not.  The evidence establishes in this case, as it did in Vanu v Valuer­General, that the land the subject of valuation is comprised of parts, namely permanent market stalls. It is open and appropriate under s 24(1)(a) of the VL Act to determine the gross rental value that each part of the land comprising each permanent market stall might reasonably be expected to realize if let on a tenancy from year to year, and to aggregate those values.

4. The applicant did not present any evidence to support its submission that it runs a 'complicated business' involving 'a very real cost' in running the markets for the City and managing a State heritage item.  However, even if there were evidence to this effect, it would not mean that the aggregation method is not valid or appropriate in the circumstances of this case.  The very purpose of the arrangements between the City and the applicant is to facilitate the operation of Fremantle Markets involving 'a diverse range of highly individualised stallholdings'.

5. Finally, in relation to the Head Lease Point, as counsel for the Valuer General submitted, the applicant has not put forward any valuation evidence to found or support its submission that the gross annual rental that it paid to the City under the lease is the 'best evidence' of the gross annual rental that the land might reasonably be expected to realize if let on a tenancy from year to year, for the purposes of the determination of gross rental value under the VL Act.  However, and in any case, the aggregation method is an 'alternative, expanded or supplementary method of ascertaining the gross rental value of the land' (J B and Valuer General at [75]) and in the circumstances of this case it is appropriate to determine the gross rental value of the land on that basis.

6. As noted earlier, the applicant's 'Licenses Point' contention is that 'the aggregation was misconceived in any event because it took into account monies paid under licenses to occupy, which are not in point of law "tenancies" open to be valued in an aggregation'. The applicant submits that the form of 'sublease' confers a licence, rather than a lease, as a matter of land law, and therefore is not 'a tenancy' for the purposes of the definition of 'gross rental value' in s 4(1) of the VL Act.

7. The principles in relation to the distinction between a lease and a licence as a matter of land law are not in dispute in this proceeding.  They are summarised by Emeritus Professor Peter Butt at [15 10] of the sixth edition of his work Land Law (Lawbook Co. 2010) as follows (citations omitted):

   A lease (or 'demise') gives the tenant the right to exclusive possession ­ the right to exclude all others from the land.  This includes the right to exclude even the landlord, subject only to any right the landlord has by law or under the lease agreement, such as the right to enter and view the state of repair.  Further, a lease usually gives the tenant an interest in the land (the 'demised premises') itself.  In contrast, a licence gives a mere right to occupy, and usually gives no interest in the land.  The qualification 'usually' is added in both instances, because (exceptionally) a lease may not give a proprietary interest, and a licence may be coupled with the grant of a proprietary interest (such as a lease or a profit à prendre) conferring on the licensee an ancillary interest in the land which is protectable by proprietary remedies[.]

8. Although there are some inconsistent indications in the form of 'sublease' as to whether it is, in substance, a 'lease' (as it is termed) or a licence, it is ultimately unnecessary to review these aspects. In light of the express terms of clause 1(b) ('The legal right to possession and control over the Stall remains vested in the Landlord … and this Lease shall not confer upon the Tenant any tenancy or interest whatsoever in or over the Stall or any rights of exclusive occupation of the Stall'), the form of 'sublease' is probably a licence, rather than a lease. However, in my view, even if the occupancy agreements between the applicant and permanent stallholders are properly characterised as licences, rather than leases, as a matter of land law, that does not, in the circumstances of this case, have the consequence that the aggregation method is not valid or not appropriate to be applied to determine the gross rental value of the land. The permanent stalls are 'parts of which the land is comprised', within the meaning and for the purposes of s 24(1)(a) of the VL Act, which the Valuer General may separately value on the basis of the actual annual gross rental for each part at the date of valuation, and aggregate, under that provision, for the purpose of determining the 'gross rental value' of the land as defined in s 4(1) of the VL Act.

9. The VL Act does not require that, in order to inform the determination of the gross annual rental that the land (or a part of which the land is comprised) might reasonably be expected to realize if let on a tenancy from year to year, an actual gross annual rental for the land (or a part of the land) must be under a lease, rather than a licence. As discussed earlier in these reasons, the 'tenancy' referred to in the definition of 'gross rental value' in s 4(1) of the VL Act is a hypothetical tenancy, not an actual tenancy of the land (or a part of which the land is comprised).

10. Furthermore, as discussed earlier in these reasons, having regard to:

    •the physical characteristics of the permanent stalls at Fremantle Markets (in particular, that stallholders do not share occupation of their stall, stalls have a combination of lockable doors, shutters and mesh screens with padlocks, or hard canvas roll down blinds that are capable of being padlocked, ensuring that most of the stalls are able to be locked up and left with stock and/or equipment in place 'in reasonably secure circumstances');

    •the rights conferred by clause 12.1 of the form of 'sublease' (to 'access … and hold the Stall on each Market Day during the Term without interruption by the Landlord' and also to access the stall at other reasonable times as necessary to clean and stock the stall); and

    •that the only use of the land contemplated by the lease between the City and the applicant, the Operating Strategy Agreement between them, the Operating Strategy and the form of 'sublease', is as a retail stall market operating on market days,

    the 106 permanent stalls utilised by Mr Gilbert in his valuation are each capable of separate long­term occupation and have sufficient elements of exclusive occupation to make it appropriate to apply the aggregation method.

11. It is therefore valid and appropriate, in the circumstances of this case, to carry out the valuation of gross rental value of the land, as Mr Gilbert has done, by aggregating the actual annual gross rent paid for the 106 permanent stalls at the date of valuation and then coordinating that valuation with comparable properties of Malaga Markets and Wanneroo Markets.

Conclusion

1. The use of the aggregation method to determine the gross rental value of the land comprising and known as Fremantle Markets as at the date of valuation is valid and appropriate in the circumstances of this case.  Neither of the applicant's two principal contentions have satisfied the Tribunal that the application of the aggregation method is erroneous.  The correct and preferable decision in the circumstances of this case is to apply the aggregation method of valuation to determine the gross rental value of the land as at the date of valuation and to affirm the Valuer General's valuation of gross rental value as at the date of valuation of $1,878,643.

2. The application for review should be dismissed and the valuation of gross rental value as at 1 August 2012 of $1,878,643 should be affirmed.

Orders

1. For these reasons, I make the following orders:

   1.The application for review is dismissed.

   2.The determination by the Valuer General of gross rental value of Lot 1380 on Deposited Plan 254153, Lot 1376 on Deposited Plan 40767 and Lot 1693 on Deposited Plan 210453 as at 1 August 2012 of $1,878,643 is affirmed.

I certify that this and the preceding [78] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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JUDGE D R PARRY, DEPUTY PRESIDENT