PERRON INVESTMENTS PTY LTD -v- SERVCORP WA PTY LTD
[2015] WASC 78
•6 MARCH 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: PERRON INVESTMENTS PTY LTD -v- SERVCORP WA PTY LTD [2015] WASC 78
CORAM: BEECH J
HEARD: 23 FEBRUARY 2015
DELIVERED : 6 MARCH 2015
FILE NO/S: CIV 1501 of 2014
BETWEEN: PERRON INVESTMENTS PTY LTD
First Plaintiff
APF MANAGEMENT PTY LTD AS TRUSTEE FOR THE CENTRAL PARK LANDHOLDING TRUST
Second PlaintiffAND
SERVCORP WA PTY LTD
Defendant
Catchwords:
Landlord and tenant - Lease - Rent review clause - Proper construction - Whether implied term - Turns on own facts
Legislation:
Nil
Result:
Orders in favour of plaintiffs
Category: B
Representation:
Counsel:
First Plaintiff : Mr M G Lundberg & Mr J Y Wang
Second Plaintiff : Mr M G Lundberg & Mr J Y Wang
Defendant: Mr M L Bennett
Solicitors:
First Plaintiff : King & Wood Mallesons
Second Plaintiff : King & Wood Mallesons
Defendant: Bennett + Co
Case(s) referred to in judgment(s):
Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9) [2012] NSWSC 984
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd (No 2) [2008] VSC 478
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 88 ALJR 814
Devpro v Seamark Pty Ltd [2007] QCA 241
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Green v Wilden Pty Ltd [2005] WASC 83
Growthpoint Properties Australia Ltd v Australia Pacific Airports (Melbourne) Pty Ltd [2014] VSC 556
Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311
Kidd v The State of Western Australia [2014] WASC 99
Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28
Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
St Barbara Ltd v Hockley (No 2) [2013] WASC 358
Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444
United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904
Vercorp Pty Ltd v ACN 096 278 483 Pty Ltd (No 2) [2010] QSC 405
BEECH J:
Introduction
The plaintiffs, Perron Investments Pty Ltd (Perron Investments) and APF Management Pty Ltd (APF Management) (together, the Lessor), are the owners of the 51 storey building known as Central Park situated at 152‑158 St Georges Terrace, Perth in the State of Western Australia (the Central Park Building).
The defendant, Servcorp WA Pty Ltd (Servcorp WA or the Lessee), currently operates serviced offices at Level 18 of this building under a lease with the Lessor.
The parties are in dispute in relation to the rent review clause in their lease.
I will outline the facts, before explaining the Lessor's claims and the parties' competing contentions as to the proper construction of the rent review clause.
The Lease
On or about 2 December 2003, a lease over the whole of Level 18 of the Central Park Building (the Lease) was executed on behalf of the following parties:
(1)the Government Employees Superannuation Board and Perron Investments; and
(2)Parkwater (WA) Pty Ltd.
The Lease consists of the terms and conditions set out in:
(1)a formal instrument of lease dated 2 December 2003;
(2)Schedule 1 - Lease details;
(3)Schedule 2 - Special conditions;
(4)Schedule 3 - Operating expenses;
(5)Schedule 4 - Guarantee and indemnity;
(6)Schedule 5 - Trustee conditions;
(7)Schedule 6 - Building rules; and
(8)the Standard Conditions of Lease (the Standard Conditions).
The Lease was for a term of 10 years commencing on 1 November 2003, with an option for a further five year term commencing on 1 November 2013.
The Lease refers to the Lessor in the first person (we, us and our) and the Lessee in the second person (you and your).
Clause 5 of the Standard Conditions deals with Rent. As amended by cl 2(b) and cl 2(c) of the Special Conditions, it reads as follows:
5.1Paying Rent
You must pay the Rent in equal monthly instalments, in advance, on or before the first day of each month. We will tell you, by Notice, how we want you to pay the Rent and other monies due to us.
5.2Adjustment of Rent
(a)We will review the Rent on:
(i)1 November 2004;
(ii)1 November 2005;
(iii)1 November 2006;
(iv)1 November 2007;
(v)1 November 2008;
(vi)1 November 2009;
(vii)1 November 2010;
(viii)1 November 2011;
(ix)1 November 2012;
(x)1 November 2014;
(xi)1 November 2015;
(xii)1 November 2016; and
(xiii)1 November 2017,
and the New Rent will be
New Rent = (3.75% x R)
where:
R = the Rent payable immediately before the relevant Review Date.
(b)We will review the Rent on 1 November 2013 and the New Rent will be the highest of:
(i)the Rent you had to pay immediately before the relevant Review Date; and
(ii)the Current Market Rent, as determined under clause 6.
(c)You must pay the New Rent from each Review Date.
Thus, the scheme is for fixed increases of 3.75% per annum for the 10 year term of the Lease, with a review to Current Market Rent, as determined under cl 6, when and if the Lessee exercises its five year option.
Clause 6 of the Standard Conditions deals with rent reviews. As amended by cl 2(d) of the Special Conditions, it reads as follows:
6.1We will tell you our Assessment
(a)We must:
(i)on each Review Date, review the Rent based on clauses 5.2(a) and 5.2(b) or any other criteria we agree with you, in writing; and
(ii)within 3 months before or after each Review Date tell you, by Notice, our Assessment, which is then treated as the New Rent. We can give you this Notice late, but, if we do, clause 6.1(d) applies.
(b)Until we tell you our Assessment, you must pay the Old Rent but it will be increased to the New Rent from the relevant Review Date.
(c)If we have not given you the Notice in accordance with clause 6.1(a) before the Review Date, you can give us written notice of your intention to have the rent reviewed and require us to give you our Assessment of the New Rent within 28 days.
(d)If we are late giving you the Notice in clause 6.1(a)(ii) or 6.1(c), you must pay the New Rent from the day we gave you the Notice.
6.2If you disagree with our Assessment
(a)If you disagree with our Assessment, we must both follow the procedure in clause 6.3.
(b)The time limits in clause 6.3:
(i)follow each other; and
(ii)are of the essence so, if either of us do not do something within the time allowed, we may not do it afterwards.
6.3Dispute procedure
Action
Time
If you disagree with our Assessment, you must tell us, by Notice
within 14 days after we give you our Notice
You and we must try, in good faith, to agree on the New Rent
10 days
If you and we both agree, you must pay the (agreed) New Rent
subject to clause 6.1(d), pay from the relevant Review Date
If you or we do not agree, you and we may each appoint a Valuer, instruct the Valuer to establish the New Rent and tell each other the name, address and contact details of our respective Valuers
10 days
The Valuers must each decide and then try to agree on the New Rent
14 days
If you or we do not appoint a Valuer, or either Valuer does not decide the New Rent on time, you must pay the New Rent that the sole Valuer who is appointed or decides the New Rent on time (as the case may be) decides
pay from the relevant Review Date
If both Valuers do not agree on time and you and we agree, in writing, at that time that we want to resolve the dispute in this way, you or we may ask the President of the Australian Institute of Valuers and Land Economists Inc (WA Branch) to appoint another independent Valuer to decide the New Rent.
10 days
If we agree to appoint an independent Valuer, the independent Valuer must decide the New Rent
14 days or any other period we agree
You must pay the New Rent the independent Valuer decides
pay from the relevant Review Date
6.4Other conditions which apply to Valuers
(a)If the Valuers (including the independent Valuer, if we agree to appoint one) agree that our Assessment was correct, we must share equally all the Valuer's Costs (including the independent Valuer's costs, if we agree to appoint one) in connection with the valuation procedure in clause 6.3.
(b)If the Valuers (including the independent Valuer, if we agree to appoint one) agree that our Assessment was wrong, we must share equally all the Valuer's Costs in connection with the valuation procedure in clause 6.3. We must each pay our share of these costs as soon as they are due.
(c)Subject to clause 6.4(a), we must share equally all the independent Valuer's (if we agree to appoint one) costs. We must also each pay our share of these costs as soon as they are due.
(d)Each Valuer must give detailed written reasons for his or her decision.
(e)The Valuers act as experts and not as arbitrators.
6.5Adjusting the Rent
(a)You must pay the Old Rent until the New Rent is agreed or determined in the way set out in this clause 6.
(b)We will calculate the necessary Rent adjustment (if any) as soon as possible after we know the New Rent.
(c)You must pay any adjustment on the next Rent Day.
Clause 26.7 of the Standard Conditions provides as follows:
Each party must sign and deliver all documents and do all other acts reasonably required of it to carry out and give full effect to this Lease and the rights and obligations of the parties under it, and must cause their respective agents to do the same.
Current Market Rent is defined under the Lease to mean the highest current open market annual rental that the Lessor could get for Level 18 of the Central Park Building on stipulated assumptions, taking account of certain identified matters and ignoring other identified matters.
Old Rent is defined to mean the rent the Lessee paid immediately before a Review Date.
Review Date is defined to mean each of the dates in item 9 of sch 1 of the Lease. Those are the dates on 1 November each year from 2004 to 2017 inclusive.
Valuer is defined to mean a property valuer who is licensed under the Land Valuers Licensing Act 1978 (WA).
For the purposes of cl 6.3 the Lease, the current successor to the position of the President of the Australian Institute of Valuers and Land Economists Inc (WA Branch) is the President of the Australian Property Institute (WA Division).
Changes in the parties to the Lease
On or about 30 June 2005, the Government Employees Superannuation Board and APF Management entered into an agreement by which the interest of the Government Employees Superannuation Board in the Lease as Lessor was assigned to APF Management as trustee for the Central Park Landholding Trust, with effect from on or about 1 August 2005.
On or about 12 July 2006, Perron Investments, APF Management, Parkwater (WA) Pty Ltd and Servcorp WA entered into an agreement by which the Lease was varied and the interest of Parkwater (WA) Pty Ltd in the Lease as Lessee was assigned to Servcorp WA, with effect from on or about 15 July 2006.
Rent during the initial term
The Rent payable by the Lessee under sch 1 of the Lease for the period 1 November 2003 to 31 October 2004 was $300 per square metre plus GST, being $471,240 plus GST per annum.
From 1 November 2004 until 31 October 2012, the Rent for the purposes of the Lease increased each 1 November by a fixed percentage of 3.75% under the amended cl 5.2(a) of the Standard Conditions.
The Rent payable by the Lessee under the Lease for the period 1 November 2012 to 31 October 2013 was $417.84 per square metre plus GST, being $656,349.40 plus GST per annum (the 2013 Rent).
The option
By letter dated 5 November 2012, the Lessee gave the Lessor notice that it wanted to exercise its option under the Lease.
In or about November 2012, the Lessor gave the Lessee a new lease on the same terms as the Lease for the option term, being the period of five years commencing 1 November 2013 and ending on 31 October 2018.
The Market Rent Review process
By letter dated 27 September 2013, pursuant to the amended cl 5.2 and cl 6.1(a) of the Standard Conditions, the Lessor gave to the Lessee a notice of the assessment by the Lessor of the New Rent for the Lease as at 1 November 2013. The Lessor assessed the New Rent in the amount of $865 per square metre plus GST, being $1,358,748 plus GST per annum (the Lessor's Assessment).
By letter dated 2 October 2013, pursuant to cl 6.2(a) and cl 6.3 of the Standard Conditions, the Lessee disagreed with the Lessor's Assessment.
The parties then followed the process set out under cl 6.3 of the Standard Conditions. The Lessor and the Lessee tried, in good faith, to agree on the New Rent within 10 days of 2 October 2013. No agreement was reached.
The Lessor and the Lessee then agreed to extend the time in which to try to agree in good faith on the New Rent to 1 November 2013, before making a further extension to 15 November 2013. No agreement was reached.
On or about 22 November 2013, the Lessor appointed a Valuer (being Mr Marc Crowe of Knight Frank Australia Pty Ltd) and instructed that Valuer to establish the New Rent.
On or about 22 November 2013, the Lessee appointed a Valuer (being Mr John Del Dosso of Colliers International) and instructed that Valuer to establish the New Rent.
By emails on 22 November 2013, the parties informed each other of the appointment of their respective Valuers, and of the names, addresses and contact details of their respective Valuers.
The Valuers then tried to agree on the New Rent. By on or about 5 December 2013, Mr Del Dosso and Mr Crowe were unable to agree on the New Rent.
By letter dated 12 December 2013, the Lessor:
(1)informed the Lessee that the Valuers appointed by the parties under the Lease had not agreed on the New Rent;
(2)informed the Lessee that, pursuant to the terms of the Lease, the Lessor agreed to the making of a request to the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent; and
(3)requested that the Lessee agree to ask the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent.
By letter dated 13 December 2013, the Lessee informed the Lessor that the Lessee did not agree to ask the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent. The letter also stated that the Lessee would continue to pay the 2013 Rent until the New Rent was agreed by the parties.
At all material times from on or about 13 December 2013:
(1)the Lessor has been ready and willing to agree to ask the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent; and
(2)the Lessee has continued to refuse to agree to ask the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent.
The Lessee has paid rent for the period 1 November 2013 to 31 October 2014 in the same quantum as the 2013 Rent.
The Lessee has paid rent on and from 1 November 2014 in the same quantum as the 2013 Rent escalated by 3.75%.
The Lessor's claims and the parties' competing constructions
The Lessor claims that:
(1)on a proper construction of cl 6.3, there was an implied term of the Lease that each of the parties would not unreasonably refuse to agree to ask the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent for the purposes of cl 6.3 of the Lease;
(2)alternatively, on a proper construction of the Lease, the main purpose of cl 5.2(b) and cl 6 is that on 1 November 2013 the rent is reviewed to the Current Market Rent and if the specific mechanisms in cl 6.3 for the determination of the Current Market Rent fail, the court may determine the quantum of the Current Market Rent and thus the New Rent for the review date of 1 November 2013.
The Lessee denies that either of these terms is an element of the Lease properly construed. On the Lessee's construction:
(1)the Lessee is free to choose whether to agree to ask the President to appoint a Valuer, and that freedom is not limited by any implied term requiring reasonable grounds for choosing not to agree; and
(2)if for this or any other reason the machinery in cl 6.3 fails to produce an agreed or determined Current Market Rent, that is the end of the market rent review process, and the New Rent will be the same as the Old Rent.
Construction of instruments: general principles
The principles relevant to the proper construction of instruments are well known, and were not in dispute in this case. In summary:
(1)the primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument;
(2)it is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters; not the parties' subjective intentions. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean;
(3)the objectively ascertained purpose and objective of the transaction that is the subject of a commercial instrument may be taken into account in construing that instrument. This may invite attention to the genesis of the transaction, its background and context;
(4)the apparent purpose or object of the relevant transaction can be inferred from the express and implied terms of the instrument, and from any admissible evidence of surrounding circumstances;
(5)an instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ; and
(6)an instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.[1]
[1] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ); Kidd v The State of Western Australia [2014] WASC 99 [122]; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [106] ‑ [112]; Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28 [55] (Martin CJ, Pullin & Murphy JJA agreeing).
No party sought to rely on any extrinsic evidence in support of its construction, so it is not necessary to say anything about the conditions under which such evidence may be admitted.
In Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd,[2] I said as follows:
[2] Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79 [48] ‑ [50].
More generally, it seems to me that the nature and purpose of a rent review clause means that consideration of whether a particular construction is unjust or unreasonable will often be of little assistance. The reasons for that were explained by Ipp JA in ADC Buildings as follows [21] ‑ [23]:
'In United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 (cited by Gleeson CJ in GR Mailman and Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 at 86) Lord Salmon said (at 948):
"[A rent review clause] is for the benefit of the tenant because without such a clause he would never get the long lease which he requires; and under modern conditions, it would be grossly unfair that he should. It is for the benefit of the landlord because it ensures that for the duration of the lease he will receive a fair rent instead of a rent far below the market value of the property which he demises. Accordingly the landlord and the tenant by agreement in their lease provide that at stated intervals during the term, the rent should be brought up to what is then the fair market rent. The revision clause itself lays down the administrative procedure or machinery by which the fair market rent shall be ascertained."
I accept that fairness, to the extent described by Lord Salmon, would ordinarily be the general purpose underlying a rent review clause. Nevertheless, the competing interests of ADC and Barana, as lessor and lessee, as to whether or not the land is to be valued without regard to encumbrances or restrictions on use, are irreconcilable. It is difficult - if not impossible - to attempt to resolve their opposing submissions on this issue by reference to fairness. The focus must be, rather on the actual meaning of the words used in their particular context.
As Giles JA in BBC Hardware Pty Ltd v Payce Properties Pty Ltd (2000) 50 NSWLR 66 at 72 noted, the normal commercial purpose of rent review provisions in long term leases is:
"to keep the rent in line with current property values. Changes in the locality, in the planning instruments relevant to the land, and in the economically advantageous use of the land could be expected. No doubt the lessee would want to be protected from paying a greatly increased rent while still restricted in the use of the land. But the lessor would not want to be left with an inadequate return from land of greatly increased value. Their bargain must be found in the words they used." '
As both Ipp JA in ADC Buildings and Giles JA in BBC Hardware observed, it is to the language of the clause in its context that attention must be directed.
For corresponding reasons, resort to the evident purpose of a rent review clause will often be of little assistance in resolution of a construction issue. Viewed from the tenant's perspective one might ask why rent should be paid calculated on the basis of a use not permitted by the tenant. From the landlord's perspective, however, the considerations are different. A landlord has a legitimate commercial interest in ensuring that its return on a long‑term lease reflects the market value of the land based on the (possibly changing) most advantageous use of the land.
Those observations, and the observations in the cases cited, were directed to questions of construction concerning the basis of a valuation exercise in reviewing the rent, and the assumptions to be made by a valuer in that context. I accept the Lessor's submission that the position is different where, as here, the question of construction relates to whether and in what circumstances a market rent review should take place at all.
Growthpoint Properties Australia Ltd v Australia Pacific Airports (Melbourne) Pty Ltd[3] concerned a question of construction of a rent review clause in a lease. The central question was whether on the proper construction of the lease, the landlord had an obligation to initiate a rent review or a discretion whether to do so. In determining that question of construction, Croft J gave detailed attention to identifying the purpose of the rent review provisions of the lease.[4] His Honour concluded that the purpose of those provisions was to benefit the landlord by safeguarding it against the effects of inflation and to maintain parity with the current rental market over time.[5] In concluding that the rent review clause provided a discretion to the landlord whether to initiate the review, Croft J took into account the commercial purpose of the rent review provisions as a factor in favour of that construction.[6] In the end, it appeared that counsel for the Lessee in this case accepted that a like approach should be taken, although he contended that, in this case, a different conclusion should be drawn in identifying the commercial purpose of the rent review provisions.[7]
[3] Growthpoint Properties Australia Ltd v Australia Pacific Airports (Melbourne) Pty Ltd [2014] VSC 556.
[4] Growthpoint [33] ‑ [42].
[5] Growthpoint [42].
[6] Growthpoint [80].
[7] ts 46.
The proper construction of cl 5 and cl 6
General observations
I begin with some general observations about the scheme of the Lease.
The Lease is for a term of 10 years, with the Lessee being granted a five year option. The Lease provides for 14 rent reviews, each occurring annually on the anniversary of the commencement date. Thirteen of the 14 reviews provide for a fixed increase in rent of 3.75%. There is a single occasion for a market rent review. That occasion is when the Lessee has chosen to exercise its option.
In cl 5.2(b) of the Standard Conditions, the market rent review is coupled with a form of ratchet clause that ensures the rent cannot go down. At the review on the Review Date of 1 November 2013, the New Rent will be the higher of the Current Market Rent as determined under cl 6 and the Old Rent.
The process in cl 6.1 to cl 6.3 may be seen to involve seven stages.
The first stage is the giving by the Lessor of its notice of assessment. The second stage is the Lessee's response to the Lessor's assessment. If the Lessee disagrees with the Lessor's assessment, the Lessee must give notice of its disagreement within 14 days of receiving the Lessor's notice. The third stage is good faith negotiation between the parties. The parties must try in good faith to agree on the New Rent for a period of 10 days. If agreement is reached, that is the end of the market rent review process and the agreed New Rent must be paid. If agreement is not reached, then the process goes to its fourth stage: the appointment of Valuers by each party. Each party may appoint a Valuer and instruct the Valuer to establish the New Rent. This must be done within 10 days of the end of the previous stage. The fifth stage is that the Valuers must each decide on a New Rent, and then try to agree on it. They must do this within 14 days of the end of the fourth stage.
Although not spelled out in cl 6.3, if the Valuers agree on the New Rent within this timeframe, that is the end of the process and the agreed New Rent must be paid.
If only one Valuer is appointed or, if only one Valuer decides the New Rent on time, the New Rent according to that Valuer must be paid.
The seventh paragraph of cl 6.3 provides for the sixth stage. It provides that if both Valuers do not agree on time, and the Lessor and Lessee agree in writing at that time that they want to resolve the dispute in this way, either party can ask the President of the Australian Institute of Valuers and Land Economists Inc (WA Branch) (the President) to appoint another independent Valuer to decide the New Rent.
The seventh stage of the market rent review process is that if the parties have agreed to appoint an independent Valuer, that independent Valuer must decide the New Rent.
This scheme reveals five ways that the New Rent can be agreed or determined under cl 6:
(1)the Lessee may agree with the Lessor's assessment;
(2)the parties may agree on the New Rent after good faith negotiations;
(3)the New Rent may be determined by a Valuer appointed by one of the parties, if that Valuer is the only Valuer appointed or the only Valuer who decides the rent within the stipulated time period;
(4)the parties' Valuers may agree on the New Rent after negotiations; or
(5)the New Rent may be determined by an independent third party Valuer.
Gaps in cl 6.3
Both parties' submissions accept that the provisions in cl 6.3 are less than comprehensive and, consequently, are liable to break down upon the happening of certain possible events. It is convenient to make some general observations about the extent to which the scheme of cl 6.3 is less than comprehensive.
The Lessee submits that if the parties failed to engage in the third stage of the market rent review process under cl 6.3, good faith negotiation, that would be the end of the process.[8] I do not accept that submission. In my view, on a proper construction of cl 6.3, if the parties failed to engage in good faith negotiation then, at the end of the 10 day period provided for that step, stage four would be reached and each party would be permitted to appoint a Valuer.
[8] Defendant's outline of submissions [43].
Clause 6.3 does not deal specifically with the possibilities that, at the fourth stage:
(a)no party appoints a Valuer; or
(b)only one Valuer is appointed, and that Valuer fails to determine the New Rent within the stipulated 14 day period; or
(c)two Valuers are appointed, but neither finishes on time.
At the sixth stage, cl 6.3 does not provide for what is to happen if the parties do not agree to ask the President to appoint an independent Valuer. That feature of cl 6.3 is at the heart of the issues in this case. Clause 6.3 also does not provide for what is to happen if neither party seeks the other party's agreement to asking the President to appoint an independent Valuer, if the President is unwilling or unable to make an appointment, or if the President purported to appoint someone who was not a Valuer, as defined in the Lease.
There is also no express provision covering what would happen if what would otherwise have been a determinative valuation was subsequently set aside, for example on the ground that it was not a valuation in accordance with the terms of the Lease.
Two features of cl 6.3
The proper construction of cl 6.3 must take account of two conspicuous features of the language of its crucial seventh paragraph.
First, cl 6.3 gives each party a choice about whether to agree to the appointment of an independent Valuer by the President. Agreement is a matter of choice; it may or may not happen. That is reinforced by the eighth paragraph of cl 6.3 '[i]f we agree to appoint …' and by the words in brackets in each of cl 6.4(a), cl 6.4(b) and cl 6.4(c) '(if we agree to appoint one)'.
A construction that in substance the Lessee is obliged to agree to ask the President to appoint an independent Valuer would run directly against the language of cl 6.3. Neither an implied obligation to cooperate, nor the express words of cl 26.7, should be construed in a way that is inconsistent with the express terms of the Lease.[9] Similarly, a term cannot be implied in fact if it is inconsistent with the express terms of the Lease.[10]
[9] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [168] (Gummow, Hayne, Heydon & Kiefel JJ); EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [109] (Buss JA, Owen & Newnes JJA agreeing); Heugh v Central Petroleum Ltd [No 5] [2014] WASC 311 [100] (Le Miere J).
[10] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283 (Lord Simon of Glaisdale, Viscount Dilhorne, Lord Keith of Kinkel); Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 347 (Mason J, Stephen & Wilson JJ agreeing), 404 (Brennan J).
The Lessor's case is not that the Lessee is obliged to agree to ask the President to appoint an independent Valuer. Rather, the Lessor's case is that the Lessee must not unreasonably refuse to agree in that respect. I will say more about that distinction later in these reasons.
The Lessor's primary claim involves implying words into cl 6.3. In my view, the implied term contended for by the Lessor is properly seen as involving an implication of fact, rather than an implication of law.[11] One of the requirements for the implication of a term in fact is necessity. A term can be implied in fact only if, among other things, it is necessary to give business efficacy to a contract. The term must also be reasonable, equitable, capable of clear expression and so obvious that it goes without saying.[12]
[11] As to the distinction, see Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 88 ALJR 814 [23] ‑ [25], [28] ‑ [29] (French CJ, Bell & Keane JJ), [56] (Kiefel J), [113] (Gageler J).
[12] Codelfa Constructions (347) (Mason J, Stephen & Wilson JJ agreeing).
The second important feature of the seventh paragraph of cl 6.3 is that it includes the phrase '[i]f you and we agree … that we want to resolve the dispute in this way'. That phrase invites attention to how else the dispute is to be or might be resolved. It appears to involve an assumption that there are other ways to resolve the dispute. However, cl 6.3 is silent in that respect. It does not make any provision for how the dispute as to the New Rent is to be otherwise resolved or how the New Rent is to be otherwise determined.
I will return to this point later in these reasons.
My preferred construction
It is necessary to consider all three competing constructions together, weighing the merits of each. That is what I have done. For ease of exposition, I will first explain why I prefer the Lessor's primary claim of an implied term to the construction advanced by the Lessee. Then I will explain why I prefer the Lessor's primary claim of an implied term to the Lessor's alternative construction.
I find that cl 6.3 includes an implied term that the parties would not unreasonably refuse to agree to ask the President to appoint an independent valuer. In summary, my reasons for that opinion are:
(1)given that under cl 5.2(b) rent cannot go down, I consider that the purpose of the market rent review on 1 November 2013 is solely for the benefit of the Lessor;
(2)the process of this rent review is compulsory;
(3)the Lessee's construction would permit the Lessee to unilaterally bring the market rent review process to an end, by refusing to ask the President to appoint an independent Valuer. On the Lessee's construction, that is the end of the rent review process in cl 6.3, with the result that the Old Rent becomes the New Rent. In my view, that is an uncommercial outcome unlikely to have been objectively intended by the parties;
(4)implication of the term is necessary to give business efficacy to cl 5 and cl 6 of the Lease, and the other requirements for implication of a term are also met.
I deal with these four considerations in turn.
I start with the question of the purpose of the market rent review contemplated by cl 5.2(b)(ii) and cl 6. In my view, given that under cl 5.2(b) the New Rent is to be the higher of the Current Market Rent and the Old Rent, the objective purpose of the market rent review is to benefit the Lessor by ensuring the New Rent is in line with the market, so long as the Current Market Rent is not less than the Old Rent as at 31 October 2013. In Growthpoint,[13] Croft J said that where there is a market rent review provision coupled with a ratchet provision, an obvious conclusion as to the purpose of the rent review provision is that it enables the rent to keep pace with inflation and in line with the market to the benefit of the landlord. I agree. There is no real potential benefit for the Lessee in a market review process in the context of a rent that cannot go down.
[13] Growthpoint [33], [42].
The Lessee submits that the purpose of the rent review clause is to benefit both parties, not solely the Lessor. In support of that submission, the Lessee relies on the speech of Lord Salmon in United Scientific Holdings Ltd v Burnley Borough Council,[14] quoted in the passage in Programme Holdings set out earlier in these reasons.[15] At a general level, it may be accepted that inclusion in a lease of a rent review provision is for the benefit of the Lessee, in that it is part of what enables the Lessee to obtain a long‑term lease from the Lessor. However, in my view, for the purposes of the question of construction in this case, attention should be directed to the purpose of the market rent review contemplated by cl 5.2(b)(ii) and cl 6 of the Lease. In my view, the purpose of that review is to benefit the Lessor by bringing the rent into line with the market, so long as the Current Market Rent exceeds the Old Rent.
[14] United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, 948.
[15] Programme Holdings [48].
The Lessee further submits that the market rent review should not be seen as solely for the benefit of the Lessor, because cl 6.1(c) of the Standard Conditions provides that the Lessee can require the Lessor to give a notice of assessment.[16] Thus, the Lessee submits, the right to require a market rent review is bilateral.[17]
[16] Defendant's outline of submissions [53].
[17] Defendant's outline of submissions [58].
I do not accept these submissions. Under cl 6.1(a)(ii), the Lessor must give an assessment of the New Rent within three months before or after the Review Date. If the Lessor has not given its notice of assessment before the Review Date, cl 6.1(c) allows the Lessee to give the Lessor notice requiring it to assess the New Rent within 28 days after the Review Date. Thus, the Lessee's rights under cl 6.1(c) enable it to bring forward the last date for the issue of the assessment notice. Nothing in cl 6.1(c)(ii) entitles the Lessee to require a market rent review. If the Lessor gives notice of assessment that the New Rent will be the same as the Old Rent, the Lessee will inevitably agree with that assessment, given that under cl 5.2(b) the rent cannot go down, and the New Rent will become the Old Rent. In those circumstances, there is no room for, and no provision permitting, the Lessee to require a market assessment.
I accept the Lessor's contention that the rent review process is, generally speaking, compulsory. Under cl 5.2(a) and (b), the Lessor will review the rent on each Review Date. Clause 6.1(a) provides that the Lessor must on each Review Date review the rent based on cl 5.2(a) or cl 5.2(b) and must give notice of the assessment in the stipulated time. Clause 6.2(a) provides that if the Lessee disagrees with the Lessor's assessment, both parties must follow the procedure in cl 6.3. Clause 6.5(a) provides that the Lessee must pay the Old Rent until the New Rent is agreed or determined in the way set out in cl 6. There is no sufficient reason to depart from the ordinary meaning of this imperative language.
The Lessee submits, in effect, that cl 6.2 and cl 6.3 permit the parties to choose to bring the market rent review process to an end, so that cl 6.3 has an 'essentially elective' character.[18] The first example of this character given by the Lessee is that if the parties fail to try in good faith to agree on the New Rent, the process would come to an end by reason of cl 6.2. I have already indicated that I do not accept that submission. In my view, on a proper construction of the Lease, the effect of cl 6.2 is that if the parties fail to negotiate in good faith to try to agree on the New Rent, the fourth stage of the market rent review process would be reached and each party would be entitled to appoint a Valuer. The Lessee gives the further illustration that if neither party appoints a Valuer, then in the absence of an agreement on the New Rent, the process comes to an end. That scenario does not involve any party having a unilateral right to elect whether to bring the process to an end. Moreover, if a party chose not to appoint a Valuer, that party would run the risk that the other party would appoint a Valuer, whose valuation would then be determinative under the sixth paragraph of cl 6.3.
[18] Defendant's outline of submissions [42] ‑ [43].
Further, the Lessee submits that if the Lessor assesses the Current Market Rent as being less than the Old Rent, then the Lessor has no obligation to give notice of its assessment, and the process under cl 6 is not engaged.[19] I do not accept that submission. In my opinion, it does not properly reflect the scheme of cl 5 and cl 6 of the Lease. Under those clauses, the first step of the market rent review process is for the Lessor to issue an assessment of the New Rent. If the Lessor assesses Current Market Rent to be less than the Old Rent, then the Lessor would determine the New Rent to be the same as the Old Rent. The Lessor would then be obliged to give notice of its assessment to that effect to the Lessee. Thus, an assessment by the Lessor that the Current Market Rent is less than the Old Rent does not detract from the mandatory character of the Lessor's obligation to give notice of its assessment of the New Rent.
[19] Defendant's outline of submissions [50] ‑ [52].
In my view, the Lessee's construction does not involve giving the Lease a 'businesslike interpretation on the assumption that the parties … intended to produce a commercial result'.[20] The scheme of the Lease as I have summarised it means that, in entering the Lease, the parties would have contemplated as follows. The market rent review process is capable of benefiting only the Lessor; the rent can go up but it cannot go down. Thus, the Lessee has no commercial incentive to facilitate the process of determination of the Current Market Rent. The parties would have contemplated that the individual Valuers appointed by them in the fourth stage of the process may both consider that Current Market Rent exceeds the Old Rent, but disagree as to the extent. The consequence of the Lessee's construction is:
(1)the Lessee has an unfettered right to choose not to agree to ask the President to appoint an independent Valuer;
(2)there being no other mechanism in cl 6.3 for the determination of the New Rent, the decision of the Lessee not to agree to that course would bring the market rent review process to an end, with the result that the New Rent would be equal to the Old Rent.
[20] Electricity Generation Corporation v Woodside Energy Ltd [35] (French CJ, Hayne, Crennan & Kiefel JJ).
On that construction, the evident purpose of the single market rent review, arising on the exercise by the Lessee of its option for a further term, would be liable to be defeated by the unfettered choice of the Lessee, in whose interest it lies for the process to fail, so that the New Rent will equal the Old Rent. The only limit on the ability of the Lessee to prevent any determination of the Current Market Rent, thereby ensuring that the rent does not increase, is the prospect of the individual Valuers appointed by each party agreeing the rent at the fifth stage of the process. To my mind, that construction produces an uncommercial result that is very unlikely to have been objectively intended by the parties.
In these circumstances, it seems to me that in order to give business efficacy to the contractual scheme in cl 5 and cl 6 for the market rent review on 1 November 2013, it is necessary to imply in the Lease a term that the parties would not unreasonably refuse to agree to ask the President to appoint an independent Valuer under cl 6.3. Further, I am satisfied that the other requirements for implication of a term are met. In my opinion, the term is reasonable, equitable and so obvious that it goes without saying. The term is also capable of clear expression and consistent with the express terms of the Lease.
Other submissions of the Lessee
The Lessee supports its construction by suggesting that it reflects a bilateral scheme. It submits that:
(1)the effect of the contractual scheme in cl 5 and cl 6 is that both parties have an option to elect to have the Old Rent continue as the New Rent;
(2)the Lessor has such an election in that it can assess the New Rent in that way under cl 5.2(b); and
(3)the Lessee has such an option in that it can decide under cl 6.3 not to agree to resolve the dispute about the New Rent by asking the President to appoint an independent Valuer.[21]
[21] ts 35 ‑ 39.
I accept the second proposition, but not the first or the third. The Lessor's ability to assess the New Rent to be the same as the Old Rent reflects the effect of cl 5.2(b). That clause is for the unilateral benefit of the Lessor. It does not provide any support for a construction involving a bilateral freedom to elect that the New Rent be the Old Rent. The market rent review process is intended to benefit the Lessor by ensuring that if and to the extent that Current Market Rent exceeds the Old Rent, the New Rent will be increased to reflect the Current Market Rent. The benefit to the Lessor of the market rent review process would be defeated if the Lessee's construction were adopted. The fact that the Lessor may assess the New Rent to be the same as the Old Rent (if it considers Current Market Rent does not exceed the Old Rent) does not make that any the less so.
The Lessee also submits that:
(1)cl 6.3 provides for the appointment by the President of an independent Valuer only if the parties agree to resolve their dispute in that way, something that may or may not happen;
(2)the language of cl 6.3 expressly contemplates the parties resolving their dispute as to the New Rent in a different way;
(3)cl 6.3 does not provide for any different way;
(4)in those circumstances, the limits of the clause should be taken to be intended; and
(5)consequently, all that has happened in this case is that the market rent review process has reached one of its intended limits, bringing it to an end.[22]
[22] ts 37, 39, 40 ‑ 41.
I accept the first three propositions, but not the ultimate conclusion invited by the Lessee. It is true that cl 6.3 does not specify any other way of resolving the dispute as to the New Rent. The language of the clause may reflect a contemplation that the parties could, at the sixth stage, propose a different means of resolving the dispute. The presence of such a proposal could be relevant to whether there are reasonable grounds for declining to agree to ask the President to appoint an independent Valuer.
In any event, for the reasons already given, I do not accept that cl 5 and cl 6 reveal an objective intention that the Lessee has an unfettered right to bring the market rent review process to an unsuccessful conclusion, with the result that the Old Rent becomes the New Rent.
The Lessee emphasises that cl 6 expressly contemplates that the parties may not agree to ask the President to appoint an independent valuer. I accept that this is so. However, I do not accept that the intention revealed by cl 5 and cl 6 is that the Lessee has an unfettered freedom to decline to agree without any grounds for doing so, apart from the desire to bring the market rent review process to an end without the New Rent having been agreed or otherwise determined.
Contrary to the Lessee's submissions,[23] the implied term contended for by the Lessor is not tantamount to a term requiring the Lessee to agree to ask the President to appoint an independent Valuer. The implied term leaves the Lessee free to decline to agree on reasonable grounds. It is not necessary to attempt a comprehensive analysis of what would and would not amount to an unreasonable refusal to agree. Any plausible ground for concern that the appointment by the President would not result in a truly independent assessment of the Current Market Rent would be a reasonable ground for declining to agree. Any alternative means of determining the Current Market Rent proposed by either party would also be relevant to whether refusal was reasonable. The desire of the Lessee to bring the market rent review process to an end without producing any result, by avoiding the determination of the New Rent by the decision of an independent Valuer appointed by the President, would not be reasonable grounds for declining to agree.
[23] Defendant's outline of submissions [1], [2], [3], [8], [55], [62].
For these reasons, I prefer the implied term contended for by the Lessor to the construction advanced by the Lessee.
The Lessor's alternative construction
I turn to the Lessor's alternative construction. The Lessor's alternative construction is that:
(1)on a proper construction of cl 5 and cl 6, their purpose is for the Current Market Rent to be agreed by the parties or otherwise determined, and the specific machinery in cl 6.3 is subsidiary to that purpose; and
(2)in such circumstances, where, as here, the specific machinery provisions fail, the court can determine the Current Market Rent.[24]
[24] Plaintiff's outline of submissions [72].
The Lessor relies on the speech of Lord Fraser in Sudbrook Trading Estate Ltd v Eggleton[25] as authority for the proposition that where on a proper construction the main purpose of a contract is for sale and purchase of a property at a fair and reasonable value, or for lease at a market rent, and where the specific machinery provisions in the contract are subsidiary to that purpose and non‑essential, then the court can determine the price or rent when the machinery breaks down. What Lord Fraser said in this respect has been followed or referred to without apparent disapproval in several cases in Australia.[26]
[25] Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, 483 ‑ 484.
[26] Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, 614 ‑ 616 (Brennan J); Green v Wilden Pty Ltd [2005] WASC 83 [924] ‑ [925], [938], [942] (Hasluck J); Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd (No 2) [2008] VSC 478 [14] (Hargrave J); Devpro v Seamark Pty Ltd [2007] QCA 241 [44] ‑ [45] (Jerrard JA, White & Atkinson JJ agreeing); Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9) [2012] NSWSC 984 [109] ‑ [113] (Black J); cfVercorp Pty Ltd v ACN 096 278 483 Pty Ltd (No 2) [2010] QSC 405 [55] (McMurdo J).
In support of its alternative construction, the Lessor points to the following features of the scheme of cl 5 and cl 6:
(1)the process of rent review is compulsory;
(2)the rent review to the higher of the Current Market Rent and the Old Rent is for the sole benefit of the Lessor;
(3)the process in cl 6.3 has the potential to break down in a number of different ways;
(4)the Current Market Rent is something that can be determined by objective criteria; and
(5)given that any licensed valuer can be appointed, there is nothing in the Lease to suggest that any specific person is intended to be the sole means of determining the Current Market Rent.[27]
[27] Plaintiff's outline of submissions [77] - [83].
I have already made findings accepting the first three features. I also agree in relation to the fourth and fifth. I prefer the Lessor's alternative construction to the construction advanced by the Lessee. However, for the reasons that follow, I adopt the implied term advanced by the Lessor in preference to its alternative construction.
Although the Lessor pleaded and argued its two claims in the alternative, the implied term and the Lessor's alternative construction are not necessarily mutually exclusive. But, if the alternative construction is adopted, the need for the implied term is less compelling.
In support of the Lessor's alternative construction, it might be said that cl 6.3 reveals an apparent assumption that alternate means of resolving the dispute about the New Rent exist. This might be taken as an indication that the parties intended that, if the specific provisions in cl 6.3 broke down, the court could resolve the dispute by determining the Current Market Rent.
However, I am not persuaded that cl 5 and cl 6 should be construed in this fashion. Two features of the contractual scheme seem to me to militate against such a construction. First, cl 6.3 provides a series of short and strict time limits for the taking of the various steps towards determining the New Rent. A construction that suggests the parties intended that, if none of the specific provisions bore fruit, the Current Market Rent could be determined by a court following litigation between the parties involving competing expert evidence does not sit easily with the expeditious process articulated in cl 6.3.
Secondly, and in any event, cl 5.2 does not say simply that the New Rent will be the highest of the Old Rent and the Current Market Rent. It provides that the New Rent will be the highest of the Old Rent and 'the Current Market Rent, as determined under clause 6'. Thus, the substantive provision defining the New Rent specifically directs attention to cl 6 as the means of determination of the Current Market Rent. I am not persuaded that cl 5 and cl 6 can be construed in such a way that determination by a court of the Current Market Rent can be characterised as determination of the Current Market Rent 'under cl 6'.
In my view, these two features of the contractual scheme in cl 5 and cl 6 reveal an objective intention that Current Market Rent would be determined in the time and manner stipulated in cl 6. Thus the machinery in cl 6 cannot be characterised as subsidiary.
As I have observed, cl 6.3 is less than exhaustive in several respects. Refusal by the Lessee to agree to ask the President to appoint an independent valuer is not the only way in which the machinery in cl 6.3 can break down. The Lessor's alternative construction would deal with all of the ways in which the machinery provisions of cl 6 might break down, whereas the Lessee's implied term fills only a part of one of several apparent gaps. That might be thought to be an advantage of the alternative construction over the implied term. The presence of gaps may also be an indication that the machinery in cl 6.3 is merely a means of ascertaining what is capable of being ascertained objectively as the Current Market Rent.[28] Moreover, there may be a question as to whether, in those circumstances, implication of a term that the parties may not unreasonably refuse to agree to request the President to appoint an independent Valuer is justified.
[28] Booker Industries (616) (Brennan J).
In my view, refusal by the Lessee to agree to ask the President to appoint an independent Valuer without any reasonable grounds raises unique considerations that justify the implication of a term to preclude it. The other gaps in cl 6.3 do not create a unilateral right on the part of the Lessee to defeat the market rent review process. For example, if no party appoints a Valuer, and the process thereby comes to an end, each party is responsible for its own omission to appoint a Valuer. None of the other potential breakdowns in the machinery provisions of cl 6.3 can be brought about by the Lessee acting alone.
A freedom on the part of the Lessee to refuse to ask the President to appoint a Valuer without any reasonable grounds for doing so would permit the Lessee to defeat the market rent review process. As I have said, that is a wholly uncommercial outcome that is unlikely to have been intended by the parties. Avoidance of that outcome is necessary to give business efficacy to the provisions of cl 5 and cl 6, sustaining the implication of the term relied on by the Lessor.
Relief
At the hearing on 23 February 2015, the Lessor handed up an amended minute of proposed orders. The orders sought in that minute differ materially from the relief sought in the statement of claim.
The Lessee's written submissions before trial advanced reasons for not making, or express concerns giving rise to doubts about making, the orders claimed in the statement of claim. The Lessor's amended minute of orders responded to those concerns. At the hearing on 23 February 2015, counsel for the Lessee did not make any submissions in relation to the relief proposed in the Lessor's amended minute.
The Lessor seeks orders that
(1)the Lessee:
(a)cause to be signed the letter dated 12 December 2013 annexed as tab H to the statement of agreed facts dated 12 January 2015;
(b)do all things as are necessary to enable the President of the Australian Property Institute (WA Division) to appoint an independent Valuer to decide the New Rent for the Review Date of 1 November 2013 for the purposes of the Lease, in accordance with the provisions of the Lease; and
(2)the Lessee pay the Lessor the New Rent with an adjustment (if any) for the period commencing 1 November 2013.
For the reasons that follow, I am satisfied that an order in terms of par 1 should be made.
The Lessor pleaded that the Lessee has not communicated and has never had any reasonable ground or reason for its refusal to agree to ask the President to appoint an independent Valuer.[29] In response, the Lessee denied that it did not have any reasonable grounds.[30] However, when particulars of that allegation were sought, the Lessee's response was simply that it had no obligation not to unreasonably refuse to agree to ask the President to appoint a Valuer.[31] The upshot is that the Lessee did not assert any grounds for its refusal other than that the Lease permitted it to not agree if it chose to do so.[32]
[29] Statement of claim [29].
[30] Defence [29.2].
[31] Defendant's answers to particulars 15 May 2014 [1].
[32] See also ts 21 ‑ 23.
In considering whether consent, or agreement, has been withheld unreasonably the court only considers the pleaded reasons for the withholding of consent or agreement.[33]
[33] EDWF Holdings [118] ‑ [135] (Buss JA, Owen & Newnes JJA agreeing); St Barbara Ltd v Hockley (No 2) [2013] WASC 358 [146].
In circumstances where the Lessee did not plead or otherwise advance any reasons or grounds for its withholding of agreement, other than its assertion that the Lease did not prevent it from unreasonably refusing to agree, the Lessor has made out its case that the Lessee had no reasonable grounds for withholding agreement, and that its refusal to agree was unreasonable.
Consequently, orders should be made in terms of par 1 of the Lessor's proposed orders.
I am not presently persuaded that an order in terms of par 2 should be made, essentially because such an order seems to me to be premature. I am inclined to think that it would be appropriate to make a declaration to the following effect:
The amount decided by the independent Valuer (as defined in the Lease) to be the New Rent for the Review Date of 1 November 2013 will be the New Rent for that Review Date.
However, I will hear further from the parties as to the appropriate relief in light of these reasons. I will also hear from the parties as to costs.
Conclusion
For the reasons that I have given, I am satisfied that the Lease contains an implied term that the parties would not unreasonably decline to agree to the appointment by the President of an independent valuer for the purposes of cl 6.3. Consequently, I would make orders along the lines sought by the Lessor.
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