VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
civil DIVISION
building and property LIST	
vcat reference No. BP1000/2020	
CATCHWORDS	
Application to vary Tribunal order under s 120A (4) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic),  Expert valuer appointed by the Australian Property Institute and the Victorian Small Business Commission, respondent refused to sign retainer and pay share of fees, mandatory injunction, valuer became unavailable after accepting appointment, new valuer appointed by Victorian Small Business Commission, respondent refused to sign retainer and pay share of fees, application to vary order to substitute valuer, Retail Leases Act 2003 (Vic) s 92(2)(a), indemnity costs. 	

APPLICANT	520 Bourke Street Pty Ltd (ACN: 609 504 618)	
RESPONDENT	El Osman Ibrahim trading as Ab's Barber Shop	
BEFORE	L. Forde, Senior Member	
DATE OF WRITTEN REASONS	6 November 2020	
CITATION	520 Bourke Street Pty Ltd v Ibrahim (Building and Property) [2020] VCAT 1241	

Reasons
Application on 6 August 2020 
1	On 6 August 2020, I made orders requiring the respondent to do all things necessary to enable Mr Milton Cations, the expert valuer appointed by the Australian Property Institute and the Victorian Small Business Commission (‘SBC’) to undertake a market rent review of the premises, including signing Mr Cations' terms and conditions and paying 50% of Mr Cations' fees. Subsequently, the applicant requested that the Orders of 6 August 2020 be amended to replace Mr Milton Cations with Mr David Clement. Mr Cations became unavailable after initially accepting the appointment. 
2	The respondent opposed the substitution. He submitted that the lease is not subject to a market rent review on the exercise of the option because he agreed to the starting rent for the new term. He says no valuer need be appointed.
3	On 24 September 2020, I made orders substituting Mr David Clement for Mr Cations.
4	The respondent has requested written reasons for the Orders made on 24 September 2020. Due to a technical error the audio recording of the hearing on 24 September 2020 is unavailable. Accordingly, these reasons are based on notes and my recollection of the hearing. To understand the Orders made on 24 September 2020 it is necessary to understand the reasons for the Orders made on 6 August 2020. 
Background 
5	From 15 April 2014, the respondent leased part of the ground floor of premises on Bourke Street, Melbourne to operate a barber shop. The applicant is the registered owner of the premises. The lease is a retail lease under the Retail Leases Act 2003 (Vic).
6	The lease commenced on 1 May 2014 for a term of five years ending on 30 April 2019 with an option for one further term of five years. Clause 2.2 of the lease (‘New Term’) provided: 
(a)	If the Tenant wanted to lease the premises for the New Term, the Tenant must tell the Landlord in writing at least three months but not more than six months before the expiry date of 30 April 2019; 
(b)	If the Tenant gives the Landlord notice in accordance with clause 2.2(a) the Landlord will give the Tenant:
i.	a new lease of the Premises for the period of the New Term which will commence on the next day after the Expiry Date (being 1 May 2019); or
ii.	an extension of the Term of the Lease to incorporate the New term.
(c)	The new lease for the New Term or extension of the Term of the Lease will be on the same terms and conditions as this Lease but:
i.	the number of remaining New Terms will be reduced by one; and
ii.	the rent for the New Term will be determined in accordance with the lease;
…
(g)	Clauses 2.2(a) and 2.2(b) will be subject to the Retail Leases Act 2003 if that Act applies.
7	It is not in dispute that the respondent exercised the option. In paragraph 5 of his affidavit dated 31 July 2020, the respondent says on around 21 January 2019 he exercised his option to renew the lease ‘on the same terms and conditions’. 
8	The lease contained a market rent review clause.
9	It is also not in dispute that on 25 February 2019, the applicant’s property manager Mr Brennan, emailed the respondent two lease proposals. One proposal was to relocate the business to Shop G.02 and the other proposal was for his current premises (Shop G.04) with rent fixed at $116,266 with annual reviews of 5%.
10	Page one of each proposal was headed ‘Indicative Offer for Lease’. The last page contained the words: ‘No legal rights or obligations will be created until such time as the lease and ancillary documents are executed by both parties.’ One of the specified conditions was that the offer was subject to formal approval by the landlord and execution of the lease and any ancillary documents in the landlord’s approved form. The final page concluded with a signing provision requiring confirmation of the terms by signing and returning the document.
11	There was no evidence that the proposal had been signed and returned.
12	By email of 4 March 2019, the respondent made a counteroffer to Mr Brennan which read: ‘Please find attached lease proposal for Shop G04’. Attached was the lease proposal dated 21 February 2019 with various amendments marked in red type (‘amended proposal’).
13	By email on 7 March 2019, Mr Brennan responded ‘I think you may have misunderstood. The proposal for shop G04 cannot be amended, those are the terms which are agreed in your lease if you exercise your option which you have done’.
14	On 15 March 2019, the respondent replied to Mr Brennan:
you are correct, many of the key commercials have been agreed under the existing lease, although please note the rent is to be reviewed at market on the commencement of the new lease term. Can you please provide evidence of the market review you have suggested? We will also not be proceeding with the neighbouring tenancy.
15	By email dated 15 April 2019 at 3.40 pm Mr Brennan provided valuation evidence of ground floor shops in the area.
16	In response Mr Lidonnici on behalf of the respondent wrote ‘..we do not entirely agree with the comparable listed below…we are happy to accept the $116K per annum provided in the HoA dated 21 February 2019’.
17	Later that day, by email at 5.07 pm Mr Brennan responded to the respondent:
The HOA was only to highlight the difference in value for our offer next door. This did not reflect a market rate and this is not our position for the current premises. If you believe a valuation is high, please provide me with a counteroffer.
18	By email of 25 September 2019 Mr Brennan sent the respondent a valuation obtained from Gary Longden.
19	By email of 14 October 2019 to Mr Brennan, the respondent’s solicitors noted that the respondent received a rental assessment increasing the annual rent by $73,270.72 and objected to the rental increase in accordance with clause 3 of appendix 4 of the lease. They proposed Mr John Dowling undertake a valuation of the premises to determine the annual rent payable but requesting a meeting before that engagement to discuss any agreement having been reached as to the starting rent for the new term.
20	On 25 October 2019, the respondent’s solicitors emailed Mr Brennan stating ‘we have received instructions from our client that he wishes to accept the current offer for the premises 520 Burke Street Melbourne. Please see attached for your attention’. The amended proposal was attached and had the handwritten words ‘counteroffer made by Abe’ written across the first page. 
21	The parties had some discussion about the market rent and were unable to agree on the rent for the new lease term.
22	The respondent’s position is that an agreement for lease was entered into by the parties based on the 21 February 2019 proposal which was accepted by the respondent on 15 April 2019. He submits that the proposal clearly sets out the rent for the renewed period and as such it is unnecessary for a specialist valuer to be appointed to determine the rent.
23	No explanation or submission was made by the respondent to explain:
a	Why he was not bound by the terms in the proposal stating no legal rights were created until the lease documents were signed by the parties or that the proposal was subject to formal approval by the landlord;
b	The effect of his counteroffer on 4 March 2019 on the original proposal if that proposal was an offer;
c	His acceptance on 15 March 2019 that the rent was subject to market review; and
d	Why his lawyers in their email of 14 October 2019 adopted the rent review mechanism in the lease.
24	Counsel for the applicant made submissions summarising the relevant legal principles, extracts of which I have set out in the following five paragraphs.
25	 In 1144 Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd [2009] VSCA 308, the Court of Appeal confirmed that where a party to a dispute, in which an independent expert has been appointed, refuses to their terms and conditions, an appropriate course of action is to seek a mandatory injunction, compelling the obstructing party to do so. 
26	It is well established that for an injunction to be granted: 
a	there must be a prima facie case; and
b	the balance of convenience must favour the granting of the injunction. 
27	The concept of ‘balance of convenience’ has been the subject of extensive treatment by the Courts. Overall, the Tribunal, must weigh, in all of the circumstances of the case, the competing implications of granting and not granting the injunction and determining what is just. In short, the inconvenience or injury which the applicant would be likely to suffer if the injunction were refused must outweigh the inconvenience or injury which the defendant would suffer if the injunction were granted.
28	In Bradto Pty Ltd v State of Victoria [2006] VSCA 89, the Court stated:
whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.
29	The issue in dispute is whether after the exercise of the option in the lease, the parties agreed on a starting rent for the new term based on the respondent’s acceptance of the proposal dated 21 February 2019 thereby making a market rent review unnecessary.
30	The applicant must establish a sufficient prospect of success to warrant the preservation of the status quo in all the circumstances. 
31	I find that the applicant has established a strong prospect of establishing that no agreement was reached as to the starting rent for the new term because:
a	the respondent acknowledged that he exercised the option to renew ‘on the same terms and conditions’;
b	the lease contains a market rent review clause;
c	the lease proposal emailed to the respondent on 21 February 2019 was headed ‘Indicative Offer for Lease’. The last page included the words: ‘No legal rights or obligations will be created until such time as the lease and ancillary documents are executed by both parties.’ One of the specified conditions was that the offer was subject to formal approval by the landlord and execution of the lease and any ancillary documents in the landlord’s approved form. The final page concluded with a signing provision requiring confirmation of the terms by signing and returning the document. No signed proposal was put into evidence before me; and
d	the respondent’s conduct on many occasions as set out in paragraphs 12, 14, 19 and 20 of these reasons was not consistent with the position adopted by the respondent today.
32	In the present case, the applicant seeks to compel the respondent to do what was agreed between the parties under the lease, which is to have the rent determined by an independent valuer to provide a market valuation as per the market review provisions set out in Appendix 4. 
33	As submitted by the applicant, the respondent exercised his option under the lease for a further term of five years. An application was made to the SBC to appoint an independent valuer to provide a market valuation. The appointment was subsequently made by the SBC. However, the respondent will not sign the terms of appointment, nor pay his share of the valuer’s professional fees and, until the terms of appointment are signed, the valuer is unable to proceed with his Rental Assessment. There is no evidence before the Tribunal that the terms of appointment, nor the fees are not reasonable. A failure, or refusal by the respondent to sign the terms of appointment has caused a stalemate; in that it is preventing the rent for the premises for year 1 of the new lease being determined in accordance with the lease.
34	 The applicant is unable to proceed with the rental review for the period dating back to 1 May 2019.
35	In considering the balance of convenience, the strength of a party’s case is relevant. On the evidence before me I found that the applicant had a strong case. The status quo is that the lease contains a market rent review. The balance of convenience favours the applicant.
36	For these reasons a mandatory injunction was ordered on 6 August 2020. Since the order was made Mr Cation’s circumstances changed.
37	It is not in dispute that:
a	on or around 7 August 2020, Mr Cations advised the parties that he was unable to undertake the market rent determination due to a newly arisen conflict of interest;
b	on 19 August 2020, the SBC emailed the parties informing them of the appointment of Mr David Clement as the Specialist Retail Valuer; 
c	the respondent refused to accepted Mr Clement’s terms and conditions and pay his invoice;
d	on 8 September 2020, Lander & Rogers wrote to Zouki Lawyers requesting that the respondent confirm David Clement's engagement otherwise an application would be made to the Tribunal to amend the Order of 6 August 2020 accordingly; and
e	no response was received to this email by 11 September 2020.
38	The underlying circumstances had not changed. Accordingly, on 24 September 2020 I made the following orders:
1.	Paragraph 1 of the Orders of 6 August 2020 be varied to read “By 5:00 pm on 1 October 2020, the respondent must do all things necessary to enable Mr David Clement, the expert valuer appointed by the Australian Property Institute and the Small Business Commission in accordance with the lease and s 37 of the Retail Leases Act 2003 (Vic) to undertake a market rent review of the premises, known as shop G.04, 520 Bourke Street, Melbourne Victoria including but not limited to:
(a)	signing and returning the terms and conditions provided by Mr Clement on 25 August 2020; and
(b)	paying his 50% share of Mr Clement’s fees.
2.	The respondent pay the applicant’s costs of this application to substitute Mr Clement for Mr Cation on an indemnity basis.
39	The applicant sought an order for costs on an indemnity bases against the respondent pursuant to s 92(2)(a) of the Retail Leases Act 2003 (Vic). That provision provides that costs may be ordered where a party conducts litigation in a vexatious manner that unnecessarily disadvantages the other party. It is a departure from the provision in s 92(1) that each party to a proceeding is to bear its own costs.
40	By email of 8 September 2020 from the applicant’s solicitors to the respondent’s solicitors, the respondent was put on notice that an indemnity costs application would be made if the applicant was required to proceed with the application. 
41	In circumstances were orders were made on 6 August 2020 to appoint a valuer and the only matter that changed was the appointment of a new valuer by the SBC, it was unreasonable for the respondent to refuse to accept the substitution in all the circumstances. The respondent did not appeal the decision of 6 August 2020 and the background facts had not changed at all. 
42	The respondent’s refusal to agree to the substitution of the valuer was accordingly vexatious conduct that forced the applicant to apply to the Tribunal for further orders. It caused a loss of time to the Tribunal and to the applicant in complete disregard of the Orders made on 6 August 2020. The situation is exceptional and justified the awarding of costs of the application heard on 24 September 2020 on an indemnity basis. 

L. Forde
Senior Member