Continuing problems with specialist retail valuers’ ‘no liability’ clauses

March 30, 2015

Property / leasing

A continuing source of tension, particularly in the retail tenancies jurisdiction, is that valuers appointed to determine the market rent routinely refuse to accept an appointment unless the parties sign a particularly broad form of release, including releasing the valuer from a claim in negligence. The standard form of release and indemnity is taken from the VSBC guidelines on current market rent reviews under the RLA 2003, which states that:

 RELEASE

The landlord and the tenant jointly and severally agree to release and forever discharge the valuer from all claims, suits, actions, damages, demands, costs and expenses of every description whatsoever (whether at common law, in equity or under any statute and including a claim in negligence) and however so arising which the landlord and tenant (whether collectively, or individually) may have had, may now have or but for this clause may have at any time against the valuer for or in respect of or arising out of or in connection with or in consequence of the appointment of the valuer as a determining valuer in respect of a rent review for the property or arising out of or in connection with that determination.

INDEMNITY

The landlord and the tenant jointly and severally indemnify and keep indemnified the valuer against any and all liabilities, claims, actions, suits, proceedings, demands, losses, damages, costs, fees, expenses incurred for or in respect of or arising out of or in connection with or in consequence of the appointment of the valuer as a determining valuer in respect of a rent review for the Property or arising out of or in connection with the determination of current market rent. Without limiting and in addition to the clause above, the landlord and the tenant jointly and severally agree to indemnify the valuer from:

(a) any costs incurred for legal advice reasonably obtained by the valuer in connection with or in furtherance of the determination of the current market rent;

(b) any common law or statutory liability that relates to that determination, including liability for negligence;

(c) all liability for legal costs and expenses incurred on a solicitor and/or own client basis for any proceedings the valuer may be obliged to defend or required to appear in respect of or arising out of or in connection with or in consequence of the appointment of the valuer as a determining valuer in respect of a rent review for the leased property or arising out of or in connection with that determination.

Valuers include these clauses because the grounds for setting aside a determination are extremely narrow (see Legal & General Life of Aust Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314).  This means that the valuer him- or herself is the next target for the disgruntled party in a controversial determination. The Court of Appeal considered whether a release and indemnity was appropriate when engaging an expert under a dispute resolution clause in 1144 Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd [2009] VSCA 308. In that case, Dr Croft SC (as he was then), Michael Redfern and others had each refused to take instructions to act as expert in the determination if a release was not signed.  The Court of Appeal found that there was an implied term that the landlord and tenant would act reasonably to give effect to the agreement, that the expert’s immunity was reasonable and that the parties must sign it. Although the context is slightly different, the principle behind that decision is applicable to the appointment of a valuer and parties can probably seek an order for specific performance if the other side refuses to sign a release to the valuer determining the rent. Warranties implied by the ACL add a further complication.  Provided the valuer charges less than $40,000, there seems to be an implied warranty that the services will be provided with due skill and care (see s 60).  This warranty cannot be excluded by contract (see s 64).  I am not aware of any decisions at VCAT or in a Court considering this as a cause of action against a valuer. As things stand, landlords and tenants have no real alternative to signing a valuer’s terms of engagement, but practitioners should advise their clients of a possible claim against the valuer under the ACL implied warranties if the determination is defective.

Practitioners should also be aware of s 64A(2) of the ACL. The section says this:

(2)  A term of a contract for the supply by a person of services other than services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person‘s liability for failure to comply with a guarantee to:

(a) the supplying of the services again; or

(b) the payment of the cost of having the services supplied again.

The standard clause does not limit liability in the way prescribed by s 64A(2) and I have not yet seen a release and indemnity from a valuer that does. Also, s 64A(3) and (4) says that:

(3) This section does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the person who supplied the goods or services to rely on that term of the contract.

(4) In determining for the purposes of subsection (3) whether or not reliance on a term of a contract is fair or reasonable, a court is to have regard to all the circumstances of the case, and in particular to the following matters:

(a) the strength of the bargaining positions of the person who supplied the goods or services and the person to whom the goods or services were supplied (the buyer) relative to each other, taking into account, among other things, the availability of equivalent goods or services and suitable alternative sources of supply; …

It seems to me that there would be a good argument that such an exclusion is not fair and reasonable in circumstances where:

(a) the parties do not chose the valuer;

(b) the parties have no ability to negotiate the valuer’s terms;  and

(c) there is limited scope for challenging the determination.

Practitioners acting for a valuer and advising them on an exclusion of liability clause, consider advising them to use a clause that limits liability in the way suggested by s 64A(2) of the ACL possibly in the alternative to the standard form release and indemnity.  It does not provide complete protection to the valuer, but is the best the valuer could expect in the circumstances.

We would like to extend our thanks to Piquet Kruzas at South East Lawyers for alerting us to s 64A. 

Sam Hopper and Lisa Rennie

About Sam Hopper

Sam is a property and insolvency barrister.

View all posts by Sam Hopper

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