Serene Hotels Pty Ltd v Epping Hotels Pty Ltd appeal dismissed

The Court of Appeal today dismissed an appeal from Croft J’s decision in Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2015] VSC 104.

The decision at first instance and the appeal before Croft J are discussed here and here.

The first decision from VCAT held that the use of the profits method to determine rent during a rent review was prohibited by s 37(2) of the RLA 2003.

During the appeal before Croft J and in the Court of Appeal, the tenant argued that the profits method was not prohibited by the RLA 2003, but that s 37(2) of that Act required the specialist retail valuer to adjust the figures that he considered to account for the costs of acquiring gaming machines and gaming entitlements.

Both Croft J and the Court of Appeal rejected those arguments, finding that the way in which the specialist retail valuer used the profits method was not prohibited by s 37(2) of the RLA 2003.

This decision is significant because:

1. the methodology used by the specialist retail valuer in this case is used widely by valuers who specialise in the hotel and gaming industries;
2. the text of s 37(2) of the RLA 2003 is substantially replicated in interstate retail leasing legislation and in a large number of Victorian leases that are not governed by the RLA 2003;  and
3. consequently, a significant number of rental determinations could have been challenged if the appeal was successful.

A copy of the Court of Appeal’s reasons is available here.