PARTIES/LEGAL REPRESENTATION/ TYPE OF DISPUTE The inquiry was with regard to the selling price of…
Retail lease matter – read Schnitzel World Pty Ltd.
PARTIES/LEGAL REPRESENTATION/ TYPE OF DISPUTE
In D & M Pelle Holdings Pty Ltd v Cottrell Pty Ltd (No 2) [2005] ACTSC 82 (29 August 2005).
Experienced Canberra retailer’s lease breached which would significantly damage Intangible Asset Value of good flexible lease. The lease would have added value to both the landlord and the tenants assets i.e. principles of AASB 138, which in my opinion was not adequately covered.
INSTRUCTION: Telephone inquiry: volunteer advice in regard to loss.
Provide detailed report to consider “wider market influences on the business” i.e. isolate causation factors back to the alleged dispute; and
Review Plaintiff and Defendants expert’s figures in regard to the calculation of losses and damages for the terms of the lease available to the Plaintiff
DESCRIPTION OF DISPUTE
Alleged that landlord had breached exclusivity provision that in my opinion significantly added value to the landlord and tenant’s “businesses”; the delicatessen business paid double the rent the supermarket traded at, with multiple options at current market rent, that adds value to property and business assets under AASB 138.
Immediately after the supermarket was allowed to trade across exclusive lines the business went into decline.
Losses would continue to accrue the longer D & M Pelle Holdings continued to trade.
To conduct a “forensic” analysis of causation one needed to:
Analyse economic factors
Consider local factors within catchment (demographic factors)
Review factors within the industry
Analyse the centre, traffic flows, turnover levels, etc
Detailed analysis of key anchor (before and after); other businesses within the category
Detailed analysis of the Plaintiff’s business; and
The operator
Involved significant modelling, use of best benchmark sources, “cause effect” modelling and calculation of loss flowing
How it was settled
In my report I state “I am a Specialist Retail Valuer & Land Economist and have been a member of the Australian Property Institute since 1991. The API NZPI Professional Practice 2004 requires that we “practice their (our) vocation with integrity, honour and professionalism, to act impartially and objectively when providing independent advice, and to respect the public interest.” I abide by that Code as well. In carrying out my research and preparation of this report I have applied my knowledge and experience as an expert (specialist retail valuer and land economist), incorporating property economics, business economics, marketing and my knowledge and application of commercial law, tenancy and contract law.
I am not an accountant, but I am able to analyse both the Plaintiff and Defendant’s accountants calculations of losses and damages. I have considered case law precedent in my calculations. The practical knowledge and experience having specialised in retail tenancy matters for 12 years, has enabled me to consider matters within the business, the centre, lease terms and conditions and wider catchment which would impact on Deli Planet.
This would naturally assist in assessing sales and profit projections, risk profiles and thus applying discount rates. Queensland Lease Consultants have had no prior involvement with the Plaintiff and I have no conflict of interest in this matter. The preparation of an Experts Report and calculating losses and damages are within the scope of the services offered by QLC.”
My calculation of losses was $911,398 excluding interest. Damages of $799,000 were awarded, plus costs (see below the Appeal); the damages in my view did not properly consider future losses for a business which had good tenure, flexible lease terms and mixed two methodologies up; the tenant not a “willing seller” and one would pay a premium to acquire the cash-flow of the business (more traffic growth “but for breach of the lease”).
The Plaintiff in that matter then informed me that the matter went to appeal. In front of three Appeal Court Judges, they literally threw the matter out of court and said if they proceeded, the Claim would be higher i.e. assuming future loss would be reviewed.
