Abdel-Messih v Marshall

NCAT Appeal Panel|2017-05-25

Background

This is an appeal made from a decision in the Consumer and Commercial Division of the Tribunal (the Tribunal) concerning a dispute between a tenant and a subtenant. The decision (the Decision) was published on 19 January 2017. The appeal was filed within time.
The appellant was the applicant in the first instance proceedings, and the respondent to this appeal was the respondent at first instance. We will refer to the appellant as the "tenant" and to the respondent as the "subtenant".

The Decision

The order made by the Tribunal recorded in the Decision was to dismiss the tenant's application. The tenant sought an order for payment of $1,600.00 as compensation for loss caused by the abandonment by the subtenant of the subtenancy. The tenant also sought an order for payment of $38.25 as further compensation. Finally, an order was sought requiring a copy of a key to be given to the tenant's landlord (the head landlord). The orders sought relied upon ss 106, 107, 187(1)(d) and 73(c) of the Residential Tenancies Act 2010 (RT Act).
A summary of the reasons for the Decision is as follows: 1. The tenant and subtenant entered into a residential tenancy agreement dated 23 August 2016. There was also an agreement under the RT Act between the tenant and the tenant's landlord dated 18 August 2016. The relevant premises was a unit in Central Sydney; 2. Under the agreement between the tenant and the subtenant, the subtenant was required to pay rent of $800.00 per fortnight for bedroom two in the unit for a fixed term of three months commencing 24 August 2016 and ending on 24 November 2016. The subtenant vacated the premises on 5 November 2016; 3. The Decision records that the tenant sought a break fee of $1,600.00 relying upon printed condition 41 of the residential tenancy agreement between the parties, and that the tenant also sought a cleaning fee of $38.25; 4. The tenant produced to the Tribunal at first instance a copy of his agreement with the landlord, copies of notices of termination bearing the dates 8, 14 and 16 September 2016 served upon the tenant by the head landlord alleging breaches of cl 32 (subletting) and for non-payment of rent; 5. There was also evidence before the Tribunal of the existence of proceedings before the Tribunal between the tenant and the head landlord. The Decision records that the tenant's argument in those proceedings was that he had the head landlord's consent to subletting to the subtenant. The Decision also records that in those proceedings the head landlord contested that consent had been given to the subtenancy; 6. The Tribunal found that there was a residential tenancy agreement between the tenant and the subtenant and that the Tribunal had jurisdiction under the RT Act to determine the issues in dispute between the parties; 7. The subtenant abandoned the premises on 5 November 2016; 8. The subtenant had not given notices of termination complying with the RT Act and that the communications which were given were not given in accordance with the provisions of the RT Act (s 223); 9. Subject to the exercise of the Tribunal's discretion under s 107(1) of the RT Act concerning ordering compensation for abandonment before the end of a fixed term, the tenant was entitled to compensation by way of a break fee in an amount equal to four weeks' rent (s 107(4)) of the RT Act. The agreement between the parties included condition 41 (the text of which we will set out later in these reasons); 10. The Decision records that the Tribunal accepted the subtenant's evidence that the head landlord's agent had informed him and that he reasonably believed that the head agreement would be terminated by the head landlord for breaches of the head agreement by the tenant for non-payment of rent and subletting without consent in breach of printed condition 32 of the head agreement; 11. Other proceedings were pending between the head landlord and the tenant. In those other proceedings, interim orders were made on 24 October 2016 requiring the tenant to pay arrears of rent and to continue to pay rent in accordance with the head agreement; 12. Without the adjournment of those other proceedings, the head agreement would have been brought to an end for breaches by the tenant, at least in respect of non-payment of rent; 13. The Tribunal accepted the subtenant's evidence that he abandoned the premises on 5 November 2016 in circumstances where he reasonably believed that it was imminent a person having superior title to the tenant (i.e. the head landlord) was about to become entitled to possession of the unit (see s 81(4)(a) of the RT Act) and that the subtenant required certainty about his accommodation arrangements; 14. The Tribunal then stated: In the exercise of its discretion under s 107 of the RTA, the Tribunal determines that it is not appropriate in the particular circumstances of this case for the Tribunal to order the respondent to pay compensation to the applicant by way of a break fee in the amount of $1,600.00 or any lesser amount. 1. The Tribunal rejected the claim for a cleaning fee as the claim was not supported by evidence that the subtenant had left the premises in a state of uncleanliness and also because there was no ingoing condition report.

Notice of Appeal

The Notice of Appeal stated that the tenant sought leave to appeal on the basis that the Decision was not fair and equitable because the Member "continues to ignore the evidence and relevant legislation in guiding his decisions". The Notice of Appeal attached the evidence of the tenant and the evidence of the subtenant. The subtenant has not argued that the attachments provided by the tenant were incomplete.

Reply to Appeal

The subtenant has filed a Reply to Appeal. In the Reply, the subtenant submitted that the Decision was correct and reasonable.

Tenant's Submissions

The tenant has filed submissions in support of the appeal. We have also been supplied with a copy of the decision in the other proceedings referred to above between the tenant and the head landlord. That decision was published on 22 February 2017 and is a decision in proceedings RT 16/42334, RT 16/44922 and RT 16/39468.
In addition to the written submissions filed by the tenant, the tenant also handed up written submissions at the appeal hearing. A summary of both sets of submissions is contained in the following paragraphs.
The Tribunal found that the vacating of the premises by the subtenant was based upon s 81(4)(a) of the RT Act. The tenant submits that that interpretation was misconceived. That provision states that a residential tenancy agreement terminates if a person having superior title of the landlord becomes entitled to possession of the residential premises. The tenant submitted that s 81(4)(a) should not be taken into account when a finding has been made pursuant to s 81(4)(d) that the subtenant abandoned the premises.
The second ground raised by the tenant was whether the Tribunal had a discretion available under s 107 to award a break fee given that cl 41 of the residential tenancy agreement provided for the payment of a break lease fee, and the Tribunal was not able to override that contractual term.
The tenant submitted that evidence which was not taken into account concerned the fact that the tenant informed the subtenant on 26 October 2016 of the outcome of the other proceedings (i.e. the proceedings between the tenant and his head landlord) and that there was no termination order. Accordingly, there was no basis for the subtenant to vacate on 5 November 2016, having been told of the outcome of the proceedings on 26 October 2016.
In the written submissions handed up at the hearing, the tenant submitted that the subtenant had relied upon information communicated to him by the head landlord's building manager who provided to the subtenant information intended to create a dispute between the subtenant and the tenant. The tenant submitted that he had difficulties with the head landlord in relation to obtaining consent to subleasing the premises to other subtenants (other than this subtenant, Mr Marshall) and that he (the tenant) ceased paying rent owing under the head lease to the head landlord. Nevertheless, despite the subtenants' fears, the head lease has remained on foot and is still on foot to this day.
The tenant repeated in the submission handed up at the appeal hearing that the Tribunal's reference to s 81(4)(a) of the RT Act was an error in law because that section was inapplicable to the facts.
Further, the tenant submitted that the Tribunal correctly found that the subtenant had abandoned the premises and that the subtenancy had therefore come to an end (see s 81(4)(d) of the RT Act).
The tenant submitted that just because there may be a dispute between a head tenant and the tenant, the subtenant is not entitled to abandon the premises. The way the tenant put it was that a dispute of that kind does not give to the subtenant a "free pass" to abandon the premises.
The tenant submitted that subject to the exercise of the Tribunal's power under s 107(1) to order compensation for abandonment before the end of the fixed term, the tenant, by reason of condition 41, is entitled to compensation by way of a break fee in an amount equal to four weeks' rent (s 107(4)(b)). The tenant submitted that s 107(3) directs the making of an order for a break fee if the agreement provides for the payment of a break fee.
The tenant submitted that if the Tribunal had a discretion as to whether a break fee should have been awarded, the exercise of the discretion must be based upon the evidence and the discretion cannot override the contractual term agreed between the parties. The tenant relied upon the decision in House v King (1936) 55 CLR 499. The tenant submitted that in relying upon s 81(4)(a) of the RT Act (which concerns a person having superior title becoming entitled to possession) the Tribunal relied upon an irrelevant matter.
The tenant submitted that the appropriate order for the Appeal Panel to make was an order requiring the payment of $1,600.00 from the bond to be paid to the tenant. In the alternative, the tenant sought an order for the payment of $256.06 by the subtenant. That amount is the amount of loss actually suffered by the tenant being the rent which the tenant would have derived from the subtenant between 5 November 2016 (when the subtenant vacated the premises) and the date shortly thereafter when replacement subtenants took possession.

Subtenant's Submissions

The subtenant filed written submissions. These submissions were directed toward taking the Appeal Panel to the evidence which formed the basis of the Tribunal's finding that the subtenant had been informed by the head landlord's agent, and that the subtenant reasonably believed, that the residential tenancy agreement between the tenant and the head landlord would be terminated by the landlord for breaches by the tenant including for non-payment of rent and the absence of consent to subletting.

Consideration

This is an appeal against an internally appealable decision regulated by the provisions of s 80 of the Civil and Administrative Tribunal Act 2013 (NCAT Act). Section 80(2) provides that an internal appeal may be made from a decision (other than an interlocutory decision) as of right on any question of law, or with leave of the Appeal Panel, on any other grounds. In addition, cl 12 of Sch 4 of the NCAT provides: 12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80 (2) (b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). Note. Under section 80 of this Act, a party to proceedings in which a Division decision that is an internally appealable decision is made may appeal against the decision on a question of law as of right. The leave of the Appeal Panel is required for an internal appeal on any other grounds. (2) Despite section 80 (2) (b) of this Act, an internal appeal against a Division decision may only be made on a question of law (as of right) and not on any other grounds (even with leave) if: (a) the appellant is a corporation and the appeal relates to a dispute in respect of which the Tribunal at first instance had jurisdiction because of the operation of Schedule 3 to the Credit (Commonwealth Powers) Act 2010, or (b) the appeal is an appeal against an order of the Tribunal for the termination of a tenancy under the Residential Tenancies Act 2010 and a warrant of possession has been executed in relation to that order.
Although the Notice of Appeal did not identify errors of law, it is clear that the tenant's submissions assert that the Tribunal made errors of law in coming to the decision which is the subject of this appeal. In addition, the Notice of Appeal states that the Decision was not just and equitable.
The parties agree that the premises were abandoned by the subtenant and that the question before the Tribunal is whether the tenant is entitled to the compensation of an amount equal to the agreed break fee. This involves a consideration of cl 41 (which forms part of the residential tenancy agreement between the parties) and s 107 of the RT Act.
Clause 41 provides as follows: 41. The tenant agrees that, if the tenant ends the residential tenancy agreement before the end of the fixed term of agreement, the tenant must pay a break fee of the following amount: 41.1 if the fixed term is for 3 years or less, 6 weeks rent if less than half of the term has expired or 4 weeks rent in any other case, or 41.2 if the fixed term is for more than 3 years, [specify amount]: This clause does not apply if the tenant terminates the residential tenancy agreement early for a reason that is permitted under the Residential Tenancies Act 2010. Note: Permitted reasons for early termination include destruction of residential premises, breach of the agreement by the landlord and an offer of social housing or a place in an aged care facility. Section 107 of the Residential Tenancies Act 2010 regulates the rights of the landlord and tenant under this clause.
Section 107 provides: 107 Landlord's remedies on abandonment (1) The Tribunal may, on application by a landlord, order a tenant to pay compensation to the landlord for any loss (including loss of rent) caused by the abandonment of the residential premises by the tenant. (2) The landlord must take all reasonable steps to mitigate the loss and is not entitled to compensation for any loss that could have been avoided by taking those steps. This subsection does not apply in the case of a fixed term agreement that provides for the payment of a break fee. (3) The compensation payable by a tenant under this section in respect of a fixed term agreement is the amount of the applicable break fee for the tenancy, if the agreement provides for the payment of a break fee. (4) The break fee for a fixed term agreement for a fixed term of not more than 3 years is: (a) an amount equal to 6 weeks rent if less than half of the fixed term had expired when the premises were abandoned, or (b) an amount equal to 4 weeks rent in any other case. (5) The break fee for a fixed term agreement for a fixed term of more than 3 years is the amount set out in subsection (4) or, if an amount is specified in the agreement, the amount specified. An agreement must not specify a break fee exceeding the amount (if any) specified by the regulations. (6) The amount of any money paid by a tenant to a landlord on terminating a fixed term agreement before the end of the fixed term or before otherwise abandoning the premises (other than money previously due to the landlord under the residential tenancy agreement) is to be deducted from any amount payable to the landlord under this section. (7) This section does not prevent a landlord from obtaining an occupation fee under Division 2 of Part 6 for goods left on the residential premises.
In our view, the language of s 107 by the use of the word "may" has the effect that where a landlord has suffered loss caused by the abandonment of the residential premises by the tenant, the Tribunal may order the tenant to pay compensation but it is not the case that the Tribunal must order compensation. In Cain v New South Wales Land and Housing Corporation [2014] NSWCA 28 the Court said: The word "may", "if used to confer a power, indicates that the power may be exercised or not, at discretion": Interpretation Act 1987 (NSW), s 9(1). Nevertheless, such a power can, in particular circumstances, be coupled with a duty to exercise the power: Ward v Williams [1955] HCA 4; 92 CLR 496 [14].
In Cain the Court also said: The difference in effect between "may" and "must" (or "shall", being the term identified as imposing a duty in s 9(2) of the Interpretation Act) does not depend upon the existence of s 9 of the Interpretation Act; it is an element of ordinary English usage [25].
Clause 41 provides that if the tenant ends the residential tenancy agreement before the end of the fixed term the tenant must pay a break fee. To the extent that it could be said that cl 41 is inconsistent with s 107 of the RT Act, s 107 must prevail. In Talbot-Price v Jacobs [2008] NSWCA 189, the Court of Appeal dealt with a dispute under the Residential Tenancies Act, 1987. The Court referred to a form prescribed by the Residential Tenancy Regulation applicable to that Act and stated that to the extent that the prescribed form is inconsistent with any aspect of the relevant part of that Act, the prescribed from would be invalid.
Section 15 of the RT Act provides that the Residential Tenancy Regulations 2010 (the Regulations) may prescribe a standard form of residential tenancy agreement and further states that a standard form of residential tenancy agreement must be consistent with the RT Act and the Regulations (s 15(3)). In addition, the last sentence in cl 41 confirms that s 107 regulates the parties' rights under cl 41.
In our view, s 107 does not mandate the payment of compensation. There was no error by the Member in determining that the Tribunal had a discretion under s 107 as to whether compensation should be awarded.
The question remains as to whether the exercise of the discretion miscarried.
As stated in the Decision, the determination by the Tribunal not to award compensation was based upon "the particular circumstances of this case". Those circumstances were set out earlier in the Decision and were based upon the finding that the subtenant reasonably believed that it was imminent that a person having superior title to the tenant (i.e. the head landlord) was about to become entitled to possession of the premises. The factual background supporting the subtenant's belief and therefore the finding that the belief was reasonable is set out in the Decision. The factual background concerned the non-payment by the tenant of rent under the head lease and assertions concerning whether other subtenancies had been consented to by the head landlord.
The Court of Appeal in Cain said that the factors which a Court or Tribunal may take into account may be characterised as mandatory, permissible or prohibited. In our view, the Tribunal relied upon a number of permissible factors, none of which were prohibited. Essentially, those factors (which we have summarised above) described the state of affairs between the tenant and the head landlord, which made it reasonable for the subtenant to believe that the subtenancy was likely to end imminently.
The tenant makes the point that by 5 November 2016 (when the subtenant abandoned the premises) the subtenant was aware that the proceedings concerning the head landlord had been heard on 26 October 2016 and that there had been no termination order. However, at that time the Tribunal proceedings were not concluded. Indeed the proceedings were still pending at 5 November 2016 and remained pending when the decision was published on 19 January 2017. Accordingly, we are of the view that the Decision does not reveal that the Tribunal took into account factors which were not relevant to the exercise of the discretion under s 107 of the RT Act. One factor was obviously more relevant than others because the Tribunal gave it specific mention: that was the tenant's failure to pay rent to the head landlord. The Decision records that in the opinion of the Tribunal, but for the adjournment of the proceedings on 26 October 2016, the agreement with the head landlord "would have been brought to an end for breaches by the [tenant] (at least in respect of the non-payment of rent)".
The tenant also made the point that the exercise of a discretion should not conflict with contractual obligations. Here, the relevant contractual obligation is that contained in cl 41. In our view, cl 41 does not inhibit or modify the exercise of the discretion under s 107 of the RT Act for two reasons. The first is that cl 41 is to be interpreted subject to s 107 for the reasons previously indicated in this decision. Indeed, cl 41 includes the statement that s 107 regulates "the rights of the landlord and tenant under this clause". The second reason is that in our view, cl 41 does not determine whether the tenant is liable for the break fee but rather determines the amount of the break fee if compensation is payable (see s 107(3)) and if the tenancy agreement provides for a payment of a break fee. That interpretation is also justified upon the basis that cl 41 states that if the tenant ends the residential tenancy agreement before the end of the fixed term, "the tenant must pay a break fee of the following amount". Then the clause goes on to provide how the amount is to be calculated.
Our conclusion is that the Decision does not display any error of law by the Tribunal in the exercise of its discretion under s 107 of the RT Act.

Tenant's Alternative Submission

The tenant's alternative submission was that if the break fee is not awarded as compensation, compensation of $256.06 should, nevertheless, be awarded as compensation for the loss of rent otherwise payable by the subtenant from 5 November 2016 to the date when the subtenancy expired (24 November 2016). There are two difficulties with this submission. First, s 107(3) provides that the "compensation payable by a tenant under this section in respect of a fixed term agreement is the amount of the applicable break fee for the tenancy, if the agreement provides for the payment of a break fee". In other words, if the Tribunal exercised the discretion under s 107(1), the Tribunal is directed under s 107(3) to award the applicable break fee. Where the Tribunal exercise its discretion under s 107(1) not to award compensation, that decision also operates as a refusal to award compensation calculated by reference to the landlord's (in this case referred to as the tenant) actual loss. The second difficulty is that the reason the Tribunal exercised its discretion not to award the break fee was because of the tenant's conduct which put the position of the subtenant under the subtenancy into jeopardy. The early departure of the subtenant did not result in the subtenant becoming better off. There is evidence that the subtenant incurred an obligation to pay rent elsewhere. Accordingly, we reject the tenant's submission that we should make an order requiring the subtenant to pay $256.06.

Leave Ground

We refer to the tenant's submission that the Decision was not just and equitable and therefore the appeal should be upheld upon the basis set out in cl 12 of Sch 4 of the NCAT Act. We are not satisfied that the conditions of cl 12 have been met. We are not satisfied that the tenant may have suffered a substantial (or any miscarriage of justice) because the Decision was not just and equitable. Furthermore, applying the principles set out in the Appeal Panel decision in Collins v Urban [2014] NSWCATAP 17, this appeal raises no matter of principle or question of public importance and there is no injustice arising by reason of the Decision. Nor is there any error that is plain and readily apparent which is central to the Tribunal's decision at first instance.
Accordingly, we reject the tenant's submissions that the appeal should be upheld on the basis of cl 12 of Sch 4 of the NCAT Act.

The Bond

At the appeal hearing, a question arose as to the whether the bond had been paid to the Rental Bond Services. Both parties had agreed that the bond had been paid and both were able to provide an identical receipt number. The following facts are not in dispute: 1. The subtenant paid the bond of $1,600.00 directly to the tenant at the commencement of the subtenancy. On 5 September 2016 the subtenant emailed the tenant seeking confirmation that the bond application had been made; 2. On 5 September 2016, the tenant responded by saying: You seem to be extremely concerned about your bond. Not to worry I am not going to take it and run away 1. Following a further enquiry by the subtenant, the tenant emailed the subtenant on 5 September 2016 describing the process for lodging a bond and states that he is "filing out the form and depositing the bond in person". He also stated it may take up to five days for a letter to arrive confirming the details of lodgement; 2. Following a further enquiry about the bond, the tenant emailed the subtenant stating that he would be attending "Service NSW on Thursday to fix things"; 3. On 22 September 2016, the tenant emailed the subtenant and stated that he had attended Service NSW "so as to switch the bond to the new online system. I was advised that it might take up to two weeks for both of us to receive an email. Please find receipt attached". Attached was a document headed "Application number APP 0002215032". It does not appear to record the receipt of any money; 4. Following a further enquiry, the tenant emailed the subtenant on 23 September 2016 and stated that he had "received the email from Fair Trading earlier today so I should have everything processed and forwarded to you by tonight"; 5. On 24 September 2016, the tenant emailed the subtenant and stated that he would be happy to meet with the subtenant so that the bond can be paid online and that the tenant would give to the subtenant $1,600.00 cash instantly so as to "avoid double payment of bond"; 6. After a further exchange of emails, by email dated 27 September 2016, the tenant stated that he was happy to meet with the subtenant so that the subtenant could "pay the bond first, then after it is paid in front of me or otherwise, I will give you the sum in cash"; and 7. On 29 September 2016, the parties met and the bond was paid online.
We invited both parties to make submissions in writing after the hearing of the appeal concerning the payment of the bond. The subtenant produced an email from the Rental Bond Board dated 6 November 2016 which stated: Your agent/landlord has completed the bond lodgement process for the premises above on 7/11/2016 10:54:13am. Your bond number is SO40433-9 A bond amount of $1,600.00 is held on your behalf by NSW Fair Trading.
On the other hand, the tenant's submissions stated that the bond was paid on 29 September 2016. In this respect, the tenant relied upon an email from the Rental Bond Services dated 29 September 2016 which stated: We have received $1,600.00 from the tenant for their rental bond on the above premises. You should now arrange for the tenancy agreement to be signed and finalise the pending lodgement in Rental Bonds Online.
We infer that the tenant did not complete his obligations under s 162 of the RT Act until 5 November 2016. Section 162(1) requires the landlord who receives an amount of rental bond to deposit that amount within the deposit period together with a notice in the approved form. The relevant deposit period is 10 working days (in this case, calculated from 24 August 2016).
It is clear, and the tenant concedes, that the tenant did not comply with his obligations under s 162 of the RT Act in respect of the agreement with the subtenant.

Conclusion

In our view, no error of law has been identified and there is no basis for giving leave to the tenant under the provisions of cl 12 of Sch 4 of the NCAT Act. Accordingly, the appeal must be dismissed. It is necessary to dispose of the dispute between the parties by making an order for the payment of the bond. Accordingly, an additional order will be made that the bond is to be paid to the subtenant.

Orders

The Appeal Panel makes the following orders: 1. Except for the purposes of making order 2, the appeal is dismissed; and 2. The bond of $1,600.00 held by Rental Bond Services (reference number P0000626726) is to be paid to the Respondent.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 June 2017

At a glance

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Judgment (13 paragraphs)

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Legislation Cited (1)

Cases Cited (5)

Cited By (8)