Bhana v Chamoun

Procedural history

1. The application first came before the Tribunal in a Group List for Conciliation and Hearing on 8 September 2017. Mr Bhana attended that hearing in person. Mr Harry Reskakis, a Senior Property Manager with Raine & Horne Burwood, the proprietors' Managing Agent, attended on behalf of the proprietors. In accordance with the Tribunal's usual practice where both parties are present in person, prior to the case being called, the parties were provided with an opportunity to attempt to resolve the dispute co-operatively in conciliation with the assistance of a Tribunal Conciliator. Those efforts were not successful.
2. When the parties returned to the hearing room, the Tribunal adjourned the matter for a special fixture hearing on a date to be fixed by the Registrar, and gave directions to the parties for the filing and exchange of any documentary evidence they intended to rely upon at the hearing.

Evidence before the Tribunal

1. The proprietors have filed a bundle of documentary evidence, which includes a chronology of events, a copy of the resident's trust account ledger for the period 17 March 2014 to 12 July 2017, a copy of the termination notice issued to the resident dated 23 May 2017 and associated correspondence, a locksmith's invoice dated 3 July 2017, an invoice for costs of rubbish removal dated 6 July 2017, an undated cleaning contractor's invoice, a quotation for the supply and installation of new carpet which is dated 12 July 2017, photographs said to depict the state of the resident's room when possession was recovered, and correspondence between the resident and representatives of the Managing Agent concerning the proprietors' refusal to refund the resident his occupation fees paid in advance. This bundle was marked Exhibit R1.
2. The resident did not file or exchange any documentary evidence. He told the Tribunal that he only sought to rely upon the Managing Agent's trust account ledger.
3. Mr Bhana attended the hearing in person and gave oral evidence under a solemn promise to tell the truth. Mr Reskakis attended the hearing on behalf of the proprietors and also gave evidence under a solemn promise to tell the truth. Both parties had the opportunity to present their respective cases to the Tribunal, to ask each other questions, and to make final submissions.

Material facts

1. The material facts to emerge from the evidence may be stated as follows: 9.1 The premises which is the subject of the dispute is a room in a large residential dwelling in Harris Park which comprises 25 single or double occupancy rooms (boarding house). The room has an interior toilet. Kitchen and laundry facilities are shared with the occupants of other rooms. The boarding house has a caretaker who is on site each day; 9.2 Mr Bhana first took up occupancy of the room some time in 2012. He does not remember the date. He recalls paying a key deposit of $40.00 and being given a copy of a document called "house rules" (or similar). He does not recall being asked to sign any document other than a key register. He says he was not asked to, and did not pay any security deposit for the room. He says that when he first moved into the room, the proprietors provided some meals, but that ceased in March 2014; 9.3 Mr Bhana says that the occupation fee he paid from the commencement of the occupancy agreement was $180.00 per week, which he paid fortnightly upon receipt of his Centrelink income support payment in the amount of $360.00. This fee originally included the costs of some meals; 9.4 The house rules provided to Mr Bhana when he took up occupation of the room in 2012 are not in evidence. Mr Bhana told the Tribunal he did not retain this document and only has a vague memory of it. He remembers it said that he was not allowed to have other people in his room; 9.5 Mr Bhana describes himself as a person living with schizophrenia who is, and has been for many years, in poor mental and physical health. He says that he was referred to the boarding house in 2012 by an officer of Housing NSW when he lost his home because he could not afford to pay rent or mortgage payments (it was not clear which). He says that due to his disability and poor health he struggles to perform activities of daily life; 9.6 Mr Reskakis told the Tribunal that his agency was first retained by the proprietors as Managing Agent for the boarding house in early March 2014. He told the Tribunal that he believed that house rules were given to residents prior to that date, however he says that his agency does not have a copy of those rules; 9.7 The resident's trust account ledger maintained by Raine & Horne Burwood commences from 17 March 2014. There are no records of any payments made by the resident to the proprietors prior to that date in evidence. The trust account ledger establishes that when the resident made his first payment of $360.00 to Raine & Horne Burwood on 19 March 2014, this paid occupation fees up to and including 25 March 2014. He thus appears to have been paying occupation fees fortnightly one week in arrears and one week in advance at that time. This continued for some time thereafter, however, across the period of the occupancy agreement up to 3 July 2017 other amounts have been paid according to different intervals at various times. The trust account ledger does not contain any acknowledgement of a $40.00 key deposit held in trust (at least not until 4 July 2017, as to which see following). However, there is no dispute between the parties as to the existence of that deposit; 9.8 On 23 May 2017 the Managing Agent issued the resident with a notice of termination of the occupancy agreement. That notice states as follows: Re: TERMINATION OF PERIODIC OCCUPANY AGREEMENT Property: [address of premises] We wish to advise you that the landlord requires vacant possession of the premises at the end of the agreement. Please ensure that you clean the room, remove your belongings and return the keys by no later than 23 June 2017. Please ensure that all rents are paid to the vacate date. If keys are not returned by 23 June 2017 we will take back possession by changing the locks, any belongings left behind will be disposed of. Thanking you in anticipation of your co-operation in this matter. 9.9 The termination notice was delivered to the resident's room on 23 May by the boarding house's caretaker. On 13 June 2017, the caretaker approached the resident to enquire when he intended to move out. The resident disputed receiving the termination notice. This resulted in the resident contacting Mr Reskakis to request an extension of time in which to move out, which Mr Reskakis refused. The resident did not give vacant possession of the room on 23 June 2017. After the caretaker made further attempts to contact the resident, leaving messages for him to make contact, on 30 June 2017 the resident again contacted Mr Reskakis to request an extension of time in which to move out, which Mr Reskakis refused. Mr Reskakis advised the resident that if he had not delivered up vacant possession of his room by the morning of Monday 3 July 2017 he would attend the premises with a locksmith and recover possession of the room; 9.10 The resident did not give vacant possession of the room prior to the morning of 3 July 2017. Consequently, Mr Reskakis attended the premises at 12:30pm on 3 July 2017 with a locksmith. It is not clear in the evidence if the resident was at home or not. The locksmith removed and replaced the lock on the door of the room. He later invoiced the Managing Agent $88.00 for the costs of this work. The resident was thus prevented from entering the room thereafter. At that time all of the resident's personal possessions remained in the room; 9.11 On 6 July 2017, Mr Reskakis permitted the resident to enter the room to remove his personal belongings and clean the room. The resident also used the boarding house bins to dispose of a large accumulation of rubbish from his room; 9.12 Mr Reskakis contends that the resident left the room in a seriously unclean state and that, as a consequence, the proprietors were required to engage a cleaning contractor to perform further cleaning at a cost of $165.00. He also contends that there remained some rubbish in the room, including an abandoned sofa and chair, mattress, what appears to be a console for a TV set, some smaller items of furniture, and the contents of a bar refrigerator. He contends that the resident filled all the boarding house bins with rubbish removed from the room, such that the bins were not able to be used by other residents. He says that, as a consequence, the proprietors were obliged to engage a contractor to remove this rubbish, and that remaining in the resident's room, at a cost of $250.00. Mr Reskakis also contends that the carpet in the room was left fatally damaged by stains and that, as a consequence, the proprietors were obliged to engage a contractor to remove the existing carpet and replace it with new carpet at a cost of $495.00. 9.12 The photographs of the condition of the room submitted into evidence by the proprietors leave no doubt that the room was in a seriously unclean state and contained various items of badly stained and apparently broken furniture when possession was recovered on 3 July 2017. They also reveal that the carpet was very seriously stained. Nevertheless, the resident contends that he left the room in a better condition than that in which it was provided to him when he took up occupation in 2012; 9.13 The trust account ledger shows that on the date the termination notice was served on 23 May 2017, the resident had paid occupation fees due to 13 June 2017 and was thus 21 days in advance. It then shows that further payments of occupation fees were made on 5 and 19 June and on 3 July 2017 each in the amount of $360.00 which resulted in the resident being paid up to and including 25 July 2017 when possession of the premises was recovered on 3 July 2017; 9.14 On 4 July 2017, the Managing Agent reconciled the resident's trust account ledger, and an entry was recorded that the resident was due to be refunded $642.86 in occupation fees paid in advance by cheque. This is described on the ledger as a "rent refund". However, no cheque was issued for this amount; 9.15 Between 4 and 12 July 2017, when the resident's trust account was archived, a further credit entry is made in the amount of $40.00 to acknowledge the key deposit lodged by the resident at the commencement of the occupancy agreement, and then three debit entries are made, being $88.00 (described as "payment of locksmith from bond"), $250.00 (described as rubbish removal paid by tenant") and $344.86 ("described as repairs and cleaning paid by tenant"). These transactions resulted in the trust account ledger showing a nil balance on 12 July 2017; 9.16 There is no dispute between the parties that the resident did not authorise these deductions from this trust account. On or about 10 July 2017 the resident contacted the Managing Agent to demand a refund of the occupation fees he had paid in advance, which he calculated to be $540.00. This led to a series of acrimonious email exchanges in which the Managing Agent asserted a right to retain these fees on behalf of the proprietors to cover the costs of cleaning, rubbish removal, and of changing the locks and replacing the carpet of the room. That dispute is now before the Tribunal for determination.

Applicable law

1. The resident relies upon the provisions of the BH Act for his cause of action. The objects of that Act are set out in section 3. It is to "establish an appropriate regulatory framework for the delivery of quality services to residents of registrable boarding houses, and for the promotion and protection of the well-being of residents", including by (relevantly to this case) "(b) providing for certain occupancy principles to be observed with respect to the provision of accommodation to residents of registrable boarding houses and for appropriate mechanisms for the enforcement of those principles". The BH Act came into force in stages in 2013. It has been fully in force at all material times for this dispute.
2. The term "registrable boarding house" is defined in sub-section 5(1) of the BH Act to mean either of the following: (a) a general boarding house, or (b) an assisted boarding house that is required to be authorised under Part 4 for it to be lawfully used as such under that Part (a "regulated assisted boarding house"). Sub-section 5(2) provides that boarding premises are a general boarding house if the premises provide beds, for fee or reward, for use by 5 or more residents (not counting any residents who are proprietors or managers of the premises or relatives of the proprietors or managers. Sub-section 5(3) excludes a range of premises and living arrangements from the definition of general boarding house. None of those exclusions are relevant in the present case.
3. Part 3 of the BH Act deals with occupancy agreements and principles for registrable boarding houses. The term "occupancy agreement" is defined in section 27 to mean "a written or unwritten agreement: (a) that is between a proprietor of the boarding house (or a person acting on behalf of the proprietor) and a resident of the house (or a person acting as an authorised representative of the resident), and (b) under which the resident is granted the right to occupy, for fee or reward, one or more rooms in the boarding house as a resident of the house (but does not include a rental agreement between the proprietor and resident of a registrable boarding house.)" The term "occupation fee" is defined to mean "an amount payable by or for a resident of a registrable boarding house for the right to occupy one or more rooms in the boarding house as a resident of the house during the term of an occupancy agreement".
4. Sub-section 28(1) of the BH Act imposes an obligation on a proprietor under an occupation agreement to ensure that the agreement is in writing. In this case sub-section 28(1)(b) applies because the occupancy agreement predates the entry into force of Part 3 of BH Act on 1 July 2013. The proprietors were required to ensure that a written occupancy agreement was put in place within the period of 3 months from that date. They did not do so. However, pursuant to sub-section 28(2)(b) of the BH Act, the failure to put the occupancy agreement in writing as required by sub-section 28(1)(b) does not affect the enforceability of an occupancy agreement that is not in writing or is only partly in writing.
5. Sub-section 29(1) of the BH Act empowers the Commissioner for Fair Trading to approve a standard form occupancy agreement by order published in the NSW Government Gazette. A standard form agreement was approved by order published in the NSW Government Gazette on 10 July 2013 (NSW Government Gazette No 90, 12 July 2013 [at page 3431]). Sub-section 29(3) provides that unless the regulations provide otherwise, the use of a standard form occupancy agreement is not mandatory and, accordingly, a failure to use the standard form of agreement does not itself affect the validity or enforceability of an occupancy agreement. Sub-section 28(5) of the BH Act provides that an occupancy agreement that is in or to the effect of the applicable standard form of occupancy agreement for the class of registrable boarding house, parties or agreement concerned, is taken to give effect to the occupancy principles in the manner required by or under Part 3 of the BH Act. Sub-section 28(6) provides that the regulations may make provision for or with respect to requiring the use of a standard form of occupancy agreement and the enforceability of agreements that are not in the standard form. However, the Boarding House Regulation 2013 (BH Regulation) does not do so.
6. Division 3 of Part 3 of the BH Act deals with "occupancy principles" which are applicable to registrable boarding houses where there is an occupancy agreement subsisting between the proprietor and resident. Sub-section 30(1) of the BH Act provides that the occupancy principles in relation to registrable boarding houses are set out in Schedule 1 of that Act. Schedule 1 provides that that there are 12 occupancy principles, which are stated as follows: 1 STATE OF PREMISES A resident is entitled to live in premises that are: (a) reasonably clean, and (b) in a reasonable state of repair, and (c) reasonably secure. 2 RULES OF REGISTRABLE BOARDING HOUSE A resident is entitled to know the rules of the registrable boarding house before moving into the boarding house. 3 PENALTIES FOR BREACHES OF AGREEMENT OR HOUSE RULES PROHIBITED A resident may not be required to pay a penalty for a breach of the occupancy agreement or the rules of the registrable boarding house. 4 QUIET ENJOYMENT OF PREMISES A resident is entitled to quiet enjoyment of the premises. 5 INSPECTIONS AND REPAIRS A proprietor is entitled to enter the premises at a reasonable time on reasonable grounds to carry out inspections or repairs and for other reasonable purposes. 6 NOTICE OF INCREASE OF OCCUPANCY FEE A resident is entitled to 4 weeks written notice before the proprietor increases the occupancy fee. 7 UTILITY CHARGES (1) The proprietor is entitled to charge a resident an additional amount for the use of a utility if: (a) the resident has been notified before or at the time of entering the occupancy agreement of the use of utilities in respect of which the resident will be charged, and (b) the amount charged is based on the cost to the proprietor of providing the utility and a reasonable measure or estimate of the resident's use of that utility. (2) A "utility" for the purposes of this clause is each of the following: (a) the supply of electricity, (b) the supply of gas, (c) the supply of oil, (d) the supply of water, (e) the supply of any other service prescribed by the regulations. 8 PAYMENT OF SECURITY DEPOSITS (1) The proprietor may require and receive a security deposit from the resident or the resident's authorised representative only if: (a) the amount of the deposit does not exceed 2 weeks of occupancy fee under the occupancy agreement, and (b) the amount is payable on or after the day on which the resident (or the resident's authorised representative) enters the agreement. (2) Within 14 days after the end of the occupancy agreement, the proprietor must repay to the resident (or the resident's authorised representative) the amount of the security deposit less the amount necessary to cover the following: (a) the reasonable cost of repairs to, or the restoration of, the registrable boarding house or goods within the premises of the boarding house, as a result of damage (other than fair wear and tear) caused by the resident or an invitee of the resident, (b) any occupation fees or other charges owing and payable under the occupancy agreement or this Act, (c) the reasonable cost of cleaning any part of the premises occupied by the resident not left reasonably clean by the resident, having regard to the condition of that part of the premises at the commencement of the occupancy, (d) the reasonable cost of replacing locks or other security devices altered, removed or added by the resident without the consent of the proprietor, (e) any other amounts prescribed by the regulations. (3) The proprietor may retain the whole of the security deposit after the end of the occupancy agreement if the costs, fees or charges referred to in subclause (2) (a)-(e) are equal to, or exceed, the amount of the security deposit. (4) In this clause: "security deposit" means an amount of money (however described) paid or payable by the resident of a registrable boarding house or another person as security against: (a) any failure by the resident to comply with the terms of an occupancy agreement, or (b) any damage to the boarding house caused by the resident or an invitee of the resident, or (c) any other matter or thing prescribed by the regulations. 9 INFORMATION ABOUT OCCUPANCY TERMINATION A resident is entitled to know why and how the occupancy may be terminated, including how much notice will be given before eviction. 10 NOTICE OF EVICTION (1) A resident must not be evicted without reasonable written notice. (2) In determining what is reasonable notice, the proprietor may take into account the safety of other residents, the proprietor and the manager of the registrable boarding house. (3) Subclause (2) does not limit the circumstances that are relevant to the determination of what is reasonable notice. 11 USE OF ALTERNATIVE DISPUTE RESOLUTION A proprietor and resident should try to resolve disputes using reasonable dispute resolution processes. 12 PROVISION OF WRITTEN RECEIPTS A resident must be given a written receipt for any money paid to the proprietor or a person on behalf of the proprietor.
7. Sub-section 30(3) of the BH Act provides that the BH Regulations may make provision for or with respect to: (a) what constitutes, or what does not constitute compliance with the occupancy principles for the purpose of Part 3 of the Act, and: (b) for the issuing of guidelines for that purpose. However, the BH Regulation does not do so.
8. Section 31 of the BH Act sets out how the occupancy principles apply in relation to registrable boarding houses. It provides (relevantly): 31 Application of occupancy principles (1) The occupancy principles apply as follows in relation to a registrable boarding house: (a) a resident must be provided with accommodation in compliance with the occupancy principles, (b) … (c) … (d) the proprietor must exercise the proprietor's rights or powers under the occupancy agreement (including in relation to the collection, payment, retention and repayment of money) subject to any requirements of the occupancy principles. (2) … (3) This section is taken to be a term of every occupancy agreement (whether entered into before or after the commencement of this section), but only on and from the day that is 3 months after the commencement of this section. (4) Any term of an occupancy agreement or another agreement is void to the extent to which it is inconsistent with the provisions of this section.
9. Division 4 of Part 5 of the BH Act sets out the Tribunal's jurisdiction to resolve an occupancy principles dispute, which is defined in sub-section 32(3) to be a dispute between relevant parties about the application of occupancy principles in relation to a resident or former resident of a registrable boarding house. The term "relevant parties" is defined in sub-section 32(2) to include a resident or former resident of a registrable boarding house and a proprietor or former proprietor of a registrable boarding house. Pursuant of sub-section 32(4) the Tribunal may, on application, make one or more of a range of orders including, pursuant to sub-section 32(4)(c) an order for the payment of an amount of money (including an order for the refund or repayment of some or all of an amount paid as an occupation fee or security deposit) and, pursuant to sub-section 32(4)(d), an order as to compensation. Sub-section 32(5) provides that the Tribunal must not (relevantly) make an order for (a) the payment of an amount that exceeds the amount (if any) prescribed by the regulations for the purpose of section 32. No limit on the Tribunal's order making power is prescribed in the BH Regulation.

Jurisdiction

1. I am satisfied that I have jurisdiction to deal with the resident's claim under section 32 of the BH Act. The evidence before me establishes that the residential premises that is the subject of this dispute is a registrable boarding house within the meaning of section 5 of the BH Act in that it provides beds for a fee for use by 5 or more residents who are not proprietors or managers or their relatives. I am satisfied that the subject matter of the dispute is an "occupancy principles dispute" within the meaning of sub-section 32(3) of the Act because it is a dispute about the application of occupancy principle 8 (as to which see following). The applicant is a "relevant party" entitled to bring the application to the attention of the Tribunal because he is a former resident of the boarding house. The order sought by the applicant is an order that the Tribunal has the power to make pursuant to sub-section 32(4)(c) of the BH Act. There is no prescribed monetary limit on the Tribunal's order making power under section 32 of the BH Act. The Tribunal therefore has the power to make an order for the payment of money in the amount claimed by the resident.
2. The BH Act and BH Regulation to not prescribe a time limit within which applications concerning occupancy principles disputes must be brought to the attention of the Tribunal. Rule 28(3) of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) therefore applies. The application must be made within 28 days from the day on which the applicant became entitled to make the application under the BH Act. In this case, that date was 3 July 2017, being the date he was deprived of possession of his room with occupation fees paid in advance. The application was made to the Tribunal on 11 August 2017. The applicant has thus made the application to the Tribunal 10 days outside the time period permitted (time being reckoned from 4 July 2017 (section 36 of the Interpretation Act 1987)).
3. Section 41 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) confers the Tribunal with discretion to extend the time in which an application may be made to the Tribunal. The principles to be applied in the exercise of the discretion were distilled by the Appeal Panel of the Tribunal in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22. In brief, time limits are to be strictly enforced unless to do so would work an injustice to an applicant. In determining if an injustice would occur, the Tribunal is to consider the length of the delay, the applicant's explanation for the delay, any prejudice to the respondent that would arise from time being extended, and whether the applicant has an arguable case. If the delay is significant, the applicant's case must be more than merely arguable, it must have substantial merit.
4. In this case, the resident's delay is a relatively short period of 10 days.
5. The delay is explained by the resident's attempts to resolve the dispute directly with the proprietors' Managing Agent. The email correspondence between the resident and Mr Reskakis which is in evidence makes it clear that the resident commenced these attempts on 10 July 2017 when he did not receive the expected repayment of overpaid occupation fees, and that he did not finally give up on these efforts until the afternoon of 14 July 2017 when it became clear to him that the proprietors claimed all of the occupation fees he had paid in advance for the costs of cleaning, rubbish removal, carpet replacement and room lock replacement, and would not be refunding any amount to him.
6. It is clear from the resident's final email to Mr Reskakis on 14 July 2017 that he was at that time aware of his right to make an application to the Tribunal. However, it is also clear on the evidence that after being locked out of his room on 3 July 2017, the resident experienced difficulty in finding suitable alternative accommodation. I accept that it was reasonable for him to prioritise his shelter and subsistence needs over legal action to recover the occupation fees he had paid the proprietors in advance in the weeks immediately following that event. I also take into account that the resident lives with a significant disability, and in poor health, which affects his ability to attend to the activities of daily life.
7. I am therefore satisfied that the resident has provided a reasonable explanation for his delay in making this application to the Tribunal.
8. There is no relevant prejudice to the proprietors arising from time being extended for the resident to make this application. The proprietors have been on notice of the dispute since 10 July 2017, and their Managing Agent retains all of the relevant documents they intend to rely upon at the hearing, including the trust account ledger, invoices for the compensation they claim, and photographs of the resident's room at the end of the occupation agreement. The delay has not had any discernible impact on the proprietors' capacity to respond to the application.
9. Finally, for the reasons set out following, the resident has succeeded in obtaining the relief he claims. I was satisfied on a prima facie basis that his claim was arguable, and indeed, that it had substantial merit.
10. Taking each of these factors into account, I am satisfied that it would work an injustice to the resident if the time limit for the making of this application to the Tribunal were to be strictly enforced. I therefore exercise the discretion conferred by section 41 of the NCAT Act to extend the time in which this application may be made to the Tribunal to 11 August 2017, being the date the application was made.

Consideration

1. Having regard to the resident's cause of action, the material facts, and the applicable law, the questions the Tribunal must pose and answer in order to determine the outcome of this proceeding may be stated as follows: 1. Is the resident entitled to be refunded the occupation fees he had paid in advance on 3 July 2017 when the proprietors' took possession of his room? 2. Are the proprietors entitled to retain the key deposit paid by the resident at the commencement of the occupancy agreement to cover the costs of enforcement of the termination notice? 3. Are the proprietors entitled to compensation for damage and loss they claim to have incurred as a result of the resident's failure to comply with a term of the occupation agreement or Occupation principles at the end of the agreement?

Is the resident entitled to the refund of occupation fees paid in advance?

1. As noted above, sub-section 31(1)(a) of the BH Act provides that a resident must be provided with accommodation in compliance with the occupancy principles. Sub-section 31(1)(d) of the BH Act provides that the proprietors must exercise their rights and powers under the occupancy agreement (including in relation to the collection, payment, retention and repayment of money) subject to any requirements of the occupancy principles. Section 31 is taken to be a term of every occupancy agreement (in this case, from 1 October 2013 being the day that was three months after the commencement of that section) by sub-section 31(3) of the BH Act.
2. In my view, Occupancy principle 8 is determinative of the dispute in this case. It entitles a proprietor to require and receive from a resident a security deposit that does not exceed 2 weeks of occupancy fee under the occupancy agreement. Pursuant to Occupancy principle 8(2) the proprietor must repay this security deposit to a resident within 14 days after the end of the occupancy agreement, less (relevantly to this case) any amount necessary to cover the reasonable costs of repairs to, or restoration of, the boarding house or goods within the premises of the boarding house that result from damage caused by the resident (or a resident's invitee), but not fair wear and tear. The proprietor may also deduct from the security deposit the reasonable cost of cleaning any part of the premises occupied by the resident not left reasonably clean by the resident at the end of the occupancy agreement, having regard to the condition of that part of the premises at the commencement of the occupancy, and the reasonable cost of replacing locks or other security devices altered, removed or added by the resident without the consent of the proprietor.
3. Occupancy principle 8 makes it clear that the proprietors are only entitled to withhold an amount up to the whole of the security deposit to compensate them for a resident's failure to comply with a term of the occupancy agreement or an occupancy principle. Occupation principle 8 does not provide the proprietors with any warrant entitling them to withhold occupation fees paid in advance for this purpose.
4. In this case the proprietors did not require the resident to pay a security deposit, and he refused to allow them to retain the occupation fees he had paid in advance to meet other costs they claimed to have incurred at the end of the occupation agreement. Their only option in the circumstances was to apply to the Tribunal under sub-section 32(4)(d) of the BH Act for an order that would require the resident to pay them compensation in relation to the damage and loss they allege. They have not done so. This course is potentially still available to the proprietors, although I note that as at the date of the hearing any such application would already be 90 days outside the 28 day period permitted for the making of such an application.
5. Even if Occupancy principle 8 was not determinative of this dispute, I am satisfied that the proprietors would be prevented from converting occupation fees paid in advance into security for compensation for damage and loss claimed against the resident for cleaning, repairs, carpet and lock replacement by the common law of contract. The covenants (promises or obligations) of a contract operate independently of one another. Breach of an obligation by one party will not usually (except in very limited circumstances which do not apply in this case) entitle another party the breach one or more of its obligations: see generally Hawkesbury Nominees P/L v Battick P/L [2000] FCA 185.
6. In this case, the proprietors failed to comply with sub-section 28(1)(b) of the BH Act by ensuring that a written occupancy agreement was put in place before 1 October 2013. However, pursuant to sub-section 28(2)(b) of that Act, this does not prevent the enforcement of the agreement. In the absence of a written agreement there is a degree of uncertainty as to the terms of the occupation agreement in so far as this is not supplied by the Occupancy principles. However, at its core, the agreement required the resident to pay the proprietors occupation fees in consideration for the proprietors providing him a room in the boarding house. The proprietors withdrew that consideration on 3 July 2017, and the resident was therefore not liable for occupation fees after that date. It would amount to a breach of the contract for the proprietors to continue to have the benefit of occupation fees paid in advance without providing any consideration for these fees.
7. There is no evidence before the Tribunal as to any term of the occupancy agreement that relates how occupation fees paid in advance at the end the agreement would be dealt with. However, at the least, the Tribunal may imply a term into the occupancy agreement to give effect to the presumed intentions of the parties: Codelfa Construction v SRA (1982) 149 CLR 337 [at p 345] per Mason J. That term is that occupation fees paid in advance at the end of the occupancy agreement will be refunded to the resident.
8. It follows from this analysis that the resident is entitled to an order pursuant to sub-section 32(4)(c) of the BH Act that will require the proprietors to refund him $642.86 in occupation fees he had paid in advance on 3 July 2017 when the occupancy agreement ended.

Are the proprietors entitled to retain the key deposit to cover the costs of enforcement of the termination notice?

1. The proprietors seek to claim the cost they incurred in changing the lock on the door of the resident's room in order to recover possession of the premises when the resident failed to give up possession in accordance with their termination notice. On any view, the cost incurred by the proprietors in changing the lock is an enforcement cost.
2. It is not disputed that at the commencement of the occupancy agreement, the resident paid the proprietors a key deposit of $40.00. In general terms, the Tribunal may infer that this deposit was to be held in trust by the proprietors as security against the resident's default on an obligation that he had under the occupation agreement with respect to the lock and key to his room. In this respect it is a "security deposit" within the meaning of Occupancy principle 8(4). When the Occupancy principles came into force on 1 October 2013 the proprietors became obliged by section 31 of the BH Act to exercise their rights and powers under the occupancy agreement that subsisted between them and the resident subject to the Occupancy principles, including in relation to the key deposit.
3. Occupancy principle 8(2)(d) states that a proprietor may apply a security deposit to the reasonable cost of replacing locks or other security devices altered, removed or added by the resident without the consent of the proprietor. It does not permit the use of a security deposit to cover the cost of replacing a lock to enforce a termination notice. There is no issue in this case that the resident changed or replaced the lock and key to his room in the course of the occupancy agreement. Occupancy principle 8(2)(d) thus provides no warrant for the proprietors to retain the resident's key deposit. In this respect, I note that Occupancy principle 8(2)(a) to (e) prescribes a closed list of items to which a proprietor may apply a security deposit. It is not open to a proprietor to apply a security deposit for a purpose not stipulated in that list.
4. It follows from this analysis that the proprietors have exercised their rights and powers under the occupancy agreement with respect to the key deposit in a manner that is inconsistent with Occupancy Principle 8. They are not entitled to do so. The result is that the key deposit must be returned to the resident. I will make an order to this effect.

Are the proprietors entitled to compensation for damage and loss they claim to have incurred at the end of the occupation agreement?

1. The proprietors claim that the resident breached his obligations under the occupancy agreement by failing to leave the premises reasonably clean having regard to their condition at the commencement of the occupancy agreement, and by causing or permitting damage to his room beyond fair wear and tear. They also claim compensation for the costs of enforcing the termination notice, being the cost of changing the lock to his room. Additionally, it emerged in the hearing that the proprietors sought to be compensated for the period of lost use of the room after 3 July 2017 until the room could be re-let. As noted above, the BH Act provides the proprietors with a cause of action to pursue this claim, but they have not done so (to date).
2. In this case I am dealing with the resident's application in the absence of there being any related claim by the proprietors before me. The only orders I could make benefiting the proprietors in the context of the resident's application would be in relation to the distribution of a security deposit. For the reasons I have stated above, I cannot make any such orders in this case. I am therefore not called upon to determine the merits of the proprietors' compensation claim.
3. If I did have a related (or cross) application before me, to any extent that that claim was successful, I would have been able to offset the results in both applications against each other to finalise the rights and obligations of the parties under the occupancy agreement. However, that opportunity did not arise in the circumstances of this case. In the course of the hearing, I considered if I ought to offer the proprietors an adjournment to enable them to make their own application to the Tribunal for an order for compensation to be dealt with concurrently with the resident's application. I accept that under certain circumstances I am bound to offer this even if it is not requested of me, especially when a party is not legally represented: Wilson v Chan & Naylor Parramatta Pty Ltd as trustee for Chan & Naylor Parramatta Trust [2016] NSWCATAP 236 [at 21] and the authorities set out there. However, I determined that it was not appropriate to do so in the circumstances of this case for the following reasons.
4. While the proprietors are not legally represented, they are represented by a Managing Agent who may be taken to have professional expertise in the law concerning registerable boarding houses. At all material times for this dispute the proprietors have had the benefit of that specialist knowledge. Despite this, they did not make an application to the Tribunal for a compensation order prior to the hearing and they did not request an adjournment of the hearing to enable them to do so.
5. Even if the Managing Agent had made an application for an adjournment at the hearing, or if I had granted this of the Tribunal's own motion, to enable an application for compensation to be made, any such application subsequently made would be more than 90 days outside the time period permitted by Rule 23 of the NCAT Rules. To justify an extension of time being granted to permit the proprietors to make an application for compensation after such a long delay, the Tribunal would need to be satisfied that the proprietors claim had substantial merit. In this respect, it appears to me that the proprietors would face serious difficulties, and that the claim would have limited prospects of success.
6. In relation to the compensation claim for cleaning costs, there is a dispute between the parties as to the condition of the premises at the commencement of the occupancy agreement. The resident claims that he left his room in a cleaner condition than that in which it was provided to him at the commencement of the occupancy agreement. Having regard to the condition of the premises at the end of the occupancy agreement depicted in the proprietors' photographs that would appear inherently unlikely. However, the proprietors appear to have no objective evidence of the condition of the premises at the commencement of the occupancy agreement (such as a condition report). This may make the proof of this element their compensation claim challenging.
7. The proprietors also seek to claim from the resident the new replacement cost of the carpet in his room. The resident denies causing any damage to the carpet beyond mere wear and tear. As noted, there is no condition report that records the condition of the carpet at the commencement of the occupancy agreement. This would present difficulties for the proprietors in proving the resident breached his obligation not to cause damage to the carpet.
8. Even if the proprietors were able to establish that the resident did cause damage to the carpet beyond mere wear and tear, the measure of their loss would be the loss in future use of that asset they suffered, not its new replacement cost: see further Yang v NSW Land and Housing Corporation [2016] NSWCATCD 37 and the authorities on which it relies. In this case it appears to be accepted that the carpet was of considerable age. It appears to have been in place for the whole period of the occupation agreement, which was approximately five years. If the carpet exceeded 10 years of age, the Tribunal is unlikely to be persuaded that it had any value in terms of future use: that is, it would be open to the Tribunal to conclude that its useful life had ended on the basis it had fully depreciated: Australian Taxation Office, Guide for Rental Properties 2017, NAT 1729-06.2017 [at 36]. The proprietors therefore may face a difficulty in establishing any damage and loss in relation to the carpet.
9. In relation to the proprietors' claim for compensation for the costs of enforcing the termination notice, they may face a difficultly in identifying a cause of action that would entitle them to recover this cost. In this case there is no written occupation agreement that sets out the obligations of the parties on the termination of the occupancy agreement upon which the proprietors are able to rely. In the absence of a specific term dealing with the issue, enforcement costs would not generally arise from a breach of the occupation agreement by the resident. Enforcement costs are in the general character of legal costs, not damages. Legal costs are assessed differently to damages, their award being a matter of discretion (see further Gray v Sirtex Medical Limited [2011] FCAFC 40 [at 15 to 17]).
10. I make these observations on the merits of the proprietors' compensation claim only to explain why I declined to exercise discretion to adjourn the application before me to allow time for the proprietors to make a related application. I make no findings of fact or law in relation to the claim that would prevent the Tribunal from dealing afresh with any application for compensation that might now be made by the proprietors.

Conclusion

1. For the reasons set out above the resident is entitled to an order that will require the proprietors to pay him $682.86 immediately, constituted by $642.86 in occupation fees he had paid in advance when possession of his room was recovered by the proprietors on 3 July 2017, and the $40.00 key deposit he paid at the commencement of the occupancy agreement. P French General Member Civil and Administrative Tribunal of New South Wales 15 November 2017 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: 26 June 2018