Bridget Ann O'Neill v Commonwealth Bank of Australia

EX TEMPORE Judgment 1The plaintiff in these proceedings, Ms Bridget Ann O'Neill, signed a residential tenancy agreement in respect of premises in Stanmore ("the Stanmore premises") on 17 May this year. Two days ago, on Wednesday of this week, 12 June 2013, the Commonwealth Bank of Australia ("the Bank"), the mortgagee of the Stanmore premises, executed writs of possession against the registered proprietor of the premises, Mr Elio Coppola. 2Ms O'Neill's residential tenancy agreement is in the form of a standard residential tenancy agreement in conformity with the Residential Tenancies Regulation 2010 made under the Residential Tenancies Act 2010 ("Residential Tenancies Act"). It gives her possession of the Stanmore premises on the payment of rent of $1,000 a fortnight for a three-month period from 17 May and expiring on 17 August 2013. 3As a result of the execution of the writ of possession on Wednesday, Ms O'Neill was locked out of these premises. She applies to the Court today in the Court's possession list for orders that she is entitled to occupation of the Stanmore premises as against the Bank for the remaining period of the tenancy, until 17 August 2013. And further she seeks an order that the Bank, do all things reasonably necessary to facilitate the restoration of her entitlement to occupation under her residential tenancy agreement. 4The matter came on in the Common Law duty list at about 3pm this afternoon. The Court is now sitting after hours and must determine this matter immediately. I have asked both sides whether they want to deal with this proceeding on an interim or a final basis and whether they want an adjournment. Both sides have declined to deal with the matter on an interlocutory basis. The Bank does not want an adjournment, although this matter has come on at only a few hours notice. Ms O'Neill indicates that she also wishes to proceed today, as she has been locked out of the Stanmore premises. So this is judgment on a final hearing upon the basis of very limited evidence and upon equally brief submissions. 5Mr O'Neill of counsel represents the plaintiff, his sister, on a pro bono basis. Ms Carter appears for the Bank. A mortgagee, a mortgagor and a tenant 6There are two sets of legal relationships that need to be dealt with here: one between Ms O'Neill and the person from whom she took possession of the Stanmore premises; and the other, between the Bank and the registered proprietor. Those two relationships came into conflict on Wednesday. 7I make the following findings based on the evidence before me. Ms O'Neill signed the 17 May residential tenancy agreement with Mr Angelo Coppola and Ms Maria Coppola, who are described in it as joint landlords. The other essential terms of the residential tenancy agreement are as described earlier in these reasons. Ms O'Neill occupied the Stanmore premises between 17 May and 12 June. But on 12 June she was notified that her landlords had been evicted. Prior to that, she says, and I accept, she had no notice from any person that her landlord was to be evicted. During the eviction a mercantile agent in the company of the Sheriff changed the locks on the premises. Since then Ms O'Neill has been unable to obtain access to them. 8Ms O'Neill says, and I accept, that she was given a very short period yesterday from approximately 5pm to 5.45pm to gain access to the property for the purposes of removing some of her belongings. This was insufficient time for her to remove all her belongings. She says that prior to that time she was still wearing the clothes that she had been wearing the previous day. A large majority of her possessions, both perishable and non-perishable, still remain in the premises. She would like to be permitted to complete the term of her tenancy of the premises, which expires on 17 August 2013. 9The Bank says that Ms O'Neill has been offered what I might call the "usual terms" in these circumstances. The Bank has offered to pay her some four weeks' rental for the purposes of her finding other accommodation and offered to give her more access to the premises to remove her goods. Her counsel, Mr O'Neill has not contested that such an offer has been made. I accept that it was made. But that is not an offer that is acceptable to Ms O'Neil. Given the timing at which these proceedings have come on for hearing the making of the offer is relevant, as to whether in fairness to all parties, some interim arrangement should be moulded of the kind provided for in the offer. 10The other relevant legal relationship is that between the Bank and members of the Coppola family. I made a decision in this list yesterday in relation to a related proceeding between the Bank and the Coppola family: Commonwealth Bank of Australia v Elio Coppola [2013] NSWSC 830. But I did not deal yesterday with the Stanmore premises. I was dealing with other premises the Coppola family owns in Concord. 11But the Stanmore premises were the subject of a judgment of the Court on 6 December 2012 in the Common Law possession list: Bank of Western Australia Limited v Coppola and Anor (No 2) [2012] NSWSC 1495. There Johnson J made orders entitling the Bank to possession of the Stanmore premises, along with at least one other Coppola family property. 12The next step in the history between the Coppolas and the Bank is that on 4 March this year Campbell J stayed the orders made by Johnson J on 6 December, until 4 May 2013, on certain conditions, including that they make the payments continuing to fall due under the Bank's mortgages. Breach of those conditions by the defendants in those proceedings led to the Bank acting on the writ of possession in respect of the Stanmore property, leading on Wednesday to the Sheriff entering the premises. 13The Stanmore premises are partly commercial and partly residential. They comprise a shop, with the residential area above that Ms O'Neill occupied. It is only that upper residential area which is the subject of the residential tenancy agreement. The Bank has possession of the rest of the Stanmore property. But I note that should Ms O'Neill be restored to occupation of the residential part of the Stanmore premises, ordinary principles of the law of tenancy would apply - her lease would have an implied accommodation for access to those premises through any other part of the commercial premises necessary for the purposes of the enjoyment of her tenancy: Dowse v Wynyard Holdings Ltd [1962] NSWR 252. 14The immediate problem is whether or not Ms O'Neill has lost her rights under the residential tenancy agreement by reason of the execution of the writ of possession. To that, one must look to the relevant statutory structure under the Residential Tenancies Act 2010. 15The argument upon this issue has taken place within two hours. I have been much assisted by the careful argument put on both sides by Mr O'Neill for Ms O'Neill and by Ms Carter for the Bank. Mortgagees, Tenants and the Residential Tenancies Act 16Ms O'Neill's rights arise under the Residential Tenancies Act by reason of her signing a standard form residential tenancy agreement: Residential Tenancies Act, s 6 and Part 2. But despite the terms of the agreement the question here is how secure are those rights against the Bank as mortgagee. 17A preliminary issue is who is her landlord? There is no doubt that the registered proprietor of these Stanmore premises is Mr Elio Coppola. But he died last year. His executrix, Mrs Gabriella Farmakis is administering his estate and has not yet transferred title to the property. The residential tenancy agreement here is not signed by Mrs Farmakis as executrix of his estate as might be expected. The arrangements are more informal. Mrs Maria Coppola, the widow of Elio Coppola, and Mr Angelo Coppola, one of the sons of Mr Elio Coppola are the signatories as landlords. 18Under the Residential Tenancies Act s 3, a landlord means "(a) a person who grants the right to occupy a residential premises under a residential tenancy agreement" or "(c) a tenant who has granted the right to occupy a residential premises to a subtenant". A "landlord" may apparently include someone who is subletting. But there is no evidence on the face of the residential tenancy agreement that it involves a subletting. 19I have no evidence before me about the formal relationship in law between Mr Elio Coppola's executrix, Mrs Farmakis and the named landlords on the residential tenancy agreement, Mrs Maria and Mr Angelo Coppola, other than the unchallenged bare facts just indicated. I am prepared to infer from those fact that Mrs Farmakis has probably given some authority to her mother and her brother to let the Stanmore premises, as part of her administration of her father's estate. It is not clear whether she has taken probate of her father's will as yet. Be that as it may, the residential tenancy agreement Ms O'Neill signed in May appears to conform to the requirements of the Residential Tenancies Act and gives her rights under that Act. 20The questions that follow are whether or not this residential tenancy has now been terminated by the Bank's entry into possession and if so what rights Ms O'Neill has to maintain her residential tenancy as against the Bank. These questions require a closer understanding of the relevant provisions of the Residential Tenancies Act, ss 81, 122 and 125. 21Part 5 of the Residential Tenancies Act deals with the termination of residential tenancy agreements. And Part 6 deals with the recovery of possession of premises. Within Part 5 of the Residential Tenancies Act, s 81 provides that residential tenancy agreements "terminate only in the circumstances set out in the Act", which may include the giving of notice or the making of orders by the tribunal with relevant jurisdiction, the Consumer, Trader and Tenancy Tribunal ("CTTT"). Residential Tenancies Act s 81 provides: 81 Circumstances of termination of residential tenancies (1) Termination only as set out in Act A residential tenancy agreement terminates only in the circumstances set out in this Act. (2) Termination by notice and vacant possession A residential tenancy agreement terminates if a landlord or tenant gives a termination notice in accordance with this Act and the tenant gives vacant possession of the residential premises. (3) Termination by order of Tribunal A residential tenancy agreement terminates if the Tribunal makes an order terminating the agreement under this Act. (4) Other legal reasons for termination A residential tenancy agreement terminates if any of the following occurs: (a) a person having superior title (such as a head landlord) to that of the landlord becomes entitled to possession of the residential premises, (b) a mortgagee of the residential premises becomes entitled to possession of the premises to the exclusion of the tenant, (c) a person who succeeds to the title of the landlord becomes entitled to possession of the residential premises to the exclusion of the tenant, (d) the tenant abandons the residential premises, (e) the tenant gives up possession of the residential premises with the landlord's consent, whether or not that consent is subsequently withdrawn, (f) the interests of the landlord and tenant become vested in the one person (merger), (g) disclaimer occurs (such as when the tenant's repudiation of the tenancy is accepted by the landlord). 22But apart from termination of a residential tenancy agreement by a landlord through the CTTT, Residential Tenancies Act s 81 contemplates other possible means of termination when a mortgagee is involved, as is the case here. Residential Tenancies Act s 81(4)(b) provides that another legal reason for termination of a residential tenancy agreement is if "a mortgagee of the residential premises becomes entitled to possession of the premises to the exclusion of the tenant" (emphasis added). 23Residential Tenancies Act s 122 provides a regime of mutual mortgagees' and tenants' rights for mortgagees taking possession of rented properties from former tenants. This regime meshes closely with the operation of Sheriff Act 2005 s 7A. Section 122 provides as follows: (1) Application This section applies if a residential tenancy agreement is terminated because the mortgagee in respect of the residential premises becomes entitled to possession of the premises and the former tenant under that agreement is given notice to vacate the premises by the Sheriff. Note: The Sheriff must give the former tenant not less than 30 days to vacate the residential premises (see section 7A of the Sheriff Act 2005). (2) Former tenant may withhold or recoup rent etc The former tenant who is holding over after termination of the residential tenancy agreement: (a) is not, during the period of 30 days following the date on which the tenant is given the notice to vacate, required to pay any rent, fee or other charge to occupy the residential premises, and (b) is, if the former tenant has paid any rent in advance for any part of that period, entitled to be repaid the amount of that rent. (3) Tribunal may order repayment to former tenant The Tribunal may, on application by the former tenant, order the repayment to the former tenant of any amount referred to in subsection (2). (4) Inspection of residential premises by prospective purchasers The mortgagee (or any person acting on behalf of the mortgagee) is, during the period in which the former tenant is holding over after termination of the residential tenancy agreement, entitled to enter the residential premises to show the premises to prospective purchasers on a reasonable number of occasions, but only if the former tenant: (a) is given reasonable notice of each such occasion, and (b) agrees to the date and time of the inspection. (5) Mortgagee not prevented from doing certain things This section does not prevent the mortgagee from: (a) taking possession of the residential premises before the date specified in the notice to vacate if the former tenant voluntarily vacates the premises before that date, or (b) changing (by written notice given to the Sheriff and the former tenant) the date specified in the notice to vacate to a later date, or (c) entering into a new residential tenancy agreement with the former tenant in respect of the residential premises. (6) Relationship with other laws This section has effect despite the terms of any court order, contract or other agreement. 24Relevantly, s 122 provides that if a mortgagee becomes entitled to possession of the premises and the "former tenant" under the agreement is given notice to vacate the premises by the Sheriff, then certain mutual rights arise. Those rights include: the former tenant's right for 30 days not to pay any rent for the premises (s 122(2)), the mortgagee's right to take possession of the premises before the date specified in any notice to vacate, if the tenant vacates early (s 122(2)(a)), and the mortgagee's right to enter into a new residential tenancy agreement with a former tenant (s 122(2)(c)). 25A complimentary regime for the Sheriff's execution of writs of possession is provided for under the Sheriff Act 2005. The Sheriff's relevant powers are set out in s 7A as follows: Powers of Sheriff when executing writs and warrants for possession of land 7A Powers of Sheriff when executing writs and warrants for possession of land (1) A sheriff's officer executing a writ or warrant for possession of land may do any of the following: (a) enter the premises and take all reasonably necessary steps to enforce the writ or warrant, (b) use such force as is reasonably necessary to enforce the writ or warrant, (c) obtain the assistance of a police officer. (2) A police officer may, at the request of a sheriff's officer, assist the sheriff's officer to enforce the writ or warrant. (3) The Sheriff must give the occupier of land subject to a writ of possession of land or a writ for the levy of property that relates to land not less than 30 days notice to deliver up possession of the land. (4) Subsection (3) does not apply if the execution of the writ has been previously stayed by a court or if a warrant for possession is issued under the Residential Tenancies Act 2010 , the Residential Parks Act 1998 , the Retirement Villages Act 1999 or the Holiday Parks (Long-term Casual Occupation) Act 2002 . (5) In this section: "writ or warrant for possession of land" means: (a) a writ of possession of land, or (b) a writ for the levy of property that relates to land, or (c) a warrant for possession of residential premises under the Residential Tenancies Act 2010 , or (d) a warrant for possession of residential premises under the Residential Parks Act 1998 , or (e) a warrant for possession of residential premises under the Retirement Villages Act 1999 , or (f) a warrant for possession of a site under the Holiday Parks (Long-term Casual Occupation) Act 2002 . 26The Sheriff is required to give to the occupier of land subject to a writ for possession not less than 30 days' notice to deliver up possession of the land, although that requirement does not exist if the execution of the writ has been previously stayed by a Court. 27But the Residential Tenancies Act ss 124 and 125 also make specific provisions for the recovery of premises subject to a tenancy by a person with a title superior to the landlord. The Act allows the creation of a temporary tenancy between a tenant and a person with superior title (such as a mortgagee) recovering the possession of the premises. Sections 124 and 125 provide: 124 Notice of proposed recovery of premises by person with superior title (1) This section applies if proceedings for the recovery of possession of residential premises are commenced before a court or the Tribunal (whether under this Act or otherwise) by a person (the "plaintiff" ) who is not the landlord or former landlord under the agreement. (2) The court or Tribunal must not give judgment or make an order for possession, unless it is satisfied: (a) as to whether or not there is a person in possession of the residential premises as a tenant under a residential tenancy agreement or a former tenant holding over after termination of a residential tenancy agreement, and (b) that any such person has had reasonable notice of the proceedings brought by the plaintiff. (3) Failure to comply with this section does not invalidate or otherwise affect the judgment or order. 125 Order for tenancy against person with superior title (1) This section applies if proceedings for the recovery of possession of residential premises are commenced before a court or the Tribunal (whether under this Act or otherwise) by a person (the "plaintiff" ) who is not the landlord or former landlord under the agreement. (2) An application may be made under this section by a person who is or was, when the proceedings were commenced, in possession of the residential premises as: (a) a tenant under a residential tenancy agreement, or (b) a former tenant holding over after termination of a residential tenancy agreement. (3) The application may be made to: (a) the court or Tribunal before which the proceedings are pending, or (b) if the proceedings have been completed-the Tribunal, and must be made within the period prescribed by the regulations after the applicant was given notice of the proceedings or (if no notice was given) within a reasonable time after the completion of the proceedings and before possession of the premises is recovered. (4) The court or Tribunal may, on such an application, and if it thinks it appropriate to do so in the special circumstances of the case, make an order vesting a tenancy over the residential premises in the applicant. (5) The plaintiff is to be the landlord under the tenancy and the tenancy is to be on such terms and conditions as the court or Tribunal thinks fit, having regard to the circumstances of the case. (6) Such an application or order may be made before possession of the premises is recovered, even though: (a) notice was not given to the applicant of the proceedings brought by the plaintiff, or (b) the proceedings brought by the plaintiff have been completed. 28Residential Tenancies Act ss 124 and 125 are beneficial provisions that provide a fair and workable statutory regime between mortgagees and residential tenants to ameliorate the potentially harsh effects of the general law in this area. At general law under both common law title and under Real Property Act 1900 title a mortgagor in possession can only grant a lease which will be valid against an existing mortgagee if either the mortgagee has consented to the lease or the mortgagor was entitled to grant the lease without the mortgagee's consent, for example under an express power in the mortgage or under Conveyancing Act 1919 s 106: cf Braham v Parkinson [1962] NSWR 165. Neither the general law nor the Real Property Act makes valid and effective, as against a prior mortgagee a subsequent lease created by a mortgagor without the mortgagee's consent unless one of these exceptions applies: Bank of New South Wales v Hartman & Anor (1955) 72 WN (NSW) 382. The terms of the mortgage were not before the Court at this hearing. And the legal considerations are more complex than this here, especially as the mortgagee already had a judgment for possession (which had been stayed) at the time that Mrs O'Neill entered her residential tenancy agreement. But where a mortgagor leases (as it can be assumed Mrs Farmakis effectively did here in the name of the registered proprietor) otherwise than in accordance with the prior mortgage, the lessee's title is liable to be defeated by the paramount title of the mortgagee: Dudley and District Building Society v Smith (1949) Ch 707 and Commonwealth v Orr (1981) 37 ALR 653 per Fox J at 657 lines 15-20. 29The combined effect of Residential Tenancies Act ss 124 and 125 is to somewhat ameliorate this position of a residential tenant from a mortgagor, as against the mortgagee. The provisions effect this by placing obligations of proof on the mortgagee when taking possession to satisfy a Court that there is no tenant or former tenant under a residential tenancy agreement in possession (s 124) and by allowing for the creation of a tenancy between mortgagee and the former tenant of the mortgagor (s 125). 30But a case like the present, where the tenancy was created (May 2013) well after the mortgagee had judgment for possession (December 2012) tests the limits of this statutory regime. Ms O'Neill's position was especially vulnerable because I find she was given no notice whatsoever of the Bank's possession proceedings. I accept her evidence that the Bank failed to bring the fact of those proceedings to her attention. 31Residential Tenancies Act s 125 gives a tenant liable to be dispossessed by a mortgagee a right to apply to the Court or to the CTTT for relief. Ordinarily the tenant would apply for relief in the Bank's possession proceedings that by s 125(1) attract this remedy. On such application the Court may, in its discretion and on such terms as it think fit, make an order "vesting a tenancy" between that tenant and the person who commenced the possession proceedings. Here Mrs O'Neil has commenced her own proceedings. But that is just a matter of form: she may apply to this Court under s 125(3). 32But s 125 prescribes two kinds of limits for such applications. They may be commenced by a person who "is, or was when the proceedings were commenced, in possession of the residential premises": s 125(2). They must be made within a reasonable time within the completion of the possession proceedings and before possession of the premises is recovered. That is not obviously the case here.