CAN22 Pty Ltd (Receivers and Managers Appointed) v Barbaro

NCAT Consumer and Commercial|2023-08-22

Introduction

The substantive application before the Tribunal is an application pursuant to s 11 of the Residential Tenancies Act 2010 (NSW) (the RT Act) that would declare that an agreement that subsists between the respondent and CAN22 Pty Ltd is a residential tenancy agreement to which that Act applies. The applicant also applies for an order pursuant to s 60 of that Act that would authorise it to enter the premises that is the subject of that agreement, including for the purpose of showing it to prospective purchasers. Additionally, the applicant applies for an order pursuant to s 87 of that Act that would terminate the agreement and require the respondent to give it possession of the premises on the ground of non-payment of rent. This application was made to the Tribunal on 2 June 2023 (the residential tenancy application).
However, before me for determination is an interlocutory application by the applicant for an order pursuant to clause 6(1) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) that would transfer the application to the Supreme Court of NSW to be dealt with concurrently with another claim that has been filed in that jurisdiction by the respondent (the pre-existing Supreme Court proceedings) (the transfer application). The applicant contends that this is necessary because at the time its' residential tenancy application was made an issue arising in this proceeding was the subject of a dispute in the pre-existing Supreme Court proceedings. Consequently, the applicant contends the Tribunal has no jurisdiction to determine the dispute by operation of clause 5(7) of the NCAT Act.
The respondent opposes the transfer application. She submits that the Tribunal does not have jurisdiction to deal with the residential tenancy application at all because by operation of s 8(f) of the RT Act the agreement is not an agreement to which that Act applies. It is also contended that the issue of the correct characterisation and interpretation of the agreement relied upon by the applicant as a residential tenancy agreement is already the subject of a dispute in her pre-existing Supreme Court proceedings. It is said that by operation of clause 5(7) of the NCAT Act the residential tenancy proceedings cannot subsist in the Tribunal during the pendency of the Supreme Court proceedings and that Tribunal is deprived of power to exercise any function with respect to the application, including the power to transfer the application to the Supreme Court.

Procedural history

The application was first listed before the Tribunal, differently constituted, for Conciliation and Hearing by AVL on 21 June 2023. Both parties were represented by their legal representatives at that listing. In accordance with the Tribunal's usual practice where both parties are present at the first listing of an application the Tribunal attempted to assist the parties to resolve the dispute by Conciliation. Those efforts were not successful.
The issue of the Tribunal's jurisdiction to determine the application was identified at that hearing. Consequently, the Tribunal set this issue down for hearing as a preliminary issue and made directions for the filing and exchange of evidence and submissions in relation to this issue. Leave was granted for both parties to be legally represented in the proceedings.

Evidence and hearing

Both parties have complied with the Tribunal's directions for the filing and exchange of evidence and submissions. The applicant relied upon bundles of documents and/or submissions filed on 22 June 2023, 13 July 2023, and 11 August 2023. The respondent relied upon bundles of documents and/or submissions filed on 20 June 2023 and 8 August 2023.
The Special Fixture Hearing was conducted in person. Mr N Li of Counsel appeared for the applicant. Ms B K Nolan of Counsel appeared for the respondent. No witness evidence was called. The matter proceeded on the basis of submissions and oral argument.

Background facts

The respondent is the former registered proprietor of a property at Edensor Park on which is situated a residential dwelling which she occupies as a residence ("the property"). In December 2021, the property was independently valued at $1,700,000.00.
In 2021 the property was mortgaged to Pepper Finance Corporation Limited (Pepper) with $867,753.74 owing. Another entity, Kolargi Pty Ltd, also held a caveat on the property in respect of a debt of $390,000.00 it asserted the respondent owed to it. In the second half of 2021 the respondent was in financial stress with respect to the property and was in dispute with Pepper which had commenced foreclosure action.
In that context the respondent had dealings with Ben Horne who was a solicitor and Principal of Aqua Law Pty Ltd. In the Supreme Court proceedings, she contends that a retainer existed pursuant to which Mr Horne and/or Aqua Law Pty Ltd provided her with legal and financial advice in relation to the sale of the property and Pepper's foreclosure action.
On 23 February 2022 Pepper issued the respondent with an eviction notice requiring her to give it possession of the property on 5 April 2023.
On 24 February 2022 an entity somehow associated with Mr Horne, CAN22 Pty Ltd atf CAN22 Trust, entered into a Contract for the Sale and Purchase of Land to purchase the property from the respondent for $3,300.000.00. Settlement of that sale was to occur 42 days later.
On or about 25 February 2022 a document came into existence which is in the form of a standard form residential tenancy agreement. The stated parties to that document are CAN22 Pty Ltd which is described as "landlord" and Lina Barbaro who is described as "tenant". The property is described as the "residential premises". The document states that the "term of agreement" is "12 months" starting on "/03/2022" and ending on "/03/2023". It states that the "rent" is "$1,500.00 per week payable in advance starting on /03/2022". There is an issue as to whether this document was ever signed.
The respondent has a son, Francesco Barbaro, who was at the material time, the sole director and shareholder of Blu Estate Pty Ltd.
In or about 10 March 2022 the respondent and Blue Estate Pty Ltd entered into a Deed of Agreement with CAN22 Pty Ltd atf CAN 22 Trust and Benjamin Horne pursuant to which the respondent agreed to direct the proceeds of sale of the property in a specified manner, which was, broadly, to discharge the mortgage to Pepper and the debt to Kolargi, to make two payments to Blu Estate, to pay Aqua Law legal fees of approximately $400,000.00, and to allow CAN22 to retain $150,000.00 in respect of a "Vanuatu project"
Clause (c) of the Deed's Operative provisions provided as follows: (c) Lina is to remain in the Property under a Residential Tenancy Agreement for a 12 month period from the date of completion of the Contract for Sale (the anniversary date). The rental is to be $1,500 per week which will be deferred for the first twelve month period.
Clause (e) of the Operative provisions provided as follows: (e) On or before 12 months from the Completion Date, Lina or her nominee will be entitled to purchase all of the Units in CAN 22 (the Unit Purchase) so as to purchase the Property for a price which will cover [the loan then owing, and related exit costs, stamp duty on the original purchase, disbursements, and any applicable GST)
CAN22 Pty Ltd's purchase of the property was financed, at least in part by Aquamore Finance Pty Ltd.
On 6 March 2023 Aquamore Finance Pty Ltd appointed Desmond Teng and John Refalo (Teng and Rafalo) joint and several Receivers and Managers of CAN22 Pty Ltd in its own right and as trustee for CAN22 Trust.
On 23 March 2023, by Statement of Claim, the respondent commenced proceedings in the Supreme Court of New South Wales (proceedings no. 2023/00094883) (the Supreme Court proceedings). Mr Horne and Aqua Law Pty Ltd are the first and second defendants to that claim respectively. CAN22 Pty Ltd is the third defendant. The relief sought by the respondent in those proceedings includes the following: 1. A declaration that the Contract for the sale and purchase of the property … entered into by the plaintiff and the third defendant, CAN22 Pty Ltd ATF CAN 22 Trust on or about 22 February 2022 is void ab initio under the general law. 2. A declaration that the Deed of Agreement entered into by the plaintiff, the first defendant, Benjamin John Horne, and the third defendant on or about 14 March 2022 is void ab initio under the general law or pursuant to section 7(1)(b) of the Contracts Review Act 1980 (CRA).
Subsequent to their appointment as Receivers and Managers ,Teng and Rafalo in April and May 2023 made demands on the respondent that she pay rent it is contended she owes CAN22 Pty Ltd pursuant to a residential tenancy agreement. The respondent has not acceded to those demands. Teng and Rafalo have also purported to issue the respondent with Notices of Termination the purported residential tenancy agreement under s 85 (end of periodic tenancy) and 87 (breach of the agreement) on the ground of non-payment of rent. The respondent has refused to give up possession of the premises in response to those Notices, which has resulted in the applicant's residential tenancy proceedings being instituted before the Tribunal.

Applicable law

Part 1, Division 2 of the Act concerns the application of the RT Act. Section 8 in that Part specifies forms of occupation agreements to which the Act does not apply. In this respect it provides, relevantly: 8 Agreements to which Act does not apply (1) This Act does not apply to the following agreements: … (f) an agreement for the sale of land that confers a right to occupy residential premises on a party to the agreement, …
Section 11 in that Part provides: 11 Declaration by Tribunal The Tribunal may, on application by the Secretary or another person, make an order declaring that a specified agreement is, or is not, a residential tenancy agreement to which this Act applies or that specified premises are, or are not, premises to which this Act applies.
Part 3, Division 4 of the RT Act deals with a landlord's rights to enter residential premises. In this respect s 60 provides: 60 Landlord's remedies relating to access to premises (1) The Tribunal may, on application by a landlord, make any of the following orders - (a) an order authorising the landlord or any other person to enter the residential premises for a purpose permitted under this Division, (b) an order authorising the landlord or any other person to enter the residential premises for the purposes of showing the residential premises to prospective purchasers on a periodic basis (c) an order authorising the landlord or any other person to enter the residential premises for the purpose of determining whether the tenant has breached a term of the residential tenancy agreement. (2) The order may specify the days and times, and purposes for which, entry to the residential premises is authorised.
Part 5, Division 2 of the Act sets out the circumstances in which a residential tenancy agreement may be terminated by a landlord. Section 87 in that Part concerns termination by a landlord on the ground of breach of the agreement by a tenant. It provides: 87 Breach of Agreement (1) A landlord may give a termination notice on the ground that the tenant has breached the residential tenancy agreement. (2) The termination notice must specify a termination date that is not earlier than 14 days after the day on which the notice is given. (3) The termination notice may specify a termination date that is before the end of the fixed term of the residential tenancy agreement if it is a fixed term agreement. (4) The Tribunal may, on application by a landlord, make a termination order if it is satisfied that - (a) the tenant has breached the residential tenancy agreement, and (b) the breach is, in the circumstances of the case, sufficient to justify termination of the agreement, and (c) the termination notice was given in accordance with this section and the tenant has not vacated the premises as required by the notice. (5) In considering the circumstances of the case, the Tribunal may consider (but is not limited to considering) the following - (a) the nature of the breach, (b) any previous breaches, (c) any steps taken by the tenant to remedy the breach, (d) any steps taken by the landlord about the breach, (e) the previous history of the tenancy. (6) The Tribunal may refuse to make a termination order if it is satisfied the tenant has remedied the breach.
The meaning of the term "Tribunal" is found in s 3 of the Act. It means the Civil and Administrative Tribunal.
Part 6 of the RT deals with the recovery of possession of premises. Section 119 in that Part prohibits certain recovery proceedings in courts: 119 Prohibition on certain recovery proceedings in courts. A landlord or former landlord must not commence proceedings against a tenant or former tenant of the landlord in the Supreme Court, the District Court or the Local Court to obtain recovery of possession of the residential premises subject to a residential tenancy agreement.
Part 2 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) concerns the establishment of the NSW Civil and Administrative Tribunal (NCAT). Section 16 concerns NCAT's Divisions. It provides, relevantly: 16 Divisions of Tribunal (1) On the establishment of the Tribunal, there are to be the following Divisions of the Tribunal - … (b) the Consumer and Commercial Division, … (2) The functions of the Tribunal in relation to enabling legislation that are allocated to a Division of the Tribunal are to be exercised in that Division. Note: Section 4(2) provides that a reference in this Act (however expressed) to the exercise by the Tribunal of its functions in relation to other legislation includes a reference both to its functions under the legislation and its functions under this Act in relation to the legislation. (3) The functions of the Tribunal in relation to enabling legislation that are allocated to a Division of the Tribunal are the functions in relation to such legislation that are allocated to the Division by the Division Schedule for the Division. …
Section 17 of the NCAT Act concerns the Division Schedule for a Division of NCAT. It provides, relevantly: 17 Division Schedule for a Division of Tribunal (1) The "Division Schedule" for a Division of the Tribunal is the Schedule to this Act that provides for the composition and functions of that Division. (2) Without limiting subsection (1), a Division Schedule for a Division of the Tribunal may include provisions about the following matters - … (c) the allocation to the Division of functions of the Tribunal in relation to enabling legislation, … …
Schedule 4 of the NCAT Act is the Consumer and Commercial Division's Division Schedule. It provides, relevantly: Schedule 4 - Consumer and Commercial Division … Part 3 - Functions of Division 3 Functions allocated to Division (1) The functions of the Tribunal in relation to the following legislation are allocated to the Division - … Residential Tenancies Act 2010 … (2) Subclause (1) extends to - (a) any functions conferred or imposed on the Tribunal by statutory rules made under legislation referred to in that subclause, and (b) any functions conferred or imposed on the Tribunal by or under this Act or enabling legislation in connection with the conduct or resolution of proceedings for the exercise of functions allocated by that subclause (including the making of ancillary and interlocutory decisions of the Tribunal). … Part 5 - Special practice and procedure 5 Relationship between Tribunal and Courts and Other Bodies in connection with Division Functions … (3) Effect of application to Tribunal or court: If, at the time when an application was made to the Tribunal for the exercise of a Division function, no issue arising under the application was the subject of a dispute in proceedings pending before a court, a court has no jurisdiction to hear or determine such an issue. (4) Subclause (3) ceases to apply to the extent to which the application concerned is dismissed for want of jurisdiction or withdrawn. … (6) For the purposes of subclause (3), an issue arises under an application only if the existence of the issue is shown in the applicant's claim or is recorded in the record made by the Tribunal in accordance with this Act. (7) Effect of pending court proceedings on Tribunal: If, at the time when an application is made to the Tribunal for the exercise of a Division function, an issue arising under the application was the subject of a dispute in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue. (8) Subclause (7) ceases to apply to the extent to which the proceedings concerned are dismissed or quashed by the court, or by another court, for want of jurisdiction or without deciding the issue on its merits, or withdrawn. (9) Evidence from court proceedings: In proceedings on an application to the Tribunal for the exercise of a Division function, a finding or decision made by a court … is admissible as evidence of the funding or decision. (10) Clause prevails over other law: This clause has effect despite Part 3 of this Act or any law to the contrary. 6 Transfer of proceedings to Courts or to other Tribunals (1) If the parties in any proceedings for the exercise of a Division function so agree, or if the Tribunal of its own motion or an the application of a party so directs, the proceedings are - (a) to be transferred to a court (in accordance with the rules of that court) that has jurisdiction in the matter, and (b) to continue before that court as if the proceedings had been instituted there. (2) If the parties in any proceedings that have been instituted in a court so agree, or if the court of its own motion or on the application of a party so directs, the proceedings are, if the proceedings relate to a matter for which the Tribunal has jurisdiction to exercise a Division function - (a) to be transferred to the Tribunal in accordance with the procedural rules (if any), and (b) to continue before the Tribunal as if the proceedings had been instituted in the Tribunal.
Part 3 of the NCAT Act sets out NCAT's jurisdiction. Section 28 in that Part deals with NCAT's jurisdiction generally. It provides, relevantly: 28 Jurisdiction of Tribunal generally (1) The Tribunal has such jurisdiction and functions as may be conferred or imposed on it by or under this Act or any other legislation. (2) In particular, the jurisdiction of the Tribunal consists of the following kinds of jurisdiction - (a) the general jurisdiction of the Tribunal, … …
Section 29 of the NCAT Act specifies NCAT's general jurisdiction. It provides, relevantly: 29 General jurisdiction (1) The Tribunal has "general jurisdiction" over a matter if - (a) legislation (other than this Act or the procedural rules enables the Tribunal to make decisions or exercise other functions, whether on application or of its own motion, of a kind specified by the legislation in respect of that matter, … … (2) The Tribunal also has the following jurisdiction in proceedings for the exercise of its general jurisdiction - (a) the jurisdiction to make ancillary and interlocutory decisions of the Tribunal in the proceedings, … …
The term "ancillary decision" is defined in s 4 of the NCAT Act: It means, relevantly: "ancillary decision" of the Tribunal means a decision made by the Tribunal under legislation (other than an interlocutory decision of the Tribunal) that is preliminary to, or consequential on, a decision determining proceedings, including (a) a decision concerning whether the Tribunal has jurisdiction to deal with a matter, and …

Consideration

To determine the outcome of the applicant's transfer application, the Tribunal must pose and answer the following questions: 1. Does the application concern the exercise of a Division function? 2. If so, at the time the application was made, was an issue arising under the application the subject of a dispute in the Supreme Court proceedings? 3. If so, what effect does this have on the Tribunal's jurisdiction to deal with the application? 4. Subject to the above, should the application be transferred to the Supreme Court?
The functions of NCAT's Consumer and Commercial Division include matters arising under the RT Act (ss 16, 17 and Schedule 4, clause 3(1) of the NCAT Act). One of those functions is found in s 11 of the RT Act; it is the function of declaring whether a particular agreement is or is not a residential tenancy agreement to which that Act applies. The answer to that question is legally and logically prior to the question of whether the Tribunal's functions with respect to a landlord's access to premises, or in relation to the termination of a residential tenancy agreement, are engaged. If the Tribunal declares that an agreement is not a residential tenancy agreement to which the RT Act applies, it will have no jurisdiction to make access or termination orders. However, the legislative scheme clearly confers jurisdiction on the Tribunal in s 11 to determine if its functions under the RT Act are engaged by a particular agreement.
The respondent contends that the agreement in this case falls within the scope of s 8(f) of the RT Act which operates to wholly deprive the Tribunal of jurisdiction to deal with the application. It is contended on the basis of what is said in Citta Hobart Pty Ltd v Cawthorn [2022] HCA 16 at [17] to [28] that the Tribunal has a duty to act only within its jurisdiction and that it therefore must make a determination as to whether it has jurisdiction in relation to the agreement before exercising any power with respect to the application, including the power of transfer to a Court found in Schedule 4, clause 6(1).
In my view this submission misconstrues the nature of the Tribunal's power under s 11 of the RT Act. That power plainly is not predicated on the existence of a residential tenancy agreement to which the RT Act applies. That is because the Tribunal may exercise the function conferred by that section to determine that an agreement is not a residential tenancy agreement to which the Act applies.
Whether the impugned agreement in this case does or does not fall within the scope of s 8(f) is a fact to be found pursuant to an exercise of the power conferred on the Tribunal by s 11.
I am thus satisfied that the residential tenancy application concerns the exercise of a Division Function.
However, the ultimate issue of whether there is a residential tenancy agreement subsisting between the parties was the subject of a dispute in the proceedings that had been filed by the respondent on 23 March 2023 in the Supreme Court of NSW when this application was made on 2 June 2023. That fact is not in issue between the parties, and it is clearly the case.
Because those proceedings were before the Court on the date the applicant filed its residential tenancy application in NCAT, the Tribunal is prevented from determining that issue by operation of Schedule 4, clause 5(7) of the NCAT Act. While ever that issue is before the Court, it must be determined by the Court.
However, clause 5(7) only operates to deprive the Tribunal of jurisdiction to determine that "issue", it does not operate to deprive the Tribunal of all power to deal with the application. The Tribunal continues to have general jurisdiction to deal with the application, including jurisdiction to make ancillary decisions: ss 28, 29, and Schedule 4, clause 3(2) of the NCAT Act. In this respect an order transferring a proceeding to a Court is an ancillary decision, being one that is preliminary to determining proceedings.
Additionally, Schedule 4 clause 6(1) empowers the Tribunal to transfer proceedings for the exercise of a "Division Function" to a Court. The Division Function found in s 11 of the RT Act is not dependent upon the Tribunal having any broader jurisdiction to deal with an application under the RT Act. Moreover, the transfer power in Schedule 4, clause 6(2) does not require the Tribunal to have jurisdiction in respect of the "issue", but for the proceedings to "relate to a matter for which the Tribunal has jurisdiction to exercise a Division Function: Sunaust Properties Pty Ltd v Owners - Strata Plan No 64807 [2022] NSWSC 1643 at [21] and [23].
For these reasons I am satisfied that the Tribunal has power to transfer the residential tenancy application to the Supreme Court.
The power to transfer the application to the Supreme Court is discretionary in nature. That discretion is unfettered by any provision of the NCAT or RT Acts, but it must nevertheless be exercised judicially. It must be in the interests of justice to do so.
I am satisfied that it is in the interests of justice for the application to be transferred.
The guiding principle to be applied in all aspects of the Tribunal's practice and procedure is the just, quick, and cheap resolution of the real issues in a dispute: s 36(1) of the NCAT Act. Allowing a bifurcation of a dispute to persist is inconsistent with that guiding principle.
If a residential tenancy agreement is found by the Court to subsist between the parties the applicant will face a difficulty in this Tribunal in obtaining an order for payment of outstanding rent. That is because the rent arrears claimed far exceed the prescribed limit on NCAT's order making power imposed by s 187(4)(a) of the RT Act and s 40 of the Residential Tenancies Regulation 2019 (NSW), which is $15,000.00 (the last letter of demand served by the Receivers and Managers on the respondent in May 2023 claimed $78,000.00 in unpaid rent at that time). The Supreme Court would be able to make a money order for any amount of rent proved to be owed by the respondent if a residential tenancy agreement is found.
I also accept the applicant's submission that it would be at a forensic disadvantage if its residential tenancy application was not transferred to the Court. That is because it is the Third Defendant in those proceedings and its' participation is limited to pleading a defence to the respondent's claim. As a defendant it is not able to assert an affirmative case. Transfer of this application, and its joinder with the respondent's Supreme Court proceedings, will enable it to do so, including in relation to any rent that may be found to be owing as explained above.
Because of s 119 of the RT Act there may be an issue as to whether the Supreme Court has power to make orders for termination and possession if a residential tenancy agreement is found. That is a matter for that Court. However, if the Court were to conclude that it did not have this power any remaining element of the residential tenancy application could be transferred back to the Tribunal pursuant to the power contained in Schedule 4, clause 6(2) of the NCAT Act: Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 944 at [524]; Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [6] and [10]. The possibility that it is only NCAT that has jurisdiction to make an order for termination of a residential tenancy agreement is not a sufficient reason to refuse the application for transfer.
It was submitted in argument on behalf of the respondent that a further reason why transfer should be refused was the fatal weakness in the applicant's case. I do not accept this submission. The applicant has an arguable claim on the face of the application. I do not have jurisdiction to determine the primary issue on which the merit of the application turns. That is a matter for the Court to determine.

Orders

For the foregoing reasons, I make the following orders: 1. The application is transferred to the Supreme Court of New South Wales.

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: 02 January 2024

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