This is an appeal by landlords from a decision of the Tribunal ordering the return of the tenants' bond and ordering the landlords to pay the tenants $15,000, as compensation pursuant to s 187(1)(d) of the Residential Tenancies Act 2010 (NSW) (the "RTA").
With no disrespect to the parties, we shall refer to them in these reasons as the Landlords and Tenants respectively for ease of understanding.
The Landlords' grounds of appeal and submissions were difficult to follow, were replete with unstructured assertions and misconceptions, and displayed a lack of understanding as to what was in issue on an appeal as distinct from what the issues may have been at a hearing at first instance.
We have, as is required of us (see Cominos v Di Rico [2016] NSWCATAP 5), reviewed the stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. We have not, as we are not required to do (see Mendonca v Legal Services Commissioner [2020] NSWCA 84 at [21]), undertaken a partisan analysis of that material with a view to ensuring that the non-legally trained Landlords' representative has not missed some arguable point.
Our examination of the material referred to reveals that the Tribunal fell into four errors, each of which raises a question of law which enables the Landlords to appeal as of right in relation to each error. Those errors require that part of the Tribunal's decision concerning the award of $15,000 to be set aside, and the matter remitted to the Tribunal as originally constituted for the determination of the limited matters specified in our orders.
Given the matter is to be returned to the Tribunal for determination of the matters specified, we need not spend any undue time on the Landlords' grounds of appeal and submissions save as to one matter (concerning the bond) as to do so would not meet the requirements of s 36(4) of the Civil and Administrative Tribunal Act 2013 (NSW) (the "NCAT Act"), namely that the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings.
[2]
Background
The parties entered into a residential tenancy agreement (the "lease") for premises at Bondi, NSW, for twelve months commencing on 16 November 2020 at a weekly rental of $1,070.
Mr Ralph David is the husband of the first appellant, and father of the second appellant. He held a power of attorney from the Landlords, appeared for them before the Tribunal and on this appeal, and, the Tribunal said, effectively acted as owner of the leased premises during the tenancy. The references in the Tribunal's reasons to "Mr David" are a reference to him rather than the second appellant.
After the tenancy commenced, and due to water ingress, a partially collapsed roof and other repair or maintenance issues, disputes arose between the parties.
On 22 March 2021, the Tenants commenced proceedings against the Landlords seeking various orders including orders as to repairs, excessive rent and compensation.
On 16 April 2021, and by consent, the Tribunal terminated the tenancy effective on 30 April 2021 and ordered the Tenants to pay an occupation fee until vacant possession was given. Directions were also given for the preparation for the hearing which took place on 19 July 2021.
After that hearing, the Tribunal made its decision and gave written reasons the following day.
The Tribunal's findings and reasons relevant to this appeal were as follows:
"On any view, the property was significantly affected by water egress (meaning ingress) from the 5th of February 2021 until the tenants vacated the property on the 30th of April 2021 under a consent termination by the Tribunal. Whilst Mr David has tried to minimise the problem [for example referring to a gaping hole in the second bedroom ceiling as "small" - the ceiling collapsed soon after the photo was taken] ...
… That said, as I understand it, the tenants reduced the rent being paid, between the 5th of February 2021 and the16th of April 2021 from $1,040,00 per week to $713.33 per week as a device to compel the rectification of the issues with the property. As I understand the applicant's evidence (sic). That reduction was justifiable in the circumstances.
… The conditions that the applicants had to endure and the loss of amenity in the property were considerable. …
I accept that the amount of compensation payable should be the amount permissible under the NCATs jurisdiction of $15,000.00. The preoccupation of Mr David with cost as evidenced from the email trail produced by the applicants shows a disregard for the duties of a landlord as set out in Division 5 of the Act.
The photos submitted by the applicants show a house very affected by the inaction of Mr David and the affect that had on the occupants must have been considerable.
I note that an award of compensation is not some form of punishment for the landlord (sic), but rather a way of recognising the effect of the breach of the tenancy agreement upon the comfort and well being of the tenants.
I note that there has not been a cross claim made by Mr David. I am satisfied that the Applicants are entitled to the return of the bond given the damage caused by the failure to address the water issues would obscure the cogency of any exit condition report."
[3]
Errors
In our view the Tribunal erred in four respects: first, it failed to identify the cause of action which underpinned the award of compensation; second, it failed to provide any or any adequate reasons explaining why the Tribunal considered each element of the cause of action had been established; third, it failed to provide any or any adequate reasons explaining why it considered the award of the maximum amount of compensation the Tribunal is authorised to award was appropriate; fourth, it either incorrectly held that the Tenants were legally entitled to unilaterally reduce the rent they would pay for the premises or failed to give adequate reasons for finding the rent was excessive.
We shall deal with the first three errors together, followed by the error in relation to rent. We shall then deal with the Landlords' appeal in relation to the bond.
[4]
The Award of Compensation
There were three possible causes of action (that we can immediately see, there may be others) available to the Tenants arising out of the Tribunal's findings of fact set out in the quote above.
First, a breach of the covenant of quiet enjoyment (s 50 of the RTA and cl 15 of the lease). Second, a breach of the Landlords' obligation to provide and maintain the premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises (s 60 of the RTA and cl 19.3 of the lease). Third, an order that rent payable under the residential tenancy agreement was excessive, having regard to the reduction or withdrawal by the Landlords of any goods, services or facilities provided with the premises [s 44(1)(b) of the RTA].
We presume the Tribunal had in mind one of the first two causes of action (and most probably the first), since the award made was for compensation under s 187(1)(d) of the RTA, no orders were made of the kind usually made when the Tribunal considers the rent to be excessive per s 44 of the RTA, and the Tribunal made reference to the maximum amount the Tribunal could order as compensation pursuant to s 187, being $15,000 [see s 187(4)(a) of the RTA and cl 40 of the Residential Tenancies Regulation 2019 (NSW) (the "RTR")].
If that is correct, the Tribunal was obliged to consider and explain its reasoning as to the existence of the relevant obligation, how it was breached and how it assessed the amount of compensation flowing from that breach or breaches.
A time limit applied to any award of compensation under s 187 [see s 190(1) of the RTA and r 39(9) of the RTR], namely that a tenant may only apply to the Tribunal for an order in relation to a breach of a residential tenancy agreement within three months after the tenant becomes aware of the breach (unless time is extended by the Tribunal). Of course, assuming the failure to repair the roof and prevent water ingress was a breach of the residential tenancy agreement, it would appear to us (without deciding) that that was a recurring breach (i.e. recurring each day the appropriate repairs were not effected) rather than a once and for all breach.
The Tribunal's reasons do not contain any reference to this limitation, and we infer the Tribunal overlooked it. It should have been considered, findings of fact made, and reasons given for the Tribunal's decision in relation to that time limitation.
In terms of its reasons for decision, and at the risk of over-simplification, it is a fundamental obligation that the Tribunal explain its reasons so that the parties, and particularly the losing party, knows why the case was lost and why his, her or its arguments of substance were rejected.
The authorities which establish this obligation to give reasons are numerous. As good a summary of the obligation as any other was given by Leeming JA, with whom Simpson AJA agreed, in Gautam v Health Care Complaints Commission [2021] NSWCA 85 at [18] where his Honour said:
"It will, generally speaking, be necessary for the Tribunal to apprehend the gravamen of each side's case, to attend to the central aspects of those cases, and the evidence bearing upon them, and to give reasons for the critical findings of fact and the evidence upon which they turn. It is difficult to speak in terms of inflexible rules. Very much will turn upon the nature of the case and, in particular, the nature of the parties' submissions in support of the findings each seeks to be made."
The last two sentences are, of course, pointers to some of the limitations and qualifications of the obligation to give reasons which we expressed above in perhaps over-simplified terms. However, there is no need in this case to go beyond that simple explanation of principle given the absence of reasons on important points in this case.
Our function is not to determine the optimal level of detail required in the Tribunal's reasons, but rather to determine the minimum acceptable standard - per Payne JA, with whom Leeming JA and Simpson AJA agreed, in Gautam at [57]. The standard required of reasons is not one of perfection.
In our view the Tribunal's reasons did not meet the minimal acceptable standard as they did not explain to the losing party, even in simple terms, which obligation they had breached, how they had breached it and why the sum awarded was reasonable compensation for that breach.
Accordingly, the matter should be remitted to the Tribunal as originally constituted, to correct these errors.
That does not mean that the whole case should be reconsidered. The Tribunal's findings of fact (as set out in its reasons which we have quoted above) should remain undisturbed, and the parties should not be permitted to tender any further evidence in addition to that which they tendered at the hearing before the Tribunal without the Tribunal's leave, which should not be granted, we would have thought, in the absence of exceptional circumstances.
The Tribunal should consider the findings of fact it has already made, make any other findings of fact it considers necessary for the proper determination of the remitted issues, determine whether the Landlords have breached the residential tenancy agreement, assess the appropriate level of compensation if it was breached, and determine any necessarily incidental matters which arise in relation to those matters.
[5]
The Rent
Although it is not completely certain, it appears the Landlords asked the Tribunal to award them an amount for outstanding rent and water usage charges.
The claim seems to arise from the Tenants' unilateral decision to withhold $326.67 per week rent between 5 February and 16 April 2021 (being ten weeks and being a total of $3,266.70) as a device to compel the rectification of the issues with the property.
The Tribunal's reasons are short and obscure, the Tribunal saying no more than "That reduction was justifiable in the circumstances".
On the appeal we were not greatly assisted by the Landlords' representative, but it appears from the documents that there was a claim for outstanding rent made to the Tribunal, it appears to arise from the Tenants' withholding of rent as we have earlier described, it appears to have been considered by the Tribunal but rejected because, for unexplained reasons, the Tribunal considered that the withholding of rent was "justifiable" and therefore did not award the Landlords any amount for outstanding rent.
There are two ways to read the Tribunal's statement that "That reduction was justifiable in the circumstances". The first is that the Tribunal thought the Tenants were legally able to unilaterally reduce their rent. The second is that the Tribunal found in favour of the Tenants on their claim for excessive rent pursuant to s 44(1)(b) of the RTA. Whichever be the case, the Tribunal erred.
Turning to the first possible construction of the Tribunal's reasons, and whilst the withholding of rent might be understandable in human terms, it was not legally justifiable. It is trite law that the obligation to pay rent is generally independent of the landlord's obligations under a residential tenancy agreement.
As was said in Seymour v Wu [2021] NSWCATAP 289:
"44. Be that is it may, as the Tribunal said, correctly in our view, the obligation upon a tenant to pay rent (see clause 3.1 of the 2014 Agreement) is separate from the obligation of the landlord to maintain the premises fit for habitation (RTA s 52) and in a reasonable state of repair (RTA s 63 and s 65), assuming Mr Seymour relies upon those sections.
45. The unilateral withholding of any amount of agreed rent is not a remedy available to a tenant unless the parties have agreed otherwise, there is a statutory abatement of rent, or an authorised deduction or abatement of the rent - Halsbury's Laws of Australia, online edition, at [245-3090]; Chatfield and Another v Elmstone Resthouse Ltd [1975] 2 NZLR 269; Lolly Pops (Harbourside) Pty Ltd v Werncog Pty Ltd, NSWSC, unreported, 1 July 1998; (1998) 9 BPR 16,361.
46. As Mullighan J said in Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd [2000] SASC 244; (2000) 77 SASR 261 at 271:
'Liability to pay rent does not cease merely because the lessor has breached a covenant. The only deductions which can be made by the tenant are those authorised by statute or expressly permitted by the lease …'"
See also Butt P, Land Law, 6th ed., Lawbook Co, 2010 at [15.94].
Put another way, even if the Landlords were in breach of the agreement, the Tenants were still obliged to pay the full rent.
Turning to the second possible construction of the Tribunal's reasons, if the Tribunal came to the view that orders should have been made for a rent reduction pursuant to s 44(1)(b) of the RTA then there is a complete absence of reasons explaining that decision. Nowhere in the Tribunal's reasons is there any reference to the matters referred to in s 44(1)(b), nor findings as to from what specified day the rent should not have exceeded a particular amount.
In our view both the claim for outstanding rent and water usage on the one hand, and the claim for excessive rent under s 44(1)(b) of the RTA should be remitted to the Tribunal.
The Tenants had included a claim for excessive rent in their Application Form and that should have been considered. It was made before the end of the tenancy and so satisfied s 44(3) of the RTA.
The Tribunal noted that no cross-claim had been filed by the Landlords for the rent and water usage charges. By cross-claim we assume the Tribunal meant Application form as cross-claims do not exist in the Tribunal. But it appears that a claim for rent had been made in some form prior to the hearing (just as the Tenants' claim to the bond had been made before the hearing but was not included in their Application Form) and so, in our view, should have been considered and determined. The Tribunal is required to conduct itself with minimum formality, to reach decisions according to the substantive merits of the case and not by reference to legal form or technicalities, and to exercise its powers speedily and economically - Moloney v Taylor [2016] NSWCA 199 per the Court at [30].
Therefore, in our view, both the claims for outstanding rent and water usage charges, and the Tenants claim under s 44(1)(b) of the RTA should be remitted to the Tribunal for determination on the evidence which was before the Tribunal at first instance.
Of course, there can be some overlap between, for example, a claim for compensation for breach of the covenant for quiet enjoyment and a claim for excessive rent pursuant to s 44(1)(b) of the RTA, and care must be taken to avoid double compensation. As was said in Roberts v NSW Aboriginal Housing Office [2017] NSWCATAP 9 at [86]:
"That is not to suggest that a claim for damages for loss of quiet enjoyment and an order for the reduction of rent are mutually exclusive forms of relief. Depending on the claims made, there may be facts common to both types of claim which would need to be taken into account in order to avoid double compensation. For example if the premises (or part thereof) cannot be used in the manner intended or its use is in some way impaired by reason of a landlord's breach, it may be inappropriate to both reduce the rent and make an award of damages for loss of use."
[6]
The Bond
The Landlords also appealed against the order of the Tribunal requiring the Rental Bond Service to refund the entirety of the bond to the Tenants.
No discernible ground of appeal in relation to this order was identified by the Landlords, nor is one apparent to us.
The Landlords complained that that order was not contained in the Tenants Application Form. That statement was correct, but at the time the Tenants commenced proceedings, the residential tenancy agreement was still on foot and so there was no entitlement of any party to the bond.
By the time the proceedings were heard the circumstances had changed, the Tribunal having terminated the tenancy and entitlement to the bond having become a live issue. Therefore, by that time, it was appropriate to consider the issue of the bond per Moloney.
The Landlords complained that the Tenants owed them for rent and water charges, and thus they wanted to make a claim on the bond. But we were informed that the bond has already been refunded to the Tenants, there having been no stay of that order (Order 2 made by the Tribunal on 20 July 2021) sought by the Landlords, and so there is no utility in setting aside that order which has now been complied with. The continued existence of that order on the Tribunal's records will not impede the Landlords' claims for rent and water usage charges before the Tribunal.
[7]
Orders
We make the following orders:
1. The appeal in relation to the bond is dismissed.
2. The appeal in relation to the award of compensation in the sum of $15,000 is upheld.
3. Order 1 made by the Tribunal on 20 July 2021 is set aside.
4. The matter is remitted to the Tribunal as originally constituted to determine the following matters in accordance with these reasons:
1. whether the appellants breached the residential tenancy agreement;
2. if so, the amount of compensation to be paid by the appellants to the respondents;
3. any outstanding rent and water usage charges owed to the appellants by the respondents;
4. the respondents' claim for excessive rent pursuant to s 44(1)(b) of the Residential Tenancies Act 2010 (NSW).
[8]
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: 17 November 2021