EL v EA (Residential Tenancies) [2006] VCAT 2049

1. The landlord has failed in the duty to provide quiet enjoyment of the premises.

2. The landlord misled the tenants about his capacity to agree to a fixed term tenancy which would allow them quiet enjoyment of the premises and failed to inform the tenants that there was a warrant for possession of the property.

3. The tenants have suffered loss and damage totalling $941.00 and in addition inconvenience for which they should be compensated in the amount of $1,000.00.

4. The tenants' loss and damage resulted from the actions of the landlords not from the actions of the mortgagee, the Commonwealth Bank.

5. The new address of the applicant tenants is (deleted).

The Tribunal orders that:

1. The respondent landlord pay to the applicant tenants the sum of $1,941.00 forthwith.

2. The application that the interested party (the Commonwealth Bank) compensate the tenants is dismissed.

3. The respondent landlord pay forthwith to the applicant tenants their costs of today fixed at $160.00.

4. The respondent landlord pay forthwith to the interested party the Commonwealth Bank its costs of today and of 25 August 2006, fixed at $1,350.00.

In person and assisted by Mr Bill Darling, Tenants Union

The former tenants claimed compensation to a total of $1941.00 for their loss and expenses incurred as a result of vacating the rented premises, rent over paid and inconvenience and losses suffered as a result of their eviction.

While the landlord's agent who had acted for the landlord in the tenancy which was the subject of the dispute attended the hearing, no submissions were made and no evidence was given for the landlord. The agent's representative informed the Tribunal that he had no instructions from the landlord. However, I was satisfied that the landlord had been served with notice of the hearing in accord with section 506(2) of the RT Act.

There was no dispute about the basic facts in this matter. In June 2005, the Commonwealth Bank (the mortgagee) obtained judgment for possession of the landlord's property at 18 Redcliffs Crescent Roxburgh Park (the rented premises). On 16 December 2005, a warrant for possession was issued and the mortgagee wrote to the landlord requesting vacant possession and about 17 January 2006 the landlord was notified of the mortgagee's intention to take possession of the premises. Then the landlord informed the mortgagee that he would pay the arrears and the mortgagee deferred execution of the warrant.

Under the mortgage, the landlord was prohibited from renting out the premises without the mortgagee's consent, which the landlord did not obtain.

On 25 February 2006, the landlord entered a 12 month fixed term residential tenancy agreement with the tenants. The rent was $1084 per calendar month and the bond was $1084. The landlord did not disclose to the tenants or to his own agent the existence of the warrant for possession, or anything about the mortgage. Neither did he inform the mortgagee of the tenancy.

On 10 March 2006, a person from the sheriff's office delivered to the tenants a notice addressed to "the occupants" which stated that all persons including any tenant would be removed under supervision of the sheriff if the premises were still occupied after 14 March 2006. The notice provided the name and contact number of the sheriff's officer.

The tenants were able to find alternative accommodation through the landlord's agent. At the new property the rent was $1127.00 per calendar month. The tenants left the landlord's premises on 15 March 2006, having negotiated with the sheriff's officer for an extra day.

On 14 March 2006, the landlord phoned the mortgagee to say that the tenants found there by the sheriff had already left the property.

An employee of the bank gave undisputed evidence that the bank instructs the sheriff to inform it if a tenant is found in possession but that in this case no information was provided to the bank. The bank's written record of contacts in this matter was provided in support of this evidence which I accepted.

I accepted the tenants' evidence that they had overpaid rent by $356.40, as they had vacated the property during a period for which they had paid rent in advance. I also accepted their evidence that their out of pocket expenses (disconnection and reconnection fees, removalist fees, phone calls to the sheriff's office and three months of the difference between rent to the landlord and their new rent) amounted to $584.62.

In addition to overpaid rent and out of pocket expenses, the tenants claimed a further $1000.00 for their inconvenience and general loss suffered as a result of their unlawful eviction from the rented premises. This was not stated to be a pecuniary loss, but an amount to compensate for severe inconvenience. When I asked how this amount was arrived at or calculated, the tenants' representative (an employee of the Tenants Union who said he had experience in such matters) said that in his experience this was an appropriate amount to compensate a tenant family for the sort of inconvenience they had suffered. In the absence of any other evidence, I accepted this and agreed that $1000.00 was an appropriate amount.

In reaching this view, I took into account the tenants' evidence set out in the attachment to their application:

"We have two kids that suffered.... ...inconvenience on us, our friends and our family. Our family having to stop everything to come and take care of kids and help us pack. The biggest inconvenience was that we had to stay in the house as our new property had no power and we were unable to get it turned on until after our date to vacate. The stress of thinking we were going to be kicked out and homeless...".

Section 67 of the Residential Tenancies Act 1997 ("the Act") provides:

A landlord must take all reasonable steps to ensure that the tenant has quiet

enjoyment of the rented premises during the tenancy agreement_._

Sections 210 and 472(1)(f) of that Act empower the Tribunal to order that the landlord compensate the tenants. Section 216 provides that a tenancy agreement must not be terminated except in accordance with the Residential Tenancies Act.

Under section 268 of the Act, a mortgagee entitled to possession may give 28 days notice to a tenant to vacate. The tenancy agreement would then terminate upon the tenant vacating or the Tribunal granting a possession order (section 223). It is an offence for a landlord to require a person to vacate, except under the Act (section 229).

By section 507A (2) of the Act, the Tribunal is also empowered to apply to this situation section 159 of the Fair Trading Act 1999 which provides that a person who has suffered loss or damage by the contravention of the legislation may apply for an order for compensation from a person involved in that contravention.

Section 8A in Part 2 of the Fair Trading Act 1999 prohibits unconscionable conduct in the provision of the goods or services and section 9 of that Act prohibits misleading or deceptive conduct in trade and commerce. I agree with the submissions made for the tenants that these provisions apply to the present situation and that section 159 of the Fair Trading Act 1999 empowers the Tribunal to order the perpetrator of such conduct to compensate its victims. I agree also that the dispute between landlord and tenant may be characterised as a "consumer and trader dispute" falling with the Tribunal's jurisdiction set out in Part 9 of the Fair Trading Act 1999, where the Tribunal has power (under section 108(2)(b)) to order damages including exemplary damages as well as sums found owing and sums payable in restitution. However, it is unnecessary to apply the provisions of either Part 2 or Part 9 of the Fair Trading Act 1999 to the present case as the Tribunal is empowered by the Residential Tenancies Act 1997 to order that the tenants be compensated.

The payment of compensation under section 210 of the Residential Tenancies Act is not restricted to pecuniary loss, so that the Tribunal may order payment of a sum which compensates the applicant for inconvenience (Reardon v Ministry of Housing - unreported, Supreme Court of Victoria, 13 November 1992, Smith J). I agree with the submission made for the tenant that the sum awarded may reflect the seriousness of the breach of the Act (as suggested in the Annotated Anstat edition of the Residential Tenancies Act). Another way of characterising this principle would be to allow for exemplary damages as permitted by section 108(2)(b) of the Fair Trading Act, but the Residential Tenancies Act provisions are sufficient for present purposes.

The tenants were not obliged to vacate the rented premises when they did so on 15 March 2006, as the agreement had not terminated in accordance with the Act (section 216). The tenants were entitled (under section 268 of the Act) to 28 days notice to vacate. However, the tenants did vacate the property and the issue for me to decide was who should compensate them for their loss and damage.

The bank, acting through the sheriff, required the tenants to vacate the rented premises. It is arguable that the bank thereby committed an offence under section 229 by requiring the tenants to vacate. However, the terms of section 229 apply specifically to a landlord's actions. If these provisions do not extend to a mortgagee entitled to possession, it could be argued that the bank made a false representation prohibited by section 502 of the Act or committed some other offence under the Residential Tenancies Act. However, I declined to require that the bank compensate the tenants for loss and damage suffered as a result of any offence it may have committed. I did so because of the particular circumstances.

The circumstances were that the bank requires its mortgagors to inform it of any tenancy and the landlord had not done so. Further the bank had in place an instruction that the sheriff inform it of any tenant found in possession and the sheriff did not so inform the bank, In addition, the landlord misled the bank by telephoning to say that the tenants had vacated the premises. In these circumstances, the bank was denied any opportunity to comply with the Act. Had the bank been accorded any notice of the tenants' occupancy of the property before the tenants vacated it or had the bank been shown to have recklessly ignored the possibility of tenants being found, I would have been more inclined to require it pay compensation to the tenants. It also appeared to me that the bank had in place instructions to prevent the untimely eviction of unsuspecting tenants, albeit the system had failed in this case. The failure however, was the result of the landlords' actions in not telling the bank that the property was tenanted and in misinforming the bank about the tenants' departure.

In my view, the landlord misled the tenants by entering a fixed term tenancy in circumstances where he knew the mortgagee had obtained a warrant for possession of the rented premises and where he was in breach of his agreement with the mortgagee. This could be characterised as an offence under both section 501 of the Residential Tenancies Act and under section 9 of the Fair Trading Act.

By failing to make the necessary payments to the bank, the landlord caused the events which led to the tenants vacating the rented premises. He subjected them to the ordeal of being surprised in their home by an eviction notice from the sheriff and facing homelessness. It is trite to call these events a failure of the landlord's duty to provide quiet enjoyment, which is imposed by section 67 of the Act.

The landlord's breach of the agreement may also be characterised as a failure to provide the agreed services, enlivening the Tribunal's powers to make orders under section 108 of the Fair Trading Act, which includes the power to award damages and exemplary damages. However, it was unnecessary to apply these provisions as the Residential Tenancies Act was sufficient.

I am satisfied that the landlord misled the tenants by agreeing to a fixed term tenancy in his particular circumstances and failed to provide quiet enjoyment, causing serious inconvenience and distress to the tenants. The landlord should compensate the tenants for their loss and damage and for the real inconvenience they suffered.

Accordingly the Tribunal made the above orders.

The bank sought its costs against the landlord. I agree that this is a matter in which the bank was obliged to appear and put its case for not being held liable to compensate the tenants. The bank was not at fault and has been put to considerable expense by the landlord's behaviour and this is an appropriate case for me to exercise the Tribunal's discretion under s109 for the Victorian Civil and Administrative Tribunal Act to order costs.

The Tenant also sought costs against the landlord and I was satisfied that this was an appropriate case for the exercise of my discretion to order costs. Accordingly, after hearing from the parties the amounts of their costs, I ordered that the respondent landlord pay these costs.