Fang v Cornelius

Background

1. Although not the subject of findings by the Tribunal, the following facts appeared to be uncontroversial or established by the documents presented to the Tribunal at first instance: 1. The residential tenancy agreement between the parties was for a fixed term of one year commencing on 10 August 2019. The monthly rent was $5,170.83. (The Appeal Panel was not supplied with a copy of this agreement). 2. The residential premises were a house and swimming pool in Sydney occupied by the Tenant with his wife and children. 3. By an email, sent on 16 April 2020, from the Tenant to the Landlord's agent, the subject of which was "Notice to end tenancy due to financial hardship arising from Covid-19", the Tenant stated: Due to the Coronavirus driven economic shutdown, my wife was required to take a substantial pay cut by her employer. This has made a significant adverse financial impact on our household budget and ability to continue to pay rent and the mortgage on our existing home we are also in the process of renovating. We have discussed with our builder how we might be able to move into our home earlier than planned and he is indicated that we can do so, provided there is no move to stage 4 Covid 19 restrictions. Noting that our lease ends on 9 August 2020 we wish to terminate our lease due to financial hardship and move out on the weekend of 9 and 10 May 2019. We note that if we do break the lease that under the agreement, we would ordinarily be required to pay a penalty equal to 4 weeks rent. We would like this fee to be waived due to financial hardship. If the owner is not in a situation to consider waiving this break fee then we will include in our discussions a request to reduce the rent paid to date across the period of the lease due to the swimming pool not being available for use for the entirety of the lease and constant visits from either trades and/or the owner to deal with swimming pool, electrical, plumbing and building repairs. We believe it is only reasonable to have our rent just to compensate for these matters. [The email then set out a history concerning the pool, building and plumbing repairs since the Tenant had moved in]. The majority of these matters should really have been dealt with before we moved in and of cost both myself and my wife many days of lost work and weekend time due to us having to be home to provide secure access. I look forward to discussing with you in coming to a timely resolution so we can move out May allowing the owner to tenant the property with a family in a position to pay a commercial rate…. 1. Subsequently, the Tenant was made redundant as a consequence of the Covid-19 pandemic. 2. No agreement was reached between the Tenant and the Landlord covering the terms of the Tenant's early departure from the residential premises. 3. On 11 or 12 May 2020 the Tenant and his family moved out of the residential premises and returned the keys to the Landlord or his agent. This departure occurred just after 75% of the fixed term of the tenancy agreement had passed. 4. The last rent that the Tenant paid was the monthly rent due for the period from 10 April 2020 to 10 May 2020. 5. The residential tenancy agreement, apparently, contained a break fee clause requiring the payment of four weeks' rent. We say "apparently" because the Tenant's email referred to above suggests that this was the case, as does an email from the Landlord's agent sent to the Tenant on 15 May 2020. 6. The Landlord's agent conducted an outgoing inspection of the residential premises on 15 May 2020. According to the above email from the Landlord's agent sent on 15 May 2020, the Landlord was happy with the condition of the property as left by the Tenant and there remained three matters that needed to be finalised, namely outstanding rent to be paid up to the time when the Tenant left the premises in the sum of $340.00, payment of the last water bill for the quarter ended 11 May 2020, and: "2. The lease break fees you are required to pay as per your tenancy agreement is four weeks rent-as per my email last week the landlord has offered one weeks rent to compensate you for the time the pool issues occurred in March. In addition to this the landlord advised us not to charge water usage for the quarter between 6th December 2019-9th March 2020. If you do decide to proceed with the landlords offer your lease break fees will be 3 weeks rent. I understand you needed to seek further advice on this yourself, have you had any further thoughts about this? 1. The residential premises were re-let by the Landlord to new tenants as from early June 2020.
2. On these facts, it would seem that the residential tenancy agreement terminated when the Tenant moved out of the premises and returned the keys, or shortly thereafter, and, in any event, by the time the premises were re-let in late May or early June 2020.
3. This is because of the effect of s 81 of the Residential Tenancies Act 2010 (NSW) (the RTA) and, in particular, s 81 (4) (d), (e) or (f) of that section. Relevantly, that section 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: …. (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, …. (g) disclaimer occurs (such as when the tenant's repudiation of the tenancy is accepted by the landlord).

The Tenant's application to the Tribunal

1. On 20 May 2020, the Tenant commenced proceedings in the Tribunal for an order under s 44(1)(b) of the RTA that the rent payable throughout the tenancy was excessive and for an order under s 104(1) of the RTA that the tenancy agreement be terminated due to undue hardship. The claim that the rent was excessive was said to be because of the withdrawal or reduction of facilities at the residential premises resulting from the state of the pool. The Tenant also sought an order under s 175 of the RTA regarding the payment of the rental bond.
2. As we have pointed out, the claims that the rent was excessive and for termination based on undue hardship may well have been brought after the tenancy agreement had already terminated.
3. With respect to the state of the pool, it was said in the Tenant's application that the pool had been a key reason for renting the property but had been unavailable for use during the entire tenancy. An account as to why this was so was given.
4. As to the case of termination for undue hardship, it was said in the Tenant's application that this was based upon the effect of the Covid-19 pandemic. It was said that the Tenant had, effectively, been made redundant with no compensation and his wife had been required to take a 20% pay cut by her employer. By reference to their monthly financial obligations, some of which they had managed to defer (a mortgage and school fees), it was explained how this meant they were no longer able to pay the rent.
5. It was then said that the Tenant had given notice to the Landlord that he wished to terminate the lease due to financial hardship and to move out on 9 May 2019, and that they had requested that the four-week break fee be waived due to financial hardship. It was said that the Landlord had countered with an offer to waive one week of this break fee but, given the financial impact that the family had suffered, they would like the break fee to be waived completely. It was said that an alternate proposal would be for the Tribunal to find that the rent paid to date be reduced, due to the unavailability of the pool, by an amount equal to the four-week break fee [our emphasis].
6. The Tenant did not claim in the application that the Landlord should not have the four-week break fee and, in addition, the Landlord should have to repay the Tenant excessive rent that had been paid, which was what the Tribunal, in substance, decided.

The relevant RTA provisions

1. Other relevant provisions of the RTA (as then applicable) in respect of the Tenant's claim were as follows: 44 Tenant's remedies for excessive rent (1) Excessive rent orders The Tribunal may, on the application of a tenant, make any of the following orders - ….. (b) an order that rent payable under an existing or proposed residential tenancy agreement is excessive, having regard to the reduction or withdrawal by the landlord of any goods, services or facilities provided with the residential premises and that, from a specified day, the rent for residential premises must not exceed a specified amount. [Our emphasis] …. (3) Applications on withdrawal of goods or services A tenant may, before the end of a tenancy, make an application that the rent is excessive, having regard to the reduction or withdrawal of any goods, services or facilities provided with the residential premises, even if those goods, services or facilities were provided under a separate or a previous contract, agreement or arrangement. [Our emphasis] ….. (5) The Tribunal may have regard to the following in determining whether a rent increase or rent is excessive: (a) the general market level of rents for comparable premises in the locality or a similar locality, (b) the landlord's outgoings under the residential tenancy agreement or proposed agreement, (c) any fittings, appliances or other goods, services or facilities provided with the residential premises, (d) the state of repair of the residential premises, (e) the accommodation and amenities provided in the residential premises, (f) any work done to the residential premises by or on behalf of the tenant, (g) when the last increase occurred, (h) any other matter it considers relevant (other than the income of the tenant or the tenant's ability to afford the rent increase or rent). …. 47 Tenant's remedies for repayment of rent and excess charges (1) Requests to landlord A tenant may make a written request to the landlord that the landlord repay to the tenant any rent, or other amounts, paid by the tenant that are not required to be paid under this Act or the residential tenancy agreement. (2) A request may be made during or after the termination of a residential tenancy agreement. (3) A landlord must, within 14 days of a written request by a tenant, repay to the tenant the amount of any rent or other amount paid in excess of the amount payable by the tenant under this Act or the residential tenancy agreement. (4) Tribunal orders A tenant may apply to the Tribunal for an order for the repayment of rent or any other amount paid by the tenant if a written request by the tenant for payment is not complied with by the landlord within 14 days. (5) The Tribunal may order that rent or any other amount be repaid to the tenant if it finds that the rent or amount was not required to be paid by the tenant under this Act or the residential tenancy agreement. 104 Hardship to tenant - fixed term agreements (1) The Tribunal may, on application by a tenant, make a termination order for a fixed term agreement if it is satisfied that the tenant would, in the special circumstances of the case, suffer undue hardship if the residential tenancy agreement were not terminated. (2) The Tribunal may, if it thinks fit, also order the tenant to pay compensation to the landlord for the landlord's loss of the tenancy. The amount of compensation must not exceed the amount specified as the applicable break fee for the tenancy under section 107. (3) The landlord must take all reasonable steps to mitigate the loss and is not entitled to compensation for any loss that could have been reasonably avoided by the landlord. (4) A tenant may make an application under this section without giving the landlord a termination notice. (5) The Tribunal may make a termination order under this section that takes effect before the end of the fixed term if the residential tenancy agreement is a fixed term agreement. 106 Abandoned premises (1) The Tribunal may, on application by a landlord, make an order declaring that the tenant abandoned the residential premises on a specified day. (2) The tenant is taken to have abandoned the residential premises on the specified day. (3) The landlord may take immediate possession of residential premises that have been abandoned by the tenant if there are no remaining occupants. Note - The residential tenancy agreement is terminated if a tenant abandons the residential premises (see section 81 (4) (d)). (4) In determining whether a tenant has abandoned the residential premises the Tribunal may consider (but is not limited to considering) the following: (a) the failure by the tenant to pay rent under the residential tenancy agreement, (b) any evidence that the tenant no longer resides at the premises, (c) any failure by the tenant to carry out any obligations relating to the residential premises under the residential tenancy agreement. 107 Landlord's remedies on abandonment (1) The Tribunal may, on application by a landlord, order a tenant to pay compensation to the landlord for any loss (including loss of rent) caused by the abandonment of the residential premises by the tenant. (2) The landlord must take all reasonable steps to mitigate the loss and is not entitled to compensation for any loss that could have been avoided by taking those steps. This subsection does not apply in the case of a fixed term agreement that provides for the payment of a break fee. (3) The compensation payable by a tenant under this section in respect of a fixed term agreement is the amount of the applicable break fee for the tenancy, if the agreement provides for the payment of a break fee. (4) The break fee for a fixed term agreement for a fixed term of not more than 3 years is: (a) an amount equal to 6 weeks rent if less than half of the fixed term had expired when the premises were abandoned, or (b) an amount equal to 4 weeks rent in any other case. (5) The break fee for a fixed term agreement for a fixed term of more than 3 years is the amount set out in subsection (4) or, if an amount is specified in the agreement, the amount specified. An agreement must not specify a break fee exceeding the amount (if any) specified by the regulations. (6) The amount of any money paid by a tenant to a landlord on terminating a fixed term agreement before the end of the fixed term or before otherwise abandoning the premises (other than money previously due to the landlord under the residential tenancy agreement) is to be deducted from any amount payable to the landlord under this section. (7) This section does not prevent a landlord from obtaining an occupation fee under Division 2 of Part 6 for goods left on the residential premises. 187 Orders that may be made by Tribunal (1) The Tribunal may, on application by a landlord or tenant or other person under this Act, or in any proceedings under this Act, make one or more of the following orders - …. (c) an order for the payment of an amount of money, (d) an order as to compensation,
2. We note that the quite different current version of s 107 of the RTA (contained within the Residential Tenancies Amendment (Review) Act 2018 No 58) only applied to residential tenancy agreements entered into from 23 March 2020. Accordingly, that version of s 107 was not applicable in this case.
3. Section 104 of the RTA is contained within Division 3 of Part 5 of the RTA dealing with the topic of "Termination by the tenant". Section 107 is contained within Division 4 of Part 5 dealing with the topic of "Abandonment of residential premises".

The Tribunal's decision

1. The hearing of the proceedings at first instance took place on 8 October 2020 by which time the residential tenancy agreement had, undoubtedly, already terminated.
2. The Tribunal's written reasons issued on 8 October 2020 included the following: 1. First, it seems to have treated the Tenant's claim in respect of excessive rent as a claim for an order for "compensation" pursuant to the Tribunal's powers in s 187 of the RTA. As to this, it saw the claim as out of time because of the effect of Regulation 39(9) of the Residential Tenancies Regulations 2010 (NSW). (Regulation 39(9) is concerned with the period in which claims may be brought for breach of the residential tenancy agreement). The Tribunal decided that the claim should be allowed to be brought out of time because of the disruption caused by the Covid-19 pandemic. (The Tribunal appeared to regard s 188(c) of the RTA, concerning the power to make ancillary orders, as the source of the power to permit the claim to be brought out of time, whereas, the correct source of power was s 41(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act)). 2. Next, the Tribunal dealt with the break fee issue. It said, amongst other things: The second matter relates to the Break Lease fee, which under S107 of the Act may be awarded to a landlord, by the Tribunal. Despite the submissions on the financial hardship of the landlord [unsupported by any documents whatsoever] by the respondent's agent, given that the applicant was clearly affected by Covid [he remains on jobseeker] and the extraordinary circumstances of the pandemic, I refused to accede to the respondent's demand to be awarded the break fee. 1. The Tribunal then returned to the merits of the claim in respect of the pool. It concluded that the pool was unusable for the majority of "the period of six months". It said that the material from the pool maintenance employee was not persuasive and that the letter from the Landlord's property manager as to the extra cost in leasing a property with the pool did not comply with the requirements for an expert report set out in Makita (Australia) Pty Ltd v Sproules [2001] NSWCA 305 and was to be given little weight. It said that the landlord had made an offer based on a three-month period during which the pool was unavailable but his own documents conceded that the pool was unavailable for at least four months and other periods as well. 2. The Tribunal addressed, broadly, the problems with the pool and accepted the Tenant's submission that the "going rate" for a reasonable property with a pool was 10% above a property without a pool. It then applied that rate to the monthly rent payable for a period of six months and arrived at "compensation" payable in an amount of $3,102. 50. 3. The Tribunal rejected the Landlord's claim for a deduction from the rental bond to cover the last quarter's unpaid water bill on the basis that the claim was out of time pursuant to Regulation 39.
3. For now, bearing in mind the nature of the claims that appeared to be presented to the Tribunal for resolution, without being exhaustive, the following problems with the reasons may be noted: 1. With respect to the claim concerning excessive rent, the Tribunal made no reference to the powers of the Tribunal concerning such a matter set out in ss 44 and 47 of the RTA, to which we have referred above, or to their applicability in circumstances where the residential tenancy agreement had already terminated, and it did not identify any breach said to give rise to the entitlement to compensation or how any such claim led to compensation based on a reduced rental. (As to compensation, we put aside for present purposes the fact that the Tenant's claim in his application was not a claim for damages for breach of the tenancy agreement. It was a claim based upon s 44(1)(b) of the RTA). 2. With respect to the claim for the break fee, the Tribunal made no reference to the Tenant's claim for termination for undue hardship under s 104 of the RTA (presumably, because it recognised the tenancy agreement had already terminated) and made no findings about termination by reason of the Tenant's abandonment of the residential premises, as to which s 107 of the RTA provides remedies. 3. The reasons did not explain how the six-month period that the pool was found to be unavailable was arrived at or why the evidence from the pool maintenance employee, supported by invoices, was unpersuasive.

Notice of Appeal and Tenant's response

1. In his Notice of Appeal, the Landlord put forward a number of reasons why the Tribunal's order should be set aside. He raised an error of law because he said the order in relation to the break fee, which he treated as an order to refuse payment of compensation to the landlord made under s 104 (2) of the RTA, could only have been made had the Tenant sought an order for early termination whilst the residential tenancy agreement was still on foot.
2. He also sought leave to appeal on the basis that the decision was not fair and equitable and was against the weight of the evidence.
3. As to the former (not fair and equitable), the Landlord made a variety of contentions, including: 1. By refusing compensation in favour of the Landlord, the Tenant suffered no consequences for their breach of contract and early termination, whereas the Landlord had suffered loss of rent during the period that the premises were vacant. 2. The Tribunal's orders awarded the Tenant more than the monetary outcome he had sought in the proceedings. 3. The Tribunal was mistaken in saying that the Landlord had offered compensation in respect of the pool equal to a three-month period of the pool being unavailable for use. In fact, the three-month period of the Landlord's offer concerned an offer to pay one of the quarterly water bills which it covered the period when the pool liner had been leaking. 4. It was unfair for the Tribunal to refuse the claim for an unpaid water bill.
4. As to the decision being against the weight of the evidence, the Landlord made a variety of contentions, including that: 1. The Tribunal had not addressed the Tenant's assets in deciding there was financial hardship, even though the Tenant's application for the tenancy showed he had cash savings of $268,000 in August 2019. 2. The evidence from the pool maintenance company was specific as to the times when the pool was unavailable and was supported by invoices from the company showing normal full servicing of the pool in October, November, December 2020 and in January 2021. 3. The Tribunal should have preferred the opinion of the real estate agent as to the rental significance of a property with the pool over the personal opinion of the Tenant.
5. In his Reply to Appeal (an amended version was lodged on 4 January 2021) the Tenant contended that there was no error of law by the Tribunal, the decision was fair and was supported by the weight of the evidence. Various contentions were made in support of these answers.

The limited right of appeal

1. Under s 80 of the NCAT Act, a party may appeal as of right to the Appeal Panel in an internal appeal on any question of law. In respect of any other grounds, in the case of an appeal from the Consumer and Commercial Division of the Tribunal, as this is, the appellant must satisfy the Appeal Panel that leave to appeal should be granted under cl 12 sch 4 of the NCAT Act on the basis that: …..the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with)
2. The appellants were self-represented. In Cominos v Di Rico [2016] NSWCATAP 5 at [13], the Appeal Panel stated that it may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances, it is appropriate for the Appeal Panel to review an appellant's 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 followed that approach in determining this appeal.

Consideration-failure to ask the right questions

1. At the hearing of the appeal we raised with the parties issues with the decision giving rise to errors of law, by not addressing the right questions (or asking the wrong questions) and as to the adequacy of the reasons.
2. It is an error of law for the Tribunal to ask itself the wrong question or fail to ask itself the right question: see Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13(2)].
3. It is an error of law by the Tribunal to fail to provide adequate reasons for its decision: Prendergast at [13(1)].
4. As to the break fee issues, if the Tribunal refused to make an order that the Landlord be paid the break fee, in the exercise of its discretion concerning compensation contained in s 107 (1) of the RTA, as it appeared it did, then, not only did it need to make findings about termination by the Tenant's abandonment, it needed to take into account that the Tenant had acted in breach of the tenancy agreement and had not obtained an order for early termination based on undue hardship. It also needed to take account of the fact that such abandonment had occurred through no fault of the Landlord.
5. In our opinion, given the context of the discretion to award compensation in s 107(1) of the RTA, each of these factors was deserving of considerable weight in the exercise of the discretion.
6. It is clear that the Tribunal has a discretion not to award compensation to a Landlord under s 107(1) of the RTA: see Abdel-Messih v Marshall [2018] NSWSC 648 (where the conduct of the head tenant provoked the sub- tenant's abandonment of the premises).
7. However, the discretion in s 107 (1) arises in a context where the Tenant has acted in breach of the tenancy agreement. It stands in contrast to the discretion in s 104(2) of the RTA, which arises where an order has been made for early termination involving no breach by the Tenant. The Tribunal appears to have approached the matter as if it was considering whether to make an order for early termination because of undue hardship under s 104(1) of the RTA (an order which it did not make).
8. As to the excessive rent issues, the Tribunal needed to direct itself to the terms of ss 44 and 47 of the RTA and ask itself how it could make an order for repayment of rent in view of those terms.
9. Had it done so, it should have recognised that before a s 47(5) repayment order could be made, the Tribunal needed to have made an order that the rent was excessive pursuant to s 44(1)(b). However, it should also have recognised that an order under s 44(1)(b) could only be made in respect of an "existing or proposed residential tenancy agreement "and that neither of those terms appeared to be applicable in the circumstances.
10. If the Tribunal was prepared to approach the pool issues on the basis that the Tenant was making a claim for damages for breach by the Landlord of the residential tenancy agreement, as it appeared it may have been, then the Tribunal needed to ask itself how it was that the Landlord had acted in breach and, if so, what was the nature and measure of damages (for example, was it damages for loss of enjoyment or inconvenience). The remedy here is distinct from the statutory remedy for repayment of excessive rent set out in ss 44 and 47 of the RTA.
11. Finally, as to the Landlord's claim for the unpaid water bill, the Tribunal should have asked itself whether an extension of time in which to bring the claim should be granted (assuming, the claim was out of time) given that there appeared to be no controversy that the amount was due and it had been raised by the Landlord as owing when it came to finalising the financial consequences of the Tenant's early departure (see the agent's email to the Tenant sent on 15 May 2020, referred to above).
12. For these reasons, in our opinion, in respect of each of the three issues between the parties, the Tribunal erred in law by failing to ask itself the right questions.
13. In these circumstances, it is unnecessary for us to address any of the additional criticisms of the Tribunal's decision.

Outcome

1. As we have not been provided with sufficient material to allow us to redetermine the matter on the merits, the proceedings will have to be remitted to a differently constituted Tribunal for a new hearing and redetermination.

Orders

1. For the above reasons, we make the following orders: 1. The appeal is allowed. 2. The order made by the Tribunal on 8 October 2020 is set aside. 3. The proceedings be remitted to a differently constituted Tribunal for a new hearing and redetermination on the basis of the evidence already presented to the Tribunal and such further evidence as the Tribunal may allow.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 12 February 2021