Foyel v Brukmann

The scope and nature of internal appeals

1. By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied 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).
4. In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.

Grounds of Appeal

1. The appellants submitted that the Tribunal had erred in law by not requiring the whole of the bond to be paid to the landlord.
2. The appellants also asserted that the Tribunal had erred in the calculation of the amount of water rates due, but acknowledged at the hearing of the appeal that there was no error in that regard, and that ground of appeal was withdrawn.
3. The appellants sought an order that: "The entire bond and any accrued interest be paid to the landlord as payment towards the arrears debt. The tenant can then pay off the remainder of their arrears debt weekly in instalments of $75 per week".
4. The appellants also sought leave to appeal on the grounds that the decision was not fair and equitable, that it was against the weight of evidence and that there was significant new evidence now available that was not reasonably available at the time of the hearing.
5. In respect of the submission that the decision was not fair and equitable, the appellants stated: A bond of four weeks rent paid at the start of a tenancy is in place to settle any disputes or pay any debts at the end of a tenancy. Member Clark awarded the tenant is liable to pay a debt of almost $6,000, however also gave the tenants back the entire bond and allowed them to pay off the arrears debt. The tenants failed to provide full financials and bank statements to show that they were Covid affected, yet the bond was released to them. What is the purpose of a bond being held if a tenant can have it returned and be allowed to pay off a debt? A debt that will take more than 14 months to pay back. The owners are an elderly couple, who rely on the rent being paid as income to live off. They have suffered financially as a result of the rent not being paid, further financial stress for the four months since the tenants vacated and having the matter heard at NCAT after the bond was frozen pending the hearing and further again. Member Clark is increasing their financial stress by not giving them the bond totally $2,900, which would pay off 50% of the tenants accrued debt in one payment. The remainder left to then pay off in instalments would be $3,057.75 and at a payment plan of $75 per week, would pay the debt off in 41 weeks.
6. In support of the submission that the decision was against the weight of evidence, the appellants repeated much of their statement in support of the submission that the decision was not fair and equitable but also stated "there is no precedent that the tenant can have their entire bond back and be allowed to pay off the total amount of their debt", and "[t]he tenant's ledger shows the tenant's debt and the tenant and Member both agreed that it was due and payable".
7. In respect of the submission that there was significant new evidence available, rather than referring to new evidence, the appellants suggested that the tenants had failed to produce full bank statements to support their assertion that they were Covid affected.
8. We note immediately that that assertion does not meet the requirements of Clause 12(1)(c) of Schedule 4 to the NCAT Act and does not warrant further consideration.

Did the Tribunal err in law by not directing the payment of the whole bond to the landlords?

1. It is convenient before considering whether the Tribunal erred in not directing the payment of the whole (or any part) of the bond to the landlords to consider the terms and nature of the agreement which the parties reached regarding the deferral of rent.
2. It is not necessary for the purposes of this appeal to consider in detail the legislative changes to the RTA and the Residential Tenancies Regulation 2019 (NSW) enacted by reason of the COVID-19 pandemic.
3. The effect of those changes was summarised by the Appeal Panel in Lewis v Rejko Pty Ltd [2021] NSWCATAP 186 at [56]-[64] as follows: 56. … the 2020 legislative changes to the RT Act and RT Regulations imposed restrictions on private landlords taking action to terminate a residential tenancy agreement with a COVID-19 impacted tenant; allowed a tenant who asserted that COVID-19 had financially impacted them to request the landlord participate in a formal rent negotiation process; provided a statutory definition of a COVID-19 impacted tenant; and allowed a COVID-19 impacted tenant to apply to NCAT for a termination of the tenancy. 57. However, the legislative changes did not empower the Tribunal to order a rent reduction due to the financial impact of the COVID-19 pandemic. Rather, the purpose of the legislative changes was for landlords and tenants to have negotiations in good faith (if the tenant was a COVID-19 impacted tenant) to attempt to agree to a rent reduction or a rent deferral. NSW Fair Trading provided a mediation service to landlords and tenants that could be engaged by the parties. 58. However, when it comes to the task of the Tribunal in determining whether or not there was an agreement between the landlord and tenant to reduce rent, the legislative changes do not alter the law of contract. 59. A residential tenancy agreement is a contract. In the circumstances of this matter, it was a written contract for a fixed term of 3 months with rent of $1,720 per week commencing on 12 March 2020. 60. In the context of a dispute about what rent is payable in the context of discussions between the parties as to whether the terms of the written agreement have been changed, the Tribunal must ascertain whether there has been a variation of the contract. 61. … 62. It is well established that in determining the rights and liabilities of parties to a contract the test is objective, in the sense of what the words or conduct of each party would have led a reasonable person in the position of the other party to believe and what a reasonable person would have understood: Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]. A party may subjectively believe the contract has been varied, but that is not the applicable legal test. 63. Parties to an existing contract may vary some of its terms by agreement (Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93). Variation of an existing contract creates a new contract, which either the parties intend to replace the original contract or leave the first contract in force subject to the second contract's alteration (Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Car (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520). The varied contract is subject to the ordinary rules of contract formation (BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 286; Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240 at 248). 64. Thus, to determine whether or not the residential tenancy agreement has been varied, the Tribunal must consider objectively: (1) Whether the parties have mutually agreed to vary the terms of the contract in respect of the amount and manner rent is payable. (2) Whether any agreement is sufficiently certain to bind the parties. (3) Whether there is an intention to create legal relations; and (4) Whether there is consideration for the variation.
4. It is a general principle of the law of contract that a promise to fulfil an existing obligation is not good consideration. In terms referable to the present case, a tenant's promise to pay a lesser rent than is due under a tenancy agreement is not good consideration for the landlord's promise to accept the lesser sum: See Carter on Contract (loose-leaf) [06-380]; Wigan v Edwards (1973) 47 ALJR 586, at 594 per Mason J.
5. However, as the Appeal Panel also noted in Lewis v Rejko Pty Ltd at [70]-[72]: 70 In respect of contractual principles pertaining to variation, intention to create legal relations and consideration for the variation are unlikely to be controversial. A landlord and tenant reaching an agreement to vary the obligation of the tenant to pay rent at a certain amount in the context of the COVID-19 pandemic and the legislative changes to the RT Act and RT Regulations will likely have an intention to create legal relations by way of the variation. 71 The issue of consideration also may not be controversial. During the COVID-19 pandemic, both landlords and tenants were under financial pressure due to lockdowns and contraction of the economy. The changes to the RT Act and RT Regulations imposed by the COVID-19 Regulation restricted the rights of landlords to seek termination for COVID-19 impacted tenants, but also imposed upon tenants the obligation of demonstrating to the landlord that they were COVID-19 impacted. COVID-19 impacted tenants also were given the right to make an application to NCAT to terminate the tenancy. Landlords and tenants were encouraged to negotiate. There was, however, no prescribed rent reduction. 72 In such a context, it was clearly in the interests of both landlords and tenants to attempt to negotiate a mutually agreed rent reduction or deferral. There is a clear tangible benefit or advantage to both parties, because of the risk to both parties that the tenancy may be terminated by the tenant if an agreement to vary the rent payable under the residential tenancy agreement was not reached; leading the tenant to have to find new residential premises and the landlord being put to the time and expense of attempting to find a new tenant (Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723; Director of Public Prosecutions for Victoria v Le [2007] HCA 52; (2007) 232 CLR 562 at [43]; Hill v Forteng Pty Ltd [2019] FCAFC 105 at [11]-[44]; Rudge v The Crown in the right of the State of NSW; Wynn v The Crown in the right of the State of NSW [2020] NSWSC 1422 at [89]-[93] ('Rudge')).
6. We note that the provision which permitted a Covid-19 impacted tenant to apply to the Tribunal for a termination of the tenancy came into force on 14 May 2020, that is seven days after the parties reached their agreement regarding the deferral of rent. Nevertheless, the legislation in force as at 7 May 2020 reduced the capacity of landlords to issue termination notices to impacted tenants by reason of the non-payment of rent. Moreover, as at 7 May 2020, s 104 of the RTA permitted a tenant to apply to the Tribunal for termination of a fixed term tenancy agreement if the tenant would suffer undue hardship if the tenancy were not terminated and, since March 2020, s 107 of the RTA had limited the break fee which a tenant might be ordered to pay (when granted a termination order under s 104 or upon abandonment of the premises) to 3 weeks rent, where (as was the case here on 7 May 2020) between 25% and 50% of the term of the fixed term tenancy had expired.
7. Had the landlords and tenants not reached the agreement of 7 May 2020, the tenants could effectively have terminated the tenancy on payment of 3 weeks rent. As a consequence, it cannot be said that there was no consideration from the tenants in exchange for the landlords' agreement to the rent deferral.
8. By the agreement, the landlords agreed to the deferral of rent, the tenants agreed to remain and continue to pay the rent, less the deferred amount, and to repay the deferred amount when the tenants' financial position had improved.
9. However, the agreement did not specify the terms on which the deferred rent would be repayable. As the Tribunal noted, the agreement only provided that the repayment terms would be agreed: "it was an agreement to agree".
10. In some circumstances such an agreement would be unenforceable or void for uncertainty.
11. However, where, as here, a contract has been partly performed, in this case by the tenants remaining for the balance of the fixed term and paying the reduced proportion of the rent, the law will imply a term into the contract that the terms on which an obligation, which is not spelled out explicitly, is to be performed are "reasonable terms". See Lewison & Hughes, The Interpretation of Contracts in Australia 2012 at [8.13].
12. We do not consider that the Tribunal, in stating at [28] that "failing agreement between the parties on the payment terms, it is up to the Tribunal to decide fair payment terms" intended to suggest that the absence of explicit payment terms had the result that it was entirely a matter for the Tribunal's discretion what the payment terms would be. Rather, it is apparent that the Tribunal was recognising that the term to be implied into the contract to govern the terms of repayment of the deferred rent was that, once the tenants were in a financial position to start repayment of the deferred rent, the repayment would occur over a term and in amounts that were reasonable, that is fair to both parties.
13. Thus, we consider that the Tribunal correctly construed the contract. The Tribunal concluded that reasonable payment terms would be an upfront payment of $1,500 with the balance payable at $75 a week. At that rate the whole of the deferred rent would be repaid 56 weeks after the hearing, which would be approximately 17 months after the termination of the tenancy.
14. We find no error in the Tribunal's determination of the repayment terms which the contract required.
15. We also agree with the Tribunal that s 175 of the RTA confers a discretion on the Tribunal in relation to the payment of the bond.
16. Section 175 of the RTA provides: 175 Powers of Tribunal (1) The Tribunal may, on application by a landlord or tenant or any other person (including a former co-tenant) who has an interest in the payment of a rental bond, make an order as to the payment of the amount of the rental bond. (2) The Tribunal may make an order whether or not the amount of a rental bond has been paid by the Secretary. (3) An application for an order must be made within the period prescribed by the regulations.
17. However, the discretion conferred by s 175 must be exercised judicially, by reference to relevant considerations. In Hand v Brown [2021] NSWCATAP 228 at [7] an Appeal Panel stated: Section 175(1) confers power on the Tribunal to award monetary relief in the form of "an order as to the payment of the amount of the rental bond". As we see it, in accordance with principle, this power should be exercised having regard to the legally recognised rights and obligations of the parties in respect of the bond. We do not interpret the section as conferring a broad power upon the Tribunal to alter rights according to what the Tribunal may see fit to do.
18. The exercise of a discretion is subject to review on appeal only on the bases set out in House v The King (1936) 55 CLR 499 at 504-505, that is: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
19. In our view the fact that "having to record that the bond had not been released in full would be highly likely to affect the tenant's chances of being considered for a tenancy" was not a relevant consideration in determining whether the bond should have been paid to the tenants and, in taking that consideration into account, the Tribunal's discretion miscarried.
20. As the landlords submitted, the bond was provided by the tenants at the commencement of the tenancy to secure the tenants' obligations to the landlords at the end of the tenancy. The potential, and contested, consequences for the tenants in seeking alternative accommodation, of not receiving the whole of the bond, cannot be said to be relevant to that object.
21. To the extent that, at the date of the hearing, there were moneys due and payable by the tenants to the landlords, those moneys should have been paid to the landlords from the bond.
22. However, we do not consider that the tenants should be denied repayment of the bond by reference to amounts which, pursuant to the agreement which the parties had reached (as construed by the Tribunal), were not due and payable at the date of the hearing, but were to be repaid over a future period.
23. Accordingly, on a proper exercise of the Tribunal's discretion in relation to the payment of the bond, the landlords should have received from the bond the sum of $1,500, which the Tribunal determined was a reasonable initial payment, and the amounts of $115.92, $45, $20 and $70, that is $250.92, which the Tribunal determined were owing in respect of water, bank fees and damage to the premises.
24. As we have concluded that the Tribunal made an error of law in the exercise of its discretion in relation to the repayment of the bond, it is not necessary for us to consider whether the landlords have established grounds for leave to appeal in relation to the payment of the whole of the bond to the tenants.
25. To the extent that the landlords sought leave to appeal in relation to the Tribunal's decision concerning the terms of payment of the deferred rent, we are not persuaded that the decision was not fair and equitable or against the weight of evidence. Nor do we consider that the landlords might have suffered a substantial miscarriage of justice. We consider that the payment terms, which the Tribunal determined were reasonable, were relatively favourable to the landlords in that they provided for a lump sum payment which was not explicitly contemplated by the agreement of 7 May 2020.
26. The question then arises what orders should be made to give effect to our conclusions. The landlords should have received a payment of $1,750.92 from the bond. As the bond has been paid to the tenants, it would be futile to set aside the orders for payment of the bond to the tenants. Moreover, $1,500 of the amount the landlords should have received has been paid by the tenants.
27. In those circumstances, the only extent to which the landlords might be said to be worse off by reason of the failure to award them payment out of the bond of the moneys due and payable at the time of the hearing, was the $250.92 in respect of water, bank fees and damages.
28. We consider that the appeal should be allowed to the extent of that $250.92.

ORDERS

1. Our orders are: 1. Appeal allowed in part. 2. Amend Order 1 made on 29 April 2021 by inserting after sub-paragraph (a) 3. (ab) the amount of $250.92 is to be paid on or before seven days from publication of the decision of the Appeal Panel. 4. The appeal is otherwise dismissed.

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: 28 September 2021