This is an internal appeal against a decision of the Consumer and Commercial Division of the Tribunal (Tribunal) of 13 July 2021 requiring the appellant to pay the respondent the sum of $6,264 (Decision).
The appellant was the landlord and the respondent the tenant of a property at Otford in New South Wales. The residential tenancy agreement between the parties commenced on 3 January 2020 for a fixed term expiring on 4 January 2021. The rent was $1,050 per week.
It was not in dispute between the parties that there was erected on the property a house, which the respondent occupied as a residence throughout the tenancy (apart from one room which was occupied by the appellant's son), and a further structure, which was fitted out as a granny flat but which could not legally be occupied as a residence, as it had not been approved for such use.
The respondent vacated the property on 15 February 2021.
The respondent filed an application in the Tribunal on 7 May 2021 seeking the following orders:
1. Repayment of the sum of $10,000 representing money the respondent required me to pay to obtain a development approval for the use of part of the property as a residence.
2. Repayment of the sum of $26,000 representing money that was lost in rental return for the granny flat which the respondent failed to have Council approved.
3. Repayment of the sum of the sum of $2,400 representing the cost of a storage shed to store rubbish and belongings left in the property by the respondent which were never collected.
4. The respondent to pay my legal costs.
The issue relating to the storage shed was resolved and has no further relevance in this appeal.
The respondent's claims in relation to requested orders 1 and 2 are explained in the Decision as follows:
The tenant asserts that, prior to signing the residential tenancy agreement the parties agreed that the tenant could sublet the granny flat at the property, for possibly $500.00 per week. The landlord indicated that the granny flat would be council approved for occupation by 6 January 2020. On this basis the tenant agreed to pay $1,050 per week rent for the main house and the granny flat.
The tenant asserts that on 27 December 2019 the parties had a conversation during which the landlord indicated that she was short of funds for the approval of the granny flat, being $10,000.00. The tenant agreed to pay the landlord the $10,000.00 as rent in advance. The money was transferred on 2 January 2020.
Although the parties did not put before the Appeal Panel all of the evidence which was before the Tribunal, it is apparent that the rent ledger did record the payment by the respondent of the sum of $10,000 which was treated as rent in advance.
The Tribunal made relevant findings as follows:
The residential tenancy agreement does not refer to two structures on the property. The parties referred to the structure as a "granny flat", including in a text message sent by the landlord on 3 February 2020.
The landlord was intending to obtain Council approval for use of the structure as a granny flat, as again indicated in the text of 3 February 2020.
The structure was fitted out as a dwelling: it had a kitchen, bathroom, living space, two bedrooms. It was connected to the electricity and was fully plumbed.
The tenant used the structure for storage and as an office on occasion.
There is no clause in the residential tenancy agreement for the subletting of the property.
There is no evidence that the tenant obtained any financial benefit from the structure during the tenancy.
The Tribunal then continued:
Given the above, the Tribunal is satisfied that the property included a structure which was intended by the parties to be used as a granny flat or separate dwelling during the tenancy. This was not done as the structure was not ever Council approved for this use, despite the landlord's undertaking that it would be.
The Tribunal is of the view that the tenant is entitled to compensation from the landlord.
However, as there is no clause in the lease or written agreement for subletting the structure, the Tribunal is of the view that any compensation cannot be based on an alleged loss of rent from the structure. The loss must be assessed on the basis of any breach of the Residential Tenancies Act 2010, specifically s 49.
Section 49(1) of the Residential Tenancies Act 2010 (NSW) (RTA) provides:
49 Occupation of residential premises as residence
(1) A landlord must take all reasonable steps to ensure that, at the time of entering into the residential tenancy agreement, there is no legal impediment to the occupation of the residential premises as a residence for the period of the tenancy.
The Tribunal concluded:
The Tribunal is satisfied that the failure of the landlord to make the structure legally fit for habitation as a residential premises is a breach of the Act.
The amount of compensation must take into account the fact that the tenant knew that the structure was not approved at the start of the tenancy and the fact that she did have some use of the property for storage and as an office during the tenancy.
Neither party has provided any evidence or submissions as to the value of the whole property if the property did not include a granny flat. The Tribunal is only able to estimate the tenant's loss based on the rent for the property (which was reduced to $950 per week by the agreement of the parties when the rent was paid in advance) with a reduction due to the tenants not having full use of all of it.
The Tribunal estimated that the granny flat was one sixth of the total habitable area and calculated the appropriate measure of compensation as one sixth of the rent ($158 per week) less an allowance of $50 per week to allow for the respondent's use of the property, that is $108 per week for 58 weeks, $6,264.
The Appeal Panel was informed that the appellant paid $1,264 to the respondent shortly after the decision and, as a condition of an undertaking by the respondent not to enforce the Tribunal's decision, has been paying $100 per week to the respondent since 19 August 2021.
[2]
The scope and nature of internal appeals
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.
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, being:
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.
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 Sch 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:
1 The decision of the Tribunal under appeal was not fair and equitable; or
2 The decision of the Tribunal under appeal was against the weight of evidence; or
3 Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
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 Sch 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.
Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Sch 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
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.
[3]
Grounds of Appeal
The appellant identified her grounds of appeal as:
The decision made by the NCAT officer was based on supposed loss of rental income but:
(1) I did not charge rent for the granny flat as it was not approved by Council - tenant was informed of it not being approved for use prior to signing the lease. …
(2) There was no formal written agreement in place for the sub-leasing the tenant did, said she didn't, but also actually did.
The appellant also sought leave to appeal on each of the bases that the decision was not fair and equitable, that it was against the weight of evidence, and that there was significant new evidence that was not reasonably available at the time of the original hearing.
[4]
Extension of time
The appellant filed the Notice of Appeal on 3 August 2021, that is one week outside the period of 14 days laid down for appeals in "residential proceedings" by rule 24(4)(b) of the Civil and Administrative Tribunal Rules 2014 (NSW).
Accordingly, the appellant requires an extension of time in order to maintain the appeal.
The Appeal Panel has power to extend the time for the lodging of an appeal by virtue of s 41 of the NCAT Act.
The principles applicable to the exercise of the discretion to extend time were set out in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 at [22]:
(1) The discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the appellant - Gallo v Dawson [1990] HCA 30 at 93 ALR 479 at [2], Nanschild v Pratt [2011] NSWCA 85 at [38];
(2) The discretion is to be exercised in the light of the fact that the respondent (to the appeal) has already obtained a decision in its favour and, once the period for appeal has expired, can be thought of as having a "vested right" to retain the benefit of that decision - Jackamarra v Krakouer (1998) 195 CLR 516 at [4], Nanschild v Pratt [2011] NSWCA 85 at [39] and, in particular, where the right of appeal has gone (because of the expiration of the appeal period) the time for appealing should not be extended unless the proposed appeal has some prospects of success - Jackamarra at [7];
(3) Generally, in an application for an extension of time to appeal the Appeal Panel will be required to consider:
(a) The length of the delay;
(b) The reason for the delay;
(c) The appellant's prospects of success, that is usually whether the applicant has a fairly arguable case; and
(d) The extent of any prejudice suffered by the respondent (to the appeal),
- Tomko v Palasty (No 2) (2007) 71 NSWLR 61 at [55] (per Basten JA) but note also [14], Nanschild v Pratt [2011] NSWCA 85 at [39] to [42]; and
(4) It may be appropriate to go further into the merits of an appeal if the explanation for the delay is less than satisfactory or if the opponent has a substantial case of prejudice and, in such a case, it may be relevant whether the appellant seeking an extension of time can show that his or her case has more substantial merit than merely being fairly arguable - Tomko v Palasty (No 2) (2007) 71 NSWLR 61 at [14] (per Hodgson JA, Ipp JA agreeing at [17]) and Molyneux v Chief Commissioner of State Revenue [2012] NSWADTAP 53 at [58]-[59].
The respondent pointed out that she was prejudiced by the late filing of the appeal as she had paid $99 to the Local Court to obtain a certificate of judgment which she would not be able to recover if the appeal was upheld.
The appellant agreed that it was appropriate, as a condition of the grant of an extension of time, that she reimburse the respondent the sum of $99, if the appeal was upheld.
As:
we do not consider that the respondent will suffer prejudice if the time for filing the appeal is extended;
the delay in filing the Notice of Appeal is short, namely 7 days; and
for the reasons outlined below, we are persuaded that the appeal has merit,
we will extend the time for the filing of Notice of Appeal on condition that the appellant reimburses the respondent for the cost of obtaining a certificate of judgment, that is $99.
[5]
Question of Law
Although the Notice of Appeal does not identify any question of law, it does point to the Tribunal's findings that the appellant should compensate the respondent for the rent notionally payable in respect of the granny flat, regardless that the respondent had been made aware that it was not approved for occupation by Council at the time of commencement of the tenancy.
In Cominos v di Rico [2016] NSWCATAP 5 at [12]-[13] the Appeal Panel held:
12 The Appeal Panel must give effect to the guiding principle when exercising functions under the CAT Act, which is to "facilitate the just, quick and cheap resolution of the real issues in the proceedings" (s 36(1)). This is reinforced by s 38(4) which provides that the Tribunal is required to act with "as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms."
13 It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, 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. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.
(emphasis added)
Consistently with that approach, we have examined the appellant's materials and consider that the appellant's grounds of appeal include that the Tribunal did not apply the correct test in determining that the appellant was in breach of s 49(1) of the RTA.
For reasons which follow, we are of the view that the Tribunal made an error of law in determining that the appellant was liable to the respondent for a breach of s 49(1) of the RTA.
Section 49(1), which we have set out above, requires that there be no legal impediment to the "occupation of the residential premises as a residence".
"Residential premises" is defined in s 3 of the RTA as follows:
Residential premises means any premises or part of premises (including any land occupied with the premises) used or intended to be used as a residence.
In our view, the Member failed to address the correct question, that is whether the parties had agreed that the granny flat would be available for use as a residence. It is clear that the appellant had made available for occupation as a residence the main house (or that part not occupied by her son). The critical question in relation to the granny flat, on which the respondent bore the onus of proof, was whether the parties had agreed that the granny flat would be available for occupation as a residence during the term of the tenancy and from when.
It cannot be the case that a landlord will be in breach of s 49(1) of the RTA just because there is a secondary structure on a property the subject of a tenancy agreement which cannot be legally occupied as a residence. It is necessary that the landlord have promised or represented that the structure can be legally occupied.
The Tribunal concluded that "the structure … was intended by the parties to be used as a granny flat or separate dwelling during the tenancy" and that the appellant had given an undertaking that the structure "would be" approved for that use.
However, the Tribunal did not undertake any analysis of the evidence of the parties to put it in a position to make specific findings concerning exactly what the parties had agreed in the course of negotiation for the residential tenancy agreement. The Tribunal referred to an "undertaking" that the structure would be approved for use as a residence, but the Tribunal did not address the content of that "undertaking" including the time frame within which the undertaking was to be fulfilled. Moreover, the Tribunal did not explain how that undertaking was supposed to have arisen.
The member also failed to give any consideration to the question whether the landlord had taken "all reasonable steps to ensure that, at the time of entering into the residential tenancy agreement, there [was] no legal impediment to the occupation of the [granny flat] as a residence" (emphasis added).
The appellant provided to the Appeal Panel a transcript she had prepared of the hearing at first instance. Although the respondent stated that she had not received that document prior to the hearing, a copy was emailed to her in the course of the hearing and she did not suggest that there was any substantial error or inaccuracy in the document.
As we have set out above, the Tribunal set out in its decision the respondent's assertions in relation to the discussions between the parties prior to entry into the residential tenancy agreement. However, the Tribunal did not address evidence given by the appellant at the hearing (as recorded in the transcript) that:
I explained from the beginning that it wasn't approved and I couldn't give a time frame as the development application process is difficult and expensive. I said it was OK to be used for storage.
In our view, to the extent that the Tribunal found that the appellant gave an undertaking in relation to the use of the granny flat, that finding was not supported by adequate reasons. In particular, there was no attempt to weigh the competing evidence to determine precisely what was said at the time of the negotiation of the tenancy agreement.
In our view, "[t]he Tribunal needed to address the material evidence on this subject, make findings as to the factual contentions of the appellant and set out the reasoning that gave rise to its conclusion": Torpey v Stewart [2021] NSWCATAP 248 at [41].
As Bell P held in NSW Land & Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231 at [73], citing Cypressvale Pty Ltd v Retail Shop Leases Tribunal [1996] 2 Qd R 462 at 477:
"… while … a tribunal "might not be required to 'submit the material before [it] to the most meticulous analysis and carry into [the reasons for its decisions] a detailed exposition of every aspect of the evidence and the arguments ...' or '... incorporate an extended intellectual dissertation upon the chain of reasoning ...', at least 'a basic explanation of the fundamental reasons which led the [Tribunal] to [its] conclusion ...' is necessary".
Accordingly, the appeal must be allowed, the order requiring the appellant to compensate the respondent must be set aside, and the proceedings must be remitted to the Tribunal, differently constituted, for determination according to law and consistently with these reasons.
[6]
Leave to appeal
As we have determined that the Tribunal made an error of law, it is not necessary to consider the appellant's application for leave to appeal.
We note, however, that we are not persuaded that the new evidence which the appellant sought to tender, being a letter from a real estate agent concerning the rental values of the property, and what is apparently a post by the respondent on Facebook, which appears to contain a statement that she had been sub-letting the granny flat, was not reasonably available at the time of the hearing.
The appellant acknowledged as much in respect of the agent's letter. The appellant asserted that the Facebook post had only come to her attention after the initial hearing through a mutual acquaintance who had access to the respondent's Facebook page and had forwarded the post to the appellant.
We are not persuaded that, had the appellant taken reasonable steps to obtain such documentation, such as through the issue of a summons to the respondent seeking documents recording or referring to the sub-letting of the granny flat, she could not have obtained a copy of the Facebook post before the hearing.
The appellant attached to her Notice of Appeal a print-out, signed by her son, of a text message in which he stated that he was present at discussions between the appellant and the respondent in which it was agreed that the granny flat could only legally be allowed to be used for storage, and that he had witnessed people living in the granny flat during the term of the respondent's tenancy.
The appellant asserted that that document had been before the Tribunal. We did not understand the respondent to dispute that proposition. That document was some evidence that the appellant had not given any undertaking to the respondent and that the respondent had utilised the granny flat as a residence, despite the lack of council approval. The Tribunal did not refer to that document in its decision. If that document had been before the Tribunal, it was incumbent upon the Tribunal to address that evidence and to explain why it nevertheless concluded that the respondent had been denied the benefit of the granny flat. The Tribunal's failure to do so might also constitute an error of law or support a submission that the decision was against the weight of evidence. However, in the absence of a clear confirmation that the document was before the Tribunal, we prefer to base our decision upon the other errors of law we have identified above.
[7]
Orders
Our orders are:
1. Extend time for the filing of the Notice of Appeal to 3 August 2021 on the condition that the appellant reimburses the respondent the amount of $99 being the cost of obtaining a certificate of judgment in the Local Court.
2. Allow the appeal.
3. Set aside Order 1 made on 13 July 2021 in proceedings RT 21/20082.
4. Remit the proceedings to the Consumer and Commercial Division of the Tribunal for hearing by the Tribunal differently constituted, on such evidence as the parties may see fit to file in accordance with directions of the Tribunal.
5. Order the respondent to reimburse to the appellant the amounts paid by the appellant in partial payment of the Tribunal's decision, less the $99 referred to in Order 1, within 28 days of the date of these orders.
[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: 16 November 2021