Hyndes v Maddak Pty Ltd

Background

1. The Tenants and Landlords entered into a residential tenancy agreement for premises at Dubbo, NSW, commencing on or about 21 February 2018. That written tenancy agreement was not in evidence but is not in dispute.
2. The parties entered into a further residential tenancy agreement commencing on 18 December 2019 for a term of 14 months. That tenancy agreement was in evidence.
3. The Tenants' complained to the Landlords about several repair or maintenance issues during their tenancy, the most significant being plumbing issues involving sewerage and wastewater.
4. According to the Tenants' Application Form, they complained to the Landlords' managing agent on 21 February and 2 August 2018, approximately every three months in 2019, on 19 and 30 March, 27 May, 9 and 10 August, 27 and 29 September, 19 and 22 October 2020, 3 and 9 February and 2 March 2021.
5. Invoices showed that a plumber had attended the premises and undertaken plumbing work of different types. Not all of the invoices in evidence related to the sewerage and wastewater systems according to the descriptions of work contained in those invoices.
6. The invoices which, on their face, related to the sewerage and wastewater systems described the work done as follows (the dates being the dates of the invoices as no dates were given for when the work was actually done): 1. 1 February 2018 for water jetting to clear blockage when blocking up; 2. 13 April 2020 for the unblocking of sewer line with water jetting machine from toilet, floor waste and boundary shaft to clear; 3. 11 August 2020 for the unblocking of sewer line coming back up into house; 4. 28 October 2020 for the unblocking of sewer line with water jetting machine and inspection with CCTV camera (with the note that there did not appear to be anything blocking the pipework, the pipework was clear, unsure what was causing blockages); 5. 1 December 2020 for some 12 hrs of work involving the excavation at the rear of the premises to access the sewer point, extending an eel along the line to clear, extending the eel from rear boundary shaft (with notes that that work did not appear to remove anything significant, there may be a fracture in the sewer line, it may require camera work, it could be a small object jammed in the line, could only monitor situation as present through normal use as discussed with the Tenants)
7. The Landlords' agent arranged for Gower Carpet Cleaning to attend on 23 November 2020 to clean up sewage in the bathroom, toilet, and hallway area, to remove sewerage, clean tiles and disinfect the affected area.
8. The Tenants commenced their proceedings in the Tribunal on 3 March 2021.
9. In that Application the Tenants made a claim under s 187(1)(d) of the Residential Tenancies Act 2010 (NSW) (the "RTA") for $6,000 compensation, a claim under s 44(1)(b) of the RTA for a reduction of rent and a claim under s 65(1)(a) of the RTA for an order that the Landlords carry out repairs. The last-mentioned claim for repairs appears not to have been pursued.
10. The Tenants' claim for compensation was based on a claim that the Landlords had breached the covenant for quiet enjoyment (paragraphs 7 and 16 of their written submissions prepared for the hearing before the Tribunal, section 5B of their Notice of Appeal) in that the sewerage and wastewater issues occurred repeatedly, frequently and over an extended period, and were never resolved by the Landlords.
11. The covenant for quiet enjoyment was contained in cl 14 of the residential tenancy agreement which was in the form of the Real Estate Institute of NSW's 2019 edition, and was in the following terms: "14. The landlord agrees - 14.1 that the tenant will have quiet enjoyment of the residential premises without interruption by the landlord or any person claiming by, through or under the landlord or having superior title to that of the landlord (such as a head landlord), and 14.2 that the landlord or the landlord's agent will not interfere with, or cause or permit any interference with, the reasonable peace, comfort or privacy of the tenant in using the residential premises, and 14.3 that the landlord or the landlord's agent will take all reasonable steps to ensure that the landlord's other neighbouring tenants do not interfere with the reasonable peace, comfort or privacy of the tenant in using the residential premises."
12. It is not without significance in this case, as the Tenants acknowledged in paragraph 16 of their written submissions prepared for the hearing before the Tribunal, that a claim for compensation is different to a claim for a reduction of rent.
13. At least in this case, compensation may be awarded for breach of the covenant for quiet enjoyment, and a reduction in rent awarded for the withdrawal or reduction of services or facilities. Overlapping but different issues need to be considered in relation to alleged breaches of the covenant for quiet enjoyment to those to be considered in relation to a claim for a reduction in rent for the withdrawal or reduction of services or facilities. We shall return to these differences later in these reasons.
14. The Tribunal's reasons in relation to the claim for "non-economic loss" and a reduction in rent were brief. The Tribunal said: "5. The claim which is made for "non-economic loss" must fall to be assessed under the provisions of the Civil Liability Act 2002. Section 16 of this legislation requires a claimant to establish that the degree of non-economic loss is at least 15% of a most extreme case before any damages for non-economic loss may be awarded. This threshold has not been met upon consideration of the evidence provided. 6. The evidence does establish that notional reduction of rent payable for the subject property is justified due to disrepair of part of the premises mainly relating to plumbing issues which in tum effectively restricted full use and enjoyment of the premises as was otherwise provided for under the terms of the subject tenancy agreement. The other complaints made, including notifications concerning a leaking shed, palm trees, air conditioning and eaves, do not justify a significant additional reduction. 7. The appropriate total notional rent reduction is considered upon the available evidence to be $40 per week, which represents 10% of the original weekly rent amount of $400 payable for the property. 8. The above figure is applied over a maximum period of 52 weeks; this results in an amount of $2040 which should be ordered as compensation.

Grounds of Appeal

1. The Tenants raised two grounds of appeal.
2. First, they said that the Tribunal erred in holding that their claim for non-economic loss "must fall" to be assessed under the Civil Liability Act 2002 (NSW) ("CLA").
3. Second, they said that they were denied procedural fairness in that they were not permitted to read out their written submissions prepared for the hearing before the Tribunal (which had been prepared for them by the New England and Western Tenants Advice and Advocacy Service Incorporated).
4. The two grounds are inter-related as the Tenants submitted on appeal that had they been able to read out their written submission the Tribunal would have been informed of the binding authorities which hold that a claim for disappointment and distress resulting from a breach of the covenant of quiet enjoyment, but not arising as a result of physical injury, is not subject to the CLA. Had the Tribunal been so informed, the Tenants submitted, there was a possibility of a different result and therefore a new hearing should be ordered (per Stead v State Government Insurance Commission [1986] 161 CLR 141).

Decision

1. In our opinion the Tribunal erred in relation to Ground 1.
2. In Moore v Scenic Tours Pty Ltd (2020) 268 CLR 326; [2020] HCA 17 the High Court held at [41] (footnotes omitted): "Disappointment at a breach of a promise to provide recreation, relaxation and peace of mind is not an "impairment" of the mind or a "deterioration" or "injurious lessening or weakening" of the mind. Frustration and indignation as a reaction to a breach of contract under which the promisor undertook for reward to provide a pleasurable and relaxing holiday is, of itself, a normal, rational reaction of an unimpaired mind. In this regard, Mr Moore's claim for damages for his disappointment and distress resulting from Scenic's breach of contract can be seen as no more a claim relating to personal injury than would be a claim for damages for the indignation occasioned by false imprisonment or defamation. As was said in New South Wales v Williamson by French CJ and Hayne J, with whom Kiefel J agreed, while there may be cases where an act of false imprisonment itself causes psychiatric injury, insofar as an action for false imprisonment claims damages for loss of dignity and harm to reputation associated with the deprivation of liberty it is not a claim for an "impairment of a person's physical or mental condition" or otherwise a form of injury within s 11 of the CLA."
3. And at [46]: "Disappointment and distress of this kind is not "non-economic loss" under Pt 2 of the CLA. The text and structure of Pt 2 of the CLA are clear that non-economic loss within Pt 2 is a head of loss associated with personal injury as pain and suffering. At common law, "pain and suffering" was understood to mean actual physical hurt occasioned by the accident or its aftermath; and damages for emotional harm were not recoverable unless a psychiatric injury was suffered. Similarly, the assessment of damages for "loss of amenities of life" invites a comparison between the ability of a person to enjoy life before and after the personal injury. But in the present case, no physical injury was alleged and no psychiatric illness was alleged to have resulted from the breach of the consumer guarantees in the ACL. The exception to the general rule relating to promises of enjoyment, relaxation or freedom from molestation, breach of which results directly in disappointment and distress, compensates a plaintiff for what he or she was promised where the expectation of a peaceful and contented holiday has been unfulfilled. The comparison between "the expectations against the reality" does not involve any reference to, or assessment of, an impairment to the plaintiff's mental condition."
4. These principles have been applied in cases where the contract breached was a residential tenancy agreement.
5. In Makowska v St George Community Housing Ltd [2020] NSWCATAP 159 a tenant sued her landlord for compensation under s 187(1)(d) of the RTA and for a reduction of rent under s 44. Before the Tribunal the tenant succeeded on her claim for a reduction of rent but failed in relation to her claim for compensation. In relation to the latter the Tribunal held that the CLA applied to the tenant's claim for compensation based on a breach of the covenant for quiet enjoyment and, in addition, found that there was no breach of that covenant.
6. The Appeal Panel held: "30. We accept that the Tribunal made an error of law to the extent that it applied s 16(1) of the Civil Liability Act to the appellant's claim for compensation for loss of enjoyment of her property and inconvenience. That s 16(1) is not applicable to such claims is made clear by the decision of the High Court in Moore v Scenic Tours Pty Ltd [2020] HCA 17; 77 ALR 209. 31. However, that error had no impact upon the Tribunal's ultimate decision. The Tribunal having determined that the respondent was not in breach of its obligation to give quiet enjoyment, there was no basis for the Tribunal to award compensation in respect of the appellant's loss of enjoyment and inconvenience."
7. The tenant appealed to the Supreme Court with the case being decided by Basten J - Makowska v St George Community Housing Ltd [2021] NSWSC 287, a case binding on us.
8. In that case his Honour quoted the two paragraphs from the Appeal Panel's reasons which we have set out above and said, immediately beforehand (at [25]): "The Appeal Panel correctly accepted that the claim for compensation for loss of quiet enjoyment of the premises, and for inconvenience, did not constitute a claim for personal injury damages and did not fall within the definition of non-economic loss in s 3 of the Civil Liability Act."
9. Thus, a claim for disappointment, or distress, or some other synonym for those terms, not consequential upon physical injury or psychiatric illness, is not caught by the CLA and so the Tribunal erred in holding otherwise.
10. In Torpey v Stewart [2021] NSWCATAP 248 the Appeal Panel applied the holdings in Moore and Makowska (Appeal Panel) in holding, at [27], that: "Hence, mental distress unassociated with physical injury of the kind referred to in these cases is not a "personal injury" within the meaning of Part 2 of the CLA."
11. To be fair to the Tribunal, it was not assisted by the Tenants calling their claim as one for non-economic loss, which is a term used in the CLA and which is inapt to describe their claim. Their claim was not for "non-economic loss" as that term is generally understood in the civil law of NSW.
12. Be that as it may, it is clear from the material the Tribunal was given that the Tenants' claim was for disappointment, distress, frustration, or indignation (or howsoever the Tenants' "mental reaction to a breach of contract" per Brennan J in Baltic Shipping Co v Dillon (1993)176 CLR 344; [1993] HCA 4 might be described) which was not consequential on physical injury or psychiatric illness. Hence, it was not caught by the CLA.
13. It follows that the Tribunal erred in holding otherwise and the appeal should be upheld in relation to Ground 1.
14. As that conclusion is sufficient to dispose of the appeal, we need not consider the second ground, although a reading of the transcript does not, on its face, suggest the Tenants were prevented from reading their written submission. As we read the transcript the Tenants were encouraged not to do so unless it was to "add anything" to what was in the written material already submitted or which "needs to be pointed out". As the Tenants did not read out their written submission it appears they did not consider at the time that it added anything or contained anything that needed to be pointed out. That is not to be critical of them as they are not legally trained or experienced, but the fact remains that the Tribunal did not prevent them from reading out the written submission.

The Appropriate Orders to Make

1. Two issues remain: should we set aside the whole of the Tribunal's decision or only that part dealing with "non-economic loss"; and should we remit the proceedings to the Tribunal for a new hearing or should we determine the issues ourselves.
2. In our opinion the whole decision should be set aside.
3. The Tenants' claim for breach of the covenant for quiet enjoyment (from which came the claim for compensation) was not decided by the Tribunal. It needs to be determined.
4. Whether there was a breach of that covenant will need to be decided on the facts of the case and the authorities as to what is a breach of that covenant. Those authorities include Aussie Traveller Pty Ltd v Marklea Pty Ltd [1997] 1 Qd R 1 per McPherson JA, with whom Thomas J agreed, at 9-10, Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 at [35]-[38] per Hill J, with whom Gallop J agreed, and Spathis v Hanave Investment Co Pty Ltd & Anor [2002] NSWSC 304 at [124]-[152].
5. That a malfunctioning drainage system may amount to a breach of the covenant of quiet enjoyment was so held by Yeldham J in Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15.
6. But, as will be apparent from those authorities, the mere fact that there were recurrent problems with the sewerage and wastewater systems does not necessarily mean that there was a breach of that covenant.
7. The Tribunal did find in favour of the Tenants in relation to their claim for reduction of rent, but it seems the Tribunal was confused as to what was in issue in such a claim because the Tribunal said that a reduction of rent was justified: "… due to disrepair of part of the premises mainly relating to plumbing issues which in tum effectively restricted full use and enjoyment of the premises …"
8. "Full use" is the language of s 44 (reduction or withdrawal) whilst "enjoyment" is the language of disappointment or distress (or similar) arising from a breach of the covenant of quite enjoyment.
9. The claim for reduction of rent is a different claim to a claim for breach of the covenant for quiet enjoyment, although they may overlap and although both claims may succeed. As Basten J said in Makowska at [43], the description "a reduction or withdrawal of a facility" used in s 44 is: "… language which does not necessarily involve loss of quiet enjoyment of the premises."
10. That the claims are not mutually exclusive was the holding in Roberts v NSW Aboriginal Housing Office [2017] NSWCATAP 9 at [86] in a passage cited with approval by Basten J in Makowska at [46].
11. In Roberts at [86] the Appeal Panel said: "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."
12. The Tribunal's reasons were sparse to say the least, and had the Tenants' argued that the reasons were inadequate we would probably have upheld the appeal on that ground. The Tribunal's reasons do not satisfy the basal objective of informing the parties of the relevant findings and reasoning process which led to its decision as the "minimum characteristics that a Tribunal's reasons must possess" (New South Wales Housing Corporation v Orr [2019] NSWCA 231 at [71]).
13. In any event, it appears from the reasons that some element of "enjoyment" was included by the Tribunal in the reduction of rent award, and that award should also be set aside to avoid any possibility of double compensation should the Tenants succeed on their claim for compensation from a breach of the covenant of quiet enjoyment.
14. We did consider determining those issues ourselves, but other issues arise on which we have not heard the parties, and which may be the subject of evidence.
15. The principal issue which appears to arise is whether the Tenants' claim for compensation is subject to a limitation period.
16. A claim for breach of the covenant for quiet enjoyment is a claim for a breach of the residential tenancy agreement, i.e. clause 14 set out at [15] above.
17. In relation to claims for breaches of residential tenancy agreements s 190(1) of the RTA says that such claims must be commenced within the period specified in the Residential Tenancies Regulation 2019 (NSW). Section 190(1) says: Applications relating to breaches of residential tenancy agreements (1) A landlord or a tenant may apply to the Tribunal for an order in relation to a breach of a residential tenancy agreement within the period prescribed by the regulations after the landlord or tenant becomes aware of the breach or within such other period as may be prescribed by the regulations.
18. The "period prescribed by the regulations" is the period set out in reg 39(9) of the Residential Tenancies Regulation 2019 (NSW). That regulation says: Times for making applications to Tribunal - ss 44(2), 83(2)(a), 98(4), 115(3), 125(3), 134(3), 141(2), 175(3) and 190(1) of Act (1) - (8) … (9) For the purposes of section 190(1) of the Act, the prescribed period is within 3 months after the applicant becomes aware of the breach.
19. The Tribunal has power to extend that period if such an application is made - s 41 of the Civil and Administrative Tribunal Act 2013 (NSW) - and such an application might be the subject of evidence and submissions taking into account principles such as those set out in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22. Given that possibility it is not appropriate that we determine the issues as they presently stand.
20. Another issue which may arise, and on which we have not heard the parties, is whether, assuming there was a breach of the covenant of quiet enjoyment, it was a continuing breach or a once and for all breach. We would be inclined to the former view, but that is not a decision for us on this appeal.
21. For those reasons the matter should not be decided by us and should be remitted to the Tribunal.

Orders

1. For all those reasons we make the following orders: 1. Appeal upheld. 2. The whole of the decision of the Tribunal is set aside. 3. The matter is remitted to the Tribunal, differently constituted, to be determined according to law.

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

Amendments 05 October 2021 - no amendment 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: 05 October 2021