Jeffrey v Fitzroy Collingwood Rental Housing Association Ltd [1999] VSC 335

11. On 30 June 1993, the appellant moved again: from room 4, to room 7. He continued to pay $52.80 per week. Then, by notice dated 5 October 1993, he was told that the respondent had decided to impose a further increase. The amount involved was $4.90 per week. The rent thereafter demanded by the respondent, effective from Tuesday 16 November 1993, was therefore $57.70 per week. Again, the appellant claims that this increase was invalidly imposed. Again, the basis for the claim is that less than six months had elapsed between the appellant's initial occupancy of room 7 on the one hand, and the imposition of the new rent on the other.

14. Another increase in rent was announced on 28 August 1994. The amount of the proposed increase was $2.95 per week, taking the weekly rent to $60.65. It was to be effective from 25 September 1994, less than 30 days later. The appellant claims that, for this reason, the increase was invalidly imposed.

17. Two smaller increases followed. As from 20 November 1994, the weekly rent rose by either 30 cents or 35 cents (there is a conflict in the material placed before me) to either $60.95 or $61.00. As from 9 April 1995, the increase was 45 cents per week, to either $61.40 or $61.45. I shall, for the purposes of this judgment, assume that the greater amount was levied.

20. Notice of the increase of November 1994 was given on 23 November. Notice of the increase of April 1995 was given on 13 April. Each was, therefore, imposed retrospectively. Both are, for that reason, the subject of the present complaint.

23. The rent increased yet again on 18 January 1996. On this occasion, the amount involved was $2.45 per week. From that date, therefore, the appellant was charged either $63.90 per week or $63.85 per week for the occupancy of room 7. Although originally one of the matters taken by the appellant to the Tribunal, this claim is no longer pursued.

26. In each case, the increased charge was paid by the appellant. He now claims, however, that each save the first and the last was and is invalidly imposed. He wants his money back. He asked the Tribunal to order accordingly. It refused. He now appeals to this Court.

29. The first relevant statutory provision is s.8 of the Rooming Houses Act 1990. After identifying the exceptions to which I refer below, s.s.(1) stated that "a rooming house owner must not increase the rent payable by the resident more than once every six months." There were two exceptions to this, one of which is (for present purposes) irrelevant. The other was that the rent could, "before the expiry of six months from the day on which the resident commenced residing in the room", properly be increased for the first time; but only if the owner (a) notified the resident of the rent increase dates for the rooming house before the resident commenced residing in the room, and (b) increased the rent payable by all residents of the rooming house on the same dates each year. Any rent increase in contravention of the section is invalid.

32. The second relevant statutory provision is s.9 of the Rooming Houses Act. By that section:

"9.(1) A rooming house owner must give a resident at least 30 days' written notice of a proposed rent increase. (2) Any rent increase in contravention of this section is invalid."

36. Both s.8 and s.9 are concerned with the time within which certain acts must, or must not, be done. Given the importance of these sections to the outcome of this appeal, it may be relevant to set out at this point a chronology of the relevant events:

The appellant becomes a resident of room 8, 472 Napier Street, Fitzroy.

The appellant's rent is increased from $42.85 per week to $48.00 per week (seven months after the appellant first took up residence at 472 Napier Street, Fitzroy).

The appellant moves to room 4, 472 Napier Street, Fitzroy.

The appellant's rent is increased from $48.00 per week to $52.80 per week (two months and two weeks after the appellant moves to room 4).

The appellant moves to room 7, 472 Napier Street, Fitzroy.

The appellant's rent is increased from $52.80 per week to $57.70 per week (four months and two weeks after the appellant moves to room 7).

The respondent announces that, as from 25 September 1994, appellant's rent is to be increased from $57.70 per week to $60.65 per week.

The rent increase announced on 28 August 1994 (28 days earlier) becomes effective.

The appellant's rent is increased from $60.65 per week to $61.00 per week (less than two months after the increase which became effective on 25 September 1994).

The respondent announces the rent increase imposed as from 20 November 1994.

The appellant's rent is increased from $61.00 per week to $61.45 per week (less than five months after the increase which became effective on 20 November 1994).

The respondent announces the rent increase imposed as from 9 April 1995.

40. The appellant's case is founded on the proposition that he is entitled to the return of money paid under a mistake of law. He asserts that he was mistaken when, as a tenant of room 4, he acceded to a demand that, as from 16 January 1993, he pay an increase of $4.80 per week in his rent: had he appreciated that this increase was (as he submits) invalid by reason of the prohibition in s.8 of the Rooming Houses Act, he would have refused to pay it. He accepts that when, on 30 June 1993, he moved to room 7, the additional $4.80 was thereafter properly chargeable. Every subsequent increase, however, was (he submits) vitiated either (a) because it was imposed within six months of the move to room 7, or (b) because less than 30 days' notice was given or (c) because not only was less than 30 days' notice given, but the increase was imposed less than six months after the previous increase. In paying those increases he was, he says, acting under a mistake. He then thought that they were lawfully imposed. Now he does not. He therefore submits that, if his present view of the law is correct, he is entitled to have the difference returned to him.

43. Calculating the amount in dispute is, of course, simply a matter of mathematics. At the Victorian Civil and Administrative Tribunal, the overpaid rent was quantified for each period in respect of which an impugned increase was charged and paid. The first such period, between Saturday 16 January 1993 and Wednesday 30 June 1993, ran for 23 weeks and four days. At $4.80 per week, that resulted in a claimed overpayment of $113.14. The second period commenced on Tuesday 16 November 1993 and ended, 44 weeks and five days later, on Sunday 25 September 1994. At $4.90 per week, the amount allegedly overpaid was $219.10. The third period commenced on 25 September 1994, when a further increase of $2.95 per week was added to the $4.90 per week which the appellant says he was already being overcharged. The amount in issue therefore rose to $7.85 per week. Given that the third period ended on Sunday 20 November 1994, exactly eight weeks later, the total claimed for this period should, according to my calculations, have been $62.80. The Tribunal reached a figure of $61.68. The difference is not material.

46. Using the principles outlined above, the remaining claims were quantified by the Tribunal as follows:

51. I have checked these calculations. Although there is a problem with the conflict referred to in paragraph 6 above, the results which I have obtained broadly coincide with those published in the judgment of the Tribunal. In the end, and given that the matter was not the subject of argument before me, I am content to adopt the figures used by the Tribunal. The result is a claimed overpayment of $903.45.

54. Restitution will, in general, be ordered where a party is overpaid and it is unjust that the overpayment should be retained. That, the appellant claims, is the case here. But the justice of the thing is not, however, entirely one-dimensional. If the appellant is right, he is entitled to restitution on the basis that (a) for the 12 months between 1 July 1992 and 30 June 1993, the amount validly chargeable to him as rent remained at $48.00 per week; and (b) between 30 June 1993 and 18 January 1996, a period of a little more than two and a half years, the amount for which he was properly liable as rent remained at $52.80 per week. But a result which relieved him of the burden of all but one increase over that period (a total of three and a half years) would, it would seem, fail to recognise not only the reality of the market place but also the fact that Parliament contemplated the possibility of rent increases every six months. Even given that the market was a specialised and regulated one (rooming accommodation for people with limited means), the appellant could not persuasively assert that his success in this litigation would result in perfect justice. Rather, such a result would amount to something of a windfall for him - albeit (if the appellant is right), a windfall the source of which was the respondent's failure to do that which the relevant legislation required it to do.

57. The proper disposition of issues such as these is not made any easier by the complexity of the law of restitution. To this must be added a web of relevant statutory provisions found in a succession of Acts of Parliament. The last of these repealed those which went before - but with savings and transitional provisions which preserve a portion of the past.

60. When the appellant became a resident of 472 Napier Street, both the Residential Tenancies Act 1980 and the Rooming Houses Act 1990 were in force. The former was repealed by s.528 of the Residential Tenancies Act 1997; the latter by s.530. In each case, the repeal took effect on 1 July 1998.

63. The appellant first complained to the Residential Tenancies Tribunal. As at the date of the complaint (1 June 1998) this was the body with relevant jurisdiction. By the time the matter came to be heard, however, the Residential Tenancies Act 1997 had commenced operation. While, by reason of the operation of that Act's transitional provisions, the appellant's rights under the former legislation continued to exist, the powers of the Residential Tenancies Tribunal had by then been transferred to the Victorian Civil and Administrative Tribunal.

66. In her written submissions, counsel for the appellant helpfully surveyed the means by which the matter came (as it initially did) before the Residential Tenancies Tribunal. It seems that the appellant initiated his complaint by lodging an inappropriate document. The Victorian Civil and Administrative Appeals Tribunal nevertheless proceeded to hear and determine the matter, doubtless taking the view (a) that a procedural irregularity was not in the circumstances sufficient to vitiate the claim, and (b) that it had jurisdiction pursuant to s.23 of the Residential Tenancies Act 1980. For relevant purposes, that section enables a tenant under a tenancy agreement to apply to the Tribunal where he or she claims that a breach of the provisions of the Residential Tenancies Act relating to the tenancy agreement has occurred.

69. The appellant was not a tenant under a tenancy agreement; but, by s.48 of the Rooming Houses Act, s.23 of the Residential Tenancies Act applies "with such modifications as are necessary as if incorporated in" the relevant Part of the Rooming Houses Act. It therefore seems to me clear enough that, where the appellant claims that a breach of the provisions of the Rooming Houses Act relating to his rights as a resident has occurred, he had the right to make an application to the Residential Tenancies Tribunal (and then to the Victorian Civil and Administrative Appeals Tribunal). I proceed to deal with the appeal accordingly.

72. It will be remembered that the appellant moved from room 8 to room 4 on 28 October 1992. He was then paying $48.00 per week in rent. On or about 16 January 1993, less than three months after he became the occupier of room 4, this was increased by the respondent to $52.80 per week: a breach, the appellant submits, of s.8.

75. The Tribunal agreed. In giving its reasons for its decision, it said:

"It was argued for the [appellant] and not contested by the [respondent] that a new residency was created when he moved from room 8 to room 4. I think that this is correct. ... In my view it is clear ... that the residency governed by the Act relates to a particular room and when the resident ceases to occupy the particular room and commences to occupy another room as his residence it is a new residency, notwithstanding that both rooms may be in the same building. ... The evidence on behalf of the [respondent] was that, when he moved into room 4, Mr. Jeffrey signed a further tenancy agreement in the same form as the first agreement. It was not suggested that this agreement specified a rent increase date within the meaning of s.8(2)(a). Since the [respondent] cannot rely on s.8(2)(a), it follows that the rental increase intended to be effected by the form was invalid in the case of Mr. Jeffrey because it was made less than six months after the commencement of his residency in room 4."

79. The same set of circumstances arose following the appellant's move, on 30 June 1993, from room 4 to room 7. It will be remembered that a rent increase, effective from 16 November 1993, was announced by notice dated 5 October 1993. Again, less than six months had elapsed between the move and the increase. Adopting the reasoning outlined above, the Tribunal held that the latter, too, was invalid.

82. The word "resident" is defined in s.3 of the Rooming Houses Act as meaning "a person who takes up occupancy of a room with the consent of a rooming house owner". The expression "room" is defined in s.3 to mean "any room ... which is used ... for the purpose of residents". Clearly, therefore, as the appellant himself accepts (see, for example, paragraph 6 of the affidavit of Vanessa Eckhaus, the appellant's solicitor, affirmed in this appeal on 22 October 1998) he was from 26 November 1991, a resident of 472 Napier Street, Fitzroy. Equally clearly, he was a member of the class of persons protected by s.8 from rent increases imposed more frequently than once every six months.

85. To this point, I have no quarrel with the reasoning of the Tribunal. Thereafter, we part company. It is true that, by s.5(2)(a) of the Act, a "residency right" (an expression which is not defined in the Act, but which appears in s.5) ended if, after giving notice to the rooming house owner, the resident vacated the room which he or she had hitherto occupied. The appellant's residency right to room 8 doubtless ended when, on 28 October 1992, he vacated that room in the course of moving to room 4. But his right to occupy room 4 was created, and he therefore enjoyed a new "residency right", no later than the moment when he took up occupancy of that room. Because the appellant was merely engaged in moving from one room to another, the ending of one residency right was followed immediately by the beginning of another; and in these circumstances the appellant's status as a resident was not affected. His residency right to room 4 was in all relevant respects identical to his residency right to room 8. More importantly, he continued throughout to be a "resident" as that expression is defined in s.3. In other words, his status under s.3 of the Rooming Houses Act as "a person who takes up occupancy of a room with the consent of a rooming house owner" never changed. By s.8(1) of the Act he was, therefore, a member of the class which is protected against rent increases which occur less than six months after the last such increase. Equally, however, if increases are so spaced that six months or more elapses between them, then the appellant will not be able successfully to complain on that score, no matter how many room changes he might make in between.

88. Section 8(2) is concerned with new residents. Not with new residency rights. Accordingly, in my opinion the Senior Member was wrong to conclude that the creation of a new "residency" (a concept which, as far as I can see, is foreign to the Act) gave rise in the appellant to a right to receive the notice to which s.8(2) referred.

91. The plain fact, it seems to me, is that the appellant did indeed receive in fact the protection which s.8(1) was designed to accord to him as one of the respondent's residents. By 16 January 1993, the appellant had lived in the rooming house for nearly 14 months. During this time, his rent had been increased only once - on 1 July 1992. He had by the latter date been a resident of 472 Napier Street for more than seven months. It therefore follows that the prohibition in s.8 against increasing his rent more often than once in every six months had not been breached. There is nothing in s.8(1) or elsewhere in the Act to suggest that a change of room by the resident should affect this position. Nor is there any reason grounded in principle or policy why such a change should be relevant. This being so, it is in my opinion impossible to use an exception to the prohibition as the foundation for the conclusion that such a breach had occurred. In other words, it is only if the rooming house owner seeks to increase the rent payable by the resident more than once every six months that one can properly look to the exception - and then, only to see whether such an increase is justifiable. In the present case, the respondent did not seek to increase the rent payable by the appellant more than once every six months. The exception is therefore irrelevant.

94. The next increase in rent after 16 January 1993 took effect on 16 November 1993. Again, therefore, the appellant retained his status as a resident upon whom no increase in rent had been imposed within six months after the previous increase. It follows that no breach of s.8 was involved in the increase of November 1993.

97. In my opinion, the construction of s.8 which I have endeavoured to articulate is consistent with what I take to be the purpose of the section. It is to protect rooming house residents against the imposition of rent increases unless these occur at intervals of not less than six months. Such protection, however, might unduly favour a new resident, and unduly prejudice the proper administration of a rooming house, where the policy of the rooming house was to increase rents to all residents on the same twice-yearly dates. Unless within the first six months of the commencement of a new residency a rooming house owner could lawfully impose one increase in the rent payable by the new resident, such increase dating from the same day as that on which an increase became payable by all residents, then the new resident would be favoured with a longer period free of any increase in rent than that enjoyed by his or her colleagues. Clearly, Parliament thought that such a result was inappropriate, although fairness demanded that the new resident be informed, before he or she became a resident, that his or her rent would rise, along with that payable by all residents, on a given day less than six months later. Hence the prohibition enacted by s.8, and hence the (relevant) exception to that prohibition.

100. In enacting the Rooming Houses Act 1990, Parliament contemplated a situation in which rent increases would be permitted only once every six months; in which some rooming house owners would adopt a policy of increasing rents across all the rooms in their premises on a regular six-monthly basis; and in which new residents in such rooming houses (where they had been adequately informed about rental policy in this regard) ought be required to pay an increase in rent imposed as from the next appointed day of general increase even though that increase might take effect before the expiration of the new residents' first six months of residency. None of this, however, provides any reason why an established resident should be protected from a rent increase which is imposed more than six months after the last such increase. In particular, there is no reason why such a resident should receive protection from a rent increase simply because he or she has within the last six months moved from one room to another.

103. For these reasons, I do not think that the Tribunal was right to conclude that the rent increases imposed on the appellant on, respectively, 16 January 1993 and 16 November 1993, were invalid. If they were valid, then the appellant has no right to recover the amount of the increase. In the one case, that amount is in the sum of $113.14. In the other case, the amount involved is $219.10. The total of the two sums is $332.24. When this is subtracted from the claimed over payment of $903.45, the balance remaining is $571.21.

106. The effect of s.9 of the Rooming Houses Act was, it seems to me, to invalidate the rent increases imposed by the respondent on 25 September 1994, 20 November 1994 and 9 April 1995. In each case, the respondent gave less than 30 days' written notice of its intention to increase the rent. Moreover, the rent increases of 20 November 1994 and 9 April 1995 became effective within six months of the previous increase. Accordingly, they were also rendered invalid by s.8 of the Rooming Houses Act.

109. I am asked to proceed upon the basis that, had the appellant known of the relevant infringement, he would have refused to accede to the respondent's demands. There is, however, no evidence to support this proposition; a problem which the High Court confronted in David Securities Pty. Ltd. & Ors. v. Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 C.L.R. 353. In that case, as in this, there was no evidence pointing to what the appellant would have done had he known the true state of the law. In the David Securities case, the High Court referred the matter back to the trial Judge so that the proper finding of fact could be made.

112. I have considered whether I should do the same in this case. In the end, I have decided that I need not. The case was argued before both the Tribunal and me on the basis that, were it not for his ignorance of the law, the appellant would not have acceded to the respondent's requirement that increased rent be paid. Whereas in the David Securities case, there was a real question about what the appellant might have done had he not been ignorant of the law, here one can fairly assume that no resident would pay an increase which he or she knew to be invalidly imposed.

115. The appellant submitted that, in paying the increases in question, he was acting under a mistake of law. Such a mistake, it is now settled, may found a claim for the recovery of the amount by which the person making the payment was over-charged: David Securities Pty. Ltd. & Ors. v. Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 C.L.R. 353; Commissioner of State Revenue (Victoria) v. Royal Insurance Australia Ltd. [1994] HCA 61; (1994) 182 C.L.R. 51; Commonwealth of Australia v. S.C.I. Operations Ltd. [1998] HCA 20; (1998) 192 C.L.R. 285; Kleinwort Benson Ltd. v. Lincoln City Council [1998] UKHL 38; [1998] 3 W.L.R. 1095; Nurdin & Peacock Plc. v. D.B. Ramsden & Co. Ltd. [1999] EWHC 275; [1999] 1 W.L.R. 1249. Indeed, the claimant is prima facie entitled to recover moneys paid under a mistake if it appears that the payment was made in the unfounded belief that there was a legal obligation to pay, or that the recipient was legally entitled to the funds in question: David Securities at 378, per Mason, C.J. and Deane, Toohey, Gaudron and McHugh, JJ.

118. Once the plaintiff has overcome the burden of establishing on the balance of probabilities that a causative mistake has been made, the defendant will be placed under a prima facie obligation to make restitution. In short, a defendant's prima facie liability will not be displaced unless the defendant is able to point to circumstances which, were an order for restitution made, would give rise to an injustice.

121. The relevant defences were set out in a passage in the judgment of Goff, J. in Barclays Bank Ltd. v. W.J. Simms Son & Cooke (Southern) Ltd. [1980] Q.B. 677 at 695:

"(1) If a person pays money to another under a mistake ... which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake ... (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so."

125. The Senior Member took the view that the respondent had changed, or was deemed to have changed, its position. It had also acted in good faith. When the Tribunal's reasons for judgment are analysed, however, it appears that, far from changing its position in reliance on the appellant's payments of increased rent, the respondent was by those payments lulled into a false sense of security. Accordingly, it did not change its position; and its failure to change was the source of difficulties by which the Senior Member was impressed. The respondent is a non-profit organisation. It is funded by its rental income and, to the extent necessary, by government. It is managed with a view to matching its income by its expenditure. It has no pool of assets. If the problems with the rent increases had been revealed at the time, the respondent might have taken steps not only to rectify them, but also either to (properly) increase the rents of its residents generally so as to make up the shortfall, or obtain additional government financial support. Now, according to the Senior Member, it will be "extremely difficult" for the respondent to find the money needed to "repay" the appellant. This, he held, amounted to a relevant change in position.

128. It is not apparent to me that it will be more difficult now than it was then for the respondent to make up any funding shortfall (caused, after all, by its failure to obey the legislation which was supposed to govern the conduct of its affairs). As for the respondent's good faith, that was, according to the Tribunal, grounded in the respondent's ignorance of the fact that its rent increases were invalid. In my opinion, good faith which is based upon a failure to obey the law, albeit through ignorance, is not the good faith about which Goff, J. spoke in the Barclays Bank case.

131. The High Court considered, in the David Securities case, the "change of position" defence. The majority judgment said of it, at 385-386:

"In the jurisdictions in which it has been accepted (Canada and the United States), the defence operates in different ways but the common element in all cases is the requirement that the defendant point to expenditure or financial commitment which can be ascribed to the mistaken payment. In Canada and in some United States decisions, the defendant has been required to point to specific expenditure being incurred because of the payment. Other cases in the United States allow a wider scope to the defence, such that a defendant can rely upon it even though he or she cannot precisely identify the expenditure caused by the mistaken payments. In no jurisdiction, however, can a defendant resort to the defence of change of position where he or she has simply spent the money received on ordinary living expenses."

135. Here, it seems that the respondent spent the money in question on its ordinary day to day business. Certainly, there is no evidence pointing to any other conclusion. In the circumstances, it seems to me that the defence upon which the Tribunal based its decision cannot be made out. Nor is any other defence available to the respondent. The appeal so far as it relates to the rent increases of 25 September 1994, 20 November 1994 and 9 April 1995 must therefore succeed.

138. In my opinion, the appeal should, to the above extent, succeed for another reason. Each of the rent increases referred to above were invalidly imposed. Being invalid, the moneys acquired by that mechanism must be returned to him (the appellant) from whom they were invalidly extracted. Questions of mistake are irrelevant. In Kiriri Cotton Co. Ltd. v. Dewani [1960] A.C. 192, restitution was ordered because payment had been made pursuant to a contractual obligation rendered void by statute. In Woollwich Building Society v. Inland Revenue Commissioners [1993] A.C. 70, payments were made to a public authority following an ultra vires demand. There, too, restitution was ordered. In neither case was mistake the basis of the decision.

141. It would in my opinion be wrong for this Court to allow, at least as a matter of course, the retention by the charging authority of moneys obtained following an invalidly imposed rental increase. To do so in the present case would be to nullify those legislative provisions by which the invalidity is proclaimed.

144. For these reasons, the appeal must, in part, be allowed. The order dismissing the claim will be set aside. There will, in lieu of that order, be an order that the respondent pay to the appellant the sum of $571.21, being the amount of rent overcharged. I will hear the parties on the questions of interest and costs.