Lal v Auto and General Insurance Company

Jurisdiction

1. The Applicants rejected the FOS Determination and in February 2018 applied to this Tribunal for orders that the Respondent pay them the sum of $24,706.87, being the benefit payable under the Policy.
2. The Tribunal has jurisdiction to consider this application under Part 6A of the Fair Trading Act (FTA). Section 79J FTA gives the Tribunal jurisdiction to hear claims falling under the FTA. Section 79D of the FTA defines a 'consumer' to include a natural person to whom a supplier has supplied or agreed to supply goods or services, whether under a contract or not. The Applicant meets this description. "Services" are specifically defined to include the provision of insurance cover [S79F(1)(f) of the FTA]
3. The claim arises from the supply of services to the consumer (under a contract or not), and constitutes a claim by payment of a sum of money (FTA section 79E). The Applicants therefore have a consumer claim. The Respondent is a Company based in Queensland, but there is no question that the contract of insurance contemplated that the services (the insurance cover) would be provided for premises in NSW (FTA section 79K). The claim was made within the period of time allowed in Section 79L FTA.
4. The claim is therefore maintainable under the FTA and is within the Tribunal's monetary jurisdiction.
5. The Applicants' claim is under the contract of insurance. If the Tribunal is so satisfied, it may make orders under Section 79N of the FTA, including orders for payment of a sum of money. The Tribunal has a discretion in respect of which remedy it determines is appropriate. Under Section 79R(2) of the FTA, the Tribunal can impose such conditions on any order it deems appropriate. Under Section 79U of the FTA, the Tribunal must make remedial orders which are "fair and equitable to all the parties to the claim."

Proceedings

1. Both parties were given leave to be legally represented.
2. The matter first came before the Tribunal on 14 March 2018, when the Tribunal adjourned the hearing with directions for each party to file and serve any documents upon which they intended to rely within a certain timeframe. Both parties submitted their documents within the allowed times.
3. A number of summonses for production of documents were subsequently issued at the request of both parties. There were 3 separate Return of Summons hearings, and parties were given access to all documents produced in response to those Summonses.
4. The matter was listed for final hearing before me on 25 June 2018. On that day, Mr Darrin Smith, Principal of the Applicants' managing agents, appeared on behalf of the Applicants, and gave evidence on oath. One of the Applicants Mrs Sumintra Lal and her nephew Mr Kamlesh Kumar, and son Mr Janendra Kumar also attended. Mrs Lal played no active role in the proceedings. Mr Janendra Kumar and Mr Kamlesh Kumar gave some brief evidence on oath as noted below. Mr Ben Hallam, in-house counsel for the Respondent, appeared by telephone on behalf of the Respondent. The other Applicant Mr Bharat Lal is now deceased.
5. Prior to commencing the hearing, I provided the parties with a further opportunity to discuss the matter in private with a view to resolving the matter by consent. The parties had a brief unsuccessful discussion.

Applicant's amended claim

1. At the start of the hearing, I sought to clarify the quantum and basis for the Applicant's claim. The initial amounts sought by the Applicants under the policy related to the malicious damage by the tenant and were for reimbursement of the following amounts:

• Painting and Repairs to walls $4,600.00
• Plumbing costs including replacement of vanities/ tapware $3,630.00
• Electrical repairs and re-wiring $1,848.00
• Remove and replace kitchen $7,500.00
• Loss of rent during repairs $6,208.42

1. I note that the Applicant did not include a claim for missing blinds in the above summary, but did provide a copy of an Invoice from Sunproof Blinds for $1,700. Mr Hallam noted this discrepancy, but acknowledged that FOS had considered the claim for missing blinds. Mr Smith gave evidence about the missing blinds at the hearing noting that they had been "ripped off the window frames". In these circumstances, I was prepared to accept that the insurance claim had been made in respect of damage which included the missing blinds, and that this therefore be considered as part of the Applicants' claim.
2. Mr Smith acknowledged that the total of the above amounts exceeded the maximum amount payable under the policy for malicious damage being $10,000. There was some debate at the hearing about whether this amount was inclusive or exclusive of any loss of rent claim. Towards the end of the hearing, Mr Hallam on behalf of the Respondent conceded that a claim for Loss of Rent was a separately compensable event under the Policy which was not subject to the $10,000 limit, but subject to its own limits as indicated below.
3. Mr Smith confirmed that the Applicants were therefore seeking payment of the maximum of $10,000 coverage for the tenant malicious damage and theft, and a further $6,208.42 for the loss of rent, less the excess payable.

Relevant Parts of the Policy

1. The Applicants claim under the following parts of their policy (only relevant parts included): A: Theft and Malicious Damage by tenants or their Visitors You are covered for loss, damage or destruction caused by these events, provided you report the incident to the police. The maximum we will pay you for any one incident will be shown on your insurance certificate. What is Not Insured Loss or damage caused by lack of maintenance by you or your tenant or anyone living at the site. Any amount equivalent to the excesses shown on your certificate B: Landlord Benefit when we insure your home Loss of Rent If your home is not fit to live in following loss or damage by an insured event and we have agreed to pay your claim, then we will pay the amount of net rental income lost for the period the home cannot be occupied What is NOT Insured Loss of rental income: Beyond the reasonable time it takes to rebuild or repair the part of your home that was damaged …

General Response of Respondent

1. Mr Hallam clarified that the Respondent continues to deny the existence of an insured event, namely that there was damage to the premises caused by theft or malicious damage of the Tenant.
2. If the Tribunal was to find the existence of such damage, Mr Hallam referred to the lack of evidence of payment of a number of the Invoices, and suggested that a number of these Invoices appear to be for repairs/maintenance not directly related to the purported malicious damage.
3. Mr Hallam also suggests that any claim by the Applicants must be reduced not only by the amount of the excess, but also by the rental bond recovered by the Applicants, and possibly the amount claimed for repairs in the Applicants' 2016 tax return.

Issues Arising

1. The following issues arise from the matters in dispute between the parties: A: Has an Insured event occurred, in particular was there any theft or malicious damage by the tenant? B: If the answer to A is yes, did this cause the home to become unfit to live in? C: To what benefits are the Applicants entitled under the policy?

8.1 Applicant's evidence and submissions

1. In support of their claim, the Applicants rely on the following documents: 1. Managing Agency Agreement dated 10 June 2014 2. Residential Tenancy Agreement (RTA) dated 25 February 2010 3. Ingoing Condition Report (ICR) dated 5 March 2010, signed by tenant and managing agent 4. Routine Inspection Report (RIR) dated 8 April 2015 5. Termination Notice dated 28 April 2018. 6. Outgoing Inspection Report (OIR) dated 15 May 2015 7. Table highlighting differences between Ingoing and Outgoing reports 8. Photos taken at time of OIR on 15 May 2015 9. Ledgers for old and new tenancy 10. Invoices from: 1. AAA Painting Services dated 26 June 2015 2. Total Alcott plumbing dated 27 June 2015 3. Procom Electrical Services dated 12 August 2015 4. Victor Ali dated 26 June 2015 5. Sunproof Blinds dated 25 May 2015 1. (Unsworn) Statements from Kamlesh Kumar, Janendra Kumar, Sumintra Kumar and (Ms) Ashley Avon.
2. Mr Smith provided the following material evidence: 1. The ICR indicates that the condition of the premises was reasonably good at the start of the tenancy in 2010. 2. However, by the time of the RIR, significant damage was discovered. 3. The managing agents gave the tenant a short period of time to resolve these issues. When he did not, they issued a Notice of Termination on 28 April 2015 based on a breach of Clauses 13.3 and 13.1 of the RTA. 13.1 deals with the tenant's obligation to keep the premises reasonably clean. 13.3 requires the tenant "not to intentionally or negligently cause of permit any damage to the premises". The Notice of Termination notes that the tenant has breached these terms, and states: "Property has not been kept neat and tidy and damage has been caused to the house internally." 4. The Notice of Termination required the tenant to vacate by 13 May 2015. He vacated on that day, and on 15 May 2015, the managing agent returned to complete the final or outgoing inspection. Further damage, and also some missing blinds were discovered at this time. 5. The Applicants believe the damage has been caused maliciously or intentionally for 2 main reasons: 1. An inspection of the main areas of damage appear to show damage caused either through the impact of some hard object - likely to be a small-headed hammer or through punching or kicking. This is supported by the photos. 2. The tenant admitted he had intentionally done the damage to the property as a result of his mental state. He made this admission to Ms Ashley Avon who was the managing agent at the time who conducted the inspections, but she has since left this employment. 1. Mr Smith drew my attention to certain photos in particular which appear to show cracks in the window panes, damage to doors, small holes in the walls, smashed tiling in the kitchen. They also show inadequate attempts by the tenant to repair some of the plasterboard walls. In addition to damage by hammer, Mr Smith suggests that some of the photos demonstrate damage by fists and kicking. The laundry tub door is also cracked, and there is a hole in the front security door and internal door. 2. Mr Smith states they reported the malicious damage to the Green Valley police. They have received an event number but are unaware of any subsequent charging or prosecution. 3. He also relies on the statements of Mr Kamlesh Kumar, Mr Janendra Kumar, Mrs Sumintra Lal and Ashley Avon, as set out below.
3. The statement of Mr Kamlesh Kumar dated 27 March 2018 indicates that he attended the property with the late Mr Lal once the tenant had vacated. He writes: "I witnessed the following which makes me believe that this cannot be fair wear and tear as claimed by [the Respondent] - The garden shed door was pulled out of place and placed next to the shed All the fly screens were missing The walls had holes in them and they were not behind the door handles as per [the Respondent's] report, i.e. they could not have been made by the door handles as they were in the middle of the walls The vanity in the bathroom was cracked as if this was hit with a large heavy object such as a hammer The floor tiles were cracked The power points were ripped out of the walls The kitchen benchtop, doors, handles, draws [sic] and cupboards were all maliciously damaged. The extent of the damage was such that this cannot be classified as wear and tear or lack of maintenance. This was maliciously damaged by [the tenant] who had anger issues and this was most likely his way of cooling off. The floorboards were missing in places, the front and rear security door was sitting in the backyard. I very clearly remember the then property manager Ashley had advised that the tenant had admitted to these damaging these things (sic) maliciously as he had issues with controlling his anger …"
4. In oral evidence, Mr Kamlesh Kumar notes that the late Mr Lal was his uncle. He was living with him at the time the tenancy ended, and he is aware of the work that was done. He helped to deliver the new kitchen, and he remembers seeing the plumber and the painter. He met everyone except the person who installed the blinds.
5. The statement of Janendra Kumar dated 27 March 2018 indicates that he attended the property with his late father Mr Lal after the tenant had vacated. He writes that: "it was obvious from the damage that the property was maliciously damage (sic) and the damage wasn't just wear and tear …"
6. In oral evidence, he stated that he knows the history of these premises. The tenant's mother lived there before he did. When the mother moved out in 2010, he assisted in completing some minor maintenance work at the premises.
7. Mr Janendra Kumar also became familiar with the tenant over the years of his occupation of the premises. He confirms that the tenant was "mentally unstable" and that he tried to complete some "quick fixes" of the items he had deliberately damaged.
8. The statement of Mrs Sumantra Lal dated 26 March 2018 indicates that she attended the property with her late husband Mr Lal after the tenant had vacated. She writes that (similar to her son): "it was obvious from the damage that the property was intentionally and maliciously damage (sic) and the damage wasn't just wear and tear from lack of maintenance…"
9. The statement of Ms Ashley Avon dated 27 March 2018 contains the following material information:

• She was the property manager when the claim was made
• In 2015, the tenant had fallen behind in rent and a routine inspection revealed that the tenant had caused severe damage
• After the claim was lodged, she was given conflicting information about the need to arrange for a police event number
• The Respondent's representative also indicated that the Applicants could commence their repairs, even though the claim had not been determined.
• The decision of the Respondent and its dispute department were wrong. The claim was "black and white" and "we had all the evidence to support the claim"

1. I also have had regard to a letter from Ms Avon to FOS dated 21 October 2015, provided as part of the Applicant's original application. This letter provides further information about a conversation between her and the tenant. She states she spoke to the tenant by phone before serving the termination notice on 28 April 2015. She told him she had to give him notice due to the condition of the property. He replied that "he had caused the damaged [sic] to the property as he had a medical condition that made him aggressive. He advised me that he had the right medication now and it would not happen again and that he would do repair to the damage [sic] that he had caused". Ms Avon also confirms that the tenant vacated on 13 May 2015 and that she conducted the inspection, took photos and wrote the report on 15 May 2015. Ms Avon also takes issue with the report from the Respondent's assessor, noting it is "not very descriptive". She believes the evidence from her outgoing report and the photos speaks for itself, supported by the words of the tenant himself. She believes it is clear that the property has been maliciously damaged. She notes that the new tenant could not move in until 28 August 2015 "as the property was left in an unliveable condition from the last tenant. The owner lost rent … due to the fact that the property was that badly damaged and the insurer did not act in accordance with their duty. …"

8.2 Respondent Submissions

1. Mr Hallam made written submissions in accordance with the Tribunal's directions, and made further oral submissions at the hearing. The following summarises his principal arguments: 1. The FOS findings regarding tenant theft or malicious damage should be upheld, but subject to adjustment as indicated below. 2. The Applicants should be entitled to the following amounts: $2,200 towards repairs One week of rental ($320) Fair and reasonable sum to replace the blinds ($1,700). Plus Interest under the Insurance Contracts Act ($325.48). Less the $1,520 excess under the policy TOTAL $3,025.28 1. This amount should be further reduced by: $1,280 being the amount of bond recovered by the Applicants, and $2953 being the total amount claimed in the Applicants' 2015-16 tax returns for Repairs in respect of the rental premises the subject of this claim, Resulting in a net payment to the Applicants of NIL. 1. The bond and tax deductions should be deducted from any claim to ensure the Applicants are not double dipping. 2. The FOS determination should be upheld because it is clear from the photos, the ICR and other evidence that the property was "in great need of maintenance at the time of the claim". The policy contains a general exclusion in the following terms: "What we will not cover Gradual deterioration loss or damage caused by rust, corrosion, rot, mould, rising damp, mildew, gradual deterioration, wear, tear or fading." 1. Only a small part of the damage could be considered as having been caused maliciously as the term is usually understood. It is "a well-worn home" where "the great bulk of damage is maintenance and repair related. 2. Comments in the ICR indicate that the property was not in a "reasonably good condition" at the start of the tenancy, as Mr Smith claims. [Further reference to specific parts of the ICR is made in the Analysis section below]. 3. The fact of reporting the damage to the Police does not establish the fact of malicious damage or theft by the tenant. This was only done at the suggestion of the Respondent, not on the initiative of the Applicants or their managing agent 4. There is no overwhelming evidence of damage done intentionally. There is no expert evidence about the cause of the damage, and the only other evidence is an alleged admission by the tenant to the property manager of the time. The property manager Ms Avon did not give evidence and the Applicants rely on her unsworn statement which should not be given much weight. 5. Some of the work was not done promptly. One of the Invoices - from Victor Ali for the installation of a new kitchen - is dated June 2016, more than one year after the alleged damage.

8.3 Consideration - Meaning of Malicious Damage

1. As noted in the FOS determination, the policy does not contain a definition of "Malicious Damage
2. The FOS determination uses a Macquarie Dictionary definition for "malicious" - "Full of, characterised by, or showing malice, malevolent". The FOS determination also notes that Court's consideration of this term as "the intentional doing of a wrongful act without lawful excuse", and that there must be a deliberate or intentional act for it to be considered malicious. A person must desire to cause the damage.
3. The Macquarie dictionary definition offers little assistance, and the judicial interpretation of "the intentional doing of a wrongful act without lawful excuse" is clearer. This meaning was given by Thomas J in the maritime insurance case of Jeffery v Associated National Insurance Co Limited [1984] 2 Qd R 238 at 249, and was cited with approval by Kaye J in the matter of Insurance Manufacturers of Australia Pty Ltd v Vandermeer [2007] VSC 28. I intend to adopt that meaning in considering the Applicant's claim in these proceedings.

8.4 Analysis of Evidence and Findings

1. The Applicants claim that the entire damages for which they have claimed was due to malicious damage or theft by the tenant.
2. The Respondent answers that much of the damage was not malicious because it was either: 1. Damage which pre-existed the tenancy (as indicated in the Ingoing Condition report), or 2. Damage which is due to gradual deterioration or wear and tear.
3. I have considered carefully the evidence relied on by both parties. I agree with the FOS determination that the onus is on the insured (the Applicants) to establish on the balance of probabilities that they suffered a loss caused by an event covered by the policy.
4. I turn to the evidence supporting the individual parts of the Applicants' claim.

Painting and Repairs to walls and doors

1. The Applicants rely on an invoice from AAA Painting Services in relation to this item. This quotation is to repair and paint all internal and external doors including internal of all windows, and to repair and paint all walls and ceilings in the whole house, and all external window frames. I have therefore looked for evidence of damage to these areas.
2. I set out below the comments in the OIR and the ICR and details of any relevant photos for each room in which it is alleged damage was found. Entrance: OIR: "Patch and small holes to timber door" ICR: (Not included) Photos show some marks on the front door and a hole in the front security door Hallway: OIR: "holes and marks in the walls" ICR: (Not included) No identified photos Bedroom 1: OIR: "small holes and patches and large dents in the walls, marks on the door and holes in window frame" ICR: "Marks on ceiling, Door handle is loose, "C and M" on door Photos show a small dent above the light switch, what appears to be patches on the walls, what appears to be more significant impact damage, some holes and dents near the power point and higher up the wall, some damage to a window frame, and holes on the window sill Bedroom 2: OIR: "a lot of dents and holes to the walls and punch holes to the door and painting on the door frame" ICR: "1 screw hole on ceiling. Stickers all over the ceiling. Dirt from door stopper. Paint peels on walls. I screw on door. Cannot reach [blinds] to test Photos show some small holes in the walls and one larger one, and a large shoe-shaped dent towards the bottom of the wall and smaller holes on the ceiling, some paint on a door frame, and what appears to be paint and plaster patches on the wall and a broken door handle Bedroom 3: OIR: "holes and dents on the wall" ICR: "Marks all over the ceilings. Blinds are too big for the windows" Photos show some small holes to the wall and on the window frame, and a large incomplete paint patch on 2 sections of the door, some scratched areas of the wall Bedroom 4: OIR: "big punch holes to the door" ("patched"), ICR: (Not included) No identified photos Lounge Room: OIR: "broken timber sliding door, nails to the wall, marks and holes to the walls" ICR: "3 dints in the wall, marks on the ceiling, dints on the door and chips, marks on the floor" Photos some damage to the wooden sliding door, some holes and dents in the wall Dining Room: OIR: "pin holes and marks and dents to the walls" ICR: "Minor marks on ceiling, screen torn on the bottom" No identified photos Laundry: OIR: "Marks to ceilings and small dents to walls" ICR: "Screw holes and scratch marks on walls and ceilings, smudge marks on the door, wash tubs/taps have stains all over it" No identified photos. Bathroom: OIR: "Door marked. Big patches to wall" ICR: "Cracks on ceiling. Door has holes in it and chips. 1 power point cracked. Crack on edge of bath. Wash basin/vanity has a very big crack going across it. Mirror/cabinet chipped" Photos show a large patch on the wall Toilet Room: OIR: "Small dents to walls, punch hole patched to door" ICR: "Dint from door knob, toilet water does not stop running" No identified photos.
3. Comments in relation to the kitchen are set out below as part of a separate claim. I also note there are a number of other photos provided which do not identify the rooms, so I cannot match them with the comments.
4. I note also the comments in the RIR (Routine Inspection Report) which was completed on 8 April 2015, only 38 days before the final inspection. This report does not contain the same detail, allowing only one line for comments in relation to each room. The main distinctions with the final report is that the lounge, toilet, dining rooms, and Bedrooms 2 and 3 are said to be "Undamaged". The marks and holes are noted in Bedroom 1 ("Lots of holes in walls and door is smashed"), the Hallway ("Large Hole in wall"), the Bathroom ("Large crack in basin"), the Laundry ("Holes and marks in wall") and Internal Painting ("Lots of scratches and peeled paint"). This is indicative that the damage to the other rooms must have occurred in the last 5 weeks of the tenancy.
5. In determining whether any of the damage was caused by the tenant intentionally doing of a wrongful act without lawful excuse, I also take into account the assertion that the tenant told the managing agent Ms Avon that he had caused the damage. I have no direct evidence of this alleged admission, but it gains some weight from the fact that it was contained in a letter written by Ms Avon to FOS only about 5 months after the alleged events. I also note this claim appears in a transcript of the conversation between Ms Avon and the Respondent's consultant on 1 June 2015, which was produced by the Respondent in answer to a Summons to Produce. These are reasonably contemporaneous records. No-one else who gave evidence had any direct recollection or knowledge of this alleged admission. Mr Janendra Kumar's indication that the tenant was "mentally unstable" can be given little weight, as it does not lead to the inevitable (or even likely) conclusion that the tenant caused the damage intentionally. I note that FOS appears to accept that it is consistent that a person in the situation of this tenant may cause further damage after being served a termination notice.
6. Having considered all of this evidence, I am satisfied that some of the condition of the doors, walls and window frames at the end of the tenancy was a direct result of the intentional infliction of damage by the tenant. I am further satisfied the tenant had no lawful excuse for inflicting this damage. On the other hand, there also appears to be areas of damage that are equally consistent with gradual deterioration or wear and tear. I note that the tenant was in occupation for just over 8 years, and it is reasonable to expect some small marks and holes. It is also evident that there were a number of holes and marks on the ceilings and walls at the start of the tenancy. In making this finding, I rely on the following factors: 1. Some of the holes and marks are considerably larger than the others, and are most unlikely to have been caused in the ordinary course of events. 2. The shape and size of some of the holes suggest they were not caused accidently, and they only came about with the application of some force. 3. The existence of many patches on the walls and doors indicates that the tenant regarded himself as responsible for these areas. This is not necessarily only consistent with malicious damage as defined, but this is a probable explanation. 4. There is reasonably reliable evidence that the tenant has acknowledged intentionally causing some damage.
7. I note Mr Hallam's submission that there is no overwhelming evidence or expert report confirming the malicious damage. However, I am satisfied on the balance of probabilities, for the reasons indicated above, that the Applicants have established the existence of at least some malicious damage by the tenant to the walls and ceilings and doors and window frames.

Plumbing costs including replacement of vanities/ tapware

1. The Applicants rely on the Invoice from Total Alcott Plumbing for "Remove and Install new vanity with alterations to pipe work and drainage, install new toilet suite, alterations to fit suit new kitchen layout, and install new gas outlet to stove."
2. It was noted that the owners supplied the taps and toilets etc.
3. The invoice makes it clear that this part of the claim relates to damage to the kitchen and bathroom and toilet. The issues relating to the kitchen are separately considered below, and that part of this invoice relating to the kitchen can be considered in that context.
4. In relation to the bathroom: 1. The ICR refers to: "Cracks on ceiling. Door has holes in it and chips. 1 power point cracked. Crack on edge of bath. Wash basin/vanity has a very big crack going across it. Mirror/cabinet chipped" 2. The RIR also refers to "Large Crack in Basin". 3. The OIR refers to "crack to bathtub, not clean, door marked, big patches to wall, shower not clean, walls not clean, blinds missing"
5. The photos show a large patch on the wall and the crack across the bathroom sink.
6. In relation to the toilet: 1. the ICR refers to "Dint from door knob, no screens, dusty blinds, toilet water does not stop running" 2. The RIR also refers to "Dirty but all working". 3. The OIR refers to "Small dents to walls, punch hole patched to door, blind missing, window/sill track dirty, flyscreen missing"
7. The photos show a large patch on the door.
8. In relation to these matters, Mr Hallam correctly notes that it is quite clear that the damage to the bathroom vanity was pre-existing. This is clearly indicated in the ICR. In these circumstances, it has not been established that the damage to the vanity was due to the malicious damage of the tenant. Mr Hallam also questions the need to replace the toilet. Mr Smith replied that there appeared to be "some sort of nail polish" in the toilet bowl. There is no evidence to support this claim. Even if such evidence existed, and it was established that this was due to the intentional acts of the tenant, it is not clear why this would require the replacement of the toilet.
9. In these circumstances, I cannot be satisfied that any of the non-kitchen labour or materials which form part of the Total Alcott Plumbing invoice was required as a result of the malicious damage of the tenant. There is simply no independent direct or circumstantial evidence linking the damage to the vanity and the toilet with the intentional actions of the tenant.

Electrical repairs and re-wiring

1. This part of the claim relies on the Procom Electrical Services invoice. It reports changing damaged power points, cover missing, paint on power points, switches and TV points, and notes some power points and switches hanging off the wall.
2. The invoice includes 25 double power points, 8 single switches, 3 double switches, 3 TV points and 2 phone points. It also includes the replacement of 1 exhaust fan and 1 cover, and wiring for the new kitchen.
3. The ICR indicates 1 cracked power point cover in the bathroom, and some missing light covers, but otherwise no comments. Neither the RIR nor the OIR make any comments on the electricals or wiring. One photo shows some marks on a light switch.
4. In evidence, Mr Smith claimed the wiring had been "ripped out", and this is confirmed in the statement of Mr Kamlesh Kumar, but there is no other independent evidence supporting these claims. It is particularly surprising that something as presumably obvious as this damage would not be mentioned in the OCR. This damage is also not referred to in the transcript of the phone conversation between the Respondent's consultant and Ms Avon on 1 June 2015. In these circumstances, I cannot be satisfied that any damage to the wiring, power points, light switches, TV points or phone points are the result of the deliberate actions of the Tenant. The issues relating to the wiring to the kitchen are considered below.

Remove and replace kitchen

1. The ICR refers to "Marks on the ceiling, minor marks on floorboards no damage, chips all over cupboards and draws, 1 chip on benchtop"
2. The RIR refers to holes in the wall next to the fridge space and missing tiles.
3. The OIR refers to "chips to the benchtop, whole kitchen not clean, rangehood greasy, cooktop/over not clean, blinds missing, holes to frame, window/track sill very dirty, cracked tiles and small nail holes to walls".
4. Photos show some missing tiles in the splash back region behind the sink, damaged tiles under the rangehood, and some minor and larger chips to the floor and benchtop. Mr Kamlesh Kumar in his statement also refers to damage to the doors, door handles, draws and cupboards.
5. I am satisfied on all the evidence that some of the condition of the kitchen at the end of the tenancy - particularly some of the larger chips on the floor and benchtop, and the smashed and missing tiles were a direct result of the intentional infliction of damage by the tenant. Any other damage in my opinion appears to be result of the gradual deterioration or wear and tear of an already older kitchen. I am further satisfied the tenant had no lawful excuse for inflicting this damage. In making this finding, I rely on the following factors: 1. The tiles appear to have been broken by the application of some force at the intersection of the tiles due to the manner in which they are cracked. 2. There is no evidence of missing tiles in the Ingoing Condition report. 3. There are a number of chips in the benchtop, including quite large ones consistent with the application of some force, going well beyond the description in the ICR. 4. There is reasonably reliable evidence that the tenant has acknowledged intentionally causing some damage.

Replace missing blinds

1. The ICR notes the existence of blinds in the lounge room, dining room, kitchen, bathroom, laundry, toilet and Bedrooms 1, 2 and 3. There is reference to being unable to test the operation of some blinds (Dining and Bedroom 2), and another blind being too big for the window (Bedroom 3). Other blinds are said to be dusty.
2. There is no reference to any blinds in the RIR.
3. In the OIR, the following comments appear: Hallway: Blinds missing Bedroom 2: Blinds missing Bedroom 3: Blinds missing Bedroom 4: Blinds missing Lounge room: 2 sets of blinds missing Kitchen: Blinds missing Bathroom: Blinds missing Toilet: Blinds missing
4. The Invoice from Sunproof Blinds lacks detail referring only to Vertical Blinds for the residential premises, and that the amount of $1,700 was paid in cash.
5. The photos are unremarkable except for the absence of any vertical blinds. The FOS determination appears to accept that the missing blinds are as a result of "theft" by the tenant, and therefore is an event covered by the policy. It recommends payment for the missing blinds upon presentation of "fair and reasonable invoices".
6. I am satisfied that the most likely explanation for the missing blinds at the end of the tenancy is due to their deliberate removal by the tenant. I reach the conclusion for the following reasons: 1. No blinds were apparently missing at the time of the Routine Inspection just over one month before the tenant vacated. 2. Almost all (if not all) of the blinds were missing by the time the tenant vacated. This suggests that they were removed, rather than they simply fell off due to their deteriorated state. 3. There is reasonably reliable evidence that the tenant has acknowledged intentionally causing some damage, and it is not inconsistent with this to find that he had removed the blinds.
7. The Applicants are entitled to be paid under their policy for their loss arising from this event.

9.1.1 The Policy provisions

1. There are different provisions applicable to the Theft and Malicious Damage coverage and the Loss of Rent coverage.
2. In relation to the "Theft and Malicious Damage by Tenants and their Visitors", the policy indicates that "You are covered for loss, damage or destruction caused by these events, provided you report the incident to the police. The maximum we will pay for any one incident will be shown on your insurance certificate." The insurance certificate provides that the maximum payable for this part of the claim is $10,000. The applicable excess is $1,520.
3. The method by which claims are settled is set out on pp 36 and 37 of the policy. It relevantly provides that: 1. The insurer can choose whether to repair the damaged property to the same standard as it was when new, or replace the damaged property with the nearest equivalent property or pay the amount it would cost to repair or replace the property to an as new condition. 2. The cost is the retail price less any trade discount, or the costs of repair or replacement 3. The insurer will pay to repair or replace internal blinds but only in the same room where the loss or damage occurred. 4. The insurer will not pay: 1. to rebuild or replace undamaged property to achieve a match with repaired or replaced property 2. Any additional costs to replace materials not damaged 3. Any decrease in the value of any pair or set 1. The excess is the "first amount" the insured party ids to contribute towards the cost of the claim.

9.1.2 Submissions

1. Mr Hallam states that the Applicants are entitled to the direct costs associated with the damage caused by an insured event, subject to the other provisions relating to the policy coverage and limits, and any the general law on recovery of damages.
2. In addition to the deduction of the excess from any amounts payable, Mr Hallam suggests that the following amounts should also be deducted: 1. The rental bond of $1,280 recovered by the Applicants, and 2. The amount claimed by the Applicants as a tax deduction in their 2016 return for "repair work and maintenance"
3. Mr Hallam suggests that these amounts should be deducted based on the general principles of indemnity that a person cannot benefit from their loss.
4. In relation to the tax deductions, Mr Hallam refers to the 2015/2016 tax return and Schedules of the Applicants produced by them in answer to a Summons. This return indicates that the Applicants claimed a total of $2,953 for repairs on their rental property, the subject of these proceedings. He states that as the Applicants received the benefit of both the rental bond and the tax deductions, these should be deducted from any benefit payable by the insurer to prevent double dipping.
5. Mr Hallam also refers to the information in the policy concerning the maximum amount paid for Landlord's fixtures and fitting, and their definitions. As I have not found any malicious damage to any fixtures, it is unnecessary to consider these submissions further.
6. Mr Hallam also denies the Applicants' claims that the Respondent's consultant had authorised them to proceed with repairs prior to the assessor attending. He relies on a transcript of a conversation between Mrs Lal and the consultant on 1 June 2015 advising that her husband had already commenced repairing the property.
7. The Applicants acknowledged that the excess must be deducted from any claim, but reject the suggestion that there should be any other deduction.
8. Mr Smith noted there is no reference to the rental bond in the PDS. He notes that the Applicants' expenses associated with the tenant's actions far exceeded the amount payable under the Respondent's policy. The rental bond must be regarded as simply going towards offsetting some of these costs.
9. In relation to the tax deductions claimed for repairs to the rental property, Mr Smith indicates that he does not have the specific invoices to support the claims. Mr Kamlesh Kumar gave evidence that it was his understanding that the amounts included in the ATO claim were separate from the amounts claimed in the subject insurance claim. He was unable to provide any further detail.

9.1.3 Proof of payment

1. One other issue was raised by Mr Hallam - the absence of formal proof of payment of the invoices. He notes that some of the invoices are handwritten without adequate details of the work completed. There is no independent evidence of actual payment, in circumstances where the Applicants could presumably have easily shown bank account statements or proof of payment from the suppliers. Mr Hallam also notes that the invoice from Viktor Ali for the removal of the old kitchen and installation of new kitchen does not contain any hourly labour rates or reference to the kind or type of kitchen installed.
2. I note that only one of the invoices - that from Mr Ali for the kitchen - bears the words "Paid" on it, or indicates that any payment has been made. In relation to payment, Mr Smith relied on the evidence of Mr Kamlesh Kumar and Mr Janendra Kumar. Mr Kamlesh Kumar states he was there when the work was done at the end of the tenancy. He remembers showing the plumber the area where work was to be done, and he saw the painter paint the premises. Mr Lal was there opening and closing the premises for the tradesmen.
3. Mr Kamlesh Kumar also noted that Mr Lal paid all accounts in cash. He was a mechanic by trade and worked from home. He was paid in cash, and this is the way he preferred to pay others.
4. Mr Janendra Kumar gave evidence that he was also there at the premises when the work was being done. He describes his father as "an old-timer" who always had cash. Mr Janendra Kumar remembers making the payment for the blinds himself. He received a receipt by email, but was unable to produce that at the hearing. His father Mr Lal looked after all the other jobs done at the premises. Mr Janendra Kumar states he was there when the new kitchen was delivered. They did the tiling themselves. He remembers seeing his father pay Mr Ali for the kitchen in cash.
5. I am satisfied on the preponderance of the evidence that the Applicants have paid for the Invoices they rely on. In particular, I accept the evidence that the late Mr Lal was responsible for making payment, and that it was his habit to pay in cash. The absence of supporting documentation to establish these payments is more understandable in these circumstances. In making these findings, I rely mainly on the evidence of Mr Kamlesh Kumar and Mr Janendra Kumar. Clearly, they are not entirely independent, and they have some interest in the outcome of the matter. Nevertheless, I am satisfied that that their evidence about these matters rang true, and was consistent with the invoice of Mr Ali who confirmed payment had been made. There was no direct evidence that payment had not been made, e.g. that any of the tradesmen had refused to undertake the work due to non-payment.

9.1.4 Findings

1. There is no dispute that the Applicants did report the incident to the police, and are therefore otherwise entitled.
2. I have found that the loss or damage related to an insured event under the PDS includes: 1. some of the damage to the doors, walls and window frames in a number of the rooms 2. some of the damage to the kitchen, including the broken and missing tiles, and some of the damage to the benchtop, and 3. the missing blinds.
3. I am satisfied that the Respondent is not liable under its policy in relation to other work done which does not fall within the above categories. Since repairs have already been completed, I am satisfied that the Respondent is liable for "the amount it would cost to repair or replace the property to an as new condition".
4. In relation to the claims for painting and repairs to walls, doors and windows, the Applicant relies on the invoice of AAA Painting Services. This is for work "to repair and paint all internal and external doors including internal of all windows, and to repair and paint all walls and ceilings in the whole house, and all external window frames". Mr Kamlesh Kumar gave evidence that it was a "Canadian gentleman" who undertook this work. They told him just to fix the damaged areas, but the tradesman stated "it would cost more in time and effort to try to blend the paint", so they agreed to repaint all areas.
5. Clearly a claim for repainting the whole house goes beyond repairing the malicious damage I have found to have been caused by the Tenant.
6. One of the basic principles of indemnity is that the insured should not profit from a loss or damage but should be returned (as near as possible) to the same financial position that existed before the loss or damage occurred. In other words, the insured cannot recover more than his or her actual loss from the insurer, subject to the actual terms of the policy.
7. In this case, I am satisfied there is evidence of malicious damage to the walls, doors and ceilings and window frames in approximately 6 rooms. This is a large part of the total premises. I am satisfied the Applicants are entitled to the costs of necessary repairs and repainting. The total amount of the invoice is $4,600. Doing the best I can with the evidence, and noting this is an inexact science, I am satisfied the Applicants are entitled to $4,000 in respect of this item.
8. In relation to the kitchen, the Applicants have claimed $7,500, being the cost of removing the old kitchen and installing a new one. Mr Smith suggested this was a very reasonable price. He was unable to indicate whether this included any new appliances. I note however form other invoices that new wiring and plumbing was required for the new kitchen. I am not satisfied that the Respondent is liable to pay the Applicants the costs of a complete new kitchen, in circumstances where I have found malicious damage to only smaller (though significant) individual parts of the kitchen. I am satisfied that the Applicants are entitled to the ordinary costs of repairing these elements of the kitchen.
9. I have no direct evidence of the costs of these repairs, but that does not relieve me from making a finding.
10. At common law the general rule is that if a party suffers loss by reason of breach of contract that party is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed (per Parke B in Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850 at 855; [1848] EngR 135; 154 ER 363 at 365; see also Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 per Mason CJ and Dawson J (with whom Toohey J agreed) at [23], per Brennan J at [2], Dean J at [2], Gaudron J at [4] and McHugh J at [6] ). In this matter, the damages are the amount that would have been payable under the insurance contract had the Respondents complied with their contractual obligations.
11. There are circumstances where a party seeking damages may prove the breach, but find it difficult or impossible to quantify its loss, because for example such evidence no longer exists. In those circumstances a Court will sometimes only award nominal damages. In other circumstances, substantial damages may still be awarded despite the means of calculation of the damages being uncertain or imprecise. This is usually where there has been a complete failure to perform the contract. [Baak v Concrete Services Group Pty Ltd [2016] NSWCATAP 42 (17 January 2016)]
12. By refusing to make payment under the insurance contract, I have found that the Respondent has clearly breached its obligations. It would not be "fair and equitable to all parties" [S 79U FTA] to order merely nominal damages in these circumstances (usually of the amount of $100 or less). The Applicants have assumed their entitlement to damages associate with all the Invoices they have paid. They did not provide a breakdown of the cost of repairs of individual items (benchtop, tiles) because they decided to replace the kitchen as a whole.
13. Doing the best I can with the evidence, I assess the "the amount it would cost to repair or replace the [items damaged maliciously by the tenant] to an as new condition" at $1,000. In making this finding, I rely upon the fact that it is likely what appears to be a laminate benchtop would need to be replaced, together with some tiles and flooring.
14. In relation to the missing blinds, I have found that the Applicants are entitled to be paid under the insurance contract for the missing blinds, as this was due to an insured event - "theft" by the tenant. The Applicants rely on the Invoice from Sunproof Blinds which refers only to Vertical Blinds for the residential premises, and that the amount of $1,700 was paid in cash. On the evidence, there were blinds missing from 8 or 9 rooms at the end of the tenancy. There is some evidence from the ICR that some of the blinds were not in pristine or even working condition at the commencement of the tenancy. However, that is irrelevant. The amount payable under the contract is the amount it would cost to repair or replace the items to an as new condition. The Invoice from Sunproof Blinds is completely lacking in detail, and I cannot be satisfied that it related only to the missing blinds. I cannot find therefore that the Respondent is liable to pay this Invoice in full. However, I still regard the loss of blinds in 8 or 9 rooms to be significant, and, doing the best with the information available to me, I assess the Respondent's liability for this item to be $1,000.

9.2.1 Policy provisions

1. The relevant section of the PDS provides: B: Landlord Benefit when we insure your home Loss of Rent If your home is not fit to live in following loss or damage by an insured event and we have agreed to pay your claim, then we will pay the amount of net rental income lost for the period the home cannot be occupied What is NOT Insured Loss of rental income: Beyond the reasonable time it takes to rebuild or repair the part of your home that was damaged …
2. The Limits set out on page 4 of the additional benefits part of the PDS is indicated as follows: "The most we will pay for this benefit is the amount of net rental income lost for the period the home cannot be occupied up to 10% of your home sum insured. Net rental income means the amount of rental income you receive less any fees for agents' commission or administration costs".
3. The sum insured is $300,000, which means the maximum amount payable for the Loss of Rent part of the claim is $30,000 (Mr Hallam conceded he had made a mistake in his written submissions when he claimed this figure was $3,000).
4. I have found that the loss or damage related to an insured event includes: 1. some of the condition of the doors, walls and window frames 2. some of the condition of the kitchen, including the broken and missing tiles, and some of the damage to the benchtop 3. the missing blinds.

9.2.2 Meaning of "Not fit to live in"

1. The question is whether this damage has caused the home to be not fit to live in. In making this determination, I need to consider the nature of the damage, and the extent to which damage affects the inhabitability of the premises.
2. There is no definition in the Policy of the phrase "not fit to live in". In matters before this Tribunal in its residential tenancy jurisdiction, consideration has been given to the term "fit for habitation" in the context of the Landlord's obligation to provide and maintain the premises in this state. Premises have been held to be not fit for habitation if: 1. the state of the repair of the house is such that by ordinary use damage may naturally be caused to the occupier either in respect of personal injury to life or limb or injury to health, or 2. injury is to be expected, or will naturally occur, from the ordinary use of the premises, either because the premises are in a state of disrepair or dilapidation or because of a lack of facilities such as the provision of adequate water, light, ventilation, and so on, or 3. [the premises cannot] be used and dwelt in, not only for safety, but for reasonable comfort, by the class of persons by whom and for the sort of premises for which, they were to be occupied. [from authorities referred in the decision of Member Sarginson in the matter of Keith Bannister v David and Mariam Cheung [2014] NSWCATCD 105, cited with approval in the Appeal Panel decision of Bhandari v Laming [2015] NSWCATAP 224]
3. I take into account that the term "not fit to live in" appears in the context of a loss of rent claim by a landlord against an insurer, rather than in the context of a claim by a tenant against a landlord. This implies a definition somewhat different from that of "uninhabitability" indicated above. This interpretation is supported by the words: "the period the home cannot be occupied" in the benefit limit section of the policy. This implies that consideration must be given to the extent of the repairs required (as a direct result of the malicious damage and theft), and the extent to which this could or could not be done with a tenant in occupation.

9.2.3 Analysis and Findings

1. The Applicants in these proceedings have claimed a loss of rent for approximately 3 ½ months. Mr Smith noted that this was the quickest they could get all the work completed. The amount claimed is calculated at the new market rent of $410 per week. The property could not be re-let until 28 August 2015. Mr Kamlesh Kumar gave evidence that he was there with his uncle at the time the work was completed. He confirms that all work was completed before the next tenancy commenced.
2. Mr Hallam for the Respondent submits that the Applicant has not established that the malicious damage of the tenant has resulted in the need to completely replace the kitchen, including the costs associated with new wiring and plumbing. I have agreed with this submission. At the highest, I am satisfied that the malicious damage of the tenant has resulted in the need to replace tiles and benchtop.
3. I am satisfied that the combined effect of the damage which I found to be due to an insured event is much more limited than that claimed by the Applicant. There is no clear evidence that the damage to the walls, ceiling and doors, and the tiles and benchtop in the kitchen increases the risks of personal injury to another occupier. However, I do accept that it could not be handed over to another tenant without a number of repairs being completed, and that the extent and location of those repairs particularly to the walls, ceilings, doors and window frames, and kitchen benchtop, and the lack of privacy due to the missing blinds, meant that the premises were not fit to live in during this period.
4. The FOS determination allows for one week of rent being a reasonable time to complete the repairs and repaint, at the rate the tenant was paying at the end of the tenancy. However, the FOS determination did not accept any damage to the kitchen being part of the insured events, as I have found. Mr Smith spoke from his experience as a managing agent that there are constant challenges getting access to tradespeople, and that it is possible to wait up to 6 to 8 weeks just to get a benchtop replaced. However, there is no independent evidence of the steps taken to undertake these repairs, and as Mr Hallam submits, the Applicant has an obligation to mitigate their loss by taking steps promptly to undertake repairs.
5. On all the evidence, I assess the period of 4 weeks as being a reasonable period of time for completing the repairs relating to the damage which I have found to be due to malicious damage or theft, and that this is therefore the period of time in which the premises were "not fit to live in".
6. The Applicants are entitled to their net rental income, being the "rental income you receive less any fees for agents' commission or administration costs". The Applicants have calculated their loss at the rate of $410 per week, being the rent being charged to the new tenant who commenced in August 2015, but the rental ledger makes it clear that the tenant who caused the malicious damage was paying $380 per week. I am satisfied that the rental income is intended to refer to the amount being received at the time the tenancy ceased, as the increased rent could not commence until after the repairs were complete, and therefore any additional loss had not materialised. There is no evidence of the amount of the agents' commission. I allow an approximation of 6%. I therefore assess the loss of rent claim at $1429 ($357.20 x 4)
7. In summary, I have assessed the Respondent's liability under the insurance contract (before any deductions) to be: Repairs to Doors, Walls and window frames $4,000 Kitchen repairs $1,000 Replace Blinds $1,000 Loss of Rent $1,429 TOTAL $7,429

1. I note that the above amounts fall below the limits specified in the PDS.

9.3 Deductions

1. The parties agree that the excess of $1,520 applies.
2. I have also considered the Respondent's submissions in relation to: 1. The rental bond, and 2. The amount claimed as a deduction for repairs in the 2016 tax returns
3. In relation to the rental bond, the Applicants' documents confirm that they recovered the full bond of $1,280 and that it was applied as follows: $621.06 to bring the rent up to date (including $135.36 "paying back rent as increase has not taken effect") $207.48 for water usage, and the balance of $451.46 towards the repair costs.
4. As the amount of $451.46 has been made available for the said costs, this must be deducted from the Respondent's liability to avoid double counting and to ensure the Applicants do not profit from their loss. The fact that the Applicants' expenses may have exceeded the amount claimable under their policy is not to the point. This part of the rental bond was available for the repairs the subject of this insurance claim, and must therefore be taken into account when calculating the Respondent's liability.
5. In relation to the Amount claimed as a tax deduction for repairs, I note the following matters: 1. The amount of $2953 is unspecified. Neither party is able to specifically link or distinguish the amount of this claim from the repairs required due to the tenant's malicious damage or theft. 2. The amount is for the whole of the 2015/2016 financial year, and it is conceivable that some of this amount related to repairs unrelated to the actions of the tenant 3. If a benefit was obtained by the Applicants, it would not be for the whole amount, but only at their marginal rate of taxation.
6. I accept that the likely reason for the Applicants being unable to provide details of the Invoices upon which the tax deduction was claimed is that the person responsible for making this claim, and for most of the financial arrangements - Mr Lal - is no longer alive. This has led to a position where I cannot make a clear finding about whether the amount claimed as a deduction in the 2016 return was for the same amount as that claimed under the Respondent's insurance policy.
7. In any event, I am of the view that this has marginal relevance to the Applicant's claim. I do not regard a claim made by a Landlord for a tax deduction in relation to repairs for which they also seek payment under an insurance policy as causing a "profit from a loss" in the same way as a direct financial payment made for the same items. It is not paid in compensation for such a loss, but subject to the provisions of the relevant tax law. Even if it could be established that the claim relates to the same repair items for which I have found the Respondent liable, the relevance of this is too obscure to affect the Respondent's liability.
8. I am therefore satisfied that only the following amounts should be deducted from the amounts payable by the Respondent: Excess: $1,520.00 Part of rental bond: $451.46 TOTAL $1,971.46

1. I find therefore that the Respondent is liable to pay the Applicants the sum of $5,457.54 [$7,429 - $1,971.46].

9.4 Interest

1. To this must be added the interest under the Insurance Contracts Act 1984, as found in the FOS determination and accepted by the Respondent. The interest calculation is in accordance with S 57 of the Insurance Contracts Act and Regulation 38 of the Insurance Contracts Regulation 1985. The period commences from the day on which it was unreasonable for the insurer to have withheld payment and ends on the day on which payment is made. I am satisfied that the period runs from the date of initial rejection of the claim (8 July 2015) to the date of this decision being the date payable (17 July 2018) - a period of 1105 days, at the rate of 5.5% per annum. The total interest payable is therefore $5,457.54 x 1105 days x 5.5% per annum = $300.16 per annum for 1105 days = $908.08. The total amount payable is therefore $6,365.52 ($5,457.54 + $908.08)
2. I order that this amount be paid immediately. B Shipp Senior Member Civil and Administrative Tribunal of New South Wales 26 July 2018

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: 18 October 2018