McGeown v NSW Land and Housing Corporation

Court of Appeal (NSW)|2015-02-12|Before: McColl JA, Macfarlan JA, O'Connor AM, Coll JA, MacFarlan JA

Solicitors: Marrickville Legal Centre (Applicant) Housing NSW (Respondent) File Number(s): 2014/341878 Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Appeal Panel Citation: [2014] NSWCATAP 66 Date of Decision: 24 October 2014 Before: Acting Judge K P O'Connor, AM, Deputy President G Meadows, Senior Member File Number(s): 2012/217369

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Residential Tenancies Act 1987

At the time the Lease was entered into, the Premises constituted "residential premises" within the definition of that term in s 3(1) of the Residential Tenancies Act 1987 (NSW) (1987 Act). The Lease was a "social housing tenancy agreement" as defined in s 3(1) of the 1987 Act, being a "residential tenancy agreement" in respect of "social housing premises" leased by the Corporation to a tenant.
Sections 8 and 9 of the 1987 Act provided, in effect, that a residential tenancy agreement had to be in the form prescribed by the regulations. The prescribed form of lease was contained in the Residential Tenancies (Residential Premises) Regulation 1995 (NSW), cl 6, sch 1.
Section 10 of the 1987 Act permitted the parties to a residential tenancy agreement for which a standard form was prescribed to insert additional terms, but only if the terms did not contravene the 1987 Act and were not inconsistent with the prescribed terms. Section 11 provided that a term of a residential tenancy agreement was void to the extent it was inconsistent with any term included in the agreement by Part 3 of the 1987 Act. The terms set out in Part 3 of the 1987 Act included a covenant requiring the tenant to have quiet possession of the premises.

The Lease

The Lease was described as a "Residential Tenancy Agreement" between the Corporation as landlord and the applicant as tenant. The Lease created a weekly tenancy of the Premises and the tenant was obliged to pay the specified rent weekly in advance. However, the tenant was entitled to remain on the Premises on the same terms and conditions (subject to permissible increases in rent) until the Lease was terminated in accordance with the 1987 Act.
The Lease defined the following expressions (Notes, cl 1): "'residential premises' means any premises or part of premises … used or intended to be used as a place of residence. 'tenancy' means the right to occupy residential premises under this agreement. 'tenant' means the person who has the right to occupy residential premises under this agreement, and includes the person's heirs, executors, administrators and assigns."
In addition to the standard terms required by the 1987 Act and the regulations, the Lease incorporated a number of "Department of Housing Additional Terms". Apart from cl 35 (which is reproduced at [5] above), the Additional Terms included the following: "27. UNDER OCCUPANCY 27.1. The tenant acknowledges that the landlord may formulate public housing policy from time to time to ensure that the premises are fully used and occupied, having regard to the number of person residing in the premises and the size of the premises. 27.2. The tenant agrees that the premises should not be under-occupied. "Under Occupied" means that, if the landlord has formulated policies as referred to in sub-clause 27.1 above, the premises are not being fully used and occupied in accordance with any policy that applies. 27.3. Where the landlord reasonably believes that the premises are under-occupied and are likely to continue to be under-occupied for an unreasonably long time, the landlord may make a determination to that effect and may give written notice of the determination to the tenant. …"

Residential Tenancies Act 2010

The 1987 Act was repealed with effect from 31 January 2011 by the Residential Tenancies Act 2010 (2010 Act): s 5. The savings and transitional provisions in the 2010 Act are contained in sch 2 and include the following: "2 Definitions In this Part: existing residential tenancy agreement means a residential tenancy agreement in force immediately before the repeal of the former Act. former Act means the Residential Tenancies Act 1987. … 3 Application of Act to existing residential tenancy agreements (1) The terms included in a residential tenancy agreement by this Act are included in any existing residential tenancy agreement on the repeal of the former Act. (2) This Act applies to any such agreement despite the terms of the agreement. (3) This clause is subject to this Schedule and the regulations."
Each of the provisions of the 1987 Act to which I have referred (at [10]-[12] above) has, in substance, a counterpart in the 2010 Act: see ss 15, 21, Pt 3, s 136. The standard form of lease is now prescribed by the Residential Tenancies Regulation 2010 (NSW) (2010 Regulation) cl 4(1), sch 1. The transitional provisions of the 2010 Act have the effect that the terms included by that Act in a residential tenancy agreement are included in the Lease and the 2010 Act applies to the Lease.

Course of Events

As has been noted, the applicant commenced a term of imprisonment on 11 December 2012. On that date, she was incarcerated in the Dillwynia Correctional Centre.
On 18 March 2013, the Corporation notified the applicant that due to her incarceration for a period in excess of three months, she was in breach of cl 35.1 of the Lease and required her to surrender the tenancy of the Premises. (Mr Robinson SC, who appeared with Mr Robison for the applicant, said from the bar table that the letter reflected a Departmental policy that any public housing tenant who is imprisoned for a period of more than three months has his or her residential tenancy agreement terminated. There is nothing in the application book to show that there is such a policy. In any event, if there is such a policy it is not relevant to the issue before the Court.)
On 7 August 2013, the Corporation served a Notice of Termination on the applicant pursuant to s 87 of the 2010 Act. Section 87 provides as follows: "87 Breach of agreement (1) A landlord may give a termination notice on the ground that the tenant has breached the residential tenancy agreement. (2) The termination notice must specify a termination date that is not earlier than 14 days after the day on which the notice is given. … (4) The Tribunal may, on application by a landlord, make a termination order if it is satisfied that: (a) the tenant has breached the residential tenancy agreement, and (b) the breach is, in the circumstances of the case, sufficient to justify termination of the agreement, and (c) the termination notice was given in accordance with this section and the tenant has not vacated the premises as required by the notice. (5) In considering the circumstances of the case, the Tribunal may consider (but is not limited to considering) the following: (a) the nature of the breach, (b) any previous breaches, (c) any steps taken by the tenant to remedy the breach, (d) any steps taken by the landlord about the breach, (e) the previous history of the tenancy. … ."
The Notice of Termination was as follows: "'You have breached Term 35 of your Residential Tenancy Agreement by not personally occupying the residential premises all of the time.' Specifically Term 35.1 and 35.2 of your Residential Tenancy Agreement by not personally occupying the residential premises all of the time. Additionally by ceasing to personally occupy the premises whether by operation of the law or as a result of a court order or for any other reason whatsoever, is a breach of this agreement enabling the landlord to give a Notice of Termination on grounds of breach of this agreement. PARTICULARS You have not been in personal occupation of the premises since 11th December 2012. At time of issue of this Notice of Termination you remain in custody and are not occupying the premises. Housing NSW received notification that you have been incarcerated since 11th December 2012 at Dillwynia Correctional Centre. You are required by the landlord to give vacant possession of the premises on 28th August 2013 being a date not earlier than fourteen (14) days after the service of this notice.'"
On 10 September 2013, the Corporation filed an application in the Consumer Trader and Tenancy Tribunal (CTTT) seeking an order for termination of the Lease pursuant to s 87 of the 2010 Act. Since the application had not been determined by 1 January 2014, the effect of the transitional provisions of the NCAT Act was that the proceedings were taken to have been commenced in the Tribunal: NCAT Act sch 1 cl 7. (It appears that the CTTT made an order terminating the Lease. However, the applicant subsequently successfully applied to set aside the order, presumably on the ground that it were made in her absence.)

Tribunal Decision

The Tribunal considered the merits of the Corporation's application at a hearing conducted on 16 January 2014. The Tribunal Decision was handed down on 15 April 2014.
The Tribunal noted (at [7]) that there was no real dispute about factual matters. It also noted (at [16], [68]) that the applicant had conceded that she had not been in personal occupation of the Unit since 11 December 2012. Her contention, however, was that cl 35 of the Lease was void.
The Tribunal recorded (at [21]) that the applicant had advanced three arguments to support the contention that cl 35 was void, as follows (at [21]): "(a) The term [was] inconsistent with the Residential Tenancies Act 2010; (b) The meaning of the term was so uncertain that the parties cannot be said to have reached an agreement; (c) The term [was] unfair in the sense referred to in the Australian Consumer Law."
In support of the first argument the applicant relied on s 50 of the 2010 Act, which provides that a tenant is entitled to quiet enjoyment of residential premises subject to a lease. The argument in the Tribunal proceeded on the assumption that the 2010 Act rather than the 1987 Act applied to the Lease, although no reference was made to the transitional provisions of the 2010 Act which produce that result.
The Tribunal rejected (at [49]-[51]]) the applicant's first argument, on the ground that under the Housing Act 2001 (NSW) (Housing Act) the Corporation had power to insert cl 35 in the Lease and that power overrode any contrary provision in the 2010 Act.
The Tribunal also rejected the applicant's contention that cll 35.1 and 35.2 were void for uncertainty. It considered (at [57]) that the word "occupy" in these provisions meant "reside in". In the Tribunal's view, if the applicant ceased to reside in the Premises she would be in breach of cl 35.2.
The Tribunal held (at [67]) the applicant's third argument to be unfounded since the Australian Consumer Law 2010 had no application to the Lease.
Having found that the applicant was in breach of cll 35.1 and 35.2 of the Lease, the Tribunal considered whether it should exercise the discretion conferred on it by the 2010 Act in favour of making an order terminating the Lease. In concluding that a termination order should be made, the Tribunal took into account the matters identified in s 87(5) of the 2010 Act (reproduced at [20] above) and also the additional matters specified in s 152 (which applies to an application for an order terminating a "social housing tenancy agreement").

Appeal Panel Decision

The Appeal Panel pointed out (at [3]-[4]) that the applicant's appeal was confined to questions of law pursuant to s 80 of the NCAT Act (no application having been made to appeal on other grounds).
The Appeal Panel recorded (at [12], [13], [26], [52]) that the applicant advanced three arguments before it:

cl 35.1 of the Lease was inconsistent with the statutory right to quiet possession conferred on a tenant by s 50 of the 2010 Act;
the Tribunal failed to take into account all the matters specified in s 87(5) of the 2010 Act and failed to give adequate reasons for concluding that an order should be made terminating the Lease; and
the Tribunal failed to exercise the discretion conferred by s 114 of the 2010 Act to suspend the operation of its orders.

The Appeal Panel rejected all three arguments. It is not necessary to summarise its reasons, except to note that it rejected the inconsistency argument for different reasons than those given by the Tribunal. The Appeal Panel held (at [24]) that the right to quiet enjoyment created by s 50 of the 2010 Act is directed to a landlord-tenant relationship where the tenant is in practical occupation. Since cl 35.1 of the Lease was directed to circumstances where the tenant was no longer in practical occupation, cl 35.1 was not inconsistent with s 50 of the 2010 Act.

Applicant's Submissions

In this Court, the applicant submits that the Appeal Panel misconstrued cl 35.1 of the Lease in holding that the applicant was in breach of the Lease because she was no longer in "practical occupation" of the Premises. The applicant contends that residential premises are not unoccupied merely because the tenant is not actually residing there, provided the tenant intends to return to the premises. The applicant relies on authorities suggesting that a person does not cease to "occupy" premises because he or she resides for a period of time in other premises. It follows, so the applicant argues, that she has never ceased personally to occupy the Premises notwithstanding that she has not physically been in occupation since her incarceration. As Mr Robinson put it in his oral submissions, the applicant never ceased personally to occupy the Premises; instead there had merely been a temporary interruption to her personal occupation of the Premises.
The applicant also says that the Lease is a contract for the provision of public housing and should be interpreted beneficially in favour of the applicant as the tenant. The words "personally occupy" should therefore be interpreted so as to include a person whose absence from the premises is enforced and who intends to return on the completion of her period of imprisonment.
In his oral submissions, Mr Robinson pointed to the hardship that the applicant would experience if she were "forcibly" prevented from returning to her home. He also invoked the human right to adequate housing embodied in Art 25(1) of the Universal Declaration of Human Rights. However, he accepted that the terms of Art 25(1) have no direct bearing on the question of law raised by the applicant.

Preliminary Matters

The question of law the applicant seeks to raise in this Court was not the subject of argument in either the Tribunal or the Appeal Panel. The applicant expressly conceded before the Tribunal that she had not been in personal occupation of the Premises since 11 December 2012, eight months prior to service by the Corporation of the Notice of Termination. The Panel Decision does not refer to the concession, but appears to assume (at [24]), consistently with the concession, that the Premises were "no longer occupied by the tenant in a practical sense". Mr Robinson criticised aspects of the Appeal Panel's reasoning, but the Appeal Panel cannot legitimately be criticised for not addressing an argument that was not put to it.
Ms McWilliam, who appeared with Ms Anniwell for the Corporation, points out that the applicant is seeking to rely on an argument not put either to the Tribunal or the Appeal Panel. However, Ms McWilliam, does not submit that the applicant is precluded from appealing on the question of law raised by the draft notice of appeal. I am content to proceed on this basis: see Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390 at [91] (Hayne, Heydon, Crennan and Kiefel JJ).
The applicant's argument in this Court on the question of law she identifies is based on what is said to be her intention to resume physical occupation of the Premises as soon as her custodial sentence expires. The applicant did not ask the Tribunal to make any such finding of fact and it did not do so. However, it may be inferred from the applicant's opposition to the orders sought by the Corporation that she intends, if allowed, to resume physical occupation of the Premises as soon as she can. Again, the Corporation does not object to the argument being conducted on this basis and I am content to do so.

The Construction Issue

Clause 35.1 of the Lease requires the applicant to "personally occupy" the Premises at all times. Clause 35.2 contains an acknowledgement by her that "ceasing personally to occupy the Premises" for any reason is a breach of the Lease. The applicant's argument directs attention to the expression "personally occupy" in cl 35 and to whether she ceased her personal occupation of the Premises.
It is trite to observe that "occupy" is an ordinary word, the meaning of which varies according to the context in which it is used. If authority is needed for this proposition, it is available: Blood-Smyth v Carter [1965] NSWR 946 at 950 (Sugerman, Brereton and Asprey JJ); The Queen v The Assessment Committee of St Pancras (1877) 2 QBD 581 at 588 (Lush J), cited in Morrisby v Winter [1946] VLR 471 at 483 (Herring CJ). The starting point, therefore, must be the language of cl 35 of the Lease, understood in the context of the Lease as a whole. It is also permissible to take into account the legislative framework within which the Lease was entered into: Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10; 222 CLR 241 at [50] (Gummow, Hayne and Heydon JJ); at [66] (Kirby J); JW Carter, The Construction of Commercial Contracts (2012, Hart Publishing) at [7-18].
Clause 35.1 imposes a positive obligation on the applicant not merely to occupy the Premises, but to "personally occupy the Premises at all times". The standard terms of the Lease (both in its original form and incorporating the standard terms imposed by sch 1 to the 2010 Regulation) make it clear that the Premises are to be used by the tenant for residential purposes. The emphatic language of cl 35.1 strongly suggests that the applicant must at all times during the currency of the Lease use the Premises as her personal residence. This accords with the dictionary definition of "occupy", which includes "to reside in"; "to dwell"; "to stay" (Shorter Oxford Dictionary).
Clause 35.1 is reinforced, again in emphatic terms, by the acknowledgement in cl 35.2. By cl 35.2, the applicant acknowledges that "ceasing personally to occupy the premises" is a breach of the Lease, entitling the Corporation to give a Notice of Termination. Moreover, she breaches the Lease regardless of whether her ceasing to occupy the Premises is due to operation of law, a court order "or for any other reason whatsoever". Thus cl 35.2 expressly contemplates the situation where the applicant is prevented from continuing in personal occupation of the Premises by reason of a court order (in this case the order sentencing her to a term of imprisonment for at least two years and three months). The language of cl 35.2 makes it clear that a tenant may cease personally to occupy residential premises because of circumstances beyond his or her control and regardless of the tenant's subjective intention or desire to resume occupation of the premises. The language cannot be reconciled with the applicant's contention that simply because she intends to resume occupation of the Premises in the future, she has not ceased personally to occupy the Premises.
Clause 35.3 of the Lease further reinforces a construction of cll 35.1 and 35.2 that renders the applicant in breach of the Lease if she no longer uses the Premises as her personal residence. Clause 35.3 recognises, in effect, that the Premises constitute part of the stock of public housing in New South Wales for which the Corporation is responsible. The provision also reflects the practical consideration that if the Premises become and remain vacant because the applicant no longer uses them as her residence, the Corporation's obligation to provide accommodation to those in need of public housing will be compromised. Clause 27 of the Lease (reproduced at [15] above) is another textual indication of the parties' agreement that limited public housing stock should be fully used and occupied.
That the Corporation's objectives include providing public housing to those in need of subsidised housing can be inferred from the Lease itself. The same objective can also be inferred from the Housing Act, under which the Corporation is established. The objects of the Housing Act include (s 5(1)): "(a) to maximise the opportunities for all people in New South Wales to have access to secure, appropriate and affordable housing, (b) to ensure that housing opportunities and assistance are available to all sections of the community with housing needs, … (f) to ensure that the public housing system focuses on housing people who are most in need, (f1) to ensure that the available supply of public housing is shared equitably among people who are most in need,"
The text of the Lease and the legislation governing the Corporation's activities demonstrate that the Lease cannot be construed simply on the basis that it is intended to confer a benefit on the applicant. Contrary to Mr Robinson's submissions, there are other considerations to be taken into account, notably the adverse consequences for those on waiting lists if public housing is allowed to remain unoccupied for lengthy periods.
At the time the Corporation served the Notice of Termination, the applicant had been incarcerated for about eight months. At no time during the period was she physically present on the Premises. Nor can it be said that she had been using the Premises during that period as her personal residence. Not only had she left the Premises, albeit involuntarily, but her place of residence had become the prison facility in which she was incarcerated. She may have continued to be in legal possession of the Premises (in the sense of having a right to immediate possession until the termination of the Lease), but she had ceased to be in personal occupation of the Premises.
It is not to the point that the applicant had no choice but to cease personal occupation of the Premises and take up residence elsewhere. The effect of cl 35.2 is that the applicant breached the Lease when she ceased to be in personal occupation of the Premises regardless of the reason for this state of affairs. Nor is it to the point that she wishes to return to the Premises once she completes her sentence. At the time the Notice of Termination was served, eight months had elapsed since the applicant had been on the Premises. Her furniture and personal possessions were presumably there. But to all intents and purposes the Premises were vacant and, if the Corporation did not regain possession, were likely to remain so for another 19 months. The applicant's intention to resume occupation of the Premises when released from custody cannot negate the objective facts. In particular, the circumstances cannot be characterised as involving a mere temporary interruption to the applicant's occupancy of the Premises.
This is not to say that the intention of a tenant of public housing will always be irrelevant in construing a provision such as of cl 35 of the Lease. Nor does it mean that a tenant's temporary absence from public housing will expose him or her to termination of the lease. If, for example, a tenant leaves public housing for a vacation, even for a period of a few months, it is unlikely that he or she will be regarded as having ceased personally to occupy the premises. (The position may be different if the "vacation" lasts for a longer period, during which the tenant takes up residence somewhere else.) Similarly, if the tenant requires a period of convalescence in a medical or rehabilitation facility, he or she is unlikely, by reason of that fact alone, to be regarded as in breach of cl 35.2. The question of whether a tenant has ceased personally to occupy premises, within the meaning of cl 35.2 of the Lease, will often involve matters of fact and degree. The present case, however, in my opinion is clearly one in which the applicant ceased personally to occupy the Premises.

Some Authorities

Since each case must depend on the language of the lease or other agreement being construed and its own circumstances, not a great deal of assistance can be derived from authorities considering different contractual or statutory provisions. Nonetheless, I note that the approach I have taken is consistent with authorities interpreting legislation authorising a landlord to serve a notice to quit if a lessee "ceased to be a bona fide occupant of the premises".
In Morgan v Davis [1962] NSWR 1014, Wallace J interpreted (at 1016) the expression "bona fide occupant" as requiring a "distinct element of personal user", a construction subsequently approved by the Full Court in Blood-Smyth v Carter at 950. Wallace J also considered that because of the infinite variety of possible circumstances, bona fide occupancy was "a question of fact and degree" and the doctrine of animus revertendi could not be applied inflexibly to determine whether a tenant had ceased to be a bona fide occupant. His Honour held that a tenant who had gone overseas, initially for an extended holiday, but who remained overseas for two years, had ceased to be a bona fide occupant of the premises. The fact that the tenant intended to return to the premises at some time in the future could not alter that conclusion.
In McConville v Federici [1967] 2 NSWR 552, Lee J accepted (at 556) that "bona fide occupancy" of premises required the tenant to make substantial personal use of the premises. However, he disagreed with Wallace J as to the relevance of the subjective intention of the tenant, holding that in the absence of substantial personal use, the tenant's intention was irrelevant. Whatever the correct position in relation to the expression "bona fide occupancy", I consider that, depending on the circumstances, the intention of a public housing tenant may be relevant to the issue posed by cl 35.2 of the Lease, but is unlikely to be determinative.
The applicant placed particular reliance on the Victorian decision in Morrisby v Winter. That, however, concerned post-war regulations that allowed "protected persons" to claim possession of dwellings that were unoccupied or about to become unoccupied. Herring CJ observed (at 479) that the regulations made "a serious inroad upon the existing legal rights of owners of dwelling houses". Moreover, as Wallace J noted in Morgan v Davis (at 1017), there were "special factors" in Morrisby v Winter that make it of little relevance to the present case. It is hardly surprising that in view of those factors Herring CJ was not prepared to hold that the premises were "unoccupied".

A Further Observation

I add one further observation. Much of Mr Robinson's submissions focussed on the hardship that will be experienced by the applicant if she cannot return to the Premises upon her release. Unfortunately, it may well be the case that she will experience hardship, at least if she is not provided with or is unable to find satisfactory alternative accommodation. That, however, is not a matter that bears on the question of law identified on her behalf in this Court.

Orders

The applicant has not established that the Appeal Panel erred in law. In my view, the applicant should be granted leave to appeal but the appeal should be dismissed. I propose the following orders:
Grant leave to appeal.
Dismiss the appeal.
The applicant pay the respondent's (Corporation's) costs of the appeal, including the costs of the application for leave to appeal.

Amendments 25 March 2015 - corrected numbering in paragraph 55 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: 25 March 2015

Residential Tenancies Act 1987(NSW)

Residential Tenancies (Residential Premises) Regulation 1995(NSW)

Residential Tenancies Regulation 2010(NSW)

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