Murphy v Pitt

DOCUMENTARY EVIDENCE OF THE TENANTS

1. The documents relied upon by the tenants were as follows: 1. Letter of demand to the landlord dated 21 February 2017. 2. Notice to terminate dated 31 October 2017. 3. Emails between the tenants and the landlord's agent for the period from 7 November 2016 to 16 November 2016. 4. A receipt from furniture removalists to the tenants dated 21 November 2016 in the sum of $2,340.00 for "moving…on 16 and 17th" of November 2016. 5. Receipts for $200.00 and $157.00 from Southern Sydney Cleaning Services dated 16 November 2016 and 19 November 2016, in respect of the cost of cleaning the new residential premises the tenants moved into. 6. A tax invoice from Stop Bugging Me Pest Control Pty Ltd dated 30 November 2016 in the sum of $160.00, for the cost of a pest treatment for the new residential premises the tenants moved into. 7. An invoice of Foxtel dated 24 December 2016, including an installation fee of $100.00 for the cost of transferring the Foxtel connection from the old residential premises to the new residential premises the tenants moved into. 8. An email from the day care centre at which the tenants' children attend, stating that they would be attending on 18 November 2016 "outside the usual Mon-Thurs schedule". 9. A statement of account from the day care centre indicating the tenants' children attended on 18 November 2016 and 25 November 2016. 10. An extract from the new residential tenancy agreement stating that rent is $750.00 per week "payable in advance starting on 16 November 2016" and the bond amount is $3,000.00. 11. Documents from the employer of the respective tenants regarding annual leave taken.

ORAL EVIDENCE OF THE TENANTS

1. The evidence of the tenants was that they have two young children, and wished, at all relevant times, to reside in the suburb of Oatley. The tenants signed a written residential tenancy agreement and moved into the property soon after 30 August 2016. There were some initial issues with the property, including difficulties getting Foxtel connected to the property, but there were no major issues until the tenants received a telephone call from Mr Hopkins, principal of the agency that managed the property, on 31 October 2016. Mr Hopkins informed them the landlord had been ordered by the Council to return the property to its original condition as soon as possible or face large fines, and the landlord was issuing a notice to terminate that would be served that day, on the basis the agreement was frustrated by the actions of the Council. Mr Hopkins said the agency would try to assist the tenants to find a new property as soon as possible.
2. The tenants stated that they were initially sympathetic to the landlord's situation, but needed to find a suitable property as soon as possible with Christmas not far away. The tenants stated that they wished to stay in Oatley, as their children were enrolled in day care. The tenants stated that they are both employed, and their two children attend day care from Monday to Thursday.
3. The tenants stated that, although the agent notified them of some properties, none were suitable. The found a suitable 3 bedroom property at Oatley, and signed a new lease on or about 16 November 2016. There had been discussions between the parties regarding compensation for the fact that the tenants had to move out early. The landlord had agreed to pay removalist expenses of up to $1,000.00, but no other expenses. The tenants used a removalist recommended to them by the landlord to conduct the move, but had to pay a further amount of over $1,300.00 to removalists. The move took a number of days, and the tenants both took time off work and incurred extra day care fees. In respect of the new property, the tenants had the new property professionally cleaned when they moved in. The tenants also incurred a fee for transferring their Foxtel connection.
4. The tenants stated that they made clear to the landlord, by oral conversations with the landlord's agent and correspondence between the parties that they did not accept the $1,000.00 paid by the landlord in settlement of the dispute, and that there were further losses they sought from the landlord.

DOCUMENTARY EVIDENCE OF THE LANDLORD

1. The landlord's documents were as follows: 1. A chronology of events. 2. An email exchange between the tenants and the landlord's agent on 6 and 7 September 2016 regarding issues with the residential premises. 3. A tax invoice from Houseproud Cleaning dated 27 August 2016 in respect of cleaning of the property. 4. An Occupation Certificate from a private certifier, Mr Ludlow, dated 29 August 2016. Notably, the Occupation Certificate refers to the address as number "50", where the address of the residential premises the subject of this dispute is number "50A". 5. The residential tenancy agreement between the parties. 6. The ingoing inspection report dated 30 August 2016. 7. Letter from the Council to the landlord dated 19 October 2016 and 31 October 2016 setting out that the garage of Number 50 had been converted to a "secondary dwelling" without approved development consent, and directing that it be restored to its previous condition, or significant penalties would be imposed. 8. Emails between the landlord, the landlord's managing agent (Ms Frankland) and the principal of the agency, Mr Hopkins. 9. Covering letter from the landlord's agent to the tenants dated 31 October 2016 and notice to terminate dated 31 October 2016. 10. Emails between the landlord, the landlord's agent, and the tenant regarding the service of the notice to terminate; the efforts of the tenants to find new premises at short notice; and the issue of compensation for the tenants in respect of the cost of moving. 11. The tenancy ledger. 12. An application the landlord had made to the Tribunal to terminate the tenancy, and order of the Tribunal dated 18 November 2016 stating that the landlord's application had been withdrawn. 13. An invoice from Houseproud Cleaning dated 10 December 2016. 14. Statutory declaration of Mr Hopkins dated 8 May 2017.

ORAL EVIDENCE OF THE LANDLORD

1. The landlord stated that the private certifier had approved the landlord using the residence as a dwelling, and the only reason the Council became involved was due to a complaint by a neighbour. According to the landlord, there was no legal impediment to renting out the residence to the tenants, and it was only when the Council issued a notice that the residential tenancy agreement was frustrated. The landlord stated that the complaint by the neighbour, and intervention of the Council, had caused a "nightmare" and she had tried to assist the tenants.
2. The landlord stated that she was sympathetic to the situation of the tenants, but it was not her fault the Council had issued the notice to restore the property, and she believed she had been acting in accordance with the development approval at all times. The landlord stated that she had instructed the agent to provide assistance to the tenants in finding a new residence, and that $1,000.00 for moving expenses was a fair and reasonable amount. The landlord stated she had not made any claim on the bond, despite the property requiring cleaning and the end of the tenancy, to "assist" the tenants. The landlord submitted that the tenants taking 2 days off work and putting their children into day care for 2 extra days was excessive. The landlord submitted that the tenant choosing to have the new premises cleaned was the choice of the tenant, and not her responsibility. The landlord submitted that any extra bond amount paid by the tenants for the new premises would be refunded at the end of that tenancy, and there was no loss to the tenants.

APPLICABLE LEGAL PRINCIPLES

1. A residential tenancy agreement is a contract, and the RT Act implies various terms into the agreement, and also provides circumstances in which a party can terminate the agreement.
2. Under Section 49(1) of the RT Act, a landlord "must take all reasonable steps to ensure that, at the time of entering into the residential tenancy agreement, there is no legal impediment to the occupation of the residential premises as a residence for the period of the tenancy."
3. Section 49 of the RT Act is different to its statutory predecessor, Section 20 of the Residential Tenancies Act 1987. Section 20 of the Residential Tenancies Act 1987 relevantly provided that "It is a term of every residential tenancy agreement on the part of the landlord that there is not any legal impediment (of which the landlord had, or ought reasonably have had knowledge at the time of entering into the agreement) to occupation of the residential premises for the period of the tenancy". The obligation of the landlord under Section 49 of the RT Act is to take "all reasonable steps" at the time of entering into the residential tenancy agreement that there is no legal impediment to the premises being occupied by the tenant for the period of the tenancy.
4. It is obviously a key element to any residential tenancy agreement, particularly a residential tenancy agreement for a fixed term of 12 months, that the tenant will be able to lawfully occupy the premises during throughout the period of the tenancy, unless there is some action outside the control of the landlord that prevents the premises being lawfully occupied (such as, for example, a road authority taking possession of the premises under a statutory power to build a road through the property).
5. The landlord asserts that she took "all reasonable steps" to ensure the dwelling the subject of the residential tenancy agreement between the parties was approved to be used as a dwelling under the Environmental Planning and Assessment Act 1979 because the private certifier had issued an occupation certificate. However, the occupation certificate issued by the private certifier only applied to the premises at Number 50, not the new premises at Number 50A. The reason the Council issued a notice under Section 121B of the Environmental Planning and Assessment Act 1979 is that the landlord had converted the garage of Number 50 into a "secondary dwelling" without approval. It is that "secondary dwelling" that became Number 50A. The responsibility of the landlord before converting the garage into a "secondary dwelling" and renting it out to the tenants was to ensure that it was compliant with the development approval issued by the Council.
6. The only explanation given by the landlord for the dwelling at Number 50A failing to comply with the development consent in respect of the development of Number 50 was that the landlord believed the occupation certificate covered both dwellings. No evidence was given in respect of what enquiries the landlord had made with Council, or what advice had been sought from the private certifier. Whether or not the landlord misunderstood the terms of the development approval issued by the Council; or misunderstood the advice of the private certifier; or was not given adequate advice by the private certifier, does not alleviate the responsibility of the landlord to take all reasonable steps to ensure the dwelling at 50A could be used as a private dwelling before renting it to the tenants.
7. It was the landlord who lodged the development application seeking to re-develop Number 50, and a landlord acting reasonably would understand the scope of the development consent did not extend to converting the garage to a separate residential dwelling. Even if the landlord did not understand the scope of the development consent, the landlord could have made enquires with Council, or made further enquiries with the private certifier in respect of the scope of the development consent issued by the Council and the occupation certificate issued by the private certifier. If the landlord had made such enquiries, there is a reasonable prospect the landlord would have realised the dwelling at 50A did not comply with the development consent, and could not be used as a residential dwelling, prior to entering the residential tenancy agreement with the tenants. I am satisfied the landlord breached Section 49 of the RT Act.
8. If a contract is illegal because it is explicitly prohibited by statute from its formation, then the contract is void and confers no rights on either party (North v Marra Developments Ltd [1981] HCA 68, (1981) 148 CLR 42). In such circumstances, however, rights separate to the contract by reason of the principle of restitution, such as unjust enrichment, still apply (Bygrave v Harris and O'Brien [2012] NSWCTTT 268). However, legal or equitable rights under a contract that is contrary to statute arising out of an unlawful purpose remain enforceable, unless the statute discloses an intention that those rights should be unenforceable in all circumstances or the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; the imposition of the sanctions is necessary to protect the objects or policies of the statute; and the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences for a breach of the statute or frustration of its policies (Karl Suleman Enterprises Pty Ltd (in liquidation) v Babanour [2004] NSWCA 214).
9. Under Section 109 of the RT Act, a party to a residential tenancy agreement may issue a termination notice on the other party "…if residential premises…otherwise than as a result of a breach of an agreement…cease to be lawfully usable as a residence…" In this matter, the landlord purported to terminate the residential tenancy agreement under Section 109 of the RT Act.
10. However, Section 109 of the RT Act only applies to circumstances in which neither of the parties are in breach of their obligations under the RT Act, or the residential tenancy agreement. As the landlord breached Section 49 of the RT Act, the landlord cannot rely upon Section 109 of the RT Act to issue a notice to terminate. Consequently, the residential tenancy agreement has been wrongfully terminated by the landlord, and the tenants are entitled to damages by reason of the landlord's breach of contract.
11. In determining damages to the tenants, the Tribunal must apply the guiding principle of putting the party in the same position it would have been, as far as money can, as if the contract had been performed, and not in a better or worse position (Commonwealth v Amman Aviation Pty Ltd [1991] HCA 54, (1991) 174 CLR 64). Loss arising by breach of contract must either (i) be caused naturally (i.e. in the usual course of events) or (ii) have been in reasonable contemplation of both parties at the time of entering into the contract as a type of loss that would probably arise from the breach (Hadley v Baxendale (1854) 9 Exch 341 at 354; 156 ER 145 at 151). The party claiming damages is under a duty to take all reasonable measures to avoid incurring loss, and is not entitled to damages for losses that reasonable measures would have avoided (known as the 'duty to mitigate'-see Clark v Macourt [2013] HCA 56 at [17], (2013) 304 ALR 220). The respondent bears the onus of proving failure to mitigate.

Breach of Contract

1. As discussed above, I am satisfied the tenants have established the landlord breached Section 49 of the RT Act, and had no grounds for terminating the contract for frustration under Section 109 of the RT Act.

Assessment of Damages

1. Reimbursement of Rent Paid
2. No claim is made by the tenants that they paid rent in advance of the date of vacant possession. The tenants claim $3,850.00 for "50% reimbursement of rent paid for duration of tenancy". I am not satisfied that any damages should be awarded to reimburse the tenant for rent paid up to the date of vacant possession.
3. Although the residential tenancy agreement was in respect of a property that did not comply with the provisions of the Environmental Planning and Assessment Act 1979, the provisions of Environmental Planning and Assessment Act 1979 do not make clear that it is prohibited that an owner of a property cannot enter into a residential tenancy agreement in respect of the property. Rather, the provisions of the Environmental Planning and Assessment Act 1979 (in particular, Section 121B of that Act) empower the Council to give notice to the landlord to restore the property to its previous condition because modifications or work has been performed without the necessary development consent, and to impose fines on the owner if the property is not restored.
4. In such circumstances, any illegal conduct falls within the principles set out by the NSW Court of Appeal in Karl Suleman Enterprises Pty Ltd (in liquidation) v Babanour [2004] NSWCA 214 and rather than making the contract void from its outset, the rights and liabilities of the parties remain on foot until the termination of the contract. The tenant remains liable to pay rent to the date of vacant possession, but may (as has occurred in this matter) sue the landlord for any losses arising from the landlord's breach of contract.
5. Even if the alternative approach is taken that the residential tenancy agreement was void from the outset, it would unjustly enrich the tenants for the tenants to be reimbursed for rent paid when the tenant was occupying the premises. The tenants would have been liable to pay rent if the tenants had rented other premises, and the practical effect of an order that the tenants be reimbursed for rent paid would be that the tenants had the benefit of residing in premises without the obligation of paying the amount of rent that had been agreed with the landlord at the commencement of the tenancy. Accordingly, there should be no order to reimburse the tenants for rent paid (Bygrave v Harris and O'Brien [2012] NSWCTTT 268).

Additional Rent for Moving Into New Premises At Short Notice

1. The tenants claim $2,050.00 for the cost of additional rent over the fixed term of the new residence they moved into on or about 16 November 2016, compared to the cost of rent under the fixed term residential tenancy agreement with the landlord up to the date the fixed term agreement with the landlord would have ended (i.e. 41 weeks from 16 November 2016 to 29 August 2017). The tenants state they are paying $50.00 per week rent in excess of the previous rent. The oral evidence of the tenants was that they had to move "urgently" and the only comparable property they could rent at short notice in the Oatley area was for $750.00 per week. The tenants gave oral evidence the lease at the new property is for a fixed term of 12 months, although the extract of the written residential tenancy agreement contained in the tenants' documents did not identify the fixed term. On the basis of the uncontradicted evidence of the tenants given at the hearing, the Tribunal accepts that the lease entered into on or about 16 November 2016 is for a fixed term of 12 months.
2. The rent for the residential premises the subject of this dispute was $3,041.67 per month. That equates to a total amount for 12 months of $36,500.04, and a daily rent amount of $100.00. Accordingly, the difference between the rent for the two properties is $50.00 per week.
3. The landlord issued a termination notice on the tenants seeking "immediate" vacant possession; had commenced proceedings in the Tribunal seeking a termination order; and had encouraged the tenants to move out as soon as possible so that the landlord could take action to avoid large fines under the Environmental Planning and Assessment Act 1979 due to the landlord's own failure to comply with its obligations under that Act. The tenants had signed a residential tenancy agreement with the landlord that gave them certainty that, until 30 August 2017, they would not be paying more than $700.00 per week for rent, by reason of Section 42(1) of the RT Act.
4. I am satisfied that the tenants have suffered financial loss by reason of moving into a property and paying a higher rent, and that such loss arises "naturally" from the breach by the landlord. Considering all the circumstances of the matter, and the urgency in which the tenants were required by the landlord to move out so that the landlord would not incur substantial fines, I am not satisfied that the tenants acted unreasonably by agreeing to lease a new property at $750.00 per week. There was no evidence that the new property the tenants moved into had better amenities than the property the tenants had rented from the landlord, and the evidence of the tenants were that they were comparable properties. I am not satisfied the landlord has established the tenants acted unreasonably by entering into a new lease with a higher rent than the property the tenants had rented from the landlord.
5. Accordingly, the tenants have established an entitlement to damages of $2,050.00 for the increased cost of renting new premises by reason of the landlord's breach of the residential tenancy agreement.

Removalist's Fees

1. The tenants incurred a total of $2,340.00 for removalist's fees, involving moving their property from the old residence to the new residence on 16 and 17 November 2016. I am satisfied that such loss arises naturally from the breach by the landlord, and the loss was not caused by any unreasonable action of the tenants. The landlord has previously paid the tenants $1,000.00 towards the cost of moving to the new property. I am satisfied that the amount of damages to the tenants for the cost of moving their belongings to the new property is $1,340.00, the amount of $1,000.00 being credited to the total amount of $2,340.00 that was paid by the tenants to the removalists.
2. Additional Bond at New Residence
3. The tenants claim $200.00 for the difference between the bond at the old residence ($2,800.00) and the new residence ($3,000.00). However, the bond in respect of the new premises is the property of the tenants, unless the Tribunal orders otherwise by reason of breach of a provision of the residential tenancy agreement in respect of the new premises, or Section 51(3) of the RT Act. The fact that the tenants paid a higher amount for the new bond is not a loss caused by the breach of the residential tenancy agreement by the landlord. This aspect of the claim is dismissed.

Cleaning and Pest Control of New Premises

1. The amounts that the tenant spent on cleaning and pest control for the new premises they moved into are not losses for which the landlord is liable. It was the tenants' decision to have the new premises professionally cleaned and pest control performed. Any liability for such a cost lies either with the tenants, or the new landlord, if the new landlord has breached Section 52(1) of the RT Act by failing to provide premises not reasonably clean at the commencement of the new tenancy. This aspect of the claim is dismissed.

Cost of Childcare Incurred By Reason of Moving to the New Premises

1. The tenants claim $800.00 for "childcare for 2 children (move over 4 days)". The statements of the day care centre contained in the tenants' documents indicated their 2 children attended the day care centre in addition to the usual Monday-Thursday periods on 20 November 2016 and 27 November 2016. However, the receipt from the removalist indicated that the move occurred on 16 and 17 November 2017, and the new residential tenancy agreement commenced on 16 November 2017.
2. In circumstances where the belongings of the tenants had been moved on 16 and 17 November, I am not satisfied there is any causal nexus between the landlord's breach of the residential tenancy agreement and the decision of the tenants to put their children in day care on 20 and 27 November 2016. The tenants had the opportunity to complete the move without arranging extra days of day care. I am not satisfied that such a loss arises naturally from the breach by the landlord, nor is a type of loss the parties would have reasonably had in their contemplation as a type of loss that would arise from the breach by the landlord. Even if the loss had not been too remote from the breach, the landlord could have taken reasonable measures to avoid the loss, by completing the move without putting their children into day care for 2 extra days. This aspect of the claim is dismissed.

Loss of Income by the Tenants

1. The tenants claim $948.00 for the cost of each taking annual leave to facilitate the move into the new premises. The documents of the tenants show that Mr Murphy took leave from his employer on 21 November 2016, and Ms Murphy took leave from 16 November 2016 to 21 November 2016. However, the documents do not evidence the amount lost by the tenants by reason of taking annual leave, but simply refer to the hours of leave taken. Although the Tribunal may award damages despite it being difficult to estimate the loss, the tenants must prove both the fact and the amount of the loss sufficient to put the Tribunal in a position to quantify damages (JLW (Vic) Pty Ltd v Tsiloglau [1994] VicRp 16; (1994) 1 VR 237 at [9]). I am not satisfied there is sufficient evidence to quantify any loss by reason of annual leave taken, and this aspect of the claim is dismissed. In the absence of evidence quantifying the loss, it is unnecessary to consider whether the loss is too remote, or whether the tenants have failed to take reasonable measures to mitigate any loss.

Foxtel Relocation Fee

1. The tenants claim $100.00 for the cost of transferring their Foxtel connection to the new residence. The tenants' documents contain evidence of the fee. I am satisfied that the re-connection fee is a loss caused by the landlord's breach of the residential tenancy agreement, and that damages of $100.00 are awarded in respect of this item.

Conclusion

1. For the above reasons, I am satisfied that the landlord has wrongfully terminated the residential tenancy agreement, and the landlord is liable to pay damages to the tenants in the total amount of $3,490.00. G.J. Sarginson Senior Member Civil and Administrative Tribunal of New South Wales 6 June 2017 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: 23 August 2017