New South Wales Land and Housing Corporation v Diab

Court of Appeal (NSW)|2015-03-16|Before: Beazley P, Macfarlan JA, Leeming JA, Wright J

Solicitors: NSW Family and Community Services (Appellant) Legal Aid of NSW (Respondent) File Number(s): CA 2014/191182 Decision under appeal Court or tribunal: New South Wales Civil and Administrative Tribunal Jurisdiction: New South Wales Citation: [2014] NSWCATAP 27 Date of Decision: 02 June 2014 Before: Wright J, PresidentHennessy LCM, Deputy PresidentG Meadows, Senior Member File Number(s): AP 14/0006

[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.]

HEADNOTE [This headnote is not to be read as part of the judgment] The New South Wales Land and Housing Corporation applied for leave to appeal on a question of law pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW) against a judgment of the Appeal Panel of the New South Wales Civil and Administrative Tribunal ([2014] NSWCATAP 27) which related to the residential tenancy of Mr Spiro Diab who lives in public housing at Ermington in Sydney. In 1990 Mr Diab lived in the premises with his wife and four teenage sons. He was apparently granted a rental rebate from about that time. In about 2011 the Corporation conducted an investigation under s 58 of the Housing Act 2001 (NSW) and concluded that Mr Diab's sons had remained living with him after they commenced earning income and that their income was not disclosed to the Corporation or its predecessor, the Department of Housing. The Corporation contended that it and the Department granted Mr Diab rental rebates on the basis of incorrect information he supplied and that, once the incorrectness of that information became apparent, it was entitled to treat the rental rebates as arrears of rent and terminate his lease for non-payment of rent. In the Tribunal, both the Senior Member and the Appeal Panel rejected that contention. The questions of law sought to be raised on appeal to this Court were, in effect, (1) whether the Appeal Panel erred in concluding that the grants of rebates, and Mr Diab's payment of rent at the reduced levels, resulted in variations to the tenancy agreement and precluded the differences between the rent otherwise payable and the rebated rental being characterised as arrears of rent and (2) whether the exercise of power to cancel a tenant's rebate with effect from an earlier time pursuant to s 57 of the Housing Act gives rise to a "breach" arising from a "failure to pay rent" within the meaning of ss 87 and 88 of the Act. The Corporation's application for leave to appeal was heard concurrently with the appeal. Because the Corporation contended, without opposition, that its application raised an issue of general importance in the performance of the Corporation's functions, leave to appeal was granted. Held, dismissing the appeal: On the first question raised (per Macfarlan JA; Beazley P agreeing if it were necessary to determine the issue and Leeming JA agreeing generally): (1) The Appeal Panel and Senior Member were correct to find that the tenancy agreement was varied by the Corporation (and its predecessor) granting rental rebates and Mr Diab paying rent at the rebated rates. Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 referred to. (2) There was consideration for the contract variations because the tenancy was only weekly and by the variations Mr Diab agreed to occupy for the period for which he paid rent in advance and the landlord agreed to let him do so at the rebated level. (3) These conclusions do not leave the landlord without remedies. First, the Corporation has a statutory right conferred by s 57 of the Housing Act to recover the amounts of the withdrawn rebates. Secondly, the landlord might have an action for damages for fraudulent misrepresentation by the tenant or a statutory claim based on misleading and deceptive conduct. (4) Termination for breach of the residential tenancy agreement (for example, if the tenant failed to pay ongoing rent at the unrebated level after the landlord withdrew a rental rebate) would be in futuro and would not therefore affect the efficacy of the variations made to the tenancy agreement in the past by the grant of rebates and their acceptance by the making of rebated rent payments. On the second question raised (per Leeming JA; Beazley P and Macfarlan JA agreeing): (5) The retrospective cancellation of a tenant's rental rebates under s 57 of the Housing Act does not convert the amounts of the rebates into arrears of rent. Rather, the obligation to repay the cancelled rebate is, or is analogous to, a quasi-contractual or restitutionary right to recover money owed. On this characterisation the Corporation is unable to invoke the provisions allowing it to terminate the tenancy agreement for breach due to the failure to pay rent during those periods.

Judgment

BEAZLEY P: I have had the advantage of reading in draft the reasons of Macfarlan JA and Leeming JA. I agree with the orders proposed by Macfarlan JA.
The essential issue on the appeal was whether the retrospective cancellation of rental rebates granted by the appellant pursuant to the Housing Act 2001 (NSW) gave rise to rental arrears under the respondent's (Mr Diab's) tenancy agreement upon cancellation of the rebate. If so, the Corporation was entitled to bring proceedings under the Residential Tenancies Act 2010 (NSW) seeking an order for the termination of the tenancy for non-payment of rent.
The Tribunal's determination in favour of the respondent was made on the basis that the rebates granted by the Corporation constituted an offer to vary the rental payment under the tenancy agreement, accepted by Mr Diab when he paid the rebated rent. It followed that the contract was thereby varied for each period of the tenancy up until the rebate was cancelled. Accordingly, the retrospective cancellation of the rebate did not give rise to the non-payment of the full rent payable under the tenancy agreement.
The Corporation contended that the Tribunal erred in law in coming to that conclusion.
Leeming JA at [47]-[49] records the concession made by the Corporation that there was no failure to pay the agreed rent prior to the cancellation of the rebate. I agree with his Honour that for that reason, the Corporation's challenge to the Tribunal's finding that the tenancy agreement was varied by the offer of the rebate and its acceptance by the payment of rent, was not maintainable. I otherwise agree with his Honour's reasons. Had it been necessary to determine the question of contractual variation, I agree with the reasons of Macfarlan JA at [33]-[41] as to why the Corporation's submissions on that point should be rejected.
MACFARLAN JA: This is an application by the New South Wales Land and Housing Corporation (the "Corporation") pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW) for leave to appeal on a question of law against a judgment of the Appeal Panel of the New South Wales Civil and Administrative Tribunal (the "Tribunal") dated 2 June 2014 ([2014] NSWCATAP 27). The judgment was given on an internal appeal from a decision dated 31 January 2014 of Senior Member Ms Kim Rosser.
The proceedings relate to the residential tenancy of the respondent, Mr Spiro Diab, of public housing premises at Ermington in Sydney. The Corporation contends that it and its predecessor landlord (the Department of Housing) granted Mr Diab rental rebates on the basis of incorrect information he supplied and that, once the incorrectness of that information became apparent, it was entitled to treat the rental rebates as arrears of rent and terminate Mr Diab's lease for non-payment of rent. In the Tribunal, both the Senior Member and the Appeal Panel rejected that contention. The question of law sought to be raised on appeal to this Court is, in effect, whether the Appeal Panel erred in concluding that the grant of rebates, and Mr Diab's payment of rent at the reduced levels resulted in variations to the tenancy agreement and precluded the differences between the rent otherwise payable and the rebated rental being characterised as arrears of rent.
The Corporation's application for leave to appeal was heard concurrently with the appeal that would lie if leave to appeal were granted. As the Corporation contends, without opposition, that its application raises an issue of general importance in the performance of the Corporation's functions, I consider that leave to appeal should be granted. However, for the reasons given below, the Corporation's appeal should be dismissed with costs.

Housing Act 2001

The Housing Act 2001 (NSW) replaced a 1985 Act of the same name. References below to the Housing Act are to the 2001 Act unless otherwise indicated.
The Corporation was established under the Housing Act with the function, inter alia, of acquiring land "for present or future residential development and for public purposes" (s 8). The objects of the Act included the provision of public housing to those in need of it, "public housing" being relevantly defined as "housing owned or leased by the Corporation, and managed by the Department [of Human Services], that is leased to members of the public that meet the Department's or the Corporation's eligibility criteria …" (s 3).
Section 56(1) of the Act permits the Corporation to grant a weekly rental rebate to a tenant of public housing who applies for a rebate. Prior to doing this, it must conduct an investigation under s 58 to determine the weekly income of the applicant and any other resident of the house.
Section 57 of the Act states: Cancellation or variation of rental rebate (1) The Corporation may, after conducting an investigation under section 58, vary or cancel any rental rebate granted under this Part. (2) The Corporation is to determine the date (being a date occurring before, on or after the making of the determination) on which the variation or cancellation has effect or is taken to have effect. (3) The Corporation is to give notice in writing to a tenant of any decision to vary or cancel any rental rebate being received by the tenant and is to include in the notice the date on which the variation or cancellation takes effect or is taken to have effect. (4) If the Corporation reduces or cancels a tenant's rental rebate under this Part with effect from a preceding date, the Corporation may, by notice in writing to the tenant, require the tenant to pay to the Corporation: (a) an amount equal to any rental rebate or part of a rental rebate received by the tenant on or after the date that the variation or cancellation took effect to which, because of the variation or cancellation, the tenant was not entitled, and (b) interest (at the rate prescribed under section 101 of the Civil Procedure Act 2005 in respect of unpaid judgments) on any outstanding amount under paragraph (a) from a date specified in the notice, being a date not earlier than the date on which the notice is issued to the tenant. (5) Any amount (together with interest) referred to in subsection (4) that is unpaid may be recovered by the Corporation as a debt in any court of competent jurisdiction.
Under s 69 it is an offence for a person wilfully to make any false statement or representation, inter alia, to obtain or claim a rental rebate from the Corporation.

Residential Tenancies Act 2010

By s 6, the Residential Tenancies Act applies to residential tenancy agreements in respect of residential premises whether made before or after the commencement of that section. It was common ground in the proceedings that this Act applies to the tenancy agreement between the Corporation and Mr Diab.
Section 88 provides that a termination notice given by a landlord on the ground of failure to pay rent "has no effect unless the rent has remained unpaid in breach of the agreement for not less than 14 days before the notice is given". Under s 89, unless the Tribunal is satisfied that the tenant "has frequently failed to pay rent", a termination of a residential tenancy agreement "solely on the ground of non-payment of rent … cease[s] to have effect if the tenant pays all the rent owing or enters into, and fully complies with, a repayment plan agreed with the landlord and the tenant has not vacated the residential premises".
Part 7 of the Act relates to social housing tenancy agreements such as Mr Diab's agreement with the Corporation which is a "social housing provider" as defined in s 136.
Section 141, which falls within Part 7, provides that a social housing tenant whose rental rebate is cancelled may apply to the Tribunal for an order declaring that the rent payable under the agreement is excessive.

THE FACTUAL CIRCUMSTANCES

The Department of Housing and Mr Diab entered into a residential tenancy agreement on 11 October 1990 which created an ongoing weekly tenancy with a stated weekly rent of $180. In the present proceedings both parties accepted that this initial amount represented the market rent and that, because of the weekly character of the tenancy, it was open to the Department (and the Corporation as its successor) to vary the rent from time to time to reflect changes in the market, subject to the constraints of s 41 of the Housing Act and its counterpart in the earlier legislation.
Clause 26 of the agreement stated: "RENTAL REBATE ABATEMENT The landlord and the tenant agree that the landlord may formulate a policy for the granting of rebates or waiver of rents. The parties agree that in accordance with such policy the Department may grant a rebate or waive rent at its discretion".
The following appeared on the final page of the agreement: "The Department of Housing grants tenancies and residential premises in accordance with relevant government policies. In the event that a tenant's circumstances change so as to render the tenant inelligible under such policy or in the event of the commission of a breach by the tenant of any of the terms of this Residential Tenancy Agreement the Department of Housing as landlord shall be entitled to terminate the tenancy."
In 1990 Mr Diab lived in the premises with his wife and four teenage sons. He was apparently granted a rental rebate from about that time. In about 2011 the Corporation conducted an investigation under s 58 of the Housing Act and concluded that Mr Diab's sons had remained living with him after they commenced earning income and that their income was not disclosed to the Department or the Corporation.
The Corporation notified Mr Diab of the outcome of the investigation by letter dated 4 April 2012 in which it stated that his "rent subsidies" were cancelled from 7 November 1993 and that he owed the Corporation $135,752.27 in respect of rent arrears.
By Notice dated 11 December 2012 the Corporation purported to terminate Mr Diab's tenancy under s 87 of the Residential Tenancies Act for "not paying rent on time". No other breaches of the tenancy agreement were specified in the Notice of Termination and the Corporation confirmed in the present proceedings that it did not allege that there were any failures to pay rent other than Mr Diab's non-payment from time to time of the rental rebates. On the Corporation's cancellation of the rental rebates, Mr Diab commenced paying rent at the unrebated rate.

THE TRIBUNAL'S DECISION

In her decision of 31 January 2014, Senior Member Rosser concluded that the landlord's granting of rental rebates to Mr Diab and Mr Diab's payment of the consequently reduced rentals had varied Mr Diab's contractual rent obligations with the effect being that the amounts of the unpaid rebates were not properly characterised as "rent arrears" (at [55], [60] and [61]). Senior Member Rosser therefore found that Mr Diab had not failed to pay rent in accordance with his obligations and, consequently, that his tenancy had not been terminated.
On 2 June 2014 the Appeal Panel upheld Senior Member Rosser's decision, finding that she did not err in concluding that the payment of the weekly rebated rent "had the effect of varying or amending the original contractual relationship between the parties such that the amount [Mr Diab] was required to pay in order to occupy the premises, while he had the benefit of the weekly rebates of rental, was the rebated rent" and that this reasoning "was not inconsistent with the weekly rebates of rental being able to be cancelled under s 57 of the Housing Act, with all the statutory consequences which flowed from cancellation" (Appeal Panel Judgment at [57]). The Appeal Panel thus concluded that the consequence of the cancelling of the rebates was that Mr Diab had thenceforth to pay rent at the unrebated rate and that the Corporation could, under s 57 of the Housing Act, require Mr Diab to pay the previously rebated amounts and, if necessary, recover them by Court action. It followed however that Mr Diab had not breached his tenancy agreement by not paying the rental rebates and that the Corporation was not therefore entitled to terminate the tenancy by reason of any such breaches.

DETERMINATION OF THE APPEAL

In my view the Appeal Panel and Senior Member Rosser's conclusion that the tenancy agreement was varied by the Corporation (and its predecessor) granting rental rebates and Mr Diab paying at the rebated rates was correct. The Corporation or the Department's grant of rebates constituted offers to Mr Diab to make rebated rent payments in satisfaction of his rental obligations. Such offers were accepted by Mr Diab's conduct in paying the rent. This is an application of conventional principles relating to contracts concluded by conduct (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153).
This is not to suggest that the Corporation or the Department were precluded from withdrawing rebate offers insofar as they applied to subsequent rental periods. So long as the landlord's offer to accept a rebated amount was current, it was open to the tenant to accept it by paying the rebated amount. There was no reason apparent from the facts put before this Court why the varied rental would have been applicable for longer than the particular periods in respect of which Mr Diab paid rent whilst the offer of a rebate was still current.
There was consideration for the contract variations because the tenancy was only weekly and by the variations Mr Diab agreed to occupy for the period for which he paid rent in advance and the landlord agreed to let him do so at the rebated level.
If the tenancy agreement had been for a longer period, the result would have been the same but the analysis would probably have to be founded in estoppel because it is unlikely that Mr Diab would have given consideration, he already being bound to continue to rent the premises. His promise to do what he was already bound to do (that is, lease the premises) would not have been sufficient consideration (Wigan v Edwards (1973) 47 ALJR 586 at 594 per Mason J). In such a case, the landlord would have been bound by a promissory estoppel as a result of it offering to accept less than the contractual rent and the tenant suffering detriment by exposing himself to termination of the lease by not paying the full contractual amount. In that case, the landlord would be estopped from alleging that the contractual rent had not been paid (Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130; Legione v Hateley [1983] HCA 11; 152 CLR 406).
These conclusions do not leave the landlord without remedies. First, the Corporation has a statutory right conferred by s 57 of the Housing Act to recover the amounts of the withdrawn rebates. It may recover amounts relating to the period after the date which the Corporation decides under s 57 that its rebate withdrawal should be taken to have had effect. The Corporation accepted at the hearing in this Court that that could not be a date prior to the Housing Act 2001's commencement date (1 July 2001). In some circumstances, ss 72A and 72B will assist in the recovery of amounts due under s 57. The former renders persons living with tenants liable to repay certain amounts and the latter enables registration of a debt due to the Corporation as a charge on land in certain circumstances. Section 57 does not deem amounts the subject of withdrawn rebates to be rental arrears. Rather, it provides the Corporation with a statutory right to recover those amounts as a distinct debt, separate from any lease obligations. I agree with the reasons given in Leeming JA's judgment for this being so. Secondly, the landlord might have an action for damages for fraudulent misrepresentation by the tenant or a statutory claim based on misleading and deceptive conduct.
Termination for breach of the residential tenancy agreement (for example, if the tenant failed to pay ongoing rent at the unrebated level after the landlord withdrew a rental rebate) would be in futuro and would not therefore affect the efficacy of the variations made to the tenancy agreement in the past by the grant of rebates and their acceptance by the making of rebated rent payments. However in the case of fraudulent misrepresentations inducing the landlord to offer rental rebates, the landlord's right would be to rescind the contract variations ab initio thus leaving the market value rent otherwise chargeable in accordance with the lease provisions unaffected by variations related to rebates. This distinction was explained by Dixon J in McDonald v Dennys Lascelles Ltd [1933] HCA 25; 48 CLR 457 at 477 as follows: "When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach" (citations omitted).
The Corporation did not however make any allegation of fraud in the present case. As a result, the hearing necessarily proceeded upon the basis that Mr Diab was an innocent non-provider of information that, according to the Corporation, he should have provided. In those circumstances the contract variations resulting from the payments of rebated rent amounts remained effective.
The Corporation put various submissions to support its contention that the grants of rebates, and payments of rent in accordance with them, did not vary the terms of the tenancy. The submissions and my responses to them are as follows.
First, the Corporation submitted that the fact that the rental rebates were revised "on numerous occasions" indicated that the parties could not have intended the rebate to amount to contractual variations. In accordance with my analyses above, the variations to the tenancy agreement were binding for each period that Mr Diab paid rent in accordance with the Corporation's corresponding and current rebate offer. No difficulty arises out of the fact that this occurred on many occasions.
Secondly, the Corporation submitted that the Appeal Panel's reasoning involved an undue emphasis on the conduct of the Corporation, as distinct from that of Mr Diab. However it was the acts of both parties that effected the contractual variations: the Corporation's rebate offers and Mr Diab's payments of rent accepting them.
Thirdly, the Corporation submitted that if the Appeal Panel's decision was correct, the Corporation could not unilaterally cease to grant a rental rebate. That does not however follow from that decision or from my reasoning above. On the facts under consideration in this case, there was nothing to preclude the Corporation or the Department withdrawing or varying its rental rebate in respect of any tenancy period prior to Mr Diab's payment of the rebated rent for that period.
Fourthly, the Corporation submitted that the Appeal Panel's decision was inconsistent with a statement in Mr Diab's Application for Rental Subsidy that: "I understand that I may have to pay back money to the Department of Housing if my subsidy is changed or cancelled" which he signed on 31 October 2001. However that acknowledgement is consistent with the possible application of s 57 of the Housing Act to require Mr Diab to pay back rebated rent and also a remedy that would have been available if Mr Diab had acted fraudulently.
Fifthly, the Housing Corporation submitted that the Appeal Panel's reasoning ignored s 56 of the Housing Act which makes it clear that a decision to grant a rebate is a matter for the Corporation. There is no substance in this submission as nothing that the Appeal Panel said, or that I have said above, suggests otherwise. The relevant point is that if the Corporation decides to grant a rebate, it will become bound to that decision if the tenant pays rent in reliance on the communication of the decision.
Sixthly, the Corporation submitted that any rent rebate to which it agreed was conditional on Mr Diab having "complied with his obligations under the Housing Act to provide accurate statements of the income of the respondent and persons residing with him which obligations are also reflected in Clause 27 of the tenancy agreement".
I do not accept this submission. The Corporation was unable to point to any indication in the evidence that its (or its predecessor's) grants of rebates were intended to be conditional in this fashion. This inability led it to submit that a term to that effect should be implied, based upon the principles stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; 180 CLR 266; 52 ALJR 20 at 26 and Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 at 347.
I do not consider there is any basis for making such an implication as it is not necessary to give business efficacy to the variation agreements and those agreements do not operate unreasonably without the implication. On the contrary, it seems to me that in the case of an innocent tenant, such as Mr Diab has been assumed to be in this case, the suggested implied term would be unreasonable because it would be capable of retrospectively putting a tenant in breach of his or her lease, many years after he or she had duly paid the rent that the landlord had indicated was appropriate. Moreover, the landlord's rights are adequately protected without such implication (see [29] above).

ORDERS

For the reasons given above, I propose the following orders: 1. Leave to appeal granted. 2. Applicant to file its Notice of Appeal within seven days of today's date. 3. Appeal dismissed with costs.
LEEMING JA: I agree with Macfarlan JA that although there should be a grant of leave, this appeal must be dismissed. I agree generally with his Honour's reasons. However, I would analyse the position differently, principally because in light of the way the Corporation ran its case below, and its concession at the hearing, the appeal can in my view be resolved quite shortly. The fact that his Honour has reproduced the uncontroversial factual background and relevant provisions enables me to do so concisely.
Following its "retrospective" cancellation of Mr Diab's rental rebate under s 57 of the Housing Act 2001 (NSW) (which Macfarlan JA has reproduced), the Corporation issued a termination notice and sought a termination order from the Tribunal. In doing so, it was invoking the regime contained in ss 82, 87 and 88 of the Residential Tenancies Act 2010 (NSW). Section 82 requires termination notices, relevantly, to specify the ground relied on. Sections 87 and 88 are in the following terms: "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. (3) The termination notice may specify a termination date that is before the end of the fixed term of the residential tenancy agreement if it is a fixed term agreement. (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. (6) The Tribunal may refuse to make a termination order if it is satisfied that the tenant has remedied the breach. 88 Termination notices for non-payment of rent (1) A termination notice given by a landlord on the ground of a breach of the residential tenancy agreement solely arising from failure to pay rent (a non-payment termination notice) has no effect unless the rent has remained unpaid in breach of the agreement for not less than 14 days before the notice is given. (2) A non-payment termination notice is not ineffective merely because of any failure of the landlord or the landlord's agent to make a prior formal demand for payment of the rent. (3) A non-payment termination notice must inform the tenant that the tenant is not required to vacate the residential premises if the tenant pays all the rent owing or enters into, and fully complies with, a repayment plan agreed with the landlord, unless the Tribunal makes a termination order on the basis that the tenant has frequently failed to pay rent on time. (4) Despite any other provision of this Part, a landlord may apply to the Tribunal for a termination order before the termination date specified in a non-payment termination notice. The Tribunal must not consider any such application until after the termination date."
Section 87 requires there to be a breach of the residential tenancy agreement as a precondition of making a termination order. Section 88 deals more particularly with a particular type of breach, namely, failure to pay rent. A termination notice which is confined to the ground of breach through failure to pay rent is a "non-payment termination notice". That is what the Commission purported to issue.
Only if the exercise of power to cancel a tenant's rental rebate with effect from an earlier time pursuant to s 57 of the Housing Act gives rise to a "breach" arising from a "failure to pay rent" within the meaning of ss 87 and 88 of the Housing Act could there be material error in the orders made by the Tribunal below. Whether or not that is what occurred turns upon the interplay between (a) the agreement between landlord and tenant, (b) the impact of the Residential Tenancies Act, and (c) the effect of the exercise of power under the Housing Act.
This Court's jurisdiction, pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW) is confined to questions of law. The Corporation pressed three questions of law when its appeal was heard. The first and second related to the impact of the decision to grant a rebate upon Mr Diab's residential tenancy agreement. Those grounds challenged the Appeal Panel's conclusions that the grant of rental rebate amounted to an alteration of the residential tenancy agreement, so as to reduce the amount of "rent" payable by Mr Diab. However, the Corporation has previously run a case that Mr Diab was not in breach prior to the "retrospective" cancellation of the rebate. That was recorded at [12] of the reasons of Senior Member Rosser, who said "It is not in dispute that but for the cancellation of the rental rebate and the subsequent debiting of the respondent's account of the difference between the market rent for the premises and the rebated rent the respondent was paying, there would be no rental arrears." The same concession is found in the reasons of the Appeal Panel at [14].
However, by its written submissions on appeal, the Corporation advanced a very different stance. It was said as an element of each of the questions of law raised on further appeal that Mr Diab was in breach prior to the cancellation of his rebate because he was not "entitled" to receive a rebate (what precisely "entitled" meant in this context was unclear). The Corporation's submissions included the following: "If the tenant was not entitled to receive the rental rebate at any particular time, the market rent remained payable by the tenant under the tenancy agreement at that time. ... As the respondent was not entitled to a rental rebate, no amount was waived or remitted from the amount that was payable by the respondent under the tenancy agreement for the right to occupy the premises for [the] period of the agreement. The rent payable by the respondent to the applicant to occupy the premises remained the market rent. ... The rental arrears did not arise under the tenancy agreement as a result of the retrospective cancellation of the rental rebate under the Housing Act. It is submitted that the rental arrears arose under the tenancy agreement given that the respondent was not, at the time he paid the rebated rental, entitled to receive the benefit of the grant of the rental rebate and thus was obliged to pay the market rent. ... The respondent failed to pay rent on time whenever he paid the rebated rent if at that time, the respondent was not entitled to receive the benefit of the rental rebate. The respondent was therefore in breach of the tenancy agreement each week he paid the rebated rent for failing to pay the market rent. The rental arrears continued to accrue each weekly period of the tenancy during which the respondent received the rental rebate in circumstances where he was not entitled to receive the rebate" (amended summary of argument, paragraphs 15, 19, 21 and 25).
Mr Diab, understandably, complained in written and oral submissions of the Corporation's change of stance. Apart from anything else, I struggle to see how there can be an error of law in failing to find there were arrears of rent prior to the exercise of the power under s 57 to cancel the rebate, in circumstances where the issue was the subject of a concession. I need not express a concluded view on the questions of this Court's jurisdiction, because senior counsel for the Corporation confirmed when the appeal was heard that the concession recorded in [12] of Senior Member Rosser's reasons remained the case: "because until there is a cancellation of the rebate, it just doesn't arise" (transcript, 16 March 2015, page 35). It was entirely proper for that confirmation to be given.
The proposition that there could be a breach of the obligation to pay rent before the cancellation of the rebate was essential to the first and second of the questions raised by the Corporation on appeal. It follows that it is the question of law identified in the third ground of the notice of appeal, and that ground alone, which is dispositive. That ground was: "The Civil and Administrative Appeal Panel erred in law in finding the Appellant's retrospective cancellation of the rental rebate granted by the Appellant to the Respondent did not give rise to rental arrears that became due and payable by the Respondent to the Appellant pursuant to the Residential Tenancy Agreement dated 11 October 1990 upon the cancellation of the rental rebate."
The starting point is the text of the provisions of Part 7 of the Housing Act dealing with rental rebates. Although the ground of appeal and the submissions in its support were made using the language of "retrospective", that word can be ambiguous (as Isaacs J observed in South Australian Land Mortgage and Agency Co Ltd v The King [1922] HCA 17; 30 CLR 523 at 546) and the safer course is to apply the statutory language. A "weekly rebate of rental" may be granted under s 56, and may be varied or cancelled, after conducting an investigation, under s 57. Subsections (4) and (5) are confined in their operation to exercises of power in which the Corporation determines a date on which the variation or cancellation has effect which is earlier in time than the date of the determination. In those circumstances, subsection (4) confers a power to require payment of a sum of money, and subsection (5) confers a right to recover that sum of money as a debt in a court of competent jurisdiction.
The Corporation maintained that the exercise of the power to cancel a rebate with effect from an earlier date gave rise to a "breach" amounting to a "failure to pay rent" so as to engage ss 87 and 88 of the Residential Tenancies Act. If that be so, it arises either because of the direct operation of statute, or conceivably because of the consequential operation of statute upon the tenancy between the Corporation and Mr Diab. The focus of the Corporation's submissions was upon the direct operation of statute, and understandably so, for there is nothing in the contractual documents to support the unlikely result that an amount of money answering the description of rent is retrospectively owed following the retrospective cancellation of a subsidy. There is nothing like, for example, a covenant whereby the tenant agreed that "if at some stage in the future the landlord insists upon the payment of full rent, with effect from an earlier time, the tenant agrees that he or she will be taken to have failed to pay the full rent as and from that earlier time".
However, the Corporation enjoys the benefit of a statutory power expressed to be effective from an earlier time; that is a much less unpromising basis to sustain a back-dated obligation to pay rent. Even so, that is not the effect of the legislation.
There is a basic juristic difference between the cancellation of a rebate with effect from an earlier time and the non-payment of rent. The exercise of the power to cancel a rebate with effect from an earlier time gives rise to an obligation to repay a sum of money. But it does not follow that the sum of money to be repaid answers the description of "rent" - an amount required to be paid pursuant to the tenancy agreement. Rent is a result of the bargain between landlord and tenant for the occupation of the premises. In contrast, the obligation to repay the cancelled rebate is, or is analogous to, a quasi-contractual, or restitutionary, right to recover money paid to the use of Mr Diab.
Further, the statutory language tends to confirm that the money owed is not "rent". First, the amount determined by s 57(4)(a) is "an amount equal to" the rental rebate received by the tenant; it is not expressed to be a right to recover "rent". Secondly, s 57(4)(b) ensures that interest is not calculated retrospectively from a date prior to the issue of the notice. Once again, this suggests that the statutory amount specified by s 57(4) is not equivalent to unpaid rent. Thirdly, s 57(5) expressly confers a right of recovery and characterises the nature of that right as "debt". It is striking that in a section dealing with retrospectively cancelled payments of rebate of rent, nothing is said so as to engage the particular rights attaching to non-payment of rent under the Residential Tenancies Act.
The exercise of power under s 57(3) of the Housing Act also gives rise to precise statutory rights conferred by s 72A (to recover amounts from other persons residing with the tenant), s 72B (to register the order upon land owned or co-owned by the tenant), and s 73(2) (to recover the amount by reducing or cancelling other rental rebates). It may be seen that the Act specifies four remedies, with precision, that the Corporation enjoys following the exercise of the power.
The upshot is that the Corporation asks for a fifth remedy to be implied as a matter of construction, in addition to the four remedies for which statute makes explicit provision. The Corporation does so by reference to a textual and a contextual consideration.
The Corporation's textual basis is s 141 of the Residential Tenancies Act, which addresses in terms the cancellation or reduction of rent rebate. That section is in the following terms: "(1) A tenant under a social housing tenancy agreement whose rent rebate is cancelled may apply to the Tribunal for an order declaring that the rent payable under the agreement (or a proposed social housing tenancy agreement for premises already occupied by the tenant) is excessive. (2) The tenant may do so within the period prescribed by the regulations after the cancellation of the rent rebate takes effect. (3) This section is in addition to any other provision of this Act."
However, s 141 does not speak to the present problem. It may be seen from subsection (2) that the right conferred is expressly confined to a period of time "after the cancellation of the rent rebate takes effect". (In fact, by reg 22(7) of the Tenancies Regulation 2010 (NSW), that period is 30 days.) It is not necessary to express a view on whether Mr Diab, whose rental rebate was cancelled with effect from many years ago, would have been entitled to apply under s 141. It is sufficient to say that the terms of s 141(2) make it plain that that section was not speaking to the question of a back-dated cancellation or variation of a rent rebate. Accordingly, the Corporation's submission that the order from the Tribunal declaring the "rent payable" to be excessive does not assist in answering the question whether the varied amount (excluding the cancelled rebate) answers the description of a "failure to pay rent" for the purposes of ss 87 and 88.
Contextually, the Corporation pointed to questions of "fairness" and the object stated in the Housing Act of ensuring an equitable sharing of the available supply of public housing and that the system focuses on housing people who are most in need: s 5(1)(f) and (f1). Those are but two of 19 objects, not all of which are consistent, which are mandatory relevant considerations for the purposes of administering this Act. They impact upon the question of construction only indirectly, if at all. They do not bring about what is required under the Residential Tenancies Act: namely, a breach, and a failure to pay rent.
The ordinary textual meaning is reinforced by orthodox principles of statutory construction. Not lightly, in an area heavily regulated by statute with the intention of protecting rights of occupancy, would there be implied a right to dispossess a tenant by reason of a debt created by an exercise of power taking effect from an earlier time. Generally speaking, laws with retrospective or retroactive effect are construed narrowly: Moss and Phillips v Donohoe [1915] HCA 62; 20 CLR 580 at 621; NSW Food Authority v Nutricia Australia Pty Ltd [2008] NSWCCA 252; 72 NSWLR 456 at [130]. Further, there are criminal sanctions (under ss 69 and 69A of the Housing Act) where there has been a non-disclosure or erroneous disclosure to the Corporation. The construction for which the Corporation contends amounts in substance to a penalty, which a court would not lightly reach where express provision has been made for penal sanctions.
The foregoing substantially accords with the reasons and conclusion of the Appeal Panel. It follows that there is no error of law, and that the appeal must be dismissed with costs.

Amendments 27 October 2015 - corrected paragraph numbering in headnote and judgment 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: 27 October 2015

Tenancies Regulation 2010(NSW)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (11 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (10)

Cited By (14)