Novakov v Carew

[2017] NSWCATAP 194

NCAT Appeal Panel|2017-06-01|Before: Dr J

View original source

At a glance

Source facts

Court

NCAT Appeal Panel

Decision date

2017-06-01

Before

Dr J

Source

Original judgment source is linked above.

Judgment (8 paragraphs)

[1]

Introduction

This is an appeal against an order of the Tribunal dismissing a landlord's application for a break lease fee in connection with a residential tenancy agreement for a property at Point Piper.
The order was made on 27 February 2017.
The appellant is the landlord. The respondents were the tenants.

[2]

Notice of Appeal and submissions

The appellant filed a Notice of Appeal on 16 March 2017.
The appeal is in respect of residential proceedings. The appeal was filed out of time, r 25(4)(b) of the Civil and Administrative Tribunal Rules, 2014 (Rules) requires an appeal in residential proceedings to be filed within 14 days of the date of the decision or the date notice of the decision is received, whichever is the later. Consequently, leave is required to appeal out of time.
The appellant's grounds of appeal can be summarised as follows: 1. the respondents had breached cl41.1 of the residential tenancy agreement (agreement); 2. the Tribunal incorrectly considered the application under s 107 of the Residential Tenancies Act, 2010 (RT Act). 3. the appellant suffered financial loss of 37 days rent, namely $4,096.27 due to the "break of lease" by the respondents.
The appellant provided a bundle of documents in support of the appeal. The appellant also provided a copy of the sound recording of the hearing on 27 February 2017 together with a typed document setting out details of what was said at the hearing and the appellant's submissions. The appellant also made oral submissions at the hearing through her agent Ms Novak.

[5]

In vacating the residential premises on 22 December 2016, did the respondents breach the residential tenancy agreement or was there an agreement permitting them to do so?

The primary question to be resolved is whether or not the parties entered into an agreement to permit the respondents to vacate the residential tenancy agreement during the fixed term period or did the appellant otherwise consent to the respondents doing so.
The appellant contends that there was no agreement between the parties permitting the respondents to vacate the premises early nor was there a transfer of the respondents' residential tenancy agreement to new tenants. The respondents contend the opposite.
The Tribunal said at [5]: The facts, as to which the parties agree, are that the tenant informed the landlord's real estate agent that they wish to vacate the residential premises within the first 6 months of a 12-month agreement. They complained about the alleged breaches of the agreement. The outgoing tenant proposed a person who they said might wish to take over the lease. The real estate agent arranged to show that person through the property and the person signed a new lease. The tenant vacated the property a day earlier, at the landlord's request, and the tenant took possession almost immediately.
Having decided that cl 41 of the residential tenancy agreement had been crossed out and did not permit the payment of a "break fee", the Tribunal then said at [9]: In the circumstances, it is not strictly necessary to consider whether the premises were abandoned pursuant to s 106 or s 107 of the Act. However, the facts support the proposition that the landlord consented, through the agent, to the termination of the tenancy by the tenants (Act, s81(4)(e)), because the landlord requested the tenants to leave a day earlier than they had suggested. In these circumstances, it is unlikely that the tenants abandoned the premises, and that the landlord is entitled to compensation under s 107 of the Act: see Diago Lobo v Abdel-Messih [2016] NSWCATCD and [59] to [62].
Finally, the Tribunal said at [10]: Even if s 107 of the Act applies in the circumstances, there is no evidence of the landlord suffering any loss caused by the respondents leaving the premises early, so that the Tribunal declined to order any compensation.
It is unclear from the Tribunal's reasons whether the facts recorded as agreed at [5] included, as an agreed fact in the proceedings, that the parties had reached an agreement to the effect that that the appellant had consented to the respondents vacating the premises prior to the expiry of the fixed term of the residential tenancy agreement. The alternative view is that all that was agreed was that the landlord, having been told by the respondents that they wished to vacate the premises, in fact requested the respondents to leave a day earlier than that which had been intended, the Tribunal being required to determine whether the communications between the parties in these circumstances amounted to consent from the landlord to allow early vacation, which issue would need to be determined for the purpose of deciding if the residential tenancy agreement was terminated in accordance with s81(4)(e) of the RT Act (which relates to termination occurring when a tenant vacating residential premises with consent of the landlord).
The second alternative seems likely having regard to the Tribunal's consideration of the whether cl 41 applies and to the conclusion in [9] that "the landlord consented, through the agent, to the termination of the tenancy by the tenants … because the landlord requested the tenants to leave a day earlier than they have suggested". That is, the Tribunal was required to determine if consent of the type referred to in s81(1)(e) had been given.
This view is supported by the appellant's notations concerning the sound recording of the proceedings at first instance in respect of time mark 20:17 where the appellant contended that "No transfer was accepted by Novak Properties".
Further, to the extent that the Tribunal concluded there was an agreement or consent was given by the appellant to the respondents to vacate the premises and/or terminate the residential tenancy agreement, the reasons for decision do not explain the circumstances in which this occurred nor the date on which the agreement or consent was given. This failure constitutes an error of law for which the appellant has a right of appeal: see Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13].
Be that as it may, it was clear from the evidence and submissions provided by the parties in the appeal that the issue to be resolved by the Appeal Panel was whether, in vacating the residential premises on 22 December 2016, the respondents were in breach of the residential tenancy agreement.
A residential tenancy agreement only terminates in circumstances provided in the RT Act: see s81 of the RT Act.
On the submissions made by the parties there are two possibilities that may have given rise to termination or otherwise permitting the respondents to vacate the premises otherwise than in circumstances of breach by them.
The first is that the residential tenancy agreement was terminated during the fixed term period because the tenant gave up possession with the landlord's consent: see s81(4) of the RT Act. The second is that the residential tenancy agreement was not terminated, but rather was transferred from the respondents to a new tenant with the consent of the landlord: see s 74 of the RT Act.
Both parties referred the Appeal Panel to the email exchange between the parties prior to the date the respondents vacated the premises on 22 December 2016.
In oral submissions, the respondent said that an agreement was reached permitting them to vacate the premises on 28 November 2006. The respondent said that the agreement was recorded in the agent's email dated 28 November 2016 found that RB 53.
Prior to this email, the respondents and the appellant agent had exchanged emails on the subject of the respondents vacating the premises. It is necessary to set out extracts from various emails to ascertain whether the agent's email (RB 53) constitutes the acceptance of an offer or consent on behalf of the appellant for the respondents to vacate the premises.
The first email to consider is the email of 28 November 2016 sent by the respondents to the appellant's agent at 11:29 AM (RB 49-50 and also RB 51-52) which says: I'm following on from Patrick's emails in respect of major works at 2a Wentworth Street, point Piper. The number of issues we are experiencing is becoming intolerable. From the very start of the lease, I am sure you'll agree there has been ongoing issues. Some of these issues shouldn't have been issues as the governed by NSW legislation. Amongst the repairs, condition of the property when we moved in, smoke alarms, breach of agency agreement in terms of reimbursing our emergency repairs, disclosing the house rules, unable to use parking space supplied, renovations, building works plus so many other items as detailed in prior emails, Patrick and I have decided will be vacate in the property and handing keys back on 22/23 December 2016 (final date to be confirmed). We can accommodate viewings, however, we will need to be home during these. Our time at the property has not been enjoyably (sic) and it is frustrating to continually be told we're breaking the rules, however, are not being issued the rules in order to comply. A neighbour in our building introduced us to a couple from a few doors down who have sold in Point Piper and are keen to take over of our lease until the end of its term. From my understanding they will need to apply etc. But please do let me know the process in terms of them being candidates for the lease (we have advised this person we just relocating in terms of why we leaving early). They have taken a look and are keen to move in ASAP, so there will be no loss of rent occurred to the owner. Please note, irrespective of this person, Patrick and I will not be paying any break lease fees. We will more than happily take this to the Tribunal (Frustrated Agreement) as all parties involved with this lease have been made well aware, in writing, that we left our prior property because of the building works, and it was confirmed there were no works taking place and 2a Wentworth Street, Point Piper… …
Later that day, on 28 November 2016 at 3:45 PM (RB53), the appellant's agent sent to the respondents an email in the following terms: Thank you for your email. Please ask the applicant to fill out an application, which can be downloaded from our website; …. At this stage, we will only be reviewing the application & will then consider it via our usual channels. We will advise you of our outcome moving forward. All representations made by the landlord & agency. We will be in contact with you regarding your email, pending this application.
In our view, this email exchange did not amount to consent by the appellant to the respondents vacating the premises and giving up possession nor was there an agreement reached to transfer the residential tenancy agreement to a proposed new tenant at this time. As is clear from the terms of the emails: 1. the respondents were taking unilateral action to vacate the premises because of alleged breaches by the landlord of the residential tenancy agreement; 2. no consent was being sought, the respondents indicating that if necessary they "will more than happily take this to the Tribunal, namely the "Frustrated Agreement", complaints said to arise from various breaches by the appellant; 3. the proposed new tenant was required to fill in an application form and any agreement to transfer the residential tenancy agreement was subject to review of the application if and when received; 4. irrespective of whether the new tenant was accepted by the appellant, the respondents indicated that they "will not be paying any break lease fees."
It follows that the respondents' submission that they lawfully vacated the premises and were not in breach of the residential tenancy agreement should be rejected.
Our conclusion that no consent was given by the landlord and no agreement was reached is corroborated by a consideration of the following emails sent after 28 November 2016: 1. Agent's email dated 5 December 2016 (RB 55); 2. Agent's email to respondents dated 7 December 2016 at 10:16 AM (RB 56); 3. Respondents' email to agent dated 7 December 2016 at 11:06 AM (RB 57); and 4. Agent's email to the respondent dated 9 December 2016 sent at 12:18 PM (RB 58).
The first two emails (RB 55 and RB 56) relate to access to show the property to prospective tenants. Clearly no new tenant has been agreed as at 7 December 2016, contrary to the respondents' position that agreement has been reached in November.
In reply, the respondent said in RB 57: … All good regarding access. If they need to come through again to measure anything etc. this is all good. They text me last night and the only concern is we get keys for the new rental on 20 December 2016 (probably in the afternoon) so, we can't physically move until 21 December 2016, then have to get cleaners etc. in to do what they do. As you saw we have already moved out various large pieces of furniture to simplify the move, and what's remaining should be straightforward, but I don't think the move and cleaning will be done until 21 December 2016 and will have to leave it as the 22 December 2016. If somehow we do get everything done earlier, we can of course hand back keys early.
In response to that email, the appellant's agent said (RB 58): Thank you for your email. You have confirmed your vacate date as 22/12/2016, therefore you will need to return the keys no later than 10am of the 23/12/2016. Once you hand in the keys I will contact a final inspection, please advise if you wish to attend the inspection and we will advise you of the time. Please refer to your signed Tenancy Agreement (Clause 41.1 break of lease fees), vacate in on 22/12/16 you are obligated to pay Break of lease fee. In your case it would be 6 weeks rent. Break of lease fee means to pay rent until you vacate the property plus additional 6 weeks rent ($4650). Currently you are paid to 15/12/16, therefore $775 is owing to vacate date 22/12/16. Total monies owing to owner are $775.00 + $4650.00 = $5425.00.
While the parties had been discussing vacation of the premises on or before 22 December 2016, these discussions must be seen in the context where: 1. the respondents had unilaterally indicated they were going to leave the premises, 2. the appellant's agent was attempting to negotiate with a new tenant while maintaining a claim for the "break of lease fees", a claim which was the subject of the earlier November and was clearly never resolved.
Further, there is no evidence before the Appeal Panel to suggest that the agreement with the respondents was subsequently transferred to the new tenant. Rather, the only material to which we have been referred suggest that a new agreement was subsequently entered into with a new tenant which commenced on 4 January 2017.
When considered in this light, the conduct of the respondents is properly to be categorised as an abandonment of the premises and/or a repudiation of the residential tenancy agreement which the appellant accepted and terminated the residential tenancy agreement: see s81(4) (d) or (g) of the RT Act.
Consequently, the appellant became entitled to claim loss of rent and other damages arising from the breach.
It follows that the Tribunal was in error to dismiss the appellant's claim.

[6]

If the respondents breached the agreement, what is the appellant's entitlement to damages?

The appellant sought compensation by way of a break fee calculated in accordance with cl 41.1 of the residential tenancy agreement.
The appellant's submissions and Notice of Appeal appeared to put forward two propositions.
First, upon its proper construction, only parts of cl 41 were deleted from the General Conditions and cl 18 of Part 1 permitted a claim for the break lease fee because the residential tenancy agreement has ended before the end of the fixed term. Further, that entitlement existed whether or not the respondents were in breach of the residential tenancy agreement because the agreement was terminated by the respondent tenants within the first 6 months.
Secondly, while the appellant said in her notice of appeal that s107(3) of the RT Act had no application and that no claim was made under that section, nonetheless the appellant continued to say that "if the agreement is broken a lease break fee is payable".
During the course of submissions at the hearing of the appeal, the following was discussed: 1. the parties agreed that: 1. the respondents vacated the premises on 22 December 2016; 2. the premises were let to a new tenant on 4 January 2017; and 3. the daily rate for rent was $110.71 under the respondents' residential tenancy agreement; 1. while the appellant sought $390.00 being half the re-letting fee, there was no evidence before the Tribunal at first instance of the amount of this fee or that the fee had in fact been paid by the appellant to her agent.
In relation to the proper construction of the residential tenancy agreement and whether cl 41.1 remained a part of that agreement, we do not accept the appellant's submission that the "X" placed as an electronic mark over of cl 41 meant that the parties intended to delete part only and not the whole of the clause.
Rather, in our view the intention of the parties objectively determined was to delete the whole of clause 41 including cl 41.1 and 41.2.
The reasons for this conclusion are as follows: 1. While the "X" does not cover the whole of the clause, it is of the same size found in the deletion made to cl40 of the residential tenancy agreement (relating to swimming pools) and is consistent with an intention found elsewhere in the agreement to delete the whole clause; 2. Above the deletion covered by the "X" and beside the heading "Additional Term-Break Fee" the parties have initialled the document. This form of execution, beside the relevant heading, is the same as found in respect of the amendments in respect of cl 40 (swimming pools) and cls 43-45 (Additional Term - Pets); 3. An intention to delete only the introductory words of clause 40 would render the clause unintelligible as to the circumstances in which it is to operate; and 4. the appellant's construction would render the respondents liable for a break fee: 1. contrary to s107 of the RT Act which limits liability to pay a break fee to circumstances of abandonment; and LA on the question; and 2. despite the fact that the obligation of a tenant to pay rent ends upon the lawful termination of the residential tenancy agreement by the tenant in accordance with the RT Act
Clause 18 of Part 1 of the residential tenancy agreement does not otherwise save cl 41.1 and 41.2. This is because the first sentence of cl 18 of Part 1 are the very words deleted from cl 41, the only reasonable conclusion being that the parties failed to delete cl 18 of Part 1 when carrying out the deletions to cl 41 so as to bring that clause into conformity with cl 41 which was amended.
It follows that the appellant is not entitled to a break fee equivalent to 6 weeks rent.
However, in our view the appellant is entitled to loss of rent for the period from 22 December 2016 until 4 January 2017. This is a period of 12 days which, at a rate of $110.71 per day amounts to $1328.52.
This is because the respondent breached the residential tenancy agreement and suffered loss of rent up until the date when the new tenant took possession of the property. There is no suggestion that on or after 4 January 2017 the rent obtained from the new tenant was less than the rent in the respondents' residential tenancy agreement. Accordingly, the actions of the appellant had the effect of mitigating the appellant's loss so as to limit any loss of rent to the 12 day period to which we have referred.
As to the claim for fees for re-letting, as recorded above there is no evidence on this aspect and this part of the claim fails.