Was the s 57(5) Debt Rent Which Had Not Been Paid On Time?
44In the absence of express statutory guidance, whether the amount of the cancelled rebates referred to in s 57(4) and recoverable as a debt under s 57(5) are properly to be characterised as rent arrears in the sense of rent that had not been paid on time pursuant to the residential tenancy agreement depends on the terms and proper construction of that agreement.
45The Appeal Panel has only the somewhat limited findings made by the Tribunal below as to the terms of the original residential tenancy agreement entered into on 15 October 1990. The specific obligation to pay rent was in the following terms: "to pay rent in advance which is due every Monday at any office listed on the rent account card". The full weekly rental, referred to in these proceedings as the market rent, at the commencement of the tenancy was $180 per week and increased in accordance with s 41 of the RT Act or similar provisions of the earlier Act. As noted above, the other terms of the original tenancy agreement included cll 26 and 27.
46Clause 26 referred to the Department of Housing (the landlord at the time of entry into the agreement) formulating a policy for the granting of rebates of rent and recorded that the "parties agree that in accordance with such policy the Department may grant a rebate or waive rent at its discretion."
47In the present case:
(1)at least from 7 November 1993, the respondent was granted weekly rebates of rental in accordance with a policy formulated by the Department of Housing as expressly contemplated by cl 26 and as a consequence the appellant did not require the respondent to pay on a weekly basis the market rent but only the market rent less the amount of the weekly rebate of rental (the rebated rental);
(2)after 1993, the Department was succeeded by the appellant as the landlord, the RT Act came into effect and rental rebates came to be granted under Part 7 of the RT Act not merely under a Departmental policy;
(3)after 1 July 2001 and until cancellation of the rebates, the respondent was granted weekly rebates of rental under Part 7 of the Housing Act the amount of which was determined in accordance with guidelines approved by the Minister and which were able to be cancelled under s 57(1) with the consequences which flowed from cancellation under s 57(4) and (5);
(4)after 1 July 2001 and until cancellation of the rebates, the appellant did not require the respondent to pay on a weekly basis the market rent but only the rebated rent.
48In the light of the matters referred to in the preceding paragraph and as a result of the fact that the appellant continued to grant to the respondent the right of occupation of the premises for the purpose of use as a residence in return for the respondent paying the rebated rent, the Tribunal below in effect found these arrangements and changes to be part of the continuing residential tenancy agreement. There was no error in so finding.
49It was appropriate to conclude that these arrangements became part of the residential tenancy agreement in this matter, in effect superseding in part and supplementing in part cl 26 and other relevant provisions of the original form of the tenancy agreement, especially those requiring the respondent to pay the market rent. The residential tenancy agreement for the relevant period was, thus, partly in writing and partly to be inferred from conduct - see County Securities Pty Ltd V Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [2] and [7] where Spigelman CJ comments upon contracts inferred from conduct and note the comments of Basten JA in Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [122] to [124].
50Clause 27 imposed an obligation on the respondent "to notify the landlord in writing of all income and any subsequent changes to the income of the tenant and of all other persons residing in the premises." This term may have particular relevance where a rental rebate is granted on the basis that the income of all the persons residing in the premises is, in total, so low that the granting of a weekly rebate of rental would be appropriate under the relevant rental rebate policy or guidelines. Nonetheless, the express wording of cll 26 and 27 does not make the granting of a rental rebate as contemplated by cl 26 conditional upon compliance with cl 27.
51In the circumstances, the terms of the residential tenancy agreement after the respondent was granted the rental rebates were, in relation to the payment of rent, to the effect that, while ever the respondent was entitled to a weekly rebate of rental, the appellant agreed that it would accept the rebated rental paid weekly in accordance with the agreement in full satisfaction of the respondent's obligation to pay for the right to occupy the premises. After 1 July 2001, the weekly rebate was always subject to potential cancellation under s 57(1), with the consequences which flowed under s 57(4) and (5). The Appeal Panel was not taken to any material that provided information as to cancellation or the consequences of cancellation of weekly rebates prior to 1 July 2001.
52Thus, while the respondent was entitled to a weekly rebate of rental, if he paid the rebated rental on a weekly basis, he was not in breach of his obligation "to pay rent in advance which is due every Monday" under the residential tenancy agreement. After the weekly rebate of rental was cancelled under s 57(1) of the RT Act, if the respondent paid the market rental each Monday, he was not in breach of that obligation.
53These conclusions do not, however, address the issue of whether the retrospective cancellation of the weekly rental rebates had the consequence that the respondent could be found to have beached the residential tenancy agreement every week from 7 November 1993 to the date of cancellation by failing to pay the full amount of the market rent on time. As the Appeal Panel understands it, the appellant's position had inherent in it the proposition that the retrospective cancellation of the rental rebates meant that the respondent was in breach of the tenancy agreement because of failure to pay rent on time for every week between 7 November 1993 and the date of cancellation notwithstanding that before the cancellation he was not in breach.
54The Appeal Panel has difficulty accepting this proposition. The difficulty arises because the obligation which is said to have been breached as a result of retrospective cancellation was an obligation to pay a certain amount at a particular time. Generally, whether the payment by the respondent discharged his obligation to pay rent at a particular time must be considered at the time of the payment. To take a very specific example, on Monday 2 February 2009 (being a date before the appellant cancelled the rebates of rental) the respondent had the benefit of a weekly rebate of rental which the appellant had granted to him. If on that Monday he paid to the appellant the rebated rent for the week beginning from that day, he could not have been found to have breached the residential tenancy agreement by failing to pay rent on time in respect of that week. The later cancellation of the rebate did not, absent some term in the residential tenancy agreement to that effect or some equivalent statutory provision, convert conduct which, at the time of the conduct, discharged the respondent's obligations under the tenancy agreement into conduct which breached those obligations at that time.
55This conclusion is consistent with the reasoning of the predecessor to the Consumer and Commercial Division of the Tribunal, the Consumer Trader and Tenancy Tribunal, in NSW Land and Housing Corporation v Bergman [2008] NSWCTTT 1201. In that matter, the Land and Housing Corporation sought orders for termination and possession of premises the subject of a residential tenancy agreement on the basis of failure to pay rent on time. The tenant had been granted a weekly rebate of rental by the Corporation. Under s 57(3) of the 1987 Residential Tenancies Act (in substance the same as s 88(1) of the RT Act), a termination notice given by a landlord on the ground of a breach of the agreement to pay rent had no effect unless the rent had remained unpaid in breach of the agreement for not less than 14 days before the notice was given. The principal question for the Tribunal in Bergman was whether the tenant was 14 days in arrears of rent as at the date of service of the notice of termination. The market rent was $200.00 per week but the tenant was entitled to a rental rebate of $147.30 per week so that the rebated rent was $52.70 per week. The amount of rent unpaid as at the date of service of the notice of termination exceeded $105.40 (the figure of $103.40 in the report of the decision appears to be a typographical error) but was apparently less than $400. It was argued on behalf of the tenant that because the tenant did not owe $400 or more (that is 2 weeks of rent at $200 per week), she had not been in breach of the agreement to pay rent for not less than 14 days. This was said to follow because the rent which the tenant agreed to pay under the residential tenancy agreement was the market rent not the rebated rent. Senior Member Durie held in that matter:
In my opinion, when the Tribunal calculates rent arrears for a tenant on a rebated rent it should, for all purposes, calculate those arrears after the rebate has been applied. It should do so in the calculation of any sum which may be owing to the landlord. It should be used in determining if a tenant is in excess of 14 days arrears as at the date of service of a notice of termination. It should be used in considering both whether a breach of a residential tenancy agreement of failure to pay rent justifies termination of the tenancy and also whether in all the circumstances of the case a tenancy should be terminated. If a tenant [of] the Applicant is paying market rent, then it is that rent which should be used for these purposes.
56This decision supports the conclusion that in determining whether the tenant has failed to pay rent on time, it is the actual amount payable at the relevant time, the rebated rent if a rental rebate has been granted and not the market rent, which must be considered when determining whether there has been a failure to pay rent on time.
57The appellant also submitted that the Tribunal below erred in holding that the appellant waived the portion of the rent constituted by the weekly rebates of rental. The Senior Member sitting in the Tribunal below did not express her conclusions by reference to waiver. As the Appeal Panel has stated above, the Senior Member's reasoning was that granting the rebate and continuing to permit the respondent to reside in the premises if he paid the rebated rent weekly had the effect of varying or amending the original contractual relationship between the parties such that the amount the respondent 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. As stated earlier, there was no error in this approach. Furthermore, 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.
58The appellant did not draw the Appeal Panel's attention to any term of the residential tenancy agreement which expressly dealt with the effect of cancellation of rebates of rental. On the material available to the Appeal Panel, it should be concluded that the residential tenancy agreement did not provide that retrospective cancellation of weekly rebates of rental had the effect of rendering a tenant in breach of the agreement if the tenant had, at the time of payment, been granted a weekly rebate of rental and had paid the rebated rent on time. There was no term of the residential tenancy agreement specifying that cancellation of rental rebates rendered the respondent liable for non-payment of the rebates of rental to which he was not entitled as rent not paid on time.
59In addition, there was no provision in the tenancy agreement as it applied after at least 7 November 1993 that the amount required to be paid each week notionally included the rebated portion. There was no provision that the respondent was liable to pay the rebated portion only so long as he complied with the agreement or any particular term or terms of the agreement. There was no provision that the respondent remained liable to pay the market rent while he was receiving the benefit of rental rebates, or that the difference between the rebated rent and the full market rent was in some unspecified manner notionally accumulating as rental arrears in the event that the rebate were cancelled retrospectively.
60Similarly, it was not suggested that the RT Act, the Housing Act or any other legislation contained a provision that a retrospective cancellation of rental rebates meant that a tenant was in breach of the agreement by failing to pay rent on time when the tenant had in fact paid the rebated rental on time.
61Indeed, the definition of "rent" in the RT Act provides some, albeit equivocal, support for the view that such a conclusion should not be adopted. Under the RT Act, "rent" is defined in s 3(1) as "an amount payable by a tenant under a residential tenancy agreement for the right to occupy premises for a period of the agreement." In the present case where the rent was payable weekly, "a period of the agreement" refers to each one week period of the tenancy.
62During the time when the respondent had been granted weekly rebates of rental by the appellant (or its predecessor), the amount payable by the respondent under the residential tenancy agreement for the right to occupy the premises each week was in fact the rebated rent, that is, the market rent less the weekly rebate of rental. Thus, for the purposes of the RT Act the "rent" in respect of the respondent's residential tenancy agreement from at least 7 November 1993 until the date when the rebates were cancelled was the rebated rent payable for each week during that time. Accordingly, a failure to pay "rent" for the purposes of the RT Act would only have occurred during that time if the respondent had not paid the rebated rent due in respect a relevant week.
63In the absence of any term in the residential tenancy agreement establishing that the retrospective cancellation of the rental rebates led to a breach of the obligation to pay rent on time or legislation to a similar effect, the consequences which flowed from cancellation of the rebates of rental were only those specified in the Part 7 of the Housing Act, and in particular in s 57. Thus in the present case the cancellation of the rebates of rental under s 57(1) had no consequences other than the following:
(1)after the cancellation, the respondent was required to pay the market rent each week in order to discharge his obligation "to pay rent in advance which is due every Monday" under the residential tenancy agreement;
(2)the appellant could by notice in writing to the respondent, require the respondent to pay to the appellant the amount of the rental rebates received to which the respondent was not entitled because of the cancellation plus interest - s 57(4); and
(3)the appellant could recover that amount plus interest as a debt in any court of competent jurisdiction - s 57(5).
64The appellant was not left without a remedy in relation to the rental rebates to which the respondent was not entitled following cancellation of rental rebates under s 57 of the Housing Act. Nonetheless, s 57 does not establish a regime whereby the amount referred to in s 57(4) or the debt referred to in s 57(5) could be recovered as "rent" payable at the time when each of the payments of rebated rent had been made.
65For these reasons, the Appeal Panel concludes that the amount of the rebates of rental to which the respondent was no longer entitled because of the cancellation of those rebates under s 57(1) was a debt owed by the respondent to the appellant but that amount did not constitute rent arrears in the sense of rent that had not been paid on time pursuant to the residential tenancy agreement.