Paul Thomas Kenny and Patricia Leigh Kenny v Leighton Killalea

Background

1. The appellants allege that some time after the lease commenced, they noticed severe cracking in an external brick wall, so severe that they believed the building might collapse and they were in danger by remaining in the building. The appellants raised this issue with the Council and subsequently there were inspections carried out by qualified engineers on more than one occasion. In the opinion of the engineers, the building was not in "immediate" danger of collapse. The respondent did not agree repairs were required.
2. The appellants were not satisfied with that outcome and after sending emails to the respondent's agent advising of their intention to leave, they vacated the premises on 4 July 2014, almost two months before the fixed term expired. By reason of the respondent filing the original application seeking outstanding rent, it is apparent the respondent did not agree that the tenants were entitled to break the lease.

The Notice of Appeal

1. The Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act) sets out the basis upon which appeals from decisions of the Tribunal may arise. This is an internal appeal under s 80(2)(b) of the CAT Act. Such an appeal may be made as of right on any question of law, or with leave of the Appeal Panel on any other grounds.
2. Appeals on any other grounds from decisions made in the Consumer and Commercial Division are governed by Sch 4, cl 12 of the CAT Act. This clause provides that an Appeal Panel may grant leave to appeal if satisfied the appellant may have suffered a substantial miscarriage of justice because the decision of the Tribunal under appeal was not fair and equitable, that it was against the weight of the evidence, or that evidence was available that was not reasonably available at the time of the hearing.
3. In determining an internal appeal, the Appeal Panel has broad powers under s 81 of the CAT Act and may make such orders as it "considers appropriate in light of its decision" on the appeal. Those orders include, but are not limited to, orders that the appeal be allowed or dismissed, the decision under review be confirmed, affirmed or varied, the decision under appeal be quashed or set aside, the decision under appeal be quashed or set aside for another decision to be substituted or that the whole or part of the case be reconsidered by the Tribunal, either with or without further evidence, according to the directions of the Appeal Panel.
4. In the Notice of Appeal, the appellants sought an extension of time but noted that they were not sure what the time limit was. As the Notice of Appeal was filed less than 14 days after they received the original decision, an extension of time is not required.

Conduct of the internal appeal

1. Prior to the hearing, directions were made by the Appeal Panel about the parties filing and serving submissions and the material on which they wished to rely. The respondent did not provide a Reply to the Notice of Appeal and did not file and serve any submissions or material in response to the material provided by the appellants. The respondent did not participate in the hearing and the appeal was initially heard in his absence.
2. After the hearing, the Tribunal was notified that the agent for the respondent had been available to participate by telephone and wished to make submissions. Given the apparent technical difficulties that had resulted in the respondent being unable to participate in the hearing, the Appeal Panel determined to provide the respondent with a sound recording of the hearing and directed that the respondent provide any submissions in writing in response. The matter was relisted for hearing to give the parties the opportunity to make any oral submissions arising. The respondent provided submissions in response and participated in the subsequent hearing. The Appeal Panel had regard to those submissions, which have been summarised in these reasons.

Grounds of appeal and submissions of the parties

1. The appellants' grounds of appeal can be summarised as follows: 1. while the appellants agree with the Member's "assessment in points [paragraphs] 2 to 13", the Member has made errors in his interpretation of the matters put at the hearing at points [paragraphs] 14 to 18; 2. the subject premises was not in reasonable repair; 3. the Member has contradicted himself in relation to the weight to put on the photographic evidence tendered by the appellants; and 4. the lease was invalid from the beginning.
2. The appellants, under the hearing "Grounds of Appeal," also listed a number of matters which they asserted were not contested by the respondent. These matters were not in issue and were not relevant to the critical issues raised in the grounds of appeal. We have therefore not addressed these matters in our reasons.
3. The appellants sought leave to appeal in answer to questions 12A and 12B on the Notice of Appeal. The appellants referred to "the attached 11B and 11C" documents. In fact those documents do not in terms refer to questions of law or to issues requiring leave to appeal, although there is reference to the Member's "errors in his interpretation." The appellants similarly referred to their "11B and 11C" documents in relation to whether the decision was not fair and equitable and whether the decision was against the weight of the evidence. In relation to evidence being available that was not reasonably available at the time of the hearing, the appellants referred to the photographs later provided but noted "they were submitted originally but Mr Bryant misinterpreted/dismissed their relevance."
4. The appellants seek the following orders: 1. an apology be issued to the appellants; 2. that rent following vacation of the premises be "foregone;" and 3. the bond be repaid in full.
5. The respondent's submissions dated 13 February 2015 are summarised as follows: 1. Member Bryant provided extensive explanations to Mr Kenny about the process the appellants should have undertaken to apply for a termination of the tenancy, and that Mr Kenny "seemed very vague" as to what he had been advised of by Member Bryant; 2. the "correct" reason Mr Kenny wanted to vacate the premises was that they had purchased a property; 3. if Mr Kenny had wanted to break the lease, he should have filled out a break lease form; 4. Council agreed the crack did not form an immediate danger to the public or the residents or any immediate need to vacate; and 5. Mr Kenny went straight to Council with his concerns rather than contacting the landlord's agent's office.
6. The Tribunal below made an order that the appellants pay rent of $2,240, being the rental payable under the residential tenancy agreement after they vacated the premises until the end of the tenancy. The Appeal Panel does not have jurisdiction to direct the respondent to issue an apology but if the Appeal Panel concludes the Tribunal made an error of law it may, amongst other things, set aside the decision and substitute another or remit the matter to the Tribunal below for reconsideration.

Consideration and Determination

1. At first instance, at paragraph 10, the Tribunal found that the respondent had breached s 63(1) of the RT Act. Section 63 provides: 63 Landlord's general obligation (1) A landlord must provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises. (2) A landlord's obligation to provide and maintain the residential premises in a reasonable state of repair applies even though the tenant had notice of the state of disrepair before entering into occupation of the residential premises. (3) A landlord is not in breach of the obligation to provide and maintain the residential premises in a reasonable state of repair if the state of disrepair is caused by the tenant's breach of this Part. (4) This section is a term of every residential tenancy agreement.
2. Relevantly, the Tribunal stated: 10. Was the cracking such that the building was not in a reasonable state of repair (s.63(1))? Yes, because the same was a significant breach of the fabric of the building, … and it was unsightly. The tenants' concerns as detailed in their material filed in the matter are acknowledged and quite understandable."
3. In the next paragraphs the Tribunal stated as follows: 11. In that case the tenants had remedies under the Act: other than dealing directly with the landlord they could have sought orders from the Tribunal for repairs or sought to terminate the tenancy because of the landlord's breach. 12. There was no application for repairs and the only document which could be construed as a notice of termination was the email of 23 June and it did not comply with the requirements of the Act as to form or method of service. The tenants acknowledged that this was so and did not seek to avail themselves of the assistance of s113 of the Act. The Tribunal doubts that any such request would have been acceded to.
4. It was on this basis that the Tribunal rejected the appellants' claim that they had terminated the lease and were therefore not liable to pay rent for the balance of the period.
5. We do not agree with the conclusions of the Tribunal as set out in paragraphs 11 and 12 and, in so far as the Tribunal found that the appellants were liable for rent for the outstanding term of the lease, we are of the view the Tribunal was in error our reasons follow.
6. The Tribunal found there was a breach of s 63 of the RT Act because the building was not in a reasonable state of repair. The respondent contended that the building was habitable and safe and relied on a report from Xeros Piccolo, Consulting Engineers, dated 1 September 2014 to the effect that the crack did not "present any immediate danger from overall collapse or failure." However, it is not necessary for premises to be uninhabitable or unsafe for there to be a breach of s 63. In this case, it was clear that there was a large crack in the building, which was, according to the photographs provided to the Tribunal below, several centimetres wide and affected the eastern side of the wall from the top to the bottom of the building. According to the report of Xeros Piccolo, it was recommended that "the crack be filled with suitable brick mortar to bind all loose pieces and to temporarily support the crack until the final repair has been carried out." Xeros Piccolo also referred to previous discussions with the respondent and recommended that "the wall be repaired by partial demolition and reconstructed".
7. We accept the finding of the Tribunal that there was a breach of s 63 of the RT Act based on the uncontroverted evidence. The respondent contended that the appellants must have known about the crack at the time of entering into the lease and occupying the property. The appellants denied this and gave evidence at the original hearing that the crack was concealed by a large tree near the property. Ultimately, this issue was not material because s 63(2) expressly provides that the obligation arises regardless of whether the tenants were on notice of the state of repair at the time of occupation.
8. It is relevant to note that cl 18 of the residential tenancy agreement is in identical terms to s 63(1). Accordingly, a breach of s 63(1) of the RT Act will also be a breach of the residential tenancy agreement.
9. Section 98 of the RT Act provides: 98 Breach of agreement - termination notice by tenant (1) A tenant may give a termination notice on the ground that the landlord 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 made before the termination date and within the period prescribed by the regulations, revoke a termination notice by a tenant if satisfied that the landlord has remedied the breach and that it is appropriate, in the circumstances of the case, to continue the tenancy. Note. The tenant may apply directly to the Tribunal on the ground of breach by the landlord for a termination order without first giving notice (see section 103).
10. Given the finding by the Tribunal that there had been a breach of s 63(1) (and thereby cl 18 of the residential tenancy agreement) the issue for determination in the Tribunal below was whether the appellants had given notice under s 98 of the RT Act. This was referred to in para [12] of the reasons. The Tribunal also noted the appellants did not seek the assistance of s 113 of the RT Act but doubted such a request would have been successful.
11. Section 113 provides as follows: 113 Defects in termination notices The Tribunal may make a termination order for a residential tenancy agreement or any other order even though there is a defect in the relevant termination notice or the manner of service of the notice if: (a) it thinks it appropriate to do so in the circumstances of the case, and (b) it is satisfied that the person to whom the notice was given has not suffered any disadvantage because of the defect in the notice or service or that any disadvantage has been overcome by the order and any associated order.
12. That section is in very wide terms. The Tribunal has a broad discretion to make a termination order or any other order if it thinks appropriate in the circumstances of the case and if it is satisfied that the person to whom the notice was given has not suffered any disadvantage.
13. There was evidence before the Tribunal below that the appellants had sent emails to the respondent's agent complaining about the crack. In particular, there was evidence the appellants sent an email to the respondent's agent dated 28 May 2014 referring to the "serious structural damage" to the property and attaching various photographs of the crack in the wall. Relevantly, the appellants notified the agent as follows: We are nervous and are vacating as soon as we can arrange alternative accommodation. We will be vacating within the next few weeks at least. The cracks are getting worse by the week …
14. By further email dated 23 June 2014, the appellants notified the agent for the respondent as follows: We are: vacating the unit on Wednesday 2 July cleaning the unit of Thursday 3 the unit would be available to inspect on Friday 4 July.
15. When read together it is clear that the appellants sought to give the respondent notice they were vacating the property and thereby terminating the lease prior to the end of the fixed term.
16. Having regard to this evidence, s 113 should have been brought to the attention of the parties and reasonable consideration given to whether the termination notice was effective notwithstanding the obvious defects in the notice given by the appellants. Section 36 of the CAT Act provides that the Tribunal must give effect to the "guiding principle" when determining proceedings "to facilitate the just, quick and cheap resolution of the real issues in the proceedings" [emphasis added]. This is reinforced by s 38(4) which provides that the Tribunal is "to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms."
17. In this case, the email of 28 May 2014 was clearly in evidence, although the Tribunal did not refer to it. While this email does not specify a termination date and the second email does not give the required 14 days' notice, it cannot be found that, considering both emails together, the respondent suffered any disadvantage by the defects in the notice. Taken together, the emails provide all the information required by the RT Act: the address of the premises, more than 14 days' notice and a specified termination date (see s 82 of the RT Act).
18. The Tribunal properly identified s 113 as potentially relevant but, in our view, incorrectly rejected the provision, possibly because of the failure to take into account the first email. Neither party was asked to address this issue. It is also relevant to note that the reasoning process, through which the Tribunal concluded that the second email was the only document that could have constituted notice and that s 113 would not have assisted the appellants, is not disclosed in the reasons for decision.
19. While the appellants sought leave to appeal on the basis that they may have suffered a substantial miscarriage of justice because the decision was not fair and equitable and was against the weight of evidence, we have identified potential errors of law. It appears that the Tribunal did not have regard to s 36 and s 38 of the CAT Act but it is difficult to critically examine this issue because the Tribunal's reasons do not adequately explain the basis for the conclusion in respect of s 113 of the RT Act. Both matters would be errors of law.
20. Even if no error of law was established, we would give leave to appeal. It was not fair and equitable that the appellants were not given the opportunity to argue about the question of notice in circumstances where s 113 of the RT Act may have been available and the Tribunal had clearly identified the provision as being relevant, apparently without directly raising the issue with the parties. In our view, this is a case where leave should be given, either because there would be "an injustice which is reasonably clear" if the decision is allowed to stand or "there was a factual error that was unreasonably arrived at and clearly mistaken" (Collins v Urban [2014] NSWCATAP 17 at [84]).
21. Having regard to these matters, the appeal is allowed and the Appeal Panel sets aside the decision made on 2 October 2014.
22. Rather than remit the matter for reconsideration, the Tribunal gave the parties the opportunity to make submissions on whether a finding should be made that the termination notice was effective in determining the lease. The representative of the respondent could not point to any disadvantage to respondent in the notice not complying with the RT Act. The respondent's agent clearly knew the appellants were proposing to vacate the premises "in a few weeks" as early as 28 May 2014. The respondent could have taken steps from this time to fix the crack and persuade the appellants to stay or readvertise the premises. There is no evidence the respondent did so.
23. Having regard to these matters, the Appeal Panel was satisfied the respondent did not suffer any disadvantage from the defect in the notice and that it was appropriate in the circumstances of the case to find that the appellant's termination was effective and the lease ended on 4 July 2014.
24. Accordingly, in substitution of the decision made on 2 October 2014, the Appeal Panel determined to dismiss the respondent's application for rent for the period 5 July to 29 August 2014.

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: 20 April 2015