Perkins v Barraket

Background

1. In order to better understand the nature of this appeal it is of assistance to briefly describe the facts which do not appear to be disputed between the parties and the oral reasons in support of the orders made by the Member (as disclosed from the disc provided by the tenants).
2. The parties entered into a residential tenancy agreement on 31 March 2015 and one of the tenants (Mr C Perkins) took possession of the property including by storing some of his belongings on the property. He then became concerned about the level of security and privacy at the premises as the premises appeared to him to have no blinds or curtains as well as inadequate locks on windows. Mr C Perkins gave notice to the landlord's representative on 10 April 2015, giving 14 days' notice terminating the lease by reason of the premises being insecure. The notice expired on 24 April 2015 and Mr C Perkins left the premises. His application to the Tribunal sought return of the bond (as to which he was successful) and orders for compensation. Compensation included a claim for expenditure incurred in respect of accommodation until he found alternative premises and entered a fresh residential tenancy agreement in June 2015. These facts are a brief summary and do not include all of the relevant events throughout this period.
3. In summary the Member's reasons for the Decision found the following: 1. The landlord breached s 70 of the Residential Tenancies Act 2010 NSW (RTA); 2. The RTA was not breached by the failure to provide blinds and window furnishings for the premises but deadlocks on external doors, and that keyed window locks are a basic requirement of residential premises; 3. The tenants gave a valid termination notice and the question arises as to whether the tenants are entitled to claim for compensation for expenses incurred in finding accommodation following their departure from the premises; 4. Nothing should be awarded for damages because there was a failure by the tenants to mitigate their loss. The tenant (Mr C Perkins) freely conceded in his own evidence that the cost of the window locks and dead locks were minimal and accordingly it would have been far more expeditious and reasonable to spend that small amount of money making the premises reasonably secure, rather than go and spend money on hotel accommodation for some considerable time; 5. As to the claim for breach of quiet enjoyment, the Member found that the lack of window furnishings did not mean that the premises were not reasonably habitable or that there was a breach of the tenants' right to quiet enjoyment in this particular case, having regard to the location and layout of the premises; and 6. The Member upheld the tenants' termination of the lease and therefore the tenants' right to the return of the bond. 7. The landlord's separate application for a break lease fee should be dismissed.
4. Section 70 of the RTA is as follows: 70 Locks and other security devices (1) A landlord must provide and maintain the locks or other security devices necessary to ensure that the residential premises are reasonably secure. (2) A landlord or landlord's agent must give to each tenant named in the residential tenancy agreement a copy of the key or any other opening device or information required to open a lock or security device for the residential premises or common property to which the tenant is entitled to have access. (3) The initial copies are to be provided free of charge but the landlord may recover from a tenant the cost of providing replacement or additional copies. (4) This section is a term of every residential tenancy agreement. Note. Section 191 provides for matters to be considered by the Tribunal when determining an action for a breach of this Division.
5. Section 191 of the RTA is in these terms: 191 Matters for consideration by Tribunal in applications relating to security breaches (1) This section applies to proceedings before the Tribunal relating to a breach of Division 7 of Part 3. (2) For the purposes of determining whether a landlord has provided residential premises that are reasonably secure, the Tribunal may consider (but is not limited to considering) the following matters: (a) the physical characteristics of the premises and adjoining areas, (b) the requirements of insurance companies for allowing the tenant to obtain insurance for property of the tenant kept at the premises, (c) the likelihood of break-ins or unlawful entry or risks to the tenant's personal safety. (3) For the purposes of determining whether compensation is payable to a tenant for a breach of the obligation to provide residential premises that are reasonably secure, the Tribunal must consider (but is not limited to considering) the actions taken, or that should reasonably have been taken, by the tenant and the landlord for the security of the premises.

Grounds of Appeal

1. The tenants appeal only against the decision not to award damages for the landlord's breach of the residential tenancy agreement. The grounds of appeal are listed as follows: 1. Error of law mitigation of loss; 2. Lack of procedural fairness; 3. Misinterpretation of and error in applying facts and evidence; 4. Failure to apply relevant law; and 5. Failure to deal with complete application
2. The notice of appeal also indicated that leave was sought to file the appeal out of time and that an extension of time was requested.
3. The tenants have elaborated upon the grounds of appeal in an attachment in the notice of appeal and in separate submissions filed on or about December 2015. In the following paragraphs we deal with those grounds and submissions.
4. The tenants submit that the "[L]aw of mitigation of loss does not require an innocent party to rectify the breach of the party at fault. It was not for the innocent party to rectify the defaulting landlord's breach. This is what the tribunal member was requiring the applicant to do and it has no basis in law and is unfair".
5. The tenants relied on the decision of the New South Wales Court of Appeal in Karacominakis v Big Country Developments Pty Ltd [2000] NSW CCA 313 where Giles JA said: A plaintiff who acts unreasonably in failing to mitigate his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so called duty, and the onus is on the defendant to show he has not and the extent to which he has not.
6. Similarly in Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 Garde J said that the onus of proof is on the defendant to show that the plaintiff has not acted reasonably in minimising loss arising from the defendant's breach of contract.
7. The tenants submit that the reasonableness of the plaintiff's conduct is judged upon the information the plaintiff possessed at the relevant time: Arnott v Choy [2010] NSCA 259 and a plaintiff does not act unreasonably merely because his or her impecuniosity prevents him or her from taking steps that a person with sufficient funds would undertake: Burns MAN Automotive (Aust) Pty Ltd 1986 (161 CLR 653).
8. The tenants also relied upon the decision of Glass JA in Munce v Vinidex Tube Makers Pty Ltd [1974] 2 NSW LR 235. In that case Glass JA said that there is an exception to the principle that the plaintiff bears the onus of proving all matters relating to damages. That exception relates to any disputed question which is truly a matter of mitigation of damages. In relation to questions properly so classified the defendant must not only introduce the evidence that the plaintiff has failed to minimise his loss, but also persuade the jury that the balance of testimony favours this conclusion.
9. The tenants submit that the decision which held that there was failure to mitigate loss because the tenants did not spend money on window locks and deadlocks (which according to the Decision would have been more expeditious and reasonable than to spend money on hotel accommodation), was in error two respects. The first was that there was no evidence put forward by the landlord that the tenants' action in securing alternative accommodation, as opposed to spending money to secure the premises, was unreasonable. Secondly, there was a denial of procedural fairness because the issue was raised by the Member at the hearing and was not the subject of any prior submission or evidence put forward by the landlord. The tenants submitted that the Member did not address whether the tenants' conduct was unreasonable but simply made a comparison as to two courses of action and decided that one, spending money on securing the premises, was more expeditious and reasonable than spending money on alternative accommodation.
10. The tenants also made submissions with respect to the Member's finding that the tenant, Mr C Perkins had: freely conceded in his own evidence the cost of window locks and deadlocks is minimal.
11. The tenants submitted that nothing of that kind was said. In view of our decision in this matter it is not necessary to make any findings with respect to this aspect of the appeal.

Reply to Appeal

1. The landlord filed a reply on 28 October 2015. In that reply the landlord stated that he was: in support of the original orders that were made. The member ran through all documentation and evidence presented to the Tribunal and gave both parties an opportunity to present their case. We found the member to be fair to both parties with his decisions.
2. There is no cross-appeal before us seeking to set aside the decision of the Tribunal that the landlord had breached s70 of the RTA and that the tenants had validly terminated the tenancy. This means that the only issue before the Appeal Panel is whether the decision to deny the tenants' compensation should stand or whether an alternative compensation decision should be made in the place of the present decision, or finally, whether the application should be remitted for a further hearing on the amount of compensation only.

Decision

1. Before explaining our decision it is necessary to draw attention to the fact that in the original application the tenants sought compensation for both economic and non-economic loss, including physical distress and psychological distress.
2. A proportion of the economic loss claimed includes expenditure incurred for storage of goods. At the appeal hearing we were informed that the claim for non-economic loss was discontinued insofar as it related to physical or psychological injury but was maintained insofar as it concerned a claim for loss of quiet enjoyment.
3. Accordingly, the tenants' claim is for compensation being the expense incurred in finding temporary accommodation pending entry into a new residential tenancy agreement in different premises, less the amount that was payable under the residential tenancy agreement which had been terminated for breach. In addition the tenants claim the costs of moving and storing goods and damages for loss of quiet enjoyment.
4. In considering the tenants' claim for compensation the Tribunal was required by s 191(2) to consider the actions taken, or that should reasonably have been taken, by the tenants and the landlord for the security of the premises.
5. The Decision under appeal is an internally appealable decision and under s 80 of the Act the appellant has a right of appeal on any question of law and with leave on other grounds. Clause 12 of Schedule 4 of the Act provides that leave may only be given in the circumstances described in that clause. In this case the grounds of appeal are all grounds falling within the category of questions of law. Leave is therefore not required.
6. In this case the parties do not seek to disturb the finding made by the Tribunal that the tenancy was terminated by reason of the landlord's breach of s 70 of the RTA. The question for our decision concerns whether the Decision refusing compensation was in error or whether cl 12 of Sch 4 is relevant.
7. The assessment of damages for a breach of an agreement involves applying the well-established principles in Hadley v Baxendale (1854) 9 Exch 341. That means damages (ie. compensation) can be recovered if the loss results from the usual course of events. Damages can also be recovered if the loss was in the contemplation of both parties at the time the contract was entered into. In this case it is our view that the reasonable cost of alternative accommodation incurred by the tenants pending entry in to a fresh residential tenancy agreement are costs which flow in the usual course of events from the landlord's breach.
8. However, in this case the tenants were relieved of the obligation to pay rent under the tenancy agreement which was terminated and therefore had they been able to obtain alternative accommodation at the same or, at a lower rent, they would not have suffered any loss as a result of the breach, other than the costs associated with moving their belongings and the possible loss of quiet enjoyment.
9. It follows that if the tenants are able to establish that they were put to additional costs (i.e. rent or expense in excess of the daily or weekly amount under the terminated agreement) and if that cost was reasonable then the tenants would be able to cover the excess costs.
10. It is well established that damages cannot be recovered for any loss which could have been prevented by reasonable mitigation action of the injured party (para 23.41 Cheshire and Fifoot 9th Edition). A loss which is attributable to the failure to mitigate can be regarded as an aspect of causation (Castle Constructions Pty Ltd v Fekula Pty Ltd [2006] NSWCA 133 at [21]).
11. In other words, it is necessary for the tenants to establish that the expense they incurred was caused by the landlord's breach and to the extent that they failed to mitigate and that failure (and the additional expense they incurred) resulted in a level of expense not caused by the breach, such expense was not causative of their loss.
12. Here the tenants had provided evidence of the expense incurred in obtaining alternative accommodation. The standard of that accommodation bore no resemblance to the premises vacated. The premises to which the tenants (or one of them) moved appear to have offered some services not available at the premises vacated. These services include meals provided by room service, internet access, access to golf facilities, access to massage and associated services including spa treatments. Even if the tenants did not utilise such offerings they paid for accommodation which enable such offerings to be purchased. In our view that expense was incurred by the decision of the tenants to move into accommodation far superior to the premises which had been vacated. The expense thus incurred was not incurred as a result of the landlord's breach, and there is no evidence that the tenants had no other choice of accommodation. That does not appear to have been the case as the tenants' evidence includes typical motel tariffs in the locality of the subject premises.
13. The tenants submitted that because the landlord had not discharged the onus of proof to show that the tenants had not acted reasonably the Tribunal should accept the loss they incurred as appropriate compensation flowing from the breach. In our view this submission must be rejected. The expense incurred must flow naturally from the breach. If that appears to be the case then the onus may shift to the other party as stated by Giles JA in Karacominakis v Big Country Developments Pty Ltd.
14. The approach described above has support from Priestley JA in TCN Channel 9 v Hayden Enterprises ((1989) 16 NSWLR 130 at 162) where his Honour said that a "plaintiff must prove what damage it is that flowed from the defendant's breach, and that, if it appears that the plaintiff is seeking to include in his damages losses which he would not have incurred had he acted reasonably in the ordinary course of business following the breach of contract then he has not shown that such "losses" were a result of the breach; hence, he is not entitled to make the defendant liable for them".
15. Having regard to the above principles our view is that the tenants will have poor prospects of recovering the expenses actually incurred in obtaining temporary accommodation (less, of course, the amounts they would have had to pay to the landlord). However, they may be able to establish that they suffered a loss in requiring temporary accommodation more akin to the standard of the accommodation of the subject premises.
16. In addition, the tenants may have other heads of compensation which may be meritorious. They appear to include claims for storage of goods and their removal to new premises, and electricity disconnection costs. The tenants submitted that they had put forward evidence at the hearing of the costs of the temporary accommodation in the form of typical motel tariffs and, in our view, an assessment of compensation having regard to such alternative expense may have been appropriate.
17. In our view the Decision below fell into error by finding that the tenants had failed to mitigate their loss by failing to spend money to make the premises secure. Where, as here, the tenancy has been lawfully terminated, the appropriate analysis, after a finding of lawful termination by the tenant, was to consider what losses reasonably flowed from the landlord's breach or whether the losses actually incurred were reasonably incurred.
18. Turning back to s191 of the RTA, that section requires the Tribunal to consider, for the purposes of determining whether compensation is payable, the actions taken, or that should reasonably have been taken by the tenant and the landlord for the security of the premises. In our view where there has been a finding that the tenant lawfully terminated the tenancy for breach by the landlord of the obligation to provide premises that are reasonably secure, the actions which s 191 require the Tribunal to consider do not include actions as to whether the tenant should have spent his or her own money making the premises secure. Once the tenancy has been held to have been lawfully terminated, s191 has no role to play because the tenant cannot be held to have any obligation to take action "for the security of the premises" (to use the language of s191).
19. As stated in our view the Decision was in error in finding that the tenants failed to mitigate by not incurring expense in securing the premises. That was not an approach which was appropriate given the finding that the tenants had lawfully terminated the tenancy.

Section 41 of the Act - extension of time

1. Previous Appeal Panel decisions (eg. Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22) have described the matters for consideration when considering whether time ought to be extended.
2. One consideration is the length of the delay. Here the appeal was lodged on 2 October 2015 and the last day for filing was 3 September 2015. This arises from the operation of rl 25(4)(b) of the Rules. Therefore the delay was short - approximately one month.
3. The second consideration is the reason for the delay. The tenants state that the matter is reasonably complex and that they (or one of them) needed legal assistance and advice. Given that one tenant stated at the appeal hearing that he is a law teacher and the other appears to be a solicitor, the reason given seems unpersuasive.
4. The third matter for consideration is the tenants' prospect for success. In our view, as stated above, there has been an error made on a question of law and the tenants are entitled to have this appeal upheld.
5. A further consideration is any prejudice to the landlord. The landlord has not been prejudiced in a practical sense by the appeal because the landlord has participated in the appeal only to a very limited extend. However obviously the landlord will be prejudiced by a decision which upholds the appeal.
6. A further consideration is whether strict compliance with the Rules would work an injustice.
7. In our view, given our decision that the Decision contains an error of law in the approach to the assessment of compensation, there would be an injustice if the tenants were required to comply strictly with the Rules. Further given the relatively short delay (albeit explained unpersuasively) justice requires that we extend the time for filing the appeal.

Orders

1. Accordingly, the orders which the Appeal Panel must make are: 1. Terence John Perkins is joined to these proceedings as an appellant; 2. Leave is granted under s 41 of the Act for the appeal to be filed on 2 October 2015; 3. The appeal is upheld insofar as the decision the subject of the appeal determined the compensation to which the appellants may be entitled; 4. Proceedings RT 15/34873 are to be remitted for a rehearing before the Tribunal as previously constituted for the limited purpose of assessing the appellants' entitlement to compensation; 5. The parties are at liberty to adduce further evidence limited to the assessment of compensation pursuant to any directions given by the Member hearing the proceedings on remittal.

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: 16 March 2016