Raats v Zein

NCAT Consumer and Commercial|2016-08-10|Before: Palmhide P

REASONS FOR DECISION

This is an application by Rayno and Monique Raats (the tenants) for an Order from the Tribunal pursuant to sections 187 and 190 of the Residential Tenancies Act 2010 (RT Act) that will require Mohsen Zein (the landlord) to pay them the sum of $1,763.08 in compensation for the costs they incurred in moving from residential premises they rented from the landlord which they claim were uninhabitable from the commencement of the tenancy due to a dangerous mould infestation. The tenants also claim compensation for the costs of this application to the Tribunal. This application was made to the Tribunal on 28 July 2016 (the application).
For reasons that are set out following, the Tribunal has determined that the tenants are entitled to compensation for the costs they incurred in relocating from the residential premises because those premises were uninhabitable from the commencement of the tenancy due to a dangerous mould infestation. This constitutes a breach by the landlord of clause 18.1 of the Residential Tenancy Agreement (RTA) and section 52(1) of the RT Act which required the landlord, respectively, to 'make sure that the residential premises are reasonable clean and fit to live in' at the commencement of the tenancy, and to 'provide the residential premises in a reasonable state of cleanliness and fit for habitation by the tenant'. The tenants are not entitled to claim compensation for the costs of their application to the Tribunal because this is a legal cost, being a cost incidental to the proceedings, and the ordinary rule prescribed in section 60 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) is that each party is to pay its own costs of a proceeding.

Evidence before the Tribunal

Both Mr Rayno and Ms Monique Raats gave evidence under oath. They indicated that they relied upon the contents of their application and the documentary evidence submitted by the Managing Agent on behalf of the landlord, and in particular the Expert Report prepared by Mould Cleaning Australia dated 11 July 2016.
Ms Suzanne Stone gave oral evidence under oath. She submitted into evidence a copy of the Managing Agency Agreement with the landlord which evidenced her authority to act on behalf of the landlord in these proceedings, a copy of the RTA, a copy of the Incoming Condition Report for the residential premises, copies of email correspondence between the Managing Agent and the Tenants concerning the condition of the residential premises, a series of photographs of the condition of the residential premises, and a copy of an Expert Report prepared by Mould Cleaning Australia dated 11 July 2016.

Material facts

The dispute arises from a RTA made between the parties on 1 July 2016. The RTA was for a fixed term of twelve months which commenced on 2 July 2016 and it was expressed to end on 1 July 2017. The rent payable under the agreement was $610.00 per week. The tenants provided the landlord with a rental bond of $2,440.00 which was lodged with Rental Bond Services.
Immediately prior to the residential premises being offered for rent, the landlord arranged for the interior repainting of parts of the premises.
When the residential premises was offered to the market for rent there was no mould or damp was evident in the residential premises.
On or about 1 July 2016, the Managing Agent completed an Incoming Condition Report for the residential premises. It was provided to the tenants for their comment on that day or shortly thereafter. The Incoming Condition Report notes several issues with the condition of the residential premises. However, it does not note the presence of any mould or damp.
On or about 6 July 2016 the tenants returned the Incoming Condition Report to the Managing Agent with their comments annotated. The tenants note a number of additional issues with the condition of the residential premises. In particular they note mould in the linen cupboard, water damage on the walls and skirtings of bedroom 3, mould on the wall and skirting boards of bedroom 3, mould in the kitchen cupboards beneath the sink, mould in the air conditioning, mould on the door frame of the lounge room, water damage to the skirting board outside the laundry, and mould to the shower screen in the first bedroom en-suite.
By email dated 6 July 2016, Mr Raats also further notified the Managing Agent of a damp and mould problem in bedroom 3. That email reads in part as follows: Hi Suzie/Sarah I want to bring to your attention the following items that needs to be rectified as soon as possible as it is affecting our use of the property: Dampness smell from the 3rd bedroom, bathroom and laundry. Upon closer inspection it seems that there are signs of rising dampness in the skirting boards or other water damage. The dampness has had an immediate detrimental effect on my 9 month old as he is showing signs of a severe allergic reaction since Monday afternoon and Tuesday morning after sleeping in the room. We have temporarily moved him out of the room as a precaution for now. Please see below pictures of the swollen skirting boards: … Attached to this email are six photographs of skirting boards and door frames which are misshapen apparently due to moisture ingress and which show evidence of active mould growth.
In the same email, Mr Raats raises six other issues about the condition of the residential premises when the tenants received it. The tenants do not rely upon these issues as entitling them to terminate the RTA, and to seek compensation for the consequential costs associated with doing so. The tenants conceded that in relation to these matters, were they able to prove that the landlord breached the RTA by handing them possession of the residential premises in the condition described, the appropriate remedy would likely have been orders for repairs and maintenance of the residential premises. These issues would have been unlikely to justify early termination of the tenancy. They are therefore not considered further here.
On 6 July 2016, Ms Stone replied to Mr Raats' email on behalf of the Managing Agent requesting a time be arranged for her to attend the residential premises to inspect the damp issue. It appears she attended the residential premises later that day to carry out an inspection. In response to this email and to Ms Stone's visit, Mr Raats sent two further emails dated both dated 6 July 2016 attaching photographs of mould growth behind the 3rd bedroom door and under (or through) the carpet of the 3rd bedroom.
On 7 July 2016, Mr Raats again emailed Ms Stone to terminate the tenancy. That email reads in part: … We here by give notice to terminate our residential tenancy agreement for [residential premises] with immediate effect. We will be vacating the property as soon as practical as the property hasn't been provided to us in a reasonable state of cleanliness when we moved in and we have the following health and safety concerns: Significant signs of mould and rising damp as discussed yesterday afternoon. I have also discovered mould in the following areas after your visit: - significant mould in the air conditioner filter in the living room - mould on outside ceiling above the front door - mould around light on the balcony - mould growing on top of the porch sliding door - mould in linen cupboard - various other signs of mould across the property. This poses a health risk to us as well as a risk of infecting our possessions. … Attached to this email were nine additional photographs of mould in the air conditioning unit and at other locations about the residential premises.
As a result of her attendance at the residential premises on 6 July 2016, Ms Stone arranged for a mould specialist to attend the residential premises to carry out an inspection and provide advice. That inspection was carried out by Mould Cleaning Australia on 11 July 2016, and the report provided as a result of the inspection is in evidence. Its findings are summarised in the extracts set out below: … Upon inspection of the [residential premises], it was evident that the mould growth was present due to a previous water intrusion from the wet area into bedroom three and hallway. Also it was noted that dew point was present throughout the property. Cause of the Mould Growth Previous Water Leak It was noticed in the property that there was a previous water leak from the wet areas into bedroom three and hallway. Any water event causes excess moisture and if the moisture is not correctly dried after the event occurs the excess moisture remains. In this particular case, no excess moisture was detected. Dew Point Dew point is the temperature given to a parcel of humid air which is cooled causing water vapour to condense into water, creating ideal conditions for mould growth. The way that mould reproduces is by creating tiny spores that are present within the air. These air borne mould spores occur at natural levels in the outdoor environment. Once mould starts growing in an indoor environment these mould spores become concentrated, landing on furniture, clothing and other items. Once mould spores become concentrated in an indoor environment it can cause mould growth to start, often with minimal moisture and in places where it would not normally take hold …. The initial inspection found that the property currently has visible mould in multiple areas which will require micro cleaning and the fogging treatment of entire premises to remove mould.
The representative of Mould Cleaning Australia recommend remediation works be carried out to remove the mould and prevent or inhibit is reoccurrence. A scope of works and quotation for this work is provided.
Mr Raats has had an allergic sensitivity to mould since childhood. Both children of the tenants also appear to have this sensitivity. Mr Raats and both children experienced respiratory disruption and discomfort immediately after moving into the residential premises up until vacant possession was given, which Mr and Mrs Raats both contend was due to mould spores and odour. The illness experienced by the tenants' children meant that they are unable to inhabit bedroom 3 where the mould growth was particularly severe.
The tenants gave vacant possession of the residential premises to the landlord on 14 July 2016. The landlord waived any right to claim to a break lease fee associated with the tenants' early termination of the RTA. Other issues arising from the early termination of the tenancy related to the payment of rent in advance, the condition in which the tenants left the residential premises, and the rental bond were also resolved between the parties with one exception.
That exception is a dispute between the parties about the landlord's liability to pay the tenants their costs of removal from the residential premises. These costs are constituted by removalist costs in the amount of $1,741.00 and the costs of a special metre reading the tenants obtained from Energy Australia to determine their liability for electricity charges at the end of the tenancy in the amount of $22.08. It is this dispute that comes before the Tribunal for determination.

Applicable law

Section 187(1)(d) of the RT Act provides that the Tribunal may make an order for compensation. However, in order to enliven the Tribunal's power to do so, in the circumstances of this case, the tenants must establish with evidence that the landlord breached a term of a RTA causing them damage and loss for which they are entitled to be compensated. In other words it falls to the tenants, first, to establish a breach of an obligation by the landlord, and once that is proved, to then prove the damage and loss that is a consequence of the breach.
Section 190 of the RT Act confers jurisdiction on the Tribunal to determine disputes involving an alleged breach of a RTA by a tenant or landlord. Such claims may be made to the Tribunal during or after the end of an RTA and whether or not a termination notice has been given or a termination order made. However, such a claim must be made within the time period allowed, which is 3 months from the date the party asserting the breach becomes aware of it (unless time is extended pursuant to section 41 of the NCAT Act) (Regulation 22(9) of the Residential Tenancies Regulation 2010), and the claim is limited by the prescribed amount of the Tribunal's monetary jurisdiction. No issue arises in relation to these limitations in this case.
For a party to be entitled to compensation for damage and loss based on breach of a contract, such as an RTA, they must prove that the loss claimed results from the usual course of events, or arises naturally from, such a breach, or that it was in the reasonable contemplation of the parties at the time the contract was made that such a loss would be incurred if the contract was breached in the manner alleged (in other words, the loss must have been foreseeable): Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341.
In this case it falls to the tenants to prove that the landlord breached section 52(1) of the RT Act, which is incorporated into clause 18.1 of the RTA between the parties. Section 52(1) is made a term of every RTA by operation of section 52(3) of the RT Act. It provides: 52 Landlord's general obligation for residential premises (1) A landlord must provide the residential premises in a reasonable state of cleanliness and fit for habitation by the tenant.
In its prior consideration of the scope and content of the obligation imposed upon a landlord by section 52(1) of the RTA the Tribunal and its predecessors have developed two 'tests' for the habitability of residential premises. These tests are the "risk of injury test" and the "reasonable comfort." The application of these tests in the circumstances of this case are discussed following.
Section 63 of the RT Act sets out (further) general obligations on landlords in respect of residential premises. Section 63 is also a term of every RTA by operation of section 63(3) of the RT Act. It relevantly 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. …
Section 63 of the RT Act is relevant in this case because the Managing Agent contends that there was no breach of the RTA by the landlord; that he acted immediately to fulfil his obligation to maintain the premises in a reasonable state of repair upon being notified of the mould growth. If there was no breach of the RTA, any claim for compensation based upon such an alleged breach must fail. This will require the Tribunal to consider the interaction and distinctions to be drawn between sections 52 and 63 of the RT Act.

Consideration

The evidence establishes to the Tribunal's comfortable satisfaction that there was a serious and extensive mould infestation at the residential premises when the tenants took possession of it on 2 July 2016. The Tribunal is also satisfied on the evidence that this mould infestation continued to escalate over the first week of the tenancy.
There is no dispute between the parties, and the Tribunal also accepts based upon Mr and Mrs Raats oral evidence, that Mr Raats and the tenants' two young children each have an allergic sensitivity to mould and that they each experienced respiratory disruption and discomfort immediately upon moving into the residential premises and that this continued until vacant possession was given.
The evidence also establishes that the Managing Agent and landlord responded immediately when the tenants notified the Managing Agent of the presence of mould at the residential premises. In fact, Ms Stone attended the residential premises to inspect the tenants' report of damp and mould on the day that this was reported to her. Within a week a mould expert had been retained and had inspected the residential premises, and provided recommendations as to how the mould problem could be rectified. The Managing Agent and landlord clearly took the tenants' concerns about the mould seriously. I accept without hesitation Ms Stone's evidence that the landlord was prepared to act immediately on the recommendations of the mould expert to remove the mould and prevent its reoccurrence.
On this basis there could be no sustainable argument that the landlord failed to reasonably maintain the residential premises when requested to do so by the tenant. If that were the relevant test to be applied in this case, the tenants claim for compensation could not succeed as no breach of this obligation by the landlord emerges from the evidence.
However, that is not the test to be applied in this case. The obligation of a landlord which is engaged in this case is the obligation to "provide" the residential premises to the tenants "in a reasonable state of cleanliness and fit for habitation" (section 52(1) of the RT Act) and in a "reasonable state of repair" (section 63(1) of the RTA). In other words, these obligations must be fulfilled at the time the landlord passed possession of the residential premises to the tenants. The obligation is expressed in absolute terms; that is, the landlord "must" fulfil these obligations. A failure to do so will therefore constitute a breach of the RTA.
The key question for the Tribunal to determine is therefore whether the premises were reasonably clean and in a reasonable state of repair, such that they were fit for habitation, when possession of them passed from the landlord to the tenants. As has been noted above, the question of whether or not residential premises are "habitable" turns on whether "might be used and dwelt in not only with safety but also with reasonable comfort" by the tenants (Proudfoot v Hart (1890) 25 QBD 420, judged by contemporary standards: Menashi v Ly [1997] NSWRT 162.
It is a serious matter for the Tribunal to find that residential premises are uninhabitable and such a conclusion should not be drawn lightly: De Soleil v Palmhide P/L [2010] NSWCTTT 464.
In this case the evidence establishes that the mould infestation of the residential premises was extensive at the commencement of the tenancy and that it constituted a serious health risk to Mr Raats and to the tenants' children. In this respect, the Tribunal is satisfied that there was an unreasonable risk that sickness would result from the ordinary use of the premises and that the residential premises were not fit for habitation on this basis: Hampel v South Australian Housing Trust [2007] SADC 64; Roberts v Bell [2000] NSWRT 6; Stuart v Colley [2005] NSWCTTT 520. I do not draw this conclusion lightly; the evidence to this effect is compelling.
The evidence also establishes that the tenants were unable to occupy bedroom 3, a designated child's bedroom, from the outset of the tenancy due to the risk of respiratory difficulty and infection, and that the mould growth was unsightly and gave off a foul odour. I am satisfied that in these respects the mould infestation constituted an unreasonable interference with the comfort of the tenants judged by contemporary standards. Again, I do not draw this conclusion lightly; the evidence to this effect is compelling.
For the foregoing reasons, I am satisfied that the landlord breached the RTA in failing to provide the residential premises to the tenants in a state fit for habitation. That breach is inherently a very serious breach of the RTA and one that entitled the tenants to immediately terminate the RTA and vacate the residential premises.
The costs the tenants incurred in vacating the premises, being their removalist costs, and the costs of obtaining an electricity metre reading to determine their liability for electricity charges up to the date of vacant possession, naturally arise from the landlord's breach of the RTA. Had the premises been habitable, the tenants would not have incurred these costs at least until after the end of the fixed term of the RTA on 1 July 2017. As it was, they had to bear the expense of moving into and out of the residential premises in short succession.
The Tribunal is therefore satisfied that the tenants are entitled to be compensated by the landlord for the reasonable costs of moving out of the residential premises. In this respect there is in evidence before the Tribunal a copy of a paid invoice rendered by a removalist for the costs of removal in the amount of $1,741.00 and a copy of an Energy Australia bill which sets out the cost of a special metre reading in the amount of $22.08. Ms Stone opposes any Order for compensation being made, but does not cavil with costs claimed by the tenant on the basis that they are unreasonable sums for the items claimed. The Tribunal is also satisfied that the amounts claimed are reasonable.
The tenants also claim compensation from the landlord for the costs of their application to the Tribunal for determination of this dispute. The application fee is a cost incidental to a proceeding before the Tribunal. The ordinary rule, prescribed in section 60 of the NCAT Act, is that each party must pay its own costs of a proceeding in the Tribunal absent special circumstances. In this case no special circumstances are disclosed. The tenants are therefore not entitled to claim compensation for the cost of the application to the Tribunal.

Conclusion

For the foregoing reasons, the Tribunal is satisfied that the landlord breached his obligation under clause 18.1 of the RTA and section 52(1) of the RTA to give possession of the residential premises to the tenants in a state fit for habitation. This was a very serious breach of the RTA which reasonably entitled the tenants to terminate the RTA and relocate from the residential premises. The costs the tenants incurred in doing so arise naturally and are a reasonably foreseeable consequence of the breach of the RTA by the landlord. They are therefore entitled to be compensated by the landlord for these costs. The removal costs claimed by the tenants are reasonable (leaving aside the application fee). The Tribunal therefore orders the landlord to pay compensation the tenants for these costs in the amount of 1,763.08 immediately. P French General Member Civil and Administrative Tribunal of New South Wales 7 September 2016 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

Amendments 14 October 2016 - new case replaced cmn not in use 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: 14 October 2016

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