Rathod v Liu

[2019] NSWCATAP 80

NCAT Appeal Panel|2018-10-24

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NCAT Appeal Panel

Decision date

2018-10-24

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Judgment (20 paragraphs)

[1]

Introduction

The appellant, Pran Rathod, is a former tenant of residential premises, owned by the respondent landlord, Helen Liu. Mr Rathod seeks to appeal the decision of the Tribunal, in the Consumer and Commercial Division, that he pay Ms Liu 'the sum of $3,300.00 immediately - being break lease fee for the early termination of tenancy'.
The decision of the Tribunal is an internally appealable decision and an appeal lies to the Appeal Panel from that decision as of right on a question of law, or with the leave of the Appeal Panel on any other grounds: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), ss 32 and 80(1) and (2)(b).
As this is an appeal from a decision of the Tribunal in the Consumer and Commercial Division, cl 12 of Sch 4 of the NCAT Act applies and the Appeal Panel may only grant leave to appeal where it is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
For the reasons that follow we have allowed the appeal in regard to Ms Liu's claim (RT 18/24796) and set aside the orders made by the Tribunal in that claim. We have also made an order remitting those proceedings for reconsideration by the Tribunal in accordance with these reasons for decision and without further evidence to determine the following matters: 1. Was the tenancy terminated by consent of the landlord or her agent? 2. If it was not terminated by consent, was the tenancy abandoned by Mr Rathod? 3. If the tenancy was abandoned should the Tribunal exercise its discretion to impose a break lease fee?

[2]

Background

Mr Rathod inspected the premises on 14 April 2018. The previous tenants were still in occupation of the premises at that time.
Mr Rathod and Ms Liu, through her agent at that time, entered into a residential tenancy agreement (the lease), on 4 May 2018, in regard to the premises. The term of the lease was 26 weeks and ended on 11 November 2018. The weekly rent payable by Mr Rathod was $550.00 per week.
Clause 41 of that lease relevantly provided as follows: 41 The tenant agrees that, if the tenant ends the residential tenancy agreement before the end of the fixed term of the agreement, the tenant must pay a break fee of the following amount: 41.1 if the fixed term is for three years or less, six weeks rent if less than half of the term has expired or four weeks rent in any other case, or 41.2 if that fixed term is for more than three years, $ this clause does not apply if the tenant terminates the residential tenancy agreement early for a reason that is permitted under the Residential Tenancies Act 2010. Note. Permitted reasons for early termination include destruction of residential premises, breach of the agreement by the landlord and an offer of social housing or a place in an aged care facility. Also refer to clauses 52, 53, 54 and 55 for termination of this agreement. Section 107 of the Residential Tenancies Act 2010 regulates the rights of the landlord and tenant under this clause. The landlord agrees that the compensation payable by the tenant for ending the residential tenancy agreement before the end of a fixed term is limited to the amount specified in clause 41 and any occupation fee payable under the Residential Tenancies Act 2010 for goods left on the residential premises.
On 21 May 2018, Mr Rathod sent by email, to Ms Liu's agent, a Notice to vacate, in which he said: In accordance with my earlier advices, I hereby give notice to vacate the above premises on 1 June 2018 on the grounds of breach of Clause 18 of the Residential Tenancy Agreement, the known breaches which your office have been continually informed of and are very well aware. I propose to seek, if required by NCAT, orders from it under Section 103 and Section 109. …
On 23 May 2018, Mr Rathod lodged an application (RT 18/23373) in the Consumer and Commercial Division of the Tribunal seeking a number of orders including an order for termination under ss 103 and 109 of the Residential Tenancies Act 2010 (NSW) (RT Act).
Mr Rathod vacated the premises on 1 June 2018. On the same day, Ms Liu lodged an application (RT 18/24796) in the Consumer and Commercial Division seeking an order under s 187(1)(c) of the RT Act for the payment of $3,300. Ms Liu explained that the reasons for seeking the order was: Tenant vacated and refuses to pay the break fee of 6 weeks rent for not satisfying the lease agreement term …
After Ms Liu lodged her application, Mr Rathod lodged a further application seeking an order that his bond be repaid to him (RT 18/26114).
On 6 August 2018, the Tribunal heard and determined all three applications. As we have noted in paragraph 1 above, in regard to Ms Liu's application (RT 18/24796), the Tribunal made an order that Mr Rathod pay Ms Liu $3,300.00 being the break lease fee for early termination.
In regard to Mr Rathod's initial application, RT 18/23373, the Tribunal made the following order: 1. The application is dismissed because the issues it raises are properly dealt with in another application before the Tribunal.
In regard to Mr Rathod's further application, RT 18/26114, the Tribunal made the following order: 1. By consent, the application is dismissed because the issues it raises are properly dealt with in another application of the Tribunal.
Mr Rathod lodged his appeal on 9 August 2018.

[5]

Decision of the Tribunal

In its reasons for decision, the Tribunal noted that the application of Ms Liu (RT 18/24796) was 'one of a group of applications touching a tenancy of the premises in … Ashfield' and that Ms Liu and Mr Rathod both appeared in person at the hearing that day.
The Tribunal noted that in her application Ms Liu was seeking a break fee as Mr Rathod had vacated the premises two weeks after taking possession. In finding that Ms Liu was entitled to the 'break fee', the Tribunal said the following in regard to Mr Rathod's claim: 1. it was satisfied from the evidence that Mr Rathod had inspected the property before taking possession and that after he had moved in he had chased the managing agent for the ingoing inspection report; 2. Mr Rathod was subsequently provided with the condition report, which noted that the carpets were in poor condition and that there were some taps leaking; and 3. there was some email correspondence in which Mr Rathod complained to Ms Liu's agent about the carpets and a reference to negotiations with Ms Liu about repair or replacement. The Tribunal went on to say: I pointed out to Mr Rathod that to terminate the tenancy he needed to give the landlord a proper notice identifying the breach of the agreement and giving a date not less than 14 days in the future for vacant possession. He relied on a letter on file which did not comply with the time limit imposed by the legislation. He vacated the premises, Ms Liu demanded the 'break lease fee' of six weeks rent being some $3300. I put it to Mr Rathod that he had inspected the premises and was in difficulty if he now wanted to terminate the tenancy. His documents contain some photos of the carpet among other things but none of the items identified would have made the premises uninhabitable which could have provided another ground for termination is established. In his defence Mr Rathod said that the previous tenant was still packing up when he inspected and the state of the carpet was not clear to him. However it does seem true that he could have carried out a more thorough inspection and that he did not reject the premises immediately. From the evidence put to me I was satisfied that the proximate cause of the dispute was that the tenant had conducted a cursory inspection only and was bound by tenancy (the) agreement when he signed it. The landlord was entitled to her 'break fee'.

[8]

Termination of a residential tenancy agreement generally

Section 81 of the RT Act sets out the circumstances in which a residential tenancy agreement is terminated. That section relevantly provides: 81 Circumstances of termination of residential tenancies (1) Termination only as set out in Act A residential tenancy agreement terminates only in the circumstances set out in this Act. (2) Termination by notice and vacant possession A residential tenancy agreement terminates if a landlord or tenant gives a termination notice in accordance with this Act and the tenant gives vacant possession of the residential premises. (3) Termination by order of Tribunal A residential tenancy agreement terminates if the Tribunal makes an order terminating the agreement under this Act. (4) Other legal reasons for termination A residential tenancy agreement terminates if any of the following occurs: (a) … … (d) the tenant abandons the residential premises, (e) the tenant gives up possession of the residential premises with the landlord's consent, whether or not that consent is subsequently withdrawn, … (g) disclaimer occurs (such as when the tenant's repudiation of the tenancy is accepted by the landlord)
Section 82 of the RT Act sets out what is to be contained in a termination notice: 82 Termination notices (1) A termination notice must set out the following matters: (a) the residential premises concerned, (b) the day on which the residential tenancy agreement is terminated and by which vacant possession of the premises is to be given, (c) if the notice is not given under section 84, 85, 96 or 97, the ground for the notice, (d) any other matters prescribed by the regulations. (2) A termination notice must be in writing and be signed by the party giving the notice or the party's agent. (3) A termination notice for a periodic agreement may specify a day other than the last day of a period for the payment of rent as the termination date.
Section 109 of the RT Act makes provision for a tenant or a landlord to give notice of termination to the other party where the residential tenancy agreement is frustrated thorough an event, other than a breach of the agreement, that destroys or makes the premises uninhabitable. We have dealt with this section in more detail below.
Section 111 of the RT Act makes provision for a landlord or a tenant to apply to the Tribunal in relation to a dispute over a termination notice. That section is in the following terms: 111 Disputes about termination (1) A landlord or tenant may apply to the Tribunal for an order in relation to a dispute about a termination notice. (2) The Tribunal may, on application by a landlord or tenant, declare that a termination notice was or was not given in accordance with this Part. (3) Subsection (2) does not limit any other order the Tribunal may make on an application under this section.
Section 113 of the RT Act gives the Tribunal a discretion to make a termination order even though there is a defect in the relevant termination order. That section is in the following terms: 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.
In this case, Mr Rathod did not rely on s 111, or s 113 in his application before the Tribunal.

[9]

Termination of a tenancy agreement by a tenant

Section 98 of the RT Act makes provision for a tenant to give a termination notice on the ground that the landlord has breached the residential tenancy agreement. That section is in the following terms: 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).
Section 103 of the RT Act makes provision for the Tribunal to make a termination order on the ground of the landlord's breach, on the application of a tenant and without the need to issue a notice. That section is in the following terms: 103 Breach of agreement - termination by Tribunal (1) The Tribunal may, on application by a tenant, make a termination order if it is satisfied that: (a) the landlord has breached the residential tenancy agreement, and (b) the breach is, in the circumstances of the case, sufficient to justify termination of the agreement. (2) In considering the circumstances of the case, the Tribunal may consider (but is not limited to considering) the following: (a) the nature of the breach, (b) any previous breaches, (c) any steps taken by the landlord to remedy the breach, (d) any steps taken by the tenant about the breach, (e) the previous history of the tenancy. (3) The Tribunal may refuse to make a termination order if it is satisfied that the landlord has remedied the breach. (4) A tenant may make an application under this section without giving the landlord a termination notice. (5) The Tribunal may make a termination order under this section that takes effect before the end of the fixed term if the residential tenancy agreement is a fixed term agreement.
In this case, Mr Rathod also contended that the premises were uninhabitable and sought a termination order under s 109 of the RT Act.

[10]

Abandonment

Section 107 of the RT Act makes provision for a landlord's remedies where a tenant 'abandons' the residential premises. That section relevantly provides: 107 Landlord's remedies on abandonment (1) The Tribunal may, on application by a landlord, order a tenant to pay compensation to the landlord for any loss (including loss of rent) caused by the abandonment of the residential premises by the tenant. (2) The landlord must take all reasonable steps to mitigate the loss and is not entitled to compensation for any loss that could have been avoided by taking those steps. This subsection does not apply in the case of a fixed term agreement that provides for the payment of a break fee. (3) The compensation payable by a tenant under this section in respect of a fixed term agreement is the amount of the applicable break fee for the tenancy, if the agreement provides for the payment of a break fee. (4) The break fee for a fixed term agreement for a fixed term of not more than 3 years is: (a) an amount equal to 6 weeks rent if less than half of the fixed term had expired when the premises were abandoned, or (b) an amount equal to 4 weeks rent in any other case. (5) The break fee for a fixed term agreement for a fixed term of more than 3 years is the amount set out in subsection (4) or, if an amount is specified in the agreement, the amount specified. An agreement must not specify a break fee exceeding the amount (if any) specified by the regulations. (6) The amount of any money paid by a tenant to a landlord on terminating a fixed term agreement before the end of the fixed term or before otherwise abandoning the premises (other than money previously due to the landlord under the residential tenancy agreement) is to be deducted from any amount payable to the landlord under this section. (7) This section does not prevent a landlord from obtaining an occupation fee under Division 2 of Part 6 for goods left on the residential premises.
Section 106 of the RT Act makes provision for a landlord to apply to the Tribunal for an order declaring that the tenant had abandoned the premises on a specified day.

[13]

The 21 May 2018 Termination Notice of Mr Rathod
Mr Rathod contends that his application to the Tribunal for an order terminating the lease agreement had been validly made. In this regard, Mr Rathod said: 1. in his Notice to vacate he had expressly stated: 1. the grounds on which the Notice had been issued, namely a breach of clause 18 of the lease agreement; and 2. if required, he would be seeking orders from the Tribunal under ss 103 and 109 of the RT Act; and 1. Ms Liu had failed to lodge her application within the time prescribed in clause 22 of the Residential Tenancies Regulation 2010 (NSW) (RT Regs).
We accept that, in his initial application lodged with the Tribunal, Mr Rathod had sought orders along the lines set out in (1) above. Ms Liu did not dispute that he pressed for these orders before the Tribunal. We accept that in its reasons for decision, the Tribunal did not deal with each and every contention Mr Rathod made. However, this does not mean the Tribunal erred on a question of law in regard to Mr Rathod's claim or that its decision in this regard was not fair and equitable and against the weight of evidence.
Section 98(1) makes provision for a tenant to issue a termination notice to the landlord on grounds of a breach of the lease agreement by the landlord. Section 98(2) provides that the termination notice 'must' specify a date that is not earlier that 14 days after the day on which the notice is given. In this case, the Tribunal must have had in mind this requirement when it said 'I pointed out to Mr Rathod that to terminate the tenancy he needed to give the landlord a proper notice identifying the breach of the agreement and giving a date not less than 14 days in the future for vacant possession'. The Tribunal went on to find that Mr Rathod's Notice to vacate did not comply with 'the time limit imposed by the legislation'. As a matter of fact this was correct as the termination date specified in Mr Rathod's Notice was only 10 days after the date of that Notice.
On this basis alone, Mr Rathod's Notice of 21 May 2018 failed to comply with the requirements of s 98, and failed to successfully initiate a termination of the lease agreement under s 81(2) of the RT Act. In regard to Mr Rathod's contention that Ms Liu had breached the lease agreement, we note the Tribunal did not accept Mr Rathod's contention and found that the proximate cause of the dispute between him and Ms Liu was that he 'had conducted a cursory inspection only' of the premises; see paragraph 26(3) above. In our opinion, such a finding was open to the Tribunal on the evidence.
Mr Rathod's contention that Ms Liu's application was brought under s 98(4) of the RT Act is misconceived. That subsection, as can be seen from its terms, is intended to give a landlord who is served with a valid notice of termination under 98(1) the opportunity to remedy the alleged breach as specified in the notice and thereby have the notice revoked or set aside. In our opinion, it cannot be inferred from the Tribunal's reasons for decision that it approached Ms Liu's application as having been made under that section.
It is not disputed that subsequent to having lodged his initial application and some two months before the hearing, Mr Rathod had given up possession of the premises and Ms Liu had re-entered possession on or about the same day. Hence, the lease agreement had ended some time prior to the hearing and on this basis there was no agreement on foot for which the Tribunal could make an order under s 103 of the RT Act: see Darren and Julia Patterson v David Dawson [2015] NSWCATAP 31, at [59]
In our view, Mr Rathod's understanding of his application for an order under s 109 of the RT Act is also misconceived. That section applies where the premises become wholly or partly uninhabitable for reasons other than a breach of the agreement. On appeal, Mr Rathod continued to contend that his claim was entirely based on an alleged breach of the lease agreement by Ms Liu. In any event, we note the Tribunal identified this as another ground for termination but found on the basis of photos provided by Mr Rathod, Again, Mr Rathod's claim would in any event have failed on this ground alone and in its reasons for decision the Tribunal noted that none of the items identified in the photos 'would have made the premises uninhabitable'. Accordingly we can find no error in the Tribunal's reasons for decision in this regard.

[14]

Ms Liu was not entitled to the payment of 6 weeks rent
Mr Rathod said he disagreed with the amount awarded to Ms Liu by the Tribunal. He contended that Ms Liu had failed to provide details of her losses, or outlined the steps she took to minimise her losses by re-leasing the premises. Instead, she carried out various repairs, including the removal of the carpets.
As we have noted, where a tenant 'abandons' the residential premises, this is a circumstance of termination prescribed in s 81(4)(d) of the RT Act. A landlord's remedy for abandonment is set out in s 107 of the RT Act. Where the lease agreement between the parties is a fixed term lease agreement and the agreement provides for the payment of a break fee, then s 107(3) RT Act provides that the compensation payable to the landlord for abandonment is the prescribed break fee: see RT Act, s 107(2) which expressly provides that the landlord's obligation to mitigate his/her loss does not apply where the lease is a fixed term agreement that provides for a break fee.
However, in the absence of a finding that Mr Rathod had abandoned the premises an order under s 107 of the RL Act for the payment of a break fee could not be made. As noted by the Appeal Panel in Darren and Julia Patterson v David Dawson, at [54], whether a tenant has abandoned premises is a question of fact and there is no need for the landlord to seek a declaration by the Tribunal in this regard under s 106 of the RT Act before an order under s 107 can be made.
At [56], in Darren and Julia Patterson v David Dawson, the Appeal Panel explained that abandonment occurs when a tenant vacates within the fixed term of a lease without the consent of the landlord or without a Tribunal order. In this case, Mr Rathod did vacate the premises without an order from the Tribunal.
Hence, having found that Mr Rathod's Notice to vacate was an invalid Notice of Termination, the issue the Tribunal was required to determine was whether he vacated the premises without the consent of Ms Liu (i.e. Mr Rathod abandoned the premises), or with the consent of Ms Liu or her agent. In its reasons for decision, the Tribunal did not make a finding in this regard. It only referred to Ms Liu having made a demand for that fee and that she was entitled to it. Why this was the case was not explained.
Clause 41 of the lease agreement between Ms Liu and Mr Rathod made provision for the payment of a break fee if the tenant 'ends the tenancy agreement". However, that clause also provides that clause 41 does not apply if the tenant terminates the residential tenancy agreement early for a reason that is permitted under the RT Act. A valid notice issued by the tenant under s 98 of the RT Act that is not revoked by the Tribunal on an application by the landlord within the prescribed time would be a permitted reason, but as we have noted, in this case there was no valid notice.
Another permitted reason would be where the tenant gives up possession with the consent of the landlord: see RT Act, s 81(4)(e). Again, whether this permitted reason for terminating a lease is a question of fact and if there was consent, then the landlord could not recover the break fee.

[17]

Incorrect comments by the Tribunal
Mr Rathod said he did not agree with the remarks of the Tribunal that he should have inspected the premises thoroughly. Mr Rathod went on to explain the circumstances in which he inspected the premises, which included the premises being occupied by the tenants (4 adults), there was hardly any visible space and the shower had just been used. He said he respected the privacy of the tenants who were there and a condition report was not provided to him until about eight days after he took possession of the premises.
The Tribunal, in its reasons for decision accepted the evidence of Mr Rathod that he had 'conducted a cursory inspection' of the premises because of the presence of the tenants. The Tribunal also accepted that Mr Rathod did not receive a copy of the condition report until after he took possession. The condition report, it was noted, made reference to stains on the carpet and water leaks from the taps.
The Tribunal did not otherwise say Mr Rathod 'should have inspected the premises thoroughly'. What it did say was: 'he could have carried out a more thorough inspection'. We understand the Tribunal to infer that Mr Rathod could have carried out an inspection that was more than a cursory one. We note the Tribunal went on to note, that Mr Rathod did not reject the premises immediately.
In our view, the remarks of the Tribunal were not inconsistent with the evidence before it. Hence we can see no error in the Tribunal's reasons for decision.
In regard to the condition of the carpet, Mr Rathod reiterated that Ms Liu had removed the carpet after he left. He said that the psychological effect of the stained and dirty carpets had a psychological effect on him causing him to sleep in the lounge for three weeks. He also explained that he suffered from sleep apnoea and the 'inhabitable environment' he was in affected his sleeping. He also said that the continuous leakage of the water did not help.
From the material filed in this appeal, we note that Mr Rathod sent an email to Ms Liu's agent on the date he obtained possession of the premises (i.e. 4 May 2018). In that email he said: Thanks for your time yesterday. You mentioned that there were some stains. The stains are so numerous and its just not liveable in that room. May I suggest that the carpet be replaced as I do not wish to live in this environment.
In this email, Mr Rathod made no mention of suffering from sleep apnoea. Nor did he mention this in subsequent emails, or that he slept in the lounge because of the condition of the carpet in the bedrooms, or that the continuous leaking water was a akin to water torture. What is evident from the material before us, which was before the Tribunal, is that Mr Rathod wanted the carpet to be replaced, as it was not in the condition he had anticipated and when Ms Liu refused to pay for the carpet to be replaced, he decided to end the lease agreement. As we have already noted, based on the material before it, it was open to the Tribunal to conclude that the stains on the carpet and the other things mentioned by Mr Rathod were not sufficient to make the premises uninhabitable.
Finally, Mr Rathod contended that there was: 'so much evidence on the files that suggested Ms Liu was guilty of misleading (sic) or being deceptive'. Mr Rathod went on to set out a number of incidents that he alleged to have been examples of misleading and deceptive conduct of Ms Liu. However, Mr Rathod did not identify the misleading and deceptive conduct claim, if any, he had made before the Tribunal. Nor is such a claim identified in his application lodged with the Tribunal in May 2018. On this basis alone, this aspect of Mr Rathod's appeal must also fail.
Many of the incidents identified by Mr Rathod in his written submissions in this appeal relate to the manner in which Ms Liu prosecuted her application before the Tribunal. This was not misleading and deceptive conduct in the relevant sense. The only incident which may have been misleading, or deceptive conduct was the representation in the email he received, on 16 April 2018, from Ms Liu's agent, Jonathan Hong of Harris Tripp.
Section 26(1) of the RT Act prohibits a landlord from making representations that he or she knows to be false, misleading or deceptive. That section is in the following terms: 26 Disclosure of information to tenants generally (1) False representations A landlord or landlord's agent must not induce a tenant to enter into a residential tenancy agreement by any statement, representation or promise that the landlord or agent knows to be false, misleading or deceptive or by knowingly concealing a material fact of a kind prescribed by the regulations.
There is no evidence to indicate that at the time Ms Liu's agent made the representation that he knew it to be false, misleading or deceptive. Furthermore, even if this were established Mr Rathod appears not to have been induced by the representation as he subsequently signed the lease agreement knowing that it was only a six-month lease. Mr Rathod was nevertheless dissatisfied with this change and he communicated this at the time he executed the lease agreement, but this does not amount to a breach of s 26(1) of the RT Act. But this does not constitute a misrepresentation.

Rathod v Liu

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