Reiss & Anor v Helson & 2 Ors

Supreme Court of NSW|2001-04-10

CITATION : Reiss & Anor v Helson & 2 Ors [2001] NSWSC 486 CURRENT JURISDICTION: Administrative Law FILE NUMBER(S) : SC 30002/2001; 30003/2001 HEARING DATE(S) : 10 April 2001 JUDGMENT DATE : 13 June 2001

Howden Phillip Reiss (First Plaintiff)

PARTIES : Francois JM Helsen (First Defendant)

Jennifer L Thommeny (Second Defendant)

Residential Tribunal of New South Wales (Third Defendant) JUDGMENT OF : Master Harrison

LOWER COURT Residential Tribunal of New South Wales JURISDICTION : LOWER COURT 00/02912 FILE NUMBER(S) : LOWER COURT Tribunal Member Hopkins JUDICIAL OFFICER :

Mr R Glasson (Plaintiffs) COUNSEL : Mr G K J Rich (First and Second Defendants) The Law Firm Corporations Group Counsel SOLICITORS : (Plaintiffs)

Burrell Solicitors (First and Second Defendants) CATCHWORDS : Appeal decision of RTT - extension of time - Duties of owner in respect of common property - Termination notices Residential Tribunal Act LEGISLATION CITED : Residential Tenancies Act 1988 (NSW) Strata Schemes Managements Act 1996 Residential Tenancies (Residential Premises) Regulations 1995 Higginbottom v Buongiorno (RTT 97/016938) Collins & Anor v Ebeling (unreported, 6 August 1996, 96/16109) Newman v Bludell-Felisak (unreported 20 october 1997, 97/23358) Butt v McDonald (1898) 7 QLJ 68 Marklea Pty Limited v Aussie Traveller (QldCA unreported, 11 February 1992) Jewell & Anor v Godfrey (RTT, unreported 17 June 1999, 99/14763) Northern Sandblasting Pty Limited v Harris (1997) 188 CLR 313 CASES CITED : British Telecommunications Pty Limited v Sun life Assurance Society Pty Limited [1996] Ch 69 Scazmi v Choi (unreported, 3 November 1995, 95/15924) Blackmore v Matthews [2000] NSWTR 100 (30 June 2000) Day v Hartland & Wolff Ltd (1953) 2 All ER 387 London Transport Executive v Betts [1959] AC 213 Graham v Market Hotel Ltd (1936) 67 CLR 567 Capper v Thorpe [1998] 194 CLR 342 RTT v Offe (NSWCA, unreported 1 July 1997) DECISION : (1) The orders of the Tribunal member Geoffrey Hopkins of 31 January 2001 are affirmed; (2) The amended summons filed 8 March 2001 is dismissed; (3) The plaintiffs are to pay the defendants' costs as agreed or assessed.

THE SUPREME COURT OF NEW SOUTH WALES ADMINISTRATIVE LAW DIVISION

30002/2001 - HOWDEN PHILLIP REISS & ANOR 30003/2001 v FRANCOIS JM HELSEN & 2 ORS

JUDGMENT (Appeal decision of Residential Tenancy Tribunal - extension of time; duties of owner in respect of common property: termination notices) 1 MASTER: In proceedings No 30002/2001 by amended summons filed 8 March 2001 the plaintiffs seek to appeal the decision dated 31 January 2001 of Mr Hopkins a member of the Residential Tenancy Tribunal. In proceedings No 30003/2001 by amended summons filed 8 March 2001 the plaintiffs seek to appeal the decision dated 31 January 2001 of Mr Hopkins which required the plaintiffs to pay to the first and second defendants compensation in the sum of $3,230. The first plaintiff is Howden Phillip Reiss and the second plaintiff is Valerie Mary Ann Reiss. They are the landlords of the premises and the appellants in both matters. The first defendant is Francois JM Helsen. The second defendant is Jennifer L Thommeny. They are the tenants of the premises. The third defendant is the Residential Tribunal of New South Wales. In both matters the Residential Tenancies Tribunal filed a submitting appearance.

The appeal 2 Section 62 of the Residential Tribunal Act allows for an appeal to be made to this court on a question of law. A reference to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. The onus lies on the plaintiff to demonstrate that there has been an error of law. Section 62(3) of the Act provides that after deciding the question of the subject of an appeal the Court may, unless it affirms the decision of the Tribunal on the question that should have been made by the Tribunal, remit its decision on the question to the Tribunal and order a rehearing of the proceedings before the Tribunal. 3 At the outset, it is helpful to set out some of the provisions of the Act. The function of the Residential Tribunal is to adjudicate disputes between landlords and tenants. The Tribunal is not constrained by the rigour of the court room. Its objects are to ensure that the Tribunal is accessible, its proceedings are efficient and effective, its decisions are fair and to enable proceedings before the Tribunal to be determined in an informal, expeditious and inexpensive manner. 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 (s 27(3)). 4 Evidence must be given on oath or statutory declaration (s 36(1)) but the Tribunal is not bound by the rules or practice of evidence and the Tribunal may inform itself on any matter in such manner as it considers appropriate (s 27(2)). The Tribunal must conform to the rules of natural justice, but broadly speaking, has control of and responsibility for its own procedures (s 27(1) and (2)). Its business is conducted in public (s 30). Normally a party to the proceedings has carriage of his or her own case and is not entitled to be legally represented (s 33(1)). The Tribunal has the power to award costs (s 47), but usually each party bears its own costs. Pursuant to s 49 of the Act the Tribunal is obliged to use its best endeavours to bring the parties to a settlement before making an order. The Tribunal has a power to correct its decision (s 46) and the registrar can issue a certificate which operates as a judgment (s 47). 5 The first and second defendants occupied residential premises at 9/51 Elizabeth Bay Road Elizabeth Bay under a Residential Tenancy agreement dated 24 August 1999 with the first and second plaintiffs who are the registered proprietors of the premises. The lease was for a period of 12 months. 6 In November 1999 the defendants complained to the landlords' managing agent about noise emanating from the floor boards of unit 15. The tenants occupied the unit directly underneath unit 15, namely unit 9. The tenants vacated the premises in January 2000 after purporting to terminate the agreement in December 1999. The tenants (the defendants in these proceedings) applied to the Residential Tenancy Tribunal pursuant to the Residential Tenancies Act 1988 (NSW) (the Act) for orders terminating the agreement for a declaration that the premises had been abandoned by the tenants. The landlords applied to the Tribunal for compensation for the loss arising from that abandonment. Both proceedings were heard together by the Tribunal. On 31 January 2001 the Tribunal decided in favour of the defendants on their application (00/00069) and dismissed the plaintiffs' application (00/02912). 7 Overall, in this appeal the plaintiffs raised four main issues in this appeal namely; firstly, the extension of time to bring proceedings in the Tribunal; secondly, the landlords responsibility to take action for noise created by the floorboards and joists; thirdly, the validity of service of notice of termination and lastly the award of damages which comprised of moving costs, compensation and legal costs. 8 In Proceedings No 30003/2001 the grounds of appeal are that the Tribunal erred in law in:

(i) Extending the time limit for the defendants' application under s 16 of the Residential Tenancies Act and thereby exercising jurisdiction.

(ii) Finding that the defendants had suffered significant interference with the use of the premises.

(iii) Finding that the plaintiffs had breached s 22 of the Residential Tenancies Act .

(iv) Finding that the plaintiffs had failed to provide the premises in a reasonable state of repair in breach of s 25(1)(b) of the Residential Tenancies Act .

(v) Awarding the defendant compensation of $1,500 pursuant to s 16(2)(d)(iii) of the Residential Tenancies Act .

(vii) Awarding the defendants costs pursuant to s 48 of the Residential Tribunal Act 1998 (NSW).

(1) Extension of time 9 The plaintiffs alleged that the tribunal was in error by allowing the defendants to proceed with a claim that was commenced after the 30 day time limit proscribed by s 16 of the Residential Tenancy Act. The Residential Tribunal Act contains several provisions that offer the tribunal, under s 74, the power to extend the period of time for making an application under the Act (s 74(1)) and such an application may be made even though the relevant period of time for making such an application has expired (s 74(2)). 10 In Higginbottom v Buongiorno (RTT 97/016938) the Tribunal identified the two important principles governing extensions of time as being firstly, whether the other party will have suffered any prejudice by reason of the delay and secondly, whether there is any reasonable explanation for the delay. The Tribunal member stated: "The tenants first became aware of the alleged breach on 19 August 1999 but did not file an application until December 1999. On the submission of Mr Lengyel the application was out of time as being outside the 30 day time limited prescribed by section 16(1) of the Act. Mr Lengyel had also referred to that in correspondence to the Registrar. Despite that, the applications before the Tribunal before being listed before me had not had those issues dealt with seemingly. The Tribunal heard submissions from both parties. The main factors assisting the tenants: the ongoing nature of the problems; the problems first becoming evidence in 1997 when the landlords were clearly aware of the problems; the orders of Mr Cheesman on 21 February 2000, which appeared to allow the compensation claim to proceed as Mr Cheesman had amended the claim without specifically dealing with time. The landlords were unable to show that there was any prejudice or that they were unable to put their case if time was extended. Therefore, time was extended." 11 The plaintiffs submitted that the Tribunal member found that the defendants had met only one of the criteria required by Higginbottom but had not provided an explanation for delay and thus the Tribunal member had erred in law. 12 Elsewhere (see for example paras 6.2 and 6.6) in the lengthy and considered reasons for his decision, the Tribunal member has recorded the tenants' reasons for the delay in lodging their application. The tenants provided explanations as to why they were late in filing their claim. The tribunal member restated the reasons for the late application, which included, the tenants belief that the landlords were taking action to cure the defect; the landlords awareness of the problem; and a desire to avoid litigation. This last reason is most compelling and well documented. The tenants wrote several letters to the landlord's agent in the hope of having the problem resolved but this was not to be the case. There has been a proper explanation for the delay. The Tribunal member was satisfied as to both limbs referred to in Higginbotham. 13 The Tribunal member was satisfied that the landlords would not suffer prejudice if the extension was granted. In these circumstances it is my view that the Tribunal member was entitled to extend time within which the tenants were permitted to file the application. There is no error of law.

(2) Breaches of ss 22 and 25 of the Residential Tenancies Act 1987 14 This is perhaps the most difficult issue raised in the appeal. The Tribunal member's decision decided that the landlord had breached ss 22 and 25 of the Residential Tribunal Act and found in favour of the tenants. He adopted a wide statutory interpretation of these sections. There has been a divergence of opinion between the Tribunal Members as to the scope of ss 22 and 25. 15 Section 22 of the Residential Tenancies Act 1987 states: "Tenant's right to quiet enjoyment

(1) It is a term of every residential tenancy agreement that: (a) the tenant shall have quiet enjoyment of the residential premises without interruption by the landlord or any person claiming by, through or under the landlord or having superior title (for example, a head landlord) to that of the landlord, and

(b) the landlord or the landlord's agent shall not interfere, or cause or permit any interference, with the reasonable peace, comfort or privacy of the tenant in using the residential premises. (2) A landlord or a landlord's agent under a residential tenancy agreement shall not, during the currency of the agreement, contravene or fail to comply with subsection (1)." 16 Section 25 of the Residential Tenancies Act 1987 states: "Landlord's responsibility for cleanliness and repairs

(1) It is a term of every residential tenancy agreement that: (a) …

(b) the landlord shall 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) In this section: "residential premises" includes everything provided with the premises (whether under the residential tenancy agreement or not) for use by the tenant." 17 There is an obvious tension between the lot owner's/landlord's obligations to provide quiet enjoyment of the unit to the tenant and to on the one hand maintain the residential premises in a reasonable state of repair and on the other the owners corporation's obligation to maintain the common property. Two different approaches have been taken by Tribunal members in relation to whether the owner has a responsibility to the tenant when the cause of the interference with the tenants entitlements to peace and comfort or alternatively the need for repairs are ones for which the owners corporation is responsible. In the case before the Tribunal member currently on appeal, the defect was in the common property.

(3) Divergence of views of the Tribunal in relation to the interpretation of ss 22 and 25 18 There may not be an exhaustive list of decisions referred to in this judgment but they are sufficient to show the divergence of opinion in the Residential Tenancy Tribunal on this issue. Both parties referred to common law decisions but these are of limited assistance. As previously stated this Act sets up a statutory regime to regulate dealing between landlords and tenants and it is these statutory provisions that are important. 19 In a decision of the Residential Tenancy Tribunal Collins & Anor v Ebeling (unreported 6 August 1996, 96/16109) the Tribunal member P Cheesman interpreted s 22 narrowly. He stated that s 22 requires that the landlord interfere or cause or permit interference with the reasonable peace, comfort or privacy of the tenant in using the premises (my emphasis added). The Tribunal member held that the interference was caused by the installation of the new garage door motor and that was done at the behest of the strata corporation and not the landlord. Hence there was no breach of s 22. The Tribunal member took a similar view in relation to s 25. He stated that under s 25 the matter complained of must be something within the landlord's control (my emphasis added). The concrete slab into which the motor was installed and the motor itself were the property of the strata corporation and not the landlord. 20 According to the Tribunal member the matters complained of by the tenants arise from a defect in the common property and the landlord is, in the first instance at least, powerless to do anything about this other than to complain to the body corporate as the tenants, in effect, had done on their behalf. However, the Tribunal member left open whether any obligation of the landlord arises if there is delay in the strata corporation rectifying the problem. The Tribunal member stated subject to his earlier comments about the speed with which the matter was dealt he was satisfied there was no breach of s 25. 21 The case of Newman v Bludell-Felisak (unreported 20 October 1997, 97/23358) involved a duplex. The landlord lived in one of the units, the tenants in the other. The Tribunal member A Anforth examined whether the landlord is responsible for the acts of other tenants. At para 36 of the Tribunal members reasons, he or she stated that the prima facie position by weight of authority and by virtue of the passive wording of s 22 of the Residential Tenancies Act 1987 (NSW), the landlord may not be liable for breaches by neighbouring tenants. However he considered this proposition in the light of two important recent developments. First, he said that there has been increasing acceptance by courts at all levels, including the High Court and New South Wales Court of Appeal, of the duty of parties to contract and to act in good faith (see Cheshire & Fifoot "Law of Contracts" 7th ed at [10.39]). The proposition as put by Griffith CJ in Butt v McDonald (1896) 7 QLJ 68 at 70-71 is as follows: "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his (or her) part to enable the other party to have the benefit of the contract." 22 The Tribunal member took this principle to mean that the present landlord was under an implied duty to take active steps to deliver to the tenant the quiet enjoyment for which the tenant contracted. In this sense the implied term is similar in effect to the express terms found in the Victorian and Queensland legislation. The Victorian and Queensland counterparts differ from the New South Wales s 22 in that they are the corresponding provisions of the Victorian and Queensland residential tenancies legislation are drafted more broadly and impose on the landlord the duty to 'take all reasonable steps to ensure that a tenant has quiet enjoyment…". It may be that the New South Wales legislation may need to be amended to reflect the Queensland and Victorian legislation. As the Tribunal member stated these provisions are not limited to the passive tense of not causing or permitting an interference, but impose an active duty to do all that is reasonable to deliver quiet enjoyment. 23 The Tribunal member referred to a recent decision of the Queensland Court of Appeal in Marklea Pty Limited v Aussie Traveller (QldCA unreported, 11 February 1992) where a tenant successfully sued a landlord for the landlord's failure to control the activities of an adjacent tenant whose activities amounted to a nuisance to the first tenant. The Tribunal member also referred to a general rule that is applicable to every contract, namely that each of the parties agrees by implication, to do all such things that are necessary on his/or her part to enable the other party to have the benefit of the contract and by applying this general principle to the landlord, which meant that the landlord was under an implied duty to take active steps to deliver to the tenant the quiet enjoyment for which the tenant contracted. The Tribunal did not discern any inconsistency with the implied term of acting in good faith with the express words of s 22. 24 In relation to s 22, the Tribunal member in Newman concluded that in the light of the development of the law he was of the view that until the matter was further specifically decided by the Supreme Court, the law in New South Wales was to the effect that a landlord may be in breach of his/her duty of quiet enjoyment where the landlord failed to take reasonable steps to restrain the anti-social conduct of an adjacent tenant which interferes with the quiet enjoyment of another tenant of the same landlord. 25 In Jewell & Anor v Godfrey (RTT, unreported 17 June 1999, 99/14763) the Tribunal member, G R Cochrane interpreted s 25. He made a finding that upon evidence presented the landlord took no steps to alleviate the obvious plight of his tenants. He concluded that a landlord, who is a lot owner in a strata scheme, cannot sit on his or her hands and hide behind the shield of mismanagement or inefficient management by that owners corporation. According to the Tribunal member the landlord as lot owner is required to take every reasonable step to protect the interests of the persons with whom they have entered into a contract. The Tribunal member concluded that the landlord should have done something within a fortnight of the balconies being removed and the failure to take any steps at all in these circumstances constituted a breach of the obligation referred to in section 25 to maintain the premises and everything provided with them in a reasonable state of repair. 26 Further, the Tribunal member in Jewell and other Tribunal members have cited a passage from Northern Sandblasting Pty Limited v Harris (1997) 188 CLR 313 per Gummow J at 28 as authority for the proposition that there is no breach of an expressed covenant by a landlord to keep the demised premises in repair unless two criteria have been met. They are firstly, the landlord must have information as to the existence of the defect the landlord must have failed to carry out the necessary works with reasonable expedition. The source of this proposition is an English decision of British Telecommunications Pty Limited v Sun Life Assurance Society Pty Limited [1996] Ch 69 at 74, 78 and 79. 27 The Tribunal member held that following complaints to the landlord's agent, by 6/3/1999 the landlord had in failing to take any action fallen into breach of their duty to repair and/or had constructively withdrawn the services or facilities provided with the premises. 28 In an earlier decision Tribunal member G R Cochrane in Scazmi v Choi (unreported, 3 November 1995, 95/15924) the stated that the strata titles legislation enabled tenants and owners to apply for orders that a strata body take action. He concluded previously in Otten and Otten v Willis the statutory obligation in the tenancy contract that the lessor comply with s 25 and it was not possible for landlords to hide behind a lack of action by strata managers or strata bodies. 29 Finally, in Blackmore v Matthews [2000] NSWTR 100 (30 June 2000) Tribunal member Geoffrey Hopkins referred to Tribunal member Cochrane's reasoning in Jewell and the decisions in Scazmi and Collins. He chose not to follow Jewell but preferred Scazmi and Collins. Hence he took the view that it was not possible for landlords to hide behind the lack of action by strata managers or strata bodies.

(4) The decision on appeal 30 It is with this background that I approach the present case before me. The Tribunal member at para 6.8 recorded that the tenants described the noise problems they were experiencing, namely, that there was significant amount of bounce in the existing floor structure so if a person just walked into the room that motion caused the ornaments on the shelves to shake considerably and the doors to creak. Further the tenants complained that when the occupants of unit 15 walked around there was a creaking/screeching noise emitted which was intolerable. The Tribunal member accepted the tenants evidence referred to above. He was entitled to do so. 31 Both parties relied on experts reports, the tenants upon the report of Ashby Doble Consulting Engineers (reproduced para 6.10 of the judgment) and the landlord relied upon the report of Mr Meth (also reproduced in the judgment). Mr Doble stated that the bounciness of the floorboards in the apartment was both extraordinary and unacceptable and that both the bounce in the floor and the noise transmitted from the upper floor were quite severe and as such "would have an extremely detrimental effect on the quiet enjoyment of the unit." The Tribunal member was entitled to prefer the opinion of Mr Doble to that of Mr Meth. 32 The Tribunal member found that it was only after these tenants commenced proceedings in the RTT that the landlords took further action. The landlords had done nothing to alleviate the tenant's plight and had been aware since 1997 that there were noise transmission problems in the unit. On 14 February 2000 pursuant to s 62 of the Strata Schemes Management Act 1996 the owners of SP54298 were ordered to strengthen the floor structures in units 9 and 15 so as to reduce the amount of bounciness in the floors and reduce the noise transmission. The work that was to be undertaken was to include installing steel or timber beams into the floor structure at approximately mid span of the existing floor joists so as to halve their span. Time for compliance was extended to 19 July 2000. 33 The Tribunal member considered that the delay between the original complaint by the landlords to the owners corporation dated 5 June 1997, and the application before the Strata Scheme Commissioner, disentitled the landlords to raise the defence that the defects occurred in common property and were not their responsibility.

(5) Did the plaintiffs breach s 22 of the Residential Tenancies Act 34 The tribunal member, at 10.27, stated "it is common to the evidence that that the flooring is common property. However the duty of a landlord to repair is not avoided by a defence based on the owners corporation doing nothing". The tribunal member noted that his decision was in accordance with Blackmore, Jewell and Scazmi, in that there was failure by the landlord to take reasonable steps to ensure that the owners corporation remedy the defect and that this failure to act disentitles the landlord to state the breach of s 22 is caused by defective common property. 35 The Residential Tenancy Act at s 22 provides that the tenant has a right to quiet enjoyment of the premises without interference by the landlord and that the landlord, by act or omission, shall not interfere or cause or permit any inference with the reasonable peace, comfort or privacy of the tenant (s 22(1)(b)). The Tribunal held that the plaintiffs had permitted the noise and vibration caused by inadequate floor joists to interfere with the tenants peace, comfort and privacy. Hence the landlords were in breach of s 22. The Tribunal made a finding in accordance with the natural meaning of the wording of s 22(1)(b). It is my view that the Tribunal member did not err in law in deciding that the plaintiffs were in breach of s 22(1)(b) of the Residential Tenancies Act.

(6) Finding the plaintiffs had breached s 25(1)(b) of the Residential Tenancies Act 36 At para 10.29 the Tribunal made his decision in relation to s 25. He stated that: "Clearly, there is the factual link. It is common evidence that the floor joists are inadequate. It is common to the evidence that such vibrations and noise would be caused. The landlords knew about this in 1997 and wrote to the owners corporation. No further action was taken. It was clearly within the contemplation of the landlord that a tenant can experience noise and vibration from residing in that strata unit. The loss of enjoyment of that unit and the complaints made by the tenants flow from inadequate flooring. The casual connection is very clear. There is no question of remoteness of damage; the landlords knew about the problem. It is clearly within the contemplation that the person who suffers from the floor being inadequate will also suffer a reduced use of the premises. The tenants would not have suffered but for the flooring being inadequate. The landlords sought no orders against the owners corporation between 1997 and 2000 to get repair. The landlords, as such, failed to provide the premises in a reasonable state of repair contrary to section 25(1)(b) of the Act." 37 By finding that there was a factual link, the Tribunal member is saying that the noise suffered by the tenants was caused by the inadequate floor joists and inadequate flooring. 38 The Tribunal member at paragraphs 9.1 to 9.10 gave his reasons in relation to s 25. He referred to Day v Hartland & Wolff Ltd (1953) 2 All ER 387 at 388 where Pearson LJ referred to the obligation of a landlord to carry out repair work in anticipation of likely defects rather than waiting for them to occur. No particular kind of repair is excluded - see London Transport Executive v Betts [1959] AC 213 at 232-233. The Tribunal member pointed out that the obligation to repair does not involve an obligation to renew or improve the premises although replacement of the structure from time to time may be necessary depending on the facts of the case and it appears to be a question of degree whether the amount of work required can properly be described as repair - see Graham v Market Hotel Ltd (1936) 67 CLR 567 at 579. The Tribunal member adopted the reasoning in Jewell that the landlords are responsible for the maintenance and repair of defective common property if they fail to take reasonable steps to ensure the owners corporation rectify the problem. 39 In view of the foregoing authorities, does carrying out work such as installing steel or timber beams into the floor structure at mid span fall within the landlords duty to provide and maintain the premises in a reasonable state of repair? It appears that the Tribunal member did not make a finding in this regard. The Tribunal member held that the landlords had breached s 25(1(b) of the Act as they had failed to maintain the premises in a reasonable state of repair. His reasons relied in part on the fact that the landlords sought no orders against the owners corporation between 1997 and 2000 to get repairs. The Tribunal member cited a passage from Gummow J (referred to earlier in this judgment) and held that the landlord failed to carry out the necessary works with reasonable expedition. 40 However, as the landlords were in breach of s 22, it is unnecessary for me to finally determine whether the Tribunal member's decision the landlords were in breach of s 25 was correct. I have some doubts that the foreshadowed work falls within the definition of "maintaining the premises within a reasonable state of repair".

(7) Notice of termination 41 In proceedings No 30002/2001 the grounds of appeal are that the Tribunal erred in law in finding that:

(1) The defendant validly served a notice of termination.

(2) Holding that s 130(4) of the Residential Tenancy Act and cl 25(2) of the Residential Tenancies (Residential Premises) Regulations 1995 in combination were not mandatory.

(3) Finding that pursuant to s 53(a)(i) of the Residential Tenancies Act the defendants had validly termination the agreement.

(4) Dismissing the plaintiffs' application for compensation. 42 The tenants served the notice of termination by placing it under the door of the landlords agent's premises on the evening of 9 December 1999. It is important to note that the landlords' agent acknowledged receipt of the notice on 13 December 1999 in a letter to the tenant. The landlords received the notice through service upon their agent. Hence, the landlords were aware of the notice. 43 The relevant part of s 53 of the Residential Tenancies Act provides: "Termination of residential tenancy agreements A residential tenancy agreement terminates only in one or more of the following circumstances: (a) if the land lord or the tenant gives notice of termination under this Part and: (i) the tenant delivers up vacant possession of the residential premises on or after the day specified in the notice, or …" 44 The relevant portion of s 63 states: "(2) A notice of termination of a residential tenancy agreement given to a landlord by a tenant shall: (a) be in writing,

(b) be signed by the tenant or the agent of the tenant (if any) appointed under section 31,

(d) specify the day on which vacant possession of the residential premises will be delivered up to the landlord, and

(e) specify and give particulars of the ground (where applicable) on which the notice is given." 45 Section 130(4) provides: "A notice of termination given under this Act may be given in such manner as may be prescribed for the purposes of this section." 46 Regulation 25(2) of the Residential Tenancies (Residential Premises) Regulation 1995 provides: "Service of notices of termination: sec 130 (4)

(1) For the purposes of section 130 (4) of the Act, a notice of termination given under the Act to a tenant may be given: (a) by delivering it personally to the tenant or a person apparently of or above the age of 16 years by whom the rent payable by the tenant is ordinarily paid, or

(b) by delivering it to the residential premises occupied by the tenant and by leaving it there with some person apparently of or above the age of 16 years for the tenant, or

(c) by sending it by post to the residential premises occupied by the tenant. (2) For the purposes of section 130 (4) of the Act, a notice of termination given under the Act to a landlord may be given: (a) by delivering it personally to the landlord, the landlord's agent under the residential tenancy agreement or a person apparently of or above the age of 16 years to whom the rent payable to the landlord is ordinarily paid, or

(b) by sending it by post to the landlord's usual place of residence or business or employment, or

(c) by sending it by post or facsimile transmission to the usual place of business of the landlord's agent under the residential tenancy agreement." 47 The Tribunal member referred to the definition of the words "may" and "shall" in s 9 of the Interpretation Act 1987. The word "may" if used to confer a power indicates that the power may be exercised or not, at discretion. 48 It is suffice to refer to a recent authority, namely Capper v Thorpe [1998] 194 CLR 342 the High Court in a joint judgment stated: "…However, unless the statute says so, a document may be "served" although it is not personally served. Thus, it may be served by posting it to the person required to be served. In many statutory contexts, a document may also be "served" when it is brought to the notice of the person who has to be served. At all events, it will be "served" in such contexts if the efforts of the person who is required to serve the documents have resulted in the person to be served becoming aware of the contents of the document." 49 The Tribunal members at paras 13.17 and 13.18 stated that: "13.17If the factual circumstances are considered in this case having regard to the summary by Pearce & Geddes passage above there is substantial compliance together with the decree of substantiality. That is, the notice of termination came to the notice of the landlords' agent within the required time period specified in the legislation. The legislation must be read as a whole. The time limits for service of the notice and the method of service are designed to ensure the notice comes to the attention of the relevant person within time limits specified. For the foregoing reasons I am satisfied that a strict interpretation of the Act and regulation requiring service only in the circumstances proscribed would lead to an absurd result. The landlord, aware of a notice of termination (or indeed a tenant in another case), could avoid legal consequences though the person has been given completely adequate notice. That would be absurd. As such I do not find the provisions mandatory. 13.18 I am satisfied for the foregoing reasons that the landlord was served with the notice of termination." 50 The Tribunal member was entitled to find that the wording "may" was discretionary and that as the landlord had knowledge of the notice of termination, service was effected. It is my view that the Tribunal member made no error of law.

(8) Damages and costs 51 The tribunal member ordered that the landlords pay the tenants the sum of $3,230.00; being $1,500.00 by the way of compensation for distress and inconvenience caused by the landlords breach of the residential tenancy agreement; $1,170.00 being the removal costs paid by the tenants when they vacated the premises; and $560.00 in costs for the hearing. 52 In awarding the amount of $1,500.00 for compensation the tribunal member exercised the discretion permitted to him by s 16(2)(d)(iii) of the Act which allows him to make an order for compensation for a breach of the residential tenancy agreement. For reasons outlined later in this judgment it was decided that the landlords did breach the agreement and that this breach caused "a significant interference with the use and enjoyment of the premises from 4 November until they vacated the premises on 9 January 2000 and this caused the tenants distress, disappointment and inconvenience" - see the tribunal member's decision at 10.22. 53 A tribunal member may make orders for compensation for non-economic loss when such a loss flows from a breach of contract provided that the contract is one for enjoyment, relaxation or freedom (Strahan v Residential Tenancies Tribunal and Anor NSWSC, Dowd J unreported, 9 December 1998). The method by which the amount of compensation should be determined is outlined by Abadee J who opines that the tribunal must consider, as a question of fact, the circumstances before it and determine what compensation is appropriate for the disappointment or distress suffered by the injured party (Residential Tenancy Tribunal v Offe NSWCA, unreported 1 July 1997). The tribunal member, upon finding that the tenants had suffered disappointment and distress due to a breach of the contract, determined the sum of compensation for the injury to be $1,500.00. The tribunal member did not err in law. 54 The plaintiff's claim seeking to overturn the decision to award the defendants $1,170.00 to reimburse their costs of vacating the residence has two premises: firstly, the defendants would have incurred these costs at a later date regardless of any alleged breach as the contract for tenancy was fixed at 12 months, and that secondly, in any event, the costs of removal cannot be said to arise out of a the breach of contract. 55 The first claim asks the court to make a finding as to whether the tenants would have, or not, incurred the moving expenses at a later date and this issue is factual in nature. This is a finding of fact which cannot form the subject of appeal in this court. 56 The second part of the appeal against the award asks the court to consider whether the removal costs are damages flowing from a breach of contract. The tribunal member stated at 10.30 that the tenants were required to move at a earlier date than set out in the contract as the landlords had failed to ensure that the premises were maintained in a reasonable state of repair. It is difficult to see that the breach, especially considering that it had such a detrimental effect on the quiet enjoyment of the residence, could not be said to have caused the tenants to vacate the premises and removal costs directly follow this vacation. The tribunal member did not err in law in awarding $1,170.00 in removal costs to the defendants. 57 The plaintiffs also dispute the tribunal member's decision to make a costs order of $560.00 in favour of the defendants. The tribunal member referred to s 48 of the Residential Tribunal Act and the powers it confers on a tribunal to award costs. Section 48(3) empowers the tribunal to award costs "in respect of any particular expenses, if it is satisfied that there are special circumstances warranting an award of costs in respect of them." The tribunal member considered that there were, in this case, sufficiently special circumstances to permit the awarding of expenses to the tenants. The tribunal member noted that it was unusual for a party to before the tribunal to seek costs and more unusual for such an order to be made, as such the tribunal member gave a considered list of reasons for awarding costs to partly compensate the defendants for some of the expenses they incurred in presenting their case namely, (1) For the purposes of the hearing the landlords' agent refused to admit the existence of a defect in the property despite the fact that the landlords were clearly aware that such a problem existed, as per their letter to the owners corporation dated 5 June 1997. (2) The landlords, through their agent, insisted on cross-examining the expert witness Mr Doble and this incurred an expense for the tenants.

(3) The cross-examination of Mr Doble did not reduce the effect of his evidence and no attempt was made to discredit his evidence. In fact the landlords used his report on a prior occasion. 58 The tribunal member opined that the fact that the landlords, through their agent: denied a defect that was previously common ground; insisted on unnecessarily calling a witness for the purposes of cross-examination; and then failed to use the cross-examination to any effective purpose; all in order to force the tenants to prove facts that had been admitted, constituted sufficiently special circumstances to warrant a costs order in favour of the tenants. 59 The tribunal member felt that the quantum of costs should reflect the expense incurred by the tenants in procuring the services of Mr Doble in order to reprove the defect existed. The tenants were charged $250.00 by Mr Doble for the preparation and writing of his report dated 6 January 2000 and the tribunal member allowed expenses of $310.00 for his time before the tribunal. As such the tribunal member ordered that the landlords reimburse the tenants for Mr Doble's expenses an amount of $560.00. Costs are discretionary and it was open to the Tribunal member to exercise his discretion in the manner he did. The tribunal member did not err in law in making this order. 60 These four general issues were covered by 8 specific errors that the plaintiff's claimed that the tribunal member had made.

(9) Awarding the defendants $1,500.00 in compensation 61 The Tribunal exercised the discretion permitted to it under s 16(2)(d)(iii) of the Residential Tenancies Act and awarded the $1,500.00 for the distress, disappointment and inconvenience they suffered from 4 November 1999 and 9 January 2000. The Tribunal member found that the above injuries resulted from damage to the residence that was factually linked to the landlords breach. 62 In Strahan and Baltic Shipping it was held that not only could a court or tribunal make an award for non economic loss if the breached contract was for enjoyment, relaxation or freedom, but also if the injured party suffered physical distress as a result of the breach. As per Strahan medical evidence is not required to prove distress. The Tribunal member made no error in law in deciding to award $1,500 in compensation to the tenants. 63 This aspect of the plaintiffs' appeal has been covered. The Tribunal member did not err in law in awarding the tenants' costs and therefore the plaintiffs' appeal is dismissed. 64 Costs of this appeal are discretionary. Costs should follow the event. The plaintiffs are to pay the defendants' costs as agreed or assessed. 65 The orders I make are:

(1) The orders of the Tribunal member Geoffrey Hopkins of 31 January 2001 are affirmed.

(2) The amended summons filed 8 March 2001 is dismissed.

(3) The plaintiffs are to pay the defendants' costs as agreed or assessed. **********

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Residential Tenancies Act 1988(NSW)

Residential Tribunal Act 1998(NSW)

Residential Tenancies Act 1987(NSW)

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