Serious v Barlow; Barlow v Serious

NCAT Consumer and Commercial|2020-07-22

History of the proceedings

On 23 April 2020 Tanya and Andrew Barlow (the landlords) commenced proceedings (RT 20/18131) against Yahoo Serious (the first tenant) seeking orders under section 87 of the Residential Tenancies Act 2010 (the Act) for a termination order and an order under section 175 for payment of the rental bond.
The next day, 24 April 2020, a notice of hearing by telephone was issued with directions for the provision of documents, to the Tribunal and the other party. As a result, the Tribunal received the documents upon which the landlords and the tenants wished to rely.
On 15 June 2020 a termination order was made, with the date for possession suspended to 19 June 2020, along with other associated orders which included an order that the tenant pay the landlord's $15,000 in respect of arrears of rent. Serious Productions Pty Limited (the second tenant) was added as a respondent since its name also appeared on the tenancy agreement. Those orders were made ex parte as a result of there being no answer when the tenant's landline number was rung twice and since there was no other available number, such as a mobile phone number.
On 18 June 2020 an application to both stay and set aside the 15 June 2020 decision was lodged and on 19 June 2020 a stay was granted, with directions being made for the provision of documents in relation to the application to set aside the orders made on 15 June 2020: by the tenants on or before 26 June 2020 and by the landlords on or before 03 July 2020.
By letter dated 07 July 2020 a notice was issued to advise the parties that the proceedings were listed for hearing on 22 July 2020 and that the issues would be (1) whether the orders made on 15 June 2020 should be set aside and, if so, (2) what orders should be made in relation to the original application by the landlords. The attention of the parties was drawn to the provisions of the Act and Residential Tenancies Regulation 2019 (the Regulations) which have been introduced in order to deal with the COVID-19 pandemic.

The documents

The documents received by the Tribunal have been marked as follows:

Exhibit A Landlords' document in original application.
Exhibit B Tenant's documents in original application.
Exhibit C Application to set aside and supporting documents, filed 18 June 2020.
Exhibit D Tenants' documents in support, filed 29 June 2020.
Exhibit E Landlords' documents in reply, filed 01 July 2020.

Jurisdiction

As it is clear there was a landlord-tenant relationship between the landlords and the tenants, the Act applies with result that the Tribunal has jurisdiction to hear and determine these proceedings.

The hearing

The hearing was conducted over the telephone due to the impact of the COVID-19 pandemic. Ms Kara Harris, the landlords' agent, spoke in support of the landlords' case while Mr Yahoo Serious spoke on behalf of both tenants.
As the first tenant had lodged a statutory declaration, Ms Harris indicated she wished to ask him a number of questions. Those questions were directed towards the tenant's prospects of funding to which the first tenant was unable to provide any definite indication as to either time or amount. It was noted by Ms Harris that the tenants had not completed the Tribunal's financial statement. Ms Harris also explored what rent assistance had been sought by the first tenant and the only matter that appeared to have been explored by the first tenant was to go to Centrelink who he said advised him to apply for the old age pension as he is now about to turn 67.

Submissions

For the landlords, Ms Harris submitted the tenants were not impacted by the COVID-19 pandemic in that they did not show they had any income prior to April 2020. It was also suggested that the tenants had cash flows problems in January 2020, before the COVID-19 situation arose. Ms Harris said the agency she worked for had 250 properties and that 70% of those had already been the subject of rent reductions and that most tenants had paid something, but these tenants had not paid anything. She indicated that she had a number of properties available for $400 per week and suggested the tenants should transfer to a more affordable property in order to save money. Mr Harris also suggested the tenants were unable to get rent assistance as they had money in the bank although the Tribunal notes that the first tenant denied that was the case.
For the tenants, it was submitted that there had been a denial of natural justice due to a telephone problem. It was suggested the first tenant was COVID-19 impacted with the result that Regulations 41C and 41D prevented the Tribunal from making a termination order. The first tenant's reference to those Regulations reveals that has either considered them or has been advised in relation to them. The first tenant also said he generates jobs and income through his artistic and creative endeavours but that he had been caught by the COVID-19 pandemic which had changed the industry in which he works. He went on to say that, prior to the current pandemic, he had an impeccable record in relation to paying rent. It was further submitted that the legislation that had been introduced in response to the COVID-19 situation was intended to protect people like him and said that this pandemic was a unique situation and that nothing like this had ever happened to him before.

First issue: Application to set aside

In order to consider the set aside application, clause 9 of the Regulations needs to be considered. That clause provides the Tribunal with the power to set aside or vary a decision made in the absence of a party if the Tribunal is satisfied that resulted in the absent party's case not being adequately put to the Tribunal. However, that clause requires the Tribunal to provide the parties with an opportunity to make submissions about the proposed order and to take those submissions into consideration.
Those statutory provisions are satisfied in the present case in that it is clear the respondent's absence prevented him from putting his case and since both parties were provided with an opportunity to make submissions during the hearing.
The Appeal Panel decision in Hammond v Ozzy's Cheapest Car Sales [2015] NSWCATAP 65 indicated that the question, when considering clause 9(1)(b), was "whether there would be a real likelihood of injustice if the decision was allowed to stand" and said that relevant considerations would include: (1) why the party was absent and whether the absent party had a reasonable opportunity to be heard or have its submissions considered, (2) whether the absent party has an arguable defence or an arguable case that a different decision could have been reached, (3) what degree of prejudice would be occasioned to the successful party if the decision is set aside, and (4) can any such prejudice be cured or reduced.
As to the first of those matters, there is evidence in the form of a statutory declaration from the first tenant that he was ready, willing and able to participate in the hearing but the attempts by the Tribunal to contact him by telephone were unsuccessful. A similar situation arose at the time appointed for the hearing but was fortunately overcome by the first tenant ringing the Tribunal and being connected to the hearing room. Secondly, although there is a proposal to pay arrears of rent, there does not appear to be an arguable defence although a different date for possession may have been obtained and a payment plan may have been negotiated. Thirdly, the prejudice to the landlords if the decision is set aside would be that they may lose the benefit of the orders made on 15 June 2020. Fourthly, if such prejudice occurred then the landlords would need to commence fresh proceedings since a 22 July 2020 hearing post-dates 15 June 2020, being the date 60 days after the commencement of Part 6A of the Regulations.
The first matter provides significant support for the tenants while the remaining matters provide significant support for the landlords. Noting that these proceedings were commenced during the moratorium period and that the existing orders carry a significant impact for the tenants, the Tribunal considers it preferable to grant the application to set aside the ex parte orders in order that the dispute between these parties can be determined on the merits of their respective cases.
As a result, the Tribunal is satisfied that an order should be made in these proceedings is that, pursuant to clause 9 of the Regulations, the ex parte orders made on 15 June 2020 be set aside.

Second issue: The original application

In view of that order, it is now necessary to consider afresh the original application.

The landlord's case

As indicated above, in the original application the landlords sought a termination order and an order for payment of the rental bond.
The landlords' case was set out in the documents that have been marked Exhibit A. They include copies of the managing agency agreement dated 26 February 2017 and a residential tenancy agreement made on 21 March 2017 for an 18-month period from 23 March 2017 at a monthly rent of $5,866.07 (which equates to more than $1,350 per week) and a rental bond of $5,400. There is also a termination notice dated 07 April 2020, based on non-payment of rent, which nominated 22 April 2020 as the date on which the tenants were required to provide vacant possession of the premises to the landlords. Rent ledger pages were also included along with copies of two emails, dated 01 and 03 April 2020, the first requesting the payment of rent or a part payment and the second seeking a payment urgently.
Exhibit A also contains a copy of an email dated 15 May 2020 in which the landlords indicated to their agent the steps they had taken due to the financial burden resulting from the non-payment of rent: 1. Sold all major shares. 2. Applied for an early release of superannuation. 3. Exchanged to a cheaper car. 4. Looked to downsize their own apartment to save costs. 5. Cut all spending. 6. Negotiated an extension of time for payment of children's school fees. 7. Used savings to service personal loans previously covered by rent.
That email goes on to say that Mrs Barlow only had job protection until the end of June 2020 and that Mr Barlow had zero income due to the pandemic. If the landlords were forced to sell the tenanted premises, they would become liable for $250,000 in capital gains tax. Copies of bank documents were also provided. They show a deferral of required repayments until 30 June 2020 on one loan and to 28 September 2020 on another.

The tenants' case

In the application to set aside, being the documents marked Exhibit C, the tenants indicated they sought the following orders: (1) dismissal of the landlord's application, (2) permission to occupy the premises until 30 September 2020, (3) the payment of rent be suspended until that date, (4) monthly payments of rent in advance resume after 30 September 2020, and (5) all arrears of rent be paid by 31 December 2020.
The tenants' case is that the first tenant's ability to derive income has been severely compromised by the corona virus pandemic which has made him presently unable to pay rent. He says he intends to resume rental payments, no later than 30 September 2020 and notes that he has lived in the property since 2017 and has paid rent in full up to 23 March 2020. It is the evidence of the tenant that he has nowhere else to go, currently has limited financial means and that if his office equipment and business records are placed in storage then his ability to earn income will be further affected.
In the statutory declaration of the first tenant dated 26 June 2020 (Exhibit D) there is set out details of how the corona virus pandemic has adversely impacted his work in the arts and entertainment industry which has involved making films over a period of more than 40 years. With the pandemic reshaping the movie industry towards home entertainment, the project on which the first tenant was working has been impacted. Although he notes the Federal Government has recently announced a $250 million assistance package for the entertainment industry and hopes to be thereby able to obtain financial assistance, there are no firm details he was able to provide at the hearing.
According to the first tenant, his weekly income has been reduced by well over 25% due to the pandemic and, due to ongoing Family Law proceedings, he is unable to draw on his superannuation entitlements. He offered to agree to release the $5,400 rental bond to the landlords.
The alternative presented by the tenants was as follows. If allowed to remain in the premises, the first tenant estimates he could resume paying rent by the end of September 2020 and clear the arrears by 31 December 2020. If evicted, he would not have the means to rent alternative accommodation and would be unable to afford a rental bond. Accordingly, he sought to be "afforded the protection of the NSW Evictions Moratorium" and informed the Tribunal that he is aged 67 and had a health issue for which he was hospitalised in 2018 which has recently re-occurred.
It is also necessary to consider the documents which the tenants lodged with the intention of relying on them at the 15 June 2020 hearing, being the 28 pages that have become Exhibit B. In addition to emails and copies of tenant ledger pages, there were bank statements of both tenants for March and April of 2020, a superannuation statement showing a balance of $810.08 as a result of a $10,000 withdrawal and testimonials suggesting the tenants had a good record of paying rent prior to the pandemic.

The landlords' case in reply

In response to what the tenants recently placed before the Tribunal in support of their application to set aside the 15 June 2020 orders and have different orders made, being the documents marked Exhibit E, the landlords referred to the following matters: 1. The rent ledger which was said to show that the tenants fell into arrears on 29 November 2019. 2. The last payment of rent was on 25 February 2020. 3. Emails were sent by the landlords' agent on 01 and 03 April 2020 seeking an indication of when the landlords could expect to receive at least some payment. 4. The landlord's agent applied to the Department of Fair Trading (FT), seeking assistance via mediation, the reference number being 10166898. 5. The tenants have not provided any COVID-19 financial statement, have not provided proof of income or eligibility for rent reduction, have not asked for a rent reduction and have not participated in an FT mediation on 13 May 2020. 6. The tenants have not made any indication of paying any amount towards rent prior to 30 September 2020. 7. As at 30 June 2020 the arrears of rent were $23,464.28 which is $10,000 over the limit that landlord's insurance will pay for rent default. 8. The landlords owe $1,665.89 in gardener's fees, water and Council rates for the premises and documentary support for that amount was provided. 9. No documentation has been provided in support of his reference to the prospect of income from Village Roadshow. 10. The rent for the premises in question is $1,300 per week. 11. By 31 December 2020, the date by which the tenant suggests he will clear the arrears of rent, those arrears will amount to $58,564,80.

The applicable law

In response to the COVID-19 pandemic, Part 13, containing section s 228A to 228C, was added to the Act to deal with the current pandemic and Part 6A, containing Regulations 41A to 41E, was added to the Regulations.
Section 228A introduced notions such as a formal rent negotiation process, an impacted tenant and a moratorium period of six months, from 15 April 2020 to 15 October 2020. Section 228B defines when a household is impacted by the COVID-19 pandemic and section 228C is not relevant to these proceedings as it deals with termination by tenants.
Section 228B provides as follows: "(1) For the purposes of this Part, a household is impacted by the COVID-19 pandemic if - (a) any 1 or more rent-paying members of the household have - (i) lost employment or income as a result of the impact of the COVID-19 pandemic, or (ii) had a reduction in work hours or income as a result of the impact of the COVID-19 pandemic, or (iii) had to stop working, or materially reduce the member's work hours, because of - (A) the member's illness with COVID-19, or (B) another member of the household's illness with COVID-19, or (C) the member's carer responsibilities for a family member ill with COVID-19, and (b) as a result of any of the matters stated in paragraph (a), the weekly household income for the household has been reduced by at least 25% compared to the weekly household income for the household before the occurrence of any of the matters. (2) In this section - weekly household income means the total of the weekly income, including any government payments, received by each rent-paying member of the household."
That section may be summarised by saying there are two tests that both need to be satisfied. The first test, set out in sub-section (1)(a), can be satisfied in any one of three ways. The second test, set out in sub-section (1)(b), requires that one of the three matters in the first test must have reduced the weekly household income "by at least 25% compared to the weekly household income for the household before the occurrence of any of those matters".

Findings of fact

The evidence in these proceedings warrants the following findings of fact: 1. The termination notice was given on 07 April 2020. 2. The proceedings based on that notice were commenced on 23 April 2020. 3. The second landlord (Mr Barlow) has lost income due to COVID-19. 4. The tenants currently have no income due to COVID-19. 5. The landlords have tried to participate in a formal rent negotiation process. 6. The tenants have not been willing to do so. 7. The landlords have taken significant steps to deal with their financial predicament. 8. The tenants have not paid any rent since 25 February 2020. 9. The rent has been paid to 23 March 2020. 10. The arrears of rent are currently well in excess of $15,000.

Application of the law to the facts

The difficulty of this case is that the COVID-19 pandemic has created severe difficulties for both the landlords and the tenants and the decision as to whether or not the tenancy should be terminated will cause additional hardship for whichever party is unsuccessful.
It is necessary to first consider whether the tenants are impacted tenants. The tenants have no income as a result of the impact of the COVID-19 pandemic and thus satisfy the first test under sub-section 228B(1) of the Act.
However, the only bank statements of the tenants are those for the months of March and April 2020 that were included in the documents upon which the landlords rely. The absence of any evidence as to the income of either tenant for the period prior to the pandemic prevents the Tribunal from finding that the second test under sub-section 228B(1) has been satisfied. Since what might be called the pandemic amendments to the Act and Regulations took effect from 15 April 2020, the Tribunal could take into consideration the bank statement for March and the first half of April in 2020 but they do not reveal any income. Well may the tenants say that by March their income was already affected but the simple fact is that the Tribunal has no evidence of pre-pandemic income for the tenants which would enable this second test to be satisfied.
Put simply, for either or both the tenants to meet the definition of an impacted tenant, it is not enough to say that income is now zero since the definition of impacted tenant requires a 25% reduction in income and if income was zero before the pandemic or if there is no evidence of what income was before the pandemic, then the necessary conclusion is that the tenants do not meet the statutory definition of an impacted tenant.
Since the tenants do not satisfy the definition of an impacted tenant, the protections introduced to deal with the impact of the COVOD-19 pandemic do not apply to them and the landlords are not now precluded from obtaining orders of the same kind they obtained on 15 June 2020.
Under sub-section 87(4) of the Act the Tribunal may, on application by a landlord, make a termination order if it is satisfied that: 1. the tenant has breached the residential tenancy agreement, and 2. the breach is, in the circumstances of the case, sufficient to justify termination of the agreement, and 3. the termination notice was given in accordance with the Act and the tenant has not vacated the premises as required by the notice.
It is clear that the tenants have breached the residential tenancy agreement by failing to pay any rent since 25 February 2020 and by their arrears of rent being four months, ie 23 March 2020 to 23 July 2020. The resulting arrears of rent exceed $15,000. The termination notice was given in accordance with the Act and the tenants have not vacated the premises. Thus, the Tribunal may make a termination order.
However, it remains to consider sub-section 87(5) of the Act which sets out a non-exhaustive list of matters to which the Tribunal may have regard when considering whether to make a termination order: 1. (a) the nature of the breach, 2. (b) any previous breaches, 3. (c) any steps taken by the tenant to remedy the breach, 4. (d) any steps taken by the landlord about the breach, and 5. (e) the previous history of the tenancy.
The nature of the breach is arrears of four months' rent. There do not appear to be any previous breaches. The evidence reveals that the landlords have taken significant steps in response to the breach and, on the evidence before the Tribunal, those steps outweigh any steps taken by the tenants who declined an opportunity to participate in a Fair Trading rent negotiation process and who have not engaged in discussions with the landlords' agent. The previous history of the tenancy does not suggest anything adverse to the tenants.
Having regard to the extent of the arrears of rent, the absence of any payment of rent for almost five months, the steps taken by the landlord and the fact that those steps outweigh any steps taken by the tenants, the Tribunal is persuaded that a termination order should be made. It is not necessary to recalculate the arrears of rent since they have only increased since 15 June 2020 when they were already in excess of the $15,000 and the landlords' evidence was that the arrears of rent were $23,464.28 as at 30 June 2020 which suggests current arrears exceed $27,500.
It is appropriate to make similar orders to those made on 15 June 2020. However, it remains to consider what should be specified as the date for possession and whether there should be a finding under section 89(5) of the Act.
The orders made on 15 June 2020 included an order for possession on 19 June 2020, only four days after the order. Having regard to the evidence before the Tribunal and the submissions of the parties, the Tribunal considers a period of three weeks to be reasonable which would give a date for possession of 12 August 2020.
The reasons why the Tribunal considers that period appropriate in this cases is that such a period will enable to tenants to: (1) seek government assistance (such as that recently announced for the arts and entertainment industry), (2) seek finance for his project that was adversely affected by the pandemic, (3) consider the suggestion of the landlords' agent that the tenants move to alternative accommodation which would reduce their weekly rent from $1,300 to $400, and/or (4) make other arrangements for alternative accommodation.
The orders made on 15 June 2020 included a finding under sub-section 89(5) that there had been a frequent failure to pay rent which has the consequence, by reason of sub-section 89(6), that a warrant for possession may be issued even if the tenant has paid the arrears of rent. By not including that finding on this occasion, the Tribunal leaves open to the tenants the possibility of retaining possession in the event that that the arrears of rent are paid. Leaving that "window" may enable the tenants to put pressure on those who may be able to provide financial assistance which, if provided, would accrue to the financial benefit of the landlords.

Decision and orders

For these reasons, the Tribunal makes the following orders. which will finalise both proceedings (ie RT 20/26442 and RT 20/29331): 1. The ex parte orders made on 15 June 2019 are set aside, pursuant clause 9 of the Civil and Administrative Tribunal Regulation 2013. 2. The residential tenancy agreement is terminated in accordance with section 87 of the Residential Tenancies Act 2010 as the tenants have breached that agreement by failing to pay rent in accordance with that agreement and the landlords have given a valid termination notice. 3. The residential tenancy agreement is terminated immediately and possession is to be given to the landlords on the date of termination. 4. The order for possession is suspended until Thursday 13 August 2020. 5. The tenants shall pay the landlord a daily occupation fee at the rate of $192.86 per day from the day after the date of termination, namely 24 July 2020, until the date vacant possession is given to the landlords. 6. Within 60 days of the date for possession of the premises specified in these orders the landlords may request the relisting of the application to determine the amount of the occupation fee owing, 7. The tenants, Yahoo Serious and Serious Productions Pty Ltd, 9 Dress Circle Road, Avalon Beach, NSW, 2107 are to pay the landlords, Tanya Barlow and Andrew Barlow, c/- Belle Property Avalon, 56 Old Barrenjoey Road, Avalon, NSW, 2107, the sum of $15,000.00 immediately.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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 06 October 2023 - Formatting amendments. 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: 06 October 2023

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