Catchwords: RESIDENTIAL TENANCIES - 26 week notice to vacate - whether notice to vacate retaliatory in nature - covenants of quiet enjoyment - breach of tenancy agreement

Legislation cited: Residential Tenancies Act 1997 (ACT) ss 57, 71, 71(2), 83

Legal Profession Act 2006 (ACT) ss 419, 210, 225, 229,

ACT Civil and Administrative Tribunal Act 2008 (ACT)

ACT Civil and Administrative Tribunal (Transitional Provisions) Regulation 2009 (ACT), regulation 30

Cases cited: Abuaagla v Edwards (Residential Tenancies) [2014] ACAT 55 ACT Housing v Frank [2006] ACTRTT 8

ACT Housing v Margules [2003] ACTRTT 6

Aussie Traveller Pty Ltd v Marklea Pty Ltd [1997] QCA 2

Baltic Shipping Company Dillon [1993] HCA 4; (1993) 176 CLR 344

Commonwealth Bank of Australia v Barker [2014] HCA 32

Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341

Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185

Hughes Aircraft Systems International v Airservices Australia [No. 3] [1997] FCA 558; (1997) 76 FCR 151

Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91

Jarvis v Swan Tours Ltd [1973] 1All ER 71

Kenny v Preen [1962] EWCA Civ 2; [1963] 1 QB 499

Kiternas v Watts [2006] ACTRTT 4

Osuchowski & Scouller v Radojevic [2008] ACTRTT 13

Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 16

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

Robinson v Harman [1848] EngR 135

Worrall v Commissioner for Housing for the Australian Capital Territory [2002] FCAFC 127

List of

Texts/Papers cited: Allan Anforth et al, Residential Tenancies Law and Practice New South Wales (Federation Press, 5th ed, 2001)

AJ Bradbrook, 'The Rights and Duties of Landlords and Tenants Under The Victorian Residential Tenancies Act', Melbourne University Law Review [Vol. 13, Dec. '81]

ACT CIVIL & ADMINISTRATIVE TRIBUNAL ) RT 14/756

1. The respondent landlord shall pay to the applicant tenants the amount of $1796 within seven days of the date of this order.

1. Mr Glen Shkolar appeared and represented his co-tenant. Mr Shkolar held a power of attorney from his co-tenant, Poniman Tju.
2. Ms Tamara Davis and Ms Talia Rennie, from Luton Properties, represented the landlord. They held a power of attorney from the landlord, Benjamin Lloyd Thomson.

1. The applicants as tenants and the respondent as landlords entered into a residential tenancy agreement on or about 30 August 2013. The residential tenancy agreement was for a fixed term of 12 months commencing 30 August 2013 and terminating 29 August 2014.
2. On 17 June 2014 the tenants lodged an application with ACAT. This application was resolved on 3 July 2014 at a conference and in the tenants' favour.
3. On 18 June 2014, the landlord served a termination notice in accordance with clause 94 of the residential tenancy agreement. This notice required the tenants to vacate the premises on or before 18 December 2014. The notice was served by both email and registered post.
4. The tenants vacated the premises on 27 July 2014. This vacation date was determined by agreement between the landlord and the tenants.
5. It is common ground between the parties that at the date of vacation the tenants were in full compliance with the terms of the residential tenancy agreement: rent had been paid in advance and the landlord agreed to refund the excess rent to the tenant; the premises were left in the appropriate condition and the tenant was entitled to a full refund of the rental bond.

Was the termination notice served on 18 June 2014 retaliatory in nature?**

1. The tenants make application to the tribunal for compensation for loss arising from the breach by the lessor of the residential tenancy agreement. The tenants allege that the termination notice served on 18 June 2014 was served in retaliation for the tenants' application to ACAT. The tenants' submission is that serving of a notice that is retaliatory in nature is unlawful and therefore a breach of the residential tenancy agreement.

9. Section 57 of the Residential Tenancies Act 1997 (ACT) (the RT Act) provides that where the lessor has made an application to ACAT for termination and possession and the tenant presents evidence that the tenant took reasonable action to secure or enforce the tenant's rights, ACAT must refuse to make an order for termination and possession if satisfied that the tenant did take such action and there is no proof that the lessor was not motivated for an order for termination possession by that circumstance.[1]

1. Mr Shkholar gave evidence on 3 July 2014 that, immediately after the conference relating to his application to ACAT, and while still in the ACAT precinct, Ms Davis had said to him words to the effect of now you can use the money to move out.
2. The lessor has offered the following explanations as to the motivation for the serving of the Notice to Vacate on 18 June 2014:
   • (a) In a written submission in response to the tenants' earlier application to ACAT. The lessor stated that:

the reason for the 26 weeks NTV is due to the market changing so much in the last 12 months and the owner would like to have [the] tenancy period move [to] around the time when the rental market is known to be much stronger. The tenant did mention to Tamara the [senior property manager] verbally ... that they were looking to buy real estate in the near future and would be vacating very soon anyway, the NTV is purely to ensure if the tenant does buy in the next 26 weeks the lease that the tenant would prefer to remain on month to month comes to an end when the market is strong.

(b) In a further written submissions received by the tribunal of 21 October 2014 the landlord, through his agent, said:

As per email, 17 June 2014 - tenant threatens to lodge an application with ACAT - however, the owner was continuously threatened with ACAT to resolve all matters throughout the tenancy, where the tenant was not happy with the outcome - this is only relevant because it supports the notion that the owner was not acting in a retaliatory manner by issuing the 26 week notice to vacate - as he had endured numerous threats from the tenant, of this nature, on past occasions without retaliating.

(c) In the course of the hearing conducted on 6 November 2014 Ms Davis noted there was a multitude of reasons for the serving of the Notice to vacate and gave the following explanations:

We'd already attended ACAT I think once at this stage, with threats of two more applications. The owner's costs increasing - it was like what we what do we do just to put a stop to all of this?[2]

...the tenant had said they were looking at some point to move out, so the first thing in my head at the time was the tenant is not going to renew. So we're not looking at renewing, and it was the time - all of this was coming at the time of June. We look at three months before lease is due to expire in regards to obviously you've got the eight weeks notice to give increases which in this market isn't even really a factor at this point. If anything, the market was declining, but basically it also came up on the report at the time for the June tenancy reviews.

(d) That the tenant had asked to be released from the tenancy agreement. There was no evidence before the tribunal that the tenant had ever asked to be released from the tenancy agreement. The landlord's agent's view that the tenant had requested early termination is based on an email from the tenant to the agent in which the tenant stated "...if the noise continues...We will lodge an application with ACAT for either a reduction in rent or termination of tenancy for breach or both". ACAT finds as a matter of fact that the tenants did not request early termination of the tenancy agreement at any time prior to the serving of the 26 weeks notice to vacate

(e) That the tenant was unhappy. This view appears to have been reached because of the complaints made by the tenant relating to breaches of the tenancy agreement by the landlord and the applications by the tenant to ACAT for the resolution of those matters.

(f) The tribunal had before it email correspondence between the landlord and his agent. The respondent indicates that the landlord viewed complaints from the tenant as an attempt to break the lease. On 17 June 2014, the agent wrote to the landlord and stated openly:

...given all the grief this tenant has caused, we think it is in your best interest to let him go as a tenant and advertise for a new tenant. Their lease expires on 29/08/14. I would issue them with 26 weeks' notice to vacate without cause, which will bring their vacate date up to mid-December. Once they have received the notice to vacate they may decide to give 21 days notice of any point between the last day of their lease and the notice date we have given them in December which, would be better for all parties anyway. Overtime, I think this tenant is a liability and it is in the best interest to give the 26 weeks notice to avoid further claims from him.

Yes it is unfortunate that this guy is such a troublesome liability. I feel bad letting him get away with it all as it will just become the next tenants issue to deal with. Hopefully you can write him up a very average review that will be viewable by any and all future potential landlords?

(g) The evidence before the tribunal was that the tenants had always paid the rent on time and had taken good and proper care of the premises and that the 'grief' and 'trouble' which was in the landlord's opinion given by the tenant amounted to no more than applications to ACAT in relation to disputes arising from a breach of the residential tenancy agreement by the landlord.

1. ACAT does not accept the multiple explanations provided by the landlord in relation to the decision to serve the 26 week notice of termination. In the absence of a satisfactory explanation by the lessor as to the motivation for the serving of the Notice to Vacate on 18 June 2014, I am satisfied that that Notice to Vacate was retaliatory in nature.

Is the issue of a retaliatory notice to terminate a breach of the tenancy agreement, that is a breach of the covenant of quiet enjoyment?

1. The right to quiet enjoyment is a right conferred on the tenant under the residential tenancy agreement and at common law. The common law covenant of quite enjoyment is implied into all residential tenancies agreements by reason of the existence of the landlord and tenant relationship. The basis of the covenant was explained in Kenny v Preen [1962] EWCA Civ 2; [1963] 1 QB 499. The basis is that the landlord, by letting the premises, confers on the tenant the right of possession during the term and impliedly promises not to interfere with the tenant's exercise and use of the right of possession during the term. The tenant is entitled to have the full benefit of the right of use and possession of the premises.[3]
2. Quiet enjoyment is the legal concept of a tenant being entitled to hold the premises and use them for normal residential purposes without interference. This would encompass the notion of reasonable peace, comfort or privacy of the tenant in the use by the tenant of the premises and would include, but is not confined to, the right to enjoy the premises free from harassment by the landlord or the landlord's agents; the right to prevent others from entering the premises; the right to prevent others from damaging the premises; the right to enter and exit the premises without fear of threats or abuse while using common areas to do so; and the right to use the house and surrounding gardens for relaxation and enjoyment without being abused, threatened or made to feel unsafe.
3. A wide range of conduct has been found to amount to interference with quiet enjoyment: violent and abusive behaviour[4]; noise alone[5] and failure by the lessor to take steps to prevent others from causing interference with quiet enjoyment[6]; continual loud swearing and abuse[7]; noise of many cars coming and going, loud music, loud voices, bad language, abusive behaviour and making of threats[8]. [9]
4. In Kenny v Preen[10] the tenant's complaint related to a series of letters, in which the landlord threatened to evict the tenant physically and to throw her property into the street, and to visits by the landlord to the premises, where he regularly shouted threats to her and knocked on the door demanding that she quit the flat. There it was held that a breach of the covenant for quite enjoyment could occur, even though the acts complained of did not amount to a direct physical interference with the premises. The conduct by the landlord was held to seriously interfere with the tenant's proper freedom of action in exercising her right of possession and deprived her of the full benefit of that right to possession. Conduct that prevented the tenant exercising undisturbed possession would constitute a breach of the covenant for quiet enjoyment.[11]
5. The covenant for quiet enjoyment is reflected in the Standard Residential Terms as set out in schedule 1 to the RT Act. Clause 52 provides that the lessor must not cause or permit any interference with the reasonable peace, comfort or privacy of the tenant in the use by the tenant of the premises.
6. If the Tribunal considers that the tenant's use or enjoyment of the premises has diminished significantly as a result of interference with the tenant's quiet enjoyment of the premises, or the tenant's ability to use the premises in reasonable peace, comfort and privacy by the lessor section 71 of the RT Act provides that a reduction in the rental rate payable under the Residential Tenancies Act agreement must be ordered by the Tribunal. Section 71(2) provides that a tenant's quiet enjoyment of premises is interfered with if there is substantial interference with, or a significant lessening of freedom in exercising, the tenant's rights.
7. Clause 52 uses the word 'must' to describe the landlord's obligation, and thus this contractual obligation requires strict performance. This means that a breach of the covenants or quiet enjoyment may arise irrespective of whether or not the landlord intended to disturb the tenant's enjoyment of the premises. Indeed, the landlord might be liable to compensate a tenant for breach of quiet enjoyment, notwithstanding that the landlord is engaged in otherwise lawful activity.[12]
8. The conduct of the lessor in serving a retaliatory notice of termination has resulted in an interference with the quite use and enjoyment of the premises by the tenants. The tenants provided evidence of the following:
   • (a) On 3 July 2014, immediately after the tenants' application to ACAT in relation to a breach of the residential tenancy agreement by the landlord which had been settled by agreement, and whilst still in the precincts of ACAT, the lessor's agent remarked to Mr Shkolar that he could use the money paid to him in compensation 'to move out'. It is noted that this remark was made immediately after a conference in which the tenant had revealed that he was suffering from depression.
   • (b) The conduct of the lessor and the lessor's agent's resulted in the tenants feeling stressed and worried and fearful of further harassment or retaliatory action during the notice period.
   • (c) The Tribunal had before it a letter from a clinical psychologist in relation to the effect of the termination notice (and the comments described in paragraph a above). The effect was severe levels of anxiety and depression and stress.
9. The evidence before the Tribunal indicates that the tenants were good tenants who always paid the rent on time and took proper and appropriate care of the premises. The landlord was annoyed that the tenants asserted their right to commence action in ACAT, and received compensation in relation to a breach of the residential tenancy agreement by the landlord. In retaliation, and in order to get rid of the 'troublesome' tenants, a 26 weeks notice of termination was served. This resulted in a high level of stress and uncertainty for the tenants and in contrast to their expectations that this would be a longer tenancy, the distress and lack of stability caused by having to search for a new home. I find that the conduct of the landlord in serving a retaliatory notice of termination, and the conduct of the landlord's agent in making the caustic comments described above resulted in an interference with the tenants' quiet enjoyment of the premises. Their conduct is a form of harassment and harassment has long been recognised as a breach of the covenant of quiet enjoyment.
10. The law in Australia has not gone so far as to suggest that there is an implied duty to act in good faith in every contract, but it is clear that, as a matter of construction, a term to act in good faith may be implied into any particular contract. In Commonwealth Bank of Australia v Barker[13] the High Court noted that fairness in dealings between contracting parties may be understood as an aspect of the duty of good faith, which has been accepted in other legal systems and is wider than that of honesty.[14] While noting that the question of whether the standard of good faith should be implied generally to contracts in Australia has not been resolved, the Court stated that such an implication may depend on the type of contract in the context. There are numerous instances where superior courts in Australia have implied a duty to act in good faith, for example, in Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 76 FCR 151. In that matter, the Court noted that the community had grown so used to courts applying standards of fairness to contracts that fair dealing in good faith is the expected standard and that fair dealing is a major theme in Australian contract law.[15]
11. Section 6A of the RT Act defines a residential tenancy agreement as one where the lessor gives to the tenant the right to occupy premises for use as a home. It would be appropriate in the context of a contract where a core provision is the provision of a home for a tenant to imply a duty on all parties to act in good faith. The conduct of the lessor in serving a 26 weeks notice of termination in the circumstances described above in retaliation for the conduct of the tenant in asserting his rights is an example of a manifest failure to act in good faith.

1. Section 83 of the RT Act provides that ACAT may make an order requiring the payment of compensation for loss of rent or any other loss caused by the breach of a residential tenancy agreement. The interference with the tenants' rights to peace, comfort, enjoyment and relaxation in the use of the premises constituted by a breach of the covenants for quiet enjoyment is a breach, which would justify the making of an order for the payment of compensation.
2. A party who suffers damage as a result of a breach of contract by another party is entitled to an amount of damages which will, as far as possible, put the injured party in the same position they would have been in had the breach not occurred. That is, damages for breach of contract are compensatory.[16] The innocent party must establish that the loss complained of was caused by the breach of contract and that the loss was not too remote from the breach. The rule in Hadley v Baxendale[17] is applied to determine which loss is recoverable. An innocent party may recover damages caused by a breach of contract if they are the types of loss that occurs in the usual course of events, or arise naturally from the breach, or where the loss complained of may be reasonably supposed to have been in the contemplation of the parties at the time they made the contract to be likely to result from the breach.
3. While damages for personal distress or pain and suffering are not usually awarded for a breach of contract, recent decisions indicate that such an award is appropriate and proper where the contract itself promised peace, comfort, and enjoyment or relaxation. Damages have been awarded for non-economic loss resulting from a breach of contracts relating to holidays and weddings.[18] Damages have been awarded in this tribunal for unlawful eviction in similar circumstances to this matter.[19] While the circumstances of those cases were different, the principles set out in those cases are relevant to this case and will be followed.
4. I am satisfied that the tenants had suffered economic loss, however I note that the losses claimed are of a type which would ordinarily be incurred by a tenant at the end of the tenancy, although this tenancy has, as a direct result of the conduct of the landlord, been brought to an end earlier than anticipated by the tenant. All tenancies do come to an end and these are costs that would have in the fullness of time been incurred by the tenants, therefore, it is appropriate that the amount claimed be discounted.
5. The tribunal is satisfied that the tenants have suffered non-economic loss as a result of the emotional stress and upset caused by the retaliatory notice to vacate. The tribunal is satisfied that this is an appropriate case for the determination of amount of compensation for that non-economic loss.
6. The tribunal, applying the rule in Hadley v Baxendale makes the following award in relation to the economic loss suffered by the tenant:
   • (a) ACAT application fee $66
   • (b) medical costs $180
   • (c) costs associated with moving and relocating $300.
7. The tribunal, taking into account the evidence before the tribunal and the quantum of award made in similar cases, makes the following award in relation to the non-economic loss suffered by the tenant: $1250.

[1] Residential Tenancies Act 1997 - Section 57

(a) a lessor has applied for a termination and possession order under this part; and

(i) the tenant applied to the ACAT for an order in relation to the lessor; or

(ii) the tenant complained to a governmental entity in relation to the lessor; or

(iii) the tenant took reasonable action to secure or enforce the tenant's rights; or

(2) The ACAT must refuse to make the termination and possession order -

(a) if satisfied that the circumstance mentioned in subsection (1) (b) exists; and

(b) in the absence of proof to the satisfaction of the ACAT that the lessor was not motivated to apply for a termination and possession order by the circumstance.

(3) Subsection (2) applies despite any other provision of this part.

[2] Transcript 6 November 2014 at page 6

[3] See for a fuller discussion AJ Bradbrook, 'The Rights and Duties of Landlords and Tenants Under The Victorian Residential Tenancies Act', Melbourne University Law Review [Vol. 13, Dec. '81]

[5] Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185

[6] Aussie Traveller Pty Ltd v Marklea Pty Ltd [1997] QCA 2

[7] ACT Housing v Frank [2006] ACTRTT 8

[8] ACT Housing v Margules [2003] ACTRTT 6

[9] The Commissioner for Social Housing in the ACT v Norman FAULL [2008] ACTRTT 20

[10] [1962] EWCA Civ 2; [1963] 1 QB 499

[11] AJ Bradbrook, 'The Rights and Duties of Landlords and Tenants Under The Victorian Residential Tenancies Act', Melbourne University Law Review [Vol. 13, Dec. '81] 186-187

[12] Worrall v Commissioner for Housing of Australian Capital Territory [2002] FCAFC 127. For a fuller discussion see Allan Anforth et al, Residential Tenancies Law and Practice New South Wales (Federation Press, 5th ed, 2001) 109 to 110

[13] [2014] HCA 32

[14] Commonwealth Bank of Australia v Barker [2014] HCA 32 [105]

[15] see also Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 and Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 16

[16] Robinson v Harman [1848] EngR 135

[17] [1854] EngR 296; (1854) 9 Exch 341

[18] Jarvis v Swan Tours [1973] 1All ER 71; Baltic Shipping v Dillon [1993] HCA 4

[19] Osuchowski & Scouller v Radojevic [2008] ACTRTT 13 ; Kiternas v Watts [2006] ACTRTT 4 and Abuaagla v Edwards (Residential Tenancies) [2014] ACAT 55