Tralee Technology Holdings Pty Limited v Yun Chen

Supreme Court of NSW|2015-03-05|Before: Bellew J

Judgment

Tralee Technology Holdings Pty Limited ("the plaintiff") seeks to appeal from a decision of Magistrate Hunstman delivered on 25 November 2013 in proceedings brought against Yun Chen ("the defendant") in the Local Court. The defendant has filed a notice contending that the decision of the Magistrate (in respect of ground 1) should be affirmed on grounds in addition to those upon which the Magistrate relied. The notice of contention specifies that the defendant does not seek a discharge or variation of any part of the Magistrate's decision.
A joint Court Book was prepared containing the following affidavits: 1. Guy Joseph Maloney dated 27 March 2014; 2. Guy Joseph Maloney dated 27 May 2014; 3. Jonathan Hai Song Lu dated 27 January 2015.

The agreement to lease premises at 41 Churchill Street, Killara

The plaintiff is a software research and development company. In or about November 2010 its principal, Mr Mark Bradley, commenced looking for premises that would be suitable both as an office for the plaintiff, and a residence for himself and his family. In his affidavit filed in the proceedings before the Magistrate Mr Bradley explained that he was looking for a "substantial home" which could meet both his business and personal needs.

The proceedings in the Consumer Trade and Tenancy Tribunal

In 2011, proceedings were commenced by the defendant in the Consumer Trade and Tenancy Tribunal ("CTTT") seeking recovery of arrears of rent from the plaintiff. The plaintiff subsequently brought proceedings in that jurisdiction claiming damages for breaches of the agreement. Those breaches included an alleged failure on the part of the defendant to repair and/or properly maintain the premises. Ultimately, it was determined that the plaintiff's claim for damages exceeded the jurisdictional limit of the CTTT and the proceedings were transferred to the Local Court for determination.

The plaintiff's claim for damages in the Court below

In the amended statement of claim filed in the Local Court, the plaintiff pleaded a breach of clause 12 of the agreement which was in the following terms: "12. The Landlord agrees: 12.1 To make sure the residential premises are reasonably cleen (sic) and fit to live in, and 12.2 To keep the premises in reasonable repair considering the age of, the amount of rent paid for and the respective life of the premises."
Paragraph (8) of the amended statement of claim then pleaded the following: "In breach of the lease, the following defects were present at the property: a. Floorboard movement and subsidence; b. Water ingress to roof cavity; c. Vermin (possum) access to roof cavity; d. Inadequate sound insulation during rain events; e. Ceiling mould on rear patio, southern eaves and front veranda; f. Shower door and tiles coming away from the downstairs bathroom walls; g. Cornice in upstairs bathroom falling from the ceiling; h. Ceiling stain and bowed ceiling in parent's retreat/study; and i. Noisy air-conditioning unit.
The amended statement of claim sought damages for both non-economic loss and economic loss totalling $57,100.00. The particulars of the claim for damages for non-economic loss were pleaded in paragraph (14) of the amended statement of claim as follows: Particulars of non-economic loss The table below particularises the amount of non-economic loss claimed for each defect. The amount claimed is based on the Table of Comparable Verdicts set out in Residential Tenancy's Law and Practice NSW, 5th Edition (2011) at paragraph [2.187.7]. Defect Duration Comparable CTTT Decision/s Amount Claimed Floorboard movement and subsidence 24 months Baxter and Ellard v Confeggi (2005) $5,000.00 Reiss v Helson [2001] NSWSC 386 Cassidy v Chandra (2010) Water ingress to roof cavity resulting in ceiling mould on rear patio, southern eaves and front veranda and ceiling stain and bowed ceiling in parent's retreat/study 24 months Cooley v Department of Housing (2003) $6,000.00 Eisman v Grant (1998) Vermin (possum) access to roof cavity 24 months Alder v Goodee (2005) $500.00 Lovell v Sainjo (2007) Inadequate sound insulation duration rain events 24 months Melita and Parker v Santa Cruz Resources Pty Limited (2008) $3000.00 Nouvellas v Culley (2009) Reiss v Helson [2001] NSWSC 386 Shower door and tiles coming away from the downstairs bathroom walls 12 months McCleary v Parker (2007) $300.00 Cornice in upstairs bathroom falling from the ceiling n/a McCleary v Parker (2007) $300.00 Noisy air-conditioning unit 24 months See above, inadequate sound insulation during rain events $3,000.00 TOTAL $18,100.00

The particulars of the claim for economic loss were pleaded in the same paragraph as follows: "Particulars of economic loss The lease by the plaintiff of commercial premises in North Sydney as its principal place of business during the term of the Lease for $39,000 as, due to the Defects, it was unable to be used as the plaintiff's principal place of business."

THE MAGISTRATE'S CONCLUSIONS

The Magistrate concluded that the plaintiff was entitled to damages in the sum of $2,807.17, plus interest calculated in accordance with s. 100 of the Civil Procedure Act 2005 NSW ("the CPA"). Such damages were expressed to be referable to breaches of the agreement arising from the presence of mould and vermin, the damage to the cornice, the ingress of water and the damage to the shower door (see Magistrate's reasons at [83]). I have considered in more detail below those particular aspects of the Magistrate's reasons which go directly to the four grounds of appeal upon which the plaintiff now relies.

Ground 1 - The Magistrate erred in construing the lease in a manner which excluded the landlord's liability for conduct which caused the premises to be unsuitable for the conduct of the tenant's business.

The Magistrate's reasons

Commencing at [30] of her reasons the Magistrate said the following: "I consider that the fact that a company has advised that it will use a residential address as its registered office address does not indicate that the parties have agreed that the lease of the residential premises is a business lease or commercial lease. For a lease of residential premises to become a lease for business premises or a commercial lease, there needs to be clear terms and conditions to evidence the parties agreement, or clear evidence of such an agreement being made in oral terms supported by part performance. There is no evidence that the landlord, or the landlord's managing agent, agreed to a lease of the premises for business purposes, rather the conversation with the managing agent, detailed Mr Mark Bradley, indicates a concern expressed by Mr Bradley that repairs would be promptly attended to in discussions to that effect and advice by Mr Mark Bradley that business clients and workers would be attending the premises and using the premises. In the tribunal's (sic) view this does not evidence any agreement between the landlord's managing agent, or the landlord, and the tenant, that the premises could be substantially used to conduct a business. There was no agreement to provide a premises for use as a business, there was an agreement to provide a premises for use as a residence. In my view the agreement between the parties remained an agreement to lease residential premises, and the agreement was a residential tenancy agreement, notwithstanding that there may have been some intended use of the premises, and to have workers and clients visit expressed by Mr Mark Bradley. [31] The written residential tenancy agreement and the Act provide that the agreement is for lease of residential premises, for use as a residence, not as a business. Given the existence of a clear residential tenancy agreement between the parties there would need to be clear evidence to establish that the parties enter into an agreement to lease a premises for business purposes. There are no express written terms to this effect. It is significant that the agreement contains special conditions which were quite detailed but did not contain any conditions or terms that the parties that the premises were lease for conduct of a business. Nor is there any evidence of any value paid by the tenant to the landlord for business use - the rent remained the rent originally agreed upon for lease of a residential premises. The tenant relies on paragraph 7 of the affidavit of Mark Bradley, for reasons detailed above I do not consider that this evidences an agreement for use of the premises for business purposes, or to supply the premises as suitable for conduct of a business."
The summons which has been filed cites paragraph [32] of the Magistrate's reasons as being reflective of the error relied upon in respect of ground 1. That paragraph is as follows: "I am not satisfied as to an agreement between the landlord and tenant to lease the premises for the purpose of conduct of a business. As such the landlord cannot be liable for any alleged conduct by the landlord which caused the premises to be unsuitable for the conduct of the business - the landlord did not agree to provide or maintain the premises for the purpose of the business. I therefore find that the plaintiff has not established the claim for damages relating to the business as I am not satisfied that any such loss or damage flows from breach of the agreement, as the agreement did not include any terms of conditions warranting that the landlord would provide or maintain the property for business purposes"

Submissions of the plaintiff

Counsel for the plaintiff submitted that paragraph [32] of the Magistrate's reasons reflected that the Magistrate had erred in law, either in: 1. construing the agreement; and/or 2. assessing damages.
It was submitted that the evidence established that Mr Bradley had made it clear to the defendant's agent that the plaintiff proposed to use the premises for business purposes. Counsel for the plaintiff submitted that in light of that evidence, it was not open to the Magistrate to construe the agreement in a way which operated to exclude the plaintiff from seeking damages arising from its asserted inability to use the premises for business purposes. It was submitted that the Magistrate had erred by concluding that because the agreement was governed by the Act, and/or because it did not expressly include a reference to the premises being used for business purposes, damages could not be awarded in connection with such use.

Submissions of the defendant

Counsel for the defendant specifically drew attention to s. 39 of the Local Court Act 2007 ("the LCA") which is in the following terms: 39 Appeals as of right (cf LCA 1982, section 73) (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. (2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness.
It was submitted that properly construed, ground 1 raised the question of whether the Magistrate had failed to give proper consideration to evidence before her, and/or whether the evidence was capable of supporting the particular construction of the lease for which the plaintiff contended. It was submitted that neither of these matters gave rise to any question of law.
It was further submitted on behalf of the defendant that the fact that the intended use of premises was communicated by the plaintiff to the defendant did not render the intended purpose a term of the agreement, and did not constitute a warranty. It was submitted that no such term was included in the agreement and that all of the relevant terms pointed to the intended use of the premises for residential purposes.
Finally, it was submitted that in any event, the evidence that it was the defendant's conduct which caused the premises to be unsuitable for the conduct of the plaintiff's business was tenuous, if not non-existent. It was submitted that the high point of the evidence in this regard was a broad assertion made by Mr Bradley (at paragraph [109] of his affidavit) to the effect that the plaintiff could not use the premises for its business due to the alleged defects. It was submitted that such a broad assertion was largely unsupported by the evidence and was made in circumstances where, notwithstanding the alleged defects, the plaintiff continued to occupy the premises for the duration of the agreement.

Consideration and conclusion

Section 39 of the LCA confers a right of appeal from a decision of a Magistrate on a question of law. In Zogiannis v Stevens [2012] VSC 264 Davies J observed (at [4]): "Where the grounds do no more than indicate that the subject matter of the proposed appeal invites reconsideration of the merits of the decision, the jurisdiction of the court is not enlivened, even though the question of law identified may be expressed in judicial review terms. If the question of law properly analysed is not a question of law, the form of its expression does not turn it into a question of law. Questions of fact or questions of mixed fact and law are not turned into pure questions of law merely by embracing language that the Magistrate "erred in law" or by using formulaic language for grounds of judicial review".
It is important to emphasise that ground 1 does not assert that the Magistrate reached a finding in respect of which there was no evidence, nor does the ground assert that the Magistrate misdirected herself in law. Rather, the ground asserts that the Magistrate erred in her construction of the agreement. In doing so, the ground specifically refers to what the Magistrate said at [32] of her reasons. In my view, what the Magistrate said in that part of her reasons does not involve any question, or error, of law. Properly understood, what the Magistrate determined at [32] was that the plaintiff did not agree to lease the premises from the defendant for the purposes of the conduct of a business. That, in my view, was a conclusion of fact.
Counsel for the plaintiff referred me to two authorities which, he submitted, supported the proposition that the question of construction of a contract is a question of law. The first was Jackson Nominees Pty Limited v Hanson Building Products Pty Limited [2006] QCA 159 where, in dealing with the issue of costs following the determination of the principal proceedings between the parties, Jerrard JA said (at [4]): "[4] This appeal against the decision of the District Court to the Court of Appeal succeeded on a question of law. It involved a pure question of law, namely the correct construction of a contract. The particular legal issue was whether there was a term implied in the contract that required the appellant to provide work to the respondent for the duration of the four year contract, even if that required the appellant to conduct a business which otherwise it would have ceased to conduct. The respondent succeeded in the District Court but lost on appeal. The respondent's case found favour with two of the four judges who heard it. In the particular circumstances of that appeal, it is appropriate for this Court to issue an indemnity certificate to the respondent in respect of the appeal costs."
The "pure question of law" to which his Honour referred was whether or not a particular term was implied into the agreement by law: Jackson Nominees Pty Limited v Hanson Building Products Pty Limited [2006] QCA 126 esp. at [17]-[19]. It was no part of the plaintiff's case in the present proceedings that any term was implied by law into the agreement, and neither ground 1 itself, nor the submissions made in support of it, asserted that the Magistrate was in error in failing to find that this was so. In my view, the decision in Jackson is clearly distinguishable from the present case and provides no support for the plaintiff's position.
The second authority to which I was referred was the decision of Harrison AsJ in Video Ezy International Pty Limited v Sedema Pty Limited [2014] NSWSC 143 where her Honour observed (at [18]): "Sedema said that the appeal falls into two categories. The first category involves matters of appeal as of right on the question of law and the second category involves matters that require leave because they involve a question of mixed law and fact. The parties dispute which grounds of appeal raise questions of mixed fact and law. Both parties agree that Ground 1 involves the proper construction of a contract which is a question of law giving Video Ezy an appeal as of right. Video Ezy's position is that only Ground 5 is a question of mixed fact and law and the balance of the grounds of appeal raise questions of law only. Sedema's position is that Grounds 2 to 6 involve mixed questions of fact and law that require leave. Sedema opposes leave being granted."
Her Honour's reference to the proper construction of a contract being a question of law must be viewed in the context of the issues between the parties in those proceedings. That context emerges from the various grounds of appeal set out at [16] of her Honour's judgment. Grounds (3) and (4) asserted that the Magistrate had erred in law by concluding that a particular condition was implied by law into the relevant agreement. As I have already observed, that was not part of the plaintiff's case in the present proceedings. Ground 1 does not assert that the Magistrate erred in failing to find that any condition(s) were implied by law. It follows that in my view the decision in Video Ezy is also distinguishable from the circumstances of the present case.
No question of law arises in respect of ground 1 and it is not made out. In these circumstances it is not necessary for me to consider the defendant's notice of contention.

Ground 2A - The Magistrate erred in holding that because the human occupants were not parties to the contract, damages for non-economic loss were not recoverable.

The Magistrate's reasons

Having outlined the nature of the plaintiff's claim for damages the Magistrate said (at [85] of her reasons): "[85] It is arguable that damages are not payable to the plaintiff for non-economic loss suffered by the occupants (discomfort, distress, inconvenience, disappointment) as such was not suffered by the tenants/plaintiff, the company. The cases where a person asserting breach of contract and damages for non-economic loss for him or herself and a spouse and or children usually involves someone who is a natural person and who is themselves a party to the contract, claiming non-economic for themselves as a party, and for a family member who was to have the benefit of the contract. In the present case the occupants were not parties and for this reason I consider that no damages for non-economic loss are payable."

Submissions of the plaintiff

Counsel for the plaintiff submitted that the Magistrate erred in law in finding (at [85]) that because the individual occupants of the premises (i.e. Mr Bradley and his family) were not parties to the agreement, damages for non-economic loss were not recoverable. Such error, it was submitted, was evident in light of what was said to be "authoritative case law" which established that damages for non-economic loss in connection with losses suffered by persons who are not parties to a contract, but for whose benefit the contract was entered into, are recoverable. In this regard counsel referred me, in particular, to the decisions in Jackson v Horizon Holidays [1975] 3 All ER 92 and Cranston v CBFC Limited (NSWSC, unreported 11 June 1993, Bryson J). Counsel also emphasised the provisions of item 3 of the agreement (set out at [5] above).

Submissions of the defendant

Counsel for the defendant submitted that ground 2A involved no question of law. In the alternative, it was submitted that the facts of the present case were distinguishable from those cases upon which counsel for the plaintiff relied. Counsel for the defendant submitted that all of the matters which went to the alleged failure on the part of the defendant to keep the premises in good order and repair arose after the commencement of the agreement. It was submitted that in these circumstances, they could not have been contemplated at the time at which the agreement was entered into, just as any alleged distress and discomfort could similarly not have been contemplated. The primary point of distinction which counsel for the defendant sought to draw arose from the fact that the authorities upon which the plaintiff relied all dealt with circumstances in which there had been a failure on the part of a contracting party to deliver that which was agreed would be delivered by the contract.

Consideration and conclusion

Ground 2A raises the question of whether the Magistrate erred in finding that damages for non-economic loss were not recoverable. In my view, that involves a question of law. That requires me to consider a number of authorities to which I was referred.
In Jarvis v Swans Tours Limited [1973] QB 233 the plaintiff booked a 15 day holiday with the defendant but returned disappointed in the fact that some of the advertised amenities had not been provided. The Court of Appeal concluded that he was entitled to damages for (inter alia) his loss of enjoyment. Denning MR concluded (at 239) that the plaintiff's damages were not limited to the mere cost of the ticket but extended to general damages for the disappointment he had suffered and the loss of the amenities which he should have had. A similar view was reached by Edmund Davies LJ who concluded (at 239) that if a travel agent failed to provide a holiday of the contracted quality, the damages for which it was liable were not restricted to the amount paid by the client for the holiday or for matters of physical inconvenience and discomfort, but extended to damages for disappointment. Stephenson LJ (at 240) agreed.
The decision in Jarvis is authority for the proposition that in particular circumstances, damages payable for breach of contract may extend to damages for loss of enjoyment. However Jarvis was a case where the plaintiff was suing for damages solely in his own right.
In Jackson (supra) the plaintiff had contracted with the defendant, a travel agent, in respect of arrangements for a holiday. The plaintiff was the sole contracting party but his family were to accompany him. He had told the defendant, generally speaking, that he wanted all aspects of the proposed holiday to be of the highest standard. Specific requests were made in respect of (inter alia) accommodation. As events transpired, the plaintiff and his family were greatly disappointed with the standard of accommodation, along with the fact that advertised amenities were not available. The plaintiff brought an action against the defendants for breach of contract.
Lord Denning MR (with whom Orr and James LJJ agreed) concluded (at 95) that where a party enters into a contract for the benefit not only of himself but for the benefit of others who were not parties to such contract, that person is able to sue for damages for the loss suffered not only by himself but also by those others for whose benefit the contract was entered into, even though he did not act as a trustee for those others. In so concluding, his Lordship referred to the decision in Lloyd's v Harper (1880) 16 Ch D 290 at 321 where Lush LJ had said: '… I consider it to be an established rule of law that where a contract is made with A. for the benefit of B., A. can sue on the contract for the benefit of B., and recover all that B. could have recovered if the contract had been made with B. himself.'
The decision in Jackson was referred to by Bryson J in Cranston (supra) where his Honour observed: "The question of damages in respect of a benefit which would not have been enjoyed, or would not have been enjoyed solely by the contracting party but would have flowed to his wife, children or close friends and associates is a familiar one. The solution of allowing the damages to the contracting party is well supported by practicalities, and is supported by authority, although it can be criticised in theory. The fact that a benefit is conferred on a husband by his making provision for his wife or children to go on a holiday or enjoy some other contractual benefit is fully demonstrated by the fact that he is willing to pay for it. The supposed anomaly that he was not going to enjoy the advantages would arise on the supposition that it was a matter of indifference to him whether those close to him enjoyed the contemplated advantages, whereas his behaviour demonstrates that it was a matter of money value to him. Any element of anomaly is greatly outweighed by the anomaly of the other party to the contract not providing the contemplated advantage, although receiving the consideration. Lord Denning MR in Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468 at 1472 and 1473 stated his views in terms which have been disapproved in the House of Lords, but accompanied by practical illustrations which I would respectively sa yare of value. In Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 disapproval was expressed of the basis on which Lord Denning put his decision, but not of the result. Lord Wilberforce said at 283: "I am not prepared to dissent from the actual decision in that case. (scil. Jackson v Horizon Holidays Ltd) It may be supported either as a broad decision on the measure of damages (per James LJ) or possibly as an example of a type of contract - examples of which are persons contracting for family holidays, ordering meals in restaurants for a party, hiring a taxi for a group - calling for special treatment. As I suggested in New Zealand Shipping Co Ltd v AM Satterthwaite and Co Ltd [1975] AC 154, 167, there are many situations of daily life which do not fit neatly into conceptual analysis, but which require some flexibility in the law of contract. Jackson's case may well be one." Observations to similar effect were made by Lord Russell of Killowen at 293, and Lord Keith of Kinkel at 297."
Subsequently in Holloway v Witham (1990) 21 NSWLR 70 Lee CJ at CL, citing the decision in Jackson, observed (at [87]): "Then the second technical argument that I am aware of is the question of whether the Civil Liability Act, and this is raised on the defendant's defence, limits the ability to recover non-economic loss in this case…Now, for reasons that are later in this document, that is not a viable argument because a Supreme Court Associate Justice has looked at this and ruled that out. The Civil Liability Act concerns injuries, and this is not about an injury; this is about the interruption to the enjoyment of the property."
Finally in Dockside Fitness Pty Limited & ors v Woods [1996] TASSC 142 Slicer J applied the decision in Jackson and concluded that a contracting party can recover damages not only in respect of his or her own losses, but in respect of the losses suffered by others as a consequence of the relevant breach of contract.
The Magistrate's ultimate conclusion in the present case, as expressed in the final sentence of paragraph [85] of her reasons, was that damages for non-economic loss were not payable to the plaintiff because the other occupants of the premises were not parties to the agreement. Her Honour appeared to draw some distinction between circumstances in which a plaintiff was a corporation and those where the plaintiff was an individual. Although her Honour did not say so expressly, she appears to have held the view that in the former circumstances, damages were not recoverable.
In my view, the authorities which I have referred support the proposition that it is open to a party, in an action for breach of contract, to claim damages not only on that party's own behalf but on behalf of any other person or persons who were intended to receive some benefit from the agreement which had been reached. In the present case, the agreement was a residential tenancy agreement to which the Act applied and it was clearly contemplated that Mr Bradley and his family would reside at the premises. In my view, the fact that the contracting party was a corporation does not affect the operation of the principle, established by the authorities to which I have referred, that a contracting party can recover damages in respect of losses suffered by others as a consequence of the relevant breach of contract.
I am unable to accept the submission made on behalf of the defendant that some distinction is to be drawn between the various "holiday" cases and the circumstances of the present case. Nothing turns on the fact that in the present case, the circumstances giving rise to the claim for damages arose after the agreement had been entered into. The same could be said in the case of each of the authorities to which I have referred.
It follows that ground 2A is made out. However, that of itself does not entitle the plaintiff to relief. The Magistrate concluded that even if the plaintiff could recover damages in respect of the losses suffered by others, the provisions of the Civil Liability Act 2002 (NSW) ("the CLA") applied to the present proceedings, and that no damages were recoverable. That conclusion is the subject of ground 2, to which I now turn.

Ground 2 - The Magistrate erred in holding that non-economic loss could not be awarded due to the provisions of the Civil Liability Act 2002

I have previously set out (at [11]) the terms in which the plaintiff's claim for damages for non-economic loss was pleaded. Consistent with that pleading, in the course of opening the case to the Magistrate counsel for the plaintiff outlined what he expected to be the various issues and said (commencing at T5 L15): "Then the second technical argument that I am aware of is the question of whether the Civil Liability Act, and this is raised on the defendant's defence, limits the ability to recover non-economic loss in this case…Now, for reasons that are later in this document, that is not a viable argument because a Supreme Court Associate Justice has looked at this and ruled that out. The Civil Liability Act concerns injuries, and this is not about an injury; this is about the interruption to the enjoyment of the property."
The Magistrate (at [84] of her reasons) expressed the view that the plaintiff's claim for damages for non-economic loss included "a claim for distress, inconvenience, discomfort and disappointment arising from the landlord's breaches of the agreement". Her Honour concluded (at [86]) that even if the plaintiff could recover damages for the losses suffered by others, she was not satisfied that this was so in the present case. Commencing at [87], her Honour considered a number of authorities to which she had been referred by the parties. She also considered the relevant provisions of the CLA. Having done so, her Honour concluded (at [94]): "There is thereby a conflict between the cases of Fawzi and Louw, both Supreme Court decisions. In Fawzi there was no consideration of the decision in Louw, nor was there consideration of the Court of Appeal decisions which were fully considered by Justice Barr in Louw. Given the reliance by Justice Barr on Court of Appeal decisions then I find the decision of i to be more persuasive authority. I am bound to consider persuasive authority of the Supreme Court. Justice Barr's decision is also authoritative because he addresses the questions before him with the specific intention of providing guidance to inferior courts and tribunals. Accordingly, on the authority of the Supreme Court, in (sic) I find, in the current matter that non-economic loss cannot be awarded because of the provisions of the Civil Liability Act 2002 ("CLA"). In particular, the CLA provides that I must consider, in accordance with s. 16 of the CLA, whether the severity of the non-economic loss was at least 15% of a most extreme case. Accordingly I make no award for non-economic loss."

Submissions of the plaintiff

The fundamental submission advanced by counsel for the plaintiff was that in advancing its claim for damages for non-economic loss, the plaintiff was not claiming damages for "personal injury", but was rather claiming damages for discomfort and loss of enjoyment of the property. It was submitted that in these circumstances, the provisions of the CLA and the relevant authorities supported the conclusion that the plaintiff's claim was one for damages which did not attract the provisions of the CLA.

Submissions of the defendant

Counsel for the defendant submitted that the plaintiff's claim for damages for non-economic loss was properly viewed as a claim for damages for mental distress and anxiety, which were "injuries" within the meaning of the CLA. It was submitted that in these circumstances, where the severity of any losses fell below the threshold imposed by s. 16 of the CLA, the Magistrate's conclusions were correct. It was further submitted that the Magistrate's reasons reflected a careful consideration of the authorities to which she was referred.

Consideration and conclusion

A consideration of the competing positions of the parties firstly requires reference to various provisions of the CLA. Section 3 contains the following relevant definitions: "damages" includes any form of monetary compensation but does not include: (a) any payment authorised or required to be made under a State industrial instrument, or (b) any payment authorised or required to be made under a superannuation scheme, or (c) any payment authorised or required to be made under an insurance policy in respect of the death of, injury to or damage suffered by the person insured under the policy. "non-economic loss" means any one or more of the following: (a) pain and suffering, (b) loss of amenities of life, (c) loss of expectation of life, (d) disfigurement.
Section 11 contains the following further definitions: 11 Definitions In this Part: "injury" means personal injury and includes the following: (a) pre-natal injury, (b) impairment of a person's physical or mental condition, (c) disease. "personal injury damages" means damages that relate to the death of or injury to a person.
Section 11A of the Act is in the following terms: 11A Application of Part (1) This Part applies to and in respect of an award of personal injury damages, except an award that is excluded from the operation of this Part by section 3B. (2) This Part applies regardless of whether the claim for the damages is brought in tort, in contract, under statute or otherwise. (3) A court cannot award damages, or interest on damages, contrary to this Part. (4) In the case of an award of damages to which Part 2A (Special provisions for offenders in custody) applies, this Part applies subject to Part 2A.
Section 16 of the Act makes provision for the determination of damages for non-economic loss as defined in s. 3: 16 Determination of damages for non-economic loss (1) No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15% of a most extreme case. (2) The maximum amount of damages that may be awarded for non-economic loss is $350,000, but the maximum amount is to be awarded only in a most extreme case. (3) If the severity of the non-economic loss is equal to or greater than 15% of a most extreme case, the damages for non-economic loss are to be determined in accordance with the following Table: Table Severity of the non-economic loss (as a proportion of a most extreme case) Damages for non-economic loss (as a proportion of the maximum amount that may be awarded for non-economic loss) 15% 1% 16% 1.5% 17% 2% 18% 2.5% 19% 3% 20% 3.5% 21% 4% 22% 4.5% 23% 5% 24% 5.5% 25% 6.5% 26% 8% 27% 10% 28% 14% 29% 18% 30% 23% 31% 26% 32% 30% 33% 33% 34%-100% 34%-100% respectively

(4) An amount determined in accordance with subsection (3) is to be rounded to the nearest $500 (with the amounts of $250 and $750 being rounded up). The following are the steps required in the assessment of non-economic loss in accordance with this section: Step 1: Determine the severity of the claimant's non-economic loss as a proportion of a most extreme case. The proportion should be expressed as a percentage. Step 2: Confirm the maximum amount that may be awarded under this section for non-economic loss in a most extreme case. This amount is indexed each year under section 17. Step 3: Use the Table to determine the percentage of the maximum amount payable in respect of the claim. The amount payable under this section for non-economic loss is then determined by multiplying the maximum amount that may be awarded in a most extreme case by the percentage set out in the Table. Where the proportion of a most extreme case is greater than 33%, the amount payable will be the same proportion of the maximum amount.

In the State of NSW v Ibbett [2005] NSWCA 445; (2005) 65 NSWLR 168 Spigelman CJ inclined to the view (at [21]-[22]) that an emotional reaction to, or "injured feelings" in respect of, the apprehension of physical violence, and an accompanying sense of outrage or indignation, did not amount to "impairment of a mental condition" within the definition of "injury" set out in s. 11 of the CLA. Ipp JA said at [122]-[125]: "[122] The damages sustained by Mrs Ibbett were, according to the trial judge's findings, caused by "anxiety and distress". The State contended that s 3B(1)(a) did not apply because the anxiety and distress did not amount to an "injury" within that section. [123] The State submitted that s 11 supported its argument. Section 11 provides that in Pt 2 "personal injury damages means damages that relate to the death of or injury to a person," and that, in Pt 2: "Injury means personal injury and includes the following: (a) pre-natal injury, (b) impairment of a person's physical or mental condition, (c) disease." The State contended that the meaning of injury as defined in s 11 should be applied to the meaning of injury in s 3B(1)(a). [124] I would not uphold this submission. In my view, anxiety and distress would be an "impairment" of a person's mental condition in accordance with the ordinary meaning of "impairment", as the word is used in s 11. [125] In my opinion, irrespective of whether the ordinary meaning of the word is attributed to "injury", or whether it is given the meaning defined in s11, the word is wide enough to encompass anxiety and stress" (emphasis added).
In the same case Basten JA said (at [211]-[212]): "[211] The Plaintiff sought to escape from these questions by arguing that her award was not an award of "personal injury damages", because it did not relate to injury … . Although "injury" is defined in s 11 to include "impairment of a person's physical or mental condition", that terminology, she argued, was not intended to include impairment constituting something less than a recognised psychiatric condition. The trial judge held, in awarding damages with respect to the assault: "Even in the absence of evidence that the assault caused any medically (including psychiatrically) identifiable injury, the anxiety and distress caused by the assault should be compensated by an appropriately substantial award of general damages …" There being no recognized psychiatric illness, there was, the Plaintiff argued, no impairment of her mental condition. [212] There may be a doubt as to whether limiting the concept of "impairment of mental condition" to an impairment involving a recognised psychiatric illness accords with the general understanding of the term "impairment" or with its use in the statute. In ordinary usage, the term "impairment" connotes a diminution of an antecedent state of affairs or a departure from an objective standard. In discrimination law the term is used to describe departure from a standard; in tort law, it is used to describe departure from a state of affairs caused by the act of the tortfeasor. The ordinary meaning of the term may not reflect a distinction drawn by the law between emotional distress and a psychiatric condition".
Spigelman CJ re-visited the issue in Insight Vacations Pty Limited v Young [2010] NSWCA 137 (at [78]-[79]) and concluded that grief, anxiety, distress and disappointment were elements of pain and suffering within the definition of "non-economic loss" contained in s. 3 of the CLA. In the same case, Basten JA (with whose reasoning Spigelman CJ agreed) said (at [125]): "It is undoubtedly true, as the Chief Justice noted in Ibbett at [21], that injury to reputation, deprivation of liberty and outrage, humiliation, indignity and insult are not commonly referred to as forms of personal injury; rather they usually derive from torts other than negligence, often intentional torts. Matters such as grief, anxiety, distress and disappointment, may fall into a different category. They can be elements of pain and suffering which are the subject of awards for non-economic loss. Similarly, as reflected in the definition of non-economic loss in the Civil Liability Act, an award may be made for "loss of amenities", to cover the non-economic loss resulting from "the deprivation of the ability to participate in normal activities and thus to enjoy life to the full and to take full advantage of the opportunities that otherwise it might offer": Teubner v Humble [1963] HCA 11; 108 CLR 491 at 506 (Windeyer J). … These, however, are heads of damage which fall within the general law understanding of non-economic loss and the statutory definition of that term. Accordingly, they are subject to the constraints imposed by s 16."
In State of NSW v Williamson [2011] NSWCA 183 Campbell JA (at [67]) considered that the extension of the ordinary meaning of "injury" to impairment of a person's mental condition effected by s. 11 of the CLA "could arguably" have the effect that damages for anxiety and distress could be personal injury damages within the meaning of s. 11. However, his Honour made it clear that it was unnecessary to decide the question whether this was in fact so. Clearly, his Honour's comments were obiter.
Counsel for the plaintiff in the present case placed significant reliance upon the decision of Harrison AsJ in Fawzi El-Saiedy v NSW Land and Housing Corporation [2011] NSWSC 820. In that case, the plaintiff was a party to a Residential Tenancy Agreement with the defendant and alleged that his enjoyment of the premises, and that of his family, had been curtailed due (inter alia) to the fact that the premises had been found to contain asbestos. Her Honour concluded (at [95]): "The plaintiff has not claimed damages for physical injury. He has claimed damages for discomfort and loss of enjoyment. It is my view that these types of damages do not fall within the definition of personal injury contained in the Civil Liability Act. Therefore Act does not apply."
In Flight Centre Limited v Louw [2011] NSWSC 132; (2011) 78 NSWLR 656 the plaintiff, in the conduct of its business as a travel agent, arranged bookings of holiday accommodation and travel. The first and second defendants booked a holiday at a resort recommended by the plaintiff. It transpired (inter alia) that the defendants' stay at the resort was interrupted by construction work which was being carried out at the time. The defendants also complained that they had not been notified of other matters by the plaintiff, including the fact that such construction work restricted their access to an adjoining beach. The defendants sued the plaintiff for breach of contract. The particulars of damage were pleaded in terms of the defendants having suffered "loss, inconvenience, distress and disappointment" arising from the matters referred to above. At first instance, an assessor in the Local Court awarded the defendants damages together with interest and costs. The plaintiff brought an appeal to this Court and argued that the damages sought by the defendants were personal injury damages to which s. 16 of the CLA applied.
Barr AJ, having reviewed the authorities, found in favour of the plaintiff, concluding (at [31]): "In my opinion the inconvenience, distress and disappointment experienced by the first and second defendants constituted non-economic loss for the purposes of s 3, being pain and suffering. In my opinion they constituted impairment of the mental condition of each of the first and second defendants and so amounted to personal injury. It follows that the assessor was obliged to ask himself, in accordance with s 16, whether the severity of the non-economic loss was at least 15% of a most extreme case. He did not do so. The plaintiff has established that there was an error of law and has made good its case on the first ground."
In considering the application of these various authorities to the present case, it is important to bear in mind the basis upon which the plaintiff brought its claim for damages for non-economic loss. Mr Bradley asserted (at paragraph [31] of his affidavit) that he was "embarrassed" to use the outside of the house for entertaining guests and business visitors". He expanded upon this in his evidence (at commencing at T26 L10): "So the requirement for us was to have a prestigious property, which is one of the reasons that we hired it at the time. The property was, frankly, an embarrassment and it was not a property where you would entertain your friends in the rain, for example, and it was certainly not a property where you would bring prospective investors to, to have meeting (sic), because the, the potential - if it wasn't raining, the potential for rats to scamper up and down the wall would have been an embarrassment".
When asked whether other defects affected his aspiration to host people at the property, Mr Bradley replied (commencing at T26 L27): "…. You could not use the outside. …. If it rained it was just unusable because the water would just bounce off the guttering and flow inside".
The weight of authority supports the view that a claim for damages for distress, anxiety, or disappointment is a claim for damages to which the CLA will apply. However in my view that was not the claim brought by the plaintiff in the present case. Although Mr Bradley made reference to the property being an "embarrassment" that was not, in my view, an expression of distress, anxiety, disappointment or any similar emotion. It is apparent from those extracts of his evidence above that the claim for damages for non-economic loss arose from a loss of enjoyment of the property. That was not a claim for personal injury damages.
In my view, the Magistrate erred in reaching a contrary conclusion. Her Honour found that there was a "conflict" between the decisions in El-Saiedy and Louw. In my view, the differing conclusions reached in those cases is explained by the fact that the respective claims for damages were brought on different bases. The claim brought in El-Saiedy was one for discomfort and loss of enjoyment of the property. That brought in Louw was one for inconvenience, distress and disappointment. The differing bases upon which the respective claims were brought explain why different conclusions were reached. They also explain why Harrison AsJ in El-Saiedy did not consider (and was apparently not taken to) the various decisions of the Court of Appeal which support the proposition that claims for damages based upon anxiety and distress are claims which attract the provisions of the CLA.
It follows that Ground 2 is made out.

Ground 3 - Due to the error exposed in ground 2, the Magistrate's quantification of damages failed to account for the total loss suffered by the plaintiff.

In light of my conclusions in respect of Grounds 2 and 2A, Ground 3 is made out.

Ground 4 - The Magistrate erred in finding that damages in respect of vermin were only calculable in respect of a three month period when the correct period on the evidence commenced in around June 2011 and was therefore an 18 month period.

The Magistrate's findings

At [70] of her reasons the Magistrate said the following: "I cannot be satisfied on the evidence that the rodents were present for the entire time that the tenant was concerned about possums. The statement of claim only refers to possums. However I am satisfied that the landlord failed to respond and was in breach of the agreement from September 2012 to December 2012, a period of 3 months"

Submissions of the plaintiff

In written submissions, counsel for the plaintiff submitted that leave was required in respect of this ground as it raised "purely a matter of fact". On reflection, and in light of the provisions of ss. 39 and 40 of the LCA, counsel accepted that the plaintiff: 1. had an appeal as of right on a question of law; 2. could seek leave to appeal on the basis of a question of mixed law and fact.
In these circumstances, counsel submitted that there had been a failure on the part of the Magistrate to consider specific evidence, and/or a failure to give proper reasons for her decision. In either case, it was submitted that a question of law arose.

Submissions of the defendant

Counsel for the defendant submitted that no error of law was established on either basis. It was submitted that the Magistrate's reasons set out the basis upon which she reached her conclusions, from which it was clear that she preferred some parts of the evidence over others.

Consideration and conclusion

There is no merit in this ground. The Magistrate's reasons (commencing at [66]) set out a careful consideration of the evidence. The path which led to her conclusion is clearly exposed.
This ground is not made out.

ORDERS

For the reasons expressed, Grounds 2 and 2A have been made out. Section 39 of the LCA does not operate to confer power upon this Court to review the merits of a case, or to otherwise expand the scope of the appeal, so as to make new findings of fact. The parties agreed that in these circumstances, if error was found, the appropriate order was to remit the matter to the Magistrate to be further dealt with according to law.
I therefore make the following orders: 1. The appeal is allowed. 2. The judgment and orders of the Magistrate are set aside. 3. The proceedings are remitted to the Magistrate in the Local Court of NSW to be dealt with according to law. 4. Each party is to provide to my Associate, by 4.00 pm on Friday 18 September 2015, written submissions, not exceeding two pages in length, as to the appropriate orders in respect of the costs of this appeal, and the costs of the proceedings in the court below.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 September 2015

Legal Profession Act 2004(NSW)

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