Residential tenancy - compensation for property damage or loss - whether documentary evidence is required

Residential tenancy - breach of landlord's obligations - whether compensation can be awarded to tenants for distress and inconvenience

Residential tenancy - breach of landlord's obligations - compensation to tenants for property loss - assessment of loss - adjustment for contributory negligence

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 ss 4, 7

South Australian Civil and Administrative Tribunal Act 2013 ss 39, 57, 70

Athens-Macdonald Travel Service Pty Ltd v Kazis [1970] SASR 264

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

Burke v Lunn [1976] VicRp 22; [1976] VR 268

Fox v Percy [2003] HCA 22; (2003) 214 CLR 118

Varricchio v Wentzel [2016] SASC 86

1. This is an application for internal review of a decision made by Executive Senior Member Stevens on 12 May 2016 to award compensation to the tenants in the sum of $4,000.00. The tenants owed sums of $1,903.63 by way of rent and $250.50 for an outstanding water account. Those amounts were to be offset against the compensation. The end result was that the net amount of $1,845.87 was payable by the landlord to the tenants.
2. Mr Stevens has set out his reasons for making the orders in substantial detail and I will not repeat that material here.
3. The agent has lodged detailed written submissions with the Tribunal dated 1 June 2016. The style and content of the submissions very much resembles that typically found in an outline of argument prepared by a legal practitioner for use in appellate proceedings. None of the parties who appeared seemed familiar with the technical legal language used in the document, eg de novo. Perhaps for that reason, most of the grounds advanced in the written submission were not the subject of oral submissions. I must nevertheless consider those matters.
4. The first contention in the written submission is that Mr Stevens refused to receive photographic evidence contained on a USB stick. Those photographs were said to depict the state and condition of the premises. It is alleged that Mr Stevens declined to accept the USB stick as it may contain a virus which might infect the SACAT computer system. It is submitted that he should have allowed the landlord the opportunity to produce hard copies of the photographs at a later time. His alleged refusal is said to be contrary to the principles of natural justice and also the practice that has been followed by some other Tribunal members in particular cases. It was also submitted that if Mr Stevens had seen the photographs he would have come to a different conclusion.
5. I have received a report from Mr Stevens concerning the matters raised by the agent in the internal review. He stated that he recalled Ms Martin advising him on 5 May 2016 that she had taken some photographs of the premises after they had been vacated by the tenants but she had been unable to provide them due to a difficulty with access. He did not recall it being suggested that the photographs were available on a USB stick but could not be certain of that fact. However, he said that he did not reject the photographs on the ground that they were on a USB stick that might be infected with a virus. The correct position was that because he did not have before him any application by the landlord for damages relating to the condition of the premises at the end of the tenancy he did not regard the photographs as being relevant.
6. I received a very large bundle of photographs at the internal review hearing. I will refer to their significance at a later point. My present point is that even if there was any substance to the complaint that Mr Stevens had failed to provide an opportunity for the agent to produce the photographs that has been resolved by the production of the photographs to me at the internal review hearing.
7. The agent has also complained in the written submission that on all previous occasions in her experience where a landlord has claimed compensation they have been required to produce reasonable documentary evidence to establish the value of the goods. Mr Stevens did not require the tenants to produce documentary evidence of the purchase price of the property that was covered by the award of compensation.
8. As I explained during the internal review hearing, there is no legal requirement that either a landlord or a tenant produce documentary evidence to support a claim for property damage or the loss of goods. The only requirement is that the Tribunal must be satisfied by the evidence presented to it that the sum claimed is reasonable. That evidence may be in the form of documents, oral evidence or, where appropriate, the Tribunal may inform itself as it sees fit using its powers under s 39 of the South Australian Civil and Administrative Tribunal Act 2013.
9. A landlord would need to keep accurate records of expenditure so that they can claim the taxation deductions to which they would be entitled. In most cases, the landlord will be assisted by an agent who will meet the costs of repairs and the like on behalf of the landlord. As such payments would be made out of the agent's trust account, the agent must also keep proper records. Thus a landlord or agent should be able to produce documentary evidence of their expenditure. If they cannot do so that may often result in the Tribunal not being satisfied that the expenditure has been incurred.
10. Those record-keeping obligations under the general law do not apply to tenants. Thus, when the Tribunal is dealing with a claim for compensation made by a tenant it must proceed on the basis of the best available evidence. In some cases the tenant may be able to produce a receipt but their inability to do so is not a basis, of itself, to refuse to consider their compensation claim. The Tribunal may determine the claim on the basis of oral evidence from the tenant as to the value of the property. The landlord or agent would be entitled to test that evidence by cross-examination. In my experience many agents and landlords lack the skills to conduct an effective cross-examination in an acceptable fashion. For that reason the Tribunal member may test the oral evidence by questioning the tenant if they have concerns about the true value of the property. The Tribunal member is also entitled to apply their own general knowledge when determining value. I will return to that point.
11. The agent has also submitted on behalf of the landlord that the Tribunal lacks power to award compensation for distress and inconvenience. A further submission is that if there is any such power, appropriate evidence must be provided before awarding compensation on that basis. It has been further submitted that an award of compensation based on convenience can only be made if there is evidence of the actual cost resulting from that inconvenience.
12. The author of the submission referred to in the previous paragraph does not appear to have had regard to the wide power conferred upon the Tribunal by s 110(1)(c) of the Residential Tenancies Act 1995 to order the payment of compensation. The only specific restriction placed upon the power to award compensation appears in s 110(2) which provides that the Tribunal does not have jurisdiction to award compensation for damages arising from personal injury. I also note that in Varricchio v Wentzel [2016] SASC 86 Doyle J held at [73] that it was appropriate for the Tribunal to take a broad brush approach to the assessment of compensation arising from a breach of the Residential Tenancies Act. While not directly on point, the observation made by Doyle J serves to indicate the broad discretion held by the Tribunal when assessing compensation.
13. For the reasons that follow I consider that the Tribunal does have jurisdiction and power to assess and award compensation for inconvenience arising from a breach of the Residential Tenancies Act but cannot award damages for distress_._
14. While the Tribunal has a wide discretion in the award of compensation for a breach of the obligations imposed by the Residential Tenancies Act or a tenancy agreement made under that Act, in my view the Tribunal should apply orthodox legal principles when determining whether compensation should be awarded. In essence, a residential tenancy agreement is a particular form of contract. Thus, except to the extent that there has been a statutory intervention, I consider that ordinary contract principles should be applied in determining compensation.
15. I have already noted that s 110(2) excludes the award of compensation for personal injury arising from a breach of a tenancy agreement. The common law does not permit the recovery of damages for distress (which I take to include vexation or annoyance or loss of enjoyment or pleasure) arising from a breach of contract except in very limited circumstances. The primary exception is where the contract specifically provides for the party to be provided with enjoyment or pleasure. The existence of that exception was accepted by the High Court in Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344. In Athens-Macdonald Travel Service Pty Ltd v Kazis [1970] SASR 264 the Supreme Court awarded damages for physical discomfort and inconvenience arising from the failure of a travel agency to make the agreed travel arrangements.
16. I consider that Mr Stevens erred to the extent that he awarded compensation for distress. However, he did have power to award compensation for inconvenience arising from the action of the landlord in excluding the tenants from the property. The courts have long recognised that physical inconvenience is a proper basis to award damages for a breach of contract. Those cases have often involved delayed or faulty building work or building inspections, for example, Burke v Lunn [1976] VicRp 22; [1976] VR 268.
17. I am not persuaded that when the Tribunal awards damages for inconvenience caused by a breach of the Residential Tenancies Act it is limited to reimbursement of actual costs incurred. Consistently with the observation by Doyle J in Varricchio v Wentzel the Tribunal is entitled to take a broad brush approach to the assessment of compensation. Moreover, the cases decided in the superior courts relating to breach of contract have not limited compensation for inconvenience in the manner contended by the agent.
18. The agent has also made submissions concerning the use made of an adverse finding by the Housing Improvement Branch concerning the state of repair of the property. The complaint is that the landlord was not given the opportunity to respond to the adverse findings made by the HIB. In fact, when the first hearing was conducted on 31 March 2016 neither the landlord nor the tenants had received a copy of the HIB report. The proceedings were adjourned to enable the Tribunal to obtain a copy of the report. Mr Stevens has stated in the report provided to me that he was not informed that neither the property manager nor the landlord were aware of the report. While the landlord had been present at the earlier hearing, he did not attend that held on 5 May 2016. The agent appeared on his behalf. The agent did not suggest that the report had not been received by the landlord prior to the hearing on 5 May 2016. Moreover, Mr Stevens has observed in his report that the landlord was aware from the time of the hearing on 21 March 2016 that the content of the HIB report was to be discussed on 5 May 2016. If it was truly the case that he had still not received a copy of the HIB report he could have instructed the agent to seek an adjournment on his behalf. That did not occur.
19. In the circumstances I do not consider that there was a denial of procedural fairness as contended by the agent. I also note that the only use made by the member of the HIB report was to provide some corroboration of the complaints made by the tenants. The landlord was aware of those complaints and those matters had been ventilated by the tenants at the hearing on 31 March 2016.
20. While the landlord and the several staff of the agent made various contentions as to why they considered the findings of fact made by the member were wrong, I am not persuaded by any of those submissions. In essence, they were merely seeking to reargue the points that had been decided against them.
21. Section 70 of the SACAT Act requires me to give appropriate weight to the decision made by the member at first instance. In assessing the weight to be attached to findings of fact made by a member who has heard the witnesses at length, it is appropriate to follow the principles enunciated by the High Court in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 ie I must recognise the considerable advantage that the member who heard the matter had in seeing and hearing the witnesses give oral evidence.
22. Moreover, to the extent that I received further evidence on the internal review, I was not favourably impressed by the attitude of Mr Tronnolone towards compliance with his obligations under the Residential Tenancies Act. In particular, he appeared to me to be uninterested in compliance with the obligations of a landlord with respect to the property of a tenant imposed by Division 7 of Part 5 of that Act. He also appeared unconcerned about his obligations under s 66 to ensure that the premises are reasonably secure. As I am not persuaded that the member did not make the correct or preferable decision on the facts, I dismiss that aspect of the internal review.
23. I turn to the assessment of compensation. As I have already noted, Mr Stevens awarded total compensation of $4,000.00 to the tenants. That comprised a global award of $500.00 with respect to the failure to repair the bedroom floors and patio and also the kitchen sink. He awarded a further $3,500.00 on an aggregate basis for loss of property and for distress and inconvenience. The award of $3,500.00 included compensation for the loss of a "bouncy castle" that had been purchased two years earlier for $1,500.00, a laptop computer purchased one year earlier for $900.00 and other items with a total value of $220.00. In aggregate the original purchase price of the property was $2,620.00 but that was reduced in recognition of depreciation. Mr Stevens did not specify to what extent he made an adjustment for depreciation.
24. I have already indicated that the Tribunal should not award compensation for distress but may award compensation for inconvenience. As Zelling J noted in Athens-Macdonald it is not always easy to distinguish between distress and inconvenience. Nevertheless, I must do so. In all of the circumstances, I find that I should reduce the award of compensation by $250.00 in recognition of the fact that the Tribunal should not have awarded compensation for distress.
25. The further evidence I received on the internal review made clear that there was a short period of time when the tenants were not living in the house but some of their personal property remained upon the premises. It was the loss of that personal property that lead to the award by Mr Stevens of compensation as a result of their remaining goods being dumped in a rubbish skip by workers employed by the landlord. The tenants were aware that the front door of the property could not be properly locked during that time. Nevertheless, they left attractive, moveable items in the house.
26. The evidence did not establish whether the laptop computer and the "bouncy castle" were actually deposited under other heavy rubbish in the skip or were stolen by trespassers. Either possibility is open on the evidence. It is clear for reasons that I will state shortly, that trespassers did enter the property while it was unsecured and caused damage. I was also informed that it was not physically possible to ascertain whether the missing property was buried under immoveable rubbish at the bottom of the skip.
27. I received the photographs the landlord and agent sought to have admitted at the second hearing before Mr Stevens. While there was no claim for compensation by the landlord before me, some of the photographs did show the property that remained on the premises at the end of the tenancy. The landlord alleged that the tenants had been responsible for malicious damage to the property, eg holes having been kicked in doors and so forth. The tenants vehemently denied that they were responsible. Given that the tenants were not in residence and the property was unsecured, I find that it is probable that vandals entered the property and caused the damage. The landlord and agent appeared to accept that this was the likely explanation.
28. While the primary responsibility for the loss of the tenant's property rests with the landlord on account of his failure to meet his statutory obligation to ensure that the premises could be properly secured, a question arises as to whether the award of compensation should be adjusted in recognition of the fact there was some contributory negligence on the part of the tenants.
29. Section 4 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 provides that the modifications to the common law made by that statute apply to, amongst other matters, a liability in damages that arises under statute. Section 7 of that Act provides that if contributory negligence has contributed to, but is not the sole cause of, the harm for which a claimant seeks damages, the claim is not to be defeated on the ground of contributory negligence. Section 7(2) provides that a court must reduce the award of damages to the extent that it thinks just and equitable having regard to the extent to which contributory negligence contributed to the harm.
30. I do not need to decide in this case whether those statutory provisions apply when the Tribunal assesses compensation for a breach of the Act. That is because the tenant has not contributed to the breach of the Act by the landlord. Instead, the issue is that the loss may not have occurred if the tenants had taken the sensible precaution of not leaving attractive moveable property in the house while it was unsecured.
31. The Tribunal is required by s 39 of the SACAT Act to decide matters according to equity, good conscience and the substantial merits of the case. I consider that equity and good conscience requires me to adjust the award of compensation in recognition of the fact that there was some degree of contributory negligence on the part of the tenants because they left reasonably valuable portable property overnight in a house that they knew was not adequately secured.
32. In all of the circumstances I consider that the appropriate reduction is 20% of the value of the property that was taken into account in awarding compensation. While it is not possible to directly determine the compensation awarded by Mr Stevens for the loss of the tenants' property, I work on the basis that it was $2,000.00. I therefore reduce the compensation by $400.00 on account of contributory negligence.
33. The landlord and agent contended that the amount accepted by Mr Stevens as the value of the "bouncy castle" was excessive. During the course of the hearing they conducted an Internet search and came up with a much lower purchase price for an approximately similar item. I have exercised the Tribunal's power to make its own enquiries and found that generally similar items were priced well over $2,000. Under the circumstances, and in the absence of any clear contrary evidence, I have no basis to set aside the decision by Mr Stevens to accept that the purchase price of the "bouncy castle" was $1,500. His decision was the correct and preferable decision. The purchase price of the laptop computer as $900 appears reasonable for a laptop of mid-range quality. The landlord and agent did not suggest otherwise when I canvassed that view.
34. The landlord and agent have also sought an order for costs on the following basis. The agent has claimed total costs of $690. That comprises 11 hours work by Ms Martin at the rate of $45 per hour and car parking fees of $15. The 11 hours labour was said to comprise attendance at SACAT hearings, administrative costs, research and photography. A further sum of $180 has been claimed in respect of three hours work performed by Ms D'Ortenzio at the rate of $60 per hour. That work is said to comprise research and telephone calls, including calls to the Deputy Registrar of SACAT. The landlord has claimed a total of $1,134 by way of costs. This comprises five hours for attendance at a SACAT hearing and travel time at $110 per hour, car parking fees of $15, the initial application fee of $69 and the internal review fee of $500.
35. The clear effect of s 57 of the SACAT Act is that SACAT is generally a no costs jurisdiction and costs will rarely be awarded. In particular, s 57(2)(b) indicates that costs should only generally be awarded where a party has been disadvantaged by proceedings that have little or no merit. I do not consider that to be the situation with the present matter. The proceedings were no more or no less meritorious than most of the cases that come before this Tribunal. There was clearly a dispute that required adjudication. Moreover, while I have reduced the quantum of the compensation payable by the landlord to the tenants, the overall result is that the tenants rather than the landlord have been the successful party. I refuse the application for costs made by the landlord and tenant.
36. The result of the internal review is that I vary the decision made by Mr Stevens to the extent that I reduce the compensation payable to the tenants by $650. The net amount of $1,195.87 is payable by the landlord to the tenants. I will order accordingly.