Submissions
25The plaintiff's position can be summarised as follows. She submits that Kilpatrick v Gresser was wrongly decided and that when construing s48 of the Act the Court should not take into account any of the matters there set out as being a "predominant consideration". Secondly, the plaintiff submits that affordability or economic impact on the tenant falls within the scope of sub-paragraph 48(g) of the Act being a relevant matter which the Tribunal should have had regard to.
26The start point for a consideration of the plaintiff's first submission is the decision of Foster J in Kilpatrick v Gresser. That was a decision handed down in May 1987. It concerned the interpretation of s52(3) of the Residential Tenancies Tribunal Act 1986. Section 52(3) of that Act was in identical terms to s48 of the Act, except for sub-paragraph (f), "Any work done to the premises by or on behalf of the tenant, to which the landlord has consent", which was added when the 1986 Act was repealed and the Act was proclaimed. Kilpatrick v Gresser has been generally followed in the Tribunal and has been applied by this Court in Randy River Health and Beauty Aid Co Pty Limited trading as Middle Rock Village Park v Consumer Trader and Tenancy Tribunal [2007] NSWSC 1142 (Malpass AsJ). In those circumstances and taking into account that s48 of the Act has now been repealed and is in a very different form in the 2010 legislation, there would need to be compelling reasons for a single Judge of this Court not to apply that case.
27In Kilpatrick v Gresser Foster J was considering an appeal from the Tribunal in point of law where the Tribunal had found that the proposed rent increase was not excessive. In the course of giving his decision, his Honour made the following observations and findings:
"I am satisfied, having considered the submissions put to me, that the word "may" appearing in the first line of section 52(3), and also in the last line of the first paragraph, must necessarily in the context of the section and the role that it plays in this Act, be given the meaning of "shall". In my view the Tribunal has the positive obligation imposed by law in determining whether or not a rent increase is excessive to have regard to the matters which are set out in that section. ...
It is to be noted that the first obligation of the Tribunal under s52(3) is to "have regard to the general market level of the rents for comparable premises in the locality or a similar location". I consider that the structure of this section does indicate that the question of general market level of rents for comparable premises is the predominant criterion to which the Tribunal must have regard in determining the question of excessiveness or otherwise of the rent increase. It is to be noted that the matters to which it "may also have regard" set out in sub-paras (a) to (e) are undoubtedly matters which it would want to take into consideration on the basis of available evidence in determining whether the premises the subject of the application were in fact premises comparable with these said to evince a comparable rental level. In other words I am satisfied that s52(3) contemplates that in determining that overriding and predominant question of what is the general market level of rents for comparable premises the Tribunal will take into account in determining relevant comparability the characteristics of premises and of lettings as set out in sub-paras (a) to (e).
It has been submitted to me that the Tribunal has adopted an impermissibly strict construction of s52(3) in that it has attributed to subsidiary a role to the matters referred to in sub-paras (a) to (e) and indeed sub-para (f). It is submitted that the Tribunal has in effect held as a matter of construction that it can have regard to those sub-paragraphs only in aid of determining the question of comparability posed by the main paragraph. It is clear that the construction would be the correct one beyond doubt if the words "in doing so" had been introduced into the section by the legislature between the words "and" and "may" at the conclusion of the first paragraph of s52(3).
I think it is probably correct that the legislature is not to be taken as having intended that the matters for consideration posed in sub-paras (a) to (f) are to have only a minor subsidiary role in the ultimate determination of the question of comparability posed in the first part of the section. It certainly does not appear from the ministerial speech, to which I have made reference, that the Minister was expressing such a limited view to Parliament.
However, I do not think that the matters referred to in those sub-paragraphs can be divorced from the overall obvious intention expressed in this section that the overriding matter to be considered by the Tribunal in determining whether a rental is excessive is the comparison of that rental with general market levels for rents for comparable premises.
I think that the obligations of the Tribunal are clearly satisfied if, in approaching the determination of the question of excessiveness or otherwise of a rental increase, it has regard to the matters set out, so far as the evidence permits, in paras (a) to (f), in conjunction with its overall and predominant considerations as to the general market rents of comparable premises. If it appears that the Tribunal has borne such matters in mind in the manner contemplated by the passage to which I have referred in Rathbourne's case, then the Tribunal clearly, in my view, has done all that it is required to do under the section."
28The plaintiff submits that this approach is fundamentally flawed. She says that the word "may" in s48 of the Act should have its natural meaning, i.e. it refers to what is permissible as distinct from what "must" or "shall" be considered. In other words, everything in s48 is discretionary in nature. She submits such a discretion was made clear by the reference in s49(1) of the Act to "after considering any matters it considers appropriate under s48". In summary, the plaintiff submits that the very start point in Kilpatrick v Gresser is wrong.
29She justifies that approach by reference to the very broad nature of the Act. She relies upon the fact that it applies to what is described as "social housing premises" as well as residential tenancies generally which are defined very broadly. She submits that because s48 has such a wide application, it should not be construed in the narrow way prescribed by Kilpatrick v Gresser.
30She says that such an approach is consistent with the reference to "any other relevant matter" in sub-para (g) and to the subjective element included for the first time in the Act in sub-para (f), i.e. work done to the premises by or on behalf of the tenant.
31She submits that the error in the decision is that comparability of is the ultimate determinant for whether or not a rent increase is excessive. She submits that such an approach is not consistent with a proper analysis of sub-paras (a) to (g) of the section. It is also not consistent with the application of s48 and s49 of the Act to social housing premises.
32She submits that the problem with Kilpatrick v Gresser is demonstrated by the approach adopted by the Tribunal to the facts of this case. She submits that the Tribunal, having concluded that the proposed rental increase was less than the general market level of rents for comparable premises in the locality, only took account of sub-paras (a) to (g) of s48 for the purposes of considering whether they derogated from that prima facie conclusion which the Tribunal had already reached. She submits that such an approach was inconsistent with the overall intention and structure of the Act.
33I do not agree with those submissions.
34The submissions do not answer his Honour's reasoning based on the structure of s48. His Honour was entitled to give weight to the juxtaposition of the comparability requirement with the words "and may also have regard to" before the list of other considerations. The approach of his Honour gives appropriate weight to what is a somewhat unusual structure to the section. This structure supports the conclusion of Foster J that the comparability factor which is first raised in the chapeau to the section, is the one which should predominate over the others.
35Next the plaintiff's submissions do not give adequate weight to the considerations identified in paras (a) to (f). Even having regard to sub-para (f) which was not in the section considered by his Honour, all of those paragraphs reflect matters that go to the comparability of the premises. Such an approach gives to s48 an internal cohesiveness and consistency. Even so it is clear from his Honour's reasoning that his Honour did not confine the consideration of those sub-paragraphs only to that purpose.
36It is true, as the plaintiff submits, that the Act and s48 have a very broad application. However, no intention is disclosed anywhere in the Act to the effect that rents assessed under s48 should be anything other than market based. The fact that there are other sections in the Act, to which the Court was referred, which deal specifically with social housing suggests that if the legislature had intended that there was to be some special consideration given to social housing when applying s48, that would have been expressly referred to in the section.
37The question can be looked at in another way. If it were accepted that all of the matters expressly referred to in s48 were discretionary in nature, it is difficult to see why any particular matters or considerations should have been expressly referred to. It would have been sufficient to provide the Court with a general discretion to take into account "any relevant matter". Such an approach not only ignores the structure of s48 but its content.
38It is difficult to see how a Court or Tribunal could properly construe s48 if its content were not the starting point and if its content did not provide guidance as to what matters were relevant considerations. It is the specific reference to comparability and the further reference to other considerations which relate to comparability, which provide the context in which applications for increase in rent need to be considered.
39Support for such an approach is found in the observations of Windeyer J in Finance Facilities Pty Limited v Commissioner of Taxation (1970-71) 127 CLR 106 at 134 where his Honour said:
"This does not depend on the abstract meaning of the word "may" but of whether the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the "may" becomes a "must". "
40To similar effect are the comments of Wilson, Deane and Gaudron JJ in Re: Coldham & Ors Ex Parte Brideson (1988-1989) 166 CLR 338 at 347 where their Honours said:
"A legislative direction to decide does not, as a matter of ordinary statutory construction, import a discretion to give effect to that which, having regard to the scope and purposes of the legislation, is in the opinion of the decision maker desirable. A discretion of that nature will be implied only if the context (including the subject matter to be decided) so necessitates as, e.g. where the context provides no positive indication of the considerations by reference to which a decision is to be made."
41In this case, of course, there are such positive indications and as already demonstrated, those positive indications have their own internal consistency.
42Finally, I do not see that the wording of s49(1) provides a basis for reaching a conclusion different to that in Kilpatrick v Gresser . The reference to "considering any matters it considers appropriate under s48" does no more than make it clear that a Court or Tribunal is not obliged to specifically have regard to all the matters in s48, but only those matters in relation to which evidence has been adduced and which apply to the premises the subject of the application.
43For the above reasons I have not been persuaded that the approach of his Honour in Kilpatrick v Gresser is incorrect and that jurisdictional error occurred when the Tribunal followed it.
44The plaintiff's second point needs to be considered on the basis that Kilpatrick v Gresser was correctly decided and provides guidance as to the construction of s48 of the Act.
45The plaintiff submits that there were two matters relevant to whether the proposed rent increase was excessive for the purposes of s48 which the Tribunal refused to consider. These were the capacity of the plaintiff to pay the increased rent and that rent paid in respect of premises owned by other Aboriginal Land Councils was lower than the proposed rent increase.
46In relation to the first of those issues, the Tribunal said:
"I turn now to consider the central issue raised in these applications: whether the "affordability" of a rent increase falls within "any other relevant matter" under s48(g) of the Act.
The applicants argued that it was a relevant matter within this paragraph to consider the capacity of the applicants to pay, or at least, whether the new rent was affordable by persons for whom this community housing provider made accommodation available.
There is no doubt that the majority of the applicants who gave evidence are struggling to pay the increased rent on the fixed incomes they receive. Many have been tenants for long periods and have expressed concerns as to their ability to continue to reside in the premises as a result of this and previous rent rises. ...
The respondent disputed the claim that the Tribunal could take into account the financial circumstances of the tenants."
47In reaching its conclusion the Tribunal rejected any reliance on the ejusdem generis rule. The Tribunal said:
"I do not see why a matter can only be relevant under s48(g) if it relates to the premises solely because this is the focus of the matters in (a) to (f). The better view, in my opinion, is that the legislative intention was to identify those matters most commonly anticipated to bear on the issue of the increase but recognise that not all situations that may have a bearing on this consideration could be anticipated. Accordingly, paragraph (g) was included to allow the Tribunal to take account of those other matters that in the circumstances of the particular case are relevant to the question of whether the rent increase is excessive. I am of the view that the application of the ejusdem generis rule to s48(g) would be contrary to the legislative intention as to the operation of that paragraph."
48The Tribunal then considered some earlier decisions in the Tribunal, in particular Bentink v NSW Land & Housing Corporation (Tenancy) (2007) NSWCTTT 47 where contrary to previous decisions, the Tribunal held that affordability was a matter relevant under s48(g) of the Act. The Tribunal rejected the reasoning in Bentink because it was based on "social policy grounds rather than a judgment on legal principles". The Tribunal said:
"It is not for the Tribunal to substitute its own decision on how [the policy of the Department of Housing] be effected in preference to that made by the Department in application of its housing policy. To do so departs from the matters arising under s48 and raises the potential for a decision to be arbitrary or capricious. ... If it is relevant under s48(g) to consider the tenants' financial circumstances, it must be relevant to consider the policy and equally, the financial circumstances of the social housing provider.
In the present applications that would involve consideration of Gandangara's financial statements and whether its cost-rent method of setting rents corresponded to the cost of providing services to its tenants. It is clear that in engaging in such an exercise, the Tribunal would depart from its statutory jurisdiction and embark on a review of administrative decision-making. This function is vested exclusively in superior courts and based on legal constraints in the process of administrative decision-making. It is not the task of the Tribunal to impose its own "personal judgment" on an administrative decision or administrative policy.
Bentink made findings as to the poor state of repair of the premises and the tenants' work in maintaining and improving the premises. To the extent that these matters diminished the weight to be given to comparable rents and led to a finding that the rent increase was excessive, the decision is unremarkable. To the extent that the ultimate finding was based on a tenant's capacity to pay, it is a decision that I cannot follow.
I find that the affordability of the increased rent is not a relevant consideration under s48(g)."
49The plaintiff submits that the purpose of the Act as a whole is to regulate the provision and use of residential premises in NSW. She submits that it does this, in the first instance, by controlling the agreement that may be entered into between a landlord and tenant. She notes that a determination by the Tribunal is binding only as between the parties to the particular agreement. In those circumstances, she submits that since the Act moderates the relationship between landlord and tenant, matters specific to each of them are relevant to the Tribunal's task. In support of that proposition the plaintiff relies on the reference in s 48(f) to work done by the tenant.
50In essence the plaintiff submits that sub-para s48(g) should be given a wide and unrestricted interpretation so that if a matter is relevant to whether a proposed rental increase is excessive it should be taken into account by the Tribunal.
51I do not agree.
52In accordance with Kilpatrick v Gresser the predominant consideration in s48 is the comparability of premises. The other considerations in sub-paras (a) to (f) not only relate to questions of comparability, but also relate entirely to the state of the premises. Despite the submissions of the plaintiff, there is nothing in those sub-paragraphs which relates to the personal circumstances either of the landlord or of the tenant.
53It is clear that the Act has and is intended to have a broad and general application to residential tenancies. There is, however, no intention disclosed anywhere in the Act, and certainly not in s48, that the power to review excessive rent increases was intended to avoid what is essentially a market based process. In this sense the scope and purpose of the Act is consistent with the construction of s48 in Kilpatrick v Gresser and as applied by the Tribunal.
54While not endorsing the application of the ejusdem generis rule, it is clear that a consideration of the financial circumstances of either the tenant or the landlord would raise matters quite different to those specifically referred to in the section. The matters in s48 relate to various aspects of the premises whereas the financial circumstances of either the landlord or tenant raise matters entirely personal to the parties and unrelated to the premises.
55The Tribunal referred to the subjective nature of such an inquiry, whether it be directed to the financial circumstances of the tenant or the financial circumstances and quality of decision making of the landlord. That is to be contrasted with the more objective and certainly more easily measured matters expressly referred to in s48. It is nave to think that if the financial circumstances of the parties are relevant for the purposes of s48, such examinations would not form a significant, if not the predominant consideration, in s48-49 determinations. Such a result would distort the structure of s48 and would be inconsistent with the result in Kilpatrick v Gresser .
56The personal financial circumstances of the parties is such a potentially significant and controversial issue in rent increase proceedings that it is surprising, if it were a relevant matter under s48, that the legislature had not specifically referred to in the section. The absence of any specific reference to it in the section is indicative of an intention that it not be a relevant matter. Its absence from s48 is to be contrasted with the specific reference to it in other sections of the Act, e.g. s65(1) and s69(1), s69A.
57The first defendant listed a number of anomalous results which could arise if the plaintiff's submissions were accepted. A landlord of premises in a wealthy suburb could be constrained in the rent which it charged its tenants because the tenant had fallen upon hard times, even though the market rent for neighbouring comparable properties might be much higher. If the personal or financial circumstances of the landlord could be taken into account, should a wealthy landlord be constrained in its capacity to raise rent because of the absence of need on its part. Alternatively, should a tenant have to pay more than the market rent for premises just because the landlord cannot afford to keep the rent at market levels. The first defendant also referred to practical difficulties arising from the subjective assessment of the reasonableness of expenditure by tenants so as to determine whether hardship genuinely exists in meeting any increase in rent.
58For the above reasons I am not persuaded that the Tribunal erred in failing to have regard to a relevant consideration when it refused to consider the financial position of the plaintiff in its application of s48 of the Act.
59Little was submitted by the plaintiff either orally or in writing, as to how the Tribunal should have treated the evidence as to rents charged by other Local Aboriginal Land Councils. This is not surprising. Once the Tribunal had (correctly in my opinion) rejected evidence on that issue as relevant to the construction of the phrase "general market level of rent" in s48, it is difficult to see what other use could be made of that material in the application of s48. This was not explained anywhere in the plaintiff's submissions. Once again this is not surprising given the nature of the evidence which comprised addresses of premises with an accompanying statement as to the number of bedrooms and rent paid but no other detail of the premises.
60Once that material was excluded from a consideration of "the general market level of rents for comparable premises" it is difficult to see how that material would otherwise have been relevant or would have assisted the Tribunal in the application of s48.