Auld & Auld v Withers & Wright - [2007] SADC 17

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Under Residential Tenancies Act 1995)
AULD & AULD v WITHERS & WRIGHT
[2007] SADC 17
Reasons for Decision of Her Honour Judge Simpson
2 March 2007
LANDLORD AND TENANT - TERMINATION OF THE TENANCY
Appeal by landlord against decision of Residential Tenancies Tribunal not to compensate landlord for early termination of tenancy on the application of tenant- Tribunal found real estate agent misled tenant regarding availability of rented premises for 3-5 year term - tenant signed residential tenancy agreement for fixed term of 12 months in any event - Held: landlord not responsible for representation of real estate agent, nor for tenant's failure to appreciate legal effect of tenancy agreement - tenant's decision to vacate premises after 8 months to suit own interests- Order for tenant to compensate landlord for advertising costs and loss of rent.
Residential Tenancies Act 1995 ss 41, 89, referred to.
Petersen v Moloney and another (1951) 84 CLR 91 ; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 , considered.

AULD & AULD v WITHERS & WRIGHT
[2007] SADC 17

This is an appeal pursuant to section 41 of the Residential Tenancies Act 1995 (‘the Act’) against a decision of the Residential Tenancies Tribunal made on the 30 November 2006. The appellants are the registered proprietors of a property situated at 22 Beadnell Crescent, Bridgewater, South Australia (‘the property’), and were renting the property to the respondents, in accordance with a residential tenancy agreement dated 26 April 2006. The respondents lodged an application to the Tribunal on 1 November 2006 pursuant to section 89 of the Act for orders that they be released from the residential tenancy agreement in respect of the property, and for the full refund of a security bond following a satisfactory final inspection.
Section 89 of the Act provides:
(1)If the continuation of a residential tenancy would result in undue hardship to the landlord or the tenant, the Tribunal may, on application by the landlord or the tenant, terminate the agreement from a date specified in the Tribunal’s order and make an order for possession of the premises as from that day.
(2)The Tribunal may also make an order compensating a landlord or tenant for loss and inconvenience resulting, or likely to result, from the early termination of the tenancy.
The Tribunal found that prior to the respondents entering into the residential tenancy agreement, the respondents had been misled in a material way by an agent of the appellants in respect of the availability of the rented premises for a term of between 3-5 years. The Tribunal found the appellants had behaved in ‘an impeccable manner in their limited dealing’ with the respondents but nevertheless found that ‘under the law of agency’, the appellants were responsible for any misleading information the respondents were given by the agent, ‘whether or not these actions were authorised (by) the landlord’.
Under those circumstances, the Tribunal found it appropriate to terminate the tenancy. The Tribunal reached the conclusion on the available evidence that no compensation should be paid to the appellants by the respondents for an early termination of the tenancy and made the following order:
Pursuant to Section 89 of the Act, I order that the tenancy agreement be terminated and I make an order in favour of the landlord for possession of the premises at 22 Beadnell Crescent, Bridgewater SA 5155 at 11.00am on Saturday 2 December 2006 ON CONDITION THAT if the tenant fails to give up possession then the order for possession may only be enforced by the Tribunal bailiff.
The Tribunal did not deal with the refund of the security bond because at the time of the hearing, the respondents were still in occupation of the property, and any refund would depend on whether the appellants claimed any amount for compensation for repairs and/or cleaning, after final inspection.
The appeal against the order made by the Tribunal is governed by section 41 of the Act, which relevantly provides as follows:
(1)An appeal lies to the District Court from a decision or order of the Tribunal made in the exercise (or purported exercise) of its powers under this Act.
(2)     On an appeal, the District Court may (according to the nature of the case)-
(a)     re-hear evidence taken before the Tribunal, or take further evidence;
(b)     confirm, vary or quash the Tribunal’s decision;
(c)     make any order that should have been made in the first instance;
(d)     make incidental and ancillary orders.
(3)The appeal must be commenced within one month of the decision or order appealed against unless the District Court allows an extension of time.
On appeal, the appellants provided written submissions. They sought an order for compensation for the loss sustained on account of the early termination of the tenancy agreement, including loss of rent between 3 December 2006 and 5 January 2007, costs of re-advertising the property, compensation for loss of wages on account of stress associated with the decision of the Tribunal and court fees on appeal. A separate application for deduction from the security bond of an amount for the replacement of a broken internal skylight cover was outside the scope of the appeal.
The appellants are a married couple who purchased the property around April 2006 as an investment property. Settlement on the property was on about 20 April 2006. They proposed to rent the premises for a period of 12 months, while they completed renovating another home in which they were living, after which they intended to move into the property themselves. The appellants contacted a real estate agent to let the property on their behalf. The appellants were arranging for the installation of Puratap and for ducted air-conditioning in the property, but were willing to have tenants move in as from 27 April 2006, if the tenants were willing to be in occupation when the air-conditioning was installed. It is not in dispute that the appellants played no part in the negotiations related to the tenancy agreement.
The respondents, it appears, were looking for what they described as a long-term rental property, for a minimum period of 3 to 5 years. On the hearing of their application before the Tribunal, the respondents told the Tribunal that the appellants’ agent, LJ Hooker-Stirling, had told them that the rented premises were available long-term. They had looked at other properties which suited their requirements, but had rejected them when told they were only short-term rentals.
At the hearing before the Tribunal, the appellants’ agent said that she was unable to recall any conversations with the respondents at the time they entered into the tenancy agreement. She said that her normal practice was to explain to tenants who were seeking long-term availability that there was no guarantee that the property would be available after the tenancy agreement expired.
The respondents made an application in writing dated the 21 April 2006 to rent the property at 22 Beadnell Crescent, Bridgewater. The application states the rent at $370 per week and the initial tenancy required was stated to be for 12 months. The application states that the respondents were leaving their current premises because they were too small. The date the premises were required was stated to be as soon as possible.
The respondents told the Tribunal that their application to rent the property was based on information that the premises would be available for the longer period they were looking for. In particular, the respondents said that they were engaged in a business in Mt Barker which was expanding and they wished to use part of the premises, in particular a double garage, to set up a workshop associated with the business. It would not have been worthwhile to set up the garage as a workshop unless they could be sure they were staying at the property for the longer term.
Notwithstanding their concern to obtain premises for a period of 3–5 years, the respondents entered into a residential tenancy agreement on the 26 April 2006, for a fixed term commencing on the 30 April 2006 and ending on the 29 April 2007. Clause 5.4 of the agreement provided for continuation of the tenancy only as follows:
If, with the approval of the Landlord, the Tenant remains in occupation of the Property after the expiration of the term, this agreement continues until determined by either party in accordance with the Act.
In the application made to the Tribunal, the respondents stated that prior to signing the lease, the agent had confirmed that it was an investment property and that the property was available long-term. It appears that the Tribunal accepted the respondents’ evidence, although it was not directly stated, that the agent had given them to understand that the property would definitely be available after the expiry of the fixed term. The respondents said that their acceptance of a lease of the property, notwithstanding it was for a fixed term of 12 months only, was based on their understanding that the property was “easily available for 3-5 years”. On appeal, the respondents said that they understood that it was not possible to lease a residential property for more than 6 or 12 months.
About one week after the respondents moved into the rented premises, they met the appellant, Mr Auld, and in conversation with him, became aware that the property was unlikely to be available for rent for any longer than the fixed term tenancy. The respondents advised the Tribunal that they were then concerned about the property not being available and they telephoned the agent, who was not able to give them any advice.
The basis of the respondents’ application to the Tribunal was that the agent had provided them with false and misleading information about the long-term availability of the property they were renting, that Christmas was approaching and the business required extra shop-floor space for a new major international product. The respondents needed to relocate the workshop from the place of business to other premises that would be secure long-term. The respondents planned to vacate the property by Saturday, 2 December 2006, and wished to be released from the tenancy agreement as of that date. It is not clear whether the respondents advised the Tribunal that they had purchased a property of their own, settlement on which was due on 24 November 2006.
At the hearing of the appeal, the respondents said that they had advised the appellants on 20 October 2006, through the agent, that they would be moving out before the end of the fixed term tenancy. The appellants had told the respondents that they were not prepared to release the respondents from the residential tenancy agreement. The respondents emphasised that they were required to look for alternative premises to allow for the expansion of floor space related to their business activities and in the end, with the help of a relative, they were able to purchase a property of their own.
On appeal, the appellants submitted that at no time had the property ever been available longer term. The respondents signed a 12-month lease. The appellants advertised the property for the balance of the fixed term tenancy shortly after they became aware that the respondents were to move out and that the respondents were applying to the Tribunal for earlier termination of the agreement. The appellants began advertising the property on or around the 15 November 2006. The advertising expenses incurred with The Advertiser newspaper totalled $1,009.45 in relation to 18 advertisements between the 15 November 2006 and the 3 January 2007. In the event, they were able to rent the premises for the short remaining period of the term. The appellants do not challenge the order of the Tribunal terminating the tenancy agreement after just over 8 months of the 12-month term.
In my opinion, while it may have been open to the Tribunal to be satisfied that the respondents would suffer ‘undue hardship’ resulting from the continuation of the tenancy, it was not appropriate to require the appellants to bear the loss associated with relieving the respondents of their continuing obligations under the tenancy agreement. The real estate agent, while carrying out the task of finding a tenant on behalf of the appellants, was an agent for the appellants only in a limited sense, not in the sense of an agent of the appellants as principal for all purposes. It has been described as a matter of common experience that the employment of a real estate agent, under the designation of agent, does not in connection with the disposal of an interest in real estate necessarily create any authority to do anything which will affect the legal position of his employer. The agent may be given any express authority which the employer thinks fit to give him, and estoppels may arise, but the law does not imply a general authority from the mere fact of his or her employment. While there is a general rule that the employer will be responsible for misrepresentations made by the agent, each case will depend on its facts and on the law relating to misrepresentation. (Petersen v Moloney & another (1951) 84 CLR 91 at 94-95; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 606)
In this case, there is no basis on which the respondents should be vicariously liable for loss associated with any representation, if one was mistakenly made by the real estate agent, that the property would be available long-term. The evidence suggests that the appellants always intended to move into the property themselves at the end of the term and they could not reasonably be expected to have known that any representation otherwise would be made. The tenancy agreement prepared and executed by the agent on their behalf was clear in relation to the term of the tenancy. The respondents believed they would not be offered a residential tenancy by any landlord for any longer than 6 or 12 months in any event. If the agent did not advise the respondents, as she said was her general practice, that there was no guarantee that the property would be available after the fixed term tenancy agreement expired, the respondents must be taken to have known that the terms of the agreement the respondents signed and the Act itself had that legal effect.
Regardless of any intimation or advice given by the real estate agent, section 79(a) of the Act provides that a residential tenancy terminates if the tenancy is for a fixed term and the fixed term comes to an end. If the respondents wished to rent premises for a 3-5 year term, the residential tenancy agreement they executed gave them no right or option to extend the 12-month term. If when they signed the agreement they were under the impression that they had a right to stay in the property at the end of the fixed term, that was a misunderstanding of the effect of the agreement on their part, for which the appellants are not responsible.
The question of whether the respondents may have any remedy against the agent directly on the basis that the agent told them they would be able to stay in the property long-term and had they known the appellants were intending to require their property at the end of the fixed term, they would not have entered into the tenancy agreement at all, is not one to be resolved in these proceedings. Regardless of the information given to the respondents by the agent, the appellants could in any event have decided at the end of the term not to continue to lease the property to the respondents or at all. Notwithstanding the wishes of the respondents and any information that may have been given to them, when they entered into a tenancy agreement for 12 months they necessarily took the chance that they would be held to its terms. In any event, it was the respondents’ decision first, to execute a tenancy agreement in terms which could not allow them to assume they would be able to remain at the property after 29 April 2007, and secondly, to terminate the tenancy early, for reasons associated with their business and the desire to purchase a property of their own, ultimately to suit their own interests.
The respondents should in my opinion compensate the appellants for the reasonable loss associated with the early termination of the tenancy. The appellants claim compensation for re-advertising the property and for loss of rent between 3 December 2006 and 5 January 2007. I reject the submission of the respondents that the appellants should have begun to take steps to find alternative tenants before 15 November 2006. The costs of advertising and the time taken over the Christmas holiday period to find another tenant for the remaining short term of the tenancy are reasonable.
In the circumstances, I allow the appeal and vary the order made by the Tribunal by including an order in favour of the appellants for compensation for loss of rent for the period between 3 December 2006 and 5 January 2007 in the sum of $1797.15, together with the cost of re-advertising the property, in accordance with the tax invoice given to the appellants by the real estate agent, in the sum of $1009.45, loss resulting from the early termination of the tenancy. I make no allowance for the loss of one of the appellant’s wages on account of stress occasioned by the decision of the Tribunal itself. In my opinion, compensation for loss of wages is not sufficiently related to the termination of the tenancy and is not warranted.
I order:
1.The respondents are to pay to the appellants the sum of $2806.60 as compensation for loss resulting from the early termination of the tenancy in respect of the property situated at 22 Beadnell Crescent, Bridgewater, South Australia.
2.The respondents are to pay the costs of instituting the appeal, fixed in the sum of $70.00.