Barrow v Yu (Residential Tenancies)
[2021] ACAT 68
•23 July 2021
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
BARROW & ORS v YU (Residential Tenancies) [2021] ACAT 68
RT 285/2021
Catchwords: RESIDENTIAL TENANCIES – whether written agreement purported to be a residential tenancy agreement – where agreement required rent to be paid monthly in advance and payment of a bond exceeding 4 weeks rent – where terms inconsistent with the Residential Tenancies Act and therefore void – where agreement found to be unenforceable because parties failed to agree on essential terms – whether, in those circumstances, the agreement is a ‘residential tenancy agreement’ – whether, in those circumstances, the dispute is a ‘tenancy dispute’ – where the ACAT found to lack jurisdiction under the Residential Tenancies Act – where tenants’ cause of action is for money had and received based on a total failure of consideration – where tenants’ alternative cause of action is for recovery of money paid as a result of a mistake – whether application should be characterised as an application “in relation to a contract” – where order made that application be heard and determined as a civil dispute application – lessor ordered to repay first month’s rent paid in advance
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 11, 15, 16, 22, 56, 57
Magistrates Court Act 1930 ss 257, 258
Residential Tenancies Act 1997 ss 6A, 7, 8, 9, 20, 37, 56, 58, 60, 62, 63, 64AC, 72, 76, 77, 83, 85, 101
Residential Tenancies Act 1997 (Reprint 68) standard terms 16, 28
Cases cited:Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26
David Securities Pty Ltd & Ors v Commonwealth Bank of Australia [1992] HCA 48
Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150
Hopkins v Governor-General of Australia [2013] NSWCA 365
McCarthy v Federal Commissioner of Taxation [2013] FCA 715
Owners of the Ship ‘Shin Kobe Maru’ v Empire Shipping Co Inc. [1994] HCA 54
Progressive Mailing House Pty Ltd v Tabali [1985] HCA 14
List of J. D. Heydon, Heydon on Contract (Lawbook Co., 2019)
Texts cited:J. W. Carter, Contract Law in Australia (LexisNexis Butterworths, 7th ed, 2018)
Tribunal: Senior Member M Orlov
Date of Orders: 23 July 2021
Date of Reasons for Decision: 23 July 2021
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) RT 285/2021
BETWEEN:
EDWARD BARROW
First Applicant
OLIVER PULSFORD
Second Applicant
ALEX AMBROSI
Third Applicant
CONOR NAKKAN
Fourth Applicant
AND:
HSIAO-I YU
Respondent
TRIBUNAL: Senior Member M. Orlov
DATE:23 July 2021
ORDER
The Tribunal orders that:
The application be heard and determined as a civil dispute application under Part 4 of the ACT Civil and Administrative Tribunal Act 2008.
The respondent must pay the sum of $4,069.19 to the applicants within 7 days of the date of this order by electronic fund transfer into the following bank account:
[Bank details redacted]
………………………………..
Senior Member M Orlov
REASONS FOR DECISION
Introduction
This is an application by the former tenants of a residential property for an order that the lessor repay the sum of $2,158.92, representing the remainder of a $4,000 payment they made on 2 February 2021 for one month’s rent in advance, less two weeks rent for the period between the date the tenants terminated the residential tenancy agreement and the date the lessor entered into a residential tenancy agreement with a replacement tenant. The parties to the dispute entered into the residential tenancy agreement on 2 February 2021. The tenants purported to terminate the agreement the next day on the grounds that the lessor’s agent had made misleading statements to them and the residential tenancy agreement was inconsistent with the standard residential tenancy terms in Schedule 1 of the Residential Tenancies Act 1997 (RT Act).
The lessor counterclaims for an order that the tenants forfeit the sum of $4,000 as compensation for breaking the lease.
The parties have consented to the Tribunal deciding the tenants’ application and the lessor’s counterclaim on the papers.
Background
The property in question is a four-bedroom furnished house in O’Connor, ACT. The lessor’s agent, Janelee Li (the agent), had all relevant dealings with the tenants. The tenants – Oliver Pulsford, Edward Barrow, Conor Nakkan and Alex Ambrosi – were university students. Mr Pulsford acted as their main point of contact with the agent.
The tenants inspected the property on 30 January 2021 and lodged an application by email the same day, saying they were happy to sign a 24-month lease at a rent of $895 per week, commencing as soon as possible. The agent replied by email on 1 February 2021, stating that the monthly rent was $4,000, and the bond would be $5,000. If the tenants agreed, the agreement would be prepared “today and you will need to put the bond and the first month’s rent into our nominated bank account by Wednesday, and we can hand over the keys Friday 6 pm or earlier subject to kitchen painting progress this week”.[1]
[1] Email to the tenants sent on 1 February 2021 at 7:29am
The tenants agreed and arrangements were made to meet at the property for a final inspection and to sign the lease on Tuesday, 2 February 2021, in the late afternoon. There was a further negotiation following the inspection, because of which some handwritten amendments were made to the residential tenancy agreement. There was also a discussion about depositing the bond with the Office of Rental Bonds instead of the lessor’s nominated bank account as the agent had stipulated. This was left on the basis that the tenants would make enquiries about the lodgement process, because the agent said she did not know how to do it. It appears the tenants also asked for the furniture in the bedrooms to be removed.
The parties signed the residential tenancy agreement at about 7:00pm on 2 February 2021. The agreement states that it is for a fixed term commencing on 5 February 2021 and ending on 4 January 2023. A handwritten amendment adds the words “or with 3 months notice to terminate the lease prior to 4/1/2023”. The effect of this appears to be to create a fixed term tenancy for the period 5 February 2021 to 4 January 2023, unless terminated earlier on three months’ notice. The rent is stated as $4,000 per month payable in advance on the 1st of the month into the lessor’s nominated bank account. The amount of the bond is stated as $5000.
Mr Pulsford paid $4,000 for the first month’s rent by electronic funds transfer to the lessor’s nominated bank account at 9:12pm that evening – i.e., on 2 February 2021.
At 9:17pm on 2 February 2021, the agent sent Mr Pulsford a screenshot of an email from another prospective tenant for the property, which said “we are willing and able to pay three months rent upfront if it helps our prospects as tenants”.
At 9:27pm the agent emailed Mr Pulsford, saying that the owner was insisting on the bond being deposited into their nominated account and “if your group is concerning ur [sic] bond and rent, we can cancel our contract tonight. We have several strong applications with better deal”.
Mr Pulsford replied by text at about 10:00pm advising that the tenants were happy to deposit the bond into the lessor’s nominated account but wished to know whether it remained the lessor’s intention to lodge the bond with the bond office, reflecting the tenants’ understanding of the outcome of their discussions with the agent earlier that evening. Mr Pulsford also enquired whether the tenants would be given a condition report for the property.
The agent replied by text, saying that she would try to figure out how to lodge the bond with the bond office, but the condition report would take some time to generate.
At 3:52pm on 3 February 2021, the agent wrote to Mr Pulsford:
After meeting with your group yesterday afternoon, some conditions have to be changed. I quickly did some work this morning based on your group’s request. Here, I will confirm with you the first month’s rental payment $4000 has arrived in nominated HSBC account.
1) You can lodge the rental Bond here $3500 Rental bonds/ACT Revenue Office – Website
2) Condition Report
3) Remove ALL furniture in 4 bedrooms
4) Extra storage room access (Blue Room)--------> this request could be available by mid-April
The property owners agree to your requests, and also reduce the bond but the contract will be for a 2 YEARS LEASE, not 1 year. We will prepare a condition report on the property. We will reduce the house inspections to semi-annual, but we may have a special inspection for the property owners at the end of this year, subject to the Covid situation. We will give you at least 1 week’s notice.
…
You requested that all the bedding furniture in the rooms be removed. We can do that for your group but it will require a few extra days to organise all the furniture. Therefore, we may not be able to hand over the keys later this week depending on the movers’ time and truck availability. I will keep you informed. You also wished that you could have an extra storage room which we have not listed in our AD (blue decking room), we can try our best to relocate all the house items in mid-April but not guarantee at this stage. [emphasis omitted]
At 7:11pm on 3 February 2021, Mr Pulsford emailed his reply:
I called the bonds office today and because $5000 is more than 4 weeks rent, which is legally all they can accept, we won’t be able to lodge the bond with the office. This is really important to us, however we understand that the owner wishes for the $5000 and as such we would like to cancel the rental contract as we understand you have other keen applicants and also have other preferences with lodging the bond privately anyway.
Could you please return the $4000 rental payment I made last night (2/2/2021) as soon as it arrives with the owner. We are really sorry for any inconvenience that this has caused but it seems to us that it would be better to cancel the contract now rather than have any differences down the line.
After speaking with the agent by telephone on 4 February 2021, Mr Pulsford sent an email stating:
… We understand that you have incurred additional costs as a result of our failed agreement and are happy to reimburse you 1 weeks rent ($4000 monthly = $920.55 weekly) as well as a portion of any cancellation fees you may have had to pay for furniture removal services. If you can attach receipts for the payments you have made for these purposes to your reply to this email, as well as a receipt of transfer for the remainder of our rent payment once these costs have been accounted for that would be great.
Ideally we would prefer to have at least $3000 return to us within the next day but as previously stated, we can negotiate this based on any attached proof of costs you have had to pay.
The agent replied by email on 9 February 2021:
This email is to formally acknowledge and accept your early termination of the lease of no 7 Foster Place Watson by email received on 04th Feb 2020 [sic].
As the legally binding tenancy contract has already been signed by both parties on 2nd Feb 2020 [sic] and the security deposit has been sent to the nominated account, the rental agreement had commenced on 02 FEB 2021.
Despite not having moved in yet, cancelling the rental agreement is considered breaking the lease, which legally incurs a break fee.
You will, therefore, must compensate for the rent until a new tenant is found and has signed a new tenancy contract. The cost of republishing the advertisement, agent fees, and administration services all have to be included.
We will inform you once a new tenancy contract has been well accepted, we will issue the refund in February. [emphasis omitted]
There were further communications by email in the following weeks, but nothing in those communications has a bearing on the outcome of the application, so it is unnecessary to refer to them.
Summary of the issues
In substance, the parties’ written submissions identify the main issues for the Tribunal to decide as whether:
(a)on the tenants’ case, the tenants lawfully terminated the residential tenancy agreement by notice in writing to the lessor’s agent on 3 February 2021; or
(b)on the lessor’s case, the lessor validly terminated the agreement on 9 February 2021 by written acceptance of the tenants’ abandonment of the tenancy on 3 February 2021.
The tenants submit that they were entitled to terminate the agreement for various reasons. The lessor submits that the tenants had no grounds to terminate, and that the tenants had abandoned the tenancy. Both parties seek an order for compensation.
The tenants’ claim and the lessor’s counterclaim assumes the existence of a binding and enforceable residential tenancy agreement, which came into effect upon signing of the agreement on 2 February 2021. The only difference in their respective positions is that, on the tenants’ case, the written terms of the signed document were supplemented or modified by an oral term providing for the bond to be paid to the Office of Rental Bonds, rather than into the lessor’s nominated bank account.
Whether a binding and enforceable agreement came into effect on 2 February 2021 is a threshold issue, which requires the Tribunal to consider:
(a)whether the written terms providing for payment of a $5,000 bond and $4,000 rent monthly in advance are void because they are inconsistent with the standard residential tenancy terms; and
(b)if so, whether the agreement is ineffective because the parties have failed to reach agreement in relation to one or more essential terms.
It is, in fact, the determinative issue. For reasons that follow, I am satisfied that the agreement signed on 2 February 2021 is ineffective at law, because the terms providing for payment of a bond and rent are void under section 9 of the RT Act. The issue whether the tenants lawfully terminated the agreement on the grounds that they did, or whether they abandoned the tenancy as the lessor contends, does not arise in those circumstances.
Issue 1 – are the terms providing for payment of the bond and rent void?
The parties signed the agreement on 2 February 2021. It appears that both parties obtained a copy signed by the other on the same day. Neither party suggested otherwise. I am satisfied, therefore, that pursuant to section 7(b) of the RT Act, the agreement commenced on 2 February 2021.
The agreement was prefaced by the following statement:
It is agreed that the lessor grants to the tenant for value a right of occupation of the premises for use as a residence by the tenant in accordance with this tenancy agreement (including the 100 terms of the tenancy under the heading “Terms of Tenancy”).
This suggests that the agreement included, or was intended to include, a document headed “Terms of Tenancy”. Neither party tendered a document of that description. I note that the standard residential tenancy terms in Schedule 1 of the RT Act comprise 100 numbered clauses, suggesting that the document in question, if it existed, was likely to have reproduced the standard residential tenancy terms, or some version of those terms.
However, the problem of identifying the terms applicable to the agreement signed on 2 February 2021 is resolved by applying section 8(1)(a)(i) of the RT Act, which provides that a residential tenancy agreement for a fixed term, as is the case here, is taken to contain the standard residential tenancy terms mentioned in Schedule 1, as in force on the day the parties entered into the agreement. The standard terms in force on 2 February 2021 were those mentioned in Schedule 1 of Reprint 68 of the RT Act.[2] In the absence of evidence to the contrary, it is appropriate to proceed on the basis that the standard residential tenancy terms mentioned in Schedule 1 of Reprint 68 of the RT Act were incorporated into the residential tenancy agreement signed on 2 February 2021. I will refer to these as the Standard Terms.
[2] RP 68 – effective from 1 November 2020 to 25 February 2021
Section 9 of the RT Act provides that a term of a residential tenancy agreement is void if it is inconsistent with a standard residential tenancy term and it has not been endorsed by the ACAT under section 10, or if it is inconsistent with the RT Act.
The agreement signed on 2 February 2021 provided for payment of a bond in the amount of $5,000. Clause 16 of the Standard Terms provided that the amount of the bond must not exceed four weeks rent. Section 20 of the RT Act is to similar effect. As the monthly rent was $4,000, the amount of the bond required by the agreement clearly exceeded four weeks’ rent. As the term was inconsistent with clause 16 of the Standard Terms, pursuant to section 9(1) of the RT Act, it was void and of no effect.
The agreement provided for payment of $4,000 rent, monthly in advance on the first day of each month. Clause 28 of the Standard Terms provided that the lessor must not require an amount of rent paid in advance greater than two weeks “or a longer period nominated by the tenant”.[3] The lessor’s agent advised the prospective tenants that the lessor required rent to be paid monthly in advance on 1 February 2021.[4] While the tenants were willing to accept the lessor’s requirement and did so by signing the agreement the next day, that does not amount to the tenants ‘nominating’ that rent should be paid monthly in advance, rather than fortnightly. A lessor may require rent to be paid not more than fortnightly in advance. A tenant may nominate that payment should be monthly in advance. If the lessor agrees, the residential tenancy agreement may provide accordingly. As that did not happen here, the lessor is not entitled to rely on the exception in clause 28.
[3] Clause 28 of the Standard Terms
[4] See paragraph [5]
As the term providing for the payment of rent was inconsistent with clause 28 of the Standard Terms, pursuant to section 9(1) of the RT Act, it was void and of no effect.
Issue 2 – was the agreement ineffective as a result?
A residential tenancy agreement is a contract as well as a grant of an estate in land. The ordinary principles of contract law apply to a residential tenancy agreement, as it does to all contractual leases, except to the extent modified by statute.[5] In this case, the relevant principles are those relating to agreements that are unenforceable because they are incomplete. An incomplete agreement is not enforceable as a contract where the parties have failed to agree on the essential terms of the contract.[6] The same principles apply to leases and agreements to lease.[7]
[5] Progressive Mailing House Pty Ltd v Tabali [1985] HCA 14 at [28] (per Mason J, Wilson, Deane, and Dawson JJ agreeing); [4] (per Brennan J); [4] per Deane J; (1985) 157 CLR 17 at 29, 40-41, 53
[6] J. W. Carter, Contract Law in Australia (LexisNexis Butterworths, 7th ed, 2018) at [4.10] and the cases referred to in f.n. 37; J. D. Heydon, Heydon on Contract (Lawbook Co., 2019) at [3.60]
[7] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 at [31] (French CJ, Kiefel and Bell JJ) and the cases referred to in f.n. 40 and 41
In this case the parties failed to agree on terms for the payment of rent and a bond that were valid under the RT Act.
In the context of a residential tenancy agreement, as with all contracts, ‘essential term’ can be used in two senses. The first refers to a term that the law regards as necessary for any residential tenancy agreement to take effect as a contract. The second, refers to a term that the parties regard as essential.
In this case, a term fixing the amount of the bond was an ‘essential term’ in the second sense. Although a residential tenancy agreement can be effective without provision for a bond, the circumstances described earlier make it clear that both the lessor and the tenants regarded agreement as to the amount of the bond and how it should be paid to be an essential term of their bargain.
A term fixing the amount and frequency of payment of rent is an ‘essential term’ in the first sense.
It might be thought that $4,000 rent payable monthly, on the first day of the month could be converted readily into an amount of rent payable weekly or fortnightly. However, the difficulty in doing so, in the absence of express agreement by the parties, may be illustrated by the following examples.
The equivalent daily and weekly rent depends on how the conversion is made. Converting an amount payable on a calendar monthly basis to a weekly basis, means that the amount payable will vary according to the number of days in the month. The equivalent weekly rent works out at $1,000 in February, $903.26 in March and $933.33 in April. Doing the conversion based on an annual rent of $48,000 gives an equivalent weekly rent of $920.55.[8] However, doing the conversion based on the total rent payable over the fixed term from 5 February 2021 to 4 January 2023, namely $92,000 payable over 23 months (or 699 days), gives an equivalent weekly rent of $921.32.
[8] $48,000/365 days x 7 = $920.55
Putting those difficulties aside, neither the tribunal nor a court has power to remake the parties’ agreement. Further, as Kaye J said on behalf of the Full Court in Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd:
The law does not permit a court to imply a term into a bargain between parties for the purpose of making their bargain an enforceable contract.[9]
[9] [1989] VR 695 at 702
I am satisfied, therefore, that the residential tenancy agreement signed on 2 February 2021 is unenforceable on the grounds that it is an incomplete agreement.
Issue 3 – what is the appropriate remedy?
The tenants’ application described the dispute as:
…one regarding the actions of the Respondent in her false and misleading statements, the illegal nature of the lease agreement which led to the Applicants terminating the lease agreement. However, the $4000 deposit is still being retained by the Respondent despite settlement offers made.[10]
[10] ‘History of Dispute’ attached to the application filed on 6 April 2021
The tenants claimed repayment of the balance of the $4,000 paid to the lessor on 2 February 2021, giving credit for the lessor’s ‘loss’ of two weeks rent while replacement tenants were sought. The claim reflects an offer of settlement that the tenants made on a ‘without prejudice’ basis by email sent on 26 February 2021. Both parties included a copy of the email in the material they submitted to the Tribunal, so that the ‘without prejudice’ privilege that would normally attach to a communication of that kind has been waived. The email said in part:
Without prejudice, we would like to once again request that you return the rent paid in advance to the sum of $4000…
We have been in touch with legal support on this matter and would like to bring to your attention several items:
·It is not legal to request rent paid in advance eclipsing the equivalent of 2 weeks rent.
·It is not legal to request a bond payment of more than the equivalent of 4 weeks rent.
·Bond payments legally must be paid to the bonds office.
·If a break fee is required it should not be more than the sum of 6 weeks rent plus readvertising fees (with proven receipts, up to the value of 1 weeks rent). However if new tenants are found, any amount of rent they would pay in this period should be subtracted from this break fee value. (see Residential Tenancy Amendment Act 2019 fact sheet for further information…)
The credit that the tenants allowed to the lessor assumes that they are liable for a ‘break fee’. However, the conclusion that the residential tenancy agreement is unenforceable means that the lessor is not entitled to charge a ‘break fee’ for lost rent and re-letting costs. The tenants’ concession is not binding on the Tribunal. Before the Tribunal can give the lessor credit for any amount, it must be satisfied that there is a legal entitlement to claim a ‘break fee’. In this case, there is none.
The tenants claim, therefore, must be taken as a claim for repayment of the $4,000 paid to the lessor as rent on the grounds, among others, that the tenancy agreement included impermissible terms governing the payment of rent and bond. The effect, as I have found, is that the residential tenancy agreement is unenforceable.
The tenants did not take possession of the property. They obtained no benefit for the $4,000 they paid to the lessor on 2 February 2021 as the first month’s rent in advance. As a result, there was a total failure of consideration.
An action to recover money based on a total failure of consideration is a common law action for money had and received.[11]
[11] Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [45] (Bathurst CJ), [100], [105] (Leeming JA), [119] (Emmett JA)
Further, the tenants paid the money in the mistaken belief that they had entered into a binding and enforceable agreement to rent the property and that the first month’s rent was due and payable under the terms of the agreement.
Since the High Court decision in David Securities Pty Ltd & Ors v Commonwealth Bank of Australia,[12] the different rules that applied previously to recovery of money paid under a mistake of law and money paid under a mistake of fact, are no longer relevant. The plurality stated in that case (omitting citations):
The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust. There can be no restitution in such circumstances because the law will not provide for recovery except when enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.[13]
[12] [1992] HCA 48 at [40] (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ)
[13] [1992] HCA 48 at [47]
Adopting the same language, the fact that the payment of the rent in this case was caused by a mistake gives rise to a prima facie obligation on the part of the lessor to make restitution on the grounds that the lessor has been unjustly enriched. I am satisfied that there are no countervailing considerations which show that the lessor’s retention of the payment is not unjust. I accept that the lessor did not receive rent for a short time while the premises were re-let and incurred costs in doing so. However, those were circumstances of the lessor’s making. The lessor prepared the residential tenancy agreement. The terms which I have found were void were terms that the lessor chose to include in the agreement. There is nothing unjust in visiting on the lessor the consequences of the lessor’s own actions.
As the tribunal’s jurisdiction is entirely statutory,[14] the tribunal’s power to make an order for payment in relation to a claim to recover money based on a total failure of consideration, or to recover money paid because of a mistake, must be found in the relevant legislation[15] – in this case, the RT Act or the ACAT Act. I consider that issue next.
Jurisdiction
[14] ACT Civil and Administrative Tribunal Act 2008 (ACAT Act), section 11
[15] ACAT Act, section 57
Pursuant to section 76 of the RT Act, the ACAT has exclusive jurisdiction to hear and decide any matter that may be the subject of an application under the RT Act or the standard residential tenancy terms, subject to certain limitations that are not presently material.[16]
[16] RT Act, sections 76(2), 76(3), 77
A ‘tenancy dispute’ is defined in section 72 of the RT Act:
(1) For this Act, a dispute is a tenancy dispute if it –
(a)is between the parties (including between co-tenants) to a residential tenancy agreement; and
(b)is about, arises from, or relates to, the agreement.
(2) A tenancy dispute includes –
(a)a dispute if an application relating to the dispute may be made under part 4 (Termination of residential tenancy agreements) or part 5 (Rental rate increases; and
(b)a referral of an application and notice of dispute taken to be an application about a tenancy dispute under section 35(3); and
(c)an application for compensation under this Act.
Is the present dispute a tenancy dispute? For the following reasons, the answer is ‘No’.
The starting point is the definition of residential tenancy agreement in section 6A:
(1) An agreement is a residential tenancy agreement if –
(a)under the agreement –
(i)a person gives someone else (the tenant) a right to occupy stated premises; and
(ii)the premises are for the tenant to use as a home (whether or not together with other people); and
(iii)the right is given for value; and
(b)the agreement is not an occupancy agreement under section 71C.
It is apparent from the language of section 6A(1) that an agreement is a residential tenancy agreement only if the agreement has the effect required by subsection 6A(1)(a)(i)-(iii). That is, the agreement must give a tenant a right to occupy premises as their home for value. An agreement purporting to give a tenant a right to occupy premises as their home for value, but which is unenforceable because it is incomplete, cannot be a residential tenancy agreement within the meaning of the RT Act because it does not have the effect required by the section. As the present circumstances illustrate, taken at face value the document the parties signed on 2 February 2021 appears to satisfy the conditions in subsections 6A(1)(a) and (b). However, the agreement is ineffective. It does not give the tenants a right to occupy the premises as their home for value, because the term providing for payment of rent is void, as is the term providing for payment of the bond, which the parties treated as essential. The agreement which is the subject of the dispute is not a residential tenancy agreement within the meaning of the RT Act.
It follows that the dispute in this case is not between parties to a residential tenancy agreement and therefore falls outside the definition of a ‘tenancy dispute’ in section 72(1).
Nor does the dispute involve an application for compensation under the RT Act, to bring it within the expanded definition of a ‘tenancy dispute’ in section 72(2). The RT Act gives the ACAT power to make an order for payment of compensation in a variety of circumstances, none of which apply to the circumstances here.[17]
[17] See sections 37(unlawful entry for eviction purposes where person has prescribed possession); 56 (failure to vacate after termination and possession order); 58(2) (wrongful eviction); 60(2) (tenants vacates after giving defective termination notice); 62 (abandonment during fixed term); 63 (abandonment during periodic agreement); 64AC(5) (void residential tenancy agreement in relation to affected residential premises); 83(1)(d) (compensation for loss of rent, occupancy fees or any other loss caused by a breach of residential tenancy agreement); 84(1)(b) (notice of intention to vacate before end of fixed term accepted by lessor); 101 (contravention of Part 7 – Residential tenancy databases)
That means the Tribunal does not have jurisdiction under the RT Act to grant relief in relation to the tenants’ application. However, that is not the end of the matter.
Under Part 4 of the ACAT Act, the ACAT has jurisdiction to hear and determine a ‘civil dispute application’ up to a limit of $25,000. The definition of a ‘civil dispute application’ in section 16 of the ACAT Act includes a ‘contract application’, which is defined in section 15 as “an application in relation to a contract, and includes an application for damages for breach of contract”.
Is this an application “in relation to a contract”? For the following reasons, that question should be answered ‘Yes’.
The words “in relation to a contract” should not be construed narrowly. As Leeming JA stated recently in Great Northern Developments Pty Ltd v Lane,[18] “[t]here is a general principle that laws conferring jurisdiction are to be construed broadly and laws denying jurisdiction are to be construed narrowly”, referring to Hopkins v Governor-General of Australia[19] and McCarthy v Federal Commissioner of Taxation.[20]
[18] [2021] NSWCA 150 at [90]
[19] [2013] NSWCA 365 at [24]
[20] [2013] FCA 715 at [65]
It is sufficient that there is, or appears to be, a contract and the application is “in relation to” that contract. It is immaterial to the issue whether the ACAT has jurisdiction to hear and determine a contract application, that the tribunal ultimately may find that there is no contract, or the contract is void, voidable or otherwise unenforceable for any reason. The question whether an application is properly characterised as a claim “in relation to a contract” is to be determined at the outset and does not depend on the ACAT making findings of fact.[21]
[21] Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [95] (Leeming JA); Owners of theShip ‘Shin Kobe Maru’ v Empire Shipping Company Inc. [1994] HCA 54 at [46]-[49] (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ)
I have observed earlier that a residential tenancy agreement is a contract and that ordinary principles of contract law apply, except to the extent they have been modified by statute.[22] The tribunal has jurisdiction to hear and determine an application in relation to a tenancy dispute under the RT Act only where there is, or was, a valid residential tenancy agreement. The tribunal’s jurisdiction to hear and determine an application “in relation to a contract” is not subject to the same kind of limitation.
[22] See paragraph [31]
I am satisfied, for the reasons given earlier, that a claim at common law for recovery of money paid under an unenforceable contract, on the grounds that there has been a total failure of consideration, is a claim “in relation to a contract” for the purpose of Part 4 of the ACAT Act. The fact that the cause of action is for ‘money had and received’ does not prevent the application from being characterised as an “application in relation to a contract”.
I am satisfied also that a claim for restitution of money paid because of a mistaken belief that the contract requiring payment was valid and enforceable, is a claim “in relation to a contract” for the purpose of Part 4 of the ACAT Act.
Pursuant to section 22(1) of the ACAT Act, the tribunal has the same jurisdiction and powers in relation to a civil dispute application as the Magistrates Court has under Part 4.2 (Civil jurisdiction) of the Magistrates Court Act 1930.
Pursuant to section 257 of the Magistrates Court Act 1930, the Magistrates Court may hear and decide any personal action at law subject to a monetary limit. Pursuant to section 258(1), in any proceeding that the Magistrates Court has jurisdiction to hear and decide, the court may grant any relief or remedy and make any order that the Supreme Court may make in a similar action in that court. That includes equitable relief in the form of an order for restitution.
Accordingly, I am satisfied that the Tribunal has jurisdiction to hear and determine the tenants’ claim and grant appropriate relief subject to one proviso.
The application was not brought in the ACAT’s civil dispute jurisdiction. However, section 56(d) of the ACAT Act gives the Tribunal power to take any action in relation to an application that the Tribunal considers appropriate and that is consistent with the ACAT Act or an authorising law. As the ACAT would have jurisdiction to hear and determine the current application if it had been brought in the tribunal’s civil jurisdiction, it is appropriate that I should make an order that the application be heard and determined as a civil dispute application under Part 4 of the ACAT Act.
Conclusion
I am satisfied that there has been a total failure of consideration and that the $4,000 paid to the lessors as rent due under the agreement on 2 February 2021 should be repaid by the lessor as money had and received.
I am satisfied also that the lessor has been unjustly enriched by the receipt and subsequent retention of the $4,000 payment the tenants made on 2 February 2021 in the mistaken belief that they had entered into a valid and binding residential tenancy agreement and that the lessor should be required to make restitution.
In the circumstances, it is appropriate to order the lessor to pay the amount of $4,000 to the tenants, together with interest accruing from the date of payment to the date of the hearing (5 July 2021).
Interest is calculated at $69.19.
The appropriate order is that the lessor pay the sum of $4,069.19 to the tenants. By agreement between the tenants, payment should be made to Mr Pulsford’s bank account. I have provided for this in the final orders.
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Senior Member M Orlov
| Date of hearing | 5 July 2021 (on the papers) |
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