Bowyer v McDonald and McDonald v Bowyer

[2017] NSWCATCD 65

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Bowyer v McDonald and McDonald v Bowyer [2017] NSWCATCD 65

Hearing dates:

11 July 2017

Decision date:

25 July 2017

Jurisdiction:

Consumer and Commercial Division

Before:

J. C. Thompson, General Member

Decision:

(1) Matter number RT 17/15064: the application is dismissed.

(2) Matter number RT 17/16118: the Tribunal directs Rental Bond Service as the holder of rental bond No A949720-1 to pay out the bond monies of $1,400.00 and any accrued interest to Jess McDonald and Paul McDonald of PO Box 679 Walgett NSW 2832.

Catchwords:

Standing of vendor landlords; contradictory evidence; depreciation of fixtures.

Legislation Cited:

Residential Tenancies Act 2010, ss. 29, 30 and 76

Texts Cited:

Residential Tenancies Law and Practice NSW, 6th edn, Federation Press 2014

Category:

Principal judgment

Parties:

Brendon Bowyer & Kylie Bowyer (applicants/cross respondents)
Jess McDonald and Paul McDonald (respondents/cross applicants)

Representation:

Applicants and Cross Respondents - Kylie Bowyer
Respondents and Cross Applicants - Jess McDonald

File Number(s):

RT 17/15064 & RT 17/16118

Publication restriction:

Nil

REASONS FOR DECISION

Background

1. In August 2006 Brendon Bowyer and his wife Kylie Bowyer (“the landlords”) became the registered proprietors of residential premises at Walgett in Western New South Wales (“the premises”).

2. In early 2016 Paul McDonald and his wife Jess McDonald (“the tenants”) agreed to take a tenancy of the premises.

3. In respect of the premises, the parties entered into a Residential Tenancy Agreement, signed by the landlords on 16 March 2016 and by the tenants on 21 March 2016, for the period of one year from 19 March 2016 to 19 March 2017, at a rent of $350.00 per week.

4. The tenancy came to an end in March 2017. These proceedings arise from allegations made by the landlords as to the condition of the premises at the conclusion of the tenancy. The landlords claim that the premises had the smell of dog urine and faecal matter, and that the carpets were stained and the venetian blinds damaged.

5. By Application dated 31 March 2017 the landlords claim from the tenants the sum of $6,000.00 as compensation for damage to the carpet and timber venetian blinds in the premises, claimed by the landlords to have arisen during the tenancy. Other complaints were raised by the landlords in their evidence but the claims in the Application are restricted to those in respect of carpet and blinds only. The Tribunal restricts its consideration to the carpet and blinds only.

6. The tenants oppose the making of any orders for compensation on the grounds that:

1. by the time the tenants vacated the premises, the landlords no longer owned the property, so have no standing to make their claim;

2. damage was pre-existing;

3. there is a lack of evidence in support of the landlords’ case; and

4. in respect of quantum, any compensation for damage to the carpet and/or blinds should allow for depreciation of the value of the items.

7. By Application dated 6 April 2017 the tenants seek an order that the whole of the rental bond of $1,400.00 be paid over to them.

8. The hearing of the two matters together took place in Walgett on 11 July 2017. The decisions were reserved.

The evidence

9. At the hearing each party relied on a bundle of evidence including Statutory Declarations and photographs. Each called witnesses for cross-examination.

10. The landlords relied on the evidence in writing of: Ms Kylie Bowyer, with annexures; Mr Gerard Winston Brazier, a one-time prospective purchaser who inspected the property on two occasions; Ms Robyn Pearson, who cleaned the property for the landlords on 17 March 2017; Ms Jenni Mavis McKenzie in relation to yard work; and Ms Rhonda Bradley, Ms Bowyer’s mother, and Mr Stephen Dowton, Ms Bowyer’s step-father, who had inspected the property and in March 2017 became its registered proprietors. The landlords’ evidence included photographs, and quotations for the replacement of the carpet and of the blinds.

11. The tenants relied on the evidence in writing of: Ms Jessica McDonald and Mr Paul McDonald, with annexures; Ms Alesha Swan who was a live-in nanny for the tenants and cleaned the Premise in March 2017; Mr Mark Thomas Daly, who assisted the tenants in moving in March 2017; Ms Stacey McFarlane, the sister of Jess McDonald who had visited the premises. The tenants’ evidence included photographs.

12. Each party provided written submissions.

The history

13. In about 2013 the landlords installed new carpet and timber venetian blinds throughout the Premises. Those same items were in place at the commencement of the Residential Tenancy Agreement on 19 March 2016.

14. Prior to letting the property, in 2015 it was inspected by Mr Brazier, a prospective purchaser. At the time, he detected no animal smell.

15. In about 2015 the landlords took photographs of the property before they moved out of the premises. The photographs depict that the premises were furnished at that time. Much of the floor surface was covered by furniture.

16. On 17 March 2016 the premises were cleaned for the landlords by Ms Pearson. Her evidence was that “it was thoroughly cleaned with no blood stains on the floor and no animal faeces anywhere through the house”.

17. The landlords did not prepare an Ingoing Condition Report, either in the company of the tenants, or at all. Instead, on 16 March 2016, prior to the commencement of the tenancy on 19 March 2016, Ms Bowyer emailed to the tenants a blank form of Condition Report with the invitation: “This is for you to do if you wish and send me a copy.”.

18. The tenants occupied the premises from 20 March 2016. At their request, on that day Ms Swan took some photographs of the condition of the premises. Those photographs depict significant staining of the carpet throughout the premises.

19. The evidence of the tenants was that the Ingoing Condition Report was completed by them and given to Mr Bowyer in March 2016. It describes the carpets as, variously: “various stains all over - not cleaned well”; “various stains throughout room”; “minor light stains”; “minor stains throughout”; and “carpets not cleaned - lightly vacced by cleaner but very dirty upon moving in”. It describes the blinds as, variously: “minor damage to some blinds - don’t work”. The ICR was not signed by either of the tenants.

20. The landlords say that they did not receive the Ingoing Condition Report until 20 March 2017, towards the very end of the tenancy.

21. Mr Brazier’s evidence was that he inspected the property again on 27 June 2016. He noticed dogs on the property and on the back veranda, bird seed on a window sill with a small amount below, the smell of dog urine and a strong smell of dogs in the house.

22. For the tenants, Ms McFarlane, Ms McDonald’s sister, made a Statutory Declaration that she had a young relative with a disorder which makes him particularly allergic to animals, including dogs. She attested that she saw the stained carpet in March 2016. She also attested that she and the boy had visited the premises in June and July 2016 and again in January 2017. On those occasions she saw no animals in the house and did not notice any smells. The boy suffered no ill-effects during the visits, even after times spent lying on the floor of the house. That evidence supports a conclusion that the house was not affected by dog residues.

23. On 24 September 2016 Ms McDonald deposited $1,400.00 into Ms Bowyer’s bank account, for the rental bond. Ms Bowyer deposited the bond with Service NSW on 20 March 2017 - at the very end of the tenancy.

24. On 24 February 2017 the landlords exchanged contracts for the sale of the property to Ms Bowyer’s mother and step-father, Ms Bradley and Mr Dowton.

25. Consistently with the casual approach of all parties to the formalities of the tenancy, the landlords did not serve upon the tenants a Notice of Termination. Instead, in March 2017 the landlords conveyed to the tenants the landlords’ wish that the tenants vacate and the tenants conveyed to the landlords a willingness to comply. As described above, the Residential Tenancy Agreement specified a fixed term of one year, ending on 19 March 2017.

26. On 20 March 2017, the day on which the bond was deposited with Service NSW, the landlords emailed the tenants, recording their agreement to vacate the premises by 22 March and to undertake an Outgoing Inspection on 24 March.

27. On 24 March there took place the settlement of the sale of the property by the Bowyers to Mrs Bowyer’s mother and step-father.

28. On that day, 24 March, Ms Swan finalised the cleaning of the premises for the tenants. The landlords did not arrive to conduct an inspection. No Outgoing Condition Report was prepared by or for the landlords or the tenants.

29. The tenants vacated the premises on 24 March and on 25 March handed the keys to Mr Dowton, one of the new owners. Later that day the landlords conducted an inspection, not in the company of the tenants. They found its condition not to their liking and recorded their findings in an email to the tenants sent at 10.53 am on 28 March. Significantly, only 12 minutes later, which the Tribunal takes as insufficient time for them to concoct an account differing from fact, the tenants responded, at 11.05 am that day, that the place was “cleaner than when we moved in” and informed the landlords that they would need to lodge their “request with the DFT” and that the tenants would oppose any claim.

30. The quotation to replace the carpet was $6,260.00; for the blinds $2,814.00.

Consideration

31. The issues are now dealt with in the order of the tenant’s grounds as set out at par. 6 (above).

The standing of the landlords

32. Section 76 of the RTA provides:

Notice of sale of residential premises by landlord

1. This section applies if residential premises subject to a tenancy are sold.

2. The landlord, landlord’s agent or other person authorised by the landlord must give the tenant a notice of the sale containing the following:

1. the name of the purchaser,

2. a direction that the tenant pay all future rent to the purchaser.

Note. For the effect of such a notice on requirements at law for an attornment, see section 125 of the Conveyancing Act 1919.

33. It is understandable that the landlords did not comply with sub-section (2): all parties - the landlords, the tenants and the purchasers - agreed that the property was to be sold with vacant possession and that the tenants would vacate, preferably before, but if not, at or around, the settlement date. None of the parties wished for the status of landlords to be transferred to the purchasers.

34. In Residential Tenancies Law and Practice New South Wales, 6th edn, Federation Press 2014 at p. 171, the learned authors, Anforth, Christensen and Bentwood, offer the following commentary on section 76:

If an existing landlord passes title to the premises to a third party, whether through sale of the premises [or other means] ... then the status of landlord under a residential tenancy agreement passes to that third party.

35. That is the position adopted by the tenants in their submissions. The Tribunal finds that such a conclusion is not valid in this case because of the mutual acknowledgment of the parties that the end of the tenancy and the commencement of new ownership were to be co-incident. That settlement took place on 24 March 2017 and that the tenants handed back the keys on 25 March are not facts which go to found a conclusion that the relationship of landlord and tenant was transferred from the landlords to the incoming purchaser. Of more accord with the facts is a conclusion that the tenants vacated on the day of settlement and received the implied permission of the purchasers to attend the next day to put the finishing touches to their cleaning and to remove some animals.

36. The Tribunal finds that the landlords have standing to make their application in the Tribunal in respect of the condition of the premises at the end of the tenancy. What agreements were reached by the landlords, as vendors, and the purchasers does not impact on the rights of the landlords as against the tenants. The Tribunal is against the tenants on this ground of defence.

Pre-existing damage; sufficiency of evidence

37. Section 29 of the Residential Tenancies Act 2010 (“the RTA”) provides:

Condition reports

(1)   A condition report relating to the condition of residential premises on a day specified in the report must be completed by or on behalf of a landlord before or when the residential tenancy agreement is given to the tenant for signing.

(2)   Two copies of the condition report must be given by the landlord or landlord’s agent to the tenant before or when the tenant signs the residential tenancy agreement.

(3)   The tenant must complete and give one copy of the condition report to the landlord or landlord’s agent not later than 7 days after receiving it and both the landlord and the tenant must retain a copy of the report.

(4)   At, or as soon as reasonably practicable after, the termination of a residential tenancy agreement, the landlord or landlord’s agent and the tenant must complete the copy of the condition report retained by the landlord or the tenant under this section, in the presence of the other party.

(5)   It is not a breach of subsection (4) for the condition report to be completed in the absence of the other party if the party completing the report has given the other party a reasonable opportunity to be present when it is completed.

(6)   A condition report is to be in the form prescribed by the regulations and may be included in a prescribed standard form of residential tenancy agreement.

38. It is not in contest that the landlords did not comply with sub sections (1) and (2) in that they did not complete a condition report and give two (or any) copies to the tenants for signing. What is in contest is when the tenants completed the condition report and served it on the landlords. The Tribunal finds that the tenants did complete the condition report during the week commencing 20 March 2016 and handed a copy to Mr Bowyer on 26 or 27 March 2016. The Tribunal does not accept that the first time the landlords saw the tenants’ condition report was at the end of the tenancy in 2017.

39. Section 30 of the RTA provides:

Condition report evidence of condition of premises

(1)   A condition report that is signed by both the landlord and the tenant is presumed to be a correct statement, in the absence of evidence to the contrary, of the state of repair or general condition of the residential premises on the day specified in the report.

(2)   This section does not apply:

(a)   to any matter that could not have reasonably been discovered on a reasonable inspection of the premises, or

(b)   to any statement in the report about which the tenant makes a written dissenting comment on the copy of the report completed by the tenant and retained by the landlord.

40. By giving the tenants a blank Ingoing Condition Report, the landlords effectively waived their rights to formally record their observations of the condition of the premises at the start of the tenancy. The ICR was not signed by either party so, pursuant to s. 30, the ICR cannot be “presumed to be a correct statement”. However, the evidence of the tenants, which the Tribunal accepts, is that the document was completed shortly after the commencement of the tenancy.

41. That the parties cannot rely on either an ingoing nor an outgoing condition report is not the end of the matter. It is still open to the landlords to prove their case by adducing other evidence. Likewise, it is open to the tenants to adduce countervailing evidence.

42. Witnesses for each party gave evidence of the state of the carpet and/or blinds as at March 2016 and March 2017. The evidence of the witnesses for the landlords directly conflicts with that of those for the tenants. The landlords’ witnesses attest to the deterioration of the condition of the carpets and blinds over the year of the tenancy. The evidence of the tenants’ witnesses is to the effect that the premises were in much the same condition at the end of the premises as they were at the beginning, after allowing for fair wear and tear. For that reason, one must turn to such objective evidence as is available.

43. The photographs of the landlords taken in 2015 or, in any event, prior to the tenancy, show the premises furnished. They do not depict the clear floors and the stains on the carpet as seen in the photographs tendered by the tenants as having been taken by Ms Swan on the date they bear, 20 March 2016.

44. Ms Swan was cross-examined on the veracity of her evidence, it being suggested that she altered the date stamp on her telephone. Ms Swan’s evidence was given in a forthright manner and the Tribunal found no reason to doubt her evidence given on oath. The Tribunal finds that the photographs taken by Ms Swan accurately record the condition of the premises as at 20 March 2016. They show stained carpets and damaged blinds.

45. The Tribunal also finds that the photographs put in evidence by the landlords accurately record the condition of the premises as at the end of the tenancy. They too show stained carpets and damaged blinds.

46. In the circumstances the Tribunal concludes that the landlords have not made out their case that they are entitled to compensation under their heads of claim - for damage to the carpets and for damage to the blinds arising during the tenancy. They have not proved their case sufficiently to satisfy the Tribunal, on the balance of probabilities that their claims are made out. The landlords’ application shall be dismissed.

47. Given that determination, it is unnecessary to deal with the other defence raised by the tenants, but for the sake of completeness the Tribunal now does so.

Quantum

48. With regard to the amount in issue, the Australian Taxation Office, in its publication Rental Properties 2016, allows for an effective life of 10 years for each of carpets and internal window blinds. Accordingly, at the end of the tenancy the carpets and blinds in the premises had an effective remaining life of six years, allowing for fair wear and tear. Thus the carpets had a 2017 replacement value of $3,756.00 and the blinds $1,668.40. Even had the Tribunal found for the landlords, the total claim would not have been more than the total of those two sums: $5,424.40.

49. The landlords’ claim is to be dismissed and an order made for the return of the bond to the tenants.    

Orders

1. Matter number RT 17/15064: the application is dismissed.

2. Matter number RT 17/16118: the Tribunal directs Rental Bond Service as the holder of rental bond No A949720-1 to pay out the bond monies of $1,400.00 and any accrued interest to Jess McDonald and Paul McDonald of PO Box 679 Walgett NSW 2832.

J. C. Thompson

Member

New South Wales Civil and Administrative Tribunal

25 July 2017

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 06 September 2017