Cosgrove v Hutchinson; Hutchinson v Cosgrove

Case •

[2024] NSWSC 748

•

19 June 2024

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Cosgrove v Hutchinson; Hutchinson v Cosgrove [2024] NSWSC 748
Hearing dates: 17-18 June 2024
Date of orders: 19 June 2024
Decision date: 19 June 2024
Jurisdiction:Equity
Before: Hammerschlag CJ in Eq
Decision:

Proceedings no. 2022/00182954 in the Local Court and transferred to this Court dismissed with costs

Catchwords:

LEASES AND TENANCIES – Residential Tenancies Act 2010 (NSW) s 119 – Where landlord commences proceedings in the Local Court to obtain recovery of residential premises subject to a residential tenancy agreement and the statement of claim includes a claim for rent – Whether the proceedings can continue with respect to the claim for rent – HELD: They cannot, the proceedings constitute one suit and were unlawfully instituted and the inclusion of the rent claim which might have been able to be brought separately and lawfully does not change this – The lawfulness of the commencement of the proceedings must be tested at the point of commencement

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Residential Tenancies Act 2010 (NSW)

Residential Tenancies Regulations 2010 (NSW)

Residential Tenancies Regulations 2019 (NSW)

Category:Principal judgment
Parties:

2022/00182954
Phillip Anthony Cosgrove (First Plaintiff)
Pamela Margaret Lawrence (Second Plaintiff)
Andrew Peter Cosgrove (Third Plaintiff)
Karen Hutchinson (Defendant)

2023/00041000
Karen Hutchinson (Plaintiff)
Phillip Anthony Cosgrove (First Defendant)
Pamela Margaret Lawrence (Second Defendant)
Andrew Peter Cosgrove (Third Defendant)
Representation:

2022/00182954

Counsel:
S Ryan (Plaintiffs)
R E Quickenden (Defendant)

Solicitors:
Nicholas Dan Solicitor (Plaintiffs)
Whitelaw Mcdonald (Defendant)

2023/00041000

Counsel:
R E Quickenden (Plaintiff)
S Ryan (Defendants)

Solicitors:
Whitelaw Mcdonald (Plaintiff)
Nicholas Dan Solicitor (Defendants)
File Number(s): 2022/00182954
2023/00041000
Publication restriction: Nil

JUDGMENT

  1. On any view, aspects of the conduct of this case can only be described as extraordinary. Why I say this will be made clear later.

INTRODUCTION AND BACKGROUND

  1. Don O’Donald Cosgrove, a retired financial planner, died on 19 April 2020, aged 89. All the protagonists in this dispute have referred to him as Don, Uncle Don or Grandpa Don. Intending no disrespect, I will refer to him as Don.

  2. I will also refer to others by their first names on the same basis.

  3. When Don died, he was married to Merna Cosgrove (Merna). Merna was his second wife. Merna is now 90 years old.

  4. Karen Louise Hutchinson (Karen) is Merna’s daughter. She is aged 63. Prior to 18 November 2011, Karen lived with her son, Chadd Hutchinson (Chadd), in Raymond Terrace, near Newcastle, New South Wales.

  5. Don made a will on 21 August 2007 appointing his son, Philip Anthony Cosgrove (Philip) and his accountant, John Buxton (Buxton), as executors. He left his household chattels to Merna as well as an indexed annuity. He left the residue of his Estate to his children, Philip, Pamela Margaret Lawrence (Pamela), and another son, Andrew Peter Cosgrove (Andrew) (collectively, the Cosgroves).

  6. By all accounts, Don was successful and generous.

Events leading up to the signing of the Lease

  1. According to Karen, Don asked her to move closer to him and Merna. He said he would buy a property so she could live in it and pay rent she could afford. He asked her how much she could afford, and she said no more than $200 per week. Karen said she was happy in Raymond Terrace but would move if she could get accommodation for her and Chadd, as Don suggested.

  2. Subsequently, he told her that he would buy a house at 19 Whitehaven Drive, Lakelands, NSW (the House) for her to live in. He told her that she would not have to pay more than $200 per week, even after he died, but that when she was elderly and did not need the House, it would be sold and the proceeds given to his children. She maintains that she asked him what would happen after he died to which he responded that it would not change until she was old and did not need to live in the property and that his children would only be able to charge her $200 per week for the whole of the time she was there. She asked him how long that would be, and he said that the lease would specify about 30 years.

  3. Don bought the House and Karen moved in with Chadd. Karen still lives there. It is said to be a substantial and attractive residence.

The Lease is entered into

  1. On 18 November 2011, Don and Karen signed a lease (the Lease) of the House for a term of 30 years, commencing on 18 November 2011 and terminating on 17 November 2041.

  2. The Lease was witnessed by Rhonda Pill (Rhonda), Karen’s younger sister, who gave evidence of a conversation in which Karen asked Don whether his children could evict her or increase the rent under the Lease to which he replied no, neither of those things will occur.

  3. Chadd gave evidence of having heard a conversation between Don and his mother in which Don told her that the House was hers until the end of the Lease, in about 30 years, or if she did not want it anymore. He told of a conversation during which Don said words to the following effect:

“…you don’t need to worry, the kids won’t get their hands on it, they’ve been told to leave you alone till you die or want to move out yourself. Phil knows what I want, and it’s all documented in the lease for you. The only thing that changes is the money will increase to $200 per week from $1.00 per year and it will go to the Cosgrove trust not to me. Everything else remains the same my love. You’re not going anywhere and you’re secure my darling, I’ve made sure of it.”

  1. Although, as things have transpired, it is no longer necessary to make any findings about the reliability of their evidence, my impression was that the substance of their evidence was honestly given.

  2. Merna swore an affidavit, but due to her age and infirmity, was not able to be cross-examined. Her evidence lined up in material respects with that of the other witnesses called in Karen’s case.

The salient terms of the Lease

  1. The Lease is in the form of Schedule 1 to the Residential Tenancies Regulations 2010 (NSW). That regulation has been superseded by the Residential Tenancies Regulations 2019 (NSW), but nothing turns on this.

  2. Under the heading ‘Rent’, there appears the following:

The rent is $1.00 per annum payable in advance starting on 18 November 2011 PROVIDED HOWEVER that on and from the death of the Lessor Don O’Donald Cosgrove the rental shall be $200.00 per week payable by monthly instalments to the Executors of Don O’Donald Cosgrove.

  1. Under the heading ‘Rent Increases’, the following clause 5 appears:

5. The landlord and the tenant agree that the rent cannot be increased after the end of the fixed term (if any) of this agreement or under this agreement unless the landlord gives not less than 60 days written notice of the increase to the tenant. The notice must specify the increased rent and the day from which it is payable.

Note: Section 42 of the Residential Tenancies Act 2010 sets out the circumstances in which rent may be increased during the fixed term of a residential tenancy agreement. An additional term for this purpose may be included in the agreement.

The rent increase and termination

  1. After Don died, the House was transferred, pursuant to his will, to the Cosgroves as tenants in common.

  2. The Cosgroves retained a managing agent for the House.

  3. On 2 December 2021, the Cosgroves’ agent served on Karen a notice increasing the rent to $750 per week from 31 January 2022.

  4. Throughout, Karen has continued to pay $200 per week in rent.

  5. On 10 March 2022, the Cosgroves’ agent served a termination notice on Karen relying on her failure to pay the increased rent as a breach of the Lease.

The Proceedings

  1. Curial hostilities between Karen and the Cosgroves began when the Cosgroves initiated proceedings against Karen in the NSW Civil and Administrative Tribunal (the Tribunal). The precise nature of their claim was not elucidated by the evidence, but what is clear is that on 20 April 2022, the Tribunal determined that it did not have jurisdiction to determine the Cosgroves’ application because it involved a dispute between residents of two different states. Its lack of jurisdiction is by virtue of the operation of the Australian Constitution. Because of this problem, s 34B of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act) contains provisions which apply when the determination of an application or an appeal by the Tribunal would involve the exercise of federal jurisdiction, in that case, a person with standing to make an application or appeal in the Tribunal can apply to the Local Court or District Court for leave to bring the proceedings in that Court instead of the Tribunal. The Court concerned becomes vested with the powers of the Tribunal. No such application was made in this case.

  2. Karen herself initiated proceedings in the Tribunal against the Cosgroves claiming that the rental increase was excessive. By consent, Karen’s proceedings in the Tribunal were transferred to the Local Court by the Tribunal on 28 March 2022. What happened to the transferred proceedings in the Local Court is unclear.

  3. On 22 June 2022, the Cosgroves commenced proceedings no. 2022/00182954 against Karen in the Local Court at Newcastle (the Local Court Proceedings) claiming the following relief:

1 Declare that the Defendant’s lease of Lot 25 in Deposited Plan 835734 better known as 19 Whitehaven Drive, Lakelands New South Wales is terminated.

2 Order the Defendant to provide vacant possession of the premises within 14 days.

3 Order that the Defendant pay to the Plaintiffs the sum of $11,550.00.

4 Interest.

5 Costs.

  1. The Statement of Claim pleads that the terms of the Lease included that the landlord could increase the rent payable by the tenant on 60 days’ notice, the ownership of the House by the Cosgroves, the notice increasing rent, and the termination of the Lease.

  2. The Defence contains only four paragraphs. It puts in issue only that the Lease included a term that the Landlord could increase the rent payable by the tenant on 60 days’ notice and that Karen breached the terms of the Lease by not paying the increased rent. The substance of the defence is only the point that the Lease did not contain the term entitling the Cosgroves to increase the rent and accordingly, Karen did not breach the Lease.

  3. Karen’s defence did not include a plea of non-jurisdiction.

  4. On 7 February 2023, Karen commenced proceedings no. 2023/00041000 in this Court (these Proceedings) against the Cosgroves seeking a declaration that the Cosgroves hold the House “in a constructive trust” entitling Karen to reside in the House until 17 November 2041 on the condition that she pay the Cosgroves $200 per week, alternatively, that the Cosgroves pay her equitable compensation in the sum of $600,000 on her vacating the House on or before 1 January 2025. She also claims an order that the Cosgroves discontinue the Local Court Proceedings.

  5. On 4 April 2023, the Local Court Proceedings were, by consent, transferred to this Court.

  6. On 15 June 2023, orders were made by consent that the Local Court Proceedings and these Proceedings be heard together and that evidence in one be evidence in the other.

Salient sections of the Residential Tenancies Act

  1. The following sections of the Residential Tenancies Act 2010 (NSW) (RTA) are pertinent:

20   Mandatory terms may be varied for long term leases

(1)  A fixed term agreement for a fixed term of 20 years or more may—

(a)  provide that terms that would otherwise be included in the agreement by this Act or the regulations (mandatory terms) do not apply, or are varied as provided by the agreement, and

(b)  include terms that would otherwise be prohibited by this Act or the regulations.

(2)  However, any such agreement must not exclude or modify any of the following—

(a)  any term included by this Act relating to the payment of rates, taxes and charges by the landlord,

(b)  the prohibition against more than one rent increase a year under a fixed term agreement for a fixed term of more than 2 years,

(c)  any right under this Act to make an application to the Tribunal,

(d)  the grounds on which a residential tenancy agreement may be terminated under this Act,

(e)  any other term prescribed by the regulations for the purposes of this section.

(3)  The Tribunal may, on application by a tenant under a fixed term agreement for a fixed term of 20 years or more, make an order declaring that—

(a)  a mandatory term does form part of the agreement, or

(b)  a prohibited term is not included in an agreement, or

(c)  a mandatory or prohibited term included in the agreement is varied as specified by the declaration.

(4)  The Tribunal may make an order if it is of the opinion that the inclusion or variation of a term, or failure to include a term, is unconscionable, unjust, harsh or oppressive.

(5)  This section has effect despite any other provision of this Act.

…

41   Rent increases

(1)  The rent payable under a residential tenancy agreement may be increased only if—

(a)  the tenant is given a written notice by the landlord or the landlord’s agent specifying the increased rent and the day from which it is payable, and

(b)  the notice is given at least 60 days before the increased rent is payable.

…

(3)  A rent increase is not payable by a tenant unless the rent is increased in accordance with this section or the rent is increased by the Tribunal.

…

42   Rent increases under fixed term agreements

(1)  The rent payable under a fixed term agreement for a fixed term of less than 2 years must not be increased during the fixed term unless the agreement specifies the increased rent or the method of calculating the increase.

(2)  The rent payable under a fixed term agreement for a fixed term of 2 years or more—

(a)  must not be increased more than once in any period of 12 months, and

(b)  may be increased whether or not the agreement specifies the increased rent or the method of calculating the increase.

(3)  A landlord or landlord’s agent must not increase the rent payable under a fixed term agreement in contravention of this section.

Maximum penalty—20 penalty units

…

44   Tenant’s remedies for excessive rent

(1) Excessive rent orders The Tribunal may, on the application of a tenant, make any of the following orders—

(a)  an order that a rent increase under an existing or proposed residential tenancy agreement is excessive and that, from a specified day, the rent for residential premises must not exceed a specified amount,

…

119   Prohibition on certain recovery proceedings in courts

A landlord or former landlord must not commence proceedings against a tenant or former tenant of the landlord in the Supreme Court, the District Court or the Local Court to obtain recovery of possession of residential premises subject to a residential tenancy agreement.

The Course of the Hearing

  1. The Court received written opening and closing submissions from both sides and heard oral argument.

  2. As I understood it, Karen’s position on the Local Court Proceedings was that neither the Local Court nor this Court has jurisdiction to entertain them, and they should be dismissed. But if the Court does have jurisdiction, the Local Court Proceedings should be dismissed because the Lease, on its proper construction, does not allow the increase in rent the subject of the Cosgroves’ notice. If, however, the Court has jurisdiction and the Lease in its terms permits an increase in rent, the Court should make an order under s 20 of the RTA because the inclusion of such a term is unconscionable, unjust, harsh or oppressive.

  3. Although the submission that the Court should make an order under s 20 of the RTA was conditioned on the Court having jurisdiction, no basis was suggested as to how it did. Counsel also did not identify any basis on which this Court could exercise a statutory jurisdiction conferred on the Tribunal in the absence of an order under s 34B of the CAT Act. Indeed, Counsel was unable to satisfactorily identify any application pursuant to the requirements of s 20(3) of the RTA, apart from saying that his written submissions asked for such an order.

  4. Karen’s position, as I understood it, on these Proceedings is that if she failed in all her contentions in the Local Court Proceedings, then she sought the substantive relief claimed in these Proceedings. I record that Karen did not rely on any form of estoppel.

  5. The Cosgroves’ submissions did not, in any meaningful way, address the challenge to jurisdiction. Perhaps this is unsurprising, seeing that Karen’s opening written submissions made no reference to s 119 of the RTA and it was referred to orally for the first time by Counsel for Karen in his reply submissions.

  6. As will have been observed, s 42(2)(b) of the RTA provides that rent payable under a fixed term agreement for a fixed term of two years or more (which the Lease is) may be increased. Section 41 of the RTA provides that rent may only be increased if there is written notice specifying the increased rent and the day from which it is payable given at least 60 days before the increased rent is payable.

  7. Counsel for Karen argued that the note to clause 5 of the Lease enables the Lease to contain a provision restricting the operation of s 42(2) by providing for a once and for all increase, and that such a provision was constituted by the increase provided in the Lease from $1 per annum to $200 per week.

  8. It is not necessary for me to deal with this submission. Indeed, for the reasons that follow, I consider that I should not deal with it.

  9. The plain effect of s 119 of the RTA is that the Cosgroves were prohibited from commencing the Local Court Proceedings because they are to obtain recovery of possession of the House which is subject to a residential tenancy agreement.

  10. Counsel for the Cosgroves accepted that the Local Court Proceedings offended s 119 insofar as they seek recovery of the House or recovery of possession of the House but argued that they were permissible so far as they claimed money. This was referred to as the rent.

  11. On the basis of the concession, I dismissed the claims for possession summarily, leaving over for consideration whether the rent claim can stand. Counsel for the Cosgroves did not oppose this course.

  12. In my view, it cannot.

  13. For present purposes, it does not matter that the Local Court Proceedings include a claim for money, which claim on its own may have been permissively brought. The Local Court Proceedings constitute one suit and were commenced contrary to the express prohibition in s 119 of the RTA. They were unlawfully commenced, and they should not be permitted to continue in whole or in part. The unlawfulness must be tested at the time that they were commenced. At that time, they included a claim for recovery of possession of the House.

  14. This problem was referred to by Counsel on both sides as one of jurisdiction. That may not, strictly speaking, be the correct description. Even though the Local Court Proceedings were commenced in contravention of the RTA, they have been transferred to this Court and are not to be treated as a nullity. As a superior court of record, the Court undoubtedly has jurisdiction to deal with them, amongst others, as an incident of controlling its own processes.

  15. Counsel for Karen, somewhat unexpectedly, informed the Court that if paragraphs 1 and 2 were dismissed because of s 119, Karen sought that these Proceedings be dismissed because she did not wish there to be any findings by the Court. He later changed this to an application for leave to discontinue. This was not opposed, and I acceded to it. He accepted that an order for costs against Karen would follow.

  16. I consider that it is apt to observe that neither Karen’s pleading nor Counsel’s submissions in these Proceedings articulated in any comprehensible fashion, how there could be a constructive trust in this case or what basis there is for a claim for equitable compensation. By the same token, the evidence clearly establishes that there was an agreement, understanding, convention or representation by Don that after his death Karen could live in the House for $200 per week, which could not and would not be increased. Karen undoubtedly relied on these assurances by proceeding with the arrangements to move close to Don and Merna and entering into the Lease. However, no estoppel was pleaded or relied upon. This is not to suggest that an estoppel would have necessarily succeeded. I am not called on to decide that question.

  1. The proper home for this dispute is a Court vested with the powers of the Tribunal under the CAT Act.

  2. The Statement of Claim in the Local Court Proceedings claimed $11,550 presumably because of the jurisdictional limit in that Court. If rent was payable at the higher rate, the amount that would be outstanding as rent as at 17 June 2024 is $68,200. But it is to be observed, that if the Lease has been terminated the Cosgroves’ claim from the date of termination will not be rent but damages. There was no evidence before the Court as to the damages, if any, they have suffered. Given my conclusion that the Local Court Proceedings should be dismissed, this is not an issue that requires to be addressed.

  3. The Local Court Proceedings no. 2022/00182954 are dismissed with costs.

**********

Decision last updated: 19 June 2024

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