NSW land and Housing Corporation v Spiro Diab

[2014] NSWCATCD 129

NSW Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	NSW land and Housing Corporation v Spiro Diab [2014] NSWCATCD 129
Hearing dates:	22 October 2013, 23 October 2013 and 12 December 2013
Decision date:	31 January 2014
Before:	K Rosser, Senior Member
Decision:	The application is dismissed.
Legislation Cited:	Residential Tenancies Act 2010 (the RTA) Residential Tenancies Regulation 2010 (the RT Regulation) Housing Act 2001 (the Housing Act)
Category:	Principal judgment
Parties:	NSW Land and Housing (Applicant) Spiro Diab (Respondent)
File Number(s):	SH 13/00016

reasons for decision

APPLICATION

1. Mr Diab (the respondent) entered into a residential tenancy agreement with the Department of Housing of New South Wales on 15 October 1990. His tenancy is now characterised as a social housing tenancy agreement in accordance as defined in section 136 of the RTA. It is not in dispute that the New South Wales Land and Housing Corporation (the applicant) succeeded the Department of Housing as owner of the premises and is the correct applicant in the proceedings.

1. The applicant seeks an order terminating the respondent's tenancy agreement on the ground that the respondent breached the agreement by not paying rent on time. An application for an order for payment of an amount of money was withdrawn at the hearing. The termination notice on which the applicant relies is dated 11 December 2012.

1. The respondent's alleged failure to pay rent on time relates solely to a debt arising from the retrospective cancellation of a rental rebate which was granted to the respondent. The rebate was cancelled with effect from 7 November 1993 because the applicant determined that the respondent had not disclosed that his sons had been living with him at the premises.

PROCEEDINGS IN THE TRIBUNAL

1. The proceedings were commenced on 2 January 2013.

1. The matter was initially listed for conciliation and hearing on 23 January 2013. The hearing was adjourned at the request of the respondent's solicitor. The adjournment request was made primarily on the basis that the respondent had sought a review of the decision to cancel the rental rebate.

1. The matter was further adjourned on 31 January and on 17 April 2013. The parties were given leave to be legally represented at the hearing on 17 April. On 22 May 2013, after the Housing Appeals Committee had heard the respondent's application for review of the decision to cancel the rental rebate and the appeal had been declined, the Tribunal made directions for the filing and serving of evidence. Further directions were made on 30 July 2013 and the matter was adjourned for a two day hearing.

1. The hearing took place on 22 and 23 October 2013 with the parties' representatives making oral submissions on 12 December 2013.

1. The proceedings were commenced in the Consumer, Trader and Tenancy Tribunal (CTTT) when the Consumer Trader and Tenancy Tribunal Act 2001 (CTTT Act) and the Consumer Trader and Tenancy Tribunal Regulation 2009 (CTTT Regulation) were in force. As of 1 January 2014 the CTTT Act and Regulation were repealed and the CTTT was abolished and replaced by the New South Wales Civil and Administrative Tribunal. As the application was not determined prior to 1 January 2014, the proceedings are incomplete.

1. Transitional provisions in relation to part heard (that is, incomplete) proceedings are set out in Clause 7 of Schedule 1 of the Civil and Administrative Tribunal Act 2013 (NCAT Act). Pursuant to Clause 7(3), the current Tribunal has and may exercise all the functions that the CTTT had immediately before its abolition, and the provisions of the CTTT Act and Regulation continue to apply to incomplete proceedings. The application has therefore been determined in accordance with the transitional provisions of the NCAT Act.

BACKGROUND

1. The respondent is a 72 year old man in receipt of the age pension. He commenced his current tenancy agreement with the applicant on 15 October 1990. At the time, the respondent lived in the premises with his wife and four teenage sons.

1. In May 2011 the respondent's wife died and he reported to the applicant that three of his sons had returned home to live with him. In June 2011, the applicant received information from an anonymous source that the respondent's sons had always resided at the premises. The applicant commenced an investigation into the allegation. Various documents were obtained, including bank, tax and motor vehicle registration records which showed that the respondents' sons had used the address of the premises. The applicant cancelled the respondent's rental rebate. On review of this decision, the applicant determined that the respondent had been unable to substantiate other addresses for his sons during the period in question and declined the respondent's appeal. The respondent did not seek judicial review of the decision to cancel the rental rebate.

1. It is not in dispute that but for the cancellation of the rental rebate and the subsequent debiting of the respondent's account of the difference between the market rent for the premises and the rebated rent the respondent was paying, there would be no rental arrears.

EVIDENCE AND SUBMISSIONS

1. The applicant relied on documents filed with the Tribunal on 5 June and 26 July 2013, submissions dated 13 August, 17 October and 6 December 2013 and the report of Associate Professor Tuly Rosenfeld dated 4 October 2013.

1. The respondent relied on documents filed on 26 July 2013. These documents included:

• Statements by the respondent, his sons John Diab, Gabriel Diab and Anthony Diab, Andrew Drugakov, Marina Semaan and Edmond Diab;

• A report by Dr Vana Tam from Westmead Hospital;

• A report by Dr Mounjed Dagher, the respondent's general practitioner and

• A rental rebate application dated 20 June 2011.

1. The respondent also relied on a social work report dated 29 July 2013 prepared by Ms Mary Jelen and submissions dated 24 July and 6 August 2013.

JURISDICTION

1. I have first considered whether the Tribunal has jurisdiction to deal with the application, as Mr Stafford for the respondent submitted that the application was lodged out of time. This issue was determined orally on the first day of hearing and the parties were advised that reasons would be given for that finding in the reasons for decision.

1. The argument that the application was brought out of time is based on section 190 of the RTA and clause 22(9) of the RT Regulation, which require an application for an order in relation to a breach of a residential tenancy agreement to be brought within three months of the landlord becoming aware of the alleged breach. Mr Stafford argued that the applicant was aware of the alleged breach on 4 April 2012 when it revoked the respondent's rental rebate, but the notice of termination was not issued until 11 December 2012 and the application was not lodged until 2 January 2013, almost nine months after the applicant became aware of the alleged breach.

1. I am not persuaded that the application was lodged out of time. The time limit in relation to applications for termination of residential tenancy agreements is specified in section 88(2)(a) of the RTA and clause 22(2) of the RT Regulation, which require an application to be lodged within 30 days after the termination date specified in the termination notice. Section 190 of the RTA and clause 22(9) of the RT Regulation are therefore not relevant to this application.

1. Further, the termination notice given to the applicant is a notice issued pursuant to section 88 of the RTA. Section 88(4) of the RTA provides that despite any other provision in the Act, a landlord may apply to the Tribunal for a termination order in respect of a non-payment termination notice before the termination date specified in the notice. In this case, the termination date specified in the notice was 6 January 2013 and the application for termination was lodged on 2 January 2013, which is in accordance with section 88(4) of the RT Act and within the time period specified by clause 22(2) of the RT Regulation.

1. Even if my finding that the application was lodged within time is incorrect, I am satisfied that this would be an appropriate matter for time to lodge the application to be extended. In relation to this, I am satisfied that the delay between the cancellation of the rebate and the giving of the termination notice arose because the respondent's solicitor notified the applicant in a letter dated 7 May 2012 that the respondent wished to have the decision to cancel the rebate reviewed. That letter acknowledged the possibility that the applicant may commence proceedings to terminate the tenancy agreement. Over the ensuing period the respondent was given an opportunity to provide submissions and other material in relation to the internal review. On 14 November 2012, the applicant notified the respondent that the decision to cancel the rebate had been upheld and a notice of termination was given some four weeks later.

1. In these circumstances, I am satisfied that the reason for the delay in issuing the termination notice was to give the respondent an opportunity to pursue internal review of the decision to cancel the rebate. I am satisfied that any delay in issuing the termination notice and lodging the application for termination and possession was reasonable. Further, I am not satisfied that the respondent suffered prejudice by any delay, as the delay was caused substantially by the respondent seeking internal review of the applicant's decision.

SUBSTANTIVE ISSUES

1. As noted above, the termination notice dated 11 December 2012 on which the applicant relies was given under section 88 of the RTA. In the termination notice the applicant stated that the respondent had breached the agreement by "not paying rent on time". No other breaches of the tenancy agreement were specified in the notice.

1. Section 82 of the RTA specifies what must be included in a termination notice and section 88(3) of the RTA sets out an additional inclusion in a non-payment termination notice. It is not in dispute and I am satisfied that the notice given to the respondent complies with section 82 and section 88(3).

1. As the termination notice is for breach of the tenancy agreement, section 87 of the RT Act is also relevant. I am satisfied that in accordance with section 87(2), the termination notice specified a termination date not earlier than 14 days after the day on which the notice was given. I am satisfied that the notice was properly given and that as at the date of the hearing, the respondent had not vacated the premises.

1. The remaining issues to be considered in this matter are whether the respondent breached the tenancy agreement by not paying rent on time and if so, whether the breach is, in the circumstances of the case, sufficient to justify termination of the agreement. (See section 87(4)(a) and (b) of the RTA.) As no other breaches of the tenancy agreement were specified in the notice, an order terminating the tenancy agreement can only be made if the respondent breached the tenancy agreement as specified in the notice.

1. The assertion that the tenant did not pay the rent on time is based on the applicant having determined that the respondent's rent is in arrears by a sum exceeding $100,000.00. The amount of rent arrears has been determined by calculating the difference between the rebated rent paid by the applicant and the applicable market rent from the date the cancellation of the rental rebate took effect, (that is, from 7 November 1993) and applying that sum to the respondent's rental account.

1. Whether the difference between the market rent and the rebated rent paid by the tenant can be characterised as rent arrears after the cancellation of a rental rebate is therefore a central issue in this case.

THE TENANCY AGREEMENT

1. The written tenancy agreement between the parties was entered into on 15 October 1990. The tenancy agreement states that weekly rent is $180.00, which I accept was the market rent at that time. In relation to paying the rent, the tenant's obligation (set out in the preamble to the agreement rather than in a numbered clause) is to "pay rent in advance which is due every Monday at any office listed on the rent account card".

1. Clauses 26 and 27 are relevant to the application. They provide as follows:

26 Rental Rebate Abatement

The landlord and the tenant agree that the landlord may formulate a policy for the granting of rebates or waiver of rents. The parties agree that in accordance with such policy the Department may grant a rebate or waive rent at its discretion.

27 Rental Rebate Provisions

The tenant agrees to notify the landlord in writing of all income and any subsequent changes to the income of the tenant and of all other persons residing in the premises.

LEGISLATION

1. Provisions of both the RTA and the Housing Act are relevant to this application.

Residential Tenancies Act

1. Section 3 of the RTA defines "rent" as "an amount payable by a tenant under a residential tenancy agreement for the right to occupy premises for a period of the agreement".

1. Section 13(2) of the RTA states that an agreement may be express or implied and may be oral or in writing, or partly oral and partly in writing.

1. Section 19 of the RTA sets out the terms which are prohibited in a residential tenancy agreement. This includes a term to the effect that if the tenant does not breach the agreement, the rent is or may be reduced or the tenant is to be or may be paid a rebate of rent or other benefit.

1. Section 136 of the RTA defines a "rent rebate" for the purposes of Part 7 of the Act (which is headed "Social Housing Tenancy Agreements" as "an amount waived or remitted, in accordance with a rent rebate scheme administered by a social housing provider, from rent payable to a social housing provider". The same section defines a "social housing provider" to include the applicant in these proceedings and a "social housing tenancy agreement" as a residential tenancy agreement where the landlord is a social housing provider.

1. Under section 140 of the RTA, a tenant under a social housing tenancy agreement who incurs or who has incurred a debt to the landlord "in connection with that agreement or a prior social housing tenancy agreement" must enter into and comply with arrangements to pay the debt to the landlord.

1. Section 141 of the RTA permits a tenant under a social housing tenancy agreement whose rent rebate is cancelled to apply to the Tribunal to seek an order that the rent payable under the agreement is excessive.

Housing Act

1. Part 7 of the Housing Act deals with rental rebates. Section 54 states that Part 7 applies to, amongst others, tenants who are renting public housing. Section 55 allows a tenant to whom Part 7 applies to apply for a weekly rebate of rental. Section 56(1) allows the applicant to grant a weekly rebate of rental may after making an investigation under section 58 to determine the weekly income of the applicant for the rebate and of any other resident of the house in which the applicant for the rebate resides. Section 56(2) provides that the "the amount of rebate is to be determined by the Corporation [that is, the applicant in these proceedings] in accordance with guidelines approved by the Minister".

1. Section 57 of the Housing Act deals with cancellation of the rebate. It provides:

57 Cancellation or variation of rental rebate

(1)The Corporation may, after conducting an investigation under section 58, vary or cancel any rental rebate granted under this Part.

(2)The Corporation is to determine the date (being a date occurring before, on or after the making of the determination) on which the variation or cancellation has effect or is taken to have effect.

(3)The Corporation is to give notice in writing to a tenant of any decision to vary or cancel any rental rebate being received by the tenant and is to include in the notice the date on which the variation or cancellation takes effect or is taken to have effect.

(4)If the Corporation reduces or cancels a tenant's rental rebate under this Part with effect from a preceding date, the Corporation may, by notice in writing to the tenant, require the tenant to pay to the Corporation:

(a)an amount equal to any rental rebate or part of a rental rebate received by the tenant on or after the date that the variation or cancellation took effect to which, because of the variation or cancellation, the tenant was not entitled, and

(b)interest (at the rate prescribed under section 101 of the Civil Procedure Act 2005 in respect of unpaid judgments) on any outstanding amount under paragraph (a) from a date specified in the notice, being a date not earlier than the date on which the notice is issued to the tenant.

(5)Any amount (together with interest) referred to in subsection (4) that is unpaid may be recovered by the Corporation as a debt in any court of competent jurisdiction.

APPLICANT'S SUBMISSIONS

1. In summary, the applicant argues that the difference between the market rent and the rebated rent should be characterised as rent arrears because:

• Pursuant to clause 26 of the residential tenancy agreement, the respondent agreed that any rebate he was granted by the applicant was granted in accordance with the applicant's rental rebate policy. As the respondent continued to receive the rental rebate from 1993 to 2011, the terms of the applicant's rental rebate policy were incorporated into the tenancy agreement pursuant to clause 26.

• Pursuant to clause 27 of the residential tenancy agreement, it was a term and condition of the respondent's tenancy and his receipt of the rental rebate that he notify the applicant in writing of all income and any subsequent changes to the respondent's income and that of all other persons residing in the premises. The respondent breached clause 27.

• The rental arrears arose as a result of the applicant having found a difference between the rental rebate the respondent was eligible to receive and the rebate he received from 1993 to 2011.

• In accordance with the applicant's rental rebate policy and pursuant to clause 26 of the agreement, the amount of the difference was backdated from 2011.

• The applicant's rental rebate policy provides that the backdating of the difference in the rental rebate that a tenant was eligible to receive will reflect the correct rent that the tenant should have been charged and may result in a tenant owing money to the applicant.

• Having regard to clause 26, the cancellation of the rent rebate and the backdating of the difference between the rebate the respondent was eligible to receive and the amount he was actually paid gives rise to rental arrears.

• The rent rebate is received by a tenant in respect of rent that is payable by the tenant pursuant to the residential tenancy agreement. Therefore any debt that arises under section 57 of the Housing Act is a debt of the tenant in respect of the tenancy. The debt that arises under section 57(4) must therefore be a debt in relation to rent that is payable pursuant to the residential tenancy agreement.

• The debt that arises pursuant to section 57(4) of the Housing Act upon cancellation of the respondent's rent rebate is rent arrears payable by the respondent pursuant to and in connection with the tenancy agreement.

• The legislative definition of rent rebate confirms that the rent payable by a tenant who receives a rent rebate remains the rent payable under the residential tenancy agreement (the market rent).

• That the debt arising from the cancellation of a rent rebate is rent arrears is reflected by the inclusion of sections 140 and 141 of the RTA.

RESPONDENT'S SUBMISSIONS

1. In summary, it was submitted on behalf of the respondent that the amount of the cancelled rebate does not constitute rent arrears because:

• The reasoning in the leading cases in relation to the issue, [Department of Housing v Christodoulou (12 March 1996) [Christodoulou] and Department of Housing of NSW v Elkazzi (Tenancy) [2004] NSWCTTT 6333 (31 August 2004) [Elkazzi], is flawed.

• The reasoning in Christodoulou is flawed because the Tribunal's finding that a cancelled rebate is retrospectively payable as rent arrears because the tenant is always obliged to pay the market rent, does not sit well with Clauses 26 and 27 of the tenancy agreement. It is also flawed because if the tenant is legally obliged to pay the market rent, then every tenant who receives a rebate is technically in rental arrears in breach of the tenancy agreement. This cannot have been the intention of the tenant and is an "artificial, strained and absurd" construction of the tenancy agreement, particularly when it is not the only construction available. Further, Christodoulou does not address the "inclusive nature of the arrangements that together can constitute a residential tenancy agreement".

• The reasoning in Elkazzi is flawed because of the finding that the rent rebate should be considered a waiver conditional on compliance with the tenant's obligation under clause 27 of the agreement. The clear words of the tenancy agreement do not make the reduced rent conditional on compliance with its terms. If the agreement operated in this manner, the landlord would have to prove that clause 27 had been breached and the Tribunal in Elkazzi failed to determine whether the landlord had proven the breach. Further, reasoning that a debt from a cancelled rebate constitutes rent arrears because of an implied term that the tenant will comply with the agreement brings the rebate scheme within the prohibitions contained in section 19(2) of the RTA.

• The better construction of the tenancy agreement is that any failure to comply with clause 27 sounds in damages for breach. Whatever statutory right the applicant has to seek to recover the rebate in Court, the amount is not rent arrears for the purpose of the tenancy agreement.

FINDINGS AND REASONS

1. There are two lines of authority in the Tribunal relevant to the issue of whether the debt which arises from the cancellation of a rent rebate can be characterised as rent arrears. These are the decisions on which the applicant substantially relies in arguing that the debt arising from the cancellation of a rent rebate can be characterised as rent arrears, although in submissions the applicant's primary argument relates to the incorporation of the applicant's policy into the residential tenancy agreement through clause 26 of the agreement.

1. As noted above, the first line of authority is based on the decision in Christodoulou. The second is based on the decision in Elkazzi. In both matters the Tribunal found that a sum arising from a revoked rental rebate constitutes arrears of rent under a residential tenancy agreement.

1. The reasoning in Christodoulou is that the sum that arises from the cancellation of a rebate is retrospectively payable as rent because a tenant is always obliged to pay the market rent under the residential tenancy agreement as there is no interaction between the rebate scheme and the residential tenancy agreement. The Tribunal found that the two arrangements "run in parallel but are not interdependent".

1. The reasoning in Elkazzi is that the sum arising when a rent rebate is cancelled is repayable as rent arrears because receipt of the rebate under clause 26 (or its equivalent) is impliedly conditional on compliance with terms of the residential tenancy agreement relating to the rebate (clause 27 in the tenancy agreement between the parties in these proceedings). The Tribunal found that there was a sufficient connection to the tenancy agreement for the amount of the rebate which was cancelled to form rent arrears under the tenancy agreement. I am of the view that this reasoning is inconsistent with the reasoning in Christodoulou, in which the Tribunal found that the rebate was not connected to compliance with the tenancy agreement.

1. Having considered the written submissions made by the parties, I am not satisfied that the reasoning in Christodoulou is correct, at least in relation to the tenancy agreement in this matter. This is because, as noted above, the tenancy agreement contains clauses 26 and 27, which expressly recognise the potential grant of a rental rebate. Given these clauses, I do not accept that the rebate granted to the respondent was separate from and parallel to the residential tenancy agreement as found in Christodoulou. While the mechanics of the granting and revocation of a rent rebate are outside the tenancy agreement and not open to review by the Tribunal under the RTA, the existence of the rebate is expressly provided for in the agreement pursuant to clause 26 and while in receipt of the rebate the respondent was subject to the obligation set out in clause 27.

1. In my view the reasoning in Christodoulou is also flawed because if the tenant is always obligated to pay the market rent then the consequence is that a tenant in receipt of a rental rebate who is paying the rent as rebated will technically be in breach of that term of the tenancy agreement which obliges the tenant to pay the rent on time. A tenant in this situation will remain in breach of the agreement for as long as the tenant is paying market rent less the rebate. I am not satisfied that this is a proper construction of the tenant's contractual obligations.

1. Further, the reasoning in Christodoulou does not take into account section 13(2) of the RTA. There is nothing in the RTA which specifies that a residential tenancy agreement must be contained in one document. Clause 26 of the tenancy agreement contemplates that rent may be waived or rebated. If the granting of a rebate reduces the amount payable by a tenant to occupy the premises, then that arrangement can properly be considered to be part of the tenancy agreement. While the rent remains the rent set out in the tenancy agreement (as increased from time to time by the service of a valid rent increase notice), the applicant agrees to accept the market rent less the rebate in full satisfaction of the tenant's obligation to pay rent on time. To that extent, the granting of the rent rebate modifies the tenant's contractual obligation in relation to payment of the rent.

1. I am also not persuaded that the reasoning in Elkazzi justifies the debt which arises from the cancellation of a rent rebate being properly characterised as rent arrears. Significantly, the wording of the tenancy agreement does not make the granting of a rent rebate conditional on compliance with the terms of the agreement and I am not satisfied that such a condition can be read into the agreement. Further, a finding that arrears of rent arising from a cancelled rebate are rent arrears because of an implied term that the tenant will comply with the terms (or even with a particular term) of the tenancy agreement may be in conflict with section 19(2)(e) of the RTA which prohibits a tenancy agreement containing a term to the effect that if the tenant does not breach the agreement, "the rent is or may be reduced or the tenant is to be or may be paid a rebate of rent or other benefit".

1. I note in relation to this issue the decision in NSW Department of Housing (Landlord) v Williams, Elaine (Tenant) [1996] NSWRT 6 (Member Nolan), in which the Tribunal found that section 43 of the Residential Tenancies Act 1987 - the equivalent of section 19 in the current RTA - did not apply to the Department of Housing's rebate scheme. To the extent that this decision means that the applicant may make the payment of a rent rebate conditional on a tenant complying with the tenancy agreement, I respectfully disagree, as there is nothing in the wording of section 19 which excludes social housing tenancy agreements from its ambit.

1. In any event, a rent rebate is in practice not conditional on the tenant complying with the terms of the tenancy agreement. The applicant's rebate policy was not in evidence, an issue to which is dealt with further below, so I cannot comment on any of its terms beyond those extracted in the applicant's submissions. However, the comment made by Member Cochrane in Christodoulou that he had observed and heard "hundreds of cases where the Department had continued to grant a rental abatement notwithstanding the fact that the tenant is in breach of the fundamental obligation to pay rent" has considerable force. When hearing applications involving social tenancy agreements, it has not been my experience that social housing providers such as the applicant cancel rebates because a tenant does not comply with specific terms of the tenancy agreement or with the tenancy agreement generally. Rather, if a rent rebate is cancelled, it is because of a change in the tenant's circumstances or the circumstances of other residents in the premises and (presumably) on the basis of the outcome of an investigation conducted under section 58 of the Housing Act in accordance with relevant policies and guidelines.

1. I have considered the applicant's other arguments in support of the proposition that the debt can be characterised as rent arrears.

1. The primary submission put by the applicant is that the applicant's rebate policy is incorporated into the tenancy agreement through clause 26 of the agreement and that this justifies treating the debt arising from the cancellation of the rebate as rent arrears.

1. While clause 26 of the tenancy agreement expressly refers to the respondent's policy, I am not satisfied that the applicant's submission that clause 26 incorporates the terms of the rent rebate policy into the tenancy agreement is well based. Firstly, the policy did not form part of the evidence relied on by the applicant and certain paragraphs only were included in the written submissions. In such circumstances, it is inappropriate to find that the policy is incorporated into the tenancy agreement. Secondly, there is no evidence as to the date of the policy or as to whether, when and under what circumstances its terms were drawn to the respondent's attention. In view of the lack of evidence concerning the policy, I am not satisfied that the applicant's rebate policy is incorporated into the tenancy agreement between it and the respondent. Nor am I satisfied that its terms together with the wording of Clause 26 can be used as a basis to find that the debt arising from the cancellation of the rent rebate is a debt of rent arrears arising from a failure to pay rent on time.

1. I am not satisfied that it follows from the definition of rent rebate in section 136 that a tenant who receives a rent rebate has a contractual obligation to pay the market rent. The definition of a "rent rebate" in section 136 does not change the definition of "rent" in section 3. Pursuant to section 3 of the RT Act, rent is "an amount payable" for the right to occupy the premises. If a rebate is applied to the rent payable, then this is the amount the tenant is contractually obliged to pay.

1. I am not satisfied that section 140 and 141 mean that a cancelled rent rebate necessarily gives rise to rent arrears. Section 140 obliges social housing tenants to enter into and comply with arrangements to pay a debt incurred "in connection" with their tenancy agreement or with a prior social housing tenancy agreement. Social housing tenants may have debts for a range of reasons. For example, a social housing tenant may have a debt of rent arrears from a current or a prior tenancy agreement, or may have a debt of water usage charges or a debt which arises from an order for compensation made by the Tribunal against the tenant.

1. There is nothing in section 140 which expressly or impliedly supports a conclusion that a debt arising from the cancellation of a rent rebate must constitute rent arrears. Equally, there is nothing in section 141 - the section allowing a social housing tenant whose rebate is cancelled to apply for an order declaring that the rent payable is excessive - which expressly or impliedly supports a conclusion that a debt arising from the cancellation of a rent rebate must constitute rent arrears.

1. I agree that a debt which arises under section 57 of the Housing Act can be considered to be a debt incurred by the tenant in respect of the tenancy. However, it does not follow that such a debt constitutes rent arrears. As noted above, not all debts of the kind referred to in section 140 of the RTA are debts of rent arrears. If anything, I consider that the inclusion of section 140 in the RTA strengthens the argument that the amount of a cancelled rebate should be considered to be a debt incurred in connection with the tenancy rather than as rent arrears arising from rent not having been paid on time.

1. For the purposes of this decision, I do not consider it necessary to make a finding as to whether the respondent breached clause 27 of the agreement, as the termination notice relied on by the applicant is not based on a breach of clause 27. However, assuming that the respondent did breach that section, it would have been open to the applicant to seek damages from the respondent for breach of that clause. An award of damages in respect of a breach of clause 27 could then constitute a debt in connection with the tenancy agreement for the purposes of section 140.

1. However, regardless of whether the respondent breached clause 27, and even though he has incurred a debt in connection with the tenancy, I am not satisfied that the respondent breached the tenancy agreement by not paying rent on time. He has at all relevant times paid the sum he was contractually obliged to pay under his agreement with the applicant.

CONCLUSION

1. Overall, I am not persuaded that the decisions in either Christodoulou or Elkazzi should be followed to establish that the debt which arises on cancellation of a rent rebate necessarily constitutes rent arrears. I am also not persuaded that the debt can be characterised as rent arrears arising from a failure to pay rent on time on the basis of the other arguments advanced by the applicant.

1. In my view, the preferable construction of the relationship between the tenancy agreement and the rental rebate is that the granting of a rebate to a tenant affects the contractual obligations which would otherwise apply, as the landlord has agreed to accept the rebated rent in full satisfaction of the rent payable. The granting and cancellation of a rebate is subject to the Housing Act and to any regulations and policy guidelines relevant to such issues. While the granting of the rebate is connected to the tenancy agreement, I am not satisfied that it is conditional on compliance with the tenancy agreement.

1. In accordance with section 57(4) of the Housing Act, cancellation of a rent rebate gives rise to a debt equal to the amount of rebate received by the tenant after cancellation took effect, which is recoverable in a Court of competent jurisdiction. It may also give rise to a claim for damages for breach of a clause of the tenancy agreement if, for example, a clause to the effect of clause 27 is included in the agreement and if the debt arises from breach of such a clause. Cancellation of a rent rebate may also give rise to the issuing of a termination notice for breach of a clause to the effect of clause 27.

1. In many similar matters which come before the Tribunal, when a rent rebate is reduced or cancelled and the tenant becomes liable to pay market or an otherwise higher rent, the tenant does not comply with their obligation to pay the higher rent. In such cases, a termination notice for rent arrears may be valid because the tenant has prospectively failed to pay the correct rent payable under the tenancy agreement from the date the rebate was cancelled. That is not the case in this matter. At all relevant times the respondent paid the rebated rent and he commenced paying the market rent on cancellation of the rent rebate. As noted above, the rent arrears in this matter arise solely from the retrospective cancellation of the rebate. There is no part of the rent arrears which is attributable to a failure to pay the correct rent after the rebate was cancelled.

1. I am not satisfied that the respondent has breached the tenancy agreement by failing to pay rent on time and I am not satisfied that the debt arising from the cancellation of the rent rebate in this matter can be characterised as rent arrears. It follows that I am not satisfied that the ground specified in the termination notice has been made out. I have therefore dismissed the application.

Kim Rosser

Senior Member

Civil and Administrative Tribunal of New South Wales

31 January 2014

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

Registrar

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: 11 September 2014