Penfold v Firkin & Balvius - [2023] QCATA 11

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Penfold v Firkin & Balvius [2023] QCATA 11

PARTIES:

Todd Penfold and inga penfold

(Applicants)

v

wayne murray firkin and kalie maree balvius

(Respondents)

APPLICATION NO/S:

APL231-21

ORIGINATING APPLICATION NO/S:

MCDO11/21 (Caloundra)

MATTER TYPE:

Appeals

DELIVERED ON:

22 February 2023

HEARING DATE:

21 June 2022

HEARD AT:

Brisbane

DECISION OF:

Judicial Member Forrest SC

ORDERS:

1.     Leave to appeal granted.

2.     Appeal allowed.

3.     The Orders made on 19 July 2021 are set aside.

4.     The original application is otherwise dismissed.

CATCHWORDS:

APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – FROM QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – BY LEAVE OF TRIBUNAL – where the Applicant seeks to appeal a decision by a Magistrate sitting as a Tribunal Member in a Minor Civil Dispute – Minor Debt – where leave is granted

ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – APPEAL – MINOR CIVIL DISPUTE – MINOR DEBT – whether the Respondents’ tenancy was wrongfully terminated early – where the Respondents seek to be compensated for money they spent on improvements – whether the Tribunal had jurisdiction at first instance under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) – where the appeal is allowed and the original application is dismissed

Queensland Civil and Administrative Tribunal Act 2009 (Qld), ss 13, 142(3)(a)(i) and (3)(b)

Residential Tenancies and Rooming Accommodation Act 2008 (Qld), ss 184, 209, 291, 415, 416, 419, 420 and 426

Action Health Centre Pty Ltd v Searipple Holdings Pty Ltd [2022] QCATA 7, cited

Big4 Brisbane Northside Caravan Village v Schliebs [2012] QCAT 277, applied
Owen v Menzies [2013] 2 Qd R 327, [2012] QCA 170, cited
Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221, cited

Pickering v McArthur [2005] QCA 294, cited

APPEARANCES & REPRESENTATION:

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld)

REASONS FOR DECISION

This is an application for leave to appeal and, if leave is granted, an appeal against the orders of a Magistrate sitting as a Tribunal Member in a Minor Civil Dispute – Minor Debt matter.
Critically though, the dispute between the parties arises out of a tenancy agreement between them in respect of land and premises in the hinterland of the Sunshine Coast. The matter came before the Tribunal by way of an Application in Form 3. Such a form commences matters in the Minor Civil Dispute – Minor Debt jurisdiction of the Tribunal. However, this is problematic because the way the Respondents set out or “pleaded” their application, it is plainly a claim by a tenant against a landlord for payment of money compensating them for loss allegedly suffered as a consequence of an alleged wrongful breach of their tenancy agreement. I will return to this issue in due course.
FACTUAL BACKGROUND
The Applicants were the registered proprietors of real property on the Sunshine Coast. In 2019, they entered into a standard form General Tenancy Agreement with the Respondents for a twelve-month term. In March 2020, when the pandemic had just started, they entered into a fresh lease agreement for a two year term at $1,200 per week, again using the standard form General Tenancy Agreement.
The rights and obligations of landlords and tenants in Queensland are governed by the provisions of the Residential Tenancies and Rooming Accommodation Act 2008 (“the RTRAA”), but also the terms of the written tenancy agreement between them, and the general law, to the extent that the terms of the tenancy agreement and the general law are not inconsistent with the provisions of the RTRAA.
In the relevant second General Tenancy Agreement between the parties, under the heading “Part 3 Special terms” the following was included:-
The lessor is aware and agrees to the tenant granting guests a licence to occupy part of the rented premises. For example, the tenant can list the property on Airbnb, take bookings and therefore allow guests to stay for a period of time.
The lessor has objected to Sunshine Coast Council rates increase due to the Airbnb criteria being added to the existing rates. If this objection is not approved, the lessee agrees to pay the difference between the General Category 18 rate and the General Category 18RT.
Relevantly also, under the heading “Clause 27 Fixtures or structural changes – ss 207-209” read as follows:-
(1)     The tenant may attach a fixture, or make a structural change, to the premises only if the lessor agrees to the fixture’s attachment or the structural change.
(2)     The lessor’s agreement must be in writing, describe the nature of the fixture or change and include any terms of the agreement.
Examples of terms –
·That the tenant may remove the fixture
·That the tenant must repair damage caused when removing the fixture
·That the lessor must pay for the fixture if the tenant cannot remove it
(3)     If the lessor does agree, the tenant must comply with the terms of the lessor’s agreement.
(4)     The lessor must not act unreasonably in failing to agree.
(5)     If the tenant attaches a fixture, or makes a structural change, to the premises without the lessor’s agreement, the lessor may-
(a)Take action for a breach of a term of this agreement; or
(b)Waive the breach (that is, not take action for the breach) and treat the fixture or change as an improvement to the premises for the lessor’s benefit (that is, treat it as belonging to the lessor, without having to pay the tenant for it.)
The Respondents did have paying guests at the property. The subject property was but one of a number of properties they leased and then sub-let for short-term stays through Airbnb. The Applicants knew this. The evidence establishes that. Indeed, during 2020, when COVID-19 Government imposed lock-downs were in place, the Applicants gave the Respondents a 50% rent reduction for a twelve-week period, saving the Respondents $7,200 in rent they would otherwise have had to pay. This was a clear acknowledgment by the Applicants that the Respondents were using the property to generate income for themselves.
The Respondents apparently saw the potential for earning even more income using the property and began to either sub-let to persons who conducted health and lifestyle retreats on the property or began to conduct lifestyle retreats on the property themselves as a commercial venture offered to paying customers. As part of the preparation of the property to be offered for this purpose, they began to undertake some improvements to the structures that were on the property that would make it more attractive to customers, including offering them overnight accommodation options.
They undertook improvements to a store room and turned it into what they called a “games room” in which it seems they at least conducted yoga sessions from time to time. They added an office as well. They then renovated a room into a bathroom, installing a shower, a vanity and a pedestal toilet. They then installed what they called a “soak well” which they described as a mini-septic tank to receive the waste water from the bathroom. They constructed a couple of bedrooms and, after a visit from a local Council Inspector, they carried out required rectification/improvements to a swimming pool surround and fence so it would meet regulatory standards.
All of that work, of course, cost the Respondents money. That is what this dispute is about. Claiming their tenancy was wrongfully terminated early, the Respondents want to be compensated for the money they spent on those improvements.
The evidence supports findings that they generally sought and obtained the consent of the Applicants for the work that was being done, including advising them from time to time of the anticipated costs of the work. Indeed, in late-July 2020, they sent the Applicants an email in which they detailed some of the work they were planning on doing and giving them an estimate of $11,000 - $12,000 for the proposed work, as well as advising them that they had already spent about $6,500 in the previous weeks finishing the bathroom and installing the “soak well”.
Relevantly, there is no evidence that the Applicants told the Respondents not to do any of this proposed work. It seems abundantly clear that the Applicants were content to let the Respondents undertake the work. However, there is no evidence that the Applicants ever agreed in accordance with Clause 27(2) of the General Tenancy Agreement, namely, in writing, describing the nature of the work to be done and setting out any terms of the agreement for such work to be done. More importantly, in my view, there is no evidence that the Applicants ever agreed to pay the Respondents for the cost of the works or any part thereof (save, perhaps, in respect of the pool fencing that I shall return to). Importantly, in this respect, the Respondents’ understanding of this is demonstrated in the July 22 2020 email to the Applicants where they say:-
We were hoping that you’d be open to helping out with some of the costs associated with this next project? We’re really enjoying making improvements to the place and are excited for you to come and take a look at some point. [Emphasis added]
This statement of the Respondents evidences their understanding that there was, at that time at least, no obligation on the Applicants to pay for or contribute any money towards the costs of the projects the Respondents were undertaking.
There is no evidence at all that the Applicants did agree to “helping out with some of the costs associated with [that] next project.” There is no evidence that the Respondents acted on the basis of an understanding that the Applicants would. On the contrary, there is evidence that the Respondents were sufficiently content with that and prepared to spend that money believing that they had a tenancy until March 2022, no doubt based on a belief that the investment would produce a suitable return to them and also harbouring some thoughts that they might ultimately offer to buy the property from the Applicants at the expiration of their lease.
Critically, in my view, there is no evidence of any written agreement that would meet the requirement of clause 27(2) of the General Tenancy Agreement that would oblige the Applicants to pay the Respondents for the work they undertook.
A CHANGE OF CIRCUMSTANCES
In September 2020, a local Council Inspector visited the property unannounced. During that visit, the Inspector checked on the swimming pool’s compliance with applicable Regulations. The Respondents were told the pool did not meet the compliance standards and would require immediate rectification works to do so. They informed the Applicants of this, but then immediately set about having the rectification work done to their own satisfaction, not just to meet the compliance standards, but also to be aesthetically pleasing, given the pool’s role as a central feature in their business activities on the property. Again, whilst they kept the Applicants informed of the plans and progress, at the same time gaining their consent or at least their acquiescence, the Respondents did not get the Applicants’ written agreement to pay for the $5,164.52 that they spent on the project. The Applicants told the Tribunal that they had been quite prepared to pay the sum of $2,600 which was their estimate of the cost of minimal compliance rectification works that would at least meet the requirements.
Then, in late November 2020, the Respondents received a letter from the local Council. It was a “Show Cause Notice” under the Planning Act 2016. The Council foreshadowed issuing the Respondents with an “Enforcement Notice” under that Act unless the Respondents showed sufficient cause within the specified time as to why that action should not be taken. Council informed the Respondents that it believed they were committing a development offence pursuant to provisions of the Planning Act 2016 by conducting health and wellness retreats, holiday accommodation, yoga and meditation classes and workshops and other special events without appropriate planning permits being issued. The Respondents were told that to resolve the problem, they had to either immediately cease the use of the land for those purposes, or relocate those commercial activities to a more appropriate site, or make a formal application to the Council for a Material Change of Use for the land uses it was being used for by 5 January 2021. The time limit they were given to otherwise show cause why the Enforcement Notice should not be given was also 5 January 2021.
There is no evidence of any steps at all being taken by the Respondents in response to that Show Cause Notice. There is no evidence to support a finding that the Respondents formed any intention at all to take any steps in response to the Show Cause Notice.
On 5 December 2020, just days after receiving that Show Cause Notice, the Respondents had some sort of disagreement with a third person who was, it seems, also occupying a dwelling somewhere upon the same land that they were leasing or right adjacent to it. He was, the evidence establishes, a former employee of the Applicants’ business and was there with the Applicants’ approval and authority, it seems, but also with the acquiescence of the Respondents. That much is not in dispute. Indeed, he had been helping the Respondents with the construction and renovation work they undertook at the property.
On that day in early December, there was an argument. The evidence supports a finding that it had its origins in the third party’s dissatisfaction with the noise generated by the commercial activities the Respondents were conducting on the land. There is evidence that the Respondents reached out to the Applicants immediately after the incident by text message communication, informing them that the third party had turned off the power at the property and attempted to screw the power box shut, so that it could not be turned back on.
The evidence supports a finding that the male Applicant and the male Respondent had a conversation shortly thereafter in which the male Applicant suggested to the male Respondent that the Respondents might have to leave the property in the circumstances that had emerged. The male Respondent replied to the male Applicant with words that clearly conveyed the Respondents’ position which was that if they did not have the support of the Applicants in respect of the dispute with the third party they would be leaving the property.
Soon thereafter, the Applicants caused a RTRAA Form 12 Notice to Quit to be sent to the Respondents, relying on the assertion that they had been carrying on a commercial enterprise on the property contrary to Council planning requirements. After the Respondents told the Applicants that they should have been given a RTRAA Form 11 Notice to Remedy Breach, the Applicants did send such a notice to them. Nevertheless, there is no evidence that the Respondents acted in any way that was consistent with an intention to oppose the Applicants’ moves and to try to stay on in occupation based on belief that none of these notices had any sound factual or legal foundation. On the contrary, the Respondents notified the Applicants that they still intended to leave the property and advised they would do so by 1 February 2021. This was, of course, more than a year short of the full-term of the lease.
Having confirmed with the Applicants that they intended to leave on 1 February 2021, in the period before they moved off the property, the Respondents began to negotiate with the Applicants towards striking an agreement for monetary compensation for the work they had done on the property. They based their position on the assertion that they were not now going to be able to enjoy the fruits of that work over the remaining term of the lease. Negotiations took place, but no deal was struck.
Very quickly after they moved off the property, the Respondents lodged the Application in the Minor Civil Dispute – Minor Debt jurisdiction of this Tribunal. They claimed the sum of $25,000 was owing to them by the Applicants. Their claim was particularised to actually total $75,124.34, made up of $4,800 outstanding bond, $32,679.34 for the costs of the improvements they had made, $31,245 for loss of Airbnb income for the unused term of the lease, $4,000 unexpected short term removal expenses and $2,400 for interest. They conceded that as the Tribunal’s jurisdiction was limited to a maximum of $25,000, that was the actual limit of their claim.
By the terms of their Application, it was clear that they based their claim on the assertion that they were prematurely and unfairly evicted from the property well before the expiration of the term of the lease and that therefore the Applicants were in breach. In support, they claimed that the Applicants knew of the commercial use of the property. The inference to be drawn from that assertion is that the Respondents were asserting that somehow meant the Applicants could not terminate the lease for that reason without being liable for all of the compensation claimed.
The Applicants opposed the claim, asserting that they had valid grounds to serve the Form 12 because the Respondents had breached clause 21 of the Tenancy Agreement by running commercial health and wellness retreats on the property and by causing nuisance that interfered with the peace of neighbours. They also asserted that they had never agreed to compensate the Respondents for any of the costs involved in any of the work they undertook and relied on Clause 27 of the Tenancy Agreement to argue they did not have to pay for any of the work. They also said they relied upon the absence of Council approval for the Respondents to run a commercial health and wellness retreat at the property. Relevantly, clause 21 of the Tenancy Agreement provides as follows:-
(1) The tenant may use the premises only as a place of residence or mainly as a place of residence or for another use allowed under a special term.
(2) The tenant must not –
(a)Use the premises for an illegal purpose; or
(b)Cause a nuisance by the use of the premises; or
(c)Interfere with the reasonable peace, comfort or privacy of a neighbour of the tenant; or
(d)Allow another person on the premises to interfere with the reasonable peace, comfort or privacy of a neighbour of the tenant.
THE TRIBUNAL’S FIRST INSTANCE DECISION
Her Honour, Magistrate Benson, sitting as the Tribunal at first instance, heard and determined the matter and delivered her decision orally on 19 July 2021.
It is to be remembered that s 13(1) of the Queensland Civil and Administrative Act 2009 (“the QCAT Act”) requires the Tribunal, when hearing a minor civil dispute, to make orders that it considers fair and equitable to the parties to the proceeding in order to resolve the dispute. I respectfully have no doubt that is what the learned Magistrate sincerely believed she was doing.
In her oral reasons, her Honour recited her findings of fact, including that the costs of the work done by the Respondents amounted to $32,679.34. She also found that at no stage had the Applicants agreed to contribute to those costs. Her Honour did not discuss the important question of jurisdiction and she did not discuss, in any way clauses 21 and 27 of the General Tenancy Agreement. Her Honour simply went on to assert that the questions for her to decide were whether the Respondents had lost money as a result of work they carried out and the lease being ended earlier than its term and whether the Applicants have benefited in some way from the work that has been carried out.
Her Honour went on to find that the work done clearly improved the property, enhancing its look and the services and facilities available on the property. Her Honour found:-
·That the Applicants have benefited “to some extent from the improvements that have been made”;
·That the Respondents have lost financially as a result of carrying out those improvements;
·That the Applicants were aware of the improvements, were notified of them as they were progressing, either consented to or did not object to those improvements taking place;
·There was no evidence clearly indicating how much income the Respondents lost between January 2021 and March 2022;
·That the dispute about the bond was subject to separate proceedings before the Tribunal;
·That there were costs to the Applicants of remediation work having to be done on the “soak well” that had been installed by the Respondents;
·That in all the circumstances, she was satisfied that the Applicants have received a financial advantage “to some degree” [emphasis added] for the work that had been carried out, though it was difficult to precisely calculate what that might be;
·That an appropriate way to deal with it was to grant the Respondents compensation equal to 50% of what they had spent on the works – 50% being $16,339.67.

Her Honour ordered the Applicants to pay the Respondents that sum of $16,339.67 within sixty days of her decision.
THE APPLICATION FOR LEAVE TO APPEAL AND THE APPEAL
The Applicants lodged an Application for Leave to Appeal against her Honour’s decision and the former President of the Tribunal, Daubney J, granted a stay of the orders pending the hearing and determination of the application.
The Application has been heard on the papers. I express regret at the length of time it has taken the Tribunal to get to and determine this matter. The scant resources with which this Tribunal works are well known.
Given this is an appeal from a decision made in the Tribunal’s minor civil dispute jurisdiction, leave to appeal must first be obtained before any appeal proceeds.[1] Leave to appeal is also required where an appeal is in relation to questions of fact and/or mixed fact and law.[2] Leave to appeal will usually only be granted where an appeal is necessary to correct a substantial injustice to the appellant and where there is a reasonable argument that there is an error to be corrected.[3]
[1] Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 142(3)(a)(i).
[2] Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 142(3)(b).
[3]Pickering v McArthur [2005] QCA 294.
For the Applicants, it is submitted that her Honour:-
(i)erred in law and fact in finding that the Applicants were liable to the Respondents in the sum of $16,399.67;
(ii)erred in law by failing to consider the terms of the Lease Agreement and the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (“the Act”) in reaching her decision; and
(iii)erred in law and fact in deciding that the case was to be determined by the law of unjust enrichment and on the basis that some benefit was enjoyed by the Applicant.
That said, and I shall return to the merits of these submissions, I am satisfied that there is an even more obvious error – a jurisdictional one.
There is a fundamental obligation on any court or tribunal to satisfy itself as to jurisdiction when being asked to quell controversies that come before it. Section 11 of the QCAT Act gives the Tribunal jurisdiction to hear and determine a minor civil dispute. “Minor Civil Dispute” is defined in Schedule 3 of the QCAT Act. It means :-
(a)     a claim to recover a debt or liquidated demand of money of up to the prescribed amount; or
(b)     a claim arising out of a contract between a consumer and trader, or a contract between 2 or more traders, that is—
(i) for payment of money of a value not more than the prescribed amount; or
(ii) for relief from payment of money of a value not more than the prescribed amount; or
(iii) for performance of work of a value not more than the prescribed amount to rectify a defect in goods supplied or services provided; or
(iv) for return of goods of a value not more than the prescribed amount; or
(v) for a combination of any 2 or more claims mentioned in subparagraphs (i) to (iv) where the total value of the combined claim is not more than the prescribed amount; or
(c)     a claim for an amount of not more than the prescribed amount for damage to property caused by, or arising out of the use of, a vehicle; or
(d)     a tenancy matter; or
(e)     a claim that is the subject of a dispute under the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011, chapter 2 and is for an amount not more than the prescribed amount; or
(f)     a matter in relation to which a person may, under the Building Act 1975, chapter 8, part 2A apply to the tribunal for an order.
Note—
A matter mentioned in paragraph (f) would relate to part of a barrier for a swimming pool along a common boundary.
However, if an enabling Act confers jurisdiction on the tribunal to deal with a claim (however called) within the meaning of paragraph 1(a), the claim is not a minor civil dispute unless the enabling Act expressly states it is a minor civil dispute.
A “tenancy matter” is defined in Schedule 3 to mean a matter in relation to which a person may, under the RTRAA, apply to the tribunal for a decision.
As I observed earlier in these reasons, it is clear from the particulars of the claim attached to the Respondents’ application that their claim is one arising out of their residential tenancy agreement with the Applicants. I am satisfied that they seek compensation, as is their right to do so, pursuant to one or more of sections 291, 419, 420, and 426 of the RTRAA. Jurisdiction to determine this claim is given by the RTRAA to the Tribunal. However, it is clear that where the RTRAA gives jurisdiction to the Tribunal over these matters then it is that jurisdiction and also the prescribed procedures under the RTRAA which must be followed. In Big4 Brisbane Northside Caravan Village v Schliebs [2012] QCAT 277, the then President of the Tribunal, Wilson J, said at [42] -
“... it is compelling that the RTRAA is intended to be prescriptive and all-embracing in governing the procedure for determination of disputes arising under residential tenancies. It is, as discussed earlier, an enabling Act and its provisions and procedures will, if different from those to be applied by the Tribunal under the QCAT Act, prevail.”
So, the application should have been commenced by a Form 2 rather than a Form 3, but there is an even more fatal error, that really cannot be simply procedurally waived through as being a matter of “form” and not “substance”. Unless the application is an “urgent application” that is defined in section 415 of the RTRAA (and this application was not within that definition), pursuant to section 416 of the RTRAA, a tenant cannot apply to the Tribunal about an issue unless they have first sought conciliation through the Residential Tenancy Authority (“the RTA”) by making a dispute resolution request about the issue in the approved form (under the RTRAA) and either the conciliation process has ended without agreement reached, or a compromise was reached but this has not been adhered to. Unless this is done, the Tribunal has no jurisdiction over the matter.
It is clear to me that the parties did, after the application was filed with this Tribunal, participate in a short telephone mediation conducted in an attempt to help them resolve the dispute. But that was organised by this Tribunal as part of its processes. It was not the conciliation through the RTA that is mandatorily required to have taken place before an application could be filed in the Tribunal’s Minor Civil Dispute – Tenancy matters jurisdiction.
Accordingly, I am satisfied that the learned Magistrate sitting as a Tribunal member at first instance erred in determining that the Tribunal had jurisdiction and should have simply dismissed the application for want of jurisdiction and given the parties a little guidance as to where and how the matter should have been correctly commenced.
It is, respectfully, not enough for a Tribunal member simply to rely on section 13 of the QCAT Act in determining a matter that comes before the Tribunal, though I concede that must be very tempting in busy lists. There is an obligation, notwithstanding the wording of section 13 of the QCAT Act, to determine disputes according to law[4] and jurisdictional determinations should be the first port of call.
[4] Owen v Menzies [2013] 2 Qd R 327, [2012] QCA 170 per Holmes CJ with whom McMurdo P and Muir JA agreed; see also Action Health Centre Pty Ltd v Searipple Holdings Pty Ltd [2022] QCATA 7 per Judicial Member D J McGill SC.
That alone is sufficient to determine this application, in my judgment. However, lest I be wrong about that, I shall go on.
The Applicants’ submissions in support of their application for leave to appeal particularly refer to clause 21 of the Tenancy Agreement and to Part 3 of the Special Terms. They then refer to the definition of residential premises in section 10 of the Act that defines “residential premises” as “a premise used or intended to be used as a place of residence or mainly as a place of residence. They refer to s 184 of the Act which prohibits a tenant from using the premises for an illegal purpose; or causing a nuisance by the use of the premises; or interfering with the reasonable peace, comfort or privacy of a neighbour of the tenant. These statutory prohibitions are given expression in clause 21 of the Tenancy Agreement that was signed by the parties.
The Applicants effectively submitted that her Honour ignored and did not engage with the fact that the use of the tenanted premises was by statute and contract confined to residential use and the undisputed evidence was that the Respondents were in breach of those prohibitions. For the Applicants, it was submitted that her Honour erred in failing to consider those matters.
It was further submitted that clause 27 and section 209 of the Act set up the regime by which tenants may make structural changes to the leased premises and the consequences of failure to abide by that regime. It was submitted that her Honour erred in fact and in law by her failure to engage with those matters and by simply moving to a determination of the questions she set out as needing to be answered.
Finally, for the Applicants, it was submitted that her Honour erred by determining the case by reference to the equitable principles around unjust enrichment and on the basis that some benefit was enjoyed by the Applicants. It was submitted that her Honour made a subjective evaluation of the circumstances and simply found that it was unfair for the Applicants to retain the benefits of the works carried out at their property by the Respondents and that she was not permitted to do so. It was also submitted that her Honour erred in fact in finding that the Applicant has benefited from the improvements.
The Respondents, without legal representation, simply submitted that her Honour did not make any errors and also sought to put in more evidence going to their alleged loss of income.
MY DETERMINATION
I consider there is substantial merit in the submissions made for the Applicants that her Honour has erred at law by not engaging at all with the questions of law that arise pursuant to clauses 21 and 27 and sections 184 and 209 of the Act.
Respectfully, there was no determination at all by her Honour of the questions of fact and law going to the issue of whether or not the Applicants wrongfully terminated the Respondents’ tenancy or whether the Respondents had breached the terms of the Agreement and section 184 of the Act or what the consequences of such determinations might be for the parties in respect of the claim. Similarly, there was no determination at all by her Honour of the questions of fact and law going to the operation or otherwise of clause 27 of the Agreement or section 209 of the Act. These failures, in my judgment, amount to appealable errors.
So, what of them? Would proper consideration of them assist the Applicants?
It seems, on the evidence, that the use of the leased premises was limited by written agreement and by law to residential purposes only, including, by the inclusion of the Special Term, people staying at the property on a short-term basis, contracted through the Airbnb internet platform or other similar platforms. There is no mention in the agreement that the property could be used by the Respondents for the commercial purposes that the evidence shows it was being used for. The Council’s Show Cause Notice makes it clear that the Respondents’ use of the property was, prima facie, not permitted by law and there has been no submission made by the Respondents and no evidence adduced supporting a contrary finding.
Though there does not appear to be any doubt that the Applicants knew the Respondents were using the property to generate income other than just by having paying guests stay sourced through the Airbnb platform, that does not mean that the Respondents were not in breach of clause 21 and section 184 of the Act by using the premises for an illegal purpose. In this context, I interpret the term “use the premises for an illegal purpose” to mean “a purpose not permitted by law.” In my judgment, that catches the use of the premises contrary to or not in accordance with State planning laws administered by local authorities.
There is also evidence sufficient to support a finding that the Respondents’ use of the premises did cause a nuisance and interfere with the reasonable peace, comfort or privacy of a neighbour. That finding is supported by the evidence that an argument took place about noise and the assertion that the neighbour third party had, in apparent retaliation, turned off the power and tried to screw the power box shut.
So, I am satisfied the Respondents were in breach of clause 21 and section 184 by their use of the property, whether the Applicants knew of that or not. Knowledge on the part of the landlords that the leased property was being used for an illegal purpose and, arguably, acquiescing in that, does not excuse a breach by the tenants, though it might be relevant to determining what is the appropriate response to that.
In any event, as observed already, the evidence supports a finding that when the male Applicant said to the male Respondent words to the effect of “I think you might have to leave the property” after the incident on 5 December 2020, the male Respondent told him they were going to leave. Furthermore, on the evidence, the Applicants sent a Form 12 Notice, requiring the Respondents to leave within 14 days. The Respondents took no steps to get that set aside or to seek any other appropriate remedy. Clearly, they had already decided to leave, but in their own time. No doubt, the Show Cause Notice served on them by the Council played a very big part in their decision as well. As already observed, there was no evidence supporting a finding that the Respondents had determined to positively address the Council’s requirements.
At the same time, whilst they were readying to leave, the Applicants withdrew the Form 12 Notice and issued a Form 11 Notice, thereby making it clear to the Respondents that they could stay if they could remedy their breach. Nevertheless, the Respondents had clearly already determined that they were going to leave rather than take remedial steps.
I am, accordingly, satisfied that the Applicants did not wrongfully terminate the tenancy. Rather, the Respondents were in breach of their obligations and when that was pointed out to them and they were given the chance to remedy the situation, they simply chose to leave and surrender the lease. In my judgment, this action did not give rise to any rights on their part to seek compensation from the Applicants for wrongful termination.
Further, I am quite satisfied that the provisions of clause 27 of the General Tenancy Agreement and section 209 of the RTRAA applied in respect of determining the rights and obligations of the parties in respect of the money spent by the Respondents on the improvements they undertook at the property within the term of the tenancy. I am satisfied that the Respondents were aware of that, evidenced by the expression of a mere “hope” that the Applicants would contribute something towards the costs of the improvements they were making.
Even though the Applicants might have acquiesced in the Respondents’ undertaking the improvements, they never agreed in writing to any commitment to pay for the work done. On the evidence, they were clearly aware that the Respondents had a “hope” but no “expectation” that they would contribute. The Respondents clearly did not consider the Applicants obliged to contribute before they decided to leave the property earlier than they otherwise expected to.
I am quite satisfied that the provisions of clause 27 should determine the dispute and that the Applicants were entitled to not take any action for the breach (the Respondents’ actions done without the Applicants’ clear written agreement, including terms as to payment) and to treat the works as an improvement for their benefit without having to pay for it.
Lest that determination be seen as overlooking what the Applicants refer to as her Honour’s unjust enrichment determination, I make the following observations about that:-
(a)Her Honour did not even refer to the equitable principles of restitution or unjust enrichment making it impossible to determine if any consideration of those guided her decision. This is easily seen, in my respectful judgment, as a failure to give adequate reasons in any event;
(b)Her Honour acknowledged herself the paucity of evidence led by the Respondents as to the “benefit” or “enrichment” the Applicants gained and could not quantify it in any meaningful, evidence-based way, simply saying that it was difficult to precisely calculate what that might be;
(c)The usual way to advance evidence proving the “benefit” or “enrichment” is to adduce expert valuation opinion of the increase in value of the property attributable to the work done, as any “benefit” or “enrichment” would be limited to that in a case such as this;
(d)Her Honour said, without any explanation as to why she was so satisfied, that simply ordering the Applicants to pay the Respondents an amount equal to 50% of the amount said by the Respondents to have been spent on the works, was “an appropriate way to deal with it.”;
(e)Her Honour apparently disregarded the evidence that the Respondents did not even consider the Applicants under any enforceable obligation to pay them anything for the work they did on the property whilst they were doing the work and were apparently content to reap the expected investment return over the remaining term of the tenancy, only deciding they wanted to be reimbursed those costs after they decided to leave the property early, after being asked to show cause why an Enforcement Notice should not issue.
In these circumstances, her Honour’s determination is left completely open to a finding, respectfully, that she simply made a decision that she idiosyncratically considered was fair. With respect, that course is not good enough and has been expressly eschewed by the High Court in the past.[5]
[5] See for example Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J at 256.
In the circumstances, I consider that there are a number of appealable errors to be corrected and that a substantial injustice has been done to the Applicants. I will grant leave to appeal, allow the appeal, set aside the learned Tribunal Member’s Orders and simply otherwise dismiss the original application, leaving neither party with any obligation to pay the other party any money at the end of these proceedings. That said, having observed the Applicants’ concession that they would pay $2,600 to the Respondents for the remedial work done on the fence around the swimming pool, I consider it would be the right thing for the Applicants to do to honour that concession now, if they have not already.
I make the Orders set out at the commencement of these written reasons.