Redondo Property Investments Pty Ltd v Bennett
[2011] QCAT 282
•19 May 2011
| CITATION: | Redondo Property Investments Pty Ltd v Bennett and Anor [2011] QCAT 282 |
| PARTIES: | Redondo Property Investments Pty Ltd |
| v | |
| Tracey Maree Bennett Robert John Blair |
| APPLICATION NUMBER: | MCDT242-11 |
| MATTER TYPE: | Residential tenancy matters |
| HEARING DATE: | 5 & 29 April 2011 |
| HEARD AT: | Southport |
| DECISION OF: | Christine Trueman, Adjudicator |
| DELIVERED ON: | 19 May 2011 |
| DELIVERED AT: | Southport |
| ORDERS MADE: | 1. That the claim is dismissed. |
| CATCHWORDS: | Compensation – rental arrears – cleaning, pest control, repairs – Duty to mitigate loss – terms of lease – whether claims for interest a penalty – reasonable cost of expenses – breach of agreement and time limitations – orders must be fair and equitable to the parties Residential Tenancies and Rooming Accommodation Act 2008, ss 173, 358, 362, 419 Joelco Pty Ltd v Balanced Securities Ltd [2009] QSC 236 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Redondo Property Investments Pty Ltd represented by Mr Donald Ross |
| RESPONDENT: | Ms Tracey Bennett Mr Robert Blair |
REASONS FOR DECISION
The Applicant Company is the Lessor of the property located at 1 Zane Street, Molendinar in the State of Queensland. The Respondents are two of four tenants that are named on a General Tenancy Agreement that was a fixed term of 12 months that started on 26/11/2008 and ended on 25/11/2009. The tenants remained in the property after the tenancy ended and occupied the property under a periodic agreement. The lease agreement provided that the property was let fully furnished and the tenants paid weekly rent of $806.00. Rent was paid directly into a Commonwealth Bank Account.
The tenants were not required to pay a Bond pursuant to the Lease Agreement. The lease contains special ‘Terms and Conditions’ that were attached to the lease and marked Schedule ‘A’ with pages numbered 9, 10 & 11. The lease was signed by four tenants, the two tenants who were Respondents to this claim and two other tenants, Jay McGavie and Allecia Cole. The lease was signed by all parties.
The claim was filed on 22 February 2011 seeking orders that the Respondent tenants pay to the Applicant the sum of $25,271.98 for matters of compensation including rental arrears and other charges. The Applicant alleges the tenants vacated the property on 31/1/2010. The claim alleges that the tenants had failed to pay any rental arrears despite requests to do so.
History
The lease was signed by the tenants Robert Blair, Tracey Bennett, Jasyn McGarvie and Allecia Cole on the 23 November 2008. The Applicant listed two of the tenants to the claim, alleging that the two other tenants signed the lease and moved into the property, but shortly after they moved in, all four tenants had a falling out and the two tenants McGarvie and Cole moved out of the property.
The Applicant contends that the tenants who moved out after just a few weeks, were not removed from the lease, but that the remaining tenants, Ms Bennett and Mr Blair took over the responsibility for the lease and all rental payments.
The claim was listed for hearing before the tribunal on the 5th of April 2011 and all parties appeared. The Applicant and Respondents indicated that the matter was a consent matter and that agreement had been reached for the repayment of the full amount of rental arrears and costs, and that a payment plan had also been agreed. An order was made but set aside when it was noted shortly after the hearing that there were four tenants on the lease agreement and that only two tenants had been listed as Respondents. The matter was then relisted for further hearing and evidence regarding the failing by the Applicant to list all four tenants to the agreement as Respondents to the claim.
The claim was listed again on 29th April 2011 for hearing. The Applicant appeared but the Respondents did not. The Applicant submitted that the two tenants on the lease agreement that were not named on the Claim had vacated the property, although had not been removed from the lease but that the two remaining tenants, Ms Bennett and Mr Blair, agreed to be solely responsible for the lease and all rental payments. The Applicant stated that he had no knowledge of the tenants Cole and McGarvie’s whereabouts.
The hearing proceeded although the Respondent tenants did not appear despite being served with a Notice of Hearing. The Respondent tenants had telephoned the registry on the morning of the hearing to advise that they could not attend as Ms Bennett had to take Mr Blair to hospital that day and they could not attend. The Applicant provided further evidence to the tribunal and the matter was reserved with further orders and directions.
Orders that were made on 29 April 2011 were:
“i.Decision reserved
ii.That the Respondents must file and serve within 14 days Affidavit or Statutory Declaration setting out evidence as to an explanation as to why the tenants Jasyn Lawrence McGarvie and Allecia Cole should not be liable to pay rental arrears and named as the Third and Fourth Respondents.
iii.Reasons and Orders will be made upon compliance with Order 2 herein.”
[10] The Respondents did not file any affidavit material and comply with the orders made on 29 April 2011.
[11] The Applicant is claiming compensation for the following:
(a)Rent arrears (from 26/9/09-31/1/10) $14,496.36
(b)Interest Charges(April 09-Feb 11) 8,853.12
(c)Cleaning 250.00
(d)Repairs 767.50
(e)Pest Control 560.00
(f)Filing fee 255.00
(g)TOTAL $ 25,181.89
Applicant’s Submissions
[12] The Applicant stated that the lease was signed by all tenants but as two of the tenants moved out shortly after moving in he was only pursuing the Respondents to the claim for unpaid rent and other compensation matters.
[13] The Applicant contends that the Lease Agreement provided that the tenants rented a fully furnished residential premise in Molendinar and that the tenants breached the lease agreement by not paying rent pursuant to the agreement.
[14] The Applicant stated that although the rental arrears were outstanding for some time he did not press for payment as the Respondent Mr Blair was incarcerated and that he requested that the Applicant not require his wife and children to leave the property while he was in custody.
[15] The Applicant gave evidence that he charged interest on outstanding rental payments as if he was not paid rent pursuant to the lease agreement he would be required to borrow the money to pay his mortgage from a credit card and that would be at a very high interest rate.
[16] The Applicant gave evidence that during the entire tenancy period, he did not issue to the tenants any Form 11 Notices to Remedy Breaches for Rental arrears or Notices to Leave despite them being in arrears for most of the tenancy and failed to pay any rent for some time.
Tenants’ Submissions
[17] The tenants that appeared at the hearing on 5 April 2011 gave evidence that they were prepared to pay the amounts outstanding as the Applicant had told them that the amount was fair and they wanted “to do the right thing”. When questioned if they knew about their rights and entitlements and if they had obtained legal advice before attending the tribunal hearing, they indicated that they had not.
[18] The tenants gave evidence that they had not paid rent due to some financial difficulties they had encountered and had moved out of the property on the 31st of January 2010.
[19] The tenants gave evidence that they were impecunious and would have to repay the rent arrears and compensation amounts to the Applicant by way of a payment plan, agreeing to pay $150 per week until the full payment was made.
Legislation
[20] When considering the relevant sections of the Residential Tenancies and Rooming Accommodation Act 2008 (“the Act”) the sections relevant to orders that the tribunal can make for compensation, there is an onus on parties to mitigate losses. That section states:
362 Duty to mitigate loss or expense
(1)This section applies to the lessor if the lessor incurs loss or expense because of—
(a)the tenant's failure to hand over vacant possession of the premises after a termination order is made by a tribunal; or
(b)the tenant's abandonment of the premises; or
(c)another act or omission of the tenant.
(2)This section applies to the tenant if the tenant--
(a)incurs loss or expense because of an order made by a tribunal or registrar declaring that the tenant abandoned the premises on a stated day; and
(b)contends that the premises were not abandoned or were only abandoned on a day after the day stated.
(3)The lessor or tenant--
(a)must take all reasonable steps to mitigate the loss or expense; and
(b)is not entitled to receive compensation for any loss or expense that could have been avoided by taking the steps.
[21] The Applicant did not mitigate the loss to the tenants and allowing them to remain in occupation of the property without paying their rent caused the rental arrears to escalate to such a large amount that the tenants had little chance of repaying those funds. The Applicant stated at the hearing on the 29th April that the reason he allowed the tenants to stay at the property was due to the fact that Mr Blair was in prison but no evidence was produced to support that contention. The Applicant stated that Mr Blair had specifically asked him not to evict his wife and children from the property while he was in prison. The tenants were not present when this evidence was given and there was no opportunity for the tenants to respond to those contentions.
[22] The Applicant stated that he did not issue Notices to Remedy Breaches for rent arrears or Notices to Leave at the specific request of Mr Blair.
[23] The Applicant contends that the tenants had agreed to pay the full amount of the claim and as there was consent to both the amount and a payment plan for the repayment of the claim, that the orders should be made. However, there are other matters that the Tribunal is required to take into account to ensure that any orders that are made comply with section 13 of the Queensland Civil and Administrative Tribunal Act 2009.(“QCAT Act”).
[24] Section 13 of the QCAT Act states:
13 Deciding minor civil dispute generally
(1)In a proceeding for a minor civil dispute, the tribunal must make orders that it considers fair and equitable to the parties to the proceeding in order to resolve the dispute but may, if the tribunal considers it appropriate, make an order dismissing the application.
(2)For subsection (1), the tribunal may make only the following final decisions to resolve the dispute--
(a)for a claim mentioned in schedule 3, definition minor civil dispute, paragraph 1(a), (b), (c) or (d)--
(i)an order requiring a party to the proceeding to pay a stated amount to a stated person; or
(ii)an order that a stated amount is not due or owing by the applicant to a stated person, or by any party to the proceeding to the applicant; or
(iii)an order requiring a party to the proceeding, other than the applicant, to perform work to rectify a defect in goods or services to which the claim relates; or
(iv)an order requiring a party to the proceeding to return goods that relate to the claim and are in the party's possession or control to a stated person; or
(v)an order combining 2 or more orders mentioned in subparagraphs (i) to (iv);
(b)for a tenancy matter--a decision the tribunal may make in relation to the matter under the Residential Tenancies and Rooming Accommodation Act 2008;
(c)for a claim that is the subject of a dispute under the Dividing Fences Act 1953--an order a Magistrates Court could make in relation to the claim under that Act.
(3)However, the tribunal can not make an order or decision under subsection (2) that--
(a)purports to require payment of an amount, performance of work or return of goods of a value of more than the prescribed amount; or
(b)purports to grant relief of a value of more than the prescribed amount from the payment of an amount; or
(c)combines 2 or more orders mentioned in subsection (2)(a)(i) to (iv) and purports to award or declare entitlements or benefits (or both) of a total value of more than the prescribed amount.
(4)Subsection (3) does not apply to--
(a)a claim for repair of a defect in a motor vehicle under the Property Agents and Motor Dealers Act 2000, section 324; or
(b)a tenancy matter.
Note--
See the Residential Tenancies and Rooming Accommodation Act 2008, section 516 for tenancy matters involving amounts greater than the prescribed amount.
[25] I am bound to make orders that comply with section 13(1) of the QCAT Act and that any order must be considered fair and equitable to the parties to the proceeding in order to resolve the dispute.
Claim for Interest for late rent – is that a penalty?
[26] The Applicant has drafted and attached to the General Tenancy Agreement an Annexure that contains Special Terms and Conditions that require careful examination. The lease states that the weekly rent is $806.00 per week but offers a ‘discount’ of rent if paid on time.
[27] Annexure ‘A’ of the Lease contains the Special Terms and Conditions in relation to the weekly rent, and at paragraph 2 it states:
“2. The rent is to [sic] paid weekly on the day of the week in Item 7 on page one direct to the Ban account of the Lessor – in item 8 and in Item 9 All monies received will be applied to the oldest dated invoice(s). The rent will be discounted and reduced to $725.00 if paid on or before time in lue [sic] of the $806.00”.
[28] The Special Terms and Conditions also state at paragraph 13, that if the rent is not paid on time or is in arrears for more than 14 days interest will accrue, the term states:
“13. If rent payments are in arrears for more than 14 days. Tenant(s) agrees to pay interest at the rate of 2.5% per month on the outstanding balance calculated daily from the first day of the payment default, payable monthly. In the event of returned unpaid transactions for direct debit/unpaid cheques a fee of $45 will be incurred.”
[29] When determining if a certain term of an agreement is a penalty or voidable the Tribunal must consider section 173 of the Act, which states:
173 Certain terms about penalties and other payments void
(1)A term of an agreement is void to the extent it provides that, if the tenant breaches the agreement or this or another Act, the tenant is liable to pay--
(a)all or a part of the rent remaining payable under the agreement; or
(b) increased rent; or
(c)an amount as a penalty; or
(d)an amount as liquidated damages.
(2)Despite subsection (1), a term of a fixed term agreement is not void to the extent it provides that, if the tenant terminates the agreement other than in a way permitted under this Act, the tenant is liable to pay the reasonable costs incurred by the lessor in reletting the premises.
(3)Subsection (2) applies to a term only if the only reference in the term to the amount payable by the tenant is a reference to the reasonable costs incurred by the lessor in reletting the premises.
(4)A lessor or lessor's agent must not require a tenant to enter into an agreement containing a term that is void under subsection (1).
Maximum penalty for subsection (4)--20 penalty units.
[30] The tenant ledger statement provided to the tribunal and printed 21/2/2011 indicating rent activity from 1/1/2008 to 23/2/2011 highlights that interest has been charged to the tenants on outstanding rent as follows:
(1) For 2009
a) April $ 56.32
b) May $77.58
c) June $92.62
d) July $129.43
e) August $167.02
f) September $187.84
g) October $224.49
h) November $260.31i) December $328.06
(2) For 2010
j) January ‘10 $427.07
k) February $456.11
l) March $474.52
m) April $486.38
n) May $498.54
o) June $511.01
p) July $523.78
q) August $536.88
r) September $550.30
s) October $564.05
t) November $578.16
u) December $592.61(3) For 2011
v) January ’11 $607.43
w) February $622.61TOTAL $ 8,853.12
[31] The interest rate that is stipulated in the lease at 2.5% per month equates to a real interest rate of approximately 30% per annum. The Applicant alleged that the interest component of his claim was for a loss he had suffered from being deprived the payment of rent on time and the damage resulted from the cost to him of having to make the payment of his mortgage over the property by borrowing funds at the highest credit card rate.
[32] As said in Clambake Pty Ltd v Tipperary Projects Pty Ltd[1]:
“... the ability to recover the alleged arrears of rent, outgoings and interest claimed depends, to a significant degree, upon the proper construction of certain provisions in the lease. In addition, it is necessary to have regard to the principles applying to whether or not a contractual provision, such as the entitlement to interest relied upon by Clambake is void and unenforceable because it amounts to a penalty. It will also be necessary to consider the authorities bearing on whether or not provisions in a contract, such as the rent review powers in this lease, can be exercised after the contract has been terminated or, after the right to possession has expired and possession has been yielded up to the landlord.”
[1] (No 3) (2009) 77 ATR 242.
[33] The more recent decision of Ringrow Pty Ltd v BP Aust Pty Ltd[2] the High Court reaffirmed the application of the analysis contained in the speech by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd[3] and where the court unanimously held that:
“The principles of law relating to penalties require only that the money stipulated to be paid on breach or the property stipulated to be transferred on breach will produce for the payee or transferee advantages significantly greater than the advantages which would flow from a genuine pre-estimate of damage. Among the different words which have been used to describe how extensive the difference must be before the transaction creates a penalty are the words employed by Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin (supra)[4] – a 'degree of disproportion' sufficient to point to oppressiveness”
which led their Honours to conclude that nothing in the doctrine supports a 'proportionality' doctrine such as giving rise to a need for the court to inquire into whether there is proportionality between the impugned provision and the legitimate commercial interests of the party relying on it.
[2] [2005] HCA 71; (2005) 224 CLR 656, 657.
[3] [1914] UKHL 1; [1915] AC 79.
[4] [1986] HCA 63; (1986) 162 CLR 170.
[34] The case of Ringrow Pty Ltd at page 656 summarised quite usefully the relevant principles in relation to the application of a penalty where they stated that:
“the law of penalties, in its standard application, is attracted where a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach.”
[35] That decision accepted the guidance from Lord Dunedin In Dunlop Pneumatic Tyre Co Ltd whereby he indicated that a claim would be held to be a penalty in various circumstances including that the sum stipulated for is extravagant and unconscionable in comparison with the greatest loss that could conceivable been proved to have followed from the breach.
[36] The Residential Tenancies and Rooming Accommodation Act 2008 codifies the common law cases in this regard, and in particular section 173(1) of the Act.
[37] Section 173(1) of the Act provides that “a term of an agreement is void to the extent that it provides that if a tenant breaches the agreement, the tenant is liable to pay an amount as a penalty”. I note from the Act that increased rent or liquidated damages are also precluded from being recovered in those circumstances. It is clear that the Act is seeking to ensure, just as the common law does, that a penalty or an unfair imposition of an amount is not levelled against the agreement breaker, but rather, that a genuine pre estimate of damages of something that is referrable to the loss is articulated and sought that is substantiated to be lost by the suffered party. That is, a loss that is fair and reasonable due to the breach of the agreement, and that which could be fairly recovered in an instance of breach of contract.
[38] It is clear that the rate of interest payable on all late rental payments is at 2.5% per month which is equivalent to 30% per annum. The current market rate for Bank overdrafts is between 6.75 and 7.8%, for Personal Loans between 14.55 and 15.10% and for Credit Cards between 13.35 and 19.7%.[5] In comparison the interest rate prescribed by the lease is much higher than the highest mortgage and credit card rates that exist in the current market place.
[5]Reserve Bank of Australia Interest rates and Indicator Lending Rates as at 3 May 2011.
[39] Given the high interest rate sought to be charged to the tenant in the Special Terms and Conditions of the lease which are contained in “Annexure A” to the Residential Tenancy Agreement, where the sum of 30% per annum, it is difficult to ascertain that amount as anything other than a penalty as that term is to be understood by reference to the previous cases, in that the rate cannot be anywhere near what the Applicant would estimate as his actual and genuine loss. The Applicant would not have suffered a loss of 30 per cent per annum by having not received his rental payments when they fell due.
[40] The Applicant alleged that by having the rent paid late he was required to borrow the funds at the highest credit card rate to pay the mortgage payments. No evidence was provided to support that contention. Even if that was the case the rate of 30% contained in the lease is far greater than even the highest credit card rate in the current market.
Has the Application been filed out of time?
[41] The Applicant filed his claim on 22 February 2011. The Act contains provisions that require strict compliance with timeframes for both tenants and lessors to bring claims against each other for compensation arising from a breach of a tenancy agreement. Section 419 of the Act relating to breach of agreements states that:
419 Applications about breach of agreements
(1)This section applies if any of the following claim there has been a breach of a term of a residential tenancy agreement or a rooming accommodation agreement--
(a)a lessor or tenant under the residential tenancy agreement;
(b)a provider or resident under the rooming accommodation agreement.
(2)The lessor or tenant, or provider or resident, may apply to a tribunal for an order about the breach.
(3)The application must be made within 6 months after the lessor or tenant, or provider or resident, becomes aware of the breach.
(4)For a residential tenancy, the application may be made--
(a)during the term, or after the end, of the agreement; and
(b)whether or not an application for termination, or a termination order, has been made about the agreement; and
(c)whether or not a rental bond for the agreement is held by the authority when the application is made.
(5)For rooming accommodation, the application may be made--
(a)during the term of the agreement or after the agreement ends; and
(b)whether or not a rental bond for the agreement is held by the authority when the application is made.
[42] The Applicant was aware that the tenants had breached a term of the residential tenancy agreement as early as April 2009 when the first interest penalty was claimed and evidenced on the tenant ledger as 29/4/2009.
[43] The Applicant did not issue the tenant with Notices to Remedy Breach for rental arrears and a Notice to Leave. The Applicant did not at any time ever issue Notices to Remedy Breaches regarding rental arrears, despite the breach continuing for the following nine months.
[44] Section 419(3) requires the Applicant to file an application regarding the rental arrears within 6 months of the lessor becoming aware of the breach.
Findings
[45] I find that the claim for interest of 30% per annum does not represent a genuine pre-estimate of loss or damage flowing from the breach of the agreement. I find that the rate of the highest level of interest charged on a credit card being 20%, and mortgage rates even lower, and in the circumstances that the interest rate contained in the lease of 30%, being so disproportionate as to be oppressive.
[46] I find the interest rate excessive in the circumstances. I find that the interest is a penalty as defined in the leading authorities and amounts to a penalty. I find the interest clause of the Residential Tenancies Agreement therefore void. I therefore strike out the claim for interest and find that the tenants are not required to pay any of the interest penalties during their tenancy. I therefore would preclude any claim for interest from the application for compensation.
[47] I find that the Applicant has not served any Form 11 Notices to Remedy Breach and Form 12 Notices to Leave on the tenants nor a Form 16 Dispute Resolution Request Form with the RTA within 6 months of when the Lessor became aware of the breach of the term of the lease agreement.
[48] I find it unbelievable that the Applicant did not issue any Notices to Remedy Breach for rental arrears during the tenancy when clearly the tenant ledger indicates the tenants were behind in their rent regularly, and so early on during the lease. The Lessor claimed he uses the high rate of interest for arrears at 30% in the lease agreement due to the fact he is required to pay that same high rate of interest on a credit card to top up his mortgage payments, yet he gave evidence that he was charitable in allowing the tenants to remain in the property for some 9 months without paying any rent due to their personal and financial difficulties arising from the tenant’s (Mr Blair) incarceration.
[49] I do not accept the evidence of the Applicant in that regard as his evidence portrays him as on one hand, a business man focused on commercial transactions to receive the best possible return for his investment rental property and justifying interest rates at 30% on unpaid rent, and yet charitable on the other hand allowing tenants to live in his property without paying rent for some 9 months. I find that while the Lessor is entitled to receive rent for his property pursuant to the lease agreement I find that his conduct in waiting for more than 12 months to file this claim after the tenants had vacated the property and claiming for exorbitant interest on the arrears, unconscionable and failing in his obligation to mitigate the loss for the tenants.
[50] I find that the Applicant has not filed his claim for compensation in compliance with section 419(3) of the Act. I therefore find that the residual claim for rent arrears and other matters including cleaning, repairs and pest control cannot be determined as the claim has been filed out of time.
[51] I find therefore that the claim must be dismissed.
ORDERS
That the claim is dismissed.
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