Ried & Ried v Pham & Vu - [2007] SADC 48

District Court of South Australia
(District Court Administrative and Disciplinary Division: Appeal Under Residential Tenancies Act 1995)
In the Matter of RESIDENTIAL TENANCIES ACT 1995
RIED & RIED v PHAM & VU
[2007] SADC 48
Judgment of His Honour Judge Beazley (ex tempore)
2 May 2007
LANDLORD AND TENANT - TERMINATION OF THE TENANCY
Residential Tenancies Act - Appeal against findings and orders of Tribunal - Whether tenancy validily terminated in absence of notice of termination, procedural fairness, relevance of alleged poor state of repair of premises, whether evidence of failure to pay rental in accordance with previous orders of Tribunal, claims for compensation, Held - Orders of Tribunal quashed.
Residential Tenancies Act 1995 ss56, 68, 79, 80(2), 84, 91 and 93; Residential Tenancies (General) Regulations Form 2, referred to.
Sullivan v Department of Transport (1978) 20 ALR 323 at 343; Wright v Weston Raine & Horne [2004] SADC 16, considered.

RIED & RIED v PHAM & VU
[2007] SADC 48

Leslie Ried and Samantha Ried (the tenants) appeal, pursuant to s 41 of the Residential Tenancies Act 1995 (SA) against Orders made by the Residential Tenancies Tribunal on 17 April 2007 and 24 April 2007. The tenancy arrangements have a long and unsatisfactory history. As the parties are stressed about the outcome of the appeal, it is important that I deliver a judgment forthwith, these being my Ex Tempore Reasons.
The formal Orders of which the tenants complain are as follows:
“1.Pursuant to section 110(1)(e) and (j) of the Act that this Agreement is terminated, I require that the tenants give up possession of the premises at 6 Ragless Avenue Enfield at 10.00 am on Thursday 26^th April 2007 ON CONDITION THAT if the tenants fail to give up possession then the order of the possession may only be enforced by the Tribunal Bailiff.
2.Pursuant to section 110(1)(i) of the Act that the security bond of $900 held by the Commissioner be paid to the landlord via the agent.
3.Pursuant to section 110(1)(c) that the tenants make the following payment to the landlord: $2,153.57 within 14 days of the date of 17 April 2007. Failing payment this order may be registered in the appropriate Court and enforced as an Order of that Court”.
Background
It is common ground that the tenants entered into a Residential Tenancy Agreement in respect of the premises with Kim Pham and Anh Vu (the landlords) for a period of 2 years commencing on 23 February 2006.
A security bond in the sum of $900 guaranteed by the Housing Trust was lodged with the Commissioner. The agreed rental of $225 per week was to paid fortnightly.
The tenants dealt initially with the landlord’s then agent Ray White – Adelaide. By 19 April 2006 a rental direct deposit cheque had been dishonoured. The Tenant’s Ledger Reports tendered to the Tribunal disclosed that this complaint of insufficient funds became a regular event.
Applications dated 8 May 2006; 19 September 2006; 13 October 2006 and 12 December 2006 were all filed by the landlords with the Residential Tenancies Tribunal seeking Orders for vacant possession and the payment of outstanding rent. The application of 12 December 2006 was subsequently withdrawn on 31 December 2006 because, as the landlords had noted, on an application to withdraw, the arrears had been met. This notation was to be of critical importance to the Appeal.
However earlier orders had been made by the Tribunal with respect to ensuring prompt payment, on 25 May 2006 and 3 October 2006. It is clear that the landlords were extremely accommodating to the plaintiffs in permitting time for those payments to be made. Notwithstanding these opportunities being given to them by the landlords, the tenants subsequently fell into default, leading to the subject application to the Tribunal for an Order for Possession. The terms of the previous orders were the basis of the subject application.
The Previous Orders
On 25 May 2006, the Tribunal approved a Schedule of Payments to ensure that arrears were brought up to date, and for payment of two weeks rent in advance.
On 3 October 2006 the Tribunal noted that the arrears of rental at that time then totalled over $2,000. The Tribunal reinstated the Tenancy Agreement strictly conditioned upon the payment of a specified List of Payments in Clause 2 of that Order. That Order provided a self-executing mechanism in that if any of the payments itemised in Clause 2 were not made in accordance with the Schedule, then the landlords were entitled to seek an Order for Termination further Order by the Tribunal. Such self executing have been criticised by this Court previously. See Wright v Weston Raine & Horne [2004] SADC 16.
In addition the Order referred to additional payments beyond those in Clause 2. Of significance to the Appeal are the following Orders made on 3 October 2006:
“5.If the payments in Clause 2 are made and the tenancy then continues, pursuant to section 110(1)(c) of the Act, I order that the tenant continue to pay $250 per week, commencing on Thursday 30 November 2006 and continuing each week thereafter until the arrears are paid in full and the rent is two weeks in advance as required by the agreement.
6.It is a condition of Clause 5 that if it is not complied with the landlord may lodge an Application with the Tribunal for Orders of Termination and Possession without first serving a Form 2 Notice of Termination on the tenant. This exemption from serving the Notice applies only in relation to breaches of Clause 5”.
There is no dispute that the payments in Clause 2 were made, save for one payment which had been delayed because of a computer error. By Order of 17 October 2006 the Tribunal dismissed the Landlords Application for Possession in consequence of that one failure to make payment and said:
“For these reasons, I shall dismiss the current application. The tenants are now required to continue payments in accordance with the Order of 3 October 2006 which requires the $250 be paid each Thursday from Thursday 19 October 2006 until rent is two weeks in advance. If any payment is missed on or before 23 November 2006 the tenants must give up possession”.
The subject application
By application to the Tribunal issued by the landlords on 3 April 2007, an Order for Vacant Possession was sought. In addition the landlords sought Orders for outstanding rental and water charges unpaid since 19 January 2007. The landlords did not serve a Notice of Termination in accordance with Form 2 of the Residential Tenancies (General) Regulations 1995, or at all, upon the tenants in respect of their failure to pay rent. The only possible basis for the tenants not serving such a Notice of Termination was a reliance upon Clause 5 and 6 of the Orders made by the Residential Tenancies Tribunal on 3 October 2006.
On or about 10 April 2007 the tenants appointed Re/Max Partners to be their agent. The Tribunal fixed a hearing date as at 17 April 2007 at 1.00 pm.
The Hearing – 17 April 2007
There was no appearance at the hearing by the tenants. For Reasons delivered that day the Tribunal proceeded in their absence. It was noted that after commencing the hearing “the tenants contacted the Tribunal to say that they could not attend because their car radiator had blown up and they offered to make payments”.
The Tribunal had the power to proceed in the absence of the tenant pursuant to s 32(1)(d) of the Act. No application was made for an adjournment. As the Full Court of the Federal Court said in Sullivan v Department of Transport (1978) 20 ALR 323 at 343.
“The absence of any application for an adjournment does not, however, necessarily conclude the issue adversely to the appellant. The failure of a Tribunal which is under a duty to act judicially, to adjourn a matter may conceivably, constitute a failure to allow a party the opportunity of properly presenting his case even though the party in question has not expressly sought an adjournment ….In this regard, however, it is important to remember that the relevant duty of the Tribunal is to ensure that a party is given a reasonable opportunity to present case. Neither the Act nor the common law imposes upon the Tribunal the impossible task of ensuring that a party takes the best advantage of the opportunity to which he is entitled”.
In this case the Tribunal had knowledge of the history of defaults; an acknowledgement by the tenants that they were in arrears to some extent at least, and there was no other factors apparently in favour of the tenants. It was, with respect, entirely justified in proceeding in their absence.
The crucial finding of the Tribunal appears to have raised, albeit indirectly, the failure to serve a Notice otherwise required by the terms of the lease s 80(2) of the Act. That finding was:
“It was a condition of the last Order namely 17 October 2006 that the landlords have the right to apply for Orders of Termination and Possession if rent payments were not made as ordered. I find that they were not made as ordered”.
The Tribunal did not state the basis upon which the “rental payments” were not made in accordance with the Orders. In fact the relevant order was that made on 3 October 2006. The Tribunal merely referred to the rent having been paid to 18 January 2007.
The proper construction of the Orders of 3 October 2006
Whether the landlords were permitted to apply without serving a Notice depends upon the proper construction Clause 5 and 6 of the Order of 3 October 2006.
In my opinion Clause 5 was not intended to regulate the payment of rental until the end of the tenancy. It was simply to provide a mechanism whereby the landlords could proceed without first serving a Notice of Termination but only in respect of a quite limited number of payments being, “until the arrears are paid in full and the rent is two weeks in advance as required by the Agreement”. Once the payments of arrears had been made, and the first time rent was paid in advance as required by the Agreement, then the Tenancy Agreement was to continue in force. Clause 6 of the Order of 3 October 2006 made it clear that thereafter the relationship was to be regulated by the Act. That is to say that the parties respective rights, once the arrears of rental had been paid up to date and a payment was made in advance, would be governed by the terms of the tenancy agreement, and the Act. Clause 5.2 of the Tenancy Agreement provided that the landlords may terminate the agreement on seven days notice. Section 80(2) of the Act obliged the landlords to serve a Form 2 Notice of Termination alleging failure to pay rent.
I do not know whether the Tribunal construed Clause 5 as applying to any rental which fell into arrears until the end of the tenancy, or whether it concluded that the payments in Clause 5 had not been paid. The reference only to the rental outstanding since 18 January 2007 suggests that, with respect, the Tribunal proceeded under an incorrect construction of Clause 5.
However in the alternative the question remains whether there was any evidence to justify a finding that the tenants had not complied with the payments required by Order 5 of 3 October 2006.
The records before the Tribunal disclosed that on 31 December 2006 the landlords filed a Consent to Withdraw the application dated 12 December 2006 on the basis that the tenants had paid all outstanding monies.
There was no other evidence before the Residential Tenancies Tribunal which could justify a finding that the tenants had failed to comply with the Orders of 3 October 2006 nor indeed 17 October 2006. The absence of the tenants might well be the reason why the Tribunal fell into error. It had no assistance about the payments which had been made in accordance with Clause 5 of the earlier order.
Although the landlords referred briefly to the question of hardship in their Application to the Tribunal of 3 April 2007 they gave no evidence on that matter before the Tribunal, and the Tribunal itself did not treat the Application as a termination based upon hardship under s 89 of the Act.
In my opinion in light of the finding by the Tribunal that the rent was paid to 18 January 2007; any action to be taken by the landlords in respect of any later breach was to be governed by the terms of the reinstated tenancy agreement and s 80(2) of the Act, and not upon Clause 5 of the Orders made on 3 October 2006. Accordingly they were obliged to serve a Form 2 Notice of Termination upon the tenants before seeking an Order for Termination and Possession.
Conclusion
This result is unsatisfactory for the parties generally. For reasons which will become clear there is no doubt that the tenants have for many months, and indeed, still are grossly in default in respect of their rental obligations. In light however of the failure to serve the Notice it is necessary for me to quash the Orders made by the Tribunal. This is an unfortunate delay in that the landlords remain immediately in a position to serve the appropriate Notice, and to have the matter dealt with expeditiously by the Residential Tenancies Tribunal.
Subsequent events
By Application dated 19 April 2007 the tenants sought a rehearing before the Residential Tenancy Tribunal. The grounds alleged procedural unfairness, because the application had been heard in their absence on 17 April 2007. Further they alleged that the premises were substandard. They had not raised the question of premises being substandard in their telephone call to the Registrar of the Tribunal on 17 April 2007. They further alleged that the landlords’ previous agents were had been made of their complaints about the substandard nature of the premises, and that “they had not been informed that they were four months in arrears or that the previous agents were no longer the agents”.
As to the arrears it is clear that the tenants must have known that they were in arrears irrespective of what they were told by the agents. At best the complaint was that they had not been served with a Form 2 Notice which would have required the arrears to be specified.
The tenants also asserted that the rent ought to be reassessed, so that the present rent be determined to be excessive, and that they be permitted to offset, against any arrears, the difference in rental to be fixed by the Tribunal. They filed an inspection sheet setting out the alleged defects. They also sought an order for compensation.
The Hearing – 24 April 2007
The tenants’ application was listed for hearing on 24 April 2007, however the tenants again did not appear. Shortly prior to the hearing Mrs Ried telephoned the Tribunal to indicate that her husband would appear. He did not appear. No excuse was given to the Tribunal as to why he did not appear. The Tribunal delayed the hearing for 15 minutes and even though it took some 40 minutes to complete there was no appearance by the tenants. With respect, the Tribunal was entirely justified in proceeding in the absence of the tenants. The absent party can hardly be heard to subsequently complain of procedural unfairness when he or she elects to be elsewhere at a time when an opportunity was given for that person to be heard.
In the absence of the tenants the Tribunal concluded that it should not vary the Orders made on 17 April 2007, save for giving additional time for the tenants to leave the premises.
As to the alleged state of the premises the Tribunal noted that the inspection had occurred after the Tribunal hearing on 17 April 2007 and no mention had been made to the Tribunal before that date. The landlords gave undisputed evidence that the premises were in fair and good repair at the start of the tenancy. The landlord had inspected the premises in mid 2006, and again it appeared to him to be in a “normal condition”. The Tribunal thereby dismissed the tenants’ application in the absence of any evidence of the tenants. In passing it said that even if the premises were in a poor condition, this would allow the tenants to apply for a compensation order but that it would not alter the proved breach of failure to pay rental. It preserved the right of the tenants to seek orders for compensation by separate application. It then ordered that the possession be given and taken on 26 April 2007.
The Appeal
On 26 April 2007 because of its urgency I stayed the possession order until this day at 5.00 pm, and listed the matter for an urgent full hearing. On the Appeal Mr Leslie Ried appeared on behalf of himself and his wife, and the landlords were represented by their agents. Mr Ried indicated that the quantum of the rental outstanding to the landlords was in dispute in that he had made at least three payments which had not been recorded. His assertions were quite unsatisfactory. He produced receipts for earlier periods but did not produce evidence of alleged payments made since January 2007. He indicated that the evidence was “at home”. He conceded that whatever payments had been made, and that indeed he was in a position to pay a further $500 this day, the rental owing under the Agreement would still be in arrears. He made no proposal with respect to the payment of those arrears. Instead he asserted that the premises were in a poor condition, and that either pursuant to the Housing Improvement Act or alternatively pursuant to section 56 of the Residential Tenancies Act, he was seeking a declaration that the rent being due under the Agreement was excessive. He asserted that it ought to be offset against the current arrears. It was made clear to him that even if a Tribunal were to make such an order with respect to alleged excessive rent it would only apply prospectively pursuant to s 56(3) of the Act. Mr Ried did not assert that any fresh evidence as to the state of the premises would have the effect of limiting the right of the landlord to terminate the tenancy pursuant to s 84 of the Act; namely that the premises were potentially subject to rent control under the Act. Mr Ried indicated that he and his family wished to be relocated but would need at least 6 weeks for that to occur. I did not have regard to the evidence of the alleged unsatisfactory state as that had not been placed before the Tribunal, and further in light of the statement made by Mr Ried.
Discussion
It is plain that the tenants remain in arrears with respect to the rent, whether it be for the full sum of $3,052.57 asserted by the landlords to be owing as at 23 April 2007, or some lesser sum. This is a clear case where an order would have been made for the Termination of the Lease, but for the requirement that a Notice of Termination be served upon the tenants. It is particularly frustrating for the landlords given their long history of granting indulgences to the tenants, and still being denied the rental due to them. Although it is a most unsatisfactory result in my opinion there is no other alternative but for me to quash the orders made on 17 April 2007 and 24 April 2007. This has the effect that the Tenancy Agreement remains on foot. The landlords are in a position forthwith to serve a Form 2 Notice based upon the past and continuing defaults in the payment of rental, unless those payments are made by the tenants forthwith, and thereafter to have the matter dealt with expeditiously by the Tribunal. I of course make no comment about what orders the Tribunal might make in due course. Accordingly the formal order of this Court is that the orders made by the Tribunal on 17 April and 24 April 2007 be quashed.