Smith v Orlando

[2022] NSWCATCD 140

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Smith v Orlando [2022] NSWCATCD 140

Hearing dates:

1 July 2022

Date of orders:

09 September 2022

Decision date:

09 September 2022

Jurisdiction:

Consumer and Commercial Division

Before:

J Searson, General Member

Decision:

1. The landlords, Marco Orlando and Sarah Orlando, are to pay the tenants, Anne-Gisele Monica Smith and Benjamin Blake Walker, the sum of $6,500.00 on or before 2 October 2022.

Catchwords:

LEASES AND TENANCIES — Residential Tenancies Act 2010 (NSW) — Compensation — rent reduction — failure to repair — non-economic loss — mould.

Legislation Cited:

Civil and Administrative Tribunal Act 2013

Civil Liability Act 2002 (NSW)

Residential Tenancies Act 2010

Residential Tenancies Regulation 2010

Cases Cited:

Baltic Shipping Co v Dillon [1993] HCA 4.

De Soleil v Palmhide P/L [2010] NSWCTTT 464

Dupont v Lawrence RTT 97/022753

Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341

Hartland and Panuccio v Bergmark (2010)

Menashi v Ly [1997] NSWRT 162

Moore v Scenic Tours Pty Ltd [2002] HCA 17

Proudfoot v Hart (1890) 25 QBD 420

Weeks v Bond [1997] QCA 349

Texts Cited:

Allan Anforth, Peter Christenson and Sophie Bentwood, Residential Tenancies Law and Practice New South Wales, 6th Edition (“Anforth”)

Category:

Principal judgment

Parties:

Anne-Gisele Monica Smith (First Applicant)
Benjamin Blake Walker (Second Applicant)

Marco Orlando (First Respondent)
Sarah Orlando (Second Respondent)

Representation:

Applicants (self-represented by A Smith)

Respondents (self-represented by S Orlando)

File Number(s):

RT 22/18475

Publication restriction:

Nil

REASONS FOR DECISION

APPLICATION

1. This is an application by the tenants for compensation as a result a failure of repair and due to mould in the property. The amount of compensation that was sought by the tenants was initially $32,893.00, however the tenant sought the reduced amount of $15,000 at the hearing and accepted the jurisdiction limit of the Tribunal.

2. The application was opposed by the respondent landlords.

JURISDICTION

3. The Tribunal has jurisdiction to hear and determine this matter. The applicants are tenants, and the dispute relates to a residential tenancy within the meaning of the Residential Tenancies Act 2010 (“RT Act”).

4. The Tribunal is a statutory body, established on 1 January 2014 by the Civil and Administrative Tribunal Act 2013 (NSW) section 7(2)(a) (‘NCAT Act’).

5. Under Schedule 4 section 3 of the NCAT Act, the Tribunal’s Consumer and Commercial Division has jurisdiction in relation to matters arising under the Residential Tenancies Act 2010 (“RT Act”).

EVIDENCE

6. The parties entered into a residential tenancy agreement (“RTA”) which commenced on or about 11 September 2021 and ending on or about 9 September 2022 to lease the premises situated at 122 Narara Valley Drive Narara NSW (“the premises”) for $550 per week.

7. The tenants vacated the premises before the expiration of the fixed term on or about 11 April 2022.

8. Both parties substantially complied with the Tribunal’s orders in relation to the filing of their documentary evidence.

9. The parties gave oral evidence at the hearing and the parties were given the opportunity to cross examine each other. Ms Smith gave affirmed oral evidence on behalf of the applicant tenants and Ms Orlando gave affirmed oral evidence on behalf of the respondent landlords.

10. The Tribunal reserved its decision and invited the parties to provide written submissions. Both parties have provided their written submissions to the Tribunal.

11. The Tribunal has read and considered all of the documentary evidence of the parties, including the parties’ written submissions.

THE LAW

12. Section 187(1)(d) of the RT Act says that the Tribunal may make an order for compensation. However, in order to do so, in the circumstances of this case, the tenants must establish on the balance of probabilities and with evidence, that the landlords breached a term of the RTA causing them damage and loss for which they are entitled to be compensated. That is, the tenants must first establish a breach of an obligation by the landlords, and once that is proved, to then prove the damage and loss that is a consequence of the breach.

13. Section 190 of the RT Act gives the Tribunal jurisdiction to determine disputes involving an alleged breach of a RTA by a tenant or landlord. Such claims may be made to the Tribunal during or after the end of an RTA and whether or not a termination notice has been given or a termination order made. However, such a claim must be made within the required time period, which is 3 months from the date the party asserting the breach becomes aware of it (unless time is extended pursuant to section 41 of the NCAT Act) (Regulation 22(9) of the Residential Tenancies Regulation 2010), and the claim is limited by the prescribed amount of the Tribunal’s monetary jurisdiction. There is no issue in relation to these limitations in the current matter.

14. In order for the Tribunal to award compensation for damage and loss based on breach of a contract, such as an RTA, the applicant must prove that the loss claimed results from the usual course of events, or arises naturally from, such a breach, or that it was in the reasonable contemplation of the parties at the time the contract was made that such a loss would be incurred if the contract was breached in the manner alleged (in other words, the loss must have been foreseeable) see: Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341.

15. In this matter the tenants must prove that the landlord breached section 52(1) of the RT Act, which is incorporated into clause 19.1 of the RTA between the parties. Section 52(1) is made a term of every RTA by operation of section 52(3) of the RT Act. It says:

52 Landlord’s general obligation for residential premises

(1) A landlord must provide the residential premises in a reasonable state of cleanliness and fit for habitation by the tenant.

16. The Tribunal has developed two ‘tests’ for the habitability of residential premises. These tests are the “risk of injury test” and the “reasonable comfort.”

17. Section 63 of the RT Act sets out further general obligations on landlords in relation to residential premises. Section 63 is also a term of every RTA by virtue of section 63(3) of the RT Act. It relevantly states:

63 Landlord’s general obligation

(1) A landlord must provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises.

…

18. Section 63 of the RT Act is relevant in this case because the landlords contend that they did not breach the RTA; that they acted appropriately to fulfil their obligations to maintain the premises in a reasonable state of repair upon being notified of the mould growth. If there was no breach of the RTA, any claim for compensation based upon such an alleged breach must fail. This will require the Tribunal to consider the interaction and distinctions to be drawn between sections 52 and 63 of the RT Act.

CONSIDERATION

19. The obligation of the landlord in this matter is to “provide” the residential premises to the tenants “in a reasonable state of cleanliness and fit for habitation” (section 52(1) of the RT Act) and in a “reasonable state of repair” (section 63(1) of the RT Act). That is, these obligations must be fulfilled at the time the landlords gave possession of the residential premises to the tenants. The obligation is expressed in absolute terms; in other words, the landlords “must” fulfil these obligations. A failure to do so will constitute a breach of the RT Act.

20. The first question for the Tribunal to determine then is whether the premises were reasonably clean and in a reasonable state of repair, such that they were fit for habitation, when possession of them passed from the landlords to the tenants. As noted above, the question of whether residential premises are “habitable” turns on whether the premises “might be used and dwelt in not only with safety but also with reasonable comfort” by the tenants, see Proudfoot v Hart (1890) 25 QBD 420, judged by contemporary standards see: Menashi v Ly [1997] NSWRT 162.

21. In the matter of De Soleil v Palmhide P/L [2010] NSWCTTT 464 the Tribunal said that it is a serious matter for it to find that residential premises are uninhabitable and such a conclusion “should not be drawn lightly”.

22. In the current matter there is no evidence to suggest that at the time possession was given to the tenants that the premises were in such a state that they could be considered to be “uninhabitable”. The ingoing inspection report which was completed by the managing agent on 11 September 2021 and by the tenants on 12 September 2021 does not record any issue with mould. In fact, it states “Are there any signs of mould and dampness – N”. Further the report notes under “minimum standards” that the premises has “Adequate ventilation - Y”.

23. Therefore, the Tribunal is unable to find that there has been a breach by the landlords, based on the evidence, of their obligations under s 52(1) of the RT Act.

24. The tenants also claim to have suffered loss as a result of the landlords’ failure to keep the premises in a reasonable state of repair due to the mould issue. Section 63(1) of the RT Act says that a landlord must provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises. This provision is an implied term of every tenancy agreement pursuant to s 63(4) of the RT Act.

25. The obligation of the landlord to repair arises after the landlord has been put on notice of the need to repair. Once notice is received by the landlord a breach of s 63 will only occur where the landlord fails to carry out any necessary repairs within a reasonable time.

26. Section 63 of the Residential Tenancies Act 2010, states:

Landlord’s general obligation

i. A landlord must provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises.

ii. A landlord’s obligation to provide and maintain the residential premises in a reasonable state of repair applies even though the tenant had notice of the state of disrepair before entering into occupation of the residential premises.

iii. A landlord is not in breach of the obligation to provide and maintain the residential premises in a reasonable state of repair if the state of disrepair is caused by the tenant’s breach of this Part.

iv. This section is a term of every residential tenancy agreement.

27. As noted in Residential Tenancies Law and Practice New South Wales, 6th Edition by Allan Anforth, Peter Christenson and Sophie Bentwood (“Anforth”) at [2.63.4] “The landlord has actual or imputed notice of all defects which exist at the commencement of the lease and are detectable by reasonable non-technical inspection”.

28. Further “The landlord can acquire notice either through the tenant providing it or from any other means, including for example from the landlord’s own periodic inspections. If the landlord acquires notice of the defects other than via the tenant, the duty of repair arises whether or not the tenant requests the repairs (Weeks v Bond [1997] QCA 349) and irrespective of whether the tenant is even aware of the defect”.

29. It did not appear to be in dispute that there was mould in the premises. What appeared to be in dispute between the parties was the geneses of the mould and whether there had in fact been a failure by the landlord to attend to the mould issue.

30. It was the tenants’ position that the mould had been caused by structural issues in the property. Further, the mould issues had been exacerbated by the inaction of the landlord. The tenants contended that the landlords had failed to take reasonable steps to deal with the mould issue.

31. It was the landlords’ position that the mould had been caused by “dew point” as a result of the tenants’ use of the property, including a failure to adequately ventilate the premises and additionally due to the prevailing poor weather conditions. There were no structural issues causing the mould and there was also no water intrusion within the premises. Further the landlords stated that they had spent in excess of $36,000 in repairs to the premises.

32. The only expert report about mould in the premises is the report of Mould Cleaning Australia dated 31 January 2022. That report states as follows:

“MAIN CAUSE

Dew Point

Dew point is the temperature given to a parcel of humid air which is cooled causing water vapour to condense into water, creating ideal conditions for mould growth.

This is very common at times when the outside air is cooler than the inside air. This will result in condensation and subsequently an excess of moisture inside the premises. Dew point is most noticeable as condensation noticed on windows and walls but can also be present on furnishing and appliances.”

33. Further that report goes on to note under “Observations” “Bathroom exhaust fan inadequately sized”.

34. The report notes “Recommendations for your property dehumidifier”. A further recommendation is micro cleaning and fogging treatment of the premises to remove visible mould.

35. The tenants have not provided any expert evidence in the form of a report from a builder or other suitably qualified expert to support their assertion that the cause of the mould was due to structural issues in the property. They appeared to be reliant upon bare assertion in this regard.

36. Further, the mould report that the tenants appear to be reliant upon does not relate to the address of the premises, but rather another premises which is unrelated to the current premises. The Tribunal therefore gives this report no weight as it appears to be irrelevant to the current matter.

37. The Tribunal needs to consider what has caused the mould in the premises, that is whether there is some issue which is inherent in the premises or whether it is through the tenants’ use of the premises.

38. The Mould Cleaning Australia report does note that the bathroom exhaust fan is inadequately sized in order to ventilate the space effectively. This may be a cause of excess moisture in the premises. There was no suggestion in the Mould Cleaning Australia report that the tenants were engaged in unusual activities which might have caused excessive condensation, or moisture in the premises. The landlord suggested that the tenants were inadequately ventilating the premises based on one of the landlords driving past the premises and observing windows to be shut. The Tribunal does not accept this assertion as it is at odds with the evidence of the tenants who said that they constantly ventilated the premises and left windows open during the day in an attempt to ventilate the premises.

39. The Mould Australia report does not provide any opinion as to what has caused “dew point” in the premises. In the absence of any conclusive evidence that the actions of the tenants have caused the issues the Tribunal concludes that the issues are inherent within the premises.

40. The Tribunal finds that the nature and structure of the premises created condensation and dampness and caused mould to grow inside the premises.

41. The Tribunal finds that the residential premises were affected by mould during the tenancy and at the end of the tenancy.

42. The landlords agreed to provide the tenants with residential premises that were free from mould and dampness. The tenants did not get what they bargained for, or what they paid for, in this regard.

43. The Tribunal finds that the mould was not caused or exacerbated by any action of the tenants.

44. Having made this finding, the Tribunal then needs to consider whether the landlord has taken reasonable steps to address the mould issue and therefore comply with the requirements of s 63 of the RT Act.

45. In this regard the evidence reveals that the tenants first reported a mould issue to the landlord and the landlord’s agent at a routine inspection on or about 29 November 2021. As a result of this inspection the landlord organised to replace an existing ceiling fan in one of the bedrooms and to install ceiling fans in the second and third bedrooms. There were previously no fans in these bedrooms and the fans were installed with a view to improving ventilation and therefore assisting with the mould issues. The fans were installed on or about 14 January 2022.

46. On or about 21 December 2021 the tenants advised the landlords’ agent by email about mould appearing on multiple items of furniture and mildew on clothing items. Further the tenants advised that the conditions in the property were becoming worse. It had been a number of weeks since the electrician had come out to the property to quote for the ceiling fans and they had not yet been installed at the premises.

47. On or about 13 January 2022 the tenants emailed the landlords’ agent to report further mould damage to belongings and sent a list with photos. The ceiling fans were installed the following day.

48. On or about 17 January 2022 the tenants sent a further email to the landlords’ agent about more mould growth including a list of items and further photos.

49. The managing agent organised for a professional mould inspection and report to be undertaken. This was done on or about 31 January 2022 by Mould Cleaning Australia.

50. The conclusions of this report were that the mould had been caused by “dew point”. The report also observed that there was an inadequate exhaust fan in the bathroom. There were two recommendations made in the report in relation to the mould issue. Firstly, that a dehumidifier be run in the property and secondly micro cleaning and fogging treatment of the premises to remove visible mould.

51. It appears that the landlords did not adopt any of the recommendations of the report of Mould Cleaning Australia. The exhaust fan was not replaced, the tenants were advised to run the air conditioner on a “dehumidify” setting and no micro cleaning or fogging treatment of the premises was undertaken to remove visible mould.

52. Further, the first report to the agent and the landlord of the mould in the premises was made on or about 29 November 2021. The tenants continued to make the landlords’ agent aware of the worsening situation with the mould in December 2021 and January 2022. A mould specialist did not attend the premises until 31 January 2022 over two months after the mould issue had been first reported.

53. The landlords did install fans in the premises to try and increase ventilation in the bedrooms to assist in resolving the mould issue, however this was not sufficient to fully resolve the issue. Further, the fans were installed in mid- January 2022, over 6 weeks after the mould was reported by the tenants.

54. The mould issue was clearly brought to the Landlords’ attention in November 2021. From this point in time the landlords had a duty to ensure the property was in a reasonable state of repair. The Tribunal has previously determined that the landlord has a strict obligation to ensure that repairs are carried out see: Dupont v Lawrence RTT 97/022753.

55. The landlords responded to the tenants’ complaint by installing celling fans. However, it is not sufficient for the landlords to make efforts which are ultimately ineffective in remedying a defect. It would appear that the landlords’ attempt to rectify the transmission of damp and the growth of mould was not effective, based on the tenants’ evidence and the Mould Cleaning Australia report.

56. The landlords did not address the problem of damp/mould appropriately and accordingly have breached the obligation to keep the premises in a reasonable state of repair, having regard to the age of, rent payable and prospective life of the premises. Based on all of the evidence the Tribunal finds that there has been a breach of the obligations of the landlords under s 63. This is because although the landlords took some steps to rectify the mould issue, these steps were not ultimately successful in the full resolution of the issue. The landlords also failed to implement the recommendations of the Mould Australia report including installing a more appropriate exhaust fan, provision of a dehumidifier and micro cleaning and fogging treatment of the premises to remove visible mould.

33. Having carefully considered all of the evidence and the submissions, the Tribunal finds that the landlords failed to keep the premises in reasonable repair, having regard to the age of the premises, the prospective life of the premises and the amount of rent paid for the premises.

34. In particular, the delay in repairing the premises from November 2021 to April 2022 when the tenants’ vacated was unreasonable and unacceptable and a breach of the landlords’ obligation to keep the premises in reasonable repair

35. Having found that the landlords have breached their obligations under s 63 the Tribunal then needs to consider what a fair and reasonable amount of compensation is for the landlord’s breach.

36. The tenants sought an amount of $15,000 by way of compensation for the landlords’ breach. Initially, the tenants sought an amount of $32,893.00 in economic loss for damage to goods and a rent reduction of $2750 (50% of the weekly rent from 1 February 2022 to 11 April 2022). However, the tenants accepted the limit of the Tribunal’s jurisdiction of $15,000.00.

37. Section 187 of the RT Act provides that the Tribunal may, on application by a landlord or a tenant, make an order for compensation to be paid for any breach of a residential tenancy agreement.

38. The Tribunal finds that, because of the landlords’ breach of the residential tenancy agreement, namely, failing to keep the premises in reasonable repair, the tenants suffered loss and damage.

39. The Tribunal is satisfied that the tenants mitigated their losses, particularly by attempting to clean and ventilate the premises.

40. The Tribunal finds that the tenants are entitled to compensation for breaches of the residential tenancy agreement by the landlord, namely failing to keep the residential premises in a condition that was free from mould and dampness; and failing to keep the premises in reasonable repair due to not adopting the recommendations of the Mould Cleaning Australia Report.

41. The tenants also sought an order for a rent reduction because the residential premises were uninhabitable during their tenancy. Section 43 provides that the rent payable under a residential tenancy agreement abates if the residential premises are destroyed, or become wholly or partly uninhabitable, otherwise than as a result of a breach of an agreement.

42. The Tribunal finds that the conditions that gave rise to the inhabitability of part of the premises were due to breaches of the residential tenancy agreement by the landlords and therefore Section 43 and 45 does not apply.

43. The Tribunal finds that it is appropriate to deal with the application in accordance with Section 187(1)(d), rather than under Sections 43 and 45.

44. The tenants have the onus of proving that the amount they claim represents the losses suffered by them.

45. The tenants have produced some receipts to prove the date of purchase and the actual cost of some items. They have also produced some evidence in the form of photographs (not all fully dated) of items damaged by mould.

46. The tenants have said that they threw out some items and provided a list of the items that were discarded.

47. The Tribunal does not accept that the tenants should be entitled to the current value of items, given some are seven years old. A depreciated cost is the appropriate assessment of loss. Doing the best the Tribunal can on the available evidence, it is estimated that the value of the damaged items is around $5000 once depreciation is applied to the various items.

48. The Tribunal also considers that the tenants are entitled to an amount of compensation representing non-economic loss for the loss of enjoyment of the premises and their distress caused by the mould issues.

49. This loss is recoverable as the RTA is contract for enjoyment pleasure and relaxation and therefore falls under the exception to the general rule that damages for distress and disappointment are not recoverable see: Baltic Shipping Co v Dillon [1993] HCA 4.

50. The Tribunal also accepts that distress, disappointment, and anxiety do not constitute a personal injury for the purposes of the Civil Liability Act 2002 (NSW) (CLA) and s 16 of the CLA does not apply see: Moore v Scenic Tours Pty Ltd [2002] HCA 17.

51. In the matter of Hartland and Panuccio v Bergmark (2010) an amount of $1500 was awarded for non-economic loss for water leaks into the property causing mould to develop over a period of six months. Similarly in the present matter the Tribunal considers that an amount of $1500 should be awarded for non-economic loss.

52. Therefore, the Tribunal will order that the respondents are to pay the applicants the sum of $6500 within 28 days of the date of these orders.

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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

Amendments

27 September 2023 - Formatting amendments.

Decision last updated: 27 September 2023