Verma v Chilukuri & Ors (Residential Tenancies)

[2017] ACAT 12

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

VERMA v CHILUKURI & ORS (Residential Tenancies) [2017] ACAT 12

RT 917/2015

Catchwords:RESIDENTIAL TENANCIES – group house – change in composition of joint tenants – assignment of a lease – whether the tenancy agreement was repudiated – breach of the residential tenancy agreement – compensation

Legislation cited:      ACT Civil and Administrative Tribunal Act 2008 s 26

Residential Tenancies Act 1997 ss 6, 15, 36, 38 standard terms 3, 42, 46, 48, 72

Cases cited:               Baird v Campbell & Ors [2005] ACTRTT 8
  Conteh v Fan [2011] ACAT 45

Jayawardena v Yue [2009] ACAT 5
Williams v Onerwal Local Aboriginal Lands Council [1997] NSWRT 137

List of

Texts/Papers cited:   Anforth and Christensen, Residential Tenancies Law and Practice in NSW (Federation Press, 4th ed)

Tribunal:                   Senior Member H Robinson

Date of Orders:   22 February 2017

Date of Reasons for Decision:         22 February 2017

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          RT 917/2015

BETWEEN:

MANJARI VERMA

JITENDRA VERMA

Applicant/Lessors

AND:

ROHIT CHILUKURI AND DHULIPALLA VENKATA SWAMULU AND RAGHUPATHI SANDEVENI AND RAJAVARDHAN REDDY YASA AND ALI HUSSEIN ABOU DAOUD

Respondent/Tenants

TRIBUNAL:   Senior Member H Robinson

DATE:  22 February 2017      

ORDER

The Tribunal orders that:

1.The tenants, Rohit Chilukuri, Dhulipalla Venkata Swamulu, Raghupathi Sandeveni, Rajavardhan Reddy Yasa and Ali Hussein Abou Daoud are to pay the Lessors the sum of $771.45 being of $1371.45 for unpaid rent, less the $600 paid as a ‘bond’.

2.Ali Hussein Abou Daoud is to pay the Lessors a further sum of $3235.71:

(a)     $2885.71for unpaid rent.

(b)     $350 for breach of the residential tenancy agreement.

………………………………..

Senior Member H Robinson

REASONS FOR DECISION

1.       This is a residency tenancy dispute arising from the breakdown of a ‘group house’ and multiple tenancy arrangement. Although the circumstances surrounding the establishment of the tenancy were unorthodox, the deterioration in the relationships is all too common. The case is illustrative of the difficulties that arise when appropriate procedures are not followed and where parties enter in legal arrangements without appropriate research or advice.

The Proceedings

2.       The applicants, Mr and Mrs Verma (Lessors), are the lessors of a property in Evatt in the Australian Capital Territory (the property). The respondents were all tenants of that property for varying periods of time.

3.       These proceedings were commenced as an application for a termination and possession order (TPO) and compensation brought by the Lessors against one of the tenants, Mr Daoud. When the matter first came before the Tribunal on 29 and 30 October 2015, the application for a TPO was dismissed, on the basis that there was no valid termination notice, and hence no jurisdiction for the Tribunal to make the orders sought. During the course of that proceeding, the Tribunal raised concerns about the status of the tenancy, and directed that the other persons who had been parties to the residential tenancy agreement be joined.  Mr Daoud eventually moved out of the premises on 28 February 2016. The application for the payment of arrears of rent, utilities and compensation for a breach of the residential tenancy agreement proceeded and it is those issues that are addressed in this decision.

Facts

4.       Despite several days of hearing, some documentation and the testimony of Mr Verma, Mr Daoud and two other tenants, Mr Rohit Chilukuri and Mr Dhulipalla Swamulu, the facts of this matter remain somewhat opaque. Still, on the basis of the evidence before me, both contested and uncontested, I am satisfied that the following facts are made out on the balance of probabilities.

5.       The property was used by the Lessors as both an investment property to generate an income stream, and as an occasional residence for Mr Verma.  Mr Verma lives interstate, but occasionally commuted to Canberra, and used the rear room of the property as a temporary residence when he did. The other rooms of the property were leased out, usually to students or others who wanted affordable temporary accommodation.

6.       In December 2014, Mr Verma came into contact with a number of international students who were seeking a place to live in Australia.  While I do not know the details of the arrangement, it is apparent that Mr Chilukuri played a facilitator role in introducing the parties, and acted as a liaison between the students and the Lessors. In December 2014, Mr Chilukuri introduced Mr Swamulu to Mr Verma. Mr Swamulu agreed to rent a room within the property and paid for two weeks in advance.

7.       Shortly thereafter, Mr Chilukuri suggested to Mr Verma that a group of five international students commence a tenancy – the members were Mr Chilukuri, Mr Swamulu, Mr Ragapathi Sandeveni, Mr Kilian Gunganeni and Mr Rajahvardhan Yasa (Original Tenancy Group). Mr Verma agreed to that arrangement, and the parties signed a residential tenancy agreement using the standard form[1] on 5 January 2016 (Original RT Agreement). Two other individuals also lived briefly in the property but were not on the lease and are not parties to these proceedings.

[1] Available from the ACT Law Society or the ACT Tenants Union website

8.       I do not know how long Mr Verma had been a lessor, but on his evidence this was the first time he had dealt with such a big group, or such a lengthy arrangement. He knew he needed a greater degree of formality than usual, and his evidence as to what he did to put formal arrangements in place was as follows:

Before I used to sign one or two person, which was shared accommodation kind of, because there were four people looking after a whole area, and that’s where I understood there was a risk that if I do not sign a proper document, so I just took the tenancy agreement which I downloaded from the internet without knowing too much detail and I sign it. Now, my intention at that time also was like a shared, because the rear of the house, the rear of the house which is a one room, and having a TV room which connecting rear and the front, so that’s where I was keeping the room for myself as a share accommodation.[2]

[2] Transcript of proceedings 22 February 2016 page 15, lines 3-10

9.       On the basis of the above, and other evidence given by Mr Verma, it appears that he had initially intended to establish occupancy, or ‘boarding house’ style arrangement with the tenants, not a residential tenancy. This is what he had done in the past - students would stay for short periods of time, then move into other accommodation. He was agreeable to Mr Chilukuri’s proposal, but wanted some certainty. He did not seek legal advice, he did not engage an agent, and he was unaware of the Renting Book produced by Access Canberra. He also wanted to minimise costs.  So what he did was print an standard form residential tenancy agreement off the internet, and proposed that the parties sign it. The members of the Original Group Tenancy agreed to this proposal. No one seems to have given the legal consequences of the agreement or its full terms any real thought. However, notwithstanding the intentions of the parties, the Tribunal determined at a hearing on 30 October 2015 that this arrangement constituted a residential tenancy agreement and not an occupancy. I agree with that finding, and the hearing proceeded on that basis.

10.     The terms of the Original RT Agreement provide for a fixed term lease from 6 January 2015 to 5 January 2016. The tenancy was stated to be over the “front part of house (except rear room).” No plan was attached to the agreement, but the parties agreed that the original tenancy included the four rooms “at the front of the house,” and included shared access to the kitchen, the TV room and a bathroom. Mr Verma retained the use of a rear room, which I understood to be the room off the television room.

11.     Although the arrangement implemented by Mr Verma is not the typical arrangement, it is not inconsistent with the Residential Tenancies Act 1997 (the RT Act). Indeed, section 6A of the RT Act seems to contemplate such arrangements, as it provides that residential tenancy agreements may be exclusive or not exclusive, and may include the right to use other facilities. Additionally, the Dictionary to the RT Act defines ‘premises’ to include a ‘part of a premises’ only. Arrangements of this kind may give rise to complex factual disputes when house rules are breached, the tenancy breaks down or where the property is damaged. It may be difficult, for example, to determine which tenants, if any, are liable for damage to common area, and disputes about access to or use of common areas may compromise a tenant’s right to quite enjoyment. However, these issues go to the practicality of such arrangements rather than the legality.

12.     Another term of the original RT Agreement was that electricity would be paid by the Tenants, and internet and water by the Lessors. I note here that, as there was no separate meter for the front four rooms of the house, this term of the RT Agreement was contrary to clause 42(c) of the Standard Residential Tenancy Terms[3], which provide that the lessor is liable to pay for services for which there is not a separate metering device so that amounts consumed during the period of the tenancy cannot be accurately decided. The consequences of this are considered below, but briefly stated, the tribunal cannot order that the Tenants pay the electricity costs.

[3] Found in Schedule 1 of the RT Act and incorporated into the RT Agreement by operation of section 8 of the Residential Tenancies Act 1997

13. The Original RT Agreement provided for the payment of a bond of $2160. Only $600 of the agreed amount was paid. Mr Verma contended that Mr Chilukuri took the lead negotiator role, and agreed to collect the bond from the other tenants, but either did not do so, or failed to hand over the monies that he did collect. Mr Chilukuri disputed this and denied taking bond money from the other tenants. There is some conflicting evidence from the tenants and Mr Chilukuri about what was paid and when. I am unable to make any findings of this issue, and likely do not need to in any case. I accept that only $600 of the bond was paid, and that Mr Verma permitted the parties to move into the premises anyway. I also note that it appears that the partial bond was not lodged with the Office of Rental Bonds, which appears to be a breach of section 23 of the RT Act, although at this stage Mr Verma was of the view the agreement was an occupancy agreement and not a tenancy and that he was not required to lodge it.

14.     I have not seen a copy of the Original RT Agreement as signed. The only copy of the RT Agreement that was before the tribunal was marked up with subsequent purported amendments, and consisted only of pages 1, 2 and 12 (of 12). On the last page, the names ‘Kilian Gunganeni’ and ‘Rajahvardhan Yasa’ had been crossed out, and Mr Ali Daoud’s name was added as tenant number 4. Next to Mr Yasa’s crossed out name were the words “(stayed back)”.  After the words “the water and internet will be paid by the owner” are the additional words, written in pen, “up to $500. Any excess paid by tenants.” The amendments were undated, although it was common ground that they occurred in March 2015, and most were made by Mr Verma. The deletions were signed by Mr Verma, and the additional of Mr Daoud’s name was signed by Mr Daoud, but no amendment was signed by any other party.

15.     The above-mentioned purported amendments to the RT Agreement resulted from a series of incidents in March 2015, the culmination of which appears was the breakdown of the tenancy. As best as I can determine, these incidents were as follows.

16.     First, on or about 15 March 2015, Mr Chilukuri rang Mr Verma and said that he was moving another friend, Mr Cosmas Nsirim, into the ‘back room’. Mr Verma’s evidence was that he resisted this request, as he wished to use the back room, but he eventually agreed to allow Mr Nsirim to stay for a six week period. Mr Verma described this arrangement as a “shared tenancy agreement”. While I am unclear as to what this means, I do not need to make any determinations, as it does not seem to be in contention that Mr Nsirim paid his rent for the period he was in the house, albeit late at times, and then, relatively amicably, vacated the premises. There were some passing suggestions that Mr Nsirim was involved in the business operated by Mr Daoud, but this was not seriously pressed. There does not appear to have been any flow-on effect for the Original Group Tenancy in terms of a reduction in rent or change in the conditions.

17.     Next, sometime in mid to late March 2015, Mr Verma and Mr Chilukuri had another discussion where it was agreed that Mr Verma would re-let one of the smaller rooms (the small room) that had been subject to the Original Group Tenancy, and would in return reduce the rent paid by the group by $60 a week, from $540 to $480. A new tenant, Mr Chan Hoong Wong moved into the small room on 3 April. There was no written documentation relating to this amendment before the Tribunal, and no amendments were made to the Original RT Agreement. However, the parties all appear to have consented to the change, and everyone was in agreement that there was a new, separate agreement between Mr Verma and Mr Wong. Presumably, this left the members of the Original Group Tenancy sharing three of the four front rooms.

18.     Later in March 2015, Mr Chilukuri again rang Mr Verma and advised that another person, an acquaintance, Mr Ali Daoud, would be moving into the room with the ensuite. Mr Verma’s evidence was that he opposed this, but that Mr Chilukuri was insistent. Mr Chilukuri said that he has always foreshadowed that he would be finding another tenant even before entering into the tenancy agreement, and that Mr Verma said this would be fine prior to the parties agreeing to the lease. Whatever is the case, it is evident that Mr Verma eventually (if reluctantly) acquiesced to the request, asking only that Mr Chilukuri “put something in writing” about Mr Daoud’s tenure. What that ‘writing’ had to be was not specified.

19.     For his part, Mr Verma contended that Mr Daoud was to deal with him through Mr Chilukuri. He appears to have contemplated, perhaps, a subtenancy arrangement. However, Mr Verma later acquiesced to Mr Daoud becoming a tenant, allowing the addition of his name to the RT Agreement.

20.     For his part, Mr Chilukuri initially said that all he did was introduce Mr Daoud to Mr Verma and that there was to be a separate agreement between them.  However, later in proceedings he was adamant that Mr Daoud was “on the bond”. This also reflected his position taken in email correspondence with Mr Verma after the breakdown of the tenancy. From this, I conclude that Mr Chilukuri had agreed that Mr Daoud would be joining the Original Group Tenancy. Mr Swamulu also appeared to be of the view, so far as he had any view, that Mr Daoud was a co-tenant. I do not know what the position of the other members of the Original Group Tenancy.

21.     Mr Daoud himself had given little thought to the legal arrangements. He said that he knew “the guys in the house”, but not Mr Verma. He had agreed with Mr Chilukuri to pay $150 a week. He then just moved in as “as a new tenant” and signed the residential tenancy agreement put to him by Mr Verma. He did not read it and did not “care much about that thing.” In his view, he was obliged to pay his weekly rent “and that’s it.”[4]

[4] Transcript of Proceedings 22 February 2016 page 51, lines, 25-29

22.     On balance, having regard to the above, I satisfied that it was the intention of all the parties to the Original RT Agreement that in late March, Mr Daoud would be added as as a co-tenant to the existing residential tenancy agreement. The legal consequences of this are considered below.

23.     Finally, in mid to late March or early April 2015, one of the Original Group Tenancy members, Mr Gunganeni, moved out of the property and was removed from the lease. It appears to have been an amendment to the lease made by mutual consent of all other parties. There was no check out, no final inspection, and the amendments to the lease were not signed by all the parties to it, but no party suggested that Mr Gungaeni had not been removed as a party to the lease.  Mr Gungaeni was not a party to these proceedings. 

24.     Can the parties to a group tenancy be altered in the manner set out above?

25.     The relationship between co-tenants was considered by Senior Member Anforth in Baird v Campbell & Ors [2005] ACTRTT 8 (Baird). The relevant part the Senior Member’s reasons were as follows:

The joint tenants are bound contractually to the landlord in the terms of the lease. In addition, there exists a second contract between the joint tenants themselves regulating their internal rights arising from the lease. This second lease may be the subject of explicit agreement between the joint tenants but is otherwise implied by the common law (Hammersmith and Fulham London Borough Council –v- Monk [1991] UKHL 6; [1992] 1 AER 1; ACT Housing –v-Midgley [2001] ACTRTT 7; Residential Tenancies Law and Practice in NSW [2.57.3]). It is a term of the contract between joint tenants implied by law that the consent of all joint tenants is required to end a lease in the fixed term, but that any one joint tenant can terminate the lease on behalf of all joint tenants at the end of a fixed term or during a period lease. In short, the contract between joint tenants is to the effect that they are bound together for the fixed term, but that none gives any commitment to remain so bound after the expiration of the fixed term.

Because the identity of the tenants is a fundamental term of a lease, a change in the composition of joint tenants to a lease has implications for the ongoing existence of the lease. A change in the composition of joint tenants may occur in one of the following manners:

(a)     where the lessor and each of the existing and prospective tenants agree to an assignment of the lease from the existing composition of joint tenants to the proposed composition of joint tenants (an assignment). An assignment involves the new tenants taking over the existing lease on its terms, in the place of the previous tenants. An assignment does not involve a new lease being granted to the incoming tenants, and is therefore not relevant to the issue of the granting of a new fixed term lease.

(b)     in theory the existing composition of joint tenants could sub-let to the proposed composition of joint tenants, although this raises the serious issue on the part of those joint tenants who are common to both groups, of their right to contract with themselves. When this occurs the sub-tenancy is said to merge with the head tenancy and the sub-tenancy becoming the one tenancy pursuant to section 36(g). This option is probably not available at law.

(c)      where the lessor and all of the tenants agree to terminate the fixed term lease (a surrender at common law) whether they then enter a new lease or not.

26.     The Standard Terms place some limits on assignments, but these limits are consistent with the reasoning of the Tribunal in Baird. Clause 72 of the Standard Terms provides that a tenant must not assign a premises, or any part of them, without the written consent of the lessor. Section 128(1) provides that an assignment that does not comply with those Standard Terms is unenforceable and the assignee resides in the premises as a licensee. However, as long as these conditions are met, and the parties all agree it, the assignment of a fixed term tenancy from one group of tenants to another is consistent with the RT Act.

27.     Having regard to the above, it appears that members of the Original Group Tenancy were entitled to assign the interest to a new group tenancy that excluded Mr Gunganeni. This required the consent of the all the parties to the agreement, but the evidence before the tribunal is that all the parties agreed to this. Once this was agreed, the lease was amended to reflect the assignment by way of crossing Mr Gunganeni’s name from the residential tenancy agreement. Only Mr Verma signed this amendment, but I am satisfied that Mr Verma’s signature amounts to written consent of the lessor for the purposes of clause 72 of the Standard Residential Tenancy Terms.  There is no requirement for the express written consent of the tenants. Unfortunately, I can make no findings as to the actual date the assignment occurred.

28.     The situation with Mr Daoud is more complicated.

29.     As noted above, Mr Verma argued that the arrangement whereby Mr Daoud lived in the ensuite room was a sublease arrangement between the Original Group Tenancy (represented by Mr Chilukuri) and Mr Daoud, made without his consent. I accept that this may have been the case initially, but it is apparent that in late March Mr Verma gave reluctant agreement to a more formal arrangement, and Mr Daoud was invited to sign as a co-tenant – an invitation that he accepted and that the remaining members of the Original Group Tenancy agreed to (albeit perhaps without understanding the consequences).

30.     At this stage, consistent with the reasoning in Baird above, one of two things could have happened. The previous RT agreement should have come to an end, through the written agreement of all the parties, and a new RT Agreement entered into. Alternatively, the parties could have all agreed that the remaining members of the Original Group Tenancy assigned the tenancy to a new group that included Mr Daoud.

31.     In fact, none of the parties contemplated the legal characterisation of the new agreement, so trying to impose a legal framework on the arrangement has a degree of unreality about it. Still, on balance, I am satisfied that ‘assignment approach’ is the most consistent with the facts as relayed to me by the various witnesses. The parties clearly assumed they were continuing an existing relationship, of which Mr Daoud was now a part (and Mr Gunganeni no longer a part), and not commencing a new one.  Mr Verma gave his written consent to the assignment by way of the amendment to the RT Agreement.  Consequently, I find that the interest was transferred from the remaining members of the Original Group Tenancy to a new group tenancy with Mr Chilukuri, Mr Swamulu, Mr Sandeveni, Mr Yasa and Mr Doaud (New Group Tenancy).

The New Group Tenancy

32.     

The New Group Tenancy did not get off to a good start. Sometime around

22 March 2015 there was a disagreement between Mr Daoud and some of the other tenants over dietary issues. Mr Chilukuri asked that Mr Daoud not use the common fridge, and Mr Verma, obligingly, bought him as separate fridge to use. At some stage, the police were called.

33.     Around this time, also, Mr Yasa indicated that he wanted to leave. Mr Verma deleted his name from the lease, apparently with the consent of the other tenants, but he “stayed back” anyway until July. Mr Yasa only briefly attended the proceedings, and left in the midst of them. I have not heard evidence from him, but on balance, having regard to the evidence of the other parties, I am satisfied that while a assignment of his interest in the tenancy was contemplated, it never actually took place, and he remained on the lease as a co-tenant in the New Group Tenancy.

34.     Over the subsequent weeks, the relationships between the parties became more strained and, for whatever reason, the majority of members of the New Group Tenancy wanted to cease the tenancy and leave the property.  Mr Daoud did not.

35.     In May 2015, Mr Verma received a large electricity bill of $1684 and a substantial water bill of $1023.00. He made investigations, including paying for a leakage test, but no problem was found. Mr Wong advised Mr Verma that other tenants in the property had installed an additional washer and a dryer. Mr Verma expressed some concern about this to some of the tenants, because of the effect on the electricity and water bills. It appears at this time that Mr Verma became suspicious that Mr Daoud, and perhaps Mr Nsirim, were operating a business in the premises, but he had no evidence.

36.     In June 2015, the problems in the house had further increased and the members of the New Group Tenancy, other than Mr Daoud, became determined to leave. As relationships deteriorated, the co-tenants started to fall behind on the rent. Some tenants paid a portion of the rent and others did not. Mr Daoud started paying his rent by giving it to Mr Wong. Mr Wong became increasingly annoyed with arrangement, and also with what he alleged were the increasingly unsanitary conditions in the common areas of the property. Mr Wong raised these issues with Mr Verma. All parties seemed to be of the view that continuing existing arrangements was not tenable.

37.     Following some conversations, Mr Verma agreed that the members of the New Group Tenancy could end the fixed term agreement on the basis that:

(a)      He received vacant possession of the rooms on the lease, including the ensuite bedroom Mr Daoud was living in;

(b)     the house was clean;

(c)      the keys were handed over to Mr Wong; and

(d)     payment for outstanding bills and rent.

38.     It was common ground that Mr Chilukuri, Mr Swamulu, Mr Sandeveni and Mr Yasa agreed to these terms and conditions and vacated the property on 5 July 2015. However, Mr Verma argued that the terms were not complied with. The carport remained a mess, $960 in rent was owed, and the electricity bills and excess water had not been paid. Most significantly, however, Mr Daoud refused to leave, so Mr Verma did not receive vacant possession of the ensuite bedroom. The tenants did not seriously dispute this assertion.

39.     Mr Daoud’s evidence to the Tribunal was that, when told by the other tenants that they intended to leave, he refused to do so:

...they said the contract is finished and we are moving, so you have to go with us. But I didn’t prepare like for that. Why I should move? Okay, the problem between you – what should I move from the house?

40.     Mr Daoud’s position was that, no matter what the other members of the New Group Tenancy decided to do, he was entitled to remain in the main bedroom and continue to pay $150 a week in rent.

41.     Mr Chilukuri’s position was that he and the other tenants were no longer liable for rent, as they had vacated the property, and the entire tenancy had effectively be assigned to Mr Daoud. In an email to Mr Verma on 7 August 2015, he wrote:

We are not gona pay any more as Ali in on bond too so that would be gud if you can collect the rent from him.

42.     At the hearing Mr Chilukuri’s maintained that he just wanted out of the agreement, and that he had a “right to give notice” and an obligation to pay the rent and bills up to that date, but no further.

43.     So what was the status of the group tenancy as at 6 July 2015?

44. First, the agreement was a fixed term agreement for the period of one year. The agreement had not expired. The members of the New Group Tenancy had a contract with the Lessors to remain in the premises for the period of the fixed term, subject to termination being effected in accordance with the RT Act, or the payment of damages to the Lessors for breach of contract. The co-tenants were jointly and severally liable to the Lessors for any such breach.

45.     Secondly, consistent with the comments of Senior Member Anforth in Baird, set out in paragraph 25 above, the members of the New Group Tenancy were contractually bound to each other to remain in the tenancy for the duration of the fixed term, and were liable to to compensate their co-tenants for any damages suffered a consequence of a breach of that obligation.

46. Thirdly, a fixed term tenancy does not come to an end simply because some members of the co-tenancy vacate the premises. The only circumstances under which a fixed term residential tenancy agreement may terminate or be terminated are set out in section 36 of the RT Act. This provides:

36Termination

Despite anything to the contrary in any territory law, a residential tenancy agreement must not terminate or be terminated other than in the following circumstances:

(a)if a fixed term agreement ends and the tenant vacates the premises on or after the end of the agreement;

(b)if a tenant notifies the lessor in the form approved under section 133 (Approved forms—Minister) for a termination notice, and vacates the premises in accordance with the notice;

(c)if the ACAT terminates an agreement under division 4.3 or division 4.4;

(d)if the ACAT makes a termination and possession order in relation to the premises that are the subject of the agreement under division 4.4 or division 4.5;

(e)if the tenant abandons the premises that are the subject of the agreement;

(f)if a person takes action in accordance with section 64;

(g)if the tenant and lessor agree in writing to terminate the agreement and the tenant vacates the premises in accordance with the agreement to terminate;

(h)if the tenant and the lessor are the same person;

(i)if—

(i)a party to the agreement repudiates the agreement; and

(ii)the other party accepts the repudiation; and

(iii)the tenant vacates the premises;

(k)for crisis accommodation—if the lessor—

(i)gives the tenant 4 weeks notice to terminate the agreement; and

(ii)has given the tenant information about alternative accommodation; and

(iii)needs the premises to use as crisis accommodation for someone other than the tenant;

(l)if a party to the agreement terminates the agreement under section 64AA because the premises are affected residential premises;

NoteAffected residential premises—see the dictionary.

(m)if a party to the agreement terminates the agreement under section 64AB because the premises are an eligible impacted property.

NoteEligible impacted property—see the Civil Law (Sale of Residential Property) Act 2003, s 9A (1).

47.     Subsections (a), (b), (c), (d), (f), (h), (k), (l) and (m) do not apply to the facts of this case.

48. Under section 36(d), a residential tenancy agreement may end of the tenant abandons the premises. ‘Abandonment’ is not defined in the RT Act, but it broadly means that the tenant has vacated the property without the consent of the lessor.[5] I am satisfied that Mr Chilukuri, Mr Swamulu, Mr Sandeveni, and Mr Yasa effectively abandoned the property when they vacated but did not comply with the agreed terms of their release, but as Mr Daoud remained in the premises, the requirement in this subsection that the tenants vacate the premises was not met.

[5] See Anforth and Christensen , Residential Tenancies Law and Practice in NSW (Federation Press, 4th ed) at [2.81.9]

49.     Under subsection 36(g), a tenancy may be terminated if the tenant and lessor agree in writing to terminate the agreement and the tenant vacates the premises in accordance with the agreement to terminate. There is a written (emailed) offer from Mr Verma to the tenants, but no written acceptance of it from all the tenants. Additionally, Mr Daoud remained in the property, so the requirements of the section were not met.

50. That leaves the question as to whether there has been a repudiation of the agreement for the purposes of section 36(i) of the RT Act.

51.     At common law a repudiation occurs where the tenant demonstrates by their words or actions that they have no intention of being bound by an essential term of the tenancy agreement. At common law, repudiation could occur if the tenant simply refused to pay rent and refused to move[6], but section 36(i) of the RT Act imposes the additional requirement that the tenant actually abandon the property[7].

[6] See Williams v Onerwal Local Aboriginal Lands Council [1997] NSWRT 137; although any failure to pay rent would be prolonged and extreme before it would amount to repudiation (as opposed to a ground to terminate under section 49 of the RT Act: See: Jayawardena v Yue [2009] ACAT 5 at [22]; Anforth and Christensen at [2.81.121]

[7] Although section 55 provides that the ACAT can make a termination and possession order where a tenant repudiates an agreement in writing but fails to vacate

52.     In this case, there was a clear incident of abandonment by Mr Chilukuri, Mr Swamulu, Mr Sandeveni, and Mr Yasa, but no vacation by Mr Daoud. Consequently, it was not open to Mr Verma, as at 6 July 2015, to accept the repudiation of the agreement. The RT Agreement remained on foot and the tenants remained jointly and severally liable for the tenancy[8].

[8] RT Act section 100

53.     But matters soon became more complicated. Within days, Mr Daoud and Mr Verma began to negotiate around a new agreement. Mr Daoud indicated that he did not wish to remain in the ‘premises’ the subject of the RT Agreement. He only wished only to remain in an individual room – the ensuite room – and pay the rent that he had agreed to pay for for that room. He only paid the rent for that room.

54.     Although the construction is somewhat artificial, one characterisation that can be put on Mr Daoud’s action is that he had repudiated the Original RT Agreement. He did not consider himself bound by the terms of that agreement, including the agreement to pay the agreed rent for the four front rooms. He did not consider himself a resident of any room other than the ensuite room. He had vacated the ‘premises’ as defined in the Original RT Agreement. He was inhabiting one room as a residence (in addition to the common areas).

55.     A lessor confronted with the repudiation of a contract has two options – the lessor can elect to maintain the lease on foot and sue for unpaid rent, or the lessor treat the lease as being at an end and sue for damages. Conduct that indicates an election to accept the repudiation and terminate the lease includes conduct that is inconsistent with the rights of the tenants who repudiated the contract.

56.     On or around 9 July 2015, Mr Verma and Mr Daoud had a conversation about Mr Daoud’s situation. The exact terms of the conversation are unclear, but Mr Verma sent a follow-up email that evening which states as follows:

As discussed:

1-   You have joined a new lease for en-suite room only, starting from 29 June 2015;

2-   You will be paying $160 per week + Electricity + Water bills

3-   You need to pay two weeks rent toward bond and it has to be paid by the end of July

4-   Current electricity bill has to be paid that I have attached. Your share to be paid for the current outstanding electricity bill is $240.

5-   As everyone has noticed your aggressive behaviour and involvement in physical fights. I would request you not to repeat it again. You agree that you will be responsible for any reporting of such incidents again.

6-   You are only responsible for your lease only; you are not required to deal or interfere with others. If it changes in future I will write a separate email for both of us to agree.

You have to pay your rent for current fortnight is $320 and has to be paid tomorrow.

You agree that your rent day falls on Monday. You are agreeing there will be no delay in your rent deposits.

I will prepare the new lease shortly and email you to sign, in the mean time just reply back to this email to confirm its details.

57.     Having regard to the conversation above, the facts of this matter, and the progress of this litigation, I am satisfied that, by at least 9 July, each of the tenants had repudiated the RT Agreement and Mr Verma had accepted that the tenancy was at an end and acted in a manner consistent with the termination of that agreement.

58.     This does not mean that the Lessors are without remedies against the remaining members of the New Group Tenancy. They were, jointly and severally, liable for the breach of the fixed term agreement. However, I am satisfied that, by operation of law, the RT Agreement ceased on 9 July 2015.

59. Section 62 of the RT Act deals with the damages that may be awarded when tenants abandon a lease during its fixed term period. This includes compensation for the loss of rent the former lessor would have received had the agreement continued to the end of the fixed term, up to 25 weeks, and up to one week’s reletting costs. The entitlement to compensation, however, is subject to a duty to mitigate, as set out in section 38 of the RT Act:

General duty to mitigate

A person who, apart from this section, would be entitled to compensation under this Act is not entitled to the compensation, or part of it, if the loss, or part of the loss, to be compensated could have been reasonably avoided.

60.     I have little evidence as to any steps the Lessors took in mitigation of their loss.

61.     I allow $68.58 per day compensation to the Lessor for the period between the cessation of the Agreement on 9 July 2015, and the Lessor entering into a new agreement on 13 July 2015, being $205.74.  There is little that the Lessor could have done by way of mitigation during this period.

62. I do not order any damages for any period of time beyond this date, as I am not satisfied that the Lessors have taken any steps to mitigate their loss beyond this date, as required by section 38 of the RT Act. For example, the Lessors provided no evidence of any attempt to re-lease the other rooms the subject of the Original Residential Tenancy. I accept that part of the reason for this may have been the presence of Mr Daoud in the en-suite bedroom, and I also appreciate that the Lessors were taking steps to try to evict him. However, their lack of success in this process is attributable, at least in part, to the failure to seek appropriate advice or assistance. Had the Lessors sought appropriate advice, or followed appropriate processes, much of the additional period in which Mr Daoud was in residence in the property may have reasonably been avoided. In any case, no evidence was provided as to any attempt to re-lease the rooms the subject of this dispute.

63.     Consequently, the members of the New Group Tenancy are jointly liable for the rent up to and including 9 July 2015. This amounts to $1165.71, consisting of:

(a)      $960 in rent owed as at the vacation date of 6 July 2015; and

(b)     $68.58 a day for 7, 8 and 9 July 2015.

The Oral RT Agreement

64.     For the reasons set out above, I am satisfied that from 10 July 2016, the Lessors had accepted the repudiation of the RT Agreement, and had entered into a new, oral RT agreement with just Mr Daoud.

65.     The terms of that agreement were governed by the terms set out in the email of 9 July 2015, together with further correspondence, and the Standard Terms imposed by legislation. I note that, following the email of 9 July 2015, Mr Daoud questioned his obligation to pay the electricity bill, stating that he had paid Mr Chilukuri a portion of it. Mr Verma does not appear to have contested this point, and for reasons set out below, any agreement about the electricity is unenforceable in any case. There was some further discussion and clarification between the parties, including clarification that $640 in rent was due on 13 July 2016.

66.     On 13 July 2016, Mr Verma emailed further to say that he had “prepared an agreement” – which I take to mean a written RT agreement – and asked Mr Daoud identification.  It is not clear whether he complied, but he remained in the property anyway. This is conduct consistent with the creation of a new residential tenancy agreement.

67.     Mr Daoud did not pay the rent of $640 on 13 July 2016, instead paying it several days later on 16 July 2016. Mr Verma then purported to withdraw the offer set out above, and the parties instead agreed to another proposal:

We have agreed to week by week lease to help out with your move. Condition to that you are going to pay next two weeks rent in advance and bills for the period 29 June till 9 August 2015.

I only consider next two weeks for your move to finalise.

68. Unfortunately for Mr Verma, the parties had, by this time, already entered into a new residential tenancy agreement. The payment of rent late does not amount to a repudiation of a residential tenancy agreement, and it does not entitle a lessor to commence a process that may lead to termination of an agreement. Under the RT Act, rent must be seven days late before a lessor can even issue the notice to remedy that begins the eviction process[9], and the rent in this case only three days late. In any case, Mr Daoud did not vacate the premises on 9 August 2015

[9] Standard Residential Tenancy Terms, section 92

69.     Mr Daoud also refused to pay any rent for the month of August at all. Mr Daoud’s evidence as to the reason for this was:

...I did not know what I want to do because they’re asking me to move and at the same time I don’t have any place to move. So I want to collect money for myself just for the time being because if I want to move, at least I have a little bit of money to move. So that’s why I know 100 percent he has the right to pay him like on the spot, but I was late because this situation. I don’t’ want to pay him because I want the money to move.[10]

[10] Transcript of Proceedings page 56, line 27-32

70.     Notwithstanding he did not pay rent for the month of August, Mr Daoud did pay rent of $600 a month, or $150 a week, for the months of September, October and December 2015. At no stage did Mr Daoud pay $160 a week.  Mr Verma accepted the $150 per week for Mr Daoud, by I accept that he did so as a part payment and a means of mitigating his loss, and that there was no waiver of his entitlement to the additional $10 a week.

71.     I am satisfied that Mr Daoud remained in the property on a residential tenancy agreement for the payment of rent of $160 per week. He owes $160 week for the period 10 to 31 July 2015, and for months of July, August and November and January and February 2016.  He owes an additional $10 a week for each week that he paid only $150. He has paid the Lessors a total of $2440, out of a liability of $5325.71.

72.     Mr Daoud is ordered to pay outstanding rent in the sum of $2885.71.

The cleaning business and breach of contract

73.     Under questioning by the Tribunal, Mr Daoud admitted that he had been operating a cleaning business from the property every day since he moved in.[11] This was in clear breach of clause 69 of the Standard Terms, which provides that, unless otherwise agreed in writing, the tenant must only use the premises for residential purposes. There is no suggestion that the Lessors agreed to Me Daoud operating a business at the property.

[11] Transcript of Proceedings page 57 lines 38-43

74.     Where there is a breach of a clause of the residential tenancy agreement by a tenant, the lessor is entitled to sue for damages. The damages are for breach of contract, and are compensatory in nature – that is, the damages should compensate for the costs incurred by the Lessors as a consequence of Mr Daoud’s breach of the agreement.

75.     The damages in this case are that part of the water and electricity bills for the period from Mr Daoud’s residence in the property in late March, through to the time he vacated on 28 February 2016, that are a result of his inappropriate use of the premises to conduct his cleaning business. For reasons set out below, Mr Daoud is not responsible for that component of the water or electricity that he, or his fellow residents of the premises, used for domestic premises.

76.     It is impossible to assess the Lessors’ damage with any real precision. I have no evidence, for example, as to the brand or type or even the capacity of the dryer, and little reliable evidence as to how often it was used – Mr Daoud having denied using it ‘every day’, but otherwise gave little detail.

77. Section 26 of the ACT Civil and Administrative Tribunal Act 2008 provides that the Tribunal may inform itself in any way it considers appropriate. In the absence of any direct evidence from the parties as to the costs of the washing machine and, I will rely on the ACTSmart Energy Saving Guide produced by the ACT Government.[12]  The guide states that the cost of running an 8kg top loading washing machine for a year is $117, and the cost of running a clothes dryer is $83. These are minimum costs only and represent residential rather than commercial use, but they are the best evidence available. I also award a sum of $150 to cover excess water usage.

[12] electricity bill

78.     The Lessors sought to enforce their agreements with the tenants in relation to the payment of utilities.

79.     Clauses 42, 46 and 48 of the Standard Terms deal with the issue of who pays for electricity charges. Clause 46 provides that:

Tenant’s costs

46            The tenant is responsible for all charges associated with the consumption of services supplied to the premises, including electricity, gas, water and telephone.

80.     However, clause 42 provides that:

Lessor’s costs

42            The lessor is responsible for the cost of the following:

(a)rates and taxes relating to the premises;

(b)services for which the lessor agrees to be responsible;

(c)services for which there is not a separate metering device so that amounts consumed during the period of the tenancy cannot be accurately decided;

(d)all services up to the time of measurement or reading at the beginning of the tenancy;

(e)all services after reading or measurement at the end of the tenancy providing the tenant has not made any use of the service after the reading.

81.     There was no separate metering of the electricity service to that part of the premises occupied by the tenants in these proceedings. It follows from clause 42(c) of the Standard Terms that the tenants are not contractually bound to pay the electricity costs.

82.     Nonetheless, Mr Chilukuri has stated in these proceedings that he, at least, consents to the payment of the outstanding electricity bill for the period 26 May 2015 to 5 July 2015. This bill is some $588.00. There is also an excess water useage bill for the same period for $252.00. Can the parties simply agree to the payment of this sum?

83.     In Conteh v Fan[13] Senior Member Anforth said:

[13] [2011] ACAT 45

Standard term 42(c) and 48 do not explicitly say that the lessor must not receive payments for electricity and may therefore have no further effect than setting up the prima facie recoverability of the payments in a restitution claim.

Section 15 of the Act however is framed in terms of payments that the lessor may require or accept :

15    Rent or a bond only

(1)In consideration for giving a tenant a right to occupy premises, a lessor may only require or accept rent or a bond.

(2)A lessor must not require or accept any consideration for—

(a)agreeing to enter into, extend or renew a residential tenancy agreement; or

Section 15 is framed in mandatory terms. It refers to any consideration received by a lessor as part of the tenancy agreement. The term consideration includes the receipt of money from the tenant to defray the lessors’ liability under the Act for the unmetered electricity charges.

Section 15(1) limits the consideration that the lessor may require or receive to the rent and the bond. No other form of consideration is permitted.

The legislative intention appears to be to preclude any money or other form of consideration being either required or received from a tenant other than rent and bond. This would preclude either requiring or receiving money for the lessor’s electricity accounts.

The lessors’ actions in requiring the tenant to pay the electricity charge and in receiving the payment are each unlawful actions in breach of section 15. In terms of the defences to a restitution claim, it cannot possibly be just or equitable to permit the lessor to rely upon and benefit from his unlawful action.

84.     I agree with these observations.  In saying that, I do not import and malicious intent to Mr Verma.  It is clear that he intended to establish an occupancy agreement, and the shared payment of utilities may be appropriate in that setting.  However, it not permissible for the Tribunal to order the tenants who are parties to a residential tenancy agreement to pay unmetered electricity or water bills, even if those orders were made by consent. I therefore decline to do so.

85.     Mr Daoud, however, remains liable to pay damages to the Lessors for the loss they incurred as a consequence of the excessive consumption of electricity and water in the course of a commercial enterprise conducted in breach of the RT Agreement.  The ground for such payment is damages for breach of contract, not the recovery of utility bills incurred in the course of the residential tenancy.

Conclusion

86.     The tenants, Rohit Chilukuri, Dhulipalla Venkata Swamulu, Raghupathi Sandeveni, Rajavardhan Reddy Yasa and Ali Hussein Abou Daoud are to pay the Lessors the sum of $1371.45 for unpaid rent. From this must be deducted the $600 bond.

87.     Ali Hussein Abou Daoud is to pay the Lessors a further sum of:

(a)      $2885.71 for unpaid rent; and

(b)     $350.00 for damages for breach of the residential tenancy agreement.

………………………………..

Senior Member H Robinson

HEARING DETAILS

FILE NUMBER:

RT 917/2015

PARTIES, APPLICANT:

Manjari Verma

Jitendra Verma

PARTIES, RESPONDENT:

Rohit Chilukuri, Dhulipalla Venkata Swamulu, Raghupathi Sandeveni, Rajavardhan Reddy Yasa, Ali Hussein Abou Daoud

COUNSEL APPEARING, APPLICANT

N/A

COUNSEL APPEARING, RESPONDENT

N/A

SOLICITORS FOR APPLICANT

N/A

SOLICITORS FOR RESPONDENT

N/A

TRIBUNAL MEMBERS:

Senior Member H Robinson

DATES OF HEARING:

22 February 2016