Smith v Accessible Properties New Zealand Ltd

[2018] NZHC 1010

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2018-470-000010

[2018] NZHC 1010

IN THE MATTER

of an Appeal pursuant to the Residential Tenancies Act 1986

BETWEEN

ESMERALDA SMITH

Appellant

AND

ACCESSIBLE PROPERTIES NEW ZEALAND LIMITED

Respondent

Hearing:	9 April 2018
Appearances:	M Sharp for the Appellant O Grant for the Respondent
Judgment:	9 May 2018

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Wednesday, 9 May 2018 at 4:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Te Whenua Law, Rotorua

Duncan Cotterill, Wellington

Counsel:            M Sharp, Barrister, Mt Maunganui

SMITH v ACCESSIBLE PROPERTIES NEW ZEALAND LIMITED [2018] NZHC 1010 [9 May 2018]

[1]                   This is an appeal from the decision of Judge PG Mabey QC, dated 18 January 2018.1 The Judge dismissed an appeal from a decision of the Tenancy Tribunal at Tauranga (Adjudicator, JP Smith) dated 11 December 2017. The Tribunal had granted Accessible Properties New Zealand Limited (Accessible Properties) possession of the premises situated at 25 Osprey Drive, Welcome Bay, Tauranga (the property), formerly occupied by Ms Esmeralda Smith pursuant to a tenancy agreement between the parties.

Factual background

[2]                   On 12 December 2011, Ms Smith entered a residential tenancy agreement with Housing New Zealand Corporation (Housing NZ) in respect of the property.

[3]                   In the early part of 2017, Housing NZ transferred the property to Accessible Properties, a community housing provider, and wholly owned subsidiary of IHC New Zealand. Accessible Properties became Ms Smith’s landlord on 1 April 2017.

[4]                   On  15  May  2017,  the   Tenancy   Manager   for   Accessible   Properties, Ms Georgina Willers, wrote to Ms Smith saying they would like to visit the property on 23 May 2017 for the purpose of an inspection, which would take up to 45 minutes and would involve the need to check all the rooms in the house for any maintenance, repairs and to make sure smoke alarms were in place and working. Ms Willers also advised Ms Smith that during the course of this inspection they would be completing a very simple non-invasive methamphetamine test. Ms Smith was invited to contact Ms Willers if she had any questions.

[5]                   Ms Smith was not present for the scheduled inspection on 23 May 2017, so Accessible Properties postponed the inspection. On 31 May 2017, Ms Willers sent a second inspection notice to Ms Smith. It advised her that an inspection was scheduled for 7 June 2017. Again, it advised Ms Smith that during the inspection they would also be completing a very simple non-invasive methamphetamine test.

1      Smith v Accessible Properties New Zealand Ltd [2018] NZDC 704.

[6]                   On 7 June 2017, Ms Willers and a Property Manager for Accessible Properties visited the property to conduct an inspection. Ms Smith’s adult son, who resided at the property, was present at the time of the inspection. The Accessible Properties staff advised Ms Smith’s son of the purpose of the visit and Ms Willers says that he gave them permission to enter the property. He also signed the inspection report once the inspection and the methamphetamine tests were completed.

[7]                   On 12 June 2017, the results of the methamphetamine test were returned. The test indicated a level of methamphetamine contamination above the relevant Ministry of Health New Zealand standard for safe occupancy. Ms Willers rang Ms Smith and told her of the results and advised her that a more comprehensive test was required to ensure that the property was safe to occupy. Ms Smith did not tell Ms Willers that she did not want further tests to occur or that she had not given permission to Accessible Properties to conduct the initial test.

[8]                   On 14 June 2017, Ms Willers advised Ms Smith by letter that they had arranged for further testing to be conducted on 21 June 2017 and that it was preferred, but not required, that all occupants vacate the property during the testing to ensure accurate results were achieved.

[9]                   On 21 June 2017, Ms Willers and an employee from MethSolutions went to the property to carry out a comprehensive methamphetamine test. Ms Smith was present and gave the MethSolutions employee permission to enter the property knowing that she was to conduct the comprehensive test. The comprehensive test confirmed levels of methamphetamine contamination on the property above the relevant Ministry of Health New Zealand standard for safe occupancy.

[10]               On 11 July 2017, Ms Willers telephoned Ms Smith to discuss the results and advise her that the property would need to be decontaminated. Ms Willers says that she also spoke with Ms Smith about other tenancy issues, including on-going rent arrears and her failure to comply with the payment arrangements, damage to the property and Ms Smith’s children hosting parties at the property. At the end of the telephone call, Ms Willers told Ms Smith that Accessible Properties would be issuing her with a 90 day notice to end the tenancy.

[11]               A 90 day notice was accordingly issued by Accessible Properties. Pursuant to this notice, the tenancy was scheduled to end on 20 October 2017.

[12]               Accessible Properties then filed proceedings in the Tenancy Tribunal at Tauranga seeking a possession order for the property. When the application was called in the Tenancy Tribunal on 31 October 2017, counsel appeared for Ms Smith asking for an adjournment and indicated that she intended to seek orders pursuant to s 78(1)(f) of the Residential Tenancies Act 1986 (the Act) that it would be harsh or unconscionable for Accessible Properties to exercise its rights under the tenancy agreement to terminate the tenancy on notice. This was on the basis that Ms Smith was a social housing tenant and that the decision was based upon the results of methamphetamine testing of the  property  that  was  earlier  carried  out  without  Ms Smith’s consent and was, accordingly, illegal.

[13]               The application was adjourned to 29 November 2017 at which time Ms Smith was serving a term of imprisonment. An application by her counsel on that date for a further adjournment of the hearing was refused. Counsel then withdrew from the hearing and the application proceeded on a formal proof basis. The Tenancy Tribunal delivered its decision granting Accessible Properties possession of the premises on 11 December 2017.

[14]               On 20 December 2017, the Tenancy Tribunal heard and refused an application by Ms Smith through counsel for a rehearing pursuant to s 105(1) of the Act.  On   22 December 2017, the Tenancy Tribunal issued a decision refusing the rehearing application, but delaying the possession date until 3 January 2018.

[15]               On 3 January 2018, an appeal was filed on behalf of Ms Smith in the District Court against the possession order and the refusal to grant a rehearing. On 4 January 2018, the Tenancy Tribunal granted a stay of proceedings for 14 days upon the basis that the matter would be placed before a District Court Judge and Accessible Properties would file submissions in response.

[16]               By a minute issued by Judge Mabey QC on 15 January 2018, the District Court directed that all matters would be dealt with when the appeal was called on 16 January

2018 at 12.00 pm. On 16 January 2018, counsel for Ms Smith asked that the appeal be adjourned for the usual pre-trial directions to be made and to enable Ms Smith to attend the hearing after her release from prison in mid-February and give evidence if leave to do so was granted. The District Court Judge indicated that he would only grant an adjournment if he considered that there was merit in the proposed grounds of appeal which were then discussed with counsel.

[17]               On 18 January 2018, Judge Mabey QC delivered a judgment dismissing the appeal. Ms Smith filed a notice of appeal on 24 January 2018.  On 31 January 2018, a District Court bailiff took possession of the property for Accessible Properties. Accessible Properties thereupon commenced decontamination of the property. On  27 February 2018 this Court ordered a stay of the judgment in as far as Accessible Properties is not to re-let the property pending the outcome of the appeal. It also granted leave to the parties to file further evidence.

Further evidence

[18]               Ms Smith has filed two further affidavits – one dated 19 March 2018 and a second one dated 29 March 2018 in reply to an affidavit dated 22 March 2018 from Ms Willers.

[19]               Ms Smith says that she first heard that Accessible Properties had tested the property for methamphetamine in the middle of 2017 when she was contacted by  Ms Willers, who told her that her son was in the house at the time.  She says that   Ms Willers told her that they were coming back to the property to do some more testing for methamphetamine and that she would need to be out of the house when they undertook the testing. She says that Ms Willers did not ask for permission but, because she thought they had a right to do so, she did not object.

[20]               After the second test for methamphetamine, Ms Smith says she was advised by Ms Willers that the test results showed high levels of methamphetamine contamination and consequently Accessible Properties would be giving her 90 days notice of termination of the tenancy.

[21]               Ms Smith says she does not know how the property came to be contaminated by methamphetamine and it was not because of any methamphetamine smoking or activities by herself or anyone else that she knows of in the house. She wants to move back into the property once it is cleaned of methamphetamine.

[22]               On the other hand, Ms Willers says that the methamphetamine testing was undertaken with the specific permission of Ms Smith or her adult son, who lived with her. On the first occasion Ms Smith was not present, but her adult son gave permission to enter the property and signed the inspection report once the inspection and baseline tests were completed. On the second occasion Ms Smith was at home and gave permission to enter the property. Ms Willers says she stood outside the property for a period and talked to Ms Smith while the methamphetamine testing got underway.

[23]               In her reply affidavit dated 4 April 2018, Ms Smith says that after Ms Willers asked her she did allow a person to enter the property knowing she was going to carry out methamphetamine testing, but she certainly did not give her permission to carry out the tests. Ms Smith says that she was under the impression that Accessible Properties had the right to carry out the tests and they did not need her permission.

District Court decision

[24]               At the outset of his decision, Judge Mabey QC recorded the provision of the tenancy agreement that enabled Accessible Properties to terminate the tenancy by giving 90 days notice to vacate. No reasons need be given. After setting out the procedural history, the Judge noted the grounds of appeal which were:

(a)The application for adjournment should have been granted.

(b)The Tribunal erred in law in refusing the application for rehearing.

[25]               Ms Smith’s position on the appeal was that the tenancy agreement made no provision for methamphetamine testing so such tests could only be carried out with her consent. She said she did not consent and therefore the testing was conducted illegally. She also said that the only reason she was given notice terminating her tenancy was because methamphetamine was found in the property. As the testing was

conducted illegally it was therefore harsh and unconscionable for the tenancy to be terminated.

[26]               Ms Smith sought an order that Accessible Properties’ termination of the tenancy was harsh or unconscionable conduct under s 78(1)(f) of the Act or, alternatively, that there should be a rehearing before the Tribunal.

[27]               Judge Mabey QC was of the very clear view that the appeal must be dismissed. He stated:

[31] …The tenancy was terminated pursuant to a provision in the tenancy agreement. The respondent was exercising a contractual right which is consistent with its statutory rights to terminate. An appropriate notice was given. No reasons were required and the tenancy was validly terminated.

[28]               The Judge was of the view that even if the methamphetamine testing was conducted without Ms Smith’s consent, that would make no difference to the outcome of the appeal.

Grounds of appeal

[29]Ms Smith’s grounds of appeal are:

(a)The refusal of the District Court Judge to allow an adjournment of the appeal when it was first called on 16 January 2018 to allow Ms Smith to attend and give evidence when she was released from prison was a breach of her right to justice under s 27(1) of the New Zealand Bill of Rights Act 1990 and  her  right to be  heard on the  application under  s 93(1) of the Act.

(b)The District Court Judge was in error in finding that illegal methamphetamine testing of the property could have no impact on Accessible Properties’ contractual termination of the tenancy given that s 78(1)(f) of the Act provides jurisdiction for a finding that it would be harsh or unconscionable for Accessible Properties to exercise its right to terminate the tenancy.

Discussion

[30]               This appeal is brought under s 119 of the Act, which provides that appeals to the High Court from decisions of the District Court can be brought only on questions of law.

[31]               The proper approach to appeals under s 119 of the Act was explained by Duffy J in Anderson v FM Custodians Ltd:2

[32]                …In short, this Court is not to substitute its own views for that of the lower Court; instead the Court must consider whether the decision under appeal reveal a misinterpretation and/or misapplication of the statutory powers in the [Residential Tenancies] Act, and if not, whether what has been decided is so misconceived that it is an unlawful decision…

[32]   The issue for this Court to determine is, therefore, whether the Tribunal and the District Court in granting possession of the property to Accessible Properties under s 64 of the Residential Tenancies Act on the basis of a 90 day notice under s 51(1)(d) of the Act misinterpreted and/or misapplied the statutory powers in ss 51, 54 and 64 of the Act and, if not, whether what has been decided is so unconscionable that it is unlawful decision.

[33]The provisions of the Act relevant to termination by notice are ss 51, 54 and

64. These relevantly provide:

51       Termination by notice

(1)Subject to sections 52, 53, 53A, 59, and 59A, the minimum period of notice required to be given by a landlord to terminate a tenancy shall be as follows:

(a)where the owner of the premises requires the premises as the principal place of residence for the owner or any member of that owner’s family, 42 days:

(b)where the landlord customarily uses the premises, or has acquired the premises, for occupation by employees of the landlord, that fact being clearly stated in the tenancy agreement, and the premises are required for occupation by such an employee, 42 days:

(c)where the owner is required, under an unconditional agreement for the sale of the premises, to give the purchaser vacant possession, 42 days:

(d)in any other case, 90 days.

2      Anderson v FM Custodians Ltd [2013] NZHC 2423, (2013) 15 NZCPR 123.

(2)Subject to sections 52 to 53A, 59, and 59A, the minimum period of notice required to be given by a tenant to terminate a tenancy shall be 21 days, in any case.

(3)Every notice to terminate a tenancy shall—

(a)be in writing; and

(b)identify the premises to which it relates; and

(c)specify the date by which the tenant is to vacate the premises; and

(ca)in any case where the tenant is given less than 90 days’ notice, set out the reasons for the termination; and

(d)be signed by the party giving the notice, or by that party’s agent.

…

54       Tribunal may declare retaliatory notice of no effect

(1)Within 28 working days after receipt of a notice terminating the tenancy, being a notice that complies with the requirements of section 51 (or, in the case of a boarding house tenancy, section 66U), the tenant may apply to the Tribunal for an order declaring that the notice is of no effect on the ground that, in giving the notice, the landlord was motivated wholly or partly by the exercise or proposed exercise by the tenant of any right, power, authority, or remedy conferred on the tenant by the tenancy agreement or by this or any other Act or any complaint by the tenant against the landlord relating to the tenancy.

(2)If, on any such application, the Tribunal is satisfied that the landlord was so motivated in giving the notice, it shall declare the notice to be of no effect unless the Tribunal is satisfied that the purported exercise by the tenant of any such right, power, authority, or remedy, or the making by the tenant of any such complaint, was or would be vexatious or frivolous to such an extent that the landlord was justified in giving the notice.

(3)The giving of a notice terminating a tenancy is an unlawful act if the notice is declared under subsection (2) to be of no effect.

64       Possession orders

(1)Subject to subsection (2), on the application of any person entitled to possession of the premises following the termination of a tenancy, the Tribunal shall make an order granting possession of the premises to that person.

(2)No possession order may be made more than 90 days after the date of the termination of the tenancy.

(3)Every order of the Tribunal made under section 55 or section 56 or section 59 or section 61 terminating a tenancy shall have effect as a possession order granting possession of the premises to the landlord.

(4)No possession order (including an order of a kind referred to in subsection (3)) shall be capable of being filed under section 106 more than 90 days after—

(a)the date of the order; or

(b)in the case of a conditional order under section 55(1A) or section 78(3) or section 88(2) which states that it is an order to which this paragraph applies, the date on which the conditional order takes effect as a final termination order.

[34]   The Court of Appeal in Winther v Housing Corp of New Zealand confirmed that a notice under s 51 need not give reasons for termination and the only specific provision empowering the Tenancy Tribunal to declare a s 51 notice of no effect is    s 54 of the Act, where the landlord has issued the notice of termination in retaliation to the tenant exercising his or her rights or in breach of a tenant’s human rights under s 12 of the Act,3 neither of which apply in the present case.

[35]Ms Smith relies upon s 78(1)(f) of the Act, which provides:

78       Orders of Tribunal

(1)Without limiting the generality of section 77 or the nature or extent of orders that the Tribunal may make in the exercise of its jurisdiction, the Tribunal may, in respect of any claim within its jurisdiction, make 1 or more of the following orders:

…

(f) where it appears to the Tribunal that an agreement between the parties, or any term of any such agreement, is harsh or unconscionable, or that any power conferred by an agreement between them has been exercised in a harsh or unconscionable manner, an order varying the agreement, or setting it aside (either wholly or in part):

…

[36]   The term “harsh or unconscionable” is not defined in the Act, but in the circumstances of this case I am of the view that it is unnecessary to define the term.

[37]   Section 78(1)(f) enables the Tribunal to make an order varying an agreement or setting it aside (either wholly or in part) if an agreement between the parties or any terms of any such agreement is harsh or unconscionable, or if a power conferred by the agreement has been exercised in a harsh or unconscionable manner.

3      Winther v Housing Corp of New Zealand [2010] NZCA 601, [2011] 1 NZLR 825.

[38]   There are two fundamental difficulties with Ms Smith’s reliance on this provision. First, she does not seek an order varying the tenancy agreement or setting it aside. She wants possession of the property. In the notice of appeal the order sought is specified as an order that it would be harsh or unconscionable for Accessible Properties to exercise its right to terminate Ms Smith’s tenancy of the property. No order is sought to vary the tenancy agreement or set it aside.

[39]   Second, Accessible Properties did not exercise a power conferred by the agreement when it gave Ms Smith 90 days notice of termination of the agreement. It exercised a statutory power conferred on it by s 51(1)(d) of the Act. The fact that the statutory power may  have  been  repeated  in  the  agreement  is  immaterial.  Section 78(1)(f) does not enable the Tribunal to vary or set aside the Act on the basis that a 90 day notice pursuant to s 51(1)(d) of the Act was given in a harsh or unconscionable manner.

[40]   Perhaps recognising these difficulties, Ms Smith submits that even if the case did not fall strictly within the terms of s 78(1)(f), the Tribunal still has general jurisdiction under ss 77 and 85 to make orders concerning agreements considered to be harsh or unconscionable.

[41]   Section 77(1) provides that the Tribunal has jurisdiction to determine, in accordance with the Act, any dispute that exists between a landlord and tenant. The words “in accordance with the Act” means that the Tribunal’s jurisdiction is not unlimited. Subsection (2) then provides that, without limiting the generality of subsection (1), the Tribunal has jurisdiction to make determinations or orders in 23 specified situations. Ms Smith does not identify which of these is applicable to the present case.

[42]   At the heart of Ms Smith’s case is a complaint that Accessible Properties acted unlawfully when testing for methamphetamine at the property. Section 77(2)(o) is one of the 23 specified situations in which the Tribunal has jurisdiction. It gives jurisdiction to the Tribunal to consider and determine any complaint by any party to a tenancy agreement that any person has committed an unlawful act, and, where it finds such a complaint to be proved, to order the payment of such sum in the nature of

exemplary damages as the Tribunal may think just. This is not, however, a route that was taken by Ms Smith. It is not clear which, if any, of the remaining 22 situations applies to Ms Smith’s case.

[43]   Ms Smith also points to s 85 as conferring jurisdiction to make orders concerning agreements considered to be harsh or unconscionable. It provides:

85       Manner in which jurisdiction is to be exercised

(1)Subject to the provisions of this Act and of any regulations made under this Act, the Tribunal shall exercise its jurisdiction in a manner that is most likely to ensure the fair and expeditious resolution of disputes between landlords and tenants of residential premises to which this Act applies.

(2)The Tribunal shall determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case, but shall not be bound to give effect to strict legal rights or obligations or to legal forms or technicalities.

[44]   Section 85 does not, however, confer any new jurisdiction on the Tribunal. It relates only to the manner in which the Tribunal’s jurisdiction is to be exercised. It does not provide the Tribunal with any new powers.

[45]   I, therefore, disagree with counsel’s submissions that the Tribunal had specific jurisdiction under s 78(1)(f) or general jurisdiction under ss 77 and 85 to make an order that it was harsh or unconscionable for Accessible Properties to give 90 days notice of termination of the tenancy to  Ms Smith.   This finding is sufficient to dispose of   Ms Smith’s second ground of appeal.

[46]   I am, therefore, not required to make a finding as to whether the methamphetamine testing of the property was unlawful. However, if I was required to make a finding, I am of the opinion that it was not unlawful. Based on the fresh evidence submitted by way of affidavits sworn by Ms Smith and Ms Willers, I am of the opinion that, in the circumstances of this case, the residents of the property did agree to the testing carried out by Accessible Properties. On the second  occasion  Ms Smith was present at the property and allowed Accessible Properties’ agent to enter the property knowing she was going to test for methamphetamine. Ms Smith says that she did not object because she thought Accessible Properties was entitled to enter the property for that purpose. She says she would have objected if she had known that

Accessible Properties required permission to test for methamphetamine. Any mistaken belief on her part does not, however, invalidate her actions in allowing the Accessible Properties’ agent onto the property to test for methamphetamine.

[47]   In any event, non-invasive testing for methamphetamine may be included in the general power of inspection provided for in the tenancy agreement. Accessible Properties had an obligation to provide and maintain a habitable property in a reasonable state of repair and to comply with all legislative requirements pertaining to buildings and health and safety, including the Health Act 1956, Health and Safety at Work Act 2015 and the New Zealand Standard 8510: Testing and decontamination of methamphetamine contaminated properties.

[48]   In recognition of a landlord’s obligation to provide and maintain a habitable property, the Tenancy Tribunal in two recent cases declared that Accessible Properties could conduct methamphetamine testing during a property inspection.4 It would, of course, be preferable to specifically provide for a right of inspection for methamphetamine contamination, but when Ms Smith entered the original tenancy agreement with Housing New Zealand in 2011, the extent of the methamphetamine contamination problem was not recognised.

[49]   Ms Smith recognised that the outcome of the appeal would likely depend on the Court’s decision on the second ground of appeal and there was, accordingly, little by way of submissions on the first ground of appeal.

[50]   On the first ground of appeal, Ms Smith did not submit that a party had an absolute right to continue to request adjournment of hearings to allow it to attend. She submitted, however, that there was a breach of natural justice in the present case when the District Court Judge refused an adjournment of the hearing when she was in prison. She was to be released shortly and wanted the opportunity to present her evidence in the District Court hearing.

4      Accessible Properties New Zealand Ltd v Beach [2017] NZTT Tauranga, Application Number 4094382 at [10] and Accessible Properties New Zealand Ltd v Thompson [2017] NZTT Tauranga, Application Number 4103627 at [11].

[51]   I am of the view that, in these circumstances, there was no breach of natural justice. The appellant was represented by competent counsel and the Judge was advised of the proposed evidence, which he said would not make a difference to the outcome of the case. That evidence is now before the Court and I agree with the District Court Judge that it makes no difference to the outcome of the case.

[52]   In those circumstances, the District Court decision to dismiss the application for an adjournment was appropriate, in the interests of justice and in accordance with the statutory powers in ss 85(1), 96(4) and 117(4) of the Act and r 18.17 of the District Court Rules 2014.

[53]   The appeal is dismissed. Costs on a 2B basis are payable by Ms Smith to Accessible Properties.

Woolford J