Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Tang v Zhao [2020] NSWCATAP 243 Hearing dates: 16 November 2020 Date of orders: 23 November 2020 Decision date: 23 November 2020 Jurisdiction: Appeal Panel Before: S Westgarth, Deputy President D Robertson, Senior Member Decision: (1) Leave to appeal refused (2) Appeal dismissed Catchwords: LEASES AND TENANCIES – Residential tenancies – Entitlement to payment of bond – Onus of proof of landlord's claim to payment Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Residential Tenancies Act 2010 (NSW) Cases Cited: Collins v Urban [2014] NSWCATAP 17 Hall v Hawkins [2015] NSWCATAP 197 McGinn v Barilla [2018] NSWCATAP 85 Russo v Brack [2016] NSWCATAP 261 Pearson v Clark [2016] NSWCATAP 134 Sakr v Saward [2016] NSWCATCD 32 Texts Cited: None cited Category: Principal judgment Parties: Mi Tang (First Appellant) Zhe Tan (Second Appellant) Pengming Zhao (Respondent) Representation: Solicitors: Appellants (Self-Represented) Respondent (Self-Represented) File Number(s): AP 20/38338 Publication restriction: None Decision under appeal Court or tribunal: Civil & Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 21 August 2020 Before: P French, General Member File Number(s): RT 20/28730 REASONS FOR DECISION 1. The appellants (the landlords) are the owners of a residential unit in Zetland. The respondent (the tenant) rented the unit from the landlords under a residential tenancy agreement from May 2015 until February 2020, when the tenancy was terminated, apparently because the landlords had become aware that the tenant had sub-let the premises without approval. 2. The tenant had paid a bond of $2,600 which had, as required by the Residential Tenancies Act 2010 (NSW) (RTA), been lodged with the Rental Bond Board. 3. In circumstances which were not apparent from the material before the Appeal Panel, the rental bond was paid to the landlords' agent after the termination of the tenancy. 4. The landlords informed the Appeal Panel that they had not authorised their agent to claim the bond and had terminated that agent's agency agreement. 5. The landlords acknowledged that the bond had been paid into their bank account. 6. The tenant commenced proceedings in the Tribunal on 21 April 2020 seeking an order under s 175 of the RTA for the return of the bond. 7. At the hearing before a Member of the Tribunal on 21 August 2020, the landlords relied upon a number of alleged failures on the part of the tenant to comply with the requirements of clauses 17.2, 17.3 and 17.6 of the tenancy agreement which were as follows: "17. The tenant agrees, when this agreement ends and before giving vacant possession of the premises to the landlord: … 17.2 to leave the residential premises as nearly as possible in the same condition, fair wear and tear accepted, as at the commencement of the tenancy, and 17.3 to leave the residential premises reasonably clean, having regard to their condition at the commencement of the tenancy, and … 17.6 to return to the landlord all keys, and other opening devices or similar devices, provided by the landlord." 1. These terms are also implied into the tenancy agreement by s 51(3)(b), (c) and (e) of the RTA. 2. The landlords were unable to produce to the Tribunal a condition report, prepared pursuant to s 29 of the RTA, relating to the condition of the unit at the commencement of the tenancy. The landlords asserted before the Appeal Panel that this was a failure on the part of their former agent. 3. The Tribunal ordered the landlords to repay the whole of the bond to the tenant. The Tribunal rejected each of the landlords' claims in respect of alleged breaches of the tenancy agreement, finding that: "The evidence relied upon by the landlords does not establish that the tenant failed to leave the premises reasonably clean, having regard to its condition at the start of the tenancy. … Similarly, the evidence relied upon by the landlords does not establish that the tenant caused or committed any damage to the walls of the premises with the result that he failed to return them in the condition as close as possible to the condition they were in at the start of the tenancy, fair wear and tear accepted. … In relation to the landlords' claim for the repair of the dishwasher, no satisfactory evidence has been provided to establish it was in disrepair, or the cause of any such disrepair. … In relation to the claim for a missing blind fastener, in the absence of any Start of Tenancy Condition Report it is not possible for the Tribunal to determine if that damage was caused or committed by the tenant or if it was pre-existing. Nor has sufficient evidence been provided to establish what keys and security devices were returned by the tenant at the end of the tenancy." 1. The Tribunal further found: "In relation to the whole of the claim the tenant has presented compelling photographic evidence that the premises was returned in a clean and undamaged condition. He denies that the premises were damaged in any way or that he failed to return keys and security devices. It appears from his evidence that the landlords' former agent was content with the condition in which he returned the premises and had advised him that a full bond refund would be processed." The Scope and Nature of Internal Appeals 1. By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel. 2. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. The decision of the Tribunal under appeal was not fair and equitable; or 2. The decision of the Tribunal under appeal was against the weight of evidence; or 3. Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). 1. In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. 1. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). 2. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed. Grounds of Appeal 1. The landlords' Notice of Appeal set out their grounds of appeal as follows: "(1) It should be the obligation of the previous property management agency to issue the Conditional Report when Pengming Zhao signed off the contract. The new Tribunal case (RT 20/36439) and Fair Trading Complaint (Ref. 10326381) has been lodged. (2) Please reconsider the case as a full picture. As Pengming Zhao had subleased the property … under his company name (Marble Real Estate Holdings & GR Project Marketing) for commercial use for 5 years without landlords' permission or giving any notice. He subleased the property NOT individually or personally, while he subleased the property as a Real Estate Agency for commercial use, which definitely breached the contract and also the Agency's Code of Conduction. (3) As landlords we have never authorised anyone or any party to claim the bond, the previous email communication showed that we as landlords would like to return the bond until the dispute was resolved. Pengming Zhao should raise the dispute when the previous agent claimed the bond without our authorisation from Fair Trading Trust Account, and should not wait until the bond is returned (although we had thought the bond should still stay in Fair Trading as we asked the agent to keep it freezed in Fair Trading until the dispute was resolved)." 1. The landlords also sought leave to appeal on substantially the same grounds. 2. At the hearing of the appeal, the parties confirmed that the landlords had not complied with the order of the Tribunal. The landlords informed the Appeal Panel that what they sought by the appeal was that they should not be required to repay the bond to the tenant until the case(s) they had filed against their former agent and companies associated with the tenant had been determined. Consideration 1. The landlords' case on the appeal effectively encompassed two propositions: 1. That the absence of an Start of Tenancy Condition Report was not the landlords' fault and that, because the tenant failed to ensure he signed a Condition Report at the commencement of the tenancy, he could not establish that he had complied with the requirements of the tenancy agreement to return the property reasonably clean having regard to its condition at the start of the tenancy and as nearly as possible in the same condition, fair wear and tear accepted, as at the commencement of the tenancy. In Mr Tan's words, "it was at his risk". 2. That the tenant, through two companies, had unlawfully sub-let the premises, that the landlords had commenced separate proceedings against those companies and against their former managing agent and that the appeal should not be determined and the landlord should not be required to repay the bond until those proceedings had been determined. 1. Both of those propositions must be rejected. 2. The tenant was presumptively entitled to the return of the bond. The onus of establishing an entitlement to payment of the bond or any part of the bond lay upon the landlords. As an Appeal Panel held in Russo v Brack [2016] NSWCATAP 261 at 48: Section s 157 of the Residential Tenancies Act, 2010 defines a "rental bond" to be a "security" and it follows that unless a legitimate claim is otherwise established, it remains the property of the tenant who provided the security. A landlord may bring a claim under s. 166 of the Residential Tenancies Act, under which the landlord carries the burden to prove his entitlement. 1. See also McGinn v Barilla [2018] NSWCATAP 85 at [19]; Pearson v Clark [2016] NSWCATAP 134 at [71]; and Sakr v Saward [2016] NSWCATCD 32 at [9]. 2. Pursuant to s 29 of the RTA, the obligation to provide a Condition Report at the commencement of a residential tenancy lies upon the landlord or their agent. The landlords' submission that the absence of a report was "at the tenant's risk" is incorrect. A landlord who fails to ensure a Condition Report is completed at the commencement of a tenancy bears the risk that they will be unable to establish the condition of the premises at the commencement of the tenancy. 3. The fact that the failure to obtain a Condition Report at the commencement of the tenancy may have been the fault of the landlords' agent does not alter that situation. The landlords are bound by the conduct of their agent. We are not concerned in this appeal with any claim the landlords may have against their former managing agent. 4. The absence of a Condition Report prepared at the commencement of the tenancy is not fatal to a claim for compensation of breach of the provisions of clauses 17.2 and 17.3 of the standard form Residential Tenancy Agreement (or s 51(3)(b) or (c) of the RTA): Hall v Hawkins [2015] NSWCATAP 197 at [58]-[66]. 5. Nevertheless, in the absence of such a report, a landlord must provide other persuasive evidence of the condition of the premises at the commencement of the tenancy. There is no presumption that premises are delivered to a tenant in a pristine condition. 6. As there was no evidence before the Tribunal of the condition of the premises at the commencement of the tenancy, there was no error of law in the Tribunal's finding that the landlords had failed to establish a breach by the tenant of his obligations with respect to the condition of the premises and the delivery of keys. 7. Nor might the landlords have suffered a substantial miscarriage of justice in that regard. 8. The further proceedings commenced by the landlords (against their former agent and two companies associated with the tenant) have no significance for the resolution of the appeal. 9. The Appeal Panel has jurisdiction to determine whether the decision of the Tribunal from which the appeal is brought involved an error of law or warrants the grant of leave on one of the grounds set out in clause 12 of Schedule 4. In the absence of an error of law in the decision under appeal or a basis in the decision under appeal for the grant of leave to appeal, the appeal must be dismissed. 10. The landlords were required by the decision of 21 August 2020 to pay the amount of the bond to the tenant. They should have done so immediately. Whether or not the landlords may subsequently obtain orders against their former agent or against other companies associated with the tenant, the tenant is entitled to the return of the bond and there is no warrant for his being left out of pocket. 11. Our orders are: 1. Leave to appeal refused. 2. The appeal is dismissed. ********** 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 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 November 2020