Civil and Administrative Tribunal New South Wales Medium Neutral Citation: NSW Land and Housing Corporation v Diab [2014] NSWCATAP 27 Hearing dates: 28 April 2014 Decision date: 02 June 2014 Jurisdiction: Appeal Panel Before: Wright J, President Hennessy LCM, Deputy President G Meadows, Senior Member Decision: 1.The appeal is dismissed. Catchwords: ADMINISTRATIVE LAW - Civil and Administrative Tribunal (NSW) - residential tenancies - whether cancellation of rental rebate arrears Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Housing Act 2001(NSW) Residential Tenancies Act 2007 (NSW) Residential Tenancies Regulation 2010 (NSW) Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337 County Securities Pty Ltd V Challenger Group Holdings Pty Ltd [2008] NSWCA 193 Department of Housing v Christodoulou [1996] NSWRT 8 Department of Housing v Elkazzi [2004] NSWCTTT 6333 Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 New South Wales Land and Housing Corporation v Diab [2014] NSWCATAP 8 NSW Land and Housing Corporation v Bergman [2008] NSWCTTT 1201 Category: Principal judgment Parties: NSW Land and Housing Corporation (Appellant) Mr Spiro Diab (Respondent) Representation: J O'Connor (Appellant) A Stafford (Respondent) Housing NSW, Legal Services Branch (Appellant) Legal Aid NSW (Respondent) File Number(s): AP 14/0006 Publication restriction: n/a Decision under appeal Jurisdiction: 150003 Citation: n/a Date of Decision: 2014-01-31 00:00:00 Before: K Rosser, Senior Member File Number(s): SH 13/00016 REASONS FOR DECISION Introduction 1This appeal concerns weekly rebates of rental which may be granted, under Part 7 (ss 54 to 58) of the Housing Act 2001 (NSW) (the Housing Act) or previous policies to a similar effect, to a tenant who is renting social housing. The particular issues which arises is whether retrospective cancellation of such rebates leads to there being rent which had not been paid on time by the tenant. 2On 31 January 2014, the Consumer and Commercial Division of the Tribunal dismissed an application by the appellant/landlord for an order terminating the residential tenancy agreement between the appellant and the respondent/tenant and for an order for possession of the premises in question - New South Wales Land and Housing Corporation v Diab (31 January 2014, Application No SH13/00016). The ground for termination relied upon by the appellant in its notice of termination was that the respondent had breached his tenancy agreement by "not paying rent on time". The rent said not to have been paid on time was an amount equal to the weekly rebates of rental to which the respondent was no longer entitled because the appellant had cancelled the rebates retrospectively (as it was permitted to do). 3For the reasons set out below, the Appeal Panel has decided that non-payment of the amount of the cancelled rental rebates does not constitute not paying rent on time in breach of the residential tenancy agreement for the purposes of the appellant's notice of termination and ss 82, 87 and 88 of the Residential Tenancies Act 2010 (NSW) (the RT Act). Accordingly, the appeal should be dismissed. Facts 4The facts found by the Tribunal below include what is set out in the following paragraphs. The respondent entered into a written tenancy agreement in respect of the premises in question with the New South Wales Department of Housing on 15 October 1990. It was not in dispute that the appellant succeeded the Department as the owner of the premises and the landlord under the tenancy agreement and was entitled to bring these proceedings. 5The terms of the tenancy agreement in its original form included that the weekly rent was $180 per week, and this has generally been referred to as the "market rent". As the Appeal Panel understands it, the market rent could be increased from time to time in accordance with the relevant procedures for so doing under s 41 of the RT Act or similar provisions of the earlier Act. 6Under the agreement, the tenant's obligation was "to pay rent in advance which is due every Monday at any office listed on the rent account card". 7Clauses 26 and 27 of the agreement were as follows: 26 The landlord and the tenant agree that the landlord may formulate a policy for the granting of rebates or waiver of rents. The parties agree that in accordance with such policy the Department may grant a rebate or waive rent at its discretion. 27 The tenant agrees to notify the landlord in writing of all income and any subsequent changes to the income of the tenant and of all other persons residing in the premises. 8In 1990, the respondent lived in the premises with his wife and four teenage sons. 9This tenancy agreement is now characterised as a social housing tenancy agreement, as defined in s 136 of the RT Act. 10In May 2011, the respondent's wife died and he reported to the appellant that three of his sons had returned home to live with him. In June 2011, the appellant received information from an anonymous source that the respondent's sons had always resided at the premises. The appellant commenced an investigation into the allegation. As the Appeal Panel understands it from submissions made by the parties, the significance of the respondent's sons residing at the premises was that they earned income and that their income may not have been disclosed, in accordance with cl 27 of the tenancy agreement and for the purposes of determining whether and what rebate of rental the respondent should be granted. 11The rental rebate was cancelled by the appellant with effect from 7 November 1993 because the appellant determined that the respondent had not disclosed that his sons had been living with him at the premises. The respondent sought a review of that cancellation decision which was unsuccessful. He did not, however, seek judicial review of the decision to cancel his rental rebate. 12Given that the appellant decided to cancel the rental rebate with effect from 7 November 1993, it can be accepted that at least by that date the respondent had been granted a weekly rebate of rent payable under his tenancy agreement with the appellant (or its predecessor). 13At all relevant times prior to the appellant's decision to cancel the rental rebate the respondent paid the rebated rent, that is the market rent payable weekly under the tenancy agreement less the weekly rebate of rent which he had been granted. On cancellation of the rental rebate by the appellant, the respondent commenced paying the market rent payable under his tenancy agreement. 14The appellant relied in the Tribunal at first instance upon the assertion that the respondent was in arrears of rent. The amount of those arrears was a sum exceeding $100,000. This amount of arrears was determined by calculating the difference between the applicable market rent from the date the cancellation of the rental rebate took effect, that is 7 November 1993, and the rent actually paid by the respondent and applying that sum to the respondent's rental account with the appellant. But for the cancellation and the subsequent debiting of the respondent's account with the difference between the market rent for the premises over the years and the rebated rent the respondent had paid, there would have been no rental arrears on the respondent's rental account. There was no part of these rental arrears which was attributable to the respondent's failure to pay the correct or full rent after the rebate was cancelled. 15It was not in dispute that the respondent had not paid the amount of more than $100,000 applied to his rental account consequent upon the cancellation of the rental rebates by the appellant. The Decision at First Instance 16At first instance, the appellant sought an order terminating the respondent's tenancy agreement on the ground that he had breached the agreement by not paying rent on time and other consequential orders. The termination notice dated 11 December 2013 on which the appellant relied was given under s 88 of the RT Act. In the termination notice the appellant alleged that the respondent had breached the tenancy agreement by "not paying rent on time". No other breaches of the agreement were specified in the notice. 17The Tribunal below found that the procedural and formal requirements of ss 82, 87 and 88 of the RT Act had been satisfied and as a result the Tribunal's decision would turn upon: (1)whether the respondent breached the tenancy agreement by not paying rent on time as alleged in the termination notice; (2)whether the breach was, in the circumstances of the case, sufficient to justify termination of the agreement, in accordance with s 87(4)(a) and (b) of the RT Act. 18In relation to those issues, the Tribunal below declined to follow previous decisions of the Residential Tribunal and the Consumer Trader and Tenancy Tribunal, Department of Housing v Christodoulou [1996] NSWRT 8 and Department of Housing v Elkazzi [2004] NSWCTTT 6333, and rejected the proposition that the debt that arises on retrospective cancellation of weekly rebates of rental constitutes rent arrears arising from a failure to pay rent on time. Consequently, the Tribunal was not satisfied that the respondent had breached the tenancy agreement in the manner asserted in the termination notice. As a result of this, the Tribunal dismissed the appellant's application. The Appeal 19The appellant appealed against this decision under s 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act). This was the appropriate avenue of appeal - see New South Wales Land and Housing Corporation v Diab [2014] NSWCATAP 8. The notice of appeal was lodged on 14 February 2014 but on 31 March 2014 the appellant filed, in accordance with a direction of the Appeal Panel, an amended notice of appeal in which the grounds of appeal were reformulated. In the amended notice of appeal the appellant relied on two grounds of appeal: 1. The Tribunal erred in law in deciding that the respondent did not breach the tenancy agreement by failing to pay rent on time and in deciding that the debt arising from the cancellation of the rebate is not characterised as rent arrears pursuant to the residential tenancy agreement. 2. As a separate question, the Tribunal erred in law and made procedural error when conducting the proceedings in that it accepted into evidence material which sought to impugn the applicant's decision to impose the rent arrears/cancel the tenant's rental subsidy. 20However, in the appellant's written submissions dated 9 April 2014, the appellant indicated (at [3]) that it no longer relied upon the second ground but reserved "the right to defend any proceedings which accept into evidence material which seeks to impugn Housing's decision to impose the rent arrears/cancel a tenant's subsidy". 21Accordingly, on this appeal the Appeal Panel will only consider the two related questions raised by the first ground of appeal in the amended notice of appeal, namely: (1)whether the debt arising from the cancellation of the weekly rebates of rent should be characterised as rent arrears, that is, rent that had not been paid on time pursuant to the residential tenancy agreement; and (2)whether the respondent breached the tenancy agreement by not paying rent on time for the purposes of ss 87 and 88 of the RT Act. 22In order to address these questions it is essential to consider not only the relevant residential tenancy agreement but also the provisions of the Housing Act and the RT Act which are applicable. Relevant Legislation and Related Matters Weekly Rebates of Rental 23Weekly rebates of rental have been able to be granted under Part 7 of the Housing Act, since 1 July 2001. Part 7, ss 54 to 58, has provided since that time: 54 Application of Part This Part applies to tenants: (a) who are renting public housing, or (b) who are renting housing leased in accordance with the HomeFund Restructuring Act 1993 or that is substituted for housing leased in accordance with that Act, or (c) who belong to such class or classes of tenant as may be prescribed by the regulations. 55 Application for rental rebate A tenant to whom this Part applies may make an application to the Corporation in a form approved by the Corporation for a weekly rebate of rental. 56 Grant of rental rebate (1) The Corporation may, after making an investigation under section 58, grant to an applicant a weekly rebate of rental. (2) The amount of rebate is to be determined by the Corporation in accordance with guidelines approved by the Minister. 57 Cancellation or variation of rental rebate (1) The Corporation may, after conducting an investigation under section 58, vary or cancel any rental rebate granted under this Part. (2) The Corporation is to determine the date (being a date occurring before, on or after the making of the determination) on which the variation or cancellation has effect or is taken to have effect. (3) The Corporation is to give notice in writing to a tenant of any decision to vary or cancel any rental rebate being received by the tenant and is to include in the notice the date on which the variation or cancellation takes effect or is taken to have effect. (4) If the Corporation reduces or cancels a tenant's rental rebate under this Part with effect from a preceding date, the Corporation may, by notice in writing to the tenant, require the tenant to pay to the Corporation: (a) an amount equal to any rental rebate or part of a rental rebate received by the tenant on or after the date that the variation or cancellation took effect to which, because of the variation or cancellation, the tenant was not entitled, and (b) interest (...[at the rate relevantly prescribed]) on any outstanding amount under paragraph (a) from a date specified in the notice, being a date not earlier than the date on which the notice is issued to the tenant. (5) Any amount (together with interest) referred to in subsection (4) that is unpaid may be recovered by the Corporation as a debt in any court of competent jurisdiction. 58 Investigation of application (1) The Corporation may make an investigation to determine the weekly income of: (a) a person who is an applicant for, or a recipient of, a rental rebate under this Part, and (b) any other resident of the house in which that person resides. (2) The Corporation may require a person who is an applicant for, or a recipient of, a rental rebate under this Part to produce such evidence as the Corporation thinks fit of the person's weekly income and of the weekly income of any other resident of the house in which that person resides. 24It was common ground that, prior to the introduction of Part 7 on 1 July 2001, the landlord (whether the respondent or its predecessor, the Department of Housing) also granted weekly rebates of rental under a policy developed by the landlord. This was not done, however, under the Housing Act 1985 (NSW) since there was no provision in that Act permitting or referring to rebates of rental. The policy which existed at the time the residential tenancy agreement in its original form was entered into was referred to in cl 26 of that agreement. That clause contained the express agreement of the parties that "in accordance with such policy the Department may grant a rebate or waive rent at its discretion". There was no specific evidence as to the terms of this policy at the time the agreement was entered into although some parts of the policy, in its present form, not as it was in 1990 to 1993, were referred to in submissions below and one part was read to the Appeal Panel. Termination of Residential Tenancy Agreements 25The Tribunal's power to terminate a residential tenancy agreement is found in the RT Act. It can be noted here that the parties also referred to the Residential Tenancies Act 1987 because the tenancy the subject of the appeal commenced in late 1990 and the decisions relied upon by the appellant and referred to in the reasons for decision below were made under the 1987 Act. However, there was no issue taken that there was any relevant amendment to the legislation or any relevant difference between the 1987 Act and the 2010 Act which might affect the outcome of the appeal. In these reasons we deal with the provisions of the 2010 Act, only specifically referring to the 1987 Act where it is necessary to do so. 26The termination notice which was the foundation for the application at first instance relied on a breach of the residential tenancy agreement solely arising from failure to pay rent. The termination notice was issued to the respondent pursuant to s 88 of the RT Act. That section states: 88 Termination notices for non-payment of rent (1) A termination notice given by a landlord on the ground of a breach of the residential tenancy agreement solely arising from failure to pay rent (a "non-payment termination notice") has no effect unless the rent has remained unpaid in breach of the agreement for not less than 14 days before the notice is given. (2) A non-payment termination notice is not ineffective merely because of any failure of the landlord or the landlord's agent to make a prior formal demand for payment of the rent. (3) A non-payment termination notice must inform the tenant that the tenant is not required to vacate the residential premises if the tenant pays all the rent owing or enters into, and fully complies with, a repayment plan agreed with the landlord, unless the Tribunal makes a termination order on the basis that the tenant has frequently failed to pay rent on time. (4) Despite any other provision of this Part, a landlord may apply to the Tribunal for a termination order before the termination date specified in a non-payment termination notice. The Tribunal must not consider any such application until after the termination date. 27Section 82 of the RT Act specifies some of the matters which must be included in a s 88 termination notice: 82 Termination notices (1) A termination notice must set out the following matters: (a) the residential premises concerned, (b) the day on which the residential tenancy agreement is terminated and by which vacant possession of the premises is to be given, (c) if the notice is not given under section 84, 85, 96 or 97, the ground for the notice, (d) any other matters prescribed by the regulations. (2) A termination notice must be in writing and be signed by the party giving the notice or the party's agent. (3) A termination notice for a periodic agreement may specify a day other than the last day of a period for the payment of rent as the termination date. 28Section 87 confers on the Tribunal the power to terminate a residential tenancy agreement in a case of breach. It provides: 87 Breach of agreement (1) A landlord may give a termination notice on the ground that the tenant has breached the residential tenancy agreement. (2) The termination notice must specify a termination date that is not earlier than 14 days after the day on which the notice is given. (3) The termination notice may specify a termination date that is before the end of the fixed term of the residential tenancy agreement if it is a fixed term agreement. (4) The Tribunal may, on application by a landlord, make a termination order if it is satisfied that: (a) the tenant has breached the residential tenancy agreement, and (b) the breach is, in the circumstances of the case, sufficient to justify termination of the agreement, and (c) the termination notice was given in accordance with this section and the tenant has not vacated the premises as required by the notice. (5) In considering the circumstances of the case, the Tribunal may consider (but is not limited to considering) the following: (a) the nature of the breach, (b) any previous breaches, (c) any steps taken by the tenant to remedy the breach, (d) any steps taken by the landlord about the breach, (e) the previous history of the tenancy. (6) The Tribunal may refuse to make a termination order if it is satisfied that the tenant has remedied the breach. 29Section 152 sets out additional matters to be considered if the residential tenancy agreement is a social housing tenancy agreement. None of its provisions is, however, relevant in the present appeal. 30When s 88 of the RT Act uses the expressions "failure to pay rent" and "the rent has remained unpaid in breach of the agreement for not less than 14 days before the notice is given", the "rent" referred to is defined in s 3(1) of the RT Act as follows: rent means an amount payable by a tenant under a residential tenancy agreement for the right to occupy premises for a period of the agreement. References to Rental Rebates in the RT Act 31The only substantive provisions of the RT Act which refer to rental rebates are ss 136 and 141. Those sections provide, in part: 136 Definitions In this Part: ... rent rebate means an amount waived or remitted, in accordance with a rent rebate scheme administered by a social housing provider, from rent payable to a social housing provider. ... 141 Cancellation or reduction of rent rebates (1) A tenant under a social housing tenancy agreement whose rent rebate is cancelled may apply to the Tribunal for an order declaring that the rent payable under the agreement (or a proposed social housing tenancy agreement for premises already occupied by the tenant) is excessive. (2) The tenant may do so within the period prescribed by the regulations after the cancellation of the rent rebate takes effect. (3) This section is in addition to any other provision of this Act. 32It was not in dispute that the appellant was a social housing provider and that the respondent was a tenant under a social housing tenancy agreement. Section 141 would permit the respondent to apply to the Tribunal for an order declaring the rent payable under the tenancy agreement in this case is excessive. No such application has been made by the respondent and he has paid rent at the applicable market rate without a rebate since his rental rebate was cancelled. Was the Debt arising from the Cancellation of Rental Rebates Rent Not Paid On Time? 33Of the two issues raised in the grounds of appeal relied upon by the appellant the first which will be addressed is whether the debt arising from the cancellation of the weekly rebates of rental should be characterised as rent arrears, that is, rent that had not been paid on time pursuant to the residential tenancy agreement. 34The appellant submitted in effect that the cancellation of the weekly rebates of rental retrospectively from 7 November 1993 had the consequence that the respondent owed the appellant the total amount of the weekly rebates of rental of which he had had the benefit from 7 November 1993 to the date of cancellation but to which he had not been entitled. This is correct and this is the amount which was referred to in s 57(4) of the Housing Act and is the debt which is recoverable by the appellant from the respondent under s 57(5). 35It was further submitted, however, that the debt which arose on cancellation of the rental rebates should be characterised as rent arrears or rent that had not been paid on time pursuant to the residential tenancy agreement because the respondent, not being entitled to the weekly rebates of rental, had been obliged to pay the full market rent at all times from 7 November 1993 but had failed to do so. The amount the respondent had failed to pay each week was the amount of the weekly rebate of rental to which he was not entitled because it had been cancelled. 36The respondent submitted that this characterisation of the amount of the weekly rebates to which the tenant was not entitled as arrears or rent should be rejected on the basis that: (1)the granting of the rebate changed the contractual relationship under the residential tenancy agreement such that the landlord agreed to accept the rebated rent in full satisfaction of rent payable under the agreement; (2)compliance with the residential tenancy agreement was not a condition of the granting of the rent rebate; (3)treating the debt as arrears was not supported under the Department's rent rebate policy because it was not incorporated into the residential tenancy agreement through clause 26; (4)"rent rebate" defined in the RT Act, s 136, does not cause a tenant who receives a rebate to pay market rent since the definition there does not change the definition of "rent" in s 3 as " an amount payable" for the right to occupy the premises. If a rebate is applied to the rent then the rebate rent is the "amount payable"; (5)cancellation of a rebate cannot be justified as rental arrears under the RT Act, ss 140 and 141, since those sections encompass a variety of debts "in connection with a tenancy" and it cannot be taken that any or all of those encompassed debts should become arrears; and (6)the other consequences that might flow from the cancellation of the rent rebate do not incorporate a breach of the residential tenancy agreement for failure to pay rent on time (which the respondent correctly notes is the "specific ground for termination raised in the application"). The Statutory Basis for the Debt Arising on Cancellation of Rental Rebates 37It is essential, in addressing this issue, to understand how the debt arising from the cancellation of the respondent's weekly rebates of rental came about. For the period after 1 July 2001, the granting and cancellation of weekly rebates of rental was governed by Part 7 of the Housing Act. Under s 56 of that Act, the appellant could grant to an applicant such as the respondent "a weekly rebate of rental" and the amount of the rebate was to be determined by the appellant "in accordance with guidelines approved by the Minister". This is apparently what occurred in the present case. The appellant granted the respondent weekly rebates of rental under Part 7 of the Housing Act after 1 July 2001. The Appeal Panel and the Tribunal at first instance had no specific evidence or information as to the policy or policies under which rental rebates were granted prior to 1 July 2001. 38Under s 57(1) of the Housing Act, the appellant could, after conducting an investigation under s 58 of the Housing Act, cancel "any rental rebate granted under this Part [Part 7, ss 55 to 58, of the Housing Act]". The appellant did conduct such an investigation and decided to cancel the respondent's rental rebate. In accordance with s 57(2), the appellant determined that the cancellation was to take effect from 7 November 1993. In determining this date of cancellation, the appellant apparently treated the rental rebates granted between 7 November 1993 and 30 June 2001, in addition to those for the period after 1 July 2001, as having been granted under Part 7 of the 2001 Housing Act. It is not necessary for the Appeal Panel to reach a conclusion on whether that approach is correct as it does not affect the conclusion reached by the Panel. Were it necessary to decide that matter, specific evidence as to the policies under which rental rebates were granted prior to 1 July 2001, the basis upon which they could be cancelled and the consequences of cancellation would be required. 39Under s 57(4), the appellant was then entitled, by notice in writing to the respondent, to require the respondent to pay to the appellant "an amount equal to any rental rebate ... received by the tenant on or after the date that the ... cancellation took effect to which, because of the ... cancellation, the tenant was not entitled" together with interest. 40In addition, if the respondent did not pay that amount referred to in s 57(4) plus interest, under s 57(5) the appellant could recover that amount plus interest "as a debt in any court of competent jurisdiction". The lack of a reference to the Tribunal in s 57(5) means that, although the Tribunal is empowered under s 187(1)(c) to make an order for the payment of an amount of money, that provision would not allow the Tribunal to make an order for the payment of the debt referred to in s 57(5) of the Housing Act. In any event, such a monetary claim even if it were possible would be limited by the application of cl 23 of the Residential Tenancies Regulation 2010 to $30,000.00 for a claim in regard to a bond, or $15,000.00 in any other case. 41It can be noted here that there is no express provision in Part 7 of the Housing Act allowing the appellant to recover the "amount equal to any rental rebate ... received by the tenant on or after the date that the ... cancellation took effect to which, because of the ... cancellation, the tenant was not entitled" as rent under the residential tenancy agreement. The only mechanism for recovery of that amount established by the Housing Act in s 57(5) is that the amount is recoverable as a debt in any court of competent jurisdiction. 42Furthermore, the RT Act provides no express guidance on how the amount referred to in s 57(4) and the debt recoverable under s 57(5) of the Housing Act should be regarded for the purposes of a residential tenancy agreement to which it relates or for the purposes of an application for termination under ss 87 and 88 of the RT Act. 43Since neither the Housing Act nor the RT Act expressly deals with the question of whether the debt recoverable under s 57(5) constitutes arrears of rent or rent not paid on time, it is necessary to turn to the tenancy agreement in order to consider whether that debt can be so characterised under the tenancy agreement. Was the s 57(5) Debt Rent Which Had Not Been Paid On Time? 44In the absence of express statutory guidance, whether the amount of the cancelled rebates referred to in s 57(4) and recoverable as a debt under s 57(5) are properly to be characterised as rent arrears in the sense of rent that had not been paid on time pursuant to the residential tenancy agreement depends on the terms and proper construction of that agreement. 45The Appeal Panel has only the somewhat limited findings made by the Tribunal below as to the terms of the original residential tenancy agreement entered into on 15 October 1990. The specific obligation to pay rent was in the following terms: "to pay rent in advance which is due every Monday at any office listed on the rent account card". The full weekly rental, referred to in these proceedings as the market rent, at the commencement of the tenancy was $180 per week and increased in accordance with s 41 of the RT Act or similar provisions of the earlier Act. As noted above, the other terms of the original tenancy agreement included cll 26 and 27. 46Clause 26 referred to the Department of Housing (the landlord at the time of entry into the agreement) formulating a policy for the granting of rebates of rent and recorded that the "parties agree that in accordance with such policy the Department may grant a rebate or waive rent at its discretion." 47In the present case: (1)at least from 7 November 1993, the respondent was granted weekly rebates of rental in accordance with a policy formulated by the Department of Housing as expressly contemplated by cl 26 and as a consequence the appellant did not require the respondent to pay on a weekly basis the market rent but only the market rent less the amount of the weekly rebate of rental (the rebated rental); (2)after 1993, the Department was succeeded by the appellant as the landlord, the RT Act came into effect and rental rebates came to be granted under Part 7 of the RT Act not merely under a Departmental policy; (3)after 1 July 2001 and until cancellation of the rebates, the respondent was granted weekly rebates of rental under Part 7 of the Housing Act the amount of which was determined in accordance with guidelines approved by the Minister and which were able to be cancelled under s 57(1) with the consequences which flowed from cancellation under s 57(4) and (5); (4)after 1 July 2001 and until cancellation of the rebates, the appellant did not require the respondent to pay on a weekly basis the market rent but only the rebated rent. 48In the light of the matters referred to in the preceding paragraph and as a result of the fact that the appellant continued to grant to the respondent the right of occupation of the premises for the purpose of use as a residence in return for the respondent paying the rebated rent, the Tribunal below in effect found these arrangements and changes to be part of the continuing residential tenancy agreement. There was no error in so finding. 49It was appropriate to conclude that these arrangements became part of the residential tenancy agreement in this matter, in effect superseding in part and supplementing in part cl 26 and other relevant provisions of the original form of the tenancy agreement, especially those requiring the respondent to pay the market rent. The residential tenancy agreement for the relevant period was, thus, partly in writing and partly to be inferred from conduct - see County Securities Pty Ltd V Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [2] and [7] where Spigelman CJ comments upon contracts inferred from conduct and note the comments of Basten JA in Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [122] to [124]. 50Clause 27 imposed an obligation on the respondent "to notify the landlord in writing of all income and any subsequent changes to the income of the tenant and of all other persons residing in the premises." This term may have particular relevance where a rental rebate is granted on the basis that the income of all the persons residing in the premises is, in total, so low that the granting of a weekly rebate of rental would be appropriate under the relevant rental rebate policy or guidelines. Nonetheless, the express wording of cll 26 and 27 does not make the granting of a rental rebate as contemplated by cl 26 conditional upon compliance with cl 27. 51In the circumstances, the terms of the residential tenancy agreement after the respondent was granted the rental rebates were, in relation to the payment of rent, to the effect that, while ever the respondent was entitled to a weekly rebate of rental, the appellant agreed that it would accept the rebated rental paid weekly in accordance with the agreement in full satisfaction of the respondent's obligation to pay for the right to occupy the premises. After 1 July 2001, the weekly rebate was always subject to potential cancellation under s 57(1), with the consequences which flowed under s 57(4) and (5). The Appeal Panel was not taken to any material that provided information as to cancellation or the consequences of cancellation of weekly rebates prior to 1 July 2001. 52Thus, while the respondent was entitled to a weekly rebate of rental, if he paid the rebated rental on a weekly basis, he was not in breach of his obligation "to pay rent in advance which is due every Monday" under the residential tenancy agreement. After the weekly rebate of rental was cancelled under s 57(1) of the RT Act, if the respondent paid the market rental each Monday, he was not in breach of that obligation. 53These conclusions do not, however, address the issue of whether the retrospective cancellation of the weekly rental rebates had the consequence that the respondent could be found to have beached the residential tenancy agreement every week from 7 November 1993 to the date of cancellation by failing to pay the full amount of the market rent on time. As the Appeal Panel understands it, the appellant's position had inherent in it the proposition that the retrospective cancellation of the rental rebates meant that the respondent was in breach of the tenancy agreement because of failure to pay rent on time for every week between 7 November 1993 and the date of cancellation notwithstanding that before the cancellation he was not in breach. 54The Appeal Panel has difficulty accepting this proposition. The difficulty arises because the obligation which is said to have been breached as a result of retrospective cancellation was an obligation to pay a certain amount at a particular time. Generally, whether the payment by the respondent discharged his obligation to pay rent at a particular time must be considered at the time of the payment. To take a very specific example, on Monday 2 February 2009 (being a date before the appellant cancelled the rebates of rental) the respondent had the benefit of a weekly rebate of rental which the appellant had granted to him. If on that Monday he paid to the appellant the rebated rent for the week beginning from that day, he could not have been found to have breached the residential tenancy agreement by failing to pay rent on time in respect of that week. The later cancellation of the rebate did not, absent some term in the residential tenancy agreement to that effect or some equivalent statutory provision, convert conduct which, at the time of the conduct, discharged the respondent's obligations under the tenancy agreement into conduct which breached those obligations at that time. 55This conclusion is consistent with the reasoning of the predecessor to the Consumer and Commercial Division of the Tribunal, the Consumer Trader and Tenancy Tribunal, in NSW Land and Housing Corporation v Bergman [2008] NSWCTTT 1201. In that matter, the Land and Housing Corporation sought orders for termination and possession of premises the subject of a residential tenancy agreement on the basis of failure to pay rent on time. The tenant had been granted a weekly rebate of rental by the Corporation. Under s 57(3) of the 1987 Residential Tenancies Act (in substance the same as s 88(1) of the RT Act), a termination notice given by a landlord on the ground of a breach of the agreement to pay rent had no effect unless the rent had remained unpaid in breach of the agreement for not less than 14 days before the notice was given. The principal question for the Tribunal in Bergman was whether the tenant was 14 days in arrears of rent as at the date of service of the notice of termination. The market rent was $200.00 per week but the tenant was entitled to a rental rebate of $147.30 per week so that the rebated rent was $52.70 per week. The amount of rent unpaid as at the date of service of the notice of termination exceeded $105.40 (the figure of $103.40 in the report of the decision appears to be a typographical error) but was apparently less than $400. It was argued on behalf of the tenant that because the tenant did not owe $400 or more (that is 2 weeks of rent at $200 per week), she had not been in breach of the agreement to pay rent for not less than 14 days. This was said to follow because the rent which the tenant agreed to pay under the residential tenancy agreement was the market rent not the rebated rent. Senior Member Durie held in that matter: In my opinion, when the Tribunal calculates rent arrears for a tenant on a rebated rent it should, for all purposes, calculate those arrears after the rebate has been applied. It should do so in the calculation of any sum which may be owing to the landlord. It should be used in determining if a tenant is in excess of 14 days arrears as at the date of service of a notice of termination. It should be used in considering both whether a breach of a residential tenancy agreement of failure to pay rent justifies termination of the tenancy and also whether in all the circumstances of the case a tenancy should be terminated. If a tenant [of] the Applicant is paying market rent, then it is that rent which should be used for these purposes. 56This decision supports the conclusion that in determining whether the tenant has failed to pay rent on time, it is the actual amount payable at the relevant time, the rebated rent if a rental rebate has been granted and not the market rent, which must be considered when determining whether there has been a failure to pay rent on time. 57The appellant also submitted that the Tribunal below erred in holding that the appellant waived the portion of the rent constituted by the weekly rebates of rental. The Senior Member sitting in the Tribunal below did not express her conclusions by reference to waiver. As the Appeal Panel has stated above, the Senior Member's reasoning was that granting the rebate and continuing to permit the respondent to reside in the premises if he paid the rebated rent weekly had the effect of varying or amending the original contractual relationship between the parties such that the amount the respondent was required to pay in order to occupy the premises, while he had the benefit of the weekly rebates of rental, was the rebated rent. As stated earlier, there was no error in this approach. Furthermore, this reasoning was not inconsistent with the weekly rebates of rental being able to be cancelled under s 57 of the Housing Act, with all the statutory consequences which flowed from cancellation. 58The appellant did not draw the Appeal Panel's attention to any term of the residential tenancy agreement which expressly dealt with the effect of cancellation of rebates of rental. On the material available to the Appeal Panel, it should be concluded that the residential tenancy agreement did not provide that retrospective cancellation of weekly rebates of rental had the effect of rendering a tenant in breach of the agreement if the tenant had, at the time of payment, been granted a weekly rebate of rental and had paid the rebated rent on time. There was no term of the residential tenancy agreement specifying that cancellation of rental rebates rendered the respondent liable for non-payment of the rebates of rental to which he was not entitled as rent not paid on time. 59In addition, there was no provision in the tenancy agreement as it applied after at least 7 November 1993 that the amount required to be paid each week notionally included the rebated portion. There was no provision that the respondent was liable to pay the rebated portion only so long as he complied with the agreement or any particular term or terms of the agreement. There was no provision that the respondent remained liable to pay the market rent while he was receiving the benefit of rental rebates, or that the difference between the rebated rent and the full market rent was in some unspecified manner notionally accumulating as rental arrears in the event that the rebate were cancelled retrospectively. 60Similarly, it was not suggested that the RT Act, the Housing Act or any other legislation contained a provision that a retrospective cancellation of rental rebates meant that a tenant was in breach of the agreement by failing to pay rent on time when the tenant had in fact paid the rebated rental on time. 61Indeed, the definition of "rent" in the RT Act provides some, albeit equivocal, support for the view that such a conclusion should not be adopted. Under the RT Act, "rent" is defined in s 3(1) as "an amount payable by a tenant under a residential tenancy agreement for the right to occupy premises for a period of the agreement." In the present case where the rent was payable weekly, "a period of the agreement" refers to each one week period of the tenancy. 62During the time when the respondent had been granted weekly rebates of rental by the appellant (or its predecessor), the amount payable by the respondent under the residential tenancy agreement for the right to occupy the premises each week was in fact the rebated rent, that is, the market rent less the weekly rebate of rental. Thus, for the purposes of the RT Act the "rent" in respect of the respondent's residential tenancy agreement from at least 7 November 1993 until the date when the rebates were cancelled was the rebated rent payable for each week during that time. Accordingly, a failure to pay "rent" for the purposes of the RT Act would only have occurred during that time if the respondent had not paid the rebated rent due in respect a relevant week. 63In the absence of any term in the residential tenancy agreement establishing that the retrospective cancellation of the rental rebates led to a breach of the obligation to pay rent on time or legislation to a similar effect, the consequences which flowed from cancellation of the rebates of rental were only those specified in the Part 7 of the Housing Act, and in particular in s 57. Thus in the present case the cancellation of the rebates of rental under s 57(1) had no consequences other than the following: (1)after the cancellation, the respondent was required to pay the market rent each week in order to discharge his obligation "to pay rent in advance which is due every Monday" under the residential tenancy agreement; (2)the appellant could by notice in writing to the respondent, require the respondent to pay to the appellant the amount of the rental rebates received to which the respondent was not entitled because of the cancellation plus interest - s 57(4); and (3)the appellant could recover that amount plus interest as a debt in any court of competent jurisdiction - s 57(5). 64The appellant was not left without a remedy in relation to the rental rebates to which the respondent was not entitled following cancellation of rental rebates under s 57 of the Housing Act. Nonetheless, s 57 does not establish a regime whereby the amount referred to in s 57(4) or the debt referred to in s 57(5) could be recovered as "rent" payable at the time when each of the payments of rebated rent had been made. 65For these reasons, the Appeal Panel concludes that the amount of the rebates of rental to which the respondent was no longer entitled because of the cancellation of those rebates under s 57(1) was a debt owed by the respondent to the appellant but that amount did not constitute rent arrears in the sense of rent that had not been paid on time pursuant to the residential tenancy agreement. Additional Bases Relied upon by the Appellant 66In addition to the arguments dealt with above, the appellant also relied upon a number of additional submissions. The Appeal Panel will deal with these before turning to the issue of whether the respondent breached the residential tenancy agreement by not paying rent on time. 67First, the appellant's submissions included an argument to the effect that the respondent's entitlement to the weekly rebates of rental was conditional on his compliance with cl 27 of the tenancy agreement. As a result, if he did not comply with that clause at any particular time, he was not entitled to the rental rebates at that time. Thus, on each occasion when he was in breach of cl 27 and he paid only the rebated rent, he was in breach of the residential tenancy agreement and failed to pay the full amount of rent due on time. 68This argument depends upon it being a term of the tenancy agreement that entitlement to the weekly rebates of rental was conditional upon compliance with cl 27. There was no such express term in the residential tenancy agreement. Nor would it be implied upon the usual principles relating to the implication of terms in a contract as set out in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337 at 347. Moreover, such a term could not be included in the tenancy agreement in the light of the prohibitions contained in s 19 of the RT Act (and ss 42 and 43 of the 1987 Act). Section 19 states: 19 Prohibited terms (1) A residential tenancy agreement must not contain a term of a kind set out in this section or prescribed by the regulations for the purposes of this section. (2) Terms having the following effects must not be included in a residential tenancy agreement: ... (d) that, if the tenant breaches the agreement, the tenant is liable to pay all or any part of the remaining rent under the agreement, increased rent, a penalty or liquidated damages, (e) that, if the tenant does not breach the agreement, the rent is or may be reduced or the tenant is to be or may be paid a rebate of rent or other benefit. 69Given the definition of "rent" in the RT Act, a term that failure to comply with cl 27 had the effect that the respondent was liable to pay "increased rent" being the market rent rather than the rebated rent could not be included in a residential tenancy agreement as a result of the operation of s 19(2)(d). Similarly, under s 19(2)(e) a term that if the respondent did not breach cl 27, the respondent was or might be paid a rebate of rent would also be prohibited. 70Secondly, the appellant also relied upon two decisions of predecessor tribunals of the Tribunal to support its position. These were Department of Housing v Christodoulou [1996] NSWRT 8 and Department of Housing of New South Wales v Elkazzi [2004] NSWCTTT 633. 71In Department of Housing v Christodoulou [1996] NSWRT 8, the Member of the Residential Tribunal in that matter held that: [i]n many cases this [a cancellation of rebate] has led to a retrospective debiting of an amount into the rental account being the difference between the abated rent and the market rents or some other figure which should in fact have represented the correct abated rent amount. In my opinion moneys so debited to an account may truly be regarded as rent arrears. This follows from the statement that from the [sic] my perspective the rent is truly the market rent." 72This was based upon his "perspective" that "rent in relation to Department of Housing Tenancies means at all times the market rent then payable". It was also held that "[e]xperience has shown" that the grant or withdrawal of a rebate was not connected with compliance with the terms of a tenancy agreement. 73In relation to the particular circumstances of Mrs Christodoulou, however, the Member found that "in this case Mrs Christodoulou always paid $101.50 per fortnight being the rent abated to that figure pursuant to a grant of rental rebate" and then concluded: It is quite clear that if Mrs Christodoulou was not notified of the cancellation of her rebate, and that a greater amount of rent was being debited to her account, then she could not be in breach of her agreement to pay rent on time. 74The conclusion is consistent with payment of the rebated rent satisfying the obligation to pay rent under the tenancy agreement and inconsistent with the rent due always being the market rent. 75The Appeal Panel does not accept that any statement of principle of general application can be extracted from this decision. Further, given the terms (both express and those arising by conduct) of the tenancy agreement the subject of these proceedings and the definition of "rent" in the RT Act, it would be inappropriate to apply any reasoning from Christodoulou in the present case. Under the residential tenancy agreement between the appellant and the respondent in this case, the "rent" payable each week was not at all times the market rent. 76There are further difficulties with Christodoulou which mean that it should not now be followed. The decision as reported does not provide a clear indication of the nature of the alleged debt. On one reading, the decision could be seen as referring to rental arrears arising only after the date the rebate was stated to have "lapsed". The Member adjourned the hearing because in his view the application raised a series of important issues being matters of public interest which required clarification "arising from the Department's standard tenancy agreement". Before the hearing recommenced, the applicant advised it wished to withdraw the application, treating the premises as abandoned. The Member refused leave to withdraw, stating that the matters of public interest needed to be decided. He then went on to consider eight separate issues most of which related to the wording of the Department of Housing's standard form of tenancy agreement current in 1996. It is not clear that these issues all related to the particular application before him. They were said to be matters of, and were discussed as matters of, public or general interest. Having considered those issues, including those discussed in the previous paragraph, the Member gave consent to the withdrawal of the application. None of the issues discussed by him, or the conclusions reached by him in relation thereto, were said to be necessary to his decision granting consent. Furthermore, it is not clear to what extent the issues upon which the Member opined were the subject of full submissions or argument before him. 77In Elkazzi the Senior Member was responding to a submission of the tenant that accumulation of the debt, being the difference between a rebate to which the tenant was not entitled and the market rent, was a "fiction". This arose in the context of the practice of the appellant (at least at that time) of entering for each payment period the weekly market rent as a debit, and then two credit amounts, one being the rebated rent paid weekly by the tenant and the other a payment made by the landlord of the amount of the weekly rebate of rent. There was no evidence that the second such payment was actually made, rather than being a book entry. The submission was that, on cancellation of the rental rebate, the debt recoverable under s 57(5) arose and this had been debited to the tenant's rental account but "[a]s the money has been paid to the tenant the Corporation cannot seek to recover that sum as rent arrears". The Senior Member rejected the submission on the following basis: I do not consider the entry on the ledger of an amount which is the difference between the subsidised rent the market rent is in fact a payment to the tenant. The creation of the debt is not a fiction, it is probably better to view the amount which has been debited to the tenant's ledger as a debt for rent arrears, the liability for which had been conditionally waived on apparent compliance with contractual and other requirements, and the waiver withdrawn on a determination made that conditions for the waiver have not been satisfied. and Having regard to the provisions of the Housing Act 2001, the subsidy application forms before me and the terms of the residential tenancy agreement between the parties the rebate or subsidy provided by the Corporation can be seen as a conditional waiver by the Corporation of the tenant's obligations to pay market rent under the residential tenancy agreement. The mechanisms by which the subsidy procedures operate are for the most part outside the scope of the residential tenancy agreement, however there are clauses in the tenancy agreement which deal with at least part of the tenant's obligations in respect of the rebate policy. The tenancy agreement imposes an obligation on the tenant to pay the rent agreed to under the agreement. The exemption provided under s132 in relation to notices of rent increase is not relevant to that obligation. To that extent the view can be taken that when a rebate is given it is given as to part of the rent and is therefore a waiver of part of the obligation to pay rent under the agreement. The waiver is conditional on the tenant complying with his obligations as to disclosure of the persons residing in the premises and their income which, whatever else they might also be, are contractual obligations under the residential tenancy agreement. There may be other arrangements between the parties to support the rebate policy however in my view there is sufficient connection to the tenancy agreement for the amount of rebate which is cancelled to form rent arrears under the tenancy agreement. 78The Senior Member at first instance in this matter was correct not to accept the reasoning in Elkazzi. She noted that the tenancy agreement in the case, the subject of this appeal, did not make the granting of a rebate conditional on compliance with the terms of the agreement and that a term to that effect could not be implied into the agreement. The Appeal Panel's reasons for rejecting the proposition that the entitlement to the rental rebates was conditional upon continuing compliance with the obligations contained in cl 27 have been set out above. Further, the Panel does not accept that the rebates of rental operate as a contractual conditional waiver of part of the obligation to pay rent which could result in a tenant being retrospectively in breach of the tenancy agreement by non-payment of rent on time, even though at the time of payment of the rebated rent the tenant would not have been in breach. In the Panel's view, the consequences of cancellation of rebates of rental and the remedies available to recover the amount of the rebates to which a tenant was not entitled because of retrospective cancellation are those expressly provided in s 57 of the Housing Act. These do not include retrospectively rendering the tenant liable for breach of the tenancy agreement because of non-payment of rent on time. 79Further, to the extent that the Senior Member below found that while the respondent had the benefit of the rental rebates, he was also subject to the obligations in cl 27, we do not accept that she was thereby stating that his receipt of that benefit was in a contractual sense conditional upon compliance with cl 27. The facts that might have established non-compliance with cl 27 were also likely to have been relevant to the appellant's investigation under s 58 of the Housing Act and its decision to cancel the rebates of rental under s 57(1). The cancellation process under ss 57 and 58 and the consequences of cancellation under s 57(4) and (5) are founded upon the Housing Act and do not depend for their efficacy upon the terms of the residential tenancy agreement. 80The decision and reasoning in Elkazzi should not be followed. Did the Respondent Breach the Tenancy Agreement by Not Paying Rent on Time within ss 87 and 88 of the RT Act? 81In the light of the conclusion that the debt arising under s 57(5) in the present case did not constitute rent that had not been paid on time and given that the respondent had paid all other amounts due in respect of rent under the residential tenancy agreement, it follows that the respondent did not breach the tenancy agreement by not paying rent on time as alleged by the appellant. Accordingly, Senior Member Rosser did not fall into error by concluding that the respondent had not breached the tenancy agreement by failing to pay rent on time for the purposes of s 87(4)(a) of the RT Act. 82In these circumstances the question of whether the breach was, in the circumstances of the case, sufficient to justify termination of the agreement under s 87(4)(b) did not arise. 83It should be observed here that the appellant might have alleged other breaches of the tenancy agreement and have sought a termination order under s 87 of the RT Act on bases other than non-payment of rent on time. It did not do so. The notice of termination only alleged breach of the residential tenancy agreement by "not paying rent on time". This being the case, there was no other breach which could relevantly have formed the basis for a termination order in the present proceedings. Conclusion on the Appeal 84For the reasons above, the appeal should be dismissed. Orders 85Accordingly, the Appeal Panel makes orders as follows: (1)The appeal is dismissed. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar ********** 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: 03 June 2014