Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Okun v Danielli [2020] NSWCATAP 44 Hearing dates: 11 December 2019 Date of orders: 13 March 2020 Decision date: 13 March 2020 Jurisdiction: Appeal Panel Before: P. Durack SC, Senior Member D Goldstein, Senior Member Decision: (1) For the above reasons, we extend the time for lodging the appeal to 14 October 2019 and dismiss the appeal. Catchwords: APPEALS- residential tenancy – claim by landlord for break fee – whether tenant abandoned the premises or vacated with the landlord's consent – no appellable error - no break fee recoverable Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Rules 2014 (NSW) Residential Tenancies Act 2010 Cases Cited: None cited Texts Cited: None cited Category: Principal judgment Parties: Leonid Okun (Appellant) Ashleigh & Daniel Danielli (Respondent) Representation: Solicitors: Diamond Conway Lawyers (Appellant) Respondents (Self represented) File Number(s): AP 19/45164 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: Not Applicable Date of Decision: 18 September 2019 Before: C Campbell, General Member File Number(s): RT 19/30137 REASONS FOR DECISION Overview 1. Mr Okun, the appellant landlord, appeals from the dismissal of his claim to be paid a 6 week break fee by the respondents who had let his apartment in Bondi for a number of years but vacated the premises in March 2019. 2. The claim was a claim pursuant to s 107 of the Residential Tenancies Act 2010 (RTA) which is concerned with a landlord's rights resulting from the tenant's abandonment of the premises. 3. In this case, well in advance of the tenants' departure from the premises, there were communications between landlord and tenant about the tenant leaving the premises early. The question was whether there was appellable error by the Tribunal at first instance had erred in concluding that the claim based upon abandonment of the tenancy was unsuccessful given the events that had occurred. 4. For the reasons set out below, whilst we grant the necessary short extension of time for lodging the appeal, in our opinion, the appeal should be dismissed. Facts 1. The following facts are based upon the established documentary evidence or the unchallenged findings of the Tribunal at first instance. 2. In October 2018 a new 12 month written tenancy was entered into by the parties ending on 8 October 2019. Rent was required to be paid monthly in advance. 3. The tenancy contained a break clause, relevantly, as follows (cl 41: The tenant agrees that if the tenant ends the residential tenancy agreement before the end of the fixed term of the agreement, the tenant must pay a break fee of the following amount: 41.1 if the fixed term is for 3 years or less, 6 weeks rent if less than half of the term had expired or 4 weeks rent in any other case,… …. This clause does not apply if the tenant terminates the residential tenancy agreement early for a reason that is permitted under the Residential Tenancies Act 2010. 1. The tenants vacated the premises on 2 March 2019 which was before half of the term had expired. 2. Shortly before the new tenancy was signed, on 4 October 2018, chat messages were exchanged between the parties, including the following: Hi Leon [Mr Okun], sorry for our delay. We're waiting on a response from the USA but we understand you need an answer as our lease expires on Monday. As mentioned, we are likely to move to the USA for dans work by the end of April next year. We will sign a 12mth lease with a $25/wk rent increase, but this needs to be on the proviso that we will contact you in Feb to advise you if we're leaving in April (there's a high chance of this). We don't want to be responsible for any further rent following our possible departure. On this basis, we are prepared to sign the lease agreement. Please let us know if you're agreeable? ….. Hi Ashleigh and Daniel, I understand your point. I can't say you will not be responsible at all, but, how I said, let me know in February and we will try to minimise your responsibility. I will try to do my best. …. [Our emphasis] 1. Plainly, Mr Okun did not, at this time, accede to a proposal which relieved the tenants of responsibility to pay rent after the potential early departure in 2019. 2. On 12 January 2019 (the Tribunal, incorrectly, gave the date of 13 January), chat messages occurred in which Mr Okun was notified by the respondents that Mr Danielli had accepted a role in Denver and would be heading over to start there on 11 March 2019 and the rest of the family would stay around until the end of April 2019 and would leave for America on 1 May 2019. Nothing was expressly mentioned by the tenants about responsibility for rent after departure. Instead the question was asked of Mr Okun whether he was planning to re-lease or live in the property after they left. In reply, Mr Okun simply thanked them for letting him know. 3. In chat messages in 20 January 2019, the tenants said they wanted to follow up to see how we progress the apartment and asked again whether Mr Okun was planning to re-lease or move back in. Mr Okun replied that he would not be moving in. In reply, Ms Danielli said that Dan would be moving earlier than the rest of the family on 9 March so there was a chance that if he wanted the the place back earlier they could arrange that. She indicated that they would be happy to catch up and discuss. 4. Importantly, Mr Okun replied : Hi Ashleigh, you need to look for new tenants to replace you once you vacate the apartment, since your lease expires in October 2019. Once you find them, we will need to approve them. We will do the same on our end. 1. By this response, it was again made plain by Mr Okun that he was not relieving the tenants from their obligations under the lease from the time they departed, although this would occur if new, acceptable tenants were found either by the tenants or himself. 2. It also appears from this response that Mr Okun did not have in mind the more limited exposure to rent provided for in the break clause. 3. Following this information, the tenants retained a real estate agent Ms Bloom (at Express Realty) to find a new tenant: see the proposal in the email from Ms Bloom to the respondents on the subject of "Re-lease…" of the apartment sent on 28 January 2019. 4. On 1 February 2019 there was a meeting at the apartment with Mr Okun and "the tenant": paragraph 16 of the Tribunal's reasons. It would appear this was with Mr Danielli because he subsequently spoke with Mrs Danielli about what transpired. There was no dispute that a meeting had occurred and there was no challenge on appeal to the terms of an oral "offer" found to have been made at the meeting by Mr Okun. 5. As found by the Tribunal, the offer was as follows, made in the agreed context where the rent was then paid up to 23 February 2019: 1. The tenants agree to vacate the property on 23 March 2019, 2. The landlord would use the four weeks bond money to cover the last four weeks of rent (to 23 March 2019) and the tenant would pay cash for any shortfall. (This reference to "shortfall" appears to have contemplated a shortfall in the amount of the rental bond and the monthly rent due to 23 March 2019 – in this regard, we note that the amount of the bond was $5,080.25 and the rent paid to 23 February 2019 was $5,910.00). 1. Central to the appeal is the appellant's argument that there was no finding, or suggestion in the evidence, that in this meeting the parties had any discussion whatsoever about the break fee - in particular, that the landlord agreed to waive the break fee. 2. It should also be noted that there was no finding, or suggestion by Mr Okun on appeal, that there was any discussion about any need for the tenants to find new tenants to replace them. 3. More significantly, there was nothing communicated at this meeting to suggest that the possession, which, plainly, it was intended the landlord would re-take after 23 March 2019, was on the basis that the tenant had a more extensive financial liability than the requirement to pay the rent due to 23 March 2019 and, possibly, implicitly, to meet any costs for default in returning the premises in good repair. On the contrary, it was implicit in the offer, including the communication about the use of the rental bond, and from what was not mentioned, that there would be no such further liability. 4. Later on 1 February 2019, Mr Danielli sent an email to Ms Bloom cancelling her engagement. In the email he said that there had been a change of plans as discussed that day with the landlord and they were no longer "due to re-lease" the apartment. 5. The following day, on 2 February 2019, (the Tribunal, incorrectly, gave the date of 3 February) Mr Danielli sent a chat message to Mr Okun which the Tribunal concluded was an acceptance of the offer made the previous day. The message said: Hi Leon, I had a chat with Ashleigh and we liked the idea you proposed. I believe our last payment takes us to the 23rd of this month, so if you take our bond for the payment due on the 23rd and then we sort the cash bit that should take us to the 22nd of March. Let me know if that works and your (sic) free to chat and discuss today. 1. In the evening of the day of that chat message the landlord, by arrangement, came to the apartment with a tradesman: paragraph 17 of the reasons at first instance. There was no challenge on appeal to the finding that on this occasion the landlord and "the tenant" agreed to a "slight variation of the agreement" (paragraph 18 of the reasons), namely that the tenant was to pay the rent up to 23 March 2019 in the normal way and then the tenant could claim his bond back in the usual way. 2. As we see it, this did not alter the position as we have described it in paragraph 21 above. 3. Consistently, with the agreement that the landlord would re-take possession after 23 March 2019, the landlord, with the tenants' consent had tradesman inspect the premises for some renovation works to be carried out after the tenants vacated: paragraphs 19 and 31 of the reasons and see chat messages on 11, 12 and 15 February 2019. 4. The tenants, relying on the agreement that had been reached, arranged alternative, short term accommodation for Mrs Danielli and the rest of the family for the period from vacation of the apartment up until 1 May 2019, at which time it was planned they would join Mr Danielli in the USA. This step carried with it the inconvenience of an additional move before returning to the USA. 5. To the surprise of the respondents, on 25 February 2019, after the rent to 23 March 2019 had been paid, Mr Okun visited the apartment and told them the agreement was off. He said this was because the transaction slip the respondents had provided for the last rental payment had contained the words "Last Months Rent". Mr Okun's objection was not that this statement was inaccurate, but that because of this writing he would no longer honour the agreement because he was no longer able to make a claim on his insurance policy. 6. There was an unchallenged finding of the Tribunal that at the meeting on 1 February 2019 Mr Okun had requested that nothing be put in writing about their arrangement. 7. Following this development, the tenants re-engaged Ms Bloom to try and find a replacement tenant but without success. 8. The tenants vacated the apartment on 23 March 2019. The landlord re-took possession at that time. The premises were not re-let until 1 July 2019. The tenants applied for the return of the bond and it was paid out to them by Rental Bond Services on 6 May 2019. 9. Meanwhile, on 4 April 2019, Mr Okun commenced proceedings in the Tribunal for the break fee in the amount of 6 weeks rent on the basis of "the broken lease" in the first half the tenancy agreement. The Tribunal's decision 1. Whilst not as clearly spelt out as it might have been, we interpret the Tribunal's core reasons as being: 1. The break clause in the lease was no different from a landlord's entitlement to a break fee as provided for in s 107 (4) of the RTA (paragraph 32). 2. There was no entitlement to a break fee in the circumstances of this case because there had been no abandonment of the premises by the tenants because they had vacated in accordance with the agreement reached with the landlord in early February 2019 which agreement they had fully complied with (paragraphs 29, 32 and 33). 3. The landlord was not entitled to "rescind" the early February 2019 agreement before the premises were vacated, as he had sought to do, and this agreement continued in existence between the parties at the time when the tenants vacated the premises (paragraph 33 and 34). 1. We regard the following reasons of the Tribunal (with which we do not agree) as immaterial to these core reasons. 2. First, that it inferred from the landlord's statement (just prior to the signing of the new lease) that he would try and minimise the tenants responsibility that the landlord was expressing an intention not to seek full break lease fees even if the tenants vacated prior to the end of the lease term - an inference which was confirmed by the 1 February 2019 proposal that was put to the tenants (paragraphs 28 and 29). In this regard, we do not see how such an inference was available but, relevantly, the Tribunal did not base its decision upon some agreement reached at, or just prior to, the signing of the new lease. It based its decision upon the unchallenged agreement reached in early February 2019. 3. Secondly, the Tribunal's finding that the tenants relied on the agreement reached in early February 2019 by, amongst other things, retaining the agent to find a replacement tenant (paragraph 32). However, that step only occurred because the landlord had said it would not honour the agreement. Again, this is not essential to the Tribunal's decision because, to the extent that reliance was thought to be required, the Tribunal had already found that this had occurred by arranging the alternative accommodation. The limited right of appeal 1. Under s 80 of the Civil and Administrative Tribunal Act 2013 (NCAT Act), a party may appeal as of right to the Appeal Panel in an internal appeal on any question of law. In respect of any other grounds, in the case of an appeal from the Consumer and Commercial Division of the Tribunal, the appellant must satisfy the Appeal Panel that leave to appeal should be granted under cl 12 sch 4 of the NCAT Act on the basis that: …..the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with) Extension of time in which to appeal 1. Mr Okun seeks a short extension of time in which to bring his appeal. We are prepared to grant the extension in view of the short delay and in the circumstances described below. 2. Under r 25 (4) (b) of the Civil and Administrative Rules 2014 (NSW) (the NCAT Rules) the time period to file an internal appeal from a decision made in residential proceedings is 14 days from the date the appellant was "notified" of the decision or given reasons for the decision (whichever is the later). 3. This period expired on 2 October 2019. On 4 October 2019, Mr Okun lodged an incomplete Notice of Appeal sating that he requested another two more weeks to lodge because he had been occupied taking care of his wife's health condition. He then lodged a completed Notice of Appeal on 14 October 2019. 4. In these circumstances, and because his appeal raises points that are not devoid of merit, we grant the extension sought. Grounds of Appeal 1. Through a combination of the grounds set out in the Notice of Appeal and written submissions, Mr Okun raised a variety of grounds of appeal, including both errors of law and fact. 2. As to errors of law, he contended that: 1. There was no evidence for a conclusion that the parties had agreed that the tenants could vacate without paying the contractual break fee. 2. The Tribunal had failed to engage with the landlord's core argument, namely that whilst an agreement may have been reached in early February 2019 such an agreement did not include waiver of the break fee. This was a breach of procedural fairness. 3. Alternatively, there was an absence of reasons explaining why this argument had been rejected and for the reasons for the conclusion that the landlord had rescinded the agreement concerning early termination of the tenancy. 4. The decision was legally unreasonable because it lacked an evident and intelligible justification. 1. Mr Okun also contended that the decision was against the weight of the evidence or was not fair and equitable. Again, at the heart of these contentions was the claim that there was no real evidence for a conclusion that that the parties had ever discussed waiver of the break fee, let alone any agreement to do so and there was no finding to that effect. Submissions 1. In written and oral submissions on the appeal, Mr Isackson, who appeared for the appellant elaborated upon the grounds of appeal referred to above. 2. He emphasised that the early February 2019 "agreement" was nothing more than an acknowledgment that the tenants were telling Mr Okun that they were vacating the apartment on 23 March 2019 and an agreement about how the rent for the month before their departure at that time would be paid. 3. Furthermore, or in any event, and most significantly, it was clear, he submitted that there had been no agreement to waive the break fee. 4. Mr Isackson also submitted that the Tribunal had erred in the conclusion it reached concerning the chat message in October 2918 about minimising the tenants' responsibility. In this regard, he submitted that if leave to appeal was necessary then it should be granted because the ultimate conclusion was unreasonably arrived at. Consideration 1. We begin with some reference to the law concerning termination of a residential tenancy in the circumstances with which we are concerned. 2. Section s 81 (1) states that a residential tenancy can only be terminated in the circumstances set out in the RTA. Section 81 (4) is pertinent to the present case. It, relevantly, provides: (4) Other legal reasons for termination A residential tenancy agreement terminates if any of the following occurs— ….. (d) the tenant abandons the residential premises, (e) the tenant gives up possession of the residential premises with the landlord's consent, whether or not that consent is subsequently withdrawn, ….. (g) disclaimer occurs (such as when the tenant's repudiation of the tenancy is accepted by the landlord). 1. Section 106 of the RTA makes provision for the Tribunal to declare that the residential premises have been abandoned by the tenant. The landlord may take immediate possession of the premises that have been abandoned by the tenant: s 106 (3). In determining whether the tenant has abandoned the premise the Tribunal may consider: (a) the failure by the tenant to pay rent under the residential tenancy agreement, (b) any evidence that the tenant no longer resides at the premises, (c) any failure by the tenant to carry out any obligations relating to the residential premises under the residential tenancy agreement. 1. Section 107 deals with the landlord's remedies on abandonment. It, relevantly, provides: 107 Landlord's remedies on abandonment (1) The Tribunal may, on application by a landlord, order a tenant to pay compensation to the landlord for any loss (including loss of rent) caused by the abandonment of the residential premises by the tenant. (2) The landlord must take all reasonable steps to mitigate the loss and is not entitled to compensation for any loss that could have been avoided by taking those steps. This subsection does not apply in the case of a fixed term agreement that provides for the payment of a break fee. (3) The compensation payable by a tenant under this section in respect of a fixed term agreement is the amount of the applicable break fee for the tenancy, if the agreement provides for the payment of a break fee. (4) The break fee for a fixed term agreement for a fixed term of not more than 3 years is— (a) an amount equal to 6 weeks rent if less than half of the fixed term had expired when the premises were abandoned, or (b) an amount equal to 4 weeks rent in any other case. ….. (6) The amount of any money paid by a tenant to a landlord on terminating a fixed term agreement before the end of the fixed term or before otherwise abandoning the premises (other than money previously due to the landlord under the residential tenancy agreement) is to be deducted from any amount payable to the landlord under this section. …. 1. It is sufficiently clear that the Tribunal at first instance rejected the claim that the premises had been abandoned by the tenant because vacation of the premises had occurred in performance of the early February 2019 agreement which it had relied upon in various ways. In other words, the tenants had given up possession with the consent of the landlord – an event of termination described in s 81 (4) (e) set out above. 2. Whilst not giving rise to any issue on the appeal, such an event of termination is concerned with termination by surrender: Anforth, Christensen & Adkins, Residential Tenancies Law and Practice New South Wales, 7th ed at 2.81.10. In the English case of QFS Scaffolding Ltd v Sable & Sable [2010] EWCA Civ 682 (referred to in that text) various aspects of the common law concerning such surrender are summarised (at paragraphs 7 to 14), including that it is said to be founded upon estoppel but without the need to examine the commonly accepted ingredients for the application of that principle such as reliance and detriment. 3. Be that as it may, the key point raised by the appellant was that the terms of the early February 2019 agreement as found by the Tribunal (see above) make it clear that there had been no agreement by the parties that possession could be given up early by the tenants without payment of the break fee. 4. From this proposition the appellant contends that the appeal should be upheld relying on all the various ways outlined in the grounds of appeal to which we have referred above for successful appellate review. 5. We do not agree with the appellant's key point. It is sufficiently clear the Tribunal found that the making of the early February 2019 agreement resulted in a comprehensive set of terms for the consensual termination of the tenancy (including all mutual rights and obligations). A set of terms that did not encompass a requirement to still pay the break fee. 6. Not only was such a conclusion reasonably open to the Tribunal, it was a conclusion with which we agree. We can elaborate in our own terms. Such a comprehensive agreement is to be inferred or implied from the following: 1. The landlord put what amounted to a proposal as to the terms for early, consensual termination of the tenancy. It was not a case of the tenants simply telling the landlord they were leaving. 2. Nor was it a case of a mere expression by the landlord of acknowledgment or acceptance that the tenants were leaving at a specified time, although we note that such a step might well lead to a consensual termination of the tenancy. 3. Such proposed terms for a consensual termination of the tenancy, as distinct from an abandonment or termination through breach by the tenant, carried with it the implication of an ending of the mutual rights and obligations of the parties, subject to any specific agreement to the contrary. 4. Such an ending was reinforced by the specific discussion about making the final rental payment and use of the rental bond. 1. It also seems to us to have made no (or little) commercial sense for the parties discussing an early consensual termination to have expected a six week break fee to still be paid in circumstances that might provide a windfall gain to the landlord should he manage to find a new tenant shortly after the tenants departed or, in any event, before the elapse of six weeks after their departure. If it be the case that the landlord was planning to occupy much or all of those six weeks in doing renovations, then, on the face of it, there appeared to be no justification for the tenants compensating the landlord for loss of rent. 2. On appeal, we were told by Mr Isackson that the tenants were financially better off by the move out to short term accommodation before joining Mr Danielli in the USA. However, there was no evidence presented about this in the proceedings at first instance. 3. There was no basis for any permissible challenge to the Tribunal's finding that the tenants had relied upon the early February 2019 agreement by proceeding to arrange alternative short-term accommodation. To the extent that more was required for a surrender than mere agreement to give up possession then such a step, along with the landlord re-taking possession, would appear to satisfy such a requirement. However, this was not a point that was pursued on appeal. 4. We think it is sufficiently clear, first, that the Tribunal found that it was not open to the landlord to cancel the early February 2019 agreement. (The effect of a lawful cancellation would have been that the tenants were in breach in giving up possession on 23 March 2019). Such a conclusion was implicit in the Tribunal's incorrect reference to the landlord's rescission of the agreement (paragraph 33) and implicit conclusion that this had not been effective. 5. It is, we think, also sufficiently clear that the Tribunal's reasons for that conclusion were that the February 2019 agreement was an enforceable agreement when made (an issue that was not raised on appeal) which agreement had been fully performed by the tenants. In so finding the Tribunal found that it was no part of this agreement that the landlord would be able to make a claim on his insurance; paragraph 34 of the reasons. Understandably, it was not suggested on appeal that there was a term of the agreement that the tenant would not put anything in writing about it and that such a term had been breached by the tenants. 6. We do not uphold the appellant's contention that the Tribunal did not engage with the core argument about the absence of an agreement to waive the break fee. It was implicit in the Tribunal's reasoning that this argument was rejected by the findings as to the making of February 2019 agreement and its terms which had not included a term that the break fee was, nevertheless, payable. 7. We accept that the Tribunal did not explain its reasons for such rejection as fully as it might have done and, as appears from our reasoning set out above, the same conclusion, which we consider to be the correct conclusion, could have been arrived at by more detailed reasoning. However, that is not the test as to whether an absence of detail in the reasons concerning the particular argument advanced has given rise to an error of law. The question is whether the reasons on this issue met the minimum acceptable standard: New South Wales Land and Housing Corporation v Orr [2019] NSWCA 231 per Bell P at [66]. We think they did. It was sufficiently clear why the argument was not upheld, namely that the February 2019 agreement was a comprehensive set of terms for the consensual termination of the tenancy. 8. We have already said that we do not agree with the Tribunal's conclusion about the effect of the chat message before the signing of the lease. However, this was not part of the foundation for the decision which foundation lay in the making and effect of the early February 2019 agreement. ORDERS 1. For the above reasons, we extend the time for lodging the appeal to 14 October 2019 and dismiss the appeal. ********** 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: 13 March 2020