Ehrenfeld & Anor v Nan Sun & Ors

Mrs Michelle Ann Ehrenfeld leases premises in George Street, Dover Heights (“the premises”) from Nan Sun under a residential tenancy agreement (“the lease agreement”) which commenced on 19 July 2016 and concludes on 18 July 2017. As at today, 28 April 2017, there are approximately 10 weeks to run on the lease. Mrs Ehrenfeld lives in the premises with her husband Mr Gabriel Ehrenfeld and two of their adult children.

On 26 April 2017 the NSW Civil and Administrative Tribunal (“NCAT”) decided (“the NCAT decision”) to terminate the lease agreement under Residential Tenancies Act 2010 (“the Act”), s 87. It did so on the ground that the tenant had breached the lease agreement by failing to pay rent. NCAT was satisfied under the Act, s 89(5) that the tenant had frequently failed to the pay the rent owing. So NCAT terminated the lease agreement immediately. NCAT ordered that possession was to be given to the landlord on the date of termination.

NCAT found that $8,045.71 in rent was due on 26 April (being the rent from 14 March 2017 to 26 April 2017), under the lease agreement. That amount remains outstanding today. The only parties to the NCAT proceedings at the time they were decided, were Nan Sun and Mrs Ehrenfeld.

Mrs Ehrenfeld and her husband both approached the Court late yesterday, 27 April, in the Duty List. They sought to file a Summons which names Nan Sun, the registered proprietor of the premises, and Nan Sun’s leasing agent, Megaward Pty Ltd trading as “the Megaward Property Group” (“Megaward”), as the first and second defendants and NCAT as the third defendant. The Summons claiming relief as plaintiffs: (1) to restrain Nan Sun and Megaward from acting on the NCAT decision; and (2) to restrain them from taking possession of the premises, or interfering with Mr and Mrs Ehrenfeld's quiet enjoyment of the premises. Although Mrs Ehrenfeld is the only named tenant in the lease agreement, Mr Ehrenfeld also claims the relief sought in the Summons. Yesterday, the Court authorised service on the defendants and made temporary restraining orders which, unless extended, will expire at 5 pm this afternoon.

Mr and Mrs Ehrenfeld were both present yesterday. Today, when the matter was returnable before the Court at 3 pm, Mr Ehrenfeld continued to represent the couple. Mrs Ehrenfeld had expressly authorised Mr Ehrenfeld to represent her interests. The Court gave leave for him to do so both yesterday and today. Mrs Ehrenfeld said she had other employment duties and claimed not to be able to be present at all times in Court.

The standard form of lease agreement under the Act provides a space on the first page for the lessor’s name to be inserted. The entity named in the lessor section of the lease agreement is Megaward Pty Ltd. But the standard form makes clear that the person named as lessor, can be either the owner or the owner's agent. Megaward is the managing agent for Nan Sun.

This matter came on late today, 28 April, in a busy Equity Duty List. The plaintiffs sought to extend the existing restraint, pending final hearing. They relied upon the same evidence as had been read yesterday, namely, Mr and Mrs Ehrenfeld’s respective affidavits of 27 April.

Ms Angelina Wen an employee of Megaward sought leave to appear for Nan Sun and Megaward. Ms Wen is not legally qualified. But as the amount ultimately in issue in relation to these proceedings is very modest, the Court gave her leave to appear. Through Ms Wen the first and second defendants tendered the original lease agreement, a notice of termination and correspondence recording Megaward chasing arrears of rent on the premises.

The Court asked the plaintiffs to define the legal basis of the relief they sought. Mr Ehrenfeld was not readily able to articulate a precise legal basis for the relief. But he in substance submitted that there had been a denial of procedural fairness in the NCAT hearing on 26 April and that the restraint now being sought was in substance ancillary to an application for prerogative relief to quash the decision of the Tribunal.

The NCAT decision included the following orders:

NCAT’s reasons make clear that the overdue rent of $8,045.71 referred to in Order 7 was for the period from 14 March 2017 to 26 April 2017.

NCAT gave reasons for its orders and explained the procedural steps leading to its decision, including Mr Ehrenfeld’s removal as one of the named parties to the NCAT proceedings.

NCAT then made findings based on the contested evidence before it. These findings were the following:

Two questions arise in this, as in every hearing for an interlocutory injunction: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199. First, the Court must consider whether there is a serious question to be tried at a final hearing. The second question is the balance of convenience, to assess whether injustice will be occasioned to any party before a final hearing by the making of the orders requested and whether any injustice is able to be mitigated by terms imposed in this Court.

As earlier indicated, the plaintiffs appear to be proceeding under the Court's general power to grant an injunction or prerogative relief to restrain the first and second defendants from acting on the NCAT decision, which is allegedly void because of a denial of procedural fairness. As neither party was legally represented in this Duty List hearing, analysis of the legal basis for the plaintiffs’ Summons was not developed beyond this bare statement.

Leaving aside for a moment the plaintiffs’ substantive claim of denial of procedural fairness, strong discretionary and procedural obstacles stand in the way of the plaintiffs’ success at final hearing. Principal among these is that adequate alternative remedies to prerogative relief may be available to the plaintiffs in NCAT, which the plaintiffs have not sought to deploy before coming to this Court: see for example, Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 73 ALD 321 at 327 [33].

For example, the plaintiff almost certainly had additional options for relief available to him including an internal appeal to an Appeal Panel in accordance with the Civil and Administrative Tribunal Act 2013, Schedule 4.

A party to an NCAT hearing, with the leave of this Court, may appeal on a question of law an “appealable decision” of NCAT, as defined in Civil and Administrative Tribunal Act 2013 (“CAT Act”), s 82 (1). Such a decision includes, inter alia, a decision of an Appeal Panel in an internal appeal: CAT Act, s 82(1)(a). The requirements for an appeal to this Court from the Tribunal are fully set out in Division 3 of Part 6 of the Civil and Administrative Tribunal Act 2013.

There may also be jurisdictional arguments against the plaintiffs’ present application, given the jurisdictional limitations set out in the Consumer and Commercial Division Schedule of the CAT Act, Schedule 4.

It is not necessary for present purpose to go beyond these very general observations about procedural and jurisdictional issues that might arise at final hearing, before turning to the plaintiffs’ case.

The plaintiffs advance three arguments in support of their claim that NCAT denied them procedural fairness. The first of these relates to Mr Ehrenfeld’s removal as a party to the NCAT proceedings and NCAT’s refusal to hear submissions from him or to allow an adjournment for his wife to attend.

The plaintiffs’ argument arises in the following circumstances. The NCAT proceedings as originally constituted were brought by the first and second defendants against Mr and Mrs Ehrenfeld. But when the matter was heard on 26 April, NCAT at its own motion, removed him from the proceedings because he was not the tenant under the lease agreement. This left Mrs Ehrenfeld as the only respondent. As she was not present at the Tribunal, Mr Ehrenfeld applied to NCAT to represent her interests. NCAT did not given him leave, for the reasons it explained in the passages of its decision set out above. Nor did it allow him an opportunity for an adjournment to arrange for her to attend to argue her case for herself.

Looking at these facts, one can understand why Mr Ehrenfeld might wish to argue there was a denial of procedural fairness. A denial of procedural fairness arguably occurred, at least to the extent that he was denied an adjournment, so he says, to allow his wife to attend. It is arguable on the plaintiffs’ behalf at a final hearing that it was reasonable for both of them to assume that one of them could appear to represent both and that when that assumption was denied he should have been given the chance to arrange for her to appear.

It is no answer to a denial of procedural fairness case to inquire what the decision-maker would have done had procedural fairness been afforded. The denial itself is usually sufficient to ground relief avoiding the decision in question. But the Court will at final hearing need, to some extent, to assess the probable course of the NCAT proceedings, in the process of assessing the strength or weakness of the plaintiffs’ case for final discretionary relief.

Further circumstances suggest there may be discretionary reasons to decline relief to the plaintiffs at a final hearing. The rent under the lease agreement was $1,280 per week. But by late January this year it had fallen into arrears. So in early March Mrs Ehrenfeld agreed to pay an additional $1,280 a week, commencing on about 9 March 2017 for as many weeks as it took to bring the arrears up to date (“the catch-up agreement”). She paid the arrears under the catch-up agreement (together with the rent as it accrued) more or less on time for about four weeks. The defendants said she was late in the third week. She says she was ahead of time in the third week. Which of those two versions is right cannot be determined at this hearing. But it will depend on when the parties agreed that the periodic payment date of the catch-up agreement would commence. In the defendants’ opinion Mrs Ehrenfeld was late. So they commenced the NCAT proceedings for termination of the lease.

But this was not the landlord’s first application to NCAT in respect of the lease agreement. In February the landlord had applied to NCAT for the termination of the lease (the first application). The arrangement under the catch-up agreement was for the defendants to stay their hand and not pursue an NCAT application for termination of the lease agreement provided that the plaintiffs remained up to date not only with the rent but with the reduction of the arrears. So this first application was dismissed on 10 March. The second NCAT application was made on or about 17 March, after the alleged default under the catch-up agreement.

But once the defendants lodged the second application, the plaintiffs took the view the first and second defendants had repudiated their mutual arrangements under the catch-up agreement. The plaintiffs then decided they would pay no rent at all. It is difficult to fathom on what possible basis the plaintiffs could have reached this conclusion, whilst still claiming a right to occupy the premises. One would have thought they should have continued paying the rent if they wanted to maintain their right of possession. But they did not.

NCAT has the power to amend its process. If Mrs Ehrenfeld had been present on 26 April 2017, to pursue the second application for the termination of the lease, as matters then stood she would still have had to explain the non-payment of rent up to 26 April 2017 and her prior history of non-payment. She would have faced considerable difficulty in doing so. Mr Ehrenfeld says that the plaintiffs were up to date when the landlord launched the second application. The effective answer to this really is that by the time the hearing took place, they were well in arrears. When this proposition was put to Mr Ehrenfeld, he frankly confessed that there was no good reason why the rent, even if not the arrears, had continued to be paid in this period.

If Mrs Ehrenfeld had appeared arguably NCAT may have been obliged to hear argument on a claim that the plaintiffs had repudiated the catch-up agreement and that the lease agreement could be terminated in any event. The defendants may argue with some force at a final hearing that whilst the rent remains in arrears that any grant of relief would be futile.

The plaintiffs deploy two other procedural fairness arguments. Neither has much obvious merit. First, the plaintiffs contend: that the lease agreement describes Megaward as the Landlord; and that Megaward can bring the NCAT proceedings but instead they were wrongly brought in the name of Nan Sun.

This argument contains a misconception. The proceedings were brought in the name of Nan Sun. But that that does not inhibit NCAT making valid orders in respect of the premises. The lease agreement provides an option for the person whose name is entered into the lease agreement to be either the landlord or the landlord's agent. In these circumstances, I see no difficulty with proceedings being brought by the agent’s principal, the landlord, Nan Sun, even though the landlord’s agent's name was on the lease.

Finally the plaintiffs contend that the second application to NCAT was a mere duplicate of the first application; and that the dismissal of the first application means that the second cannot now be brought.

There may be many answers to this contention, which need not be addressed in this interlocutory judgment. But the contention has already been dealt with by NCAT itself. The NCAT decision of 26 April 2017 says on this subject that the first application was not dismissed on the merits:

The next hurdle for this argument at a final hearing is that the available evidence appears to show that the two applications contain different rental claims for different rental periods. But there was no apparent duplication as can be seen from the schedules of the different rent claimed in each application. In the first application the amount claimed is arrears of $6,400 up to 17 February 2017. The second application claims arrears of $6,400 up to 20 March 2017. The same amount of arrears is claimed but it is for different periods.

As to the balance of convenience, in order to prevent unfairness to the defendants, if the Court were prepared to grant interlocutory relief, particularly in light of weaknesses in the plaintiffs’ case, it would only do so on terms that gave clear financial protection to the first and second defendants, because of the several periods during which rent has already failed to be paid.

This Court cannot realistically fix a final hearing for these proceedings, even on an urgent basis, until about a month to six weeks from now. The matter may take half a day to one day to argue.

This lease only has 10 weeks to run. There is already $8,045 owing in arrears. Between now and 19 July another $1,280 per week will fall due. The total due from now until the end of the lease agreement is $23,222.85.

The plaintiffs submitted that as a term of allowing the present restraint to continue beyond this afternoon that they should be put on terms to bring the arrears up to date and then be allowed to periodically meet the rental payments as they fall due.

In light of the history of this matter, the Court is not prepared to do that. Such an order would grossly prejudice the defendant. Nan Sun may have to expend legal costs to re-list the matter to argue further for the recovery of arrears under these interim arrangements.

NCAT has been given jurisdiction over residential tenancy matters under the Act for good reason: to determine terminations of leases such as this after holding informal hearings such as the one that took place in NCAT before the plaintiffs came to this Court. Bringing a Summons to this Court may possibly be an available course but is not a substitute for NCAT’s own internal appeal processes. Depending on the result of arguments about jurisdiction and alternative remedies, the defendants may well recover their costs in any event at a final hearing.

If the Court does not impose strict financial terms upon the plaintiffs for any continuation of the present restraint, the defendants will be prejudiced. If the plaintiffs want a final hearing, the plaintiff will have to bring existing arrears up to date. And the plaintiffs should pay or secure the balance of the amounts falling due, right through to the end of the lease.

That is a fair balance in my view. It does mean that the money is being paid or secured, in advance of falling due under the lease. It may not have to be paid in advance, provided it can be secured in a satisfactory way. The Court will allow a very brief adjournment to permit the plaintiffs to make these arrangements, otherwise the injunction will be allowed to expire.

Accordingly the Court makes the following orders and directions: