Orr v New South Wales Land and Housing Corporation (No 2)

By summons filed on 14 November 2018, the plaintiff, Susan Orr (the tenant) seeks leave to appeal against the decision of the Appeal Panel of the Civil and Administrative Tribunal (the Tribunal) on 9 October 2018 that her social housing tenancy (the tenancy) was terminated (the Appeal Panel Decision). The Appeal Panel directed that possession of the premises occupied by the tenant pursuant to the tenancy was to be given to the defendant, NSW Land and Housing Corporation (the landlord) on 20 November 2018.

When the matter came before Fagan J as Duty Judge on 20 November 2018, the landlord gave an assurance that the tenant’s possession would not be disturbed until the matter came before the Court on 21 November 2018, at which point the application for a stay would be determined. On 21 November 2018, I granted a stay until further order and listed the matter for final hearing on 10 December 2018.

Before turning to the facts and the proposed grounds of appeal if leave is granted, I will set out the relevant legislation. All references in these reasons to legislation are, unless otherwise stated, references to the Residential Tenancies Act 2010 (NSW) (the Act).

An internal appeal from a final decision of the Tribunal may be made to the Appeal Panel as of right on a question of law and, by leave, on any other ground: s 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (the CAT Act). Clause 12 of Sch 4 to the CAT Act relevantly provides

Section 81 of the CAT Act provides:

An appeal to this Court lies only by leave on a question of law: s 83 of the CAT Act.

The Tribunal, including an Appeal Panel, is obliged to give reasons on request. Section 62(3) provides:

Part 5 of the Act is concerned with termination of residential tenancies. Division 2 of Part 5 is concerned with termination of such tenancies by landlords. Section 91, which is contained within Division 2 of Part 5, relevantly provides:

Part 7 of the Act is entitled “Social housing tenancy agreements” and contains s 137 which provides that a provision of Part 7 prevails to the extent of any inconsistency between it and any other provision of the Act. Division 5 of Part 7 is concerned with termination of social housing tenancy agreements. Sections 154D and 154E are contained in Subdivision 4 of Division 5 of Part 7, which is concerned with termination for breach.

Section 154D relevantly provides:

Section 154E relevantly provides:

Section 154G, which is contained in Subdivision 5 of Division 5 of Part 7, relevantly provides:

Before turning to the proposed grounds of leave, I will summarise the relevant facts as found in the reasons for the Appeal Panel Decision.

The landlord and the tenant entered into an agreement for the tenancy in April 2009. On 17 April 2017, NSW Police executed a search warrant and discovered 31 cannabis plants on the premises. The tenant was charged and pleaded guilty to cultivation of the cannabis plants.

The landlord applied to the Tribunal for a termination order of the tenancy under s 91(1)(a) of the Act on the basis of the conviction referred to above. The Tribunal found that the tenant suffers from post-traumatic stress disorder, which is a disability within the meaning of the Anti-Discrimination Act 1977 (NSW). The Tribunal found that the tenant would suffer undue hardship if her tenancy agreement were terminated, on the following bases:

On 9 February 2017 the Tribunal dismissed the application for termination and possession (the First Tribunal Decision).

The landlord’s appeal against the First Tribunal Decision was pending as at 9 March 2017, when the police executed a second search warrant. The police found ten cannabis plants on the premises, seven of which were over two metres tall, and a quantity of cannabis leaf and seeds. The tenant told police that her daughter was cultivating the cannabis. On 17 May 2017 the tenant pleaded guilty to cultivating cannabis. A community service order was made.

On 28 July 2017 the landlord’s appeal against the First Tribunal Decision was withdrawn and dismissed.

On 20 April 2017 the landlord lodged an application in the Tribunal to terminate the agreement under s 91(1)(a). The matter was listed for hearing on 30 October 2017.

It was common ground in the Tribunal that cannabis is a prohibited drug within the meaning of s 91(1)(a) and that the tenant has post-traumatic stress disorder, which is a disability for the purposes of the Anti-Discrimination Act.

The tenant defended the landlord’s application on the basis that she would suffer undue hardship if her tenancy were terminated. She alleged that she did not realise the seriousness of reoffending after the First Tribunal Decision and that the stress of being evicted and the difficulty of finding private rental accommodation could cause a re-occurrence of the cerebral aneurism she had suffered in 2013. The tenant also said that she would have difficulty finding alternative accommodation because she has three dogs and two cats.

The Tribunal was not satisfied that the tenant would suffer undue hardship if her tenancy was terminated (the Second Tribunal Decision). The Tribunal found that the tenant was at fault by growing cannabis in the premises again a short time after she had successfully resisted a termination order on the basis of undue hardship. The Tribunal said, at [8]:

The Tribunal purported to consider s 154E on the alternative basis (on the assumption that the tenant would suffer undue hardship in that event). It said, at [9]:

The Tribunal continued in [9]:

Accordingly, the Tribunal found that the tenancy should be terminated on the alternative basis.

On 16 January 2018 the tenant lodged a notice of appeal against the Second Tribunal Decision. The appeal was an internal appeal under s 80 of the CAT Act and, as such, was heard by the Appeal Panel.

The tenant appealed as of right on the following grounds which were accepted to raise questions of law:

The tenant also sought leave to appeal on the basis that the Tribunal’s decision that termination would not cause undue hardship to the appellant was against the weight of evidence: cl 12(1)(b) of Sch 4 of the CAT Act.

The Appeal Panel considered the statutory framework and, having set out the relevant provisions, said:

The Appeal Panel considered that s 154D(3) required specific consideration to be given to the impact of termination of the social housing tenancy on a person with a disability, in this case, the tenant. The Appeal Panel found that the Tribunal’s interpretation of “undue hardship” as meaning “consequences out of proportion to the tenant’s fault” omitted this consideration and was, therefore, erroneous. The Appeal Panel did not determine for itself whether the tenant would be likely to suffer undue hardship if a termination order were made but proceeded to consider whether the Tribunal had correctly exercised its discretion on the alternative basis (that the tenant would be likely to suffer undue hardship if the tenancy were terminated).

The Appeal Panel addressed the plaintiff’s argument that the Tribunal had failed to consider all of the matters to which s 154E(1) required it to have regard and that the Tribunal had also failed to address the discretion conferred by s 91 itself. The Appeal Panel found, at [59], that it was clear that the Tribunal appreciated that there was a general discretion under s 91 which required consideration of matters other than those listed in s 154E(1).

The Appeal Panel’s reasons for considering that the s 154E(1) matters had been taken into account were as follows:

The Appeal Panel concluded:

The Appeal Panel rejected the tenant’s submission that the Tribunal’s reasons were inadequate in the following terms at [71]:

The Appeal Panel refused leave to appeal and dismissed the appeal. It varied order (2) made by the Second Tribunal and ordered:

Mr Batley, who appeared on behalf of the tenant, contended that the matter raised questions of principle about the proper interpretation of the Act and its application to the termination of social housing tenancy agreements for tenants with disabilities who have used the premises unlawfully. He submitted that it was appropriate that there be a grant of leave.

Leave was sought to appeal on the following grounds:

It is convenient to address grounds 1 and 3 before turning to ground 2 as grounds 1 and 3 are related.

Mr Batley contended that the Tribunal’s use of the phrase “in all the circumstance[s]” and “the whole of the circumstances” in [9] of its reasons (highlighted in the extracts above) ought not be read as an indication that the Tribunal understood the scope of the discretion under s 91 or that it turned its mind to all the relevant circumstances. He submitted that the Tribunal misapprehended the discrete nature of the discretion under s 91 and, effectively, treated the discretion under s 91 as tantamount to a discretion which was governed by s 154E and required consideration to be given only to the matters which s 154E required to be taken into account. Mr Batley also relied on the express words of s 154E(2) which provide that the section does not limit any other matter that may be considered by the Tribunal under the Act.

Mr Batley submitted that hardship to the tenant (which included in the present case the impact of the tenant’s disability and the risks to her of termination of the tenancy) was not only a relevant consideration but, in the context of the subject matter, scope and purpose of the Act and the exception in s 154D(3), it was also a mandatory relevant consideration for the discretion under s 91. While Mr Batley accepted that the Tribunal took into account hardship to the tenant under s 154G in allowing three months for the termination to take effect, he submitted that the Tribunal did not take it into account in deciding whether to make a termination order under s 91.

Mr Batley also contended that it was not correct to conclude from the Tribunal’s assumption of undue hardship that it had taken the hardship to the tenant into account. He argued that the Tribunal had, erroneously, concluded that the hardship was not excessive because of the tenant’s own fault in cultivating cannabis on the premises for a second time. Secondly, he submitted that the Tribunal had failed to expressly weigh hardship in its consideration whether to terminate the tenancy on the alternative ground (s 91 or s 154E). The inference the tenant sought to draw from the Tribunal’s reasons in [9] is that it did not in fact take the hardship to the tenant into account and addressed the alternative basis (that the tenant would be likely to suffer undue hardship) only in a somewhat limited and hypothetical way.

Mr O’Connor, who appeared on behalf of the landlord, submitted that the use of the terms, “in all the circumstances” and “the whole of the circumstances” in [9] of the Tribunal’s decision were sufficient to incorporate consideration of all the matters the Tribunal had referred to in earlier paragraphs of its reasons. He submitted that the Appeal Panel’s reasons for dismissing the appeal were plain and that this Court ought not intervene to disturb the decision.

When s 154D does not exclude the Tribunal’s discretion under s 91, the discretion under s 91 is at large (subject to the requirements of s 154E): Cain v New South Wales Land and Housing Corporation (2014) 86 NSWLR 1; [2014] NSWCA 28 at [12]-[26] (Basten JA, Gleeson and Leeming JJA agreeing) and [46]-[53] (Leeming JA). The real question for present purposes is whether it was open to the Appeal Panel to conclude that the Tribunal appreciated, when it purported to exercise the discretion on the alternative basis, the nature and extent of its discretion. The Tribunal’s reasons for exercising the discretion against the tenant appear from [9], which are set out above. However, its reasons ought fairly be read as a whole.

I am not persuaded that there is any error in the Appeal Panel’s analysis of the statutory framework in [33]-[36] (extracted above). The Appeal Panel plainly appreciated that, in circumstances where s 154D(3) did not apply so as to mandate termination, there was a discretion to terminate the tenancy under s 91, to which s 154E applied.

The Tribunal appears to have considered, to the extent relevant, each of the matters which s 154E expressly required it to consider before terminating a social housing tenancy. As to s 154E(1)(a), (b) and (c), the Tribunal noted, at [9], that there was no evidence about the effect the tenancy has had on “neighbouring residents” and “the landlord’s other tenants”. It proceeded to consider the effect on “other persons” in the context of society as a whole and the Drugs Misuse and Trafficking Act 1985 (NSW). I discern no error in this approach. The Tribunal addressed the matters in s 154E(1)(d) and (e) specifically in [9].

The Tribunal continued, in [9], to say “[h]aving regarded [sic] to the whole of the circumstance[s] the Tribunal is of the view that the tenancy should be terminated”. The question arises whether the Appeal Panel was correct to regard this phrase as incorporating the other matters referred to in the Tribunal’s reasons, which included the reports of the tenant’s health and circumstances as well as the hardship which she would suffer if the tenancy were terminated or whether the Tribunal’s consideration of the hardship suffered by the tenant was limited to its power under s 154G to specify the day on which the order for possession was to take effect.

If the Appeal Panel’s interpretation of the Tribunal’s reasons is correct, the Tribunal did take into account the impact of the tenant’s disability and the risks to her of termination of the tenancy at least on the question whether the hardship was undue, since these matters are expressly referred to at [7]-[8] of its reasons. However, it is not, in my view, clear that the Tribunal took hardship to the tenant into account as a factor that was relevant to the discretion whether to make a termination order on the alternative basis. It is, accordingly, necessary to decide whether hardship to the tenant was a mandatory relevant consideration, such that failure to consider it caused the discretion to miscarry.

The fact that hardship to the tenant (in this case, the impact of the tenant’s disability and the risks to her of termination of the tenancy) is not expressed as a mandatory relevant consideration under ss 91(1) or 154E is relevant but not determinative. The subject matter, scope or purpose of a statute may, by necessary implication, result in a particular factor being required, as a matter of law, to be taken into account: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40 (Mason J); [1986] HCA 40.

In my view, the likely hardship to a social housing tenant if a termination order is made is a mandatory relevant consideration when the Tribunal is considering whether to terminate a social housing tenancy in circumstances where a person (including the tenant) is in occupation of the premises and falls within the descriptors in s 154D(3)(b) and the termination order would be likely to result in undue hardship. This conclusion follows from the wording of ss 154D and 154E. It can hardly be supposed that hardship to a person within the descriptors in s 154D(3)(b) (a child, a person in whose favour an apprehended violence order could be made or a person suffering from a disability within the meaning of the Anti-Discrimination Act) is relevant only when it is not undue, in which case a termination order is mandated under s 154D(1). The potential hardship (which is, for the discretion to arise, by definition undue) to persons within this category must also be relevant to the discretion whether a termination order ought be made under s 91. I note that Mr O’Connor accepted that hardship to the tenant was a mandatory relevant consideration in cases such as the present. While the weight to be given to the hardship was a matter for the Tribunal, it was bound to take it into account: Minister for Aboriginal Affairs v Peko-Wallsend Ltd at 40-41.

Because the decision upheld by the Appeal Panel was made by the Tribunal on an alternative basis, it is also appropriate to consider Wade v Burns (1966) 115 CLR 537; [1966] HCA 35. In Wade v Burns a mining warden considered that he was required to refuse an application but said that if he had had power to grant the application he would not have done so. The warden was found to be in error with respect to his power. Barwick CJ explained at 555:

Statements concerning what have subsequently been referred to as “contingent findings” were also made by Menzies J (Taylor J agreeing) at 563 and Owen J at 568. Menzies J said:

The difference between the present case and Wade v Burns is that in the present case the existence of the discretion was dependent on a factual finding (that the Tribunal was not satisfied of undue hardship), whereas in Wade v Burns, the mining warden’s power arose as a matter of law. The similarity is that, in both cases, the decision-makers (the Tribunal in the present case or the mining warden in Wade v Burns) concluded incorrectly that they did not have a discretion or power but made alternative findings on the basis that they had the requisite discretion or power and said that they would not have exercised the power in favour of the individual.

In Canham v Austin Guarantee Corporation Ltd (1993) 31 NSWLR 246, Kirby P (Priestley and Meagher JJA agreeing) at 263 considered Wade v Burns and said that “stated intentions to deal with a matter on a given basis which is not accepted by the decision-maker sometimes need to be disregarded as purely theoretical and not a proper exercise of the decision-maker's jurisdiction”.

It is, accordingly, important to consider whether the “alternative basis” on which the Tribunal decided was a proper exercise of its jurisdiction to decide whether to make a termination order, albeit on an alternative basis, or a purely theoretical comment. Contingent findings are commonly made by judges in personal injury actions where liability has not been established but the judge proceeds to assess apportionment and damages to save the cost and inconvenience of remitter if the finding on liability is overturned on appeal: Canham v Australian Guarantee Corporation at 261G-262A. There is no reason in principle why alternative findings cannot also be made by decision-makers such as the Tribunal. However, in each case where such a finding is made, it is important to address whether, if the premise for the principal finding is set aside, the alternative finding should stand: see, for example, King v Goussetis (1986) 5 NSWLR 89 at 94-95 (McHugh JA) and the discussion in Tarabay v Leite [2008] NSWCA 259 at [31]-[35] (Basten JA, Allsop P and Bell JA agreeing).

In the present case, the alternative finding purported to be a contingent exercise of a discretionary power. It was an evaluative judgment which, like apportionment or a sentence imposed, could not readily be characterised as correct or incorrect. In those circumstances, the Appeal Panel was obliged to determine whether the Tribunal had, in substance, exercised its discretion (albeit on a hypothetical, or contingent, basis) in accordance with law.

Unlike the court in Wade v Burns, the Appeal Panel had wide powers on appeal under ss 80 and 81 of the CAT Act. It was therefore entitled to identify the error made by the Tribunal (that it had applied the wrong test to determine whether the hardship to the tenant was “undue”) and to consider the balance of the Tribunal’s decision in light of the different assumption (that the hardship was “undue”).

It was open to the Appeal Panel, under s 81 of the CAT Act, to substitute its own decision for that of the Tribunal; to refer the matter back to the Tribunal for its reconsideration; or to confirm, affirm or vary the decision under appeal. Under s 81(2) of the CAT Act, the Appeal Panel had the power to exercise all of the functions that were conferred or imposed by the CAT Act or the Act on the Tribunal at first instance. Thus, it would have been open to the Appeal Panel to determine for itself whether the tenant was likely to suffer undue hardship (as correctly construed) if a termination order was made and, if so, exercise the discretion whether to terminate the tenancy: for an analogy in the context of sentencing: see Kentwell v The Queen (2014) 252 CLR 601; [2014] HCA 37 at [40]-[42] (French CJ, Hayne, Bell and Keane JJ). It would also have been open to the Appeal Panel to correct the Tribunal’s error (about how to determine undue hardship) and remit the matter back to the Tribunal for its further consideration. But the Appeal Panel did none of these things. Instead, the Appeal Panel accepted that the Tribunal had exercised its discretion correctly on an alternative basis which was not legally erroneous and dismissed the appeal.

The question is whether the Appeal Panel was correct to be satisfied that the Tribunal had undertaken the task which it set for itself in accordance with the Act: namely, to decide whether the tenancy ought be terminated notwithstanding the hardship (which the Appeal Panel was prepared to assume was undue) to the tenant. If the Tribunal failed to appreciate that it was obliged to take into account the potential hardship to the tenant, not only when determining the threshold question (whether, for the purposes of s 154D, the potential hardship was not undue, in which case a termination order was mandated), or fixing the date on which the order for possession is to take effect (under s 154G) but also when exercising the discretion to make a termination order (under s 91), then its discretion to terminate the tenancy miscarried and ought to have been set aside by the Appeal Panel.

In Canham, Kirby P said at 263:

The Appeal Panel’s conclusion that the Tribunal was in error in its determination of what constituted undue hardship is not the subject of challenge. In these circumstances, it is questionable whether the Tribunal could have exercised its discretion under s 91 on the alternative basis unaffected by this error.

In any event, when exercising its discretion under s 91, the Tribunal did not articulate what, if any, hardship to the tenant it took into account. It is, accordingly, not possible to conclude that it took hardship into account or, if so, that its discretion was not infected by the error which had led to the erroneous finding under s 154D. For the reasons given in more detail below in relation to ground 3, the Tribunal was required to indicate in its reasons what the hardship to the tenant was and that it had taken it into account when exercising its discretion under s 91. To borrow Kirby P’s words from Canham, it was unsafe for the Appeal Panel to accept the anticipatory remarks of the Tribunal when the Appeal Panel had found that the Tribunal had misapprehended what “undue hardship” meant (for the purposes of s 154D) and its reasons did not indicate that the process of evaluation for the purposes of s 91 had ever been properly carried out.

Accordingly, I am satisfied that the Appeal Panel erred in failing to find that the Tribunal’s discretion miscarried in the sense described in House v The King (1936) 55 CLR 499 at 505 (Dixon, Evatt and McTiernan JJ); [1936] HCA 40.

Mr Batley submitted that the Tribunal failed to disclose its path of reasoning in its reasons as required by Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 at [55]. He contended that it was insufficient to say, as the Tribunal did at [9]:

Mr Batley submitted that the Tribunal failed to set out its reasoning in sufficient detail to enable the Appeal Panel to see whether the conclusion it reached involved an error of law. Mr Batley referred to the Tribunal’s conclusion about reasons (at [71]) and submitted that the Appeal Panel did not address the tenant’s complaint that the Tribunal failed both to explain its path of reasoning in the conclusion reached on the alternative ground or make clear what it meant by the expression “in all the circumstances”. Mr Batley particularly relied on the absence of any reference to the potential hardship to the tenant if a termination order were made.

Mr O’Connor submitted that the Tribunal’s reasons in [9] were sufficient to indicate that it had taken into account everything that it had set out in its reasons in [1]-[8], including hardship to the tenant. He relied on the specific discussion of the tenant’s evidence of hardship which was considered by the Tribunal in the context of s 154D and said that this evidence was also taken into account under s 91 as indicated by the Tribunal’s reference to “the whole of the circumstance[s]” or “all of the circumstances” in [9]. Mr O’Connor relied on the following passage Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 where Basten JA (Beazley JA agreeing) said at [48]:

As set out above, s 62(3) of the CAT Act sets out the content of the Tribunal’s statutory obligation to give reasons. Section 62(3) of the CAT Act is to be understood in the context of the authorities on the obligation to give reasons. Although the Appeal Panel, at [70], correctly summarised several of the principles involved in the duty to give reasons, with reference to Pollard v RRR Corporation Pty Limited [2009] NSWCA 110, it failed to refer to the minimum requirement in the context of a potential appeal: that the appellate body must not be left to speculate from collateral observations as to the basis of a particular finding.

The Tribunal’s reasons are sufficient to indicate that the potential hardship to the tenant was taken into account on two of the three bases to which it was relevant: in determining for the purposes of s 154D whether the tenant was likely to suffer undue hardship if the tenancy were terminated; and in the fixing of the date on which the termination was to take effect under s 154G. However, the Tribunal’s reasons were insufficient to show whether the error that affected its determination under s 154D also affected its alternative finding. They were also insufficient to indicate that hardship to the tenant was taken into account on the alternative basis in the exercise of the discretion under s 91. Given that the potential hardship to the tenant was, as was common ground, a mandatory relevant consideration in the decision whether to terminate the tenancy, the Tribunal was obliged, when setting out the pathway of its reasoning, to indicate that it was taken into account and how it was taken into account. It failed to do so.

At the very least, there was a real possibility that the Tribunal did not take into account the hardship to the tenant in expressing its contingent finding that a termination order was warranted or, if it did, that its finding was affected by the same error as had infected its finding under s 154D. In these circumstances, failure to address the issue of hardship in [9] is a material error: see, in the context of sentencing (where the guilty plea was not referred to in the judgment), Lee v R [2016] NSWCCA 146 at [37] (Basten JA and McCallum J). The Tribunal’s reasons did not comply with s 62(3) of the CAT Act in that it failed to set out the reasoning process that led it to its conclusion. The Appeal Panel was in error in finding that the Tribunal’s reasons were adequate.

Mr Batley submitted that the Tribunal appeared to conclude that the tenant’s cultivation of cannabis had a serious adverse effect on other tenants and neighbouring residents on the basis that the tenants and residents are part of society and cultivation of cannabis in breach of the Drugs Misuse and Trafficking Act is regarded as a serious threat to society. He contended that the Appeal Panel’s finding that the Tribunal did not draw such inferences was lacking in any evidence.

I am not persuaded that the Tribunal considered that other tenants and neighbouring residents suffered any adverse effect from the tenant’s cultivation of cannabis beyond that suffered by them as members of the society as a whole. The Appeal Panel was entitled to read the Tribunal’s reasons as it did. The Tribunal was entitled to take into account that offences against the Drugs Misuse and Trafficking Act are regarded as a “serious threat to society”, since it considered it to be a relevant matter under s 154E(1)(a) or s 154E(2). I regard it as significant that the Tribunal referred to [51] of NSW Land & Housing v Raglione [2015] NSWCATAP 75 (5 May 2015), where the general question of drug use was addressed and not to [74]-[75], where the Tribunal considered the specific consequence of methamphetamine and its effect on users in terms of criminal conduct (breaking and entering and impulsive, violent behaviour).

I am not persuaded that leave to appeal ought be granted with respect to ground 2.

Mr Batley sought costs if the plaintiff was successful. Mr O’Connor submitted that each party ought pay its or her (as the case may be) own costs. He submitted that the defendant had had to meet a tight timetable to be ready for the hearing at short notice and ought not have to bear the plaintiff’s costs if she were successful. He also submitted that there would be no utility in an order for costs as both the plaintiff, who is legally aided, and the defendant are publicly funded.

I am not persuaded that there is any reason why costs ought not follow the event in accordance with the general rule: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. The plaintiff has been almost wholly successful. The ground on which leave to appeal was refused was relatively minor compared with the other two grounds which have been made out.

Because of the effect of the orders made by the Appeal Panel, it is necessary to set aside not only the Appeal Panel’s orders but also the orders made by the Second Tribunal.

For the reasons given above, I make the following orders: