Cosgrove v Hutchinson; Hutchinson v Cosgrove

1. [1]

   On any view, aspects of the conduct of this case can only be described as extraordinary. Why I say this will be made clear later.

2. [2]

   Don O’Donald Cosgrove, a retired financial planner, died on 19 April 2020, aged 89. All the protagonists in this dispute have referred to him as Don, Uncle Don or Grandpa Don. Intending no disrespect, I will refer to him as Don.

3. [3]

   I will also refer to others by their first names on the same basis.

4. [4]

   When Don died, he was married to Merna Cosgrove (Merna). Merna was his second wife. Merna is now 90 years old.

5. [5]

   Karen Louise Hutchinson (Karen) is Merna’s daughter. She is aged 63. Prior to 18 November 2011, Karen lived with her son, Chadd Hutchinson (Chadd), in Raymond Terrace, near Newcastle, New South Wales.

6. [6]

   Don made a will on 21 August 2007 appointing his son, Philip Anthony Cosgrove (Philip) and his accountant, John Buxton (Buxton), as executors. He left his household chattels to Merna as well as an indexed annuity. He left the residue of his Estate to his children, Philip, Pamela Margaret Lawrence (Pamela), and another son, Andrew Peter Cosgrove (Andrew) (collectively, the Cosgroves).

7. [7]

   By all accounts, Don was successful and generous.

Events leading up to the signing of the Lease

1. [8]

   According to Karen, Don asked her to move closer to him and Merna. He said he would buy a property so she could live in it and pay rent she could afford. He asked her how much she could afford, and she said no more than $200 per week. Karen said she was happy in Raymond Terrace but would move if she could get accommodation for her and Chadd, as Don suggested.

2. [9]

   Subsequently, he told her that he would buy a house at 19 Whitehaven Drive, Lakelands, NSW (the House) for her to live in. He told her that she would not have to pay more than $200 per week, even after he died, but that when she was elderly and did not need the House, it would be sold and the proceeds given to his children. She maintains that she asked him what would happen after he died to which he responded that it would not change until she was old and did not need to live in the property and that his children would only be able to charge her $200 per week for the whole of the time she was there. She asked him how long that would be, and he said that the lease would specify about 30 years.

3. [10]

   Don bought the House and Karen moved in with Chadd. Karen still lives there. It is said to be a substantial and attractive residence.

The Lease is entered into

1. [11]

   On 18 November 2011, Don and Karen signed a lease (the Lease) of the House for a term of 30 years, commencing on 18 November 2011 and terminating on 17 November 2041.

2. [12]

   The Lease was witnessed by Rhonda Pill (Rhonda), Karen’s younger sister, who gave evidence of a conversation in which Karen asked Don whether his children could evict her or increase the rent under the Lease to which he replied no, neither of those things will occur.

3. [13]

   Chadd gave evidence of having heard a conversation between Don and his mother in which Don told her that the House was hers until the end of the Lease, in about 30 years, or if she did not want it anymore. He told of a conversation during which Don said words to the following effect:

4. [14]

   Although, as things have transpired, it is no longer necessary to make any findings about the reliability of their evidence, my impression was that the substance of their evidence was honestly given.

5. [15]

   Merna swore an affidavit, but due to her age and infirmity, was not able to be cross-examined. Her evidence lined up in material respects with that of the other witnesses called in Karen’s case.

The salient terms of the Lease

1. [16]

   The Lease is in the form of Schedule 1 to the Residential Tenancies Regulations 2010 (NSW). That regulation has been superseded by the Residential Tenancies Regulations 2019 (NSW), but nothing turns on this.

2. [17]

   Under the heading ‘Rent’, there appears the following:

3. [18]

   Under the heading ‘Rent Increases’, the following clause 5 appears:

The rent increase and termination

1. [19]

   After Don died, the House was transferred, pursuant to his will, to the Cosgroves as tenants in common.

2. [20]

   The Cosgroves retained a managing agent for the House.

3. [21]

   On 2 December 2021, the Cosgroves’ agent served on Karen a notice increasing the rent to $750 per week from 31 January 2022.

4. [22]

   Throughout, Karen has continued to pay $200 per week in rent.

5. [23]

   On 10 March 2022, the Cosgroves’ agent served a termination notice on Karen relying on her failure to pay the increased rent as a breach of the Lease.

6. [24]

   Curial hostilities between Karen and the Cosgroves began when the Cosgroves initiated proceedings against Karen in the NSW Civil and Administrative Tribunal (the Tribunal). The precise nature of their claim was not elucidated by the evidence, but what is clear is that on 20 April 2022, the Tribunal determined that it did not have jurisdiction to determine the Cosgroves’ application because it involved a dispute between residents of two different states. Its lack of jurisdiction is by virtue of the operation of the Australian Constitution. Because of this problem, s 34B of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act) contains provisions which apply when the determination of an application or an appeal by the Tribunal would involve the exercise of federal jurisdiction, in that case, a person with standing to make an application or appeal in the Tribunal can apply to the Local Court or District Court for leave to bring the proceedings in that Court instead of the Tribunal. The Court concerned becomes vested with the powers of the Tribunal. No such application was made in this case.

7. [25]

   Karen herself initiated proceedings in the Tribunal against the Cosgroves claiming that the rental increase was excessive. By consent, Karen’s proceedings in the Tribunal were transferred to the Local Court by the Tribunal on 28 March 2022. What happened to the transferred proceedings in the Local Court is unclear.

8. [26]

   On 22 June 2022, the Cosgroves commenced proceedings no. 2022/00182954 against Karen in the Local Court at Newcastle (the Local Court Proceedings) claiming the following relief:

9. [27]

   The Statement of Claim pleads that the terms of the Lease included that the landlord could increase the rent payable by the tenant on 60 days’ notice, the ownership of the House by the Cosgroves, the notice increasing rent, and the termination of the Lease.

10. [28]

    The Defence contains only four paragraphs. It puts in issue only that the Lease included a term that the Landlord could increase the rent payable by the tenant on 60 days’ notice and that Karen breached the terms of the Lease by not paying the increased rent. The substance of the defence is only the point that the Lease did not contain the term entitling the Cosgroves to increase the rent and accordingly, Karen did not breach the Lease.

11. [29]

    Karen’s defence did not include a plea of non-jurisdiction.

12. [30]

    On 7 February 2023, Karen commenced proceedings no. 2023/00041000 in this Court (these Proceedings) against the Cosgroves seeking a declaration that the Cosgroves hold the House “in a constructive trust” entitling Karen to reside in the House until 17 November 2041 on the condition that she pay the Cosgroves $200 per week, alternatively, that the Cosgroves pay her equitable compensation in the sum of $600,000 on her vacating the House on or before 1 January 2025. She also claims an order that the Cosgroves discontinue the Local Court Proceedings.

13. [31]

    On 4 April 2023, the Local Court Proceedings were, by consent, transferred to this Court.

14. [32]

    On 15 June 2023, orders were made by consent that the Local Court Proceedings and these Proceedings be heard together and that evidence in one be evidence in the other.

15. [33]

    The following sections of the Residential Tenancies Act 2010 (NSW) (RTA) are pertinent:

16. [34]

    The Court received written opening and closing submissions from both sides and heard oral argument.

17. [35]

    As I understood it, Karen’s position on the Local Court Proceedings was that neither the Local Court nor this Court has jurisdiction to entertain them, and they should be dismissed. But if the Court does have jurisdiction, the Local Court Proceedings should be dismissed because the Lease, on its proper construction, does not allow the increase in rent the subject of the Cosgroves’ notice. If, however, the Court has jurisdiction and the Lease in its terms permits an increase in rent, the Court should make an order under s 20 of the RTA because the inclusion of such a term is unconscionable, unjust, harsh or oppressive.

18. [36]

    Although the submission that the Court should make an order under s 20 of the RTA was conditioned on the Court having jurisdiction, no basis was suggested as to how it did. Counsel also did not identify any basis on which this Court could exercise a statutory jurisdiction conferred on the Tribunal in the absence of an order under s 34B of the CAT Act. Indeed, Counsel was unable to satisfactorily identify any application pursuant to the requirements of s 20(3) of the RTA, apart from saying that his written submissions asked for such an order.

19. [37]

    Karen’s position, as I understood it, on these Proceedings is that if she failed in all her contentions in the Local Court Proceedings, then she sought the substantive relief claimed in these Proceedings. I record that Karen did not rely on any form of estoppel.

20. [38]

    The Cosgroves’ submissions did not, in any meaningful way, address the challenge to jurisdiction. Perhaps this is unsurprising, seeing that Karen’s opening written submissions made no reference to s 119 of the RTA and it was referred to orally for the first time by Counsel for Karen in his reply submissions.

21. [39]

    As will have been observed, s 42(2)(b) of the RTA provides that rent payable under a fixed term agreement for a fixed term of two years or more (which the Lease is) may be increased. Section 41 of the RTA provides that rent may only be increased if there is written notice specifying the increased rent and the day from which it is payable given at least 60 days before the increased rent is payable.

22. [40]

    Counsel for Karen argued that the note to clause 5 of the Lease enables the Lease to contain a provision restricting the operation of s 42(2) by providing for a once and for all increase, and that such a provision was constituted by the increase provided in the Lease from $1 per annum to $200 per week.

23. [41]

    It is not necessary for me to deal with this submission. Indeed, for the reasons that follow, I consider that I should not deal with it.

24. [42]

    The plain effect of s 119 of the RTA is that the Cosgroves were prohibited from commencing the Local Court Proceedings because they are to obtain recovery of possession of the House which is subject to a residential tenancy agreement.

25. [43]

    Counsel for the Cosgroves accepted that the Local Court Proceedings offended s 119 insofar as they seek recovery of the House or recovery of possession of the House but argued that they were permissible so far as they claimed money. This was referred to as the rent.

26. [44]

    On the basis of the concession, I dismissed the claims for possession summarily, leaving over for consideration whether the rent claim can stand. Counsel for the Cosgroves did not oppose this course.

27. [45]

    In my view, it cannot.

28. [46]

    For present purposes, it does not matter that the Local Court Proceedings include a claim for money, which claim on its own may have been permissively brought. The Local Court Proceedings constitute one suit and were commenced contrary to the express prohibition in s 119 of the RTA. They were unlawfully commenced, and they should not be permitted to continue in whole or in part. The unlawfulness must be tested at the time that they were commenced. At that time, they included a claim for recovery of possession of the House.

29. [47]

    This problem was referred to by Counsel on both sides as one of jurisdiction. That may not, strictly speaking, be the correct description. Even though the Local Court Proceedings were commenced in contravention of the RTA, they have been transferred to this Court and are not to be treated as a nullity. As a superior court of record, the Court undoubtedly has jurisdiction to deal with them, amongst others, as an incident of controlling its own processes.

30. [48]

    Counsel for Karen, somewhat unexpectedly, informed the Court that if paragraphs 1 and 2 were dismissed because of s 119, Karen sought that these Proceedings be dismissed because she did not wish there to be any findings by the Court. He later changed this to an application for leave to discontinue. This was not opposed, and I acceded to it. He accepted that an order for costs against Karen would follow.

31. [49]

    I consider that it is apt to observe that neither Karen’s pleading nor Counsel’s submissions in these Proceedings articulated in any comprehensible fashion, how there could be a constructive trust in this case or what basis there is for a claim for equitable compensation. By the same token, the evidence clearly establishes that there was an agreement, understanding, convention or representation by Don that after his death Karen could live in the House for $200 per week, which could not and would not be increased. Karen undoubtedly relied on these assurances by proceeding with the arrangements to move close to Don and Merna and entering into the Lease. However, no estoppel was pleaded or relied upon. This is not to suggest that an estoppel would have necessarily succeeded. I am not called on to decide that question.

32. [50]

    The proper home for this dispute is a Court vested with the powers of the Tribunal under the CAT Act.

33. [51]

    The Statement of Claim in the Local Court Proceedings claimed $11,550 presumably because of the jurisdictional limit in that Court. If rent was payable at the higher rate, the amount that would be outstanding as rent as at 17 June 2024 is $68,200. But it is to be observed, that if the Lease has been terminated the Cosgroves’ claim from the date of termination will not be rent but damages. There was no evidence before the Court as to the damages, if any, they have suffered. Given my conclusion that the Local Court Proceedings should be dismissed, this is not an issue that requires to be addressed.

34. [52]

    The Local Court Proceedings no. 2022/00182954 are dismissed with costs.