Published tribunal order
Tenancy Tribunal case 4779579 — Exemplary damages at 37 Rochester Street, Tamatea, Napier 4112
Decided 31 May 2024 · Published 31 May 2024 · Application 4779579
- Exemplary damages
- Property damage
Party names are redacted in the official published order.
Order
- The Bond Centre must pay the bond of $2,000.00 ([Bond number suppressed]) to the tenants immediately.
- [The landlord/s] must pay [The tenant/s] $4,184.94 immediately, calculated as shown in the table below:
Reasons
- Both parties attended the hearing. Both were represented. Procedural Issues
- This matter was heard on 24 April 2024.
- The landlords sought an adjournment of the hearing on the basis that since the applicants vacated, damage has been discovered from misuse of the fire, including damage to the fireplace and contamination from toxic fumes.
- The landlords say that investigating that damage and quantifying the resulting compensation claim has not yet been possible.
- I took the view that it would not be just to the tenants to further delay the determination of their claims and directed that the hearing proceed. Either party is free to file any further claims they consider warranted, other than those determined by this Order.
- At conclusion of the hearing leave was given to the landlords to adduce specific additional evidence, proving the nature of the underfloor insulation.
- The landlords then sought to file additional evidence. A direction was issued on 2 May 2024 that: “I do not consider it fair that I take into account evidence sought to be introduced by e-mail after the hearing has concluded, and I have not looked at it. The timing of the termination notice has been a central issue since the application was filed. I would need to be satisfied that the new evidence the landlord seeks to introduce was not reasonably discoverable before the hearing, before I would consider granting leave to admit it now. If that is the landlord’s position, counsel may file and serve a memorandum by 5pm today, addressing why the evidence the landlord now wishes to introduce was not able to be provided at the hearing and why it should be considered now. If the tenants object to the introduction of that evidence after considering the landlord’s memorandum, they should advise the Tribunal by 5pm Friday 3 May 2025 and a short case conference by teleconference will be scheduled for next week.”
- Those memoranda have now been filed. The tenant opposes the introduction of further evidence.
- In my view it would only be proper to allow the introduction of further evidence if: a.the evidence is relevant and might affect the Tribunal’s assessment of issues in dispute; and b. it was not reasonably able to be provided at the hearing. It should not be allowed simply as an opportunity for the landlords to have a second chance to present their case or to bolster their position. I must also be mindful of the costs implications of allowing further hearing time.
- Counsel for the landlords submits that new evidence has come to light concerning the timing of the landlords’ notice to terminate the tenancy which is central to the issues and was only able to be located after the hearing. The findings I have made on those issues, based on the evidence available at the hearing, means that the introduction of further evidence for the landlord does not impact on the Tribunal’s findings.
- Counsel for the landlord also submits that evidence should be admitted from [Landlord 1] concerning the rating of the underfloor insulation. That was clearly an issue from the time the builder’s report was made available and [Landlord 1] could have been called to give evidence about the matter. The report writer’s recollection of his conversation with [Landlord 1] provides only hearsay evidence on the substantive issue and I have placed no significant weight on it. Insufficient basis is shown for introduction of that additional evidence.
- There has been some reference (though not in counsel’s memorandum dated 2 May 2024), to evidence [Landlord 1] wishes to give about the ability for water to reach the underfloor. Again, that was clearly an issue apparent from the builder’s report which [Landlord 1] had opportunity to give evidence about at the hearing. Moreover, with respect, there is nothing to suggest that [Landlord 1] is able to give expert evidence about the matter.
- Again, I find insufficient basis for allowing introduction of that additional evidence.
- No need for a further case conference is made out. I accordingly determine the claims in the basis of the evidence available at the hearing.
- Counsel for the landlords asks for a transcript or recording from the hearing. It is not appropriate that a recording be made available. A transcript can be requested but the very significant cost of doing so is generally only warranted where required for a re-hearing or appeal. There is no apparent basis for having a transcript prepared at this stage. The Claims
- The tenants bring the following claims: a. exemplary damages for failure to provide prescribed information in the agreement; b. compensation for the cost of a dehumidifier and curtains and for damage to possessions, said to have resulted from the landlord’s failure to adequately maintain the premises; c. exemplary damages in respect of that claimed breach; d. exemplary damages for issue of a retaliatory notice of termination; e. exemplary damages for issue of a notice of termination without grounds; f. refund of the bond g. reimbursement of the building report fee.
- No claims have been filed by the landlords, although in its Order dated 8 February 2024, the Tribunal amended the pleadings to allow for an application by the landlords for rent arrears. Bond
- A bond of $2,000.00 was paid by the tenants.
- It is agreed that if the landlords’ notice of rent increase is valid and effective, further rent of $500.00 is owed by the tenants for the period from 23 October 2023 to 29 December 2023.
- I am told that the Bond Centre has been asked to pay the uncontested part of the bond to the tenants but as at the date of this Order the whole of the bond remains at the Bond Centre.
- It is therefore appropriate that I include in this Order a direction as to application of the bond.
- The tenancy began and the bond was paid in April 2020. The bond was not lodged until an online lodgement was made on 25 March 2021.
- A landlord is required to lodge the tenants’ bond within 23 working days of receipt. Failure to do so is an unlawful act for which exemplary damages of up to $1500.00 may be awarded.
- The landlords acknowledge the delay in lodging the bond, which they say was simply due to an oversight on their part. The tenants do not claim exemplary damages for that oversight. Rent Increase
- The landlords issued the tenants a notice dated 28 August 2023, advising the tenants that the rent would increase to $550.00 per week from $500.00 per week from 23 October 2023. That notice, on its face, meets the requirements of section 24(1).
- The tenants did not challenge that notice by seeking a market rent assessment under s. 25 RTA. The tenants do say however that the notice of rent increase should not be regarded as effective.
- The tenants’ position is that the landlords did not pursue payment of the additional rent after the tenants raised with them concerns about maintenance and repair of the premises. The tenants say that as a result, they were entitled to assume that the landlords had decided not to enforce the rent increase and that the landlords are now estopped from pursuing the arrears.
- For an estoppel to be established in these circumstances there would need to be evidence proving: a. conduct (which could include acquiescence) on the landlords’ part, creating a belief or expectation in the tenants that the landlords had waived their right to claim the increased rent; b. reliance on that expectation by the tenants; c. detriment caused to the tenants as a result of that reliance; d. circumstances meaning that it would be unjust to allow the landlords to go back on the expectation they had created.
- The evidence here is that after issuing the notice of rent increase, the landlords did not proactively pursue the increased rent. There is no evidence of the landlords having indicated to the tenants that they had waived the rent increase. Importantly too, the evidence does not persuade me that the tenants took irrevocable steps to their detriment, in reliance on their expectation that the rent increase would not be enforced. They continued to pursue compensation for the issues they raised after the rent increase notice was given.
- Fundamentally, the landlords issued a notice of rent increase in circumstances where they were entitled to do so. The issues raised by the tenants about maintenance of the premises, which they say were the “quid pro quo” for the landlords not pursuing the rent increase, are being pursued by the tenants as entitlements under the RTA. In those circumstances I see no injustice if the landlords are also entitled to pursue their rights, including to have rent paid pursuant to a legitimate notice of rent increase.
- The landlords are entitled to an award of $500.00 for the additional rent owed. Information in the agreement
- Section 13A of the version of the RTA effective at 1 April 2020, required that the landlords include in the tenancy agreement; a. an insulation statement detailing the insulation installed on the premises; b. a statement of compliance with healthy homes standards; c. an insurance statement.
- Failure to include that information in the agreement was an unlawful act for which exemplary damages of up to $500.00 could then be awarded for each breach. The maximum award for each breach is now $750.00.
- The tenancy agreement between the parties contains none of that prescribed information. The landlords thereby committed an awful act.
- Where an unlawful act has been committed intentionally the Tribunal must consider whether it is just to make an award of exemplary damages having regard to the criteria in s.109(3) which are: a. the intent of the person in committing the unlawful act; b. the effect of the unlawful act; c. the parties’ respective interests; and d. the public interest.
- In terms of s.109(2), an application for exemplary damages cannot be made later than 12 months after the date of the commission of the unlawful act. Where, as here, the breach is an ongoing failure to provide to the tenants, information they have a right to be provided with, that is a continuing breach so s.109(2) does not apply and the appropriate maximum award to apply is that applicable at the end of the tenancy.
- The landlords say that the omission was simply as a result of their being unaware of those requirements. In considering whether the breach was intentional, it is the act (not providing the information) that needs to be intentional, not an intent to act unlawfully.
- I accept that the landlords may have been unaware of their obligations. Nevertheless, a significant part of this hearing has involved issues around the adequacy of the insulation. That should never have been an issue as the landlords were required to record that information in the agreement. There have been significant and ongoing consequences flowing from that breach.
- There is an obvious public interest in encouraging landlords to be aware of and comply with their obligations to provide tenants with prescribed information before they commit to a tenancy.
- In my view, making an award of damages that would be the maximum for one breach, recognising that there were multiple breaches, is appropriate. Repair and Maintenance issues – Garage
- The tenants’ evidence is when they moved into the premises there was a significant quantity of their belongings, particularly winter clothing and bedding, which they stored in boxes in the garage. Not long afterward, the tenants discovered that the garage roof had leaked, and their belongings had been damaged to the extent they needed to be destroyed.
- [Tenant 1] bought a sealant product which he applied to the roof flashings (the cost off the sealant was later reimbursed out of the rent). Correspondence between the parties shows [Tenant 1] indicating to the landlords after that temporary repair, that there had been rain, but the leak appeared to have stopped.
- No steps were taken by the landlords to investigate the cause of the leak or fix it.
- The landlords’ position is that as far as they were aware, the steps taken by [Tenant 1] to fix the garage roof had been effective, they had reimbursed the tenants for the cost of the material used to undertake the repair and that nothing further was required of them. However, inspection reports completed after that temporary repair record, “garage still leaking”.
- I find it proved on balance that the tenants suffered loss as a result of leaking in the garage. Provision of the garage in a watertight condition was the landlords’ responsibility. The tenants are entitled to compensation for losses caused by a failure to meet that responsibility. In calculating that loss, the tenants are entitled to be put in the position they would have been in but for the landlords’ breach and should not be better off.
- I have no reason to doubt the tenants’ evidence about what possessions were lost. The compensation ordered takes into account that evidence and the tenants’ evidence about replacement cost. A reasonable allowance for depreciation and the existing age and condition of those belongings is made. Repair and Maintenance issues – Mould
- There is no doubt that the premises were affected by mould. Photographs show significant mould growth, particularly on the lower areas of outside facing walls.
- The tenants say that the primary cause of that mould growth was inadequacies in the damp proofing and insulation of the premises. Their initial view was that the most likely cause was leaking through windows that were inadequately flashed. That assessment was supported by an insurance assessor’s report but is not supported by subsequent evidence.
- The landlords insist that the principal cause was the tenants’ failure to adequately air the premises.
- In assessing the likely causes of mould growth (which may be multiple) the Tribunal must give weight to the best evidence available.
- As to the manner in which the tenants occupied the premises and managed damp/ mould issues, I heard direct evidence from both [Tenant 1] and [Tenant 2] who were examined under promise.
- They are the only persons who can give direct evidence about how those issues were addressed by them on a day to day basis. They have described the steps they took to try and prevent mould growth. Their evidence is that they regularly aired the premises, did not dry washing inside, regularly washed mould from wall surfaces and bought a dehumidifier to try and keep the premises dry. Those measures appear reasonable and appropriate.
- The tenants’ evidence, corroborated by the building report, is that the mould was not particularly evident in the bathroom or kitchen areas but was a particular problem low on the exterior facing bedroom walls.
- [Landlord 2] for the landlords, says that whenever an inspection was done she found the windows closed and raised with the tenants many times the need to keep windows open to adequately ventilate the premises. A heat transfer system was installed by the landlords.
- The tenants acknowledge that during winter the windows were not always left open as often, because of the cold outdoor temperature and also because leaving the windows open created a security risk. They say they asked the landlords to help by fitting security stays to the windows, which the landlords said they would, but never did.
- By consent an assessment was undertaken by [The inspector], who attended the hearing to be examined on his report. [The inspector] undertook an inspection on 19 March 2024 which included invasive testing of the walls. It is helpful that I record [The inspector]’ findings and conclusions which are: “Findings The results of the inwall testing indicate no signs of a product or system failure which means no leaks. The subfloor ground remains damp even after a relatively dry period and good ventilation. Bedrooms are notoriously colder than other living areas and breathing increases their relative humidity. The R factor of the underfloor insulation is around 1 which is low. There is no insulation in the walls. The ground is evaporating around 30 litres of water per day. The temperature of the bedroom floor is slightly higher than the sub floor temperature. Conclusion During the day time the relative humidity level is in the 50% range. The relative humidity will increase as the room becomes colder if the room temperature drops to 8° or less than the relative humidity will reach 100% (dew point) and condensation will form on the walls. Photo 9 damage to window trim shows condensation does occur. A combination of no insulation in the walls low R factor in the subfloor and damp ground indicates this is the most likely cause of the mould specs speaks at floor level. The way to stop it is by • reducing the amount ground evaporation by laying a vapour barrier • increase the sub floor insulation • increased the room temperature.”
- [The inspector] was questioned about his assessment of the likely insulation rating of the underfloor insulation. He gave clear evidence that his assessment of the likely rating of R1.0 was consistent with the thickness of the insulation material, measured against the known depth of the floor joists. He says he vaguely recalls discussing the insulation with [Landlord 1] who he thought said it was rated R1.0. He also said that usual industry practice is to staple the “tag” from the insulation product to a joist, to confirm the installation installed.
- The insulation was installed by [Landlord 1] who was not called to give evidence. Opportunity was given to the landlords after the hearing to try and locate and provide a copy of the that tag. It could not be located.
- When I consider that evidence, along with the landlords’ breach of the obligation to provide mandatory information about the insulation to the tenants in the agreement, I find it more likely than not that the underfloor insulation was not qualifying insulation for the purposes of the Residential Tenancies (Smoke Alarms and Insulation Regulations) 2016.
- [The inspector] made particular note of the dampness of the underfloor, even at the dry time of year his testing took place. He also noted the likely contribution to mould growth of the evaporation from that moisture.
- One of the issues raised by the tenants, directly with the landlord and in this application, relates to a broken downpipe outside a verandah area. Photographs provided by the tenant show pooling of water discharged from the downpipe in an area of the property where any runoff toward the dwelling, would appear to take the water under the house toward the bedroom area where the mould is most apparent.
- The landlords say that the roof area drained by that downpipe is very small so there would only be enough water discharging from the down pipe to pool in that way in exceptional rain conditions. The landlords also say that the garden bed between where that stormwater pipe discharges and the house underfloor is raised, so the water could not run under the house. The landlords have provided a builder’s opinion that in any event it is not unlawful for downpipes to discharge onto the ground.
- The evidence persuades me that the down pipe was designed to continue into a stormwater drain. The down pipe has been broken and not fixed so the water from that small roof area is not channelled into the stormwater system as designed.
- The discharge of water from that down pipe and where the water is shown to pool on the property, are consistent with what [The inspector] describes as a surprisingly high level of moisture underneath the dwelling.
- Those factors persuade me that it is more likely than not that the landlords’ failure to repair the broken down pipe has contributed to a level of underfloor moisture, giving rise to more than usual susceptibility to mould growth in the premises.
- Whether legal or not, the down pipe was clearly designed to discharge into the stormwater system. It is broken and was not fixed. No explanation is given for the failure to complete that repair.
- In terms of the tenants’ claim, I accordingly find that breach of the landlord's obligation to maintain the premises in a reasonable state of repair has more likely than not contributed to mould issues within the premises which have negatively affected their use and enjoyment of those premises.
- I note too that continuing problems with the mould have been noted in a series of inspection reports. In my view, given the issues raised by the tenants, there was an obligation on the landlord to take their concerns more seriously and investigate the causes, rather than assuming and insisting that the problem was only the tenants’ failure to adequately air the premises.
- Why the landlords declined to provide window stays, to make it easier for the tenants to safely and securely ventilate the premises when it appears the landlords had agreed they would do so, is difficult to understand.
- I find that the tenants are entitled to be reimbursed the cost of replacing curtains ($50.00) and for a contribution towards the dehumidifier which they bought, and which should have some continuing utility for them ($100.00) as losses resulting from the landlords’ breach.
- Breach of the landlords’ obligation to ensure the premises are provided and maintained in a reasonable state of repair is an unlawful act which exemplary damages of up to $7,200.00 may be awarded.
- Considering the s.109(3) criteria detailed above, my finding is that the landlords’ intent reflected their genuine belief that the damp problems were caused by the tenants’ failure to adequately ventilate the premises, based on the assumption from visits to the premises for inspections, that the windows were rarely opened.
- The effect of the breach has been significant both in terms of mould issues that the tenants had to deal with and in terms of the resulting conflict between the parties and allegations made against them by the landlords.
- The public interest in my view is in expecting that where such issues are raised, landlords make reasonable efforts to ascertain the causes. Had a report like that provided by [The inspector] been obtained (at the modest cost of $264.50) when the issues first became apparent, things may have taken a different course.
- I find that the tenants should be compensated for the cost of that report.
- I am persuaded that there were exchanges between the parties showing that the landlords took a position that they were no longer required to undertake the repair and maintenance work noted in the tenants’ notice to remedy, even the work they had agreed they would attend to, once the notice of termination had been given. That is not a tenable position and worsens the landlords’ failure to meet their obligations.
- Weighing those considerations, I find that an award of exemplary damages of $3,500.00 would be just. Termination of the Tenancy
- On 13 September 2022 the tenants gave the landlords notice of their concerns about repair and maintenance issues at the premises. The landlords responded on 9 October 2023.
- Then, on 28 October 2023, the tenants served a notice to remedy on the landlords in respect of those issues.
- On 30 October 2023 the landlords issued the tenants with notice that the tenancy would end on 7 January 2024 as they required the premises within 90 days after the termination date, as the principal place of residence for the owner or a member of the owners’ family.
- The tenants contest that notice of termination on 2 grounds.
- First, they say it is retaliatory. Second, they say that the premises were not genuinely required for that purpose, so it was given on invalid grounds.
Was the notice of right of termination issued on valid grounds?
- Section 60AA provides that: “A landlord commits an unlawful act if they give or purport to give a notice to terminate to the tenant or apply or purport to apply to the Tribunal for an order terminating the tenancy knowing that they are not entitled, under this Act, to give the notice or to make the application.”
- The landlord’s evidence is that due to the effects of cyclone Gabrielle, they had their daughter and her family living with them. For some time, it had been discussed that it might be a good idea for their daughter and family to move into the premises. [Landlord 2]’s evidence was that during a holiday away she and [Landlord 1] discussed the matter in depth and decided that they would end the tenancy so their daughter could move in.
- Her further evidence is that after the tenancy ended, their daughter did move into the premises but then they were approached by a close friend who had required surgery and was struggling to manage in his two-storey home, to see if he might stay at the premises. Their daughter agreed to move out temporarily, during the summer when her alternative accommodation was habitable, while their friend recovered. The friend has now vacated and their daughter has moved back in on a full time basis.
- Based on information they were given by neighbours, that the persons occupying the premises after their tenancy had ended were not part of the landlords’ family, the tenants understandably question whether the reasons given for termination of their tenancy were genuine.
- It is not disputed that the landlords’ daughter is now occupying the premises.
- I do not find it proved, on the evidence provided by the tenants, that the grounds given in the notice of termination did not entitle the landlords to issue the termination notice under s.51(1)(a).
Was the notice of termination retaliatory?
- For a notice to be declared retaliatory, the tenant must prove that in terminating the tenancy, the landlord was motivated wholly or partly by the tenant exercising a right under the tenancy agreement or any Act, or by any complaint against the landlord. See section 54(1) Residential Tenancies Act 1986.
- I note that even if a notice of termination it is given on lawful grounds, it may still be set aside as retaliatory if so motivated.
- The sequence of events inevitably gives rise to an inference that the landlords issued the notice of termination, at least in part, because of the issues raised by the tenants.
- The landlords’ communication to the tenants that they no longer needed to do the repair work required by the tenants, because the termination notice had been given, reinforces that inference.
- Given that the landlords’ daughter was able to live elsewhere during the summer, the decision to put the tenants in the position of having to find a new home in 2 months over the Christmas/ New year period, is also difficult for the tenants to understand.
- [Landlord 2] has given evidence, under formal promise, that the repair/ maintenance issues raised by the tenants played no part at all in the landlords’ decision to end the tenancy. The above issues were put to her directly.
- Despite the highly persuasive circumstantial evidence to the contrary, I am not prepared to find that the evidence given by [Landlord 2] to the Tribunal was untruthful.
- Like the evidence given by the tenants about how they occupied the premises, only the landlords know and can give direct evidence about their motives in issuing the notice of termination. Filing fee
- Because [The tenant/s] have succeeded with claims I must reimburse the filing fee. Costs
- As both parties are represented, the Tribunal can consider awarding costs (s.102(b)). Counsel should file memoranda as to costs within 7 days of the date of this Order.