Family Disputes #1 Without a lease, brotherly love goes out the door

When a house owning brother shows allows their brother to move into their house without a lease, this is a recipe for a family dispute.

In Zitsis v Zitsis [2018] NSWSC 722 (21 May 2018) the brother who had moved in refused to move out when the house owning brother wanted to sell the house. This family dispute ended up in the Supreme Court of New South Wales.

In Zitsis, the house owning brother argued that the brother who moved in was occupying the house under a tenancy at will, which could be terminated by giving notice. The other brother who moved in argued that he had a life interest and could remain because the house was promised to be left to him under his brother’s will.

There was also a constitutional law argument: Does NCAT have jurisdiction to resolve tenancy disputes between residents of different states?

Tenancy at will or life interest?

Steve, the house owner, argued for a tenancy at will, for these reasons:

• In 1985, he purchased the house at 265 Doncaster Avenue, Kensington (Sydney) in his name.
• In December 2006, he had a conversation with his brother George. George asked if he could move in. Steve agreed and stipulated a rent of $250 per week, and payment of council and water rates and all utilities. One of the bedrooms was to be kept available for Steve to stay in when he came to Sydney from Surfers Paradise, where he lived, for medical appointments every six months. Steve paid the home insurance. No lease was prepared: nothing was written down.
• This arrangement continued until December 2013, when Steve told George he had decided to sell the property, and asked George to move out.
• Steve had decided to sell because he was getting old (he was 81 at the time of the hearing), was in declining health and wanted to cash up, the house being his only asset. He had never married and had no children (but was living in Surfers Paradise in the house of his friend and carer, who cleaned, cooked and provided general housekeeping).

George, the occupant, argued for a life interest, for these reasons:

• Over the years, George had renovated the house – he had installed a second-hand kitchen with a new stove, an air-conditioner, wardrobes, he had removed the carpet and polished the floor boards and had converted one bedroom into an office. George claimed he had spent $35,000 on the house renovations and $15,000 renovating two granny flats at the rear.
• George had not asked Steve for permission to renovate, but Steve noticed this work had been done.
• Steve was grateful for George having accepted responsibility for other members of the family, including a challenge to their mother’s will to make provision for them all. George said that for these reasons, Steve had told him he could live in the house forever, and that on his death, the house would be left to George and his sister.
• George did not own any other home to live in. He failed to disclose in his evidence that in 2008 he had purchased an industrial property (which could be sold to fund the purchase of a home). He was 74 at the date of the hearing.

Justice Latham determined in favour of Steve, that it was a tenancy at will. She made a finding of fact that Steve’s evidence should be accepted, and in particular, that he did not encourage or induce in George an expectation of obtaining an interest in the property nor were the renovations made with Steve’s consent. As a consequence, there was no contractual basis, no proprietary estoppel nor a remedial constructive trust which would allow George to remain in occupation.

She therefore upheld the notice of termination given under s 85 of the Residential Tenancies Act 2010 (termination of a periodic agreement, by notice).

Did NCAT have jurisdiction?

The eviction proceedings were originally brought in NCAT.

The Attorney General for NSW intervened, to argue the constitutional law issue that because NCAT exercises administrative, not judicial power, it was not a court with jurisdiction to determine matters between residents of different States (which was reserved to a court under s 75(iv) of The Constitution).

Two issues needed to be determined:

First: to determine whether NCAT exercises power which is judicial in nature. The Court decided it did because it gives a binding and authoritative decision on breaches of a tenancy agreement, and can make orders for possession, payment of rent owing and compensation for breach of a tenancy agreement.

Second: to determine if NCAT is a court. The Court decided that it was not a Court of NSW because it had not been designated as a court, and its members have fixed term appointments and fixed salaries.

As a consequence, the court concluded that:

“sections 81, 83, 85, 119 and 187 of the Residential Tenancies Act are invalid as an attempted conferral of judicial power on a body which is not a court of a State, with respect to the resolution of disputes between residents of different States. They should be read down to avoid that invalidity. It follows that NCAT has no jurisdiction to resolve this matter.”

Note: this conclusion is consistent with the recent decision of the High Court of Australia (which was not cited in the judgment) in:

Burns v Corbett [2018] HCA 15 (18 April 2018), in which the High Court (Kiefel CJ, Bell and Keane JJ, Gageler J agreeing, Nettle, Gordon and Edelman JJ dissenting on this point) held that:

the Commonwealth Constitution precludes the Parliament of a State from conferring jurisdiction, in respect of a matter between residents of different States (s 75(iv)) (known as “diversity jurisdiction”), on a tribunal, which is not one of the "courts of the States" (s 77).

Orders

The NSW Supreme Court, having jurisdiction, ordered George to give vacant possession and to pay mesne profits since August 2017, plus interest, to Steve. The Court also ordered George to pay Steve’s legal costs in the proceedings.

Conclusions

This is an excellent example of a family dispute that could have been avoided, had the home owning brother had a simple Residential Tenancy Agreement signed when his brother moved in.

Without a lease, the seeds of dispute are sown in two ways:

1. Whether or not the occupation is indefinite and cannot be terminated without the consent of the occupant; and
    
2. Whether or not the occupant is to be compensated for improvements they make;
   such as was argued in this case.

And, if you are an interstate landlord, you need to acquire residency status in the state where the property is situated if you need to use NCAT (or an equivalent Tenancy Tribunal) to enforce your rights as landlord (and avoid the legal fees of Supreme Court proceedings).

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