SMITH v ACCESSIBLE PROPERTIES NEW ZEALAND LIMITED [2018] NZHC 1010

SMITH v ACCESSIBLE PROPERTIES NEW ZEALAND LIMITED [2018] NZHC 1010 [9 May 2018]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYI TE KŌTI MATUA O AOTEAROATAURANGA MOANA ROHECIV-2018-470-000010[2018] NZHC 1010IN THE MATTER of an Appeal pursuant to the ResidentialTenancies Act 1986BETWEEN ESMERALDA SMITHAppellantAND ACCESSIBLE PROPERTIES NEWZEALAND LIMITEDRespondentHearing: 9 April 2018Appearances: M Sharp for the AppellantO Grant for the RespondentJudgment: 9 May 2018JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Wednesday, 9 May 2018 at 4:30 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: Te Whenua Law, RotoruaDuncan Cotterill, WellingtonCounsel: M Sharp, Barrister, Mt Maunganui[1] This is an appeal from the decision of Judge PG Mabey QC, dated 18 January2018.1 The Judge dismissed an appeal from a decision of the Tenancy Tribunal atTauranga (Adjudicator, JP Smith) dated 11 December 2017. The Tribunal had grantedAccessible Properties New Zealand Limited (Accessible Properties) possession of thepremises situated at 25 Osprey Drive, Welcome Bay, Tauranga (the property),formerly occupied by Ms Esmeralda Smith pursuant to a tenancy agreement betweenthe parties.Factual background[2] On 12 December 2011, Ms Smith entered a residential tenancy agreement withHousing New Zealand Corporation (Housing NZ) in respect of the property.[3] In the early part of 2017, Housing NZ transferred the property to AccessibleProperties, a community housing provider, and wholly owned subsidiary of IHCNew Zealand. Accessible Properties became Ms Smith's landlord on 1 April 2017.[4] On 15 May 2017, the Tenancy Manager for Accessible Properties,Ms Georgina Willers, wrote to Ms Smith saying they would like to visit the propertyon 23 May 2017 for the purpose of an inspection, which would take up to 45 minutesand would involve the need to check all the rooms in the house for any maintenance,repairs and to make sure smoke alarms were in place and working. Ms Willers alsoadvised Ms Smith that during the course of this inspection they would be completinga very simple non-invasive methamphetamine test. Ms Smith was invited to contactMs Willers if she had any questions.[5] Ms Smith was not present for the scheduled inspection on 23 May 2017, soAccessible Properties postponed the inspection. On 31 May 2017, Ms Willers sent asecond inspection notice to Ms Smith. It advised her that an inspection was scheduledfor 7 June 2017. Again, it advised Ms Smith that during the inspection they wouldalso be completing a very simple non-invasive methamphetamine test.1 Smith v Accessible Properties New Zealand Ltd [2018] NZDC 704.[6] On 7 June 2017, Ms Willers and a Property Manager for Accessible Propertiesvisited the property to conduct an inspection. Ms Smith's adult son, who resided atthe property, was present at the time of the inspection. The Accessible Properties staffadvised Ms Smith's son of the purpose of the visit and Ms Willers says that he gavethem permission to enter the property. He also signed the inspection report once theinspection and the methamphetamine tests were completed.[7] On 12 June 2017, the results of the methamphetamine test were returned. Thetest indicated a level of methamphetamine contamination above the relevant Ministryof Health New Zealand standard for safe occupancy. Ms Willers rang Ms Smith andtold her of the results and advised her that a more comprehensive test was required toensure that the property was safe to occupy. Ms Smith did not tell Ms Willers that shedid not want further tests to occur or that she had not given permission to AccessibleProperties to conduct the initial test.[8] On 14 June 2017, Ms Willers advised Ms Smith by letter that they had arrangedfor further testing to be conducted on 21 June 2017 and that it was preferred, but notrequired, that all occupants vacate the property during the testing to ensure accurateresults were achieved.[9] On 21 June 2017, Ms Willers and an employee from MethSolutions went tothe property to carry out a comprehensive methamphetamine test. Ms Smith waspresent and gave the MethSolutions employee permission to enter the propertyknowing that she was to conduct the comprehensive test. The comprehensive testconfirmed levels of methamphetamine contamination on the property above therelevant Ministry of Health New Zealand standard for safe occupancy.[10] On 11 July 2017, Ms Willers telephoned Ms Smith to discuss the results andadvise her that the property would need to be decontaminated. Ms Willers says thatshe also spoke with Ms Smith about other tenancy issues, including on-going rentarrears and her failure to comply with the payment arrangements, damage to theproperty and Ms Smith's children hosting parties at the property. At the end of thetelephone call, Ms Willers told Ms Smith that Accessible Properties would be issuingher with a 90 day notice to end the tenancy.[11] A 90 day notice was accordingly issued by Accessible Properties. Pursuant tothis notice, the tenancy was scheduled to end on 20 October 2017.[12] Accessible Properties then filed proceedings in the Tenancy Tribunal atTauranga seeking a possession order for the property. When the application was calledin the Tenancy Tribunal on 31 October 2017, counsel appeared for Ms Smith askingfor an adjournment and indicated that she intended to seek orders pursuant to s 78(1)(f)of the Residential Tenancies Act 1986 (the Act) that it would be harsh orunconscionable for Accessible Properties to exercise its rights under the tenancyagreement to terminate the tenancy on notice. This was on the basis that Ms Smithwas a social housing tenant and that the decision was based upon the results ofmethamphetamine testing of the property that was earlier carried out withoutMs Smith's consent and was, accordingly, illegal.[13] The application was adjourned to 29 November 2017 at which time Ms Smithwas serving a term of imprisonment. An application by her counsel on that date for afurther adjournment of the hearing was refused. Counsel then withdrew from thehearing and the application proceeded on a formal proof basis. The Tenancy Tribunaldelivered its decision granting Accessible Properties possession of the premises on11 December 2017.[14] On 20 December 2017, the Tenancy Tribunal heard and refused an applicationby Ms Smith through counsel for a rehearing pursuant to s 105(1) of the Act. On22 December 2017, the Tenancy Tribunal issued a decision refusing the rehearingapplication, but delaying the possession date until 3 January 2018.[15] On 3 January 2018, an appeal was filed on behalf of Ms Smith in the DistrictCourt against the possession order and the refusal to grant a rehearing. On 4 January2018, the Tenancy Tribunal granted a stay of proceedings for 14 days upon the basisthat the matter would be placed before a District Court Judge and AccessibleProperties would file submissions in response.[16] By a minute issued by Judge Mabey QC on 15 January 2018, the District Courtdirected that all matters would be dealt with when the appeal was called on 16 January2018 at 12.00 pm. On 16 January 2018, counsel for Ms Smith asked that the appealbe adjourned for the usual pre-trial directions to be made and to enable Ms Smith toattend the hearing after her release from prison in mid-February and give evidence ifleave to do so was granted. The District Court Judge indicated that he would onlygrant an adjournment if he considered that there was merit in the proposed grounds ofappeal which were then discussed with counsel.[17] On 18 January 2018, Judge Mabey QC delivered a judgment dismissing theappeal. Ms Smith filed a notice of appeal on 24 January 2018. On 31 January 2018,a District Court bailiff took possession of the property for Accessible Properties.Accessible Properties thereupon commenced decontamination of the property. On27 February 2018 this Court ordered a stay of the judgment in as far as AccessibleProperties is not to re-let the property pending the outcome of the appeal. It alsogranted leave to the parties to file further evidence.Further evidence[18] Ms Smith has filed two further affidavits – one dated 19 March 2018 and asecond one dated 29 March 2018 in reply to an affidavit dated 22 March 2018 fromMs Willers.[19] Ms Smith says that she first heard that Accessible Properties had tested theproperty for methamphetamine in the middle of 2017 when she was contacted byMs Willers, who told her that her son was in the house at the time. She says thatMs Willers told her that they were coming back to the property to do some more testingfor methamphetamine and that she would need to be out of the house when theyundertook the testing. She says that Ms Willers did not ask for permission but, becauseshe thought they had a right to do so, she did not object.[20] After the second test for methamphetamine, Ms Smith says she was advised byMs Willers that the test results showed high levels of methamphetamine contaminationand consequently Accessible Properties would be giving her 90 days notice oftermination of the tenancy.[21] Ms Smith says she does not know how the property came to be contaminatedby methamphetamine and it was not because of any methamphetamine smoking oractivities by herself or anyone else that she knows of in the house. She wants to moveback into the property once it is cleaned of methamphetamine.[22] On the other hand, Ms Willers says that the methamphetamine testing wasundertaken with the specific permission of Ms Smith or her adult son, who lived withher. On the first occasion Ms Smith was not present, but her adult son gave permissionto enter the property and signed the inspection report once the inspection and baselinetests were completed. On the second occasion Ms Smith was at home and gavepermission to enter the property. Ms Willers says she stood outside the property for aperiod and talked to Ms Smith while the methamphetamine testing got underway.[23] In her reply affidavit dated 4 April 2018, Ms Smith says that after Ms Willersasked her she did allow a person to enter the property knowing she was going to carryout methamphetamine testing, but she certainly did not give her permission to carryout the tests. Ms Smith says that she was under the impression that AccessibleProperties had the right to carry out the tests and they did not need her permission.District Court decision[24] At the outset of his decision, Judge Mabey QC recorded the provision of thetenancy agreement that enabled Accessible Properties to terminate the tenancy bygiving 90 days notice to vacate. No reasons need be given. After setting out theprocedural history, the Judge noted the grounds of appeal which were:(a) The application for adjournment should have been granted.(b) The Tribunal erred in law in refusing the application for rehearing.[25] Ms Smith's position on the appeal was that the tenancy agreement made noprovision for methamphetamine testing so such tests could only be carried out withher consent. She said she did not consent and therefore the testing was conductedillegally. She also said that the only reason she was given notice terminating hertenancy was because methamphetamine was found in the property. As the testing wasconducted illegally it was therefore harsh and unconscionable for the tenancy to beterminated.[26] Ms Smith sought an order that Accessible Properties' termination of thetenancy was harsh or unconscionable conduct under s 78(1)(f) of the Act or,alternatively, that there should be a rehearing before the Tribunal.[27] Judge Mabey QC was of the very clear view that the appeal must be dismissed.He stated:[31] The tenancy was terminated pursuant to a provision in the tenancyagreement. The respondent was exercising a contractual right which isconsistent with its statutory rights to terminate. An appropriate notice wasgiven. No reasons were required and the tenancy was validly terminated.[28] The Judge was of the view that even if the methamphetamine testing wasconducted without Ms Smith's consent, that would make no difference to the outcomeof the appeal.Grounds of appeal[29] Ms Smith's grounds of appeal are:(a) The refusal of the District Court Judge to allow an adjournment of theappeal when it was first called on 16 January 2018 to allow Ms Smithto attend and give evidence when she was released from prison was abreach of her right to justice under s 27(1) of the New Zealand Bill ofRights Act 1990 and her right to be heard on the application unders 93(1) of the Act.(b) The District Court Judge was in error in finding that illegalmethamphetamine testing of the property could have no impact onAccessible Properties' contractual termination of the tenancy given thats 78(1)(f) of the Act provides jurisdiction for a finding that it would beharsh or unconscionable for Accessible Properties to exercise its rightto terminate the tenancy.Discussion[30] This appeal is brought under s 119 of the Act, which provides that appeals tothe High Court from decisions of the District Court can be brought only on questionsof law.[31] The proper approach to appeals under s 119 of the Act was explained byDuffy J in Anderson v FM Custodians Ltd:2[32] In short, this Court is not to substitute its own views for that of thelower Court; instead the Court must consider whether the decision underappeal reveal a misinterpretation and/or misapplication of the statutory powersin the [Residential Tenancies] Act, and if not, whether what has been decidedis so misconceived that it is an unlawful decision[32] The issue for this Court to determine is, therefore, whether the Tribunal andthe District Court in granting possession of the property to Accessible Properties unders 64 of the Residential Tenancies Act on the basis of a 90 day notice under s 51(1)(d)of the Act misinterpreted and/or misapplied the statutory powers in ss 51, 54 and 64of the Act and, if not, whether what has been decided is so unconscionable that it isunlawful decision.[33] The provisions of the Act relevant to termination by notice are ss 51, 54 and64. These relevantly provide:51 Termination by notice(1) Subject to sections 52, 53, 53A, 59, and 59A, the minimum period ofnotice required to be given by a landlord to terminate a tenancy shallbe as follows:(a) where the owner of the premises requires the premises as theprincipal place of residence for the owner or any member ofthat owner's family, 42 days:(b) where the landlord customarily uses the premises, or hasacquired the premises, for occupation by employees of thelandlord, that fact being clearly stated in the tenancyagreement, and the premises are required for occupation bysuch an employee, 42 days:(c) where the owner is required, under an unconditionalagreement for the sale of the premises, to give the purchaservacant possession, 42 days:(d) in any other case, 90 days.2 Anderson v FM Custodians Ltd [2013] NZHC 2423, (2013) 15 NZCPR 123.(2) Subject to sections 52 to 53A, 59, and 59A, the minimum period ofnotice required to be given by a tenant to terminate a tenancy shall be21 days, in any case.(3) Every notice to terminate a tenancy shall—(a) be in writing; and(b) identify the premises to which it relates; and(c) specify the date by which the tenant is to vacate the premises;and(ca) in any case where the tenant is given less than 90 days' notice,set out the reasons for the termination; and(d) be signed by the party giving the notice, or by that party'sagent.54 Tribunal may declare retaliatory notice of no effect(1) Within 28 working days after receipt of a notice terminating thetenancy, being a notice that complies with the requirements of section51 (or, in the case of a boarding house tenancy, section 66U), thetenant may apply to the Tribunal for an order declaring that the noticeis of no effect on the ground that, in giving the notice, the landlordwas motivated wholly or partly by the exercise or proposed exerciseby the tenant of any right, power, authority, or remedy conferred onthe tenant by the tenancy agreement or by this or any other Act or anycomplaint by the tenant against the landlord relating to the tenancy.(2) If, on any such application, the Tribunal is satisfied that the landlordwas so motivated in giving the notice, it shall declare the notice to beof no effect unless the Tribunal is satisfied that the purported exerciseby the tenant of any such right, power, authority, or remedy, or themaking by the tenant of any such complaint, was or would bevexatious or frivolous to such an extent that the landlord was justifiedin giving the notice.(3) The giving of a notice terminating a tenancy is an unlawful act if thenotice is declared under subsection (2) to be of no effect.64 Possession orders(1) Subject to subsection (2), on the application of any person entitled topossession of the premises following the termination of a tenancy, theTribunal shall make an order granting possession of the premises tothat person.(2) No possession order may be made more than 90 days after the date ofthe termination of the tenancy.(3) Every order of the Tribunal made under section 55 or section 56 orsection 59 or section 61 terminating a tenancy shall have effect as apossession order granting possession of the premises to the landlord.(4) No possession order (including an order of a kind referred to insubsection (3)) shall be capable of being filed under section 106 morethan 90 days after—(a) the date of the order; or(b) in the case of a conditional order under section 55(1A) orsection 78(3) or section 88(2) which states that it is an orderto which this paragraph applies, the date on which theconditional order takes effect as a final termination order.[34] The Court of Appeal in Winther v Housing Corp of New Zealand confirmedthat a notice under s 51 need not give reasons for termination and the only specificprovision empowering the Tenancy Tribunal to declare a s 51 notice of no effect iss 54 of the Act, where the landlord has issued the notice of termination in retaliationto the tenant exercising his or her rights or in breach of a tenant's human rights unders 12 of the Act,3 neither of which apply in the present case.[35] Ms Smith relies upon s 78(1)(f) of the Act, which provides:78 Orders of Tribunal(1) Without limiting the generality of section 77 or the nature or extent oforders that the Tribunal may make in the exercise of its jurisdiction,the Tribunal may, in respect of any claim within its jurisdiction, make1 or more of the following orders:(f) where it appears to the Tribunal that an agreement between the parties,or any term of any such agreement, is harsh or unconscionable, or thatany power conferred by an agreement between them has beenexercised in a harsh or unconscionable manner, an order varying theagreement, or setting it aside (either wholly or in part):[36] The term "harsh or unconscionable" is not defined in the Act, but in thecircumstances of this case I am of the view that it is unnecessary to define the term.[37] Section 78(1)(f) enables the Tribunal to make an order varying an agreementor setting it aside (either wholly or in part) if an agreement between the parties or anyterms of any such agreement is harsh or unconscionable, or if a power conferred bythe agreement has been exercised in a harsh or unconscionable manner.3 Winther v Housing Corp of New Zealand [2010] NZCA 601, [2011] 1 NZLR 825.[38] There are two fundamental difficulties with Ms Smith's reliance on thisprovision. First, she does not seek an order varying the tenancy agreement or settingit aside. She wants possession of the property. In the notice of appeal the order soughtis specified as an order that it would be harsh or unconscionable for AccessibleProperties to exercise its right to terminate Ms Smith's tenancy of the property. Noorder is sought to vary the tenancy agreement or set it aside.[39] Second, Accessible Properties did not exercise a power conferred by theagreement when it gave Ms Smith 90 days notice of termination of the agreement. Itexercised a statutory power conferred on it by s 51(1)(d) of the Act. The fact that thestatutory power may have been repeated in the agreement is immaterial.Section 78(1)(f) does not enable the Tribunal to vary or set aside the Act on the basisthat a 90 day notice pursuant to s 51(1)(d) of the Act was given in a harsh orunconscionable manner.[40] Perhaps recognising these difficulties, Ms Smith submits that even if the casedid not fall strictly within the terms of s 78(1)(f), the Tribunal still has generaljurisdiction under ss 77 and 85 to make orders concerning agreements considered tobe harsh or unconscionable.[41] Section 77(1) provides that the Tribunal has jurisdiction to determine, inaccordance with the Act, any dispute that exists between a landlord and tenant. Thewords "in accordance with the Act" means that the Tribunal's jurisdiction is notunlimited. Subsection (2) then provides that, without limiting the generality ofsubsection (1), the Tribunal has jurisdiction to make determinations or orders in 23specified situations. Ms Smith does not identify which of these is applicable to thepresent case.[42] At the heart of Ms Smith's case is a complaint that Accessible Properties actedunlawfully when testing for methamphetamine at the property. Section 77(2)(o) is oneof the 23 specified situations in which the Tribunal has jurisdiction. It givesjurisdiction to the Tribunal to consider and determine any complaint by any party to atenancy agreement that any person has committed an unlawful act, and, where it findssuch a complaint to be proved, to order the payment of such sum in the nature ofexemplary damages as the Tribunal may think just. This is not, however, a route thatwas taken by Ms Smith. It is not clear which, if any, of the remaining 22 situationsapplies to Ms Smith's case.[43] Ms Smith also points to s 85 as conferring jurisdiction to make ordersconcerning agreements considered to be harsh or unconscionable. It provides:85 Manner in which jurisdiction is to be exercised(1) Subject to the provisions of this Act and of any regulations madeunder this Act, the Tribunal shall exercise its jurisdiction in a mannerthat is most likely to ensure the fair and expeditious resolution ofdisputes between landlords and tenants of residential premises towhich this Act applies.(2) The Tribunal shall determine each dispute according to the generalprinciples of the law relating to the matter and the substantial meritsand justice of the case, but shall not be bound to give effect to strictlegal rights or obligations or to legal forms or technicalities.[44] Section 85 does not, however, confer any new jurisdiction on the Tribunal. Itrelates only to the manner in which the Tribunal's jurisdiction is to be exercised. Itdoes not provide the Tribunal with any new powers.[45] I, therefore, disagree with counsel's submissions that the Tribunal had specificjurisdiction under s 78(1)(f) or general jurisdiction under ss 77 and 85 to make an orderthat it was harsh or unconscionable for Accessible Properties to give 90 days notice oftermination of the tenancy to Ms Smith. This finding is sufficient to dispose ofMs Smith's second ground of appeal.[46] I am, therefore, not required to make a finding as to whether themethamphetamine testing of the property was unlawful. However, if I was requiredto make a finding, I am of the opinion that it was not unlawful. Based on the freshevidence submitted by way of affidavits sworn by Ms Smith and Ms Willers, I am ofthe opinion that, in the circumstances of this case, the residents of the property didagree to the testing carried out by Accessible Properties. On the second occasionMs Smith was present at the property and allowed Accessible Properties' agent to enterthe property knowing she was going to test for methamphetamine. Ms Smith says thatshe did not object because she thought Accessible Properties was entitled to enter theproperty for that purpose. She says she would have objected if she had known thatAccessible Properties required permission to test for methamphetamine. Anymistaken belief on her part does not, however, invalidate her actions in allowing theAccessible Properties' agent onto the property to test for methamphetamine.[47] In any event, non-invasive testing for methamphetamine may be included inthe general power of inspection provided for in the tenancy agreement. AccessibleProperties had an obligation to provide and maintain a habitable property in areasonable state of repair and to comply with all legislative requirements pertaining tobuildings and health and safety, including the Health Act 1956, Health and Safety atWork Act 2015 and the New Zealand Standard 8510: Testing and decontamination ofmethamphetamine contaminated properties.[48] In recognition of a landlord's obligation to provide and maintain a habitableproperty, the Tenancy Tribunal in two recent cases declared that Accessible Propertiescould conduct methamphetamine testing during a property inspection.4 It would, ofcourse, be preferable to specifically provide for a right of inspection formethamphetamine contamination, but when Ms Smith entered the original tenancyagreement with Housing New Zealand in 2011, the extent of the methamphetaminecontamination problem was not recognised.[49] Ms Smith recognised that the outcome of the appeal would likely depend onthe Court's decision on the second ground of appeal and there was, accordingly, littleby way of submissions on the first ground of appeal.[50] On the first ground of appeal, Ms Smith did not submit that a party had anabsolute right to continue to request adjournment of hearings to allow it to attend. Shesubmitted, however, that there was a breach of natural justice in the present case whenthe District Court Judge refused an adjournment of the hearing when she was in prison.She was to be released shortly and wanted the opportunity to present her evidence inthe District Court hearing.4 Accessible Properties New Zealand Ltd v Beach [2017] NZTT Tauranga, Application Number4094382 at [10] and Accessible Properties New Zealand Ltd v Thompson [2017] NZTT Tauranga,Application Number 4103627 at [11].[51] I am of the view that, in these circumstances, there was no breach of naturaljustice. The appellant was represented by competent counsel and the Judge wasadvised of the proposed evidence, which he said would not make a difference to theoutcome of the case. That evidence is now before the Court and I agree with theDistrict Court Judge that it makes no difference to the outcome of the case.[52] In those circumstances, the District Court decision to dismiss the applicationfor an adjournment was appropriate, in the interests of justice and in accordance withthe statutory powers in ss 85(1), 96(4) and 117(4) of the Act and r 18.17 of the DistrictCourt Rules 2014.[53] The appeal is dismissed. Costs on a 2B basis are payable by Ms Smith toAccessible Properties._________________________Woolford J