Tenancy

A renter may claim compensation from a rental provider if:

• the renter has suffered loss or damage as a result of a breach of duty, under the RT Act or a rental agreement by the rental provider;
• the renter has paid more to the rental provider than required under the rental agreement or RT Act;
• the rental provider has not reimbursed the renter for urgent repairs within seven days of receiving written notice; or
• the renter has suffered loss or damage due to discrimination against them by the rental provider or agent (ss 209, 209AA, 209AAB, 210AA, 210). The RT Act distinguishes between compensation claims based on breaches of a ‘duty provision’ and claims based on other breaches. Where a rental agreement remains in effect, a renter must usually serve a Breach of Duty Notice on a rental provider before claiming compensation for a breach of duty. If the rental agreement has terminated, a renter does not need to serve a Breach of Duty Notice before applying for compensation. An application (under ss 209, 210 RT Act) may be made immediately to VCAT. (See also ss 209AA, 209AAB, 210AA.) A compensation claim should include evidence of the breach and loss, the first communication of the issue to the rental provider, the number of days the issue persisted for, and when or if the issue was rectified. Parties should identify each issue and the loss they suffered as a percentage of their daily rent. Or parties can identify issues as a separate loss where appropriate (e.g. the cost of making urgent repairs to the property). Evidence of the report is essential as this dictates the start date from when the compensation can be considered (see also ‘Condition reports’, above). A renter may also claim discrete losses in addition to losses as a percentage of their daily rent. For example, an electrical fault is reported to a rental provider and the rental provider fails to attend to it. Two weeks later, the electricity goes out and cannot be restored without intervention. The rental provider does not arrange repairs until seven days later, when an electrician arrives and restores power. All the food has been spoiled and the family has been unable to use much of the premises. The renter may claim for loss of quiet enjoyment of the premises due to not having electricity for seven days. If the daily rent is $50 and the renter believes the loss is 50 per cent, then the sum claimed is $175 (i.e. $50 x 0.5 x 7), plus loss of food and other reasonable expenses for which the renter should provide receipts. A renter can also claim for the ‘general inconvenience’ they have experienced. The general principle of claiming compensation for general inconvenience arises from the Supreme Court decision of Reardon and Reardon v Ministry of Housing (SCVCA, unreported, 13 November 1992, per Smith J). General inconvenience is normally only considered in cases where there has been a serious interference with a renter’s rights and those rights can be tied to a renter’s right to the quiet enjoyment of the property. It is recommended that renters claim $1000 as a starting point for general inconvenience (see also Walmsley & Walmsley v Charles (Hall) (Residential Tenancies) [2019] VCAT 1691 (28 October 2019)). Further, in Young v Chief Executive Officer (Housing) [2023] HCA 31 (1 November 2023), the High Court has acknowledged that a renter may be entitled to compensation for experiencing distress and disappointment arising from the rental provider’s breach of the agreement or the Act. This is a decision from the Northern Territory. However, it is expected to have significant application in Victoria. The decision acknowledges that compensation for distress and disappointment should not be considered as a form of personal injury (cf. s 447), but rather a loss similar to losses set out in the ‘travel holiday cases’ (for example, Jarvis v Swans Tours Ltd [1972] EWCA 8). The court recognises two forms of distress and disappointment that may be compensated; that which comes as a consequence of physical inconvenience, and that which comes from a breach where the contract was objectively concerned with the renter’s state of mind. In Young, the court agreed that the renting of a home is a contract that is fundamentally concerned with safety and security of the renter and this has a direct bearing on the mind. Accordingly, this overcomes the common law presumption against claims for distress and disappointment in transactions such as business or commercial contracts. This decision emphasises that the duty to provide ‘quiet enjoyment’ is a duty fundamentally concerned with the renter’s state of mind and that rental provider’s or agents should be cautious about ignoring or mistreating renters. The types of evidence to substantiate and quantify claims for distress and disappointment remains to be seen. Distinguishing between a claim for a breach of quiet enjoyment and distress and disappointment of mind will need to be drafted carefully to avoid ‘double recovery’ (see para 24 of Young) and to show the claim is reasonable. It is anticipated that the test regarding the amount of compensation will be objectively determined. That is to say, the distress and disappointment will likely be referenced to what the ‘reasonable person’ would have experienced because of the breach rather than taking into consideration an applicant’s specific disposition or susceptibility to distress or disappointment. Young also makes it clear that the enabling enactment (in this case, the RT Act) does not operate in isolation or to the exclusion of the common law when being interpreted by the tribunal. Rather, the interpretation of an enabling Act must rely and draw upon common law principles available to clarify and ensure a harmonious and consistent application of the law across jurisdictions to the extent possible (Young at para 35). Ultimately, VCAT may reduce any claim. Generally, VCAT will not increase the amount claimed for a renter. Therefore, parties should be reasonable, and err on the side of making a larger claim, but expect that they will likely be reduced to a more reasonable amount. Parties should also pay particular attention to factors outlines in section 211, 211A and 211B of the RT Act regarding what VCAT considers when determining fault and amounts of compensation payable. Section 211 allows VCAT to consider a wide range of factors including the parties’ conduct and reasonable offers, actions and inactions leading up to the point of VCAT’s determination. It is important, however, that the obligation to mitigate loss specifically is not overstated or misconstrued (see Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd & Ors [2014] VSC 57 (28 February 2014) at 157). One of the factors considered under section 211(h) of the RT Act relevant to compensation related to repairs is whether the renter gave the rental provider written notice of the damage or disrepair as soon as practicable, as required under section 72AA of the RT Act. Therefore, it is important that renters always give this written notice as soon as practicable when repairs are required, so that they do not jeopardise any potential future compensation claims. When determining a compensation claim, VCAT is required to consider certain guidelines issued by CAV. These guidelines cover maintenance, cleanliness, damage, fair wear and tear, and urgent repairs (s 211B RT Act). Refer to the Director Guidelines on the CAV website (www.consumer.vic. gov.au).

  Jurisdiction

  VCAT has jurisdiction to hear claims of up to $40 000, or a higher amount if the parties agree (s 447(1) RT Act). VCAT cannot hear claims for compensation for death, personal injury, or pain and suffering (s 447(2)).

  Interstate parties

  In the Supreme Court decision of Meringnage v Interstate Enterprises Pty Ltd [2020] VSCA 30 (25 February 2020), the court confirmed that VCAT lacks the jurisdiction to determine matters where one party lives in another state. This does not apply to companies, territories, or parties who live overseas. Parties may still apply to VCAT and make submissions about whether a party who is in an excluded jurisdiction is in fact a resident (as distinct from being domiciled) (see Howe (1922) 31 CLR 290 at 329; Watson v Marshall and Cade [1971] HCA 33; (1971) 124 CLR 621). However, if it is clear that one party is a resident in another state, VCAT cannot hear the matter and applications must be made to the Magistrates’ Court under Part 3A of the VCAT Act. These matters are referred to as ‘substitute proceedings’ (s 57C VCAT Act). For example, a rental provider who is on holiday in Queensland at the time of an application may still have standing if their residence is in Victoria or one of the territories. While there may be some exceptional matters, agency is unlikely to overcome this issue of jurisdiction (see Masters v Wilkinson (Residential Tenancies) [2021] VCAT 36). Part 3A of the VCAT Act was enacted on 29 November 2021 and affects all decisions from 25 February 2020. This part is retrospective in effect and makes valid orders that would otherwise be invalid for want of jurisdiction (s 57F VCAT Act). The Magistrates’ Court is able to hear the matter provided there is doubt that VCAT could not hear it for the reasons set out in the Meringnage case. Parties may apply to the Magistrates’ Court under its federal jurisdiction using Form 10A and the Residential Tenancies Annexure. All the substantive rights and time limits under the RT Act (s 57B(4)) remain the same. The costs of the application and cost discretion of the court remain the same as would have applied at VCAT in most cases (ss 57B(3)(i), 109 VCAT Act). However, the practice and procedures (including enforcement of orders) of the Magistrates’ Court apply, rather than the procedures of VCAT (unless the court determines otherwise). This impacts the forms, and includes additional requirements such as a need to file a notice of reply, affidavits of service, and may require some interlocutory applications to expedite time for hearing urgent matters (e.g. urgent repair hearings). There may be additional fees for interlocutory applications unless a fee waiver is granted by the registry on the basis of section 57B(3) (i). Appeals against Registrar decisions can be made (s 16K Magistrates’ Court Act 1989 (Vic) (‘Magistrates’ Court Act’); r 4.02 Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2020 (Vic)). Overarching and proper basis certificates are not required (s 4(2)(ja) Civil Procedure Act 2020 (Vic)). Evidence requirements should be consistent with that of VCAT (s 98(1)(b); cf. s 57(3)(c)). However, in practice, evidence requirements and witness examination tends to be similar to a Magistrates’ Court civil litigation; proceedings are more formal and adversarial (rather than inquisitorial as at VCAT), evidence and the examination of witnesses follows the practice of examination in chief, cross- examination and re-examination (r 40 Magistrates’ Court General Civil Procedure Rules 2020 (Vic)). Applications for reopening an order from the Magistrates’ Court should be accepted using the VCAT Application to Reopen an Order (s 120; cf. s 57C(3)(g) VCAT Act). However, in practice, Form 46B and a supporting affidavit will be required to address why the renter did not attend the hearing or file a notice of defence. Positive steps should be taken by the renter to ensure the local police station is aware the application to reopen the order has been lodged if the warrant has already been purchased. The right to written reasons for a decision (s 117 VCAT Act) is not directly mirrored in the Magistrates’ Court (r 59.04 Magistrates’ Court General Civil Procedure Rules 2020 (Vic)). Appeals are also made directly to the Supreme Court (s 109 Magistrates’ Court Act; s 57C(3)(j) Magistrates’ Court General Civil Procedure Rules 2020 (Vic)). There is a 30-day time limit to lodge the appeal. However, in the case of evictions, if the warrant is executed, the appeal will be futile with respect to preserve the rental agreement. Appellants should also be more proactive in obtaining a stay in the practice court of the Supreme Court as the application to appeal will not stay the effect of the order as is the practice at VCAT. Contact the self-litigant coordinators of the Magistrates’ Court (see ‘Contacts’ at the end of this chapter). They can provide guidance and procedural information but are unable to provide legal advice.

  Cost

  The cost of a basic VCAT application is $70.10; this fee is indexed annually. Under the VCAT Act (s 132), parties may be eligible for fee waivers. Parties are presumed to bear their own costs of proceedings (s 109(1)). However, if a party’s conduct causes delay or procedural disadvantage to other parties, VCAT has discretion to award costs (s 109). Costs may be awarded against a party where an offer has been rejected and the subsequent VCAT decision is less favourable than the offer made (s 112). Rejected offers that may give rise to such costs must comply with sections 113 and 114 of the VCAT Act. If a party is successful (or has substantially succeeded) in their VCAT application, the unsuccessful party may be directed to reimburse the successful party their application fee. An applicant should include in their application a request to have their application fee reimbursed. This is at the discretion of VCAT (s 115A–D VCAT Act). Refer to the fee schedule and the fee waiver grounds on VCAT’s website (www.vcat.vic.gov.au).

Parties may concurrently invoke the ACL&FTA). Since the reforms made to the RT Act on 29 March 2021, these provisions may be less relevant. However, they may still be of benefit, in particular for rental agreements that commenced before 29 March 2021. Invoking the ACL&FTA can be done by referring to section 184 of the ACL&FTA and checking the correct box on the general application form. This means applications may be made for amounts greater than $40 000. Such applications may attract higher application fees. However, it is necessary to show the relationship was in trader dispute (s 182 ACL&FTA).

Under the ACL&FTA, VCAT may also consider the Australian Consumer Law (ACL), which is contained in schedule 2 of the Competition and Consumer Act 2010 (Cth). If cited as part of the application, VCAT may consider issues such as:

• ‘misrepresentation’ (ss 29–30 ACL) (see also s 30E, 30G RT Act);
• ‘unconscionable conduct’ (ss 21–22 ACL) (see also s 27B RT Act);
• ‘unfair contract terms’ (ss 23–28 ACL; s 185 ACL&FTA) (see also s 28 RT Act);
• ‘bait advertising’ (s 35 ACL) (see also s 30F RT Act);
• guarantees as to ‘fitness for purpose’ (s 61 ACL) (see also s 68 RT Act); and
• whether goods or services have been rendered with due skill and diligence (s 60 ACL) (see also ss 6, 12 Estate Agents (Professional Conduct) Regulations 2018 (Vic)). Previously, the RT Act did not clearly set out a renter’s right to cancel a rental agreement where the renter had been misled about the rental agreement. However, the RT Act now has clear mechanisms that allow renters to claim for compensation or (potentially) to obtain an order to end the rental agreement without incurring lease-breaking costs. These mechanisms only apply if the renter can show they were induced to enter the rental agreement by misleading and deceptive conduct (s 30E). Whether misleading conduct extends to and includes a failure to make statutorily required disclosures (s 30D) remains to be seen. Renters who believe they have been misled in this way cannot cancel the rental agreement themselves, but they can apply to VCAT for compensation or for an order to end the agreement (s 472(1A)). The ACL&FTA also provides VCAT with a wide range of remedies to resolve disputes (ss 184–185; pt 8.2 ACL&FTA).

It may be possible to make personal injury claims under the ACL&FTA for claims less than $10 000 (s 182(3) ACL&FTA). However, there is some doubt as to whether an injury that is ‘significant’ would appropriately be brought to VCAT (see Allan v McLennan (Residential Tenancies) [2018] VCAT 1283 (22 August 2018)). It is strongly advisable to consult a personal injuries expert before proceeding with any such claim at VCAT. Given the complexity, gravity, unique time limits and other issues arising out of such claims, parties should seek legal advice. Limitation of action period Legal actions for a tort or breach of contract (such as a rental agreement) must be brought within six years of the alleged loss or damage occurring (s 5 Limitation of Actions Act 1958 (Vic)). After such time, an application may be statute barred. Note that the Limitation of Action Act was amended in 2023 to extend the meaning of ‘action’ to include actions at both court and VCAT (cf. Lanigan v Circus Oz [2022] VSC 35 (9 February 2022)). Evidence The success of a claim depends on what the renter can prove at VCAT. If the renter makes a claim, the renter has the onus of producing evidence that establishes on the balance of probabilities that:

• the rental provider breached the tenancy agreement or the RT Act;
• the breach caused loss or damage (or, occasionally, substantial quantifiable inconvenience); and
• the amount the renter is claiming as compensation is reasonable.

If a rental provider or agent has breached the RT Act or the rental agreement, the renter should serve them with a Breach of Duty Notice in order to claim compensation (ss 208, 209 RT Act).

The types of breaches for which a notice might be served are discussed in ‘Rental provider and renter duties’ above. The notice must:

• specify the breach;
• detail the loss/damage caused by the breach;
• require the rental provider to remedy the breach or pay compensation within a required timeframe (seven days for a breach of quiet enjoyment and 14 days for any other breach);
• state that the rental provider must not commit a similar breach again; and
• state that if the notice is not complied with, an application may be made to VCAT; or a Notice of Intention to Vacate can be given if there have been multiple breaches (ss 3, 208 RT Act). The notice must be in writing, addressed to the person allegedly in breach of the duty (or their agent) and be signed by the person giving the notice (s 208 RT Act). The renter can give this notice in the form of a letter; however, given the requirements of section 208, it is advisable to use the prescribed Notice of Breach of Duty to Rental Provider form. It is recommended that the renter send the notice by registered mail in case of a dispute about service. Alternatively, if parties have consented within the meaning of the Electronic Transactions (Victoria) Act 2000 (Vic), the notice may be served via email (see ‘Serving Notices to Vacate’, above). If the rental provider does not pay the compensation claimed or comply within the required timeframe (seven days for a breach of quiet enjoyment and 14 days for any other breach), the renter may apply to VCAT for a compensation order or a compliance order (ss 3, 208, 209 RT Act).

If a rental provider or agent has breached the RT Act or a tenancy agreement, but the breach was not of a duty provision (e.g. damage was caused to the renter’s goods during entry by the rental provider or their agent), or if the claim is for repayment of moneys overpaid (e.g. invalid rent increases, or rent paid beyond a vacate date), or the loss or damage is due to discrimination, the renter may apply to VCAT without first serving any notice (ss 209AA, 210, 210AA RT Act).

Nonetheless, it may still be beneficial for the renter to serve a notice on the rental provider or agent even if the breach was not of a duty provision. This gives the rental provider details of the claim, and an opportunity to agree to payment. The renter’s application to VCAT for compensation must give details of the breach and of the loss or damage caused by the breach (r 8.10(2) VCAT Rules).

A rental provider may claim compensation from a renter if:

• the rental provider has suffered loss or damage as a result of a breach of duty under the RT Act or a breach of the rental agreement by the renter; or
• the rental provider has paid more to the renter than required under the rental agreement or RT Act (ss 209, 209AA, 210 RT Act).

If making a claim for compensation, the rental provider bears the onus of proof and must establish that on the balance of probabilities:

• the renter breached the rental agreement or the RT Act;
• the rental provider has sustained loss or damage;
• the loss or damage sustained by the rental provider resulted from the renter’s breach of the rental agreement or the RT Act; and
• the amount they are claiming is reasonable. The rental provider must provide evidence to support their claim and must give the renter copies of any documents or photos they want to present to VCAT. It is prudent for parties to ask for, in writing, any document they wish to see before the VCAT hearing. If a document is not provided before the hearing, parties may wish to consider requesting an adjournment on the basis of procedural fairness, or to raise the issue with VCAT with respect to credibility. It may also be possible to compel a party (or third parties) to produce a particular document (s 104 VCAT Act). According to VCAT Rule 8.10(1), an application for compensation must state the amount of compensation being claimed. While it is the rental provider’s obligation to prove their claim, it is prudent for the renter to provide any evidence that shows:
• they did not breach any duty under the RT Act or the rental agreement;
• the breach did not cause the loss or damage claimed by the rental provider; or
• the amount claimed is excessive/unreasonable in the circumstances.

  Rental provider to minimise loss

  If a renter agrees that they are liable for some of the rental provider’s losses, but believes the amount the rental provider is claiming is unreasonable, the renter should provide evidence of this. The rental provider has a duty to keep any loss they suffer to a minimum, and if they have not done so, they may not be entitled to claim compensation from the renter (s 211(e) RT Act).

  Compensation for repairs or replacements

  If a rental provider is claiming an amount for repairs or for the replacement of property or fixtures (e.g. to replace carpet or repaint rooms) that the renter believes is excessive, the renter should get quotations from tradespeople or shops to show this. If the property was damaged or worn before the renter moved in, the renter should also point this out on the condition report or using other available evidence. The renter may make a written request for the original receipts or invoices of when the particular items being claimed as needing repair were purchased as new, to raise the issue of age and whether the effective life of the item has been exhausted. The rental provider cannot claim the full cost of replacing something that was not new when it was damaged. VCAT must allow for ‘fair wear and tear’ (s 61 RT Act). VCAT must also consider the depreciation life-spans listed in the ATO’s guide when it calculates the amount of compensation the renter pays (s 211A(2); reg 90). The rental provider’s actions in repairing the damage must also be reasonable and in proportion to the amount of damage caused. The renter should be prepared to argue about both their responsibility for the damage, and about the amount they should have to pay if VCAT finds that they are responsible.

  Costs for ending a rental agreement early

  If a renter ends a rental agreement before the end of the fixed term without getting the rental provider’s agreement or a VCAT order, the rental provider may ask for compensation for any reasonable costs they have to pay because the rental agreement ended early. (See ‘Breaking a fixed-term rental agreement (lease-breaking)’, above, for more information about how to defend this kind of compensation claim.) There are certain circumstances where a renter can leave early without paying costs. (See ‘Ending a rental agreement: Renter wants to leave’, above.)

  Director guidelines

  When determining a compensation claim, VCAT is required to consider guidelines issued by CAV on the following topics: maintenance, cleanliness, damage and fair wear and tear, and urgent repairs (s 211B RT Act). Refer to the director guidelines on CAV’s website (www.consumer.vic.gov.au).

  Insurance claims

  Insurance operates under a legal principle called ‘subrogation’. The rental provider (‘the insured’) and the insurance company (‘the insurer’) enter a contract. Upon certain events, the insured will pay the insurer a sum of money called an ‘insurance excess’ and give their legal rights to take action for the damage or loss covered under the insurance contract to the insurer. In exchange, the insurance company will either arrange for the damage or loss to be fixed or pay the insured a sum of money as set out under the insurance contract. It is important that renters understand that just because a rental provider makes a claim under their insurance policy, this does not necessarily protect the renter unless there is a clear settlement agreement to the contrary. Further, if the rental provider elects to make a claim on their insurance, the renter is not liable for an excess fee (s 27B, r 11(h) RT Act). See Matthews v Huppert (Residential Tenancies) [2017] VCAT 395 (10 March 2017). If a large compensation claim proceeds to VCAT, it is recommended to ask under oath the identity of the rental provider’s insurer (if any) and if there is any intention to make a claim. The tribunal may or may not entertain such questions. Note that a renter cannot force a rental provider to make a claim on their insurance. Equally, once the rights to make a claim against the renter have been given to the insurer, the rental provider cannot also make a claim against the renter (sometimes referred to as ‘double dipping’). If a renter has been to VCAT already about a matter, and it is resolved, and the insurer is later pursuing the rent for the same issues, the renter should indicated the matter has already been determined by VCAT. The inverse is also true, if an agreement is resolved with the insurer, the rental provider is not able to make a valid claim to VCAT, and VCAT should be shown the agreement with the insurer. A rental provider seeking to ‘double dip’ may either void their insurance or potentially risk fraud-related charges. If a debt has not been before VCAT or any court to be decided, a claim by an insurer against a renter may be challenged. It is not a decided debt or issue, it is an allegation. If an insurer or their agent alleges a renter owes money, the renter should not immediately admit liability. The renter should first ask to see a more detailed outline of the evidence, and a breakdown of the amounts that the renter is alleged to owe. If the matter relates to a fire and a fire report was created, this may be requested under freedom of information. As with any other claim by a rental provider, they must prove that the renter is at fault. Also, any alleged losses are subject to depreciations and the other principles set out earlier in this chapter. The proper forum to resolve disputes in most cases remains VCAT (see ‘Proper forum’, below). Forcing an insurer to litigate in VCAT will substantially improve negotiations if the issue is disputed. Insurance is a numbers game, and renters should not be afraid to seek waivers, or assertively negotiate low lump-sum payments. Before reaching any settlement with an insurer, renters should read Chapters 10 and 11 of the General Insurance Code of Practice (available at www.insurancecouncil.com.au/cop/) and seek both legal and financial advice as soon as practicable after initially being contacted.