Harding v Schellevis

[2021] NZHC 1265

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-000378

[2021] NZHC 1265

BETWEEN

CLARE DINA HARDING

Appellant

AND

MONICA SCHELLEVIS (File no. 4223837) DAVID TAN and SAMANTHA TAN (File no. 425538)

ANDRIES GONSALVES CAROTO (File no. 4241288)

Respondents

Hearing:

19 May 2021

Appearances:

S Abdale for the Appellant Respondent A Caroto in Person

No Appearance for D Tan and S Tan (written submissions filed) No appearance for Ms Schellevis

Judgment:

1 June 2021

JUDGMENT OF WALKER J

This judgment was delivered by me on 1 June 2021 at 4 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

CLARE DINA HARDING v MONICA SCHELLEVIS & ORS [2021] NZHC 1265 [1 June 2021]

Introduction

[1]    This is an appeal from a District Court decision dismissing an appeal from the Tenancy Tribunal. It concerns the interpretation of s 5(1)(n) of the Residential Tenancies Act 1986 (“the Act”). This section excludes the operation of the Act where the rented premises are principally used as the landlord or owner’s residence or a member of their family’s residence. If the Act is excluded it means that the Tenancy Tribunal has no jurisdiction to adjudicate disputes. It follows that this issue is important to prospective tenants and landlords alike.

[2]    The appellant and her family own a two-level house with six bedrooms at 75 Aberley Road, Auckland. The upper level has four bedrooms, a kitchen, bathrooms and living area. The lower level has a living room, laundry and garage. The family generally occupy those areas. But there is also an area on the lower level comprising two bedrooms, a kitchenette, bathroom, laundry and living room. The respondents at various times occupied this area. They entered an agreement described as a “flat/house- sharing agreement”. The appellant characterises this as an occupation agreement to distinguish it from a tenancy agreement.

[3]    For ease of reference, I call this area the “granny flat” to distinguish it from the rest of the house. The degree of separation and independence of the granny flat is contested by the parties.

[4]The notice of appeal presents the issue in these terms:

The Judge erred in law in determining that s 5(1)(n) of the Act did not apply to the occupation agreements entered into with the respondents, and that the jurisdiction of the Act therefore applied.

The Judge was wrong in law by defining “residential premises” to mean only that part of the single dwelling that the flatmates occupied, and not the entire single dwelling that is the appellant’s family home

[5]    The operation of s 5(1)(n) of the Act is generally a question of mixed law and fact. But the issue before this Court is narrow because appeals to the High Court under the Act are limited to questions of law. To that extent, the jurisdiction is limited. It does not extend to an examination of the merits of the underlying dispute. Nor does it extend to revisiting the lower Court’s factual findings. For that reason, the real

question—the crux of this appeal—is whether the granny flat is the residential premises at issue for the purpose of the Act or the family home (including the granny flat) is the residential premises. This is the question of law at stake in this appeal.

The decisions

[6]    The Tenancy Tribunal determined that the tenancy is a residential tenancy and it had jurisdiction to deal with the substantive applications before it.1

[7]    The Adjudicator set out the background in her decision. She noted that the landlord previously rented the granny flat as a separate dwelling. In 2015 the Council advised that because there was no firewall between the granny flat and the rest of the house, it could not be tenanted as a separate dwelling.2 It was however lawful to have flatmates residing in the property. From that time, the landlord entered into the occupancy agreements. Those agreements included an acknowledgement that the residence was the primary residence of the family and therefore exempt from the Act.3

[8]    The Adjudicator determined that the granny flat is a separate premises to the rest of the house. Although there was one building, there were two separate and distinct household units. The adjudicator relied on the definition of “premises” in s 2 of the Act and the statement of law in the High Court decision in Kahi v Lucas which she considered binding on the Tribunal.4 She distinguished the District Court decision of Musson v Dobrisek.5 She noted that to give effect to the Act’s intent, the exemptions in s 5 should be interpreted strictly and not liberally.6

[9]    On appeal, Judge GM Harrison reached the same conclusion. He dismissed the appeal.7 The appellant now appeals the District Court decision in reliance on

1      Caroto v Harding [2020] NZTT North Shore 4241288, 4261473.

2      Whether any premises are lawful does not determine whether the Act applies. The definition of residential premise was amended in July 2019 to specifically refer to “whether or not the occupation or intended occupation for residential purposes is or would be unlawful”.

3      Section 11 of the Residential Tenancies Act 1986 provides that, subject to limited exceptions, attempts to contract out of the Act are of no effect.

4      Kahi v Lucas HC Auckland HC 81/96, 23 September 1996.

5      Musson v Dobrisek DC Lower Hutt CIV-2006-032-36, 5 May 2006.

6 At [11].

7      Harding v Schellevis  [2021] NZDC 1802.   The appeal was pursuant to a right of appeal under   s 117 of the Residential Tenancies Act 1986 and the appeal was conducted as a rehearing.

s 119(1) of the Act. As stated, that provision stipulates that appeals are limited to errors of law. She argues that Kahi is distinguishable and therefore not binding on either the Tenancy Tribunal or the District Court; the obiter remarks in Prasad v Chief Executive of the Ministry of Social Development are not pertinent;8 and the Adjudicator and Judge failed to apply the test in Musson which has been consistently applied by the Tenancy Tribunal.

[10]   The respondents filed written submissions.9 Only Mr Caroto appeared. He was not entitled to advance oral submissions on behalf of the other respondents. However, that is of no moment as their interests overlap and their respective positions on this issue are the same.

[11]   Mr Caroto supports the decisions of the Tribunal and District Court. He emphasises the separation in the living arrangements both in terms of physical separation and degree of independence. He says that while facilities such as water and power were shared the cost of both was included in the rent as a fixed amount. The internet connection was separate and arranged by him. In that sense, outgoings were not shared as such.

[12]   He emphasises the separate entrance, separate dedicated parking and exclusive use of the outside area separated from the rest of the garden by a fence. He submits that he had to maintain the outdoor lawn area. There was no mingling with the family. The appellant was only entitled under the terms of the agreement to enter the granny flat on notice for inspections, repairs and viewings for new tenants. Mr Caroto had no right of entry into that part of the house that the family occupied. His submission is that these factors all pointed to characteristics of a landlord-tenant relationship rather than a flat-share situation.

8      See Prasad v Chief Executive of the Ministry of Social Development CA119/04, 22 December 2005.

9      By the time the appeal was heard, Ms Schellevis had dropped out. Ms Tan advised the Court that she was unable to attend the hearing.

The legal principles

[13]   The Tenancy Tribunal only has jurisdiction to hear disputes between landlords and tenants (and between a landlord and a guarantor of a tenant’s obligations) where the dispute is in relation to a residential tenancy.

[14]Section 4 of the Act reads:

4        Act generally to apply to all residential tenancies

This Act applies to every tenancy for residential purposes except as specifically provided.

[15]“Tenancy” is defined in the interpretation section:10

tenancy, in relation to any residential premises, means the right to occupy the premises (whether exclusively or otherwise) in consideration for rent; and includes any tenancy of residential premises implied or created by any enactment; and, where appropriate, also includes a former tenancy …

[16]   Exceptions to the application of the Act are set out in s 5. In particular, s 5(1)(n) states:

5        Act excluded in certain cases

(1)This Act shall not apply in the following cases:

…

(n)where the premises, not being a boarding house, continue to be used, during the tenancy, principally as a place of residence by the landlord or the owner of the premises or by any member of the

landlord’s or owner’s family …

[17]“Premises” is defined by the Act in the following way:

premises includes (other than in relation to a boarding house tenancy, in which case the definition in section 66B applies)—

(1)any part of any premises; and

(2)any land and appurtenances, other than facilities; and

(3)any mobile home, caravan, or other means of shelter placed or erected upon any land and intended for occupation on that land …

10     Residential Tenancies Act, s 2.

[18]“Residential premises” is defined in the following way:

residential premises means any premises used or intended for occupation by any person as a place of residence, whether or not the occupation or intended occupation for residential purposes is or would be unlawful …

[19]   Ms Abdale for the appellant submits that the Judge erred when he concurred that the decision in Kahi v Lucas was binding because the case is not on point. Kahi was also an appeal under s 119 of the Act and therefore restricted to questions of law. The premises in question comprised one  floor  of  a  three-floor  building  in  Galatos Street, Newton. Mr Kahi was the head tenant of the building. A workshop and garage which Mr Kahi operated was on the ground floor. There was a residential flat on the first or mezzanine floor and another floor at the top of the building which was capable of residential use. The first question was whether the Act applied to the top floor.

[20]   The landlord’s principal argument was that the whole of the premises was commercial because of the ground floor mechanic’s garage/workshop. If correct, then the Act would be excluded under the commercial premises exclusion in s 5 (1)(a).

[21]   To determine that question, Anderson J turned to the interpretation section noting that “premises” includes “any part of any premises”. Describing the definition as inclusive rather than an exhaustive definition, he stated that the definition must carry its usual and ordinary meaning. He referred to the dictionary meaning of premises as “[a] house or building with its grounds etc. Also (a part of) a building housing a business etc.”11 Thus, it was perfectly plain that the everyday meaning recognises that there may be premises within premises. This ordinary definition satisfied Anderson J that the top floor was a residential premises even if there were commercial premises elsewhere in the building.12

11     Kahi, above n 4, at 8.

12     At 9.

[22]   Anderson J held that it followed from his finding that the top floor was a residential premises that s 5(1)(n) did not apply, because the top floor was not used principally as a residence by Mr Kahi but exclusively as a residence by the tenant.

[23]   Ms Abdale did not argue that Kahi was wrongly decided. I consider the decision to be completely on point. Ms Abdale’s contention that 75 Aberley Road is not a “building” as in Kahi but a single residential dwelling is not a distinguishing feature and in fact begs the question. There is no logical conceptual distinction between the building in Kahi and 75 Aberley Road, save that the division between the separate premises in Kahi is all the clearer factually. It follows that I find that the Adjudicator and the District Court Judge were correct to apply Kahi.

[24]   Ms Abdale also refers to the District Court decision in Musson which she submits bound the Adjudicator. It would not bind the District Court on the appeal, but Ms Abdale points out that the Judge did not refer to the case or the argument reflected in Musson.

[25]   In Musson, the premises at issue comprised a dwelling with the landlord occupying one of the nine bedrooms. The Court considered the legal nature of the landlord’s relationship with the other occupants whom the landlord described as “flatmates”. The Court there described the character of a flatmate (in contrast to a tenant) in the following terms:13

… a co-operative arrangement whereby, in a functional sense, all occupants are on [the] same footing in that they exclusive occupation of their own rooms and shared use and occupation of common areas such as kitchens. However, the legal position of people quite legitimately described as flatmates can vary considerably:

1.The owner may share occupation with others who pay him rent. The others may be tenants of the owner or mere licensees.

2.A tenant may hold the tenancy of the whole dwelling and arrange for others to share occupation with him or her. Again, the others may be subtenants or mere licensees of the head tenant.

[26]   It held that s 5(1)(n) did not apply because the premises were not used principally as the landlord’s residence. While I accept that the legal position of people

13     Musson, above n 5, at [22].

quite legitimately described as flatmates can vary considerably, that does not address the key issue in this appeal. The focus in Musson was on the principal residence point, in the sense of who was the principal or main resident. The premises were clearly shared in that case—there was no separation of living spaces and could be no question of more than one premises.

[27]   Ms Abdale is correct that there is a line of decisions in the Tenancy Tribunal which have decided that separate living in a self-contained part of a dwelling does not mean there is a residential tenancy in that part of the dwelling.14 The Tribunal is a specialist jurisdiction with considerable expertise and the decisions of adjudicators warrant this Court’s consideration. However, I consider that none of the decisions referred to me cogently address the essence of the legal question before this Court. They either focus on what is “principal use”, do not address the definition of premises, or the facts at issue in the case do not support the notion that the occupier lives in separate premises because there are common areas. None of the decisions referred to me refer to the High Court decision in Kahi.

[28]Other Tribunal decisions are in fact consistent with the approach taken here.15

[29]   Similarly, the commentary relied on by Ms Abdale on Westlaw does not address the question at the heart of the case before me because it does not comment on what comprises the “premises”.

[30]   Ms Abdale also submits that the District Court erred in relying on obiter remarks in the Court of Appeal decision of Prasad v Chief Executive of the Ministry of Social Development.16 It is correct that this case involved a different context, being an appeal under the Social Security Act 1964. The appellant owned a property which comprised two separate flats. She sought an accommodation supplement in respect of the whole property but occupied only one of the flats with her family and tenanted the adjoining flat. The question of law before the Court was whether the accommodation

14 Kasparova v Petrov [2020] NZTT Auckland 4218868; Paavo v Super [2021] NZTT Queenstown 4290611; and Sohrabinia v Jennings [2020] NZTT North Shore 4215943.

15 Barnett v Dempsey Auckland TT 790/03, 13 June 2003 upheld by the District Court in Dempsey v Barnett DC Auckland TT 790/03, 12 November 2003. See also Bartlett v Heywood [2020] NZTT North Shore 4216449, 4210474.

16 See Prasad, above n 8.

costs for the composite premises were relevant or only the part of the payments referable to the flat she occupied.

[31]   The Social Security Act contained its own definition of “premises” for the purposes of assessing entitlement to an accommodation benefit:17

premises, in relation to any person, means the place that he or she occupies as a home; and includes, in relation to a person who is a boarder or lodger, any room or other accommodation occupied as a home by that person.

[32]   That definition is context specific, but the appellant’s supporting argument in Prasad was that the renting of the rental flat was not a residential tenancy under the Residential Tenancies Act. The argument was that “the premises continue to be used

… principally as a place of residence by the landlord” and therefore the appellant should be treated as occupying not only the flat she and her family lived in but also the rental flat.18

[33]   The Court agreed that this submission misinterpreted s 5(1)(n) of the Act. It stated that s 5(1)(n) does not apply to the appellant’s situation where she lets a self-contained flat occupied exclusively by the tenant.19

Discussion

[34]   I agree that s 5(1)(n) of the Act does not apply to the present situation. The relevant premises is the granny flat occupied by the respondents and not the entire dwelling. There are five reasons for this conclusion.

[35]   First, I respectfully agree with Anderson J in Kahi that the natural and ordinary meaning of “premises” contemplates that there may be more than one premises within a larger premises.

[36]   Second, the definition of residential premises means “any premises used or intended for occupation by any person as a place of residence”. As the statutory

17     Section 61E(1).

18 At [21].

19     At ]29].

definition of “premises” includes “any part of any premises”, it follows that a residential premises includes any part of “any premises used or intended for occupation … as a place of residence”.

[37]   Third, nothing in the Act points against this interpretation. On the contrary, the purpose and policy of the Act supports a generous approach to jurisdiction for the Tribunal and conversely a strict approach to exceptions. There are many provisions which support that view. One illustrative indicator is s 10 which stipulates that the onus of establishing the facts on which it is contended that the Act does not apply lies on the party trying to exclude the Act. The s 11 restrictions on contracting out of the Act are another.

[38]   Fourth, the right to occupy held by the respondents did not extend to any area used by the appellant or her family during that period of occupancy. There were no shared or common areas which characterise a flat share. The fact that the granny flat was only physically separated from the rest of the house by a set of internal double doors with a magnetic latch does not alter this analysis. It is not the physical possibility of access which matters but whether the occupants were lawfully entitled to enter any other part of the house. Similarly, the fact that the appellant did enter the granny flat from time to time for maintenance and cleaning says nothing about the legal character of the occupancy. She had no entitlement without notice under the written terms of the agreement between the parties. That is determinative.

[39]   Fifth, the District Court Judge was entirely justified to find significant support from the dictum of the Court of Appeal in Prasad.20 Although that appeal emerged in a different  statutory  context, the Court’s observations regarding the application of   s 5(1)(n) of the Residential Tenancies Act remain relevant to this proceeding.

[40]   In my view, the decisive factor in this case must be the self-contained character of the granny flat, its exclusive use by the respondent occupiers and the exclusive use of the rest of the dwelling by the appellant and her family. There were no communal living or shared spaces but two separate and distinct household units within the dwelling. In these circumstances, the term “premises” cannot be interpreted as

20     Prasad, above n 8.

referring to the property in its entirety. The relevant premises is instead the functionally independent granny flat. That was not principally a place of residence of the appellant. It was solely occupied by the respondent. Section 5(1)(n) of the Act does not apply.

[41]I therefore find no error of law by either the Adjudicator or the District Court.

Result

[42]I dismiss the appeal.

Costs

[43]   If costs are sought, a memorandum of no more than 3 pages is to be filed within 21 days. As the respondents are litigants in person, costs claims are limited to out of pocket disbursements such as filing fees.

............................................................

Walker J