NSWALC INFORMATION SHEET ON THE CASE OF WOODS VS GANDANGARA: IMPLICATIONS FOR LALCS.

Land and Environment Court rules on Eviction of Tenants in Woods v Gandangara LALC

•1.       Background

The Land and Environment Court ("LEC") handed down judgment on 23 March 2011 in the case of Woods v Gandangara LALC; Thatcher v Gandangara LALC [2011] NSWLEC 42 (go to http://www.caselaw.ns14w.gov.au/action/PJUDG?jgmtid=151055 for a copy of the case online).

This case raises some important issues of direct concern to LALCs and their administration of residential tenancies. In summary, in order to comply with the Aboriginal Land Rights Act 1983 ("the ALRA"), LALCs need to ensure that decisions about entering into residential tenancies and termination of residential tenancies are made by a resolution of the members of the LALC and not delegated to the Board or the CEO.  However, these resolutions can authorize in advance that the CEO or Board implement the decision.

•2.       What were the facts of the case?

The two applicants were both members and tenants of Gandangara LALC ("GLALC"). They had been living in their rental properties under standard residential tenancy agreements under the Residential Tenancies Act 1987 (now repealed) for a number of years, prior to them receiving notices of termination of their tenancy agreements, requiring vacant possession within 3 months. Neither notice specified any ground or reason for the termination.

GLALC did not at any time pass a resolution specifically terminating the agreements with those tenants. In March 2007 it had passed a resolution stating that "the process for collection of rental arrears and eviction be as prescribed within the Residential Tenancy Act" and requesting its CEO to "pursue" all tenants failing to comply with agreements, policy or the Residential Tenancy Act, "in accordance with the provisions of the Residential Tenancy Act".

Neither applicant complied with the termination notices sent by GLALC. GLALC commenced eviction proceedings in the NSW Consumer, Trader and Tenancy Tribunal ("CTTT"). The applicants then applied to the LEC seeking orders to prevent their evictions.  They said that the termination notices issued by GLALC were an invalid exercise of functions under the ALRA, because under s.52E(1)(a) and under s52G(e), termination of a residential tenancy agreement could not be delegated to the CEO and a members' resolution was required.

•3.       What did the Court decide?

The Court was required to decide a number of questions in this judgment. Of most relevance to LALCs was whether the notices of termination were a land dealing and if so, whether a members' resolution was required to give the notices, or whether this function could be delegated.[1] The relevant sections are s52E(1)(a) and 52G(e).

Section 52E(1)(a) states:

"A Local Aboriginal Land Council may, by resolution, delegate to any person or body the exercise of any of the functions of the Council, other than the following:

•(a)   the acquisition of land and the use, management, control, holding or disposal of, or otherwise dealing with, land vested in or acquired by the Council."

When the notices of termination were issued, section 52(G)(e) stated:

"The following functions are to be exercised, in accordance with this Act, by resolution of the voting members of a Local Aboriginal Land Council:

...(e) approval of dealings with land..."

The Court held that residential tenancy agreements were dealings with land for the purposes of sections 52E and 52G. This was because the scope and purpose of the ALRA required, "land dealings" as used in those sections to be interpreted broadly.[2] Further, the Court said that a termination of residential tenancy agreements is also a land dealing and it is separate to the land dealing that commenced the tenancy.

The effect of the judgment is that entering into and deciding to terminate residential tenancy agreements cannot be delegated by members.  Resolutions of the voting members of the Council are required for entry into a residential tenancy agreement and the termination of one.

The Court granted an injunction against GLALC from pursuing actions to evict in the CTTT in reliance upon the notices of termination issued pursuant to March 2007 resolution. It also found that the notices of termination fell within s52E(1), and that in this instance this function was not properly exercised, due to the lack of a member's resolution to terminate the agreements and evict.

•4.       What does this mean for LALCs wishing to terminate tenancy agreements?

GLALC has advised NSWALC that it has appealed the decision in the Supreme Court of NSW. A hearing date for the appeal has not yet been set. NSWALC cannot predict the outcome of any appeal or the likely chances of success, but hopes that the appeal will clarify legal issues of concern for LALCs.

In the meantime, the current decision remains relevant, and raises concerns for LALCs who are currently seeking action in the CTTT to evict, and for those who wish to take such action. It is unlikely that tenants evicted previously without a resolution would have any avenues open to them to pursue, since the case cannot be applied retrospectively.

•5.       What does this mean for LALCs who already have proceedings on foot in the CTTT?

If a LALC has a valid resolution passed by its members, expressly authorizing eviction of specific tenants for non-payment of rent, and the facts of a case meet the criteria of the resolution, then the CTTT has the power to grant an eviction and there is no reason why proceedings in the CTTT cannot continue as normal.

The NSWALC understands that there may be LALCs with CTTT proceedings on foot, that are concerned that they do not have sufficient or proper members' resolution to evict tenants, and that tenants against whom CTTT action has commenced will seek to rely on this recent Court decision. Such LALCs have two options:

Option 1- Stay of proceedings in the CTTT

"Staying" (placing on hold) their CTTT action pending a decision on the appeal of the GLALC case.  This will likely mean that the tenant will be permitted to stay in the property pending the outcome of the appeal.

NSWALC cannot predict when the appeal will be heard or judgment handed down and this could take some time. Therefore LALCs may consider that a stay of proceedings is not the best course of action for a speedy resolution of non-payment of rent, or other breach of an agreement.

Option 2 - fresh members' meeting and fresh resolutions

If a LALC is concerned that it does not have proper resolutions authorizing the eviction, the LALC could withdraw its current CTTT action, hold a fresh members' meeting and obtain a fresh resolution (to either evict the particular tenant(s) on specific grounds or, more generally, authorising in advance that the CEO/Board take steps in certain specific circumstances of breach of a tenancy agreement to evict) and re-issue eviction notices before commencing new CTTT proceedings. Whilst this may seem time-consuming and cumbersome, it may in some instances result in a faster resolution of the issue.

•6.       What has changed as a result of this decision?

Confirmation of the importance of members making certain decisions under section 52E

NSWALC recognizes that this judgment is likely to cause concern amongst LALCs. However, it is hoped that LALCs can take comfort in the fact that, for the most part, the end result of this case does not change as much about residential tenancies as it appears from the outset. Entry into residential tenancies has generally always been understood to be a land dealing within the meaning of s52E requiring an appropriate LALC members' resolution.

The Brewarrina decision[3] confirmed that a LALC is not authorized under the ALRA to delegate full powers of control and management of leased properties to agents or third parties; a LALC must have ultimate responsibility for the decisions made in relation to housing operations. Therefore, the GLALC case confirms the earlier Brewarrina decision that management and control provisions cannot be delegated by LALC members. In order for LALC members not to breach the prohibition against delegation, any resolution concerning section 52E or 52G must be specific about the event being authorized by the members (ie, the eviction of X person in XYZ specific circumstances) rather than providing a very broad or 'blanket' authorization for someone else to make a decision about whether or not to take action in certain circumstances.

•7.       Some suggestions for LALCs going forward in the current circumstances

Where LALCs wish to enter into and/or terminate tenancy agreements, they should ensure that these dealings are authorised by a clear and detailed resolution, approved by the LALC members in accordance with the terms of the ALRA. In all cases where resolutions are being passed, there must be a quorum of at least 10% of the total number of voting members of the LALC present at the meeting. For resolutions relating to functions falling within s52E and s52G of the ALRA (such as termination of a lease), a resolution must be passed by a majority vote of more than 50% (s52H).  There is still no requirement to obtain approval by NSWALC for residential tenancies of less than three years.

The resolution must expressly and specifically state what action is authorised to be taken by the LALC. For example, a resolution dealing only with commencement and management of a tenancy agreement is unlikely to be enough to also cover termination of that tenancy agreement. Further, a resolution authorizing eviction for non-payment of rent is unlikely to be sufficient to authorise eviction for some other purpose.  When calling a meeting to vote on a resolution, it is important to notify all members of this, including any tenants sought to be evicted.

This judgment has ruled that decisions to enter into and terminate residential tenancies cannot be delegated to CEOs or the LALC Board; these decisions can only be exercised by a resolution of the voting members.

NSWALC understands that this finding may cause concern amongst LALCs who currently only have members' meetings a few times per year, or who may have trouble obtaining the requisite quorums to pass resolutions at these meetings. However, as long as a resolution is detailed enough to include the action intended to be undertaken, this action (not the decision) can still be authorised in advance for the CEO/board to carry out. For example, a specific members' resolution requesting the CEO to take steps to terminate a tenancy agreement, and if necessary evict the tenant, if specific terms (including payment of rent) are breached and sufficient notice is given, is likely to be acceptable to a Court.  In this example, the members have still made the decision - the CEO is merely authorized to carry out the members' wishes in the specified circumstances.

If you have any concerns or queries, or would like to discuss this case further, please contact the Legal Services Unit through NSWALC on 02 9689 4444.

[1] Section 52E(1)(a) refers to a "dealing with, land" and section 52G(e) refers to a "land dealing".  For ease of reference, the term "land dealing" has been used throughout this note.

 [2] The Court held [at paragraphs 70-71] that the right to terminate is not part of the initial "bundle of rights" attaching to entry into a tenancy agreement, because a tenancy agreement does not terminate just because its natural term expires (it continues as a periodic tenancy or tenancy at will). To regain possession a landlord has to take certain steps, including issuing a termination notice. This is a separate dealing in the Court's view.

[3] Murdi Paaki Regional Housing Corporation Limited v Gordon and Ors (Tenancy) [2006] NSWCTTT 738.