Legal case reveals jurisdictional flaw

Hammer and GavelA recent decision of the NSW Court of Appeal may have serious implications for interstate landlords.

Investing in rental properties in other states is a strategy employed by a growing number of Australians. States and cities where there is exceptional capital growth, strong rental yields or more affordable housing are drawcards for property investors. But a recent decision by the NSW Court of Appeal has laid bare a jurisdictional flaw that could impact both tenants and landlords.
In February, the court ruled that the NSW Administrative and Civil Tribunal (NCAT) has no jurisdiction if one party lives in another state. Since that judgement, NCAT has been advising those affected, with disputes before the tribunal, that the “tribunal has no jurisdiction to hear and determine this matter as a result of the NSW Court of Appeal’s decision in Burns v Corbett”, while also noting that the complainants are free to pursue their case in the courts.
Although Burns v Corbett; Gaynor v Burns was not a residential tenancy case (but was actually heard by the Anti-Discrimination and Equal Opportunity Complaints Division of NCAT), the finding of the Court of Appeal may have serious ramifications for tenants and landlords where one party lives interstate.
“A State tribunal which is not a “court of a State” is unable to exercise judicial power to determine matters between residents of two States because the State law which purports to authorise the tribunal to do so is inconsistent with the conditional investment by s 39(2) of the Judiciary Act of all such jurisdiction in State courts, and therefore rendered inoperative by virtue of s 109 of the Constitution”, noted the ruling.
To explain, unlike tribunals in other states which are part of the judicial branch (“a court of a State”) and can therefore exercise jurisdiction, NCAT is fully a part of the executive branch of the NSW Government. As such, it may have no authority, or jurisdiction, over parties who are outside of NSW.  
The take out? This ‘no jurisdiction’ ruling could mean that tenancy agreements are unenforceable unless both parties reside in NSW. 
Tenants seeking to enforce rights and obligations against landlords may find they are unable to do so if their landlord lives interstate. 
Landlords who reside interstate may also find that they are thwarted when seeking orders against tenants in NSW. Of particular concern would be whether landlords have the ability to affect an eviction through due process using the Residential Tenancies Act.
REINSW chief executive Tim McKibbin told ABC News that both parties may now be exposed if they cannot resolve issues themselves: “If parties are in dispute, if either party wants to bring the proceeding, then that becomes very difficult when the judicial authority that has the exclusive jurisdiction to hear the matter is unable to do so.” 
Although the NSW Attorney-General Mark Speakman told the news service that only a small number of cases heard by NCAT (0.2 per cent of the 30,000 applications to resolve residential tenancy disputes) would potentially be affected by the Court of Appeal’s judgement, the result may be costly or untenable for the small number that are affected. 
If the parties are unable to access the services of NCAT, which is designed to provide “a simple, quick and effective process for resolving disputes and reviewing executive action”, the only option may be to head to mainstream court to have the case heard as a breach of contract. Commercial litigation is time-consuming and expensive. The possible compensation amounts are unlikely to justify the risk in most cases and many cases may go unresolved.
It is expected that an appeal in the Burns case will be heard by the High Court later this year (no date had been set at the time of publishing). In the interim, REINSW is calling on the NSW Government to prioritise closing the loophole and the government has advised it is examining a number of options to enable NCAT to continue delivering informal and affordable dispute resolution.