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Bank error caused rent default – tenant evicted – other breaches of tenancy agreement – bank partly liable
Mr T operated a business in Auckland. It appeared that in January 2004 his company had taken it over from a previous owner and had been assigned the lease of the business premises. On 5 January 2004 Mr T made a rent payment into the landlord’s account, but due to a bank error the transaction was not completed and the funds were returned to Mr T’s account.
On 14 January the landlord issued a final warning to Mr T, stating that if he did not pay the outstanding rent, he could be evicted from the premises. The warning referred to the non-payment of the rent, and also to alleged breaches of the terms of the lease in 2003. A week later Mr T and his family were evicted.
Mr T complained to the bank, seeking reimbursement of $5,705 for all losses associated with the eviction. The bank accepted that it had erred in not paying the rent into the landlord’s account, but was not prepared to accept full responsibility for the eviction. It claimed that other factors must have contributed, because failure to make one rent payment would not normally cause a landlord to evict a tenant.
It became apparent during my investigation that the business relationship with the landlord was complicated. The assignment of the lease had not in fact been completed at the date of the eviction, and although the landlord was aware that Mr T was in the process of taking over the lease, he was clearly uncomfortable with this situation. It appeared that tension between the predecessors in the business and the landlord had contributed to the seriousness with which the landlord viewed Mr T’s failure to pay rent. Although there was a suggestion that the landlord had written to Mr T on 14 January, advising him that the rent had not been received, this letter could not be located.
I found that the bank’s error was the immediate cause of the landlord’s decision to evict Mr T, but that the irregular relationship and Mr T’s failure to contact the bank after he received the landlord’s letter of 14 January had contributed to the events. If it had not been for this background, an eviction for a failure to make one rent payment would have been less likely. I proposed that the bank reimburse Mr T for 70% of his costs ($3,993 plus interest), in addition to paying $500 in recognition of the inconvenience caused to him by the eviction.
When my assessment was accepted by Mr T but rejected by the bank, I had to make a recommendation on the matter. It was at this juncture that I identified a significant factual misunderstanding that had occurred due to the mistranslation of information provided by Mr T. Mr T had since 2003 actually been the director of the predecessor business, as well as a director of his own company, and was thus personally responsible for ensuring that the terms of the lease were observed. I found that this fact lent weight to the bank’s argument, as Mr T would then have been responsible for the earlier breaches of the lease agreement.
If there had been no tension between the business (of which Mr T was at all relevant times a director) and the landlord, it is unlikely that eviction would have occurred so promptly. However, it remained significant that the eviction notice was issued so soon after the error that a causal link must be inferred between the eviction and the bank’s failure to process the payment correctly. I recommended that the bank pay 50% of the costs incurred by Mr T, in addition to $250 compensation for inconvenience. Both parties accepted my recommendation.