Young v Chief Executive Officer (Housing) [2023] HCA 31

At a glance

• On 1 November 2023, The High Court of Australia held that the Civil and Administrative Tribunal of the Northern Territory (Tribunal) is empowered by s 122(1) of the Residential Tenancies Act 1999 (NT) (the Act) to compensate tenants for distress or disappointment suffered in reasonable response to a landlord’s breach of certain prescribed terms of a residential tenancy agreement.
• This decision may have significant implications for the residential tenancy sector in the Northern Territory, as well as other Australian jurisdictions with similar legislative provisions.

Background

The elderly and vulnerable applicant (Ms Young) was a public housing tenant in an Aboriginal community some 85 km from Alice Springs. The respondent was the landlord of the premises in which she resided.

Ms Young did not have a suitable back door to her premises for over 5 years and relied on a mesh-steel door which she had installed, and which was not secure. The premises in that time was subject to animal intrusions. Ms Young was, understandably, also worried about potential human intrusions.

Section 49(1) of the Act stated the following:

“It is a term of a tenancy agreement that the landlord will take reasonable steps to provide and maintain the locks and other security devices that are necessary to ensure the premises and ancillary property are reasonably secure.” (Our emphasis)

As this term had been incorporated in her prescribed tenancy agreement under Schedule 2 of the Regulations, Ms Young applied to the Tribunal for damages pursuant to s 122(1) of the Act arising from the landlord’s failure to provide a back door (being a “security device”) within a reasonable time. She was one of 70 applicants with similar issues.

Section 122(1) stated:

“Subject to subsection (2), the Tribunal may, on the application of a landlord or the tenant under a tenancy agreement, order compensation for loss or damage suffered by the applicant be paid to the applicant by the other party to the agreement because:

(a) the other party has failed to comply with the agreement or an obligation under this Act relating to the tenancy agreement…”

The Tribunal held that the back door was not a “security device” within the meaning of s 122(1) and dismissed Ms Young’s application. On appeal to the Supreme Court of the Northern Territory, the respondent conceded that an external door is indeed a “security device” within the meaning of the Act. Ms Young was consequently awarded $10,200 for distress or disappointment.

On further appeal, the Court of Appeal of the Supreme Court of the Northern Territory held that s 122(1) of the Act did not entitle Ms Young to damages for distress or disappointment because it called on the application of established common law principles that cater only to applicants who suffer physical (not mental) inconvenience.

The appeal to the High Court of Australia concerned two issues. The first issue was whether the damages to which Ms Young can be entitled under s 122(1) are limited by existing common law principles surrounding contracts. If so, the second issue was whether the Court of Appeal correctly applied those common law principles in finding against Ms Young.

The decision

The majority of the High Court (per Kiefel CJ, Gageler and Gleeson JJ) held that, because the relevant term of the residential tenancy agreement had been prescribed by s 49(1) of the Act, its intended purpose is a matter of statutory interpretation as though the term had been directly imposed by the Act. This is to be distinguished from bespoke contractual terms that may only be subject to common law principles. Whilst s 122(1) did not interfere with existing common law principles, it provided an additional and alternate mechanism for statutory compensation under the Act, noting that the Act also had a mechanism by which double recovery would be avoided.

What was therefore required of the Tribunal in considering any orders under s 122(1) of the Act was an evaluative exercise to determine the appropriate measure of compensation, having regard to both the overall purpose of the Act, but also “the justice and equity of the case” (paragraph 25).

The purpose of s 49(1) of the Act and the consequences of its breach by the landlord were discussed at paragraph 29, as follows:

“The evident purpose of the obligation specified by s 49(1) of the Act to be a term of a tenancy agreement, with which [the landlord] failed to comply, is ensuring that premises occupied by a tenant for the purpose of residency are reasonably secure. For a tenant to be secure in the occupation of premises is for the tenant to reside there free from threat of harm or unwanted access. The feeling of insecurity which Ms Young experienced because of the landlord’s failure to provide the residential premises with a back door was the obverse of the security which it was the purpose of that obligation to secure.”

Having regard to the above, it was held that s 122(1) entitled Ms Young to damages that went beyond what was merely allowed under common law, and this encompassed the damages which she was originally awarded following her first appeal to the Supreme Court. It followed that there was no need to consider the second issue of the appeal.

The minority (per Gordon and Edelman JJ) found that the application of s 122(1) was indeed limited by the operation of common law principles of contract. However, in deciding the second issue of the appeal, their Honours went on to find that those principles had not been applied correctly by the Court of Appeal with reference to Baltic Shopping Co v Dillon (1993) 176 CLR 344.

It was said that according to Baltic, the entitlement to damages for purely mental disappointment or distress depended on whether there was a promise made for peacefulness and comfort that was then breached. Quoting from Mason CJ at paragraph 69:

“[A]s a matter of ordinary experience, it is evident that, while the innocent party to a contract will generally be disappointed if the defendant does not perform the contract, the innocent party’s disappointment and distress are seldom so significant as to attract an award of damages on that score. For that reason, if for no other, it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation.” (Our emphasis)

Turning to the facts in Ms Young’s case, the minority concluded that the object of the Act, and in particular s 49(1), was to ensure both the physical but also psychological safety and security of tenants. It followed that Ms Young was entitled to damages for distress or disappointment, even though there was no physical inconvenience involved, because her landlord breached its prescribed contractual promise to afford her psychological safety and security.

The High Court unanimously allowed the appeal, with all members ultimately agreeing on the orders to be made.

Implications

Although each case will rest on its facts and will involve legislative and contractual interpretation, this decision may have significant implications for the residential tenancy sector in the Northern Territory and other Australian jurisdictions with similar legislative provisions.

Public housing authorities and other residential landlords across Australian jurisdictions must be aware that the assessment of damages for breach of residential tenancy terms that are prescribed by legislation may be subject to common law principles, as well as the statutory compensation scheme devised by the relevant legislation.

There may be newfound challenges for public housing bodies with limited resources, as concurrent causes of actions may arise in respect of allegations of poor maintenance that have led to stressful environments for tenants (separate to any injury or damage), with the High Court now placing emphasis on the obligation of residential landlords to provide reasonable safety and security.

As an example, Part 9 of the Residential Tenancies Act 2010 (NSW) concerns the powers of the Tribunal in New South Wales to make orders for compensation, including due to security breaches. It remains to be seen whether this issue may enliven as against, for example, New South Wales Land and Housing Corporation, being one of the largest public housing providers with similar obligations as a landlord to those discussed in this decision.

This decision may similarly have implications for disputes arising from the entitlement to damages for breach of contractual terms that are prescribed by statute, pertaining to sectors other than residential tenancy.

For contractual terms not prescribed by statute, the minority decision has now expanded on the decision in Baltic Shopping Co v Dillon (1993) 176 CLR 344 and confirmed that common law damages for breach of contract will generally seek to address both tangible and intangible loss suffered by a party if reasonably incurred due to another party’s broken contractual promise.