Case note on Young v Chief Executive Officer (Housing) [2023] HCTA 31 – an interesting case

Why is this case important?

Young v Chief Executive Officer (Housing) [2023] HCTA 31 was heard in the High Court of Australia earlier this year.

It is important because:

1. The High Court ruled that a tenant’s distress and disappointment due to a prolonged absence of a backdoor was compensable under statute. This will have significant implications on the residential tenancy sector in the Northern Territory and other Australian jurisdictions with similar legislative provisions and with significant numbers of low cost public housing.
2. The minority in the High Court also opined 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 – so this case extends beyond the lack of a backdoor.

Facts and procedural history

Ms Young is an elderly public housing tenant in an Aboriginal community who can speak limited English.

The respondent, the Chief Executive Officer (Housing) (CEO), a statutory housing corporation established under the Housing Act 1982 (NT) is the landlord of the premises in which Ms Young 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 are potentially subject to animal intrusions and potential human intrusions.

The lease agreement between Ms Young and the CEO was a prescribed tenancy agreement set out in Schedule 2 of the Residential Tenancies Regulations 2000 (NT) (Regulations).

Clause 12(1) of the prescribed terms in the Regulations notes that:

12.Landlord’s duties in relation to security of premises

(1) 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.

It is also required under section 49(1) of the Residential Tenancies Act 1999 (NT) (Act) that:

49. Premises to be secure

(1) 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.

 Ms Young applied to the Civil and Administrative Tribunal in the Northern Territory for damages arising from the CEO’s failure to provide a back door (being a “security device”) within a reasonable time pursuant to s122(1) of the Act. She was one of 70 applicants with similar issues.

Section 122(1) of the Act states that:

122. Compensation and civil penalties

(1) 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.

At first instance, the Tribunal held that the back door was not a “security device” within the meaning of s122(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 s122(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:

1. the first issue was whether the damages to which Ms Young can be entitled under section 122(1) are limited by existing common law principles surrounding contracts; and
2. if so, the second issue was whether the Court of Appeal correctly applied those common law principles in finding against Ms Young.

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

The common law principles under Baltic Shopping Co v Dillon (1993) 176 CLR 344

It is important to have a basic understanding of the common law principles under Baltic Shopping Co v Dillon (1993) 176 CLR 344 before considering the issues in Young v Chief Executive Officer (Housing) [2023] HCTA 31.

Brief facts

Mrs Dillon entered into a contract to board a cruise operated by Baltic Shipping. The ship sank midway during the cruise and Mrs Dillon suffered personal injuries, property damage and also mental distress.

Mrs Dillon sued to recover the cost of the cruise and damage for distress.

Mrs Dillon was granted compensation for the distress and disappointment she experienced due to the loss of entertainment.

Findings

One of the issues heard at the High Court of Australia was whether damages can be awarded for mental distress or not.

The High Court of Australia held that damages for disappointment and distress can be recovered only if they result from physical inconvenience caused by the breach or if the object of the contract is to provide enjoyment or relaxation or freedom from ‘molestation’.

Findings of the High Court of Australia in Young v Chief Executive Officer (Housing) [2023] HCTA 31

Majority 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 section 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.

The purpose of section 49(1) of the Act and the consequences of its breach by the CEO were discussed at paragraph 29:

[29] 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.

The CEO has not met its obligation and therefore not satisfied the purpose of section 49(1) of the Act.

Further, whilst section 122(1) of the Act did not interfere with existing common law principles, it provided an additional and alternate mechanism for statutory compensation under the Act.

What was therefore required of the Tribunal in considering any orders under section 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”.

Having regard to the above, it was held that section 122(1) of the Act 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.

Minority decision

The minority (Gordon and Edelman JJ) found that the application of section 122(1) of the Act was 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.

The minority concluded that the object of the Act, and in particular section 49(1) of the Act, 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 the CEO breached its prescribed contractual promise to afford her psychological safety and security.

Key takeaways

Although each case will rest on its facts and 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.

By way of example, in NSW, section 70 of the Residential Tenancies Act 2010 (NSW) requires landlords to “provide and maintain the locks or other security devices necessary to ensure that the residential premises are reasonably secure.” Under Part 9 of the Residential Tenancies Act 2010 (NSW), the Tribunal may also make orders for compensation, including due to security breaches under section 191 (which relates back to section 70).

For contractual terms not prescribed by statute, the minority decision in this case has also 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. This is an elaboration of the principles set out in the Baltic case.

The issues extend well beyond the absence of a back door.

If you would like to discuss this article with us, please contact Mike Ellis, partner, or Yanlie Leung, Senior Associate on (02) 9261 5900.