Estate of Tanya Humphries v Commissioner for Housing in the ACT [2003] ACTSC 40 (23 May 2003)

Last Updated: 30 May 2003

THE ESTATE OF TANYA HUMPHRIES v THE COMMISSIONER FOR

HOUSING IN THE AUSTRALIAN CAPITAL TERRITORY

[2003] ACTSC 40 (23 May 2003)

APPEAL - Residential Tenancies Tribunal - residential tenancy - nature of interest granted - whether tenancy can be passed by will - whether Residential Tenancies Act 1997 abrogates common law position that lease passes under will - it does not.

Wills Act 1968, s 7

Residential Tenancies Act 1997, ss 3, 4, 10, 127, 134

Legislation Act 2001, s 139

Australian Capital Territory (Self-Government) Act 1988, s 23

Housing Assistance Act 1987

Legislation Act 2001, s 139

Potter v Minahan [1908] HCA 63; (1908) 7 CLR 277

Thompson v Australian Capital Television Pty Ltd [1994] FCA 688; (1994) 127 ALR 317

The Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited [1985] HCA 14; (1985) 157 CLR 17

Bryen v Reus (1961) 78 WN (NSW) 373

In re Messenger; Agent for Worthdale Pty Ltd; Re The Public Trustee (1960) 77 WN (NSW) 114

Ex parte Buchanan; Re Newman (1959) 77 WN (NSW) 850

Frank v Australian Capital Territory [2001] ACTSC 42, (2002) 142 ACTR 15

Community Law Reform Committee of the Australian Capital Territory, Report No 8, Private Residential Tenancies Law, December 1994

DC Pearce and RS Geddes, Statutory Interpretation in Australia, 5^th ed (2001), Butterworths, at 145

ON APPEAL FROM THE RESIDENTIAL TENANCIES TRIBUNAL

No SCA 77 of 2002

Judge: Connolly J

Supreme Court of the ACT

Date: 23 May 2003

IN THE SUPREME COURT OF THE )

) No SCA 77 of 2002

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM THE RESIDENTIAL TENANCIES TRIBUNAL

BETWEEN: THE ESTATE OF TANYA HUMPHRIES

Appellant

AND: THE COMMISSIONER FOR

HOUSING IN THE AUSTRALIAN

CAPITAL TERRITORY

Respondent

ORDER

Judge: Connolly J

Date: 23 May 2003

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be upheld.

2. The decision of the Residential Tenancies Tribunal be set aside.

3. The respondent pay the appellant's costs.

1. This is an appeal from a decision of the Residential Tenancies Tribunal of 14 November 2002 that Mrs Valerie Costello and Mr Gregory Shepherd vacate premises leased by the respondent at 4 Dennis Street, Garran in the Australian Capital Territory. The facts giving rise to the dispute were set out by the learned Member of the Residential Tenancies Tribunal, and are agreed by the parties to the appeal, and it is appropriate to set them out.

1. A Residential Tenancy Agreement in relation to premises at 4 Dennis Street, Garran in the Australian Capital Territory was entered into by the parties on 26 October 2000. Ms Humphries was the sole tenant. Mrs Valerie Costello and Mr Gregory Shepherd were described in the schedule to the Residential Tenancy Agreement as "other residents".

2. Ms Humphries died on 6 July 2001.

3. Ms Humphries executed a last Will and Testament on 3 February 2001. No specific mention is made of the tenancy relating to 4 Dennis Street in the Will, however Ms Humphries' Will contains the following clause:

I give my whole estate to my mother Valerie Francis Humphries.

4. Mrs Valerie Costello and Mr Gregory Shepherd are still residing in the premises.

5. The Applicant has applied to the Residential Tenancies Tribunal for an order for vacant possession of the premises.

2. It should be added that Mrs Valerie Costello is the mother of Ms Tanya Humphries, identified in the will as Valerie Francis Humphries.

3. The issue for determination in this appeal is whether the nature of the interest held by Ms Humphries under the Residential Tenancy Agreement was an interest that would form part of her estate and could be passed to another person under a will. The learned Member held that it was not, and it is this aspect of her decision that was challenged by the appellant. The Tribunal ordered that Mrs Costello vacate the premises by 29 October 2002. A stay of this decision was granted by this Court pending the determination of this appeal, on the condition that Mrs Costello continue to pay the appropriate rent, and I was advised that this condition had been complied with.

4. It was common ground at this appeal that, under common law, a lease and a periodic tenancy were forms of property interest that could be transferred by will. This must be so - after all, in the Australian Capital Territory all residential property in Canberra is leasehold property. The Wills Act 1968 (the Wills Act) provides at s 7:

Person may dispose of all his or her property by will

(1) A person may, by his or her will, devise, bequeath or dispose of any real property or personal property to which he or she is entitled at the time of his or her death, whether he or she became entitled to the property before or after the execution of his or her will.

5. The Wills Act defines real property to include an estate, right or interest in real property, and in this sense the common law position is reflected in the statute.

6. The respondent's argument, accepted by the learned Member, was that a proper interpretation of the Residential Tenancies Act 1997 (the Residential Tenancies Act) prevented the transfer of a periodic tenancy by will. It was also argued in the Tribunal that a tenancy in Mrs Costello's favour had arisen by implication. This argument was rejected, and was subject to appeal, but the appellant indicated that this aspect of the appeal would not be proceeded with.

7. The Tribunal acknowledged in its decision (Appeal Book at 7) that:

If the residential tenancy agreement which existed between the Applicant and Ms Humphries is property, then the argument put by the Respondent that the tenancy has passed to Mrs Costello has some strength.

8. This is a reference to the long established common law position.

9. The Tribunal then examined the nature of the interest conferred on a tenant by a residential tenancy agreement under the Act, and noted that a periodic tenancy under the Residential Tenancies Act differs significantly from a common law periodic tenancy agreement, most significantly in that, at common law, a periodic tenancy could be terminated by either party by notice, which absent a specific term to the contrary would be for the rental period. Thus a fortnightly tenancy could be terminated by either side by giving two weeks notice. The Residential Tenancies Act confers significant additional rights on tenants in the standard conditions of a tenancy by providing that, while a tenant can generally terminate a periodic tenancy by giving three weeks notice, a landlord who wishes to terminate without cause (such as breach) must give 26 weeks notice (cl 94).

10. It is no doubt correct that the Residential Tenancies Act has conferred a significant additional statutory right in clear terms upon tenants. It does not seem to me, however, that there are clear terms in the Act to indicate that it was the intention of the legislature to abrogate a longstanding common law principle that a tenancy is a form of property interest that may be transferred by will.

11. The Tribunal noted that s 127 of the Residential Tenancies Act provided an additional new statutory right that co-tenants can continue with a tenancy when one co-tenant dies. Section 127 provides:

Death of 1 of more than 2 tenants

Where 1 of 2 or more tenants who are parties to a residential tenancy agreement dies, the tenancy and the tenancy agreement continue to operate-

(a) with the remaining tenant as the sole tenant; or

(b) where there are 2 or more remaining tenants - with those tenants as joint tenants or tenants in common.

12. Although the point was not argued before the Tribunal or before me, it may well be that s 127 has some applicability to the present case. Mrs Costello is not described on the Commissioner for Housing Tenancy Agreement as a tenant, but she is described as an "other resident". The Act defines a tenant as "a person who has a right of occupation under a residential tenancy agreement". Mrs Costello did have, during the period of Ms Humphries' life, a right of occupation in these premises, and so is defined as a tenant for the purposes of the Act. This, it seems to me, may be sufficient to allow her to claim the benefit of s 127 to continue the tenancy. However, it is not necessary for me to decide this point in order to determine this appeal.

13. The respondent argued before the Tribunal, and the Tribunal accepted, that the presence of this provision in the Residential Tenancies Act is an indication that the common law position was intended to be varied by the Act. The Tribunal said (Appeal Book at 6):

It would seem that section 127 is not simply a restatement of the general law doctrine of survivorship in relation to joint tenancies. If a tenancy could be transferred by will, a deceased tenant's beneficiaries would be entitled to the tenancy; an outcome which is directly contradictory to that contemplated by section 127. The Applicant further submits that it would be surprising for the Act to allow transfer of a tenancy by will in the case of a sole tenant and not in the case of co-tenants.

14. Clearly, the effect of the plain words of s 127 is to abrogate the common law to the extent of the section, and so it is the case that, regardless of the common law position, a person who is a co-tenant cannot devise their interest in the tenancy agreement under their will, because s 127 provides that on their death the remaining tenant, or tenants, are to continue with the tenancy agreement. I am not satisfied, however, that it is apparent from s 127 that it was intended to generally abrogate the common law right of a sole tenant to transfer an interest under a will.

15. The Residential Tenancies Act was enacted to implement the recommendations of the Community Law Reform Committee of the Australian Capital Territory, Report No 8, Private Residential Tenancy Law, December 1994. That Report dealt only with private tenancies. In introducing the Residential Tenancies Bill 1997 the then Attorney-General, Mr G Humphries, made it clear that the Bill was implementing the recommendations of the Community Law Reform Committee, and was also bringing public tenancies within the scope of the regime set out in the Committee's Report: (ACT Hansard, 15 May 1997 at 1454). The decision to bring public tenancies into line with private tenancies must carry with it the consequence that the legal rights of public tenants are to be equated with the legal rights of private tenants. It may have been open to argument that the nature of a public rental housing tenancy agreement under the Housing Assistance Act 1987 was a form of right to occupy premises that fell short of a property interest that could pass under a will. But the clear intention of the legislature has been to create a common form of tenancy agreement that applies equally to public and private tenants.

16. The Report (to which regard may be taken pursuant to s 139 of the Legislation Act 2001) refers to the problems that may arise concerning the death of a tenant in paragraphs 709-713. The Report commences at [709]:

Problems arise when a tenant dies leaving the premises occupied by other co-tenants or dependants or friends who are not tenants. Depending on the circumstances, the surviving occupiers may continue to be tenants or may have no rights to continue to occupy the premises and be liable to eviction.

17. The Committee recommended that the Act should provide that surviving co-tenants should continue with the tenancy agreement. This part of the recommendation, which is set out in whole in para 713, was implemented in s 127 of the Residential Tenancies Act.

18. The Committee made a further recommendation, which was not accepted, that persons who were in occupation but were not co-tenants, should have a right to apply to the Residential Tenancies Tribunal to be declared to be a tenant. While this recommendation was not adopted by the Legislative Assembly, it is significant that in the recommendation the Committee said:

Application for occupants to be declared tenants, or application of surviving co-tenant(s) for early termination of the tenancy, shall have priority over any claim of the estate of the deceased tenant. Subject to this requirement, the estate of the deceased shall acquire the tenancy of the deceased in accordance with the general law.

19. This, it seems to me, is a clear indication that the Committee reported on the basis that the Residential Tenancies Act would create and modify common law rights in accordance with its terms, but that otherwise pre-existing common law rights would continue. I can find nothing in the Act or the parliamentary record to indicate the contrary. It is of course a well recognised principle of statutory construction that an Act is not to be taken to abrogate a common law right except with clear terms.

20. That a statute is presumed not to alter common law doctrines or invade common law rights without clear terms is a well established doctrine (DC Pearce and RS Geddes, Statutory Interpretation in Australia, 5^th ed (2001), Butterworths, at 145 ff). The principle in Australia is usually traced to the statement of O'Conner J in Potter v Minahan [1908] HCA 63; (1908) 7 CLR 277 where his Honour at 304 cited with approval the passage from the fourth edition of Maxwell on Statutes that:

It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used.

21. In this situation we are not even considering a provision of the Act which is said to abrogate the common law position, we are rather considering the effect that one part of the Act, s 127, has on the general law. The Tribunal seems to have reasoned on the basis that the fact that a particular aspect of the general law having been modified can be taken to support the proposition that the underlying law has been abrogated. That this is inappropriate reasoning is well set out, in my respectful opinion, in the remarks of Burchett and Ryan JJ in Thompson v Australian Capital Television Pty Ltd [1994] FCA 688; (1994) 127 ALR 317 at 329, where their Honours said:

Statutory reforms removing a particular plank from the edifice of the common law do not necessarily bring down whole sections of the structure just because a rule expressly changed or abolished had an historical or a logical connection with other rules of the common law. To forbid such a consequence the rule has been established (and should be adhered to: Corporate Affairs Commission of New South Wales v Yuill [1991] HCA 28; (1991) 172 CLR 319 at 322; [1991] HCA 28; 100 ALR 609, per Brennan J) that Acts altering the common law should be construed as doing so only so far as is necessary to give effect to their provisions.

22. The Tribunal formed the view (Appeal Book at 8 and 9) that a residential tenancy agreement under the Act is to be treated not as a form of property interest but as a contractual right. The authority for this proposition is said to be The Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited [1985] HCA 14; (1985) 157 CLR 17, and the Tribunal cites the remarks of Mason J where his Honour says (at 29):

... as the law of landlord and tenant had outgrown its origins in feudal tenure, it was more appropriate in the light of the essential elements of the bargain, the modern money economy and the modern development of contract law that leases should be regulated by the principles of the law of contract.

Accordingly, the balance of authority here as well as overseas, and the reasons on which it is based, support the proposition that the ordinary principles of contract law, including that of termination for repudiation or fundamental breach, apply to leases.

23. With respect to the Tribunal, it does not seem to me to follow from the decision of the High Court that, because the principles of contract law are to be applied in interpreting the terms of a lease (for which The Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited is clear authority), a lease is no longer a form of property.

24. It was further argued by the respondent, and accepted by the Tribunal, that the possibility of a tenancy being devised by will was inconsistent with the terms of the tenancy agreement under the Act, in that the permission of the landlord, in this case the respondent, is necessary before a tenant can transfer their interest. The respondent argued that it could not have been the intention of the legislature that a public housing tenant could not transfer their interest voluntarily during their life without the consent of the landlord, but that this transfer could take place under their will.

25. While this may seem to be an anomaly, this is the effect of a series of decisions of the New South Wales Supreme Court which held that a prohibition of assignment or transfer contained in a tenancy agreement should not be taken to include an involuntary transfer, or a transfer taking effect by operation of law. The authorities to this effect are Bryen v Reus (1961) 78 WN (NSW) 373, In re Messenger; Agent for Worthdale Pty Ltd, Re The Public Trustee (1960) 77 WN (NSW) 114, and Ex parte Buchanan; Re Newman (1959) 77 WN (NSW) 850. The Tribunal concluded that these authorities were not binding, being based on other legislation, and preferred the dissenting view of Street CJ in Ex parte Buchanan.

26. While the decisions of the New South Wales Full Court are clearly not binding in this jurisdiction, they are of course to be accorded due respect, and it seems to me, having considered the authorities, that the dissenting view of Street CJ was not followed in later cases, and does not reflect the law in New South Wales. The proposition for which the cases stand, that is that a prohibition of a voluntary assignment should not be taken to include a prohibition of an involuntary assignment or an assignment by operation of law, seems to me to be good law and in accordance with principle.

27. It seems to me that the Tribunal erred in following the dissenting views of Street CJ, and that the law as stated in these authorities provides a good answer to the respondent's argument that the prohibition of a voluntary transfer of a tenant's interest must be taken to indicate that an interest cannot be transferred by will. It seems to me that the Tribunal erred in taking the view that the Residential Tenancies Act has abrogated the common law position that an interest under a lease can be transferred by will.

28. I am of the opinion that the Tribunal erred in holding that a residential tenancy agreement was not a form of property interest that could be transferred under a will, and accordingly I uphold the appeal, and set aside the decision of the Residential Tenancies Tribunal made of 14 November 2002.

29. I should add that, if I am wrong in this, it would raise a further and more complex question, in that it is now well established that, pursuant to s 23 of the Australian Capital Territory (Self-Government) Act 1988, the Legislative Assembly may not without just terms compensation abolish or take away a property right (Frank v Australian Capital Territory [2001] ACTSC 42, (2002) 142 ACTR 15). The Residential Tenancies Act applies, on its face, to all tenancies, whether entered into before or after the commencement date of the Act (s 4), and so, if the Tribunal is correct, the passing of the Act has had the effect of changing the legal nature of all existing leases for residential property, which would have been property capable of passing under a will, to residential tenancy agreements which are a form of contractual interest and not a property interest and so incapable of being transferred under a will. This question does not need to be further considered in this case, as I am of the view that this is not the effect of the legislation.

30. The Tribunal's view of the effect of the Act renders meaningless part of the definition of "tenant" in s 3 of the Residential Tenancies Act, which provides:

Tenant means a person who has a right of occupation under a residential tenancy agreement, and includes-

(a) the person's heirs, executors, successors and assigns; and

(b) a prospective tenant.

31. That the legislature defined tenant to include an heir, seems to me to indicate that the legislature did not intend to abrogate the common law doctrine. I do not agree with the Tribunal's conclusion that the words have no effect.

32. The effect of this decision is that Mrs Costello, as the heir, has taken the interest of Ms Humphries under the tenancy. This interest is a periodic tenancy, which under the common law would have been determinable by the landlord on two weeks notice, because the rental period is fortnightly. Pursuant to the Act, the landlord may terminate such a periodic tenancy, without cause, only by giving 26 weeks notice pursuant to cl 94 of the tenancy agreement.

33. It was argued before me, and before the Tribunal, that this raised significant public policy concerns, in that a limited resource, being public housing accommodation, could be transferred by will. The Tribunal referred to this concern in the following way (Appeal Book at 10):

The Residential Tenancies Act 1997 regulates residential tenancy agreements in relation to privately owned rental premises and premises provided by the Applicant under the public rental housing assistance program. In its report on Private Residential Tenancy Law the Committee noted that the problems and needs of tenants are broadly the same whether the lessor is a private individual, a corporation, or the ACT Housing Trust. Public tenants have the same rights, protections and obligations as private tenants. The Applicant has argued that unless the Residential Tenancies Act 1997 is interpreted to prevent the passing of a tenancy by will, the ACT Housing Trust's ability to manage its waiting list and to allocate housing to those most in need will be jeopardised. The Tribunal is of the opinion that as a matter of public policy the Act cannot be interpreted in a way that would allow persons to circumvent the regulations relating to the allocation of public housing on the basis of need.

34. While I can understand the concern expressed by the Tribunal, it seems to me that a perceived public policy benefit is an inappropriate basis for a ruling that so dramatically alters underlying common law property doctrines. The effect of the Tribunal's decision that a tenancy under the Residential Tenancies Act is not a form of property interest that can pass under a will does not just apply to public housing - it would also have the extraordinary effect, if correct, that a long-term lease over private residential premises for a period of many years, if executed under the Act, would not be able to be transferred by will. To read such a dramatic abrogation of common law rights into the Act is, for the reasons set out above, clearly inappropriate.

35. Moreover, there are, as Mr Thawley pointed out in his submissions, a number of other ways of dealing with the public policy concern. In the first place, the only benefit obtained by the estate is the ability to take over the periodic tenancy, which can be terminated by the landlord pursuant to the Act, albeit with six months notice. The Act, however, provides a range of other options. The six months notice term for termination without cause is included in the prescribed standard terms, and so forms part of all public housing tenancies, but it is open for the respondent to make an application to the Tribunal to approve a different standard term in public housing agreements where a tenancy is transferred under a will (s 10 of the Residential Tenancies Act). In making such a determination the Tribunal must consider any criteria determined by the Minister pursuant to s 134 of the Residential Tenancies Act. It follows that the executive government would have a way of resolving the perceived public policy difficulty. An alternative would be for the Legislative Assembly to amend the Act by providing expressly for the question of what rights should be able to be passed under a will by a public tenant.

36. I note that the Tribunal drew this conclusion from a reference in a property law dictionary that the addition of "heirs and executors" adds nothing to the nature of the interest of a tenant. This may be so, but the interests of a tenant is that established at common law, which is the position advanced by the appellant. That the legislature defined tenant to include an heir and executor, must be taken to mean that the legislature intended to preserve these common law rights, not to abolish them.

37. I am satisfied that the Tribunal erred in holding that the Residential Tenancies Act had the effect of abrogating the common law position that a periodic tenancy is a form of property interest that may pass under a will. Accordingly, the appeal must be allowed. The respondent should pay the appellant's costs.

I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 23 May 2003

Counsel for the appellant: Mr TM Thawley

Solicitor for the appellant: Welfare Rights and Legal Centre Limited

Counsel for the respondent: Mr P Christensen

Solicitor for the respondent: ACT Housing Legal Adviser

Date of hearing : 28 April 2003

Date of judgment: 23 May 2003