Introduction

On 24 December 2024, the Northern Territory Court of Appeal handed down a judgment in which it clarified a landlord’s obligation to ensure the habitability of leased premises under s 48(1)(a) of the Residential Tenancies Act (NT) (RTA).

The decision is Chief Executive Officer (Housing) v Pepperill & Ors [2024] NTCA 10 (Decision). It is the most recent in a series of judgements arising out of a dispute between public housing tenants in the remote community of Laramba and the Chief Executive Officer (Housing) (CEOH), which is the landlord of public housing assets in the Northern Territory. It provides important clarity as to how a landlord’s obligations under s 48(1)(a) of the RTA should be interpreted. It was an appeal by CEOH of an earlier Northern Territory Supreme Court decision[1] in which the Supreme Court found that the quality of drinking water supplied to leased premises is an issue of habitability within the meaning of s 48(1)(a) of the RTA (despite the quality of that water being typically supplied by a third party, and therefore not able to be controlled by the landlord).

In the Decision, the Court of Appeal confirmed that water quality is an issue for habitability under the RTA. However, the Court of Appeal clarified the earlier decision by saying that the question of whether or not a landlord has breached the RTA requirement to provide habitable premises turns on whether uninhabitable conditions at a leased premises are a consequence of the landlord’s failure to take reasonable steps to ensure the premises is habitable. This consideration involves questions as to the nature and degree of the risk to or impacts upon the health, safety and/or reasonable comfort of the tenants, the measures available to the landlord to alleviate the risks or impacts, the capacity and power of the landlord to control or address those risks or impacts and the nature and extent of any expertise or special skill involved.[2]

Although this decision was made in the context of remote public housing, it has application to all private and public landlords in the Northern Territory whose tenancies are subject to the RTA.

Mills Oakley represented the Chief Executive Officer (Housing) in this proceeding.

Background: The Laramba Test Cases

In November 2019, 24 separate applications were commenced in the Northern Territory Civil and Administrative Tribunal (NTCAT) pursuant to the provisions of the RTA.

These applications were all commenced by tenants of public housing residences in Laramba, which is a remote Aboriginal community located approximately 200km north-west of Alice Springs with a population of about 300 people.

CEOH is the respondent to each of these 24 applications. CEOH is a body corporate sole with perpetual succession created by the Housing Act 1982 (NT). One of its functions is to provide and assist in the provision of residential accommodation (s 15(1)(a)). In the exercise of its powers and the performance of its functions, it is subject to the direction of the Minister (s 17).

Of the initial 24 applications, three were selected to proceed as test cases (the current proceeding being one of those test cases).

Tenants’ claims regarding water quality

The tenants alleged that the concentration of uranium in the water supplied to the residences was significantly higher than the maximum level for that mineral set out in the Australian Drinking Water Guidelines. The tenants further allege that this meant their residences were not ‘habitable’ as required by s 48(1)(a) of the RTA and/or did not meet all health and safety requirements specified under an Act as required by s 48(1)(b) of the RTA.

The tenants sought an order that the CEOH install a system or filter to remove uranium from the water emanating from at least one tap in the kitchen to below the maximum safe drinking level in the Water Guidelines. They also sought compensation and/or rent repayment.

CEOH does not supply water to the residences. Responsibility for the supply of water to residences in Laramba lies with the Power and Water Corporation (PWC).[3] A wholly owned subsidiary of the PWC, Indigenous Essential Services Pty Ltd (IES), actually supplies the water to the residences.

Issues for determination by the Court of Appeal

Previously, the Supreme Court had determined that the quality of drinking water supplied to the tenants’ residences in Laramba was an issue of habitability for the purposes of s 48(1)(a) of the RTA. The Supreme Court arrived at that conclusion by the following process of reasoning:[4]

• If running water were not supplied to the tenants’ residences, the residences would not be habitable because they would not provide the applicants with ‘reasonable comfort’ in the Central Australian climate (citing Chief Executive Officer (Housing) v Young [2022] NTCA 1, [47]-[50].
• The CEOH’s obligation under s 48(1)(a) thus requires that it ensure that running water is supplied to the residences.
• Water is supplied to the residences by the PWC (through its subsidiary, IES).
• The CEOH knows, or must be taken to know, that water is supplied to the residences by the PWC (or a subsidiary). Water is supplied with the consent, express or implied, of the CEOH.
• It follows from these propositions that the quality of the water which the CEOH permits to be supplied to the residences is a habitability issue because it would make no sense if the CEOH were not required to ensure that the water supplied is safe to drink. That is a matter of ‘health and safety’ as it bears on habitability.
• The objective standard of reasonableness applied to the criterion of comfort or reasonable comfort in Young was incorrectly applied by the NTCAT to this criterion of ‘health and safety’, although it may still be relevant to determining the measures required to minimise or eliminate a real or potential risk, if one is identified.

On appeal, CEOH argued that this reasoning is wrong as a matter of law, both as to the conclusion that s 48(1)(a) of the RTA obliges the CEOH to ensure that running water is supplied to the residences and as to the conclusion that s 48(1)(a) obliges the CEOH to ensure that the water supplied is safe to drink, including but not only because the second conclusion depends on the first, incorrect, conclusion.

The tenants argued that the Supreme Court’s reasoning is wholly correct.

Findings by the Court of Appeal

The Court of Appeal found that:

• The question whether premises or ancillary property are ‘habitable’ does not turn on the landlord’s power or capacity to control the matter affecting habitability or whether that matter emanates from within or external to the premises.
• For premises or ancillary property to be other than ‘habitable’ within the meaning of the RTA, they must be ‘not reasonably suitable for occupation for residential use in that condition, whether by reason of safety, health or reasonable comfort’. Where the issue is one of safety or health, premises will be other than habitable where there is an actual and appreciable risk to the health and/or safety of the tenants in their ordinary residential day to day use of the premises.
• If premises are not habitable, the question may then arise as to whether the landlord has breached the term implied into the tenancy agreement by s 48(1)(a) of the RTA. Whether or not the landlord has breached the implied term in s 48(1)(a) turns on whether the uninhabitable condition of the premises was a consequence of the landlord’s failure to take reasonable steps to ensure that the premises or ancillary property were habitable. That consideration involves questions as to the nature and degree of the risk to or impacts upon the health, safety and/or reasonable comfort of the tenants, the measures available to the landlord to alleviate the risks or impacts, the capacity and power of the landlord to control or address those risks or impacts and the nature and extent of any expertise or special skill involved.

After making the above legal findings, the Court of Appeal remitted the matter back to NTCAT for determination on the facts.

Conclusion

This decision clarified the earlier position articulated by the Northern Territory Supreme Court in Pepperill v Chief Executive Officer (Housing) [2023] NTSC 90. Both public and private landlords now know that issues over which they do not have control (such as the quality of water supplied to properties) can be an issue of habitability under the RTA. And, if a premises is found to be uninhabitable, the Court will consider whether that was a consequence of the landlord’s failure to take reasonable steps to ensure the premises was habitable.

[1] Pepperill v Chief Executive Officer (Housing) [2023] NTSC 90.

[2] Chief Executive Officer (Housing) v Pepperill & Ors [2024] NTCA 10, [96].

[3] Under the Power and Water Corporation Act 1987 (NT).

[4] Pepperill v Chief Executive Officer (Housing) [2023] NTSC 90, [43]-[46].