The Bills Digest at a glance

The Bill is a return to Parliament of a substantively identical Bill tabled by the previous Morrison Government on 30 March 2022, which lapsed at dissolution of the 46th Parliament on 11 April 2022.

The Bill has two chief overall purposes: to respond to the High Court decision in Williams v Wreck Bay Aboriginal Community Council & Anor[1] (Williams) by exempting long-term (40 years+) domestic leases in Wreck Bay from the Residential Tenancies Act 1997 (ACT) (RTA); and to make a number of corporate and governance changes to the Wreck Bay Aboriginal Community Council (WBACC or ‘the Council’). Other, largely symbolic, changes are made to the title of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Land Grant Act), and to the legislative requirements that must be met before land within the Booderee National Park can be declared as Aboriginal Land.

These amendments have reportedly been extensively negotiated with WBACC and members of the Wreck Bay community, who have expressed a wish for the Bill to be passed as-is.[2]

The corporate governance and other changes seem uncontroversial. For example, there are minor changes to the voting structure and new rules around who may hold a position on the WBACC Committee, and a new requirement for a Committee member to be a ‘fit and proper person’.

However, the Bill’s proposed response to the Williams decision may place Wreck Bay tenants (and potentially WBACC) in a precarious position. If passed, the effect of the Bill is that domestic leases over forty years are no longer covered by the RTA, without any statutory scheme replacing it. The relationship between landlord and tenant may then exist in a kind of ‘regulatory vacuum’ covered by an amalgam of rights and implied obligations under the common law and equity, which may be displaced or modified depending on the contractual terms upon which each individual lease is negotiated. As the High Court made clear in the case of Williams:

the Land Grant Act is not exclusive of common law and equitable rules concerning the content of a grant of an estate or interest [at 156].

A corresponding impact is that the Bill may shift to long term tenants the risks of home ownership, without providing corresponding material benefits. This may result in a future financial and regulatory burden for the Commonwealth, especially if tenants are unable to manage these risks without assistance from WBACC. While the Explanatory Memorandum to the Bill suggests these leases will be a voluntary measure, WBACC corporate documents state a clear intention to shift ‘100%’ of tenants on to these leases in the near future (p. 12).

There is also a potentially significant issue that statements by WBACC appear to indicate that it believes legislative reform will give them the ability to levy on-the-spot fines for breaches of Jervis Bay Territory By-Laws. It is unclear whether this issue was intended to be addressed in the current Bill, but the Bill does not appear to make any changes to current arrangements for enforcement of by-laws.

Finally, there may also be an issue that the Bill may result in community services being withdrawn from community residents who are not registered members of WBACC. It is unclear if there are any persons in this category.

Purpose of the Bill

The Bill’s stated purpose is that it amends the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 ( Land Grant Act) to:

• amend the title of the Act to the Aboriginal Land and Waters (Jervis Bay Territory) Act 1986
• exempt certain leases granted by the Wreck Bay Aboriginal Community Council from the application of the Residential Tenancies Act 1997 (ACT) (RTA)
• increase the payment amount at which the Council is required to seek approval from the Minister before entering into a contract
• amend the council's governance structure and decision making powers to align more closely with other corporate Commonwealth entities
• remove the requirement for the council to enter into an agreement to lease with the Director of National Parks before land in the Booderee National Park can be declared as Aboriginal land
• clarify that the functions of the council relate to registered members and eligible children
• update the wording of the term 'physical or mental incapacity' and
• eight Acts to make consequential amendments.

Though not discussed in any detail in the Explanatory Memorandum, a key purpose of the Bill is to respond to the High Court’s decision in Williams.

Structure of the Bill

See Explanatory Memorandum, (pp. 1–2).

Background

In the case of Williams, Mr Williams, a long-term occupant of a residence in Wreck Bay, argued that the WBACC had an obligation under the RTA to, amongst other things, undertake necessary repairs to his premises. Mr Williams is a registered member of WBACC, having joined in 1989. In reply, WBACC argued that the RTA did not apply to its dealings with Aboriginal Land under the Land Grant Act and, accordingly, that it did not have a responsibility under the RTA to maintain the premises in a reasonable state of repair.

The legal question to be answered by the ACT Civil and Administrative Tribunal (ACAT), and subsequently referred to the ACT Supreme Court, was whether the relevant parts of the RTA could operate concurrently with the Land Grant Act given the wording of section 46 of the Act:

[The Land Grant Act] does not affect the application to Aboriginal Land of a law in force in the Territory to the extent that that law is capable of operating concurrently with this Act.

Justice Elkaim of the ACT Supreme Court found that the RTA was capable of acting concurrently with the Land Grant Act, a result which WBACC subsequently appealed. On appeal, the ACT Court of Appeal concluded that section 38 of the Land Grant Act conferred a power on the WBACC to grant leases on such terms and conditions as it thought fit, and therefore the RTA was not able to operate concurrently with the Land Grant Act. Mr Williams appealed the decision of the ACT Court of Appeal to the High Court. The High Court found for Mr Williams, concluding that the two legislative regimes could operate concurrently, meaning that WBACC did have obligations to its tenants under the RTA (provided the existence of a residential lease could be established, which was established by ACAT and not contested by WBACC).

In its 2018-2019 Annual Report, WBACC summarised the effect it believed this decision would have on its operations:

The 2018–19 year saw a significant cultural shift in the organisation’s approach to housing, brought about because of the implications of the High Court decision which made Council liable for all repairs and maintenance to housing regardless of whether a tenant has paid rent and regardless of whether damage has been caused to the property by the tenant. The application of ACT tenancy law also means that residents (regardless of whether they hold a lease) can sue for compensation for houses not kept in a reasonable state of repair. The risk that the decision poses to WBACC and government is too significant to ignore and action needed to be taken (p. 45).

WBACC has since negotiated with the Commonwealth for legislative reform to relieve them of this risk, and for financial assistance with bringing existing properties up to ‘a reasonable state of repair’, which the Commonwealth estimates at between $34 and $64 million dollars (p. 291). A Bill agreed with WBACC was tabled by the Morrison Government on 30 March 2022, which lapsed at dissolution of the 46th Parliament on 11 April 2022. The current Bill is identical in substance to that previous Bill.

The current Bill addresses the impact of this decision on WBACC, Mr Williams, and other long-term tenants of Wreck Bay, by proposing to exempt leases of 40 years or more from the application of the RTA (Item 34). Absent a new (or alternative) regulatory regime, under which these longer-term domestic leases will exist, it appears open to the parties to individual lease agreements to negotiate provisions such as: the amount of rent payable (if any); the duration of the lease; notice of entry and expiry provisions; obligations surrounding repair and maintenance; outgoings and expenditure; rights of re-entry and forfeiture of the lease (including relief thereof). Although RTA protections will not apply to these leases, individual negotiations may or may not displace implied common law and equitable obligations vis a vis the parties to a lease arrangement.  

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bill (and its predecessor) had not been considered by this Committee.

Policy position of non-government parties/independents

At the time of writing, other parties had not commented on the Bill.

As set out above, the Bill is substantively identical to a previous Bill of the same name introduced by the Morrison Government on 30 March 2022, which lapsed at dissolution on 11 April 2022. As such, it is likely to receive bipartisan support.

Position of major interest groups

The Bill’s Explanatory Memorandum states that the Bill has been approved by WBACC and by the community through a series of consultations (p. 3). These consultations were conducted by both the Morrison and Albanese Governments, with consultations conducted since the election confirming that WBACC and the community wanted no changes made to the Morrison Government’s version of the Bill.

Financial implications

The Explanatory Memorandum states that the Bill has no financial implications (p. 8).

While this may be true for the changes directly made by the Bill, Budget Paper 1 (p. 291) states that the Home Ownership Strategy that the Bill is intended to enable comes with associated costs estimated (but not yet quantified) at between $34–$64 million:

The High Court held in Williams v Wreck Bay Aboriginal Community Council & Anor [2019] HCA 4, that the Australian Capital Territory’s Residential Tenancies Act 1997 applies to Aboriginal Land in the Jervis Bay Territory and the Wreck Bay Aboriginal Community Council (WBACC) is obliged to keep its leased premises in a reasonable state of repair, regardless of whether tenants pay rent. To mitigate its housing maintenance liabilities, WBACC has devised a Home Ownership Strategy, which centres on granting 99 year home ownership-style leases. Tenants who choose to take up such leases would have effective home ownership, relieving WBACC of the legal obligation to maintain those tenants’ properties. Before issuing home ownership-style leases, WBACC must ensure that properties are in a reasonable state of repair. Initial estimates for housing upgrades or new houses range from $34 million to $64 million and have not been reflected in the Budget estimates.

It seems unlikely that WBACC can raise this money, and so the cost is likely to be borne by the Commonwealth. WBACC’s 2020–21 Annual Report states that a budget submission was made to the Government seeking funding, after a costing had been completed by an external contractor.

It should be noted that this, or a similar, contingent liability would arise even if the Bill were not passed, as WBACC would then be responsible for carrying out repairs and maintenance for domestic properties to the standard demanded by the RTA, and would likely need Commonwealth financial assistance to do so.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[3]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bill (and its predecessor) had not been considered by this Committee.

Key issues and provisions

A key issue associated with this Bill is the position Wreck Bay tenants may be placed in if they accept the ‘99 year home ownership-style leases’ proposed by WBACC and enabled by this Bill, which are not protected by the RTA. Although this may appear to absolve the WBACC of financial responsibility for the repair of properties, it may result in a financial and regulatory burden for the Commonwealth if tenants are unable to manage associated risks to structures and land in the future, including potential PFAS contamination concerns.

There is also a potentially significant issue that WBACC corporate documents (pp. 4–5, 10) appear to indicate that they believe the Bill will give them the ability to levy on-the-spot fines for breaches of Jervis Bay Territory By-Laws. This does not appear to be the case.

There may also be an issue that the Bill may result in community services being withdrawn from any community residents who are not registered members. It is unclear if there are any persons in this category.

Key Issue: Long term leases, withdrawal from the RTA, and tenants’ risk

Item 34 of the Bill proposes a new subsection 38(7) of the Land Grant Act. This subsection will make the RTA inapplicable to leases of longer than 40 years duration issued to a registered member (or non-registered member approved by the Minister) for domestic or community benefit[4] purposes. The practical effect of this clause is to reverse the effects of Williams for this class of leases, so that WBACC is no longer liable, financially or otherwise, for house and property maintenance for longer term tenants.

Issue: lack of statutory requirements for remedial work or liveable housing

While WBACC has stated in its 2022–23 corporate plan that houses to be offered in long-term leases will be ‘brought up to a standard to make them suitable for home ownership’ (p. 12), there is no statutory requirement for them to do so, nor has the Commonwealth yet budgeted funds to upgrade or replace the existing run-down housing stock (see Financial implications above). While the Explanatory Memorandum refers to tenants ‘voluntarily entering into a home ownership style lease with the Council’ (p. 2) [emphasis added], the WBACC corporate plan states that 100% of tenants will have entered into these leases by 2025–26 (p. 12). With the RTA being made inapplicable, there would appear to be no applicable legal standard by which the question of whether a house is ‘suitable for home ownership’ can be assessed, or enforced by a tenant, nor has funding yet been provided to bring housing to this standard. This raises the risk that tenants will be pressured into accepting sub-standard housing and/or housing they are unequipped to personally manage.

Issue: potential immediate application to some existing leases

In Williams v Wreck Bay Aboriginal Community Council (Residential Tenancies)[5], the decision eventually upheld by the High Court, ACAT determined that even though no written lease had been located, a residential tenancy agreement or lease did in fact exist between Mr Williams and WBACC, which was subject to the RTA. ACAT stated:

It appears from section 38(3) of the [Land Grant Act] the lease could have been for as long as 99 years. The Tribunal simply does not know.

During the proceedings, ACAT heard that ‘about 12 or 13’ properties inhabited by ‘12 or 13 families’ similarly did not have written leases in place. It is almost certain that these properties, although not specifically at issue in the Williams case, would also be covered by the High Court’s judgment and the proposed changes in the current Bill.

It is consequently not clear whether these existing ‘12 or 13’ de facto leases for ‘as long as 99 years’ would be considered to have durations longer than 40 years, as no findings were made on this issue. If these de facto leases are considered to have durations longer than 40 years, then the effect of proposed section 38(7) would be to make the RTA inapplicable to these properties as soon as the Bill’s amendments took effect, even if no remedial works have yet been carried out. Presumably this would immediately release WBACC from responsibility for rebuilding, maintenance, repair etc of this old, unmaintained, but inhabited, housing (absent any other sources of contractual or property law obligations found under the common law or equity).

It is also not clear whether any tenants with written leases currently have lease terms longer than 40 years. If so, these concerns may also apply to them.

Issue: a regulatory vacuum for the ‘new’ landlord-tenant relationship?

The notion of new ‘home-ownership style’ leases (Explanatory Memorandum, p. 3) presents some potential legal issues. If the RTA regime does not apply to long-term leases, what is the legal framework that governs the rights and responsibilities between landlord and tenant?

The situation is not analogous to the ACT, in which 99-year leasehold interests are held directly from the Crown (and may be registered under the Land Titles Act 1925 (ACT)). In Wreck Bay, Aboriginal Land was granted as inalienable title to WBACC. It may be leased, licensed or otherwise ‘dealt with’ directly by WBACC pursuant to section 38 of the Land Grant Act, but the title remains with WBACC.

WBACC has stated in its 2022–23 Corporate Plan that it is currently unclear what legislative regime (if any) would govern the proposed long-term ‘home-ownership style’ leases, including who would be responsible for registering the leases, or whether they are subject to (any) planning laws or development codes:

Sometimes it is not clear which level of government or which agency is responsible for service provision or management. An example of this kind of cross jurisdictional confusion from the past year has arisen during discussions between WBACC, the Department of Infrastructure and the ACT government in relation to subdivision, registration of title and Land Use Planning for the WBACC Home Ownership Program.

It seems that there is no current facility within the ACT Government to manage registration of leases within the Jervis Bay Territory. There is also a question about whether WBACC, in granting long-term leases, needs to comply with ACT planning laws? (To date, the Council has been complying with the requirements of the ACT Building Act for new development and renovations.). Assuming that WBACC is required to follow ACT planning laws, should the proposed Land Use Plan (LUP) be modelled on the ACT Territory Plan? Would this allow the Council to adopt the ACT Development Codes in their entirety, including any future amendment to the Codes? Is WBACC obliged to seek the approval of any second party to implementation of the LUP? (Under the Land Grant Act the Council is required to seek the approval of the Minister if a proposal may have a significant effect on the environment.)

Can WBACC be nominated within the LUP as the consent authority for development applications, provided that there are no significant or undue effects on the environment? (In which case the approval of the Minister would be required?) These are all questions that WBACC is currently grappling with and they will require resolution during the coming year (p. [4]).

The Bill does not appear to resolve these issues, but potentially enables WBACC to grant long-term leases capable of being ‘sold’ to other registered members (Explanatory Memorandum, p. 3) before any of these complex questions are fully addressed.

Following Williams, this may result in further legal disputes about who owes what obligations with respect to the property(s) in Wreck Bay that are subject to the new arrangement. It is worth noting that such complications do not arise in the case of ‘true’ home ownership situations, where alienable freehold rights (for example those available in most cities and towns) are indefinite in duration and without any private interest in the estate reverting back to a lessor or any superior private interest.

Issue: the risks of home ownership without the material benefits

The trade-off proposed to tenants by WBACC, and endorsed by the Commonwealth in the Bill, is that while WBACC will pass any responsibility to repair and maintain properties to tenants, tenants will receive an upgraded house with ownership-equivalent title and then ‘enjoy the intergenerational benefits of homeownership.’ However, these benefits may not materialise, due to the encumbrances and practical difficulties attaching to any property in Wreck Bay. This then raises the prospect that with the passage of time, tenants may again be living in damaged or dilapidated housing which they may lack financial capacity to repair, but for which WBACC has no legal responsibility (under the RTA).

In the superficially comparable situation in the ACT, where land is held under 99-year Crown Leases, homeowners are readily able to obtain insurance against damage, or leverage the value of their house to raise capital for repairs or upgrades via a loan or mortgage. They are able to obtain mortgages to buy or renovate houses or invest in commercial ventures, and enjoy rising property values over time. In Wreck Bay, it is unclear whether or how these benefits will be available to ‘home-owners’.

Insurance

Insurers may be reluctant to issue ordinary home insurance at affordable prices to residents of Wreck Bay under longer term ‘home ownership style’ leases. This is because:

1. As construction may not have been legally covered by ACT (or other) planning laws and building codes (even if they have been adhered to in practice) insurers may not be able to efficiently assess any risks or liability stemming from construction issues (see ‘a regulatory vacuum’ above). For example, if a builder of a Wreck Bay house is found to have performed substandard work leading to subsequent damage, but that work was not covered by any statutory planning law or building code, and was signed off by WBACC and/or the tenant, would an insurer be able to recover costs from that builder?
2. Land in and around Wreck Bay is contaminated by PFAS runoff from naval base HMAS Creswell and the Jervis Bay Range Facility, with a currently unquantified effect on properties, which may give rise to unknown risks (and hence insurance claims) in future.
3. Properties in and around Wreck Bay are rated as being at medium to high risk from bushfires in the near future by recent studies of climate change’s effect on insurability in Australia.
4. There may be racial discrimination against Aboriginal residents by lenders and insurers. Racial discrimination in insurance in Australia has not been extensively studied but has been shown to exist in the related private rental and business finance markets, and in the US and UK insurance industries.

The combination of these factors may inhibit Wreck Bay community residents’ access to affordable home insurance in the private market.

Mortgages, loans and capital (non)appreciation

For the same reasons (construction code risks, PFAS contamination, bushfire risk, and racial discrimination) Wreck Bay residents may also have difficulty securing loans against or otherwise leveraging their properties, or obtaining loans to buy properties within the community. Three additional factors may further limit access to finance:

1. As a property could only be sold to another member of the Wreck Bay Aboriginal Community (without explicit permission from the Minister) there will not be a sizable market for them, meaning property values are unlikely to rise substantially over time. This makes the property an unattractive loan security or vehicle for intergenerational wealth building.
2. The requirement for ministerial permission for sale to the general market would mean that banks might regard the property as encumbered (as it could not be easily sold in the event of loan default), and not suitable as a security for a loan.[6]
3. Banks may be reluctant to issue mortgages on, or loans secured by, Aboriginal homes on Aboriginal land due to downside reputational risks. As stated in the Northern Territory Aboriginal housing context in 2015:

   Bankers expressed a further concern about public relations should they ever need to enforce their rights of foreclosure under a mortgage. It was stated, frankly, that it would be a public relations nightmare for a bank to be on the news for evicting an elderly remote Aboriginal person from their first home due to default on a bank loan. These concerns mean that banks may be reluctant to lend on a traditional 'one on one' basis and would be more comfortable if there was, for example, government guarantees or other assurances provided.[7]

These obstacles do not appear to be insurmountable, and could be overcome by, for example, support from Indigenous Business Australia’s Indigenous housing loan program, or a Community Land Trust model in which WBACC offered a variety of tenure options, or played an ongoing role as finance guarantor, or collective negotiator of insurance and repair services, as does a strata body corporate. However, available WBACC documents do not mention any such options or ongoing role for WBACC, but appear to be oriented towards shifting legal risk away from WBACC (2022–23 Corporate Plan, p. 7). In future, if these issues are not resolved, Wreck Bay residents may again be appealing to the Commonwealth for financial support for housing.

Potential Issue: enforceable by-laws?

In a number of corporate publications, such as the most recently available annual report, WBACC has suggested that current laws do not enable it to effectively enforce Jervis Bay by-laws, and that legislative reform is underway to remedy this situation. For example, the 2022–23 WBACC Corporate Plan states:

Legislative and Regulatory Challenges to the Maintenance of Aboriginal Land:

The Land Grant Act includes a set of By-Laws in relation to activities that can/cannot occur on the land. The By-Laws have no compliance mechanism attached. A warden may point out a breach, but to pursue a matter WBACC would have to prosecute the matter in court. There is no facility for fines or alternative enforcement mechanisms. WBACC is working with the Commonwealth Government to implement legislative changes to allow WBACC to efficiently enforce the By-Laws. This activity is well underway the bill was introduced to Parliament; the House of Representatives, in March 2022; this lapsed at dissolution in April 2022. Until the By-Laws can be enforced WBACC's ability to manage and maintain Aboriginal Land is impacted (pp. 4–5).

This appears to refer to the introduction of the (identical previous) Bill under the Morrison Government.

However, the Bill (in its current and previous form) contains no provisions relating to mechanisms to enforce Wreck Bay by-laws. The capacity to levy penalties for breaches of by-laws is already provided by the existing Aboriginal Land Grant (Jervis Bay Territory) Regulation 2016 (the Regulation), although this does not appear to cover WBACC’s request for ‘fines or alternative enforcement mechanisms’ that would avoid having to take court action. Existing subsection 52A(8) of the Land Grant Act enables the Regulation to make provision for an offender to pay a fine as an alternative to prosecution, but the Regulation does not currently enliven this section.

It is not clear why WBACC appears to believe that the current Bill, which was apparently subject to extensive consultation,[8] will provide them with additional enforcement powers. It is possible that the Commonwealth and WBACC have agreed on a revision of the Regulation, invoking subsection 52A(8), to be tabled after passage of the Bill, which has not yet been brought to the attention of Parliament. However, a new Regulation would not be dependent on passage of the Bill.

The Morrison Government did not table any new Regulation for Jervis Bay by-laws before dissolution. If it had, the dissolution of Parliament would only have paused the period for consideration and disallowance, not automatically disallowed it[9] (unlike Bills, which lapse on dissolution) so, unless a new motion for disallowance were tabled, the new Regulation would have taken effect once the new Parliament was seated and the disallowance period elapsed.

Potential issue: disenfranchisement or withdrawal of services

As noted in the second reading speech, residents of Jervis Bay Territory do not have votes in ACT elections, nor in a regular local government body. However, WBACC does provide a local-government-equivalent representative and service delivery organisation to the Wreck Bay Community.

Items 4–9 of the Bill limit WBACC’s service delivery, representative and other community functions from being provided to ‘the Community’ to ‘registered members and their children’. While this provides WBACC with increased clarity of corporate governance, it may mean that representational, community and other services are withdrawn or denied to any people residing in the community, who are not registered members. It is unclear if there are any persons in this category.

Other provisions

In addition to the changes proposed to the lessor-lessee relationship above, there are other provisions in the Bill that specifically concern decision-making by WBACC. These appear to be aimed at empowering WBACC to make its own decisions without too much ‘red-tape’, including, for example, raising the threshold at which WBACC is required to seek approval from the Minister from $100,000 to $1,000,000 (Item 10). When the Land Grant Act was first passed in 1986, this amount was $1,000. The rise appears to be reasonable in the context of the rise in property prices and inflation generally.

The governance and corporate operations provisions appear uncontroversial from a legal or policy standpoint and seem to be in keeping with the long-standing ‘community-focused’ functions of WBACC found in s. 6 of the Land Grant Act.

The changes to WBACC’s governance and corporate operations, and including the role of a CEO as an accountable authority of WBACC (Item 3), would seem to allow WBACC to better perform these functions in a transparent, consistent and accountable manner. Positive initiatives from the point of view of accountability appear to include:

• empowering registered members to remove the Executive Committee of WBACC where required (Item 26), and
• introducing a ‘fit and proper person’ test to hold a position on the Committee (Item 30).

The governance changes appear to serve the Committee, WBACC and its members well into the future as it grapples with the challenges of managing culturally significant land and waters in the face of relatively few financial resources. The fact that the governance changes are endorsed by WBACC, and the wider Wreck Bay community, is also noteworthy.