The Director, Housing Division, Department of Works and Housing, has submitted the following memorandum for advice:

The Commonwealth and State Housing Agreement was executed under the authority of the Commonwealth and State Housing Agreement Act 1945 (Commonwealth Act No. 44 of 1945) and the corresponding legislation of each Australian State.

The Agreement provided for advances by the Commonwealth to the States for the purpose of erection of dwellings. Clause 10 required the weekly rental of dwellings to be calculated in the manner provided in First Schedule. Paragraph 3 of the First Schedule permits a State to estimate the probable capital cost of a dwelling and to fix the tentative rental upon that estimate. The actual capital cost of the dwelling shall be ascertained as soon as possible and if the actual capital cost differs from the estimate, the economic rental of the dwelling shall be varied accordingly.

There has been no alteration in these provisions.

Recently, upon ascertainment of final capital costs of a number of projects which have been carried out by the Agricultural Bank of Tasmania under the Agreement, it has been found that estimated capital costs have been very greatly exceeded and that tentative rentals required to be considerably increased also so as to comply with the requirements of the Commonwealth and State Housing Agreement.

The Agricultural Bank has been advised by the State (Tasmanian) Crown Solicitor that the provisions of the Tasmanian ‘Landlord and Tenant Act 1949’ (Act No. 21) preclude the increasing of rentals as required by the Agreement. Section 5 of the Tasmanian Act specifically binds the Crown. A copy of this opinion is not available at present. The view of this Division is that the obligations which were accepted under the Agreement by both the Commonwealth and State legislation could not be avoided by the unilateral action of either party. Your advising is requested upon the obligation of the Tasmanian authorities to charge the correct rentals as provided in the sections of the Agreement referred to above.

(2)  In my view the answer to this question is that the rental provisions of the Tasmanian Landlord and Tenant Act apply to houses let by the State even though those houses come within the ambit of clause 10 of the Agreement and rents must accordingly be fixed under the provisions of the Act notwithstanding that this course may possibly result in a breach of the Agreement by the State.

(3)  It is understood that advice is desired also as to the action open to the Commonwealth in the event of the State failing to carry out is obligation under Clause 10. I shall deal with this matter in paragraphs 8 and 9 of this Opinion.

(4)  The Agreement is a contract between the Executive Governments of the Commonwealth and of each particular State concerned which, in this case, is the State of Tasmania. This contract imposes obligations on the Commonwealth and Tasmanian Governments and each Government is entitled to look to the other to perform the obligations undertaken by the other. The fact that by a statute the Parliament of the State has merely approved the contract which its Executive has entered into does not give any greater force to the obligations undertaken by the State in the contract. In particular, no term of the contract becomes part of the law of the State so as to affect in any way the rights and obligations of any person entering into a contractual relationship of tenancy with the State or any authority of the State.

(5)  Part II of the Landlord and Tenant Act provides for the fixing of rents of prescribed premises (including premises owned the by Crown in right of the State of Tasmania and its agencies).

(6)  The net effect of the Agreement and the Act is that the State or its Housing Authority is subject to two conflicting obligations, namely—

1. an obligation under the Act to charge a tenant rent in accordance with the provisions of the Act, and, therefore, rent calculated in accordance with Clause 3 of the First Schedule to the Agreement continues in relation to any tenancy until varied by the Rent Controller; and

2. an obligation to the Commonwealth under the Agreement to charge the tenant the economic rent calculated in accordance with clause 4 of the First Schedule.

(7)  The first obligation is imposed by statute and must be performed by the State. The second obligation is a contractual one only. In the face of these two mutually inconsistent obligations, it seems to me that, however reluctantly, the State will probably comply with the provisions of its own Act.

(8)  The Commonwealth, as a party to a contract, may request the Tasmanian Government to perform its obligations under the contract. For the purpose the Commonwealth could communicate with the State, pointing out, if the rents of houses coming within the Agreement are to be fixed in accordance with the Act, it seems likely that the provisions of Clause 10 of the Agreement will not be given effect to. The attention of the State Authorities could be drawn to the provisions of Clauses 3(1)(a) and 15(1) of the Agreement. The State could be reminded of its obligation under Clause 3(1)(a) to ensure that adequate legislation exists to enable it at all times to control rental housing projects under the Agreement and that the operation of the Landlord and Tenant Act 1949 in preventing the performance by the State of its obligation under clause 10 is considered by the Commonwealth to constitute a failure on the part of the State to ensure the existence of adequate legislation to control a rental housing project under the Agreement. It could be further pointed out that the Commonwealth’s obligation under Clause 15(1) to contribute to the State a portion of its losses in connexion with its administration of its housing projects (which portion under paragraph 6 of the Second Schedule is 3/5ths of the loss) is expressly subject to the State observing the provisions of the Agreement including, of course, Clause 10. I should think that the Commonwealth could quite legitimately intimate to the State that it proposed to withhold so much of its contribution under Clause 15(1) as is attributable to the failure by the State to observe its obligation under Clause 10. The State could then be asked to indicate whether it proposes to remedy the matter and the means by which it would propose that the obligation of Clause 10 is to be carried out.

(9)  The possibility of action under Clause 10 to provide for the variation of the calculation of the economic rent might receive consideration if the State is not prepared either to amend its Act to exempt from its operation houses let in pursuance of the Agreement or otherwise to fulfil its obligations.

[Vol. 39 p. 110]