Wow, I do feel for you. Sadly the PM should have sought assistance from someone in the office, perhaps the Principal, to have stopped this getting out of hand. Perhaps arrange to have a meeting with the PM and the office Principal to develop a going forward strategy. At the end of the day, yes it is their job to "manage" this for you, not just roll over to the tenants demands. I do know that our paperwork clearly states, the tenants take the property as is, and they are happy with it, so to "try on" things were not right after, just does not fly. As someone else has said, after you have confirmed you position, let them take you to the tribunal, however it will require someone from the office with experience to attend on your behalf. At the end of the day, perhaps the best strategy is to just sit tight, and wait for the tenancy to expire, and go back to good tenants. Perhaps this is a wake up call for Canberra landlords, not to take on defence tenants, outside the defence housing plan.
