Persons using a building in the course of running a business might be liable for damage caused by a defect in the building on the basis of strict liability. Such liability exists if there is a link between the origin of the defect and the running of the business. In its decision of 24 November 2017 (ECLI:NL:HR:2017:3016), the Dutch Supreme Court clarified how to ascertain whether there is such a link.
Fire in a multi-tenant business building
A fire destroyed a multi-tenant business building in the Dutch city of Beverwijk. One of the companies renting a unit in the building was Planet Little Kids Furniture. It used its unit to store furniture, which was lost in the fire. Planet claimed damages from the owner of a truck parked in an adjacent unit in the building, arguing that the fire was caused by a short circuit in the truck’s battery. Planet also sued the tenant of this adjacent unit. According to Planet, the unit was not equipped with the appropriate fire precautions. One of the legal grounds Planet invoked against the tenant was strict liability for defective buildings.
Strict liability for defective buildings
In addition to liability based on the defendant’s fault, the Dutch Civil Code (DCC) provides for several strict liabilities. These liabilities are ‘strict’ in the sense that the mere fact that a person has a certain capacity is sufficient to establish liability, regardless of whether the person can be blamed for the damage caused. Strict liability for defective buildings falls into this category. If a building (i) does not meet the appropriate standards in the given circumstances, (ii) which creates a danger for persons or other objects, and (iii) this danger materializes, the possessor of the building is in principle liable (Art. 6:174 DCC). If the defective building is being used in the course of running a business, this strict liability shifts from the possessor to the person running the business (Art. 6:181 DCC). However, there is an exception to this rule. Strict liability does not shift to the person running the business in the building if there is no link between – in the wording of the DCC – “the origin of the damage” and running the business.
Court of Appeal dismisses Planet’s claim
In response to Planet invoking strict liability for defective buildings, the tenant invoked the exception to the rule that strict liability shifts from the possessor of the building to the person running a business in the building. According to the tenant, there was no link between Planet’s damage and the tenant’s business. The Court of Appeal agreed with the tenant. It ascertained as facts that the fire was caused by a short circuit or another unknown cause and that the business run by the tenant was a haulage company. According to the Court of Appeal, Planet had not sufficiently substantiated a link between this business and the origin of the fire. Nor did the Court of Appeal see a link between this business and the further development of the fire, supposedly a “flashover” or “backdraft” effect between the units through spaces in the walls separating the units. The Court of Appeal dismissed Planet’s claim against the tenant. Planet did not agree.
Planet’s complaint before the Dutch Supreme Court
Before the Supreme Court, Planet complained that the Court of Appeal had been too strict in its judgment that there was no link between Planet’s damage and the tenant’s business. In addition, Planet argued that the Court of Appeal had not appropriately taken into consideration its assertions about the nature of the tenant’s business. Planet had asserted that as part of this business, the unit was also used for repair work, including fire hazardous activities, and storage of gas cylinders.
Clarifications of the Supreme Court
Planet’s complaint triggered the Dutch Supreme Court to clarify the exception to the rule that strict liability for defective buildings shifts to the person running a business in the building. As mentioned before, this rule does not apply if there is no link between “the origin of the damage” and the running of the business. The Supreme Court held that the words “the origin of the damage” in the DCC should be read as “the materialization of the danger connected to the defectiveness of the building”. Therefore, the rule that strict liability shifts to the person running a business in the defective building does not apply if there is no link between such materialization of this danger and the running of the business.
More precise statement of existing case law
To that, the Supreme Court added that this includes the situation of materialization of a danger as a consequence of pre-existing properties of the building, making the building defective in view of how it is used. The Supreme Court continued with a “more precise” statement of its existing case law on strict liability for buildings used for business. For such strict liability not to shift to the person running the business, it its necessary and sufficient that there is no link between “the existence or the arising of the defect and running the business”.
Correction of the Court of Appeal
In light of the foregoing, the Supreme Court corrected the Court of Appeal. It should have explicitly ascertained (i) whether Planet’s damage was caused by the materialization of the danger created by the (alleged) absence of appropriate fire precautions in the tenant’s unit and (ii) whether there was a sufficient link between the materialization of this danger and the running of the business by the tenant, taking into consideration Planet’s assertions about the nature of the business run by the tenant in the unit. The Supreme Court annulled the decision of the Court of Appeal. Another court will have to rule on the case along the lines set out by the Supreme Court.
Relevance of the nature of the business
The main lesson from the Supreme Court’s decisions seems – it is somewhat confusingly – that the nature of the business is relevant in two respects, when it comes to strict liability for buildings used for business. In case a building is being used for business, the nature of this business is first of all relevant for ascertaining whether the building is defective in view of how it is used. One and the same building could for instance be fit to be used as a bakery, but defective when used as a nuclear power plant. If a building is defective in this sense, the nature of the business is subsequently relevant for ascertaining whether there is a sufficient link between the materialization of the danger connected to this defectiveness and the business being run in the building.
Back to Planet’s case
In practice, as it appears, these two steps seem to go hand in hand. Once it would be established in Planet’s case that the unit used by the tenant was defective, in view of the use that was made of this unit in the course of running the business of the tenant (insufficient fire precautions in view of fire hazardous activities), it appears to be a small step to also establish a link between the materialization of the danger created by that defectiveness and the running of the (same) business. Although eventually this would obviously depend on the (established) facts of the case.
The tenant in turn raised a procedural matter before the Supreme Court. I have discussed this complaint in a separate blog