The NSWCA had to assess the respective liability of a residential owner, a tenant occupier and the Managing Agent of a property where a balcony collapsed and injured the tenant occupier's guests.
- Whether the trial judge erred in finding that the Bhides and Ms Gillies were not liable to the plaintiffs
- The application of a contractual indemnity
- Assessment of contributory negligence and contribution
On 15 June 2012, the four plaintiffs sustained injuries as a result of a balcony collapse which occurred in the evening at a residential property in Collaroy (the property) owned by Mr and Mrs Bhide, the first and second respondents. The reason for the collapse was due to weathered deterioration of the structural beams and metal fixings. All parties to the proceedings were aware of issues with the structural adequacy of the balcony prior to its collapse.
Libra Collaroy Pty Limited trading as Elders Real Estate (Elders) managed the property pursuant to a Management Agreement with the Bhides. The third respondent, Ms Gillies was the tenant pursuant to a Tenancy Agreement at the time of the incident. The plaintiffs were Ms Gillies’ daughter and her three friends.
The Decision at Trial
The trial judge held that the Bhides as owners owed the plaintiffs a duty to exercise reasonable care in maintaining the premises. It was held that the Bhides had discharged this duty by engaging a competent contractor, Elders. Elders accepted delegation and authority of that duty by reason of the Management Agreement. Pursuant to that agreement, Elders were held solely liable in negligence to the plaintiffs.
The court held that the Bhides were liable to the plaintiffs in contract, for breach of their obligations under the Tenancy Agreement to maintain the premises in a reasonable state of repair. However, it was held that they were entitled to a contractual indemnity from Elders in relation to their liability to Ms Gillies.
Ms Gillies was found to have sufficiently discharged her duty of care as tenant by complaining about the level of maintenance and repair to Elders.
The Issues on Appeal
Elders (the appellant) contended that the trial judge erred in determining that the Bhides and Ms Gillies were not liable as co-tortfeasors. They also contended that the Bhides were not entitled to a contractual indemnity under the Tenancy Agreement. The finding of negligence against Elders was not challenged.
The Decision on Appeal
The Court of Appeal held that although the Bhides initially delegated their duty of care to Elders, they ought to have later formed the view that Elders had not discharged its delegated duties competently. A reasonable person in the Bhides’ position would have instructed Elders to obtain a report as to the structural integrity of the balcony and, if necessary, to have taken steps to rectify any identified defects. The Court of Appeal found that the Bhides’ failure to do so was a necessary condition of the harm suffered, and held that Elders and the Bhides were joint tortfeasors. Ms Gillies was also a joint tortfeasor and liable to contribute to Elder’s liability to the plaintiffs.
The Court of Appeal further held that Ms Gillies breached her duty of care because a reasonable person in her position with such concern for the precarious support for the deck would have refused any access to the deck until such time as the structural integrity had been investigated and any identified defects rectified.
The Court of Appeal upheld the trial judge’s decision relating to the contractual indemnity. Since the collapse of the balcony was due to Elder’s breach of its duty of care and breach of the implied term of reasonable care in the Management Agreement, it was inevitable that the Bhides were entitled to a contractual indemnity for their liability for breach of the contractual obligation as landlord to Ms Gillies to keep the premises in good repair.
However, the Bhides’ entitlement to recovery under the contractual indemnity was reduced to the extent of their contributory negligence (assessed at 30%) for failure to realise that the regular complaints about the balcony indicated that Elders was not competent in identifying experts qualified to resolve the structural issues with it. The Court of Appeal also held that the contractual indemnity precluded Elders from claiming contribution pursuant to s 5 Law Reform Miscellaneous Provisions Act 1946 (NSW). Elders was nevertheless successful in obtaining an order for contribution from Ms Gillies for 20 % of the plaintiffs’ damages because she was a long standing tenant with ample opportunity to observe the poor maintenance of the balcony prior to its collapse.
Implications for you
If you own an investment property and you have engaged a managing agent for your property, it is important to ensure that you have effectively delegated your duty of care. A Management Agreement is not sufficient to prove acceptance of delegation and does not necessarily establish that a duty of care has not been breached.