When the Balcony Collapses, Who is to Blame?

If you are a tenant, owner, or property manager in New South Wales, it is important to know your rights and responsibilities. A recent decision from the NSW Court of Appeal brings new insight and has far-reaching implications concerning the apportionment of liability among joint tortfeasors.

Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196.

Background

This case began in 2012 when a balcony collapsed, injuring the people gathered on it. Four of the injured brought claims against the owners of the property, the Bhides, and the property agent, Libra Collaroy Pty. Ltd. (Libra). The Bhides had hired Libra to manage their property under an Exclusive Management Agency Agreement (MAA). The Bhides and Libra also issued a cross claim against the tenant, Ms. Gillies, as she was aware of the balcony’s defects and failed to prevent access to it.

District Court

In 2015, the District Court held that though the Bhides owed the plaintiffs a duty to exercise reasonable care in maintaining the premises, this duty was discharged by the hiring of Libra as property managers. Through the MAA, Libra accepted responsibility for the duty of care.

Similarly, the court held that Gillies sufficiently discharged her duty of care by notifying Libra of the unsatisfactory condition of the balcony. Therefore, Libra was held solely responsible for the balcony and for the plaintiffs’ damages. Unsurprisingly, Libra chose to appeal this verdict.

Court of Appeal

Upon appeal, Libra contended that the Bhides had not achieved contractual indemnity under the MAA and that Gillies and the Bhides should not have been dismissed as joint tortfeasors.

The Court of Appeal held that the Bhides did initially discharge their duty of care but, upon receiving quotes from Libra and repeated complaints from Gillies, should have known that Libra was not fulfilling their duty of care in a satisfactory way. Being on notice of Libra’s failures, a reasonable person in the Bhides’ position would have realized that they had a responsibility to either guarantee that Libra rectified the balcony defects or take steps to fix the balcony themselves.

Though the Court still recognized the Bhides’ contractual indemnity, the amount was reduced in proportion to the amount of their liability. In failing to recognize that Libra was incompetent to repair the balcony, the Bhides were found to be 30% liable to the plaintiffs, and any damages they recovered from Libra were to be reduced by 30%.

Gillies was also found contributorily liable because she was on notice of the balcony’s dangerous condition. For failing to lock the balcony until it was satisfactorily repaired, Gillies was found to be liable for 20% of the plaintiffs’ damages.

Ultimately, Libra’s liability to the plaintiffs was reduced to 50%, Gillies’s 20%, and the Bhides’ 30%.

Relevant Law

Duty of Care: The Australian government defines duty of care as “an obligation to take reasonable care to avoid foreseeable harm to another person on their property.”

Reform (Miscellaneous Provisions) Act 1946 No 33 Section 5: The law relied upon by the Court of Appeals in Libra Collaroy Pty Ltd v. Bhide describes how contributions between tort-feasors are to be apportioned when more than one tort-feasor is liable to the plaintiff for the damages stated in the action.

Implications

Tenants

As residents, tenants are the primary source of knowledge about the property and will likely be the first to notice defects. Tenants have a responsibility to report these defects to the owners and property managers. As we saw in Libra, Gillies fulfilled this duty in that she reported the structural defects of the balcony to Libra many times. However, the court still held her liable because she only partially fulfilled her duty. A reasonable person in her position, who was on notice of the dangerous balcony, would have prevented access to it.

Owners

Property owners owe a duty of care to tenants to maintain a safe and habitable property. While owners may choose to delegate this duty through hiring property managers, a MAA will not fully indemnify them when circumstances reflect that a reasonable person in their position would be on notice of dangerous conditions on the property and that their Agent had failed to properly rectify the issue. This decision (along with similar decisions in NSW, see Hunt v. Roads and Traffic Authority of NSW) require owners to adhere to a higher duty of care. Though MAAs and indemnity clauses are a good start, they are not a catch-all of liability.

Agents

As seen in Libra, agents may be able to demonstrate that they are not solely responsible for damages caused, even when an indemnity clause in a MAA exists. The agents in Libra were able to shift their liability significantly from 100% to 50%. Though agents should always endeavor to fulfill their duties, not all hope is lost if you can demonstrate that the other parties should be held liable as well.

Know Your Rights & Responsibilities

In the ever-changing landscape of law, it is important to be aware of important decisions like that of Libra. Though Managing Agents might be able to find some relief through shared liability, Tenants and Owners now find themselves held to a higher standard of care. Overall, this case demonstrates that it is important to be aware of the scope of your responsibilities so that you can best protect yourself from liability should an accident occur.