[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
HEADNOTE
[This headnote is not to be read as part of the Judgment]
Libra Collaroy Pty Limited trading as Elders Real Estate (Elders), appealed from a decision of the District Court in which his Honour Judge Curtis found Elders was liable for damage suffered by four people (plaintiffs) who were injured in the collapse of a balcony on the evening of 15 June 2012 at a residential property in Collaroy (property). The balcony collapsed, in short, due to weathered deterioration of the structural beams and metal fixings.
Elders managed the property pursuant to a Management Agreement executed on 14 June 2005 with its owners, the first and second respondents, Mr and Mrs Bhide. At the time of the balcony's collapse, the third respondent, Ms Joanne Gillies, was the tenant. The four plaintiffs were Ms Gillies' daughter, Sanchia Gillies, and her three friends.
The Bhides bought the property in 1999. It was a two-storey residence, constructed in 1995, with a timber balcony on the north side of the upper level (balcony). The balcony was constructed with untreated Oregon timber which, due to its lack of durability, is unsuited for weather-exposed structural members and is highly prone to rot.
On 9 November 2005, the Bhides entered into a tenancy agreement to lease the house to Ms Gillies and her husband, Mr Gillies. When the lease was renewed on 10 December 2010, Ms Gillies became the sole lessee.
In the years following the purchase of the property, a number of issues arose concerning the state of repair of the walking surface of the balcony and, too, concerning the structural adequacy of the balcony. Early in the piece with the Bhides' approval, Elders arranged for it to be braced to minimise sideways movement. Thereafter, periodically Elders obtained quotes for repairs to the balcony which they provided to the Bhides. In 2001, a quote noted "top edges of Oregon supporting beams are rotting out"; in 2004, another quote advised that "repairing the joists [as opposed to replacing the deck was] a temporary measure"; in 2007, another quote recorded that the "supporting timbers [could]…fail over time." In 2010, Mr Gillies and Ms Gillies communicated to Elders their concerns about the structural adequacy of the major supporting cross beam holding the upper deck contending it had substantial wood rot which was not easily noticed and required inspection. In February 2012, Ms Gillies complained in an email to Elders both about the deterioration in the walking surface of the deck and, too, that the "[metal bracing] underneath [the deck] is also precarious and the deck is not fully supported." Elders arranged for a carpenter to inspect the deck with a view to the walking surface being replaced. The carpenter did not have the expertise, and was not retained, to advise on the structural adequacy of the balcony. By the time of the balcony's collapse, the carpenter had provided two quotes to Elders, one to repair the walking surface of the deck, the other to construct a pergola over it to prevent it from getting wet. The quotes were forwarded to the Bhides on the morning the balcony collapsed.
Each plaintiff commenced proceedings against Elders and the Bhides seeking damages for personal injury (plaintiffs' proceedings). Ms Gillies also brought proceedings against Elders and the Bhides claiming to have suffered psychiatric injury as a consequence of seeing her daughter injured at the accident scene (Ms Gillies' proceedings). A number of cross-claims were filed as between Elders, the Bhides, Mr Windred (a carpenter who did some maintenance work on the deck of the balcony in 2008) and Ms Gillies (only in the plaintiffs' proceedings). The details of these cross-claims are set out below. As the primary judge's finding in Mr Windred's favour is not challenged, it is not necessary to set out the details of any cross-claims against him.
In Ms Gillies' proceedings, there were two cross-claims. First, the Bhides cross-claimed against Elders seeking, relevantly, indemnity by reason of Elders' failure to use reasonable care and skill in managing the property and for its breach of the Management Agreement including for breach of an implied term to use reasonable care and skill in performing the work for which it provided. They also sought contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (1946 Act) in respect of any liability to Ms Gillies. Secondly, Elders brought a cross-claim seeking indemnity from the Bhides pursuant to an indemnity provision in the Management Agreement and also contribution from them as joint tortfeasors pursuant to s 5 of the 1946 Act.
In the plaintiffs' proceedings, there were two relevant cross-claims. First, the Bhides filed a cross-claim seeking contribution from Elders and Ms Gillies pursuant to s 5 of the 1946 Act. Secondly, Elders brought a cross-claim seeking contribution from the Bhides and Ms Gillies as joint tortfeasors pursuant to, inter alia, s 5 of the 1946 Act.
In defence to the Bhides' cross-claims, Elders pleaded that, to the extent the Bhides suffered any loss or damage in the manner particularised in their cross-claim, and if that loss or damage was due to Elders' negligence, any damages to which they might be entitled should be reduced by reason of their contributory negligence.
All the proceedings were dealt with as one for directions and hearing purposes. The question of liability was determined separately in advance of damages issues.
The primary judge found that, by reason of the Management Agreement, Elders had accepted the delegation and authority to arrange repairs and maintenance in accordance with the Bhides' obligations to repair the property and, accordingly, owed to the plaintiffs a duty to exercise reasonable care in maintaining the premises. His Honour held that in the light of the balcony's maintenance history, and pursuant to the express terms of the Management Agreement, Elders was liable in negligence to each of the plaintiffs and Ms Gillies. His Honour also held that the collapse of the balcony resulted from breach of the contractual duty to exercise reasonable skill and care Elders owed to the Bhides pursuant to the Management Agreement.
The primary judge held that the Bhides had discharged their duty of care to the plaintiffs by engaging a competent contractor to fulfil that duty. He also held that the Bhides were liable to Ms Gillies in contract for breach of their contractual obligation under the tenancy agreement to maintain the premises in a reasonable state of repair. However, he held that the Bhides were entitled to a contractual indemnity from Elders in respect of this liability. He rejected Elders' submission that it was entitled to indemnity from the Bhides pursuant to an indemnity provision in the Management Agreement.
The primary judge held that Ms Gillies had discharged the duty of care she owed the plaintiffs as occupier of the property by complaining about the level of maintenance on the property and seeking that the agents intervene.
Accordingly, the primary judge concluded that, if the plaintiffs and Ms Gillies had suffered injuries, Elders was solely liable to them in tort, the Bhides were only liable to Ms Gillies in her case for breach of contract, for which they were entitled to a contractual indemnity from Elders, and the Bhides and Ms Gillies were not liable on Elders' cross-claims.
On appeal, Elders did not challenge the finding that it was negligent, nor the finding that it was not entitled to rely upon the indemnity provision. However, it contended that the primary judge erred in determining that the Bhides and Ms Gillies were not also liable as tortfeasors, and in determining that the Bhides were entitled to a contractual indemnity in respect of their liability to Ms Gillies for breach of the tenancy agreement.
The Bhides filed a notice of contention contending that the primary judge ought to have held the contractual indemnity to which they were entitled from Elders extended to any liability to the plaintiffs.
The principal issues on appeal were:
(i) Whether the primary judge erred in finding the Bhides and Ms Gillies not liable to the plaintiffs, and hence not liable to Elders on its cross-claims.
(ii) Whether the primary judge erred in finding:
a. that the Bhides discharged their duty of care to the plaintiffs by engaging a competent contractor (being Elders) to fulfil the duty of care they owed to the plaintiffs; and
b. that Ms Gillies discharged her duty as occupier by complaining to Elders about the condition of the balcony.
(iii) Whether the primary judge failed to consider and apply the principles of s 5B of the Civil Liability Act 2002 (NSW) (CLA) to Elders' respective cases against the Bhides and Ms Gillies.
(iv) Whether the primary judge erred in finding that the Bhides were entitled to contractual indemnity from Elders with respect to their liability to Ms Gillies.
(v) Whether the primary judge erred in not finding that the Bhides were entitled to contractual indemnity from Elders with respect to their liability to the plaintiffs.
(vi) Whether, insofar as the Bhides were entitled to recover pursuant to the contractual indemnity any amounts for which they might be jointly liable with Elders to the plaintiffs (including Ms Gillies), their entitlement to recover should be reduced by reason of their contributory negligence pursuant to s 9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) (1965 Act).
(vii) Whether, in the event they were found to have breached their respective duties of care, to what extent the Bhides and Ms Gillies should be found liable to contribute to any damages for which Elders is found liable to the plaintiffs.
Held, per McColl JA (Meagher JA and Ward JA agreeing), allowing the appeal and upholding the notice of contention:
As to issues (i) and (ii)
(1) The Bhides breached their duty of care to the plaintiffs and Ms Gillies:
a. Although they initially delegated their duty of care to Elders, they ought, at least by 2010, to have formed the view that Elders had not discharged and was not discharging its delegated duties competently. (at [193]); [211] - [216])
b. By either 2008, or at the latest 2010, a reasonable person in the Bhides' position ought expressly to have instructed Elders to engage an expert to investigate the structural integrity of the balcony and, if necessary, to have taken steps to have rectified any deficiency identified, including, if necessary, by replacing the balcony. (at [216])
c. In failing to prevent anybody from having access to the balcony pending remedial work.
Jones v Bartlett (2000) 205 CLR 166; [2000] HCA 56 discussed.
Bevillesta Pty Ltd v Liberty International Insurance Co [2009] NSWCA 16; Laresu Pty Ltd v Clark [2010] NSWCA 180 applied.
(2) Ms Gillies breached the duty of care she owed the plaintiffs in that a reasonable person in Ms Gillies' position who had formed the opinion she expressed in her February 2012 email, concerning the precarious support for the deck, ought to have refused anybody access to the deck until the position as to its structural integrity had been properly investigated and the patent defects Mr Gillies drew to her attention, which she herself observed, and any latent defects revealed on investigation, had been rectified. (at [233])
As to issue (iii)
(1) The proper starting point for the inquiries as to breach and causation the case posed accordingly was the relevant provisions of the CLA. (at [194])
Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48 applied.
(2) The primary judge erred in failing to apply the provisions of the CLA, the effect of which was that his Honour failed to identify the relevant risk of harm and whether either the Bhides and/or Ms Gillies knew, or ought to have known of it (s 5B(1)(a)) and, further, failed to apply the standard s 5B(1)(c) imposed to test the question of their breach by reference to what precautions a reasonable person in their respective positions would have taken in the circumstances, including by reference to the matters set out in s 5B(2). (at [196])
(3) Accurate identification of the actual risk of harm the plaintiffs and Ms Gillies faced was necessary as it was only through the correct identification of the risk that his Honour could determine what a reasonable response to that risk would be. (at [197])
Roads and Traffic Authority of New South Wales v Dederer (2007) 234 CLR 330; [2007] HCA 42 applied.
As to issue (iv)
(1) The primary judge did not err in finding that the Bhides were entitled to contractual indemnity from Elders with respect to their liability to Ms Gillies. (at [249])
Florida Hotels Pty Limited v Mayo (1965) 113 CLR 588; [1965] HCA 26; Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6 applied.
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145; Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94 referred to.
As to issue (v)
(1) The primary judge ought also to have held that the Bhides were entitled to contractual indemnity from Elders with respect to their liability to the plaintiffs. (at [225] - [226])
As to issue (vi)
(1) Insofar as the Bhides were entitled to recover pursuant to the contractual indemnity any amounts for which they might be jointly liable with Elders to the plaintiffs (including Ms Gillies), their entitlement to recover should be reduced by reason of their contributory negligence pursuant to s 9 of the 1965 Act to the extent of thirty per cent. (at [271] - [276])
Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522; [1985] HCA 37; Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10; Boral Bricks Pty Ltd v Cosmidis (No 2) (2014) 86 NSWLR 393; [2014] NSWCA 139 applied.
Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6 discussed.
ASF Resources Ltd v Clarke [2014] NSWSC 252; Reinhold v New South Wales Lotteries Corporation (No 2) (2008) NSWLR 726; [2008] NSWSC 187 referred to.
As to issue (vii)
(1) Section 5(1)(c) of the 1946 Act disentitled Elders from recovering contribution from the Bhides having regard to the fact the Bhides are entitled to a contractual indemnity from Elders in respect of the same damage, being their liability as joint tortfeasors to the plaintiffs and Ms Gillies. (at [287])
(2) Ms Gillies' liability to contribute to any damages for which Elders is found liable to the plaintiffs should be assessed at twenty per cent. (at [291])