Originally published by Andrew Sharpe on October 30, 2017
There’s nothing more Australian than getting together with family and friends to enjoy a BBQ on the timber deck out the back of the family home. Unfortunately, all too frequently, those wooden decks just don’t last in the harsh Australian conditions. Personal injury resulting from collapsing balconies is a frequent source of litigation, especially in the context of rented residential premises.
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Mr and Mrs Bhide (the Landlords) retained a real estate agent, Elders Collaroy[1] (the Agent) to manage their residential property in Collaroy by way of Management Agreement executed in 2005. The property was leased to Ms Gillies (the Tenant).
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The Landlords were entitled to a contractual indemnity from the Agent in respect of their liability to the Plaintiffs because the Agent breached its implied duty to take reasonable care in carrying out its duties under the Management Agreement. That entitlement arose notwithstanding the Landlords’ own breach of duty. Where a principal and an agent have both been found liable in negligence, the law provides (unless otherwise agreed) that the principal is entitled to a contractual indemnity for the whole of the principal’s loss[2].
Because the Landlords’ entitlement to indemnity arose from the Agent’s breach of contractual duty of care (being concurrent or co-extensive with the Agent’s duty of care in tort), the amount of the contractual indemnity was reduced to reflect the contributory negligence of the Landlords[3]. The Landlords’ contributory negligence was assessed at 30%.
The Agent’s claim for contribution against the Landlords failed because an action for contribution under section 5 of the the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) does not operate in circumstances where the person against whom indemnity is sought is entitled to a contractual indemnity from the person seeking contribution in respect of that liability[4].
In relation to the Tenant:
The Tenant breached her duty of care to the plaintiffs because a reasonable person in her position, having expressed concerns about the precarious nature of the balcony, ought to have refused access to the balcony until its structural integrity had been properly investigated. The Tenant’s liablity liability to make contribution to the Agent was assessed at 20%.
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To avoid this, agents should seek to include in their management agreements an express contractual indemnity in favour of the landlord (in the case of breach by the agent) which is limited so as not to apply to the extent that the landlord’s loss is caused, or contributed to, by the landlord’s own negligence. In the absence of such a clause, the agent will be liable to fully indemnify the landlord for the whole of its loss which will prevent it from obtaining contribution from the landlord.
[1] Libra Collaroy Pty Ltd t/as Elders Collaroy
[2] Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 (at 598) per Barwick CJ (Kitto, Taylor and Menzies JJ agreeing); (at 602) per Windeyer J; [1965] HCA 26
[3] Pursuant to s9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW)
[4] See section 5(c)