New South Wales Supreme Court CITATION : Wu v Carter [2009] NSWSC 355 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 23/03/09, 24/03/09 JUDGMENT DATE : 14 May 2009 JURISDICTION : Common Law Division JUDGMENT OF : Hislop J at 1 (1) Verdict and judgment for the fourth defendant on its cross-claim against the third defendant in the sum of $193,750 and 25% of the plaintiff's costs; DECISION : (2) The third defendant is to pay the fourth defendant's costs of its cross-claim against the third defendant; (3) By consent the proceedings by the plaintiff against the third defendant are dismissed; (4) The third defendant and the fourth defendant are to bear their own costs of the plaintiff's proceedings. CATCHWORDS : TORTS - negligence - injury to tenant - defect in common property - apportionment of liability between body corporate and lessor's agent. Law Reform (Miscellaneous Provisions) Act 1946 LEGISLATION CITED : Residential Tenancies Act 1987 Residential Tenancies (Residential Premises) Regulation Strata Schemes Management Act 1996 CATEGORY : Principal judgment James Hardie & Co Pty Ltd v Roberts (1999) 47 NSWLR 425 CASES CITED : Jones v Bartlett (2000) 205 CLR 166 Sakoua v Williams (2005) 64 NSWLR 588 State of NSW v Watton (1998) NSW Conv R 55-885 Li Na Wu (Plaintiff) Joan Carter (First Defendant) Julie Ann Hohne (Second Defendant) PARTIES : Honer & Dodd United Realty Pty Ltd (Third Defendant) The Owners - Strata Plan No. 6466 (Fourth Defendant) Strata Owners Services Pty Ltd (Fifth Defendant) FILE NUMBER(S) : SC 20039 of 2007 B Dooley SC with G Hickey (Plaintiff) COUNSEL : J Reimer (First and Second Defendants) S A Kerr (Third Defendant) G M Watson SC (Fourth Defendant) Keddies Lawyers (Plaintiff) Hunt & Hunt Solicitors (First and Second Defendants) SOLICITORS : Thompson Playford (Third Defendant) Curwoods Lawyers (Fourth Defendant) Moray & Agnew (Fifth Defendant) - 16 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HISLOP J 14 May 2009 20039/07 WU v CARTER JUDGMENT Introduction 1 The plaintiff was the tenant of a second floor home unit at 6/6-8 St George Parade, Hurstville, New South Wales. On 7 December 2003 she sustained significant injuries when a wooden railing on the unit balcony gave way causing her to fall to the ground, a distance, she estimated, of 7-8 metres. 2 The plaintiff brought proceedings to recover damages for her injuries from the owners of the unit (first and second defendants), the real estate agents employed by the first defendant to manage the unit, (third defendant) the body corporate (fourth defendant) and the managing agent retained by the body corporate (fifth defendant). 3 The proceedings brought by the plaintiff against the first, second and fifth defendants, were resolved by consent verdicts and judgments in favour of those defendants. The cross-claims between the third defendant and the first and second defendants, and the fourth defendant's cross-claim against the first and second defendants, were dismissed by consent. Judgments were entered in favour of the fifth defendant on cross-claims against it, also by consent. A consent judgment was entered for the plaintiff against the fourth defendant for $775,000.00 plus costs. 4 There remained for determination, after the settlements above noted, a cross-claim by the fourth defendant against the third defendant seeking indemnity or contribution pursuant to s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 and the proceedings by the plaintiff against the third defendant. Background 5 I accept the following evidence which was either agreed, the subject of documentary proof, or not the subject of significant dispute. (a) The strata plan was registered on 15 August 1972. The unit block was completed about that time. (b) The first and second defendants purchased unit 6 on 19 April 1989. (c) The premises comprised a brick home unit block, consisting of three residential levels above ground floor garages. Unit 6 was situated on the middle residential level, at the rear of the block. (d) The balcony was bordered by a brick balustrade 600mm high. Attached to the top of the balustrade was a timber railing. The railing which gave way ("the railing") was placed latitudinally to the building and was approximately 600mm long, 140mm deep and 32mm thick. It was attached to the brick wall of the unit by an L shaped bracket held by a single masonry bolt with two wood screws going through the bracket into the under side of the timber. The other end of the railing was mitred and formed a right angle with the mitred end of the longitudinal railing. That join was secured by six nails, three driven into the outer face of the railing and the other three driven into the longitudinal railing. The nails were 2.5mm in diameter and 30mm long. They penetrated about 15mm into the end grain of the other rail. The total height of the balustrade and railing was 940mm. (e) The first defendant entered into a management agency agreement with the third defendant on 8 August 1994. The agreement provided that all inspections by prospective lessees were to be carried out in the company of the third defendant, the third defendant had authority to lease the premises, sign tenancy agreements and authorise certain repairs. The owners gave the third defendant a general indemnity. (f) The third defendant inspected the condition of the unit when new tenants were entering into a residential tenancy agreement and once yearly. The records of a number of those inspections were admitted into evidence. They revealed the following: (i) On 25 August 1994 the third defendant inspected the premises and recorded that the condition of the balcony was "clean", "undamaged" and "working" : Exhibit D. (ii) On 7 June 1996 the third defendant inspected the premises and recorded that the condition of the balcony was "clean", "undamaged" and "working" . A handwritten notation was entered that the balcony was "clean" : Exhibit E. (iii) On 3 January 1997 the third defendant undertook an "Annual Condition Report" and reported that apart from some minor matters the "unit was in satisfactory condition" : Exhibit F. (iv) On 26 July 1997 the third defendant inspected the premises and recorded that the balcony was "clean" and "undamaged" : Exhibit G. (v) About 14 April 1998 the third defendant carried out an annual inspection of the premises: Exhibit H. It did not refer to the balcony. (vi) On 18 November 1999 the third defendant inspected the premises and recorded that the condition of the balcony was "clean" : Exhibit J. (vii) On 16 September 2000 the third defendant produced an Annual Condition Report: Exhibit K. It did not refer to the balcony. (g) The plaintiff, her husband and a friend (Wei Liu) inspected unit 6 in company with an employee of the third defendant before the residential tenancy agreement was signed. (h) The plaintiff signed the residential tenancy agreement for unit 6 on 8 January 2003. Under the residential tenancy agreement the landlord agreed to make sure that the premises were reasonably fit to live in and to keep the premises in reasonable repair; the landlord and tenant agreed that the condition report set out in part 2 of the agreement formed part of the agreement; the tenant agreed to notify the landlord as soon as practicable of any damage to the premises and at the end of the agreement to leave the premises as nearly as possible in the same condition (fair wear and tear accepted) as set out in the condition report. (i) A residential tenancy agreement condition report completed by the third defendant was handed to the plaintiff at the time of signing the agreement. The third defendant had noted on the report that the balcony was then clean, undamaged and working. The plaintiff was not present when the document was completed by the third defendant and there were no written comments by her on that document. (j) The condition report was required to be included in the residential tenancy agreement by s8(4) of the Residential Tenancies Act 1987 and to be completed by or on behalf of the landlord at or before the time the agreement was given to the tenant for signing – Residential Tenancies (Residential Premises) Regulation 1995. (k) The plaintiff took up residence in the unit on 9 January 2003 and she, her husband and Wei Liu resided at the unit until the plaintiff sustained the subject injury. Another friend lived there for part of that period. (l) A consulting engineer retained by the plaintiff attended at the site on 9 December 2003. He observed the equivalent join on the unit above had been repaired with an L shaped steel strap on the outside of the end joint and that the balcony railing of the unit below had a visible separation of the timber joint and a partial failure of the fixing to the brick work. He also observed that the railing which had fallen was on the balcony of the downstairs unit leaning against the corresponding railing. (m) The plaintiff gave notice of intention to vacate the unit on 12 December 2003. It was in the course of cleaning the unit preparatory to moving out that the injury occurred. The lay evidence for the fourth defendant 6 The plaintiff's evidence was, in short, as follows: (a) She was born in 1977 in China. She contacted the third defendant maybe after seeing a for lease sign outside the unit block. An agent of the third defendant showed her, her husband and Wei Liu over the unit. The inspection took about 10 minutes, during the course of which the agent opened the door to the balcony and said "this is the balcony". The plaintiff did not step onto the balcony being more interested in the living room. (b) After residing in the unit for a while the plaintiff, her husband and Wei Liu inspected it and made a list of faults ("Exhibit N") which they gave to the third defendant. The plaintiff understood that it was "the rule to go around the various parts of the unit and note down things"…"they gave us a check list and we need to double check." The plaintiff was concerned to tell the third defendant all of the things she thought were wrong with the unit as she did not wish to forfeit any part of the residential bond as had occurred in relation to a previous rental. Exhibit N does not refer to any damage to, or defect in, the balcony. The plaintiff was not expressly asked by either party whether she had inspected the balcony when preparing Exhibit N. (c) The plaintiff seldom used the balcony. One or two months after moving in she observed "a little gap between the timbers", at the joinder of the railing and the longitudinal railing. She estimated the gap as being 2 to 3cm wide. She did not tell the third defendant about it as the third defendant had not fixed some other problems which had been reported. (d) On the day of injury she was dropping material from the balcony to her husband who was standing on the ground below catching the items as they fell. She dropped an empty plastic milk crate to her husband. She described what then happened as follows "I hold the rail to see my husband got it or not, then the rail gave way and I just fall down". She said that she had just put her two hands on the railing and did not put any weight down. No part of the front of her body touched the timber nor did the crate. When the rail gave way she lost her balance and fell to the ground. 7 The plaintiff's husband gave evidence which added little of significance to that of the plaintiff. He said he very seldom used the balcony; he noticed a "crack" between the two timbers after a couple of months residing at the premises. He was asked no questions by either party in relation to the inspection of the property giving rise to Exhibit N. 8 Wei Liu gave evidence that he, on occasions, used the balcony to dry his clothing and to smoke. He said he used the balcony one or two times per week. Neither party asked him any questions as to his observations in respect of the railing either generally or when preparing Exhibit N. The expert evidence for the fourth defendant 9 Mr Buckland, a consulting engineer, was called by the fourth defendant. He gave evidence that; (a) the railing failed by detaching from its connections at a loading well below its required design load thereby indicating that the railing was in a substandard and dangerous condition at that time. (b) That condition was the result of the deterioration of the end connections of the balcony railing and would have been gradual. It was an inevitable result of poor construction practice when originally installing the railing. It was not possible to form an adequate mitred joint by merely relying on nails to secure the railing in the manner attempted. The screw connection between the timber rail and the L shaped bracket attached to the brick work was ill devised and not adequate. (c) There was deterioration evident in the mitred joint end fixing of the railing. That involved the splitting of the abutting timber rail and the rusting of the nails used to secure the joint which, given the extensive amount of rusting, was clearly of a long term nature. (d) The soundness of the balcony railing could have been tested at any time by applying measured loads of the value specified in the building code. Short of such exact and involved testing a simple and practical "lay" test for the soundness of the railing would have been to grip the top of the rail firmly with two hands and shake it vigorously. Any resulting undue movement in the railing and deformation or separation of the mountings would be an indication that the railing was not sound. (e) Another practical "lay" test would have been to strike the inner face of the rail firmly near the end points with the heel of the hand, again looking out for undue movement and/or deformation. (f) The railing would have failed if a proper inspection had been made and such simple testing had been carried out, well prior to the date of the plaintiff's accident. (g) In cross-examination Mr Buckland agreed that he did not know whether or not there was a visible gap prior to the accident taking place, the fact that there was a gap between the railings on the unit below did not mean that there was a gap in the join of the railing which gave way, he did not know whether the railing had fallen onto the balcony of the unit below or had been placed there nor did he know if the falling railing was responsible for the gap in the railing on the downstairs unit. He agreed that the railing could have caused such a gap if it had struck the downstairs railing. (h) He agreed that evidence of splitting in timber does not automatically result in the timber being inadequate. It depended on the position of the splitting and its extent. That was something that one with some experience needed to consider in determining whether or not timber exhibiting signs of splitting was inadequate or not. (i) Mr Buckland agreed he did not know what the condition of the railing was in January 2003. However he said he would be surprised if the timber was any different and the condition of the railing was any different in January 2003. He didn't know if anything had occurred to the railing in the months after January 2003 and prior to 7 December 2003. The evidence for the third defendant 10 The only witness called by the third defendant was Ms Andreadis who was the third defendant's property manager at the relevant time. She gave evidence: (a) She was 20 years old at that time and had no qualifications or experience as a builder, architect or engineer. (b) Her role as a property manager was to carry out routine inspections, ingoing and outgoing inspections, tribunals, showing properties, rent reviews, repairs. When carrying out an inspection she had to go around the premises and check that everything was in good order. If there were any repairs that needed to be done she had to record that on a document which she had with her during the inspection. (c) She said she did an inspection prior to the renting of the property to the plaintiff. She said that she checked that everything was intact and there were no structural problems. The plaintiff was not with her during the inspection. (d) She said as part of her duties she walked onto the balcony and checked it to see if it was intact by which she meant that the brackets were attached to the wall and "we used to shake the balcony to see that it was in good order." She shook the balcony on this occasion and formed the opinion that the balcony was in good condition and "everything was intact". She ticked the report form to that effect. (e) She said in cross-examination that she had gone to the edge, held it and checked to see that it was "in good tact" because that was "our normal procedure that we were taught to do." She did it to check that it was in good order to see that it was safe for the tenants to move in. She said it was a safety issue and that if the balcony rail was defective "we wouldn't rent the property until it was fixed." She was asked detailed questions in cross-examination as to her observations at the time. She had difficulty in answering many of these questions. 11 The third defendant had qualified a consulting engineer but did not call him to give evidence. Determination 12 The fourth defendant seeks indemnity or contribution from the third defendant pursuant to the provisions of the Law Reform (Miscellaneous Provisions) Act 1946 which provides "where damage is suffered by any person as a result of a tort (whether a crime or not) - "… (c) any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued had been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be identified in respect of the liability in respect of which the contribution is sought." 13 The third defendant conceded that "to the extent that it can be shown that someone had a liability to the plaintiff in respect of the accident, the settlement which is recorded in the first of the two sets of orders that your Honour made today is an appropriate settlement." The first of the two sets of orders was the judgment in favour of the plaintiff against the fourth defendant. 14 The initial question for determination was whether a liability of the third defendant to the plaintiff for the damage conceded by the fourth defendant could be established. If this was established there was a further question as to the apportionment of responsibility between the third and fourth defendants. 15 The third defendant submitted that it did not owe a duty of care to the plaintiff. Alternatively, if a duty was owed, there was no breach of that duty as the evidence did not establish the railing was in a defective condition at the time of the inspection or that, if it was, there was any sign which ought to have made the third defendant aware of the defect. 16 It was common ground that the High Court in Jones v Bartlett (2000) 205 CLR 166 established a landlord may be liable to a tenant in respect of defects in rented property provided the landlord was aware of, or ought to have been aware of, the defect at the time the lease was entered into – see also Sakoua v Williams (2005) 64 NSWLR 588 at [3] and [8]. 17 The fourth defendant submitted that, as a result of the agreement between the first and third defendants, the third defendant was in the same position as the first and second defendants in terms of the duty owed to the plaintiff. The third defendant submitted the third defendant was not the landlord. It was the agent of the landlord. As such it owed duties to the landlord but those duties did not extend to the plaintiff. 18 In State of NSW v Watton (1998) NSW Conv R 55-885 the Court of Appeal held that there was an obligation to inspect residential premises before the commencement of a tenancy which obligation arose under statute implied from the requirement to complete and provide the tenant with a condition report at the start of the tenancy. Pursuant to the Residential Tenancy (Residential Premises) Regulations there was a duty to carry out the inspection with due care. Fitzgerald AJA who was a member of the court said: "The report relating to the condition of residential premises must be completed by or on behalf of the landlord and given to the tenant at or before the time the residential tenancy agreement is executed by the landlord. These statutory regulatory provisions necessarily import a requirement that residential premises be inspected with reasonable care prior to letting to a new tenant. Breach of that obligation is evidence of negligence." 19 In my opinion the third defendant undertook the obligation to inspect and complete the condition report and by so doing became subject to a duty of care to the plaintiff to warn the plaintiff and/or the landlord of any dangerous defects in the premises of which it was, or ought to have been aware. 20 Such a duty was acknowledged by Miss Andreadis when she observed that the condition of the railing was obviously a safety issue and that if the railing was defective "we wouldn't rent the property" until it was fixed. 21 I do not accept that it has been proven that the gap at the join of the railings was present at the commencement of the tenancy. There is no direct evidence that anyone observed a gap at that time, notwithstanding that the premises were inspected by the plaintiff, her husband and Mr Liu and Miss Andreadis for defects and damage. Mr Buckland was unable to say that the gap would have been present at that time. 22 I do not accept that the evidence of splitting in the timber was, by itself, such as to put a lay person on notice that the railing was dangerously defective nor do I accept that the condition of the bracket attaching the railing to the wall of the unit was such as to put the third defendant on notice that it was defective. 23 Nevertheless I find the railing, on the balance of probabilities, was in a dangerously defective condition at the time of the commencement of the tenancy for the following reasons: (a) I accept the plaintiff's evidence as to the circumstances of the railing giving way without any weight being placed upon it other than the plaintiff's hands. I infer from that evidence that at that time the railing was in an extremely defective condition. I also accept the evidence of Mr Buckland that the condition of the railing was due to deterioration over a long period of time. (b) I accept the evidence of the plaintiff and her husband that there was a two to three centimetre gap at the join between the railing and the longitudinal railing and this was present no later than one or two months after the commencement of the tenancy. I find that the existence of the gap was a sign of the advanced deterioration of the join of the railings. (c) I accept the evidence of Mr Buckland that the railing was in a substandard and dangerous condition at the time it gave way and that he would be surprised if the condition of the railing was any different in January 2003. In my opinion there was no evidence that the railing had sustained accidental damage during the period of the plaintiff's tenancy. 24 In my opinion the age of the railing was such that reasonable care required that a simple lay test such as described by Mr Buckland should have been performed on the railing at the time of the inspection prior to the commencement of the plaintiff's tenancy. The third defendant apparently had instructed Ms Andreadis to perform an appropriate lay test. 25 Having regard to the condition of the railing at the time of the fall, the small amount of pressure on the railing when it gave way, the presence of the gap at the join one or two months after the commencement of the tenancy, the existence of splitting and the other matters referred to in [23] I consider it more likely than not that if an appropriate "lay test" for the soundness of the railing had been properly carried out at the commencement of the tenancy it would have resulted in undue movement in the railing or deformation or separation of the mountings such as to indicate that the railing was unsound. 26 In my opinion it is more likely than not that the test which Miss Andreadis said she carried out was either not performed on the railing or not adequately performed. 27 I therefore conclude that the railing was dangerously defective at the time of the commencement of the tenancy, that the third defendant ought to have been aware of the condition of the railing if an appropriate lay test had been properly carried out by it and that the third defendant was negligent in either not performing or not adequately performing an appropriate lay test. 28 I infer that if the third defendant had informed the owners of the defective condition of the railing they, in turn, would have informed the fourth defendant of the problem and the fourth defendant would have rectified it in time to avert the injury to the plaintiff. Apportionment 29 In determining any apportionment under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 it is "the whole conduct of each negligent party in relation to the circumstances of the accident which must be subject to comparative examination…there must be a comparison both of culpability, that is, of the degree of departure from the standard of care of the reasonable man, and of the relative importance of the acts of the parties in causing the damage…the other tortfeasors' responsibility for the damages are to be taken into account and given weight to "as a fundamental element" in making the finding by the court of what is just and equitable" – James Hardie & Co Pty Ltd v Roberts (1999) 47 NSWLR 425 at [89] and [90]. 30 The fourth defendant submitted that a just and equitable apportionment of responsibility for the injury between the third and fourth defendants was 50% each. The third defendant submitted that its liability, if it had any at all, was of a minor degree and the apportionment should be in the order of 10 to 15%. 31 Section 62 of the Strata Schemes Management Act 1996 provides: (1) An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation. (2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation. 32 In my opinion the railing formed part of the common property which the fourth defendant had a continuing duty to maintain and keep in a state of good and serviceable repair pursuant to section 62 of the Strata Schemes Management Act 1996. The primary duty in respect of the condition of the balcony railing rested with the fourth defendant. It is apparent it took no steps to make the railing safe and thereby avert injury to the plaintiff. In my opinion its culpability in failing to repair the railing was of a much higher degree than the failure by the third defendant to carry out an adequate inspection of the premises at the commencement of the plaintiff's tenancy. In my opinion the appropriate apportionment is 75% to the fourth defendant and 25% to the third defendant. 33 As I understand it the effect of my findings is that the orders in [34] are appropriate. However I grant leave to the parties to apply within three days should my orders not accurately represent the agreement of the parties in this regard. Orders 34 I make the following orders: (1) Verdict and judgment for the fourth defendant on its cross-claim against the third defendant in the sum of $193,750. (2) The third defendant is to pay the fourth defendant's costs of its cross-claim against the third defendant. (3) By consent the proceedings by the plaintiff against the third defendant are dismissed with no order as to costs between the plaintiff and the third defendant. The fourth defendant is to pay 75% of the third defendant's costs of defending those proceedings. Addendum 35 Having heard further submissions from the third and fourth defendants as to the form of the orders in this matter: (a) I confirm orders [34] (1), (2) and so much of (3) as is in the following terms: "(3) By consent the proceedings by the plaintiff against the third defendant are dismissed"; (b) I vacate the balance of order (3) and in lieu thereof, order: "(4) The third defendant and the fourth defendant are to bear their own costs of the plaintiff's proceedings"; (c) I vary order (1) by adding at the end of the order the following words: "… and 25% of the plaintiff's costs". 36 The orders of the Court therefore are: (1) Verdict and judgment for the fourth defendant on its cross-claim against the third defendant in the sum of $193,750 and 25% of the plaintiff's costs; (2) The third defendant is to pay the fourth defendant's costs of its cross-claim against the third defendant; (3) By consent the proceedings by the plaintiff against the third defendant are dismissed; (4) The third defendant and the fourth defendant are to bear their own costs of the plaintiff's proceedings. ********** 30/10/2009 - Amendment to orders following submissions - Paragraph(s) Coversheet, [35], [36] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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