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Loose Fit Pty Limited v Marshbaum [2011] NSWCA 372 30 November 2011

BACKGROUND

The New South Wales Court of Appeal has of recent times reviewed circumstances where an owner of a small suburban shopping area may still be liable for accidents even when a managing agent has been appointed (Laresu Pty Ltd v Clark).

Loose Fit (Vision Personal Training) involves the liability of a landlord to a patron of a commercial tenant due to the static state of the leased premises where there is no managing agent.

FACTS

In about 1977 there came to be constructed a small suite of rooms over two levels in Military Road, Mosman. Access to the upper floor was via a two-tier concrete staircase.

At the time of approval, the Council required the then owner to construct a handrail to assist people, if necessary, ascending or descending the stairs. The handrail would have been affixed to the vertical wall which formed the perimeter of staircase.

In 2003 when the premises were in a general state of disrepair they were sold to a couple who arranged to carry out substantial renovations including the covering of the stairs with timber and constructing a low wall along one side of the upper flight of stairs. At that time no handrail was present.

Had an application been made to the Council (as ought to have been the case) the Building Code of Australia would have compelled the installation of handrails to both levels of the staircase. Also, there was a technical imperfection between the BCA and the risers and treads of the covered stairs, although that imperfection probably
had nothing to do with the accident.

The upstairs area was from prior to 2003 generally used for a commercial gymnasium. In 2005 a franchisee to the Vision Personal Training group sought to lease the upstairs location.

A three year lease was agreed to and at the tenant’s request the owners installed a handrail on the bottom run of the staircase. Had a handrail been requested for the upper run no doubt the owner would have acceded to that request.

The only reason that the franchisee did not request that the handrail be installed on the upper run was because he, personally, being nearly 6 feet tall, did not see any special reason that it needed to be installed. Had he been 4 foot 10 like the plaintiff he may have been subjectively motivated differently.

The plaintiff became a member of the gymnasium immediately after it opened. After the end of the first year’s lease, the tenant negotiated a variation of the lease which meant that the staircase itself became part of the demised premises.

The leases, unsurprisingly reserved to the landlord the sole right to undertake structural changes including additions such as handrails on the stairs. It was during the new lease period that the accident occurred when the diminutive plaintiff stumbled and was unable to reach the top of the stud wall to correct her fall.

The plaintiff sued the gym operator in contract and in tort for failing to provide safe entry and exit to the gymnasium.

TRIAL DECISION

The plaintiff succeeded. She was awarded $433,441.

The cross-claim against the landlord failed because it was said the landlord if sued by the plaintiff would not be liable and it was the failed recovery action which was the subject of the appeal.

APPEAL RESULT

On appeal the landlord was ordered to contribute 50%.

REASONING OF COURT OF APPEAL

There was nothing material in the lease which permitted the gym operator to pursue a contract claim. Its recovery rights were solely dependent upon the landlord being liable to the plaintiff if the plaintiff had sued them.

While the High Court had adjudicated on the liability of a landlord to a tenant or a tenant’s visitor in respect of residential property, there seemed no superior court appellate decision dealing with the scope of the landlord’s liability where the premises were commercial and the visitor injured was the tenant’s invitee.

Had the lease not been changed to include the staircase, the possibility of the landlord’s risk would have been commercially obvious because the landlord had not complied with the BCA in connection with the renovations.

At the rhetorical level given the reservation to the landlord about structural attractions one might wonder why that risk was thought to evaporate because of the change in the lease.

In determining the landlord’s potential liability, the court had to consider and review the touchstone High Court cases such as Northern Sandblasting and Jones v Bartlett. Both of those cases were in connection with a residential tenancy.

Sackville JA who wrote the judgment on behalf of the court reasoned that it was false reasoning to conclude that a landlord of commercial premises only breached its duty of care to a tenant’s entrant if the entrant was injured by what had come to be perceived as a dangerous defect.

The judge reinforced that which is apparent from many past and current cases that a defendant’s potential liability had to be reviewed in the light of the statutory provisions of the Civil Liability Act which go to the imposition of a duty of care.

While the liability for injury sustained by an entrant will usually rest with the tenant in the case of commercial premises, the real exposure of the landlord will depend upon the particular circumstances of each case.

In the opinion of Sackville JA, the telling facts against the landlord were:

1. the renovations were done without any consideration of the need for Council approval;
2. the works did not comply with the BCA (no handrails);
3. the landlord therefore turned their minds away from safety requirements applicable to the renovations;
4.  it was the landlord’s conduct in failing to comply with safety standards (i.e. installation of handrails) that created the very hazard which confronted the plaintiff; and
5. the landlord reserved for itself under the lease the right to undertake building type changes.

COMMENTS

1.  While the case will be unlikely to lead to a proliferation of plaintiffs claims against landlords (unless a tenant is not insured), the result certainly stands as some reason for reviewing leases to see whether contribution can be sought by a tenant against the landlord when the accident seems to result from the static state of the premises and the landlord had reserved for itself te sole right to do things structural.
2.  The case is also a signal reminder for insurers that the existence of a commercial lease is not a firewall to prevent liability attaching for injury claims on leased property.

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