A hot topic: Who is responsible to repair accidental fire damage in a rental property? – Afluk v The New South Wales Land and Housing Corporation [2024] NSWDC 521

Introduction

The writers acted for the successful defendant in the matter of Afluk v The New South Wales Land and Housing Corporation [2024] NSWDC 521 where the NSW District Court recently held that the plaintiff owner/lessor had failed to establish the cause of the fire which damaged his head-leased property, and thereby could not establish the lessee’s obligation to repair the premises pursuant to section 51(3)(b) of the Residential Tenancies Act (RTA). This is the first reported decision to consider this section of the act in NSW and raised novel issues of statutory interpretation.

Background

The plaintiff was the owner of a property at Casula which had been leased to the New South Wales Land and Housing Corporation (the Corporation). At the material time, the premises had been sub-let by the Corporation to a third-party tenant.

Unfortunately, a fire occurred in the property on 8 October 2018 resulting from an unidentified electrical fault which resulted in significant loss and damage to the premises, which was a near total loss.

The plaintiff commenced proceedings in the District Court alleging that the fire was caused by the tenant’s incorrect use of a double power point and power cord, and/or a faulty mobile phone charger, as well for failing to maintain smoke detectors within the premises. The plaintiff plead that as a result of the tenant’s negligence, or its own, the Corporation was liable to rectify the damage to the premises.

Further, or in the alternative, the plaintiff plead that the Corporation had a strict liability to repair the premises even absent a finding of negligence. The source of this obligation was an interpretation of section 51(3)(b) of the RTA, as also reflected within the lease agreement between the parties, which the plaintiff said obliged the Corporation to ensure that the premises were returned to him “as nearly as possible in the same condition [as when the lease agreement was entered into]”.

Decision

In weighing up the competing expert opinions, Justice Cole found that the plaintiff had not established that the plaintiff had provided that either the tenant or the Corporation was negligent noting:

“[…] the fire arose either from a fault inside the charge or a fault inside the cable attached to the charger. I find that neither the fault inside the charger nor the fault inside the cable would have been apparent to the user of the charger and the cable.

…As to the smoke detector, it was damaged by the fire. I accept Mr Graham’s evidence that there is no reason to doubt that it was working immediately prior to being damaged by the fire. The fact that a neighbour said that they did not hear it or did not notice it does not prove that it did not go off before it was damaged”.

Absent a finding of negligence, the plaintiff’s claim turned upon the novel interpretation of section 51(3)(b) of the RTA that was contended by the plaintiff.

It was accepted that there had been no earlier decisions which had considered the interpretation of the section, and that the reading speech to the act did not assist in how the section was to be applied.

The Corporation contended that the plain and ordinary meaning of the words indicated that where damage is caused by a tenant, aside from normal wear and tear, then an obligation arose under the RTA for the lessee to return the premises to the lessor with such damage being rectified. However, the obligation did not go so far as to encompass damage which was not caused by the negligence of the tenant (or the lessee). This was the logical reading of the clause which avoided the lessee being responsible for loss caused by incidents (such as weather or ‘acts of god’) which are completely outside of its control.

Ultimately, Her Honour agreed with the Corporation’s submissions.

In support, Her Honour referred to the decision of Cooper, Cooper and Margon v Westpac General Insurance Limited [2007] ACTCA 20 which considered a lease agreement in broadly similar terms, where the ACT Court of Appeal  held that the obligation to repair the damage caused by a fire fell upon the landlord, noting that the fire was not caused by the negligence of the tenant.  There, the Court held:

“It should also be noted that the lease was in a form prescribed by the Residential Tenancies Act 1997 for use throughout the ACT. We think it is most unlikely that this statutory form of lease was intended to make tenants liable for the rectification of any major damage caused to their lessors’ premises, irrespective of whether it had been attributable to any fault on their part.”

 

Why this case is important

The decision establishes the boundaries of the obligations of both the lessor / landlord and lessee / tenant to repair damage to a leased premises which is not caused by an act of negligence.

Landlords cannot seek to impose a strict liability on tenants to rectify damage to a premises regardless of cause, or in the absence of any negligence on the part of the tenant. The provisions of the RTA, as replicated in contractual provisions of the lease, are not intended to create such strict liability.

Devoid of any fault by the tenant, the obligation remains upon the lessor / landlord to undertake the necessary repairs if its property is damaged, and resultingly, to ensure that it has proper insurance or other arrangements in place should such an unfortunate situation arise.