Houghton v Potts [2022] NSWSC 1778: Circumnavigating the Civil Liability Act?

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By Thomas Monnox, Law Clerk

Introduction

On 8 August 2014, Darren and Joanne Houghton leased premises at Fairlight, a beach suburb of northern Sydney.

On 28 December 2014, Mr Houghton and Bethany Long fell off the balcony of the premises. As a result, Mr Houghton sustained injuries rendering him partially quadriplegic. Meanwhile, Mrs Houghton suffered nervous shock.

The Houghtons sued the lessors in negligence and breach of contract, asserting that the balcony wall did not meet the regulated height and that this caused the accident. However, Chen J disagreed and gave judgement for the lessors.

Findings of fact

According to Mr Houghton, the accident occurred because of a mishap when lifting Ms Long away from the balcony wall. By contrast, Ms Long recalls Mr Houghton losing his balance while jokingly holding her over the balcony wall.

The court preferred Ms Long’s version of the events and further accepted expert evidence that Mr Houghton was severely impaired physically, mentally and behaviourally by alcohol.

Liability

Based on how Chen J found the accident to have occurred, the Houghtons’ claims in negligence and breach of contract were virtually doomed to failure. Nevertheless, Chen J proceeded to make several important observations with regard to liability in this case.

Negligence

In respect of negligence, Chen J reaffirmed the duty of care owed by lessors to lessees (and other users) as one ‘to take reasonable care to avoid foreseeable risk of injury’ (Australian Safeway Stores Pty Limited v Zaluzna (1987) 162 CLR 479). His Honour noted, however, that this duty is ‘delimited by the expectation that users will exercise reasonable care for their own safety’ (Patrick Stevedores Operations (No 2) Pty Ltd v Hennessey [2015] NSWCA 253).

Chen J also reaffirmed that, pursuant to section 5B(1) of the Civil Liability Act 2002 (NSW) (‘the CLA’), the plaintiff must prove the defendant knew, or ought to have known, of the risk of harm in order to establish breach of duty. In the present case, the Houghtons failed to do this. Although the balcony wall did not meet the regulated height, nothing about the balcony wall suggested to the lessors that it was defective. Furthermore, a general recommendation to conduct a building inspection for the purpose of assessing latent structural inadequacies was insufficient to establish the kind of knowledge required by section 5B(1).

However, on the facts established, Mr Houghton was considered solely responsible for the accident. Accordingly, causation pursuant to section 5D(1) of the CLA could not be established.

In any event, because the accident was unlikely to have occurred had Mr Houghton not been intoxicated, the intoxication defence set out by section 50 of the CLA would have prevented the recovery of damages.

Breach of contract

In addition to negligence, the Houghtons argued that the terms of their tenancy agreement entitled them to sue for damages independently of provisions contained within Part 1A of the CLA (including sections 5B(1) and 5D(1) discussed above). This argument was based on the language of section 5A(1), which states that Part 1A ‘applies to any claim for damages for harm resulting from negligence’.

Without going into detail as to the terms of the tenancy agreement, Chen J dismissed this argument on the basis that ‘negligence’ is defined as a ‘failure to exercise reasonable care and skill’. It follows that the word ‘negligence’ is ‘not a reference to the tort but to a category of conduct, which may be an element of a cause of action in tort, in contract, under statute or otherwise’ (Paul v Cooke (2013) 85 NSWLR 167). Part 1A therefore applies irrespective of how a cause of action has been formulated.

The same can be said for Part 6 of the CLA (which includes section 50 discussed above). This is because section 47(1) states that Part 6 ‘applies to civil liability of any kind for personal injury damages’.

Implications

Overall, Houghton v Potts [2022] NSWSC 1778 reaffirms well-established principles surrounding negligence and, to an extent, breach of contract. Most significantly, however, the decision clarifies that Parts 1A and 6 of the CLA apply irrespective of how a cause of action is formulated.

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