Tenants exonerated in fire

Inlet Storage Limited v United Movers Limited [2024] NZDC 6928

This case involved consideration of the provisions of the Property Law Act which exonerate tenants from liability for fire at leased premises where the landlord is insured.  The District Court took a stronger line than has been the case in previous judgments, saying that the exoneration provisions apply to bar claims for all losses that might otherwise be sued for.   Pauline Davies and Dayna Vautier acted for the successful defendant.

Background

Inlet Storage owned a commercial property in Takanini which it leased to United Movers. United used the property as a freight and storage facility for customer goods.

On 4 February 2019, the property was destroyed by fire. Inlet Storage incurred significant costs after the fire to demolish, clean-up and remove the debris of the building and its contents.

Inlet Storage sued United in negligence, voluntary waste and trespass, alleging that the fire was caused by United’s employee/s carelessly dropping a cigarette onto the concrete floor, which then blew against cardboard boxes.  Its claim was for its assessment of the proportionate cost of cleaning up the debris from United’s property and that of United’s customers.

The Court held that Inlet had failed to prove the cause of the fire, which disposed of the negligence and waste causes of action; and the trespass cause of action failed on the facts. Nevertheless the Court went on to consider whether, in any event, the Property Law Act prevented Inlet from recovering from United, in any event.

Discussion/Decision

Sections 268 and 269 of the Property Law Act exonerate tenants of property from liability for damage caused by a range of perils, including fire and flood, where the landlord has an insurance policy that covers the causative peril.  The issue here was whether those provisions applied to the costs incurred in the general clean-up of the property, to the extent that the cost related to the removal of debris of the tenant’s goods.

The judge reviewed the case law on sections 268 and 269, and the Law Commission report which had led to them being enacted.  She concluded that their effect is to exonerate tenants from liability in every situation where an action might previously have been brought, including claims for clean-up costs related to the tenant’s property.  

Comment (Pauline Davies)

This judgment followed an earlier one in the same case, where the Court had struck out Inlet’s claim for the cost of cleaning up fire and asbestos debris which had affected the general neighbourhood, rather than just the site itself, also in reliance on the Property Law Act.  Neither judge was swayed by the evidence that Inlet was badly under-insured in relation to the clean-up costs due to an asbestos sublimit.  The fact that Inlet held a policy which covered fire, was sufficient to bring the Property Law Act into play.

Previous cases have discussed the Act only in the context of the particular facts in issue, so the broader approach taken in the Inlet judgment is potentially a significant advance in the law.