8 Share Housing

This chapter is Contributed by staff of Tenancy WA and current to December 2018

8.1.1.2 Liability between co-tenants

Notes on Joint Liability Issues in Residential Tenancies

Where there are multiple tenants on the Residential Tenancy Agreement, and one of them breaches the agreement, what is the liability of the others?

Joint liability

"The common law presumption is that a promise by two or more is made jointly. However, the question is one of intention which is to be determined by construction of the language used, and in the case of ambiguity, by reference to the interests and relations of the parties."(1)

If the lease agreement says nothing (as the prescribed form does), the tenants are presumed to be "jointly liable".(2) That means that the lessor must sue all of the tenants together. If the lessor sues only some of the tenants, those sued are entitled to insist on a stay in proceedings until the remaining tenants are joined as parties to the action. Although jointly liable tenants must all be sued together, a judgment against "jointly liable" tenants may be enforced against whichever tenant the lessor chooses.

If that leads to one tenant paying the debts of the other jointly liable tenant(s), that tenant may recover those amounts from the other jointly liable tenant(s) – s 17A of the RT Act.(3)

17A. Disputes between tenants

(1) Where 2 or more tenants under a residential tenancy agreement are jointly liable under the agreement to pay an amount to the lessor and one of the tenants (the first tenant) pays another tenant’s portion of that amount, the first tenant may apply to a competent court for an order that the other tenant pay to the first tenant the other tenant’s portion.

(2) The court hearing the application may —

(a) make the order referred to in subsection (1); and

(b) order the payment of compensation to the first tenant by the other tenant for loss or injury, other than personal injury, caused by a failure by the other tenant to pay that tenant’s portion of the amount referred to in subsection (1); and

(c) make such ancillary or incidental order as the court considers appropriate.

What if the lessor sues only some of the tenants, and those tenants do not insist on the remaining tenants being joined? In that case, the lessor may obtain judgment against the tenants that he sues, but if he later tries to sue the remaining tenants, they may insist on the previously sued tenants being joined as parties. The lessor will not be able to join them as parties because he has already recovered a judgment against them in the same cause of action (issue estoppel or res judicata would apply), and so would not be able to sue the remaining tenants.(Walker v Bowry)(4)

Joint and Several Liability

Residential Tenancy Agreements that are drawn up by REAs usually contain a term imposing "joint and several liability".(5) In this case, the lessor need not sue all the tenants jointly, but may sue any of the tenants separately for the full amount.

Several Liability

This is not common in Residential Tenancy Agreements (because lessors or their agents usually draw up the agreements, and for obvious reasons prefer tenants to be either jointly or jointly and severally liable). A several agreement would have to make it clear that it imposes a separate obligation on each tenant (e.g. it may say that the rent is $200 per week, paid severally by tenants A and B, and that would mean that tenant A had to pay $200 p.w. and tenant B also had to pay $200 per week, making a total to the lessor of $400 per week). Tenants who are severally liable are not responsible for each other's promises.

Combinations of liability in the same contract

One contract can contain any combination of joint, joint and several, and purely several liabilities:

"Joint, joint and several, and purely several liability in the same transaction

It is possible for A, B and C to contract jointly as between A and B and jointly and severally as between them on the one hand and C on the other [footnote omitted]. It is also possible for some promises to be joint and other promises in the same contract to be purely several."(6)

So it could be the case, for example, that tenants in a share house are severally liable for the rent, whilst being jointly liable for keeping the common areas in a reasonable state of cleanliness.

Examples:

1. Tenants A and B in a relationship both sign the same fixed term agreement for 12 months. After 6 months they break up, and Tenant A moves out. The tenants pay half the rent each, even though only Tenant B remains living in the premises. Tenant B pays his share of the rent for a while, but then falls into arrears and stops paying entirely.

If the tenants are jointly and severally liable, the lessor can choose to sue Tenant A for the whole amount (or Tenant B for that matter, or both Tenant A and Tenant B jointly). If the tenants are jointly liable, the lessor must sue them jointly, but can choose to enforce the judgment against whomever she chooses. Tenant A could therefore end up paying for Tenant B's default, but could bring a s 17A claim against Tenant B.

1. Three tenants sign the same residential tenancy agreement and live together in a share house. One of them negligently drives their car into the side of the garage of the rented premises, causing significant damage. The other two tenants are on holiday in Bali at the time. If the tenants are jointly, or jointly and severally liable, any of them could end up paying for the damaged garage.

Whether the tenants are jointly liable, or jointly and severally liable, if one who did not damage the garage has the judgment enforced against him, he can bring a s 17A claim against the one who did. Note that the Limitation Period for claiming contribution is 6 years running from the date that the tenant who did not damage the garage actually paid the damages (Douglas v Scanlan [2010] WADC 126) – not from the date of any judgment given against him).

1. Four tenants, A, B, C and D sign the same Residential Tenancy Agreement in respect of a 3 bedroom house which includes the following clauses:

• Rent shall be payable as follows: o A and B to pay $250 per week o C to pay $100 per week o D to pay $75 per week(7)
• […] the tenants must leave the residential premises as closely as possible in the same condition, fair wear and tear excepted, as at the commencement of the tenancy
• There is no clause imposing joint and several liability on the tenants.

At the end of the tenancy, A and B are in rent arrears of $2500, and the lounge door has a large hole in it from C's negligent act.

A and B are jointly liable for rent of $250 per week. The lessor must sue A and B jointly for the rent arrears, but can enforce the judgment against either A or B (or both). The lessor cannot sue C or D for A and B's rent arrears, because A and B, C and D are only severally liable for their respective rents.

A, B, C and D are very likely to be jointly liable for the breach of the clause that required them to leave the premises in as closely as possible the same condition [etc.]. The lessor must sue them jointly, but can enforce the entire judgment against only one of them, if he so chooses.

Joint and Several Liability Presumed Where There is a Covenant in a Deed

S 50 of the Property Law Act 1969 (WA)(8)

"Covenants to be joint and several

Where under a covenant whether express or implied under this or any other Act more persons than one are covenantors, the covenant shall unless a contrary intention is expressed be deemed to bind all the covenantors jointly and each of them severally."

This only affects covenants, which are "promise[s] under seal, although in general legal parlance it is used to denote any promise, whether contained in a deed or not" David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at paragraph 18 (citations omitted). In Residential Tenancies the only agreements that I have seen made as deeds are those that fall under the Residential Tenancy Agreement in the prescribed form exception in r. 5 AB of the Residential Tenancies Regulations 1989, where the premises are ones to which a "housing management agreement applies". In these cases, liability will be joint and several, unless the agreement says otherwise.

Death of a jointly liable tenant

If one jointly liable tenant dies, her obligations under the Residential Tenancy Agreement cease and the whole obligation passes to the surviving jointly liable tenant(s) – not to the dead tenant's estate.(9)

Death of a jointly and severally liable tenant

If one jointly and severally liable tenant dies, joint liability ends, but his several liability passes to his estate.(10)

The startling implication of this is that the estate of the deceased tenant will still be liable for paying (at least) the rent until the end of a fixed term, at least if the remaining tenant(s) does not pay it.(11)

Statutes affecting joint liability issues

Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA)

3A. Claims etc. founded on etc. negligence, construction of references to

In sections 4 and 6 –

(a) a reference to a claim or action founded on or resulting from negligence includes a reference to a claim or action founded on or resulting from a breach of a contractual duty of care that is concurrent with and coextensive with a duty of care in tort; and

(b) references to negligence have a corresponding meaning so far as they relate to a defendant.

This section only applies to sections 4 and 6. Section 6 concerns proceedings under the Workers' Compensation and Injury Management Act 1981. Section 4 only affects claims involving contributory negligence by the plaintiff, and says that contributory negligence will not operate as a defence, but the court may reduce the damages "to such extent as the court thinks just in accordance with the degree of negligence attributable to the plaintiff".

Part 3- Contribution between tortfeasors

This part only applies to "damage suffered as the result of a tort", and section 3A does not apply to it, so it would only apply if (which is very unlikely in a residential tenancy matter) the tenant was sued in tort, rather than for breach of the term implied by section 38 of the RT Act (not to negligently or intentionally cause damage). In any event it is also "Subject to Part 1F of the Civil Liability Act 2002.

Civil Liability Act 2002 (WA)

Part 1F — Proportionate liability

5AI. Terms used

In this Part —

apportionable claim means —

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care (but not including any claim arising out of personal injury); or

(b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 2010 based on misleading or deceptive conduct;

concurrent wrongdoer, in relation to a claim, means a person who is one of 2 or more persons whose act or omission caused, independently of each other or jointly, the damage or loss that is the subject of the claim

5AJ. Application of Part

(1) For the purpose of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

(2) This Part does not apply —

(a) to a claim for damages of a class that is excluded from the operation of this Part by section 3A; or

(b) to the extent that its operation is excluded, modified or restricted in accordance with section 4A. […]

4A. Limited contracting out

(1) A written agreement signed by the parties to it may contain an express provision by which a provision of Part 1A, 1B, 1C, 1CA, 1D, 1E or 1F is excluded, modified or restricted and this Act does not limit or otherwise affect the operation of that express provision.

(2) Subsection (1) applies to any provision of this Act referred to in that subsection even if the provision applies to liability in contract.

5AK. Proportionate liability for apportionable claims

(1) In any proceedings involving an apportionable claim —

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss; and

(b) the court may give judgment against the defendant for not more than that amount.

The relevance of Part 1F of the Civil Liability Act 2002 is that, in some circumstances, it may just be arguable that, where two or more tenants are jointly liable under a Residential Tenancy Agreement, and one of the tenants causes "economic loss or damage to property […] arising from a failure to take reasonable care", then the liability of the other tenant(s) will be zero. This is what occurred in the Victorian tribunal decision of Andreasen v Harriss(12). In that case, three tenants were jointly and severally liable under a Residential Tenancy Agreement. Two of the tenants moved out after the third tenant became violent towards them. After they had moved out, the third tenant caused extensive damage to the premises. At the time the tenants moved out, the rent was up to date, but no further rent was paid by any of the tenants until the termination of the tenancy. The equivalent of the Civil Liability Act 2002 (WA) in Victoria is the Wrongs Act 1958 (Vic), which has practically identical provisions to the WA Act's ss 5AI, 5AJ and 5AK.(13)

The tribunal found that the rent arrears were not apportionable as they did not arise from "a failure to take reasonable care". Various claims for damage caused by the third tenant after the others had moved out were all apportioned solely to that tenant, applying the Wrongs Act 1958 (Vic).

The Andreasen decision has yet to be followed (as of 17/01/18) by any other decisions in any other State or Territory, and there are a number of reasons why it may be of very limited relevance, if any, to us.

The first is that the Civil Liability Act 2002 (WA) allows contracting out as per s 4A, whereas the Wrongs Act 1958 (Vic) does not. In contracting out, a party need not refer expressly to the Civil Liability Act 2002 (Aquagenics Pty Ltd v Break O'Day Council)(14). A clause in a Residential Tenancy Agreement which imposed joint and several liability on the parties would almost certainly mean that the parties had contracted out of Part 1F of the Civil Liability Act 2002 (WA). Just such a clause is invariably found in Residential Tenancy Agreements made through Real Estate Agents. (However, the prescribed form for a written Residential Tenancy Agreement does not contain any express clause as to liability, and therefore does not contract out.)

Another issue is that "the power to apportion responsibility is only as against a 'concurrent wrongdoer.' It is doubtful whether the power exists in a case where one joint tenant is the sole wrongdoer and the other joint tenant is blameless."(15) Needless to say, this is at odds with the decision in Andreasen. Not only that, but the power to apportion would arise where a party was responsible for loss or damage to the slightest extent, but not where they were entirely blameless. In other words, a party could be 99.9% liable, but not 100%.(16) E.g. if one tenant damaged a door by putting a poster on it with tin tacks, then another smashed holes in it with a baseball bat, the court would have to apportion liability; however had the first tenant not damaged the door at all, it could not (and the first tenant could end up having judgement enforced against her for the whole amount).

Finally, in cases where it is not possible to show by evidence which tenant caused which loss or damage, it will not be possible to apportion liability.(17)

Bibliography

Civil Liability Act 2002 (WA) Federation Insurance Ltd v Wasson [1987] HCA 34; (1987) 163 CLR 303

JW Carter, Carter's Guide to Australian Contract Law (LexisNexis Butterworths, 2006)

Glanville L Williams, Joint obligations: a treatise on Joint and joint and several liability in contract, quasi-contract and trusts in England, Ireland and the common-law dominions (Butterworth, 1949)

Greer v Pickering [2015] NSWSC 1131

John Billings, Jacquellyn Kefford, Alan Vassie, Heather Barker, VCAT Annotated Residential Tenancies Act (Anstat, 2017)

Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA)

Law Reform (Miscellaneous Provisions) Act 1941 (WA)

Peter E Nygh and Peter Butt (eds), Butterworths Concise Australian Legal Dictionary (Butterworths, 2nd ed, 1998)

Property Law Act 1969 (WA)

Residential Tenancies Act 1987 (WA)

Walker v Bowry [1924] HCA 28; (1924) 35 CLR 48

Wrongs Act 1958 (Vic)

Notes

1 : Carter, [12-34].

2 : Note that, where the agreement is in a deed, the presumption is that the co-promisors are jointly and severally liable – see below.

3 : There is also the equitable and common law right of contribution, but it would seem to be redundant in RT matters since the enactment of s 17 A. In any event, it is beyond the scope of this research memo. For an overview of contribution, see Burke v LFOT Pty Limited [2002] HCA 17 and the cases referred to therein. It is not clear whether or not it is possible for unequal contribution between co-promisors (and note that it is not clear what "portion" means in s 17A).

4 : Walker v Bowry [1924] HCA 28; (1924) 35 CLR 48.

5 : For example, this from REIWA: "Where either the tenant or the lessor comprise more than one person, the obligations to be performed in this lease are binding upon such two or more persons jointly and severally."

6 : Williams, (p.44), and see Federation Insurance v Wasson, per Gaudron J at paragraph [9] of her judgment.

7 : A and B get a double bedroom with ensuite, C a single bedroom and D is in a hot, stuffy, narrow fibro "sleepout".

8 : Note s 131 of the Transfer of Land Act 1893, which makes obligations under covenants implied under that Act joint and several. The most significant covenant for tenants would be that implied under s 92 (b), for the tenant to keep and yield up the leased property in good and tenantable repair accidents and damage from storm and tempest and reasonable wear and tear excepted"; however s 131 also provides that implied covenants may be excluded by express terms which are inconsistent (and cl 38.2 of the prescribed form tenancy agreement would seem to achieve this); additionally, it is in dispute whether such covenants can be implied other than in deeds (see Waterhouse v Waugh [2003] NSWCA 139 at [32]).

9 : Williams, p.63.

10 : Ibid. p.74; also see Law Reform (Miscellaneous Provisions) Act 1941 (WA), s 4(1).

11 : Note, if it was a periodic tenancy, the dead tenant's estate would have an argument that the tenant had abandoned the premises when he expired, and the estate could only be liable for failure to give 21 days' notice.

12 : Andreasen v Harriss [2016] VCAT 1352.

13 : It is important to note, however, that there is no equivalent to s 4A – i.e. the Victorian Act does not permit contracting out.

14 : Aquagenics Pty Ltd v Break O'Day Council [2010] TASFC 3 at [15] – [23].

15 : Billings et al. at [210.08].

16 : Notwithstanding that, see Greer v Pickering [2015] NSWSC 1131 for a case where liability was apportioned 100% to one concurrent wrongdoer.

17 : Billings et al. at [210.08].

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