My property was damaged by a disaster while in the possession of a service provider. What are my rights?
Last updated November 2023
Last updated November 2023
This resource is for people in New South Wales (NSW) who own property that was damaged by a disaster while it was in the possession of a service provider.
This resource explains the obligations service providers in NSW have in relation to their customer’s property while they are in possession of it. It also explains what rights to compensation you have if your property is damaged by a disaster while it is in the possession of a service provider.
This resource only considers the obligations of a service provider in a commercial context. Non-commercial dealings, such as lending your property to a friend or keeping your property at your parent’s house for free, are outside the scope of this resource and different laws apply. See here for how to get help.
A service provider is any person, business, or organisation that agrees to do something for you, in exchange for payment.
A service provider could be:
a small business
a franchise or chain store
a large business or corporation
a sole trader
someone who occasionally performs work on your property in exchange for something else (this person could be family, a friend, a neighbour, or someone else).
Some examples of services provided include:
repairs
delivery or couriering
cleaning
dry cleaning or tailoring
consignment
a parking lot or garage
Most likely, yes. Most of the time if you agree to pay a service provider in exchange for work performed on your property you will have entered a contract with the service provider, even if it is not in writing.
A contract is a legally binding agreement between two or more people to do certain things. A contract can be verbal, written, implied through a party’s conduct or a combination of these things.
A contract is made up of four essential elements:
First, there must be an offer by one party to do something.
For example, a service provider could make an offer in relation to your property, by setting out the scope of repair work to be performed and a price.
Second, an offer must be accepted by the other party. Acceptance can be verbal, written or by conduct.
For example, you could accept the service providers offer to repair your property by signing the quote (written), telling the service provider you want to go ahead (verbal) or by leaving your property with them for repair (by conduct).
Third, each party must intend to enter into a legally binding agreement. This means that each party must intend to go through with the agreement, not just be thinking about it.
Fourth, both parties must provide consideration by agreeing to exchange something of value.
For example, the consideration provided by the service provider could be the materials, labour and skill needed to complete a repair, and the consideration provided by the customer is the money they pay for the work.
If these four elements exist, you are likely to have a contract with the service provider even if it is not written down.
Please note that a contract may not be valid if either of the parties did not have capacity to enter the contract at the time of signing because, for example, they were underage, mentally impaired or not acting freely. Similarly, a contract is not enforceable if it is an agreement to do something that is illegal.
If you are unsure whether you have a contract with the service provider or whether a contract that you have is valid, you should seek legal advice.
Please note that Justice Connect Answers can only help with quick legal questions, and does not qualify as an application for comprehensive legal help. If you need ongoing legal help with your problem, the best thing to do is submit an online application.
Contracts between customers and service providers may:
establish duties that set out what standard of care the service provider must exercise in relation to your property; and
limit the service provider’s responsibilities for any breaches of their duties.
If a contract does not talk about, address, or provide instructions or requirements about a particular issue or topic, this means that the contract is “silent” on that issue or topic. If your contract with the service provider is silent as to what happens if your property is damaged while in their possession, then their obligations are established by the laws governing bailment relationships, which are explained below.
Your next step in determining the service provider’s obligations is reading the fine print of any documents related to your contract. These documents might be the “contract”, or they might be called something else, such as a “quote” or “terms and conditions”.
You may have also agreed on additional terms verbally (in-person or over the phone) or over text message or email.
When reading or thinking about your contract, look for “limitations of liability” clauses, any statements that the service provider is “not responsible” for certain things while they have your property in their possession, or any promises that the service provider makes to you in relation to your property.
A contract can establish duties that both the customer and service provider commit to fulfil, including in relation to the customer’s property. A contract may also limit the service provider’s liability for any loss of the customer.
What duties might be established by my contract?
Examples of contract terms that establish a duty of the service provider in relation to your property include a requirement that the service provider:
Exercise reasonable care over your property while it is in their possession.
Returns your property in the same or better condition than when they took possession of it.
Implements certain security or safety measures to keep your property safe while it is in their possession.
Returns your property to you in a timely manner.
Handles your property in a professional and skilled manner.
Liability for damage
If the service provider does not fulfil their duties under your contract, and their failure to fulfil their duties contributes to the damage to your property, then they may be liable to pay you compensation.
For property damaged or lost while in the service provider’s possession, to avoid liability to compensate the customer, the service provider carries the onus of providing either that:
the service provider took appropriate care of the bailed goods; or
the service provider’s failure to take appropriate care did not contribute to the loss.
Ultimately, the service provider must show that the loss or damage occurred without it engaging in any neglect, default or misconduct.
The service provider may be able to contract out of liability for the customer’s loss by including a “limitation of liability” clause in the contract. Limitation of liability clauses are contract terms that define how much responsibility a service provider is willing to take on if there are any problems with the service they provide or if anything goes wrong while your property is in their possession.
Not all clauses limiting liability are valid. For a limitation of liability clause to be enforceable, it must be sufficiently:
If your property is damaged by a disaster, or lost, while in the possession of a service provider, you should consider:
If the service provider caused or contributed to the property damage and loss you have experienced.
Whether your contract with the service provider contains a valid limitation of liability clause that limits the service provider’s responsibility for any damaged caused by the disaster (is that clause clear and were you told about it?).
If your property is damaged by a disaster while in the possession of a service provider, because of the service provider’s negligence or misconduct, but your contract contains a valid limitation of liability clause, then you may be restricted in claiming compensation from the service provider.
How much you are restricted in making a claim for compensation will depend on the wording of the clause. The restriction could range from total (for example, you have no contractual right to bring a claim for compensation in court) to partial (for example, the contract sets an upper limit on how much compensation can be ordered by a court).
If a service provider can prove that the limitation of liability clause in your contract is valid, then you should consider whether the term is “unfair”, under the Australian Consumer Law.
The Australian Consumer Law is legislation that establishes enforceable obligations upon customers and service providers when they enter into certain agreements about the provision of services. The Australian Consumer Law does not apply to all contracts and only courts have the final say in determining if a contract term is unfair. If the Australian Consumer Law applies to your contract with a service provider, then the court will consider all of the rights and responsibilities established for you and the service provider by the contract, as well as whether the language is transparent.
If a court decides that a term is unfair, then it will be “void”. This means that it will no longer apply to the parties of the contract.
For more information on unfair contract terms, see:
Understanding your contract can be challenging and it’s important that you seek legal advice. See here on how to apply free legal help.
We explain some of the steps you can take if you think you are entitled to compensation in this section.
Most of the time, when a customer leaves their property in the possession of a service provider for a temporary period of time, for a specific purpose and in exchange for payment, the customer and service provider enter a legal relationship. This is called a “bailment relationship”.
Entering a bailment relationship is something that happens automatically when certain conditions are met; you do not need to know that you have entered a bailment relationship and do not need to have expressly agreed to enter a bailment relationship for one to exist.
There are different types of bailment relationships that can arise under different circumstances. The relevant type of bailment relationship in this scenario is a ‘bailment for reward’.
A bailment for reward will be created when:
If your property has been damaged whilst in the possession of a service provider, it is important to consider whether the relationship meets these three conditions. This is because bailment relationships place obligations on both the customer and the service provider, which will inform your next steps.
Examples of when a bailment for reward might be formed include:
Hiring a storage space to keep your property in
Taking your property to a service provider for repairs or maintenance, in exchange for payment
Paying a service provider to transport your property from one place to another.
Obligations of the service provider are automatically established through the laws about bailment relationships.
Under a bailment for reward, a service provider has a duty to:
Do the work you have both agreed upon
Exercise reasonable care and skill in the task they have to perform
Personally undertake their obligations
Care for your property as is reasonable in the circumstances
Comply with the terms of the bailment
Contracts between service providers and consumers can modify the scope of a bailment relationship. The court will, in practice, first consider the terms of the contract before applying the general common law principles of bailment. Contractual terms take precedence.
In considering a service provider’s obligations to you, having accepted to work on your property, you should first consider the terms of any contract you may have with them.
If the contract does not specify the service provider’s precise duties, then the duties of a bailee (service providers) established under common law will apply to the service provider.
A service provider has a duty to take reasonable care of its customers’ goods. If there are no contractual terms that vary the scope of the bailment relationship or the duties owed by the service provider, then the key question is: did the service provider take reasonable care of your property while it was in their possession?
Taking reasonable care requires the service provider to take the same amount of care that a careful and vigilant person would of their own property in the same circumstances. This means that whether the service provider took reasonable care depends on the context in which your goods were damaged.
In the context of a disaster event, the scope of the service provider’s duty to take reasonable care may depend on whether, for example, the possibility of the disaster event was foreseeable and whether there was an evacuation order in force.
A service provider’s duty to take reasonable care of goods in its possession may require the service provider to take steps to prevent a disaster event from damaging goods in its possession. While this requires the service provider to store the customer’s property in a safe location, it does not mean that the service provider must take every possible precaution.
So, if a service provider could or should foresee that their place of business may be affected by flooding (for example, because it has been flooded previously), then they may be required to take precautions to prevent flood damage from occurring to goods in its possession. Alternatively, if a service provider’s place of business has no history of flooding, they are less likely to be expected to consider flood risks when storing goods.
A service provider will still have a duty to take reasonable care of goods in its possession if there is a disaster event imminent or in progress. However, what is “reasonable” depends on the nature of the disaster event and how a person would reasonably respond to circumstances facing them, particularly if it is an emergency.
The actions of a reasonable person depend on the context they are acting in, and a person forced to act in a sudden crisis, like a disaster event, without time for calm reflection may not be in breach of their duties if they make an error of judgement.
There are many things that might be taken into account when determining the standard of reasonable care during a disaster event. Some examples include:
What was the nature and scale of the disaster event?
Was an evacuation order issued, and if so, how long did the service provider have to evacuate?
Did a government official or agency provide a warning to the public that a disaster event was imminent, and if so, how far in advance did the public receive that warning?
Would it have been safe for the service provider to take action to protect their customer’s property?
Did the service provider have other peoples’ property in their possession as well?
What was the value of the damaged property?
What location was the property placed in?
It can be challenging to work out exactly which facts surrounding the disaster event and the damage to your property are relevant when determining whether the service provider breached their duty to take reasonable care of your property. See here on how to apply for free legal help.
If the service provider did not take reasonable care of your property and:
their failure to take reasonable care contributed to the damage or loss of your property; and
there is no enforceable clause in your contract fully limiting the liability of the service provider for any loss you experience,
then they may be liable to pay you compensation. They may agree to pay you compensation through negotiation, or they might be ordered to by a court if you make a successful claim in court. The type of compensation you may be awarded by a court if your claim is successful are “damages”. Damages are intended to restore you to the position that you would have been in if the service provider exercised reasonable care.
Going to court can be costly. There may be certain facts surrounding the service provider’s actions that you don’t know before starting a claim in court, and the service provider might be able to successfully defend against your claim. If you are unsuccessful in court, then you may be liable to pay the other parties’ legal costs, as well as your own.
Try to work things out directly with the service provider. You could write them a letter explaining why you think they failed to exercise reasonable care over your property and that you believe they are obligated to restore your property to its former state, either by fixing it, replacing it, or compensating you with money.
If you are unable to reach an agreement, you may consider alternatives to going to court, such as negotiating with the service provider or commencing alternative dispute resolution. For more information on alternative dispute resolution in NSW, see this resource.
If you or the service provider do not wish to participate in alternative dispute resolution or cannot reach agreement, you can initiate legal action.
You will need to commence your claim in the court in which it will be heard. This will depend on the amount of money that you are claiming from the service provider. This resource explains which court you need to commence your claim in.
To commence your claim, you need to fill out a statement of claim form and file it with the court. A statement of claim is a written statement that sets out the facts of your case and what it is you are seeking. You can find a statement of claim form on the Uniform Civil Procedure Rules forms website: here.
The best way to draft a statement of claim is to write a series of numbered short paragraphs, each containing a separate fact that is central to your claim. If your statement of claim does not accurately outline your claim, or if parts of the claim are inadequate or do not comply with the rules, the court may decide to throw out part or all of your claim. You should spend enough time to get the statement of claim right the first time.
See LawAccess NSW for a useful guide on starting your case in the NSW Local Courts.
Navigating the courts can be complicated. See here for information on how to access legal help.
Scenario – Mark’s car and the NSW Floods.
Mark dropped his car off at his local mechanic’s workshop for a routine service. Mark lives in a regional area of Northern NSW, in a small town that has no recent history of major flooding. Mark and the mechanic agreed verbally on the scope of the work the mechanic would carry out and the fee to be paid once the service was complete, in-person, when Mark picked up his car. Mark didn’t sign anything.
A few days before Mark was due to collect his car from the workshop and pay for the repairs, the mechanic’s workshop was flooded in a declared disaster event. The flood caused significant damage to Mark’s car, including to the engine and the interior. Mark is waiting for the mechanic to assess the extent of the damage, but at this stage, it looks like the car is no longer roadworthy and repairs will be expensive.
The mechanic told Mark that she had no time to move his car to higher ground before the floodwaters reached her workshop. The NSW Government had issued a flood warning for Mark’s town four days before the floods.
What laws determine what Mark’s rights are?
Mark’s property was damaged because of a disaster event, but the mechanic may have been obligated to protect his property and could be found at fault for the damage caused.
The first question Mark needs to consider is whether he entered a contract with the mechanic, because that may give him certain options to try to get his car fixed or replaced or to be compensated.
Mark’s verbal agreement with the mechanic met all the requirements of a contract. There was:
An offer – the mechanic provided Mark with a quote for the service by telling him how much the service would cost and what a service entails;
Acceptance: Mark agreed to the price on the terms of their verbal agreement; and
Intention: Mark left his car at the workshop for work to be performed, indicating that both Mark and the mechanic intended to follow through on their promises
Consideration: Mark agreed to pay the invoice when he collected his car
So, by entering a contract with the mechanic for a routine service, agreeing to pay the mechanic and leaving his car at the workshop, Mark entered a bailment relationship with the mechanic.
A term of Mark’s contract may be that the mechanic performs the work as promised. The obligations that the mechanic owes Mark regarding the standard of care the mechanic must exercise in relation to his car, are also determined by the laws of bailment.
What are Mark’s rights to compensation?
Mark has found out that the damage to his car, which was damaged when his mechanic’s workshop was flooded, is total. Mark is wondering whether the mechanic breached her duty to take reasonable care of his car while it was in her possession.
After making sure that there was no modifying or limiting contract terms agreed to between the mechanic and himself, Mark can consider the context surrounding the flood damage to assess whether the mechanic performed her duties as per the bailment relationship.
1. Reasonable care prior to a disaster event
Mark’s town has no recent history of major flooding. So, even if the mechanic did not have any precautions in place to protect her workshop from floods, she is unlikely to have breached her duties to take reasonable care prior to a disaster event.
2. Reasonable care during a disaster event
Mark’s town was issued a warning four days before the flood. Mark could argue that four days is plenty of time for the mechanic to move the cars parked at her workshop to higher ground, lift them off the ground (if she has the technology), or to let Mark know that the car is at risk and that he should come and get it.
Mark might be able to argue that the mechanic breached her obligations to exercise reasonable care during the disaster event. This means that Mark may be entitled to compensation, to recoup his losses.
There might be other factors that impacted Mark’s mechanic’s decision not to move the cars to higher ground. Determining what might be relevant can be challenging. The best thing for Mark to do is to seek legal advice.
*Mark’s story is a made-up example which has been created to help illustrate the principles of law which this resource explains.
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This resource was last updated on November 2023. This is legal information only and does not constitute legal advice. You should always contact a lawyer for advice specific to your situation. Please view our disclaimer for more information.