The outcome of the case was that tenants will only be held liable for insured damage if it can be proved the damage was intentional – even if it was reckless.

Christchurch landlord Susan Linklaterrented a property to a group of youths but the tenancy was ended early because of damage the tenants did to the house, including extensive cigarette burns to the carpet.

Linklater made insurance claims for some of the damage and also went to the Tenancy Tribunal, where she was awarded some costs for damages.

She then appealed to the District Court as she felt the tenants should pay her the insurance excess she had paid and to replace two carpets which were insured, but where the excess meant it was not economic to claim.

The District Court dismissed her appeal so Linklater went to the High Court, arguing the District Court was wrong to apply the Osaki decision as the damage was not accidental, but caused by the recklessness of the tenants.

She also argued that some damage was caused by intentional breaches of the tenancy agreement, namely smoking inside the house which was prohibited.

However, Justice Gerald Nation overturned Linklater’s appeal in favour of the tenants, saying the District Court had not erred in its interpretation.

Linklater says she is disappointed by the High Court decision as it essentially means there are no consequences for tenants even if they breach clauses in tenancy agreements and cause damage.

“I wanted clarification on the law and what constituted intentional versus careless damage and if there was a continuum which included reckless damage.

"But it seems there isn’t. The damage is either careless (and no fault) or intentional. There is no in-between, no leeway in the definition.”

Tenancy law as it now stands doesn’t respect private property and doesn’t create a sense of responsibility in tenants, she says.

Crombie Lockwood head of insurer relationships Myles Nobles says while the decision won’t be pleasing to landlords it is largely consistent with the Osaki decision.

“The only hope that landlords have is for a change in the legislation, or to pass on the costs of insurance (including factoring in their excess) to their tenants as many will already be doing via rent increases.”

The former government’s proposed bill on this matter is currently before a Select Committee.