Vane-Tempest v Century 21 Forster

LEGISLATION CITED : Local Courts Act 1982 Strata Titles Act (NSW) 1973

Allen v Kerr & Anor [1995] Aust Torts Reports 81-354 Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 BCS Strata Management Pty Ltd v Robinson & Anor [2004] NSWCA 80 Carr v Neill [1999] NSWSC 1263 Colliers Jardine Pty Ltd v Castle Mall Properties Pte Ltd Devries v Australian National Railways Commission (1993) 177 CLR 472 CASES CITED : Dickinson v Motor Vehicle Insurance Trust (1987) CLR 500 Kalfine Pty Limited v Kenneth Hill [2007] NSWSC 284 Networth Pty Ltd v Sensis Pty Ltd (No 2) [2007] NSWCA 268 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 Speno Rail Maintenance Australia Pty Ltd v Hammersley Iron Pty Ltd (2000) 23 WLR 291 State of NSW v Tempro Services Ltd [2004] NSWCA 4 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council (2005) 220 CLR 517

PARTIES : Peter Lionel Vane-Tempest & Herbert James Vane-Tempest (Plaintiffs) M J & M K Abbo Pty Ltd trading as Century 21 Richardson & Wrench Forster (Defendant)

COUNSEL : D S Weinberger (Plaintiffs) D A Priestley (Defendant)

SOLICITORS : Gadens Lawyers (Plaintiffs) Thomson Playford (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

15252/2007 - PETER LIONEL VANE-TEMPEST v M J & M K ABBO PTY LTD t/as CENTURY 21 RICHARDSON & WRENCH FORSTER

JUDGMENT (Appeal decision of Local Court Magistrate - indemnity clause) 1 HER HONOUR: By amended summons filed 4 August 2008, the plaintiffs seek an order that the judgment of his Honour Magistrate Williams dated 27 September 2007 be set aside. 2 The plaintiffs are Peter Lionel Vane-Tempest and Herbert James Vane-Tempest ("the Vane-Tempest brothers"). The defendant is MJ & MK Abbo Pty Ltd trading as Century 21 Richardson & Wrench Forster ("Century 21"). The Vane-Tempest brothers relied on an affidavit of Constantine Kakakios sworn 26 May 2008. 3 In the Local Court proceedings the plaintiff was Meghann Fay Roberts (Ms Roberts). The first defendants/cross defendants were Peter Lionel Vane-Tempest and Herbert James Vane-Tempest. The second defendant/cross claimant was Century 21. For convenience, I shall refer to the parties by name. 4 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 5 Section 75 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

Grounds of Appeal 6 The plaintiffs appeal from the whole of the decision of his Honour Magistrate Williams dated 27 September 2007 on the grounds firstly, that the Magistrate erred firstly, in failing to properly construe the agreement between the plaintiffs and defendant; secondly, in finding that the plaintiffs liable to indemnify the defendant; thirdly, in finding the plaintiffs liable in damages to the defendant; and fourthly, by failing to provide adequate reasons.

Local Court proceedings 7 In the Local Court the proceedings between Ms Roberts and the Vane-Tempest brothers settled. The issue to be determined by the Magistrate was the cross claim brought by Century 21 against the Vane-Tempest brothers seeking indemnity. 8 The Vane-Tempests were the owners of a property at Forster. The Vane-Tempests had entered into four agency agreements with Century 21. I shall refer the last two agreements in more detail later in this judgment. 9 In March 2004, Ms Roberts entered into a residential tenancy agreement with the Vane-Tempest brothers to lease unit 6 of the property. On 2 November 2004, Ms Roberts tripped on an unstable or wobbly paver located on the property sustaining injury to her left foot. 10 On 28 August 2006, Ms Roberts filed a statement of claim in the Local Court seeking damages against the Vane-Tempests (the first defendant) and the managing agent, Century 21 (the second defendant). On 29 November 2006, Century 21 filed a defence denying liability. On 30 January 2007, Century 21 filed a cross claim seeking indemnity and/or contributory negligence. On 16 February 2007, the Vane-Tempest brothers filed a similar cross claim denying liability and seeking indemnity and/or contributory negligence. They also filed a defence around this time. 11 On 5 March 2007, there was an agreement as to judgment between Ms Roberts and both defendants. It was agreed that by consent and without admission of liability firstly that there would be judgment for the first and second defendants as against the plaintiff on the statement of claim and secondly that the first defendant make an ex gratia payment to the plaintiff in the sum of $6,000. Each party was to pay its own costs. 12 A document entitled "Agreed Facts and Case Summary" was before the Magistrate (tab 8). 13 Relevantly, it stated: "4. On or about 30 May 2000, Richardson & Wrench entered into a further Managing Agency Agreement with the Vane-Tempest Bros to continue managing the residential leasing of the property. The third Managing Agency Agreement contained an indemnity clause at 8.1 identical to the indemnity clause quoted from the first Managing Agency Agreement. 5. On or about 16 March 2004, Meghann Fay Roberts ("Roberts") entered into a residential Tenancy Agreement with the Vane-Tempest Bros to lease Unit 6 of the property. 6. On or about 31 October 2004 M J & M K Abbo Pty Limited ceased trading as Richardson & Wrench Forster. 7. On the next day, 1 November 2004, M J & M K Abbo Pty Limited in association with Barberossa Pty Ltd commenced trading as Century 21 Your Agent Forster ("Century 21"). 8. Roberts alleges that on or about 2 November 2004 she fell on a defective paver located on the property and sustained serious personal injuries. 9. On or about 28 August 2006 Roberts issued proceedings in the Local Court of New South Wales at Ballina ("Ballina Proceedings") against the Vane-Tempest Bros as the first defendants and the incorrectly described Century 21 as the second defendant alleging that the Vane-Tempest Bros and Century 21: (a) permitted the property to remain in a defective state and condition; (b) failed to adequately address prior complaints in respect of the defective state and condition of the property; (c) failed to take appropriate measures for the safety of Roberts' (d) failed to adequately warn Roberts of the potential risk of injury; (e) failed to adequately barricade that part of the property where the defect was located;" 14 There was a Managing Agent Agreement between MJ & MK Abbo Pty Ltd and Barberossa Pty Ltd t/as Century 21 Your Agent Forster and the Van-Tempest brothers in existence. Paragraph 3 states "this agreement begins on 1` November 2004 and continues until terminated by either party." That agreement signed by the owner and the date 23 July 2005 appears above the words "date received". 15 In the defence to the cross claim at 4(b) and (c) the Vane-Tempests admit that pursuant to an agreement dated 1 November 2004 and entitled Management Agency Agreement (Residential), Century 21 agreed for reward to manage and let the property (the second agreement); and that, at all material times, the second agreement governed the relationship between the cross defendants and the cross claimant.

The Magistrate's decision 16 The issue for determination was whether the Vane-Tempests' were liable to indemnify the managing agents for the legal costs and disbursements that it incurred in defending Local Court proceedings. The sum claimed was $18,192 exclusive of GST. On 27 September 2007, the Magistrate entered judgment for the cross claimants, Century 21, with the Vane-Tempests' to pay costs in issue and costs of the proceedings. The Vane-Tempests' were ordered to pay indemnity costs from 24 November 2006. 17 The Vane-Tempests' counsel in oral submissions during the hearing of this appeal asserted that the Magistrate either erred or failed to provide reasons for finding that the third agreement applied. But this issue was not raised in the written submissions, nor were any submissions made to the Magistrate as to the significance of the change of identity of the managing agent on 1 November 2004 (the day before the accident occurred). Rather, counsel for the Vane-Tempest brothers in the Local Court submitted (at t 2.11): "Your Honour, can I just make one observation about two of the documents. My friend has said that there are four agreements before the court, the first three are in identical terms. It may be relevant for my friend to identify which of the four agreements he sues upon. As I understand it, he sues upon the last two, but the other perhaps more important point I wish to make is that the fourth and final agreement was, in fact, signed and entered into almost 12 months, maybe nine months, after the relevant event, which is the plaintiff's accident. So there is an issue as to whether the fourth agreement, in fact, was on foot at the relevant time." 18 Counsel for the managing agent submitted (at t 21.2): "…I'm content to rely on the third, and there is no doubt in my submission that it was an agreement on foot for all of the relevant period up until the accident, and if neither party established that it was not on foot on the day before, then in my submission your Honour needn't consider it and it is plain that the claim brought against us was not based on something that happened on the day that she was injured, it was based on our conduct for a period of time leading up to it, so it was that conduct that was covered by the contract." 19 And at 3.5 of his reasons, the Magistrate stated that it should be noted that the claims that were in issue against the managing agent related to its failure to do things which was on the lead up to the injury suffered by the plaintiff on 2 November 2004. The Magistrate held that it was the third agreement, that is the one dated 30 May 2000, that was in force and the claim was brought on the basis of the failure to do things by the agent. In my view, it was open to the Magistrate to decide that it was the third agreement that was in force. That being so, clause 8 of the third agreement is headed "Indemnity" and reads: "The Principal will keep the Licensee Indemnified against all actions, claims and demands brought against and all costs, losses and liabilities incurred by the Licensee in the course of or arising from the exercise or performance of the licensee's authorities or duties under this agreement." 20 On this issue of indemnity the Magistrate stated (at 3.41): "It is clear to the court that the cross claimant was brought into these proceedings due to the fact that they were the managing agents and for no other reason. It is not that they were sued by a coincidence. The only reason that they are before the court in these proceedings was the fact that they were joined as second defendants by the plaintiff, pursuant to the managing agent agreement or pursuant to the fact that they were the managing agent." 21 And at 4.25-46: "It is clear on the cases that have been put, including the case of New South Wales v Tempo Services that these proceedings have arisen from the work which was performed by the cross-claimant and would come under what would be expected as to the services. … Clearly, in consideration of New South Wales v Tempo Services and also Colliers Jardine Pty Limited v Castle Mall Properties , the fact that these proceedings have arisen as a result of the managing agent agreement would mean that the cross-claimant should receive indemnity on all issues including costs." 22 Counsel for the Vane-Tempest brothers submitted that there is no relevant difference between the clause considered in BCS Strata Management Pty Ltd v Robinson & Anor [2004] NSWCA 80 and the indemnity clauses within the two relevant agency agreements. According to the Vane-Tempest brothers indemnity is for costs and expenses properly incurred in the carrying out work/duties under the relevant agreements and suggest by its terms, that the indemnity, if it is to apply, arises from positive acts in performing work under the agreement, rather than omissions, let alone alleged omissions. 23 The parties also referred to State of NSW v Tempo Services Ltd [2004] NSWCA 4 and Colliers Jardine Pty Ltd v Castle Mall Properties Pte Ltd [2005] NSWCA 311. I shall refer to these cases in turn. 24 BCS Strata Management v Robinson was an appeal from proceedings in the District Court brought by Mrs Robinson against the Owners of the Strata Plan (Owners) and the Strata Manager of the home unit premises in which she lived. Mrs Robinson sustained a severe leg injury from falling as she stepped into a lift in the home unit premises due to the floor of the lift not aligning with the floor of the foyer. Proceedings against the Owners and the Strata Manager were brought in negligence, res ipsa loquitur and breach of statutory duty under the Construction Safety Regulation was pleaded against the Owners. The Owners and the Strata Manager cross-claimed against each other with the Strata manager seeking indemnity for its legal costs in defending the proceedings. The trial judge found against the Owners and the Strata Manager in negligence and under the res ipsa loquitur principle but did not decide the question of breach of statutory duty. 25 On appeal it was held (Beazley JA with Handley JA and Palmer J agreeing) that there was no breach of duty by the Strata Manager and no statutory claim was made out against the Owners. Counsel for Mrs Robinson did not seek to maintain the finding of res ipsa loquitur. The Court also held that the Strata Managers claim for indemnity under the Agency Agreement failed as the terms of the indemnity did not extend to the case where the Strata Manager was sued in its own capacity for its own alleged negligence as managing agent. The cross-appeal by the Strata Manager relied on clause 10 of the Managing Agent's Agreement which provided: "The Body Corporate:

(a) indemnifies the Agent for all costs and expenses (including legal costs on a solicitor and client basis) properly incurred in carrying out work pursuant to this agreement or as instructed by the Body Corporate; and

(b) acknowledges that all such work will be carried out for the Body Corporate and not for the Agent directly." 26 The Strata Manager submitted that, assuming this Court found that it had not breached its duty of care to Mrs Robinson, then, on the natural and ordinary meaning of the words of the clause, it was entitled to an indemnity from the Owners for its costs in defending the proceedings. Beazley JA stated at par [24]; "… the proper approach to the construction of an indemnity clause is not contentious. Such clauses are to be construed according to their natural meaning in the context in which they occur: see Pendal Nominees Pty. Limited v Lednez Industries (Australia) Limited (1996) 40 NSWLR 282." 27 Her Honour then referred to the duties of the Strata Manager as listed in the Agency Agreement which included arranging insurances, maintaining the records of the Owners required by law, having the possession and care of the records and documents of the Owners, arranging and attending the annual general meeting and disbursing money in accordance with the Strata Titles Act (NSW) 1973. Further duties included attending hearings conducted by a Strata Titles Board or Tribunal or Court and a specific power to "instruct solicitors, attend conferences and generally supervise legal proceedings involving the Body Corporate." 28 It was held that the Strata Manager had been sued in its own capacity for its own alleged negligence. On this basis Beazley JA found that the expenses incurred in the proceedings were in respect of the Strata Manager's own conduct and not "in carrying out work under [the Agency] Agreement or as instructed by the Body Corporate", being the expenses for which indemnity is provided by clause 10 of Managing Agent's Agreement. 29 In State of NSW v Tempo Services initial proceedings were brought against the State of New South Wales by a cleaner employed by Tempo who was contracted by the State. The cleaner's claim for damages (due to an injury caused when she while fell crossing a courtyard to clean an area in a state school) was settled in favour of the State. The State proceeded with a cross-claim seeking indemnity for its costs in the proceedings pursuant to a contract made with Tempo. The relevant indemnity clause, cl. 20 (c), was in the following terms: "The Contractor shall be liable for and indemnifies and shall keep indemnified the Government against any liability, loss, expense, damages, claims, suits, actions, demands or proceedings, whether arising under any statute or at common law, in respect of personal injury (including illness) to or death of any person arising out of or in connection with or caused by the performance of the Services." 30 The trial judge dismissed the State's cross-claim and the State successfully appealed. The judgment of Gibson DCJ was set aside, and judgment was entered for the State on the cross-claim. 31 Meagher JA in his reasons stated that the fact that Tempo bore no blame for the plaintiff's injury and thus liability in costs is not relevant to the question of whether the accident arose "in connection with the performance of services" at par [6]. Further the fact that the cleaner's presence at the school had no other reason than the performance of the contractual services must compel a finding that the injury arose "in connection with the performance of the services". His Honour at par [8] made the following remarks:

"The words "in connection with" are words of the widest import, do not require any direct or proximate relationship with the contract in question, but must have some causal or consequential relationship with it. The question then becomes: does Mrs Coleiro's injury have any causal or consequential relationship to the performance of the services contracted for? It must. She was at the accident site because the contract required her to be there; she was there during the school term, during specified hours of duty, her presence there had no other reason than performance of the contractual services; she had signed on at the commencement of her shift as required by a clause in specification forming part of the cleaning contract, and she was going about the performance of the contracted services. These factors must compel a finding that the injury arose "in connection with" the performance of the services. It does not matter that her mop was not actually on the floor. Her Honour does quote a decision of the Victorian Court of Appeal to support her reasoning. That decision is Australian Paper Plantations Pty Ltd v J & EM Venturoni [2000] VSCA 71. However, that case concerned the construction of the words "in respect of" not "in connection with", and in any event is plainly unsupportable." 32 The reasons of Hodgson JA with which Giles JA agreed were similar in that the term "services" included doing whatever is necessary to have cleaners in place at appropriate times at [19]. Hodgson JA also distinguished Venturoni stating that the fact that the injury occurred at a work place, during working hours, when the plaintiff was there for the purpose of performing services, gives the injury sufficient connection with the provision of services. Hodgson JA concluded by stating at par [21]: "Finally, in my opinion, cl 20(c) is wide enough to give the State an indemnity in respect of costs. An indemnity in respect of "claims" includes an indemnity against costs reasonably incurred in defending claims." 33 Colliers Jardine v Castle Mall Properties concerned a shopping Centre Management and Leasing Agreement (the Agreement) between Castle Mall Properties Pte Ltd, the owner of the Castle Mall Shopping Centre (the Centre), and Colliers Jardine (NSW) Pty Ltd, the manager of the Centre. The issue between the parties centred on the interpretation of an indemnity clause in the Agreement (cl 2.01.1) and its application to a claim by Colliers Jardine to be indemnified by Castle Mall Properties in respect of costs incurred by them firstly, in successfully defending an action by a cleaner/handyman against Colliers Jardine and Castle Mall Properties for damages arising out of injuries sustained by him when working at the Centre and secondly, costs for a failed cross-claim against the handyman's employer Assetlink Services Pty Ltd (Assetlink) for indemnity. The primary judge found in favour of Castle Mall Properties. Colliers Jardine appealed to the Court of Appeal and ultimately the appeal was dismissed. 34 Paragraph 2.01 of the Agreement was headed "OWNER'S COVENANTS". Clauses 2.01 and 2.01.1, which were at the centre of the appeal, provided: "Owner's Covenant 2.01 In consideration of the Manager agreeing to carry out to the best of its ability the duties and obligations imposed on the Manager under this Agreement the Owner shall at all times during the currency of this Agreement:

Indemnity 2.01.1 Fully indemnify the Manager (and its respective employees and agents) from and against all claims, demands, actions, suits, proceedings, loss and damage for which the Manager in the course of properly performing its duties hereunder may render itself legally liable provided always that this indemnity shall not apply to any wilful act or wilful omission of the Manager or of its employees or agents." 35 The handyman who was employed at the Centre by Assetlink had been contracted by Colliers Jardine to provide maintenance and other services at the Centre. On the day in question, the handyman was closing a gate to the car park when a piece of metal allegedly fell striking him on the head and causing various injuries. He first sued Castle Mall Properties and then joined Colliers Jardine as second defendant. It was agreed between the parties that the handyman was in effect alleging a breach of Colliers Jardine's duties relating to maintenance, supervision and repair of mechanical installations listed under the Agreement. 36 On Colliers Jardine v Castle Mall Properties, the negligence claim was settled with each party to bear their own costs. In the cross-claim against Assetlink, a verdict and costs order was made in favour of Assetlink. 37 The issue on appeal was a claim by Colliers Jardine that if they were liable to the handyman as alleged, then pursuant to cl 2.01.1 of the Agreement, they were entitled to be indemnified by Castle Mall Properties in respect of the handyman's claim. 38 Tobias JA considered the indemnity clause in two different ways. The first looked at another clause in the Agreement, which required Castle Mall Properties to maintain a full liability policy in the name of itself and Colliers Jardine as the insured. Tobias JA stated at par [34] to par [35]: "The obligation of the respondent under cl 6.0 to maintain a Public Liability Policy in the name of it and the appellant to cover all risks normally covered by such a policy and which, it was accepted, would include the plaintiff's claim in the present case, is a significant guide to an understanding of the structure of the Agreement whereby claims by third parties for damages for personal injuries sustained as a consequence of the negligent failure of the appellant properly to perform its duties were intended to be covered by such a policy under which it would be the insurer who would indemnify the appellant against any such claim including the costs of defending it.

In other words, the fact that the respondent was obliged under cl 6.0 to maintain such a policy in order to provide indemnity cover to itself and the appellant of the nature of that now claimed by the appellant in reliance upon cl 2.01.1 underpins the proposition that the appellant's current claim for indemnity was intended under the Agreement to be covered pursuant to a Public Liability Policy maintained under cl 6.0 and not by the personal covenant of the respondent to indemnify the appellant under cl 2.01.1 where it may have rendered itself legally liable in the course of properly performing its duties under the Agreement as distinct from any such liability incurred in the course of failing to properly perform those duties." 39 The second construction looked at the terms in clause 2.01.1 that the indemnity shall not apply to any wilful act or omission of the appellant, its employees or agents. Colliers Jardine had submitted that this clause meant that a negligent act or omission must be wilful to fall outside the ambit of the indemnity. This construction created the problem outlined by Tobias JA in par [37]: "By its express terms, for the indemnity to operate the relevant legal liability of the appellant must arise in the course of it properly performing its duties in which case I acknowledge that it is difficult to see what work the proviso has to do. This is because it must follow that a wilful act or omission in the performance by the appellant of its contractual duties is the very antithesis of the proper performance of those duties. Hence arises the textual tension to which I have referred. How is it to be resolved?" 40 Although distinguishing the indemnity clause in this instance from the one discussed in Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424, Tobias JA continued at par [39] to [41] and [44]: "However, the respondent relied upon the concurring but separate judgment of Kirby J where at 452 [68] his Honour said (omitting citations): "Indemnity clauses are provisions that purport to exempt one party from civil liability which the law would otherwise impose upon it. They are provisions that shift to another party the civil liability otherwise attached by law to the first party. Self-evidently this is a serious thing to do or to attempt to do. Where such indemnities are said to arise out of contracts which are ambiguous or unclear, it is not unreasonable that their provisions should be construed so that any uncertainty is resolved favourably to the party thereby burdened by legal obligations that would not otherwise attach to it."

40 Andar was the subject of consideration in this Court in F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193. Ipp JA, with whom McColl JA agreed, referred (at [47]) to Andar and at [34] observed that by reason of the judgment in Andar , the approach of the High Court in Darlington Futures can no longer be relied on in regard to indemnity clauses. In this respect it should be recollected that in Darlington Futures the clause in question was an exclusion clause. Nevertheless, his Honour held that if the indemnity clause is ambiguous then, on the authority of Andar , it must be construed in favour of the party upon whom lies the obligation to indemnify (in the present case, the respondent).

41 The textual tension to which I have referred makes it tolerably clear that cl 2.01.1 is ambiguous in terms of reconciling the requirement that the claim, demand or action etc in respect of which indemnity is sought must be one in respect of which the appellant may render itself legally liable in the course of properly performing its duties under the Agreement and the proviso that the indemnity shall not apply to any wilful act or omission by the appellant, its employees or agents. On that basis, the clause should be construed in favour of the respondent.

44 Although the issue is not without its difficulties, in my opinion the structure of the Agreement and the context in which cl 2.01.1 is to be construed are such that, when combined with the other provisions of the Agreement to which I have referred, including, in particular, cl 6 which obliges the respondent to maintain a Public Liability Policy covering the very risks (including as to costs) to which the appellant was subjected by the plaintiff's claim, they lead to the conclusion that the indemnity contained in cl 2.01.1 of the Agreement did not extend to the costs for which the appellant rendered itself legally liable in defending that claim including those ordered to be paid by it to Assetlink. It follows that no error on the part of the primary judge has been demonstrated." 41 There was some argument about the issue of whether the absence of a finding of negligence would affect the operation of the indemnity clause and reference was made to Kalfine Pty Limited v Kenneth Hill [2007] NSWSC 284. The parties had agreed to settle in the terms of settlement as outlined earlier in this judgment together with some additional terms but these are not reflected in the terms of settlement. They also agreed that some other terms are relevant to the issue of negligence. They are firstly that the Vane-Tempests admit that Century 21 was not negligent as alleged in the plaintiff's statement of claim and in its conduct of either management agency agreement pleaded in the cross claim; and secondly, Century 21 similarly admits that the Vane-Tempests were not negligent as alleged in the plaintiff's statement of claim [B68]. Hence there is an agreement between the parties that neither of them was negligent but there has been no finding to this effect by the court.

42 Kalfine v Kenneth Hill involved injury of a tenant residing in a property at Richmond which was owned by the defendant Mr Hill and managed and let by the plaintiff Kalfine Pty Limited (Kalfine) under a management agency agreement. Proceedings had been brought by the tenant against Mr Hill and Kalfine as the second defendant. These proceedings were dismissed by consent of the parties, each paying their own costs. Kalfine commenced proceedings in the Local Court to recover costs said to have been incurred by it in defending the proceedings brought by the tenant. Kalfine relied on the following clause in the management agency agreement; "16 Agent's Indemnity and Liability The Principal will hold and keep indemnified the Agent against all actions suits proceedings claims demands costs and expenses whatsoever which may be taken or made against the Agent in the course of or arising out of the proper performance or exercise of any of the powers duties or authorities of the Agent hereunder." 43 In Kalfine v Kenneth Hill, the parties agreed that if the agent were found to be negligent then the agent would not be entitled to indemnity under Clause 16. At [47] the Magistrate stated: "47 I believe there is considerable support for the proposition that an Agent can only rely on the indemnity if there is a finding by a court that the Agent was not negligent. There was such a finding in George Halmay, Colliers Jardine and BCS Strata . In my view it was significant that the settlement in Colliers Jardine was on the basis of a verdict in favour of the defendant (the Agent in that matter). It could be argued that would amount to a finding of no negligence." 44 The Local Court Magistrate in Kalfine found in favour of the defendant on the basis that Kalfine had not demonstrated that it had properly performed its duties and obligations under the management agency agreement and as such could not rely on the indemnity. Kalfine appealed on the grounds that the Magistrate misdirected himself in concluding that he could not make a finding as to whether the appellant had properly performed its duties under the contract without a "full hearing" on the question of negligence and had erred in finding there was insufficient evidence that the appellant had properly performed its duties under the contract." The appeal to this Court in Kalfine was dismissed as the first ground of appeal was held to misconstrue what the Magistrate had done and the second ground was dismissed on the basis that it did not give rise to error in point of law. 45 The Vane-Tempests submitted that in relation to the third agreement the indemnity applies to claims incurred by the agent in the course of arising out of the exercise or performance of the agent's authorities or duties under the agreement. The agent's authorities are set out at clause 4 of the agreement. The claim could not and did not arise out of the matters specified in clause 8.1 of the third agreement. 46 Century 21 says that the Magistrate observed that the agents were not sued by coincidence and submitted that on any view of the material before the Court they were sued directly and unarguably as a consequence of their role as managing agents for the property. That role encompassed the authorities and duties in the agreement as evidence in writing, in particular clause 4.1(g), relating to repairs and maintenance, and was indisputably governed entirely by the written agreement. Century 21 submitted that the personal injury action was precisely the type of claim contemplated by the clause, and otherwise it is difficult to conceive what sort of actions were contemplated - see Speno Rail Maintenance Australia Pty Ltd v Hammersley Iron Pty Ltd (2000) 23 WAR 291 at [67]). Century 21 says that there was nothing that could have provided any basis for Ms Robert's action against the agent but for its obligations and authorities under the agreement. 47 Century 21 further submitted that the use of the expression "arising out of" is particularly broad and does not required a direct or proximate casual relationship in any event - see Dickinson v Motor Vehicle Insurance Trust (1987) CLR 500 at 505. Any duty of care that the agents owed Ms Roberts could only have arisen out of the duties and authorities under the management agency agreement and inevitably it must be the action between the two, and any liability on the part of the agents - see Speno Rail at [130]. 48 Century 21 says that the indemnity clause is broader still and contains the expression "in the course of" and this connotes merely a temporal relationship as distinct from a casual one. Century 21 says that there is really no answer to the proposition that the action against the agent and their consequent liability for costs were incurred in the course of performing the services. 49 Century 21 submitted that no error of law could be demonstrated, as there was no controversy in the proceedings before the Magistrate as to the correct legal principles to be applied. The Magistrate did not misunderstand them or misapply them. The construction was plainly open to the Magistrate as a matter of law and the appeal should be dismissed with costs. 50 In this current appeal, the onus is upon Century 21 to establish that the indemnity clause applies. The proper approach to be adopted is that the clause to be construed according to its natural meaning and the context in which it occurs. The agent has been sued for alleged negligence, namely, for permitting the property to remain in a defective state and condition for failing to adequately address prior complaints in respect of the defective state and condition of the property; failing to take appropriate measures for the safety of the plaintiff; failing to adequately warn the plaintiff of the potential risk of injury; and failing to adequately barricade that part of the property where the defect was located. 51 Unlike BCS Management v Robinson the words of Clause 8 of the agreement are not restricted to "costs and expenses properly incurred in the carrying out of work pursuant to this agreement". Clause 8 requires the costs to be incurred by the licensee "in the course of or arising from the exercise or performance of the licensee's authorities or duties under this agreement". The authorities and duties are set out in Clause 4 of the agreement. Clause 4 reads: "4. AUTHORITY OF LICENSEE 4.1 Subject to the limitations contained in this agreement the Principal authorises the Licensee, on behalf of the Principal, from time to time to (a) seek and choose a tenant or tenants of the Premises (b) prepare, enter into and sign tenancy agreements (c) received, and issue receipts for, money (d) receive, deposit and otherwise deal with rental bonds (e) enforce or terminate tenancy agreements and give notices for these purposes (f) represent the Principal in any application or proceedings before, and make or respond to any application to any Tribunal (including the Residential Tribunal if the Premises are residential premises) or any Board, Registrar, Commission or statutory authority having jurisdiction in relation to the Premises or to any tenancy agreement (g) fulfil the Principal's obligations under any tenancy agreement, and for this purpose (or otherwise as instructed) to arrange for the Premises to be repaired and maintained. Provided that, except in case of emergency when it is impractical for the Licensee to obtain the Principal's instructions, the costs of any one matter shall not exceed the amount stated in item G of the Particulars (h) exercise the rights of the Principal under or in relation to any tenancy agreement (i) if the Premises are residential premises - (i) enforce, or cause to be enforced, any order of the Residential Tribunal, (ii) take all necessary steps to have any order of the Residential Tribunal which is an order for payment of an amount of money, deemed to be a judgment of a Court, and to take steps to have issued a garnishee order or a writ of execution to enforce any such judgment." 52 The licensee is authorised to carry out the obligations on behalf of the principal from time to time. The only relevant paragraph is 4(g). Can it be said that the costs and expenses incurred by the licensee "were in the course of or arising from" the exercise or performance of fulfilling the principal's obligations under the tenancy agreement to arrange for the premises to be repaired and maintained? Under Clause 4 (g) the costs of the repair or maintenance cannot exceed the amount stated in Item G, namely $100.00. 53 There is evidence that the managing agent did arrange for the property to be maintained. The gardener Kevin Gregory (Aff 06/02/07 [4]-[10]) deposed that his duties as gardener included mowing lawns, cutting edges, pruning, removing rubbish and various other odd jobs as needed. He had been attending to and maintaining the gardens and commons of the property on a regular basis since early 2000. When he attended at the property he mowed the front lawns of the property, did the edges and removed any rubbish from the common areas. During that time he never observed any defects in the pavers outside unit 6 of the property. He says that they had always been in a clean and undamaged condition. 54 Sometime between 3 November 2004 and 12 November 2004 (after the accident had been reported to Ms Solman) Mr Gregory deposed that Kim Solman the property manager telephoned him and said words to the effect of "Can you please attend at 6 … and remove the pavers in the front yard." Mr Gregory replied, "Yes". Sometime between 3 and 12 November 2004, he attended unit 6 of the property and removed the pavers. At this time he did not observe any defects in the pavers. Mr Gregory took the pavers home and then a week or so later took them to his brother-in-law's property where they were re-laid. On 31 January 2007, Mr Gregory took photographs of the pavers after he had removed them and laid them at his brother-in-law's property. These photographs depict the pavers in the same condition as they were when he removed them from the garden of unit 6. 55 Ms Kim Solman (Aff 06/02/2007) is the property manager for Century 21. She deposed at [11] to [18] that Mr Gregory carried out the regular maintenance and gardening on the property including the immediate surrounds and that he attended the property on a regular basis to attend to these tasks. On 16 August 2004, Ms Solman carried out a further inspection of the property with Ms Roberts and she (Ms Solman) observed the grounds and gardens to be clean and undamaged and the pavers to be undamaged with no apparent defects. She completed a residential premises condition report after the inspection and handed it to Ms Roberts and said words to the effect, "Do you agree with my assessment of the property and how I have completed the condition report? If not, do you wish to add any comments?" Ms Roberts replied, "I agree with what you have written." Ms Roberts then signed the condition report. The condition report noted that the property was in very good condition with no maintenance required. 56 In early November 2004, Ms Solman contacted the plaintiff by telephone to remind her that she was in arrears with her rent. Ms Solman told the plaintiff that her rent was in arrears and asked her when it would be paid. The plaintiff told Ms Solman that a couple of days ago she had fallen on the pavers in the garden and had broken her ankle, was on crutches and would not be able to attend the office to pay her rent. A week or so after that telephone call Ms Solman requested Mr Gregory to attend and remove the pavers. 57 The evidence of Ms Solman and Peter Vane- Tempest is that they had never received any complaints in relation to the condition of the pavers or the path where the plaintiff allegedly fell. The evidence of Mr Gregory, Ms Solman and Mr Peter Vane-Tempest supports a finding that the principal had fulfilled their obligations to arrange for the premises to be maintained. In this instance, as there was no report of the need for repair and no obvious signs that the pavers were defective, the obligation for the principal to arrange for the pavers to be repaired did not arise. However, clause 8 must be read according to its natural meaning. As previously stated clause 8 refers to the authorities or duties set out in clause 4 of the agreement. 58 Clause 4 refers to "repairs and maintenance". The word "and" is conjunctive. Although maintenance work was done, there is no evidence that the licensee from time to time carried out repairs on behalf of the principal leading up to the accident. The licensee has not discharged its onus and established that it carried out the principal's obligations to arrange for the premises to be repaired and maintained. Hence, it cannot be said that the costs and expenses were incurred by the licensee "in the course of or arising from the exercise or performance of the licensee's authorities or duties under this agreement." 59 I have come to a different decision to that of the Magistrate. In construing the indemnity clause, the Magistrate did not refer to clause 4. It is my view that the Magistrate erred in law. The appeal is upheld. The decision of his Honour Magistrate Williams dated 27 September 2007 is set aside. On the cross claim brought by MJ & MK Abbo Pty Ltd trading as Century 21 Richardson & Wrench Forster, I enter judgment in favour of the cross defendants Peter Lionel Vane-Tempest and Herbert James Vane-Tempest. Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiffs' costs in the Local Court and of this appeal on a party/party basis up to and including 15 August 2007 and then from 16 August 2007 on an indemnity basis. The defendant is to have a certificate under the Suitors Fund Act, if appropriate.

(2) The decision of his Honour Magistrate Williams dated 27 September 2007 is set aside.

(3) On the cross claim brought by MJ & MK Abbo Pty Ltd trading as Century 21 Richardson & Wrench Forster, I enter judgment in favour of the cross defendants Peter Lionel Vane-Tempest and Herbert James Vane-Tempest.

(4) The defendant is to pay the plaintiffs' costs in the Local Court and of this appeal on a party/party basis up to and including 15 August 2007 and then from 16 August 2007 on an indemnity basis

(5) The defendant is to have a certificate under the Suitors Fund Act , if appropriate. **********

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