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.