Colliers Jardine Pty Ltd v Castle Mall Properties Pte Ltd

[2005] NSWCA 311

CITATION:	Colliers Jardine Pty Ltd v Castle Mall Properties Pte Ltd [2005] NSWCA 311 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	23 August 2005
JUDGMENT DATE:	10 October 2005
JUDGMENT OF:	Tobias JA at 1; McColl JA at 46; Brownie AJA at 47
DECISION:	(a) Leave to appeal granted; (b) Direct that the appellant file a Notice of Appeal within seven days of the date hereof; (c) Appeal dismissed; (d) The appellant to pay the respondent's costs of its Notice of Motion filed on 7 July 2005, the summons for leave to appeal and the appeal

CATCHWORDS:	CONTRACTS - Indemnity Clauses - Whether indemnity clause covered legal costs - Agreement between owner and manager of shopping centre - Owner to indemnify manager against all claims etc for which manager liable "in the course of properly performing its duties" under agreement - Manager successfully defended negligence claim with each party to pay own costs - Whether owner required to indemnify manager for costs - Whether indemnity confined to claims arising in course of non-negligent performance of duties - Relevance of requirement for owner to maintain public liability insurance policy for manager - Construction of ambiguous indemnity clauses - Effect of proviso that indemnity not to apply to any wilful act or omission of manager
LEGISLATION CITED:	District Court Act 1973 Supreme Court Rules 1970
CASES CITED:	Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193 New South Wales v Tempo Services Ltd [2004] NSWCA 4 Transport Commission (Tas) v Neale Edwards Pty Ltd (1954) 92 CLR 214
PARTIES:	Colliers Jardine Pty Limited Castle Mall Properties Pte Limited
FILE NUMBER(S):	CA 40931/04
COUNSEL:	A: Mr D J Russell SC R: Mr L T Grey
SOLICITORS:	A: Phillips Fox, Sydney R: Hickson, Sydney

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 10371/01
LOWER COURT JUDICIAL OFFICER:	English DCJ

CA 40931/04
DC 10371/01

TOBIAS JA
McCOLL JA
BROWNIE AJA

Monday 10 October 2005

COLLIERS JARDINE (NSW) PTY LTD v CASTLE MALL PROPERTIES PTE LTD

Judgment

1 TOBIAS JA: Castle Mall Properties Pte Ltd (the respondent) is the owner of the Castle Mall Shopping Centre (the Centre). Colliers Jardine (NSW) Pty Ltd (the appellant) is the manager of the Centre. It was agreed between the parties that at all relevant times each was bound by the provisions of a Shopping Centre Management and Leasing Agreement entered into between the respondent and Burnett Property Management Pty Ltd on 18 May 1994 (the Agreement).

2 The issue between the parties concerned the proper interpretation of an indemnity clause in the Agreement (cl 2.01.1) and its application to a claim by the appellant to be indemnified by the respondent in respect of the legal and other costs (the costs) incurred by it in successfully defending an action by Eduardo Vasquez (the plaintiff) against the appellant and the respondent for damages arising out of injuries sustained by him when working at the Centre. The primary judge found in favour of the respondent and it is against that decision that the appellant appealed to this Court.

A matter of procedure

3 The primary judge, Judge English of the District Court, delivered her judgment on 29 September 2004. On 26 October 2004 the appellant's solicitor caused a Notice of Appeal without Appointment to be filed. Within the time limited by the Supreme Court Rules (the Rules), the appellant filed, on 14 January 2005, a Notice of Motion with Appointment. There was then some correspondence between the solicitors for the parties as to whether, in truth, the order of the primary judge in respect of which that Notice of Appeal had been filed was an order as to costs only within the meaning of s 127(2)(b) of the District Court Act 1973 in which case an appeal against that order only lay with the leave of this Court.

4 The dispute over whether leave was or was not required was not resolved. Accordingly, on 7 July 2005 the respondent filed a Notice of Motion seeking to have the appellant's Notice of Appeal with Appointment filed on 14 January 2005 dismissed on the basis that the appeal was incompetent. The appellant responded by filing a Notice of Motion on 9 August 2005 seeking orders from this Court extending the time required under Pt 51 r 4(1) of the (the Rules) for the appellant to file and serve an Ordinary Summons for Leave to Appeal and that its application for leave to appeal be heard concurrently with the hearing of the appeal. That Notice of Motion was returnable on the day the appeal was listed for hearing.

5 After hearing short argument from the parties as to whether the primary judge's order was one as to costs only, the Court determined that it was, as a consequence whereof leave to appeal from that order was required. In these circumstances, subject to any question of costs, the respondent quite properly consented to the time being extended for the filing and service of an Ordinary Summons for Leave to Appeal and to that application for leave being heard concurrently with the appeal. Accordingly, the Court made orders in terms of [1] and [2] of the appellant's Notice of Motion filed on 9 August 2005.

The relevant provisions of the Agreement

6 Before relating the facts giving rise to the dispute between the parties, it is convenient to refer to the relevant provisions of the Agreement against which those facts are to be considered.

7 The Agreement recited that the respondent wishes to appoint the appellant's predecessor

"as its agent to manage and lease the Centre on its behalf"

and then, under the heading " AGENCY & TERM " provided in cl 1.01 that the respondent

"hereby employs the [appellant] for the purposes of managing and leasing the Centre."

8 Paragraph 2.01 of the Agreement was headed "OWNER'S COVENANTS". Clauses 2.01 and 2.01.1 are at the centre of the appeal and I therefore set them out in full:

"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."

9 A critical issue which arose in the appeal concerned the use in cl 2.01.1 of the expression "in the course of properly performing its duties hereunder" (emphasis added) and the relationship of that phrase to the proviso that the indemnity was not to apply to any wilful act or wilful omission on the appellant's part. It will be necessary in due course to refer to other provisions of the Agreement which bear upon that issue. I flag them at this point as being cll 2.01.3 and 5.0.

10 It was common ground that the indemnity to which cl 2.01.1 referred related to all claims, demands etc made with respect to the performance by the appellant of its duties under the Agreement. Those duties were to be found in cl 4.0 of the Agreement and can generally be summarised as requiring the appellant to provide a number of services for the respondent including, relevantly, handling routine and day-to-day contacts with tenants and store managers of the Centre; negotiating and executing in the respondent's name and administering at the respondent's expense, contracts for, inter alia, window washing, equipment maintenance and other similar services deemed appropriate by the parties; maintaining contact and negotiating all necessary agreements with appropriate governmental agencies and with the appropriate utility companies or authorities serving the Centre and, at the respondent's expense, paying any taxes and utility company bills payable by the respondent for the Centre; invoicing tenants for rent and other charges due to the respondent and assisting in the collection thereof; instituting and prosecuting actions to evict tenants and recover possession of premises occupied by them and to recover rents and other sums due; making all reasonable efforts to procure desirable and suitable tenants and to obtain execution of leases after approval by the respondent; administering and enforcing all leases and other contracts relative to the Centre; paying all operating expenses; and procuring with the respondent's approval such outside services as may be necessary for the performance of the appellant's duties as outlined in the Agreement including the services of attorneys, real estate valuers, consultants, architects, engineers and advertising agents.

11 Of more immediate relevance to the facts of the present case are the duties set forth in cl 4.01(g) and (h)(i) and (ii) which I set out in full:

"Mechanical and Electrical Installations	(g)	Mechanical and Electrical Installations: Supervise the operation and maintenance of the Owner's mechanical and electrical installations (including lifts and escalators), equipment, furnishing, heating, ventilation and cooling services to the Centre and/or tenants, utilising either an outside service company or in-house personnel as deemed appropriate and subject to the Owner's approval.
Repairs	(h)	Repairs: (i) Make or have made under its supervision, all repairs, replacements, alterations, additions, improvements and decorations necessary to preserve the Centre in good condition and repair and at optimum operating efficiency, or necessary for the installation of tenants, (ii) purchase materials and supplies required for the operation and maintenance of the common area of the Centre; "

12 As I have observed, there are other clauses of the Agreement to which I shall refer later in these reasons which assist in further providing the context in which or the structure of the Agreement against which cl 2.01.1 is to be construed.

The relevant facts

13 The relevant facts giving rise to the dispute may be shortly stated. On 17 October 1998 the plaintiff was employed at the Centre by Assetlink Services Pty Ltd (Assetlink) as a cleaner/handyman. Assetlink had been contracted by the appellant to provide maintenance and other services at the Centre pursuant to the power of the appellant under cl 3.01 of the Agreement to cause to be hired, paid and supervised (as independent contractors) all persons necessary to maintain and operate the Centre including maintenance and security personal.

14 On the day in question, Assetlink had required the plaintiff to work in the security carpark of the Centre. On the evening of that day when the Centre ceased trading, the plaintiff was closing the gate to the carpark when a piece of metal which had been fixed to the carpark ceiling or wall by two bolts at the end of a track on which the carpark gate was required to slide, allegedly fell striking him on the head and causing various injuries. He first sued the respondent and then joined the appellant as a second defendant alleging that his injuries occurred as a consequence of the failure of the appellant and the respondent properly to maintain the Centre and, in particular, by failing to conduct periodic maintenance of the area of the gate by checking that the part of the gate stop which allegedly fell and struck the plaintiff was properly fixed and bolted to the ceiling.

15 It was common ground that as far as the allegations of negligence against the appellant were concerned, the plaintiff was in effect alleging a breach of its duties under cl 4.01 (g) and (h)(i) in that it had failed to supervise the maintenance of the respondent's mechanical installation constituted by the gate to the carpark and/or that it failed to make or have made under its supervision all repairs and replacements necessary to preserve the Centre and, in particular, the relevant part of the gate's sliding mechanism in good condition and repair and at optimum operating efficiency.

16 A number of cross-claims were filed including one (the Second Cross-Claim) by the appellant against the respondent and the plaintiff's employer (Assetlink) in which it was pleaded (in [11]) that if the appellant was liable to the plaintiff as alleged, then pursuant to cl 2.01.1 of the Agreement it was entitled to be indemnified by the respondent in respect of the plaintiff's claim. Relevantly [10] of the Amended Second Cross-Claim had pleaded that

"[i]t was a term of [the] agreement that [the respondent] would indemnify [the appellant] from and against all claims, demands, actions, suits, proceedings, loss, damage for which [the appellant] may render itself legally liable in respect to the performance of its duties required by the Agreement."

17 It will be appreciated that the pleading of cl 2.01.1 of the Agreement in the [10] of the Amended Second Cross-Claim was not strictly in accordance with the terms of that provision as it made no reference to the adverb "properly" but it did serve to illustrate that the appellant was claiming indemnity from the respondent upon the basis of its legal liability to the plaintiff arising out of the performance of its duties under the Agreement. As I have indicated, it was common ground that the relevant duties which the plaintiff was alleging the appellant had failed to perform were those set forth in cl 4.01(g) and (h)(i).

18 The hearing of the proceedings commenced before the primary judge on 23 February 2004 but were settled on the fourth day as between the plaintiff and the appellant on the basis that there would be a verdict in favour of the appellant against the plaintiff with each party to pay his or its own costs. A verdict was also entered in favour of Assetlink on the appellant's Amended Second Cross-Claim, the appellant being ordered to pay Assetlink's costs thereof.

19 Accordingly, the appellant had incurred and, so it was alleged, had therefore rendered itself legally liable to pay to its legal representatives and to Assetlink the legal costs and disbursements relating to its defence of the plaintiff's claim against it together with Assetlink's costs of the Amended Second Cross-Claim including its own costs of pursuing that cross-claim. Those costs were said to amount to a sum well in excess of $100,000 (the costs).

20 An issue before the primary judge (and the only issue on the appeal) was whether the respondent was required to "fully indemnify" the appellant pursuant to cl 2.01.1 of the Agreement with respect to its legal liability to pay the costs.

The primary judge's decision

21 After noting the respective arguments of the parties (which were repeated before this Court and to which I shall refer later in these reasons), the primary judge considered that the proper approach to be taken to the construction of a contractual indemnity such as cl 2.01.1 was that set out by the High Court in Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510 where, in a joint judgment, the Court said:

"These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity."

22 Her Honour then continued in these terms:

"The indemnity clause provided for in clause 2.01.1 is limited to claims, demands, actions, suits, proceedings, loss and damage as a result of actions taken by the [appellant] in the course of properly performing the duties specified in the agreement.
In the present case the proceedings commenced by the plaintiff and the subsequent actions taken by the [appellant] in response to the claim, did not occur in the course of the [appellant] properly performing any of the duties specified in the agreement, and furthermore, did not occur as a result of any proved or admitted action by the [appellant] that may have rendered it legally liable to the plaintiff, or anyone else for that matter."

23 The primary judge also held that the contractual indemnity in cl 2.01.1 had no application to claims for personal injury due to the provisions of cl 6 of the Agreement the relevant parts of which it is now appropriate to set out:

"The Manager and Owner agree that the Manager will, if required by the Owner, on the Owner's behalf and at the Owner's expense maintain throughout the term hereof insurance covering the Owner and the Manager against all claims, demands or actions for injury to, or death of, persons and damage to property. …The Manager and the Owner further agree that the Owner will maintain at its expense an Industrial Special Risks Policy and a Public Liability Policy over the Centre in which both the Owner and the Manager shall be named as Insured to such amounts as shall be reasonably determined from time to time to cover all risks normally covered by such policies including loss of rental. …"

24 It was common ground between the parties that the reference in cl 6 to an Industrial Special Risks Policy did not assist in the resolution of the issues in the appeal. On the other hand, it was accepted that the risks normally covered by a Public Liability Policy included personal injury claims for damages due to negligence. In particular, the kinds of insurance policies referred to in those parts of cl 6.0 which I have set out above (other than in an Industrial Special Risks Policy), provided coverage to the appellant in circumstances where accidental damage or injury had occurred whether to the appellant or to a third party or to the property of either including damages for personal injuries of the nature of those sustained and claimed by the plaintiff in his action against the appellant. It is noteworthy that both parties sought solace in cl 6 in a manner to which I shall refer hereunder.

The appellant's submissions on the appeal

25 The appellant's submissions may be summarised as follows:

(a) Clause 2.01.1 of the Agreement obliges the respondent to indemnify the appellant for the costs which it incurred in relation to defending the proceedings brought by the plaintiff in which it was alleged that the appellant was negligent in the performance of its duties under the Agreement;

(b) The costs incurred by the appellant in defending the proceedings were part of the action, suit or proceedings brought against it by the plaintiff;

(c) Those costs comprise "loss and damage" for which the appellant has rendered itself legally liable, presumably to its legal representatives and Assetlink;

(d) The indemnity was always intended to cover the tort of negligence and its width is underpinned by firstly, the use of the adjective "fully" at the commencement of the clause and by the proviso which only excludes wilful acts and omissions as distinct from negligent acts or omissions;

(e) The clause therefore obliges the respondent to pay any verdict or costs awarded against, or incurred by, the appellant in relation to the plaintiff's claims;

(f) Although the litigation itself was not a duty of the appellant performed under the Agreement, the action of maintaining the Centre was and that formed the basis of the plaintiff's claim;

(g) Had the plaintiff been successful, then the indemnity would have covered any verdict and order for costs obtained by the plaintiff against the appellant. It would be an odd result if the clause operated to cover a verdict and costs awarded to the plaintiff against the appellant if it was found to have negligently performed its duties under the Agreement causing injury to the plaintiff but did not cover its costs of successfully defending such a claim;

(h) Clause 6 of the Agreement relating to the maintenance of public liability insurance supported the appellant's construction of the clause or, alternatively, did not provide a reason either to limit the indemnity or to read it down by reference to the kinds of acts and omissions which would be covered by the types of insurance policies referred to in that provision. In fact, the existence of a public liability policy required to be maintained by the respondent under cl 6 was confirmation that it was the respondent who had to indemnify the appellant if the appellant was sued in an action of the nature of that instituted by the plaintiff.

26 In essence, therefore, the appellant's case was that if it was sued by a third party for neglect or default arising out of the performance of one or more of its duties under the Agreement, then if the claim related to some act or omission of the appellant in the performance of those duties, the indemnity operated in respect of any loss or expenses for which the appellant incurred a legal liability whether to the third party or otherwise in connection with that claim.

27 The appellant further submitted that the width of cl 2.01.1 was not only exemplified by the use of the adjective "fully" at the commencement of the provision but also by the fact that it applied to "all" claims, demands etc for which the appellant in the course of performing its duties under the agreement "may", rather than "has", rendered itself legally liable. In other words, the indemnity operated not only where actual legal liability was established but also where there was a claim etc which "may" render the appellant legally liable so that, in the present circumstances where it had successfully resisted that legal liability, the indemnity applied.

28 Finally, and critically, it was submitted that the adverb "properly", given the proviso which only excluded from the indemnity wilful acts and omissions rather than negligent acts or omissions, should be construed as meaning that the appellant was acting within the scope of its duties under the Agreement in a manner which may (but not necessarily) render it legally liable. Accordingly, the requirement that the claim be one for which the appellant may render itself legally liable in the course of properly performing its duties under the Agreement did not mean that the indemnity was confined to a claim the legal liability for which only arose in the course of the appellant performing its duties in a non-negligent manner.

The respondent's submissions on the appeal

29 The respondent's submissions may be summarised thus:

(a) The indemnity was limited to claims etc occurring as a result of action taken by the appellant "in the course of properly performing the duties" specified in the Agreement;

(b) The proceedings commenced by the plaintiff, the appellant's defence of those proceedings and the bringing by it of the Second Cross-Claim did not occur "in the course of" the appellant properly performing any of the duties so specified;

(c) The phrase "in the course of" is of narrower application than phrases such as "arising out of" or "in connection with" which were relevant to the construction of the indemnity clause discussed by this Court in New South Wales v Tempo Services Ltd [2004] NSWCA 4 at [18], [19] and [20] per Hodgson JA, with whom Giles JA agreed;

(d) Furthermore, the costs in respect of which the appellant rendered itself legally liable to pay were not incurred as a result of any proven or admitted action by the appellant that may have rendered it legally liable to the plaintiff or anyone else;

(e) Accordingly, for the indemnity to apply two preconditions must be satisfied:

(i) the appellant must have been properly performing one or more of the duties imposed upon it by the Agreement; and
(ii) the appellant must have rendered itself legally liable as a result of something actually done by it in the course of the proper performance by it of those duties.

(f) Had it been intended that the indemnity should apply to any liability incurred by the appellant in the course of performing its duties as manager, then the indemnity would have been more generously drafted. The clear intent of cl 2.01.1, so it was submitted, was that the appellant would not suffer any loss as a consequence of properly performing its duties under the Agreement. There was no commercial reason why it should be indemnified by the respondent in respect of a claim for which it has rendered itself legally liable in circumstances where it has failed properly to perform, or has negligently performed those duties. In the present case, the plaintiff alleged a failure by the appellant to perform its duty to repair and/or maintain the Centre. Accordingly, the appellant rendered itself legally liable to pay the costs in defending a claim that it had failed to perform, rather than properly performed, its contractual duties;

(g) On the respondent's case, there was still plenty of work for cl 2.01.1 to do. It was intended to indemnify the appellant in respect of claims made in the course of its commercial management decisions, made by it in the proper performance of its duties. Accordingly where it had, pursuant to cl 4.01(g), entered into contracts with third parties for the maintenance of the respondent's mechanical and electrical installations, or where it had entered into contracts with a third party to carry out repairs or replacements necessary to preserve the Centre in good condition and repair pursuant to clause 4.01(h)(i), or purchased materials and supplies required for the maintenance of the common area of the Centre pursuant to cl 4.01(h)(ii), it was entitled to be indemnified in respect of any claim for which it rendered itself legally liable under any such contract or in respect of any such purchase.

(h) Further, where the appellant engaged outside services pursuant to cl 4.01(o) as necessary for the performance of its duties and had rendered itself legally liable for those services, then the indemnity would apply. Again, where it instituted and prosecuted actions to recover possession of premises or to recover rents pursuant to cl 4.01(f)(v), it would be entitled to indemnity regarding any legal liability which it incurred in relation to the costs of and expenses of performing that duty;

(i) Finally, it was submitted that in order to invoke the indemnity the appellant must establish that an action taken by it in the course of properly performing its contractual duties "may render it legally liable" for "claims, demands, actions, suits, proceedings, loss and damage". In relation to the claim brought by the plaintiff, the verdict in favour of the appellant meant that it was not legally liable to the plaintiff in respect of his claim and there was no evidence that it did anything "in the course of properly performing its duties" that even "may" have rendered it legally liable in respect of that claim.

Did the primary judge err?

30 A number of observations need to be made before answering this question. They are as follows:

(a) The consideration for the giving by the respondent to the appellant of the indemnity embodied in cl 2.01.1 was, according to cl 2.01, the agreement of the appellant

"to carry out to the best of its ability the duties and obligations imposed on [the appellant] under this agreement." (emphasis added)

(b) It is therefore in the context of the appellant carrying out its duties "to the best of its ability" that, where it did so and thereby rendered itself legally liable, it became entitled to be indemnified under cl 2.01.1. The emphasis in cl 2.01.1 on the entitlement of the appellant to be indemnified in circumstances where it has rendered itself legally liable is upon claims etc for which it may so render itself legally liable in the course of properly performing its duties.

(c) Further emphasis on the proper performance by the appellant of its managerial duties as the consideration for the respondent's covenants in cl 2.0 of the Agreement is to be found in cl 2.01.3 where the respondent covenants to pay or guarantee payment of all expenditure incurred by the appellant on behalf of the respondent but only where the appellant

"shall have been acting properly and within the scope of its authority." (emphasis added)

(d) It will be recalled that the appellant submitted that the adverb "properly" where used in cl 2.01.1 meant no more than that the appellant may render itself legally liable in the course of acting within the scope of its duties. However, in cl 2.01.3 a distinction is drawn between the appellant "acting properly" on the one hand and acting "within the scope of its authority" on the other: there is no reason why the word "properly" should be given a different meaning in cl 2.01.1 to that in 2.01.3.

(e) Paragraph 5 of the Agreement which is headed "MANAGEMENT" also emphasises the obligation of the appellant as manager to perform its contractual duties in a non-negligent manner. It provides:

"The [appellant] agrees to use due diligence in the exercise of the powers and duties conferred herein and in the management and leasing of the Centre by the [respondent] for the period and upon the terms herein provided …"

(f) The context in which the expression "due diligence" is used in cl 5.0 makes it clear, in my opinion, that the appellant agreed to exercise its powers and perform its duties in a non-negligent manner.

(g) Understandably perhaps, cl 4.0 which is headed "DUTIES" imposes a series of positive obligations upon the appellant in its management of the Centre. In the course of performing those positive duties there are, as I have already observed, a number of duties in the course of the proper performance of which the appellant may render itself legally liable in respect of claims, demands, losses and damages sustained by a third party. Clearly, cl 2.01.1 was intended to provide that the appellant be fully indemnified against any such legal liability where the claim in question arises in the course of it properly performing its duties to the best of its ability, the latter being the consideration moving from the appellant in respect of which the respondent's indemnity was given.

31 Given the respondent's covenant in cl 2.01.3 only to pay or guarantee payment of expenditure incurred by the appellant on behalf of the respondent pursuant to the Agreement where the appellant shall have been "acting properly" and given the obligation of the appellant in cl 5.0 to use "due diligence" in the exercise of the powers and duties conferred upon it by or under the agreement, a strong case exists for construing cl 2.01.1 as only applying to indemnifying the appellant against claims etc for which it has rendered itself legally liable in the course of properly performing its contractual duties. Accordingly, where it has rendered itself legally liable to pay costs in defending a claim which alleges that the appellant was legally liable for failing to perform its duties or performing them other than "properly", that is, negligently, then there is much to be said for the construction of cl 2.01.1 adopted by the primary judge.

32 It is true that in the present case although the claim made by the plaintiff alleged that the appellant was legally liable for negligently failing to perform its duty of repair, that claim failed in that it was not proven, one assumes, that the appellant did not properly perform that duty. The question that one immediately encounters is, where the appellant has successfully defended the plaintiff's claim upon the basis that it had properly performed its duties and, in so doing, has rendered itself legally liable for the costs of that defence, why should it not be indemnified by the respondent in respect of that liability?

33 The answer to the question so posed is two-fold. The first is that cl 2.01.1 applies only to indemnity against claims for which the appellant may render or has rendered itself legally liable, whereas the plaintiff's claim was one in respect of which no legal liability was or could be incurred in the relevant sense. The second reason lies in the provisions of cl 6 of the Agreement and, in particular, in that part thereof which unconditionally obliged the respondent to maintain a full liability policy in the name of itself and the appellant as the insured. It is to be noted that whereas under the first part of cl 6 it was the appellant, if required by the respondent, that was to maintain the relevant insurance cover, under the second part of the clause it was the respondent who was obliged to maintain a Public Liability Policy covering both it and the appellant irrespective of whether such a policy was required by the appellant or not.

34 The indemnity set out in cl 2.01.1 is contained in that part of the Agreement which provides for the respondent's covenants in favour of the appellant in consideration of the latter properly performing its duties and obligations under the Agreement "to the best of its ability" and with "due diligence". The parties obviously contemplated that a situation may occur where the appellant has failed properly to perform its duties under the Agreement and thereby rendered itself legally liable to a third party such as the plaintiff. 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.

35 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.

36 A textual tension, which prima facie might be regarded as undermining the foregoing observations, is the proviso in cl 2.01.1 that the indemnity shall not apply to any wilful act or omission of the appellant, its employees or agents. The appellant relied heavily on this proviso as establishing that cl 2.01.1 was to be construed as covering the legal liability of the appellant where it has negligently performed its duties or failed properly to perform its duties provided that any relevant act or omission giving rise to that liability was not wilful. In this respect an act or omission, to be wilful, must amount to more than mere negligence: it must be an act or omission known to be wrong yet intentionally persisted in or persisted in with reckless disregard as to its likely consequences: Transport Commission (Tas) v Neale Edwards Pty Ltd (1954) 92 CLR 214 at 223 per Webb J with whom Fullegar J agreed; at 227-228 per Kitto J. Thus, so the argument ran, the use of the adverb "properly" in qualifying the word "performing" cannot have been intended to mean the same thing as "non-negligently" or otherwise there would be no requirement for the proviso. It followed that the effect of the proviso was only to exclude wilful acts or omissions but not to exclude any legal liability of the appellant in respect of a claim for loss or damage incurred by a claimant in the course of the negligent performance by the appellant of its duties under the Agreement. To construe the clause otherwise would give the proviso no work to do.

37 In my opinion there is some force in this submission but, if accepted, it does not give the adverb "properly" any work to do. In this respect I have already rejected the appellant's submission that "properly" means no more than that the appellant is acting within the scope of its duties (whatever that might mean). If the proviso is to be regarded as the only exclusionary provision from the indemnity, so that the indemnity applies where the appellant's legal liability arises in the course of negligently performing its duties providing the acts or omissions in question are not wilful, then the effect of that construction is to write the adverb "properly" out of the clause. 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?

38 The appellant placed reliance upon the decision of the High Court in Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424. That case concerned an indemnity clause whereby Andar agreed to indemnify Brambles from and against all actions, claims, demands, losses, damages, proceedings, compensation, costs, charges and expenses for which Brambles shall or may be or become liable in respect of or arising from loss, damage, injury or accidental death, from any cause, to property or person occasioned or contributed to by any act, omission, neglect or breach or default of Andar.

39 It was submitted that that provision was not, at least so far as its opening words were concerned, that different from cl 2.01.1 in the present case. With respect I would not agree. I would consider it as far removed from the present case as was the indemnity clause the subject of the decision of this Court in Tempo Services. 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.

42 In any event, it may well be that the proviso can be explained upon the basis that it was inserted out of an abundance of caution so as to emphasise, consistent with the other provisions of the Agreement to which I have referred including, in particular, cl 2.01, 2.01.3 and 5.0, that the indemnity is only to apply where the appellant renders itself legally liable in the course of performing its duties strictly in accordance with their terms and is not to apply where it wilfully fails to perform them or performs them in a persistently wrongful manner.

43 At the end of the day, one returns to the proposition that cl 2.01.1 is only engaged where the appellant may render or has rendered itself legally liable in the course of properly performing its duties under the Agreement. Accordingly, the present case poses the question: did the appellant render itself legally liable to pay the costs in the course of properly performing any of those duties within the meaning of cl 2.01.1? In my opinion, the answer is: No.

Conclusion

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.

45 I would therefore propose the following orders:

(a) Leave to appeal granted.

(b) Direct that the appellant file a Notice of Appeal within seven days of the date hereof;

(c) Appeal dismissed;

(d) The appellant to pay the respondent's costs of its Notice of Motion filed on 7 July 2005, the summons for leave to appeal and the appeal.

46 McCOLL JA: I agree with Tobias JA.

47 BROWNIE AJA: I agree with Tobias JA.

**********

13/10/2005 - Incorrect matter number - Paragraph(s) Page 1