Kalfine Pty Ltd t/as Wilkinson Real Estate Agency v Hill

[2006] NSWLC 29

Local Court of New South Wales

CITATION:	Kalfine Pty Ltd t/as Wilkinson Real Estate Agency v Hill [2006] NSWLC 29
JURISDICTION:	Civil
PARTIES:	Kalfine Pty Ltd t/as Wilkinson Real Esatate Agency Kenneth Hill
FILE NUMBER:	11696/05
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	07/31/2006
MAGISTRATE:	Magsitrate B A Lulham
CATCHWORDS:	Contract - Indemnity clause - Interpretation of clause "in course of or arising out of the proper performance or exercise of any of the powers duties or authorities of the agent - Onus on agent - How proved
LEGISLATION CITED:
CASES CITED:	Colliers Jardine Pty Ltd v Castle Hill Mall Properties Pty Ltd (2005) NSWCA 311 Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 B.C.S. Strata Management Pty Ltd t/as Body Corporate Services v Robinson & Anor (2004) NSWCA 80 Smith & Ors v Roach & Ors (No. 2) (2004) NSWCA 463 State of New South Wales v Tempo Services Pty Ltd (2004) NSWCA4 George Halmay v Baryy Michael Haiser t/as Figtree Quality Meats (Nielson DCJ) Wollongong 3/12/04
REPRESENTATION:	Mr D A Priestley - Counsel Thompson Playford - Solicitors Mr S Torrington - Counsel Johnstone Robinson - Solicitors
ORDERS:	Judgment and verdict for the defendant. I would propose that the plaintiff pay the defendant's costs and disbursements as agreed. In default of agreement within 28 days the costs are to be assessed under the Legal Profession Act.

BACKGROUND TO PROCEEDINGS

1    Kenneth Hill purchased a property known as Units 1 and 2, 30 Pitt Street, Richmond in 1999. Settlement took place around 10 December 1999 and on that date Mr Hill (hereinafter referred to as either ‘Mr Hill’ or ‘the Owner’) entered into a Management Agency Agreement with Kalfine Pty Ltd t/as Wilkinson Real Estate Agency (hereinafter referred to as ‘the Agents’). The form of Management Agency Agreement was that approved by the Real Estate Institute of New South Wales. The Owner appointed the Agents exclusively to let and manage the premises. Those premises consisted of an upstairs flat which was leased to Anthony Tramontano and a downstairs section was leased as a general store.

2    The tenant Anthony Tramontano alleged that on 24 March 2000 he was electrocuted while turning a light switch on at the property. He sued the Owner for damages claiming $750,000. The Owner had a public risk policy of insurance with QBE Mercantile Mutual Limited. Solicitors Johnstone Robinson were instructed by the Insurance Company to act on his behalf. The Owner’s policy of insurance excluded any liability assumed by way of contract, such as an indemnity under a Management Agency Agreement.

3    Mr Tramontano, the plaintiff in the injury claim, filed a Motion in the District Court on 20 August 2004 seeking an extension of time to bring proceedings against a proposed second defendant being the Agent, the plaintiff in this matter, Wilkinson Real Estate Agency. The Agents had a professional indemnity policy with ACE Insurance Limited. The Agents had to pay an excess of $7,500 which was paid. Solicitors Thompson Playford were appointed by the insurance company to act on behalf of the Agents. They received instructions on or about 7 September 2004. The Motion was returnable on 10 September 2004. The Motion was adjourned to 8 October 2004 before. The matter was adjourned to 12 November 2004 for hearing. The plaintiff Tramontano was ordered to pay the Agent’s costs occasioned by the vacation. The Motion was heard on 12 November 2004 and adjourned to 15 November 2004 when the Motion was resolved by consent, on the basis that the plaintiff’s Motion was dismissed with each party to pay its own costs. The parties agreed to enter into a Deed which was subsequently done. Thompson Playford assessed their costs for acting on behalf of the Agents on the Notice of Motion at $25,000. I have prepared that summary from the evidence in the affidavits filed in this matter.

THESE PROCEEDINGS

4    The Management Agency Agreement between the Owner Mr Hill and the Agents Wilkinson Real Estate, contained standard clause 16 in the following terms;

’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.’

5    Thompson Playford Solicitors acted for the Agents in opposing the Motion by Mr Tramontano for the Agents to be joined as second defendants.

6    The Agents, the plaintiff in these proceedings, issued their Statement of Claim dated 13 November 2005. The Statement of Claim sought to recover the sum of $25,000 being the costs incurred by the Agent in defending the Motion and was claimed pursuant to clause 16 of the Management Agency Agreement (hereinafter referred to as ‘the Agency Agreement’).

7    The Owner filed his Defence on 7 December 2005. He denied liability on various bases, some of which were relied upon in these proceedings and some which were not. I propose to set out the basis of the Defence when discussing the issues and the submissions.

8    Although the Owner had a public risk insurance policy with QBE Mutual Insurance Company, such policy excluded any obligation assumed by the Owner pursuant to an agreement and therefore did not cover the Agent’s claim against the Owner in this matter.

THE ISSUES

9    The parties filed of Statement of Agreed Facts and Issues. I do not propose to set out the agreed issues, because I believe the issues were better defined in the oral submissions which I received from Mr Priestly and Mr Torrington.

10    It was agreed that whether or not the Owner was liable to indemnify the Agent for the costs would depend upon the construction and application of Clause 16 of the Agency Agreement. It was agreed that the Agent would only be entitled to the indemnity if the costs were “incurred by the Agents in the course or arising out of the proper performance or exercise of any of the powers, duties or authorities of the Agent.” (cl 16) It was agreed for instance, that if in a claim against the Agent, the Agent was found to be negligent, then the Agent would not be entitled to indemnity under the clause. Further, it appeared to me from the evidence and from the previous cases to which I was referred, that the application of cl 16 to the facts in this matter would involve the following considerations;

(i) What would be the position if an action was commenced against the Agent who was found to be not negligent – would the indemnity apply?


(ii) What would be the position if in the previous proceedings there was no finding to the Agent’s negligence – would the indemnity apply?


(iii) If, in the previous proceedings, there was no finding of negligence against the Agents, how in these proceedings and by what process would the court determine whether the costs were incurred in the course, or arising out of, the proper performance of exercise of the Agent’s powers, duties or authorities?

11    There was a second main issue. The Owner argued that the actions of the plaintiff when entering into the Agreement with Mr Tramontano for the dismissal of the Motion was such as to disentitle the Agents to claim against the Owner under the indemnity. The defendant submitted that the plaintiff’s conduct was such as to amount to a waiver of its rights to recover the costs against the Owner pursuant to the indemnity, or alternatively, the plaintiff’s conduct in the manner in which it settled the matter was not “a proper performance or exercise of any of the powers, duties or authorities of the Agent hereunder.”

12    The third general issue went to the quantum of the plaintiff’s claim based on the reasonableness of the costs incurred by the plaintiff in opposing the Motion.

THE LEGAL POSITION AND DISCUSSION OF AUTHORITIES

13    I now propose to discuss the authorities tendered by each Counsel. Before I do so I propose to set out paragraph 39 from the decision of His Honour Tobias JA in Colliers Jardine Pty Ltd v Castle Mall Properties Pty Ltd (2005) NSWCA 311. In setting out such reference, I propose to adapt the reference in the case by inserting in brackets after the reference to parties in that case to match the position of that party with the identity of the parties in this matter. So in the excerpt the appellant in that case was generally in the same position as the Agent in this case, and the respondent was in the same position as the Owner. His Honour Tobias JA was discussing the case of Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424. He stated as follows;

‘However, the respondent (Owner) 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.” (In this case the indemnity sought to exempt the Agent and to make the Owner liable).


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]) and at [34] observed that by reason of the judgment of 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)

14    I am satisfied on that authority that if in this case Clause 16 being the Indemnity Clause, is found to be ambiguous, then it should be construed in favour of the party upon whom lies the obligation to indemnify – in this case being the owner Mr Hill. I now propose to discuss the cases.

Colliers Jardine Pty Ltd v Castle Mall Properties Pty Ltd (2005) NSWCA 311

15    The respondent Castle Mall Properties Pty Ltd was the Owner of Castle Mall Shopping Centre. The appellant Colliers Jardine were the Manager of the Mall pursuant to a Management Agreement. In an action in the District Court one Eduardo Basquez sued the Owner and the Manager for damages arising out of the injuries sustained by him when working at the centre. The claim against the Manager was settled on the basis that there would be a verdict in favour of the Manager with each party to pay its own costs. The Manager then proceeded on a Cross Claim against the Owner seeking indemnity for the costs which it had incurred in defending the claim for damages. The Manager relied on the indemnity contained in paragraph 2.01 of the Managerial Agreement which was in the following terms;

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.”

16    The Trial Judge found for the Owner finding;

“The Indemnity Clause provided for in 2.01.1 is limited to claims, demands, actions, suits, proceedings, loss and damage as a result of actions taken by the appellant (Agent) in 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’s (Agent) in response to the claim did not occur in the course of the appellant (Agent) properly performing any of the duties specified in the Agreement, and furthermore did not occur as a result of any proved or omitted action by the appellant (Agent) that may have rendered it legally liable to the plaintiff or anyone else for that matter.”

17    The Trial Judge also held that the contractual indemnity in cl 2.01.1 had no application to claims for person injuries due to the provision of Clause 6 of the Agreement, the relevant parts of which provided as follows;

“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 cover all risks normally covered by such policies including loss of rental. …”



In coming to her decision the Trial Judge relied partly on the provisions of Clause 6 of the Agreement.

18    The appeal from the decision of the Trial Judge not to require the Owner to indemnify the Agent was upheld in the Court of Appeal. Tobias AJ found as follows;

“At the end of the day, one returns to the proposition at cl 2.01.1 is only engaged where the appellant (Agent) 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 (Agent) 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 .


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 Aft 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 (Agent) was subjected by the plaintiff’s claim, they lead to the conclusion that the indemnity contained in cl 2.01.1 of the Aft did not extent to the costs for which the appellant rendered itself legally liable in depending the claim including those ordered to be paid by it as Assetlink. It follows that no error on the part of the primary judge has been demonstrated.



DISCUSSION RE CASE

19    The form of the indemnity in Jardine included the additional proviso as follows;

‘ Provided always that this indemnity shall not apply to any wilful act or wilful omission of the Manager or of its employees or agents.’

The presence of that proviso did not seem to play an important part in the reasoning of Tobias JA. It is true that the Trial Judge and Tobias JA placed some importance on the requirement under cl 6 for the Owner to maintain a public risk policy covering its duties in the name of both the Owner and the Manager. That clause does not appear in the Managerial Agency Agreement in this matter. There is a very good argument that it should. However, in this matter the Owner had a public risk policy and the Agent had a professional indemnity policy protecting it against the very claim brought against it in these proceedings.

BCS Strata Management Pty Limited t/as Body Corporate Services v Robinson & Anor. (2004) NSWCA 80

20    In that case the plaintiff Mrs Robinson, suffered a severe injury to her leg when she tripped and fell as she stepped into a lift in the home unit premises where she lived, due to the floor and lift not aligning with the floor of the foyer where she was standing. She sued the owners of the Strata Plan (the Owner) and the Strata Manager (Manager) in negligence. She succeeded against both at the trial in the District Court, but lost against both in the Court of Appeal. In the Court of Appeal the Manager claimed indemnity against the Owners of the Strata Plan for its costs in defending the proceedings. The form of the indemnity in that matter was as follows;

‘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.’

The Agent’s claim was dismissed with costs, Her Honour Beasley JA finding;

(26) – What has happened here is that the Managing Agent has sued in its own capacity for its own alleged negligence. It has incurred expenses in defending the proceedings. Those expenses cannot in my opinion be categorised as having been incurred;
‘in carrying out work under the Agency Agreement or as instructed by the Body Corporate’
being the expenses for which indemnity is provided in cl 10. They are expenses incurred in respect of its own conduct.
(27) – It follows therefore in my opinion that on its proper construction cl 10 does not extend to cover the legal costs incurred by the Managing Agent in these proceedings. That part of its appeal should be dismissed with costs.

COMMENT RE CASE

21    The form of the indemnity in BCS Strata was not nearly as wide as that in the present case.

Smits & Ors v Roach & Ors (No.2) (2004) NSWCA 463

22    This case was relied upon by Mr Torrington for the Owner in connection with the submission that the Agents had waived their rights to claim the costs incurred under the indemnity because of its action in not pursuing costs against the plaintiff Mr Tramontano. I have read the case, but I do not think it necessary to discuss it further.

State of New South Wales v Tempo Services Limited (2004) NSWCA 4

23    Mr Priestly for the Agent relied on this case. In Tempo an employee of that company which had the contract to clean a State school, suffered an injury whilst walking through the playground and sued the State of New South Wales in damages. The claim was unsuccessful. The State sought to recover its costs in the proceedings against Tempo Services Limited pursuant to an indemnity which was in the following form;

‘The contractor shall be liable for and indemnifies and shall keep indemnified the Government against any liability, loss, expenses, 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.’

The Trial Judge found that the indemnity did not apply because there was no causal connection between her employment with Tempo Services Limited and her injury. Her decision was overturned as there was ample connection between the injury and the performances of the service, the injured worker being at work during working hours for the purpose of performing services.

COMMENTS RE THIS CASE

24    The form of the indemnity in Tempo was far wider than that in the present case. For the indemnity to apply in Tempo it was merely necessary for the personal injury to or the death of any person to arise out of or in connection or caused by the performance of the services.

Sandra McGregor v Weatherall Holdings Pty Ltd (Sidis DCJ Albury Wednesday 18 September 1996)

25    Mr Priestly submitted this case on behalf of the Agent. However, he indicated that the case was not particularly helpful, and no further reference was made to it in argument and submissions.

George Halmay v Barry Michael Haiser t/as Figtree Quality Meats (Neilson DCJ Wollongong, Friday 3 December 2004)

26    Mr Priestly relied strongly on this case. The facts appeared to be that the plaintiff sued the Agent and the Owner in a claim in which it appeared that the plaintiff suffered personal injuries when falling on a walkway that was said to be slippery. The allegations against the Agent included failing to ensure that the walkway and step were safe, failing to ensure that the walkway did not become slippery, failing to keep the walkway generally safe and failing to put up appropriate notices. The Managing Agency Agreement between the Owner and the Agent was the same as in this case. In Halmay the plaintiff’s claim was unsuccessful and the plaintiff was ordered to pay the costs of the Agent and the Owner. The Agent sought to be indemnified by the Owner for its costs in defending the proceedings. The indemnity clause in that case was identical to that in the present case namely;

‘ 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 of exercise of any of the powers duties or authorities of the Agent hereunder.’

27    Judge Neilson found that one of the duties of the Agent under the Agreement is the ‘arrangement/supervision of repairs’. Cl 13 in that case was the same as cl 13 in this case. His Honour Judge Neilson pointed out that the plaintiff was alleging against the Agent that the Agent failed to arrange proper repairs. The allegation failed. Judge Neilson found that the failure to exercise a power or duty can be within ‘the proper performance or exercise of a power or duty’ and so construed the contract. At p60 His Honour Judge Neilson stated as follows;

“If the Agent affected repairs which were unnecessary or inappropriate or in some way could be categorised as improper and because of the state of the premises created by those improper repairs, someone was injured, then the Agent would not be entitled to an indemnity. In other words, a positive act may not give rise to an indemnity. Where there is no act, but it is alleged that the Agent ought to have acted and a court finds that the Agent was not remiss in failing to do what it is alleged he ought to have done then, in my view, on a proper construction of cl 16 the Agent would be entitled to an indemnity.”

28    His Honour Judge Neilson found that the indemnity clause in Halmay was closer to that considered by the Court of Appeal in State of New South Wales v Tempo.

29    It appears that His Honour Judge Neilson may have ordered the Owner to indemnify the Agent for his costs in Halmay, even though the Agent had obtained a cost order against the plaintiff. It appears Judge Neilson did so because of some concern as to whether the plaintiff would be able to pay the cost order.

COMMENT ON CASE

30    Clearly Mr Priestly relied strongly on the decision of His Honour Judge Neilson. I am not bound by such decision, but of course I must take it into account and it is highly persuasive. I indicate however my disagreement that cl 16 in that case being the same clause 16 in this case, was similar to the indemnity clause in Tempo. In my view clearly it was not.

THE EVIDENCE

31    Each party relied on affidavit evidence. No witness was called for cross examination.

32    The plaintiff relied on the following affidavit evidence;

Exh 1 – Geoffrey Denis Cordner, Legal Cost Consultant sworn 26 April 2006
Exh 2 – Stewart Neville Pascoe, Director of Wilkinson Real Estate sworn 27 April 2006
Exh 3 – Stephen Patrick Connell, Solicitor sworn 28 April 2006
Exh 4 – Paul Boleslaw Kozub, Solicitor sworn 28 April 2006

33    The defendant relied on the following affidavit evidence;

Exh 5 – Mark David Robinson, Solicitor sworn 11 May 2006
Exh 6 – Louise Mary Gillespie, Legal Cost Consultant sworn 12 May 2006
Exh 7 – Kenneth Hill, defendant sworn 18 May 2006.

34    I do not propose to go through the affidavits in detail as I do not believe it necessary. I do however propose to consider and discuss the aspect of the evidence going to proof of the plaintiff’s proper performance of exercise of any of the powers, duties or authorities under the Management Agency Agreement.

35    The examination of that evidence is crucial in this case because in my view this case is distinguished from the cases of George Halmay (Judge Neilson) and the decision of Colliers Jardine (Tobias JA) and the decision in BCS Strata Management Pty Ltd (Beasley JA), because in George Halmay and BCS Strata Management there was a finding by the court that the Agent was not negligent. In Colliers Jardine the claim was settled, but on the basis of a verdict in favour of the Agent against the plaintiff with each party to pay its own costs.

36    There has been no finding by any court in favour of the Agent in this matter on the question of negligence.

37    The court proceedings served on the Agent in this matter was a Motion filed by the plaintiff Tramontano seeking the following orders;

(1) Pursuant to s60C of the Limitations Act 1969 (as amended) the time in which the plaintiff may bring proceedings against the proposed second defendant/second respondent be extended.
(2) Such other orders as the court deems fit.
(3) Costs of the Motion be costs in the cause.

38    The proposed second defendant was the Agent and the claim against the Agent set out the following particulars of negligence against the second defendant;

1. Failure to ensure the electrical circuitry was safe.
2. Failure to heed the warnings of the Plaintiff.
3. Failure to adequately manage the property.
4. Failure to inform the First Defendant of the warnings of the Plaintiff .
5. Failure to comply with Australian Standard 3000.
6. Failure to take appropriate action to inspect the said premises and/or repair the said premises after warnings from the Plaintiff and/or other persons as to the defective nature of the said premises.
7. Failure to ensure that the gutter of the said property was kept clear of debris by either regular inspections and cleaning and/or by inserting appropriate materials to stop debris from getting into the said guttering.
8. Failure to ensure that the guttering of the said premises was in such a condition so it would not overflow onto power points.
9. Failure to ensure the power points were positioned in such a way so as they would not be the subject of overflowing gutters causing water to flow on and/or near them.
10. Failure to inspect and/or regularly and/or adequately inspect the said property and repair appropriate defects.
11. Failure to improve the switchboard at the said property to international protection rated quality.
12. Failure to bring the defects to the attention of the First Defendant.

39    On 15 November 2005 the Notice of Motion was dismissed by consent with each party to pay its own costs. The disposal of the Motion in that manner involved no finding at all as to whether the Agent had properly performed its powers, duties or authorities. Such disposal involved no finding that the Agent was not negligent. The Motion, for example, may have been withdrawn because the plaintiff accepted that he could not satisfy the court as to his reason for the delay in joining the Agent.

40    Both Mr Priestly and Mr Torrington agreed that for the Agent to be entitled to an indemnity under cl 16, it was necessary for the Agent to have properly performed its duties and obligations. They agreed that if the Agent was negligent, the Agent would not be entitled to the indemnity.

41    It follows, in my view, that it was necessary for me to be satisfied that the Agent properly performed its duties or was not negligent before it is entitled to rely on the indemnity. As indicated, unlike the position in George Halmay, Colliers Jardine and BCS Strata Management there has been no finding by any court that the Agent in this matter was not negligent.

42    In this matter I then have to consider how and upon what basis and upon what evidence can I come to a positive finding that the Agent has properly performed its duties.

43    There was no evidence which would assist the Agent in the Affidavit of Stephen Patrick Connell. There was no evidence which would assist the Agent on the question of proper performance of its work or absence of negligence in the Affidavit of Paul Boleslaw Kozub.

44    There was no direct evidence as to the proper performance of its obligations and duties which would assist the Agent in the Affidavit of Stewart Neville Pascoe the real estate agent who was the director of the plaintiff, Wilkinson Real Estate. Para 20 of his Affidavit stated as follows;

’20. I later received further advice from Thompson Playford as to the merits of the Motion. They advised that whilst it was likely the court would reject the Motion on the basis of the lack of merits of Mr Tramontano’s claim against Wilkinsons, there was a risk that it would not. As there would be no prejudice to Wilkinsons, they advised that Mr Tramontano might potentially succeed in joining Wilkinsons to the proceedings. In order to avoid that risk and to provide Wilkinsons with costs protection should Mr Tramontano later join Wilkinsons to the proceedings, the legal advice from Thomson Playford was that Wilkinsons should offer to bear its own costs in the event that Mr Tramontano withdrew the Motion (“the settlement offer”). They advised me not to accept the 27 October 2004 offer.’

45    I do not believe that evidence assists the plaintiff in proving its proper performance of its obligations and duties.

46    There would therefore appear to be no evidence from or on behalf of the plaintiff upon which I could make the finding as to the Agent’s proper performance of its duties and obligations. Somewhat surprisingly however the Affidavit of Mark Robinson, the defendant’s solicitor set out some of the evidence filed in the Motion and some statements which were apparently to be relied on by the plaintiff in the proceedings for damages. He annexed a copy of the Affidavit of Joanne Ruth Butler, the Agent’s property manager who looked after Mr Hill’s account. Such Affidavit provided some evidence as to her properly carrying out her duties. However, her evidence would also indicate that Mr Hill properly attended to his obligations as Owner to the tenant. Her Affidavit deposed that in relation to the two complaints made by Mr Tramontano, the complaints were referred immediately to Mr Hill who had them attended to. To Mr Robinson’s Affidavit were also annexed statements of the plaintiff, Mr Tramontano, his partner and other witnesses. Clearly I am not in a position to decide any question of negligence. The evidence indicated that the plaintiff’s claim was eventually settled for the sum of $15,000 plus costs. On the information attached to Mr Robinson’s Affidavit it would seem to me, at least arguable, that if there was some basis on which Mr Hill was liable, then the same basis may well have been open as against the Agent.

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.

48    I have come to the view that I am not prepared to find that there is evidence which would allow me to positively find that the Agents properly performed their duties and obligations under the Management Agency Agreement. I repeat that this case is different from the other cases to which I was referred, because in those cases after a full hearing there was a finding by the court that the Agent was not negligent. There has been no such finding in these proceedings or indeed in the proceedings by the plaintiff Mr Tramontano. Absence such a finding in those proceedings and absence evidence which would allow me to make a finding in these proceedings, then in my view the plaintiff’s claim must fail.

49    In coming to that finding I relied on the oral submissions of Mr Torrington for the plaintiff and I took into account the oral submissions of Mr Priestly. When the matter was raised in submissions Mr Priestly submitted that his client could rely on the Affidavit of Joanne Butler, attached to Mr Harrison’s Affidavit and submitted that there was no evidence that the Agent did not properly carry out its duties and obligations. He relied heavily on the decision of Judge Neilson in George Halmay, but in that case there was a full hearing on the question of negligence and the judge found the Agent not negligent. There has been no such full hearing in this matter, and as I have previously indicated, I consider that the crucial difference in this case. I am not satisfied that the Agent can rely on the negative proposition that is, that there was no evidence in this case that it did not properly carry out its duties and obligations. I am satisfied that the onus was on the plaintiff to prove that it did properly carry its duties and obligations, and I am not satisfied that there is sufficient evidence for me to find that it did so.

50    In coming to that view, I am satisfied that the construction which I have placed on cl 16 adopts the approach favoured by Kirby J in Andar Transport Pty Ltd (supra) (see para 13 hereof).

51    I propose to deal quickly with the other submissions relied upon by Mr Priestly and Mr Torrington. Mr Torrington submitted that I would find that the indemnity does not apply for the reasons indicated by the primary judge and subsequently upheld by the Court of Appeal as set out in the judgment of His Honour Tobias JA in Colliers Jardine. I considered that there was considerable merit in that submission, but in the end the absence in this matter of a clause similar to cl 6 in the Agreement in Colliers would distinguish that case from this one, and I do not accept that submission.

52    I was initially impressed by the submission of Mr Torrington based on the decision of Her Honour Beasley JA in BCS Strata Management to the effect that the Agent in that case in defending the claim for negligence against it, was defending a separate and distinct claim of negligence arising out of its own duties under the Management Agreement and was not therefore entitled to indemnity by the Owner. That was the factual situation in this matter, and whilst I might agree as a matter of fairness that should be the position here, the indemnity in this matter was much wider and clearly extended to indemnifying the Agent against claims (including the costs of successfully depending such claims) made against it arising out of its proper performance of the contract, and I am therefore of the view that such decision does not assist the defendant in this matter.

53    The final basis upon which the defendant relied was that the actions of the Agent when settling the plaintiff’s Motion were such as to amount to a waiver of its rights to pursue Mr Hill for the costs under the indemnity. That submission raised difficult and complex questions which in view of the decision I have come to in favour of the defendant, I do not propose to finally determine. The plaintiff in its Motion did not even seek costs against the Agent but sought that such costs should be costs in the cause. I am satisfied that the normal practice is that in such circumstances if a plaintiff is asking for an indulgence, even if the indulgence is granted, the plaintiff would normally have to pay the respondent’s costs. The Agent had already obtained an order for the costs of one day of the Motion against the plaintiff. I am satisfied the Agent in return for the plaintiff withdrawing the Motion against the Agent, gave up its rights to costs against the plaintiff in circumstances where it would certainly have been entitled to such costs against the plaintiff if the Motion was dismissed, and very more probably than not, would have recovered the costs even if the plaintiff had succeeded in obtaining the order in the Motion. The Agent therefore had very strong prospects of obtaining an order against the plaintiff for the costs of the proceedings irrespective of the result. The Agent gave up those rights to an order for costs, but then sought to recover the very same costs from the Owner. The solicitors for the Agents had informed the defendant’s solicitors of the intention of the Agent to rely on the indemnity. The Agent’s solicitors were informed that the Owner was uninsured in relation to that potential liability. The Agent, although contracted to the Owner by the Management Agency Agreement reached the settlement with the plaintiff without informing or notifying the Owner of the consequences of the basis of settlement upon the Owner. I have grave doubts whether in so doing the Agent was properly performing its obligations to the Owner pursuant to the Agreement. However, as indicated previously, it is not now necessary for me to finally determine that matter.

54    In view of the decision I have come to, it is not necessary for me to consider the question of quantum.

55    There will be judgment and verdict for the defendant.

56    I would propose that the plaintiff pay the defendant’s costs and disbursements as agreed. In default of agreement within 28 days the costs are to be assessed under the Legal Profession Act.

57    I shall hear from the parties in relation to the proposed cost order.