Lugo (A Pseudonym) v R
[2020] VSCA 7
•6 February 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0023
| WILLIAM YEUNG | Applicant |
| v | |
| SANTOSA REALTY CO PTY LTD | First Respondent |
| ELIZABETH ANNE POTTER | Second Respondent |
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| JUDGES: | TATE, KAYE and NIALL JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 13 November 2019 |
| DATE OF JUDGMENT: | 6 February 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 7 |
| JUDGMENT APPEALED FROM: | [2019] VCC 10 (Judge O’Neill) |
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OCCUPIER’S LIABILITY – Personal injury – Claim brought by tenant against landlord and managing real estate agent – Property not in good repair – Failure by agent to inspect property and notify landlord of obvious defects – Apportionment of liability between tortfeasors – Whether landlord delegated duty of care to agent – Whether judge erred in finding that landlord failed to take any real steps to ensure property was in good repair – Jones v Bartlett (2000) 205 CLR 166 applied – Bevillesta Pty Ltd v Liberty International Insurance Co [2009] NSWCA 16 and Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196 discussed - Wrongs Act 1958 ss 14A, 14B, 24(2) – Leave to appeal granted – Appeal allowed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr J Ruskin QC with Mr S Gladman | Mills Oakley |
| For the First Respondent | Mr J Gorton QC with Mr C Madder | Moray Agnew |
| For the Second Respondent | No appearance |
TATE JA
KAYE JA
NIALL JA:
TABLE OF CONTENTS
| Introduction and summary......................................................................................... | 1 |
| The management agreement between Yeung and Santosa..................................... | 3 |
| The lease between Yeung and Potter......................................................................... | 5 |
| Potter’s fall on the back stairs................................................................................... | 6 |
| The proceedings in the County Court........................................................................ | 6 |
| The evidence at trial..................................................................................................... | 7 |
| The judge’s reasons....................................................................................................... | 10 |
| Grounds of appeal........................................................................................................ | 19 |
| Did Yeung delegate his duty of care to Santosa? (Grounds 1 and 2).................... | 20 |
| Did Yeung take real steps to keep the premises in good repair? (Grounds 3 and 4)...................................................................................................................................... | 28 |
| Was it irrelevant that Yeung received rental income? (Ground 5)......................... | 31 |
| Was the apportionment wrong? (Ground 6)............................................................. | 32 |
| Conclusion..................................................................................................................... | 34 |
Introduction and summary
On 19 May 2014, a tenant of residential premises, Ms Potter (‘Potter’), slipped at night on back stairs that were worn, slippery, unlit and had no handrail. She fractured her right ankle. She brought proceedings for negligence in the County Court against the owner of the premises, Mr Yeung (‘Yeung’), and the real estate agent that managed the premises, Santosa Realty Co Pty Ltd (‘Santosa’). The judge found that Yeung and Santosa had each breached their duty of care to Potter and were liable to pay damages totalling $433,899.80. He apportioned two-thirds of that liability to Yeung and one third to Santosa.[1]
[1]Potter v Yeung [2019] VCC 10 (‘Reasons’).
Yeung seeks leave to appeal from the apportionment of that liability.[2]
[2]Santosa is the first respondent to the application and Potter is the second respondent. Potter did not take an active role in the appeal and indicated she would abide by the decision of the Court.
Yeung claims that the orders of the judge should be set aside because it was the failure of Santosa, and specifically Ms Hunter (‘Hunter’), a licensed real estate agent employed by Santosa, to inspect the back stairs and detect their defects, especially their slipperiness, and report to Yeung for repair, which led to Potter incurring her injuries. He claims that Santosa should indemnify him in respect of all his liability to Potter because he had relevantly delegated the performance of his duty of care as landlord and occupier to Santosa. Alternatively, he claims that this Court ought make a just and equitable apportionment for itself having regard to the extent of each party’s responsibility for the damage Potter has suffered.
For the reasons set out below, we would grant leave to appeal and allow the appeal.[3]
[3]In what follows we refer simply to ‘the appeal’.
In our view, the judge’s apportionment of liability between Yeung and Santosa is inconsistent with several critical findings he made that: (1) Under the agreement between Yeung and Santosa, Santosa had a duty to inspect the premises and report visible or obvious risks to Yeung for repair;[4] (2) Santosa failed to carry out any proper inspection of the back stairs;[5] (3) the defects that caused Potter to fall were not latent defects, but ones that would have been visible on ordinary inspection;[6] (4) given the defects, the risk of someone slipping was both foreseeable and not insignificant, with a further risk of a significant injury;[7] (5) if Santosa had carried out an inspection it would have seen the defects and arranged for repairs, with the approval of Yeung;[8] and (6) if the risk of slipping had been obviated, Potter’s injury would not have occurred.[9]
[4]Reasons [125], [135]. See [45], [51] below, respectively.
[5]Reasons [83]. See [46] below.
[6]Reasons [155]. See [57] below.
[7]Reasons [165]. See [61] below.
[8]Reasons [168]. See [63] below.
[9]Reasons [168]. See [63] below.
The basis of Yeung’s liability to Potter in negligence is breach of the duty to take reasonable care in respect of the premises against the foreseeable risk of injury with respect to obvious defects. The performance of this duty was wholly delegated by Yeung to Santosa. It is irrelevant whether or not Yeung retained responsibility, completely or residually, for latent defects arising from the age and nature of the premises or whether identifying those defects would require a program of safety audits and maintenance. The apportionment of liability for injuries caused by latent defects does not arise in this case.
We consider that Santosa should indemnify Yeung in respect of all his liability to Potter.
The management agreement between Yeung and Santosa
Santosa was engaged by Yeung to manage the premises on his behalf pursuant to a management agreement dated 9 January 2008 (‘the management agreement’). Santosa warranted to Yeung that it was a member of the Real Estate Institute of Victoria (‘REIV’), and Yeung gave evidence that, in reliance on that accreditation, he ‘handed management of the property to Ms Hunter and trusted the estate agency as it was accredited by [REIV]’.[10] He relied on the professional integrity of Santosa to work conscientiously and report truthfully given it was a licensed agent.
[10]Reasons [122].
Yeung had purchased the premises in December 1992 as an investment, when he was living in Canberra, and had visited on only a few occasions over the years. He could not recall whether he had visited the premises in the 10 years before Potter had her accident.[11] During the duration of his ownership he had either been working overseas or, since returning to Australia in 2006, living in Queensland.[12]
[11]Reasons [58], [122].
[12]Reasons [3], [51], [134].
The management agreement provides that ‘The Agent will manage the property and the client shall pay the managing fee as set out in this Authority’.
The ‘Agent’s Authorisation’ includes:
üInitial Leasing.
üSubsequent re-leasing to initial tenant or assignee.
üSubsequent leasing to new tenant.
üOn-Going Management of the property.
The General Conditions of the management agreement defines ‘managing’ in the following terms:
1.11‘Managing’ is managing the Property and/or the collection of rent, body corporate contributions, interest and/or other fees and amounts in any way connected with the Property. …
There was no evidence that there was any specific level of services that had been negotiated.
The particulars of appointment provide for Santosa to undertake urgent repairs at the property up to the value of $1,000 excluding GST. Yeung gave evidence that the $1,000 delegation was for urgent repairs, and the practice followed by Hunter was to always come to him for approval for routine maintenance and repair items before they were undertaken.[13]
[13]Reasons [53].
Yeung warranted that the premises were not in a dangerous condition:
The Client [Yeung] warrants to the Agent [Santosa] that the Property (which includes all its fixtures, fittings and any goods and chattels leased with the Property) is not in a Dangerous Condition and also warrants that
if at any time the Client becomes aware of any Dangerous Condition the Client will immediately notify the Agent of the Dangerous Condition both verbally and in writing and
if anybody is injured because of the Dangerous Condition of the Property the Client shall fully indemnify the Agent (and anybody engaged through the Agent) against any resulting claim or proceeding.
If the Client is advised by the Agent of potential or actual problems with the Property, the advice is deemed to be sufficient notice to the Client of a Dangerous Condition.[14]
[14]Reasons [204].
The term ‘Dangerous Condition’ is defined to mean ‘any physical defect in the property that may injure anybody on the Property.’
The lease between Yeung and Potter
On 18 September 2013, Potter and her co-tenant, Mr Eden (‘Eden’), entered into a 12-month lease for the premises, commencing on 28 September 2013 (‘the lease’). Among the conditions of agreement is cl 2, which provides that:
2 Condition of the Premises
The Landlord shall make sure that the premises are maintained in good repair.
Clause 13 of the additional terms of the lease provides for the tenant to notify the landlord of any defects:
13 The Tenant shall notify the Landlord or Agent immediately upon becoming aware of any defects in the premises or any other matter [that] gives rise to a liability pursuant to the Occupiers Liability Act 1983.
Clause 30 of the additional terms deals with the tenant’s obligation to replace defective light tubes and globes:
30The Tenant shall at the Tenant’s expense replace all lighting tubes and globes to the premises, which become defective during the term of the tenancy unless the defect is proven to be caused by faulty wiring.
Clause 50 of the additional terms provides for right of access by the agent for routine inspections, which the landlord may attend:
50The Tenant understands that routine inspections will be carried out during the tenancy and that the agent will use the office keys to gain entry [as] necessary. The Tenant understands that the Landlord may attend routine inspections.
Potter’s fall on the back stairs
At about 9:00 pm on 19 May 2014 Potter was ascending the back stairs of the premises when she slipped on the second or third stair, fell backwards onto the ground, and landed on her right ankle at the bottom of the stairs. She suffered a transverse fracture across the lower part of the calcaneus with extension of the fracture to the calcaneocuboid joint and the subtalar joint. As a result of having to use crutches to support her right ankle, she subsequently sustained a full-thickness tear to the supraspinatus tendon of her right shoulder some weeks later.[15]
[15]Reasons [211].
Following the accident, Eden contacted Hunter to tell her that Potter had fallen and that the stairs had to be fixed and a handrail installed. Those works were done in July 2014 at a cost of $572.[16] The works involved installing replacement stairs which have four treads instead of three, and putting in a handrail.[17]
[16]Reasons [27]–[28].
[17]Reasons [163].
The proceedings in the County Court
Potter brought claims against Yeung in negligence, for breach of occupier’s duty under s 14B of the Wrongs Act 1958, for breach of statutory duty under the Residential Tenancies Act1997 (‘the RT Act’) and for breach of the lease. She also brought a claim in negligence against Santosa alleging a failure to inspect the premises adequately or to report to Yeung that the stairs were ‘rotten and slippery and in need of repair’; a failure to report to Yeung that a handrail was needed and the lighting was inadequate; and a failure to report that the patio roof was leaking causing the stairs to be rotten and slippery.[18]
[18]Reasons [8].
Both Yeung and Santosa admitted a duty of care to Potter but denied any breach. Yeung denied breach of the lease.[19] He also asserted that any duty of care he owed to Potter was delegated to Santosa. Both defendants alleged contributory negligence on the part of Potter.
[19]Yeung also denied that the RT Act gave rise to a private right to common law damages. The judge dismissed Potter’s claim for statutory breach on the basis that the RT Act was not intended to give a private right for compensation for injury suffered in relation to rented residential premises: Reasons [113]–[114].
Yeung and Santosa sought contribution from each other on the standard basis:
as may be found by the Court to be just and equitable having regard to the extent of your responsibility for such damages [as the Plaintiff may recover] on the grounds that your negligence and/or breach of duty caused or contributed to the Plaintiff’s injury, loss and damage as set out in the Statement of Claim annexed to the Writ.
The evidence at trial
Hunter gave evidence that two categories of reports were prepared in respect of tenancies: condition reports which recorded the condition of the vacant premises at the start and end of a tenancy; and reports following routine inspections conducted by Hunter three months after the tenant first moved into the premises, and then six monthly during the term of the lease.
She gave evidence that she regarded her role as managing agent, in general, as including providing tenants with information about how to raise maintenance issues; asking tenants about any maintenance matters during routine inspections; following up any maintenance with the owner; obtaining quotes if the owner wished and ‘keeping an overall view of the property’. Hunter said that the condition report was provided to incoming tenants as part of a ‘pack’, which also included forms for requesting repairs, both urgent and non-urgent.[20] Her evidence was that the condition report was to check things such as the number of power points, light fittings, and whether there was a handle on the doors — she would use the previous one to see if there had been any change and note differences.
[20]Reasons [63].
Hunter said that condition reports were not provided to owners and she did not provide them to Yeung.[21] However, she provided Yeung with the routine inspection reports.
[21]Reasons [62].
Prior to the commencement of the lease between Yeung and Potter, Hunter conducted an inspection of the premises and prepared a condition report.[22]
[22]This was dated 26 September 2013.
With respect to the back stairs of the premises, the condition report has a notation next to the items ‘Patio/steps’: ‘Laserlight, wooden deck, shade cloth’. It does not record any problems with the back stairs. There is no mention of the floodlight not working nor the absence of any handrail. A series of photographs of the premises is appended to the condition report, including one of the back patio and stairs, which depicts the stairs as being intact. This is not an accurate depiction of the condition of the back stairs at the relevant time.[23] A coloured larger format version of that photo was tendered at the trial as exhibit A. As noted, Yeung was not sent copies of condition reports.
[23]See [35] below.
Hunter gave evidence that at the time of this inspection, there was no power to the premises and so she could not see which lights worked and which did not.
In December 2013, Hunter conducted a routine inspection of the premises. She gave evidence that during this inspection she took notes; that the tenants were in attendance; that it was her standard practice to go to the back garden; and that no issues were raised by the tenants in relation to the back stairs, the outdoor light or the lack of any handrail.
The inspection report has next to the item ‘Backyard ** Deck/Patio’ a tick in the ‘Clean’ column and a tick in the ‘Good Repair’ column and nothing in the ‘Notes’ column. It does not have any photographs of the premises attached.
Under cross-examination, Hunter said that the routine inspection reports were really aimed at whether the tenants were keeping the premises in a reasonable condition during the tenancy (that is, not punching holes in the walls or damaging things), rather than for maintenance generally, although she said if she noticed a maintenance item that the tenant had not reported, she would include that in the report. However, she said she was not a qualified builder, so there were ‘a lot of things [she] was not aware of’.
Potter disagreed with Hunter’s assessment in the routine inspection report of the state of the back stairs.[24] Her evidence, which the judge accepted[25] and in respect of which there was no challenge on the appeal, was that the condition of the back stairs from the beginning of the lease until the date of her fall was as depicted in a set of photographs which were tendered as exhibit B at the trial. Those photographs show the wooden stairs as being weathered, with the lowest tread of the three stairs, which had come away from the side stringer boards, resting on the ground.[26]
[24]Reasons [29].
[25]Reasons [76]. This led the judge to conclude that Yeung was in breach of cl 2 of the lease. See [60] below.
[26]The judge noted that evidence was also given by one of the previous tenants, Antony Gibbons, that exhibit B ‘best depicted the state of the stairs during his tenancy’: Reasons [34].
Potter’s evidence was that, with respect to the routine inspection of December 2013, Hunter wandered about the premises, but did not go outside.
Yeung gave evidence of receiving monthly reports or statements that listed invoices for repairs or work that was done. He said he did not ever receive the condition reports, which were between the tenant and the agent. He saw Hunter’s role as advising him on what repairs and maintenance were needed and he waited for her to tell him what needed to be done, and then he would do it.
There is no evidence that Yeung ever saw the photographs of the stairs in poor repair before Potter’s fall. When he was shown them in cross examination, he agreed that the state of the stairs as depicted in exhibit B indicated they were not in good repair. Yeung said that he could not recall doing any prior work to the back stairs, but he said he received no communication of any sort from Santosa regarding the condition of the back stairs before Potter’s fall.
There was some divergence in the evidence about whether Yeung was generally responsive about paying for repairs when he was notified about them. Hunter gave evidence that Yeung did not want to spend money on the premises and this was ‘always an issue’.[27] She agreed that it was difficult to get approval from Yeung to spend money and he was parsimonious about paying for recommendations to improve the premises. She said houses of the age of the premises require regular maintenance but during her time managing the property, she did not think it had been repainted or that the carpets had been replaced. She could not recall plumbing work to the toilets or bathrooms. She thought the place was fairly original, although she was not sure. She said she could not get very much done so would do what she needed to keep the premises safe.[28] She said that if she had tried to identify every item of damage, it would take her years.[29]
[27]Reasons [66].
[28]Reasons [72].
[29]Ibid.
Yeung said that it was his practice to approve all repairs requested by Hunter.[30]
[30]Reasons [56].
The judge’s reasons
The judge accepted Potter as a witness of truth.[31] He accepted her evidence that when she ascended the back stairs on 19 May 2014 the stairs were ‘very slippery and that caused her to miss her footing’.[32] He was satisfied that at the commencement of Potter’s lease, and on the day of her fall, the second and third stairs ‘were worn and slippery’ and that it was foreseeable that someone using the stairs, in particular at night when it was wet, would fall due to their state.[33] He accepted evidence from a mechanical engineer, John Dimopoulos, that if the stairs had had some form of tread or slip-resistant material that would have likely reduced the risk of slipping.[34] He found that if a handrail had been in place, given that on the night Potter was not carrying anything, she probably would have used it and this ‘would have reduced the risk of falling’ although it was difficult to say with certainty that it would have prevented her fall.[35] He also accepted Potter’s evidence that the floodlight was not working from the start of the lease until after her fall[36] and if it had been working it would have reduced the risk of her falling but that it was impossible to say that a light would have prevented the fall.[37] The judge summarised his findings about the accident in the following terms:
In summary, I am satisfied that on the evening in question, the second or third step which Ms Potter ascended was in a worn, dilapidated and very slippery condition, wet from the light rain, and it was dark as there was no light in the immediate vicinity. Those factors were the cause of her fall. Had there been present a slip-resistant tread or nosing on the stair, a handrail or overhead light, the risk of the plaintiff falling would be significantly reduced.[38]
[31]Reasons [75].
[32]Reasons [83].
[33]Reasons [150].
[34]Reasons [87].
[35]Reasons [84].
[36]Reasons [12], [76].
[37]Reasons [84].
[38]Reasons [90].
The judge rejected the submission that there was any contributory negligence on the part of Potter. Potter was in a very different position to Yeung and Santosa; her obligation to report any defects or damage, either under the lease or under the RT Act, was confined to defects or damage that arose after the commencement of the lease.[39] Moreover, because the light was ‘not operating’ from the commencement of the tenancy, cl 30 had no application.[40]
[39]Reasons [194]–[195].
[40]Reasons [175]. See [19] above.
He accepted that neither Potter, nor the previous tenants, made any complaints to Hunter about the state of the stairs, the lighting or the absence of a handrail, and that Yeung was therefore not aware of any issue about them.[41]
[41]Reasons [88], [123], [206].
He found that the first time that Yeung became aware of any problem with the back stairs was when Hunter emailed him about Potter’s fall and he then approved the repair works.[42]
[42]Reasons [123].
With respect to the management agreement, the judge observed that, save for Santosa contracting to endeavour to lease the property for a fee and then being obliged to ‘manage the property’, while Yeung warranted that the property was not in a dangerous condition, the management agreement ‘spoke little of the obligations, respectively, of the owner and the agent.’[43] The obligations that were identified were that Santosa ‘was responsible for obtaining tenants to lease the property, receiving the rent, arrange repairs (subject to the authorisation of Mr Yeung) and inspecting the property for the purpose of condition reports and routine inspection reports.’[44]
[43]Reasons [125].
[44]Ibid.
He rejected Hunter’s evidence that for the purposes of her inspection report of December 2013 she went out to the back of the premises, that she was able to walk on the back stairs safely, and that she recalled there being no issues in respect of the back stairs at this time. He found that Hunter had no specific recollection of inspecting the premises, ‘in particular given she was managing something in the order of two hundred properties’, and she either did not inspect the back stairs, or if she did, she did not notice that they were worn and slippery.[45] The judge was not satisfied that Hunter specifically remembered going into the back garden area.[46]
[45]Reasons [83].
[46]Reasons [82].
The judge noted the submissions made on behalf of Yeung that the routine inspection reports were ‘in part at least, designed to check for defects in the property’.[47] He observed, however, that an agent does not have the expertise to determine a range of potential defects or hazards which may occur at a rented property. He said:
in relation to potential defects, the agent is in no better position than the landlord to identify them. The agents are not builders, engineers, plumbers nor electricians. They do not have the expertise to determine a range of defects and hazards which may occur at a rented property.[48]
[47]Reasons [132].
[48]Reasons [134].
The judge accepted that a landlord’s duty ‘is capable of being delegated’ in circumstances such as these, where no hazardous activities are being carried out upon the premises.[49] In doing so, however, the landlord must exercise reasonable skill and care in engaging another person to perform the duty. The judge referred to the observations of Hodgson JA (with whom Gyles AJA and Nicholas J agreed) in Bevillesta Pty Ltd v Liberty International Insurance Co[50] that:
There is no doubt also that this occupier’s duty of care is ‘delegable’, in the sense that it may be discharged in whole or in part by the occupier’s exercise of reasonable skill and care in engaging someone else to take steps to keep the property safe either generally or in particular respects. Discharge of the duty in this way requires reasonable skill and care in the selection of the other person, in arranging the terms of engagement of that person, and in confirming that the person does take appropriate steps. If it is reasonable for an occupier to seek to discharge or partly discharge the occupier’s duty in this way, and the occupier does exercise reasonable skill and care in all these respects, then if a person coming on to the property is injured due to the failure of the other person engaged to exercise reasonable skill and care to keep the property safe, the occupier may escape liability.[51]
[49]Reasons [120]. Jones v Bartlett (2000) 205 CLR 166.
[50][2009] NSWCA 16 (‘Bevillesta’).
[51]Ibid [53] (emphasis added). Reasons [126].
He also considered Libra Collaroy Pty Ltd v Bhide[52] as an example where the owners of the property had not fulfilled their obligation to confirm that the delegate, the agent, was taking appropriate steps.[53] In that case, although the owners had initially delegated their duty to the agent, they had personally undertaken annual inspections of the property and received complaints over time via the agent about the integrity of a wooden balcony, which then collapsed. The NSW Court of Appeal[54] held that the owners were not absolved of their duty on the basis of the delegation because they ought to have formed the view that the agent was not discharging its delegated duties competently. This was because they were aware both of delays and that an appropriately qualified person had not been retained by the agent to carry out the remedial work. The owners ought to have directed the agent to engage an expert to investigate the integrity of the balcony.
[52][2017] NSWCA 196 (‘Libra’).
[53]Reasons [127]–[128].
[54]McColl JA, with whom Meagher and Ward JJA agreed.
The judge held that, while it was clear that Yeung relied on Santosa to carry out a range of tasks in relation to the management of the property,[55] it was not sufficient for Yeung simply to ‘wash his hands of all responsibility’[56] to inspect the premises and instead to rely on a real estate agent, who is in no better position to identify potential defects than a landlord. He said:
In my view, Mr Yeung cannot wash his hands of all responsibility in respect of the state of rented premises. While clearly he relied upon Santosa to arrange tenants and inspect the premises, premises of that age may be the subject of a range of defects from, on the one hand, substantial structural problems, through to electrical and plumbing issues and down to more superficial problems, including the state of the rear steps. In the modern environment, there is an obligation, in my view, upon a landlord to attend premises from time to time and have regard to that range of possible defects. … the landlord has the obligation to ensure that persons upon the premises, including tenants, are not injured by reason of the state of the premises, or of things done or not done in relation to the state of the premises. That obligation is not one which can be met by simply saying that the matter is in the hands of real estate agents.[57]
[55]Reasons [133].
[56]Reasons [134].
[57]Ibid.
He went on to say that although the back stairs represented a slipping hazard and this ought to have been detected and assessed by Santosa on inspection, nevertheless Yeung could not absolve himself of responsibility. Yeung ought to have inspected the premises on a reasonably regular basis to make an assessment of its state of repair to uncover hazards that may cause injury:
As I have said, I am satisfied that the steps at the rear of the premises did represent a slipping hazard. It was a hazard that ought to have been seen and assessed by the agent in the course of the various inspections, and been the subject of a report to Mr Yeung to carry out repairs; however, I am of the view that Mr Yeung could not abrogate his responsibility in relation to those steps in circumstances where he rarely, if ever, attended the property. He ought to have attended on a more regular basis to inspect the property and to make an assessment. This ought to have occurred on a reasonably regular basis, perhaps at the outset of a new lease. Older houses need some form of reasonably regular inspection by an owner when they are tenanted, with an eye to uncovering anything which may constitute a hazard and cause injury. That was not done by Mr Yeung.[58]
[58]Reasons [135] (emphasis added).
He held that Yeung’s failure to undertake regular inspections of the premises meant he was in breach of his common law duty, and but for his negligence, the fall would not have occurred.[59]
[59]Reasons [156].
The judge, while accepting that the duty of care owed by Yeung to Potter was capable of delegation, was not satisfied that Yeung had in fact delegated his duty. He said, at [136] of the Reasons:
In the circumstances of this case, I am not satisfied that the duty Mr Yeung owed, either in general negligence, or as an occupier under the provisions of the Wrongs Act in relation to the area at the rear of the premises, was delegated to the agent.
This conclusion is challenged on the appeal.[60]
[60]Ground 1 of the grounds of appeal. See [67] below.
The judge went on to observe that a landlord is required by s 68 of the RT Act and Yeung was required by cl 2 of the lease to ensure the premises are maintained in good repair at the commencement of any lease, and those ‘statements inform, to some extent, the duty of care owed by the landlord’.[61] He therefore concluded that the landlord’s obligation was to ensure that the state of the premises was such that a person coming onto them would not be injured:
I am satisfied that the extent of the landlord’s duty included an obligation to put the premises in good repair. Put another way, the obligation of the landlord was to ensure that the state of the premises was such that a person coming onto them would not be injured by reason of the state of the premises, or of things done, or omitted to be done, in relation to the state of the premises.[62]
[61]Reasons [152].
[62]Reasons [154] (emphasis added).
The judge found that despite the premises being of an ‘age where it required reasonably regular maintenance and repair’,[63] there was no evidence of any significant maintenance being undertaken to the premises at any time during Yeung’s ownership of it.[64] He held, at [155] of the Reasons, that, given the age of the premises, they required reasonably regular maintenance and repair, and this obliged Yeung to inspect the premises, including the back stairs, at least at the outset of the tenancy ‘to ensure the premises were in reasonable tenantable repair’.
[63]Reasons [134].
[64]Reasons [155].
In the context of his discussion about Yeung’s obligations, the judge reiterated that the state of poor repair of the back stairs of the premises was not a latent defect and would have been revealed on ordinary inspection. More specifically, he found that the ‘worn and slippery state’ of the stairs and the issue with the lighting was not latent and would not have required any particular expertise to detect; those issues ought to have been revealed on an inspection. He said:
This is not a situation where the defect was latent. It would require no particular expertise to discover the state of the stairs or lighting.
Given the slippery and worn state of the stairs, as I have already observed, an inspection by the owner ought to have revealed they needed attention or repair, and that the lighting over the steps ought to have been working and, if not, replaced, then a handrail be put there to assist persons ascending and descending the stairs.[65]
[65]Reasons [155]–[156] (emphasis added).
He went on to conclude, at [156] of the Reasons, that Yeung breached his obligation to ensure the premises were in reasonable tenantable repair by failing to inspect the premises and undertake the relevant repairs that an inspection would have revealed were necessary. He said: ‘The owner did none of these things. He was in breach of the common law duty. But for his negligence, the fall would not have occurred.’
The finding in [155]–[156] of the Reasons that Yeung breached his duty of care by failing personally to inspect the premises and remedy defects he observed on inspection is challenged on the appeal.[66]
[66]Ground 2. See [67] below.
He also held that Yeung was in breach of the lease.[67] Given the age of the premises, and in the absence of evidence that any work had been carried out on the back stairs, he held that it must have been foreseeable to Yeung that there was a clear risk that, if they were not in good repair, someone using them at night, when it was raining, would slip and injure themselves.[68] Since the stairs were in a ‘worn, slippery and degraded’ state, that condition taken together with the failure to provide lighting, meant that, at the outset of the lease, that part of the premises was not in ‘good repair’ in breach of cl 2 of the lease.[69]
[67]Reasons [188].
[68]Reasons [180].
[69]Reasons [181], [187].
With respect to Santosa’s liability, the judge considered that it was ‘clear Santosa owed Ms Potter a duty to take reasonable care in respect of the state of the premises against the foreseeable risk of injury’.[70] As noted,[71] the judge rejected Hunter’s evidence that she had used the back stairs during her inspection and on that basis assessed them as safe. He preferred Potter’s evidence that the back stairs were worn and very slippery and as depicted in the exhibit B photographs.[72] He said:
Given the state of the stairs, I am satisfied that the risk of someone slipping was foreseeable and was not insignificant. Were a person to slip, there was a risk they might suffer a significant injury, as occurred to [Potter].[73]
[70]Reasons [157].
[71]See [46] above.
[72]Reasons [83]. See [35] and [38] above.
[73]Reasons [165].
He held that it would have been relatively obvious to Hunter, had she inspected the back stairs, that they were in a ‘dilapidated, worn and slippery condition, in particular if wet’.[74] Further, the ‘fact that the bottom step was lying on the ground was a clear marker of the need for maintenance generally’.[75] Even if the problem with the light was not detected by Hunter during the initial inspection for the condition report, it ought to have been apparent by the time of the routine inspection in December 2013. And given the state of the back stairs, ‘it would have been reasonably obvious the provision of a balustrade would have helped reduce the risk.’[76]
[74]Reasons [165].
[75]Ibid.
[76]Reasons [166].
Hunter knew the property was of an age where it required work to be done but that little work had been carried out, and this circumstance ‘ought to particularly have alerted [her] to be on the lookout for things such as slipping hazards’.[77] Had she observed the hazard, it would have been ‘relatively simple’ to arrange for a quote and for the repair to be undertaken. The judge was satisfied that, but for that negligence having occurred, the risk of slipping ‘would have been obviated’, and the ‘injury would not have occurred’.[78] Santosa therefore breached its duty to Potter.[79]
[77]Reasons [167].
[78]Reasons [168].
[79]Ibid.
Having found both Yeung and Santosa liable for Potter’s injuries, the judge addressed the issue of apportionment of liability between Yeung and Santosa by noting that Yeung lived interstate and retained Santosa to manage the premises and carry out inspections ‘on a far more regular basis’.[80] He had found that, relevantly, Hunter did not make an adequate inspection, or made no inspection at all.[81] At [201] of the Reasons the judge found that Yeung should bear major responsibility for Potter’s loss because of Yeung’s failure to take any real steps to ensure the premises were in good repair when he knew the history of the premises and was in the best position to know what needed to be done in relation to the state of the premises; he stood to benefit from the rental income, and was the person who decided what should be spent on it:
Given my findings in relation to the obligations upon Mr Yeung as owner, and his failure to take any real steps to ensure the premises was in good repair, to my mind, he ought to bear major responsibility for the loss suffered by Ms Potter. He was the owner of the premises. He stood to benefit from the rental return. He was the person effectively in control of the purse strings when it came to spending money on the property. He was in the best position to know the age of the property, and what needed to be done in relation to the state of the property.
[80]Reasons [200].
[81]Reasons [202].
Yeung challenges on the appeal the proposition that he failed to take any real steps to ensure the premises were in good repair and that he was in the best position to know what needed to be done.[82] He also claims the fact that he would receive the rental income and that he was in effective control of the purse strings were irrelevant considerations that the judge impermissibly allowed to affect his discretion in apportioning liability.[83]
[82]Grounds 3 and 4. See [67] below.
[83]Ground 5. See [67] below.
The judge, at [203] of the Reasons, held that it was appropriate to apportion two-thirds of the liability to Yeung, and the remaining one-third to Santosa. This assessment lies at the heart of the appeal.[84]
[84]Ground 6. See [67] below.
Grounds of appeal
The applicant relies on the following proposed grounds of appeal:
1.The trial judge erred at [136] of the reasons in finding that the applicant had not delegated to the first respondent the duty of care that he owed to the second respondent.
2.The trial judge erred at [155]–[156] of the reasons in finding that the applicant had breached the duty of care that he owed to the second respondent.
3.The trial judge erred at [201] of the reasons in finding that the applicant failed to take any real steps to ensure the property was in good repair.
4.The trial judge erred at [201] of the reasons in finding that the applicant was in the best position to know what needed to be done in relation to the state of the property.
5.The trial judge erred at [201] of the reasons in allowing himself to be guided or affected by—
(a)the consideration that the applicant ‘stood to benefit from the rental return’; and
(b)the consideration that the applicant was ‘the person effectively in control of the purse strings when it came to spending money on the property’—
in circumstances where each of those considerations was irrelevant to the proper exercise of his discretion under s 24(2) of the Wrongs Act 1958 (Vic).
6.The trial judge erred at [203] of the reasons in finding that, in the exercise of his discretion under s 24(2) of the Wrongs Act 1958 (Vic), it was appropriate to apportion to the applicant two-thirds of the responsibility for the plaintiff’s damage.
Did Yeung delegate his duty of care to Santosa? (Grounds 1 and 2)
Yeung accepts that, at common law, as a landlord of residential premises he owes a duty to take reasonable care to avoid foreseeable risk of injury to tenants and members of their household. The duty is informed by statute.[85] Part IIA of the Wrongs Act redefines the common law duty owed by an ‘occupier of premises’.[86] Yeung is an occupier because he is ‘the landlord of premises let under a tenancy … who … is under an obligation to the tenant to maintain or repair the premises’.[87] He accepts that, under s 14B(3), his duty as an occupier of premises requires him:
to take such care as in all the circumstances of the case is reasonable to see that any person on the premises will not be injured or damaged by reason of the state of the premises or of things done or omitted to be done in relation to the state of the premises.[88]
[85]Victorian Workcover Authority v Jones Lang Lasalle (Vic) Pty Ltd [2012] VSC 412, [5] (Beach J).
[86]Ibid.
[87]Wrongs Act, s 14A(a)(i).
[88]Section 14B(4) sets out the factors to be taken into account in determining whether the duty has been discharged including (a) the gravity and likelihood of the probable injury and (c) the nature of the premises.
Yeung recognises that the judge correctly stated that the duty of care imposed on Yeung as the landlord and deemed occupier of the premises was capable of delegation.[89] The question becomes: did Yeung in fact delegate the performance of his duty of care to Santosa?
[89]Reasons [120]. See [48] above.
Yeung submits that the judge, in his discussion of whether Yeung did in fact delegate his duty to Santosa, made a number of erroneous observations that contradicted his ostensible understanding that the relevant duty was delegable, including stating that:
(1) Yeung could not ‘wash his hands of all responsibility in respect of the state of the rented premises’;[90]
[90]Reasons [134]. See [50] above.
(2) ‘the landlord has the obligation to ensure that person upon the premises, including tenants, are not injured by reason of the state of the premises, or of things done or not done in relation to the state of the premises’;[91]
[91]Reasons [154] (emphasis added). See [55] above.
(3) in a ‘modern environment, there is an obligation … upon a landlord to attend premises from time to time’;[92]
[92]Reasons [134]. See [50] above.
(4) that obligation cannot be met ‘by simply saying that the matter is in the hands of real estate agents’; [93]
[93]Ibid.
(5) ‘Yeung could not abrogate his responsibility in relation to [the] steps in circumstances where he rarely, if ever, attended the property’[94] and he ‘ought to have attended on a more regular basis to inspect the property and to make an assessment’;[95]
(6) ‘[o]lder houses need some form of reasonably regular inspection by an owner when they are tenanted, with an eye to uncovering anything which may constitute a hazard and cause injury’.[96]
[94]Reasons [135]. See [51] above.
[95]Reasons [135]. See [51] above.
[96]Reasons [135]. See [51] above.
Yeung submits that the judge’s finding that Yeung breached his duty to Potter by failing personally to inspect the property, in particular the back stairs, at least at the outset of the lease[97] cannot stand if Yeung delegated the performance of that duty to Santosa, either generally or in relation to the conduct of inspections at the premises, and he did so with reasonable skill and care. He submits that imposing an obligation upon him personally to inspect the premises to confirm that Santosa was taking appropriate steps to keep it safe would, contrary to established authority, transform the duty to exercise reasonable care into a non-delegable duty. It would be tantamount, wrongly, to requiring Yeung to ensure that Santosa exercised reasonable care in the performance of the very work that it had been entrusted to perform under the management agreement.
[97]Reasons [155]. See [56] above.
Yeung submits that the judge should have found that Yeung delegated the performance of his duty in all relevant respects given that the management agreement obliged Santosa to ‘manage the property’.[98] The judge found that ‘managing’ included conducting inspections on behalf of Yeung for the purpose of preparing condition reports and routine inspection reports[99] and he found that Yeung relied upon Santosa to inspect the premises.[100] Moreover, the comprehensive nature of the delegation was apparent from the fact that Yeung resided interstate from the date he executed the management agreement with Santosa until the date of the accident, and there was no evidence that he visited the property during this period. Nor did he have any contact with Potter or Eden, or with the previous tenants.
[98]See [8]–[12] above.
[99]Reasons [125]. See [45] above.
[100]Reasons [133]–[134]. See [50] above.
Furthermore, Yeung submits that he acted with reasonable skill and care in delegating to Santosa the performance of his duty of care because he retained Santosa on the basis that the agent had an established name in the industry, was a licensed agent, and was a member of the REIV. He received, read, and retained the routine inspection reports prepared by Hunter and sent to him every six months, but those inspection reports did not disclose any problem with the back stairs. He engaged with Hunter’s requests to carry out repairs as needed, but there was no such request for work to be done on the back stairs until after Potter’s fall.
In response, Santosa submits that whether a landlord has acted reasonably must be assessed having regard to the circumstances of the case, including in this instance the fact that the premises had deteriorated over time and had reached a state where the structure of the premises had been allowed to fall into disrepair. As the premises required reasonably regular maintenance and repair there was an obligation on Yeung (which he did not discharge) to attend the premises from time to time to assess the property, as the judge put it, for ‘substantial structural problems, through to electrical and plumbing issues and down to more superficial problems’.[101]
[101]Reasons [134].
Santosa also insists that assessing whether a landlord has acted reasonably in engaging someone else to keep a property safe depends not only on the qualifications of that person but on whether, as affirmed in Bevillesta, the landlord has taken care in ‘arranging the terms of engagement of that person’ and ‘in confirming that the person does take appropriate steps’.[102] It submits that here there was no evidence that Yeung reached any agreement with Santosa for it to take on any prophylactic or routine maintenance program for the upkeep of the property in order to identify and rectify risks that might emerge as a result of gradual wear and tear. Indeed, the evidence was that Yeung had not undertaken any such maintenance program at the premises at any time since purchase in 1992; his approach was to be entirely reactive to safety-related problems only as and when they were brought to his attention fortuitously by a tenant or an agent.
[102][2009] NSWCA 16, [53]. See [48] above.
Santosa noted that the arrangement between Yeung and Santosa was limited to that set out in the management agreement. The duties under the management agreement are confined to marketing the property; finding potential tenants; obtaining references and choosing the tenants; ensuring the tenants have all the information they are required to have, including the condition report; receiving and forwarding the rent; dealing with issues such as overgrown trees needing to be cut back or urgent repairs such as a dishwasher leaking; and making sure that tenants do not damage the property, and if they do, that they pay to rectify any damage. The limited scope of the obligations under the management agreement stand in contrast to the scope of the management agreement in Libra,[103] where it was held that the agent was obliged ‘to arrange repairs and maintenance in accordance with the Principal’s obligations to repair’.[104] Santosa submits that the management agreement here clearly does not reflect the broad scope recognised in Libra.
[103][2017] NSWCA 196, [86].
[104]Ibid [86].
Santosa emphasises that Yeung did not engage Santosa to conduct any risk assessments or audit of the premises for hazards, or to remedy derelict aspects of the premises. This was despite Yeung knowing that 22 years had passed since he purchased the premises and, in particular, despite there being no evidence that he had arranged for any specific maintenance of the back stairs during that time while their slipperiness was developing incrementally. Santosa submits that in the circumstances of the case (and especially the age and deteriorating quality of the premises), Yeung’s duty of care required that he implement a program of safety audits, risk assessment, and proactive maintenance, and it was this aspect of his duty that was not discharged by appointing Santosa as a managing agent of the ageing property on the terms of the management agreement, and no more.
In effect, Santosa seeks to uphold the conclusion of the judge that Yeung had not in fact delegated his duty of care on the basis that the obligation of Santosa to inspect the premises did not extend to risks that might be the result of wear and tear and which should be the subject of routine maintenance undertaken by the landlord. Santosa submits that the residual obligation of Yeung, which was derived from the age of the premises and Yeung’s knowledge of their age and history, was to inspect the premises from time to time and to address maintenance issues that were the product of deterioration through ageing. Santosa submits that, viewed in this light, Yeung’s duty of care was not coterminous with Santosa’s duty of care and the judge was correct to recognise this.
In our view, there is a fundamental difficulty facing Santosa’s submissions, identified by Yeung, that precludes their acceptance.
There is well-established authority for the proposition that the duty of a landlord and deemed occupier of premises to take reasonable care to avoid foreseeable risk of injury to tenants can be discharged by the exercise of reasonable skill and care in engaging an apparently competent contractor to take steps to keep the property safe, either generally or in particular respects, and in confirming that the contractor did take appropriate steps.[105] The judge correctly found that a landlord’s duty of care to a tenant is delegable.[106]
[105]Jones v Bartlett (2000) 205 CLR 166, 221 [193], 228 [217]; Bevillesta [2009] NSWCA 16 [53].
[106]Reasons [120]. See [48] above.
Under the management agreement, Santosa was engaged to conduct routine inspections of the premises and, in its inspection reports, indicate what repairs were needed. The first critical finding by the judge is that Santosa’s obligation to inspect and report included identifying and recording visible or obvious risks and reporting them to Yeung.[107] Thus, the obligation to ‘manage’ the premises included, at minimum, the identification and recording of obvious risks. Furthermore, Santosa undertook that duty in practice.
[107]Reasons [125], [135]. See [45], [51] above respectively.
The second critical finding of the judge is that Santosa failed to carry out an inspection of the back stairs at the relevant time, as it was bound to do.[108]
[108]Reasons [83], [135]. See [46], [51] above respectively.
The third critical finding of the judge is that the defects were not latent.[109] The foreseeable risk of injury here was the slippery and worn nature of the back stairs, the absence of a handrail, and the failure of the overhead lighting to work. The unsafe nature of the back stairs was obvious.[110] Detection required no specialist expertise.[111] In particular, an ordinary inspection of the back stairs would have revealed that they were worn and slippery. As the judge put it, the slippery nature of the back stairs ‘was a hazard that ought to have been seen and assessed by the agent in the course of the various inspections, and been the subject of a report to Mr Yeung to carry out repairs’.[112]
[109]Reasons [156]. See [57] above.
[110]Reasons [165]–[166]. See [62] above.
[111]Reasons [156]. See [57] above.
[112]Reasons [135]. See [51] above.
The judge’s fourth critical finding is that Santosa breached its duty of care to Potter by failing to inspect the back stairs in circumstances in which, given their state, the risk of slipping was both foreseeable and not insignificant, with a further risk of a significant injury, as occurred.[113] The breach of duty causative of loss was the failure to inspect and detect obvious or visible risks.
[113]Reasons [164]–[165]. See [61]–[62] above.
The fifth critical finding is that if Hunter had carried out the inspection that she was obliged to carry out under the management agreement, those defects would have been identified and, upon Yeung being notified, the defects would have been remedied.[114]
[114]Reasons [168]. See [63].
The sixth critical finding is that if the risk of slipping had been removed, Potter’s fall would not have happened.[115]
[115]Reasons [168]. See [63].
The critical findings reveal that, had Santosa done what Yeung required of it under the management agreement, Potter would not have fallen and suffered injury. These findings reveal, in our view, that Yeung in fact delegated the performance of his relevant duty of care to Santosa and the judge erred in failing to draw that inference. The risks that ought to have been obviated fell well within the responsibility delegated by Yeung to Santosa; indeed, in our view, they amounted to the minimum obligation required under the management agreement. In the circumstances, the basis of any liability from Yeung to Potter, the duty to take reasonable care to avoid foreseeable risk of injury from visible or obvious defects, was precisely the responsibility that was delegated by Yeung to Santosa. We consider that the critical findings made by the judge are inconsistent with his finding that in fact Yeung had not delegated his duty of care to Santosa. The submission by Santosa that, given the age of the premises, there was an obligation on Yeung to conduct an audit or risk assessment, was irrelevant to the breach found. That process may have detected and avoided the injury but it was not the breach of duty found by the judge that caused the loss; the relevant breach of duty was simply to inspect and report on visible or obvious risks.
The duty of care Yeung owed to Potter was indeed coterminous with the duty Santosa owed to Potter because Yeung’s duty had been relevantly delegated to it and it had accepted that duty. There was no relevant residual duty owed personally by Yeung to Potter. The question of delegation is fact-specific and the circumstances here demonstrate that Yeung had not reserved for himself any aspect of the responsibility to identify obvious hazards. The circumstances are quite unlike those in Libra.[116] The question, raised by Santosa, whether Yeung as lessor retained and did not delegate the duty to inspect the premises for latent defects resulting from the ageing nature of the premises (for example, a defect due to the age or inadequate design of the back stairs) is here academic and irrelevant to the circumstances of the case.
[116][2017] NSWCA 196. See [49] above.The circumstances are also quite unlike those in Nillumbik Shire Council v Victorian YMCA Community Programming Pty Ltd [2016] VSCA 192 where the Council continued to have concurrent obligations regarding the maintenance and safety of a public leisure centre and, in particular, had not delegated responsibility to the YMCA for the structural components of the centre including the structure of a handrail beside a pool (and the absence of a barrier around it) that was implicated in a fall.
Having delegated his duty of care to Santosa, there was nothing that Yeung did, or omitted to do, that placed him in breach of that duty. For the judge to determine, in the circumstances of the case, that, ‘Yeung could not abrogate his responsibility in relation to those steps in circumstances where he rarely, if ever, attended the property’[117] is tantamount to a finding that the duty Yeung owed as a landlord and occupier was not delegable. This is contrary to law which, as a matter of principle, the judge recognised.
[117]Reasons [135]. See [51] above.
We consider that the judge erred in finding that Yeung had not in fact delegated his duty of care to Santosa and in finding that Yeung was in breach of his duty of care to Potter.
We would uphold grounds 1 and 2.
The remaining grounds of appeal can be dealt with briefly.
Did Yeung take real steps to keep the premises in good repair? (Grounds 3 and 4)
Yeung submits that the judge made two erroneous findings in apportioning responsibility for Potter’s damage, namely, that Yeung ‘fail[ed] to take any real steps to ensure that the premises was in good repair’[118] and ‘was in the best position to know the age of the property, and what needed to be done in relation to the state of the property’.[119] Yeung submits that he did take a ‘real step’ to ensure the premises were in good repair, namely, he appointed Santosa as his property management agent. Furthermore, given that he resided interstate and rarely, if ever, visited the premises, he relied on Santosa to make arrangements for any necessary repairs to be carried out. It was Santosa who was best placed to know what needed to be done.
[118]Reasons [201]. See [64] above.
[119]Reasons [201]. See [64] above.
Santosa submits that when the judge referred to Yeung’s failure to take any ‘real steps’ to ensure that the premises were in good repair this was simply shorthand for finding that Yeung had not acted reasonably. He was not saying that the relevant inspections always had to be performed personally by Yeung in the sense that safety assessments could not be delegated. The judge used ‘real’ to mean ‘sufficient’. That is, the judge was concerned that the limited terms of the agreement with Santosa did not discharge the obligation Yeung had to ensure the property was in a state of good repair, and that Yeung did not take positive steps to maintain his ageing property. Had Yeung instituted a system of ongoing maintenance, the poor condition of the back stairs, which ultimately resulted in them being replaced entirely, would have meant that the slippery state of the treads would not have arisen, and the accident would not have occurred. Santosa also submits that Yeung was aware that the back stairs did not have a handrail. This was a safety and structural issue that it submits fell within those responsibilities of the owner which were not delegated to Santosa.
Moreover, given that he had purchased the premises in 1992, and owned them ever since, Santosa submits that it is Yeung who was best placed to know the initial state of repair of the premises and what maintenance had taken place over the years.
We consider that the judge was wrong to find that Yeung failed to take any real steps to ensure the premises were in good repair. There is no reason to reject the proposition that it was reasonable for Yeung to appoint Santosa as a management agent for the purposes of conducting inspections that required no specialist expertise. Nor was there a failure of care to arrange the appropriate terms of the engagement with Santosa relevantly with respect to those inspections. Nor did any breach derive from a failure by Yeung ‘to confirm ... that [Santosa did] take appropriate steps’.[120] Yeung was entitled to rely on the inspection report of Hunter as sufficient confirmation that the back stairs had been inspected and were in good repair. As mentioned, the inspection report has next to the item ‘Backyard ** Deck/Patio’ a tick in the ‘Clean’ column and a tick in the ‘Good Repair’ column and nothing in the ‘Notes’ column.[121] In those circumstances, there was no need for any further inspection of the back stairs to be carried out by Yeung and no reason for him to arrange for a safety audit of those stairs when the inspection report stated there were no relevant problems.
[120]Bevillesta [2009] NSWCA 16, [53].
[121]See [33] above.
Moreover, the judge found that a handrail may not have prevented Potter’s fall; the presence of a handrail may only have reduced the risk of Potter’s fall on the slippery back stairs in the dark.[122] The absence of a handrail may thus have increased the risk of a fall. Increasing a risk is not a sufficient basis to establish causation.[123] It was the slippery state of the back stairs which was a foreseeable risk and which caused Potter to fall;[124] had Hunter inspected the back stairs, reported their state to Yeung (as she was obliged to do), and had their slipperiness repaired, this would have prevented Potter’s injury.[125] The engagement by Yeung of Santosa to conduct routine inspections ought to have been a sufficient step to avoid foreseeable risks from visible or obvious defects; it was only not so because of Santosa’s breach of duty.
[122]Reasons [84]. See [41] above.
[123]Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145, 171 [102]–[103] (Federal Court of Australia, Full Court) agreeing with Allsop P in Evans v Queanbeyan City Council [2011] NSWCA 230, [22]. See also Amaca Pty Ltd v King (2011) 35 VR 280, 309–10 [126]–[127].
[124]Reasons [83]. See [41] above.
[125]Reasons [168]. See [63] above.
We consider that the judge was wrong to treat Yeung as best placed to identify defects in the premises. It was Santosa who had the responsibility to inspect the premises and to prepare condition reports on the premises and regular inspection reports. Those functions placed Santosa in the best position to identify defects.
We would uphold grounds 3 and 4.
Was it irrelevant that Yeung received rental income? (Ground 5)
Yeung submits that the judge fell into error by having regard to the fact that Yeung stood to benefit from the rental income from the property and that he was the person with financial control when it came to spending money on the property. Neither of these matters was relevant to Yeung’s culpability when it came to apportioning liability.
Santosa contends that these matters are relevant because it is the relationship of landlord and tenant which provides the foundation for the liability of Yeung to keep the premises in good repair, in return for receiving rental income, and it is that income which provides the funds for repairs. Further, putting to one side a situation where Santosa may need to arrange for emergency repairs up to $1,000 under the terms of the management agreement, Santosa only has the capacity to bring something needing repair to the owner’s attention. It is then a matter for the owner to direct that remedial steps be taken and to pay for those repairs. Yeung is the person who is responsible for initiating and paying for any program of ongoing maintenance of the premises in circumstances where he is aware of the history of any work done, or not done, since he purchased it in 1992. These are all factors which are relevant to the extent to which Yeung fell below the standard to be expected.
In our view, it is irrelevant that Yeung stood to benefit from the rental return or had control over expenditure. If it had any potential relevance, it might relate to the question of whether Yeung had the financial capacity to repair the back stairs. However, the injury in this case was caused by an anterior breach, namely, the failure of Santosa to inspect and detect the defective state of the stairs which could have been readily repaired. It was not caused by an incapacity or a refusal to pay the sum required for the repairs ($572). The material failure had nothing to do with the rental return derived by Yeung.
We would uphold ground 5.
Was the apportionment wrong? (Ground 6)
Yeung submits that he should be entitled to a complete indemnity from Santosa.
Yeung submits that the case that Santosa ran at trial, namely, that Hunter had inspected the back stairs and there was no need for any repairs or maintenance, was wholly rejected by the judge.[126] Hunter had insisted that the state of the back stairs at the time of Potter’s fall was not as depicted in exhibit B.[127] Santosa did not allege, for example, that Hunter had told Yeung about the poor condition of the back stairs and that he either refused to approve repairs, or was so dilatory in doing so that Potter was injured in the meantime, factors that could have formed the basis for Yeung’s liability in tort.
[126]See [46] above.
[127]See [35] above.
Santosa submits that the apportionment of liability arrived at by the judge was open to him. Yeung relied on the joint tortfeasor provisions in the Wrongs Act. Apportionment was thus to be guided by the principles set out in Podrebersek v Australian Iron & Steel Pty Ltd[128] which requires a consideration of the extent to which each of the parties fell below the standard of care required of them, and the causal potency of their breaches. In Podrebersek the High Court remarked:
The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man … and of the relative importance of the acts of the parties in causing the damage: … . It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance.[129]
[128](1985) 58 ALR 529 (‘Podrebersek’).
[129]Ibid 532–3 (citations omitted).
Santosa submits that the judge’s apportionment is readily explicable given that, on the one hand, Yeung owned the property; was in breach of his personal obligations under both the lease and statute; and had not taken reasonable care by merely appointing Santosa on the terms of the management agreement and nothing more. By contrast, Santosa submits, the judge’s findings of Santosa’s liability ‘was almost coincidental’; while Yeung ought to have arranged a safety audit given the age of the premises, Santosa was only liable because of Hunter’s failure to detect the problem with the back stairs when she did her inspections to manage the tenancy. Potter’s fall occurred because Yeung had allowed the back stairs to become dilapidated and fall into disrepair over decades, rather than anything being broken by the tenant which Hunter might have been expected to identify. It is appropriate, therefore, for Yeung to be apportioned the ‘lion’s share’ of the liability.
In our view, Santosa’s submissions should be rejected.
The question of indemnification, or appropriate apportionment, must be considered in light of Yeung’s success on grounds 1 and 2. The analysis that flows from the critical findings of the judge, described above, removes any reliance Santosa would seek to place on Yeung having failed to take reasonable care in appointing Santosa on the terms of the management agreement or otherwise being in breach of his duty of care. It also removes any basis upon which Santosa could characterise its liability as ‘almost coincidental’ given that the judge found that it failed to discharge the duty of taking reasonable care against the foreseeable risk of injury resulting from visible or obvious defects. As discussed, the breach of duty causative of loss was the failure to inspect and detect obvious or visible risks, to effect repair. This was a breach by Santosa. The duty to inspect and detect and report on obvious hazards was a duty delegated by Yeung to Santosa.
In these circumstances, we would conclude that Yeung should be indemnified by Santosa. As set out above,[130] the conclusion reached by the judge that Yeung had breached his duty of care to Potter was erroneous. Yeung was therefore not ‘culpable’ in the sense described in Podrebersek because his conduct did not involve any degree of departure from the standard of the reasonable person.
[130]See [81]–[90] above.
The only remaining liability of Yeung is for breach of cl 2 of the lease,[131] in that he failed to ‘make sure that the premises are maintained in good repair’. On the critical findings of the judge, and the analysis adopted above, Yeung engaged Santosa to inspect the premises and identify obvious defects in them. If Santosa had complied with that obligation, Yeung would not have been in breach of cl 2. As described above, if, in December 2013, Hunter had inspected the premises, she would have detected the defects in the back stairs and caused them to be repaired, at the modest cost of $572, and Potter’s fall would not have occurred.[132] As discussed, the fundamental breach in this case was the failure of Santosa to carry out the inspection it was required to carry out and to identify the necessary repair. (The circumstance was aggravated because, by its inspection report and its assurances that the patio/deck was in ‘good repair’ it reassured Yeung that no repairs were necessary.)[133] It was the failure by Santosa that resulted in the liability of Yeung to Potter under cl 2 of the lease. Had Santosa performed its delegated duty by inspecting the back stairs, Yeung would never have been in breach of his contractual obligation to Potter.
[131]See [17] above.
[132]See [63] above.
[133]See [96] above.
In those circumstances Yeung is entitled to a complete indemnification. Pursuant to s 24(2) of the Wrongs Act Yeung should receive a contribution from Santosa that amounts to a complete indemnity.
Conclusion
In our view, leave to appeal should be granted and the appeal allowed.
Paragraphs 4 and 5 of the orders of the judge dated 5 February 2019 ought be set aside and, in their place, it be ordered that Santosa indemnify Yeung with respect to all Yeung’s liability under paragraphs 1 and 2 of those orders whereby the judge ordered that there be judgment for the plaintiff in the sum of $433,899.80 plus interest in the sum of $40,960 and that the defendants pay the plaintiff’s costs (including reserved costs) on an indemnity basis.
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