Yeung v Santosa Realty Co Pty Ltd [No 2] [2020] VSCA 29 (24 February 2020)

Last Updated: 25 February 2020

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2019 0023

WILLIAM YEUNG	Appellant
v
SANTOSA REALTY CO PTY LTD	First Respondent
ELIZABETH ANNE POTTER [No 2]	Second Respondent

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JUDGES:	TATE, KAYE and NIALL JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	Determined on the papers
DATE OF JUDGMENT:	24 February 2020
MEDIUM NEUTRAL CITATION:	[2020] VSCA 29

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COSTS – Appellant successfully challenged apportionment of liability determined by trial judge – Application by unsuccessful first respondent to vacate order that it pay successful appellant’s costs of the proceedings below – Whether unsuccessful first respondent denied opportunity to obtain contribution from second respondent for appellant’s trial costs – Application to vacate order rejected.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	No appearance	Mills Oakley
For the First Respondent	No appearance	Moray Agnew
For the Second Respondent	No appearance

TATE JA

KAYE JA

NIALL JA:

1 On 6 February 2020 this Court delivered judgment^[1] in an application for leave to appeal brought by Mr Yeung (‘Yeung’) against Santosa Realty Co Pty Ltd (‘Santosa’) and Ms Potter (‘Potter’).

2 Yeung is the owner of residential premises. He engaged Santosa, a real estate agent, to manage those premises. Potter was relevantly the tenant of those premises. On 19 May 2014, Potter slipped at night on back stairs that were worn, slippery, unlit and had no handrail. The primary 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.^[2] He apportioned two-thirds of that liability to Yeung and one-third to Santosa and, on 5 February 2019, he made the following orders:

1. There be judgment for the Plaintiff [Potter] in the sum of $433,899.80, plus interest in the sum of $40,960.
2. The Defendants pay the Plaintiff’s costs (including reserved costs) on an indemnity basis.

3 Certify [for] counsel ...

4. The First Defendant [Yeung] pay two thirds and the Second Defendant [Santosa] pay one third of the judgment entered and orders made in paragraphs 1–3 hereof.
5. The First Defendant pay the Second Defendant’s costs on the standard basis up until and including 18 February 2018, and on an indemnity basis thereafter. Certify cost of transcript ...
6. Stay on payment of judgment and costs for a period of 42 days from this day.
7. Liberty to apply.

3 This Court held that the apportionment of liability arrived at by the primary judge was in error and that Santosa should indemnify Yeung in respect of all his liability to Potter. On 6 February 2020 we pronounced the following orders:

1. The application for leave to appeal be granted.

2. The appeal be allowed.

3. Paragraphs 4 and 5 of the order made by his Honour Judge O’Neill dated 5 February 2019 be set aside, and in their place it be ordered that:

(i) the second defendant, Santosa Realty Co Pty Ltd, indemnify the first defendant, Mr William Yeung, in respect of all his liability under paragraphs 1 and 2 of that order; and

(ii) the second defendant pay the first defendant’s costs of the proceeding, including any reserved costs, on a standard basis.

4. The first respondent [Santosa] pay the appellant’s costs of the application for leave to appeal and the appeal on a standard basis.
5. The first respondent pay to the appellant [Yeung]:

(i) the sum of $316,573.20, being the sum paid by the appellant to the second respondent [Potter] pursuant to paragraphs 1 and 4 of the order made by his Honour Judge O’Neill, plus interest of $5774.98.

(ii) the sum of $176,666.67, being the sum paid by the appellant to the second respondent [Potter] pursuant to paragraphs 2 and 5 of the order made by his Honour Judge O’Neill, plus interest of $1829.56.

6. The first respondent be granted an indemnity certificate in respect of its costs of the proceeding pursuant to section 4(1) of the Appeal Costs Act 1998 (Vic).^[3]

4 Santosa now seeks to vacate order 3(ii) of this Court which dealt with Yeung’s costs of the proceeding below, his trial costs.^[4]

5 Santosa submits that there is no proper basis for an order that it pay Yeung’s trial costs. It submits that Yeung was named as the first defendant by Potter; he was not joined by Santosa nor did Santosa do anything to prompt Potter to join Yeung. Yeung incurred costs by defending himself against allegations made by Potter that he had not acted reasonably in leasing premises that were not in a state of good repair and without a handrail, and that he had not in fact delegated the performance of his duty of care. These defences, and the costs incurred in mounting them, were a matter for Yeung.

6 Moreover, Santosa submits, Yeung did not allege that Santosa was in breach of any contractual or tortious duty it owed to him or that it was necessary for him to incur costs to defend himself in the proceeding as a consequence of such a breach. His claim against Santosa was limited to contribution or indemnity under the Wrongs Act 1958 in respect of his liability to Potter.^[5] If the judge had adopted the reasoning of this Court and held that Yeung had acted reasonably by delegating his relevant obligations to Santosa, then, Santosa submits, Potter’s claim against Yeung would have been dismissed; Santosa would have had to pay all the damages, and costs, to which Potter was entitled but most likely it would have been Potter who was ordered to pay Yeung’s trial costs (and not Santosa) as a consequence of having named Yeung as a defendant.

7 Moreover, if the judge had held (as he did) that Yeung was liable to pay damages and costs to Potter but held (contrary to his findings) that Santosa was liable to indemnify Yeung in respect of his liability to Potter, Santosa submits that the most that the judge might have ordered in respect of Yeung’s trial costs would have been that Santosa pay Yeung any non-common costs of the contribution claim. These would have been negligible and possibly confined to the filing of the joint tortfeasor contribution notice against Santosa.

8 Santosa also submits that it should not be disadvantaged by reason of the forensic decision Yeung made to appeal only against the judge’s apportionment of liability and the order that he pay Santosa’s costs, arising from an offer made by Santosa to contribute (paragraphs 4 and 5 of the orders made below). The orders that Yeung pay damages and costs to Potter remain on foot (paragraphs 1 and 2 of the orders made below). Had Yeung successfully sought leave to appeal against the orders that established his primary liability to Potter, it is likely that both Potter and Santosa would have been ordered to pay Yeung’s trial costs and Santosa could have sought contribution from Potter in respect of those costs. Santosa is now denied that ability to seek contribution from Potter.

9 In response, Yeung relies on the reasoning in the principal judgment supporting the conclusion that Yeung was entitled to a complete indemnity from Santosa in respect of all his liability to Potter, finding that:

(1) Yeung was liable to Potter only for breach of cl 2 of the lease, which required him to ‘make sure that the premises [were] maintained in good repair’;

(2) Yeung had discharged his duty of care to Potter by engaging Santosa to inspect the premises and to identify obvious defects in them;

(3) the fundamental breach was Santosa’s negligent failure to carry out an inspection of the premises and to identify the obvious defects in the back stairs;

(4) the fundamental breach was aggravated because, by its representation that the patio and deck were in ‘good repair’, Santosa had reassured Yeung that no repairs to the back stairs were necessary; and

(5) but for the negligence of Santosa, Yeung would not have breached the lease and he would not have been liable to Potter.

10 Yeung submits that Santosa is wrong to consider that Yeung could have possibly sought costs against Potter. Potter succeeded in her claim against Yeung for breach of the lease and she was therefore entitled to an order that Yeung pay her costs of the trial. The fact that Yeung discharged his duty of care by delegating the performance of that duty to Santosa does not mean that Potter’s entire claim against him could be dismissed. There is no basis on which Yeung could have sought an order that Potter pay his costs.

11 We agree.

12 The liability of Yeung to Potter under the lease was clear. Clause 2 is unequivocal:

2 Condition of the Premises

The Landlord shall make sure that the premises are maintained in good repair.

13 Yeung denied breach of the lease.^[6] The judge accepted that, from the beginning of Potter’s lease until her fall, the back stairs were in a weathered condition and in need of repair.^[7] They were worn and slippery and it was foreseeable that someone using the stairs, particularly at night and if it was wet, would fall due to their state.^[8] This was not challenged on appeal. On this basis, the judge held that Yeung was in breach of the lease.^[9] In the principal judgment we concluded that although Yeung was in breach of cl 2 of the lease, this was due to Santosa’s failure to inspect the premises and identify obvious defects for repair, as Yeung had engaged Santosa to do. We said:

The only remaining liability of Yeung is for breach of cl 2 of the lease, 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. 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.) 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.^[10]

14 These observations, alongside our finding that Yeung had delegated the performance of his duty of care to Santosa, informed our ultimate conclusion that Yeung was entitled to a complete indemnification by Santosa.

15 It follows that Santosa has not been denied the opportunity to obtain ‘contribution’ from Potter for Yeung’s trial costs as, given our findings, Potter would not have been ordered to pay Yeung’s trial costs.

16 The question becomes, who, between Yeung and Santosa should pay Yeung’s trial costs?

17 The difficulty for Santosa is that in the principal judgment we concluded, based on unchallenged findings of the primary judge, that had Santosa discharged its obligations under the management agreement with Yeung, Potter’s fall would not have happened. Yeung would not have been sued by Potter in tort or contract. We determined that liability in tort to Potter lay entirely with Santosa, by reason of the delegation from Yeung. We further determined that Santosa should provide a complete indemnity with respect to Yeung’s contractual liability under the lease. As Yeung submits, his liability to Potter is now purely hypothetical. There would have been no proceeding to defend.

18 In those circumstances, we consider that the just and fair exercise of the discretion to award costs of the trial is to reject the application to vacate order 3(ii) of the orders we pronounced on 6 February 2020.

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^[1] Yeung v Santosa Realty Co Pty Ltd [2020] VSCA 7 (‘the principal judgment’).

^[2] Potter v Yeung [2019] VCC 10.

^[3] Emphasis added. The parties provided the Court with information on the agreed sums for order 5.

^[4] The Court granted Santosa and Yeung leave to file written submission on the issue of the trial costs.

^[5] Principal judgment [25].

^[6] Ibid [24].

^[7] Ibid [35].

^[8] Ibid [41].

^[9] Ibid [60].

^[10] Ibid [111].