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A cautionary tale for principals denying agents’
claims for indemnity
Pavlis v Wetherill Park Market Town Pty Ltd [2014] NSWCA 292
Roger Walter & Melissa McCosker | September 2014 | Insurance & Financial Services
Summary
This recent NSW Court of Appeal
decision about a slip and fall claim
against a shopping centre owner and its
managing agent illustrates the difficulties
that can be encountered with indemnity
clauses in management agency
agreements and with expert reports on
liability issues.
Facts
On 4 October 2009, Ms Pavlis slipped and fell on a wet
pavement as she went to access an ATM outside Wetherill
Park Market Town, which was owned by Wetherill Park
Market Town Pty Ltd (‘Market Town’). It had been raining
and the pavement had been surfaced with non-slip paint
almost 6 months before. She unsuccessfully sued Market
Town and the shopping centre manager, Pretti Real
Estate Pty Ltd (‘Pretti’). Her appeal was also dismissed.
The judgment of Basten JA, with whom Meagher JA and
Leeming JA agreed, is of interest in several respects.
At First Instance
Entering judgment for the defendants, the trial judge
found that there was no breach of duty of care. Despite
the liability experts concluding that the slip resistance of
the area of the fall, at least when wet, was significantly
lower than the coefficient of friction recommended by
the Australian Standard, the trial judge did not accept that
the defendants knew or ought to have known that the
area was slippery.
www.turkslegal.com.au Pretti also succeeded on its cross-claim in which it sought
indemnity for its costs from Market Town in accordance
with its management agency agreement.
The plaintiff’s liability expert, Mr Adams, observed in
his report that the area where the plaintiff slipped was
significantly smoother than elsewhere and that the nonslip paint had been significantly worn away. Mr Adams’
evidence (adduced by report only) was ultimately found
to be vague as to timing and, importantly, his friction
readings did not demonstrate that one area was more slip
resistant than another.
The trial judge was satisfied that in April 2009 (at least
six months prior to the plaintiff’s accident), Pretti had
arranged for the entire area to be painted with a nonslip paint, having regard to Mr Pretti’s oral evidence and
relevant invoices describing the work (which he had
supervised) and the product used.
Further, there was no evidence that anyone had slipped
in the area before or since the plaintiff’s accident.
Court of Appeal Decision
On appeal, the plaintiff was again unsuccessful. So was
Market Town in its attempt to overturn the ruling on
Pretti’s cross-claim. It was therefore required to indemnify
Pretti for costs incurred by Pretti in defending the action.
The ruling on the cross-claim, discussed below, is perhaps
the most interesting aspect of the case.
The plaintiff’s case on appeal was that the trial judge had
erred:
1. in finding the plaintiff had slipped on a surface that had
been painted within a period of 6 months;
2. in not finding that the plaintiff had slipped on a surface
that would have been very slippery when wet;
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3. in dismissing the suggestion by the plaintiff’s expert
that the smoothness of the area where the plaintiff
slipped suggested it had been painted some time ago;
and
4. in finding that the plaintiff did not establish that there
was something the defendants should have done to
prevent the plaintiff from falling.
Expert evidence
The Court of Appeal observed that the plaintiff’s case
turned on a passage from the expert report of Mr Adams,
who had inspected the site on 17 December 2009. The
passage commenced:
“The walkway surface immediately adjacent to the ATM,
and extending further to the east, is lightly textured consistent with having been painted relatively recently with
a product that incorporated a non-slip additive. However,
the adjoining area where Ms Pavlis slipped was significantly
smoother, particularly near the heavily trafficked centre
of the walkway and close to the edges - consistent with
having been painted some time ago with a product that
incorporated a non-slip additive that has since been
significantly worn away ....”
The Court of Appeal considered the evidence of Mr
Adams about the worn surface to have been vague.
Managing agent agreement
The most interesting aspect of the decision was in
relation to Pretti’s claim for indemnity from the centre
owner under a contract term that was a common
form used to engage managing agents. The indemnity
provision read as follows:
“15. The Principal will hold and keep indemnified the Agent
against all actions, suits, proceedings, claims, 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 any of the powers, duties or authorities of
the Agent hereunder.”
Market Town argued that the plaintiff did not allege that
Pretti was negligent in the performance of its functions
as managing agent, but rather that Pretti had failed
to take steps to fulfil its duties to patrons so that the
allegations did not ‘arise out of the proper performance
of’ any duties of the agent. As such, Market Town argued
that the plaintiff’s case against Pretti was one of nonperformance, rather than one of negligent or any other
www.turkslegal.com.au sort of performance of its duties, and therefore that the
indemnity, strictly construed, had no operation. The Court
of Appeal rejected this argument and drew attention to
the common law of agency and concluded:
“There is no reason to read cl 15 of the written agreement
as restricting the general right of indemnity. Nor is there
any reason to read the language of the clause referring to
the “proper performance of any of the powers, duties or
authorities of the Agent” under the agreement, as excluding
the non-negligent performance of its duties. …”
Implications
This decision provides an illustration of and some useful
insight into some of the common difficulties and traps
that can be encountered with indemnity clauses and
the use of expert liability evidence. In particular, this case
highlights:
1. Courts will be very cautious about attributing weight to
and accepting opinions of experts that are not
supported by appropriate expertise, clearly reasoned
evidence and supportive test results.
2. Parties obtaining and arranging the preparation
of expert reports should do so with great care and, if
necessary, instruct their expert to conduct further
testing and/or prepare a supplementary report.
3. Evidence about an Australian Standard is only evidence
relevant to the existence of a breach of duty, it is not
determinative in itself that there has been a breach of a
duty of care.
4. Principals must exercise great caution with claims
for indemnity by their agent. They must firstly bear in
mind the common law when considering contractual
indemnities, especially if some ambiguity appears on
the face of the clause, or the clause seems to invite the
drawing of a distinction between non-performance
and negligent or other sorts of performance.
5. The argument sometimes raised by principals that the
indemnity is not triggered because the allegations of
the plaintiff relate to the ‘non-performance’ of the
agents duties – as opposed to the ‘proper performance’
will receive little support from the courts.
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For more information,
please contact:
Roger Walter
Partner
T: 02 8257 5736
M: 0419 996 722
[email protected]
Melissa McCosker
Lawyer
www.turkslegal.com.au Sydney: 02 8257 5700 Melbourne: 03 8600 5000