Yeung v Santosa Realty Co & Anor [2020] VSCA 7

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By Stuart Eustice, Partner

In a unanimous decision, Tate, Kaye and Niall JJA allowed an appeal against the decision of O’Neill J in the County Court. In so allowing the appeal in its entirety, the managing real estate agent was ordered to provide the appellant, an absentee landlord, a full indemnity.

Elizabeth Potter (‘Potter’) was a tenant of residential premises owned by Mr Yeung, and managed by Santosa Realty Co Pty Ltd (‘Santosa’). On the night of 19 May 2014 she had slipped on the back stairs to the premises and fractured her right ankle. She sought damages in negligence against both Mr Yeung and Santosa.

At first instance, the County Court held that both Mr Yeung and Santosa had breached their duty to Potter and were liable to pay damages totalling $433,899.80. Two thirds of that liability was apportioned to Mr Yeung, whom the Court found was in the best position to know what needed to be done in relation to the state of the premises. The remaining one third was apportioned to Santosa. By reason of that award the Plaintiff was paid her costs on an indemnity basis.

Mr Yeung appealed primarily on the basis that the trial Judge had erred in finding that Mr Yeung had not delegated his duty to inspect and that, accordingly, the apportionment of two thirds liability to Mr Yeung was in error. Mr Yeung further submitted that the trial Judge had erred in finding that he failed to take any real steps to ensure the property was in good repair and that he was in the best position to know what needed to be done to the premises.

Santosa in reply contended that whether a landlord (such as Mr Yeung) had acted reasonably must be assessed in light of the circumstances of the case. Relevant to this matter was the fact that the premises had deteriorated over time and was in a state of disrepair. According to Santosa, the agreement between it and Mr Yeung was limited to that set out in the management agreement; Mr Yeung did not engage Santosa to conduct any risk assessments or audit of the premises for hazards.

The Court of Appeal wholly rejected Santosa’s submissions and found that Mr Yeung had delegated the performance of his relevant duty to Santosa, evidenced in part by the management agreement. The Court was further critical of the finding at first instance noting the finding that had Santosa done what Mr Yeung had required of it under the management agreement, Potter would not have fallen and suffered injury, was inconsistent with the finding that Mr Yeung had not delegated his duty. The facts of this case were distinguished from those in Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196 on the basis that Mr Yeung had not reserved for himself any aspect of the responsibility to inspect/identify obvious hazards.

Having appropriately delegated his duty to Santosa there was nothing that Mr Yeung did, or didn’t do, which resulted in him breaching that duty. Accordingly, the Court held that Santosa should indemnify Mr Yeung in respect of all of his liability to Potter.

This decision confirms the legal proposition that the duty of a landlord to take reasonable precautions (by routine inspection of rental premises) to avoid foreseeable risk of injury can be delegated by engaging a competent contractor (managing real estate agent).

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