BGC Residential Pty Ltd v Fairwater Pty Ltd - [2011] WADC 76

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: BGC RESIDENTIAL PTY LTD -v- FAIRWATER PTY LTD [2011] WADC 76

CORAM: WAGER DCJ

HEARD: 21-25 FEBRUARY 2011

DELIVERED : 3 JUNE 2011

FILE NO/S: CIV 1912 of 2007

BETWEEN: BGC RESIDENTIAL PTY LTD
Plaintiff
AND
FAIRWATER PTY LTD
Defendant
QBE INSURANCE (AUSTRALIA) LTD
Third Party

Catchwords:

Contract claim - Breach - Whether Civil Liability Act 2002 applies to issue of causation - Whether breach proved to be causative of loss - Common law principles

Legislation:

Civil Liability Act 2002
Corporation Act 2001
Trade Practices Act 1974

Result:

Plaintiff's claim dismissed except for nominal damages for defendant's breach of contract
Defendant's claim against third party dismissed

Representation:

Counsel:

Plaintiff:     Mr J R Ley
Defendant:     Mr D J Pratt
Third Party                   :     Mr A P Hershowitz

Solicitors:

Plaintiff:     Greenland Legal Pty Ltd
Defendant:     Jackson McDonald
Third Party                   :     SRB Legal

Case(s) referred to in judgment(s):

Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd (2005) 62 NSWLR 148
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Chappel v Hart (1998) 195 CLR 232
Hughes (as Trustee for the Kingstream Steel Creditors Trust) v St Barbara Mines Ltd (No 4) [2010] WASC 160
Lentzner v Baumwol [2009] WADC 168
Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516
Roads and Traffic Authority v Royal (2008) 245 ALR 653
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65

WAGER DCJ: The defendant, Fairwater Pty Ltd (Fairwater), a corporation that carries on business as a property developer, developed a residential housing estate in Seville Grove, known as Corondale Estate.
Fairwater set up a display village of houses showcasing home building companies that would appeal to prospective land purchasers. The plaintiff, BGC Residential (BGC), a corporation that carries on business as a home builder, purchased one of the five display home lots that was sold in the display village (lot 336) from Fairwater and built a display home representing its WA Housing Centre range. The contract between DTZ Australia (WA) as agent for Fairwater and BGC for the sale of lot 336 dated 8 April 2004 included the following express special conditions:
Clause 7(BGC) and (Fairwater) agree that (Fairwater) will provide a static security service on site from 6 o'clock pm to 6 o'clock am every day for a period of six months from the date of the first slab down in the builder's display village.
Clause 8Thereafter for the next six months (BGC) and (Fairwater) will share the cost of continuing static security service with the seller paying 50% of the total cost and the builders (being BGC and the other display home builders) contributing the remaining 50%.
The date of the first slab down was 1 August 2004.
Verdenius Enterprise (VE) was engaged to provide security for the Corondale Estate.
The BGC display home was completed in June 2005.
On 17 July 2005 the BGC display home was damaged by a fire event that occurred at approximately 5.46 am as a result of an unknown person or persons breaking the display home's front bedroom window and introducing fuel and ignitions onto the bed. The loss and damage caused as a result of the fire is an agreed sum of $400,000.
QBE Insurance (Australia) Ltd (QBE) were the insurers of VE at the time of the fire and have been joined as a third party by Fairwater.
BGC pleads that Fairwater breached the special conditions of the contract because it failed to provide the required security service at the time of the fire event.
Fairwater denies that it breached the contract and denies that pursuant to the contract it was required to or failed to provide the required security. Fairwater does not admit liability for the damages claimed and denies that any breach of contract by Fairwater caused BGC's loss.
However, in the event that Fairwater is liable to BGC, Fairwater claims that QBE would have been required to indemnify VE under its insurance policy and claims damages from QBE equal to any sum awarded to BGC against Fairwater. In the third party proceedings, Fairwater pleads that VE breached its contract and/or its contractual and tortious duty of care to Fairwater by failing to supply security services at Corondale Estate thereby causing loss and damage, a claim that is denied by QBE.

The Corondale Estate

The map that was exhibited at trial (exhibit 1.16) sets out the stages of 1 ‑ 3B of the Corondale Estate development. The estate is bordered by Seville Drive to the west, however the boundary to the north‑east is a public open space and to the south‑east is the Cecil Andrews High School. Although it is accepted that the circumference of the estate is approximately 3 km, there are no roads that provide a driveable ring or boundary around the estate. The display village is to the north‑west of a roundabout that is positioned on the corner of Poad Street and Seville Drive. Machinery the subject of security concerns was positioned near the Poad Street/Seville Drive roundabout.
Entry to the estate can be gained by the Poad Street/Seville Drive roundabout or by driving from the south end of Seville Drive or from the north end of Seville Drive/Salamanca Boulevard via a roundabout. It is accepted that young people would congregate in the area of Cecil Andrews High School which is to the south‑east of the estate and on the public open space to the north‑east of the estate.
The sales office car park is situated near the Poad Street/Seville Drive roundabout and is directly next to the display homes. The display village is comprised of Lots 334 to 339. Each of the lots has a frontage of approximately 20 m and faces onto Seville Drive north of the sales office. By July 2005 a fence had been erected between the car park and the display home on Lot 334 and each of the display homes was fully fenced. The construction of the display homes also included instant 'gardens' to enhance the appearance of the display home. At least one security light was installed in front of the display homes on Seville Drive. Access to the display village is gained by driving along Seville Drive on the west side of the estate. Entry onto Seville Drive at this location is via the Poad Street/Seville Drive roundabout or the Seville Drive/Salamanca Boulevard entrance.

The evidence

The plaintiff's case

BGC called evidence from Mr Roberts, consultant with DTZ Australia (WA) Pty Ltd who was contracted to promote and sell the estate on Fairwater's behalf; Mr Underwood who was employed by BGC as the brand manager for WA Housing Centre; Mr Kinder who was BGC's general manager; and Mr Butchart who was the security guard employed by VE to carry out security duty at the estate at the time of the fire event.

Mr Roberts

When Mr Roberts started his contract with Fairwater as the estate's sales representative the estate had yet to be completed. Earthworks were still being undertaken and roads were still being constructed. Early in 2004 after the sales office had been set up Mr Roberts approached 10 building companies that specialised in the first home owners market because that was the market targeted by the estate. One of the builder's representatives, Mr Underwood, was contacted on behalf of BGC in order to encourage BGC to purchase land and build a WA Housing Centre display home in the estate's display village.
At that time in 2004, the most active first home builder was the Homebuyers Centre. Given its position in the market, Mr Roberts considered it very important to ensure that the Homebuyers Centre was represented in the display village so he approached Mr Hooper, the sales and marketing manager from the Homebuyers Centre. Although Mr Roberts had agreed to sell the best placed lot in the display village that was positioned next to the sales information centre (lot 334) to BGC, he reneged on that agreement and instead agreed to sell lot 334 to the Homebuyers Centre because Mr Hooper told him that the Homebuyers Centre would only be part of the display village if it could obtain that particular lot. Mr Hooper also said that the Homebuyers Centre would only agree to the purchase of lot 334 if express special conditions were added to the contract for the sale of the lot relevant to security. Mr Hooper drafted and added cl 7 and cl 8 to the contract that was entered into between the Homebuyers Centre and Fairwater. Clause 7 and cl 8 in that contract are identical to cl 7 and cl 8 in the contract that was later signed between BGC and Fairwater.
Mr Roberts' evidence is that once other builders were aware that the Homebuyers Centre had contracted to purchase and build in the display village, five others including BGC (agreeing now to purchase lot 336) contracted to purchase lots and to build display homes. Each of the contracts relevant to the sale and purchase of the display home lots contained the same special conditions cl 7 and cl 8.
Mr Roberts was aware that clauses similar to cl 7 and cl 8 were regularly included in contracts relating to the sale of land upon which display homes were to be built.
In discussion at the time of drafting the clauses, Mr Hooper had said that static security meant static, on‑site security. At (ts 58) Mr Roberts says:
… he was not interested in a roving patrol where, you know, the – they come around and just leave a card to show that they'd been there. He wanted static, on site security. So that was how we arrived at the use of the term 'static'. The – that meant, to him and to me, that it – the security had to be on site.
After Mr Hooper had drafted the clauses, Mr Roberts took the contract to Mr Bond, Fairwater's director. Mr Roberts accepts that Mr Whelpdale was present at that time. Mr Roberts did not explain Mr Hooper's understanding of static security to Mr Bond nor to Mr Whelpdale, nor did either of them question the wording or meaning of the clauses with him. However, Mr Bond agreed to the inclusion of the special conditions.
Mr Roberts' evidence is that at the time when BGC entered into its contract to purchase, Mr Underwood, on behalf of BGC, asked him if Aiden (Mr Hooper), on behalf of the Homebuyers Centre, was happy with the special conditions to the contract. Mr Roberts says that each of the builders had said words to the effect that if Aiden was happy (with the special conditions) then they (the building company) were happy and that each home building company had then proceeded to sign the contract.
Mr Roberts prepared weekly reports in relation to the sales at the estate. Buyers' incentives noted in his reports include landscaping and fencing to be installed within three months of the completed construction and his records indicate that blocks were sold and houses were built soon after release and that these sales were consistent with incentive packages.
The BGC display home was completed in July 2005. Gardens and fences were immediately installed and promotional flags displayed.
Mr Roberts had observed vandalism and graffiti on the estate. Initially in 2004 the damage was mainly related to the sales office; however in 2005, as slabs for private housing started to be laid and with greater activity on the roads of the estate there was an increase in graffiti and vandalism that included damage to builders' sheds positioned on individual blocks.

Mr Underwood

Mr Underwood was employed by BGC as the brand manager for WA Housing Centre. The position required that Mr Underwood be in control of sales and marketing and, to a degree, the administration and business. He was directly answerable to Mr Kinder, BGC's general manager. Mr Roberts confirms that he approached Mr Underwood in relation to the WA Housing Centre purchasing a lot in the display village and building a display home. Mr Underwood considered a WA Housing Centre display home would be a showcase of the type of product that it could offer to prospective land purchasers, particularly those who wanted to build on the estate.
In considering whether Fairwater should make an offer to purchase a display home lot, Mr Underwood assessed the price of the land, the availability of lots, the visibility of the display village (particularly given that the estate had only just been cleared at the time of the offer and that the display village was around a bend making visibility poor) and the level of security that could be provided for the display home. Mr Underwood knew from his own experience that the area of the estate was a high crime area and he told Mr Roberts that he was concerned about the location for that reason. Following initial negotiations, Mr Roberts came back to Mr Underwood with a proposal that cl 7 and cl 8 be inserted into the contract for the sale of land consistent with the Homebuyers Centre contract. Mr Underwood says that the clauses gave him confidence. At (ts 107) he says:
Because of my concern about the high crime rate in the area … the thought of having security on site gave me – peace of mind that our investment in the location would be secure.
Mr Underwood proceeded to recommend the purchase and construction to Mr Kinder who agreed to proceed.
Mr Underwood became aware that Mr Whelpdale was project manager for the site during the course of his dealings with Fairwater. This was confirmed by correspondence dated 31 January 2005 (exhibit 1.55). Mr Underwood understood that a security company had been employed by Fairwater to provide security consistent with cl 7 and cl 8 of the contract, and he understood, given Mr Whelpdale's role, that Mr Whelpdale had arranged security consistent with cl 7 and cl 8, in line with Mr Whelpdale's letter dated 31 January 2005.
Although Mr Underwood accepts that he described Mr Whelpdale as being from security in an email based on a telephone call from the day of the fire, he does not question that Mr Whelpdale was in fact Fairwater's project manager. In cross‑examination, Mr Underwood states that his memory was hazy on the day of the fire in light of the events that had occurred. Mr Underwood agrees in cross‑examination that he was not surprised that Fairwater were not providing the security services themselves.

Mr Kinder

As BGC's general manager, Mr Kinder dealt with Mr Underwood in relation to the decision to purchase a lot and build a WA Housing Centre display home at the estate. Mr Kinder considers that the main factors for determining whether a display home block would be purchased and a display home built were the proximity to and access of affordable land and whether the display home area had a high volume of traffic going through it. Mr Kinder was aware that the Corondale Estate was on the urban fringe and offered affordable land for first homebuyers, however, he had also assessed that its location made it more susceptible to damage, vandalism and theft.
Mr Kinder knew that security procedures were usually put in place in relation to display homes on developments however he did not consider that there was any set format as to how the security was offered. He does not recall having a discussion with Mr Underwood about the security requirements at the time when he agreed that BGC should go ahead with purchasing and building a home in the display village however Mr Kinder describes his reaction to cl 7 and cl 8 at the time Mr Underwood showed him the contract as (ts 139):
My reaction was that it was consistent with the type of arrangement that we wanted and that is that there would be security in the village.

Mr Butchart

Mr Butchart, who is a trained and qualified security guard, was employed for 2 1/2 years by VE and was required to work at the Corondale Estate on a regular basis in 2004 and 2005.
Mr Butchart says that the work he performed on the estate was similar to work that he had performed at other housing estates. The security work usually commenced prior to the construction phase and initially would require him to patrol the display homes and the sales office. However, as an estate developed he would also be required to patrol the new houses that were being built.
Mr Butchart worked at the estate as a static guard. He describes the role of a static guard as being to stay in the one area, more or less, and keep an eye on the estate itself as people come to the estate. A static guard's role can be contrasted with a patrol guard who is required to move around from site to site.
It was Mr Butchart's practice when at Corondale Estate to wear his uniform and to drive a car that was marked with the company's logo.
Mr Butchart's initial training as a security guard did not specifically include how to approach someone if he thought they were engaged in suspicious activity. He describes his training as 'it was basically [to] minimise confrontation' (ts 163).
He understood that it was part of his duties to secure the display homes based on instructions that he had received from his employer, Mr Verdenius. He says that his usual procedure was to carry out a quick vehicle patrol on the estate and then to take part in a foot patrol of the display homes and gardens in order to make sure that they were secure and not damaged. He would then remain static in his vehicle, patrolling the estate every hour at a minimum and recording and following anyone who he deemed suspicious as they came onto the estate. It was his usual practice to wait five minutes before following or investigating a vehicle that may be suspicious, however, if a vehicle aroused his interest straight away then he would follow the vehicle straight away. Apart from doing the hourly patrols of the estate, Mr Butchart would usually remain in his vehicle parked near the sales office. He was unable to see the individual display homes from this position.
It was Mr Butchart's practice to note, contemporaneously with the sighting, any suspicious activity that he saw during the shift. He would then copy the details he had noted in his notebook onto an incident report form, which was a pro forma document provided by VE, at a later time. He describes the suspicious activity that he normally saw and noted as (ts 145):
Normally it was just the local young people driving around, hooning around, that sort of thing.
… But occasionally there would be people that would park in front of a residential block and get out and have a look at the – the house under construction, or sometimes they would be just driving around the estate with their lights off. Things that just seemed odd.
If Mr Butchart saw instances of suspicious activity involving a vehicle, then he would drive his car to that location. He would try and obtain the registration of the vehicle and a description of the vehicle, try and work out what the people were doing, make his presence obvious to them and then, after they had moved on, if he deemed it serious enough, he would report it to the police. If the matter noted was not deemed by him to be serious enough to report to the police then he would report back to his employer, Mr Verdenius, by facsimile the morning after the suspicious activity via a pro forma incident report form and if the activity noted was minor he would fax the relevant incident form to Mr Verdenius at the end of the week or hand it directly to Mr Verdenius when he next saw him.
Mr Butchart had noted antisocial behaviour and minor criminal conduct on numerous occasions during the course of his employment as a static security guard. The incident reports that he completed included the following entries (in summary):
10 August 2004            A car had continued driving slowly through the estate and left.
19 August 2004          A vehicle had driven through all the roads on the estate.
7 March 2005               Broken sprinklers had been found on the recreation playground area.
7 March 2005              On direction from Mr Verdenius checks of the builder's sheds on building blocks had been made.
7 March 2005              A vehicle had driven slowly before leaving the estate.
8 March 2005              A vehicle had driven around the estate and then left.
13 March 2005            The garage door had been left open on one of the display homes.
18 March 2005            A vehicle had been parked with spotlights on. It had driven out of the estate the way it had come in.
18 March 2005             A vehicle appeared to be about to drive onto a housing pad, however the driver had left when Mr Butchart had approached.
19 March 2005            A vehicle had been parked but drove off as Mr Butchart approached.
20 March 2005            There had been two incidents; one at 4.05 am and 4.38 am when a vehicle had turned off its lights and driven around the estate and then returned 'presumably to play again'.
27 March 2005            On two occasions; 11.44 pm and 2.37 am (28 March 2005) a vehicle drove around the estate with its lights off.
20 June 2005               Mr Butchart followed a vehicle that parked with its lights off. He had driven back and chased the vehicle out of the estate.
27 June 2005               The vehicle drove past Mr Butchart quickly, did a burnout and slowed down when the driver realised that Mr Butchart was not going to chase it.

On 16 July 2005, the night of the fire event, Mr Butchart was employed to provide a static security service at the estate from 6.00 pm until 6.00 am on 17 July 2005. Mr Butchart completed an incident report form on that date setting out that he had seen a vehicle at 7.27 pm and then again at 8.14 pm. The vehicle had driven past slowly and had then driven out of the estate. On the second occasion the driver drove past Mr Butchart, smiled at him, and had then driven out of the estate via the Poad Street/Seville Drive roundabout. During the same shift but on 17 July 2005, Mr Butchart had seen the same vehicle once at 3.34 am near the location where machinery was stored and then again at 4.10 am when Mr Butchart was driving through the estate on patrol.
At 5.30 am Mr Butchart found himself very tired and decided that he was going to leave early. As he was preparing to leave, the same vehicle drove down Seville Drive through the Poad Street/Seville Drive roundabout and travelled in a northerly direction in front of the display homes. Mr Butchart describes this at (ts 150) in response to questioning:
Did they do anything as they were going past the display homes or did the car do anything as it was going past the display homes? … Just it seemed to slow down, so I've – as I'm leaving and recognised the – the car, I've come out of the car park, turned right on Salamanca – onto the roundabout and chose to follow them down past the display homes just to see what they were doing.
He confirms that he followed the car in the same northerly direction, taking the same path that the car had taken. The car just continued on and did not stop. He then saw the car's lights fading in front of him. Once the car had left the estate he turned his vehicle back onto Salamanca Boulevard, being the northern entrance of the estate of Seville Drive. Prior to turning onto Salamanca Boulevard he could only just see the tail lights of the vehicle that he had been following going off in the distance. Given that the car had already driven out of the estate Mr Butchart dismissed the matter and he proceeded to drive home. He formed the view 'they've already left the estate so they're no longer a threat or an incident to me' (ts 211).
Mr Butchart is clear that he left the estate at 5.30 am because he takes the times recorded on incident report forms from the clock in his car from which he noted the time on 17 July 2005. He is satisfied that he had checked the clock from time to time in order to ensure that incident reports were accurate and that the time he noted on 17 July was an accurate recording.
Mr Butchart was cross‑examined in relation to the accuracy of the time, why he omitted to include the time in his statement to police, and how six years after the event he can remember that he left at a particular time when he could not recall whether he followed his usual practices on arriving at the estate on 16 July 2005. Mr Butchart's evidence is that he clearly recalls reporting to Mr Verdenius on the morning of 17 July 2005, after being advised of the fire event, that he had left the estate early however he cannot remember the precise details of his shift (seven) years later. Mr Butchart is a clear, forthright witness. I accept that he accurately recalls the events that occurred at approximately 5.30 am on 17 July 2005, having had those events reinforced in his memory by his discussions with Mr Verdenius later on that same day.
Mr Butchart had never personally witnessed fires at the estate nor had he personally seen vandalism occurring. He had seen a vehicle driving around with a spa bath on the back of it and he described this in his police statement dated 18 August 2005. He had also accompanied Mr Verdenius to a small fire area near the machinery on one occasion.

The defendant's case

Fairwater called evidence from Mr Whelpdale, the project manager contracted to Fairwater for the Corondale Estate, and from Ms Silva who was Fairwater's financial controller.

Mr Whelpdale

Mr Whelpdale was employed by New Homes Australia Pty Ltd trading as Investment Project Management (IPM) as a director and project manager and he specialised in land development. In 2004 Mr Whelpdale was contracted by Fairwater to be the project manager for the Corondale Estate.
Although the letter of engagement sent by Mr Bond on behalf of Fairwater to Mr Whelpdale, dated 22 January 2004, does not set out that the facilitation and overseeing of security was part of his role as project manager, Mr Whelpdale considers that it was part of the general duties of a project manager to ensure that there was security at an estate. It is for this reason that he arranged for VE to be engaged to provide security on the estate.
Mr Whelpdale contacted VE early in 2004 because he had recommended to Mr Bond that a security service was required and should be engaged. Mr Bond accepted that VE could undertake the contract consistent with VE's quotation on price and services. This discussion occurred before Mr Whelpdale was aware of the conditions relating to the display village security as set out in cl 7 and cl 8 of the contract. When Mr Whelpdale subsequently became aware of Fairwater's obligations under cl 7 and cl 8, he carried out additional calculations on static security at an hourly rate for the times set, being 6.00 pm until 6.00 am. He did not show Mr Verdenius cl 7 and cl 8 nor did he bring the special conditions to VE's attention.
By letter dated 2 August 2005 (exhibit 1.23), Mr Whelpdale wrote to VE on behalf of Fairwater. Although Mr Whelpdale was the project manager he says in evidence that all decisions that he made were in consultation and on behalf of Fairwater as the owner of the estate.
Mr Whelpdale arranged for invoices in respect of the security services performed to be sent to Fairwater but care of his business address at IPM. Although Mr Whelpdale accepts that cl 7 and cl 8 required security from 6.00 pm until 6.00 am on a daily basis from 1 August 2004, he also accepts that his direction to VE, including a facsimile from 1 June 2005, required security services to be provided at alternative times (including on Sundays from 12.00 am until 12.00 pm) and that the time was contrary to the requirements of cl 7 and cl 8. He also accepts that security was decreased to three days per week on 23 September 2005. This was after the period relevant to cl 8 had ended and after the fire event.
Mr Whelpdale agrees that when he initially approached Mr Verdenius on behalf of VE, the discussion was in relation to guarding the entire estate for stages 1 through to 3. He does not specifically recall mentioning the security required for display homes prior to writing the correspondence to VE dated 31 January 2005 (exhibit 1.55) setting out that he was acting on behalf of Fairwater in relation to security and noting that VE must 'make sure that there is adequate coverage in relation to the patrolling of the display homes'.
In cross‑examination, Mr Whelpdale agrees that in discussion with Mr Verdenius, there were oral instructions or terms in relation to the hours and type of security required. Mr Whelpdale does not dispute that more than one security guard was required at some point of time when VE was working on the estate, nor does he dispute that Mr Verdenius raised this with him, however, he cannot recall the conversation nor can he recall any specific request for more than one security guard to be placed on‑site. He accepts that by letter dated 1 September 2005 (exhibit 1.159) Mr Verdenius wrote to him stating that two guards should be on duty on a Saturday night. However, he had sent an email to Mr Verdenius stating that he only wanted one guard to be on patrol on a Saturday night. It is noted that the evening prior to the fire event, 16 July 2005, was a Saturday night.

Ms Silva

Ms Silva was Fairwater's financial controller. Mr Whelpdale, who was project manager, directed Ms Silva to pay the VE accounts that were sent to Fairwater at the IPM address. Mr Whelpdale advised Ms Silva that from February 2005 until August 2005 Fairwater was required to pay the entire sum of the invoice of VE for Corondale Estate security, however after August 2005 Ms Silva was to invoice the five home builders who had purchased display village lots in relation to a proportion of the sum that had been paid for security. This is consistent with cl 8 requiring the home builders to pay 50% of the cost of the provision of security from 1 February until 1 August 2005.

The third party's case

QBE called Mr Verdenius, director of VE, as its sole witness.

Mr Verdenius

Mr Verdenius, a qualified security officer with 15 years experience in the security business, was the sole director of Verdenius Enterprises Pty Ltd.
In 2004 Mr Verdenius employed 15 or 16 licensed security officers. He had had prior business dealings with Mr Whelpdale when Mr Whelpdale represented Peet & Co, and he was therefore not surprised to be contacted by Mr Whelpdale in relation to the provision of security at an estate that he later learnt was Corondale Estate.
After the initial contact about the estate Mr Verdenius wrote to Mr Whelpdale confirming that VE was prepared to offer its services. That correspondence dated 4 March 2004 included the following:
We are currently working from Wanneroo to Port Kennedy, working for Australand, Stocklands and Satterley to name a few.
Mr Verdenius confirms in evidence that the named companies were all developing estates. He dealt only with project managers in respect of each of those estates and it was his understanding that payment by cheque for work performed was signed off by the project manager responsible for an estate. It did not faze Mr Verdenius that payment was made by the project manager rather than by the estate developer and he was unconcerned about whether the payment was made from the project manager's own money or whether the sum was actually paid by the development company. Mr Verdenius was happy to proceed with the work as long as VE was paid for the job. Mr Verdenius understood that if anything went wrong in relation to security work performed at a development, then he should communicate the problem directly with the project manager and he therefore saw himself as being directly answerable to the project manager.
When Mr Verdenius wrote to Mr Whelpdale on 4 March 2004 he recommended that a single static security guard be placed on the site. In the third paragraph of the correspondence (exhibit 1.8) Mr Verdenius said:
I would highly recommend that a security guard stay on site for a number of hours to your discretion, and possibly patrols to eradicate any problems of your estate.
Mr Verdenius offered the following service:
While the guard is onsite, he or she will be initially checking all the display homes, building sites and park areas for anything/anyone suspicious, whilst checking on the garden sprinklers, newly‑built homes, lights, newly‑laid lawn and anything else out of the ordinary.
In evidence, Mr Verdenius agrees that the service VE offered for the housing estate as set out in his correspondence dated 4 March 2004, was pretty much standard for the cover that was normally provided on estates of this type. He also confirms that checking on display homes, if requested, was an important part of the service provided.
In the same correspondence dated 4 March 2004, Mr Verdenius also said:
One thing that I emphasise to all my clients is that if any trouble does arise, like vandalism, break and enter or cars doing burnouts, we would call on one of our other guards for help, then notify the police to remove them off the site.
Mr Verdenius confirms in cross‑examination that the letter correctly stated the position in relation to the services provided (ts 311):
… that's – that's correct. That's for safety, because quite often – well we lost three cars on different estates through fire‑bombing, stabbing. And our big priority is look after the – if there's only one guard there, get our backup first, but the police are quite often too slow. You can ring the police and it can take up to three or four hours for them to come out.
By facsimile to Mr Whelpdale dated 2 August 2004 (exhibit 1.24), Mr Verdenius undertook to provide security at Corondale Estate, as discussed, being for 'random patrols per night starting 5 August 2004 until the landscapers had started'. Given that this correspondence was sent by facsimile, I accept that it would have been sent and received on 2 August 2004.
By letter dated the same date, 2 August 2004 (exhibit 1.23), Mr Whelpdale wrote to VE to confirm that the security service provided was being carried out on behalf of Fairwater. He confirmed that telephone contact was required to discuss the estate security requirements and the use of static and random patrols. Although Mr Verdenius did not recall receiving this letter, he did recall conversations with Mr Whelpdale on an ongoing basis in relation to the nature of the security required. There is no suggestion that this letter was sent by facsimile, and I accept that it would have been received by Mr Verdenius on a date after 2 August 2004.
Mr Verdenius responded to the letter by sending a facsimile (exhibit 1.28) suggesting security on Monday, Tuesday, Wednesday for random patrols and static security officers on-site on Thursday, Friday, Saturday, Sunday 8.30 pm – 11.30 pm, 12.30 pm ‑ 3.30 pm, 4.30 pm ‑ 5.30 am. Mr Verdenius confirms in evidence that this was written clarification of a proposal that had been put to him verbally by Mr Whelpdale.
Mr Verdenius considered that if a strong security presence was obvious at an estate in the early stages of development, then it would discourage antisocial or delinquent behaviour. He states in evidence that although he suggested a strong presence early on to Mr Whelpdale, including two static security officers on-site, Mr Whelpdale did not agree to have two officers on‑site and accordingly only one static security officer was placed on guard in 2004 to cover the whole of the estate.
Mr Verdenius directed his employees to wear uniforms, carry a torch and drive marked cars indicating that they represented VE in the course of their employment on housing estates. The guards did not have any 'powers', such as police powers, and the guard's role was just to monitor everything. Mr Verdenius described his instructions to the guards as being (ts 281):
… basically watch everything, note everything that's going on in the area, write out the reports … Then not to intervene in any big fights or anything going on. They're basically just to monitor and stuff like that and anything goes on they notify the police.
The service offered by VE included random or static security. Mr Verdenius described the two services as entailing the following (ts 289):
Random patrols is where you drive into an estate, maybe say, three or four times a night, do a patrol around. Whereas static you stay on the estate and just patrol around the estate.
The security guards were directed by Mr Verdenius to take notes, observe and monitor the estates, parks, gardens and the whole of the estate. They were required to drive around and walk around and patrol in different sections of the estate and just monitor everything going in and out of the estate. By (exhibit 1.85), Mr Verdenius noted that it was important for security guards to record details of offences on the incident report forms and to provide such information to police so they could charge.
A practice developed at the estate that the security officer on duty would park his vehicle at the sales office car park. From training most of the security officers would pick the areas that they thought were going to be the hot zones and park there. In Mr Verdenius' view the car park was a hot zone.
Mr Verdenius agrees that the security guard was supposed to keep an eye on the display homes as well as the whole of the rest of the estate. He says that the service he provided was not really concentrated on the display homes. His concerns included graffiti work and 'everything else' in the surrounding parklands. He considers that most of the problems were caused by young people at the school end of the estate and the display homes were located at the opposite end.
Although only one static security officer was required to be at the estate, Mr Verdenius would attend on-site to assist or to relieve his staff from time to time. On one of his brief visits to site on 7 August 2004, Mr Verdenius brought coffee to Mr Butchart who had parked his car next to the sales office. While on the estate with Mr Butchart, Mr Verdenius noticed a small fire that, on investigation, had been lit by young people situated at the machinery area to the side of the estate near the Poad Street/Seville Drive roundabout. Mr Verdenius attended the scene and was satisfied that the fire was put out. He made notes of his observation on an incident report form.
As the provision of security services continued into 2005 the issues relating to security become more serious. At that time Mr Verdenius considered that the only way to deal with problems in relation to graffiti, vandalism and theft from the home building sites was for two guards to work at the same time. However, Mr Whelpdale only agreed to Mr Verdenius' two guard proposal on 1 September 2005 after the fire event.
Mr Verdenius was aware that the display homes had their own blue light alarm systems that operated independently of VE. An officer from the blue light company would be notified directly if security was triggered in a display home. Mr Verdenius had also been supplied with a 24‑hour telephone number in relation to any security concerns in respect of the display homes. He directed his staff to telephone the number if something was wrong relevant to display home security.
Mr Verdenius acknowledges that he received the facsimile from Mr Whelpdale dated 31 January 2005, confirming that the display home builders were paying half of the cost of the security service provided. Mr Verdenius describes the security provided in relation to the display homes as follows (ts 333):
We walked past these buildings and kept an eye on it that way. But under – under law, we're not even supposed to even enter onto these buildings' properties, because we had no letter authorising us to enter onto these buildings' properties, because we were classed as trespassing on the properties.
Accordingly the coverage provided to the display homes by VE was that a guard would walk past or drive past the homes. The guard would not walk on the display home property because they were directed to walk on the footpath in front of the property adjacent to Seville Drive following a direction not to trespass on or in the homes. If a door was open at one of the display homes, the security officer would notify the 24‑hour number.
Mr Butchart admitted to closing a door on a display home on one occasion, however Mr Verdenius states in cross‑examination that this should only have occurred if he had noted his actions in an incident report or after ringing the 24‑hour number relevant to the display home and receiving no response.

The issues

Was Fairwater required to provide a static security service at Corondale Estate continuously between 6.00 pm on 16 July 2005 and 6.00 am on 17 July 2005?

I accept that Mr Hooper, sales marketing manager of the Homebuyers Centre, told Mr Roberts, Fairwater's selling agent, that Fairwater would have to agree to terms or conditions in relation to security for the builders' display village before the Homebuyers Centre would purchase a lot in the display village and build a display home because of Mr Hooper's concerns that the display village would be vulnerable to vandalism and theft. Mr Hooper wrote down the express special conditions that he required and that Mr Bond, on behalf of Fairwater, agreed to. The conditions are identical to the special conditions cl 7 and cl 8 in the contract between BGC and Fairwater.

Mr Underwood, brand manager for WA Housing Centre also had concerns about security. Mr Underwood arranged to have the contract that included cl 7 and cl 8 signed by Mr Kinder, BGC general manager, after Mr Underwood had specifically asked Mr Roberts whether Mr Hooper was happy with the special conditions and following Mr Roberts' advice that Mr Hooper was.
Mr Underwood confirms that the special conditions provided him with confidence and peace of mind that BGC's involvement in the display village would be secure (ts 107).
The commercial purpose and object of the special conditions was to provide a degree of protection for the display homes for the period specified. The issues to be determined are whether cl 7 and cl 8 placed a contractual obligation on Fairwater to supply the security services and what degree of protection was to be provided by the security services and what level of service had to be provided.

What, if anything, had Fairwater contracted to provide?

The special conditions provide:
7.The Buyer and Seller agree that the Seller will provide a static security service on site from 6 pm to 6 am every day for a period of six months from the date of the first slab down in the builders' display village.
8.Thereafter, for the next six months the Buyer and Seller will share the costs of continuing the static security service with the Seller paying 50% of the total cost and the Builders contributing to the remaining 50%. (exhibit 1.13)
It is submitted by counsel for Fairwater that when Mr Hooper drafted the special conditions that BGC agreed to, it was never suggested that Fairwater had or would have its own security guards. Fairwater submits that Mr Underwood was not surprised that the security service was not directly provided by Fairwater. BGC was advised by letter dated 31 January 2005 (exhibit 1.55) that the time period relevant to cl 7 had been reached and that from 1 February 2005 cl 8 would apply and Fairwater proposed to continue to have VE provide the security but with a shared cost contribution. BGC did not challenge or dispute this proposal.
It is also submitted on behalf of Fairwater that once BGC received the letter dated 31 January 2005 it was open to BGC to vary the security provisions that had been arranged by BGC because cl 8 is silent as to who was to arrange the security service after the expiry of the six‑month period referred to in cl 7 and because BGC has not pleaded an implied term or pleaded a proper construction of the special clauses to fill the lacunae created.
Further, it is submitted by counsel for Fairwater that by engaging VE to provide security on-site from 6.00 pm until 6.00 am daily commencing from 1 February 2005, Fairwater acted as agent for BGC and for the other display village builders in respect of cl 8, Fairwater having already discharged its own obligations in respect of cl 7.
Fairwater makes reference in cl 8 to 'the Seller paying 50% of the total cost' and submits that the cost of the security service was expected by the parties to be in the nature of a disbursement. It is submitted that if the cost was to be an internal cost for Fairwater, then a word such as 'bearing' rather than 'paying' would have been inserted.
Counsel for BGC submits that in order to render the two clauses harmonious, one with another, the requirement for security services to be supplied by the seller in cl 7 also applies to cl 8. It is submitted that BGC only entered into the agreement with Fairwater to purchase the display block on the estate because it was satisfied that security needs consistent with those drafted and agreed to by Mr Hooper would be met by Fairwater and therefore Fairwater had an obligation to provide it security service.

Both counsel submit that the words are unambiguous however both rely on different dictionary meanings in relation to the term 'to provide' and the related term 'to supply'. BGC submits that 'to provide' means to supply, to furnish or to make available. Fairwater submits that the definition of 'supply' includes 'the act of providing something needed or wanted'. Both counsel refer to definitions from the shorter Oxford English Dictionary. Given the different interpretations in respect of the dictionary meanings in relation to 'to provide' I find that there is a degree of ambiguity in relation to the interpretation of the special conditions.
In Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 Gibbs J clarified the court's primary duty in relation to construction of a written contract:
It is trite law that the primary duty of the court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parties, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different.
In Hughes (as Trustee for the Kingstream Steel Creditors Trust) v St Barbara Mines Ltd(No 4) [2010] WASC 160, 594 Kenneth Martin J refers to and adopts the summary of McDonald J in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603. McDonald J summarises the law in relation to objective intention relevant to contract formation and construction. His Honour's summary [262] ‑ [265] is as follows:
For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the 'objective intention' of the parties. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461‑462, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179, [40]; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114-115; 1 WLR 896 at 912-913; Taylor v Johnson (1983) 151 CLR 422 at 429; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 – 550.
There is also authoritative recognition that a factor to be taken into account in deciding whether a contract has been entered and if so what are its terms is 'the purpose and object of the transaction': Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179, [40]. In Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, [22] the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ recognised the appropriateness of taking into account the purpose and object of the transaction, and continued:
'In Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 350, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574:
"In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating." '
But the purpose and object of the transaction is itself ascertained objectively – it is ascertained by considering what a reasonable observer, in the situation of the parties, would conclude was the purpose and object of the transaction. In Prenn v Simmonds [1971] 1 WLR 1381 at 1384 Lord Wilberforce noted that Lord Blackburn’s judgment in River Wear Commissioners v Adamson (1877) 2 App Cas 743 at 763 had said that the task involved in construction required one to:
'… inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view'. (emphasis added)
Lord Wilberforce also said, at 1385:
'the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact'. (emphasis added)
and,
'… evidence of negotiations, or of the parties' intentions … ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the 'aim' of the transaction'. (emphasis added)
The summary of McDonald J identifies the issues that need to be considered in the assessment of objective intention in respect of cl 7 and cl 8.
Clause 7 and cl 8 were originally drafted by Mr Hooper to address the security concerns of the Homebuyers Centre, concerns that were shared and adopted by BGC. Clause 7 and cl 8 were drafted together to be read together and they should not be read separately. When read together, cl 7 provides an obligation on Fairwater to provide the static security service. Clause 8 provides for that security service to continue for the next six months following the previous six months referred to in cl 7. The change in payment in respect of the security service does not change the obligation to continue to provide the service in respect of the second time period relevant to cl 8.
Evidence of the surrounding circumstances in which the contract was made was principally given by Fairwater's selling agent, Mr Roberts. As part of his duties, Mr Roberts manned the sales office on-site and represented the estate on behalf of Fairwater. There was no suggestion that representatives of the home building companies were to be present on site while the estate was being developed. It was Mr Roberts who approached the home builders, holding himself out as having a presence at the estate. I accept that the understanding in relation to the conditions relevant to security was that Fairwater ran the estate and would be present on the estate and would therefore be the party responsible for the provision of the security service.
It was on the basis that Fairwater would carry this responsibility that Mr Underwood was confident to recommend that BGC proceed with the display home.
The surrounding circumstances to cl 7 and cl 8 establish that the commercial purpose and object of the special conditions was for Fairwater to provide protection for the home builders on the estate for the period specified and the time specified in special conditions, cl 7 and cl 8.
Fairwater's obligation was to provide the security service. Payment made for the provision of the service to VE was therefore not just a disbursement.
I also note that Fairwater, through its agent Mr Whelpdale, arranged for VE to provide security on the estate from approximately early 2004 until late 2005. I find that the contract was to provide an ongoing security presence at the estate at times and on dates as advised.
On 31 January 2005 Mr Whelpdale provided confirmation to VE of variations of times and dates consistent with cl 8 (exhibit 1.57) although he did not refer to the special conditions. The instruction to VE was one of many instructions received during the continuing contract between Fairwater and VE in relation to the provision of security services at the estate. The instruction was not the basis of a new contract or obligation between Fairwater and VE but a variation of the instructions in respect of the ongoing contract.
I accept that Mr Whelpdale had not communicated with the building companies in relation to the identity or details of the security service provider prior to 31 January 2005 however this is not relevant to Fairwater's obligation. Although Fairwater was obliged to provide the security service, there was no reason why Fairwater could not arrange for a third party to carry out the security on its behalf. That arrangement however did not relieve Fairwater of its contractual obligation to the home builders to ensure the provision of security. In arranging the services of VE, Fairwater was not acting as agent for the display home builders but was acting on its own behalf fulfilling its contractual obligation to the home builders.
The final issue to be determined in relation to the interpretation of special cl 7 and cl 8 is precisely where and for what reason Fairwater was obliged to provide the static security service. Clause 7 refers to the provision of a static security service 'on-site'. Clause 8 refers to the 'continuing' of the static security service.
BGC pleads that 'on-site' means at or near the builders' display village, however counsel for Fairwater submits that the definition of 'on site' is far wider, encompassing the whole of the Corondale Estate and that, if Mr Hooper in drafting the condition intended the security service to only be provided in the builders' display village, then the conditions would have been worded accordingly. Further, it is submitted that at the time when BGC and Fairwater entered into the contract on 8 April 2004 only three of the display village lots had been sold and therefore the ultimate composition of the display village was not known.
The ambiguity about the composition of the display village at the time the contract was signed is contrasted with the precise plan of Corondale Estate that set out the proposed lots and borders approved on the whole of the site that was Annexure E to the contract. The builders' display village shown in Annexure E extends beyond the lots that became the builders' display village. Given that Annexure E provides certainty whereas the precise area that came to be known as the builders' display village was unclear at the time when the parties entered into the contract, it is submitted that the term 'site' in cl 7 referred to the whole of the site of the Corondale Estate.
Mr Underwood and Mr Kinder have both given evidence about the factors that each considered in relation to reaching a decision to purchase and build a display home. Mr Underwood refers to a number of factors that include the price of land, the availability of lots, the visibility of the display village and the level of security. Although Mr Kinder considered cl 7 and cl 8 were consistent with the type of arrangement that would be appropriate for display homes and that there would be security in the village, he also considered that the main factors determining whether a display home would be built were the proximate access to affordable land and whether the display home area had a high volume of traffic going through it.
BGC's intention was to display its product through a display home and to engage first home owners to purchase lots and build BGC's WA Housing Centre homes on the lots. The lots were part of the estate that was also comprised of roads, surrounding parklands, a neighbouring school, a machinery storage area, a display village and a sales office and parking area, together with the housing blocks.
Mr Verdenius on behalf of VE is an experienced provider of security services on sites at housing estates, and sets out in his letter to Mr Whelpdale dated 4 March 2004 (exhibit 1.8) the experience and the services that VE could provide. Mr Verdenius recommended a single static security guard to provide a service of checks of all display homes, building sites and park areas for anything/anyone suspicious and checks of the garden sprinklers, newly built homes, lights, newly laid lawn and anything else out of the ordinary. He describes the service offered as pretty much standard to cover what was normally provided on estates of this type. Although Mr Verdenius was unaware of cl 7 and cl 8 and therefore did not specifically address the special conditions in his correspondence, he did refer to the provision of service including checks in respect of all display homes.
When cl 8 came into operation Mr Whelpdale made reference to adequate coverage of the display village in his correspondence to Mr Verdenius (exhibit 1.56) and noted that coverage was to be provided between the period from 6.00 pm to 6.00 am. Mr Verdenius recalls receiving this correspondence and agreed that the direction he received as a result of the correspondence required him to protect the display homes. At that time building on housing lots had already commenced. BGC's commercial intention was for lots on the estate to be purchased by its clients in order for houses to be built. I find that security of the site as a whole was considered by BGC to be important. The words 'on-site' in cl 7 carry a wider meaning than at or near the builders' display village.
Accordingly, pursuant to cl 7 and cl 8, Fairwater was obliged to provide a static security service on-site that included checks to the display homes, building sites and park areas for anything/anyone suspicious and check on the garden sprinklers, newly built homes, lights, newly laid lawn and anything else out of the ordinary every day from 6.00 pm one day to 6.00 am the next for 12 months from 1 August 2004 to 31 July 2005.
Specifically in relation to this matter, Fairwater was obliged to provide a static security service on-site at the Corondale Estate from 6.00 pm on 16 July 2005 to 6.00 am on 17 July 2005.

Was a static security service provided on site between 5.30 am and 6.00 am on 17 July 2005?

Mr Butchart was the sole security officer at the estate providing a static security service on 17 July 2005. Mr Butchart gave his evidence in a frank and forthright manner and I accept that he was clear in relation to his recollection of events immediately prior to 5.30 am on 17 July 2005.
Mr Butchart was required to complete incident report forms in the course of his employment. He made notes that formed the basis of the incident reports contemporaneously with the event and ensured that he noted the time and date. The time was recorded from the clock in his car and he checked from time to time in order to ensure its accuracy. I accept that Mr Butchart noted the time when he left the estate on 17 July 2005 to be about 5.30 am consistent with the time on the clock in his car. I accept that any discrepancies between Mr Butchart's statement to police dated 18 August 2005, and his memory of events when giving evidence in February 2011, arose either because he had not been asked specific questions by police in relation to his conduct on 17 July 2005 or because of difficulties he now has in remembering events that occurred nearly six years ago.
On 17 July 2005, soon after and on the same day as the fire event, Mr Butchart admitted to his employer Mr Verdenius that he had left Corondale Estate half an hour earlier than his contracted end time. Given that a serious event, the fire event, had occurred on that day, I accept that this conversation would have stayed in his mind and that Mr Butchart is now accurately remembering the time as being 5.30 am on 17 July 2005.
Mr Butchart did not advise Mr Verdenius or any other security officers that he was leaving Corondale Estate that morning. No other provision was made for a static security service between 5.30 am and 6.00 am on 17 July 2005. Fairwater failed to provide a static security service on-site for the period 5.30 am until 6.00 am on 17 July 2005 in breach of cl 7 and cl 8.

What did the provision of a static security service entail?

Mr Roberts and Mr Underwood understood that a static security service required a guard to be on-site as opposed to being a roving patrol. Evidence of the static security service that was actually provided on site is given by Mr Butchart and Mr Verdenius.

Mr Butchart describes static security as requiring the officer to stay in one area, more or less, and keep an eye on the estate as people are coming into it. He considers that his role was to observe suspicious activity and to make his presence felt, to obtain details of suspicious motor vehicles and, if appropriate, report the matter to police or to his employer. Mr Butchart says that he was trained to minimise confrontation. It was his practice to wait five minutes before following or investigating a vehicle that may have been suspicious, although in cross‑examination he concedes that if something aroused his interest straightaway, then he would have followed. However, in evidence Mr Butchart did not resile from his position that he would not confront or apprehend a person who appeared to be involved in the commission of a criminal offence.
Mr Butchart describes carrying out foot patrols and vehicle patrols around the estate. These patrols included the area of the display village and occurred on approximately an hourly basis. The majority of Mr Butchart's time, however, was spent parked next to the sales office near the roundabout at Poad Street/Seville Drive. Although Mr Butchart had a view of the estate from this location, by 17 July 2005 fences had been erected around each of the display homes, obstructing Mr Butchart's vision of the area around the display homes from both the front of the village on Seville Drive and from the rear yards of the individual display homes.
In his letter to Mr Whelpdale dated 2 August 2004 (exhibit 1.8) Mr Verdenius clarified that the service offered was that if trouble arose, like vandalism, break and enter or cars doing burnouts, then the security officer would call on one of the other guards for help, then notify the police to remove the offender from site. Mr Verdenius never said that the security officer's role was to confront a potential offender. He did not suggest that the security of the officer would be placed at risk. The officer was to observe and then monitor and notify the police of the actions observed if appropriate.
VE security officers were directed to use a 24‑hour telephone number in respect of any difficulties or concerns about the display homes. They were not to trespass on the homes. The display homes were each fitted with a blue light security system that reported back to a base unconnected with VE. It was not VE's responsibility to ensure that the report back in respect of a blue light had actually occurred.

Does pt 1A of the Civil Liability Act as amended by the Civil Liability Act Amendment Act 2003 (WA) (CLA) apply in relation to the question of whether the breach of contract caused BGC's loss?

On 1 December 2003, the current CLA legislation was introduced following a national resolution to provide uniform legislation in all the States of Australia to reform the law of negligence and to reduce insurance premiums by reducing liability and to restore 'personal responsibility' at all cost: see McDonald B, Legislative Intervention into the Law of Negligence: the Common Law, Statutory Interpretation and Tort Reform in Australia (2005) 27 Syd Law Rev 443, (443).
Although the New South Wales legislation related only to negligence for personal injury, the CLA was not restricted in this way. Part 1A of the CLA deals with liability for harm caused by the fault of a person. Relevantly, s 5A states:
5AApplication of Part
(1)Subject to sections 3A and 4A, this Part applies to any claim for damages for harm caused by the fault of a person unless this section states otherwise.
(2)This Part extends to a claim for damages for harm caused by the fault of a person even if the damages are sought to be recovered in an action for breach of contract or any other action.
Division 2, dealing with duty of care, also falls within pt 1A of the CLA. Section 5B, General principles, (1) states:
A person is not liable for harm caused by that person's fault in failing to take precautions against a risk of harm unless ‑
(a)the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known);
(b)the risk was not insignificant; and
(c)in the circumstances, a reasonable person in the person's position would have taken those precautions.
Division 3, in relation to causation, also falls within pt 1A. Section 5C deals with general principles. 5C(1) states:
A determination that the fault of a person (the tortfeasor) caused particular harm comprises the following elements ‑
(a)that the fault was a necessary condition of the occurrence of the harm (factual causation); and
(b)that it is appropriate for the scope of the tortfeasor’s liability to extend to the harm so caused (scope of liability).
Section 5D sets out that the onus of proof in determining liability for damages for harm caused by the fault of a person is always borne by the plaintiff on the balance of probabilities in respect of any fact relevant to the issue of causation.
Part 1D of the CLA deals with mental harm. Part 1C addresses liability relating to public function. Part 1D deals with good samaritans. Part 1E relates to apologies. Part 1F relates to proportionate liability. Section 5AI of pt 1F states:
In this Part ‑
'apportionable claim' means ‑
(a)a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care (but not including any claim arising out of personal injury); or
(b)a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 10 of that Act;
Relevantly, s 10 of the Fair Trading Act 1987 states:
Misleading of deceptive conduct (Trade Practices Act 1974 s 52)
(1)A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)Nothing in this Part shall be taken as limiting by implication the generality of subsection (1).
Sections 5A, 5B, 5C and 5D all fall within pt 1A, 'Liability for harm caused by the fault of a person'.
A failure to exercise reasonable care may constitute a breach of contract as well as being a tortious breach. If a contract is breached by a failure to exercise reasonable care, then it is likely to be a liability for harm caused by the fault of a person and pt 1A could apply.
In the present case, however, Fairwater has committed a strict breach of contractual duty. A breach of contractual duty does not fall within the general principles of the duty of care enunciated in div 2 of pt 1A. Causation in div 3, s 5C refers to a person at fault as the 'tortfeasor'. Although 'tortfeasor' is not specifically defined in the CLA, the term has never been used to describe a person whose breach is restricted to a breach of a strict contractual duty.
Counsel for Fairwater submits that the CLA is not limited to claims arising from a breach of failure to exercise reasonable care because of the inclusion of s 5AI(i). I accept that the CLA could apply to matters that arise as a result of a breach of contract or as a result of a breach of statute in appropriate cases. However, 5AI(i) must be read in conjunction with the rest of the CLA. Section 5AI(i) falls within pt 1F proportionate liability. It is not part of pt 1A liability for harm caused by fault of the person and while it may apply to some cases that fall within pt 1A, it does not override pt 1A CLA.
I do not consider that the present case falls within pt 1A CLA. The issue of causation to be determined relates to whether the breach of contract caused BGC's loss and not to the issue of a liability for harm caused by the fault of a person. The breach of contract must be assessed on common law principles.

Did the breach of contract cause BGC's loss? - Common law principles

In Lentzner v Baumwol [2009] WADC 168, Davis DCJ summarised the relevant principles in relation to the issue of causation in respect of a claim relating to medical negligence. I adopt her Honour's succinct summary of the relevant principles on the issue of causation as they apply to this case. They are set out from 1 ‑ 5 in [10] of her Honour's decision as follows:
1.The plaintiff bears the legal burden of proving causation on the balance of probabilities.
2.Causation involves two distinct inquiries. The first concerns the question of causation in fact. The second involves the legal question of whether, and, if so, to what extent, the defendant should in law be responsible for the consequences of his breach: City of Stirling v Tremeer (2006) 32 WAR 155 per McLure JA at [73]; Grainger v Williams [2009] WASCA 60 at [179] and [180].
3.Causation in fact is established if the plaintiff can prove that the harm the subject of the claim would not have occurred without the defendant's negligent act or omission. Causation in fact is to be determined not according to scientific or philosophical theories of causation but by common sense principles: Dorsett v Janeska [2005] WASCA 215 at [44], citing Chappel v Hart (1998) 195 CLR 232 at 244, per McHugh J; Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 420–421, per Gaudron J.
4.A defendant's act or omission need not be the sole cause of the loss or damage. Causation will be established if the negligent act or omission caused or 'materially contributed to' the damage: see City of Stirling v Tremeer (supra) at [71]; Bennett v Minister of Community Welfare (supra) at 420–421.
5.If an injury occurs within an area of foreseeable risk, then a prima facie causal connection will be established. The defendant has an evidential burden to adduce evidence that the breach had no effect or that the injury would have occurred even if the duty had been performed. If there is evidence sufficient to displace the prima facie case, it remains for the plaintiff upon the whole of the evidence to satisfy the tribunal of fact that the injury was caused by the defendant's negligence: Bennett v Minister of Community Welfare (supra); Amaca Pty Ltd v Hannell (2007) 34 WAR 109 at [395], [396].
The burden is on BGC to prove causation in respect of the act or omission that caused or contributed to the fire event that occurred.
BGC submits that the inference can be drawn that the presence of a security service on-site deterred many people from coming onto the estate and committing an offence. However, Mr Butchart's evidence of incidences reported by him when on duty at the estate confirms that he observed at least 11 incidences in respect of motor vehicles that aroused his suspicion but that did not extend to the commission of any offence. Mr Butchart also refers to an incident on 20 May 2005 when the driver of a motor vehicle, once confronted, left the estate but later returned and brought his vehicle to Mr Butchart's attention 'presumably to play again'. Further, on 27 June 2007 the driver of a vehicle that had done burnouts stared Mr Butchart down. Mr Butchart concluded that the driver realised that Mr Butchart was not going to chase the vehicle.
Mr Verdenius notes that on occasion at other estates VE was the victim of crime and not a deterrent. The presence of security at the estate had not been sufficient to deter antisocial or criminal behaviour. While VE was on the estate, offences including the stealing of a spa, the lighting of a fire and the responsibility for doing burnouts had occurred.
On the morning of the fire event Mr Butchart saw a vehicle that had been identified by him as being on the estate during the night. The vehicle drove away from the display home village. Although the number plate of the car that drove away was recorded by Mr Butchart on 17 July 2005 there is no evidence that that number plate or vehicle was linked to or involved in the fire event.
Accordingly there is no evidence to lead to an inference or to form a link between the particular vehicle that drove away on the morning of 17 July 2005 and the fire event that occurred soon after that morning.
The only evidence in relation to the fire event is the agreed time of its occurrence and the fact that flammable material was introduced through a window.
There is no evidence of how the offender or offenders arrived at the scene, whether a motor vehicle was involved, whether the offenders were adults or children or, indeed, whether the person or people who committed the offence came out of a display home or had been present in the display home area for a period of time on 16/17 July 2005. Any conclusion as to how the display home bedroom window broke or how the fuel was introduced into the house or in relation to whether there was any premeditation or intention would be speculation only and could not be based on the evidence led in this trial.
It is not enough if the act or omission caused or had the potential to cause or contribute to an act of vandalism or damage generally. The question of causation relates to the fire event that actually occurred.
The present case can be distinguished from cases where the cause of damage is known or can be inferred. In Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 the plaintiff had received advice about security and chose to install a security door in a doorway where a non‑secure wooden door had previously hung. The advisor indicated that the security door would provide a degree of protection but that the premises would be vulnerable to entry at other sources and in other ways. A security door was duly installed. A burglary subsequently occurred during which the door was jemmied off its wooden frame. It was possible to remove the security door from the wooden frame because the frame had not been replaced with a secure frame when the security door had been installed. It was held by the majority of the High Court that there was a warranty implied by common law to supply, fit and hang a door, such that when it was in use it would provide a reasonable means to prevent breaking and entering. In that case, the manner in which entry had been gained, that is the jemmying of the wooden frame, indicated that a breach of the implied warranty had occurred because the inference could be drawn that the frame had left the door vulnerable to a break‑in regardless of the installation of the security door within the frame.
The present case can also be distinguished from Roads and Traffic Authority v Royal (2008) 245 ALR 653 (RTA) because RTA is another case where causation could be inferred from the established facts. RTA relates to a collision between two vehicles. The appellant (the RTA) was found not to have contributed to the accident even though the intersection at the point of the accident was in a poor state and had previously been assessed as being an intersection that was dangerous to road users. Accepting that the intersection was a known danger, the trial judge at first instance found that the evidence led at trial supported the conclusion that the plaintiff should have been in a position to see the defendant's car from its position at the intersection. Further, the evidence was that the defendant was able to see the plaintiff's car and therefore the plaintiff had proceeded through the intersection when it was not safe to do so because the plaintiff should have been able to see the defendant. The trial judge found that the action of the plaintiff in going through the intersection was the cause of the accident. The poor condition of the intersection itself was not found by the trial judge to have caused or contributed to the collision. At [32] the majority of the High Court said in relation to the issue of causation:
The defendant also relied on the third-last paragraph of Mason CJ’s reasons for judgment in March v E & M H Stramare Pty Ltd. He there said, inter alia:
'… [I]t makes no sense to regard the negligence of the plaintiff or a third party as a superseding cause or novus actus interveniens when the defendant's wrongful conduct has generated the very risk of injury resulting from the negligence of the plaintiff or a third party and that injury occurs in the ordinary course of things.'
That passage is inapplicable here. Discussions about the effect of a novus actus interveniens necessarily assume that a breach of duty has been causative. In the majority's view, there was a potential risk of injury, depending on the position of the cars on the Pacific Highway in any given circumstances, arising from the problem of one car masking another in an adjoining lane. That risk did not exist in relation to any of the cars involved in this collision: there was no car on the defendant's left masking it from the plaintiff. The collision did not occur as a result of 'the ordinary course of things' in the particular circumstances. Mason CJ also remarked:
'… [I]n the nature of things, there will be some cases in which a court concludes that a precondition does not play such a part in the consequence that it deserves to be characterized as a cause.'
That is the case here. Furthermore the reliance by the majority on a 'but‑for' test as a comprehensive causation test is erroneous since March.
Factually, the majority held that in RTA that the collision did not occur as a result of the ordinary course of things (in the sense that the road was bad).
Kiefel J, who also allowed the appeal, said at [143] ‑ [145] in relation to the issue of causation:
It remains a requirement of the law that a plaintiff prove that a defendant's conduct materially caused the injury. Nothing said in Betts detracts from that requirement, which forms the basis for the restatement of the test of causation in March. The question whether there is no real distinction between breach of duty and causation, and the question whether a failure to take steps which would reduce a risk amounts to a material contribution to the injury, have been discussed elsewhere in connection to a possible shift in the onus of proof. No decision of this court holds that there is that equivalence or some lessening of the requirement of proof. As the majority in Bennett observed, they are questions which have not been considered by this court.
The present state of authority does not accept the possibility of risk of injury as sufficient to prove causation. It requires that the risk eventuate. Kitto J in Dunkel said that one 'does not pass from the realm of conjecture into the realm of inference' unless the facts enable a positive finding as to the existence of a specific state of affairs. Spigelman CJ pointed out in Seltsam, with respect to an increased risk of injury, that the question is whether it did cause or materially contribute to the injury actually suffered. This inquiry is consistent with the commonsense approach required by March.
In the present case the only risk arising from the nature of the intersection, which might possibly have been referrable to the circumstances of the accident, was that Mr Smurthwaite may have had part of his vision of cars travelling north on the highway obscured momentarily. But his Honour the trial judge discounted this and, as Basten JA pointed out, Mr Royal was not travelling in the left lane, but in the right. The better inference is that Mr Smurthwaite thought that Mr Royal was turning right and would therefore slow down. There is nothing to suggest that Mr Royal could not be seen by Mr Smurthwaite. The evidence did not show that the design of the intersection contributed to the accident. It is not sufficient to suggest that there was a statistical possibility of an accident at the intersection because it was not the best design. To hold the RTA liable on this account would be to impose something approaching absolute liability. The accident was caused by driver error.
In the present case counsel for BGC submits that the question of a prima facie case of causal connection arises as it did in Chappel v Hart (1998) 195 CLR 232. In Chappel v Hart the question was whether a doctor who performed an operation with reasonable care was nevertheless liable for an injury occurring to the patient as a result of the operation. The question had to be determined in the context of the doctor failing to warn his patient that such an injury could occur and the patient, stating that if she had been warned prior to surgery she would not have chosen to proceed and would instead have had the operation carried out by 'the most experienced person with a record and reputation in the field'. It was never suggested in that case that Dr Chappel would have been that doctor.

Although nominal damages were awarded to the plaintiff, the defendant submits that this finding alone is insufficient for the plaintiff to be deemed the successful party when the judgment as a whole is considered.
The defendant accepts that an award of costs to a party that receives nominal damages only may be appropriate where some other right is vindicated by the judgment, such as where a declaration is made. The defendant submits that Mid‑City Skin Cancer & Laser Centre Pty Ltd v Zahedi‑Anarak [2006] NSWSC 1149 [52] was such a case, but it submits that in the present case there is no such vindication. For the purposes of exercising any cost discretion an award of nominal damages is not enough for the party to be considered successful.
It is accepted in this case that no declaration was made in favour of the plaintiff. The plaintiff does not challenge the defendant's submission. The plaintiff however argues that this case is analogous to the decision of Crown Insurance Services Pty Ltd v National Mutual Association of Australasia Ltd [2005] VSCA 280 (30 November 2005) a case where the costs order made reflected the time and effort involved at trial as a result of unsuccessful argument. The plaintiff submits that because the defendant in this case unsuccessfully pursued the Civil Liability Act argument and the agency argument and because both arguments required considerable time, effort and cost (having to be investigated factually, researched legally, addressed and ultimately defeated at trial) the plaintiff should be deemed to be the successful party in the action.
I accept that the Civil Liability Act argument and the agency argument raised by the defendant had to be addressed by submissions at trial and ultimately in the judgment, however the issues did not add to the number of witnesses required to be called or to the substance of the evidence that was given that primarily addressed the issue of causation. The main thrust of the plaintiff's case related to the issue of causation. Ultimately the plaintiff was unsuccessful in this claim.
The court dismissed the plaintiff's claim for $400,000 plus interest of $87,302.68 and awarded the plaintiff nominal damages of $200. The plaintiff did not seek to have any rights other than damages vindicated. The plaintiff has not had substantial success in the proceedings in light of the claim that was brought and the matters that were canvassed in evidence that were ultimately reflected in the judgment.

The 'Calderbank' offer

By letter dated 14 November 2008 the defendant wrote to the plaintiff on a 'without prejudice' basis save as to costs. The substance of the correspondence is:
We refer to our letter dated 13 November 2008.
Pursuant to Calderbank v Calderbank [1975] 3 All ER 333 our client offers to settle your client's action ('the action') on the following terms:
1.Our client will pay your client $50,000 inclusive of costs and disbursements in full and final settlement of the action.
2.The offer expires 28 November 2008.
3.If your client rejects this offer and the outcome of the trial is less favourable to your client than the offer our client will seek indemnity costs from 28 November 2008.
Yours faithfully
Jackson McDonald
The defendant submits that given that the offer was not accepted an order for indemnity costs from 28 November 2008 is appropriate.
In Ford Motor Company v Lo Presti (2009) 41 WAR 1, Buss JA considered the issue of costs following the rejection of a Calderbank offer made by a successful litigant. In that case his Honour adopted the factors noted by the Court of Appeal of Victoria in Hazeldene's Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) (2005) 13 VR 435 [23] as being the appropriate factors to which regard should be had. Buss JA said:
As the Court of Appeal of Victoria noted in Hazeldene's Chicken Farm, deciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression [24]. Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, the Court of Appeal said that, ordinarily, regard should be had to, at least, the following:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for … indemnity costs in the event of the offeree's rejecting it [16].
In the present case the offer was made early in the proceedings nearly two years before the plaintiff sought admission of facts in relation to matters relevant to the fire event. Although it is desirable to settle matters as early as possible it is not clear to me whether the parties had considered the material that was ultimately the subject of the notice to admit facts being expert evidence and police depositions. It is therefore difficult to assess the offeree's prospects of success, assessed as at the date of the offer.
The sum offered by way of compromise being $50,000 was significantly less than the $400,000 plus interest that the plaintiff claimed at trial. Although it should have been apparent by February 2011 that the plaintiff's claim was unlikely to succeed this assessment was unlikely to have been possible in 2008. It is not appropriate to look back and in hindsight consider whether the offer should have been accepted in light of the evidence that was ultimately led at trial and the court's ruling.
Although the offer refers to a foreshadowed application for indemnity costs the reasons for the offer are not clearly expressed.
Recently, in Keays v JP Morgan Administrative Services Australia Ltd (No 2) [2011] FCA 547 the court considered the issue of what constitutes a Calderbank offer in the context of a determination of costs. At [19] the court cited with approval the dictum of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd(No 11) (2001) 109 FCR 77:
No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, if the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs.
…
The requirements of 'sufficient particularity' and 'inevitability of failure' are important. In their absence, it would be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope that if it ultimately finds favour with the court, an award of indemnity costs will follow. If this was correct, one might ask rhetorically, 'Why write a letter as distinct from simply relying on the pleadings?'.
The offer made by the defendant in its letter dated 14 November 2008 does not state with any particularity why the plaintiff's case must fail. It is not suggested that the defendant's letter dated 13 November 2008 that is referred to in the correspondence particularises why the plaintiff ought to accept the offer of 14 November 2008.
Further, there is no suggestion of compromise in the correspondence. Although the defendant's offer refers to the decision of Calderbank v Calderbank [1975] 3 All ER 333, I do not consider that the offer encompasses the matters raised by Lindgren J that were adopted by the court in Keays v JP Morgan Administrative Services Australia Ltd (No 2). The plaintiff's conduct was reasonable and an order for costs on an indemnity basis is not appropriate.
However although indemnity costs are not appropriate, I accept that the plaintiff's substantive claim was dismissed. The offer was put within about 13 months of the action being commenced and after discovery had been provided by the plaintiff and defendant and after a pre‑trial conference. It is submitted by the defendant that at the time of its offer the plaintiff ought not to have incurred significant costs. The plaintiff had incurred loss and damage in the form of material damage to its house and resultant loss of sales and that some legal and investigative costs had been incurred but I accept that the costs incurred by the plaintiff after the offer was made and up to and including trial would have been more significant than the costs incurred prior to and up to the expiration of the defendant's offer on 28 November 2008.

The plaintiff's notice to admit facts

The plaintiff first issued its notice to admit facts on 11 October 2010 and sought a response from the defendant within 28 days. The defendant did not file and serve its response until 11 February 2011. The defendant submits that it responded to the plaintiff's notice to admit facts within a reasonable period of time because it conferred with both the plaintiff and third party regarding the admissions that were sought by the plaintiff (affidavit of Robert Lelio Marando dated 13 June 2011, attachments RLM‑12 to RLM‑22).
The plaintiff submits (and I accept the submission for the purposes of this application) that, as a result of the defendant's failure to respond to its notice to admit facts it arranged for 18 witnesses to be subpoenaed and ordered to attend court to give evidence. The admissions were made only three days before the trial commenced on 14 February 2011 and as a result of the defendant's admissions 12 witnesses were no longer required. I accept that the 12 witnesses' evidence related directly to proving the nature and timing of the fire. I accept that these issues, without the defendant's admissions, would have had to have been the subject of evidence in order for the plaintiff to properly put its case. The nature and timing of the fire would have required expert evidence had admissions not been made. I accept that the plaintiff appropriately obtained expert reports from Maurie Tong and Michael Dyer that were provided to the defendant and the third party on 23 December 2010, being approximately six weeks before the admissions were made.
The defendant did not admit all of the facts that the plaintiff sought to have admitted. The defendant, in its outline of submissions on trial costs, has provided a schedule setting out the admissions sought by the plaintiff and the defendant's response. The following admissions sought were not admitted and as a result of the findings were not proved in any event:

Plaintiff's sought admissions

Defendant's response

Court's findings

9. Prior to 26 March 2004 Roberts knew that Hooper's (and the other four builders') interests in the village would be confined to his/their own display home(s), but that Hooper (and the other builders) would expect the protection would be 'divided' between all the display homes in the village

Not admitted.

The plaintiff's commercial intention was for lots on the estate to be purchased by its clients in order for houses to be built [109].

10. Prior to 26 March 2004 Roberts knew that Hooper (and the other four builders including the plaintiff) would not expect that the protection would be 'divided' between the village and the rest of Corondale Estate (as defined at par 19)

34. Not admitted.

[11] – [13], [104] – [110].

[109] Further, the plaintiff's commercial intention was for lots on the estate to be purchased by its client in order for houses to be built.

11. Roberts therefore drafted two proposed clauses (the proposed protection clauses) to be added to the offer and acceptance documents between the defendant and builders and showed them to Hooper for his approval.

35. Not admitted.

Mr Hooper drafted and added cl 7 and cl 8 to the contract [16].

12. Hooper approved the proposed protection clauses.

36. Not admitted.

Mr Hooper drafted and added cl 7 and cl 8 to the contract [16].

13. Roberts then copied the proposed protection clauses verbatim into the sales contract of each of the builders at cl 7 and cl 8.

37. Not admitted.

It was found that each of the contracts relevant to the sale and purchase of the display home lots contained the same special conditions, cl 7 and cl 8 [17]. No findings in relation to who copied the clauses.

18. Butchart did not confine his security patrol to the village and would, roughly hourly, conduct a vehicular patrol of about five minutes' duration of the area within the perimeter of:

(a) Seville Dr (between the roundabout and Chidzey Dr and the creek only);

(b) The north‑western boundary of Cecil Andrews Senior High School;

(c) A creek which borders part of Viana Lp, Granada Lp and Salamanca Blvd (cumulatively Corondale Estate).

Not admitted.

Mr Butchart's usual procedure was accepted, however precise details of the route taken were not the subject of comment in reasons.

19. Before and on 17 July 2005, Butchart's practice, whenever he saw any suspicious or illegal activity on Corondale Estate, was to drive up to the persons performing the activity, and in every instance when he did this, the person(s) departed the area.

Not admitted.

Mr Butchart's usual practice was to wait five minutes … [37]. Mr Butchart would not confront or apprehend a person who appeared to be involved in the commission of a criminal offence [117].

The defendant made partial admissions or did not admit a number of facts that ultimately were not challenged at trial. The plaintiff submits that the cost of proving the alleged facts was not significant.
I make the following comments in relation to the admissions sought by the plaintiff.

Plaintiff's sought admissions

Defendant's response

Comments

3. At all material times Malcolm Roberts (Roberts) was the defendant's disclosed sales agent or was the director, employee or agent of the defendant's disclosed sales agent.

27. Partial admission.

Mr Roberts' evidence on this point was not challenged. If challenged the plaintiff could have proved the fact through Mr Roberts in re‑examination.

4. At all material times Aidan Hooper (Hooper) was a director of Homebuyers Centre Pty Ltd which was the largest of the six building companies/contractors of the proposed display homes at lots 334 to 339 inclusive (the village)

Partial admission.

The fact that Homebuyers Centre Pty Ltd was the most active/largest of the six building companies was not challenged. Evidence could have been led through Mr Hooper in re‑examination to confirm this if challenged.

6. Before 26 March 2004 Roberts knew that Hooper was very concerned about security of his (company's) display homes, especially in areas where theft and malicious damage were prevalent.

Not admitted.

Admission sought proved [81]. No material challenge by the defendant. Mr Roberts was required to give evidence in any event.

7. The village was located in an area where theft and malicious damage were prevalent.

31. Not admitted.

Admission proved [26]. Not challenged by the defendant. No evidence called specifically in relation to crime statistics, theft and malicious damage on behalf of the plaintiff.

8. Prior to 26 March 2004 Roberts knew that to get Hooper to join the village Roberts needed to convince him that any display home Hooper caused to be constructed in the village would be adequately protected against theft and malicious damage by static security arranged by the defendant (protection).

32. Not admitted.

Admission proved [81].

15. By fax dated 31 January 2005 Whelpdale contracted with Verdenius with the intention of discharging the defendant's obligations to the plaintiff pursuant to cl 8 of the contract.

Partial admission.

The admissions sought by the plaintiff proven [111]. Challenged by third party not by defendant.

The defendant was unable to make three admissions sought by the plaintiff given that the third party had not admitted the sought admission.
Order 66 r 3(2) Rules of the Supreme Court states:
If a party on whom a notice to admit facts is served under O 30 r 2 refuses or neglects to admit facts within seven days after the service on him of the notice or such longer time as may be allowed by the court, the costs of proving the facts shall be paid by him, unless the court orders otherwise.
I am satisfied that the admissions made by the defendant on 11 February 2011 related to facts that would have been in issue at trial and that the plaintiff properly subpoenaed, proofed and arranged for witnesses, expert witnesses and for expert reports in relation to the witnesses who were ultimately not called.
Although the plaintiff may have had copies of sworn witness statements (taken by the police) which evidenced that the fire occurred between 5.30 am and 6.00 am on 17 July 2005 (RLM‑5 to RLM‑11) it was still appropriate for the plaintiff to seek expert evidence in relation to the timing of the fire event because the defendant had not indicated that the sworn witness statements would not be challenged at trial.
For the reasons outlined in my comments in relation to the admissions sought that were not admitted by the defendant I do not accept that the defendant was put to additional expense in relation to the facts that were never admitted by the defendant but that were subsequently found at trial.
I do not accept that the defendant has provided a reasonable explanation as to why the defendant could not have made the admissions it ultimately made on 11 February 2011 by 9 November 2010.
The defendant is required to pay the plaintiff's costs relevant to the 12 witnesses for the period 9 November 2010 to 11 February 2011. The plaintiff's costs in relation to the preparation of expert evidence, including the preparation of expert reports prior to 9 November 2010 does not fall within the period 9 November 2010 to 11 February 2011.

Defendant's notice to admit facts

The defendant sought five admissions from the plaintiff. The plaintiff did not make any of the admissions sought prior to trial. I do not consider it necessary to set out the admissions sought but note that I consider that it was open to the plaintiff to make a partial admission in respect of admission 1, to admit admission 2, to make a partial admission in respect of admission 3, to admit admission 4 in light of Mr Roberts' prepared weekly reports that were known to the plaintiff and to admit admission 5. Failure by the plaintiff to make full or partial admission has, however, not contributed significantly to the defendant's costs at trial. Most of the court's findings in relation to the admissions sought came from the unchallenged evidence led by the plaintiff in any event.

Third party's costs

Given that the third party was wholly successful the usual course would be to order that it recover its costs from the defendant; O 66 r 1 Rules of the Supreme Court. The defendant, however, submits that the third party ought to pay the defendant's costs for the third party proceedings on all issues other than the issue of causation.
The position between the defendant and the third party can be distinguished from that between the plaintiff and the defendant because the plaintiff's action against the defendant was only in relation to contract whereas the defendant proceeded against the third party in contract and in tort.
Although the reasons for decision indicated that the third party owed the defendant a duty of care to provide its security service with due care and skill [170] and that the third party breached the owed duty because it left the site unguarded between 5.30 am and 6.00 am on 17 July 2005 [171], the defendant did not prove that the loss the subject of the trial was caused by the third party's breach.
Further, given that the defendant's claim against the third party was in both contract and in tort, the Civil Liability Act would have applied to the tortious claim. I adopt the reasoning of [121] ‑ [132]. I note that my findings on the Civil Liability Act were in relation to a pleading based solely in breach of contract being the action between the plaintiff and the defendant. Given that the plaintiff chose not to proceed against the third party because it recognised that a tortious claim would be likely to fail, I do not accept that the plaintiff should be liable to pay or contribute towards the costs incurred by the third party.

The defendant has failed to show any exceptional circumstances or special grounds to persuade me to exercise my discretion against the order that would usually be made. The defendant is to pay the third party's costs of the third party proceedings on all issues (including reserved costs).
Accordingly, I make the following orders:
1.The plaintiff pay the defendant's costs of the action on a party/party basis to be taxed if not agreed.
2.The defendant pay the plaintiff's costs incurred between 9 November 2010 and 11 February 2011 in relation to the proof of facts numbers 1, 2, 5, 14, 16, 22, 23 and 24 contained in its notice to admit facts dated 7 February 2011 (deemed served on 11 October 2010).
3.The defendant pay the third party's costs of the third party proceedings on all issues (including reserved costs) to be taxed if not agreed.
4.The defendant pay the third party's costs relevant to this application for costs to be taxed if not agreed.
5.There are no further orders as to costs in respect of this costs application.

Plaintiff's sought admissions	Defendant's response	Court's findings
9. Prior to 26 March 2004 Roberts knew that Hooper's (and the other four builders') interests in the village would be confined to his/their own display home(s), but that Hooper (and the other builders) would expect the protection would be 'divided' between all the display homes in the village	Not admitted.	The plaintiff's commercial intention was for lots on the estate to be purchased by its clients in order for houses to be built [109].
10. Prior to 26 March 2004 Roberts knew that Hooper (and the other four builders including the plaintiff) would not expect that the protection would be 'divided' between the village and the rest of Corondale Estate (as defined at par 19)	34. Not admitted.	[11] – [13], [104] – [110]. [109] Further, the plaintiff's commercial intention was for lots on the estate to be purchased by its client in order for houses to be built.
11. Roberts therefore drafted two proposed clauses (the proposed protection clauses) to be added to the offer and acceptance documents between the defendant and builders and showed them to Hooper for his approval.	35. Not admitted.	Mr Hooper drafted and added cl 7 and cl 8 to the contract [16].

12. Hooper approved the proposed protection clauses.	36. Not admitted.	Mr Hooper drafted and added cl 7 and cl 8 to the contract [16].
13. Roberts then copied the proposed protection clauses verbatim into the sales contract of each of the builders at cl 7 and cl 8.	37. Not admitted.	It was found that each of the contracts relevant to the sale and purchase of the display home lots contained the same special conditions, cl 7 and cl 8 [17]. No findings in relation to who copied the clauses.
18. Butchart did not confine his security patrol to the village and would, roughly hourly, conduct a vehicular patrol of about five minutes' duration of the area within the perimeter of: (a) Seville Dr (between the roundabout and Chidzey Dr and the creek only); (b) The north‑western boundary of Cecil Andrews Senior High School; (c) A creek which borders part of Viana Lp, Granada Lp and Salamanca Blvd (cumulatively Corondale Estate).	Not admitted.	Mr Butchart's usual procedure was accepted, however precise details of the route taken were not the subject of comment in reasons.
19. Before and on 17 July 2005, Butchart's practice, whenever he saw any suspicious or illegal activity on Corondale Estate, was to drive up to the persons performing the activity, and in every instance when he did this, the person(s) departed the area.	Not admitted.	Mr Butchart's usual practice was to wait five minutes … [37]. Mr Butchart would not confront or apprehend a person who appeared to be involved in the commission of a criminal offence [117].

Plaintiff's sought admissions	Defendant's response	Comments
3. At all material times Malcolm Roberts (Roberts) was the defendant's disclosed sales agent or was the director, employee or agent of the defendant's disclosed sales agent.	27. Partial admission.	Mr Roberts' evidence on this point was not challenged. If challenged the plaintiff could have proved the fact through Mr Roberts in re‑examination.
4. At all material times Aidan Hooper (Hooper) was a director of Homebuyers Centre Pty Ltd which was the largest of the six building companies/contractors of the proposed display homes at lots 334 to 339 inclusive (the village)	Partial admission.	The fact that Homebuyers Centre Pty Ltd was the most active/largest of the six building companies was not challenged. Evidence could have been led through Mr Hooper in re‑examination to confirm this if challenged.
6. Before 26 March 2004 Roberts knew that Hooper was very concerned about security of his (company's) display homes, especially in areas where theft and malicious damage were prevalent.	Not admitted.	Admission sought proved [81]. No material challenge by the defendant. Mr Roberts was required to give evidence in any event.
7. The village was located in an area where theft and malicious damage were prevalent.	31. Not admitted.	Admission proved [26]. Not challenged by the defendant. No evidence called specifically in relation to crime statistics, theft and malicious damage on behalf of the plaintiff.

8. Prior to 26 March 2004 Roberts knew that to get Hooper to join the village Roberts needed to convince him that any display home Hooper caused to be constructed in the village would be adequately protected against theft and malicious damage by static security arranged by the defendant (protection).	32. Not admitted.	Admission proved [81].
15. By fax dated 31 January 2005 Whelpdale contracted with Verdenius with the intention of discharging the defendant's obligations to the plaintiff pursuant to cl 8 of the contract.	Partial admission.	The admissions sought by the plaintiff proven [111]. Challenged by third party not by defendant.