BGC Residential Pty Ltd v Fairwater Pty Ltd
[2012] WASCA 268
•18 DECEMBER 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: BGC RESIDENTIAL PTY LTD -v- FAIRWATER PTY LTD [2012] WASCA 268
CORAM: PULLIN JA
NEWNES JA
MURPHY JA
HEARD: 21 MARCH 2012
DELIVERED : 18 DECEMBER 2012
FILE NO/S: CACV 64 of 2011
BETWEEN: BGC RESIDENTIAL PTY LTD
Appellant
AND
FAIRWATER PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram :WAGER DCJ
File No :CIV 1912 of 2007
Catchwords:
Contract - Construction of special conditions - Whether breach of contract caused damage - Where breach consists of an omission - Whether 'but for' test of causation satisfied - 'Commonsense' notions of causation
Contract - Breach of contract - Application of Civil Liability Act 2002 (WA)
Legislation:
Civil Liability Act 2002 (WA)
Town Planning and Development Act 1928 (WA)
Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant: Mr C G Colvin SC
Respondent: Mr D J Pratt
Solicitors:
Appellant: Greenland Legal Pty Ltd
Respondent: Jackson McDonald
Case(s) referred to in judgment(s):
Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420
Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310
Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158; (2007) 34 WAR 109
Amaca Pty Ltd v Booth [2011] HCA 53
Amaca Pty Ltd v Ellis [2010] HCA 5; (2010) 240 CLR 111
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Bank of New South Wales v Commonwealth (1948) 76 CLR 1
Bennett v Minister of Community Welfare [1992] HCA 27; (1992) 176 CLR 408
Flounders v Millar [2007] NSWCA 238
Gales v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
McCourt v Cranston [2012] WASCA 60
Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management [2012] WASCA 79
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 27; (1998) 192 CLR 603
PULLIN JA: The appellant (BGC) appeals against a judgment of Wager DCJ pursuant to which the appellant was awarded nominal damages of $200 against the respondent (Fairwater) for breach of contract. Under the contract Fairwater was obliged to provide security services in relation to property on which stood a house owned by BGC. On 17 July 2005, Fairwater failed to provide such security services and in that time an arsonist set fire to BGC's home which fire caused considerable damage. There is an issue about the proper construction of the contract and also about whether the admitted breach of contract caused damage justifying an award beyond the award of nominal damages.
The surrounding circumstances known to both parties at the time of the contract
The contract between the parties was dated 8 April 2004. There is no question that one term in the contract was ambiguous or susceptible of more than one meaning, and on that basis it is relevant to examine the surrounding circumstances known to both parties at the date the contract was entered into: McCourt v Cranston [2012] WASCA 60 [13], [14]. At trial there was a great deal of evidence led about the negotiations between the individuals representing the companies and what they thought was involved in the contract. All that evidence was irrelevant.
The facts known to both parties on 8 April 2004 were that:
(a)Fairwater was carrying out development work in preparation for the sale of housing lots in an estate known as Corondale Estate Stages 1‑3B.
(b)The development would, over time, involve Fairwater in carrying out earthworks, the construction of roads, the installation of services, the creation of building lots for houses and the construction of homes.
(c)Some of the lots were to be sold to builders so that they could build display homes. The general area where the builders' display homes were to be constructed was known to both parties. It was an area adjacent to Fairwater's sales office and the proposed lots fronted onto Seville Drive, which was a road running along the western edge of the Corondale Estate.
(d)Work had only just started on the Corondale Estate development. The land was still being cleared and earthworks were being carried out. Heavy machinery was on site. No houses had been constructed.
(e)The only building which existed on the estate at that time was a sales office. A plan which existed at about that time depicted the Corondale Estate and the various stages of construction (exhibit 1.16). It depicted the sales office with a car park alongside it. It identified six lots coloured in red next to the sales office and facing onto Seville Drive which, according to the legend on the plan, was the 'display village'.
(f)The Corondale Estate had a circumference of about 3 km. It was in an isolated location, and susceptible to vandalism and property damage as a result of criminal activity.
The contract
The contract was on the Real Estate Institute of Western Australia standard Contract for Sale of Land or Strata Title by Offer and Acceptance form. The standard form was completed by insertion of particulars, the addition of some annexures and the writing in of some additional special conditions.
Under the contract, BGC agreed to purchase 'the land' described in the schedule. The 'description of the property' was of 'the land' situated and known as lot 336 Corondale Estate, Seville Drive, Seville Grove. There were four annexures to the contract which formed part of it. Annexure E was a copy of a plan of the Corondale Estate. On this plan lot 336 was initialled by one of the parties, presumably to signify its location. Annexure A, headed 'Corondale - Stage 1', contained an acknowledgement by BGC that the property being purchased was not yet a 'lot' within the meaning of the Town Planning and Development Act 1928 (WA) and stated that the contract was conditional upon Fairwater subdividing the land and obtaining a certificate of title. Annexure B was headed 'Corondale - Stage 1' and it contained provisions whereby BGC agreed that it would not construct certain types of building or subdivide 'their lot'. There were some other restrictions in relation to the lot.
Two conditions in the contract read:
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 6 months from the date of the first slab down in the builder's display village.
8.Thereafter for the next 6 months the buyer and seller will share the cost of continuing the static security service with the seller paying 50% of the total cost and the builders contributing to the remaining 50%.
The ambiguous term of the contract
The ambiguous term was the expression 'on site' in clause 7. BGC contended that the 'site' was a reference to the builders' display village located next to the sales office. Fairwater contended that the 'site' was a reference to the whole of the Corondale Estate, not just the builders' display village. Fairwater submitted that this was so because, if the parties had intended the site to refer to the builders' display village, they would have used that term rather than the expression 'on site' so that the use of the phrase 'on site' and, in the same clause, 'the builders' display village', suggested that the same area was not being referred to. Fairwater also submitted that the expression the 'builders' display village' was ambiguous because the precise boundaries and the number of lots had not been settled on 8 April 2004. However, there was no contention that the contract was uncertain and so the submission even if true has no consequence. The builders' display village was unquestionably an area of a few lots set aside for builders to construct their display homes. At the time of that contract the plan showed six lots, one of which was the lot BGC had purchased.
Fairwater submitted that cl 8 suggested that the reference to the site was a reference to the whole estate.
There was no issue on the appeal that a 'static' security service was one where the security guard remained in the one area on the 'site' for 12 hours each night rather than merely visiting the area in the course of patrolling a number of different areas.
In a sense, the issue about the meaning of the words 'on site' does not matter because, whichever meaning the phrase is given, there is no doubt that the contract was breached because the security guard on duty on 17 July 2005 (Mr Butchart) went home at 5.30 am which meant that Fairwater was not providing a security service for the period from 5.30 to 6.00 which was when the damage to BGC's property occurred. However, the correct construction of the contract will bear upon the causation issue because what was not done will be relevant in considering what would have happened if the contract had been performed.
The trial judge's findings about the proper construction of the contract
The trial judge found that the words 'on site' in cl 7 'carry a wider meaning than at or near the builders' display village' [109]. Her Honour said that, 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 pm one day to 6 am the next for 12 months from 1 August 2004 to 31 July 2005' [110], and 'specifically in relation to this matter, Fairwater was obliged to provide a static security service on‑site at the Corondale Estate from 6 pm on 16 July 2005 to 6 am on 17 July 2005' [111].
These findings are challenged by BGC as an error of law. Her Honour construed the contract in this way because of the conclusion that 'BGC's commercial intention was for lots on the estate to be purchased by its clients in order for houses to be built … [and that] security of the site as a whole was considered by BGC to be important' [109].
'Slab down' and the contract between Verdenius Enterprise (VE) and Fairwater
The trial judge found that the date of the first 'slab down' was 1 August 2004. The BGC display home was completed in June 2005.
VE was engaged by Fairwater to provide security for the whole of the Corondale Estate. The trial judge referred to evidence about exchanges which occurred between VE and Fairwater which related to the dealing between them leading to the formation of a contract between VE and Fairwater, but did not make findings about what constituted the contract. However, the parties accepted that VE's contract was one to provide static security services in relation to the whole of the Corondale Estate, including the display village.
In accordance with the contract between VE and Fairwater, a security agent would be on the Corondale Estate between 6 pm and 6 am. He used to wear a uniform and, from time to time, he would drive around the internal roads within the estate or the roads surrounding the estate, but most of his time was spent in his motor vehicle parked in the car park next to the sales office.
The situation on the Corondale Estate in July 2005
By 17 July 2005, several display houses had been constructed in the builders' display village and fences had been built around each of the houses (although not on the front where the houses faced Seville Drive). North of the car park was the sales office. North of that building were two display houses and to the north of and next door to those houses was the BGC display house.
What VE did to discharge its contract with Fairwater
In the period leading up to July 2005, Mr Butchart was employed by VE and was required to work at the Corondale Estate as a security guard. The trial judge related the undisputed evidence about Mr Butchart's practice as follows:
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 [35] ‑ [40].
After the commencement of the time when security was provided by VE, the only damage to the homes in the builders' display village or the sales office was one instance of graffiti to the sales office and adjacent display home in November 2004: ts 64, exhibit 1.9. The evidence was that this damage probably occurred on Tuesday 9 November 2004. At that time, it happened that there were not static security guards, but merely random patrols at the estate from time to time: exhibit 1.28, exhibit 1.52, exhibit 1.122 and ts 242 ‑ 246. That being so, the display homes in the builders' display village were never damaged in the period when the security guard was on duty driving around or parked near the sales office.
Counsel for Fairwater referred to some evidence, at ts 73 ‑ 74, by Mr Roberts, a consultant with DTZ Australia (WA) Pty Ltd, an agent of Fairwater, who was contracted to promote and sell the estate on Fairwater's behalf, to the effect that graffiti and minor vandalism was 'ongoing': ts 73 ‑ 74. This imprecise and generalised evidence did not support a conclusion that the sales office and display homes were ever damaged by vandalism or graffiti (apart from the 4 November 2004 incident).
However, graffiti, vandalism and minor property damage occurred on numerous occasions in the estate at locations away from the sales office and display village. It was much more likely that such damage would occur away from the display village and the sales office because for most of the time the security guard's car and the security guard were located in the car park near the sales office.
The events in the 12 hours before the fire which damaged BGC's display home
On 16 July 2005, Mr Butchart was working as the security guard. He was contracted by VE to remain there from 6 pm until 6 am on 17 July 2005. Early in his shift, he noted that he saw a vehicle (at 7.27 pm) and then saw it again at 8.14 pm. The vehicle had driven past slowly and then had driven out of the estate. During the same shift, but at 3.34 am on 17 July 2005, Mr Butchart has seen the same vehicle near a 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 he was going to leave early. As he was preparing to leave, the same vehicle drove down Seville Drive, through a roundabout on the boundary of the estate, and travelled in a northerly direction in front of the display homes. Mr Butchart followed the car, taking the same path that the car had taken. The car 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 and drove home. There was no evidence linking the car observed by Mr Butchart with the fire.
The damage to BGC's display home
The trial judge found that on 17 July 2005, at approximately 5.46 am, 'the BGC display home was damaged by a fire event … 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.' This finding was based upon an admission in writing made by the respondent which became part of the record of the proceedings. It read:
The defendant admits, for the purpose of the action and third party proceedings only … that the arson event comprised the simultaneous:
(a)breaking of the house's front bedroom window; and
(b)introduction through it of both fuel and an ignition source which then contacted the bed adjacent to the window.
The claim for damages by BGC
The loss suffered by the appellant was agreed at $400,000.
BGC sued Fairwater for damages, claiming that Fairwater had breached its contract because it failed to provide the required security service at the time of the fire event. Fairwater does not challenge the trial judge's finding that Fairwater breached the contract because it failed to provide the required security.
The trial judge's finding that the breach of contract did not cause loss
The trial judge found that although Fairwater had breached the contract, it was not possible to infer that the breach of contract caused the damage suffered by BGC from the fire.
Her Honour said:
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 [137] ‑ [141].
The trial judge held that the cause of the fire event remained unknown and could not 'be inferred' [150].
As a result, the trial judge awarded only nominal damages of $200.
BGC's appeal
BGC appeals on seven grounds but acknowledges, in its written submissions, that only two points arise for consideration. The first involves the correct construction of the special conditions. BGC contends, as it did at trial, that cl 7 required a static security service to be provided 'on site', meaning at the builders' display village and that the contract should not be construed as meaning that security was to be provided by Fairwater in relation to the whole of the Corondale Estate. The second point raised by BGC was that the trial judge erred in finding that the breach of contract did not cause the damage which resulted in the loss of $400,000 by BGC.
The first point - the construction issue - was important because it had a bearing on the second point - the causation issue. If the obligation was to provide static security for the whole of the Corondale Estate, then there would be times when no security guard would be present at the builders' display village. The security guard would, at times, be elsewhere touring the Corondale Estate. If the 'site' was the builders' display village, then the security guard would always be present during the specified hours at the builders' display village and, as BGC contends, be in a position to deter those who might come to the site intending to cause damage to display houses.
The resolution of the construction issue
Fairwater submitted, in its written submissions, that the site was the Corondale Estate rather than the builders' display village for six reasons. Those reasons were as follows:
(a)At the time the contract was entered into, the number of the lots which would finally comprise the builders' display village was not known.
(b)That such a construction was consistent with the use of the word 'site' rather than 'lot', 'property' or 'builders' display village', each of which terms were used elsewhere in the contract.
(c)That such a construction was consistent with the area shown in annexure 'E' and the plan provided by Fairwater to BGC prior to BGC entering into the contract and which the parties knew to be the area then being developed and sold.
(d)That such a construction was consistent with the purpose and object of the contract which her Honour found was to sell houses and land within the Corondale Estate and that, accordingly, the parties had an interest in protecting the 'wider estate' on which homes would be constructed.
(e)That the expression 'on site' was 'readily capable' of referring to the entire estate and not to the builders' display village was demonstrated by the way the term was used by Mr Roberts, the witness called by BGC.
(f)That Mr Roberts' 'understanding', which was that 'site' was a reference to the builders' display village, was 'correctly found to be inadmissible and irrelevant to the construction of the agreement since it was not communicated to anyone else'.
As to the first reason, the fact that the precise number of lots in the builders' display village was not settled at the time the contract was signed is a neutral factor. What was clear was that there was to be a builders' display village. Its general location was understood by both parties to the contract and the property BGC was purchasing was to be located within it.
As to the second reason, it is true that the contract referred to the land being purchased as the 'lot' or the 'property' (or the 'land') and it is true that the phrase the 'builders' display village' was expressly used in cl 7, but all of those points beg the question as to whether the 'site' was a reference to the 'builders' display village' or to the 'Corondale' estate, which latter quoted word also appeared in the contract.
The third reason is not persuasive. Just because the word 'site' could apply to the area shown in Annexure 'E' again begs the question as to whether the 'site' was the whole of the Corondale Estate or the builders' display village.
The fourth reason asserts that the 'site' meant the Corondale Estate because the purpose and object of the transaction was that Fairwater 'wanted a builders' display village in the Corondale Estate to promote sales of lots and BGC wanted a display home to promote the sale of its homes'. That submission ignores the fact that it was obvious to the parties that for the period when the static security was to be provided, the Corondale Estate generally was to be open land being prepared for building works. The only buildings which were likely to be constructed during that period were the houses in the builders' display village which, being in an isolated area, were vulnerable to damage or pilfering of goods.
The last two reasons provide no reasons in support of the respondent's submission. Those two reasons refer to evidence about what witnesses thought the expression the 'site' meant or how they used the expression. That evidence cannot assist in construing the contract.
The sale of lots in the Corondale Estate was primarily the business of Fairwater. The contract between BGC and Fairwater related only to lot 336. Annexure A contained an acknowledgment by BGC that the property being purchased was not yet a lot within the meaning of the Town Planning and Development Act. The contract made it clear that BGC was to construct a house on lot 336 which would form part of a builders' display village constituted by BGC's house and other builders' display houses. The builders' display village would be vulnerable to criminal damage and graffiti because of its isolated location, the reputation of the area and the fact that those homes would be constructed when there were few, if any, houses in the Corondale Estate generally. Clause 7 specified the commencement of the period when a static security service was to be provided. The commencement was identified by a reference to the 'first slab down' in the builders' display village, not by reference to something elsewhere in the Corondale Estate. Once the 'first slab down' occurred in the builders' display village, then presumably work would proceed quickly and, once that happened, there would be something in the display village to damage and something to be protected by the security service.
All of these indications point to the 'site' as being the builders' display village. In my view, that is the correct construction of the contract and the trial judge erred in concluding that the site was the whole of the Corondale Estate. The first ground of appeal should therefore be upheld.
The next step is to consider the position BGC would be in if the security service had been provided at the builders' display village in performance of the contract. The object of an award of damages would be to restore BGC to that position: Gales v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 11 ‑ 12. This consideration requires the determination of the causation issue.
The law relating to the causation issue
In considering the issue about causation, the court has to decide whether to attribute responsibility for the damage suffered by BGC to Fairwater because of its breach of the contract: March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 509. Legal causation will be established if the evidence justifies a finding or inference of a probable causal connection between the breach of contract and the harm suffered. As in tort cases, this inquiry is a factual inquiry; March v E & MH Stramare (515) (Mason J), (522 ‑ 523) (Deane J), that has to be decided on the balance of probabilities. If the probable causal connection is established, then the law treats as certain that there is such a connection even though otherwise no certain answer can be given: Amaca Pty Ltd v Ellis [2010] HCA 5; (2010) 240 CLR 111 [70].
In determining whether there is a probable causal connection, BGC must show that 'but for' the breach of contract BGC would not have been firebombed. This 'but for' test of causation is applied in tort and likewise in contract: Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 27; (1998) 192 CLR 603 [22] (McHugh J).
This has to be determined in accordance with 'commonsense notions' of causation: March v E & M H Stramare. The reference to 'commonsense' is to exclude the application of a philosophical or scientific theory of causation. This accepts that in commonsense terms some conditions will have to be disregarded even though 'but for' that condition the injury would not have happened. See Deane J's beheading example: March v E & M H Stramare (523). When the case concerns an omission to do something which the defendant had contractually promised to do, then questions of causation are answered by reference to what would or would not have happened had the act occurred: Bennett v Minister of Community Welfare [1992] HCA 27; (1992) 176 CLR 408 (420) (Gaudron J).
The damage in this case was inflicted by a third person or persons carrying out the deliberate act of setting fire to the house. The damage having been directly caused by one or more third persons, the question arises as to whether Fairwater can be said to have caused the damage by its breach of contract.
Under the contract, Fairwater was to provide security services. The security service industry is a substantial industry in Australia. It is obvious that, depending on the terms of the contract involved, people are willing to pay for security services on the basis that the presence of security guards will either prevent or deter third persons from causing damage to property or injury to persons. The assumption is that the presence of a security guard will prevent or deter people from damaging property or causing injury to persons.
However, sometimes the presence of a security guard will neither prevent nor deter a third person from causing damage to property or injuring a person. An extreme case is seen in the case of Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420. In that case two customers of a licensed restaurant and function centre sued the proprietor of the business for negligence in not having prevented another customer injuring them. The facts were that there was a fight at the centre and one man involved was hit in the face. He left the premises and returned soon after with a gun. He followed one customer into the kitchen and shot and wounded him. He went back to the restaurant area and shot and wounded the customer who had previously hit him. There were no security personnel on the premises. Questions of duty and breach were considered and the court also considered the question of causation. The court was prepared to accept that security personnel may have been able to deter or prevent re‑entry by the drunk or 'obstreperous would‑be patron willing to throw a punch' [47]. However, the court held that there was 'no basis in the evidence for concluding that security staff at the entrance to the restaurant would have deterred or prevented the re‑entry to the premises of a man armed with a gun when later events showed he was ready and willing to use the weapon on persons unconnected with his evident desire for revenge' [47]. The court added:
The evidence at trial did not show that the presence of security personnel would have deterred the re-entry of the gunman. That conclusion could have been reached only if it was assumed that the gunman would have acted rationally. But, as was pointed out in Modbury, '[t]he conduct of criminal assailants is not necessarily dictated by reason or prudential considerations'. The gunman's conduct at the restaurant on this night was dictated neither by reason nor by prudential considerations. He shot the man who had struck him during the mêlée that broke out after the confrontation … And before shooting that man, the gunman had shot a man who had done nothing to him and who, defenceless, begged for mercy [48].
The court concluded that the evidence did not show that security personnel could or would have prevented re‑entry by a determined person armed with a gun and irrationally bent on revenge. The court stressed at [50] that recognising that changing any of the circumstances in which the shootings occurred might have made a difference does not prove factual causation. The court concluded that the plaintiff was not able to prove that but for the absence of security personnel, the shootings would not have taken place. That is, 'the absence of security personnel at Adeels Palace on the night the plaintiffs were shot was not a necessary condition of their being shot' [53].
In this case, the question is whether the appellant proved that it was probable that the presence of the security guard would have deterred or prevented the person or persons responsible from carrying out the firebombing of BGC's house.
The arguments came down to two simple competing propositions. Fairwater's proposition was that BGC had proved only that by reason of the breach of contract there was an increased risk of damage or, putting it another way, all that BGC could prove was that the presence of the security guard might have prevented the damage and that causation is not established by such proof: see Booth [41] (French CJ); Adeels Palace [50]. BGC advanced the proposition that, in effect, it could be inferred on the balance of probabilities that the breach did cause the damage.
It is clear that there can be no certainty about what would have happened if the security guard had not gone home early. This will usually be the case where the breach consists of an omission to do something, but the High Court made the obvious point in Ellis [6], that a court is not permitted to respond to a claim that is made by saying that the claim is neither allowed nor rejected. A court must decide the claim and either dismiss it or hold the defendant responsible in damages. The advantage courts have over other 'seekers after truth' (an expression used by Dixon J in Bank of New South Wales v Commonwealth (1948) 76 CLR 1, 340) is that, by the court's judgment, they can reduce to legal certainty questions to which no other conclusive answer can be given: Ellis [6].
The proper inference to be drawn on the balance of probabilities depends, as has been said above, upon a commonsense assessment of all relevant evidence, although the justification for that approach has lost some of its force for the reasons given by the plurality in Booth [67]. In many cases in place of the 'rough and ready answers of the practical man' an 'exact and reasoned solution' is now required. This is so in cases where the wealth of knowledge of science may provide such an exact and reasoned solution to a causation issue: Booth [68]. However, the plurality in Booth accepted [69] that there will still be cases (and this is one such case) where 'other disciplines' cannot give any conclusive answer, in which case a commonsense assessment of the evidence is the only method which can be used to reach a conclusion about whether a breach of contract has caused the claimed damage. The question to be asked is whether it is possible to infer, on the balance of probabilities and applying a commonsense approach, that but for the breach the damage would not have occurred.
Fairwater relies heavily on the Adeels Palace case. Counsel for Fairwater submitted that the conduct of the person or persons who set fire to BGC's home was not dictated by reason or prudential considerations and submitted that the appellant had proved nothing more than that the house might not have been set on fire if the security guard was on site.
This case cannot be equated with the Adeels Palace case. The evidence in Adeels Palace revealed that the person responsible did not care that he was witnessed. He intended to shoot his victims and was not deterred by the presence of others, and the finding was that he would not have been deterred by security personnel.
Evidence given by Mr Butchart showed that persons who were found on the estate would leave when Mr Butchart appeared. Here, the person or persons unknown who were responsible for the firebombing of the BGC house acted early in the morning at a time when no‑one was about. As a result, it may and should be inferred that the person or persons did not want to be witnessed performing the act of setting fire to the house and, from that, it follows that if the guard had been on site at the village it is more probable than not that his presence would have deterred the person or persons from starting the fire. There was nothing to suggest that this was the work of a person or persons prepared to commit arson whether they were observed or not. In other words, but for the breach of contract, the building would not have been damaged.
On the balance of probabilities, the lack of the security guard did cause the loss. Not to provide security was a breach of contract which caused the loss.
The application of the Civil Liability Act
By ground 7, BGC asserted that the trial judge erred by 'failing to find that once it had been demonstrated that there had been a breach of contract, with a loss of a kind that proper performance of the contract was to protect against then the evidential burden shifted to the respondent and the respondent had not discharged that burden on all the evidence'. As to this ground, senior counsel for BGC said, during oral submissions at the hearing of the appeal, 'we have a formal submission in ground 7 ... but we accept, for the purposes of the appeal, that on the authorities as they presently stand, that that would be decided against us, so we don't invite your Honours to go through all of [the] authorities' (ts 25). Ground 7 seems to have been inspired by what Gaudron J said in Bennett v Minister of Community Welfare at 420, namely that:
[A]lthough it is sometimes necessary for a plaintiff to lead evidence as to what would or would not have happened if a particular common law duty had been performed … generally speaking, if an injury occurs within an area of foreseeable risk, then, in the absence of evidence that the breach had no effect … or that the injury would have occurred even if the duty had been performed … it will be taken that the breach of the common law duty caused or materially contributed to the injury.
and by obiter dictum by Steytler P and McLure JA in Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158; (2007) 34 WAR 109 [395] when they said:
As we understand the law in Australia, once a plaintiff demonstrates that a breach of duty has occurred followed by injury within the area of foreseeable risk, a prima facie causal connection will be established and 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.
(Contra see Flounders v Millar [2007] NSWCA 238 [34].
Senior counsel for BGC said that he considered that the subsequent statements by the High Court meant that he could not rely on Bennett and the obiter in Hannell. He referred to Amaca Pty Ltd v Booth [2011] HCA 53, where the court said that:
[Q]uestions of causation, as a step in the ascertainment of rights and the attribution of liability in law, call for sufficient reduction to certainty to satisfy the relevant burden of proof for the attribution of liability [69].
and to Ellis (121 ‑ 122), where the High Court said that the plaintiff had to gain an 'affirmative answer' by inference or otherwise that it was more probable than not that the negligence of the defendant was a cause of the plaintiff's cancer in circumstances where the plaintiff had inhaled both asbestos fibres and cigarette smoke. Senior counsel for BGC said (ts 59) that what was said by the High Court in Booth and in Ellis meant that ground 7 could only be advanced to preserve the argument presumably so that if the matter went further an attempt could be made to reventilate the question in the High Court.
In tort cases, the CLA makes it clear that there is no shifting of the onus of proof: see s 5D. A question arose at trial as to whether this provision applied in determining the issue of causation in the case of a claim for breach of contract and therefore to this case. Fairwater's submission to the trial judge was that the CLA was 'not limited to claims arising from a breach of failure to exercise reasonable care because of s 5A'. Section 5A, which is in pt 1A of the CLA reads:
(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.
The trial judge said in her reasons at [129] that a failure to exercise reasonable care may constitute a breach of contract as well as being a tortious breach, and added '[i]f 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'. However, the trial judge concluded at [132]:
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.
This conclusion was not challenged by either party by the notice of appeal or the notice of contention. However, because the question was one of law, the court called for written submissions from the parties which were received after the completion of the oral hearing.
BGC submitted that the CLA did not apply because:
(a)s 5A requires a claim for damages to have two aspects in order for pt 1A to apply, namely a claim for damages for harm and that the harm was caused by the fault of a person;
(b)liability which arises without 'fault' is not captured;
(c)if 'fault' were interpreted to mean any breach of a legal obligation then the 'fault' aspect of s 5A would be otiose;
(d)as a matter of ordinary language the term 'fault', when used in the sense of 'fault of a person' as it is in s 5A, denotes some form of culpability or blame for the events which had occurred and that this may be due to 'failing or neglect, mistake or blunder' on the part of a person but that there is no such 'fault' inquiry in most claims for breach of contract, and that a party is liable, if a
contractual obligation is not performed, no matter why there has been non‑performance.
Fairwater's submission was that 'fault' was any breach of 'legal obligation', and that a breach of contract is therefore a fault. That submission must be rejected. In Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management [2012] WASCA 79, McLure P (Buss JA agreeing) at [126] expressed a 'preliminary view' that the CLA would only apply in that case if the appellants had to prove negligence. The President said that pt 1A of the CLA only applied where there is 'a claim for damages for harm caused by the fault of a person' even if they are sought to be recovered other than in an action for negligence and that the requirement for a causal link between the damage and the fault suggests fault must be an element of the cause of action. See also [326] ‑ [329] in the dissenting judgment. The meaning of 'fault' in the CLA cannot be so broad as to encompass any and all breaches of contract.
Both parties accepted that when a claim is based in tort, alleging a breach of a duty to exercise reasonable care, and the claim is likewise properly formulated in the alternative as a breach of a contract to exercise reasonable care, then the CLA would apply.
The allegation in this case was that the contract was breached when Fairwater failed to comply with a contractual promise to provide static security. No issue arose about why there was such a failure. Fault was not an element of the cause of action.
As a result, pt 1A of the CLA did not apply to this case.
Result
The appeal should be allowed, the judgment of the District Court should be set aside and in lieu, judgment should be entered for the appellant. The parties should be heard about the precise terms of the judgment.
NEWNES JA: I agree with Pullin JA.
MURPHY JA: I am in general agreement with the reasons for judgment of Pullin JA. I wish, however, to provide the following additional observations on the proper construction of the contract in question.
By cls 7 and 8 of the contract for sale between the appellant (the builder) and the respondent (the developer), it was, in effect, agreed that as part of the consideration for the builder purchasing a lot in the proposed estate:
(a)the developer would provide, at its cost, a 'static security service', 'on site', for a period of six months, commencing upon the first laying of a slab for the construction of a display home within the area designated for the location of a display village;
(b)the developer would continue the provision of such security service 'on site' for a further six months following the expiration of the six‑month period referred to in subpar (a), on terms that the developer and the builder would pay 50% of the cost of the service for that second six‑month period;
(c)the 'static security service' would be provided on a daily basis between the hours of 6 pm and 6 am.
As Pullin JA has observed, it was not in dispute that the words 'static security service' meant that a security guard was to remain in situ for the 12‑hour period between 6 pm to 6 am each day, rather than simply to visit the area in the course of patrolling a number of different areas.
The word 'site' in its ordinary meaning, denotes the position of a town or building (Macquarie Dictionary). The parties clearly did not use the word 'site' in cl 7 in connection with the position of a town. Rather, in cl 7, the parties referred to a group of buildings, described as the 'builders display village'. In its ordinary signification, the word 'site', when used in cl 7, denoted the position of the 'builders display village'. That construction could not be regarded as 'capricious, unreasonable, inconvenient or unjust': see Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109. It imputes to the parties a recognition that the developer had an interest in the erection of a display village on the estate and an intention that the developer should contribute to the initial costs of securing the display village for builders who agreed to purchase a lot and participate in the creation of the display village.
The developer's principal contention in this appeal, in substance, was that the word 'site' in cl 7 was a reference to 'estate'. There is nothing in the language of cl 7 which indicates that 'site' means 'estate'. Furthermore, the developer's argument that in cl 7 the word 'site' must mean 'estate' because the word 'site' has been used in contradistinction to 'builders display village' cannot, in my view, be maintained. First, the differential use in cl 7 of 'site' and 'builders display village' cannot, in itself, justify the conclusion that 'site' means 'estate'. Secondly, the differential use is explicable by reference to the fact that at the time the contract was entered into, there was no 'builders display village' in existence. There was merely a 'site' for one. The parties used language which was apposite to the then existing state of affairs. It was the 'site' of the 'builders display village' which formed the subject matter of cl 7, and not some other 'site'.
I would allow the appeal.
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