Grade One Monitoring Pty Ltd trading as Artemis Security Solutions v Sargent Security (Aus) Pty Ltd

[2010] NSWSC 1377

CITATION:	Grade One Monitoring Pty Ltd trading as Artemis Security Solutions v Sargent Security (Aus) Pty Ltd [2010] NSWSC 1377
HEARING DATE(S):	17 November 2010
JUDGMENT DATE :	7 December 2010
JURISDICTION:	COMMON LAW
JUDGMENT OF:	Davies J
DECISION:	(1) The Summons is dismissed. (2) The Plaintiff is to pay the Defendant’s costs.
CATCHWORDS:	APPEAL - from Local Court - errors of law alleged - whether there was any evidence of breach of contract and/or loss and damage. CONTRACT - general contractual principles - implied terms - breach of contract - contract for security services - whether implied term to ensure no loss - no error by Magistrate shown.
CATEGORY:	Principal judgment
CASES CITED:	BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
PARTIES:	Grade One Monitoring Pty Ltd t/as Artemis Security Solutions (Applicant) Sargent Security (Aus) Pty Ltd (Respondent)
FILE NUMBER(S):	SC 2010/149231
COUNSEL:	L Katsinas (Applicant) L Morgan (Respondent)
SOLICITORS:	JT Law (Applicant) Moray & Agnew (Respondent)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	10243/09
LOWER COURT JUDICIAL OFFICER :	Gilmore LCM
LOWER COURT DATE OF DECISION:	18 May 2010

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

DAVIES J

7 DECEMBER 2010

2010/149231 GRADE ONE MONITORING PTY LTD T/AS ARTEMIS SECURITY SOLUTIONS V SARGENT SECURITY (AUS) PTY LTD

JUDGMENT

1 A builder, Link Constructions Pty Ltd, contracted with the Plaintiff, Grade One Monitoring Pty Ltd, for Grade One to provide security services at one of Link Constructions’ building sites in Botany Street, Randwick. Grade One then entered into an arrangement with Sargent Security (Aus) Pty Ltd for Sargent to provide the security services for the period 2 March 2009 to 30 April 2009.

2 On 16 April 2009 21 hot water systems were stolen and removed from the property.

3 Link Constructions sent a letter to Grade One effectively claiming damages of $31,500 plus GST to replace the hot water units and rectify the damage caused by their theft. Ultimately, Link Constructions went into administration and it does not appear that any money has passed between Grade One and Link Constructions in respect of the contract for security services or for the replacement of the hot water systems.

4 When Sargent claimed its fees of $46,000 from Grade One, Grade One sought to offset the amount of $34,650 (the total claimed by Link Constructions including GST) by alleging a breach of contract on the part of Sargent.

5 The Magistrate who heard the proceedings found against Grade One and awarded Sargent the full amount of its claim of $46,000. Grade One now seeks leave to appeal on the basis that the Magistrate made errors of law. Although the appeal grounds in the Summons raised 6 matters the Plaintiff abandoned 5 of these at the hearing and sought leave to amend one of the abandoned grounds and rely upon that. No objection was taken to the proposed amendment.

6 The 2 grounds relied upon by the Plaintiff were these:

(1) The decision in the Court below is founded upon areas of law in which his (sic) Honour erred in finding that:

(a) there was no evidence of a breach of contract between the Plaintiff and the Defendant;
(d) making findings (sic) inconsistent with the Defendant’s admissions in evidence and pleading in that there was no evidence that was capable of establishing the loss suffered by it as a result of the Plaintiff breaching the Contract, the subject of the proceedings;

The Agreement

7 The evidence of the Agreement between Grade One and Sargent is initially to be found in the Witness Statement of Parry Doukas. Mr Doukas was a Director of Grade One. He said that after he had been contacted by George Simon from Link Constructions asking for security guards, Mr Doukas rang Peter Harris of Sargent and had a conversation to this effect:

I Said: "Hi Peter I have just got a job for security guards on two construction sites one at Drummoyne and one at Randwick, the job is just for night time only during the week and 24 hours on weekends and public holidays. Are you interested?"
He said: "Yes Parry for sure, I can organise a guard for you, where about are the sites?"
I said: “One site is on Lyons Road Drummoyne and the other one is a big construction site on Botany Street, Randwick. The Randwick job has 2 main entrances, one on Botany Street the other one is on Middle Street, both the entrances will be locked at night all your guard needs to do is patrol both entrances through the night and make sure they are secure".

8 Sargent relied on a Statement of Mr Harris which was largely in inadmissible form. Despite that, objection was not taken to the parts set out below. Mr Harris said in his Statement:

[4] On 11 February 2009 the defendant subcontracted to Sargent Security an agreement it had with Link Constructions to provide static guard services at two properties, 80 Middle St Randwick ("the property"). The security guards provided by Sargent Security were required to wear a Grade One Monitoring Uniform and report to its call centre on an hourly basis.

[5] The arrangements in relation to the property at 80 Middle St, did not require services on a 24 hours per day, 7 days per week basis. We were required to provide site monitoring between 5.30pm and 7am Monday to Friday and 24 hours on weekends. Builders were present at the property between 7am and 3pm Monday to Friday and the site was unattended between the hours of 3pm and 5.30pm Monday to Friday.

[6] The property had two main entrances, one on Middle street and the other on Botany Street however the property did not have a secure fence around it.

[7] As part of the agreement we provided two patrol cars and rang the defendant's 24 hour call centre, once an hour to check in.

…

[9] We were contracted to monitor the property. At no time did we guarantee that thieves would not enter the property, nor did we guarantee that theft or vandalism would not occur. Further, there were periods when the property was not being monitored by Sargent Security.

The theft

9 On Friday 17 April 2009 at approximately 3 o'clock in the afternoon Mr Doukas said that he was rung by Rene Araiji from Link Constructions who told him that on the previous night they had 21 hot water units stolen from the building at a time when “your guard” was supposed to be looking after the place.

10 Mr Doukas said that he immediately rang Mr Harris and conveyed that information to him. Mr Harris said that he would need to speak to the guard who was on duty to see what happened. Subsequently, Mr Harris rang Mr Doukas and said that he spoken to the guard who told him that he saw nothing and that no one went in or out of the site on that night.

11 Mr Harris said in his Statement that neither he nor the Company was informed of the theft until some time after it occurred and only when Sargent had contacted Grade One about unpaid invoices. It is not necessary to resolve the conflict of that evidence with the evidence of Mr Doukas.

12 In any event, a meeting was subsequently held between representatives of Grade One and Sargent including the security guard who had been present on the night. That meeting broke up acrimoniously. The subsequent failure to pay Sargent’s fees resulted in the present proceedings.

13 It appears that the only evidence of the cost of the hot water systems was the letter of 30 May 2009 Mr Araiji wrote to Grade One giving an overall figure of $31,500 plus GST for a supply of 15 hot water units (what happened with regard to the other 6 was not set out) and the cost to rectify damage to brick work and walls.

The hearing before the Magistrate

14 At the hearing before the Magistrate the various statements were before the Magistrate, and Mr Harris (from Sargent), Messrs Doukas and Papps (from Grade One) and Mr Araiji (from Link Constructions) were cross-examined.

15 The Magistrate reserved her decision for about half an hour and then gave an ex tempore judgment which relevantly said this:

The statement of claim filed is seeking payment for security services provided, on a subcontract basis, to the defendant company. At the commencement of proceedings today, the plaintiff was granted leave to amend the amount claimed to be $46,000. The defendant indicated likewise that the defendant company was abandoning its second cross-claim against Link Construction Group Pty Ltd. In summary, Link Construction Group were undertaking construction work at Randwick and employed the defendant company to carry out security work on site at various times.

The defendant company then subcontracted some of that work to the plaintiff company. The defendant filed a grounds of defence alleging negligence on behalf of the plaintiff company. The defendant also filed a cross-claim against the plaintiff asserting negligence and breach of contract and seeking money claimed by Link Construction Group against the defendant for theft and damage to property at the Randwick site. The defendant company accepts and agrees that a sum of $46,000 is owed to the plaintiff by the defendant company.

Statements exhibited before the court by both the plaintiff and the defendant are relied upon, together with the oral evidence of witnesses called. It is accepted between the parties that any agreement between them was oral and apparently was quite flexible with arrangements being changed at short notice by telephone conversations. The only evidence as to any agreement or contract is a conversation about when patrols were required and the nature of the duties to be performed. There is no evidence of any other agreement as to liability associated with carrying out those duties.

There is evidence of a report of theft from and damage to the Randwick site but, apart from some evidence from a witness today, that he attended the site and saw it, there is no other evidence by way of photographs, quotes, documentation or any other substantive evidence relating to the theft and damage.

Whilst the plaintiff by the defendant's cross-claim is said to be liable for the cost of replacing and repairing the property, the plaintiff was denied access to the site once the theft had been reported and, in fact, was not permitted access to the site during its shifts, conducting what appears to have been perimeter security only.

The defendant cannot say or produce evidence that the property or the damage has in fact been rectified. Each claim must be proven on the balance of probabilities. Each claim must be based on evidence, not suspicion or speculation, and whilst the court accepts inferences can sometimes be drawn, there must be evidence that allows proper inferences. Some of the defence submissions and assertions require quantum leaps to be made based on pure speculation.

In relation to the statement of claim, the defendant admits both liability and quantum in the sum of $46,000. On the evidence before the court on the cross-claim, there is no evidence of any breach of contract. The only evidence of any agreement was to the provision of security staff from time to time at the Randwick site. There is no evidence capable of establishing any liability on the plaintiff for the property allegedly stolen or damaged, nor is there any evidence capable of establishing any negligence on behalf of the plaintiff company, and there is certainly no evidence, even if liability could be established, to substantial (sic – substantiate) the defendant's cross-claim as to quantum.

THEREFORE, IN RELATION TO THIS MATTER I ENTER A VERDICT ON THE STATEMENT OF CLAIM FOR THE PLAINTIFF; A VERDICT ON THE DEFENDANT'S CROSS-CLAIM FOR THE PLAINTIFF; I ORDER JUDGEMENT IN THE AMOUNT OF $46,000 WITH $394 FILING FEES.
Ground (a) - no evidence of a breach of contract

16 One of the significant difficulties the Magistrate had was determining precisely what the terms of the contract were between Grade One and Sargent because of the paucity of evidence in that regard. On two occasions during the hearing the Magistrate raised this difficulty. At one point counsel for Sargent said that he wanted to lead evidence of the nature of security arrangements generally in the industry which he said would assist her Honour. Her Honour replied:

No, it will not. I need to know what they were in relation to this gentleman. I mean, really, on paperwork I have, I have Sargent Security (Aus) Pty Ltd, Grade One Monitoring Pty Ltd trading as Artimus (sic) Security Solutions. It is all over the shop. Verbal agreements. Nothing as to what was agreed under the ... (not transcribable) ... I do not want a general outline - I want to know what it is here.

17 A little later, whilst addressing the solicitor for Grade One, her Honour said this:

Well, where is your evidence that Sargent Security have any liability for the cost of the stolen items? Where is there anything other than an agreed patrol? Where is the agreement that says we undertake in the event of any theft occurring during our service that we will compensate? Where is that because I have to not only work out liability but quantum.

18 The thrust of Grade One’s submissions in this Court was that Sargent had breached the terms of its contract with Grade One by allowing the hot water systems to be removed from the property during the time Sargent was carrying out the guard services. That conduct was said to be negligent on the part of Sargent and therefore, it is submitted, Grade One should be entitled to damages represented by the cost of replacing the stolen heaters together with ancillary work. It was further submitted that an implied term of the contract should be found to the effect that Sargent was required to protect the premises from theft and/or damage during the course of the patrol.

19 Mr Katsinas of counsel who appeared for Grade One in this Court accepted that an implied term was not pleaded (the pleadings in the Local Court were not put in evidence in this Court) and that there was no specific agreement between the parties to the effect of the implied term. However, he said that her Honour could have inferred from the evidence the nature of the duties Sargent were undertaking, and that meant that they had to protect the premises from theft and/or damage.

20 The only evidence of the terms of the contract are to be found in that part of Mr Doukas’s Statement that I have set out in para [7] above and the hours that Sargent were to provide security set out in para 5 of Mr Harris’s statement (para [8] above). In accordance with those terms the guards provided by Sargent were required to patrol both entrances to the property through the night and to make sure they were secure.

21 There is no evidence to show that the guard did not patrol those entrances, nor that those entrances were not secure. In fact there was no evidence to show how the premises were broken into, if they were broken into. Nor was there any evidence to show when the heaters were removed, whether it was during the night or whether it was some time before 5:30pm the previous afternoon, before which time Sargent had no obligation to have its guards present on the property. The evidence of Mr Araiji was that Link Constructions’ tradesmen and employees usually left the site by 5.00pm, although Mr Harris asserted it was 3.00pm. On either account there was a window period for which Sargent could not be responsible.

22 The evidence of when the loss was discovered was vague. Mr Araiji of Link Constructions attended the site on the morning of 17 April although the time was not specified. Mr Araiji said the site foreman, George Tadrosse, told him that the units had been stolen. Mr Tadrosse was not called to give evidence. There was no other evidence of when he or anyone else first ascertained that the hot water systems were missing.

23 It is not easy to see why a term should be implied into the arrangement that Sargent would somehow ensure or guarantee that there would be no break-ins at the premises. It is difficult to see how such a term could be implied under any principles for implication of terms: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 and Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.

24 Indeed, a term that Sargent would be guaranteeing that there would be no loss caused by any means would be so unusual that it is doubtful that it could ever be implied. If that was a term of the arrangement it would need to have been an express term.

25 Grade One led no evidence of any negligence on the part of Sargent, and no evidence that it breached any of the terms that were proved to have formed part of the agreement, namely, to patrol both the entrances at night between 5:30pm and 7:00am, and make sure they were secure. It was no proof of a breach of those terms that in fact the heaters went missing, and that was the more so when there was not any evidence to show either that there was a break-in or that the heaters were taken in any such break-in.

26 For all of these reasons, the Magistrate was not in error in finding that there was no evidence of a breach of contract between the Plaintiff and the Defendant. Ground (a) is not made out. As Mr Katsinas accepted, a failure to establish this ground means that the appeal fails. I will nevertheless consider the other ground of appeal.

Ground (d) – no evidence of loss

27 The only evidence going to the quantification of the loss was a letter written by Mr Araiji to Grade One on 30 May 2009. The letter relevantly said:

As per our previous meeting with Artemis Security, we hereby notify Artemis Security Solutions Pty Ltd of the Cost Damages that will apply as discussed for the stolen hot water units.

Description

Link to re-supply 15 hot water units (hwu)

Link to rectify damage to brickwork

Link to rectify render work

Painter to re-coat damaged rendered walls

Plumber to rectify damaged hwu services
Plumber to Install hwu and commission
Total cost to rectify damaged work, supply and install 15 hot water unit = $31,500.00 plus GST

We draw your attention and reserve our rights in that regard to apply cost damages for the above stolen and damaged property.

The estimated cost to be incurred by Link will be deducted from any claim by you and shall be a debt due from you to Link.

28 Rather surprisingly, objection was not taken to this letter. Mr Araiji’s expertise to be writing a letter that assessed the lost value or even replacement costs and rectification work was not established. All the letter appears to do is to provide an indication to Grade One that Link Constructions was likely to deduct the amount shown from the fees that Grade One would be charging Link Constructions for the provision of the security services.

29 Paragraph 18 of Mr Araiji’s Statement said that he obtained quotes for the costs involved in replacing the stolen hot water units as well as rectifying the damage caused by the theft. Those quotes were not annexed to his Statement, and, as far as can be determined from the transcript before the Magistrate, were not put into evidence before the Magistrate.

30 This rather inadequate evidence was reinforced to a small extent by the cross-examination of Mr Araiji as follows:

Q. Well, sir, as part of your claims that you purported to make to Artina (sic) Security Solutions, you have indicated that the costs associated with rectifying damage to brickwork, rectifying render, re-coating walls is something in the order of $15,000?
A. Correct.

Q. The units themselves are only worth something in the order of $14,000?

A. No, once you damage the brick - once you damage the brick you've got your - you have to understand you have to rip off - to take out a brick, to prop it up, to render it again, it's time consuming because you got to patch up not just that section. You got to patch up the most - that whole area.

31 Ultimately, therefore, there was some slight evidence before the Magistrate of the cost of, perhaps, some of the work, given that the letter from Mr Araiji was allowed to go into evidence and he was cross-examined about the costs of rectification of the work of $15,000, although where that figure was derived was not made clear in any of the material put before me.

32 It will be noted that Ground (d) criticises the Magistrate for making findings inconsistent with Sargent’s admissions in evidence and in pleadings. I have already made mention of the fact that the pleadings in the Local Court were not in evidence before me. Nor was any attempt made by counsel for Grade One to point to the admissions said to have been made by Sargent in respect of which the Magistrate made inconsistent findings. Ground (d) as articulated in the Summons was not made out, but there was some evidence before the Magistrate of loss.

33 Sargent submitted, in accordance with what the Magistrate had said in her judgment, that there was no evidence that the damage had in fact been rectified. The fact that the damage has not been rectified is, however, no proof that loss has not occurred. On the other hand, if there was proof of rectification and the payment of a sum of money for that rectification work, that may be strong evidence of the damage suffered.

34 The problem in the present case is not so much that there was not proof of rectification work and payment therefor, but rather that the evidence of loss and damage was so flimsy. Nevertheless, a judicial officer must endeavour to do the best he or she can to assess loss and damage unless there is no evidence to justify a finding to that effect. In the present case there was slight evidence of the quantum of the claim evidenced by the letter from Mr Araiji and supplemented to some extent by his oral evidence.

35 However, in the light of the fact that I have held that there was no evidence of a breach of contract, and the Magistrate was correct in so finding, the fact that the Magistrate may have wrongly concluded that there was no evidence of loss does not lead anywhere.

Conclusion

36 Accordingly, I make the following orders:

(1) The Summons is dismissed.

(2) The Plaintiff is to pay the Defendant’s costs.

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