North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited (formerly known as Joseph Merhi Industries Pty Limited) trading as Synergy Protection Agency

[2008] NSWSC 413

CITATION:	North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited (formerly known as Joseph Merhi Industries Pty Limited) trading as Synergy Protection Agency [2008] NSWSC 413
HEARING DATE(S):	28/04/08, 29/04/08, 05/05/08
JUDGMENT DATE :	9 May 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Defendant fails on its construction of relevant contracts, but succeeds in its repudiation claim albeit being unable to obtain relief for loss/damage
CATCHWORDS:	Contract - Construction - Principles - Repudiation - Security services - Exclusivity - Supply contracts - Primacy of words used in a written contract - Business commonsense test - Sensible commercial operation
LEGISLATION CITED:	Evidence Act 1995 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; [1998] 1 All ER 98 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 Masterton Homes Pty Ltd v Palm Assets & Ors [2008] NSWSC 274 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15
TEXTS CITED:	Lord Steyn, “The Intractable Problem of the Interpretation of Legal Texts” (2003) 25 Sydney Law Review 5
PARTIES:	North Sydney Leagues Club Limited (Plaintiff) Synergy Protection Agency Pty Limited (formerly known as Joseph Merhi Industries Pty Limited) trading as Synergy Protection Agency Pty Limited (Defendant)
FILE NUMBER(S):	SC 50195/06
COUNSEL:	Mr R Bromwich (Plaintiff) Mr R G Forster SC (Defendant)
SOLICITORS:	Thomson Playford (Plaintiff) Carroll & O'Dea (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 9 May 2008

50195/06 North Sydney Leagues’ Club Ltd v Synergy Protection Agency Pty Ltd (formerly Joseph Merhi Industries Pty Ltd) t/as Synergy Protection Agency

JUDGMENT

The proceedings

1 These are proceedings concerning:

i. the proper construction of contracts entered into between the parties;

ii. the alleged repudiation of those contracts by the defendant, North Sydney Leagues Club Ltd [“Norths”];

iii. claims by the defendant/cross claimant, Synergy Protection Agency Pty Ltd to damages for breach of contract consequent upon the suggested repudiation.

2 At all relevant times, Norths operated the North Sydney Leagues Club at Cammeray [“the Leagues Club”], the North Sydney Bowling Club at North Sydney [“the Bowling Club”] and the Seagulls Club at Tweed Heads [“the Seagulls Club”], and Synergy carried on business as the provider of security services to clubs and other organisations.

3 In or about 2002, Synergy commenced providing certain security services to Norths at each of the three locations referred to above. The relationship between the parties was formalized in 2002, which saw the execution of a series of formal written agreements between the parties.

4 Those agreements were as follows:

A. Agreement relating to the Seagulls Club for the period 27 July 2002 – 27 January 2003;

B. Agreement relating to the Leagues Club and the Bowling Club for the period 11 November 2002 – 11 November 2004;

C. Agreement relating to the Seagulls Club for the period 1 July 2003 – 30 June 2004;

D. Agreement relating to the Seagulls Club for the period 15 October 2004 – 15 October 2007 (“the Seagulls Contract”); and

E. Agreement relating to the Leagues Club and the Bowling Club for the period 11 November 2004 – 11 November 2007 (“the Norths Contract”).
[As a matter of convenience the final two contracts are often together referred to as "the final contracts"]

5 Other than in respect of the respective dates and the rates of remuneration provided, the said five agreements are relevantly in identical terms.

6 Norths required the provision of various types of security services at each of its premises.

7 Those services which Synergy provided were defined in an annexure to each of the agreements entitled "The Services" [hereinafter referred to as “the dot point services provision”] which was in the following terms:

“The Security Services under this agreement are as follows:

The provision of appropriately licensed, experienced and uniformed Security Operatives to the Club in accordance with the Club’s requirements on a weekly basis.

The operatives’ duties are to include:

· Ensure that only person over the age of 18 are admitted to the restricted areas of the Club;

· Greeting patrons on their way in and out of the Club;

· Monitoring the levels of intoxication within the Club;

· Keeping the peace within the Club’s grounds;

· Escorting patrons that are evicted off the premises in an orderly manner;

· Enforcing Dress regulations;

· The recording of incidents that occur pertaining to Security matters in an incident report book;

· Communicating with the Club’s Staff and Management on a regular basis;

· Keeping the Club Management informed of incidents that arise from time to time.”

8 It was submitted by the plaintiff that, as a matter of plain language and reading, the word “includes” makes it clear that this is a non-exhaustive list of the operatives’ duties. Thus, where relevant, it will be useful to refer to those duties expressly listed as the ‘dot-point services’.

9 It is common ground between the parties that both of the Relevant Contracts are now at an end, having been brought to an end by the events of November 2005 – January 2006. The issue between the parties is the legal consequences that flow from the manner in which the Relevant Contracts were brought to an end.

The claims to relief

10 By its Summons, Norths seeks declarations relating to the Relevant Contracts to the effect, in relation to each of them:

(a) That upon its proper construction, it did not compel Norths to use the services of Synergy to the exclusion of any other provider of the same or similar services;

(b) that on its proper construction, it did not compel Norths to use the services able to be provided by Synergy to any fixed or minimum extent; and

(c) that on its proper construction, the use by Norths, to any extent, of the services of any other provider of the same or similar services to those described in each such Contract does not constitute a breach of that Contract.

11 By its Cross Summons, Synergy seeks declarations in respect of each of the Relevant Contracts:

(a) that upon its true construction and in the events which have happened, Norths was compelled to acquire the security services specified in Annexure “1” from Synergy to the exclusion of any other provider of the same or similar services; and

(b) that the conduct of Norths constituted a wrongful repudiation of each of the Relevant Contracts, which repudiation Synergy accepted and that it validly terminated the Relevant Contracts.

12 Outside of the dot point service provision, the terms of the 15 October 2004 Agreement [which save for presently irrelevant material were repeated in the 11 November 2004 Norths contract] were as follows:

1. DEFINITIONS

“ Agreement ” means this document including all schedules and annexures.

“Fee” means the fee described in clause 5

“Service” means the service described in Annexure 1.

2. ENGAGEMENT

THE CLUB engages the Contractor to provide the Service in accordance with this Agreement for the duration of the term specified in the Schedule.

3. CONTRACTOR’S OBLIGATIONS

3.1 Professional standard of care

The Contractor must perform the Service in a diligent manner and to the standard of skill and care expected of a Contractor experienced in the provision of the type of service required by THE CLUB in accordance with this Agreement.

3.2 Knowledge of THE CLUB’S requirements

The Contractor must use all reasonable efforts to inform itself of the requirements of THE CLUB and must regularly consult with THE CLUB during the performance of the Service.

3.3 Personal (sic)

(a) The Contractor must ensure that all personal (sic) engaged by it in connection with the Service are appropriately qualified, competent and experienced in the provision of the type of services required by THE CLUB.

(c) The Contractor’s responsibility for the performance of the Service and for the work and performance of its personnel is not altered in any way by this clause 3.3 or by anything done in accordance with this clause 3.3…

3.5 Delay

As soon as practicable after becoming aware of any matter which is likely to change or which has changed the scope or timing of the Service, the Contractor must give notice to THE CLUB detailing the circumstances and extent or likely extent of the change or delay.

3.6 Co-operation by the Contractor

The Contractor must liaise, co-operate and confer with others as directed by THE CLUB…

3.13 Security of premises

The Contractor must comply with all directions, procedures and policies relating to occupational health, safety and security of THE CLUB premises and facilities, when using them.

3.14 Insurances

The Contractor must upon request provide THE CLUB with proof of all insurance policies required to be maintained by the Contractor under this Agreement.

4. THE CLUB’S OBLIGATIONS

4.1 Provide information

THE CLUB will as soon as practicable, or as required by this Agreement:

(a) make available to the Contractor all relevant instructions, information, documents, specifications, plans, drawings and any other material and particulars; and

(b) answer queries made by the Contractor,

relating to THE CLUB’s requirements in connection with this Agreement…

5. PAYMENT

5.1 Payment

In consideration of the provision of the Service , THE CLUB will pay the Contractor the Fee as calculated using the rates shown in Annexure 2, subject to the conditions of this Agreement.

5.2 Timing of payment

(a) At the times specified in item 4 of the Schedule, the Contractor must lodge with THE CLUB a payment claim for the Services preformed (and for approved reimbursable expenses, if any, incurred) during that period.

(b) THE CLUB will make a payment within the time specified in item 5 of the Schedule following the lodgement of the payment claim.

6. VARIATIONS

6.1 Instruction

THE CLUB may, on the recommendation of the Contractor or otherwise, instruct the Contractor in writing to vary the Service, so long as the variation is within the general scope of the Services.

6.2 Consequences of variation or proposed variation

(a) Before instructing a variation, THE CLUB may request the Contractor to provide a written estimate of the time, cost and programming effects of the proposed variation. A written estimate so requested must be provided by the Contractor within a reasonable time nominated by THE CLUB.

(b) If:


(1) a variation is instructed;

(2) no request has been made by THE CLUB under clause 6.2(a); and

(3) the Contractor considers that the variation will affect the timing or cost of the Service.
the Contractor must, as soon as practicable after the variation is instructed, provide THE CLUB with a written estimate of the time and cost of the variation.


6.3 Variation instruction binding

The Contractor must comply with a written direction issued under clause 6.1 except where clause 6.2(b) applies.

Where clause 6.2(b) applies, the direction is not binding until THE CLUB has received the Contractor’s written estimate and given written approval for the Contractor to proceed with varied Services.

6.4 Valuation

Unless otherwise agreed, the value of a variation will be determined using the hourly rates set out in Annexure 2. If Annexure 2 does not include hourly rates relevant to the variation, reasonable rates and prices apply…

10. TERMINATION

10.1 Termination by THE CLUB for default by the Contractor

If the Contractor :-

(a) becomes bankrupt, or insolvent, or enters into a scheme or arrangement with its creditors;

(b) fails to carry out the Service with due diligence and competence;

(c) without reasonable cause suspends the carrying out of the Service ; or

(d) commits a substantial breach of this Agreement.

THE CLUB may:

(a) in the case of the default specified in clause 10.1 (a), forthwith terminate this Agreement by written notice addressed to the Contractor; and

(b) in the case of any other specified default, terminate this Agreement by written notice addressed to the Contractor fails to remedy the default within 14 days from the date of service of a notice by THE CLUB on the Contractor specifying the relevant default.

10.2 Termination by the Contractor

If THE CLUB :-

(a) becomes involved or enters into a scheme of arrangement with its creditors.

(b) fails to pay the Contractor in accordance with the Agreement ; or

(c) commits a substantial breach of this Agreement,

the Contractor may:

(d) in the case of the default specified in clause 10.2(a), forthwith terminate this Agreement by writing notice addressed to THE CLUB ; and

(e) in the case of any other specified default, terminate this Agreement by written notice addressed to THE CLUB if THE CLUB fails to remedy the default within 14 days from the date of service of a notice by the Contractor on THE CLUB specifying the relevant defaults.

10.3 Effect of termination

Termination of this Agreement by either party is without prejudice to any accrued rights or remedies of each party.

10.4 Adjustment of the Fee on termination

(b) Upon termination of this Agreement pursuant to clause 10.1, THE CLUB will pay the Contractor for the Services performed by the Contractor as at the date of termination.

(c) Upon termination of this Agreement pursuant to clause 10.2, THE CLUB will pay the Contractor for the Services performed by the Contractor as at the date of termination.

11. DISPUTE RESOLUTION

11.1 Negotiation and expert appraisal

The Contractor and THE CLUB will endeavour to resolve any dispute speedily by negotiation. If a dispute between the Contractor and THE CLUB is not resolved by negotiation, then before either party has recourse to litigation, the party must submit the dispute to expert appraisal. If the Contractor and THE CLUB do not agree upon an independent expert, either may request the Secretary General of the Australian Commercial Disputes Centre to nominate an expert.

11.2 Continuing performance

Each party must continue to perform its obligations under this Agreement , notwithstanding the existence of a dispute.

12. GENERAL

12.1 Notices

(a) Any notice given under this Agreement:


(1) must be in writing addressed to the intended recipient at the address shown in the Item 8 of the Schedule or address last notified by the intended recipient to the sender.

(2) must be signed by an authorised officer of the sender; and

(3) will be taken to have been given or made (in the case of delivery in person or by fax, cable or post) when delivered, received or left at the specified address.


(b) If delivery or receipt of a notice occurs on a day on which business is not generally carried on in the place to which the communication is sent or later than 5.00pm (local time), it will be taken to have occurred at the commencement of business on the next business day in that place.

THE SCHEDULE

Item 1
Term of Agreement:
(Cl. 2) Commencing on 15th October 2004 and Ending on 15th October 2007…

The construction issue

13 Norths contends that the contracts are relatively indistinguishable from common or garden ‘supply’ contracts. Mr Bromwich appearing for Norths, posited, as an apposite example, contracts to regulate dealings between a supermarket and its suppliers for the provision of particular supplies over a period of time and at a particular rate. There was no evidence of any such terms of any supermarket supply contracts, but nonetheless one is able to understand Mr Bromwich's submission by the example.

14 The proposition is that there may be no particular obligation upon such a supermarket to seek that any supplies from the relevant supplier be provided at all. The proposition is that if and when such a supermarket would place an order for supply, such order would require to be fulfilled in a fashion consonant with the provisions of the relevant contract. The proposition is that there are likely benefits to both parties in that form of contract: in a practical sense, the supplier likely benefits from having such a contract in place because it is likely to in fact be a preferred supplier, and the supermarket benefits from being in a position to call on the supplier to honour its contractual obligations.

15 Mr Forster SC, appearing for Synergy, took issue with this construction. His submission was that upon the true construction of the material contracts, Norths were obliged to look to Synergy for all of their requirements for security services of the type nominated in the services provision [with the potential exception of security services provided in-house by Norths’ own staff].

Contractual construction - the principles

16 It is unnecessary to do more than to repeat the general statement of principles concerning proper construction in Masterton HomesPty Ltd v Palm Assets & Ors [2008] NSWSC 274 [at 26] with most particular emphasis upon the quotation from the recent judgment of Tobias JA in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65, affirming the approach taken by Palmer J at first instance:

"Dealing firstly with conventional approaches to the construction of written documents the following propositions are well established:

i. where the language of an Agreement is ambiguous or susceptible of more than one meaning the factual matrix including the context and surrounding circumstances, its aim, object or commercial purpose may be taken into account in the construction of an agreement: Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 997 cited in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 per Mason J at 350-352.

ii. Clearly primacy must be given to the actual words used in a written contract. McColl JA in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [69] enunciated the following principles:

“[69] If the words used [in a written contract] 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. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, ‘even though the construction adopted is not the most obvious, or the most grammatically accurate’: A ustralian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109–110 per Gibbs J (as he then was). However, in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party’s construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result, it is essential that that intention be made “abundantly clear”: L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251 per Lord Reid.

[70] Dealing with the circumstances where there are internal inconsistencies in a contract, Gibbs J said “it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument.”: Australian Broadcasting Commission at 109.

[71] Gibbs J’s statement in Australian Broadcasting Commission at 109 that “the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which “must speak for itself, but … must do so in situ and not be transported to a laboratory for microscopic analysis”.

[72] Consistently with this approach, it has been held that if detailed semantic and syntactical analysis of a written contract lead to a conclusion that flouts business commonsense the contract must be made to yield to business commonsense: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 per Lord Diplock; applied by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181, at 198 [43]. In Maggbury , after referring to Lord Diplock’s observations, Gleeson CJ, Gummow and Hayne JJ added: “what in respect of a particular contract comprises ‘business commonsense’, as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible.”

iii. In Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Santow JA [with whom Meagher JA and Stein AJA agreed] at [22] referred with approval to what the trial judge had said concerning the observations of the High Court in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 292–3:

“In Codelfa , Mason J (with whose judgment Stephen J and Wilson J agreed), had referred to authorities [[i]n particular, speeches of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381 at 1383–1385 [1971] 3 All ER 237 at 239–241; LSchuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 261; and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995–997 [1976] 3 All ER 570 at 574–576] which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract:

“presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating” [citing Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574].
[cf Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179 [40]].

iv. Such statements exemplify the point made by Brennan J in his Judgment in Codelfa at 401:

“The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.”

v. In Optus Vision, Santow JA at [23] continued:
“To this I would add the observation of Lord Steyn, writing extra-judicially on “ The Intractable Problem of the Interpretation of Legal Texts ” (2003) SLR 1 at 7. After pointing to the shift from literal to purposive interpretation, he adds the caveat that it would be an oversimplification to say that there has been a homogenous shift towards a purposive interpretation of all legal texts. Nonetheless he says: “In a network of contracts governing a construction project, parties ought generally to be able to rely on the obvious meaning of the interlocking texts”.

vi. More recently these principles have been affirmed by the Court of Appeal in terms of the proposition that even if evidence of surrounding circumstances is admissible it cannot be used to construe a meaning to the document that is contrary to the express language: cf Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65 where Tobias JA affirmed the approach of Palmer J at first instance, quoting his Honour as follows (at [108]-[109]):


“However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation.

When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court's task to identify which of the possible meanings represents the parties' contractual intention.

However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit.
That is the case here ...

[109] In my opinion his Honour's approach articulated in the foregoing paragraphs of his judgment is unexceptionable.”

vii. Hence I take it as axiomatic that:

· the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management, supra;

· the proper approach seeks “the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract” (Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 citing Lord Hoffmann; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd, supra at [66] et seq);

· commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide and Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64].”

The admissibility of earlier contracts

17 Both parties sought to obtain assistance from what was suggested to be the matrix of circumstances in which the final contracts had been entered into.

18 Norths endeavoured to tender:

i. not only the contracts between the present parties predating the final contracts;

ii. but also, earlier contracts entered into between Synergy and other parties.

19 In my view the earlier contracts entered into between Synergy and other parties were clearly inadmissible. Those contracts cannot affect the proper construction of the final contracts with which this litigation is concerned. There is no evidence of the circumstances leading up to the negotiation of those, as it were, ‘outside contracts’. And even if they had been admissible, they would have been rejected by reference to their probative value being substantially outweighed by the danger that the evidence might be unfairly prejudicial to Synergy and/or be misleading or confusing and/or would amount to a waste of time.

20 The objection concerning the admissibility of the earlier contracts between the same parties raises some interesting questions which are not altogether easy of resolution. Commonly where the same parties have, over a number of years, participated by medium of a number of relevantly consecutive contracts, it might seem surprising that those contracts should not be before the court as part of the matrix of fact in terms of which the last of the contracts being litigated are appropriate to be considered. On the other hand, there is some force in the contention that, insofar as the litigation concerns the entry into of the last of the contracts, it is only the factual situation as to the work which was being carried out shortly prior to the entry into of the last of the contracts that may be accepted as part of the relevant matrix of fact: in which case the Court should not have before it the detail of all of the earlier contracts.

21 I tend to the view that it cannot be said that the earlier contracts are outside the range of 'relevance' as defined in the Evidence Act 1995. Having said that, it seems to me that whether or not any reference to the manner in which the parties saw fit to administer those earlier contracts may cast light on the proper construction of the final contracts is appropriately dealt with as no more than a question of weight. Hence the earlier contracts will be admitted [a decision on the admissibility issue having by a consensus been reserved into the final judgment].

The material background covering provision of services anterior to the entry into the final two contracts

22 As already indicated, there was considerable attention given to the material background covering provision of services anterior to the entry into of the final contracts.

23 Mr Forster put that material forward as an important indicator that the anterior contracts, with only certain exceptions, showed that for many years before the entry into of the final contracts, the practice of both parties had been that only one service provider would exclusively provide particular services for the club at any particular point in time. Hence it was suggested that upon the entry into of the latest contracts, both parties must be taken to have had precisely that notion and intent in mind, which would be the meaning which the final contracts would convey to a reasonable person having all the background knowledge of the parties in the situation in which they were at the time of the final contracts.

24 Mr Bromwich contended to the contrary that a close analysis of what had occurred in the years prior to the entry into of the final contracts showed that from time to time Synergy acquiesced in some of its services being provided by the club ‘in house’ or by other service providers, and indeed that this was the position at the very time when the final contracts were entered into.

25 In consequence it becomes necessary to travel into this evidence in order to unravel the position. I repeat that I find real difficulty in accepting that any of this material can assist on the construction issue. The reason is that there was no evidence as to the particular circumstances in play at such times when, for whatever reason, the club elected to use its own in-house services or to permit some other service provider to provide services.

26 As an example of the problems which surrounded this evidence, it was not clearly established whether the provision of ‘dog patrol’ and ‘lock up’ services by Synergy [as described in the facts below] occurred pursuant to the Norths Contract, or whether it was the result of some more informal arrangement. The provision of each of these services involved “(t)he provision of appropriately licensed, experienced and uniformed Security Operatives to the Club” [as required by Annexure 1 of the agreement], however ‘dog patrol’ and ‘lock up’ are not specifically named on the list of dot-point services contained within that annexure. The plaintiff contended that the word ‘includes’ is, by definition, non-exhaustive, and does not cut back the scope of the contracts in relation to security guard services. The plaintiff pointed to the fact that the dog patrol security hours were included as part of the invoice issued by Synergy to Norths for crowd and patron control, and the fact that such services were provided at a ‘rate as per the contract’, to evidence the fact that both parties treated these services as being part of the relevant agreement.

27 Absent detailed adjectival information to explain what had happened and why during the pendency of prior ongoing contracts, there is simply no assistance given to the Court in the fact that from time to time the club or other service providers were retained to work with or to replace Synergy in particular tasks allocated to it. As Giles JA observed in Kooee v Primus [2008] NSWCA 5 [at 30]:

"[t]he requirement that the construction of a written agreement is to be undertaken by reference to the understanding of a reasonable person in the position of the parties may be seen as another way of excluding as irrelevant, evidence of the subjective intention of the parties, to the extent that it is not revealed in the language of the agreement".

28 As the matter was subjected to such close scrutiny I move now to examine the evidence, noting that the findings are as follows:

i. From about early September 2000 to late June 2002 [which is prior to the commencement date of the earliest written agreements] Kalantzis Merhi Holdings Pty Ltd [trading as Quantum Security] provided security services to Norths at the Leagues Club and Bowling Club. Mr Merhi [the chief executive officer of Synergy] was the Managing Director of Quantum Security during that period.

ii. Synergy’s first agreement to provide security services to the Leagues Club and Bowling Club commenced in November 2002. For the first few months of this agreement, Norths was also providing its own in-house security guards for crowd and patron control at the Leagues Club. Thus crowd and patron control at the Leagues Club were being partially provided in-house and partly outsourced to Synergy for this period.
iii. On 11 December 2002, Synergy wrote to Norths proposing that the component of the services done in-house be outsourced [TB vo1. 1, tab 5, p.23 – 28]. This proposal was accepted, and Synergy took over these services in January 2003.
iv. Until 7 January 2003, a dog patrol security was provided by MPS; but after that date, and until 12 June 2005, all of the dog patrol services were provided by Synergy.

v. From January 2003, Synergy was responsible for lock-up services on those nights when the dog patrol officer was present at closing time [four nights a week], while MPS remained responsible for lock-up on the other three nights. This continued to be the case in November 2004, at which time the parties entered into the final Leagues contract.

vi. Other security services were provided at the Leagues Club by other firms during the period of the Synergy contracts, including:

1) Cash in Transit Security;

2) CCTV Security;

3) Alarm Monitoring Security;

4) Access Control; and

5) Two Way Radios.

Of these, only the first involved the use of security guards. Synergy was at no stage involved in providing these services at the Club.

vii. The following security services were required at the Seagulls Club:

1) Crowd and Patrol Control

2) Tweed City Voucher Collections

3) Cash in Transit Security;

4) CCTV Security; and

5) Alarm Monitoring Security.

Of these, the first three involved the use of security guards.
viii. The Cash Collections Security and Tweed City Voucher Collections Security services were at all times provided by security companies other than Synergy, including prior to any contract between Norths and Synergy, and throughout all of the Seagulls contracts with Synergy.
ix. The Crowd and Patrol Control services at Seagulls were at all times provided by Synergy, and no other firm was involved in providing these services at Seagulls.

29 Synergy seeks to suggest that the final contracts were entered into in an environment in which, up to that point in time, there was an established practice that at any one time, only one group of service providers would provide particular services: the proposition being put by Synergy being that this constituted a contextual matter able to be taken into account by the Court in construing the final contracts.

30 The difficulty for Synergy is that, during the period that it was providing dog control services, it was locking up the club at night for four nights a week and MPS was doing that job on the other three nights [when there was no dog present and no representative of Synergy was there]. Thus, over this period, there were clearly two groups, MPS and Synergy, performing the same service. Even if these services are ignored [as, arguably, outside the terms of the dot point services provision], the first Norths Contract was entered into at a time when Synergy was not the exclusive provider of even the dot point services, which were shared with Norths’ in-house security operatives.

31 The Court’s ruling regarding the admissibility and weight to be accorded to the contextual factors has already been set out. However, even if the context were to be taken into account, it does not effectively demonstrate the defendant’s contention that the Norths contracts were exclusive.

The remaining issues

32 It is fair to say that the heart of the evidentiary material before the court reposed in the following categories

i. The evidence of the entry into of the sundry original and then of the final contracts;

ii. The evidence adduced in relation to the so-called repudiation [which evidence was substantially no more than evidence of a few letters and a few conversations];

iii. The evidence called in support of the proposition that Synergy had suffered loss and the contradictor evidence comprising a very extensive cross-examination of Mr Merhi, the managing director of Synergy, who had deposed in a number of affidavits to the loss calculations upon which Synergy relied.

Dealing with the proper construction of the final contracts

The respective arguments

33 Synergy contends that:

i. it would make no sense to provide a three-year term if Norths could simply bring the Relevant Contracts to an effective end at will in the way it has done, by no longer requiring any services from Synergy;

ii. it would likewise make no sense for the Relevant Contracts to provide complex termination provisions for default if the Relevant Contracts could effectively be terminated unilaterally by Norths at will; and

iii. similarly, it would make no rational sense to provide a complex dispute resolution process or a complex variation provision if, at Norths’ option, the Relevant Contracts could be brought to an end at any time for no reason at all.

iv. the Court will strive to avoid a construction of a commercial agreement for a fixed period of time, where that construction entitles one party unilaterally to bring it effectively to an end, in circumstances where there are specific express provisions prescribing the circumstances in which the agreement can be brought to an end.

v. to construe the Relevant Contracts in the way Norths seek to do would result in an uncommercial outcome, if not an absurd one.

34 Norths contends that:

i. A clear indicator in favour of its construction is to be found in the second sentence of the services provision which it will be recalled reads:

"The provision of appropriately licensed, experienced and uniformed Security Operatives to the Club in accordance with the Club's requirements on a weekly basis"

ii. The proposition is that Synergy's construction requires the insertion [in the place of the last line] of the words "all of" : Hence the full sentence would read:

"The provision of appropriately licensed, experienced and uniformed Security Operatives to the Club in accordance with all of the Club's requirements on a weekly basis"

iii. Reliance is placed upon the principle that the Court is not able to disregard clear words, nor under the guise of interpreting the contract, to rewrite it: a principle most recently expressed in:

a) Kooee Communications v Primus [2008] NSWCA 5 per Giles JA at 38 citing Lewison, The Interpretation of Contracts , third edition (2004) Sweet & Maxwell at 7.15 and the authorities there referred to;
b) Ryledar supra by Tobias JA [at 108].
[notably Synergy's contention was that the word 'requirements' meant 'all requirements’]

Decision

35 Ultimately the decision as to the proper construction of the agreement rests solely on the words of the agreement. I accept as correct the Club's submission that upon its proper construction the agreement did not confer upon Synergy an entitlement to be the exclusive provider to Norths of the dot point security services. In truth the parties’ previous dealings during the years anterior to the entry into the final contracts do not assist on the construction issue. But to the extent that such evidence may be resorted to, it does not bear out Synergies contention. This is because Norths own in-house security service shared dot point services with Synergy – cf the letter from Mr Merhi to Norths of 11 December 2002 [PX TAB 5 at pages 23 – 24].

36 The task of the court is to construe the contracts. There simply is no part of the contracts which yields to the construction requiring exclusivity. Had it been intended for an exclusivity provision to be included it would have had to be made express. To the extent, if at all, that the cross contentions threw up an ambiguity, the factual matrix in which the final contracts were set seemed to me, if anything, to favour the club's construction, but in all probability is simply neutral.

37 Further, properly construed, the words “the provision… of Operatives in accordance with the Club’s requirements…” simply mean ‘as and when required by the Club’.

38 Mr Forster sought to pray in aide what he suggested were the authorities which stood for the following propositions:

i. as a general rule, where a contract is construed, the court will apply a presumption that the parties did not intend its terms to operate unreasonably. Therefore, where a particular construction would achieve an unreasonable result, the court will be reluctant to accept that this was intended by the parties;

ii. a commonsense approach must be taken, particularly in commercial contracts which are expressed in an imperfectly constructed document. If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.

39 There are very real difficulties in the Court determining in respect of the particular contracts before the Court, what comprises 'business commonsense'. So much was emphasised by Giles JA in Kooee at 27 in the following terms:

"In support of [the trial judge's approach in finding that a particular construction presented a strong aura of commercial unreality], Giles JA referred to the principle articulated by Lord Diplock in Antaios [1985] AC 191 at 201 to the effect that "if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense". Although this principle has often been repeated, it should not be seen as permission for judicial rewriting of contractual provisions to accord with the result said by one party to accord with "commercial reality", namely its financial interests. Thus in restating Lord Diplock's principal, the joint judgment in Maggbury 210 CLR 181 at [43] (Gleeson CJ, Gummow and Hayne JJ) remarked :

"Of course, what in respect of a particular contract comprises 'business commonsense', as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible…. Here the difficulty arises not from the need for detailed semantic and syntactical analysis of the language used in the agreements, but from the use therein of simple terms such as 'at any time hereafter' and 'for ever'.

40 For these reasons it is extraordinary difficult to be certain of what is or is not commonsense in any particular business dealing which has been reduced to writing in the form of a contract. The court requires to be very wary before applying the so-called ' business commonsense' test.

41 I am certainly not satisfied that a reasonable objective bystander in the position of the parties at the time they entered into their contract [and being aware of the background circumstances in which they came to contract] would necessarily form the view that the parties intended that Synergy was to have an exclusive right to provide the so-called dot point services.

42 During the final tranche of written submissions, Mr Forster put an alternative construction argument to the effect that the relevant contract merely prohibited the club from using the security services of other external providers of such services, and that, upon the true construction of the contracts, the club itself was entitled to use its own internal resources to provide its own services of the kind referred to in the dot point service provisions. This construction is also rejected in favour of the clear words used in the contracts.

43 It may be observed that amongst Synergy's sets of alternative submissions it appeared to be submitting that properly construed, the dot point services provisions were clearly intended by both parties:

i. to permit the club to use its own internal resources to provide its own services of the kind referred to in the dot point service provision;

ii. to prohibit the club from using the security services of other external providers for such services as are included in the dot point service provision;

iii. to permit the club to use the security services of other external providers for such security services as are not included in the dot point service provision, but which also involve the provision of licensed security guards.

44 The proposition clearly suffers from the simple fact that the process of construction of a written document is not intended to be a licence for speculation as to what the parties intended. The more Synergy produced alternative possibilities, the less prospect there was to persuade the court that any of those possibilities represented that which the parties must clearly have at all material times intended.

45 Moreover, as the plaintiff contends, this argument, which allows Norths to simply do the work itself, employing guards directly and to take no services from Synergy, does not really sound very exclusive at all.

46 The construction for which Norths contends is consistent with the words of the contract. It is the construction which is upheld presently.

Turning to the repudiation case

47 Of course, none of the matters dealing with construction affect in the slightest, the case pursued by Synergy in terms of its proposition that Norths repudiated the contract. For reasons which will be given below, Synergy succeeds in that case. But the problem for Synergy concerns the fact that it has not pleaded any case for damages in the event that its construction of the contracts was rejected. As Mr Foster contended, if there was a world in which Synergy could nonetheless have been able to establish that it suffered material loss by reason of the repudiation, this was not a matter which had been pleaded.

48 In these circumstances the repudiation case may be dealt with very shortly. The evidence of Mr Merhi as to the relevant conversations is accepted as reliable. The evidence called by Norths in relation to those conversations is rejected.

49 The material facts are in short compass:

i. On Mr Merhi's evidence, which is accepted as reliable, he had discussions with Mr Simmons, operations manager at the Leagues club in about early May 2005 when he was told that Norths were going to have to reduce the number of hours from the required roster from the week beginning 23 May 2005. Mr Merhi responded by saying that Synergy would of course be able to provide the services as required by the agreement but that he would like to talk to Mr Sarlemyn, the new CEO, about whether the club might be prepared to agree to a rate increase;

ii. Mr Merhi gave further evidence of a meeting which he attended with Mr Sarlemyn shortly after his discussion with Mr Simons, in the course of which Mr Merhi said that he would like to discuss the possibility of whether or not there was any room for an hourly rate increase for the security operatives being provided at the club in the light of the club's decision to reduce the number of hours under the roster. Mr Sarlemyn made clear that, at that stage, an increase to the hourly rate was not possible;

iii. Mr Merhi also gave evidence, which is accepted as reliable, of a conversation which he had on about 29 July 2005 with Mr Kendrigan during the course of which Mr Merhi pointed out that there had been a shortage of security guards in the industry in various places and indicated that Synergy's security guards had approached him asking for a pay rise. He effectively said that he would be prepared to give his security guards a pay rise if the club agreed to pay more for Synergy's security services, which he did not believe would be more than approximately one dollar an hour. Mr Merhi recalled that Mr Kendrigan had indicated that the club's objective was to reduce costs and that the hourly rate which he had provided the club was fixed for the duration of the contract, but said that he would see what he could do.

[Mr Kendrigan recalled conversations occurring in or about October 2005 to the effect of the above described conversation alleged by Mr Merhi to have taken place on about 29 July 2005. However Mr Kendrigan gave evidence that in the subject conversation he indicated that the hourly rate was fixed but he agreed that if he was to review the costs it would be on the basis that the agreement was terminated and that he would ask someone else to provide a quote for Seagulls and he asked whether that was agreed. According to his version, Mr Merhi said that he had already given the details of what others were charging to meet the club's additional security needs and Mr Kendrigan said that he would not review the price unless he arranged for someone else to quote, as he had a duty to the members and to the board to ensure that he would get the best price. According to his version Mr Merhi said "okay then" and Mr Kendrigan asked Mr Merhi to send in his price and said that he would obtain a quote from others for that price.]

iv. Mr Merhi then gave evidence that on about 29 November 2005 he received a telephone call from Mr Kendrigan in which Mr Kendrigan had said that he was calling to indicate that he would be in Sydney on the following day for a board meeting and asked if Mr Merhi could send him a request for the increase in the rate for the security guards in writing so that he could put it forward to the board.

[Mr Kendrigan's version of the conversation was that he had said that he would be in Sydney on the following day for a board meeting; he had said that he had a quote from another company and was still waiting on a quote from Mr Merhi; he said that he would like to put the matter to bed if possible and he asked whether Mr Merhi could get a quote to him on that day, indicating that otherwise he would have to defer it to the December meeting.
On Mr Kerrigan's evidence Mr Merhi had said that he would have his quote in by the end of the day and had asked what price he had to beat, to be informed by Mr Kerrigan that this information could not be disclosed as it would be unethical but that he could say that it was a good price for the Club.]


v. In consequence, on about 30 November 2005 Mr Merhi sent a letter to Mr Kendrigan requesting that Norths increase the hourly rate for the security services set out under the Seagulls contract.

This letter was in the following terms:

“Further to our recent conversations and pursuant to Clause 6 (Variations) of the Agreement I would like to formally provide you with a costing on the Services that have been considerably varied from the past. I would like to also like to highlight to you, the CEO and the Board regional issues that have greatly affected the supply and demand of security guards in the Tweed and surrounding areas, in the past year in particular.

BACKGROUND

Synergy Protection Agency has been providing security operatives to Seagulls since 26 July 2002. Synergy commencing at Seagulls resulted from local security companies’ inability to meet with insurance obligations at that time.

Since 2002 and until recent times the functions held at the Club have only required one or two additional guards for the most part with few exceptions. With the exception of very few occasions Synergy has met with all the Club’s requirements.

However, more recently, the Club has begun to hold larger functions, concerts and shows that have required a substantial increase in the number of security guards (eg Joe Cocker concert 8 guards for 2 nights, and in the near future the Rodney Rude Show requiring 15 guards).

At this point, it is worthy to point out some critical issues with the shortage in supply of security guards around the Tweed area. Statistics from the Security Industry Registry (the industry’s governing body) have been sought and reveal that there are only 176 security guards in about 30 precincts stretching from Yelgun and Ocean Shores through Tweed Heads and to Pottsville.

This regional shortage in the supply of security guards in recent times has produced a two-pronged problem. On the one hand it has put upward pressure on wages requested by security guards that Synergy employs (and guards in general for that matter) and on the other has also meant that Synergy needed to ‘partner’ and create relationships with other local security companies in order to fulfil the increased requirements requested by the Club.

In an attempt to deal with the latter issue, Synergy set out to find another company to assist us in fulfilling the Club’s requirements for special events, and in doing so, Synergy canvassed the 6 security companies operating in this broad area, namely:

· East Coast Investigations and Security

· Tweed Coast Protective Services

· Step Ahead Security

· Border Security

· Salt Water Security

· Gold Coast Guards

All the firms expressed serious concern regarding the shortage of guards they are experiencing for their own businesses – an issue they have been experiencing increasingly over the last year.

One firm (East Coast Investigations and Security) however, stated that whilst they were also experiencing shortages they may be able to transport guards from as far as Lismore for some events.

Whilst Synergy appeared to have found a solution, this would come at a cost.

East Coast’s rates were found to be exorbitant and considerably higher ($1/hr higher Monday to Friday and $5/hr higher on Saturdays and $13/hr higher on Sundays with public holidays higher again) than Synergy’s Flat hourly Service Fee of $31/hr to Seagulls.

Please note that for transparency reasons, and to demonstrate that Synergy is not being opportunistic and to justify our claim pursuant to Clause 6 of the Agreement, East Coast’s prices were forwarded to the Club previously and trust that they would be treated confidentially.

When requested to justify their high rates, East Coast explained that these rates were consistent with those they charge their own customers and whilst may appear relatively high include for transport costs in having to transport additional guards from Lismore and other areas.

Given the current supply of and demand for security guards in this region, Synergy reluctantly agreed to East Coast’s rates in order to meet the Club’s expectations.

Furthermore, given the up and coming events were during Monday to Friday, Synergy requested that the Club cover the additional $1/hearing fee sought by East Coast.

The Club thankfully agreed to this marginal increase (amounting to about $40 for both Joe Cocker Concerts) and albeit Synergy had a zero margin for the additional guards (in fact sustained a marginal loss related to administrative costs), the event was considered a success since the Club’s requirements were met and the event passed without incident.

THE WAY FORWARD

In light of the above, Synergy is requesting to have its flat hourly service fee increased by $1/hr. This increase will be passed on in its entirety to the existing guards at Seagulls to help alleviate the upward pressure on wages induced by the lack of supply of guards in the region.

Furthermore, Synergy is requesting an increase of $4/hr to be applied conditionally and only for additional guards requested so that the differential between Synergy’s Service Fee and that charged by East Coast can be covered on average.

Please note that Synergy will make every effort as we have done in the past to minimize any additional costs to Seagulls by sourcing as many of our own security guards as possible.

Synergy greatly values the long standing relationship it has with Seagulls and is mindful of the difficult times that Club’s are experiencing at present mostly due to increased taxes and it is for this reason that we are requesting marginal increases to help cover additional costs only.

Furthermore, this marginal increase would both help assure that the Club’s requirements are met and minimize the costs to Seagulls that would otherwise (if Seagulls was contracting another local firm) appear inevitable if the prices provided by East Coast are genuinely mainstream in the region as I suspect they are.

I trust under the circumstances that the above will meet with your approval and that of the CEO’s and the boards and I look forward to a favourable outcome for all parties involved and a continued strong relationship with Seagulls.”

vi. Mr Merhi gave evidence, which is accepted as reliable, that on or about 7 December 2005, he received a telephone call from Mr Kendrigan and Michelle Lampier who were both on a conference call line. Mr Merhi recalled Mr Kendrigan saying words to the following effect:


"The Club has sought another quotation from another company that has been found more competitive than our current arrangement and the Club has accepted the quotation from the other company and your service will no longer be required after 16 January 2006";

[Mr Kendrigan disagreed with this version of the conversation and relevantly gave evidence that the conversation was as follows:
Mr Kendrigan said that he was calling to advise of the outcome of the tender process and had to inform Mr Merhi that another company came in at a more competitive price and that as such, the Club would be changing over to them as from 16 January in the following year. Mr Merhi asked whether there was much in it and Mr Kendrigan responded by saying that there was enough of a difference to justify the change. Mr Kendrigan gave evidence that Mr Merhi had then said:

"Oh, I am sorry to hear that, I have enjoyed our working relationship. Can you send me a letter confirming that" and that Mr Kendrigan had said that he would send a communication on the same day's mail.]

[Ms Lampier, presently the Senior Operations Manager for Seagulls club, gave evidence broadly substantiating the version of events which had taken place during the conference call that had been given by Mr Kendrigan.]

vii. On about 7 December 2005 Mr Merhi received a letter from the Club in relation to the security services provided at the main premises of North Sydney Leagues Club in Cammeray and North Sydney Voting Club in the following terms:

“Dear Joe,
I refer to our recent discussions regarding the security requirements for the Seagulls Club and your letter of 30 November 2005, requesting a review of the hourly price for the security services.

After careful consideration of your request and a review of the number and standard of the security personnel that you provide to the Club, it has been decided that as from 16 January 2006 the services of Synergy Protection Agency will no longer be required at Seagulls.

As you are aware the relationship between your company and Seagulls Club has been in place since 2002. However it has become apparent in recent times that you have been unable to provide an adequate number of qualified security personnel at times required by the Club. In recent weeks you have attempted to supplement your services by sub-contracting work out to another company. However, the standard of security personnel from this sub-contractor has been poor and the reports that all security personnel are required to complete when an incident occurs on club premises has not been completed.

Our Management team has raised issues with your security personnel and yourself on several occasions but the underlying issues have not been addressed satisfactorily.

In conclusion, Seagulls Clubs cannot ignore a competitive quote from another company and as such it has been decided that the services of the other company will be engaged for all Seagulls work commencing on 16 January 2006.”

viii. On or about 6 January 2006, Synergy's solicitors on its instructions sent a letter to the Seagulls Club accepting the plaintiff’s repudiation of the Seagulls contract and terminating the contract. On or about the same day, a similar letter was written by Synergy’s solicitors to Norths accepting the plaintiff’s repudiation of the Norths contract and terminating the contract.

50 In my view the evidence given by Mr Kendrigan cannot be regarded as reliable. Mr Kendrigan agreed that effectively he was the decision maker to in effect, dismiss Synergy from 16 January 2006 onwards. He exhibited clear signs of being partisan in his approach taken to the questions asked of him in cross-examination. It was put to him that it was his belief that Mr Merhi was requesting that an extra one dollar per hour be provided to him for those services and the non-responsive answer which came forward was as follows:

"He was asking for an extra dollar an hour to pay the guards because he was having problems sourcing the guards and we could not continue to have the club under resourced in security personnel when we needed them. So I agreed that I would put the matter out to tender on the understanding that he if his was the best quote, then he would retain the business."

51 In terms of the scant contemporaneous material which is available, the letter from Mr Merhi which Mr Kendrigan received on about 30 November 2005, did not include anything about any agreement having been reached with Mr Kendrigan of the type for which Mr Kendrigan contends. There was nothing in the letter to suggest that Synergy was seeking to compete with some other tenderer for the work.

52 Under cross-examination Mr Kendrigan was asked whether or not he had told Mr Merhi on 7 December that another company had come in at a more competitive price. His evidence was that he had said that this had been the case. He was asked whether or not he told Mr Merhi the name of the other company and gave evidence that he thought that Mr Merhi had asked that very question either later that day or the following day and that he had mentioned Barringtons as the other company at that time. His evidence was that in that conversation, Mr Merhi had asked whether the matter could be reconsidered and who had won the bid and been awarded the contract and that he had replied, that the matter ‘could not be reconsidered as the decision had been made’.

53 It is clear that there is no reference to any such conversation in his affidavit. Mr Kendrigan could give no good reason as to why that conversation was not referred to in his affidavit. That casts some doubt on the reliability of his evidence. Likewise the fact that there is no reference in the letter of 7 December 2005 to any agreement of the type which Mr Kendrigan contended had been reached in October 2005 suggests that there had been no such agreement.

54 Likewise in my view the evidence adduced from Ms Lampier cannot be regarded as reliable. Her presence at the conference telephone discussion occurred in a situation in which she did not know very much at all about what was happening, did not take notes of what was said in the conversation and was simply going on her own recollection, never having discussed the subject of the conversation with Mr Kendrigan. The events in respect of which she had given evidence occurred in December 2005 being approximately 2 years before she made her affidavit, and the first time that she was asked to reflect back on what had occurred during the course of the conference telephone conversation was some time after she had read the affidavit of Mr Merhi.

55 Mr Merhi presented as a quiet and careful witness who had a reasonable recollection of the events which had occurred. Whilst of course he had a very partisan interest in the result of these proceedings, I formed the clear impression that he had endeavoured to accurately recall the events of the time, which would of course have been difficult for him to forget. Whilst it is only a small matter, the balance of probabilities did not favour his having meekly said on receipt of the bad news that the Club would be changing over to a competitor: "Oh, I am sorry to hear that, I have enjoyed our working relationship".

56 Mr Bromwich heavily emphasised the evidence given by Mr Merhi under cross-examination when he conceded that at a particular point in time one of the Synergy employees was recorded as having carried out work which was in fact done by another. Mr Merhi explained he had gone along with this arrangement at the request of both employees. He recalled the two men in question telling him that the reason for their request was that the one owed the other some money. Mr Bromwich submitted that the resultant incorrect entries in the books of accounts and incorrect made clear that Mr Merhi could not be regarded as a reliable person of integrity such that his otherwise evidence before the court could not be regarded as reliable.

57 In my view this attack on the credit of Mr Merhi was considerably overdone. Even taking the whole of the incident into account it shows no more and no less than that Mr Merhi likely should never have gone along with this arrangement. However no aspect of the arrangement favoured the interests of Mr Merhi, who is seen to have simply erred in having permitted the arrangement.

Decision on repudiation

58 Plainly enough the termination provisions of the contracts were not engaged in the manner in which the contracts were summarily brought to an end. Plainly enough, the only answer able to be put forward by Norths to the allegation of repudiation concerns the agreement for which Mr Kendrigan contends and Mr Merhi denies. The evidence given by Mr Kendrigan of the agreement with Mr Merhi to be bound by the result of an outside tender is rejected. The finding is that in all of the circumstances the Club repudiated the agreement.

Loss and damage

59 It will be plain from the above reasons that the defendant’s loss and damage claim does not require to be dealt with. Notwithstanding the extensive treatment given by both parties to the loss and damage claim it is simply inappropriate in the circumstances for the court to deal with that claim.

60 It would however be wrong for the Court not to indicate that in major litigation of this type the Court is usually assisted by some form of expert evidence. A simple inspection of the vast number of charts and documents which the parties put forward from the bar table in an attempt to analyse the extensive materials adduced concerning loss and damage makes it very plain that this was a case where the court was entitled to the parties’ assistance in terms of the mobilisation of expert evidence.

Reserved rulings

61 I allow exhibit JM2 to Mr Merhi’s affidavit of 11 December 2007.

Short minutes of order

62 The parties will be given an opportunity to prepare short minutes of order on which occasion costs may be argued.

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