Action Alarms Ltd Trading as Action Security Systems v Emmet O'Rafferty and Top Security Ltd

• Jurisdiction: Ireland
• Court: High Court
• Judge: Humphreys J.
• Judgment Date: 04 February 2022
• Neutral Citation: [2022] IEHC 33
• Docket Number: [2014 No. 3292 P]

Between

Action Alarms Limited Trading as Action Security Systems

Plaintiff

and

Emmet O'Rafferty and Top Security Limited

Defendants

[2022] IEHC 33

[2014 No. 3292 P]

THE HIGH COURT

Breach of contract – Damages – Courts Act 1981 interest – Plaintiff seeking damages for breach of contract – Whether there was a case for Courts Act 1981 interest

Facts: The plaintiff company, Action Alarms Ltd (Action), began business as an alarm installer but later added an alarm monitoring service. The second defendant, Top Security Ltd (Top), was an alarm monitoring service company which worked closely with the plaintiff up to the point when the plaintiff itself diversified into monitoring. The business relationship between the parties went back to around 1986. The plaintiff encouraged customers to connect to the defendant’s monitoring service, and the defendant paid the plaintiff a substantial commission from customer income. This was reflected in monthly commission statements. The relationship continued without major difficulty until late 2008 or January 2009 when the plaintiff decided to set up its own monitoring service and sought to migrate customers to its own service. Most of the customers did move to the plaintiff’s monitoring service, but some did not. In respect of those that remained with Top at that point, Top stopped sending commission statements, stopped paying commission on the customers introduced by Action, and according to Action, stopped responding to its communications in large measure although not completely. The plaintiff claimed damages for breach of contract in respect of the non-payment of commission after January 2009. Proceedings were instituted on 21st March, 2014. In Action Alarms v O’Rafferty (No. 1) [2021] IEHC 779, the High Court (Humphreys J) gave directions as to mode of trial and declined an adjournment request by the plaintiff.

Held by Humphreys J that the arrangement between Action and Top could not have been anything other than a contract. He held that the letter of 3rd November, 1989 was not the totality of the contract, merely one term of it. He held that payment of commission was a core part of the contract between the parties. He held that the plaintiff continued to provide the same service to the disputed customers after early 2009 as it had provided before. It seemed to him that under those circumstances, the plaintiff continued to support the relationship between the customer and Top by maintaining the physical connection and therefore satisfied the conditions for payment of commission even after January 2009; thus it was entitled to such commission under the contract. He held that the specific agreement as to non-penalisation of Action in the event of customer transfer as set out in the letter of 3rd November, 1989 precluded Top from withholding commission that would otherwise be payable. He held that there was an ample case for Courts Act 1981 interest.

Humphreys J held that there would be judgment as against the second defendant in the amount of €148,324.89 made up as follows: (i) damages for breach of contract of €95,528; (ii) VAT at 23% in the amount of €21,971.44; and (iii) Courts Act 1981 interest of €30,825.45.

Damages awarded to plaintiff.

(NO. 2)

JUDGMENT of Humphreys J. delivered on Friday the 4th day of February, 2022

1 The plaintiff company (“Action”) began business as an alarm installer but later added an alarm monitoring service. The second defendant (“Top”) (who is really the only relevant defendant and thus who I will also refer to as “the defendant”) is an alarm monitoring service company which worked closely with the plaintiff up to the point when the plaintiff itself diversified into monitoring.

2 The business relationship between the parties goes back to around 1986. The plaintiff encouraged customers to connect to the defendant's monitoring service, and the defendant paid the plaintiff a substantial commission from customer income. This was reflected in monthly commission statements.

3 The relationship continued without major difficulty until late 2008 or January 2009 when the plaintiff decided to set up its own monitoring service and sought to migrate customers to its own service. Most of the customers did move to the plaintiff's monitoring service, but some did not. In respect of those that remained with Top at that point, Top stopped sending commission statements, stopped paying commission on the customers introduced by Action, and according to Action, stopped responding to its communications in large measure although not completely.

4 The plaintiff now claims damages for breach of contract in respect of the non-payment of commission after January 2009.

5 The proceedings were instituted on 21st March, 2014.

6 Unfortunately the case has had a total of three separate substantive hearing dates.

7 The first hearing date was before O'Connor J. on 22nd November, 2017. After the case was opened, a dispute broke out about discovery and particulars and a possible amended defence. O'Connor J. adjourned the hearing and made an order directing the plaintiff to furnish particulars, allowed an amended defence and provided timelines for discovery.

8 In the light of a submission that the plaintiff's pleadings as to the contract were inadequate, O'Connor J. directed that the plaintiff should rectify this by additional replies to particulars (rather than by an amended statement of claim), so, in effect those replies to particulars serve a more formal purpose and now do adequately define the contractual claims, having been envisaged by O'Connor J as being in effect a refinement of what was originally pleaded. Hence while the defendant made a pleading objection at the first trial, it no longer does so, and merely points to the lack of definition in the statement of claim prior to its clarification by replies to particulars as being evidence of what it sees as the general nebulosity of the plaintiff's claim.

9 On 14th May, 2019, the matter was set down again for trial.

10 The second hearing date was on 19th November, 2019 when trial commenced before Pilkington J. She heard the matter over seven hearing days between that date and 5th December, 2019 when judgment was reserved. Unfortunately, Pilkington J. became indisposed in mid-2021 before she had an opportunity to finalise the judgment, and in October, 2021 it was decided that the matter should be reassigned to me for a fresh hearing. In November 2021, I fixed 11th January, 2022 as the new and third hearing date.

11 In Action Alarms v. O'Rafferty (No. 1) [2021] IEHC 779, ( [2021] 12 JIC 2108 Unreported, High Court, 21st December, 2021), I gave directions as to mode of trial and declined an adjournment request by the plaintiff.

12 The third hearing date occurred as envisaged on 11th January, 2022, and the trial then took place over four days from then until 14th January, 2022. The present judgment now deals with the substantive claim.

Plaintiff's evidence

13 The plaintiff called two witnesses, Mr Derek Mooney the founder of Action (who for simplicity I will refer to as “Mr Mooney” if used without further identification) and Mr Aaron Mooney.

Derek Mooney

14 In evidence-in-chief Mr Mooney stated that he had been in the alarm business since 1977, which included working with Chubb Alarms who had their own monitoring centre.

15 From the late 1970s there were a number of independent alarm monitoring centres. Monitoring was the only way to get Garda cover, the alternative to monitoring being external and internal bells.

16 Mr Mooney went out into business on his own and installed alarms into a monitoring centre called SCRAM (Security Control Risk and Monitoring). He had put some systems into a number of different monitoring companies to give a bit of variety.

17 He met Mr Emmet O'Rafferty of Top in 1985 and described him as “charming.” Mr O'Rafferty encouraged Mr Mooney to give his business a try, and they did so, building up a good relationship. The terms were as with any monitoring service, they didn't invent the whole situation. From the very first, SCRAM had explained how it would work. The alarm company would connect into the monitoring centre which would collect the fee and split it with the alarm company, not necessarily 50:50. If the system was not connecting in, they would contact the alarm company in order to contact the customer. The signal was tested on a daily basis.

18 None of the monitoring companies were allowed to actually go into the customers premises, it was the alarm company that had the codes to the alarm panels and security systems. The monitoring centres did not have engineers on the ground. The monitoring company would contact Action on a daily basis and they would get one of their engineers out to the customer to solve the problem.

19 As of 1985 they worked with a number of monitoring centres. The terms were the same and it generally works exactly the same way to this day. The installer would introduce the customer to Top. Top would send a contract. Action would install the alarm and check it, and Top would invoice the customer and then pay Action its proportion.

20 By 1989 he had been doing business for a number of years with Mr O'Rafferty. A letter was prepared by Mr O'Rafferty dated 28th September, 1989 referring to the possible transfer of 200 connections to Top central station. Paragraph C of that letter allowed Action to move or sell the business. However, that transfer did not happen.

21 There was a subsequent letter which was agreed of 3rd November, 1989 and new connections were introduced after that date.

22 Top was an innovative company. It encouraged installers to sell more alarms and did educational trips to New York and London.

23 A letter of 12th July, 1993 illustrated the prices for monitoring and the version produced had handwritten notes regarding alternative prices which were a result...