Idameneo (No.123) v Robalino [2009] NSWSC 969 (23 September 2009)

Last Updated: 24 September 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Idameneo (No.123) v Robalino [2009] NSWSC 969


JURISDICTION:
Equity Division

FILE NUMBER(S):
4450/04

HEARING DATE(S):
11/8/09, 12/08/09, 13/08/09

JUDGMENT DATE:
23 September 2009

PARTIES:
Idameneo (No.123) Pty Limited (Plaintiff)
Doctor Carlos Robalino (Defendant)

JUDGMENT OF:
McDougall J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
R L Harper SC (Plaintiff)
J A Jobson (Defendant)

SOLICITORS:
Massey Bailey (Plaintiff)
Brock Partners (Defendant)


CATCHWORDS:
CONTRACTS – variation – whether contract varied to provide for sale of home practice – breach – whether defendant’s conduct of home medical practice in breach of contract – whether within scope of contractual exception – whether sufficiently serious breach of a non essential term to allow termination – termination – whether contract validly terminated – plaintiff able to rely on reason for termination other than that given to defendant at the time of termination.

LEGISLATION CITED:
Evidence Act 1995
Medical Practice Act 1992 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Hadley v Baxendale (1854) Exch 341
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245

TEXTS CITED:
Australian Oxford Dictionary

DECISION:
See paragraphs [145] to [146] of the judgment.



JUDGMENT:

-

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


McDOUGALL J

23 September 2009

4450/04 IDAMENEO (No.123) PTY LIMITED v DOCTOR CARLOS ROBALINO

JUDGMENT

1 HIS HONOUR: On about 17 February 2001, the plaintiff (Idameneo) and the defendant (Dr Robalino) made two deeds. One was described as “sale of practice” (the sale deed). The other was described as “provision of services to medical practitioner” (the services deed). By the sale deed, the parties agreed, among other things, that Dr Robalino would sell a practice then conducted by him to Idameneo, and would work for Idameneo at its medical centres at Fairfield and Caringbah. Idameneo claims that Dr Robalino breached his obligations under the sale deed. It says that it has terminated the deed either according to its terms or pursuant to the general law. It claims damages. Dr Robalino denies the allegations of breach. He says that the alleged termination was in fact a repudiation, which he has accepted. He claims damages for that alleged repudiation.

Relevant terms of the sale deed

2 Since the issues that the parties agreed arose on the pleadings cannot be understood without reference to the relevant terms of the sale deed, I shall set those terms out before turning to the issues.

3 The recitals in the sale deed read as follows:

A. The Doctor is a registered medical practitioner under the Act and has for some time owned and conducted a medical practice from the Old Premises (“the practice”).

B. The Purchaser has a lease of the New Premises and has, at its expense, equipped a number of New Premises for use as a medical centre.

C. The Doctor wishes to cease the conduct of a medical practice from the Old Premises, to sell to the Purchaser the practice conducted by him from Old Premises, and the Doctor wishes to conduct a new medical practice only from the New Premises on the terms now set out.

4 Relevant definitions included the following (cl 1.1):

“the New Premises” means each of the premises referred to in Clause 7.1, with “New Premises” also being interpreted under Clause 7.2; and

“the Old Premises” means Cnr Spencer Street & Council Lane, Fairfield NSW 2165.

5 The “Act” was the Medical Practice Act 1992 (NSW).

6 Clause 2.1 of the sale deed provided as follows:

2.1 The Doctor agrees to sell, and the Purchaser, agrees to buy, the practice of the Doctor comprising the following assets:

(a) the goodwill of the practice;

(b) patient lists;

(c) the records of patients of the practice;

(d) any other assets or benefits agreed to be sold or vested in the Purchaser under this Deed.

7 Clause 3.1 provided for a purchase price of $250,000.00. Clause 5.1 dealt with transfer of title:

5.1 Title to, and property in, the practice and in all assets included in the sale under this Deed, pass to the Purchaser on completion of the sale.

8 Clause 7 (referred to in the definition of “the New Premises”) provided as follows:

7. NEW PREMISES

7.1 In the construction of this Deed, unless the contrary intention appears, “the New Premises” means each of:

(a) Cnr Spencer Street & Council Lane (“the Fairfield Premises”); and

(b) for the purpose only of the hours referred to in Clause 8.2(d), 42 President Avenue, Caringbah NSW 2229 (“the Caringbah Premises”).

9 By clause 8.1, Dr Robalino was required to enter into the services deed at the same time as he made the sale deed. The commencement date of the services deed was to be, in effect, the date of completion of the sale deed.

10 Clause 8.2 set out certain warranties. It provided:

“The Doctor agrees with the Purchaser that he will, under the Practitioner Contract:

(a) render medical services from the New Premises for 6 years from the Commencement Date under the Practitioner Contract. The Doctor agrees with the Purchaser that he will render medical services only from the New Premises during that period. This requirement extends the restraint in Clause 10.1. The only exceptions to this are:

(i) where the rendering of the medical services is in accordance with any prior specific written permission of the Purchaser given at any time; or

(ii) it is the rendering of urgent medical attention as referred to in section 36 of the Act;

(b) render medical services from the New Premises, during those 6 years, for no less than 50 hours per week for 48 weeks per financial year. The Doctor is entitled to be absent for up to 4 weeks per financial year, and for the financial year during which the Practitioner Contract commences or terminate this is pro rated;

(c) as part of those hours, work not less than:

(i) an average of 8 hours in the 29 hours between 8.00am Saturday to 10.30pm Saturday and 8:00am Sunday to 10:30pm Sunday, every 2^nd weekend (that is, 26 weekends each financial year), each of those weekends being exclusive of periods referred to in (iii) and (iv) below;

(ii) each Monday from 6:00pm to 10:00pm;

(iii) one half of the Christmas and New Year period special rosters (5 days on, 5 days off); and

(iv) an equal share of other public holiday period special rosters along with the other practitioners at the Premises;

so as to enable the Purchaser to manage the New Premises as a medical centre which operates efficiently 24 hours a day for 365 days a year;

(d) for the first 2 years of the term of the Practitioner Contract only, in addition to the 50 hours per week referred to in paragraph (b) above, render medical services at the Caringbah Premises each Friday from 10:00 pm in the evening until 8:00 am the following day;

(e) conduct himself in a harmonious way with other practitioners and staff at the New Premises; and

(f) use his best endeavours to, ethically and professionally, expand the turnover, profitability, quality and image of the services provided at the New Premises.”

11 Clause 8.4, provided, among other things, for the payment of liquidated damages for a breach of cl 8.2(a). So far as it is relevant, it read:

“If, prior to the 6^th anniversary of completion:

...

(c) the Doctor otherwise breaches Clause 8.2(a) (other than as a result of termination of the Practitioner Contract by the Doctor under Clause 10.1 of the Practitioner Contract),

then:

(i) the Doctor must pay to the Purchaser, as agreed and assessed damages, a once only payment equal to $3,472 for each month in the period from the death, permanent disablement or that breach (as the case may be) through to the due expiry of the initial term of 6 years under the Practitioner Contract;

...

(iii) interest is payable on the amount due, at the rate per annum equal to the then 90 day bank bill rate plus a margin of 3%, as from the expiry of the relevant period in paragraph (ii);

12 Clauses 8.5 and 8.6 provided:

8.5 The Doctor must:

(a) complete and sign all documents and do all other things necessary to obtain, by completion, a provider number in respect of the New Premises; and

(b) cease, as from completion, to use his provider number in respect of any other location, except a provider number in respect of his principal place of residence for the time being but only on the basis that:

(i) both the total number and total value of such services must be immaterial compared to those rendered by the Doctor from the New Premises; and

(ii) the rendering of medical services from his principal place of residence must not interfere with the Doctor’s Health Insurance Commission profile, and if it does, then at the Purchaser’s request, the Doctor must cease to use his provider number in respect of that location.

13 Clause 9 set out the “objective” of the transaction. It provided:

9. OBJECTIVE

The parties agree that it is fundamental to the transaction recorded in this Deed that:

(a) the Purchaser receive the benefit of the medical goodwill of the Doctor;

(b) the Doctor commit at least 6 years (from completion) to the development of the goodwill of the Purchaser at the New Premises;

(c) the Doctor should ensure, so far as reasonably possible, that all the patients attended by the Doctor in the course of the conduct of the practice from the Old Premises should, as from completion, attend medical practitioners located at the New Premises and continue to attend medical practitioners at the New Premises even after the time when the Doctor has ceased to render medical services from the New Premises.

14 Clause 14 provided for termination. So far as it is relevant, clause 14.2 gave Idameneo a contractual right to terminate. It provided:

14.2 The Purchaser may terminate this Deed on the happening of any of the following events:

(a) the Doctor commits any serious breach of any provision of this Deed and the Doctor has failed to remedy that breach within 7 days of receiving a notice from the Purchaser calling for that breach to be remedied; or

(b) in the reasonably held opinion of the Purchaser the Doctor has committed an act which if true would, in the opinion of the Purchaser, adversely affect the reputation or business of the Purchaser conducted from the Premises; or

(c) the Doctor is guilty of any wilful neglect or misconduct; or

(d) the Doctor is partly or fully disqualified under the Health Insurance Act 1973 (Cwlth); or

(e) the registration of the Doctor under the Act lapses, is cancelled or suspended.

15 By clause 15, a proper termination of the sale deed effected an automatic termination of the services deed.

The issues for decision

16 The parties agreed that the following issues arose on the pleadings:

1. Whether the Sale of Practice Agreement was varied to oblige the defendant to render medical services from the plaintiff’s premises at 30 Short St, Leichhardt, as well as from the premises as [sic] Fairfield and Caringbah.

2. Whether the defendant was in serious or fundamental breach of the Sale of Practice Agreement in that the defendant:

a. breached clauses 8(a), (b), (c) or (f) of Sale of Practice Agreement

or

b. breached his implied obligations in the Sale of Practice Agreement:

i. to do all such things necessary to enable the plaintiff to have the benefit of the Sale of Practice Agreement;

ii. not to hinder or prevent the fulfilment of the purpose of express promises made in the Sale of Practice Agreement.

iii. to act reasonably and in good faith in performance of his obligations under the Sale of Practice Agreement,

by:

a. failing to render medical services for no less than 50 hours a week for 48 weeks per financial year from the Fairfield and Caringbah premises;

b. failing to render medical services at the times specified in 8.2(c) of the Sale of Practice Agreement;

c. failing to render medical services exclusively from the Fairfield and Caringbah premises, and, in the event the agreement was varied, the Leichhardt premises;

d. failing to render medical services from the Leichhardt premises at all;

e. rendering medical services from his premises at Dulwich Hill;

f. inviting or inducing patients to seek his medical services at his Dulwich Hill premises; or

g. rendering medical services from his premises at Dulwich Hill while pretending to be ill and incapable of rendering medical services from the plaintiff’s premises.

3. Whether the plaintiff validly terminated the Sale of Practice Agreement either pursuant to clause 14.2, or otherwise.

4. What damages the plaintiff is entitled to.

5. Whether the plaintiff is entitled to an account of profits.

6. Whether the plaintiff repudiated the Sale of Practice Agreement.

7. Whether the defendant is entitled to damages, and whether the defendant has proved any damages.

Factual context

17 From the prolix, and to a great extent irrelevant, affidavit and oral testimony and documentary evidence, the following facts emerge (it will be necessary to examine some aspects of the facts in greater detail when I turn to the issues).

18 Idameneo owns and operates a number of medical centres in and around the Sydney metropolitan area. The Fairfield Centre opened in October 1998. Dr Robalino worked in that centre from about 1998 or 1999. He is a native Spanish speaker (having been born in Ecuador, and having obtained qualifications from tertiary institutions there and in Spain). He built up a following among Spanish speaking patients at the Fairfield Centre.

19 Completion of the sale deed took place on about 17 February 2001. Dr Robalino commenced to render medical services at the Fairfield Centre, pursuant to the terms of the sale deed and the services deed, from that date. To the extent that it is relevant, it appears that he also rendered medical services at the Caringbah Centre.

20 It is apparent that, within the first twelve months or so from completion, difficulties arose between Dr Robalino and the medical director of the Fairfield Centre, Dr Dawood Haddad. In April 2002, Dr Haddad and others (including the practice manager, Ms Deborah Marlin) complained to Dr Edmund Bateman. Dr Bateman is the managing director of Primary Health Care Limited (PHC), a listed public company, and a director of Idameneo. Idameneo is a wholly owned subsidiary of PHC.

21 The complaints made by Ms Marlin and Dr Haddad to Dr Bateman were that:

(1) Dr Robalino was not working the hours required of him under cl 8.1(b) of the sale deed; and

(2) he was not working in the evenings or on public holidays as required by cl 8.2(c) of the sale deed.

22 On 17 May 2002, Dr Haddad faxed a letter to Dr Bateman. In that letter, Dr Haddad amplified those complaints, and raised a number of other concerns with Dr Robalino’s performance.

23 Also on 17 May 2002, and presumably after receipt of Dr Haddad’s letter, Dr Bateman wrote to Dr Robalino. It is apparent that they had had at least one discussion before Dr Bateman wrote. So far as it is relevant, the letter read as follows:

“You are in breach of your contract:

1. Not working the roster. Roster for weekends and holidays were put in place months ago at which all doctors were invited to attend.

2. Not working share of Public holidays. Have not worked any this year.

3. Not working required weekend 2 p.m. start on Sundays.

4. Not allowing us to run Centre as 365 day practice. Problem with “sickness” and with late notification and no contact number available which in turn gives rise to concerns.”

24 Dr Robalino replied the same day. His letter confirmed that he and Dr Haddad did not “hit it off”. Of greater relevance, it said:

“I work in [sic] average above 54 hours and 45 minutes at he [sic] Fairfield Chase Medical Centre, plus four hours per week at home preparing medical reports; my hours of work start at 8:15 am in the morning which can also be proved and finish in between 5:30 pm to 7:00 pm, excluding Mondays when I finish at 10:00 pm and Fridays I finish in between 2:00 pm to 3:00 pm at least, ... . This is to show that I am not watching the clock when I work. Also I worked in [sic] Public Holidays when I have been put in the Medical Centre roster.”

25 Dr Bateman replied (again on 17 May 2002). So far as it is relevant, his letter stated:

“I do not disagree with your statement regarding hours you work – you are not a clock watcher – time of arrival etc. Monday to Friday.

I do not disagree that you have had less holidays than you could. You have given a lot of time and effort.

The only issues are:

1. 2 p.m. start/roster time on weekend

2. You are not doing your share of Public holidays

3. The holiday roster you propose not to work”

26 It is also apparent that there was some dispute between Dr Robalino Idameneo about money. That was not elaborated in the evidence, nor does it feature in the agreed issues. It may be disregarded.

27 On 28 May 2002, Dr Haddad wrote again to Dr Bateman “to inform you about another irresponsible and impolite behaviour [sic] of Dr Carlos Robalino”. The complaint related to Dr Robalino’s allegedly taking patients who had asked specifically for him in preference to other patients who had been waiting for longer. In this context, it was common ground that the Fairfield Centre operated on the basis that patients could not make appointments, and would be seen in order of their arrival and presentation to the receptionist. Doctors were required to take patients in the same fashion. It was acceptable for patients to request to see a particular doctor, but neither they nor the doctor could thereby “jump the queue”.

28 Dr Haddad’s letter raised other complaints, which do no more than confirm that there was a serious breakdown in the relationship between him and Dr Robalino.

29 Dr Bateman was aware, from at least the time when the deeds were signed (T45.30), that Dr Robalino maintained a home practice: from his residence in Dulwich Hill. After Dr Bateman received Dr Haddad’s letter of 28 May 2002, he had a conversation with Dr Robalino. According to Dr Bateman, that conversation was as follows:

24. I recall the discussion with Dr Robalino in words to the following effect:-

EB: “I have received more complaints about the fact that you refuse to see first available patients and you insist on only seeing your own patients in priority. Also you have abused Dr Haddad. We do not have appointments. That is just not on.

Robalino: I have many Spanish speaking patients. No-one else in the Centre can communicate with them so I see them with priority.

EB: You know that this is not allowed. We do not have an appointment system and you know that. Unless it is an emergency they can wait until you become available and in a queue. I also know that you are seeing some patients at your home in Dulwich Hill. This is not the way we operate and home visits or seeing patients at home surgeries is also not permitted especially while you are not working the hours that you are meant to. You know this from our negotiation.

Robalino: I know that. The home surgery is part of my general practice.

EB: This is not encouraged. Well you should transfer your home surgery to one of the centres. Why don’t you run your home surgery form the Leichhardt Centre so that those patients don’t have to travel all the way to Fairfield.

Robalino: I will look into that, but the contracts will need to be revised.

EB: Look, there will be no more money. You should just follow your contract in the first instance.”

30 Dr Robalino did not dispute that a conversation to that effect took place in late May or early June 2002.

31 On about 1 July 2002, Idameneo introduced an electronic medical records system known as “Medtech”. That system contained (in electronic form) the medical records of every patient who attended any PHC Medical Centre, Australia wide.

32 When a patient attended a PHC Medical Centre, a place in the queue was allocated. The queue was operated through Medtech. When the patient was seen by a doctor, the doctor would click on the patient’s name in the Medtech system. That would bring up whatever file (including medical records) was stored on the system for that patient. Presumably, for new patients, the file was created when the patient attended at reception. When the consultation finished, the patient’s file would be closed. The process would then repeat for the next patient in the queue.

33 It seems that there was some discussion between Dr Robalino and Dr Bateman concerning the “transfer” of Dr Robalino’s home practice to PHC. On 7 April 2003, Dr Robalino wrote to Dr Bateman about that subject. So far as it is relevant, the letter stated:

“Subject to negotiation or revision of contract these are the hours I am proposing to work at Leichhardt Medical Centre (or from “Home-Surgery” more extended hours as needed including after hours services and home visits):

Tuesday to Thursday from 7:00pm to 10:00pm, and

Every second Sunday from 10:00am to 5:00pm.

I appreciate an urgent consideration and answer to this matter.”

34 Dr Bateman wrote to Dr Robalino on the same day. It is not clear whether their letters crossed, or whether Dr Bateman’s letter was intended to reply to Dr Robalino’s. Dr Bateman’s letter read as follows:

“Further to our discussion regarding your contract with the above Company it is agreed that you will transfer your right to have “home surgery” moved from your residential address as you propose to sell that residence and/or move from that residence.

You will attend in the alternative at the Leichhardt Medical Centre at 30 Short Street, Leichhardt. The hours you work there will be at your option. These hours have always been additional to your basic contractual obligations which are unaltered and those basic contract obligations regarding weekends/hours/evenings will not change and will be met at Fairfield.

The only additional requirement is that there would be a restraint applied in relation to the Leichhardt practice in similar terms and conditions and distance as applies to the Fairfield practice. The only change in that restraint for the Leichhardt practice as compared to the Fairfield practice is that the distance of restraint should be 7km.”

35 On 13 April 2003, Dr Robalino wrote to Dr Bateman:

“We have agreed in the time frame for this matter; however no consideration has been given to costs. Considering that, the practice building up has costed to me approximately $75,000 and that it will generate additional income to your company which will grow throughout the time; and that the number of hours that I will be dedicating to it is of 12.5 hours per week (minimum).

I am asking you to consider a payment of $150,000, to be fair, before proceedings with the actual transfer to occur on the 26/04/2003. It will be also necessary to send letters to patients (approximately 600) notifying about this change (of this paperwork my wife will be in charge) and some advertising in the local and Spanish newspapers.

I am also asking you (as discussed with you on the 25/03/2003) to kindly consider the proposal to introduce some changes in your IT system, at not too much costs, which will significantly increase the value of your company and will generate additional income and perspectives of continuous growth.”

36 In a letter anomalously (and clearly erroneously) dated 7 April 2003, Dr Bateman replied:

“I refer to your letter dated 13 April, 2003.

It is your option to come to Leichhardt. There are no funds for such arrangements. That is for doctors who already have a contract in place.

We will pay the costs of any move; that is, postage and ads and similar costs.

There appears to be some issues with your contract at Fairfield and it is essential that the Fairfield practice be looked after by yourself as a priority.

I would appreciate if you could talk to Dr Haddad with regard to whatever his needs are in relation to that...”

37 In May 2003, Dr Bateman became aware that Dr Robalino was advertising his home surgery in a Spanish speaking newspaper. The copy of the advertisement that is in evidence is almost completely illegible. No clear copy has been provided; nor has any translation. Be that as it may, Dr Bateman wrote to Dr Robalino about the advertisement, again in a letter anomalously (and erroneously) dated 7 April 2003. He said:

“With reference to your ad that advertised the practice at your “home surgery”, this is clearly in breach of the objective of the Sale of Contract deed (see Clause 9). By having patients going to your home and especially advertising this in a way that will lead patients from Fairfield to move to the home surgery, we clearly are disadvantaged and we do not get the goodwill built up at the Fairfield premises.

I have checked your contract as a result of the advertisement and I can find no reference to “home surgery” that you have had discussions with me about.

Could you please contact me regarding these issues.”

38 Dr Robalino did not transfer his home practice to the Leichhardt Centre. In about early May 2003, Dr Bateman spoke to him about this. He said that they had a conversation to the following effect:

EB: “I notice you haven’t moved your home surgery to Leichhardt. This is not on. I am also told that you are still not making your hours at Fairfield. How many times do we have to keep discussing this?

CR: I am too busy to do anything. The Centre needs more nurses. How can I do my job when there is no support?

EB: I will look into the nursing issue, but it is no excuse for you to not work your hours at Fairfield, but instead work at your home surgery. I expect you to devote your time to Fairfield not your home surgery. You are still in breach of your contract and you must stop work at your home surgery and work your hours and roster at Fairfield.”

39 Dr Robalino did not dispute this evidence.

40 In mid January 2004, Dr Bateman’s son, Mr Henry Bateman, had a conversation with Dr Robalino. Mr Bateman is the general manager of Idameneo’s medical centres, and was responsible for the development and operation of all the medical centres operated by Idameneo. Mr Bateman said that the conversation concerned the transfer of Dr Robalino’s home practice to Idameneo’s Leichhardt Centre, and was to the following effect:

“Robalino: “I have spoken your father about this. In order for me to transfer my home surgery to Leichhardt I wish to be paid $100,000.00. I will enter into a 6 year contract in exchange for giving up the home surgery. Your father agreed that a restraint area should be 8 kilometres. My wife will need to be paid $2,000.00 to transfer patients over in exchange for working exclusively for Primary.

HB: You already work exclusively for us. You are also in breach of your contract anyway as you are operating a home surgery and not doing your hours. This is a new arrangement that you are trying to negotiate. I will speak to my father, but no money will be paid to your for your home surgery as you shouldn’t be having a home surgery.”

41 Dr Robalino did not dispute this evidence. Undeterred by that, Mr Jobson of counsel, who appeared for Dr Robalino, attacked part of it. In circumstances where Dr Robalino did not controvert the evidence, and where I see no reason to disbelief Mr Bateman, I accept the evidence.

42 On 28 June 2004, Dr Robalino saw another general practitioner at Fairfield (not in the Fairfield Centre), Dr Z Athour. Although there was some attack made on Dr Robalino for seeing Dr Athour rather than one of the other doctors at the Fairfield Centre, I accepted that it was reasonable for Dr Robalino to see a general practitioner independent of Idameneo. Dr Athour provided a “WorkCover NSW medical Certificate”. That certificate stated that Dr Robalino was suffering from disorders of his cervical and lumbar spine. It said that he was (or would be) unfit for work from 28 June to 13 July 2004.

43 It is I think a reasonable inference from the evidence that Dr Robalino provided this certificate to someone at the Fairfield Centre on or about 28 June 2004. Mr Jobson did not explore this with Ms Marlin, although she was cross-examined on her affidavit.

44 On 1 July 2004, Dr Bateman wrote to Dr Robalino giving notice of breaches of contract and requiring the breaches to be remedied. The letter stated:

“We refer to your contract between the above company, 2001 Sale of Practice Agreement.

We wish to give you Notice of Breach of Contract in respect of that undertaking. You are in breach of Clause 8.2(b), 8.2(c), 8.2(f).

I would ask that you remedy these breaches within seven (7) days as required by the Contract.”

45 Dr Robalino replied on 5 July 2004. He said:

“Thank you, for your letter dated 1 July 2004. I note you had received my Workers Compensation Medical Certificate which states my health condition.

As soon as my health improves and my doctor finds me fit to work I will re-assume my duties.”

46 Dr Robalino returned to work on 13 July 2004. The Medtech system records that he worked some 7 hours 9 minutes, and saw some 40 patients, on that day.

47 On 14 July 2004, Dr Bateman prepared a notice of termination of the sale deed and, therefore, the services deed. The letter stated:

“We refer to our notice to you of 1 July 2004 requesting that you remedy your breach of the Sale of Practice Deed and the Provision of Services Deed (“the Deeds”) entered between Idameneo (No 123) Pty Limited and you on or about 17 February 2001.

In particular we directed you to your breaches of Clause 8.2(b), 8.2(c) and 8.2(f) of the Sale of Practice Deed.

In excess of 7 days has passed since our notice was given you to remedy your breach of the Deeds and you have failed to remedy such breaches.

As a result of your failure to remedy your breaches of the Deeds within the specified time we hereby terminate the Deeds under Clause 14 of the Sale of Practice Deed.”

48 Dr Robalino attended the Fairfield Centre on 14 July 2004. The Medtech system recorded that he worked 6 hours 13 minutes that day, and saw 31 patients.

49 Apparently, Dr Robalino attended the Fairfield Centre on 15 July 2004. He found that he had been “locked out” of his room. (Ms Marlin says that this occurred on 14 July 2004. Given what is recorded in the Medtech system, I think she is mistaken.)

First issue: the alleged variation to the sale deed

50 According to Idameneo’s pleading (paragraph 11C of its amended statement of claim) the variation was made “between 7 and 13 April 2003”.

51 Mr Harper SC, who appeared for Idameneo, submitted that the variation was proved by the exchange of correspondence to which I have referred at [33] to [36] above. He expressly disavowed reliance on any oral agreement.

52 Leaving aside the legal question of whether a deed can be varied otherwise than by a deed – and noting there was no case of promissory or other estoppel pleaded – I am not satisfied that there was ever any agreement to vary as pleaded, in April 2003 or otherwise. True it is that Dr Robalino’s letter of 7 April 2003 suggests that there has been some discussion of a transfer of his home practice to PHC. However, that letter starts with the words “subject to negotiation or revision of contract”. It is not in terms an offer capable of acceptance so as to give rise to a contract.

53 True it is also that Dr Bateman’s reply of the same date says that “it is agreed that you will transfer your right to have “home surgery” moved from your residential address...”. However, it is not clear that this relates to a “sale” of the practice to Idameneo. It appears to relate to a proposed change of address, and to some documentation of this for the purposes of cll 8.5 and 8.5 of the sale deed. Although Dr Bateman’s letter purports to give directions for Dr Robalino to attend the Leichhardt Centre, it seems to me that this is nothing more than a statement of what would happen if there were in fact some agreement for the sale of the home practice.

54 I add that it is also clear from the last paragraph of Dr Bateman’s letter that he too was looking to the negotiation of some more formal agreement.

55 That there was no concluded agreement is made clear by Dr Robalino’s letter of 13 April 2003. It referred to agreement “in the time frame for this matter” but noted there had been no discussion of cost. It asked for a payment of $150,000.00, and other matters. Dr Bateman’s reply (the first of his letters erroneously dated 7 April 2003) rejected the proposal for any payment, and stated that all that would be paid is “the costs of any move”.

56 It is impossible to spell out from that correspondence any concluded agreement.

57 In addition, it may be noted that Mr Bateman at least appears to have regarded the matters as still being up in the air in January 2004 (see the conversation referred to at [40] above). That conversation makes it clear, apart from anything else, that Dr Robalino still required some consideration for the “transfer” of his home practice – although he had dropped the asking price significantly.

58 It appears that, in late February 2004, a draft deed was prepared to conclude the sale of the home practice to Idameneo. Again, it is difficult to see why this would have been done if there had been a concluded agreement made back in April 2003.

59 The first issue should be answered “no”.

Second issue: serious or fundamental breach

60 The second issue requires consideration of two principal, although related, matters:

(1) whether the home practice conducted by Dr Robalino fell within the limited exception to cl 8.2(a) of the sale deed set out in cl 8.5(b). (I put the matter this way because Mr Harper accepted that, notwithstanding the apparently mandatory words of cl 8.2(a) and the very limited – and in this case inapplicable – exceptions set out in subparas (i) and (ii), cl 8.5(b) did provide, according to its terms, for a limited exception to cl 8.2(a)); and

(2) the extent to which Dr Robalino worked the hours required by 8.2(b) of the sale deed, in accordance with the more specific requirements of cl 8.2(c).)

First matter: the home practice

61 Dr Robalino’s affidavit is silent as to the circumstances in which, or time at which, he set up his home practice. It is however clear, from documents in evidence, that Dr Robalino was conducting a practice from his home at Dulwich home when the sale deed and services deed were signed in February 2001.

62 Dr Robalino maintained a separate “provider number” for his home practice. Medicare bulk billing records relating to that provider number were tendered without objection. One group of those records, known as “direct bill statements”, were sent to Dr Robalino at his Dulwich Hill home. They quoted what I will call his Dulwich Hill provider number. They showed that he was seeing patients, and using that provider number, from at least early January 2001. I infer, in the absence of any evidence to the contrary from Dr Robalino, that the services rendered by him using his Dulwich Hill provider number were services provided at his home practice. (Dr Robalino had a separate provider number for his practice at Idameneo’s Fairfield Centre, and that provider number was utilised for services rendered by him from that centre.)

63 Further, the Medicare records (which include not only the “direct bill statements” but also a bundle of “bulk bill EFT statements”) show that Dr Robalino continued to render medical services, utilising his Dulwich Hill provider number, for the entire period from 17 February 2001 to 14 July 2004. Again, in the absence of any evidence of the contrary from Dr Robalino, I infer that those services were rendered from his home.

64 There is also, as I have mentioned, some evidence that Dr Robalino advertised for patients in a Spanish language newspaper. The advertisement (so far as it is legible) appears to have directed patients to his home practice at Dulwich Hill.

65 There was no suggestion that any of the medical services rendered by Dr Robalino from his home were in accordance with any prior specific written permission (or any other permission) of Idameneo, or that they related only to the rendering of urgent medical attention.

66 It follows, prima facie, that throughout the entire period from 17 February 2001 to 14 July 2004, Dr Robalino was in breach of his obligation under cl 8.2(a) to “render medical services only from the New Premises”.

67 Can it be said that the total number and total value of services rendered by Dr Robalino from his home were immaterial compared to those rendered by him from the new premises cl 8.5(b)(i)? In my view, it cannot.

68 An analysis of the Medicare records carried out by Idameneo’s solicitors, and tendered without objection, showed that over the period from 8 April 2003 (more than two years after the sale deed and the services deed were made) to 14 July 2004, the total of the amounts paid by Medicare to Dr Robalino, in respect of his Dulwich Hill provider number, was some $67,842.45.

69 Mr G C A Gower, an accountant retained by Idameneo to give expert evidence, said that for the period 17 February 2003 to 30 June 2004 Idameneo’s gross receipts from Dr Robalino’s rendering of services at the Fairfield Centre was $327,264.00. It will be observed that those figures relate to a period commencing about 6 weeks earlier than the period over which Dr Robalino’s Medicare earnings from his home practice were calculated, and finishing about two weeks earlier.

70 The parties agreed that over the period 8 March 2003 to 14 July 2004, Dr Robalino saw some 2314 patients at his Dulwich Hill practice, and some 12132 patients at his Fairfield practice.

71 Thus, for the period 8 March 2003 to 14 July 2004 (and acknowledging the slight disparity in what is being compared):

(i) the total revenues derived by Dr Robalino (from Medicare) under his Dulwich Hill provider number are approximately 21% of the total revenues derived by Idameneo’s from his medical services rendered at the Fairfield Centre for a slightly longer period; and

(ii) the total number of patients seen by Dr Robalino at his Dulwich Hill premises was about 19% of total number of patients seen by him at Idameneo’s Fairfield Medical Centre.

72 In broad terms, over the last 15 months during which Dr Robalino rendered medical services at the Fairfield Centre pursuant to the sale deed, his home practice, both in number of patients seen and in the amount of its revenues, was approximately 20% of his Fairfield practice.

73 The Australian Oxford Dictionary (second edition, 2004) defines “immaterial” to mean, relevantly “of no essential consequence; unimportant”.

74 What is “immaterial”, for the purposes of cl 8.5(b), requires attention to the objectives of the sale deed generally, and the part that cl 8.5(b) is intended to play in the fulfilment of those objectives.

75 Clause 9 (see at [13] above) set out the “objective” of the agreement recorded in the sale deed. In summary, the fundamental objectives of the transaction were agreed to be that Idameneo should receive the benefit of the goodwill of the practice sold to it by Dr Robalino; that Dr Robalino should use his best endeavours to enhance the goodwill of Idameneo at the Fairfield Centre; and that Dr Robalino should ensure so far as he could that his former patients would continue to attend the Fairfield Centre. Put more compendiously, the fundamental objective of the agreement was that (subject to the limited exception for home practice comprised in cl 8.5), Idameneo should receive the benefit of Dr Robalino’s labours, (for and at the specified hours) and of his patients.

76 Clearly enough, cl 8.2(a) was intended to secure, for the benefit of Idameneo’s business at the Fairfield Centre, the fruits of Dr Robalino’s labours as a medical practitioner. The importance of cl 8.2(a) was emphasised by the restraint in cl 10:

10.1 The parties agree, that given that the Purchaser is acquiring the goodwill of the practice, that the Doctor is to render medical services from the New Premises, and the objective in Clause 9, as a reasonable protection for the business of the Purchaser, the Doctor must not during the restraint period:

(a) render medical services at any place within a radius of 8 kilometres of the Old Premises; or

(b) render medical services at any place within a radius of 8 kilometres of the New Premises; or

(c) operate or be engaged within a radius of 8 kilometres of the Old Premises either on his own account, or in partnership with, or as agent, manager or servant for any other person or entity, or as a shareholder, in any business of the nature of the business conducted by the Purchaser at or from the Premises; or

(d) operate or be engaged within a radius of 8 kilometres of the New Premises either on his own account, or in partnership with, or as agent, manager or servant for any other person or entity, or as a shareholder, in any business of the nature of the business conducted by the Purchaser at or from the Premises; or

10.2 The restraint period under the proceeding Clause is the period from completion until the later to occur of:

(a) the 6^th anniversary of completion; or

(b) the 3^rd anniversary of the date on which the Practitioner Contract terminates for whatever reason.

10.3 The restraint in Clause 10.1 is suspended from time to time:

(a) to the extent, and in accordance with, any specific written permission given by the Purchaser; or

(b) so as to permit the Doctor to enter into and carry out the terms of the Practitioner Contract.

10.4 For each time the Doctor renders a medical service in breach of Clause 10.1(a) or Clause 10.1(b) he must pay to the Purchaser, as agreed and assessed damages, 50% of the gross fee payable to the Doctor in respect of that medical service.

10.5 Each payment due under the preceding Clause must be made within one month of the relevant breach and interest is payable on the amount due, at the rate of 8% per annum, as from the expiry of that month.

77 Further, it is necessary to bear in mind that by cl 8.2(f), Dr Robalino was required to “use his best endeavours to, ethically and professionally, expand the turnover, profitability, quality and image of the services provided at the New Premises”.

78 In those circumstances, it cannot be said that either the total number or the total value of the medical services rendered by Dr Robalino from his residence was immaterial compared to those rendered by him from the Fairfield Centre. There are two main reasons why this is so.

79 The first reason is that the sheer volume of the number and value of the services (in both absolute and percentage terms) is of itself redolent of materiality. The effect of the magnitude of Dr Robalino’s home practice was to deprive Idameneo of substantial revenues, even accepting (as I am prepared to do) that not all of the patients who saw Dr Robalino at home would have seen him at Fairfield had he not conducted his home practice.

80 The second reason is that, as the summary of the Medicare records relating to Dr Robalino’s Dulwich Hill provider number shows, Dr Robalino from time to time saw patients at his home on Mondays. By cl 8.2(c) of the sale deed, he was required to work Monday evenings at the surgery from 6:00pm to 10:00pm. It is very difficult to understand how Dr Robalino could have fulfilled that obligation on the evenings when, according to the Medicare records, he saw patients at his home. By my count, he saw patients at his home surgery on twenty-two Mondays scattered through the period from 8 April 2003 to 14 July 2004 – on average, more than once a month. To the extent that Dr Robalino worked at home on Monday nights, he put it beyond his power to fulfil his obligations under cl 8.2(c). This analysis lends some support to the proposition that the extent of Dr Robalino’s home practice compared to his Fairfield practice was anything other than immaterial, although I would have reached the conclusion that it was not immaterial even if Dr Robalino had scrupulously worked every Monday (apart from the Mondays of the four weeks a year that he was entitled to have off) at the Fairfield Centre.

Second matter: hours of work

81 By clause 8.2(b) of the sale deed, Dr Robalino was required to work at the Fairfield centre for six years for no less than 50 hours per week for 48 weeks each financial year.

82 Idameneo relied on its computerised practice management system, Medtech, to show that over the 106.4 weeks from 1 July 2002 (when the Medtech system commenced to operate) to 14 July 2004, Dr Robalino’s average hours, based on a 48 week year, were:

Total	Evening hours	Weekend hours
44.18	3.44	2.37

83 This analysis included the period from 28 June to 13 July 2004, when Dr Robalino was absent from work, he said because of ill health. I shall return to this. (It appears that Dr Robalino was not too unwell to work from home; he apparently saw some 79 patients over that period, including 18 on 6 July 2004.)

84 Mr Harper relied on the Medtech records to show that, for the period covered by them, Dr Robalino had fallen well short of his contractual obligations in three respects:

(1) he had not worked the total number of weekly hours required by cl 8.2(b);

(2) he had not worked the number of weekend hours required by cl 8.2(c)(i); and

(3) he had not worked the number of evening hours required by cl 8.2(c)(ii).

85 Dr Robalino denied that the Medtech system recorded the whole time that he was engaged at the Fairfield Centre providing medical services. He said, in addition, that he worked a number of hours each week at home, preparing medico-legal reports. In those circumstances, Mr Jobson submitted, I should not accept the Medtech records as proving breach of cll 8.2(b) or 8.2(c).

86 The evidence relating to the Medtech system is that, in substance, it records among other times when a doctor first sees a patient on a particular day and when a doctor last sees a patient on a particular day. That is because it is necessary for the doctor to click onto the patient’s records in Medtech when he or she commences a consultation with the patient. Thus (subject to some relatively minor dispute as to whether the time recorded for the last consultation recorded for a particular day is when it begins or ends) the Medtech records show the first time and the last time during a day that a doctor renders medical services to patients.

87 Dr Bateman said that if a doctor arrived at work and commenced by reviewing patient files, this would show up on the Medtech system because he would have to open the particular file for that purpose (T64.16-.33).

88 Further, there was evidence that there were always patients waiting to see doctors at the Fairfield Centre (see Ms Whiteley at T25.17-.25). Thus, a doctor who started work at the rostered hour would not have to wait some time for a patient to become available. There was no challenge to that evidence, and I accept it.

89 Of course, not all medical services are rendered in consultation with a patient. For example (as Dr Robalino said) doctors are required to write medico-legal reports. However, as Dr Bateman pointed out, this would require them to access the Medtech system so that they could review the patient’s history and other matters relevant to the preparation of a report. Thus, even if a doctor were spending some time writing medico-legal reports rather than seeing patients, the Medtech system would still record when it was that the doctor opened the file for the patient for whom the report was being prepared.

90 Further, the method upon which Idameneo relied shows only the total time elapsed between the first and last relevant uses of the Medtech system (i.e., the first time and the last time when a patient file is opened). Idameneo has assumed, for the purposes of argument, that Dr Robalino was fully engaged in providing medical services between those times. As Mr Harper submitted, that is an assumption favourable to Dr Robalino.

91 Accepting as I do the evidence given by Idameneo’s witnesses as to the operation of the Medtech system, I conclude that the records produced, the relevant effect of which I have summarised above, are capable of proving the matters asserted: namely, the total number of hours that, on average, Dr Robalino worked weekly during the period in question and the total numbers of evening and weekend hours during that period.

92 Mr Jobson submitted that a better understanding of the hours spent by Dr Robalino in rendering medical services at the Fairfield Centre could be obtained from the rosters that, on the evidence, were prepared for each medical practitioner who worked there. It is clear that rosters were drawn up, under the supervision of the medical director of the practice from time to time. No rosters were proved. There was some debate as to whether they existed, whether they should have been discovered and what inferences could be drawn from the apparent failure to discover any rosters. In the result, none of that matters.

93 I do not accept that rosters (even if available) would be more reliable than the records obtained from the Medtech system in demonstrating the number of hours spent providing medical services at the Fairfield Centre. There are at least two reasons for this. The rosters are prospective: that is to say, they show the hours that a doctor is expected to work. They are not records of the hours actually worked. For example, a doctor may have been prevented by illness or misfortune from working on a particular day; or by something as trivial as a traffic jam from starting at the rostered time. The second reason is that, even if a doctor was at the Centre for the whole of the rostered hours for a particular day, it does not follow that he or she was rendering medical services throughout that day. Clauses 8.2(a) and (b) focus on the rendering of medical services. The roster indicates the hours during which a doctor is expected to render medical services, not the hours spent by a doctor rendering medical services.

94 It follows further that, unless there is something in Dr Robalino’s evidence as to the preparation of medico-legal reports that would suggest he was working more hours than shown through Medtech (even though not, as cll 8.2(b) and (c) require, only at or from the Fairfield Centre) then this second matter should be resolved in Idameneo’s favour. Thus, I turn to Dr Robalino’s evidence as to his work at home.

95 Dr Robalino gave no admissible evidence of this in his affidavit. The paragraph in which he referred to the preparation of medico-legal reports was rejected, with leave to adduce oral evidence on the topic. Before turning to Dr Robalino’s evidence, I should note that some of the witnesses for Idameneo were cross-examined in effect to suggest that if a doctor at the Fairfield Centre had been working at the Centre preparing medico-legal reports, this would not show up on the Medtech system.

96 For example, Ms Vicky Whiteley, a medical centre operations manager employed by Idameneo who had some supervisory responsibility for the Fairfield Centre, was asked about her “observations of doctors carrying out the preparation of medico-legal reports at the Fairfield Centre” (T23.31). Perhaps not surprisingly, she agreed that she “did not often see the doctors preparing the medico-legal reports” (T23.35). Again, Dr Bateman was asked what material he had “consulted” relating to Dr Robalino’s preparation of medico-legal reports. He said that he “looked at the archive – the MediTech [sic] systems that showed when the doctors were dealing with the records of patients which will be part of the preparation of a medico-legal report” (T62.9). He said that the system was relevant because “it’s not possible to do a medical report without looking up the medical record” (T62.20) and that a doctor would need to consider a patient’s clinical notes, often in the absence of the patient, to prepare a medico-legal report (T62.26-.31).

97 Dr Bateman also said that it was not possible to obtain remote access to the Medtech system. Thus, if doctors wished to prepare medico-legal reports outside their ordinary working hours, they would need to do so from the Fairfield Centre, accessing the relevant patient records through the Medtech system (T63.1-13).

98 Dr Robalino did not suggest that he worked at the Fairfield Centre, before or after his rostered hours, in the preparation of medico-legal reports. His evidence (given orally, pursuant to the leave that I reserved when I rejected the relevant paragraph of his affidavit) was that he prepared reports at home. He said that he did this by obtaining photocopies of the relevant records and taking them home to work on (T80.28). He said that he used his home computer to prepare reports, taking about 3 to 5 hours for each (T80.37-.50).

99 Mr Jobson sought to lead evidence from Dr Robalino of a document, prepared over the weekend preceding the hearing by Dr Robalino’s wife. It seems that the document in question was prepared from records kept on Dr Robalino’s home computer, and that it was intended to show the number of medico-legal reports prepared by Dr Robalino over some specified period of time. I rejected the tender of that document. Clearly, it was prepared for the purposes of the proceedings, and thus fell outside the “business records” provisions of the Evidence Act 1995 (see s 69(3)). The computer records on which, apparently, it was based had not been discovered. Dr Robalino’s wife was not called to give evidence, although she had been in court throughout the hearing and she and Dr Robalino got on “pretty well” (T89.36-90.7).

100 In circumstances where the relevant documents were not discovered (nor were they referred to in Dr Robalino’s affidavit) and a witness who could cast light on the matter was not called, I do not accept that the preparation of medico-legal reports at home (even assuming that it constituted a relevant rendering of medical services for the purposes of cll 8.2(a) and (b) of the sale deed) was sufficient to boost Dr Robalino’s average weekly hours of work up to the contractual 50.

Conclusion as to fact of breach

101 It follows that in my view that Dr Robalino breached cll 8.2(a), (b) and (c) of the sale deed and that the breach persisted from at least April 2003 until termination in July 2004. It is not necessary to express a conclusion on breach of cl 8.2(f) – although it would seem to follow almost inevitably, from my findings as to Dr Robalino’s home practice – that he was in breach of that clause also – or the implied obligations (assuming, without finding, that those obligations are to be implied into the sale deed).

Serious or fundamental breach

102 It is thus necessary to characterise the breaches.

103 In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115, the High Court of Australia considered, among other things, the circumstances in which a breach of contract by one party to it might entitle the other to terminate. The majority (Gleeson CJ, Gummow, Heydon and Crennan JJ) said at 136 [47] – 138 [49] that there were two such circumstances:

(1) “where the obligation with which there has been failure to comply has been agreed by the contracting parties to be essential”; and

(2) “where there has been a sufficiently serious breach of a non-essential term”.

104 At 140 [54], [55], their Honours said that for breach in the second category – that is, breach of what their Honours had referred to as an “intermediate term” - to justify termination of the contract by the innocent party, it must be a breach “going to the root of the contract”. That meant, their Honours said, that the breach was “such as to deprive the injured party of a substantial part of the benefit to which he is entitled under the contract”. A resolution of this question would depend on a construction of the contract and, in the light of its proper construction, making a judgment of the consequences of the breach and the adequacy of damages as a remedy.

105 It is not necessary to consider whether the terms in questions ought be regarded as essential terms of the sale deed. As the majority did in Koompahtoo (see at 140 [53]), I am content to rest my decision on the basis that, assuming without deciding that the terms in question are not essential but are intermediate terms, the breaches were sufficiently serious to have entitled Idameneo to terminate the contract.

106 The effect of the evidence is that, over the period from April 2003 until termination, Dr Robalino worked on average less than 90% of his contractual weekly 50 hours, and less than 60% of his contractual 8 hours every second weekend. Further, although the discrepancy is not so marked, Dr Robalino worked consistently less than his contracted Monday evening hours, and appears to have worked at home (and thus, I infer, not at the Fairfield Centre) on about 22 Mondays over the period in question.

107 There is ample evidence in the material of the dissatisfaction caused by Dr Robalino’s failure (or, more accurately, refusal) to work in accordance with the requirements of the sale deed. For example, on 17 May 2002, Dr Haddad wrote to Dr Bateman complaining about Dr Robalino’s refusal to work rostered hours in accordance with the sale deed. He stated that this was causing other doctors to work longer hours, and, in effect, causing disruption to the rosters. It is fair to observe that when those complaints were relayed to Dr Robalino, he rejected them; and the dispute cannot be resolved by reference to the Medtech system, because it was not then in operation.

108 Dr Haddad made another complaint to Dr Bateman, about Dr Robalino’s failure to work his contractual hours, on 28 May 2002.

109 Further, it is I think open to draw the inference that Dr Robalino’s failure to work his rostered hours was due in part to the fact that he was working consistently at home in the evenings. That of course was of itself a breach of contract, as I have found. The effect of that breach was to deprive Idameneo of the benefit of at least some of the medical services provided by Dr Robalino at home. However, I think, it is also likely to have been a reason why Dr Robalino was unable to work his full contractual hours at the Fairfield Centre, so that the impact of the breach is magnified.

110 Overall, I had the very strong impression, both from the documentary evidence and from seeing Dr Robalino in the witness box, that he was determined to do things his way, even if this put him in breach of his contractual obligations to Idamaeneo.

111 Are damages an adequate remedy for the breaches that I have found occurred? In my view, the answer to this question is “no”, notwithstanding the agreement for liquidated damages set out in cl 8.4 of the sale deed.

112 I deal with damages at [127] and following below. For the reasons that I give at [131], the liquidated damages seem to me to represent the parties’ agreement as to the loss flowing from breach of cl 8.2(a), and the loss of fee revenue (discussed at [132]) could be seen to represent an aspect of the damages flowing from breach of cl 8.2. However, it does not follow that the consequences of the breaches, in the real world as compared to the somewhat artificial world to which Hadley v Baxendale (1854) Exch 341 directs attention, are so limited.

113 For example, one of the complaints made against Dr Robalino was that, in breach of cl 8.2(c), he failed to work his contractual number of evening and weekend hours. I have found that this complaint is made out, and, obviously enough, that it constituted a breach of contract. Whilst the loss flowing from the shortfall in hours might be captured by the damages referrable to cl 8.2(b), the disruptive effects of which Dr Haddad complained to Dr Bateman (see at [21], [22] and [27] above) would not be captured by damages representing the loss to Idameneo flowing from a short fall in hours worked. It is likely that other doctors would (as Dr Haddad said they did) become dissatisfied by the thought that they were being required to “cover” for Dr Robalino. It is likely that patients who waited longer in the queue, because Dr Robalino took “his” patients out of turn, would become dissatisfied: because they could observe that people who arrived after them were seen before them. The first of those matters could lead to a higher than normal turnover of medical practitioners working at the centre. The second could cause patients to go elsewhere.

114 Again, it is likely that the disruptive effects of Dr Robalino’s failure to adhere to the requirements of the contract would mean that others in the Fairfield Centre, including the practice manager and the medical director, would be required either to work longer to keep things properly organised or to divert attention from their other duties, to the detriment to Idameneo’s business generally.

115 Further, although liquidated damages under cl 8.4 might be regarded as an agreed compensation for the fact that Dr Robalino received the revenue from his home patients and Idameneo did not (or did not receive its proportion thereof), it could not be regarded as compensation for the loss of goodwill for the failure of Dr Robalino to use his best endeavours to ensure that those patients attended the Fairfield Centre (which must be regarded as an incident of the obligations under cl 8.2(f), read in conjunction with cl 9). I accept that not all of those patients would have gone to the Fairfield Centre if they could not see Dr Robalino at his home at Dulwich Hill. I do not think that it could be seriously argued that none of them would have seen him at Fairfield if he were not available to be seen at Dulwich Hill.

116 Taking all of those matters into account, I conclude that damages are not (and as at 14 July 2004 were not) an adequate remedy for the consequences of the breaches of contract that I have found.

117 The result, as I have indicated, is that in my view Dr Robalino’s repeated breaches of his contractual obligations were sufficiently serious to justify termination.

118 In this context, it is instructive to look at the events leading up to termination. As I have said at [43] above, Dr Robalino reported sick on 28 June 2004. The medical certificate that he obtained said that he was unfit to work from that day until 13 July 2004. However, over the 14 days in question, he saw 73 patients at home, or between 5 and 6 a day. No doubt, Dr Robalino felt under some sense of obligation to those patients. It seems to me to be open to infer that he did not feel the same sense of obligation to Idameneo, notwithstanding the terms of their contract.

Third issue: efficacy of the termination

119 On 1 July 2004, Idameneo gave Dr Robalino what purported to be a notice of breach pursuant to cl 14.2(a) of the sale deed. After referring to the sale deed, the letter stated:

“We wish to give you Notice of Breach of Contract in respect of that undertaking [apparently, a reference to the sale deed]. You are in breach of Clause 8.2(b), 8.2(c), 8.2(f).

I would ask that you remedy these breaches within seven (7) days as required by the Contract.”

120 The letter did not give details of the breaches. Thus, absent some understanding derived outside the letter, it was not possible for Dr Robalino to accept or dispute the fact of the breaches alleged, or to know what it was that he was required to do to remedy those breaches. However, Dr Robalino’s reply of 5 July 2004 did not refer to those difficulties. It stated, relevantly:

“Thank you, for your letter date 1 July 2004. I note you had received my Workers Compensation Medical Certificate which states my health condition.

As soon as my health improves and my doctor finds me fit to work I will re-assume my duties.”

121 As I have noted, Dr Robalino did return to work, although not in accordance with the terms of the sale deed, on 13 July 2004. The next day, Idameneo gave him notice of termination. The notice was based on what was said to be Dr Robalino’s failure to remedy the breaches referred to in the letter of 1 July 2004, and Idameneo relied expressly on cl 14 of the sale deed to justify its termination.

122 It is not necessary to decide whether the notice of breach was a valid notice for the purposes of cl 14.2(a). Nor is it necessary to decide whether, in the circumstances, Idameneo was entitled to terminate on the basis of cl 14.2. Mr Jobson did not submit that cl 14.2 contained an exhaustive, and exclusive, statement of the circumstances in which Idameneo might terminate for breach, nor of the means by which it might do so. Clause 14.2 is intended to give Idameneo the right of termination for breaches which, although of themselves serious, cannot be characterised of breaches of an essential term or breaches of an intermediate term that are of themselves sufficiently serious to justify termination. It should not be seen as ousting any general law right of termination.

123 It is clear that termination of an agreement may be justified even if the ground relied upon was ineffective, provided that there were other circumstances existing at the time of termination that entitled the party terminating to take that step. Indeed, it is not necessary that the party terminating should have known of those circumstances. See Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359. As Rich J said at 371 (after referring to authority going back to 1838) “[t]he question is whether the defendant was entitled to do what it did, not whether the reason why it exercised the rights it in fact had was a good or a bad one”. To like effect, Starke J said at 373 that “[i]f there were, in fact, any circumstances in existence at the time of the termination of the agreement which could have justified the respondent in so terminating it, then it may justify the termination by subsequent proof of those circumstances”. In the same case, Dixon J, with whom Evatt and McTiernan JJ agreed, said at 377 – 378 that:

(1) “a servant’s dismissal may be justified upon grounds on which his master did not act and on which he was unaware when he discharged him”;

(2) that rule “is of general application in the discharge of contract by breach”; and

(3) “a party to any simple contract who fails or refuses further to observe its stipulations [may] rely upon a breach of conditions, committed before he so failed or so refused, by the opposite party to the contract as operating to absolve him from the contract as from the time of such breach of condition whether he was aware of it or not when he himself failed or refused to perform...”.

124 In Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, Mason CJ (with whom Deane, Dawson and Toohey JJ agreed) said at 262 that the decision in Shepherd “stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance”.

125 It follows, from my findings as to breach and the quality of breach, that even if, on 14 July 2004, Idameneo was not entitled to terminate the sale deed for the reason it then gave, its termination was nonetheless justified by reference to the breaches on Dr Robalino’s part that I have found.

126 It follows that the third issue should be answered by saying that Idameneo has validly terminated the sale deed.

Fourth issue: damages

127 Idameneo relied on cl 8.4 of the sale deed. It quantified its damages under that clause as follows:

“Agreed and assessed damages in accordance with subpara (i) $107,632.00.

Interest pursuant to subpara (iii) to 11 August 2009 $45,317.17

Total as at 11 August 2009 $152,949.17

Interest accruing after 11 August 2009 at the daily rate of $24.86

128 Those calculations were not disputed. Nor was it submitted that cl 8.4 operated as a penalty. The only “issue” raised to the claim under 8.4 was an unparticularised denial of entitlement. It follows that Idameneo is entitled to recover, pursuant to cl 8.4, the sums claimed together with interest both accrued and accruing, as set out above.

129 Since I have found that there was no variation to the sale deed as articulated in the first issue, there can be no question of damages for breach of any obligation in relation to the Leichhardt Centre.

130 The other damages claimed were:

(1) damages for loss of revenue that would have been derived had Dr Robalino rendered medical services in accordance with his contractual obligations;

(2) damages being the loss of service fee revenue by reason of reduction in business at the Fairfield Centre; and

(3) damages being a proportion of the revenue generated by Dr Robalino from his home practice.

131 As to the first and second of these claims: it seems to me that the claim for liquidated damages was intended to measure the loss flowing from breach of cl 8.2(a). Idameneo having elected to claim liquidated damages, there is no basis on which it should be allowed general damages as well for the breach of that clause. In any event, Mr Harper accepted in his closing submissions that there was no evidence to support this aspect of the claim for damages.

132 Mr Gower, the expert retained by Idameneo, sought to quantify its claim for loss of service fee revenue. Mr Gambhir Watts, the expert retained for Dr Robalino, adjusted Mr Gower’s calculations. In their joint report, they appeared to have agreed that a figure of $5,740.00 should be allowed for this head of loss. Interest on this amount was quantified at $2,749.00 to 11 August 2009, accruing at a daily rate of $1.42 thereafter. Mr Jobson did not dispute this aspect of Idameneo’s claim.

133 It follows that Idameneo is entitled to a judgment, comprising the amounts referred to in the preceding paragraph and at [127] above, of $161,438.17, together with interest at $26.27 per day from 11 August 2009 until the date of entry of judgment.

134 Mr Harper accepted that the third head of claim – in effect, for same for some proportion of the revenue derived by Dr Robalino from his home practice – could not be substantiated on the evidence. He acknowledged that the whole of the amount would not be claimable as damages and that there was no way in which the Court could quantify some proportion that might be allowable. Accordingly, he can find his claim to that summarised to that summarised in the preceding paragraph.

135 On that basis, the damages to which Idameneo is entitled should be quantified, at today’s date, at $161,438.17 plus 43 x $26.27, a total of $162,567.78.

Fifth issue: account of profits

136 Mr Harper did not press this claim. It is accordingly unnecessary for me to do anything other than record that fact, from which it follows that the answer to this question must be “no”.

Sixth issue: did Idameneo repudiate?

137 The repudiation relied upon was what was said to be the unjustified notice of termination that Idameneo gave on 14 July 2009. Since I have found that Idameneo was then entitled to terminate, and that its notice of termination was valid, it follows that there was no repudiation.

Seventh issue: damages pursuant to the cross-claim

138 It follows from what I said that Dr Robalino has no entitlement to damages. Were it necessary to do so, I would conclude in any event that he had not proved that he had suffered any loss, and that accordingly he would have no entitlement to anything other than nominal damages quantified in some ad hoc manner.

139 Dr Robalino did rely on two reports prepared by Mr Watts. I rejected the first of those reports completely, and the second save to the extent that it commented on Mr Gower’s first report (and disclosed, by reference to instructions, curriculum vitae and the like, the basis of those comments).

140 The first report simply stated, in substance, that Mr Watts had examined details of information apparently given to him by Dr Robalino and concluded:

“On the basis of the information provided by you and the applicable rates including penalty rates I have prepared a statement of calculations – attached. The statement indicates that you have been underpaid to the extent of $880,546.00 and the amount of unpaid superannuation works out to be $120,836.00. These amounts do not include unpaid sick leave and any interest component. The statement of calculations includes year wise [sic] breakdown.”

141 The portions of the second report that I rejected included one headed “Amendments to Income Tax Returns” (which on any view had nothing to do with any matter in dispute) and another section, with supporting schedules, headed “Summary of Dr Robalino’s Losses”. The latter section effectively repeated, in slightly different words, what had been said in the first report, and added some further hearsay comments from Dr Robalino:

“Dr Robalino has also indicated to us that he has suffered a further loss on account of split of his gross income by way of billings to his new contractor during the period July 2006 to June 2008 in which he is paid only fifty percent of the billings for the services rendered by him. These fifty percent billings total $284,221. This figure, as claimed by Dr Robalino, represents loss suffered on account of the terms and conditions of service contract with the new service provider medical centre in Perth and is being sought to be recovered by Dr Robalino from Idameneo.

In total, the losses sought by Dr Carlos Robalino total $1,285,596.”

142 Finally, the rejected portion of the second report referred to instructions given by Dr Robalino as to “serious physical and psychological injuries [suffered] during the period of his employment with Idameneo”. That hearsay material had no relevance to any issue in the proceedings.”

143 I rejected that evidence for the following reasons (in addition to what I have said as to the irrelevance of some of the material):

(1) the material on which, apparently, Mr Watts relied to reach the conclusions set out in his report was not identified. It was impossible to tell, from the reports, how the conclusions expressed by Mr Watts represented opinions based wholly or substantially on the application of his specialised knowledge (based on his training, study or experience) to the material in question (see s 79(1) of the Evidence Act 1995);

(2) the bald and conclusory nature of the statements of opinion, coupled with the absence of identification of the material on which those opinions were based, rendered any evaluation of the validity of the opinions impossible (see Heydon JA in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at 729 [59]);

(3) Mr Watts did not state the factual assumptions on which he relied, and in any event whatever may have been the factual basis of his opinions was not apparent from the evidence (see Heydon JA in Makita at 731 [64]); and

(4) Although Idameneo’s solicitors had called for the material provided to Mr Watts, it was not made available to them prior to, or indeed at the commencement of, the hearing. The somewhat surprising reason given for this was that Mr Watts held the material in question, and had not given it to Dr Robalino’s solicitors to be passed onto the solicitors for Idameneo (T9.35-10.15).

144 The first three matters meant that Mr Watts’ reports (in so far as they were rejected) were not admissible as expert opinion evidence. Alternatively, those matters, or the fourth matter, or all four together, justified the rejection of the evidence under s 135 of the Evidence Act on the basis that to admit it might have been unfairly prejudicial to Idameneo and cause or result in an undue waste of time.

Conclusion

145 Idameneo is entitled to judgment in the sum of $162,567.78. The cross-claim must be dismissed. Prima facie, costs should follow the event in each case. I will however reserve leave to the parties to apply to vary the costs order set out below.

Orders

146 I make the following orders:

(1) Direct entry of judgment for the plaintiff against the defendant in the sum of $162,567.78.

(2) Direct that the judgment take effect from 23 September 2009.

(3) Direct entry of judgment for the cross-defendant on the cross-claim.

(4) Subject to order (5), order the defendant to pay the plaintiffs costs of the proceedings, including the cross-claim.

(5) Reserve leave to either party to apply to discharge or vary order (4); any such application to be made by notice in writing to the other side and my Associate to be given by 9 October 2009 any such notice to specify both the orders sought in lieu of order (4) and, in brief, the reason why those orders are sought.

(6) Exhibits to be retained for 28 days and thereafter dealt with in accordance with the rules

**********

LAST UPDATED:
23 September 2009