BP Refinery (Westernport) Pty Ltd v Shire of Hastings

The relief now sought

1. It is common ground that the Terms of Settlement are binding on all parties.
2. By interlocutory process filed on 4 May 2021, as amended pursuant to leave granted during the hearing on 19 May 2021, the plaintiffs seek the following relief: "1. A declaration that the Terms of Settlement agreed between the parties in these proceedings on 4 March 2021 (Terms of Settlement) entitle [Clarity] to retain ownership of the following property or rights after settlement: (a) Voyager PACS software licence, including the referrer and patient portals; (b) Kestral Karisma software licence; (c) phone number 02 4990 2655; (d) facsimile number 02 4990 2522; and (e) website www.clarityimaging.com.au and associated domain name and email accounts. 2. An order that [the Macdougall interests, Thakorlal interests and Fernando interests] indemnify [the plaintiffs and the Gibbs interests] for: (a) all capital expenses incurred by [Clarity, Specialist or VATS]; (b) any orders for compensation made against [Clarity]; that arise as a result of the decisions or actions of Dr Macdougall, Dr Thakorlal and Dr Fernando or their appointed representatives, without the consent or approval of [Dr Chan], between 4 March 2021 and 31 May 2021. 3. An order that [the Macdougall interests, Thakorlal interests and Fernando interests] indemnify [the plaintiffs and the Gibbs interests] for all capital expenses incurred by [Synergy] without the consent or approval of [Dr Chan], between 4 March 2021 and 31 May 2021. 3A. In respect of the Independent Contractor Agreement between [Clarity] and JOLT Consulting Services Pty Ltd ABN 71 649 986 318 bearing the date of 18 March 2021 (JOLT Agreement) and any other engagement of Jodie Ng on the part of any of [Synergy, Specialist, Clarity and VATS] after 4 March 2021, declarations that: (a) by causing [Clarity] to enter into such arrangements, [Dr Macdougall, Dr Thakorlal and Dr Fernando] breached implied terms of good faith and co-operation in the Terms of Settlement; and (b) the profit calculation and distribution to be undertaken on the Settlement Date pursuant to clauses 6(a) and 7(a) of the Terms of Settlement, should be undertaken such that the [Macdougall interests, Thakorlal interests and Fernando interests] bear the costs arising from such arrangements. … 6. Costs. 7. Such further or other order as the Court deems fit."
3. The plaintiffs rely on s 73 of the Civil Procedure Act 2005 (NSW) in making these claims for relief as an interlocutory application in the substantive winding up proceeding rather than as a fresh proceeding: Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6]-[8] per Basten JA.
4. The interlocutory process also refers to s 29 of the Civil Procedure Act and s 66 of the Supreme Court Act 1970 (NSW), but no reliance was placed on s 29 in the plaintiffs' submissions and the orders sought by the plaintiffs did not include any injunction. Counsel for the plaintiffs referred to s 66 of the Supreme Court Act in opening submissions and suggested that s 73 of the Civil Procedure Act and prayer 7 of the interlocutory process left it open to the Court to grant injunctive relief if the Court considered such relief appropriate after hearing all of the evidence. In a similar vein, counsel for the plaintiffs submitted that the plaintiffs' application was "an application to alleviate, or for the Court to fashion an appropriate order … to alleviate any loss which may be occasioned to the plaintiffs" by alleged breaches of implied obligations of good faith and co-operation in the Terms of Settlement and to ensure "the plaintiffs are not otherwise prejudiced by" the release in clause 14 of the Terms of the Settlement. As I indicated to counsel at that time, procedural fairness requires that the defendants have notice of and an opportunity to be heard about the relief sought by the plaintiffs. I required counsel to make it plain whether the plaintiffs were seeking an injunction instead of or in addition to the declarations and orders for indemnity set out in the interlocutory process. Counsel responded that the plaintiffs were not seeking an injunction, and were seeking the relief set out in the interlocutory process.
5. A similar exchange with counsel for the plaintiffs on the second day of the hearing, after the plaintiffs had already made certain amendments to the interlocutory process (including the addition of prayer 3A), concluded with the plaintiffs confirming that they did not seek to further amend the terms of the relief set out at [21] above.
6. The Gibbs interests support the plaintiffs' claims for relief. The Gibbs interests adopted the plaintiffs' submissions, and references in these reasons to submissions made by the plaintiffs should be read as referring to the plaintiffs and the Gibbs interests.
7. The Macdougall interests, Thakorlal interests and Fernando interests oppose the plaintiffs' claims for relief.

Prayer 1

1. As the plaintiffs submitted, prayer 1 turns on whether Clarity owned the rights to the relevant software licences and phone and facsimile numbers as at 4 March 2021 and, if so, whether the Terms of Settlement, properly construed, entitle Clarity to retain those rights after completion.
2. Clarity's ownership of the rights to the relevant licences and numbers as at 4 March 2021 must be established in order for the declarations in prayer 1 to be made. Counsel for the plaintiffs accepted that the plaintiffs bear the legal onus of proof: Hung v Warner; Re Bellpac Pty Ltd (recs and mgrs. apptd) (in liq) [2013] FCAFC 48 at [21] and [23]-[31].
3. Only if Clarity's ownership of those rights is proved does it become necessary to apply the established principles of contractual construction to determine whether the Terms of Settlement entitle Clarity to retain those rights. [2]

Voyager software licence

1. Voyager is a software program owned by Intellirad Solutions Pty Ltd. The software allows a licensee to provide medical practitioners and clients with radiology images and image reporting.
2. It is common ground that the Voyager PACS software licence was purchased by Synergy (which was then trading as "Valley Imaging") in August 2013 at a cost of $42,000. After the initial purchase, Intellirad issued annual service contracts and an invoice for the annual service fee each year.
3. Clarity was incorporated in 2018. As I understand the evidence, it is at that time that Synergy began trading under the name "Clarity Imaging", which is also the trading name used by Specialist.
4. Dr Chan gave evidence that, from 2018, "the name on the Voyager licence was changed to Clarity Imaging", invoices were issued to Clarity and Clarity "commenced payment of the mandatory licence fees" which it then apportioned between Synergy and Specialist.
5. Dr Thakorlal gave evidence that name on the annual service contracts for the Voyager Software changed to "Clarity Imaging (formerly Valley Imaging)" in 2019 and that this reflected the change in Synergy's trading name. Dr Fernando gave evidence to similar effect. Copies of the annual service contracts for one year terms commencing on 4 November 2019 and 4 November 2020 are indeed issued in the name of "Clarity Imaging (formerly Valley Imaging)". [3]
6. Dr Thakorlal also gave evidence that Synergy had paid all of the annual fees in respect of this Voyager software licence. Dr Macdougall and Dr Fernando gave evidence to similar effect. This evidence was corroborated by copies of annual service fee invoices and Synergy bank statements showing payment of the invoiced amount. [4]
7. Dr Chan gave evidence that a "Voyager Mirror Server Licence" was purchased for the Waratah practice operated by Specialist in October 2018. The invoice for this mirror licence was issued to "Clarity Imaging - Waratah". [5] Separate annual service contracts and service fee invoices have been issued to "Clarity Imaging - Waratah" for the years commencing 28 January 2020 and 28 January 2021. The service contracts issued to "Clarity Imaging - Waratah" cover equipment that is described differently from the equipment covered by the contracts issued to "Clarity Imaging Cessnock (formerly Valley Imaging)". Specifically, the Waratah service contracts cover "PACS Mirror Software" whereas the Cessnock service contracts do not, and the Cessnock service contracts include "Voyager Patient Portal" whereas the Waratah service contracts do not. [6]
8. Dr Chan gave evidence that the fees relating to this mirror licence have been paid by Clarity. [7] The evidence of Dr Thakorlal and Dr Macdougall evidence is that Specialist (not Clarity) pays the fees for the mirror licence. This is confirmed by bank statements of Specialist that were exhibited to Dr Thakorlal's affidavit sworn on 12 May 2021. [8]
9. Dr Chan gave evidence that, "as part of the Voyager software licence", there is a patient portal on the clarityimaging.com.au website which allows referrers and patients to access their images. Dr Chan deposed that the patient portal is also invoiced to, and paid for by, Clarity. However, the invoices to which Dr Chan referred relate to the separate service contracts for Cessnock and Waratah. As I have referred to above, the patient portal is included in the Cessnock service contract only and Synergy bank statements show that those annual service fees are paid by Synergy.
10. Dr Thakorlal gave evidence that the Voyager Patient Portal was purchased and paid for by Synergy in December 2016. This is corroborated by the invoice issued by Intellirad Solutions Pty Ltd to "Valley Imaging Radiology Clinic" on 19 December 2016 and paid from Synergy's bank account in two equal instalments on 21 December 2016 and 16 January 2017. [9] As I have already mentioned, the subsequent annual service fees for the Voyager Patient Portal are included in the annual service contracts and invoices issued to "Clarity Imaging Cessnock (formerly Valley Imaging)" and paid for by Synergy.
11. The Voyager software, including the patient portal, is currently stored on a computer server owned by Synergy that is located at the Cessnock practice. There is no dispute that it is possible to migrate the software to an alternative server.
12. Since 2018, the Voyager Patient Portal has been accessible to patients of both the Cessnock and Waratah practices through the clarityimaging.com.au website. That website is to remain with Clarity on completion of the Terms of Settlement. However, just as it is possible to migrate the Patient Portal software to an alternative server, it is also possible to make the portal accessible through an alternative website. It is the intention of the Macdougall, Thakorlal and Fernando interests to establish an alternative website on completion of the Terms of Settlement through which patients of Synergy's Cessnock practice will be able to access the patient portal to view their images. Dr Chan wishes the portal to continue to be accessible through Clarity's website.
13. The contracts, invoices and bank statements to which I have referred above establish on the balance of probabilities that Synergy, and not Clarity, has the rights to the Voyager software licence and patient portal purchased by Synergy in 2013 and 2016 (respectively). Dr Chan's evidence to the contrary is nothing more than bare assertion hitched to a reference to the trading name "Clarity Imaging" on annual service contracts and invoices issued after 2018 when Synergy changed its trading name from "Valley Imaging" to "Clarity Imaging". The plaintiffs' submissions suffered from the same vice, and failed to grapple with the distinct dealings of Synergy and Specialist, trading under the same "Clarity Imaging" name from 2018, with the Voyager software provider Intellirad Solutions Pty Limited. Those distinct dealings are plain from a review of the documents, as set out above. The documentary evidence is entirely inconsistent with rights to the licences purchased by Synergy in 2013 and 2016 having been assigned or novated to Clarity. Dr Chan's evidence concerning payment for the licence fees is incorrect, as demonstrated by the bank statements of Synergy and Specialist showing that those two entities paid the licence fees invoiced to them under their separate licence and mirror server licence.
14. The plaintiffs relied on an assumption provided to a valuer instructed jointly by all parties in January 2020 to the effect that Clarity holds all software licences. [10] Taken at its highest, that assumption is evidence of the parties' understanding as at January 2020. It is not evidence of the parties' understanding at the time they entered into the Terms of Settlement more than one year later on 4 March 2021.
15. I accept the plaintiffs' submission that clause 7(b) of the Terms of Settlement is capable of being read as suggesting that the parties believed at the time they agreed on the terms that Clarity owned the rights to both the Voyager and Kestral software licences, because the clause implicitly assumes that it is Clarity that has practical control of the images that Synergy and Specialist are entitled to retain. On the other hand, clause 7(b) is also capable of being read as merely reflecting a concern by the parties that Synergy and Specialist may need to obtain certain information that was only available through the website maintained by Clarity.
16. It is difficult to reconcile the first reading of clause 7(b) with the separate contracts and invoices that Intellirad Solutions Pty Limited had been issuing to the two practices, and the payment of those invoices by Synergy (in the case of the Cessnock practice) and Specialist (in the case of the Waratah practice). The parties must also have been aware of those matters. By contrast, the second reading of clause 7(b) is consistent with this contractual, invoicing and payment history. I therefore prefer the second reading of clause 7(b) and I am not persuaded on the balance of probabilities that the parties believed when they entered into the Terms of Settlement that Clarity owned the rights to both the Voyager software and patient portal licences.
17. Even if I am wrong about this and the parties did hold that belief at the time they entered into the Terms of Settlement, the belief was mistaken as demonstrated by the documentary evidence to which I have referred above. In my opinion, there is no clause of the Terms of Settlement that is capable of being construed as transferring or assigning Synergy's rights in the Voyager software (including the patient portal) to Clarity. The software licences are not "administrative resources" or "intellectual property" referred to in clause 7(g). Even if they were (or if some of the parties mistakenly believed that the software licences were "intellectual property"), clause 7(g) merely provides for those things to "remain" property of Clarity, and does not provide for the transfer of those things from another entity to Clarity. The plaintiff did not seek rectification of the Terms of Settlement on the grounds of mistake to include a provision transferring the Voyager software licence and patient portal purchased by Synergy in 2013 and 2016 (respectively) to Clarity.
18. In light of my finding that Clarity did not own the Voyager software licence (including the patient portal licence) when the Terms of Settlement were entered into, the plaintiffs' claim for declaratory relief in prayer 1(a) of the interlocutory process is dismissed.

Kestral software licence

1. Kestral is a practice management software program owned by Kestral Computing Pty Ltd that is designed for radiology practices.
2. In support of their contention that Clarity owned the Kestral software licence, the plaintiffs' relied on: 1. the fact that the licensed software can be migrated to a different server from Synergy's server on which it is presently stored at Cessnock; 2. minutes of a board meeting in July 2018 discussing Clarity taking on the role of "uploading and access provider"; 3. the instruction to the valuer in January 2020 to assume that Clarity owned the software licences; 4. clause 7(b) of the Terms of Settlement; 5. clause 7(g) of the Terms of Settlement and the subjective understanding of some of the parties that the software licences were "intellectual property"; and 6. the fact that the annual fee for the Kestral software licence is paid by Clarity in the first instance, before being on-charged by Clarity to Synergy and Specialist with a 5% service fee added by Clarity which the plaintiffs submitted "only makes commercial sense if [Clarity] were charging [Synergy] for the service of providing the software."
3. The ability of the software to be migrated to a different server has no logical bearing on the question of which entity owns the chose in action that is the software licence. There is a stark inconsistency in the plaintiffs' submissions relying on the ability to migrate from one server to another, yet at the same time contending that a reference in board minutes to Clarity's role as "uploading and access provider" is evidence of Clarity's ownership of the rights under the software licence. The evidence provides no basis for reading those board minutes as referring to anything more than the making of arrangements for portals enabling patients to view images to be accessible through Clarity's website. Those access arrangements can be changed, just as the server on which the software is held can be changed.
4. In relation to the January 2020 instructions to the valuer, I repeat my observations at [43] above.
5. In relation to clauses 7(b) and (g) of the Terms of Settlement, I repeat my observations at [44]-[46] above.
6. Synergy entered into the Kestral software licence agreement in December 2013. Kestral has charged Synergy an annual software maintenance fee in each year thereafter. The invoice for the current year is addressed to Synergy. [11]
7. In his affidavit sworn on 3 May 2021, Dr Chan deposed that Clarity "assumed the ownership of the software licence" in 2018 and it was then "made available for use by the Waratah site on the basis that it belonged to [Clarity]." There is no documentary evidence to suggest that the Kestral software licence was novated or assigned for Synergy to Clarity in 2018 or, indeed, at any time. Dr Thakorlal, Dr Macdougall and Dr Fernando deny that the licence has been assigned or novated. The fact that Kestral continues to issue invoices for the annual software maintenance fees to Synergy suggests that the licence in fact continues to be held by Synergy. I do not regard Dr Chan's evidence as reliable in the absence of corroborating documentary evidence. Dr Chan gave similar evidence in relation to the Voyager software, ignoring clear contemporaneous documentary evidence to the contrary as I have referred to in some detail above.
8. I reject the plaintiffs' submission that the invoicing arrangements only made commercial sense if Clarity was providing the software as a service to Synergy. Dr Thakorlal gives a cogent explanation of the invoicing arrangements in which Clarity's role was effectively to split the total cost for which Synergy was liable to Kestral between the two entities who were benefitting from the software. There are various possible explanations for the 5% service fee including, by way of example only, to reimburse Clarity for its administration service (noting that the income stream thereby generated for Clarity may have also generated certain taxation advantages for Synergy and Specialist). It would be mere speculation to conclude that the 5% service fee was charged because Clarity was the owner of the rights under the software licence. In any event, the available documentary evidence suggests that Synergy owned those rights, as I have explained above.
9. For those reasons, the plaintiffs have failed to establish on the balance of probabilities that Clarity owned the Kestral software licence when the Terms of Settlement were entered into. The plaintiffs' claim for declaratory relief in prayer 1(b) of the interlocutory process is therefore dismissed.

Application for extension of time

1. The plaintiffs submissions dated 17 May 2021 referred to Dr Chan's concern that the disputes concerning the Voyager and Kestral software licences "gives rise to likely delay in the transfer of data and/or licences" prior to the completion date of 31 May 2021 under the Terms of Settlement. The submissions sought an order extending the completion date to 30 June 2021 pursuant to the Court's "broad powers to assist in giving effect to settlement under s 73 of the Civil Procedure Act".
2. The plaintiffs' submissions misstate the effect of s 73 of the Civil Procedure Act. That section provides: "(1) In any proceedings, the court-- (a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and (b) may make such orders as it considers appropriate to give effect to any such determination. (2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question."
3. It will be necessary to return later in these reasons to the question of the scope of the power conferred on the Court by s 73(1)(b). However, even taking the broadest view of that power, it is not a power to vary (as opposed to give effect to) terms of settlement that the Court has determined the parties entered into: see [75]-[84] below.
4. For those reasons, the plaintiffs' application for an extension of the time for completion under the Terms of Settlement is dismissed. It has not been necessary to consider the competing arguments about who is responsible for the delays in the parties' preparation for completion that have arisen from the dispute about the rights to the Voyager and Kestral software licences.

Phone and facsimile numbers

1. The plaintiffs have established on the balance of probabilities that Clarity owns the rights to the telephone and facsimile numbers referred to in prayers 1(c) and (d) of the interlocutory process. The evidence of Dr Chan and Dr Gibbs demonstrates that Synergy established the account with Telstra for the telephone and facsimile numbers in 2014, but those numbers were ported to VoIP internet service provider in late 2018. GoFax account documentation for the relevant facsimile number and VoIP service provider account details for the relevant telephone number are in the name of Clarity Imaging Pty Limited and, in the case of the GoFax documents, bear the ABN of Clarity.
2. The plaintiffs submitted that clause 7(g) of the Terms of Settlement entitled Clarity to retain the rights to the two numbers. The plaintiffs' submissions merely asserted that "administrative resources" in clause 7(g) included telephone numbers. It is unnecessary to undertake any detailed consideration of the meaning of those words because, even if they did not include telephone and facsimile numbers, it would follow that the Terms of Settlement make no provision concerning rights to the numbers at all in which case (as the McDougall, Thakorlal and Fernando interests submitted in support of their contentions concerning the software licences) those rights simply remain with the entity that held the rights at the time of entry into the Terms of Settlement. In light of my in finding above that Clarity held those rights, the plaintiffs' claim for a declaration in terms of prayers 1(c) and (d) of the interlocutory process succeeds.

Website

1. The plaintiffs rely on certain solicitors' correspondence as demonstrating that the Macdougall, Thakorlal and Fernando interests previously asserted that Synergy owned the rights to the domain name referred to in prayer 1(c) of the interlocutory process. [12] I do not read that correspondence as making any such assertion. The correspondence discusses the need for practical arrangements to be made in preparation for completion concerning the software licences, the patient portal and images and information that may be contained "within the website". It does not expressly or impliedly claim that the domain name is owned by any entity other than Clarity. I accept the evidence of Dr Macdougall, Dr Thakorlal and Dr Fernando denying that they have made any such claim or disputed that Clarity has the rights to the domain name.
2. As there is no controversy between the parties, it is not necessary to make any declaration concerning the domain name.

Prayers 2 and 3

1. The plaintiffs submitted that prayers 2 and 3 turn on "whether the Terms impose requirements of cooperation and/or good faith on the parties" and, if so, "whether the evidence justifies making orders 2-3 or any other order the Court considers appropriate to give effect to the Terms."
2. The hearing of the interlocutory process proceeded on the following basis.
3. The plaintiffs primary contention is that the Court should make orders for indemnities in the very wide terms of prayers 2 and 3 of the interlocutory process on the basis of evidence that the plaintiffs submit demonstrates that the Macdougall interests, the Thakorlal interests and the Fernando interests have been "taking advantage of a majority shareholding to obfuscate the process or prejudice the interest of minority parties".
4. Alternatively, the plaintiffs contend for orders for indemnities in respect of the following specific transactions that were the subject of the evidence: 1. capital expenditure incurred by Synergy without the consent or approval of Dr Chan on two x-ray machines for the Cessnock practice; 2. capital expenditure incurred by VATS without the consent or approval of Dr Chan to repair water damage to the Cessnock property; 3. the engagement by Clarity of Ms Jodie Ng and/or JOLT Consulting Services Pty Ltd (JOLT) to provide certain services; and 4. certain decisions taken and implemented by the Macdougall interests, the Thakorlal interests and the Fernando interests concerning staff employed by Clarity and working in the Synergy (Cessnock) and Specialist (Waratah) practices.
5. The engagement of Ms Ng and/or JOLT Consulting is the subject of prayer 3A of the interlocutory process, but the plaintiffs ask the Court to make orders concerning the other specific transactions as alternative orders within the scope of prayers 2 and 3 of the interlocutory process if the Court does not make orders in the wider terms of prayers 2 and 3.
6. At the conclusion of his oral submissions, counsel for the plaintiffs submitted that the plaintiffs' complaint was not about these transactions or decisions per se but about the fact that Dr Chan had not been consulted before decisions were made to enter into the transactions. Counsel submitted that Dr Chan may have agreed with the transactions if he had been consulted. The plaintiffs then downplayed this submission and pressed their claims in prayers 2 and 3 and the alternative more specific claims to which I have referred above.
7. The plaintiffs relied on s 73 of the Civil Procedure Act as the source of the Court's power to make orders in terms of prayers 2 and 3 of the interlocutory process, or the alternative orders referred to at [68] above, in the event that Terms of Settlement include implied "requirements of cooperation and/or good faith" for which the plaintiffs contend.
8. In cases where s 73 is invoked, the parties are typically in dispute about whether there is a binding and enforceable agreement between them pursuant to which the proceedings have been settled. In the present case, it is common ground that the Terms of Settlement are binding on all parties and that they resolve the dispute that is the subject of these proceedings. The controversy concerns: 1. whether the Terms of Settlement include implied obligations of "cooperation and/or good faith"; 2. if so, whether the Macdougall interests, Thakorlal interests and Fernando interests have breached those implied terms; and 3. if so, whether the Court should order the Macdougall interests, Thakorlal interests and Fernando interests to indemnify the plaintiffs in the terms of prayers 2 and 3 of the interlocutory process or in respect of the specific transactions to which I have referred above.
9. It was common ground that the Terms of Settlement include an implied obligation on the part of each party to do all such things as are necessary to enable the other parties to have the benefit of the agreement: Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607. [13]
10. The plaintiffs submitted that: "There is ample authority for implying into settlement deeds a term that the parties would deal with one another in good faith. Such situations are 'circumstances where the law will insist that parties co-operate to bring about the substantial requirement of the contract as shown by their common intention.'"
11. The sole case to which the plaintiffs referred as an example of the "ample authority" is Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94. That case was determined on the assumption that the settlement agreement in that particular case contained an implied obligation of good faith, but the Court questioned whether the content of that obligation added anything to the implied obligation to do all such things as are necessary to enable the each other party to have the benefit of the agreement: [2002] WASCA 94 at [15]-[21] and [55]-[65]. The case does not stand as authority for any proposition concerning settlement agreements generally.
12. It was submitted on behalf of the Macdougall, Thakorlal and Fernando interests that an obligation of good faith is not implied into settlement agreements as a class of contracts as a matter of law, and that any term to be implied in this case must therefore satisfy the five point test in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. Assuming that to be correct, I consider that an obligation for the parties to act in good faith in the performance of their obligations and exercise of their rights under the Terms of Settlement (in the sense of co-operating to achieve the contractual objectives, acting honestly, and acting reasonably having regard to the interests of the parties) [14] satisfies that five point test.
13. The implied term is reasonable and equitable, bearing in mind that it does not require any party to act in the interests of any other party or to subordinate its own legitimate interests to the interests of those parties. [15] It is necessary to give business efficacy to the Terms of Settlement and is so obvious that it goes without saying in circumstances where the document did not address the details of which staff are to be employed by Synergy and which staff are to continue to be employed by Clarity and/or employed by Specialist after completion. In my opinion, clause 2 of the Terms of Settlement which requires each party to "do all things necessary … if and when called upon to do so by any other party" does not address how those details are to be worked out. The implied term is capable of clear expression following the extensive case law that has explored the meaning of good faith. A determination of whether particular conduct breaches the implied term may be complex and may depend on a detailed examination of all of the circumstances surrounding the conduct and the matters affecting the parties' legitimate interests at the time. However, this does not mean that the term itself is unclear. The implied term does not contradict any express term of the Terms of Settlement.
14. I reject the plaintiffs' submission that the implied obligation of good faith extends to the parties' "dealings with one another", as opposed to the performance of their obligations and exercise of their rights under the Terms of Settlement. Counsel for the plaintiffs did not refer me to any authority in support of the proposition that an obligation of good faith may be implied in a contract that extends to dealings between the parties beyond the scope of the contract. In this case, the parties' dealings with one another generally are governed by any shareholders agreement and by the statutory and other duties of Dr Chan, Dr Macdougall, Dr Thakorlal, Dr Fernando and Dr Gibbs as directors of Clarity, Synergy, Specialist, Thornton and VATS.
15. I turn now to consider whether s 73 of the Civil Procedure Act confers power on the Court to grant the relief sought by the plaintiffs to give effect to the Terms of Settlement, including the implied obligations referred to above.
16. Section 73 of the Civil Procedure Act permits effect to be given to a settlement agreement by order in the proceedings that are settled, without the parties being required to commence separate proceedings to enforce that settlement agreement: Katter v Melhem (2015) 90 NSWLR 164; [2015] NSWCA 213 at [84]-[86]; Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6].
17. The plaintiffs' submissions emphasised the breadth of the power under s 73, and particularly s 73(1)(b).
18. The scope of the power was discussed by Basten JA in Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6]-[8] (citations omitted): "[6] Section 73 (and its analogues in other jurisdictions) has been understood to confer power on the court to deal with settlements in the proceedings to which they relate, rather than leaving the parties to commence separate proceedings to enforce a settlement. Accepting that to be the primary purpose of the provision, it is nevertheless expressed in broad terms as to the scope of the power conferred, terms which should not be read down by implied constraints. Rather, the breadth of the power as it operates in the Supreme Court is confirmed when it is read in the context of other powers conferred on the Court. Thus, s 56 of the Civil Procedure Act, to which the primary judge referred, states that the court must give effect to the overriding purpose of facilitating 'the just, quick and cheap resolution of the real issues in the proceedings.' In order to undertake that function, the court must have the necessary powers to assist it to identify what are the 'real issues' in the proceedings. In order to determine what are the real issues in the proceedings it is necessary for the court to seek to ascertain the extent to which the parties can or have narrowed their dispute, so as to limit the proceedings to that part, if any, which remains unresolved. That was the course which the primary judge undertook. If any express power were required for the judge to act on her own initiative, the court had power to act 'of its own motion' pursuant to s 86(3) of the Civil Procedure Act, subject always to according procedural fairness to each party. [7] The Court also has power to grant any remedy to which the party appears to be entitled, so that, as far as possible, all matters in controversy may be completely and finally determined, pursuant to s 63 of the Supreme Court Act 1970 (NSW). That may include relief which has not been sought in express terms. To similar effect, s 90 of the Civil Procedure Act provides that the Court is 'at or after a trial, or otherwise, … to give such judgment or make such order as the nature of the case requires'. The breadth of these powers is consistent with the general jurisdiction of the Supreme Court, being that which may be necessary for the administration of justice. [8] None of this is to suggest that there are no limits on the powers of the Supreme Court, a proposition which would be manifestly wrong. Nevertheless, as noted above, limits are not to be implied with respect to jurisdiction or powers conferred in unqualified terms. Limits imposed by the requirements of procedural fairness and by the creation of Commonwealth judicial power under the Constitution, are not engaged in the present case."
19. In my respectful opinion, those observations of Basten JA do not support the substance of the plaintiffs' contention in this case that s 73 confers power on the Court to make orders sought by a party to a settlement agreement that vary the terms of the settlement, even where that party would not be entitled to those orders in the exercise of the Court's general jurisdiction to which his Honour referred if separate proceedings had been commenced to enforce the settlement agreement.
20. In this case, orders in terms of prayers 2 and 3 of the interlocutory process would impose on the Macdougall, Thakorlal and Fernando interests an obligation that travels beyond the obligations they assumed under the Terms of Settlement. Assuming (without deciding) that the Macdougall, Thakorlal and Fernando interests have breached the implied obligations of good faith and cooperation, the range of remedies to which the plaintiffs may be entitled in any proceedings on a cause of action for that breach would not include an order imposing an obligation of indemnity on the defendants. The effect of prayers 2 and 3 would therefore be to vary, rather than give effect to, the Terms of Settlement (including the implied obligation of good faith and the implied obligation to do all things necessary to enable the other party to have the benefit of the agreement). It follows that s 73 of the Civil Procedure Act does not confer power on the Court to make orders in terms of prayers 2 and 3 of the interlocutory process.
21. Even if orders in terms of prayer 2 and 3 were within the scope of the Court's power under s 73 (contrary to my conclusion above), I would not have regarded orders in those terms as appropriate and I would therefore have declined to exercise the discretion to make those orders. In my opinion, it would not be appropriate in the circumstances of this case to impose on the Macdougall, Thakorlal and Fernando interests an obligation of indemnity to which they had not agreed and which would put them at risk of liability in respect of decisions made during the three month period leading up to completion of the Terms of Settlement if Dr Chan did not consent to or approve that decision. Such an order would effectively confer on Dr Chan - a minority shareholder in each company - a power of veto in respect of any decisions concerning capital expenditure and decisions about staff or any other matters that may give rise to a claim for compensation against Clarity.
22. Prayers 2 and 3 of the interlocutory process are dismissed for the reasons at [84]-[85] above. In light of those conclusions and in circumstances where the parties require the Court's judgment as a matter of urgency, it is not necessary to consider whether the Macdougall, Thakorlal and Fernando interests breached their implied obligations by the decisions and transactions referred to at [68] above, with the exception of the engagement by Clarity of Ms Jodie Ng and/or JOLT which is the subject of prayer 3A of the interlocutory process.

Prayer 3A

1. The plaintiffs bear the onus of proving the matters of fact and law necessary to establish the basis for the declaration sought in prayer 3A.
2. The plaintiffs have failed to discharge that onus. According to Ms Ng's email sent to Dr Chan and Ms Gibbs on 20 April 2021, Ms Ng had been engaged "for my services to assist with the transition of the Synergy Medical Imaging including rebranding, liaising with third party providers as well as engaging and managing staff for Clarity Cessnock (until share sale) and Synergy Medical Imaging." [16] According to the contract subsequently entered into between Clarity and JOLT, the engagement was to provide business management services and predominantly financial management and staff management.
3. There is nothing in the business services described in the written contract that is inconsistent with the Terms of Settlement or that suggests that the engagement would deprive the plaintiffs of the benefit of the Terms of Settlement. Moreover, Ms Ng's more detailed description of the services in her 20 April 2021 email is entirely consistent with the Terms of Settlement. In particular, the reference to rebranding being part of the transition or Synergy acknowledges that branding was to remain the property of Clarity under clause 7(g) of the Terms of Settlement. The need to manage staff in the period up to completion is obvious. The need for Synergy to liaise with third party providers presumably reflects the fact that, post-completion, Synergy will no longer have the practical benefit of contracts entered into by Clarity with third party providers. There is nothing in the engagement per se that is dishonest, contrary to the achievement of the objectives of the Terms of Settlement or unreasonable having regard to the interests of the parties.
4. For the same reasons, I reject the plaintiffs' submission that, by causing Clarity to engage Ms Ng and/or JOLT, Dr Macdougall, Dr Thakorlal and Dr Fernando "brazenly" indicated their intention to use their position as "majority shareholders" of and directors of Clarity and Synergy in the period up to the settlement date to conduct the affairs of those entities "in a way which suits their interests as majority shareholders and is detrimental to the interests of the plaintiffs". [17] In my opinion, nothing in Ms Ng's email of 20 April 2021, on its face, supports that characterisation of the engagement. Dr Chan may not have appreciated the tone of the reminders in the email about the legal ownership of property of Synergy and Specialist in the period leading up to completion. He may have vehemently disagreed with the statements in the email concerning his conduct towards staff, but there is no evidence that establishes that those statements were false or lacked a reasonable basis. The Court is not called on to determine those matters. It is plain from Dr Chan's evidence that he disagrees with some of the actions taken in relation to post-completion staffing arrangements, but that evidence does not support a finding that those actions were dishonest or unreasonable having regard to all parties' interests. The Terms of Settlement expressly provided that the staff would be split between the Cessnock and Waratah practices, and Dr Chan's evidence rises no higher than establishing that the plaintiffs would have preferred the split to be done differently.
5. Prayer 3A(b) of the interlocutory process would, in substance, add to or interfere with the Terms of Settlement concerning interim distributions rather than give effect to those terms. I repeat [80]-[84] above.
6. For all of those reasons, the plaintiffs' application for a declaration in terms of prayer 3A of the interlocutory process is dismissed.

Costs

1. I will hear the parties in relation to costs.

Conclusions and orders

1. For all of those reasons, I make the following declarations orders and directions: 1. The Court declares that the Terms of Settlement agreed between the parties to these proceedings on 4 March 2021 entitle the second defendant to retain ownership of the following rights after completion under those Terms of Settlement: 1. rights to telephone number 02 4990 2655; and 2. rights to the facsimile number 02 4990 2522. 1. Order that the interlocutory process filed by the plaintiffs on 4 May 2021, as subsequently amended, is otherwise dismissed. 2. Direct the parties to file and serve written submissions of no more than 2 pages in length by 28 May 2021 concerning the costs of the interlocutory process, with costs to be determined on the papers after receipt of those submissions.

Endnotes

1. T11.20.
2. Those principles were recently summarised in Lawrence v Ciantar [2020] NSWCA 89 at [98]-[101].
3. Exhibit AT-2, pp 36-40 and 44.
4. Exhibit AT-2, pp 33-35, 41-43 and 45-48.
5. Exhibit VC-3, p 73.
6. Exhibit VC-3, pp 63-73.
7. Chan 3/5/21, para 41.
8. Exhibit AT-2, pp 61-75.
9. Exhibit AT-2, pp 49-52.
10. Exhibit VC-1, p 1156.
11. Exhibit AT-2, pp 13-25.
12. Plaitniff's written submissions dated 17 May 2021, paragraph 28, referring to Exhibit VC-3 at pp 34 and 36.
13. See also N C Seddon and R A Bigwood, Cheshire & Fifoot's Law of Contract (11th Australian ed, 2017) at paragraph 10.41.
14. Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [144]-[145] and the authorities there cited.
15. Ibid.
16. Exhibit VC-3, p 21.
17. T12.21-29. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 May 2021