St George Fertility Centre Pty Ltd v Clark

Additional counselling and consents 56The 2005 revision of the RTAC Code of Practice introduced a provision that sperm donors should be counselled twice and their partners be counselled by a person who was a member of the Australian and New Zealand Infertility Counsellors Association (ANZICA) or who was eligible for membership. There was also a new paragraph that the wife or long-term partner of any donor should consent in writing to the use of that donor's sperm. 57It was submitted that these requirements should be taken into account as reducing the number of usable straws that Dr Clark acquired from St George Fertility. 58As already indicated, these changes did not take effect until 1 July 2006, over four years after the acquisition of the straws by Dr Clark by which stage a considerable number of the straws would have been used. 59The new measures were also not requirements. They were contained in Attachment B to the Code of Practice, which stated that the attachments to the Code had been developed as guides. 60Furthermore, the requirements disappeared with the introduction of the 2008 RTAC Code of Conduct and were, accordingly, in operation as guides for just two years. 61One of the complaints Dr Clark made was that the records provided to her did not include records as to counselling of spouses and partners. It would be strange if that very delict should give rise to a diminution in her damages. St George Fertility and Dr Macourt cannot take advantage of their own wrong. 62In any event the donors were mainly single rendering the counselling measures largely irrelevant. So too with the consents. Since the donors were mainly single consents were required but infrequently and consents might have been obtained from those donors who were married or in a long-term relationship had the records provided by St George Fertility and Dr Macourt complied with the warranties. 63Furthermore, it was the policy of St George Fertility from as early as 1992 to counsel spouses and long-term partners of donors by ANZICA recognised counsellors. 64The policy document provided that all donors had to consent to undergo an initial interview with Dr Macourt to review physical and mental history followed by attendance at a counselling session designed to obtain "consent of spouse/partner (if applicable)" amongst other things. 65St George Fertility and Dr Macourt have failed to establish a basis for reduction of the damages to which Dr Clark is entitled by reason of the counselling changes in the 2005 RTAC Code of Practice. The evidence supports the conclusion that St George Fertility, as a matter of policy, complied with the requirements as to counselling introduced on 1 July 2006 in the conduct of its practice from at least as early as 2002. And consents were rarely required as most donors were single and the few that might have become necessary could have been sought if the St George Fertility records had complied with the warranties in the deed. 66Besides, a guide to practice introduced four years after the event is irrelevant to the hypothetical purchase and sale of sperm in 2002.

Five women limit 67The Assisted Reproductive Technology Act 2007, s 27(1) reduced the ten family rule to a five women rule. It was in the following terms: "An ART provider must not provide ART treatment using a donated gamete if the treatment is likely to result in offspring of the donor being born, whether or not as a result of ART treatment, to more than five women (or such lesser number as may be specified in the donor's consent), including the donor and any current or former spouse of the donor." 68The new rule commenced on 1 January 2010. A hypothetical purchase of replacement straws in 2002 should not be made on the assumption that future legislation might limit the number of women producing offspring from the same donor's sperm. That event is far too remote to be taken into account.

Ten year limit 69The Assisted Reproductive Technology Act , s 25 placed a ten-year limit on the storage of sperm. Section 25(3) was in the following terms: "An ART provider must not store a gamete or an embryo for any longer than the shortest of the following periods: (a) the period (if any) of proposed storage of which the ART provider has given written notice to the gamete provider (whether before or after the gamete was obtained), (b) the period authorised by the gamete provider's consent or, if there is more than one gamete provider, the shorter of the periods authorised by the gamete providers' consents, (c) in the case of a donated gamete or an embryo created using a donated gamete, the period of 10 years from the date the gamete was obtained from the donor plus any additional period that may be authorised by the Director-General under section 26." 70A ten-year limit on the use of sperm was introduced by s 26(1) as follows: "An ART provider must not provide ART treatment using a donated gamete if the gamete was obtained from the donor more than 10 years before the provision of the ART treatment unless the Director-General has given written authorisation for the provision of the ART treatment." 71Dr Clark did not know of any circumstance in which the Director-General had given permission for the use of sperm stored for more than ten years other than where a woman with a child from a sperm donor wished to have another child using that donor's sperm. Dr Clark agreed that except in that case none of the St George Fertility sperm would be usable after the end of 2011 and in the period from 2005 to 2011 only 100 straws had been used for this purpose. 72It was submitted that the possibility that future regulatory changes would render St George Fertility's sperm unusable should be taken into account. 73For the reasons expressed above with respect to the five women rule, I reject that proposition. A hypothetical transaction taking place in 2002 should not be predicated on the basis that, with effect from 1 January 2010, restrictions would be placed on the use of sperm obtained from St George Fertility. 74By 1 January 2010, Dr Clark may well have used all the St George Fertility sperm. At least she would have used a large part of it. And she would have used the oldest sperm first. 75It would be wrong to suppose that in relation to a hypothetical sale and purchase in 2002 there should be any expectation in the market place or by any of the hypothetical participants that from 1 January 2010 restrictions on the use and storage of sperm might render some of the straws the subject of the purchase unusable. The introduction of the legislation is too remote.

Betterment 76It was submitted that the sperm Dr Clark obtained from Xytex was superior to the sperm that would have been supplied by St George Fertility if it had been warranty compliant. The information available on Xytec's donors was far more extensive. It included photographs of donors and recordings of donors speaking. Patients could browse Xytex's website and see details of the various donors and they could purchase even more information and additional photographs if they wished. 77In addition Dr Clark had negotiated an exclusive arrangement with Xytex under which it would not supply donor sperm to any other party in New South Wales. 78It was submitted that there was a significant element of betterment in the use of Xytex sperm in replacement of St George Fertility sperm. 79The onus of proving the presence of betterment and its quantum lies with St George Fertility and Dr Macourt ( Roberts v Rodier [2006] NSWSC 282; (2006) 12 BPR 98191 at [143]; (4), 23,477). There, Campbell J pointed out that if the only practical way in which a plaintiff can be compensated for damage to an item is by providing the plaintiff with the price of acquiring an item that is better than the item that was damaged, it could sometimes be appropriate to allow the plaintiff the full value of that better item. 80Amongst the authorities cited by his Honour was Harbutt's Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447 in which a building destroyed by fire was replaced by a new one. Lord Denning MR said at 468: " The destruction of a building is different from the destruction of a chattel. If a second-hand car is destroyed, the owner only gets its value; because he can go into the market and get another second-hand car to replace it. He cannot charge the other party with the cost of replacing it with a new car. But when this mill was destroyed, the plasticine company had no choice. They were bound to replace it as soon as they could, not only to keep their business going, but also to mitigate the loss of profit (for which they would be able to charge the defendants). They replaced it in the only possible way, without adding any extras. I think they should be allowed the cost of replacement. True it is that they got new for old; but I do not think the wrongdoer can diminish the claim on that account. If they had added extra accommodation or made extra improvements, they would have to give credit. But this is not this case." 81Harbutt was overruled by the House of Lords in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, but on a different point. 82Here the market comprised but one seller, Xytex. Dr Clark had no choice. It was not suggested that she could have acquired the sperm more cheaply elsewhere. It was not suggested that the price paid was inflated by the agreement for exclusive supply to Fertility First. And St George Fertility and Dr Clark failed to establish the quantum of any benefit. 83Dr Clark does not have to give credit for any betterment.

Non-compliance of Xytex sperm 84Section 20D of the Human Tissue Act 1983 was introduced by the Health Legislation Amendment Act 2004 with effect from 1 August 2004. 85It was submitted that there was a failure by Xytex to comply with this provision with respect to the straws of sperm actually provided by it. 86Section 20C(c) of the Human Tissue Act provided that the Division applied to semen obtained or received from a donor for the purpose of using some or all of the semen for the artificial insemination of a woman. Section 20D(2)(b) was in the following terms: "A person must not .... (b) obtain, receive or use a donor's semen for a purpose referred to in section 20C(c), unless the donor has signed a certificate and had the signature witnessed by a person (or a person belonging to a class of persons) (the prescribed witness ) prescribed by the regulations." 87The Human Tissue Regulation 2005, reg 4 prescribed the certificate as Form 1 of Schedule 1. Regulation 5 prescribed medical practitioners or nurses employed where the semen is to be obtained or received, amongst others, as prescribed witnesses. 88It was submitted that the Xytex sperm did not comply with all of the regulatory requirements and was not a relevant comparison for assessing loss. 89Assuming that the Act and Regulation applied extra-territorially to the United States, the issue is not whether sperm actually supplied by Xytex failed to comply with the regulatory requirements. The issue is whether a hypothetical sale of straws of sperm by Xytex in 2002 should be challenged on the basis of a failure to comply with requirements not then in force. 90In my view they cannot. The hypothetical purchase should only be considered in light of the legislation as it stood when the deed was executed in early 2002. 91But even if later legislative change was relevant, there is no reason why it should be assumed that donor semen delivered pursuant to a hypothetical sale could not comply with the Human Tissue Act and the Human Tissue Regulation . The form signed by Xytex donors was substantially similar to Form 1 and there was no reason why a medical practitioner or nurse could not have witnessed donor signatures. 92It was submitted that from at least February 2005 the RTAC Code of Practice required counselling of donors and donor spouses to be carried out by counsellors who were members of, or eligible to be members of, ANZICA. There was no counselling of Xytex's donors by ANZICA members until about July 2011. 93As has already been indicated, the RTAC Code of Practice revised in February 2005 was not ratified until 30 June 2005 and then provided a period of grace of twelve months. 94Even assuming that the Code of Practice applied to the conduct of an assisted reproductive technology practice in the United States, a requirement introduced three years after a hypothetical purchase of replacement sperm from Xytex cannot influence the purchase price.

Damages 95There are three components to the damages sought by Dr Clark. A sum to compensate her for the non-usability of all but 504 straws from the 3,513 straws delivered to her. That is for 3,009 unusable straws. 96As discussed earlier in these reasons, I am of the view that the appropriate measure is unusability of 1,996 straws being 2,500 straws that ought to have been usable less the 504 straws that were used. 97The second head of damage claimed is the amount necessary to compensate Dr Clark for employing Ms Martin whose employment was said to be almost exclusively devoted to reconciling the records of St George Fertility. 98It was a term of the deed that St George Fertility transfer its telephone numbers to Fertility First. The third head of damage was the cost of maintaining the St George telephone numbers, which, it was said, would not have been necessary if there had been no breach of the deed. 99I am not prepared to award any damages for Ms Martin's employment. She said she was not involved almost solely on reconciling the records of St George Fertility. She said she merely transcribed information from the donor lifestyle declarations and it took her only half an hour. 100Nor am I prepared to award the damages claimed with respect to the telephone lines. The evidence revealed that they had been used by Fertility First to make outgoing calls. 101It could not be said, in those circumstances, that the maintenance of the telephone numbers was caused solely by a breach of the deed. 102Dr Clark claimed $7,680 under this head but conceded that the amount should be reduced having regard to the outgoing phone calls made from the telephone lines. 103St George Fertility and Dr Macourt submitted that if the telephone lines had not been used by Dr Clark the cost would have been $42 per month or a total of $3,024 for the six year period claimed by Dr Clark. In my view that is the appropriate amount of compensation together with interest. 104Dr Clark did not commence acquiring Xytex sperm until 2005. Between then and 2011 she acquired 1,546 straws of sperm. She says the proper method of calculation of damages is to take the actual replacement costs of the 1,546 straws together with interest and, for the remainder of the straws to be acquired, on her submission 1,463, but in light of my finding 450, they should be priced at the latest price incurred by Dr Clark without interest. 105Reference was made to Biscayne Partners Pty Ltd v Valance Corp Pty Ltd & Ors [2003] NSWSC 1016 at [17] where Einstein J observed that where defendants seek to rely upon their own wrongdoing the court assesses damages and loss of opportunity in a robust manner, relying on the presumption against wrongdoers. 106In Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46, in circumstances where the wrongdoers' failure to keep and produce accounts of their actual expenditure made it difficult to assess the compensation due to the plaintiff, the court at 59 said that it should assess compensation in a robust manner relying on the presumption against wrongdoers. 107To similar effect was my judgment in Commercial & Accounting Services (Camden) v Cummins [2011] NSWSC 843. At [44] I held that the principle applied where the defendant had failed to produce a list of the persons to whom he had sent letters of solicitation using the plaintiff's confidential customer lists. 108In my view, Dr Clark has fallen into the error that she attributes to St George Fertility and Dr Macourt by her submission that damages should be assessed with respect to the actual purchases of Xytex's straws of sperm where the proper measure of damages is by reference to an hypothetical purchase of the sperm in 2002. 109The best evidence is that of the first purchase by Dr Clark on 29 September 2005 of 30 straws at US$350 giving a figure of US$10,500. With freight and discounts of US$150 the total is US$10,650. 110The invoice from Xytex was for US$10,670 which was discharged with AU$15,363.26 giving a result for US$10,650 of AU$15,334.46. When that is extrapolated to 1,996 straws the result is AU$1,020,2520.70. 111In robust fashion I would account for the fact that the cost of replacement in early 2002 is likely to have been less than this figure by allowing interest on AU$1,020, 252.70 from 29 September 2005. To this figure should be added AU$3,024 plus interest for the telephone lines. 112What is to be offset against that amount is the AU$219,950.91 plus interest that is owed by Dr Clark to St George Fertility under the deed. 113I will hear the parties on the appropriate terms of orders and I will hear the parties on costs. I direct the parties to bring in short minutes of order reflecting these reasons.

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: 28 October 2011