Stephenson and Anor v Dental Corporation Pty Ltd [2025] QSC 82

• [1] The first plaintiff, Dr David Stephenson, is a dentist who carried on a dental practice at Albany Creek between 1991 and 2008. Originally, he did so personally, but in 1997 he incorporated the second plaintiff and, at a later time, entered into a Services Agreement between himself and the second plaintiff for the provision of dental services.
• [2] In June 2008 the defendant, Dental Corporation, approached the first and second plaintiffs with a view to purchasing the Albany Creek practice which acquisition ultimately took place shortly thereafter. Dr Stephenson remained working at the practice until 2013, but his mental health declined, and he took a period of leave.
• [3] This proceeding pertains to a claim for damages brought by the first and second plaintiffs against the defendant which is said to have arisen as a result of the defendant purporting to terminate its contractual arrangements with the plaintiffs.

• [4] On 27 June 2008 the parties entered into an Acquisition Agreement for the sale to the defendant of the assets of the practice which was carried on from the Albany Creek premises.
• [5] Under the Acquisition Agreement, the parties agreed that the plaintiffs would sell, and the defendant would purchase, the Assets (as defined in cl 1.1) for the purchase price of $1.55 million, less any reduction under cl 11.5(b), plus any Performance Bonus payable in accordance with the Smiledentist Services Agreement, apportioned (by cl 4.2) set out in the schedule to the Acquisition Agreement.
• [6] Separately to the Acquisition Agreement, the parties also entered into a Dental Corporation Services Agreement, also dated 27 June 2008, which was the services agreement relating to the dental practice at Albany Creek (the DC Services Agreement).
• [7] On or about 30 June 2008, completion occurred of the sale of the practice carried on from the Albany Creek premises to the defendant under the Acquisition Agreement. From that date, the first and second plaintiffs commenced providing dental services to the defendant under the DC Services Agreement.
• [8] Under the DC Services Agreement (as validly amended from time to time), Dr Stephenson was engaged as the Practice Principal to provide dentistry services and practice management, set out in Schedule 1 to the DC Services Agreement to include:

(a) the provision of dentistry services including diagnostic, remedial, specialist (including cosmetic) and preventative dentistry as appropriate to the patients of the practice; and

(b) management of the practice, in consultation with Dental Corporation, in a manner in which performance and operations were consistent with, or of a better standard than, those which the practice enjoyed immediately prior to the agreement.

• [9] As to the practice management issues in paragraph [8](b) above, they included, that the Practice Principal was responsible for achieving various financial targets and the general operational management of the practice such as staff and other dentists.
• [10] Under the DC Services Agreement, the parties agreed that there would be an initial term of five years "unless otherwise terminated under cl 13 or extended under cl 8.6", and an automatic renewal term unless either party advised the other that it did not wish to renew the terms of the agreement (cl 2.2).
• [11] Clause 2 provided:

This agreement commences with effect from Completion and, unless otherwise terminated under clause 13 or extended under clause 8.6, continues until the fifth anniversary of Completion (Initial Term).

Unless at least six months prior to the expiry of the Initial Term or the then current Renewal Term (as the case may be):

(a) the Service Company notifies Dental Corporation in writing that it does not wish to renew the agreement for a further term;

(b) the Service Company or the Practice Principal is in breach of this agreement and Dental Corporation notifies the Service Company that it does not wish to renew the agreement for a further term; or

(c) Dental Corporation notifies the Service Company in the final Anniversary Year of the Initial Term or Renewal Term (as the case may be) that it does not wish to renew the agreement for a further term based on:

(i) the fact that the Annual Cash Flow of the Practice declined in the fourth Anniversary Year of the Initial Term or Renewal Term (as the case may be);

(ii) the Annual Cash Flow of the Practice is, in Dental Corporation's reasonable opinion, likely to continue to decline in that Anniversary Year,

this agreement will be automatically extended for a further term of five years or such other period as the parties may agree (each a Renewal Term)."

• [12] Clause 13 of the DC Services Agreement provided as follows in relation to termination of the agreement:

Dental Corporation may terminate this agreement immediately by written notice to the Practice Principal if:

(a) the Practice Principal ceases to be registered as a dentist under the Act or has conditions of registration imposed which are unacceptable to Dental Corporation;

(b) in the opinion of Dental Corporation, the Practice Principal has committed an act or done anything which may materially adversely affect the reputation of the Practice or Dental Corporation; or

(c) the Practice Principal breaches this Agreement or the Dental Practice Acquisition Agreement and does not remedy that breach within 30 Business Days of receiving written notice from Dental Corporation to do so.

13.2 Death or Total and Permanent Disability of Practice Principal

If the Practice Principal dies or suffers a Total and Permanent Disability, Dental Corporation will terminate this agreement.

The Practice Principal may terminate this agreement by written notice to Dental Corporation if:

(a) Dental Corporation provides the Administrative Services in a manner which materially prevents the Practice Principal from conducting the Practice in accordance with the terms of this agreement; and

(b) Dental Corporation does not remedy that breach within 30 Business Days of receiving written notice from the Practice Principal to do so."

• [13] On 17 June 2010 the parties entered into an Amendment Deed (the 2010 Deed) by which the Initial Term of the DC Services Agreement was extended for a period of a further five years, being the tenth anniversary of completion of the DC Services Agreement, that is until on or about 30 June 2018. That amendment took effect by the deletion of the words "fifth anniversary" in clause 2.1 and insertion of the words "tenth anniversary" in their place.
• [14] The 2010 Deed did not affect any amendments to clause 13.
• [15] On 15 October 2012 the parties entered into a further Amendment Deed, amending the DC Services Agreement (the 2012 Deed). The 2012 Deed provided for a new clause 2 which read as follows:

In consideration for Dental Corporation agreeing to:

(a) set up a repayment strategy for outstanding Cash Flow Shortfall relating to the first, second, third and fourth Anniversary Years, and

(b) reduce the Practice Principal's Minimum Annual Cash Flow and hurdle for the Performance Bonus for the fifth and each subsequent Anniversary Year;

the Practice Principal confirms the extension of the Services Agreement as set out in the Amendment Agreement and the parties agree to further amend the Services Agreement in accordance with the terms of this Deed."

• [16] The new clause 2 was not said to be an "insert" into the existing deed i.e. additional to the existing terms, nor is it clearly a substitution for the then existing clause 2. This contrasts with other clauses such as at paragraph 3 of the 2012 Deed which contains an instruction that the two new clauses 8A and 8B "are inserted as follows". Rather, the "Background" section merely recites that the parties have agreed to further amend the DC Services Agreement in accordance with the Deed. While it is not therefore entirely clear whether clause 2 contained in the 2012 Deed was additional to, or in substitution of, clause 2.1 of the DC Services Agreement, as amended by the 2010 Deed, neither party suggested the issue was of importance.
• [17] The financial performance of the practice was one of the critical features of the agreement. By clause 8 of the agreement, in consideration for the Practice Principal providing the dentistry services set out at paragraphs [8] and [9] above, and provided that the Practice Principal complied with the terms of the agreement, the defendant agreed to pay the Practice Principal a monthly amount and, if the practice exceeded its targets, the first plaintiff would be entitled to a bonus. If, however, the practice did not achieve the financial targets, then the first plaintiff was to pay the defendant a shortfall. The first plaintiff referred to this shortfall throughout as the "clawback debt" or "clawback hurdle" interchangeably, and I will adopt that terminology.
• [18] Both parties agree that during the financial years ended 30 June 2009, 2010, 2011 and 2012, the practice did not achieve the relevant financial target and in each of those years the first plaintiff was therefore liable to the defendant for a clawback debt. In each of those four years the first plaintiff owed the defendant:

(a) $22,338 (inc GST) in the financial year ended 30 June 2009;

(b) $58,752 (inc GST) in the financial year ended 30 June 2010;

(c) $147,922 (inc GST) in the financial year ended 30 June 2011; and

(d) $185,609 (inc GST) in the financial year ended 30 June 2012.

• [19] The accumulated total of the clawback debt in those four years therefore amounted to some $414,621.
• [20] The first plaintiff alleges that the clawback debt accumulated as a consequence of a mistake that arose during the negotiation phase of the DC Services Agreement. The first plaintiff's evidence was that, in simple terms, his dental practice was given a profit and loss budget. From the gross practice fees, the whole of the practice's costs were then deducted. The Principal dentist (Dr Stephenson) was then responsible to produce a practice EBIT (earnings before income tax) of at least the clawback sum, that is, the minimal practice EBIT that the Practice Principal must produce from the entire practice each year. If there was a shortfall in EBIT, then the Practice Principal would be required to pay the shortfall as a clawback debt from the Practice Principal's Dental Draw (which was paid monthly).
• [21] In short summary, Dr Stephenson described that the agreement which was reached was:

(a) the parties arrived at an agreed value for the practice by four times the average EBIT profit for the three prior financial years, resulting in a practice value of $1.4 million;

(b) payment by the defendant of the purchase price of $1.4 million, with three-quarters as cash and one-quarter by the transfer of shares in the defendant;

(c) Dr Stephenson was to be paid 40 per cent (after laboratory costs) of his personal gross fees, to be known as his Dental Draw;

(d) Dr Stephenson was to agree to a personal budgeted gross fee amount of $864,000;

(e) Dr Stephenson was to agree to a practice EBIT clawback hurdle of $349,774 for the purposes of calculating the Cash Flow Shortfall; and

(f) so far as Dr Stephenson's involvement in the practice was concerned, there was to be a five year contract after which time it would be renewed for a further five years, all other things being equal.

• [22] As to the practice EBIT hurdle which Dr Stephenson said was to be set at $349,774, he produced a spreadsheet contemporaneously with his discussions with a representative of the defendant, Mr Bonham, which he made during the due diligence period, which he claimed demonstrated the agreed budget had been fixed at that sum.
• [23] In addition, Dr Stephenson gave evidence that he was to receive a five per cent commission (calculated over the term of the agreement) amounting to five per cent of the annual budget Dental Draw totalling $155,000 upfront at settlement of the acquisition agreement, and, instead of the usual 40 per cent commission, he was to be paid a 35 per cent commission on the generated gross fees for the term of the contract. Including the five per cent Dental Draw paid upfront, the purchase price therefore paid by the defendant was increased from $1.4 million to $1.55 million.
• [24] In accordance with those negotiations during the due diligence phase, the Acquisition Agreement stated that the purchase price was the sum of $1.55 million.
• [25] Dr Stephenson was not challenged in cross-examination in relation to his evidence that these negotiations had occurred during the due diligence phase, or at all.
• [26] However, when the DC Services Agreement was signed, it identified that the Minimum Annual Cash Flow for the purposes of calculating the Cash Flow Shortage was $370,000, not the sum which Dr Stephenson gave evidence had been agreed, being the sum of $349,774.[1] Nevertheless, Dr Stephenson signed the DC Services Agreement containing the $370,000 figure, as did the defendant. If there was an error at that stage, no party seemed aware of it.
• [27] Whilst Dr Stephenson accepted that the amounts of the clawback debt as set out at paragraph [18] above were correct based on the $370,000 per year clawback hurdle, in his evidence he blamed the incorrect figure ($370,000 versus $349,774) for the amount of the clawback debt.
• [28] In his oral evidence, Dr Stephenson agreed that he had read the agreement which contained the $370,000 figure before he signed it. He maintained that between 2008 and 2013 he had made attempts to remedy the issue with the defendant but it did not agree that the $370,000 figure was incorrect.
• [29] The DC Services Agreement contained an "entire agreement clause" that the agreement constituted the entire agreement between the parties in connection with the subject matter, and superseded all previous agreements or understandings between the parties in connection with the subject matter.

"I felt that this offer adequately addressed the incorrect clawback hurdle, and the credit to the practice of $70,000 on account of (an employed dentist). I saw this, finally, as an equitable attempt by Dental Corp to address all of my legitimate concerns."

• [33] On 15 October 2012 the parties entered into and executed, the 2012 Deed, further amending the DC Services Agreement.
• [34] It is worth observing a number of things in relation to the 2012 Deed. First, the 2012 Deed did not change the EBIT profit margin from $370,000 to $250,000 for anything other than the fifth and subsequent years. Item 1 of Schedule 2 of the DC Services Agreement was amended as follows:

"The parties agree that the Minimum Annual Cash Flow for the purpose of calculating the Cash Flow Shortfall:

1. For the first, second, third and fourth Anniversary Years is $370,000; and

b. For the fifth and each subsequent Anniversary Year is $250,000."

• [35] Framed as such, there was no acknowledgement by the defendant that there had been any error in respect of the first, second, third and fourth Anniversary Years being fixed at $370,000, rather only that the fifth and subsequent years would be reduced to $250,000. Dr Stephenson did not seek any term by which there was a renegotiation of the $370,000 figure for the earlier years, nor a flow on effect to the clawback debt for those years.
• [36] Second, in the same way, the amendment to the commission was not retrospective. Item 2 of Schedule 2 was deleted and replaced with:

"For the first, second, third and fourth Anniversary Years, the Annual Dental Draw percentage is calculated as a percentage of the Annual Revenue generated and collected by the Practice Principal as follows:

a. 35% of the Annual Revenue up to and including $1 million; and

b. 45% of the Annual Revenue which exceeds $1 million.

For the fifth and each subsequent Anniversary Year, the Annual Dental Draw percentage is calculated as a percentage of the Annual Revenue generated and collected by the Practice Principal as follows:

a. 40% of the Annual Revenue up to and including $1 million; and

b. 45% of the Annual Revenue which is exceeds $1 million."

• [37] Each of the DC Services Agreement and the 2012 Deed contained an entire agreement clause that the agreement constituted the entire agreement between the parties in connection with the subject matter and superseded all previous agreements or understandings between the parties in connection with the subject matter.

• [38] Despite having agreed to the change to the clawback hurdle for the year starting 1 July 2012, the practice was still not meeting its financial performance targets.
• [39] Dr Stephenson gave evidence that during April of 2013, a representative of the defendant, Mr Chambers, was in communication with Dr Stephenson's accountant, Mr Edwards, and Dr Stephenson. Dr Stephenson says that Mr Chambers "mooted the idea" that Dr Stephenson would "no longer be the Practice Principal responsible for the EBIT profit margin". Dr Stephenson said that he was interested in this arrangement which would mean that he would continue to work under an employment contract with the practice as an employed dentist under the 40 per cent commission (after laboratory fees) of his gross fees, for the remaining term of his DC Services Agreement until 30 June 2018. He understood it to mean he would not be responsible as Practice Principal to meet the EBIT profit margin but that he would continue to work under an employment contract with the practice.
• [40] That evidence is broadly consistent with the fact that on 2 April 2013, Mr Chambers of the defendant contacted Dr Stephenson's accountant, Mr Edwards, regarding the ongoing poor financial performance of the practice. Mr Chambers' email records, amongst other things:

"I would like to have a chat with you ASAP to run through where we are at. I have a plan in mind that I would like to discuss with you that may assist all of us."

• [41] On 13 April 2013 the defendant sent an email to Dr Stephenson noting that his fifth year anniversary was approaching and identified that based on the practice's financial performance, Dr Stephenson would have (another) shortfall amount to repay of approximately $160,000.
• [42] Mr Chambers' email of 16 April 2013 to the accountant Mr Edwards then detailed the "key points for reference" as follows, where DS is a reference to Dr Stephenson:

"● DS to relinquish practice principal role from end of nearest practical month

• Shortfall at that time to be pro rata to annual hurdle level e.g., annual hurdle is $250k which is $20,833 per month. Multiply by number of months completed (say 10 if we can complete this by end April) equals $208,333. This is his 10 month hurdle
• This shortfall to be repaid over 24 months
• DS to remain as associate dentist on 40% draw (per current) with requirement to generate $800K net revenue per year. If he falls below this then he pays back 60% of the difference i.e., for every $10K below, he owes $6K
• Must work with and at the direction of the new principal. Must cooperate fully. We will naturally have zero tolerance! Staff etc are at the direction of the principal

Worth noting that the principal wants to see DS stay and flourish as his revenue should be the base of a good practice."

• [43] Sometime after the email of 16 April 2013 and before 23 April 2013, Dr Stephenson was contacted by Dr Malcolm Duff. Dr Duff gave evidence before me. Given the effluxion of time since the conversation occurred some 12 years ago and the giving of his evidence, his recollection of the conversation was not particularly good. Nevertheless, he recollected that Dr Stephenson wanted to step down from being the Practice Principal and that he, Dr Duff, was to take over as the Practice Principal at the Albany Creek premises. It seems fair to conclude that Dr Duff must have contacted Dr Stephenson sometime before 23 April 2013, because on that date Mr Chambers of the defendant sent an email to Dr Stephenson, and his accountant, saying:

"Firstly, my apologies for Malcom Duff having called. This was my fault and I jumped the gun. He only called because I said he could, so it's not his fault either! That said, he is keen to work with you and thinks (as we do) that this can be a win win for everyone."

• [44] That email suggests that Dr Duff must have contacted Dr Stephenson sometime before the email of 23 April 2013, and perhaps discussed with Dr Stephenson that he, Dr Duff, was to take over as Practice Principal at a time at which it seems Dr Stephenson may not have been sure whether there was a concluded arrangement to that effect.
• [45] The email from Mr Chambers of 23 April 2013 went on:

"Secondly, and further to your conversation with Terry, we are wanting to engineer an outcome that will hopefully make life a bit easier and relieve some of the pressure on you, including financial pressure, from the practice. This involves you becoming an associate dentist at Albany Creek and financial and operational responsibility being handed over to Malcolm."

• [46] The email then went on to re-state the key elements of the proposal which had already broadly been contained in the email to Mr Edwards of 16 April 2013 set out at paragraph [42] above. The first dot point of the 16 April 2023 proposal was that Dr Stepheson "relinquish practice principal role from end of nearest practical month (we would like to target 1 May)".
• [47] In response to Mr Chambers' email of 23 April 2013, Dr Stephenson replied:

I am happy to meet with you to wrap up issues w my management.

I expect you will provide an employment contract at the same time??"

• [48] According to Dr Stephenson's affidavit, he agreed to the new proposal "in principle," and awaited Service Agreement documents. That is broadly consistent with the email immediately above.
• [49] Dr Stephenson's affidavit then went on:

"Dr Malcom Duff phoned me, in late April 2013, and he confirmed that he was looking forward to working together under the new arrangement, with him taking over as Practice Principal effective from 1 May 2013. I agreed to work in the Practice as an employed Dentist under an employment contract.

As of late April 2013, Dental Corp and I were still formalising the 'new arrangement', but from 1 May 2013, in truth and in fact:

(a) Dr Duff took over as Practice Principal of the Practice and he remains in that position so far as I am aware to this day;

I attended at the Practice and worked for the whole of May 2013 and June 2013 as an employed Dentist ...

Prior to 1 May 2014 (sic), I was told by Chris Chambers, and I believed, that because Dr Duff was taking over as Practice Principal, I would no longer be held responsible for the Practice EBIT from 1st May 2013 onwards.

On 1st of May, DC Steve Ralphs (Human Resources) attended the practice and formally advised me that I was no longer the Practice Principal, and that the Practice was now being administered by and under the responsibility of Dr Malcolm Duff. I was further advised that I was to continue as an employed dentist under a Services Agreement." (emphasis added)

• [50] On 1 May 2013, Mr Ralphs of the defendant provided Dr Stephenson with a copy of a proposed Services Agreement.
• [51] Further, on 1 May 2013, Dr Duff attended at the practice and he and Dr Stephenson had a conversation about the future arrangements. Dr Stephenson, in his affidavit, gave evidence that he was open to work with Dr Duff who had reassured him that he was looking forward to working together and improving the practice's profitability.
• [52] Before Dr Stephenson gave his oral evidence, he was taken to his affidavit which I have set out at some length above. He was given the opportunity to make any changes to it which he wished to make, and he did make some minor corrections to it. He did not however resile from the substance of those matters which are set out at paragraph [49] above or seek to correct them in any way.
• [53] Dr Duff also gave evidence that he took over as the Practice Principal at the Albany Creek practice on and from 1 May 2013, replacing Dr Stephenson in doing so.
• [54] Dr Stephenson's affidavit describes that during May 2013 he was negotiating terms of the proposed Services Agreement with the advice of his lawyer, in conjunction with representatives of the defendant, Dr Duff and Dr Stephenson's accountant, Mr Edwards. Those terms included:

(a) payment of his Dental Draw on billings, not collections, because after May he had no authority over collections, debtors, use of vouchers as payment, etc;

(b) guarantee of access to patients who wish to have an appointment with him specifically;

(c) guarantee of staffing because he was already working, sometimes without a chairside dental assistant;

(d) the proposed minimum annual revenue;

(e) the proposed clawback of any shortfall amount as an employee;

(f) exceptions to restraint (of practice);

(g) calculation of any and all outstanding EBIT debt and the value of his shares; and

(h) the proposed clawback hurdle on production as an employee.

• [55] Dr Stephenson also gave evidence that the ledger contained in Exhibit DFS-18 to his affidavit showed that in May and June of 2013 when he was working as an employed dentist for Dr Duff, he "produced gross fees of $152,933.85 towards the 1st year production target of $700,000 under the negotiated terms of the new Services Agreement."
• [56] On 16 May 2013, Ms Bryce of the defendant emailed Dr Stephenson to discuss with him some of the terms which were then under negotiation. That email contains numerous references to Dr Duff now being the Practice Principal such as:

(a) "Clause 5...to ensure that the Practice Principal (Dr Duff) does everything reasonably necessary to give full effect to Dr Stephenson's Services Agreement...";

(b) "Dr Duff has agreed to assume the role of incumbent Practice Principal and as such will have the day to day responsibility of managing...";

(c) "...it is a matter between Dr Stephenson and Dr Duff to discuss and agree on availability of a chair, chair side assistant, patient flow etc..."

(d) "...[the defendant] has put in place contractual arrangements with Dr Duff regarding him assuming the Practice Principal role in Albany Creek...".

• [57] The defendant therefore contends that the parties reached an enforceable agreement on 23 April 2013, the fundamental terms of which included that:

(a) effective from 1 May 2013, Dr Stephenson would cease to be engaged as the Practice Principal of the Albany Creek practice;

(b) Dr Stephenson would cease to have the financial and operational responsibilities for the Albany Creek practice;

(c) Dr Duff would be engaged as the Practice Principal and would have the financial and operational responsibilities for the practice from that date;

(d) Dr Stephenson would be engaged as an associate dentist and would work at the Albany Creek practice with and at the direction of Dr Duff from that date onwards. As part of that arrangement, Dr Stephenson would be entitled to 40 per cent of the fees that were collected from the provision of services by him with a personal performance hurdle of $800,000 in fees per year; and

(e) Dr Stephenson's shortfall, or clawback, would be pro-rata'd to the annual hurdle (which was then $250,000) for the 10 months to 30 April 2013, and that that amount would be repaid to the defendant over the following 24 months.

• [58] Dr Stephenson alleges that from about February 2013 he began developing symptoms of work stress related to clinical depression. Between February 2013 and July 2013, his condition worsened such that on 1 July 2013 he was admitted to the Pine Rivers Private Hospital and by reason thereof was temporarily precluded from being able to provide dental services at the Albany Creek practice.
• [59] The cause of the decline in Dr Stephenson's mental health is not a matter which I have to decide in these proceedings. It can however be accepted that Dr Stephenson was not able to work, and did not work, between that date and 2 September 2013.
• [60] In the period that Dr Stephenson was not working a couple of events occurred, set out at paragraphs [102] to [114], each of which Dr Stephenson submits that I ought to consider in the context that he was heavily medicated at the time, and was angry about what he describes as the miscalculation of the debt which he owed to the defendant. Additionally, he felt that he was not supported by anyone within the defendant's business during a time that he was obviously experiencing very significant difficulties with his health.

What were the contractual arrangements as and from 1 May 2013?

• [61] It is necessary is to determine what the status of the contractual relationship was between the parties at this time because of the need to identify whether any breach of the then existing contractual terms arose from the events which happened after

• [62] The plaintiffs' case proceeds on the basis that the DC Services Agreement was still in place from 1 May 2013, but especially throughout the whole period that Dr Stephenson was unable to work from 1 July 2013 onwards. The defendant contends that the parties had mutually agreed to terminate, or abandon, the DC Services Agreement with effect on or from 1 May 2013 (or in the alternative by no later than 2 September 2013).
• [63] The first question is whether the parties had terminated the DC Services Agreement on or around 1 May 2013. If the answer to that question is yes, the second issue to determine is whether some other agreement had been reached around that time and what were the terms of it.
• [64] These issues arise out of the following paragraphs of the pleadings. By its amended statement of claim the plaintiffs pleaded, at paragraph [23]:

"23. By letter dated 2 September 2013, from Evans of Dental Corp to Stephenson and Smiledentist ("Dental Corp Termination"), Dental Corp purported to terminate the Dental Corp Services Agreement, effective immediately.

Letter Evans of Dental Corp to Stephenson and Smiledentist dated 2 September 2013."

• [65] In its second further amended defence to the statement of claim the defendant replied to that allegation as follows:

"9. In answer to the allegations in paragraph 23 of the amended statement of claim, the defendant:

1. says that in or about April 2013, the parties agreed that commencing on or about 1 May 2013:
   1. the first plaintiff would cease or no longer be engaged as the Practice Principal for the dentistry practice at...Albany Creek...:
   2. Dr Malcolm Duff would assume the position and commence providing services to the defendant as the Practice Principal at the Albany Creek Practice; and
   3. the first plaintiff would be engaged to work in the Albany Creek Practice as an Associate Dentist under the direction of Dr Duff as Practice Principal.

Affidavit of the first plaintiff sworn 19 April 2023 at paragraphs 125-145, 150-154, 167-168, 173,175, 220, 224.

1. says further that:
   1. on or about 1 May 2013, Dr Duff assumed the position and commenced providing services to the defendant as the Practice Principal at the Albany Creek Practice; and
   2. in May 2013 and June 2013, the first plaintiff worked in the Albany Creek Practice as an, or in the position of, Associate Dentist:

1. says by reason of the matters pleaded in sub-paragraphs (a) and (b) above, the parties mutually agreed to terminate or abandon the Dental Corp Services Agreement with effect on or from, or no later than, 1 May 2013:

1. says further that by reason of the matters pleaded in sub-paragraph (c), the Dental Corp Services Agreement had terminated by 2 September 2013:
2. in the alternative to sub-paragraphs (a)-(d) above, if the parties did not mutually agree to terminate or abandon the Dental Corp Services Agreement with effect on or from, or no later than, 1 May 2013:
   1. admits that Evans on behalf of the defendant sent the letter dated 2 September 2013 (Termination Letter);
   2. admits that by the Termination Letter the defendant terminated the Dental Corp Services Agreement;
   3. says further that the defendant's termination of the Dental Corp Services Agreement was legally valid and effective; and
3. otherwise denies the allegations because they are not true as a matter of fact or as a matter of law."

• [66] The plaintiffs replied to the amended defence denying the agreement as alleged in paragraph 9(a) as set out above on the basis that:

(a) no final agreement was reached between the parties in the respects pleaded or at all;

(b) there was no alteration to the DC Services Agreement signed by each of the parties in accordance with clause 20.1 thereof or at all;

(c) the draft employee contract provided to the first plaintiff in May 2013 was never accepted, nor signed, by or on behalf of the first or second plaintiffs; and

(d) in the premises, the parties did not in truth and in fact enter into any agreement as alleged or at all.

• [67] The plaintiffs then provided particulars as to the last mentioned fact that there was no agreement as alleged or at all by reference to various documents contained in the plaintiffs' disclosure.
• [68] As to the balance of the allegations in paragraph 9 of the amended defence, the plaintiffs plead:

(a) as to paragraph 9(b), admits the allegations in 9(b)(i) but says that "Dr Duff was, and was intended, as a temporary measure" in light of Dr Stephenson's condition as pleaded in paragraphs 16 and 17 of the amended statement of claim;

(b) deny the allegations in paragraph 9(b)(ii) on the basis that those facts were untrue and that from the period from February 2013 the first plaintiff was under the care of, and receiving treatment from, his psychiatrist; and

(c) as to the matters in paragraph 9(c), the plaintiffs deny the allegations and plead that there was no mutual agreement to terminate or abandon the DC Services Agreement in May 2013 as alleged, or at all, specifically pleading that the defendant did not ever act consistently with an actual or constructive termination of the DC Services Agreement in May 2013.

• [69] The plaintiffs' case therefore proceeds on the basis that the DC Services Agreement was ongoing as at 1 May 2013, and continued to be ongoing after Dr Stephenson became ill in July 2013. The plaintiffs contend that the parties remain bound on the terms of that agreement, as amended in 2010 and 2012, until the effluxion of the second five-year term under the agreement, that is until June 2018.
• [70] Whether the parties have made an agreement is to be determined objectively.[2] In Solle v Butcher[3], Denning LJ said:

"...once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground."

• [71] Whether a contract has come into existence is to be determined by reference to the intention of the parties "disclosed by the language the parties have employed".[4]
• [72] In Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd[5] the Court of Appeal identified that the proper approach is to consider the relevant communications and what they would have conveyed to a reasonable person in the position of the parties, informed in the context of the surrounding circumstances. In Weemah's case, the Court of Appeal followed the New South Wales Court of Appeal in Brambles Holdings Ltd v Bathurst City Council[6] where the court accepted that the "acid test... is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain."[7]
• [73] No party disputed that there was an existing contract on foot between Dr Stephenson and the defendant in the five years prior to May 2013. That contract was in writing and signed by the parties. The terms of it were contained in the DC Services Agreement and the 2010 and 2012 Deeds.
• [74] As to the first question being whether there was a termination of the DC Services Agreement, no party pleaded or submitted that:

(a) the only means by which the DC Services Agreement could be terminated were set out in clause 13; or

(b) there had in fact been a termination in accordance with clause 13.

• [75] Rather, the case was conducted by the plaintiffs on the basis that by a letter dated 2 September 2013, the defendant purported to terminate the DC Services Agreement effective immediately. The statement of claim did not raise any issue that there had been a termination, or purported termination, on or around 1 May 2013. That issue only arose in the defendant's defence (as set out in paragraph 9 of the amended defence above) when, in denying that the contractual arrangements were terminated on 2 September 2013, the defendant pleaded a positive case that in fact the contractual arrangements had been terminated earlier, and specifically on or about 1 May 2013. Specifically, the defendant pleaded that "the parties mutually agreed to terminate or abandon the DC Services Agreement with effect on and from, or no later than, 1 May 2013".
• [76] I find that by 1 May 2013 there was a concluded agreement in relation to the termination of the DC Services Agreement for the following reasons.
• [77] First, and by way of context prior to 1 May 2013, the idea of Dr Stephenson no longer being the Practice Principal at the Albany Creek clinic was first "mooted" with him in April 2013. At that time, his evidence demonstrates that he understood that that meant that he would no longer be responsible as Practice Principal to meet the EBIT Profit Margin and rather would work under an employment contract with the practice.
• [78] Second, also by way of context prior to 1 May 2013, when the defendant, by Mr Chambers, proposed that Dr Stephenson relinquish the Practice Principal role from the end of the nearest month (then April 2013), Dr Stephenson agreed to the proposal "in principle". The proposal included the four critical features that Dr Stephenson would:

(a) relinquish the Practice Principal role as of 1 May 2013;

(b) remain as an associate dentist;

(c) work under the direction of Dr Duff who would have the overall financial responsibility; and

(d) have no financial responsibility for the overall practice performance.

In his affidavit Dr Stephenson said that he agreed to the new proposal in principle, and awaited documentation.

• [79] Third, when Dr Duff telephoned him in late April 2013, Dr Duff confirmed that he was taking over as the Practice Principal effective from 1 May 2013. Dr Stephenson's evidence was that he agreed to work in the practice as an employed dentist under an employment contract.
• [80] Fourth, Dr Stephenson then proceeded on the basis that whilst he and the defendant were formalising the new arrangement he considered "in truth and in fact" that Dr Duff was taking over as the Practice Principal from 1 May 2013.
• [81] Fifth, Dr Stephenson gave evidence that during the period of "the whole of May 2013 and June 2013" he was working as an employed dentist for the practice.
• [82] Sixth, Dr Stephenson considered that because Dr Duff was taking over as the Practice Principal, he would no longer be responsible for the practice EBIT from 1 May 2013 onwards.
• [83] Seventh, on 1 May 2013 Mr Ralphs of the defendant attended the practice and "formally advised" Dr Stephenson that he was no longer the Practice Principal as the practice was now being administered by and under the responsibility of Dr Duff. Dr Stephenson understood that he was to continue to act as an employed dentist after that time. He was given a proposed services agreement on that day.
• [84] Eighth, Dr Duff's evidence was that he in fact took over as Practice Principal on 1 May 2013, replacing Dr Stephenson, and has continued to act as Practice Principal since that time.
• [85] Ninth, the contemporaneous emails support that conclusion. Dr Stephenson's email of 11.58am on 23 April 2013 (set out at paragraph [47] above) can, in context, be seen as an acceptance of the change in the contractual arrangements between the parties. In fact, the response "no problem. sounds fine. I would like to work with Malcolm. Am I to be an employed dentist or a contractor" suggests that not only had the first plaintiff accepted, in an unqualified way, that he was no longer to be the Practice Principal, but his acceptance of that proposition was also not conditioned upon whether he would be an employed dentist or a contractor. He seemed open to accept either option, so long as he was no longer the Practice Principal.
• [86] Tenth, that reading of his email is also consistent with his next email, which occurred after the defendant responded he would be a contractor, to which he responded, "I am 100% behind the proposal".

• [92] The plaintiffs' reply pleads that the draft employee contract provided to him was never accepted, nor signed, by or on behalf of the first or second plaintiff. That is correct, and the defendant did not contend to the contrary.
• [93] The fact that the draft employee contract was never settled by its terms proves only that the terms of the new contract were not established, but does not prove that the terms of the old contract were not terminated.
• [94] Dr Stephenson did not plead or submit an alternative damages claim based on some contractual arrangements other than as Practice Principal. There are therefore no damages claimed for breach of the agreement to work as a contractor dentist.

• [95] The plaintiffs submit that there are several witnesses that the defendant failed to call, each of whom were well-placed to give relevant evidence. The plaintiffs submit that it can be inferred reasonably that those witnesses are available, and no explanation was provided for their absence.
• [96] The plaintiffs identify five such persons, the majority of whom either were the authors of emails in evidence before me, or with whom the plaintiffs or others had conversations relevant to the first plaintiff's contractual arrangements with the defendant.
• [97] No Jones v Dunkel inference arises in this case. Primarily that is because the first plaintiff's own evidence in his affidavits made their evidence unnecessary. The defendant expressly pleaded its reliance upon the first plaintiff's own evidence at identified paragraphs of his affidavits to support its allegation that the contractual arrangements with Dr Stephenson acting as the Practice Principal were terminated on and from 1 May 2013. The defendant did not plead, nor particularise, any reliance upon the evidence of any of the five persons whom the plaintiffs allege ought to have been called. In my view, the plaintiffs' reliance upon Jones v Dunkel in this case is misplaced.
• [98] Nevertheless it is submitted on the plaintiffs' behalf that it is "the clearest possible instance for invoking Jones v Dunkel" because this case is, the plaintiffs submit, "a classic Masters v Cameron[9] situation", being whether the parties were proceeding on the basis that they could arrive at an agreement orally, and that they would be immediately bound by it or whether they arrived at an agreement orally which depended on the documenting of its terms later. Senior counsel on behalf of the plaintiffs submitted that if the defendant wished to proceed on the basis that the parties were immediately bound by the terms of their arrangement, then they ought to have called evidence from one of the persons who was involved in those contractual discussions with the first plaintiff to prove that, objectively, the defendant was proceeding on the basis that it was so immediately bound.
• [99] I reject that approach. I am satisfied that the evidence to which I have referred at paragraphs [77] to [90] above, demonstrate that the intention of the parties was that on and from 1 May 2013 Dr Stephenson was to no longer be the Practice Principal at the Albany Creek practice and he was to assume a role as a contractor dentist.

• [102] After 1 May 2013 Dr Stephenson continued to negotiate terms of a new Services Agreement with the defendant. That included issues in relation to a possible buy up of his shareholdings in the defendant's company as well as discussions about access to patients, billings, dealing with restraints of trade and calculations of his outstanding debts, to name a few. Emails passed between the solicitor then acting for Dr Stephenson, his accountant, Mr Edwards, and Dr Stephenson himself with representatives of the defendant. Whilst those negotiations were directed to the new contractual arrangements between Dr Stephenson and the defendant which had not been finalised, the correspondence also reflected the facts, as I have found them, that Dr Duff had taken over the role of Practice Principal at the Albany Creek Practice. The correspondence was therefore directed towards the proposed new contractual arrangements, but did not reflect that Dr Stephenson had an ongoing role in relation to making decisions on resourcing, rostering, equipment, consumables purchases, marketing etc., all which were to now be the responsibility of the new Practice Principal.
• [103] The email negotiations for Dr Stephenson's new contract continued through to June 2013.
• [104] During this period, and indeed even as early as February 2013, Dr Stephenson says he was developing symptoms of work stress, anxiety, sleeplessness and depression. It seems from the evidence of Dr Stephenson's psychiatrist, Dr Granger, that Dr Stephenson had been experiencing at least some of those symptoms, to a lesser extent, since about 2007. I accept that those symptoms became debilitating in the period February 2013 to July 2013. By mid-June 2013 Dr Stephenson was reporting to his general practitioner that he was significantly depressed, he was recorded as weepy, withdrawn and undergoing intense, chronic work pressure.
• [105] On 1 July 2013 Dr Stephenson was admitted to hospital under the care of a psychiatrist, Dr Granger.
• [106] Whilst he was in hospital as an inpatient, Dr Stephenson was contacted by Dr Duff who rang to enquire about his health and reassured him that the practice was being looked after. He did not receive any contact from any other representative of the defendant during the period of his admission as an inpatient.
• [107] In late July 2013 Dr Stephenson was allowed a day pass out of hospital, and on one such day he attended the Albany Creek practice to pick up some personal items. He then received an email dated 23 July 2013 from the defendant the contents of which were as follows:

I understand that you are currently staying at and receiving treatment at an inpatient facility. I hope that you are finding that the treatment is beneficial and that it will provide the best longterm outcome for your wellbeing.

It has come to our attention that you attended the practice on recent occasions, subsequent to your admission at the facility, to treat patients. As you are currently away from the practice on medical grounds, it is concerning that you are continuing to treat patients.

Whilst I have no doubt as to your clinical abilities generally and understand that you have a loyal patient base you wish to care for, we request that until you have completed your treatment you refrain from treating patients. The wellbeing of patients is extremely important, as is your own health and so I would ask that you genuinely give yourself the time to recover.

Ultimately, everyone at DC wants to see you back to health in a position to be servicing the needs of your patients just as soon as you are ready. Please don't push yourself and put yourself in a difficult situation by treating patients when you are still undergoing treatment.

This is not intended to be an admonishment, but rather a message of support to let you know that your patients will be there for you when you return and we will ensure that they are cared for whilst you are away.

It is our intention that you focus on yourself at the moment, so please take the time to do so. The staff at the practice can see to the continued care of your patients.

• [108] Dr Stephenson's reply of 30 July 2013 to that email was lengthy, but it did not raise any issue leading to a conclusion that Dr Stephenson considered he was still the Practice Principal. The email traversed a number of different issues but, amongst other things, set out that Dr Stephenson would not be signing the contract which the defendant had offered. He went on to assert:

If DC hasn't been able to transfer marketable goodwill of the patients to itself over the last 5 years, it is not my problem or responsibility to do so."

• [109] Dr Stephenson was then discharged from hospital, having received advice from his psychiatrist that he should go home, rest, take things easy and try to establish a routine. He was to attend weekly private consultations with his doctor, and was told that a review of his condition, including his fitness to return to work, would be undertaken in October 2013.
• [110] On 9 August 2013 he received a further email from the defendant noting that the defendant understood that he was now out of hospital and hoped that he was feeling better. The email went on:

"Can you please let me know when you will be in a position to return to the practice and provide dentistry services as per your Services Agreement?

It is of course your prerogative not to sign the new agreement. DC respects your right to take this stance. However, if the new agreement is not signed, the default position of course is that the Services Agreement (as amended) remains on foot." (emphasis added)

• [111] The reference to the Services Agreement remaining on foot could only have been a reference to the DC Services Agreement, as amended in 2010 and 2012, as there is no suggestion that any other agreement could possibly have been "on foot". For the reasons which I have set out below, I have found that the defendant was wrong to assert that any agreement remained on foot as at the date of the 9 August 2013 email.
• [112] Dr Stephenson replied on 21 August 2013:

"I am an employed dentist in your company and you have specified that I am paid on collections. Therefore I would like an explanation as to why I have not been paid my dental draw due on 15 August.

I also request that you immediately stop lab and suppliers incorrectly billing David Stephenson or Smiledentist.net P/L for supply. You have several lab invoices billed to me recently that are not mine.

• [113] Dr Stephenson's assertion that he was an "employed dentist" appears to be an assertion on his part that the Services Agreement did not in fact remain on foot. That assertion was a correct one, and is consistent with the evidence given by Dr Stephenson in his first affidavit.
• [114] On 26 August 2013 Dr Stephenson again wrote to the defendant and recorded that his doctors had required that he not return to work at the present but that he would be reassessed in early October. He recorded that he had not received any response to his request that he be paid his Dental Draw of 15 August, and reminded the defendant of its obligation to collect outstanding fees and pay him his commission.

• [115] On 2 September 2013 the defendant sent by email copies of two letters, and accompanying documents, which had also been faxed and sent to Dr Stephenson by registered post.
• [116] The letter of 2 September 2013 referred to the DC Services Agreement between Dr Stephenson, the second plaintiff and the defendant dated 27 June 2008, and amended by the 2010 and 2012 deeds. The letter is headed "Acceptance of your repudiation of the Services Agreement".
• [117] The letter identified that Dr Stephenson had not performed any work "under the Services Agreement" since 28 June 2013. The letter went on:

"It is clear to us, on the basis of your correspondence with Dental Corporation and your recent conduct, that you do not intend to continue to perform work under the Services Agreement, that you do not regard yourself or the Service Company as being bound by the obligations under the Services Agreement and that you and the Service Company have repudiated the contract with Dental Corporation. Dental Corporation hereby accepts that repudiation, effective immediately, which terminates the Services Agreement."

• [118] The letter otherwise went on to reserve the defendant's rights in relation to aspects such as confidentiality, intellectual property and restraint of trade.
• [119] Whilst the defendant's primary case was that the agreement was terminated on 1 May 2013, the alternative case was that by the correspondence of 2 September 2013 the defendant validly and effectively terminated the DC Services Agreement. The defendant relied upon Dr Stephenson's repudiation of the agreement, and purported to accept that repudiation.
• [120] Repudiation of a contract may be constituted by renunciation of it, or breach, or both.[10] Renunciation generally refers to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. The High Court in Koompahtoo's case described it as the conduct of a party "which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations". Gleeson CJ, Gummow, Heydon and Crennan JJ went on to say:

"[44] ... The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it."

• [121] Alternatively, repudiatory breach of contract may refer to any breach of contract which justifies termination by the other party. The plurality went on:

"[44] ...There may be cases where a failure to perform, even if not a breach of an essential term ... manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words."

• [122] The defendant contends that, if the contract still remained on foot as at 2 September 2013, Dr Stephenson had evinced an unwillingness or inability to render substantial performance of that agreement by:

(a) first, Dr Stephenson did not perform the dentistry services under the DC Services Agreement at any time after 1 May 2013; and

(b) second, Dr Stephenson's evidence as to what he would have done if he was able to return to the Albany Creek Practice from November 2013 was directed to him performing the agreement or arrangement that existed from 1 May 2013, and not to performing the services under the DC Services Agreement.

• [123] Importantly, the defendant relies on the fact that nowhere in the material did Dr Stephenson say that he was prepared to work at the Albany Creek Practice as the Practice Principal from 1 May 2013 onwards, taking on the financial and operational responsibility for the practice.
• [124] There is no evidence that any medical practitioner provided a report regarding Dr Stephenson's capacity to resume work as a Practice Principal, or at all, prior to the letter of 2 September 2013. Two medical practitioners did provide evidence of their opinions at later times.
• [125] Dr Howard Granger, a psychiatrist, provided correspondence of 7 February 2014, which appears to have been given to Dr Stephenson's insurer in the context of an income protection claim. The relevant parts of the correspondence, for present purposes are:

"Mr Stephenson suffers from a pervasive and intense dislike of regular dentistry. He can't stand the thought of doing the usual stuff associated with the dental profession. Whenever he considers such a prospect, he breaks out in a cold sweat, becomes nauseated, his heart races, he gets dizzy, and can't focus. In essence, he has a panic attack.

The main barrier to him returning to regular dentistry is the major panic attacks he has when faced with the task of doing it. I don't believe he will be able to overcome this. He is basically over it, and never wants to do it again.

He has no capacity to do regular dentistry, either part or full-time."

• [126] Dr Granger then sent a further piece of correspondence dated 2 March 2014 observing that Dr Stephenson was recovering from Major Depressive Disorder and observed:

"He is unable to go back to regular clinical dentistry. His experiences with an uncompromising and uncaring contract burnt him out. The mere idea of returning to that sort of work fill him with trepidation, worry, and severe physical symptoms of anxiety. His concentration goes out the window, and he does not believe he could complete the required tasks safely. ... In essence he is incapable of doing a regular dentistry job ..."

• [127] Dr Granger did go on to identify that Dr Stephenson had a particular interest in a variation of dentistry that looked at the mechanics of the jaw and the upper neck, and that he had taken on a part-time role supervising some dental students.
• [128] Dr Granger gave a further report of 6 June 2014 in which he again expressed the opinion that Dr Stephenson would not go back to traditional clinical dentistry. In a further letter of 27 November 2016, he expressed the opinion that although Dr Stephenson's depression and anxiety were "definitely improved" he would not be able to work any more than 25 hours per week as a dentist.
• [129] Dr Granger's oral evidence was not particularly helpful, as he had virtually no recollection of the patient or his condition. On a number of occasions, he referred to things that he "would assume" or to the fact that he was "guessing" about Dr Stephenson's condition. In that context I take the evidence in his affidavit to be the best evidence that he could possibly give in relation to the issue.
• [130] Dr Stephenson did not give any evidence before me that he was in fact able to perform his duties as a Practice Principal in the period between 1 May 2013 and 2 September 2013. For the period of the whole of May and June 2013, his evidence was that he worked as an employed dentist and that Dr Duff had taken over as the Practice Principal in that period. The evidence satisfies me that he worked as a dentist in that period, but not that he carried out the duties of a Practice Principal. Then, for the period 1 July 2013 to 2 September 2013, Dr Stephenson did not return to employment at Albany Creek as an employed dentist or contractor, and certainly not as Practice Principal.
• [131] In addition to those matters, between 2 September 2013 and 6 June 2014, Dr Granger's evidence satisfies me that Dr Stephenson had no capacity to do regular dentistry work on either a part-time or full-time basis. I infer from that evidence, and find, that in circumstances where he was not able to carry out regular dentistry work, he was certainly not in a position to carry out all of the requirements of Practice Principal.
• [132] Senior counsel for the plaintiffs contended that the court should have regard to the evidence of Dr Stephenson's taxable income contained in his taxation returns for the purposes of demonstrating that Dr Stephenson has in fact been generating significant income from the carrying on of dental work despite the concerns which he expressed to his medical practitioners. Extracted from the report of Mr Otto, who performed calculations as to Dr Stephenson's contended losses, the plaintiffs relied upon the following evidence of Dr Stephenson's actual earnings:

(a) financial year ended 30 June 2013, a taxable income of $27,118;

(b) financial year ended 30 June 2014, a taxable income of $64,826;

(c) financial year ended 30 June 2015, a taxable income of $201,873;

(d) financial year ended 30 June 2016, a taxable income of $169,512;

(e) financial year ended 30 June 2017, a taxable income of $202,196; and

(f) financial year ended 30 June 2018, a taxable income of $221,704.

• [133] The submission misunderstands the question in relation to repudiation. Dr Stephenson had ceased to be the Practice Principal on 1 May 2013. He carried out the employment duties of a dentist between May and June of 2013, but undertook none of the responsibility for the operational, financial or managerial parts of the practice at any time after 1 May 2013. He performed none of these duties from 1 July 2013 onwards. On 26 August 2013 he told the defendant "my doctors have required that I do not return to work at present" and stated that he would be reassessed in early October. As at 2 September 2013, he had not therefore worked for the months of July and August and had told the defendant he was not, effectively, returning to work in September. There being no DC Services Agreement on foot, and no substitute contractual arrangements agreed to, the defendant was fairly able to conclude that Dr Stephenson was not in a position to perform the fundamental obligations of his services as a dentist and was therefore quite properly in the position to consider that Dr Stephenson's inability to perform those services was a repudiation of the undocumented agreement that existed between the parties. The fact that in the years which followed, Dr Stephenson exercised his ability to earn an income in no way informs the question of whether his conduct was repudiatory at the relevant time.
• [134] As to the question of repudiation therefore, I am satisfied that Dr Stephenson's inability to render substantial performance of any duties between 1 July 2013 and 2 September 2013, coupled with the fact that he did not perform the Practice Principal's duties from 1 May 2013 to 1 July 2013, would reasonably have lead the defendant to conclude that there had been a renunciation either of the contract as a whole or of the fundamental obligations under it. The defendant would therefore have been justified as treating the contract as no longer on foot and accepting the repudiation of the contract.
• [135] Had it been necessary to so decide, I would have concluded, in the alternative, that the defendant was entitled to treat Dr Stephenson's conduct as a repudiation of the contract and accept that repudiation.

• [136] Although it is unnecessary for me to make any decision in relation to the calculation of Dr Stephenson's loss, his claim having been dismissed, I should nevertheless say something about the basis upon which the claimed loss was calculated.
• [137] The first and second plaintiffs plead in the amended statement of claim that the loss and damage suffered by reason of the defendant's breach of contract amounts to some $1,461,854 million. That figure is calculated on the basis that Dr Stephenson would have resumed provision of services under the DC Services Agreement continuously from about November 2013 and would have continued to provide those services until July 2018. Additionally, it is claimed that the second plaintiff suffered loss and damage in an amount in the order of $121,975.
• [138] For the reasons which I have already given, I find there is no such loss. Dr Stephenson and the defendant had mutually agreed to terminate the DC Services Agreement. Dr Stephenson was no longer the Practice Principal and had no intention to resume that role. To the extent that he intended to have a continuing contractual relationship with the defendant, it was intended to be a relationship where he would work as a dentist, contracted to the defendant, but with no responsibility for the performance, management or financial success of the business. The calculation of his damages by Mr Otto by reference to a contract which had ended on or about 1 May 2013 is a calculation which is based on a series of assumptions which are not made good.
• [139] The court was provided with two reports of Mr Otto, a chartered accountant, in relation to this issue. The first report was prepared on the basis that Mr Otto was to assume that Dr Stephenson was fully prepared to resume his professional duties as a Practice Principal by November 2013.
• [140] No evidential basis for that assumption was offered.
• [141] Dr Stephenson did not provide evidence that he was ready to resume those duties by that date, and nothing in the evidence of Dr Granger or the general practitioner, Dr Murray, supported it. Dr Granger's contemporaneous evidence in 2014 was that Dr Stephenson would not have been able to return to dentistry work up to and including 6 June 2014. His later report of 27 November 2016 suggested that Dr Stephenson's "limit" was 25 hours per week as a dentist.

"In May 2013 as part of a new arrangement BUPA Dental Corporation required a power of attorney over Mr Stephenson's shares, to absorb his historical cash flow shortfall. BUPA Dental Corporation required this to be done to complete the buyout by BUPA on 9 May 2013 without any encumbrance."

• [150] As a consequence of that instruction, Mr Otto then removed from his calculations the historical shortfall amount. Mr Otto understood that the instructions therefore were that Dr Stephenson's remuneration was no longer linked to the cash flow of the practice, but all the other assumptions remained that both Dr Stephenson and others who were working in the practice would continue to generate the same fees. Put another way, the instructions to Mr Otto were premised on the basis that Dr Stephenson was no longer the Practice Principal, and therefore not affected by the clawback provisions of the DC Services Agreement. But that is not the plaintiffs' case. The plaintiffs' case is that Dr Stephenson was in fact still the Practice Principal, and that there had been no valid and legally effective termination of that arrangement. Therefore, Mr Otto's calculations, based effectively on a set of assumptions that Dr Stephenson was now merely a dentist within the practice had no evidentiary foundation when, according to the plaintiffs' own case, the terms of the agreement between Dr Stephenson and the defendant had not been settled upon for that new role. In the circumstances, the factual foundation underpinning the alternative calculations of Mr Otto's are simply not made out.
• [151] Even if the plaintiffs had an alternative claim for damages on the basis that Dr Stephenson would have worked as an employed dentist or contractor, it is unlikely that they could demonstrate any loss in any event. The plaintiffs' case proceeded on the basis that the court should accept that the figures set out at paragraph [132] above were reflective of the first plaintiff's ability to earn an income as a dentist in the years between 2013 and 2018. Assuming that I accepted that as correct (which I do not) the figures demonstrate an income in the four years between 2015 and 2018, generally in the vicinity of $200,000 per year. Those figures can be contrasted, historically, with Dr Stephenson's actual earnings as were summarised by Mr Otto in which the taxable income is demonstrated of:

(a) financial year end 30 June 2009 $67,849;

(b) financial year end 30 June 2010 $118,969;

(c) financial year end 30 June 2011 $73,102;

(d) financial year end 30 June 2012 $29,684; and

(e) financial year end 30 June 2013 $27,118.

• [152] An average over that five year period is the sum of just in excess of $51,000 per year. In those circumstances, the court is most unlikely to accept an assessment, based on an incorrect set of assumptions, to demonstrate an income of $200,000 per year when historically the earnings were substantially less than that.
• [153] What the evidence in fact demonstrates is that, when unburdened by the responsibilities of a Practice Principal, Dr Stephenson was in a position to more freely exercise his earning capacity as a dentist, when his mental health permitted him to do so. There is no reason to think that he exercised less than whatever capacity he in fact possessed in those years. In those circumstances, even had the alternative case been pursued, that the first plaintiff might have worked as an employed dentist, or a contractor for the defendant, had that undocumented agreement ever reached a conclusion, there is no reason to think he would have had the capacity to earn any greater income employed by the defendant than he did employed at any of the other places at which he subsequently worked.
• [154] But nothing about the comparison of his actual earnings whilst working as a Practice Principal with the defendant and his actual earnings after he returned to work when his mental health permitted him to do so, would lead to the conclusion that he in fact suffered any loss as a consequence of the purported termination on 2 September 2013. By that stage, the contractual relationship in terms of the Practice Principal engagement had been long concluded, and to the extent that there was a termination of the undocumented relationship, it did not lead to any loss in circumstances where Dr Stephenson returned to work as and when he was able to do so, and remuneratively engaged in the employment which he was able to undertake.
• [155] Finally, I ought to say something about the plaintiffs' submission regarding the letter of 2 September 2013, which the first plaintiff characterises as a wrongful termination that, "... obstructed his return [to work], exacerbating his mental distress and financial instability."
• [156] On behalf of the plaintiffs it was submitted:

"The impact of the letter on Dr Stephenson, at a time when he was at his most vulnerable, cannot be understated:

(a) it came completely 'out of the blue';

(b) it was entirely inconsistent with the message expressed by [the defendant];

(c) it was unequivocal and final in its language; and

(d) its impact on Dr Stephenson could only reasonably be said to have resulted in a substantial set back in his recovery, delaying any possible return to duties."

• [157] Cast in this way, the submission has the hallmark of a breach of duty claim rather than a contractual damages claim.
• [158] I have no doubt that the termination of the relationship was a blow to a person who was already experiencing mental health difficulties as Dr Stephenson was. But it does nothing to inform the consideration as to whether the termination was wrongful or otherwise. No contractual damages flow.

• [159] The plaintiffs' claims are dismissed.
• [160] Ordinarily, standard costs should follow the event. If there is to a be a costs argument, the parties are directed to exchange costs submissions, each confined to no more than three pages, with those submissions to be provided electronically to my associate by 8 May 2025.

[1] In a number of places in the evidence, different figures are referred to, being $348,774 and $347,774, but I procced on the basis that the correct figure is as contained in the first plaintiff's evidence, of $349,774.

[2] Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 at 429.

[3] [1949] 2 All ER 1107, CA at 691.

[4] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 362.

[5] [2011] QCA 150; [2011] 2 Qd R 582.

[6] [2001] NSWCA 61; (2001) 53 NSWLR 153.

[7] Ibid at 177-178 citing Meates v Attorney-General [1983] NZLR 308 at 377 (Cooke J).

[8] [1959] HCA 8; (1959) 101 CLR 298.

[9] [1954] HCA 72; (1954) 91 CLR 353.

[10] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at [44].