Sundararajah v Teachers Federation Health Ltd [2010] NSWSC 471 | Case summary

(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it: (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. 7 The Defendant submits, correctly, that that Rule gives power to the Court to vary or set aside interlocutory orders in appropriate circumstances. Both parties are agreed that the ordinary rule of practice is that an application to set aside, vary or discharge an interlocutory order must be founded on a material change of circumstances since the original application was heard, or on the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 440 at 46. (1) The proper construction of the order 8 Before considering whether the order I made should be varied, there seems to me to be a preliminary question which is whether or not, as a matter of construction, the words "any substitute notice" are confined only to a further notice of termination under cl 7.3 or whether they also embrace a notice under cl 7.2. I indicated to the parties that in formulating the order in the way I did I had not intended it to include a notice of termination for cause under cl 7.2. Nevertheless, the issue remains whether the form of the order that was made includes such a notice. 9 The Oxford Dictionary definition of "substitute" ("acting or serving in place of another") would not immediately suggest that notice given under cl 7.2 could be regarded as a substitute notice. What is involved in the procedure under cl 7.2 envisages 2 separate notices. The first requires a party who has committed a material breach to remedy the breach within 90 days of a notice being served. That is then followed by a second notice which would be required to state that either the breach has not been remedied or has not been remedied to the satisfaction of the party giving the notice. 10 It is only the second such notice that could be regarded as a Notice of Termination and, therefore, a "substitute notice" because the first notice required under cl 7.2 only requires the remedying of the breach. It was not a Notice of Termination. However, since the second such notice can only be served following the service of the notice requiring remedying of the breach, it is difficult to see how it could be regarded as a "substitute notice" for a notice given under cl 7.3. It would need, presumably, to identify again the breach and the failure to remedy. In addition, it would not be a notice that terminated after another 90 days. It would be a notice stating that the innocent party was entitled to terminate and did so terminate forthwith. Such a notice could not properly be regarded as a "substitute notice" for one under cl 7.3. 11 Again, one can well envisage that such a procedure could, in some circumstances, occur even if a notice had already been given under cl 7.3. Nor would the service of the notices referred to in cl 7.2 mean that the notice already issued under cl 7.3 would not take effect in accordance with that clause. In that sense a notice of the second type under cl 7.2 is not a "substitute notice" for one served under cl 7.3. 12 A further, although subsidiary, consideration is what might transpire after the notices under cl 7.2 on the one hand and cl 7.3 on the other hand were issued. The dispute in relation to a cl 7.2 notice would be whether there has been a material breach of an obligation by one party and whether it had been remedied or remedied to the satisfaction of the innocent party. The dispute in relation to a cl 7.3 notice could, presumably, only be the sort of dispute that has arisen in the present case, namely, whether the notice has been given in good faith. 13 For these reasons, I do not consider that a notice terminating the Agreement under cl 7.2 can be a "substitute notice" for one issued under cl 7.3 or within the meaning of the order made on 17 December 2009. 14 However, accepting the shortcomings involved in a judge construing his own orders, and noting also that such a conclusion only deals with half of the issue, I will deal with the Defendant's application to amend the orders in any event. (2) Should the order be varied? 15 The Defendant submits that the words "or from issuing any substitute notice" in the interlocutory order should be deleted to allow it to issue any further notice it desires to do so whether under cl 7.2 or cl 7.3. Whilst accepting that the ordinary rule of practice is that there needs to be a material change of circumstances to set aside, vary or discharge the order, the Defendant submits that there are exceptions to that rule which include (i) the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application: Brimaud at 46 and the cases there cited, and (ii) that the interests of justice require it: Brimaud at 46; Metropolitan Petar v Mitreski [2008] NSWSC 243 at [27]; JBK Engineering Pty Ltd v Brick & Block Company Pty Ltd [2007] NSWSC 163 at [7]. 16 The Defendant points to the fact that the hearing in December 2009 was conducted at very short notice and at a time when the affidavit of Donna Maree McCarthy, subsequently sworn 16 March 2010, and the material in it was not available. Whilst accepting that it would have been very difficult, if not impossible, for the Defendant to assemble, collate and tender all of the material contained in Ms McCarthy's affidavit in the time available in December, most of the material (except the audit of 24 February 2010) was available to the Defendant at the time. 17 What the Plaintiff says ought to have happened is that the Defendant ought to have agreed to an injunction for a short period of time to enable it to get its evidence together. The Plaintiff submits that the Defendant made a tactical decision to defend the interlocutory injunction without relying on evidence. 18 I am prepared to assume, for the purposes of the present application, that the whole of the material contained in Ms McCarthy's affidavit demonstrates changed circumstances since December 2009, alternatively, shows that it is in the interests of justice to enliven the power under r 36.16 UCPR. Notwithstanding all of that evidence I do not consider it would be appropriate to vary the order to permit a further notice under cl 7.3. What the evidence tends to show is that the Defendant had some reason or reasons that it considered justified the issue of a cl 7.3 notice. Those reasons, and that material, do not provide such an answer to what the Plaintiff raised about the lack of good faith that justifies a variation of the order. 19 Viewed from another perspective, even if all the evidence in Ms McCarthy's affidavit had been before me when the orders were made in December I would have considered that there was still a serious question to be tried so that an interlocutory injunction would have been ordered. In particular, the material does not deal with items (i), (iii) and (iv) in para 31 of my earlier judgment in such a way that demonstrates there was no serious question to be tried. 20 That being so, it is hard to see how, whilstever the present proceedings remain undetermined, there does not remain between the parties the issue of a lack of good faith. With the parties locked in combat in the present proceedings it is difficult to see how any further notice issued under cl 7.3 would not result in a further injunction to preserve the status quo until the completion of the present proceedings. It is only at that time that, whatever the outcome, the air might be thought to be cleared from the perspective of allegations of a lack of good faith. 21 In the course of his submissions Mr Phillips for the Defendant took me to a number of matters which might be thought to have provided some sort of basis for a termination under cl 7.2 but which he submitted show clearly no absence of good faith by the Defendant in purporting to terminate under cl 7.3. Matters such as the number of complaints made against the Plaintiff, matters that suggested over-charging by the Plaintiff, matters that suggested that the Plaintiff might have misled his clients about there being no GAP to pay for particular procedures, matters involving other dentists in the practice using the Plaintiff's Provider Number in breach of the Agreement, matters involving the provision of services in one year but delaying charges until the next, are all said to be matters that the Defendant was entitled to have regard to when coming to a decision to terminate under cl 7.3. Mr Phillips says further that it is no lack of good faith for the Defendant to have regard to its own legitimate and commercial interests. 22 I can accept that because cl 7.2 enables the party in breach to remedy the breach within 90 days there may be some difficulty (and I have no concluded view about this) in the Defendant purporting to terminate under the procedure set down in cl 7.2 for the matters identified above. That may well be the reason the Defendant chose to go down the cl 7.3 path instead. 23 But if all of these things had been in evidence at the time the interlocutory injunction was sought and, on the assumption, that the Plaintiff would have led at least some evidence to answer these matters it still seems to me clear that there would have been a serious question to be tried, and the absence of evidence about those items in para 31 of my earlier judgment that I have mentioned would only have highlighted that that was so. They are only matters, it seems to me, that can be dealt with at a final contested hearing of the present proceedings. If it transpired that the Plaintiff was able to answer all of the allegations that appear from Ms McCarthy's affidavit, it may, but would not necessarily, mean that there had been an absence of good faith in issuing the impugned Notice of Termination. 24 During the course of argument at the time the interlocutory injunction was being sought, and in my judgment of 18 December 2009 at para [35] I drew attention to the fact that the making of a declaration in relation to the notice issued in September 2009 could not govern future relations between the parties. It seems to me, however, that whilstever the present interlocutory injunction is in place relations between the parties are governed by the issue that awaits final determination, namely, whether there was a lack of good faith in the issue of the September 2009 notice. (3) Is the order too wide? 25 It is then necessary to consider if the injunction was framed too widely. 26 In that regard, the Plaintiff submits that a number of the matters contained in the Defendant's written submissions on the present application were not put at the hearing of the interlocutory injunction and, in particular, the Defendant did not expressly challenge the words in the prayer for relief prohibiting the issue of substituted notices. 27 The Defendant draws my attention to the decisions of Campbell J in Corporate Transport Services v Toll [2005] NSWSC 166 and Hansen J in Kellogg Brown & Root v Australian Aerospace Ltd [2007] VSC 200 as providing support for the submission that it was not appropriate to have framed the order as widely as it was framed by including "any substitute notice". Implicit in that suggestion seems to be the submission that the injunction was framed too widely and that that ought to be corrected. 28 Toll appears to me to be distinguishable on its facts. The issue raised by the Plaintiff in support of its application for an interlocutory injunction was that there was said to be a representation that an agreement would not be terminated before a specified date and that an estoppel in that regard was raised by the Plaintiff acting to its detriment in reliance on the representation. If that was the issue, there was really no occasion for the interlocutory injunction to add words such as were included in the order I made because any further notice of termination issued would necessarily meet the same fate as the one in respect of which the injunction was granted. 29 I accept, on the other hand, that the decision in Kellogg Brown is relevantly indistinguishable where what was being restrained was a notice terminating in much the same terms as cl 7.3 of the present Agreement provided. In that case, the interlocutory injunction did not add words similar to "or from issuing any substitute notice". 30 The decision was not drawn to my attention at the time I made the orders on 17 December 2009. However, even if it had been it is unlikely to have influenced the view I formed that there was a serious question in relation to the issue of good faith because of the matters set out in para 31 of my judgment. Further, I would still have considered that had there been no prohibition on issuing a substitute notice, such a notice would effectively undermine the effect of the injunction I considered it appropriate to order. That is because the issue of a lack of good faith could not necessarily be said to have been isolated to the date of issue of the impugned notice. Another way of putting the matter is to say that any lack of good faith demonstrated could not be said, unarguably, to have dissipated by the shortness of time which had elapsed since the issue of the notice on 29 September 2009. It is for a similar reason that I do not think it is appropriate to amend the order I made in a way which would permit the service of another notice under cl 7.3 prior to the final hearing of the present claim. 31 On the other hand, and putting aside for this purpose the view I expressed earlier in this judgment that "any substitute notice" did not as a matter of construction embrace a notice under cl 7.2 of the Agreement, I consider that the injunction ought to be varied to make it clear that a notice under cl 7.2 would not amount to a substitute notice for the one issued in September 2009 and in respect of which the injunction was granted. If the Defendant has the occasion to issue a notice under cl 7.2 for the failure to remedy a material breach by the Plaintiff of his obligations under the Agreement, that seems to me to be a qualitatively different issue from the issue whether the Defendant properly issued a notice under cl 7.3. The latter notice would appear only to concern the issue of whether it was issued in good faith as a result of the implication of such a principle as discussed in my judgment of 18 December 2009. 32 Moreover, if something arose that justified the Defendant giving a notice under cl 7.2 it is very likely, almost by definition, to be a material change in circumstances that might justify a variation of the existing order in any event. That seems to me to be an additional reason why the present order needs to be clarified to make it clear that it does not preclude a notice under cl 7.2. 33 It would not be appropriate for the Defendant to be restrained from issuing a notice under cl 7.2 if the proper occasion for that has arisen. For the present injunction to prevent the issue of such a notice would be an improper restriction on the contractual rights that exist between the parties when nothing has been alleged by the Plaintiff, let alone demonstrated, that the Defendant had exercised, or intended to exercise, its powers under cl 7.2 improperly. Conclusion 34 The Defendant has asked for expedition of the final hearing. I do not consider it is appropriate for me to make such an order when expedition is dealt with by particular judges in the Equity Division. It is understandable, however, why the Defendant wishes to have an early final hearing in the matter. Although it was appropriate to grant an interlocutory injunction, the situation is not ideal that the Defendant is compelled to continue the contractual relationship with the Plaintiff for any lengthy period when, but for the injunction, the Defendant would be free to issue a notice under cl 7.3 to bring the arrangement to an end without any cause being shown. That was what the parties agreed by the terms of the contract they entered. For that reason, at the conclusion of the hearing of this application on 13 May 2010 I stood the balance of the Motion into the Expedition Judge's List on 28 May 2010. 35 In the meantime, Order 1(a) made by me on 18 December 2009 should be varied so that the Order reads:

Sundararajah v Teachers Federation Health Ltd

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Judgment (13 paragraphs)

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