Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor

Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor - [2008] NSWIRComm 146 - NSWIRComm 2008 case summary — Zoe

[23]

14 At [73] the trial judge considered the reasons given by Mr Court for acquiescing in Dr Windrum's conduct in continuing to overcharge: Whilst it is true that Matrix acquiesced, both at that time and thereafter, in paying invoices rendered by Dr Windrum that were not in accordance with his agreement with Matrix, being based on an averaging, rather than on a proper application of the minimum number of cases per day as required by Mr Court, I accept Mr Court's evidence that such acquiescence was not based upon Matrix accepting Dr Windrum's practice in this regard was appropriate and fair, but rather on the basis that Dr Windrum's indispensability meant that Matrix was effectively hamstrung from taking any effective steps to correct Dr Windrum's unacceptable behaviour in this regard. Mr Court's evidence was that when he challenged Dr Windrum about overcharging, he "cut his feet off". He explained that by the use of this expression, he meant that he should not dare question what Dr Windrum said, or his method of charging. Mr Court explained that he formed the view at this time (2003) that if he had gone any further, he would have caused a huge row with Dr Windrum and he may have walked out on him. Mr Court's behaviour in respect of the overcharging is consistent with his approach to claims made by Dr Windrum for increases in remuneration. He said that he would not have dared reject outright any claim by Dr Windrum. Such was the strength of his bargaining position. Mr Court usually negotiated with him either agreeing with his argument that he should receive an increase or adopting a different method, as he did in October 2004, which resulted in an increase in remuneration for Dr Windrum. 15 At [75] Staff J found that "Such persistent overcharging after the events of 2003 constituted serious misconduct and was a proper basis for summary termination of Dr Windrum." As to Mr Court's acquiescence in the overcharging, Staff J noted the reliance by counsel for Dr Windrum on the decision of Kirby J in Concut Pty Ltd v Worrell & Anor (2000) 103 IR 160 at [51] and counsel's submission that as the overcharging (if the Court found there was overcharging) was "ancient in time", reliance could not be placed on this breach of the contract. His Honour rejected the submission, stating: [77] The difficulty I have with this submission is that firstly, as Kirby J noted "acts of dishonesty ... once discovered, ordinarily ... authorises summary dismissal." Furthermore, it is not correct to characterise the overcharging as ancient in time as such conduct occurred within six months of the date of dismissal. To rely on such conduct to terminate the contract does not manifest unfairness. In any event, when considered, together with the other reasons for summary termination, to which I now turn, in my view, the matters relied upon as a whole (sic) summary termination. 16 In relation to the poor work performance and conduct issue, there was evidence about the difficulties created by Dr Windrum's practice of commencing work early - at about 6.00 am - and leaving early - about midday. The difficulties were those created for other staff in matching such hours, the fact that the laboratory was left unsupervised for a significant proportion of the day and the problems caused by Dr Windrum being uncontactable after he left for the day. Staff J accepted evidence that the respondents had sought to address these problems with Dr Windrum, by saying to him that his practice of commencing early and leaving early was "unreasonable and risky". His Honour accepted that Dr Windrum was dismissive of the respondents' concerns. His Honour also appears to have accepted that the respondents were unable to take any action against Dr Windrum because of their concern about his threat to leave and the difficulties they would face in finding a replacement.

[28]

21 Staff J considered that, "on balance", the disclosure of the information by Dr Windrum was "inappropriate". However, it would appear from what his Honour said at [107] that the trial judge did not place a great deal of weight on the confidentiality breach: [107] Mr Court's evidence was that by 16 May 2005, he had "had enough" of Dr Windrum. What he believed to be a breach of confidentiality on 14 May 2005 was a culmination of a series of events that led Mr Court and Dr Andrew Walker (the other Director of Matrix) to proceed with Dr Windrum's summary termination. In my view, even if the issue of breaching confidentiality was excluded, taking into account the balance of the matters relied upon, I find that the reasons for summary dismissal are made out. 22 Notwithstanding his Honour's findings in favour of the respondents, the trial judge found that the contract between the appellants and the first respondent was unfair as there had been a lack of procedural fairness. The respondents had failed to put allegations, the basis of the summary termination to Dr Windrum, and in turn had not provided an opportunity for Dr Windrum to respond to those allegations. However, his Honour found that the conduct of Dr Windrum, being the "inappropriate" disclosure of confidential information, the persistent overcharging and the conduct and work performance issues, which included offensive comments to staff, were a sufficient basis for the respondents to exercise their right to summarily terminate the contract. In his Honour's opinion, even if the allegations had been put to Dr Windrum, there was no evidence that he would have had any explanation or defence to the allegations. Accordingly, his Honour found the appellants had not made out a case to void or vary the contract. Consequently, there was no basis to make an order for payment in lieu of notice, or to order any further notice beyond the three months that was provided by the respondents. 23 His Honour dismissed the summons and ordered the appellants to pay the respondents' costs.

[91]

73 The issue in respect of overcharging had been raised with Dr Windrum in 2003 when three examples of overcharging had been brought to his attention. Whilst it is true that Matrix acquiesced, both at that time and thereafter, in paying invoices rendered by Dr Windrum that were not in accordance with his agreement with Matrix, being based on an averaging, rather than on a proper application of the minimum number of cases per day as required by Mr Court, I accept Mr Court's evidence that such acquiescence was not based upon Matrix accepting Dr Windrum's practice in this regard was appropriate and fair, but rather on the basis that Dr Windrum's indispensability meant that Matrix was effectively hamstrung from taking any effective steps to correct Dr Windrum's unacceptable behaviour in this regard. Mr Court's evidence was that when he challenged Dr Windrum about overcharging, he "cut his feet off". He explained that by the use of this expression, he meant that he should not dare question what Dr Windrum said, or his method of charging. Mr Court explained that he formed the view at this time (2003) that if he had gone any further, he would have caused a huge row with Dr Windrum and he may have walked out on him. Mr Court's behaviour in respect of the overcharging is consistent with his approach to claims made by Dr Windrum for increases in remuneration. He said that he would not have dared reject outright any claim by Dr Windrum. Such was the strength of his bargaining position. Mr Court usually negotiated with him either agreeing with his argument that he should receive an increase or adopting a different method, as he did in October 2004, which resulted in an increase in remuneration for Dr Windrum. 55 The appellants submitted that in circumstances where there was a disagreement between Dr Windrum and Mr Court as to what the remuneration arrangement was, and after the discussion the accounts, as presented, were paid and continued to be paid on that basis for the next year, without further comment or dispute, then it was clear that any disagreement about the method of remuneration between the two had been resolved. All accounts clearly showed the method of charging. Certainly, it was submitted, the first appellant was entitled to take that view. Further, it was submitted, if the reason for Mr Court conceding the matter in 2003 was the superior bargaining power of Dr Windrum at the time, then that does not turn an agreed position into one of dishonesty and misconduct by the appellant. Nor does the agreement turn on Mr Court's subjective position.

[94]

59 The reference to "Recent scrutiny…" was a reference to the fact that in or about April or May 2005, Ms Pohlner brought to Mr Court's attention that she had reviewed Dr Windrum's reporting statistics and tax invoices and had discovered that Matrix had been overcharged by Dr Windrum in 2004. Even if that were so, the respondents had been aware of Dr Windrum's method of billing since November 2003 and acquiesced in it until it came time to formulate the grounds for summary termination of the contract. It was not as though Dr Windrum's billing practice was a revelation in April or May 2005, thereby adding another ground supporting summary termination. Having acquiesced back in November 2003, the respondents took no steps to advise Dr Windrum that they were accepting his billing practice under protest. That is, Dr Windrum was not advised that the respondents regarded his billing practice as unacceptable or a breach of the contract and in those circumstances, as we have said, Dr Windrum was entitled to believe his billing practice was acceptable. After the discussion between Mr Court and Dr Windrum regarding overcharging in November 2003, Dr Windrum wrote to Mr Court saying that he felt Mr Court's questioning of three invoices based on an averaging approach indicated some "deep distrust" on Mr Court's part. Mr Court responded by saying "I don't distrust you and never have…" Nothing was said about any reservations Mr Court may have had about averaging or gave any indication the practice was unacceptable. 60 In these circumstances, the description by Staff J of "persistent overcharging" by Dr Windrum after 2003 is not supportable on the evidence. Where the first appellant was left with the belief that his practice of averaging was not in breach of any contractual term, the respondents waived any right to use the overcharging issue as a basis for summary termination of the contract: Clarke and Metropolitan Meat Industry Board [1967] AR 16 at 25. Accordingly, we consider his Honour erred in finding that Dr Windrum's "continued overcharging" constituted a "further basis for warranting summary termination".

[103]

[94] It seems to me that because the Supervising Pathologist was responsible for meeting all licensing and regulatory requirements in relation to the Health Insurance Commission/NATA and any other relevant governing authority which is referred to in the statement of duties, it is more likely than not that the respondents would have chosen to have such a matter recorded in a statement of duties and that statement of duties provided to its supervising pathologist. Furthermore, from 1 October 2003, Dr Windrum and Matrix entered into a formal written agreement headed "Deed to formalise his appointment as a supervising pathologist". This document makes reference to duties in paragraph 5 which, it seems to me more likely than not, was a reference to the duties contained in the statement of duties. 72 It may be seen that his Honour essentially preferred Mr Court's version over that of Dr Windrum in finding the statement was provided to the first appellant, but only did so "on balance". His Honour does refer to the Deed entered into by Dr Windrum and Matrix and the fact that the Deed referred to duties. It seemed to his Honour that the reference to duties was "more likely than not" a reference to duties contained in the statement of duties provided to the first appellant. In this respect the appellants submitted reference to "duties" in the Deed ("the Doctor will carry out his duties in a supervisory capacity…") was "highly indicative of the absence of such a document which surely would have been referred to by name in the Deed if it had been provided to Dr Windrum and formed part of the contract". Additionally, it was submitted, if such a document was provided at the time, then paragraph 3 of the Deed would be totally unnecessary. Paragraph 3 provided that: It is agreed between the parties that the Doctor will act in a supervisory role during his contract. 73 The reference to duties in paragraph 5 of the Deed does not assist in reinforcing Mr Court's evidence that he provided a statement of duties to Dr Windrum. Equally, however, we do not consider the reference is "highly indicative" of the absence of the document. The reference to duties in the Deed could mean what his Honour suggested or, equally, it could mean what the appellants submitted. The Deed is of no assistance in determining whether the respondents provided the first appellant with a statement of duties.

[109]

80 Staff J found that despite requests and warnings to carry out the full range of his responsibilities, Dr Windrum's failure to do so provided a clear basis for summary termination of his contracts with Matrix. It does not necessarily follow that because Dr Windrum regularly left work about midday that the first appellant failed to carry out the full range of his duties. There was no specific finding by his Honour about which aspects of his range of duties that Dr Windrum was said to have failed to carry out. The finding that the first appellant failed to carry out the full range of his duties appears to have followed solely from the finding that Dr Windrum regularly left work about midday. 81 Further, if a supervising pathologist "responsible for meeting all licensing and regulatory requirements in relation to the Health Insurance Commission/NATA and any other relevant governing authority" (see [94] of first instance decision) was neglecting or refusing to carry out the full range of his duties, the pathology company's licence or accreditation would undoubtedly be placed in jeopardy. It is most unlikely that could be tolerated even if the company was concerned about losing its supervising pathologist if it were to confront the pathologist. Yet from at least late 2003 until May 2005, the respondents tolerated Dr Windrum leaving work regularly about midday. 82 In making this observation, we are conscious of the affidavit evidence of Mr Court, which was accepted by the trial judge (see [88] of first instance decision), that at some time in 2004 Mr Court said to Dr Windrum: What also concerns me is that you are arriving to the lab extremely early and leaving it unsupervised when you leave by lunch time. This is driving the staff mad because they often have to get to the lab before 5 am, and means that you are not fulfilling your role as Supervising Pathologist. You know what is expected of you, you have the Statement of Duties and the NPAAC requirements. I must warn you that this cannot continue. This is an official warning. If you continue to behave inappropriately and fail to fulfil your duties we will have to terminate the contract.

[112]

86 There was extensive material admitted into evidence that Dr Windrum was insensitive and rude to other workers and arrogant in his attitude. Whilst the appellants' complained that much of the admitted material was conclusionary, not in proper form, lacking in specificity and, therefore, inadmissible, we consider that despite its shortcomings the evidence, overall, was such as support a conclusion that the first appellant's conduct and attitude created disharmony and an unpleasant working environment. Consistent with the trial judge's findings, we are satisfied that Dr Windrum was rude, arrogant and, at times, offensive in his behaviour towards management and staff. 87 Mr Court gave evidence that he raised informally with Dr Windrum complaints he had received from staff regarding the latter's attitude. Staff J recorded at [102] that Mr Court: [E]ncouraged Dr Windrum not to annoy staff, not to make comments which were unsuitable or inappropriate and not to hassle them. He asked Dr Windrum to tone it down, otherwise he would have to possibly consider his options. Mr Court believed that he had a good relationship with Dr Windrum and thus chose to raise complaints he was receiving in informal discussions. Mr Court recognised that it was important to the business as it was heavily relying on Dr Windrum to keep him as suitably qualified pathologists were hard to come by. Mr Court's evidence is that he had to balance the complaints that he was receiving about Dr Windrum's behaviour with the need for the business to retain a fulltime pathologist. He therefore had to tolerate some aspects of what he considered to be inappropriate behaviour. He believed that he was at a severe disadvantage in these circumstances. 88 Apparently then, Mr Court did not regard Dr Windrum's conduct as being so bad that he was left with no choice than to terminate the contract summarily prior to May 2005; up to that time Mr Court was prepared to tolerate the inappropriate behaviour in order to retain Dr Windrum's services.

[114]

91 It follows from our findings that the contract was summarily terminated in the absence of fair and proper reasons to do so. That is to say, the contract permitted termination to be effected summarily without requiring proper and fair reasons to be provided, thereby giving rise to unfairness. Further, as the trial judge effectively found, the contract permitted the respondents to summarily terminate the contract without providing to the appellants an opportunity to address any of the respondents' concerns about those matters that led to the summary termination, thereby denying the appellants procedural fairness. 92 However, the trial judge decided there were no grounds to vary the contract for unfairness (or provide compensation) because even if there had been a fair investigation of the matters that led to the summary termination, Dr Windrum would not have changed his view that he had done nothing wrong. In light of our findings, we consider his Honour erred in this respect. Dr Windrum was given no opportunity at all to address the breach of confidentiality allegations, which was said by Mr Court to have been the "last straw". As to the overcharging allegations, there was no ultimatum given to Dr Windrum to cease charging on an averaging basis and so he was entitled to proceed on the basis that he was not breaching any part of his contract in that respect. 93 As to the work performance allegations, a proper exploration of them, in consultation with the first appellant, would have led to a finding that they lacked substance - at least to the extent that there was nothing about them that justified summary termination of the contract. As to the personal conduct of Dr Windrum towards management and staff, a proper consultative process and investigation may have concluded that it was of such a nature as to terminate the contract on reasonable notice because of the strain it was placing on the relationship, particularly after 24 February 2005 when it was contended the conduct had worsened, but insufficient to sustain a conclusion that summary termination was justified. Notice

[115]

94 The effect of the respondents' letter of 24 February 2005 was to give the appellants three months' notice of termination of the contract and, at the same time, to propose the terms of a new contract to commence at the expiration of the notice period. Given the fundamental nature of the changes proposed by the respondents to the contract it does not seem to us the changes proposed were mere variations to the original contract: see Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567. 95 At the expiration of the three months' notice period the existing contract would have terminated. It would then have been a matter for the appellants as to whether they were prepared to accept the new terms. However, about one week before the contract was to terminate (23 May 2005) according to the notice given, the contract was summarily terminated. 96 The respondents contended that if the Full Bench were to find that the trial judge erred and summary termination was not justified, the appellants would be entitled to no more than the value of one week's notice (approximately $13,000) because at the time of the summary termination the contract only had a further week to run before it terminated according to the notice given in February 2005. 97 There is some force in this submission. However, it does overlook the options that would have been open to the appellants at the expiration of the notice period. As the respondents conceded in their submissions, the appellants could have accepted that the contract had been terminated and the relationship severed. Alternatively, the appellants, despite their opposition to the terms of the new contract offered by the respondents, could have decided to accept its terms. In the further alternative, the appellants could have continued the relationship with the respondents under the new terms, but sought to negotiate changes to the contract. We note in this last respect that the appellants had engaged lawyers to try to negotiate changes and had sought, unsuccessfully, to meet with the respondents on either 25 or 27 May 2005. That is, after the expiration of the three months' notice period. This indicates an intention on the part of the first appellant to continue with the relationship subject to what might be achieved in any negotiations. 98 The options of accepting the terms of the new contract or seeking to negotiate changes to it were denied to the appellants because the contract was summarily terminated on 16 May 2005. If Dr Windrum had continued working for the respondents after 23 May 2005 the contract that became operative on that date would have been terminable on reasonable notice, which in our opinion, having regard to the factors relevant to determining what is reasonable notice (see Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) (2007) 167 IR 325 at [25]), would have been three months. Although Dr Windrum was 76 at the time of the termination, as a pathologist he was in high demand in an industry experiencing a shortage of pathologists. Moreover, the evidence suggested that three months' notice was the norm in the industry concerned. 99 The purpose of notice in the context of employment contracts was explained in Westfield Holdings v Adams (2001) 114 IR 241 at [138]: Notice provisions focus on the future of an employee and are intended to compensate, to the extent possible, for the disruption, cost and hardship caused by periods of unemployment that commonly follow termination. 100 The contract between the appellants and the respondents was something akin to an employment relationship and so the observations in Westfield are apposite. It is apparent that during the period from 24 February 2005 to 16 May 2005, Dr Windrum had not taken the view that he would need to find other employment upon the expiration of the notice period and, therefore, did not look for it. The summary termination of the contract precluded Dr Windrum from taking the opportunity of seeking other work. In those circumstances, the contract should be varied to provide that in the event the contract is summarily terminated without fair and proper reason and in the absence of a positive regime of fair investigative procedures the appellants shall be entitled to three months' notice or payment in lieu. 101 It should be recognised that there were unusual aspects of the relationship between the parties and that a consideration of only the terms of the contract does not necessarily address that reality. However, Pt 9, Division 1 of the Act, and s 106 in particular, allows the Court to look beyond the contract. Putting to one side the legal effect of the letter of 24 February 2005, even on the respondents' case, they were willing to continue the engagement of Dr Windrum after May 2005 and Dr Windrum wanted to continue the engagement although without diminution in its terms. The notice given on 24 February 2005, and looking at the arrangement in the broad, could be regarded in substance as directed to terminating Dr Windrum's supervisory role rather than terminating the engagement. As already noted, the terms of the arrangement were not able to be concluded before Dr Windrum was terminated. The termination of that arrangement, in all the circumstances, was unfair and the arrangement should be varied to provide three months' notice in the event of termination. Thus, it can be seen that whatever approach is adopted, Dr Windrum is entitled to appropriate notice. Mitigation

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