Dr Praneal Dutt Sharma v Dr Phillip Segal and Dr Greg Chen

[2017] NSWSC 867

Supreme Court

New South Wales

Medium Neutral Citation:	Dr Praneal Dutt Sharma v Dr Phillip Segal and Dr Greg Chen [2017] NSWSC 867
Hearing dates:	26 June 2017
Decision date:	30 June 2017
Jurisdiction:	Equity - Commercial List
Before:	Hammerschlag J
Decision:	Declaration that there has been an agreed determination within the meaning of clauses 5.9.5, 5.10, 5.11.2 and 5.13 of the Deed of Agreement Commercial Arrangements dated 18 April 2013.
Catchwords:	CONTRACT – commercial agreement between specialist radiologists pertaining to the conduct of a radiology clinics business – construction – provision providing for three types of determination (dissolution) of arrangements – which of two applies.
Cases Cited:	Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Category:	Principal judgment
Parties:	Praneal Dutt Sharma - First Plaintiff Praneal Sharma & Associates Pty Ltd - Second Plaintiff Phillip Segal - First Defendant Greg Chen - Second Defendant Melita Segal - Third Defendant Yanyi Pty Limited - Fourth Defendant South West Radiology Pty Ltd - Fifth Defendant SWR Pty Ltd - Sixth Defendant Park Central Radiology Pty Ltd - Seventh Defendant
Representation:	Counsel: S.A. Lawrance with D.E. Birch - Plaintiffs M. Izzo - First and Third Defendants A. Hourigan - Second and Fourth Defendants   Solicitors: Carneys Lawyers - Plaintiffs Clayton Utz - First and Third Defendants Booth Boorman Kiely - Second and Fourth Defendants
File Number(s):	2016/322612

Judgment

introduction

1. HIS HONOUR:   Doctors Praneal Sharma, Phillip Segal and Gregory Chen are specialist radiologists. For some years, they have operated three radiology clinics in south-west Sydney. They have fallen out. They are in dispute about the terms on which their association must be dissolved.

2. The doctors hold their interests in the clinics through a unit trust of which the fifth defendant (the Company) is the trustee. The sixth and seventh defendants are other corporate vehicles of the parties, but they play no meaningful role here. Each of the Sharma and Segal interests hold 960 (or 40%) of the units and the Chen interests hold the remaining 20%. The shares in the Company are owned and controlled in the same proportions. Where I refer to a doctor by name, I include his interests.

3. Drs Sharma and Segal were in association for some years before Dr Chen joined them in 2013. The commercial relationship between them is governed by an instrument styled Deed of Agreement Commercial Arrangements dated 18 April 2013 (the Agreement). It contains provisions regulating what is to occur when their association is determined.

4. The Agreement provides for, and describes, three types of “determination” namely, forced determination, agreed determination and discretionary determination. The consequences of each differ. Forced determination has not occurred. The parties are agreed that there has been a determination, but they are in dispute whether it is an agreed determination or a discretionary determination.

5. If it is an agreed determination, the business is to be sold and the proceeds distributed to the parties via the trust. If it is a discretionary determination, there is provision for a buyout at a fixed price.

6. Dr Sharma contends that there has been a discretionary determination and that the others must to buy him out for $1.4 million. Drs Segal and Chen contend that there has been an agreed determination, and that the business must be sold.

7. The only issue is which type of determination it is.

the facts

The material terms of the Agreement

8. Clause 5 of the Agreement provides:

5.    Determination of Commercial Arrangements

Change of Circumstances

5.1   Parties are desirous that their working and professional relationship remain as robust as it is as at the date of this Agreement but are mindful that relationships may change over time as circumstances change.

Majority Rule

5.2    In the event that any two of Dr Segal, Dr Sharma or Dr Chen (“the majority doctors") determine that the commercial arrangements with the other doctor (“the minority doctor") are no longer viable, the majority doctors must indicate to the minority doctor that they are considering a determination of the commercial arrangements recorded herein and provide the minority doctor written reasons specifying the reasons for that consideration.

5.3   The written reasons may relate to any matters or behaviours whatsoever that has or it is reasonably foreseeable will detrimentally affect the majority doctors, the Facilities, the Properties, the Business or NewTrust in a substantial manner. For the purposes of this Agreement, a substantial manner shall be taken to mean errant matters or behaviours likely to cost the majority doctors more than $25,000 each.

5.4   The minority doctor is to be given three months to rectify the errant matters or behaviours and to provide a written statement outlining the steps taken in this regard, unless the majority doctors declare in writing that such a written statement is not necessary because the errant matters or behaviours have been rectified.

Binding Decision   

5.5   In the event that there is any dispute regarding the reasonableness of the actions of the majority doctors or the minority doctor, the matter shall be referred to the then President of the NSW Branch of the Australian Medical Association for selection of an independent medical practitioner to be appointed to determine any dispute in respect of the actions of the minority doctor ("arbitrator"), and whose decision it is agreed shall be final and binding on the parties as to whether the commercial arrangements with the minority doctor remain viable.

5.6   The majority doctors may bring to the attention of the arbitrator any prior errant matters or behaviours of the minority doctor in the event that multiple efforts to rectifying such behaviour is required and the arbitrator is to have due regard to all the facts and circumstances presented to him or her.

5.7   The costs of the arbitrator shall be borne by the unsuccessful party.

5.8   In the event that the minority doctor is Dr Chen and it is found that commercial arrangements do not remain viable with him, then Dr Chen must resign as a director of the Company and sell his units in NewTrust and the majority doctors must pay Dr Chen the amount that is then owing on the loan between the Chen Trust and Investec Professional Finance Pty Ltd (or any alternative funder that has replaced that has [sic] Investec Professional Finance Pty Ltd) that was taken out on or about the date of this Deed for the purpose of acquiring those units.

Determination Required

5.9   It may become becomes [sic] necessary to determine the commercial arrangements recorded herein for reasons that include:

5.9.1   The majority doctors are successful in establishing that the commercial arrangements with the minority doctor are no longer viable;

5.9.2   One or more of Dr Segal, Dr Sharma or Dr Chen serves on all other parties a written document stating that they no longer wish to be part of the commercial arrangements;

5.9.3   One or more of Dr Segal, Dr Sharma or Dr Chen passes    away;

5.9.4   One or more of Dr Segal, Dr Sharma, Dr Chen or Dr Smith, suffers permanent physical or mental disablement such that he is unable render radiology services. In the event of their [sic] being a dispute about whether a disablement is genuine and / or permanent, it shall be deemed conclusive if confirmed in writing by an appropriately qualified medical practitioner approved by NewTrust or, if a resolution of NewTrust cannot be reached in this regard, the matter shall be referred to the then NSW Branch of the Australian Medical Association for selection of an independent medical practitioner to be appointed to determine the genuineness and / or permanency of any disability, whose decision shall be final; and

5.9.5   Each of Dr Segal, Dr Sharma and Dr Chen agrees that the commercial arrangements ought to be determined and that they no longer wish to work at the Property.

5.10   In the event that the commercial arrangements are to be determined, different methodologies shall apply depending on the reason why the commercial arrangements are to be determined, in particular whether it is due to a breakdown in the commercial relationship but one or more of the doctors wish to continue to utilise the Property and the Facilities ("discretionary determination"), if it is due to an unfortunate event ("forced determination") or if the arrangements are no longer viable ("agreed determination").

5.11   For the purposes of this clause 5:

5.11.1   A forced determination arises only where the matters detailed at clauses 5.9.3 or 5.9.4 occur;

5.11.2   An agreed determination only arises where the matter included at clause 5.9.5 occurs; and

5.11.3   A discretionary determination arises in relation to any other matters including those at clauses 5.8, 5.9.1 or 5.9.2.

5.12   In the event that there is a forced determination, the following provisions apply:

5.12.1   The units in NewTrust owned by any entity related to the deceased or disabled doctor will be sold equally to the surviving or remaining non-disabled doctors or any entity nominated by them for a consideration based on the price paid by the Chen Group for each of the acquired units in NewTrust provided the forced determination occurs within 7 years of the date of this Agreement.

5.12.2   The remaining doctors or their related parties will pay all stamp duty applicable to the [sic] on the transfer of the units in NewTrust

5.12.3   NewTrust will pay for appropriate insurances to ensure sufficient funds are available in the event of the death to meet the costs associated with the Clause 5.12.

5.13   In the event of an agreed determination, the following provisions apply:

5.13.1   The Business will be sold and the proceeds paid to    NewTrust;

5.13.2   Final distributions and the winding up of NewTrust will be made after receipt of appropriate accounting and legal advice by each of the Segal Group, the Sharma Group and the Chen Group; and

5.13.3   In the event that appropriate accounting and legal advice is not finalised within 6 months from the later of the sale of the Business or the Property, time to be of the essence in this regard (unless all parties agree in writing to a deferral), parties agree that the NewTrust will be liquidated with the accounting and legal consequences flowing therefrom falling as they may.

5.14   In the event that there is a discretionary determination, the following provisions apply:

5.14.1   A meeting will take place on any date suitable to each of Dr Segal, Dr Sharma and Dr Chen within 3 months from date that the discretionary determination occurs, time to be of the essence in this regard;

5.14.2   Whichever of Dr Segal, Dr Sharma or Dr Chen wish to or otherwise are no longer to be part of the commercial arrangements, they must resign as a director of the Company and sell any shares in the Company and any units owned in NewTrust by any of the Segal Group, the Sharma Group or the Chen group to the remaining doctors or their nominee for a price equal to 70% of the consideration paid by the Chen Group for each of those units in NewTrust within 1 month from the date that the discretionary determination occurs, time to be of the essence in this regard.

5.14.2 (sic)   If the discretionary determination arises as a result of Clause 5.9.1 for Dr Chen, the provisions of Clause 5.8 apply.

The end of the commercial relationship

9. By 30 June 2016, the relationship between Dr Chen on the one hand, and Drs Sharma and Segal on the other, had soured. On that date, Dr Chen’s lawyers (Booth Boorman & Kiely or BBK) gave notice that Dr Chen resigned as a director of the Company. From about that time, Dr Chen ceased to practice medicine in association with Drs Sharma and Segal. Matters did not end there.

10. An exchange of correspondence between the doctors (through their lawyers) ensued. Relevant extracts are set out below.

11. On 29 July 2016, Dr Sharma’s solicitors (Carneys Lawyers) wrote to Drs Segal and Chen:

We confirm that we act for Dr Praneal Sharma and refer to the Deed of Agreement, Commercial Arrangements between Doctors Segal, Sharma and Chen (the Doctors), their respective related parties and others dated 18 April 2013 (Commercial Agreement).

Dr Sharma hereby gives notice pursuant to clause 5.9.2 of the Commercial Agreement that he no longer wishes to be part of the commercial arrangements.

This Notice constitutes a “discretionary determination” pursuant to clause 5.11.3 of the Commercial Agreement requiring the parties to meet within 3 months.

We advise that Dr Sharma is available to attend a meeting between the hours of 9.00AM to 6.00PM on any week day during the fortnight commencing Wednesday, 24 August 2016.

In the event that none of these dates are suitable to your client, please advise a range of suitable dates from Monday, 12 September 2016.

12. On 11 August 2016, Dr Segal’s solicitors (Clayton Utz) wrote to Drs Sharma and Chen and their lawyers:

We act for Dr Phillip Segal.

We refer to:

•   the letter from BBK Lawyers dated 30 June 2016 enclosing Dr Chen's resignation as a director of South West Radiology Pty Ltd (Trustee Company) dated 30 June 2016, effective immediately; and

•   the letter from Carneys Lawyers to Clayton Utz dated 29 July 2016, enclosing a letter from Carneys Lawyers addressed to Dr Segal and others dated 29 July 2016, in which Dr Sharma purports to give notice pursuant to clause 5.9.2 of the Deed of Agreement - Commercial Arrangements dated 18 April 2013 (Deed of Agreement).

It is clear from the above-mentioned correspondence that there has been a breakdown in the commercial relationship, and that Dr Sharma and Dr Chen wish to determine the commercial arrangements and no longer wish to work at the Properties.

We are instructed that Dr Segal also does not wish to continue to utilise the Properties and the Facilities.

Given:

•   the position of each of Dr Sharma, Dr Chen and Dr Segal in respect of the commercial arrangements, as set out above; and

•   that the "discretionary determination" provisions under the Deed of Agreement require, pursuant to clause 5.10 of the Deed of Agreement, that one or more of the doctors wish to continue to utilise the Properties and the Facilities;

the "discretionary determination" provisions under the Deed of Agreement do not arise.

Instead, it is clear from the parties' conduct that the commercial arrangements between them are no longer viable and that the parties are agreed that those arrangements ought to be determined.

Accordingly, an "agreed determination" has arisen in accordance with clauses 5.11.2 and 5.9.5 of the Deed of Agreement. As a result, the provisions set out in clause 5.13.1 of the Deed of Agreement apply, and the Business must now be sold.

Our client is available to meet on a day from Monday 12 September 2016 onwards to discuss the process for selling the Business. On the assumption that these dates are still suitable to Dr Sharma, we request that Dr Chen's lawyers advise which of these dates is suitable for their client.

13. On 18 August 2016, Dr Chen’s solicitors wrote to Dr Sharma’s solicitors and Dr Segal’s solicitors, asserting breaches and repudiation of the Agreement by Drs Sharma and Segal. Dr Chen alleged, amongst others, that he had been underpaid in relation to radiology sessions, had not been simultaneously appointed a director of the company and had been denied dividends and or profits. The letter concluded as follows:

Insofar as the Sharma Group and the Segal Group are in substantive and material breach of the Deed of Agreement, and as such the Deed of Agreement has been repudiated by the Sharma Group and the Segal Group, Dr Chen now exercises his rights to accept the repudiation and HEREBY TERMINATES the Deed of Agreement and reserves his right to claim damages thereon in due course.

Further, or in the alternative, insofar as there may be any issue in relation to the termination of the Deed of Agreement by Dr Chen and the Chen Group, then Dr Chen and the Chen Group HEREBY GIVE NOTICE pursuant to Clause 5.8 of the Deed of Agreement that the commercial arrangements do not remain viable with him. To that end Dr Chen has resigned as a director of the Company and now offers his units in the Trust for sale. Dr Chen and the Chen Group hereby invite the majority doctors to pay to Dr Chen the amount that is owing on the loan.

14. On 30 August 2016, Dr Sharma’s solicitors wrote a long letter to Dr Chen’s solicitors and Dr Segal’s solicitors. Relevantly, they said:

1.   Given the BBK letters and the letter from Clayton Utz dated 11 August 2016 on behalf of Dr Segal and our letter to the parties dated 29 July 2016, it is clear that the parties have come to an “agreed determination” under clause 5 of the Commercial Agreement.

2.   In respect of Dr Chen providing notice under clause 5.8 of the Commercial Agreement, our client’s response is as follows:

a.   an agreed determination has arisen under clause 5 (namely 5.11.2 and 5.9.5) of the Commercial Agreement;

b.   clause 5.8 should be read in conjunction with the whole of clause 5 and in light of the three categories of “forced determination”, “agreed determination” and “discretionary determination” (recognised in clauses 5.10 and 5.11);

c.   clause 5.13 sets out the provisions for an agreed determination. This clause does not refer to nor import clause 5.8 in any way nor does clause 5.13 contemplate a minority situation in the way that clause 5.8 does.

3.   As such, our client rejects Dr Chen’s view that clause 5.8 of the Commercial Agreement applies.

15. On 8 September 2016, Dr Sharma’s solicitors wrote to Dr Segal’s solicitors:

We refer to your letter dated 11 August 2016 in which you invited our client to a meeting to discuss the process of SWRHUT selling its radiology business.

With reference to earlier correspondence, we note that the parties have reached an "agreed determination" and that the business must now be sold. We also note that Dr Segal and Dr Sharma are the only Directors of the SWRHUT Trustee Company and are also the owners of 80% of the issued units in SWRHUT.

On 18 August 2016 we sent you a letter advising that our client would be available at any time on 15 or 16 September 2016 that would be convenient to Dr Segal to attend such a meeting.

On 24 August 2016 Arthur Carney telephoned Ms Roxana Carrion to request a time for this meeting.

Again, on 5 September 2016, Arthur Carney telephoned Roxana Carrion to request a meeting time.

Given that an agreed determination has been reached, and that the majority unit holders and the only two directors agree that the business is to be sold, our client is of the view that any unreasonable delay in agreeing a timeline for events leading to a sale of the business at the highest achievable price will be detrimental to the business and may well diminish its value.

We request that, as a matter of urgency, you advise us of a convenient time for the parties and their respective legal advisors to meet on 15 or 16 September 2016 at your offices.

To facilitate discussion we attach a draft Agenda for the proposed meeting.

AGENDA

MEETING OF UNIT HOLDERS OF SOUTH WEST RADIOLOGY HOLDING UNIT TRUST

AT CLAYTON UTZ ON   SEPTEMBER 2016

1.   Issues in respect of Agreed determination

2.   Finalisation of Financial Statements and Tax Returns for FY15 and FY16;

3.   Appointment of Advisor for sale of the Radiology Practice;

4.   Timeline and process for sale of business;

5.   Claim by BOQ against Yanyi Pty Ltd & Guarantors;

6.   Arrangements concerning the properties at Liverpool, Campbelltown and Moorebank.

16. On 14 September 2016, Dr Sharma’s solicitors wrote to Dr Chen’s solicitors and Dr Segal’s solicitors expressing amongst others objection to the postponement of a proposed meeting between the parties.

17. On 16 September 2016, Dr Chen’s solicitors wrote to Dr Sharma and Dr Segal’s solicitors repeating allegations of breach and responding to various aspects of earlier correspondence. Relevantly, they said:

A. Agreed determination

Whilst we note Dr Segal’s and Dr Sharma’s view that an “Agreed determination” has been reached, we reserve our client’s rights in respect of the Commercial Agreement generally and in respect of our client’s rights under clause 5.8.

18. Also on 16 September 2016, Dr Segal’s solicitors responded to the allegations of breach by Dr Segal, and made claims of breach by Dr Sharma of his obligations under the Agreement and of his statutory and equitable obligations as a director of the Company. The letter concluded as follows:

Next Steps

3.34   At the time of our letter on 22 August 2016, we were of the view that an "agreed determination" had occurred, and that it was necessary to meet to discuss the sale of the business (and the properties) as required by clause 5.13 of the Deed of Agreement.

3.35   However, in light of Dr Chen's purported termination of the Deed of Agreement and the matters raised in this letter, our clients reserve all of their rights and consider that all the parties, together with their lawyers, should now meet to discuss the issues in dispute and the future of the business. Our clients also do not consider that any third party would be interested in purchasing the business whilst such disputes remain on foot.

3.36   We will be in contact to arrange a date and time for such a meeting.

19. On 19 October 2016, the doctors met. Their lawyers were present. The meeting was agreed to be without prejudice. There is no evidence of what occurred at the meeting save that in an affidavit, Dr Sharma’s solicitor, Mr Carney, says that there was no agreement reached at the meeting between the doctors to proceed with an agreed determination for the purposes of the Agreement.

20. On 28 October 2016, Dr Sharma’s solicitors wrote to Drs Segal and Chen relevantly:

On 29 July 2016, Dr Sharma gave notice pursuant to clause 5.9.2 of the Deed that he no longer wished to be part of the commercial arrangements. Dr Sharma relies on that notice and requires the Segal Group and the Chen Group to perform their obligations under clause 5.14.2 of the Deed arising from that notice.

If for any reason Dr Sharma’s notice of 29 July 2016 was not, or no longer is, effective, Dr Sharma hereby gives notice pursuant to clause 5.9.2 of the Deed that he no longer wishes to be part of the commercial arrangements.

21. On 7 February 2017, Dr Segal’s solicitors wrote to the other doctors’ solicitors:

We refer to previous correspondence between the parties in relation to the determination of the commercial arrangements between them under the Deed of Agreement Commercial Arrangements dated 18 April 2013 (Commercial Deed).

For the reasons set out in our letter dated 11 August 2016, an "agreed determination" has arisen in accordance with clauses 5.11.2 and 5.9.5 of the Commercial Deed.

That an “agreed determination” has occurred was admitted by Dr Sharma in letters from Carneys Lawyers on 30 August 2016 and again on 8 September 2016.

The letter from Carneys Lawyers addressed to Dr Segal and others dated 28 October 2016 is ineffective in so far as it seeks to resile from the admissions previously made.

In the circumstances, the provisions set out in clause 5.13.1 of the Commercial Deed clearly apply, and the Business must now be sold.

We re-confirm our client’s willingness to meet to facilitate the sale of the Business.

We will be in contact this week to arrange a date and time for a meeting.

22. Since 7 April 2017, Dr Sharma has not worked at the clinics. He has apparently had personal medical problems.

23. On 19 June 2017, Dr Chen’s solicitors wrote to the other doctors’ solicitors:

We refer to the Deed of Agreement, Commercial Arrangements dated 18 April 2013 (“the Deed”).

Without prejudice to the validity or otherwise to any written document which may or may not have been previously served by one or more of Dr Segal, Dr Sharma or Dr Chen, Dr Chen hereby notifies Dr Segal and Dr Sharma as per clause 5.9.2 of the Deed, that he no longer wishes to be part of the commercial arrangements pursuant to the Deed.

We confirm that Dr Chen resigned as director of the trustee company and notice of that resignation was provided to all parties on about 30 June 2016.

Proceedings commence

24. Dr Sharma initiated these proceedings on 28 October 2016 by suing out a Summons and accompanying Commercial List Statement claiming that there has been a discretionary determination and that Drs Segal and Chen are obliged to purchase his units and shares. In the alternative he sought a declaration that there has been an agreed determination. He also alleged and claimed relief for oppression. His Commercial List Statement described the dispute as a shareholder dispute.

25. Drs Segal and Chen filed Commercial List Responses. Dr Chen filed a Cross Claim asserting, amongst others, that the Agreement is void or had been terminated by him, and seeking the winding up of the Company. Dr Segal filed a Cross Claim asserting an agreed determination, asserting oppression and claiming an order that he purchase the units and the shares held by the others at a price determined by the Court.

26. On 14 February 2017, I ordered the parties to attend mediation and stood the matter over to 26 May 2017. Evidently, the mediation was unsuccessful.

Final hearing

27. On 18 May 2017, Dr Sharma filed a motion seeking orders for the appointment of provisional liquidators to the Company on the grounds that it had become dysfunctional as a result of the breakdown of the doctors’ relationship. The motion came before me on 9 June 2017. I indicated to the parties that I considered that they would be better served by a final hearing on the merits rather than by the distraction of an application for an appointment of liquidators. There was no demur. I stood the matter over to 14 June 2017, and on that day fixed it for final hearing on 26 June 2017, and made directions to ensure that it would be ready for hearing.

28. Dr Sharma’s position was then (as it is now) that there has been a discretionary determination. Dr Segal’s position was then (as it is now) that there has been an agreed determination. Dr Chen, however, was still motivating other claims and was not prepared to commit to a firm position on either form of determination. However, shortly before the hearing, he abandoned all other claims. But he did not until the morning of the hearing commit to a firm position on the form of determination. On the morning of the hearing, he took the position of supporting Dr Segal without equivocation.

29. Hence, as I have said earlier, the only issue is the binary one of whether the determination that has occurred is agreed or discretionary. The only substantive relief sought is a declaration as to which it is.

the Argument

30. The Court had the benefit of written and oral argument.

31. Mr S. A. Lawrance of counsel appeared for Dr Sharma, Mr M. Izzo of counsel appeared for Dr Segal and Mr A. Hourigan of counsel appeared for Dr Chen.

32. The argument for discretionary determination can be distilled into the following essential propositions:

1. Dr Sharma’s notice on 29 July 2016 under cl 5.9.2 triggered a discretionary determination;

2. under cl 5.14.1 the parties were then to have a meeting within three months (that is, by 29 October 2016);

3. it was open to each of the doctors (before or at the meeting) to agree under cl 5.9.5 that the commercial arrangements ought to be determined and that they no longer wished to work at the property and so convert the discretionary determination into an agreed one;

4. agreement under cl 5.9.5 requires actual agreement between each of the doctors, in the sense of a consensus ad idem, that the commercial arrangements ought to be determined and that each no longer wishes to work at the Property;

5. despite Dr Sharma’s assertions on both 30 August 2016 and 8 September 2016 of an agreed determination, there has in fact never been any such agreement because at the time Dr Sharma asserted it (albeit that Dr Segal agreed) Dr Chen never did so, and by the time Dr Chen came around at the final hearing to saying he agreed, Dr Sharma no longer did. (Dr Chen could not have agreed, for the purposes of cl 5.9.5, because he had taken the position that the Agreement was void or that he had terminated it);

6. it was not put by any other party that Dr Sharma had given some form of irretrievable notice causing an agreed determination, or that if he had, he could not withdraw it or that he is estopped from asserting that he did;

7. the meeting contemplated by cl 5.14.1 took place on 19 October 2016, but yielded no agreement for an agreed determination;

8. it follows that discretionary determination, triggered on 29 July 2016 stands, and under cl 5.14.2 Dr Sharma must resign as a director of the Company (which he has done) and sell his shares and units to Drs Segal and Chen (who must purchase) for 70% of the consideration paid by Dr Chen (Dr Chen paid $2083.33 per unit; 70% = $1458.33 x 960 units = $1.4 million).

33. The argument for agreed determination can be distilled into the following essential propositions:

1. discretionary determination only occurs when notice is given under cl 5.9.2 and one or more of the recipients wish to continue to utilise the Property and the Facilities;

2. cl 5.9.5 does not require agreement between each of the parties in the sense of consensus, but merely that each of them should independently agree that he no longer wishes to work at the Property;

3. the position of each (and all) of the doctors has, since at least 18 August 2016 (albeit for different reasons), been that the commercial arrangements ought to be determined and that he no longer wishes to work at the Property;

4. accordingly, the determination that has occurred is an agreed determination.

decision

34. For the reasons which follow the determination which has occurred is an agreed determination, not a discretionary determination.

35. Which it is, is a question involving the proper construction of the Agreement as it applies to the events which have occurred.

36. The Agreement is a commercial contract and is to be given a business-like interpretation. Interpreting it requires attention to the language used by the parties, the commercial circumstances which it addresses and the objects which it is intended to secure. Reference must be had to its entire text, context and purpose. It is to be construed so as to avoid making commercial nonsense or working commercial inconvenience. Preference is given to a construction supplying a congruent operation to the various components of the whole; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 117.

37. The construction contended for by Drs Segal and Chen accords both with the language used by the parties and the commercial objects the Agreement is intended to secure. Dr Sharma’s contended construction, on the other hand, accords with neither. The construction contended for by Drs Segal and Chen gives congruent operation to the provisions of the Agreement as a whole. Dr Sharma’s construction works commercial inconvenience.

38. Clause 5.11 does at least two things. First, it gives clear insight into how the parties intended the Agreement to operate and second, it defines the three types of determination which the Agreement contemplates might occur.

39. Discretionary determination is defined as one which is “due to a breakdown in the commercial relationship, but one or more of the doctors wish to continue to utilise the Property and the Facilities” [emphasis added]. On the plain words of the definition, it is an element of such a determination that one or more of the doctors wish to stay on. On no view of the facts is that element present here. Hence, the determination cannot be a discretionary one.

40. The motives respectively of Drs Segal and Chen for not wishing to continue are irrelevant. From at the latest 18 August 2016, each has taken (and maintains) the unequivocal position that he no longer wishes to work at the Property or utilise it and the Facilities. Dr Segal has said so in terms. Dr Chen resigned as a director, maintained that the Agreement was void or had been terminated and stopped working at the clinics. He also stated that the commercial arrangements were no longer viable with him.

41. Under cl 5.11.3, a discretionary determination includes the circumstances described in cls 5.8, 5.9.1 and 5.9.2. The common feature is that one or more doctors wish to stay.

42. Agreed determination is defined as one where the arrangements are no longer viable. That definition is satisfied on the facts here. None of the doctors wish to be part of them anymore. They are thus no longer viable.

43. That the determination is an agreed one sits comfortably with the way cl 5 operates as a whole.

44. The specific arrangements which apply after a determination vary depending on which kind of determination occurs. The applicable arrangements have a clear commercial congruity with the type of determination.

45. Upon a forced determination, that is, one due to an unfortunate event (death or permanent physical or mental disablement) the units of the deceased or disabled doctor are sold for a consideration based on the price paid by Dr Chen, provided the forced determination occurs within seven years after the date of the Agreement (and presumably for a reasonable price otherwise assessed after that). In other words, the remaining doctors buy the deceased or disabled doctor’s interest for its value (assumed for a period of seven years to be what Dr Chen paid).

46. Where the determination is discretionary, that is, where one or more doctors choose to go and one or more choose to stay, those remaining get the opportunity to buy the interest of those departing at a discount to the price originally paid by Dr Chen.

47. Where all depart, because the arrangements are no longer viable, the business is sold and they share in the proceeds in accordance with their interests.

48. Dr Sharma’s construction has the consequence that although the other doctors do not wish to stay, they must nevertheless buy Dr Sharma’s interest. His construction gives him, in effect a put option with respect to his interest, because he gave notice first. I consider this result to be inimical to the commercial rationale underlying the Agreement and to work commercial inconvenience.

49. Clause 5.9.5 cannot sensibly be read or understood to require consensus ad idem, that is, a synchronised meeting of the minds of all three doctors. It merely requires each to have taken the described position. Where a doctor has given notice under 5.9.2, that doctor has already taken the described position. There is no rational reason why he should be required to take it again. A requirement for consensus ad idem also does not sit with the words of cl 5.9.5 because it would nonsensically require one person to agree that another no longer wishes to work at the Property. Added to this, on the construction contended for by Dr Sharma, a tripartite consensus is required. This would leave open the possibility that one doctor could give notice under cl 5.9.2, the others could then agree that the commercial arrangements ought to be determined and that they no longer wish to work at the Property, but the first doctor could take the position that he does not agree, thereby thwarting an agreed determination. This is inimical to the objects which the Agreement is intended to secure.

50. Cl 5.14 is infelicitously drafted. Under cl 5.14.1 a meeting is to take place within three months of the date of the discretionary determination. This is clearly a reference to the date that notice is given, albeit that the discretionary determination may not ultimately eventuate. Under cl 5.14.2, whoever wishes no longer to be part of the commercial arrangements must resign and sell their shares and units to those who wish to remain within one month from the date that the discretionary determination occurs. The reference to one month after the discretionary determination occurs must be erroneous. It would be absurd to require the sale to take place before the meeting. What must have been contemplated is a sale one month after the meeting, provided by the meeting someone wishes to buy.

51. The machinery of cl 5 works congruently in the following way. Once a discretionary determination is initially triggered, there must be a meeting. If some wish to stay, they buy the shares and units of those wishing to go. They in effect get the option of purchasing the departing party’s shares at a fixed price. If nobody wishes to stay there is clearly agreement by each that the commercial arrangements ought to be determined and that they no longer wish to work at the Property. An agreed determination results. That is this case.

52. I record that the evidence does not establish that the meeting which occurred met the requirements of clauses 5.14.1 and 5.14.2. I doubt that it did, given its without prejudice status. It is nevertheless clear that each doctor has agreed that the commercial arrangements ought to be determined and that he no longer wishes to work at the Property.

53. It must also follow from the facts that the parties agree that there has been a determination and that discretionary determination has not been established, that an agreed determination has occurred.

54. Ironically, or perhaps not, the firm position taken by Dr Sharma on 30 August 2016 and 8 September 2016, that the parties had reached an agreed determination, is correct.

Conclusion

55. The Court declares that there has been an agreed determination within the meaning of clauses 5.9.5, 5.10, 5.11.2 and 5.13 of the Deed of Agreement Commercial Arrangements dated 18 April 2013.

56. The parties are to bring in Short Minutes disposing of the proceedings in accordance with this outcome.

57. Should it be necessary, I will hear them on costs. The exhibits are to be returned.

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Decision last updated: 17 April 2018