Hurley v Healthcare Imaging Services (Victoria) Pty Ltd
[2011] VCC 1214
•10 June 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-10-01691
| VICTOR HURLEY | Plaintiff |
| v | |
| HEALTHCARE IMAGING SERVICES (VICTORIA) PTY LTD | Defendant |
---
| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 29, 30 and 31 March 2011 |
| DATE OF JUDGMENT: | 10 June 2011 |
| CASE MAY BE CITED AS: | Hurley v Healthcare Imaging Services (Victoria) Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1214 |
REASONS FOR JUDGMENT
---
Catchwords: Services agreement – whether ultrasound specialist fulfils contractual obligations by being “on call” – Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165; Earney v Australian Property Investment Strategic Pty Ltd [2010] VSC 621; Cameron v Asciano Services Pty Ltd [2011] VSC 36.
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Sowden | Nicholas O’Donohue & Co |
| For the Defendant | Mr N Evans | Cornwall Stodart |
| HIS HONOUR: |
“They also serve who only stand and wait.”
1 This last line of Milton’s sonnet ‘On His Blindness’ neatly encapsulates the plaintiff’s stance in this proceeding. Let me explain.
2 The plaintiff is a Fellow of the Royal College of Obstetricians and Gynaecologists of Australia and New Zealand. As such he has a specialist interest in ultrasound and is certified by the College in that sub-specialty. In late 1995, he bought into the practice of Melbourne Ultrasound for Women (“MUW”). In June 2003, MUW sold its ultrasound practice to the Mayne Health Group Ltd. The plaintiff was retained on a contract of service by the defendant to work for it for a period of five years. To effect this, the plaintiff entered into a contract with Mayne Group Limited (which subsequently changed its name to that of the defendant), dated 20 June 2003 (“the first agreement”). The first agreement was for a period of five years. The plaintiff was required to perform 10.9 sessions per fortnight. A session was defined as:
“… a period of 4 hours and such additional time as is reasonably required
to fulfil the Duties”.
3 “Duties” were outlined in Schedule B to the first agreement and, inter alia, required the plaintiff to:
“… devote the whole of your time and attention during the Sessions and
any additional hours you agree to work to the Duties”.
4 The plaintiff’s salary or Total Employment Cost, as it was called under the first agreement, was a package of $259,000 per annum. As the first agreement was reaching its termination date of 20 June 2008, negotiations ensued between the plaintiff and the defendant with respect to a new contract. Eventually, the plaintiff entered into a services agreement with the defendant which by then was trading under the name of Symbion Health (“the second agreement”). The second agreement was titled “Diagnostic Ultrasound Specialist Services Agreement”.
5 There was some doubt as to when the second agreement was executed. I was provided with an executed copy which bore the date of 11 June 2008. I was also provided with an executed copy which was undated. The plaintiff stated that the agreement was signed in June 2008. Stephen James (“James”), general manager of the defendant at the time, carried out pre- contractual negotiations on behalf of the defendant and signed the agreement on its behalf, and stated that the contract was signed after its commencement date, 1 August 2008, and certainly after it was agreed that the defendant’s ultrasound clinic in Carlton would be shutting – James and the plaintiff were still negotiating with respect to the Carlton clinic on 14 July 2008, as an email of that date indicates.
6 This proceeding is about the proper construction of the second agreement.
7 Relevant terms of the second agreement as appear from the “Term Sheet” which forms part of it, are:
• Item 2 – It was for a term of four years. • Item 7 – Its commencement date was 1 August 2008. • Item 8 – The plaintiff was required to work: “… 11.3 sessions per week, with each session being a minimum of four hours each and such additional time as may be necessary to complete all necessary reporting for the work done during the relevant session.”
Further, and importantly, it provided “Additional sessions may be worked in addition, however our consent is required prior”.
• Item 9 – “Business” was defined as: “The business of providing specialist diagnostic ultrasound
services conducted by Symbion.”
•
Item 10 – “Salary” was stated to be $659,489.20 per annum, including superannuation. Additional sessions were to be paid at $1,100 per session. This item continued:
“Please note that this package is conditional upon:
- An agreement to raise fees at MUSFW-Hampton to a
(minimum) average fee of $250 per patient.
- the addition of a minimum 1 extra scan room at Hampton (subject to the availability of capital), with an increased capacity of minimum 12 ultrasound scans per day.”
• Item 17 – “Business Sites” was defined as:
“Melbourne Ultrasound for Women – Hampton.”
8 Standard Terms and Conditions which also formed part of the second agreement provided:
“1.5 Additional sessions
If the Practitioner provides further sessions of specialist diagnostic ultrasound services to Symbion as referred to in clause 3(g), Symbion must pay the Practitioner an additional amount per session as specified in item 10 of the Term Sheet for each additional session of services provided.
…
3 Practitioner’s duties
During the Term, the Practitioner must:
(a) devote the whole of the Practitioner’s time, attention and skill during the hours specified in item 8 of the Term Sheet and other reasonable or agreed times (in accordance with the roster prepared by Symbion) to providing specialist diagnostic ultrasound services; (b) faithfully and diligently perform the duties and exercise the powers of a duly qualified diagnostic ultrasound specialist and any other ancillary duties related to the provision of specialist diagnostic ultrasound services reasonably assigned to the Practitioner by Symbion; (c) perform the duties referred to in this clause 3 in a timely and efficient manner and in accordance with: (A) all applicable professional and ethical standards and all relevant laws, regulations and valid directions of any governmental agency; and
(B) the professional standards, policies and procedures of the
Business (as varied from time to time);(d) … (e) comply with all reasonable directions of Symbion … (f) actively contribute to the management of the Business and market and promote the interests of Symbion and the Business to referring medical practitioners and other health care facilities; and (g) provide further sessions of diagnostic ultrasound services to Symbion as may be reasonably requested by Symbion for the additional remuneration referred to in clause 1.5.”
9 From March 2008, the plaintiff performed an additional session on a Saturday morning. From 1 August 2008, when Dr Bethune, another ultrasound specialist, decided not to continue working with the defendant, the plaintiff also performed an additional session on a Tuesday morning. The plaintiff claimed for these additional sessions at $1,100 per session and was paid for them until 29 August 2009. The second agreement is still on foot and the plaintiff has continued to perform additional sessions but has not been paid for them by the defendant. The plaintiff now claims $165,000 in respect of these additional sessions.
10 The parties have agreed that the plaintiff did not attend for the whole of each additional session but was on call and available to attend if required. The plaintiff gave evidence that he was actively involved in each of the additional sessions, in that he would normally have two or three calls from the sonographers who operated the ultrasound machine, that once or twice in each additional session he would be ringing a referring doctor to give information about the ultrasound which had been performed and once every second or third additional session he would be asked to physically attend, which he did, to see a patient. He stated that, in any event, he always attended towards the end of the additional session to prepare reports which took one to one and a half hours.
11 The sole issue for my determination is whether the second agreement requires the plaintiff to attend at the Hampton Clinic of the defendant for the whole of the additional session or does it suffice for him to be on call to attend if required – hence the Milton quotation which was used by Dixon J, as he then was, in Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, at 466.
12 Although the issue of whether it sufficed for the plaintiff to be on call arose in the context of the additional sessions, Mr Evans submitted that if the plaintiff was entitled to perform his duties while on call for the additional sessions, it must follow that he was entitled to perform his duties for the standard 11.3 sessions per week while on call. I agree with this submission.
13 Mr Evans, who appeared for the defendant, sensibly conceded that attendance at the Hampton Clinic for the whole of the additional sessions did not preclude the plaintiff from walking out to obtain a cup of coffee or to have a breath of fresh air.
The Law
14 I am required to determine the proper construction of the second agreement to resolve the matter in issue. The approach to be adopted is set out in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165, at 179, where the Court stated:
“This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.”
15 Similarly, in Earney v Australian Property Investment Strategic Pty Ltd [2010] VSC 621, Hargrave J stated, at paragraph 97, in relation to an employment contract, as here:
“It is necessary to construe the relevant provisions of the contract in accordance with general principles of contractual interpretation. This requires the Court to consider what reasonable persons in the position of the parties would have understood the words to mean by reference to the text of the agreement, the surrounding circumstances known to the parties and the purpose of the transaction. In interpreting the words and resolving any ambiguity, the Court should proceed in a common sense and non-technical way and give the agreement a commercially sensible construction. The Court should have regard to all of the words used in the agreement ‘so as to render them all harmonious with one another’ and to ensure the ‘congruent operation of the various components as a whole.’”
16 This statement of principle was adopted by Beach J in Cameron v Asciano Services Pty Ltd [2011] VSC 36, at paragraph 47.
17 As appears, I am required to consider the terms of the agreement, the purpose and object of the transaction and the surrounding circumstances known to the parties.
The Terms of the Agreement and the Purpose and Object of the Transaction
18 The second agreement clearly indicates that the plaintiff is required to provide “specialist diagnostic ultrasound services” – see definition of the business to be conducted at the Hampton Clinic and Clause 3(a) of the Standard Terms and Conditions. As Mr Evans submitted, I am being required to define this phrase in the context of the second agreement.
19 The plaintiff gave evidence that a fundamental part of such services is an ultrasound machine which he could operate or sonographers could operate. He stated that in a normal session he would perform approximately one quarter of the scans, with the remainder being done by sonographers. He stated that these sonographers were very experienced at operating ultrasound machines. The plaintiff referred to sonographers rather as “technicians” and confirmed that it is the specialist, such as he, who provides the “specialist diagnostic ultrasound services”, i.e. interpreting and reporting upon the scans performed and consulting with patients.
20 It is significant, in my view, that the second agreement does not state that the plaintiff is to be in attendance throughout his session, whether it be a standard session covered by the 11.3 sessions per week or an additional session. Further, the second agreement does not preclude the plaintiff from providing “specialist diagnostic ultrasound services” on an on-call basis.
21 I also note that the second agreement does not require the plaintiff to provide what was referred to during the trial as “premium” services.
22 Mr Evans submitted that the words “on call” lacked certainty. As I indicated in the course of the hearing, I do not agree with this submission. The term “on call” as indicated by the plaintiff and, and in my view, understood generally, is that a doctor “on call” is available to give verbal advice or instructions or, if necessary, to attend personally.
Surrounding Circumstances
23 It was common ground that the surrounding circumstances must be known to both parties before they could be taken into account as an aid to construction.
24 Clause 3(c)(A) of the Standard Terms and Conditions requires the plaintiff to perform his duties in accordance with “all relevant laws, regulations and valid directions of any governmental agency”. A document entitled “Claiming guide (Mediguide: section (4)” issued by the Australian Government – Medicare Australia, states:
“Ultrasound services … are not eligible for a Medicare benefit unless the
service is performed:
1. under the professional supervision of a specialist or a consultant physician in the practice of his or her specialty who is available to monitor and influence the conduct and diagnostic quality of the examination and, if necessary, to personally attend the patient.”
(my emphasis).
25 Thus for a patient obtaining ultrasound services from the defendant at Hampton, it was not necessary for the plaintiff to be present to enable Medicare benefits to be obtained. A patient’s being able to claim for a Medicare benefit is, of course, crucial to the operation of the defendant’s ultrasound practice.
26 On account of this provision, it follows, and was conceded by James, that the defendant’s income was in no way reduced by the fact that the plaintiff was on call only for the additional sessions.
27 While I accept Mr Evans’ submission that the Medicare Guidelines only set a minimum standard which must be complied with, still, they are, in my view, very relevant. This is particularly so when the second agreement does not stipulate higher standards.
28 Very relevant, in my view, is an email dated 30 June 2008 forwarded by James to the plaintiff, which stated:
“Subsequent to our phone discussion, I have confirmed the position of the eligibility for the Medicare rebate for obstetric and gynaecological ultrasound examinations.
The requirement is replicated below:
The rebate is available to the “… specialist … who is available to monitor and influence the conduct and diagnostic quality of the examination, and if necessary to personally attend the patient”
I accept your observation that the nature of the practice may be one where there is an expectation that you will see the patient.
I write merely to highlight an opportunity for you to substantially increase your income by overseeing both practices.”
29 The plaintiff gave evidence that this email was written in the context of negotiations between the plaintiff and James as to whether the plaintiff might be able to operate the defendant’s Carlton ultrasound practice as well as the Hampton practice. The plaintiff stated that James was suggesting that the plaintiff could operate the Carlton practice without needing to attend there at all. The plaintiff stated that James was encouraging him to run the Carlton practice totally upon an “on call” basis but that he was resisting this. Certainly at 30 June 2008, which on James’ evidence was prior to the execution of the second agreement, the defendant had no qualms about operating one of its ultrasound practices upon an “on call” basis. James conceded under cross- examination that he was suggesting in the email of 30 June 2008 that compliance with the Medicare minimum standard would suffice.
30 Mr Evans relied upon the plaintiff’s salary under the second agreement, $659,489.20 per annum, indexed by CPI each year as indicating a requirement for the plaintiff to attend during sessions at Hampton and not just be on call. In addition, the plaintiff was entitled to seven weeks’ paid leave and two weeks each year paid leave to attend conferences. Mr Evans submitted that this package particularly needed to be considered in the context of the salary under the first agreement, being $259,000 per annum. However, the plaintiff received a capital payment at the time of entering the first agreement and stated that he accepted a lesser salary on account of this.
31 The plaintiff stated in an email to James and Marie Ann Mould (“Mould”), operations manager of the defendant, that he was earning a salary less than that of ultrasound specialists performing similar work.
32 There was no other evidence before me as to what salary other ultrasound specialists received. Nor, for that matter, was there any evidence before me as to whether other ultrasound specialists provided their services “on call”.
33 In the circumstances, the plaintiff’s salary is, in my view, a fairly neutral factor and does not assist the defendant.
34 Mr Evans relied upon the plaintiff’s evidence that under the first agreement he was generally in attendance during the hours the clinic was open and that this might have been expected to continue. As mentioned, it was only from March 2008 that he performed his duties on call in respect of additional sessions. The plaintiff explained that early in 2008 there was unrest amongst the sonographers at Hampton with respect to their salary. To provide extra income for them and at the same time expand the Hampton practice, the plaintiff organised a higher rate of payment for the sonographers on Saturday and Tuesday mornings and also arranged the engagement of an additional sonographer so that there were now three sonographers operating the three ultrasound machines at Hampton. With the three ultrasound machines being used, the plaintiff would not have been able to himself perform ultrasounds as he did during normal sessions and would have had some idle time if in full attendance. The defendant would have been aware, of course, that an additional sonographer was being employed for the additional sessions and that there was not an ultrasound machine available for the plaintiff to use.
35 Mr Evans also relied upon the evidence both of the plaintiff and James and Mould, that the Hampton Clinic provided a premium specialist service. The plaintiff stated that his “ideal practice model” and the way that he operated most of the time was that most of the patients who came to the Hampton Clinic saw him as part of their visit. He said that he compromised this model somewhat for the extra sessions on Saturday and Tuesday mornings to provide extra work at a higher rate of pay for the sonographers. Further, James stated that the Carlton practice was also “top end”, yet this did not deter him from suggesting that it could be run to the minimum standard required by Medicare.
36 Mr Evans further relied upon the fact that the first agreement provided for the plaintiff to provide his services at the Carlton and Hampton sites of the defendant. In my view, this provision can well be interpreted as indicating where the plaintiff was to work rather than requiring his full-time attendance at those sites rather than just being on call. In any event, there is no similar provision in the second agreement.
37 Taking all of the above matters into account, I conclude that the surrounding circumstances do not assist the defendant.
Consent
38 As indicated, the second agreement requires the plaintiff to obtain prior consent before working additional sessions.
39 Carmine Polidori, a regional operations manager of the defendant in 2008, by email dated 12 March 2008, authorised the plaintiff to perform an additional session on Saturday mornings. In evidence he stated that he authorised Saturday morning and Tuesday morning sessions in 2008 and that they were, in September 2008, to be regarded as two additional sessions to the 11.3 sessions required of the plaintiff under the second agreement.
40 On 23 October 2009, James wrote to the plaintiff in the following terms:
“I write following the meeting held u Marie Mould and me on 7 October
2009.
I acknowledge receipt of your email dated 8 October addressing some issues that arose during our meeting.
I am disappointed that the spirit of our negotiations during the third quarter of 2008 to actively grow the women’s ultrasound business have not been met, despite a near doubling of your remuneration in recognition of this anticipated effort.
To learn that you have then presented a timesheet requesting additional payment for sessions already included within your new contract causes me considerable concern.
You have been paid in excess of $125,000 over and above your newly negotiated terms, yet have not fulfilled the agreed sessions of the underlying contract
I seek repayment of these overpaid sessions to an extent they were paid for your work within your contractual obligations, and am prepared for this repayment to be made by way of instalments over the next twenty four months.
In addition, I confirm the following:
1) HIS requires you to work 11.3 sessions as per your contract with the company.
2) These sessions are to be performed on-site (“attended”) at our rooms in Hampton and are to be a minimum of 4 hours in duration, ensuring all work is reported prior to departure.
3) The Saturday morning session and a Tuesday evening session will be included in the 11.3 standard sessions.
4) No additional ‘reporting’ sessions will be paid without prior
Operations or State Manager approval.
5) HIS assist in reviewing booking times, staff rosters and billing to maximise the use of the three existing rooms, and will assess the viability of a fourth room.
We look to move forward with continuing to build the Hampton site as per our joint vision set out over a year ago now and would welcome your contribution to this.”
(sic)
41 Paragraph (3) in the letter is, in my view, an endeavour by the defendant to unilaterally amend the terms of the second agreement. It is stated to apply to Saturday morning and Tuesday evening (it was agreed that the reference to “evening” should be to “morning”) for the future. The plaintiff would hardly agree to work on a Saturday or Tuesday morning without remuneration. It is one thing to say that a session is to be a minimum of four hours and that a session might last longer than this. The plaintiff accepted this. It is another thing to say that this required the plaintiff’s attendance on a Saturday or Tuesday morning.
42 Clearly, the defendant requires the plaintiff to attend on Saturday and Tuesday mornings. This is clear from paragraph (3). Mould stated that Saturday and Tuesday mornings were to be worked by the plaintiff as part of his remuneration package and were not to be regarded as additional sessions.
43 By email of 26 October 2009, the plaintiff replied as follows:
“Thank you for responding to my e mail. The terms of my contract are quite clear. I am to be paid under its terms for 11.3 sessions per week which was based on my hours established at the time of the signing of my original contract with Symbion 5 years ago. The extra sessions Tuesday morning and Saturday morning were discussed with and approved by Carmine Polidori as extra sessions to be paid at the sessional rate in my contract. Time sheets to this effect were submitted and signed off on by him. These were seen as a temporary measure to maintain patient services growth until Symbion provided me with the extra room to expand the business. This still has not happened.
Attendance at all times by myself was never part of my contract terms. Since the business opened in 2000 my attendance was never total and my position on this has been quite transparent. My duties are to appropriately supervise the imaging work of the technicians and generate reports and billing in my name. In fact I am on site almost all of the time and reports are always completed before the end of the sessions. This is accepted as appropriate practice by most of the people work (sic) in Obstetric Ultrasound practices which employ sonographers. It is also accepted by the Department of Health as specifically laid out in the Medicare schedule.
We are now in dispute concerning my contract and I am forced to pursue legal avenues to receive my entitlements. The sessions on Saturday and Tuesday are additional sessions which are needed by the business but I will not work them if I am not to be paid. If I do not have a guarantee they will be paid including those already worked by the end of the week I will instruct the administrative staff to cancel them. This will damage the business.”
44 In response, the defendant did not instruct the plaintiff not to work on Saturday and Tuesday mornings although it was well aware that the plaintiff was working on Saturday and Tuesday mornings.
45 The plaintiff was in a bind. If he ceased to work on Saturday and Tuesday mornings, on the basis of the stance taken by Mould and James, he was likely to be sued for breach of contract. It is clear that the defendant consented to the plaintiff working on Saturday and Tuesday mornings. In fact, it required him to do so. The only issue is his entitlement to be paid for working these sessions.
46 I conclude that in the circumstances, the plaintiff did have the appropriate consent to work on Saturday and Tuesday mornings.
Conclusion
47 Taking all of the above matters into account, I have come to the conclusion that the plaintiff can perform his contractual obligations for the normal 11.3 sessions or for additional sessions by being “on call” and available to attend if necessary. (Actually, it was not suggested that for the normal 11.3 sessions,
Quantum
48 The plaintiff’s submission is that if I should make the finding I have, the plaintiff is entitled to be paid the sum of $165,000. The defendant submits that the sum payable is rather $132,000. Both counsel provided short written submissions in support of their stances. The parties agree that the plaintiff’s claim is for 120 additional sessions on Tuesday and Saturday mornings between 29 August 2009 and 25 March 2011. At $1,100 per session, this would entitle the plaintiff to the sum of $132,000. The plaintiff however claims an entitlement to six hours for each Tuesday morning session, that is, an additional one and a half sessions. On this basis, the plaintiff would be entitled to $165,000. Given that the sum payable for an additional session is $1,100, I have some difficulty in understanding how the plaintiff can claim more than this sum for an additional session.
49 My tentative view is therefore that the plaintiff is only entitled to the sum of $132,000. However, I am prepared to hear any further submissions the parties wish to make upon this matter and also with respect to interest and costs.
- - -
0
4
0