Negoescu v Dental Corporation Pty Ltd
[2022] WASC 365
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NEGOESCU -v- DENTAL CORPORATION PTY LTD [2022] WASC 365
CORAM: ALLANSON J
HEARD: 10 OCTOBER 2022
DELIVERED : 2 NOVEMBER 2022
FILE NO/S: CIV 2070 of 2020
BETWEEN: ALEXANDER NEGOESCU
First Plaintiff
NEGUS DENTAL SERVICES PTY LTD AS TRUSTEE FOR THE NEGUS DENTAL SERVICES TRUST
Second Plaintiff
AND
DENTAL CORPORATION PTY LTD
First Defendant
DC HOLDINGS WA PTY LTD
Second Defendant
Catchwords:
Practice and procedure - Where parties dispute proper construction of agreement - Whether defendants should provide particulars of plea about effect of agreement
Practice and procedure - Discovery - Turns on own facts
Legislation:
Nil
Result:
Application for particulars refused
Orders made for discovery
Category: B
Representation:
Counsel:
| First Plaintiff | : | ML Bennett |
| Second Plaintiff | : | ML Bennett |
| First Defendant | : | D Harris |
| Second Defendant | : | D Harris |
Solicitors:
| First Plaintiff | : | Bennett |
| Second Plaintiff | : | Bennett |
| First Defendant | : | Blackwall Legal LLP |
| Second Defendant | : | Blackwall Legal LLP |
Case(s) referred to in decision(s):
Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368
Segelov v Ernst and Young Services Pty Ltd [2015] NSWCA 156
Tah Land Pty Ltd v Western Australian Planning Commission [2022] WASC 219
ALLANSON J:
Introduction
Dr Alex Negoescu is a dentist. He was the owner of a group of dental practices trading under the name LifeCare Dental. Negus Dental Services Pty Ltd is the entity through which Dr Negoescu conducted LifeCare Dental.
In April 2015, the plaintiffs and the second defendant entered into an agreement by which the second defendant, DC Holdings WA Pty Ltd, purchased assets constituting Dr Negoescu's existing dental practice.
Dr Negoescu and the first defendant, Dental Corporation Pty Ltd, also entered into a Facilities and Services Agreement by which Dr Negoescu would continue to manage the dental practice in exchange for specified remuneration.
In April 2015, Dr Negoescu, Negus Dental, and Dental Corporation entered into a Deed that amended and restated the Acquisition Agreement and the Facilities and Services Agreement.
The parties, by mutual agreement, ended their contractual relationship on 31 January 2021.
Dr Negoescu and Negus Dental claim damages for breach of contract, alleging that the defendants included the wages of staff who provided administrative services as a cost in the calculation of the annual cash flow of the dental practice when administrative services were to be provided by the defendants at no cost. Dr Negoescu alleges that, as a result, his annual remuneration was less than it should have been.
In these reasons, unless it is necessary to distinguish between the different plaintiffs and the different defendants, I will simply refer to the plaintiffs and the defendants.
The evidence
The plaintiffs read the affidavit of Jessica Louise Border, an Australian legal practitioner, affirmed 28 July 2022.
Ms Border attached:
(1)an excerpt containing relevant parts of the Deed of Amendment and Restatement, dated 8 April 2015;
(2)true copies of the Practice Report dated April 2019 for the Admin Centre and corresponding Practice Summary;
(3)a true copy of an email from Ms Mackenzie (the defendants' Head of Transformation) to the first plaintiff, dated 15 December 2019.
The defendants read the affidavit of Belinda Sarah Giles, an Australian legal practitioner, affirmed 26 August 2022.
The Facilities and Services Agreement
In the Facilities and Services Agreement, as amended and restated, 'Facilities and Services' were defined as the facilities and services to be provided by Dental Corporation to Dr Negoescu set out in sch 1. Administrative Services had the meaning given in sch 1 item 6.
By cl 3.1, Dental Corporation, in consultation with Dr Negoescu, was to provide facilities and services to the extent reasonably required to enable Dr Negoescu to conduct his dental practice at specified premises and to manage the 'Dental Endeavour' ‑ defined as the dental practice and other dental practices, related and supporting activities carried out at specified premises.
In consideration for Dental Corporation providing the Facilities and Services, Dr Negoescu was to pay services fees.[1] Dental Corporation was entitled to draw a monthly service fee calculated under sch 3, item 3.[2] The service fee was subject to an annual adjustment calculated in accordance with sch 3 item 2 ‑ in effect, a percentage of annual revenue.[3]
[1] Cl 7.
[2] Cl 7.4.
[3] Cl 7.5.
Clause 8 provided for a shortfall payment where the Annual Cash Flow of the Dental Endeavour (defined in cl 1.1) was not equal to or greater than an agreed Minimum Annual Cash Flow. The Annual Cash Flow was, in effect, the fees derived by Dental Corporation from the 'Monthly Service Fees' and other revenue that Dental Corporation generated which was collected from all sources 'as a result of the provision of the facilities and Administrative Services to the Dental Endeavour', before interest and taxes and less specified expenses.
Schedule 1 cl 3 set out facilities and services that Dental Corporation would provide to Dr Negoescu. The facilities and services were listed in item 1 and more fully described in items 2 to 6. A central issue in dispute is the proper construction of cl 3 and, in particular, item 6.
By item 4, Dental Corporation would employ Employees and engage associate dentists and other contractors where reasonably required. Employees are defined in cl 1.1 as persons employed by Dental Corporation to provide assistance to Dr Negoescu 'or any other person employed or contracted to provide services at the Premises [specified in the Acquisition Agreement] in the operation of the Dental Endeavour'.
Item 6 provided:
In addition to all other facilities and services to be provided by Dental Corporation, Dental Corporation will provide the Practice Principal (at no cost to the Practice Principal) with head office and other administrative services to the extent reasonably required to enable the Practice Principal to conduct the Dental Practice and manage the Dental Endeavour, including information technology services, equipment support, group marketing and accounting (Administrative Services).
That definition of Administrative Services must then be read into the definition of Annual Cash Flow in construing that clause and other provisions in which it occurs.[4]
[4] See Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 [158]; Segelov v Ernst and Young Services Pty Ltd [2015] NSWCA 156 [88].
The application for particulars
The plaintiffs allege, in statement of claim [10], that the 'Administrative Services' to be provided at no cost to Dr Negoescu included:
10.1marketing services, including:
10.1.1consulting with [Dr Negoescu] to establish LifeCare's marketing needs;
10.1.2suggesting marketing activities to suit LifeCare's marketing needs;
10.1.3assisting in the development of marketing activities, including filming and editing of promotional videos and lecture series;
10.1.4assisting with basic design and artwork development for LifeCare;
10.1.5assisting in working with third-party marketing suppliers;
10.2accounting services, including:
10.2.1managing all payments going out of LifeCare;
10.2.2processing all payments to LifeCare's suppliers;
10.2.3processing 'Employee' expenses;
10.2.4processing payments to dentists practicing at LifeCare;
10.2.5assisting with the preparation of and response to audits conducted by Medicare, Dental Corporation, and other health funds from time to time;
10.3human resources (HR) services, including:
10.3.1assisting with the recruitment of staff, including by placing advertisements;
10.3.2co-ordinating the interview process;
10.3.3screening resumes of prospective employees;
10.3.4facilitating the training of new 'Employees';
10.3.5managing 'Employee' benefits, including the Star Performer Program and insurance benefits;
10.3.6providing HR services and performance metrics;
10.3.7working with LifeCare to improve HR systems;
10.3.8providing general HR support, such as award interpretation, performance management and termination procedures;
10.4information technology (IT) services, including:
10.4.1reviewing the practice IT system against Dental Corporation's minimum standard;
10.4.2providing advice and consultancy services;
10.4.3co-ordinating upgrades with IT providers; and
10.5storeroom, warehouse and courier services.
The defendants plead that the services to be provided at no cost were more limited. The defendants plead that, on the proper construction of the Facilities and Services Agreement, the 'Administrative Services':
i.were something that were in addition to, and thus did not include any of, the other four 'Facilities and Services' (including staff) that were to be provided by the Defendants to [Dr Negoescu];
ii.were to be provided by the Defendants and not by [Dr Negoescu], LifeCare or 'Employees';
iii.were in the nature of particular types of services that could only be provided (or, alternatively, could only be provided in an efficient manner) by Dental Corporation's head office; and
iv.did not include the various activities, tasks and responsibilities described in paragraphs 10.1 to 10.5 of the Statement of Claim.[5]
[5] Defence [10e].
On 22 April 2022, the plaintiffs sought further and better particulars of [10e] of the defence. They now apply for an order that the defendants give those particulars.
In substance, the plaintiffs requested full particulars of the Administrative Services the defendants provided that were in addition to the other Facilities and Services, including the persons who provided the services, why those services could only be provided by Dental Corporation's head office, and 'particulars of the various activities, tasks and responsibilities that constituted the Administrative Services'.
The plaintiffs complain that the defendants plead what Administrative Services are not, without pleading adequate particulars of what they are. The plaintiffs say that they do not understand the case put against them and, without the particulars, they cannot meet with necessary evidence any questions that may be raised at the trial, to prevent surprise and consequent delay.
The defendants submit that the plea in the defence is a plea about the proper construction of the Facilities and Services Agreement. The defendants' answer to the plaintiffs' case is clearly stated.
I agree with the position advanced by the defendants. The plea in [10] of the defence is a plea about the proper construction of sch 1, cl 3 of the Facilities and Services Agreement. The defendants have sufficiently set out what they say is the effect of the agreement. The services that were subsequently provided under the contract, whether at cost or otherwise, are not relevant to the question of construction.
The discovery application
The court made orders for discovery by consent on 28 April 2021 requiring:
(1)the parties to 'give discovery on affidavit of all documents that are directly relevant to the issues raised by the pleadings on which they intend to rely'; and
(2)the defendants to give discovery of consolidated 'Practice Reports' and 'Practice Summary' transaction reports which accompanied, formed the basis of, or were used to produce, the consolidated Practice Reports.
The plaintiffs now say the agreed orders have led to inadequate discovery. By a minute of proposed orders, filed 28 July 2022, the plaintiffs applied for discovery in nine categories.
On 7 October 2022, in response to a minute of proposed categories of discovery filed by the defendants, the plaintiffs amended their proposed orders. Only the matters in bold remain in dispute:
1Documents (such as job descriptions, employment contracts and internal organisational charts) identifying or describing the roles and duties of people at the defendants' head office who:
(a)performed roles consistent with those set out at paragraph 10 of the statement of claim between 1 July 2010 and 2020 (inclusive); or
(b)provided the services the defendants contend constitute the 'Administrative Services'.
2ADocuments dated between 1 July 2010 and 15 April 2011 in which the 'Administrative Services' that were to be provided to the plaintiffs by the first defendant are identified or described (whether the documents were created in that time period or later).
2CDocuments dated between 1 July 2010 and 15 April 2011 provided to the first plaintiff by the first defendant which identify or describe the 'Administrative Services' the defendants would provide.
2DDocuments provided to Practice Principals who had entered into an FSA with the Defendants in 2010 or 2011 identifying or describing the 'Administrative Services' the Defendants would provide (whether the documents were created in that time period or later).
3ADocuments dated between 2015 and 2020 which describe the roles and duties of the individuals listed at paragraphs 25.1, 32.1, 39.1 and 46.1 of the plaintiffs' substituted statement of claim.
3BDocuments between the years 2011 and 2015 identifying or describing the salaries, roles and duties of:
a)Gunjan Katoch;
b)Sarah Murchison;
c)Trent Smith;
d)Kiri Stowell;
e)Kathy Clarkson;
f)Kim Jackson;
g)Derek Peters;
h)Samantha Druce; or
i)Kathleen Nims,
or any other LifeCare employee who held the following (or similar) job titles:
j)Marketing and Promotions Coordinator;
k)Marketing Advisor;
l)Patient Support and Marketing Assistant;
m)Finance Manager;
n)Accounts Administrator/Assistant;
o)Human Resources Advisor/Officer;
p)Warehouse/Operations Coordinator; and
q)Information Technology Officer.
4Any 'Admin Staff Summary' spreadsheets (or similar document or documents) for the 1st to 4th anniversary years.
6Internal correspondence regarding the first plaintiff's requests for a detailed breakdown of the calculation of the Annual Cash Flow, including internal correspondence relating to the emails identified at paragraph 3.2 of the plaintiffs' substituted reply.
7Correspondence between Mr Ben Woodward or Ms Naomi Mackenzie and the first plaintiff between the years 2011 and 2020 where that correspondence is in relation to calculation of the Annual Cash Flow or Cash Flow Shortfall.[6]
[6] The passages in bold are the plaintiffs' proposed additions to the defendants' minute.
It is not necessary to restate the principles relating to an application for discovery, those principles are well known.[7] It is sufficient to state the fundamental principle. The power to order discovery is discretionary. The discretion is to be exercised having regard to the objects set out in O 1 r 4A of the Rules of the Supreme Court 1971 (WA). The ultimate test is whether the discovery sought is 'essential to the fair and just determination of the issues bona fide in contention between the parties and the preparation of the case for trial'.
[7] See, for example, Tah Land Pty Ltd v Western Australian Planning Commission [2022] WASC 219 [14].
Relevance is not the only factor the court must consider in the exercise of its discretion, but it remains the descriptive criterion in O 26 of what documents should be discovered. To determine whether a class of documents may be relevant, the court should consider the pleadings, together with the conduct and admissions of the parties and the nature of the action. If a document is relevant and arguably necessary for the just determination of the issues at trial, discovery should generally be ordered.
The pleadings
The pleadings are the starting point in this application.
I have earlier set out [10] of the statement of claim.
The plaintiffs plead that in the first four years of the agreement, that is before the 'Anniversary Year' that commenced on 1 June 2015, Dental Corporation employed Employees, some of whom, as part of their role, spent a proportion of their time providing Administrative Services. The plaintiffs claim that the whole of the remuneration of these employees was included as an expense in the calculation of Annual Cash Flow when the proportion attributable to Administrative Services should not have been included.
The plea for each of the years after 1 June 2015 identifies named Employees who were employed to provide assistance to Dr Negoescu, together with their roles and salaries. The plaintiffs allege for most of those Employees that they spent all of their time providing Administrative Services. For a small number of others, the plaintiffs allege the Employee spent part of their time providing administrative services. In two annexures to the statement of claim, the plaintiffs summarise the roles and salaries of Employees who provided Administrative Services in the Anniversary Years after 1 June 2015, and the Administrative Services provided.
With regard to the first four Anniversary Years, the defendants deny that Employees spent a proportion of their time providing Administrative Services. Further, the defendants plead that they do not know who are the Employees the subject of the plaintiffs' claims in the first four years.[8] The defendants further plead that Employee Remuneration was required by the Facilities and Services Agreement to be treated as an expense of Dental Endeavour.[9] They deny that they failed to provide Administrative Services at no cost, and deny that the plaintiffs suffered loss and damage.[10]
[8] Defence [20].
[9] Defence [21].
[10] Defence [23].
For the later years, where the plaintiffs have identified the relevant employees, the defendants deny the Employees provided Administrative Services. In some cases they deny, in the alternative, that the particular employee spent all (or 50%) of their time providing Administrative Services, and particulars of the proportion of time spent on Administrative Services 'may be provided following discovery and evidence'.
The disputed categories
Category 1
The plaintiffs submit that the documents are relevant on the basis that the meaning of Administrative Services and the identification of the persons who performed those services are in issue.
There is no doubt that the meaning of Administrative Services is in issue, but it is a matter of statutory construction. The documents in Category 1 could not be relevant to the question of construction.
No doubt, whether some of the factual matters are relevant will depend on the proper construction of the agreement. But this is not the occasion to determine that construction dispute. The plaintiffs' construction is not patently untenable. Because everything has been put in issue, should the plaintiffs' construction be accepted, I am satisfied that the documents in this category are of sufficient relevance to prove of the plaintiffs' factual case as pleaded.
On the parties' pleaded cases, it is material, for the whole of the period of the agreement:
(1)what services were provided by the defendants;
(2)whether the services were required by Dr Negoescu to conduct LifeCare to the required standard;
(3)whether services provided by Employees at the premises of LifeCare or at head office were Administrative Services that, on the proper construction of the Facilities and Services Agreement, the defendants were to provide at no cost;
(4)whether the defendants charged for services which should have been provided at no cost; and
(5)if the defendants charged for services that they were required to provide at no cost, how much was charged.
The defendants submitted that the plaintiffs have pleaded who were the employees on site who provided the Administrative Services. They submitted, in effect, that the services that were provided at head office, and by whom they were provided, is not an issue.
But it may, for example, be relevant to the plaintiffs' case to establish, not only what services were provided by the named Marketing and Promotions Coordinator on site, but also that such services were reasonably required to enable Dr Negoescu to conduct his practice and manage the Dental Endeavour and no person at 'head office' was providing administrative services of that kind. To do so, the plaintiffs must rely on documents within the control of the defendants to prove matters which are largely within the knowledge of the defendants.
Category 2A
The only point in issue in this category is the reference to documents which 'describe' Administrative Services and the indefinite period.
The plaintiffs rely on the submission that the definition of Administrative Services is in issue. As the defendants correctly submitted, post contractual conduct will not assist with the question of construction.
The plaintiffs also contend that the Administrative Services that were actually provided is in issue. Category 2A, however, is limited to documents dated between 1 July 2010 and 15 April 2011 ‑ a period preceding the parties entering the original Dental Practice Acquisition Agreement and Facilities and Services Agreement. I see no possible relevance of documents created later, but dated between July 2010 and 15 April 2011. Discovery of documents 'created … later' would require search over an 11 year period for documents of no apparent forensic significance and is not justifiable.
Category 2D
This category also has the difficulty of an extended time period with no apparent forensic relevance.
The evidence in this application does not show how documents provided to others who entered into agreements with the defendants, at or about the same time, are relevant. If the question is one of construction, those documents are of no relevance. If the question is what Administrative Services were actually provided to Dr Negoescu, I am not satisfied that documents identifying or describing what the defendants (in 2010 or 2011) identified they 'would provide' to other dentists is relevant to any matter on the pleaded issues.
Category 3B
The last contentious category are documents relating to the first four Anniversary Years and describing the salaries, roles and duties of nine named people or any other LifeCare employee who held specified (or similar) job titles. The people named in the application are not identified by name in the pleadings. The job titles, however, are those pleaded for (other) named people in the years after the first four anniversary years, and the fact that people were employed with those job titles is admitted. The plaintiffs plead that, in those later years, the persons who were in the roles with those titles provided Administrative Services for up to 100% of their time.
The plaintiffs allege that they have been charged for services provided by employees of the defendants, when those services should have been provided at no cost. Particularly where the defendants have specifically pleaded the failure of the plaintiffs to identify the persons said to have provided services in the first four years, the documents requested by reference to specified roles are, in my opinion, necessary for the fair and just determination of the issues raised in the plea.
There is no evidence before the court about the individuals named by the plaintiff in this proposed category in the application, and there is no overlap between those names and the persons who are identified as acting in specified roles in later years. The relevance of the named persons was not agreed, and the evidence filed in the application would require the court to speculate, or to assume, that they are the employees who provided services in relevant years. There is, at present, no evidence to support the application for discovery by reference to those named.
Discovery of documents by reference to job titles is, however, supported by the pleadings and should be sufficient.
The defendants referred to the burden of searching for documents by reference to job title. The evidence does not, however, show that the burden would be disproportionate to the forensic benefit of that information being provided.
Conclusion
I would accordingly make an order for discovery in the following terms:
1Documents (such as job descriptions, employment contracts and internal organisational charts) identifying or describing the roles and duties of people at the defendants' head office who:
(a)performed roles consistent with those set out at paragraph 10 of the statement of claim between 1 July 2010 and 2020 (inclusive); or
(b)provided the services the defendants contend constitute the 'Administrative Services'.
2ADocuments dated between 1 July 2010 and 15 April 2011 in which the 'Administrative Services' that were to be provided to the plaintiffs by the first defendant are identified.
2CDocuments dated between 1 July 2010 and 15 April 2011 provided to the first plaintiff by the first defendant which identify or describe the 'Administrative Services' the defendants would provide.
3ADocuments dated between 2015 and 2020 which describe the roles and duties of the individuals listed at paragraphs 25.1, 32.1, 39.1 and 46.1 of the plaintiffs' substituted statement of claim.
3B.Documents between the years 2011 and 2015 identifying or describing the salaries, roles and duties of any LifeCare employee who held the following (or similar) job titles:
(a)Marketing and Promotions Coordinator;
(b)Marketing Advisor;
(c)Patient Support and Marketing Assistant;
(d)Finance Manager;
(e)Accounts Administrator/Assistant;
(f)Human Resources Advisor/Officer;
(g)Warehouse/Operations Coordinator; and
(h)Information Technology Officer.
4Any 'Admin Staff Summary' spreadsheets (or similar document or documents) for the 1st to 4th anniversary years.
6Internal correspondence regarding the first plaintiff's requests for a detailed breakdown of the calculation of the Annual Cash Flow, including internal correspondence relating to the emails identified at paragraph 3.2 of the plaintiffs' substituted reply.
7Correspondence between Mr Ben Woodward or Ms Naomi Mackenzie and the first plaintiff between the years 2011 and 2020 where that correspondence is in relation to calculation of the Annual Cash Flow or Cash Flow Shortfall.
The application for further and better particulars will be refused.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TB
Associate to the Honourable Justice Allanson
2 NOVEMBER 2022
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