Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Idameneo (No 123) Pty Ltd v Dr Colin Gross [2012] NSWCA 423
• Hearing dates: 26 October 2012
• Decision date: 14 December 2012
• Before: McColl JA at [1]; Hoeben JA at [2] and [184]; Ward JA at [183]

Decision

(1) The appeal is dismissed.

(2) The cross-appeal is allowed.

(3) The orders made by Latham J, dated 17 October 2011, are set aside.

(4) In lieu thereof, the following orders are made:

(a) Judgment for the first cross-claimants (Dr Johnson and Dr Gross) against the first cross-defendant (Idameneo (No 123) Pty Ltd) on the amended first cross-claim in the sum of $377,000.

(b) The first cross-defendant to pay pre-judgment interest to be calculated pursuant to s 100 of the Civil Procedure Act 2002 on the judgment sum.

(c) Judgment for the second cross-defendants (Dr Johnson and Dr Gross) against the second cross-claimant (Idameneo (No 123) Pty Ltd) on the amended second cross-claim.

5. The appellant (Idameneo No 123) pay the cross appellants' (Dr Gross and Dr Johnson's) costs of the trial on an ordinary basis up to 14 January 2010 and thereafter on an indemnity basis.

6. The appellant (Idameneo No 123) pay the cross appellants' (Dr Gross and Dr Johnson's) costs of the appeal on an ordinary basis.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: TORTS - negligence - transmission of disease to partner by patient of medical centre - successful action by partner against doctors at medical centre - cross-claims in contract and tort by doctors against operator of medical centre - content of duty of care owed by medical centre to partner of patient - nature of breach of duty by doctors - causation - failure by medical centre to maintain accurate patient records - causation - apportionment of responsibility between doctors and medical centre - contract - service agreements between medical centre and doctors - meaning of indemnity clauses in service agreements - whether breach of service agreements by medical centre and doctors - consequences of breach - circuity of action - whether principle of equitable contribution applies - measure of damages recoverable by doctors.
• Legislation Cited: Civil Liability Act 2002 (NSW) - s 5D(1); Law Reform (Miscellaneous Provisions) Act 1946 - s 5; Medical Practice Act 1992 (NSW); Public Health Act 1991 (NSW)
• Cases Cited: Accident Compensation Commission v Baltica General Insurance Co Ltd [1993] 1 VR 467; Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; 239 CLR 420; Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424; Astley & Ors v Austrust Ltd [1999] HCA 6; 197 CLR 1; Austral Pacific Group Ltd (in liq) v Airservices Australia (2002) 203 CLR 136; Belan v Casey (2003) 57 NSWLR 670; Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport [1955] HCA 1; 92 CLR 200; BT v Oei [1999] NSWSC 1082; Burke v LFOT Pty Ltd [2002] HCA 17; 209 CLR 282; Caltex Refineries (Qld) Pty Ltd v Stavar & Ors [2009] NSWCA 258; 75 NSWLR 649; Climax Management v Scansash [2002] NSWCA 167; Codelfa Construction Pty Ltd v SRA of NSW [1982] HCA 24; 149 CLR 337 at 347; C S v Anna BIEDRZYCKA [2011] NSWSC 1213; Florida Hotels Pty Ltd v Mayo [1965] HCA 26; 113 CLR 588; House v R [1936] HCA 40; 55 CLR 499; James Hardie & Co Pty Ltd v Roberts [1999] NSWCA 314; 47 NSWLR 425; James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53; Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418; Laresu Pty Ltd v Clark [2010] NSWCA 108; McCamley v Harris (1997) 8 BPR 15,683; Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337; Oxley County Council v MacDonald [1999] NSWCA 126; Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180; Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; 59 ALJR 492; Redken Laboratories (Australia) Pty Ltd v Docker [2000] NSWCA 100; Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) v James Hardie & Coy Pty Ltd; James Hardie & Coy Pty Ltd v The State of New South Wales; James Hardie & Coy Pty Ltd v Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) [2001] NSWCA 461; 53 NSWLR 626; Royston v McCallum [2006] QFC 193; Strong v Woolworths Ltd [2012] HCA 5; 86 ALJR 267; The Nominal Defendant v Gabriel & Anor [2007] NSWCA 52; 71 NSWLR 150; Wynbergen v Hoyts Corporation Pty Ltd [1997] 72 ALJR 65
• Texts Cited: Shirley's Selection of Leading Cases of the Common Law (5th ed, 1896, R Watson (ed))
• Category: Principal judgment
• Parties: Idameneo (No 123) Pty Ltd t/as Bondi Junction Medical and Dental Centre - Appellant/Cross Respondent; Dr Colin Gross - First Respondent/Cross Appellant; Dr Harry Johnson - Second Respondent/Cross Appellant
• Representation: Counsel: Mr GM Watson SC/ Mr NE Chen - Appellant/Cross Respondents; Mr AJ Sullivan QC/Ms J Lonergan SC - Respondents/Cross Appellants; Solicitors: HWL Ebsworth - Appellant/Cross Respondents; Avant Law Pty Ltd - Respondents/Cross Appellants
• File Number(s): 2012/17580

Decision under appeal

• Citation: [2011] NSWSC 1213
• Date of Decision: 2011-10-17 00:00:00
• Before: Latham J
• File Number(s): 2007/264861

Judgment

1 McCOLL JA: I agree with Hoeben JA's reasons and the orders his Honour proposes.

2 HOEBEN JA:

Nature of appeal

This is an appeal from the Common Law Division of the Supreme Court (CS v Anna Biedrzycka [2011] NSWSC 1213 (Latham J)). The proceedings before her Honour derived from a medical negligence case. The principal proceedings settled and the issue before her Honour comprised cross-claims between the doctors who had provided medical services and the corporate manager of the medical centre where those services were provided.

3 The principal proceedings involved a claim by CS who was the partner of LB. LB was a patient at the medical centre who was not informed that tests carried out for the presence of the HIV virus were unresolved and had unprotected sexual intercourse with CS, resulting in the transmission of the disease to him. Settlement of the proceedings between CS and Drs Gross and Johnson, the first and second respondents to the appeal, was reached in July 2009.

4 The claims brought by the doctors were contribution claims pursuant to

s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (the statute) and claims for breach of contract. Those claims were denied by the manager of the medical centre, which brought claims against the doctors for breach of contract and relied on indemnities provided by the doctors in its favour. The doctors were substantially, although not entirely, successful in the proceedings.

5 The manager of the medical centre has appealed from her Honour's judgment on the basis that her Honour erred in her findings, that she left important issues unresolved and that the final orders made did not reflect the issues at trial or the reasons for judgment. The doctors have cross-appealed.

Factual background

6 In early 2004 a female, LB, commenced a relationship with a male, CS. Sometimes they took precautions against the transmission of sexually transmitted diseases (STDs) by using condoms. They decided to undergo appropriate tests to determine whether each was free from disease, so that they could pursue unprotected sex.

7 LB had previously attended as a patient at the Bondi Junction Medical Centre (BJMC) and as such, some of her relevant details were on record, including her address and contact telephone number. The BJMC was managed by Idameneo (No 123) Pty Ltd, which was the fourth defendant in the proceedings before her Honour, and is the appellant in these proceedings. The last time LB had attended the BJMC was in July 1999.

8 On 30 March 2004 LB attended the BJMC and requested an STD screen. The tests were arranged by Dr Biedrzycka and sent for analysis. Dr Biedrzycka advised LB to return to the BJMC for the results in about a week and to see another doctor as she would be on leave.

9 LB's contact details had changed but she did not inform Dr Biedrzycka or anyone at the BJMC of that fact. No-one at the BJMC sought to confirm that the contact details the clinic had for her on the record, were current and correct at the time of her visit.

10 The fact that no-one at the BJMC confirmed that the contact details for LB were correct at the time of her visit was contrary to the admitted "invariable practice" of the appellant. The appellant's practice was to confirm the name, address and telephone number of a patient attending the BJMC and, if the details then given were different to those appearing in the records, to insert the new details into the record. The requirement for the appellant's staff to confirm the address and telephone details of patients was set out in its Reception Training Manual and in its Receptionist Job Description.

11 LB was required to give a blood sample for the purposes of pathology testing. The blood testing was carried out by a pathology nurse at the BJMC employed by the appellant. In accordance with the appellant's Procedure Manual, the pathology nurse was required at the time of the collection of blood to check the patient's identification details, date of birth, address and telephone number. This did not occur.

12 Her Honour found (at [11]) that none of the appellant's staff at the BJMC charged with the duty to ascertain and record the correct contact details of LB performed that task. That finding has not been challenged on appeal. At trial the appellant offered no explanation for this failure.

13 LB's blood tests were sent to SES Pathology Laboratory for analysis. On 5 April 2004 a person from that laboratory telephoned the BJMC. That person spoke to Dr Harry Johnson. Dr Johnson was the third defendant in the proceedings before her Honour and is the second respondent and a cross appellant in these proceedings. The person from the laboratory told Dr Johnson that LB's results were "equivocal with respect to the HIV test" and that LB "needed retesting".

14 Dr Johnson immediately updated LB's records by adding an entry "By phone, needs bloods repeated, pos result, needs repeat". Dr Johnson also directed the staff at the BJMC to write to LB and request that she return for a repeat of her blood tests.

15 Dr Johnson's conduct was not in accordance with the appellant's recall system for when an abnormal pathology result was received. This system was set out in the appellant's Reception Training Manual and involved a six step process. Those steps were set out in the order in which they were to be taken. Steps two, three and four involved making attempts to contact the patient by telephone. The sending of a letter to the patient was step five in the procedure.

16 Her Honour found (at [62] - [63]) that had Dr Johnson and the BJMC staff followed the recall system set out in the Reception Training Manual, it was likely that the harm ultimately suffered by CS would have been averted. This is controversial and has been challenged by the appellant.

17 The letter to LB was in the following terms:

"Dear L,

Dr Johnson would like you to come back to the surgery to repeat some of your blood tests. We look forward to seeing you at your earliest convenience. Dr Johnson requests that you please come into the surgery as soon as possible.

Yours sincerely,

Dr Harry Johnson"

The letter was expressed in general terms for privacy reasons.

18 LB had changed address and did not receive the letter. However, on 22 April 2004 LB returned to the BJMC of her own accord, in accordance with the advice of Dr Biedrzycka.

19 On that day LB was seen by Dr Colin Gross. Dr Gross was the second defendant in the proceedings before her Honour and is the first respondent and a cross appellant in these proceedings. Dr Gross discussed with LB the results of her blood tests. Dr Gross gave LB advice. Dr Gross admitted that during this consultation he made serious errors.

20 Dr Gross did not examine LB's clinical records, even though they were available to him on the computer screen in the consultation room. If he had done so, he would have seen the note "By phone, needs bloods repeated, pos result, needs repeat". Dr Gross agreed that he should have read these notes and that if he had done so, it would have raised an "alarm" regarding the positive results.

21 Dr Gross had the results of the blood tests in front of him. He gave incorrect advice to LB. She asked about HIV. He told her that her blood tests were clear, except for Candida. In fact, LB was HIV positive.

22 In his affidavit, Dr Gross said that had LB brought Dr Johnson's letter with her, or had she told him that she had received a letter from Dr Johnson, indicating that she should return to the BJMC to repeat some of her pathology tests, he would have made inquiries while she was present to ascertain which of the pathology tests needed repeating. This would have included contacting Dr Johnson and if he were not available, contacting the pathology laboratory. He said that had either Dr Johnson or the pathology laboratory informed him that it was a HIV test which needed to be repeated, he would have then counselled LB regarding safe sex practices.

23 LB left the consultation with Dr Gross believing that there was no impediment to unprotected sex. She and CS had one episode of unprotected sexual intercourse about one week after 22 April 2004. CS contracted HIV from that one episode of unprotected sex.

24 On 12 May 2004 Dr Johnson was advised by the appellant's staff that there had been no response to the letter. He directed that a telephone call be made to the phone number in the records of the practice but that attempt at contact was unsuccessful. On that same date a further letter was sent requesting that LB come to the BJMC as soon as possible. Dr Johnson made a note to that effect in LB's clinical records.

25 The following day the appellant's staff informed Dr Johnson that the telephone number for LB in their records was incorrect. Attempts to contact LB through Directory Assistance were unsuccessful. Thereafter, Dr Johnson attempted to contact LB by making a number of inquiries through the Sydney Hospital Sexual Health Clinic and the NSW Department of Health. Ultimately, a representative of the Clinic made contact with LB's father on 31 May 2004. LB attended the BJMC on 3 June and was told of the need for retesting for the HIV virus.

26 CS commenced a claim for damages for the injury which he had suffered. He sued four parties:

(a) Dr Biedrzycka, alleging that she had been responsible for failing to review the blood tests.

(b) Dr Gross, in respect of his consultation with LB. Dr Gross admitted his negligence.

(c) Dr Johnson, upon the ground that he had failed to contact LB or inform her that she was HIV positive. Dr Johnson admitted breach of duty of care in that he had "failed to take all reasonable measures to notify LB of the results of her HIV test and thereafter counsel LB on how to avoid transmission of the virus".

(d) The appellant upon two bases: first that it was vicariously liable for the negligence of the doctors; second that it had failed to update LB's contact details.

27 The claim by CS was settled before trial. That settlement was effected as follows:

(a) The claim against Dr Biedrzycka was dismissed and a verdict entered in her favour with each party agreeing to pay their own costs.

(b) Judgment was entered against Dr Gross and Dr Johnson in the sum of $745,000 plus $197,500 for costs. That judgment was entered without admission of liability and took effect jointly and severally with there being no apportionment between Dr Gross and Dr Johnson.

(c) There was a verdict in favour of the appellant, but it was agreed that this would not be a bar to any contribution proceedings by Dr Gross or Dr Johnson against it.

28 Dr Gross and Dr Johnson each brought a cross-claim against the appellant. This comprised a claim for statutory contribution under s 5 of the statute and a claim that the appellant had breached contracts which it had with each of them.

29 The appellant cross-claimed against each of Dr Gross and Dr Johnson seeking statutory contribution pursuant to s 5 and damages, or an indemnity, pursuant to contract.

30 By way of further background, the relationship between the appellant and the doctors was that it supplied a working space, administrative services and equipment and support staff, so that they could provide medical services to patients. The doctors entered into a contract with it described as a "practitioner contract". The doctors were not employees of the appellant. Each doctor conducted his or her own practice and in doing so, agreed to pay the appellant a service fee being a proportion of the fees he or she generated for the services provided. As part of its contract with the doctors, whose medical practices it had purchased and to whom it provided services, the appellant took possession of all of the medical records. The practitioner contracts were prepared by the appellant.

31 More will be said about the contracts between the doctors and the appellant in due course. In relation to Dr Gross, the contract was between the appellant and Colin Gross Pty Ltd, referred to in the contract as the IMP (Incorporated Medical Practice). In order to ensure that Dr Gross performed the obligations of the IMP in accordance with the contract, he entered into a performance guarantee with the appellant whereby he undertook to "procure" that the IMP carried out the terms and obligations imposed on the IMP under the practitioner contract.

32 A trial of the cross-claims was conducted over three days, 15 - 17 November 2010. On 20 May 2011 the primary judge delivered her first set of reasons for judgment, but did not make all of the orders necessary to finalise the competing claims.

33 The original reasons for judgment did not deal with a separate claim made by the appellant against the doctors that, if they breached their contracts for service, it was entitled to damages. An application for this to be dealt with was made and granted on 2 June 2011. The parties addressed on this issue on 16 June 2011.

34 On 12 August 2011 the primary judge delivered a second set of reasons for judgment, the effect of which was to vacate the earlier orders and to require the parties to bring in Short Minutes of Order. The parties were unable to agree on Short Minutes of Order. On 28 September 2011 submissions were made as to the form which the orders should take.

35 On 17 October 2011 a third judgment was delivered. The earlier orders were vacated and new orders made.

36 In substance the primary judge decided the matter this way:

(a) The appellant breached the duty of care which it owed to CS.

(b) The breach by the appellant caused the injury suffered by CS.

(c) Each of Dr Gross and Dr Johnson was negligent and the negligence of each caused the injury to CS.

(d) The appellant was not entitled to an indemnity under the various contracts.

(e) In terms of statutory contribution - the appellant must contribute 40 percent of the damages paid to CS.

(f) Each of Dr Johnson and Dr Gross breached their contracts with the appellant thereby entitling the appellant to damages.

(g) The appellant breached its contract with Dr Johnson, thus entitling Dr Johnson to contractual damages which "cancelled out" the appellant's successful contractual claim.

(h) Dr Gross did not have a relevant contract with the appellant, so his claim in contract had to fail.

37 The orders made by her Honour were as follows:

"1) Verdict and judgment for the third defendant [Dr Johnson] on the Amended First Cross Claim against the fourth defendant [the appellant] by way of contribution in the amount of $188,400:00.

2) The fourth defendant [the appellant] to pay pre-judgment interest to be calculated pursuant to s 100 of the Civil Procedure Act on the judgment sum.

3) The fourth defendant [the appellant] to pay the third defendant's [Dr Johnson's] costs of the Amended First Cross Claim in relation to the claim for contribution on a party/party basis up to 14 January 2010 and thereafter on an indemnity basis.

4) Verdict for the second defendant [Dr Gross] on the Amended First Cross Claim against the fourth defendant [appellant] in relation to the claim for contribution.

5) Verdict for the second and third defendants [Dr Gross and Dr Johnson] on the Amended First Cross Claim against the fourth defendant [appellant] in relation to the breach of contract claim.

6) Verdict for the fourth defendant [appellant] on the Amended Second Cross Claim against the second and third defendants [Dr Gross and Dr Johnson] in relation to the breach of contract claim.

7) The second defendant [Dr Gross] to pay the fourth defendant's [appellant's] costs on the Amended Second Cross Claim in relation to the breach of contract claim on a party/party basis."

38 In general terms, the appellant complained that despite handing down three judgments, there were still some issues which were raised before her Honour but which were not dealt with. In relation to her Honour's orders, the appellant submitted that they failed to reflect her Honour's reasons. Subject to the matters raised in the cross-appeal, the doctors generally supported her Honour's reasons and orders.

The appeal

39 The appellant's amended notice of appeal raised the following grounds in relation to the issue of duty of care.

"Ground 1: The primary judge erred in finding that the appellant owed the plaintiff a duty of care to maintain current and accurate records that ensure effective and timely contact with its patients when the need arises.

Ground 2: The primary judge erred in finding:

(a) that the appellant was aware that any delay in notification to a patient who had provided a pathology sample increased the risk that others coming into contact with the patient would be exposed to infection;

(b) constructive knowledge on the part of the appellant of the harm that would result from the failure to properly notify a patient of a serious medical condition.

(c) that, in the case of patients for whom a doctor had ordered a pathology sample, the appellant had constructive knowledge of the risk to members of the public posed by a patient who was potentially infected with the HIV virus engaging in unprotected sexual intercourse in ignorance of the nature of his/her medical condition.

(d) that the appellant operated a medical practice and that the Public Health Act 1991 relevantly applied to the appellant.

(e) that in the absence of knowledge of LB's medical condition the plaintiff was almost wholly reliant upon the integrity of the appellant's procedures to avert the risk of infection from LB.

(f) that compliance with the appellant's own documented procedures would have averted the relevant harm."

40 The primary judge accepted the appellant's submission that the question of whether it owed a duty of care to CS raised novel issues in unusual circumstances and fell to be decided by reference to the factors referred to by Allsop P in Caltex Refineries (Qld) Pty Ltd v Stavar & Ors [2009] NSWCA 258; 75 NSWLR 649.

41 The "salient features" taken into account by her Honour in concluding that the appellant owed CS a duty of care were as follows. First that the provisions of the Public Health Act 1991 emphasised the importance of reporting communicable diseases and that accurate record keeping played an important part in the operation of the Act (at [23]). Secondly her Honour took into account the contents of the appellant's own documentation, i.e. the Reception Training Manual, the Policy and Procedures Manual and the Treatment Room Policy Re Pathology Collection (at [31], [37] - [41]). Those documents emphasised the importance of keeping and maintaining up to date patient records, particularly where blood tests were carried out.

42 Thirdly her Honour took into account the unchallenged evidence of the doctors that it was the appellant which had full ownership and control of patient records at the BJMC and that it was its staff which had responsibility for maintaining the up to date status of those records (at [33] - [36]).

43 Finally her Honour took into account the Recall Register which the appellant's Policy and Procedures Manual required to be kept (at [39]). This book was to be placed at the front desk of the practice and in the event that a doctor asked a member of staff to recall a patient urgently, the patient's name, date of birth and address were to be entered in the register and the staff member was required to telephone the patient to request attendance at the centre in relation to the last consultation. The Policy and Procedures Manual instructed staff to check the Recall Register each Saturday morning and to attend to any non-completed entries. It also provided that in the event that three recall letters were sent to the patient and the patient had not attended the practice, "attempts should be made to contact the Electoral Office to establish the correct address".

44 Her Honour concluded:

"41 The combination of these polices and procedures reflect an awareness on the part of the fourth defendant of the importance of maintaining accurate and current patient records, particularly in the case of patients in respect of whom a doctor has requested a pathology sample. A procedure was put in place to allow for the collection of accurate information, capable of ensuring ready contact with a patient in the event that a pathology sample was returned with a positive result, or indicated a need for retesting. It cannot be suggested that the fourth defendant's employees, including those employed at reception, were not aware of the risk to members of the public posed by a patient, who was potentially infected with the HIV virus, engaging in unprotected sexual intercourse, in ignorance of the nature of his/her medical condition.

...

48 The potential widespread nature of the harm, including its recognition by a strict statutory scheme, the fact that the fourth defendant was in the business of providing health care, constructive knowledge on the part of the fourth defendant of the harm that would result from the failure to promptly notify a patient of a serious medical condition, the foreseeability of harm to others with whom an infected patient came into contact, the assumption of responsibility by the fourth defendant for keeping accurate and current patient records, and the fact that compliance with the fourth defendant's own documented procedures would have averted the relevant harm, justify the imputation of a duty of care on the fourth defendant in the circumstances of this case."

45 The appellant submitted that the doctors were not its employees, so that patients attending the BJMC were only the patients of the medical practitioners. It submitted that the class of persons of which CS was a member to whom the duty of care the primary judge identified was owed was large and indeterminate. It contended that that factor militated against it being subject to any such duty.

46 The appellant submitted that the reference to HIV in the primary judge's reasons was redolent of hindsight, particularly when, because of privacy considerations, the appellant's staff would not have had any actual knowledge of the LB's private problems. The appellant further submitted that her Honour had taken into account a number of irrelevant considerations such as the seriousness of the injury to CS, the application of the Public Health Act 1991 and the failure to follow its own internal manuals and procedures.

47 Next the appellant submitted that the finding by her Honour that CS was vulnerable ignored the role of the doctors. The heavy obligations set out in the Public Health Act were imposed on the doctor, not on the manager of a health care centre. It submitted that because its staff had no actual knowledge of the conditions from which patients may have suffered, it was incorrect of her Honour to impute "constructive knowledge" to the appellant that LB might have been HIV positive.

48 The appellant's submissions on this issue should be rejected. Her Honour was correct in finding the existence of a duty of care owed by the appellant to CS.

49 The difficulty in determining the existence of a duty of care and its content only arose because of the way in which the management of the BJMC was set up. In a more traditional medical practice the doctor, as well as providing medical services, would have control over his or her medical records and it would be the doctor's responsibility to keep those records up to date. At the BJMC, those functions were divided between the doctor and the appellant. It was the appellant which assumed responsibility for maintaining patient records. Nevertheless, what was being conducted was still a medical practice and I see no difficulty in imposing a duty to maintain up to date records on the entity responsible in the practice for patient records. In this case, that was the appellant.

50 The application of principle to the facts of this case supports that conclusion. In Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180 the Court had occasion to consider the matters upon which the existence of a duty of care depended. On this issue, the plurality (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) concluded that it was the combination of foresight of the likelihood of harm, knowledge or means of knowledge of an ascertainable class of vulnerable persons who were unable to protect themselves from harm, the fact that implying a duty would not impair the legitimate pursuit of commercial interests and that the damage flowed from the occurrence of activities within the control of the potential tortfeasor, which gave rise to the existence of a duty of care.

51 In relation to some of those issues, Gleeson CJ said:

"10 ... At the same time, however, his Lordship made it clear that "in some cases the degree of foreseeability is such that it is from that alone that the requisite proximity can be deduced". In relation to the giving of advice or information, questions of reliance and actual foresight of the possibility of harm, (or, what is the same thing, the foresight that a reasonable person would have), are closely related. Moreover, knowledge (actual, or that which a reasonable person would have) of an individual, or an ascertainable class of persons, who is or are reliant, and therefore vulnerable, is a significant factor in establishing a duty of care.

11 Vulnerability can arise from circumstances other than reliance. In Caltex, the obvious vulnerability of a specific plaintiff was influential in a number of the judgments. This was not merely an arbitrary method of solving the problem of potentially indeterminate liability. It was an application of what Lord Oliver later discussed as the idea that in a given case, the degree (and nature) of foreseeability may have an important bearing on whether there is a duty of care.

...

13 The acknowledgment, in the internal communications of the respondent, that there was a need to be careful so as not to damage the interests of those involved in potato growing on land within 20 km of a farm that might be affected by bacterial wilt, is not merely a matter of legally irrelevant prejudice. It shows actual foresight of the likelihood of harm, and knowledge of an ascertainable class of vulnerable persons."

52 Gaudron J expressed the proposition more broadly:

"42 In my view, where a person knows or ought to know that his or her acts or omissions may cause the loss or impairment of legal rights possessed, enjoyed or exercised by another, whether as an individual or as a member of a class, and that that latter person is in no position to protect his or her own interests, there is a relationship such that the law should impose a duty of care on the former to take reasonable steps to avoid a foreseeable risk of economic loss resulting from the loss or impairment of those rights."

53 McHugh J by reference to the "incremental approach" to determining the existence of a duty of care, said:

"103 Nevertheless, when a court is satisfied that the economic loss suffered by the plaintiff was reasonably foreseeable by the defendant, that no question of indeterminacy of liability arises and that the defendant was not legitimately protecting or pursuing his or her social or business interests, it will often accord with community standards and the goals of negligence law, as an instrument of corrective justice, to hold that the defendant should have had the plaintiff's interests in mind when engaging or refusing to engage in a particular course of conduct. ...

104 What is likely to be decisive, and always of relevance, in determining whether a duty of care is owed is the answer to the question, "How vulnerable was the plaintiff to incurring loss by reason of the defendant's conduct?" So also is the actual knowledge of the defendant concerning that risk and its magnitude. ..."

54 In relation to indeterminacy, McHugh J said:

"107 However, it is not the size or number of claims that is decisive in determining whether potential liability is so indeterminate that no duty of care is owed[109]. Liability is indeterminate only when it cannot be realistically calculated. If both the likely number of claims and the nature of them can be reasonably calculated, it cannot be said that imposing a duty on the defendant will render that person liable "in an indeterminate amount for an indeterminate time to an indeterminate class.""

55 The force of these statements of principle is all the greater when one takes into account that their Honours were dealing with a case involving pure economic loss, whereas here the subject matter is serious personal injury.

56 The reasonable foreseeability of serious harm eventuating if patient records were not kept up to date is clear. As Gleeson CJ pointed out, the existence of the appellant's documentation and procedures relating to the maintenance of accurate patient records shows actual foresight on the part of the appellant and knowledge of an ascertainable class of vulnerable persons. If the patients themselves were vulnerable, how much more vulnerable was a person who might come in contact with a patient who unknowingly was the carrier of a communicable disease?

57 Her Honour's reference to the Public Health Act was not in the context of that Act having direct application to the appellant or imposing obligations upon it. Rather, the provisions of the Act emphasised the importance of medical practitioners being able to maintain contact with their patients in circumstances where the patient may have a serious communicable disease. This went to the reasonable foreseeability of the risk of harm and serious consequences if patient records were not maintained. It also informed the content of the duty of care owed by the appellant.

58 For the reasons outlined by McHugh J, persons such as CS were not part of an "indeterminate group". The patients of the BJMC were clearly a determinate group, as were persons they might come in contact with within a particular timeframe and in a particular way, depending upon the nature of the disease under consideration. The vulnerability of such persons as CS is obvious. Without the intervention of the appellant by way of notification to a patient, such persons as CS had no way of protecting themselves from the contraction of a communicable disease in circumstances such as arose here.

59 The application of such principles to a situation, where the sexual partner of a patient contracted a serious communicable disease, can be seen in BT v Oei [1999] NSWSC 1082 (Bell J). At [63] - [65] her Honour applied the principles in Perre v Apand. By reference to those principles and other authorities extensively analysed in that decision, her Honour found that a duty of care existed between a medical practitioner and the sexual partner of a patient. There is, in my opinion, no difference in principle between a doctor owing such a duty and a person in the position of the appellant with its control of patient records in a medical practice, owing a similar duty of care.

60 It is true that in this case, her Honour's specific reference to HIV does involve an element of hindsight. It does not, however, invalidate her Honour's reasoning or conclusion. If instead of HIV, her Honour had used a generic phrase such as "a communicable disease", there could be no criticism of her analysis or conclusion on that issue.

61 Her Honour's reference to constructive knowledge in her reasons was clearly intended to articulate the proposition set out by Gleeson CJ (at [51] hereof) above concerning "the foresight that a reasonable person would have". Her Honour was saying no more than that the appellant's own documents and procedures indicated an actual awareness of the importance of maintaining accurate patient records. The corollary was an actual awareness of the serious consequences both to the patient, and in certain circumstances, including those present, those with whom the patient had contact, if such records were not accurate and up to date.

62 These grounds of appeal have not been made out.

Causation

63 The appellant advanced the following grounds of appeal concerning the causation issue.

"Ground 3: If such a finding was made, the primary judge erred in finding that the unresolved nature of the HIV results was not known to Dr Gross on 22 April 2004.

Ground 4: The primary judge erred in finding that the receipt by LB of a recall letter would have averted the risk, at any time thereafter, of an incomplete consideration of LB's patient history and of incorrect advice being given to her on the status of her test results.

Ground 5: If such a finding was made, the primary judge erred in finding that LB would have attended the medical centre prior to 22 April 2005.

Ground 6: If such a finding was made, the primary judge erred in finding that LB would have attended upon Dr Johnson, rather than Dr Gross.

Ground 7: If such a finding was made, the primary judge erred in finding that had the plaintiff taken the recall letter and/or conveyed its contents to Dr Gross, that Dr Gross would have read LB's patient history and that Dr Gross would not have given her incorrect advice on the status of her test results."

64 When dealing with causation, her Honour referred to s 5D(1) of the Civil Liability Act 2002 (NSW) (CLA) and to the guidance as to its application provided by the High Court in Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; 239 CLR 420. Specifically, her Honour was aware that the test which she had to apply was the "but for" test.

65 Her Honour found that had up to date medical records been kept, LB would have received notification of the need to attend the BJMC and would have attended. In that regard, her Honour relied upon the evidence of LB to that effect.

66 On this issue, her Honour said:

"59 It was therefore more probable than not that LB's attendance at the medical centre some time after 5 April 2004 would have alerted the treating doctor (whether that was Dr Gross or Dr Johnson) to the unresolved nature of the test results for the HIV virus. LB would have been advised of the need for retesting and counselled against engaging in any unprotected acts of sexual intercourse until the results of a further test were available. It therefore follows that LB would not have engaged in the unprotected act of sexual intercourse with the plaintiff, approximately a week after 22 April 2004, which resulted in the relevant harm."

67 The appellant challenged this finding by her Honour on the basis that the negligence of Dr Gross in the consultation of 22 April 2004 was so extreme that it was his negligence, and his negligence alone, which led to the harm suffered by CS. Alternatively, the appellant submitted that even if LB had attended the BJMC with Dr Johnson's letter, it did not follow that the advice of Dr Gross would have been any different. On that issue, the appellant relied on the evidence that even though LB had raised the issue of HIV with Dr Gross, he had apparently misread the test results when providing advice to her.

68 The appellant submitted:

"LB's consultation with Dr Gross is an extreme example of medical negligence. It defies common sense to think that Dr Gross would have behaved any differently in the purely hypothetical circumstances underpinning ... the decision of the primary judge. The unreliability of evidence given upon hypothetical circumstances with the advantage of hindsight is well recognised." [AS [46]]

69 The appellant's submission on this issue should not be accepted. Her Honour correctly applied s 5D(1) CLA. Not only was her Honour's finding open to her, it was a finding required by the evidence.

70 There are a number of problems with the appellant's submissions. Implicit in them is a suggestion that the negligence of Dr Gross was so extreme that it operated as a novus actus interveniens. Such a proposition was not pleaded, nor was it raised expressly or even implicitly before her Honour.

71 The most recent statement of principle in relation to s 5D is in Strong v Woolworths Ltd [2012] HCA 5; 86 ALJR 267 where the majority said:

"18 The determination of factual causation under s 5D(1)(a) is a statutory statement of the "but for" test of causation: the plaintiff would not have suffered the particular harm but for the defendant's negligence. While the value of that test as a negative criterion of causation has long been recognised, two kinds of limitations have been identified. First, it produces anomalous results in particular cases, exemplified by those in which there is more than one sufficient condition of the plaintiff's harm. Secondly, it does not address the policy considerations that are bound up in the attribution of legal responsibility for harm."

72 The decision in Strong recognises that the test of factual causation in

s 5D(1)(a) may be satisfied in circumstances not only where the defendant's negligence was a necessary condition of the occurrence of the harm, but also in circumstances where there are two sets of conditions jointly sufficient to account for the occurrence of the harm and the defendant's negligence was necessary to complete one of those sets of conditions. As the majority said:

"20 Under the statute, factual causation requires proof that the defendant's negligence was a necessary condition of the occurrence of the particular harm. A necessary condition is a condition that must be present for the occurrence of the harm. However, there may be more than one set of conditions necessary for the occurrence of particular harm and it follows that a defendant's negligent act or omission which is necessary to complete a set of conditions that are jointly sufficient to account for the occurrence of the harm will meet the test of factual causation within s 5D(1)(a). In such a case, the defendant's conduct may be described as contributing to the occurrence of the harm."

73 To the extent that the appellant's submission is that causation is not made out if there is more than one necessary condition for the occurrence of the injury, that submission must be rejected. It is clear from the evidence that both the negligence of the appellant and of Dr Gross made a material contribution to the harm suffered by CS and in the way described in Strong, satisfied the "but for" test.

74 The other difficulty with the appellant's submission is that it assumes that had LB attended the BJMC in response to Dr Johnson's letter, she would have been seen by Dr Gross. This does not follow. There were ten doctors practising from the BJMC. A person such as LB attending the practice without an appointment would be allocated to the next doctor available to see her. Accordingly, there was but a one in ten chance of her seeing Dr Gross (assuming that Dr Gross was at the practice on the day on which LB attended). The probabilities are strongly against LB being referred to Dr Gross in such circumstances.

75 Even if LB had attended the BJMC in answer to Dr Johnson's letter, and the doctor to whom she had been referred was Dr Gross, his evidence which her Honour was entitled to accept, was that he would have made inquiries which in turn would have caused him to advise LB to undergo further tests and he would have provided counselling as to safe sex practices (at [22] hereof).

76 It was, of course, entirely correct and indeed necessary for the primary judge to determine causation on a hypothetical basis. It is difficult to see how else the analysis required by the "but for" test could occur in circumstances where what is being relied upon is an omission to do something. Strong accepted that this was so at [32] where the plurality said:

"32 The appellant was required to prove on the balance of probabilities that Woolworths' negligence was a necessary condition of her harm. Woolworths' negligence lay in its failure to employ a system for the periodic inspection and cleaning of the sidewalk sales area. Proof of the causal link between an omission and an occurrence requires consideration of the probable course of events had the omission not occurred. Here, the appellant was required to prove that, had a system of periodic inspection and cleaning of the sidewalk sales area been employed on the day of her fall, it is likely that the chip would have been detected and removed before she approached the entrance to Big W."

The liability of Dr Johnson

77 The appellant raised the following grounds of appeal concerning Dr Johnson's liability.

"Ground 8: The primary judge erred in finding that Dr Johnson's entry in the medical records of LB was not appropriate or sufficient to convey the information that he received from the pathology laboratory to another doctor who may, from time to time, in treating LB, have cause to access her patient history.

Ground 9: The primary judge erred in finding that Dr Johnson's failure to direct staff to contact LB by telephone, at the same time that he instructed the recall letter to issue, constituted a breach of his duty to LB and to those with whom she came in contact.

Ground 10: The primary judge erred in concluding that Dr Johnson was negligent and that any breach of duty on the part of Dr Johnson was a cause of the plaintiff's loss.

Ground 11: The primary judge erred in concluding that Dr Johnson was a tortfeasor liable within s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946."

78 Her Honour's findings on this issue were:

"70 ... I do not agree with the proposition that Dr Johnson's entry on 5 April was appropriate and sufficient to convey the information that he received from the pathology laboratory to another doctor who may, from time to time, in treating LB, have cause to access her patient history. In a practice where patients routinely presented without an appointment and requested to see the next available doctor, it was vital, particularly where a doctor had previously requested testing of a pathology sample, that the most complete information was made available on the patient history. ...

71 I also agree with the submission that Dr Johnson's failure to direct staff to contact LB by telephone, at the same time that he instructed a recall letter to issue, constituted a breach of his duty to LB and to those with whom she came into contact. Dr Johnson's awareness that LB was potentially HIV positive, and his awareness of the public health implications in failing to make prompt contact with LB, dictated that every possible avenue ought to have been explored at the earliest available opportunity."

79 The importance of her Honour's findings in relation to Dr Johnson was that before he could seek contribution from the appellant after the settlement with CS, he had to establish that if the claim by CS had proceeded to judgment, he would have been held liable to pay damages to him. The appellant submitted that Dr Johnson's claim under the statute should fail because her Honour was wrong to find that he had breached his duty of care and that such breach had caused the injury to CS.

80 There was a preliminary issue as to whether the appellant was entitled to rely upon these grounds of appeal because of admissions which Dr Johnson made on the pleadings and because of the Terms of Settlement which had been entered into between Dr Johnson, Dr Gross and CS.

81 In his Defence to the claim brought by CS, Dr Johnson had admitted breach of duty of care in one respect only, i.e.:

"21(d) Failure to take all reasonable measures to notify Ms B of the results of her HIV test, and thereafter counsel Ms B on how to avoid transmission of the virus."

He had in his defence expressly denied causation. In the Consent Judgment entered between Dr Johnson, Dr Gross and CS, it was noted that judgment was entered "without admission of liability".

82 In those circumstances I am satisfied that the appellant can challenge the finding that the entry made by Dr Johnson in LB's clinical records was "not appropriate and sufficient to convey the information", but that it cannot challenge her Honour's finding that Dr Johnson failed to take all reasonable measures to notify LB of the results of her HIV test. That was clearly admitted on the pleadings (The Nominal Defendant v Gabriel & Anor [2007] NSWCA 52; 71 NSWLR 150 per Basten JA at [110]). The appellant can also challenge the finding as to causation since this was expressly reserved by Dr Johnson in his Defence. Similarly, the reservation in the Consent Judgment that it was entered "without admission of liability" means that the appellant is not prevented from raising these issues.

83 Even if breach of duty in failing to take reasonable steps to contact LB were not admitted on the pleadings, there was ample evidence to justify such a finding. The report of Dr Carr, which was not challenged (Blue 477-478), sets out that doctor's opinion "I do not believe that the defendant (including Dr Johnson) adequately pursued locating LB". There was also the failure on the part of Dr Johnson to comply with the appellant's patient recall procedure. This was significant in that Dr Johnson was the medical director of the BJMC.

84 While I agree that the entry in the clinical notes of LB by Dr Johnson after he was contacted by the pathology laboratory, is somewhat Delphic, it does seem to me to convey the essential information. Certainly Dr Gross thought that it was sufficient and if he had read that note, he agreed that it would have set off an "alarm" in his mind.

85 In any event, it matters not whether that note by Dr Johnson was adequate, since it was not read by Dr Gross and accordingly it had no causative role in what happened. Regardless of the adequacy of the note, because it was not read by Dr Gross, causation with respect to that alleged breach was not made out.

86 The appellant submitted that in relation to Dr Johnson's admitted breach of duty in failing to take all reasonable measures to notify LB of the results of her HIV test, causation was not established. It submitted that subsequent events, i.e. the attempts to contact LB after 12 May 2004 which were not successful until LB's father was contacted on 31 May made it clear that even if telephone calls were made and the appellant's recall system was activated, LB would not have been contacted before 22 April. The appellant submitted that after 12 May 2004 it took approximately 22 days before LB attended the BJMC on 3 June 2004. Accordingly even if a telephone call had been made on 5 April 2004 and the same measures taken, they would have been unlikely to secure a return of LB to the BJMC before her actual return to consult Dr Gross on 22 April 2004.

87 It is true, as the appellant submitted, that her Honour did not deal with the issue of causation as it affected the liability of Dr Johnson. There is, however, nothing to prevent this Court determining that issue.

88 I am satisfied that causation in respect of this breach of duty by Dr Johnson has been made out. As a start point, it is incorrect to fix 22 April as the cut off date for contact with LB. The crucial date is the occasion, approximately seven days later, when unprotected intercourse took place between her and CS. That was approximately 24 days after the letter was sent on 5 April and, significantly, after she had been told by Dr Gross that her blood tests were clear, save for Candida."

89 Some reasonable inferences can be drawn from the affidavit and oral evidence of Dr Johnson. What seems clear is that nothing was done by the appellant, or Dr Johnson, between the sending of the letter to LB on 5 April and the notification to Dr Johnson on 12 May that the letter had not been received. Thereafter, there was a significant increase in the efforts made to contact LB. Telephone calls were made to LB's old number and to Directory Assistance. Dr Johnson made at least six telephone calls to the Sydney Hospital Sexual Health Clinic, a medico-legal adviser at United Medical Protection and the NSW Department of Health for advice in attempting to contact LB. The staff member at the practice responsible for following up patients, Ms Henville, was also active in trying to contact LB. As indicated, contact eventually occurred when the person from the Sydney Hospital Sexual Health Clinic spoke to LB's father on 31 May. Significantly, no attempt was made by anyone to check the Electoral Roll, which was a step set out in the appellant's recall protocol.

90 Even with the increased urgency associated with attempts to locate LB after 12 May, the efforts which were made were not particularly impressive, given the potential seriousness of what could occur. There was no attempt to check relevant surnames in the phone book, not only to locate LB herself, but a family member, no attempt to check the Electoral Roll and no attempt to locate LB or a family member through the Police Service. In that regard, LB's surname was somewhat unusual so that a check of the phone book and Electoral Roll may have been fruitful. I am satisfied that much more could and should have been done by Dr Johnson to contact LB after 12 May. It follows that the delay which occurred between that date and 31 May when LB's father was contacted for the first time, is not necessarily indicative of the time which would have elapsed after 5 April had proper efforts been made to contact LB.

91 There is another consideration which is relevant. Had the appellant's recall protocol been activated on 5 April 2004, as it should have been, not only Ms Henville but other members of staff would have been aware of the importance of locating LB. This would have occurred as a result of the making of telephone calls and the sending of the letters required by the protocol. There was a strong likelihood that when LB attended the BJMC of her own accord on 22 April, a connection would have been made by the appellant's staff between her and the person they had been trying to contact since 5 April.

92 Taking those matters into account, I am satisfied, on the balance of probabilities, that when LB attended the BJMC on 22 April she would have been told that the BJMC had been trying to contact her and she would have been told why. I am also satisfied that had more effort been made to contact LB between 5 April and when the unprotected intercourse occurred that such contact would have been achieved and that LB would have attended the BJMC before harm was suffered by CS.

93 It follows that Dr Johnson would have been found liable to CS and thus was entitled to make a claim for contribution pursuant to s 5 of the statute against the appellant.

The Indemnity

94 The appellant advanced the following grounds of appeal concerning the indemnity issue.

"Ground 12: The primary judge erred in construing the indemnity as to only require Dr Gross and Dr Johnson to indemnify the appellant for liability arising out of their acts or omissions in the course of carrying out their duties as doctors within the medical practice in the event that the appellant as the owner of the medical practice was sued by a patient for injuries arising out of the treatment provided by either of them.

Ground 13: The primary judge erred in failing to find that, even on such construction, the appellant was entitled to be indemnified by Dr Gross and Dr Johnson.

Ground 14: The primary judge erred in failing to construe the indemnity as requiring Dr Gross and Dr Johnson to indemnify the appellant in connection with the claims made by each."

95 The relevant contracts between the appellant and the doctors are at Blue 231 and 279. Of course, the contract relating to Dr Gross was between the appellant and the corporate entity referred to as the IMP. The performance guarantee signed by Dr Gross to the effect that he would procure that the IMP would comply with the terms and obligations under the contract is at Blue 229. Apart from that difference, the "practitioner contracts" are in identical terms. In exchange for the provision of staff and facilities, the doctors agreed to provide medical services to patients attending the BJMC and to pay a specified percentage of their earnings to the appellant.

96 Although the contracts must be read as a whole, the relevant indemnity clauses, the subject of these grounds of appeal, provide:

"Dr Johnson

7.1 The Doctor is liable for, and by this Deed indemnifies the Company against, any liability whatever arising from the Doctor rendering medical services pursuant to or in connection with this Deed or other acts or a failure to act on the part of the Doctor, whether of a medical service nature or otherwise."

"Dr Gross

7.1 As between the Company on the one hand and the IMP and the Doctor on the other, the IMP and the Doctor are jointly liable for, and by this Deed indemnify the company against, any liability whatever arising from the Doctor rendering medical services as a consequence of the IMP being a party to this Deed or otherwise in connection with this Deed or other acts or failure to act on the part of the Doctor or the IMP, whether of a medical service nature or otherwise."

97 Her Honour set out her conclusions in relation to those clauses as follows:

"77 I have reached the conclusion that the submissions of the second and third defendants as to the plain meaning of the language in the clauses ought be accepted and that there is no relevant ambiguity that requires the Court to go further in construing the provisions."

98 Having said that, her Honour at ([78] - [81]) went further and set out the intentions which she imputed to the parties to the contract and what she described as the "objective circumstances under which the relevant deeds were executed". Her Honour's conclusion was that the indemnities only applied to liability which arose from conduct of the doctors and that, accordingly, they did not operate to defeat the claims for contribution by the doctors.

99 The appellant submitted that the methodology followed by her Honour when interpreting the indemnity clauses was erroneous and therefore, by implication, the conclusion at which she arrived must also be erroneous.

100 The appellant submitted that the primary judge erred as follows:

(a) Having determined that the indemnity clauses contained no ambiguity, her Honour proceeded to construe them by reference to an inference derived from an intent imputed by her to the doctors.

(b) Despite the lack of ambiguity, her Honour thought it relevant to take into account that "throughout their professional lives [the doctors] understood that they were liable for their own professional negligence including the negligence of their staff".

(c) Despite the lack of ambiguity, the primary judge construed the clauses not by reference to their words, but by inference (drawn in the absence of evidence) of what one side to the contract might have intended or understood, i.e. what "a reasonable person in the position of the doctors would have understood the clauses to require each of them to indemnify".

(d) The primary judge had rewritten the words of the clauses by reference to a one-sided interpretation of their "commercial sense".

101 While I agree that there were errors in the primary judge's approach to the construction of the indemnity clauses, her conclusion as to their meaning was correct. Her Honour's error was in not taking as her start point the actual words of the clauses. It was only necessary to employ other modes of interpretation if some ambiguity emerged. In the case of these clauses, her Honour's initial conclusion was correct, i.e. that there was no ambiguity and that their meaning was clear. Accordingly, it was not necessary to go beyond the words used.

102 Insofar as the indemnity part of the clauses is concerned, it is directed to "any liability whatever" of the Company. The only relevant liability of the Company, i.e. the appellant, for the purposes of statutory contribution to the doctors, is its failure to maintain up to date patient records. That is not a liability "arising from the doctors rendering medical services", nor is it a liability arising from other acts or failures to act on the part of the doctors. It is a liability which arises from the appellant's own conduct. That liability is not covered by the indemnity. Accordingly, on a simple reading of the terms of the indemnity clauses, they do not operate to prevent the doctors pursuing their contribution claims.

103 The construction of the indemnity clauses can be approached in a different way which leads to the same result. By reference to the indemnity clause in Dr Johnson's contract, the construction sought by the appellant would require the clause to be read with additional words in parentheses as follows:

"The Doctor is liable for and, by this Deed indemnifies the Company against, any liability whatever arising from the Doctor rendering medical services pursuant to or in connection with this Deed (even if that liability also arises from the Company rendering the services it has promised to provide pursuant to this Deed) or other acts or failure to act on the part of the Doctor whether of a medical service nature or otherwise (even if there is also liability in respect of the failure to act on the part of the Company in respect of its provision of services under this Deed)."

104 As indicated, the statutory contribution claim by the doctors was based not on acts or omissions on their part, but on acts or omissions of the appellant as the administrative services provider in failing to keep up to date contact details of patients attending the BJMC. Such conduct does not "arise from the doctor rendering medical services pursuant to or in connection with the Deed". Similarly, the failure by the appellant to provide the agreed administrative services, including the maintenance of patient records was not a failure "on the part of the doctor". The phrase "on the part of" does not mean "on behalf of". When used as it is, to qualify "other acts or failure to act", it serves to identify whose acts or failures to act are covered by the indemnity.

105 If it were necessary to interpret the indemnity clauses by reference to their clear object and purpose, the same result would be achieved. It is trite law that in indemnity clauses, any ambiguity should be resolved in favour of the party providing the indemnity (Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 at [117]; Laresu Pty Ltd v Clark [2010] NSWCA 108 at [87] - [89], [99]). The clear purpose of these indemnity clauses was to protect the appellant from claims against it by third parties on the basis that it was responsible for the conduct of the doctors, whether they were providing medical services or not.

106 Accordingly, although there is some force in the appellant's criticism of her Honour's approach to the interpretation of the indemnity clauses, her Honour's conclusion was correct. These grounds of appeal have not been made out.

Apportionment

107 The appellant advanced the following grounds of appeal concerning the apportionment issue.

"Ground 15: The primary judge erred in apportioning, under s 5(1) of the Law Reform (Miscellaneous Provisions) Act 1946, the liability of the appellant as 40 percent of the damages paid to the plaintiff.

Ground 16: The primary judge erred in apportioning, under s 5(2) of the Law Reform (Miscellaneous Provisions) Act 1946, the liability based upon a comparative examination of culpability on the part of each negligent party without consideration of the causal potency or relative importance of the acts of each tortfeasor in causing the damage.

Ground 17: The primary judge erred in finding that an incomplete entry in LB's notes was incorrectly conveyed to LB as a negative result for HIV.

Ground 18: The primary judge erred in concluding, despite finding that there was no evidence of the sum Dr Johnson and/or Dr Gross paid in contribution towards the damages paid to the plaintiff, that Dr Johnson and/or Dr Gross was entitled to statutory contribution from the appellant.

Ground 19: The primary judge erred in ordering that the appellant contribute to Dr Johnson the amount of $188,400 when the primary judge had concluded that there was no evidence of the sum Dr Johnson paid towards the damages paid to the plaintiff."

108 In determining apportionment, her Honour referred to and sought to apply James Hardie & Co Pty Ltd v Roberts [1999] NSWCA 314; 47 NSWLR 425. Her Honour noted a concession by counsel for the doctors that they bore the bulk of the responsibility for the harm suffered by CS. In that regard, her Honour observed that Dr Gross' departure from the standard of care required of a doctor was considerable and that Dr Johnson's negligence was of a lesser order. Her Honour concluded as follows:

"84 The terms of the Consent Order disclose that the second and third defendants were jointly liable to the plaintiff for payment of the agreed amount. There is no evidence before me of any apportionment.

85 The culpability of the fourth defendant was, in my view, no less than, and arguably greater than, that of Dr Johnson. It is not necessary to do more than emphasise the importance of maintaining accurate and current records in the provision of health services, a responsibility which the fourth defendant took upon itself. This case demonstrates the serious consequences of the failure to carry out that responsibility. The policy considerations underlying liability in this case warrant a contribution from the fourth defendant of 40% of the damages paid to the plaintiff."

109 The appellant accepted that an assessment of this kind under s 5(2) of the Law Reform (Miscellaneous Provisions) Act 1946 involved an exercise of discretion. Accordingly, it was necessary for it to establish operative error before this Court would be entitled to intervene and make its own assessment.

110 The appellant sought to overcome this hurdle by submitting that in making her assessment her Honour had focused upon relative culpability, but had not considered causal potency, i.e. the contribution which the conduct of the parties had made to the damage suffered by CS. The appellant reviewed the facts with a view to establishing that the contribution by the appellant should have been substantially less than 40 percent. The appellant submitted that on the facts, the result of her Honour's apportionment was unreasonable or plainly unjust (House v R [1936] HCA 40; 55 CLR 499 at 505).

111 As the appellant appreciated, an exercise of discretion of this kind should not be lightly reviewed. In Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; 59 ALJR 492 at [493/494] the Court said:

"A finding on a question of apportionment is a finding upon a "question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds": British Fame (Owners) v. Macgregor (Owners) (1943) AC 197, at p 201. Such a finding, if made by a judge, is not lightly reviewed."

112 Observations to similar effect were made in Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) v James Hardie & Coy Pty Ltd; James Hardie & Coy Pty Ltd v The State of New South Wales; James Hardie & Coy Pty Ltd v Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) [2001] NSWCA 461; 53 NSWLR 626 per Fitzgerald AJA at 172.

113 In Oxley County Council v MacDonald & Ors; Brambles Holdings Ltd v MacDonald & Ors [1999] NSWCA 126 the trial judge had apportioned liability but had given no reasons for that apportionment. Both parties to the apportionment challenged it on appeal on the basis that the Court should infer that in some way there had been a failure by the trial judge to properly exercise his discretion.

114 On this issue, Sheller JA (with whom Priestley and Powell JJA agreed) having referred to Wynbergen v Hoyts Corporation Pty Ltd [1997] 72 ALJR 65 at 68, said:

"58 ... While I, myself, would have favoured an apportionment of 50 per cent, I am not persuaded that Bruce J's decision on apportionment was unreasonable or plainly unjust. Accordingly, I would reject each party's claim to vary the apportionment."

115 Similarly the apportionment of the responsibility of the appellant arrived at by her Honour was reasonably open on the evidence and this Court should not interfere with it. Just because a different apportionment could also be justified is not sufficient. This aspect of the appellant's grounds of appeal has not been made out.

116 The appellant at trial raised a further issue which the primary judge did not address or resolve. The submission is based on s 5(1) of the Law Reform (Miscellaneous Provisions) Act 1946. That section relevantly provides:

"5(1) Where damage is suffered by any person as a result of a tort (whether a crime or not):

(a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage,

...

(c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought."

117 The appellant submitted that the doctors were not entitled to bring a contribution claim because they had not established the extent of the liability against which they claimed contribution. It submitted that this was an essential requirement for a contribution claim: Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport [1955] HCA 1; 92 CLR 200 at 213. There the court said:

"The Court, however, is required to find what is just and equitable as an amount of contribution having regard to the extent of the responsibility for the damage of the tortfeasor against whom the claim is made. There does not seem to be any valid reason why that tortfeasor may not say to the tortfeasor making the claim, if he has improvidently agreed to pay too large an amount or by unreasonable or negligent conduct in litigation has incurred or submitted to an excessive verdict, that the excess is due to his fault and not to that of the tortfeasor resisting the claim. It would be a matter for the Court to consider under the heading of "just and equitable".

118 The appellant submitted that there was no evidence of how much each doctor had paid towards the settlement figure agreed with CS. It submitted that each doctor was making a separate claim against it and it was necessary for the primary judge to work out whether and if so, how much contribution, it had to pay to each of Dr Gross and Dr Johnson separately, not jointly. In that regard, the appellant referred to the observation made by her Honour at Red 201G:

"... It is pertinent to note once again that there is no evidence before me of the sum Dr Johnson paid in contribution towards the damages paid to the plaintiff. This lacuna in the evidence has important consequences, as the following demonstrates."

One of the complaints of the appellant was that those "important consequences" were not identified and her Honour did not resolve the issue.

119 The appellant submitted that because of this failure by each doctor to establish the extent of the liability for which he was claiming contribution, the contribution claims failed and should be dismissed.

120 This submission by the appellant should be rejected. It fails to take into account that the liability of the doctors for the amount agreed to be paid to CS was joint and several. Each doctor, therefore, was liable to pay to CS the whole of the agreed judgment. That obligation to CS was not affected by any agreement between the doctors as to how they were to apportion responsibility for that payment (even if there were such an agreement). If there had been such an agreement between the doctors, it would not be binding upon CS or upon the Court. To the extent that it was necessary for the Court to apportion liability between the doctors, that was an exercise which the Court would carry out independently of any agreement between them if it became necessary.

121 The important consideration is that each doctor as a concurrent tortfeasor had a joint and several liability to pay the whole of the settlement sum to CS. CS could enforce that liability for the whole amount against either Dr Gross or Dr Johnson.

122 Such an approach is consistent with the analysis of the Court in Bitumen & Oil Refineries. At 210 the Court said:

"It seems to me clear that a tortfeasor cannot recover contribution until his liability is ascertained. If he had not been sued and has paid nothing and admitted nothing, he can have no cause of action for contribution, for the simple reason that he may never be called on to pay at all. The damaged plaintiff may go against the other tortfeasor only. Once the liability of the first tortfeasor has, however, been ascertained by judgment against him or by admission, then he has a cause of action for contribution against the second tortfeasor."

123 Observations to similar effect were made at 211:

"Now whether the question when the 'cause of action for' or the right to claim contribution arises in the first tortfeasor is put directly on the construction of the word 'liable' or upon the more general consideration that only an ascertained liability is regarded as the basis of contribution, it seems to follow that ascertainment by judgment is at least one, and indeed the chief, example of what is required to satisfy the condition expressed by the words 'any tort-feasor liable in respect of that damage'."

124 This is what occurred when judgment was, by consent, entered jointly and severally against the doctors. The appellant's submissions on this aspect ignore the fact that defendants who settle with a plaintiff, or who have judgment entered against them in favour of a plaintiff, are jointly and severally liable for the whole of the relevant sum (except where proportionate liability principles apply, which is not the case here).

125 These grounds of appeal have not been made out.

The Contractual Claims

126 The appellant advanced the following grounds of appeal concerning the contractual claims issue.

"Ground 20: The primary judge erred in holding that the appellant breached clause 3.1 of the "Provision of Services to Medical Practitioner" agreement dated 7 June 2002.

Ground 21: The primary judge erred in holding that the above agreement between the appellant and Dr Johnson contained an implied term "to the effect as set at [105]" and that such term was breached.

Ground 22: The primary judge erred in concluding that Dr Johnson was entitled to an award of damages from the appellant, in circumstances where she found that there was no evidence of the sum which Dr Johnson paid in contribution towards the damages paid to the plaintiff.

Ground 23: Alternatively, despite finding for the appellant against Dr Gross in relation to the breach of contract claim, the primary judge erred in failing to award the appellant, as damages on its cross claim against Dr Gross, the contribution that the appellant was ordered to pay to Dr Johnson.

Ground 24: The primary judge erred in finding a verdict for Dr Gross on the amended first cross claim against the appellant in relation to the breach of contract claim, when the primary judge had earlier found that the breach of agreement was a breach between Dr Gross' company vehicle (the IMP) and the appellant and not between Dr Gross and the appellant."

127 The following cross-appeal grounds are also relevant:

Cross-Appeal Ground 1: Her Honour erred in failing to find that on a proper construction of the contract between the parties, the parties had agreed to allocate or apportion responsibility for loss with the result that the cross-respondent was not entitled to contractual damages (Judgment pars [92] - [102]).

Cross-Appeal Ground 2: Further, or alternatively, her Honour erred in failing to find that by reason of the operation of the principles of circuity of action, her findings of contribution pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 should not be disturbed or changed as a result of the cross-respondent's claim for contractual damages (Judgment pars [103] - [116]).

Cross-Appeal Ground 3: Her Honour erred in failing to find that her findings of contribution pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 should not be disturbed or changed in light of the cross-respondent's claim for contractual damages because of the application of the principles of equitable contribution (Judgment pars [117] - [121]).

128 The following provisions of the practitioner contracts between the appellant and the doctors are relevant:

Dr Johnson -

"3.1 The Company must, at its cost and expense, provide supply and maintain to and for the Doctor, and such other persons as may at any time practise medicine and provide paramedical services from the Premises, such administrative services, clerical staff, facilities, plant and equipment as are in the reasonable opinion of the Company necessary for the Doctor to render medical services from the Premises.

3.2 The services and facilities to be provided by the Company under clause 3.1 include but are not limited to:

...

(d) The provision of all staff, employees and contractors as are reasonably necessary to provide the services to be made available by the Company in accordance with this Deed;

...

7.1 The Doctor is liable for, and by this Deed indemnifies the Company against, any liability whatever arising from the Doctor rendering medical services pursuant to or in connection with this Deed or other acts or failure to act on the part of the Doctor, whether of a medical service nature or otherwise.

...

7.3 The Doctor must comply with the Act and all other legislation which relates to the rendering of medical services and must comply with the customs and standards of conduct becoming practitioners registered under the Act. In connection with rendering or initiating of each medical service the conduct of the Doctor must be acceptable to the general body of general practitioners in Australia."

Dr Gross - agreement between appellant and IMP.

"3.1 The Company must, at its cost and expense, provide supply and maintain to and for the IMP, and such other persons as may at any time practise medicine and provide paramedical services from the Premises, such administrative services, clerical staff, facilities, plant and equipment as are in the opinion of the Company necessary for the IMP to render medical services from the Premises.

3.2 Services and facilities to be provided by the Company under clause 3.1 include:

...

(d) The provision of all staff, employees and contractors as are reasonably necessary to provide the services to be made available by the Company in accordance with this Deed;

...

7.1 As between the Company on the one hand and the IMP and the Doctor on the other, the IMP and the Doctor are jointly liable for, and by this Deed indemnify the Company against, any liability whatever arising from the Doctor rendering medical services as a consequence of the IMP being a party to this Deed or otherwise in connection with this Deed or other acts or failure to act on the part of the Doctor or the IMP, whether of a medical service nature or otherwise.

...

7.3 The IMP must comply with the Act and all other legislation which relates to the rendering of medical services and must comply with the customs and standards of conduct becoming practitioners registered under the Act. In connection with rendering or initiating of each medical service the conduct of the IMP must be acceptable to the general body of general practitioners in Australia.

...

10.1 The IMP must procure that the Doctor complies with such of the terms of this Deed as will enable the IMP to meet its obligations under this Deed.

10.2 The IMP must procure that the Doctor complies with clauses .... 7.3 ... as if each of those obligations have been a binding contractual obligation between the Company and the Doctor."

Dr Gross - Performance Guarantee with appellant.

"1.2 The Doctor covenants with the Company that the Doctor will procure that the IMP carries out the terms of the obligations imposed on the IMP under the Practitioner Contract."

References to "the Act" are to the Medical Practice Act 1992 (NSW).

129 The doctors and the appellant each brought claims for breach of contract. They relied upon the decisions in Florida Hotels Pty Ltd v Mayo [1965] HCA 26; 113 CLR 588; Oxley County Council v MacDonald [1999] NSWCA 126; Redken Laboratories (Australia) Pty Ltd v Docker [2000] NSWCA 100; Climax Management v Scansash [2002] NSWCA 167. It was common ground that if any of the claims for breach of contract were successful it would displace the apportionment of responsibility in tort.

130 Her Honour found that the IMP was in breach of clauses 7.3, 10.1 and 10.2 of its contract with the appellant and that as a result, Dr Gross was in breach of the performance guarantee between him and the appellant. She found that Dr Johnson was in breach of clause 7.3 of the contract between him and the appellant.

131 Her Honour upheld Dr Johnson's claim against the appellant for breach of contract in that it had breached clauses 3.1 and 3.2 of the agreement with him. Her Honour also held that the appellant was in breach of an implied term to the effect that administrative services to be provided by the appellant would include a procedure for updating and checking addresses and phone contact details for every patient on presentation to the Centre. Her Honour found against Dr Gross in his claim for breach of contract against the appellant because he did not have a contract with it and as a result, his claim must fail.

132 Her Honour rejected three other bases put forward by the doctors as to why they should not be liable to pay damages to the appellant for breach of contract.

133 The doctors had submitted that on a proper construction of the contracts between them and the appellant, any liability for acts or omissions occasioning loss would be borne by the party responsible for that loss. If both parties were jointly liable, the loss would be apportioned. Her Honour rejected that submission. She found that the contracts, in particular clause 7.1, did not address the question of damages payable by the appellant for breach of the agreement, but were directed to ensuring that it was not made liable for acts or omissions of the doctors that might occasion loss or damage to a third party. Her Honour concluded that there was nothing in the agreements which dealt explicitly with the appellant's liability in negligence.

134 As an alternative, the doctors submitted that the appellant's claim for breach of contract should fail by application of the principle of circuity of action.

135 While her Honour was prepared to accept that this principle could apply even though no proceedings had been brought by the IMP, she rejected the submission because the evidentiary basis for it had not been made out. This was because one of the considerations critical to the application of the principle of circuity of action was that precisely the same damages would be awarded to each party. Her Honour found that this would not be the result of actions brought for breach of contract between the doctors and the appellant because the doctors were seeking 60 percent of the damages awarded to CS, whereas the appellant was seeking 40 percent which was the amount apportioned against it.

136 The third submission by the doctors was that they were entitled to equitable contribution from the appellant. Her Honour rejected that submission by reference to Burke v LFOT Pty Ltd [2002] HCA 17; 209 CLR 282. Her Honour found that as between the doctors on the one hand and the appellant on the other, there was not "equal or comparable culpability and equal or comparable causal significance".

137 These three issues form the basis of the cross-appeal by the doctors against the appellant. I propose to deal with the doctors' cross-appeal as part of the overall consideration of the contractual claims.

138 Her Honour resolved the breach of contract claims as follows:

"123 The result of these findings is that the breach of contract claims by the third defendant [Dr Johnson] and the fourth defendant [the appellant], against each other, cancel out, leaving the third defendant's successful claim for contribution against the fourth defendant. Whilst the second defendant [Dr Gross] was successful in his claim for contribution against the fourth defendant, that claim is met by the fourth defendant's successful claim against the second defendant pursuant to the performance guarantee."

139 The appellant submitted that her Honour's finding in its favour that Dr Gross was in breach of his performance agreement with it, should have led to him being liable for damages arising out of that breach. It submitted that nowhere in the judgment or in the final orders did her Honour deal with the legal consequences of that finding. The appellant submitted that this Court should correct that error by making the appropriate damages finding.

140 The appellant challenged her Honour's finding that it was in breach of its agreement with Dr Johnson on two bases. The first was that Dr Johnson had not established how much he had paid towards the settlement of the claim by CS. As a result, his claim should fail on that basis alone.

141 Alternatively, it submitted that her Honour had misread the words of clauses 3.1 and 3.2(d). It submitted that the language of those clauses did not support her Honour's construction in that those clauses related to the provision of services, not the quality of the services so provided. The appellant submitted that there was no basis in law for the implication of a term that "the administrative services provided should ensure the accuracy and currency of patient records". It submitted that such a term was not necessary to give business efficacy to the contract, since the contract would be effective without it (Codelfa Construction Pty Ltd v SRA of NSW [1982] HCA 24; 149 CLR 337 at 347).

142 The appellant submitted that her Honour's ultimate conclusion that, as between it and Dr Johnson, the damages for breach of contract to which each was entitled would be cancelled out, was not open. This was because there was no basis whereby her Honour could calculate the damages to which Dr Johnson was entitled.

143 The appellant supported her Honour's rejection of the three bases on which the doctors sought to challenge the appellant's claim for breach of contract, being the issues raised in the cross-appeal.

144 If her Honour's primary findings were correct, the appellant's complaint that her Honour's orders were inconsistent with these findings is made out. I have, however, concluded that a number of her Honour's primary findings were not correct so that the appellant's entitlement to damages for breach of contract against Dr Gross does not arise.

145 The appropriate start point for any claim for breach of contract is the construction of the contract. In this case, the crucial clause in each of the practitioner contracts is clause 7.1. This is the only clause which refers in terms to the liability of the parties to the contract.

146 The doctors' primary submission before her Honour and in this Court was that clause 7.1 had a dual function. They submitted that it delineated the liability of the doctor, as well as delineating the extent of the indemnification. Read in that way, i.e. distributively, the first part of clause 7.1 provides:

"The Doctor is liable for ... any liability whatsoever arising from the Doctor rendering medical services pursuant to or in connection with this Deed or other acts or failure to act on the part of the Doctor whether of a medical service nature or otherwise."

The same reading applies to the IMP contract.

147 The doctors submitted that read in that way, the liability of the doctor and indemnity given to the appellant are both confined or limited in the same way and that the interpretation given to the indemnity limb of the clause should also be applied to the liability limb.

148 I agree with that submission. Not only does it accord with the obligation to interpret a contract, consistently where possible, but it accords with the natural meaning of the words used. It is also an interpretation which accords with the object and purpose of the clause. As already indicated, on its plain meaning the clause did not make the doctor bear the whole burden of the loss where there was fault on the part of both the doctor and the company. Rather, it rendered the doctor solely liable if it was his provision of medical services or other personal acts which gave rise to the liability.

149 It is true, as her Honour noted, that the clause is silent as to the liability of the appellant in respect of liabilities arising solely from its breaches of duty to a third party. However, it is implicit in the delineation of a limited responsibility on the part of the doctor for his own actions that the appellant is to accept responsibility for its actions and for liabilities arising solely from its breaches of duty to a third party.

150 It follows that on a true construction of clause 7.1 of the practitioner contracts, the clause amounted to an agreement by the parties to allocate or apportion responsibilities for any liabilities the parties may have to third parties as follows:

(a) The doctor was to be wholly liable (and indemnify the company) where the liability arose solely as a result of his fault.

(b) The appellant was to be wholly liable where the liability arose solely as a result of its fault; and

(c) Where the liability arose as a result of the fault of both the doctor and the appellant then the liability was to be shared (in the manner provided for by law).

151 It is fundamental to the claims for breach of contract by the appellant, relying as it does on such cases as Florida Hotels v Mayo and Oxley County Council v MacDonald, that a breach of the contract would entitle the "innocent" party to the damages and costs which it was required to pay to CS. It matters not that the "innocent" party was a co-tortfeasor with the party in breach of contract. The situation is different, however, if the terms of the contract allocated responsibility for the risks associated with the contract. Clause 7.1 gives effect to that latter circumstance.

152 The rationale behind that result was set out in Astley & Ors v Austrust Ltd [1999] HCA 6; 197 CLR 1 at [84] - [87]:

"84 It seems likely that those judges who have held that apportionment legislation applies to contract claims have regarded the contrary view as either anomalous or unfair or both. But when the nature of an action for breach of a contractual term to take reasonable care and the nature of an action in tort for breach of a general law duty of care are examined, it is by no means evident that there is anything anomalous or unfair in a plaintiff who sues in contract being outside the scope of the apportionment legislation. Tort obligations are imposed on the parties; contractual obligations are voluntarily assumed. In Simonius Vischer Samuels JA noted that "the first count founds upon a duty imposed by the relationship in which the parties stood, and the second upon a duty imposed by their agreement". In Henderson, Lord Goff of Chieveley emphasised the will of the parties as the factor which supported different results in contract and tort:

"The result may be untidy; but, given that the tortious duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him".

85 In contract, the plaintiff gives consideration, often very substantial consideration, for the defendant's promise to take reasonable care. The terms of the contract allocate responsibility for the risks of the parties' enterprise including the risk that the damage suffered by one party may arise partly from the failure of that party to take reasonable care for the safety of that person's property or person. Ordinarily, that risk is borne by the party whose breach of contract is causally connected to the damage. Rarely do contracts apportion responsibility for damage on the basis of the respective fault of the parties. Commercial people in particular prefer the certainty of fixed rules to the vagueness of concepts such as "just and equitable". That is why it is commonplace for contracts to contain provisions regulating liability for breach of a duty to take reasonable care, whether by excluding liability altogether or limiting it in some other way.

86 Absent some contractual stipulation to the contrary, there is no reason of justice or sound legal policy which should prevent the plaintiff in a case such as the present recovering for all the damage that is causally connected to the defendant's breach even if the plaintiff's conduct has contributed to the damage which he or she has suffered. By its own voluntary act, the defendant has accepted an obligation to take reasonable care and, subject to remoteness rules, to pay damages for any loss or damage flowing from a breach of that obligation. If the defendant wishes to reduce its liability in a situation where the plaintiff's own conduct contributes to the damage suffered, it is open to the defendant to make a bargain with the plaintiff to achieve that end. Of course, the result of such a bargain may be that the defendant will have to take a reduced consideration for its promise to take reasonable care. But the bargain will be the product of the parties' voluntary agreement to subject themselves to their respective obligations.

87 In an action in tort, however, the duty of the defendant to take reasonable care and the obligation of the plaintiff to take reasonable care for his or her own safety or interests are imposed on the parties by law. Absent a contractual stipulation varying the rights of the parties, it is the general law that defines their rights and liabilities. It is one thing to apportion the liability for damage between a person who has been able to obtain the gratuitous services of a defendant where the negligence of each has contributed to the plaintiff's loss. It is another matter altogether to reduce the damages otherwise payable to a plaintiff who may have paid a very large sum to the defendant for a promise of reasonable care merely because the plaintiff's own conduct has also contributed to the suffering of the relevant damage." (Emphasis added)

153 As indicated by the underlined qualification in the above quotation, what the parties did in the practitioner contracts was to allocate responsibility between themselves with respect to liability to third parties. It follows that success in its claims for breach of contract by the appellant does not change the effect of the statute. The liability of the doctors under the contracts is limited to the consequences of their own defaults. It does not extend to those of the appellant. In other words, the apportionment pursuant to the statute remains effective because that was the outcome for which the parties contracted.

154 That is sufficient to answer these grounds of appeal and the cross-appeal. In deference to the extensive submissions which were made on the other aspects of the breach of contract claims, I make some observations in relation to them.

155 I have concluded that her Honour was in error in rejecting the alternative submission by the doctors that the appellant's claims for breach of contract against them should fail because they gave rise to circuity of action. Her Honour rejected this submission on the basis that identical damage had not been suffered, i.e. the damages being claimed by the doctors represented 60 percent of the settlement amount whereas that claimed by the appellant was 40 percent.

156 The appellant's contention was that, as Dr Johnson had not proved what, if any, portion of the settlement amount his (or his insurers) had paid to CS (and there was no finding as to the proportion of CS's loss for which, as between the doctors, he was liable), he had not proved his loss and both his claim in contract and in tort must fail. That seems to me to involve a misunderstanding of the damages to be awarded in the breach of contract claims.

157 The error can be best illustrated as follows. Had the claim by CS not been settled, he would have obtained judgment against Dr Gross, Dr Johnson and the appellant. That judgment would have been obtained against each of them for the whole amount of his damages and costs and each would have been jointly and severally liable to CS for the whole amount. That situation, as between CS and those parties, would continue even though as between themselves, the amount of their contributions to that judgment had been adjusted when their cross-claims against each other for contribution were determined.

158 In other words, CS could have chosen from whom he sought to recover the whole of his judgment regardless of any apportionment determined by the cross-claims between them (though he could not have recovered in aggregate more than the total amount of the judgment). It follows, therefore, that in any action for breach of contract by either of the doctors against the appellant and vice versa, the damages claimed would be the whole of the judgment to which CS was entitled. It further follows that the damages claimed by each of the doctors and the appellant against the others for breach of contract are the same, i.e. the whole of the judgment to which CS was entitled.

159 The requirements for the application of the circuity of action principle were summarised by Young J in McCamley v Harris (1997) 8 BPR 15,683. There his Honour said:

"Before one can have circuity of action, as I understand it:

(a) It must be shown that precisely the same amount of damages would be awarded in the defendant's proposed action as in the plaintiff's action;

(b) Both the plaintiff and the defendant must be suing each other in the same right;

(c) Both actions must be actions at law, not one in law and one in equity; and

(d) Either the cause of action must be complete, or alternatively, the defendant so obviously has an action as a result of the finding for the plaintiff that it would be scandalous to put the defendant to the trouble of starting a fresh action."

160 In the actions for breach of contract between Dr Johnson and the appellant, those requirements have been satisfied. The principle of circuity of action, therefore, operates to defeat the appellant's claim against Dr Johnson for breach of contract and vice versa.

161 The position is more complicated in the case of Dr Gross because of the part played by the IMP. Dr Gross submitted that under the Performance Guarantee between him and the appellant, he became the guarantor of the IMP. Accordingly, the appellant could proceed directly against him with respect to any breaches of the practitioner contract by the IMP. If that occurred, and he was required to pay damages to the appellant, he was entitled by way of subrogation to require the IMP to bring proceedings against the appellant based on its breaches of the practitioner contract.

162 I agree with that submission. The end result would be that as with Dr Johnson, the respective claims for breach of contract would cancel each other out. This is so even though the IMP is not a party to this litigation and had not commenced any proceedings for breach of contract against the appellant. This is the sort of situation envisaged by Young J in requirement (d) to which he referred.

163 A good illustration of the principle at work can be seen in Royston v McCallum [2006] QFC 193 (Chesterman J). In that case, the plaintiff had been injured by a trailer which was being towed behind a prime mover owned by the second defendant, and driven by its employee. The trailer was supplied to the second defendant by the third defendant. Both the prime mover and the trailer were insured by the fourth defendant. The fourth defendant made a payment to the plaintiff in discharge of the second defendant's liability to him. Subsequently, the fourth defendant in purported exercise of its right of subrogation caused the second defendant to proceed against the third defendant for damages for breach of contract or negligence in order to recover the amount paid to the plaintiff. His Honour rejected the fourth defendant's claim on the basis of circuity of action.

164 His Honour said:

"57 The question is whether the sum claimed by Concept is one for which RACQ promised to indemnify Gunnings pursuant to the policy of motor vehicle insurance it issued. If it is, it is conceded, again rightly, that Concept's claim cannot succeed. This is for the reason that there would be, in the circumstance just described, a "circuity of action". The claim (brought by RACQ exercising its rights of subrogation to compel Concept to bring the action) would be met by an action by Gunnings against RACQ seeking indemnity under the same policy for the very amount which it would be liable to pay Concept.

58 Sankey LJ described the doctrine in Aktieselskabet Ocean v B Harding & Sons Ltd [1928] 2 KB 371 at 391:

"Since the Judicature Acts gave facilities for counter-claim and third party procedure, the doctrine of circuity of action has neither been as necessary nor as frequently resorted to as in former years ... In the third edition of Bullen and Leake's Precedents of Pleadings ... the law is ... accurately stated as follows:

"Wherever the rights of the litigant parties are such that the defendant would be entitled to recover back from the plaintiff the same amount of damages which the plaintiff seeks to recover, the defendant may plead the facts which constitute such a right as a defence, for the purpose of avoiding circuity of action ..."

... It must clearly be shown that the same sum which the plaintiff sues for can in turn be recovered from him."

59 In Eastern Extension, Australasia and China Telegraph Co Ltd v Federal Commissioner of Taxation [1923] 33 CLR 426 Isaacs and Rich JJ said this of the doctrine (at 441):

"There has been for centuries deeply embedded in the common law of England, a principle known as preventing circuity and multiplicity of suit. It is a principle which we are persuaded cannot properly be ignored ... Lord Denman CJ speaks of the "principle ... of avoiding circuity of action, i.e. -the scandal and absurdity of allowing A to recover against B, in one action, the identical sum which B has a right to recover in another against A. The law, when it clearly detects the possibility of such a waste of the suitor's money and its own process as well as of the public time, will interpose to prevent its happening. ... We see no reason, in the determination of this case, we are not bound to adhere to the high considerations which are at the root of this principle of the common law, and which are so powerfully expressed by Lord Denman."

165 Of course the application of the principle of circuity of action depends upon Dr Johnson and the IMP on the one hand, and the appellant on the other, each having a claim for breach of contract against the other.

166 There was no issue in the appeal that Dr Johnson and the IMP were in breach of the practitioner contracts. The appellant maintained, as it had at trial, that it was not in breach. As is apparent from the above analysis, I do not accept that submission and her Honour was correct in finding that in the case of Dr Johnson the appellant was in breach of clause 3.1 of the practitioner contract. The same result would have eventuated in respect of the contract with the IMP had this issue been separately addressed. However, I do not agree that it was necessary to imply any additional term into the practitioner contract. In my opinion, the meaning and effect of the words in clause 3.1 is clear.

167 The relevant words of the clause are:

"3.1 The Company must, at its costs and expense, provide and maintain to and for the Doctor, such administrative services as are in the reasonable opinion of the Company necessary for the Doctor to render medical services from the premises."

168 These words are not descriptive. They impose a clear obligation on the company. The obligation can be objectively assessed because of the use of the word "reasonable" to qualify the words "opinion of the company". As the Public Health Act 1991 (to the contents of which frequent reference was made in her Honour's judgment) makes clear, the provision and maintenance of up to date patient records is an obligatory requirement for a doctor practising medicine in New South Wales. It follows that the "administrative services" which must be provided to the doctors by the company must include the provision and maintenance of such records.

169 There was no issue that the appellant had failed to maintain such records in respect of LB and as a result, the appellant was in breach of the practitioner contract with Dr Johnson and that with the IMP. Hence the principle of circuity of action applies.

170 The third issue relied upon by the doctors before her Honour and raised in the cross-appeal is the availability of equitable contribution. This issue was but faintly pressed in the appeal. The claim for equitable contribution was on the basis that, due to the circumstances which existed between the doctors on one hand and the appellant on the other hand (as contracting parties owing contractual duties to each other and each also owing a duty of care to CS), there arose an equitable right of contribution as between the doctors and the appellant in discharging their "common obligation" to CS.

171 I am not satisfied that the doctrine of contribution applies in this case. Although the categories of case in which contribution may be claimed are not closed (Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 298-303; Accident Compensation Commission v Baltica General Insurance Co Ltd [1993] 1 VR 467 at 482), contribution does not arise as between joint tortfeasors at general law (Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337). The history as to the development of the rule is set out in Belan v Casey (2003) 57 NSWLR 670 at [91]-[101] per Campbell J as his Honour then was.

172 While there were certain exceptions to the general rule denying contribution between tortfeasors (see, by way of example, the illustration given in Shirley's Selection of Leading Cases of the Common Law (5th ed, 1896, R Watson (ed)) there was no suggestion that the present case would fall within any of those exceptions.

173 The suggestion in Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418 (at 422 per Davis J) that, following the enactment of the Law Reform (Miscellaneous Provisions) Act 1946, the principle enunciated in Merryweather v Nixan had been abrogated by statute "and the justice of an order for contribution has been recognised" (such that there should remain no bar to the application of the general law of contribution to a case involving joint tortfeasors), was not dealt with upon appeal to the Full Federal Court. However, the reasoning on which that suggestion was based was rejected by Campbell J in Belan v Casey (on the basis that while the statute provided a statutory remedy to overcome the rule in Merryweather v Nixan it did not abrogate the principle recognised in that case, nor did it found a right at general law). Campbell J's conclusion was supported by references to dicta in James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53 and Austral Pacific Group Ltd (in liq) v Airservices Australia (2002) 203 CLR 136 (where it was observed that no right to contribution existed at common law between joint tortfeasors, the only rights were founded in statute and that the purpose of the statutory regime for contribution was remedial in order to redress the existing deficiency).

174 The liability of joint and several concurrent tortfeasors is unitary in the sense that they are responsible for the one damage. There seems no relevant distinction in this regard in relation to the application of the general law principle precluding equitable contribution claims between joint tortfeasors and between joint and several concurrent tortfeasors for the one loss (see James Hardie & Coy Pty Ltd v Seltsam Pty Ltd at 75 per Kirby J). Had the issue arisen for determination, the doctors' claim for equitable contribution from the appellant (a concurrent tortfeasor responsible for the same damage) would fail. The co-ordinate liability that arises as between the doctors and the appellant does so from the fact of their respective breaches of duty to CS, which caused the same damage. The contractual relationship between the doctors and the appellant does not alter the nature of their common obligation to CS as concurrent tortfeasors. Absent a right to apportionment available under statute, there is no equitable right of contribution between them.

175 Accordingly, while I would uphold the cross-appeal in relation to the interpretation of the practitioner contracts and the application of the principle of circuity of action, I would dismiss that part which relies upon equitable contribution.

Costs

176 The appellant advanced the following grounds of appeal concerning the costs issue.

"Ground 25: The primary judge erred in awarding Dr Johnson indemnity costs, based upon the non-acceptance of an offer of settlement, when the judgment sum in favour of Dr Johnson did not better the offer that he had made.

Ground 26: The primary judge erred in not ordering Dr Gross to pay the costs payable by the appellant to Dr Johnson.

Ground 27: The primary judge erred in not ordering Dr Gross to pay the appellant's costs of the Second Amended Cross-Claim.

Ground 28: The primary judge erred in not ordering Dr Gross to pay the appellant's costs of the primary proceedings.

Ground 29: The primary judge erred in not ordering Dr Gross to pay the appellant indemnity costs from 9 May 2009 pursuant to its offer of compromise."

177 For completeness, I should here set out those parts of the cross-appeal which are relevant to the costs issue.

"Cross-Appeal Ground 4: Her Honour erred in failing to order that the cross-respondent contribute a sum reflective of 40 percent of the total sum Dr Johnson and Dr Gross have paid to the plaintiff, given her finding that both Dr Johnson and Dr Gross had succeeded in their argument that the appellant was liable for contribution in that proportion pursuant to s 5(2) of the Law Reform (Miscellaneous Provisions) Act 1946 (Judgment pars [82] - [85]).

Cross-Appeal Ground 5: Her Honour erred in failing to order the cross-respondents pay to the cross-appellants the sum equivalent to 40 percent of the damages and costs payable to the plaintiff pursuant to the terms of settlement and consent judgment 29 June 2009, i.e. a sum of $377,000 which is 40 percent of the settlement sum of $745,000 and costs of $197,500 (Judgment pars [82] - [85]).

Cross-Appeal Ground 6: Her Honour erred in failing to award the first cross-appellant Dr Gross indemnity costs given her finding in Order 4 of her judgment to the effect that he had succeeded in his claim for contribution pursuant to s 5(2) of Law Reform (Miscellaneous Provisions) Act 1946 (Judgment pars [82] - [85] and [124])."

178 The appellant's submissions as to costs were:

"99 Whether it was the intention of the primary judge or not, the net result was that Dr Johnson recovered 20 percent contribution, Dr Gross nothing. Based upon the earlier judgments, it appeared as though Dr Johnson and Dr Gross had recovered 40 percent between them.

100 On the understanding that the doctors have recovered 40 percent, a concession was made that they were entitled to indemnity costs, because of an offer of compromise under which they sought a contribution of one-third. In other words they would have beaten their offer of compromise if they recovered 40 percent.

101 As it turns out, the doctors recovered only 20 percent between them and thus failed to beat their offer of compromise. In those circumstances there was no basis for an award of indemnity costs."

179 As can be seen, the appellant has failed in its appeal and the doctors have substantially succeeded in their cross-appeal. The net result will be that the doctors will recover 40 percent of the damages paid to CS and accordingly I would not have disturbed her Honour's costs order. This is the effect of the concession properly made by the appellant at paragraph 100 of its written submissions.

180 Despite that concession, the appellant further submitted:

"104 The proceedings are complex and Idameneo would wish to be heard upon the issue of costs (including those at trial and the import of Idameneo's offer of compromise) after the result of this appeal is known. The primary judge did not deal with this in her judgment."

181 This submission is duly noted. I have in the orders which I propose reserved the question of costs, both of the trial and of the appeal. However, should the appellant not wish to make submissions as to costs I would order that it pay the costs of the trial on a party/party basis up to 14 January 2010 and thereafter on an indemnity basis and that it pay the costs of the appeal.

Orders

(1) The appeal is dismissed.

(2) The cross-appeal is allowed.

(3) The orders made by Latham J, dated 17 October 2011, are set aside.

(4) In lieu thereof, the following orders are made:

(a) Judgment for the first cross-claimants (Dr Johnson and Dr Gross) against the first cross-defendant (Idameneo (No 123) Pty Ltd) on the amended first cross-claim in the sum of $377,000.

(b) The first cross-defendant to pay pre-judgment interest to be calculated pursuant to s 100 of the Civil Procedure Act 2002 on the judgment sum.

(c) Judgment for the second cross-defendants (Dr Johnson and Dr Gross) against the second cross-claimant (Idameneo (No 123) Pty Ltd) on the amended second cross-claim.

(5) The costs of the trial and of the appeal are reserved.

182 Any submissions by the appellant as to costs are to be filed and served by 4pm 25 January 2013 and are not to exceed four folios. Any submissions in reply by the respondents are to be filed and served by 4pm 8 February 2013 and are not to exceed four folios.

183 WARD JA: I agree with Hoeben JA.

184 HOEBEN JA: Following the handing down of these reasons on 14 December 2012 the parties agreed to the following orders as to costs which were made in Chambers on 1 February 2013.

"5. The appellant (Idameneo No 123) pay the cross appellants' (Dr Gross and Dr Johnson's) costs of the trial on an ordinary basis up to 14 January 2010 and thereafter on an indemnity basis.

6. The appellant (Idameneo No 123) pay the cross appellants' (Dr Gross and Dr Johnson's) costs of the appeal on an ordinary basis."

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Amendments

04 February 2013 - Orders made by Hoeben JA in chambers on 1 February 2013.
Amended paragraphs: [184]

Decision last updated: 04 February 2013