Daynes v I-MED Central Queensland Pty Ltd; I-MED Central Queensland Pty Ltd v Daynes

1. [1]

   BELL CJ: This matter involved an appeal and cross-appeal from a decision of Cavanagh J (the primary judge) in Daynes v I-MED Central Queensland Pty Ltd [2024] NSWSC 1064 (PJ or primary judgment). The appeal was heard concurrently with applications for leave to appeal and cross appeal from the primary judge’s decision in respect of costs: Daynes v I-Med Central Queensland Pty Ltd (No 2) [2024] NSWSC 1313 (CJ or costs judgment).

2. [2]

   The proceedings arose out of the decision of the Respondent and Cross Appellant, I-MED Central Queensland Pty Ltd (I-MED), summarily to dismiss the Appellant and Cross Respondent, Dr Anthony Kevin Daynes (Dr Daynes), from his position as a senior radiologist at I-MED’s radiology clinic in Cairns (the Cairns Clinic).

3. [3]

   The summary dismissal of Dr Daynes followed allegations of bullying and victimisation of one co-worker, Ms Odgers, and the alleged sexual harassment of another, Ms Turner. Both allegations were the subject of a report by an independent consulting firm named Workdynamic Australia (Workdynamic), commissioned by I-MED: PJ [4], [26]. The report was adverse to Dr Daynes and he was summarily dismissed on 11 May 2022, having been suspended during the pendency of an inquiry leading to the report.

4. [4]

   The primary judge held that I-MED was not entitled summarily to dismiss Dr Daynes and that his dismissal entailed a repudiatory breach of his contract of employment which justified Dr Daynes in terminating that contract, and entitled him to an award of damages. Dr Daynes sought damages in the sum of $4,308,164.38 but was held to be only entitled to recover the last 11 weeks and 5 days of his fixed term employment contract in addition to an amount representing the three months’ notice period under his contract of employment: PJ [263]. That amounted to $302,769.23, plus interest of $45,410.73 (PJ [267]), totalling $348,179.96.

5. [5]

   The following two key findings of the primary judge were subject to challenge by I-MED and Dr Daynes respectively:

   1. (1)

      that I-MED’s summary dismissal of Dr Daynes was unlawful (PJ [6], [221]);

   2. (2)

      that Dr Daynes’ damages were $348,179.96 (PJ [268]).

6. [6]

   In holding that the summary dismissal was unlawful, the primary judge was not satisfied that Dr Daynes performed a pelvic thrust towards Ms Turner at a staff Christmas party on 11 December 2021 and thereby had engaged in conduct of a sexual nature. His Honour was also not satisfied that Dr Daynes had failed to comply, in breach of contract, with certain policies in I-MED’s Workplace Policies Handbook (the Handbook) relating to victimisation and bullying.

7. [7]

   The primary judge initially indicated that I-MED should pay Dr Daynes’ costs but varied this following an application made after the delivery of reasons which drew the Court’s attention to the fact that certain offers of compromise had been made. While his Honour rejected an argument that the proceedings should have been commenced in the District Court with costs consequences under the Uniform Civil Procedure Rules 2005 NSW (UCPR) because Dr Daynes was awarded less than $500,000, the primary judge held that the rejection by Dr Daynes of a Calderbank offer of 28 June 2024 made by I-MED, was unreasonable. This led his Honour to ordering that:

   1. (1)

      I-MED pay Dr Daynes’ costs as agreed or assessed up to and including 28 June 2024; and

   2. (2)

      Dr Daynes pay I-MED’s costs as agreed or assessed from 29 June 2024.

8. [8]

   Both parties seek leave to appeal from the costs judgment. These applications are dealt with at [171]-[209] below.

Brief Background

1. [9]

   It is convenient to summarise the background facts in relation to Dr Daynes’ professional history and the Cairns clinic. The two overlap.

2. [10]

   Dr Daynes is 73 years old and worked as a radiologist in Cairns for 35 years between 1987, when he obtained his specialist registration, and May 2022, when he was summarily dismissed from his position as senior radiologist at I-MED where he had been employed since 2019: PJ [7]-[8].

3. [11]

   Dr Daynes originally worked in the only radiology practice in Cairns, where he quickly became partner and then stayed on as an employee for three years after he and his fellow partners sold the business: PJ [8].

4. [12]

   In 2010, Dr Daynes established a radiology practice in Cairns with his wife, Ms Gordon-Daynes: PJ [9]. Between 2010-2019, that business developed into a very successful practice, employing approximately 25 to 30 people, including two other radiologists: PJ [9], [14]. Ms Gordon-Daynes worked as the practice manager, doing “everything other than the actual radiology work” at the clinic: PJ [13], [16].

5. [13]

   Once the two other radiologists joined the practice, Dr Daynes focused on the “women’s imaging side of the practice” which included “obstetrics, bone density, and breast imaging”: PJ [15]. Dr Daynes gave evidence that his practice was the “leading site in Cairns for breast investigation work”: PJ [16]. The primary judge accepted Dr Daynes was an experienced radiologist with an excellent reputation: PJ [17], [7].

6. [14]

   In 2019, Dr Daynes and Ms Gordon-Daynes sold the business to I-MED: PJ [9]. There was some dispute at trial as to how much they received from the sale, but the Sale and Purchase Deed (the Deed) records the completion payment as $15,000,087.00, “as adjusted in accordance with clause 7” of the Deed, which dealt with advance payments and apportionment of outgoings: PJ [10]. In cross examination Dr Daynes suggested “the final number was $21 million”. Suffice to say, the business was sold for a very substantial sum: PJ [11].

7. [15]

   A condition precedent of the Deed was Dr Daynes entering into an employment agreement with I-MED: PJ [12]. The precise terms of that employment are outlined below: see [19]-[28].

8. [16]

   The completion date in the Deed was 1 August 2019, and Dr Daynes commenced his employment as the senior radiologist with I-MED on 2 August 2019: PJ [21]. He remained in that position until 11 May 2022, when his employment was terminated without notice by way of an email from Ms Nicholson, the general manager of I-MED for Queensland and the Northern Territory (the termination letter): PJ [28]. The key terms of that letter are reproduced at [33] below.

9. [17]

   Some nine days prior to his termination, Dr Daynes sent the following email to Ms Nicholson:

10. [18]

    Dr Daynes and Ms Gordon-Daynes’ intentions in selling the business, and whether it was part of a process of “winding back from their work”, or, alternatively, whether Dr Daynes intended to continue to work at I-MED until retiring at the age of at least 77, as he maintained in his evidence, were hotly contested at trial and will be considered later in these reasons in the context of considering his Appeal in relation to the quantum of damages.

Terms of Employment

1. [19]

   Annexed to the Deed was a document dated 31 May 2019 and headed “Schedule of Commercial Terms – employee” (Schedule of Commercial Terms) and another document dated 1 May 2016 headed “Radiologist & Nuclear Medicine Physician’s Terms and Conditions of Employment” (TCE): PJ [82].

2. [20]

   Under the heading “Term”, the Schedule of Commercial Terms provided that the employment would run for an “Initial Fixed Term of 3 years” (the Initial Fixed Term), “then conversion to an Indefinite Term with a Notice Period”.

3. [21]

   Under the heading “Expiry Date”, the Schedule of Commercial Terms provided that:

4. [22]

   “Start Date” was defined as “the day after the Completion Date” (as that term was defined in the Deed). As already noted, the Completion Date was 1 August 2019.

5. [23]

   Under the heading “Notice Period”, the Schedule of Commercial Terms provided:

6. [24]

   “Indefinite Term” is defined in the TCE as:

7. [25]

   As for the terms and conditions of employment, cl 1.9 of the TCE provided:

8. [26]

   The clause governing termination without notice is cl 7.3 of the TCE:

9. [27]

   As will become clear, I-MED placed significant weight on the Handbook, which provided definitions and examples of workplace bullying, victimisation and sexual harassment.

10. [28]

    Clause 12 of the TCE provided:

11. [29]

    The Handbook dealt with Sexual Harassment as follows:

12. [30]

    Other examples of sexual harassment were then given, all of which were qualified by the phrase “[d]epending on the circumstances”. One of these was “[d]eliberate and unnecessary physical contact, such as patting, pinching, fondling or deliberately brushing against another body, attempts at kissing.”

13. [31]

    Workplace bullying was defined in the Handbook as follows:

The Alleged Workplace Misconduct

1. [32]

   The termination letter was sent to Dr Daynes by Ms Nicholson. The letter purported to justify the termination of Dr Daynes’ employment by reference to alleged breaches of cl 7.3 of the TCE: PJ [54].

2. [33]

   The termination letter relevantly provided as follows: PJ [56]

3. [34]

   Two kinds of alleged misconduct were thus relied on: PJ [58]

4. [35]

   I-MED particularised that alleged misconduct as occurring in the period between September 2020 and the termination of Dr Daynes’ employment on 11 May 2022 (the particularised period): PJ [18].

5. [36]

   Both allegations were purportedly substantiated by an independent report requested by I-MED and prepared by “the investigators” at Workdynamic, which was dated 1 April 2022: PJ [62]. Workdynamic understood its role in the investigation as: PJ [62]

6. [37]

   The evidence at trial in respect of the two complaints is summarised below. The summary draws on that given by the primary judge.

7. [38]

   I-MED relied on a single incident to substantiate the allegation of sexual harassment, which was said to have occurred at the I-MED office Christmas party on 11 December 2021: PJ [105]. The party was fancy dress, the theme was to come as something relating to your first initial or name, and so Ms (Holly) Turner wore “a large foam costume over her clothes in the shape of a holly leaf”: PJ [106].

8. [39]

   The function was held on the veranda of the Edge Hills Bowls Club and there were roughly 20 to 30 people in attendance: PJ [107]. Dr Daynes gave evidence that he arrived at the event between 5:05 pm and 5:10 pm and stayed “for about an hour”, during which period he consumed only one glass of wine: PJ [108].

9. [40]

   At some point in the evening, Ms Turner was standing in a circle of a group of people which included Dr Daynes: PJ [108].

10. [41]

    On Dr Daynes’ recollection of the evening, provided by way of an affidavit filed 29 September 2023, the following conversation took place between him and Ms Turner: PJ [109]

11. [42]

    Dr Daynes also provided the following recollection of a later conversation between him and Ms Turner: [PJ 111]

12. [43]

    Those interactions were not the subject of the allegations. The alleged impugned conduct occurred later in the night when Dr Daynes made some kind of physical gesture whilst standing with a group of work colleagues. According to Dr Daynes, that gesture was a “haka”, a well-known Maori tradition regularly performed by the New Zealand All Black rugby team and in other sporting and cultural contexts. Dr Daynes said that:

13. [44]

    In cross examination, Dr Daynes provided the following account of the “haka” movement:

14. [45]

    Dr Daynes denied ever making a pelvic thrust towards Ms Turner: PJ [114].

15. [46]

    In support of Dr Daynes’ recollection was the evidence of Ms Couch, a medical receptionist at the Cairns clinic, who was present at the Christmas Party. Ms Couch had formerly worked for Dr Daynes prior to I-MED purchasing the Cairns clinic: PJ [125]. Ms Couch did not observe any interactions between Dr Daynes and Ms Turner that evening, and told the Court that it would have surprised her to hear that Dr Daynes had performed a pelvic thrust “as that is inconsistent with [her] observation of his character and behaviour”: PJ [126].

16. [47]

    Ms Della Bella, a medical receptionist and later the practice manager at the Cairns clinic, gave evidence that she did not observe any physical contact between Ms Turner and Dr Daynes: PJ [128]. Neither Ms Couch nor Ms Della Bella were cross-examined on their evidence dealing with the Christmas Party (and Ms Della Bella was not cross-examined at all): PJ [127].

17. [48]

    Ms Turner did not give evidence: PJ [115]. Ms Nicholson could only give evidence of Ms Turner’s complaint: PJ [121]. I-MED thus relied on the evidence of Ms Bailey, a supervisor employed by I-MED, who claimed to have observed Dr Daynes make a pelvic thrust towards Ms Turner: PJ [121].

18. [49]

    In cross examination, Ms Bailey provided the following recollection of the pelvic thrust:

19. [50]

    Ms Bailey did not, however, confirm that Dr Daynes actually made contact with Ms Turner: PJ [121], [123]. That concession emerged under cross examination: PJ [123]

20. [51]

    Ms Bailey went on to say that she did not recall Dr Daynes having a conversation about “kiwis” or a haka, and did not agree that she could have confused a haka movement for a pelvic thrust: PJ [124].

21. [52]

    Ms Nicholson gave evidence that, in the week commencing 13 December 2021, she was informed by Ms Murphy, a member of the Human Resources team, that Dr Daynes “had acted inappropriately towards Ms Turner at a Christmas party function by thrusting into her and that this occurred in front of other colleagues”: PJ [117].

22. [53]

    Other evidence was referred to in the Workdynamic report regarding Dr Daynes’ comments or behaviour which was “of a sexualised nature” at times other than the 2021 Christmas party, but I-MED did not rely on that behaviour “as providing any part of the foundation for its termination”: PJ [120].

23. [54]

    I-MED alleged that Dr Daynes engaged in the bullying and victimisation of Ms Odgers in the particularised period: PJ [139]. In support of these allegations, I-MED called evidence from:

24. [55]

    Ms Odgers moved to Cairns in September 2019, and worked at the Cairns clinic from October that year as a radiographer specialising in mammography: PJ [140]. Ms Odgers worked part time, originally four days a week, then, after COVID-19, two days a week, and finally she settled on three days a week: PJ [140].

25. [56]

    Ms Odgers gave evidence that she reported directly to Mr Wellby but regularly interacted with Dr Daynes as the senior radiologist: PJ [141]. She recalled that she initially “got along really well” with Dr Daynes until their relationship changed around late 2019.

26. [57]

    Ms Odgers made three complaints about Dr Daynes’ behaviour, only the latter two of which fell within the particularised period: PJ [152].

27. [58]

    The first complaint concerned Dr Daynes’ behaviour in late 2019. At that time, Ms Odgers began to perceive Dr Daynes to be treating her rudely particularly by blaming her for technology problems: PJ [141]-[142]. That behaviour coincided with a change in the software used by the clinic to view patients’ images: PJ [142]. Ms Odgers raised this complaint with the Chief Radiographer, Mr Wellby, and Mr Wellby raised the issue with Dr Daynes: PJ [143]. She also sent an email to Mr Wellby outlining these concerns in late January 2020: PJ [144].

28. [59]

    The second complaint emerged in August 2020 (PJ 154) by way of a Microsoft Teams message from Mr Wellby to the Queensland Regional Manager, Mr Keri Kamau, who then conveyed the complaint by email to Ms Nicholson: PJ [154]. That complaint included allegations of Dr Daynes ignoring Ms Odgers, swearing at her, and throwing paperwork around: PJ [154]. The primary judge pointed out not that all of that alleged behaviour was the subject of evidence at trial (PJ [155]), although Ms Odgers did give evidence that around this period Dr Daynes: PJ [146]-[147]

29. [60]

    Ms Odgers did not observe Dr Daynes treat other staff in that way, and felt she was being intentionally humiliated: PJ [147].

30. [61]

    Ms Nicholson followed this complaint up with Dr Daynes, who responded by suggesting Ms Odgers “talks too much”, admitted to ignoring her, and claimed “what do you want me to do, she’s hopeless”: PJ [156]. Ms Nicholson also followed up with Ms Odgers, and I-MED’s human resources department: PJ [157].

31. [62]

    The third complaint arose in December 2021, by way of an email dated 8 December 2021 from Ms Odgers to Ms Nicholson: PJ [157]. That complaint primarily concerned a particular incident which occurred on 6 December 2021 between Ms Odgers and Dr Daynes. The primary judge summarised the alleged incident as follows: PJ [148]

32. [63]

    Following that encounter, when Ms Odgers went to find the paperwork, she found a sticky note in heavy capital letters asking for old images: PJ [160]. Following that incident, Ms Odgers made a formal complaint to I-MED and applied for workers compensation: PJ [149]. The application was accepted.

33. [64]

    Dr Daynes denied bullying Ms Odgers at any time: PJ [175]. He also denied not speaking to or failing to acknowledge Ms Odgers (“at least generally”), or swearing or yelling at her: PJ [184]. He also denied throwing paperwork around and “saying that he didn’t want to talk to her”: PJ [184].

34. [65]

    Dr Daynes did, however, give evidence of having concerns in relation to Ms Odgers’ performance, including that “he did not consider [Ms Odgers] to have the experience necessary to be hired for the job”: PJ [177]. He told the Court that it was not his practice to engage in small talk in the tearoom or hallways, and that communicating with post-it notes was “a general practice of staff” which he regularly engaged in with all radiographers, between 20 to 30 times a day: PJ [180], [184]. As the primary judge concluded: PJ [186]

35. [66]

    Dr Daynes also gave evidence that he was under significant stress whilst working at I-MED, owing to an audit from Medicare of over 4000 of I-MED’s billings using Dr Daynes’ provider number (the Medicare audit), and concerns about the spread of COVID-19, and the way I-MED was operating the practice, particularly in relation to the distribution of patients’ radiography images: PJ [175]-[178].

36. [67]

    Dr Daynes’ response to the incident of 6 December 2021 was summarised by the primary judge as follows: PJ [183]

37. [68]

    In support of Dr Daynes’ case was the evidence of Mr Elston, Ms Crew, Ms Della Bella and Dr Robson, all of whom had known Dr Daynes for some time and had not heard negative rumours about his interactions with Ms Odgers, with one exception (in the case of Dr Robson) in relation to a complaint which the primary judge described as “unsubstantiated”: PJ [187]-[190].

Primary Judgment

1. [69]

   Dr Daynes’ position at trial was that, by terminating his employment without notice, I-MED either breached the employment contract, or evinced an intention not to be bound by it: PJ [32]. Either, it was argued, constituted a repudiation of the employment contract, entitling Dr Daynes to terminate it and seek damages for breach of contract: PJ [32].

2. [70]

   Dr Daynes also argued that I-MED breached an implied term of the employment contract to act in good faith by the way in which it formed the opinion that Dr Daynes had engaged in serious misconduct: PJ [33], [225]-[230]. That alternative case was not determinatively considered by the primary judge: PJ [222]-[234].

3. [71]

   I-MED relied on the allegations of sexual harassment and bullying and victimisation, the evidence of which has been summarised at [38]-[68] above, as entitling it to terminate Dr Daynes’ employment: PJ [100]. The primary judge thus had to consider two questions: PJ [64]

   1. (1)

      what conduct Dr Daynes’ engaged in; and

   2. (2)

      whether that conduct entitled I-MED to terminate his employment without notice.

4. [72]

   The primary judge concluded that the alleged sexual harassment of Ms Turner at the 2021 Christmas Party was not established, at least to the degree of satisfaction required for such a serious allegation, citing s 140 Evidence Act 1995 (NSW) and Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw): PJ [131]-138].

5. [73]

   That finding was reached in light of the conflicting evidence of the witnesses as to the occurrence of the alleged pelvic thrust (PJ [133]), and the lack of explanation as to why Dr Daynes would perform such an act: PJ [134]. On that latter point, the primary judge reasoned: PJ [135]

6. [74]

   Regarding the alleged bullying and victimisation of Ms Odgers, the primary judge made detailed findings of fact at PJ [196]-[197]:

7. [75]

   After observing at PJ [208] that:

8. [76]

   In light of his findings, the primary judge was not satisfied that Dr Daynes’ conduct entitled I-MED summarily to dismiss him: PJ [221].

9. [77]

   His Honour emphasised that employment contracts should not be construed such that any trivial breach of policy gives rise to a right to dismiss employees without notice: PJ [199], [202], [219]. His Honour held that the requirement for a “material” breach in cl 7.3(c) of the TCE was a reference to “something so significant such that the conduct might constitute serious misconduct as referred to in 7.3(a)”: PJ [203].

10. [78]

    As to whether the requirement for “serious misconduct” in cl 7.3(a) of the TCE was made out, the primary judge acknowledged that cl 7.3(a)(2) imported a subjective element, but found that the threshold was not met due to a lack of “deliberate or serious misconduct or serious professional misconduct or serious breach of duty”: PJ [217]. Nor were breaches of cll 7.3(b) or (e) made out: PJ [218]-[220].

11. [79]

    In any event, and even if a mere breach of policy in the Handbook were sufficient, the primary judge was not satisfied that Dr Daynes engaged in sexual harassment at the Christmas party towards Ms Turner and found that such of Dr Daynes’ conduct towards Ms Odgers as he held was established on the evidence fell below the standard of “workplace bullying” as defined in the Handbook: PJ [204]-[216]. In reaching that conclusion, the primary judge accepted that Dr Daynes had (wrongly) blamed Ms Odgers for aspects of her workplace performance, but held that he had not repeatedly belittled or berated her: PJ [216].

12. [80]

    The task of the primary judge was to identify “the value of the loss of entitlements” which Dr Daynes would have achieved but for the wrongful termination (citing Johnson v Perez (1998) 166 CLR 351 at 355; [1998] HCA 64): PJ [235]-[239]. His Honour proceeded on the basis that he was required to engage in an assessment, as a matter of probability, of what would have occurred but for the wrongful summary dismissal, applying this Court’s decision in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 at [122] per Macfarlan JA (Willis).

13. [81]

    Both parties agreed damages would be assessed by reference to Dr Daynes’ base salary, regional salary, and clinic director allowance: PJ [243], [245]. The difference between the parties, and the critical question at trial, was for how long Dr Daynes would have continued to be employed at I-MED but for the wrongful termination of his employment contract: PJ [250].

14. [82]

    Dr Daynes contended that, but for the wrongful termination of his employment, he would have worked at I-MED for 6 years and 8 months from the date of his termination, until he was 77 years of age: PJ [243]. Damages for that period calculated by reference to his base salary, regional salary, and clinic director allowance would have amounted to $4,308,164.38: PJ [243].

15. [83]

    I-MED, on the other hand, submitted that Dr Daynes’ damages should be calculated on the basis of an additional 11 weeks and five days from the date of his termination until the expiration of the initial fixed term of his contract, plus three months of notice to which he would have been entitled if terminated without cause on the expiry of the fixed term of the contract: PJ [244]. This was because it was said that neither Dr Daynes nor I-MED would have extended his employment following the three-year fixed period and that he would have ceased to work following the giving of a three month notice period at the end of the fixed term, it being recalled that I-MED could terminate the employment agreement without cause upon the giving of three months’ notice following expiry of the fixed term.

16. [84]

    His Honour did not resolve the damages issue by resort to any presumption or common law rule that I-MED would have adopted the most advantageous approach available to it regarding Dr Daynes’ continued employment (meaning that it would have terminated his employment at the earliest stage permitted by law) and noted the disapproval by Macfarlan JA (with whom Ward JA agreed) in Willis of what had been said by this Court in New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 (Sarfaty). Rather, his Honour proceeded to consider the evidence bearing on the probabilities of what would have happened. This entailed consideration both as to:

17. [85]

    The primary judge held that:

18. [86]

    The primary judge’s reasoning in support of these conclusions was typically thorough and, given the numerous grounds of appeal raised by Dr Daynes attacking it, that reasoning needs to be set out in full. His Honour noted at PJ [255] that:

19. [87]

    His Honour continued his reasoning as follows:

Notices of Appeal and Cross Appeal

1. [88]

   Dr Daynes challenged the primary judge’s damages assessment in some 11 grounds of appeal.

2. [89]

   I-MED opposed the orders sought by Dr Daynes and relied on a Notice of Contention, identifying two additional grounds on which it was contended the assessment of damages in the primary judgment ought to have been affirmed.

3. [90]

   By way of an Amended Notice of Cross Appeal, I-MED cross-appealed from the finding that I-MED was not entitled to dismiss Dr Daynes summarily and that I-MED’s termination of Dr Daynes’ employment constituted a repudiatory breach of the employment contract, justifying Dr Daynes’ termination of it.

4. [91]

   These grounds of appeal and cross appeal will be dealt with thematically, dealing with the lawfulness of the summary dismissal, then the damages assessment, and finally the costs appeals.

Summary Dismissal

1. [92]

   The primary judge’s findings relevant to his decision that I-MED unlawfully terminated Dr Daynes’ employment without notice have been summarised above at [72]-[79].

2. [93]

   By its Amended Cross-Appeal, I-MED contended that the primary judge erred in:

3. [94]

   Grounds 1A and 3 both depended upon grounds 1 and 2 succeeding, and accordingly it is to those two grounds that attention is first turned.

4. [95]

   The primary judge was not satisfied to the requisite standard that Dr Daynes engaged in “conduct of a sexual nature towards Ms Turner at the Christmas Party”: PJ [138].

5. [96]

   It will be recalled that Dr Daynes’ evidence was that he had sought to imitate the Maori “haka” after another member of the group in which he was standing at the staff Christmas party made a comment about “Kiwis and hakas”. He was adamant, however, that in making a haka movement at a particular point in a conversation at the Christmas party, he did not make a “pelvic thrust”: see [45] above. Dr Daynes’ relevant evidence about the alleged incident has been set out earlier in these reasons.

6. [97]

   The expression “pelvic thrust” carries a strong sexual connotation. Dr Daynes candidly accepted that a pelvic thrust could be considered by some people to be sexual in nature, could offend and could humiliate.

7. [98]

   The person to whom it was said that the pelvic thrust was directed, Ms Turner, did not give evidence either as to the physical conduct as she observed it, or her reaction to it, or at all. This last point, in particular, is of significance as, to constitute sexual harassment within the terms of the Handbook, the conduct in question was required not only to be “of a sexual nature” but “unwelcome” and the Handbook stated that “[i]t is the viewpoint of the person harassed that is relevant.”

8. [99]

   Ms Couch who gave evidence that she was in the group with Dr Daynes and Ms Turner said that she did not observe Dr Daynes make a pelvic thrust towards Ms Turner and that it would have surprised her if he had as that would have been inconsistent with her observation of his character and behaviour: see [47] above. Ms Della Bella gave evidence that she did not see any contact between Dr Daynes and Ms Turner: see [47] above. It was not suggested to either of them in cross examination that he made any movement towards her of any kind. Ms Couch was not cross examined to suggest that the alleged conduct was not out of character for Dr Daynes.

9. [100]

   The only witness who gave evidence of observing the alleged conduct was Ms Bailey whose evidence has been set out at [48]-[51] above. Although she had initially said that there was physical contact between Dr Daynes and Ms Turner, she was effectively cross examined and was not confident in her evidence that there had in fact been physical conduct.

10. [101]

    No evidence was given by Ms Bailey or any other witness as to how Ms Turner reacted to the alleged pelvic thrust.

11. [102]

    This is not a case where there is a dispute as to whether Dr Daynes made any movement at all. It is a dispute, at best, about the characterisation of a brief movement, whether it amounted to conduct “of a sexual nature” and whether it was unwelcome. Putting aside this last matter, both a pelvic thrust and a haka involve a movement of the body and a certain thrusting motion. The latter is not of a sexual nature whereas the former may be, as Dr Daynes accepted under cross examination.

12. [103]

    The primary judge did not have to make a binary decision as to whether the movement in question was one or the other; rather, he needed to be satisfied that Dr Daynes engaged in “conduct of a sexual nature”. He expressed himself in classical terms of not being satisfied to the requisite standard of proof. He made reference to Briginshaw in a manner that did not attract criticism from I-MED.

13. [104]

    The primary judge, having cited Briginshaw, expressed himself as follows:

14. [105]

    This reasoning is, in my view, not only sound but unimpeachable.

15. [106]

    I-MED’s position on appeal was that none of the evidence presented by Dr Daynes, Ms Della Bella or Ms Couch was materially inconsistent with Ms Bailey’s evidence that Dr Daynes “made a physical gesture capable of description as a pelvic thrust”, and thus the primary judge’s contrary conclusion was in error.

16. [107]

    The primary judge had to be satisfied that Dr Daynes “engaged in conduct of a sexual nature”, not that he “made a physical gesture capable of description as a pelvic thrust”. While this may have been Ms Bailey’s perception of what she saw, as reflected in her evidence, the two movements were, on Dr Daynes’ evidence, quite distinct and he was adamant that what he did was not a pelvic thrust, still less was it conduct of a sexual nature.

17. [108]

    It is far from surprising, based upon the competing perceptions and the primary judge’s acceptance of the honesty and genuine beliefs of all relevant witnesses that he was unable to reach the “actual persuasion” referred to by Sir Owen Dixon in Briginshaw at 361. In that famous decision at 362, his Honour went on to observe that:

18. [109]

    The primary judge, especially at PJ [134]-[135], tested the probabilities of whether the disputed movement was of a sexual nature by reference to context, circumstances and the surrounding conversation in a manner entirely consistent with these observations. Dr Daynes’ evidence of Mr Mohan having made a reference to “Kiwis and hakas” was a matter which supported Dr Daynes’ explanation of what he did and negated any characterisation of his conduct as being of a sexual nature. His Honour also had the benefit of Ms Couch’s evidence that any such conduct would have been inconsistent with her perception of Dr Daynes. It was to Ms Couch and not Ms Della Bella that the primary judge referred in PJ [137] as not having seen “any such thing”, referring to the pelvic thrust. To the extent that the primary judge referred in PJ [129] to Ms Della Bella also not observing “anything like that happening” – a matter complained about by I-MED in its submissions – this was a slight overstatement by the primary judge of her evidence but was not repeated in the essential part of his reasoning in PJ [137].

19. [110]

    I-MED’s submissions in effect invite this Court to prefer Ms Bailey’s evidence over that of Dr Daynes in circumstances where it did not have the benefit of observing either witness. While his Honour did not make a finding of fact, per se, which could be described as “glaringly” mistaken (cf. Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28), rather relevantly expressing himself in terms of not reaching the requisite state of satisfaction, his Honour was undoubtedly in a superior position to this Court to assess all of the evidence.

20. [111]

    For the above reasons, I-MED’s challenge to an essential part of the primary judge’s reasoning must be rejected.

21. [112]

    The evidence before the primary judge as to the alleged bullying and victimisation of Ms Odgers has been summarised above at [54]-[68], and the primary judge’s factual findings and reasoning has been reproduced at [74]-[75] above.

22. [113]

    His Honour’s findings of fact were not challenged per se. Rather, what is challenged by ground 2 was the primary judge’s failure to characterise what he did find to be Dr Daynes’ conduct as meeting the definition of workplace bullying in the Handbook. His Honour’s task was an evaluative one based upon his underlying findings of fact in light of the definition of workplace bullying in the Handbook.

23. [114]

    No detailed criticism was advanced in relation to his Honour’s extended reasoning process as set out at [75] above and very little was advanced orally by Mr Foreman SC in support of ground 2 of the Amended Cross Appeal.

24. [115]

    In terms of written submissions, I-MED submitted that:

25. [116]

    This submission is, with respect, unhelpful. The definition of workplace bullying in the Handbook (which has been set out at [31] above) does not simply entail the three elements highlighted in I-MED’s submissions. Rather, it requires the identification of particular behaviour. This impugned behaviour must be “unreasonable”, “be directed towards a worker or group of workers” (i.e. not of a general kind) as well as having the characteristics contained in the passage from I-MED’s written submissions set out above.

26. [117]

    This criticism may be illustrated by what his Honour held with regard to Dr Daynes’ practice of giving instructions by way of post-it notes containing capital letters. That conduct was unquestionably repeated. There was no finding that it was unreasonable, however, nor was there any finding that it involved a singling out of Ms Odgers. Indeed, at PJ [211], his Honour rejected any singling out or suggestion of humiliation by this practice.

27. [118]

    I reject I-MED’s submission that the primary judge’s conclusion that Dr Daynes’ conduct did not meet the definition of workplace bullying in the Handbook was influenced by a view that any such conduct would need to amount to serious misconduct, and so was infected by “some externally derived standard of seriousness”. That submission is not supported by the clear terms of PJ [209] or his Honour’s extended reasoning process at PJ [210]-[216]. It is true that his Honour returned to the question of serious misconduct at PJ [217], but the question of the proper construction of cl 7.3 of the TCE and the contractual right summarily to dismiss was not reached unless workplace bullying was established. This was because if the act (here, relevantly, sexual harassment and/or workplace bullying) relied upon for the purposes of cl 7.3(a)(2) was not found by the Court to have occurred, then the clause could not be engaged or relied upon to justify the summary dismissal of Dr Daynes.

28. [119]

    I-MED also submitted that the primary judge’s conclusions at PJ [211]-[216] were “highly informed by what Dr Daynes did not do – swearing or repeated shouting – as opposed to what he did.” This is an unfair criticism of his Honour’s careful and close analysis of the evidence before him which resulted in findings of fact which are not challenged. It was obviously relevant and appropriate for his Honour to reach the necessarily evaluative conclusion or characterisation exercise by reference to his detailed findings.

29. [120]

    I-MED’s final written submission on this topic was to criticise the primary judge’s observations at PJ [206]-[208] as erroneously equating “bad management practices” as referred to in the Handbook’s workplace bullying provisions with “rude or discourteous behaviour by managers” rather than “poor systems of managing work”. No such equation was drawn. At PJ [208], what his Honour said was:

30. [121]

    No specific criticism was made of the observations in this passage and they are a statement of commonsense. Rudeness and discourtesy are obviously undesirable characteristics of both individuals and institutions, and are properly to be discouraged. They are not coterminous with the bullying of an individual and a fair reading of the definition of workplace bullying in the Handbook and the examples of what may and may not constitute workplace bullying do not support any different conclusion.

31. [122]

    For these reasons, ground 2 of the Amended Cross Appeal must also be dismissed.

32. [123]

    Grounds 1A and 3 of the Amended Cross Appeal both involve the proper construction of cl 7.3 of the TCE.

33. [124]

    Questions relating to the proper interpretation of cl 7.3 do not strictly arise because the acts or conduct of Dr Daynes said to engage various aspects of cl 7.3 and entitle I-MED summarily to dismiss him were found not to have been made out, and the appeal from those findings the subject of grounds 1 and 2 has also failed. In deference to the arguments of the parties, however, I will deal with them briefly.

34. [125]

    Clause 7.3(c) entitled I-MED summarily to dismiss Dr Daynes if he breached a “material term of these terms and conditions”.

35. [126]

    The primary judge held at PJ [202]-[203] that:

36. [127]

    I-MED submitted that only breach of a “material term” of the employment contract was required to justify summary dismissal under cl 7.3(c) of the TCE, without also having to establish “serious misconduct” as referred to in cl 7.3(a). To import the additional requirement of “serious misconduct”, argued I-MED, erroneously focused on the materiality of the breach where the focus ought to have been the materiality of the term. On that construction, I-MED submitted that the obligation to comply with its workplace conduct policy (as outlined in the Handbook) as imposed by cl 12 of the TCE (set out at [28] above) was a “material term” breach of which would justify summary dismissal.

37. [128]

    Against the primary judge’s construction, I-MED also submitted that, if the reference to a “material term” in clause 7.3(c) is equivalent to that of “serious misconduct” in clause 7.3(a), then clause 7.3(c) had “no independent life” and courts should generally interpret contracts to avoid such redundancies, citing Fayad v B & G Properties Pty Ltd [2022] NSWCA 129 at [25]; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215 at [72]; North v Marina [2003] NSWSC 64 at [45]; Dovuro Pty Ltd v Wilkins (2000) 105 FCR 486 at [152], [230]; [2000] FCA 1902.

38. [129]

    Dr Daynes supported the construction of the primary judge, and submitted that what the primary judge held at PJ [203] when read in context entailed a recognition that there is overlap, rather than any redundancy, between “serious misconduct” in clause 7.3(a) and “breach of a material term” in clause 7.3(c).

39. [130]

    The expression “material term” is not defined in the TCE. Neither party pointed to any authorities outlining the approach to be taken by courts seeking to determine what constitutes a “material term” absent an express definition in the contract. “Material term” is a protean phrase, the meaning of which must ultimately be derived from its broader contractual context. There have, of course, been cases where judges have used the expression “fundamental term” (see, for example, Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240; Alexander v Railway Executive [1951] 2 KB 882; Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 1) [1953] 1 WLR 1468 at 1470) but, as has been explained, these cases arose in the context of attempts to circumvent exemption clauses, and were the subject of criticism by the High Court in Sydney City Council v West (1965) 114 CLR 481 at 488-490, 500; [1965] HCA 68: see JD Heydon, Heydon on Contract: The General Part (2019, Thomson Reuters) at [11.180], [11.220]. A feature of these cases was that the expression “fundamental term” was often used interchangeably with “fundamental breach”.

40. [131]

    Accepting that cl 7.3 makes it plain that the breach of any term of the contract will not necessarily warrant summary dismissal, the word “material” in the phrase “material term” must be given some work to do but in a way that would not render other parts of cl 7.3 otiose or redundant, in accordance with well established principles of contractual construction. There has been some judicial consideration as to what “material” means more generally. For something to be “material”, it “must be of moment or of significance, not merely trivial or inconsequential”: Minister for Immigration, Local Government & Ethnic Affairs v Dela Cruz (1992) 34 FCR 348 at 352, applied in Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669 at [186] (Thera Agri).

41. [132]

    In the context of the expression “material breach” of contract, Rees J in Thera Agri reviewed the relevant authorities as follows:

42. [133]

    Drawing on these authorities, an available interpretation of “material term” in the TCE is a term which, if breached, would have a serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms. This construction does not entail any necessary redundancy by reason of cl 7.3(h) which permitted summary dismissal in circumstances where the employee engaged in conduct for which the employer “may terminate your employment at law” although it may be accepted that it would entail a degree of overlap between the two sub-clauses. As Mr Moses SC on behalf of Dr Daynes submitted, however, it is not surprising that there might be overlap in a clause such as cl 7.3.

43. [134]

    Whether or not breach of cl 12 of the TCE would have had a “serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms” was not explored at the trial and, because of I-MED’s failure to establish a breach of the Handbook’s workplace conduct policy, it does not fall to this Court to consider it.

44. [135]

    In relation to cl 7.3(a)(2), the subject of ground 3 of the Amended Cross Appeal, notwithstanding the way this ground is formulated, it was accepted by Mr Foreman SC that the formation of a view by I-MED that acts or omissions of an employee “materially and detrimentally affected I-MED or the I-MED Network” was predicated on those acts or omissions having occurred. If, as in the present case, the “findings” of an adviser such as Workdynamic as to sexual harassment and/or workplace bullying and victimisation were not vindicated in subsequent court proceedings where they were put in issue, a previously formed view by I-MED based on those original findings could not be relied upon to justify summary dismissal.

45. [136]

    It is convenient to set out again the terms of cl 7.3 (a):

46. [137]

    Also to be noted is that aspect of the Interpretation clause of the TCE which states that “use of the expressions ‘include’ and ‘in particular’ does not limit the generality of the preceding words, or exclude anything not expressly included or particularised, unless these terms and conditions expressly provide otherwise.”

47. [138]

    As to cl 7.3(a)(2), the primary judge held at PJ [217] that:

48. [139]

    His Honour’s view was no doubt informed by the fact that cl 7.3(a) is headed “Serious misconduct” which is emboldened.

49. [140]

    Although the matter is finely balanced and, as I have said, strictly not necessary to decide, I would respectfully disagree with the primary judge’s construction to the extent that it required “deliberate or serious misconduct or serious professional misconduct or serious breach of duty” for the purposes of subclause (2).

50. [141]

    In Eldridge v Wagga Wagga City Council [2021] NSWSC 312 at [285], I said that:

51. [142]

    Subclause 7.3(a)(2) deliberately extends subclause (1) in at least three ways: first, subclause (1) requires the conduct, act or omission to be in connection with the Business whereas subclause (2) does not require a connection but the formation of a view that any other act or omission has a material and detrimental effect upon I-MED or the I-MED Network; secondly, the expression “any other act or omission” identifies acts or omissions other than the ones identified in subclause (1); third, those other acts or omissions may include deliberate or serious misconduct, serious professional misconduct or serious breach of duty but the use of the word “includ[e]” does not limit the generality of the expression “other act or omission”.

52. [143]

    What it is that makes “any other act or omission” “serious misconduct” for the purposes of cl 7.3(a) is the determination, no doubt required to be made in good faith, by I-MED (“we”) that the act or omission in question “materially and detrimentally affects” I-MED or the I-MED Network. In the context of a business that was acquired for between $15-21 million, conduct which had that effect would appropriately be described as “serious misconduct”. Contrary to Dr Daynes’ submissions, this construction of cl 7.3(a) does not result in any absurdity or lead to commercially unreasonable outcomes. I-MED would need to be satisfied that the underlying act or omission occurred (if it did not, as in the present case, any termination could be subject to effective challenge) and form its view as to “material” and “detrimental” effect in a bona fide manner.

Damages

1. [144]

   Dr Daynes raised no fewer than 11 grounds of appeal in relation to the primary judge’s findings on damages but Mr Moses SC distilled this in oral submissions to “one central question”, namely “was the judgment amount the correct measure of damages for his wrongful dismissal?”.

2. [145]

   The first seven grounds of appeal were essentially a variation on a theme, namely that the primary judge had erred in not approaching the assessment of damages on the basis of a loss of a chance or loss of opportunity to continue working for I-MED beyond the end of the (three year) initial fixed term of his employment contract. In this context, Dr Daynes relied on Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (Sellars) for the proposition that a loss of opportunity or chance, if it has value, is a compensable form of economic loss even where that chance is unlikely to eventuate, citing in addition to Sellars at 349, Chaplin v Hicks [1911] 2 KB 786 and McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411-412; (1951) HCA 79.

3. [146]

   Dr Daynes submitted the lost chance or opportunity in the present case was the “promise to provide the chance of indefinite employment until [Dr Daynes’] retirement”. That promise to provide the chance of employment was said to be located in those terms outlined at [20]-[24] above which provided for conversion of the fixed term contract to an indefinite term contract with a notice period, permitting the indefinite contract to be terminated without cause on the giving of three months’ notice.

4. [147]

   As for the determination of how the loss of chance should be compensated, Dr Daynes contended that the Court should have “determine[d] the outer limit for which the employee could have remained in employment by reference to the evidence”, then assigned a percentage to the possibility that he would not have continued in employment at I-MED until aged 77 and apply a discount accordingly, citing Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687 (Walker).

5. [148]

   I do not agree that the question of Dr Daynes’ entitlement to contractual damages should have been assessed on the basis of loss of a chance cases or the principles enunciated by the High Court in Sellars which was, of course, a decision concerning the assessment of damages for breach of the Trade Practices Act 1974 (Cth). Dr Daynes had a contractual entitlement to continue to be employed for an indefinite period if he elected to continue to work for I-MED. This was not an uncertain chance but a contractual right following his giving of notice that he intended to continue past the end date of the fixed term contract. That right, once exercised, was then subject to I-MED’s contractual right to terminate his employment without cause on the giving of three months’ notice.

6. [149]

   In short, Dr Daynes’ contract did not contain “a promise to provide the chance of indefinite employment until the Appellant's retirement”, to quote the language of ground 1 of the Notice of Appeal.

7. [150]

   The case was very different from Guthrie v News Ltd (2010) 27 VR 196; [2010] VSC 196 where damages were sought (but not awarded) for the loss of opportunity to have a contract renewed in circumstances where, unlike the present case, there was no contractual right to an extension of a fixed term contract, subject to a right to terminate without cause on three months’ notice. Dr Daynes’ contract with I-MED did not contain a promise of an opportunity or chance to obtain a benefit which was lost upon its wrongful termination: cf. Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357 at [2]. Rather, as noted above, it contained and conferred, on his election, a right to continuing indefinite employment subject to I-MED’s right to terminate without cause on 3 months’ notice.

8. [151]

   As part of his claim for damages, Dr Daynes needed to establish on the balance of probabilities that I-MED would not have exercised that right to terminate or would not have exercised that right at the earliest available date following the conclusion of the fixed term. As noted at [84] above, the primary judge did not invoke or place any reliance on any presumption (but not a rule of law) that a contract breaker would act to minimise the loss to itself to the extent that it could lawfully do so. By its Notice of Contention, I-MED contended that his Honour should have done so and that, had he done so, this would only have served to reinforce his finding that I-MED would have exercised its right to terminate without cause at the earliest available opportunity.

9. [152]

   The relevant legal principles and authorities were succinctly identified by Meagher JA (with whom Barratt AJA and I agreed) in Martinez as trustee for Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers v Griffiths as trustee for the Griffiths HWL Practice Trust [2019] NSWCA 310 at [29]-[35] (Martinez) as follows:

10. [153]

    Subsequent to the decision in Martinez, the High Court delivered its decision in Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27. This decision was in turn considered and explained in the context of an action for contractual damages by Gleeson JA (with whom Leeming JA and Adamson JA agreed) in Chandrasekaran v Western Sydney Local Health District [2023] NSWCA 288 at [148]-[152] as follows:

11. [154]

    Even had the primary judge proceeded on the basis of these authorities, it is plain that the question of damages needed to be addressed having regard to the evidence and by making findings both as to what I-MED would likely have done as well as what Dr Daynes would have done, on the balance of probabilities. The primary judge evaluated the “possible exercise of the right [to terminate without cause] in all the relevant circumstances of the case”, to use the language of The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 93; [1991] HCA 54, citing TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 154, and found, on the balance of probabilities, that it would have been exercised by I-MED as early as possible.

12. [155]

    His Honour reached his detailed conclusions with reference to the significant body of evidence that emerged or was tendered in the course of the four-day trial, including documentary evidence such as Avant Law Pty Ltd’s letter to Mr Mark Phelps informing the Department of Health of Dr Daynes’ intention to retire in July 2022:

13. [156]

    While his Honour’s findings in this regard were on the counterfactual scenario that I-MED had not summarily dismissed Dr Daynes, those findings were reached with the same advantages that a trial judge determining disputed factual questions enjoys over those of an appellate court: see Percy; Lee. That has implications for the standard of appellate review where an evaluative judgment in relation to factual questions (including counterfactual questions) has been reached.

14. [157]

    During the course of the hearing of the appeal, the question was posed as to how much of what had in fact transpired between the parties leading up to Dr Daynes’ summary dismissal should be excised from consideration of the counterfactual for the purposes of assessing damages, that is to say, was the Court only to proceed on the basis that I-MED had no entitlement summarily to dismiss Dr Daynes, or was it required to proceed on the basis that no complaints had been made in respect of his alleged conduct, that the report of Workdynamic had not been received and that the whole process of investigation into the complaints had not exacerbated relations between Dr Daynes and I-MED.

15. [158]

    The answer to this question was identified in this Court’s decision in Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30 (Bartlett) where Macfarlan JA (with whom Meagher JA agreed) said as follows:

16. [159]

    As Meagher JA put it at [101], the inquiry as to damages is directed to “the circumstances as they existed at the time the breach or repudiatory conduct occurred, but on the hypothesis that such conduct had not occurred.” In that case, as in the present case, the repudiatory conduct was the unjustified summary dismissal of the employee.

17. [160]

    It follows, contrary to an argument put by Mr Moses SC, that many of the considerations to which the primary judge had regard in PJ [255] (set out at [86] above), such as that “the defendant's concerns about the plaintiff’s behaviour at the workplace would have remained” (PJ [255(2)]), for example, were legitimately taken into account.

18. [161]

    The cumulation of factors referred to by the primary judge laid a solid foundation for his Honour’s ultimate conclusion that I-MED would have terminated Dr Daynes’ employment by the giving of three months’ notice at the end of the fixed term contract, i.e. from 2 November 2022. The only qualification to that would have been if Dr Daynes had voluntarily retired earlier which is what his lawyers had told the Department of Health he was preparing to do: see [155] above. This powerful forensic matter only operated to reinforce the primary judge’s conclusion on damages and underpinned what his Honour said at PJ [253], noted at [85] above.

19. [162]

    Dr Daynes relied upon Walker especially at [82] in support of the proposition that direct evidence as to whether the employer would have terminated an employee without cause in any event was necessary, and that there was no such evidence in the present case. The inquiry as to what would have occurred is classically fact-specific and I would not interpret the Full Court as purporting to express a general rule.

20. [163]

    Hypothetical evidence is frequently of limited value, such as in cases of reliance and causation: see, for example, Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [93]; Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 at [87], [109]; Wilson v Arwon Finance Pty Ltd [2020] WASCA 137 at [227]-[229]. The decision in Walker, moreover, predated most of the authority as to proof of loss in employment cases referred to at [152]-[154], [158]-[159] above, and the Full Court did not consider the role assumptions of damage-minimising conduct play in this area of discourse.

21. [164]

    It was open to the primary judge to reach the clear conclusions he did and his reasoning was not so much attacked on the appeal but, rather, other reasons pointing the other way, such as Dr Daynes’ financial value to I-MED, were relied upon. These reasons were undoubtedly taken into account by the primary judge but rejected by him in his careful evaluation of all of the evidence.

22. [165]

    To the extent that Dr Daynes gave evidence that he wanted to continue to work because he needed the money, the primary judge rejected this evidence as “absurd” (PJ [255(8)) and this credit based finding was not assailed on the basis that it was “glaringly” improbable cf. Percy at [28]-[29].

23. [166]

    In PJ [255(7)], the primary judge referred to “ample other evidence to support the defendant's case that it would not have continued to employ the plaintiff.” This evidence was identified by I-MED in its written submissions on appeal, sourced in the Affidavit evidence of Ms Nicholson. This evidentiary material was summarized as follows:

24. [167]

    I-MED also submitted that the primary judge’s use of the word “would” in PJ [254] meant that his Honour had excluded the possibility that Dr Daynes’ employment may not have been terminated without cause at all or by the giving of three months’ notice at the time of expiry of the fixed term, namely 2 August 2022. Mr Moses SC’s submission was that:

25. [168]

    This submission should be rejected. When his Honour said at PJ [254], that “I do not accept that the defendant would have continued to employ the plaintiff, even if the plaintiff wanted to continue his employment after his fixed term”, his Honour was not expressing a definitive or absolute conclusion but was using the word “would” based on his assessment of the balance of probabilities. This was entirely orthodox. The same observation may be made in relation to the primary judge’s use of the word “would” in PJ [262], set out at [87] above.

26. [169]

    Grounds 10-11 of the Notice of Appeal related to the restraint period in the Deed. Given that the primary judge held, correctly as I have found, that I-MED would have exercised its contractual right to terminate Dr Daynes on three months’ notice following the expiry of his fixed term, the significance of the restraint period and how the primary judge dealt with it does not arise.

27. [170]

    For the above reasons, Dr Daynes’ appeal in relation to damages must be dismissed with costs.

Costs - competing applications for leave to appeal

1. [171]

   Both parties have filed applications for leave to appeal from the primary judge’s orders as to costs, noted at [7] above.

2. [172]

   The primary judge initially ordered that I-MED pay Dr Daynes’ costs in view of his success in the proceedings and in accordance with the usual rule that costs follow the event. However, by way of an Amended Notice of Motion filed 16 September 2024, I-MED successfully sought a variation of that 22 August 2024 costs order, advancing three arguments in favour of the proposed variation. They were that:

3. [173]

   Rule 42.34 of the UCPR is in the following terms:

4. [174]

   There was no question as to whether the proceedings could have been commenced in the District Court although the relevant monetary limit to that Court’s jurisdiction absent consent was $1,250,000. The sole question before the primary judge was whether he was satisfied that “the commencement and continuation of the proceedings in the Supreme Court was warranted”. The primary judge held that it was. After making reference to referring to State of New South Wales v Quirk [2012] NSWCA 216 and Milich v The Council of the City of Canterbury (No. 3) [2012] NSWSC 1280, his Honour said at CJ [31]:

5. [175]

   I-MED maintained that leave to appeal was not required from this decision in circumstances where there was an underlying challenge to the primary judgment. Had I-MED succeeded in its cross-appeal, there would been obvious strength to that position as the underlying costs discretion would fall to be re-exercised in view of the success on the cross appeal. But it has not succeeded and the costs judgment involved discrete questions of a kind ordinarily requiring a grant of leave to appeal.

6. [176]

   I-MED made an application for leave to appeal from this aspect of the primary judge’s decision, notwithstanding its position that leave was not strictly necessary. I would refuse I-MED any grant of leave to appeal, and even if no grant of leave were required, I would have dismissed any appeal on this aspect of the case. The primary judge was best placed to make the assessment he did as to whether commencement in the Supreme Court was warranted and no error of principle in his reasoning has been identified which would warrant a grant of leave to appeal. In any event, having considered all aspects of the proceedings at first instance in the course of dealing with both the appeal and cross appeal, I agree with his Honour’s conclusion that commencement of the proceedings in the Supreme Court was warranted.

7. [177]

   Moving to I-MED’s alternative arguments on costs at first instance, noted at [172] above, a number of relevant offers were considered by the primary judge:

8. [178]

   The offers of 8 December 2023 were not replied to and in any event were bettered by the judgment Dr Daynes secured. The primary judge correctly declined to vary his costs order by reference to this offer, since it was less than the total damages Dr Daynes received, when interest was included: CJ [34].

9. [179]

   Prior to considering I-MED’s later Calderbank offer of 28 June 2024, a Calderbank offer made by Dr Daynes on 26 June 2024, following a mediation the previous day, should be noted. The terms of that offer were relevantly as follows:

10. [180]

    The Heads of Agreement attached to this Calderbank offer included the following two proposed clauses:

11. [181]

    These clauses reflected the reputational impact Dr Daynes evidently considered his summary dismissal had had on him, which concern was wholly unsurprising.

12. [182]

    This offer was not accepted and two days after it was made (on 28 June 2024), I-MED countered with the following Calderbank offer:

13. [183]

    There was no suggestion in this letter of any of the proposed agreed statements that had been set out in the draft Heads of Agreement that had been proffered on behalf of Dr Daynes two days earlier.

14. [184]

    I-MED’s Calderbank offer of 28 June 2024 was issued 10 days prior to the commencement of the hearing.

15. [185]

    The primary judge’s reasoning which led to his varying the previously pronounced costs order in favour of Dr Daynes was set out in the following three paragraphs of the costs judgment:

16. [186]

    In Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 at [26] (Valmont), this Court said:

17. [187]

    Failure to accept a Calderbank offer does not create a presumption in favour of the offeror as to costs or indemnity costs, even where the party making the offer receives a result more favourable than that offered: Jones v Bradley (No 2) [2003] NSWCA 258 at [9].

18. [188]

    It is clear that the primary judge’s decision in light of the Calderbank offer of 28 June 2024 was a discretionary decision, and his Honour’s reasons plainly disclose that he took into account and weighed a number of matters, including the differential between the monetary value of the offer and what Dr Daynes obtained as well as the proximity of the offer to the commencement of the proceedings.

19. [189]

    In his submissions in support of a grant of leave to appeal, Dr Daynes complains that his Honour did not have regard to an important argument raised in writing by him going directly to the question of whether the rejection of I-MED’s offer of 28 June 2024 was reasonable.

20. [190]

    That the reasonableness of any rejection of a Calderbank offer is a centrally important question going to the exercise of the costs discretion is well established: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (SMEC). In Hunter v Roberts (No 2) [2019] NSWCA 235 at [6] (Hunter), quoted in Valmont at [21], it was observed that:

21. [191]

    The question of the reasonableness or otherwise of the rejection of a Calderbank offer falls to be considered by reference to “the situation at the time when the offer was made and not solely by reference to the ultimate outcome of the proceedings”: Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25 at [41] (Crump). The inquiry should not be undertaken with the benefit of hindsight: Crump at [41]; SMEC at [41], [93], [101].

22. [192]

    Dr Daynes’ complaint is that his Honour did not appear to take into account in considering the Calderbank offer of 28 June 2024 the fact that it did not contemplate or accommodate in its terms the consequence of public aspects of his summary dismissal by I-MED.

23. [193]

    That this was the central aspect of Dr Daynes’ submissions may be seen in the following extracts of those submissions before the primary judge on this question (the matter having been determined wholly on the papers):

24. [194]

    There is no indication in the primary judge’s very brief reasons in respect of the Calderbank offer of 28 June 2024 that his Honour considered these submissions: see [185] above. The failure to do so would vitiate any exercise of his discretion because, contrary to SMEC, the question of the reasonableness of the rejection of the Calderbank offer would not have been undertaken by reference to “all the circumstances”. All the circumstances in the present case included Dr Daynes’ concern for his personal and professional reputation. That this concern was a real one was plain from the fact that his attempts to secure a settlement of the dispute required either entry of a public judgment in his favour or a series of agreed statements going to his departure from I-MED and his reputation, coupled with a non-disparagement clause: see [179]-[180] above.

25. [195]

    If, contrary to the above, his Honour did in fact take these submissions into account, no reasons are apparent in the costs judgment for any rejection of them. These complaints are both taken up in Dr Daynes’ draft Notice of Appeal. Whether the primary judge failed to take these submissions into account or, if he did so, failed relevantly to give reasons, are matters which, notwithstanding the discretionary nature of his Honour’s decision, merit the grant of leave to appeal and, for reasons explained below, the upholding of Dr Daynes’ appeal in relation to costs.

26. [196]

    In reaching these conclusions I note the following arguments advanced by I-MED. First, I-MED submitted that:

27. [197]

    There is no issue with the accuracy of these statements of principle. The difficulty for I-MED arises from the fact that there was, as the extract from Dr Daynes’ costs submissions reproduced at [193] above demonstrates, a ‘substantial, clearly articulated argument’ with which his Honour did not grapple or engage. True it is that shorter reasons will frequently be more likely to be appropriate in determining a question of costs and that an assessment of the reasonableness of a party’s conduct in not accepting an offer may be made on a summary basis: see e.g. Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [16]. Costs decisions may, however, have significant financial consequences for parties especially when there has been a multi-day proceeding and where the outcome of a costs decision is to reverse, or partially reverse, the usual rule, as stated in UCPR r 42.1, namely that costs follow the event.

28. [198]

    Where a detailed argument is put in favour of or against a departure from this rule, it should ordinarily be addressed, even if only briefly. For whatever reason, that did not occur in the present case. The fact that, as I-MED submitted, the primary judge’s process of reasoning in relation to the significance of Dr Daynes’ Calderbank offer was “explicit and explicable”, and that “[r]ead fairly, the Costs Judgment makes it clear that the primary judge’s principal reason for ordering that Dr Daynes pay I-Med’s costs on and from 29 June 2024 was the significance of the monetary difference between the offer and the outcome Dr Daynes achieved”, is no answer to the failure to engage with what was Dr Daynes’ central argument on the question of costs and the particular question of the reasonableness of I-MED’s rejection of Dr Daynes’ offer.

29. [199]

    I-MED drew attention to the fact that in another part of his Honour’s costs judgment dealing with the question of interest, the primary judge noted the following matters:

30. [200]

    These paragraphs do not assist I-MED. On their face, they make it clear in the passages to which emphasis has been added, that the primary judge was dealing with the question of vindication to reputation in the specific context of the availability of interest from the commencement of proceedings. This required the demonstration of special circumstances: Civil Procedure Act 2005 (NSW) s 100(4). His Honour had already dealt with the question of costs by this stage of his reasons, and it would not have been correct to deal with questions of vindication to reputation in the context of a question of interest rather than costs (and I do not suggest that his Honour did so). If such questions were relevant to both the question of costs and interest, they had to be dealt with in both, quite distinct, contexts.

31. [201]

    What is, perhaps, significant about these paragraphs is his Honour’s statement at [47] that “I find it difficult to accept that a radiologist accused of sexual harassment would not suffer reputational damage.” This observation tends to confirm that his Honour must have inadvertently overlooked this aspect of the argument advanced in the context of the 28 June 2024 Calderbank offer, dealt with earlier in the costs judgment.

32. [202]

    That a concern to vindicate his personal and professional reputation through the Court proceedings by establishing that his summary dismissal was unlawful was a relevant matter for Dr Daynes to raise in the context of an assessment of the reasonableness or otherwise of a rejection of a Calderbank offer is supported, if authority were required, by this Court’s decision in Bartlett v Australia & New Zealand Banking Group Ltd (No 2) [2016] NSWCA 142 at [25].

33. [203]

    Having found error in the manner in which the primary judge reached his ultimate order as to costs, that discretion falls to be re-exercised.

34. [204]

    In my opinion, notwithstanding that Dr Daynes did not better I-MED’s Calderbank offer of 28 June 2024, it was reasonable for him, in all the circumstances, to have rejected it, with the consequence that there should not have been a departure from the usual rule that costs follow the event.

35. [205]

    Dr Daynes’ summary dismissal had obvious ramifications for him of a reputational kind, especially given the “particulars”, as it were, which underpinned that dismissal, namely alleged sexual harassment of one co-worker and the bullying and victimisation of another. Dr Daynes was a senior radiologist who had been working in Cairns for more than 35 years.

36. [206]

    That Dr Daynes was concerned about his reputation must have been obvious to I-MED but, even if that were not the case, his concern was manifested in the terms of his own Calderbank offer made two days prior to I-MED’s offer and which has been produced at [179]-[180] above.

37. [207]

    I-MED’s Calderbank offer contained no functionally equivalent terms that would have permitted at least some salvaging of, or amelioration of any harm to, Dr Daynes’ reputation as a consequence of his summary dismissal. Indeed, the confidentiality and non-disparagement terms in I-MED’s offer would have operated to constrain any attempts by him to defend himself vis-a-vis I-MED. While such a clause may have foreclosed any further reputational damage to Dr Daynes by publication or disclosure of allegations of misconduct by I-MED, the fact was that he had been peremptorily suspended during the Workdynamic Inquiry and then summarily dismissed. It is entirely understandable that leaving these matters unexplained in the context of a senior medical practitioner with a large roster of patients was unsatisfactory to the doctor.

38. [208]

    Absent I-MED proposing a mechanism to accommodate these reputational concerns or incorporating those that had been reasonably proposed in Dr Daynes’ own Calderbank offer of 26 June 2024, he had only one available course if he was to have any chance of reputational repair. He achieved that to a large degree by his success in the proceedings, albeit that he did not secure as large an award of damages as he had hoped.

39. [209]

    It was not unreasonable for him to have rejected I-MED’s Calderbank offer. In reaching that conclusion, I have, of course, taken into account the financial differential between what was offered and what was ultimately awarded, as well as the proximity of the offer to the commencement of the trial. Taking all matters into account, notwithstanding the Calderbank offer of 28 June 2024, the costs of the trial should follow the event.

Conclusion and orders

1. [210]

   For the foregoing reasons, I propose the following orders:

   1. (1)

      Appeal dismissed with costs.

   2. (2)

      Cross appeal dismissed with costs.

   3. (3)

      Grant leave to Dr Daynes to appeal with respect to the costs judgment of the primary judge and allow the appeal with costs.

   4. (4)

      Set aside the following order of the primary judge, namely:

   5. (5)

      Cross Summons seeking leave to cross appeal with respect to costs dismissed with costs.

2. [211]

   LEEMING JA: I agree with the orders proposed by the Chief Justice, and with his Honour’s reasons, subject to the following, which is mostly added by way of emphasis rather than qualification.

3. [212]

   Logically, the cross-appeal (which sought to set aside the judgment in Dr Daynes’ favour) should be addressed first. The challenge to the factual findings made by grounds 1 and 2 of the cross-appeal should fail for the reasons given by the Chief Justice: I agree with him that no basis for setting aside the finding by the primary judge, on evidence adduced at trial which was different from and in significant respects more limited than, the material supplied to the investigator, that a basis of bullying or sexual harassment sufficient to summarily terminate Dr Daynes’ employment pursuant to cl 7.3(a)(2) had not been made out. Ground 3 does not strictly arise, and accordingly I see no reason to express a conclusion on the proper construction of the contract. However, I would say that more light is apt to be shed upon the legal meaning of a clause that uses “material” to qualify “term” as opposed to “breach”, and also uses “materially” in a related context, by reading the clause as a whole in its context, rather than by relying on dictionary definitions and constructions of the same word in different contexts.

4. [213]

   On the question of damages, in addition to what the Chief Justice has said, the primary judge made a finding of fact as to when Dr Daynes would leave his employment. On the view I take, that finding was favourable to Dr Daynes. It was inconsistent with what he had advised during a Medicare audit, on the basis of which Medicare appears to have abandoned the audit. His solicitor told Medicare’s investigator that he “turns 70 years of age in January 2022 and is preparing to wind down his practice to retirement in July 2022”, in support of a submission that the audit contemplated would “effectively remove Dr Daynes from clinical practice”. The judge awarded damages for a longer period. There was ample evidence of his dissatisfaction with I-MED aside from the investigation. Further, the primary judge rejected Dr Daynes’ evidence that he intended to continue to work because he needed to raise the money. That rejection was a finding based on what had been squarely put to Dr Daynes in cross-examination. No proper basis was put forward to interfere with the findings made by the primary judge.

5. [214]

   Finally, I agree with the Chief Justice that Dr Daynes should succeed, and I-MED should fail, on their separate summonses seeking leave to appeal from the costs orders.

6. [215]

   FREE JA: I agree with Bell CJ, subject to the qualification that, in light of the failure of the cross-appeal based on the determination of grounds 1 and 2, I prefer not to express a view about the construction of cl 7.3 of the agreement.