Leximed Pty Ltd v Morgan[2015] QSC 318

SUPREME COURT OF QUEENSLAND

1. This is a dispute between the owners of a business which is conducted by the applicant company, Leximed Pty Ltd.  The business is the provision of medico-legal opinions.  Leximed conducts the business as a trustee of two trusts.  One is the so-called McCosker Trust, which is controlled by Ms Debra McCosker.  The other is the so-called Medicolegal Trust, which is controlled by the respondent, Dr Morgan, an orthopaedic surgeon. 
2. The business uses the services of many legal practitioners, including Dr Morgan.  And his medico-legal practice is not confined to services provided through Leximed’s business.  Under the agreement or arrangement between the owners of the business, Dr Morgan is permitted to provide medico-legal services outside this business.  But that permission is subject to a qualification that the number of appointments for medico-legal opinions, meaning the occasions when Dr Morgan examines the subjects of his opinions, should not rise by more than 10 per cent from year to year. 
3. This agreement or arrangement has been in place since 2009.  But in recent times, the relationship between the two investors has become strained.  Ms McCosker has become concerned that Dr Morgan’s medico-legal practice outside the business, measured by that number of appointments, has increased by more than the permitted rate.  Thus far, she has not alleged that it has done so.  But she has pressed for information and documents from Dr Morgan so that she may assess that matter.  It is the provision of that information and documentation which is the relief claimed in this proceeding.
4. Dr Morgan says that he is under no obligation to provide what is sought.  Further, he says that the relevant information, which is the number of his medico-legal appointments for each calendar year from 2008 through 2014, has now been disclosed. 
5. In a separate proceeding,^[1] Ms McCosker was given leave under s 237 of the Corporations Act 2001 (Cth) to bring the present proceeding in the name of and on behalf of Leximed Pty Ltd “in its capacity as trustee for the McCosker Trust and in its capacity as trustee for the Medicolegal Trust”.  It can be seen why Ms McCosker sought some order to the effect that she could bring this proceeding in the name of Leximed Pty Ltd, because the only directors of Leximed are her and Dr Morgan.  The basis for her being allowed to bring this proceeding for the benefit of both trusts is not so clear.  As I will discuss, that is difficult to reconcile with the fact that the relevant written agreement for the conduct of this business is in the form of a partnership agreement between the two trusts.  Be that as it may, it was by this means that the present proceeding was commenced.  As the case was conducted, it was a contest between what would be described as McCosker and the Morgan interests.

A partnership agreement

6. In October 2009, Ms McCosker signed a so-called Partnership Agreement for the conduct of Leximed’s business.  Ms McCosker signed twice:  once for “Leximed Pty Ltd as trustee for McCosker Trust” and also for “Leximed Pty Ltd as trustee for Medicolegal Trust”.  This corresponded with the terms of the document, which defined the parties to be “Medicolegal” (defined as Leximed Pty Ltd as trustee for the Medicolegal Trust) and “McCosker” (defined as Leximed Pty Ltd as trustee for the McCosker Trust).  These parties were also defined as “the Partners”.  The document recorded that a partnership between them had commenced in or about October 2007. 
7. Schedule 1 of this document has a so-called Partnership assets table.  It contains column headings of “Partner’s Name”, “Associated Director”, “Assets Contributed by Partner” and “Partner’s Net Contribution To Initial Capital”.  There were two lines under these headings, as follows: 

“Medicolegal David MorganCash $60,00050%

  McCoskerDebra McCoskerCash $60,00050%”

This reflects the fact that the directors of Leximed were and are Dr Morgan and Ms McCosker.

8. “McCosker” is described as the “Managing Partner”, where as Ms McCosker is described as the “Business Director”.  Dr Morgan is described as the “Consultant”. 
9. This document contains terms of the kind to be expected in a partnership agreement, but expressed by reference to the two trusts or “McCosker” or “Medicolegal” as the “Partners”.  It is necessary to refer to several terms which are relevant to the present parties’ submissions on the question of whether Ms McCosker and Dr Morgan (or one of them) is also a partner and contractually bound by this document in that capacity.
10. The personal participations of Ms McCosker and Dr Morgan are the subject of several terms set out under a heading “Partnership Management”.  By cl 16.3, the Partners appointed the Managing Partner (as noted earlier, the McCosker Trust) to manage the day to day business of the Partnership and to ensure that Ms McCosker (the Business Director) was available to do so.  For this she was to be remunerated by a certain salary^[2] or as “amended by agreement of the Partners and the Business Director”. 
11. By cl 16.4, the Medicolegal Trust was to procure the services of Dr Morgan for at least one business day per calendar month, to take at least four patient appointments.  It was further recorded that as the partnership business grew, there would be a need for Dr Morgan to increase that number of appointments and for that purpose, the Partners were to confer and review in good faith the number of days and the number of patient appointments of Dr Morgan. 
12. As I have noted, the document records the initial equal capital contributions from the two trusts.  It provides that the Partners will be entitled to the partnership capital according to those and any further capital contributions as agreed by them.^[3]  It further provides that the profits were to be shared by the Partners in the same proportions as their respective shares in the capital of the Partnership.^[4]  These profits are to be shared after the McCosker Trust is paid for the provision of the services of Ms McCosker as the Business Director.^[5]
13. The Partners are to hold meetings once each month.^[6]  Each partner present in person or by a proxy has one vote.^[7]  A quorum is to be “two Partners or two Directors associated with the Partners”.^[8]
14. Clause 17.1 provides that “[e]ach Director who is associated with a Partner” is to give such “time and attention to the business and interests of the Partnership as is necessary to fulfil that Partner’s responsibilities under this agreement …”.^[9]  This is subject to Ms McCosker, as the Business Director, being able to take various forms of leave as set out in the document.^[10]  Clause 18.1, entitled “Partners’ duties”, provides as follows:

“Each Partner agrees:

(a)…

(b)to be just and faithful to the other Partners and Directors who are associated with a Partner and give to them:

(i)full information and truthful explanations of all matters relating to the affairs of the Partnership; and

(ii)every assistance in the Partner’s power in carrying on the business of the Partnership to the mutual advantage of the Partners; …”

It will be necessary to return to this provision, upon which the applicant’s case heavily relies for its argument that Dr Morgan is thereby bound to provide information and documentation as is sought. 

15. By cl 20.1, Leximed Pty Ltd acknowledged that it “enter[ed] into the documents to which it is a party in its capacity as trustee of the Medicolegal Trust and its capacity as trustee of the McCosker Trust and is only liable in its capacity as trustee”.  By cl 20.2, Leximed Pty Ltd undertook to comply with its obligations as trustee of each of those trusts.  By cl 20.3, it agreed that it would not do anything by which it would cease to be the trustee of either trust.  And, by cl 20.4, there is a purported agreement by each of the trusts to procure Dr Morgan or Ms McCosker, as the case may be, not to appoint any new trustee without the consent of “the other Partners”. 
16. Clauses 28.1 through 28.5 provide for the retirement of a partner or the dissolution of the Partnership in various circumstances, in terms which consistently distinguish between “a Partner” and “a Director associated with a Partner”.  Similarly, cl 29.1 provides that a Partner would cease immediately to be a Partner if the Director associated with it dies or becomes permanently disabled, bankrupt or insolvent (and in certain other circumstances).  In the event of a Partner ceasing for any reason to be a Partner, cl 29.7 requires that the Partner not compete with the business for 12 months and that the Partner shall procure that any associated Director not do so. 
17. The restriction upon Dr Morgan’s practising in competition with the business is set out in cl 19 in relevantly the following terms:

“19.1Restrictions

Whilst a Partner, and subject to clause 19.2, no Partner may, and each Partner must procure that a Director associated with it does not, without the consent of the other Partners:

(a)either directly or indirectly engage in any other medico-legal business that is in direct competition with the business of the Partnership;

…

19.2Disclosure of competing business

The Partners acknowledge that the Consultant carries on the Brisbane Private Hospital Business and agree that the business is exempt from the restriction in clause 19.1(a), so long as:

(a)no other competing business is engaged in by the Consultant; and

(b)the number of patient appointments of the Consultant at the Brisbane Private Hospital Business does not increase by more than 10% from the number of patient appointments of the Consultant in the previous year.

19.3Indemnity

(a)If a Partner commits a breach of any of the restrictions contained in clause 19.1 they must indemnify the other Partner or Partners against all losses and expenses arising directly or indirectly from the breach.

(b)If any Director associated with Medicolegal commits a breach of any of the restrictions contained in clause 19.1 Medicolegal must indemnity the other Partner or Partners against all losses and expenses arising directly or indirectly from the breach.

(c)If any Director associated with McCosker commits a breach of any of the restrictions contained in clause 19.1 McCosker must indemnify the other Partner or Partners against all losses and expenses arising directly or indirectly from the breach.”

18. It can be seen that the so-called Partnership Agreement is in terms which consistently distinguish the so-called Partners from their associated directors, Ms McCosker and Dr Morgan.  There is more than one provision which requires a Partner to procure that something be done or not done by its associated director.  The profits of the business are to be divided between the Partners.  Ms McCosker is to be remunerated, not as a partner, but as the Business Director.  Importantly, cl 18.1 is in terms of an agreement by each Partner “to be just and faithful to the other Partners and Directors who are associated with a Partner” and to give them full information of all matters relating to the affairs of the Partnership.  It is not in terms of a promise by each Director associated with a Partner. 
19. There is, if read alone, some indication of distinct promises by the Directors in the terms of cll 19.3(b) and (c), which refer to a director associated with Medicolegal or McCosker committing a breach.  But that is a breach of cl 19.1, which imposes obligations only upon a Partner and not a Director associated with it.  The promises within cl 19.1 are by each Partner not to do the matters set out in (a) to (k) and to procure its associated Director not to do so.  Consistently with that distinction, cll 19.3(b) and (c) provide that it is Medicolegal or McCosker which must indemnify the other Partner against losses from that breach.
20. Therefore, this document is not in terms which impose any contractual obligation upon Dr Morgan.  But for the applicant, it is argued that the document must be construed as doing so, because otherwise it would have no legal effect.  This is because, it is submitted, it is a contract with only one party, Leximed Pty Ltd, although it purported to contract in its several capacities under the respective trusts.
21. At common law, there must be at least two parties to a contract. Therefore, a party cannot, as Millett LJ (as his Lordship then was) said in Ingram v Inland Revenue Commissioners,^[11] contract with a nominee for itself or with its own agent, if that agent is contracting with its principal in that capacity and, two agents of the same principal cannot contract with each other.  In Ingram, a solicitor, to whom property had been transferred by his client, declared that he held the property as nominee for her and agreed to transfer it back to her as she might direct.  On the following day, acting on her instructions, the solicitor granted her leases which extended to the whole of the property.  A majority of the Court of Appeal (Nourse and Evans L JJ) held that a nominee could not grant a lease to his principal, since he could not contract with his principal, and that therefore the leases were of no effect.  Millett LJ dissented on this question, holding that the leases did not infringe the requirement that a contract have two parties.  Millett LJ’s reasons in this respect were preferred on appeal to the House of Lords.^[12]  Millett LJ said:^[13]

“But a trustee who contracts with his beneficiary contracts as principal, even when he enters into the contract for the benefit of the trust estate and not on his own behalf.  He contracts so as to make himself personally liable to sue and be sued on the contract, though he would usually have a right of indemnity out of the trust fund.  The fact that he may hold the benefit of the contract and any damages which he recovers in trust for the covenantor does not make the contract nonsensical, still less void.  To put the same point another way, it is conceptually impossible for an agent to contract with his principal as agent and on behalf of his principal so as to make the principal the only person liable to sue and be sued on the contract.  But it is not conceptually impossible for a trustee to contract with his beneficiary and hold the benefit of the contract in trust for the beneficiary.  It is no doubt an economic absurdity, unless it is intended to be a step in some other transaction having an economic effect.  But it is not a legal absurdity.  It does not infringe the two-party rule.”

22. In Ingram, the contract constituted by the leases was valid because it was made between two persons, the trustee not contracting with his beneficiary as her agent but as a trustee.  This suggests a flaw in the Partnership Agreement, where Leximed Pty Ltd, on behalf of one trust or the beneficiaries under it, purports to contract with itself on behalf of the other trust or its beneficiaries.  A trustee who contracts in that capacity does not do so as an agent for another.  It is the trustee and not the beneficiaries which is the party which is liable to perform the contract.  It cannot be said that the trust, as distinct from the trustee, is the party which is contractually bound because a trust is not a distinct legal entity.  And nor is a trustee, in its personal and trustee capacities, more than one legal entity, as Davies JA (with the agreement of Fryberg J) observed in Suncorp Insurance & Finance v Commissioner of Stamp Duties.^[14] 
23. That passage from the judgment of Millett LJ in Ingram was cited by the plurality in Clay v Clay,^[15] where the common law rule that there be two parties to a contract was distinguished from the equitable doctrine that a trustee should not put himself in the position where his interests conflicted with his duty.  Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ there said:

“Shortly stated, the ‘self-dealing rule’ is that the sale by the trustee of the trust property to himself is voidable by any beneficiary ex debito justitiae, however honest and fair the transaction and ‘even if [the sale] is at a price higher than that which could be obtained on the open market’.  This ‘rule’ may represent the conflation of several principles.  First, at common law in such circumstances the contract lacked ‘intrinsic validity’; there was no contract which could be sued upon, the principle being ‘that no man can be at the same time plaintiff and defendant’.  Secondly, at common law, a person could not convey a freehold estate to himself, nor assign a leasehold term or other personal property, and, in general, choses in action were not assignable; attempted dispositions would be nullities at common law; however, under the Statue of Uses a conveyance might vest a freehold estate in the conveyor.”

24. Counsel for Dr Morgan submit that although, as a general rule, a party cannot contract with itself, there is “compelling authority” for the validity of a contract such as this, where a trustee acting in one capacity enters into a contract with itself in another capacity.  They cite the judgment of Kilner Brown J in Rowley, Holmes & Co v Barber.^[16]  In that case, a solicitor died and by his will appointed his employed legal executive as his sole executor and trustee and bequeathed to him the solicitor’s practice.  The legal executive, who was not legally qualified, engaged a solicitor to conduct the practice for some months until he purchased the practice.  The purchaser employed the legal executive until he was later made redundant.  A question arose as to whether the executive had been in continuous employment by the firm from the time of his engagement by the (testator) solicitor (some years before his death) until his dismissal, for which it became necessary to determine whether, between the solicitor’s death and the executive’s employment by the new owner of the practice, he had been employed because he had effectively contracted with himself, in the capacity of an executor and trustee as the employer and in his personal capacity as an employee.  Kilner Brown J held that this was a valid contract.  He referred to this statement from Halsbury’s Laws of England, 4th ed, Vol 9 (1974), p 81:

“Where a person has different capacities (eg a trustee, executor, administrator or agent), he may have power to contract in his representative capacity with himself as an individual.”

(footnote included)

25. Kilner Brown J accepted that this statement of law was accurate although there was no direct authority for it.  But he saw some support in Lee v Lee’s Air Farming Ltd,^[17] in which Lord Morris of Borth-y-Gest said:^[18]

“There appears to be no greater difficulty in holding that a man acting in one capacity can give orders to himself in another capacity than there is in holding that a man acting in one capacity can make a contract with himself in another capacity.”

26. Lee v Lee’s Air Farming Ltd was not a case which raised, as Millett LJ described it, the two-party rule.  Mr Lee had been governing director of the respondent company and had been employed by the company at a salary as its chief pilot.  When he was killed in the performance of that work, his widow, the appellant, claimed compensation from the company, alleging that he was a “worker” within the meaning of the Workers’ Compensation Act 1922 (NZ).  The Court of Appeal of New Zealand had held that Mr Lee could not have held the office of governing director and also be a servant of the company.  That decision was reversed by the Privy Council.  In giving the judgment of the Judicial Committee, Lord Morris said that it was impossible to resist the conclusion that the relevant “aerial operations were performed because the deceased was in some contractual relationship with the company [which] came about because the deceased as one legal person was willing to work for and make a contract with the company which was another legal entity”.^[19]  His Lordship continued:^[20]

“Nor in their Lordships’ view were any contractual obligations invalidated by the circumstance that the deceased was sole governing director in whom was vested the full government and control of the company.  Always assuming that the company was not a sham then the capacity of the company to make a contract with the deceased could not be impugned merely because the deceased was the agent of the company in its negotiation. … In their Lordships’ view it is a logical consequence of the decision in Salomon’s case^[21] that one person may function in dual capacities.  There is no reason, therefore, to deny the possibility of the contractual relationship being created as between the deceased and the company.”

Lord Morris rejected the argument that there could have been no employer and employee relationship, because Mr Lee could not have given orders to himself, by the passage to which Kilner Brown J cited in which I have set about above at [25].  It can be seen then that there was no support in Lee v Lee’s Air Farming Ltd for the conclusion reached in Rowley, Holmes & Co v Barber.  Indeed the emphasis in Lee’s case upon the necessary distinction between Mr Lee and the legal entity which was his company, indicates the error of the conclusion in Rowley, Holmes & Co.

27. Still there is some Australian support for the proposition from Rowley, Holmes & Co.  In Gulland v Federal Commissioner of Taxation,^[22] Kennedy J, sitting at first instance in the Supreme Court of Western Australia, cited Rowley, Holmes & Co and Lee v Lee’s Air Farming Ltd and said that he was prepared to accept for the purposes of that case that a contract of employment between the taxpayer as employee and, as employers, the taxpayer and a colleague of the taxpayer, as trustees of a unit trust, was a valid contract.^[23]  However, he held those arrangements to be void against the Commissioner of Taxation under the then s 260 of the Income Tax Assessment Act 1936 (Cth).  On appeal to the Full Court of the Federal Court, Toohey J noted that there was no argument in that court as to the validity, apart from s 260, of the employment agreement.^[24]
28. More recently, in Re Australand Holdings Ltd,^[25] Barrett J (as he then was) referred to that part of the decision of Kennedy J in Gulland and said that:^[26]

“[20]On the whole, and having regard to the authorities [discussed in Gulland], I am disposed to think that it is possible and permissible for a trustee of one trust to contract with himself or herself as trustee of another trust but, of course, with subsequent difficulties of conflict of duty and duty or duty and interest …”

Barrett J noted that he had had occasion to consider the cases which were cited in Gulland in his earlier judgment in Walker v Romano,^[27] a case which was, Barrett J said, “distinguishable because of the interposition of a custodian”.^[28]  In Re Australand Holdings, Barrett J disclaimed any concluded view on the question because of the fact that the relevant trustees’ covenants were also given in favour of third parties and were therefore enforceable.^[29]  It appears that Ingram was not cited to Barrett J. 

29. The two-party rule has been affected by statute in one or perhaps two ways.  Section 50 of the Property Law Act 1974 (Qld) provides that any covenant or agreement entered into by a person with the person and one or more other persons, shall be construed and be capable of being enforced in like manner as if the covenant or agreement had been entered into with the other person or persons alone.  That provision could not apply in the present case if there is no other person who is a party to the Partnership Agreement or for whom any covenant within it is given.  But it is argued for Dr Morgan that this is such a case because, it is contended, Ms McCosker is also a party.  Counsel for Dr Morgan submit that the preferred construction of the Partnership Agreement is that the parties to it are Leximed in its two trustee capacities and Ms McCosker, but not Dr Morgan.  Therefore, at least for that reason, they say that the Partnership Agreement is not void. 
30. I am unable to accept the correctness of a construction of the Partnership Agreement under which either (or both) of Ms McCosker or Dr Morgan is bound by the agreement as a partner.  The agreement makes such a consistent and clear distinction between the so-called Partners and the individuals as Directors that such a construction is not open.  Clause 18.1 of the agreement does contain a covenant in favour of “the other Partners and Directors who are associated with a Partner”.  The agreement within cl 18.1, by each Partner, is for the benefit of the Directors so as to be potentially enforceable by each of them under s 55 of the Property Law Act 1974 (Qld) which provides, in part, as follows:

“(1)A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.”

Arguably cl 18 contains an agreement which thereby engages s 50.  Nevertheless, the promisor within cl 18.1, unambiguously, is a Partner.  Clause 18 fortifies the construction that the parties to the contract are the so-called Partners and not the individuals, although they may be beneficiaries of the contractual promise within the clause.

31. If s 55 does apply to cl 18.1, it does not follow that Dr Morgan became bound by the promises which it expresses.  Section 55(3) provides in part as follows:

“(3)Upon acceptance -

(a)the beneficiary shall be entitled in the beneficiary's own name to such remedies and relief as may be just and convenient for the enforcement of the duty of the promisor, and relief by way of specific performance, injunction or otherwise shall not be refused solely on the ground that, as against the promisor, the beneficiary may be a volunteer; and

(b)the beneficiary shall be bound by the promise and subject to a duty enforceable against the beneficiary in the beneficiary's own name to do or refrain from doing such act or acts (if any) as may by the terms of the promise be required of the beneficiary; and

(c)the promisor shall be entitled to such remedies and relief as may be just and convenient for the enforcement of the duty of the beneficiary; …”

Upon acceptance of the benefit of the promise or promises within cl 18.1, Dr Morgan would be bound only terms of the promise required some act or acts of him.  But the promises in cl 18.1 are not in such terms.  It follows that even with the operation of s 55, Dr Morgan would not be personally bound by the agreement of each Partner in cl 18.1.

32. The other potential statutory qualification of the two-party rule might be found in s 59 of the Trusts Act 1973 (Qld) which provides as follows:

“59Trustee may sue himself or herself in a different capacity

Notwithstanding any rule of law or practice to the contrary, a trustee of any property in that capacity may sue, and be sued by, himself or herself in any other capacity whatsoever, including the trustee's personal capacity; but in every such case the trustee shall obtain the directions of the court in which the proceedings are taken as to the manner in which differing interests are to be represented.”

The two-party rule has been said to be “based on the principle that no man can be at the same time plaintiff and defendant”, as the plurality noted in Clay v Clay.^[30]  Section 59 may provide a basis for qualifying the operation of the two-party rule, not according to the reasoning in Rowley, Holmes & Co, but because of the statutory removal of the basis for the rule where, as here, a trustee contracts with itself as trustee of another trust. 

33. I am inclined to the view that, s 59 of the Trusts Act apart, a contract purportedly made by a trustee with itself is invalid under the two-party rule.  I would disagree with the reasoning in Rowley, Holmes & Co, which in my view involved a misapplication of Lee v Lee’s Air Farming Ltd.  But in a case such as the present, s 59 of the Trusts Act may remove the basis for the rule and thereby exclude it.
34. It is unnecessary, however, to reach a concluded view on that question, for at least two reasons.  The first is that if, as the applicant contends, this would be an invalid contract because of the two-party rule, it does not follow that it should be construed as a contract to which Dr Morgan is a party.  The second is that if Dr Morgan was a party, and in particular a promisor under cl 18.1, nevertheless, it is not demonstrated, by withholding any information or documentation as is now sought by this proceeding, that there has been a failure to provide full information and truthful explanations of all matters relating to the affairs of the Partnership.
35. As to that first reason, I cannot accept that the Partnership Agreement is open to the interpretation for which the applicant contends.  The consistent demarcation between the position of Dr Morgan and Leximed Pty Ltd as Trustee for the Medicolegal Trust negates an interpretation by which Dr Morgan is, or is also, a partner.  Unambiguously, the intention was that the partnership income be distributed by Leximed according to the two trusts rather than being income which, by this agreement or otherwise, is derived by Ms McCosker and Dr Morgan. 
36. To discuss that second reason, it is necessary to detail the events by which information as to Dr Morgan’s practice, most relevantly the number of his medico-legal appointments over the relevant years, has now been provided.  That information has been provided by the evidence, both in affidavit and oral form, of Ms Bowker, an employee in Dr Morgan’s practice, and by a special referee appointed by the court to assess the number of appointments, year by year, over the subject period.  As I will discuss, the evidence of Ms Bowker substantially corresponds with the report of the referee. 

Ms Bowker’s evidence

37. Ms Bowker has been Dr Morgan’s private secretary over several periods:  from 1988 to 1992, from 1995 to 2011 and from October 2012 to the present.  She is responsible for making appointments, including medico-legal appointments, booking surgical procedures to be undertaken by Dr Morgan, typing his medico-legal reports, invoicing patients and medico-legal clients and generally managing his practice. 
38. In her affidavit dated 6 March 2015, she describes the task which she undertook, at the request of Dr Morgan, of calculating the number of medico-legal patient appointments in his practice between 2007 and 2014.  By such an appointment, she means a “consultation by a person with Dr Morgan, meaning that an appointment to see Dr Morgan is made for the person and then the person sees him for a medical consultation”.  No issue was taken as to this being an accurate understanding of what constitute “patient appointments” within cl 19.2(b).  According to her affidavit, she calculated the following numbers of patient appointments which she said were correct:

2007-432

2008-453

2009-420

2010-441

2011-453

2012-469

2013-480

2014-487

39. The process by which she made these calculations was explained in her first affidavit and in her oral evidence as follows.  This was not simply a matter of going to appointment diaries and counting the number of scheduled appointments.  What had to be identified were the appointments for which the person to be assessed did attend for the assessment, the purpose of which was for Dr Morgan’s medico-legal work, as distinct from treating a patient.  Instead, Ms Bowker had to start with the invoices for medico-legal work performed by Dr Morgan, followed by the identification of those for which there had been an appointment, as distinct from, for example, some “follow up” or supplementary reports for which it had not been necessary for Dr Morgan to again examine the subject of the report. 
40. Until 2010, scheduled appointments were recorded in a hard copy diary.  But as she explained, simply totalling the appointments from that diary would not have yielded the total number of relevant appointments for each year.  In the hard copy diaries, there was a notation indicating whether the appointment was for a medico-legal purpose.  If an appointment was cancelled ahead of the scheduled day, the cancellation would be marked in the diary.  However, if the appointment was cancelled on the day, or the subject of the appointment simply failed to attend, that would not be revealed by the appointments diary.  Therefore, Ms Bowker had to go to other records. 
41. Ms Bowker collected the relevant invoices and looked for what she described as “aberrant amounts”, meaning anything “less than what appeared to be that particular year’s fee for a medico-legal consultation and report”.  In such cases, she “scrutinised [the invoice] to determine whether an appointment had occurred” and on some occasions went to the medico-legal report itself because it was and is the practice of Dr Morgan (like other practitioners doing this work) to record in his report the fact of an examination of the subject person.^[31]
42. An electronic diary was used to record patient appointments from 2010.  On the eve of a working day, a hard copy of that day’s scheduled appointments would be printed.  But those copies are not available and in any event, for the same reasons, were not the basis for Ms Bowker’s calculations.  Again, she went to the invoices and excluded those which, she was able to conclude, were not for services which included an examination of the claimant in a medico-legal matter. 
43. Under the electronic accounting and records system used in the practice, Ms Bowker enters an item code for every service provided by Dr Morgan in the practice.  Prior to the introduction of that system, medico-legal work was also identified in the same way.  In her first affidavit, she described the item codes which were relevant to medico-legal reporting as being “MLR” (medico-legal reporting) and “100150”.  The latter code was and is used for certain work performed for WorkCover.  The MLR item code is used for all “medico-legal patient appointments which result in a medico-legal report” and also for other medico-legal services, such as supplementary reports and joint expert reports, which do not involve an appointment for the purposes of that report.  Having retrieved all invoices with an MLR or 100150 item code, her task was then to identify and exclude those which did not involve an appointment which she did by identifying:^[32]

“(a)entries showing a nil amount;

(b)invoiced amounts less than the amount ordinarily charged for medico-legal reporting at the particular time (which requires, as a first step, ascertaining what was being charged by the practice for medico-legal reporting at each relevant date); and

(c)duplicate entries.”

44. She explained each of those exclusions as follows.  Entries showing a “nil amount” are the result of a reversal of an account which was raised in error, such as for the wrong amount or to the wrong payer.  She explained that if an account is then re-issued correctly, there will be two entries in the system which will appear as if there had been two medico-legal patient appointments.  Therefore, by deducting the entries with a nil amount, that duplication is avoided.
45. Where an invoice was for an amount less than that which was ordinarily charged against the MLR item code, this was an indication to Ms Bowker that the service had been for something other than a medico-legal patient appointment followed by a medico-legal report, such as a supplementary report which did not involve a patient appointment. 
46. Duplicate entries indicated that more than one account had been raised for the same service, which she explained occurred where “multiple payers agreed to share the costs of the service”.  The practice management system will show a separate entry for each account, even though it relates to the one patient appointment and report.  Again, where Ms Bowker believed that it was necessary to do so, she located the particular medico-legal report to see whether it recorded the relevant appointment. 
47. Ms Bowker described this exercise as a time consuming one, taking over 20 hours.  It required her particular understanding of the ways in which invoices, which had been allocated the relevant item codes for medico-legal work, might or might not have involved a patient appointment.
48. In her third affidavit, having read the referee’s report, Ms Bowker acknowledged an error in her calculations in that she had overlooked invoices addressed to WorkCover under another item code, which was 100211.  According to the referee’s report, the numbers of appointments within this item code were insignificant, amounting to two appointments in 2010, seven in 2011, one in each of 2012 and 2013 and two in 2014. 
49. She also referred to other item report codes which identified invoices for a cancellation fee, the late cancellation of an appointment or a non-attendance.  For obvious reasons, Ms Bowker, like the referee, excluded those invoices from her calculations. 
50. Again in her third affidavit, Ms Bowker referred to an exercise which she undertook, when making her calculations, in relation to invoices which were for an amount under $1,000 (apart from WorkCover invoices).  She referred to the referee’s report (at paragraph 3.1.5 of that report) where the referee reported that he manually checked “actual client reports to determine whether a medico-legal patient appointment was made”.  Ms Bowker said that she also conducted that kind of review for invoices under $1,000 for the whole of the period from 2008 to 2014 and did not locate any invoices which related to a medico-legal appointment, in an amount of less than $1,000 (apart from WorkCover invoices).^[33]
51. The applicant sought to lead evidence in the form of a report by a Mr Ross Vile, a chartered accountant.^[34]  Counsel for Dr Morgan objected to the admission of that evidence and its admissibility was reserved.  They submitted that the subject matter of the report was not a matter for expert legal opinion because it was not founded upon any particular skill or learning of the author.  Further, they submitted that Mr Vile had failed to explain his reasoning process and the factual basis for his conclusions:  Makita (Australia) Pty Ltd v Sprowles.^[35]  I am persuaded to admit the report.  The author has a relevant expertise as an accountant from which to comment upon the use that could be made of Dr Morgan’s accounting records to calculate the number of patient appointments and the reliability of the analyses undertaken by Ms Bowker and the referee. 
52. Importantly, in his report Mr Vile answered a question of whether there were any financial records, other than the materials referred to by Ms Bowker, which would be expected to be held or able to be generated by Dr Morgan’s practice, to identify the number of patient appointments, to which Mr Vile answered:

“2.3.1The process that Mrs Bowker followed to extract the number of medicolegal reports appears prudent, and the time taken to extract the information appears reasonable.

2.3.2There is no mention of records extracted in order to produce BAS’s, in particular the report used to calculate or extract the ‘GST on sales’ amount which is disclosed in the BAS.  As I have not inspected these records, I am unable to ascertain whether they could be used to achieve the Purpose.”

The referee’s report

53. The way in which the court came to appoint a special referee, under r 501(1)(b) of the Uniform Civil Procedure Rules, needs to be explained.  The Originating Application came before another judge in the Civil List on 23 April 2015.  The applicant was then seeking orders that Dr Morgan “account to the Applicant” by providing information and documents as follows:

(a)The number of medico-legal patient appointments in Dr Morgan’s practice over the years from 2008-2014 (although for years ending 30 June rather than calendar years).

…

(c)“[D]ocumentary evidence of such appointments” in the form of “patient booking records”, “each invoice for each appointment”, “cash receipt journals for such appointments” and “each Business Activity Statement recording the receipt of income for each such booking”.

54. Substantially the same relief was sought at the hearing before me, by an Amended Originating Application filed on 11 August 2015.
55. The judge before whom the case came in April considered that it would be conducive to the resolution of this litigation that the court appoint a special referee to provide a report about the numbers of patient appointments.  That course was at first resisted by each of the parties, although later in the hearing, it was supported by the applicant.  No reasons were given for the order, save as appear from the exchanges between his Honour and counsel leading up to the order being made.  At first the judge’s intention seemed to be to make an order for the special referee to decide a question, under r 501(1)(a).  But the order which was made was that the referee provide a written opinion on a defined question, under r 501(1)(b). 
56. The order defined that question as follows:

“For each calendar year between 2008 to 2014 inclusive, how many medico-legal patient appointments did the respondent conduct in the course of the Brisbane Private Hospital business?”

It also defined “medical-legal patient appointments” as follows:

“(b)‘medical-legal patient appointment’ is an appointment at which a medico-legal patient attends the Brisbane Private Hospital Business for the purpose of being examined by the respondent for the purpose of the respondent preparing a medico-legal report.”

57. Those definitions were agreed between the parties, as evidenced by the draft order which they handed to his Honour.  By that stage, it appeared to be common ground, as it seemed to be in the hearing before me, that the number of appointments was to be calculated calendar year by calendar year. 
58. Rule 505 of the UCPR provides as follows:

“505Use of opinion, decision or findings

(1)The court may -

(a)accept or reject all or part of a special referee’s opinion, decision or findings in a report; and

(b)make an order or give judgment in the proceeding on the basis of the opinion, decision or findings in the report as it considers appropriate.

(2)An application by a party for an order or judgment under subrule (1) must be made on 7 days notice to the other parties.”

59. Counsel for Dr Morgan submit, as they submitted to the judge who made the order for the referee’s report, that the report is of no utility at least because it answers a question which does not arise for determination in the present proceeding.  They emphasise that this is not a claim for damages or other relief for Dr Morgan exceeding the 10 per cent restriction prescribed by cl 19.2 of the Partnership Agreement.  The applicant’s counsel has made it clear that he is not seeking any finding that the 10 per cent limit was exceeded or any other finding as to the numbers of appointments. 
60. However, the evident purpose of the order for the appointment of the special referee was to procure information for the court from which the accuracy of Ms Bowker’s calculations could be assessed.  In the course of the discussions between his Honour and counsel which preceded this order, his Honour described the process to be undertaken by the special referee as akin to an “audit” of Ms Bowker’s calculations. 
61. As I have noted, the referee’s report contains calculations which are substantially the same as those made by Ms Bowker.  If the referee’s report is accepted by the court under r 505(1)(a), the court may make an order or give judgment in the proceeding on the basis of that report as it considers appropriate:  r 505(1)(b).  Therefore, if the court accepts the referee’s report which has been given, the court may act on the basis of that opinion to make an order dismissing the Originating Application because the information as to the number of relevant appointments will have been provided and there would be no utility in requiring the production of documents which evidence those appointments.
62. The special referee was Mr Brian McDonald, a chartered accountant.  Amongst the documents with which he was provided was what he described as a medico-legal patient appointments work paper which had been prepared by Dr Morgan’s practice.  This was a document which had been prepared by Ms Bowker.  The numbers of appointments, year by year, according to that work paper corresponded with those in Ms Bowker’s evidence.  The total number of appointments in the calendar years 2008 through 2014, according to Ms Bowker’s calculations, was 3,203.  The total number according to Mr McDonald’s calculations was 3,191, constituting an average difference per year of fewer than two appointments.  Mr McDonald’s calculations are as follows (with Ms Bowker’s corresponding figure in brackets):

2008-445 (453)

2009-412 (420)

2010-443 (441)

2011-459 (453)

2012-466 (469)

2013-477 (480)

2014-489 (487)

Mr McDonald was assisted by a member of his staff in preparing his report.  But as he there explained, this person was under his supervision at all times and the opinions reached were his own.

63. Mr McDonald’s methodology was similar to that of Ms Bowker, although in some respects his inquiries were more extensive.  He explained his steps in making his assessment as follows.  First he identified potentially relevant Item Reports (in billings).  He explained that all medico-legal work is subject to GST, whereas medical services provided to a doctor’s patients is not.  He therefore obtained all Item Reports that contained GST.  He checked that he had all of the documents within that category by reconciling the individual Item Reports to GST Reports produced by the software in Dr Morgan’s practice and, in turn reconciling the GST Reports with what he described at one point of his report as Business Activity Summaries.^[36]  Counsel for the applicant suggested that the so-called Business Activity Summaries were a category of documents which were not otherwise explained and cast some doubt over Mr McDonald’s report.  But it is clear from paragraph 3.1.7 of his report that this was an intended reference to Business Activity Statements lodged with the Australian Tax Office.  Mr McDonald said that the comparison of the Item Reports with the GST Reports and Business Activity Statements showed a variance of less than one per cent, thereby confirming for him that he had identified all potentially relevant Item Reports. 
64. He then reviewed the Item Reports to identify the relevant categories for further review.  The Item Reports were categorised according to item by codes.  Some were for cancellation fees, late cancellations and non-attendances and were therefore excluded.  The relevant categories were coded MLR, 100211 and 100150. 
65. He then divided the individual billings with those item codes into billings within the following sub-categories:

1. “Follow up” appointments.
2. Billings under $1,000 for an Item Report MLR.
3. Billings with “nil value”.
4. Duplicate billings.
5. “Other billings”.

66. “Follow up” appointments were excluded because they were not in fact appointments.  They involved the provision of a further report by Dr Morgan from documents rather than a further examination. 
67. Billings under $1,000 for an Item Report MLR were excluded because Mr McDonald did not consider them to be a billing for a report.  (It should be noted here that this would not include the billings for a report provided to WorkCover.)  Mr McDonald reasoned in the same way as Ms Bowker had for billings containing the code MLR and for less than $1,000. 
68. His reason for excluding billings in a zero amount was that of Ms Bowker, as was his reason for excluding duplicate billings. 
69. In his consideration of the categories of “follow up” appointments, billings under $1,000 for an Item Report MLR and duplicate billings, Mr McDonald reviewed a sample of billings in these categories to confirm that they were irrelevant and should be excluded.^[37]  Counsel for the applicant was critical of this sampling process, at least because, it was contended, the process of sampling was not shown to be reliable.  But Mr McDonald was not called to give evidence and therefore this criticism of his report is difficult to accept when, on the face of the report, there is no flaw in his work in this respect.
70. In respect of “other billings”, Mr McDonald described this category as including billings between $1,000 and $2,200 (which he said was typically the lowest in the range of fees charged for a medico-legal report by Dr Morgan), billings above $2,500 and “billings to the same patient which may result in two appointments”.  But importantly, it appears that Mr McDonald did not simply exclude any billings which were less than $2,200.  Rather, he identified them as requiring particular consideration and investigation of other material to identify the nature of the service in those cases.  At paragraph 7.5.7, he said that with the assistance of Ms Bowker, he examined documents such as patient files and the medico-legal reports to confirm whether the billing was for a report which had followed an appointment.  He said that generally billings which were within this category and excluded from his calculations were for “file reviews, supplementary reports, review of x‑rays, DVD review or perusal”.^[38]  Notably the number of “other billings” which were excluded was small, amounting to none in 2010, one in each of 2008 and 2009, two in 2012, four in each of 2011 and 2013, and five in 2014. 
71. He explained the means by which he adjusted between years to allow for billings where the appointment was at the end of a calendar year before the invoice was sent in the following year.  Counsel for the applicant suggested that at least in this respect, the referee had not had the benefit of information within the item reports showing the “date of service”.  An example of an Item Report was exhibited to Ms Bowker’s third affidavit.  It shows for a certain person that there were four accounts sent at various times in the 2014 year and that on three of those occasions that the date of service corresponded with the account date.  On the fourth occasion there was a difference of some six days.  Ms Bowker’s evidence is that for a medico-legal report, the account date would represent the date on which the report (with the invoice) was sent.  The date of service was said to be a particularly important piece of information for the purpose of making the necessary calculation.  But whilst there is no specific reference to that component of an Item Report which is made by Mr McDonald, it does not follow that he made no reference to it or that his calculations are inaccurate for this reason.  Nor does it follow that he did have the Item Reports.  Indeed, at paragraph 4.1.1, Mr McDonald said that he relied upon, amongst other things, “[v]arious Item Reports generated by the [practice’s] software”.
72. I return to the differences between the calculations of Ms Bowker and Mr McDonald.  As Mr McDonald explained, the differences are attributable to three causes.  The first are arithmetical errors by Ms Bowker, discovered by Mr McDonald, in totalling the number of relevant MLR invoices.  The difference was one appointment in each of 2008 and 2009 and three appointments in 2011 for these errors.  The second is that Ms Bowker did not include billings against the item number 100211.  This means that she omitted one appointment in 2012 and 2013, two appointments in each of 2010 and 2014 and seven appointments in 2011.  Thirdly, Mr McDonald excluded some patients from the total for the billings under item number 100150, upon the basis that these were existing patients of Dr Morgan who later became the subject of a report requested by WorkCover but who had not been examined for the purposes of that report.  This led Mr McDonald to exclude four appointments from each of 2011, 2012 and 2013, seven from 2009 and nine from 2008. 
73. Already I have discussed some of the criticisms of the referee’s report which were made by counsel for the applicant.  I now go to the remainder of them. 
74. The first of these arguments is based upon the rate at which the amount of fees generated from the provision of medico-legal opinions by Dr Morgan increased over the subject period.  The rate of increase in total fees was markedly greater than any increase in the number of patient appointments.  It was argued that this indicates some error in the calculation of the appointments because there is no apparent explanation for that discrepancy.  The total fees for MLR items over the relevant years were as follows:

2008-$630,399

2009-$656,095

2010-$759,295

2011-$854,260

2012-$1,010,845

2013-$1,230,220

2014-$1,340,843^[39] 

75. Those revenue amounts include work for which there was no patient appointment.  However, the numbers of, for example, follow up reports increased but not greatly over the same period.^[40]  The same applies to Mr McDonald’s category of billings less than $1,000. 
76. A more likely explanation is that Dr Morgan’s fees for the same work rose from year to year.  But for the applicant it was submitted that this explanation was excluded by the evidence.  It was submitted that “[t]he thrust of the evidence, both Ms Bowker’s and also recorded in [the referee’s] report, is that throughout [the relevant] period [medico-legal reports] have been charged [an amount in] the range of $2,200 to $2,500”.^[41]  Counsel there referred to paragraph 7.5.5(b) of Mr McDonald’s report where he wrote, in respect of the category of billings under $1,000, “[r]eports are typically $2,200 to $2,500.  I do not consider any billings under $1,000 to be a report”.  But Mr McDonald was not saying there that the price for reports was unchanged over the years.  His reference to a range of $2,200 to $2,500 was expressed in the present tense. 
77. More importantly, the notion that, against common economic experience, Dr Morgan’s level of fees remained unchanged over this seven year period is inconsistent with Ms Bowker’s evidence.  In her first affidavit, she referred to her identification of invoiced amounts which were less than “the amount ordinarily charged for medico-legal reporting at the particular time “which requires, as a first step, ascertaining what was being charged by the practice for medico-legal reporting at each relevant date …”.^[42]  In her oral evidence, she said that she looked for amounts which were “[a]nything less than what appeared to be that particular year’s fee for a medico-legal consultation and report …”.^[43]  Ms Bowker said that she was not the source of Mr McDonald’s information of a range of $2,200 to $2,500.^[44]  And when asked whether “over the years” Dr Morgan’s fees for reports have been within that range, she answered “no”.^[45]  She said that he sometimes charges more and sometimes less than that range (which was expressed in the present tense).^[46]  She was asked to say whether she could estimate the percentage of occasions on which Dr Morgan charged outside that range over this seven year period and she provided what were obviously very broad estimates of the possibilities.^[47]  Although that last piece of evidence was given by reference to a seven year period, it does not provide a basis for a finding that Dr Morgan’s level of fees did not increase over this period.  That is even before that piece of evidence is considered with the other evidence of Ms Bowker to which I have referred.  In summary, it from appears that Dr Morgan did not increase his fees over the years.  Instead, the contrary appears from Ms Bowker’s evidence.  Importantly, counsel for the applicant did not suggest to Ms Bowker that his level of fees was unchanged over these years.  Nor was that suggestion made to Dr Morgan.  He was asked whether there were “standard fees that people engaged in the medico-legal industry charge” to which Dr Morgan answered “no, there are no standard fees.  In fact they vary enormously from reporter to reporter”.^[48]
78. Without a finding that the level of fees per service remained constant, I am unable to accept that the rate of increase in the total fees, in comparison with the increase in the number of appointments, indicates a miscalculation of the latter. 
79. The applicant led evidence from Mr Howe, an accountant employed by Shine Lawyers Limited (“Shine”).  It is a public company which conducts a legal practice, acting for plaintiffs in personal injuries matters.  It is a source of much medico-legal work for Dr Morgan.  There is evidence about the fees rendered by Dr Morgan to Shine over recent years which is said to be at odds with the conclusions of the referee.  In paragraph 7.5.5 of his report, the referee described his category of “other billings” as including “billings above $2,500”.  As I have noted, he went on to explain the kinds of billings which were within this category and which were excluded from his calculation of the number of appointments.^[49]  As I have also explained, the number from this category “other billings” which was excluded by the referee was small.  (The highest number excluded on this basis was five in 2014.)  But for the applicant it is argued that this evidence is at odds with the evidence from the records of Shine, from which it appears that in 2013 there were 14 invoices each exceeding $2,750 to Shine and 36 such invoices in 2014.  But there is no inconsistency because the referee did not say that he excluded all billings of more than $2,750.  Plainly he did not do so. 
80. The total fees paid by Shine to Dr Morgan have certainly increased markedly over the years.  But the amounts do not suggest an error on the part of either Ms Bowker or the referee.  They do show that from 2012, when the business provided by Shine accounted for 14 per cent of the value of Dr Morgan’s medico-legal work measured by revenue, the percentage increased to 22 per cent in 2013 and 25 per cent in 2014.  This gives some basis to suppose that the increased volume of work from Shine may be part of an explanation for the overall increase in revenue for medico-legal work (if that work is relatively more remunerative).  But again it does not reveal a flaw in the calculations of the number of appointments either by Ms Bowker or the referee. 
81. Importantly, the referee started with all billings from the practice for which GST had been added.  Unless there was some parallel and distinct set of accounts to which the referee was not given access, it plainly appears that the referee has considered all of the potential invoices.  There was no suggestion to Ms Bowker or Dr Morgan that such a parallel set of accounts was maintained. 
82. There appears to be one omission from the calculations of both Ms Bowker and the referee.  It relates to another category of work performed for WorkCover.  In the cross-examination of Ms Bowker, it was established that there are now some kinds of service provided to WorkCover by reference to item numbers to which reference was not made by Ms Bowker or Mr McDonald.  That cross-examination was conducted by reference to a document produced by WorkCover entitled “Specialist supplementary services table of costs effective 1 December 2014”.  The document contains a number of descriptions of types of service under the heading “Medical Reports”.  They include the types of service within item numbers 100150 and 100211.  But also included are the services described by item numbers 100802, 100803, 100279 and 100293. 
83. The item number 100802 refers to a type of report which is described as “Permanent Impairment (PI) Assessment using GEPI”.  It appears from the table that this was to be used for injuries which occurred on or after 15 October 2013.  Codes 100802 and 100803 were also referable to a report described simply as a permanent impairment (PI) assessment, which was relevant for injuries occurring before 15 October 2013.  The difference between a 100802 and a 100803 report appeared to be that the latter, for which a lower fee could be charged, would not be in a form as required by WorkCover.  Ms Bowker agreed that Dr Morgan has written some reports charged as item number 100802.  But she said that “he hasn’t done very many of those” and that this code “is a fairly recent addition to our system, because the GEPI qualification is a fairly recent one”.^[50]  And it was suggested to her by counsel for the applicant that this GEPI assessment was introduced only in “early 2014”.  Ms Bowker was later asked whether Dr Morgan had raised invoices for item 100802 throughout the relevant years to which she answered that she did not recall “throughout those years, but I do of recent times”.^[51]  She said that prior to the introduction of this code 100802, WorkCover would ask for a “comprehensive report”.^[52]  In the WorkCover table of costs, the description “Comprehensive Report” is given to a report under item 100150. 
84. It follows that the evidence goes only as far as showing the use of this item number 100802 for injuries which occurred from mid-October 2013 and that it was only in the 2014 year that that item number was used by Dr Morgan’s practice.  Ms Bowker agreed that the report under item number 100802 would involve a patient appointment.^[53] 
85. This evidence was given on the second day of the hearing.  Her cross-examination continued into the third day.  She was not asked to extract the item reports for this item number so as to show the number of appointments which could have been overlooked by her and the referee.  That was unsurprising given her evidence as to the low number of them.  Further, it is to be noted that the overall revenue from WorkCover matters, not limited to item numbers 100211 and 100150, was only $8,109.^[54]  Ms Bowker was not asked to estimate, let alone identify by a search of the records before the completion of her evidence, the contribution made by item 100802 reports to that total.  It is known that the total includes two appointments under item code 100211 and three appointments under item code 100150.^[55]  Therefore, no more than about $5,000 could be attributed to 100802 reports.^[56]  At $749 plus GST for each report, there could not have been more than six such reports (and appointments for them), even assuming that they accounted for all of the other WorkCover revenue.  It can be seen that the addition of six appointments to the total for 2014 year would be inconsequential.^[57]
86. The other suggested omission is in respect of “consultations associated with a report”.  But the billing for the report itself would be made under another item code such as 100150, 100211 or 100802.  Therefore, by counting that report as representing a patient appointment there would be included any appointment which was the subject of item codes 100279 or 100293.  Therefore, the absence of a reference to these item codes in the referee’s report could not be consequential. 

Conclusion on the referee’s report 

87. The methodology of the special referee was logical and sound.  (Mr Vile said that a like process followed by Ms Bowker appeared to be “prudent”.)  Moreover, the referee had regard to the GST records of the practice to confirm that he had begun his work with a consideration of every potentially relevant billing.  The various steps which the referee then took in order to exclude irrelevant billings are well explained and have no apparent flaw. 
88. I must infer that there was an omission by the referee to consider the small number of billings, all within the 2014 year, under the item code 100802.  But the number of appointments which might have been overlooked in that respect could not be consequential and could not justify a direction from the court that the referee consider them. 
89. Under r 505(1)(a), I accept the special referee’s findings in answer to the question for his determination, save for his finding as to the number of medico-legal patient appointments for the calendar year 2014.
90. It follows that the application for orders which would require further some consideration of the question by the referee should be refused.

Disposition of the proceeding

91. The relief sought by the Originating Application was said to be available upon many legal bases.  The first was that upon the proper construction of the Partnership Agreement, both Ms McCosker and Dr Morgan are parties to it so that he is bound by cl 18.1(b) of the agreement to provide the information and produce the documents which are sought by the Originating Application. 
92. As I have held, they are not parties to the Partnership Agreement and Dr Morgan is not contractually bound by cl 18.1(b).  Further, the obligation within cl 18.1(b)(i) is to provide full information and truthful explanations of all matters relating to the affairs of the Partnership.  If, in fact, the 10 per cent limit was not exceeded in any year, the information as to Dr Morgan’s own practice could not be relevant in the conduct of the affairs of the Partnership.  Such information could only be relevant if, because the 10 per cent limit was exceeded, cl 19.3(b) were engaged.
93. And there is no basis for the implication of a term by which Dr Morgan would have to provide such information regardless of whether the 10 per cent limit had been exceeded.  This would not be necessary to give the agreement business efficacy.  And in this contract, the implication would be excluded by the fact, which is established by Dr Morgan’s third affidavit, that in the negotiations of the Partnership Agreement the parties agreed not to include a draft term in the form of this sentence at the end of cl 19.2(b):^[58]

“For the purposes of this clause 19.2(b), Medicolegal will procure the Consultant to disclose to the Partners the number of patient appointments in the previous year at a partners meeting and annually thereafter.”

94. In any case, now that Ms McCosker and Leximed Pty Ltd as the trustee of her trust have the information within the referee’s report, they are in possession of all relevant information.  If there had been any contractual obligation upon Dr Morgan to provide the information, it could not be suggested that it extended to the present circumstance where the applicant has that information and the court has accepted its correctness.
95. It was argued for the applicant that Dr Morgan is obliged to provide this information and documentation by reason of his duties as a director of Leximed Pty Ltd.  The argument refers to s 180, s 181 and s 182 of the Corporations Act 2001 (Cth).
96. Under s 180, Dr Morgan is obliged to act with reasonable care and diligence.  If he is not contractually bound, it is submitted that Leximed Pty Ltd at least is obliged to provide the information under cl 18.1(b)(i) and (ii) and that, as a diligent director, Dr Morgan should see to it that Leximed complies this obligation by providing the information and documentation. 
97. Under s 181, Dr Morgan is obliged to act in the best interests of the company.  Ordinarily that would prevent him from conducting his own business in competition with that conducted by the company.  He is permitted to do so only within the 10 per cent limit under cl 19.2.  It is then said that a refusal to provide the information manifests “an irreconcilable conflict” with his duty under s 181.
98. Section 182 requires that Dr Morgan not use his position as a Director of Leximed to gain an advantage for himself.  It is argued that Dr Morgan misused his position by causing the Partnership Agreement to be made in terms by which he would not be required to provide information of this kind.  The argument here complains of his conduct in the formation of the Partnership Agreement.  There are similar arguments also made by reference to s 180 and s 181, that he breached the duties under those provisions by causing the company to contract in these terms.
99. In my view, the position of Dr Morgan as a Director of Leximed Pty Ltd is relevantly as follows.  As a Director, he owes duties to the company in the conduct of all of its affairs.  Consistently with his duty under s 181, Dr Morgan is not to practise in competition with the company’s business unless he does so within the 10 per cent limit.  It is only by observing that limit that he can avoid a breach of his duty to act in the interests of the company in preference to his personal interest.  If Dr Morgan breached s 181 by practising in excess of the 10 per cent limit, there would be a range of remedies available to the company against him.  They would include relief to the effect that he would compensate the company and would disclose to it information which it is in the interests of the company to have in making its own assessment of the extent of its right of recovery against him.
100. However, where he practises in competition with the company but within the 10 per cent limit, it could not be said that he is in breach of his duties as a Director, having regard to the terms of the company’s agreement that he may do so.  In that circumstance, the interests of the company could not be affected by whether or not information as to his practice is disclosed and the company would have no remedy against him by which he would be required to make that disclosure.  On my findings, that is the present situation, as is established by Ms Bowker’s evidence and the referee’s report. 
101. The argument that he was in breach of his duties as a director by causing the company to contract in terms of the Partnership Agreement cannot be accepted.  If that is a valid contract, it is because it was made between two distinct interests constituted by the respective capacities in which the company acted as a trustee.  In a negotiation of that agreement, plainly Ms McCosker acted for the company in its capacity as trustee for her trust and Dr Morgan for his trust.  In that context, neither was obliged to protect the interests of the other’s trust.
102. Again, in any case, the information sought by the application has been provided and there is no reason for the court to order that it be provided again. 

Orders

103. For these reasons the orders will be as follows:

1. Pursuant to Uniform Civil Procedure Rules 1999, r 505(1)(a), the court accepts the answers of the special referee, appointed by order of the court on 23 April 2015, in his report dated 25 May 2015, to the questions defined by that order save for his answer to the question for the calendar year 2014.
2. The application for the special referee to provide a further report or an explanation or for the question originally referred to him to be remitted for further consideration, is refused.
3. The Originating Application is dismissed.