National medical centre operator's claim for damages against defaulting doctor upheld

HopgoodGanim Lawyers successfully acted for a national medical centre operator in defending an appeal by a defaulting doctor of an award of damages. This is the first time that the calculation of damages in this specific scenario (and where the contracts did not contain any agreed damages clause or calculation) has been examined by the Supreme Court and now the Court of Appeal in Queensland. 

From July 2010 to February 2012, the doctor provided medical services from medical centres owned and operated by Idameneo (No. 123) Pty Ltd (Idameneo). The doctor did so under two contracts between the parties. The first provided for Idameneo to acquire the doctor’s former practice for $500,000. The second confirmed that the doctor would have the use of Idameneo’s premises and the benefit of its administrative services in return for payment of one half of the fees earned by the doctor for rendering medical services at those centres for a period of five years from 29 July 2010.

Commonly, large medical centre operators recruit doctors in this manner - by acquiring a doctor’s existing practice and agreeing the terms upon which the doctor will render medical services at the operator’s centre from then on. 

In February 2012, after a dispute, the doctor left Idameneo’s centre, complaining that it was in breach of contract for various reasons, and decided to practise elsewhere. Idameneo issued the doctor with a notice of breach and, ultimately, terminated the contracts for this reason. Idameneo sued the doctor claiming damages for breach of contract or, alternatively restitution of the $500,000.

At first instance, Idameneo was successful and was awarded damages and interest of $234,202, being the loss of profits that would have been earned for the period from when the doctor left and when another doctor commenced at the centre (although, it was argued that the relevant period ought to be wider than that).

The doctor appealed, but the Court of Appeal dismissed the appeal. The Court of Appeal confirmed that the grounds for termination by Idameneo were valid. As to damages, the position was more complex, and the Court decided the following:

1. The Court was unable to find that there would have been sufficient patient demand to keep the doctor, as well as the other doctors, fully occupied during the relevant period after the contracts were terminated.
2. However, Idameneo had proved that it suffered some loss as the doctor would have yielded some additional profit, based on evidence as to waiting times in the centre, the number of people who did not wait and the likely perception of patients as a result that there were not enough doctors working at the centre.
3. Given this, Idameneo, as the innocent party, could still recover damages assessed by reference to the expenditure it incurred in its performance of the contract (ie, the $500,000).  In this regard, Idameneo had the benefit of the doctor’s performance for about 19 months, so it could be assumed that Idameneo suffered a loss in the order of more than half of that payment.
4. Therefore, Idameneo was entitled to an award at least as high as that which it received by the Judgment at first instance, such that the outcome should not be disturbed.

For more information or discussion, please contact Partner Anthony Pitt. 

^{1. Zahedpur v Idameneo (No 123) Pty Ltd [2016] QCA 134}