Medical Practitioner's Right to Use Shared Facilities Reversed

The Court of Appeal allowed an appeal, reversing a lower court's decision that denied a medical practitioner's right to use shared facilities under a sublease. The court held that the sublessor could not impose conditions beyond those expressly stated in the sublease.

Reported Decision : (2005) Aust Contract Reports 90-[ADDRESS] of Appeal

CITATION: [NAME] v [COMPANY] [2005] NSWCA 134

HEARING DATE(S): 14, 15 March 2005

JUDGMENT DATE: 28 April 2005

JUDGMENT OF: Sheller JA at 1; Santow JA at 2; [NAME] at 90

DECISION: Appeal allowed with costs with orders at para [89].

CATCHWORDS: CONTRACT - Medical services arrangement and sublease - interpretation of contractual arrangements as to whether medical practitioner had right to use shared facilities by way of procedures room or whether dependent on favourable exercise of discretion by [NAME] [COMPANY] proprietor - no capacity of [NAME] to attach conditions outside those expressly referred to in the clause such as extent of insurance or possible obligation to register under relevant legislation - principles of contractual interpretation as regards background knowledge reasonably available to the parties - capacity to terminate on the ground of breach constituting repudiation - PROCEDURE - scope of appellate review where credibility findings based on incorrect interpretation of medical practitioner's rights.

LEGISLATION CITED: Private Hospitals and Day Procedure Centres Act 1988 and Regulations

Archibald v Byron Shire Council (2003) 129 LGERA 311 Fox v Percy (2003) 214 CLR 118 CASES CITED: Investors Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181

[NAME] (Appellant) PARTIES: [COMPANY] (ACN [PHONE]) (Respondent)

FILE NUMBER(S): CA 40130/04

[NAME], SC/ [NAME] (Appellant) COUNSEL: [redacted]

[NAME] (Appellant) SOLICITORS: [redacted]

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 9024/01

LOWER COURT JUDICIAL OFFICER: [NAME]

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40130/04 DC 9024/01

SHELLER JA SANTOW JA [NAME]

28 APRIL 2005 [NAME] v [COMPANY] (ACN [PHONE]) Judgment 1 SHELLER JA: I agree with the reasons and orders of Santow JA. 2 SANTOW JA: INTRODUCTION AND OVERVIEW Each party to a medical services arrangement and sublease, namely the appellant and sub-lessee [NAME] and the respondent/manager and [NAME], [COMPANY] ("[NAME]"), accuse the other of breaching and repudiating the contractual arrangements between them. Under the contract, as distinct from the sublease, [NAME] was obligated to carry on his general medical practice at the [COMPANY] operated by [NAME]. In return [NAME] was obligated to provide various facilities for [NAME]. [NAME] subleased to [NAME] an adjoining area to the [COMPANY], to enable [NAME] to carry on his practice of cosmetic medicine and surgery, specifically excluding general medicine. The contract and sublease were only partially interdependent. 3 The trial judge, [NAME], concluded in favour of [NAME] and awarded it damages, holding that [NAME] had repudiated the contractual arrangements. 4 By way of broad overview, the dispute centred around [NAME]'s exclusion of [NAME] from use of what was called a "Procedures Room". This had the consequence that [NAME] was for a period of several months unable in that room to carry out cosmetic medicine and surgery procedures under his sublease with consequent constraint on his capacity to carry out such procedures. That sublease was not as such of the Procedures Room but of an adjoining area. It adjoined a general practice area in which [NAME] also participated and in which the Procedures Room was located. However, the sublease nonetheless conferred access to what were termed "Shared Facilities" under the definitions in the sublease. These included the Procedures Room. Under clause 3 of the sublease, the [NAME] was permitted "at reasonable times on prior arrangement with the Sub Lessor to make use of the Shared Facilities". 5 The trial judge concluded that: (a) [NAME] had a discretion whether or not to make available the Procedures Room to [NAME] for his procedures, and (b) [NAME]'s being excluded by [NAME] from that Procedures Room was within [NAME]'s discretion, particularly as [NAME]'s use of the premises "was unreasonable"; [NAME], 24. 6 [NAME]'s unreasonableness was said by [NAME] and accepted by the trial judge as including that he had failed to provide sufficient information: (a) as to his professional indemnity cover for the procedures he was carrying out ([NAME], 19S), or (b) as to the nature of those procedures and in particular whether they were such as to require [NAME] to undertake what were said to be onerous obligations for obtaining a statutory licence under the Private Hospitals and Day Procedure Centres Act 1988 ("the Act") and Regulations. It also included what was said to be his "unreasonable use" of the Procedures Room, "when it was clear that his use was much greater than contemplated by his sublease" ([NAME], 19X to 20B). Finally, the trial judge concluded that "there was a real possibility that the defendant was in breach of the Day Procedure Centres Regulations" ([NAME], 25C). 7 [NAME] challenges those findings on this appeal. The issue of licensing turned on whether the procedures carried out in the Procedures Room by [NAME] would have rendered the [COMPANY] which housed the Procedures Room a "[COMPANY]" as defined in s3(1) of the Act and Regulation 3 of the Regulations. Relevantly, paragraph (a) of clause 3(2) of the Regulations defines the "prescribed treatment and circumstances" for the purposes of s3(1) of the Act as follows (inter alia): "(a) surgical treatment that involves the administration of a general, spinal, epidural or major regional block anaesthetic or intravenous sedative otherwise than for the purpose of simple sedation, …." 8 The relevant definition is as follows: "Simple sedation" is defined in cl 4(1) as "a technique in which the use of a drug or drugs produces a state of depression of the central nervous system enabling treatment to be carried out in such manner

(a) that verbal contact with the patient can be maintained throughout the period of sedation, and

(b) that the drugs and techniques used have a margin of safety wide enough to render unintended loss of consciousness unlikely." 9 At issue between the parties on this appeal is whether the relevant surgical treatment did indeed involve a "major regional block" or "intravenous sedative" otherwise than for the purpose of "simple sedation" (as those terms are defined in the legislation). 10 [NAME] challenges the relevance of these matters at a more fundamental level. As to insurance, the contention is that whether adequate professional indemnity insurance had been taken out by [NAME] was no business of [NAME]; there was no contractual entitlement to obtain that information, which in any event was given. 11 As to licensing, [NAME] contends that the procedures he contemplated carrying out were not such as to render the Procedures Room a [COMPANY]. But even if they did, [NAME] contends that the responsibility for obtaining the necessary licence fell not upon [NAME] as [NAME] but upon [NAME] as the entity in charge of the premises requiring to be licensed. [NAME] was expressly entitled under the sublease to "make use of the Shared Facilities", provided only that this was "at reasonable times on prior arrangement with the [NAME]". There was no other contractual constraint on his doing so, in his carrying out cosmetic medicine and surgery. 12 Finally, [NAME] challenges the trial judge's apparent finding (see Judgment at para 4) that it was not available to [NAME] to treat any breach by [NAME] (if such there were) in excluding him from the Procedures Room as constituting repudiation of the sublease, so as to permit [NAME] to have treated that as a repudiation of both sublease and contract so as to permit him to terminate them. This action was treated by the trial judge as itself (wrongful) repudiation by [NAME] of his sublease and contract which [NAME] properly accepted, being entitled so to do; that too is challenged on appeal by [NAME].

SALIENT FACTS 13 Set out below are the salient facts, which are largely uncontroversial save where indicated. One particular matter of dispute is, however, the precise characterisation of the procedures carried out in terms of the Act and Regulations requiring licensing for day treatment centres. I shall deal with that to the extent necessary under "Disposition" below. 14 [NAME] is a medical practitioner of considerable experience, who had conducted a general practice in the Liverpool area for a considerable period of time. As at 2000 he wished to expand the cosmetic medicine side of his practice. 15 [NAME] is a subsidiary of [COMPANY] ("[NAME]"), which owns and operates medical centres throughout Australia. [NAME] was the lessee of premises known as the [COMPANY], at 279 Macquarie St, Liverpool ("the [COMPANY]"). [NAME] was [NAME]'s Practice Manager. 16 On 18 October 2000, [NAME] entered into a Facilities and Services Contract ("the contract") with [NAME] together with a memorandum of sublease ("the sublease"), by which he essentially agreed to bring his practice, being both cosmetic surgery and general medicine, within the [COMPANY] operated and managed by [NAME]. 17 By the contract, [NAME] agreed to "practice general medicine at the [COMPANY]" (recital B) for a minimum number of hours, over successive years from September 2000, so carrying on his general medical practice at the [COMPANY]. [NAME] in turn agreed to provide to [NAME] "services" (defined to include not only administrative operations for [NAME]'s medical practice but, relevantly, "provision of premises and equipment at the [COMPANY] necessary for the Practitioner to operate his [general] medical practice from the [COMPANY]"); see cl 2.2, made an essential term by cl 6.4. There was a fee-sharing arrangement, by which [NAME] would essentially pay [NAME] fees (50% of all monies from the general medical reports and of all monies for letters and reports plus 25% for home visits, etc.), for providing the premises, facilities and administrative services; see cl 3. 18 By the sublease, [NAME] granted [NAME], for a term of 3 years from 1 September 2000 (a) exclusive possession of an area adjoining, and physically accessible to the [COMPANY] ("the Premises"); and (b) a shared usage of "shared facilities" at the [COMPANY], in the terms of cl 3 (quoted below with relevant cross-referenced definitions), which could be used only for cosmetic medicine and surgery, specifically excluding the practice of general medicine (cl.3, Appendix, Item3). "3. USE OF PREMISES

The Sub-Lessee must use the Premises only for the permitted use as set out in Item 3 of the Appendix.

The Sub Lessee may at reasonable times on prior arrangement with the Sub lessor make use of the Shared Facilities."

"' Shared Facilities ' means areas, rooms and equipment in the [COMPANY] designated by the Sub Lessor in its discretion from time to time as being available for use in common with other tenants and occupiers of the [COMPANY] including a Procedures Room, treatment room and restrooms."

"Item 3 – Permitted Use

Cosmetic medicine and surgery and specifically excludes the practice of general medicine." 19 The area adjoining [COMPANY] subleased to [NAME] was referred to by him in later correspondence (see, for example, Blue, 31 letter of 15 May 2001) as "the [COMPANY]". 20 In addition the sublease contains a cross-default clause, though only in rendering a breach of the contract a breach of the sublease and not vice versa. This is in the following terms: "

8. FACILITIES AND SERVICES CONTRACT

It is a condition of this Sub-Lease that at all times during the currency of this Sub-Lease the Sub-Lessee is bound by and is not in breach of a contract with the Sub-Lessor or its assignees for the provision of services by the Sub-lessor to the Sub-Lessee such services to be provided at the [COMPANY] (in premises adjoining the Premises) such agreement having been exhibited to the parties and initialled by them for identification purposes. A breach of such agreement is a breach of this Lease." 21 A floor plan of the [COMPANY] is contained at Blue, 139, indicating the Procedures Room, a treatment room with three individually curtained off beds and restrooms, plus the rooms occupied by [NAME], who conducted his practice there under the name of "[NAME]". 22 At the time the sublease was entered into, the Procedures Room was not yet operational. It became operational in about February 2001, shortly after the fit-out of [NAME]'s rooms was completed. It was directly accessible from [NAME]'s rooms. 23 It is [NAME]'s usage of the Procedures Room which ultimately became the subject of the dispute and termination of the contract between himself and [NAME]. This dispute materialised in the following sequence: (a) The Procedures Room contained an ECG machine, a bed and a "crash cart" for emergencies, and various other medical equipment. Between February and May 2001, [NAME] made use of the Procedures Room to perform a number of cosmetic medical procedures, because he considered his subleased areas did not contain sufficient facilities for that purpose; (b) [NAME] apparently formed the view that [NAME] was making an unreasonable use of the Procedures Room, which it conveyed orally to [NAME] by [NAME] an employee at the time of [COMPANY], during early May 2001 as well as having concerns about the level of professional indemnity cover held by [NAME] in relation to the cosmetic surgery carried out in the Procedures Room (affidavit of its general manager [NAME] at Blue, 141 para 5). It should be noted that the access was shared with 9 or 10 general practitioners practising as such in the [COMPANY]. There was no evidence from any of them complaining about [NAME]'s access. (c) By letter dated 3 May 2001 from [COMPANY] to [NAME] (Blue, 29), but probably sent 15 May 2001, the dispute crystallised in a denial of access to the Procedures Room "so long as there is no appropriate insurance cover in place". As the letter is of some importance in the sequence which follows, I quote the relevant part below: "[NAME],

Re: Use of procedure room and subtenancy at [COMPANY] .

Thank you for meeting with [NAME] and myself yesterday, to discuss the use of the Procedure Room at Liverpool.

I would like to identify the key issues, which were discussed and which we both agreed must be resolved as soon as possible.

You reported that you believe you have a verbal contract, negotiated with [NAME], which provides you with unrestricted use of the Procedure Room for the treatment of patients of [NAME]. In relation to these treatments, you acknowledge that there is no professional indemnity insurance in place, which would adequately cover the procedures performed. Further, you believe that [NAME] ([NAME]) is responsible for such insurance, for your cosmetic medicine patients treated in the Procedure Room.

You acknowledge that there is no registered lease, which allows you unrestricted use of the Procedure Room to treat [NAME] patients. We advised you that, so long as there is no appropriate insurance cover is in place, you may not use the Procedure Room.

The meeting discussed a number of paths for resolution. These included 1. Cessation of use of the Procedure Room together with suspension of lease payments, until the matter is resolved, which is not agreeable to [NAME].

2. We administer the terms of the lease, which means ceasing use of the Procedure Room 3. We negotiate with you, to allocate approximately 30 square metres of additional space for [NAME], on a sessional basis 4. We undertake to contact [NAME], to seek clarification of the arrangements, following which both parties would supply Statutory Declarations indicating the nature of the arrangement. This would allow us to formalise and document an acceptable agreement.

Please note that we have undertaken to contact [NAME] and this process has commenced, with an email sent to London on 14th May 2001. We await his response.

……

We look forward to resolution of these matters, which will involve a secure basis for operation of both [COMPANY] and [NAME]." (d) [NAME] responded, on, it appears, 15 May 2001, in the following terms (Blue, 31): "[NAME],

My use of the Procedure room does impinge on the daily function of the treatment room.

My reason for utilizing the procedure room is because that is what it has always been intended for. When I was negotiating a lease with [NAME] I agreed to take a smaller area for the [COMPANY] on the grounds that he built a procedure room that I could use along with the other doctors in the center, and that I had access to the rest of the facilities in the [COMPANY]. I do not have enough space in the [COMPANY] for the procedures that are currently done in the procedure room.

I do want [NAME] to continue to provide the facilities of a procedure room and feel that this would be best achieved by [NAME] building another room. The use of the procedure room is included in the rent I already pay.

During my negotiations with [NAME] we agreed not to directly compete. I would not practice General Medicine in the Cosmetic area and [NAME] would not have other Cosmetic Practitioners in the center. I am doing Laser Hair Removal and Australia Laser Clinic are doing Laser Hair Removal in the [COMPANY]. This is counter to our verbal agreement and I would like them moved out." (e) By letter dated 16 May 2001 from [NAME] to [NAME] (Blue, 32) [NAME] is denied access to the Procedures Room in the following terms: "[NAME],

Re: Use of Procedure Room and subtenancy at [COMPANY]

I am writing to advise that we have forwarded an email to [NAME] in an attempt to clarify the agreement relating to [COMPANY] and [NAME]. At this time we have not received a written reply.

I note that in our telephone conversation of today, you indicated that you do hold professional indemnity insurance related to these procedures. However, as we are unable to resolve the agreement relating to access and we are advised that we are not adequately covered for work performed by you, in our Procedure Room, I advise that you may not have access to the Procedure Room until these matters are resolved.

To facilitate, resolution I request that you supply to [NAME], proof of professional indemnity insurance which is appropriate for the level of services you wish to perform in the Procedure Room. In addition, I ask you to provide copies of your qualifications to perform these procedures, to ensure our records are complete.

Until these requirements are provided and we resolve the agreement, we cannot permit use of the Procedure Room for treatment of patients of [NAME].

As discussed in our meeting of Monday 14th May 2001, we must clarify the agreement for use of facilities. When this is done and dependant upon the requirements stated above, we would like to negotiate a sub-lease, which provides you with adequate resources to perform procedures in the space sub-leased by [NAME]." 24 From that date on, [NAME] was refused access to the Procedures Room at the [COMPANY], but was allowed to use the more restricted and less private treatment room (and restrooms). He made it clear that this alternative was inadequate and unsuitable for his purposes. 25 On 18 May 2001, [NAME]'s solicitor ([NAME]) wrote to [NAME], stating that [NAME] did not accept the restriction on his use of the Procedures Room and viewed this conduct as a continuing breach (or repudiation) of the contract (Blue, 33). I quote the letter below, so far as material: "We note the existence of an agreement with respect to the joint use of the Procedures Room (and various items of capital equipment used in conjunction therewith), which until recently had been the subject of a co-operative arrangement, is not in dispute. We note however you have recently found it necessary to obtain 'clarification' with respect to the contents of that agreement. We note also in the meantime that our client is to be unilaterally denied access to the Procedures Room . The same communication in which as much was advised then proceeds to discuss a commercial resolution that appears to involve offering to our client an expansion of his existing subleasing arrangements.

In these circumstances we have advised our client that it would be open to him to apply to the Supreme Court for injunctive relief to restrain a continuing breach of the parties' agreement with respect to the joint use of the Procedures Room , and in this regard our client notes among other matters that the actual layout of the premises and in particular the positioning of the Procedures Room between the two centres with provision for access from either [COMPANY] arose pursuant to the aforesaid agreement reflecting as it did the synergies which would arise from shared use.

In any event the foregoing also amounts to a fundamental repudiation of the agreements in place with respect to our client's occupation of the premises, and our client is accordingly entitled to accept the said repudiation and terminate his lease of the premises from which his business is conducted and seek compensation. In this regard we understand it is common ground that proper access to the Procedures Room is fundamental to the continuing smooth conduct of both practices. In this respect also we note our client has already commenced making enquiries concerning the leasing of alternative premises suitable for the conduct of his practice.

Without prejudice to the foregoing our client has indicated that an alternative resolution of the parties' disagreement might involve the establishment of a Procedures Room within the area already leased to our client and at the same time ending all arrangements with respect to the joint use of facilities and common areas, and in fact as much would be likely to lead to the sealing off of the premises presently demised to our client. As much could be effected by a registered variation to the parties' existing commercial sublease agreement and would necessitate a reduction in the rental payable thereunder reflecting the loss of access to facilities, which access our client would be required to forego. We are instructed that a reduction in the rental commensurate with the foregoing would be quantified as one third of the present sum payable.

While our client would prefer to reach a negotiated settlement of this matter the continuing and somewhat abrupt breach of the former arrangement with respect to the use of the Procedures Room is a cause of significant prejudice to the smooth operation of our client's practice, and accordingly it is necessary that he require a response to this letter forthwith, and in any event by 5.00pm on 21 May 2001, in default of which he will take such action in accordance with this letter as may be advised, and without further notice." 26 Further correspondence between the respective solicitors for [NAME] and [NAME] ([NAME]) followed during the course of June and July 2001, basically attempting to reach a mutually agreeable resolution to the dispute. In the course of that correspondence: (a) [NAME] provided a copy of his insurance Schedule (20 June 2001, Blue, 47) which was in respect of a period of insurance from 11 May 2001 to 28 July 2002 for $5 million and excluded " anaesthetics and obstetrics "; (b) [NAME] requested an indemnity from [NAME] in respect of the procedures he carried out in the Procedures Room (29 June 2001, Blue, 50); (c) [NAME] (16 July 2001, Blue, 51) raised concerns as to: (i) whether the policy was adequate, given it was issued on the basis that cosmetic procedures were only 30% of [NAME]'s practice; (ii) whether [NAME] was appropriately trained/qualified in cosmetic procedures; (iii) in procedures where anaesthetic (including intravenous) is administered, confirmation was sought that an anaesthetist was in attendance; (iv) whether the procedures carried out by [NAME] required licensing under the Private Hospitals and Day Procedures Act 1988, because [NAME] did not want to be exposed to a penalty for operating an unlicensed [COMPANY]; It appears from the correspondence and affidavit evidence that (ii), (iii) and (iv) were being raised for the first time. (d) on 17 July 2001 [NAME]'s solicitor replied (Blue, 53) proposing a without prejudice and informal settlement conference in lieu of formal response to the matters raised on 16 July 2001. This was agreed by [NAME]'s solicitors on 18 July 2001 (Blue, 54) and arrangements confirmed on 21 July 2001 (Blue, 55) for such a meeting to take place on 23 July 2001. 27 Ultimately, on 26 July 2001 (Blue, 56), [NAME], by his solicitors, gave notice of his election to accept [NAME]'s "fundamental breach of the leasing arrangements", and to terminate both the contract and the sublease, to take effect from 5pm the following day. He had by then been denied access to the Procedures Room for over ten weeks and had access only to the less than suitable treatment room for cosmetic surgery, so that [NAME] was forced to have space elsewhere, ad hoc, for cosmetic surgery. 28 On 30 July 2001, [NAME]'s solicitors replied denying that it had committed a fundamental breach of contract, and stating that it considered [NAME]'s notice of termination as a wrongful repudiation of both the contract and the sublease, which it elected to accept. 29 By subsequent letter, dated 6 August 2001, [NAME] also demanded arrears of rent ($13,750), and damages calculated pursuant to the liquidated damages cl 6.3 of the contract ($104,166.66). 30 By Ordinary Statement of Claim filed in the District Court on 5 September 2001, [NAME] commenced proceedings against [NAME] claiming damages for breach of contract and sublease, being: (a) $13,750 for arrears of rent and other monies owing under the sublease; (b) $104,166.66 pursuant to cl 6.3 of the contract; (c) loss and damage consequent upon the wrongful repudiation and termination of the lease (apparently based on loss of rent). 31 [NAME] denied the breaches of the agreements and alleged that [NAME] had committed a fundamental breach entitling him to terminate the agreements, effective on 27 July 2001. He also filed a Notice of Cross-Claim claiming loss of funds expended in fitting-out the rooms. 32 The matter came before [NAME] who upheld [NAME]'s claim and dismissed [NAME]'s cross-claim, and awarded damages to [NAME] in the sum of $287,471.81.

The judgment at first instance 33 I turn now to the judgment at first instance and shall attempt to summarise the key findings on credit, fact and law. Regrettably, the trial judge did little to enter into the issues, which were not without difficulty. What the trial judge did do was to set out in summary form the submissions of the plaintiff and the defendant and then under "Conclusion" he gave rather brief reasons for "adopt[ing] the submissions of the Plaintiff" ([NAME], 24). What was said by Sheller JA (with whom Beazley JA agreed) in Archibald v Byron Shire Council (2003) 129 LGERA 311 at 323 [54] sets out what should be done in a case such as this: "Where a dispute, such as this one, involves something in the nature of an intellectual exchange with reasons and analysis advanced on either side, the parties are entitled to have the judge enter into the issues canvassed before the court and to an explanation by the judge as to why the judge prefers one case over the other." 34 The trial judge's findings of credit were prefaced by the following paragraph under the heading "Credibility". "The credibility of the defendant was an issue. Although reliance was placed on affidavit evidence, testing by cross-examination of the witness took place. I had the advantage of observing the demeanour of the witness – an advantage not available to a Court of Appeal, - an advantage that permits the observer to note evasiveness in responding to difficult questions, or a hesitancy to reply to awkward probing, or when it is obvious a witness is able to answer frankly, because it is against his/her interest to do so." ([NAME], 19G) 35 There then followed the following favourable assessment of the plaintiff's/respondent's witnesses and the very unfavourable assessment of [NAME]/defendant, which I should quote in full: "To my mind, the Plaintiff's witnesses were frank and honest. [NAME] and [NAME] were frank and compelling witnesses; [NAME] and [NAME] were truthful and responsive.

The Defendant was less than frank, even evasive at times. He seemed to have a stubborn point of view that he was in the right. His self interest and the desire to vindicate his actions created a bias, that led me to conclude that he was more concerned with protecting his financial interests and medical reputation than being a frank, honest witness adhering to his oath to tell the whole truth.

He was less than honest in many of his answers to the type of procedure he was conducting in the Procedures Room, and, it seemed to me that he had not revealed the true position about his professional indemnity insurance. If from the start of his contract, he had appropriate cover, why not produce proof, rather than be asked for it many times, only then produce, on 20 June 2001, proof of adequate cover from 11 May 2001?

The evidence of the Defendant was not satisfactory and I reject it as incredible. Where his evidence conflicts with that of the Plaintiff's witnesses, I prefer the evidence of the Plaintiff against the Defendant.

The Defendant was not a witness doing his best to present the facts truthfully and candidly and without bias. He was evasive, always giving me the impression that he was stubbornly adhering to his point of view. He refused to consider any possible unreasonable use of the Procedures Room, when it was clear that his use was much greater than contemplated by his sub-lease. He acted in his own interests, without complying with the meaning of Shared Facilities.

His response to the legitimate concerns of the Plaintiff, was not a proper response. It demonstrated the evasiveness of the Defendant, which he showed in the witness box." [NAME] 19M to 20D 36 The earlier statement of the advantage that the trial judge has needs to be read with an important qualification, emphasised by the High Court in Fox v Percy (2003) 214 CLR 118 at 128 [omitting footnotes]: "However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings. 37 To this should be added what was said by McHugh J at 146-7: "[90] It is a serious mistake to think that anything said in [NAME] necessarily prevents an appellate court from reversing a trial judge's finding when it is based, expressly or inferentially, on demeanour. Those cases recognise — in accordance with a long line of authority — that it may be done. But there must be something that points decisively and not merely persuasively to error on the part of the trial judge in acting on his or her impressions of the witness or witnesses. Recently in State Rail Authority (NSW) v [COMPANY] (in liq), for example, this court held that undisputed and documentary evidence was so convincing that no reliance on the demeanour of witnesses could rebut it." 38 While I shall deal in more detail under "Disposition" with that evidence, I should point out at this juncture several matters which bear on the fairness of certain of the highly critical observations made by the trial judge concerning [NAME]. 39 The first matter is the observation that "if from the start of his contract, he had appropriate cover, why not produce proof, rather than be asked for it many times, only then to produce, on 20 June 2001, proof of adequate cover from 11 May 2001?" 40 The answer which [NAME] gives is first that it was no business of [NAME] to require him to provide evidence of insurance cover. There was nothing in the sublease requiring that it be provided. So far as the contract was concerned, while there was an insurance obligation, that insurance obligation in clause 5 related to the medical practice contemplated by that contract, namely "general medicine". It had nothing to say about cover for cosmetic medicine and surgery excluding the practice of general medicine, being the permitted use under the sublease. The complaint of the [COMPANY] was that there was no sufficient professional indemnity insurance for the cosmetic surgery to be done under the sublease. Quite simply, the sublease imposed no such requirement. Moreover, the trial judge in the end made no finding in relation to the adequacy of the insurance cover held by [NAME] for the relevant period, adverse or otherwise. Nor did he suggest any breach of clause 5 of the contract. 41 The second matter is that the trial judge makes no mention of the fact that the following passage of cross-examination indicated a good reason why [NAME] did not provide a certificate for his insurances prior to 11 May 2001. This was that he had been working as a general practitioner for [NAME] since about August 2000. Therefore in relation to the adequacy of that insurance cover at least, for the previous year [NAME] would either have satisfied themselves on his then insurance cover or waived the requirement; see [NAME], 92.45-93.12 and Appeal transcript of 14 March 2005 at 14-15. For convenience, I quote the transcript of evidence upon which the submission was made by [NAME] to which I have made reference and which was not disputed in argument on appeal: "Q. Was it not just as easy for you to produce a similar document that you ultimately did as contained in page 47? A. For what period?

Q. For the earlier period, before 11 May? A. No I didn't think – well they never asked me for it and I never spontaneously gave it, no.

Q. Well I want you to assume they did ask, well putting that one aside would it not have been just as easy for you to produce a document that showed that you were insured from August 2000 to 11 May 2001? A. I could have done that for them, yes. What they wanted was a current certificate.

Q. Well that's your perception of it, isn't it. Supposing that there was the other perception, for the purposes of the whole of your occupation they were wanting confirmation by a piece of paper showing that there was insurance in place by you in accordance with your contract? A. Well no, because I already worked for them prior to that date.

Q. Prior to August 2000? A. Yes.

Q. You produced a piece of insurance, document, for that period, to them? A. I don't think that I had produced insurance or registration documentation for them but basically I had been working for them for several years.

Q. In any event you are saying that from August 2000 to May 2001 you were insured? A. Yes." 42 Following that passage of cross-examination, further questions were asked which clarified that the policy was with the [NAME]. 43 It was unfair of the trial judge not to refer to this undisputed evidence, if he was to make the criticism he did. 44 The next matter is the trial judge's observations that "he refused to consider any possible unreasonable use of the Procedures Room, when it was clear that his use was much greater than contemplated by his sublease. He acted in his own interests, without complying with the meaning of Shared Facilities." 45 When one considers the terms of the sublease, the only reference to "reasonable" is in clause 3 where the reference is to use of the Shared Facilities "at reasonable times on prior arrangement with the sub-lessor".

I would conclude that reasonableness is therefore a matter of the times of usage rather than any other aspect of reasonableness, certainly so far as the actual terms of the clause are concerned. To suggest otherwise is to impute an implied term that the use had to be reasonable in some other undefined sense. There is nothing in the trial judge's reasoning, or in the evidence, that justifies the implication of such a term, in order to give business efficacy to the arrangements. 46 As to the times that [NAME] in fact used the Procedures Room, there is the following evidence from [NAME] (an employee of [NAME] or an affiliate): "In April 2001, during one of my visits to the [COMPANY], Dr [NAME], the Acting Medical Director of the [COMPANY] came to see me and told me certain things. Following my meeting with Dr [NAME], I met with [NAME] at the [COMPANY] and we had a conversation, which included words to the following effect:

Myself: '[NAME], I have been informed that your use of the Procedures Room has been fairly heavy. I understand that you have been requiring exclusive use of the area for periods of up to 4 hours at a time. This is impinging on the use of the Procedures Room by the other doctors in the [COMPANY]. The arrangement is that you are to have reasonable access of the Procedures Room and the treatment room by prior arrangement with the [COMPANY].'

[NAME]: 'I need the Procedures Room. I do let them know when I will be using the room.'

Myself: 'Please consider the needs of the doctors. I understand your agreement was reasonable use. Is 4 hours reasonable?'." 47 Apart from the contractual position, which, as I have said, was based upon reasonableness only in relation to times of use, [NAME]'s evidence in his affidavit of 6 September 2002 explains why he chose to use the shared Procedures Room for Cosmetic Medicine procedures of a surgical character: "18. I commenced my practice of Cosmetic Medicine in the leased area in or about February 2001. I conducted the practice under the name [NAME].

19. In my cosmetic practice I offer and perform a number of procedures including liposuction, breast enhancement, botox treatment and laser removal. The procedures can take from 30 minutes to several hours.

20. At the premises there was a shared procedure room which I used for procedures on my patients. I did not have the facilities in my leased area for performing procedures. The Procedures Room is a sterile area with a bed, room to work and the various equipment and facilities that I needed to conduct cosmetic procedures. The room was also private so that I could treat my patients without interruption.

21. I conducted several procedures in the procedure room from February 2001 to May 2001." 48 In that same affidavit he describes the communication from [NAME] that he was not to use the Procedures Room, so that, still needing to perform procedures on patients he had earlier booked for his use, he "used a Procedures Room at a medical practice at Cabramatta for the procedures" (Blue, 155 para 24 of the affidavit). 49 Earlier he refers to discussions with [NAME], a representative of [NAME] in relation to the use of the Procedures Room. This was to allow him to conduct Cosmetic Procedures, describing it as "essential to my practice of cosmetic medicine that I had access to a Procedures Room. If I did not have reasonable access to a Procedures Room I would have made other arrangements for my practice of cosmetic medicine." His difficulty using the treatment room was its restricted space, lack of suitability for surgery and lack of privacy. 50 Finally, reviewing the letters that passed, to which I have made earlier reference, at no point does [NAME] either directly or through its solicitors, give as a reason for exclusion, unreasonable use of the premises in the only sense identified by the clause, namely requirement that the use be "at reasonable times on prior arrangement". Given the terms of those letters, if there were a genuine concern about the question of reasonable times, one would have expected to see that complaint made, since other complaints were certainly enumerated. There is no suggestion in the evidence that this was a case of new information as to unreasonable use only belatedly coming to the notice of [NAME]. 51 Moreover, insofar as the trial judge puts these kind of matters against [NAME] in a context of being "evasive" and "always giving me the impression that he was stubbornly adhering to his point of view", that needs to be considered by reference to the proper interpretation of the contractual arrangements. If it be the case that the trial judge's interpretation of those arrangements was in error, such criticism would be unfair insofar as [NAME]'s point of view, stubbornly adhered to or not, coincided with the proper interpretation of the clause. 52 For the reasons elaborated under "Disposition", I consider, with respect, that the clause was not correctly interpreted by the trial judge. He construed the clause as conferring on the [NAME] the discretion to permit or exclude [NAME] from the Shared Facilities and in particular the Procedures Room, rather than a contractual right on [NAME]'s part conditioned only on (a) an exercise of discretion to designate each relevant area as available for use, once construction of the [COMPANY] was completed with scope " from time to time " to re-designate areas , but not so as to exclude just [NAME] or some particular doctor, and (b) his use thereafter being at reasonable times, on prior arrangement with the [NAME]. 53 In my opinion, the sublease did give [NAME] more than merely the opportunity to invoke a discretion on the part of the [NAME]. It actually conferred a contractual right on [NAME], conditioned only on (a) and (b) above, to use the previously designated Shared Facilities, and thus the Procedures Room. There is nothing in the sublease otherwise to limit him doing so as regards the procedures he there chose to carry out, whether in respect of cosmetic surgery or indeed general practice. The opening part of clause 3 restricts his use of "the Premises" to "the Permitted Use". The Shared Facilities adjoin and are linked to the Premises but are not part of them. He was using the Procedures Room as part of the Shared Facilities and as an adjunct to his "Permitted Use" of the subleased area. This was in order to carry out his cosmetic practice including cosmetic surgery. That was his entitlement He was in no way constrained from doing so by either the contract or the sublease. 54 Accordingly, it should be accepted that the correct interpretation was that [NAME] had a contractual right of access to use the Shared Facilities, so designated as to area, and was entitled to use it for his cosmetic practice without further constraint. The Shared Facilities have not ceased to be so designated. His access was never merely discretionary access. It was a right of access subject only to prior arrangement in relation to reasonable times and with any discretion being limited to designation of, in the first instance, the area for a Procedures Room, treatment room, and restrooms, within the [COMPANY] once its construction was completed. It is highly relevant that construction was only completed by February 2001, while the sublease was signed with an earlier commencing date of 1 September 2000. 55 With that background, the stated reason for excluding [NAME] by reason of the perceived lack of information concerning adequacy of his insurance cover or the possible requirement for a licence under the Act and Regulations could not provide a basis for denying his right of access. This is more especially when that access was denied for all use by him, not merely use that might potentially bring about the licensing obligation. That contractual interpretation places the criticism of [NAME] by the trial judge in a very different light. From his viewpoint, entirely justified at law, he was being wrongly denied his contractual right, despite his attempts to find a solution. 56 I will return now to the findings of fact as identified in the judgment and summarise these below: 57 The contract required [NAME] to provide accommodation and services to [NAME] at the premises to allow him to concentrate on the provision of medical services at the [COMPANY]: [NAME], 15V. 58 [NAME] conducted both a General Practice and Cosmetic Medicine and Surgery. The latter included procedures requiring sedation by anaesthesia: [NAME], 16W-X. 59 There was cross-examination as to whether [NAME]'s procedures might breach the Act and Regulations. [NAME] denied that the use of hypnoval (valium) amounted to other than "simple sedation", so falling outside the requirements of a "[COMPANY]" within the Regulations; [NAME], 17B-N. A registered nurse employed by the [COMPANY], [NAME], said her opinion was that the patients were unrousable. That bore on whether "prescribed treatment" for purposes of cl 3(2) of the Regulations was being carried on as would require a licence, because the use of hypnoval took the technique out of the category of "simple sedation" within the meaning of that term in cl 4 of the Regulations. 60 There was also cross-examination as to whether [NAME]'s spinal block injections were in breach of Pt 3 of the Regulation and in particular cl 5, but [NAME] claimed his procedures were not a "major field block" within the terms of that legislation: [NAME], 17Q-W. 61 [NAME] sent letters expressing what the trial judge described as a "legitimate concern" as to [NAME]'s insurance cover: [NAME], 18A-K. I have earlier concluded that there was no contractual basis for such enquiry. 62 The trial judge concluded that it was clear that [NAME]'s use was much greater than that contemplated by the Sub-Lease, and he acted in his own interests without complying with the meaning of the shared facilities: [NAME], 19X-20B. He does not, with respect, point to the evidence needed to justify that conclusion. There was no evidence justifying that conclusion in so unqualified a form. [NAME]'s evidence was that she questioned whether exclusive use four hours at a time was reasonable, that it was heavy and impinged on use by other doctors in the [COMPANY]. She concluded with the request "Please consider the needs of the doctors, I understand your agreement was reasonable. Is 4 hours reasonable?" That evidence was no sufficient basis for concluding that "He refused to consider any possible unreasonable use of the Procedures Room, when it was clear his use was much greater than contemplated by his sublease. He acted in his own interests without complying with the meaning of Shared Facilities" ([NAME], 19X-20B). 63 I turn finally to the trial judge's findings of law. They are to be derived principally from the trial judge's conclusion that "I adopt the submissions of the plaintiff" which followed an earlier summation of the "submissions on behalf of the plaintiff" and "defence submissions". 64 That broad statement of adoption of the submissions of [NAME] was followed by the elaboration quoted below: "The Procedures Room was only a part of the area covered by the sub-lease. The Defendant was entitled to its use at reasonable times, yet his use of it was unreasonable. He was not entitled to repudiate the lease and the contract. That wrongful repudiation was properly accepted by the Plaintiff, which it was entitled to do, in applying the ordinary laws of contract.

There was a genuine concern in the Plaintiff's mind about the use of the procedure room. Further there was a genuine concern about the extent of professional indemnity insurance. There was a real possibility that the Defendant was in breach of the Day Procedure Regulations. It is not to the point that this possible breach was raised at the hearing. The use of the procedure room by the Defendant, was clearly raised in 2001, and required the Defendant to give appropriate attention to the matters raised.

The repudiation by the Defendant of the sub-lease was inappropriate. The Plaintiff was entitled to repudiate, and to seek damages for the Defendant's breach." [NAME], 24-5. 65 The earlier submissions on behalf of [NAME] which were expressly adopted by the trial judge ([NAME], 24V), are summarised below: (a) the area in question was to be shared by [NAME] with other doctors, and it was used by him between two and five hours, one day per week; [NAME], 20H; (b) [NAME] was entitled to access at reasonable times by clause 3 of the sublease and then, subject to the unfettered discretion of the [NAME]; (c) there was no breach by [NAME]; "by the conduct of the defendant, and the power given in the lease the plaintiff was entitled to exclude the defendant, certainly while he consistently continued to breach the reasonable use of the room" ([NAME], 20J); (d) but even if that were not accepted, [NAME]'s exclusion amounted only to a minor breach, not entitling [NAME] to repudiate the lease and the contract, it being only one aspect of the rights of [NAME] under the lease ([NAME], 20L); (e) [NAME] was entitled to exercise its discretion: (i) because it was not satisfied that [NAME] had resolved the doubt about his insurance cover being adequate; and (ii) the insurance schedule given on 20 June 2001 does not appear to cover the types of procedures that [NAME] was performing; and (iii) it was satisfied that [NAME] was apparently carrying on Day Procedures without being licensed ([NAME], 20Q). (f) By letter 17th July 2001, [NAME] did not give satisfactory response to those legitimate concerns. Thereafter, as there was no satisfactory answers, it was inappropriate for [NAME] to repudiate the sub-lease and the contract. It would have been more appropriate for [NAME] to satisfy the concerns of [NAME] by not continuing those procedures involving use of anaesthesia or breaches of legislation and by ensuring that he had adequate cover for professional indemnity ([NAME], 20V). (g) Further there was no repudiation of the contract of [NAME]. [NAME] has not established that access to the Procedures Room, denied to him between May and July 2001, was fundamental to his performance of his general practice under the contract ([NAME], 21B). (h) He could carry out his practice, if not in the Procedures Room, then in the treatment room ([NAME], 21D). (i) Hence there was no fundamental breach of contract, no denial of access to rooms where he could carry on his practice ([NAME], 21F). (j) In any event, [NAME] cannot terminate the contract, when he himself is in breach; [NAME] was in breach of his obligation to insure under the contract; because he was using Hypnoval and performing general block procedures for breast implants ([NAME], 21I). (k) [NAME]'s repudiation of the contract was of an anticipatory nature, confirming that he was not bound, and would not comply; [NAME] then wrote on 30th July pointing out that [NAME] was acting wrongfully under the contract, and accepted [NAME]'s repudiation ([NAME], 21L).

DISPSOSITION 66 The issues raised by this appeal ultimately turn on the correct interpretation of the sublease and in particular clause 3 and the definition of "shared facilities" in clause 1. For reasons which I now elaborate, I have earlier concluded that [NAME] as [NAME] had the contractual right to make use of the shared facilities and therefore a right of access to the Procedures Room, once the relevant areas of Procedures Room, treatment room and restrooms, along with the relevant equipment were designated by the [NAME]. This occurred in February 2001, the lease having been signed with a commencing date several months earlier for 1 September 2000. 67 The language of clause 3 of the sublease is clear enough; "the Sub Lessee may … make use of the Shared Facilities". Neither the qualifying words "at reasonable times" nor the definition of Shared Facilities detract from this constituting a contractual right according to the plain language of the clause. It is fallacious to regard the right as in truth not a right at all but as dependent upon the favourable exercise of a discretion in favour of the [NAME] so that the availability of the Procedures Room was entirely dependent upon the continued willingness of [NAME] to make it available. It is likewise wrong to extend the concept of reasonable use beyond the requirement of use "at reasonable times on prior arrangement with the [NAME]". 68 If one invokes the interpretative approach of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896, quoted with approval by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181; (2001) 76 ALJR 246 at 258 [11], one asks this question. What would "a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract "have understood by the reference to "discretion" in the definition of "Shared Facilities"? The answer is clear. The relevant background knowledge was that the [COMPANY] had not been completed at the time the lease was entered into so that the designation which was required in the discretion of the lessor related to the particular location of the Procedures Room, treatment room and restrooms. No doubt it might also have encompassed the equipment to be included therein, though that location would be within the bounds of the [COMPANY] itself. But once the relevant areas were so designated, as had occurred by May 2001, the discretion had been exercised. Re-designation from time to time, as I have said, may re-shape the relevant areas, but cannot apply so as to exclude a particular doctor. 69 When one turns to clause 3 itself, it is true that a "prior arrangement with the sub-lessor" is necessary for the [NAME] to avail itself of his right at reasonable times to make use of the shared facilities. However, that means no more than the need to ensure that the envisaged shared usage could be co-ordinated. The trial judge held that the use by [NAME] was between two to five hours per week. While the trial judge found that his use of the Procedures Room was unreasonable, it is clear that this was on the premise that use was subject to the "unfettered discretion of the [NAME]" ([NAME], 20H) and that premise, with respect, was incorrect. I have earlier referred to the evidence at Blue, 146 that [NAME] informed [NAME] "I have been informed that your use of the Procedures Room has been fairly heavy" being "up to four hours at a time". Her evidence does not go so far as to indicate that he was using the Procedures Room without first letting the [COMPANY] know. In fact she quoted him as saying to the contrary that he did "let them know when I will be using the room". None of this, however, can possibly justify a denial of use of the Procedures Room altogether as occurred here, based on some supposed discretion in relation to reasonable use. And, as I have said, there was no suggestion that any complaint was formalised in the various letters that enumerated other complaints as to the level of [NAME]'s usage. 70 The reasons given for denial of that use were enumerated in the correspondence to which I have earlier made reference. The initial reason was a failure to supply information regarding professional indemnity insurance. Then, when it was supplied, there was complaint about the extent of the cover. The short and correct answer to that purported basis for denial of use is that there was no provision in the sublease requiring insurance. Nor has it been established that there was any breach of the contract with its more limited obligation to insure under clause 5 in relation to the general practice carried out by [NAME]. 71 Even if it be the case that [NAME]'s insurance cover were insufficient, being $5 million for the kind of cosmetic surgery he was carrying out, there is simply no warrant under the sublease either read on its own or with clause 5 of the contract for denial of access to the Procedures Room on such a basis. That disposes of this basis for denial of access, as well as any argument based upon a failure to give sufficient information. As to the latter, I consider that it is clear on the evidence that [NAME] did give sufficient information regarding the insurance cover he had taken out. I would accept [NAME]'s submission that the [COMPANY] must have been aware of the insurance cover he had prior to 7 May 2001. 72 The next stated reason was a failure on [NAME]'s part to respond to whether he was appropriately trained or qualified in cosmetic procedures to carry out the kind of procedures that he was carrying out. Insofar as that pertained to insurance it afforded no basis for excluding access. Insofar as that question concerned his competence on any other basis, such as whether a particular licence was required to be carried out under the Act, the short answer is that [NAME] should have made those enquiries before it entered into the sublease. The sublease provides no warrant for such an enquiry and indeed pre-supposed satisfaction on the [NAME]'s part. 73 The belated and final reason for denying access was a concern that the procedures carried out by [NAME] required licensing under the Act and Regulations. The argument advanced by [NAME] is that it did not want to be exposed to a penalty for operating an unlicensed [COMPANY]. 74 That argument was put in various forms including that even if a licence might not have been required, [NAME] was entirely justified in withholding access to the Procedures Room until such time as it could be satisfied that the procedures carried out did or did not require licence and [NAME] failed to provide that information. 75 There are a number of difficulties with those submissions. 76 It is clearly the case that the sub-licence made no mention of any requirement to provide such information. The right of access was in no way qualified by a requirement that it be contingent upon [NAME] not requiring to have a licence. Nor was the sublease expressed to be contingent upon [NAME] being afforded such information about the nature of the practice carried on as would enable [NAME] to determine whether or not it required a licence. While an analysis of the regulations indicates that the requirements are not limited to simply paying an annual fee of $690 (Regulation 7(b)), but include various matters going to licensing standards, it was not shown that those licensing standards were so onerous as to make obtaining a licence unfeasible, were one required. 77 The argument pressed by [NAME] was, explicitly, not that an implied term should be added to the sublease to give it business efficacy so as to require such information to be given by the [NAME] or to permit the [NAME] to deny access should a licence be required. Rather the matter was put on the sole basis that the clause conferred a discretion to deny access on that or other grounds, a submission which I have earlier concluded cannot be sustained. 78 Thus while one may accept that the licensing standards included the provision of a suitable maintenance programme for various items of equipment, and the requirement that there be such items of equipment (see Part 2 of the Regulations), and while there are significant clinical standards with associated staffing and operational matters under Parts 4 and 5, [NAME] could have obtained a licence if it were of the view that such a licence was or might be required. It certainly was not in a position to compel the [NAME], to do so on pain of losing access to the Procedures Room. I should add that the access that was denied was in any event not limited to procedures that might have required such a licence. That ostensible reason could not have justified total denial of access as occurred here. 79 Accordingly, it would not matter whether a licence was or was not required so far as the unavailability of this basis for denying access was concerned. It is therefore unnecessary for me to consider the question whether, in terms of cl 3(1) of the Regulations, the kind of procedures that were carried out by [NAME] involved a "a major regional block" or "intravenous sedative otherwise than for the purposes of simple sedation". This is so as in either case to constitute "the prescribed treatment" as would give rise to the licensing obligation for a [COMPANY]. Suffice it to say that the evidence on these matters was not such as to reach a concluded view one way or the other. There was some suggestion that a local anaesthetic which blocked pain to the thoracic region might constitute a "major regional block". Likewise there was some evidence that patients could not be roused (see the evidence of the nurse at the [COMPANY], [NAME], in her affidavit of 3 October 2003 at Blue, 148 and following). However, as I have said that need not be resolved in order to conclude, as I do, that there was no basis for denying access even had the procedures that [NAME] carried out required a licence. 80 Indeed in stipulating for a Permitted Use as the sublease did, cosmetic surgery was the very kind of practice (as distinct from the excluded practice of general medicine) that was likely to require such a licence. The sublease not only lays down no preclusion of such activity as was likely to require a licence but expressly contemplates that activity. 81 Once it be concluded that [NAME] was not in breach of the sublease, his actions in protesting at the demands made upon him with regard to insurance and information about the procedures he was carrying out take on an entirely different complexion. He was not in breach of the sublease nor has it been shown that he was in breach of the contract. However, to deny him access to the Procedures Room was a clear breach by [NAME] as [NAME], of the right of access that [NAME] enjoyed under the sublease. 82 Moreover, as the evidence demonstrated, he had 30% of his practice consisting of cosmetic surgery requiring access to the Procedures Room. Such a breach removing his capacity to carrying it on conveniently next door was in my opinion clearly fundamental. It went to an essential matter under the contract of sublease. He had paid rent based upon that access. It was entirely unreasonable for [NAME] to invite [NAME] to set up a Procedures Room in his subleased premises, with no reduction in rent for the privilege, quite apart from whether his premises would have been sufficient in size to enable this to be done. 83 Finally, there is the subsidiary question whether [NAME] as [NAME] would have been the party required to take out a licence, were the premises to require one; see s37. The requirement to take out a licence falls under the legislation upon the person intending to "carry on the business of" the establishment. That may mean either that the licence should be taken out by [NAME], or [NAME] in conjunction with [NAME]. Either way, the most that one can derive from that fact is that ultimately there would have needed to have been co-operation between [NAME] and the [COMPANY] so as to enable a decision to be made as to whether a licence was required and to proceed with obtaining the licence. However, there was never any indication from [NAME] that it would have permitted the Procedures Room to be used for procedures that required such a licence. No attempt was therefore made to secure such co-operation. Instead, [NAME] asserted, without legal [NAME], the right to deny access to [NAME], on the false premise that [NAME]'s access depended on a favourable exercise of [NAME]'s discretion, either absolute or qualified. 84 I also agree with [NAME]'s submissions that the repudiatory conduct around 15 or 16 May 2001 was in no way connected with any perceived licensing considerations but rather by concern on [NAME]'s part as to its own insurance position. The licensing issue was a justification raised well after the repudiation such that the repudiatory intent emerged in mid-May 2001 and was not ex post facto justified by recourse to a perceived concern about licensing. 85 It follows from the conclusion that [NAME] had breached the sublease in denying access and that the breach was a fundamental one, that [NAME] was entitled, as he did, to treat the breach as a repudiation of the sublease. In those circumstances he was entitled to take the course he did of electing to treat the sublease as at an end and to obtain damages in consequence. 86 I should here deal with the question of whether there was any entitlement to terminate the contract which had not been itself breached. In my view the contract and the sublease were mutually dependent in the sense that breach of the contract was a breach of the sublease, though not in terms vice versa. Here, however, the two arrangements were so closely connected that the actions of [NAME] in denying access to the Procedures Room, including for the purpose of any general practice carried out in the Procedures Room by [NAME], suffice to entitle [NAME] to terminate the contract as well, once its substratum was removed by terminating the sublease.

Damages 87 Clearly the damages awarded to [NAME] in the sum of $287,471.81 cannot stand. No damages should be awarded in favour of [NAME] as respondent. However, there remains the question of what damages should be awarded to [NAME]. 88 [NAME] proposed orders whereby judgment for [NAME] should be awarded on [NAME]'s cross-claim and there should be a direction to the parties "to attempt to agree on quantum or failing agreement, to attend a mediation to determine the quantum of the cross-claim". Alternatively, the matter may be remitted to the District Court for damages to be determined. 89 In all the circumstances, I propose orders as follows (noting that it is open to the District Court if it so chose, to order mediation under s164A of the District Court Act 1973 (NSW)): (1) Appeal allowed. (2) Set aside the verdict and judgment in favour of the respondent, made by [NAME] on 30 January 2004, and in lieu thereof direct that judgment be entered for appellant on the claim and the cross-claim. (3) Remit the cross-claim to the District Court for the assessment of damages. (4) Order the security to be returned to [NAME] forthwith. (5) The respondent to make restitution of all damages paid by [NAME] to it pursuant to the verdict of [NAME]. (6) The respondent to pay the costs of the appeal and of the proceedings before [NAME].

90 [NAME]: I agree with Santow JA. **********

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