FEDERAL COURT OF AUSTRALIA Idoshore Pty Limited v IPN Medical Centres (NSW) Pty Limited [2007] FCA 1175 TRADE PRACTICES – misleading and deceptive conduct – representations and warranties collateral to written contract purportedly concerning future matters CONTRACT – sale of business – interpretation of complex written contractual arrangements settled between legal representatives of vendor and purchaser of business – whether the contract by implication excluded oral representations and warranties made antecedently to or collaterally with formation of written contract – meaning and operation of principal contract relating to disputed increase in price based on first year's financial results of business – operation of subsequent written variation to contract of sale – directions concerning assessment of damages Trade Practices Act 1974 (Cth) ss 51A, 52, 82 Federal Court of Australia Act 1976 (Cth) Jones v Dunkel (1959) 101 CLR 298 cited McRae v Commonwealth Disposals Commission (1951)84 CLR 377 cited James v Australia And New Zealand Banking Group Ltd (1986) 64 ALR 347 referred to Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 referred to Gullett v Gardner (1948) 22 ALJ 151 referred to Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 referred to IDOSHORE PTY LIMITED v IPN MEDICAL CENTRES (NSW) PTY LIMITED, IPN HEALTHCARE PTY LIMITED NSD 1510 OF 2004 CONTI J 7 AUGUST 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1510 OF 2004 BETWEEN: IDOSHORE PTY LIMITED Applicant/Cross-Respondent AND: IPN MEDICAL CENTRES (NSW) PTY LIMITED (formerly Foundation Medical Centres (NSW) Pty Limited) First Respondent/First Cross-Claimant IPN HEALTHCARE PTY LIMITED (formerly Foundation Healthcare Pty Limited) Second Respondent/Second Cross-Claimant JUDGE: CONTI J DATE OF ORDER: 7 AUGUST 2007 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. Upon the true construction of the Business Sale & Purchase Agreement bearing date 14 December 2000 made between the parties to the proceedings and in the events which subsequently happened, the respondents are severally liable to pay to the applicant an adjustment upwards to the purchase price pursuant to sub-clause 3.3(a) of that Agreement to the extent appearing in the reasons for judgment of the Court. THE COURT ORDERS THAT: 1. The applicant provide to the Court by no later than 2 pm on Friday 10 August 2007 such written calculations (inclusive of dates of computation and accompanying explanations) as are required to give effect to the foregoing declaratory relief. 2. The respondents and each of them pay to the applicant the respective sums of $85,000 and $125,000 the subject of the application. 3. Each of those amounts bear interest at such rate and computed respectively from such date or dates (as the case may be) as may be determined by the Court after receipt of written submissions to be provided by the respective parties in relation thereto by no later than 2 pm on Friday 10 August 2007. 4. The respondents' cross-claim be dismissed. 5. Each of the parties furnish to the Court written submissions as to costs of the proceedings to be provided by no later than 2 pm on Friday 10 August 2007. 6. There be liberty to either party to apply on one day's notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1510 OF 2004 BETWEEN: IDOSHORE PTY LIMITED Applicant/Cross-Respondent AND: IPN MEDICAL CENTRES (NSW) PTY LIMITED (formerly Foundation Medical Centres (NSW) Pty Limited) First Respondent/First Cross-Claimant IPN HEALTHCARE PTY LIMITED (formerly Foundation Healthcare Pty Limited) Second Respondent/Second Cross-Claimant JUDGE: CONTI J DATE: 7 august 2007 PLACE: SYDNEY INDEX Context to the proceedings including the sale of medical centre assets from the applicant to the first respondent – an outline of the pleadings and of the issues arising....................................................................... [1] Idoshore's acquisition in 1995 of the subject Oxford Square Medical Centre operations and its subsequent expansion of those operations................................................................................................. [5] The amalgamation in 1999 of the operation of the Oxford Square Medical Centre conducted by Idoshore with the Kings Cross medical practices operated by Dr Grech............................................................ [14] Negotiations to sell the Oxford Square Medical Centre structure and operations undertaken by Idoshore as prospective vendor with Foundation as prospective purchaser – finalisation of Heads of Agreement between Idoshore and Foundation...................................................................................................... [19] Securing the Facilities and Services Contracts between Idoshore and certain medical practitioners including Dr Fox – Finalisation of the Business Sale & Purchase Agreement between Idoshore as vendor and the Foundation companies respectively as purchaser and guarantor............................................................... [31] Material provisions of the Business Sale & Purchase Agreement made between Idoshore as so-called 'Vendor' of the first part, Foundation Medical of the second part and Foundation Healthcare of the third part (except to the extent already extracted or summarised)................................................................................ [35] The case presented by Idoshore based on the operation of the Business Sale & Purchase Agreement in the light of the events which happened in the course of the same being purportedly carried into effect by the parties [39] Events subsequent to completion of the Business Sale & Purchase Agreement –adjustments to EBITDA circumstances and calculations made post-acquisition at the instance of Foundation – submissions of Idoshore concerning significance as to fall in revenues subsequent to Foundation's takeover of operation of the Oxford Square Medical Centre......................................................................................................... [54] Implications to Idoshore's case concerning Foundation's 'key man' payment made to Dr Fox subsequent to completion of the Business Sale & Purchase Agreement........................................................ [80] EBITDA calculations submitted by Idoshore for the purpose of computation of moneys payable by Foundation to Idoshore pursuant to the purchase price adjustment provisions of clause 3.3(a) of the Business Sale & Purchase Agreement........................................................................................................................... [88] Idoshore's claims to damages consequential upon Foundation's conduct complained of relating to Dr Grech's departure............................................................................................................................. [93] Methods of assessing the quantum of damages claimed by Idoshore.................................... [104] Interest on moneys claimed by Idoshore.............................................................................. [106] Foundation's submissions in response to Idoshore's case for misrepresentation and breach of warranty collateral to the formation of the Business Sale & Purchase Agreement................................................... [108] Idoshore's submissions in reply and the Court's preliminary observations on the issues arising from the respective submissions of the parties.................................................................................................... [142] Summary of the proceedings and my conclusions upon the issues addressed by the parties following conclusion of the evidence....................................................................................................................... [151] Foundation's cross-claim against Idoshore.......................................................................... [168] IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1510 OF 2004 BETWEEN: IDOSHORE PTY LIMITED Applicant/Cross-Respondent AND: IPN MEDICAL CENTRES (NSW) PTY LIMITED (formerly Foundation Medical Centres (NSW) Pty Limited) First Respondent/First Cross-Claimant IPN HEALTHCARE PTY LIMITED (formerly Foundation Healthcare Pty Limited) Second Respondent/Second Cross-Claimant JUDGE: CONTI J DATE: 7 AUGUST 2007 PLACE: SYDNEY REASONS FOR JUDGMENT Context to the proceedings including the sale of medical centre assets from the applicant to the first respondent – an outline of the pleadings and of the issues arising 1 These proceedings were commenced on 18 October 2004 by application and statement of claim filed by Idoshore Pty Limited ('Idoshore') against each of the respondents, being related companies of the Foundation corporate group effectively controlled in the context of the same ultimate corporate ownership. The context was the leasehold estate of a city building in Sydney and medical practices conducted in different rooms located in that building. The causes of action pleaded in chief were based principally upon and otherwise related to a comprehensive agreement in writing styled Business Sale & Purchase Agreement ('the Agreement') bearing date 14 December 2000, to which the parties to the proceedings were solely privy, concerning the sale to the first respondent Foundation company, then named Foundation Medical Centres (NSW) Pty Limited, of the medical centre business conducted by the applicant, Idoshore. The business involved the provision of facilities and services to medical practitioners for the conduct of their respective professional practices in consultation rooms located within that city building. The second respondent company, then named Foundation Healthcare Limited (at the time of the Agreement a public company), was a party to that Agreement as guarantor of the first respondent's obligations under that Agreement. The cross-claim involved an issue also purportedly arising under the Agreement for monetary claims made by Foundation against Idoshore. 2 By an originating application, Idoshore made the following claims: (i) damages pursuant to sections 82 and/or 87 of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act') for losses suffered as a result of its detrimental reliance on misleading and deceptive conduct of the first and second Foundation respondents by way of representations collateral to the formation of the Agreement; (ii) further or in the alternative, damages as a result of certain breaches of the Agreement by the first and second respondents; and (iii) repayment of a sum of $85,000, being the balance of the deposit paid by Foundation to Idoshore pursuant to the Agreement, which was released by Idoshore by way of loan to the first Foundation respondent pursuant to a Deed of Variation made in relation to the Agreement, the repayment of which the second respondent guaranteed, and which in breach of the Agreement and the Deed of Variation was not repaid on the due date, nor since has been repaid, by the first respondent and/or second respondent. By a comprehensively amended statement of claim later filed on 21 March 2006, claim was made by Idoshore for the additional sum of $125,000 relating to what may be described as the Dr Fox issue. A number of matters pleaded by the amended statement of claim, inclusive of certain of the alleged representations collateral to the formation of the Agreement and of certain alleged implied terms, were not ultimately pursued. 3 The circumstances of the case are complex, as is evident from the pleadings as subsequently amended, and also from the comprehensive written submissions provided by counsel to the Court. A defence to the amended statement of claim and an amended cross-claim were filed by the respondents on 27 April 2006. An amended defence to that amended statement of claim and the amended cross-claim were subsequently filed on 12 March 2007 by the respondents, being the first day of what was in excess of a four day final hearing conducted upon the basis of the tender of the affidavit evidence in the first instance, followed by oral evidence. Issues principally raised by the time of filing of the amended defence and amended cross-claim, additionally to joinder of issue upon the material averments of the amended statement of claim, were first, that the representations and the collateral warranties pleaded were not promissory in nature nor otherwise went to the root of the contract, secondly were not representations as to future matters within section 51A of the Trade Practices Act, and thirdly involved representations which the Foundation respondents had reasonable grounds for making. The amended cross-claim of the Foundation respondents sought remedies by way of damages from Idoshore for breach of certain warranties and/or conditions. The change to the present names of both respondent companies, whereby there was substituted the prefix IPN in the place of Foundation, apparently took effect after the commencement of the proceedings, but consistently with the extensive written submissions of the parties, the convenient course is for me to refer generally to the respondent companies, whether alone or together, as 'Foundation', except to the extent where otherwise necessary to the context. 4 Comprehensive written submissions were provided by both parties. Those provided in chief by Idoshore on 29 March 2007 extended over 39 pages, divided into seven parts and headed respectively as follows: Part 1 – Background to the Transactions Part 2 – The Representations and Warranties Part 3 – Adjusted Foundation/Gower Accounts Part 4 – Gower's Impossible EBITDA Thesis Part 5 – Payments to Dr Fox and Breach of the Business Relocation Part 6 – EBITDA Calculations by Deloitte (Mr Phillps) Part 7 – General Assessment & Comparison of Damages Foundation responded on 17 April 2007 by 14 pages of submissions, and Idoshore replied on 24 April 2007 with 21 pages of submissions in reply. The consequences flowing from what I have therefore recorded was that the material presented to the Court for resolution is of considerable complexity, and not precisely or conveniently partitioned in presentation. Idoshore's acquisition in 1995 of the subject Oxford Square Medical Centre operations and its subsequent expansion of those operations 5 The managing director of Idoshore Pty Limited ('Idoshore') has been at all material times Mr P G O'Shanassy, a legal practitioner of the Supreme Court of New South Wales since 1999, and the managing director of Sagacious Legal Pty Limited ('Sagacious Legal'), the incorporated legal practitioner for Idoshore on the record of the present proceedings. In addition to his legal qualifications, Mr O'Shanassy holds a Masters of Business Administration, having majored in what he described as 'new business ventures'. It appears that he had engaged in commercial business affairs prior to the transactions the subject of the proceedings. He exercised personally on behalf of Idoshore the management of the subject Oxford Square Medical Centre ('OSMC') during times material to its operation as a modern medical centre in the usable space comprising the ground and first floor(s) or level(s) within the building complex located at Nos 10-14 Oxford Square Darlinghurst, Sydney. 6 That location was described in the evidence as 'premium' for a medical centre, by reason of its high pedestrian traffic and its close proximity to the Central Business District of Sydney. It was said to traditionally attract a demand for 'walk in' patient treatment. The lessor of that building complex appears to have been a member of the Meehan group of companies, being related corporately, whether directly or indirectly, to the Foundation group of companies (inclusive of the respondents), whereof Mr Graham Meehan had been at all material times chief executive officer. 7 It was in or about the years 1994-1995 that Mr O'Shanassy caused to be acquired by Idoshore, pursuant apparently to an assignment of the head leasehold estate, the occupation of certain level(s) in that building complex. There was by then in operation a medical centre conducted by about four or five general medical practitioners assisted by two or three employed support staff, that medical centre by then being already named the 'Oxford Square Medical Centre' and being located on at least the ground floor level. Medical services had been provided at the premises since about 1975 or 1976. That acquisition took place pursuant to arrangements made by Idoshore with the liquidator of the then corporate operator of that medical centre. Included within the scope of the acquisition were fixtures and fittings, and also patient medical records. At the time of that acquisition, part of the ground floor was sublet to an unrelated operator of an x-ray clinic, and part of the first floor was sublet to a beautician. As I have foreshadowed, Idoshore caused to be operated in due course on the ground and first of those levels the activities of a composite medical centre, under the continuing designation of 'Oxford Square Medical Centre', until the sale in December 2000 of what may be described imprecisely as the medical centre assets of that going concern to the first Foundation respondent as a corporate member of the Foundation Healthcare group of companies, being a transaction which provided the context to the disputes the subject of the present proceedings. No issue arises as to the standing of Idoshore to bring the present proceedings. 8 From the time of the commencement in 1995 of Idoshore's business operations appertaining to the OSMC, the occupancy of rooms with associated facilities, inclusive of support staff, was provided for medical practitioners for the time being engaged professionally at the OSMC, in return for payment of service fees equivalent to about 50 per centum of each such resident doctor's gross billings. I use the description 'resident doctor' in the particular sense just described, none of the practitioners for the time occupying any part of the OSMC in any residential sense. The occupancy/facility arrangement made with each of those medical practitioners was described by Mr O'Shanassy as 'simply a longstanding arrangement' whereby each doctor 'used Oxford Square['s] medical facilities' at the material times for financial reward to Idoshore. I would infer that the set-up originally was that no medical practitioner had exclusive rights at all times to occupation of a particular room within the OSMC. Mr O'Shanassy explained in his comprehensive affidavit evidence that '[t]he ability of Oxford Square medical to retain its medical practitioners was… dependent on (in the main) its ability to provide them with quality facilities in a good location'. Mr O'Shanassy claimed to have adopted at the OSMC the objective that the size of a medical clinic accommodating discrete practices of various medical practitioners, crucially affected profitability of the clinic operator, in circumstances where each practice was thus conducted 'within one roof', with the attendant savings in costs and other pecuniary advantages. It may be inferred that, at least generally speaking, the patients of the OSMC practitioners were 'bulk billed' in respect of his or her treatment, so that the ultimate pecuniary source of each OSMC medical practitioner's gross earnings was confined essentially to the Commonwealth Medicare funding of the patients of the practices conducted at the OSMC. 9 Following upon completion in or about 1995 of Idoshore's acquisition of the occupation and conduct of the operations of the OSMC, being operations (as I have foreshadowed) extending beyond the grant of occupation of rooms to what may be described as the conduct of a clinic, Mr O'Shanassy took up occupation individually of an administrative office on level 1 of the OSMC building in order to manage those operations. He described that administrative role which he exercised as 'supervisory'. Thus he would liaise with the medical practitioners who used the premises the subject of the OSMC for their respective practices, and arranged their attendance rosters, and resolved finance, accounting and management issues for the practitioners, inclusively of attending to bulk billed Medicare claims. Idoshore did not acquire the freehold title to the OSMC at any material time and hence found itself from time to time in negotiation with the building owner. Until certain activities and innovations took place in 1998 and 1999, which I will address in the following segment of these reasons, Mr O'Shanassy said that '… there was little change in… the structure or staffing of Oxford Square medical'. There were a number of important aspects to the successful operation of that business at all times, the key aspect being the retention of competent medical practitioners for regular engagement in practice at the OSMC at specified times of the day or evening. As I have foreshadowed, during Idoshore's operation of the OSMC Mr O'Shanassy caused to be engaged for the most part general practitioners with differing specialist interests in areas such as sports medicine, sexual health, casualty and women's health. Mr O'Shanassy testified that a further factor, significant to what he described as the success of the OSMC, was Idoshore's retention of well-trained and experienced support staff, including a registered nurse, a centre manager (being the point of communication between the doctors and the administrative support staff and having a supervisory role in relation to other support staff) and a receptionist. 10 Mr O'Shanassy described the corporatisation of the medical services industry, as it emerged and evolved at least by the late 1990s, as the aggregation through purchase and/or takeover of smaller medical services businesses by larger corporate operations or infrastructures. He identified the then 'primary players' in that corporatisation process, apart from the Foundation Healthcare corporate group (inclusive of the respondents), as the Endeavour Healthcare and Primary Healthcare corporate groups, and he explained that '[c]ompetition between these entities for market share in the medical services industry involved the acquisition of medical centres and pathology labs across Australia'. The second respondent Foundation company was a public company which changed to a proprietary company in about January 2003, and thus subsequently to the sale of the OSMC assets from Idoshore to Foundation made in December 2000. 11 In or about 1999 Mr O'Shanassy caused to be further established and developed a complementary multidisciplinary services corporate group, which provided from time to time legal, consulting and associated services to its clients inclusive of medical practitioners, the parent company of that group being Sagacious Group Pty Limited. Throughout the submissions of the parties, the description 'Oxford Square Medical' was used synonymously for the expression Oxford Square Medical Centre. That corporate group was said to have retained the individual services of various professional and business employees, directly or indirectly. As managing director and major shareholder of the Sagacious Group of companies, Mr O'Shanassy caused to be offered business consulting services, as well as legal services, in the latter case in the name of Sagacious Legal. He also set about the development of retainer relationships at the OSMC with the medical specialists to whom general practitioners in practice at the OSMC could refer patients. Those specialists would attend the OSMC at pre-arranged dates and times on a weekly basis, for which they would pay an occupation fee to Idoshore. That became in time a significant source of revenue for the OSMC operations conducted by Idoshore. 12 At about the beginning of July 2000, Mr O'Shanassy caused to be leased additional space within the OSMC premises (that is additional to the status quo at the time of Idoshore's original acquisition of the OSMC) in the form of consulting rooms, which additional space produced rental income of about $30,000 per annum, and thereby added in relation to the OSMC operations a so-called 'bottom line revenue'. One such subtenant was Dr Diamond, a specialist obstetrician, and another was Dr Hakim, a specialist gynaecologist. In addition, he made an arrangement with Dr Tornya for the provision of consulting rooms on an ad hoc basis, in return for which Idoshore received one half of that consulting doctor's revenue derived from practice at the Centre. Those additional sources of income were said to have boosted OSMC's 'medical profitability', yet without any material increase in costs. Those operations did not bear directly upon the circumstances arising for present resolution. 13 The expanded corporatisation of medical services implemented by Idoshore from about 1999 involved an increase in the number of general practitioners from time to time engaged in individual medical practices conducted at the OSMC. I use the expression 'individual' in the sense that none of the general practitioners appear to have operated in partnership at the OSMC. For the purpose of advancing that professional reorganisation within the OSMC, Idoshore retained the services of Dr Peter Gesovic to secure an increase in the number of general, and also specialist, practitioners engaged professionally in practice at the OSMC. Dr Gesovic had formerly practised medicine at the subject OSMC premises, in or about 1995, being shortly prior to Mr O'Shanassy's commencement of Idoshore's activities. Dr Gesovic was a resident of the inner eastern suburbs, and Mr O'Shanassy explained that '[a]s a consequence … he knew a lot of the local doctors', and further that '… unlike other professions, there is an advantage of having local doctors, as they tend to retain their patients'. Dr Gesovic continued to be retained by Idoshore until February 2002 as a liaison between Idoshore and the general practitioners engaged at the OSMC. He did not testify at the hearing of the proceedings. The amalgamation in 1999 of the operation of the Oxford Square Medical Centre conducted by Idoshore with the Kings Cross medical practices operated by Dr Grech 14 It was at least by 1999, as Mr O'Shanassy further explained, that the Commonwealth Government commenced to offer financial incentives by way of lump sums for the amalgamation or so-called corporatisation of small partnerships and sole practitioner medical practices, and did so in order to improve economies of scale and efficiencies in particular in the general practitioner segment of medical service providers. It was apparently at about the time of Idoshore's corporatisation of an increased number of general practitioners that Mr O'Shanassy set about negotiations for the amalgamation of the practices of then existing medical practitioners at the OSMC with two medical practices located at Kings Cross operated by Dr Joseph Grech in conjunction with two other medical practitioners. 15 Mr O'Shanassy expressed the view that '[t]he Commonwealth financial incentives were not the only reason why Idoshore entered into the merger with the Kings Cross practices, [since] [b]ringing in more doctors could generate more revenue and mean that Oxford Square Medical could become more profitable', and moreover that '[i]f my anticipation of the impending corporatisation in this sector of the industry was correct, increased revenue and profitability would enhance the value of Oxford Square [M]edical to an incoming purchaser, and increase the purchase price which Idoshore could obtain on any sale'. It was the circumstances related to and involving the subsequent sale of the entire OSMC operations and the assets thereof from Idoshore to Foundation that gave rise to the present complex litigation. 16 On 21 August 1999, the amalgamation of the practices by then conducted at the OSMC on the one hand, and of the Kings Cross practices of Dr Grech on the other, was formalised upon the following basis in outline: (i) payment of $60,000 by Idoshore to Dr Grech for the acquisition by the OSMC of his Kings Cross practices; (ii) Dr Grech's appointment as medical director at the OSMC; (iii) putting in place an incentive scheme for Dr Grech based upon the financial performance of the OSMC; (iv) provision of a remuneration rate for Dr Grech based upon sixty per centum (60%) of his patient billings; (v) a minimum appointment term of 18 months subject to termination on six months' notice; (vi) a restraint of trade imposed upon Dr Grech after termination of the arrangements for a period of two years and within a two kilometre radius from Oxford Square; and (vii) a grant of first right of refusal to Dr Grech to purchase what may be described broadly as the OSMC operational structure in the event that Idoshore might decide to sell the same. 17 In or about September 1999, the OSMC and Dr Grech each received the amalgamation incentives payment by then available from the Commonwealth Government as a consequence of that medical practice amalgamation. As a consequence, the Kings Cross general practitioners Drs Grech, Paull and Mackenzie continued the provision of their respective services within the auspices of the OSMC, and as part of its overall or consolidated operations with those two Kings Cross practices. 18 Mr O'Shanassy testified that after the amalgamation of the OSMC with the Kings Cross practices of Dr Grech, the operating costs of the OSMC practice as thus reconstituted increased temporarily, by reason of first, the costs associated with the physical merging of the practices (for example stationery, advertising and removal costs), and secondly, of the short term retention of Dr Grech's support staff during the transition period. From about 1 July 2000, those additional costs were said by Mr O'Shanassy to have 'fallen away', and he testified to beginning 'to see positive benefits' from having these additional three doctors in operation under the OSMC administrative umbrella. That was said to be because of a significant increase in revenue coupled with a reduction in costs asserted by Mr O'Shanassy to have been achieved because of the two practices being thus assimilated, and because of Dr Grech's support staff, after a relatively brief time, being no longer retained. Negotiations to sell the Oxford Square Medical Centre structure and operations undertaken by Idoshore as prospective vendor with Foundation as prospective purchaser – finalisation of Heads of Agreement between Idoshore and Foundation 19 In September 2000, Mr O'Shanassy attended a meeting with representatives of the corporate group comprising the Foundation Healthcare companies, being Messrs Meehan and Murphy, concerning what Mr O'Shanassy described as 'aspects of the commercial lease between Idoshore and HMP Finance Pty Limited'. As already indicated, a related or corporate member of the HMP Finance group was apparently at all material times the freehold owner of the OSMC property. The Foundation Healthcare companies included of course the respondents. Medical centres with which the Foundation corporate group was by about that time associated were located in Auburn, Edgecliff, Liverpool and Penrith, and also on the Central Coast of New South Wales. Mr Meehan informed Mr O'Shanassy as to the sale of 'my medical centres into Foundation Healthcare Limited' and as to his having taken up an executive position in relation thereto. Mr Meehan enquired of Mr O'Shanassy as to whether he would be interested in selling the OSMC to Foundation and Mr O'Shanassy had replied in the affirmative. By about that time, the OSMC had assembled a management team, inclusive of Mr O'Shanassy as the chief executive officer, and comprising otherwise Mr S Nijssen-Smith as the chief financial officer, Mr Laere as a director, the earlier mentioned Dr Gesovic as the administrative director, and more recently the abovementioned Dr Grech as the medical director. Those persons headed up what was described as the support and practising medical staff in administrative office in relation to the OSMC. 20 Either at or a short time after that meeting in September 2000, Mr O'Shanassy had given to Mr Meehan a document bearing date July 2000 and headed 'Oxford Square Medical Centre' and 'Business Overview Prepared for Foundation Healthcare Limited', explicitly for the purposes of furnishing to Foundation '… an accurate summation of the medical practice known as the Oxford Square Medical Centre… and thereby provide sufficient information so that Foundation Healthcare can consider the acquisition of OSMC'. Attached to that document was comprehensive financial information bearing the description 'Maintainable Earnings Calculation' and containing the primary subheadings mentioned in the next paragraph below, each such segment relating to the year ended 30 June 1999 together with the further quarters ended 31 March 2000, 31 December 1999 and 30 September 1999. 21 In addition to that extent of comprehensive historical financial information related to OSMC earnings, there was set out figures for each of those corresponding financial periods of time relating to OSMC's 'Costs of Sales', 'Gross Margin', 'Expenses', 'Other Income', 'Profit (Loss) before Tax', 'EBITD Normalisation Adjustments', 'Adjusted EBITDA' and 'Annualised EBITD'. 'Explanatory Notes' were additionally provided, along with other explanations and details. The expression EBITDA is the abbreviation for 'Earnings Before Interest Taxation and Depreciation', and thus reflected the notion for measurement of income achievement used in the proceedings. Under the sub-heading '5. Financials & Growth Strategy', it was stated that '[b]y virtue of the… relocation and other initiatives, the revenue stream of the medical practice could be increased substantially, resulting in an EBIT of $400,000 - $500,000 per annum'. 'EBITDA' and the more restricted term 'EBIT' were both reflective of measurements of income derived from business operations, such as here in the case of the OSMC. The assets the subject of sale and purchase by the Agreement were described by the documentation subsequently entered into between the parties as 'Business', 'Goodwill' and 'Facilities and Service Contracts', and hence what may be described, in part, as intangible assets of the OSMC. 22 Mr O'Shanassy also met in September 2000 with Dr Ken Jones, the chief executive officer of Foundation Healthcare Pty Limited, Mr Meehan as chief executive officer of Foundation Medical Centres (NSW) Pty Limited (of course the previous name of the first respondent to the present proceedings), and Doctors Fox and Grech (by then of the OSMC). Each of those doctors have already been identified in these reasons. After a tour of the OSMC property, there occurred at the meeting a further discussion, in the course of which Mr Meehan was said by Mr O'Shanassy to have remarked, for what it may ultimately matter, that '[t]here is huge potential for this medical centre – strategically speaking, it is ideally located and has the ability to expand in sheer size by either expanding into level 1 or relocating to larger premises', and '[t]o optimise the medical centres potential it would need to grow in size to benefit from the economies of scale etc'. 23 Thereafter Mr Meehan wrote to Mr O'Shanassy's legal firm (Sagacious Legal) on 5 September 2000 on the letterhead of Peak Health Pty Limited, a corporation apparently related to Foundation, which stated as follows (omitting formal parts): 'I apologise for the delay in writing to you. This was due to the pressure of completing other Medical Centre purchases. We are prepared to purchase the above Medical Centre on a formula basis, based on 3x last year's earnings before interest, tax, depreciation and amortisation (EBITDA) with a further payment to be made at the end of either the first year after completing the purchase of the above Medical Centre or at the end of the second year where we would be prepared to pay the multiple of 5x the difference between purchase price EBITDA and the EBITDA achieved in whatever year (first or second year) were [sic] taken as the earn out year. The principle is that, if you are able to amalgamate the current medical centre and its doctors with other medical practices in the area and grow the business to the size required by Foundation, then they would be prepared to pay you a premium. The EBITDA would have to increase to at least $500,000 pa before the increased EBITDA was paid. Any costs incurred in achieving the earn out would be for your account or would be deducted from the increase in purchase price. There would be no claw back from the initial purchase price. We would wish to see all of your doctors sign a three-year Service Contract. I enclose the standard Foundation Health Care Service Agreement for doctors. Please amend this Contract so that your doctors would be comfortable to sign. I also enclose the Standard Foundation Health Care Purchase Contract, which will need to be amended. If you have any questions, please do not hesitate to contact me with regard to any matters relating to the purchase of the Medical Practices at the Oxford Street Medical Centre. Representing the owners of the property (10, 12 and 14 Oxford Square, Darlinghurst), I would see no problem in you surrendering your lease of the ground and first floors, subject to you giving suitable notice to the landlords, and allowing the landlords a reasonable amount of time after you vacate the premises to get a new letting in place. I would see this time frame as being a maximum of six months, if a tenant were in place before the six months had elapsed, we would refund to you any portion of the rent payment not needed to cover the rental shortfall. If it assists you, we would be prepared to take a surrender of the first floor lease before the ground floor lease. Alternatively, you may prefer to sub-lease the premises yourself. The above comments are without prejudice and would be subject to Contract.'` Apart from the references to 'EBITDA' as a means of measurement of quantification of purchase price to be payable by Foundation for the OSMC, the Foundation requirement that 'your doctors sign a three-year Service Contract' may be observed; such service contracts were thus required to be entered into by the medical practitioners then practising at the OSMC in favour of Foundation as the incoming operator of the OSMC. Foundation's offer was described as 'performance based', being made referrable to a starting base equal to OSMC's existing performance criteria, and thereafter to OSMC's performance criteria involving one or two years earnings etc (as the case may be) following upon completion of the takeover, being criteria in both instances related to the EBITDA formula. 24 A meeting occurred subsequently on 15 September 2000 between Mr O'Shanassy (of course of Idoshore) on the one hand and with Messrs Meehan and Mr Murphy together (of course of Foundation) on the other. Mr O'Shanassy stated that the Foundation offer was 'way too low', despite what he referred to as the 'additional incentive of a further earn up at the times multiple of [five] but this is all too uncertain…', and he further stated that '… I have a strong preference for just a competitive times multiple figure – which I believe to be 7.5'. He added 'this is comparable, as I understand it, with the initial purchase price paid by Foundation… in recent acquisitions'. Mr Meehan was said by Mr O'Shanassy to have stated, by way of representation or warranty inter alia: 'Based upon what I have outlined, you will be financially far better off accepting a lower initial purchase price that provides you with further earn up capacity. I can assure you that you can rely upon the underlying assumption, as I've just stated, because I intend to be involved in the management of Foundation and I have a vested interest in ensuring that Foundation is successful… the best I can do is increase the initial times multiple from 3 to 4.5 and give you two… further "earn ups" – the 1st earn up at the end of the first year and a 2nd earn up upon relocating Oxford Square medical to a larger premises… you have my assurance that it will go the way I have described to you.' Those notions of 'earn ups' were of course performance based criteria. Mr Meehan was said by Mr O'Shanassy to have further added 'I will in the meantime get Foundation to contact you for the purposes of undertaking the due diligence to establish the sustainable EBITDA', which was of course to comprise the benchmark formula as to performance of the OSMC at the material time for the purpose of the calculation of the sale price to ultimately crystallise for payment by Foundation. In response, Mr O'Shanassy deposed to having said the following: 'That's a good idea, I would like to think we could enter into a sale agreement with the benchmark EBITDA having been agreed to.' 25 Mr O'Shanassy explained in his affidavit evidence that in relation to '… the determination of the purchase price, in my experience of the industry, the normal manner in which the purchase price for medical centres was determined was by applying a times multiple to the sustainable earnings of the business in question', being 'usually expressed as either: Earnings before Interest, Tax, Depreciation and Amortisation [abbreviated as above to 'EBITDA'] or Earnings before Interest and Tax [abbreviated to 'EBIT']'. Of course the precise terms and conditions of the transaction the subject of the complex formal documentation which ensued (being essentially the subject Business Sale & Purchase Agreement later predominantly extracted in these reasons) govern the operation of the purported transaction negotiated between the parties, but the circumstances leading to the formation of that transaction assist at least to explain the circumstances attendant upon the unique nature of the ongoing contractual documentation between Idoshore and Foundation thereby formed. More than that, from the perspective of Idoshore, those circumstances provided the context to the controversial collateral warranties which Idoshore pleaded. 26 Following upon that meeting held on 15 September 2000, Mr O'Shanassy instructed Mr Douglas, a chartered accountant employed by the Sagacious Group of companies, to participate as that Group's representative in the due diligence process thereafter undertaken by Foundation in respect of the OSMC annual earnings and assets. Mr Douglas subsequently prepared a three page document headed 'Maintainable Earnings Calculation', which purported to identify the income, cost of sales, gross margin, expenses and other income which went to make up the periodic profit or loss before tax of Idoshore's OSMC practice and its operations, which figures were said by Mr O'Shanassy to have been then 'normalised' or 'adjusted' to remove 'extraordinary (usually "one off") income or expenditure'. The document contained calculations styled 'Adjusted EBITDA' and 'Annualised EBITDA', described by Mr O'Shanassy as 'designed to determine a suitable profit figure for the business'. The material containing those calculations appears on pages 48, 49 and 50 of TAB 6 of exhibit PGO-1 attached to Mr O'Shanassy's affidavit under the description 'Maintainable Earnings Calculation' of 'Idoshore Pty Ltd t/a Oxford Square Medical Centre'. Upon the footing of that material, Mr O'Shanassy considered that '… an estimated EBITDA… in excess of $250,000' was shown to be derived annually in respect of the OSMC as at November 2000. 27 In amplification of that estimate of 'in excess of $250,000', which sum was precisely reflected relevantly in the Business Sale & Purchase Agreement and denoted as the 'EBITDA Benchmark', it is appropriate that I reproduce pars 51 to 54 of Mr O'Shanassy's affidavit of 20 February 2006 and the calculation exercise which Mr O'Shanassy thereby undertook, the references therein to 'Oxford Square Medical' being of course to the OSMC: '51. Whilst I did not prepare the "Maintainable Earnings Calculation", I was and am familiar with the financial statements and records of Oxford Square medical. I agree with the estimates of "Annualised EBITDA" shown on the "Maintainable Earnings Calculation". In particular, I consider that the adjustments made in relation to the month of November 2000 were appropriate and resulted in an estimated EBITDA for Oxford Square medical, as at November 2000, in excess of $250,000. 52. The actual reported income and expenses of the medical centre, with the annualised EBITDA calculations (as at November 2000) for the 3 months period ending 30 September 2000 was as follows: Income Sources: $ Amount a) Doctors patient billings 284,090 b) Other medical fees 13,843 c) Subtenancies 29,195 Total income 327,128 Expenditures d) Direct costs Doctors commissions 142,045 e) Medical supplies 13,402 f) Operating expenses 123,418 Total expenses 278,865 Net profit before tax 48,263 Dedications/Additions g) Eliminate related party 8,000 consulting expenses h) Eliminate first floor rent 18,568 expenses i) Normalise salaries and wages (1,558) expenses Sustainable EBITDA 73,273 Annualised sustainable EBITDA 293,092 53. To explain the figures in the above table I note as follows: (a) The focal period for determining the benchmark or sustainable EBITDA for the purpose of the intended transaction with Foundation was the quarter ended 30 September 2000; (b) The net profit before tax for the quarter ended 30 September 2000 was $48,263; (c) Various adjustments were calculated to restate the net profit before tax into the format of sustainable EBITDA. The total of these adjustments had the net effect of increasing net profit before tax by $25,010 to a sustainable EBITDA of $73,273 for the quarter ended 30 September 2000; (d) The items that comprise the net adjustment of $25,010 were: · An adjustment of $8,000 to increase the sustainable EBITDA by eliminating consultancy expenses paid to a director related entity for services of a one-off nature; · An adjustment of $18,568 to increase the sustainable EBITDA by eliminating rent expenses relating to the first floor of the medical centre premises – because the area was not used by the business; and · An adjustment of $1,558 to decrease the sustainable EBITDA by normalising salaries and wages expense to the average of the previous periods; (e) Using the adjusted EBITDA of $73,273 for the quarter ended 30 September 2000, an annualised EBITDA of $293,092 was calculated by simple multiplication. 54. The $293,092 EBITDA calculation was made using the September 2000 quarterly historical financial figures. The full financial data for the year ended June 2000 did not take into account the actual operating income and expenses after 1 July 2000 and was not, in my view, indicative of the sustainable financial performance of the business – as at November 2000. [That] was because (amongst other things), that full year encompassed a period in which the additional income from the doctors from the Kings Cross practice had not been optimised and did not reap the benefit of economies of scale inherent from this growth in revenue.' 28 Mr O'Shanassy recorded next that a due diligence exercise took place on or about 15 October 2000 at the instance of Foundation, and further that 'Mr Douglas subsequently told me that Foundation's due diligence process had determined that the sustainable or benchmark EBITDA was $269,000'. In that regard I was referred by Idoshore to document 68 in the Foundation respondents' list of documents bearing date 27 May 2005, and in particular to pages headed 'Due Diligence Profit & Loss Summary' and 'Due Diligence Normalisation of Accounts – Support Notes', which disclosed that Foundation had calculated a sustainable EBITDA for the quarter ended 30 September 2000 of $67,331, which produced the annualised figure of $269,324 there appearing. The fact that both Idoshore and Foundation arrived independently, by way of their respective discrete calculations, at figures within not a dissimilar range, provided the inference that '… objectively assessed the business was capable of producing that level of income or profit' of $250,000 per annum, as Idoshore contended, and in my opinion with justification. 29 On 28 October 2000, Mr O'Shanassy received draft Heads of Agreement from Foundation, which he described as having 'encapsulated the terms of the agreement that had been discussed at our meeting held on or about 15 September 2000'. On 31 October 2000, Mr Meehan wrote on behalf of Foundation to Idoshore, the opening terms whereof reading as follows: 'Further to your "OSMC Business Overview" dated July 2000 and our recent discussions regarding the abovementioned, we are pleased to confirm the basis upon which we are willing to purchase the assets, leasehold interests, management rights and goodwill of OSMC. Our offer to purchase is as follows: 1. An initial purchase price of 4.5 times the maintainable EBITDA of OSMC based upon the last 6 to 12 months trading figures ('EBITDA Benchmark'). Based upon the information provided by you and our preliminary investigations, the EBITDA Benchmark will be $250,000. 2. A one year earn up provision whereby Foundation will pay you an additional 4.5 times the incremental year 1 EBITDA above the EBITDA Benchmark (or any pro rata amount if the relocation described in Clause 3 occurs prior to the end of the first year). This calculation will take place within two months of the period and be payable to you one month after the calculation is agreed, in accordance with Clauses 4, 5 and 6 below.' It was thereafter stipulated by condition 3 as to what would occur in the event of relocation of the OSMC practice before the expiration of 18 months from the date of purchase, namely that there would be a 'second earn up period amount [being] 4.5 times the amount by which the GP EBIT of the second year following relocation…', and by condition 4 that '20% of the initial purchase price… and any and all further purchase payments… will be held… either on deposit or in share script at the current share price of Foundation, in support of any warranty claims for the first three (3) years…', the same to be subject to release conditions thereafter stipulated. Condition 11 stipulated that such offer was made 'subject to Due Diligence process being completed and formal contract negotiations' taking place. No such relocation so provided for in relation to the OSMC in fact occurred at any material time, and consequently the occasion for crystallisation of the so-called 'second earn up', by way of increase in the 'Sale Price' the subject of the Agreement, did not materialise. 30 Three of the further terms and conditions the subject of the Foundation offer to purchase, communicated by its said letter of 31 October 2000 to Idoshore, are reproduced below: '8. There will be no changes to existing structure or operations without written mutual consent (not to be unreasonably withheld) with the executives of Idoshore Pty Limited taking an advisory role with its primary objective of ensuring OSMC achieves EBITDA and GP EBIT growth (whichever is applicable) over the one (1) year post sale period. 9. Foundation will require not less than 2 of the OSMC doctors to enter into contracts for terms of not less than 3 years. We understand that the two key doctors are Dr Joseph Grech and Dr David Fox. 10. As part of the growth strategy for OSMC and as detailed in the yearly business plans, we will, when appropriate, take over the leased premises on Level 1, 10-14 Oxford Square, Darlinghurst. Idoshore will, on a pro rata rental basis, make available space as determined by OSMC. In other words, Idoshore will be responsible, independent of the sale of OSMC to Foundation, to maintain its obligations under the current lease and sublet portions of OSMC/Foundation as OSMC/ Foundation requires.' The reference above to Drs Grech and Fox may be observed. Documentation put in place prior to that offer disclosed that there were altogether seven medical practitioners, each being described as general practitioners, by then engaged in practice at the OSMC on so-called 'verbal arrangements', inclusive of Drs Grech and Fox identified in Condition 9 above as 'key doctors'. In addition there was employed at the OSMC three receptionists and two nurses. A final version of the Heads of Agreement was signed by Mr O'Shanassy on behalf of Idoshore on 31 October 2000, and forwarded on 1 November 2000 to Foundation under cover of a communication which indicated Mr O'Shanassy's intention to convene a meeting with Drs Fox and Grech for the purposes of tabling, negotiating and ultimately executing their respective three year employment contracts above foreshadowed. Securing the Facilities and Services Contracts between Idoshore and certain medical practitioners including Dr Fox – Finalisation of the Business Sale & Purchase Agreement between Idoshore as vendor and the Foundation companies respectively as purchaser and guarantor 31 Subsequently to the Heads of Agreement being mutually adopted on 31 October 2000, Idoshore entered into what were described as Facilities and Services Contracts made with each of Drs Fox and Hawkins for terms of three and four years respectively in return for payment of the respective sums of $70,000.00 and $90,000.00 per annum (called 'key man' payments). For what it may ultimately matter, Mr O'Shanassy testified that had Idoshore not first secured the benefit of those Heads of Agreement, he would not have caused Idoshore to enter into those Facilities and Services Contracts. On 23 November 2000, Mr O'Shanassy received a copy of an e-mail sent from Mr Douglas of Sagacious Legal (ante) to Mr Meehan attaching a copy of a document headed Practice Scheme Development. Thereafter Mr Meehan informed Mr O'Shanassy that he was '… welcome to use the practice development scheme that I have developed in my medical centre'. 32 On 14 December 2000, Mr O'Shanassy arranged for Sagacious Legal to finalise with Foundation's lawyers the terms of the 'Business Sale & Purchase Agreement', which was thereupon entered into on that day between Idoshore as vendor and Foundation Medical as purchaser, with Foundation Healthcare an additional party as guarantor of Foundation Medical (they are of course respectively the first and second respondents and cross-claimants in the subject proceedings). Mr O'Shanassy testified that prior to committing Idoshore to that critical Agreement, no representative of Foundation withdrew qualified or modified any of the representations allegedly made to him on behalf of Foundation in the course of the negotiations leading to the signing of that Agreement, and in relation to which representations he asserted his placement of reliance. The difficulty however which Idoshore faced in its ascribing ongoing significance to those representations made antecedently to the formation of that Agreement is that such representations were not wholly reproduced as warranties set forth in the written Agreement. Reliance thereon by Idoshore in the present proceedings faced moreover the defence pleaded by Foundation that the same did not go to the root of the contract and were not at least substantially reproduced in the Agreement subsequently entered into between Idoshore and Foundation and settled between the legal representatives of the parties. 33 Mr O'Shanassy asserted to be the implications of the 'Adjustment to Purchase Price' provisions of clause 3.3 of the Business Sale & Purchase Agreement, duly entered into of course on 14 December 2000, as follows: 'In accepting the pricing mechanism embodied in the Agreement, which involved a deferred payment under two potential "earn-up" provisions, the willingness and capacity of the Respondents to appropriately manage and invest in the business with a view to growing it was of central significance. In order to achieve a return on the first earn-up (clauses 3.2 and 3.3 of the Agreement), Oxford Square medical not only had to sustain its EBITDA at the EBITDA Benchmark level, but had to grow EBITDA beyond the benchmark level. In order to achieve the second earn-up, the business had to relocate and grow to achieve increases in EBITDA. The ability of Idoshore to be involved in and monitor the management of Oxford Square medical was critical in ensuring that the business was on track to meet and exceed the required EBITDA targets...'. It is unclear as to the implications relevantly of what Mr O'Shanassy described above as '[t]he ability of Idoshore to be involved in and monitor the management of the [OSMC]' following upon completion, no provisions of the Agreement in that particular regard being identified. The ability of Idoshore 'to be relevantly involved in any management of the OSMC' was not specifically authorised by the provisions of the Agreement, as clause 7 thereof headed 'Possession' makes clear. 34 Following upon the exchange of mutually signed copies of the Business Sale & Purchase Agreement on 14 December 2000, there was sent by Mr O'Shanassy to each of the six medical practitioners, by then in practice at the OSMC, so-called 'practical development scheme' correspondence in order, so he testified, to provide those doctors with an incentive to remain focused on the financial performance of the OSMC in terms of 'patient billing' performance. Completion of the Business Sale & Purchase Agreement took place on 1 February 2001, when Foundation paid over to Idoshore $221,576.50 representing twenty per centum (20%) of the purchase price paid by way of so-called 'warranty deposit' for lodgment into the trust account of Holman Webb, the balance of the purchase price remaining to be determined after quantification of the total 'Purchase Price' comprising (as thus defined in the Business Sale & Purchase Agreement) 'the amounts so detailed in Item Ten of Schedule One' to that principal Agreement. Those 'amounts' were specified as '4.5 times the EBITDA Benchmark' and thus comprising the sum of $1,125,000.00 therein specified, and 'Plus Consumables Less Accrued Entitlements' by then not mathematically quantified and remaining implicitly to be quantified on 'Completion' of the Agreement. Foundation 'assumed control of the operations of Oxford Square medical', to adopt Mr O'Shanassy's affidavit description. That 'Purchase Price' was stipulated by the Agreement to be partly satisfied by the issue of shares in Foundation as I will shortly explain. Material provisions of the Business Sale & Purchase Agreement made between Idoshore as so-called 'Vendor' of the first part, Foundation Medical of the second part and Foundation Healthcare of the third part (except to the extent already extracted or summarised) 35 It is necessary or appropriate to next extract below most of the provisions of the comprehensive Business Sale & Purchase Agreement of 14 December 2000, partly because of the extent of uniqueness of certain concepts and conditions therein appearing and partly because of the extent of complexity of their content and interaction. The Agreement first set out the numerous definitions in clause 1.1 thereof, which I have reproduced below to the extent here material (being in fact virtually all); many of the definitions contain expressions further defined within that clause 1.1. As I have earlier foreshadowed, the party of the first part is of course Idoshore Pty Limited as 'Vendor', the party of the second part and abbreviated therein to 'Purchaser' is Foundation Medical Centres (NSW) Pty Limited and the party of the third part and abbreviated therein to 'Foundation' is Foundation Healthcare Limited. ' "Accounting Records" means all balance sheets, profit and loss statements, records and ledgers kept in connection with the operation of the Business and all records relating to income and expenditure of the Business; "Accountancy Standards" means the Australian Accounting Standards from time to time, and where no accounting standard exists means generally accepted accounting principles for business similar to the Business; "Business" means the business of providing facilities and services to medical practitioners to facilitate the conduct of their individual medical practices carried out in and from the Premises and includes: (a) the Goodwill; (b) the Telephone Numbers; (c) the registered business name as detailed in Item Five of Schedule One; (d) the Patient Files; (e) the right to occupy the Premises; (f) the Plant and Equipment; (g) the right to receive income from any sub-lease or license at the Premises; but does not include: (h) all cash owned by the Vendor; (i) the Book Debts; and (j) Consumables. [I would interpolate to record that such registered business name was of course 'Oxford Square Medical Centre', and the meanings of 'Goodwill', 'Plant and Equipment' and 'Premises' are respectively reproduced below; I have not however reproduced the definitions of 'Book Debts' and 'Consumables', which are sufficiently self explanatory.] … "Centre" means the centre as detailed in Item Six of Schedule One [referring thereby of course to the OSMC]. … "EBIT" means earnings before interest and tax determined in accordance with the Accounting Standards; "EBITDA" means earnings before interest, tax, depreciation and amortisation, determined in accordance with the Accounting Standards; "EBITDA Benchmark" means the maintainable EBITDA of the Business which has been agreed by the Parties to be $250,000.00; … "Facilities and Services Contracts" means the contract under which the Purchaser will provide facilities and services to each of the Doctors in a form satisfactory to the Purchaser but substantially in the form of Annexure "C"; … "Goodwill" means the goodwill of the Vendor's Business together with the exclusive right to provide the medical administration services to the Doctors pursuant to the Facilities and Services Contracts; … "GP" means the general practitioners including, Dr Joseph Grech, Dr David Fox, Dr Sarah Hawkins, Dr Ian McKenzie, Dr Andrew Paull, Dr Wei Yen and Dr William Marchione and includes any additional general practitioners replacing any of the said general practitioners or joining the Business as a part of the growth of the Business; [I would interpolate to draw attention in particular to the inclusion of Drs Grech and Fox] "GP EBIT" means earnings before interest and tax in accordance with the Accounting Standards attributed to the GP's and consists of the GP Revenue and Sub-lease Income less Amortised Costs and Operating Costs; "GP Revenue" means all the revenue generated by the GP's including all existing sources of revenue generated from the treatment rooms at the Centre (excluding revenue derived from charges for the use of the treatment rooms and increases in the use of the treatment rooms not directly under the control of a GP) during the applicable period; "Lease Agreement" means the contract in relation to which the Purchaser agrees to an assignment of the lease of the Premises of the Vendor… … "Lessor" means HMP Finance Pty Limited ACN 061 269 949 [I interpolate to observe that such company appears to have been at material times a member of the Foundation corporate group] "Losses and Liabilities" includes all losses and liabilities of any nature, absolute, accrued, contingent, liquidated or unliquidated, known or unknown, matured or unmatured, including any Taxes and including all losses of profit or expected profit, claims, actions, damages, expenses, diminutions in value or deficiencies of any kind or character and also including all interest and other amounts payable to third parties, all legal or other expenses incurred in connection with investigating or defending any claims or actions, whether or not resulting in any liability and all amounts paid in settlement of claims or actions, prior to Completion; … "New Location" means a location other than the Premises under the Property Lease and includes acquiring further floor space adjoining the Premises but does not include acquiring further space on level 1 above the Premises; "Operating Costs" means that portion of Outgoings (calculated consistently with the treatment thereof in the records made available by the Vendor to the Purchaser for the purposes of due diligence) relevant to the generation of GP Revenues to be allocated to GP EBIT on a pro rata basis to be agreed by the Parties, and applicable to the period; "Outgoings" means periodic expenses of the Business, including but not limited to, Service Fees, any equipment (properly obtained to operate the Business) lease rental payments and Premises lease rental payments pertaining to those leases as outlined as Item 2 in Annexure E, variable outgoings, rates, taxes, charges for utility services including electricity and gas, and all other outgoings properly incurred by the Business; … "Patient files" means all patient files, patient records and any other material identifying patients of the Business for the period of two (2) years prior to the Completion Date; "Plant and Equipment" means the Vendor's owned plant and equipment, used in connection with the Business, as specified in the list attached to this Agreement…; … "Premises" means the ground floor of the premises from which the Business presently is conducted, namely the premises so detailed in Item Nine of Schedule One [I interpolate to record that 'Item Nine' reads 'Ground Floor, 10-14 Oxford Square, Darlinghurst, NSW 2010, more particularly described as Folio No. 2/108126, thereby indicating that the building containing the OSMC was subject to strata title]; "Property Lease" means the contract under which the Purchaser agrees to occupy the Premises from the Lessor – the Agreement is annexed…; "Purchase Price" means the amounts so detailed in Item Ten of Schedule One [that 'Item Ten' in Schedule One reading '4.5 times the EBITDA Benchmark', amounting to '$1,125,000.00', 'Plus Consumables Less Accrued Entitlements']; … "Relocation" means the relocation of the Business to a New Location not more than five (5) kilometers [sic] from the Centre. All costs (including fit out) incurred as a result of the relocation will be the responsibility of the Purchaser; "Service Fees" means that percentage of GP fees which are payable by the GP to the Purchaser as manager of the Business specifically for the provision of services and facilities such as that contemplated in the Facilities and Services Contracts…; "Sub-lease Income" means any payments by sub-leases [sic]at the New Location who are sub-lessees of the Vendor at the Premises; "Taxes" means all taxes imposed by any government or authority in Australia or elsewhere including all income tax, capital gains tax, stamp duty, financial institutions duty, company tax, sales tax, gift duty, wealth tax, customs duty, excise payroll tax, land tax, metropolitan regional improvement tax, shire rates, water rates, development taxes, value added tax, consumption tax, goods and services tax, social service tax, departure tax and all other levies, rates, contributions, imposts, withholdings, duties, taxes and charges and including any penalties, fines, additions or interests relating to or arising out of any of the foregoing; … "Warranties" means the covenants and warranties of the Vendor as contained in Clause 10.' The extent of the defined terms the subject of that Business Sale & Purchase Agreement exemplify the complexity of its provisions. In extracting most of those defined terms above, I do not imply that what remain may not be relevant. The care and precision afforded to the numerous defined expressions underline the mutual endeavour of the parties to anticipate future circumstances which might crystallise in the course of operation of that critical Agreement. What I have reproduced from the Agreement is intended to assist comprehension of its context to the issues arising in the proceedings and of the complexity of the anticipated future relationship between the parties. That detail is such as to render as further formidable the task sought by Idoshore of assigning legal significance to collateral terms and conditions not already incorporated explicitly therein, being a subject of controversy which I have already touched upon. 36 Recitals B and C to the Business Sale & Purchase Agreement may also usefully be recorded below, reflecting as they do the central importance of the 'EBITDA Benchmark' of $250,000: 'B. The Purchaser has conducted due diligence of the Business in accordance with its normal practices and relying on the books and materials provided by the Vendor has satisfied itself as to the Business, the financial position of the Business, and Accounting Records and all other matters the Purchaser considers necessary and relevant to the purchase of the Business. Having completed the due diligence, the Purchaser has accepted the EBITDA Benchmark as $250,000.00. C. The Vendor owns and carries on the Business.' 37 The terms and conditions of the Business Sale & Purchase Agreement, to which the parties respectively drew attention, directly or indirectly, and which pick up of course the inclusion of the defined terms largely extracted already above, are next reproduced below: '2. INTERDEPENDENT CONTRACTS Notwithstanding anything elsewhere provided, the Vendor and the Purchaser agree that it is an essential condition of this Agreement: (a) that this Agreement and the Facilities and Services Contracts which are to be signed or executed by the Doctors are interdependent; (b) that this Agreement, the Property Lease and Lease Agreement relating to the Centre are interdependent; and (c) completion under this Agreement is subject to the Business Sale & Purchase Agreement and the Facilities and Service Contracts for the Doctors being executed by the parties hereto. [the doctors there referred to were Sarah Hawkins and David Fox as per 'Item Eight' of Schedule One of Business Sale & Purchase Agreement]. 3. SALE & PURCHASE 3.1 Sale & Purchase The Vendor agrees to sell effective as and from the Completion Date, and the Purchaser agrees to purchase the Business for the Purchase Price (and any adjustment to the Purchase Price) free of all Encumbrances and on the terms and conditions specified in this Agreement. 3.2 Payment of Purchase Price The Purchaser shall pay the Purchase Price to the Vendor as follows: (a) The payment and release of the sum of $160,000.00 to the Vendor on execution of this Agreement as and by way of a refundable deposit ("the Deposit"), receipt of which is to be acknowledged by the Vendor; (b) The balance of the Purchase Price on Completion, paid to the Vendor as outlined in Item Twelve of Schedule One, and in respect to the payment of any adjustments to the Purchase Price (as contemplated in clauses 3.3(a), (b) and (d)), in a manner as directed by the Vendor; and (c) If Completion does not occur for any reason other than a breach by the Purchaser, the Vendor will immediately refund the Deposit to the Purchaser.' I interpolate to record that Item 12 of Schedule 1 stipulates the so-called 'Vendor's entitlement for payment of Purchase Price by way of Foundation Shares' as being '[that] number of Foundation Shares up to 30% of the Purchase Price in the discretion of the Vendor…', and further stipulates that 'Payment of Purchase Price by way of Foundation Shares on Completion' be effected as to 10% of the Purchase Price by way of the issue of a number of Foundation Shares in accordance with Clause 3.3(h), the full text whereof appears below: '3.3 Adjustment to Purchase Price (a) (1st Adjustment to Purchase Price): Subject to clause 3.3(b), the parties will, twelve (12) months from the Completion Date ("the 1st Adjustment Date"), calculate an adjustment to the Purchase Price for the Business ("the 1st Adjustment to Purchase Price"). The method for calculating the 1st Adjustment to Purchase Price will be as follows: 1st Adjustment to Purchase Price = 4.5 x (Year one (1) EBITDA – EBITDA Benchmark). Where: "EBITDA Benchmark" = $250,000.00 "Year one (1) EBITDA" = the EBITDA for the period commencing from the Completion Date to the 1st Adjustment Date. For example, where the Year one (1) EBITDA is $270,000.00 then – 1st Adjustment to Purchase Price = 4.5 x ($270,000.00 - $250,000.00) = 4.5 x $20,000.00 = $90,000.00 (b) (Relocation and 1st Adjustment to Purchase Price): However if the Vendor and the Purchaser agree to a Relocation prior to the 1st Adjustment Date, the 1st Adjustment to Purchase Price will be calculated as follows: 1st Adjustment to Purchase Price = 4.5 x (Year one (1) Relocation EBITDA – EBITDA Benchmark) Where: "EBITDA Benchmark" = $250,000.00 "Year one (1) Relocation EBITDA" = an annualised EBITDA calculated as the EBITDA for the six (6) month period immediately preceding the date of Relocation multiplied by two (2) Therefore, for example, the 1st Adjustment to Purchase Price (where the annualised EBITDA is $304,166.00) would be: = 4.5 x ($304,166.00 - $250,000.00) = 4.5 x $54,166.00 = $243,746.00 Thereafter, for the purpose of clause 3.3(c), the 1st Adjustment Date will be deemed by the parties to be the date of Relocation. For the purposes of clauses 3.3 and 10.1, the date of Relocation will be the date the Business commences operation at the New Location. (c) (Calculation and Payment of 1st Adjustment to Purchase Price): The parties will calculate and agree on the 1st Adjustment to Purchase Price within two (2) months from the 1st Adjustment Date. Subject to clause 10.5(a), the Purchaser will pay the Vendor the 1st Adjustment to Purchase Price no later than three (3) months from the 1st Adjustment Date. Any dispute between the parties in respect to the method of calculation or the amount of the 1st Adjustment to Purchase Price will be resolved in accordance with clause 16. (d) (Relocation and 2nd Adjustment to Purchase Price) The Vendor acknowledges that the Purchaser intends to undertake a Relocation of the Centre. Subject to clause 3.9, the Vendor agrees not to object to any Relocation of the Centre. If the Purchaser and the Vendor agree to a Relocation on or before the expiration of eighteen (18) months from the Completion Date, the parties will, twenty-four (24) months from the date of the Relocation ('the 2nd Adjustment Date), calculate an adjustment to the Purchase Price of the Business (the 2nd Adjustment to Purchase Price) as follows: 2nd Adjustment to Purchase Price = 4.5 x (Year two (2) Relocation GP EBIT – Year one (1) Relocation GP EBIT) Where: "Year two (2) Relocation GP EBIT" = the GP EBIT for the 12 month period commencing 12 months from the date of Relocation. "Year one (1) Relocation GP EBIT" = the GP EBIT for the 12 month period commencing from the date of Relocation. For example: Where Year two (2) Relocation GP EBIT = $300,000.00 Year one (1) Relocation GP EBIT = $250,000.00 2nd Adjustment to Purchase Price = 4.5 x ($300.000 - $250,000.00) = 4.5 x $50,000.00 = $225,000.00 (e) (Calculation and Payment of 2nd Adjustment to Purchase Price): The parties will calculate and agree on the 2nd Adjustment to Purchase Price (referred to in Clause 3.3(d) above) within two (2) months from the 2nd Adjustment Date. Subject to clause 10.5(a), the Purchaser will pay the Vendor the 2nd Adjustment to Purchase Price no later than three (3) months from the Adjustment Date. Any dispute between the parties in respect to the method of calculation or the amount of the 2nd Adjustment to Purchase Price will be resolved in accordance with clause 16. (f) (Allocation of Payment of Purchase Price): Subject to clause 10.5(a), the Payment of: (i) the Purchase Price will be paid in cash or partly in cash and partly (up to a maximum of 30%) in Foundation Shares as stipulated in Item twelve of Schedule One; (ii) any adjustment to the Purchase Price in accordance with clauses 3.3(a), (b) or (d) will be paid in cash or partly cash and partly (up to a maximum of 30%) of Foundation Shares as directed by the Vendor to the Purchaser in writing one (1) business day prior to the payment; and (iii) in relation to clause 3.3(f)(ii), if the Vendor does not notify the Purchase in writing as to the cash/Foundation share apportionment prior to payment, then the apportionment will be the same as that applied in respect to the payment of the Purchase Price on Completion. (g) (Adjustment in favour of Vendor): Adjustment under clauses 3.3(a), (b) or (d) shall only be made in favour of the Vendor. If the sum of either of the calculations required by clauses 3.3(a), (b) or (d) is negative, it shall be taken to be zero. (h) (Determination of Foundation Shares): For the purpose of determining the number of Foundation Shares to be issued as part of the Purchase Price, each Foundation Share shall be issued at a share price equal to the average closing price for Foundation Shares on ASX over the preceding five (5) days prior to Completion or as agreed by the Parties in writing. For the purposes of determining the number of Foundation Shares to be issued as part of the 1st Adjustment to Purchase Price and the 2nd Adjustment to Purchase Price, each Foundation Share shall be issued at a share price equal to the average closing price for Foundation Shares on ASX over the preceding five (5) days prior to the 1st Adjustment Date and the 2nd Adjustment Date respectively. The issue of Foundation Shares as part of the Purchase Price or any subsequent adjustment is conditional upon Foundation or the Vendor satisfying all relevant requirements of the Corporations Law, the ASX Listing Rules or its Constitution in respect of the issue. If Foundation or the Vendor is unable to satisfy those requirements within thirty (30) days of the relevant due date, the adjustment shall be paid in cash. The parties agree to do all things necessary or convenient to give effect to the provisions of this clause 3.3. [I interpolate to observe that no such relocation in fact occurred]. 3.4 Plant and Equipment On the Completion Date, the Vendor will deliver possession and title to the Plant and Equipment to the Purchaser of the Business free from encumbrances. … 3.8 Sale of Going Concern The Vendor and the Purchaser agree that the Business hereby sold is determined to be the supply of a going concern by the Vendor to the Purchaser. 3.9 Structure, Operations and Business Direction The Purchaser agrees that it will not make any material changes to the organisational structure, operations and strategic direction of the Business or the Centre without consulting with, and receiving consent (such consent not to be unreasonable [sic] withheld) from the directors of the Vendor acting in an advisory capacity with its primary objective to ensure that the Purchaser achieves EBITDA and GP EBIT growth (which ever is applicable). 3.10 The Vendor acknowledges that the Purchaser intends to grow and expand the Business and, subject to clause 3.9, will not impede the Purchaser. … 4. COMPLETION … 4.2 Action on Completion (a) … the Vendor shall take or cause to be taken all such action as is necessary to transfer the Business to the Purchaser; … 4.4 Health Insurance Commission On Completion, the Vendor must cause the Health Insurance Commission to redirect payment of consultation fees in respect of medical services performed by the Doctors at or from the Centre to an account nominated by the Purchaser, effective on and from Completion. 5. PROFITS AND DEBTS 5.1 Profits The Purchaser shall be entitled to all profits of the Business (except the Book Debts) as from the Completion Date. … 6. EMPLOYEES 6.1 Position of Current Employees The Vendor shall properly and lawfully terminate the employment of the current Employees of the Business from the Completion Date. The Vendor shall be solely responsible for all remuneration and Accrued Entitlements of such Employees up to and including the Completion Date. The Purchaser shall offer employment to all current Employees commencing on the Completion Date. … 7. POSSESSION The Purchaser shall be entitled to possession of the Business and to the income and profits of the Business on and from close of business on the Completion Date. 8. RISK Notwithstanding any rule of law or equity to the contrary, the Business shall be at the risk of the Vendor until the Purchaser is entitled to or is given possession of the Business (whichever is the earlier) and thereafter the Business shall be at the risk of the Purchaser. 9. POSITION PENDING COMPLETION For the period from the date of execution of this Agreement to the Completion Date the Vendor shall: (a) grant to the Purchaser access to the financial accounts and other records of the Business to enable the Purchaser to inspect and review the same; (b) so far as is reasonably practicable, ensure that the Business is conducted in accordance with normal and prudent business practice having regard to the nature of the Business and use its best endeavours to maintain the profitability and value of the Business and maintain an appropriate level of consumables; and (c) observe and comply with the provisions of any laws governing the operation of the Business and any agreements affecting the same. 10. COVENANTS & WARRANTIES 10.1 Covenants & Warranties The Vendor warrants and covenants to the Purchaser, to the extent that such covenants and warranties shall survive Completion, that to the best of its knowledge and belief: (a) all information given and representations made by the Vendor in respect of the Business are true and accurate; (b) The Vendor has good right and title to sell and assign the Business to the Purchaser; … (e) the Vendor has complied with and observed all covenants, conditions, agreements, statutory requirements, by-laws, orders and regulations affecting the Business; (f) all financial information on the Business supplied by the Vendor to the Purchaser is true and accurate in all material particulars; (g) full disclosure has been given to the Purchaser of all Losses and Liabilities of the Business; … (i) all the Accounting Records have been fully, properly and accurately kept and completed and will up to Completion continue to be so made up, kept and completed and that there are at the date of this Agreement, and will be up to Completion, no material inaccuracies or discrepancies of any kind contained or reflected therein and at the date of this Agreement give and reflect, and at the Completion Date will give and reflect, a true and fair view of the financial, contractual and trading position of the Business; … (k) from the date of this Agreement until the Completion Date, the Business will be carried on in the ordinary and usual course… … (n) the Year one (1) EBITDA (as defined in clause 3.3(a)) will not fall below 90% of the EBITDA Benchmark, or in the alternative, where the Relocation occurs within 12 months of the Completion Date, the Year one (1) Relocation EBITDA (as defined in clause 3.3(b)) will not fall below 90% of the EBITDA Benchmark; (o) where the Business is relocated from the Premises to a New Location as contemplated in clause 3.3(d), the average of the GP EBIT for the first and second years from the date of the Relocation will not fall below 90% of the GP EBIT for the first year from the Completion Date; and (p) where the parties do not elect to relocate the Business as contemplated in clause 3.3(d), the EBITDA for each of the succeeding 3 years from the Completion Date will not fall below 90% of the EBITDA Benchmark. … 10.2 Reliance The Vendor covenants and acknowledges that the Purchaser is entering into this Agreement in reliance on each of the Warranties and that the Purchaser may treat the same as conditions of this Agreement. 10.5 Warranty Security Deposit (a) (Amount): The Vendor agrees that the Purchaser is entitled to withhold 20% of the Purchase Price on Completion, 20% of the 1st Adjustment to Purchase Price upon payment in accordance with clause 3.3(c), and 20% of the 2nd Adjustment to Purchase Price upon payment in accordance with clause 3.3(e) ('Warranty Security Deposit'), in cash by way of security against any breach of the Warranties… . … (c) the Purchaser may make a claim in writing… to the Stakeholder… in respect of all or any part of the Warranty Security Deposit as is necessary to the Purchaser's opinion (acting reasonably) to compensate the Purchaser and Foundation… for any loss or damage suffered by them… as a result of the Vendor breaching any Warranty. The Stakeholder will act on the terms of the claim notice within seven (7) days of receiving the said notice, unless the Vendor objects in writing ("objection notice") to the terms of the claim set out in the claim notice, during the said seven (7) day period. … (e) Unless the Warranty Security Deposit is under dispute as per clause 10.5(d) or subject to court proceedings between the parties, the Vendor and the Purchaser agree that the Stakeholder must repay to the Vendor the Warranty Security Deposit or the balance (if any) of the Warranty Security Deposit then remaining (if the Purchaser has had recourse to the Warranty Security Deposit) within 36 months from the Completion Date, or within twenty seven (27) months and seven (7) days from the date of Relocation, which ever is the later.' (f) Any interest (less bank fees and charges) accruing on the Warranty Security Deposit from time to time will: (i) form part of the Warranty Security Deposit; and (ii) be dealt with in the same manner as the Warranty Security Deposit ie payable to the party entitled to the Warranty Security Deposit. … .' 38 Clause 11 of the Business Sale & Purchase Agreement comprised a covenant on the part of Idoshore in the nature of a trade restriction for periods of time and within varying distances from the OSMC. Clause 17 thereof stipulated for 'Foundation' (ie the first respondent, Foundation Medical Centres (NSW) Pty Ltd, and the second respondent, being then named Foundation Healthcare Limited) to be '… jointly and severally liable to [Idoshore] for the due performance of all the terms on the part of [Foundation Medical Centres (NSW) Pty Limited] contained in the Agreement'. Hence of course both Foundation companies were made respondents to the present Idoshore proceedings. The case presented by Idoshore based on the operation of the Business Sale & Purchase Agreement in the light of the events which happened in the course of the same being purportedly carried into effect by the parties 39 As I have foreshadowed, in arriving at the 'EBITA Benchmark' as defined in the Business Sale & Purchase Agreement, and thus the amount of $250,000, Idoshore submitted that 'both Idoshore and Foundation undertook studies of the financial records and results of [OSMC] in order to form a view about the maintainable earnings of the business, normalised for revenue or expenses that would not be incurred after purchase', and emphasised that '[t]he results generated were not identical but… remarkably similar…'. Idoshore pointed out that its calculations recorded 'Maintainable Earnings' of the OSMC for the quarter ended 30 September 2000 as having amounted to $73,273, and on an annualised basis therefore to $293,092, and the Foundation version of those calculations amounted to $67,331, and on an annualised basis therefore to $269,324. Those calculations being made of course on an EBITDA basis, no regard was paid of course by way of deductions for interest, taxation, depreciation or amortisation (see again the defined meaning of 'EBITDA' which I have earlier extracted from the Business Sale & Purchase Agreement). 40 Idoshore emphasised understandably that the circumstance that both Idoshore and Foundation had implicitly undertaken that same calculation exercise and had arrived at congruent figures for crystallisation of the Benchmark EBITDA as the sale price multiple 'strongly suggests that objectively assessed, the business was capable of producing that level of income or profit'. Moreover Idoshore submitted that the thesis of Mr G C A Gower, chartered accountant and expert witness for Foundation, to the effect that the $250,000 EBITDA figure was a 'flash in the pan' result and was incapable of being achieved by Foundation subsequent to completion of the purchase by Foundation of the OSMC business, was plainly insupportable as a proposition having regard to the evidence. There is clearly objective evidentiary support inherent in that Idoshore submission. 41 Idoshore made the telling point therefore that Foundation must face the problem of explaining '… how it is that a business that had been assessed… as producing more profit than $250,000 per annum ([calculated at] $293,092 by the vendors and at $269,324 per annum by the purchaser) under [Foundation's] management was capable of generating a loss in its second 12 months of operation', particularly given the circumstance that 'the sale agreement made specific provision that no adverse change could be made to the business without the consent of Idoshore', Idoshore thereby referring at least to clause 3.9 of the Business Sale & Purchase Agreement which I have earlier extracted. There is prima facie strength in that further Idoshore submission. 42 Idoshore identified thereafter the following five matters as having occasioned 'the substantial reversal of fortunes of the business' that it asserted to have taken place 'after acquisition' by Foundation and under Foundation's management, being matters which Foundation had not sought, or had been unable to rationalise or otherwise explain or satisfactorily account for, satisfactorily or at all: (i) the failure to maintain the growth of income that was experienced before the sale and continued for the first six months after the sale; (ii) the failure to maintain a level of retention of the doctors' income at 50% or better; (iii) the loss of the so-called 'rental income' of consulting specialists working out of the OSMC and of the so-called 'cross referring with the general practitioners'; (iv) the incurring by the business, or the attribution in any event to the 'Business' (as defined by the Business Sale & Purchase Agreement), of the so-called 'excessive wage cost of a new level of management', and of the costs associated with employment related to the business which were costs of Foundation generally and not costs of the business considered as a stand-alone entity; and (v) the imposition on the business of Foundation head office overhead allocations, without any or any adequate reference to either the actual costs of or the benefits to the business involved in head office performing various functions. 43 Idoshore characterised the 'calculation of profit' (referring thereby to the notion of EBITDA) achieved by Foundation in respect of the periods of time following immediately upon completion of Foundation's acquisition of the business conducted at the OSMC as 'artificial', in that such business ceased under Foundation's ownership and management to be that of a separate legal entity for accounting purposes and subjected to discrete accounting as such in terms of costs and revenue, and instead became merely a 'division of Foundation', and treated as one of many medical centres owned and controlled by Foundation, and in relation to which Foundation Group administration costs were imposed without prior precedent in Idoshore's accounting regime. Idoshore thus explained that after the Business Sale & Purchase Agreement was put in place and completed, what was operated and recorded 'in the sense of accountancy' by Foundation was not 'a stand-alone business conducted by a single corporation conducting a single business'. Idoshore's expert witness Mr Phillips of Deloitte Touche Tohmatsu expressed the view in that regard for the purpose of his report placed in evidence that a contractual stipulation in relation to the consideration payable in respect of the sale of a business ordinarily carried the implication that any EBITDA calculation involved would inherently fall to be assessed on the same basis after acquisition as the basis used to calculate that benchmark before acquisition. Idoshore postulated that the Agreement envisaged that the business after acquisition would remain essentially the same business, in terms of scope and structure of operations thereof, as was conducted by Idoshore before its acquisition by Foundation, in order that the full monetary consideration to be provided by Foundation to Idoshore could be quantified in the light of post-completion performance. Necessarily or inherently, so Idoshore therefore explained succinctly, the EBITDA of the post-acquisition business, 'considered as a stand alone generator of revenue and incurrer [sic] of costs', was required to be directly comparable in scope of operation and performance to the EBITDA of the pre-acquisition business. Or put another way, when the 'EBITDA Benchmark' was encapsulated by the Agreement, what was mutually intended to be addressed would be a 'stand-alone' business fulfilling the defined meaning of 'Business' conducted by a single corporate entity. There is clear force in those submissions from an accounting and an otherwise business perspective and most importantly in terms of an appropriate as well as reasonable operation of the relevant provisions of the Business Sale & Purchase Agreement, and in particular that provision which became the subject of critical focus from Idoshore's perspective, being clause 3.9 of that Agreement. 44 Idoshore contended accordingly that '[i]n large measure the issues in this case concerning the post acquisition EBITDA arise because Foundation have, for their internal accounting purposes, "notionally" applied to the calculation of the results of the OSMC business costs that were not incurred by that business [pre-acquisition], because it's not a legal entity, and would not have been incurred by the business if it were being separately conducted on a stand-alone basis outside Foundation and its influence, and was managed in accordance with the [Business Sale & Purchase Agreement]'. It was further contended by Idoshore that '[o]nce that point is understood, the objection to the method of calculation [by Foundation] of post acquisition EBITDA becomes much clearer'. That was further said by Idoshore to be the case because '[t]he argument is not whether particular costs were or were not incurred by Foundation', but rather '… whether it is appropriate to apply some particular costs to the calculation of EBITDA of "the Business" when those are not costs that would have been incurred by the business on a stand-alone basis, were not incurred before acquisition, and are not apparently necessary as a cost of the business'. It will be recalled that the definition of 'Business' stipulated by the Agreement commences 'the business of providing facilities and services to medical practitioners to facilitate the conduct of their individual medical practices carried out in and from the Premises…', and thereafter catalogues seven relatively disparate matters to be included in the definition, together with three matters to be excluded from the definition. It was emphasised by Idoshore that '[t]o the extent that they are costs incurred as a result of changes of organisation, strategy and operations of the Business without Idoshore's consent, they are simply impermissible costs to be recognised at all'. There is clear force in principle in those submissions. 45 Further as to issues involving criteria related to the costs of operation of the OSMC, Idoshore contended that 'similar observations can be made in relation to income' of the OSMC. The hypothesis was postulated in that regard to the effect that, if either for 'some wider policy reason' or 'because of sheer ineptitude or laziness', it had been the case that Foundation 'for its own internal purposes [had been] content to sacrifice income sources of a particular Centre', that would be 'a matter for Foundation', but nevertheless that was '… not an outcome that can be laid at the feet of the Business for the purposes of calculating post acquisition EBITDA, unless it can be shown that the business would have been in no different position had [it] been managed according to its own interests'. There is clear force in that further Idoshore contention. 46 Idoshore summarised its principal claim therefore to the effect that '… when the income sacrificed is added to the costs applied to the business which have no place in the calculation of post acquisition EBITDA and the [relevant] sum added to the reported profit, it is perfectly clear that Idoshore not only should have received the benefit of the balance of the purchase price but also was entitled to a very substantial "Earn-up" on the application of the 4.5 multiplier to the EBITDA, less $250,000 that should have been earned, which [earn-up] on any view, significantly exceeded $250,000'. That reference to the '4.5 multiplier' was contextually of course made in relation to the operation of the lengthy and complex 'Adjustment to Purchase Price' provisions of clause 3.3 of the Business Sale & Purchase Agreement, and sub-paragraph (a) in particular relating to initial one year 'earn-up': see again [37] above. 47 Apart from reliance upon the explicit provisions of the Business Sale & Purchase Agreement that I have already extracted, Idoshore pleaded, as I have foreshadowed, a further case based on warranties and representations asserted to have been made orally by Foundation collaterally to the provisions of the Agreement and to be operative under the general law, and also to have been 'actionable… pursuant to s 52 of the Trade Practices Act'. Those warranties and representations were described by Idoshore as encompassing the following three material matters and as having been so made by Foundation in order to induce Idoshore to commit to the transaction the subject of that Agreement: (i) '[a] sale at a multiple of earnings, [being] 4.5 of the benchmark earnings with deferred receipt as to 20% of the price'; (ii) '[a] provision for increased sale price if earnings increase over the benchmark [earnings] after 12 months'; and (iii) '[a] warranty by [Idoshore] for three years against a fall in earnings below 90% of the benchmark earnings [in the course of] any of those years'. Idoshore's case was thus described as involving an agreement that had 'an upside and a downside element' for Idoshore. I would observe that although the Business Sale & Purchase Agreement does not contain any so-called 'entire agreement' provision as frequently inserted in contracts in order purportedly to exclude anything other than explicit terms, it was nevertheless very comprehensive in scope. Accordingly there are formidable obstacles in the way of Idoshore's case for reliance upon the oral warranties and representations which it sought to establish independently and collaterally to such comprehensive documentation as is the subject of that Agreement. It is with those caveats that I will complete Idoshore's submissions made in advance of what was its case additionally or alternatively to that founded upon the explicit terms of the Agreement. 48 Each of the collateral warranties and representations asserted by Mr O'Shanassy to have been made to Idoshore by Foundation were claimed by him to have remained uncontroverted. Those warranties and representations (whichever be the strictly more accurate characterisation) were purportedly recorded at some length in pars 44 and 47 of Mr O'Shanassy's affidavit sworn on 20 February 2006, and in a context in the course whereof Mr Meehan was asserted by Mr O'Shanassy to have further represented, as I have foreshadowed, that '[t]here is huge potential for this medical centre – strategically speaking, it is ideally located and has the ability to expand in sheer size by either expanding into level 1… or relocating to larger premises', and further that '[t]o optimise the medical centres potential it would need to grow in size to benefit from the economies of scale…', and yet furtherthat '[b]ased upon what I have outlined, you will be financially far better off accepting a lower initial purchase price that provides you with further earn up… I intend to be involved in the management of Foundation and I have a vested interest in ensuring Foundation is successful'. It would be difficult for the Court to ascribe decisive significance or operation in relation to those and similar collateral statements on Mr Meehan's part, given that the parties subsequently reduced their contractual arrangements to writing in such detailed and comprehensive documentation as the Business Sale & Purchase Agreement at least implicitly settled in form between the legal representatives of the parties. All the more so would that be implicitly the case, given the terms of Foundation's offer made antecedently to the Agreement, which concluded with the traditional phraseology 'subject to Contract' (see [23] above). 49 Idoshore's summary of the operation and effect of the representations attributable by it to Foundation, and to Mr Meehan in particular on its behalf, as having allegedly induced Idoshore's subsequent entry into and its completion of the Business Sale & Purchase Agreement, appeared in comprehensive detail in its written submissions. I will record that further material in outline below, to the extent purportedly appropriate to the context in which the same took place: (i) it was in 'Idoshore's interest' to sell the assets of the OSMC at a discount on the price it was seeking, in exchange for a price based on a so-called 'lower multiple' of 4.5 of maintainable EBITDA and an initial 'earn-up' at the end of one year's management of the OSMC by Foundation, and a second 'earn-up' when the business was relocated, based on the multiple applicable to the increased EBITDA; (ii) that 'earn up' could only be achieved 'if Foundation had the will and capacity to grow the EBITDA of the Centre', any such achievement not being 'a passive matter', but that nevertheless 'Foundation had the necessary skills, capacity and capital to manage the business successfully', and would in fact so manage it in order to 'grow' the OSMC business and thereby 'obtain the earn-up', and 'necessarily create conditions whereby Idoshore would not be 'deprived of the benefit of the [so-called] earn-up'; (iii) Foundation would not make any material changes to the organisational structure, operations or strategic direction of 'the Business or the Centre' without first consulting Idoshore, and without Idoshore's approval; all that was described by Idoshore as reflective of the 'no adverse change' representations and warranties the subject of clause 3.9 of the Business Sale & Purchase Agreement which I have earlier extracted in these reasons, and which clause was said to have operated in the context of a '… primary objective… to ensure that [Foundation] achieves EBITDA and GP EBIT growth (whichever is applicable)'; consistent with that thesis was said to be Idoshore's acknowledgement by clause 3.10 of that Agreement '… that the Purchaser intends to grow and expand the Business and, subject to clause 3.9, will not impede [Foundation]'; and (iv) that those 'no adverse change' and 'the intent to grow EBITDA' representations and warranties were relevant and material both to protect Idoshore from a breach of the warranted maintenance of 90% of agreed EBITDA and to protect the 'Earn Up' (referring thereby to pars (n) and (p) of clause 10.1 of that Agreement). 50 As to the 'fact of the representations' as so described by Idoshore having been made orally to it by Foundation, it was pointed out by Idoshore that 'Mr O'Shanassy was cross-examined at length, and should be found by the Court to [have]… answered questions directly', and to have been 'a witness of truth'; moreover it was also contended that his cross-examination, in particular referrable to the content of pre-acquisition income tax returns of Idoshore, 'got nowhere'. It was Idoshore's contention that '[w]ith respect to recollections of events, [Mr O'Shanassy's] answers… demonstrated an honest and genuine recollection of conversations, [recorded] in his affidavit, and as tested in the witness box', and were 'utterly uncontradicted'. It was Idoshore's further contention that his evidence as to reliance upon the oral representations asserted to have been made by and on behalf of Foundation was entirely credible, it being argued that there was an immediate and logical connection between the alleged representations and the subject matter of pre-contractual discussions, such as to render absence of reliance 'more incredible than reliance'. Moreover Foundation adduced no oral testimony at all from Mr Meehan of Foundation, by way of denial in whole or in part of those representations attributed to him. The difficulty however for Idoshore remains that there was subsequently concluded with Foundation a very comprehensive written Agreement which made no reference to any such collateral representations on Foundation's part. 51 It is appropriate here to record that I gained a favourable impression of Mr O'Shanassy as a credible and reliable witness, who presented as a person evidently conscious of his duty to be truthful in testifying on oath of course to the Court, and who did not unduly advocate Idoshore's case in response to the careful and comprehensive cross-examination of counsel for Foundation. The difficulty for Idoshore is not therefore any concern of the Court as to shortcomings in credibility or reliability of Mr O'Shanassy's evidence, but rather the extent of significance that may be ascribed to that evidence in the light of the comprehensive provisions of the Agreement ultimately put in place, and which implicitly purported to cover the field of the complex contractual arrangements to ultimately prevail between the parties (compare incidentally clauses 15.1 and 15.2 thereof). I will expand upon that characteristic of the Agreement in later discussion of the operation of the Agreement. 52 Idoshore's written submissions on liability also included the following: (i) Foundation induced Idoshore to enter into the Business Sale & Purchase Agreement on the basis of representations, which were also promissory, as to existing circumstances, and were actionable according to principles of equity and to the law of contract, and also according to s 52 of the Trade Practices Act; (ii) Foundation breached that Agreement, or falsified the representations thereby made, by failing to consult with and obtain the approval of Idoshore 'about material changes to organisational structure, operations or strategic direction of the business and [the OSMC] and made changes which adversely affected EBITDA'; (iii) as a consequence, Foundation deprived Idoshore of 'the benefit of the contract', and of 'the right to the "Earn-Up"' in particular, by reason of 'its materially changing the organisational structure, operations or strategic direction of the business, all of which changes reduced EBITDA'; (iv) Foundation breached the Agreement in that it conducted the financial and business affairs of the OSMC business, not with the primary objective to ensure that Foundation achieved EBITDA and GP EBIT growth, or to grow and expand the business, but instead to 'inflict' new costs on the business and 'abandon' revenues previously earned; (v) Foundation breached the term of good faith to be implied into the Agreement, being an implication pleaded by Idoshore to be necessary as well as reasonable for the operation thereof, by reason that 'the purchase price payable to Idoshore and Idoshore's entitlement to "earn-up" depended on Foundation continuing to manage the business in good faith and in the same way as the business had been managed before the Agreement was made, (subject to Idoshore's reasonably required approval to any changes), or else [breached] an implied term to make such changes to the business that would ensure that Foundation achieves EBITDA and GP EBIT growth' or would grow and expand the business; and/or (vi) 'for the Business Sale & Purchase Agreement and Earn-Up provisions to have any efficacy, the EBITDA calculations for the "Earn-up" were required to be prepared [by Foundation] on the same basis as the EBITDA Benchmark', and in that regard, it was and remained necessary 'to compare like with like'; that requirement was said to have been capable of satisfaction 'within the contractual structure which required [Foundation] not to change the organisational structure, operations, or strategic direction in a material way without the consent of [Idoshore]'; moreover '[c]onstancy in relation to organisational structure, operations or strategic direction would have caused the cost structure and revenue character of the business to remain constant and therefore the EBITDA calculated after acquisition appropriately [rendered] comparable with the EBITDA calculated before acquisition', so Idoshore yet further submitted. 53 For reasons I have foreshadowed, there is formidable forensic difficulty inherent in Idoshore's submissions for substantial general damages for misrepresentation and for misleading and deceptive conduct within the Trade Practices Act (see again [2(i)] above) causative of Idoshore's entry into and completion of the Business Sale & Purchase Agreement. No judicial precedent was cited by Idoshore involving circumstances where a contracting party committed itself, subsequent to the making of misrepresentations complained of, to a comprehensively documented transaction, such as the present Agreement, where that document had been comprehensively settled between the legal representatives of the parties. Moreover Idoshore was an experienced owner and operator who stood at arm's length from the purchaser, and in relation to the formation of which transaction each of the parties was independently represented by its lawyers; indeed the apparent corporator of Idoshore Mr O'Shanassy was himself legally qualified. As to invocation of the Trade Practices Act in relation to the conduct alleged to have had legal significance, it is not easy to comprehend the commercial reality of a representation having induced entry into such a complex instrument settled by the legal representatives of the parties, yet finding no expression in such an elaborate instrument as the Agreement. Events subsequent to completion of the Business Sale & Purchase Agreement –adjustments to EBITDA circumstances and calculations made post-acquisition at the instance of Foundation – submissions of Idoshore concerning significance as to fall in revenues subsequent to Foundation's takeover of operation of the Oxford Square Medical Centre 54 I have already extracted most of the defined expressions appearing in clause 1.1 of the Business Sale & Purchase Agreement, and in particular that of 'Business' and 'EBITDA', and of the 'EBITDA Benchmark' (amounting of course in the latter case to $250,000). Idoshore asserted that the non-exclusively defined expression 'Business' was 'a logical construct' and was not indicative of a legal entity. It was further argued by Idoshore that the defined notion of 'Business' found expression in activity conducted 'within the Foundation corporate organisation' following upon the subject acquisition, albeit confined in nature to 'the business operation' which had been conducted by Idoshore before the subject acquisition. There is a need to elaborate upon that submission at the outset to the extent that the definition of 'Business' the subject of clause 1.1 of the Agreement includes 'Goodwill' (being a defined term), 'the right to occupy the Premises', 'Plant and Equipment' (again a defined term), and 'the right to receive income from any sub-lease or license at the Premises', but all that does not involve any controversy, at least of substance, to my perception of the substantive issues arising. 55 As I have foreshadowed, Idoshore contended that the operation of the definition of EBITDA post-acquisition requires an examination to be undertaken of what revenues and expenses were relevantly involved in Foundation's operations at the OSMC after completion of the Business Sale & Purchase Agreement, in order to determine whether the same 'belonged' (to adopt Idoshore's expression) in some logical way to the 'Business' as so defined in and by the Business Sale & Purchase Agreement. Put another way by Idoshore more specifically, '[t]he issue is not whether they are costs and revenues of Foundation', since '[a]ll costs of the Business will be costs of Foundation because it is the corporate owner' of the Business, and further that '… necessarily, not all costs of Foundation incurred generally or in relation to the Business [were] costs of the Business' (the emphases being that of Idoshore). So much is in my opinion correct in principle. Moreover it was further said by Idoshore that regard should be paid to the definitions of 'Losses and Liabilities', 'Operating Costs' and 'Outgoings' appearing in clause 1.1 of the Agreement in order to gain an appraisal of the validity or otherwise of the descriptions or illustrations given by Idoshore to the broad notion of '[a]ll costs of the Business'. To those defined expressions may be incorporated reference to at least the definitions of 'Premises', 'Service Fees' and 'Taxes' appearing also in clause 1.1. 56 The principal breaches by Foundation of the Business Sale & Purchase Agreement, as well as the falsification of representations collateral to the formation thereof allegedly on the part of Foundation, were described by Idoshore as the 'load[ing] up' of the OSMC business with 'new costs', being principally the costs outlined as follows: (i) 'a cost of a new management layer' of about $80,000 per annum incurred for at least the first and second years of operation of that Agreement; (ii) 'the costs of corporate overheads' of about $48,000 per annum in respect of 'all years' from and after commencement generally of the operation of that Agreement; and (iii) 'costs peculiar to Foundation (not of the OSMC business) and as an employer of a much larger size than Idoshore or OSMC as a stand-alone enterprise, being in particular group tax approximately $17,000 per annum in respect of 'all years'. There is force in that assignment of significance relevantly by Idoshore concerning those so-called 'new costs'. It would be difficult to rationalise a proposition to the effect that costs of those descriptions, being personal or otherwise peculiar to Foundation, could have been objectively envisaged mutually by the contracting parties as being accommodated contextually within the costs measurement formula of EBITDA, those being costs originating on a non-arm's length basis and having no reflection correspondingly in the EBITDA components appertaining to Idoshore. 57 As I have foreshadowed, Idoshore submitted that the bringing of costs of those descriptions incurred into the calculation of the EBITDA of the OSMC, as costs incurred by or in relation to the 'Benchmark EBITDA', contravened clause 3.9 of the Business Sale & Purchase Agreement, since the same involved '… material changes to organisational structure, operations and strategic direction of the Business and Centre without consulting with, and receiving consent from the directors of Idoshore…', for the following reasons articulated by Idoshore: (i) the 'new management layer' created by Foundation in relation to the OSMC operations involved 'material changes to the organisational structure' or 'operations' of the OSMC by way of introducing new staff and management with associated costs into the conduct of the Business for which there was no approval by Idoshore and which decreased EBITDA, as distinct from 'growing it' (see again clauses 3.9 and 3.10, where the theme of obligation on the part of Foundation as to growing 'the Business' appears); (ii) the same thesis as in (i) above applied in principle in relation to contribution to costs of corporate overheads imposed, or otherwise made attributable to the OSMC operations, by Foundation; (iii) costs incurred by Foundation in relation to the fact merely that it became the owner of the OSMC were not costs of the OSMC for the purpose of EBITDA accounting; thus it was not a relevant expense of the OSMC, for instance, that Foundation as an employer had 'overall', in the sense of 'over its whole medical centre empire', a large enough payroll to attract payroll tax than would have been otherwise the case if the OSMC was ex hypothesi its only enterprise involved in the engagement of employees; likewise the fact that Foundation was a stock exchange listed company 'could not justify inflicting some share of listing costs on OSMC', Idoshore not of course having been a listed public company. 58 There is force in principle in those submissions, in that Foundation appears to have introduced factors into its calculations which at least arguably stood outside a fair and realistic operation of the defined meanings of the 'Business' or the 'Centre' contained in Clause 3.9, and their implications in the context of the Business Sale & Purchase Agreement as a whole. In that latter regard, inherent in the Agreement's defined notion of 'outgoings' is that the same be 'of the Business' (as of course in turn defined). Idoshore emphasised, rightly I think in principle, that whilst 'Foundation could choose for its own reasons to incur costs or simply have them inflicted on it because of its peculiar characteristics', nevertheless Foundation '… could not… bring them to account in calculating the EBITDA of the Business after acquisition'. 59 Additionally to those principal breaches which Idoshore sought to thus frame, Idoshore postulated what it described as a 'second level of breaches of Clause 3.9 concern[ing] revenues'. To set the context for identifying those further alleged breaches, Mr O'Shanassy drew attention to 'the business management principles and revenue earning strategies of the Business of OSMC before sale', which he caused to be pursued by Idoshore prior to the Foundation takeover, being principally as follows: (i) to grow gross billings by doctors; (ii) to obtain an average of '50% or better from doctor retentions'; and (iii) to maximise other revenues from medical practitioners who attended rooms at the OSMC for consultations and 'cross referring', those principal strategies were characterised by Idoshore as not 'properly' subject to change by Foundation without the permission of Idoshore at all after acquisition 'because of the said clause 3.9 of the Business Sale & Purchase Agreement', or 'where because of the change, EBITDA of the business is reduced'. 60 Yet as Idoshore postulated further, 'without [its] permission', under Foundation's operation of the 'Business' following upon 'Completion': (i) the gross billings of the OSMC, which had been increasing prior to, and 'for a time' subsequent to, completion of the Business Sale & Purchase Agreement, 'were allowed to stagnate'; (ii) 'the doctors retention figure' was allowed to slip from 53% to 43% at a cost to revenue of over $100,000 per annum for each of years 2 and 3 after acquisition'; and (iii) 'consultant "rent" revenues disappeared entirely in years 1, 2 and 3 and ordinary rent fell by $29,000 in year 2, the former being referrable to visiting specialists and the latter to room occupancies by general practitioners.' The response of Foundation was not to put in issue that such falls in categories of revenues etc took place after completion of the Agreement, though Foundation did not accept that so much was in any way attributable to any breach of contractual obligation on its part. Nevertheless Foundation failed to provide a sufficient explanation for such declines in revenue. 61 By way of elaboration upon factor (i) immediately above, Idoshore submitted further as follows: (i) the Deloitte expert report made on 5 February 2007 by the firm's partner Mr Phillips, of course on the instructions of Idoshore, postulated that the figures provided by Mr O'Shanassy from the records of the OSMC, '… far from showing a declining business, actually showed a growth trend for the business from 1 July 2000 (ie for the September 2000 quarter)'; completion of the Business Sale & Purchase Agreement by the '[giving of] possession/control to Foundation Medical' occurred subsequently on 31 January 2001 having been entered into on 14 December 2000; I observe that the average monthly billings for the three months ended 30 September 2000 was $98,956, thereby totalling $296,867 for that July to September quarter, and the average monthly billings for the nine months to 30 June 2001 was $106,729, involving an increase of 7.9% for that latter period (par 3.25 of the Deloitte report); (ii) the Deloitte report postulated further that if the growth trend of the OSMC had been maintained after completion of the Foundation acquisition or takeover of the OSMC business on 31 January 2001, the '[f]orecast total billings (Static Average) ' would amount to $1,493,052 for the twelve months ended 31 January 2002 and the '[f]orecast total billings (Growth Trend)' would amount to $1,551,226 over the same period; the 'Static Average' was based on a calculation whereby the 'average monthly billings for the period 1 February 2001 to 31 July 2001 continue for the remainder of the year, ie 1 August 2001 to 31 January 2002', whilst the 'Growth Trend' was based on a calculation whereby the 'trend in the billings for the period 1 February 2001 to 31 July 2001 compared with 1 February 2000 to 31 July 2000 continues for the remainder of the year, ie 1 August 2001 to 31 January 2002'; EBITDA for the twelve months ended 31 January 2002, based on 22.4% per quarter ended 30 September 2000 and involving forecast total billings (static average), was calculated to be $334,444; forecast billings 'growth trend' was calculated to be $347,475. Neither of those outcomes occurred in the events which subsequently happened (see pars 3.119 to 3.121 of the Deloitte Final Expert Report headed Instruction 7a); and (iii) in circumstances where Foundation 'has failed to explain in any probative way why the deterioration in revenue reflected in the accounts occurred, or what steps they took to arrest it', or why no attempt was made to consult contemporaneously with Idoshore in relation to that circumstance, 'the Court can and should prefer the growth trend analysis of Deloitte to determine the proper EBITDA Earn-Up'. 62 Relevantly to the prevalence of factors (ii) and (iii) above, Idoshore asserted the following additional matters: (i) Foundation's expert witness Mr Gower, a chartered accountant and a director of his firm GCA Gower & Co Pty Ltd (and being incidentally a former partner of Deloitte Touche Tohmatsu for five years, and before then a partner of Duesburys for six years), conceded in the course of cross-examination (at transcript page 257) that he had no explanation for the 'drop of 10 per cent of the gross income'; (ii) the difference relevantly involved adversely to Idoshore (though not to the Foundation corporate group as a whole) was 'around… $100,000' which 'would otherwise fall directly to the bottom line'; (iii) accordingly Mr Gower was unable to explain, as he further appeared to at least implicitly acknowledge under cross-examination, that '… as part of [his] instructions absolutely no explanation by anyone within Foundation [was given to him] as to why it was that one of the key determinants of the business – that is to say the retention from doctors' billings, dropped from 53 per cent eventually down to 43 per cent over only three years…'. 63 By way of further elaboration upon factor (iii) immediately above, no explanation was said by Idoshore to have been provided by Foundation for 'the disappear[ance] entirely, in years 1, 2 and 3' following upon completion of the Business Sale & Purchase Agreement, of consultancy 'rent' revenues, or for the fall in 'ordinary rent' by $29,000 in year 2. It was submitted by Idoshore in that regard that '… a change in income stream (sundry and rental) of that magnitude, shows that it is more likely than not that Foundation made changes to the business which produced the collapse in sundry/rental income, and that although a reduction in income may have been unremarkable… a complete disappearance of income is inexplicable'. There is force in that submission but it is not a simple task, without more detail, to afford at least entire significance thereto. It was pointed out by Idoshore in any event that '[a]ny change sufficient to have that dramatic an effect would be a material change to the business', yet there was no cross-examination of Mr O'Shanassy as to whether he was consulted about any change in the management or in the running of the business, as Foundation was contractually required to do (see again clause 3.9). In outlined summary of Idoshore's case therefore, Idoshore contended that on the balance of probabilities, and in the absence of any satisfactory explanation by Foundation otherwise, which was said to have been not forthcoming, '… the loss of income reflected in Mr Gower's [evidentiary] table for the years 2002, 2003 and 2004 was caused by a material change in the way Foundation conducted its business, which in turn deprived Idoshore of the Earn-up, and contributed to Foundation's [so-called] embarrassing warranty claim', with the consequence that the loss 'ought to be restored to the account as income'. 64 Largely upon the basis of the foregoing submissions, Idoshore's case in broad summary was that the consequential effect upon the income generally and upon the EBITDA consequentially of the OSMC in Foundation's hands, was as follows: (i) rental income of approximately $172,000 ($116,780 + $55,372), said to constitute the relevant calculation before acquisition, fell to $51,700 in year 1, $23,000 in year 2 and $49,800 in year 3, in each case of course post-acquisition, thereby representing losses in revenue of $65,000 for those first two years and $93,000 for that third year; (ii) coupled with the loss of retention percentage in years 2 and 3, '$65,000 was lost in year 1 and $193,000 in year 2 and $165,000 in year 3'; (iii) expenses were increased by $145,000 ($97,000 plus $48,000) in year 1, by a similar sum in year 2, and by $80,000 in year 3; (iv) accordingly the aggregate impact on EBITDA was $162,000 lost in year 1, $338,000 lost in year 2 and $245,000 lost in year 3, according to Idoshore's foregoing calculations. 65 Idoshore's case was therefore that but for the circumstances I have already recorded and upon the footing of its foregoing submissions: (i) Idoshore would have had an 'earn up', or to adopt the language of clause 3.3(a) of the Business Sale & Purchase Agreement, an upwards 'Adjustment to Purchase Price'; (ii) Idoshore would have received what it called the 'purchase price balance'; and (iii) 'Idoshore could not have been liable for any warranty claim', referring thereby to the claims made by Foundation pursuant to sub-clauses (n) and (p) of clause 10.1 of the Agreement (which have been earlier foreshadowed). 66 Idoshore claimed to have sustained loss and damage which would not have occurred but for the breaches of contract alleged, based on the following further calculations which it postulated: (i) in year 1, EBITDA reported by Foundation was $69,534; an additional $162,000 of EBITDA, said to be 'the aggregate impact on EBITDA' calculated as above, would have yielded a $241,534 EBITDA; (ii) in year 2, a loss of $12,980 was reported; a '$338,000 adjustment' would place EBITDA at $325,000; (iii) in year 3, EBITDA was reported at $44,436; when 'adjusted for income and expenses, $289,436 would have been earned'; and (iv) if the loss of income from 'the stalling' of the income growth is included, another $200,000 approximately would have to be added to EBITDA; that was said by Idoshore to be 'because the actual income was $1,076,751 in 2002, that of $1,042,467 in 2003, and that of $1,064,000 in 2004', 'whereas had even the growth actually enjoyed from July 2001 to September 2002 been continued, or even the 7% growth rate… after purchase', as calculated by Mr Phillips in the Deloitte report furnished to Idoshore, the income would have been in the order of $1.5m per annum, or $400,000 higher than was derived in the events which happened and were reported; so much represented '$200,000 of what would be substantially [the] bottom line addition to EBITDA'; that was said by Idoshore to be the case 'because all other costs of achieving that income had already been incurred'. 67 Accordingly Idoshore's case was further that given all relevant income and expense adjustments having been made, 'on the basis of what the business had done and was doing at the time of sale and shortly after, EBITDA would have been $441,534 in Year 1, $525,000 in Year 2 and $489,436 in Year 3'. Therefore the 'EBITDA figures in year 1 (1st Earn Up period) would have provided the following outcomes', so Idoshore presented to the Court (see again clause 3.3(a) of the Agreement): · $441,534 - $250,000 ([so-called] EBITDA Benchmark) equals $191,534 (growth in EBITDA in year 1), which would have resulted in: · $191,534 x 4.5 (earn-up multiple as per sale contract) equalling $861,903 as thereby payable to Idoshore. 68 The foregoing submission as to the likely EBITDA in the first 'earn-up' year of a figure in excess of $400,000 was asserted by Idoshore to be supported by the evidence of Foundation's expert Mr Gower, appearing at page 257 of the transcript for Day 4 of the hearing of the proceedings, where the following appears in the course of his cross-examination by senior counsel for Idoshore: [Mr Cotman] 'Right. Well, can we then come back very briefly to the analysis of these three years and your page 13? If we go to the 2004 year, we have, yet again, a loss of about $100,000 of income by reason of the retention rate having gone from 53 per cent down to 43 per cent…? [Mr Gower] That's – the difference there is about $124,000, I think. [Mr Cotman] Yes. And, likewise, we have a loss of the rental income of about $54-odd thousand? [Mr Gower] It's reduced by approximately that, yes. [Mr Cotman] And in this year, at least, the surplus wages cost is – over the 2000 or two thousand and – September 2000 quarter, is only now only about $40-odd thousand, isn't it? [Mr Gower] That's approximately right, yes… . [Mr Cotman] Right. And so taking those four components into consideration, and the fact that the business earned [$]92,000, even under those circumstances, if the business had been conducted as it was being conducted in September 2000, or in relation to the revenue line as it was being conducted in the year ended February 2002, the business would have earned about $400-odd thousand, would it not? [Mr Gower] That's – on these numbers, that's approximately right, yes. [Mr Cotman] In other words, it would have earned around about $110,000 more that the target EBIT?--- [Mr Gower] That's what the numbers show. Yes'. 69 Further to Idoshore's submissions upon the issue which its senior counsel described as 'Gower's Impossible EBITDA Benchmark thesis', I was referred by Idoshore again to clause 3.3 of the Business Sale & Purchase Agreement, which provided for a '1st Adjustment to Purchase Price' by reference to the 'EBITDA Benchmark' of $250,000. Idoshore contended that in the course of the expert evidence of Mr Gower, given in support of Foundation's case, Mr Gower asserted that the '1st Adjustment to Purchase Price' was incapable of achievement, because it required the OSMC to 'significantly outperform' its own historical earnings and various other financial benchmarks, inclusive of '[r]evenue achieved by the [OSMC] both before and after Foundation's acquisition' (Gower, 1st Report, para [15]). Idoshore rejoined to the effect that the evident purpose of the attack was to justify and give some credence to the subsequent and 'dramatically lower' EBITDA for the years 2002, 2003 and 2004. That so-called 'attack on the EBITDA Benchmark' was said by Idoshore to have failed for reasons advanced by Idoshore, which I will summarise below. 70 The first reason so advanced by Idoshore was that the 'EBITDA Benchmark' was agreed by Foundation with Idoshore following the due diligence process, and thus antecedently to the formation of the Business Sale & Purchase Agreement. If the EBITDA benchmark was 'as profoundly overstated as a possible result for Business as Mr Gower's subsequent EBITDA calculations suggest', then as Idoshore thereupon postulated, the conduct of the respective parties in selecting that EBITDA (of course $250,000) was 'absurd'. It was submitted further by Idoshore that '[t]o the extent the collapse of post-acquisition EBITDA was a result of the bringing to account of costs not incurred previously and incurred apparently in breach of the Agreement', the selection of a $250,000 EBITDA benchmark, constituted for the purpose of course of giving definitive effect to that Agreement, was 'nothing short of a scheme to cause Idoshore to go into breach [of] the warranties, and [for] Foundation to recover that very excessive and unauthorised expenditure as a claim on warranties'. 71 The second reason advanced by Idoshore was that 'the evidence confirms that the EBITDA Benchmark was in fact economically rational'. In that regard, both parties were said to have at least implicitly or intrinsically agreed 'pre-purchase' to that circumstance or proposition. It was contended by Idoshore therefore that 'but for the changes in costs structure and revenues structure, the [Benchmark] would have been earned', that is to say, at least such 'Benchmark' figure would have been thereafter derived by the OSMC in the normal course, or would normally and reasonably have been so expected or anticipated. It was pointed out by Idoshore in that regard that '[w]hile the EBITDA was less for the period before 1 July 1999, when revenues were lower and costs higher in the amalgamation of the two practices' (ie the OSMC practice and the Kings Cross practice of Dr Grech), 'the circumstances of the business had changed by [that time]', such that the position of the OSMC, and thus the components of the OSMC business assets Foundation was buying would have improved 'as a result of various management decisions made and implemented by Mr [O'Shanassy]'. 72 The third reason advanced by Idoshore was that in the opinion of Deloittes' Mr Phillips, 'the use of the results [of the OSMC] to September 2000 for the benchmark was proper, and in fact was confirmed as proper when his analysis was done of [the] subsequent months' results'; I was referred generally in that regard to Deloitte's Final report made by Mr Phillips on 5 February 2007, as expert witness of course for Idoshore. 73 The fourth reason advanced by Idoshore was that the gross income of the business of the OSMC derived as from 1 February 2001 (when of course Foundation assumed control thereof following upon completion of the Business Sale & Purchase Agreement on the scheduled date of 31 January 2001) and continuing up to 31 July 2001, 'showed no decrease at all', and in fact 'showed an increase in gross income on Foundation's own figures', being a trend which Deloitte addressed specifically in the course of its analysis. 74 One of the 'central propositions' of Mr Gower's evidence was said by Idoshore to be that the September 2000 quarterly results of the OSMC 'were significantly better than previous results', that being explained by Mr Gower as the reason why the subsequent EBITDA calculations of Foundation for 2002, 2003 and 2004 'were so dramatically low', to adopt Idoshore's description. However it was submitted by Idoshore that the proposition so put forward by Foundation was 'destroyed' by Idoshore's analysis of the evidence as 'correctly undertaken and reasoned'. In that regard, exhibited to Mr O'Shanassy's affidavit was a table of gross revenues headed 'Oxford Square Medical Centre RX Summaries', which showed that the revenue figures of the OSMC for February 2001 to June 2001 and through to August 2001, were for each of those months $97,423, $122,621, $108,961, $124,982, $113,138, $123,706 and $109,748 respectively (it will be recalled that completion of the Business Sale & Purchase Agreement took place on 31 January 2001, having been entered into on 14 December 2000). 75 In relation to those gross monthly revenue statistics from February 2001 to August 2001, Idoshore drew attention next to the circumstance that Mr Gower could not recall having paid regard thereto, yet when presented therewith in the course of his cross-examination by senior counsel for Idoshore (at transcript pages 221 to 222), Mr Gower gave the following evidence concerning what Idoshore contended to have boiled down to significant concessions; after acknowledging in relation to those monthly figures, '[y]es, it certainly indicates that revenues were in the range of 92[,000] to 104,000 per month', Mr Gower's testimony under cross-examination thereafter proceeded as follows: '[Mr Cotman] Which is pretty much the same range we see from the September quarter? [Mr Gower] Approximately it appears to be, yes. [Mr Cotman] Then [it] starts to grow quite strongly subsequent to purchase through to August of 2001? [Mr Gower] That's right, the revenue does grow. … [Mr Cotman] The question I asked you was in the period subsequent to purchase down to August of 2001, one in fact sees the business consistently doing better than $100,000 a month of revenue? [Mr Gower] Certainly from March onwards it does, yes. [Mr Cotman] So that we're not looking at winters and we're not looking at peculiar features of the September quarter in relation to the revenue aspect of the equation are we? [Mr Gower] Well, I don't know. These – I don't know whether there are such features. These figures tend not to indicate it. [Mr Cotman] Quite? [Mr Gower] They tend to be reasonably stable. [Mr Cotman] Yes, but these figures are inconsistent with the view that September was a revenue spike due to winter aren't they? [Mr Gower] That's correct, yes.' 76 Idoshore submitted therefore that given Mr Gower's acknowledgment that revenues remained 'in the range of $92,000 to $104,000 per month' through to August 2001, and further that 'it was pretty much the same range as we see from the September [2000] quarter', his attack based on the EBITDA benchmark must fail, since it was demonstrably not the case that the EBITDA September Quarter (for the year 2000) used for the EBITDA benchmark 'was in any way exceptional'. What was submitted by Idoshore to be exceptional was the post-acquisition expenses and collapse of 'net revenue (after retentions) and other income' of the OSMC. There is force in those Idoshore submissions. For essentially the comprehensive reasons propounded by Idoshore, it is readily apparent that Foundation's attack on the viability of the 'EBITDA Benchmark' as a basis relevantly for measurement failed and must be put aside. 77 Further in the foregoing context of Idoshore's submissions, reference was made thereby to Mr Gower's use of 'CCH Industry Benchmarks'. Idoshore contended that in the second Deloitte report, bearing date 5 February 2007, Mr Phillips explained why the use of CCH Benchmarks by Mr Gower was inappropriate. That 'wholly inapt' use of material was said to be further demonstrated during the cross-examination of Mr Gower, during which the following exchange occurred: '[Mr Cotman] … what you have looked at as comparable figures is doctors running a medical practice delivering medical services? [Mr Gower] That's correct. [Mr Cotman] And what we are here looking at is a business providing facilities to doctors who conduct medical practices, the business of this operation being the facility-providing? [Mr Gower] That's correct. … [Mr Cotman] And so, to the extent that you bring across the CCH figures and assert them into an analysis of Oxford Square Medical Centre, you are potentially doubling up whole bodies of costs, aren't you? [Mr Gower] There is a potential doubling up of costs, yes.' For the purpose of reference, the relevant testimony of Mr Gower to which I have referred appeared at transcript pages 221-222, which Idoshore specifically addressed at length and with emphasis. 78 What was therefore submitted by Idoshore to follow was that Mr Gower's explanation for the so-called 'dramatic reversal in Foundation's EBITDA calculations for 2002, 2003 and 2004 – being that the original $250,000 Benchmark was set too high – must fail', and that the reasons advanced by Foundation for the conclusion that the September quarter involved a 'spike' were 'recanted by Mr Gower', and yet further that his purported comparison with the CCH Benchmark 'was wholly inapt'. In my opinion, so much is clearly demonstrated by the thrust of those Idoshore submissions, which were made upon the basis of material which I have summarised. 79 Accordingly it was submitted by Idoshore, upon the basis of evidentiary material it addressed, that 'the only logical alternative explanations' were first, that 'the figures have been made up by Foundation', or secondly 'that something material happened in the business after about July 2002 which caused the 2002, 2003 and 2004 EBITDA calculations to fall dramatically in Foundation's favour', and thirdly that '[g]iving Foundation the benefit of the doubt [on that first proposition], in the absence of any probative explanation from Foundation, the Court can [and should] more readily draw the inference' inherent in that second proposition'. Those were formidable submissions. Upon the footing of the material I have reviewed, and in particular Foundation's resort to purported reliance upon non-arm's length expenditure, it suffices for me in all such circumstances to uphold the validity of the second proposition. Implications to Idoshore's case concerning Foundation's 'key man' payment made to Dr Fox subsequent to completion of the Business Sale & Purchase Agreement 80 Part of the so-called 'essential condition' comprising clause 2 of the Business Sale & Purchase Agreement, headed 'Interdependent Contracts', was that a service contract, to be called Facilities and Services Contract, would be entered into between Idoshore and Dr David Fox, to whom reference has been earlier made in these reasons. It was stipulated that such Facilities and Services Contract was to be in force for a term of three years commencing from the purported date of its execution on 15 November 2000. The consideration for the formation of that contract was a so-called 'key man payment' to be made to Dr Fox of $70,000. That arrangement was described in Idoshore's submissions as involving 'a deal similar as that made with Dr Grech'. 81 Sometime shortly after 15 May 2001, Foundation notified Mr O'Shanassy that unless Dr Fox 'receives a key man payment then he may reconsider his position at Oxford Square medical and go elsewhere to practice medicine'. That information was conveyed to Mr O'Shanassy by Dr Ken Jones on behalf of Foundation. In relation to Dr Grech's departure from the Medical Centre in November 2001, Dr Ken Jones was said by Mr O'Shanassy to have added the assurance that 'Foundation will use its medical industry connections to find a suitable replacement for Dr Grech and we [Foundation] are still committed to relocate Oxford Square medical – the developer of the CBA site will give us a response in June [2001]'. Dr Grech was of course one of the seven general practitioners falling within the definition of 'GP' in the Business Sale & Purchase Agreement, as was Dr Fox. Dr Grech had given notice in writing, four days earlier on 11 May 2001, of his resignation '… as Medical Practitioner and as Medical Director for Idoshore… to take effect by 11 November 2001…'. The so-called 'CBA site' comprised Commonwealth Bank premises located on the corner of Oxford and Crown Streets Darlinghurst, to which consideration was by then apparently being given for relocation of the OSMC operations. Mr O'Shanassy described those premises as '… ideal for a multi-faced medical centre'. 82 Shortly thereafter on or about 17 May 2001, Mr O'Shanassy attended a meeting at the offices of Foundation with Dr Ken Jones of Foundation and Drs Fox and Gesovic of the OSMC, in the course of which Dr Jones was said by Mr O'Shanassy to have stated to Dr Fox, in response to Dr Fox's assertion in the nature of an ultimatum thereupon made, that he could get a $250,000 key man payment elsewhere. Dr Jones was said to have responded by stating that 'Foundation will agree to pay you a further $250,000 provided your contract is extended by another couple of years'. Mr O'Shanassy testified at [82] of his lengthy affidavit evidence as to the following further conversation having occurred between himself, Dr Jones and Dr Gesovic, in the absence of Dr Fox, as follows: '[Mr O'Shanassy]: I just do not understand your logic – it is an ambit claim by Dr Fox – it's a try on – and you fell for it. [Dr Jones]: Look, we need to keep doctors like Fox happy, we will all benefit from his continued involvement at Oxford Square medical. I propose that the funds necessary for the proposed key man payment should come out of Idoshore's Warranty Deposit. [that so-called 'Warranty Deposit' was the subject of clause 10.5 of the Business Sale & Purchase Agreement as earlier extracted in these reasons, and was constituted, in part, by 20% of the 'Purchase Price' which had been withheld on 'Completion' and placed on deposit in conformity with subclause (a) of that clause 10.5] [Mr O'Shanassy]: Why and what is the benefit to Idoshore? [Dr Jones]: I would prefer not to have to go back to head office [Perth] for these additional funds – it will be time-consuming and potentially create problems. When we relocate the medical centre to larger premises and you get a second Earn Up this will more than justify this contribution. The alternative is that Dr Fox leaves and the turnover for Oxford Square medical will be adversely affected. [Mr O'Shanassy]: You have me between a rock and a hard place. So that there can be no misunderstanding, you are assuring me that as far as Foundation is concerned you are in agreement that Oxford Square medical can relocate to larger premises. [Dr Jones]: Yes that's correct – I understand there are a couple of prime property development opportunities coming up in Darlinghurst. [Mr O'Shanassy]: Based upon your assurances I will reluctantly agree to using the Warranty Deposit monies to pay Dr Fox a further key man payment on one proviso – that 50% of the money used from Idoshore's Warranty Deposit be treated as a loan to Foundation and repayable within 12 months. [Dr Gesovic]: This deal of Dr Fox needs to be kept strictly confidential, otherwise every other doctor at Oxford Square medical will be seeking key man payments.' 83 Mr O'Shanassy's affidavit narrative of post-contractual events continued as follows: '83. The reference made, in the conversation in the preceding paragraph, to "prime development opportunities in Darlinghurst" I understood to mean at least the CBA site on the corner of Oxford & Crown streets Darlinghurst. 84. There had been no forewarning concerning Dr Grech's resignation on 11 May 2001, and this event gave a greater importance to ensuring that Dr Fox continued to practice at Oxford Square medical. In other words, any resistance I had, in relation to Dr Fox getting an additional $250,000 key man payment, was influenced by the fact that Oxford Square medical could potentially lose both Dr Grech and Dr Fox who accounted for about 40% of the patient billings income. If there had not been an assurance that Oxford Square medical would be relocating, or in default of relocation, expanding to occupy level 1 of the Premises, I would never have agreed to fund the key man payment out of the Warranty Deposit. The relocation was significant because it would have resulted in the ability to grow the business and achieve economies of scale. This in turn would have led to a payment under the second earn up provisions of the [Business Sale & Purchase] Agreement.' The reference above to 'level 1 of the Premises' was of course to part of the subject Oxford Square building. The latter two sentences above were treated by the Court as being the nature of a submission and not of expert testimony. 84 It was submitted by Idoshore that the inferences open rightly to be drawn from those events involving the dialogue between Mr O'Shanassy and Dr Jones were as follows: (i) Foundation did not want to pay the larger part of the relevant moneys demanded by Dr Fox from its own resources immediately available at the time; Foundation wanted to draw down moneys from the retention fund the subject of the 'Warranty Security Deposit' (see clause 10.5 of the Agreement) and to have Idoshore 'pay' one half of the sum demanded by Dr Fox, presumably on the basis that Idoshore would be benefited by the payment because of its interest in the so-called 'earn-up' of the OSMC; (ii) the effect of that transaction was that if Idoshore was entitled to the balance of the purchase price the subject of that 'Deposit' fund, which Idoshore submitted to have remained the case, that fund would be accordingly diminished by the sum of $210,000 proposed to be paid to Dr Fox, involving $85,000 which Foundation expressly agreed to restore to the retention fund and $125,000 as Idoshore's contribution induced by the promise to relocate the OSMC to the CBA site; (iii) it was not said 'by anyone' in May 2001, when of course Dr Fox's demand was discussed, that Idoshore was told of the 'load-up' expenses that Foundation intended to apply to the EBITDA calculation andwhich would destroy any prospect of an 'earn up' in favour of Idoshore, and create instead warranty liability for an EBITDA shortfall. 85 The Deed of Variation to the Business Sale & Purchase Agreement subsequently drawn up and executed between Idoshore and Foundation, which bore the date 28 May 2001, was constituted by both of the Foundation corporate respondents to the present proceedings as well as of course by Idoshore as the parties thereto, purportedly gave expression to the further arrangement made orally between Mr O'Shanassy on behalf of Idoshore with Dr Jones on behalf of Foundation. Dr Fox was not a party to that Deed of Variation. The preambles to that Deed, appearing under the heading 'Background', together with Clauses 2.1, 2.2 and 2.3 thereof, read as follows (the references below to 'Vendor" was to Idoshore and to 'Purchaser' was to the first respondent Foundation company as in the case of the nomenclature of the Business Sale & Purchase Agreement): 'BACKGROUND: A. On 12 December 2000 the parties entered into a Business Sale and Purchase Agreement ("Agreement") whereby the Purchaser purchased the business of the Vendor as therein defined. B. A term of the Agreement was that the Purchaser lodge a warranty security deposit being 20% of the Purchase Price on Completion, 20% of the first Adjustment Purchase Price and 20% of the Second Adjustment Purchase Price. C. The parties have agreed to utilise the funds in the warranty security deposit as hereinafter described and for that purpose the Agreement is amended on the terms described below. … 2. Use of Warranty Security Deposit: 2.1 Notwithstanding the provisions of Clause 10.5 of the Agreement and subject to the following provisions the Purchaser may withdraw funds from the Warranty Security Deposit and apply such amount withdrawn to make keyman payments to a Contracting Medical Practitioner and for no other purpose. 2.2 The choice of a Contracting Medical Practitioner to whom payments may be made is subject to mutual agreement between the Vendor and the Purchaser. The Vendor may not make any representations that the Purchaser will enter into an agreement with a medical practitioner without the Purchaser's written approval. Subject to clause 3.9 of the Agreement, the Purchaser may enter into such contracts with a medical practitioner in connection with the Business without utilising any funds comprising the Warranty Security Deposit. 2.3 Where the parties agree on approaching a medical practitioner for the purpose of the Purchaser entering into a Facilities and Services Contract with that medical practitioner the following applies: (a) The Vendor and the Purchaser will mutually agree the appropriate payment to be made to the medical practitioner. (b) The Vendor and the Purchaser will be equally responsible for the payment of such agreed amount. The Vendor and the Purchaser's share (including their reasonable legal fees incurred in connection with the preparation, negotiation and finalisation of this Deed and a Facilities and Services Contract with a Contracting Medical Practitioner) may be satisfied by drawing from the Warranty Security Deposit. If either party wishes to increase the amount payable to a medical practitioner beyond the amount mutually agreed then that party may do so but has no recourse against the other party in respect of any amount paid in excess of the agreed share. (c) Any payment made to a Contracting Medical Practitioner pursuant to this Deed (including the parties reasonable legal fees contemplated in clause 2.3(b) above) will be treated as a capital payment and amortised and depreciated over 7.5 years from the date of payment. 3. Loan 3.1 That share of the money withdrawn from the Warranty Security Deposit by the Purchaser will be treated as a loan by the Vendor to the Purchaser which loan: (a) carries no interest; (b) must be repaid no later than 1 February 2002 by re-deposit into the Warranty Security Deposit; and (c) may not be set-off by the Purchaser against any other claim it now has or later may have against the Vendor in respect of any breach of warranty or other matter as between the Vendor and the Purchaser pursuant to this Deed or the Agreement. … .' 86 Thus, so Idoshore pointed out, Idoshore entered into the Deed of Variation on 28 May 2001 with each of the two Foundation respondents in relation to the use of Idoshore's so-called 'Warranty Security Deposit' for the purpose of a 'key man' payment to be made to Dr David Fox, and Mr O'Shanassy authorised the release to Foundation from the relevant deposit fund for use 'for the express purpose of a key man payment to Dr David Fox', which payment was thereafter attended to by Foundation, but upon the basis that the '… share of the money withdrawn from the Warranty Security Deposit by [the first Respondent Foundation company] will be treated as a loan by [Idoshore] to [the first Respondent Foundation company]…'. The text of Idoshore's letter of 28 May 2001 to Foundation's solicitors, so far as was material, read as follows: 'We refer to the Deed of Variation between our company and the Foundation Health Care Group. Pursuant to clause 3.2, we hereby instruct your firm, as the purchasers solicitor, to draw down the amount of $210,000 from the Warranty Security Deposit. This money is to be used by Foundation in accordance with the Facilities and Service Contract between Foundation and Dr David Fox. (We have not specified the total amount presently held (approx $223,000) in light of legitimate legal expenses which will need to be met from the Warranty Security Deposit monies in the near future).' 87 The following submissions were advanced by Idoshore as to the implications of that contribution which it made to Dr Fox warrant precise reproduction, as follows: (i) 'Idoshore was induced to permit this transaction [to be implemented] on the clear condition and representation that Foundation would take forward the move to a larger location, the CBA building, which in turn would entitle Idoshore to a second Earn-Up with the profits of the economies of scale. Dr Fox was, on the evidence, a critical part of that overall plan for larger premises'; (ii) '[a]gain, no evidence has been called to challenge either Mr O'Shanassy's account of the circumstances, or to demonstrate that Foundation had the present intention represented when the inducement was made, or that it had a reasonable basis for the representations'; based on the Jones v Dunkel (1959) 101 CLR 298 principle of evidence, 'and (for the TPA claim) on s 51A of the Trade Practices Act 1974 (Cth), the failure to adduce evidence necessary to explain or demonstrate the truthfulness of the representation is fatal'; the representation having 'induced the payment, relief under sec 87 to order the restoration of the funds to Idoshore is an obvious remedy'; (iii) '[f]urther, by reason that the payment was made pursuant to the undertaking to expand the business, which did not happen, the consideration for the payment wholly failed'; (iv) '[t]he argument that there was simply a breach of contract by not moving, damages for which cannot be demonstrated, because there is no evidence as to what the income would have been in the new premises, invites the McRae v Commonwealth [Disposals Commission (1951) 84 CLR 377] response that Idoshore having been deprived of the opportunity to show what the effect of a move would have been, because there was not a move, is entitled to recover the monies it paid on the warranty that there would be a move; in McRae the disappointed salvagers were entitled to recover the costs of the salvage expedition undertaken that discovered there was no tanker to salvage because the absence of a tanker prevented them showing what the profits might have been from that expenditure'; (v) '[a]ccordingly, either in restitution for the sum paid on a pre-contractual misrepresentation, or because the consideration and purpose of the payment wholly failed; or because the conduct [of Foundation] was misleading and deceptive in circumstances undertaken within s 51A, the $210,000 removed from the warranty retention money must be returned to Idoshore's account and benefit together with interest'; (vi) '[t]he simplest way of dealing with this in a case such as this is to treat the $210,000 warranty retention money as being intact in the hands of Foundation; in circumstances where the Court concludes (as is submitted) that Foundation has no right to retain any of that money for "warranty" breaches or for any other reason, it should be treated as a remaining part of the original purchase price not yet paid to Idoshore'. As I have foreshadowed, that sum of $210,000 comprised the sums of $125,000 and $85,000 referred to in [2] above, and the same did not as such lose their clause 10.5 character as the part of the 'Purchase Price' payable by Foundation to Idoshore for the 'Purchase' of the 'Business'. There is force in Idoshore's submission that the consideration for and purpose of the payment of the $210,000 failed, and that the totality of those warranty retention moneys should be returned to Idoshore beneficially. There is no evidence before the Court that challenges at least the substance of Mr O'Shanassy's account of the circumstances regarding the drawing down of the Warranty Security Deposit to pay 'one half of the sum demanded by Dr Fox'. EBITDA calculations submitted by Idoshore for the purpose of computation of moneys payable by Foundation to Idoshore pursuant to the purchase price adjustment provisions of clause 3.3(a) of the Business Sale & Purchase Agreement 88 This claim has been foreshadowed in [46] above, the same being based upon and related to the provisions of sub-clauses (a) and consequently of par (c) of clause 3.3 of the Business Sale & Purchase Agreement. No claim has been advanced in the proceedings referrable to sub-clauses (b) and consequentially (d) of clause 3.3, because there has not taken place any relocation of the 'Business'. The provisions of pars (a) and (c) have been of course characterised by reference to the shorthand expression 'first earn-up', as I have already mentioned. 89 Idoshore's quantification of entitlement to first earn-up depends upon my resolution in the first place of the issues raised by Idoshore concerning the costs and expenses of a non-arm's length nature which Foundation has sought to attribute to its operation of the subject 'Business' (of course as defined by the Agreement) in respect of the first year's operation thereof by Foundation following upon 'Completion' (again as defined) of the Agreement. Given the reasons and conclusions I have given as to Foundation's breach of clause 3.9 referrable to Foundation's effectuation of 'material changes', it follows that Idoshore is entitled in principle to payment of moneys by way of an 'earn-up' at least on that basis. There remains however for determination Idoshore's calculations as to its first earnt-up entitlement, which were submitted to the Court for consideration and concerning which Foundation has not seemingly provided detailed submissions. 90 Deloitte contended that 'the figures provided by Mr O'Shanassy showed a growth trend for the business, at least to June 2002; the so-called 'relevant parts of the calculation provided by Idoshore were as follows, as I have foreshadowed in [61] above, the same being demonstrative of a growth trend for the 'Business' as follows: Forecast total income EBITDA 12 months ended 12 months ending 31 June 2002 31 Jan 02 Billings Basis @ 22.4% per qtr end 30 Sep 2000 Forecast total billings (static average) $1,493,052 $333,444 Forecast total billings (Growth trend) $1,551,226 $347,475 91 In order to arrive at the EBITDA figure for the purchase price adjustment for which Idoshore contended an affirmative entitlement in principle, being that stipulated by sub-clauses (a) and (c) of clause 3.3 of the Business Sale & Purchase Agreement, the chartered accountant retained by Idoshore who testified in the proceedings, being as earlier indicated Mr Phillips of Deloitte, had regard to the monthly billings of the OSMC for what was said to be the relevant period of time, and thereupon made the two calculations set out in Schedules 7.1 and 7.2 respectively to his final report, that report bearing date 5 February 2007. As has been earlier set out in the text of the Agreement which I have earlier reproduced, the Agreement stipulated for the '1st Adjustment to Purchase Price', to take effect as at 'twelve (12) months from the Completion Date', to equal '4.5 x (year one (1) EBITDA [minus] EBITDA Benchmark)', where that benchmark amounted to $250,000.00 and the 'Year one (1) EBITDA' related to '… the period commencing from the Completion Date to the 1st Adjustment Date'. 'Relocation' for the purposes of clause 3.3(b) never of course occurred at any material time or at all. Thus the foreshadowed ultimate objective of the arrangement, upon the footing whereof payment was agreed by Idoshore to be made on its part, at the request of Foundation, never eventuated. 92 Idoshore asserted that instructions 7 and 8 of Schedule 7.1 and 7.2 of Phillips' final report are 'directed to repairing the Foundation/Gower account to arrive at the true EBITDA figure' for what Idoshore termed 'the First Earn Up'. As previously outlined, Idoshore contended that the aforementioned report suggested that the figures provided by Mr O'Shanassy purportedly demonstrated a growth trend for the 'Business' at least up to 30 June 2002, being calculated by Mr Phillips. Upon the basis of those calculations, Idoshore contended that the operation of the formula framed by the Business Sale & Purchase Agreement, taking appropriate effect in respect of the foregoing 'first year Earn-Up', produced the following: '1st Earn Up = 4.5 x (Year One EBITDA – Benchmark EBITDA Accordingly, the calculation is: Forecast basis Static growth Growth trend Year 1 EBITDA 334,444 347,475 Benchmark EBITDA (250,000) (250,000) x 4.5 84,444 97,475 379,998 438,638' Idoshore's claims to damages consequential upon Foundation's conduct complained of relating to Dr Grech's departure 93 Idoshore's case for quantification of that aspect of its damages case was framed upon the following exercise which it undertook: Review the patient billing information (and any other financial information deemed necessary) in relation to Dr Joseph Grech for the six (6) months period immediately preceding his departure on 21 September 2001 from the Oxford Square Medical Centre and provided an opinion: (a) as to the loss suffered by OSMC as a consequence of not having the benefit of Dr Grech's patient billing income for 44 working days; (b) as to the likely ongoing loss suffered by OSMC by the failure of Foundation to replace Dr Grech with a general practitioner of similar income producing capacity; (c) as to the likely effect Dr Grech's early departure had to the loss suffered by OSMC as a consequence of patients following Dr Grech to his new place of employment which was located within a 2 kilometre radius of the Oxford Medical Centre. 94 The starting point in any consideration of Idoshore's measure of claims as to loss and damage was said to be the circumstances leading to the merger of Dr Grech's former medical practices conducted at Kings Cross with those conducted then by Idoshore at the OSMC, and Dr Grech thereupon becoming what Idoshore described as one of the 'highest billing doctors' at the OSMC, and accordingly the 'best remunerated' doctor engaged at the OSMC in terms of so-called 'retention'. Foundation's due diligence report commissioned in the context of its negotiations with Idoshore to acquire the OSMC recorded that 'there would be a need to secure agreements, [for a] minimum of 3 years, with the 2 principal general practitioners currently practicing at the medical centre', referring thereby to Drs Grech and Fox, and to the OSMC. 95 Dr Grech's commitment to the OSMC was described by Idoshore as 'secured by an agreement' made on 21 August 1999, being an agreement which provided for the following conditions, as summarised by Idoshore: (i) an obligation to work exclusively at the OSMC for 18 months (cl 8); (ii) a notice of termination period of six months (cl 10); (iii) a 'non-compete clause' within 2 kilometres of the OSMC for 24 months after leaving the OSMC (cl 9); and (iv) 'a retention of 60%', in that 'Dr Grech took 60% of the billings he made by being retained at the OSMC (cl 15). 96 Foundation had seemingly recognised the importance of Dr Grech to the OSMC medical practice infrastructure prior to Foundation's entry into the Business Sale & Purchase Agreement, Foundation's due diligence report obtained for the purpose of takeover, stating on the fourth page thereof as follows (inter alia): 'The arrangement in respect to Dr Grech relocating his 2 practices into the medical centre was as follows: … Dr Grech is acknowledged as being the Medical Director. Paul O'Shanassy (Sagacious Group) advises the following in respect to Drs Grech and Fox: Dr Grech: agreement needs to be put in place, 50/50 basis, 3 year initial term, possible keyman consideration (will be part of earn up under the contract). … .' That reference to 'earn up' was of course to the operation of clause 3.3 of the said Agreement. 97 It was subsequently on 11 May 2001, as I earlier foreshadowed, that Dr Grech gave his controversial six months' notice of resignation from the OSMC, with a departure date consequentially from the OSMC of 11 November 2001. It will be recalled that the Business Sale & Purchase Agreement had been completed earlier on 31 January 2001. On 15 September 2001, Dr Grech purported to bring forward the date for his departure from the OSMC from 11 November 2001 to 21 September 2001, thus not serving the period of time the subject of his earlier six months' notice, so Idoshore further recorded. 98 Idoshore raised the Dr Grech departure issue with Foundation by letter dated 17 September 2001, and further by letter dated 18 September 2001, but Foundation was said to have declined to cause to be taken any appropriate action against Dr Grech, whether explicitly or implicitly on its part. Furthermore, Dr Grech took up new medical practice on his own account within a two kilometre radius of the OSMC, in circumstances further said by Idoshore to constitute breach of his contractual obligations. Foundation's inactivity in that regard constituted a subject of complaint on Idoshore's part in the proceedings. I would mention in passing that an order for specific performance of an employment contract is not obtainable by an employer against an employee (see Meagher R, Heydon D, Leeming M, Equity Doctrines & Remedies (4th ed, Butterworths, 2002) at [20-055]), but of course an action for damages at common law is an availableremedy for an employer against an employee for breach of an employment contract. Proof of damage actually sustained would have been conceivably open to establishment, though the conceptual practicalities of any such proof may well have presented as an imponderable if not largely unrewarding course to be undertaken in terms of outcome. 99 The Deloitte report (made of course by Mr Phillips on Idoshore's instructions) calculated the loss sustained by the OSMC as a consequence of cessation of the benefit of Dr Grech's patient billings for 44 working days, being billing days said to have been lost by his early departure, and of the on-going loss to the OSMC occasioned by the absence of replacement by the OSMC of Dr Grech with a qualified general medical practitioner of similar professional capacity. That calculation of loss was put at $22,394 upon the basis of 44 working days denied to the OSMC, and a calculation allowing for 'Clinician retention (50% of billings)' referable to Dr Grech's average daily billing for the period from 1 February 2001 to 24 June 2001. Moreover the Deloitte report calculated a so-called 'Annual impact on OSMC' of $122,151 in respect of the period of time from 1 February 2001 to 24 June 2001 comprising 102 working days and allowing once more for the same pro rata as to so-called 'Clinician retention'. 100 In the compilations of those monetary claims, Idoshore asserted that there was 'no doubt' that Dr Grech's departure constituted or effected a material change to the operations of the OSMC. I was referred in that regard to Foundation's identification of him as one of the two so-called 'key men' employed at the OSMC. It will be recalled that Dr Grech's relationship with Idoshore commenced with the merger of his two Kings Cross practices with the OSMC back in August 1999, upon the contractual footing of a restraint of trade of two years and within a two kilometre radius of the OSMC was obtained from him. 101 Idoshore appeared to accept that the clinical retention assumed by Deloitte in its calculations of 50 percent should have been 60 percent. Subject to that adjustment, Deloitte's calculations made on the instructions of Idoshore, as to the yearly loss and damage arising out of the loss of Dr Grech were as follows: 'Loss of Billings for [Dr] Grech Dr Grech billing (1 February to 24 June 2001) 103,828 Dr Grech average daily billing (based on 102 working days) 1,018 Loss of billings due to Dr Grech departure (44 days) 44,789 Less: Clinical retention (60% of billings) (26,873) Net Impact on Oxford Medical $17,916 Consequential loss Dr Grech billing (1 February to 24 June 2001) 103,828 Dr Grech average daily billing (based on 102 working days) 1,018 Annualised impact of Dr Grech departure (240 days) 244,301 Less: Clinical retention (60% of billings) (146,580) Net Impact on Oxford Medical $9,771' ====== 102 It was submitted by Idoshore to follow that the income of the OSMC in the calculation of EBITDA should be increased by the following amounts: 'Loss to income on First Earn-Up (to 11 November 2001) $26,873 Loss for year 2 (1 February 2001 – 31 January 2002) $97,721 Loss for year 3 (1 February 2002 – 31 January 2003) $97,721' 103 Those adjustments so postulated by Idoshore were further said to 'result in the following improvements to OSMC revenue in the relevant years', which I reproduce from Idoshore's submissions below: 'Adjusted Year to 31 January 2002 2003 2004 Income 1,076,751 + 1,042,467 + 1,064,555 Patient billings 26,873 97,721 9,771 1,103,624 1,140,188 1,074,326' It was submitted by Idoshore that the Court should more readily accept the foregoing evidence it postulated and the foregoing financial conclusions it further postulated, in circumstances where Foundation was said to have 'not purported to explain its position, or prove what steps it took to mitigate the loss of Dr Grech'. Methods of assessing the quantum of damages claimed by Idoshore 104 As to what Idoshore described as 'the methods of assessing the quantum', Idoshore contended that what I have recorded above outlined three ways in which the Court might approach that assessment, being as follows: (i) on the so-called adjusted Foundation/Gower accounts (ante); (ii) on Deloitte's calculation of the fair value of the OSMC, upon the hypothesis that if instead of being induced into an 'earn-up scheme', the assets of the OSMC had been sold at fair market value; (iii) Deloitte's own calculation of the so-called 'first earn-up and EBITDA'. 105 Idoshore provided to the Court the following table of comparative figures relating to each such approach, which I will reproduce below: Lower Upper (i) Using the adjusted Foundation/ Gower accounts Year 1 EBITDA 441,534 Benchmark EBITDA (250,000) EBITDA Growth 191,534 x 4.5 earn up 861,903 Plus return of $225,000 security 225,000 (Total) $1,086.903 (ii) Deloitte: using fair market value Fair market value $1,400,000 $1,650,000 Purchase price actually paid by ($900,000) ($900,000) Foundation (Total) $550,000 $800,000 (iii) Deloitte: using EBITDA Earn Up $225,000 $225,000 $225,000 (wrongly retained by Foundation on the purchase price) First EBITDA $334,444 $347,475 Benchmark EBITDA (250,000) (250,000) EBITDA Growth $84,444 $97,475 x 4.5 earn up $379,998 $438,638 (Total) $604,998 $663,638 Idoshore contended that on any one of those three approaches, Idoshore should be entitled to recover at least an amount in the range of $500,000 to $1,087,000, together with any applicable interest and costs. The foregoing calculations purportedly extend to general damages for breach of the warranties and representations made collaterally to the formation of the Business Sale & Purchase Agreement and therefore to claims extending beyond the scope of operation of the Agreement and clause 3.9 thereof in particular. Moreover the calculations apparently encompass the Dr Grech issue, assuming its resolution in favour of Idoshore, contrary to my finding on that issue. It suffices for me presently to place the foregoing calculations on record, but given my findings in relation to Idoshore's more limited entitlement to damages confined to breach of clause 3.9 of the Agreement and not more broadly as it were for breach of representations and warranties collaterally made to the formation of the Agreement, and as to exclusion of Idoshore's entitlement in relation to Dr Grech, it becomes necessary for general damages to be assessed on a more restricted approach to calculation. Interest on moneys claimed by Idoshore 106 Idoshore outlined two separate perspectives arising in relation to Idoshore's entitlement to interest to be ordered in respect of any sums found to be payable by Foundation to Idoshore, as follows: (i) the interest on the moneys that ought to have been placed in the retention deposit account and which would have been available (and continue in effect to be payable) to meet the balance of the purchase price payable to Idoshore along with such interest as the Business Sale & Purchase Agreement required; (ii) interest on the 'earn-ups' that ought to have been received by Idoshore after the first year of operation of the OSMC business under the management of Foundation. 107 As to the matter of interest to be awarded on the sums found to be payable by Foundation, it was submitted by Idoshore that interest should ordinarily flow from the date that loss or damage accrued due, which was said to be January 2001. It will be recalled in that regard that the 'Completion Date' for the Business Sale & Purchase Agreement was stipulated to be 31 January 2001. However, the first earn-up provisions of clause 3.3(a) did not crystallise in operation until one year from Completion, and thus on 31 January 2002. Foundation's submissions in response to Idoshore's case for misrepresentation and breach of warranty collateral to the formation of the Business Sale & Purchase Agreement 108 The Foundation respondents, to whom I shall continue to refer individually or together as Foundation (wherever not misleading or inconsistent with the context), denied the making or giving of the representations or warranties pleaded by Idoshore collaterally to the formation of the Business Sale & Purchase Agreement. Alternatively Foundation contended, as I foreshadowed earlier in these reasons, that if those pleaded representations and warranties were found to have been made, the same were not promissory in nature or otherwise did not go to the root of the contract, and were not representations as to future matters within s 51A of the Trade Practices Act. In any event those representations were said to be such that Foundation had reasonably sufficient grounds for making the same. By way of cross-claim, Foundation sought damages for non-fulfilment of the warranties on Idoshore's part the subject of pars (n) and (p) of clause 10.1 of the Business Sale & Purchase Agreement (extracted of course earlier in these reasons), and did so purportedly in the light of clause 10.2 thereof concerning 'imputed reliance'. It was Foundation's further case the subject of the cross-claim that such damages were required to be assessed in Foundation's favour by reference to 'the difference between the [maintainable] $250,000 'EBITDA Benchmark' (as defined) and the actual EBITDA for [each of] the three years following the completion date', in the latter case of course asserted to have been experienced adversely by Foundation. 109 In support of its threshold observation that '… the submissions of [Idoshore] indicate a loss of focus on what has been claimed', Foundation drew attention to the following matters which it asserted Idoshore would have to establish in order to make out the case which it had sought to present, but which Idoshore had allegedly failed nevertheless to make good: (i) that the collateral warranties pleaded by Idoshore were in fact made by Foundation and formed part of the contractual obligations between the parties; (ii) that a breach or breaches of those collateral warranties actually occurred; (iii) that any breach or breaches on Foundation's part that may be found to have occurred was or were the cause of OSMC's failure to reach the 'EBITDA Benchmark' in the years following the change of ownership of the OSMC; (iv) that the alleged representations on the part of Foundation pleaded by the amended statement of claim were in fact made by or on its behalf; and (v) that Idoshore actually relied upon those representations in entering into the Business Sale & Purchase Agreement. 110 It was the further case of Foundation that the onus remains upon the applicant to establish that if such representations were made and relied upon, that they were made in relation to a 'future matter' upon 'reasonable grounds' within the scope of operation of s 51A of the Trade Practices Act. Section 51A is in the following terms: '(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.' Because of the view I have reached upon the meaning and operation of the Agreement, constituted as I think it was implicitly by what was mutually intended by the parties to represent the entirety of their contractual arrangements, it becomes unnecessary for me to further address subpars (i) to (v) of the preceding paragraph and the foregoing s 51A issue, but I will nevertheless record the entirety of Foundation's submissions for completeness. 111 At the outset of Foundation's submissions, attention was drawn by Foundation to Idoshore's assertion that 'the primary context [was] a contemplated agreement that had three material elements to it', as purportedly summarised by Foundation: (i) the 4.5 multiple to be applied to a Benchmark both for the setting of a purchase price and assessment of [first] earn-up (see again Item Ten of Schedule One to the Agreement and also clause 3.3(a) thereof); (ii) the provision for increased sales price if earnings were above the Benchmark in the first twelve months; and (iii) a vendor's warranty that the earnings of OSMC would not fall below 90% of the Benchmark (see again clause 10.1(n), (o) and (p)) for the respective periods of time therein specified. Foundation contended correctly to the effect that far from being the 'primary context of a contemplated agreement', such elements comprised 'the very provisions set out in the Agreement', as 'contracted for by the parties', and represented moreover the parties' 'considered approach to their contractual dealings'. Emphasis was placed in that regard on Mr O'Shanassy's qualification as a lawyer as well as an experienced businessman 'holding an MBA', and what he therefore should be taken to have appreciated in terms of significance or otherwise as to what was, and conversely was not, including ultimately within the text of the Business Sale & Purchase Agreement. I have already acknowledged the force of an emphasis broadly stated thereby made by Foundation to that effect. 112 Foundation summarised its case to the effect that 'the representations' relied upon by Idoshore in the present proceedings 'do not form any part of the [Business Sale & Purchase Agreement], nor is there any reference in the Agreement to reliance or any representations', and further in that regard that the Agreement contained '… none of the collateral warranties alleged nor any hint of their existence either'. So much was correct, as I have already postulated. 113 Foundation thereafter addressed its response in relation to what Idoshore characterised as representations on Foundation's part asserted to have been made and to have been relied upon by Idoshore,by the following submissions: (i) nowhere in the evidence was it established that Foundation ever represented that it was in Idoshore's 'interests to sell [the] OSMC at a discount' on the price it was seeking, in exchange, for a price based on a lower multiple (4.5) of maintainable EBITDA and an 'Earn-up' at the end of one (1) year's management of OSMC by Foundation' (and a 2nd 'Earn-up' when the business relocated) based on the multiple applied to the increased EBITDA'; what occurred was 'a straightforward negotiation'; (ii) the 'suggested multiple of 4.5, rather than the 7.5 proposed by Mr O'Shanassy was accepted within [24] hours by Mr O'Shanassy' on behalf of Idoshore, thereby implying of course that Idoshore was more than a willing vendor; moreover Mr O'Shanassy was 'clearly confident if perhaps misplaced that OSMC, in the hands of Foundation, would automatically continue to enjoy an EBITDA in excess of the [EBITDA] Benchmark', defined by the foregoing Agreement, it will be recalled, as 'the maintainable EBITDA of the Business which has been agreed by the Parties to be $250,000'; that confidence of Mr O'Shanassy was described by Foundation as 'based, on his own evidence, as much on his confidence in Foundation, as on any representation made by Mr Meehan or anyone else'; (iii) 'Mr O'Shanassy's alacrity in entering into the Agreement, within hours of receiving the letter suggesting a 4.5 multiple rather than a 7.5 multiple', suggested inferentially that 'he had satisfied himself that the multiple of 4.5 was appropriate and that his decision was not reliant, or solely reliant, on any representation by Meehan' (or so of course Foundation asserted); moreover there was said to be 'no evidence that Mr O'Shanassy attempted to counter with a multiple figure between 4.5 and 7.5', and further that 'if a businessman of Mr O'Shanassy's experience was relying on representations alleged to have been made by [Mr] Meehan, it beggars belief that he would not have safeguarded [Idoshore's] position in the written contract'; (I should point out however that Foundation's initial response was a multiple figure of three (3) – see Mr Meehan's letter of 5 September 2000 extracted above at [23]). (iv) Mr O'Shanassy testified to the effect that 'he had confidence in Foundation' because 'it would grow the business… and thereby ensure the "EBITDA Benchmark" was met'; there was however nothing expressed in the Agreement 'setting out specific obligations for Foundation to ensure that the EBITDA Benchmark or any guarantee was met'; Foundation's only obligation under the contract was described as being 'to take over the business'; and further that it was implicit that Foundation 'would seek to make a profit'; moreover 'the very nebulous nature' of the Idoshore assertion that 'necessarily [Foundation] would create conditions whereby Idoshore would not be deprived of the benefit of the earn-up' was in reality 'a bland assertion that Foundation would continue to operate [the] OSMC with a view or intention of making a profit'; for Idoshore then to claim that 'it was not a passive matter to achieve the earn-up' was in reality 'to assert that any failure to achieve the earn-up must constitute either a breach of some implied warranty or the basis of a claim in misrepresentation', which could not 'clearly' be the case; (v) it was Mr O'Shanassy's 'belief in Foundation [that] gave him the confidence to deal with [Foundation] and reject the overtures of another medical centre operator', the latter being a reference to Endeavour (ante); '[t]he Court would be [therefore] satisfied that even if, in the course of negotiations, Mr Meehan represented that Foundation had the necessary skills, capacity and capital to manage OSMC successfully, that was something Mr O'Shanassy took as a given even before he entered into the [Business Sale & Purchase] Agreement', the representations having been made on reasonable grounds so it was asserted by Foundation; it was emphasised by Foundation in that context that it 'was a large public company that was seeking to expand', concerns as to Foundation's share price being said to have arisen only 'later' and further Mr O'Shanassy 'clearly had confidence in the sustainability of the September 2000 quarterly figures and readily accepted, apparently within hours of it being proposed, the reduced multiple of 4.5'. 114 It was emphasised by Foundation that the Business Sale & Purchase Agreement 'contained no warranty, nor could one be implied', that 'Foundation would guarantee achieving the earn-up'; for Foundation to have done so 'would fly in the face of Idoshore's warranty that the EBITDA would not fall below 90% of the Benchmark', that being a reference to Idoshore's so-called warranty and covenant the subject of par (n) of clause 10.1, which I have of course earlier reproduced. Furthermore in that context, Foundation pointed to that warranty as 'clear evidence that the parties appreciated there was a potential for the [EBITDA] Benchmark not to be met', that benchmark being defined by the Agreement, it will be recalled, as 'the maintainable EBITDA of the Business which has been agreed by the parties to be $250,000.00'. It was further pointed out by Foundation in that context moreover that the Agreement was 'silent as to any reciprocal guarantee on the part of Foundation', though in that regard of course the agreement and acknowledgment of Foundation the subject respectively of clauses 3.9 and 3.10 need nevertheless be kept in mind; in relation to clause 3.10, I observe that the same speaks of the intention, though not the representation or promise of Foundation 'to grow and expand the Business'. 115 In any event, so Foundation's submissions continued, any representation to the effect that Foundation would work to grow the Business was asserted to have been made 'on reasonable grounds', Foundation emphasising that '… given Foundation's ongoing operation as a large public company operating many medical centres, [then] without direct proof of intention on the part of Foundation not to meet the Benchmark, the reasonable grounds are established', and further that '[i]t is not sufficient that matters represented may have been subject to a change of mind'. Foundation referred in that regard to dictum in James v Australia And New Zealand Banking Group Ltd and Others (1986) 64 ALR 347 at 372 where Toohey J drew attention to principles to the effect that '[t]he mere fact that representations as to future conduct or events do not come to pass does not make them misleading or deceptive', though further that '[n]evertheless, a statement relating to the future may contain an implied statement as to present or past fact [and] may represent impliedly that the promisor has a present intention to make good the promise and it may represent impliedly that he has the means to do so'. Of course so much often depends upon the context to and the subject matter of a representation, but in any event Foundation submitted that the decision 'relating to relocation' was inherently of that general character. 116 In addressing the 'primary objective' theme of clause 3.9 of the Business Sale & Purchase Agreement, that clause being the provision of the Agreement per se upon which Idoshore of course placed significant reliance, Foundation asserted that 'an objective' was to be distinguished from a guarantee or warranty and that clause 3.9 was 'couched in appropriate terms as an objective'. It was further contended that if the purpose of the clause was to provide a guarantee or warranty 'it would have been phrased in definitive terms'. Achievement of growth as such, without nomination or specification for instance of a minimum or maximum standard or parameters for the growth, carries somewhat imponderable implications of difficulty in a contractual setting such as clause 3.9. In any event that clause has significance independently concerning the making by Foundation of 'any material changes' without consultation or consent. 117 As to the operation of clause 3.10 of the Business Sale & Purchase Agreement, which records the unspecific themes as to Foundation's stated intention '… to grow and expand the Business and, subject to clause 3.9, [not to] impede the Purchaser', Foundation submitted that the same constituted a 'motherhood' statement, since '[n]o purchaser would pay $1.125 million dollars for a business without intending to grow and expand it'. Nevertheless contractual significance should be assigned to that contractual acknowledgment, however confined in scope it may be. Foundation submitted further those contractual passages were not to be interpreted as saying that 'performance can be expected to automatically continue at existing levels or outstrip them'. Foundation was already engaged of course in business operations similar to, though apparently much more substantial than, those conducted by Idoshore at the OSMC at the time the Agreement was formed. 118 As to the claim of Idoshore that significantly increased costs in relation to the management of the OSMC, termed by Idoshore as 'load up', at least contributed to the failure of the business conducted at the OSMC to meet the EBITDA Benchmark, Foundation sought to explain that '… changes in the cost structure within OSMC' were 'not shown by [Idoshore] to be costs that could have been avoided or costs that Mr O'Shanassy with his experience would not have anticipated'. So much would depend of course, in the context of debate of that issue, as to what costs or categories of costs were the subject of scrutiny, and whether such costs were outlaid at arm's length. Nevertheless it may be said that Idoshore's essential post 'Completion' complaint was necessarily based on what it contended to be an unexplained trend downwards of significant proportion, such that an evidentiary onus passed inherently or reasonably to Foundation, especially where that trend occurred in non-arm's length circumstances. Foundation submitted that '… it is not clear from [Idoshore's] case what are the adverse changes as opposed to disappointing results on which [Idoshore] bases its case', but I do not think that the submission is correct, or at least substantially so. It was further pointed out by Foundation that the OSMC operations, in the period of time following the so-called 'exchange of ownership', were 'effectively overseen on behalf of Idoshore by Dr Gesovic', who was asserted to have 'not only remained in regular contact both with the doctors of the OSMC through the first year [of Idoshore's operation of the OSMC], but also [with] Mr O'Shanassy', thereby providing Idoshore with so-called feed back. Whether those latter factors would have ensured or contributed to ensuring the confinement by Foundation of its costs of operation of the OSMC, at least to the extent that the same became controversial or otherwise not reasonably or appropriately comparable to pre-purchase circumstances, is another matter. Foundation cited Mr O'Shanassy's testimony that although Dr Gesovic reported back 'on an infrequent but regular basis…', he conceded that 'I'm sure if there were things that were taking place that would [be] adverse to our interests [Gesovic] would let me know'. 119 It was contended by Foundation furthermore that Mr O'Shanassy '… did not see issues of staffing as constituting [the] organisational structure, operations and strategic direction [of the Business or the Centre] as envisaged… in clause 3.9'. Foundation drew attention in that context to '… the unexplained failure of [Idoshore] to call evidence from Dr Gesovic', who as I earlier recorded remained employed at the OSMC after 'Completion' of the Agreement and until February 2002. Presumably it would have been equally open to Foundation to have adduced evidence from Dr Gesovic as to circumstances relevantly prevailing during even the initial period of time of Foundation's operation of the OSMC business activities, given that it was Foundation who had by then formed a working relationship with Dr Gesovic at the OSMC. 120 Specifically as to the departure of Dr Grech from his professional working association with the OSMC, Mr O'Shanassy was said by Foundation to have been in fact consulted 'in relation to the loss of Dr Grech' and to the demand for an increase in 'keyman' medical assistance. Foundation submitted broadly that those matters involved 'service contracts with doctors where decisions were required to be made in relation to questions of goodwill and commercial benefit in pursuing a doctor for a limited period of service'. Foundation rejected the notion that such matters so encountered concerned 'adverse changes' for which Foundation was responsible. The critical point of controversy remains however whether whatever 'changes' were so involved constituted 'material changes' of the nature and scope falling within clause 3.9, yet were made without consultation or consent. 121 As to the complaint raised by Idoshore concerning the 'management, corporate overhead and group tax costs being brought to the balance sheet… in contravention of clause 3.9' of the Business Sale & Purchase Agreement, Foundation characterised the same as 'unfounded', pointing out thereby that '[t]he trade-offs provided by economy of scale, as noted in Mr Gower's report and the evidence of Ms Kennedy [Foundation's chief financial officer and company secretary who testified in the proceedings] have to be taken into account'. I would observe that much would depend upon whether the relevant changes were 'material… to the organisational structure, operations and strategic direction of the Business or the Centre' within clause 3.9 of the Agreement. Foundation emphasised that '… changes [are] unavoidable when a large public company takes over a comparatively small medical centre', and moreover that any such matters 'if they were to be covered by clause 3.9 should have been [spelt out] in unambiguous terms', but I do not think that there has been any ambiguity relevantly involved in those submissions of Idoshore which I have acknowledged to have significant force, such as in the case of quantification of non-arm's length expenditure incurred after 'Completion' by Foundation. 122 It was next submitted by Foundation that the clause 3.9 expression '… organisational structure, operations and strategic direction [of the Business]' referred to 'major aspects and not general staffing issues and day to day running of the medical centre', and further that '[t]he only word that could conceivably refer to day to day running' of 'operations' must be 'read in its context in clause 3.9 as referring to the services to be provided in terms of specialists and major changes to things such as opening hours, advertising and matters of general strategy'. However it is difficult to follow why the scope of the expression at least of 'operations', if not also of 'organisational structure', in the context of clause 3.9, would not have included reference for instance to 'general staffing issues', or any other issues involving monetary outgoings or commitments at least of significance and relevance to the operational overheads of 'the Business or the Centre' for the time being. 123 Foundation contended broadly that the ultimate difficulty for Idoshore's case was that ultimately it cannot point to any evidence that would substantiate its allegations that: (i) 'Foundation allowed gross billings to stagnate'; (ii) 'Foundation allowed the doctor's retention figure to slip from 53% to 43%'; or (iii) 'Foundation caused consultant "rent" revenues to disappear.' It was said thus by Foundation that '[t]hose allegations require proof of an active attempt by Foundation to run the business down', which as I have at least implicitly observed already, tends to put the test for breach or otherwise of clause 3.9, and otherwise of the Agreement, too high as a general proposition of construction. In the context of the decline in business income of relative significance which occurred subsequent to the Foundation takeover, a stage could conceivably be reached in principle and reality whereby it might rightly be said that a downturn in or loss of revenue inherently involved such significance as to indicate prima facie default relevantly of Foundation in compliance with clause 3.9 to an extent 'material', in the absence of some rational or cogent explanation. Foundation argued further that Idoshore's '[a]ssertions of unintended passive behaviour are unsubstantiated and even if proved cannot constitute an active attempt to thwart [Idoshore's] ability to secure "earn-ups"' within clause 3.3; as I have already indicated, so much puts the requisite test for contravention of clause 3.9 too high. 124 It was further submitted by Foundation that Idoshore had not shown that '… there was an adverse change and a deliberate intention on the part of [Foundation] not to grow EBITDA', and further that it was 'incumbent' on Idoshore to demonstrate such an intention, neither of which propositions Idoshore was said to have addressed, or addressed adequately, by way of evidence concerning '… what took place 7 years ago'. Or as Foundation emphasised in the same context, 'there is no evidence that would establish any intent on the part of Foundation to limit the growth of OSMC's business'. Aside from the non-arm's length outgoings incurred by Foundation, I think that the need for Idoshore to establish an intent on Foundation's part to infringe the operation of clause 3.9, whether or not contextually to the operation of clause 3.10, puts the requisite test again too high. Breach of contract does not normally of course require necessarily the presence of an element of intention of the party in alleged default in order for a breach to be established, and I am unable to accept that any such requirement would be here required in relation to the operation of clause 3.9. 125 Addressing the issue of reliance on Idoshore's part upon the representations of Foundation, referring thereby to the alleged representations made by Foundation collaterally to the formation of the Business Sale & Purchase Agreement, it was disputed by Foundation that any such factor had been established. Foundation asserted, somewhat repetitively, in relation to Mr O'Shanassy's decision to enter into the Business Sale & Purchase Agreement, that '… an astute and experienced businessman with legal training would be expected to protect his position by having the representations claimed to be relied upon committed to the contract document, particularly when it was [Idoshore] who was providing details of earnings and warranting that the EBITDA would not fall below ninety percent'. As I have foreshadowed, there is force in that Foundation response, so far as those collateral representations (or warranties) were not reflected in explicit terms or conditions of the Agreement. 126 Foundation contended further that Idoshore's evidence (per medium of Mr O'Shanassy) as to reliance on the representations of Foundation alleged, was in any event 'limited'. After referring to conversational material involving Dr Jones and Mr O'Shanassy, deposed to by Mr O'Shanassy, Foundation submitted that the Court should find in any event that the representations alleged constituted 'negotiation and/or puffery in a negotiating context', rather than amounting to 'representations', being related to 'the financial strength of Foundation and its ability to expand businesses through access to capital', being matters said by Foundation to be 'not largely in dispute'. The Court ruled against the admissibility of certain purported reliance evidence the subject of par 59 of Mr O'Shanassy's affidavit sworn on 20 February 2006, and Foundation pointed out in that regard that 'no further evidence was adduced in relation thereto'. Foundation further contended that the representations upon which Idoshore relied were '… largely borne out in explicit terms in the [Business Sale & Purchase] Agreement in any event', and yet further that '… it should only be those explicit terms relied upon, and not other assertions that [Idoshore], through Mr O'Shanassy, was induced to enter into the contract on the basis of representations or collateral warranties outside the entire contract'. As I have already indicated, there is inherent force in what was that repetitive theme of Foundation's submissions, which I have only recorded for completeness. 127 Foundation next submitted, in relation to its description of 'Alleged Breaches', that for Idoshore to assert that Mr O'Shanassy was 'induced' to commit Idoshore to the Business Sale & Purchase Agreement '… [was] to put a colour on Mr O'Shanassy's evidence'. Foundation referred in that regard to Mr O'Shanassy's affidavit evidence appearing in particular from pars 40 to 47 thereof under the heading 'Negotiations to sell Oxford Square medical', which deposed largely to conversations said to have occurred between himself and Mr Meehan during August and September 2000. The significance which Foundation purportedly ascribed to that affidavit evidence was that '[r]ather than Mr O'Shanassy being "induced" [by Mr Meehan], the conversations attested to indicate a strong negotiating position undertaken by Mr O'Shanassy'. Whilst I think that submission was somewhat of an overstatement on Foundation's part, I have already indicated in any event my juridical difficulty with Idoshore's case, to the extent that it placed reliance upon oral warranties and representations concerning the OSMC 'Business' allegedly made collaterally to the formation of the Agreement. 128 Foundation drew attention to the further circumstances that the evidence disclosed that the '… parties continued to consult in relation to the operation of the OSMC throughout the first and into the second year' of operation of the Agreement, and that whilst Idoshore had advanced submissions concerning the '… costs of management, corporate overheads and group tax, those sums have to be seen in what is acknowledged [by Idoshore]… as a growth trend in revenue from July 2000 through to at least June 2002'. Foundation submitted further in that context that '[t]he difficulty remains for [Idoshore] is that it continues to use pejorative and exaggerated terms such as "sacrifice income sources" and "sheer ineptitude or laziness"…, but does not provide any substantiation for such… accusations'. I think that I have already said enough in these reasons appertaining to the matters the subject of those submissions. 129 Foundation emphasised that '… difficulties were experienced in retaining doctors, specifically Dr Grech but also Dr Fox who demanded further keyman money', and further that '… the specialists who, through the auspices of Mr O'Shanassy, only signed up for twelve month lease terms… did not renew', but did not relate those incidents, which of course I have earlier addressed, in any way specifically to Foundation's post-completion conduct of the Business the subject of Idoshore's complaints. According to the testimony of Foundation's witness Ms Kennedy, the OSMC doctors were 'disinclined to refer patients to specialists within the Centre, preferring specialists with whom they had existing working arrangements', but that factor was not developed in terms which come sufficiently to issue with Idoshore's case. It was submitted by Foundation in any event that 'it was not surprising that the leases were not renewed', and further that '[t]here is utterly no evidence of any inaction or ineptitude or intention on the part of Foundation to bring those leasing arrangements to a halt nor any evidence that could substantiate any claim that there was anything Foundation could have done to retain those parties'. Certainly it may be acknowledged that no conduct relevantly of Foundation has been cogently shown to have contributed materially to the unfortunate departures of Drs Grech and/or Fox from the OSMC. 130 Foundation complained generally of Idoshore's use of the words 'materially changing' in relation to 'the organisational structure' of the OSMC, but 'without providing concrete evidence of such action on the part of Foundation, nor pointing specifically [as to] how those changes in the overall flow of income and expenditure reduced the EBITDA'. In that context however, it remains appropriate to keep in mind that EBITDA is defined by the Agreement as '[e]arnings before interest, tax, depreciation and amortisation, determined in accordance with Accounting Standards', and not income and expenditure generally according to their respective general law connotations. Foundation made the further contention that the Court should '… pay no heed to the ludicrous suggestion that a corporate entity [would have]… conducted the financial and business affairs of the business not with [the] primary objective being to ensure that the purchaser achieves EBITDA', that being described as an alleged intention on the part of Foundation as a public company which could 'rarely be inferred and certainly not on the limited evidentiary material available to the Court in these proceedings'. In the context of inter-corporate transactions conducted within a wholly owned corporate group, however there may well be sound reasons to transfer profits or losses. In that context, in any event, Foundation submitted that Idoshore 'has not established a lack of good faith on the part of Foundation', that alleged shortcoming being described by Foundation as '… a point that is critical to [Idoshore's] case', and further that Idoshore was required to '… show a deliberate attempt on the part of [Foundation] to hold back the growth of the business such as to prevent the EBITDA from reaching and sustaining the agreed Benchmark', or '[i]n other words, [Idoshore] must show that [Foundation] did not act in good faith', all of which Idoshore 'has failed to do'. All that may be correct in terms of propositions in the ordinary course, but what falls for critical consideration, aside from the Doctors Fox and Grech issues and the collateral warranty issue, all of which I have separately addressed, is the major issue as to breach or otherwise of clause 3.9 of the Agreement. 131 Foundation then drew attention to what was described as '… [Idoshore's] unsupported assertion that there was an implied contractual obligation on [Foundation's part] to, in effect, keep things the way they were'; the existence of any such implied term, to any extent ultimately relied upon by Idoshore, was rejected by Foundation not unexpectedly, but in any event I do not think that any such issue has realistically survived for close examination. It was asserted by Foundation in any event that Mr O'Shanassy '… knew all along that he was selling to a large public company with different structures from his own', though precisely what were those 'different structures' and the significance relevantly thereof was not particularised in the context of the submission. Foundation further submitted that if Mr O'Shanassy 'had wished to preserve the exact accounting and operating structures [so much] should have been set out in the [Business Sale & Purchase Agreement] which he prepared', though the nature and intended significance relevantly of 'exact accounting and operating structures' was not particularised, whether by way of comparison to those structures actually put in place by Foundation after the acquisition of the OSMC, or otherwise. 132 Foundation emphasised that what it described as the 'implied assertion' of Idoshore, that 'constancy in relation to organisational structure, operations or strategic directions' would have meant that the EBITDA was met, had not been substantiated. However once more, I doubt whether the submission confronts adequately the nub of Idoshore's case, as it ultimately crystallised. Foundation also emphasised that '[a]s in any business, there are too many variables to say with certainty that the EBITDA would have been met in any set of circumstances', and further that, '… there was no guarantee that the EBITDA would have been met had the business not have been sold and Idoshore continued as the proprietor', but once again, the submission did not seem to me to come sufficiently to issue with Idoshore's critical or most critical case as to contravention or otherwise of clause 3.9 of the Agreement. 133 Continuing its submissions by way of emphasis upon the need for Idoshore 'to prove its case', further reference was made by Foundation to 'the role played by Dr Gesovic in relation to the ongoing operation of the OSMC', and to Mr O'Shanassy's evidence that '… in terms of billings OSMC from February 2001 to June 2001 had performed well', and also to his consequential 'remark' that 'the financial results were pleasing'. Foundation drew attention moreover to Mr O'Shanassy's attestation that as at July 2001, he retained confidence that Foundation was a strong and growing company that would carry out its strategic plan. The month of July 2001 was on the other hand of course no more than six months following upon completion of the Business Sale & Purchase Agreement, and I think that Mr O'Shanassy's comment in that regard was seemingly referrable to Foundation generally as a corporate group. Foundation submitted in that further context that there was nothing in Idoshore's evidence adduced in the proceedings that suggested that 'Foundation ever resiled from its desire to continue to grow [the business]', and further that it was '[i]ndeed axiomatic that a public company would pursue that course'; once more the submission ultimately affords insufficient significance to what boil down to the critical evidentiary issues raised by Idoshore. 134 Foundation asserted next that '[t]he departure of Dr Jones and Mr Meehan from the ranks of Foundation is not a matter that goes to the issue in this case', which I would understand to be so, though whether so much dissolves any significance to Foundation's absence of adducement of evidence in particular from Mr Meehan, as the former apparent principal of Foundation, is another matter. Reference was made also to the testimony of Mr O'Shanassy concerning his having stated in August 2001 to Foundation's (by then) new chief executive officer, Mr Ralph Shreeve, that 'the sale of OSMC was predicated on assurances by Meehan and Jones about growing the business "by relocating to larger premises, Idoshore having ongoing involvement, and as a consequence of these things the greater likelihood of further earn-ups payable to Idoshore"'. Foundation accordingly submitted that '[g]iven the involvement of Dr Gesovic throughout this time it is hard to understand exactly what more "ongoing involvement" Mr O'Shanassy expected', and it asserted that '[m]ost tellingly, Mr O'Shanassy in effect acknowledges that at its highest the expectation is "a greater likelihood" rather than an absolute certainty'. 135 It was next maintained by Foundation that Mr O'Shanassy was 'clearly concerned with only relocation and not other aspects of [the] operation', though it was unclear what were definitively those 'other aspects'. As to 'relocation', so Foundation's submissions continued, '… it is clear from the [Business Sale & Purchase Agreement] that there was no obligation on the part of Foundation to move OSMC to larger premises on site or in the immediate locale'. So much I would observe was supported at least by what first appears under the clause 3.3(b) heading '(Relocation and 1st Adjustment to Purchase Price)', commencing '[h]owever if the Vendor and the Purchaser agree to a Relocation…', and consistently therewith clause 3.3(d) commenced '[i]f the Purchaser and Vendor agree to a Relocation…'; see also clause 10.1(p), which commences 'where the parties do not elect to relocate the Business as contemplated…'. It was submitted by Foundation moreover that Idoshore could 'point to no evidence that would substantiate its apparent claim that moving to larger premises would have automatically increased OSMC's earnings', and also that '[g]iven the difficulties in retaining specialists in [the] existing Centre and the difficulties in retaining Dr Grech and having to pay further money to Dr Fox, moving to larger premises could well have had a countering effect'. Hence perhaps a principal thrust of Idoshore's case was seemingly directed to the objective of at least maintenance of the status quo of operational earnings of the OSMC, in terms of course of EBITDA measurement, whether the OSMC was to be conducted at the existing location of the OSMC or otherwise, and if possible further reward by way of the first 'earn up' provisions of clause 3.3(a). I am unable to draw the inference in any event, for which Foundation seemingly contended, that Idoshore was '… clearly concerned with only relocation and not other aspects of the operation'. 136 As to the subject of moving the OSMC operations from Oxford Square to more expansive premises, Foundation also drew attention to Mr O'Shanassy's affidavit evidence as to having additionally informed Mr Shreeve of Foundation, back in August 2001, that 'I want Foundation to reconsider its position in respect of [the] CBA site and put in an "offer to lease" for these premises'. Upon that basis, it was submitted by Foundation to be 'clear that Mr O'Shanassy was aware that Foundation was reconsidering the question of relocation' completely. Moreover it was pointed out by Foundation that Mr Shreeve 'did not dismiss the prospect of relocation completely' and indeed that he was 'willing to reinstate our expression of interest to lease but we will need to have a close look at the sub-tenancy commitments we have'. Mr O'Shanassy's response was said to suggest 'encouragement', but not support for the assertion that there existed a contractual obligation on the part of Foundation to undertake a relocation, contrary to what Foundation purportedly described as '… now the thrust of [Idoshore's] case'. Foundation characterised that conversation as 'very telling', and pointed out that at no time did Mr O'Shanassy 'express any concern in relation to the operation of [the] OSMC, or a relocation, beyond a hope… that relocating the business would help to make it grow'. Consistently with what I have already recorded from Foundation's submissions, that 'hope' was said by Foundation not to be supported by any 'hard evidence that [growth] would have been [the] inevitable consequence of a relocation', which I think to be per se inevitably correct as a matter of reality in terms of the usual exigencies of business or commercial affair. Again however I do not think that the submission came wholly or sufficiently to critical issue with the way in which the presentation of Idoshore's case ultimately evolved at least in the course of the hearing of the proceedings. 137 Mr O'Shanassy's letter of 30 August 2001 was next said by Foundation not to assist Idoshore, since '[t]he conversation evidence set out in paragraph 98 of Mr O'Shanassy's affidavit', concerning his meeting on 29 August 2001 with Drs Gesovic and Fox and also with Messrs Shreeve and Sloane, did not disclose any 'agreement in principle', nor was it understood by Foundation to the effect that Idoshore now 'pleads as part of its case that a further agreement was reached on 29 August 2001 to definitely relocate the OSMC'. The Court was next referred by Foundation to par 102 of Mr O'Shanassy's affidavit, where he spoke of a telephone conversation on 6 September 2001 with Mr Brett Sloane of Foundation, and in the course of which Mr Sloane was said by Mr O'Shanassy to have indicated that Foundation would not relocate to the so-called 'CBA site'. Mr O'Shanassy testified to having responded that such decision was 'extremely disappointing' and 'contrary to every assurance we have been given', and further, to asking what was Foundation's justification for not relocating, though he did not testify at that time ('quite properly' so Foundation submitted) that there was any contractual obligation on the part of Foundation to relocate. In the overall context therefore, so the evidence was summarised by Foundation, no assurances were made amounting to any representation to the effect that Foundation would 'definitely relocate OSMC'. 138 Returning to the critical focus ultimately on clause 3.9 and its reference to Idoshore's achievement of EBITDA, relevantly of course to the operation of the comprehensive 'earn-up' provisions of clause 3.3 of the Business Sale & Purchase Agreement, the concluding thrust of Foundation's submissions in chief was that '[w]hilst there was much evidence before the Court from the experts as to what may or may not have caused the OSMC not to reach its EBITDA, the fact is it did not', and further that nothing 'contained in the evidence provides a concrete basis for [Idoshore's] claim', and therefore that '[a]bsent proof of a deliberate attempt by [Foundation] to not meet the EBITDA, the Court cannot go to the aid of [Idoshore] for the making of an imperfect bargain'. It was 'equally' postulated by Foundation that 'the Court would not go to the aid of [Foundation] had [Foundation] not included in [the Business Sale & Purchase Agreement] the warranty at clause 10.1(p)', which I have of course earlier extracted, and which commenced 'where the parties do not elect to relocate the Business as contemplated in clause 3.3(d)…'. The formidable obstacle however to Foundation's invocation of clause 10.1(p) by way of cross-claim is whether the non-fulfilment of that sub-clause was occasioned by the conduct of Foundation in contravention of clause 3.9. 139 In any event, Foundation concluded its submissions as to its rejection of Idoshore's principal case to the effect that '[i]n a perfect business world all companies would make profits and continue to grow', but the fact '[t]hat did not happen in the [present] particular case in the first year after the sale transaction… does not justify the applicant's claim in these proceedings'. That submission, however, is predicated also implicitly on Foundation not having occasioned the shortfall, or materially contributed thereto, by its own business conduct involving in particular non-arm's length transactions and transactions otherwise the subject of complaint as I have earlier recorded, being conduct said by Idoshore to have been in contravention of clause 3.9. 140 Foundation's principal defence in summary was that the Court should not find the representations and/or collateral warranties, as alleged or propounded by Idoshore, to have been made by Foundation, nor the alleged breaches of clause 3.9 (or otherwise of the Business Sale & Purchase Agreement) on its part to have been substantiated, and that the Court should accordingly dismiss Idoshore's claims. As I have made clear however, I think that aside from the Drs Fox and Grech issues which I have separately addressed, it is the issue as to breach of clause 3.9 of the Agreement, and its implications in terms of Idoshore's claim for the 'first earn-up' pursuant to clause 3.3(a) of the Agreement that I must address for the purpose of assessment. 141 As to Foundation's cross-claim against Idoshore, Foundation framed the same upon the circumstance allegedly on Foundation's part that the EBITDA was less than 90% of the Benchmark agreed to by the parties and therefore the warranty on the part of Idoshore contained in clause 10.1(n) must apply. The full text of that warranty has been of course earlier extracted. Foundation asserted that the Court should '… deal with the specific and that is the readily quantifiable loss being the difference between the Benchmark EBITDA and the actual EBITDA for the three years post sale'. Its cross-claim was framed on the basis of the overt events that occurred after 'Completion', in the following terms: 6. 'Following the completion of the purchase pursuant to the Agreement on 31 January 2001: (a) the OSMC did not relocate; (b) the EBITDA of the OSMC for the 12 months following the completion of the Agreement fell below 90% of the EBITDA benchmark; and (c) the EBITDA of the OSMC for the succeeding three years following the completion of the Agreement fell below 90% of the EBITDA benchmark. 7. In the premises, 6(b) and (c) above constituted breaches of the warranties and express conditions of the Agreement at the hands of the Cross-Respondent.' However, as I have foreshadowed, if Idoshore succeeds on its case for contravention of clause 3.9 of the Agreement, Foundation's foregoing cross-claim necessarily fails. Idoshore's submissions in reply and the Court's preliminary observations on the issues arising from the respective submissions of the parties 142 Idoshore's somewhat extensive submissions in reply, filed with the Court on 24 April 2007, reflected much of what I have already recorded of its submissions in chief, and accordingly I need to record only limited aspects of its reply for completeness. 143 Idoshore described Foundation's principal scope of defence to the proceedings as resting on three matters, encapsulated by Idoshore controversially as follows: (i) '… the "fact" that the OSMC did not reach the EBITDA Benchmark'; (ii) '… whether the contract properly construed was an "imperfect bargain" which required nothing of [Foundation] by way of efforts to maintain or increase EBITDA of OSMC after acquisition'; and (iii) '… the existence of [Foundation's] reasonable grounds for its growth or profit maintenance representations and whether intent not to fulfil the represented state of affairs has anything to do with that case'. 144 In relation to the critical stipulations of clause 3.9 (inter alia) of the Business Sale & Purchase Agreement, and what Foundation had sought to submit in response, Idoshore drew attention in reply to restatements of legal principles as to the interpretation of contractual business agreements, and particularly as to implications of reasonableness to that end or for that purpose, being principles said to be operative in relation to the Agreement. I will merely record those submissions for completeness, though I do not think that I need to have recourse thereto for the purpose of supporting such views and conclusions I have reached in these reasons concerning the meaning and operation of the Agreement. 145 The first such restatement of principle cited by Idoshore was that enunciated by Priestly JA as a member of the New South Wales Court of Appeal in relation to a building and engineering contract in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 260: 'There is nothing in the slightest novel in the implication of terms requiring reasonableness by parties to a contract in implementing terms of the contract.' And further at 268: 'The result is that people generally… have grown used to the courts applying standards of fairness to contract which are wholly consistent with the existence in all contracts of a duty upon the parties of good faith and fair dealing in its performance. In my view this is in these days the expected standard, and anything less is contrary to prevailing community expectations.' In framing those principles, his Honour acknowledged the briefly reported dictum of Dixon J (as he then was) in Gullett v Gardner (1948) 22 ALJ 151, as follows: 'This appeal depends upon the interpretation that should be placed upon a transaction of a somewhat curious nature between the two parties, the plaintiff and the defendant. It depends upon its interpretation in the wide sense; not the mere construction of the language in which it is expressed, but the extraction from the documents and the circumstances to which they refer and in which they were made of the full intention which the parties had or are to be consideredas having with reference to the question now arising from the events that have occurred' (that emphasis appearing in the foregoing dictum was that of Dixon J). To similar effect was the dictum of Handley JA appearing in Renard at 280. Meagher JA reached the same outcome in decision-making, upon the operation of the contractual material addressed, as did Priestly and Handley JJA, though (at 275) his Honour rejected the notion '… that reasonableness could be imported as a limitation on the existence of cl 44 powers…', upon the basis that '[s]uch a limitation, if it existed, could only arise either from the express words of the contract or by way of an implied term'. 146 Idoshore cited also what appeared more recently in the unanimous reasons of the High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ), concerning the bearing of surrounding circumstances upon the construction of written contracts, as follows: 'The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP and the purpose and object of the transaction.' 147 The surrounding circumstances implicitly known to Idoshore and Foundation included the nature and extent of Idoshore's then existing business activities, described by the Agreement as the provision of 'facilities and services to medical practitioners to facilitate the conduct of their individual medical practices carried out in and from the Premises…', such premises being of course the subject of the medical operations of Idoshore's medical practitioners by the time of formation of the Business Sale & Purchase Agreement. As I have foreshadowed, at the time of formation of the Agreement, Foundation was already itself engaged extensively in the operation of business activities of that general description, though on a much larger scale than Idoshore. 148 As I have already placed on record, Idoshore listed the following matters in summary as the principal focus of its case, being of course the case the subject of its several claims (I put aside for the moment Foundation's briefly framed cross-claim): '(a) the representations made to [Mr] O'Shanassy about exchanging a higher price for an Earn-Up provision; (b) the pre-contractual representations as to [Foundation's] intention to grow the Business [and] the Heads of Agreement; (c) the contractual provisions of the Business Sale & Purchase Agreement setting out [Foundation's] intention to grow the Business; (d) the express obligation [of Foundation] not to make any material change to the Business; and (e) the contractual warranties by Idoshore as to maintenance of post acquisition EBITDA.' As to (a) above, the same is apparently a reference to representations made in the course of pre-contract negotiations, as is explicitly the case in (b) above. 149 As I have earlier indicated, substantial controversy lay especially in relation to subparagraphs (a) and (b) above, given that the parties committed themselves, following upon the conclusion of their negotiations, to comprehensively framed documentation in the form of the Business Sale & Purchase Agreement, the text of which was at least finalised, as a matter of implication, between the parties' legal representatives on their respective behalves. For that reason, those matters must be discarded as not justiciable for reasons I have earlier explained in detail. Idoshore proceeded to submit, in the context however of the remaining issues, that '[t]aken together, it is quite plain that the parties' intention was not [directed] to a contract whereby [Foundation] could passively allow revenue to be lost and was not one which contemplated loading additional costs to the business and thus to the EBITDA calculations, [and further that] the reliance [of Foundation] on the absence of any express requirement not to do these things… would entirely defeat the efficacy of the Purchase Price adjustments' (referring apparently thereby principally to clause 3.3 of the Agreement). Rather, so the Idoshore submissions continued, '… by referencing the Purchase Price to an EBITDA Benchmark, and by the Earn-Up provisions, the parties contemplated a continuing contractual relationship, and positive obligations on [Foundation] in this regard'. It seems to me that the 'positive obligation', relevantly to the present dispute, was indeed clause 3.9 of the Agreement. 150 A further emphasis of Idoshore's case in purported reply was that Foundation had been 'unable to offer any good explanation for the introduction of large cost items', such as 'wage costs, on-costs of employment and management fees', following upon completion of the Business Sale & Purchase Agreement, despite Foundation's assumption of control of the subject Business (as of course comprehensively defined by the Agreement) on the one hand, yet the sustaining by Foundation of 'loss of revenue from key income sources' on the other hand, which costs and losses were alleged by Idoshore to have caused or substantially caused 'a post-acquisition EBITDA calculation that was lower than the EBITDA Benchmark' of $250,000. That Idoshore submission in reply was advanced in the context of Idoshore's complaint that no explanation or satisfactory explanation was provided, much less demonstrated, by or on the part of Foundation in relation to changes of significance, made after 'Completion' of the Agreement, in the operation of the OSMC, being changes having consequences as to downturn in levels of EBITDA experienced following upon 'Completion' of the Agreement on 31 January 2001. Summary of the proceedings and my conclusions upon the issues addressed by the parties following conclusion of the evidence 151 Although the subject proceedings were originally commenced by application and statement of claim filed by Idoshore on 18 October 2004, the Idoshore case was substantially repleaded by an amended statement of claim filed on 21 March 2006. The response of Foundation by way of amended defence and amended cross-claim was filed on the first day of the hearing of the proceedings. The substantial amendments made on 21 March 2006 to the original pleadings, followed by the nature and extent of the submissions presented by Idoshore to the Court on 29 March 2007, exemplified the difficulties experienced by Idoshore in framing comprehensively its various causes of action which it has sought to pursue. I should perhaps repeat what I have indicated at the commencement of these reasons that my references throughout to 'Foundation' have extended as a matter of drafting convenience to either or both respondents, according to the context, though for the most part it has been the first Foundation respondent involved at least more directly in the relevant transactions and conduct otherwise, the second Foundation respondent being a guarantor relevantly of the first Foundation respondent's contractual obligations. As I have also indicated at the outset, and consistently with the submissions and the pleadings, I have maintained reference to the Foundation designation of the respondents in these reasons, despite their recent changes of name involving the omission of reference to 'Foundation'. 152 The persons who provided testimony at the hearing on behalf of Idoshore were Mr O'Shanassy and Idoshore's expert accountancy witness Mr Phillips of Deloitte, and the persons who provided testimony on behalf of Foundation were Ms Kennedy, being Foundation's chief financial officer, Mr Gower, being Foundation's expert accountancy witness, and Ms Salagiannis, being the business manager/director in the employ of the second Foundation respondent since mid 2000. The evident major decision-maker of Foundation at the material times, being Mr Meehan, did not testify in the proceedings. As I have earlier recorded, he ceased at least his managerial association with Foundation prior to the hearing of the proceedings. The principal witness in the proceedings for Idoshore, being Mr O'Shanassy, was the only witness whose testimony related to the entire scope of the circumstances addressed by the evidence tendered in the proceedings. Although Ms Salagiannis of Foundation had assumed the apparent role of supervision of the operations of the OSMC at least by February 2001, that was only a 'part-time role'. She testified unspecifically as to the absence of '… change in the staffing levels' at the OSMC 'over the period from 2001 to 2002', and the detail and implications otherwise of her description of 'staffing levels' were not detailed. There was a discernible absence of comprehensive documentary material placed in evidence sourced or otherwise emanating from Foundation and relating to what I have recorded in these reasons under the heading 'Events subsequent to completion of the Business Sale & Purchase Agreement – adjustments to EBITDA circumstances and calculations made post-acquisition at the instance of Foundation – submissions of Idoshore concerning significance as to fall in revenues subsequent to Foundation's takeover of operation of the OSMC'. That was particularly the case in relation to the nature, scope and commercial significance of the apparently non-arm's length transactions internally to the Foundation corporate group, which Idoshore has identified as causative of Foundation's purported absence of at least an increase in performance since 'Completion' of the Business Sale & Purchase Agreement. 153 The hearing of the testimonial evidence in the proceedings commenced on 12 March 2007 and concluded on 15 March 2007. On 16 March 2007 there took place a brief hearing in Court for the purpose of setting the agenda for the provision of the written submissions of the parties. As foreshadowed, those written submissions subsequently provided were comprehensively articulated by counsel for both parties, except in the case of Foundation to the extent I have already indicated, and were not supplemented by oral submissions. I have found it necessary or appropriate to reproduce much of the text or the effect of the text of the respective submissions of the parties because of the complexity of the issues arising as well as the wide ranging evidentiary material placed before the Court, and also the implications of the submissions of the parties. I have frequently used the actual words and expressions used by counsel in the course of submissions and thus place the same in order to reflect contextual nuances and matters of emphasis. Similarly, given the central importance of the complex Business Sale & Purchase Agreement, I have found to be appropriate the repeated use of the actual words and expressions of the Agreement, and I have often extracted the full text thereof for identification as well as precision. A number of volumes of documentary material were provided to the Court, though the major proportion of that documentary material placed in evidence was not specifically addressed by either party in the course of the evidence or in concluding submissions. 154 The lengthy and comprehensive affidavit testimony of Mr O'Shanassy addressed extensively the context, as well as certain implications, of relevant aspects of the documentary materials and of events which took place before and subsequently thereto. His testimonial affidavit material alone extended over 54 pages. As I have foreshadowed, I thought that Mr O'Shanassy's oral testimony, in the course of careful and precise cross-examination by counsel for Foundation, reflected a sound, as well as truthful, recall of empirical and otherwise relevant detail of the transactions and their controversial implementation. Generally speaking, Mr O'Shanassy refrained from uninvited embellishment of Idoshore's case, though given the adverse view I have reached as to Idoshore's case based on oral collateral covenants and warranties said to have been made by Foundation antecedently to and by way of inducement of the principal transactions the subject of the Agreement, I have not reproduced much of his testimonial material. Understandably there was reflected in aspects of his oral evidence, which was largely by way of responses in cross-examination, that degree of subjectivity which tends to be inevitable in the testimony of a litigant witness having a pecuniary interest directly and indirectly in the outcome of commercial litigation. I have reached the view nevertheless that his recall of evidentiary detail should be acknowledged and accepted by the Court as at least substantially accurate and credible. As I have already mentioned, his executive counterpart in office at Foundation at the time of material events, being Mr Meehan, did not testify by affidavit or orally in the proceedings. 155 For reasons I have already foreshadowed, I would not assign ultimate significance to Idoshore's evidence, to the extent that it would purport to establish oral warranties and representations asserted to have been made explicitly or implicitly by or on behalf of Foundation antecedently or collaterally to the formation of the Business Sale & Purchase Agreement, and consequently to breaches of any such collateral warranties and representations, whether in terms of provisions of the Trade Practices Act, as has been pleaded, or otherwise. The contents of the complex contractual instrument were settled by and between the respective legal representatives of the respective parties, and addressed by reasonable and necessary implication the entirety of the commercial arrangements objectively put in place between the parties for the purpose of giving effect thereto. As I have already emphasised, although it would have been open to the parties to have stipulated in the Agreement explicitly to the effect that the operation of any collateral warranties and representations extrinsic to the Agreement was excluded, in the formation of the Agreement it did not do so explicitly, nevertheless, the comprehensive and detailed stipulations of the Agreement carried in my opinion an implicit operation to that effect. In other words, the Agreement by implication reasonably and necessarily to be imputed should be construed to have covered the field of the arrangements made relevantly between the parties and in relation to which contractual force and effect alone was mutually intended. Material to the basis for that finding is that each of the corporate partiesto the proceedings was legally represented in relation to the preparation and execution of that very comprehensive Agreement. I prefer that approach primarily, although there is force also in Foundation's denial of the operation in any event of s 51A of the Trade Practices Act as to future matters and the contention that such representations did not go to the root of the contract. What therefore falls for principal determination in the proceedings are the causes of action asserted by Idoshore for breach on Foundation's part of that comprehensive Agreement and clause 3.9 thereof in particular, and the consequences of any such contractual breaches in terms of loss and damage allegedly sustained by Idoshore. 156 The operation of clause 3.9 of the Agreement, which must constitute the principal focus of Idoshore's case in terms of contractual breach, unconditionally enjoined Foundation from making 'any material changes to the organisational structure, operations and strategic direction of the Business or the Centre without consulting with and receiving consent' from Idoshore, and did so '… with [the] primary objective to ensure that [Foundation] achieves EBITDA… growth…'. The explicit 'primary objective' of clause 3.9 was 'to ensure that [Foundation] achieves EBITDA…', and in that context, it was mutually agreed in particular that Idoshore, of course as vendor of the assets of the 'Business' (as comprehensively defined by clause 1.1 of the Agreement), would obtain the benefit of the clause 3.3(a) 'earn-up' to the extent that there might crystallise any such entitlement in the events which might happen. Incidentally there is no suggestion in the evidence as to Foundation having consulted Idoshore as to the grant of any consent to Foundation for the 'mak[ing] of any material changes' within the scope of clause 3.9, and no such consultation and consequential consent of Idoshore has been pleaded in any event. I should add for completeness that the somewhat curiously structured clause 3.10 provided no independent cause of action relevantly in favour of Idoshore, though it sheds light upon the mutually intended operation of the Agreement. 157 The reason why no price increment or so-called 'earn-up' in favour of Idoshore within clause 3.3(a) was acknowledged by Foundation to Idoshore was due to what it asserted to be the shortfall in the EBITDA of the OSMC which, according to Foundation's case, crystallised in quantification in respect of the initial period of 'twelve (12) months from the Completion Date', during the whole of which period of time of course the 'Business' had become the subject of Foundation's ownership and control. Idoshore pointed to the five factors enumerated in its submissions (recorded earlier at [42] of these reasons) as having caused or contributed materially to that outcome, the fourth and fifth factors being the more tangible in terms of demonstration of breach of clause 3.9 of the Agreement. The evidentiary material as to the pre-takeover earnings and otherwise of the operations of the 'Business' bearing upon the contractual notion of EBITDA, and appearing at [27], [39] and [61] of these reasons, when compared to the lower earnings correspondingly of the 'Business' under Foundation's subsequent ownership and control, as so outlined at [60], were not explained or rationalised by Foundation, or at least adequately so, by reference to the operation of the Agreement subsequent to 'Completion', and in particular as here relevant, by reference to the initial year's operation of the Business under Foundation's control. In that regard the surprising absence of testimonial evidence of Foundation's former chief executive officer Mr Meehan, in the course of the conduct of Foundation's case, was not explained by Foundation. In making that observation concerning Mr Meehan, it was not sufficient that his business/ employment relationship with Foundation had ceased prior to the hearing of the proceedings. 158 Foundation's endeavours to account for the post-completion financial results concerning the operations of the OSMC 'Business' per medium of its expert witness Mr Gower, were of no assistance of significance to its case as will have been already appreciated from observations I have already made. Transactions inherent in relation to what I have recorded in [56] were not explained, much less rationalised by Foundation relevantly in terms of the operation of clause 3.9, and in particular by way of rebuttal of the occurrence of '… material changes to the organisational structure, operations and strategic direction of the Business or the Centre' within clause 3.9. Conversely, Foundation's case the subject of its cross-claim based upon the operation of sub-clauses 10.1(n) and (p) has therefore not been made out at least to the extent of those outgoings. Foundation cannot in principle invoke the operation of those latter contractual provisions in circumstances referable substantially to its own breaches of the Agreement. Given the circumstances I have earlier summarised in the course of my narrative of the case advanced by Idoshore in chief, the evidentiary onus effectively passed to Foundation to demonstrate reasons contrary to, or at least at variance with, the case which Idoshore prima facie established adversely to Foundation in those aspects, being an evidentiary onus in relation to which Foundation at least fell short in adequately addressing. 159 Idoshore and Foundation stood of course at arm's length in relation to the formation and subsequent performance of the terms and conditions of the Business Sale & Purchase Agreement, to the extent that performance duly took place. For EBITDA Benchmark adjustments to have been effectively put in place pursuant to the Agreement, either by way of increase in favour of Idoshore, or decrease in favour of Foundation, it was implicit that costs falling potentially for consideration be relevant from an objective standpoint in relation to the scope of the defined notion of 'Business' and of the clause 3.9 expression 'material changes'. No exercise by way of demonstration of arm's length cost equivalence of relevance to the 'Business' was undertaken by Foundation. 160 The non-arm's length cost factors particularised by Idoshore in [56] above were not of course Idoshore's only basis for its claim for clause 3.9 breaches on Foundation's part. Other factors identified by Idoshore, and outlined generally at [59] of my reasons, were also said to involve 'material changes to the organisational structure, operations and strategic direction of the Business or the Centre', having the significance, especially in estimated monetary terms, particularised in [60]-[67]. Enough has been estimated to demonstrate significant monetary cost to the Business in Foundation's hands, and hence further significance in terms of clause 3.9 and conversely sub-clauses 10.1(n) to (p). 161 It follows that Idoshore has established in principlean entitlement to an adjustment by way of increase to the 'Purchase Price' the subject of the Business Sale & Purchase Agreement based upon year one (1) EBITDA, pursuant to the operation of clause 3.3(a) thereof, described of course as the 'first earn-up'. There remains however to be addressed with precision the calculation of the so-called '1st Adjustment to Purchase Price' pursuant to the operation of clause 3.3(a) of the Business Sale & Purchase Agreement. 162 I am unable to identify any viable cause of action in law for the recovery of moneys by Idoshore from Foundation directly or indirectly referrable to any conduct relevantly of Foundation regarding the so-called 'Loss of Billings for Grech' and the 'Consequential loss', upon or referrable to the operation of the Business Sale & Purchase Agreement, or otherwise by reason of any facts and circumstances in evidence in the present proceedings. No viable cause of action for breach of contract according to law was formulated by Idoshore in that regard, much less particularised for instance in [93]-[103] above. Nor has any cause of action in contract or tort, or for equitable damages, been persuasively articulated by Idoshore. I am unable to identify any sound basis for imputing an obligation to Foundation to have sought any injunctive relief against him, and the task of calculation of loss to the 'Business' (as of course defined) of approximately 44 working days referred to in [99] and the cost involved in seeking curial relief were not subjects which could somehow be attributed to breach of clause 3.9 or of any other contractual duty on Foundation's part, or at least clearly or readily so. 163 I should record nevertheless in that regard that the amended statement of claim of Idoshore bearing date 21 March 2006 purportedly pleaded the failure of Foundation 'to manage the business of the OSMC with a view to maintaining or increasing a profit' by taking 'any action to enforce contractual rights held by OSMC against Dr Joseph Grech', upon the basis that such failure was said to be 'contrary to the First Representation and the collateral warranties', and whereby 'the OSMC lost billing revenue for approximately 44 days' and '[n]o doctor was recruited to replace the services of Dr Grech to OSMC'. More was required by way of demonstration of material facts and circumstances of significance in order for Idoshore to establish the juridical framework of a viable cause of action in relation to the Dr Grech controversy. 164 In regard to the issue of Idoshore's entitlement to 'earn-up' in respect of the period of twelve months following 'Completion', I think Deloitte's 'lower' assessment of quantum of damages, appearing at [105(iii)] of my reasons, was soundly conceived in principle, to the extent it conforms with my reasons. However any quantification of damages must have regard to my findings that: (i) the pre-contractual representations and collateral warranties pleaded were not promissory in nature nor otherwise went to the root of the contract; and (ii) there is no viable cause of action in law for the recovery of moneys by Idoshore from Foundation directly, or indirectly, referrable to any conduct relevantly of Foundation regarding the so-called 'Loss of Billings for Grech' and the 'Consequential loss'. The calculation of loss and damage essayed by Idoshore in [105(iii)] above requires revision downwards therefore in order to accommodate those findings. I therefore direct Idoshore to provide to the Court no later than 2 pm on Friday 10 August 2007 a revision of calculations as to general damages required to give effect to these reasons. The composition of the calculation should be provided. 165 The remaining principal issue falling for resolution concerns the subject of the controversial payment of $250,000 to Dr Fox. It will be recalled that clause 2 of the Business Sale & Purchase Agreement entered into of course on 14 December 2000, stipulated for its interdependency with the Facilities and Services Contract made between Idoshore and Dr Fox on 15 November 2000 for a term of three years (see generally in that regard [80] above). In the context of the circumstances recorded subsequently at [82]-[86] above, payment of that sum of $250,000 was made to Dr Fox pursuant to the terms of the Deed of Variation bearing date 28 May 2001 made between Idoshore and each of the Foundation companies, which is substantially extracted at [85] above, and which Deed took effect by way of supplement to the Business Sale & Purchase Agreement which had been completed four months earlier on 31 January 2001. As outlined in these reasons, part of that sum of $250,000 paid to Mr Fox, being $210,000, was drawn down from the retention fund comprising the 'Warranty Security Deposit' established by clause 10.5 of that Agreement. Of that amount of $210,000, the sum of $125,000 was constituted by a contribution made by Idoshore to Foundation said to be induced by a promise made by Foundation to relocate the OSMC to the CBA site, and the amount remaining of $85,000 was treated as a loan by Idoshore to Foundation, which Foundation expressly agreed to restore to the retention fund in accordance with the Deed of Variation. Repayment was stipulated by the Deed to be repaid by 1 February 2002 into or in favour of the 'Warranty Security Deposit' the subject of clause 10.5 of the Business Sale & Purchase Agreement earlier of course fully extracted, and thus not to Idoshore at least in the first place. That deposit formed part of the balance of purchase money payable by Foundation to Idoshore as indicated by that clause 10.5. The Warranty Security Deposit was constituted by '… an interest bearing deposit… operated by [Foundation's] solicitor' as a stakeholder pursuant to that clause 10.5 and paragraph (b) in particular. It appears that such sum of $85,000 has not since been paid by Foundation to Idoshore, either directly, or indirectly by relodgment into that 'Warranty Security Deposit'. 166 Given those circumstances and the events which subsequently happened, Idoshore became presently entitled to payment of each of those sums of $125,000 and $85,000 from Foundation, whether per medium of Foundation's operation of the Warranty Security Deposit or otherwise. As to the sum of $125,000, Idoshore advanced the same, as I have foreshadowed, upon the footing of the OSMC being relocated to the so-called CBA site, which has never subsequently occurred at the instance of Foundation, and as to the sum of $85,000, Foundation explicitly agreed to restore that amount to the Warranty Security Deposit, by way of repayment of what I have above referred to as Idoshore's loan to the first respondent Foundation company (see again [84(ii)] above). In both cases, the 'security' purposes for the establishment of the so-called Warranty Security Deposit have been fulfilled, no claim for compensation having crystallised for any payment thereof in favour of Foundation, whether by way of any entitlement of Foundation pursuant to clause 10.1(n) and (p) in light of principal findings of the Court the subject of these reasons or otherwise. 167 In relation to the issue of interest on the moneys that are or have been or ought to be in the Warranty Security Deposit, according to the provisions of clause 10.5 of the Agreement, and of the interest on the 'first earn-up' that ought to have been received by Idoshore in regard to the first year of operation of the OSMC by Foundation, I will direct that each of the parties provide to the Court submissions on that issue in writing by 2 pm on Friday 10 August 2007. Foundation's cross-claim against Idoshore 168 The issues the subject of Foundation's cross-claim, or more strictly it would seem, of the first Foundation respondent, remain to be addressed in the light of evidentiary material which I have already recorded in these reasons. As I have foreshadowed, it necessarily follows from the conclusions I have already reached in relation to the operation of the Agreement and of clause 3.9 in particular, and in the events which have happened relevantly to the principal issues arising for resolution in the proceedings, that Foundation's case for breach of the 'Covenants and Warranties' the subject of sub-clause (n) and (p) of clause 10.1 must be dismissed. I certify that the preceding one hundred and sixty-eight (168) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 7 August 2007 Counsel for the Applicant: Mr N Cotman SC Solicitor for the Applicant: Sagacious Legal Pty Ltd Counsel for the Respondent: Mr R K Weaver Solicitor for the Respondent: Watson Mangioni Date of Hearing: 12, 13, 14, 15 and 16 March 2007 Final Submissions: 24 April 2007 Date of Judgment: 7 August 2007