IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE	
CIV-2019-419-000268
[2023] NZHC 1360	

BETWEEN	KEEZZ LTD (NZCN 6836013)
First Plaintiff

KEEZZ PTY LTD (CAN 116 327 005)
Second Plaintiff	
AND	TE WHATU ORA – HEALTH NEW ZEALAND (FORMERLY WAIKATO DISTRICT HEALTH BOARD)
Defendant	

Hearing:	8–12 May 2023	
Appearances:	A R Gilchrist and A V Shinkarenko for Plaintiffs S Barker, J Maltby and E Donnelly for Defendant	
Judgment:	1 June 2023	

JUDGMENT OF VENNING J

This judgment was delivered by me on 1 June 2023 at 12.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:	McLeod & Associates, Auckland
Buddle Findlay, Wellington
Counsel:	A R Gilchrist, Auckland
A V Shinkarenko, Auckland

KEEZZ LTD v TE WHATU ORA – HEALTH NEW ZEALAND [2023] NZHC 1360 [1 June 2023]

TABLE OF CONTENTS

Introduction	[1]
Background	[9]
The SSRP	[15]
The Steering Committee	[18]
Variations to the Services Agreement	[24]
The Christmas 2017 shutdown	[28]
The termination of the Services Agreement	[30]
Events following termination	[39]
Issues	[41]
Preliminary evidential issue	[44]
Responsibility for the ARF clause	[51]
Did the $25 million savings have to be banked?	[59]
Case for Action	[64]
Outsourcing	[70]
The success of the project	[72]
Credibility and reliability of witnesses	[74] Was the WDHB’s liability to pay the ARF in terms of the Services
Agreement triggered prior to cancellation?	[89]
Does subsequent evidence support Keezz’s position that the threshold
target of $25 million was met?	[123]
Was the Services Agreement varied in December 2017?	[152]
Was the Services Agreement assigned or novated to KNZ?	[161]
Was WDHB entitled to cancel the Services Agreement?	[176] Relief under the Contract and Commercial Law Act (CCLA)	[186] Result	[187]
Costs	[188]

Introduction

[1]	Keezz Pty Limited (KAU) and Keezz Limited (KNZ) (collectively Keezz) offer consulting advice services focused on processes and systems to a variety of businesses and organisations.

[2]	In September 2017 KAU and the defendant Te Whatu Ora – Health New Zealand (at the time Waikato District Health Board (WDHB)),1 entered a services agreement under which KAU agreed to transform Waikato Hospital’s surgical services operation by designing and implementing a new operating model in return for which it was to be paid AUD 2.4 million.

1	Throughout the judgment I refer to the defendant as WDHB.

[3]	Keezz says it has provided the services under the agreement, but WDHB has refused to pay it in full.

[4]	WDHB cancelled the services agreement on 21 June 2018.

[5]	Keezz sues WDHB alleging non-payment and breach of contract. In particular,
Keezz claims to be entitled to an At Risk Fee (ARF) of AUD 500,000.2

[6]	Keezz also claims AUD 180,000 for the provision of services for three weeks during the 2017 Christmas break and AUD 30,000 for the period 21 June 2018  to  29 June 2018 (following what it says was WDHB’s unlawful repudiation of the services agreement on 21 June 2018).

[7]	WDHB denies liability. It says the pre-conditions for liability to pay the ARF were never met. Further, it says the project was suspended over the 2017 Christmas break and it paid for the limited services KAU provided during that period. Finally, WDHB says it was entitled to cancel the Services Agreement and is not liable for any further payment for the eight day period between 21 June 2018 and the end date of the services agreement of 29 June 2018.

[8]	Keezz had also initially sued WDHB alleging misrepresentation and breach of the Fair Trading Act 1986, but at the conclusion of the evidence Mr Gilchrist confirmed Keezz no longer pursued those causes of action.

Background

[9]	At the start of 2017, WDHB faced a number of issues relating to its provision of theatre and surgical services. There were also tensions between clinicians and senior executives. The issues had led to a creeping growth in outsourced surgeries. By early 2017 the outsourcing of surgeries was costing WDHB about NZD 25 million a year. Dr Howard, at the time a clinical leader for cardiovascular services and critical care within WDHB, suggested to the CEO at the time, Dr Murray, that Lindsay Boyd

2	First amended statement of claim, dated 7 May 2021.

of KAU may be able to assist. Dr Howard had previously worked with Mr Boyd when Dr Howard had held a position with the Queensland Department of Health.

[10]	Dr Murray contacted Mr Boyd to explore the possibility of KAU carrying out an operational review of Waikato Hospital’s surgical division. Mr Boyd came to Hamilton and met with members of WDHB on 10 May 2017. Mr Boyd’s recommendation that KAU carry out a review was accepted. KAU duly carried out the operational review between 17 and 31 May 2017, and in late May 2017 delivered a document to WDHB entitled Case for Action.

[11]	The Case for Action detailed a programme designed to achieve operational improvements in WDHB’s surgical division. It proposed that KAU would develop an operating model over two weeks which it would then implement within a further 16 to 18 weeks. Overall it expected the programme to be completed in 20 weeks. KAU committed to a measurable improvement in financial performance of at least $25 million per annum and proposed to charge AUD 2.4 million for its services.3 The Case for Action included an ARF component of 50 per cent (AUD 1,200,000) of KAU’s fee for the proposed work. It proposed the ARF would not be payable until the stated improvements were fully realised.

[12]	During July and August 2017 the parties discussed the proposed project and made some amendments to the Case for Action document. By this time Mr Hablous was the acting CEO of WDHB in place of Dr Murray. The Clinical Unit Leaders (a senior doctors’ group) was supportive of engaging Keezz. Mr Hablous considered that engaging Keezz (with Dr Howard’s encouragement) would improve management’s relationship with the senior clinicians. Also, with their support it was more likely the project would be successful. Ultimately WDHB decided to proceed with the project.

[13]	On Monday, 28 August 2017, Mr Boyd and Mr Pearson came to Hamilton. Mr Boyd provided Mr Hablous with a further copy of the case for action. The version of the Case for Action provided by Mr Boyd omitted the financial details.

3	The measurable savings were to be NZD 25 million. The fee charged by KAU, as an Australian company, was in AUD.

[14]	Geoff Pearson, a co-director of KAU with Mr Boyd, negotiated and settled the final terms of the Services Agreement with WDHB’s legal counsel during that week. In the course of the negotiations Mr Pearson provided WDHB with a further version of the Case for Action (the final Case for Action) to be attached to the Services Agreement. That version included the commercial details. On 4 September 2017 KAU and WDHB executed a written agreement, entitled “Waikato DHB Services Agreement” (the Services Agreement) providing for delivery of the project. The Services Agreement provided, inter alia, for the establishment of a steering committee and for the details of the project work. It confirmed the contract price and the basis upon which the ARF would be payable. On 6 September Mr Pearson noted that the final Case for Action had not been annexed to the Services Agreement as intended. WDHB agreed to it being attached.

The SSRP

[15]	The work to be provided pursuant to the Services Agreement was known as the Surgical Services Reinvention Project (SSRP). The SSRP called for KAU to transform the Waikato Hospital’s surgical services operations by developing a new surgical services operating model (SSOM) over an initial two weeks and then by implementing that SSOM over the following 16 to 18 weeks. It was to be delivered by KAU over 20 consecutive calendar weeks from 4 September 2017.4

[16]	The services and expected financial improvements to be provided and the price to be paid by WDHB for the services were set out in the schedule to the Services Agreement:

SCHEDULE A
…

THE SERVICES

A1	…

Transform Waikato Hospital’s Surgical Services Operations through developing over 2 weeks a new operating model and implementing that model over 16-18 weeks.

4	The 20 consecutive calendar weeks from 4 September 2017 would have taken the project through to 19 January 2018.

The detailed specification for the Services is set out in attached document entitled “Waikato District Health Board, Waikato Hospital Surgical Services Case for Action May 2017”. …

A2	Timetable for Services

…

The Services will be provided over a period of 20 weeks. The Services must be provided over consecutive weekly periods, unless the Steering Committee agrees otherwise in writing.

…

FINANCIAL IMPROVEMENTS

Financial improvement will be derived from two principal sources:

•	Increasing throughput; this will result in driving down waitlists and bringing outsourced work back in house.

•	Decreasing operational costs; removing obstacles (including cancellations) from patient flows will diminish wasted labour and overtime costs involved in rework. It is foreshadowed that less resources will be required to do the increased patient throughput.

Through the Services, Supplier will achieve a measurable improvement in financial performance by at least NZ$25,000,000 per annum.

…

SCHEDULE B
…

THE PRICES

The total cost of providing the Services is $AUD 2,400,000 (“Fee”), excluding GST or other imposts, plus all reasonable travel and accommodation, billed at cost (subject to the provision to Waikato DHB of suitable evidence of costs incurred).

The Fee is payable in 20 equal payments of $AUD 60,000 excluding GST or other imposts, plus travel and accommodation expenses. Invoices will be issued each Wednesday for the Services rendered the previous week ending the previous Sunday.

The remaining amount of the Fee, being $AUD 1,200,000 excluding GST or other imposts (the “At Risk Fee”), will be payable when the Steering Committee notifies the Supplier in writing that all actions necessary to implement a savings of $NZ 25 million to Waikato DHB’s profit and loss statements have been delivered by the Supplier. Upon receipt of such notice, the Supplier will issue an invoice in the sum of $AUD1,200,000, excluding GST or other imposts. That invoice will be payable within 7 days of receipt.

[17]	From 4 September 2017 KAU provided services pursuant to the Services Agreement. KAU developed the SSOM and began the process of assisting WDHB to implement it. Mr Boyd, Mr Pearson (from time to time), Felix Kong, and four other KAU contractors were involved in delivering the SSRP.

The Steering Committee

[18]	The Case for Action detailed the role and purpose of the Steering Committee:

Steering Committee; it is proposed that this be formed to oversee the project. It would be a fortnightly meeting armed with a simple and effective status reporting system against the project plan and improvement metrics. … Actions from this meeting will both guide the project and address off schedule situations. Moreover, this forum will ensure that project initiatives remain consistent with corporate responsibilities.

[19]	The members of the initial Steering Committee were Mr Hablous, Dr Howard, who at the time was Clinical Director of surgical services, Mr Paradine the Executive Director of Waikato Hospital Services and Mr Boyd. At some point Messrs Hablous and Paradine ceased to be members and Mr Derek Wright, the newly appointed interim Chief Executive of the WDHB was appointed to the Steering Committee.

[20]	From time to time Mr Boyd reported on progress of the SSRP to the Steering Committee by means of “Flash Reports”.

[21]	In addition to the Steering Committee’s role noted under the final Case for Action to monitor the progress of the SSRP, the Services Agreement confirmed that the Steering Committee had responsibility to trigger payment of the ARF by giving notice in writing to KAU that all actions necessary to implement a savings of $25 million had been delivered by KAU.

[22]	In around November 2017 Mr McCurdie, WDHB’s Chief Financial Officer, identified that neither the Services Agreement nor the Case for Action provided a methodology to measure and quantify the savings from the SSRP that would trigger payment of the ARF. On 5 December 2017 Mr McCurdie met with Mr Boyd, Mr Currie (WDHB Finance Programme Manager) and Ms Barrie (WDHB Finance Team

Leader) to discuss the development of an agreed approach to evaluate and measure the savings from the SSRP.

[23]	Mr McCurdie, together with Mr Currie and Ms Barrie, prepared a “Theatre Re- engineering Benefits Measurement”, (the Baseline document) and, through Dr Howard, provided it to Mr Boyd for comment on 4 May 2018. However, the parties were unable to agree on a methodology to measure and quantify the savings from the SSRP before WDHB terminated the Services Agreement.

Variations to the Services Agreement

[24]	The Services Agreement was formally varied twice by two written agreements. In the first, made in February 2018, the parties agreed that as from 12 February 2018 the time for implementing the SSOM would be extended from 16 to 18 weeks to 26 to 28 weeks, with the overall period for delivery of the services being extended from 20 weeks to 30 weeks (the February variation). The end date for the SSRP was extended to 20 April 2018.

[25]	The February variation also amended the provision relating to payment of KAU’s fee. In place of 20 equal weekly payments of AUD 60,000 the fee was to be paid by 30 equal weekly payments of AUD 60,000. As a quid pro quo the ARF was reduced from AUD 1.2 million to AUD 600,000. The overall contract price remained at AUD 2.4 million.

[26]	The second formal variation to the Services Agreement was concluded on or about 16 May 2018 to apply from 20 April 2018 (the May variation). After discussing the future of the project with Mr Boyd, on 23 April 2018 Dr Howard advised Maureen Chrystal, the director of Corporate Services, that it was proposed Mr Boyd and one other team member (Mr Kong) would carry on in particular roles at a fixed fee of AUD 20,000 per week for an extended 10 week period. Mr Boyd was to have the role of Director Operations, Surgical Services and Mr Kong was to be Manager, Acute Services while permanent recruitment for those positions took place.

[27]	The May variation provided that the implementation of the SSOM was extended to 36 to 38 weeks with the period for provision of services extended from 30

weeks to 40 weeks. As a result of the May variation and the extension of the project’s life, the total of the weekly fees payable by WDHB under the Services Agreement as amended increased to AUD 2 million. As a quid pro quo the ARF was further reduced from AUD 600,000 to AUD 500,000. The overall effect of the May variation was to increase the contract price to AUD 2,500,000. Under this extension the SSRP was due to be completed by 29 June 2018.

The Christmas 2017 shutdown

[28]	It is Keezz’s case that there had been an earlier oral variation to the Services Agreement in December 2017 when WDHB proposed that the elective services component of the project would be placed in abeyance during the Christmas break and the WDHB requested that KAU, specifically Mr Boyd and Mr Kong, perform the roles of Surgical Services Operations Manager and Acute Services Manager over the period of the Christmas vacation. Mr Boyd says on or about 11 December 2017, the Steering Committee agreed that the elective surgical component of the project would be suspended from 15 December 2017 to 7 January 2018 while certain relevant WDHB staff were on annual leave. Mr Boyd says that as a result, the term of the Services Agreement was extended to 23 calendar weeks and KAU agreed to manage WDHB’s surgical management roster during that period at the same weekly rate recorded in the Services Agreement.

[29]	WDHB accepts that the parties agreed to a Christmas shutdown period for the project but says there was no agreement to extend the term of the Services Agreement to 23 weeks, nor was there any agreement to pay the full rate of AUD 60,000 per week for the limited services provided by Mr Boyd and Mr Kong during that period. WDHB says it received an invoice for AUD 60,000 for the limited services provided by KAU and Mr Boyd over that three week period and that it paid it.

The termination of the Services Agreement

[30]	By the time the May variation was being discussed, Mr Boyd and Mr Pearson had fallen out. Discovered emails exchanged between 22 April and 12 May 2018 confirm the extent of their dispute.

[31]	Mr Boyd incorporated KNZ on 8 May 2018 and purported to have the Services Agreement assigned to it in the May variation.

[32]	WDHB became drawn into the dispute between Mr Boyd and Mr Pearson in a number of ways. When Mr Pearson became aware of the assignment referred to in the May variation, he sought clarification of WDHB’s position.

[33]	In his reply to Mr Pearson, on 11 June 2018 Mr Wright purported to confirm that the Services Agreement remained with KAU. Mr Pearson queried how that could be, given the May variation, which referred to the assignment to KNZ.

[34]	In the meantime, on 8 June 2018, Dr Howard met with Mr Boyd to discuss the issue of the assignment. Dr Howard suggested that WDHB rescind the purported assignment and confirm the variation with KAU. Dr Howard says Mr Boyd agreed in principle but wanted to meet with Mr Wright.

[35]	Mr Boyd’s position apparently changed after taking advice. KNZ and Mr Boyd’s solicitor, Luke Bhatty of Hedges Bhatty, emailed WDHB on 15 June 2018 demanding the WDHB confirm that it would not assign the Services Agreement to any other entity. On the same day but in a separate communication Mr Bhatty emailed WDHB advising that KAU was insolvent and had ceased trading.

[36]	In the meantime, Mr Pearson had lodged a complaint with New Zealand Police who in turn contacted the WDHB on 18 June 2018 about the matter.

[37]	On 20 June 2018 Mr Boyd left New Zealand.

[38]	On 21 June WDHB gave notice to KAU terminating the Services Agreement. WDHB relied upon cl 23.1(b) following Mr Boyd’s departure from New Zealand without notice on 20 June 2018. WDHB did not consider the default to be capable of remedy.

Events following termination

[39]	Following termination of the Services Agreement the parties made several attempts to resolve the issues between them, particularly whether the ARF was payable, but were unable to do so. WDHB’s position throughout has been that if it could be satisfied that measurable annual savings of $25 million would be achieved by the SSRP then it would pay the ARF. But it says that Keezz cannot satisfy it of that.

[40]	On the review by Andrew McCurdie, then WDHB’s Chief Financial Officer, and Michael Currie, WDHB’s Finance Program Manager, the measurable savings in WDHB’s profit and loss accounts attributed to the SSRP amounted to approximately
$9.4 to $9.7 million, well short of the $25 million required to trigger payment of the ARF.

Issues

[41]	The principal issues for the Court are:

(a)	Was the WDHB’s liability to pay the ARF of $500,000 triggered prior to cancellation?

(b)	If the WDHB’s liability to pay the ARF was not triggered prior to cancellation does subsequent evidence support Keezz’s position that the threshold target of $25 million in savings was met?

(c)	Was the Services Agreement varied in December 2017 and if so, what were the terms of the variation?

(d)	Was the Services Agreement assigned or novated to KNZ?

(e)	Was the WDHB entitled to cancel the Services Agreement on 21 June 2018? If not what, if any, loss was suffered by KAU (or KNZ if the Services Agreement was assigned or novated)?

[42]	Keezz called two witnesses in support of the claim: Lindsay Boyd, a director of KAU and KNZ, and Matt Kemp, an expert accounting witness.

[43]	WDHB called Neville Hablous, Dr Grant Howard, Derek Wright, Andrew McCurdie, Erica Barrie, and Michael Currie, all of whom were at the relevant time employed by WDHB. In addition, WDHB called Jay Shaw as an expert accounting witness.

Preliminary evidential issue

[44]	Mr Boyd’s statement of evidence was extensive. In the course of it he referred to a number of news articles and reports regarding the operation of WDHB. Mr Kemp, the plaintiff’s expert accountant, also referred to certain news articles and reports. Mr Barker took objection to the admissibility of those documents, (particularly where the reports were not authored by any witness) on the basis they were either hearsay or irrelevant to the matters in issue. In response Mr Gilchrist submitted that most of the documents were relevant and admissible, particularly a Board Resource Review created by the WDHB which Mr Currie had some input into.

[45]	The relevant principles are established by ss 7 and 8 of the Evidence Act 2006. In the context of contractual interpretation, evidence is prima facie admissible if it has a tendency to prove or disprove anything of consequence to determining the meaning the contractual document, (in this case the Services Agreement) would convey to a reasonable person having all the background knowledge reasonably available to the parties in the situation in which they were at the time of the contract. However, evidence that is prima facie otherwise admissible may still be inadmissible in terms of s 8.5 Relevantly s 8 of the Evidence Act confirms that evidence must be excluded if its probative value is outweighed by the risk the evidence will have an unfairly prejudicial effect on a proceeding or otherwise needlessly prolong the proceeding.

[46]	As to post-dispute conduct, in Bathurst Resources Ltd v L&M Coal Holding Ltd the Supreme Court confirmed that:6

5	Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85 at [62].
6	(Footnotes omitted).

[90] To the extent that evidence of subsequent conduct may cross the relevance threshold (which we suggest will not be often), s 8 is likely to come into particular play. Care will be needed to assess the probative value of that evidence. For example, conduct that occurs post-dispute is very unlikely to be admissible. By then, the parties will have retreated into their respective corners, and their conduct may well be self-serving. Its admission is likely to add time and cost, especially in light of the inevitable calling of rebuttal evidence. Another example of problematic evidence is where the subsequent conduct is that of executives of corporate parties to the contract who had no involvement with negotiating the contract and no knowledge of its background. Such evidence will not be probative if their actions do not represent the views of the relevant corporate party at the time the contract was formed.

[47]	In principle I generally agree with Mr Barker’s objections to the documents referred to by Mr Boyd and Mr Kemp. For example, documents which the plaintiff says show WDHB had a history of not complying with the Government’s procurement requirements and reports of the Labour Government campaigning on underfunding in the health system and related Parliamentary reports are not directly relevant to the interpretation of the Services Agreement, or the other issues in this case as defined by the pleadings. Next, a number of the documents referred to by Mr Boyd were created after the Services Agreement was concluded and some even after termination. They are of very limited probative value as they do little to assist the interpretation of the Services Agreement and the written variations to it.

[48]	Further, a number of the news articles advanced as proving particular matters were not relevant because the matters they sought to prove were not in issue as they were either established by the pleadings or other direct evidence. Also, WDHB accepts that it faced a number of issues in relation to the provision of theatre and surgical services.7

[49]	However, I permitted Mr Gilchrist to put WDHB’s Resource Review of 6 June 2019 to Mr Currie during his cross-examination, even though it post-dated the termination of the Services Agreement, as Mr Currie had some input into the document, although as it emerged, it was not particularly relevant.

[50]	Before dealing with the principal issues there are a number of other side or peripheral issues that arose during the course of hearing.

7	See [9] above.

Responsibility for the ARF clause

[51]	Mr Boyd said that Dr Murray had introduced the concept of the ARF. He said he only agreed to it because Dr Murray had gone on to assure him that he would have his full support for the project.

[52]	For the reasons that follow I do not accept Mr Boyd’s evidence on this point, or that KAU was in some way induced to enter the Services Agreement by any representation of Dr Murray.8

[53]	The WDHB witnesses confirmed that there were no other commercial contracts WDHB had entered which involved an ARF. Such a clause was novel from WDHB’s point of view.

[54]	While Mr Boyd said that Dr Murray had suggested the ARF, in my assessment is it more likely Mr Boyd promoted it as part of his marketing of the project to WDHB. While WDHB was interested in engaging Mr Boyd and KAU, Mr Boyd was clearly interested in a 20 week project which could return AUD 2.4 million. In both his witness statement and in his cross-examination Mr Boyd came across as being extremely confident in his own ability to deliver the project. I have no doubt that he considered it would succeed and that the ARF would become payable. Next, Mr Boyd prepared the initial Case for Action, the wording of which is consistent with the concept of the ARF coming from KAU:

Keezz has an unwavering commitment to deliver tangible outcomes to WDHB and to visibly support that commitment will place fifty percent of this fee “at risk”, that is $AUD 1,200,000 will not be payable until stated improvements are fully realised.

And later:

We pride ourselves on the quality of our analysis and effectiveness in solving business problems through our participative approach. Our success is a result of creative application of proven philosophies and methods combined with our ability to recruit, develop, and integrate into our team people of exceptional experience and qualifications.

8	As noted, Keezz has abandoned its claims based on misrepresentation and breach of the Fair Trading Act 1986.

[55]	For completeness I note that, as Mr Barker submitted, Mr Boyd’s evidence on this point has not been entirely consistent. In his witness statement for the hearing Mr Boyd said Dr Murray “insisted on” the ARF, whereas in an earlier affidavit filed on WDHB’s security for costs’ application Mr Boyd stated that WDHB had “requested” the inclusion of the ARF.

[56]	In any event, as noted, the final Services Agreement which provided for the ARF was negotiated and concluded over a number of days in late August by Mr Pearson on behalf of KAU, and at a time when Dr Murray was no longer CEO of the Hospital Board. Importantly the Services Agreement included an entire agreement clause:

43	Entire Agreement

This Agreement supersedes any prior arrangements, understandings, promises or agreements made or existing between the Parties in relation to the subject matter of this Agreement and constitutes the entire understanding between the Parties on that matter. Except as otherwise provided in this Agreement, no addition, variation, amendment to or modification of this Agreement will be effective unless it is in writing and signed by both Parties. On execution of this Agreement by both Parties any existing agreements between the Parties relating to the provision of the Services will terminate.

[57]	Section 50 of the Contracts and Commercial Law Act 2017 (CCLA) provides the Court is not prevented by such a clause from inquiring into and determining any question as to whether representations were made in the course of negotiations, unless the Court considers it fair and reasonable the provision should be conclusive between the parties having regard to:

(a)	the subject matter and value of the transaction; and

(b)	the respective bargaining strengths of the parties; and

(c)	whether any party was represented or advised by a lawyer at the time.

[58]	Given the subject matter and value of the contract in this case, the commercial experience of KAU and Mr Boyd and Mr Pearson (who was a lawyer), and the parties’ bargaining positions, I am satisfied that it is fair and reasonable for the entire

agreement clause to apply. Any representations that may have been made on behalf of WDHB prior to execution of the Services Agreement are superseded by the terms of the Services Agreement.

Did the $25 million savings have to be banked?

[59]	In both his opening and closing for Keezz Mr Gilchrist suggested that WDHB took the view that Keezz was required to achieve and substantiate actual savings of
$25 million in WDHB’s profit and loss statements, i.e. to show recurring annual “banked” savings before the ARF was payable. However, Mr Barker confirmed that was not WDHB’s position. WDHB accepts that the agreement was forward looking and the Services Agreement contemplated that the savings could be achieved in the future.

[60]	Such an approach (that the Services Agreement contemplated the savings would be achieved in the future rather than the need for them to be “banked”) is consistent with both the language used in the Services Agreement and the underlying logic of it. The wording of the Services Agreement provided that the ARF would become payable “when the Steering Committee notifies the Supplier in writing that all actions necessary to implement a savings of $NZ 25 million to [WDHB’s] profit and loss statements have been delivered by the Supplier …”.9 That wording placed the focus on the implementation of actions which would, in turn, lead to the savings.

[61]	Further, while the initial Case for Action referred to the ARF not being payable until the stated improvements had been “fully realised”, at one point the final Case for Action referred to them being “agreed”. In other words, it would be sufficient if the improvements could be agreed, even though they had not yet been fully realised.

[62]	Next, while the SSRP project was required to provide savings of $25 million per annum to WDHB’s profit and loss statements, as the project was initially intended to only run for 20 weeks, the assessment of the $25 million savings per annum must, as a matter of logic, have been prospective.

9	Emphasis added.

[63]	What was required was that, once implemented, the SSRP would provide future “measurable” savings of $25 million per annum.

Case for Action

[64]	Various versions of the Case for Action were produced to the Court. There was the initial Case for Action provided by Mr Boyd in late May 2017, which recommended the project to WDHB. That document led to the further discussions between the parties, which ultimately concluded with the Services Agreement. It included the financials and the ARF proposal.

[65]	Mr Boyd says that he provided a second version of the Case for Action to Mr Hablous on 28 August which was intended to be attached to the Services Agreement. That second Case for Action did not include the financial details or reference to the ARF proposal.

[66]	As noted, WDHB considers that a further, third version of the Case for Action which included the financials was the version ultimately attached to the Services Agreement.

[67]	Although little turns on it, given that the Services Agreement provides for the financial details and the ARF, I am satisfied that the Case for Action that was ultimately attached to the Services Agreement was the third version WDHB identified, referred to above as the final Case for Action. Mr Hablous did not recall Mr Boyd sending him a version of the Case for Action without the commercial details in late August but accepts he may have done so. I note that on 16 August Mr Hablous had asked Mr Boyd to provide him with a copy of the Case for Action without the commercial elements so that he could circulate it to staff at large without impinging on KAU’s commercial privacy. Mr Boyd’s provision of a copy of the Case for Action without financials is consistent with that request.

[68]	More relevantly, as noted, the Services Agreement was ultimately negotiated between Mr Pearson for KAU and WDHB’s legal counsel. After the Services Agreement was concluded and copies exchanged, Mr Pearson noted the Case for Action was not attached and requested that it be attached as a schedule. WDHB

understood that the version attached was the full Case for Action including financials. That is the more likely scenario, as the Services Agreement included the financial details as well. There was no reason not to include the financial details in the final Case for Action.

[69]	The third, final version of the Case for Action is also consistent with the version (which included financials) that Mr Boyd sent through to Mr Hablous when Mr Hablous requested a further copy of the Case for Action in October 2017.

Outsourcing

[70]	Mr Boyd made something of the fact that although KAU had been engaged to reduce outsourcing and bring it back within the hospital, at about the same time WDHB had appointed Brenda Wills as an outsourcing manager. Mr Gilchrist submitted that was counterintuitive and showed WDHB was not committed to the SSRP. However, as WDHB witnesses explained, while the SSRP was being implemented, outsourcing had to continue to enable WDHB to meet its targets and it was important that the outsourcing be conducted efficiently. I see nothing of significance or contradictory in WDHB’s position on that issue.

[71]	There was apparently some conflict between Mr Boyd and Ms Wills. For example, on one occasion Ms Wills sought, in rather direct terms, an explanation why a scheduled elective surgery had been cancelled. Dr Howard had to become involved in the email exchange. In context, the conflict between Mr Boyd and Ms Wills is most likely to have been more a matter of a clash of personality than anything else. WDHB’s continued outsourcing is certainly not evidence of bad faith on the part of WDHB toward the SSRP. WDHB had committed a significant sum of money and resources to the success of the SSRP. A number of the WDHB witnesses, including Dr Howard in particular, confirmed that WDHB was committed to the SSRP.  I accept that evidence.

The success of the project

[72]	On a related point, it is not in issue that the SSRP was successful, in that it did lead to an improvement in the surgical operational division of WDHB and it did, even

on WDHB’s assessment, lead to some measurable savings. Mr Wright acknowledged on several occasions through his evidence that he considered the SSRP was a successful project. Dr Howard also considered it a success. The issue remained, however, whether the savings met the threshold or requirement for WDHB to pay the ARF.

[73]	Mr Gilchrist suggested that after Mr Boyd left in June, the WDHB had not pursued the implementation of the SSRP. That is not, however, Dr Howard’s evidence. Dr Howard recognised the risks to the sustainable benefits from the project, but as he observed, the single biggest risk was the dispute between Mr Boyd and Mr Pearson and their failure to quarantine that from their work for WDHB. Dr Howard was a supporter of the project and remained with WDHB until June 2020.

Credibility and reliability of witnesses

[74]	This case does not turn on the credibility of witnesses. It is principally a matter of determining the meaning of the Services Agreement and the effect of the variations. There are however, a number of aspects of Mr Boyd’s evidence which call into question his credibility and reliability on important issues.

[75]	Scattered throughout Mr Boyd’s brief of evidence were re-creations of conversations he suggested he had with various officers or employees of the WDHB. Mr Boyd does not suggest that he took notes at the time of these conversations although he says he began preparing his brief some years ago. The detail of the conversations are not referred to or recorded in contemporaneous emails. It is unrealistic to suggest that Mr Boyd’s recollection of what took place during those conversations is an entirely accurate record.

[76]	As Leggatt J stated in Gestmin SGPS S.A. SA v Credit Suisse (UK) Ltd, Credit Suisse Securities (Europe) Ltd:10

[t]he best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what

10 Gestmin SGPS S.A. SA v Credit Suisse (UK) Ltd, Credit Suisse Securities (Europe) Ltd, [2013] EWHC 3560 (Comm), cited with approval in Street v Fountaine [2018] NZCA 55. See also the text by Dr Julia Shaw The Memory Illusion: Remembering, Forgetting and the Science of False Memory (Random House Books 2016) at ch 6, p 14.

was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.

[77]	Mr Gilchrist submitted that the Court should accept Mr Boyd’s evidence as, compared to Mr Boyd’s confidence in his recollection, the WDHB witnesses were not able to recall or did not challenge the gist of Mr Boyd’s recollection. It is correct that WDHB witnesses did not recall the detail of some conversations with Mr Boyd. But to the extent that the WDHB witnesses are not adamant about the exact wording of the conversations, in my view that supports a finding their evidence is reliable. My assessment of the WDHB witnesses is that they were credible witnesses seeking to give their evidence to the best of their recollection. The fact they could not recall certain events or conversations does not amount to an admission that Mr Boyd’s account is necessarily correct. Further, it is not correct to say that Mr Boyd’s evidence went unchallenged. There are a number of examples where there is a direct conflict between the evidence of Mr Boyd and other witnesses and documents.

[78]	There is, for example, a major conflict of evidence between Mr Boyd and Dr Howard on the issue of a conversation Mr Boyd had with Dr Howard before leaving New Zealand on 20 June. Dr Howard said that Mr Boyd told him that following legal advice, he had decided to return to Australia to avoid being barred from leaving New Zealand as a result of the Police investigation. Mr Boyd denied having such a conversation.

[79]	Dr Howard made a note at the time. Mr Gilchrist made the point that Dr Howard had recorded the conversation as having occurred on 19 June but that cannot have been correct as Mr Boyd attended a meeting at the hospital on 19 June. Dr Howard was clearly mistaken as to the date, but while the conversation must have been on 20 June rather than 19 June, it is the substance of the conversation that is particularly material.

[80]	I accept Dr Howard’s evidence as to the substance of the conversation and reject Mr Boyd’s denial of it. As noted, Dr Howard made a note of the conversation shortly after it. Further, as he said when pressed on the point in cross-examination, it was “not the kind of conversation you would forget”. Dr Howard was a supporter of Mr Boyd and a keen advocate of the SSRP which was in part based on a paper he had previously prepared. He had no reason to make up the conversation or to paint Mr Boyd in a bad light.

[81]	There are other examples of instances where I do not accept Mr Boyd’s evidence. There is, for example, Mr Boyd’s evidence about an occasion in April 2018 when he says that Dr Howard wrote: “I fully agree” on the surgical reinvention program document that Mr Boyd had prepared. No such document with Dr Howard’s notes on it has been produced. Mr Boyd says he gave it to Mr Wright on 23 April. Mr Wright could not recall if he had been handed a hard copy of the document but was prepared to accept he might have been. But that is not an admission that the document contained Dr Howard’s note. Mr Boyd sent Mr Wright an electronic copy of it. That copy did not have Dr Howard’s note recorded on it. Dr Howard confirmed in cross- examination he had no recollection of making such a note. Again, it is something you would expect him to remember if he had made such a note. A hard copy with Dr Howard’s note on it was not discovered by WDHB. I would have expected if there was such a document with Dr Howard’s acknowledgement on it, either Mr Boyd would have kept a copy, or he would have referred to Dr Howard’s agreement in contemporaneous email exchanges, or that WDHB would have it in its records. None of the above apply.

[82]	Further, Mr Boyd did not refer to this point in either of his affidavits filed during the interlocutory stages of the proceeding even though he referred to the document. While Mr Boyd referred to Dr Howard signing the document, he did not say Dr Howard had written “I fully agree” on it.

[83]	Nor do I accept Mr Boyd’s evidence that the May variation contained a further, third page which was executed by KNZ. That evidence is inconsistent with the evidence of Mr Howard (who had not appreciated there was any reference to KNZ) and also with the document itself. The only entities referred to as parties to the May

variation were KAU and WDHB. KNZ was not referred to as a party. The hard copy of the May variation held by WDHB did not contain such an execution page. Further, in none of the contemporaneous correspondence is there a reference to KNZ having executed the May variation. I do not accept Mr Boyd’s evidence that there was a third page of the May variation executed by KNZ.

[84]	As noted, I also reject Mr Boyd’s evidence that the Case for Action intended to be attached to the final Services Agreement did not include the financial details. I consider Mr Boyd deliberately advanced the proposition that the Case for Action without financials was to be attached to the Services Agreement to avoid having the financial and other aspects referred to in the third Case for Action which do not support Keezz’s case as part of the contractual matrix. It is an example of Mr Boyd attempting to make the evidence fit his theory of the case.

[85]	Next there is the issue of the emails between Mr Pearson and the Police. Dr Howard said that before he left New Zealand, Mr Boyd showed him emails between Mr Pearson and the New Zealand Police. Mr Pearson had made a criminal complaint to the Police about Mr Boyd setting up KNZ in an attempt to defraud him. Dr Howard made a file note at the time noting that Mr Boyd had access to the emails as Mr Pearson had used his keezz.com email address which Mr Boyd could access.

[86]	Mr Boyd denied showing Dr Howard the emails. He also denied having access to the emails.

[87]	Dr Howard had no reason to lie about that issue. As noted, he worked closely with Mr Boyd and fully supported the project. His evidence was based on a note he made at the time, and is also consistent with Mr Boyd’s actions at the time and the dispute between Mr Boyd and Mr Pearson.

[88]	There were also other inconsistencies between Mr Boyd’s evidence and relevant documents as discussed in following sections of this judgment.

Was the WDHB’s liability to pay the ARF in terms of the Services Agreement triggered prior to cancellation?

[89]	I return to the principal matters in issue. Keezz appears to rely on a number of different bases for saying the ARF is payable.

[90]	Mr Boyd referred to a joint workshop on 9 September 2017. He says the SSOM was agreed at the workshop. On Keezz’s case the risk of operating the SSOM passed to WDHB from then on as it was responsible for the implementation of the SSOM.

[91]	Mr Boyd and Keezz then suggest that, by incorporating savings of $25 million into its operating budget for 2017-18 and confirming the savings in its 2017-18 Annual Plan, WDHB had accepted the requirement for payment of the ARF had been triggered.

[92]	Mr Boyd notes that on 27 September 2017, the WDHB Board met and agreed to incorporate a saving of $25,000,000 to the WDHB profit and loss statements in respect of the project.11 On 30 November 2017 WDHB incorporated the savings within the WDHB Annual Plan 2017-2018. The Plan was subsequently approved by the Minister of Health on 7 May 2018.

[93]	Keezz and Mr Boyd’s reliance on the budget and annual plan as evidence that all actions necessary to implement a savings of $25 million to WDHB’s profit and loss had been delivered by KAU by 27 September 2017 misunderstands the provisions of the Services Agreement, the nature of budgets generally, and WDHB’s budget and annual plan process in particular.

[94]	As noted, Keezz’s argument on this point is also, in part, based on Mr Boyd’s contention that it was WDHB’s responsibility to implement the SSOM. However, that is inconsistent with the express provisions of the Services Agreement. Under the Services Agreement there were two distinct aspects of the SSRP. KAU was to deliver both aspects. First, KAU was to develop the SSOM (which was expected to take two

11	Agenda item 6.2 of the Board meeting.

weeks) and then it was to implement the SSOM over the next 16 to 18 weeks. The Case for Action noted the two distinct phases as follows:

Phase One: will surround the development of the Operating Model. This process is anticipated to be completed within two weeks. It will provide the blueprint for how future services will be organised, controlled and resourced (surgical services and related areas). The IOC functions as they relate to the “production line planning and control” of surgical services will also be included.

And:

Phase Two: The second phase is about developing, designing and implementing appropriate systems and processes to transform the surgical divisions work consistent with the operating model developed within the first phase. Formulation of task teams will be a function of the operating model however, for the purpose of clarity the following are likely.

[95]	Further, the Case for Action also noted that:

To design, develop and implement the operating model Keezz will require the services of 5 to 8 of its people engaged fulltime and working daily within Waikato Hospital (WH) surgical services and relevant support services to implement the required operating model. Our people will cover all relevant shifts and all week days working as one with WH staff. Accordingly, the transfer of skills and knowledge will minimise regression to the norm.

[96]	As Mr Hablous confirmed:

Q.	And so it was a combined or a joint effort, wasn’t it?

A.	It was.

Q. And it was only going to work if you then implemented what they had suggested, wasn’t it?

A.    It was a combined exercise with Keezz taking far more responsibility for introducing change and ensuring it is embedded than is normally the case with consultants.

[97]	Keezz’s proposition that it was WDHB’s, not Keezz’s responsibility to implement the SSOM is not sustainable. While WDHB obviously had a role, the principal responsibility to oversee the implementation lay with KAU. That is what it was being paid for.

[98]	Next, by 27 September 2017 the parties were only just over three weeks into the 20 week project (which was subsequently extended). Given the very preliminary

stage of the SSRP in September 2017, the potential savings referred to in the budget document was not an acknowledgement that payment of the ARF was triggered. It cannot sensibly be suggested that KAU had “delivered all actions necessary to implement savings of $25 million to WDHB’s profit and loss statement” by that date. Further, there is no suggestion in any contemporaneous correspondence that was the case and it is, in any event, contrary to Keezz’s reliance on other, later dates as being the triggering event. It also begs the rather obviously question of why, if KAU and Mr Boyd believed the ARF of AUD 1.2 million became payable in September 2017, KAU would agree to the reduction in the ARF to $600,000 in the February variation.

[99]	Keezz’s attempt to rely on the budget figures in the Annual Plan also misstates and misunderstands the budgeting process in this case. Each year WDHB developed a “bottom up” budget which included a savings plan to meet the gap between spending and Government funding. The 2017/18 budget was not a profit and loss statement. I note also that the savings of $25 million were noted in the budget for the 2019/20 year and the risk (in terms of achieving the budgeted savings) was stated to be “medium”.

[100]	The second “trigger” for payment of the ARF that Keezz relies on is a document entitled “Surgical Service Reinvention Program WDHB”, which Mr Boyd says he provided to Dr Howard for review on or about 15 April 2018. The document recorded:

This paper is a notice “that all actions necessary to implement a savings of
$NZ 25 million to [WDHB’s] profit and loss statements have been delivered by the Supplier” and that the [ARF] is now payable.

The document estimated savings totalling $36,450,000. Mr Boyd said he considered the document to be formal notice to the Steering Committee that all work required by the project to implement the savings of $25 million had been delivered by Keezz and that the ARF was payable. Mr Boyd says that Dr Howard wrote on the front page of the document “I fully agree” and signed his name with the title “Interim COO” below. Mr Boyd says that at the next Steering Committee meeting on 23 April 2018 he handed the document to Mr Wright. Mr Boyd says that he had a conversation to the following effect:

Mr Boyd:	This is the formal notice that the at-risk payment is payable.

Mr Wright:	Okay.

[101]	As noted above, Dr Howard has no recollection of signing the document on or about 15 April 2018. Mr Wright does not recall receiving a hard copy with Dr Howard’s notation on it. When the existence of the document came to his attention he asked for an electronic copy of it, which Mr Boyd sent him on 23 April 2018.

[102]	Mr Gilchrist submitted that payment of the ARF was triggered as Mr Boyd and Dr Howard, constituting a majority of the Steering Committee, agreed that the projected savings of $25 million would be achieved.

[103]	For the reasons given previously, I do not accept Mr Boyd’s evidence that Dr Howard recorded his agreement that all steps necessary to achieve the savings of $25 million had been implemented or that he accepted that savings of $36,450 had been achieved.

[104]	Mr Boyd’s and Keezz’s proposition that a majority of the Steering Committee (Mr Boyd and Dr Howard) agreed that payment of the ARF had been triggered is inconsistent with Dr Howard’s evidence as to how he understood his role on the Steering Committee in relation to the ARF. Dr Howard confirmed that he would not agree the ARF was payable without discussing it with Mr Wright. As he said in the following exchange:12
Q.       You  were aware that the contract [called] for the steering committee to make decisions about whether the at-risk was payable weren’t you?

A.	Correct.

Q. And so if you and Mr Boyd agreed that the savings had been made it wouldn’t have then have mattered what Mr Wright thought, would it?

A.   I think that, that’s one representation, not the dynamic.  I think as I put in my brief of evidence it will be highly unlikely for a – not a junior officer, but someone less junior than the Chief Executive to agree without first getting the Chief Executive’s agreement given that there was no time pressure. It’s not a matter in an emergency to have two signatures on so you know, no.

Q.	But you – sorry I’ll let you finish.

12	(Emphasis added).

A. No I was just saying you know I have no problem with two people  signing as, as triggering the payment but the process by which those two people would have come to the point of signing is important.

[105]	The practical position was that the Services Agreement provided for the members of the Steering Committee to oversee the development and implementation of the project. They were to oversee its progress at a high level. However, given that the savings had to be measurable, the members of the Steering Committee would have had to have had some advice or input from the appropriate WDHB staff, including Mr McCurdie and his team as to the actual level of savings achievable.

[106]	Both Dr Howard and Mr Wright were clear in their evidence that they would need to refer the issue of whether the measurable savings had been achieved to WDHB’s finance team for confirmation. That is consistent with the Case for Action which referred to the savings as “measurable” and provided the ARF was not payable until the stated improvements “are agreed”. Logically, the members of the Steering Committee would not have the necessary information themselves and would need to take advice and receive information about that from WDHB’s financial team.

[107]	Mr Boyd’s and Keezz’s position in relation to when payment of the ARF was triggered is itself inconsistent. Each of the February and May variations altered the quantum of the ARF. As noted, the February variation reduced it from $1.2 million to
$600,000 and the May variation reduced it further from AUD 600,000 to AUD 500,000. If, as Mr Boyd suggests, it was agreed that the ARF was payable in April, then it makes no commercial sense for him to have later agreed to reduce the ARF by a further $100,000, as he did by executing the May variation. Further, nor was there any suggestion by Mr Boyd at that time when that May variation was concluded, that the ARF was already payable. Mr Boyd’s reference to savings of $36,400,000 as at 15 April 2018, is a bare and untested assertion. It is also inconsistent with his later assertion in June of an agreed improvement of $29,600,000.

[108]	The provision in the Services Agreement providing for the triggering of payment of the ARF is clear and unambiguous. I set it out again:

The remaining amount of the Fee, being $AUD 1,200,000 excluding GST or other imposts (the “At Risk Fee”), will be payable when the Steering

Committee notifies the Supplier in writing that all actions necessary to implement a savings of $NZ 25 million to Waikato DHB’s profit and loss statements have been delivered by the Supplier. Upon receipt of such notice, the Supplier will issue an invoice in the sum of $AUD1,200,000, excluding GST or other imposts. That invoice will be payable within 7 days of receipt.

[109]	The Steering Committee’s notification to Keezz that all actions necessary to implement a savings of $25 million was the mechanism by which the payment of the ARF was triggered, but there was the separate requirement that the savings had to be “measurable”. That inevitably would require the members of the Steering Committee to take advice about the level of savings.

[110]	Finally, Mr Boyd next relied on the week 37 Flash Report in June 2018 as evidence that payment of the ARF had been triggered prior to cancellation. His evidence was that at the Steering Committee meetings he routinely presented projected saving improvements, both identified and agreed by way of the Flash Reports.

[111]	Mr Boyd says that following the May variation, KNZ continued to work on site and at the week 37 Steering Committee meeting on 10 June 2018 Dr Howard and he reviewed the improvements which by then he recorded as a measurable total of
$29,600,000. He says it was agreed that the SSRP had achieved its deliverables totalling $29,600,000.

[112]	Mr Boyd referred to the Flash Reports as minutes of the Steering Committee. They were not. Nor were they an agenda as he also suggested. The Flash Reports were prepared by Mr Boyd in advance of the meetings rather than at the conclusion of the meetings. They were used as a basis for updating progress on the SSRP and for discussion. There was no evidence of any discussion regarding the “agreed improvements” nor how they were actually to be achieved.

[113]	Again, Dr Howard’s evidence is relevant. With reference to the Flash Reports the following exchange took place:13

Q.	And they [Flash Reports] would be circulated to you and the other members in advance?

13	(Emphasis added).

A.	I don’t know if they’re always circulated in advance but they were tabled on, at the meeting is not circulated in advance.

Q.	And you never objected to what was contained in the flash reports did you?

A.	Not particularly, no.

Q.	No. Because they were generally accurate weren’t they?

A.	I think they’re indicative, that’s a different word from “accurate”.

[114]	On 11 June 2018, KNZ raised an invoice for the ARF of AUD 500,000. Mr Boyd says that on 12 June he met with Dr Howard and Dr Howard said words to the effect of “that looks in order. I agree. It’s best to pass it on to Derek (Wright) for him to take care of it.” Mr Boyd said he then met with Mr Wright and handed him the invoice with the “minutes” (the Flash Report) attached, and that the conversation went something along the lines of:

Mr Boyd:   This is the invoice for the “at-risk” fee, I’ve shown it to Grant [Dr Howard] he has agreed with it and he requested that I give it to you.

Mr Wright:	Oh, haven’t we paid that yet? Mr Boyd:	No you haven’t.
Mr Wright:	Leave it with me and I’ll sort this out straight away.

[115]	I do not accept Mr Gilchrist’s submission that the above evidence suggests that members of the Steering Committee agreed the ARF was payable. Dr Howard could not recall receiving the final report nor whether he received and approved the ARF invoice. Mr Wright was clear that he had never agreed the invoice was payable. He raised an objection to it within the time provided by the Services Agreement. While he was prepared to accept the SSRP was a successful project, he wanted to confirm the measurable savings before he would agree to pay $500,000 of public money.

[116]	As the WDHB witnesses said on a number of occasions, the starting point to test the measurable savings was to fix a base and then to compare that to enable a reasonable calculation of the quantifiable improvements. The parties were never able to agree that base or methodology, despite the baseline document proposed by Mr McCurdie.

[117]	Further, despite Mr Boyd’s assertions, the evidence does not support a finding that Dr Howard agreed the ARF was payable. Dr Howard’s evidence of his reluctance to agree without getting approval is consistent with the need for the formal notice provided for in the Services Agreement. Dr Howard’s email to Mr Wright on 5 July 2018 where he noted:14
… I would recommend a cooling oﬀ period of a week or so in order for us to feel secure with regard the data on a whole year basis.

Based on the data and context, in terms of operational gains, I would recommend the at-risk sum is paid as long as the advice provided to you by the Chief Finance Oﬃcer is consistent with this recommendation in your estimation.

is consistent with his evidence he had not previously agreed to payment of the ARF.

[118]	When cross-examined about that, Dr Howard clarified:15

Q. So that was your view at least that on the basis of what you were aware of, you thought the at-risk fee should be paid, wasn’t it?

A. I think there’s two parts to this and I think we’ve you know expressed this in a number of different ways. The operation centre and the operational model that Mr Boyd worked with me to set up was in fact you know world class in terms of the results it delivered and on that basis I would’ve been happy to pay any bonus on that, however, the contract predicated the payment on the savings being realised and being able to be agreed upon and that wasn’t part of my involvement.

[119]	Mr Gilchrist also referred to the following email exchange where Mr Wright referred to making payment of the ARF fee. The email was in response to a query from Dr Howard:

Thanks Grant

We will not be paying the at risk until Lindsay & Geoff have agreed on a bank account, so this will probably not be paid for at least another week.

[120]	Mr Gilchrist suggested the email supported the view Mr Wright agreed to payment of the ARF. But in context, it is consistent with Mr Wright’s expectation that while payment would be made, that was always conditional upon him being satisfied

14	(Emphasis added).
15	(Emphasis added).

as to the financial information provided by WDHB’s financial team that the measurable results had been achieved. The focus of the email was clearly on the dispute between Mr Boyd and Mr Pearson, rather than being an acknowledgement that the measurable savings had been achieved.

[121]	But in any event, the short point is that the Services Agreement provided a process for triggering WDHB’s liability to pay the ARF. The Steering Committee had to give written notice to KAU that all actions necessary to implement a savings of
$25 million had been delivered by KAU. The clause is clear and unambiguous. No such notice was ever given.

[122]	As noted, this is not to say that the SSRP was not a worthwhile project or that it did not achieve some of the aims it set out to achieve. Dr Howard and other witnesses for the WDHB were clear it achieved improvements in the hospital operation. Dr Howard in particular, was a supporter of the operating model. He worked closely with Mr Boyd and considered it a success. But the issue always has been whether, once implemented, the SSRP would achieve measurable $25 million savings.

Does subsequent evidence support Keezz’s position that the threshold target of
$25 million was met?

[123]	The final issue concerning the ARF is whether, even without formal notice and after cancellation, the evidence supports the conclusion that a measurable improvement in financial performance of at least $25 million per annum was achieved by implementation of the SSRP.

[124]	In the pleadings Keezz seeks, in the alternative to judgment for the ARF of AUD 500,000:

(a)	a declaration that satisfaction or otherwise of the pre-condition to payment of ARF is capable of determination by objective criteria; or

(b)	a declaration that the mechanism in schedule B for approval of the ARF by the Steering Committee is unenforceable and is severable; and

(c)	a declaration that on objective assessment the pre-condition to the payment of ARF is satisfied, and damages for breach of contract in an amount equal to the sum of varied ARF.

[125]	Further relief is also claimed pursuant to s 43 of the CCLA “as may be appropriate”.

[126]	There is no basis to sever the condition relating to approval and payment of the ARF. The declaration seeking severance relies in part on cl 35 of the Services Agreement which provides:

35	Severability

Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any applicable jurisdiction, the invalid or unenforceable part or provision will be replaced with a provision which accomplishes, to such extent as possible, the original business and purpose of such or provision in a valid and enforceable manner and the remainder of the Agreement will remain binding on the Parties.

[127]	The notice provision is clear and enforceable. It was part of the parties’ negotiated bargain. The scheme of the Services Agreement was that Keezz would, through provision of its services, provide measurable savings of $25 million to WDHB’s future profit and loss. Once the members of the Steering Committee were satisfied of that (which would require them to take appropriate advice about the measurable financial savings) they could trigger payment of the ARF by giving written notice to KAU that all actions necessary to implement the savings had been achieved. The issue remains whether or not objectively the measurable savings of $25 million were achieved by Keezz.

[128]	The other declarations sought are strictly unnecessary as WDHB has conceded that, if it could be established that measurable savings of $25 million were achieved, then payment would be made. On this aspect the WDHB’s position throughout has been that provided it could be satisfied the SSRP would lead to measurable savings of
$25 million then the ARF would be paid, even though the Services Agreement had been cancelled. To that end Mr Wright and WDHB’s accounting team sought to

engage with Mr Boyd regarding a process or formula to determine whether that could be said to have been achieved.

[129]	To support its claim that on an objective assessment the ARF was payable, Keezz called the evidence of an accountant, Mr Kemp. Mr Kemp approached the matter on two bases. First, applying a “but for” test and secondly, a “status quo” test. His preference was for the “but for” test. Mr Kemp’s approach assumed that the increase in inhouse surgeries/discharges that occurred after the project’s implementation would, in the alternative, have still occurred but would have been undertaken using outsourced providers if the project had not proceeded.

[130]	Mr Kemp relied upon inhouse patient discharge figures for both acute and elective surgery and applied a value to the benefits equal to the estimated cost of achieving the same outcome on an outsourced basis.

[131]	Mr Kemp took the discharge figures for the six months ending 30 June 2017 and compared them with the discharge figures for the six months ending June 2018. The increase in inhouse procedures over the second six month period from January to June 2018 were 2,014 which he annualised at 4,028 and then multiplied that by the cost per procedure of $7,549 to arrive at a gross value of $30,407,372. From that he deducted a variable expenses figure of $1,000 per procedure leading to a net saving of
$26,379,372.

[132]	While Mr Kemp also ran the figures on the basis of higher costs per procedure, the $7,549 is the most accurate for theatre events. It was a figure confirmed by WDHB to be the total weighted average cost of theatre events based on the varying cost of different surgeries.

[133]	On the “status quo” basis Mr Kemp estimated there would have been savings of $37,706,096, but of that, $24 million was the “penalty” saved of $2 million per month.

[134]	WDHB called Mr Shaw. Mr Shaw reviewed Mr Kemp’s approach. At a broad level Mr Shaw considered Mr Kemp’s “but for” approach to be consistent with the Services Agreement and preferable to the “status quo” approach.

[135]	There are obvious flaws with the “status quo” approach which relies heavily on the imposition of penalties of $2 million per month. Its underlying premise is flawed. The Ministry of Health had the ability to reduce funding if targets were not met. But the evidence from WDHB witnesses was that, while there was a possibility of such penalties or, more accurately, sanctions, they had never been imposed in the past. The fallacy of that status quo approach is clear. Further, as Mr Shaw observed, it appears to deliver the same outcome, regardless of the project’s success. It simply looks at the number of surgical discharges prior to the project. It then assumes all of them would have been brought inhouse. On that basis, Keezz could have delivered nothing, but the same avoided cost would be calculated.

[136]	Mr Shaw considered that, given the high–level nature of Mr Kemp’s analysis and the assumptions he relied on, even his “but for” approach was deficient and resulted in a material overstatement of the likely savings.

[137]	In particular, Mr Shaw noted that Mr Kemp based his cost savings on the change in inhouse surgery performance over the defined period by reference to reported changes in inhouse surgical discharges. Mr Kemp’s analysis is based on the assumption that all such surgical discharges would otherwise have been undertaken on an outsourced basis. But as Mr Shaw notes, and the evidence of WDHB witnesses confirm, the surgical discharge figures (as opposed to theatre discharges) include patients who would never have had their procedures outsourced.

[138]	The issue of whether the savings were to be measured by reference to surgical discharges or theatre discharges is a fundamental difference between the parties. Keezz’s position is that the appropriate measure was surgical discharges. The significance of the difference is that there are more surgical discharges than theatre events/discharges. For example, a patient seen and treated by a surgeon in a procedure room or the Surgical Assessment Unit (SAU), would be recorded as a surgical

discharge, even though the treatment did not involve the use of a theatre or perhaps even a bed.

[139]	Keezz supports its position by reference to the name of the project itself, the SSRP. Mr Gilchrist also put to a number of the WDHB witnesses that the WDHB’s calculation of savings could not have been achieved purely by reference to the theatre discharges. He also referred to the following evidence of Mr Hablous in cross- examination:

Q. Now you would accept that the review wasn’t limited to just theatre services was it?

A.  It was concerned with processes as they pooled patients into and   through the hospital, yes.

Q.	And so it was a review of the entire surgical division wasn’t it?

A.	That’s fair.

to support Keezz’s submission that the correct measure for calculating the savings of the SSRP was surgical discharges.

[140]	However, while the SSRP did relate to surgical services generally, the driver for the project was the need to reduce the outsourcing of theatre events which was costing WDHB $25 million a year. It is no coincidence that was the figure for the expected savings required to trigger payment of the ARF. The target for the financial improvements in the Services Agreement was identified as reducing outsourcing costs (which related to theatre usage) and operational costs (resources spent per patient). The Services Agreement notes that the expected financial improvement is to be derived from two principal sources:

•	Increasing throughput; this will result in driving down waitlists and bringing outsourced work back in house.

•	Decreasing operational costs; removing obstacles (including cancellations) from patient flows will diminish wasted labour and overtime costs involved in rework. It is foreshadowed that less resources will be required to do the increased patient throughput.

[141]	The principal objective was to save the significant expense associated with full outsourcing and, to a more limited degree, the cost of facility lists.16 For that reason, the appropriate focus of the measure of the savings achieved was on theatre discharges. However, WDHB’s calculations also took into account the savings in bed occupancy through reduce average length of stay (ALOS).

[142]	To the extent that the surgical discharges include patients who did not occupy a bed but were treated and discharged the same day, the costs associated with their procedures would have been significantly less than elective or even acute theatre operations. The figure of $7,549 was the weighted cost of theatre events, not surgical discharges. In answer to questions from the Court, Mr Boyd accepted that different costs would apply to inpatients who did not need a bed. Obviously there are significantly more costs associated with a theatre event than the costs associated with a patient who can be treated during the day without requiring theatre or an overnight bed. As Mr Currie put it, to multiply “an increase in surgical discharges with the weighted cost of theatre events is like using apples and oranges – they are not comparable”.

[143]	Further, Mr McCurdie’s evidence was that, prior to the creation of the SAU, a patient assessed by a surgeon as not needing surgery after presenting to the Emergency Department (ED), would have been counted as a discharge from ED. The cost would have been attributed to the ED discharge so an increase in surgical discharges from the SAU did not necessarily equate to a financial saving for WDHB as the cost would just appear in a different department.

[144]	I find that the correct focus of the “measurable” success of the SSRP is the output of theatre events.

[145]	Mr Shaw noted that, applying the measure of inhouse theatre events or surgical procedures, for the April to September 2018 period, there were 837 more surgery events than in the same period in the previous year which, when annualised to 1,674 was considerably lower than the 4,028 procedures relied on Mr Kemp. On that basis,

16	Under facility lists WDHB provided the surgeon but the external provider supplied the theatre and support services.

on Mr Shaw’s figures, (using the data provide by WDHB) the measurable savings would have been in the region of $9,351,699 (which Mr Currie later adjusted to
$9,761,806) for the annualised savings based on the six months April to September 2018 compared to April to September 2017. However, for the reasons that follow, even applying a reasonable approach to the surgical discharges measure advocated for by Keezz and Mr Kemp, the threshold was not met.

[146]	I return to an assessment of Mr Kemp’s evidence. Mr Kemp’s analysis of surgical discharges is based on the figures for the six month period January to June in 2017 and the same period in 2018. That is based on Keezz’s case that the SSRP was “embedded” by January 2018. However, as noted, the SSRP was extended in February for a further 10 weeks, at the full contractual rate, which rather suggests there was further work required to complete the project. It was extended further in April (by the May variations) but for present purposes I accept that extension was limited to the roles Mr Boyd and Mr Kong were to carry out. For that reason the six month period of April to September in 2017/2018 seems the most appropriate comparator. That was the period taken by WDHB.

[147]	Even applying the surgical discharge data, Mr Shaw identified a significant disparity in results if a different period was taken to the six month period of January to June 2017/2018. Mr Shaw presented the following table:

Table 2: WDHB - surgical discharges
	Jan- June
A	Feb- Jul
B	Mar- Aug
C	Apr- Sept
D	May- Oct
E	June- Nov
F	July- Dec
G	
Total
H	
2017									
January	   1,793	-	-	-	-	-	-	1,793	
February	2,335	2,335	-	-	-	-	-	2,335	
March	2,711	2,711	2,711	-	-	-	-	2,711	
April	2,261	2,261	2,261	2,261	-	-	-	2,261	
May	2,742	2,742	2,742	2,742	2,742	-	-	2,742	
June	2,411	2,411	2,411	2,411	2,411	2,411	-	2,411	
July	-	2,432	2,432	2,432	2,432	2,432	2,432	2,432	
August	-	-	2,677	2,677	2,677	2,677	2,677	2,677	
September	-	-	-	2,481	2,481	2,481	2,481	2,481	
October	-	-	-	-	2,497	2,497	2,497	2,497	
November	-	-	-	-	-	2,619	2,619	2,619	
December	-	-	-	-	-	-	2,341	2,341	
Total 2017	14,253	14,892	15,234	15,004	15,240	15,117	15,047	29,300	
2018									
January	2,523	-	-	-	-	-	-	2,523	
February	2,578	2,578	-	-	-	-	-	2,578	
March	2,830	2,830	2,830	-	-	-	-	2,830	

April	2,651	2,651	2,651	2,651	-	-	-	2,651	
May	2,973	2,973	2,973	2,973	2,973	-	-	2,973	
June	2,712	2,712	2,712	2,712	2,712	2,712	-	2,712	
July	-	2,688	2,688	2,688	2,688	2,688	2,688	2,688	
August	-	-	2,869	2,869	2,869	2,869	2,869	2,869	
September	-	-	-	2,699	2,699	2,699	2,699	2,699	
October	-	-	-	-	2,877	2,877	2,877	2,877	
November	-	-	-	-	-	2,892	2,892	2,892	
December	-	-	-	-	-	-	2,414	2,414	
Total 2018	16,267	16,432	16,723	16,592	16,818	16,737	16,439	32,706	
Difference									
December									
January	 	730	-	-	-	-	-	-	730	
February	243	243	-	-	-	-	-	243	
March	119	119	119	-	-	-	-	119	
April	 	390	390	390	390	-	-	-	390	
May	231	231	231	231	231	-	-	231	
June	301	301	301	301	301	301	-	301	
July	-	256	256	256	256	256	256	256	
August	-	-	192	192	192	192	192	192	
September	-	-	-	218	218	218	218	218	
October	-	-	-	-	380	380	380	380	
November	-	-	-	-	-	273	273	273	
December	-	-	-	-	-	-	73	73	
Total	2,014	1,540	1,489	1,588	1,578	1,620	1,392	3,406	
Annualised	4,028	3,080	2,978	3,176	3,156	3,240	2,784		
Average	3,316	3,078		
Average	3,206	3,069	

[148]	If any of the other six month periods are taken (other than January to June), and even applying the $7,549 theatre cost to the surgical discharges, the measurable savings are less than $25 million even before providing any allowance for variable costs.

[149]	As to the variable costs, Mr Kemp allowed $1,000 per procedure as the increased costs of consumables associated with the increased discharges. He based that on ACC figures. However, as Mr Shaw noted, the underlying data relating to each outsourced procedure was available to WDHB. The actual figure was $2,414 per procedure. The WDHB figure used by Mr Shaw is based on the actual underlying data available to WDHB. Applying that figure to the above table reduces even the January/June calculation of savings down to $20,683,780, and applying it to the range of other dates reduces the savings to between $14,300,000 (approximately) and
$16,637,000 (approximately) even based on surgical discharges.

[150]	On an objective basis, the evidence does not support a finding that the implementation of the SSRP has led to measurable savings of $25 million in WDHB’s profit and loss.

[151]	I conclude that neither before nor after the termination of the Services Agreement was payment of the ARF triggered.

Was the Services Agreement varied in December 2017?

[152]	Mr Boyd’s evidence is that in December 2017 he became aware WDHB was considering its service provision for the Christmas break. He says he had a discussion with Dr Howard about the suspension of elective surgeries during the Christmas break and the possibility of him (Mr Boyd) and Mr Kong taking on the roles of Surgical Operations Manager and Acute Surgical Stream Lead during that period. Mr Boyd says that on 11 December 2017 the Steering Committee of Mr Wright, Dr Howard and himself met and agreed to the above arrangement.

[153]	Mr Boyd says that Mr Kong provided coverage for the Duty Acute Surgical Operations Manager during the Christmas break from 18 December 2017 to 24 December 2017. From 25 and 26 December, Dr Howard covered or oversaw the role and from 27 December to 7 January 2018 Mr Boyd covered the role. Mr Boyd says that during the Christmas shutdown period he and Mr Kong also maintained other project duties. On that  basis  Keezz  now  claims  AUD 180,000  calculated  at  AUD 60,000 per week for the three week period. Effectively, he maintains that the SSRP continued over the three week Christmas period and was thus extended to 23 weeks.

[154]	However, the evidence does not support Keezz’s argument that the parties agreed to an effective extension of three weeks to the SSRP so that it carried on through the Christmas break and ran for an initial period of 23 weeks. Rather, the evidence supports the conclusion that the SSRP was suspended for that three week period and that Mr Boyd and Mr Kong carried out some limited cover for WDHB over the period.

[155]	The Flash Reports prepared by Mr Boyd on 10 and 17 December record that the SSRP would go “into abeyance pending return of WDHB people”, and that the other Keezz staff would return when WDHB colleagues would return. The project was to be maintained between 18 December until 12 January but only in relation to the acute stream. Consistent with that interpretation is that the week 14 Flash Report was for the week ending 17 December, and the next Flash Report for week 15 was not until the week ending 14 January 2018.

[156]	The February variation is also consistent with the SSRP going into abeyance for that three week period. It expressly referred to the initial period of 20 weeks and also recorded that the period of the SSRP was to be extended by 10 weeks to 30 weeks. There was no mention of any prior extension to 23 weeks. Further, the additional 10 weeks was to run from 12 February 2018, which is consistent with the project having being in abeyance for three weeks over the Christmas period. Finally, in an email of 18 December 2017 attaching an invoice for the previous week, Mr Boyd said “BTW this will be the last fee invoice until around 15 January 2018”.

[157]	Mr Boyd accepted in cross-examination there had been no discussion about how much KAU was to be paid for providing the acute cover and the other limited services provided by him and Mr Kong over the period. Indeed, his evidence of the amount due to Keezz during the period has been inconsistent. In an affidavit in opposition to the application for security for costs he claimed that the sum payable to KAU was AUD 80,000 (calculated at the daily rate of AUD 4,000 per day for 20 days). But then in his witness statement for this hearing Mr Boyd stated that the fee was AUD 360,000 and he sent an invoice for that sum on 14 June 2018. Then, in the course of his evidence he produced Exhibit A, an invoice for AUD 60,000, and said that was the correct sum but on the basis it was a weekly invoice so that the total figure claimed was actually AUD 180,000 for the three weeks. He said he had sent that invoice to WDHB on 17 January 2018.

[158]	However, under cross-examination, Mr Barker put to Mr Boyd that in the email which accompanied the invoice of 17 January for AUD 60,000 Mr Boyd said: “The fee invoice relates to the last four weeks (skeleton staff)”. That is consistent with the more limited services provided by Mr Boyd, Mr Kong and Keezz during that period.

Mr Boyd could only say that it was a mistake and the invoice should have had three other lines.

[159]	I note that the May variation provided for payment of $20,000 per week during the period Mr Boyd and Mr Kong were fulfilling managerial roles, much as was the case during the Christmas vacation period, although during that Christmas vacation period they were actively sharing one role. The $60,000 for three weeks or $20,000 a week for those services (which Mr Boyd accepts was paid) is consistent with the payments for the roles Mr Boyd and Mr Kong were carrying out over the Christmas period.

[160]	Mr Wright properly accepted in evidence WDHB did not expect that Mr Boyd and Mr Kong would work for nothing during that Christmas period. But Mr Boyd accepted in cross-examination that he understood the invoice for $60,000 had been paid. Keezz fails to satisfy the Court that it is entitled to any further payment for services rendered over the three week Christmas period.

Was the Services Agreement assigned or novated to KNZ?

[161]	Keezz says that the May variation assigned the Services Agreement to KNZ.

[162]	The conventional view of the effect of a purported assignment of a contract was stated by Lord Collins MR in Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd as:17
“It is, I think, quite clear that neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to some one else; this can only be brought about by the consent of all three, and involves the release of the original debtor … .”

[163]	In Savvy Vineyards 3552 Ltd v Karaka Estate Ltd, the Supreme Court confirmed the position and went on to say:18

The provisions of the Property Law Act 2007 as to the assignment of things in action proceed on the same basis, addressing the assignment of debts

17	Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 (CA) at 668.
18	Savvy Vineyards 3552 Ltd v Karaka Estate Ltd [2014] NZSC 121 at [85].

(including the right to the performance of obligations) but not the assignment of the burden of obligations. On this basis, where there has been a contract between A and B and an assignment by B to C, and nothing else, the traditional view is that:

(a)	the rights but not the obligations of B are transferred to C;

(b)	C may enforce the rights of B against A;

(c)	B remains liable on the contract to A; and

(d)	A and C are not otherwise in contract.

[164]	The majority of the Supreme Court did not consider s 11 of the Contractual Remedies Act 1979 (now s 54 of the CCLA) affected that or operated so as to provide for the assignment of the burden of the contract.

[165]	So the starting point is that KAU could not transfer its contractual obligations under the Services Agreement to KNZ by a bare assignment. Novation is the only means by which KNZ could replace KAU as the original obligor under the Services Agreement. Novation required a new contract between all three: KAU, WDHB, and KNZ.

[166]	While in Savvy Vineyards the majority of the Supreme Court confirmed, by reference to the English Court of Appeal decision of British Gas Trading Ltd v Eastern Electricity Plc,19 that it was conceptually possible for a contract between A and B to confer on A the right to novate the contract in favour of a third party, in that case, the original contracts gave Goldridge the right to assign its interest to a related party without requiring the written consent of Karaka. In the circumstances the right to transfer or assign could be seen as a right to introduce a new party to a contract and thus a right to novate. Effectively, the majority confirmed that the required consent could be provided for by a contractual provision, and no further consent may be needed, when the contracting party exercised that right as Goldridge did in that case.

[167]	But in the present case the relevant provision of the contract required WDHB’s written consent to any assignment:

40	Assignment

19	British Gas Trading Ltd v Eastern Electricity Plc unreported, 18 December 1996 (CA).

The Supplier must not sub-contract or assign any right, duty or obligation under this Agreement without Waikato DHB’s prior written consent.

[168]	Mr Barker submitted that WDHB’s “prior” written consent was not obtained to the assignment. He argued that while Mr Boyd discussed the possibility of the assignment with Mr Wright, it was never formalised and nor was approval given in writing before the May variation. I am not able to accept that submission. The written consent of WDHB to the assignment was confirmed in the May variation. I consider that written acknowledgement in the May variation amounts to prior written consent (the assignment would follow execution of the May variation) and could be sufficient for a bare assignment if the assignment was otherwise valid.

[169]	Mr Barker then referred to Dr Howard’s evidence that he did not pick up on the fact that the May variation presented by Mr Boyd referred to an assignment to KNZ and Mr Boyd did not alert him to that fact. However, the May variation does expressly refer to the assignment in the operative provisions of the variation document. The onus was on Dr Howard to read the document before he signed it, to ensure he understood the content.20 He was not misled about it.21 I accept that the May variation could potentially support an argument that the benefit of the Services Agreement was assigned to KNZ.

[170]	Despite that, there are a number of other difficulties with the purported assignment of the Services Agreement to KNZ in the present case. For a start, it is not an effective novation, as KNZ is not a party to the May variation. KNZ has not executed the document as a party. In his evidence Mr Boyd suggested there was another missing page to the document but that has never been discovered. I do not accept Mr Boyd’s evidence on this point. It seems extremely unlikely there was such a page given that there is no reference in the heading to KNZ as a party. In my judgment this is another example of Mr Boyd making an assertion which is not supported by relevant and contemporaneous documentation, and indeed is even contrary to them. On 28 May WDHB (Ms Lane) sent Mr Boyd a copy of the May

20	Saunders v Anglia Building Society [1971] AC 1004, 1027.
21	Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111, at 120–121.

variation. The copy did not have a third page signed by KNZ. Mr Boyd did not raise the issue with WDHB at the time.

[171]	Next, the May variation purported to assign the Services Agreement to KNZ effective from 20 April 2018, but KNZ was not incorporated and thus not in existence until 8 May 2018. KAU’s rights could not have been assigned to KNZ before it was incorporated.

[172]	On a related point, there is no document or other evidence of the terms of any contract between KAU and KNZ providing for the assignment of KAU’s rights to KNZ.

[173]	Further, there is the fact that if KNZ was entitled, as assignee, to charge for the provision of services, as a New Zealand entity it would have had to charge GST for the services. Under the Services Agreement KAU had acknowledged that “the services are deemed to be provided outside New Zealand and therefore are not subject to … GST”. The invoices rendered by KNZ did not include GST. As a consequence, KNZ would have been in breach of cl 12.1(a) of the Services Agreement that it had complied with all legal obligations.

[174]	In conclusion on this point, there was no valid novation of the agreement. Nor, on the evidence, do I consider there was a valid assignment by KAU to KNZ of the benefits of the Services Agreement.

[175]	However, for the foregoing reasons, nothing really turns on the point, as neither KAU nor KNZ are entitled to payment of the ARF, and as discussed below, WDHB was entitled to cancel the Services Agreement.

Was WDHB entitled to cancel the Services Agreement?

[176]	WDHB terminated the Services Agreement on 21 June 2018. KAU says WDHB was not entitled to terminate the Services Agreement and that by purporting to do so it repudiated the Services Agreement, which Keezz accepted and then cancelled the contract. It seeks damages of AUD 30,000 for the period from 21 June 2018 to 29 June 2018 when the contractual period would have concluded.

[177]	The Services Agreement provided for termination in the following circumstances:

23	Termination for Cause

23.1	If a Party materially defaults in the performance of any of its obligations under this Agreement, and:

(a)	the material default is capable of being remedied and within thirty (30) days of written notice by the non- defaulting Party specifying the default, is not remedied; or

(b)	the material default is not capable of being remedied, then the non-defaulting Party may by notice in writing to the defaulting Party immediately terminate or temporarily suspend the operation of this Agreement in whole or in part.

23.2	Waikato DHB may immediately terminate this Agreement in its entirety (or in part) by notice in writing to the Supplier if:

(a)	the Supplier enters into a composition with its creditors, is declared bankrupt, goes into liquidation or administration, or a receiver, or a receiver and manager, or statutory manager is appointed in respect of it (except for the purposes of solvent amalgamation or reconstruction), or any steps are taken towards its liquidation or administration, or it is unable to pay its debts when they fall due;

(b)	the supplier assigns its rights, or sub-contracts its obligations under this Agreement other than in accordance with the terms of this Agreement;

(c)	the Supplier commits any fraudulent or unlawful act which adversely affects Waikato DHB;

(d)	any person who has executed a Confidentiality Deed in favour of Waikato DHB breaches the Confidentiality Deed and that breach adversely affects Waikato DHB;

…

[178]	In giving notice of cancellation WDHB relied on cl 23.1(b). Mr Barker submitted that at the time, Keezz was in material default of its obligations to provide the services in the Services Agreement, as Mr Boyd was obliged to work at Waikato Hospital on a full-time rotation, which was 10 days on and four days off (in other words he was to spend 10 out of 14 days on-site). The final 10 day rotation had

commenced on 18 June 2018. On 20 June 2018 Mr Boyd left New Zealand indefinitely after spending only part of his final 10 day-on period (which would have effectively taken him to the end of the contract period on 29 June) at the hospital and after the discussion with Dr Howard he had made it clear that he had no intention of returning to complete the contract.

[179]	While, as Mr Boyd noted, Mr Kong remained on site, that was only part of the contractual obligation. Mr Kong in fact sent KAU his final invoice to WDHB and agreed to continue working for WDHB under an independent contract.

[180]	The breach could have been remedied if Mr Boyd had responded to the letter of termination by advising, as he now says, that he was only temporarily returning to Australia. However, Mr Boyd’s actions at the time are inconsistent with any intention to return to complete the contract. On 23 June 2018 he apologised to Dr Howard for his actions. Dr Howard’s evidence was that Mr Boyd called Mr Kong that day when Dr Howard was with Mr Kong and after speaking to Mr Kong asked to speak to Dr Howard. Mr Boyd told Dr Howard he was embarrassed by how things had unfolded, that he would be continuing to liaise with WDHB to resolve matters and that he and Mr Pearson had met to find a resolution of the issues between them. At no stage during that conversation did Mr Boyd challenge the termination of the Services Agreement or suggest that he would remedy KAU’s default by returning to complete the contract. It was only subsequently, much later, on 6 November 2018, in the context of the discussion of the dispute about the ARF that in an email to Mr Wright, Mr Boyd suggested for the first time the breach could have been remedied.

[181]	Further, quite apart from relying on Mr Boyd’s abandonment of the project, WDHB had other grounds to terminate the Services Agreement. While Mr Barker properly referred to the case of DSJ (Pte) Ltd v TPF Restaurants Ltd ,22 which suggests a party cannot retrospectively change its reasons for termination, in Thompson v Vincent the Court of Appeal accepted that where one party had abandoned a contract and it was subsequently discovered there had been a pre-contractual

22	DSJ (Pte) Ltd v TPF Restaurants Ltd HC Auckland CP168/96, 23 December 1997 at 98.

misrepresentation, the termination could be justified on that alternative basis.23 The Court explained:24

The same view can indeed be reached more simply on a basis of fairness and probable Parliamentary intentions. Why should a party which, by the time of trial, can demonstrate it was entitled to cancel, nevertheless be held to have acted wrongfully in doing so because it was unaware of that position at the earlier time? That question can be asked with particular force given that there is no requirement to state, at the time of cancellation, the reasons for doing so. Revelation is not required before pleadings in proceedings issued, and some might say before the trial itself. It is not a situation where reasons must be given at outset with reliance likely to follow. Parliament is not likely to have intended such a curiosity.

[182]	The Supreme Court in Kumar v Station Properties (in liq and in rec) confirmed that to be a correct statement of the law. In that case the Supreme Court accepted that, even though the appellants were not entitled to refuse to perform their obligations on the basis they initially advanced, they were entitled to cancel for another, quite different reason.25

[183]	On that basis, as at 21 June 2018 WDHB would have been entitled to cancel as:

(a)	the purported assignment to KNZ was invalid and KAU, the contracting party, was, according to Mr Boyd and his solicitor, insolvent at the time;

(b)	if the Services Agreement had been assigned to KNZ, KNZ was in breach of cl 12.1, the warranty that it had complied with all legal tax obligations by issuing an invoice without accounting for GST.

[184]	I conclude that WDHB was entitled to cancel the Services Agreement on 21 June 2018.

[185]	Even if I am wrong in that conclusion, at that stage only eight days remained in the contract. WDHB was, subject to the ARF, only obliged to pay $20,000 a week so at most the amount claimed would have been $22,857.14. Further, WDHB paid Mr

23	Thompson v Vincent [2001] 3 NZLR 355 (CA).
24	At [87].
25	Kumar v Station Properties (in liq and in rec) [2015] NZSC 34 at [65].

Kong $7,500 direct for his services during that time so that the sum due to Keezz for Mr Boyd’s services would be $15,357.14.

Relief under the Contract and Commercial Law Act (CCLA)

[186]	For completeness I confirm that there is no basis for providing any relief to Keezz on a “just and practicable basis” under s 43 of the CCLA. The parties entered a commercial contract for the provision of services. KAU has not complied with its obligations under the Services Agreement and is not entitled to the payment of the ARF fee. I have also concluded that WDHB was entitled to terminate the Services Agreement for cause (Mr Boyd’s abandonment of the project).

Result

[187]	The claims by KAU and KNZ are dismissed. Judgment for WDHB.

Costs

[188]	Costs should follow the event. Costs on a 2B basis with an allowance for second counsel would seem appropriate. However, I reserve the issue of costs in case there has been any relevant exchange between the parties on that issue. Any costs memoranda by WDHB to be filed and served without 20 working days. Any response by Keezz 10 working days later, with any reply within five working days. Submissions are to be limited to five pages.

Venning J