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

KEEZZ LTD v TE WHATU ORA – HEALTH NEW ZEALAND [2023] NZHC 1360 [1 June 2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2019-419-000268[2023] NZHC 1360BETWEEN KEEZZ LTD (NZCN 6836013)First PlaintiffKEEZZ PTY LTD (CAN 116 327 005)Second PlaintiffAND TE WHATU ORA – HEALTH NEWZEALAND (FORMERLY WAIKATODISTRICT HEALTH BOARD)DefendantHearing: 8–12 May 2023Appearances: A R Gilchrist and A V Shinkarenko for PlaintiffsS Barker, J Maltby and E Donnelly for DefendantJudgment: 1 June 2023JUDGMENT OF VENNING JThis judgment was delivered by me on 1 June 2023 at 12.30 pm, pursuant to Rule 11.5 of the HighCourt Rules.Registrar/Deputy RegistrarDateSolicitors: McLeod & Associates, AucklandBuddle Findlay, WellingtonCounsel: A R Gilchrist, AucklandA V Shinkarenko, AucklandTABLE OF CONTENTSIntroduction [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 ServicesAgreement triggered prior to cancellation? [89]Does subsequent evidence support Keezz's position that the thresholdtarget 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 ofbusinesses and organisations.[2] In September 2017 KAU and the defendant Te Whatu Ora – Health NewZealand (at the time Waikato District Health Board (WDHB)),1 entered a servicesagreement under which KAU agreed to transform Waikato Hospital's surgical servicesoperation by designing and implementing a new operating model in return for whichit 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 hasrefused 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 weeksduring the 2017 Christmas break and AUD 30,000 for the period 21 June 2018 to29 June 2018 (following what it says was WDHB's unlawful repudiation of theservices agreement on 21 June 2018).[7] WDHB denies liability. It says the pre-conditions for liability to pay the ARFwere never met. Further, it says the project was suspended over the 2017 Christmasbreak 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 anyfurther payment for the eight day period between 21 June 2018 and the end date of theservices agreement of 29 June 2018.[8] Keezz had also initially sued WDHB alleging misrepresentation and breach ofthe Fair Trading Act 1986, but at the conclusion of the evidence Mr Gilchristconfirmed Keezz no longer pursued those causes of action.Background[9] At the start of 2017, WDHB faced a number of issues relating to its provisionof theatre and surgical services. There were also tensions between clinicians andsenior 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 milliona year. Dr Howard, at the time a clinical leader for cardiovascular services and criticalcare within WDHB, suggested to the CEO at the time, Dr Murray, that Lindsay Boyd2 First amended statement of claim, dated 7 May 2021.of KAU may be able to assist. Dr Howard had previously worked with Mr Boyd whenDr Howard had held a position with the Queensland Department of Health.[10] Dr Murray contacted Mr Boyd to explore the possibility of KAU carrying outan operational review of Waikato Hospital's surgical division. Mr Boyd came toHamilton and met with members of WDHB on 10 May 2017. Mr Boyd'srecommendation that KAU carry out a review was accepted. KAU duly carried outthe operational review between 17 and 31 May 2017, and in late May 2017 delivereda document to WDHB entitled Case for Action.[11] The Case for Action detailed a programme designed to achieve operationalimprovements in WDHB's surgical division. It proposed that KAU would develop anoperating model over two weeks which it would then implement within a further 16to 18 weeks. Overall it expected the programme to be completed in 20 weeks. KAUcommitted to a measurable improvement in financial performance of at least $25million per annum and proposed to charge AUD 2.4 million for its services.3 The Casefor Action included an ARF component of 50 per cent (AUD 1,200,000) of KAU's feefor the proposed work. It proposed the ARF would not be payable until the statedimprovements were fully realised.[12] During July and August 2017 the parties discussed the proposed project andmade some amendments to the Case for Action document. By this time Mr Hablouswas the acting CEO of WDHB in place of Dr Murray. The Clinical Unit Leaders (asenior doctors' group) was supportive of engaging Keezz. Mr Hablous considered thatengaging Keezz (with Dr Howard's encouragement) would improve management'srelationship with the senior clinicians. Also, with their support it was more likely theproject 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. MrBoyd provided Mr Hablous with a further copy of the case for action. The version ofthe 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 Australiancompany, was in AUD.[14] Geoff Pearson, a co-director of KAU with Mr Boyd, negotiated and settled thefinal 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 versionof the Case for Action (the final Case for Action) to be attached to the ServicesAgreement. That version included the commercial details. On 4 September 2017KAU and WDHB executed a written agreement, entitled "Waikato DHB ServicesAgreement" (the Services Agreement) providing for delivery of the project. TheServices Agreement provided, inter alia, for the establishment of a steering committeeand for the details of the project work. It confirmed the contract price and the basisupon which the ARF would be payable. On 6 September Mr Pearson noted that thefinal 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 theSurgical Services Reinvention Project (SSRP). The SSRP called for KAU to transformthe Waikato Hospital's surgical services operations by developing a new surgicalservices operating model (SSOM) over an initial two weeks and then by implementingthat SSOM over the following 16 to 18 weeks. It was to be delivered by KAU over20 consecutive calendar weeks from 4 September 2017.4[16] The services and expected financial improvements to be provided and the priceto be paid by WDHB for the services were set out in the schedule to the ServicesAgreement:SCHEDULE ATHE SERVICESA1 Transform Waikato Hospital's Surgical Services Operations throughdeveloping over 2 weeks a new operating model and implementingthat model over 16-18 weeks.4 The 20 consecutive calendar weeks from 4 September 2017 would have taken the project throughto 19 January 2018.The detailed specification for the Services is set out in attacheddocument entitled "Waikato District Health Board, Waikato HospitalSurgical Services Case for Action May 2017". A2 Timetable for ServicesThe Services will be provided over a period of 20 weeks. The Servicesmust be provided over consecutive weekly periods, unless theSteering Committee agrees otherwise in writing.FINANCIAL IMPROVEMENTSFinancial improvement will be derived from two principal sources:• Increasing throughput; this will result in driving down waitlists and bringingoutsourced work back in house.• Decreasing operational costs; removing obstacles (including cancellations)from patient flows will diminish wasted labour and overtime costs involvedin rework. It is foreshadowed that less resources will be required to do theincreased patient throughput.Through the Services, Supplier will achieve a measurable improvement infinancial performance by at least NZ$25,000,000 per annum.SCHEDULE BTHE PRICESThe total cost of providing the Services is $AUD 2,400,000 ("Fee"), excludingGST or other imposts, plus all reasonable travel and accommodation, billed atcost (subject to the provision to Waikato DHB of suitable evidence of costsincurred).The Fee is payable in 20 equal payments of $AUD 60,000 excluding GST orother imposts, plus travel and accommodation expenses. Invoices will beissued each Wednesday for the Services rendered the previous week endingthe previous Sunday.The remaining amount of the Fee, being $AUD 1,200,000 excluding GST orother imposts (the "At Risk Fee"), will be payable when the SteeringCommittee notifies the Supplier in writing that all actions necessary toimplement a savings of $NZ 25 million to Waikato DHB's profit and lossstatements have been delivered by the Supplier. Upon receipt of such notice,the Supplier will issue an invoice in the sum of $AUD1,200,000, excludingGST or other imposts. That invoice will be payable within 7 days of receipt.[17] From 4 September 2017 KAU provided services pursuant to the ServicesAgreement. KAU developed the SSOM and began the process of assisting WDHB toimplement it. Mr Boyd, Mr Pearson (from time to time), Felix Kong, and four otherKAU 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 statusreporting system against the project plan and improvement metrics. Actionsfrom this meeting will both guide the project and address off schedulesituations. Moreover, this forum will ensure that project initiatives remainconsistent 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 ExecutiveDirector of Waikato Hospital Services and Mr Boyd. At some point Messrs Hablousand Paradine ceased to be members and Mr Derek Wright, the newly appointed interimChief 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 SteeringCommittee by means of "Flash Reports".[21] In addition to the Steering Committee's role noted under the final Case forAction to monitor the progress of the SSRP, the Services Agreement confirmed thatthe Steering Committee had responsibility to trigger payment of the ARF by givingnotice in writing to KAU that all actions necessary to implement a savings of $25million 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 amethodology to measure and quantify the savings from the SSRP that would triggerpayment of the ARF. On 5 December 2017 Mr McCurdie met with Mr Boyd, MrCurrie (WDHB Finance Programme Manager) and Ms Barrie (WDHB Finance TeamLeader) to discuss the development of an agreed approach to evaluate and measure thesavings 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 DrHoward, provided it to Mr Boyd for comment on 4 May 2018. However, the partieswere unable to agree on a methodology to measure and quantify the savings from theSSRP 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 2018the time for implementing the SSOM would be extended from 16 to 18 weeks to 26 to28 weeks, with the overall period for delivery of the services being extended from 20weeks to 30 weeks (the February variation). The end date for the SSRP was extendedto 20 April 2018.[25] The February variation also amended the provision relating to payment ofKAU's fee. In place of 20 equal weekly payments of AUD 60,000 the fee was to bepaid by 30 equal weekly payments of AUD 60,000. As a quid pro quo the ARF wasreduced from AUD 1.2 million to AUD 600,000. The overall contract price remainedat AUD 2.4 million.[26] The second formal variation to the Services Agreement was concluded on orabout 16 May 2018 to apply from 20 April 2018 (the May variation). After discussingthe future of the project with Mr Boyd, on 23 April 2018 Dr Howard advised MaureenChrystal, the director of Corporate Services, that it was proposed Mr Boyd and oneother team member (Mr Kong) would carry on in particular roles at a fixed fee ofAUD 20,000 per week for an extended 10 week period. Mr Boyd was to have the roleof Director Operations, Surgical Services and Mr Kong was to be Manager, AcuteServices while permanent recruitment for those positions took place.[27] The May variation provided that the implementation of the SSOM wasextended to 36 to 38 weeks with the period for provision of services extended from 30weeks to 40 weeks. As a result of the May variation and the extension of the project'slife, the total of the weekly fees payable by WDHB under the Services Agreement asamended increased to AUD 2 million. As a quid pro quo the ARF was further reducedfrom AUD 600,000 to AUD 500,000. The overall effect of the May variation was toincrease the contract price to AUD 2,500,000. Under this extension the SSRP was dueto 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 ServicesAgreement in December 2017 when WDHB proposed that the elective servicescomponent of the project would be placed in abeyance during the Christmas break andthe WDHB requested that KAU, specifically Mr Boyd and Mr Kong, perform the rolesof Surgical Services Operations Manager and Acute Services Manager over the periodof the Christmas vacation. Mr Boyd says on or about 11 December 2017, the SteeringCommittee agreed that the elective surgical component of the project would besuspended from 15 December 2017 to 7 January 2018 while certain relevant WDHBstaff were on annual leave. Mr Boyd says that as a result, the term of the ServicesAgreement was extended to 23 calendar weeks and KAU agreed to manage WDHB'ssurgical management roster during that period at the same weekly rate recorded in theServices Agreement.[29] WDHB accepts that the parties agreed to a Christmas shutdown period for theproject but says there was no agreement to extend the term of the Services Agreementto 23 weeks, nor was there any agreement to pay the full rate of AUD 60,000 per weekfor the limited services provided by Mr Boyd and Mr Kong during that period. WDHBsays it received an invoice for AUD 60,000 for the limited services provided by KAUand 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 Pearsonhad fallen out. Discovered emails exchanged between 22 April and 12 May 2018confirm the extent of their dispute.[31] Mr Boyd incorporated KNZ on 8 May 2018 and purported to have the ServicesAgreement assigned to it in the May variation.[32] WDHB became drawn into the dispute between Mr Boyd and Mr Pearson in anumber of ways. When Mr Pearson became aware of the assignment referred to in theMay variation, he sought clarification of WDHB's position.[33] In his reply to Mr Pearson, on 11 June 2018 Mr Wright purported to confirmthat the Services Agreement remained with KAU. Mr Pearson queried how that couldbe, 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 theissue of the assignment. Dr Howard suggested that WDHB rescind the purportedassignment and confirm the variation with KAU. Dr Howard says Mr Boyd agreed inprinciple but wanted to meet with Mr Wright.[35] Mr Boyd's position apparently changed after taking advice. KNZ and MrBoyd's solicitor, Luke Bhatty of Hedges Bhatty, emailed WDHB on 15 June 2018demanding the WDHB confirm that it would not assign the Services Agreement to anyother entity. On the same day but in a separate communication Mr Bhatty emailedWDHB advising that KAU was insolvent and had ceased trading.[36] In the meantime, Mr Pearson had lodged a complaint with New Zealand Policewho 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 Zealandwithout notice on 20 June 2018. WDHB did not consider the default to be capable ofremedy.Events following termination[39] Following termination of the Services Agreement the parties made severalattempts to resolve the issues between them, particularly whether the ARF waspayable, but were unable to do so. WDHB's position throughout has been that if itcould be satisfied that measurable annual savings of $25 million would be achievedby the SSRP then it would pay the ARF. But it says that Keezz cannot satisfy it ofthat.[40] On the review by Andrew McCurdie, then WDHB's Chief Financial Officer,and Michael Currie, WDHB's Finance Program Manager, the measurable savings inWDHB'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 theARF.Issues[41] The principal issues for the Court are:(a) Was the WDHB's liability to pay the ARF of $500,000 triggered priorto cancellation?(b) If the WDHB's liability to pay the ARF was not triggered prior tocancellation does subsequent evidence support Keezz's position thatthe threshold target of $25 million in savings was met?(c) Was the Services Agreement varied in December 2017 and if so, whatwere 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 June2018? If not what, if any, loss was suffered by KAU (or KNZ if theServices Agreement was assigned or novated)?[42] Keezz called two witnesses in support of the claim: Lindsay Boyd, a directorof KAU and KNZ, and Matt Kemp, an expert accounting witness.[43] WDHB called Neville Hablous, Dr Grant Howard, Derek Wright, AndrewMcCurdie, Erica Barrie, and Michael Currie, all of whom were at the relevant timeemployed by WDHB. In addition, WDHB called Jay Shaw as an expert accountingwitness.Preliminary evidential issue[44] Mr Boyd's statement of evidence was extensive. In the course of it he referredto 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. MrBarker took objection to the admissibility of those documents, (particularly where thereports were not authored by any witness) on the basis they were either hearsay orirrelevant to the matters in issue. In response Mr Gilchrist submitted that most of thedocuments were relevant and admissible, particularly a Board Resource Reviewcreated 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 hasa tendency to prove or disprove anything of consequence to determining the meaningthe contractual document, (in this case the Services Agreement) would convey to areasonable person having all the background knowledge reasonably available to theparties 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 ofs 8.5 Relevantly s 8 of the Evidence Act confirms that evidence must be excluded ifits probative value is outweighed by the risk the evidence will have an unfairlyprejudicial effect on a proceeding or otherwise needlessly prolong the proceeding.[46] As to post-dispute conduct, in Bathurst Resources Ltd v L&M Coal HoldingLtd the Supreme Court confirmed that:65 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 therelevance threshold (which we suggest will not be often), s 8 is likely to comeinto particular play. Care will be needed to assess the probative value of thatevidence. For example, conduct that occurs post-dispute is very unlikely to beadmissible. By then, the parties will have retreated into their respectivecorners, and their conduct may well be self-serving. Its admission is likely toadd time and cost, especially in light of the inevitable calling of rebuttalevidence. Another example of problematic evidence is where the subsequentconduct is that of executives of corporate parties to the contract who had noinvolvement with negotiating the contract and no knowledge of itsbackground. Such evidence will not be probative if their actions do notrepresent the views of the relevant corporate party at the time the contract wasformed.[47] In principle I generally agree with Mr Barker's objections to the documentsreferred to by Mr Boyd and Mr Kemp. For example, documents which the plaintiffsays show WDHB had a history of not complying with the Government's procurementrequirements and reports of the Labour Government campaigning on underfunding inthe health system and related Parliamentary reports are not directly relevant to theinterpretation of the Services Agreement, or the other issues in this case as defined bythe pleadings. Next, a number of the documents referred to by Mr Boyd were createdafter the Services Agreement was concluded and some even after termination. Theyare of very limited probative value as they do little to assist the interpretation of theServices Agreement and the written variations to it.[48] Further, a number of the news articles advanced as proving particular matterswere not relevant because the matters they sought to prove were not in issue as theywere either established by the pleadings or other direct evidence. Also, WDHBaccepts that it faced a number of issues in relation to the provision of theatre andsurgical services.7[49] However, I permitted Mr Gilchrist to put WDHB's Resource Review of 6 June2019 to Mr Currie during his cross-examination, even though it post-dated thetermination of the Services Agreement, as Mr Currie had some input into thedocument, although as it emerged, it was not particularly relevant.[50] Before dealing with the principal issues there are a number of other side orperipheral 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 saidhe only agreed to it because Dr Murray had gone on to assure him that he would havehis 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 anyrepresentation of Dr Murray.8[53] The WDHB witnesses confirmed that there were no other commercialcontracts WDHB had entered which involved an ARF. Such a clause was novel fromWDHB's point of view.[54] While Mr Boyd said that Dr Murray had suggested the ARF, in my assessmentis 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 clearlyinterested in a 20 week project which could return AUD 2.4 million. In both hiswitness statement and in his cross-examination Mr Boyd came across as beingextremely confident in his own ability to deliver the project. I have no doubt that heconsidered it would succeed and that the ARF would become payable. Next, Mr Boydprepared the initial Case for Action, the wording of which is consistent with theconcept of the ARF coming from KAU:Keezz has an unwavering commitment to deliver tangible outcomes to WDHBand to visibly support that commitment will place fifty percent of this fee "atrisk", that is $AUD 1,200,000 will not be payable until stated improvementsare fully realised.And later:We pride ourselves on the quality of our analysis and effectiveness in solvingbusiness problems through our participative approach. Our success is a resultof creative application of proven philosophies and methods combined withour ability to recruit, develop, and integrate into our team people ofexceptional experience and qualifications.8 As noted, Keezz has abandoned its claims based on misrepresentation and breach of the FairTrading Act 1986.[55] For completeness I note that, as Mr Barker submitted, Mr Boyd's evidence onthis point has not been entirely consistent. In his witness statement for the hearing MrBoyd said Dr Murray "insisted on" the ARF, whereas in an earlier affidavit filed onWDHB'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 theARF was negotiated and concluded over a number of days in late August by MrPearson on behalf of KAU, and at a time when Dr Murray was no longer CEO of theHospital Board. Importantly the Services Agreement included an entire agreementclause:43 Entire AgreementThis Agreement supersedes any prior arrangements, understandings,promises or agreements made or existing between the Parties inrelation to the subject matter of this Agreement and constitutes theentire understanding between the Parties on that matter. Except asotherwise provided in this Agreement, no addition, variation,amendment to or modification of this Agreement will be effectiveunless it is in writing and signed by both Parties. On execution of thisAgreement by both Parties any existing agreements between theParties relating to the provision of the Services will terminate.[57] Section 50 of the Contracts and Commercial Law Act 2017 (CCLA) providesthe Court is not prevented by such a clause from inquiring into and determining anyquestion as to whether representations were made in the course of negotiations, unlessthe Court considers it fair and reasonable the provision should be conclusive betweenthe 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 commercialexperience 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 entireagreement clause to apply. Any representations that may have been made on behalfof WDHB prior to execution of the Services Agreement are superseded by the termsof 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 WDHBtook 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 thatwas not WDHB's position. WDHB accepts that the agreement was forward lookingand the Services Agreement contemplated that the savings could be achieved in thefuture.[60] Such an approach (that the Services Agreement contemplated the savingswould be achieved in the future rather than the need for them to be "banked") isconsistent with both the language used in the Services Agreement and the underlyinglogic of it. The wording of the Services Agreement provided that the ARF wouldbecome payable "when the Steering Committee notifies the Supplier in writing thatall actions necessary to implement a savings of $NZ 25 million to [WDHB's] profitand loss statements have been delivered by the Supplier ".9 That wording placedthe 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 payableuntil the stated improvements had been "fully realised", at one point the final Case forAction referred to them being "agreed". In other words, it would be sufficient if theimprovements 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 millionper annum to WDHB's profit and loss statements, as the project was initially intendedto 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 providefuture "measurable" savings of $25 million per annum.Case for Action[64] Various versions of the Case for Action were produced to the Court. There wasthe initial Case for Action provided by Mr Boyd in late May 2017, whichrecommended the project to WDHB. That document led to the further discussionsbetween the parties, which ultimately concluded with the Services Agreement. Itincluded the financials and the ARF proposal.[65] Mr Boyd says that he provided a second version of the Case for Action to MrHablous 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 theARF proposal.[66] As noted, WDHB considers that a further, third version of the Case for Actionwhich included the financials was the version ultimately attached to the ServicesAgreement.[67] Although little turns on it, given that the Services Agreement provides for thefinancial details and the ARF, I am satisfied that the Case for Action that wasultimately 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 Boydsending him a version of the Case for Action without the commercial details in lateAugust but accepts he may have done so. I note that on 16 August Mr Hablous hadasked Mr Boyd to provide him with a copy of the Case for Action without thecommercial elements so that he could circulate it to staff at large without impingingon KAU's commercial privacy. Mr Boyd's provision of a copy of the Case for Actionwithout financials is consistent with that request.[68] More relevantly, as noted, the Services Agreement was ultimately negotiatedbetween Mr Pearson for KAU and WDHB's legal counsel. After the ServicesAgreement was concluded and copies exchanged, Mr Pearson noted the Case forAction was not attached and requested that it be attached as a schedule. WDHBunderstood that the version attached was the full Case for Action including financials.That is the more likely scenario, as the Services Agreement included the financialdetails as well. There was no reason not to include the financial details in the finalCase 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 MrHablous 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 toreduce outsourcing and bring it back within the hospital, at about the same timeWDHB had appointed Brenda Wills as an outsourcing manager. Mr Gilchristsubmitted that was counterintuitive and showed WDHB was not committed to theSSRP. However, as WDHB witnesses explained, while the SSRP was beingimplemented, outsourcing had to continue to enable WDHB to meet its targets and itwas important that the outsourcing be conducted efficiently. I see nothing ofsignificance or contradictory in WDHB's position on that issue.[71] There was apparently some conflict between Mr Boyd and Ms Wills. Forexample, on one occasion Ms Wills sought, in rather direct terms, an explanation whya scheduled elective surgery had been cancelled. Dr Howard had to become involvedin the email exchange. In context, the conflict between Mr Boyd and Ms Wills is mostlikely 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 ofWDHB toward the SSRP. WDHB had committed a significant sum of money andresources to the success of the SSRP. A number of the WDHB witnesses, includingDr Howard in particular, confirmed that WDHB was committed to the SSRP. I acceptthat evidence.The success of the project[72] On a related point, it is not in issue that the SSRP was successful, in that it didlead to an improvement in the surgical operational division of WDHB and it did, evenon WDHB's assessment, lead to some measurable savings. Mr Wright acknowledgedon several occasions through his evidence that he considered the SSRP was asuccessful project. Dr Howard also considered it a success. The issue remained,however, whether the savings met the threshold or requirement for WDHB to pay theARF.[73] Mr Gilchrist suggested that after Mr Boyd left in June, the WDHB had notpursued 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 heobserved, the single biggest risk was the dispute between Mr Boyd and Mr Pearsonand their failure to quarantine that from their work for WDHB. Dr Howard was asupporter 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 matterof 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 intoquestion his credibility and reliability on important issues.[75] Scattered throughout Mr Boyd's brief of evidence were re-creations ofconversations 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 conversationsalthough he says he began preparing his brief some years ago. The detail of theconversations are not referred to or recorded in contemporaneous emails. It isunrealistic to suggest that Mr Boyd's recollection of what took place during thoseconversations is an entirely accurate record.[76] As Leggatt J stated in Gestmin SGPS S.A. SA v Credit Suisse (UK) Ltd, CreditSuisse Securities (Europe) Ltd:10[t]he best approach for a judge to adopt in the trial of a commercial case is, inmy view, to place little if any reliance at all on witnesses' recollections of what10 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 thetext by Dr Julia Shaw The Memory Illusion: Remembering, Forgetting and the Science of FalseMemory (Random House Books 2016) at ch 6, p 14.was said in meetings and conversations, and to base factual findings oninferences drawn from the documentary evidence and known or probablefacts. This does not mean that oral testimony serves no useful purpose –though its utility is often disproportionate to its length. But its value lieslargely, as I see it, in the opportunity which cross-examination affords tosubject the documentary record to critical scrutiny and to gauge thepersonality, motivations and working practices of a witness, rather than intestimony of what the witness recalls of particular conversations and events.Above all, it is important to avoid the fallacy of supposing that, because awitness has confidence in his or her recollection and is honest, evidence basedon 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 notable to recall or did not challenge the gist of Mr Boyd's recollection. It is correct thatWDHB witnesses did not recall the detail of some conversations with Mr Boyd. Butto the extent that the WDHB witnesses are not adamant about the exact wording of theconversations, in my view that supports a finding their evidence is reliable. Myassessment of the WDHB witnesses is that they were credible witnesses seeking togive their evidence to the best of their recollection. The fact they could not recallcertain events or conversations does not amount to an admission that Mr Boyd'saccount is necessarily correct. Further, it is not correct to say that Mr Boyd's evidencewent unchallenged. There are a number of examples where there is a direct conflictbetween the evidence of Mr Boyd and other witnesses and documents.[78] There is, for example, a major conflict of evidence between Mr Boyd and DrHoward on the issue of a conversation Mr Boyd had with Dr Howard before leavingNew Zealand on 20 June. Dr Howard said that Mr Boyd told him that following legaladvice, he had decided to return to Australia to avoid being barred from leaving NewZealand as a result of the Police investigation. Mr Boyd denied having such aconversation.[79] Dr Howard made a note at the time. Mr Gilchrist made the point that DrHoward had recorded the conversation as having occurred on 19 June but that cannothave been correct as Mr Boyd attended a meeting at the hospital on 19 June. DrHoward was clearly mistaken as to the date, but while the conversation must havebeen on 20 June rather than 19 June, it is the substance of the conversation that isparticularly material.[80] I accept Dr Howard's evidence as to the substance of the conversation andreject Mr Boyd's denial of it. As noted, Dr Howard made a note of the conversationshortly after it. Further, as he said when pressed on the point in cross-examination, itwas "not the kind of conversation you would forget". Dr Howard was a supporter ofMr Boyd and a keen advocate of the SSRP which was in part based on a paper he hadpreviously prepared. He had no reason to make up the conversation or to paint MrBoyd in a bad light.[81] There are other examples of instances where I do not accept Mr Boyd'sevidence. There is, for example, Mr Boyd's evidence about an occasion in April 2018when he says that Dr Howard wrote: "I fully agree" on the surgical reinventionprogram document that Mr Boyd had prepared. No such document with Dr Howard'snotes on it has been produced. Mr Boyd says he gave it to Mr Wright on 23 April. MrWright could not recall if he had been handed a hard copy of the document but wasprepared to accept he might have been. But that is not an admission that the documentcontained Dr Howard's note. Mr Boyd sent Mr Wright an electronic copy of it. Thatcopy 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 youwould expect him to remember if he had made such a note. A hard copy with DrHoward's note on it was not discovered by WDHB. I would have expected if therewas such a document with Dr Howard's acknowledgement on it, either Mr Boydwould have kept a copy, or he would have referred to Dr Howard's agreement incontemporaneous email exchanges, or that WDHB would have it in its records. Noneof the above apply.[82] Further, Mr Boyd did not refer to this point in either of his affidavits filedduring the interlocutory stages of the proceeding even though he referred to thedocument. While Mr Boyd referred to Dr Howard signing the document, he did notsay 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 theevidence 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 Mayvariation were KAU and WDHB. KNZ was not referred to as a party. The hard copyof 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 havingexecuted the May variation. I do not accept Mr Boyd's evidence that there was a thirdpage of the May variation executed by KNZ.[84] As noted, I also reject Mr Boyd's evidence that the Case for Action intendedto be attached to the final Services Agreement did not include the financial details. Iconsider Mr Boyd deliberately advanced the proposition that the Case for Actionwithout financials was to be attached to the Services Agreement to avoid having thefinancial and other aspects referred to in the third Case for Action which do not supportKeezz's case as part of the contractual matrix. It is an example of Mr Boyd attemptingto make the evidence fit his theory of the case.[85] Next there is the issue of the emails between Mr Pearson and the Police. DrHoward said that before he left New Zealand, Mr Boyd showed him emails betweenMr Pearson and the New Zealand Police. Mr Pearson had made a criminal complaintto the Police about Mr Boyd setting up KNZ in an attempt to defraud him. Dr Howardmade a file note at the time noting that Mr Boyd had access to the emails as Mr Pearsonhad used his keezz.com email address which Mr Boyd could access.[86] Mr Boyd denied showing Dr Howard the emails. He also denied having accessto the emails.[87] Dr Howard had no reason to lie about that issue. As noted, he worked closelywith Mr Boyd and fully supported the project. His evidence was based on a note hemade at the time, and is also consistent with Mr Boyd's actions at the time and thedispute between Mr Boyd and Mr Pearson.[88] There were also other inconsistencies between Mr Boyd's evidence andrelevant documents as discussed in following sections of this judgment.Was the WDHB's liability to pay the ARF in terms of the Services Agreementtriggered prior to cancellation?[89] I return to the principal matters in issue. Keezz appears to rely on a number ofdifferent bases for saying the ARF is payable.[90] Mr Boyd referred to a joint workshop on 9 September 2017. He says theSSOM was agreed at the workshop. On Keezz's case the risk of operating the SSOMpassed to WDHB from then on as it was responsible for the implementation of theSSOM.[91] Mr Boyd and Keezz then suggest that, by incorporating savings of $25 millioninto its operating budget for 2017-18 and confirming the savings in its 2017-18 AnnualPlan, WDHB had accepted the requirement for payment of the ARF had beentriggered.[92] Mr Boyd notes that on 27 September 2017, the WDHB Board met and agreedto incorporate a saving of $25,000,000 to the WDHB profit and loss statements inrespect of the project.11 On 30 November 2017 WDHB incorporated the savingswithin the WDHB Annual Plan 2017-2018. The Plan was subsequently approved bythe Minister of Health on 7 May 2018.[93] Keezz and Mr Boyd's reliance on the budget and annual plan as evidence thatall actions necessary to implement a savings of $25 million to WDHB's profit and losshad been delivered by KAU by 27 September 2017 misunderstands the provisions ofthe Services Agreement, the nature of budgets generally, and WDHB's budget andannual plan process in particular.[94] As noted, Keezz's argument on this point is also, in part, based on Mr Boyd'scontention that it was WDHB's responsibility to implement the SSOM. However, thatis inconsistent with the express provisions of the Services Agreement. Under theServices Agreement there were two distinct aspects of the SSRP. KAU was to deliverboth aspects. First, KAU was to develop the SSOM (which was expected to take two11 Agenda item 6.2 of the Board meeting.weeks) and then it was to implement the SSOM over the next 16 to 18 weeks. TheCase for Action noted the two distinct phases as follows:Phase One: will surround the development of the Operating Model. Thisprocess is anticipated to be completed within two weeks. It will provide theblueprint 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 beincluded.And:Phase Two: The second phase is about developing, designing andimplementing appropriate systems and processes to transform the surgicaldivisions work consistent with the operating model developed within the firstphase. Formulation of task teams will be a function of the operating modelhowever, 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 theservices of 5 to 8 of its people engaged fulltime and working daily withinWaikato Hospital (WH) surgical services and relevant support services toimplement the required operating model. Our people will cover all relevantshifts and all week days working as one with WH staff. Accordingly, thetransfer 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 hadsuggested, wasn't it?A. It was a combined exercise with Keezz taking far more responsibilityfor introducing change and ensuring it is embedded than is normallythe case with consultants.[97] Keezz's proposition that it was WDHB's, not Keezz's responsibility toimplement the SSOM is not sustainable. While WDHB obviously had a role, theprincipal responsibility to oversee the implementation lay with KAU. That is what itwas being paid for.[98] Next, by 27 September 2017 the parties were only just over three weeks intothe 20 week project (which was subsequently extended). Given the very preliminarystage of the SSRP in September 2017, the potential savings referred to in the budgetdocument was not an acknowledgement that payment of the ARF was triggered. Itcannot sensibly be suggested that KAU had "delivered all actions necessary toimplement 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 thecase and it is, in any event, contrary to Keezz's reliance on other, later dates as beingthe triggering event. It also begs the rather obviously question of why, if KAU andMr 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 misstatesand misunderstands the budgeting process in this case. Each year WDHB developeda "bottom up" budget which included a savings plan to meet the gap between spendingand Government funding. The 2017/18 budget was not a profit and loss statement. Inote also that the savings of $25 million were noted in the budget for the 2019/20 yearand the risk (in terms of achieving the budgeted savings) was stated to be "medium".[100] The second "trigger" for payment of the ARF that Keezz relies on is adocument entitled "Surgical Service Reinvention Program WDHB", which Mr Boydsays he provided to Dr Howard for review on or about 15 April 2018. The documentrecorded:This paper is a notice "that all actions necessary to implement a savings of$NZ 25 million to [WDHB's] profit and loss statements have been deliveredby the Supplier" and that the [ARF] is now payable.The document estimated savings totalling $36,450,000. Mr Boyd said he consideredthe document to be formal notice to the Steering Committee that all work required bythe project to implement the savings of $25 million had been delivered by Keezz andthat the ARF was payable. Mr Boyd says that Dr Howard wrote on the front page ofthe 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 handedthe document to Mr Wright. Mr Boyd says that he had a conversation to the followingeffect: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 orabout 15 April 2018. Mr Wright does not recall receiving a hard copy with DrHoward's notation on it. When the existence of the document came to his attention heasked 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 andDr Howard, constituting a majority of the Steering Committee, agreed that theprojected savings of $25 million would be achieved.[103] For the reasons given previously, I do not accept Mr Boyd's evidence that DrHoward recorded his agreement that all steps necessary to achieve the savings of $25million had been implemented or that he accepted that savings of $36,450 had beenachieved.[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 isinconsistent with Dr Howard's evidence as to how he understood his role on theSteering Committee in relation to the ARF. Dr Howard confirmed that he would notagree the ARF was payable without discussing it with Mr Wright. As he said in thefollowing exchange:12Q. You were aware that the contract [called] for the steering committeeto 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 itwouldn'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 putin my brief of evidence it will be highly unlikely for a – not a juniorofficer, but someone less junior than the Chief Executive to agreewithout first getting the Chief Executive's agreement given that therewas no time pressure. It's not a matter in an emergency to have twosignatures 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 peoplesigning as, as triggering the payment but the process by which thosetwo people would have come to the point of signing is important.[105] The practical position was that the Services Agreement provided for themembers of the Steering Committee to oversee the development and implementationof the project. They were to oversee its progress at a high level. However, given thatthe savings had to be measurable, the members of the Steering Committee would havehad to have had some advice or input from the appropriate WDHB staff, including MrMcCurdie 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 wouldneed to refer the issue of whether the measurable savings had been achieved toWDHB's finance team for confirmation. That is consistent with the Case for Actionwhich referred to the savings as "measurable" and provided the ARF was not payableuntil the stated improvements "are agreed". Logically, the members of the SteeringCommittee would not have the necessary information themselves and would need totake 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 wastriggered is itself inconsistent. Each of the February and May variations altered thequantum 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 AUD500,000. 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 bya further $100,000, as he did by executing the May variation. Further, nor was thereany suggestion by Mr Boyd at that time when that May variation was concluded, thatthe ARF was already payable. Mr Boyd's reference to savings of $36,400,000 as at15 April 2018, is a bare and untested assertion. It is also inconsistent with his laterassertion in June of an agreed improvement of $29,600,000.[108] The provision in the Services Agreement providing for the triggering ofpayment 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 orother imposts (the "At Risk Fee"), will be payable when the SteeringCommittee notifies the Supplier in writing that all actions necessary toimplement a savings of $NZ 25 million to Waikato DHB's profit and lossstatements have been delivered by the Supplier. Upon receipt of such notice,the Supplier will issue an invoice in the sum of $AUD1,200,000, excludingGST 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 toimplement a savings of $25 million was the mechanism by which the payment of theARF was triggered, but there was the separate requirement that the savings had to be"measurable". That inevitably would require the members of the Steering Committeeto take advice about the level of savings.[110] Finally, Mr Boyd next relied on the week 37 Flash Report in June 2018 asevidence that payment of the ARF had been triggered prior to cancellation. Hisevidence was that at the Steering Committee meetings he routinely presented projectedsaving improvements, both identified and agreed by way of the Flash Reports.[111] Mr Boyd says that following the May variation, KNZ continued to work onsite and at the week 37 Steering Committee meeting on 10 June 2018 Dr Howard andhe 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 deliverablestotalling $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 Reportswere prepared by Mr Boyd in advance of the meetings rather than at the conclusion ofthe meetings. They were used as a basis for updating progress on the SSRP and fordiscussion. There was no evidence of any discussion regarding the "agreedimprovements" nor how they were actually to be achieved.[113] Again, Dr Howard's evidence is relevant. With reference to the Flash Reportsthe following exchange took place:13Q. And they [Flash Reports] would be circulated to you and the othermembers in advance?13 (Emphasis added).A. I don't know if they're always circulated in advance but they weretabled on, at the meeting is not circulated in advance.Q. And you never objected to what was contained in the flash reports didyou?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. MrBoyd says that on 12 June he met with Dr Howard and Dr Howard said words to theeffect of "that looks in order. I agree. It's best to pass it on to Derek (Wright) for himto take care of it." Mr Boyd said he then met with Mr Wright and handed him theinvoice with the "minutes" (the Flash Report) attached, and that the conversation wentsomething 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 giveit 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 thatmembers of the Steering Committee agreed the ARF was payable. Dr Howard couldnot recall receiving the final report nor whether he received and approved the ARFinvoice. Mr Wright was clear that he had never agreed the invoice was payable. Heraised an objection to it within the time provided by the Services Agreement. Whilehe was prepared to accept the SSRP was a successful project, he wanted to confirmthe 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 totest the measurable savings was to fix a base and then to compare that to enable areasonable calculation of the quantifiable improvements. The parties were never ableto agree that base or methodology, despite the baseline document proposed by MrMcCurdie.[117] Further, despite Mr Boyd's assertions, the evidence does not support a findingthat Dr Howard agreed the ARF was payable. Dr Howard's evidence of his reluctanceto agree without getting approval is consistent with the need for the formal noticeprovided for in the Services Agreement. Dr Howard's email to Mr Wright on 5 July2018 where he noted:14 I would recommend a cooling off period of a week or so in order for us tofeel secure with regard the data on a whole year basis.Based on the data and context, in terms of operational gains, I wouldrecommend the at-risk sum is paid as long as the advice provided to you bythe Chief Finance Officer is consistent with this recommendation in yourestimation.is consistent with his evidence he had not previously agreed to payment of the ARF.[118] When cross-examined about that, Dr Howard clarified:15Q. So that was your view at least that on the basis of what you were awareof, 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 expressedthis in a number of different ways. The operation centre and theoperational model that Mr Boyd worked with me to set up was in factyou know world class in terms of the results it delivered and on thatbasis I would've been happy to pay any bonus on that, however, thecontract predicated the payment on the savings being realised andbeing 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 Wrightreferred to making payment of the ARF fee. The email was in response to a queryfrom Dr Howard:Thanks GrantWe will not be paying the at risk until Lindsay & Geoff have agreed on a bankaccount, so this will probably not be paid for at least another week.[120] Mr Gilchrist suggested the email supported the view Mr Wright agreed topayment of the ARF. But in context, it is consistent with Mr Wright's expectation thatwhile payment would be made, that was always conditional upon him being satisfied14 (Emphasis added).15 (Emphasis added).as to the financial information provided by WDHB's financial team that themeasurable results had been achieved. The focus of the email was clearly on thedispute between Mr Boyd and Mr Pearson, rather than being an acknowledgement thatthe measurable savings had been achieved.[121] But in any event, the short point is that the Services Agreement provided aprocess for triggering WDHB's liability to pay the ARF. The Steering Committee hadto 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. Nosuch notice was ever given.[122] As noted, this is not to say that the SSRP was not a worthwhile project or thatit did not achieve some of the aims it set out to achieve. Dr Howard and otherwitnesses for the WDHB were clear it achieved improvements in the hospitaloperation. Dr Howard in particular, was a supporter of the operating model. Heworked closely with Mr Boyd and considered it a success. But the issue always hasbeen whether, once implemented, the SSRP would achieve measurable $25 millionsavings.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 andafter cancellation, the evidence supports the conclusion that a measurableimprovement in financial performance of at least $25 million per annum was achievedby implementation of the SSRP.[124] In the pleadings Keezz seeks, in the alternative to judgment for the ARF ofAUD 500,000:(a) a declaration that satisfaction or otherwise of the pre-condition topayment of ARF is capable of determination by objective criteria; or(b) a declaration that the mechanism in schedule B for approval of the ARFby the Steering Committee is unenforceable and is severable; and(c) a declaration that on objective assessment the pre-condition to thepayment of ARF is satisfied, and damages for breach of contract in anamount equal to the sum of varied ARF.[125] Further relief is also claimed pursuant to s 43 of the CCLA "as may beappropriate".[126] There is no basis to sever the condition relating to approval and payment of theARF. The declaration seeking severance relies in part on cl 35 of the ServicesAgreement which provides:35 SeverabilityShould any part or provision of this Agreement be held unenforceableor in conflict with the applicable laws or regulations of any applicablejurisdiction, the invalid or unenforceable part or provision will bereplaced with a provision which accomplishes, to such extent aspossible, the original business and purpose of such or provision in avalid and enforceable manner and the remainder of the Agreementwill 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 toWDHB's future profit and loss. Once the members of the Steering Committee weresatisfied of that (which would require them to take appropriate advice about themeasurable financial savings) they could trigger payment of the ARF by giving writtennotice 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 millionwere achieved by Keezz.[128] The other declarations sought are strictly unnecessary as WDHB has concededthat, 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 hasbeen 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 hadbeen cancelled. To that end Mr Wright and WDHB's accounting team sought toengage with Mr Boyd regarding a process or formula to determine whether that couldbe 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 thematter 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 theincrease in inhouse surgeries/discharges that occurred after the project'simplementation would, in the alternative, have still occurred but would have beenundertaken using outsourced providers if the project had not proceeded.[130] Mr Kemp relied upon inhouse patient discharge figures for both acute andelective surgery and applied a value to the benefits equal to the estimated cost ofachieving the same outcome on an outsourced basis.[131] Mr Kemp took the discharge figures for the six months ending 30 June 2017and 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 toJune 2018 were 2,014 which he annualised at 4,028 and then multiplied that by thecost per procedure of $7,549 to arrive at a gross value of $30,407,372. From that hededucted 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 WDHBto be the total weighted average cost of theatre events based on the varying cost ofdifferent surgeries.[133] On the "status quo" basis Mr Kemp estimated there would have been savingsof $37,706,096, but of that, $24 million was the "penalty" saved of $2 million permonth.[134] WDHB called Mr Shaw. Mr Shaw reviewed Mr Kemp's approach. At a broadlevel Mr Shaw considered Mr Kemp's "but for" approach to be consistent with theServices Agreement and preferable to the "status quo" approach.[135] There are obvious flaws with the "status quo" approach which relies heavilyon the imposition of penalties of $2 million per month. Its underlying premise isflawed. The Ministry of Health had the ability to reduce funding if targets were notmet. But the evidence from WDHB witnesses was that, while there was a possibilityof such penalties or, more accurately, sanctions, they had never been imposed in thepast. 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 simplylooks at the number of surgical discharges prior to the project. It then assumes all ofthem would have been brought inhouse. On that basis, Keezz could have deliverednothing, but the same avoided cost would be calculated.[136] Mr Shaw considered that, given the high–level nature of Mr Kemp's analysisand the assumptions he relied on, even his "but for" approach was deficient andresulted in a material overstatement of the likely savings.[137] In particular, Mr Shaw noted that Mr Kemp based his cost savings on thechange in inhouse surgery performance over the defined period by reference toreported changes in inhouse surgical discharges. Mr Kemp's analysis is based on theassumption that all such surgical discharges would otherwise have been undertaken onan outsourced basis. But as Mr Shaw notes, and the evidence of WDHB witnessesconfirm, the surgical discharge figures (as opposed to theatre discharges) includepatients who would never have had their procedures outsourced.[138] The issue of whether the savings were to be measured by reference to surgicaldischarges or theatre discharges is a fundamental difference between the parties.Keezz's position is that the appropriate measure was surgical discharges. Thesignificance of the difference is that there are more surgical discharges than theatreevents/discharges. For example, a patient seen and treated by a surgeon in a procedureroom or the Surgical Assessment Unit (SAU), would be recorded as a surgicaldischarge, even though the treatment did not involve the use of a theatre or perhapseven a bed.[139] Keezz supports its position by reference to the name of the project itself, theSSRP. Mr Gilchrist also put to a number of the WDHB witnesses that the WDHB'scalculation of savings could not have been achieved purely by reference to the theatredischarges. 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 theatreservices was it?A. It was concerned with processes as they pooled patients into andthrough 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 ofthe SSRP was surgical discharges.[140] However, while the SSRP did relate to surgical services generally, the driverfor the project was the need to reduce the outsourcing of theatre events which wascosting WDHB $25 million a year. It is no coincidence that was the figure for theexpected savings required to trigger payment of the ARF. The target for the financialimprovements 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 bederived from two principal sources:• Increasing throughput; this will result in driving down waitlists andbringing outsourced work back in house.• Decreasing operational costs; removing obstacles (includingcancellations) from patient flows will diminish wasted labour andovertime costs involved in rework. It is foreshadowed that lessresources will be required to do the increased patient throughput.[141] The principal objective was to save the significant expense associated with fulloutsourcing 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 occupancythrough reduce average length of stay (ALOS).[142] To the extent that the surgical discharges include patients who did not occupya bed but were treated and discharged the same day, the costs associated with theirprocedures would have been significantly less than elective or even acute theatreoperations. The figure of $7,549 was the weighted cost of theatre events, not surgicaldischarges. In answer to questions from the Court, Mr Boyd accepted that differentcosts would apply to inpatients who did not need a bed. Obviously there aresignificantly more costs associated with a theatre event than the costs associated witha patient who can be treated during the day without requiring theatre or an overnightbed. As Mr Currie put it, to multiply "an increase in surgical discharges with theweighted cost of theatre events is like using apples and oranges – they are notcomparable".[143] Further, Mr McCurdie's evidence was that, prior to the creation of the SAU, apatient assessed by a surgeon as not needing surgery after presenting to the EmergencyDepartment (ED), would have been counted as a discharge from ED. The cost wouldhave been attributed to the ED discharge so an increase in surgical discharges from theSAU did not necessarily equate to a financial saving for WDHB as the cost would justappear in a different department.[144] I find that the correct focus of the "measurable" success of the SSRP is theoutput of theatre events.[145] Mr Shaw noted that, applying the measure of inhouse theatre events or surgicalprocedures, for the April to September 2018 period, there were 837 more surgeryevents than in the same period in the previous year which, when annualised to 1,674was 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 andsupport services.on Mr Shaw's figures, (using the data provide by WDHB) the measurable savingswould 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 September2018 compared to April to September 2017. However, for the reasons that follow,even applying a reasonable approach to the surgical discharges measure advocated forby Keezz and Mr Kemp, the threshold was not met.[146] I return to an assessment of Mr Kemp's evidence. Mr Kemp's analysis ofsurgical discharges is based on the figures for the six month period January to June in2017 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 Februaryfor a further 10 weeks, at the full contractual rate, which rather suggests there wasfurther work required to complete the project. It was extended further in April (by theMay variations) but for present purposes I accept that extension was limited to theroles Mr Boyd and Mr Kong were to carry out. For that reason the six month periodof April to September in 2017/2018 seems the most appropriate comparator. That wasthe period taken by WDHB.[147] Even applying the surgical discharge data, Mr Shaw identified a significantdisparity in results if a different period was taken to the six month period of Januaryto June 2017/2018. Mr Shaw presented the following table:Table 2: WDHB - surgical dischargesJan-JuneAFeb-JulBMar-AugCApr-SeptDMay-OctEJune-NovFJuly-DecGTotalH2017January 1,793 - - - - - - 1,793February 2,335 2,335 - - - - - 2,335March 2,711 2,711 2,711 - - - - 2,711April 2,261 2,261 2,261 2,261 - - - 2,261May 2,742 2,742 2,742 2,742 2,742 - - 2,742June 2,411 2,411 2,411 2,411 2,411 2,411 - 2,411July - 2,432 2,432 2,432 2,432 2,432 2,432 2,432August - - 2,677 2,677 2,677 2,677 2,677 2,677September - - - 2,481 2,481 2,481 2,481 2,481October - - - - 2,497 2,497 2,497 2,497November - - - - - 2,619 2,619 2,619December - - - - - - 2,341 2,341Total 2017 14,253 14,892 15,234 15,004 15,240 15,117 15,047 29,3002018January 2,523 - - - - - - 2,523February 2,578 2,578 - - - - - 2,578March 2,830 2,830 2,830 - - - - 2,830April 2,651 2,651 2,651 2,651 - - - 2,651May 2,973 2,973 2,973 2,973 2,973 - - 2,973June 2,712 2,712 2,712 2,712 2,712 2,712 - 2,712July - 2,688 2,688 2,688 2,688 2,688 2,688 2,688August - - 2,869 2,869 2,869 2,869 2,869 2,869September - - - 2,699 2,699 2,699 2,699 2,699October - - - - 2,877 2,877 2,877 2,877November - - - - - 2,892 2,892 2,892December - - - - - - 2,414 2,414Total 2018 16,267 16,432 16,723 16,592 16,818 16,737 16,439 32,706DifferenceDecemberJanuary 730 - - - - - - 730February 243 243 - - - - - 243March 119 119 119 - - - - 119April 390 390 390 390 - - - 390May 231 231 231 231 231 - - 231June 301 301 301 301 301 301 - 301July - 256 256 256 256 256 256 256August - - 192 192 192 192 192 192September - - - 218 218 218 218 218October - - - - 380 380 380 380November - - - - - 273 273 273December - - - - - - 73 73Total 2,014 1,540 1,489 1,588 1,578 1,620 1,392 3,406Annualised 4,028 3,080 2,978 3,176 3,156 3,240 2,784Average 3,316 3,078Average 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 measurablesavings are less than $25 million even before providing any allowance for variablecosts.[149] As to the variable costs, Mr Kemp allowed $1,000 per procedure as theincreased costs of consumables associated with the increased discharges. He basedthat on ACC figures. However, as Mr Shaw noted, the underlying data relating to eachoutsourced procedure was available to WDHB. The actual figure was $2,414 perprocedure. The WDHB figure used by Mr Shaw is based on the actual underlying dataavailable to WDHB. Applying that figure to the above table reduces even theJanuary/June calculation of savings down to $20,683,780, and applying it to the rangeof 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 theimplementation of the SSRP has led to measurable savings of $25 million in WDHB'sprofit and loss.[151] I conclude that neither before nor after the termination of the ServicesAgreement 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 wasconsidering its service provision for the Christmas break. He says he had a discussionwith Dr Howard about the suspension of elective surgeries during the Christmas breakand the possibility of him (Mr Boyd) and Mr Kong taking on the roles of SurgicalOperations Manager and Acute Surgical Stream Lead during that period. Mr Boydsays that on 11 December 2017 the Steering Committee of Mr Wright, Dr Howard andhimself met and agreed to the above arrangement.[153] Mr Boyd says that Mr Kong provided coverage for the Duty Acute SurgicalOperations Manager during the Christmas break from 18 December 2017 to 24December 2017. From 25 and 26 December, Dr Howard covered or oversaw the roleand from 27 December to 7 January 2018 Mr Boyd covered the role. Mr Boyd saysthat during the Christmas shutdown period he and Mr Kong also maintained otherproject duties. On that basis Keezz now claims AUD 180,000 calculated atAUD 60,000 per week for the three week period. Effectively, he maintains that theSSRP continued over the three week Christmas period and was thus extended to 23weeks.[154] However, the evidence does not support Keezz's argument that the partiesagreed to an effective extension of three weeks to the SSRP so that it carried onthrough the Christmas break and ran for an initial period of 23 weeks. Rather, theevidence supports the conclusion that the SSRP was suspended for that three weekperiod and that Mr Boyd and Mr Kong carried out some limited cover for WDHB overthe period.[155] The Flash Reports prepared by Mr Boyd on 10 and 17 December record thatthe SSRP would go "into abeyance pending return of WDHB people", and that theother Keezz staff would return when WDHB colleagues would return. The projectwas to be maintained between 18 December until 12 January but only in relation tothe acute stream. Consistent with that interpretation is that the week 14 Flash Reportwas for the week ending 17 December, and the next Flash Report for week 15 was notuntil the week ending 14 January 2018.[156] The February variation is also consistent with the SSRP going into abeyancefor that three week period. It expressly referred to the initial period of 20 weeks andalso 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 10weeks was to run from 12 February 2018, which is consistent with the project havingbeing in abeyance for three weeks over the Christmas period. Finally, in an email of18 December 2017 attaching an invoice for the previous week, Mr Boyd said "BTWthis will be the last fee invoice until around 15 January 2018".[157] Mr Boyd accepted in cross-examination there had been no discussion abouthow much KAU was to be paid for providing the acute cover and the other limitedservices provided by him and Mr Kong over the period. Indeed, his evidence of theamount due to Keezz during the period has been inconsistent. In an affidavit inopposition to the application for security for costs he claimed that the sum payable toKAU 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 wasAUD 360,000 and he sent an invoice for that sum on 14 June 2018. Then, in the courseof his evidence he produced Exhibit A, an invoice for AUD 60,000, and said that wasthe correct sum but on the basis it was a weekly invoice so that the total figure claimedwas actually AUD 180,000 for the three weeks. He said he had sent that invoice toWDHB on 17 January 2018.[158] However, under cross-examination, Mr Barker put to Mr Boyd that in the emailwhich accompanied the invoice of 17 January for AUD 60,000 Mr Boyd said: "Thefee invoice relates to the last four weeks (skeleton staff)". That is consistent with themore 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 threeother lines.[159] I note that the May variation provided for payment of $20,000 per week duringthe period Mr Boyd and Mr Kong were fulfilling managerial roles, much as was thecase during the Christmas vacation period, although during that Christmas vacationperiod they were actively sharing one role. The $60,000 for three weeks or $20,000 aweek for those services (which Mr Boyd accepts was paid) is consistent with thepayments for the roles Mr Boyd and Mr Kong were carrying out over the Christmasperiod.[160] Mr Wright properly accepted in evidence WDHB did not expect that Mr Boydand Mr Kong would work for nothing during that Christmas period. But Mr Boydaccepted in cross-examination that he understood the invoice for $60,000 had beenpaid. Keezz fails to satisfy the Court that it is entitled to any further payment forservices 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 contractwas stated by Lord Collins MR in Tolhurst v Associated Portland CementManufacturers (1900) Ltd as:17"It is, I think, quite clear that neither at law nor in equity could the burden ofa contract be shifted off the shoulders of a contractor on to those of anotherwithout the consent of the contractee. A debtor cannot relieve himself of hisliability to his creditor by assigning the burden of the obligation to some oneelse; this can only be brought about by the consent of all three, and involvesthe release of the original debtor ."[163] In Savvy Vineyards 3552 Ltd v Karaka Estate Ltd, the Supreme Courtconfirmed the position and went on to say:18The provisions of the Property Law Act 2007 as to the assignment of things inaction proceed on the same basis, addressing the assignment of debts17 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 assignmentof the burden of obligations. On this basis, where there has been a contractbetween A and B and an assignment by B to C, and nothing else, the traditionalview 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 ContractualRemedies Act 1979 (now s 54 of the CCLA) affected that or operated so as to providefor the assignment of the burden of the contract.[165] So the starting point is that KAU could not transfer its contractual obligationsunder the Services Agreement to KNZ by a bare assignment. Novation is the onlymeans by which KNZ could replace KAU as the original obligor under the ServicesAgreement. Novation required a new contract between all three: KAU, WDHB, andKNZ.[166] While in Savvy Vineyards the majority of the Supreme Court confirmed, byreference to the English Court of Appeal decision of British Gas Trading Ltd v EasternElectricity Plc,19 that it was conceptually possible for a contract between A and B toconfer on A the right to novate the contract in favour of a third party, in that case, theoriginal contracts gave Goldridge the right to assign its interest to a related partywithout requiring the written consent of Karaka. In the circumstances the right totransfer or assign could be seen as a right to introduce a new party to a contract andthus a right to novate. Effectively, the majority confirmed that the required consentcould be provided for by a contractual provision, and no further consent may beneeded, 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'swritten consent to any assignment:40 Assignment19 British Gas Trading Ltd v Eastern Electricity Plc unreported, 18 December 1996 (CA).The Supplier must not sub-contract or assign any right, duty orobligation under this Agreement without Waikato DHB's prior writtenconsent.[168] Mr Barker submitted that WDHB's "prior" written consent was not obtainedto the assignment. He argued that while Mr Boyd discussed the possibility of theassignment with Mr Wright, it was never formalised and nor was approval given inwriting before the May variation. I am not able to accept that submission. The writtenconsent of WDHB to the assignment was confirmed in the May variation. I considerthat written acknowledgement in the May variation amounts to prior written consent(the assignment would follow execution of the May variation) and could be sufficientfor 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 onthe fact that the May variation presented by Mr Boyd referred to an assignment toKNZ and Mr Boyd did not alert him to that fact. However, the May variation doesexpressly 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 heunderstood the content.20 He was not misled about it.21 I accept that the May variationcould potentially support an argument that the benefit of the Services Agreement wasassigned to KNZ.[170] Despite that, there are a number of other difficulties with the purportedassignment of the Services Agreement to KNZ in the present case. For a start, it is notan effective novation, as KNZ is not a party to the May variation. KNZ has notexecuted the document as a party. In his evidence Mr Boyd suggested there wasanother missing page to the document but that has never been discovered. I do notaccept Mr Boyd's evidence on this point. It seems extremely unlikely there was sucha page given that there is no reference in the heading to KNZ as a party. In myjudgment this is another example of Mr Boyd making an assertion which is notsupported by relevant and contemporaneous documentation, and indeed is evencontrary to them. On 28 May WDHB (Ms Lane) sent Mr Boyd a copy of the May20 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 raisethe issue with WDHB at the time.[171] Next, the May variation purported to assign the Services Agreement to KNZeffective from 20 April 2018, but KNZ was not incorporated and thus not in existenceuntil 8 May 2018. KAU's rights could not have been assigned to KNZ before it wasincorporated.[172] On a related point, there is no document or other evidence of the terms of anycontract between KAU and KNZ providing for the assignment of KAU's rights toKNZ.[173] Further, there is the fact that if KNZ was entitled, as assignee, to charge for theprovision of services, as a New Zealand entity it would have had to charge GST forthe services. Under the Services Agreement KAU had acknowledged that "theservices are deemed to be provided outside New Zealand and therefore are not subjectto 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 hadcomplied 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 thebenefits of the Services Agreement.[175] However, for the foregoing reasons, nothing really turns on the point, as neitherKAU nor KNZ are entitled to payment of the ARF, and as discussed below, WDHBwas 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 saysWDHB was not entitled to terminate the Services Agreement and that by purportingto do so it repudiated the Services Agreement, which Keezz accepted and thencancelled the contract. It seeks damages of AUD 30,000 for the period from 21 June2018 to 29 June 2018 when the contractual period would have concluded.[177] The Services Agreement provided for termination in the followingcircumstances:23 Termination for Cause23.1 If a Party materially defaults in the performance of any of itsobligations under this Agreement, and:(a) the material default is capable of being remedied andwithin thirty (30) days of written notice by the non-defaulting Party specifying the default, is notremedied; or(b) the material default is not capable of being remedied,then the non-defaulting Party may by notice inwriting to the defaulting Party immediately terminateor temporarily suspend the operation of thisAgreement in whole or in part.23.2 Waikato DHB may immediately terminate this Agreement inits entirety (or in part) by notice in writing to the Supplier if:(a) the Supplier enters into a composition with itscreditors, is declared bankrupt, goes into liquidationor administration, or a receiver, or a receiver andmanager, or statutory manager is appointed in respectof it (except for the purposes of solvent amalgamationor reconstruction), or any steps are taken towards itsliquidation or administration, or it is unable to pay itsdebts when they fall due;(b) the supplier assigns its rights, or sub-contracts itsobligations under this Agreement other than inaccordance with the terms of this Agreement;(c) the Supplier commits any fraudulent or unlawful actwhich adversely affects Waikato DHB;(d) any person who has executed a Confidentiality Deedin favour of Waikato DHB breaches theConfidentiality Deed and that breach adverselyaffects Waikato DHB;[178] In giving notice of cancellation WDHB relied on cl 23.1(b). Mr Barkersubmitted that at the time, Keezz was in material default of its obligations to providethe services in the Services Agreement, as Mr Boyd was obliged to work at WaikatoHospital on a full-time rotation, which was 10 days on and four days off (in otherwords he was to spend 10 out of 14 days on-site). The final 10 day rotation hadcommenced on 18 June 2018. On 20 June 2018 Mr Boyd left New Zealandindefinitely after spending only part of his final 10 day-on period (which would haveeffectively taken him to the end of the contract period on 29 June) at the hospital andafter the discussion with Dr Howard he had made it clear that he had no intention ofreturning to complete the contract.[179] While, as Mr Boyd noted, Mr Kong remained on site, that was only part of thecontractual obligation. Mr Kong in fact sent KAU his final invoice to WDHB andagreed to continue working for WDHB under an independent contract.[180] The breach could have been remedied if Mr Boyd had responded to the letterof termination by advising, as he now says, that he was only temporarily returning toAustralia. However, Mr Boyd's actions at the time are inconsistent with any intentionto return to complete the contract. On 23 June 2018 he apologised to Dr Howard forhis actions. Dr Howard's evidence was that Mr Boyd called Mr Kong that day whenDr Howard was with Mr Kong and after speaking to Mr Kong asked to speak to DrHoward. 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 andMr Pearson had met to find a resolution of the issues between them. At no stage duringthat conversation did Mr Boyd challenge the termination of the Services Agreementor 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 thediscussion of the dispute about the ARF that in an email to Mr Wright, Mr Boydsuggested 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 Barkerproperly referred to the case of DSJ (Pte) Ltd v TPF Restaurants Ltd ,22 which suggestsa party cannot retrospectively change its reasons for termination, in Thompson vVincent the Court of Appeal accepted that where one party had abandoned a contractand it was subsequently discovered there had been a pre-contractual22 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 TheCourt explained:24The same view can indeed be reached more simply on a basis of fairness andprobable Parliamentary intentions. Why should a party which, by the time oftrial, can demonstrate it was entitled to cancel, nevertheless be held to haveacted wrongfully in doing so because it was unaware of that position at theearlier time? That question can be asked with particular force given that thereis no requirement to state, at the time of cancellation, the reasons for doing so.Revelation is not required before pleadings in proceedings issued, and somemight say before the trial itself. It is not a situation where reasons must begiven at outset with reliance likely to follow. Parliament is not likely to haveintended such a curiosity.[182] The Supreme Court in Kumar v Station Properties (in liq and in rec) confirmedthat 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 onthe basis they initially advanced, they were entitled to cancel for another, quitedifferent reason.25[183] On that basis, as at 21 June 2018 WDHB would have been entitled to cancelas:(a) the purported assignment to KNZ was invalid and KAU, the contractingparty, was, according to Mr Boyd and his solicitor, insolvent at the time;(b) if the Services Agreement had been assigned to KNZ, KNZ was inbreach of cl 12.1, the warranty that it had complied with all legal taxobligations by issuing an invoice without accounting for GST.[184] I conclude that WDHB was entitled to cancel the Services Agreement on 21June 2018.[185] Even if I am wrong in that conclusion, at that stage only eight days remainedin the contract. WDHB was, subject to the ARF, only obliged to pay $20,000 a weekso at most the amount claimed would have been $22,857.14. Further, WDHB paid Mr23 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 forMr 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 toKeezz on a "just and practicable basis" under s 43 of the CCLA. The parties entereda commercial contract for the provision of services. KAU has not complied with itsobligations under the Services Agreement and is not entitled to the payment of theARF fee. I have also concluded that WDHB was entitled to terminate the ServicesAgreement 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 forsecond counsel would seem appropriate. However, I reserve the issue of costs in casethere has been any relevant exchange between the parties on that issue. Any costsmemoranda by WDHB to be filed and served without 20 working days. Any responseby Keezz 10 working days later, with any reply within five working days. Submissionsare to be limited to five pages.__________________________Venning J