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Breach of good faith obligation in healthcare services agreement

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Jason Rix

PSL Counsel


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26 April 2018

In Health & Case Management Ltd v The Physiotherapy Network, the court held there was no contractual obligation on HCML to make a certain number of referrals. However, HCML had breached its good faith obligation by using TPN’s data to set up a rival network.

Below I have picked out the court's findings on the provisions in dispute:

“HCML anticipates making circa. 700 referrals…to TPN”

This provision did not impose an obligation to provide around 700 referrals. The word “anticipates” was inconsistent with any binding commitment. The use of “circa” only strengthened this conclusion.

An earlier contract contained the same clause but with additional words about “no guaranteed minimum volumes”. The court felt able to have regard to a prior concluded agreement when determining the materiality of the deleted words in interpreting the later agreement, but acknowledged some caution was needed when determining the assistance that can be derived from undertaking such a comparison.

“HCML…will keep confidential…and will not…disclose…information to any third party…”

This provision restricted disclosure of confidential information, but did not purport to restrict use. TPN’s complaint was about HCML’s use, so there was no breach absent disclosure.

“HCML shall act in good faith towards TPN…”

Notwithstanding an absence of contractual obligation to make referrals, there was an expectation that HCML would do so; that was the shared commercial objective. The covert use of TPN’s data (under pretence of a dishonest reason) in setting up a rival network (hidden from TPN) was in breach of the good faith clause.

HCML failed to adhere to the spirit of the contract, to observe reasonable commercial standards of fair dealing, to be faithful to the agreed common purpose and to act consistently with the parties’ justified expectations.

In attempting to continue to benefit from a commercial relationship which would have been terminated had TPN known HCML’s true intentions, HCML’s conduct was "opportunistic, underhand and exploitative".