Idameneo (No. 123) P/L v Ticco P/L and Anor - [2003] NSWSC 538

No judgment structure available for this case.

Reported Decision:
(2003) ATPR (Digest) 46-235

Supreme Court

CITATION: IDAMENEO (NO. 123) P/L v. TICCO P/L & ANOR [2003] NSWSC 538

HEARING DATE(S): 16, 17 & 18/12/02; 12, 13 & 14/02/03

JUDGMENT DATE:
26 June 2003

JURISDICTION:
EQUITY

JUDGMENT OF: Bryson J at 1

DECISION: Claim dismissed: inquiry ordered on cross-claim.

CATCHWORDS: TRADE - restraint of trade by agreement - validity and reasonableness - sale of medical practice - restraint of 5 years and 8 kilometres held valid but not enforced because purchaser repudiated - numerous issues on alleged breaches of contract in complex chain of agreements on sale of medical practice where vendor was to work as Medical Director in practice management organisation conducted by purchaser.

LEGISLATION CITED: Trade Practices Act 1974
Restraint of Trade Act 1976

CASES CITED: Jones v. Dunkel (1959) 101 CLR 298
Kone Elevators Pty Ltd v. McNay & Anor (1997) ATPR 14-564
Peters (WA) Ltd v. Petersville (2001) 205 CLR 126

PARTIES :
Idameneo (No. 123) P/L - Plaintiff
Ticco Pty Ltd ACN 073411506 - First Defendant
Ian Lester Organ-Rafter - Second Defendant

FILE NUMBER(S): SC 1738/2002

COUNSEL: G. Burton - Plantiff
R. Evans - First Defendant

SOLICITORS: Abbott Tout - Plaintiff
1st & 2nd Defendants - McKells Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

THURSDAY 26 JUNE 2003

1738/02 - IDAMENEO (NO 123) PTY LIMITED v TICCO PTY LIMITED & IAN LESTER ORGAN-RAFTER

The litigation and the parties.

1 HIS HONOUR: These proceedings were commenced by Summons dated 1 March 2002 and the claims now appear in Amended Summons of 7 June 2002. The Amended Summons has over six pages of claims for orders and alternatives. There were no pleadings, and this caused considerable difficulty as there were many contested issues of fact and the issues were too complex to be readily recognised on reading the parties’ affidavits in chief. If I had understood the complexity of the case in advance I would not have allowed it to go to trial without pleadings. For all the written definition of issues I had I might as well have been a District Officer adjudicating ownership of a pig under a tropic palm. Counsel for the plaintiff compounded the difficulties by attempting to pursue discovery of documents by notices to produce delivered during the course of the hearing. It was inappropriate to seek to supplement discovery in this way in the midst of the hearing and without incurring a mutual obligation.

2 The first defendant Ticco is an Incorporated Medical Practice (IMP) company through which the second defendant Dr Rafter carries on medical practice. Doctor Rafter is a medical practitioner of many years standing, and trained as a surgeon and cardiothoracic surgeon. In August 2000 he was conducting a general practice at 298 New South Head Road, Double Bay; he had conducted that general practice for about two and a half years, and had worked long hours in building up the practice in a suburb where there was much competition. The practice was conducted under the business name Corner of Bay Medical Centre. Ticco was formed on 26 March 1996; Dr Rafter and Miss Lemmik became its only directors on 27 March 1996; Ms Tiina Lemmik became its secretary on that day and they still held those offices on 28 February 2002; and they each held one of its two issued shares.

3 The plaintiff is associated with Primary Health Care Ltd, which is listed on the Australian Stock Exchange and controls a number of medical practices and associated activities referred to as the Primary Health Care Group. The principal figure in the Group’s affairs is Dr Edmund Bateman, who is a director of the plaintiff. In March 2002 Idameneo conducted a number of medical centres in Sydney Metropolitan locations; Dr Bateman identified medical centres at Warringah Mall Brookvale, Chatswood, Bankstown, Campsie, Fairfield, Ingleburn, Caringbah, Campbelltown, Mt Druitt, Castle Hill, Maroubra, 580 George Street Sydney, Darlinghurst and Leichhardt; and also at Dubbo. After negotiations which extended over about 10 months Idameneo and Ticco entered into a complex array of written agreements on 25 August 2000. These six documents interact in some scheme of incomprehensible and superfluous complexity, and it is difficult to form an overview of how they act together, or of why there were six of them. The agreements must be considered in detail but their general effect included that the general practice at Double Bay was sold to Idameneo and Dr Rafter was to practice medicine in the Primary Health Care Group, as Medical Director at Double Bay, and also at other locations. Dr Rafter had a lease of the premises at 298 New South Head Road, and separate leases of two shops in neighbouring premises at 294-296 New South Head Road. All these leaseholds were sold to the plaintiff. Doctor Rafter had intended to open a cosmetic surgery at 294-296 New South Head Road, but had not done so.

4 The practice continued to be conducted by the plaintiff at 298 New South Head Road, Double Bay. At some time in 2000 the plaintiff purchased another medical practice in Double Bay, called The Double Bay Medical Centre. These two practices were amalgamated into the practice at 298 New South Head Road. Some building work was done at 298 New South Head Road in November 2000 to accommodate the doctors who had previously worked at Double Bay Medical Centre. The plaintiff closed the practice on 23 September 2001 and the operations conducted there were moved to a newly opened medical centre at Darlinghurst.

5 This litigation arose out of the circumstances in which Dr Rafter worked in the Primary Health Care Group organisation from August 2000 until, by a letter of 28 February 2002, he terminated or purportedly terminated the principal written agreements. The plaintiff commenced the proceedings the following day and claimed orders which would establish that the agreements had not been terminated but that the defendants had repudiated them, orders restraining the defendants from conducting competing medical practice and from providing Medical Centre Services, from disclosing confidential information, damages and interest. No claim was made at the hearing before me that Dr Rafter was using confidential information. Idameneo also claims repayment of part of the price for which the Double Bay practice was sold. There are other general claims. The Amended Summons sought to establish in detail, by declarations, many respects in which there had been breaches of the written agreements.

6 I did not find the demeanour of either Dr Bateman or of Dr Rafter of much assistance in deciding whether evidence on any particular matter should be accepted, either when they were in conflict with another witness or with each other, or in claims about facts on which no other witness spoke where I was called upon to decide whether to accept the evidence of one of them. To me both of them seemed to show indications of strong feelings and strong sense of engagement in the controversy. I approach the evidence of both on the basis that they were not objective witnesses. I also had regard to my views about the inherent probability of facts asserted, the capacity of each party to adduce evidence on a particular subject, and, to a greater extent than would be usual if there were some clear sense of the reliability of witnesses, on the onus of proof.

7 On 20 March 2002 the plaintiff obtained an interlocutory injunction restraining the defendants from medical practice and from providing Medical Centre Services in a defined restraint area which covered much of the Sydney Metropolitan Area; the restraint area adopted for the interlocutory injunction do not correspond exactly with any view of the restraints imposed by the contractual provisions. The interlocutory injunction still has effect.

8 Doctor Rafter was not engaged in the Primary Health Group under a contract of employment. Idameneo operates by acquiring existing medical practices or setting up new ones and carrying them on by providing management and logistical services to doctors and medical ancillaries who work in the practices. The general scheme is that the doctor and his IMP company contract with Idameneo for Idameneo to provide support services and logistic services including paramedical, nursing, billing and accounting services. Charges are made to patients who attend at the practice by the doctor himself but fees when paid are received by the plaintiff; in this case the plaintiff retained 55 percent of the fees received plus GST and paid on to the defendants 45 percent less GST. Fees bulk-billed to Medicare form a proportion of the fees dealt with in this way, although a significant proportion was not paid by Medicare.

9 From August 2000 to September 2001 Dr Rafter practised medicine and was the Medical Director at the plaintiff’s medical centre at 298 New South Head Road, Double Bay, formerly his own practice. Then in September 2001 Idameneo opened a new medical centre in Darlinghurst at the intersection of Victoria Road and William Street and ceased to operate the medical centre at Double Bay; Dr Rafter then worked at Darlinghurst, where he was not the Medical Director. He also, on about 10 Sundays, worked at the plaintiff’s medical centre at Maroubra, and on a number of occasions he worked at a Skin Care Clinic at the plaintiff’s medical centre at Warringah Mall, Brookvale. Idameneo seeks injunctions restraining Dr Rafter and Ticco from rendering medical services (and a number of other activities) at any place within a radius of eight kilometres of each of those four medical centres until 25 August 2005, the fifth anniversary of the Sale of Practice Agreement. The areas covered by these circles overlap. The injunctions claimed allow a contractual exception – “unless such activity is the rendering of urgent medical attention as referred to in s.36 of the Medical Practice Act 1992 (NSW)”.

The Agreements.

10 The Sale of Practice Agreement was made between Idameneo as purchaser and Ticco as vendor; and Dr Rafter incurred obligations to support those of Ticco. The agreement provides for the sale of the goodwill and business of the medical practice and associated assets for $730,000, apportioned $680,000 to goodwill and $50,000 to (unidentified) chattels and leases of chattels. Of the price $530,000 was to be paid on the completion date and $200,000 was treated as the subscription price for shares in Primary Health Care Ltd. The Sale of Practice Agreement referred to and interacted with the Practitioner Contract, the Restraint Deed, the Performance Guarantee and the Medical Director Contract.

11 In the Sale of Practice Agreement the references in cl.16 and elsewhere to New Premises at which Dr Rafter was to render medical services are convoluted and obscure, but they appear to have the effect that Dr Rafter was to work at any other medical centre in the Sydney Metropolitan Area nominated by Idameneo. I have not observed that there is any evidence of such a nomination but the existence of nominations should be inferred from the fact that he in fact worked at three other medical centres in addition to the practice he had formerly owned.

12 Clause 17.2 Performance created practice obligations. So far as now important it provided as follows:

The Vendor agrees with the Purchaser that it will, under the Practitioner Contract, conduct its incorporated medical practice and procure the Doctor to:

Clause 22.1

(b) render medical services from the New Premises, during those 5 years, for no less than 70 hours per week 48 weeks per financial year. Of those 70 hours per week, the Doctor’s time is to be allocated between rendering medical services as a general practitioner, rendering medical services as a surgeon and performing services as a Medical Director under the Medical Director Contract. … The Doctor is entitled to be absent for up to 4 weeks per financial year (1 week of which is permitted only for the purpose of the Doctor attending conferences), …

(c) [This subparagraph fixed times at which the part of the work must be performed].

(d) conduct himself in a harmonious way with other practitioners and staff at the New Premises; and

(e) use its and his best endeavours to, ethically and professionally, expand the turn-over, profitability, quality and image of the services provided at the New Premises.

13 By cl.17.6 the moneys to which the regime of collection and payment applied included grants from the Commonwealth Government and other bodies including Better Practice Grants and Practice Incentive Payments (PIPs), and Dr Rafter was to do all things necessary in relation to seeking and obtaining grants.

14 Idameneo claims $510,972.00 as liquidated damages under cl.17.7. Although cl.17.7 is headed “Pro-rata repayment” it does not provide for the repayment of anything, but provides that in several events including death, permanent disablement and that:

(c) the Vendor otherwise breaches Clause 17.2(a) (other than as a result of termination of the Practitioner Contract by the Vendor under Clause 10.1 of the Practitioner Contract),

then:

(i) the Vendor must pay to the Purchaser, as agreed and assessed damages, a once only payment equal to $12,166 for each month in the period from the death, permanent disablement or that breach (as the case may be) through to the due expiry of the initial term of 5 years under the Practitioner Contract;

(ii) the payment due under paragraph (i) must be made within:

(a) 6 months of the death;

(b) 3 months of the permanent disablement;

(c) 1 month of any other breach;

(iii) interest is payable on the amount due, at the rate per annum equal to the then 90 day bank bill rate plus a margin of 3%, as from the expiry of the relevant period in paragraph (ii);

(iv) the obligation to pay agreed and assessed damages under paragraph (i) does not limit the right of the Purchaser to take injunctive or other proceedings in respect of any action or event alleged by the Purchaser to be in breach of Clause 17.2(a); and

(v) the restraints in Section 22 continue to apply despite any payment under paragraph (i).

15 Clause 18.1 of the Sale of Practice Agreement relates to the expansion of alternative medical practice in these terms:

If the parties mutually agree at any time during the term of this Deed, the Vendor must procure the Doctor to assist the Purchaser to introduce into one or more Medical Centres, that part of the Business sold to the Purchaser under this Deed which comprises alternative medical practice. The Chief Executive Officer of the Purchaser may specify at any time the duties to be performed by the Doctor.

16 Clause 18.2 states the duties of the doctor. These are stated very extensively. They include:

The Doctor must at all times:

(a) faithfully and diligently perform his duty and powers;

(b) use his best endeavours to promote the interests of the Purchaser;

17 Clause 19 states the objective of the agreement and among other things states:

The parties agree that it is fundamental to the transaction recorded in this Deed that:

…

(b) each of the Vendor and the Doctor commit at least 5 years (from Completion) to the development of the goodwill of the Purchaser at the New Premises …

18 Clause 22.1 deals with restraint in these terms:

The parties agree, that given that the Purchaser is acquiring the goodwill of the Business (and the other medical goodwill of the Vendor developed through the Doctor), that the Doctor is to render medical services from the New Premises, and the objective in Clause 19, as a reasonable protection for the business of the Purchaser, each of the Vendor and the Doctor must not during the restraint period:

(a) render medical services (or in the case of the Vendor, conduct an incorporated medical practice) at any place within a radius of 8 kilometres of the Business Premises; or

(b) render medical services (or in the case of the Vendor, conduct an incorporated medical practice) at any place within a radius of 8 kilometres of each of the New Premises at which the Doctor has rendered medical services at any time during the 2 years prior to the termination of the Practitioner Contract for any reason; or

(c) operate or be engaged within a radius of 8 kilometres of the Business Premises either on own account, or in partnership with, or as agent, manager or servant for any other person or entity, or as a shareholder, in any business of the nature of the business conducted by the Purchaser at or from the New Premises; or

(d) operate or be engaged within a radius of 8 kilometres of each of the New Premises at which the Doctor has rendered medical services at any time during the 2 years prior to the termination of the Practitioner Contract for any reason, either on own account, or in partnership with, or as agent, manager or servant for any other person or entity, or as a shareholder, in any business of the nature of the business conducted by the Purchaser at or from the New Premises.

19 Clause 22.2 deals with the restraint period and is in these terms:

The restraint period under the preceding Clause is the period from Completion until the later to occur of:

(a) the 5th anniversary of Completion; or

(b) the 3rd anniversary of the date on which the Practitioner Contract terminates for whatever reason.

20 Clause 22.4 deals with breach of restraint and is in these terms:

For each time the Doctor renders a medical service in breach of either Clause 22.1(a) the Doctor must pay to the Purchaser, as agreed and assessed damages, 50% of the gross fee payable to the Doctor (or the Vendor, as the case may be( in respect of that medical service.

21 Clause 25 relates to Doctor’s guarantee; Dr Rafter guarantees the obligations of Ticco.

22 Clauses 27 and 28 deal with termination. Clause 27.1:

The Vendor and the Doctor may terminate this Deed by notice in writing to the Purchaser if the Purchaser commits any breach of any provision of this Deed other than a breach which (being capable of being remedied) is remedied within 7 days of notice given to the Purchaser by the Vendor and the Doctor.

23 Clause 10(1) of the Practitioner Contract is to the following effect:

[Ticco] may terminate this Deed by notice in writing to [Idameneo] if [Idameneo] commits any breach of any provision of this Deed other than a breach which (being capable of being remedied) is remedied within 7 days of notice given to [Idameneo] by [Ticco].

24 Clause 29 of the Sale of Practice Agreement relates to the relationship among the parties and excludes partnership and employment.

25 The Sale of Practice Agreement contains provisions about assignment of leases. The things which are the subject of the sale referred to in cl.2 include the unexpired term of the property leases. Clause 6 deals with property leases, identified in Schedule 4; there are very scant details in Schedule 4 but it refers to two leases, one of business premises 298 New South Head Road, Double Bay and one of business premises misdescribed as 298 New South Head Road, Double Bay. In fact there were three: in Exhibit D there is a lease of Shop 1, Ground Floor Level 1, 294-296 New South Head Road and another for Shop 4. The parties treated all three as covered by their agreement.

26 Clause 6.2 created a regime under which from completion until any assignment of a lease the vendor was to pay any rent or other moneys due to the lessor, and indemnify the purchaser in respect of any failure to do so, while Idameneo as purchaser was to provide moneys to enable this to be done, and to perform all other obligations under the property lease. Under cl.6.3 provisions were made for obligations of Ticco with respect to assigning the lease, including obtaining the lessor’s consent if Idameneo at any time required an assignment.

27 The Sale of Practice Agreement refers to Ms Tiina Elsa Lemmik-Rafter in Recital: D(3) which states that Dr Rafter is the only director and shareholder of Ticco apart from Ms Lemmik-Rafter. She is mentioned again in Schedule 6 where she is included in the list of employees whose employment Ticco must, under cl.12.1, terminate at the completion date. Here her surname is given as Lemmik. She also took part as a Director of Ticco in executing the documents under seal: and her surname is given there as Lemmik. Her usual surname is Lemmik and the only place at which she has been called Lemmik-Rafter is in Recital: D(3). Dr Rafter said in evidence that Recital D(3) was a mistake.

28 Parties to the Practitioner Contract are Idameneo and Ticco, referred to as the IMP. The contract is headed “Provision of Services to Incorporated Medical Practitioner”. According to Recital E Ticco was to conduct its incorporated medical and alternative medical practice from premises extensively defined and Idameneo had agreed to make the premises available for the purpose and to supply extensive services. The services to be provided and the duties of Idameneo are stated, as are obligations of Ticco to conduct its incorporated medical practice and procure that Dr Rafter attends and renders medical services. Clause 6.2 preserves the professional judgement of Dr Rafter as to the manner in which medical services are performed.

29 The plaintiff complains of failure to comply with clauses 6.3, 6.4 and 6.5 which are in these terms:

6.3 The IMP must use its best endeavours to promote the interests and welfare of the Company’s business and must, subject to the preceding Clause, diligently observe all the lawful directions of the Company given at any time concerning the operation or management of the Premises and the business conducted from the Premises.

6.4 The IMP must support on appropriate occasions, by word of mouth of the Doctor and appropriate referrals, the medical and paramedical services available at the Premises. Such support must be given insofar as it is professionally, ethically and medically acceptable. If at any time the IMP, through the Doctor, feels it cannot support particular services at the Premises, the IMP must discuss the matter with the Medical Director at the Premises so as to assist the Medical Director in relation to quality control of services at the Premises. If at any time the Doctor is the Medical Director, the IMP, through the Doctor, must discuss the matter with the CEO of the Company.

6.5 The IMP must promptly provide the Company with all such information and documents as the Company may require at any time in respect of any matter which falls within the ambit of this Deed or touches upon its operation.

30 Clause 6.6 relates to medical records and among other things provides that such records remain the property of Idameneo and that Ticco must not make copies or remove them from the premises, while the Practitioner Contract is in effect or after termination.

31 Clause 9 also relates to records and information and cl.9.3 provides:

9.3 The IMP must upon the expiration or termination of this Deed vacate the Premises and deliver up to the Company all of the Company’s property (whether owned or leased) and all documents which in any way relate to the business carried on by the Company. Without limiting the generality of this obligation, this includes patient lists, patient records, brochures, manuals and financial records.

32 Clause 7.4 provides for entitlement of Idameneo to an increase of 10 percent of the 55 percent part of moneys received for medical services so as to produce a GST-inclusive price. Clause 7.2 provides:

After deduction of the charges due to the Company under Clause 7.1, the Company must remit to the IMP, twice monthly (that is, about the middle of the month and near the end of the month), the other 45% of the moneys referred to in Clause 7.1.

33 The Practitioner Contract contains provisions in cl.10 (which I mentioned earlier) dealing with termination, cl.11 dealing with obtaining compliance by Dr Rafter and cl.12 dealing with the nature of the relationship.

34 A further document of 25 August 2000 is entitled Performance Guarantee: Incorporated Medical Practitioner and contains a covenant by Dr Rafter to Idameneo to procure that Ticco carries out its obligations under the Practitioner Contract.

35 A further document is the Restraint Deed. The parties are Idameneo and Dr Rafter. Clause 3 relates to restraint on providing medical centre services to any medical practitioner, in any of widely defined capacities, anywhere within the Sydney Metropolitan Area and, if Dr Rafter breaches the Medical Director Contract, anywhere within the Melbourne Metropolitan Area. Clause 2.2 provides for a fee of $20,000 in consideration of this restraint. This restraint was to continue after the termination date for a period which it was agreed will end on 25 August 2005. “Providing medical centre services” is extensively defined in cl.1.1 and extends to leasing or sharing premises or equipment and sharing staff or facilities in connection with the conduct of the medical practice. In cl.2 there is an acknowledgement of the reasonableness of the restraint, the restraints are extended in cll.4 and 5 to dealings with clients, suppliers and employees, and there is provision for severability in cl.10.

36 Clause 3.3 provides for exceptions to the restraint. Clause 3.3(a) provides to the effect that the restraint in cl.3.1 does not apply to (a) the rendering of medical services by the Doctor at any place, with the proviso; (but rendering medical services is not restrained). What is restrained is providing medical centre services to any medical practitioner, “Providing Medical centre services” is defined in cl.1.1 elaborately to include “(a) providing any of the services of the nature described as being provided by the Company [Idameneo] pursuant to the Practitioner Contract” and in cl.4 of the Practitioner Contract the services and facilities to be supplied by Idameneo are lengthily enumerated in a way which, consistently with this whole scheme of the documents, does not include rendering medical services by a doctor. At this point the Restraint Deed has lapsed into the absurdity which the scheme of documents approaches at many places.

37 Clause 6 relates to the protection of confidential information. The plaintiff’s counsel told me that apart from return of the records removed on 28 February 2002, which took place early in the litigation, the confidentiality claim is not pressed further. There is no evidence that Dr Rafter is using confidential information.

38 A further document is the Double Bay Medical Director Contract. The parties are Idameneo and Dr Rafter. This provides (cl.2.1) for engagement of Dr Rafter as Medical Director of the Double Bay Centre for five years, in cl.3 specifies the duties, in cl.4 provides for availability for not less than 65 hours per week rendering medical services and not less than a further five hours per week serving Idameneo as an employee as part-time Medical Director of the Double Bay Medical Centre. The Double Bay Medical Centre is defined so as to include the premises at 298 and 294 New South Head Road, Double Bay and also other premises in the Sydney Metropolitan Area and the Melbourne Metropolitan Area as nominated. Clause 5 provides that there is to be no remuneration.

39 The sixth document is entitled Assignment of Contractual Rights; the parties are Ticco and Idameneo and by it Idameneo conveys its property and interest in property in an annexed schedule; but there is no schedule.

Claim and cross-claim.

40 The many claims in the Amended Summons include claims for declaratory orders establishing (1) that the defendants’ purported termination on 28 February 2002 was invalid and repudiated the Sale of Practice Agreement, (2) similarly for the Practitioner Contract, and (3) for the Medical Director Agreement; and (3A) that the plaintiff accepted each repudiation by commencing the proceedings or by amending the Summons to add Claim 3A.

41 Claim 3B claims a declaration that certain conduct constituted a breach of each of those agreements: a fundamental breach, a breach of a fundamental term or a breach of a condition. The conduct referred to is identified at length by reference to breaches asserted in the letters of 18 September 2001, 4 January 2002 and 26 February 2002, the defendants’ purported termination, and (E) and (F) desisting from performance, (G) involvement in provision of medical services and medical service centres in contravention of cll.17.2(a), 17.5, 19 and 22.1 of the Sale of Practice Agreement in Cl.3 of the Restraint Deed, (H) many alleged failures to perform cl.17.2(b) and (c) of the Sale of Practice Agreement and cll.3.1, 3.3, 3.4 and 4 of Medical Director Agreement; these failures relate to Dr Rafter’s performance in rendering medical services and Medical Director Services with respect to the hours and times at which he attended and in many respects. In (I), failure to perform cl.17.2(b) of the Sale of Practice Agreement by Dr Rafter not conducting himself in a harmonious way with other practitioners and staff, (J), failure to perform cll.17.2(e), 19(b) and (c) of the Sale of Practice Agreement and cll.6.3 and 6.4 of the Practitioner Contract by failing, in many ways, to use best endeavours. In (K), by removing records on Dr Rafter’s departure in breach of cl.6.6 of the Practitioner Contract. Then in Claim 3(B)(2) the plaintiff claims a declaration that it terminated each of the agreements referred to by commencing the proceedings or making the amendment.

42 Claim 3(C) claims a declaration that by desisting from performance from 28 February 2002 onwards the defendants had breached cl.17.2(a) of the Sale of Practice Agreement and had become liable to pay money pursuant to cl.17.7(i) of the Sale of Practice Agreement.

43 Claims 4 to 12 are claims for injunctions. Claims 4 to 7 claim injunctions against Ticco. Claim 8 claims an injunction restraining Dr Rafter from rendering medical services and being engaged in various ways in a business of the nature of the plaintiff’s business within a radius of 8 kilometres of each of four of the plaintiff’s medical centres; the Double Bay Centre, the Darlinghurst Centre, the Maroubra Centre and the Brookvale Centre. Claim 4 claims a parallel restraint against Ticco. The proposed injunction contains an exception for rendering urgent medical attention. Claim 9 claims an order restraining Dr Rafter from providing Medical Centre Services as defined in cl.1.1 of the Restraint Deed in the Sydney Metropolitan Area. There is no such claim for the Melbourne Metropolitan Area. Claim 10 claims an injunction restraining Dr Rafter permanently from revealing to any person any information concerning the organisation, finances or transactions of the plaintiff and various persons related to the plaintiff, with exceptions relating to written consent, requirement of law, public domain and giving effect to the Sale of Practice Agreement. Claim 5 claims to restrain Ticco in similar terms.

44 Claim 11 claims an injunction restraining Dr Rafter from disclosing various classes of information; patient lists and records, financial records relating to patients, stated extensively. Claim 12 claims a mandatory injunction requiring delivery up of the classes of documents referred to in claim 11. Claim 6 claims an order against Ticco paralleling claim 11 and claims 7 claims an order against Ticco paralleling claim 12.

45 The Amended Summons also claims (13) damages, (13A) a sum under cl.17.7(1) of the Sale of Practice Agreement, with interest, (13B), interest on general damages and 13 (bis) costs.

46 By their Cross-claim of 24 May 2002 the defendants cross-claim (1) a declaration establishing that their termination of the Sale of Practice Agreement was lawful; (2) similarly for the Practitioner Contract and (3) for the Medical Director Agreement. They cross-claim (4) a declaration that the Restraint of Trade provision in the Sale of Practice Agreement and the Restraint Deed are void and unenforceable because of the terminations; and also because they are contrary to public policy. In Cross-claim (5) they claim a declaration establishing the liability of each party for payments to the other in consequence of the termination. In Cross-claim (6) they seek an order under s.87 of the Trade Practices Act 1974 avoiding or varying the Sale of Practice Agreement, the Practitioner Contract and the Medical Director Agreement. In Claim (7) they claim a declaration that Dr Rafter is lawfully entitled to render certain services unrestricted by any of the agreements. They also claim (8) accounts or inquiry, (9) damages and (10) costs.

47 It was established in some way, and confirmed by evidence of Dr Rafter (t128-129) that his claims under the Trade Practices Act were based on alleged representations by Dr Edmund Bateman to him, before he entered into the Sale of Practice Agreement and related documents, to the following effects.

48 The plaintiff’s counsel told me in opening that the plaintiff’s essential complaint was that there was a fundamental breach or breach of a fundamental term or breach of condition or repudiation in respect of non-compliance with the obligations in cll.17.2(b) and (c). While there were other complaints by the plaintiff, the principal topics of the plaintiff’s complaints relate to:

(1) Dr Rafter did not do the work he contracted to do, did not work enough hours, took too much leave, did not comply with rosters; and did not participate appropriately. Failures of participation included not obtaining appropriate accreditation for surgical work.

(2) Dr Rafter did not conduct himself harmoniously and did not perform satisfactorily as Medical Director or otherwise in relationships with others in the plaintiff’s organisation.

49 The principal claims for relief which counsel referred to in his opening were:

The plaintiff asked the Court to determine whether Dr Rafter and Ticco should be restrained from providing medical services within eight kilometres of each of the medical centres at Double Bay, Darlinghurst, Maroubra and Brookvale.

The plaintiff further seeks determination of which party is correct in the assertion that the party had a right to termination for breach.

The plaintiff complains that Dr Rafter failed to perform the contracted hours of work as required.

50 The defendants’ primary case as opened was that by reason of the termination of the agreement on the basis of the plaintiff’s breach of express covenants, the defendants are no longer liable to perform any obligation under the agreements. A subsidiary argument was that the restraint provisions are bad and should be read down. In the defendants’ case, Dr Rafter had the right to terminate as at 27 and 28 February 2002, when he left the practice at Darlinghurst, by reason of non-payment of amounts due to him; and they rely on cl.27.1. The defendants seek an account or inquiry as to the amounts actually owed, and also damages for the loss of bargain for three years which remained of the agreements.

Correspondence and communications.

51 A series of communications led up to Dr Rafter’s departure on 27 and 28 February 2002 and each side made complaints that there had been breaches of agreements. By a letter of 2 August 2001 from Mr Andrew Duff, Chief Financial Officer of Primary Health Care Limited to Dr Rafter, Mr Duff contended that sums of $4,000 and $3,300 for June and July respectively were not banked in the appropriate manner and this was a breach of the provision of services contract; and repayment within 7 days was requested. Mr Duff said “All mid-month and month end payments to you will be stopped until monies have been received in full.”

52 By a letter on behalf of Idameneo dated 18 September 2001 from Dr Bateman to Dr Rafter, Dr Bateman asserted that Dr Rafter was in serious significant on-going breach of contractual obligations and offered him the opportunity to correct the breaches. He went on to assert, but not comprehensively, “Some particular issues that need to be addressed” and these were (and I have given them numbers):

(1) You are not doing the minimum number of hours per week contracted by yourself. These were 65 hours a week as a GP/Surgeon, together with 5 hours as a Medical Director, i.e. a total of 70 hours per week. You have not been rostered on this number of hours. You have not even worked the number of hours you have been rostered on to cover.

(2) You often have failed to attend at rostered times. This is a major need for the proper running of a centre and care patients.

(3) You appeared to have failed to have paid when due rental monies paid to you that were due to landlords. You have not provided us with notice of such monies being paid.

(4) You have employed staff without any authorisation.

(5) You have terminated an employee without any authority. There was a subsequent cost to the company of more than $15,000 for such termination being wrongfully done.

(6) You acquired an interest in a Medical Centre in Macquarie Street allegedly in your partner’s name. This, I understand, is in breach of the contract in a number of respects.

(7) You have not worked your weekend hourly obligations.

(8) You have not made necessary day surgery accreditation application to allow you to work there as a General Surgeon. This is despite several requests by myself and staff to do so.

(9) You are not conducting yourself harmoniously with others – “will give you a hard time” said to the Medical Director of the new centre at Darlinghurst. These are similar types of behaviour, and advice have been given to numerous doctors, employees and staff of various levels both at Double Bay, Maroubra and elsewhere.

53 In a conversation at the Darlinghurst Medical Centre on 11 December 2001 Dr Rafter told Dr Bateman that he was not happy on a number of issues and that he would prefer to leave. Dr Bateman asked whether he was prepared to work in Dubbo and after a delay of about an hour Dr Rafter agreed but Dr Bateman said that he had reconsidered it. Dr Rafter said “Well, if that’s the case there is no point working for you. The best thing is I leave”, Dr Bateman said “All you have to do is to pay me back what you owe me on a pro rata basis” and no arrangement was made. After that no more payments on account of his income were made to Dr Rafter, and there were no more conversations between them.

54 On behalf of Idameneo Dr Bateman sent Dr Rafter a further letter of 4 January 2002. The letter called, in strong terms, for compliance. I have given numbers to some complaints to indicate how they generally correspond with complaints in the letter of 18 September 2001.

(9) There have been four separate independent doctor contractors and/or staff who have had numbers of patients that report to them of your “bad mouthing” the centre and/or our business. These matters have been brought to my attention because each of these persons considered the type of reports been given to them by the various patients were such as not to be in the interest of the company. They also felt were not consistent with your obligations. As this is from patients who have come in contact with these people both socially, professionally and/or in other roles, and as they represent at least 12 individual patients, it could be reasonably understood that this is part of a persistent and ongoing behaviour by yourself which is totally unacceptable.

(6) It would also appear that you are in breach of restraint clause 22.1. It would appear you are in breach of the Restraint Deed (dated 25.8.00).

While I refer to various clauses, these are not exclusive. I would refer you back to the previous notice that I gave you in regard to other breaches.

(1) You have also exceeded your contractual availability of leave of 4 weeks per financial year on a pro rata basis. You have had a total of 26 days off up to 31.12.01. The balance available to 30.6.01 is 2 days. That is extremely important in an early stage of a Medical Centre development that staff be available for commitments which are made to meet the developing flow of patients to the centre.

While I am in no way limiting our rights of removing any of our rights under the contract, I would ask you as a matter of urgency to cease all breaches under the contracts.

I would ask you to account for the amounts involved in the breaches so that we can bring to proper account. I would ask you to desist from the persistent ongoing creation of problems and clear breaches of your agreement that I refer to in this letter and in my previous letter to you.

55 Messrs McKells solicitors for Dr Rafter wrote to Mr Duff for Idameneo on 19 February 2002 giving notice of breaches as follows:

1. Clause 7.2 of Idameneo Pty Ltd has failed to pay
The Provision of Services forty five percent (45%) of Income
Agreement. Up to end of January.

2. Clause 7.1 of Service Idameneo Pty Ltd has failed to
Agreement provide services.

3. Clause 18.5 of Sale of Idameneo Pty Ltd failed to pay five
Practice Agreement. percent (5%) of sales from natural
therapies.

4. Clause 7.2 of The Provision Idameneo Pty Ltd failed to pay forty
of Service Agreement. five percent (45%) of PIP payments.

5. Clause 7.2 of The Provision Idameneo Pty Ltd failed to pay forty
of Service Agreement. five percent (45%) of accounts and
legal reports received.

56 Some of the supposed breaches were not well grounded but some related to failures of the plaintiff to make payments which the plaintiff in the person of Dr Bateman of course well knew that it had withheld because Dr Bateman had decided to do that.

57 Messrs Abbott Tout solicitors wrote in reply to Messrs McKells solicitors on 26 February 2002 and asserted that proper particulars of the alleged breaches had not been provided and that until they were Idameneo was unable to take any steps to remedy them where appropriate. There was no acknowledgement or explanation of the payments’ not having been made, although the importance of the question whether payments had been made, and of the reasons (if there were any) for not paying them must have claimed the attention of the plaintiff and of its solicitors. In the opening paragraphs of the letter of 26 February 2002 Messrs Abbott Tout claimed on behalf of the plaintiff that the plaintiff did not know what the alleged breaches were and could not remedy them. This was a piece of shameless effrontery as the plaintiff was obviously called on, in any communication conducted on an honourable basis, to acknowledge that payments had been withheld and to put forward any explanation which was relied on; there was no legal duty to reply to the letter at all but if a reply was given it was disgraceful to affect not to understand the complaints about withholding payments when the payments had been deliberately withheld. Messrs Abbott Tout compounded their disgrace by addressing Messrs McKells in groundlessly offensive terms, asserting that the letter of 19 February 2002 had been sent in bad faith. Messrs Abbott Tout stated: “We are instructed that the defendants had breached and are continuing to act in breach of both the Sale of Practice Agreement and the Practitioners Contract” and set out 9 specifications of breach, with many variations woven round the theme that Dr Rafter was engaging in practice in a rival organisation and had referred patients to other practices. This corresponded, with more specificity, to Complaint 6 in the letter of 18 September 2001.

58 Messrs Abbott Tout’s letter asserted, with gross and inexcusable discourtesy, that Messrs McKells letter had been sent in bad faith. For this reason it is obvious that Messrs Abbott Tout’s letter was not a serious attempt to engage in communication. The contents of the letter, and what it does not deal with, also illustrate this. It did not call for serious consideration. The letter did not engage with the substance of the difficulty, which was that although Idameneo had collected fees charged by Dr Rafter it had not paid him any part of those fees for many weeks. The plaintiff did not acknowledge that this had happened, but affected not to understand that there was a difficulty of that kind. The fact was that for many weeks Idameneo had not paid over money belonging to the defendants which it was Idameneo’s duty to pay, and this was a result of a deliberate decision by Dr Bateman. Of course, the flow of income to Ticco and Dr Rafter was the life blood of the arrangement and the basic purpose of their engagement in it. By 26 February 2002 Idameneo was not willing to meet its part of this complex scheme of arrangements with Ticco and Dr Rafter on the basis of good faith and honesty by paying over money due to them which Dr Bateman saw advantages in retaining, or by explaining that it was not prepared to do so and giving reasons. The plaintiff used an offensive letter from its solicitors to fend off an obviously justified complaint.

59 On 27 February 2002 Messrs McKells responded by a fax message disputing the letter of 26 February. On 28 February 2002 the defendants purportedly terminated agreements by Notice of Termination sent by fax to the plaintiff with a copy under a covering letter from Messrs McKells to Messrs Abbott Tout; the agreements were the Provision of Service Agreement, the Double Bay Medical Director Agreement and the Sale of Practice Agreement. The ground of termination asserted was “[The] failure … to rectify or take steps to rectify the breaches set out in our letter of 19 February 2001 …”. In principle the defendants are not limited to grounds which they actually expressed at the time of termination; in the absence of pleadings however I take the letter of 19 February 2002 as stating the grounds the defendants relied on.

The claim that Dr Rafter had an interest in another practice.

60 I will review the material relied on by the plaintiff’s counsel in his closing address to show involvement of Dr Rafter in a practice at 139 Macquarie Street, Sydney, in breach of cl.22 of the Sale of Practice Agreement and cl.3 of the Restraint Deed. Counsel contended that the evidence was that the Centre at 139 Macquarie Street was or was to be a cosmetic surgery practice, and that this appeared from evidence of Dr Monk and Dr Rafter about a conversation at Maroubra in early August 2001. Evidence of Dr Monk in his affidavit of 1 March 2002 para.10 dealt with a conversation with Dr Rafter. Dr Rafter responded to this in his affidavit of 14 March 2002. From Dr Monk’s para.12, and Dr Rafter’s para.5(p) it was contended that the Court should infer from a statement attributed to Dr Rafter that Dr Rafter had some ownership or proprietorial or practice role in the Chase Medical Centre Clinic which would be in clear breach of the restraint. It was contended that whichever of Dr Rafter or Dr Monk is accepted, the finding on the balance of probability should have been that there was some connection between Dr Rafter and the Macquarie Street practice. The association between Dr Rafter and Tiina Lemmik appears in part from Recital D(c) in the Sale of Practice Agreement and the name there given Tiina Lemmik-Rafter. She was Dr Rafter’s founding practice manager and had a 50 percent shareholding ownership interest in the Double Bay practice. She was one of the signatories for Ticco when Ticco sealed the contract documents. Dr Rafter could not explain how she came to have a 50 percent ownership interest in the Double Bay practice. I observe that Doctor Rafter denied that he and Miss Lemmik lived as man and wife. On the evidence it is not possible to say clearly what personal relationship existed between Dr Rafter and Ms Lemmik. She remained working in the Double Bay practice until it was absorbed into the Darlinghurst practice in September 2001.

61 Counsel contended that it should be found that that Dr Rafter has or has had a close personal relationship with Miss Tiina Lemmik, his long-standing practice manager; that she has some involvement in owning or operating a practice or clinic at 139 Macquarie Street, and that Dr Rafter has not called her to give evidence. Counsel referred to various exemplifications of close association between Dr Rafter and Ms Lemmik.

62 Counsel also relied on the evidence of Ms Cannings, who was not cross-examined. Counsel contended that the finding for which he argued was supported or corroborated by various respects in which evidence of Dr Rafter in cross-examination was said to show an unsatisfactory position. It was said that the Court should find that there was a close business or personal relationship between Dr Rafter and the Medical Centre at 139 Macquarie Street, and that this made it easier for the Court to accept that there was an ownership interest or a practitioner interest in the Centre.

63 It was contended that material related to Dr Rafter’s association with Ms Lemmik supports or reinforces direct evidence of Miss Cannings and Dr Monk that Dr Rafter attempted to practice at 139 Macquarie Street or began a process leading to practice or to establishment of a practice there or owned the practice. Counsel also contended that the findings for which he argued were supported by evidence about the FAX heading on an annexure to the affidavit of Dr Grech and by cross-examination of Dr Rafter about that.

64 The evidence of Dr Monk in his affidavit (of uncertain date but filed on 1 March 2002) is as follows:

I don’t really have to do this. I shouldn’t be here. There is a group of surgeons from Melbourne who wanted to do something with the premises next door to the Double Bay Medical Centre to turn them into a cosmetic surgery. But we’re going to do something in Macquarie Street now.

Which one? The Chase Medical Centre?

Yes.

What’s going to happen with the doctors already there?

We’re getting rid of them and changing it to a full cosmetic clinic.

Maybe I should go and visit the doctors to see if they would like to practice out of one of our medical centres?

My name is Dr. Monk. I work with Primary Health. Are you aware that this practice has been sold?

Yes.

Has it been purchased by a Dr. Rafter? Ian Rafter?

I’m not sure. I have heard the name Rafter mentioned, but I don’t know what his exact role is.

I would like to offer you the opportunity to practice at our new medical centre to be opened in George Street, Sydney.

I’m going to stay here and see what happens.

You shouldn’t have gone to speak to the doctors at the Chase Medical Centre. you’ve caused some problems. I never gave you permission to speak to them.

Well, you said that you were going to be getting rid of them.

I never said anything like that.

Well, who owns it then?

Some guys from Melbourne.

Well, I saw your wife Tiina working there.

She’s not my wife. I have a wife in Melbourne. I visit her every month.

Then, your girlfriend.

She’s not my girlfriend. She’s the Practice Manager.

65 Paragraph 11 was admitted in evidence on a limited basis as a step in showing the significance of the statements attributed to Dr Rafter in para.12, and not on the basis that the facts asserted in para.11 were evidence of the truth of those facts.

66 Doctor Rafter answered these passages in para.5(g) to (q) of his affidavit of 14 March 2002. The effect of his affidavit evidence was as follows. Doctor Rafter admitted that there was a conversation generally as alleged. He said of the opening expression “I don’t really have to do this. I shouldn’t be here” that “… it was said in the context of having already worked sixty-five to seventy … hours a week for the Plaintiff prior to having been seconded to Maroubra Medical Centre on a Sunday.” Doctor Rafter denied saying “But we’re going to do something in Macquarie Street now” and his evidence was that he said “They are going to do something in Macquarie Street now.” He denied the passage in which Dr Monk said that he asked whether it was the Chase Medical Centre and Dr Rafter said “Yes.” It was his evidence that in his belief that Chase Medical Centre had gone into liquidation approximately four years ago. Doctor Rafter denied part of the conversation in which Dr Monk asked what was going to happen with the doctors already there and Dr Rafter said “We’re getting rid of them and changing it to a full cosmetic clinic.” Doctor Rafter said that Dr Rafter had said “I was going to open a clinic at 294 New South Head Road and a group of surgeons from Sydney and Melbourne are looking at creating a similar facility in Macquarie Street because nothing had happened with the premises 294 New South Head Road” or words to that effect. He confirmed that Dr Monk had said to the effect that he might visit the doctors and see if they would like to practise out of Primary Health Care Medical Centre.

67 “Chase Medical Centre” was the registered business name, registered on 13 March 1996, of a business described as “Administration and medical centre” carried on at Level 1, 44 Martin Place, Sydney. There were several proprietors of the business name, and its proprietor from 26 March 1996 was Macquarie Street Medical Practice Pty Ltd which changed its name back to Lamofern Pty Ltd (which had been its name earlier) on 10 October 2001. Ms Lemmik became a director on 20 August 2001 and the company applied for voluntary deregistration on 13 December 2001.

68 In answer to Dr Monk’s para.12 Dr Rafter’s affidavit evidence was to the effect that he denied the conversation about problems caused by speaking to doctors at the Chase Medical Centre. Doctor Rafter’s evidence in this regard was “I recall a conversation as follows: I’d been rung by one of the doctors asking where I had information from that they were going to be removed. I said in reply to that doctor: I do not know and that if this information came from Dr Monk then it is not correct. Or words to that effect, as I was aware that he has nothing to do with the Macquarie Street Centre.” He denied that Dr Monk asked him who owned it and that Dr Rafter said “Some guys from Melbourne”. He accepted that there was a conversation generally as given by Dr Monk about Tiina Lemmik being at the Macquarie Street Centre. When challenged in cross-examination neither Dr Monk nor Dr Rafter moved significantly from their affidavit evidence.

69 Ms Anne Cannings, a medical practice manager, gave evidence on affidavit that in or about July 2001, when she was employed by the Macquarie Street practice at 139 Macquarie Street Sydney as a practice manager, she was told by a principal of that business that Dr Rafter would visit to have a look around and that she should show him the consultation rooms and facilities. She gave evidence that he arrived and that she showed him each consultation room, the procedure room and other facilities. He asked questions about the business in some detail. She then gave evidence (para 8):

On 9 August 2001 I was called into a meeting between Mr. Keen, Mr. Atgemis, the Second Defendant and a lady who was introduced to me as Tiina Lemmik. I recall that during the course of the meeting Mr Atgemis was discussing in general the doctors’ working arrangements, staff hours and pay and retention of staff etc. I was brought into the discussion at that point and told the meeting what the current arrangements regarding the staff were. I then said words to the following effect:-

70 In response to Ms Cannings’ evidence Dr Rafter said in his affidavit of 14 March 2002 para.7, as to the visit and inspection:

As to paragraph 6, I do not recall the matters contained therein. I do recall attending the premises at the request of Tiina Lemmik early one morning in June/July 2001.

I was there at the request of Tiina Lemmik who was interested in acquiring the practice. I do not dispute the conversations alleged in the first part of this paragraph.

127 Kone Elevators Pty Ltd v. McNay & Anor (1997) ATPR 41-564 shows, in the citations and observations of Sheller JA at 43834 that a restraint cannot validly protect an employer from competition, but can validly protect his trade secrets or his confidential information. The plaintiff’s business methods are not trade secrets or confidential information; there is no evidence that they are and there is nothing inherent in them which could place the business methods in either of those categories. The kind of business which the plaintiff operates is not unique to the plaintiff. Skill, experience and effective business operation will have great impact on the success of operating such a model, but the model was not, and was not claimed to be a trade secret. Although taking part in the management of such an organisation would give a person an opportunity to know confidential information special to the particular operation, the protection lawfully available to that interest is restraint of abuse of confidential information, not restraint from competition at all. In my opinion the Restraint Deed cannot be justified, notwithstanding the significant separate payment to Dr Rafter for which it provided.

128 The decision of the High Court in Peters (WA) Ltd v. Petersville Ltd (2001) 205 CLR 126 is that the test stated by Lord Pearce in Esso Petroleum Co. Ltd v. Harpers Garage (Stourport) Ltd [1968] AC 269 at 328, cited in Peters at 24 should not be accepted as Australian law; see in Peters paras 24, 26 and 39. The consequence is that a restraint of trade falls to be tested by the test of reasonableness in the interest of the parties and the interest of the public whether it is directed towards the absorption of the parties’ services or whether it is directed towards their sterilisation. In my opinion this holding has no impact on the present case. The restraint on Dr Rafter’s conduct after termination was plainly not directed to the absorption of his capacity. It was directed to the sterilisation of his capacity to engage in supply of Medical Practice Services in the Sydney Metropolitan Area, and in the Melbourne Metropolitan Area; and even accepting, as I understood the plaintiff’s counsel did, that the restraint for Melbourne, where the plaintiff did not at the time of the contract operate, is indefensible, the reasonableness of the restraint for the Sydney Metropolitan Area, in which Dr Rafter had worked for some years before August 2000, was not established, as the plaintiff’s counsel sought to do, by pointing out how much of Australia remains for him to operate in without restraint. Other parts of Australia have not been scenes of his career.

129 The plaintiff’s counsel referred to Ashcoast Pty Ltd v. Whillans (Ambrose J 14 October 1996 unreported) in which his Honour granted an interlocutory injunction to enforce a restraint for a period of three years within a radius of seven kilometres of the medical centre owned by the plaintiff at which the defendant obtained a contractual licence to use facilities. The restraint was not associated with sale of a practice. The radius of seven kilometres related to identified premises without, it would seem, any provision corresponding with the provision in the present case which creates a new restraint area around every location at which the defendant works. His Honour said of the restraint that there was nothing patently unreasonable about it. The interlocutory injunction was also grounded on the fact that the defendant had deliberately set about extracting the names of patients and canvassing them, initially by subterfuge. The decision of Ambrose J was an interlocutory decision and was appropriately closely related to the facts of the case before him. It did not purport to establish any general principle.

Cross-claim based on misleading or deceptive conduct.

130 Doctor Rafter made in evidence a number of complaints about pre-contractual representations made to him by Dr Bateman. In my understanding these were put in evidence in support of his claim for a remedy under the Trade Practices Act 1974 (C’th) based on alleged misleading or deceptive conduct. At this point as at many other points the absence of pleadings greatly hampers understanding. Doctor Rafter’s claims about misleading or deceptive pre-contractual representations suffer from the difficulty that there was a lengthy period of negotiation with exchange of drafts, and the representations which he alleges are not reflected in contractual terms: indeed on the whole they are inconsistent with the contractual terms. These circumstances are adverse to any view that representations of those kinds were relied on in entering into the agreements. The absence of some contemporaneous report of alleged oral representations upon which a claim of misleading or deceptive conduct is based is a recurring difficulty for plaintiffs seeking to rely on such representations, and the difficulties increase significantly when statements alleged were made in negotiations which led to a written agreement which did not reflect them. See Watson v. Foxman (1995) 49 NSWLR 315.

131 Dr Rafter gave affidavit evidence that at the time of signing the agreements he was informed by Dr Bateman to the effect that “Your income would increase significantly. Due to having a nurse doing dressings and ECGs and injections, you can see more patients per hour.” Dr Bateman’s evidence shows that he said something to the same general effect, and his evidence gives the statement at greater length and with more circumstantial detail, so that it was a statement to the effect that the plaintiff’s organisation, with ancillary staff and working methods, would enable Dr Rafter to increase his income if he worked the same number of hours per week and saw patients at the same rate per hour. In my finding the probabilities support Dr Bateman’s version, in which Dr Rafter was given an explanation of how the plaintiff’s working methods could potentially increase income, not a simple and bare representation that income would be increased.

132 Another representation which Dr Rafter alleged in the context of his case of misleading or deceptive conduct was (affidavit 10 May 2002, para.13 and following) that about April or May 2000 Dr Bateman told him “You’ll be able to cut back your hours as a GP to 45, at least 20 hours’ surgery and 5 hours as Medical Director.” Dr Rafter’s evidence is to the effect that at that time he had been working as a general practitioner for two and a half years, working approximately 80 to 90 hours per week, that he was looking for more regular hours doing surgery and cosmetic medicine and he wished to reduce his hours as a consulting general practitioner to 45 hours a week with particular emphasis on alternative medicine, and he wished to work 20 hours per week as a general surgeon or practising cosmetic medicine, giving working time of 65 hours plus 5 hours as Medical Director. It was Dr Rafter’s evidence that documents which were not signed but which were prepared for the sale agreement while it was under negotiation provided for him to work 45 hours as a General Practitioner and 20 hours as a surgeon. This apportionment of time is not reflected in the documents which became the parties’ agreement. Dr Bateman gave in evidence conversations on these subjects at considerably greater length, including statements to the effect that Dr Bateman was happy for Dr Rafter to do up to 20 hours per week of his total commitment as surgery; in Dr Bateman’s account he favoured developing work as a surgeon if the work was available but he did not give any representation that work as a surgeon, or 20 hours’ work as a surgeon would be available. The terms of the agreements, after long negotiations, do not reflect any commitment that work as a surgeon would be available. In my finding there was no misleading or deceptive representation on this subject.

133 There was no contractual requirement for Dr Rafter to get accreditation to work as a surgeon, or for the plaintiff to see that he got accreditation. Dr Rafter made a complaint of his not having the opportunity to work as a surgeon for part of the 65 hours of work which he was to perform, but the evidence does not show that he ever took purposeful or realistic measures to qualify to work as a surgeon. An inquiry at the Caringbah Day Surgery produced the response dated 15 May 2001 Exhibit 5 which sent Dr Rafter an Application for Visiting Practitioner Membership of that Day Surgery but said that Caringbah Day Surgery had interim contracts with some health funds but was unable to apply for a contract with MBF until 2002. Dr Rafter did not apply to Caringbah Day Surgery, and did not apply for accreditation with any other day surgery. In my view, Dr Rafter has no grounds for complaint against the plaintiff in respect of his not obtaining the accreditation and working as a surgeon, nor does the plaintiff against the defendants.

134 Doctor Rafter also made a complaint to the effect that there was a representation that practice of cosmetic medicine would be maintained or pursued in the practice at Double Bay after it was purchased by the plaintiff. In my view there is no clear basis in the evidence upon which to consider the claim that there was a representation which was misleading or deceptive on this subject. Again no arrangement on the subject is reflected in the contract documents.

135 Doctor Rafter also complained to the effect that it was represented to him that he would work only at the Double Bay Medical Centre. It was Dr Rafter’s evidence that Dr Bateman told him that where he was to work was to be decided by mutual agreement, and that Dr Rafter would have to spend some of his weekends and evenings working at clinics at Darlinghurst or Bondi Junction after they opened, which Dr Rafter was prepared to do. This claim is markedly anomalous in view of the terms of the contract documents, which are quite inconsistent with any such restriction. Dr Bateman gave evidence of pre-contractual discussions which show full contemplation that Dr Rafter would work at other places in addition to work at Double Bay. In view of the nature of the plaintiff’s organisation, Dr Bateman’s account of the conversations in this respect accords well with the probabilities.

136 My conclusion is that the defendants have not established that they have any entitlement under the Trade Practices Act 1974.

Sale of Naturopathic products.

137 Doctor Rafter complained that he had not been paid 5 percent of the proceeds of sale of naturopathic products. He maintained that there was an oral arrangement under which he was entitled to be paid part of the proceeds of sale on that basis. Exhibit 3, letter from Mr Duff to Dr Rafter of 10 April 2001, which relates to crediting Dr Rafter with $4,131.60 being “Estimate of 5 % share of products” does not record or confirm an agreement varying the contractual entitlement to 5 percent of the profits. In my finding it has not been established that there was any such oral arrangement. In any event, the arrangement would be altogether inconsistent with cl.18.5 of the Sale of Practice Agreement, which confers an entitlement to 5 percent of the operating profit fairly attributable to the alternative medical practice. Mr Duff calculated, or estimated that there were no profits, but did not produce a written statement. (t30-31). There is no evidence that there were any such profits.

Conclusions.

138 The plaintiff’s case is based on repudiation. It cannot be based on termination in accordance with the contract machinery. There is no evidence that the plaintiff purported to terminate in accordance with contract machinery. The plaintiff claims to have accepted a repudiation by issuing the summons on 1 March 2002, or by amending it on 7 June 2002. the plaintiff has not proved any repudiation by the defendants.

139 My conclusion is that the conduct of the plaintiff was repudiatory of the Sale of Practice Agreement, the Provision of Services Agreement and the skein of ancillary agreements. Dr Rafter’s conduct on the 27th and 28th of February 2002 including his statement to Dr Grech, his obviously final withdrawal from the plaintiff’s organisation and his solicitor’s letter constituted an acceptance of that repudiation and disentitle the plaintiff to further performance of any contractual obligations that had not crystallised by that time. Further, the defendants did all that was required to bring about an effective termination in accordance with the contractual machinery.

140 As the defendants’ termination was effective, and further the defendants’ conduct accepted repudiation by the plaintiff, the plaintiff is not entitled to any of the declarations in Claims 1, 2, 3 and 3A. The matters referred to in Claim 3B(1) of the Amended Summons and alleged to be breaches have not been made out and if they had been would not have grounded termination by the plaintiff. In any event there was no termination by the plaintiff. The plaintiff does not become entitled to a payment of $510,972.00 as claimed in Claim 3C. The plaintiff is not entitled to any of the injunctions and mandatory orders claimed in Claims 4 to 12. Even if the restraint on medical practice continued to have effect after termination I would not have been prepared to enforce it by injunction in view of the circumstances in which termination occurred and the plaintiff’s repudiatory behaviour. The plaintiff has no entitlement to damages as claimed in Claim 13, or to interest as claimed in Claims 13A and 13B.

141 The defendants are entitled, on their Cross-claim, to the declarations in Claims 1, 2 and 3 establishing the effectiveness of the termination. The defendants are not entitled to a declaration in terms of Claim 4, which claims that the restraints are void as contrary to public policy. The restraint on medical practice is not void, but it arises under a contract which the plaintiff has repudiated. The restraint on providing Practice Management Services is void and a declaration should be made establishing this. Upon Claim 5 there should be a reference to a Master to inquire and report. Claims 6 which relates to Trade Practices Act 1974 should be dismissed. It is not necessary to deal with Claim 7. The only order for accounts and inquiries which I should make is the order under Claim 5. The Cross-claim claims damages and the reference to the Master should deal with this.

142 I have not yet addressed questions of costs.

143 I make the following orders:

(1) Upon the plaintiff’s claim give judgment for the defendants.

(2) The interlocutory injunction is dissolved.

(i) declarations as Claims 1, 2 and 3;

(ii) declare that the restraint of trade provisions in cl.3 of the Restraint Deed dated 26 August 2000 are void and unenforceable;

(iii) order that it be referred to a Master to inquire and report to the Court what payments if any ought to be made by the plaintiff to the defendants as a consequence of the receipt of moneys by the plaintiff in relation to the operation of the Agreements, on account of or arising out of obligations of the plaintiff to the defendants under those Agreements or for damages which ought to be paid by the plaintiff to the defendants arising out of breaches by the plaintiff of those Agreements;

(iv) reserve to the Court further consideration of Claims 5, 8 and 9 in the Cross-claim and of the subject matters of the reference to the Master upon having the Master’s report;

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Last Modified: 07/23/2003

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Citations

Idameneo (No 123) P/L v Ticco P/L and Anor [2003] NSWSC 538

Most Recent Citation

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CITATION:	IDAMENEO (NO. 123) P/L v. TICCO P/L & ANOR [2003] NSWSC 538
HEARING DATE(S):	16, 17 & 18/12/02; 12, 13 & 14/02/03
JUDGMENT DATE:	26 June 2003
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson J at 1
DECISION:	Claim dismissed: inquiry ordered on cross-claim.
CATCHWORDS:	TRADE - restraint of trade by agreement - validity and reasonableness - sale of medical practice - restraint of 5 years and 8 kilometres held valid but not enforced because purchaser repudiated - numerous issues on alleged breaches of contract in complex chain of agreements on sale of medical practice where vendor was to work as Medical Director in practice management organisation conducted by purchaser.
LEGISLATION CITED:	Trade Practices Act 1974 Restraint of Trade Act 1976
CASES CITED:	Jones v. Dunkel (1959) 101 CLR 298 Kone Elevators Pty Ltd v. McNay & Anor (1997) ATPR 14-564 Peters (WA) Ltd v. Petersville (2001) 205 CLR 126
PARTIES :	Idameneo (No. 123) P/L - Plaintiff Ticco Pty Ltd ACN 073411506 - First Defendant Ian Lester Organ-Rafter - Second Defendant
FILE NUMBER(S):	SC 1738/2002
COUNSEL:	G. Burton - Plantiff R. Evans - First Defendant
SOLICITORS:	Abbott Tout - Plaintiff 1st & 2nd Defendants - McKells Solicitors