IDAMENEO (No 123) Pty Ltd v Suszko - [2013] SASC 173

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
IDAMENEO (NO 123) PTY LTD v SUSZKO
[2013] SASC 173
Judgment of The Honourable Justice Anderson
12 November 2013
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - TRIAL
TRADE AND COMMERCE - OTHER REGULATION OF TRADE OR COMMERCE - RESTRAINTS OF TRADE
APPLICATION FOR SPLIT TRIAL - PRINCIPLES
Application by defendant for a split trial to determine initial questions of law and fact. The defendant is a medical practitioner who was formerly engaged by the plaintiff to provide medical services at a medical clinic. The plaintiff seeks to enforce a restraint of trade provision against the defendant. The defendant seeks an order that issues relating to the question of liability be dealt with as a preliminary trial.
Held: Application refused. Matter to proceed as one trial.
Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC (2008) 260 LSJS 210; Ferraretto and Snappy Apple Pty Ltd v Cowell Clarke [2012] SASC 224; Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 2) (2011) 275 LSJS 191, discussed.

IDAMENEO (NO 123) PTY LTD v SUSZKO
[2013] SASC 173
Civil
ANDERSON J.
Introduction

This is an application by the defendant for a split trial, to determine mixed questions of law and fact relating to only some of the issues raised in the pleadings, pursuant to rule 211. By interlocutory application FDN 29 the defendant sought a summary judgment on the basis of a suggested interpretation of a clause of restraint in a contract entered into between the parties. A master declined the application for summary judgment. In the alternative the defendant had requested a split trial seeking determinations relating to the restraint clause as a preliminary matter. The master referred the claim in the alternative to me for decision.
The plaintiff operates medical clinics nationally. The defendant is a medical practitioner who sold his medical practice at Port Adelaide to the plaintiff. After selling his practice he then began working at the plaintiff’s medical practice at Royal Park. As a result of the arrangements regarding the practice, the parties entered into two written agreements in 2007.
The contractual arrangements
The details of the agreements entered into in 2007 are summarised by the master in his reasons. I set out those reasons.
[6]In 2007 the parties entered into two separate written agreements. The first was headed “Sale of Practice Deed” (“Sale Deed”) and was executed on 21 December 2007.
[7]The Sale Deed dealt with the sale of the defendant’s practice to the plaintiff and provided for the purchase price of $575,000.
[8]The Sale Deed provided, inter alia, that:
1.    The defendant must enter into the practitioner contract at the same time.
2.    The defendant agree to render medical services at the Royal Park clinic for a period of at least five years.
3.    The defendant would only provide medical services from the Royal Park clinic.
[9]The Sale Deed then went on to provide a restraint provision in the following terms:
5.1    Given that:
(a)The Purchaser is acquiring the goodwill of the practice; and
(b)the Doctor is to render medical services from the New Premises,
The parties agree that as a reasonable protection for the business of the Purchaser, the Doctor must not during the restraint period:
(i)render medical services at any place within a radius of 10 kilometres of the Old Premises; or
(ii)render medical services at any place within a radius of 10 kilometres of the New Premises.
5.2    The restraint period under the preceding Clause is the period from completion until the later to occur of:
(a)the 5^th anniversary of completion; or
(b)the 3^rd anniversary of the date on which the Practitioner Contract terminates for whatever reason.
[10]The parties agreed that the termination of the Sale Deed was also a termination of the second agreement. The second agreement was called Provision of Services to Medical Practitioner (“the Practitioner Contract”). It was also executed on 21 December 2007.
[11]The terms of the Practitioner Contract required the plaintiff to make available facilities at its Royal Park Clinic to permit the defendant to provide medical services.
[12]For present purposes, the following terms of the Practitioner Contract are relevant:
2.    DURATION
This Deed commences on the Commencement Date and continues for a period of 5 years, and after that until determined by either party giving to the other 30 days’ written notice of termination.
…
9.     TERMINATION
9.1    The Doctor may terminate this Deed by notice in writing to the Company if the Company 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 being given to the Company by the Doctor.
9.2    Company may terminate this Deed on the happening of any of the following events:
(a)the Doctor commits any serious breach of any provision of this Deed and the Doctor has failed to remedy that breach within 7 days of receiving a notice from the Company calling for that breach to be remedied; or
(b)in the reasonably held opinion of the Company the Doctor has committed an act which if true would, in the opinion of the Company, adversely affect the reputation or business of the Company conducted by the Premises; or
(c)the Doctor is guilty of any wilful neglect or misconduct; or
(d)the Doctor is partly or fully disqualified under the Health Insurance Act 1973 (Cth); or
(e)the name of the Doctor is removed from the Vocational Register of General Practitioners maintained under the Health Insurance Act 1973 (Cth); or
(f)the registration of the Doctor under the Act lapses, is cancelled or is suspended; or
(g)conditions, limitations or restrictions are imposed by or under the Act in relation to the registration of the Doctor under the Act.
9.3    The expiration or termination of this Deed does not affect such of the provision of this Deed as expressly or impliedly operate or have effect after that time (including Clauses 7.1, 7.2 and 8.1) and is without prejudice to any rights of action already accrued to either party in respect of any breach of this Deed by the other party.
[13]On 19 November 2012 the defendant gave notice terminating the Practitioner Contract effective 14 February 2013. The notice of termination complied with the provisions of clause 2 mentioned above, in that the date of termination was five years and 30 days after commencement.
[14]The plaintiff’s case is that, as per clause 5.2 mentioned above, the restraint period is three years from 14 February 2013.
[Footnotes omitted]
After the time the agreements were entered into the defendant continued to provide medical services at Royal Park for five years as per the terms of the agreement. The defendant gave notice to the plaintiff of his intention to terminate his arrangement with the plaintiff on 19 November 2012.
The three-year restraint period provided by clause 5 of the Sale Deed is therefore alleged to have commenced on that date. This is disputed by the defendant. The defendant commenced to provide medical services at Western Sportortho and GP Clinic (“the Western Hospital”) on or about 3 April 2013. Those premises are within the 10 kilometre geographical restraint area provided by the agreement and the plaintiff alleges that the defendant is in breach of the agreement.
The arguments regarding a split trial
The defendant argued that the question of whether he is liable to the plaintiff under the restraint provision in the contract will be determined largely on facts which are not in dispute. The defendant argued that when compared with the questions which have to be answered in relation to the remedies sought, involving complex and detailed assessments of damages, the preparation for a trial as a whole will be more expensive and more complicated and will result in considerable delay before all matters are ready for trial. Therefore it is argued the matter should proceed on the basis of the determination of the legal issues on what the defendant suggests are undisputed facts. It is suggested this may even resolve the whole matter.
The plaintiff disputes that the matter is as simple as suggested by the defendant. It points to the defence filed by the defendant which puts in issue several matters which will involve making findings of fact on contested evidence. These include the plea that the deed did not involve a “true sale of the medical practice at all”, arguments as to whether previous patients became patients of the new practice, the allegation that there is no legitimate commercial interest to protect, further that no goodwill was acquired, and questions relating to the width of the restraint clause. It is argued that all of these matters disputed by the defendant will require factual disputes to be resolved even if the trial is split.
If the plaintiff’s interpretation of the restraint clause is correct then the defendant will remain in breach, in other words whilst the matter is in the course of preparation for hearing the defendant would be continuing to breach the clause. It is for that reason that the plaintiff seeks a permanent injunction as part of its remedies. It argues that it would be unfair in those circumstances to not have all matters determined at the one time.
There is a dispute as to the estimated lengths of trial in relation to whether the trial is limited to one on liability or whether it is a total trial on both liability and damages. Mr Livesey QC for the defendant concedes that there are some factual issues which will have to be determined on contested evidence in relation to the liability issue but he contends that these are of limited scope. He submits by contrast that the factual issues to be decided on quantum will involve many days of contested evidence including expert evidence.
Mr Abbott SC for the plaintiff submits that the reasonableness of a restraint clause must be assessed as at the date of the contract and that this will involve determinations of fact on contested evidence. He submits further that the evidence relating to the enforceability of the clause is also relevant to the relief which the plaintiff seeks.
Consideration
It seems that the parties differ considerably in what needs to be identified if there is to be a determination at what has been called the first stage. There is no clear agreement on which precise issues and therefore what facts will be necessary to determine at that first stage. In short there is such an overlap of issues that they should not be separated and it will be more efficient to deal with the whole matter at the one time.
The principles in relation to a split trial are clear. The principles under r 211 have been considered by the Full Court in recent times: see Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC (2008) SASC 260 LSJS 210 per Anderson J at [61] and White J at [93]. The principles applicable to the old rules are likewise applicable to the new rule. See also Ferraretto and Snappy Apple Pty Ltd v Cowell Clarke [2012] SASC 224 at [20]. It is clear that the usual position is that all issues of both fact and law should be determined in the one hearing unless there are exceptional circumstances.
It is clear, as the decisions illustrate, that the split trial is the exceptional case rather than the rule. Decisions such as Abigroup and Alliance Craton Explorer Pty Ltd v Qasar Resources Pty Ltd (No 2) (2011) 275 LSJS 191 were on their facts exceptional cases and split trials were ordered.
Where facts have to be determined on contested evidence the cases make it clear that it will only be in the rare case that there will be an order given for a split trial. The simple reason is that the courts are concerned that splitting a case can result in appeals and increased costs and delay. The court must take this into account in making any such order for a split trial.
This matter has a history which indicates to me that it is highly unlikely that any decision on a preliminary point will be accepted by the other party. The matter has been hard fought at all levels. The recent decision by the master to refuse the application for summary judgment is now under appeal by the defendant. It is likely that any decision I give in this matter at this stage will be appealed. Further down the track any decision on preliminary issues, even if those issues could be identified and agreed, will be appealed by the losing party. Finally, when and if there is a final assessment of damages, after a long and protracted hearing involving complicated and detailed expert evidence, it is highly unlikely in my view that even then, whichever way it goes, it is likely to be the end of the matter. It is better in those circumstances to get on with the preparation of all matters for a trial.
This is not a case in which a judgment on the preliminary issues is likely to avoid a further hearing. In my view there will be contentious issues at both stages if the trial were split and that is a factor against granting a split trial. There is a considerable risk that some evidence would have to be repeated and there is certainly the likelihood that some witnesses will have to attend court twice. There would be an unnecessary and expensive duplication of resources, both from the point of view of the parties and the court, and that is an important consideration.
Conclusion
For the reasons expressed it is my view that this is not a case which is an exception to the general rule that all issues should be determined at the same time. Having been seized of this matter, and with some knowledge of the complexities involving it, I also consider that this matter be mediated. I will hear the parties on the details but the continuation of the interlocutory processes leading to trial should proceed notwithstanding a court ordered mediation.
It is my view, subject to hearing counsel, that a time should be set by which a mediation is to be concluded. In the meantime orders need to be made regarding the interlocutory processes and in particular the discovery process. There also needs to be orders made regarding the provision of experts reports. I make these comments in the hope that a mediation may resolve this matter and avoid a lengthy and costly trial. This matter should also be assigned for judge management pursuant to rule 115.
I refuse the application for a trial on preliminary issues. I will hear the parties as to costs.