IDAMENEO (No 123) Pty Ltd v Suszko - [2013] SASC 76

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
IDAMENEO (NO 123) PTY LTD v SUSZKO
[2013] SASC 76
Reasons of Judge Dart a Master of the Supreme Court
27 May 2013
PROCEDURE - DISCOVERY AND INTERROGATORIES
Pre-action disclosure - whether possible causes of action available to plaintiff - whether plaintiff entitled to pre-action disclosure - meaning and effect of rule 32.
Supreme Court Civil Rules 2006 r 32, referred to.
Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506; Newport Quays Pty Ltd & Ors v The Urban Renewal Authority & Ors [2012] SASC 84, applied.
Lifeplan Australia Friendly Society Pty Ltd & Anor v Ancient Order of Foresters in Victoria Friendly Society Ltd 115 SASR 223; Edwin Hill & Partners v First National Finance Corp plc [1989] 1 WLR 225; Sanders v Snell (1998) 196 CLR 329, considered.

IDAMENEO (NO 123) PTY LTD v SUSZKO
[2013] SASC 76
JUDGE DART:
The current proceedings

The plaintiff is a company which operates medical centres throughout Australia. These proceedings relate to a medical centre it operates at Royal Park.
The defendant is a medical practitioner. In December 2007 he entered into two written agreements with the plaintiff. The first was a Sale of Practice Deed (“the Sale Deed”) by which he sold the plaintiff his medical practice at Robe Street, Port Adelaide. The Sale Deed obliged the defendant to provide medical services at the plaintiff’s Royal Park clinic for a minimum period of five years and to enter into a deed called “Provision of Services to Medical Practitioner” (“the Services Deed”), which contained the terms and conditions by which the medical services were to be provided.
The Sale Deed contained a restraint of trade provision (“the Restraint Provision”), which became operative from the date of the termination of the Services Deed. The effect of the Restraint Provision is that the defendant was not, for a period of three years, to provide medical services within a radius of 10 kilometres from either his former Port Adelaide practice or the Royal Park clinic operated by the plaintiff.
The Services Deed provided that after a period of five years either party could terminate it on 30 days written notice. There is no restraint provision in that agreement.
On 19 November 2012 the defendant gave written notice of his intention to terminate the Services Deed. The date of termination nominated by the notice was 14 February 2013, which was five years plus 30 days from the date the defendant commenced providing medical services at the plaintiff’s clinic at Royal Park.
On 4 March 2013 the defendant entered into a written contract with Arm Fleat Pty Ltd, which trades as the Western Hospital (“the Hospital”) at Henley Beach. That contract provided that the defendant would work as a general practitioner at the Hospital on a part-time basis. The location of the Hospital falls within the radius of 10 kilometres from the plaintiff’s clinic at Royal Park.
In these proceedings the plaintiff alleges that, by reason of his employment by the Hospital, the defendant is in breach of the Restraint Provision.
This application
The plaintiff has now commenced an application for pre-action disclosure. The application seeks an order requiring the Hospital to make disclosure of a range of documents. It is slightly unusual, in that an application for pre-action disclosure is normally commenced as a stand-alone proceeding. The solicitors for the Hospital are the same solicitors that act for the defendant and no issue arises by reason of the application being brought in these proceedings.
In the application the plaintiff seeks disclosure of the following:
2That the Proper Officer of Armfleat Pty Ltd trading as Western Hospital do within five days of this Order produce to Randle & Taylor Solicitors of 204-206 Carrington Street, Adelaide SA 5000, the solicitors for the plaintiff true copies of the following documents:-
2.1    any notes of meetings or discussions, or any email communication between the Hospital and the Defendant relating to him providing (or possibly providing) medical services at the Hospital.
2.2    any correspondence or letters of intent relating to the provision (or possible provision) of medical services by the Defendant.
2.3    a list of every patient by name, birthdate, and Medicare number that the Defendant has seen since he commenced working at the Hospital on or about 4 March 2013.
2.4    all documents recording the basis upon which all financial charges are made, or money is otherwise received, by the Hospital consequent upon the provision of medical services to a patient at the Hospital by the Defendant.
2.5    the Defendant’s employment file.
2.6    details of all payments received by the Hospital arising out of or in connection with the provision of medical services by the Defendant and the Hospital.
The application is supported by an affidavit sworn by the State Manager of the plaintiff and also by an affidavit sworn by the solicitor acting for the plaintiff. In the solicitor’s affidavit the operative paragraph is paragraph 7 which is as follows:
7.The Plaintiff requires this information in order to assess whether Armfleat Pty Ltd may have knowingly induced, encouraged or aided and abetted a breach of contract by the Defendant, and to assess the possible extent of damages. In particular the Plaintiff is concerned that the existence of the restraint contained in the Sale of Practice Deed between the Plaintiff and the Defendant may have been known to the Hospital in advance of placing the Defendant on a probationary contract of employment, and that by offering him employment the Hospital may have committed a tortious act.
The purpose of the application is twofold. First, to determine whether or not the plaintiff has a claim against the Hospital for inducing a breach of contract by the defendant and, secondly, to assess the likely damages, if any. If facts to support the nominated cause of action are identified, the Hospital will be likely joined as an additional defendant to the proceedings.
The Rule
The relevant rule is r 32 Supreme Court Civil Rules 2006, which provides as follows:
32—Investigation
(1)     If the Court is satisfied, on application by a person (the plaintiff) that the plaintiff may have a good cause of action and requires further information—
(a)     to determine whether a cause of action exists; or
(b)     to formulate the claim properly; or
(c)     to determine against whom the claim lies,
the Court may exercise the investigative powers conferred by this rule in anticipation of an action.
(2)     The Court may, if satisfied that a person may be in possession of evidentiary material relevant to the possible cause of action, make an order imposing one or more of the following requirements—
(a)to disclose to the Court or to the plaintiff whether the person is or has been in possession of relevant evidentiary material and, if so, to disclose full particulars of relevant evidentiary material that is, or has been, in the person's possession;
(b)if the person is in possession of relevant evidentiary material—to produce it to the Court or to the plaintiff;
(c)to verify the person's response to the order by affidavit.
(3)     After considering a person's response (or failure to respond) to an order under subrule (2), the Court may require the person to appear before the Court for cross-examination.
(4)     Subject to any direction by the Court to the contrary, a person against whom an order is made under this rule is entitled to reasonable compensation from the plaintiff for the time and expense involved in complying with the order.
(5)     The compensation is to be fixed by agreement between the plaintiff and the person entitled to the compensation or, in default of agreement, by the Court.
The rule makes clear that as a starting point an applicant must satisfy the Court that it may have a good cause of action, and also that it requires further information for one of the purposes set out in subr (1) of the rule.
It is only if the Court is satisfied of both of those matters that the Court is in a position to consider the exercise of its discretion. A question that arises, therefore, is what is it that an applicant must put before the Court for the purposes of satisfying the Court of those two matters.
The New South Wales Supreme Court has a similar rule.[1] In that rule the threshold issue is whether it appears that the applicant may be entitled to make a claim.
[1] Rule 5.3, New South Wales Uniform Civil Procedure Rules.
The New South Wales Court of Appeal in Hatfield v TCN Channel Nine Pty Ltd[2] considered the principles applicable to its rule to be as follows:
46    It is convenient to set out the key principles relevant to an application for preliminary discovery. …
47    First, “[i]n order for it to ‘appear’ to the Court that the applicant ‘may be entitled’ to make a claim for relief, it is not necessary for the applicant to show a prima facie or pleadable case”.
48    Secondly, while “the mere assertion of a case is insufficient…[i]t will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground”.
49    Thirdly, “belief requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action”. … The use of the word “may” indicates the court does not have to reach “a firm view that there is a right to relief”.
…
52    Sixthly, … “the rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case”.
[Citation of authorities omitted. In the main, they are authorities on the Federal Court O15A r6.]
[2] (2010) 77 NSWLR 506 at [46]-[52].
In a judgment in this Court it has been held that the principles relevant to the threshold test in the New South Wales Rules are also applicable to r 32.[3]
[3] Newport Quays Pty Ltd & Ors v The Urban Renewal Authority & Ors [2012] SASC 84.
It can be accepted that r 32 is to be construed beneficially and given the fullest scope that its language will reasonably allow. It is also necessary to bear in mind that an exercise of the powers provided by r 32 involves an intrusion into the right of a citizen to keep its documents and information private.[4]
[4] Lifeplan Australia Friendly Society Pty Ltd & Anor v Ancient Order of Foresters in Victoria Friendly SocietyLtd (2013) 115 SASR 223.
Consideration of issues
The plaintiff’s counsel submitted that the cause of action that it may have against the Hospital is for the tort of inducing a breach of contract. The defendant was entitled to terminate his contract at the time and in the manner in which he did. No breach arises from that. The plaintiff’s claim is limited to the Hospital inducing a breach of the Restraint Provision.
The tort of inducing a breach of contract is an intentional tort and requires a defendant acted with the necessary knowledge and intention of procuring a breach of contract.[5] It is not enough that the breach was a natural consequence of the defendant’s conduct. The defendant must have intended it.[6] Therefore, the simple act of the Hospital hiring the defendant to act as a general practitioner in its hospital would not, without more, amount to the tort of inducing a breach of contract.
[5] Edwin Hill & Partners v First National Finance Corp plc [1989] 1 WLR 225 at 234.
[6] Sanders v Snell (1998) 196 CLR 329 at 339.
The plaintiff advanced limited evidence in support of its application. In the main the evidence consists of the defendant’s two agreements with the plaintiff and his agreement with the Hospital. The chronology of events is not in dispute.
During the argument counsel for the plaintiff submitted that the Court should assume that the defendant, as a medical practitioner of good standing, would have made full disclosure to the Hospital of the Restraint Provision and its effect. It follows, says the plaintiff, that the Hospital in proceeding to engage the defendant in such circumstances induced a breach by the defendant of the Restraint Provision. In my view, that is simply speculation. There is no evidence one way or the other as to whether the Hospital knew of the Restraint Provision at the time of contracting with the defendant.
It was also put that the Hospital was on notice of the Restraint Provision by reason of the plaintiff’s letter to the Hospital dated 4 April 2013. The difficulty with that proposition is that the letter was sent a month after the Hospital contracted with the defendant. It does not assist in determining the Hospital’s intention at the time it contracted with the defendant.
To satisfy the Court that it may have a good cause of action, the plaintiff is required to put evidence before the Court to establish that what it is alleging goes beyond mere assertion, is more than suspicion or conjecture and is more than simply a possibility. There is a possibility that the Hospital induced a breach of the Restraint Provision by the defendant, but it remains only a mere possibility. There is no evidence of any conduct of the Hospital which would incline the Court to the view that the plaintiff may have a cause of action against it.
In applications of this type an applicant will usually have an incomplete factual picture of the relevant events. The rule exists to permit the applicant to complete the picture to determine whether or not a cause of action exists. The rule is intrusive, however, and the Court should not make an order directing disclosure of documents in circumstances which amount to no more than a speculative exercise to determine whether or not a cause of action exists. In my opinion, the plaintiff has not satisfied the threshold test and therefore no order can be made on the application.
Although not strictly necessary to do so, I propose to make some comments about how the Court’s discretion might have been exercised in this case, if it had been necessary to do so. The application seeks disclosure of documents which go to the question of the liability of the Hospital as well as to the question of the quantum of damages.
In order to balance the competing interests of an applicant seeking disclosure and the holder of the documents sought, it may sometimes be appropriate to direct that there be a two-stage process. If documents relating to damages are particularly sensitive or involve documents belonging to people who will not be parties to the proposed litigation, it may be preferable to direct disclosure of documents on the question of liability first. Only if those documents disclose that the applicant may have a viable cause of action which it is seriously considering pursuing will the Court need to consider disclosure of further documents.
If the plaintiff had met the threshold test, I would have ordered that the documents sought in paragraphs 2.1, 2.2 and 2.5 of the application be provided as a first step, with consideration of the balance of the application held over until the plaintiff was in a position to satisfy the Court further in relation to the cause of action.
In the circumstances, the application should be dismissed and I will hear the parties on the question of costs.