Idameneo v Butterworth (No 123)
[2013] NSWSC 357
•10 April 2013
Supreme Court
New South Wales
Medium Neutral Citation: Idameneo (No 123) v Butterworth [2013] NSWSC 357 Hearing dates: 10/04/2013 Decision date: 10 April 2013 Before: McDougall J Decision: Accept defendant's undertakings to the court. Refuse application for interlocutory relief.
Catchwords: PRACTICE & PROCEDURE - application for interlocutory injunction - defendant undertakes to keep full records - damages an adequate remedy. Category: Procedural and other rulings Parties: Idameneo (No 123) Pty Limited (Plaintiff)
Edward Trickett Butterworth (Defendant)Representation: Counsel:
S E Gray (Plaintiff)
S L Bell (Defendant)
Solicitors:
Turner Freeman Lawyers (Plaintiff)
Websters (Defendant)
File Number(s): 2013/94170
Judgment (EX TEMPORE - REVISED 10 APRIL 2013)
HIS HONOUR: This is an application for an interlocutory injunction to restrain the defendant, Dr Butterworth, from providing medical services at a practice in Macquarie Place, Sydney.
The plaintiff (Idameneo) agreed with Dr Butterworth on 23 December 2009 to buy a practice then conducted by him at Level 1, 70 Pitt Street Sydney. The purchase price was $200,000, payable by equal instalments over a period of five years.
It was also agreed that on completion of the sale, Idameneo and Dr Butterworth would enter into a document called "Provision of Services to Medical Practitioner", which the parties called, and I shall call, the Practitioner Contract. Under that contract, and despite its title, Dr Butterworth agreed in effect to work for Idameneo at a practice conducted by it at 580 George Street Sydney, on the terms set out in the Practitioner Contract.
By cl 5.1 of the sale contract, Dr Butterworth agreed that he would not during a "restraint period" defined in cl 5.2 render medical services at any place within 5 kilometres of Level 1, 70 Pitt Street, Sydney or 5 kilometres of 580 George Street Sydney (I have cut through the definitions to the facts). The "restraint period" was stipulated to be the later of the fifth anniversary of completion of the sale contract, or the third anniversary of termination of the Practitioner Contract.
There were some carve-outs, including one to permit Dr Butterworth to
render urgent medical attention.
By cl 5.4 of the sale contract, Dr Butterworth agreed that each time he rendered medical services in breach of clause 5.1, he would pay to Idameneo as agreed and assessed damages "50% of the gross fee payable to [Dr Butterworth] in respect of that medical service".
Dr Butterworth has terminated, or purported to terminate, the Practitioner Contract. He has started to work at a practice at Level 6, 1 Macquarie Place Sydney. That is something like 450 metres from Level 1, 70 Pitt Street Sydney, and 1.45 kilometres from 580 George Street Sydney. It is comfortably within the radii of the restraint. It is also comfortably within the five year term following completion of the sale contract.
Dr Butterworth claims that he was justified in terminating the contract because there was either a fundamental change to the basis on which services were provided from the practice at 580 George Street Sydney or because there was unconscionable conduct in relation to it.
In brief, Dr Butterworth says that, to the knowledge of Idamenao, it was fundamental (to the knowledge of Idamenao) to his decision to sell his practice, and enter into the Practitioner Contract, that the practice at 580 George Street Sydney would not be conducted solely on a bulk billing basis. He says that if he were told that it would be or might be, he would never have signed the relevant agreements, nor gone to work for Idameneo.
Alternatively, Dr Butterworth says that in all the circumstances, it was unconscionable for Idameneo, during the term of the Practitioner Contract and during the term of the restraint under the sale contract, to have altered in what he says was a fundamental way the basis on which it billed patients.
Dr Butterworth illustrates the financial impact on him. He said that before the change in the billing system was made, most patients that he saw for a particular consultation, known as a Medicare item 23 consultation, were charged a fee of $66.30, of which $36.60 was the Medicare rebate and the balance was a "co-payment". Under that agreement, he would retain half - $33.15.
Under the changed arrangements, Dr Butterworth says, he got only half the Medicare rebate, namely, $18.30.
He estimates that if he were to perform 20 such consultations in a day, the drop in his income would be from $663 per day to $363 per day.
Dr Butterworth says that due to both his style of practice and his age, it is not practicable for him to increase his hours at the coalface by working in essence twice as long as presently he does, to maintain the same level of income.
There is no doubt that Idameneo has shown a prima facie case of breach of the restraint. As I have observed, the new practice from which Dr Butterworth is providing services is very comfortably within both radii for which the restraint operates. It is also comfortably within the temporal limitation.
There is no evidence of any particular disadvantage that would flow to Idameneo if the interlocutory relief which it seeks were withheld. Mr Gray of counsel, who appeared for Idameneo, submitted that there was a risk that patients would follow Dr Butterworth to his new practice. That may be accepted, at least at the level of principle. But the parties themselves agreed on a remedy for that: payment of one-half of the gross fees payable to Dr Butterworth for services rendered in breach of the restraint.
It might be noted that if, as I would infer is the case, Dr Butterworth is rendering services on a "co-payment" basis at the new practice, the financial return to Idameneo would be greater than the financial return that it would receive from his services on a bulk billing basis at 580 George Street, Sydney.
Equally, there is no evidence from Dr Butterworth, at least expressly, to the effect that he could not carry on his practice outside the radii specified in cl 5.1. It may be inferred from his affidavit that this would be difficult, because he says that many of his former patients worked in the CBD, and he now wishes to practise in a place convenient to them.
There is an obvious disadvantage to Idameneo in that it will lose the benefit of Dr Butterworth's provision of services under the Practitioner Contract. However, Idameneo does not seek specific performance of Dr Butterworth's obligations under the Practitioner Contract.
To my mind, the evidence being as it is, the governing consideration is that the parties stipulated a remedy for the breach of contract, by way of liquidated damages. Whilst I accept that contracts should be performed, and that in general the policy of the law is to require parties to perform their contract rather than to buy their way out by paying damages for breach, nonetheless I do think that cl 5.4 of the sale contract is significant. Where the parties agreed on the consequences of breach, the Court should be slow to substitute its own judgment that some further and more onerous restraint is necessary. It should instead act on the basis that the contract itself indicates the adequacy of damages as a remedy for breach.
Further, I take into account that there is at least some corroboration for Dr Butterworth's evidence to the effect that practising on a basis that did not include universal bulk billing was of importance to his decision to join the 580 George Street Sydney practice (and, thus, to his decision to sell the Level 1, 70 Pitt Street Sydney practice). I accept, as Mr Gray submitted, that there is nothing in the evidence on which Dr Butterworth relies to show that he had any expectation that there could never be any change to the billing arrangements. But that does not detract from the fact that the document on which he relies, emanating from Idameneo itself, does, as I have said, provide some corroboration for this aspect of his evidence.
It seems to be relatively clear that if Dr Butterworth is restrained, he will not rejoin the practice at 580 George Street Sydney. His evidence is quite detailed on the financial disadvantages of his doing so.
Further, in circumstances where Dr Butterworth's evidence is that many of his long-term patients work in the CBD, it is I think open to infer that it would be difficult for him, particularly at the age of 75 or thereabouts, to set up an entirely new practice 5 kilometres or more away from Level 1, 70 Pitt Street Sydney and 580 George Street Sydney.
Dr Butterworth does give to the Court an undertaking that until further order he will keep records including names and gross fees of all patients to whom he renders medical services, and that he will not approach nor cause anyone to approach any patient of the plaintiff's practice at 580 George Street Sydney to solicit their professional custom.
In all the circumstances, and bearing in mind that the significant disadvantage to Idameneo of losing the benefit of Dr Butterworth's services is not sought to be rectified expressly, and appears in any event to be covered by the agreement as to liquidated damages, I think that the best outcome is to accept the undertakings proffered by Dr Butterworth and to refuse the application for interlocutory relief.
In this context, I take into account also that the Court has given directions to have the matter prepared for hearing in a very swift fashion, and that (subject to the outcome of the mediation that is to occur by 17 May 2013) all issues of liability are to be heard on 13 and 14 June this year.
In those circumstances, it seems to me that the disadvantage of maintaining the present position, on the basis of the undertakings offered, does not justify the Court in going to the further step of restraining Dr Butterworth from practising. That would cause inconvenience not only to him but also to those of his long-term patients who wish to see him between now and the time when the issues of liability are resolved.
I should have observed, in relation to the agreed liquidated damages clause, that Mr Gray submitted that there was no evidence of Dr Butterworth's ability to meet it. However, the clause is what it is; it is what the parties agreed; and I think that the bargain should be left where it is.
For those reasons I make the following orders:
1. I note that the defendant by counsel gives to the Court the undertakings set out in para 27 of his affidavit sworn 9 April 2013.
2. I order that the notice of motion filed on 27 March 2013 be dismissed.
3. Subject to hearing from the parties, I order that the costs of that notice of motion be the defendant's costs in the suit.
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Decision last updated: 16 April 2013
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