IVF Australia Pty Ltd v Palantrou Pty Ltd

[2005] NSWSC 810

CITATION:	IVF Australia Pty Ltd v Palantrou Pty Ltd [2005] NSWSC 810
HEARING DATE(S):	03/08/05
JUDGMENT DATE :	3 August 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Limited injunction granted.

CATCHWORDS:	EQUITY [335][338]- Interlocutory injunction- Plaintiff runs in vitro fertilisation medical clinic- Legal relationship between clinic and defendant doctors unclear- Doctors established rival clinic- Doctors using patient information taken from clinic's database- Plaintiff asserts misuse of information on various bases- Test whether plaintiff has arguable case only just satisfied- Much of damage to plaintiff, if any, already occurred- In circumstances limited injunction granted to restrain defendants using information for certain purposes.
LEGISLATION CITED:	Health Records and Information Privacy Act 2002 Privacy Act 1988 (Cth)
CASES CITED:	Beck v Montana Constructions Pty Ltd (1963) 80 WN (NSW) 1578 Breen v Williams (1996) 186 CLR 71 Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd (2002) 119 FCR 491 Health Services For Men Pty Ltd v D'Souza (2000) 48 NSWLR 448 John Fairfax & Sons Pty Ltd v Australian Consolidated Press (1959) 60 SR (NSW) 413 Ng v Clyde Securities Ltd [1976] NSWLR 443 Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd (2002) 55 IPR 542
PARTIES:	IVF Australia Pty Ltd (P) Palantrou Pty Limited (D1) David Knight (D2) Kim Matthews (D3) Georgiana Tang (D4) John Tyler (D5)
FILE NUMBER(S):	SC 4166/05
COUNSEL:	J R J Lockhart (P) M Bozic SC and H Stowe (D)
SOLICITORS:	Johnson Winter & Slattery (P) TressCox (D)

LOWER COURT JURISDICTION:

-

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 3 August 2005

4166/05 – IVF AUSTRALIA PTY LTD v PALANTROU PTY LTD

JUDGMENT

1 HIS HONOUR: This is an application for an interlocutory injunction brought by the plaintiff which runs a business in various parts of Sydney. The business involves medical specialists with programs to bring about in vitro fertilisation. The exact legal analysis of the relationship between the parties is very difficult to fathom and for the moment I will use vague terms.

2 The plaintiff discussed with the medical specialists whether those specialists would sign a letter of agreement. In the case of the second defendant, Dr Knight, there is in evidence a letter of 4 October 2002 which was signed by a person who describes himself as CEO, which Dr Knight has signed under the words "I hereby confirm my agreement to the above".

3 Paragraph 2 of the letter provides that the letter "covers all of what has been agreed between us" and indeed at the beginning of paragraph 2 are the words "(Whole Agreement"). Accordingly, one would expect not to find any implied terms and that as the letter was drafted by the plaintiff, one would expect to find the ambit of the agreement wholly within the letter and if there was any ambiguity, to construe it contra proferentem.

4 Paragraph 3 of the letter which is headed "Responsibilities and Services" starts:

“The responsibilities and services to be provided by each of us are detailed in the attached schedule entitled...".

5 When one looks at that it contains two paragraphs. Paragraph 1, the "Plaintiff's Services to be Provided" and paragraph 2, what is called the "Consultant's Responsibilities". The former provides that the plaintiff will do certain measurements, assessments, support and counsel. It will schedule appointments and bill. It will do patient administration. It will report patient clinical data to the consultant and provide consulting rooms, subject to availability at agreed times, reception and secretarial services. There is no direct or indirect reference to the keeping of records apart from the obligation of the plaintiff to report patient data to the consultant.

6 The second half of the document, although headed "Consultant Responsibilities", says that the consultant is to provide services and perform responsibilities and these are then listed, including: to provide agreed patient clinical data, to conduct surgical procedures and to participate in research projects and work shops conducted under the auspices of the plaintiff.

7 Paragraph 4 of the letter deals with fees payable. It is a little hard to work out just how this fits into the general arrangement because it would appear that the basic system was that each patient coming to the enterprise would have to have a letter of referral from a general practitioner to a particular named specialist. The evidence before me to date, and of course at this early stage it may change before the final hearing, shows that in many cases the general practitioner nominated the specialist, but, in many other cases, the patient was attracted to the plaintiff by the advertisements which the plaintiff disseminated in the state-wide media and the plaintiff indicated to the prospective patient which of the specialists who had entered into agreements with it, might be the appropriate person for their general practitioner to recommend.

8 The way in which the patient paid for what was happening at the plaintiff's premises is also a little unclear. It would certainly seem that with respect to some procedures the doctor, as a registered provider of medical services, rendered an invoice to the patient using the secretarial services of the plaintiff, the plaintiff then receipted it in the name of the doctor so that the appropriate benefit could be collected by the patient and then there was some accounting arrangement between the two. However, there were other services which may not have been covered by that system where the patient paid the plaintiff and then we get other services where a doctor who was rostered to do that procedure that day would attend to all patients who came in for that particular procedure on that day, whether they had been referred to that specialist or not. This is subject to the proviso that patients could choose that they would only see the one doctor, in which case that wish was fulfilled. The medical services ranged over quite a wide spectrum, some of which were very specialised within the particular specialty of the medical specialist, while others were not.

9 The letter indicated that the agreement between the parties would last initially for 5 years, subject to termination under clause 14 and that with some exceptions, the specialists agreed not to directly or indirectly refer patients to any other provider in the medical area for 6 months after termination. Clause 16 and 17 are as follows:

“16 (Relationship of Parties). The relationship between us is that of principal and consultant, not that of employer/employee, principal/agent, joint venturers or partners.
17 (Intellectual Property). During the term of this agreement you will have access to and acquire confidential clinical, scientific and commercial information that is the intellectual property of IVFA (IVFA was a short form of expressing the plaintiff's name). You agree not to divulge any such information to third parties or to use it in any way except to carry out your duties under this letter, without the express prior written agreement of IVFA. Upon termination of this agreement, you must immediately return all confidential clinical, scientific and commercial documents and intellectual property provided by IVFA and either return to IVFA or destroy to IVFA's satisfaction any copies of such information made by you."

10 I am not too sure what para 16 means. It clearly excludes the employer/employee relationship but what is the relationship of principal and consultant? I believe that will have to remain for the final hearing of these proceedings.

11 So far as clause 17 is concerned a letter of 16 June 2005 to Dr Tang, one of the defendants which I believe is in similar form to that sent to other doctors, contains the following paragraphs:

"... by your subsequent actions ... in establishing a new clinic and other breaches of the letter agreement, you have clearly evinced an intention no longer to be bound by the letter agreement, and have repudiated it.
In the circumstances, IVFA elects to terminate the letter agreement by reason of this repudiation, while reserving its rights to claim damages for past breaches (as well as damages as a consequence of your repudiation of the letter agreement). Accordingly, as from the close of business Friday 17 June 2005, you will no longer have access to IVFA's consulting rooms at Westmead ... ."

12 It is thus clear that the agreement has terminated and that at some stage or other, the plaintiff will seek damages for loss of bargain.

13 In order to carry out its arrangements with the several medical specialists who had signed letters, the plaintiff established what it calls a "database". Now, "database" is a scientific-sounding word but unfortunately it is a bit of a weasel-word and it is really just a modern way of expressing a collection of information stored electronically.

14 Mr Lockhart, of counsel, who appeared for the plaintiff, consistently said the plaintiff owns the database. With great respect, this is a very vague statement. It is true that insofar as the information is stored in a particular way and in a particular form that there is copyright in the way in which the compilation is made; see, for instance, John Fairfax & Sons Pty Ltd v Australian Consolidated Press (1959) 60 SR (NSW) 413 and Desktop Marketing Systems Pty Limited v Telstra Corporation Ltd (2002) 119 FCR 491.

15 However that does not mean for a moment that the plaintiff is the owner of the information which it has compiled. When one looks a little more closely at what is meant by "database" one can see that there is stored on a computer owned by the plaintiff, a series of electronic cards, if I can coin that expression, which has subsets entitled: contracts, appointments, correspondence, invoices, orders, profiles, projects and time sheets.

16 Some of that information would seem to be the property of the plaintiff. Some of it may be confidential, though it is hard to see what, as even the name and address of the patient may not be confidential information. And certainly it would not be confidential information of the plaintiff, in the case where a general practitioner referred one of the patients to a particular specialist, nor would the past history of appointments. However, the subset of profiles, which appears to be the treatment of the particular patient and the various tests that she or he had been administered, may or may not come into this area.

17 Mr Bozic SC, who appeared with Mr Stowe for the defendants said, that really the proper analysis of the letter agreement was that the specialists retained the plaintiff to do the administrative work including keeping their records for them. They put, at least impliedly, that there was an obligation, either contractual, statutory or common sense, for the doctors to keep records and the most convenient way of doing that was to have the plaintiff incorporate the records in its computer system. However, just as a person, by dictating something to a secretary does not make the secretary the proprietor of the information, so the information was still owned by the doctors. One must remember that Dawson and Toohey JJ in Breen v Williams (1996) 186 CLR 71 at 88 noted that as a general rule, documents brought into existence by an agent while in the employ of a principal belong to the principal and not to the agent. This tells against the plaintiff's position. On the other hand, we have the decision of the Court of Appeal in Health Services For Men Pty Limited v D’Souza (2000) 48 NSWLR 448 where a doctor in a general practitioner-level medical practice was contracted to an organisation to assist in providing a service at its clinic to patients who attended the clinic, the medical records were held to belong to the clinic and not to the individual doctors. In their written submissions, counsel for the defendants sought to distinguish D'Souza's case. I pay tribute to the ingenuity in trying to do so, but with great respect, it was not convincing.

18 However, what counsel for the defendants say is correct and one must approach these particular problems by looking at the contractual arrangements between the parties and of course the factual matrix in which those contractual arrangements take place.

19 When one shies away from the broad term "database" and looks at the actual compilation and the information which is compiled, it seems to me that the case becomes much clearer. There is no doubt at all, and indeed I think counsel for the defendants even acknowledged it, that the plaintiff has copyright in the compilation and that subject to the licence to use, that is the plaintiff's property and the plaintiff is entitled to some protection of it.

20 So far as the licence to use is concerned, the defendants point to cases dealing with the right of the client to use plans prepared by an architect such as Beck v Montana Constructions Pty Limited (1963) 80 WN (NSW) 1578 at 1580-1; Ng v Clyde Securities Limited [1976] NSWLR 443 and the recent decision of the Court of Appeal in Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd (2002) 55 IPR 542.

21 The present situation can be distinguished from the Beck-type situation. Obviously at the very least there was a licence to use the copyright material when the defendant doctors were acting as consultants under the letter agreement, but I cannot see how the Beck principle provides any greater licence than this.

22 The defendants seem to be saying, however, that they are not using the plaintiff's compilation, but that they are merely using the information which they originally gleaned from it.

23 However, this is only an interlocutory hearing and one has not been able to delve too deeply, but Dr Knight's affidavit seems to me to be very equivocal. There is no doubt at all that somewhere about 1 May 2005 he downloaded the plaintiff's database into his own electronic equipment. He says that in due course he burned that on to three CDs which were later surrendered to the plaintiff's solicitors, but much of the material is obviously still in his possession in one form or another. He says that there is no copyright in the information, only in the compilation. He says further that it is not the plaintiff's confidential information. What has happened, it would seem, is that the information taken by Dr Knight while he was still in a relationship with the plaintiff is now put into the defendants' database which is called a "BHealthy database" which Dr Knight described as "another OMZ database for which I have a licence". In addition, he says some of the patient information has also gone into a scientific database referred to earlier in the affidavit.

24 He admits that he used the information in the database, from which one could only naturally read as meaning the plaintiff's database, to send letters to inform patients of his change of address, telephone some patients to reschedule appointments and inform referring doctors of his change of address. Inasmuch as he has done this it is no longer a matter for injunction as, to use the usual catch phrase "the horse has bolted". What has been done, has been done. If he was not entitled to do that, then that will sound in damages in due course but for the present purposes of considering what sort of injunction should be granted, it is of no real moment.

25 However, in his affidavit under the heading "Prejudice caused by deletion of database", the doctor says that even if he had all the hard copy files in relation to all of his patients, the deletion of the database would cause significant prejudice to his ongoing patient care "because the data on the database provides a massively important statistical tool for a number of very significant aspects" of his practice. The principal significance is that:

“The database facilitates a retrospective assessment of the efficacy of various forms of treatment for particular demographic groups. This can be utilised for the determination of appropriate treatment strategies for patients under my care. It is my practice to use the database for this process approximately a dozen times a week."

26 It is not clear whether he is talking about the patient database or the BHealthy database. But whichever it is, it would seem that that database contains information not only of the patients who have been referred to Dr Knight, but also of others as well.

27 It seems to me that in using the material which was compiled by the plaintiff, it is more likely than not that he is using some material belonging to the plaintiff and such use runs outside anything that should be protected in the hands of the defendants. Especially is this so when one bears in mind that that information was abstracted without the knowledge of the plaintiff while the defendants were still in a relationship with it. The defence to this is that the defendants were legally entitled to extract the material but it is certainly strongly arguable that they were not entitled at all or at least were not permitted to extract the material otherwise than for the purpose of serving in accordance with the letter agreement.

28 I should make it clear that there does not appear to be any contest between the parties that the defendant doctors may have all relevant details of patients who have attended upon any of the defendant doctors, either at an initial consultation or follow-up appointment so that there is no concern of prejudice to members of the public. However, there is an area where the patient was, if I could use the term "processed", by the rostered doctor and the rostered doctor just happened to be one of the doctors who is now a defendant to these proceedings. I would have thought that it is not appropriate for the defendants to have that information in their possession unless the patient concerned consents.

29 In the D'Souza case at first instance, Bryson J worked out a method of dealing with this sort of problem and that was to appoint a referee to arbitrate or mediate in any dispute as to whose patient each person was. Because the Court of Appeal took a different view of the whole case, they did not continue that order but that would be a very sensible way of dealing with that particular problem in the instant case rather than granting any injunction. I encourage the parties to adopt some such course to deal with this part of their dispute.

30 The plaintiff seeks orders that:

1. Until further order the defendants and each of them be restrained from reproducing in material form the OMZ database or a substantial part of any of the OMZ database as that term is used in the Channon affidavit.

2. Until further order, the defendants be restrained from using:

(a) the BHealthy database ... to the extent that it involves using or accessing information which was imported into it from the OMZ base;
(b) any copies (held in electronic or paper form) made of the OMZ database or from any part of it.

3. Order that the second defendant, that is Dr Knight, make, file and serve an affidavit within … days of the making of these orders that discloses with particularity details of the use, if any, of which he is aware that has been made of the information downloaded by him from the OMZ database, other than as disclosed in his affidavit sworn 3 August 2005.

31 This is an application for an interlocutory injunction. At the start of the proceedings Mr Lockhart applied to cross-examine various of the doctors. The basis of that application was that he wanted to cross-examine particularly on the prejudice caused by lack of access to the database pending the hearing but also on a wider field. This was resisted by the defendants because, in accordance with the usual practice, it is generally of minimal value to permit cross-examination because the Court does not find facts, it merely works out what is the most just way of preserving the status quo pending the final hearing of the proceedings.

32 Iwas tempted to allow cross-examination on the first basis, though it did not seem to me that in the long run cross-examination would be that helpful. However, when it appeared that there would have had to have been a delay of the hearing of an hour to an hour and a half, I ruled against cross-examination. I am satisfied that it has made no difference at all to the result of this interlocutory hearing.

33 It is well-known that in order to obtain an interlocutory injunction the plaintiff must establish:

1. That there is a prima facie or strongly arguable case;

2. The balance of convenience favours the grant rather than the refusal of the injunction;

3. Damages are not an adequate remedy.

34 As to the first, Mr Lockhart says that there are six strong arguments as to why there is an arguable case or serious issue to be tried, namely:

(1) The defendants have breached the Health Records and Information Privacy Act 2002;


(2) The defendants have breached the Privacy Act 1988 (Cth);

(3) There was a breach of contract;

(4) There is unconscionable conduct in using confidential information;

(5) There is breach of copyright;

(6) There are breaches of fiduciary duties by the taking of information and engaging in a competing business and enticing staff away, etc.

35 On the other hand, Mr Bozic and Mr Stowe say that the plaintiff has a very weak case.

36 The case founded by the plaintiff is not as strong as Mr Lockhart would have it. The Health Records and Information Privacy Act seems to give no right to a civil action and the Privacy Act does not give an action in this Court, though it may be that an action in the Federal Court could be brought here under the cross-vesting legislation.

37 So far as a breach of contract is concerned, clause 17 is, with great respect to the drafter, rather a mass of gobbledegook and that one would have to imply a term that a doctor engaged is not to take information without authority which is a little hard to do in view of the whole agreement clause (clause 2).

38 As for breach of confidential information, the problem is to try and find some confidential information. There may be some confidential information in respect of the tests administered to various patients, but the parties agree if those persons are genuine patients of the defendants, the defendants can have the information and if they are not they should not have it.

39 As to breach of copyright I have already dealt with this and there is no doubt that if what is really happening by the defendants is breach of copyright there should be some sort of injunction. However, if there has been a breach of copyright and there may well have been, the horse has bolted.

40 So far as breaches of fiduciary duties are concerned, by taking the information and engaging in a competing business there may be some breach, but again, the consequences that flow in the next few months may not warrant an injunction.

41 The case has a bit of a nasty flavour about it in that the plaintiff was the entrepreneur who put the whole enterprise together. There was advertising on behalf of and at the expense of the plaintiff which brought patients into the practice. Further, the situations set out in the Court of Appeal judgment in D'Souza's case show that whatever the exact classification of the cause of action, there was some property in the plaintiff which required protection. The main protection needed probably is in respect of repeat patients. There is only a little bit of evidence as to whether return patients are common in this industry or not. It would seem that those who have gone through a procedure which has not been successful may well return after a period, but as I say there is not that much evidence.

42 The plaintiff sought to raise an argument under the Health Records and Information Privacy Act. It alleged that it was providing "health services" within the meaning of the definition in s 4 of the Act in that it was providing medical, hospital nursing services, pharmaceutical services and health education services. I was not satisfied on the evidence before me at the moment that that is so, but even if it was, the Act would only protect as "health information", information within what the plaintiff was doing with respect to those services and not what the registered medical practitioners were doing in connection with their practice, of which the plaintiff was some sort of agent, secretary or administrator. Accordingly, that part of the case did not impress me at all.

43 However, on the standard test, which is not very high, I would have to conclude on the balance of probabilities that the plaintiff had just got over the barrier of showing an arguable case.

44 So far as damages are concerned it would be very difficult to assess the damages in this particular case. One way in which one could assess damages would be how much it would cost in the market place for the defendants to have a licence to use the plaintiff's material. However there is no market as far as I can see by which that notional licence fee could be assessed. Again, it would be very difficult to show that if the defendants had not acted in the way they did, particular patients would have still resorted to the plaintiff. Accordingly, I find damages are not an adequate remedy.

45 Accordingly, I am into the area where I have to assess what is the balance of convenience. That, of course means, balance of justice. What is the most appropriate way of being fair between the parties while this case gets ready? I asked at the beginning how long it would take to prepare the case and I was told about a couple of months. I understood that to mean that it would be a couple of months before the plaintiff's case was finalised and that thereafter there would need to be some time for the defendants to put their evidence on. As it is now August, the likelihood is that the Court would not be able to hear the matter until early 2006, unless some order for expedition was made. Accordingly, what I am to do now will probably affect the parties for up to the next 6 months. In that period, is it fair that the defendants continue on without any undertaking to account (which has not been asked for and probably would be impractical anyhow) or should they be restrained from doing some or all of the things which they are currently doing?

46 I believe that there should be some limitation on the defendants but certainly nowhere near as wide as the plaintiff seeks. To a great deal the horse has bolted: the patients and general practitioners have been circulated. However it would seem to me that the defendants are making more use of the material which was abstracted from the plaintiff's database than they should reasonably be allowed to take advantage of over the period until the hearing.

47 I was inclined at one stage to order that there be no more circular letters to patients on the database but neither side really seems particularly concerned about that. The defendants do not appear to be breaching copyright in the compilation any further. It seems to me that the only order that the plaintiff is entitled to up until the final hearing is that the defendants not make any use of the material which they abstracted from the plaintiff's database for any statistical or research purposes other than with the written consent of the plaintiff. I make that order on the usual undertaking as to damages and then stand the matter over to the Registrar's list on 18 August 2005 at 9.30 am. Costs will be costs in the cause. The exhibits can be returned. I note the undertaking is given.

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