N E Perry Pty Ltd v Judge & AMJ Chiropractors Pty Ltd (No 2) No. Scciv-03-297

N E PERRY PTY LTD v ALLAN JUDGE &
AMJ CHIROPRACTORS PTY LTD (NO 2)
[2003] SASC 364
Full Court: Mullighan, Gray & Besanko JJ

MULLIGHAN J I would dismiss the appeal for the reasons given by Besanko J.
GRAY J I agree with the reasons of Besanko J. The appeal should be dismissed.
BESANKO J This is an appeal from orders made by a Judge of the District Court on 18 February 2003. A detailed statement of the facts and the course of the action is contained in the reasons for judgment of the Full Court in NE Perry Pty Ltd v Judge and Anor (2002) 84 SASR 86. In summary, N E Perry Pty Ltd brought proceedings in the District Court seeking to enforce against Mr Allan Judge and AMJ Chiropractors Pty Ltd two restraints in a contract that N E Perry Pty Ltd claimed it entered into with Mr Judge, or in the alternative, AMJ Chiropractors. The contract contained provision for Mr Judge or in the alternative, AMJ Chiropractors, to provide chiropractic services to patients at the practice of N E Perry Pty Ltd in Whyalla and contained a clause restricting Mr Judge or in the alternative, AMJ Chiropractors, for two years after the termination of the contract, from practising in Whyalla (“the restraint on practice”) or from inducing any client of the practice to become a client of Mr Judge or in the alternative, AMJ Chiropractors (“the restraint against inducement”). The Judge of the District Court held that the other party to the contract was AMJ Chiropractors Pty Ltd and that Mr Judge was not a party to the contract. The Judge held that the two restraints were unenforceable, and he dismissed the plaintiff’s claim.
The plaintiff appealed against the decision of the Judge. On 3 October 2002 the Full Court of this Court allowed the appeal, set aside the judgment of the District Court dismissing the plaintiff’s claim and remitted the matter to the District Court for further consideration in light of the reasons of the Court ((2002) 84 SASR 86). The Court upheld the Judge’s decision that Mr Judge was not a party to the contract. The other party to the contract with N E Perry Pty Ltd was AMJ Chiropractors Pty Ltd. The Court said that the Judge was right in holding that the restraint on practice was unenforceable. However, the Court said that the restraint against inducement was enforceable. The Court said that one advertisement put before the Judge was in breach of the covenant against inducement.
The Chief Justice said after noting that a breach of the restraint against inducement had been proved (at paras 55 – 57):
“That leaves the question of the appropriate remedy. It does not follow as a matter of course that it is appropriate to grant an injunction against AMJ or against the first respondent. Whether NEP has proved that any loss was caused to it as a result of one proven breach of the restraint against inducement is unclear. The judge did not deal with the issue.
In my view, the appropriate order is that the appeal be allowed, that the judgment of the District Court dismissing the plaintiff’s claim be set aside, that the matter be remitted to the District Court for further consideration in light of these reasons.
It is necessary to do this because unless NEP has proved the loss attributable to the one proven breach of the restraint on inducement, NEP is entitled to nothing other than nominal damages. It is appropriate for the District Court to consider, as well, whether there is any basis for the grant of an injunction and whether, in all the circumstances, it is appropriate to make a declaration as to the validity of the restraint on inducement, and as to the invalidity of the restraint on practice.”
Bleby J and I agreed with the orders proposed by the Chief Justice.
The matter came back on before the Judge of the District Court. After hearing argument, the Judge made the following orders:
“1.That the plaintiff’s claim against the first defendant be and is hereby dismissed.
2.That the plaintiff have judgment against the second defendant in the amount of $1.00 by way of nominal damages for breach of the inducement provision referred to in paragraph 3 hereof, being an advertisement published in the Whyalla News on 29 October 2001.
3.This Court declares that the following provision of the contract between the plaintiff and the second defendant (“the contract”), which contract by its terms terminated on 31 October 2001, is enforceable:-
‘The Contractor agrees that in consideration of this Agreement they will not use the information contained therein for their own benefit and will not seek to induce any client of the clinic to become a client of the contractor for a period of two years following the termination of this Agreement’.
4.This Court declares that the following provision of the contract between the plaintiff and the second defendant is unenforceable:-
‘The Contractor agrees that they will not practice for two years within the township of Whyalla, or within a 30 kilometre radius of the said practice in Schedule 4 (the Clinic)’.
5.The plaintiff is to pay the costs of the first defendant, such costs to be on a party and party basis.
6.The plaintiff and the second defendant are to each bear their own costs of the proceedings.
7.The question of the assessment of damages (if any) suffered by the first defendant and any other party as a result of the injunction granted by this Honourable Court on 9 November 2001 is referred to the Master for directions.
The Court notes the second defendant’s undertaking that for the period from the date hereof until midnight on 31 October 2003, it will not seek to induce any client or former client of Better Back Whyalla to become a client of AMJ Chiropractors Pty Ltd.”
N E Perry Pty Ltd has appealed to this Court against two of those orders. The appellant complains about the order that it pay the costs of the first respondent (the first defendant) such costs to be on a party and party basis. The appellant also complains about the order that it and the second respondent (the second defendant) are each to bear their own costs of the proceedings. The appellant further complains about the Judge’s decision not to take into account evidence of further breaches of the inducement clause by the second respondent. None of the documents put before this Court indicate how it is said the Judge should have taken into account evidence of further breaches of the restraint against inducement. The fourth complaint in the Notice of Appeal, namely, that the Judge erred in not making an order for an injunction to restrain the second respondent from inducing clients of the clinic, after having found AMJ Chiropractors Pty Ltd guilty of inducement, is no longer pursued.
The first complaint is that the Judge should not have ordered that the appellant pay the first respondent’s costs. In its Statement of Claim, the appellant alleged that the other party to the contract was the first respondent. In the alternative, it alleged that the other party to the contract was the second respondent. The Judge found that the first respondent was not a party to the contract and that the other party to the contract was the second respondent. The appellant challenged that finding in the Full Court. It was unsuccessful, and the Court held that the Judge was right to conclude that the other party to the contract was the second respondent. The appellant’s claim against the first respondent has been unsuccessful. On the face of it, there is no reason why the appellant should not be ordered to pay the costs of the first respondent. The appellant submitted that the Judge erred in that he failed to consider equitable principles to ensure that the final order in relation to costs was just in the circumstances of the case and that he did not consider the conduct of the first respondent and the fact that it resulted in the proceedings brought by the appellant. Had he given proper consideration to those matters (so it was argued), he would have either ordered that there be no order as to costs, or he would have ordered that the second respondent pay the costs of the first respondent.
The appellant referred to equitable principles relevant to unconscionability and equitable estoppel. It was submitted that the first respondent had acted unconscionably in a variety of ways. It was submitted that he had acted unconscionably in failing to advise the appellant that he did not intend to abide by the restraint against practice immediately he formed the intention to act in that way. It was submitted that he had acted unconscionably in failing to abide by the restraint against practice for a period of 12 months, a period which, it was submitted, the Full Court had said in the earlier appeal was reasonable. It was submitted that he had acted unconscionably in failing to compromise the dispute. This last submission must be rejected at the outset. It was not a submission made to the Judge, and there is no evidence before us which would support the submission. As far as the two earlier submissions are concerned, I would reject the first submission on the grounds that the factual basis for the submission has not been made out nor has it been established that it would be appropriate to characterise such conduct as unconscionable, and I would reject the second submission on the latter ground. Even if this is wrong, I am not satisfied that such conduct is relevant to the issue of costs as distinct from (if it had been pleaded) being possibly relevant to the substantive merits of the appellant’s claim.
I reject the first complaint. In my opinion, the appellant has not identified any error in the exercise of the discretion by the Judge sufficient to warrant the intervention of this Court. This Court will only interfere with the exercise of the discretion as to costs if the decision made was so unreasonable or unjust as to require the appellate court to substitute its own discretion (Southern Resources Ltd & Ors v Residues Treatment & Trading Co Ltd & Ors (1990) 56 SASR 455 at 480). It should be noted that in the course of submissions, counsel for the respondents accepted that the order that the appellant pay the first respondent’s costs would, because of the common representation of the respondents from the time the second respondent was joined as a party to the action, entitle the first respondent to recover no more than fifty percent of the costs after that time.
I turn now to the second complaint, namely, that the Judge erred in making the order that the appellant and the second respondent bear their own costs. The appellant put similar arguments to those put in relation to the first complaint. Again, the appellant has not shown that the Judge erred in a way which would justify the intervention of this Court. At trial, the appellant was unsuccessful insofar as its claim asserted a breach of the restraint against practice. This claim was a significant part of the appellant’s case at trial. The appellant did succeed insofar as there was a challenge to the validity of the restraint against inducement, and it did succeed in showing that there had been one breach of this clause. However, it obtained an award of no more than nominal damages. I am inclined to think that if anything the second respondent was more successful at trial than the appellant. Whatever might be said along those lines, it certainly cannot be said that the Judge’s exercise of discretion was so unreasonable or unjust as to require this Court to substitute its own discretion. I reject the second complaint.
I turn now to the third complaint, namely, the Judge erred in not taking into account evidence of further breaches of the inducement clause by the second respondent. At the hearing following the orders of the Full Court on the earlier appeal, the Judge received evidence of other alleged breaches of the restraint against inducement alleged to have occurred before he delivered his first decision and immediately after he delivered his first decision. As far as the former category of evidence is concerned there is nothing to suggest that that evidence was not available to have been put forward at trial. As far as both categories are concerned, the relevance of the evidence to the orders of the Judge which are challenged has not been demonstrated. I think counsel for the appellant accepted that the evidence was not relevant to the orders which are challenged. However, she submitted that the evidence was relevant to the content of the second order, although she acknowledged that that order was not challenged in the Notice of Appeal. Leaving aside the difficulties that this last point creates, I do not think the Judge erred in framing the second order in the way in which he did. The alleged breaches after trial could not be relevant to the award of damages in the second order, and as far as the alleged breaches before trial are concerned, there is nothing to suggest that the evidence was not available to be put forward at trial. In any event, because no loss was proved at the trial, it could not affect the quantum of the nominal damages awarded by the Judge.
The third complaint must be rejected.
In my opinion, the appeal should be dismissed. I would hear the parties on the question of the costs of the appeal.
On the previous appeal the Full Court reserved the question of the costs of that appeal. The order was in the following terms:
“That the question of costs of the appeal be reserved for further consideration in light of the outcome of the District Court’s further consideration of the matter.”
There was a suggestion that the Court as presently constituted might deal with the costs of the previous appeal. I do not think that it would be appropriate for the Court as presently constituted to do so. It is a question which should be dealt with by the Court as constituted on the previous appeal. Sensibly, the parties agree that the Court may decide the question by reference to the submissions made on 13 October 2003 and that they do not seek to put any further oral submissions.

[2003] SASC 364

23 October 2003