Perry v Judge No. DCCIV-01-1698

N E PERRY PTY LTD –v- ALLAN JUDGE & ORS.
[2001] SADC 1698/01
Judge Robertson
Civil
Introduction

The plaintiff has for many years operated a chiropractic clinic under the name of “Whyalla Better Back” (“Whyalla Clinic”) in the township of Whyalla. From November 1998 until the end of October 2001 the first defendant (“Dr Judge”) worked as the sole chiropractor in the Whyalla Clinic. Dr Judge’s presence at the Whyalla Clinic during that period arose out of a written agreement entitled “Agreement for Services” dated 22 July 1998 (“the Contract”). I have used the word “presence” deliberately as it will be seen shortly that one of the issues in the Trial was whether the Contract to provide chiropractic services at the Whyalla Clinic was entered into by Dr Judge personally or by the second defendant AMJ Chiropractors Pty Ltd (sometimes called “AMJ Chiropractors”).
AMJ Chiropractors is and at the time the Contract was entered into, a company operated by Dr Judge and his wife Malina Judge, who is also a chiropractor. The other party to the Contract is the plaintiff.
The Contract was for a period of three years with a right of renewal for two years. Dr Judge commenced practice at the Whyalla Clinic on 1 November 1998 and ceased practice on 31 October 2001. On 1 November 2001 he commenced to practise as a chiropractor in Whyalla at a clinic conducted under the name of “Access Chiropractors”. That clinic is operated by the company AMJ Chiropractors. Dr Malina Judge, was at that time already practising as a chiropractor at Access Chiropractors. It was Dr Judge’s commencement to practice as a chiropractor at the Access Chiropractors Clinic, which was the genesis of these proceedings.
Nature of the Proceedings.
Clause 10 of the Contract provides as follows:-
“10. NON COMPETITION
The Contractor acknowledges that he/she will be introduced to the client list relating to the Clinic. 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 2 years following the termination of this Agreement. The Contractor agrees that they will not practice for 2 years within the township of Whyalla, or within a 30 km radius of the said practice in Schedule 4 (the clinic).”
The Plaintiff relies upon the terms of the non-competition covenant contained in the last sentence of that Clause in seeking an injunction restraining Dr Judge from continuing to practise as a chiropractor in Whyalla.
The Plaintiff also claims that Dr Judge has induced some of the patients of the Whyalla Clinic to consult with him at Access Chiropractor Clinic. Relying upon the non-inducement provision contained in the second sentence in Clause 10, the Plaintiff also seeks injunctive relief restraining Dr Judge from seeking to induce any client of the Plaintiff to consult with him.
I mentioned earlier that one of the issues in the Trial was whether Dr Judge is a party to the Contract or whether the Contract was entered into by the company AMJ Chiropractors. This arises because the plaintiff has pleaded in the alternative that if Dr Judge was not a party to the contract then it was entered into by AMJ Chiropractors. In the alternative, the Plaintiff seeks injunctive relief against AMJ Chiropractors in similar terms to that which it seeks against Dr Judge. It is the Defendant’s contention that AMJ Chiropractors entered into the Contract.
On 9 November 2001 the Plaintiff obtained in this Court an Interlocutory Injunction against Dr Judge restraining him from providing services to clients of the plaintiff and restraining him from soliciting clients of the plaintiff to seek chiropractic treatment.
Finally I would mention that the Defendant brought a counter-claim which was not pursued at the hearing.
History of the Plaintiff’s Association with the Whyalla Clinic.
The plaintiff, NE Perry Pty Ltd, is essentially the company of Dr Naomi Perry who is a chiropractor (“Dr Perry”). It was, at all relevant times, the trustee of a Unit Trust entitled The N E Perry Family Trust and it operated the Whyalla Clinic in its capacity as Trustee. Initially the Whyalla Clinic had been conducted by Dr Perry in partnership with two others. That partnership commenced in l984. In 1991 Dr Perry incorporated the plaintiff and purchased the chiropractic practice in Whyalla from her partners.
Dr Perry had personally practiced as a chiropractor at the Whyalla Clinic during a period from l984 to l990 except for a short period when she was on maternity leave and for a further period when she practised elsewhere. Thereafter the plaintiff, as the operator of the Whyalla Clinic, from time to time placed other chiropractors in the clinic. Such chiropractors were described by Dr Perry in evidence as “associates”. Dr Perry commenced practice in the Adelaide Hills in 1990. Over the next four to five years Dr Perry, through her company, acquired a number of other chiropractic practices in the Adelaide Hills and the Adelaide Metropolitan Area. She staffed these practices with associates who ran the practices. She maintained control over the administration of those practices. Dr Perry continued to practice herself at a clinic in the Adelaide Hills. Prior to 1990 Dr Perry also operated a number of clinics, with her then partners, in addition to the one at Whyalla.
Assessment of the Evidence of Dr Perry and Dr Judge
The Defendants claim that both the non-competition covenant and the non-inducement covenant are in restraint of trade and unenforceable. The Defendants also deny any breach of the non-inducement covenant.
Before I proceed any further with these Reasons, I should say something about the evidence given by Dr Perry and Dr Judge. They were the two main witnesses at the Trial. There was only an occasional small pocket of evidence where they were in conflict. In most cases I do not need to resolve the conflicts to reach my conclusion. Even so, I think I should say something about each of the witnesses.
I found Dr Perry to be quite an impressive witness. She had a reasonable recollection of events, although at times I thought she was unconsciously reconstructing. I felt she tended to argue her case on occasions when answering questions. I formed the view that she was truthful when giving her evidence. Dr Perry impressed as a person with sound business acumen.
Dr Judge appeared to be less confident than Dr Perry. His recollection of events faltered at times. He seemed a rather reticent person and on occaisons this affected the answers he gave in his evidence. Like Dr Perry, I thought he was truthful when giving his evidence. He seemed to be a person with very little business acumen.
History of the Relationship Between Dr Judge and Dr Perry.
Dr Judge qualified as a chiropractor in the United Kingdom. Prior to coming to Australia he had conducted his own practice in the United Kingdom. Shortly after arriving in Australia he commenced to work in late 1997 at the Plympton Park Clinic operated by the plaintiff.
Whilst Dr Judge was working at the plaintiff’s Plympton Park Clinic he became aware that the chiropractor position at the plaintiff’s Whyalla Clinic would be available in November 1998. The Whyalla clinic was staffed by only one chiropractor. Dr Judge approached Dr Perry regarding taking up the position. He indicated that his wife Malina could obtain a position at another clinic so he was keen to take his wife and young family to Whyalla. Dr Perry had been impressed with the work of Dr Judge at the Plympton Park Clinic so she agreed to Dr Judge’s request.
Background to the execution of the Contract.
The Contract which was executed with respect to the Whyalla Clinic was not the first occasion that a written contract had been presented to Dr Judge by Dr Perry. On 17 January 1998 Dr Perry had written to Dr Judge, enclosing a copy of a contract relevant to his practising at the Plympton Park Clinic. The contract which was enclosed was not tendered with the letter during the course of the Trial. In the letter, Dr Perry stated that it was a contract “... we normally use”. In referring to the contract she also said:
“The contract is deigned (sic) for chiropractors who are Incorporated. I suggest you receive some advice as to whether you can work under a business name to avoid having tax automatically taken out. Otherwise we will have to treat you as an employee”.
As it turned out the contract with respect to the Plympton Park clinic was never executed and Dr Judge was treated as an employee whilst he remained at that clinic.
Dr Perry said in her evidence regarding the Plympton Park contract that the contract she normally used was a “contractor” contract although she did have an “employee” contract. She said that what was given to Dr Judge was a contractor contract. Dr Perry said that an employee contract was not very good from a taxation position for a chiropractor. She said at Plympton Park Dr Judge was treated as an employee because “... to be a contractor, you have to have a company.” (Transcript page 23, lines 3-4). Dr Perry said the contractor contract was standard in form, and had been produced by the Chiropractic Association whilst she was on the Board. I understood Dr Perry to be saying that the contract handed to Dr Judge relating to the Plympton Park Clinic was similar in form to the contract for Whyalla, although there were differences in the essential terms.
The defendant AMJ Chiropractors Pty Ltd was incorporated on 2 February 1998. Dr Judge said that as a result of receiving the letter from Dr Perry dated 1 January 2001 he decided to incorporate a company. It seems that having established the company Dr Judge did not use it immediately. Dr Perry’s evidence was that Dr Judge told him he wanted to operate through a company but intended to wait until the next financial year. As a result the contract accompanying the letter of 17 January 1998 was not executed.
The Contract and its Execution
In July 1998 Dr Malina Judge was working part-time with Dr Perry at her Oakbank Clinic. It had, at that stage, been agreed that Dr Judge would go to Whyalla. About that time Dr Perry handed Malina Judge the Contract for delivery to Dr Judge. The Contract is what Dr Perry described as a “contractor” contract. Dr Judge said that at the time he received the Contract it had been executed by the Plaintiff in that the Common Seal of the Plaintiff had been affixed and Dr Perry had placed her signature alongside the Common Seal and above the word “Principal”.
The Contract identified the parties to it and other variables by reference to a Schedule attached at the end of the Contract. Set out hereunder is the opening section of the Contract which makes reference to many of the Schedules contained in the Schedule:
‘THIS AGREEMENT FOR SERVICES is made the July 22, 1998
BETWEEN
The Person named in Schedule 1 (principal)
AND
The Person Named in Schedule 2 (Contractor)
RECITALS
A. The Principal carries on the business known by the name referred to in Schedule 3 at the location referred to in Schedule 4 (the Clinic).
B.The Contractor is a qualified and registered Chiropractor in the State of South Australia.
C. The principal has agreed to engage the Contractor to provide Chiropractic services at the Clinic during the period referred to in Schedule 3 in accordance with and subject to the terms of this Agreement”.
Other references to Schedules in the Schedule were contained in Clause 2.1 which referred to the Term of the Contract (Schedule 5) and in clause 4.1 which referred to the Rate of Remuneration (Schedule 6).
At the time the Contract was delivered to Dr Judge, Schedules 1, 2, 5 and 6 had been completed by Dr Perry. The information contained in Schedules 2, 3 and 4 are in handwriting. (Identified in Italics.) The detail in Schedules 3 and 4 are in Dr Judge’s handwriting. The detail in Schedule 2 is in the handwriting of Dr Judge’s father-in-law. He was providing assistance to Dr Judge at the time of entering into the Contract. These formulations contained in these Schedules were completed at the time the Contract was executed.
The Schedule to the Contract is set out hereunder.
“SCHEDULE
Schedule 1
(Principal)    - Name     NE Perry Pty Ltd
- Address    Dalintober Estate Oakbank 5243
Schedule 2
(Contractor) - Name      Allan Judge, Trading as, AMJ
Chiropractors Pty Ltd.
Address 3-4 Tusmore Avenue, Leabrook SA 5068.
Schedule 3
(Name of Clinic)   Better Back Whyalla
Schedule 4                 “Bunyarra”, Nicholson Ave, Whyalla.
(Address)
Schedule 5
(Term)       From November 1998 until November 2001. (With the option of a two year continuance)
Schedule 6
(Renumeration) (sic) Less than 150 patients per week =
50% gross takings.
150-199 patients per week =56% of gross takings.
200 or more patients per week = 60% gross takings.”
There were very little negotiations regarding the terms of the Contract. There was a discussion with Dr Judge’s father-in-law regarding some minor amendments. The only item which was the subject of negotiation was the amount and method of remuneration. Clause 10 was not the subject of negotiation. There is a conflict on the evidence regarding whether the terms of Clause 10 were the subject of discussion. Dr Perry said she had a detailed discussion with Dr Judge regarding the reasons for its terms. Dr Judge says it was not discussed. The evidence on this subject was one where I thought Dr Perry was unconsciously reconstructing. On the other hand, as I said, Dr Judge’s recollection faltered at times. I am not prepared to rely on his evidence when he said that it was not discussed. I think the situation was that Dr Perry directed Dr Judge’s attention to its terms but it was not discussed in the detail Dr Perry suggested in her evidence. In any event, the issue does not really amount to much as Dr Judge said he was aware of the terms of Clause 10 before the Contract was executed. One thing that is certain is that the terms of Clause 10 were not the subject of any negotiation.
The Contract was executed and returned to Dr Perry about November 1998. The date “July 22, 1998” at the beginning of the Contract had been included by Dr Perry prior to the Contract being delivered to Dr Judge in July 1998.
The form and manner of the execution of the Contract are relevant to the first issue in the Trial, namely who is the “Contractor” party to the Contract. Set out hereunder is the execution section of the Contract:
‘”EXECUTED unconditionally by the parties
THE COMMON SEAL of AMJ Chiropractors )              COMMON SEAL
PTY LTD ACN 081 468582  )              Allen Judge Trading as
was affixed in accordance  )              AMJ Chiropractors Pty Ltd
with it’s Articles of Association                )   A Judge
OF
AMJ CHIROPRACTORS PTY LTD
A Judge..............................................
Director/Contractor  COMMON SEAL
OF
N E PERRY PTY LTD
Naomi E Perry
.............................................
Principal”
The signatures of Dr Perry and Dr Judge (in two places) and written words and numbers are identified by using italics. Dr Judge said in evidence that the words “AMJ Chiropractors” and the ACN number “081468582” are in his handwriting. The words “Allan Judge trading as AMJ Chiropractors Pty Ltd” appearing in the place reserved for executing the Contract by “the Contractor” are in the handwriting of Dr Judge’s father-in-law. These words appeared to have had stamped over them the Common Seal of AMJ Chiropractors Pty Ltd.
There was no explanation given why the Contract was executed in this manner. Nor was there any explanation why Schedule 2 of the Schedule was expressed in terms of “Allan Judge, Trading as AMJ Chiropractors Pty Ltd”. Perhaps there was no explanation because it was thought that any explanation would offend the parole evidence rule.
Who are the parties to the Contract?
As I said earlier, the first issue to be determined is whether the Contractor party to the contract is Dr Judge or AMJ Chiropractors Pty Ltd. On the face of the contract there is an ambiguity regarding who is the contracting party. The Plaintiff’s case is pleaded in the alternative. It was not suggested that both are parties to the Contract.
The ambiguity on the face of the Contract arises as a result of a number of factors. First, in the Schedule in the place set aside for the name of the Contractor (Schedule 2) there was inserted in hand writing the words “Allan Judge, Trading as, AMJ Chiropractors Pty Ltd”. Secondly, in the section of the Contract set aside for execution by the Contractor, the Common Seal of AMJ Chiropractors Pty Ltd has been affixed and the Seal has been witnessed by Dr Judge in his capacity as a Director of AMJ Chiropractors Pty Ltd. Prior to the Seal being affixed the following words in the handwriting of Dr Judge’s father-in-law were placed in the section opposite where the Contractor is to execute the Contract:
“Allan Judge, Trading as, AMJ Chiropractors Pty Ltd”.
Dr Judge’s signature appears immediately below those words. It then appears that the stamp of AMJ Chiropractors Pty Ltd (the Common Seal) has been stamped over those words and Dr Judge’s signature.
Use of Extrinsic Evidence as an Aid to Construction
Where an ambiguity exists regarding who are the parties to a contract, it is permissible to call in aid general evidence of the surrounding circumstances of a contract for the purpose of resolving the ambiguity. In Giliberto v. Kenny (1982-83) 48 ALR 620 Gibbs CJ, in the High Court, said at 623:
“... but it has long been established that in construing a contract general evidence of surrounding circumstances is admissible to identify the persons or things referred to; see, for example, the discussion of the principle by Lord Wilberforce in Prenn v Simmonds (1971) 1 WLR 1381 at 1383-4 ...”
In Giliberto the issue was whether a husband had signed a contract on his own behalf solely or on behalf of himself and his wife. Extrinsic evidence, in the nature of the circumstances surrounding the signing of the contract, was permitted to resolve the issue.
The comments in Giliberto are, in my view, part of a wider principle regarding the admissibility of extrinsic evidence as an aid to the interpretation of a written contract. That principle is expressed by Mason J. in Codelfa ConstructionPty Ltd v State Rail Authority of N.S.W. (1981-82) 149 CLR 337 (at 352):
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty rises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of the two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far a they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract”.
Are facts post the execution of the Contract relevant?

There is one further matter I need to raise in dealing with the exception to the parole evidence rule. This is necessary because of some evidence which Dr Perry gave regarding events after the contract was completed. In cross-examination Dr Perry said that all remuneration pursuant to the Contract, was paid to AMJ Chiropractors and not to Dr Judge. She said that those payments were made because she understood that AMJ Chiropractors was the party to the contract. This evidence was admitted without objection. The question which needs to be resolved is whether that evidence can also be used as an aid in resolving the ambiguity.
Over time there has been some flirting by Courts with the proposition that conduct after a contract has been made may be used as an aid in the construction of the contract where an ambiguity exists. However, I take the law in Australia to be that conduct post a contract cannot be used as an aid in the interpretation of the contract. (see: Codelfa per Mason J at 348: FAI Traders Insurance Co Ltd. v Savoy Plaza Pty Ltd (1993) 2 V.R. 343 at 350-351). Accordingly, the evidence of the Plaintiff that payments under the Contract were made to AMJ Chiropractors cannot be used as an aid in assisting to resolve the ambiguity. Nor is Dr Perry’s view regarding who was the contracting party to the Contract of any assistance.
Relevant evidence to assist in resolving the ambiguity
As I said, there is clearly a patent ambiguity on the face of the Contract regarding who has entered into the Contract as the Contractor. What then are the circumstances which existed prior to or at the time of the Contract being formed which are relevant as an aid to resolving the ambiguity.
I mentioned earlier that in the letter of 1 January 1998, Dr Perry informed Dr Judge that the form of contract which was eventually entered into was designed for chiropractors who were incorporated. She also told him about that time of the benefits which could be obtained by operating through a company. The evidence of Dr Perry is that Dr Judge informed her that he wanted to operate through a company but would wait until the new financial year. These are all circumstances which, in my view, can be used as an aid in determining who was the party to the contract. They were facts known to both parties at the time Dr Perry arranged the delivery of the Contract to Dr Judge in July 1998.
Many of the clauses of the Contract point to the Contract having been prepared on the basis that an individual would enter into it as the Contractor. For example, Clause 8 of the contract commences with the words “The Contractor shall perform his/her duties pursuant to this Agreement ...”. Another example is the wording in Clause 10 to which I have referred earlier. The expression “... he/she ...” is used in that Clause. I should add that there are some clauses which could equally apply to an incorporated body. However the preponderance of clauses sit more comfortably with an individual entering into the Contract.
Whilst many of the clauses of the Contract are expressed in a manner which are more suited to an individual, at the time that the Contract was delivered to Dr Judge the execution clause was presented with the expectation that a company would enter into the Contract, as the Contractor. At the place set aside for execution it referred to the affixing of a Common Seal of a company and identified a place where the Common Seal was to be affixed. This, of course, is consistent with Dr Perry’s understanding that she had earlier been told by Dr Judge that he wanted his company to enter into the Contract. It can be said that Dr Perry encouraged him to contract in that manner because of the perceived taxation advantages in doing so.
The Contract was executed by AMJ Chiropractors Pty Ltd by affixing its Common Seal and having it witnessed by Dr Judge, as a director of the company. Such execution is again consistent with the facts known to the parties that it would be Dr Judge’s company which would enter into the Contract.
Everything to this point indicates that the Contract is between the Plaintiff and AMJ Chiropractors Pty Ltd. However, there are two other matters which need to be considered. The first being the words in Schedule 2, which identifies “the Contractor” as:
“Allan Judge Trading as AMJ Chiropractors Pty Ltd”.
Secondly, in the execution section of the Contract there are the words “Allan Judge Trading as AMJ Chiropractors Pty Ltd” written in the place where the Contractor is to execute the Contract and over which the Common Seal of the company was stamped Dr Judge’s signature appears immediately under those written words.
During the course of his evidence Dr Judge indicated that he had very little business acumen. As I said previously, this became plain in listening to his evidence. I mentioned earlier that he was being advised by his father-in-law with respect to the Contract. It was not suggested that his father-in-law had any particular expertise with respect to commercial contracts and their execution. It might be said, not unkindly, from what has transpired, that neither of them had a grasp of the legal doctrine which distinguishes an individual from a body corporate. That is understandable. I have also stated earlier that there was no explanation regarding the unusual manner of executing the Contract.
When the execution of the Contract is viewed against the background of events leading up to the time of the execution of the Contract then, in my opinion, the proper construction to be placed on these two matters is that Dr Judge was indicating that he was operating through his company AMJ Chiropractors Pty Ltd. It was known by the parties that Dr Judge intended to operate through a company. The use of the word “trading” is also consistent with the construction I have placed on those two factors. If this was not the position then what possible explanation could there be for AMJ Chiropractors Pty Ltd executing the Contract.
As I mentioned, the execution section in the Contract makes it plain that the expectation was that the party to execute the Contract as the Contractor would be a company. The words “AMJ Chiropractors” have been written after the printed words “THE COMMON SEAL of” in the execution clause and before the printed words “Pty Ltd”. The presence of the printed words “Pty Ltd” is a further indication that the common intention of the parties was that the Contractor would be a company. This is further supported by the printed letters “ACN” with a space provided behind those letters for the insertion of a company’s ACN number. Dr Judge inserted AMJ Chiropractors ACN number after those letters when the contract was executed. It is also significant that Dr Judge signed alongside the Common Seal as Director witnessing the affixing of the Common Seal. He deleted the word “Contractor”. In my opinion, those are additional matters which point to the party entering into the Contract as the Contractor was AMJ Chiropractors Pty Ltd.
For the reasons I have expressed, I am of the opinion that the ambiguity is resolved on the basis that AMJ Chiropractors Pty Ltd was the party who entered into the Contract as the Contractor and not Dr Judge.
Is the “Non-Competition” Restraint of Trade Provision Enforceable?
I turn to consider the claim by the plaintiff to enforce the covenant restraining the right to practice contained in the last sentence of Clause 10 of the Contract. Because of my conclusion that AMJ Chiropractors is the party to the contract and not Dr Judge, it follows that if the covenant is enforceable then it is enforceable against that company. I have acknowledged earlier that the terms of Clause 10 sit more comfortably where the party to the Contract is an individual. However, there is nothing in the wording which suggests it does not have application where the party to the Contract is an incorporated body. I was not told whether an incorporated body can be registered and practice as a chiropractor. There is evidence that the plaintiff and AMJ Chiropractors, at the date of trial, were operating chiropractic clinics in Whyalla. If an incorporated body cannot practice as a chiropractor then the restraint of trade provision contained in the last sentence of Clause 10 may be otiose. In any event, whatever is the position regarding incorporated bodies having the right to practice as a chiropractor and/or operate a chiropractic clinic I propose to consider the Plaintiff’s claim for the enforcement of the restraint of trade set out in that part of Clause 10 as if it can be enforceable against AMJ Chiropractors.
For convenience sake, I set out the specific section of Clause 10 restraining the right to practice:
“The contractor agrees that they will not practice for 2 years within the township of Whyalla or within 30 km radius of the said practice in Schedule 4 (the Clinic)”.
The defendants, in their filed Defence have pleaded that the restraint of trade contained in Clause 10 is void and unenforceable in that it is not a reasonable restraint of trade at common law or under Section 45A(1) of the Trade Practices Act 1974. However, at the end of his opening Mr Coppola, Counsel for the defendants, indicated that the defendants were not relying on Section 45A(1) but solely on common law principles.
Events Leading to these Proceedings
Before I turn to consider those Common Law principles I need to briefly refer to the facts which led to the plaintiff commencing these proceedings. At the time that Dr Judge commenced to work in Whyalla, the Whyalla Clinic was situated at “Bunyarra”, Nicholson Avenue, Whyalla. Towards the end of the year 2000 or the beginning of 2001 the plaintiff moved the clinic to 122 Elliott Street, Whyalla Playford which was approximately two to three kilometres from the “Bunyarra” address. I was not told the reason for the move.
In the early part of October 2001, Dr Judge informed Dr Perry that he intended to finish up with the plaintiff’s Whyalla Clinic on October 31, 2001. That was the end of the three year term set out in the Contract. He told her that he was proposing to continue to practice in Whyalla with his wife at “Bunyarra” Nicholson Avenue. At some time earlier, the precise date not being made clear from the evidence, Dr Malina Judge had established a clinic at the old “Bunyarra” address. The clinic was operated by AMJ Chiropractors under the name of “Access Chiropractors”. Dr Judge told Dr Perry that he intended to commence practice on l November 2001. On that date, Dr Judge commenced practice as a chiropractor in the Access Chiropractors Clinic at”Bunyarra” Nicholson Avenue, Whyalla Norrie. As I said earlier, it was this action on the part of Dr Judge that was the genesis of these proceedings. On Dr Judge leaving, Dr Perry returned to practise at the Whyalla Clinic.
The Common Law Principles
I turn to consider the relevant common law principles regarding restraint of trade. An agreement in restraint of trade is unenforceable unless it can be shown that the restraint is reasonable. The classic statement expressing the modern law on restraint of trade is that of Lord Macnaghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Company (1894) AC 535 (at 565):
“The true view at the present time I think is this. The public have an interest in every person’s carrying on his trade freely; so has the individual. All interference with individual liberty of action in trading and all restraints of trade of themselves if there is nothing more are contrary to public policy and therefore void. That is the general rule. But there are exceptions; restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification and indeed it is the only justification if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.”
See also Amoco Australia Pty Ltd v. Rocca Bros. Motor Engineering Co Pty Ltd (1972-1973) 133 CLR 288 at 315.
In Herbert Morris Ltd v. Saxelby (1916) AC 688 Lord Parker (at 707) explained the requirement of reasonableness in the following manner:-
“It will be observed that in Lord Macnaghten’s opinion two conditions must be fulfilled if the restraint is to be held valid. First, it must be reasonable in the interests of the contracting parties, and, secondly, it must be reasonable in the interests of the public. In the case of each condition he lays down a test of reasonableness. To be reasonable in the interests of the parties the restraint must afford adequate protection to the party in whose favour it is imposed; to be reasonable in the interests of the public it must be in no way injurious to the public.
With regard to the former test, I think it clear that what is meant is that for a restraint to be reasonable in the interests of the parties it must afford no more than adequate protection to the party in whose favour it is imposed.”
The onus of proving an agreement in restraint of trade is reasonable in the interests of the contracting parties lies upon the party seeking to enforce the covenant. Here the onus is on the plaintiff to establish that it is reasonable. The onus of proving that the restraint is injurious to the public, in other words, that it is not reasonable in the interests of the public, rests on the party alleging the covenant is against public policy. So, in the present case, the onus is on AMJ Chiropractors to establish that the restraint is against public policy. (Herbert Morris Limited at 707).
Further assistance regarding the question of whether a covenant in restraint of trade is reasonable in the interests of the parties is provided by Lord Parker in Herbert Morris Limited (at 708):
“My Lords, it appears to me that Lord Macnaghten’s statement of the law requires amplification in another respect. If the restraint is to secure no more than “adequate protection” to the party in whose favour it is imposed, it becomes necessary to consider in each particular case what it is for which and what it is against which protection is required. Otherwise it would be impossible to pass any opinion on the adequacy of the protection”. (Emphasis added)
The courts have over many years, distinguished between restraint of trade clauses where the restraint arises out of an employer and employee relationship with those where the restraint clause has arisen in the context of a sale of goodwill. The distinction was explained by Lord Shaw in Mason v Provident Clothing and Supply Company Limited (1913) A.C. 724 in the following terms (at 737-738):-
“It is necessary, my Lords, to look, in the first place, at the nature of the contract itself. As to that, the diversities may be wide and the view of the law may be different as to the upholding or the scope of a covenant in restraint of personal or industrial freedom. If the contract, for instance, be for the sale of a business to another for full consideration or price, there may be elements going in the strongest degree to shew that much a contract – in so far as it restrains the vendor from becoming a rival of a business whose goodwill he has sold and which he has bargained he shall not oppose – there may be elements shewing that such a contract is enforceable, and, indeed, that a declinature by the law to enforce it would amount to a denial of justice. It may clearly appear that the express view of the bargain may have been the elimination from the sphere of competition of the powerful personality of a possible rival who by the very terms of the contract had been paid for disappearing into retirement, carrying his sheaves with him. In such cases a restraint is enforced by the law.
But, to use Lord Macnaghten’s language in the Nordenfelt Case (1), “There is obviously more freedom of contract between buyer and seller than between master and servant or between an employer and a person seeking employment.” And in my opinion there is much greater room for allowing, as between buyer and seller, a larger scope for freedom of contract and a correspondingly large restraint in freedom of trade, than there is for allowing a restraint of the opportunity for labour in a contract between master and servant or an employer and an applicant for work.”
What approach should be taken here? The Contract is between a principal and an independent contractor. Furthermore, I have found that the contracting party is AMJ Chiropractors, a corporate body. Should that make any difference to the approach to be taken? At times the Courts have considered that the principles pertaining to an employer and employee restraint can equally apply where there is a restraint covenant applicable to an independent contractor. In my view, assistance may be gained from decisions dealing with both types of restraint. I also do not think that the fact the Contractor is a corporate body causes the issue to be treated any differently.
The first step in determining this issue is to consider what Lord parker said in Herbert Morris Limited (708) namely: “... what it is for which and what it is against which protection is required”. In this regard assistance can be gained from a number of authorities.
In Attwood v Lamont (1920) 3 KB 171, Younger LJ said (at 590):
“... the permissible extent of any covenant imposed upon a servant must be tested in every case with reference to the character of the work done for the employer by the servant whilst in his service and by the consideration whether in that view the covenant taken from them goes further than is reasonably necessary for the protection of the proprietary rights of the covenantee”. (Emphasis added).
Furthermore in Dewes v Fitch (1920) 2 Ch, 159 Warrington L.J. when considering an employer/employee covenant, said (at 184):
“The employer is not entitled to require protection against competition. What he is entitled to protection against is the use by the employee against him in his business of knowledge obtained by him of his employer’s affairs and the influence acquired by him over his customers in the course of an ordinary trade and in the case of a professional man over what is commonly called his clients”. (Emphasis added).
In my opinion the proprietary right which the plaintiff was legitimately concerned to protect was the relationship which patients had with the Whyalla Clinic at the time Dr Judge commenced to work in Whyalla and during his time at the Clinic. That is “what it is for which” (Herbert Morris at 708) protection was required. The “what it is against which” (Herbert Morris at 708) the protection was required is that AMJ Chiropractors (with Dr Judge) would on termination of the Contract move to some other address in Whyalla and patients of the Clinic would follow and seek treatment with Dr Judge due to the relationship he established with the patients whilst he was at the Whyalla Clinic.
The Facts Relevant to the Issue.
Having set out the principles I now turn to consider factual matters relevant to the issue. As I mentioned earlier Dr Perry commenced practice in Whyalla about l984. Since l990 Dr Perry has operated the Whyalla Clinic through the Plaintiff. She did not personally work in the Clinic after 1990. I mentioned earlier that she engaged a qualified chiropractor from time to time, as an associate to conduct the practice of the Clinic. Prior to Dr Judge going to Whyalla, the clinic was conducted by a Dr McAuley, who stayed for three years.
I also mentioned that Dr Judge was the only chiropractor practising at the Whyalla Clinic during the three years he was there. Dr Perry rarely came to Whyalla. On one occasion she attended the clinic for a day and a half and consulted as a “locum” when Dr Judge had taken some holidays. Dr Perry kept in contact with Dr Judge by telephone from time to time. It seems that Dr Judge was largely left to himself to operate the Clinic.

Dr Judge’s source of patients at the Whyalla Clinic were from residents of Whyalla and those who were passing through the town. Some patients who visited the Clinic would only require a single treatment to remedy their problem and other patients would require a return visit or visits. There is no evidence to indicate what percentage of patients needed on-going treatment and with what regularity did those patients who required on-going treatment need to visit the Clinic.
Profit and loss statements of the N E Perry Family Trust indicated that for the year ended 30 June l999 the Whyalla Clinic earned gross fees of $254,915. After payment of chiropractor fees of $134,695 (this amount would have been for services provided by both Dr McAuley and Dr Judge) and all other expenses of the Clinic there was a net profit earned by the plaintiff of $59,421. For the year ended 30 June 2000, the gross fees of the Whyalla Clinic were $276,293. Of that amount $160,804 was paid to Dr Judge and after other expenses of the Clinic the plaintiff received a net profit of $45,465. For the financial year ended 30 June 2001 the gross fees climbed to $324,122. After payment of $195,632 to Dr Judge and payment of other expenditure, the plaintiff received a net profit of $55,612.
Dr Judge said in evidence that when he went to Whyalla he provided his own equipment. Such equipment is personal to a chiropractor consisting of such items as a stethoscope and a fundascope. I mentioned earlier that he conducted his own practice when he was in the United Kingdom. There was no evidence that he was provided with any professional chiropractic training by Dr Perry nor that he was provided with any training on the manner in which he was specifically to conduct the Whyalla Clinic. It is clear that Dr Judge was an experienced chiropractor who had impressed Dr Perry whilst he was at the Plympton Park Clinic. He did not need any guidance from Dr Perry either in the conduct of the Clinic or in techniques to be used in treating patients.
In his evidence, Dr Judge said that he treated about fifty patients each day. Dr Judge said that he would generally operate two consulting rooms simultaneously. The treatment period for a patient would be about seven to eight minutes. Whilst one patient was undressing or dressing in one consulting room he would be treating the other patient in the other consulting room. Dr Judge would consult five days a week from Monday to Friday.
The Clinic also employed a person called a chiropractic assistant. The duties of the chiropractic assistant were generally to act as a receptionist and perform other administrative duties.
I should also mention that as part of the Whyalla Clinic, Dr Judge visited Cowell and Cleve, one day a week for the purpose of treating patients at those centres. Initially, he also visited Kimba but after about a year and a half, he ceased visiting Kimba.
Is the Restraint Reasonable In the Interests of the Parties?
It is now necessary to consider whether the non-competition restraint contained in Clause 10 is reasonable. The first question to be determined is whether it is reasonable in the interests of the parties. As was stated earlier, the principle is that laid down by Lord Parker in Herbert Morris Limited (at 707) namely, the restraint “... must afford no more than an adequate protection for the party in whose favour it is imposed”. It is necessary to keep in mind that what the plaintiff was legitimately concerned to protect was the patient relationship with the Whyalla Clinic.
Whether the restraint is reasonable is to be judged according to the circumstances at the time the parties entered into the contract. (Lindner v Murdoch’s Garage (1950) 83 CLR 628 at 653). In determining what is reasonable, the factors of area and time are closely linked (Dewes v Fitch (1920) 2 Ch 159 at 179-180).
Is The Geographical Area Reasonable?
With respect to the geographical area of a restraint of trade clause Kitto J said in Lindner v Murdock’s Garage (1950) 83 CLR 628 (at 655):
“But in order that the restraint may be reasonable in reference to the interests of the parties by means of geographical limitation, the limitation must, I think, be such as will be fairly approximate to a limitation expressed by reference to the employer’s customers of who the employee is likely to acquire a special knowledge or with whom the employee is likely to be brought into a personal relationship while in the employment (Emphasis added).
I am content to use this test in the present case.
It cannot be doubted that a chiropractor who regularly treats a patient would normally establish a personal relationship with that patient. I use the term “personal relationship” in the professional sense of patient and a treating professional. It may even be said that a personal relationship might arise in a “one-off” situation if the treatment was successful, although it must be recognised that in that situation the likelihood of such a relationship arising would be less likely than where the patient was seen regularly.
The area of the restraint was the township of Whyalla or within a radius of thirty kilometres of the “Bunyarra” address at Nicholson Avenue, Whyalla. No issue was raised regarding the area being expressed in the alternative. Clearly, the area within the radius would include the township of Whyalla. The area beyond included only small population settlements. The area outside Whyalla did not play a role in the Trial. Both counsel focused on the township of Whyalla.
Dr Perry said, without objection, that Whyalla had a population of some twenty two to twenty three thousand people. She also said that it takes about ten minutes to drive from one side of the town to the other. Whilst her evidence appeared to be directed to the present, it was not suggested that the evidence did not hold good for the time when the Contract was made. I was also told that at that time there were two other chiropractic clinics in Whyalla Stuart and another at Whyalla Norrie. The evidence is that they were still operating at the time of the Trial.
There was no evidence indicating a more specific geographical location of patients who came to the Clinic other than the fact that most of them came from the township Whyalla. It would have been helpful to know whether the patients’ locations covered the entire town of Whyalla. Because of the short distances that a person would need to travel, it is likely that patients came from most parts of Whyalla. In those circumstances I am prepared to find that the geographical area of the restraint is reasonable. In any event, I did not understand Counsel for the Defendants to attack the geographical area of the covenant as being unreasonable. The Defendants’ attack was directed to the duration of the restraint.
Is the Duration of the Restraint Reasonable?
With respect to the question of the duration of the restraint, in my opinion, those decisions dealing with the question of protection of customer connection are of assistance. In Middleton v Brown (1877-78) 47 LJ Ch 411 the Court of Appeal in England was required to consider whether a restraint of one year for an employee who sold oil in a particular section or territory in London was reasonable. With respect to this issue Jessel MR (at 413) said:
“The time is certainly not unreasonable. It is only to break the connection, as it were, of this man with his customers for a sufficient period to let the next man obtain the connection”.
In IRAF Pty Ltd v Graham (1982) NSWLR 419 Rath J, when dealing with a restraint covenant arising out of the sale of a hairdressing business, expressed the test regarding duration in this way (at 429):
“To my mind the most important consideration on the question of the period of the restraint is the time required for severing the relationship between the defendant and those clients who would patronise the business after its sale”.
He then went on to identify a period of time which he said “... would be sufficient firmly to establish the relationship between the client and the new hairdresser” (429).
A test of the nature referred to in those decisions was formulated by Professor H.M. Blake in his Article entitled “Employee Covenants not to Compete” (1960) Harvard Law Review 625 in the following terms (at 627):
“ ... duration is reasonable only if it is no longer than necessary for an employer to put a new man on the job and for the new employee to demonstrate his effectiveness to the customers”.
I think that is the test to be applied here. The question here is, what is the time required for a new chiropractor to commence practice at the Whyalla Clinic and to demonstrate his or her effectiveness to patients of the Clinic.
It is for the Court to determine what period of time is reasonable for that purpose. Evidence indicating whether a restraint is reasonable or not is not relevant. However, evidence of the nature and function of the Whyalla Clinic and the nature of the interest to be protected are relevant as an aid to the Court in reaching its conclusion (Haynes v Domain (1899) 2 Ch 13 at 24; Stenhouse Australia Limited v Phillips (1974) A.C. 391 at 402.). What then is the evidence regarding these matters?
Evidence on the Issue of Duration
I earlier referred to some of the evidence regarding the nature and function of the Whyalla Clinic. I mentioned that Dr Judge said that he consulted with fifty patients for each day of the working week. This evidence related to the period 1 November 2000 to 31 October 2001. It is unclear if he saw that number of patients for the earlier period. However, what is certain from the evidence is that at the time he joined the Whyalla Clinic the number of patients being seen each week was at least two hundred.
I mentioned earlier Dr Judge said that of the patients who consulted him each week, some were repeat visits and some were “one-off” visits. He said that the “one-off” visits tended to be those transitory patients who were passing through Whyalla. Dr Judge also said that in any one week the majority of patients made an appointment to see him although there were some who walked in off the street.
Whilst the evidence indicates that the majority of patients treated at the Clinic received more than one treatment, it would have been of assistance to know the regularity with which those patients received treatment. As I said earlier it would have also been helpful to know what percentage of patients returned for treatment for some ailment, after having undergone a course of treatment earlier for the same ailment and the time between the first set of treatment and the return of the patient. I suppose I do not need specific evidence to reach the view that with back ailments there would be some patients whose problem would return from time to time and would require further treatment. No doubt that could also occur with respect to problems in other parts of the body. On the other hand there would be some patients who would not need to return because the problem had been solved.
There is some evidence that some patients attended the Clinic every month or every two months for treatment. No doubt there were patients who attended more regularly and some who attended on a less regular basis. From the sheer numbers of patients who were treated each week it may be concluded that many of the patients at the Clinic were receiving repeat treatments. This must be so when the population of Whyalla is taken into account and there were two other Chiropractic Clinics operating in Whyalla at all relevant times.
Dr Perry said that the duration of the restraint to the Contract was determined by her by taking into account the length of time the Contractor contracted to remain at the Clinic. She said she would not have a two year period if the Contractor’s contract was only for six months. She said that the longer a Contractor was at a Clinic the more the Contractor is going to be able to establish a relationship with patients. She said that after two years a new chiropractor would have developed a good relationship with patients so that if the departing contractor returned he or she would not have a detrimental effect on the patients of the Clinic.
Dr Perry is an experienced Chiropractor who has operated a substantial number of clinics over a long period of time with movement in and out of those clinics by chiropractors she described as “associates”. It is arguable that her evidence could be characterised as going to the reasonableness of the restraint. If it was so characterised then, as I said earlier, it is not relevant. However, I am prepared to accept it as evidence going to the time required for a new chiropractor to demonstrate his effectiveness to patients of the Clinic.
As to the length of the period of the restraint, she did not offer any factual basis other than to connect the duration of the contract to the period of restraint. She did not furnish any evidence which would provide a foundation for her assertion that a new chiropractor would need two years. She did not produce specific evidence of the nature and structure of the practice at Whyalla. Her evidence did not suggest that it was common throughout the chiropractic profession that in a town the size of Whyalla that a two year period is required for a contract with a term of three years. For that matter, her evidence did not suggest that a two year period of restraint is common in the chiropractic profession where a Contractor’s contract is for three years, wherever the Clinic was situated. Whilst the evidence was that the Contract was a common form of contract supplied by the Chiropractor Association, the evidence does not suggest that the duration of the restraint was a common period for a three year contract.
Conclusion on the issue of duration
The question whether the period is reasonable is, in the end, a matter for the Court. The duration of the restraint is reasonable only if it is no longer than necessary to enable a new chiropractor to have the opportunity to demonstrate his or her effectiveness to patients. I have reached the conclusion that the period is too long. As I stated earlier, although the evidence is limited, it does suggest that many of the patients received more than one treatment when consulting for a specific ailment. In these circumstances a period of one year would seem a reasonable time for the new chiropractor to demonstrate his or her effectiveness to patients. What evidence there is suggests that with the repeat patients the repeat visit or visits would occur within a short period of time and certainly well within a period of one year. If it could have been demonstrated that the practice involved only sporadic visits by patients, similar to an accountant’s practice where the contact with the client may only be once or twice ayear, then a longer period than one year may have been justified. In circumstances such as that a longer period would be required to demonstrate effectiveness. (see: Smith v Ryngiel (1988) 1 Qd.R 179). The onus was on the plaintiff to prove that a two year period was reasonable. The evidence does not enable the Plaintiff to satisfy that onus.
Finally, I wish to mention one other matter. The case was presented and argued on the basis that the initial term of the Contract was three years. It seems that both Counsel overlooked that Clause 13 of the Contract provided that it could be terminated by either party on giving not less than three months notice in writing. On one view, the length of the Contract was potentially only three months. If the Contract was only for three months then such a fact would have been relevant to the question of duration of the restraint. In such circumstances, the time required for a new chiropractor to demonstrate his or her effectiveness would be less because the previous chiropractor would have treated far less patients of the practice than if the term was for a longer period. However, in my view it is not a factor that needs to be taken into account. It was most unlikely that the Contract would have been terminated at the end of three months. (Pyle v Sharpe Bros Pty Ltd (1968) 2 NSWLR 511 at 523). Dr Judge had brought his wife and family to Whyalla. He wanted to go to Whyalla. He would have been unlikely to terminate the Contract. Dr Perry was impressed with Dr Judge’s work whilst he was at the Plympton Park Clinic, so she would have been unlikely to have terminated it.
For the reasons I have expressed I am of the opinion that the period of two years for the restraint was not reasonable in the interests of the parties to the Contract. As a result of this conclusion I do not need to consider whether the covenant was reasonable in the interests of the public.
Accordingly, I find that restraint of trade covenant contained in Clause 10 restraining the Contractor from practising is unenforceable.
Is the Non-Inducement Covenant Enforceable?
I come to the second claim made by the Plaintiff. An injunction is sought restraining Dr Judge from seeking to induce any client of the plaintiff to become his client. Alternatively an injunction is sought restraining AMJ Chiropractors from seeking to induce any client of the plaintiff from becoming a client of the company. Like the first of the Plaintiff’s claims it is expressed in the alternative for reasons I have adverted to earlier. Since I have found that the party to the contract is AMJ Chiropractors Pty Ltd then the claim is directed to that company.
The particular section of Clause 10 relevant to this part of the plaintiff’s claim is:-
“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 Contractors for a period of two years following the termination of this Agreement”.
It is alleged that AMJ Chiropractors, through its Director, Dr Judge, has sought to induce patients of the Plaintiff to seek chiropractic treatment at the clinic of Access Chiropractors.
In her final address, Ms Salerno, Counsel for the plaintiff, identified the manner in which it was alleged that the covenant had been breached. First it was said that Dr Judge intentionally sought to induce a number of patients of the plaintiff by personally informing those patients, whilst he was treating them at the Whyalla Clinic, of his imminent departure and that he was proposing to commence practice at Access Chiropractors in Whyalla. Secondly, the fact of Dr Judge after leaving the Whyalla Clinic, commenced practising at Access Chiropractors Clinic. Thirdly, by advertising in the local newspaper, the “Whyalla News”, on 29 October 2001, that Dr Judge would be consulting at the Access Chiropractic Centre at the “Bunyarra” address from l November 2001. Fourthly, by advertising in the “Eyre Peninsula Tribune” that Dr Judge of Access Chiropractic Centres would be consulting in Cleve and Cowell each Tuesday from 1 November 2001.
Relevant Legal Principles
A covenant of this nature is a restraint of trade. (Stenhouse Australia Limited v Phillips (1974) AC 391; G.W. Plowman & Sons Ltd -v- Ash (1964) l WLR, 568) . For the covenant to be enforceable the same tests need to be satisfied which apply where the covenant in restraint of trade is one restraining a person from being employed or carrying on a business. In other words the restraint covenant must be reasonable in the interests of the contracting parties and that it is reasonable in the interests of the public. (Herbert Morris Ltd at 707; Taxation Services of Australia Limited –v- Townsend (1936) 37 S.R. (NSW) 98 at 102).
Mr Cappola, Counsel for the Defendant, in his final address, did not specifically address on the question of whether the restraint was enforceable or not. Nor did Ms Salerno. Both Counsel focused their submissions on the construction of the covenant and whether there was a breach of it. However, paragraph 13 of the Defence does plead that the covenant is unenforceable as being an unreasonable restraint of trade. Accordingly, I propose to deal with that question initially.

The first point to observe, with respect to the covenant, is that it does not confine itself to a geographical area. It is not confined to Whyalla. Theoretically, at least, it could apply to conduct where the defendant is practising in Adelaide. Does the absence of a defined geographical area cause the covenant to be one which is not reasonable in the interest of the parties?
In dealing with the question of geographical area Harman L.J. in G.W. Plowman and Sons Ltd (supra) at 522 said:
“Secondly, it is said that this is not limited as to area, and that is quite true. But I have always thought that, when dealing with a solicitation covenant as opposed to a carrying on business covenant, area was not as a rule mentioned. It was said that if one of the customers moved to the other side of the country and the representative also moved to the other side of the country he still might not canvass him under this agreement, and I think that is right. But I do not see that that is any objection. It seems to me that the employer may well wish to preserve his connection even with a man who is 50 miles away or more”.
(See also: Smith v. Ryngiel (1988) 1 Qd R. 179 at 185).
I accept that the comments in Plowman represent the state of the law in Australia. Accordingly, the absence of an area does not prevent the conclusion being reached that the covenant is reasonable in the interests of the parties.
This then leaves the question of the duration to be considered. The period is two years. In Stenhouse Australia Limited v Phillips (1974) AC 391, in considering an employee restraint, the Privy Council formulated the question in considering a “solicitation” provision in the following terms (at 402):-
“It is ... what is a reasonable time during which the employer is entitled to protection against solicitation of clients with whom the employee had contact and influence during employment ...”.
These comments are equally apposite when considering the non‑inducement provision here. In my view the test formulated by Professor Blake, in the context of protecting customer connections is also relevant in determining what is a reasonable time to protect against inducement. It will be recalled that the test was formulated in the following manner:-
“... duration is reasonable only if it is no longer than necessary for the employer to put a new man on the job and for the new employee to demonstrate his effectiveness to the customers.”
In applying that test, I am of the opinion, that a two year period is not reasonable. The reasons I expressed in concluding a two year period was not reasonable with respect to the “no‑practising” restraint of trade are equally applicable here. In my opinion a period of one year would be adequate protection for the plaintiff. This would be a reasonable time for the in-coming chiropractor to prove his or her effectiveness to the patients of the practice.
In Ginsberg Ltd v Parker (1988) 1 RLR 483 at (486) Glidewell LJ said in a question such as this, it is a matter of impression. Adopting that approach as an alternative way of dealing with the problem then the plaintiff has failed to leave me with the impression that any period less than two years was not a reasonable time to protect its patient base from inducement.
For the reasons I have expressed I am of the opinion that a two year period for the “non-inducement” covenant was not reasonable in the interests of the parties. As a result, the covenant is unenforceable.
Has AMJ Chiropractors Breached the Inducement Covenant?
Although I have reached a conclusion that the covenant is unenforceable, I propose to consider the plaintiff’s claim for breach, on the assumption that the covenant is enforceable. In dealing with this issue there are two questions of construction which need to be addressed immediately. The first is the meaning of the phrase “... any client of the clinic...”. Secondly what is meant by the phrase “... seek to induce ...”.
With respect to the first question it was agreed by both Counsel that the reference to “client” in the phrase “... any client of the clinic...” is a reference to those clients of the plaintiff who were treated by Dr Judge during the period of the Contract. I understood Counsel to mean those patients who were treated at the Whyalla Clinic or those patients who consulted with Dr Judge during his country visits each week. In my opinion that is a reasonable construction of the word “client” taken in its context in the covenant and I am prepared to adopt it.
The second matter of construction is the meaning of the phrase “seek to induce”. The Oxford English Dictionary (Second Edition) (at page 887) defines the word “induce” in the following terms:
“To lead (a person) by some persuasion or some influence or motive that acts upon the will to (into, unto) some action, condition belief etc; to lead on, move, influence, prevail upon (anyone) to do something”.
In R v Bodsworth (1968) NSWLR 132 in dealing with the word “inducement” in section 410 of the Crimes Act (NSW) said (at 138):
“Inducement” is used in its ordinary sense of persuasion aimed at producing some willing action ...”
There is no reason why the ordinary meaning of the word “induce” is not applicable in interpreting this covenant. Adopting the words of the New South Wales Court of Criminal Appeal “... it is used in its ordinary sense of persuasion aimed at producing some willing action”. The act of persuasion carries with it an intention on the part of the persuader to produce some willing action from the person sought to be persuaded.
I now turn to consider the breaches of the covenant alleged by the plaintiff. Some of the breaches alleged relates to conduct by Dr Judge. It was not disputed that Dr Judge was at all relevant times, a director of AMJ Chiropractors. It was not suggested that at the relevant times he was not acting as agent for the company.
The first alleged breach relates to conversations which Dr Judge had with some patients towards the end of his time at the Whyalla Clinic.
With respect to this allegation, Ms Andrea Boundy, a Chiropractic Assistant employed by the plaintiff gave evidence. She said she has worked at the Whyalla Clinic for about two years. Ms Boundy said much of her time in the Clinic was spent at the reception desk. She said that conversations between Dr Judge and patients in one of the treatment rooms, were audible whilst she was at the reception desk. On 26 October she said she overheard a conversation between Dr Judge and an elderly patient of the Clinic, by the name of Mr Doug White. She said that she heard Dr Judge say to Mr White, whilst he was in the treatment room, that he could telephone Dr Malina Judge’s clinic if he wanted an appointment. She said Dr Judge mentioned that there would be two diaries at the clinic, one for himself and one for Dr Malina Judge.
Ms Boundy said that she also heard Dr Judge say that Dr Perry was returning to the Clinic. Furthermore she also heard Mr White state that he was intending to remain at the Whyalla Clinic as it was closer to his residence. Ms Boundy said that what she recounted was not the entire conversation. She said that they had been speaking together, prior to her making a note of that part of the conversation. She said she had no recollection of what was said in other parts of the conversation. Mr White did not give evidence.
There was also evidence given by Ms Boundy relating to a conversation she overheard between Dr Judge and a patient of the Clinic by the name of Craig Eadon. She said this conversation took place on 31 October 2001. She said she overheard Dr Judge say to Mr Eadon that it was up to him whether he decided to remain at the Plaintiff’s Whyalla Clinic or to come and see him at “Bunyarra”. She said she also heard Dr Judge say that his fees would be the same as that charged at the Whyalla Clinic. Once again she did not suggest her evidence encompassed the entire conversation between them. She said she could not recall any other parts of the conversation. Mr Eadon did not give evidence.
Ms Boundy said she could not recall any other conversations on the subject of Dr Judge leaving the Clinic which he may have had with other patients.
Dr Judge said that during the time leading up to his leaving the Whyalla Clinic, he was aware that he was forbidden to solicit patients of the Clinic. He said it was never his intention to solicit patients. Dr Judge said that where patients were required to return to the Clinic for further treatment after the proposed date of his leaving it was his practice to inform the patients that he would not be at the Clinic for the next treatment. Dr Judge said he adopted that practice because, professionally, he felt it necessary to do so where patients had an expectation that he would be present for the next treatment. He said that when he became aware that Dr Perry was intending to return to the Clinic he would inform the patient of that fact. Dr Judge said that after informing the patient of his impending departure from the Clinic his conversation was reactive. In other words, he would not initiate any further conversation on the subject but would respond to questions asked of him by the patient. He said that if he were asked what were his plans he said he responded by indicating either that he was remaining in Whyalla or that he was intending to practice with his wife.
The defendants also called a small number of patients of the Whyalla Clinic who had undergone treatment from Dr Judge shortly before he left.
The first was Ms Josie Van Der Woude who consulted with Dr Judge at the Whyalla Clinic in October. She needed to return in November after having some X-Rays. She said Dr Judge informed her he was leaving the Clinic and he would not be there on her next consultation. Ms Van Der Woude said that in response to a question by her, Dr Judge informed her he was to commence practice at his wife’s clinic. She said she knew of the clinic. She also said that Dr Judge informed her that Dr Perry was returning to Whyalla and that she was a good chiropractor. Ms Van Der Woude, said that she told Dr Judge she would prefer to see Dr Judge at his new clinic.
Ms Dianne Moeller said that she consulted with Dr Judge towards the end of October 2001. She said that Dr Judge did not mention that he was leaving the Clinic. Ms Moeller said that she became aware of this on reading an advertisement in the local paper indicating that Dr Perry was returning to the Whyalla Clinic.
Ms Wendy Roffey said she received treatment for her spine from Dr Judge each month at the Whyalla Clinic. She said that after each treatment she would make an appointment for the next month’s treatment. She said that during a treatment at the Whyalla Clinic, Dr Judge informed her that he was leaving. She said she asked him if she could see him at his new Clinic. Ms Roffey said that Dr Judge informed her that she could see him at that Clinic.
The plaintiff asserts that evidence of conversations with Mr White and Mr Eadon demonstrates that Dr Judge was engaged in seeking to induce patients to leave the Whyalla Clinic and to consult with him at Access Chiropractors. The only evidence advanced by the plaintiff was that of Andrea Boundy which I referred to a moment ago. She also gave evidence of four patients who consulted Dr Judge at the Whyalla Clinic in October and who failed to make a new appointment after a consultation with Dr Judge although their practice in the past was to do so. There was no evidence that these patients consulted with Dr Judge at Access Chiropractors in the period up to 9 November 2001 when the order was made for the Interlocutory Injunction. Dr Judge gave evidence of a number of patients whom he had seen at the Whyalla Clinic and who came to him for treatment at Access Chiropractors in the period from 1 November 2001 until 9 November 2001.
The evidence of Ms Andrea Boundy regarding the conversations she overheard with Mr White and Mr Eadon may, on one view, appear to suggest Dr Judge was being more than reactive to questions on those occasions. I found Ms Boundy to be an honest witness. I accept her evidence regarding that part of the conversations she recounted. However the difficulty with her evidence is that she does not recount the entire conversation on each occasion.
I earlier expressed my views on Dr Judge, as a witness. Those views are equally applicable regarding the evidence he gave on this subject matter. As I said, I felt that Dr Judge was a truthful witness. I thought his memory failed him on occasions. He said he could not remember the conversations with Mr White and Ms Eadon. I would not have expected him to remember those conversations.
I accept his evidence regarding the practice he said he adopted of informing those patients who were to receive ongoing treatment, that he was leaving the Clinic. Ms Boundy’s evidence of the conversations cannot be said to be inconsistent with Dr Judge’s evidence regarding the practice he adopted. In fact what she overheard is generally consistent with Dr Judge’s evidence that he responded to a patient’s question after he informed the patient he was leaving. If Dr Judge had embarked upon a programme of soliciting patients whilst treating them at the Clinic it is surprising that Ms Boundy did not hear similar conversations with other patients. The evidence of those patients called by the defendant lend some support, in a minor way, to the evidence of Dr Judge that he did not embark upon a plan to solicit patients.
It might be thought that the practice of informing patients, as outlined by Dr Judge, was of itself conduct seeking to induce patients. Informing a patient that he was leaving would be likely to lead to questions from the patient regarding his future intentions. Of those patients who were informed that he intended to continue to practice in Whyalla, then some would be likely to follow him to his new clinic. He must have been aware of that.
However, I do not view such conduct as a breach of the non-inducement covenant in Clause 10. For there to be a breach of that covenant there must be conduct specifically aimed at leading a patient to terminate his or her relationship with the Whyalla Clinic and to take up consulting with the covenator. I accept that professionally it was appropriate for him to inform those patients who had an expectation that he would be there for their next treatment, that he was leaving the Clinic. I also accept that in holding those conversations with patients Dr Judge did not do so with an intention or aim of inducing those patients away from the Whyalla Clinic.
For the reasons I have given I am satisfied that AMJ Chiropractors was not in breach of the non‑inducement covenant through the conduct of Dr Judge holding conversations with patients of the Whyalla Clinic in the manner he described in his evidence. The plaintiff has therefore not established its first claim for breach of the covenant.
The second alleged breach of the covenant can be answered shortly. I have found that the covenant not to practice in Whyalla for two years is a restraint of trade and is unenforceable. Accordingly, AMJ Chiropractors was entitled to practice at the “Bunyarra” address. That being the case, the fact of practising at that address by AMJ Chiropractors cannot have as its specific aim or objective inducing patients to move from the Whyalla Clinic, and to consult at Access Chiropractors Clinic. That was not the intention of AMJ Chiropractors in establishing the Access Chiropractors Clinic at “Bunyarra”.
The final allegations of breach relates to an advertisement in the “Whyalla News” on 29 October 2001 and an advertisement in the “Eyre Peninsula Tribune” on 25 October 2001. The advertisement in the “Whyalla News” was published in the following form:
“CHIROPRACTOR
DR ALLAN JUDGE
(formerly of Better Back)
Wishes to advise that as from 1 November he will be consulting at Access Chiropractic Centre, Bunyarra, 153 Nicholson Ave. Whyalla Norrie. For appointments please phone 86450880.”
The advertisement in the “Eyre Peninsula Tribune” was as follows:-
“ACCESS CHIROPRACTIC CENTRES
DR ALLAN JUDGE
Will be consulting from November 1 at
Cleve – Tuesday AM
Cowell – Tuesday PM
Please note new phone number
86450880”
Although there is no evidence of this, the Eyre Peninsula advertisement would appear to have been inserted by AMJ Chiropractors. The company was entitled to conduct chiropractic clinics at those centres. Even if the non-competition covenant was enforceable, these centres were outside the area of the restraint. That being the case it cannot be said that the act of publishing the advertisement is in breach of the non- inducement covenant. AMJ Chiropractors were entitled to inform people in those centres that Dr Judge would be consulting from 1 November. Whilst the fact of advertising would inevitably lead to some patients of the plaintiff consulting with Dr Judge that, of itself, is not sufficient to establish that there has been a breach of the covenant. Once it is accepted that AMJ Chiropractors was legitimately entitled to advertise to the general population that Dr Judge would be visiting those centres, then it cannot be said that the act of advertising is conduct specifically aimed at inducing patients of the Whyalla Clinic to leave the Clinic and come to the Access Chiropractors’ Clinic for treatment.
The advertisement in the Whyalla News was worded differently. It may have been inserted by Dr Judge or AMJ Chiropractors. In any event, it does not matter because at the time Dr Judge was a director of AMJ Chiropractors. I have found that the non-competition covenant is not enforceable. AMJ Chiropractors were legitimately entitled to conduct a chiropractic centre after 1 November 2001. Again, whilst acknowledging that some patients of the Whyalla Clinic, on reading the advertisement, would be likely to follow Dr Judge, in my opinion, the act of advertising in that manner, is not in breach of the covenant for the reasons I outlined in dealing with the Eyre Peninsula Tribune advertisement.
CONCLUSION
I have found that AMJ Chiropractors was the contracting party to the Contract. For the reasons I have expressed neither the “non-competition” covenant nor the “non-inducement” covenant in Clause 10 are enforceable as they are each respectively in restraint of trade. In any event, with respect to the “non‑inducement” covenant, I have reached the conclusion that there has not been a breach of it.
Accordingly the plaintiff’s claims against the defendants are dismissed. There will be judgment for the defendants.
I will hear the parties on what further orders are required and on the question of costs.

[2002] SADC 39

23 April 2002