Vision Eye Institute Ltd v Kitchen (No 2) - [2015] QSC 66

SUPREME COURT OF QUEENSLAND

CITATION:
Vision Eye Institute Ltd & Anor v Kitchen & Anor (No 2) [2015] QSC 66

PARTIES: VISION EYE INSTITUTE LTD
(first plaintiff)
and
ICON LASER (AUSTRALIA) PTY LTD
(second plaintiff)
v
DR DAVID KITCHEN and MICHELLE KITCHEN (in their personal capacity and in their capacity as Trustees of the MDK Trust)
(defendants)

FILE NO:
10366 of 2009

DIVISION:
Trial Division

PROCEEDING:
Civil Trial

ORIGINATING COURT:
Supreme Court at Brisbane

DELIVERED ON:
21 April 2015

DELIVERED AT:
Brisbane

HEARING DATE:
Written submissions 17 December 2014, 16 and 23 February 2015, 26 March 2015, 9 and 16 April 2015.

JUDGE:
Applegarth J

ORDERS:
Proposed orders:

1.       There be judgment for the second plaintiff, Icon Laser (Australia) Pty Ltd, against the first named defendant, Dr David Kitchen in his personal capacity, for damages for breach of the Service Agreement in the amount of $10,845,476 which sum includes interest up to and including 21 April 2015.

2.       It is declared that:

a.   Dr Kitchen ceased to be an employee under the Service Agreement in circumstances where he was a “Bad Leaver” as defined in the Escrow Deed;

b.   the defendants are not entitled to the release of the restricted securities under the Escrow Deed.

3.       It is directed that the restricted securities be released from escrow on the condition that the plaintiffs are entitled to sell those shares on behalf of the defendants and to apply the Agreed Proportion of the proceeds of that sale (as defined in the Escrow Deed) in reduction of the liability of Dr Kitchen in damages for breach of the Service Agreement.

4.       It is further directed that the plaintiffs provide the defendants within 14 days written notice of the proposed process of sale, and should the defendants have any objection to that process which cannot be resolved by conferral, the parties are at liberty to apply for further directions.

5.       It is declared that save for cl 17.1(c) and (d) of the Service Agreement, the restraints in cl 17 of the Service Agreement are void as an unreasonable restraint of trade.

6.       It is declared that save for cl 12.1(c) and (d) of the Share Purchase Agreement, the restraints in cl 12 of the Share Purchase Agreement are void as an unreasonable restraint of trade.

7.       The relief sought in paragraphs 5 and 6 of the claim is refused.

8.       The defendants’ counterclaim is otherwise dismissed.

9.       The defendants’ application for leave to amend the second further amended counterclaim is refused.

10.     The parties have leave to make further submissions on the question of costs following the pronouncement of judgment.

CATCHWORDS:
DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – LOSS OF PROFITS – where an ophthalmologist wrongfully terminated his service agreement with a company – where the wrongful termination caused the closure of two practices owned by the company – whether damages for loss of practices and the opportunity to continue to derive…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] QSC 66
Decision Date: 21 April 2015

CaseChat Overview and Summary

Vision Eye Institute Ltd and Icon Laser (Australia) Pty Ltd, trading as Eye Laser Centre, initiated proceedings against Dr David Kitchen and his wife, alleging wrongful termination of a service agreement and breaches of fiduciary duty and equitable restraint. The court was required to determine whether damages for the loss of two ophthalmology practices and the opportunity to continue to derive earnings from them should include income from new forms of treatment for macular degeneration. The court also had to consider whether shares held in escrow should be released and sold to offset part of Dr Kitchen's liability for damages.

In assessing the company's loss and damage, the court considered the remoteness and causation of the losses. It found that the loss of opportunity to continue the two practices and to derive earnings from them should include income from new forms of treatment, as these were reasonably foreseeable consequences of the wrongful termination. The court rejected the argument that the loss of profit from new treatments was too remote. Regarding the shares held in escrow, the court held that they should be released and sold to offset part of Dr Kitchen's liability for damages, as the shares could remain in escrow in perpetuity otherwise.

The court ordered judgment in favour of Icon Laser against Dr Kitchen for damages for breach of the Service Agreement, including interest. It declared that Dr Kitchen ceased to be an employee under the Service Agreement in circumstances where he was a "Bad Leaver" as defined in the Escrow Deed and that the defendants were not entitled to the release of the restricted securities under the Escrow Deed. The court directed that the restricted securities be released from escrow on the condition that the plaintiffs were entitled to sell those shares on behalf of the defendants and to apply the agreed proportion of the proceeds in reduction of Dr Kitchen's liability in damages. The relief sought in paragraphs 5 and 6 of the claim was refused, and the defendants' counterclaim was dismissed. The court also declared that certain restraints in the Service Agreement and Share Purchase Agreement were void as an unreasonable restraint of trade.

Orders

Orders of the court

Proposed orders:

1. There be judgment for the second plaintiff, Icon Laser (Australia) Pty Ltd, against the first named defendant, Dr David Kitchen in his personal capacity, for damages for breach of the Service Agreement in the amount of $10,845,476 which sum includes interest up to and including 21 April 2015.

2. It is declared that:

a. Dr Kitchen ceased to be an employee under the Service Agreement in circumstances where he was a “Bad Leaver” as defined in the Escrow Deed;

b. the defendants are not entitled to the release of the restricted securities under the Escrow Deed.

3. It is directed that the restricted securities be released from escrow on the condition that the plaintiffs are entitled to sell those shares on behalf of the defendants and to apply the Agreed Proportion of the proceeds of that sale (as defined in the Escrow Deed) in reduction of the liability of Dr Kitchen in damages for breach of the Service Agreement.

4. It is further directed that the plaintiffs provide the defendants within 14 days written notice of the proposed process of sale, and should the defendants have any objection to that process which cannot be resolved by conferral, the parties are at liberty to apply for further directions.

5. It is declared that save for cl 17.1(c) and (d) of the Service Agreement, the restraints in cl 17 of the Service Agreement are void as an unreasonable restraint of trade.

6. It is declared that save for cl 12.1(c) and (d) of the Share Purchase Agreement, the restraints in cl 12 of the Share Purchase Agreement are void as an unreasonable restraint of trade.

7. The relief sought in paragraphs 5 and 6 of the claim is refused.

8. The defendants’ counterclaim is otherwise dismissed.

9. The defendants’ application for leave to amend the second further amended counterclaim is refused.

10. The parties have leave to make further submissions on the question of costs following the pronouncement of judgment.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	Vision Eye Institute Ltd & Anor v Kitchen & Anor (No 2) [2015] QSC 66
PARTIES:	VISION EYE INSTITUTE LTD (first plaintiff) and ICON LASER (AUSTRALIA) PTY LTD (second plaintiff) v DR DAVID KITCHEN and MICHELLE KITCHEN (in their personal capacity and in their capacity as Trustees of the MDK Trust) (defendants)
FILE NO:	10366 of 2009
DIVISION:	Trial Division
PROCEEDING:	Civil Trial
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	21 April 2015
DELIVERED AT:	Brisbane
HEARING DATE:	Written submissions 17 December 2014, 16 and 23 February 2015, 26 March 2015, 9 and 16 April 2015.
JUDGE:	Applegarth J
ORDERS:	Proposed orders: 1. There be judgment for the second plaintiff, Icon Laser (Australia) Pty Ltd, against the first named defendant, Dr David Kitchen in his personal capacity, for damages for breach of the Service Agreement in the amount of $10,845,476 which sum includes interest up to and including 21 April 2015. 2. It is declared that: a. Dr Kitchen ceased to be an employee under the Service Agreement in circumstances where he was a “Bad Leaver” as defined in the Escrow Deed; b. the defendants are not entitled to the release of the restricted securities under the Escrow Deed. 3. It is directed that the restricted securities be released from escrow on the condition that the plaintiffs are entitled to sell those shares on behalf of the defendants and to apply the Agreed Proportion of the proceeds of that sale (as defined in the Escrow Deed) in reduction of the liability of Dr Kitchen in damages for breach of the Service Agreement. 4. It is further directed that the plaintiffs provide the defendants within 14 days written notice of the proposed process of sale, and should the defendants have any objection to that process which cannot be resolved by conferral, the parties are at liberty to apply for further directions. 5. It is declared that save for cl 17.1(c) and (d) of the Service Agreement, the restraints in cl 17 of the Service Agreement are void as an unreasonable restraint of trade. 6. It is declared that save for cl 12.1(c) and (d) of the Share Purchase Agreement, the restraints in cl 12 of the Share Purchase Agreement are void as an unreasonable restraint of trade. 7. The relief sought in paragraphs 5 and 6 of the claim is refused. 8. The defendants’ counterclaim is otherwise dismissed. 9. The defendants’ application for leave to amend the second further amended counterclaim is refused. 10. The parties have leave to make further submissions on the question of costs following the pronouncement of judgment.
CATCHWORDS:	DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – LOSS OF PROFITS – where an ophthalmologist wrongfully terminated his service agreement with a company – where the wrongful termination caused the closure of two practices owned by the company – whether damages for loss of practices and the opportunity to continue to derive…