Vision Eye Institute Ltd v Kitchen (No 2)

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.