IDAMENEO (NO. 123) P/L v. TICCO P/L & ANOR [2003] NSWSC 538

Reported Decision : (2003) ATPR (Digest) 46-235

New South Wales Supreme Court

CITATION : IDAMENEO (NO. 123) P/L v. TICCO P/L & ANOR [2003] NSWSC 538 HEARING DATE(S) : 16, 17 & 18/12/02; 12, 13 & 14/02/03 JUDGMENT DATE : 26 June 2003 JURISDICTION: EQUITY JUDGMENT OF : Bryson J at 1 DECISION : Claim dismissed: inquiry ordered on cross-claim.

CATCHWORDS : TRADE - restraint of trade by agreement - validity and reasonableness - sale of medical practice - restraint of 5 years and 8 kilometres held valid but not enforced because purchaser repudiated - numerous issues on alleged breaches of contract in complex chain of agreements on sale of medical practice where vendor was to work as Medical Director in practice management organisation conducted by purchaser. LEGISLATION CITED : Trade Practices Act 1974 Restraint of Trade Act 1976 Jones v. Dunkel (1959) 101 CLR 298 CASES CITED : Kone Elevators Pty Ltd v. McNay & Anor (1997) ATPR 14-564 Peters (WA) Ltd v. Petersville (2001) 205 CLR 126 Idameneo (No. 123) P/L - Plaintiff PARTIES : Ticco Pty Ltd ACN 073411506 - First Defendant Ian Lester Organ-Rafter - Second Defendant FILE NUMBER(S) : SC 1738/2002 COUNSEL : G. Burton - Plantiff R. Evans - First Defendant SOLICITORS : Abbott Tout - Plaintiff 1st & 2nd Defendants - McKells Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON J.

THURSDAY 26 JUNE 2003

1738/02 - IDAMENEO (NO 123) PTY LIMITED v TICCO PTY LIMITED & IAN LESTER ORGAN-RAFTER JUDGMENT The litigation and the parties. 1 HIS HONOUR: These proceedings were commenced by Summons dated 1 March 2002 and the claims now appear in Amended Summons of 7 June 2002. The Amended Summons has over six pages of claims for orders and alternatives. There were no pleadings, and this caused considerable difficulty as there were many contested issues of fact and the issues were too complex to be readily recognised on reading the parties' affidavits in chief. If I had understood the complexity of the case in advance I would not have allowed it to go to trial without pleadings. For all the written definition of issues I had I might as well have been a District Officer adjudicating ownership of a pig under a tropic palm. Counsel for the plaintiff compounded the difficulties by attempting to pursue discovery of documents by notices to produce delivered during the course of the hearing. It was inappropriate to seek to supplement discovery in this way in the midst of the hearing and without incurring a mutual obligation. 2 The first defendant Ticco is an Incorporated Medical Practice (IMP) company through which the second defendant Dr Rafter carries on medical practice. Doctor Rafter is a medical practitioner of many years standing, and trained as a surgeon and cardiothoracic surgeon. In August 2000 he was conducting a general practice at 298 New South Head Road, Double Bay; he had conducted that general practice for about two and a half years, and had worked long hours in building up the practice in a suburb where there was much competition. The practice was conducted under the business name Corner of Bay Medical Centre. Ticco was formed on 26 March 1996; Dr Rafter and Miss Lemmik became its only directors on 27 March 1996; Ms Tiina Lemmik became its secretary on that day and they still held those offices on 28 February 2002; and they each held one of its two issued shares. 3 The plaintiff is associated with Primary Health Care Ltd, which is listed on the Australian Stock Exchange and controls a number of medical practices and associated activities referred to as the Primary Health Care Group. The principal figure in the Group's affairs is Dr Edmund Bateman, who is a director of the plaintiff. In March 2002 Idameneo conducted a number of medical centres in Sydney Metropolitan locations; Dr Bateman identified medical centres at Warringah Mall Brookvale, Chatswood, Bankstown, Campsie, Fairfield, Ingleburn, Caringbah, Campbelltown, Mt Druitt, Castle Hill, Maroubra, 580 George Street Sydney, Darlinghurst and Leichhardt; and also at Dubbo. After negotiations which extended over about 10 months Idameneo and Ticco entered into a complex array of written agreements on 25 August 2000. These six documents interact in some scheme of incomprehensible and superfluous complexity, and it is difficult to form an overview of how they act together, or of why there were six of them. The agreements must be considered in detail but their general effect included that the general practice at Double Bay was sold to Idameneo and Dr Rafter was to practice medicine in the Primary Health Care Group, as Medical Director at Double Bay, and also at other locations. Dr Rafter had a lease of the premises at 298 New South Head Road, and separate leases of two shops in neighbouring premises at 294-296 New South Head Road. All these leaseholds were sold to the plaintiff. Doctor Rafter had intended to open a cosmetic surgery at 294-296 New South Head Road, but had not done so. 4 The practice continued to be conducted by the plaintiff at 298 New South Head Road, Double Bay. At some time in 2000 the plaintiff purchased another medical practice in Double Bay, called The Double Bay Medical Centre. These two practices were amalgamated into the practice at 298 New South Head Road. Some building work was done at 298 New South Head Road in November 2000 to accommodate the doctors who had previously worked at Double Bay Medical Centre. The plaintiff closed the practice on 23 September 2001 and the operations conducted there were moved to a newly opened medical centre at Darlinghurst. 5 This litigation arose out of the circumstances in which Dr Rafter worked in the Primary Health Care Group organisation from August 2000 until, by a letter of 28 February 2002, he terminated or purportedly terminated the principal written agreements. The plaintiff commenced the proceedings the following day and claimed orders which would establish that the agreements had not been terminated but that the defendants had repudiated them, orders restraining the defendants from conducting competing medical practice and from providing Medical Centre Services, from disclosing confidential information, damages and interest. No claim was made at the hearing before me that Dr Rafter was using confidential information. Idameneo also claims repayment of part of the price for which the Double Bay practice was sold. There are other general claims. The Amended Summons sought to establish in detail, by declarations, many respects in which there had been breaches of the written agreements. 6 I did not find the demeanour of either Dr Bateman or of Dr Rafter of much assistance in deciding whether evidence on any particular matter should be accepted, either when they were in conflict with another witness or with each other, or in claims about facts on which no other witness spoke where I was called upon to decide whether to accept the evidence of one of them. To me both of them seemed to show indications of strong feelings and strong sense of engagement in the controversy. I approach the evidence of both on the basis that they were not objective witnesses. I also had regard to my views about the inherent probability of facts asserted, the capacity of each party to adduce evidence on a particular subject, and, to a greater extent than would be usual if there were some clear sense of the reliability of witnesses, on the onus of proof. 7 On 20 March 2002 the plaintiff obtained an interlocutory injunction restraining the defendants from medical practice and from providing Medical Centre Services in a defined restraint area which covered much of the Sydney Metropolitan Area; the restraint area adopted for the interlocutory injunction do not correspond exactly with any view of the restraints imposed by the contractual provisions. The interlocutory injunction still has effect. 8 Doctor Rafter was not engaged in the Primary Health Group under a contract of employment. Idameneo operates by acquiring existing medical practices or setting up new ones and carrying them on by providing management and logistical services to doctors and medical ancillaries who work in the practices. The general scheme is that the doctor and his IMP company contract with Idameneo for Idameneo to provide support services and logistic services including paramedical, nursing, billing and accounting services. Charges are made to patients who attend at the practice by the doctor himself but fees when paid are received by the plaintiff; in this case the plaintiff retained 55 percent of the fees received plus GST and paid on to the defendants 45 percent less GST. Fees bulk-billed to Medicare form a proportion of the fees dealt with in this way, although a significant proportion was not paid by Medicare. 9 From August 2000 to September 2001 Dr Rafter practised medicine and was the Medical Director at the plaintiff's medical centre at 298 New South Head Road, Double Bay, formerly his own practice. Then in September 2001 Idameneo opened a new medical centre in Darlinghurst at the intersection of Victoria Road and William Street and ceased to operate the medical centre at Double Bay; Dr Rafter then worked at Darlinghurst, where he was not the Medical Director. He also, on about 10 Sundays, worked at the plaintiff's medical centre at Maroubra, and on a number of occasions he worked at a Skin Care Clinic at the plaintiff's medical centre at Warringah Mall, Brookvale. Idameneo seeks injunctions restraining Dr Rafter and Ticco from rendering medical services (and a number of other activities) at any place within a radius of eight kilometres of each of those four medical centres until 25 August 2005, the fifth anniversary of the Sale of Practice Agreement. The areas covered by these circles overlap. The injunctions claimed allow a contractual exception – "unless such activity is the rendering of urgent medical attention as referred to in s.36 of the Medical Practice Act 1992 (NSW)".