Ashcoast v Whillans [1996] QSC 210

t\ / DEPA!lTMENT OF • State Reporting TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND AMBROSE J No 8419 of 1996 ASHCOAST PTY LTD and MARK WHILLANS BRISBANE .. DATE 14/10/96 ORDER REVISED COPIES ISSUED State Reporting Bureau Date .lJ V 10 I This judgment is to be copied for the purpose of research and private study oo~. It is not to be resold or used for republication in any other way without permission. -1111 rt,,,,1·, Tlic l.:1w C1111rls, C:rnrgi: Stn·d. Brisl1:111t:, Q. -llHHl T.:lt:pli1111t": (07) JZ-l7 -l.1(,ll F:1'(: (ll7l .12-17 s;:.12 -- 1 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) HIS HONOUR: This is an application by the owner of a medical 1 centre on the Gold Coast for interlocutory injunctions to enforce a restraint of trade clause pending trial and also to restrain the use of confidential information on the material actually taken by the defendant just prior to his leaving the centre. The question essentially is whether there is a serious question to be tried and in determining that matter, it is necessary to look at the terms of the agreement in respect of 10 which the plaintiff says the defendant is in breach. 20 It is an agreement made 10 August 1992. There is some dispute or argument as to when the agreement was signed. It does not seem to me that it matters much when it was signed, but there was an agreement in any event under which the defendant 30 obtained a licence to use the facilities at the medical centre owned by the plaintiff. The scheme, without going into all the detail which is unnecessary on an application such as this, involved a medical centre being set up by the plaintiff 40 at which a number of doctors and specialists in the provision of health care services were housed; there were management services provided by the plaintiff, secretarial, administrative functions. It seems that there was an arrangement where the medical fees earned by the doctors and 50 other health care providers were split roughly 50/50 between the service providers and the owner of the centre, and the owner of the centre, out of its share, provided not merely the rooms and facilities out of which the health care services were provided, but also the administration and so on. 2 ORDER 60 -- 2 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) It el"flerges from the material that sometimes patients would 1 come in and ask for a specified doctor or other health care service provider. Sometimes they would just ask to see a doctor and at that time the person on the desk would allocate a particular doctor who was not too busy presumably to provide the services. 10 In any event the plaintiff did some training before he set up in practice as a general practitioner at this place and eventually he entered into an agreement and this agreement was made about four years ago. Under clause 7 of the agreement it 20 was provided that except with the consent of the plaintiff, the defendant would not, for a period of three years after termination of the agreement, either alone or in partnership with any other persons, carry on the practice of a medical practitioner or act as a locum tenens within seven kilometres 30 from the plaintiff's premises. There was an exception to that general prohibition and it is not necessary for me to go to that, because it is not suggested that the defendant comes within the exception. On the material which is uncontested the defendant in September gave notice that he was moving out. There is some complaint on the part of the plaintiff that he did not give a long enough notice. That does not seem to me to be of great significance in the overall evaluation of the situation. More importantly, however, prior to his departing from the centre he extracted from a computer record kept at the centre, by the plaintiff, the names and addresses of a number of 3 ORDER 50 60 -- 3 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) patie!lts that he had treated or come into contact with while , operating out of that centre as a doctor over the period of roughly four years. There was a degree of subterfuge in this. When asked by a clerical assistant what he was doing, he said he was taking a 10 survey. It then became clear, however, as facts emerged, when he was again found to be taking them at a later time, that he was in fact simply extracting from the plaintiffs record of clientele the names and address of people, and presumably he wanted that for his own professional purposes. 20 The evidence discloses - and again it is uncontradicted - that he has canvassed persons who were patients at the centre by letter and has advised them that if they want to see him, they can now see him at his new centre which is about two 30 kilometres from the plaintiffs centre. T~e plaintiff seeks an interlocutory injunction enforcing the restraint; that is, preventing him pending the determination 40 of the action from practicing as a doctor within seven kilometres of the plaintiffs centre and also an injunction restraining him from using the names and addresses of the people he extracted from the plaintiffs computer record before he left. There is various other relief sought that pending trial, he deliver up all records and lists that he has compiled relating to patients records and names and addresses and so on. 4 ORDER 50 60 -- 4 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) There are a number of points that must be determined, not in a 1 final way but in a way which is relevant to the exercise of discretion in granting or refusing an interlocutory injunction. The first thing to determine is whether there is prima facie a breach of contract on the part of the defendant and the breach of the contract asserted as far as the 10 restraint clause is concerned, is a breach of clause 7. The second question is whether quite apart from the express term of the contract there was a breach of obligation he owed to the plaintiff in extracting from the plaintiffs computer 2o records the names and addresses of patients who attended that centre for medical treatment and advice, albeit that all of them or some of them were given advice and treatment from time to time by the defendant. 30 The first thing that has to be determined is whether there is a serious issue to be tried in both respects. In my view t.here is clearly a serious issue to be tried. It is contended, however, for the defendant, that upon its face clause 7 of the agreement is too wide a constraint to be 40 enforceable and that therefore the balance of convenience favours a dismissal of the application for an injunction, at least as far as the area constraint is concerned. 50 It is said in argument, in the course of discussion, it may not have been too wide if it had only been three kilometres in radius that was constrained, but that it is clearly too wide with a seven kilometre constraint. It is said that it is far from clear that the plaintiff will succeed in his action, 5 ORDER 60 -- 5 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) either with respect to the restraint clause or with respect to1 the breach of duty in obtaining for misuse the confidential information held by the plaintiff in its computer system. It is said, because it is far from clear, the balance of convenience favours not granting an injunction. It is said10 that it is a matter of public concern that patients may not be able to readily get treatment from the defendant if he cannot practice out of the place where he is presently practicing, a couple of kilometres away from the plaintiffs centre. 20 It is said that the centre has no property in the information that was in its computer that the defendant extracted and that the information was being held for the benefit of the defendant, not for the benefit of the plaintiff and that therefore the defendant cannot be restrained from making use 30 of the client list or the patient list that he extracted from the plaintiffs records. In my view there certainly is a serious question to be tried on all matters. In my view the plaintiff has established that 40 it has a quite strong case in respect of both the extracting of the confidential information and making use of it the defendant has obviously done on the material, and it also has a strong case that the constraint over a seven kilometre radius from the site in issue is a reasonable one. In Orton v. Melman (1981) 1 NSWLR 583, Mr Justice Mcclelland at page 587, dealing with a legislative provision relating to restraints, which is not applicable to this case, 6 ORDER so 60 -- 6 of 10 -- I 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) neve~theless, observed that it is proper firstly to determine whether the alleged breach did or would infringe the terms of the restraint properly construed and then to determine whether the restraint proved, in so far as it applied to that breach, was contrary to public policy. The question really of public policy that has been debated is the extent of the constraint that I have indicated. In my 10 view there is no doubt that the conduct of the defendant will amount to a breach of clause 7 of the agreement. The question then is whether, upon its proper construction, it is too wide. 20 Now in determining whether it is too wide, I am assisted by the tests specified in Amoco Australia Pty Ltd v. Rocca Brothers Motor Engineering, 1 33 CLR 288 at page 306. Mr Justice Ryan, in the case of Traikboa Pty Ltd v. Cache Holdings Pty Ltd and Another, Queensland Conveyancing Law and 30 Practice Reports, page 57643 dealt with this whole question in a case dealing with a restaurant or takeaway food agreement where there was a restraint of trade clause incorporated in the agreement that was breached. His Honour pointed out at page 57646 that a Court cannot accept the fact that the restrictions are those upon which the parties have agreed as conclusive to show that they are reasonable. The fact that parties have agreed, of course, is only one consideration, because His Honour went on to say: "It has been repeatedly stated by the Courts that where parties to a contract have been in that position to bargain on an equal footing, they should be treated as the best judges of what is reasonable in their own interests". His Honour then referred also to observations by Mr Justice 7 ORDER 40 s -- 7 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) Gibbs as he then was in the Amoco case. He said in the 1 absence of any material which suggested that the restraint was unreasonable, and he said in that case the restraint did not seem to his mind to be patently unreasonable - he was entitled to rely upon the principles specified by Mr Justice Gibbs in Amoco and treat the restraint as being not unreasonable as10 between the parties. He said there was nothing to suggest that it would be injurious to the public interest to enforce the restraint. On the facts of this case it seems to me that there is nothing2° patently unreasonable in the doctor, when he qualifies, agreeing as consideration for entering into a medical service centre, where a lot of doctors and health care providers work under the one roof and as part of the one organisation, there is nothing unreasonable in him agreeing not to leave the 30 place, terminate his licence and set up in competition within seven kilometres. There is nothing patently unreasonable about it. The Gold Coast is a very large place. The information that has been placed before me indicates that there are 1 5 medical care centres within seven kilometres of 40 the plaintiff's premises at which medical services are provided in competition with those provided by the plaintiffs centre. On the Gold Coast altogether there are 103 medical centres and I am told the Gold Coast stretches from Labrador in the north down to Tweed Heads in the south. It emerges from the defendants material that 77 per cent of the patients that he first came into contact with at the plaintiffs centre live within three kilometres, in fact, of 8 ORDER 50 60 \ -- 8 of 10 -- I 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) the centre. It is contended on behalf of the defendant that 1 while a restraint for a three kilometre radius may have been valid, in fact the constraint is for seven kilometres and therefore it fails simply because it is unreasonable and the bonus, I suppose, for the defendant in that situation will be that it was the width of the express restraint that allows him 10 to treat the people that live within three kilometres of the -plaintiffs centre. Had three kilometres been specified instead of seven, although not conceded at least, it is agreed that it would be very difficult to set that aside as unreasonable. 20 Looking at the material generally, it is my view that prima facie, the defendant has deliberately set about extracting the names of patients and canvassing them. He has done so by subterfuge initially. It is clear that he asserts at the 30 present time that he has got a right to do so and I have come to the conclusion that the balance of convenience favours the grant of the injunction sought. 40 It will be granted, of course, only upon the usual undertaking as to damages being given. There is no suggestion that the plaintiff does not have a capacity to meet any damages that the defendant is likely to suffer as a result of the interlocutory injunction being granted. It seems to me in 50 that situation the balance of convenience favours the grant of an injunction. It would be a very difficult matter, in my mind, for the plaintiff, whatever records it kept and whatever particulars are given and so on by the defendant, to establish the undoubted damage that it would suffer should the patients 9 ORDER 60 -- 9 of 10 -- 141096 D.1 T2/LAM M/T 1140/96 (Ambrose J) livi~g within three kilometres of its medical service centre 1 continue to. be served by the defendant in breach of the obligations imposed upon him under the licence agreement. HIS HONOUR: Do you have a draft order? MR HOWE: I don't. I can get one delivered to Your Honour's 10 associate. What is sought is really in terms of orders 2 through to 6, except what is sought in paragraph 2 of the notice of motion should read, "Restrain the defendant pending the trial of this action, either alone or in partnership". HIS HONOUR: All right, well I'll make the order. It will be taken down on the record. HIS HONOUR: Costs reserved. 20 30 40 50 60 10 ORDER -- 10 of 10 --