Idameneo P/L v Ticco P/L & 1 Ors [2004] NSWCA 329 (17 September 2004)

Last Updated: 23 September 2004

NEW SOUTH WALES COURT OF APPEAL

CITATION: Idameneo P/L v Ticco P/L & 1 Ors [2004] NSWCA 329

FILE NUMBER(S):

40606/03

HEARING DATE(S): 18 August 2004

JUDGMENT DATE: 17/09/2004

PARTIES:

IDAMENEO (No. 123) PTY LIMITED (ACN 002 968 185) (Appellant)

TICO PTY LIMITED (ACN 073 411 506) (First Respondent)

IAN LESTER ORGAN-RAFTER (Second Respondent)

JUDGMENT OF: Mason P Hodgson JA Santow JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 1738/02

LOWER COURT JUDICIAL OFFICER: Bryson J

COUNSEL:

G K BURTON (Appellant)

B RAYMENT, QC/ R EVANS (Respondents)

SOLICITORS:

Abbott Tout (Appellant)

McKell's Solicitors (Respondents)

CATCHWORDS:

CONTRACT - contractual interpretation of trade restraint clause in protection of goodwill on sale of a "business" to the appellant of respondent's medical practice. Whether vendor in breach of relevant contracts - whether vendor's breach amounted to a repudiation - purchaser instead of accepting alleged vendor repudiation continued to benefit from performance by vendor yet then withheld payment for his services - whether if the purchaser was then in breach that breach was absolved by vendor's prior breach and repudiation if such it were - whether that breach by the purchaser amounted to repudiation - whether when vendor then terminated invoking clause permitting purchaser to terminate on vendor's breach vendor entitled to do so if vendor earlier had repudiated - principles applicable - alternative basis in estoppel - need for nexus between any prior breach by vendor and subsequent breach by purchaser - no such nexus here.

LEGISLATION CITED:

Trade Practices Act s87

DECISION:

Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40606/03

EQ 1738/02

MASON P

HODGSON JA

SANTOW JA

17 SEPTEMBER 2004

IDAMENEO (No 123) PTY LIMITED (ACN 002 968 185) v TICCO PTY LIMITED (ACN 073 411 506) & 1 Ors

Judgment

1 MASON P: I agree with Santow JA.

2 HODGSON JA: I agree with the orders proposed by Santow JA, and subject to what I say below, substantially with his reasons.

3 For my part, I think that the evidence of Ms. Cannings and Ms. Becke, coupled with Dr. Rafter's signature to the application for registration of business name, very strongly supported an inference that he was a purchaser of the Macquarie Street practice; and I think that the evidence of Ms. Cannings strongly supported an inference that this purchase had been effected by about September 2001. Further, although it was not shown that any practice involving cosmetic surgery had commenced there prior to the end of February 2002, it seems clear that the existing medical practice at Macquarie Street continued after the purchase.

4 If the relevant inferences are drawn, then in my opinion it is established that Dr. Rafter was from about September 2001 in breach of cl.22.1(c) of the Sale Agreement, by being engaged in a business of the nature of that conducted by Idameneo, within the relevant area.

5 I recognise the weight to be given to findings of a trial judge, and the need for appropriate satisfaction that such findings are wrong before appellate intervention; but I am inclined to the view that in this case such intervention would be justified. It may be that the attention of the trial judge was not sufficiently drawn to the available inference that the existing medical practice at Macquarie Street continued after September 2001.

6 However, as pointed out by Santow JA, such a breach by Dr. Rafter did not entitle Idameneo to continue to require and accept performance by Dr. Rafter of his duties, and at the same time withhold payment for those duties.

7 The withholding of such payment might not of itself necessarily have amounted to a repudiation. If Idameneo had given reasons for withholding payment, and sought a resolution of the problems that led it to take such a course, I am inclined to think it would not have amounted to repudiation.

8 However, Idameneo did not do these things; and in any event cl.27.1 of the Sale Agreement entitled Ticco and Dr. Rafter to terminate, in the case of a remediable breach of contract, where such breach was not remedied within seven days of notice being given to Idameneo by Ticco and Dr. Rafter. Such notice was given by the letter of 19 February 2002, the breach was not remedied, and so Ticco and Dr. Rafter were entitled to terminate as they did on 28 February 2002.

9 SANTOW JA:

INTRODUCTION

This appeal poses two sets of contractual questions. This first requires contractual interpretation of a trade restraint clause in protection of goodwill on the sale of a "business" to the appellant, that being the respondent's medical practice. This is to ascertain if the vendor (a) was in breach of the relevant contracts and, if so, (b) whether that vendor's breach amounted to a repudiation.

10 If so, a second set of questions arise. They do so by reason of the fact that the purchaser, instead of accepting that alleged vendor repudiation, continued to benefit from performance by the vendor, yet then withheld payment for his services over at least two months. The vendor then terminated. He relied on the purchaser's breach in withholding payment, and invoked a specific clause permitting termination on breach.

11 The questions this poses are whether if the vendor had earlier repudiated the contract, did that unaccepted repudiation (a) mean the purchaser was entitled to withhold payment or at least was absolved from any breach in doing so, and in any event, (b) disentitled the vendor from terminating, even if the purchaser were then in breach.

12 The vendor successfully denied breach of the trade restraint at trial before Bryson J, so the trial judge did not have to determine whether that amounted to repudiation. The vendor also successfully contended that the purchaser was not only itself in breach of the contract but had thereby repudiated the contract. The vendor was therefore held entitled to terminate, either by accepting the purchaser's repudiation, or by invoking the express contractual right to terminate for any breach, whether or not the purchaser's breach amounted to repudiation.

13 The purchaser was Idameneo (No. 123) Pty Limited ("Idameneo"). It appeals against both these determinations by the trial judge in favour of the respondent vendors. They were respectively Dr Rafter and his practice company Ticco Pty Limited ("Ticco").

14 To elaborate, the contract was part of a suite of contracts governing the sale and purchase of a medical practice and related matters. It contained restraints on competition purporting to bind the vendor doctor, Dr Rafter whose practice company Ticco guaranteed performance. Dr Rafter directly and through Ticco contracted his services to Idameneo. It agreed to pay him a lump sum for his practice and, for his continuing services, an agreed proportion (45%) of the fee income earned. The trial judge concluded that:

(a) Dr Rafter was not in breach of the contractual stipulation precluding him from operating or being engaged in what is described as "business of the nature of the business conducted by the Purchaser at or from the New Premises" within an eight kilometre radius. This was principally on the basis that it had not been shown Dr Rafter was ever engaged in such a business or even that there ever was such a business and that any preparations to embark on a future such business were not in breach;

(b) The withholding of payments by Idameneo to Dr Rafter while