Dive v Chapman[2006] QSC 29

SUPREME COURT OF QUEENSLAND

1. McMURDO J:  The first and second plaintiffs are chiropractors.  The third plaintiff is the company by which they conduct a chiropractic practice at Mermaid Beach.  The defendants are also chiropractors.  Each of them has previously worked in the plaintiffs’ practice, under written contracts by which they were paid a proportion of the fees which they generated.  From early last year the defendants have conducted their own practice at Robina in competition with the plaintiffs’ practice. 

2. The third plaintiff says that they wrongfully caused patients who had been treated by the second defendant at its practice to leave and go to the defendants’ practice. The defendants admit that they have treated persons who had been treated by the second defendant when he worked for the plaintiff. But they deny that this involved any wrongdoing. The third plaintiff claims that the defendants have breached their contracts, fiduciary duties and duties of confidence owed to the third plaintiff in relation to information as to particular patients within its records. It claims damages in the sum of $260,000 against each defendant.

3. Each of the plaintiffs then makes a distinct claim, which is for damages for defamation, against each of the defendants. The defendants’ application, as filed, was to strike out parts of its pleading or, alternatively, for particulars, but does not relate in any respect to the defamation claim. The defendants also apply for certain orders for disclosure as do the plaintiffs. It is convenient to discuss first the challenge to the statement of claim.

The statement of claim

4. The defendants have filed a defence to the predecessor of this amended statement of claim, which admits the allegations which (still) appear in paragraphs 1 to 8. In paragraph 7 the plaintiffs plead a written agreement between the third plaintiff and the second defendant, dated 25 June 2003, whereby he “as contractor agreed to undertake and perform chiropractic service to the third plaintiff as principal for a period of 24 months”. In paragraph 8 certain express terms of that agreement are pleaded as follows:

“6.2The contractor warrants and agrees that he shall not induce patients of the principal and the practice to attend any competitor’s practice, without the prior written approval of the principal.

…

7. Termination
   1. …
   2. Either party may terminate this agreement upon giving the other party 30 days written notice of termination:

(i)if the other party commits any breach of this agreement and fails to remedy such breach within 14 days of receiving written notice requiring the breach to be remedied;

(ii)if the other party engages in any practice which may in relation to the operations of this agreement render the party liable to prosecution or other legal action.

…

8.3The contractor shall not copy or remove from the practice (without the prior written approval of the principal) the histories and other records of patients of the practice, including addresses and telephone numbers and at all times such records shall remain the property of the principal.”

5. Paragraph 8A then pleads an agreement in identical terms between the third plaintiff and the first defendant dated 6 March 2002.

6. Then follow the paragraphs which are challenged. Paragraph 9 pleads an implied term as follows:

“9Further it was to be implied in the said contractor agreements, by reason of commercial efficacy, that the first and second defendants would not solicit patients of the third plaintiff’s practice to leave the third plaintiff’s practice, or induce the patients of the third plaintiff’s practice to do so, including after the termination of the said agreements.

A claim for breach of fiduciary duty is then pleaded:

“9AFurther and in the alternative, by reason of the terms of the contractor agreements, there existed at all material times a fiduciary relationship between the third plaintiff and the first defendant, and between the third plaintiff and the second defendant.

9BBy force of the said fiduciary relationship, the first defendant and the second defendant were obliged at all material times:

(a)To act, with respect to the third plaintiff, with utmost good faith;

(b)To maintain the duties of confidentiality, in particular the confidentiality of the business records of the third plaintiff relative to its patients, provided for in the respective contracts, after the cessation of the contractual relationship;

(c)Not to induce, or attempt to induce, patients of the third plaintiff’s practice to leave such practice including after the cessation of the contractual relationships.

7. Paragraphs 10 and 11 are not challenged by the application (as filed). Paragraph 10 pleads the agreed proportions in which the third plaintiff and the second defendant divided fees from patients whom he treated. The proportion varied according to the fees received within a week, with the second defendant receiving between 45 and 65 per cent. The Defence admits that allegation. Paragraph 11 alleges that without notice to the third plaintiff, the second defendant repudiated the contract on or about 7 January 2005, and that the third plaintiff accepted that repudiation on 18 January 2005. The Defence denies those allegations, and pleads that the second defendant validly terminated his contract on the date of his alleged repudiation. Paragraph 11A then pleads a loss as follows:

“11AIn consequence of the second defendant’s repudiation of the contractor agreement dated 25 June 2003 the third plaintiff suffered loss and damage.”

I shall return to the particulars, such as they are, which have been provided of that paragraph.

8. The further breaches of contract and the breaches of fiduciary duty are pleaded in paragraphs 12 to 15 as follows:

“12.In breach of the terms of the contractor agreement referred to in paragraphs 7, 8 and 9 hereof, and in breach of the fiduciary duties referred to in paragraph 9B hereof, the second defendant, from a date unknown to the third plaintiff, without the consent of the third plaintiff:

(a)solicited and induced patiens  of the third plaintiff’s practise to attend for chiropractic treatment the practice referred to hereunder; and

(b)copied histories and other records of the patients of the third plaintiff’s practice, including addresses and telephone numbers.

13. In further breach of the terms of the contractor agreement referred to in paragraphs 7, 8, 8A and 9 hereof, and in breach of the duties referred to in paragraph 9B hereof, the second defendant, from in or about December, 2004, set up, together with the first defendant, and conducted, a chiropractic practice at suite 11, 1^st floor, 238 Robina Town Drive, Robina (“the Robina Practice”).

14. In further breach of the said terms of the contractor agreements referred to in paragraphs 7, 8, 8A and 9 hereof, and in further breach of the duties referred to in paragraph 9B hereof, the first defendant and the second defendant, from on or about 7 January 2005:

(a)serviced patients of the third plaintiff, that the first and second defendants had solicited and induced to attend the Robina practice;

(b)utilised for such purpose, the histories and other records of the patients of the third plaintiff’s practice, including addresses and telephone numbers.

15. The first and second defendants each induced the breaches of contract and the breaches of fiduciary duties by the other referred to herein.”

9. The alleged damage from those various breaches is pleaded as follows:

“16.As a result of the breaches of contract referred to in paragraphs 11 to 14 inclusive hereof, and as a result of the breaches of fiduciary duties, the third plaintiff has suffered, and continues to suffer, loss and damage.

17. The third plaintiff has suffered weekly loss of the balance of the fees referred to in paragraph 10 hereof, and has also suffered the loss of a substantial portion of the goodwill of its practice.

18. The said losses amount to no less than $260,000.00.  Particulars will be supplied after disclosure of documents herein.”

So by the reference to paragraph 10 within paragraph 17, the allegation in paragraph 18 would seem to be that by the combined effects of the loss of bargain, other breaches of contract and breaches of fiduciary duty, the third plaintiff has lost something in excess of $260,000.  That is consistent with paragraphs 26(a) and (b), which are discussed later.

The implied term

10. The first issue is whether the allegation in paragraph 9 is so clearly devoid of prospects as to warrant summary dismissal.^[1]  This is said to be an implication which is necessary to give business efficacy to the contract.  Because the implication would result not from the contract being of a certain category, but instead from the terms and circumstances of this particular contract, the alleged term is one which is said to be implied “in fact”.  Nevertheless whether such a term should be implied is an issue of law: Re: Comptoir Commercial Anversois v Power Son & Co [1920] 1 KB 868; Heimann v The Commonwealth (1938) 38 SR (NSW) 691, 695.   It involves the proper construction of the express terms informed by the facts and circumstances, known or understood by both parties, when they made their contract: Codelfa Construction Pty Ltd v State Rail Authority New South Wales (1982) 149 CLR 337.  No facts are pleaded as being the factual matrix in this case; nor are any identified in the plaintiff’s evidence or argument. 

11. The contract contains an express term that the contractor would not induce patients away from the principal’s practice.  The alleged implied term is a restraint upon inducing patients to leave, as well as a restraint against soliciting patients to leave.  In that respect the implied term would seem to add little of substance to the express term.  The significant difference is that the implied term is said to have a continuing operation after the contractor has departed the principal’s practice.  The plaintiffs’ argument seemed to accept that the express term would not restrain the contractor once he or she had left the practice, and consistently with that the pleading does not allege an ongoing operation of the restraint as it does for the implied term.  So whilst it is apparently accepted that the express term should not be construed as having that ongoing operation, it is argued that the contract should be construed as containing an implied term to that effect.  In my view the contractor is not restrained by the contract from inducing or soliciting patients after he or she has left the practice, either by the express term in clause 6.2 or by an implied term. 

12. The express term in clause 6.2 would not be construed as a restraint after the period of service. The ordinary meaning of the words of this clause would refer to conduct during the agreed term of the contract. By contrast, the restraint upon the use of confidential information (clause 8.1) is expressly extended beyond the “expiry or termination of this agreement”. And the unreasonableness of the restraint operating after the period of service, without any limit as to time, place or even to such patients of the principal whom the contractor has treated, is telling against such an interpretation.

13. To establish the implied term alleged in paragraph 9, the plaintiff would have to satisfy the five requirements stated in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 282-3.  The first of these is that the term must be reasonable and equitable.  The implied term as pleaded, would have that unlimited scope as to time, place and patients of the principal.  For the plaintiffs, Mr Griffin QC submitted that the implied term should be understood as one operating for only a reasonable time.  But with that limitation, the term would still fail the requirement of being reasonable and equitable in the interests of both parties, and that concession also illustrates the problem in identifying with certainty the ambit of this suggested term.  Nor is this term necessary to give business efficacy to the contract, which was quite workable without it.  Because of the professional relationships which would be likely to develop between the contractor and patients treated by him, some restraint of trade after the contractor left might have been agreed and able to be justified as reasonable.  But the contract was effective without it.  And the term would not be so obvious that it went without saying. 

14. It follows that the implied term alleged in paragraph 9 could not be established and the paragraph and other references to it should be struck out.

Fiduciary duty

15. The next issue concerns the alleged breach or breaches of fiduciary duty. Paragraph 9A alleges that “by reason of the terms of the contractor agreements” there existed “at all material times” this fiduciary relationship. There is a similar reference to “at all material times” in paragraph 9B. It appears from the allegations of breach of fiduciary duty that the case is that the duty survived the end of the period of service at the plaintiffs’ practice.

16. By clause 4.1 of each contract it was agreed that the parties’ relationship would not be that of partners or employer and employee. Nevertheless the context has some resemblance to one of employment for relevant purposes. The so called contractor was to work full time in the third plaintiff’s practice and in circumstances where it had to place trust in him or her to serve the interests of that practice. The employer/employee relationship is often instanced as one attracting fiduciary obligations: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 68, 96, 141.  At least for the purposes of this strike out application, I would accept that the defendant in each case owed a fiduciary duty to the third plaintiff whilst working at its practice.  But the case is that the duty was breached by the second defendant both before and after he left its practice, and by the first defendant only after she did so.

17. By paragraph 12 of the pleading, the same conduct of Dr Blair is relied upon as being in breach of contract and breach of fiduciary duty. It is alleged that “from a date unknown” he solicited and induced patients of the third plaintiff’s practice to attend at the defendants’ practice. And it is alleged that he “copied histories and other records of the patients of the third plaintiff’s practice, including addresses and telephone numbers”. That second allegation seems limited to conduct whilst he worked at the plaintiff’s practice: there is no suggestion that he has secretly entered the plaintiff’s premises and obtained this information since he left the practice. So conduct of that kind would be in breach of the fiduciary duty allegedly owed by him. And there is at least a pleadable case that his conduct, if any, in soliciting and inducing patients to go to his then proposed practice would have been in breach of his fiduciary duty. But again there is a distinction, in my view, between soliciting and inducing patients prior to his departure and such conduct if it occurred in relation to a patient only after that point. It is one thing for the third plaintiff to complain of any attempt by Dr Blair to promote his proposed practice whilst he still worked for it. But it is another to say that he has breached the equitable obligation by conduct towards a patient which entirely postdated the commencement of his own practice. The former could well involve a breach of the trust and confidence placed in him to act in the plaintiff’s interest, whereas to hold him accountable for the latter would be to effectively preclude him from competing with the plaintiff.

18. The alleged fiduciary duty is a distinct basis of the plaintiff’s case. In principle, the discharge of a fiduciary duty might require something of the fiduciary which his contract did not. But the fact that the parties have made a contract by which they have agreed on the terms upon which they will transact cannot be ignored. As I have held, they agreed that Dr Blair would not solicit or induce patients to leave the plaintiff’s practice, but only whilst he worked there. Whilst that limit upon the contractual relationship does not of itself define the scope of the alleged fiduciary duty, it strongly indicates it. In particular it indicates that conduct attracting the custom of a particular patient, if it has entirely postdated Dr Blair’s departure from the plaintiff’s practice, would not be in breach of fiduciary duty, and that his liability as a fiduciary would need a source in conduct which had begun before that date.

19. Two factual examples could illustrate the distinction. Suppose the chiropractor had had no intention of commencing a competing practice until after he had left the plaintiff’s practice: to say that he could not thereafter solicit work from his former patients upon the basis that he was forever bound to avoid any conflict between his interests and the plaintiff’s interest, would be a disproportionate burden. And it would be inconsistent with, for example, the common law’s permission of competition with a former employer notwithstanding the employee’s duty of good faith.^[2]  Alternatively, suppose the chiropractor had solicited custom for his then proposed practice from a patient whilst still working for the plaintiff.  Suppose then that the patient was also induced by conduct occurring after the chiropractor had left that practice.  If the patient followed him to his new practice, very arguably he would be liable to account for breach of fiduciary duty, because of his conduct both before and after his departure.  His conduct after departure could well be regarded as an unconscionable pursuit of the advantage he had wrongly put in place whilst working for the plaintiff.  If, by reason of misconduct during the period of service of the beneficiary, the fiduciary has placed himself at some advantage to procure some of the beneficiary’s goodwill, conduct which builds upon that position of advantage could be relevant to the determination of accountability for a profit thereby gained.  Just as the existence and scope of a fiduciary duty depend upon the particular circumstances of the case,^[3] so the question of accountability for profits derived after, for example, the end of the fiduciary’s employment, requires a judgment from a detailed examination of the relevant facts, for which generalisations are of little value.^[4]

20. If it was clear that the plaintiff’s case here was of a kind in the first example, then it would be appropriate to strike it out. A case pleaded in terms of the second example would not be struck out. This pleading is not in those terms; it does not plead that such solicitation and inducement which occurred after January 2005 was itself a breach of fiduciary duty by reason of what had occurred in relation to a certain patient before then. It simply treats the distinction between conduct before and after Dr Blair’s departure as of no relevance. It thereby encompasses the case, in relation to some patients at least, which would be within the first of those examples. In my conclusion the breach of fiduciary duty pleaded against Dr Blair is defective in its present form. It pleads a case which by its width has no reasonable prospect of success,^[5] and it has a tendency to prejudice the fair trial of the proceeding by its failure to identify the particular facts and circumstances by which the defendant’s conduct makes it unconscionable for him to have the benefit of the business which the plaintiff has lost to him.

21. Paragraph 13 appears to allege that the defendants have breached their contracts and fiduciary duties by setting up and conducting their practice (from in or about December 2004). Not surprisingly the defendants sought particulars of that paragraph. The plaintiffs have refused to supply any. A difficulty with paragraph 13 is that it fails to distinguish between conduct which is arguably in breach of contract or breach of fiduciary duty, from conduct which is not. For example, if Dr Blair did commence practice in December 2004, which was before the termination of his contract with the plaintiff, a case can be perceived, although there ought to be some pleading as to why the conduct of the practice itself breached some identified term of the contract (because the contract itself has no express term which precludes competition by the contractor even during his period of service). And simply to conduct a competing practice after leaving the plaintiff’s practice would not be a breach of contract or of itself a breach of fiduciary duty, for reasons already canvassed. The further difficulty with paragraph 13 is the case pleaded against the first defendant. There is no suggestion of any misconduct by her during the period in which she worked for the third plaintiff. Upon what basis then is it said that she has breached contractual or fiduciary duties by setting up and conducting this practice? There is a distinct allegation in paragraph 15 that each defendant has induced the other to breach his or her contractual and fiduciary duties. Assuming that there are matters within the pleader’s instructions to this effect, the first defendant could be the subject of an allegation that she wrongfully induced Dr Blair to breach his contract, or knowingly assisted him to breach his fiduciary duty. But there seems to be no basis for an allegation that simply by her involvement in this practice, she has breached some duty of her own.

22. It will be apparent from what I have said already that the third plaintiff will have to replead its case presently within paragraphs 9, 9A, 9B, 12, 13, 14 and 15. It will also have to replead its paragraphs 16, 17 and 18, at least for the reason that they are premised upon certain rights of action which are claimed too broadly. But in any case there are other defects with the allegations of loss and damage which should now be discussed.

Alleged damage

23. I have mentioned already paragraph 11A which complains of loss and damage from Dr Blair’s repudiation of his contract. Some particulars were provided of this paragraph 11A, although in the course of the argument it became plain that they would need amendment.

24. The third plaintiff claims to have lost a certain 203 patients, because those people had been treated by Dr Blair at its practice but they have gone somewhere else. The defendants admit that 130 of them have become patients at their Robina practice, but they say that they have not treated the other 73. The third plaintiff seems to suggest that all of them must have gone to the defendants, overlooking the possibility that, for example, some patients have got better, or have moved out of the area. According to the particulars, the third plaintiff has then suffered losses of two kinds. The first is a capital loss which the particulars refer to as a loss of goodwill. The second is a revenue loss. The capital loss claimed is $135,324. To reach this figure the third plaintiff took the fees derived by Dr Blair for the plaintiff’s practice in the year to November 2004 ($398,475) and compared that as a weekly sum with the average per week from patients who had been Dr Blair’s, but remained with the plaintiff’s practice in the period of January to June 2005. The difference was a drop in average weekly fees of $5,205. A loss of goodwill is then claimed as 50 per cent of the yearly equivalent of that weekly loss, resulting in $135,324. The distinct claim for loss of income works from that same weekly decrease of $5,205 but allows for the cost of paying another chiropractor a share of the fees (at 48.24 per cent) and for income tax (on that lost income) at 30 per cent. The loss of income is then claimed for a 24 week period to 25 June 2005, resulting in a loss of $42,183. The loss is calculated to 25 June 2005 because the contract with Dr Blair was for a two year period from 25 June 2003.

25. The underlying premise of the claim is that had Dr Blair not repudiated his contract, but instead served his two year term, fees from that same pool of patients which he had treated in the year to November 2004 would have been derived at the same rate. In the course of the argument, Mr Griffin QC for the plaintiff apparently accepted the difficulty with that premise. He urged the need for full disclosure by the defendants, to enable his client to formulate its claim upon the different basis, being that the fees it has lost are demonstrated by the fees the defendants have derived from those same patients.

26. A further difficulty with these particulars is that the claim for the loss of goodwill would seem to be a loss calculated as at June 2005. If it is correct to calculate the goodwill of this practice as a percentage of recent earnings, the earnings since June 2005 would have to be brought into account. The present particulars seem to claim a temporary and unrealised capital loss in the past.

27. In all of this, the basis of a claim for an amount of $260,000 does not appear. And having regard to what I have held as to the pleaded case of breach of contract and fiduciary duty, paragraphs 16 to 18 should be struck out.

The defamation claim

28. Paragraphs 19 to 26 of the amended statement of claim advance a defamation case by all three plaintiffs against the defendants. The matters complained of arise out of correspondence sent or copied to the Chiropractors Association of Australia, and/or the Chiropractors Registration Board, by the defendants’ solicitors in January 2005. After pleading the publications complained of and some imputations, the plaintiffs plead that the defendants stood to benefit “from damage done to the plaintiffs in the way of their business” (paragraph 24) and that the words complained of were published in contumelious disregard of the rights of the plaintiffs in respect of their reputation (paragraph 25).

29. Paragraph 26 consists of four sub paragraphs, each in terms of a claim rather than an allegation. Paragraph 26(a) is a claim by the third plaintiff for damages of $260,000 against each defendant for inducing the other’s breach of contract. Paragraph 26(b) is a claim by the third plaintiff for damages of $260,000 against the defendants for breach of contract and breach of fiduciary duties. For reasons given in relation to those causes of action, these paragraphs will have to be struck out.

30. Paragraph 26(c) claims unquantified damages against the defendants for defamation including aggravated and exemplary damages. Paragraph 26(d) claims interest and costs.

31. In the defendants’ application as filed there is no challenge to the defamation case. Yet the defendants’ extensive outline of submissions complains of particulars of that case and seeks an order that the entire claim be dismissed or that offending paragraphs of the statement of claim (including the defamation case) be struck out or better particularised. The plaintiffs’ counsel objected that this went well beyond the application to which his clients were responding. Mr Savage SC for the defendants says that the plaintiffs were nevertheless on notice of his side’s complaints as to the pleaded case of loss and damage from the alleged defamation. The defendants point to the order of Byrne J of 25 August 2005. His Honour then made certain orders by consent, including an order for further particulars of damages within 28 days from the completion of disclosure. On 8 September 2005 the amended statement of claim was served. On 7 October the defendants’ solicitors wrote to complain of, amongst others, paragraphs 24 and 25 of the pleading. At the same time they delivered an extensive request for particulars. They asked for the facts, matters and circumstances relied upon to support the allegation in paragraph 24. And as to paragraph 25, they asked for particulars of the facts, matters and circumstances relied upon to support the allegation that the words were published in contumelious disregard of the plaintiffs’ rights.

32. In the particulars provided by the plaintiffs and dated 14 October 2005, they said:

“20.As to paragraph 24 of the Statement of Claim, in circumstances where the First and Second Defendants had serviced the patients of the Third Plaintiff pursuant to the terms of the Contractor Agreements, the First and Second Defendants were in a position to derive income by the Second Defendant’s repudiation of his Contractor Agreement with the Third Plaintiff, by the inducement and solicitation of patients of the Third Plaintiff to attend the Robina practice, by defaming the Plaintiffs, by the timing of the making of the complaints to the Anti-Discrimination Commission (Queensland) as they did and by the non disclosure of the facts and matters set out in paragraphs 8(i)(a) to (e) and 8(i)(g) of these Further and Better Particulars to the Chiropractors Association of Australia and the Chiropractors Registration Board.

21. As to paragraph 25 of the Statement of Claim:

(i)all of the words were published in contumelious disregard of each and every of the Plaintiffs’ rights and reputation;

(ii)the facts, matters and circumstances relied upon to support the allegation that the words were published in contumelious disregard of the rights of the Plaintiffs in respect of their reputations are all of the facts, matters and circumstances referred to in paragraph 20 of these Further and Better Particulars, and the facts, matters and circumstances referred to in paragraphs 9C (i)-(vi) (inclusive) of the Plaintiff’s Reply and Answer to the Defendant’s Defence.”

Those circumstances referred to in paragraphs 9C(i)-(vi) of the plaintiffs’ reply are as follows:

“(i)by the actions referred to in the Statement of Claim, the first and second defendants intended to damage the third plaintiff’s practice and the reputation of all the plaintiffs;

2. in the actions referred to in the Statement of Claim, the first and second defendants intended to promote their own interests at the expense of the plaintiffs by deliberately soliciting the third plaintiff’s patients to leave the third plaintiff’s practice and attend the Robina practice;
3. the second defendant made, and subsequently withdrew, a complaint to the Anti-Discrimination Commission of Queensland;
4. the first and second defendants were motivated by personal animosity and collateral commercial advantage as opposed to genuinely seeking relief from the alleged grievance or grievances;
5. the first and second defendants published no such allegations during the terms of the contractor agreements, and only published such complaints after the repudiation of the contractor agreement with the third plaintiff;
6. the first and second defendants made no complaint to the Anti-Discrimination Commission of Queensland prior to such repudiation;”

33. On 27 October the defendants’ solicitors wrote that their clients were dissatisfied with the particulars. But the complaint was apparently in respect of matters other than the defamation case. On 11 November, they wrote to advise that their clients’ disclosure was complete and to put the plaintiffs on notice that they wanted certain further particulars failing which they would make an application. But they were not particulars of the defamation case. Also on 11 November, the defendants’ solicitors wrote a Rule 444 letter, but in relation to the plaintiffs disclosure, not their particulars. On 14 December, the defendants’ solicitors again complained of a want of particulars, in relation “to the alleged solicitation and canvassing by our clients”.

34. The plaintiffs are correct then in saying that they have not had proper notice of an attack upon their defamation case as pleaded and particularised. However, there are some respects in which the pleading and particulars are so clearly defective that some intervention is now required. First, the pleading seems to make no proper distinction between the matters relied upon to claim aggravated damages and those relied upon for exemplary damages. Indeed there seems to be no pleading of any facts in support of the former. And because a corporation cannot claim for wounded feelings,^[6] nor can it claim aggravated damages.^[7]  Contrary to r 155 of the Uniform Civil Procedure Rules 1999, the pleading does not state the amount of the damages claimed.  At least for these reasons, the present terms of paragraph 26(c) cannot be justified.  Although the other points made in the defendants’ written argument seem to have considerable force, I am not persuaded that I should make orders in relation to the defamation pleading other than to strike out paragraph 26(c), because of the absence of notice of this challenge by the defendants. 

Plaintiffs’ Disclosure

35. The plaintiffs’ list of documents is dated 21 November 2005. The most recent profit and loss statement for the third plaintiff which is disclosed is for the year to 30 June 2004. There were bank statements to 1 July 2005 disclosed but no accounting records for any period after June 2004.

36. The defendants have engaged a forensic accountant. He says that he needs much more from the plaintiffs to be able to asses in particular the claim for lost goodwill. This includes profit and loss statements and the general ledger for more recent periods such as the year to 30 June 2005 or more recently still. He also feels that he needs to see “all patient card records (to the extent that they have not already been disclosed)”, to assess whether any downturn in the plaintiffs’ practice might not be due to other matters. For that reason he also wants to see all appointment records for all chiropractors in the plaintiffs’ practice and chiropractor payroll and contractual records to the present date.

37. A supplementary list of documents was provided by the plaintiffs on 12 December 2005. It did not include all of the documents requested by the forensic accountant. In particular it did not include more recent financial statements. On 12 January 2006, the plaintiffs’ solicitors claimed that hard copies of financial records for the year to 30 June 2005 and the four months ended 31 October 2005 had already been disclosed. The direct relevance of the other documents requested was disputed. The defendants’ solicitor has sworn that those financial statements for the 2005 year and subsequently have not been disclosed. At the hearing, the plaintiffs’ counsel conceded that, but said that the documents were still being prepared by the plaintiffs’ accountants. It is unfortunate that this was not the response to the defendants’ r 444 letter last November. If and when they are prepared they will have to be disclosed.

38. Other documents may be required, depending upon the content of those financial statements. At present I am not persuaded that it is necessary to have disclosure to the extent outlined by the forensic accountant. It is preferable to see what the more up to date financial statements would reveal about the likelihood or otherwise of any permanent impact upon the third plaintiff’s goodwill. As I have mentioned already, if the case is that there was but a temporary and unrealised impact upon goodwill, it is difficult to see that it should result in an award of damages. More generally the plaintiffs should be put to the task of properly pleading their case and particularising their claims for damages before this case goes further along the expensive routes of disclosure and expert evidence. It is likely that the claim will reduce to one which says simply that certain patients who now go to the defendants would have stayed with the plaintiffs for a year or so but for the defendants’ conduct. That is not a case which would require extensive disclosure from either side and indeed it ought not to require expert evidence.

39. The outcome then is that the application for disclosure will have to be dismissed, but not because the defendants wrongly brought it, but because the plaintiffs need to rectify their pleadings (and they wrongly claimed to have disclosed relevant financial statements).

Defendants’ disclosure

40. The plaintiffs had sought an order pursuant to r 213 of the Uniform Civil Procedure Rules 1999 that the defendants file an affidavit stating their claim to privilege in respect of a solicitor’s file.  In the light of an affidavit of Dr Blair, that application is not pursued.

41. The plaintiffs seek disclosure of these documents in relation to former patients of its practice:

1. all patient cards – including appointment cards;

2. all daily appointment books or sheets;

3. all bank statements;

4. all bank deposit books;

5. all receipt books/sheets;

6. all correspondence with the patients;

7. all practice electronic data files of accounting records;

8. absent electronic data files, all practice monthly management accounts/summary/reports detailing income expenditure performance for the period at the commencement of the defendants’ practice.

42. What have been disclosed are computer produced summaries showing the patient’s name, the date of each attendance and receipts. Those documents disclose, as the defendants have admitted, that 130 patients followed Dr Blair to his practice. The plaintiffs seek an affidavit in relation to another 73 patients, whom he used to treat at their practice but they have not seen since his departure and are not amongst the 130. As to that last matter, I see no basis for acquiring that affidavit. More generally, there is no demonstrated basis to doubt the accuracy of the records which have been disclosed.

43. The plaintiffs argue that I should have misgivings about the defendants’ disclosure because of the view I should form of their conduct. Particular reliance was placed on a document which is a business plan obviously prepared whilst Dr Blair still worked for the plaintiffs. Clearly he was then proposing to set up his own practice and hoping to attract many of his patients to it. That in itself was not wrongful and the document does not provide any ground to infer some inadequacy in the defendants’ disclosure.

44. However the individual patient records ought to be disclosed. I am not confident that sufficient consideration has been given to their relevance in the decision to withhold them. It may be that, as the plaintiffs suggest, they will show records of treatment of the particular patient at the plaintiffs’ practice, in which case they would be directly relevant to the claim that records were copied by Dr Blair. Alternatively, if they show nothing of that kind, they are directly relevant in support of the defendants’ case, because had the records been copied by Dr Blair, it is likely that he would have recorded the information on these documents.

45. The defendants argue that these patient records are confidential to the patients and they should not have to disclose them. But there are of course the well known limits on the use which can be made of documents obtained through this process.

46. The result is that the plaintiffs’ application succeeds, but only in relation to the patient records.

Orders

47. Paragraphs 9, 9A, 9B, 11A, 12, 13, 14, 15, 16, 17, 18 and 26 of the amended statement of claim are struck out. The plaintiffs must replead within 21 days. The defendants’ application filed on 16 January 2006 is otherwise dismissed. The defendants have substantially succeeded in their attack upon the pleading and particulars. As I have mentioned already the disclosure application has failed but the fault is with the plaintiffs. The plaintiffs are ordered to pay the defendants’ costs of the application filed 16 January to be assessed on a standard basis.

48. Upon the plaintiffs’ application filed 25 January 2006, the defendants are ordered to disclose, within 14 days, all documents recording the treatment of any person who has been treated at the defendants’ practice and who had been treated by the second defendant at the third plaintiff’s practice. The application is otherwise dismissed. Each side could claim to have had success upon this application and there will be no order for costs in respect of it.