Block to starting medical practice – restraint applied

Cases

Block to starting medical practice – restraint applied

The Supreme Court of Victoria has issued an interlocutory injunction to stop a doctor (who was in breach of his contract of employment) from operating a new clinic set up within an exclusion zone of 10 kilometres.

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The Supreme Court of Victoria has issued an interlocutory injunction to stop a doctor (who was in breach of his contract of employment) from operating a new clinic set up within an exclusion zone of 10 kilometres.

[Full text of this case: Epichealth Pty Ltd v Y [2015] VSC 516 (25 September 2015)]

Blatant breach of contract


A doctor was employed as an independent contractor by a medical clinic. He signed the contract on 21 January 2013. It specified that he had to give six months notice of termination of the contract and that he was restrained from providing services to any other person within a specific radius during the contract and for a certain period after the contract had been terminated.

From about September 2014, the doctor was working fewer than the 40 hours a week required according to his contract, blaming fatigue, poor health, pursuit of further surgical experience, and a need to assist a friend who had opened a new clinic. He gave notice to terminate the contract on 28 April 2015, identifying his last working day as 27 October 2015. However, on 22 August 2015, he refused to attend the clinic and provide any further service under the contract.

By the end of August 2015, the employer’s CEO had discovered that the doctor had during 2014 purchased a property, converted it and set up his own clinic, backed by a family trust, 6 kilometres away. The new clinic had opened for business about 1 August 2015. Its receptionist had previously been working at the employer’s clinic. The doctor’s excuses of poor health, helping a friend, etc, had only been made to allow him to spend time at the new clinic.

Misleading conduct


On 14 September 2015, the employer issued a proceeding and a summons seeking an injunction restraining the doctor, not only until the termination of the contract on 27 October 2015 but for a further three months, until 27 January 2016 from providing any services associated with the new medical clinic. The employer contended that the doctor had breached the contract in a way that had created a conflict of interest. He had failed to complete the notice period and had worked in another clinic less than 10 kilometres away.

Before Justice Dixon, the doctor submitted that his notice of termination had specified that he would work six months or until a replacement contractor had been engaged. Within weeks of his notice, the employer had engaged another contractor. The CEO disputed that the notice period could be shortened and explained that the new contractor had not been a replacement but filled an existing vacancy.

The court accepted that the doctor had misled his employer and that he understood that his activities in setting up the new clinic constituted a breach of the restraint provision in his contract.

The court considered whether it would be appropriate for the doctor to pay damages. It did not have evidence of his exact financial position and decided against it, accepting that he was under some financial stress.

The court ordered that, until midnight on 27 January 2016, the doctor was restrained from providing any service associated with operating a medical clinic within a 10-kilometre radius of the employer’s clinic.

The bottom line: Whether a restraint clause will stand up to court scrutiny depends on whether the restraint is considered reasonable in all the circumstances.

Epichealth Pty Ltd v Y [2015] VSC 516 (25 September 2015) 

See also: Manager bound by restraint clause 

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