Symbion Pathology v Healthscope [2006] VSC 191

What the court decided

Symbion Pathology Pty Ltd (Symbion) sought to restrain Healthscope Ltd (Healthscope) by interlocutory injunction over conduct of Healthscope's related company, Davies Campbell & de Lambert Pty Ltd (DCL), at a private hospital in New South Wales [1].

In 2003, Symbion took a lease of premises in the hospital's building from HCoA Operations (Australia) Pty Ltd (HCoA) [2], [4], [7]. The lease's clause 20.1(a) (the restraint clause), subject to clause 20.02, barred HCoA as landlord, during the term and any extension, renewal or overholding, from carrying on or being concerned, directly or indirectly, in a business similar to the one Symbion conducted at its premises at the commencement date [8], [16].

Healthscope later bought Symbion's and the hospital's premises from HCoA, acquiring the reversion [9], [17]. By clauses 42.5 and 42.6 of the sale contract, from completion, it took HCoA's tenancy rights and obligations, whether or not they touch and concern the land [9]. Symbion sought orders against Healthscope that would have the effect of preventing DCL, a competitor of Symbion, operating its collection service at the hospital in the systematic way it had expanded that service since April 2006 and collecting hospital samples for delivery to a centre or laboratory to be established in a consulting suite, not owned by Healthscope, that DCL intended to lease (the DCL conduct) [11], [13]–[15].

Symbion's principal argument on whether Healthscope was bound by the restraint clause, founded on clauses 42.5 and 42.6, was that Healthscope arguably held that clause's benefit on trust for Symbion, relying on High Court statements whose relevance Healthscope's counsel disputed [18]–[22]. Symbion also contended that, whether or not the restraint clause bound Healthscope, Healthscope breached an implied good faith obligation in the lease [16]. The reasons do not address the good faith contention.

Hargrave J considered it arguable that, by clauses 42.5 and 42.6, Healthscope expressed an intention to give Symbion that benefit, its express assumption of HCoA's obligations being capable of supporting an inference that it intended to hold its interest as lessor subject to the restraint clause, even if that clause does not run with the reversion [27]. Having found a triable question "at this level", he left open whether section 118(1) of the Conveyancing Act 1919 (NSW) made the restraint clause bind the reversion [28].

Hargrave J also found a serious question on the restraint clause's enforceability [29]. Although Symbion had difficulty in precisely formulating its interlocutory relief, it did seem to him that, if Symbion could establish at trial that it was entitled to the benefit of the restraint clause, there was a serious question whether that clause, as applied to at least some of the DCL conduct, was not contrary to public policy [32].

Hargrave J concluded that the balance of convenience did not favour "the grant of any form of interlocutory injunctive relief as sought by Symbion" [33]. Given Symbion's size and its business at its premises not depending on referrals for hospital patients, he did not accept that Symbion, if it obtained some form of injunctive relief at trial, would meanwhile suffer any irreparable or permanent damage by reason of the DCL conduct [34]. He was of the firm view that damages would adequately remedy any loss to Symbion from that conduct before determination of the proceeding, whereas DCL's damages would be much harder to assess if an injunction were granted and later discharged at trial [35]. He was not satisfied of a real risk that, in the absence of an injunction, Symbion would lose valuable staff [36]. Nor was he satisfied of any real risk of permanent damage to Symbion's relationships with the doctors practising at the hospital who refer patients to it [37].

Why it matters

The application failed on convenience grounds; the serious questions were not decided [28], [32]–[33]. Construed literally, the restraint clause "would clearly be an unreasonable restraint of trade and void" [30]. Hargrave J found the serious question on enforceability [29] through section 4 of the Restraints of Trade Act 1976 (NSW), as possibly allowing the clause to be enforced as it applies to at least some of the DCL conduct, and so found it unnecessary to consider Symbion's reading-down submission further [30]–[32]. Readers in Victoria need to check the position there.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.