Kerr v Morris
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE LLOYD,LORD JUSTICE NICHOLLS |
| Judgment Date | 15 May 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J0515-9 |
| Docket Number | 86/0465 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 May 1986 |
[1986] EWCA Civ J0515-9
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR. JUSTICE FALCONER)
Royal Courts of Justice
Lord Justice Dillon
Lord Justice Lloyd
Lord Justice Nicholls
86/0465
MR. F. M. FERRIS Q.C. and MR. F. P. HINKS (instructed by Messrs. Ellison & Co., Colchester) appeared for the Appellants.
MR. I. L. CROXFORD (instructed by Messrs. Hempsons) appeared for the Respondent.
This is an appeal by the plaintiffs in the action against a judgment of Mr. Justice Falconer given on 13 February of this year, whereby, though directing a speedy trial, he dismissed a motion by the plaintiffs for an interlocutory injunction.
The dispute is a dispute between doctors who are the only general medical practitioners with surgeries in the small Essex town of Brightlingsea, where they were formerly in partnership together. Brightlingsea has a static population, we are told, of some 7,500 potential patients. The practice is, on the information we have been given, fairly old established in that before 1977 a Dr. Middleton and a Dr. Stephens and the first plaintiff, Dr. Kerr, were in partnership as the only medical practice in Brightlingsea, practising from a surgery at No. 7 Ladysmith Avenue. In 1977 Dr. Middleton left and a Dr. Maxwell joined Dr. Stephens and Dr. Kerr. At the end of March 1982 Dr. Stephens left, leaving Dr. Maxwell and Dr. Kerr, and in July Dr. Mirza, the second plaintiff, who had previously acted as a locum for some time, joined Dr. Maxwell and Dr. Kerr in partnership. Dr. Maxwell retired at the end of July. In the course of 1982 permission had been given under statutory provisions to which I shall have to come for a fourth partner. Consequently, on 14 September 1982 Dr. Parker, the third plaintiff joined the practice and on 2 October 1982 Dr. Morris, the defendant, joined the practice.
There then followed negotiations over terms of a partnership agreement. It had originally been the arrangement that Dr. Parker and Dr. Morris were each coming on, as it were, six months approval each way to see how everyone fitted in. Ultimately, though not until 1 March 1984, a partnership agreement was entered into between the four of them. This provided that the four doctors, who are called "the partners" wished to record the terms of their partnership as subsisting (mutatis mutandis) from 1 October 1982. There was provision that the partnership should continue unless determined under the provisions of the agreement and that the death, retirement or expulsion of a partner should not determine the partnership as between the continuing partners unless the continuing partners should unanimously so agree. There were provisions as to sharing profits which were graduated to achieve equality. Clause 26 provides:
"Each of the Partners shall be just and faithful to the other Partners and shall devote all his working hours diligently and to the highest medical standards in the Partnership business and take all reasonable and proper steps to promote the success thereof."
Clause 29 provides:
"A Partner may retire from the Partnership by giving notice in writing (a 'Retirement Notice') to all the other Partners to expire at the end of not less than six months or such lesser period as may be agreed between him and the other Partners."
Clause 30 provides for mandatory retirement unless agreed otherwise by all the partners at the end of the financial year after any partner had attained the age of 65. Clause 32, which is very important, provides:
"(1) A Partner shall for the purposes of all the provisions of this Agreement relating to the retirement of a Partner from the Partnership be deemed to have retired from the Partnership forthwith unless unanimous agreement to the contrary upon:—
(i) such Partner:—
(a) becoming bankrupt or insolvent or compounding or making any arrangement with his creditors or
(b) being struck off the professional register of the General Medical Council and be barred from practising as General Medical Practitioner or
(c) being incapacitated by mental or physical illness accident or otherwise from attending to the business of the Partnership for a period of twelve consecutive months or for a total of more than four hundred and fifty (450) days in any one period of twenty-four months.
(ii) the expiration of a Notice in writing given at any time of the other Partners' intention to cause him to retire from the Partnership such Notice being signed by all the Partners other than the one to whom it is given and expiring twelve months from its being given save in the following cases when it shall expire not less than one month from its being given namely if such Notice shall be given by reason of the Partner having:
(a) grossly neglected the Partnership's business or
(b) been grossly or persistently negligent in the performance of his duties in the Partnership's business.
(c) committed or permitted any wilful and substantial breach of the provisions hereof or
(d) been convicted on indictment of a criminal (other than a Road Traffic) offence or
(e) done or suffered any act which would be a ground for the dissolution of the Partnership by the Court
(2) Any notice under this Clause 32 shall specify the reason for which it is given."
Clause 34, which is the other important clause, then provides for restraints. It is the first part of this clause which the plaintiffs are seeking to enforce by this appeal. The whole clause reads as follows:
"No Former Partner shall for a period of two years following the date of his retirement or expulsion from the Partnership either on his own account or directly or indirectly for a third party:—
(i) carry on the profession of General Medical Practitioner within a radius of two miles from any premises from which the Partnership shall be operating as General Medical Practitioners at the date upon which he shall cease to be a member of the Partnership or
(ii) solicit directly or indirectly actively or passively any person who was at the date of such retirement or expulsion a patient of the Partnership to the intent or effect that such person shall transfer to the patient list of that Former Partner."
The motion was brought, in circumstances to which I shall have to come, to enforce against Dr. Morris both limbs of Clause 34 but, so far as the soliciting limb in sub-clause (ii) is concerned, Mr. Justice Falconer found that there was no evidence at all of soliciting on the part of Dr. Morris and that finding is not challenged on this appeal. The plaintiffs merely seek on this appeal to enforce the first limb, the area covenant over a period of two years. I shall come to the reasons why the judge declined to enforce that and why it is said for Dr. Morris that it should not be enforced; but it is sufficient to say for the moment, firstly, that the covenant is not a mere "brass plate" covenant, which would simply ban the doctor having his surgery within the area. It would also prima facie ban his visiting from outside the area patients at their homes within the area. Next, no objection is taken to the size of the area of two miles from, in effect, 7 Ladysmith Avenue, or to the duration of the restraint, two years. It is accepted that those are reasonable if it is permissible to impose any such restraint at all on Dr. Morris in the circumstances of this case and in view of the nature of the practice as a National Health Service Medical practice.
The partnership agreement, as I have said, was entered into in March 1984 but, during the course of that year or, at any rate, in the latter part of that year, difficulties arose between Dr. Morris and the three other partners. The upshot was a meeting in January 1985 when Dr. Morris was called in by the other three partners. We have in evidence Dr. Kerr's notes of what he intended to say and to propose on that occasion, and it seems to be common ground that he kept fairly accurately to his script. The notes record him as intending to say this:
"Since"—a certain event—"it has shocked us into realising just what has been going on since you joined us and the purpose of this meeting is to inform you of our conclusions after many many hours of discussion and soul searching. Over the two years you have been with us you have consistently disappointed us and failed to come up to scratch as an industrious and responsible partner of considerable previous experience and mature years. You have not shown any motivation towards completing your obstetrics or note summaries and other matters spontaneously and without pressure despite your small list size.
"You have abused your position of trust and responsibility in the gross misuse of the telephone which you admitted to only under pressure."
Then the proposal was that the other partners could not see how they could continue with Dr. Morris in the partnership, but would want to give him an opportunity for change. They put forward one way only on which they would find it acceptable for Dr. Morris to stay and that is if Dr. Morris would give them his resignation effective in six months from the date of the meeting and would go at the end of that notice unless the other partners were unanimously agreed that they were entirely happy with his performance, in which case his position would be restored. The notes end:
"If you do not agree to these terms we will seek your immediate expulsion."
The reference to "the gross misuse of the telephone" was that Dr. Morris had been using the practice telephone at the...
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