Australian Competition and Consumer Commission v Ramsay Health Care Australia Pty Limited
[2020] FCA 308
•12 March 2020
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Ramsay Health Care Australia Pty Limited [2020] FCA 308
File number:
NSD 628 of 2017
Judge:
GRIFFITHS J
Date of judgment:
12 March 2020
Catchwords:
COMPETITION – proposal to establish rival day surgery to existing day surgery and private hospital in Coffs Harbour – alleged misuse of market power and exclusive dealing in contravention of ss 46 and 47 respectively of the Competition and Consumer Act 2010 (Cth) – failure to establish to the requisite standard that the pleaded conduct, which related to certain conversations, involved contravening conduct
EVIDENCE – application under ss 135 and 136 of the Evidence Act 1995 (Cth) to exclude or restrict parts of evidence given prior to retrieval of a sound recording – unfair prejudice not established in circumstances where relevant witnesses could be recalled and cross-examined on the basis of the sound recording
Legislation:
Competition and Consumer Act 2010 (Cth), ss 46, 47
Evidence Act 1995 (Cth), ss 135, 136, 140
Cases cited:
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460
Australian Competition and Consumer Commission v Air New Zealand Limited (No 10) [2013] FCA 322
Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) (No 2) [2018] FCA 1459
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2003] FCAFC 149; 129 FCR 339
Australian Competition and Consumer Commission v Boral Ltd [1999] FCA 1318; 166 ALR 410
Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2013] FCA 909; 310 ALR 165
Australian Competition and Consumer Commission v Flight Centre Travel Group Limited [2016] HCA 49; 261 CLR 203
Australian Competition and Consumer Commission v Little Company of Mary Health Care Limited [2015] FCA 1144
Australian Competition and Consumer Commission v Pfizer Australia Pty Limited [2018] FCAFC 78; 356 ALR 582
Boral Besser Masonry vAustralian Competition and Consumer Commission [2003] HCA 5; 215 CLR 374
Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238
Dowling v Dalgety Australia Ltd (1992) 34 FCR 109
Eastern Express Pty Limited v General Newspapers Pty Limited (1992) 35 FCR 43
Jones v Dunkel [1959] HCA 8; 101 CLR 298
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; 205 CLR 1
Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; 122 FCR 110
News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45;215 CLR 563
NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 98; 219 CLR 90
Papakosmasv The Queen [1999] HCA 37; 196 CLR 297
Queensland Wire Industries Pty Limited v Broken Hill Pty Co Ltd [1989] HCA 6; 167 CLR 177
Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53
Seven Network Ltd v News Limited (No 8) [2005] FCA 1348; 224 ALR 317
Seven Network Ltd v News Ltd (2009) [2009] FCAFC 166; 182 FCR 160
Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 1381; ATPR 41-783
SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd [1980] FCA 125; 48 FLR 445
Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; 131 FCR 529
Watson v Foxman (1995) 49 NSWLR 315
Dates of hearing:
25, 26, 27 and 28 February 2019; 1, 4, 5, 6, 7, 11, 12, 13, and 14 March 2019; 2, 3, 4, 5, 6, 9, 10 and 12 December 2019
Registry:
New South Wales
Division:
General Division
National Practice Area:
Commercial and Corporations
Sub-area:
Economic Regulator, Competition and Access
Category:
Catchwords
Number of paragraphs:
442
Counsel for the Applicant:
N Hutley SC, R C A Higgins SC, with A d’Arville
Solicitor for the Applicant:
Baker & McKenzie
Counsel for the Respondent:
A J L Bannon SC, J R J Lockhart SC with I C Colquhoun
Solicitor for the Respondent:
Johnson Winter & Slattery
ORDERS
NSD 628 of 2017
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND:
RAMSAY HEALTH CARE AUSTRALIA PTY LIMITED (ACN 003 284 889)
Respondent
JUDGE:
GRIFFITHS J
DATE OF ORDER:
12 MARCH 2020
THE COURT ORDERS THAT:
1. The further amended originating application be dismissed.
2. Within 21 days hereof, the parties should seek to agree orders as to costs. If they are unable to reach agreement, within that period each should file and serve an outline of submissions not exceeding 10 pages in length, and any supporting affidavits, regarding their individual position on costs.
3. The Court will indicate in due course whether the issue of costs will be determined on the papers and without a further oral hearing.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PART A – INTRODUCTION
[1]
(a) The ACCC’s case in broad outline
[1]
(b) Some unusual aspects of the proceeding
[13]
PART B – SOME BACKGROUND MATTERS SUMMARISED
[19]
(a) Broad outline of Ramsay’s operations
[19]
(b) Dramatis personae
[42]
(c) Plans for a new day surgery in Coffs Harbour
[52]
PART C – OUTLINE OF KEY ISSUES
[70]
PART D – FINDINGS ON THE PRIMARY FACTUAL ISSUES CONCERNING THE PLEADED CONTRAVENING CONDUCT
[80]
(A) The ACCC’s case concerning the contravening conversations
[80]
(B) The four conversations said to involve contravening conduct
[85]
(a) Dr Joshi’s conversation with Mrs Ruthnam on 25 August 2015
[86]
(i) Dr Joshi’s evidence summarised
[88]
(ii) Mrs Ruthnam’s evidence summarised
[109]
(iii) Mrs Ruthnam’s evidence is preferred
[135]
(i) Conclusion
[153]
(b) Conversation between Dr Sutherland and Mrs Ruthnam on 28 August 2015
[154]
Conclusion
[178]
(c) Conversation between Dr Joshi and Mr Sims on 3 September 2015
[179]
Conclusion
[188]
(d) Conversation between Dr Summersell and Mrs Ruthnam on 8 September 2015
[189]
Conclusion
[205]
(C) Other conversations with surgeons not said to involve contravening conduct
[206]
(a) Conversation between Dr Sutherland and Mrs Ruthnam on 10 September 2015
[208]
Conclusion
[216]
(b) Conversation between Dr Joshi and Mrs Ruthnam on 15 February 2016
[217]
Conclusion
[223]
(c) Conversation between Dr Summersell and Mrs Ruthnam on 8 March 2016
[224]
Conclusion
[229]
(d) Mrs Ruthnam’s meeting with Dr Lim on 16 June 2015
[230]
Conclusion
[240]
(e) Conversation between Dr Ross and Mrs Ruthnam on 31 August 2015
[241]
Conclusion
[254]
(f) Conversation between Dr Roussos and Mrs Ruthnam on 1 September 2015
[255]
Conclusion
[261]
(g) Dr Edmund Wong She
[262]
(h) Conclusion regarding alleged contravening conversations
[264]
PART E – DR SUTHERLAND’S SOUND RECORDING AND RAMSAY’S INTERLOCUTORY APPLICATION
[265]
(a) Retrieval of the sound recording
[267]
(b) Ramsay’s application under ss 135 and 136 of the Evidence Act
[272]
(i) Introduction
[272]
(ii) Dr Sutherland recalled (12 March 2019)
[277]
(iii) Consideration and determination of Ramsay’s interlocutory application
[281]
PART F – MISUSE OF MARKET POWER
[316]
(a) Statutory provisions as in force at the relevant time
[317]
(b) Elements of s 46 contravention
[318]
(c) The relevant market
[319]
(i) Some relevant legal principles on market definition
[320]
(ii) The appropriate market definition – issues in dispute
[329]
(iii) To whom are services provided?
[339]
(iv) The product that is provided by Ramsay
[353]
(v) Are there separate markets for “operating theatre services” and “post-operative care”?
[359]
(vi) Private patients in public hospitals
[362]
(vii) An evidentiary ruling
[369]
(viii) Conclusion in respect of market definition
[371]
(d) Did Ramsay have substantial market power?
[372]
(i) Substantial market power: some applicable principles summarised
[373]
(ii) Ramsay’s substantial market power
[376]
(iii) Was Ramsay’s conduct for a proscribed purpose?
[388]
(e) Did Ramsay take advantage of substantial market power?
[391]
(i) Scenario one
[398]
(ii) Scenario two
[399]
(iii) Scenario three
[403]
(iv) Did Ramsay have a legitimate business rationale for the alleged contravening conduct?
[405]
(f) Conclusions on misuse of market power
[418]
PART G – EXCLUSIVE DEALING
[419]
(a) Statutory provisions as in force at the relevant time
[419]
(b) Elements of s 47 contravention
[420]
(i) Need for supply or offer to supply on condition
[421]
(ii) Did Ramsay’s conduct have the purpose or likely effect of substantially lessening competition?
[426]
(A) Ramsay’s purpose
[428]
(B) Likely effect of Ramsay’s conduct
[432]
(c) Conclusions on exclusive dealing
[437]
PART H – CONCLUSIONS
[440]
GRIFFITHS J:
PART A – INTRODUCTION
(a) The ACCC’s case in broad outline
The applicant (ACCC) alleges that the respondent (Ramsay) has contravened ss 46 and 47 of the Competition and Consumer Act 2010 (Cth) (CC Act). The alleged contraventions arise from four pleaded conversations which the ACCC says representatives of Ramsay had with three individual surgeons (Dr Neil Joshi, Dr Andrew Sutherland and Dr Peter Summersell) in mid-2015 when some surgeons were planning to establish a new day surgery in Coffs Harbour, in potential competition with Ramsay’s then existing day surgery and separate private hospital in Coffs Harbour.
It will be necessary to elaborate further below on the key elements of the case as pleaded by the ACCC. At this introductory point, it is sufficient to emphasise the following features. First, the pleaded case is based on four separate conversations in August and September 2015 in which it is alleged that three individual surgeons were told certain things by senior officers of Ramsay as to the consequences for the surgeons if they were to carry out some or all of their day surgery procedures at the proposed new day surgery. The ACCC alleges that these conversations conveyed to those surgeons that their access to operating theatre time at Ramsay’s private hospital in Coffs Harbour (Baringa) for the purpose of in-patient surgery procedures (which normally involve overnight stays) “would be substantially reduced or entirely withdrawn”.
Secondly, the ACCC’s case is that it was the same message that was conveyed to each of the three surgeons even though there may have been differences in the particular words which were used.
Thirdly, it is important to emphasise at the outset the fact that the pleaded conduct involves words which the ACCC claims were to a particular effect, as opposed to non-verbal conduct. This has particular implications for the burden of proof carried by the ACCC, especially bearing in mind the gravity of the allegations against Ramsay and the implications that has for that burden (see s 140 of the Evidence Act 1995 (Cth) (Evidence Act). It also highlights the difficulty which confronts the ACCC in making good its claims, which substantially depend upon oral conversations and where witnesses have given evidence of their best recollections of the words which were used some time after the conversations took place. There are, however, some relevant and relatively contemporaneous documents which relate to some of the conversations.
As Ramsay pointed out, the evidentiary difficulties are compounded by the possibility of there being “a finely nuanced linguistic distinction between a surgeon being told that their access to Ramsay’s major operating theatres may change, and a surgeon being told that their access to operating theatre time for the purposes of in-patient surgery procedures would be substantially reduced or entirely withdrawn”.
The evidentiary difficulties which can arise in a case which substantially turns on the Court making findings of fact in relation to what most probably was said in a conversation are well described by McLelland CJ in Eq in Watson v Foxman(1995) 49 NSWLR 315 at 318-319 (emphasis added):
Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved’ including the ‘seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding” …
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a cause of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration ...
Fourthly, an unusual feature of this proceeding is that in the case of one of those conversations (the conversation which took place between Mrs Elizabeth Ruthnam, the CEO of Baringa and Dr Andrew Sutherland), it unexpectedly emerged during the course of the proceeding that there was a verbatim sound recording of their conversation.
Fifthly, Ramsay submitted that the case as pleaded against it is to the effect that, notwithstanding the four relevant and central conversations pleaded by the ACCC, Ramsay’s alleged contravention of the CC Act involved a single course of conduct. In response, the ACCC submitted that insofar as the factual elements of its case were concerned, it was sufficient for it to persuade the Court that at least one of the pleaded conversations occurred. I have proceeded on that basis.
Sixthly, Ramsay raised various complaints relating to the ACCC’s own conduct in the course of the proceedings. In brief, Ramsay raised the following two matters concerning the ACCC’s conduct:
(a) its failure to take appropriate steps to preserve and recover recordings of two of the pleaded conversations which recordings were made by two of the surgeons involved in those conversations; and
(b) the ACCC’s failure to disclose earlier than it did to Ramsay that it intended to deploy the recordings of the two conversations against Ramsay.
I will address these matters in the section of these reasons where I explain why I dismissed Ramsay’s interlocutory application seeking orders under ss 135 and 136 of the Evidence Act (Pt E).
Seventhly, it should be noted that the trial related only to issues of liability, which the parties agreed should be heard and determined separately from any issue of relief in the event that liability is established.
As mentioned, those matters will be further elaborated upon below.
(b) Some unusual aspects of the proceeding
It is desirable at this point to mention the significance of some unusual aspects of the case. One relates to the fact that two of the surgeons whom the ACCC alleges had conversations with Ramsay’s representatives, during which alleged threats were made along the lines of the pleaded conversations, had surreptitiously made sound recordings of the conversations in which each was involved. Dr Joshi made a sound recording of a conversation he had with Ramsay’s CEO (Mr Danny Sim) on 3 September 2015. It will be necessary to assess the significance of this conduct and any implications it has for Dr Joshi’s credibility, as well as assess the significance of the fact that the recording was inadvertently deleted by Dr Joshi and was not available as evidence in the proceeding.
The second sound recording, which was referred to above, is one which was surreptitiously made by Dr Andrew Sutherland of the conversation he had with Mrs Ruthnam on 28 August 2015. Dr Sutherland subsequently prepared a file note based upon this sound recording, which file note was used by him in preparing his affidavit upon which the ACCC relied. It is also plain that the ACCC used the file note in drafting [108] of the Further Amended Statement of Claim (FASOC). Ramsay is highly critical of the ACCC’s actions or inactions in respect of that sound recording and the related file note. When Dr Sutherland initially gave evidence in the proceeding, it is evident that he sincerely believed that the sound recording had been deleted from his smartphone. During the course of the hearing, and after Dr Joshi and other surgeons, including Dr Peter Summersell, had given evidence of their recollections of separate conversations they had had with Ramsay’s representatives, a copy of Dr Sutherland’s sound recording was retrieved and a full transcription was then put into evidence.
It goes without saying that this was important evidence because it necessarily established precisely what was said in one of the central pleaded conversations relied upon by the ACCC. It will be necessary to describe in greater detail the significance and implications of the belated production of the sound recording. These matters were raised by Ramsay in the interlocutory application referred to at [10] above, which sought to have the three relevant surgeons’ evidence either excluded or restricted because it was given before discovery of the fact that the sound recording had not been deleted as previously thought.
When it emerged during the course of Dr Sutherland’s cross-examination that the sound recording still existed and could be retrieved, various surgeons, including Dr Joshi and Dr Summersell, had already given their evidence. Ramsay complained that it was strongly prejudiced by the fact that it had cross-examined the three relevant surgeons without knowing the fact that the sound recording still existed, nor what it contained. This issue occupied a not insignificant amount of time in the course of the proceeding. As more fully detailed in Pt E of these reasons for judgment, the Court ruled that the prejudice could satisfactorily be addressed by having the three witnesses recalled to be further cross-examined in the light of the contents of the sound recording. This necessitated the hearing being adjourned. The adjournment was for an unfortunately long period of ten months to accommodate the availability of senior counsel of both parties.
Another unusual aspect of the proceeding is the fact that it emerged during the course of the cross-examination of two surgeons, namely Dr Liam Lim and Dr Joshi, that there had been collaboration in redacting certain parts of WhatsApp messages concerning the proposed new day surgery and which were required to be produced on subpoenas issued by Ramsay. These actions had potential adverse implications for those witnesses’ credibility.
A final introductory observation should be made in relation to how the trial was conducted. Given that the pleaded conversations were at the heart of the ACCC’s case, the Court ordered that evidence from any witness relating to those conversations had to be given orally and not in affidavit form (the parties were required, however, to provide proofs of evidence from any witness who would give evidence relating to any of the conversations).
PART B – SOME BACKGROUND MATTERS SUMMARISED
(a) Broad outline of Ramsay’s operations
Ramsay operates 66 hospitals, as well as 5 day surgeries and one free-standing chemotherapy treatment centre in Australia. One of those private hospitals is the Baringa private hospital in Coffs Harbour. As previously mentioned, Mrs Ruthnam is the CEO of Baringa and held that position at all relevant times. Baringa is licensed under the Private Health Facilities Act 2007 (NSW). At the relevant times it had 81 beds and 242 staff members, of whom 218 were nursing staff. It was licensed to provide a wide list of medical services, namely anaesthesia, chemotherapy, gastrointestinal, endoscopy, medical, mental health, paediatric, rehabilitation and surgical.
In 2015 and 2016, Baringa had three operating theatres and an endoscopy theatre. A fourth operating theatre became operational in January 2017. Both in-patient and day surgery were conducted at Baringa. A Day Surgical Unit was commissioned there in 2010.
In 2015, Ramsay also operated the Coffs Harbour Day Surgical Centre (CHDS). It had one operating theatre but it was licensed to provide only ophthalmic and plastic surgery. It had no licensed beds but was licensed to provide four recovery chairs. It employed 15 staff members, 10 of whom were nursing staff. It closed in or around 2017. As its name suggests, the CHDS did not provide over-night accommodation for patients.
At all relevant times, the only other hospital in Coffs Harbour was the Coffs Harbour Health Campus (CHHC), which provided both day and in-patient surgery services. It had 292 beds, 4 operating theatres, a procedure room, an emergency department and an intensive care unit (ICU). As will emerge, there were other hospitals in the region, all of which were public hospitals. There were no other private hospitals or day surgeries within 1.5-2 hours’ drive from Coffs Harbour.
It is appropriate to say something now regarding the distinction between public and private patients. Public patients are those whose costs for a surgical procedure and related medical services are provided by the State and are generally free of charge to the patient. Public patients either do not have private health insurance or, if they do, they are unwilling to use that insurance or pay for the procedure themselves. In contrast, private patients have their medical fees paid by a private health insurer or some other third party, such as the Department of Veterans’ Affairs. Some private patients pay their own medical fees from their own resources and are referred to as “self-funding” patients. Both Baringa and CHDS only provided services in respect of private patients. Private patients could also be admitted to public hospitals, including CHHC. Ramsay provided various services to patients who were admitted at Baringa or CHDS, including admission, clinical care, provision of medical consumables, medical record management and access to Ramsay’s operating theatres. As noted, in the case of Baringa, the services also included over-night accommodation and ancillary services.
The operating theatre staff provided by Ramsay at Baringa included a scrub nurse, a scout nurse and an anaesthetic nurse. Ancillary services included the provision of a central sterile services department, a management structure, orderlies, reception staff, recovery staff and the operating theatre staff.
As will emerge, there could be different waiting times depending on whether a patient wished to have a procedure conducted at the CHHC or at either Baringa or CHDS.
It is convenient to say something about the utilisation of operating theatre time because it lies at the heart of the proceeding. The utilisation of operating theatres at Baringa and CHDS is important to the financial performance of the facility. This is mainly because if an operating theatre is not being fully utilised, other costs continue to be incurred and this has significant financial implications for Ramsay.
Mrs Ruthnam, as CEO of Baringa, was responsible for monitoring and managing operating theatre utilisation by individual surgeons who operated at Baringa. As will further be explained, this included a six-monthly review by Mrs Ruthnam of current and historical theatre utilisation data based upon information stored in Ramsay’s IT system (Meditech).
Another factor contributing to Ramsay’s profitability is the type of procedure carried out at Baringa and CHDS. That is because some procedures, particularly high turnover day procedures, are generally more profitable than others. In simple terms, some major surgery which requires over-night accommodation is less profitable than high turnover day procedures. As will emerge, however, the issue is more complex than that general summary may indicate.
It is desirable to now say something more concerning Ramsay’s relationship with surgeons who operated at either Baringa or CHDS. Surgeons who use or access Ramsay’s facilities must be accredited by Ramsay. During the relevant times, the process of accreditation was governed by Ramsay’s facility rules dated 22 March 2011 (Facility Rules). The Facility Rules, which also contained provisions relating to the general operation of a Ramsay facility, also applied to the CHDS when it was operational.
To become accredited, a medical practitioner had to complete an accreditation application which was then submitted to Mrs Ruthnam. Any medical practitioner seeking accreditation had to agree to be bound by the Facility Rules and the relevant facility’s policies.
In 2015 and 2016, Baringa and CHDS had approximately 133 accredited medical practitioners, 42 of whom were accredited surgeons.
Operating theatre times or sessions were generally allocated by Mrs Ruthnam on a half-day basis. The general practice was that only one surgeon would use each allocated list. As noted above, Ramsay’s objective was to ensure a full allocation of sessions or lists and for those sessions and lists to be fully utilised. As mentioned, a six monthly review was conducted by Mrs Ruthnam of theatre list allocations. If a surgeon did not fully utilise his or her lists, there was a risk that their theatre list allocation may be reduced or varied.
Generally speaking, where a patient needs to stay overnight (as is normally the case with major surgery), surgeons prefer to be allocated lists or sessions earlier in the week. That is because it is less likely that the treating surgeon will be required to attend upon patients over the weekend. Another relevant consideration in the allocation of theatre lists is the need to avoid a conflict between theatre lists which a particular surgeon might have at various other facilities, including at the CHHC in Coffs Harbour. For completeness, it might also be noted that there was some capacity to allocate an ad hoc theatre list to any individual surgeon upon request. This could occur, for example, when another surgeon with a regular list is on leave or is unable to fill his or her lists, in which case another particular surgeon might seek an ad hoc theatre list at a preferred time, usually earlier in the week, even if that might involve cancelling the particular surgeon’s allocated theatre list later in the week.
Ramsay submitted that it is the case that some surgeons think that they “own” particular operating lists at Baringa or CHDS, so as to give rise to a belief on the surgeon’s part that they own the particular list. I will return to deal with Mrs Ruthnam’s evidence on this matter. I will also deal with her evidence regarding the different relationship she had with individual surgeons, depending in part upon her assessment of the contribution the surgeon made to the financial success of either Baringa or CHDS.
It is convenient to note at this point that occasions may arise where Ramsay needs to take active steps to entice or encourage surgeons in particular fields to work in Coffs Harbour. That is where, for example, there is an unmet demand for a surgeon in a particular specialist field. One of the methods which Ramsay uses to entice surgeons to come to Coffs Harbour is to grant them access to regular and attractive operating theatre lists at either Baringa or CHDS (when it was operating).
I shall now briefly describe the arrangements for admitting and treating patients at Baringa and CHDS. As mentioned, most patients who were admitted at Baringa or CHDS, were either privately insured, self-funded or had the costs of their treatment paid by a third party, such as the Department of Veterans’ Affairs. Ramsay obtains payment for services provided to private patients by issuing an invoice to the private health fund or to the patient directly in the case of a self-funded patient or to the third party provider. Private patients may be charged an excess fee in some circumstances.
The rates Ramsay receives from private health funds are negotiated by Ramsay and apply at a national level.
Separate invoices are issued to private patients at Baringa or CHDS by the surgeon who provided the particular surgical service. This can involve the surgeon charging additional “out of pocket” costs to the patient which are in addition to the amount contributed either by Medicare or the private patient’s insurer.
From around March 2013, it was possible for public patients to be admitted at Baringa under a Surgical Services Agreement which was struck between Baringa and the Mid North Coast Local Health District.
It will be necessary to say something further later regarding the differences between the admission and treatment of private patients at Baringa or CHDS and at CHHC. Generally speaking, private patients in public hospitals get their choice of doctor, access to a single room where one is available, as well as other amenities. The evidence indicates that some public hospitals, including the CHHC, have been given revenue targets set by the NSW Department of Health which encouraged them to admit private patients. The evidence also indicates that where CHHC admits private patients this generates a higher margin than admitting public patients and helps the CHHC meet the revenue targets set by NSW Health.
As already noted, waiting times for private patients in public hospitals are generally shorter than is the case for public patients. I will say something further regarding waiting times later in these reasons for judgment.
(b) Dramatis personae
Before descending into greater detail, it is desirable to describe the primary relevant persons in the proceeding.
At all relevant times, the key Ramsay personnel were as follows. As previously mentioned, Mrs Ruthnam was CEO of Baringa. She reported to Mr Malcolm Passmore, who was the Operations Executive Manager – NSW Regional Hospitals for Ramsay. In turn, Mr Passmore reported to Mr Danny Sims, the CEO of Ramsay’s Australian operations.
Mr Michael Gray was the Commercial Manager – Coffs Harbour for Ramsay. He worked at Baringa. He was responsible for compiling the data from Meditech which he provided to Mrs Ruthnam to assist her in her half-yearly reviews of theatre list allocations for accredited surgeons who used operating theatres at Baringa.
Each of Mrs Ruthnam, Mr Sims and Mr Gray gave evidence and was cross-examined. Mr Passmore was scheduled to give evidence but in the events that occurred he was not called by Ramsay. As will emerge, the ACCC submits that this has evidentiary implications.
Ramsay called Mr Gregory Houston as an expert economics witness. He gave evidence concurrently with the ACCC’s expert economic witness, Dr Geoffrey Edwards.
Ramsay also relied upon affidavits by Ms Lynne-Marree Edgerton and Mr Benjamin Avery, neither of whom was required for cross-examination. Ramsay also relied upon an affidavit by Dr Harvey Ward, an obstetrician and gynaecologist based in Coffs Harbour.
Turning now to the ACCC’s witnesses, the following three surgeons were called as primary witnesses as each was involved in at least one of the four conversations which the ACCC claims gave rise to contravening conduct:
(a) Dr Joshi (a urologist);
(b) Dr Sutherland (a colorectal surgeon); and
(c) Dr Summersell (an orthopaedic surgeon).
Each had allocated lists at Baringa and CHDS during the relevant times, as well as having allocated lists at CHHC.
The ACCC relied upon evidence from other individual doctors notwithstanding that they were not directly involved in the pleaded contravening conduct, namely Dr Liam Lim (an ophthalmologist), Dr William Ross (a general surgeon), Dr David Ellis (a general practitioner), Dr Edmund Wong She (a general practitioner) and Dr Emmanouel Roussos (a general surgeon). Although neither was called as a witness there are also some references in the evidence to the wives of Dr Lim and Dr Joshi respectively, who are Dr Nani Kuswanto and Dr Devina Joshi.
The ACCC called two industry experts, namely Dr John O’Donnell and Ms Ann McHardy, as well as an economic expert, Dr Geoffrey Edwards. Both Dr O’Donnell and Ms McHardy were cross-examined. As noted above, Dr Edwards gave evidence concurrently with Mr Houston.
The ACCC also relied upon an affidavit by Mr Allan Went, Acting Executive Director, Health System Information & Performance Reporting Branch of the NSW Department of Health. He was not required for cross-examination.
(c) Plans for a new day surgery in Coffs Harbour
From late 2014, a group of surgeons who had allocated operating theatre lists at Baringa commenced planning the development of a day surgery that would compete with Ramsay in Coffs Harbour. Initially, Dr Lim and Dr Joshi were the driving forces behind the proposal. Later, Dr Sutherland also became actively involved in the discussions concerning the creation of the new day surgery. These surgeons planned to create a day surgery with two operating theatres that would perform a range of speciality day surgery procedures, including ophthalmic surgery, urology procedures and endoscopies. It was not proposed that the day surgery would provide procedures which required a patient to stay overnight.
In or around April 2015, Mrs Ruthnam heard about the acquisition of land in Hall Road, Coffs Harbour for the purpose of building a new day surgery. The land had been purchased in March 2015 by an entity associated with Dr Joshi, Dr Lim and their respective wives. Dr Joshi and Dr Lim sought to identify other “high volume day case” surgeons, such as Dr Sutherland, Dr Ross and Dr Roussos, who might be enticed to either use the proposed new day surgery and/or possibly take up a financial interest in it. As will emerge, some of the surgeons involved in the proposal took advantage of their association with Baringa and CHDS to gather confidential information about Ramsay’s operations which they thought might be helpful in developing their own day surgery. For example, on 27 May 2015, Dr Sutherland sent the following email to Dr Lim and Dr Joshi:
I was scoping at baringa today and confirmed that they have 3 colonoscopes and 3 gastroscopes. Ideally they would have 4 colonoscopes in case something breaks during a list but we could start with 3 and 2. The steris machines cost about $30,000 each and we would need 2.
I also looked at the record of procedures. For may the numbers were (include bookings for thurs/fri this week)
Ross 81
Me 79
Wenman 38
Ramsay 24
Roussos 9
Kalmar 4
warrier 5
Abraham- not sure
If there are 250 per month in private and a full day is 15-20 patients then it will be at best about 14-16 full days of scopes per month. I would expect, and support, Baringa doing 4-6 of those days which would leave 2-3 days of scopes per week at the day surgery.
I think warrier was away but as far as i know none of the others were away in may.
It gives an idea of numbers that we could expect. Also that Roussos would not expect to have a day of scopes everyweek - he did 2 lists in 4 weeks 6 and 3 patients
Dr Lim also engaged in conduct which saw him take advantage of his association with Baringa to obtain information which might assist in establishing the new day surgery. This included exploring with CHDS staff members their interest in being employed at the proposed new day surgery, asking all CHDS staff members about how particular equipment worked, taking photographs of the central sterilisation department at CHDS and asking CHDS about the dimensions of the central sterilisation department. This conduct caused Mrs Ruthnam to meet with Dr Lim on 16 June 2015 in which she asked whether Dr Lim was involved in developing a rival day surgery in Coffs Harbour. Dr Lim initially denied any such involvement, but then told Mrs Ruthnam that the new day surgery was to be in Grafton and that there would not be a day surgery in Coffs Harbour until after Mrs Ruthnam had retired. They then discussed whether Ramsay would spend $300,000 on equipment which Dr Lim had been trialling as a vitreoretinal surgeon, to which Mrs Ruthnam said she was not in a position to spend that amount of money on a machine that would be used only once a week. At this point Dr Lim threatened to speak to the ACCC about her lack of enthusiasm about purchasing the equipment.
I accept the accuracy of the contents of the email which Mrs Ruthnam sent to Mr Passmore on 17 June 2015 shortly after her meeting with Dr Lim:
Had a meeting with Dr Lim and we discussed his conduct at CHDS (offering jobs; requesting information; taking photographs). He says there is to be a new day surgery in Grafton and that was all he was referring to. When questioned about his plans in Coffs he became very defensive, offensive and completely denied any involvement. He did say when ruffled at one point that there may be plans for next year or the year after in Coffs but he later denied that too. He is very cross indeed that we are not going to purchase new vitreoretinal equipment or allow him to purchase it for use at CHDS and threatened to inform the ACCC. I did very gently but firmly inform his (sic) that all Ramsay hospital executives are very well aware of all legislation surrounding the ACCC and we always work within this. He is very cross and will start causing all sorts of trouble I'm sure.
In cross-examination, Dr Lim accepted that he had misled Mrs Ruthnam by denying any involvement in the new day surgery and by denying that he had taken photographs of Ramsay’s equipment and facilities. He also acknowledged that he sent an email to Mrs Ruthnam the day after their meeting in which he said that Ramsay was “truly jumping at shadows” and that while he was not saying that there will never be another day surgery in Coffs Harbour “there’s nothing in the works at the moment”. That was palpably false.
When Mrs Ruthnam heard about the rival day surgery proposal, she raised it with Mr Passmore. She tried to gather more information about who was involved in the proposal and what it entailed.
The ACCC alleged that Mr Passmore and Mrs Ruthnam then devised a “strategy” in response to the proposed competing day surgery. It relied upon a file note prepared by Mr Passmore of a meeting he had with Mrs Ruthnam on 5 May 2015. The file note included the following information:
Divide + Conquer → Urology + Vascular
2 Singh + Lim will keep going.
The ACCC submitted that the obvious meaning of this file note is that Mr Passmore and Mrs Ruthnam planned to target two surgeons, namely Dr Tawadrous and Dr Joshi, in some way, in order to “divide and conquer”. It submitted that it is evident that Mr Passmore also thought that Dr Singh and Dr Lim would “keep going” because they were ophthalmologists, with the consequence that if they built and were involved in the new day surgery, they would not need either of Ramsay’s facilities any longer.
The ACCC placed heavy reliance upon another file note of Mr Passmore of a meeting he had with Mrs Ruthnam on 4 June 2015. That file note includes the following statements:
Can we initiate the Hurstville/St George strategy → Urologist + Vascular → Out of Baringa
? Remove Lim from CHDS
Actions to be taken - Meet with Danny + Katrina
- ? OT in Baringa Centre.
The ACCC submitted, and I accept, that the reference in the file note to the “Hurstville/St George Strategy” is most probably a reference to the events which occurred in 2007 when various surgeons who carried out procedures at a Ramsay hospital in Sydney (St George Private) purchased a nearby hospital (Hurstville Community Hospital). In response, Ramsay removed those surgeons’ access to lists at St George Private.
The ACCC submitted that the Court should find that Mr Passmore and Mrs Ruthnam planned a similar strategy in Coffs Harbour and that, in particular, they planned a strategy to target urology and vascular surgeons, who both required access to Baringa’s in-patient facilities, and remove their access to Baringa. The ACCC submitted that this is reflected in the reference in the note to what the ACCC described as “Out of Baringa”.
The ACCC further submitted that the strategy which was agreed between Mr Passmore and Mrs Ruthnam was implemented by around 19 August 2015. The ACCC relied on an email from Mrs Ruthnam to Mr Passmore on 19 August 2015, in which she said:
I was hoping we could have a chat tomorrow. There is more buzz around the place about our competitor and I feel now is the time to visit some doctors. I would like an idea on what scale Ramsay Health Care would respond to such a threat. We discussed many strategies the strongest of which was to warn doctors that we may not be willing to support their major surgery if their day surgery was to go off site. The current contenders are Dr Joshi (urology), Dr Lim (ophthalmologist) and Dr Andrew Sutherland who is our colorectal surgeon. I believe we may have an opportunity to dissuade Dr Sutherland but I need to be able to explain the consequences of his current decisions on his future practice. Would appreciate some guidance in this.
I will explain below why I do not accept some of the ACCC’s claims and its characterisation of what it described as Ramsay’s strategy in respect of the proposed new day surgery.
Returning now to summarise the plans for the new day surgery, Dr Joshi and Dr Lim discussed the matter with an architect and various healthcare providers. The land which was purchased in March 2015 was selected by Dr Joshi and Dr Lim because they considered that they had received sufficient responses from other surgeons so as to encourage them to proceed with their plans for a new day surgery. Between April 2015 and August 2015, Dr Lim and Dr Joshi (and their respective wives who are also medical practitioners) worked with an architect to prepare plans for the new day surgery. In around June 2015, they also engaged Leith MacMillan, a day surgery consultant, to advise them on the plans.
By around mid-August 2015, Dr Lim, Dr Joshi and Dr Sutherland formed the view that there would be sufficient demand in Coffs Harbour to support a new day surgery. In July 2015, a company was established which would operate the day surgery (Coffs Coast Day Hospital Pty Ltd), with Dr Lim, Dr Joshi and Dr Sutherland as directors and one-third owners of the company.
By around August 2015, the three proponents considered that preparations for establishing the day surgery were “progressing well” and that some remaining tasks, such as obtaining regulatory approval and financing for construction were “surmountable hurdles”.
In the proceeding, Ramsay submitted that the rival day surgery proposal was relatively undeveloped and was unlikely ever to be viable. Settlement of the land purchase at Halls Road did not occur until late September 2015. Ramsay also emphasised that, by August 2015, no design for the facility had been finalised, nor had a development application been submitted. While acknowledging the retention of Leith MacMillan, Ramsay emphasised that the proponents did not implement the recommendation that they undertake an extensive feasibility study. In particular, it draw attention to the fact that Dr Joshi considered that a feasibility study may not be required. Moreover, on 16 August 2015, Dr Sutherland commented that he had not seen a business plan to know at what point the proposed day surgery “would break even”.
Another matter to which Ramsay drew attention as indicating that the plans for a new day surgery were relatively undeveloped is that the proponents made no inquiries with health funds about applicable rates even though they had been told by their architect that health funds were apparently resisting those types of development at that time.
PART C – OUTLINE OF KEY ISSUES
I accept the ACCC’s submission that the primary factual issue in the proceedings is what was said (in the sense as pleaded of “words to the effect”) by Mrs Ruthnam and Mr Sims to the three relevant surgeons (i.e. Dr Joshi, Dr Sutherland and Dr Summersell), in response to information that they and possibly other surgeons were interested in setting up a competing day surgery in Coffs Harbour. Although the ACCC also initially relied upon conversations between Mrs Ruthnam and Dr Roussos as giving rise to contravening conduct, at the hearing it did not press this aspect of its case. Accordingly, although Dr Roussos gave evidence and was cross-examined, the relevance of his evidence provides context for the determination of the primary factual issue and may also be relevant to Ramsay’s purpose. The same may be said in respect of the evidence of other doctors, including Dr Lim and Dr Ross.
This primary factual issue, which is the subject of Pts D and (less so) E of these reasons, needs to be determined in the context of the particular conduct which the ACCC has pleaded gave rise to the two alleged contraventions. It is common ground that if the Court finds that the pleaded conduct did not occur, the proceeding must be dismissed. Strictly speaking, it would be unnecessary in that scenario for the Court to proceed to determine the additional issues.
Subject to that qualification, other issues (which are the subject of Pts F and G of these reasons), which may require determination are now summarised. First, the parties disagree as to what is the relevant market. The ACCC submitted that there is a market for services provided by Ramsay to surgeons, whereas Ramsay submitted that there is a market for services provided by it to patients.
Secondly, there is a question whether Ramsay had substantial market power in any market in which in-patient services are supplied. Ramsay denied that it had any such power.
Thirdly, and importantly, assuming that Ramsay had substantial market power, there is a question whether Ramsay took advantage of that substantial market power in the conversations which occurred between Mrs Ruthnam and Mr Sims and each of the relevant three surgeons.
In brief, the ACCC submitted that Ramsay did take advantage of its substantial market power because it could only be economically rational for it to withhold access to the operating theatres at Baringa if, and because, surgeons had no real alternative but to perform operations there. It added that, in a counterfactual world where Ramsay lacked substantial market power, this would not be so, and the alleged threats would be neither credible nor effective.
Fourthly, the question of whether Ramsay offered to supply services to surgeons on the condition that they not use the day surgery could also arise for determination and is linked to the primary factual issue.
Fifthly, there is the issue whether, in making the alleged threats to the surgeons, Ramsay had a substantial purpose of either preventing the new day surgery from entering the market or engaging in completitive conduct for the purposes of s 46 or to substantially lessen competition for the purposes of s 47 of the CC Act. The ACCC’s case is that both Mrs Ruthnam and Mr Sims conversed with the relevant surgeons for the purpose of dissuading them from implementing their plans concerning the new day surgery, so as to prevent the competition with Ramsay ever occurring.
Sixthly, there is the issue whether Ramsay’s conduct was likely to substantially lessen competition. The ACCC’s case is that the conduct was likely to have that effect because it was likely to stop the development of the competing day surgery, with the consequence that a competitor to Ramsay would not enter the market.
Seventhly, there is the issue of the relevance, if any, of the ACCC’s own conduct in relation to some aspects of the proceedings which are described at [9] above in Pt A.
PART D – FINDINGS ON THE PRIMARY FACTUAL ISSUES CONCERNING THE PLEADED CONTRAVENING CONDUCT
(A) The ACCC’s case concerning the contravening conversations
The ACCC claimed that in or around mid-2015, Ramsay devised “a strategy” in response to the rumours that some surgeons were planning to establish a rival day surgery in Coffs Harbour, the essence of which is outlined in [58] ff of Pt B above. The alleged strategy, which is said to have been agreed between Mrs Ruthnam and Mr Passmore, was that Mrs Ruthnam would speak to surgeons to deter them from having any involvement with the new day surgery. More specifically, as particularised in [104] of the FASOC, the ACCC claimed that the strategy was to the effect that Mrs Ruthnam would meet with certain surgeons who were accredited to operate at Baringa and CHDS concerning the new day surgery and convey to such of them as she considered appropriate that if they were to carry out some or all of their day surgery procedures in the planned new day surgery either:
(a) their access to Ramsay’s major operating theatres may change; or
(b) their access to operating theatre time at Baringa for the purpose of in-patient surgery procedures would be substantially reduced or entirely withdrawn.
The ACCC further pleaded that between about June and October 2015 Mrs Ruthnam implemented this strategy by meeting with various individual surgeons, particularly Dr Joshi, Dr Summersell and Dr Sutherland. As noted above, the ACCC did not press its claim in the FASOC that what Mrs Ruthnam is alleged to have said to Dr Roussos involved contravening conduct. The ACCC claims that Mr Sims engaged in contravening conduct because of the things he said to Dr Joshi in the course of a restaurant dinner conversation they had on 3 September 2015. The ACCC also claims that Mrs Ruthnam conversed with other surgeons whose identities are set out in s 6.3 of Ramsay’s response dated 27 May 2016 to the s 155 notice issued to it by the ACCC, which list included Dr Lim, Dr Ross, Dr Ward and Dr Roussos. Significantly, however, the ACCC did not claim that these other conversations involved contravening conduct.
In view of their significance to the pleaded case, it is necessary to set out [104] to [108] and [110] to [113] of the FASOC ([109] is omitted because it relates to that part of the ACCC’s case concerning Dr Roussos which is no longer pressed):
104. In or around mid-2015, Ramsay devised a strategy by which Mrs Ruthnam would speak to Surgeons to deter them from being involved with the New Day Surgery.
Particulars
The strategy was to the effect that Mrs Ruthnam would meet with certain Surgeons accredited to operate at Baringa and CHDS regarding the New Day Surgery and convey to such of the Surgeons as she considered appropriate that if they were to carry out some or all of their Day Surgery Procedures in the New Day Surgery either:
(i) their access to Ramsay's major operating theatres may change; or
(ii) their access to operating theatre time at Baringa for the purpose of In‑Patient Surgery Procedures would be substantially reduced or entirely withdrawn.
That strategy was devised during discussions between (at least) Mrs Ruthnam and Mr Passmore in or around mid-2015.
Further particulars of those discussions may be provided following evidence and discovery.
105. Between about June and October 2015, Mrs Ruthnam implemented that strategy by meeting with individual Surgeons accredited to operate at Baringa and CHDS, including as pleaded at paragraphs 106-109, below.
Particulars
Mrs Ruthnam met and discussed the possibility of the New Day Surgery with a number of Surgeons, including the four Surgeons referred to in paragraphs 106-109.
Other than the Surgeons referred to in paragraphs 106-109, Mrs Ruthnam met and discussed the possibility of the New Day Surgery with the Surgeons set out in section 6.3 of the response by Ramsay dated 27 May 2016 to a notice under section 155 of the Act.
Further particulars of Mrs Ruthnam's meetings and discussions with Surgeons may be provided following evidence and discovery.
106. On or about 25 August 2015 Mrs Ruthnam said words to Dr Joshi to the effect that if he was involved or had an interest in a doctor created facility he would not be able to work at Baringa and would need to do all his work elsewhere.
107. On or about 8 September 2015 Mrs Ruthnam said words to Dr Summersell to the effect that if he was involved in a new day surgery, he would not be able to do any operating at Baringa.
108. On or about 28 August 2015 Mrs Ruthnam said words to Dr Sutherland to the effect that if he chose to take his day surgery away from Ramsay, Ramsay would need to find a balance by stopping his main theatre cases and that Ramsay would need to look at the business case for his theatre time if he took his endoscopies away.
…
110. On or about 3 September 2015 Mr Sims said words to Dr Joshi to the effect that Ramsay could not abide by a Surgeon having an interest in another medical facility and that Ramsay would not allow Dr Joshi to carry out day procedures at a new facility and carry out more complicated procedures at Baringa.
111. By the conduct referred to in paragraphs 106-110, Mrs Ruthnam and Mr Sims conveyed to those Surgeons that if they were to carry out some or all of their Day Surgery Procedures in the New Day Surgery, their access to operating theatre time at Baringa for the purpose of In-Patient Surgery Procedures would be substantially reduced or entirely withdrawn.
112. At all material times the conduct of Mr Sims, Mr Passmore and Mrs Ruthnam referred to in paragraphs 104-110 was engaged in on behalf of Ramsay within the scope of their actual or apparent authority.
Particulars
The Applicant relies on section 84(2) of the Act.
113. The conversations referred to in paragraphs 106-110 caused the Surgeons referred to in paragraph 100 to suspend their plans to establish a new private day surgery in Coffs Harbour in or around October 2015.
The following key points emerge from these pleadings:
(a) The four conversations with the three particular surgeons are said to have involved the use of “words to the effect” of those set out in [106] to [108] and [110] of the FASOC.
(b) The ACCC claims that despite some variance in the words used, Ramsay conveyed the same message to each of the three surgeons in the four conversations referred to in [106] to [108] and [110] of the FASOC. The message was that if the surgeon were to carry out some or all of their day surgery procedures in the new day surgery, their access to operating theatre time at Baringa for the purpose of in-patient surgery procedures would be substantially reduced or entirely withdrawn (see [111] of the FASOC and [5] and [45] of the ACCC’s written opening).
(c) Critically, and notwithstanding the broad terms of the pleaded strategy as particularised in [104] of the FASOC (which includes a reference to access to Ramsay’s major operating theatres “may change”), the terms of [111] of the FASOC make plain that it is only the conduct pleaded in [106] to [108] and [110] which is said by the ACCC to involve contravening conduct. The significance of this distinction lies in the fact that although the ACCC claimed that Ramsay’s representatives also told various surgeons that if they were to carry out some or all of their day surgery at the proposed new facility, their access to Ramsay’s major operating theatres at Baringa “may change”, the ACCC confirmed in a letter dated 28 July 2017 to Ramsay’s solicitors that it does not allege that these conversations gave rise to contraventions of either ss 46 or 47 of the CC Act.
Significantly (and correctly), the ACCC acknowledged in its opening address that its case must fail if the Court is not satisfied to the relevant standard that the message pleaded at [111] of the FASOC was in fact conveyed. Necessarily therefore, the focus must be on fact finding in relation to the four pleaded conversations with the three particular surgeons, to which I now turn.
(B) The four conversations said to involve contravening conduct
I will now address the four separate conversations which the ACCC relies upon in claiming that Ramsay engaged in contravening conduct.
(a) Dr Joshi’s conversation with Mrs Ruthnam on 25 August 2015
Mrs Ruthnam and Dr Joshi had a brief conversation on 25 August 2015 in Mrs Ruthnam’s office at Baringa. The conversation was brief because Dr Joshi was about to operate and was under some time pressure. It is common ground that Mrs Ruthnam asked Dr Joshi if he was involved in the proposed new day surgery.
I will summarise the conflicting evidence given by Dr Joshi and Mrs Ruthnam as to that conversation before explaining why I strongly prefer Mrs Ruthnam’s account.
(i) Dr Joshi’s evidence summarised
Dr Joshi’s oral evidence in chief (which was given prior to Dr Sutherland’s sound recording being retrieved) regarding the central part of the conversation he had with Mrs Ruthnam on 25 August 2015 was as follows:
… So Elizabeth Ruthnam had invited me to come to her office to discuss things, but I did not know what the nature of what was going to be discussed. I – this was preceding an operating theatre list, so I was time pressured and I came in to find out what she wanted to talk about. She mentioned very soon after we sat down that she had heard from people, who she did not specify, that there was contemplation of a new day surgery being created and that I was the person to speak to about this. And she said that she had heard this from multiple sources. I then was taken aback because I wasn’t expecting this line of questioning. I explained that I had heard that there may be a facility. I did not acknowledge at the time that I was an instigator of that facility, but I did say that if there was such a facility I would consider using it, but I followed that up by saying that I would still like to bring my overnight work, meaning work that would require patients to stay overnight or longer which I believed was profitable, to Baringa so that I could continue that relationship. She then replied that the Ramsay position was that if I was to use such a facility, that I would not be able – be welcome in Baringa to perform that type of work, and that I would have to take all my work to that competing facility. I was alarmed at that point and I explained but again emphasised that the work I would bring to Baringa I believe would still be profitable and that there would still be a reasonable case volume of what I brought and she declined that – she – well, she stated in response to that that – that didn’t matter, that it was Ramsay’s position, that I – that I could not be working at both places at once, and that she had planned to talk to other surgeons in the area to say exactly the same thing, and that she also said that this was Ramsay’s view – official view at that point. She also mentioned that – she stated that, “I would hate to lose you” in terms of that’s the expression that she used when she told me that I would not be able to work at Baringa anymore and she also said that Ramsay would seek to recruit other surgeons – other urologists working in my field to the area if they did lose me to another facility. At that point, she also mentioned that she wanted to talk about other equipment, laser equipment that I might use at Baringa, but I had said that at that point I was not willing to talk about it, partly because I had to attend an operating list later that day but also because that day surgery issue was far more concerning to me at that point, and troubled me greatly.
Have you any other recollections of what was said during the course of that conversation?---I can’t recall anything else.
Shortly thereafter, in his oral evidence in chief Dr Joshi recalled Mrs Ruthnam referring to Hurstville Community Hospital during their conversation on 25 August 2015. When asked to give his best recollection of what was said then on that subject, Dr Joshi said:
… So that came up after I explained that I would still be willing to bring up work – bring work that was profitable to Baringa that did include an overnight stay or longer. She then responded that Ramsay’s position is that, “We would not allow you to work at both facilities and that we would hate to lose you”. She then mentioned in the context of that that there was a precedent, that in Sydney in Hurstville when doctors decided to set up Hurstville Community that the Ramsay facility in that area had – had declined their or revoked their privileges, and that they were then forced to work only at Hurstville Community and not at the Ramsay facility.
During his resumed cross-examination (i.e. after Dr Sutherland’s sound recording had been retrieved and listened to by Dr Joshi), Dr Joshi gave an account of his conversation with Mrs Ruthnam on 25 August 2015. Aspects of this account differed from the evidence he had given in chief, with particular reference to Dr Joshi’s recollection under cross-examination of what Mrs Ruthnam said about him not being able to rely on his lists for major cases. Dr Joshi made no mention in his oral evidence in chief of Mrs Ruthnam using the word “rely” or “lists”. Dr Joshi’s account of the 25 August 2015 conversation during his resumed cross-examination was as follows (noting that the references in the extract immediately below to 20 August should be references to 25 August):
And if I could – on the – in August – in the 20 August conversation you told her that you would keep all your major surgeries at Baringa?---Yes, that’s right.
And she said, “You can’t assume you can rely on it”?---Yes, that’s right.
In other words you can’t assume you can rely on keeping your lists?---Yes, that’s - - -
Right?---Yes, I couldn’t assume that I could rely on keeping list for major – or keeping any lists for major cases.
In other words you couldn’t – that if you took day surgery away you wouldn’t be guaranteed to keep the list you had?---Yes, that’s correct.
And that’s what she told on 20 August?---She - - -
That’s what she told you on - - -?--- - - - did not use those words.
…
Please answer?--- She did not use those words.
But that’s the effect of what she said was what I just put to you, wasn’t it?---
The effect of what she had said was that I couldn’t rely on being able to take non-day cases to Baringa if I took my day cases to another facility.
In other words, what you understood that to mean, you couldn’t rely on keeping the lists you had at Baringa if you took day cases to a day surgery?---I took it to mean that I could not rely on being able to do any cases that required inpatient stay at Baringa if I took my work elsewhere.
But she didn’t say that, did she?---She did.
What she said, I suggest, that you couldn’t rely on keeping your major lists, didn’t she?---She did not – no, she didn’t use those words, nor did she use words that effect that.
Well, did she say you couldn’t rely on your lists?---She said I could not rely on being able to use Baringa for major cases – or for cases that did not require day stay.
And the major cases were based on you having lists at Baringa, weren’t they?---No, my lists are made up of both day cases and non-day cases, so what I’m saying is that what she said to me had the effect of me understanding that if I had taken my day cases to another facility I could not rely on Baringa providing a session or a list availability to perform non-day cases.
Okay. But I’m just trying to focus on what your recollection of what she actually said?---Yes.
Your best recollection is that what she said if you took day cases away you couldn’t rely on major list cases at Baringa?---I – that’s not – it’s an incorrect characterisation. I couldn’t rely on being able to do my major cases at Baringa.
And she didn’t say you wouldn’t be able to do your major cases at Baringa, did she?---
Well, she said that I would not be welcome there if I chose to go to the other facility, so I took that to mean that I would not be able to do my major cases at Baringa in that event.
There are some relatively contemporaneous written materials which are relevant to the 25 August 2015 meeting. They include a series of WhatsApp messages which were sent by Dr Joshi during the period 1:35 pm to 10:21 pm on 25 August 2015 to Dr Lim (and each of their respective wives, namely Dr Devina Joshi and Dr Kuswanto). These messages were sent after Mrs Ruthnam and Dr Joshi had met earlier that day. This series of messages commenced with the following message from Dr Joshi, which was sent at 1:35 pm:
Just met Elizabeth. Ramsay is planning to kick us all out if another facility is set up (we will have to choose). Should chat soon.
Shortly thereafter (at 1:42 pm), Dr Joshi sent Dr Lim another message, in which he said “may need ACCC talk?”. This indicates that Dr Joshi’s turned his mind very early in the piece, and shortly after his meeting with Mrs Ruthnam, to the desirability of involving the ACCC.
In response to Dr Joshi’s messages, Dr Lim sent Dr Joshi a series of WhatsApp messages during the same period on 25 August 2015. In one such message (at 1:45 pm), Dr Lim asked Dr Joshi whether Mrs Ruthnam was “as blunt as to threaten you? Seems a bit desperate”. Dr Lim also messaged immediately thereafter and stated that he agreed that they should involve the ACCC. Shortly afterwards Dr Lim messaged that there would be a “financial impact if we are ‘kicked out’ before we have somewhere else to bring our patients to”. Dr Joshi then messaged him back at 1:51 pm:
I think the kick out would happen after cases are taken to the other facility. They said they would recruit others (like Hurstville private). May be worth Nani [i.e. Dr Kuswanto] calling ACCC. I did not admit starting a ds but said a DS is likely in coffs and grafton.
When Dr Joshi messaged that they may need to consider formal legal advice, Dr Kuswanto responded by asking: “ACCC & get AMA involved too?”.
At 2:05 pm on 25 August 2015, Dr Lim sent a message to Dr Joshi asking what happened at Hurstville Private. He added that he was not worried about Ramsay recruiting other clinicians because Ramsay had no track record of success in that area and even if other surgeons came to Coffs Harbour he said that “we would recruit them ourselves”.
Dr Kuswanto messaged Dr Joshi at 2:18 pm and asked him whether Mrs Ruthnam had told him “on what basis she’s kicking you out?”. Shortly thereafter, Dr Joshi responded as follows :
She just said surgeons wiuld (sic) have to choose. They may deaccredit us or restrict ot (sic) time. I suspect they may be happy to shut surgeons down for a while. Also er [ie Mrs Rathnam] now in the process of talking to all other surgeons to tell them the same
At 2:31 pm, Dr Joshi messaged the others:
We will need to talk together tonight if possible may be skype conf call. The basis for kicking us out is that they would be in competition with the us (sic) as owners of the competitors. Maybe worth anonymous talk to ACCC first before talking to AS [ie Dr Sutherland] tonight.
Dr Joshi, Dr Lim and Dr Kuswanto then exchanged various further messages on 25 August 2015 in which they agreed that it would be desirable for Dr Sutherland to record any future conversation with Mrs Ruthnam. This agreement between the doctors further highlights the prominence they gave even at this early point in time to engaging the interest of the ACCC.
After various further message exchanges on 25 August 2015 concerning the possibility of involving the ACCC, Dr Lim sent a message at 5:05 pm which stated that “It’s hard to accuse Baringa of any anticompetitive behaviour at this stage” because Mrs Ruthnam had reminded him that she was very familiar with the rules that govern competition in the health sector. This is an apparent reference to a conversation between Mrs Ruthnam and Dr Lim in 16 June 2015 (see [230] ff below). Dr Lim messaged that Ramsay would not have broken the law unless they had actually done something and not merely threatened to expel a surgeon. Dr Joshi responded at 5.07 pm and stated that he thought that “threatening actually is enough to be illegal”.
Dr Lim sent a message at 5.35 pm saying that, at that time, he was trying to contact the ACCC (it appears that Dr Lim first telephoned the ACCC hotline at approximately 5.11 pm on 25 August 2015). He added: “I think the subcategory of anticompetitive behaviour that this falls under is ‘refusal to supply services’”, and involved a breaking of the law because Ramsay was “misusing their market power”.
Shortly thereafter, at 5:24 pm, Dr Lim messaged that he thought it would be more persuasive if “we argue that they are withholding supply of services illegally to prevent doctors from using a rival day surgery”. This further illustrates the early concern as to how best to engage the ACCC’s interest in the matter.
While Dr Lim continued to wait on hold with his call to the ACCC, he sent a message to Dr Joshi asking whether he could persuade Dr Sutherland and Dr Roussos to record any conversation they had with Mrs Ruthnam because “it would be valuable evidence”.
Two days later, on 27 August 2015, Dr Joshi sent a WhatsApp message to Dr Lim saying that he had suggested to Dr Sutherland and Dr Roussos that they tape their meeting with Mrs Ruthnam. He then added that he had talked to “WR, AR and even MB only to say what ER told me. They all seem to object to the idea that Baringa could ask vmo’s to choose. MB was unaware but was asked by ER today”. It appears that the reference to “WR” is a reference to Dr Bill Ross, the reference to “AR” is to Dr Andrew Ramsay and the reference to “MB” is to Dr Miguel Bravo.
Shortly thereafter, at 10:20 pm, Dr Lim responded to Dr Joshi saying: “We want them to join us in seeking the involvement of ACCC”. This further highlights the early importance which both Dr Joshi and Dr Lim saw in involving the ACCC.
There is other relatively contemporaneous material which may cast some light, either favourably or unfavourably, on the strength and reliability of Dr Joshi’s recollection of what Mrs Ruthnam had said to him. It includes a series of emails drafted by Dr Joshi which he sent to Dr Lim on 26 August 2015 at 10:57 pm:
I was thinking of writing an email to ER along the lines of... (baiting)
Dear Elizabeth,
I wanted to clarify the position of Baringa and Ramsay Health after our meeting yesterday. Is it that if a private day surgery was to open in Coffs Harbour and/or Grafton that any surgeon performing any operations in those facilities would be prevented from operating at all in Baringa? Obviously this affects my ability to work at another facility for private patients and I need the exact position clarified and on what basis any surgeon would be excluded from working at Baringa if they also worked at non Ramsay private day surgery. Also I would need to know when such a restriction (or is it deaccreditation?) would be applied on the services offered at Baringa (ie if cases are first taken there, or at some other point?). Does it apply to Grafton and Coffs Harbour equally ? What if I did non day surgery work at a non Ramsay hospital elswehere (sic) (eg for robotic prostatectomy). Please provide a detailed response for all these issues so I know where Baringa and Ramsay Health Care stands, as it may affect decisions moving forward. I understand these directives may have come from senior management outside Baringa but at the moment the implications for VMOs at Baringa are a bit vague. I am not aware of anywhere else (other than Strathfield private) where VMOs at a Ramsay hospital have been told they cannot also work at another private non Ramsay facility which has been established in a nearby area.
Thanks
Neil Joshi
Alternatively... (stronger wording)
After our meeting on Tuesday, I need written clarification as to exactly how Rasmay (sic) Health Care, via Baringa hospital, would restrict supply of their facilities to me if I was to do some day cases at a non Ramsay facility in Coffs.
You stated that I would have to choose when there is no alternative for private patients who need an overnight stay, if I chose to do some day cases at a non Ramsay private day surgery in Coffs Harbour.
On what basis would I be denied access to Ramsay facilities?
Please provide a detailed response.
Thanks
Neil Joshi.
Although this material was never in fact sent to Mrs Ruthnam, the draft emails provide some evidence of Dr Joshi’s state of mind at the relevant time and the second paragraph of the alternative draft email contains his relatively fresh perception or impression of the conversation which had occurred the previous day, including his uncertainty and stated need for clarification as to Ramsay’s position.
There was a further exchange of emails between Dr Joshi, Dr Lim and Dr Sutherland on 28 August 2015, after Dr Sutherland had met earlier that day with Mrs Ruthnam. The emails relate to a letter which Dr Lim had drafted on 27 August 2015 with a view to sending it to the ACCC. The emails are relevant not only to the conversation on 25 August 2015, but also to the meeting between Mrs Ruthnam and Dr Sutherland which took place on 28 August 2015, i.e. three days after she had met with Dr Joshi. The emails (which have been edited to redact email addresses] are as follows:
Subject: Re: a draft letter i dictated yesterday - feel free to edit
From: Neil Joshi (...)
To: [Dr Lim and Dr Kuswanto];
Cc: [Dr Sutherland];
Date: Friday, 28 August 2015, 19:09
I was fairly emphatic when I spoke to Elizabeth that there was a broad front of surgeons interested in both prospective day surgeries in Grafton and Coffs Harbour. I said I definitely would not be involved on my own.
It is possible that she has backtracked because of ACCC warnings from other surgeons she spoke to. I know she was going to meet WR this week or early next and I had spoken to him beforehand and he independently brought up the ACCC.
In terms of equity I would be open to sharing equity (proportionate to caseload, and only for the next 6-7 years he thinks he would like to do endoscopies for ) (sic) to high volume endoscopists like WR because we would still have to pay him some profits if he was not an equity holder, and having him as a holder tethers him not just to the DS but also the argument of anti-competitive behaviour and worsens Baringas position if they deny him operating rights at Baringa.
On 28 Aug 20156:51 pm, "Liam Urn" <...> wrote:
At the airport on my way to NZ....
It's possible that the change of tone has to do with her assumption that Neil is setting up the day surgery, whereas Andrew is an important client. She probably doesn't know Andrew has an equity interest.
Neil - what are your thoughts about changing the day surgery ownership structure? Do you mean offering equity to all surgeons?
Sent from my iPhone
On 28 Aug 2015, at 18:19, Neil Joshi <...> wrote:
I certainly was threatened. It sounds like her tune has changed slightly if you didn't get told that if you were to take day cases to another facility you would not be able to operate at Baringa, because that is exactly what she told me: “we would hate to lose you at Baringa”. She even said that the prospective facility may need to be changed to accommodate overnight inpatient stays. There was no mention of the balance of day cases versus other cases with me.
As far as the ACCC letter is concerned, I agree with its wording and sentiments and I do think it would have to be sent soon to prove that it (sic) we were threatened prior to the facility being built, to discourage it being built. We may be able to get other VMOs to sign the letter if that was thought to be helpful, or even show it to Ramsay before or as well as doing so, after thinking through the implications of these options.
The other thing to think about is if the ownership structure of the day surgery business would have to be changed to lessen the ability of Baringa to carry out such a threat I would be open to considering that.
Thanks
Neil.
On 28 Aug 2015 4:39 pm, "Liam Lim" <...> wrote:
Andrew
I wasn't threatened cos unlike general surgeons and urologists I don't have any use for inpatient beds.
Neil felt I should draft a letter on our behalf before i left for NZ - there's no need to send the letter to ACCC at this stage.
I think perhaps we could canvass the opinion of the other surgeons - a letter like this carries more weight if it is supported by most of the surgeons in coffs.
Neil was basically told that any surgeon who brings any work to our day surgery will no longer have operating rights at Baringa.
This is essentially blackmail and it's only purpose is to prevent a day surgery from becoming financially viable.
The reason Ramsay is informing surgeons of this policy now rather than when our day surgery is in operation Is to prevent it from ever being built.
Liam
Sent from my iPhone
On 28 Aug 2015, at 16:20, Andrew Sutherland <...> wrote:
Liam and Neil
Elizabeth came to see me today. She essentially said that it is a ramsay decision not Baringa. I didn't get a clear answer from her. She talked about balance between day procedures and major surgery. I pointed out that some surgeons are far less efficient with their time and perform less day procedures than I do but they are allowed to continue. So it is not just balance.
What was the content of your discussions? Has there actually been a threat
Andrew
The ACCC submitted that there is no reason to believe that these communications, which were sent shortly after the conversation with Mrs Ruthnam, did not accurately reflect Dr Joshi’s recollection of their conversation on 25 August 2015, even when presented with a different experience by one of his colleagues, namely Dr Sutherland.
(ii) Mrs Ruthnam’s evidence summarised
In her oral evidence in chief, Mrs Ruthnam gave the following recollection of her conversation with Dr Joshi on 25 August 2015:
… I asked Dr Joshi if he was involved in the proposed new day surgery on Halls Road in Coffs Harbour.
I believe he said he was. I asked him the – I did say that I admired his enterprise, but there would be a consequence of doing that, and that if he were to remove his minor surgery from Baringa, then there would be a consequent change and he could not rely on his current major lists. I also said to Dr Joshi that should we lose surgeons, and I told him I was speaking to all the surgeons who performed day surgery, that it would be my job to recruit to our losses.
In her oral evidence in chief, Mrs Ruthnam flatly denied that she told Dr Joshi any of the following things:
(a) if he or any surgeon took part of their work to a new day surgery, they would be kicked out of Baringa;
(b) he would be de-credited or de-credentialed from Baringa;
(c) his privileges would be revoked;
(d) his operating time would be restricted;
(e) he would not be allowed to work at Baringa;
(f) he would not be welcome at Baringa;
(g) he would have to choose between Baringa and the new day surgery; or
(h) that she mentioned what had happened at Hurstville.
In her affidavit dated 1 December 2017, Mrs Ruthnam deposed that she had a telephone conversation with her superior, Mr Passmore, shortly after she had met with Dr Joshi on 25 August 2015. The context of the telephone call (which will be elaborated upon further below) is that on 19 August 2015 (i.e. prior to the meeting with Dr Joshi), Mrs Ruthnam had sought Mr Passmore’s guidance on the “scale” on which Ramsay would respond to the proposal to create a rival day surgery. In an email dated 19 August 2015, which Mrs Ruthnam sent to Mr Passmore, she said:
I was hoping we could have a chat tomorrow. There is more buzz around the place about our competitor and I feel now is the time to visit some doctors. I would like an idea on what scale Ramsay Health Care would respond to such a threat. We discussed many strategies the strongest of which was to warn the doctors that we may not be willing to support their major surgery if their day surgery was to go off site. The current contenders are Dr Joshi (urology), Dr Lim (ophthalmology) and Dr Andrew Sutherland who is our colorectal surgeon. I believe we may have an opportunity to dissuade Dr Sutherland but I need to be able to explain the consequences of his current decisions on his future practice. Would appreciate some guidance on this.
The ACCC has not demonstrated that it would have been economically rational for a firm in the counterfactual to maintain an allocation of lists for the departing doctors for their in-patient work only. On the contrary, maintaining such an allocation would likely deprive the firm of the ability to allocate requisite lists in order to attract or keep other surgeons who could provide the necessary balance to maintain the desired level of return on assets. There is nothing to suggest that it would have been economically rational for a firm in the counterfactual to increase its bed and theatre capacity by the investment of additional fixed costs required to accommodate both other replacement surgeons providing the balance as well as the in-patient surgery of the departing surgeons. Nor was there anything to suggest that such a different overall balance would have been economically rational.
The ACCC has not demonstrated that it would have been economically rational for a rival firm in the counterfactual to behave any differently from the way Ramsay acted here. Thus a firm in the counterfactual would not “fear” a rival doing something which the firm regarded as economically irrational. Moreover, absent evidence that it was economically rational to run an in-patient only private hospital, neither firm acting independently would wish to signal to its incumbent surgeons that they could take away profitable day work but remain comfortable in the knowledge that the private hospital would not change their major lists for in-patient work, which required higher capital investment and running costs. Indeed, it may be noted that a key motivator for Dr Joshi in pursuing a day surgery was the belief that he could charge lower prices for day surgery because of lower costs in the “absence of overnight care costs”.
The ACCC has failed to prove that it was incrementally profitable or “economically rational” for Baringa or any firm to have only taken the three relevant surgeons’ in-patient work. There is no evidence of the cost of or the revenue earned from the three surgeons’ in-patient work which would demonstrate that such work was in and of itself incrementally profitable for Baringa. Dr Edwards agreed in cross-examination that he did not know whether in-patient work was profitable or not.
The evidence indicates that an assessment of whether any of the surgeons’ in-patient work would or would not be incrementally profitable would be “a complex and intricate matter”. Even if a particular procedure was to be considered on a stand alone basis the evidence of Mr Gray was that “it is way too complicated” to work out its profitability, which Ramsay submitted is likely to depend on a range of factors, such as the efficiency of the surgeon, the amount of consumables and the length of stay. Moreover, if a surgeon only undertook in-patient work, Baringa may not have sufficient beds to accommodate patients, which would affect Ramsay’s ability to fully utilise Baringa’s operating theatre lists. I accept Mrs Ruthnam’s evidence on this matter:
So we’ve got a finite number of beds to fit inpatients into. So in a week – and when we do our theatre utilisation review six monthly we do try and spread the inpatient work out, so we don’t have a day when we have got, let’s say, 60 admissions and they would all require a bed, because we couldn’t manage to do that.
Dr Edwards’ analysis that the hospital in the workably competitive market has excess capacity (spare lists and also it seems excess beds) is divorced from commercial reality. As Mr Houston explained, even in a workably competitive market a hospital would seek to allocate its theatre capacity so that its utilisation - assessed by reference to all potential surgeons it may be able to attract, as well as the potential to increase or reduce its theatre capacity - would maximise its profits. Maximisation of profit and operating theatre utilisation requires a hospital to attract surgeons who will bring the most profitable mix of procedures. It will always be preferable to attract a surgeon with complete and more profitable lists. In this regard, Ramsay’s Facility Rules specifically permit the CEO to allocate theatre lists on the basis of the “case mix” of the surgeon. This can involve allocation of all existing lists to more profitable surgeons, leaving no list available to a plainly less profitable surgeon bringing only in-patient work.
This is consistent with the evidence concerning Baringa’s list allocation and its analysis of the utilisation of its operating theatres, as described above. I accept Ramsay’s submission that it is unrealistic to suggest a hypothetical which does not reflect the way a private hospital actually operates, i.e. highly efficient utilisation of its theatres, which are effectively the engine room of its surgery business. To the contrary, Mrs Ruthnam’s evidence demonstrates that Baringa ensures so far as is practicable that its lists are highly utilised, fully allocated where possible, and allocated to surgeons who maximise the hospital’s revenue.
I also accept Ramsay’s submission that the ability to recruit new surgeons would be enhanced by the imposition of restrictions on existing surgeons who seek to split their lists. A potential new surgeon would be less interested in commencing practice in Coffs Harbour if existing specialists can meet most or all demand. As noted above, whilst there are challenges involved in recruitment of specialists to regional areas, there is also evidence that the offering of lists to new recruits is one way of enticing those surgeons to the region.
(f) Conclusions on misuse of market power
For these reasons, even though I would have found that Ramsay had substantial market power, I do not consider that the ACCC has established that Ramsay took advantage of its substantial market power.
PART G – EXCLUSIVE DEALING
(a) Statutory provisions as in force at the relevant time
In August-September 2015, s 47 of the CC Act relevantly provided:
Exclusive dealing
(1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.
(2) A corporation engages in the practice of exclusive dealing if the corporation:
(a) supplies, or offers to supply, goods or services;
(b) …
(c) …
on the condition that the person to whom the corporation supplies, or offers or proposes to supply, the goods or services or, if that person is a body corporate, a body corporate related to that body corporate:
(d) will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation or from a competitor of a body corporate related to the corporation;
(e)-(f) …
(3)-(9) …
(10) Subsection (1) does not apply to the practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in subsection (2), (3), (4) or (5) or paragraph (8)(a) or (b) or (9)(a), (b) or (c) unless:
(a) the engaging by the corporation in that conduct has the purpose, or has or is likely to have the effect, of substantially lessening competition; or
(b) the engaging by the corporation in that conduct, and the engaging by the corporation, or by a body corporate related to the corporation, in other conduct of the same or a similar kind, together have or are likely to have the effect of substantially lessening competition.
(10A)-(13)…
(b) Elements of s 47 contravention
The parties were agreed that to succeed in its s 47 case, the ACCC had to demonstrate that:
(a) Ramsay offered to supply services to surgeons on the condition that they not acquire services from Ramsay’s competitor, the new day surgery.
(b) Ramsay did so for the purpose of substantially lessening competition in a market or that its conduct had the likely effect of substantially lessening competition in a market.
(i) Need for supply or offer to supply on condition
As detailed above, section 47(2)(a) and (d) provide that a corporation engages in the practice of exclusive dealing if the corporation supplies, or offers to supply, goods or services on the condition that the person to whom the corporation supplies, or offers or proposes to supply, the goods or services will not, or will not except to a limited extent, acquire goods or services, or goods or services of a particular kind or description, directly or indirectly from a competitor of the corporation.
The practice of exclusive dealing does not necessarily involve the imposition of any condition; it involves supply upon condition (ReKu-ring-gai Cooperative Building Society (No 12) Ltd [1978] FCA 50; 36 FLR 134at 167 per Deane J). A condition of the kind referred to in s 47(2) need not be legally binding but it must have “attributes of compulsion and futurity” (SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd [1980] FCA 125; 48 FLR 445 at 464 per Northrop J (see also Smithers J at 454)). Thus, the mere fact that a likely consequence is exclusion is insufficient (Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; 122 FCR 110 at [71] per Heerey J).
The ACCC’s pleaded case is that by engaging in the conduct referred to in FASOC [106] to [108] and [110] i.e. the four conversations with the three surgeons referred to above, Ramsay supplied or offered to supply operating theatre time for use in relation to the performance of In-Patient Surgery Procedures on Private Patients and/or Private In-Patient Surgery Services to those surgeons on the condition that those surgeons would not acquire Private Day Surgery Services from a competitor of Ramsay in the Private Day Surgery Market, the Private Day Surgery Theatre Market or Alternate Private Day Surgery Theatre Market (FASOC [118]-[119], [137(a)]). The ACCC submitted that this conditional offer was conveyed to surgeons who relied on being allocated lists at Baringa by Mrs Ruthnam who was responsible for allocating those lists. It further submitted that this was the case in respect of Mr Sims’ conversation with Dr Joshi on 3 September 2015, given his senior position and his statement to Dr Joshi that Ramsay would not abide surgeons using Ramsay’s facilities while “creaming it” down the road.
Ramsay submitted that there was no such supply or offer to supply on condition. None of the central pleaded conversations was to the effect pleaded in the FASOC at [106]-[108] and [110]. In any event, none of conversations (which were to the effect that major lists “would no longer be guaranteed” or that surgeons “could not rely on” keeping such lists) had the necessary qualities of compulsion and futurity.
Ramsay submitted that the alleged contravening conduct was incapable of constituting a supply or offer to supply on condition. The ACCC did not allege that Ramsay intended to revoke or withdraw the surgeons’ operating lists immediately. As noted above, the ACCC’s case is that such a consequence would only occur upon the opening of a new day surgery. In August and September 2015 the new day surgery proposal was in embryonic form. There were doubts as to its financial viability (which Ramsay says proved prescient), and if it was to proceed, it would be at least two to three years before it was operational. There could be no supply or offer to supply services to surgeons on condition that the surgeons would not acquire services from a competitor in circumstances where there were no services to acquire and there was no competitor.
(ii) Did Ramsay’s conduct have the purpose or likely effect of substantially lessening competition?
Section 47(1) does not apply to practice of exclusive dealing constituted by a corporation engaging in conduct of a kind referred to in s 47(2) unless the engaging by the corporation in that conduct has the purpose, or is likely to have the effect, of substantially lessening competition (see s 47(10)).
To apply the concept of substantially lessening competition in a market, it is necessary to assess the nature and extent of the market, the probable nature and extent of competition which would exist therein but for the conduct in question, the way the market operates and the nature and extent of the contemplated lessening (Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238 at 259 per Smithers J; Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 1381; ATPR 41-783 at [12] per Burchett and Hely JJ). Assessing the element of substantiality requires a qualitative judgment (Rural Press at [41] per Gummow, Hayne and Heydon JJ), but must be adjudged to be of such seriousness as to adversely affect competition in the market place, particularly with consumers in mind (Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; 131 FCR 529 at [242] per Wilcox, French and Gyles JJ).
(A) Ramsay’s purpose
The ACCC pleaded that the conduct referred to in [106] to [108] and [110] of the FASOC had the purpose of substantially lessening competition in the Private Day Surgery Market, the Private Day Surgery Theatre Market or the Alternate Private Day Surgery Theatre Market (FASOC at [134]). Ramsay’s actual purpose must be established (Universal Music at [255]). Ramsay submitted that the Court would not find that this was Ramsay’s actual purpose.
I accept the ACCC’s submission that the reference to “purpose” in both ss 46 and 47 is a reference to an intention to achieve a particular result (Queensland Wire at 214 per Toohey J). Moreover, the proscribed purpose must be a substantial purpose of the company’s conduct, but it need not be the only purpose (see s 4F(1)(b) of the CC Act). To be a substantial purpose, the purpose must be “real and not imaginary” (Seven Network Ltd v News Ltd [2009] FCAFC 166; 182 FCR 160 at [858] per Dowsett and Lander JJ).
Importantly, s 46(7) required that a corporation’s purpose may be established by inference and the Court must take into account all relevant circumstances.
The ACCC submitted that Ramsay’s purpose with regard to Mrs Ruthnam and Mr Sims speaking to the surgeons in the pleaded terms was to dissuade those surgeons from continuing with their plans to develop a new day surgery. It submitted that this purpose is clearly reflected in the terms of Mrs Ruthnam’s email dated 19 August 2015, which she sent to Mr Passmore.
(B) Likely effect of Ramsay’s conduct
Whether or not conduct is likely substantially to lessen competition requires the Court to compare the positions “with” and “without” the proscribed conduct. The ACCC submitted that, in the “without” counterfactual, the Court should conclude that it was likely that the new day surgery proponents would have continued with their plans to build a day surgery and that it would have been built and become operational in circumstances where:
(a) in late 2015, the proponents considered that preparations for the day surgery were “progressing well” and that other outstanding tasks (such as regulatory approval and construction financing) were “surmountable hurdles”;
(b) the proponents’ calculations indicated that they would attract enough work in order to make the day surgery viable; and
(c) the ultimate reason why the project did not proceed were changes in Dr Sutherland’s personal circumstances and the development of another day surgery by Presmed.
In the “with” counterfactual world, the ACCC submitted that, assessed at the time of the conduct, it was most likely that the development of the new surgery would not proceed. This was because:
(a) the proponents were concerned about Ramsay’s reaction and its effect on their access to Baringa;
(b) as a matter of common sense, the project did not go ahead when the surgeons learned of the responses of Mrs Ruthnam and Mr Sims, noting that it was shortly after Mr Sims spoke with Dr Joshi on 3 September 2015 that planning for the new day surgery ceased; and
(c) the ability to attract surgeons to use the new day surgery was a key matter underlying the viability of the proposed new day surgery and it was reasonable for the proponents to assume that what they were told by Mrs Ruthnam was also being conveyed to other surgeons with a view to discouraging them from using the proposed new day surgery.
The ACCC also pleaded that the alleged contravening conduct referred to in the relevant paragraphs of the FASOC was likely to have the effect of substantially lessening competition in the Private Day Surgery Market, the Private Day Surgery Theatre Market or the Alternate Private Day Surgery Market (FASOC [136]). The likely effect on competition is determined by assessing whether, at the date of the impugned conduct, it was likely, having regard to existing circumstances, that the conduct would effect a substantial lessening of competition in the market (Universal Music at [247]).
Ramsay submitted that the Court would not find that the conduct was likely to have the effect of substantially lessening competition. This was because the surgeons continued their plans for the day surgery very shortly after and seemingly unimpeded by the conversations. Having continued those plans, it became apparent to them that the day surgery as proposed would not be viable. Ramsay submitted that the ACCC’s suggestion in [117] of its opening submissions that it was likely that the day surgery proponents would have continued with their plans to build the day surgery, it would have been built and business at the day surgery would have commenced, was fanciful.
Moreover, in circumstances where the treating doctors largely dictate where a patient is treated, and the evidence is that such doctors’ motive was to earn more money, there is no a priori evidence of any likely material change to quality and price. Indeed, the opposite is likely, so submitted Ramsay, relying upon Mr Houston’s evidence. According to Mr Houston, the likely effects on market outcomes were all sufficiently small or non-existent such that they could not give rise to a substantial lessening of competition in any market. This is because:
(a) prevailing, nationally negotiated HPPA prices for operating theatre services at Baringa were already at the competitive level;
(b) there is no basis to suggest there was potential for hospitals to compete by reducing prices below the pre-existing level;
(c) there is no meaningful quality metric on which the new day surgery planned to offer improved service over that at Baringa;
(d) there is no basis to suggest that surgery wait times would have reduced;
(e) there is no basis to suggest the number of private surgeries performed in the Coffs Harbour region would have increased; and
(f) the addition of another facility would only have translated into greater choice for patients in very limited circumstances.
(c) Conclusions on exclusive dealing
The ACCC’s s 47 case fails for the simple reason that it has not established the pleaded contravening conduct which it claimed gave rise to a contravention of s 47. That is enough to dismiss this part of the ACCC’s case. But there are other reasons why that case would fail, including:
(a) As Ramsay pointed out, the alleged contravening conduct was incapable of constituting a supply or offer to supply on condition. This was because it was not alleged that Ramsay intended to revoke or withdraw a surgeon’s operating lists immediately. Rather the ACCC’s case was based on the proposition that this would only occur after the new day surgery opened, which would not occur for at least two or three years assuming that all the obstacles could be overcome. It is difficult to see how there could be a supply or offer to supply services to surgeons on condition that they not acquire services from a competing day surgery in circumstances where, at the time the alleged contravening conduct occurred, there were no competing services to acquire and there was no competitor.
(b) As to that part of the ACCC’s s 47 case relating to “purpose”, I repeat and adopt what is said above on that topic in response to the ACCC’s s 46 case.
(c) As to that part of the ACCC’s s 47 case relating to “likely effect”, I do not consider that the evidence establishes that the alleged contravening conduct was likely to have the effect of substantially lessening competition. Doctors Lim, Joshi and Sutherland continued to explore planning the new day surgery for many months after the relevant conversations occurred. Any suggestion that they did so because they were comforted by the ACCC’s interest and involvement in their complaints against Ramsay does not explain why they then decided in mid-2017 not to pursue the matter, even though the ACCC was well and truly engaged by that time.
Dr Sutherland said that plans for the new day surgery in Coffs Harbour resumed in around February or March 2016. He said that, from his perspective, this was mainly due to the meetings they had had with the ACCC, as well as the support for their position which they drew from a Federal Court decision which was published on 26 October 2015 concerning exclusive dealing at the Calvary Hospital in Wagga (see Australian Competition and Consumer Commission v Little Company of Mary Health Care Limited [2015] FCA 1144). Dr Sutherland said that in around late July 2017, he was asked to invest more money in the day surgery project but he had decided at that time to withdraw his support because of a change in his personal circumstances. Dr Sutherland said that Dr Lim told him that he had no hard feelings about Dr Sutherland’s withdrawal from the project and added that if Dr Sutherland was not involved he was “not sure it’s viable or something I would want to commit to”. I accept that evidence. It indicates that the ultimate decision not to proceed with the rival day surgery was not because of Ramsay’s conduct, but was rather because the proponents ultimately came to the view that it was not viable.
In these circumstances, I would not have concluded that the alleged contravening conduct was likely to have the effect of substantially lessening competition. This is the case whether viewed through the “without” counterfactual (i.e. asking whether, at the date of the alleged contravening conduct it was likely that the day surgery proponents would have continued with their plans to build a day surgery and that it would have been built and business there would have commenced had the alleged conduct not occurred) or through the alternative scenario in the “with” world, also assessed at the time of the alleged contravening conduct.
In referring to events which occurred post the impugned conduct, I have not overlooked the requirement to put aside hindsight knowledge, but rather have referred to those subsequent events as illustrating one potential outcome (see Universal Music at [247]).
PART H – CONCLUSIONS
For these reasons, the further amended originating application should be dismissed. Accordingly, there is no need to conduct a hearing on relief.
The parties should have an opportunity to provide written submissions on the issue of costs, having regard to these reasons for judgment. They should seek to reach an agreement on costs within 21 days hereof. If they are unable to reach agreement each should, within that time, file and serve an outline of submissions not exceeding 10 pages in length, and any supporting affidavits, regarding their individual position on costs.
The Court’s tentative preference is to determine the issue of costs on the papers. If, however, either party opposes that course, it should indicate its opposition in its outline of submissions and say briefly why it considers that the issue of costs requires a further oral hearing.
I certify that the preceding four hundred and forty-two (442) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.
Associate:
Dated: 12 March 2020
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