Appanna v Anglesea Hospital Limited
[2019] NZHC 474
•18 March 2019
ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PATIENTS OF DR APPANNA DISCUSSED IN THIS JUDGMENT.
ORDER PROHIBITING SEARCH OF THE FILE WITHOUT THE LEAVE OF A HIGH COURT JUDGE.
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-1794
[2019] NZHC 474
BETWEEN NALENDRA APPANNA
Plaintiff
AND
ANGLESEA HOSPITAL LIMITED
Defendant
AND
NEW ZEALAND PRIVATE SURGICAL HOSPITALS ASSOCIATION INC
Intervenor
Hearing: 30 April, 1, 2, 3, 4, 7, 8, 9, 10 May 2018 Appearances:
A H Waalkens QC & A L Sweeney for Plaintiff M J Fisher & K J Ng for Defendant
J P Coates & C E J Deans for Intervenor
Judgment:
18 March 2019
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 18 March 2019 at 4:00 pm Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
DLA Piper, Auckland Kemps Weir, Auckland
Claro Health Sector Lawyers
APPANNA v ANGLESEA HOSPITAL LTD [2019] NZHC 474 [18 March 2019]
Introduction
[1] The plaintiff, Dr Nalendra Appanna,1 is a registered health practitioner, vocationally registered with the Medical Council of New Zealand as an obstetrician and gynaecologist (O & G). Between 2007 and 2016 he was credentialed and approved by the defendant, Anglesea Hospital Ltd (Anglesea), to undertake surgical procedures upon his own patients at Anglesea’s hospital in Hamilton. Pursuant to the credentialing arrangement he regularly conducted surgical procedures at the hospital using the facilities provided by Anglesea and assisted by its theatre nursing staff.2
[2] On 29 March 2016, Anglesea, acting on a recommendation from its Clinical Risk Management Committee (the CRMC), and without having afforded Dr Appanna an opportunity to be heard, suspended his credentialing status, pending a review by its Credentialing Committee and an external clinical review.
[3] On 6 October 2016, Dr Appanna obtained an injunction from this Court which ordered Anglesea to immediately reinstate his credentialing status. Dr Appanna says that while Anglesea did reinstate his credentialing status, it imposed conditions requiring another surgeon to be present during any surgical procedures conducted by him, and furthermore failed to provide the appropriate nursing staff support necessary to enable him to conduct surgery.
[4] Dr Appanna claims that as a consequence of his suspension, the conditions imposed by Anglesea relating to his performance of surgical procedures, and Anglesea’s failure to provide appropriate nursing staff to assist him, he has suffered irreparable harm to his professional reputation, and significant financial losses.
[5] Dr Appanna alleges that Anglesea has acted in breach of the contract entered into between the parties relating to their respective credentialing obligations or alternatively breach of fiduciary duty, entitling him to declarations and damages. He initially also sought a judicial review of Anglesea’s decision to suspend his
1 Dr Appanna is commonly referred to as “Naylin” in the various pieces of correspondence between himself, Anglesea and third parties.
2 The word “credentialing” is frequently spelled “credentialling” in the documents and correspondence referred to in this judgment. For convenience, the spelling has been standardised throughout this judgment, including where it appears in any documents quoted from.
credentialing status, coupled with declaratory relief, however he has not pursued that cause of action.
[6] Anglesea says that in making its decision to suspend Dr Appanna’s credentialing status it acted at all times in good faith and upon reasonable grounds relating to and in the interests of patient safety, which was always its primary concern. It denies that a contract was formed or entered into between the parties regarding Dr Appanna’s credentialing status, and also denies the existence of a fiduciary relationship between them. Anglesea says that being credentialed merely made Dr Appanna eligible rather than entitled to access the resources and surgical support available at its hospital. It says that credentialing status only confers rights analogous to a conditional licence which do not commit Anglesea to providing any services, surgical staff or facilities.
Background
Dr Appanna and credentialing
[7] Dr Appanna obtained his MBChB medical degree from the University of Natal in South Africa in 1984. After emigrating to New Zealand, he obtained a Diploma in Obstetrics and Gynaecology from the University of Otago in 1988. In 1993 he became a member of the Royal Australian and New Zealand College of Obstetricians and Gynaecologists, and Fellow of that college in 1996. From mid-1996, Dr Appanna practised as a specialist obstetrician and gynaecologist, specialising in laparoscopic surgery performed in private hospitals and conducting clinics with patients in Hamilton, Tauranga, Te Aroha and Morrinsville.
[8] Anglesea owns and operates a private hospital in Hamilton. In order for a medical specialist to work and carry out surgical procedures at Anglesea it is necessary to become a credentialed specialist. Credentialing is a process of confirming the qualifications and competence of health professionals which is widely employed throughout the health system by District Health Boards, public hospitals and private hospitals.
[9] Dr Appanna first applied to Anglesea to be credentialed to operate at its hospital in October 2007. The application was made on a written form entitled “Credentialing at Anglesea Procedure Centre”, and included a section signed by Dr Appanna as applicant entitled, “Credentialing and Defining Scope of Practice Agreement.”3 This section required the applicant to confirm the accuracy of the information provided in support of the application, and to acknowledge that the application would be considered in accordance with Anglesea’s “Credentialing and Scope of Practice Guide”.
[10] The “Credentialing and Scope of Practice Guide”, referred to in the “Credentialing and Defining Scope of Practice Agreement”, was in fact a document entitled: “Credentialing – Surgeons and Anaesthetists”4 (the Credentialing Guide). In the Credentialing Guide Anglesea stated that it had adopted a credentialing programme consistent with that published by the Ministry of Health. This was a reference to a Ministry of Health document entitled, “The Credentialing Framework for New Zealand Health Professionals”.
[11] The Anglesea Credentialing Guide contains a description of the process and principles it applies to assessing and determining applications for credentialing. The guide provides for applications to be considered by a “Credentialing Committee” (the Credentialing Committee) appointed by the Anglesea board. The Credentialing Guide stipulates that a formal credentialing review would take place every five years. The Credentialing Guide relevantly includes the following:
Principles
1. The credentialing process is used to promote the provision of quality health care.
2. The focus of credentialing is on the competence of health practitioners to perform specific clinical responsibilities within a designated service environment.
3. Professional bodies, employers and individual health practitioners have essential roles in credentialing that are distinct and complementary.
3 Upon incorporation the defendant was named Anglesea Procedure Centre Limited. On 26 September 2012 it changed its name to become Anglesea Hospital Limited.
4 “Credentialing – Surgeons and Anaesthetists”. (Issued: August 2007. Reviewed: August 2015)
4. Credentialing is a regular, ongoing, responsive process that commences on appointment and continues for the period of employment.
5. Credentialing processes must be fair, transparent and robust.
6. Credentialing processes accommodate a variety of practice settings and practitioner working arrangements.
…
Credentialing Committee
Credentialing is carried out by the Credentialing Committee appointed by the Board. This committee meets as required for credentialing and is responsible for approving or declining applications, determining how long an applicant is credentialed for, and approving an applicant’s scope of practice.
As a policy the Board has decided that unless the applicant is vocationally registered with the MEDICAL council [sic] the committee would not credential him/her to work at AH.
…
Adverse events would be investigated by the Clinical Committee, referred to the appropriate specialist on the committee who would advise if he could deal with it or bring in an external specialist to assist. If necessary the case would be referred to the Medical Council.
Maintenance of Credentialed Status
As Practitioners are contracted to Anglesea Hospital, they will be credentialed for five years (unless extenuating circumstances are evident). Practitioners undergoing a credential review need to include verification of changes since the previous declaration at the end of each credentialing period.
Credentialed practitioners are required to maintain appropriate professional registration, an annual practicing certificate and professional indemnity insurance. Failure to do so may result in the practitioner’s credentialed status being suspended or terminated.
…
Credentialing review will occur:
- At a five yearly formal review by credentialing committee
- Interim reviews for ‘non-routine’ events i.e. introduction of a new treatment
Termination of Credentialed Status by Practitioner
A practitioner may terminate their credentials upon giving notice in writing to the CEO. Upon receipt of such notice, the CEO will advise the credentialing committee and the Clinical committee.
Termination on Notice
The credentialing committee may terminate a practitioner’s credentialed status at any time by giving the practitioner three months’ notice in writing.
Practitioner responsibilities
·The practitioner actively engages in all aspects of credentialing as a condition of his or her employment.
…
·The practitioner does not use his or her credentialed status to unfairly demand resources or [assert] competitive advantage over a fellow practitioner.
…
[12] Dr Appanna’s first application was approved by Anglesea’s Credentialing Committee. As a credentialed surgeon Dr Appanna was required to become a shareholder in Anglesea, and thereby become an “Approved Medical Practitioner” entitled to undertake medical procedures at Anglesea’s hospital. Pursuant to this requirement Dr Appanna and his wife jointly acquired 150,000 shares in Anglesea.
[13] Pursuant to the requirement for a credentialing review after five years, Dr Appanna made a second credentialing application in November 2013.5 This second application was once again made on the printed forms prepared by Anglesea. In his second application Dr Appanna described the range and type of procedures he was applying to perform as “General gynaecology/ Laparascopic procedures”. This second application was assessed by Anglesea’s credentialing committee, and on 6 January 2014, Dr Appanna was notified that he had met the requirements for recredentialing at Anglesea Hospital for a further period of five years.
[14] Dr Appanna’s work as a private surgeon comes predominantly by means of referrals to him from medical general practitioners, other health professionals, or directly from patient referrals resulting from advertising and word of mouth recommendations. He promoted himself as a private specialist gynaecologist performing surgery primarily at Anglesea’s hospital.
5 Credentialing and Defining Scope of Practice Agreement ( 22.11.2013).
[15] Surgery at Anglesea Hospital is usually arranged by a surgeon scheduling a day and time with the hospital on a regular or ad hoc basis. The surgeon supplies the hospital with a list of the patients and the surgical procedures to be performed on a specified date. The surgeon also arranges for an anaesthetist to attend. Anglesea employs and provides circulating nurses and scrub nurses to assist the surgeon during the surgical procedures.
Anglesea - Shareholders’ Agreement
[16] Anglesea was incorporated to provide and operate a surgical hospital facility. The Board is comprised of six directors including an independent Chairman. The other directors are medical practitioners. Pursuant to the Anglesea shareholders’ agreement not less than 75% of the shares in the company are required to be held by approved medical practitioners. Following credentialing Dr Appanna was declared by the Anglesea Board to be an “Approved Medical Practitioner” in terms of the shareholders’ agreement, and on 15 July 2008 he and his wife jointly became shareholders in Anglesea. Whilst being an approved medical practitioner and shareholder did not expressly confer any entitlement to use the Anglesea facilities, the shareholders’ agreement provides that a shareholder is deemed to give a transfer notice in respect of their shares should they cease to practise as an approved medical practitioner, or cease to utilise the Anglesea’s surgical facility for a continuous period of 12 months.6
[17]The shareholders’ agreement sets out the main objectives of Anglesea as being:
(a)to provide a surgical hospital facility;
(b)to manage the Facility in a professional, efficient, orderly, and fair manner for the benefit of all the Shareholders;
(c)to maximise Shareholders’ returns on funds invested; and
(d)to create a branded organisation with which the Shareholders will be proud to be associated.
6 A transfer notice is also deemed to have been given if a shareholders’ registration is revoked by the Health Practitioners Disciplinary Tribunal, or if the shareholders pass a special resolution that the conduct of that approved medical practitioner is likely to bring the company or the surgical hospital facility into disrepute.
[18]The shareholders’ agreement further provides:
Conduct of the Shareholders
The Shareholders will exercise their rights as Shareholders in accordance with, and so as to give effect to this Agreement, and will conduct their affairs and practices in a manner which is consistent with all of the main objectives of the Company.
Dr Appanna’s Southern Cross credentialing is suspended
[19] Until December 2015 Dr Appanna was also credentialed by Southern Cross Hospitals Ltd (Southern Cross) to conduct surgery at its Hamilton hospital. However, for reasons relating to concern that he had breached an undertaking that he not use diathermy for dissection close to the bowel, his credentialing was suspended by Southern Cross on 21 December 2015. At the time of his interim suspension by Southern Cross in December 2015 Dr Appanna discussed the matter with a director of Anglesea, Dr V P Singh, and also contacted Anglesea’s Chief Executive Officer, Ms Nicky van Praagh to arrange to transfer his Southern Cross surgery list to Anglesea Hospital. When making arrangements with Ms van Praagh to transfer his surgical lists to Anglesea, Dr Appanna explained that as he had been having relationship issues with the Southern Cross hospital manager, and because of those problems he would be performing all his surgical procedures at Anglesea from early 2016. Dr Appanna says that when he asked Ms van Praagh whether she had heard that he was having problems with Southern Cross and its manager, she commented in the affirmative. As a result of his communications with Dr VP Singh and Ms van Praagh, Dr Appanna thereafter proceeded on the basis that Anglesea and Ms van Praagh, were aware of the suspension of his credentialing status with Southern Cross.
[20] On 16 February 2016 Southern Cross advised Dr Appanna that it intended to review the interim suspension as there was a more general issue of concern around the amount of time and resources required to deal with issues relating to his practice. This review later resulted in a decision by the Southern Cross National Clinical Medical Committee on 11 August 2016 to terminate Dr Appanna’s credentialing status.7
7 Dr Appanna appealed his suspension to the Southern Cross Board Clinical Review Committee, which in a decision dated 26 July 2017, upheld the NCMC decision to terminate his credentialing.
[21] During the first three months of 2016, Dr Appanna performed 20 major surgical procedures at Anglesea, which was a significant increase over the number of operations he had performed in the same period of the previous year. During this period there were three instances of his patients being required to be readmitted for further surgery.8 On 22 March 2016, Dr Appanna conducted a surgical list at Anglesea hospital after which one of the theatre nurses submitted an Event Reporting Form stating Dr Appanna had performed a procedure on one of the patients that the nurse considered was not part of the patient consented procedure. The event report stated that the nurse had questioned Dr Appanna during the surgery, and afterwards reported the matter to her manager who thought the procedure was covered by the surgeon’s discretion.
The Clinical Risk Management Committee Meeting 23 March 2016
[22] Following her receipt of the Event Reporting Form, and having regard to the three recent cases where his patients had been readmitted for further surgery, Ms van Praagh decided to refer the cases and the Event Reporting Form patient consent issue to Anglesea’s Clinical Risk Management Committee (the CRMC) for its consideration. The CRMC9 was convened by Ms Van Praagh and met with her in her office on 23 March 2016. The committee comprised Dr John Torrance and Dr Lakshmi Ravikanti. Although not a member of the committee himself, Dr VP Singh was also invited to attend the meeting. Dr Ravikanti and Dr V P Singh each had direct knowledge of two of the three cases where the patients had been readmitted to Waikato Hospital. The three re-admission cases and the patient consent case referred to in the Event Reporting Form were discussed.10 Dr Ravikanti and Dr VP Singh provided a verbal summary of the cases that they had some direct knowledge of. Following discussion, the CRMC considered that the cases showed a pattern of practice which
8 On 14 March 2016 Dr Appanna advised Ms van Praagh that he had readmitted a patient to Waikato Hospital who he had recently performed surgery on at Anglesea.
9 The members of the CRMC which met on 23 March 2016 were: Dr John Torrance and Dr Lakshmi Ravikanti. Dr V P Singh was present as an invitee. Ms van Praagh was present at the meeting as CEO, (but not as a member of the CRMC).
10 The Minutes of the CRMC meeting prepared by Ms van Praagh where referring to the issue of patient consent state: “[Patient] not consented for salpingo-oophorectomy. Highlighted by theatre staff that no consent was obtained for this procedure. Surgeon said the ovarian cyst was more extensive than he thought leaving minimal ovarian tissue which was subsequently removed. CEO discussed this event with surgeon and was told by surgeon that ovarian tissue looked suspicious. [Patient] operation note refers to minimal tissue remaining so removed.”
raised significant patient safety concerns and resolved to refer them to Anglesea’s Credentialing Committee for review. It appears that no consideration was given to informing Dr Appanna that the meeting was taking place or that his cases had been referred to the Credentialing Committee.
The Credentialing Committee meeting 29 March 2016
[23] The Credentialing Committee met on the evening of 29 March 2016 to review the clinical concerns referred to them by the CRMC. Present at the meeting were Ms van Praagh as CEO and three committee members: Dr Zac Moaveni, Dr Martin Shuitemaker, and Dr John Torrance. Dr VP Singh and Dr Lakshmi Ravikanti also attended the meeting to provide expert advice regarding gynaecological matters.11 During the meeting Ms van Praagh informed the committee that Dr Appanna had a surgical list scheduled for 5 April 2016 which involved him performing major surgical procedures. Following its consideration of written material and information provided to it regarding a number of surgical operations conducted by Dr Appanna, the Credentialing Committee recommended that an impartial external review of Dr Appanna’s practice be obtained, and in view of patient safety concerns, that his operating privileges be suspended effective immediately, pending the outcome of the review. The Credentialing Committee noted, pursuant to the Memorandum of Understanding between Anglesea and the Medical Council, that the Medical Council was to be notified of the Committee’s decision. The Committee further noted that Ms van Praagh was to refer the matter to the Anglesea Board, obtain legal advice, and arrange the external review.
11 Dr VP Singh and Dr Ravikanti are both shareholders in Anglesea Gynaecology Limited, which provides gynaecological services in the Hamilton area.
Dr Appanna’s credentialing at Anglesea Hospital is suspended
[24] Ms van Praagh telephoned Dr Appanna on 30 March 2016 and asked him to meet with her urgently.12 He asked her why she wanted to see him, but she declined to give him any explanation. He then met with her at Anglesea Hospital at around 5.30pm that evening and Ms van Praagh handed him a letter signed by herself. The letter notified him that his operating privileges were suspended effective immediately. It read:
29th March 2016 Dear Mr Appanna
There have been a number of clinical concerns over your patient management that were referred to the Clinical Risk Management Committee (CRMC) which met on Wed 23rd March 2016.
The CRMC considered these to be of such a nature that there was potentially significant risk to patient safety. They therefore referred this matter to the Anglesea Hospital Credentialing Committee.
The concerns were briefly as follows
1)Internal audit suggests that from 20 major operations performed this year, there have been 3 major complications necessitating readmission and reoperation.
2)Significant concern has been raised over clinical decision making in two of these cases and Anglesea Hospital has been verbally asked to review these cases.
3)An event form was submitted raising concerns that the operation that you performed deviated significantly from the procedure on the consent form.
In light of these concerns the Credentialing Committee has decided that an impartial external review of these issues should be performed and that to protect patient safety your operating privileges are to be suspended, effective immediately, pending the outcome of this review.
Yours sincerely
12 There is a conflict in the evidence as to whether Ms van Praagh handed the letter to Dr Appanna at a meeting on the evening of 29 March or the whether they met on the following day 30 March at which time she handed the letter to him. Ms van Praagh says that she handed the letter dated 29 March to Dr Appanna when she met with him on 30 March 2016. Dr Appanna says he received the letter from Ms van Praagh at a meeting with her in the evening on 29 March. Nothing turns on the precise date, although I prefer the evidence of Ms van Praagh as being reliable as regards the date as the Credentialing Committee meeting is said to have taken place during the evening of 29 March 2016.
Nicky van Praagh
Chief Executive Officer Anglesea Hospital
[25] Dr Appanna understood that the letter referred to three of his cases where his patients were required to be re-admitted to hospital following surgery and requiring further surgery. He asked Ms van Praagh if he could meet with the Credentialing Committee urgently. She replied saying that a meeting was not possible. He enquired as to the names of those persons comprising the Credentialing Committee and was told that he was not entitled to that information. Ms van Praagh said that she was not prepared to provide Dr Appanna with any further information, and told him that Anglesea would be arranging for an impartial review of the issues to be undertaken, and that a specialist from Auckland was to be engaged for the purpose. In the course of their conversation, Ms van Praagh referred to Southern Cross having also suspended Dr Appanna’s credentialing, commenting that the issue with Southern Cross was not one involving patient safety, but more about Dr Appanna’s relationship with Ms Haycock and Mr Holmes of Southern Cross.
[26] On 30 March 2016 Ms van Praagh telephoned the Southern Cross Hospital manager, Ms Sam Haycock. Ms van Praagh asked Ms Haycock whether Dr Appanna was currently conducting operations at the Southern Cross hospital, and if he was not what the reason was. Ms Haycock declined to provide any information, and suggested that Ms van Praagh should approach the Medical Council directly if she had any concerns. The Credentialing Agreement signed by Dr Appanna dated 22 November 2013, included him giving an authority to Anglesea to make enquiries and obtain information from other sources when necessary for decisions relating to his credentialed status, as well as giving his consent authorising Anglesea to provide information concerning him to other organisations where that information was requested in the interests of patient safety. Ms Van Praagh said in evidence that she was not familiar with the credentialing document, and it did not occur to her to employ the authority to obtain the required information from Southern Cross which Dr Appanna had authorised Anglesea to obtain.13
13 The relevant paragraph of the Credentialing and defining Scope of Practice Agreement provides: “I authorise [Anglesea Hospital] to make enquiries and obtain information from other sources
[27] On 31 March 2016, Ms van Praagh emailed the Registrar of the Medical Council Mr David Dunbar asking whether the Council held a list of Anglesea’s credentialed doctors, and advising that the Credentialing Committee had recommended that an impartial external review be undertaken of a credentialed surgeon’s practice, and in the meantime the surgeon’s operating privileges were suspended. She concluded:
So this is a temporary suspension until the external review is completed.
[28] The following day Ms van Praagh spoke to Mr Dunbar by telephone and informed him that Dr Appanna was about to depart for a one-month overseas holiday. She explained that in any event, as Dr Appanna was not performing surgical operations at any other hospital, there would be no risk to patient safety. Ms van Praagh and Mr Dunbar agreed that in these circumstances Anglesea should hold off making a formal notification to the Council of its suspension of Dr Appanna’s credentialing.
[29] As I have noted, Dr Appanna had a surgical list scheduled for 5 April 2016 which in some cases involved major surgical procedures. In the course of his meeting with Ms van Praagh on 30 March 2016 he explained the situation and asked her whether he would be able to proceed with the surgeries to ensure the welfare of the patients concerned. Ms van Praagh responded saying that she would speak to the Credentialing Committee about it. Dr Appanna later sent Ms van Praagh a text message suggesting that he could arrange for another surgeon to attend to observe him during that list. Ms van Praagh responded advising that if any other credentialed surgeon was available he or she would need to take full responsibility for the patients and Dr Appanna would have to transfer care of his patients to that surgeon. Ms van Praagh concluded by advising that Dr Appanna’s 5 April 2016 list would need to be cancelled. Dr Appanna cancelled that surgical list.
[30] While overseas, Dr Appanna wrote to Ms van Praagh in a letter dated 10 April 2016, stating that he considered the suspension of his credentialing was unwarranted and unnecessary. In his letter he referred to each of the three cases considered by the
including persons and institutions referred to above when necessary for decisions on my credentialed status or scope of practice. I consent to these persons and institutions providing any such information required by [Anglesea Hospital].
Credentialing Committee and provided an account of the clinical presentations to him during the surgeries and explained his reasons for the steps he had taken during the procedures. He then wrote:
Operations generally
In 2015 I performed a total of 44 cases at Anglesea Hospital. 30 of these were Laparoscopic Majors, with 1 laparoscopic minor and 13 minor procedures. There was 1 moderate complication during this time. A patient required readmission for Urinary retention probably, secondary to a vault haematoma and a subrapubic catheter was inserted. She made a full recovery.
In total in 2015, I performed 101 surgical procedures, 76 being laparoscopic majors (Southern Cross 46, Anglesea 30), 2 other majors (laparotomies, Southern Cross), 1 Laparoscopic Minor and 22 Minor procedures. During this time there has been 1 major complication at Southern Cross, which I am happy to discuss, and the moderate complication mentioned above at Anglesea Hospital.
I am happy to cooperate with any review, as I too would like to know whether there is any way in which I could have decreased the chances of these complications occurring. With the cases in question, if each case were considered individually, it becomes apparent that they were complications that could have occurred with any surgeon and that it is just unfortunate that they occurred in such a short period of time.
Process
I am upset at the process that has been adopted by the Hospital. The suspension of my operating privileges is an outcome that has serious implications for me both professionally, financially and reputationally. It also has serious implications for my patients. Clearly, that decision had already been made at the time you met with me on 29th March, as the letter giving me notice was already written and handed to me.
In my view, the decision is premature and unfair in that the Credentialing Committee gave me no opportunity to respond, even briefly, to their concerns and to satisfy them that the imposition of this suspension was unnecessary. I would like this response, the further summaries I will provide later this week if possible, and the accompanying documents to be placed before the Committee without delay. I ask that the interim suspension be lifted immediately, and if the Credentialing Committee requires further information or clarification, that an appropriate review is conducted. I am happy to cooperate fully with any such review.
Given the importance of the credentialing to me, if the Credentialing Committee is not willing to lift the interim suspension, then I would like to meet with it as soon as possible after my return to New Zealand on 3 May 2016. As you may be aware, I am away from New Zealand from 8 April 2016 until 3 May 2016, but I will be contactable by email and any response to this letter or any request for further information, can be sent to my email address and I will endeavour to respond as soon as I can.
I look forward to hearing from you and will happily meet with you to discuss the matter.
Yours sincerely Naylin Appanna
[31] On 20 April 2016 Dr Appanna wrote to Ms van Praagh by email. In this letter he said that despite being away from New Zealand on holiday, he had managed to compile full documentation relating to the three cases, and had engaged Dr Tal Jacobson (who he said had given a presentation on endometriosis at the most recent Australasian Gynaecological Endoscopy and Surgery Society meeting), to assess the cases and give an informed and unbiased opinion. Dr Appanna attached a reporting letter from Dr Jacobson dated 19 April 2016.
[32] In his report Dr Jacobson set out his professional medical qualifications and said that since 2010 he had held the position of Clinical Lead for Gynaecology at Mater Hospital, Brisbane. He noted that he had known Dr Appanna for about 10 years having met him at various medical conferences, professional meetings and training courses. Dr Jacobson further noted that he had been provided by Dr Appanna with a summary of each case, relevant letters and operation notes of the three cases he had been asked to comment on, but had not yet had access to the full medical records. After reviewing each of the cases, Dr Jacobson concluded by saying:
Most importantly, in all cases the complications were recognised and managed appropriately. I do not think that these cases suggest a systemic problem with Dr Appanna’s practice.
[33] On 23 April 2016, Dr Appanna sent a further email to Ms van Praagh in which he advised that he had obtained another opinion from Professor Neil Johnson, who was a member of the Health and Disability Commissioner’s committee, and is an experienced and senior Obstetrician and Gynaecologist in private practice. He attached a copy of Professor Johnson’s report. Having reviewed each of the three cases Professor Johnson concluded:
Summary:
These three complications have occurred within a short time frame. However, there are no similarities between these complications to suggest a systematic departure from accepted practice as contributory. It is highly likely that these
three cases represent a coincidental accumulation of acceptable standard complications of surgery, all being dealt with appropriately (albeit that I am not in a position to comment on the appropriateness of the decision to conduct laparoptomy for case 1, as the medical notes from this admission are not available to me). For cases 1 and 3, I am unable to find any departure from the accepted standards of gynaecological practice; for case 2 it is debatable whether the absence of sheath/fascial closure at the umbilicus represents a mild departure from standard care or not, but this has already been acknowledged. Other than the proposal already made in relation to suturing of laparoscopic port sites through which endoscopic retrieval of tissue has been undertaken, I would not see the need for further remediation to practice as being necessary.
[34] Commencing in early April 2016, Ms van Praagh approached several New Zealand O & G surgeons requesting them to carry out an independent review of Dr Appanna’s patient cases. For a variety of reasons, those surgeons were either unwilling or unable to accept engagement to conduct a review. On 21 April 2016 Ms van Praagh spoke to Mr Dunbar at the Medical Council and explained that she was having difficulty finding someone suitable to undertake an independent review. She said that she had been advised by one of the surgeons and by the RANZCOG,14 that Anglesea should request the Medical Council to undertake a review of Dr Appanna’s practice. Mr Dunbar suggested that Anglesea should formally notify the Medical Council of Dr Appanna’s suspension, and the Council would take matters from there. Accordingly, on 26 April 2016 Ms van Praagh formally notified the Medical Council of Dr Appanna’s suspension. She wrote:
Dear David [Dunbar]
I am writing to inform you under the NZPSHA MOU we have with the NZMC that we have suspended Mr Naylin Appanna’s operating privileges until further notice on the following grounds
1. Our internal audit has suggested a disproportionately high rate of major complications in Mr Appanna’s surgery. On review there were 3 cases that required readmission and reoperation with significant morbidity out of a total of 20 major cases performed this year (15%).
2. The head of Obstetrics & Gynaecology at Waikato Hospital verbally raised serious concerns about the clinical management of the two cases that were admitted to Waikato Hospital and asked that these be reviewed. A review of these cases suggests significant deficiencies in care.
3. An event form was submitted documenting an incident where the operation deviated significantly from the consent obtained pre- operatively from the patient.
14 The Royal Australian and New Zealand College of Obstetricians and Gynaecologists.
Our clinical risk management committee considered these to be of such a nature that there was potentially significant risk to patient safety.
Mr Appanna has operated at Anglesea Hospital for 8 years doing mostly minor cases with his more major cases being done at Southern Cross Hospital. He failed to inform us that he had been stood down from Southern Cross Hospital [in] late 2015 (which is a breach of our credentialing policy) and so therefore has only been operating at Anglesea Hospital and hence bringing all his major cases here since.
Regards
Nicky van Praagh
Chief Executive Officer Anglesea Hospital.
[35] Mr Dunbar, acknowledged receiving the notification and advised that in order to take the matter forward the Council needed to be able to put the basis of Anglesea’s concerns to Dr Appanna to respond. He requested that Ms van Praagh provide further details of the cases, and advised that upon receipt of that information he would refer the matter to the Council’s Team Manager - Professional Standards.
[36] Dr Appanna cut short his overseas holiday, in order to return to New Zealand and arrange a meeting with Ms van Praagh. He met with her on 28 April 2016. She told him that Anglesea had advised the Medical Council of his suspension, but had not yet commenced the independent review as they had decided to wait until the Medical Council had considered the matters they had raised. Dr Appanna once again requested an opportunity to meet with the Credentialing Committee, which was again declined. Following the meeting Dr Appanna contacted the Medical Council and was told that although it had received notification of his suspension, it had not yet received any further detailed information from Anglesea.
[37] On 3 May 2016, Dr Appanna sent Ms van Praagh a text message advising that he wanted to organise a surgical list for 20 May, and that he had arranged for Professor Johnson to be present to observe and assist him. Ms van Praagh responded saying that Anglesea needed to go through the process already underway, and was doing it as quickly as possible.
[38] On 4 May 2016 Dr Appanna’s solicitors DLA Piper, wrote to Ms van Praagh. In their letter they referred to the reports obtained from Dr Jacobson and Professor Johnson and requested that Dr Appanna’s interim suspension be lifted immediately, or alternatively that a meeting be arranged as a matter of extreme urgency. Ms van Praagh responded by letter of 6 May 2016 in which she advised that Anglesea was proceeding under the guidance of the Medical Council and having provided the Council with requested information regarding Dr Appanna, was waiting for the Council to progress the matter. She wrote:
In the meantime, we are not able to accede to Dr Appanna’s request to carry out surgery with us under the supervision of a surgeon who is not credentialed with us.
This matter is of great importance to us and we do appreciate the importance of this matter to Dr Appanna.
We will do all we can to bring it to a conclusion at the earliest date.
[39] On 6 May 2016 Ms van Praagh sent the Medical Council clinical documentation relating to Dr Appanna’s three patients and their treatment, together with notes relating to the issues discussed by the CRMC, and documents described as identifying a high rate of complications relating to Dr Appanna’s patients.15 The Medical Council acknowledged receipt of this material by email dated 10 May 2016, and advised that its process would commence with the Council sending the documentation received from Anglesea to Dr Appanna for his comments. Upon receipt of Dr Appanna’s comments they would be reviewed by the Council’s Complaints Triage Team, who would decide how best to proceed,16 and the range of possible outcomes of this process would include: a review of the doctor’s competence to practise his profession; referral of the matter to a professional conduct committee for investigation; a Council ordered recertification programme being required to be undertaken and completed; an educational letter to the doctor; or a decision that no further steps be taken in relation to the subject matter of the investigation.
15 Anglesea’s internal audit and review determined there to be 3 cases that required readmission and reoperation out of a total of 20 major cases performed by Dr Appanna in 2016.
16 The Complaints Triage Team comprised the Council’s Chairperson; Deputy Chair; CEO; Registrar; Deputy Registrar; General Manager; Senior Policy Analyst; and Medical Advisers.
[40] In a further email to Ms van Praagh on 10 May 2016, the Council advised that Anglesea’s concerns and any response received from Dr Appanna, would be considered by the full Council at its meeting on 14 and 15 June 2018, and the time frame thereafter would depend on the decision made by the Council. It advised that should the Council order a performance assessment of Dr Appanna that process could take four to six months, while if an educational letter was to be sent to him it could happen within two weeks of the Council meeting.
[41] Also, on 10 May 2016, Dr Appanna’s solicitors wrote to Anglesea and Ms van Praagh. In this letter they complained that six weeks had already elapsed since Dr Appanna had been suspended without prior notice on 29 March 2016 while an “impartial external review” of the issues was carried out, during which Dr Appanna had been unable to perform surgery upon his patients. They noted that Anglesea had justified the suspension on the basis of an internal audit that had uncovered three cases involving “major complications”, although the audit had taken place without any consultation with Dr Appanna. They further noted that since his suspension and despite his repeated requests for information, Dr Appanna had not been provided with any detail or information regarding the timing of the planned external review, the composition of the review panel, or the terms of reference of the review. As this letter sets out a summary of the situation from Dr Appanna’s perspective I shall set it out in full. It reads:
Dear Nicky NAYLIN APPANNA
Thank you for your letter of 6 May 2016.
In view of the consequences to Naylin arising from the unilateral suspension without prior notice, of his credentialing with your hospital it is important that we place on record the following matters:
1.On 29 March 2016 you met with Naylin and at the same time, confirmed to him, without warning, that the credentialing committee ‘had decided that an impartial external review’ would be undertaken. This was deemed necessary as a result of an internal audit that had uncovered three “major complications”’. Again we point out that that audit did not include any consultation with Naylin. The letter he received recorded that you had been ‘verbally asked to review these cases’ by someone who was not named. The letter also advised that Naylin’s operating privileges were suspended ‘effective immediately’ pending the outcome of the review.
2.Since that date, no detail or information regarding the timing of the review, the composition of any review panel, or the terms of reference of any review have been provided to Naylin, albeit that six weeks have now passed.
3.Naylin has agreed to cooperate fully with any independent impartial external review you wish to put in place. He is still awaiting details from you of this.
4.Naylin has responded of his own volition with two independent reports dealing with the complications that you have raised as problematic. These independent reviews have confirmed that the cases do not suggest a systematic problem with Naylin’s practice.
5.Naylin has proactively requested permission to have a highly qualified independent person, Professor Neil Johnson to observe him in theatre on 20 May 2016. This was a further attempt by Naylin to address the concerns that you have raised. In your recent letter to the writer, you have refused to allow this on the basis that Professor Johnson is not credentialed with you. We would have thought that to have him observe only would not offend any of your internal protocols and also be an effective way of addressing the committees concerns.
6.You have now informed the medical council of the three matters of concern. We have spoken to the medical council on Naylin’s behalf and they have advised that they will respond to this but are currently seeking further information from the hospital before they even decide on what steps are appropriate.
7.Currently Naylin is placed in limbo without operating privileges. The only information you have from independent sources confirms that there are no systemic issues with Naylin’s practice.
You will appreciate that Medical Council processes take some considerable time to progress through the system even to a point of a decision being made as to what process will be undertaken if any. Naylin has separately committed to the medical council that he will do whatever is necessary to cooperate with any investigation they wish to undertake.
The medical council has not imposed any restrictions on Naylin’s practice. It is not appropriate for your hospital to rely on the mere fact that the issues of concern have been raised and notified to the medical council as a basis for the continued imposition of a suspension which has a devastating effect on Naylin’s professional standing, and financial stability. This is in addition to the emotional toll such a draconian step obviously imposes on any individual in Naylin’s position.
We asked you for a meeting if the suspension was not lifted. You have not responded to this. Do we take this as being a refusal?
We seek by return a copy of any complaints made regarding Naylin’s practice of medicine. This will include the ‘significant concerns’ raised regarding his clinical decision making. We also require from your disclosure all correspondence to the medical council. If necessary, we can seek to have that from them but we presume that you have no objection to this process being
transparent and providing all relevant information to Naylin so that he is in the best position to respond to your concerns.
Finally, we ask again that the suspension of Naylin’s credential be removed immediately. Naylin remains prepared to have his operations on 20 May supervised by Professor Johnson. However, his availability would need to be confirmed without further delay.
We look forward to hearing from you by return. Yours sincerely
Sean O’Sullivan Partner
[42] Ms van Praagh responded the following day. She advised that Anglesea was not prepared to accommodate Dr Appanna’s request that he be permitted to resume surgery at Anglesea Hospital under the supervision of another doctor. She explained that pursuant to a memorandum of understanding between Anglesea and the Medical Council, the hospital was required to notify the Council of its concerns regarding Dr Appanna, and the Medical Council was now charged with the responsibility of reviewing the matter and making a decision as to how best to proceed.
[43] On 11 May 2016 the Medical Council wrote to Dr Appanna and provided copies of the documents received from Anglesea, and requested his comments on the matters raised by Ms van Praagh in her letter to the Council of 26 April 2016. On 23 May 2016, Dr Appanna wrote to the Medical Council setting out his detailed comments regarding the three cases of his patients requiring re-admission that had been identified by Anglesea as giving rise to their concerns, and attaching a number of supporting documents as appendices. In his letter he also commented on the case of another patient who had been referred to in an email sent by Ms van Praagh to the Council, but in respect of whom no specific complaint had been made, and no details had been provided raising any concern of inappropriate care or treatment. Dr Appanna also summarised the steps he had taken, including obtaining the opinions of two independent and respected O & G clinicians who had reviewed the three cases, and provided reports, both concluding that in their view there was no evidence of any systemic issues regarding his performance of surgical procedures or his standards of practice. Dr Appanna also addressed the issue of his relationship with Southern Cross Hamilton, explaining that he had had difficulties with the Southern Cross
management, especially its CEO, and he noted that Southern Cross had described its concerns as being due to his behaviour which it regarded as inconsistent with accepted professional practice and its expectations, but which did not directly raise concerns about patient safety.
[44] On 22 June 2016, Dr Appanna was advised by a member of the Medical Council staff that after reviewing the material provided, the Council had decided that there were no reasons to impose any restrictions on his practice. He was told a letter was being prepared to advise him and Anglesea of the decision. By separate letters dated 23 June 2016, the Medical Council advised both Dr Appanna and Anglesea of the outcome of its meeting held on 14 and 15 June at which it had considered the concerns regarding Dr Appanna’s practice, and his response. The Council advised that it had resolved to defer consideration of Dr Appanna’s case until its next meeting or until it had received further detailed information from Southern Cross Hospital regarding the outcome of its investigation, and why it had withdrawn Dr Appanna’s rights to conduct operations at its hospital.
[45] Following receipt of the letter from the Medical Council, Ms van Praagh advised Dr Appanna that as the Council had deferred its decision pending receipt of further information from Southern Cross Hospital, Anglesea’s suspension of his credentialing at Anglesea Hospital would continue, and Anglesea’s Credentialing Committee would reconvene after the Council had notified its decision following its next meeting. Dr Appanna challenged this decision. His solicitors wrote to Anglesea contending that as the Medical Council had already considered all the material provided by it and had found there to be no basis for imposing any interim restrictions on Dr Appanna’s practice, consequently there could be no basis upon which Anglesea could continue the interim suspension of his credentialing status. Dr Appanna also forwarded to the Medical Council a copy of Ms van Praagh’s email advising him that his suspension would continue. The Deputy Registrar of the Medical Council then wrote directly to Ms van Praagh on 24 June saying:
To further clarify Council’s position, Council considered all of the information provided by Anglesea Hospital (attached) and Dr Appanna’s submissions at its meeting on 14 and 15 June 2016. Council did not consider that the information raised any concerns about public health and safety. Council decided there were no grounds at present to limit or restrict Dr Appanna’s
practice. Council further resolved to request the outcome of the Southern Cross Hospital’s investigation prior to making a final decision about Dr Appanna’s case.
We acknowledge of course that Council has no role in Anglesea’s business decisions but do wish to make it clear that Council has no reasons for concern about the safety of Dr Appanna’s practice at present.
[46] In light of the Medical Council’s clarification of its view on the matters referred to it by Anglesea, Dr Appanna’s solicitors followed up their request for the Credentialing Committee to be urgently convened in order to reinstate Dr Appanna’s credentialing. Ms van Praagh responded advising that the Committee was unable to convene until early the following week. In further correspondence between Dr Appanna’s solicitors and Ms van Praagh, his solicitors advised that he had a surgery list scheduled for 28 June and they requested that the Committee meet urgently so as to enable him to proceed with the surgical procedures planned for his patients. They explained that there were three patients on the surgery list, two of whom had previously had their surgeries postponed and had arranged time off work for their surgery and post-surgical recovery, in one case for a period of six weeks. The solicitors also explained that the third patient was to undergo an urgent hysteroscopy as malignancy was suspected. The solicitors wrote:
We would have thought that in view of the history of this matter, the fact that the Committee has already debated it already and the clarity of the position taken by the Medical Council that an urgent meeting or telephone conference can be arranged to ensure [Dr Appanna’s] patients are not denied their treatment yet again.
[47] When they did not receive a prompt response, Dr Appanna’s solicitors wrote again to Ms van Praagh on Monday 27 June 2016. They wrote:
Hi Nicky,
You are aware that Mr Appanna has a theatre list scheduled for tomorrow morning and that his patients presume that this list is going ahead.
Mr Appanna booked this list on the basis of both you and Mr VP Singh assuring him that if the medical council gave him the go ahead, then he would be allowed to commence operating.
In your email to Mr Appanna you did point out the procedures but also indicated that the list would possibly go ahead.
Following a phone call from Sidonie from the Medical Council, where we understand she completely explained to you that all your concerns had been
looked at and Mr Appanna was not going to have any restrictions on his practice you started to make arrangements for this list to go ahead. Presumably this decision was made in conjunction with the Credentialing committee.
You contacted Mr Appanna and asked him to forward the list to you which he did.
You contacted the anaesthetist and told him that the medical council had called you re: no restrictions on Mr Appanna’s practice.
You then received the email from the medical council and interpreted this differently from what had been intended. We pointed this out to you and also had the Deputy Registrar of the Medical council clarify the decision for you.
We asked that you confirm that the suspension had been lifted by Midday today and have not heard back from you.
We have always felt that there was no need for the suspension to continue once the medical council clarified the email and have advised Mr Appanna not to cancel his list as there was no reason for the continued suspension of his privileges.
We hope to hear back from you confirming this within the next few hours.
I am away from the office for an hour but contactable on my cell phone [number provided].
Regards Sean
Sean O’Sullivan Partner
[48] A special meeting of the Credentialing Committee was held on the afternoon of 27 June 2016. Dr VP Singh and Dr L Ravikanti were in attendance to provide expert advice. The Committee decided that the suspension was to continue until a final decision had been made by the Medical Council. In a letter to Dr Appanna’s solicitors of 27 June, Anglesea advised them of the Credentialing Committee’s decision that the suspension would remain in place. In this letter, Ms van Praagh said that she had previously requested copies of relevant documentation relating to the reasons for Dr Appanna’s credentialing suspension by Southern Cross Hospital, and she advised that Dr Appanna’s Anglesea suspension would be reviewed when the Medical Council had made a final decision following its receipt of information from Southern Cross Hospital.
[49] Dr Appanna’s surgery list planned for 28 June 2016 was cancelled. The patient requiring urgent surgery was referred elsewhere and the other patients transferred to other surgeons.
[50] On 1 July 2016 Dr Appanna’s solicitors wrote again to Anglesea. In a detailed lengthy letter, they reviewed the events following Dr Appanna’s suspension on 29 March and set out the basis upon which they alleged that the procedure and steps taken by Anglesea had been totally unfair and unlawful as to the imposition and continuation of the suspension of his credentialing status. They again requested that the Credentialing Committee remove the suspension, advising that legal proceedings would be issued by Dr Appanna if his suspension was not lifted. Anglesea’s solicitors responded by letter of 5 July 2016. They advised that Anglesea had requested urgent advice from the Medical Council as to when a final decision would be made regarding Dr Appanna’s case and had been advised by the Medical Council that it was awaiting the outcome of the Southern Cross investigation, or at least further detailed information as to its concerns and the evidence for those concerns, before the Council proceeded to make a final decision. The Council noted that the timeframe for that process was in the hands of Southern Cross. Anglesea’s solicitors said that while the Medical Council’s investigation was ongoing, it was simply not in a position to make a final decision as to Dr Appanna’s credentialing, nor could it withdraw the suspension. Ms van Praagh wrote to the Medical Council on 5 July 2016 seeking urgent advice as to the timing and steps proposed by the Medical Council to achieve resolution of the matter before it. She said:
Our primary and overriding concern is that Dr Appanna is confirmed to be performing work to the required standards of competence, that he is fit to practice from a health perspective and that his conduct and his professional capacity is appropriate.
You list all three of these as concerns that have been raised and confirm that the Council cannot progress the investigation of those issues until it receives further information. Your email implies that the timeframe and process for continuing and completing this investigation is in the hands of Southern Cross. While the investigation is ongoing we can have no confidence that patient safety may not be at issue.
With respect, we suggest this matter requires urgent attention and the process for resolution and timeframe needs to be determined by the Medical Council.
Please advise urgently timing and steps proposed by the Medical Council to achieve resolution.
[51] The Deputy Registrar of the Medical Council responded to Ms van Praagh by email dated 7 July 2016. She wrote:
As you know, the information in our possession about Dr Appanna was considered by the full Council at its meeting in June. Council was very clear that it did not, at that time, have sufficient information before it to make any decision regarding Dr Appanna following Southern Cross withdrawing his operating rights.
In my email to you of 4 July I said that the concerns may “on the face of it relate to whether he is performing his work to the required standards of competence, or whether he is fit to practice from a health perspective or whether his conduct in his professional capacity is appropriate.” I did not mention this meaning that those concerns have actually been raised, rather to indicate Council’s processes that might apply in Dr Appanna’s case.
I do not wish to be seen as splitting hairs but I am concerned that you say “all three concerns have been raised”. That is not correct; in terms of fair process it is important that you understand that Council has not made any decision as to Dr Appanna’s performance, conduct or health simply because it has insufficient information to do so at the present time.
Even if, when it has more information as to the exact nature of Southern Cross’s concerns, Council ordered for example that Dr Appanna should have his performance reviewed or be referred to a professional conduct committee, these processes take several months to complete. In terms of Council’s processes, Council only stops or limits a doctor’s practice while such processes are underway if such steps are necessary in Council’s view, to protect the health and safety of the public.
As already advised, the Council has no information that would lead it to believe Dr Appanna poses a risk of harm to the public such that immediate action to protect the public needs to be taken. In the meantime you may prefer to rely on Anglesea’s own credentialing processes to assess whether Dr Appanna is able to work safely and appropriately.
Dr Appanna applies for an interim injunction, while the Credentialing Committee waits for the Medical Council decision
[52] On 2 August 2016 Dr Appanna commenced this proceeding and applied for an interim mandatory injunction directing Anglesea to reinstate his credentialing status. The Anglesea Board met on 9 August 2016, and Ms van Praagh provided an update on the injunction proceedings. The Board minutes record that the Credentialing Committee were waiting for the Medical Council decision regarding Dr Appanna to be released following the Council meeting held on 9 and 10 August. The minutes
record that the Credentialing Committee would then meet with Dr Appanna to review his credentialing status.17
[53] However before receiving advice from the Medical Council of its decision, on 12 August 2016,18 Anglesea, through its solicitors, advised Dr Appanna and his solicitors that upon receipt, the Medical Council’s decision would be referred to the Credentialing Committee for a review of the matters identified in Anglesea’s suspension letter of 29 March 2016. The letter advised that in addition to those matters, the review would also address the matters which were the subject of the Medical Council’s decision, and any other matters relevant to Dr Appanna’s credentialing review. In the letter Anglesea’s solicitors advised that the members of the Review Committee would comprise at least two of the three permanent members of the Credentialing Committee and would be joined by Dr John Tait as an independent gynaecologist. In this letter Anglesea’s solicitors also set out the proposed procedure for the review detailing a timetable for the exchange of documents and evidence to be relied on, and requested Dr Appanna’s solicitors to advise them of dates in September or October that would be suitable for him to attend a review hearing. Anglesea’s solicitors suggested that Dr Appanna’s interlocutory application for an injunction be adjourned until after the Credentialing Committee had met and made its decision.
[54] Dr Appanna’s solicitors responded by letter of 15 August 2016. In their letter they said that Anglesea had not needed to wait for the Medical Council decision before undertaking the review referred to in the 29 March 2016 letter notifying Dr Appanna of his suspension. They noted that over the course of the previous four months, they had made numerous requests of Anglesea to undertake the review, and despite their requests, it had failed to progress the matter. They took issue with the intended expansion of the scope of the review beyond the matters referred to in the 29 March 2016 letter, saying that any review must be limited to the matters previously identified as being those upon which Anglesea based the decision to suspend Dr Appanna’s credentialing. They reiterated Dr Appanna’s position, that there was in fact no basis for the suspension. They wrote:
17 Anglesea Directors Meeting Minutes 9 August 2016.
18 The Medical Council advised Anglesea and Dr Appanna of the outcome of its meeting held on 9 and 10 August 2016, in correspondence dated 19 August 2016.
These proceedings will be progressed, and urgency sought seeking interim relief unless Dr Appanna’s credentialing status is reinstated immediately.
… Anglesea have now delayed taking any action for over four months and maintained Dr Appanna’s suspension, even after it was provided with credible, independent and authoritative reports confirming that there was no departure from accepted standards.
Southern Cross Hospital Hamilton – termination of Dr Appanna’s credentialing status
[55] During early August 2016, the issue of Dr Appanna’s credentialing status at Southern Cross was also being addressed. On 1 August 2016 Dr Appanna met with the National Clinical Medical Committee (NCMC) of Southern Cross Hospitals to address the issues that had arisen leading to the interim suspension of his credentialing status at Southern Cross on 21 December 2015. The immediate concern of the NCMC regarding Dr Appanna was described as being the level of time and resources required to deal with issues related to his practice at the Southern Cross Hospital Hamilton.
[56] On 11 August 2016 the NCMC met to decide whether the interim suspension of his credentialing status should be lifted. By letter dated 15 August 2016, the Chairman of the NCMC advised Dr Appanna that it was with genuine disappointment that the committee had concluded that they did not have confidence that the burden of resource and time would change if the interim suspension was lifted, and on that basis had decided that Dr Appanna’s credentialing status at Southern Cross was terminated with immediate effect. The letter further advised that under the memorandum of understanding between Southern Cross and the Medical Council, the termination decision would be notified to the Medical Council.
[57] On 18 August 2016, Anglesea’s solicitors wrote to and engaged Dr Simon Edmonds to act as an independent expert to give an opinion on Dr Appanna’s management of the three cases that had been the subject of consideration by the Credentialing Committee. In their letter to Dr Edmonds, Anglesea’s solicitors referred to having approached him a few days previously regarding his availability.
The Medical Council decision
[58] As I have noted, the Medical Council met on 9 and 10 August to consider Dr Appanna’s case. By letter dated 19 August 2016, the Medical Council advised Dr Appanna and Ms van Praagh, of its decision. The Council wrote:
Council’s decision and reasons
Having considered all of the information before it, including Dr Appanna’s responses, Council resolved to take no further action at this time regarding the concerns raised by Anglesea and Southern Cross Hospitals.
The reasons for Council’s decision are that:
·Council has no information before it that raises concerns about Dr Appanna’s practise of medicine, therefore Council has no grounds to consider taking any action.
·The audit information submitted by Dr Appanna further reassures Council as to his competence to practise.
·Neither Anglesea Hospital nor Southern Cross Hospital has provided any information to Council that raises concerns about Dr Appanna’s competence to practise medicine, or his professional conduct.
[59] Following receipt of that advice from the Medical Council, Dr Appanna’s solicitors wrote to Anglesea’s solicitors by email on 19 August 2016 requesting that in light of the Medical Council’s decision Dr Appanna’s suspension be immediately lifted, and requesting advice as to what steps were being taken now that both the Anglesea and Southern Cross issues had been dealt with by the Medical Council. Anglesea’s solicitors responded by letter advising that their client proposed to convene the Credentialing Committee to review Dr Appanna’s credentialing status, and in particular to review the matters identified in its letter of 29 March 2016, the matters which were the subject of the Medical Council’s consideration, and any other relevant matters. Anglesea’s solicitors advised that in the meantime the suspension would not be lifted.
[60] Dr Appanna’s solicitors and Anglesea’s solicitors thereafter engaged in correspondence regarding the proposed review, in which his solicitors maintained that there was no basis for the continuation of the suspension. In their correspondence Anglesea’s solicitors set out a list of the matters additional to those identified in the 29 March 2016 suspension letter, that Anglesea intended to put before the Credentialing
Committee for consideration in relation to Dr Appanna’s credentialing status. There were six additional matters which included allegations that: Dr Appanna had failed to disclose the suspension of his credentialing status with Southern Cross Hospital in December 2015; Dr Appanna had implied that Dr Singh and Dr Ravikanti were actuated by the prospect of personal financial gain in expressing their views about his patient management; the Anglesea CEO’s view that Dr Appanna did not enjoy the confidence of theatre staff at Anglesea in relation to his professional competence and suitability to operate at the hospital; and whether Dr Appanna had performed and behaved in a manner consistent with accepted professional standards in relation to the conduct of his practice at Southern Cross Hospital Hamilton.
[61] In this exchange of correspondence Dr Appanna’s solicitors also took issue with the composition of the Credentialing Committee for the purpose of the review. Issue was taken with the involvement of: Dr Torrance, on the grounds that he been a member of the CRMC that had referred Dr Appanna’s credentialing to the Credentialing Committee; Dr Ravikanti, on the grounds that he had provided expert opinion advice to both the CRMC and the Credentialing Committee; Dr VP Singh on the grounds that he had attended both the CRMC and Credentialing Committee meetings that resolved to suspend Dr Appanna’s credentialing status; and Ms van Praagh, on the grounds that she had been directly involved in the events.
The interim injunction ordering Dr Appanna’s credentialing be reinstated
[62] Following a hearing on 3 October, on 6 October 2016 Woodhouse J made an order that:19
The defendant shall immediately reinstate the plaintiff’s credentialing status and operating privileges at Anglesea Hospital, Knox Street, Hamilton pending further order of this Court.
[63] On 6 October Dr Appanna telephoned Ms Van Praagh requesting to arrange theatre surgery lists for his patients. He advised her that he had a large number of patients awaiting surgery. Ms van Praagh scheduled lists for him on 21 and 26 October 2016.
19 Appanna v Anglesea Hospital Ltd [2016] NZHC 2378 at [1] [Results Judgment]; Appanna v Anglesea Hospital [2016] NZHC 3172 [Reasons Judgment].
[64] On 10 October 2016 Dr Appanna wrote to Ms van Praagh and the Anglesea Surgical Theatre Manager, explaining that he wished to arrange a meeting with them to re-establish a constructive relationship, and hear any suggestions they may have as to what he could do to achieve that. In his letter he set out proposals and suggestions as to how his surgery lists could be organised so far as the involvement of nursing staff was concerned. He also sent a surgery list detailing patients and procedures that he had provisionally listed for surgical procedures on several dates in November, and December 2016 involving a total of 10 patients.
[65] During this period following the interim injunction order on 6 October, issues arose at Anglesea with a number of nurses being unwilling to work in theatre with Dr Appanna because of concerns they held regarding aspects of his surgery. Confronted with this situation and the need to comply with the interim injunction order, Ms van Praagh arranged to hire theatre nurses from agencies. Ms van Praagh held discussions with some of the senior nursing staff and as a result became concerned about the working environment of these nurses when involved in assisting Dr Appanna’s surgery. Ms van Praagh arranged for the nursing staff to be interviewed independently by Anglesea’s solicitors to enable them to express their concerns.
[66] On 20 October 2016, Dr Appanna accompanied by his wife, met with Ms van Praagh, the Anglesea Hospital Theatre Manager and the Ward Manager. During the meeting Ms van Praagh suggested that Dr Appanna should have another O & G surgeon assisting him when he undertook major surgical procedures. While noting the terms of the Court order, she explained that as CEO it was her own opinion that such a requirement was appropriate. Ms van Praagh further explained that Anglesea was experiencing a major human resource issue as regards theatre nursing staff which they were working through. She said that theatre nursing staff did not want to work with Dr Appanna in theatre, and that having regard to the Court order, the situation was complicated for Anglesea. She also noted that some of the nursing staff who had previously worked with Dr Appanna had since left Anglesea. Dr Appanna through his solicitors contended that Anglesea was required to provide a scrub nurse and a theatre assistant to assist him during his surgery lists.
[67] Dr Appanna conducted surgical lists on 31 October and 1 November 2016, assisted by Anglesea nursing staff.
[68] By letter of 7 November 2016 Anglesea’s solicitors advised Dr Appanna’s solicitors that Anglesea was unable to provide a scrub nurse to assist Dr Appanna when he was performing major surgery. Anglesea’s solicitors advised that with one exception, none of the available nurses employed at Anglesea Hospital were willing to work in theatre with Dr Appanna when he was performing major surgery.
First credentialing review
[69] By letter dated 7 November 2016 Anglesea’s solicitors wrote to Dr Appanna’s solicitors setting out a proposed credentialing review process and advising that the Credentialing Review Committee would be Dr John Tait and Mr Neville Strick, the latter being an orthopaedic surgeon with knowledge and experience of Anglesea Hospital. The letter advised that the review Committee intended to convene a formal hearing on Wednesday 7 December 2016 at which Dr Appanna was entitled to be present in person. The letter also proposed a timetable pursuant to which Anglesea would supply members of the Credentialing Review Committee and Dr Appanna with the information it considered relevant to the credentialing review, including the written opinions of any expert medical practitioner. The timetable also provided for Dr Appanna to provide the Credentialing Review Committee with any information he considered relevant to the review including any written medical opinion he proposed to rely on.
[70] In a further letter, dated 10 November 2016, Ms van Praagh set out the particular matters to be considered for the purposes of the credentialing review. She said:
1.The particular matters to be considered for the purposes of your credentialing review are now as follows:
1.1your clinical decision making and professional practice in relation to four specific cases, identified and discussed in the enclosed Report by Dr Simon Edmonds;
1.2two of the referees named in your credentialing application at Anglesea Hospital (namely, Drs Singh and Ravikanti) are not
prepared to act as referees for you for the purposes of the credentialing review;
1.3only one theatre nurse employed by Anglesea Hospital is willing to work in theatre with you when you perform major surgery. None of the nurses has confidence in your surgical skills or techniques. In the circumstances, the Theatre Manager at Anglesea Hospital does not consider it to be appropriate, from a human resources perspective or from a health and safety perspective, for Anglesea Hospital to require any nurse to work in theatre with you against her will;
1.4you failed to disclose to Anglesea Hospital in December 2015 that Southern Cross Hospital had at that time suspended your credentialing status and operating privileges at Southern Cross Hospital;
1.5in relation to the conduct of your practice at Southern Cross Hospital, as disclosed in the enclosed bundle of documents relating to Southern Cross Hospital, whether you performed and behaved in a manner consistent with the professional practice standards that would be expected of a surgeon had you been practicing at Anglesea Hospital.
[71] Further correspondence between the solicitors followed in which Dr Appanna’s solicitors took issue with a number of aspects of the review process as proposed by Anglesea’s solicitors. The discussion of these issues in this correspondence ended with Dr Appanna’s solicitors commenting in their letter of 28 November 2016 that they considered any further correspondence to be pointless, and advising that Dr Appanna’s involvement in the credentialing review from that point was “under protest and without prejudice to this position on the matters raised regarding the procedure that has been adopted.”
[72] The Credentialing Review Committee met on 7 December 2016 to conduct Dr Appanna’s review. Present were: the review Committee members, Dr Tait and Dr Strick20; Dr Appanna and his wife, Sandie Appanna; Dr Neil Johnson; and Ms van Praagh.
[73] As I have already noted, shortly after the Medical Council made its decision in August 2016 but prior to the decision being notified to the parties in writing, Anglesea approached and engaged Dr Edmonds to review the cases involving Dr Appanna’s
20 Dr Strick is an orthopaedic surgeon credentialed at Anglesea.
patients which had led to the suspension of his credentialing, and provide an independent expert opinion to be presented to the Credentialing Review Committee. Dr Edmonds’ report dated 10 November 2016 was provided to the Credentialing Review Committee, together with the other materials identified by Anglesea as being relevant to the review.
[74] Dr Appanna prepared a written commentary and response to Dr Edmonds’ report, and his submission together with the reports by Dr Jacobson and Professor Johnson and other material, including a number of professional references supporting Dr Appanna, was also placed before the review Committee. Dr Appanna also obtained independent reports from two other experienced and senior O & G specialists, Dr David Leadbetter and Dr Michael East21. Dr Leadbetter has conducted performance reviews for the Medical Council on obstetricians and gynaecologists who have had expressions of concern or complaints made about them for over 10 years. In his report dated 30 November 2016, Dr Leadbetter expressed his opinion regarding two of the cases in which Dr Appanna’s patients were readmitted for surgery. Dr East has extensive experience in training doctors in endoscopic procedures and is an examiner for the RANZCOG. In his report dated 4 December 2016, Dr East commented on aspects of Dr Appanna’s surgical treatment two of the patients who had been readmitted following surgery. These reports were placed before the review Committee.
[75]In the course of the meeting of the review Committee, Dr Tait commented:
I don’t see credentialing as the same as competency. I’ve gone through these as I’m sure [Dr Strick] has as well. The same criticisms could be made about the way I practise. I don’t think that competency is the issue here. The issue is how to make you safe in an environment where there’s a bit of baggage now. How are we going to work out that you can safely practise with a team that’s supportive and how do you regain the trust of that team? I think that’s the guts of how are we going to do that.
…
I must say, as an orthopaedic surgeon, I work with another person often enough. The best cases are when there’s another surgeon in the room and I can
21 Dr Michael East is a Fellow of the RANZCOG, who served for 14 years on the board of the International Society of Gynaecological Endoscopy. Dr East has been involved in training endoscopic fellows for 18 years and is an examiner for the RANZCOG. He regularly provides expert opinions for the Health and Disability Commissioner.
share the load, it’s easier, it’s less stressful. You don’t stress as much about what’s going on. It’s a bit difficult to organise, but certainly for bigger cases it’s great… .
If you had a trained either a gynaecologist or a senior registrar helping you. It makes it go quicker, it gives everyone much more confidence, it’s actually much more fun. The team works together and I would be saying that once you start coming back into this, I would strongly recommend that you have another gynaecologist at all your majors for awhile until everyone starts to feel… You’ll feel it happen and occasionally he won’t turn up and that’s okay. The [principle] would be that you will be working together. I’m not talking supervision here, we’re not talking … We’re talking collegial working together.
Dr Strick commented:
Frankly, five rings of paper morally show that nothing terrible is going on. There’s possibly a combination of over stress, new environment, and a little bit of bad luck, all coming together to cause a bit of trouble that’s now passed.
[258] Rather than being a case where a single instance of loss was caused by several contributing factors, here in my view Dr Appanna’s reputation was diminished over the relevant period partly as a result of Anglesea’s breach of contract in suspending his credentialing status, but also partly due to other matters quite unrelated to that breach, and for which Dr Appanna must himself accept responsibility.
[259] Though cumulatively, their effect may be roughly a 60 per cent reduction in Dr Appanna’s fee income from surgery, I consider that the entirety of that loss cannot be attributed to Anglesea’s actions. As precise calculations in these circumstances are not possible, I propose to adopt a broad approach and attribute one-third of the diminution of practice income and loss suffered by Dr Appanna as a result of damage to his reputation, to the breach of contract by Anglesea.
[260] Furthermore I do not accept that the effects of Anglesea’s breach will continue to operate for a period of 10 years following his reinstatement.
[261] While I am satisfied that Anglesea’s breach of the credentialing contract caused loss to Dr Appanna during the first year following his suspension, I consider that the situation brought about by the damage caused by Anglesea’s breach of contract to his professional reputation has not and will not continue as he has claimed. I consider that once the Credentialing Review committee found nothing to indicate that Dr Appanna’s competence was wanting on 21 December 2017 and he was then re- credentialed by Anglesea to perform General Operative Gynaecology subject to certain conditions, he was then in a position to re-establish his surgical practice and to restore his professional reputation. Armed with the confirmation of the Credentialing Review committee that they had no concerns regarding his competency he would thereafter be able to approach other health providers and facilities upon that basis.
[262] In assessing the duration of the effect of the breaches of contract I consider Dr Appanna’s evidence of having applied to Braemar Hospital in July 2017 and being declined to be relevant as illustrating the ongoing nature of the effects of the suspension on his professional reputation and upon his surgery practice during 2017. In the circumstances here, while I consider that the effects of Dr Appanna’s suspension continued to have an impact on his reputation, and as a result, his ability to earn fee
income as a surgeon up until his re-credentialing on 21 December 2017, I do not consider that the effect of Anglesea’s breaches thereafter continued to impact on his reputation. Accordingly I find no causal link between the breaches and the damage complained of after the end of December 2017.
[263] Turning to consider remoteness, I consider that it would have been entirely within the reasonable contemplation of Anglesea that a breach of contract, occasioned by a private hospital suspending a surgeon’s credentialing after an inadequate investigation, and following that suspension failing to act promptly to arrange an external review of the grounds and justification for the suspension, such that the suspension lasted for six months prior to an interim mandatory injunction was granted requiring the private hospital to reinstate the surgeon’s credentials, would have the effect claimed, namely damage to the surgeon’s reputation.
[264] As I earlier noted, Mr Fisher submits that the terms of the contract cannot be read as meaning that in exchange for Dr Appanna’s adherence and compliance with the terms of the credentialing agreement, that Anglesea had assumed responsibility for any harm to his professional reputation, and consequently for any loss of custom or business suffered by him in the event of Anglesea’s breach.
[265] In support of his argument Mr Fisher notes that Dr Appanna paid nothing to Anglesea for his credentialing, and had no obligation under the credentialing agreement to bring his surgical patients to Anglesea, rather than any other private hospital. He submits that in these circumstances, to hold Anglesea responsible for Dr Appanna’s loss of custom or business, would in effect be holding it responsible for the actions of other surgical facilities should he have been excluded from them.
[266] I do not think this is one of those “unusual” or “exceptional” cases which require a departure from the ordinary principle of remoteness. It might be the case that under the credentialing agreement, Dr Appanna was not required to provide anything more than his adherence and compliance with the terms of that agreement. But by credentialing Dr Appanna, Anglesea received the benefit of his prospective use of their facilities to perform O & G surgeries, which would result in income for Anglesea. Moreover, Dr Appanna was required as a credentialed surgeon to purchase
shares in Anglesea, which he did. I note that in Achilleas, Lord Hoffman was influenced by the general understanding in the relevant market (shipping) that liability was to be restricted, and that there had been a series of dicta to this effect. Nothing of the sort is suggested here that among private hospitals and their credentialed surgeons liability is to be restricted so as not to encompass damage to professional reputation caused by breach of contract, and resulting in loss of income.
[267] Though it was not specifically argued by Mr Fisher, as noted above, the ability of Dr Appanna to mitigate the losses he suffered as a result of the suspension of his credentialing at Anglesea has been alluded to, and it seems appropriate to deal with it.
[268] The very fact of Anglesea having suspended Dr Appanna would clearly have adverse implications for him in terms of his professional reputation and his ability to arrange alternative credentialing at another medical centre, particularly for those located in the Waikato region where it would be likely that health providers engaged in the O & G field would be likely to learn of his suspension. It appears that Braemar Hospital was the only alternative option following his suspensions by both Anglesea and Southern Cross Hospital. He applied for credentialing status to Braemar Hospital in June 2016, and his application was declined on 19 July 2016. He again applied to Braemar in August 2017, and was again declined on 14 September 2017. On both occasions no reasons were given for his applications being declined.
[269] I consider that Dr Appanna did take reasonable steps to mitigate his damage by applying for credentialing status at Braemar Hospital, as a means of generating additional income. The fact his applications were declined does not negate that.
[270] I therefore turn to consider the quantum of damages for the period from when Dr Appanna’s credentialing was reinstated in October 2016 to the end of December 2017.
[271] In the two quarters of the financial year ending 31 March 2017, immediately following the reinstatement of Dr Appanna’s credentialing at Anglesea hospital, his fee income was broadly consistent with his long-term average. During those two quarters, being 1 October through 31 December 2016, and 1 January through 31 March
2017, Dr Appanna’s fee income was approximately $240,000 and $204,000 respectively. Against his long-term average, Dr Appanna’s income fell by approximately $56,000 during this period.
[272] I accept that the reason for the initial return of Dr Appanna’s fee income to a level broadly consistent with his long-term average was likely due to him catching up on the backlog of patients and procedures that had accrued over the period of his suspension during which he was unable to operate. Therefore, I consider Dr Appanna’s fee income during those quarters to be somewhat anomalous, and not indicative of his reputation having been uninjured by the suspension of his credentialing.
[273] However, in the next three quarters to the end of 2017, Dr Appanna’s fee income did suffer a significant dip compared to his long-term average. During those three quarters, being 1 April through 31 June 2017, 1 July through 31 September 2017, and 1 October through 31 December 2017, Dr Appanna’s fee income was approximately $86,000, $130,000 and $107,000 respectively. Against his long-term average, Dr Appanna’s income fell by approximately $470,000 during this period.
[274] Treating Dr Appanna’s loss of income in the period after his credentialing was reinstated by the interim mandatory injunction on 6 October 2016, through until the end of December 2017, as the aggregate of the sums of $56,000 and $470,000 identified above, and attributing a one-third share of that loss to Anglesea’s breach of contract, I find that the quantum of damages to which Dr Appanna is entitled to recover from Anglesea is $179,000.
General Damages for irreparable harm to reputation, and stress and anxiety
[275] Dr Appanna, also seeks the sum of $500,000 for damage to his reputation. Though not explicitly stated, as this head of damages was not pursued in submissions, it is clear that it is for general damage to his reputation, above that which he claims has resulted in financial loss.
[276] Damages for loss of reputation, beyond special damage resulting from such loss of reputation, is in principle irrecoverable in a suit for breach of contract. The
protection of a person’s general interest in their reputation is the role of the tort of defamation. I decline to award any damages, let alone $500,000 under this claimed head of loss.
[277] The other head of loss is stated to be general damages for stress and anxiety, caused by the breaches of the contract.
[278] The general rule in Addis, and the exceptions to it, are set out above. I consider that this case is of a kind which does fall within an exception.
[279] In my view this case is analogous to those where an object of the contract is to provide freedom from stress and anxiety. Here the credentialing contract provided that a high degree of trust and confidence be maintained, and that the process be fair, transparent and robust. Those requirements, although principally directed at how decisions are to be reached regarding a surgeon’s credentialing status, also ensure that the surgeon is kept informed and engaged in the process, and by implication prevent the stress and anxiety that would result were the surgeon alienated from the process. Where the surgeon is excluded from the deliberations concerning his or her credentialing status, Anglesea would not be satisfying its obligation to conduct itself in a manner that maintained a high degree of trust and confidence by Dr Appanna in the process being undertaken and the eventual outcome of that process. Having regard to the obvious interest a credentialed surgeon has in securing and maintaining credentialing status at Anglesea, it is “not unlikely” that they would suffer stress and anxiety as a result of a breach by Anglesea of its obligation to maintain trust and confidence.
[280] Dr Appanna clearly suffered considerable stress and anxiety as a direct result of Anglesea’s failure to inform him of its reference first to the CRMC and then to the Credentialing Committee. Following his suspension, Anglesea failed to act promptly to arrange an independent review and its actions caused undue delay and extended the period of suspension until the Court order on 6 October 2016. During that period Anglesea refused to accede to Dr Appanna’s request to be allowed to meet with the Credentialing Committee and it failed to entertain and consider the expert reports provided by Dr Appanna which supported his claim to have conducted his surgeries
competently. By its actions Anglesea caused Dr Appanna considerable anxiety and stress over an extended period.
[281] I consider that $25,000 is an appropriate sum to compensate Dr Appanna for the stress and anxiety induced by Anglesea’s breach of contract.
Conclusion on assessment of contractual damages
[282]Accordingly, I assess damages to Dr Appanna against Anglesea as follows:
(a)For actual loss of income during the suspension period between 30 March 2016 and reinstatement on 6 October 2016: $401,461.
(b)For loss of income during the period 7 October 2016 to 31 December 2017: $179,000.
(c)For general damages caused by stress and anxiety: $25,000.
The Fiduciary duty claim
[283] Dr Appanna also submits, as an alternative to his claim in contract, that the power given to the Credentialing Committee at Anglesea to fulfil its credentialing role created a fiduciary relationship between Anglesea and Dr Appanna. He does not submit that the whole of the relationship, at all times, between himself and Anglesea was fiduciary. Instead he submits that the discretion or power which the Credentialing Committee had to both suspend and reinstate his credentialing to perform O & G surgery, creates fiduciary obligations which are owed to him by Anglesea.
[284] The Association of New Zealand Private Surgical Hospitals (the Association), as intervenor, opposes the characterisation of the relationship between a private hospital and a medical specialist as fiduciary. The Association is concerned about the practical effects which private hospitals will face in balancing any fiduciary obligations owed to credentialed medical specialists with their clear obligations to patients.
Law
[285] The leading New Zealand decision on the existence of fiduciary relationships is the Supreme Court’s decision in Chirnside v Fay.53 In Chirnside, Blanchard and Tipping JJ, in a judgment given by Tipping J, identified two situations in which a relationship will be classed as fiduciary. The first category is where:54
… the relationship is of a kind which, by its very nature, is recognised as being inherently fiduciary. Most cases involving a breach of fiduciary duty are of this kind. They fall into one of the recognised categories of relationships which are inherently fiduciary. These include the relationships of solicitor and client, trustee and beneficiary, principal and agent, and doctor and patient.
[286]No such relationship is alleged to exist here.
[287] The second category of relationships involves a fact-based inquiry into whether the particular relationship has the requisite qualities to justify its description as fiduciary. Tipping J described it as follows:55
The second situation in which a relationship will be classed as fiduciary depends not on the inherent nature of the relationship but upon an examination of whether its particular aspects justify it being so classified. No single formula or test has received universal acceptance in deciding whether a relationship outside the recognised categories is such that the parties owe each other obligations of a fiduciary kind. The literature in this field is voluminous. No useful purpose would be served by an attempt at a general survey.
[288]Tipping J concluded:56
It is clear from the authorities that relationships which are inherently fiduciary all possess the feature which justifies the imposition of fiduciary duties in a case which falls outside the traditional categories; all fiduciary relationships, whether inherent or particular, are marked by the entitlement (rendered in Arklow as a legitimate expectation) of one party to place trust and confidence in the other. That party is entitled to rely on the other party not to act in a way which is contrary to the first party’s interests.
[289] In addition, the Courts have identified a number of other features which are common to and indicative of the existence and scope of a fiduciary relationship, some of which are:
53 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433.
54 At [73].
55 At [75].
56 At [80].
(a)the beneficiary is entitled to rely on the single-minded loyalty of the fiduciary to act in its interests, to the exclusion of the interests of all others;57
(b)a high degree of interpersonal trust between the parties;58
(c)the fiduciary has the ability to exercise a power or discretion affecting the interests of the beneficiary;59 and
(d)the beneficiary is vulnerable to the exercise of said discretion or power.60
[290] Where a fiduciary relationship is established, the fiduciary is subject to a number of core duties, including to avoid unauthorised personal profit or benefit from the relationship; to avoid conflicts between the fiduciary’s personal interests and those of the beneficiary; and to avoid divided loyalties to third parties.
[291] A relationship between two parties may have both fiduciary and non-fiduciary aspects to it. The Supreme Court said in Maruha Corporation v Amalta Corporation Ltd:61
It is well-settled that, even in a commercial relationship of a generally non- fiduciary kind, there may be aspects which engage fiduciary obligations of loyalty. That is because in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct, assumed.
[292] A relationship may also have a “fiduciary dimension” to it, but nevertheless fall short of giving rise to fiduciary obligations.62 Trust and confidence are not unique
57 Mothew v Bristol & West Building Society [1998] Ch 1 at 18 (CA); Alberta v Elder Advocates of Alberta Society 2011 SCC 24, [2011] 2 SCR 261 at [31]; Becker v Anderson [2014] NZHC 2037 at [53].
58 Norberg v Wynrib [1992] 2 SCR 226 at 274; Day v Mead [1987] 2 NZLR 443 (CA) at 458.
59 Liggett v Kensington [1993] 1 NZLR 257 (CA) at 281-282; Cook v Evatt (No 2) [1992] 1 NZLR 676 (HC) at 685; Frame v Smith [1987] 2 SCR 99 at [60].
60 Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 (CA) at 315.
61 Maruha Corporation v Amalta Corporation [2007] NZSC 40, [2007] 3 NZLR 192 at [21].
62 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [72].
to fiduciary relationships. There may be trust and confidence between parties to a contractual agreement, but the nature of that agreement is such that one or both parties, are entitled to act in their own interests and in a manner that is contrary to the interests of the other. Such a relationship is not fiduciary.
[293] The Privy Council, repeating with apparent approval the comments made by Gault J in the Court of Appeal,63 in McLachlan v Mercury Geothermal Ltd (in receivership) said:64
It is not enough to say that parties are in a relationship that gives rise to fiduciary obligations; it is necessary to identify those obligations. It is one thing to assert that in establishing and operating a joint venture the parties must act towards each other in good faith, but it is quite another thing to contend that in addition to the obligations they have assumed and must carry out in good faith, the law should impose further and separate duties of the kind suggested here.
[294] Duffy J made similar remarks in BDM Grange Ltd v Trimex Pty Ltd concerning fiduciary obligations arising in the context of joint ventures.65 Her Honour there stated:66
A joint venture does not automatically give rise to fiduciary duties. However, fiduciary obligations may arise out of pre-contractual arrangements before a formal joint venture is concluded, or where the parties have loose ill-defined arrangements. Whether such obligations do arise or not will depend upon the particular circumstances. Therefore, the focus is on the nature of the joint venture and the relationship between the parties. Where there is an ordinary commercial contract between the parties, the court is less willing to impose fiduciary obligations beyond what the parties agreed to in their contract.
Submissions
[295] Both parties accept and proceed on the basis that the credentialing process is a novel situation for the purposes of finding a fiduciary relationship.
[296] Mr Waalkens for Dr Appanna submits that applying the relevant principles, it is clear that:
63 McLachlan v Mercury Geothermal Ltd CA142/02, 28 August 2003 at [46].
64 McLachlan v Mercury Geothermal Ltd (in receivership) PC 36/05
65 BDM Grange Ltd v Trimex Pty Ltd [2015] NZHC 2469.
66 At [260].
(a)Anglesea, in its role as a credentialing body was in possession of a discretion or power to approve or decline Dr Appanna’s credentialing and to later to suspend, reinstate or revoke his credentialing;
(b)Anglesea is able to unilaterally exercise the power or discretion to both approve or decline, and to suspend or terminate Dr Appanna’s credentialing; and
(c)Dr Appanna is peculiarly vulnerable to, or at the mercy of, Anglsea’s exercise of that power.
[297] In relation to the requirement that the defendant undertake to act in the best interests of the plaintiff, Mr Waalkens accepts that the credentialing process is not just about protecting any prospective or credentialed practitioner and that the prime focus is on patient safety. However, Mr Waalkens submits that concurrent with its obligations in respect of patient safety, Anglesea also has undertaken to maintain a “high degree of trust and confidence” in its relationship with practitioners who are either credentialed or seeking credentialing, and that these obligations are not mutually exclusive.
[298] Mr Waalkens further submits that Anglesea cannot rely on its obligations in respect of patient safety to deny a fiduciary obligation to Dr Appanna, where such concerns do not actually exist or where the Hospital “sits on its hands”, failing to progress matters to reinstate Dr Appanna following his suspension in circumstances where he has provided prompt and detailed information to Anglesea to alleviate its concerns.
[299] Mr Waalkens also points to the undertaking by Anglesea to act consistently with The Credentialing Framework for New Zealand Health Professionals, drafted by the Ministry of Health. That framework requires, inter alia, that the process for credentialing be a partnership between the parties, based on trust and mutual respect; requires ownership of the process by practitioners; is unbiased; fair, fair transparent and robust; and complies with substantive and procedural due process.
[300] Mr Coates for the intervenor, says that in order for a fiduciary relationship to exist medical specialists must be entitled to place trust in private hospitals to act in their interests – and to put those interests above their own interests and those of third parties. Mr Coates submits that this expectation does not exist in the relationship between medical specialists and private hospitals. In support of this submission, Mr Coates points to the following conflicts between private hospitals and medical specialists:
(a)The private surgical hospital market is highly competitive, where specialists operate independently and compete with one another for work. A hospital may grant privileges to numerous specialists in direct competition with one another. In such a market environment it would be impossible for a private hospital to bestow single-minded loyalty to all of its credentialed specialists.
(b)Capacity constraints mean that a hospital may not be able to accommodate the preferences of all of its medical specialists and may have to favour one, to the exclusion of others.
(c)Medical specialists take advantage of the competitive environment, where they may hold clinical privileges at multiple hospitals that are in direct competition with one another.
(d)Private hospitals generate income from specialists bringing patients to their facilities. The specialist decides which hospital to bring patients to, and that choice directly effects the hospitals income.
(e)Private hospitals do not undertake to promote or protect the commercial operations or business of medical specialists.
[301] Mr Coates also submits that the principal purpose of credentialing is to ensure patient safety and that this obligation supersedes any and all other obligations that the private hospital might owe to the medical specialist. Mr Coates further submits that
where necessary, the hospital is obliged to act in a manner that is contrary to the interests of the medical specialist in order to ensure patient safety.
[302] The essence of Mr Coates’ argument is that the relationship between the private hospital and the medical specialists, who they credential, is an entirely commercial arrangement. Neither party to the relationship can be expected, at any time or in any circumstance, to put the interests of the other ahead of its own interests, or those of third parties.
Analysis
[303] It is clear that Anglesea has a power, being to either approve or decline and to suspend or terminate Dr Appanna’s credentialed status. Moreover, it is a power which it is able to exercise unilaterally, and as to which there is at least some level of vulnerability on the part of Dr Appanna, though I do note the submission of the intervenor concerning the competitive nature of the private hospital surgical environment, and that most practitioners, Dr Appanna included, will often hold clinical privileges in multiple hospitals.67
[304] However, I do not accept that Dr Appanna is entitled to repose trust and confidence in Anglesea not to act in a manner which is contrary to his interests. In fact, Dr Appanna has not set out clearly, just what his interests were that Anglesea was obliged to place at the forefront of their consideration as to whether to suspend and reinstate his credentials. Though for the purposes of this analysis, I take it that they include the Credentialing Committee undertaking its review of Dr Appanna’s credentialing and subsequently reconsidering his reinstatement, in light of his interest in being able to generate an income by performing O & G surgeries at that hospital.
[305] I agree with Dr Appanna that the entirety of the relationship between himself and Anglesea need not be described as fiduciary and that it is sufficient for there to be a single facet of that relationship in which Dr Appanna is entitled to repose trust and confidence in Anglesea to place his interests above its own and those of third-parties.
67 Notwithstanding that in Dr Appanna’s case, such clinical privileges have been revoked.
[306] Dr Appanna would say that such a facet of the relationship between himself and Anglesea exists in relation to the credentialing process, whereby the Credentialing Committee exercised its power to suspend Dr Appanna. I disagree.
[307] The principal interest of Anglesea at all times in relation to credentialing is clearly those of its patients. In matters of approving or declining and suspending, reinstating or revoking, Anglesea will always be entitled to place the interests of the patients who will be admitted into its hospital under the care of the credentialed medical specialist, at the forefront of its considerations.
[308] Anglesea also has its own interests as a commercial entity at stake when undertaking the credentialing process. Granting credentialed status to a medical specialist who is either inept or unqualified to perform the procedures for which they have been credentialed, could seriously impact on Anglesea’s reputation, and as a result its financial position. The poor reputation of a medical specialist operating at Anglesea would impact on the reputation of Anglesea itself, thereby lowering its estimation as a provider of specialist health services in the eyes of the public. Anglesea is entitled to assure itself that it has appropriately qualified and competent medical professionals operating in its hospital, as the procedures undertaken by those medical professionals are the means by which Anglesea earns its revenue.
[309] I do not accept the argument of Mr Waalkens that the relationship between Anglesea and Dr Appanna, which was not fiduciary at the time of suspension, became fiduciary at the point Dr Appanna furnished the Credentialing Committee with information rebutting the concerns of the Committee. The essence of the relationship, despite that information purporting to alleviate any concerns for patient safety, is still one in which Anglesea is not obliged to treat its own interests and those of its patients as subservient to the interests of Dr Appanna. And even if, as Mr Waalkens argues, there truly were no concerns for patient safety, that does not mean that Dr Appanna’s interests are elevated to such an extent that he is then entitled to repose trust and confidence in Anglesea to place his interests above all else. It may be that as a result of Anglesea’s concerns around patient safety being satisfied, Dr Appanna’s interests would be elevated, but that would only be a necessary incidence of other interests no longer being a cogent consideration in the credentialing process, and not because a
fiduciary obligation to prioritise his interests arose. The satisfaction of extraneous primary interests does not convert an otherwise ordinary commercial relationship to that of fiduciary.
[310] I also do not consider that the fact Anglesea has undertaken to maintain “a high degree of trust and confidence” in its relationship, means that the relationship should be characterised as fiduciary. As it was said in McLachlan, it is one thing for parties to assume such obligations to one another to act in good faith, trust and confidence, it is another thing entirely for the Court to impose further fiduciary obligations on them requiring the prioritisation of the other’s interests.
[311] Parties can certainly agree to assume obligations of trust and confidence to the other party another without assuming a fiduciary obligation. As Duffy J said in Grange Ltd, where there is a contract setting out the obligations between the parties, the Court is less willing to impose fiduciary obligations above and beyond what the parties agreed to.
[312] I consider that no fiduciary relationship exists or existed at any point in time, between Anglesea, as a private hospital and Dr Appanna, as a credentialed surgeon.
Conclusion
[313] A contract was entered into between Dr Appanna and Anglesea, in relation to Dr Appanna’s second application for credentialing in November 2013. The explicit and implicit terms of that contract required that the credentialing process be undertaken in a fair, transparent and robust manner, openly and with good faith, and that when conducting any assessment or review of Dr Appanna’s credentialing status, Anglesea would act fairly and consistently with the principles of natural justice. The contract also entitled Dr Appanna to surgical facilities and support services, from Anglesea.
[314] That contract was breached by Anglesea when it failed to notify Dr Appanna that it had conducted an internal audit of his surgical operations during 2016, and again when it failed to notify Dr Appanna of the formation of the Credentialing Committee
to review his credentialing status and provide him the opportunity to appear before it. As a result, Anglesea further breached the contract between them when it suspended his credentialed status. Anglesea continued to breach its contract, throughout the duration of Dr Appanna’s suspension, by failing to act promptly to arrange an external review of the grounds and justification for the suspension.
[315] Those breaches caused financial (special) damage to Dr Appanna, during the term of the suspension, by preventing him from earning income by performing surgical procedures at Anglesea, and for a period afterwards until the second Credentialing Review, by causing damage to his reputation that resulted in a reduction of income.
[316] The breaches also caused general damage to Dr Appanna in the form of stress and anxiety. Such damages are recoverable under the contract, as the failure by Anglesea to comply with its obligations to maintain a high degree of trust and confidence and to undertake the credentialing process in a fair, transparent and robust manner, caused the stress and anxiety felt by Dr Appanna, and part of the object of those obligations were to ensure that he would not experience stress and anxiety during the credentialing process.
[317] No fiduciary relationship existed, in any capacity, between Anglesea and Dr Appanna. Anglesea is entitled to place its own interests and those of its patients above Dr Appanna’s interests when conducting the credentialing process.
Result
[318] I enter judgment for Dr Appanna and award him damages for breach of contract by Anglesea in the following sums:
(a)For actual loss of income during the period 30 March 2016 to 6 October 2016, caused by the suspension of Dr Appanna’s credentialing:
$401,461.
(b)For loss of income during the period 7 October 2016 to 31 December 2017, caused by the damage to Dr Appanna’s reputation consequential on the suspension of his credentialing: $179,000.
(c)For general damages caused by stress and anxiety: $25,000.
[319] Dr Appanna is entitled to costs on a 2B basis. If the parties are unable to reach agreement as to his costs, counsel for Dr Appanna is to file and serve a memorandum within 20 working days of the date of this judgment concerning the quantum of 2B costs, and counsel for Anglesea is to file and serve a memorandum in response within a further 10 working days. The memoranda are not to exceed three pages in length other than annexed schedules and receipts relating to disbursements.
Paul Davison J
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