Cambridge Physiotherapy Services Limited v Accident Compensation Corporation
[2012] NZHC 999
•14 May 2012
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV 2010-419-1250 [2012] NZHC 999
BETWEEN CAMBRIDGE PHYSIOTHERAPY SERVICES LIMITED
Plaintiff
ANDACCIDENT COMPENSATION CORPORATION
First Defendant
ANDKAREN MOLE Second Defendant
Hearing: 6, 31 October, 1, 2 November 2011
Counsel: P A Craighead & S W Hood for Plaintiff
P J Radich & D D Watterson for Defendants
Judgment: 14 May 2012
JUDGMENT OF KEANE J
This judgment was delivered by on 14 May 2012 at 2pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
Solicitors:
Norris Ward McKinnon, Hamilton for Plaintiff
Minter Ellison Rudd Watts, Wellington for Defendant
CAMBRIDGE PHYSIOTHERAPY SERVICES LIMITED V ACCIDENT COMPENSATION CORPORATION HC HAM CIV 2010-419-1250 [14 May 2012]
[1] In this case Cambridge Physiotherapy Services Limited, in reality its principal Christopher La Pine, pursues the Accident Compensation Corporation primarily for losses he contends Cambridge incurred, and he with it, $197,088, as a result of the Corporation withholding for 18 months an extended provider network contract to which, he contends, Cambridge became contractually entitled in July
2006.
[2] In July 2006, it is Mr La Pine's case, Cambridge had a right in contract to an EPN contract, having complied with a preliminary contract that came into being when Cambridge sought and obtained accreditation for an EPN contract, having been offered one on that very basis by Gary Wilson, the chief executive of the Corporation, in a letter to Mr La Pine dated 6 September 2005.
[3] As well as pursuing that claim against the Corporation, Cambridge looks also to Karen Mole, a Corporation officer charged with monitoring physiotherapists' treatment and invoicing profiles and practices in 2006, for misfeasance in public office, whom he holds accountable for delaying the grant of the EPN contract and attempting to frustrate it altogether. Cambridge claims from her also its principal asserted losses and, as well, $20,000 exemplary damages.
[4] The Corporation denies the preliminary contract Mr La Pine contends for. Mr Wilson, it contends, did no more than to invite Mr La Pine, in a formal sense his company, Cambridge, to pursue an EPN contract by seeking accreditation. He made no offer. Once Cambridge became accredited and otherwise qualified, the Corporation contends, Cambridge had still to apply. It retained a discretion whether to grant any such application.
[5] Ms Mole also denies any liability to meet the sum Cambridge seeks from her. In 2006 - 2007, she contends, in her interactions with Mr La Pine and Cambridge, she did no more than her duty. She denies any malice.
An arm's length relationship
[6] Mr La Pine, Cambridge's principal, has practised as a physiotherapist in Cambridge since October 1985, engaging in a wide scope of practice. A significant part of his practice, as is invariable in the practice of physiotherapy in New Zealand, has been funded by the Corporation. At least since 2002 he and the Corporation have been at arm's length.
[7] The Corporation, charged as it is with administering 'a fair and sustainable scheme for managing personal injury',1 has since at least May 2002 been concerned that, according to its treatment and statistical profiles, Mr La Pine is an 'outlier', who has treated patients and invoiced for their care at a level above the average or median physiotherapist. Also that he has been, as the Corporation considers, uncooperative, indeed resistant.
[8] Between May 2002 - October 2003 the Corporation investigated Mr La Pine's billing and treatment practices, as a result of which, as it seems, they agreed a billing method compromise. It investigated him three more times when Healthwise clinical advisers could not obtain from him copies of clinical notes he regarded as privileged without his patients' consent. In 2006 he again came under scrutiny as a result of a general statistical survey of treatment and billing practices.
[9] Mr La Pine has a very different perspective. As a result of having been in practice in Cambridge for 26 years, he contends, and having obtained, in addition to his diploma in physiotherapy, qualifications in fitness management, sports medicine and acupuncture, he has attracted, often by referral, a significant proportion of patients calling for treatment beyond the ordinary.
[10] In such exceptional cases, as in any others, he considers, his clinical duty is to restore his patients to full mobility. He, and not the Corporation, he considers, is best placed to assess what that calls for. The Corporation, he considers, should accept his
clinical judgment. Also, he says, the Corporation has never had any basis for
1 Accident Compensation Act 2001, s 3.
questioning his probity. It should not have, as it has done, questioned the merit or accuracy of his invoices.
[11] Matters again came to a head in July 2005, when Mr La Pine attended, on behalf of his local Maori patients, a hui initiated by the Corporation at Hopu Hopu, near Ngaruawahia, at which the Corporation set out to clarify for Maori the entitlements it administers.
[12] At this meeting Corporation officers present, amongst whom may well have been the chief executive, Mr Wilson, understood Mr La Pine to say, speaking broadly, that the Corporation had skewed investment priorities; that it set cost saving above patient welfare; and that the Corporation rewarded physiotherapists inadequately.
[13] On 25 July 2005 Mr Wilson wrote to Mr La Pine, setting out to rebut what he understood Mr La Pine had said. In his reply Mr La Pine corrected some statements attributed to him or countered Mr Wilson's criticisms. On 6 September 2005 this exchange ended when Mr Wilson wrote to Mr La Pine, and in the final sentence of his letter invited him, in a formal sense Cambridge, to 'pursue accreditation' for an extended network provider contract.
[14] The EPN contract, a Corporation initiative in 2004, offered the Corporation the advantage that subscribing physiotherapists had to bring their practices up to a prescribed standard and accept sustained scrutiny. The advantage to physiotherapists was that, though they could no longer charge patients directly, they were paid at a higher than the usual regulation rate.
[15] By inviting him, in a formal sense, Cambridge, to 'pursue accreditation', Mr La Pine contends, Mr Wilson irrevocably committed the Corporation to granting Cambridge an EPN contract immediately when it became accredited and otherwise qualified. In the language of contract, he contends, Mr Wilson made him an irrevocable offer of an EPN contact by a prescribed process that Cambridge accepted by embarking on and completing that process.
[16] Cambridge then already qualified for an EPN contract, Mr La Pine contends, to the extent that it was a corporate entity and that he, its director, was a registered physiotherapist. To become completely qualified, he understood, all Cambridge had to do was to obtain accreditation, a certificate of compliance from a Corporation authorised assessor, in this instance, TELARC, against a New Zealand standard; and to have a compatible computer system.
[17] In July 2006, Mr La Pine contends, Cambridge's right to an EPN contract became unconditional and it became entitled to that contract by no later than 1
August 2006. Instead, he contends, in breach of their preliminary contract, the Corporation withheld the EPN contract to which Cambridge was then entitled. It remained dissatisfied with his responses to questions put to him in May 2006 about his treatment and billing practices.
[18] By 10 November 2006 there was a complete stalemate. The Corporation advised Mr La Pine that unless he answered the May 2006 questions more fully, questions he considered that he had answered to the extent he needed to, the Corporation would no longer meet Cambridge's bulk invoices, beyond a patient's first visit. For any later visits patients would have to pay Cambridge and claim on the Corporation themselves.
[19] On 17 November 2006 Mr La Pine brought a proceeding in this Court seeking a declaration that the Corporation's decisions were invalid; and an order obliging the Corporation to approve Cambridge's EPN contract application. The Corporation, without conceding any invalidity, nevertheless conceded. It considered itself compromised by internal emails in 2004 lending credence to Mr La Pine's claim that he and his practice had been unfairly singled out.
[20] So it was that on 10 March 2008, in excess of 18 months after Mr La Pine contends Cambridge became absolutely entitled to an EPN contract, it obtained one. But that contract proved to have a short life. On 16 September 2009 EPN contracts were replaced by a new form of contract, entitling physiotherapists to a slightly higher flat fee and to patient co-payments.
[21] Cambridge does not, in this proceeding, contend that its EPN contract was ended wrongfully. It does contend that, in breach of the preliminary contract it asserts, the Corporation denied it the benefit of that contract for 18 months. It seeks to recover the losses it says it incurred and the loss of income it says it suffered; the difference between the regulation rate and the higher EPN rate. On a parallel basis it looks to Ms Mole, contending misfeasance in public office.
[22] These two claims only become fully intelligible, when set against the Accident Compensation Act 2001, the statutory context within which they arose, and the EPN contract then in issue. I begin there.
Accident compensation regime
[23] According to s 3 of the 2001 Act, the purpose of the accident compensation regime is to provide:
... a fair and sustainable scheme for managing personal injury that has, as its overriding goals, minimising both the overall incidence of injury in the community and, the impact of injury on the community (including economic, social, and personal costs)
[24] This purpose, according to s 3, is to be accomplished by:
(a) establishing as a primary function of the Corporation the promotion of measures to reduce the incidence and severity of personal injury:
(b) providing for a framework for the collection, co-ordination, and analysis of injury-related information:
(c) ensuring that, where injuries occur, the Corporation's primary focus should be on rehabilitation with the goal of achieving an appropriate quality of life through the provision if entitlements that restores to the maximum practicable extent a claimant's health, independence, and participation:
(d) ensuring that, during their rehabilitation, claimants receive fair compensation for loss from injury, including fair determination of weekly compensation and, where appropriate, lump sums for permanent impairment:
(e) ensuring positive claimant interactions with the Corporation through the development and operation of a Code of ACC Claimants' Rights:
(f) ensuring that persons who suffered personal injuries before the commencement of this Act continue to receive entitlements where appropriate.
[25] The function of the Corporation is, in the most general sense, to administer the Act.2 It is a Crown entity to which the Crown Entities Act 2004 applies.3 It is a statutory body corporate that may do anything authorised by either Act and anything that a natural person of full age and capacity may do, but only for the purpose of performing its functions and only consistently with the Act's objectives.4 Within
those confines it has full capacity to enter into contracts.5
[26] The primary function of the Corporation is to determine cover for persons for whom claims are lodged and to provide them with their entitlements to the extent that they have cover.6 The Act confers entitlements on 'claimants', who have suffered a qualifying injury, not on those like physiotherapists who are responsible for their clinical care.7 It is they who must apply for cover, though a treatment provider may
do so on their behalf.8 And s 262(3) is especially pertinent:
In carrying out its functions, the Corporation must deliver services to claimants ..., as required by this Act, -
(a) in order to minimise the overall incidence and costs to the community of personal injury, while ensuring fair rehabilitation and compensation for loss from personal injury; and
(b) in a manner that is cost-effective and promotes administrative efficiency.
[27] The Corporation's consistent related liability to pay for, or to contribute to, the cost of a claimant's treatment is prescribed by Schedule 1 to the 2001 Act, the first clause of which confirms that the Corporation may become liable in contract, as under an EPN contract, or by regulation. The regulations governing payments to
Cambridge, until it obtained an EPN contract, came into force in 2003.9
2 Section 262.
3 Section 259.
4 Crown Entities Act 2004, ss 13 - 18.
5 Section 127.
6 Accident Compensation Act 2001, ss 262(1)(a), 165(1)(a), (b).
7 Section 20.
8 Sections 48, 49.
9 Injury Prevention, Rehabilitation, and Compensation (Liability to Pay or Contribute to Cost of
Treatment) Regulations 2003.
[28] In each instance the costs to which the Corporation then becomes liable are not at large. They must be 'appropriate in the circumstances' as well as agreed.10 The extent to which the Corporation then becomes liable is closely prescribed by clause
2(1):
The Corporation is liable to pay the cost of the claimant's treatment where that treatment is for the purpose of restoring the claimant's health to the maximum extent practicable and the treatment -
(a) is necessary and appropriate, and of the quality required for that purpose; and
(b) has been, or will be, performed only for the number of times necessary for that purpose; and
(c) has been or will be given at a time or place appropriate for that purpose; and
(d) is of a type normally provided by a treatment provider; and
(e) is provided by a treatment provider who is qualified to provide that type of treatment and normally provides that treatment.
[29] Nor does clause 2(1) stand alone. The Corporation is, under cl 2(2), subject to a duty to assess whether any cost it is asked to meet does qualify. Clause 2(2) says this:
In deciding whether sub-clause 1(a) - (e) applies to the claimant's treatment, the Corporation must take into account -
(a) the nature and severity of the injury; and
(b) the generally accepted treatment of an injury of that nature in New
Zealand; and
(c) the other options available in New Zealand for the treatment of such an injury, and
(d) the cost in New Zealand of the generally accepted means of treatment and of other options, compared with the benefit the claimant is likely to receive from the treatment.
[30] The EPN contract to which Mr La Pine subscribed on behalf of Cambridge on 12 July 2006, to which he says the Corporation was then also obliged to subscribe, and to which Cambridge and the Corporation did subscribe on 10 March
2008, was consistent in philosophy and terms.
10 Clause 1(2).
EPN contract
[31] The EPN contract required subscribing physiotherapists and the Corporation to agree to act in good faith and to consult each other whenever and as often as was appropriate;11 not to make adverse statements about each other;12 and to alert each other to high profile issues.13
[32] Subscribing physiotherapists had to cooperate with the Corporation to ensure that treatment was 'prompt, sustainable and cost effective'; to 'return patients to independent living and employment to the maximum degree possible', but at 'an affordable price'; and to ensure their services were 'necessary, appropriate, timely, of the required quality, and not excessive in number or duration'.14
[33] Physiotherapists had to 'ensure the stipulated time, cost and quality objectives of ACC for each Service are met'.15 They had to advise the Corporation immediately
'of any matter which may change or delay ... performance' of the treatment they gave, and they had to 'include detailed particulars of the likely change or delay' and recommend ways 'to minimise any adverse effect from it'.16 They had to ensure that
'clinical records are kept up to date'.17 They had to comply with 'all reasonable
instructions and directions from ACC'.18
[34] Physiotherapists were subject to monitoring and evaluation,19 extending across a range of subjects: their management of services, their prices, the level of satisfaction of their patients and any other matters that the Corporation reasonably
considered to be relevant.20 The Corporation retained a general right of audit.21
11 Clause 3.3.
12 Clause 1.4.
13 Clause 4.5.
14 Schedule 3, clause 4.
15 Schedule 3, clause 7.1(e).
16 Schedule 3, clause 7.1(f).
17 Schedule 3, clause 7(1)(g).
18 Schedule 3, clause 7(2).
19 Schedule 4, cl 2.1.
20 Schedule 4, cl 2.2.
21 Schedule 4, clause 4.1.
[35] Finally, it remains to mention that the contract could be terminated by either the physiotherapist or the Corporation on three months notice as of right.22 Also that the Corporation had the ability to terminate the contract if the physiotherapist was in breach or became insolvent.23
Claim against Corporation
[36] There is no issue that by 12 July 2006 Cambridge did meet the Corporation's minimal requirements for an EPN contract. It was, obviously enough, a legal entity and it had a registered physiotherapist, Mr La Pine, as a director. It had a compatible computer system. It had been accredited by an authorised assessor.
[37] The issue whether the Corporation then became immediately obliged to grant Cambridge an EPN contract depends, for the purpose of this first cause of action, on the purpose and effect of Mr Wilson's letter dated 6 September 2005. Was it, as Mr La Pine contends, an offer capable of being accepted by Cambridge by conduct? Or was it, as the Corporation contends, no more than an invitation to treat?
[38] That engages a related question, which arises in the claim against Ms Mole. Were the four or five advertised criteria for eligibility, accreditation and the like, exhaustive? Did the Corporation retain the right, indeed have the duty, to assess whether Cambridge could or would comply with the duties an EPN contract imposed?
Immediate narrative
[39] The immediately related narrative begins on 25 July 2005 when Mr Wilson wrote to Mr La Pine setting out to rebut the statements attributed to him at the recent hui. Those statements, Mr Wilson said, were both 'incorrect and misleading'. A copy of the letter was to go to those at the hui, 'so that they can receive a balanced
opinion'.
22 Clause 7.1.
23 Clauses 8, 9.
[40] Mr Wilson attributed six statements to Mr La Pine: that the Corporation had excessively large reserves; that it had invested 40% of its funds in Australia; that it had invested in toll roads in Australia but not in New Zealand infrastructure; that it had spent just under $1M on a 'birthday bash' marking its 30th anniversary; that it had not increased payments to physiotherapists for 19 years.
[41] As to that last statement, that the rate of reward to physiotherapists had remained unacceptably static, Mr Wilson said this:
This statement is correct. ACC has not increased its regulated fees for physiotherapists for this period of time.
However, as you know, ACC has developed the Endorsed Provider Network for physiotherapists and practices that pass accreditation standards are rewarded at a higher level of payment under the EPN contract.
[42] Mr Wilson does seem to have been at the hui himself if what he next said is to be taken literally:
Your concerns about the EPN contract are well known to ACC, and I would suggest were irrelevant to most of the folk at the Hui. That is why I approached you at the end of the hui to ask that you write to me outlining your issues, and to give me the chance to respond to the incorrect material you were providing.
[43] On 4 August 2005 Mr La Pine replied. He said that he had attended the hui to represent his Maori patients and been invited to speak. He accepted that he had questioned why the Corporation had invested so much off shore when, as he saw it, the Corporation had reduced access to full rehabilitation. He accepted that he had also questioned why claimants needed to be legally assisted. He denied raising the rate of reward issue. He said this:
This statement, as you say, is quite correct. However, in my hui address I made no mention of physiotherapy payment. You go on to say my concerns re the EPN are well known to ACC. I find that difficult to understand as I have only communicated this concern in one letter to the Minister, over a year ago and received a patronising letter of little value, in return.
[44] This exchange of letters ended on 6 September 2005 when Mr Wilson wrote the letter Mr La Pine contends constitutes the Corporation's offer of an EPN contract as long as Cambridge became accredited. I set it out in full:
Thank you for your recent letter outlining your concerns.
ACC has determined that accreditation against a national standard for practice based delivery of physiotherapy services is the framework which it believes results in the best outcomes for out claimants.
As you know, standards for the Allied Health Sector have now been developed and published by Standards New Zealand and workbooks for both physiotherapists and chiropractors are being completed. There are two agencies now endorsed as auditors against these standards and an additional two auditing agencies are being surveyed by JASANZ next week with the full expectation that they will be successful in their application to be certified auditors.
With the endorsement of accreditation as the preferred criteria for engagement with ACC, and the payment of a premium to EPN physiotherapy practices, the Corporation sees little point in increasing the regulation based payment.
ACC has engaged Deloitte to undertake a national survey of the cost of delivering physiotherapy services. If you were interested in having your clinics participate in this project, please contact the Society who will add your sites to the pool of clinics for consideration.
I would encourage you to pursue accreditation to ensure your services are eligible for a contract with ACC.
[45] Mr La Pine did not reply to this letter. Instead he went to the Corporation's website, which as at 26 May 2005, said this as to 'ACC endorsed physiotherapy providers':
WHAT IS AN ACC ENDORSED PHYSIOTHERAPY PROVIDER?
Endorsed Providers are physiotherapy clinics that have achieved an accreditation process approved by ACC and have chosen to take up an Endorsed Provider Network (EPN) Contract.
ACC pays these physiotherapy clinics an increased fee, in return they cannot charge claimants a fee. Claimants may still be charged for:
Physiotherapy services provided outside normal working hours.
Normal working hours are the hours of 8am - 6pm on a working day. Monday to Friday.
Materials used in treatment e.g. strapping or orthoses.
Travel to provide Physiotherapy Services for a claimant where payment for that travel is not covered by ACC.
A'no-show' fee if the claimant does not attend a scheduled appointment and does not advise the service provider in advance that they will not be attending the appointment.
WHO CAN HOLD AN EPN CONTRACT?
To be eligible for an EPN contract the physiotherapy practice must have achieved an accreditation process approved by ACC and carried out by an ACC-approved auditing agency.
Service providers must also use ACC's electronic services.
HOW DO I GET A COPY OF THE CONTRACT?
Forfurther information and a request of the EPN contract please contact ACC Healthwise by email or by phoning 04-918-7700.
[46] On 12 June 2006 TELARC, an accredited assessor, certified that Cambridge complied with the New Zealand standard applying, and gave Cambridge a certificate of compliance for three years, subject to an audit at the halfway point.
[47] TELARC certified that Cambridge complied fully with the standard as it concerned administration, maintenance and service development; policies, procedures and guidelines; the ability to meet patients' needs, reflecting contemporary physiotherapy practice. Also as to willingness to liaise with other physiotherapists and others and in its focus on the best outcome for the patient. Cambridge complied almost completely with the standard governing human and physical resources. It complied partly as to management and information services and quality improvement. It complied least completely with the standard calling for permanent legible clinical records.
[48] Relying on TELARC's certificate, and the fact that Cambridge complied in the other respects called for according to the Corporation's website, Mr La Pine, on behalf of Cambridge, applied to the Corporation almost immediately for the EPN contract he contends it was then absolutely entitled to.
[49] On 29 June 2006 Diane Matthews of the Health Procurement Section, Wellington, replied saying:
Thank you for your request to hold an 'EPN contract'. I have attached a copy of the Services Specifications (PDF), Operational Guidelines and EPN Application.
So that your application is processed in a timely manner please ensure all information is provided e.g. Full name all signatories on Contract 'Michael
Joseph Bloggs'. Please note that all contracts start from the date that the contract is signed by both parties.
[50] Mr La Pine completed this sheet and it was received by Ms Matthews, according to the date stamp, on 3 July 2006.
[51] On 5 July 2006 the Corporation's health procurement facilitator, Elizabeth Kerr, wrote to Mr La Pine thanking him for his 'expression of interest'. She sent to him two copies of his company's EPN contract and 'operational guidelines on how to use the contract'. She repeated some of the conditions on which the contract was granted. She too emphasised that the contract would not take effect until the Corporation also signed it.
[52] Mr La Pine executed and returned both copies of the contract by 13 July
2006, but by then the Corporation's service performance monitoring team manager, Ms Mole, had raised the issue whether Cambridge, in reality Mr La Pine, could or would comply with the terms of the contract.
[53] I will return to that aspect of the narrative when I come to consider Ms Mole's responsibility for what then ensued. For the present my focus must remain on whether Mr Wilson's letter to Mr La Pine on 6 September 2005 supplied the foundation for a process contract.
Process contract principles
[54] The principle on which Mr La Pine advances this aspect of his claim and the issue to which it gives rise is, as the Court of Appeal stated in Quay Stevedoring Services Ltd v ENZA Ltd, this:24
It is well established in contract law that a person contemplating a contract in a commercial endeavour may enter into a prior contract in relation to the process that will be followed. Whether such a preliminary contract is brought into existence itself, of course, turns on whether the necessary elements of offer and acceptance, coupled with an intention by the parties to enter into a binding contract, are shown to exist.
24 Quay Stevedoring Services Ltd v ENZA Ltd CA214/00, 15 November 2001 at [18].
[55] Process contracts arise most typically where tenders for a contract are invited and there too the first question is whether the invitation to tender constitutes an offer to grant the substantive contract by a process culminating in the acceptance of a tender or merely constitutes an invitation to treat. The further issue, where it does constitute an offer, is what the content of that offer is.
[56] In Wellington City Council v Body Corporate 51702 (Wellington)25 the Court of Appeal emphasised the need to keep distinct the question whether there is a process contract from the 'substantive bargain' in which it is said to culminate. The Court said:26
It is, in our view, vital to emphasise from the outset that whether the terms of a process contract are sufficiently specific to be enforceable is an issue separate and apart from whether the substantive agreement, if reached, is sufficiently certain to be enforceable.
[57] Speaking of cases where a process contract has been found to be enforceable, the Court said 'if the contract specifies the way in which the negotiations are to be conducted with enough precision for the Court to be able to determine what the parties are obliged to do, it will be enforceable.'27 There it found an agreement merely to negotiate in good faith to be unenforceable.28
[58] In Prime Commercial Ltd v Wool Board Disestablishment Co Ltd29 the Court of Appeal, speaking of the state of the law as it related to tenders, began by saying this:
The primary rule is that a tender process involves simply an invitation to treat on the part of the party calling for tenders with no contractual obligation crystallising until an offer is accepted.
[59] A process contract, the Court said, constituted therefore an exception to the primary rule.
25 Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 487 at [14].
26 At [15].
27 At [32].
28 At [34].
29 Prime Commercial Ltd v Wool Board Disestablishment Co Ltd (2006) 7 NZCPR 697 at [15].
[60] Thus, the Court said, just as it had in the Quay Stevedoring case, "A party alleging a process contract must establish the 'necessary elements' of offer and acceptance and intention to enter a binding contract." A process contract was more likely, the Court said, where 'very formal tender procedures were proposed'. So too the converse: 'the less formal the tender process, the less scope there is for implying any, or at least any onerous, obligations on the party calling for tenders'.
[61] As these cases emphasise, the issue whether there is a process contract hinges very much on how specific the 'offer' relied on is; as to whether it is an offer at all, and if there is, to what extent it prescribes a process culminating in the award of the substantive contract.
[62] In the absence of express words there is little scope to amplify an offer by implication. In Dysart Timbers Ltd v Nielsen30 Tipping and Wilson JJ, in a statement with which the majority agreed said this:
An offer is a statement of the terms upon which the offeror is prepared to be bound if acceptance is communicated while the offer remains alive. It is a unilateral statement and, in that respect, is to be distinguished from the bilateral nature of the contract which comes into existence upon the acceptance of the offer.
[63] A term implied into a contract, a bilateral transaction, turns on what a reasonable person would consider both parties must have meant to have happened. In the case of an offer 'the focus should be on what the then sole party to the transaction, the offeror, meant to happen'; and that is to be assessed objectively.
Conclusions
[64] Assessed objectively, I consider, Mr Wilson's letter to Mr La Pine, dated 6
September 2005, falls well short of an irrevocable offer to Cambridge of an EPN
contract once it obtained accreditation and met any other minimal standard applying.
[65] The purpose of this last letter from Mr Wilson, like that of his first letter, was to counter Mr La Pine's criticisms of the Corporation; and in this instance the finally
30 Dysart Timbers Ltd v Nielsen [2009] 3 NZLR 160 at [25].
concerning subject, as Mr Wilson and Mr La Pine both saw it, the static state of physiotherapists' rate of reward.
[66] In referring to the EPN contract, which the Corporation was then encouraging physiotherapists to become eligible for, it seems to me, Mr Wilson set out to say no more than that this contract supplied a way to reconcile physiotherapists' need for a higher reward with the Corporation's need for a more accountable performance on their part.
[67] In encouraging Mr La Pine, in a formal sense Cambridge, to 'pursue accreditation to ensure ... eligibility for' an EPN contract, as he did at the end of the letter, Mr Wilson at most, I consider, invited Mr La Pine to take up that opportunity. He did not, I consider, set out to accord Mr La Pine a privilege not accorded to any others - an immediate irrevocable offer of an EPN contract immediately Cambridge became eligible.
[68] I question as well whether Mr La Pine did understand Mr Wilson's letter to constitute such an irrevocable offer. He did not reply to Mr Wilson confirming that to be his understanding. Nor, when he applied to the Corporation for an EPN contract for Cambridge, did he advert to the letter. Also, on his own evidence, Mr La Pine had an intelligible reason for taking up an EPN contract.
[69] Until the point of his exchange with Mr Wilson, Mr La Pine may have been sceptical about the EPN contract, but two other physiotherapy practices in Cambridge had not been. Each had taken up EPN contracts. Each, in contrast to Mr La Pine's practice, was being paid at a higher than regulation rate. While each had foregone the right to charge co-payments to patients, each apparently used that as a marketing point. He saw himself as at a competitive disadvantage.
[70] The Corporation's website statement, therefore, and not Mr Wilson's letter, dated 6 September 2005, I consider, set the framework within which Mr La Pine pursued an EPN contract for Cambridge; and the question then arises whether the minimal terms of eligibility set out in the website were exhaustive, an issue central to the claim of misfeasance against Ms Mole.
[71] Cambridge's cause of action against the Corporation does not, however, turn on that question. It turns only on whether Mr Wilson's letter, dated 6 May 2005, gave rise to a process contract for breach of which the Corporation is answerable.
[72] I conclude that there was no such contract. Cambridge had to apply like any other physiotherapy practice. The Corporation had still to decide whether to grant the application. Mr La Pine does not plead that the Corporation was nevertheless in breach for departing from its express guidelines. This first cause of action must fail.
Misfeasance claim
[73] Mr La Pine next contends that Ms Mole is as liable as the Corporation for the losses and expenses Cambridge incurred, as well as exemplary damages, as a result of misfeasance in public office. She acted with targeted malice, out of an intent to injure Cambridge or him. Or she acted with non-targeted malice, knowingly beyond
her powers, aware that this was likely to cause Cambridge or him harm.31
[74] Mr La Pine founds this claim, first, on Ms Mole's letter, dated 9 May 2006, in which she posed questions about his practice, which he found unreasonable and oppressive. Instead of assisting him, by telephoning him or, as he invited her to do, visiting his practice, she pressed him to answer her questions. She was instrumental in having him threatened with withdrawal of his bulk billing privilege.
[75] Ms Mole also, Mr La Pine contends, set about denying Cambridge the EPN contract to which it was entitled. On 19 June 2006, just before Cambridge claimed the contract, she called for an audit of his practice. On 11 July 2006, after he had applied for Cambridge's EPN contract, she sought a legal opinion as to how it might be denied. On 10 August 2006 she searched the TELARC report for the same reasons.
[76] In these ways, Mr La Pine contends, Ms Mole, a public officer, acted at least with non targeted malice, knowingly beyond her statutory powers, aware that it was
likely that Cambridge and he with it would incur losses, if not intending that result.
31 Minister of Fisheries v Pranfield Holdings Ltd [2008] 3 NZLR 649 (CA) [104] - [107].
[77] Ms Mole accepts that, as a public officer, she was obliged to act within her power and she contends that she did. She denies knowing that in what she did she was likely to cause Cambridge or Mr Le Pine any illegitimate harm or to have intended that result.
Immediate narrative
[78] On 9 May 2006 Ms Mole wrote to Mr La Pine advising him that, according to an annual review the Corporation had just made of claim data for the period 1
June 2004 - 30 June 2005, his treatment and billing patterns appeared 'to be outside
ACC expectations and evidence-based best practice'.
[79] Ms Mole went on to say 'there may be acceptable and valid grounds for the differences in your practice' and she asked him to answer a series of questions relating to his practice:
1.In your individual data it became clear that you see a significantly high number of claimants per day. In your case there are 158 instances where there have been between 26 and 45 visits per day.
a. How long are your treatment appointments?
b.Do you treat more than one person at the same time e.g. group sessions i.e. hydrotherapy, exercise classes etc or any other format that might apply such as supervising students?
c.Do you supervise students? If so please advise the dates and claimants treated and how many students were supervised on these dates.
d.Can you explain the basis for the high number of claimants treated per day?
e.Do you invoice ACC for claimants who do not attend appointments?
2.It is noted in your data that you treat multiple injuries simultaneously across multiple claims? Can you explain why the guideline for treating injuries across multiple claims, as set down in the Treatment Provider Handbook (p.89), was not followed in these instances?
3.It is noted that 29% claims require an ACC 32 which is higher than your peers? Can you explain why this is? (See attached schedule of ACC 32s submitted).
4.It is noted that the durations of your claimants are high and frequently reach the Treatment Profile Limit. Can you explain why this is?
5.It is noted that there is an incidence of new claims for the same or similar injury site arising within 28 days of the previous claim and this previous claim received a high number of treatments.
a.Can you confirm whether this was indeed a new injury or a reaggravation of the first injury or pre-existing condition?
b.If the latter to apply can you advise why a new claim was lodged?
6.It was noted that you request an ACC 32 and then either no treatment is delivered or less than four of the total requested on the ACC 32. Can you explain why this is the case?
[80] Ms Mole invited Mr La Pine to contact her. He did not do so. Instead he wrote to her on 25 May 2006, stating that he had concerns about the nature and content of her letter. As to her statement that he appeared to be outside ACC expectations and evidence based best practice, he said this:
What are ACC's expectations?
Your questions are somewhat generic and would be better addressed to a
Physiotherapy Professional Forum such as the new Liaison Group.
I will state, that I confirm that I have treated patients within the terms of the
ACC Act and any subsequent regulations.
[81] On 11 July 2006, after Mr La Pine had applied for an EPN contract for Cambridge, Ms Mole asked for a legal opinion as to the grounds on which such a contract might be declined.
[82] An EPN contract, she said, required subscribing physiotherapists to be certified against a standard and to be able to interact electronically with the Corporation. But, she said, the contract also required physiotherapists to be registered with the Corporation and to work according to its treatment profiles. Healthwise, she said, had a small number of physiotherapists, then being paid at the regulation rate, who were applying for EPN contracts, and who might meet the advertised contract criteria, but who were open to scrutiny in one or more of four ways:
1.Is recorded as a significant provider of interest for at least two years across identified key standard areas measured by the Monitoring Team.
2.The Monitoring Team again have identified key aberrant behaviours and obtained written agreement from the provider to change these behaviours. On review three months post agreement it is apparent that the behaviour has not changed and indicates to be at the same level or escalating.
3.The provider has declined to comply with monitoring team investigations of suspected aberrant behaviours and is awaiting referral to Risk, Assurance & Fraud for consideration of there being investigating via either practice, audit or other means.
4.Risk, Assurance & Fraud have investigated but have been unable to compile a case due to claimant non-assistance and/or unable to identify distinct fraudulent behaviour from discoverable records.
[83] On 31 July 2006 Ms Mole also requested a report deriving from the
Corporation's electronic records about Mr La Pine's practice between 1 April 2005 -
31 March 2006. Mr La Pine, she said, had applied for an EPN contract and
'anticipatory breach of contract needs to be identified as a risk or identified as not a risk'. She wished to establish under a number of headings whether there was any evidence that he was 'over-servicing'.
[84] Ms Mole said that she would use that information to report to the Corporation sections most immediately concerned; initially that concerned with health procurement and primary care and then, and only potentially, that concerned with risk, assurance and fraud. And, in a report dated 28 August 2006, Richard Chiu, the business analyst who made the data analysis called for, said that Mr La Pine, measured against physiotherapy group average and median levels, was operating at a higher level.
[85] Mr La Pine, he said, made 563 claims against a 178 average and a 100 median. He claimed for 5,854 visits against an 824 average and a 376 median. He had claimed for 445 patients against a 157 average and a 92 median. He had made
1.27 claims for each claimant compared with a 1.1 average and a 1.1 median. He had claimed 10.4 visits for each claimant compared with a 3.84 average and a 3.78 median. He claimed for 246 days against a 103 day average and an 83 day median and 23.8 visits per day against a six visit average and a five visit median.
[86] In mid September 2006, according to a report Ms Mole made on 20 October
2006, to which I shall come shortly, the competence review panel concluded that, unless Mr La Pine replied fully to the 9 May letter, his billing privileges should be withdrawn.
[87] On 19 September 2006, having received the legal advice she sought, Ms Mole, in an email to other officers responsible, recommended that the Corporation's response to Mr La Pine's contract application should be by a 'due process', to begin with a letter she proposed to send out that day.
[88] The point of the letter, she explained, was to invite Mr La Pine to identify and agree changes in behaviour by 21 October 2006. He was then to have until January
2007, three months, to make those changes. Cambridge's invoices were to be reviewed until March 2007. If all was as it should be, Cambridge was to be awarded an EPN contract. If not, the contract was to be declined.
[89] Ms Mole's letter to Mr La Pine on 19 September 2006 asked him to respond to her 9 May 2006 letter 'in full and frank detail'. If he did not, she said, his bulk billing privilege would cease as from 6 October 2006. ACC would then only reimburse him for a first acute treatment. For later visits his patients would have to pay him direct and claim on the Corporation themselves. In that event also, she said, said, the Corporation would refer him to the Competence Committee of the Physiotherapy Board of New Zealand.
[90] On 23 September 2006, in a letter written without prejudice, Mr La Pine replied to Ms Mole, complaining that he had not been told that his recent telephone conversation with her on 19 September had been audio taped, confirming 'my mistrust and scepticism of ACC's intentions'.
[91] Mr La Pine said that he was not a Corporation employee. He was a self employed senior practitioner providing a professional service for which he was fully qualified. He had been subjected to several years of audit investigation and harassment. He was under no statutory duty to reply to the 9 May letter. Ms Mole's
questions, he said, were impossible to answer but he then answered her questions in a general sense.
[92] As to the first question, for instance, Mr La Pine answered, 'treatment lengths are determined by the time needed to effectively treat the patient'. As to the volume of his practice, he said, 'I work very long hours and have a busy practice'. He treated multiple pathologies in single sessions, he said, because to treat different injuries on different days would delay recovery.
[93] A large number of his patients, Mr La Pine said, were farmers who often delayed seeking treatment. Their injuries were complex. Mr La Pine questioned how then he was to be assessed against his peers. As to the Corporation's profiles, he said this:
The treatment profiles were developed by the profession on no more scientific evidence than randomly guessing what number of treatments should be necessary to treat a particular problem. The profiles were not based on the results of extensive (or any) clinical trials. They were also developed for Grade 1 uncomplicated injuries. They did not include initial injury, severity, age or sex of the patient, the socio-economic status of the patient, whether or not the patient was working, and importantly the clinical end point of treatment - i.e. was the patient considered 'cured' when 100% rehabilitated or 90% or 80%? So any bench marking of my treatment profiles against any other treatment profile would need to be able to compare like with like. It is apparent from your letter that that has not happened.
[94] Mr La Pine ended by saying that his local member of Parliament's secretary had recently told him that the Corporation had signed his contract. Yet Ms Mole had told him on 19 September that it had been deferred until he replied to her 9 May letter. He said that he had met all the requirements imposed in July 2006 for an EPN contract. He wished to understand why it had not been signed.
[95] On 9 October 2006, in a letter to Mr La Pine's solicitors going to all the topics raised in her letter to Mr La Pine, Ms Mole said as to the EPN contract:
ACC may defer a decision on, or decline, a contract application if there is evidence of an anticipatory breach of that contract. Based upon our current concerns we believe that there may be evidence of such an anticipatory breach by Mr La Pine. ACC has deferred a decision on Mr La Pine's contract application while these issues are further considered.
[96] On 20 October 2006 Ms Mole reported to the chief operating officer and a number of intermediate managers as to the decision of the competence review panel in mid September to remove bulk billing privileges if Mr La Pine did not rely to the
9 May letter fully and frankly.
[97] Mr La Pine, she said, had replied but not fully and frankly. There were, she then said, two options. Either he could be told that the bulk billing privileges were to be withdrawn within five days. Or he could be written a further firm letter alerting him to that imminent possibility. The monitoring team, she said, recommended the former.
[98] On 10 November 2006 Ms Mole replied to Mr La Pine setting out the Corporation's analysis of his response to the 9 May 2006 letter. She accepted he had answered two of the 11 questions fully. She explained why his remaining answers were insufficient. She suggested how he might answer them. She asked him to do so by 24 November 2006. Otherwise, she said, his bulk living privileges would be withdrawn within five working days.
[99] On 17 November 2006 Mr La Pine brought a proceeding in this Court in Hamilton claiming an order declaring invalid and setting aside the Corporation's decision to stop him from bulk invoicing and an order requiring the Corporation to approve his application for an EPN contract together with a declaration that he met all the requirements for such a grant.
[100] On the same day he wrote without prejudice to Ms Mole, stating that he had answered the questions posed fully but extending to her an invitation to visit his clinic to view 'first hand' how it operates. He said that he was willing then to discuss any issue she considered still to be outstanding.
[101] The Corporation filed a statement of defence stating, amongst other things, that it was under no duty to pay or continue to pay treatment providers directly, instead of claimants; and its decision was an entirely discretionary commercial matter. The Corporation stood by its decision to defer deciding whether to make
payments directly to Mr La Pine or to offer him an EPN contract until it had sufficient information.
[102] As at 16 October 2007, this claim remained pending but, as Ms Mole said in an email on 16 October 2007 to the Corporation's risk assurance and fraud unit, 'a small number of unprofessional internal emails circa 2004' had been discovered relating to Mr La Pine, that might in law constitute 'malfeasance'. That, as it appears, proved decisive.
[103] On 28 January 2008, the then senior health procurement facilitator, Ms Freeman, wrote to Mr La Pine thanking him for his application, confirming that it had been successful and enclosing two further copies of a contract to sign, along with guidelines. Once again, she said, the start date of the contract was the date on which it was executed by the Corporation as well as by him.
[104] On that same date Quality Health New Zealand, another accredited auditor, told Mr La Pine that ACC had agreed that he should have a new certificate and schedule effective from 31 January 2008.
Conclusions
[105] Ms Mole, I consider, acted within the scope of her powers as a public officer, and without any intent to cause Cambridge or Mr La Pine harm.
[106] Ms Mole's letter to Mr La Pine on 9 May 2006, like the Corporation's data survey which prompted it, and which identified Mr La Pine as an 'outlier' was fully justified. The purpose of that letter was to establish, if only retrospectively, whether the Corporation ought to be, or was liable for, the invoices Cambridge had been rendering for Mr La Pine's services.
[107] In that letter Ms Mole set out to establish, as the Act required the Corporation to be satisfied about, whether the treatment Mr La Pine gave his patients was necessary and appropriate and whether it had been performed only for the number of
times necessary for the purpose.32 To establish that she had to understand the nature and severity of the injuries treated, whether the treatment was generally accepted, any other options, and the relative costs.33
[108] Ms Mole was entitled to expect that Mr La Pine, as a treatment provider for patients claiming entitlements on the Corporation, would answer these necessary questions; and, when he did not do so, the Corporation was entitled to consider whether it should continue to bulk fund Cambridge's invoices.
[109] Ms Mole's next and related concern, that Cambridge was then applying for an EPN contract but might not be able, or willing, to comply with that contract's exacting terms, was again entirely reasonable. That contract required subscribing physiotherapists to conform to Corporation treatment profiles, and to answer the very sorts of question that Ms Mole had asked in her May 2006 letter.
[110] Ms Mole did not act arbitrarily. She sought a legal opinion as to whether the Corporation could decline an EPN contract on the basis of that concern, when it had not expressly reserved that ability in its website statement. She also set out to confirm whether or not a data analysis did establish that Cambridge was likely not to comply with an EPN contract, if one were entered into.
[111] Finally, the decisions taken within the Corporation relating to the deferral of Cambridge's contract were not taken by Ms Mole. They were taken by more senior officers. This cause of action cannot succeed.
Conclusions
[112] Cambridge, I conclude, has not established either of its causes of action. Cambridge has not suffered any loss for which either the Corporation or Ms Mole is answerable in damages. There is no basis for any award of exemplary damages
against Ms Mole. There will be judgment in their favour.
32 Accident Compensation Act 2001, Schedule 1, clause 2.1.
33 Schedule 1, clause 2.2.
[113] The Corporation is entitled to costs. I do not understand Ms Mole to seek costs independently. If costs cannot be agreed the Corporation is to file its memorandum within 10 working days of the date of this decision and Cambridge its
response within the succeeding 10 working days.
P.J. Keane J
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