Health Advocates Trust v The Director of Health and Disability Services Consumer Advocacy on Behalf of the Crown

[2008] NZCA 67

IN THE COURT OF APPEAL OF NEW ZEALAND

CA22/07
[2008] NZCA 67

BETWEENHEALTH ADVOCATES TRUST

Appellant

ANDTHE DIRECTOR OF HEALTH AND DISABILITY SERVICES CONSUMER ADVOCACY ON BEHALF OF THE CROWN

First Respondent

ANDADVOCACY NETWORK SERVICES TRUST

Second Respondent

ANDADVOCACY SERVICES SOUTH ISLAND TRUST

Third Respondent

Hearing:19 February 2008

Court:William Young  P, O'Regan and Baragwanath JJ

Counsel:A E L Ivory and F Joychild for Appellant

A S Ross and P N White for First Respondent
No appearance for Second and Third Respondents

Judgment:18 March 2008 at 3 pm

JUDGMENT OF THE COURT

A        The appeal is dismissed.

BThe appellant must pay to the first respondent costs of $6,000 plus usual disbursements.  We certify for second counsel.

REASONS OF THE COURT

(Given by O’Regan J)

Table of Contents

Para No

Introduction  [1]
Issues for determination  [6]
Did the Director discharge her duty to consult?  [12]
         The statutory framework  [13]
         What is required to meet an obligation to consult?  [14]
         Factual history  [17]
         Dialogue before the tender process  [19]
         The tender process  [25]
         HAT’s contentions about the duty to consult  [32]
         Our evaluation  [33]
         Conclusion  [36]
Did the Director fail to take account of relevant considerations?       [37]

DID THE DIRECTOR FAIL TO GIVE SUFFICIENT WEIGHT TO RELEVANT

considerations?  [41]
Was the Director’s decision unreasonable?  [42]
Has something “gone wrong” with the Director’s decision?               [48]
Result  [49]
Costs  [50]

Introduction

[1]       Until 30 September 2006, Health Advocates Trust (HAT) provided consumer advocacy services to health and disability services consumers under contract to the Director of Health and Disability Services Consumer Advocacy in the Auckland/Northland region.  The Director had similar contracts with other charitable trusts, the Advocacy Network Services Trust (ADNET) for the remainder of the North Island and Advocacy Services South Island Trust (ASSIT) for the South Island.  The Director refers to these entities as “Boards” and we will do the same.

[2]       In September 2006, after a competitive tender process, the Director awarded a new contract for a nationwide consumer advocacy service to ADNET and ASSIT, on the basis that they would form a single nationwide trust to provide a nationwide service.

[3]       HAT was aggrieved at this, and a dispute arose between HAT and the Director about HAT’s conduct in relation to the transition to the new provider, which the Director argued was in breach of the terms of HAT’s contract.  The Director commenced proceedings against HAT, and eventually HAT commenced judicial review proceedings against the Director.  This appeal concerns the latter proceedings. 

[4]       HAT’s principal basis for its judicial review claim was that the Director had not undertaken an adequate consultation process on the change from a regional contracting approach to a national one.  It also argued that the Director’s decision to award a single nationwide contract was contrary to the Health and Disability Commissioner Act 1994 (the 1994 Act), involved the failure to take into account relevant considerations, involved taking into account irrelevant considerations, was unreasonable and that the decision had otherwise “gone wrong”, and therefore ought to be quashed.  The claim failed in the High Court: Health Advocates Trust v The Director of Health and Disability Services Consumer Advocacy HC AK CIV 2006-404-006066 18 December 2006 Asher J.  HAT now appeals against that decision.

[5]       ADNET and ASSIT took no part in the High Court hearing or the appeal hearing.  They abide the Court’s decision.

Issues for determination

[6]       The issues which require our determination are:

(a)Whether the Director discharged her duty to consult;

(b)Whether the Director’s decision involved the failure to take account of relevant considerations;

(c)Whether the Director’s decision involved a failure to give sufficient weight to relevant considerations;

(d)Whether the Director’s decision was unreasonable;

(e)Whether something had gone wrong with the Director’s decision so as to require the Court to set aside the decision under the innominate ground of judicial review. 

[7]       The issues for determination in this Court are considerably narrower than those which required consideration in the High Court. For the purpose of the appeal, both parties accept the Judge’s position on a number of issues which had been in dispute in the High Court. 

[8]       The Director accepts that the Director’s decision is amenable to judicial review (as she did in the High Court), and also accepts the High Court Judge’s finding that the Director had a duty to consult on the change from a regional to a national approach.  HAT accepts that the decision to enter into a single nationwide contract is not outside the scope of the Director’s power under s 27 of the 1994 Act.

[9]       In this Court, HAT did not pursue allegations that it had made in the High Court that the Director entered into the nationwide contract for an improper purpose, that the Director’s decision was biased and predetermined or that the Director’s decision was fatally tainted by an abuse of process.

[10]     The principal argument for HAT, that the Director failed to consult adequately on that possibility, focuses on the decision of the Director to award one nationwide contract, rather than a number of regional contracts.  The other grounds of review focus on the merits of the decision to actually award the contract to ADNET/ASSIT (and the consequential decision not to award a contract to HAT) and the evaluation process which led to that decision.  Obviously the Director was not able to, and had no duty to consult HAT about the latter decision. 

[11] We will deal with the issues in the order in which they appear at [6].

Did the Director discharge her duty to consult?

[12]     Counsel for HAT, Mr Ivory, made detailed submissions on the proposition that the duty to consult arose from the 1994 Act itself.  The Director did not accept there was a statutory duty to consult, and her counsel, Mr Ross, pointed out that no such statutory duty had been pleaded in the statement of claim or in the notice of appeal to this Court.  However, as the Director accepted for the purposes of the appeal that a common law obligation to consult arose on the facts of the case, nothing turns on this.  The issue before us is whether the Director met that obligation.  We will deal with that issue by first outlining briefly the legislative context and the requirements of a duty to consult, then setting out in some detail the factual background, before considering HAT’s arguments.

The statutory framework

[13]     The Director is appointed by the Health and Disability Commissioner under s 24(1) of the 1994 Act.  However, s 24(2) requires that, in exercising or performing her powers, duties and functions, the Director is not responsible to the Commissioner but must act independently.  The 1994 Act adopts a contracting model for the provision of advocacy services: it is not open to the Director to engage directly the services of advocates and run the service herself.  Rather, her functions under s 25 include administering advocacy service agreements, and s 27 requires that, from time to time, she negotiate and enter into such advocacy services agreements and monitor the performance of each of those agreements.

What is required to meet an obligation to consult?

[14]     The requirements of the duty to consult depend on the circumstances in which consultation is required.  This Court determined in Wellington International Airport Ltd v Air New Zealand [1993] 1 NZLR 671 that the obligation of the airport company to consult airlines in relation to the charges to be levied by the airport was met in the following circumstances (at 683-684):

If the party having the power to make a decision after consultation holds meetings with the parties it is required to consult, provides those parties with relevant information and with such further information as they request, enters the meetings with an open mind, takes due notice of what is said, and waits until they have had their say before making a decision, then the decision is properly described as having been made after consultation.  It is immaterial that those parties may have had other concerns which for their own reasons they chose not to put forward.

[15]     Although the context is different here, we consider that the requirements of the duty to consult are broadly similar in this case.  The decision as to the number of contracts and the number of providers was entrusted by the 1994 Act to the Director.  Before deciding to change the contractual model in a material way, she was obliged to engage with HAT and the other Boards which had a real interest in the decision, but not obliged to negotiate with them to reach an agreed position.  That is broadly similar to the position of Wellington International Airport Limited which, in setting charges, was required to consult its customers, but not to negotiate with them to reach consensus.

[16]     Against that statutory background, we consider the dialogue and exchange of information which actually occurred between the Director and HAT (and other interested parties).

Factual history

[17]     The Director first entered into a contract for the provision of consumer advocacy services with HAT in 1996.  That contract covered the Auckland and Wellington regions.  These were two of ten regions for which contracts were let in 1996. 

[18]     In 1999 a further tender process took place, and as a result of this the number of regions was reduced to four.  HAT was awarded the contract for the Auckland/Northland region (Northland had previously been a separate region), but was not successful in obtaining the contract for the lower North Island region, which included the Wellington area.  HAT’s contract for the Auckland/Northland region was originally for three years, but was extended a number of times, eventually coming to an end in 2006 after the tender which has led to this litigation.

Dialogue before the tender process

[19]     In 2005, the Director began consulting with HAT, ADNET and ASSIT about the future contractual framework, in anticipation of a new tender round.  As Asher J noted at [45], an important backdrop to this consultation was that the Director appeared to have a preference for a structure under which advocates would work for the Director as employees, which would mean the Boards would not be required.  However, as already noted, the 1994 Act did not allow for that to occur, so a statutory amendment would have been required if that option were to be pursued.

[20]     Prior to the 2006 tender round, there was dialogue between the Director and the Boards as to the future direction of the contracting process.  In particular, the Director issued a discussion paper entitled “Future Options for the Nationwide Health and Disability Advocacy Service” in September 2005.  This paper was discussed at a meeting between the Director and representatives from the Boards (including HAT) on 14 September 2005.  The record of that meeting notes there was a general discussion on ways for the Boards to work together “as part of a national approach”.  In a paragraph dealing with the discussion on the Future Options paper, it is recorded that the points raised included:

Contracting with one national board is another option that should be considered.

[21]     On the other hand, another discussion point raised the importance of not losing the culture within each Board which reflects the needs and demands of its own region.

[22]     After this discussion, a second version of the Future Options paper was prepared.  This version proposed a model in which regional trusts remained, but “certain key roles will change to reflect a nationwide advocacy service that is provided as one service rather than by three separate advocacy organisations”.  However, the paper also recorded that another possible option to address the perceived shortcoming arising from separate regional trusts was “one combined board and longer term contracts”.

[23]     Another version of the Future Options paper was produced in May 2006 and distributed to the Boards, including HAT.  It responded to a suggestion from ADNET that a contracting model with one national board should be adopted.  It set out three possible models for the provision of advocacy services on a national basis.  All of these proposals envisaged the regional organisations continuing in some form, but under the umbrella of a national board.  However, the possibility of a single national contract was one of the contracting options referred to in the paper, which describes the possibility of a single national contract as having “an inherent attraction”.  It continues:

The in-house legal advice favours a national contract as a way of achieving national consistency and reducing overheads.

[24]     All of this dialogue signalled to the three Boards that the Director saw real benefits in a national approach to the provision of advocacy services, although there was no clarity about exactly how this would be achieved. The provision of discussion papers and the convening of meetings to discuss options, coupled with the fact that the Director was putting forward ideas and seeking comment, as well as responding (particularly in the May 2006 paper) to feedback, make it clear that the process amounted to genuine consultation.  However, the possibility of a single national contract being awarded to the exclusion of the existing Boards was not at the forefront of the consultation. 

The tender process

[25]     The tender process itself began in June 2006.  Initially the Director asked for registrations of expressions of interest.  Any party responding to the request was asked to indicate the type of service provision it wished to provided, including:

The region or area. (eg. whether your organisation is interested in providing a comprehensive regional or national health and disability service or whether your focus is on a specialist area of advocacy such as mental health, or intellectual disability.

[26]     On the same day, the Director wrote to the Chair of HAT.  That letter was prompted by an approach HAT had made to the Minister of Health about the need for more funding for advocacy services.  In that letter, the Director said:

As I have said to all current providers I have a contract with – there are no guarantees that their contracts will be renewed and that the contracting process must be consistent with public sector best practice guidelines.  I have made these guidelines available for you to view.  It is therefore inappropriate for you to assume that your particular service can automatically expect a contract and that this will be at a level that is well beyond the current funding available.

[27]     HAT submitted an expression of interest.  That document included a reference to a national advocacy service, and noted that, as the two other advocacy services had signalled an interest in the Boards working together, that was an option which HAT would pursue.

[28]     Having received the expressions of interest the Director sent out a formal request for proposal to a number of parties, including HAT.  The accompanying letter stated:

Preference will be given to proposals for a nationwide service.

[29]     That sentiment was also reflected in the criteria specified in the request for proposal. 

[30]     HAT replied to the Director indicating that it had insufficient information to submit a proposal for a national service.  She responded, explaining that although a national service was a preference, it was not a requirement for all proposals. 

[31]     HAT submitted its proposal on 1 September 2006.  It was a proposal for the provision of advocacy services in Auckland/Northland only.  In its tender document, HAT suggested that, if it was planned to switch to a national service this should be rolled out over a 12 month period to allow interest groups to be involved in the process.  HAT said that there was some merit in the proposal for a national trust, as long as the needs of people living in Auckland/Northland were not compromised and provided the national body fulfilled a number of specified criteria. 

HAT’s contentions about the duty to consult

[32]     HAT’s essential contention is that the High Court Judge was wrong to find that the above steps amounted to consultation on the adoption of a model involving a single nationwide contract that did not involve all three of the currently contracting Boards.  On HAT’s behalf, Mr Ivory said that what happened amounted to “no more than general discussions about a change in the nature of delivery of advocacy services”.  He said that none of the discussion papers had referred to a single nationwide contract which excluded one of the existing providers, and that nothing in those documents alerted HAT to the prospect of having to tender contestably against other entities for a single nationwide contract.  Mr Ivory said that the evidence showed that the outcome of the tender process “came like a bolt out of the blue for HAT”.  Mr Ivory likened that present situation to that in Leigh Fishermen’s Association Incorporated v The Minister of Fisheries HC WN CP-266-95 11 June 1997 McGechan J.  In that case the Minister had consulted with the Association on methods of preserving snapper stocks in the Hauraki Gulf.  He consulted on a number of proposals but ultimately implemented measures which had not been the subject of consultation.  His decision was quashed.

Our evaluation

[33]     We do not see this case as similar to the Leigh Fishermen’s Association case.  Here the Director made it plain to all parties, including HAT, that she would prefer a single national contract.  That was the basis on which all parties were asked to tender, and ADNET and ASSIT responded to the Director’s expressed wishes.  HAT did not.  We accept Mr Ivory’s submission that the early discussion papers and discussions were focussed more on either a completely different model not involving contracting at all or a national organisation involving all three existing Boards.  The Director was under the (mistaken) impression that she had no duty to consult, so the process was informal rather than directed at a particular legal objective.  But the discussion papers raised issues clearly and input was sought from affected parties.  The Director made it clear that she was not limiting herself to any particular option. 

[34]     As the consultation continued, and the input of the Boards was obtained, the Director’s thinking evolved and ultimately resulted in her determining that she preferred a single national contract.  That was one of the possibilities which had been under discussion during the consultation process.  In our view the process involved sufficient consultation on that possibility, and culminated with clear advice to all parties that that was her preference.  HAT did not protest prior to the submission of its tender proposal.  The fact that such clear advice was given prior to the tender process ensured that all parties were given the chance to respond to that preference.  That distinguishes the present case from the Leigh Fishermen’s Association case.

[35]     We add that the fact that the specific option of ADNET and ASSIT banding together had not been raised in consultation is of no moment.  The contract for New Zealand could have been awarded to either; that it went to the pair which combined forces is not outside the legitimate scope of what had been consulted upon.

Conclusion

[36]     We conclude therefore that the High Court Judge was correct to find that the Director had complied with the obligation to consult in the present case.  This ground of appeal fails.

Did the Director fail to take account of relevant considerations?

[37]     Mr Ivory renewed in this Court the allegation that the Director had failed to take account of a number of relevant considerations.  He relied on the 1994 Act, the New Zealand Health Strategy issued under the New Zealand Health and Disability Act 2000, the guidelines relating to the operation of advocacy services (issued by the Health and Disability Commissioner under s 28 of the 1994 Act) and other documents relating to health services, which he said raised relevant matters.  He said that all of these documents emphasised the special role of Māori and the need for community involvement in the provision of advocacy services.

[38]     The focus of this argument was on the fact that neither ADNET nor ASSIT had trustees from iwi from the Auckland/Northland region, which Mr Ivory said compromised their ability to provide for the interests of Auckland and Northland-based Māori.  It was also argued that the governing boards of ADNET and ASSIT did not have experience of or representatives from Auckland’s diverse ethnic communities, as that of HAT did.

[39] Asher J found that the Director had considered these issues, and had found that the proposal from ADNET and ASSIT was satisfactory: at [68]. He considered that the evaluation process that the Director carried out was “balanced and thorough”: at [69].

[40]     In her evidence in the High Court, the Director said that the ADNET/ASSIT proposal satisfied all of her evaluation criteria.  In particular, she said that ADNET and ASSIT were using existing Māori competencies and had significant input from Māori at the governance, management and service provision levels.  Having considered the evaluation criteria, we agree with the High Court Judge that the Director did not overlook these factors.  This ground of appeal therefore fails.

Did the Director fail to give sufficient weight to relevant considerations?

[41] HAT argued that the Director did not give sufficient weight to the factors mentioned at [37] above and that the decision should therefore be impugned on the basis of a failure to take into account a relevant matter. There is nothing in this ground of appeal: in essence the Court is being asked to second guess the Director’s value judgement on these matters. This ground of appeal fails.

Was the Director’s decision unreasonable?

[42]     This ground of appeal duplicates the previous ground.  Mr Ivory was reduced to arguing that the unreasonableness of the Director’s decision was exemplified by the fact that she had made fewer handwritten notations on the evaluation form for the ADNET/ASSIT tender than she had for the HAT tender.  That was rightly rejected in the High Court and we also reject it. 

[43]     Mr Ivory pointed to a comment by the Director to the effect that there was a focus on ethnic representation on the board of HAT, rather than on governance skills, and that in that respect the board of HAT was like an advisory board rather than a governing board.  He said no reasonable decision-maker could have reached that view.  He referred us to affidavits by members of the HAT board as to their governance experience, which he said confirmed that contention.  We do not propose to engage with the argument.  This was one of many factors taken into account by the Director, and others may well have been more significant.  In particular, the HAT proposal involved a commitment to expenditure which was higher than the funds available for the Auckland/Northland region, a problem which would have been exacerbated in the second year of the contract when fees increased further.  HAT’s proposal would have required the Director to commit 50% of the (national) advocacy budget in the second year of the contract period to HAT, which would have provided advocacy services to only 37% of the population.  The Director considered that the HAT business case was disappointing, and, as already noted, it did not respond to her preference for a nationwide proposal.

[44]     Mr Ivory argued that awarding a contract to what he described as “an amorphous group” (ADNET and ASSIT) satisfied the unreasonableness test set out in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. This argument relied on the fact that ADNET and ASSIST had no experience operating in the Auckland/Northland region and did not provide a proposal that gave an informative account of how it would implement an advocacy service through the country and in a region it had not operated in before.

[45]     We disagree, as did Asher J.  As this Court noted in Wellington City Council v Woolworths New Zealand Ltd (No 2) [1996] 2 NZLR 537 at 545, a decision in this kind of case, where the Court claims no expertise, will be reviewable on Wednesbury grounds “if the outcome of the exercise of discretion is irrational or such that no reasonable body of persons could have arrived at the decision”.  As noted in Wednesbury at 230, it is necessary to prove in a case of that kind that “something overwhelming” occurred. In Woolworths, the Court cited with approval the observation by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 at 410:

It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.

[46]     There is simply no foundation for a submission that the Director’s decision is in that category.

[47]     Mr Ivory pressed on us the concern that ADNET and ASSIT did not have representatives from iwi based in the Auckland/Northland region on its governance board, and that this would mean it was unable to provide an adequate service for Māori residing in the Auckland/Northland region.  That, of course, is only one of a number of requirements which the advocacy service must meet.  No doubt this will be a matter which is carefully monitored by the Director.  But we do not accept that the absence of representatives of local iwi on the governance board makes it impossible for the new service to provide an adequate advocacy service for Māori in the Auckland/Northland region.  On the contrary, wherever a single service is based, provision must be made for the needs of the whole of New Zealand.  Much will depend on the management of the advocacy services in the Auckland/Northland region, and on the advocates themselves.  We do not see the absence of representation on the board as, of itself, providing a proper basis for a finding of irrationality or unreasonableness in the Wednesbury sense.

Has something “gone wrong” with the Director’s decision?

[48]     This ground of appeal was pursued only faintly, for good reason.  As will be apparent from the discussion on the earlier grounds of review, we are satisfied that the High Court Judge was right to find that nothing had gone wrong with the decision, and that there was no proper basis to invoke the innominate ground of review. 

Result

[49]     For the above reasons, which are essentially the same as those of the High Court Judge, we dismiss the appeal.

Costs

[50]     We award to the Director costs of $6,000 plus usual disbursements.  We certify for second counsel.

Solicitors:
Fergusson Tuiotolava, Auckland for Appellant
Chapman Tripp, Auckland for Respondents