Mary Moodie Family Trust Board (Inc) v Attorney-General
[2015] NZHC 365
•5 March 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-1630 [2015] NZHC 365
UNDER The Judicature Amendment Act 1972
and/or High Court Rules, pt 30, and/or
New Zealand Bill of Rights Act 1990, s 27(1)
IN THE MATTER OF
An application for judicial review of a decision to terminate community residential support - Intellectual Disability Agreement No. 340645/00
BETWEEN
MARY MOODIE FAMILY TRUST BOARD (INCORPORATED) Applicant
AND
ATTORNEY-GENERAL IN RESPECT OF THE MINISTRY OF HEALTH Respondent
Hearing: 10-13 November 2014 Appearances:
D Wood for Applicant
E Child and M Clark for RespondentJudgment:
5 March 2015
JUDGMENT OF MANDER J
MARY MOODIE FAMILY TRUST BOARD (INC) v ATTORNEY-GENERAL IN RESPECT OF THE MINISTRY OF HEALTH [2015] NZHC 365 [5 March 2015]
Table of Contents
Background ............................................................................................................[4] Events leading to termination of contract ..............................................................[9]
Difficulties begin to emerge [13] The Developmental Evaluation Audit [16] The certification audit and meetings [25] The families approach LifeLinks [36] Appointment of temporary managers [39] Termination [59]
Is judicial review available? .................................................................................[64] Decision – Justiciability .......................................................................................[71] Bad faith .............................................................................................................[100] The five grounds for judicial review ..................................................................[121] Mistakes of fact ..................................................................................................[122]
Relevant and irrelevant considerations ..............................................................[139] Failing to take into account relevant considerations [140] Irrelevant considerations [149] Breach of legitimate expectation........................................................................[154] Breach of natural justice.....................................................................................[170] Opportunity to be heard [171] Bias and predetermination [180] Unreasonableness ...............................................................................................[198] Conclusion..........................................................................................................[205]
[1] The Mary Moodie Family Trust Board (Incorporated) (the Trust) operated a residential facility for people with intellectual disabilities. For a number of years a remarkable woman, Mary Moodie, cared for intellectually handicapped children in the Sumner and Redcliffs areas of Christchurch. In February 1991 the Trust was settled to formally preserve and support Ms Moodie’s work.
[2] In 1993, the Trust entered into a contract with the Ministry of Health (the Ministry). The Ministry provided funding in return for the Trust providing residential care services to its disabled residents. From 1993 a succession of these provider agreements were entered into between the Ministry and the Trust. The terms of the agreements made provision for a system of reviews and audits to maintain standards and ensure appropriate procedures were in place and were being followed.
[3] In late 2012, the Ministry terminated the then current provider agreement. The Trust seeks judicial review of that decision, relying on various orthodox grounds. The relief it seeks is a declaration that the decision by the Ministry to terminate the provider agreement was invalid. The Ministry’s position is that the proceeding, brought as a public law claim, is misconceived. It submitted that the relationship between the Ministry and the Trust was governed by contract and that the contested factual narrative of events, over an extended period, is not amenable to determination on an application for judicial review.
Background
[4] In March 2012, the Trust and the Ministry entered into a further provider agreement, by which the Ministry agreed to fund the Trust in providing residential and other care services to intellectually disabled individuals until 31 May 2015. This included accommodation and 24 hour support and assistance. The Trust managed two homes on a single site, which housed and cared for 12 residents.
[5] The latest contract was for a three year period to commence on 1 June of that year. The amount of funding paid to a private sector organisation such as the Trust
was largely dependent on the number of residents it cared for. It is understood the Trust received Crown funding of approximately $700,000 per year to provide the agreed services.
[6] The provider agreement contained detailed provisions regarding the services to be provided, quality assurance requirements (including information and reporting standards) and other terms and conditions commonly contained in service agreements of this type. These included the provision of dispute resolution processes in case of breach or termination of the contract before the end date. In accordance with the Ministry’s responsibility for the funding of support services for disabled people, a significant part of the agreement also provided for the monitoring, evaluation and audit of the contracted services undertaken.
[7] The agreement required compliance with the Code of Health and Disability Services Consumers’ Rights, the provision of complaints procedures and the effective prevention of abuse and neglect. The services to be provided needed to comply with the identified needs of individual residents, their carers and their families. The Ministry was permitted to take action to remedy failures by the provider. These included the appointment of temporary managers to take over management of the provision of services in certain circumstances.
[8] The provider agreement made provision for the termination of the contract by either party upon 26 weeks’ notice. The Ministry, however, had other powers to terminate summarily in relation to specific grounds, one of which was a failure to remedy breaches within 20 working days from notice of default. Another was failure to carry out obligations under the agreement which were considered material. In the event of disputes between the parties, the issue was to be referred to mediation.
Events leading to termination of contract
[9] The narrative of events which culminated in the Ministry issuing a notice of termination on 28 November 2012 is strongly contested between the parties. This is reflected in the affidavits filed on behalf of the Trust, and the lengthy affidavits and exhibits filed on behalf of the Ministry. In providing the following summary of the sequence of events, in the period culminating in the termination of the provider
agreement, I do not attempt to resolve those detailed disputed factual issues. The conflict in the evidence is not capable of determination in the absence of oral evidence and cross-examination. Neither party applied to cross-examine deponents.
[10] In September 2010, the Ministry undertook a certification audit of the Trust. A number of recommendations resulted from the audit, with 19 matters identified as having only been partially attained. The Trust was certified for a further two year period to 30 September 2012. The Ministry points to certification for less than three years as indicating some concern that warranted a closer level of future scrutiny and as an early indicator of the beginnings of problems. The Trust, on the other hand, points to the certification for a further two year period as endorsement of the service it was providing at that time, and that there were no outstanding complaints or identified issues relating to the safety of the residents.
[11] In August 2010, the Trust permanently appointed Ms Yvonne Boulton to manage its operation. Difficulties had arisen earlier in the year regarding the non- reporting of an assault by a member of the staff, and the inappropriate use of Trust money by the previous manager. Ms Boulton, in her earlier capacity as a temporary manager, had undertaken an investigation of the incidents and reviewed policies and documentation, including a review of the Trust’s complaints policy. The Ministry was satisfied with the process undertaken by the Trust during this period, and that measures had been taken to resolve issues pertaining to the wellbeing and treatment of residents.
[12] In September 2010 and February 2011, the significant earthquakes in Christchurch led to considerable disruption of the Trust’s activities and the lives of the residents. In the wake of the earthquakes, the Trust lost the services of a number of staff who needed to be replaced and trained to the appropriate standard.
Difficulties begin to emerge
[13] On 6 April 2011, a group of parents and welfare guardians presented a letter to the Trust complaining about what they considered to be the inadequate standard of care provided to the residents. These included concerns about what was described as the poor training of staff, their inability to recognise health problems of the residents,
poor reporting of incidents and lack of communication. The Trust met with the parents and caregivers and discussed the complaints with them. The Trust responded formally in a letter of 14 April 2011 to all parents and caregivers. In the letter, the Trust referred to a number of policies which it was required to implement in order to comply with health and disability standards required by the Ministry.
[14] It is apparent that around this time, in addition to the specific concerns families had about the training of staff and the care of residents, there was a view that the Trust was becoming more institutionalised. The concern was that the residence was no longer being run as a family home, as it once was, in accordance with the late Mary Moodie’s intent and vision. This was to become of concern to the Ministry as it ran counter to the “disability philosophy” which the Ministry expected providers to reflect in the delivery of their services.
[15] This philosophy is expressed in a high level policy document, the New Zealand Disability Strategy, which seeks to encourage and facilitate disabled people leading active lives and participating fully in the community. This philosophy was given effect to in the provider agreement, with objectives recorded in the contract to promote the care, support and independence of persons in need of the services. In particular, the provider agreement set service objectives as including support in a home-like environment, enhancement of the “service users” autonomy, control and self-reliance, and integration into community life. These and other principles, reflecting the “disability philosophy”, were recorded as rights held by disabled persons, and their families and carers, and were contained in the service and quality specifications of the provider agreement.
The Developmental Evaluation Audit
[16] A further audit of the Trust, called a Developmental Evaluation Audit, was conducted in early 2012. The audit was carried out by an external contractor experienced in the field of intellectual disability. The Ministry submitted that the purpose of this type of audit was to evaluate whether the service was, in practice, supporting each individual and meeting their expectations. It focused on the quality of the services provided and aimed to help the service provider improve. The
auditors interviewed five family members, a number of former and current staff members, and staff from organisations connected with the Trust. A draft report was provided to the Trust for comments which were included in the final report.
[17] The Trust submitted that the evaluation review did not identify any issues relating to the health and safety of residents. It took issue with a number of matters identified in the draft report, and, on 20 March 2012, through its solicitors, gave notice requiring a review of the Developmental Evaluation Report.
[18] The Ministry took the view that the report highlighted serious concerns about the Trust. The audit found that confidence in the board and management was diminishing, and staff practice was not aligning with formal policies. Families expressed concern that the service was becoming less committed to a “disability philosophy” and increasingly operating like an aged care facility. Staff turnover was considered to be high, and many of those spoken to voiced concerns about the management of the Trust. There was dissatisfaction over communication, responsiveness, and the provision of information. Reference was also made to incidents of verbal and physical abuse. Families also indicated a fear of speaking out.
[19] The audit report authors also consulted other services providers who were said to have experienced a lack of communication with the Trust. Day service providers reported difficulties with the Trust and that it was reluctant to share information relating to such things as medication for residents.
[20] As already noted, the Trust took issue with the matters identified in the draft report and, through its solicitors, chose to give notice requiring a review of the Developmental Evaluation Report. The Trust, through its solicitors, also asked that the report be withheld from release, as a copy of the report had been requested by a member of the public under the Official Information Act 1982.
[21] The Developmental Evaluation Report listed a series of “requirements”, denoting matters that were required to be done, and “recommendations”, which took the form of suggestions for improvement. The auditors identified a total of 11
requirements, seven of which were classified as high risk areas requiring urgent attention. These related to the following matters:
· Staff relationships with those in management were not conducive to a well performing organisation.
· Documentation was not completed to the standards required.
· While there was a complaints system, family meetings, and processes in place, families had concerns about the service that were not being addressed to their satisfaction.
· The behavioural management file had some issues regarding “aversive”
language, “telling people off”.
· There were two recent complaints about health-related concerns which were being followed up, and a further concern had since been raised.
· There was no active monitoring to ensure that care was being provided to the necessary requirements.
· A board trustee was also an employee and there did not appear to be any policy to manage potential conflict.
· There was limited intellectual disability knowledge on the board, and the manager had limited experience/training in this area.
[22] The Trust disputed these findings. It continues to strongly contest those matters, and sought to do so in this proceeding in some detail. The Trust is critical of the timeliness of the Ministry’s acknowledgment of its request for review which was not formally recognised until a letter was sent on 10 July 2012, almost three months following its first request. The Ministry maintains, however, that the opportunity to appropriately respond was overtaken by an allegation of sexual assault at the Trust’s premises, which required deferral of the review until that investigation had been
completed. That review was commenced in July 2012 by the Ministry formally requesting that the Trust identify its previously unspecified concerns about the report.
[23] It is not necessary to review the correspondence. It is apparent, however, that a degree of antagonism had developed between the Trust and the Ministry. During this time there was also a growing antipathy between the Trust board and the majority of the residents’ families and caregivers. A review was finally undertaken after a response had been received from the Trust identifying its concerns with the Developmental Evaluation Report. On 15 November 2012, the Ministry advised the Trust’s legal advisors that the original findings had been upheld by an auditor within the Ministry.
[24] During this period, the Ministry carried out further reviews of the Trust. The first arose out of an alleged sexual assault of a resident. The Ministry commissioned an “issues-based” audit focused on the Trust’s response to the incident, its systems and processes. This audit found that the Trust had responded appropriately to the alleged incident, although concern was expressed regarding the lack of guidelines for staff regarding events of inappropriate expressions of intimacy and sexuality, and issued requirements and recommendations for improvement.
The certification audit and meetings
[25] In July 2012, a routine certification audit was required to be undertaken. This review assessed compliance with mandatory minimum safety standards set under the Health and Disability Services (Safety) Act 2001, and again was undertaken by independent contractors. The audit identified 11 matters where full attainment had not been achieved. This included an expression of concern over the Trust’s failure to manage complaints made by family members and to communicate with them effectively to resolve concerns. The report also identified systemic issues, including the absence of analysis of incidents or documented improvements.
[26] As part of the certification process, a meeting was held with Ministry representatives on 3 August 2012 and members of the board. Various allegations have been made by the Trust regarding representations made by members of the
Ministry at this meeting. It resulted in the Trust seeking legal advice and instructing its solicitors to put the Ministry on notice regarding its concern about the meeting. The Trust, through its solicitors, also formally contested issues relating to the performance of its contractual obligations under the provider agreement. The Trust considered it had been “ambushed” at the meeting with no advance notice of the matters to be raised.
[27] It is apparent that the meeting was no less satisfactory from the Ministry’s point of view than from that of the Trust. From the Ministry’s perspective, attempts to discuss the lessening “disability focus”, the standard of interaction with the families, and their concerns, conflicted with the Trust’s representatives wishing to focus on particular aspects of the audit report which they disputed.
[28] It is the Ministry’s case that the concerns of the families regarding the operation of the Trust were sought to be discussed at the meeting. The Ministry raised the families’ concerns regarding the Trust operating like an aged care facility, marginalisation of families’ involvement in decision-making, and concerns regarding the management style of the Trust’s manager, who also sat as a member of the board. Reference was made to the complaints from families and the high turnover of staff impacting on the residents’ health needs.
[29] Following the 3 August meeting, the Ministry wrote to the Trust to recording the complaints and concerns which had been discussed and understanding of what had been agreed to take matters forward. This included its meeting to be conducted by a new board member, Mr Wilson, with the families.
[30] In its letter to the Trust, the Ministry identified the following main issues:
· A significant loss of the disability focus and the homes being run as “an institution”.
· A lessening of the values and philosophies of disability.
· Less family involvement in decision-making.
· Major communication issues, particularly regarding the manager’s style
and attitude.
· Governance arrangements.
· Status of the Developmental Evaluation Audit from January 2012.
The letter concluded by noting the Ministry’s wish to work with the Trust to find a way forward that ensured that the Trust delivered a high quality service in the future.
[31] It was in response to that correspondence that the Trust’s legal advisors complained about the nature and tone of the meeting, and rejected complaints that were being made by the families. The new board member’s, Mr Wilson’s, initiative to ease tensions between the Trust and the families did not result in any improvement. After Mr Wilson met with the families on 13 August, the board expressed a lack of confidence in him and he resigned.
[32] On 30 August 2012, the Trust arranged a meeting between the board and parents and caregivers. The meeting also included staff members and professional advisors. The purpose of the meeting was to discuss the disagreements that were deepening between the board, parents and caregivers. Various accounts of the content and outcome of that meeting have been provided in the written evidence filed by both parties. The Trust takes the view that the outcome was positive and a level of resolution was achieved with the parents. It criticises the Ministry for not taking account of the progress the meeting represented in terms of the families working with the Trust to resolve their differences.
[33] Meanwhile, the certification audit had resulted in the extension of certification to the Trust for a further period of two years. The outcome of the certification audit is considered by the Ministry to be an indication of unsatisfactory performance by the Trust, with the two year term being shorter than the average term extended to a provider. The Ministry submits that concerns were expressed regarding quality assurance and risk management processes provided by the Trust, and of a deterioration in systems, with no improvement in relationships with
families. The Trust, however, to the contrary, interpret its certification at this time and the result of the audit report to be favourable and positive, and that the auditors were very complimentary of the Trust’s performance.
[34] Notwithstanding the parties’ respective interpretations of the certification audit, it is apparent that the significant concerns of the majority of families and caregivers of residents remained unresolved. The Ministry continued to receive numerous complaints regarding the care of residents at the Trust. The Trust in response, observed that some of these complaints were anonymous and ought to have properly been characterised as localised to one or two disaffected individuals. The Ministry was copied into complaints that were made to the board or management directly. The Ministry had been obliged to prepare logs of communications it was receiving regarding the alleged problems at the Trust’s homes. The complaints included alleged assaults, including an alleged sexual assault, on Trust residents. Family members reported unexplained injuries, inadequate medical attention, neglect of residents’ hygiene needs, and a lack of communication with families of residents.
[35] Similarly, whatever the conflicting respective views of the nature and outcome of the meeting held on 30 August, between the board, staff and families, it is apparent that no improvement in the situation resulted. Towards the end of September 2012, the Trust reported to the Ministry another alleged incident of assault involving one of the residents. Concerns were raised as to the processes followed to investigate the resident’s allegation. The Ministry received reports from family members of residents behaving out of character. One resident was described as being very distressed at the prospect of having to return to the Trust’s care after a weekend stay with her family. Families’ concerns regarding the complaints process and the willingness to provide a safe and secure environment to facilitate such processes continued to be of concern. Concerns were expressed regarding the vulnerability of residents and their families should complaints be made to the management. It was apparent there was a lack of confidence in the Trust’s complaints process.
The families approach LifeLinks
[36] The Trust disputes the validity of the reports being received by the Ministry at the time and the motivation of those criticising the performance level of the service it was providing. However, on 17 September 2012, the families of 10 of the
12 residents at the Trust wrote to the operations manager of LifeLinks, requesting that he urgently find alternative placements for their family members. LifeLinks is a Needs Assessment and Coordination Service (NASC), which is contracted by the Ministry to assess individuals’ needs and organise services, including the provision of residential care facilities. The families and caregivers complained to LifeLinks that they no longer received the quality of service and care which the Trust had previously provided, and expressed concerns regarding the safety and wellbeing of the residents. They noted they had made formal complaints to the Ministry and set out their major concerns as follows:
· Health issues of residents which were left untreated.
· The manager had a bullying attitude and exercised poor judgment, leading to unsafe situations for the residents.
· The board was ineffectual and had an attitude of refusing to hear and act on concerns of the families.
· There was police involvement in cases involving three different residents.
· Unsubstantiated allegations were made by the staff manager, regarding the residents and family members, as a form of retaliation against parents for making complaints about the service.
· Poor incident reporting procedures and lack of incident reports and files.
· Derogatory comments written in the notes of a resident.
[37] These serious complaints were strongly contested by the Trust’s manager
when LifeLinks made inquiries with the Trust following receipt of the families and
caregivers’ formal letter of request. The evidence filed by the Trust vehemently contests these allegations and provides a detailed case disputing the identified concerns which it considers to be groundless.
[38] On 10 October 2012, the Ministry made the decision to appoint temporary managers, and, as provided for under the terms of its contract with the Trust, to take over management of the provision of services. This was formally advised to the Trust in a letter of the same date. Ministry officials met later with the Trust on that day to explain the decision in person.
Appointment of temporary managers
[39] In issuing formal notice to the Trust that it was appointing temporary managers to take over management of the provision of services, the Ministry relied upon cls A23.1 and A23.2 of the provider agreement. Those clauses provided as follows:
A23 WE MAY REMEDY YOUR FAILURE TO MEET YOUR OBLIGATIONS
A23.1 Where:
a. You have, in our opinion (such opinion based on reasonable grounds), committed a breach of your obligations under this Agreement; and
b. Such breach, in our opinion, requires urgent action to protect the health and safety of Service Users,
we may, unless such breach is due to an Uncontrollable Event:
c. Withhold some or all of our payments to you in accordance with clause A6 until you have remedied the breach or until we are satisfied on reasonable grounds that you have taken appropriate steps to ensure that a breach of that nature will not happen again; and
d. Ourselves take action to remedy the breach, and recover the reasonable costs (including reasonable legal expenses if any) from you, including by deducting such costs and expenses from payments due under this Agreement in accordance with A6.1.
A23.2 Temporary Manager:
a. Without limiting our rights under clause A23.1(d) we may appoint as temporary manager for your premises a person who is
appropriately qualified and experienced. Such temporary manager will take over management of the provision of services, in substitution for and on behalf of you and your manager for the purpose of remedying the breach referred to in clause A23.1(b).
b. Where a Temporary Manager is so appointed, you must:
i. Allow the Temporary Manager access to your premises;
ii. Ensure that the Temporary Manager is able to carry out his or her duties without disturbance or disruption; and
iii. Comply with any direction or instruction given by the
Temporary Manager.
[40] The notice provided that, in the opinion of the Ministry, breaches of the provider agreement had occurred which included:
· Failure to provide and follow appropriate processes to safeguard service users from abuse and/or neglect under cl B7.6 of the agreement;
· Failure to provide and allow a fair or appropriate process for management and resolution of complaints under cl B6.6 of the agreement; and
· Failure to comply with obligations to service users under the Health and Disability Commissioner (Code of Health and Disability Services Consumers’ Rights) Regulations 1996, in accordance with cl B6.5 of the agreement.
[41] The Ministry set out its opinion that the accumulation of complaints from service users, families and guardians; complaints to the Health and Disability Commissioner’s office; serious incidents that the police were currently investigating; significant staff turnover; and the failure to maintain and support relationships with family/whanau and guardians of service users, raised significant and sufficient concerns in relation to the welfare and safety of residents to warrant the appointment of temporary managers.
[42] The temporary managers worked on site at the Trust with the residents and staff. They also met with external service providers and provided reports to the Ministry, regarding their observations and assessment of the situation at the Trust. In
these reports the temporary managers expressed concerns regarding the lack of experience and understanding of intellectual disability by staff members, and a lack of training and clinical leadership for staff. Of particular concern was the Trust’s relationship with the residents’ families and caregivers.
[43] On the one hand, it was reported that the families were observed as being hostile and disrespectful of the Trust management, while, on the other, it was apparent that the families felt the board had ignored their complaints and the present management lacked compassion for the residents. The views expressed to the temporary managers by the Trust’s manager and board chair were that some families were troublesome and disruptive. In the temporary managers’ view, management and some staff displayed a lack of empathy and respect for parents with a disabled family member.
[44] The situation was not aided by the lack of clear demarcation between governance and management of the Trust. Ms Boulton, the Trust manager, was also a board member. This was viewed as compromising the ability of the board to deal with issues raised by parents and caregivers regarding the management and care of the residents. The confluence of governance and management roles had been raised as a concern in the Developmental Evaluation Audit (see above at [21]).
[45] The Trust strongly disputes the observations and findings of the temporary managers, and did so at the time. Somewhat belatedly, on 7 November 2012, the board gave formal notice challenging the appointment of the temporary managers. They identified a series of issues relating to the content of the notice of 10 October provided by the Ministry. It is plain that the relationship between the temporary managers and the Trust manager, such as it was, broke down.
[46] On 5 November, Ms Boulton advised the temporary managers that she had received legal advice that she did not need to discuss matters relating to the audit, or other matters relating to workforce structure or incidents. The temporary managers received a formal notice from the Trust requiring them to vacate their offices in order for “proper management” of the service to be carried out by Ms Boulton. Locks
were changed on two office doors and access to information, needed to allow the temporary managers to undertake their duties, was withheld.
[47] On 9 November 2012, the temporary managers provided a draft report to the Ministry summarising their observations and the evaluation they had formed in the four week period that they had been on site at the Trust. In the temporary managers’ view, family interactions with the board had continued to be “acrimonious” and was marked by an unwillingness to cooperate. Families had expressed concerns that complaining or disagreeing with management could result in retribution.
[48] The temporary managers expressed their concerns regarding the experience of staff and managers in intellectual disability, the thoroughness with which incidents were being investigated and objectively reported, and the lack of opportunities for residents to interact with the community. The temporary managers reached the following conclusions in respect of breaches of the provider agreement which had previously been identified by the Ministry (above at [40]).
(a) Failure by Trust to provide and follow appropriate processes to safeguard service users from abuse and/or neglect under cl B7.6 of the contract: The temporary managers advised that there was evidence of lack of knowledge about the management of residents’ medication requirements and health needs, and there was a requirement for intensive training around the parameters of intellectual disability, in particular autism. They considered there was evidence of inadequate processes being followed to safeguard residents from abuse and neglect, noting that there were five ongoing complaints of assaults on residents currently being investigated by police.
(b) Failure by Trust to provide and follow a fair process for management and resolution of complaints under cl B6.6 of the contract: The temporary managers found that there had been a “sustained failure” to provide and follow a fair process regarding the management and resolution of complaints. The relationship between the board and the families was described as “destructive and damaging”. The management was described as “controlling and defensive”, and that the non-acceptance of audit findings was considered
to be a barrier to families seeking to address their concerns. They noted the evident lack of differentiation between the board and management, which was perceived as a single entity that provided no forum for parents to discuss concerns about management or other service issues.
(c) Failure by Trust to comply with its obligations to service users under the Health and Disability Commissioner (Code of Health and Disability Services Consumers’ Rights) Regulations 1996: Identified breaches of the code included the right to be treated with respect, the right to dignity and independence, the right to services of an appropriate standard, and to effective communication. Other breaches of rights were also identified. Details relating to the nature of these breaches were provided by the temporary managers in their report.
[49] The temporary managers made recommendations for change which included up-skilling the knowledge of the board in terms of its understanding of intellectual disability, and to provide for parent and service user representation on the board. It was also recommended that the manager step aside and that the board chairperson step down due to a lack of confidence in her ability to support the families in respect of the future concerns that the families may raise. They also recommended that the Trust consider working cooperatively with other providers to enhance staff recruitment, education and training, and work cooperatively with day services to reinforce activities to meet joint goals of residents’ lifestyle plans.
[50] The Trust considered that the draft report of the temporary managers made a significant series of errors of fact and proceeded on unjustified assumptions that were unsupported by evidence. It characterised the content of the report as being biased and based upon incorrect commentary.
[51] The Trust noted that investigations being conducted by the police were either unknown to the Trust, or had been resolved by the police as being unsubstantiated. The Trust considered that the narrative of some of the matters referred to in the report was incomplete and inaccurate, and that a lack of evidence had been provided by the temporary managers to support many of the conclusions. The Trust pointed to
the commentary under the heading “medical issues” as being erroneous, and that the Trust’s local medical practitioners, cited as the source of such information, had denied making such representations. The Trust disputed the concerns identified in earlier audits and submitted that there remained a lack of supporting evidence to sustain the issues identified. These included allegations that families were fearful of retaliation should they complain, and that complaints and concerns said to have been identified to the Health and Disability Commissioner, particularly as they related to welfare and safety, had not been identified to the Trust. In the Trust’s view, no evidence had been produced by the report writers to sustain the alleged complaints.
[52] In relation to the recommendations made by the temporary managers, the Trust considered that they could not be attributable to any proper “findings” in the report which had been put to the Trust. By letter of 14 November 2012, the board, through its solicitors, requested urgent information under the Official Information Act to determine the basis of the observations and conclusions made in the temporary manager’s draft report. A further letter from the Trust’s solicitors, issued the following day, formally challenged the draft report but did not provide details of the particulars of the report that were being contested.
[53] The Trust also requested that the draft report be kept confidential. In further correspondence from the Trust’s solicitors, the draft report was described as “fundamentally unsound” and the process by which the draft report had been produced “flawed”. It was represented to the Ministry that they should consider the document to be unreliable.
[54] The Ministry attempted to engage with the Trust to discuss the contents of the report. It is apparent, however, that the Trust board was unwilling, given the stance that it had taken in respect of the draft report, to enter into communication with the Ministry other than through its legal representatives. By letter in reply to the Trust’s lawyers, the Ministry informed the Trust that its priority was with the safety and welfare of the residents, about which it remained concerned. The Trust had refused to engage with the temporary managers, and it was therefore difficult for them to gain the Trust’s views when it refused to speak with them. The Ministry placed the Trust on notice that it would take action to safeguard the welfare of residents.
[55] On 20 November 2012, the Ministry held a meeting with the residents’ families who expressed frustration and anger at the approach being taken by the Trust. It appeared apparent to the Ministry that the families would seek to move the residents regardless of what the Ministry did.
[56] On 23 November 2012, the board met with the Ministry. The board chairperson expressed the view that there were no issues with Trust management and considered that the temporary manager’s report was not objective, referring in particular to the medical issues referred to in the report, and that the health and safety of the residents at the Trust was never in issue. There is disagreement as between the parties as to what may have been agreed as a way forward at the conclusion of that meeting.
[57] In any event, on 25 November 2012, the families of 10 of the 12 residents signed a letter formally advising the NASC that they required the immediate relocation of their family members to alternative premises. The families cited ongoing concerns regarding the safety of their family members, which the Ministry of Health had acknowledged at an earlier meeting.
[58] Meanwhile, the temporary managers had earlier, on 22 November, updated their views regarding potential risks to the health and safety of the residents. This largely repeated the earlier observations and evaluation that management were impatient with residents, that staff members were inexperienced and unsupported, and that there was extremely poor communication between the staff, management, families and day service providers. This, it was said, had resulted in medication errors, mistakes regarding the collection and dropping off of residents, highly stressed staff, and general mistrust of what was occurring at the Trust. The temporary managers concluded that residents with autism and associated behavioural issues were not being adequately cared for and were at particular risk.
Termination
[59] On 28 November, the Ministry made the decision to terminate its contract with the Trust, and notice was given to that effect. On 30 November, the Ministry assisted residents to move to an alternative service provider, IDEA Services.
[60] In giving notice of termination to the Trust, the Ministry relied upon a clause of the agreement which provided that the Ministry could terminate the agreement if the Trust failed to carry out any of its obligations under the agreement and that such failure was “material”.1 In reliance upon that clause of the agreement, the Ministry referred to the Developmental Evaluation Audit report conducted at the beginning of the year and the reports of the temporary managers. The termination notice repeated
the failures of the Trust to comply with its obligations under the provider agreement, identified by the temporary managers in their report of 9 November 2012 (see above at [48](a)-(c)).
[61] Additionally, it listed the failure to comply with its obligations under cl A23.2b of the provider agreement, relating to the appointment of temporary managers. These were identified as failing to allow temporary managers access to its premises, failing to ensure that the temporary managers were able to carry out their duties without disturbance or disruption, and not complying with directions or instructions given by the temporary managers.
[62] On 12 November 2013, the Trust made application seeking judicial review of the Ministry’s decision to terminate the provider agreement. It eschewed reliance on the dispute resolution and remedial processes provided for in the provider agreement, nor did it issue any formal notice of default or seek specific performance or damages as was also provided in the contract. The decision not to rely on the terms of the contract may have been a recognition of the practical situation the Trust faced.
[63] Almost all the families and caregivers were determined to remove the residents they were responsible for from the Trust’s homes, and that likely would have happened regardless of any decisions or alternative approach that the Ministry took in November 2012. The families, having resolved to move their family members, the associated funding followed the individual residents. The provider contract therefore, even if left in place, would have become hollow in the absence of other families being referred to the Trust to take the place of the residents that had
moved.
1 Clause A27.1(c) of the provider agreement.
Is judicial review available?
[64] The Trust seeks a declaration that the Ministry’s decision to terminate the provider agreement was invalid. An associated claim for damages was abandoned at the conclusion of the oral hearing. The grounds for the declaration of invalidity sought by the Trust are based on alleged breaches of natural justice, legitimate expectation, mistake of fact, failing to take account of relevant considerations and taking account of irrelevant considerations, and unreasonableness.
[65] The Ministry’s response is that a public law remedy is not available to the Trust, and the issues sought to be raised in this proceeding are not justiciable by way of judicial review in the absence of fraud, corruption or bad faith. An important preliminary question, therefore, is whether the Trust’s challenge of the Ministry’s termination of the contract is able to be determined, as pleaded, by way of judicial review.
[66] The Ministry submitted that the proceeding is, in reality, a contract claim “in public law drag”.2 It maintained that the parties entered into a commercial contractual arrangement governed by a detailed written agreement. The decision to terminate the contract was made pursuant to, and in accordance with, the terms of the contract and the processes it provided. It submitted what is in issue between the parties is a matter of private law and does not involve a statutory decision or the
exercise of a public power capable of being the subject of judicial review.
[67] The Ministry argued that the proceeding has been brought on behalf of a private provider and that the wider interests of the residents, or other users of disability services, is not engaged. In the circumstances, the Ministry submits that its actions do not give rise to breaches of public law obligations, and its relationship with the Trust is governed solely by contract. Its decision to terminate its contractual relationship with the Trust, the Ministry submitted, was a matter of judgment which cannot be reviewed for correctness by way of judicial review. It says the Ministry was entitled to make the decisions it did pursuant to the terms of its contract with the
Trust, and that, in the absence of the Trust pleading any breach of the contract which
2 The phrase used by Hammond J in Lab Tests Auckland Ltd v Auckland District Health Board
[2008] NZCA 385, [2009] 1 NZLR 776 at [405].
governed the relationship between the parties, the Trust’s reliance on pleaded public law causes of action and remedies is misconceived.
[68] In reply the Trust argued that this is a proper case for judicial review, and the fact the arrangements between the Trust and the Ministry were contractual does not deny the availability of judicial review. The Trust relied upon dicta of Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service, where his Lordship observed that a decision-making power derived from common law, and not
a statutory source, does not immunise it from judicial review.3 Reliance was also
placed on two decisions of the Court of Appeal; Webster v Auckland Harbour Board and Royal Australasian College of Surgeons v Phipps, where in the latter case it was observed that the Courts over recent decades have been increasingly willing to review exercises of power which in substance are public, or have important public consequences notwithstanding how the nature or origins of the persons or bodies
exercising them may be characterised.4 The Court of Appeal further remarked that in
appropriate situations, even though there may be no statutory power of decision, or “the power may in significant measure be contractual”, the Courts are still willing to review the exercise of the power, including review for breaches of natural justice.5
[69] The Trust emphasised that the recent approach of the Courts to the amenability of administrative action to judicial review related not to the source of the power exercised by decision-makers but whether the exercise of the power had public consequences. In the present case it was submitted on behalf of the Trust that the decision, made by the Ministry to terminate the contract did have public law consequences. Alternatively, the Trust submitted that in the case of a contracting decision by a public body in a commercial context, judicial review remained available where there was fraud, corruption or bad faith, or situations that might be
considered analogous.6
3 Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (HL) at 410C-D.
4 Webster v Auckland Harbour Board [1983] NZLR 646 (CA); Royal Australasian College of
Surgeons v Phipps [1999] 3 NZLR 1 (CA) at 11.
5 Phipps, above n 4, at 12.
6 Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 (PC) at
388; Lab Tests Auckland Ltd, above n 2; Green v Racing Integrity Unit [2014] NZCA 133.
[70] In respect to that alternative argument, the Trust argued that there was evidence of bad faith on the part of the Ministry. It pointed to allegations of what the Ministry knew, or ought to have known, regarding the breaches alleged by it in its notice of termination. Particularly, it says, as it related to abuse or neglect, or health and safety issues concerning the residents. The Trust also relied upon the content of the temporary managers’ report, alleging that it exceeded its authority. In that regard reference was made to recommendations by the temporary managers regarding the continued engagement by the Trust of its manager and chairperson. I will return to the examples of alleged bad faith put forward on behalf of the Trust later in this judgment.
Decision – Justiciability
[71] The exercise of a power that is in substance public or has important public consequences is potentially subject to judicial review.7 It does not, however, follow, that every time a public body exercises powers available to it as a party to a contract, that its status as a public body renders its decision subject to scrutiny by way of judicial review. The State, in all its various forms, is regularly entering into contracts relating to the provision of services and products which would not
normally be considered to be subject to an overlay of public law principles and therefore amenable to judicial review.
[72] In Lab Tests Auckland Ltd Arnold J, delivering the lead judgment, observed that the Courts will only intervene by way of judicial review in relation to contracting decisions made by public bodies in a commercial context in limited circumstances, and that whether other procedural obligations may be placed on a body performing a public function will depend on the context in which the decision
is made.8 The Court of Appeal acknowledged that judicial review would be
available where there is fraud, corruption or bad faith.9
[73] The Court of Appeal further held that a public body exercising a particular statutory power may be bound by natural justice obligations, but that such
7 See Phipps, above n 4.
8 Mercury Energy Ltd, above n 6; Lab Tests Auckland Ltd, above n 2 at [59].
9 Lab Test Auckland Ltd, above n 2, at [91].
obligations may have less or no application to the same body when making another type of decision.10 The nature of the decision being made, the nature of the body making the decision and the statutory setting within which the decision is made are all critical considerations when assessing whether a decision is susceptible to judicial review.11 The procedural obligations on a decision-making body are therefore dependent on the nature of the function being exercised, the context within which the function was being performed, and what it is alleged has gone wrong.12 A contracting decision made by a public body ordinarily will not, absent fraud, or bad faith, or some relevant statutory underpinning requiring the public body to exercise its contracting power in a particular manner, be subject to judicial review. The Court of Appeal rejected a broad-based “probity in public decision-making approach” of the type that had been adopted by the trial Judge.13
[74] In making these observations, the Court of Appeal sought to apply the observations of the Privy Council in Mercury Energy Ltd.14 In that case, the Privy Council held that decisions of state owned enterprises were not immune to judicial review, however, it considered that it was unlikely that a decision by such an entity to enter into, or determine, a commercial contract to supply goods or services would ever be the subject of judicial review in the absence of fraud, corruption or bad faith.15
[75] In applying that dicta in Lab Tests Auckland Ltd, the Court of Appeal concluded that the matters in issue in that case, which concerned decisions made following a tender process by District Health Boards, were justiciable. This conclusion was reached only because they raised issues analogous to bad faith and that such allegations arose against an applicable statutory context relating to conflict of interest and the use of confidential information. The District Health Boards were subject to governing legislation that required the boards to comply with certain
procedural obligations. In the absence of such factors, Hammond J, in his
10 Lab Test Auckland Ltd, above n 2, at [57].
11 At [58].
12 At [85].
13 At [85].
14 Mercury Energy Ltd, above n 6.
15 At 391.
concurring judgment, warned that reviewability in this area should not otherwise be assumed.
[76] In Southern Community Laboratories Ltd v Healthcare Otago Ltd, Eichelbaum CJ observed that whether decisions made by a public body of a contractual or commercial nature, were governed by the principles of public law, would be a matter of assessment in the individual case.16
[77] Eichelbaum CJ held that a contract to purchase pathology services was essentially a commercial decision which he considered to be non-justiciable. The Court accepted that almost every administrative decision made on behalf of a Crown health enterprise might at least have the potential to impact directly or indirectly on the quality of healthcare services and therefore be considered public in nature. He contrasted, however, decisions having a major impact on the community, such as a decision to reduce acute services provided at a major regional hospital, at one end of the scale, with minor supply contracts, which lie at the other. Eichelbaum CJ held that it was sufficiently clear that the decision to purchase pathology services was not of such importance or significance as to take it out of the realm of the purely commercial.
[78] Applying the principles set out in Lab Tests Auckland Ltd, I have firmly concluded that the decision by the Ministry to terminate its contract with the Trust is not amenable to judicial review in the absence of bad faith, corruption, fraud or analogous behaviour, or any applicable statutory framework, or context, requiring the Ministry to adopt certain processes or take into account particular considerations beyond those provided for in the provider agreement. My reasons are as follows.
[79] The relationship between the parties is governed wholly by contract. As already observed, there is no relevant statutory context against which the Ministry’s decision is to be evaluated, either in a procedural or substantive sense. The Trust
does not rely on any other source regarding the Ministry’s approach to its evaluation
16 Southern Community Laboratories Ltd v Healthcare Otago Ltd HC Dunedin CP30/96,
19 December 2009.
of the situation, or how it should exercise its judgment, beyond the provisions of the provider contract itself.
[80] The Ministry is responsible for the administration of funding arrangements with some 900 organisations, which are engaged to provide services in discharge of the State’s responsibilities to care and provide for disabled people. Like the Trust, most service providers are private sector organisations and their engagement to provide services to disabled persons in return for funding is governed by formal contracts which the service providers enter into with the Crown.
[81] The Ministry has public responsibilities to provide for vulnerable individuals with high health needs. Those obligations include ensuring that certain standards of service and care are provided by the service providers with which it enters contractual arrangements. That obligation results in the need for a high level of review and audit to ensure that services it is purchasing are provided to the appropriate level. This is reflected in the terms and conditions of the provider agreements entered into by the Ministry. That responsibility is owed to disabled persons, their carers and families. It does not, however, create any wider or parallel public obligations to the private sector organisations with which it contracts, and which receive payment for the provision of its services.
[82] The provider agreement between the parties in this case was a detailed commercial contract. It expressly recorded that the contract set out the “entire agreement and understanding” between the parties. Importantly, the contract contemplated disagreement between the parties and made available specific dispute resolution procedures to resolve issues arising out of breaches by the parties, and termination. The Trust, however, did not invoke those procedures, neither in respect of the appointment of temporary managers, nor in response to the notice of termination. Similarly, it did not seek damages as expressly provided for in the contract.
[83] The nature of the body sought to be reviewed is central government, and the case involves the expenditure of public money in the public interest. The case, however, does not give rise to any issues as to how that money should be spent, nor
any related question regarding the provision of health or social services to a vulnerable sector of society. The Ministry is not being challenged regarding the implementation of policy, or the discharge of its public responsibilities and functions, but, rather, whether it can legitimately terminate a contract between itself as a purchaser, and the Trust as the provider of services.
[84] Essentially, the Trust’s complaint is that the Ministry did not have a sufficient basis upon which to terminate the contract. Similarly, it is argued that the Ministry was wrong to appoint temporary managers. Both complaints, unavoidably, are founded on the submission that the contractual preconditions to the Ministry’s actions had not been established. Indeed, it is submitted that in the circumstances the preconditions could not be established if the particular matters relied upon by the Ministry had been fully investigated and objectively analysed. Two difficulties for the Trust immediately become apparent. Firstly, that the Trust’s complaint is fundamentally contractual in nature and, secondly, that the dispute between the parties is one which involves matters of assessment and evaluation. The Trust alleges that the Ministry’s judgment regarding the Trust’s performance of its contractual obligations is flawed.
[200] In support of this ground, the Trust repeated the same alleged failures which it had relied upon under the earlier grounds alleged in its pleadings. As an example, the Trust submitted the appointment of temporary managers without prior notice when, in its submission, the threshold for the Ministry to do so had not been met, constituted unreasonableness. It was alleged the temporary managers were appointed with “general” powers outside the authority of the provider agreement, and that the Ministry accepted the temporary managers’ report without reservation, relying upon incorrect statements, assumptions and misconceptions, and accepted their recommendations.
[201] Highlighting these alleged failures does not render the decision to terminate unreasonable on its face – the decision being so absurd that the decision could not sensibly have been made. As has now repeatedly been observed, the assessment of the Trust’s allegation requires review of the Ministry’s evaluation and judgment of the situation. The state of the evidence filed by the parties is such that no conclusions of the type sought could validly be reached.
[202] I have already dealt with the complaints made by the Trust regarding the recommendations contained in the temporary managers’ draft report, about the make up of the Trust board and the engagement of its present manager. Similarly, the alleged failure by the Ministry to take into account the board’s efforts to engage with parents and caregivers, and the appointment of a parent representative to the board.
Likewise, alleged failures by the Ministry relating to the particularisation of breaches
56 Wellington City Council v Woolworths New Zealand Ltd (No 2) [1996] 2 NZLR 537 (CA).
of the provider agreement in the notice of termination have previously been canvassed. These relate to alleged failures by the Ministry in terms of the requirements of the contract. The repetition of these claims under the heading of “unreasonableness” does not add to the Trust’s argument.
[203] I have also already dealt with allegations of the Ministry’s failure to produce evidence regarding what the Trust describes in its submissions as “proven health and safety concerns” which were matters of evaluation for the Ministry, the correctness of which could only be judged by a forensic examination of the evidence that is simply not available on the written record and which, in any case, fell to be determined by reference to whether the Ministry was entitled to take steps based upon such concerns under the provider agreement. Additionally, I note that the Trust again repeats complaints regarding a failure by the Ministry to adequately consult, and predetermination, which again is a repetition of submissions already made under the ground of breach of natural justice which has already been traversed.
[204] As will be apparent from the foregoing, I am not satisfied that the Trust has demonstrated that the Ministry’s decision to terminate the provider agreement was so unreasonable that no reasonable body could have reached that decision in the circumstances.
Conclusion
[205] The application for judicial review is dismissed.
[206] In accordance with the general rule, the applicant would be entitled to costs but, in the circumstances of this case and the status of the Trust, costs may not in the event be sought by the respondent. If costs are sought, a memorandum should be filed and served in the usual way (not more than five pages). A response from the applicant (not more than five pages) should be filed and served within 15 working days of receipt of the respondent’s memorandum.
Solicitors:
G C Knight, Christchurch
Crown Law, Wellington
6
2
1