Pharmacy Care Systems Ltd v Attorney-General - [2001] NZCA 351

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 27/01

BETWEEN	PHARMACY CARE SYSTEMS LIMITED
Appellant

AND	THE ATTORNEY-GENERAL
Respondent

Hearing:	11 October 2001
Coram:	Richardson P Keith J Tipping J
Appearances:	B O'Callahan for Appellant A R Burns and R Espie for Respondent
Judgment:	11 October 2001

JUDGMENT OF THE COURT DELIVERED BY RICHARDSON P

The appellant, Pharmacy Care Systems Limited ("Pharmacy Care"), appeals against a decision of Robertson J, in which the Judge upheld a decision of Master Kennedy-Grant, striking out Pharmacy Care's claim for $80,000 withheld by the former Regional Health Authority known as North Health, plus interest and costs.

Background

Pharmacy Care operated a pharmacy business in Auckland, specialising in the supply of prescription medication to patients in private hospitals and institutions for the intellectually handicapped. Pursuant to the provisions of the relevant legislation, regulations, supply agreements and statutory notices, Pharmacy Care supplied medicines funded by the state to patients and submitted claims for payment in respect of such supply to the relevant health funding body. The legislation in this area has been the subject of considerable change over the past decade and its detail is not relevant at present.
In October 1993, Mr Peter Aitken, a director of Pharmacy Care, was informed by Health Benefits Limited ("Health Benefits") of a decision by North Health, the Regional Health Authority for Auckland established in 1993, to have Pharmacy Care's claims in respect of medicines supplied to patients audited by Health Benefits.
Pharmacy Care had been "recycling" prescription medicines. It had supplied to private hospitals and institutions for the intellectually handicapped the medicines required by their patients. When a patient was instructed to cease to take a particular medicine before the supply of that medicine held for the patient by his or her healthcare provider had been exhausted, the healthcare provider returned the surplus medication to Pharmacy Care free of charge. If Pharmacy Care was satisfied that the returned medication was safe for use by other patients, it dispensed it to other patients. It also lodged with the health funding body a claim for payment of the same amount as it would have claimed had it supplied new medication received directly from a commercial supplier of pharmaceuticals.
North Health claimed that Pharmacy Care's practice of claiming for recycled medicine as much as it claimed in respect of new medicine breached the purchase contract existing between North Health and Pharmacy Care, the Fair Trading Act 1986 and the Crimes Act 1961. North Health sought reimbursement from Pharmacy Care of $80,000. While negotiations between the parties continued, North Health asserted the right to set off the $80,000 it claimed against Pharmacy Care's claims for payment in respect of non-recycled medication.
On 15 March 2000 Pharmacy Care filed a statement of claim, naming the Health Funding Authority (North Health's successor) as the defendant and seeking payment of the $80,000 withheld, damages for harm done to its business, exemplary damages, interest and costs.
Neither the statement of claim nor the affidavit accompanying…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2001] NZCA 351
Decision Date: 11 October 2001

CaseChat Overview and Summary

Pharmacy Care Systems Limited ("Pharmacy Care") appealed against the decision of Robertson J, which upheld a decision of Master Kennedy-Grant, striking out Pharmacy Care's claim for $80,000 withheld by the former Regional Health Authority known as North Health, plus interest and costs. Pharmacy Care, a pharmacy business in Auckland, specialised in supplying prescription medication to patients in private hospitals and institutions for the intellectually handicapped. Pursuant to legislation, regulations, supply agreements, and statutory notices, Pharmacy Care supplied medicines funded by the state to patients and submitted claims for payment to the relevant health funding body. In October 1993, North Health decided to audit Pharmacy Care's claims in respect of medicines supplied to patients. Pharmacy Care had been "recycling" prescription medicines, supplying them to private hospitals and institutions for the intellectually handicapped and dispensing them to other patients if they were safe for use. North Health claimed that Pharmacy Care's practice of claiming for recycled medicine as much as it claimed for new medicine breached the purchase contract between North Health and Pharmacy Care, the Fair Trading Act 1986, and the Crimes Act 1961. North Health sought reimbursement of $80,000 from Pharmacy Care, asserting the right to set off the amount against Pharmacy Care's claims for payment in respect of non-recycled medication. On 15 March 2000, Pharmacy Care filed a statement of claim, seeking payment of the $80,000 withheld, damages for harm done to its business, exemplary damages, interest, and costs. Neither the statement of claim nor the affidavit accompanying Pharmacy Care's application for summary judgment referred to a deed of settlement of 6 September 1996 entered into by Pharmacy Care, North Health, and Health Benefits. Pharmacy Care accepted in the deed that it was liable to North Health for $80,000, that North Health was not liable to pay the $80,000 which it had withheld, and that all claims between the parties had been fully and finally settled. On 20 June 2000, the respondent sought to have Pharmacy Care's claim struck out under r 186 of the High Court Rules, averring that Pharmacy Care was estopped by the deed of settlement and that its claim was an abuse of process. On 14 July, Pharmacy Care filed a notice of opposition and on 2 August, seven weeks after the Health Funding Authority had pleaded the settlement, filed an affidavit, in which Mr. Aitken deposed that he had entered into the deed under economic duress. In an oral judgment delivered on 30 October 2000, Robertson J dismissed the application for review of the Master's decision. The Judge observed that in seeking summary judgment, Mr. Aitken filed a 39 paragraph affidavit in support which had attached an extraordinary amount of detailed information. The most extraordinary thing, however, about that affidavit was that it was totally silent as to the deed of settlement between the parties of September 1996. The Judge recorded that the rules about strike out were not in issue; that strike out occurs only in the clearest cases and that it is unusual for courts to determine questions of fact on a strike out application, although as the authorities make clear, a court should have its feet firmly on the ground and not be afraid to take hard decisions even about disputed facts where there is a clear inevitability about the outcome. The Judge concluded that the sole question was whether or not it was open to the Master to conclude as he did that Mr. Aitken's evidence on this point was "entirely unworthy of credit". On the application for leave to appeal to this court, counsel for Mr. Aitken submitted that in their analyses the Master and then the Judge had made a seriously arguable mistake of fact in the assessment of the evidence on the issue as to whether Mr. Aitken had been subjected to unlawful economic duress and threats. The Court concluded that the high threshold required in this case to justify strike out had not been met. The appeal was accordingly allowed and the strike out order was quashed. The orders as to costs made by the Master and the Judge were quashed. Costs were fixed overall in favour of Pharmacy Care at $5,000 together with all reasonable disbursements including travelling costs of counsel, as fixed, if necessary by the Registrar.

Orders