Down v St Andrew's War Memorial Hospital [1999] QSC 400

Reporting Bureau TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MUIR J No 8571 of 1999 ROGER HUGH LANGDON DOWN and REVISED COPfES ISSUED State Reporting Bureau Date oG0/ r<::> / 1-") I Applicant ST ANDREW'S WAR MEMORIAL HOSPITAL Respondent BRISBANE .. DATE 27/09/99 JUDGMENT 1 ·1111 Flllllr, Tire l.:m COllrls, Ct:tlrgt: SIred, Brisb:tllc, Q..WIlO Tclcl'ltoltl·: (07) J.?A7 .t,1(,() F:I,(: (117) J.?-t7 55.1.? -- 1 of 14 -- 270999 T1/HMH8 M/T 6098/99 (Muir J) HIS HONOUR: I propose to grant an injunction for these reasons. Dr Down, the applicant in these proceedings, is a medical specialist, namely an enctoscopist gastroenterological and colo-rectal surgeon. At the end of 1996 representatives of the respondent, St Andrew1s War 10 Memorial Hospital, requested him to set up a one stop endoscopy unit at the hospital. Such a unit, according to the applicant, is unique because it enables patients to be consulted, examined, have an endoscopy and/or anal zo()operation, be recovered and be re-interviewed to initiate treatment in the one place in one visit within 48 hours of referral. When the applicant says such a unit is unique, I 0 take him to mean that in Brisbane, at least, it is the only one of its kind. Negotiations between the applicant and the representatives of the hospital took place at the end of 1996 and in the early months of 1997. In about February 1997 the applicant sold to the hospital for $180,000 the equipment which he had for use in a practice he was proposing to establish at Mooloolaba. To the knowledge of the hospital, he abandoned that proposal. The applicant designed a new endoscopy centre for the hospital in consultation with representatives of the hospital between about February and August 1997. That absorbed a great deal of the applicant1s time, energy and expertise. On 4 January 1998 the applicant commenced o 20 40 o 30 50 <:in practice in the new endoscopy centre, which consisted of an 60 2 JUDGMENT - -----~------- ----~ -- 2 of 14 -- ( '. ( 270999 T1/HMH8 M/T 6098/99 (Muir J) office, part of the hospital reception area, a consulting room and a patient interview room. Throughout the negotiations between the parties, it was contemplated that the endoscopy unit would be operated by the applicant at least in the initial stages. With a view to entering into an agreement for the establishment and operation of the unit, the hospital wrote to the applicant on 12 December 1996 setting out proposed terms and conditions of agreement. The applicant responded by a letter dated 7 January 1997. The applicant's proposals were more detailed than those of the hospital and understandably dealt with matters of practical concern to him, such as right to employ personal staff, the use of operating theatres, terms of tenancy and promotion of the unit. On 14 February 1997, after discussion between the applicant and Mr Keogh on behalf of the hospital, the applicant prepared a document entitled Memorandum of Understanding which was signed by the applicant and Mr Keogh. This document provided, inter alia, that: "Dr Down will be allowed to lease and occupy the 10 io 20 40 practice space (previously defined) for the purpose of 30 rooms from which to conduct his surgical practice for 50 an annual lease of $4,850. The term of the lease shall be three plus three, renewable and subject only to CPI increases. Lease payments will commence monthly in arrears on 1 September 1997 ... " Dr Down will be granted visiting rights in accordance with the by-laws at St Andrew's Hospital subject to approval by the medical advisory committee. Refusal of these rights shall not affect the purchase of equipment ~n outlined in (3). 60 3 JUDGMENT -- 3 of 14 -- 270999 T1/HMH8 M/T 6098/99 (Muir J) These terms are hereby agreed to foster mutual confidence and enhance the collaborative efforts of Dr Down and St Andrew's Hospital in their efforts to develop a dedicated financially viable endoscopy unit which forms an extension to the present day surgical unit within St Andrew's Hospital." The expression "visiting rights" refers to the system under which a medical practitioner obtains authority or accreditation to practice in the hospital. The hospital has visiting medical practitioners' by-laws which, in general terms, provide that only medical practitioners who have obtained accreditation may practise at the hospital. Accreditation is granted by the hospital's board of governors. By-law 7.1 provides: "Those medical practitioners who wish to become appointed as accredited medical practitioner should apply through the chief executive officer to the board of governors which shall have the sole discretion as to whether an applicant shall be appointed and the terms of such appcintment. This matter is determined following careful consideration of the recommendations from the medical advisory committee and such further information considered relevant by the board of governors." Under by-law 2.4: "Initial accreditation is for one year. At the expiration of that period a practitioner must apply for re-accreditation. Re-accreditation is for three year terms until the medical practitioner attains the age of 65." By January 1998 the applicant had established in the hospital Brisbane's only one stop endoscopy unit. It appears to have functioned as planned and there is no reason to doubt that it was a valuable addition to the range of medical services provided by the hospital. 4 JUDGMENT --_._.- .. ------ 10 J(\ 30 o o 20 40 o 30 50 41) 60 -- 4 of 14 -- ( 270999 T2/AT14 M/T 6098/99 (Muir J) However, the relationship between the applicant and the hospital did not proceed smoothly. On 8 May 1998 the hospital wrote to the applicant stating that unless the business relationship between the parties improved, lilt will be in our mutual interests for you to consider moving your practice. II On 3 April 1998 the hospital, under the hand of Dr O'Sullivan, director of medical services, sent a letter to the applicant stating inter alia, liThe normal routine of reviewing your accreditation at St Andrew's War Memorial Hospital is once again upon us. 1I It then referred to the accreditation procedure and mentioned an enclosed application form. It was requested that the form be, II reviewed, corrected, updated and returned ll • The letter which appeared to be, in part, a standard form letter also stated, IIWe greatly value the relationship we have with you and have endeavoured to provide you with the very best of services. II On 29 May 1998 Dr O'Sullivan wrote to the applicant asserting that negotiations in relation to the applicant's 10 2G 40 30 involvement in the unit had not been finalised and that the 50 hospital proposed to withdraw from further negotiations. The letter referred to the necessity for the applicant to give up possession of the rooms occupied by him. The letter made reference to re-accreditation, liAs your initial accreditation is about to expire. II 5 JUDGMENT 4() 60 -- 5 of 14 -- 270999 T2/AT14 M/T 6098/99 (Muir J) On 3 June 1998 the medical advisory committee considered the applicant's application for re-accreditation. The committee recommended that the applicant be granted temporary privileges until such time as there had been compliance with a request for corrective action made to the applicant by the hospital. On 6 July Dr O'Sullivan, via a letter, informed the applicant that, IIDue to process of mediation which is currently underway, your application for re-accreditation has been approved temporarily." On 5 October 1998 the hospital wrote to the applicant advising that, liThe board of governors had resolved that the applicant's privileges to consult with the endoscopy centre had been withdrawn and that temporary privileges for use of the procedure room be subject to adherence to hospital policies and use of hospital staff. II The letter made reference to appeal procedures in the by-laws. On 5 October 1998 the hospital's chief executive officer wrote saying that if satisfactory arrangements for the ::' .. 10 o 20 40 C) ~o applicant's departure from the hospital were not made he 50 would give instructions for the termination of the applicant's tenancy and recovery of possession. On 14 December 1998 mediation at the offices of the applicant's solicitors took place. Present were 6 --_._-_. _. ------- JUDGMENT 40 60 -- 6 of 14 -- ( l 270999 T2/AT14 M/T 6098/99 (Muir J) representatives of the hospital, the applicant and their respective legal advisers. The applicant's recollection is that at the meeting words were said to the effect that there was no need to appeal 10 from the board's decision and that the matter would be fixed. That was a reference to the accreditation procedure. He swears that at the end of the meeting, all parties stood up and shook hands and it was agreed that documents be prepared to give effect to the agreement there reached. After this meeting, according to the applicant, the friction which had existed between himself and members of his staff on the one hand and representatives of the hospital on the j8 other diminished considerably. However, the proposed documentation to contain or give effect to the alleged oral agreement or understanding was not finalised. On 15 December 1998 the applicant received from the hospital a letter informing him that the board of governors had met and resolved that he not be re-accredited and that temporary privileges would cease the next day. He and his staff were requested to vacate the hospital premises by 5 p.m. on the 15th. On 16 September Douglas J granted an injunction aimed at maintaining the status quo in the matter until 24 September 1999. The application for an interlocutory injunction came before me for hearing on that day. 7 JUDGMENT W 40 50 40 60 -- 7 of 14 -- 270999 T2/AT14 M/T 6098/99 (Muir J) As the application is for an injunction pending the trial of the action the applicant, in order to succeed, must establish a triable issue or a prima facie case and must also satisfy me that the balance of convenience rests in his favour. Mr Bell QC and Mr Kelly who appeared for the applicant contended that there were four serious questions to be tried and that the balance of convenience greatly favoured their client. In brief summary, the four questions to be tried were: 1. That an agreement had been reached in February 1997 under which the applicant had rights to be in the endoscopy unit for a term of three years (with an option for another three years) and whereby the hospital (with some qualification) would provide accreditation. 2. If no agreement such as the one just mentioned existed there nevertheless was a compromise entered into in the meeting in December 1998 under which the applicant acquired similar rights to those just mentioned. 3. That the hospital behaved unconscionably and is estopped from denying the existence of an agreement or agreements along the lines for which the applicant contends. 8 JUDGMENT 10 20 . (~ 3d 0' 20 40 o :]0 50 40 60 ---~~--~~---~-----.-~ ------.~-.-~-- -- 8 of 14 -- 270999 T2/AT14 M/T 6098/99 (Muir J) 4. There was a denial of natural justice in the withdrawing by the hospital of the applicant1s accreditation. 10 Mr Morris QC for the hospital submitted that there is in '.;.' fact no triable issue and, moreover, that if his submissions were not accepted on that point, the balance of convenience favoured his client. I conclude that there is at least one triable issue to support the applicant1s claim for an ( injunction. Although both the applicant1s contentions as to the existence of what is described in the draft statement of claim as lithe original agreement ll and the compromise agreement in December 1998 are not without difficulty it seems to me that the applicant1s contentions are arguable. The applicant has given evidence which, if accepted on 2C trial, would go a considerable way to surmounting the 40 difficulties to his case posed by the hospital by-laws in relation to accreditation. The hospital understandably places much reliance on the by-laws and the accreditation process. It also points to the fact that notwithstanding the applicant1s assertions of an agreement about 50 accreditation he did seem to participate in the accreditation process without qualification or r.eservation. Mr Morris also drew my attention to the penultimate paragraph of the memorandum of understanding of 14 February 9 JUDGMENT -- 9 of 14 -- 270999 T3/SJ3 M/T 6098/99 (Muir J) 1997 which might be thought also to pose some difficulty for the applicant on the trial of this matter. However, if the applicant's evidence is accepted, I doubt that the by-laws and existence of the accreditation process are 10 insurmountable hurdles for him. For example, it is arguable that in the circumstances deposed to by the applicant the hospital had a duty to take reasonable steps to procure accreditation or alternatively not take steps to hinder or prevent accreditation. The circumstances I have outlined also give rise to arguments based on estoppel and just enrichment and even the existence of fiduciary duties which have been breached. In relation to the latter one plank of the applicant's :18 argument, at least one which is identified in correspondence, is that the setting up the unit was in the nature of a joint venture. It is arguable I think that the relationship between the applicant and the hospital was one o 20 of mutual trust and confidence. It is therefore possible 40 that evidence on trial will disclose that fiduciary duties ~ arose out of the nature of the parties' relationship. I now turn to balance of convenience. Mr Morris contends 30 that damages are an adequate remedy to the applicant but on 50 the other hand the harm which the hospital may suffer if the applicant stays on cannot be valued in monetary terms. He raises the spectre of harm to patients, damage to the hospital's reputation, friction with staff, stress suffered by staff and general inconvenience. He points out that the 60 10 JUDGMENT -- 10 of 14 -- 270999 T3/SJ3 M/T 6098/99 (Muir J) evidence discloses that some 60 per cent of the applicant's fees are generated from work done by him outside the hospital and that St Andrews is far from being Brisbane's only hospital. 10 It is submitted that it is open to the applicant to obtain practising rights at another hospital or hospitals. All of these points are of course ones. of substance which I must take into account. On balance though, I do not have a great ( deal of difficulty in concluding that the balance of convenience favours the applicant. There is little evidence ( that he does not conduct his professional activities in an appropriate and competent way. There is strong and clear evidence to the contrary. 1~ 30 Support for that conclusion may be found by having regard to the content of the complaints levied against him from time to time and the negotiating positions adopted by the ?r _u hospital in relation to those complaints. There is no need 40 for me resolve the question of blame or fault in relation to the friction to which I earlier referred but I mention that there is evidence to support the conclusion that the hospital itself is not entirely blameless in this regard. 30 It also appears to me to be the case that problems of this 50 nature were improving rather than deteriorating when the hospital acted to remove the applicant this month. Mr Morris submitted that I should place great weight on the conclusions reached by the hospital's Board of Governors and 60 11 JUDGMENT -- 11 of 14 -- 270999 T3/SJ3 M/T 6098/99 (Muir J) the Medical Advisory Committee which considered the applicant's complaints and acted on them. The views of a body such as the Medical Advisory Committee are certainly matters of significance but that body did not have the 10 benefit of evidence and submissions made to me. Furthermore, I have no reason to think that in acting as it did the Medical Advisory Committee would not have taken the complaints of the hospital administrative officers at face value. If the injunction is not granted the applicant's practice will be disrupted in a very major way. He will cease to be able to use Brisbane's only one stop endoscopy unit which he was instrumental in establishing, at least, in part. Given ~8 time, I assume, that it is likely that he will be able to obtain a accreditation at another hospital or hospitals but he says, and I have no reason to doubt, that his reputation will suffer adversely from the removal of his accreditation. That fact will also be a matter which may cause him difficulty in obtaining fresh accreditation. The nature and scope of his practice is likely to change fairly significantly if he obtains accreditation with o20 40 o 30 another hospital or hospitals and commences to practice from 50 his existing Sunnybank premises and by using a room or rooms obtainable elsewhere. Of course, as I have mentioned he will not have the benefit of the type of practice which he regards as important to him and which the evidence suggests is of particular value to members of the pUblic. 12 JUDGMENT -------- ... ~-- ... _- 40 60 -- 12 of 14 -- 270999 T4&7/IRK13 M/T 6098/99 (Muir J) Now, as for the form of the injunction I confess that I have not given the wording of it any consideration. HIS HONOUR: The undertaking is to work within the hospital in accordance with the conditions set out in annexure A. I am a little bit concerned about that because there are quite a few conditions and if there is inadvertent failure to comply, such as by a member of the applicant's staff, that would be a breach of the undertaking. It seems to me that ( it would be preferable if it were worded. "undertaking to use his best endeavours to work within" et cetera. HIS HONOUR: I think it will be more sensible to alter that undertaking to use his best endeavours to work, et cetera. Now, paragraph lAo Again I do not think we ought to be as grandiose about the nature of the restraint. I am concerned about any of that language for the same sort of reasons. I do not want trivial happenings being said to be a breach of injunction. 13 JUDGMENT 1 . .. . 10 20 10 30 ~v 40 30 50 ~G 60 -- 13 of 14 -- 270999 T4&7/IRK13 M/T 6098/99 (Muir J) HIS HONOUR: Perhaps we can leave it on the basis that if the discourtesy reaches unbearable limits he can come along and alter it. 10 't',!, HIS HONOUR: I think I, regrettably, will want to read through all of this before the order is finalised and I will not have time to do it today so I will do that by some time tomorrow morning. HIS HONOUR: Well, what I propose to do is to make an order 38 now in terms of the draft but as I mentioned I will not have it taken out immediately so I will order in terms of the draft initialled by me. 14 JUDGMENT (J io 40 o jQ 50 .... 40 60 --------- --- --.. --~---------- -- 14 of 14 --