Fernandez v State of New South Wales

Supreme Court of NSW|2021-05-03|Before: Wright J

Health Insurance Act 1973 (Cth) Health Services Act 1997 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Fernandez v State of New South Wales [2019] NSWSC 1736 Fernandez v State of New South Wales [2020] NSWCA 257 Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127 Category: Principal judgment Parties: Garfield Mario Fernandez (First Plaintiff) Apikali Fotu (Second Plaintiff) State of New South Wales (First Defendant) Western Sydney Local Health District (Second Defendant) South Western Sydney Local Health District (Third Defendant) Sydney Local Health District (Fourth Defendant) Northern Sydney Local Health District (Fifth Defendant) Nepean Blue Mountains Local Health District trading as Nepean Hospital (Sixth Defendant) lllawarra Shoalhaven Local Health District (Seventh Defendant) Central Coast Local Health District (Eighth Defendant) Far West Local Health District (Ninth Defendant) Hunter New England Local Health District (Tenth Defendant) Mid North Coast Local Health District (Eleventh Defendant) Murrumbidgee Local Health District (Twelfth Defendant) Northern NSW Local Health District (Thirteenth Defendant) Southern NSW Local Health District trading as Queanbeyan District Hospital (Fourteenth Defendant) Western NSW Local Health District trading as Parkes Hospital (Fifteenth Defendant) South Eastern Sydney Local Health District (Sixteenth Defendant) Representation: Counsel: P Batley (First and Second Plaintiffs) T Phillips (First to Sixteenth Defendants)

Background

The plaintiffs, Garfield Mario Fernandez and Apikali Fotu, entered into guarantees in favour of Local Health Districts (LHD) in respect of monies payable or owing to the LHDs for hospital and other health services provided to patients who were not eligible persons for Medicare benefits within the meaning of the Health Insurance Act 1973 (Cth).
The plaintiffs commenced the present proceedings, as representative proceedings under Pt 10 of the Civil Procedure Act 2005 (NSW) (the CP Act), on their own behalf and on behalf of the group members who had entered into similar guarantees, against: 1. the first defendant, the State of New South Wales, which is responsible for the State's public health system, including inter alia the LHDs, in accordance with the Health Services Act 1997 (NSW); and 2. the second to sixteenth defendants, which are 15 LHDs constituted under the Health Services Act.
The background to and nature of the proceedings are more fully set out in previous judgments including, in particular, Fernandez v State of New South Wales [2019] NSWSC 1736 and Fernandez v State of New South Wales [2020] NSWCA 257.
For present purposes, it is sufficient to note that the plaintiffs challenged the legality and enforceability of the guarantees on various bases including: that the LHDs lacked power or authority to procure guarantees since the directives issued by the Director-General of Health or the Secretary, NSW Health, to the LHDs under the Health Services Act concerning such guarantees were repugnant to ss 70 or 71 of that Act; that the LHDs provided no consideration for the guarantees in light of s 71; that the LHDs had failed to disclose to the guarantors the existence of the "duty" imposed by s 71 resulting in the guarantor's being entitled to rescind; that the obtaining of the guarantees involved unconscionable conduct; that the guarantees were entered into because of misleading and deceptive conduct; and, that the guarantees were unjust with the meaning of the Contracts Review Act 1980 (NSW).
Some of these issues were common to all of the guarantees entered into by the plaintiffs and other group members, others depended on the specific factual circumstances in which the particular guarantee was entered into.
On 31 May 2019, Garling J ordered, under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), that the common issues be decided by way of separate questions before any trial in the proceedings.
On 6 December 2019, I ordered, for the reasons set out in Fernandez v State of New South Wales [2019] NSWSC 1736 at [220], that the separate questions concerning the common issues be answered as follows: "(1) Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? No. (2) To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)? No (3) If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? The question does not arise. (4) If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that: a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee? The question does not arise. (5) Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons? On the current definition of "Impecunious Ineligible Person", it is inappropriate to answer the question, but, to the extent than an answer can be given on the alternate bases set out in the reasons for judgment, the answer is: No."
On 20 October 2020, the Court of Appeal dismissed a summons seeking leave to appeal from those orders, see Fernandez v State of New South Wales [2020] NSWCA 257.
Shortly before 3 May 2021, the plaintiffs reached agreement with the defendants to resolve the proceedings.
On 3 May 2021, the plaintiffs and the defendants provided a form of agreed orders which they proposed should be made by the Court. After some discussion concerning the position of group members other than the plaintiffs, a slightly amended form of agreed orders was prepared. The defendants also provided helpful written submissions in support of the proposed orders.

Orders

On 3 May 2021 and with the consent of the plaintiffs and the defendants, the Court made orders and a notation as follows: "1. Pursuant to s 166(1) of the Civil Procedure Act 2005 (NSW), that the proceedings no longer continue under Part 10 of the Civil Procedure Act 2005 (NSW). 1A. Order 1 not take effect until 5 July 2021. 2. That, upon order 1 coming into effect, the plaintiffs' proceedings (which will then not be representative proceedings) be dismissed insofar as they seek declaration 1 of the relief claimed in the Amended Statement of Claim and allege the matters set out at paragraphs 10 to 13 of the Amended Statement of Claim. 3. Insofar as the plaintiffs' proceedings have not been dismissed in accordance with order 2, the plaintiffs be granted leave to file a notice of discontinuance pursuant to rule 12.1 of the Uniform Civil Procedure Rules 2005 (NSW). 4. The plaintiffs are to file a notice of discontinuance by 7 July 2021. 5. By 17 May 2021, the 2nd to 16th defendants are to be directed by the 1st defendant to: a. display a notice containing the information referred to in order 7 below (Notice), prior to 7 June 2021, at the hospitals identified in Annexure A which are under their respective control, in i. the emergency department (if any); and ii. on a noticeboard or other area designated for the provision of information to the public in the main lobby or other main thoroughfare of the hospital; and b. send a copy of the Notice prior to 7 June 2021, to any person who was sent a notice in accordance with order 13(b) of the Court's orders made on 31 May 2019. 6. The plaintiffs are to cause the Notice to be published on the website of Legal Aid NSW and on the Legal Aid NSW Facebook page by 7 June 2021. 7. The Notice referred to in orders 5 and 6 above must state that: a. Order 1 has been made; b. These proceedings will, upon order 1 coming into effect, no longer be a representative action; c. Persons who have guaranteed to one of the 2nd to 16th defendants the payment of monies payable or owing by patients who were not eligible for Medicare benefits will, upon order 1 coming into effect, no longer be a group member of any representative proceeding; d. If persons referred to in (c) above wish to bring a claim or dispute their liability in respect of any guarantee provided by them or monies paid under such a guarantee, they should seek legal advice, including in relation to the expiry of any limitations period which might affect their entitlement to claim. 8. There be no order as to costs, including costs against the plaintiffs of the representative proceedings and the proceedings on the plaintiffs' own behalf and all existing costs orders be vacated. 9. The Court notes that the defendants have released the representative plaintiffs of any liability under the guarantees the subject of these proceedings."
My reasons for making these orders are set out in the paragraphs which follow.

Representative proceedings and orders 1, 1A, 5, 6 and 7

Representative proceedings, such as the present, are governed by Pt 10 of the CP Act. That Part includes s 173, which provides: "173 Approval of Court required for settlement and discontinuance (1) Representative proceedings may not be settled or discontinued without the approval of the Court. (2) If the Court gives such approval, it may make such orders as are just with respect to the distribution of any money, including interest, paid under a settlement or paid into the Court."
Accordingly, the Court is required to consider whether the settlement and discontinuance proposed by the plaintiffs and the defendants in this matter should be given effect to by way of the orders agreed to by the parties.
Orders 1 and 1A provide for the proceedings no longer to continue under Pt 10 of the CP Act, after 5 July 2021. Orders 5, 6 and 7 in effect establish a regime for informing group members that the proceedings will no longer be representative proceedings and that if any group member wishes to bring a claim or to dispute their liability in respect of any guarantee provided by them or monies paid under such a guarantee, they should seek legal advice, including in relation to the expiry of any limitations period which might affect their entitlement to do so.
Discontinuance as representative poroceedings is relevantly governed by ss 166 and 167 of the CP Act which provide: "166 Court may order discontinuance of proceedings in certain circumstances (cf s33N FCA) (1) The Court may, on application by the defendant or of its own motion, order that proceedings no longer continue under this Part if it is satisfied that it is in the interests of justice to do so because - (a) the costs that would be incurred if the proceedings were to continue as representative proceedings are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding, or (b) all the relief sought can be obtained by means of proceedings other than representative proceedings under this Part, or (c) the representative proceedings will not provide an efficient and effective means of dealing with the claims of group members, or (d) a representative party is not able to adequately represent the interests of the group members, or (e) it is otherwise inappropriate that the claims be pursued by means of representative proceedings. (2) It is not, for the purposes of subsection (1) (e), inappropriate for claims to be pursued by means of representative proceedings merely because the persons identified as group members in relation to the proceedings - (a) do not include all persons on whose behalf those proceedings might have been brought, or (b) are aggregated together for a particular purpose such as a litigation funding arrangement. (3) If the Court dismisses an application under this section, the Court may order that no further application under this section be made by the defendant except with the leave of the Court. (4) Leave for the purposes of subsection (3) may be granted subject to such conditions as to costs as the Court considers just. 167 Effect of discontinuance order under this Part (cf s33P FCA) (1) If the Court makes an order under section 164, 165 or 166 that proceedings no longer continue under this Part - (a) the proceedings may be continued as proceedings by the representative party on the party's own behalf against the defendant, and (b) on the application of a person who was a group member for the purposes of the proceedings, the Court may order that the person be joined as an applicant in the proceedings. (2) In this section - applicant, in relation to proceedings, includes a claimant or plaintiff (as the case may be) in the proceedings."
The answers to the separate questions in Fernandez v State of New South Wales [2019] NSWSC 1736 resolved the issues that were common to each plaintiff's and each group member's claim. In relation to these common issues, the defendants were, in effect, entirely successful. Nonetheless, there remained issues as to unconscionability, misleading and deceptive conduct and whether the guarantees were "unjust". These non-common issues turned on the particular circumstances in which each of the guarantees was obtained including, for example, what was said to each guarantor at the time of giving the guarantee, the financial circumstances of the patient and the guarantor and what information each guarantor was given before signing the guarantee. Given their nature, these non-common issues were not suitable for determination by way of representative proceedings. As the Court of Appeal observed in Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127 at [236] (Bell P, Bathurst CJ and Basten JA agreeing): "The representative proceedings regime [in Pt 10 of the CP Act] is concerned with the common determination of common questions only. The regime directly attends to the inevitability in representative proceedings that parts of the proceedings will not be common." (emphasis in original)
In the circumstances where all of the common issues had been effectively determined and the proceedings had been entirely resolved as between the plaintiffs and the defendants, it appeared to me that it was in the interests of justice to order that the proceedings no longer continue under Pt 10 as representative proceedings because: 1. all the relief sought could be obtained by means of proceedings other than representative proceedings, within s 166(1)(b) of the CP Act; and 2. it was likely that the costs incurred if the proceedings were to continue as representative proceedings would exceed the costs that would be incurred if each group member conducted a separate proceeding, within s 166(1)(a); 3. the representative proceedings would not provide an efficient and effective means of dealing with the claims of group members, within s 166(1)(c); and 4. the representative plaintiffs would not be able adequately to represent the interests of the group members, within s 166(1)(d).
Thus, the power to make order 1 was enlivened. In addition to the considerations referred to in the preceding paragraph, in determining whether to make that order, I took into account two further considerations. First, order 1A, together with orders 5, 6 and 7, had the effect of ensuring that group members were informed of the discontinuance of the proceedings as representative proceedings with sufficient time for them to make an application under s 167(1)(b) or to commence individual proceedings, while the running of any limitation period remained suspended under s 182 (to the extent that that might be relevant in any particular case). I was satisfied that, as a result of these orders, the interests of all group members were adequately protected.
Secondly, I accepted the evidence of Ms Stacey, in her affidavit of 30 April 2021, and the revised form of the notice provided to the Court on 3 May 2021 which established that the form of notice to be sent to group members in accordance with order 5(b) would also include notice of an opportunity for group members to avail themselves of an extra-curial process for reviewing the circumstances in which a relevant guarantee was provided, so that financial relief might be provided to a guarantor where it was determined that the guarantee had been obtained unfairly or there was financial hardship or both.
Having regard to all of these matters, I determined that it was appropriate to make order 1, as well as orders 1A, 5, 6 and 7.

Orders 2, 3, 4 and 8

Orders 2, 3, 4 and 8 relate to the disposition of the proceedings as between only the plaintiffs and the defendants. In so far as the orders come into effect after order 1 becomes effective, approval of the Court under s 173 of the CP Act, which has been set out above, is not required.
Nonetheless, and to ensure that there is no confusion or cause for concern, by the making of the orders in this matter on 3 May 2021, I approved the settlement or discontinuance as provided for in those orders. I did so, having regard to my earlier judgment concerning the common issues, the circumstances referred to above, the agreement of the parties and the notation in paragraph 9 of the orders made on 3 May 2021 that the defendants had released the plaintiffs from any liability under the guarantees the subject of these proceedings.

Conclusion

For all of these reasons, the orders set out above were made on 3 May 2021.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 May 2021

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