Solicitors:
KCL Law (Plaintiff/Applicant)
Norton Rose Fulbright (Defendants/Respondents)
File Number(s): 2022/338722
[2]
JUDGMENT
The plaintiff, Modeus Pty Ltd, seeks a separate determination, pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), of the question of whether the Procurement (Enforceable Procurement Provisions) Direction 2019 (NSW) ("the Direction") made pursuant to s 175 of the Public Works and Procurement Act 1912 (NSW) ("the Act") has been, in the circumstances of this case, engaged.
Modeus accepts that if the correct conclusion is that the Direction has not been engaged, the proceedings should be dismissed, thus avoiding what Modeus contends would otherwise be a trial lasting several weeks.
Modeus contends that the question may be decided having regard only to legislative instruments and documents and that it is a "predominantly" legal question.
The particular question sought to be determined separately from, and before all other issues, is:
"Is or was the Procurement (comprised of RFI [1] HT2008 and RFP [2] HT21089/RFx193211), or any part of it, a procurement to which an enforceable procurement provision applies or applied?"
I am not persuaded that this question is apt for separate determination.
Modeus was a respondent to a procurement activity ("the Procurement") the object of which was to select and obtain a single state-wide electronic controlled drugs registry, to be called "eCDR".
Modeus contends that the Procurement was undertaken by the Ministry of Health [3] "through" the second defendant, Health Administration Corporation.
Modeus has also named the State of New South Wales as third defendant.
Health Administration Corporation contends that the Procurement was in fact undertaken by one of its administrative divisions, known as "HealthShare NSW". Health Administration Corporation contends that the team operating the Procurement has now moved from HealthShare NSW to another of its administrative divisions, "eHealth NSW".
The Procurement was conducted by way of open market tender which included a "Request for Interest" phase and a "Request for Proposal" phase.
Mr Green SC, who appeared with Dr Sapienza for Modeus, said that:
"At the heart of the substantive proceedings are disputes about:
(a) a decision that an established prospective vendor (Modeus) was not the preferred vendor in the Procurement on the basis of undisclosed criteria;
(b) a decision (after the institution of these proceedings) to cancel the Procurement …"
Modeus contends that:
1. the Direction was engaged;
2. it is entitled to the benefit of the "enforceable procurement provisions" in the Direction;
3. one or other of the defendants has acted in breach of those provisions; and
4. it is entitled to injunctive relief under s 176D of the Act or compensation under s 176F of the Act.
Clause 6 of the Direction provides, relevantly:
"Part 2 Application of Direction
6 Procurements covered by Direction
(1) This Direction applies to a procurement of goods or services by a government agency listed in Schedule 1 if:
(a) the procurement is effected by any form of contract, and
(b) the estimated value of the procurement is or exceeds the relevant procurement threshold for the procurement (or no reasonable attempt at estimating the value of the procurement has been made).
(2) Despite subclause (1), this Direction does not apply to the following:
(a) a procurement that is specified in Schedule 2 …"
As the chapeau to cl 6(1) shows, the Direction applies only to a procurement by a government agency listed in Schedule 1. The Ministry of Health, but not Health Administration Corporation, is listed in Schedule 1.
The Direction also only applies if "the procurement is effected by any form of contract". [4]
The Direction does not apply to any procurement specified in Schedule 2 including, relevantly, "the procurement of health and welfare services".
Clause 10 of the Direction provides:
"10 Third party procurement
A government agency may arrange for another party to make a procurement of goods and services on its behalf, but only if the government agency ensures that the provisions of this Direction relating to the procurement are complied with."
During argument, it emerged that Mr Green was prepared to have any separate question decided on the basis of the following allegations which are presently set out in par 15 of Modeus' proposed "Points of Claim". [5] I have substituted the defined terms in these reasons as appropriate:
"Application of 'enforceable procurement provisions': s 162, Divs 5 and 6 of the Act
15. The [Direction] applies (making the Procurement a covered procurement) either because:
(a) [Health Administration Corporation], which is not itself named in Schedule 1 to the [Direction] as an agency to which the [Direction] applies, is properly understood as falling within the Ministry of Health (which is named in Schedule 1 to the [Direction]) for the purposes of the Procurement; or
(b) [Health Administration Corporation], by virtue of its functions across NSW Health, was conducting the Procurement on behalf of the Ministry of Health.
Particulars
(i) The [Ministry of Health] is incorporated as [Health Administration Corporation]: s 9(1) Health Administration Act 1982 (NSW) (HA Act).
(ii) The [Secretary] is head of the Ministry of Health: s 23(1), Pt 1 of Sch 1 Government Sector Employment Act 2013 (NSW) (GSE Act).
(iii) [Health Administration Corporation] is subject to the control and direction of the Minister: s 9(5) HA Act.
(iv) The relevant function conferred on [Health Administration Corporation] by the HA Act is the entry into contracts 'with any person for the performance of services, or for the supply of goods, plant, machinery or material with respect to the exercise by the Minister, [the Ministry of Health], [the Secretary], [Health Administration Corporation] or Foundation [6] of their functions under this or any other Act': see s 13(1) HA Act.
(v) [Health Administration Corporation] itself has no other functions conferred upon it in its own right to which the Procurement could relate.
(vi) The Ministry has no functions expressly conferred upon it. However, the Ministry is understood to 'support relevant ministers to perform their executive and statutory functions': NSW Health Annual Report 2020-21 (Annual Report) page 6; see also s 21(2) GSE Act. Accordingly, the functions of the Minister can be understood as the functions of the Ministry. On this basis, the functions of the Foundation not being relevant to this proceeding, [Health Administration Corporation] may only enter into contracts pursuant to s 13(1) in exercise of the functions of the Minister or the functions of the [Secretary].
(vii) The Procurement falls within the then Director-General's determination of 29 March 2006 (reconfirmed on 31 December 2010) 'Delegation of Functions' annexed to HealthShare NSW's Statement Service 2021-22, pursuant to s 8A of the HA Act, that [Health Administration Corporation] may exercise the [Secretary's] powers, duties and functions under s 126B of the HS Act.
(viii) [Health Administration Corporation] cannot employ its own staff; rather, all staff involved in the Procurement are employed in the Health Service: see s 9(2A) HA Act; s 116(1)(e) of the Health Services Act 1997 (NSW) (HS Act). The [Secretary] exercises the employer functions of the Government in relation to the staff employed in the NSW Health Service, so far as [Health Administration Corporation] is concerned: s 116(2) HS Act.
(ix) The division of [Health Administration Corporation] conducting the Procurement is HealthShare NSW on behalf of eHealth NSW, being agencies a primary function of which appears to be government procurement for NSW Health.
(x) The Procurement was a NSW Health Procurement, which term encompasses the Ministry and [Health Administration Corporation] (see s 4(1A) HA Act).
(xi) [Health Administration Corporation] was of the view that the Procurement was a covered procurement.
(xii) The Ministry of Health was represented on the Evaluation Committee assembled in respect of the Procurement.
(xiii) The Procurement was prompted by the Directors of Pharmacy, and the Chief Pharmacist Unit and the Pharmaceutical Regulatory Unit are units of the Legal and Regulatory Services Branch of the NSW Ministry of Health.
(xiv) The provision of an eCDR (being computer software) is not the provision of a 'health service' within the meaning of Sch 2 to the [Direction]." (Emphasis in original.)
Arising out of those matters, Mr Cheshire SC, who appeared with Mr Condylis for the defendants, submitted, and Mr Green did not dispute, that the following issues will arise on the proposed separate question:
1. whether the Ministry, the party named in Sch 1 to the Direction, conducted the Procurement and thus, looking at subpar (a) of the proposed allegations, whether the Health Administration Corporation should be "properly understood to fall within" the Ministry;
2. if the Ministry did not conduct the Procurement, in which case by reason of cl 6 of the Direction it does not apply, whether, for the purpose of cl 10 of the Direction (set out at [17] above), the Ministry "arranged for another party", and it could only be Health Administration Corporation, to make the Procurement "on its behalf";
3. the proper construction of cl 6(1)(a) of the Direction and whether it applies only if the Procurement was actually effected ("is effected") by a contract, or whether the Direction also applies if the Procurement was to be so effected; and
4. whether the Procurement was for "health and welfare services" so as to be excluded from the operation of the Direction by cl 6.2.
Mr Green accepted that, if there were to be a separate question, Modeus would need to make out those contentions, and the matters particularised purely by reference to documents, including legislative instruments.
Mr Cheshire submitted that, nonetheless, the defendants would seek to put on evidence in relation to those matters. That evidence is likely to be extensive and to take a considerable time to prepare.
According to the defendants' solicitor, Mr Wilford, that evidence will be adduced in relation to:
1. the structure and workings of Health Administration Corporation, including its administrative divisions, such as eHealth NSW and HealthShare NSW;
2. the relationship between Health Administration Corporation and eHealth on the one hand, and the Ministry on the other;
3. the actual operation of the Procurement (so as to illustrate the matters in (a) and (b)), including as to whether the Procurement was conducted by an administrative division of Health Administration Corporation, and not by the Ministry;
4. whether Procurement was, for the purposes of cl 10 of the Direction, conducted "on behalf of" the Ministry;
5. the structural workings of the Ministry itself;
6. the relationship between the Ministry on the one hand and Health Administration Corporation, and its administrative divisions such as HealthShare NSW and eHealth NSW, on the other;
7. the conduct of procurements by the Ministry generally including that the Ministry conducts its own procurements; and
8. whether the Procurement was a "procurement of health and welfare services".
It is thus likely that the defendants will seek to adduce a vast body of evidence on the proposed separate question.
Mr Green agreed that, for the purposes of any separate question, Modeus would not seek to contest any evidence adduced by the defendants, otherwise than as to relevance.
He submitted, however, that there may be a contest about inferences to be drawn from the evidence.
As the defendants propose to adduce evidence as to how the procurement was in fact conducted, presumably so as to establish its contentions as to who conducted the Procurement, it is likely if not certain that this evidence, or at least a significant part of it, will also be deployed on behalf of the defendants in the final hearing in the event that the separate question was answered favourably to Modeus.
That is because, in that event, there will be a final hearing concerning Modeus' claims that there has been a breach by one or other of the defendants of the enforceable procurement provisions in the Direction and its claims for injunctive or compensatory relief.
While Modeus agrees that this evidence will not be challenged, otherwise than as to relevance, on the hearing of the separate question, there is no reason as to why Modeus could not challenge it at final hearing, thus raising the spectre of inconsistent findings about the same facts or evidence. [7] That, alone, is a reason to refuse to order a separate question.
A further potential problem arises if the separate question is answered favourably to Modeus. In order to avoid the lengthy trial the subject of Modeus' apprehension, the defendants may seek to challenge the determination of the separate question on appeal.
In that regard, Mr Green did submit, in passing, that this might be an appropriate case in which to order that any separate question be removed to the Court of Appeal under UCPR r 1.21. That submission was not developed, and no such application has been made. In any event, the evidence that the defendants have foreshadowed they would adduce on the separate question points to the probability that its resolution would, at least to some extent, depend on the facts peculiar to this case, thus rendering this case not suitable for removal.
For those reasons, my conclusion is that there should not be an order for determination of the proposed separate question. I propose to dismiss that part of Modeus' Notice of Motion filed 11 August 2023 seeking this relief.
[3]
Endnotes
"Request for Interest".
"Request for Proposal".
In fact, the Secretary of the Ministry of Health is the first defendant.
Clause 6(1)(a).
These proceedings were initially commenced in the Common Law Division where directions were made for the filing and service of Points of Claim. Modeus accepts that, now that the proceedings have been transferred to the Commercial List, it will in due course have to file a Commercial List Statement.
I was not told for what entity this is an abbreviation.
See, for example, Owners Corporation SP 70672 v Trustees of Roman Catholic Church [2010] NSWSC 946 at [16] (Ball J).
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Decision last updated: 08 November 2023