Practice and procedure - Application to strike out parts of substituted statement of claim - Turns on own facts

Plaintiff to pay the defendant's costs of the application

Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564

Attorney General v Quinn (1990) 170 CLR 1

Edwardes v Kyle (1995) 15 WAR 302

Johns v ASC [1993] HCA 56; (1993) 178 CLR 408

Roberman v Metropolitan Health Service Board [2001] WASC 74

Victoria v Master Builders Association [1995] VicRp 47; (1995) 2 VR 121

1 MASTER SANDERSON: This is the defendant's application to strike out the plaintiff's substituted statement of claim dated 26 November 2001. This is the second application brought by the defendant to strike out the statement of claim. The earlier application was successful. The pleading has now been substantially recast, some causes of action have been dropped and the remaining causes of action are more carefully particularised. But the defendant says that the pleading is still defective and it cannot stand. It is perhaps worthy of note that although the defendant seeks to strike out the substituted statement of claim, it does not apply for judgment in the action. The defendant does not say that the plaintiff does not have a cause of action, but rather that any cause of action he may have is not properly pleaded by the present substituted statement of claim. It is implicit in the way the application is framed that if it was successful, leave to replead would be granted.

2 Because of the significant differences between the original statement of claim and the substituted statement of claim, it is necessary, to understand the grounds of the application to state generally the nature of the plaintiff's case. I will deal more fully with the pleading below, but I will first set out the sequence of events about which the plaintiff complains.

3 The plaintiff is and was at all material times the medical director of the obstetric clinical care unit at King Edward Memorial Hospital ("KEMH"). The defendant is responsible for running the KEMH and is the employer of the defendant. As medical director, the plaintiff was responsible for the administration of the medical services provided by the hospital and for the clinical organisation of those services. None of these matters are controversial and are common ground between the parties.

4 In March 2000 the defendant, for reasons which are not presently relevant, decided to set up a review of the obstetric and gynaecological services at KEMH. It appointed two persons to conduct the review. These two individuals were provided with terms of reference. They then undertook the review and prepared a report which was completed on or about 3 April 2000. The plaintiff says he was not consulted about the terms of reference for the review. Further, and perhaps more importantly from the plaintiff's point of view, when the review was completed it contained findings which reflected adversely on the plaintiff. The plaintiff says that the contents of the report became widely known within KEMH and its findings were subsequently published in at least one newspaper. The plaintiff says that he was given no opportunity to comment on the contents of the report and as a consequence, he has been denied natural justice because there has been a lack of procedural fairness. As a consequence, he seeks a range of relief, including an order that all copies of the report be collected and delivered up to him. In broad terms, that is the nature of the plaintiff's claim.

5 Senior counsel for the defendant, during the course of his submissions, undertook a detailed deconstruction of the substituted statement of claim which would have drawn a nod of approval from Wittgenstein. That is not to criticise counsel, rather it is a reflection of his meticulous and thorough approach to the application. Leaving to one side questions of form, counsel's essential point was that the statement of claim did not plead facts essential to make out a cause of action based upon breach of procedural fairness. To that extent counsel submitted that the application was not a technical esoteric exercise, but rather highlighted fundamental deficiencies in the statement of claim.

6 For his part, senior counsel for the plaintiff criticised the application as nitpicking, carping and taking hypercritical linguistic points when the meaning was quite clear. Perhaps Popper may have given a nod of approval to counsel's robust response. Counsel maintained that the pleading, although not without fault, was clear, concise and disclosed a cause of action. The positions of the parties was irreconcilable.

7 Turning to the pleading itself, the defendants say the first seven paragraphs, with one exception which I will deal with below, are unobjectionable. Paragraph 1 identifies the plaintiff, par 2 identifies the defendant. Paragraphs 3 through to 7 plead the fact of the review and identify those conducting it, set out the terms of reference, the fact that the review was carried out including the fact that it was carried out by means of interviews with 41 persons employed at KEMH, and the completion of the report on or about 3 April 2000.

8 The one objection taken to these seven paragraphs by the defendant relates to par 1(d). That paragraph pleads that the plaintiff was:

"At all material times between 20 March 2000 and 13 April 2000 had by reason of his seniority, professional competence and position, a career and reputation of professional excellence within KEMH and the medical profession within Western Australia".

9 The reason why the defendant took objection to that particular subparagraph will become apparent in the context of other paragraphs to which the defendant took more fundamental objection. The objection to par 1(d) is best considered in the wider context of these objections.

10 The defendant's main objections are to par 8 and par 9 of the substituted statement of claim. Because of the central nature of these two paragraphs I will quote them in full:

"Legitimate Expectations

8. By reason of:

(a) the plaintiff's position as pleaded in paragraph 1(a);

(b) the matters pleaded in paragraphs 1(b), (c), (d) and (e) including the plaintiff's career and reputation; and

(c) the fact that the Terms of Reference as pleaded in paragraphs 2(a) - (e) and (h) above necessarily concerned matters for which the plaintiff had a professional responsibility as part of his obligations as employee (as pleaded in paragraph 1(c) above), the plaintiff had, and was entitled to have, the following legitimate expectations of the defendant in respect of the Review before publication of the Report:

(i) he would be afforded reasonable notice of the nature and substance of any adverse allegations or enquiry into adverse allegations concerning his conduct, discharge or performance of duties in his position as pleaded in paragraph 1(a) above arising or likely to arise out of the Terms of Reference (the 'Allegations');

(ii) such reasonable notice would be provided with sufficient particularity of the Allegations and within a reasonable period before the commencement of any investigative inquiries into the Allegations in order to permit him an opportunity to answer the Allegations;

(iii) The Allegations would be raised or investigated in accordance with the process provided for in Park 5 of the PSM Act.

(Collectively defined as 'the Legitimate Expectations')

9. By reason of the matters pleaded in paragraph 8, in exercise of the power pleaded in paragraph 2(e) above the Defendant owed to the plaintiff a duty of procedural fairness to give effect to each of the Legitimate Expectations by ensuring in establishing the Terms of Reference of the Review that prior to publication of the Report:

(a) the plaintiff would be afforded reasonable notice of the nature and substance of any adverse allegations or enquiry into adverse allegations concerning his conduct, discharge or performance of duties in his position as pleaded in paragraph 1(a) above arising or likely to arise out of the Terms of Reference (the 'Allegations');

(b) such reasonable notice would be provided with sufficient particularity of the Allegations and within a reasonable period in order to permit the plaintiff an opportunity to answer the Allegations;

(c) The Allegations would be raised or investigated in accordance with the process provided for in Part 5 of the PSM Act,

(together, the 'Duty of Procedural Fairness')"

11 It is important to note first what the plaintiff says were his legitimate expectations: pars 8(a), (b) and (c). The plaintiff then says that these legitimate expectations led to him having the right to three things. First, that he would have "reasonable notice of the nature and substance of any adverse allegations or inquiries into allegations concerning his conduct, discharge or performance of his duties". This all relates to matters prior to the defendant setting up the inquiry. It is not a complaint about the fact of the inquiry, or the way it was conducted. The second complaint is that he would be afforded reasonable notice of complaints made against him and provided with sufficient particulars of those complaints to allow him the opportunity to respond prior to any review being commenced. Once again, matters arising prior to the establishment of the review. The question that arises is whether, in these circumstances, a requirement of procedural fairness arises.

12 In Annetts v McCann [1990] HCA 57; (1990) 170 CLR 596 the majority said (at 598):

"It can now be taken as settled that, when a statute confers power upon a public official to destroy, defeat or prejudice a person's rights, interests or legitimate expectations, the rules of natural justice regulate the exercise of that power unless they are excluded by plain words of necessary intendment."

13 Against that statement of principle it is clear that there is nothing in par 8(c)(i) and (ii) that could give rise to a right of procedural fairness. Complaint is made of matters which arose before the inquiry was called. There is no basis upon which the defendant could "destroy, defeat or prejudice" the plaintiff's rights based upon mere allegations, however nefarious, made against the plaintiff. It was only when the review commenced and made findings that there was any possibility of this occurring.

14 Paragraph 8(c)(iii) raises a different issue. It is pleaded (by par 1(b)) that the plaintiff is an employee of a public sector body within the provisions of the Public Sector Management Act 1994 ("PSM Act"). Section 76 of the PSM Act deals with the application of Pt 5. Relevant, it reads:

"(1) Subject to subsection (3), this Part applies to and in relation to -

(a) all public service officers and ministerial officers; and

(b) such other employees, or members of such other class of employees, as are or is prescribed for the purposes of this section."

15 By s 3 of the PSM Act, "public service officer" is defined to mean an "executive officer, permanent officer or term officer employed in the public service under Part 3". It is not pleaded that the plaintiff falls into any of the categories referred to in s 76(1)(a). Further, if the plaintiff, as an employee of the public service, is one of those persons "prescribed for the purpose of this section" then that must be pleaded. Absent that, par 8(c)(iii) raises a false issue. I did mention in the reasons relating to the first strike-out application that it was possible to envisage a situation where the plaintiff might have a legitimate expectation that any complaints made against him would be dealt with in conformity with s 81 of the PSM Act. However, no material facts are pleaded which could give rise to such a legitimate expectation. On that basis this aspect of the statement of claim must fail.

16 A similar difficulty arises with respect to par 9. Subparagraphs 9(a) and (b) refer to the "Allegations". Presumably the Allegations referred to in par 9(a) and (b) are the same as those referred to in par 8(c)(i). The defendant could be under no obligation to accord procedural fairness in relation to mere allegations. The difficulty which infected par 8(c)(iii) is repeated in par 9(c). In my view, par 9 cannot stand.

17 Given the difficulties with par 8 and par 9 and the conclusion that they should be struck out, it is, strictly speaking, unnecessary for me to deal with the remainder of the statement of claim. However, there is one further issue which was argued in some detail and which may be important in any repleaded statement of claim. It arises out of par 10 which is in the following terms:

"In breach of the duty of procedural fairness, the defendant failed to provide the plaintiff any or any reasonable notice of the nature and substance of allegations concerning his conduct, discharge of performance of his duties."

18 The reference in this paragraph is to 'allegations' as against 'Allegations' as defined in paragraphs 8(c)(i) and 9(a). Although it is not entirely clear from paragraph 10 the reference to allegations would appear to be a reference to the adverse comments contained in the report prepared by the individuals conducting the review and provided to the defendant. There might well be a question as to whether procedural fairness has been accorded to the plaintiff in relation to the report.

19 This question has two aspects. The defendant decided to undertake a review as it was empowered to do under s 15 of the Hospital and Health Services Act, par 2(e) of the substituted statement of claim. As a legal entity, but not a natural person, the defendant had to act through agents. It therefore appointed two individuals to conduct the review. The report, when completed by these individuals, contained comments adverse to the plaintiff. As I understand the case put on behalf of the plaintiff, it is said that the handing of the report to the defendant by the individuals who prepared it amounted to publication. The plaintiff says procedural fairness required that the individuals conducting the review to provide him with the opportunity to comment on these adverse findings. That is the first aspect. The second aspect relates to publication by the defendant. By par 11 it is said that after the report was published to executives of the defendant, those executives directed the plaintiff to take immediate leave from his position as medical director. It is said that the basis for that direction "became quickly and widely known amongst medical practitioners and employees of King Edward Memorial Hospital". It is further said that the conclusions and recommendations of the report otherwise became quickly and widely known among the hospital employees. In other words, it is not said that the report was published in its entirety, or that the defendant took any steps to deliberately make the contents of the report known to anyone other than the senior executives of the defendant. The question is then whether, as the defendant did not take steps to publish the report, any right of procedural fairness arises.

20 Before dealing with these issues it is as well to say something about the applicable principles. In Edwardes v Kyle (1995) 15 WAR 302, Owen J was concerned with a claim that the plaintiff had not been accorded procedural fairness in relation to allegations raised against him in an inquiry authorised under the Local Government Act. His Honour said (at 310):

"The position now is that subject to any contrary indication in the statute a duty of procedural fairness exists where the interests (including career and reputation) of a person may be adversely affected by the findings of an inquiry and the inquisitor is authorised to publish those findings".

21 In this case it is pleaded that by virtue of s 15 of the Hospital and Health Services Act 1927, the defendant was "empowered" to carry out a review. Section 15 of that Act deals with hospital boards and sets out in very general terms the powers of such boards. There is no mention of the power to conduct a review. It may be that such a power exists as a necessary concomitant to the power to properly manage a hospital. But it is difficult to see that it is any part of the board's function to publish such a review. It is true that there is no direct prohibition against such publication. However, it must be said that if the board were to decide, for one reason or another, that it thought it proper to publish a report prepared consequent upon a review, there is nothing in s 15 of the Act or any other provision of the Act which would prevent such publication. Nonetheless, this raises the question of whether the inquisitor is authorised to publish the findings. Dealing with this question in the Edwardes case, Owen J said (at 310 - 311):

"The requirement that the inquisitor be authorised to publish the Report must not be given too narrow a construction. The duty of procedural fairness is enlivened by the nature of the power, not by the character of the proceedings in which the power is exercised. In Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 the court dealt with a situation where an inquiry was conducted by a statutory body and the report furnished to a Parliamentary Committee which then tabled it in Parliament. In this respect, the situation is similar (although not identical) to this case, where the report was furnished to the Minister and tabled in Parliament by him. Mason CJ, Dawson, Toohey and Gaudron JJ said (at 578):

'It is not in doubt that, where a decision-making process involves different steps or stages before a final decision is made, the requirements of natural justice are satisfied if "the decision-making process, viewed in its entirety, entails procedural fairness": South Australia v O'Shea [1987] HCA 39; (1987) 163 CLR 378 at 389.'

The first defendant had, for the purposes of the inquiry, the powers of a Royal Commission. The Royal Commissions Act clearly envisages the preparation of a report: see, eg, ss 5, 32. This distinguishes the situation from that with which the court dealt in National Companies and Securities Commission v News Corporation Ltd [1984] HCA 29; (1984) 156 CLR 296 where it was held to be 'no part of the Commission's function to publish adverse findings, conclusions or evidence after a hearing': per Brennan J (at 326). The question is whether "a statutory authority contemplates a publication which would affect reputation by diminishing the estimation in which the bearer of the reputation stands in the opinion of others': see Ainsworth (at 592), per Brennan J. In Independent Commission Against Corruption v Chaffey (1993) 30 NSWLR 21 at 27, Gleeson CJ remarked that the duty was enlivened by 'the possibility that a hearing may result in an adverse report, and consequent harm to the reputation of persons'.

It may be that the contemplation that the first defendant would prepare a report and furnish it to the second defendant would, in the circumstances of this case, fulfil the requirement of publication. In any event, it seems to me that the reality of the situation was that the Report, once in the hands of the second defendant would be tabled in Parliament and thus made public. Order 232 and Order 233 of the Standing Orders of the Legislative Assembly contemplate that papers may be tabled in the House by the Minister concerned and, unless otherwise ordered by the Speaker, they thereupon become public documents. That is what happened and it is a reasonable inference from the circumstances and subject matter of the Inquiry that publication was a likely outcome. Accordingly, while it may be true that neither of the defendants was under a duty to publish the findings made they were authorised to do so and at all times there was a possibility that the Report would find its way into the public domain."

22 In light of the above I do not see how it could be said that the individuals preparing the report were authorised to publish it. It might be said the mere fact that the report was handed to the defendant amounted to publication. That, I think, gives too broad a definition to the word "publish" in this context. But even if that was not the case and there was a duty of procedural fairness, it was a duty owed by those preparing the report to the plaintiff. It is difficult to see how the present defendant is involved in any way at all. Paragraph 1 of the prayer for relief seeks a declaration that the report was not conducted in a manner which satisfied the requirement of procedural fairness. That is not a declaration that could be made against this defendant in relation to the investigators handing the report to the defendant. In my view that cause of action must fall away.

23 The position with respect to the defendant is rather less clear-cut. Once it received the report from those conducting the review there was at least a possibility that the report would find its way into the public domain. There was certainly no duty on the defendant to make the findings public but it is arguable that they were authorised to do so. This situation is somewhat different to that which applied in the Edwardes' case. Mr Kyle had been commissioned to prepare a report under the provisions of the Local Government Act and he had all the powers of a Royal Commissioner appointed under the Royal Commissions Act. Given the nature of the enquiry it was to be expected that once the report was handed by Mr Kyle to the responsible Minister it would be tabled in Parliament and become a public document. That is what in fact happened. Here a report was commissioned but there is no way of knowing what use the defendant intended to make of that report. However, for the purposes of a pleading summons I need take the matter no further. In my view it is at least arguable that once the report was in the hands of the defendant, a duty of procedural fairness arose and the defendant has not complied with that duty. The plaintiff therefore has a cause of action.

24 There is one final point that I should deal with and that relates to par 1(d). As I mentioned above, the defendant took exception to that paragraph. Essentially, what was said was that if a right of procedural fairness arises, it arises consequent upon the fact that the adverse finding impacts upon the reputation of the person concerned. It matters not whether that reputation is built on professional excellence, seniority, professional competence or any other outstanding characteristic. While I think there is merit in the defendant's submission, it must be remembered that what the plaintiff is seeking is declaratory relief. Such relief is discretionary. The matters pleaded may go to the question of whether or not relief ought be granted and to that extent the matters raised are relevant. I would be prepared to allow the paragraph to stand.

25 The proper course is, in my view, to strike out par 8 onwards of the substituted statement of claim. There should be general leave to replead. Subject to hearing from counsel I think the proper order is that the plaintiff pay the defendant's costs of the application.