BRIAN WINSTON ALDERTON, STEPHEN ARDEN SWAINSTON, DAVID JOHN BEVAN AS TRUSTEES OF THE BETTINA TRUST v THE HEALTH FUNDING AUTHORITY [2000] NZCA 94 (21 June 2000)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca 23/00

	between	Brian winston alderton, stephen arden swainston, david john bevan as trustees of the beTtina trust
		Appellant

	AND	THE HEALTH FUNDING AUTHORITY
		Respondent

Hearing:	21 June 2000
Coram:	Gault J Thomas J Blanchard J
Appearances:	H C Keyte QC and P J Napier for Appellant J R F Fardell and Y H Bassili for Respondent
Judgment:	21 June 2000

judgment of the court delivered by THOMAS J

A question of interpretation

[1] The appellants are the trustees of the Bettina Trust which operated the Bettina Rest Home from 1 April 1992.In January 1994, the Northern Regional Health Authority (called North Health) entered into a contract with the Trust (backdated to 6 October 1993) under which North Health agreed to pay for specified services provided by the Trust.The respondent, the Health Funding Authority, took over North Health's liabilities in a later restructuring.At the hearing in the Court below it was substituted as a defendant by consent.

[2] The Trust alleges that, under the contract, the Authority is liable to pay it monies for services provided by it from 1 July 1993 when North Health came into existence until 5 October 1994 when the contract was terminated.

[3] The question in issue in this appeal is whether, in the context of the contract, the words "prior to 1 July 1993" in para (a) of Schedule B mean at "any time prior" to that date or "as at" that date.

The contractual provision in dispute

[4] The contract is based on a standard form Regional Health Authority purchasing agreement.By virtue of clause 23, all schedules form part of the agreement.Schedule C provides that the purchaser (North Health) must pay the provider (the Trust) a price per day for all "eligible clients".The disputed provision is in Schedule B which defines who is an eligible client.We set the Schedule out in full:

ELIGIBILITY

1. For the purposes of this Agreement the client group is those persons who have their permanent place of residence in one of the following areas:

Far North District Council

Kaipara District Council

Whangarei District Council

Rodney District Council

North Shore District Council

Waitakere District Council

Auckland District Council

Manukau District Council

Papakura District Council

Franklin District Council

and who:

(a) have been in a private rest home and receiving Rest Home Subsidy or a public rest home for continuing care prior to 1 July 1993; or

(b) post 1 July 1993 have been assessed as requiring rest home continuing care by a multidisciplinary assessment team who will hold a separate contract with the Purchaser, and have been means tested by the New Zealand Income Support Service and come within the eligibility criteria.

The background

[5] The Bettina Rest Home has been providing care services in Avondale, Auckland, since 1981 and, as said, has been operated by the Trust since 1992. Its director since 1985, a Mr Alderton, who is also a trustee and main shareholder, has not run Bettina as a typical rest home.Under his direction, Bettina has specialised in the care of younger people with intellectual disabilities, in particular, those with Downs Syndrome.Evidence before the High Court indicated that this method of care was not in keeping with the governmental policy developed in the 1980s.It moved away from residential care for the intellectually disabled and focussed on providing such persons with care in the community.Further, relevant government agencies considered that combining care for the elderly with intellectually disabled persons in a single facility was inappropriate.

[6] Some time in the first half of 1993 (the date is not given in the Case on Appeal), North Health issued an Advice Notice Pursuant to Section 51 of the Health and Disability Services Act 1993.The Notice advised that, as from 1 July 1993, North Health would be responsible for subsidising or funding health and disability services for the population of the northern region.Section 51 of the Act required Regional Health Authorities to issue the terms and conditions which would apply to persons or organisations receiving funds from Regional Health Authorities for the provision of services.The Notice therefore set out the terms and conditions.Appendix C to the Notice defines the persons who are to be "service recipients", that is, the persons for whom the licensee would be obliged to provide services at the licensee's rest home. Such recipients are identified as persons who:

a)(i)were receiving Rest Home Subsidy as at 30 June 1993 and remain eligible pursuant to subclause b)(v), or were in a public rest home at that date;

(Clause b)(v) relates to persons who have been assessed as requiring and continuing to require care in a rest home who have been means tested by the New Zealand Income Support Service and are within and remain within the eligibility criteria as stipulated by the Minister of Social Welfare from time to time.)

[7] The funding to which the Trust was entitled diminished with the change in governmental policy.In March 1993 a multi-disciplinary team assessed 22 of Bettina's 33 residents for rest home subsidy eligibility.Three of the twenty two were found to meet the relevant criteria.Accordingly, immediately prior to 1 July 1993 only three persons were receiving the rest home subsidy referred to in subclause (a) of Schedule B.The other 19 assessed persons were all intellectually handicapped and under 65 years of age and, following the review, did not receive the subsidy.During the 1980s, however, each of the 19 residents had at some stage been in receipt of the subsidy.Bettina continued to care for these 19 persons, at least until 5 October 1994 when the contract was extinguished.They certainly met the geographical criteria in clause 1 of Schedule B.Thus, in practical terms, the dispute is whether or not these 19 people were eligible under subclause (a).

[8] The 19 persons had been expressly considered during the course of contractual negotiations.This is apparent from Schedule H.It reads as follows:

ADDITIONAL TERMS AND CONDITIONS

The Purchaser and the Provider acknowledge and agree that this contract is entered into by the parties on the basis of the letter dated 12 January 1994 attached and marked "A" and that the Provider will in particular actively assist in the relocation, to a more appropriate facility, of those younger people currently in the Provider's facility who are not considered to be close in age and interests to older people in the rest home and therefore are not eligible for a rest home subsidy.

[9] The letter of 12 January noted that 19 people had been assessed and were "not considered to be close in age and interests to the older people in rest homes".It recorded that the Trust questioned the assessment outcome for these 19 persons, and that North Health undertook to reassess the nineteen within the context of an appeal process.The letter stated:

5. Provided that you [the Trust] meet the appropriate standards, North Health is prepared to contract with you for services to the people currently eligible for Rest Home subsidy.

...

7. The 19 residents referred to in 5. above will be reassessed within the appeal process as soon as that is confirmed.

...

9. If people are assessed as not needing Rest Home services, you will actively assist their transfer to appropriate services as these become available. (Emphasis added).

[10] In the event, North Health never carried out the appeal process.

The judgment in the High Court

[11] Chambers J in the High Court held that the phrase "prior to" in subclause (a) should be read as meaning "immediately prior to".Accordingly, the Trust was not entitled to payment for the 19 people in question as they were not receiving the rest home subsidy immediately prior to 1 July 1993.The learned Judge advanced three reasons for his conclusion.The first was that there was no evidence that the contract was intended to effect a change in policy and convert people who had been assessed as ineligible in March 1993 into eligible clients from 1 July 1993.All that had changed in July 1993 was the funding purchaser, not the eligibility criteria.The second reason was that the Trust's interpretation could provide an arbitrary windfall for persons who might have once received the subsidy but had since become wealthy, having perhaps won Lotto or inherited a substantial sum.There was no basis for believing that such people were intended to be eligible for the subsidy.The final reason was that the Trust's interpretation would make the promise of reassessment in Schedule H redundant.The 19 people would already be entitled to a subsidy under Schedule B.

This Court's decision

[12] We propose to dismiss the appeal.In our view the question of interpretation is not particularly difficult.The words "prior to 1 July 1993" mean "as at" that date.

[13] We do not agree with Mr Keyte, who appeared for the Trust, that the plain meaning of the words "prior to" is necessarily "at any time prior to 1 July 1993".The phrase can sensibly mean either at any time before that date or as at that date.The subclause must take its meaning from the context and having regard to the matrix or setting of the contract.

[14] In the first place, we consider that it is necessary to read the subclause as a whole.Reference is made to those persons who have been in a private rest home "and receiving" the subsidy.The subclause does not refer to persons who "have been in a private rest home and had received" the subsidy.The use of the word "receiving" therefore suggests that the subclause is intended to encompass only those persons actually in receipt of a subsidy as at 1 July.

[15] In the second place, the contractual matrix makes it clear that the agreement was intended to give effect to the restructuring of the health sector in the early 1990s.As part of this restructuring Regional Health Authorities assumed responsibility for the payment of rest home subsidies and needs assessment of rest home care.Subsidies which were previously paid by the Department of Social Welfare would continue to be paid by a Regional Health Authority.Thus, people who immediately prior to the specified date were in receipt of residential care subsidies from the Department had their subsidies "grandparented" to the Regional Health Authorities.It would appear to us that there was no question of changing the criteria for eligibility for a subsidy. Rather, the Regional Health Authorities took the place of the Department of Social Welfare as the funder of the subsidies.

[16] This perception is supported by the Advice Notice Pursuant to Section 51 of the Health and Disability Services Act 1993 referred to above.As indicated, "service recipients" were stated to be persons who "were receiving rest home subsidy as at 30 June 1993...".Further, the letter of 12 January 1994, which is also referred to above, confirms that North Health was prepared to contract with the Trust for services to the people "currently" eligible for a rest home subsidy.The use of the word "currently" again confirms that the parties were contemplating those persons who were in receipt of a subsidy as at the specified date.

[17] Finally, we would endorse the reasons given by Chambers J.The wording in issue appears in the standard form purchasing agreement for Regional Health Authorities.It would be most unlikely that it would have been contemplated that all persons resident in a rest home, wherever situated in New Zealand, who had at some past date received a subsidy would become eligible as at the date a Regional Health Authority assumed responsibility for the funding of the services.Changes in the financial circumstances of residents would necessarily be a real possibility.We do not therefore accept Mr Keyte's attempt to diminish the force of this point by referring to the identity of the 19 persons involved in respect of this particular agreement.Again, we agree that the learned Judge's reference to Schedule H points to the meaning of subclause (a) contended for by the Authority.The undertaking to carry out further assessments of the nineteen would not be necessary if they were already eligible for the payment of a subsidy.Explicit language would be required before it could be accepted that the 19 people would be both eligible for a subsidy and yet would be reassessed for a subsidy.

[18] It follows that we reject Mr Keyte's valiant effort to vest Schedule H with a different meaning based on the premise that it was inserted for the benefit of the Trust.The argument that, if any of the 19 people were found to be ineligible, the Authority would only be liable for the costs up to that point so that, in effect, the nineteen were only "provisionally" declared to be eligible pending reassessment, proved to be a strained argument.We need not take it further.

[19] For the above reasons we consider that the meaning of the contract is clear.It was the intention of the parties that residents would continue to be eligible for the payment of a subsidy if they were in receipt of a subsidy as at 1 July 1993.

[20] The appeal is dismissed.Costs are awarded to the respondent in the sum of $3,000, together with disbursements, including travelling and accommodation expenses for one counsel, failing agreement to be fixed by the Registrar.

Solicitors

Keegan Alexander Tedcastle & Friedlander, Auckland for Appellant

Russell McVeagh, Auckland for Respondent