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Court of Appeal of New Zealand |
Last Updated: 12 December 2011
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IN THE COURT OF APPEAL OF NEW ZEALAND
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CA 27/01
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BETWEEN
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PHARMACY CARE SYSTEMS LIMITED
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Appellant
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AND
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THE ATTORNEY-GENERAL
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Respondent
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Hearing:
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11 October 2001
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Coram:
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Richardson P
Keith J Tipping J |
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Appearances:
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B O'Callahan for Appellant
A R Burns and R Espie for Respondent |
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Judgment:
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11 October 2001
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JUDGMENT OF THE COURT DELIVERED BY RICHARDSON P
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[1] The appellant, Pharmacy Care Systems Limited ("Pharmacy Care"), appeals against a decision of Robertson J, in which the Judge upheld a decision of Master Kennedy-Grant, striking out Pharmacy Care's claim for $80,000 withheld by the former Regional Health Authority known as North Health, plus interest and costs.
Background
[2] Pharmacy Care operated a pharmacy business in Auckland, specialising in the supply of prescription medication to patients in private hospitals and institutions for the intellectually handicapped. Pursuant to the provisions of the relevant legislation, regulations, supply agreements and statutory notices, Pharmacy Care supplied medicines funded by the state to patients and submitted claims for payment in respect of such supply to the relevant health funding body. The legislation in this area has been the subject of considerable change over the past decade and its detail is not relevant at present.
[3] In October 1993, Mr Peter Aitken, a director of Pharmacy Care, was informed by Health Benefits Limited ("Health Benefits") of a decision by North Health, the Regional Health Authority for Auckland established in 1993, to have Pharmacy Care's claims in respect of medicines supplied to patients audited by Health Benefits.
[4] Pharmacy Care had been "recycling" prescription medicines. It had supplied to private hospitals and institutions for the intellectually handicapped the medicines required by their patients. When a patient was instructed to cease to take a particular medicine before the supply of that medicine held for the patient by his or her healthcare provider had been exhausted, the healthcare provider returned the surplus medication to Pharmacy Care free of charge. If Pharmacy Care was satisfied that the returned medication was safe for use by other patients, it dispensed it to other patients. It also lodged with the health funding body a claim for payment of the same amount as it would have claimed had it supplied new medication received directly from a commercial supplier of pharmaceuticals.
[5] North Health claimed that Pharmacy Care's practice of claiming for recycled medicine as much as it claimed in respect of new medicine breached the purchase contract existing between North Health and Pharmacy Care, the Fair Trading Act 1986 and the Crimes Act 1961. North Health sought reimbursement from Pharmacy Care of $80,000. While negotiations between the parties continued, North Health asserted the right to set off the $80,000 it claimed against Pharmacy Care's claims for payment in respect of non-recycled medication.
[6] On 15 March 2000 Pharmacy Care filed a statement of claim, naming the Health Funding Authority (North Health's successor) as the defendant and seeking payment of the $80,000 withheld, damages for harm done to its business, exemplary damages, interest and costs.
[7] Neither the statement of claim nor the affidavit accompanying Pharmacy Care's application for summary judgment referred to a deed of settlement of 6 September 1996 entered into by Pharmacy Care, North Health and Health Benefits. The deed was, however, annexed to an affidavit which accompanied the notice of opposition filed on 8 June 2000 by the Health Funding Authority in response to Pharmacy Care's application for summary judgment. In the deed Pharmacy Care accepted that it was liable to North Health for $80,000, that North Health was not liable to pay the $80,000 which it had withheld and that all claims between the parties had been fully and finally settled. On 20 June 2000 the respondent sought to have Pharmacy Care's claim struck out under r 186 of the High Court Rules, averring that Pharmacy Care was estopped by the deed of settlement and that its claim was an abuse of process.
[8] In response, Pharmacy Care on 14 July filed a notice of opposition and on 2 August, seven weeks after the Health Funding Authority had pleaded the settlement, filed an affidavit, in which Mr Aitken deposed that he had entered into the deed under economic duress. He claimed that a Mr Gedye for North Health:
- ... told me that he would give me 1 hour to go away and think about it and if I did not agree North Health would commence criminal fraud proceedings against [me and Pharmacy Care's other director] and would make sure that I never obtain another section 51 Notice.
Section 51 of the Health and Disability Services Act 1993, which is now repealed, allowed regional health authorities to give notice of the terms and conditions on which they would make payments for health services. Mr Aitken further deposed that by 16 June 1996 North Health had withheld approximately $135,000—$55,000 more than it claimed it was owed by Pharmacy Care.
[9] In answer Mr Gedye deposed:
- I completely reject Mr Aitken's allegation that at our meeting of 20th March 1996 I forced him on one hour's notice to agree against his will to repay the $80,000 amount by way of unlawful economic duress and threats. I have no hesitation in stating that the Deed of Settlement was entered into completely lawfully, and that there are no grounds whatsoever that any party should not remain bound by its terms. At all times Mr Aitken was given considerable time to consider all issues put to him and to consult his legal advisors.
- To assist the Court, I set out the relevant background leading up to the parties signing the Deed of Settlement.
...
[10] On 9 October 2000 Master Kennedy-Grant struck out Pharmacy Care's claim. The Master concluded that if Mr Aitken's evidence were to be believed, Pharmacy Care would have an arguable claim that it entered into the deed of settlement under duress. However, he was satisfied that Mr Aitken's evidence was "entirely unworthy of credit and that the validity of the deed of settlement entered into by the plaintiff on 6 September 1996 is not affected, even arguably".
[11] The Master reached that conclusion "having regard to the facts set out in para [24] of this judgment", namely:
[a] Five-and-a-half months elapsed between the one and only (alleged) threat of prosecution on 20 March 1996 and the execution of the deed on which the defendant relies on 6 September 1996;
[b] The plaintiff had the benefit of legal advice until at least June of 1996;
[c] On 15 March 1996, by which date the view of the defendant's predecessor that the plaintiff's conduct was criminal had been expressed twice (in the letters of 18 January 1996 and 7 March 1996 from its solicitors to the plaintiff's then barrister), the plaintiff's barrister had made it clear to the defendant's predecessor that the plaintiff "remains as always ready and willing to negotiate a compromise arrangement but ... it will not negotiate at gunpoint";
[d] At no stage between 20 March 1996 and 6 September 1996 did Mr Aitken protest the treatment he was allegedly receiving;
[e] At no stage after 6 September 1996 did the plaintiff take steps to have the deed of settlement set aside;
[f] When the plaintiff brought the present proceeding, it sought summary judgment without disclosing the existence of the deed;
[g] The plaintiff only raised the issue of economic duress after the defendant had filed and served an affidavit exhibiting the deed of settlement of 6 September 1996 and had moved to strike the plaintiff's proceeding out on the ground of the deed.
[12] In an oral judgment delivered on 30 October 2000, Robertson J dismissed the application for review of the Master's decision. The Judge observed that in seeking summary judgment Mr Aitken filed a 39 paragraph affidavit in support which had attached an extraordinary amount of detailed information. The most extraordinary thing however about that affidavit was that it was totally silent as to the deed of settlement between the parties of September 1996. We pause to add that his affidavit and accompanying exhibits ran to 111 pages, that in para 38 he expressed mystification as to how the $80,000 withheld had been calculated and that in para 39 averred that he and Pharmacy Care believed that the defendant had no defence to the cause of action.
[13] The Judge recorded that the rules about strike out were not in issue: that strike out occurs only in the clearest cases and that it is unusual for courts to determine questions of fact on a strike out application, although as the authorities make clear, a court should have its feet firmly on the ground and not be afraid to take hard decisions even about disputed facts where there is a clear inevitability about the outcome.
[14] On the Judge's assessment, what this case boiled down to was whether the allegation made by Mr Aitken of an oral conversation between himself and Mr Gedye, the Manager of the Health Funding Authority in March 1996, was believable. The sole question was whether or not it was open to the Master to conclude as he did that Mr Aitken's evidence on this point was "entirely unworthy of credit". The Judge set out the seven facts identified by the Master in para [24] (para [11] above). He explicitly recognised that the Master had not articulated beyond that recording of the defendant's position his reasoning in respect of the matter but Robertson J said what the Master was effectively saying was that this oral assertion allegedly made on 20 March 1996 was simply unbelievable when it is taken within its total context and that among the matters to be considered are issues set out in para [24].
[15] Robertson J was not satisfied that the Master had been shown to be wrong in doing so in this case, adding that, if he had had to determine these matters de novo he would have reached the same conclusion.
[16] In his judgment the most telling matters here were contemporaneous surrounding documents. It was unbelievable that Mr Gedye behaved in the way in which Mr Aitken now alleges, particularly when one viewed the correspondence and the documents which arose in the period November 1995 and through until September 1996. There was undoubtedly a vigorous interchange going on at a time when the parties were represented by senior members of the legal profession. Robertson J agreed with the Master, that when one looked at the pre-March documents and correspondence it was unbelievable that Mr Gedye from the caution and the care which had existed up until that time, suddenly came out with the approach on that one occasion as asserted by Mr Aitken, and that thereafter Mr Aitken did nothing about it; and:
[19] Eventually after a lot of to-ing and fro-ing the parties entered into the deed. There was still no complaint anywhere or to anybody. Down to the present time, Mr Aitken has offered no explanation as to what appears the starting proposition that 3½ years later he seeks summary judgment in respect of a sum which on its face is covered by the September 1996 deed.
[20] When one looks at the matters listed in [a] to [g] and when they are put firmly within their contemporary context, I am satisfied that this is one of those extraordinary cases in which the Court is bound to conclude that the evidence of an oral allegation has no credit attaching to it.
[17] On the application for leave to appeal to this court, counsel for Mr Aitken submitted that in their analyses the Master and then the Judge had made a seriously arguable mistake of fact in the assessment of the evidence on the issue as to whether Mr Aitken had been subjected to unlawful economic duress and threats. After reviewing that material and noting the rival submissions that as a matter of law where there is conflict in the evidence a Court could never reach a conclusion on a factual matter (for Pharmacy Care) and it could hardly ever do so and only in the most exceptional circumstances (for the Attorney-General), Robertson J concluded:
I remain of the view that on the total facts available and adopting a robust and pragmatic approach Mr Aitken's narrative of events is unbelievable. But it may be that the applicant can persuade the Court of Appeal that such a finding is not available to a judicial officer where there is conflict in the evidence. On this very narrow point I conclude there is no option but to grant leave.
Strike out: the applicable legal principles
[18] Rule 186 provides:
Without prejudice to the inherent jurisdiction of the Court in that regard, where a pleading–
(a) Discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(b) Is likely to cause prejudice, embarrassment, or delay in the proceeding; or
(c) Is otherwise an abuse of the process of the Court, the Court may at any stage of the proceeding, on such terms as it thinks fit, order that the whole or any part of the pleading be struck out.
[19] Both parties accepted the general principles governing strike out applications set out in Attorney-General v Prince and Gardner [1998] 1 NZLR 262; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641; and, importantly, the statement by this court in Attorney-General v McVeagh [1995] 1 NZLR 558, 566 that:
The Court is entitled to receive affidavit evidence on a striking-out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking-out application is dealt with on the footing that the pleaded facts can be proved; ... But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.
[20] Those authorities are directed, in particular, to the principles underlying r186(a). As well, the Attorney-General has from the outset relied on r186(c) and specifically did so in her strike out application of 20 June 2000.
The rival submissions
[21] Mr O'Callahan for Pharmacy Care argued, first, that there was no material conflict of evidence, secondly, that, even if there was, the Master erred in law in finding that he had the power to strike out Pharmacy Care's claim and, thirdly, that both the Master and the Judge ignored two undisputed grounds of duress.
[22] Mr O'Callahan submitted that Mr Gedye's evidence does not directly contradict Mr Aitken's evidence. He pointed to the fact that Mr Gedye did not expressly deny having threatened to commence criminal proceedings or to prevent Mr Aitken from obtaining another s 51 notice and the fact that Mr Gedye simply offered his own opinion as to whether his conduct could, as a matter of law, amount to duress. It was said that Mr Gedye's evidence even amounted to a tacit acceptance of Mr Aitken's. As to Mr Gedye's denial that Mr Aitken had been given only one hour to decide whether to settle the dispute, Mr O'Callahan submitted that even this did not genuinely conflict with Mr Aitken's evidence. In saying that "Mr Aitken was given considerable time to consider all issues put to him and to consult his legal advisors" Mr Gedye must be taken to have been referring to correspondence between the two parties' solicitors, not to the amount of time Mr Aitken was given at the meeting of 20 March 1996. It was submitted that, in the absence of evidence from the respondent specifically denying the allegations made by Mr Aitken, it was not open to the Master to reject Mr Aitken's evidence and strike out Pharmacy Care's claim.
[23] Mr O'Callahan submitted that, if there was a material conflict of evidence in this case resulting from the affidavits of Messrs Aitken and Gedye as well as other evidence, it was not open to the Master to strike out the proceedings. He sought to restrict the sentence in McVeagh, submitting that this Court could not have intended to allow, on a strike out application, the resolution of a contest in evidence between deponents who have direct knowledge of the facts to which they are deposing.
[24] Next, Mr O'Callahan submitted that both the Master and Robertson J failed to consider the duress arising out of North Health's withholding more than the $80,000 which was claimed and Mr Gedye's threat to ensure that Mr Aitken did not get another s 51 notice. He submitted that neither ground was expressly denied by Mr Gedye in his affidavit.
[25] Finally, Mr O'Callahan submitted that counsel had argued abuse of process on a confined basis. It was argued before the Master as abuse of process consisting of attempting to relitigate matters which had already been fully and finally settled. The Master also refused the Crown leave to pursue the further argument that the delay on the part of Pharmacy Care in bringing the proceeding was likely to cause prejudice to the Crown. It was in that latter context that the Crown had submitted as significant the absence of any mention in the summary judgment proceeding of the existence of the deed and the absence of any explanation by Mr Aitken in his affidavit responding to the strike out application as to why he had not mentioned it in his first affidavit.
[26] Mr Burns for the Attorney-General, relying on the passage cited from McVeagh (para [19] above), submitted that there is a threshold whereby certain facts alleged can be disregarded by a Judge upon hearing a strike out application. This is clearly a discretion that must be rarely exercised by the courts and only where the contradictory facts pleaded are clearly insupportable; not genuine; and the truth of the opposing facts is apparent. He went on to submit that by its very nature Mr Gedye's denial in his affidavit of Mr Aitken's allegations constitutes a denial of each of those allegations and not an acceptance in part. On its face the settlement deed was indisputable evidence that the matter had previously been settled and was a bar to any such claim by Pharmacy Care to recovery. Mr Aitken's ensuing allegation that the settlement deed agreement was reached by way of threats and duress failed to satisfy the test in McVeagh.
[27] Mr Burns further submitted that it was clear from the respective decisions of the Master and Robertson J that in turn they had considered the allegations made by Mr Aitken and that they were not required to deal specifically and separately with each of those allegations. It was open to them successively to express the overall conclusion that Pharmacy Care's allegations of threats and duress were not credible.
[28] Finally, as to abuse of process, Mr Burns, accepting that the Crown had not squarely raised abuse of process as a separate, independent justification for strike out, submitted that, in considering whether the Crown had satisfied the high threshold justifying strike out where there was conflicting evidence, the failure to disclose the existence of the settlement deed at the outset and the absence of any explanation for that failure in the affidavit answering the strike out application, as a misuse of the court process, was a factor relevant to the assessment of whether Mr Aitken's allegations were worthy of belief.
Discussion
[29] As clearly stated in McVeagh, the High Court is entitled to receive affidavit evidence on a strike out application and will do so in a proper case. The court in McVeagh went on to note that the High Court will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. It added that there may be a case where an essentially factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further. We do not read those observations, which appear in the part of the reasons for judgment dealing with the argument that there was no reasonable cause of action, as exhaustive of the complete range of circumstances which may ever fall for consideration under r186(a). As well, the other categories in r186 may raise other considerations properly subject to affidavit assessment (see, for example, McGechan on Procedure HR 186.06A-HR 186-08).
[30] In particular circumstances the court may be entitled on a strike out application, where there are apparent conflicts in the affidavit evidence, to look beyond bare statements in affidavits to determine whether particular assertions are capable of belief. Clearly, a high threshold is required before the court will be entitled to reject affidavit evidence and strike out the proceeding but it is unnecessary for present purposes to attempt a formulation of a threshold test applicable in all the wide range of circumstances which may arise for consideration under r186. Bearing in mind that applications under different rules may raise somewhat different features, the considerations expressed by Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331, 341 are likely to provide helpful guidance. He said:
Although in the normal way it is not appropriate for a Judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be. ... It is for him to determine in the first instance whether statements contained in affidavits that are relied upon as raising a conflict of evidence upon a relevant fact have sufficient prima facie plausibility to merit further investigation as to their truth.
[31] In the present case, abuse of process is not raised as an independent justification for strike out. Nevertheless, we accept Mr Burns' submission that it is a highly relevant consideration in determining whether Mr Aitken's allegations were simply unbelievable.
[32] There are two considerations which have led us in the end to conclude that the Master and Robertson J erred in holding that the necessarily high threshold for strike out had been met in this case. The first is our concern that Mr Gedye did not expressly address and answer each of the factual allegations that Mr Aitken made (para [8] above). Rather, he claimed in paras 2 and 19 of his affidavit (para [9] above) to be justified in law in the stance he took at the March meeting.
[33] The second concerns the assessment by the Master and Robertson J of the seven factors referred to in the Master's para [24] (para [11] above). Robertson J, correctly in our respectful view, saw as the sole question whether the allegations made by Mr Aitken as to the oral conversation between himself and Mr Gedye were capable of belief. The difficulty is that on the face of the judgments and in the absence of any further discussion, both the Master and Robertson J appear to have regarded the post-March conduct on Mr Aitken's part as leading to the conclusion that Mr Aitken's evidence as to the March meeting was unbelievable. The allegations were of threats and duress. A point of blackmail is to stop people speaking out. Absence of subsequent complaint may be consistent with either the absence or the presence of continuing operating duress and for his part Mr Aitken averred that in September 1996 he was told he had to sign the deed and was once again of the view that the threats concerning fraud proceedings and preventing him from ever being involved in another s51 notice were real and subsisting.
[34] To put it another way, absence of complaint between March and September (but relied on in (a), (d) and (e) of para [24]), may at trial go either way. They did not necessarily contribute to the proof of the proposition that the evidence of Mr Aitken was unbelievable.
[35] For these reasons, we conclude that the high threshold required in this case to justify strike out has not been met. The appeal is accordingly allowed and the strike out order is quashed.
[36] The orders as to costs made by the Master and the Judge are quashed. We consider that the appropriate course is to make a single order as to costs in the High Court and this court. They are fixed overall in favour of Pharmacy Care at $5,000 together with all reasonable disbursements including travelling costs of counsel, as fixed, if necessary by the Registrar.
Solicitors
Carter & Partners, Auckland, for
appellant
Meredith Connell & Co, Auckland, for respondent
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