Back in 2017, we examined the cases of Pisano v Health Solutions (WA) Pty Ltd [2014] WASC 356 and Page v Healthscope Operations Pty Ltd [2016] NSWSC 1608. You can revisit that article here. By way of recap:

• The court in Pisano concluded that the doctor signing an application for accreditation and agreeing to abide by the by-laws of the hospital (on one hand) and the hospital accepting that application and granting the doctor status as a ‘credentialed’ practitioner (on the other hand), created an agreement between the doctor and the hospital.
• The court in Page came to the opposite conclusion, deciding that the doctor’s promise to abide by the by-laws was ‘not given in exchange for any promise of value’ from the hospital. Accordingly, in the absence of consideration, there could not be a contract.

At the time, the conclusion in Page seemed quite puzzling. Is the grant of accreditation itself – being a necessary pre-condition for any practitioner wishing to enter a private hospital and use its facilities in order to practice his or her profession – not a valuable thing? If the by-laws do not take effect as a contract, how do they take effect?

These questions are discussed in greater detail in the previous article.

The decision in Pisano is what we would expect to be the assumed state of affairs in most private hospitals in Australia. Specifically, as was concluded in Pisano, the outcome of the credentialing and accreditation process is an agreement ‘which goes no further than to bind the parties to comply with the by-laws’. It is important to understand that conclusion in the context of the analogy adopted by the Court in Pisano: ‘credentialing is the ticket that provides entry to the showground. It does not carry the right to ride any particular attraction’. In less abstract terms, the agreement to comply with the by-laws does not confer upon the doctor any right to a particular operating session or list.

The latest cases in this area each have a rich factual background which falls outside the scope of this article. The legal question in each case is fundamentally the same as Pisano and Page – what is the legal effect of an accredited practitioner applying for, and being granted, accreditation at a private hospital?

In Pathmanathan v Healthscope Operations Pty Ltd [2020] FCA 65, the applicant doctor contested the termination of her accreditation at Mount Hospital in Perth (operated by Healthscope). Amongst other claims, the applicant doctor claimed that the termination of her accreditation was a breach of contract (the contract comprising the by-laws). Healthscope cited Page in support of its position that no contract existed between the parties. The documents and accreditation processes in issue were essentially identical. The Court agreed.

The Court briefly considered the decision in Pisano and declined to follow it, briefly noting that the reasons underpinning its conclusion ‘were not entirely clear’.

It is easy to understand why the decision in Pathmanathan was reached. Page is a persuasive authority when the fundamental legal question, relevant documents and processes in issue in the case are essentially identical. It may also be fair to say that the reasoning in Pisano is far from comprehensive.

However, the applicant doctor’s case in Pathmanathan was not strong. The doctor was self-represented and, in the Court’s words, her claim was vague and confusing and her evidence was often ‘irrelevant, misconceived, inadmissible and/or scandalous’. This raises the question whether in a different case, more diligently formulated and pleaded, a court might approach the fundamental legal question differently.

To that end, a recent New Zealand case offers an interesting counterpoint. Appanna v Anglesea Hospital Limited [2019] NZHC 474 concerned the contentious suspension of the doctor’s ‘credentialing status’ (essentially, his accreditation) at Anglesea Hospital in Hamilton. Dr Appanna brought a claim for breach of contract, essentially saying that the process followed by the hospital in suspending his accreditation was in breach of contract. What is immediately apparent from Appanna is that the legal merits of the claim were far more finely balanced and the case was pleaded, and answered, with considerably more forensic rigour. As for each previous case, the Court was asked to consider whether the relationship arising from Dr Appanna’s accreditation at the hospital was contractual. The Court diligently walked through the requisite elements of contract formation, ultimately concluding that the relationship was, indeed, contractual.

The Court in Appanna was directed to the decision in Page, but ultimately decided to distinguish it from the case at hand. Rather, the Court said, the question should be decided by reference to the specific documents which set out the basis of the relationship between the parties which were actually before the Court.

There are two key aspects which distinguish Appanna from Page. Firstly, it was quite clear from the documentation before the Court that a contractual relationship was intended (the relevant documentation referred to credentialled doctors as being ‘contracted to Anglesea’). Secondly, the Court readily found that there was sufficient consideration necessary for the formation of a contract between the doctor and the hospital.

The importance of this conclusion in the reasoning cannot be overlooked. In Page, the Court concluded that the hospital ‘gave no promise or guarantee of anything of value’ in return for the doctor’s promise to comply with the by-laws. On that basis, the Court said there cannot be a contract.

To illustrate the starkly different conclusion in each case, it is instructive to consider the respective reasoning on this specific point side-by-side:

In Page:

There was no obvious commercial relationship between the plaintiff and defendant.

Accreditation gave the plaintiff no rights or entitlements. He had no right to practice within the Hospital; he was not guaranteed any work within the Hospital, or that there would be patients for him to treat; he was not guaranteed the allocation of any particular level of access to theatre time. It was entirely open to the defendant to accredit the plaintiff, but then withhold the General Manager’s authority for him to enter and practice within the Hospital.

The plaintiff’s promise to abide by rules of conduct, the By-Laws, was not given in exchange for any promise of value from the defendant.

In Appanna:

The agreement between Dr Appanna and Anglesea created by the credentialing process involved both Dr Appanna and Anglesea undertaking obligations to one another in respect of that process throughout the duration of Dr Appanna’s credentialed status. The effect of those obligations was to facilitate a commercially collaborative relationship whereby both parties each contributed to a shared objective of providing surgery and surgical facilities to patients for financial reward. The arrangement resulted in each party independently deriving benefit from the performance of services or provision of facilities provided by the other, and each party’s contribution was of commercial value to the other.

Having regard to the circumstances I find that these arrangements provided the requisite and sufficient consideration necessary for the formation of a contract between the parties.

The description in Appanna of the doctor and hospital independently deriving benefit and commercial value from the services or facilities provided by the other, is a description of that relationship we suspect many working in private hospitals would find familiar.

As we acknowledged in the previous article, we can certainly understand why a private hospital would be resistant to a conclusion that the by-laws have contractual effect. The implications of that conclusion are significant, as starkly illustrated by the award of $605,000 in damages in Dr Appanna’s favour for breach of contract. But, again, what is the alternative? If a hospital’s by-laws do not take effect as a matter of contract, how do they take effect? Do they have any legal effect at all?

So, where to from here? Although there are aspects of the decisions in Page and Pathmanathan which we find curious or puzzling, the decisions cannot be overlooked. What those cases illustrate – particularly in light of the others discussed in this article – is that there is no single way to characterise the legal relationship between a private hospital and its accredited practitioners. It depends on the documentation and the process followed.

Reasonable minds will differ on whether it is preferable for by-laws to be given legally binding effect as a contract. It is apparent, in light of this series of cases, that it is necessary to establish the intended legal effect of by-laws and relevant ancillary documents clearly and unequivocally and then give effect to those documents in a manner which is consistent with that intention.