NEW ZEALAND INSTITUTE OF INDEPENDENT RADIOLOGISTS INC v ACCIDENT COMPENSATION CORPORATION [2022] NZHC 3547

NEW ZEALAND INSTITUTE OF INDEPENDENT RADIOLOGISTS INC v ACCIDENT COMPENSATIONCORPORATION [2022] NZHC 3547 [20 December 2022]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2021-485-746[2022] NZHC 3547UNDER the Judicial Review Procedure Act 2016IN THE MATTER of an application for judicial reviewBETWEEN NEW ZEALAND INSTITUTE OFINDEPENDENT RADIOLOGISTS INCApplicantAND ACCIDENT COMPENSATIONCORPORATIONRespondentHearing: 30 November and 1 December 2022Appearances: J A Farmer KC and P Glennie for the ApplicantC J Curran and N J Fenton for the RespondentJudgment: 20 December 2022JUDGMENT OF COOKE JTable of ContentsBackground [3]The applicant's argument [18]Implications of Referrer ownership [20]Standard of review [31]Assessment in this case [37]Failure to address mandatory relevant considerations [48]Unreasonableness/irrationality [53]Unreasonableness and delay [59]Breach of legitimate expectation [65]Conclusion [77]Confidentiality [79][1] The applicant for judicial review in this proceeding is an incorporated bodyrepresenting a group of radiologists, each of whom supply radiology services to theAccident Compensation Corporation (the Corporation). The applicant wasincorporated in September 2021 to advance the views of its members on radiologistservices. It challenges decisions made by the Corporation to continue to acceptradiological services from competing radiologists whom the applicant contends arenot appropriately independent. In particular the applicant contends that theCorporation should not allow medical professionals who refer patients to radiologiststo be shareholders in the entities which provide the radiologist services. The applicantsays that this involves a conflict of interest which is prohibited under the contract thatthe Corporation has with both the referrers and the providers, and that the Corporationis wrong to continue to accept services from these parties.[2] In support of the challenge the applicant has filed evidence from Dr AdrianBalasingham, the Chair of the applicant and Director of one of its members, PacificRadiology Ltd. In addition expert economic evidence is provided by Mr JamesMellsop. In responding to the claim the Corporation has filed evidence fromMr Stafford Thompson, the Manager – Clinical Oversight and Engagement at theCorporation, and Dr John Robson the Corporation's Chief Clinical Officer.Background[3] The Corporation is required to implement the accident compensation schemein accordance with the Accident Compensation Act 2001 (the Act). In order to do soit is necessary for the Corporation to contract with health providers for the provisionof services. One of the services provided is diagnostic imaging. That includes "low-tech imaging" such as x-rays and ultrasounds, and also "high-tech imaging" includingCT scans and MRI scans. The type of scans that are in issue in this proceeding are thehigh-tech imaging scans.[4] The Corporation contracts with 40 high-tech imaging providers, 18 of whomare District Health Boards. The remaining 22 are privately owned companies. Those22 high-tech imaging providers also provide high-tech imaging services for otherprivate health needs, including when a patient has private health insurance.[5] The contractual arrangements of the Corporation are set out in a standard formagreement (the Agreement). The Agreement comprises the standard terms applicableto all services, and it applies to every provider of health services to the Corporationfor the full range of medical services contemplated by the ACC scheme. TheAgreement will then have a schedule setting out the standard terms relevant to theparticular services being provided. The Agreement is accordingly a contract that isentered by both entities that provide high-tech imaging services (referred to as"Providers") and medical practitioners, often surgeons, who refer their patients forsuch scans (referred to as "Referrers"). The schedule to the Agreement for high-techimaging services includes the price that may be charged by Providers which is fixedby the Corporation through the Agreement.[6] The Agreement at the centre of the arguments in this case came into effect inAugust 2018. Of particular significance is cl 18 which provides:Avoiding conflicts of interest18.1 You confirm that, as at the start date, you have no conflict of interestin providing the Services or entering into this Contract. You must doyour best to avoid situations that may lead to a conflict of interest.18.2. If a conflict of interest arises, you must tell us immediately in writing.You and ACC must discuss, agree and record in writing whether theconflict of interest can be managed and, if so, how it will be managed.Each Party must pay its own costs for managing a conflict of interest.Refusing financial incentives18.3. If you have a financial interest in an entity that supplies, procures ormanufactures products or services, you must obtain ACC's writtenapproval before using those products or services to provide theServices described in the Service Schedules.18.4. If you procure products or services to provide the Services, you mustnot accept or receive (or permit any service providers to accept orreceive) any incentive, rebate or reward for the procurement. You maynot receive any gift, voucher, cash, trip or travel, merchandise orequipment or any discount, rebate or credit towards such items or anincentive or reward in any other form.18.5. You must also not accept or receive (or permit any service providersto accept or receive) any incentive or reward for recommending anyproducts or services.[7] The Agreement defines what a conflict of interest is in cl 1 the following terms:Conflict of interestWhen personal or business interests or obligations conflict with obligationsunder this Contract. A conflict of interest may apply to either of the Parties orto its service providers. It may be:(a) actual: where the conflict currently exists(b) potential: where the conflict is about to happen or could happen(c) perceived: where other people may reasonably think that a person iscompromised.A conflict of interest means the independence, objectivity orimpartiality of a Party or service provider can be questioned.[8] At the hearing I asked what the position was before August 2018 as this wasnot addressed in the evidence. Following the hearing it was confirmed that there wasa contract in essentially the same terms in place from 2016.[9] It is common ground that some Providers have arrangements with Referrerswhich means there is a conflict of interest as defined by the Agreement. Three entities,or groups of entities have been the focus of the applicant's argument, namely:(a) Beyond Radiology, an entity established in August 2020 that became acontracted provider to the Corporation in August 2021. This entity isowned by individual surgeons, or their family members. It has plans toexpand its shareholding to include other similar medical practitioners.(b) The Radiology Group or "TRG", which owns two subsidiaries —Waitemata MRI Ltd and Northland MRI Ltd. Waitemata MRI Ltd isowned as to 42.5 per cent by a company whose shareholders include anumber of Referrers. Similarly Northland MRI Ltd is owned as to 35per cent by a company owned by Referrers.(c) New Zealand Radiology Group, trading as Mercy Radiology. This isnot owned by any Referrers, but is owned by a company (HealthcareHoldings Ltd) which in turn owns a number of controlling interests inother healthcare businesses, including entities that are Referrers.[10] It is not suggested that these arrangements fall within cls 18.3–18.5 of theAgreement, but it is agreed that when a Referrer holds an ownership interest in aProvider a conflict of interest as defined by the Agreement arises. That may also beso for other arrangements.[11] Although the focus of this proceeding is on radiology services, the issue thatemerges from medical practitioners having ownership interests in other healthcareproviders is relevant to the medical profession more generally. That issue has beenaddressed by other bodies. Those bodies have not prohibited such arrangements, buthave indicated that the conflicting interests must be managed. The Medical Councilof New Zealand standards provide, for example:19 Some doctors, or members of their immediate family, own or have afinancial interest in retirement homes, surgical facilities, pharmaciesor other institutions where care or treatment is provided. If you are inthis situation you should avoid conflicts of interest wherever possible.For example, if you are a general practitioner with an interest in anursing home, you should not usually provide primary care servicesto patients in that home. If a conflict of interest is unavoidable, youmust advise the patient of the conflict and ensure that it does notadversely affect your clinical judgement. For example, if a familymember has an interest in a pharmacy you must not allow that interestto influence your prescribing practice or the advice you give topatients and should advise patients of this conflict when, because ofgeographic proximity, they are likely to use that pharmacy to fulfil aprescription you have provided. Similarly, if you have an interest in aprivate surgical facility you should ensure that this does not affectyour judgement when arranging treatment at the facility and advisepatients you intend to refer of the conflict.[12] Similarly the Code of Ethics of the Royal Australian and New Zealand Collegeof Radiologists provides in principle six:5. You must provide full disclosure of any interest, financial orotherwise, that you have when referring the patients to institutions orservices, and in such an event you must make patients aware ofalternative options.[13] Under s 42C of the Medicines Act 1981 a person who issues prescriptionscannot hold an interest in a pharmacy.[14] The Corporation's approach to addressing this issue has evolved over timefollowing the Agreement coming into effect in August 2018. In May 2021 it sent anemail to Providers concerning conflicts of interests, drawing attention to the provisionsof the Agreement. It followed that up with the communication on 21 October 2021 inwhich it said:One way in which [an] actual, potential or perceived conflict of interest couldarise is through certain business arrangements or structures, where thosemaking referrals for services have a financial interest in the provider to whomthe referral is being made. By way of example, clinical services providers thatare shareholders or directors of (or otherwise having a financial interest in) acompany that provides radiology services would in our view be somethingthat could create a conflict of interest for both the clinical service provider asthe referrer, and the radiology service provider. In accordance with the parties'respective contractual obligations, ACC would expect disclosure of such anarrangement or structure.Disclosure and transparency are key to understanding and potentiallymanaging any actual, potential or perceived conflict of interest. In the spirit ofopenness, we have made our expectations very clear to you so as to supportyou in meeting the requirements of your contract with us. We ask that youreview your business arrangements and carefully consider whether there areany disclosures that you need to make. We are very happy to discuss this withyou and answer any questions.[15] The Corporation subsequently issued High Tech Imaging Services OperationalGuidelines effective from 1 December 2021. Those Guidelines said:7.2 Ethical ReferralsWe insist that investigations, treatments and procedures should only beconducted when necessary and appropriate. If it is not in the best interest ofthe client, it should not be undertaken. Where there may be perceived or actualconflicts of interest either through business ownership or similar relationships,you as supplier are required under our Standard Terms and Conditions (Clause18) to tell us immediately in writing and we will then consider whether theconflict can be managed. A common example is where a referrer holds anownership position in a radiology supplier.[16] As these communications suggest, the Corporation has not prohibited anyProvider or Referrer from having such ownership interests. Rather it has decided tomanage the conflict issues that arise from that ownership. The manner in which theCorporation has decided to manage such conflicts includes the use of ConflictManagement Plans (CMPs) which are separately entered between the Corporation andrelevant high-tech imaging Providers. Such a CMP has been entered in relation toMercy Radiology, and one of the entities associated with TRG. The other entityassociated with TRG, and Beyond Radiology, are still in discussions with theCorporation concerning a CMP.[17] The Corporation is also able to monitor referral practices for the services. Inearly 2022 the Corporation identified some unexpected referral activity in relation tothree referring consultants. It has met and discussed those referral practices with twoof those consultants, and its investigations into those matters is continuing.The applicant's argument[18] By way of summary, the applicant argues that the Corporation has failed toenforce the obligations under cl 18, particularly the obligation under cl 18.1 that therelevant Providers and Referrers do their best to avoid situations that may lead to aconflict of interest. Such ownership interests of Referrers in Providers are adverse tothe provision of independent radiologist services because the Referrer has a financialinterest in the service being provided. This leads to over referral, sub-optimal referralsand excessive referral expenditure. As such cl 18.1 of the Agreement is consistentwith the Corporation's duty under s 262(3) of the Act to deliver services in a mannerthat is cost effective.[19] It is argued that the Corporation has failed to enforce the contractual terms atall from 2018 through to 2021, and then elected not to enforce the requirement incl 18.1 but instead has entered into arrangements with breaching Providers that allowthe infringing arrangements to continue. By doing so the Corporation acted in a waythat:(a) is irrational and unreasonable, by failing to enforce the obligation thatit originally imposed that required Referrers and Providers avoid suchconflicts altogether;(b) involves a failure to take into account a mandatory relevantconsideration, namely the consideration arising from s 262(3) of theAct that services be delivered by the Corporation in the most costeffective efficient way; and(c) involves a breach of the applicant's members' legitimate expectationsarising from the terms of the Agreement that all relevant Providers andReferrers have been required to sign.Implications of Referrer ownership[20] In order to address the applicant's grounds of judicial review it is necessary tomake some initial findings related to the potential implications of a conflict of interestarising from the Referrer having an ownership interest in a Provider.[21] I accept the evidence of Dr Balasingham and Mr Mellsop that there arepotential adverse effects arising from such ownership. In particular, sucharrangements create an incentive that could compromise appropriate clinicaljudgement. The Referrer is indirectly financially advantaged by referring a patient tothe Provider. This has the potential to lead to:(a) over-referral – where patients are referred to the Provider when, underclinical criteria, they do not need a scan; and(b) sub-optimal referral – where the Referrer refers the patient to theProvider in which they have an interest notwithstanding that there maybe a different Provider who provides better service.[22] The applicant argued that these implications could adversely affect patientcare. It is true that unnecessary scans expose a patient to radiation when it may not beclinically required, but any such risk is very small. I also accept that there might besome risk associated with a patient being referred to other than the best Provider, butagain I see that risk as very small. I also consider the suggested harm arising by "over-diagnosis" — which Dr Balasingham describes as a situation where the patient is"correctly diagnosed with a condition but the condition would not have impacted onthat patient's quality of life if it had not been discovered" — with scepticism. I regardsuch potential adverse implications as immaterial.[23] For these reasons I do not consider there are high risks of sub-optimal patientcare arising from such ownership arrangements. The more likely adverse implicationis that more tests than necessary will be ordered which will have adverse financialimplications for the Corporation. I accept that the risk of unnecessary expenditure isrelevant when considering the implications of the conflict of interest.[24] It is important not to overstate such risks, however. The reality is that asignificant number of clinical professionals will have a financial interest in the clinicalservices they provide to patients in a range of other routine circumstances. A privatesurgeon who recommends an operation can be paid for that operation by a patient, orthe patient's insurer. Even a general practitioner who recommends that a patient comeback to see him or her more regularly has a financial interest in the subsequentappointments. This point could be made about almost any professional who chargesfor their services. In the end all professional services depend on professionaljudgement, here the clinical judgement of surgeons and other professionals. The factthat that professional may have a financial interest in the entity that provides otherhealth services raises an issue, but it is an issue that is common to the medicalprofession, and many other professions.[25] Such issues arise not only from Referrers having ownership interests inProviders. There are a number of other arrangements that give rise to similar issues.For example, Referrers and Providers may share premises in the same building. Orthey may have common shareholders, as is the case with Mercy Radiology whereHealthcare Holdings Limited has ownership interests in both Referrers and Providers.So there are a range of arrangements where there are other interests that could be saidto have the capacity to affect the clinical judgement of the Referrer.[26] I also accept the evidence of Mr Thompson and Dr Robson that there arepotential benefits arising from Referrers having ownership interests in Providers.Such ownership interests can encourage greater co-ordinated care for the patients.There has been some criticism of the New Zealand health system being disjointed.The associations that can be formed between Providers and Referrers where there maybe common systems, greater co-ordination of service provision, and generally greaterunderstanding of the services each provide can give rise to benefits. Greater co-ordination is encouraged by common ownership or shareholdings.[27] I also accept that permitting such ownership interests can promote theestablishment of new Providers, including in geographical areas that are not served bycurrent Providers. It can also lead to greater competition in areas where there areexisting Providers. Referrers are able to identify gaps in service provision which canbe met by the establishment of a new Provider. An example of this kind of situationis a not-for-profit research facility in Gisborne/Tairāwhiti called Mātai. This is anentity with Referrer ownership interests serving an area that does not have a localProvider. Its establishment not only allowed services to be provided locally, but hasthe potential to bring down wait-list times for Providers outside the district. It is alsorelevant that there is only one high-imaging Provider in several areas in New Zealand,including Wellington, Christchurch, Gisborne, Hawke's Bay, Dunedin, Invercargill,Nelson and Timaru. Allowing competition by new entities that have Referrerownership interests may be of benefit to patients.[28] In his submissions Mr Farmer KC accepted that the situation involving Mātaimight be one where the Corporation could accept the conflict of interest arising fromReferrer ownership. He initially indicated that this might be so in relation to areas thathad a single private Provider, but in reply argued that there were adverse consequencesin allowing Providers with Referrer ownership operating in those areas. That wasbecause Providers with Referrer ownership would have an inherent competitiveadvantage which would ultimately lead to the incumbent being forced from themarket. I am not in a position to address that argument, however. There is insufficientevidence before the Court to show that these kind of market dynamics will likely arise.The applicant's economist, Mr Mellsop, provided no such evidence. I do accept,however, that it is relevant for the Corporation to consider the market implications forthe delivery of services overall by allowing Referrer owned Providers to enter a marketto compete.[29] Given the above findings, I accept the Corporation's argument that there is arelevant balancing of considerations for the Corporation when it has decided whatapproach should be taken to the conflict arising from Referrer ownership of Providers.I also accept the Corporation's evidence that it is possible to monitor Referrer practicesas a way of ensuring that adverse implications do not arise from such ownershipinterests. Mr Thompson explained that the Corporation had recently made significantimprovements to the use of data to monitor referral patterns, and gave the example ofthe Corporation identifying unusual referral patterns in relation to three Referrers inrecent times. In the case of at least one Referrer an investment in the Provider seemsto have been contemplated at the time. In any event, the evidence establishes that theCorporation has the capacity to monitor, and has monitored, referral practices to ensurethat the possible adverse implications do not arise.[30] I accordingly accept the Corporation's evidence that there are potentialbenefits, as well as potential adverse implications in allowing Referrers to haveownership interests in Providers. I also accept that there are ways in which thepotential burdens can be managed other than through the prohibition of sucharrangements.Standard of review[31] Before addressing the grounds of judicial review advanced in light of thesefindings there is a preliminary question.[32] Both parties, but particularly the Corporation, provided extensive writtensubmissions directed to the standard, or nature of review that the Court should engagein, in relation to contracting decisions of the Corporation. Relying on the decisions ofthe Court of Appeal in Attorney-General v Problem Gambling Foundation ofNew Zealand,1 and Lab Tests Auckland Ltd v Auckland District Health Board,2 theCorporation argued that the scope of judicial review decisions was limited, and didnot extend to incorporate the grounds of judicial review advanced by the applicant inthe present case. These two decisions build on the decision of the Privy Council inMercury Energy Ltd v Electricity Corporation of New Zealand Ltd where it wasindicated that decisions to enter commercial contracts would not be subject to judicialreview absent fraud, corruption or bad faith.3[33] One way of addressing the question raised by these authorities is to focus onthe legal limits or controls that exist with respect to contractual powers. The role ofthe Court in judicial review is to ensure that public decision-making is exercisedlawfully. That involves identifying the scope of discretionary powers exercised by thepublic body, and what the legal limits or controls on the exercise of those powers are.This will be so in relation to decisions to enter contracts, and also the exercise ofcontractual power under those contracts. There will be some commercial/contractualarrangements of public bodies that have no relevant public law limitations associated1 Attorney-General v Problem Gambling Foundation of New Zealand [2016] NZCA 609, [2017]2 NZLR 470.2 Lab Tests Auckland Ltd v Auckland District Health Board [2008] NZCA 385, [2009] 1 NZLR 776.3 Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 (PC) at388.with them, as they simply involve a public body entering a commercial bargain.4 Butin other contexts the public body can be entering contractual arrangements in order tofulfil particular statutory functions. When that is so, the role of the Court is to ensurethat the relevant exercise of power by the public authority is in accordance with law,as it always is in judicial review.[34] Such legal limits on decision-making can have both substantive and proceduralcontent. They will normally be found in the statute under which the public bodyoperates. Both Problem Gambling and Lab Tests Auckland involved challenges bydecisions of public bodies to enter particular contractual arrangements. In both casesthere were statutory provisions that were relevant to, and accordingly controlled thepublic authorities' powers to enter contracts.5 In both cases there was no inconsistencywith the statutory requirements, and the Court of Appeal found that there were no otherpublic law constraints. For this reason the Court of Appeal concluded that the judicialreview proceedings should have been dismissed in both cases.[35] Relevant legal requirements can arise from sources other than empoweringstatute, however. Ririnui v Landcorp Farming Ltd involved a decision by a publicbody to enter a contract to sell land. In dismissing the claim for judicial review theCourt of Appeal applied the principle referred to in the above authorities — that adecision to enter a commercial contract was unlikely to be the subject of judicialreview in the absence of fraud, corruption, bad faith or analogous circumstances.6 Butthe Supreme Court overturned the Court of Appeal as it identified a relevant limitationon the power to dispose of land subject to claims under the Treaty of Waitangi arisingfrom the statute, and in a statement of corporate intent established under it.7 Similarlyin Moncrief-Spittle v Regional Facilities Auckland Ltd the Supreme Court dealt witha decision by a public body to cancel a contractual arrangement.8 It agreed with theCourt of Appeal that the cancellation of the contract engaged issues under theNew Zealand Bill of Rights Act 1990 which had to be addressed before the decisioncould be assessed as lawful, and that judicial review was accordingly available on a4 See Petrocorp Exploration Ltd v Minister of Energy [1991] 1 NZLR 641 (PC).5 Problem Gambling, above n 1, at [3]–[8]; Lab Tests Auckland, above n 2, at [56].6 Attorney-General v Ririnui [2015] NZCA 160 at [77]–[78].7 Ririnui v Landcorp Farming Ltd [2016] NZSC 62, [2016] 1 NZLR 1056 at [64]–[76]8 Moncrief-Spittle v Regional Facilities Auckland Ltd [2022] NZSC 138.wider basis than outlined in Mercury Energy or Problem Gambling.9 The Courtdisagreed with the conclusion of the High Court that judicial review was not availableat all because what was involved was only a private decision.10 The Supreme Courtnevertheless agreed with the Court of Appeal that the cancellation was lawful as therestriction arising from the Bill of Rights had been complied with.[36] So it can be an oversimplification to say that contractual decisions by publicbodies involve only limited judicial review scrutiny. The most straightforwardquestion is to ask what the legal limits on the exercise of discretionary powers are ina particular case, and then assess whether the public body has complied with them. Iapproach the present case on that basis.Assessment in this case[37] This is not a case concerning the entry of a contract, but rather the exercise ofpowers by the Corporation under the contracts it has entered. There are no provisionsin the Act, or in any subordinate legislation governing the entry of contracts by theCorporation or the exercise of power under those contracts. But that does not meanthere are not legal controls on the exercise of such powers.[38] The Corporation exercises discretionary power in at least three relevant ways.First it decides whether to enter the Agreement with a person who makes a disclosureto it that a conflict exists under the first sentence of cl 18.1. Secondly it decides whataction it will take in relation to any party who is in breach of the second sentence ofcl 18.1 because the party has failed to do its best to avoid situations that may lead to aconflict by entering arrangements between Referrers and Providers. Finally itexercises express contractual powers by deciding how any conflict is to be managedunder cl 18.2.[39] Looked at purely as a matter of the law of contract, the Corporation has noobligation to act in a particular way in any of those circumstances.11 A party to acontract may decide to take no action at all when another party is in breach, for9 At [108]–[113].10 Moncrief-Spittle v Regional Facilities Auckland Ltd [2019] NZHC 2399, [2019] 3 NZLR 433.11 Subject to the limits on discretionary power as a matter of contractual interpretation as recentlycomprehensively described by Isac J in Woolley v Fonterra Corporation-Operative Group Ltd[2021] NZHC 2690, from [411].example. So no obligation arises under the law of contract by virtue of a breach of theobligation of counter-parties to do their best to avoid conflicts under cl 18.1. Tosucceed with a claim for judicial review the applicant will need to establish a legalobligation on the Corporation to act in a particular way arising from its publicfunctions.[40] The Agreement here was a standard form contract to be entered by all providersof services to the Corporation to enable the Corporation to fulfil its statutory functions.The Corporation would not be able to implement the accident compensation schemewithout contracting health providers to provide the necessary services to those injuredby accidents. The standard form Agreement is accordingly in the category identifiedby Hammond J in Lab Tests Auckland — where the public body exercises a kind ofregulatory authority through contracts.12[41] Classifying the standard form Agreement in this way does not identify thenature of the legal limits on the contractual powers, however. Those limits are onlyidentified by a careful examination of the relevant statutory provisions, and any otherrelevant public law principles. The contract cannot illegitimately fetter a public body'sstatutory duties,13 and contractual decisions can be susceptible to judicial review. Asthe Court of Appeal explained in Webster v Auckland Harbour Board:14The issues of invalidity and statutory power of decision are interconnected.They cannot satisfactorily, we think, be considered separately. Undoubtedlya public body which has, as here, lawfully entered into a contract is bound byit and has the same powers under it as any other contracting party. But inexercising the contractual powers it may also be restricted by its public lawresponsibilities. The result may be that a decision taken by the public bodycannot be treated as purely in the realm of contract; it may be at the same timea decision governed to some extent by statute.[42] The relevant question accordingly becomes what the public lawresponsibilities of the Corporation are in this case.[43] The applicant here relied on the following provision of the Act:12 Lab Tests Auckland Ltd v Auckland District Health Board, above n 2, at [354]–[358].13 The Power Corporation Ltd v Gore District Council [1997] 1 NZLR 537 (CA).14 Webster v Auckland Harbour Board [1983] NZLR 646 at 650.262 Functions of Corporation(1) The functions of the Corporation are to—(a) carry out the duties referred to in section 165; and(b) promote measures to reduce the incidence and severity ofpersonal injury in accordance with section 263; and(c) manage assets, liabilities, and risks in relation to the Accounts,including risk management by means of reinsurance or othermeans; and(d) carry out such other functions as are conferred on it by this Act,or are ancillary to and consistent with those functions.(3) In carrying out its functions, the Corporation must deliver services toclaimants and levy payers, as required by this Act,—(a) in order to minimise the overall incidence and costs to thecommunity of personal injury, while ensuring fair rehabilitationand compensation for loss from personal injury; and(b) in a manner that is cost-effective and promotes administrativeefficiency.[44] The applicant focuses primarily on s 262(3). I accept that the Corporation mustexercise its contractual powers in a manner that is consistent with its statutory dutiesas identified in s 262(3), and indeed the policy of the Act generally. That includes astatutory obligation to carry out its functions in a cost-efficient manner unders 262(3)(b). But I also accept Mr Curran's submission that s 262 only outlines dutiesupon the Corporation in a general, or overarching way. It only describes theCorporation's functions. It does not purport to create particular legal requirements inrelation to any individual decisions, or particular matters to be addressed by theCorporation in implementing the Act. Section 262(3)(a) prescribes what is to be theobjective or goal in the exercise of the functions as reflected by the words "in orderto", and s 262(3)(b) introduces a corresponding obligation concerning the "manner"in which the Corporation is to deliver its services to both claimants and levy payers.These are not statutory provisions that contain prescriptive requirements, let alonerequirements that control how the Corporation must exercise its contractual powers inany particular situation. Rather I accept Mr Curran's submission that they specifywhat the organisational attitude of the Corporation must be.[45] This is confirmed when the wider statutory context is considered. The conceptsin s 262(3)(a) reflect the purposes of the Act specified in s 3, and can be seen as areiteration of those purposes when Parliament has described the Corporation'sfunctions. The references in s 262(3)(b) to cost effectiveness and administrativeefficiency are consistent with ss 50 and 51 of the Crown Entities Act 2004, whichapplies to the Corporation. The provision accordingly reflects the duties that Crownentities are generally under. So both elements of s 262(3) reflect general duties of anoverarching kind.[46] I accept that s 262(3), and the purposes of the Act more generally, provide legallimits, or controls relevant to the exercise of contractual powers by the Corporation.But before it could be said that the exercise of the contractual discretion exceeded thelegitimate scope of the power exercised by the Corporation in a specific situation it islikely that something that very clearly breached the duties would need to be involved.The section, and the Act more broadly, contemplates that the Corporation will exercisejudgement over how it fulfils its functions, and how the policy of the Act is to befulfilled. When particular decisions are made by the Corporation, particularly inimplementing cover under the ACC scheme, there are more precise legal requirementsapplicable to particular ACC claims. It is not uncommon for these to be litigatedbefore the courts through the appeal functions. But in terms of the general functionsof the Corporation, and the purposes of the Act, the Corporation has been given adegree of latitude by Parliament.[47] I address the particular grounds of review advanced against that background.Failure to address mandatory relevant considerations[48] First the applicant argued that the Corporation had failed to take into accountmandatory relevant considerations arising by virtue of s 262(3) when it has decidedhow to proceed.[49] The approach to identifying mandatory relevant considerations in relation tostatutory powers of decision is well-settled, and set out by the Court of Appeal inCREEDNZ Inc v Governor-General.15 Here I do not accept that s 262(3) creates a15 CREEDNZ Inc v Governor-General [1981] 1 NZLR 172 (CA).mandatory relevant consideration, either express or implied. A mandatory relevantconsideration is a factor that the decision-maker must address when making aparticular decision. It is a consideration that must be weighed. But s 262(3) does notcreate such a consideration or factor of this kind. Rather, it is an overriding, andgeneral, duty.[50] The applicant's argument accordingly involves an inaccurate characterisationof s 262(3). The section does not create a decision-making criteria that must bebalanced when making particular decisions. The only way an applicant for judicialreview could demonstrate unlawfulness arising from s 262(3) would be if the decisionwas substantively inconsistent with the duties in s 262(3). For the reasons alreadyexplained, given the general nature of those duties that is only likely to be possible incircumstances where a breach of the duties was very clearly apparent.[51] Moreover I also accept that when making decisions on the approach it wouldadopt the Corporation had the kind of objectives referred to in s 262(3) squarely inmind, such that it cannot be said that such matters were not taken into account.[52] For these reasons, this ground of review is dismissed.Unreasonableness/irrationality[53] The applicant argued that the Corporation's decisions were irrational and/orunreasonable and ought to be set aside on this basis.[54] The applicant argued that the Corporation had initially prohibited conflicts ofinterests arising from Referrers having ownership interests in Providers by providingthat the Providers and Referrers " must do your best to avoid situations that maylead to a conflict of interest". But it then failed to ensure that this primary obligationwas adhered to, and it accepted arrangements that were a clear breach of thisrequirement. This change in approach was irrational, including because of theexistence of the obligations under s 262(3).[55] In some circumstances the Court will set aside a decision when its lack ofrational basis means that it is inconsistent with what Parliament intended in bestowingthe discretionary power. But I do not need to address the basis, or limits of thatpotential ground of review in any detail. That is because I do not accept that theCorporation's approach was irrational in any sense. The formulation of the contractualobligation in cl 18.1 of the Agreement was not directed towards ownership interestsby Referrers and Providers, or even the radiology sector. It is a standard term in theCorporation's contracts for all services that are needed for the ACC scheme. Thecontracts were entered into with effect from August 2018, although similar termsexisted prior to then. I do not consider it irrational for the Corporation to decide howit would react to a particular kind of conflict of interest as identified by its standardform Agreement in the particular context in which it arose. The issue that arose hereinvolved a particular kind of service being provided in the context of particularownership arrangements. The Corporation acted in a rational way in deciding how torespond to this issue when it arose.[56] I also do not accept the applicant's argument that the Corporation's decisionswere unreasonable. It is again not necessary to address the debate about variablestandard unreasonableness in this context. It seems to me that the relevant question isto ask whether the decisions of the Corporation were reasonably open to it. I acceptthat it was reasonably open for the Corporation to adopt the approach that it has. Thisinvolved addressing the implications of the conflict of interest by managing thepotential conflict by CMPs, and monitoring the services provided by Referrers andProviders in accordance with the CMPs to make sure that there are no adverseimplications arising from these ownership arrangements. The Corporation decidedthat this was better than prohibiting the ownership interests. From the Corporation'spoint of view that is a sensible approach as it manages the potential disadvantagesarising from such ownership interests, but nevertheless secures the advantages that canexist from such arrangements. The Corporation described the approach as a flexibleand balanced one which it regarded as best securing the purposes of the Act. I see noreason to disagree with that characterisation.[57] It is significant that the applicant has pointed to no evidence to demonstratethat the potential adverse implications arising from Referrers having ownershipinterests in Providers have manifested themselves in some way. There is no evidenceof excess referrals, or unsatisfactory patient outcomes. There is evidence thatReferrers have the tendency to refer to Providers in which they have ownershipinterests to the disadvantage of members of the applicant. But there is no evidencethat this leads to any adverse outcomes, either for the patients, or for the Corporation.The applicant's case is solely based on the potential for such adverse implications.But the Corporation is of the view that it can manage those risks in other ways, andthere is nothing to demonstrate that that is not so.[58] The applicant's economist, Mr Mellsop, considered that the CMPs put in placewere more likely to be effective than other conflict management mechanisms, butconsidered there needed to be some cost to a Referrer for making inappropriatereferrals to provide a counteracting incentive. Only then would the moral hazardarising from the conflict be fully addressed. But I consider that this is a theoreticalpoint only, and that it is perfectly satisfactory for the Corporation to use the CMPs,and the monitoring of referrals, as mechanisms to address such risks.Unreasonableness and delay[59] Although it was not argued as a separate ground of challenge, it is appropriateto address the applicant's argument that the Corporation failed to take action in theinitial stages after August 2018 which would entitle the applicant to declaratory relief.[60] In particular, the applicant characterised the Corporation's approach in threephases — the first between August 2018 and May 2021 where it took no action at all,the second between May and December 2021 when it began gathering information buttook no enforcement action, and the final between December 2021 and the presentwhere it began to monitor referrals more actively, and it elected to manage conflictsof interest. The applicant argued that, at least in relation to the initial periods, theCorporation had failed to undertake its function consistently with its duty unders 262(3).[61] I accept that there were periods where the Corporation did not take active stepsin relation to this issue. I also accept that the Corporation does not appear to havesquarely focused on the fact that cl 18.1 created a legal obligation on Referrers andProviders to do their best to avoid what the Agreement defined to be a conflict. WhenReferrers took steps to obtain ownership interests in Providers they appear to haveacted inconsistently with that obligation. But for the reasons explained above thatdoes not mean that the Corporation had any duty to take any particular action. Thereis no evidence that the Corporation has been paying too much for the relevant services,or that the services provided to patients are not appropriate. The evidence shows thatwhen increases in referrals were identified they were investigated by the Corporation.For those reasons, there is nothing that would suggest that the Corporation hasexercised its contractual powers in a way that is not consistent with its statutory duties.There is accordingly no unlawful exercise of power that could warrant the Courtgranting any kind of declaratory relief.[62] I agree that the existence of such conflicts of interest do create a situation thatthe Corporation needs to manage, however. It is perhaps surprising that theCorporation has not fully emphasised that the Providers and Referrers have acontractual obligation to "do your best to avoid situations that may lead to a conflictof interest" under cl 18.1. CMPs have also not been entered with all of theProviders/Referrers that may have conflicts of interest as defined by the Agreement.For example, Beyond Radiology became a high-tech imaging provider for theCorporation in August 2021 but no CMP has yet been entered. One of the explanationsfor this is that Beyond Radiology shareholders do not currently include high-imagingReferrers. Although the Corporation will seek to want to manage its relationships ina sensitive way, it is nevertheless appropriate for CMPs to exist when conflicts asdefined arise under the Agreement. In the end the Corporation has the contractualpower to require steps to be taken, and it should not hesitate in exercising that powerwhen it is necessary to ensure an appropriate CMP is entered.[63] But notwithstanding those matters, the applicant is well short of demonstratingthat the Corporation has failed to exercise its discretionary powers consistently withits obligations under the Act, or otherwise unreasonably or irrationally.[64] These grounds of judicial review are accordingly dismissed.Breach of legitimate expectation[65] The applicant's final ground of review is that the Corporation's approachamounts to a breach of the legitimate expectations of the members of the applicantarising from the terms of the Agreement, including cl 18, which all such Providers andReferrers were required to enter.[66] In particular, the applicant contends that through cl 18 the Corporationrepresented that it would require providers to avoid conflicts, and it would activelymanage any conflicts that could not be avoided. It says that its members havelegitimately and reasonably relied on that commitment to their disadvantage bycomplying with the requirement of cl 18, while Providers who have Referrers asowners have taken patients away from them.[67] As an initial response to this ground of review, the Corporation invited theCourt to apply the conclusion of the Court of Appeal in Problem Gambling where theCourt said:16Again, in light of our findings as to the appropriate scope of review, we do notconsider that breach of legitimate (procedural) expectations and breach ofmandatory rules was an available ground of review. [68] As the Court indicated, this conclusion was reached as a consequence of theCourt's scope of review analysis. But the current context is different from that inProblem Gambling as the Corporation exercises powers under a standard formagreement to administer the provision of services that are necessary for it to complywith the Act generally, and in that sense the contractual powers involve a form ofindustry regulation. In any event, at least as I understand it, the Court of Appealfinding is that the elements of legitimate expectation could not be satisfied in theparticular context they were addressing. I do not understand the Court's conclusion tobe that legitimate expectation could not arise even if its elements were satisfied.[69] The elements of legitimate expectation were set out by the Court of Appeal inComptroller of Customs v Terminals (NZ) Ltd in the following way:17[125] Where legitimate expectation is raised, the inquiry generally has threesteps. The first is to establish the nature of the commitment made by the publicauthority whether by a promise or settled practice or policy. This is a questionof fact to be determined by reference to all the surrounding circumstances. Apromise or practice that is ambiguous in nature is unlikely to be treated asgiving rise to a legitimate expectation in administrative law terms.[126] The second is to determine whether the plaintiff's reliance on thepromise or practice in question is legitimate. This involves an inquiry as towhether any such reliance was reasonable in the context in which it was given.16 Attorney-General v Problem Gambling Foundation of New Zealand, above n 1, at [100].17 Comptroller of Customs v Terminals (NZ) Ltd [2012] NZCA 598, [2014] 2 NZLR 137.[127] The third, and often most difficult part of the inquiry, is to decide whatremedy, if any, should be provided if a legitimate expectation is established.[70] Here, I accept Mr Fenton's argument that none of these elements are satisfied.[71] Mr Farmer correctly submitted that a commitment, or representation, can ariseby implication, and that it can be established by a well-established practice followedby a decision-maker.18 The fact that a standard clause exists in an industry-wideagreement could, in some circumstances, give rise to a legitimate expectation that thecontractual term would not be departed from unless, or until, the contractual term waschanged. I also accept that a breach of legitimate expectation can arise when a publicbody has misinterpreted its earlier polices or advice.19 But there are several relateddifficulties with the argument that the Agreement gives rise to a legitimate expectationhere.[72] First, the Agreement does not involve any promises to persons other than theparties to it. Neither has the Corporation given any commitment, or provided anyadvice to the industry participants that the requirement that parties do their best toavoid conflicts under cl 18.1 will be strictly enforced in relation to conflicts arisingfrom ownership interests. There was no representation about enforcement of thiscontractual obligation that the applicant can rely upon. Indeed the communication tothe industry has been to contrary effect. The participants were notified in May andOctober 2021 that the Corporation expected conflicts to be disclosed, and thenmanaged. That was reiterated in formal Guidelines which applied from December2021 which were specifically directed to ownership interests.[73] Secondly, the terms of cl 18.2 expressly provide for conflicts of interest to bemanaged by the Corporation. The applicant cannot contend that the Corporation hasacted inconsistently with a commitment arising indirectly from the Agreement bydeciding to address the conflicts by such management. That option was expresslycontemplated by the Agreement. The fact that the Corporation has emphasised the18 See also Green v Racing Integrity Unit Ltd [2014] NZCA 133, [2014] NZAR 623 at [14]; Te PouMatakana Ltd v Attorney-General [2021] NZHC 2942, [2022] 2 NZLR 148 at [87].19 H.T.V. Ltd v Price Commission [1976] I.C.R. 170; R v Inland Revenue Commissioners ex partePreston [1985] 1 AC 835 at 865–867 (HL).approach contemplated by cl 18.2, rather than taking alternative action for breach ofthe promise in cl 18.1, is something contemplated on the wording of the Agreement.[74] Thirdly, there has been no reliance on any commitment made by theCorporation under the second element of legitimate expectation. "The presence ofreliance helps distinguish a legitimate expectation from one that is a mere hope thata course of action will be pursued".20 There is no evidence that Providers representedby the applicant elected not to enter the kind of arrangements that the applicantchallenges in this case because of cl 18.1. Indeed there is some evidence that someProviders in the applicant group have made arrangements of a similar kind, such assharing premises. Moreover I do not consider that it would have been reasonable forany such Providers to have assumed that such ownership would be prohibited by theCorporation without first making direct contact with the Corporation to seekconfirmation, particularly given the possibility for conflicts to be managed inaccordance with cl 18.2. Failing to seek such a confirmation can mean that reliance isunreasonable.21[75] Finally, and in any event, the claim would fail on the third element. Even ifsuch a representation had been established, all that an applicant for review would beentitled to would be a procedural remedy — an opportunity to be heard before thecommitment was no longer to apply. Relief in the form of a substantive outcome isonly granted in special cases, and only if it does not usurp the function of the publicbody.22 This is not a case where a legitimate expectation of a substantive outcomecould arise. It must be open to the Corporation to manage conflicts in the mannercontemplated by cl 18.2 if the Corporation considers this the best way for it to achieveits functions. Moreover, here the Corporation has made its position clear — it hasadvised that it will seek to manage any conflicts of interest arising from ownership byReferrers of Providers by management under cl 18.2, including through CMPs. Thesuggestion that the applicant group is entitled to a procedural remedy in thosecircumstances is artificial. The Corporation's approach was well communicated to allparticipants and those in the applicant group have had a full opportunity to make20 Green v Racing Integrity Unit Ltd, above n 18, at [15].21 Comptroller of Customs v Terminals (NZ) Ltd, above n 17, at [130].22 At [155].representations on that approach. That satisfies any legitimate expectation to be heardbefore that approach was adopted. Any legitimate expectation has already been met.[76] The applicant's challenge based on legitimate expectation is dismissed forthese reasons.Conclusion[77] I accept that the members of the applicant's group have concerns aboutcompetitors having referring surgeons as partial owners, including because of thecompetitive advantage this may give those Providers. I also accept that there arelegitimate questions to ask arising from the financial incentives that exist for suchReferrers. Under cl 18.1 of the standard form Agreement Referrers and Providerswere supposed to use their best endeavours to avoid the conflict that arise from thosesorts of arrangements. But from the Corporation's point of view any risks that arisefrom over-referral, or suboptimal referral practices are able to be managed in otherways, and there are benefits from having closer relationships between Referrers andProviders that are associated with such ownership. It also potentially leads to greatercompetition. Moreover it is not the Court's function to decide whether sucharrangements are a good idea or not. The Court's function is limited to ensuring thatthe Corporation is acting lawfully. The applicant is well short of establishing that it isnot.[78] The application for a judicial review is accordingly dismissed. The respondentwill be entitled to costs. If costs cannot be agreed I will receive a brief memorandumfrom the respondent within 15 working days, to be responded to by the applicantwithin 15 working days. Each memorandum may be no longer than five pages plus aschedule.Confidentiality[79] Both before and after the hearing the parties sought certain orders by way ofconfidentiality, as confirmed by joint memorandum dated 22 November 2022. Theorders cover information that the Corporation has obtained under the Agreementconcerning the business structures, and business plans of both Providers and Referrers.[80] At the hearing the parties agreed to orders continuing such confidentiality. Iaccept the view that protecting the confidentiality of commercially sensitiveinformation is appropriate, particularly when the information has been obtainedthrough the exercise of regulatory functions where there is an express confidentialityclause as there is in the Agreement.23 As I indicated at the hearing, however, I wasconcerned about the scope of the confidentiality orders. It is recognised that patientsof Referrers and Providers where ownership interests are in existence should be madeaware of these interests given the importance of transparency. For that reason I do notaccept that the confidentiality orders made by the Court should extend to the identityof the Referrers and Providers in question. I expressly exclude from the confidentialityorder an order protecting the identity of those persons.24 I have referred to the namesof the Providers during the course of this judgment. I also observe, should the pointever arise in the future in relation to an application to search the Court file, that theremay be a need to balance such considerations in relation to the scope of any continuedorders.Cooke JSolicitors:Dentons Kensington Swan, Auckland for the ApplicantRussell McVeagh, Wellington for the Respondent23 See Erceg v Erceg [2016] NZSC 135, [2017] 1 NZLR 310 at [7].24 The identity of Referrers whose referral practices have been investigated by the Corporation is tobe confidential, however, given that the investigations are incomplete.