Court of Appeal's Top Five Appeals Last Month (January 2011)

1) Rosenhek v. Windsor Regional Hospital (Doherty, Moldaver and Epstein JJ.A – decision "by the Court")

In this decision, the Court of Appeal considered the obligations an administrative body owed to a physician in the context of the revocation of his privileges.

Dr. Rosenhek, a specialist in cardiology, first applied for privileges at the defendant hospital in 1984. At the time, it was thought he would occupy a role running a critical care unit the hospital was planning to develop. However, the plans for this unit were opposed by a number of internists at the hospital and ultimately it did not proceed. Unfortunately, personal divisions had developed among the doctors over the merits of the plan and those lingered. Dr. Rosenhek was excluded from the internist coverage group as a result.

By 1988, Dr. Rosenhek brought his concern about his inability to be part of the coverage group to the attention of the hospital's Board of Governors. He was on call almost all the time and the stress of his work was having a negative impact on his health. The Board concluded that the coverage issue was a private matter among the doctors and refused to become involved in any attempt to resolve it. Then, in 1989, the Board renewed Dr. Rosenhek's privileges for three months, significantly less than the customary year. He was given associate staff status - the equivalent of a probationary appointment. Two months later, the hospital's Medical Advisory Committee recommended the immediate revocation of Dr. Rosenhek's privileges. Two days after that, without any notice to Dr. Rosenhek, the Board adopted the recommendation and revoked his privileges effective immediately. This action was taken although there were no concerns over Dr. Rosenhek's competency or ability to care for patients, but apparently to resolve the problem between the specialists.

Dr. Rosenhek appealed the Board's revocation of his privileges to the Hospital Appeal Board, which found the hospital had complied with its statutory obligations relating to a mid-term revocation of privileges but failed to give Dr. Rosenhek adequate notice. It ordered a new hearing, but declined to order Dr. Rosenhek's reinstatement pending the rehearing. The rehearing eventually took the form of a de novo appeal before a different constituted panel of the Appeal Board. That panel released reasons setting aside the order of the Board revoking Dr. Rosenhek's privileges and ordering that he be granted active staff privileges at the hospital.

Dr. Rosenhek began litigation against the hospital, which centered on his allegation that the Board acted in bad faith when it revoked his privileges. He claimed losses of substantial income. At trial, the parties agreed to be bound by the findings of fact from the two Appeal Board decisions. The trial judge found the Board acted in bad faith and its conduct caused Dr. Rosenhek to lose income over several years. However, he was critical of Dr. Rosenhek's evidence quantifying that loss and awarded damages that were significantly less than Dr. Rosenhek sought. The hospital appealed against the finding of liability and damages, while Dr. Rosenhek cross-appealed from the damages assessment.

The Court of Appeal held that a bad faith exercise of a statutory public power can, in law, be the basis for a tort claim by the doctor against the hospital. The Board's power to revoke Dr. Rosenhek's privileges, found in s. 33(c) of the Public Hospitals Act, is part of a comprehensive statutory scheme which governs the operations of public hospitals. The power to revoke privileges is exercised having regard to public interest factors relating, in particular, to the quality of care provided by the hospital. The Court of Appeal concluded that the exercise of the revocation power is thus properly characterized as public in nature.

The hospital made three arguments challenging the bad faith finding. First, it argued that Dr. Rosenhek did not plead bad faith in his claim. The Court of Appeal noted that the pleadings were drafted by Dr. Rosenhek and, while they left much to be desired, they did refer to a breach of statutory duty and a breach of the duty to act fairly, and describe those breaches as "malicious". The Court of Appeal was satisfied that the bad faith allegation was properly before the trial judge and central to the dispute between the parties. The hospital did not argue that it did not have adequate notice of the bad faith allegation at trial. In the result, any inadequacy in the pleading caused no prejudice and posed no bar to the trial judge's finding of bad faith.

Second, the hospital argued that the trial judge erred by equating a failure to comply with the rules of natural justice in the revocation process with the finding of bad faith by the Board. It argued that failing to comply with the requirements of the statute or the dictates of natural justice may give rise to a remedy, but will not, in and of itself, give rise to a private cause of action. The Court of Appeal held that trial judge's reasons showed that he understood the distinction between finding that a hearing was procedurally flawed and finding a bad faith exercise of statutory power. However, the trial judge correctly considered the failure to accord procedural fairness to the doctor as part of the overall evidentiary picture.

Third, the hospital argued that the evidence could not support a finding of bad faith. The hospital argued that the trial judge erred by equating the Appeal Board's finding that Dr. Rosenhek's privileges were improperly revoked with the finding of bad faith, and noted, correctly, that the question of bad faith was not before the Appeal Board. The hospital argued that the Appeal Board's findings went no further than to establish that the Board, in revoking Dr. Rosenhek's privileges, made an error in judgement.

On a careful review of the trial record, the Court of Appeal rejected that submission, finding that there was ample basis on which the trial judge could have made his finding of bad faith.

The Court of Appeal referred to the conclusion of the Appeal Board that none of the reasons advanced by the Board for revocation were made out, and most were devoid of any merit and contrary to the factual reality. The hospital had no basis on which to revoke Dr. Rosenhek's privileges. The Court of Appeal held that "while a wrong decision, even a very wrong decision, cannot be equated to a decision made in bad faith, a decision may be so clearly wrong on the merits as to provide some evidentiary support for a finding of bad faith."

The Court of Appeal also noted the timing and manner of the Board's decision to revoke Dr. Rosenhek's privileges, when he had only a month remaining on those privileges and they had been renewed only two months earlier. Nothing in the records suggested anything had changed between the renewing of those privileges and their revocation. In addition, his privileges were terminated effective immediately and he was told to leave the hospital at once, conduct the Court of Appeal found difficult to understand in the face of his acknowledged competence, absent bad faith. The Court of Appeal also noted that findings of fact of the Appeal Board pointed to the existence of an oblique or improper motive for the revocation of the doctor's privileges – to resolve a perceived problem (the coverage dispute) between specialists. Bad faith could be inferred from this. The court concluded "the Board, in bad faith, exercised its decision making function for an ulterior purpose and not for public good, in circumstances where it had to known that its conduct would likely injury the plaintiff. We are satisfied that the tort of misfeasance in a public office was made out..."

The court then turned to the damage appeals. The hospital relied on Martin v. Goldfarb (1999), 163 D.L.R. 4th 639, arguing that Dr. Rosenhek failed to adduce readily available evidence to prove his damages and so was entitled to nominal damages only. In Martin, Finlayson J.A. differentiated between damages that are difficult in nature to assess, and those that are unproven due to a failure to adduce available evidence. In the latter case, only nominal damages should be awarded. However, the Court of Appeal noted that even in Martin, Finlayson J.A. declined to award nominal damages based on insufficient support for the damage claim. Instead, he referred the damages back to the trial judge on the basis that the plaintiff had adduced enough evidence to prove a significant loss. Thus, the Court of Appeal held that nominal damages are not appropriate where a substantial loss has been demonstrated, even if evidence proving quantum is lacking.

The court noted that, without justification, Dr. Rosenhek failed to introduce evidence that would have allowed his damages to be quantified with any degree of precision. He failed to adduce his OHIP records or his income tax returns - documents which were the subject of a specific...