Lab Tests Wins Back Lab Services Contract
The recent decision of the Court of Appeal has quashed the
decision of the High Court which invalidated not only the decision
of the Auckland Regional District Health Boards
(ARDHBs) to award the contract to provide primary
referred pathology services to Lab Tests but also the contract
itself which was due to commence on 1 July 2007.
The Court of Appeal has ruled that Lab Tests' contract be
reinstated and that it commence to supply services under its
contract for the remainder of the term. Having said that,
Diagnostic Medlab Limited (DML) has indicated that it is
considering seeking leave to appeal to the Supreme Court.
The decision is a rejection of what the Court of Appeal
described as a broad based 'probity in public decision-making
approach' and is a return to the more traditional approach to
judicial review. It will provide board members of public sector
organisations, procurement managers and their advisers with a
greater degree of certainty around their procurement and tendering
processes where commercial contracts are involved, and will
hopefully reduce the ability of an unsuccessful tenderer to
challenge the award of a commercial contract using the judicial
review process.
We briefly highlight the important aspects of the case.
JUDICIAL REVIEW
One thing that the Court of Appeal makes very clear is its
unease that the Courts are not well equipped in judicial review
proceedings to deal with the range of issues that tendering
processes for commercial contracts raise and what in the Lab Tests
case ultimately involved a competition for the laboratory services
market in the Auckland region. The extent of the Court's
concern is best highlighted by the concurring judgment of Hammond J
who has written an intriguing dissertation which he called the four
P's of judicial review, which are: the point of entry of
judicial review, the purpose of judicial review, the principles of
judicial review, and the place of judicial review in New Zealand
today.
Although the New Zealand Public Health and Disability Act (NZPHD
Act) may have effected 'something of a sea change in the
management of public health services in New Zealand', the Court
of Appeal was not convinced that it swept away all elements of the
previous legislation by removing the commercial aspects of a
DHB's functions and powers. They found that under the NZPHD
Act, the DHBs are still required to make commercial decisions and
in respect of those decisions the authorities support a relatively
limited role for judicial review, subject always to the statutory
context.
In the present case the Court considered that the High Court
judge did not give proper weight to the commercial context within
which the DHBs were operating, or to the relevant statutory
provisions.
The view expressed by the Court of Appeal is that judicial
review should only be available in limited circumstances such as
where there is fraud, corruption or bad faith, although the Court
did accept that it may also be available in analogous situations.
The example given was where an insider with significant inside
information and a conflict of interest had used that information to
further their interests and to the disadvantage of their rivals to
the tender so as to undermine the...
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