Attorney-General v Problem Gambling Foundation of New Zealand

• Jurisdiction: New Zealand
• Judge: Winkelmann J
• Judgment Date: 16 December 2016
• Neutral Citation: [2016] NZCA 609
• Docket Number: CA467/2015
• Court: Court of Appeal
• Date: 16 December 2016

BETWEEN

The Attorney-General

Appellant

and

Problem Gambling Foundation of New Zealand

Respondent

[2016] NZCA 609

court:

Cooper, Winkelmann and Venning JJ

CA467/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court (“HC”) decision which granted the respondent's application for judicial review of a Ministry of Health decision concerning contracting with providers for implementing a problem gambling strategy — the application was allowed on the grounds of breach of legitimate expectation and mandatory rules; mistake of fact and lack of probative evidence and inadequately managed conflicts of interest — the HC setaside the Ministry of Health's decision and applied the test for bias in Saxmere Co Ltd v Wood Board Disestablishment Co Ltd — whether the HC applied the wrong scope of review — whether the HC had erred in applying judicial test for apparent bias and in finding unconscious bias — whether the HC had been wrong to find lack of probative evidence — whether the HC had been wrong to find breach of mandatory rules and breach of legitimate expectation.

counsel

Solicitor-General U R Jagose QC and J K Gorman for Appellant

M Chen and S L Mead for Respondent

• A The appeal is allowed.

• B The judgment entered in the High Court in favour of the respondent is set aside.

• C Judgment is entered in favour of the appellant.

• D The costs orders in favour of the respondent made in the High Court are set aside.

• E Costs in the High Court are to be fixed by that Court in accordance with the outcome of this judgment.

• F The respondent must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Winkelmann J

Winkelmann J

Table of Contents

	Para No
Background	[3]
The request for proposals	[9]
The process	[13]
High Court proceedings	[23]
First ground of appeal: did the Judge apply wrong scope of review?	[27]
Relevant principles	[30]
Legal test applied in the High Court	[39]
Discussion	[41]
Second ground of appeal: did the Judge err in applying judicial test for apparent bias and in finding unconscious bias?	[55]
Relevant facts	[57]
High Court judgment	[62]
Discussion	[72]
Third ground of appeal: was the Judge was wrong to find lack of probative evidence?	[86]
The Judge's approach	[88]
Discussion	[93]
Fourth ground of appeal: was the Judge wrong to find breach of Mandatory Rules and breach of legitimate expectation?	[100]
High Court judgment: pre-scoring and consensus scoring	[106]
Discussion	[112]
Breach of legitimate expectation/Mandatory Rules in pre-scoring
and consensus scoring	[113]
High Court judgment: Moderation phase	[128]
Discussion	[137]

Result

1 The Ministry of Health is charged with implementing an integrated problem gambling strategy. In July 2013 it requested proposals for services from private providers to assist with the delivery of that strategy and, in March 2014, it made and announced decisions as to the providers with which the Ministry would contract for services for the period from 1 January 2014 until 30 June 2016. Disappointed with those decisions, the Problem Gambling Foundation of New Zealand (the Foundation) challenged their lawfulness by way of judicial review. A three-day hearing ensued in the High Court in September 2014, with judgment released some 10 months later on 23 July 2015. 1 Woodhouse J granted the application for judicial review on three grounds: (1) breach of legitimate expectation and mandatory rules; (2) mistake of fact/lack of probative evidence; and (3) inadequately managed conflicts of interest. He set the decisions aside.

2 The Attorney-General brings this appeal on behalf of the Ministry as the litigation relates to actions of Ministry officials or delegates. For ease of comprehension, we therefore refer to the appellant as the Ministry rather than as the Attorney-General. The Ministry argues first that the Judge applied the wrong level of review to what were contracting decisions by the Ministry. Secondly, that the Judge was wrong to findthe errors he did regardless of the appropriate level of review to be applied.

Background

3 The Foundation is a charitable trust — a non-profit organisation which provides both public health and clinical problem gambling services. It has provided problem gambling services since 1988.

4 The Ministry is the government department charged with responsibility under the Gambling Act 2003 (the Act) for developing, managing and implementing an “integrated problem gambling strategy”. 2 The strategy the Ministry developsand implements has to address certain matters specified in s 317(2), which include:

• (a) measures to promote public health by preventing and minimising the harm from gambling (public health services); and

• (b) services to treat and assist problem gamblers and their family and whanau (clinical services).

5 To comply with its statutory obligations, the Ministry routinely adopts a six-year strategic plan and two three-yearservice plans. Each six-year strategic plan

describes the strategic context and each three-year service plan details the strategy for the upcoming three-year period. Cabinet approves each service plan. The Ministry consults extensively when developing strategic and service plans and involves all key stakeholders in those consultations, including the Foundation

6 It is also relevant to mention that the public health and clinical services provided by the Ministry pursuant to these plans are funded by an appropriation. 3

7 The 2013–2016 service plan recorded that all government agencies and the non-government agencies they fund are expected to strive to enhance their efficiency and effectiveness, and that the Ministry expected this goal to be a “key driver’ throughout the 2013–2016 period. The plan also recorded the Ministry's intention to test the market for the primary prevention component of public health services and for the “psychosocial intervention support” component of intervention services in order to establish the potential to enhance efficiency and effectiveness. This service plan was approved by Cabinet on 15 April 2013.

8 Although the Act provides a detailed framework for the development of the service plan, it imposes no obligation on the Ministry as to how it is to implement its service plan once approved. The Ministry could provide the services itself or contract one or more private providers to deliver the services contemplated by the plans. The Ministry has chosen the latter course.

The request for proposals

9 The request for proposals (RFP) for the above services was developed to undertake the foreshadowed testing of the market. It was the first nationwide contestable procurement process in the 10 years the Ministry had been responsible for problem gambling.

10 The RFP documentation distributed to providers and potential providers in July 2013 — which lies at the heart of this proceeding — was clear in its terms that, although the RFP might result in negotiations with a view to entering a contract for

services, it was “of itself … not an offer that Potential providers accept by submitting Proposals”. It did not create contractual relations between the Ministry and any entity which submitted a proposal. The Ministry reserved the right to accept or reject all or any proposals and to negotiate and/or complete a formal contract with any party, whether or not that party had submitted a proposal. It is therefore common ground that the RFP procedure did not give rise to process contracts of the type sometimes found in tendering situations

11 It is also not at issue that, as well as the terms and conditions contained within the RFP documentation, the RFP process was subject to the Mandatory Rules for Procurement by Departments. These were rules endorsed by Cabinet in 2006 which, according to the introduction to the rules, set out “mandatory standards and procedural requirements for the conduct of procurement by government departments” that “reflect and reinforce New Zealand's established policy of openness and transparency in government procurement”. 4

12 The RFP set out criteria and weightings for the evaluation of the proposals against quality and commercial considerations. Quality criteria were said to be weighted as to 70 per cent and price as to 30 per cent. The RFP allowed proposals to be submitted for the provision of regional or national services, and for providers to join together in the presentation of a proposal.

The process

13 The Ministry received 32 proposals in response to the RFP, representing 86 service combinations. The Foundation submitted two proposals: one to provide services in the majority of the regions as a sole provider and the other as “lead agency” in a partnership with Hapai te Hauora Ltd.

14 The Ministry selected a panel of people from within and outside the Ministry to evaluate proposals received against the published criteria and to make

recommendations to the Ministry's ultimate decision-maker, Mr Bartling, who was not part of the selection panel. Mr Bartling was at the time the group manager of Mental Health Service Improvement

15 The evaluation process used was as follows. Individual panel members scored each proposal according to the RFP criteria between one and 10 using standard scoring/evaluation sheets. All panel members returned electronic evaluation sheets. These sheets were referred to as pre-scoring sheets and the process was called the pre-scoring phase. Pre-scores were then submitted to and compiled by the non-scoring chair of the panel, Mr Levy, who was a senior contract manager at the Ministry at the time. After Mr Levy completed his compilation the panel members met and, in a...