Liability stands, says top court: The problem with holding others accountable for one person’s error

A case has shown that healthcare providers are liable for the mistakes of their contractors or partners. Is it a nonsense that disadvantages general practices or a business reality? Martin Johnson reports

GPs will be discouraged from buying into practices now that the Supreme Court has held a medical centre liable for a prescription error by one of its partners, says a GP leader.

But other top GPs say the decision is reasonable and a reminder of the need for good clinical governance in a general practice ownership landscape that has changed significantly.

The court issued its ruling on 28 April on the long-running “vicarious liability” case arising from a prescription error by specialist GP Peter Sparks at Moore Street Medical Centre in Ashburton.

Dr Sparks and specialist GP Christopher Ryan – both now retired – were effectively each half owners of the partnership that traded as the medical centre, even though they didn’t have a written partnership agreement.

A deputy health and disability commissioner found Dr Sparks breached the Code of Health and Disability Services Consumers’ Rights. In 2016 he had prescribed ciprofloxacin to a patient of Dr Ryan’s despite her having a documented allergy to that class of antibiotics. She was seen by Dr Sparks because Dr Ryan was on leave.

The Health and Disability Commissioner decision was that the centre did not directly breach the code because it had policies consistent with expected standards, but was still liable for Dr Sparks’ breach as he was an “agent” of the centre under the vicarious liability section of the Health and Disability Commissioner Act 1994.

It marks the end of the concept of doctors working individually, being responsible only for themselves in a shared premises situation

Dr Ryan sought a judicial review, writing in an affidavit: “The prospect that I am held responsible and accountable for the actions of another, where I was not involved in the consultation, had no influence over what occurred, and no ability to influence such an occurrence in the future, does not sit well with me to say the least.”

He said his professional reputation and practice would be damaged if the liability finding against the medical centre was upheld.

His case failed, however, at the High Court and on appeal first to the Court of Appeal and now, following a hearing in March last year, to the Supreme Court.

The Court of Appeal noted in its decision that Dr Sparks and, despite not personally being at fault, Dr Ryan, together trading as the medical centre, were potentially at risk of being sued, because of the vicarious liability finding, in the Human Rights Review Tribunal.

The HDC Act says an aggrieved person may bring proceedings to the tribunal if the commissioner, having found a breach, has not referred the matter to the director of proceedings, or the director declines or fails to take proceedings.

The Ministry of Justice website says the tribunal can award compensatory damages of up to $350,000.

The Supreme Court majority (chief justice Dame Helen Winkelmann and three more of the hearing’s five judges) found the centre was liable under Section 72 (3) of the HDC Act, which says that anything done or omitted by an agent of an employing authority (healthcare provider) is considered to be done or omitted by the authority as well as by the agent – unless it was without the authority’s approval.

They argue Dr Sparks was undertaking an act within the functions he was required to perform (prescribing) and was therefore acting with the medical centre’s authority.

Justice Sir William Young, however, wrote that although he had no difficulty with the majority’s result, he differed over the application of the act’s “unless” proviso, and urged Parliament to reconsider Section 72.

The interpretation advanced for Dr Ryan was that the effect of the proviso is that the centre is not liable unless it authorised Dr Sparks to prescribe ciprofloxacin despite the patient’s known allergy.

All five judges found the medical centre was a partnership.

The two GPs operated separate practices at the medical centre, which was at premises owned by a company of which they were the directors. They had separate patient registers and separate bank accounts and had different accountants.

But many aspects of the medical centre were joint activities. It employed nurses, administrative staff and locum doctors, and owned equipment and the practice management system.

To address the risk posed by vicarious liability, in the wake of the 2021 Court of Appeal decision, the Medical Protection Society introduced a new type of cover called New Zealand Practice Cover. The MPS team leader for Australia and New Zealand, Zarko Kamenica, says in an interview about 50 practices have taken that cover.

In a statement, Dr Kamenica says the Supreme Court decision means all healthcare providers are potentially liable for the acts or omissions of their agents, whether or not they could have done anything to prevent the act or omission. The agent could be a contractor or partner, but not an employee.

The HDC Act provides a defence to an employer if it can establish it took reasonably practicable steps to prevent the offending acts or omissions of an employee in a breach of the Code of Rights. This defence isn’t available regarding partners or contractors.

Dr Kamenica emphasises the court’s decision is only relevant to the HDC role in resolving complaints; it has no wider application to providers’ liability.

“This [decision] does not mean that the statutory bar on initiating civil proceedings for damages against health providers has been bypassed nor that the partners at the provider are liable to disciplinary proceedings in the Health Practitioners Disciplinary Tribunal. However, when the HDC has found the provider vicariously liable, this leaves an option to patients to initiate proceedings for compensation against the provider in the Human Rights Review Tribunal.”

Wellington lawyer Gaeline Phipps says by email the decision, coming in an acute health worker shortage, is another unfortunate disincentive for GPs to engage in collective general practice, potentially to the detriment of patients. Ms Phipps notes the judgement says it is for Parliament to change the legislation if concerned about the decision’s consequences.

“An interim step could be a clear policy statement from the Health and Disability Commissioner.”