Case summary: Administrative bad faith analyzed in Horne

  • March 29, 2018
  • Paul Saunders

Horne v Queen Elizabeth II Health Sciences Centre, 2018 NSCA 20

MacDonald C.J.N.S., Fichaud and Bourgeois, JJ.A.

Michael D. Wright, Craig M. Garson, Q.C., and Danielle E. Stampley for the appellant (cross-respondent)

Marjorie Hickey, Q.C., Peter Rogers, Q.C., and Ian Dunbar for the respondents (cross-appellants)

February 27, 2018

Dr. Horne was a staff cardiologist at Queen Elizabeth Hospital, operated by the Capital District Health Authority. She was appointed to Queen Elizabeth Hospital on the understanding that her practice would be research-intensive, and this was reflected in her letter of appointment. Her clinical research used data from patients with heart failure who presented at the hospital’s Heart Function Clinic and agreed to participate in studies on a voluntary basis.

Dr. Horne’s relationship with the clinic’s director was strained and eventually deteriorated. The director made several complaints about Dr. Horne, and her division head wrote her a letter warning that her lack of collegiality could result in revocation of her privileges. The division head realized that his friendship with the director put him in a conflict of interest, and asked Dr. Horne’s department head to assume the investigation. However, despite his declared conflict, the division head continued to deal with the merits of the case. The department head later wrote to Dr. Horne purporting to summarily vary her privileges and suspend her clinical trials. The Health Authority ultimately determined that the summary variation had not been justified. However, it took four years for the Health Authority to reinstate Dr. Horne’s privileges. Her research had foundered during this period, in part because the suspension of her privileges curtailed her access to patients and left enrolment too low to obtain research grants.

Dr. Horne sued the Health Authority, claiming her privileges were varied in bad faith and in breach of contract, and that the variation had impaired her research career. She alleged that the division head, acting on behalf of the Heath Authority, had injected the agenda of the director into the administrative process and that the department head had assented.

The case was tried in the Nova Scotia Supreme Court before Mr. Justice Boudreau. In  a Preliminary Decision (see: 2016 NSSC 169), Boudreau J. held that Dr. Horne’s contract claim was unsustainable, leaving administrative bad faith as her only cause of action; he also held that damages for loss of Dr. Horne’s research career were subsumed to damages for loss of reputation. The jury awarded Dr. Horne damages of $1.4 million as compensation for administrative bad faith.

Dr. Horne appealed. She argued that the trial judge should not have withheld her breach of contract claim from the jury, and should have assessed expectation damages for loss of her research career as a separate head of damages. 

The Health Authority cross-appealed. The Health Authority argued that Boudreau J. had wrongly instructed the jury on the principles of administrative bad faith and on the principles of damages, particularly by instructing that damages for reputational loss included loss of Dr. Horne’s research career. The Health Authority also argued that the jury should have been advised that certain aspects of Dr. Horne’s damages claim were impermissible, and, in any event, that the award of $1.4 million was a palpable and overriding error.

The Nova Scotia Court of Appeal dismissed Dr. Horne’s appeal.  Boudreau J. was correct in holding that damages for loss of privileges could be assessed administratively, but not contractually. Rosenhek v Windsor Regional HospitalFootnote1 and Shephard v Colchester Regional Hospital CommissionFootnote2 were cited by the Court of Appeal in support of the proposition that there is no contractual basis for assessing damages for loss of hospital privileges. Dr. Horne’s privileges were regulated entirely by the governing disciplinary bylaws, a comprehensive scheme of subordinate legislation that operates independently of contract. Since Dr. Horne’s other grounds of appeal assumed damages flowing from contractual liability, they could not succeed in light of this holding.

The Court of Appeal dismissed the Health Authority’s cross-appeals on liability. With respect to the principles of administrative bad faith, Boudreau J.’s overall instruction to the jury was that bad faith requires a finding of subjective advertence, and that recklessness was relevant if the division head acted out of anger or some other motive, or if the department head’s investigation was so extremely negligent that she acted in bad faith, malice, or spite. This was not a misstatement of the applicable standard for a finding of bad faith. There was also no error in leaving the jury with the theory that the bad faith of the division head and department head were attributable to the Health Authority. The division head acted for the Health Authority, and Dr. Horne’s theory was that her privileges were varied because of cronyism that motivated a breakdown of administrative decision-making. It was for the jury to decide whether the evidence supported Dr. Horne’s theory.

The Court of Appeal allowed the Health Authority’s appeals on damages. With respect to the jury instructions on damages, Boudreau J.’s instructions did appear to reject the monetized form of specific performance or expectation damages that were included in Dr. Horne’s dismissed contract claim. However, the jury charge did not explain the distinction between that approach and the appropriate measure of recoverable loss, and the jury was evidently confused. The preliminary decision therefore failed to properly distinguish between claimable and unclaimable features of the impairment of Dr. Horne’s research career, and was likely inflated by material the jury should not have considered.

The parties had previously agreed that if damages were overturned on appeal, the Court of Appeal would determine an appropriate quantum. The Court of Appeal assessed general damages at $800,000.

Horne is noteworthy for its illuminating analysis of the principles of administrative bad faith in the context of variation of hospital privileges, and in particular for its confirmation at the appellate level that claims of wrongful variation of hospital privileges are to be assessed administratively, not contractually.

Prepared by Paul Saunders, a student-at-law at Harper Grey LLP