All.Insurance.Professional Indemnity

When hospitals and practitioners share liability

The decision of Stefanyszyn v Brown; Brown v Newcastle Private Hospital Pty Limited t/as Newcastle Private Hospital (No 2) [2016] NSWSC 898 provides further guidance on contributions between joint tort-feasors, Calderbank offers and resulting cost orders in medical negligence matters.  


On 1 December 2008, Colleen Stefanyszyn attended the Newcastle Private Hospital for elective surgery, which was performed by Dr Oliver Brown. She passed away on 5 December 2008. The Coroner's report revealed that during the operation a loop of suture material was inadvertently looped around Mrs Stefanyszyn's bowel and the error was not discovered until after she suffered a fatal cardiac arrest.

Initial proceedings were brought against Dr Brown by the patient's husband and two daughters under the Compensation to Relatives Act 1897 (NSW). Dr Brown admitted he breached his duty of care to Mrs Stefanyszyn and that it had resulted in her death. However, Dr Brown did not admit that he alone was at fault. In his cross-claim, he sought orders under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) against the Hospital.

By its pleaded case, the Hospital admitted providing its hospital facilities, nursing and paramedic services to Mrs Stefanyszyn, and that it owed her a duty to exercise reasonable care in providing those services. The Hospital did not admit that it had a duty to record vital signs or to advise a patient's medical practitioner of a deterioration in the patient's health, nor did it admit that medical practitioners might reasonably rely on its nurses to alert the practitioner to a deterioration in a patient's condition and to record the patient's vital signs.

The New South Wales Supreme Court determined that the Hospital's negligence was more extensive than the Hospital was prepared to admit—it was negligent in failing to require its staff to record Mrs Stefanyszyn's deteriorating conditions after surgery, which contributed to her death. The Court assessed the Hospital's contribution to Mrs Stefanyszyn's death at 20%. It was ordered to pay Dr Brown $322,000 which represented 20% of the agreed settlement figure reached with the Plaintiffs inclusive of costs.

The issue then turned to what cost order should be made for Dr Brown's cross-claim. Dr Brown sought an order that the Hospital pay his costs on the ordinary basis up to 4 April 2016 (the date of his Calderbank offer) and thereafter on an indemnity basis. The Hospital's position was that there should be no departure from the usual order under the Uniform Civil Procedure Rules 2005 (NSW), namely an order that it pay Dr Brown's costs, as agreed or assessed.

The 2016 Calderbank offer relevantly provided:

"Our client will contribute 80% of the settlement sum or judgment sum received by the plaintiff, together with 80% of the plaintiff's costs as agreed or assessed. Our client would seek your client's consent to any settlement offer to be made to the plaintiff in the event that contribution can be agreed as proposed in this letter. This Offer is on the basis that each party bears their own costs of the Cross Claim."

The Hospital contended that the offer did not involve any genuine compromise and relied on the fact that the ultimate contribution finding was for the same amount as that offered by Dr Brown in his Calderbank letter. Dr Brown relied on the fact that the Hospital did no better than the offer to highlight that the Hospital's rejection was unreasonable.

In making her finding, Justice Schmidt stated that, "Calderbank offers do not create any entitlement to an indemnity costs order, even if a better outcome is achieved in the proceedings than that which the offering party proposed. What must be considered is whether the offer involved a genuine compromise and whether the Hospital acted unreasonably in not accepting the offer."

So, did the Hospital act unreasonably in refusing the offer?

In making her finding, Justice Schmidt looked to the precise factual circumstances. She found that at the time of the offer, the Hospital's position was supported by the views of its experts and another surgeon who had provided a report to the Coroner. Further, the offer required the Hospital to agree to bear 20% of any settlement arrived at by the plaintiffs and Dr Brown, even one that the Hospital did not consider to be reasonable. In those circumstances, Justice Schmidt found there was no basis for concluding the Hospital acted unreasonably in rejecting the offer.

As such, the Hospital was ordered to pay Dr Brown's costs of the cross-claim as agreed or assessed and not on an indemnity basis from the date of the Calderbank offer.

A recent reminder of the duty of care to family

In circumstances of medical negligence, it is not just the victim to whom the hospital or practitioner owes a duty of care, but to the victim's family as well. The decision of Sorbello v South Western Sydney Local Health Network; Sultan v South Western Sydney Local Health Network [2016] NSWSC 863 is a recent reminder of this duty, where such negligence led to psychological injuries and damages for both economic and non-economic loss.

The case involved Ms Rosemary Sorbello and Mr Sleiman Sultan, the parents of Joseph Buksh, who suffered disabilities as a result of being deprived of oxygen during his birth. They brought claims for damages for nervous shock against the South Western Sydney Local Health Network, the Network managing Bankstown Hospital. On the Friday before the hearing, the Health Network admitted that it had breached a duty of care owed to the Plaintiffs. What remained in issue during the hearing was whether Mr Sultan suffered from a recognisable psychological condition, the extent of the damage suffered by both Plaintiffs and the quantum of damage resulting from the Plaintiffs' injuries.


Ms Sorbello started having contractions on 19 September 2008. Over the next four days she attended Bankstown Hospital a number of times but was sent home. Her waters broke at 7.30 am on 23 September 2008 and she was admitted to hospital. The birth was protracted, difficult and involved an epistomy. The next day Joseph was born. It was observed that the umbilical cord was wrapped around his neck and he was not breathing. Over the coming months, it became apparent that, as a result of the oxygen deprivation, he was severely intellectually disabled, suffered from cerebral palsy, had a significantly shortened life expectancy and would be in need of lifetime care. The Plaintiffs claimed that a combination of the birth experience and learning of Joseph's disabilities has resulted in nervous shock. 

Ms Sorbello's Claim

The parties agreed that Ms Sorbello suffered from a depressive condition, however, disagreed on the extent of her injuries. The Local Health Network suggested they were minor and Ms Sorbello could have returned to work at the end of her maternity leave. Ms Sorbello argued that the extent of her psychiatric condition did not permit her to do so. The Court, based on expert evidence and the evidence of Ms Sorbello, determined that her psychiatric condition had in fact precluded her from returning to wor, and she had therefore suffered past economic loss. 

The Court also recognised that Mr Sorbello had a theoretical residual earning capacity. In these circumstances, based on the decision in Mead v Kerney [2012] NSWCA 215, the Court formed the view that it was for the Local Health Network to identify either past or future job opportunities that were open to Ms Sorbello. The Court held that it had failed to do so and determined that Ms Sorbello's future economic loss should be determined on the basis that she would not be able to work before retirement age. 

Based on the severity of her depressive condition, the Court determined that her non-economic loss should be assessed at 35% of a most extreme case. 

Mr Sultan's Claim

Whilst the experts agreed that Joseph's birth contributed to Mr Sultan's psychiatric condition, this was subject to the reservation that he may not have provided an accurate medical history. The Local Health Area's expert questioned his history because Mr Sultan separated from Ms Sorbello and became removed from the day-to-day care of Joseph in January 2011. Unusually, his depressive symptoms thereafter appeared to worsen rather than improve. 

The Court relied on the evidence of Dr Allnut (Mr Sorbello's expert), as well as the corroborating lay witness testimony from Ms Sorbello, Ms Ghamrawi (Ms Sorbello's sister) and Ms Carpinato, her mother. The Court accepted all witnesses as truthful. Based on the corroborating testimony, the Court determined that Mr Sultan had suffered a psychiatric injury as a result of Joseph's birth, that this led to him losing his job as a security guard and that he had suffered past economic loss as a result. 

However, unlike Ms Sorbello, Mr Sultan's evidence identified that with the assistance of treatment he would soon be able to return to work. As such, the Court was satisfied that his future economic loss should be assessed on the basis that he could presently work part-time and would be able to return to full-time work within 12 months. 

Based on the evidence presented on the severity of Mr Sultan's symptoms, the Court assessed his non-economic loss at 20%. 

We would like to acknowledge the contribution of Mark Doepel, Morgan Moroney and Steve Canton to this update.

Duckett Report on Bacchus Marsh Hospital deaths handed down

Following 11 instances of newborn and stillborn deaths, and a number of significant injuries sustained by neonates at Bacchus Marsh Hospital in rural Victoria, an independent review headed by Dr Stephen Duckett into this particular hospital and the wider Victorian health care system is set to trigger a significant overhaul in the state.

The Duckett Report has just been handed down and was critical of the Victorian Department of Health for allowing hospital boards to manage their own safety issues without Department oversight. This created a situation whereby the Department of Health failed to detect a spike in neonatal deaths at Bacchus Marsh Hospital.

Following the Report, Safer Care Victoria (a new watch dog) will be set up to monitor patient safety and hold providers of health services more accountable. The Government is also reportedly creating a council to advise on hospital safety improvements as well as the introduction of a health information agency, which will ensure health performance data is collected accurately and transparently.

Dr Duckett made a total of 179 recommendations, all of which have been accepted (in principle) by the Victorian Government. The Minister for Health has again raised the long-discussed possibility of a "no-fault" medical insurance scheme for health care injuries and the introduction of a "duty of candour" similar to that implemented by the UK's National Health Service.

Violence in the Victorian health care system

Health care professionals are facing increasingly significant risks of violence and abuse in the workplace. Those working in emergency departments (ED) are particularly vulnerable to violent alcohol and drug-affected patients, and those experiencing acute mental illness symptoms. A study conducted at Royal Melbourne Hospital found a rate of 32 "Code Greys" (emergency violence) for every 1000 presentations [Knott et al, Emergency Medicine Australasia 17 (2015) p. 351].

The issue is not limited to metropolitan hospitals. Between 2009 and 2011, Ballarat Health Services saw an increase of 34% in presentations to the ED. In this same period, instances of Code Greys increased by 60%. A Monash University study found that of the 5000 nurses interviewed, 70% had experienced violence or aggression from a patient in the previous year [De Cieri et al, Leading indicators of health and safety: A report on a survey of Australian Nursing and Midwifery Federation (Victorian Branch) Members (2015)]. A New South Wales study found that 90% of ED nurses experience physical intimidation and violence at some point in their career and 100% will experience verbal abuse [Lyneham J, Aust J Adv Nursing, 18/2 (2000) p. 8].

While these figures are alarming, they do not paint a complete picture. A 2011 Victorian Government Inquiry into Violence and Security Arrangements in Victorian Hospitals found there was a consistent theme of underreporting. Many health care staff either did not have time to complete an incident report or brushed it off as "part of the job".

Occupational violence in the health care sector has significant social, health and economic consequences. This, in turn, impacts the insurers and underwriters of health care facilities and professionals. It is axiomatic that exposure to abuse impacts the employee's physical and mental health and wellbeing. Repeated exposure is likely to lead to increased levels of stress and anxiety and, ultimately, "burnout". It may lead to decreased engagement and concentration, resulting in clinical errors and decreased quality of patient care and outcomes. Significant economic costs include spiralling sick leave, diminished staff effectiveness, employment and retention, and in some cases, legal action.

Victoria's Occupational Health and Safety Act 2004 states that an employer must, so far as is reasonably practicable, provide and maintain a working environment that is safe and without risks to health. If an employer has failed to meet these requirements, it may face prosecution for breaching its duty of care. Accordingly, it is vital that health care facilities maintain an adequate standard of training and security to keep their employees safe.

A unique feature of the Victorian jurisdiction arises from the application of the Accident Compensation Act 1985 (Vic.) (the Act). When a worker is injured in the course of his or her employment, he or she is entitled to receive compensation from the employer. This is insured by statutory work cover insurer, the Victorian WorkCover Authority (VWA). Section 138 of the Act allows the VWA to seek an indemnity for this compensation from a non-employer third party, which has caused or contributed to the worker's injury. The VWA pursues these recoveries relentlessly. These proceedings are entirely separate to the worker's own compensation claim, meaning additional defence and claim costs are incurred in defending these proceedings. This section of the Act is particularly relevant given the increased use of agency nurses within health care facilities. In such cases, facilities may face significant exposure to recovery claims from the VWA under s 138 of the Act in their capacity as non-employers, which have caused or contributed to the worker's injury. Underwriters of health care facilities must be prepared for the possibility of multiple legal claims arising from one incident.

The prevalence of violence in the health care sector has now seen formal recommendations issued by the Department of Health and Human Services (DHHS). The DHHS has released a toolkit, Preventing Occupational Violence in Victorian Health Services: A Policy Framework and Resource Kit. The kit is designed to assist health care services prevent and manage violence in the workplace. The DHHS also developed the Better Responses, Safer Hospitals: Standard for Code Grey Responses in 2014, outlining best practice principles and minimum practice standards.

In June 2015, the Victorian Government established an Occupational Violence Taskforce to identify issues and recommend reforms to reduce violence in Victorian hospitals. The Violence in Healthcare Taskforce Report was released in June 2016 and made a number of recommendations, including providing health care professionals with more training, up-skilling in how to de-escalate potentially violent situations and to develop a simplified reporting system. The Report also addressed the need for systemic and cultural changes in the health care sector, including improved incident reporting. The Victorian Government accepted all recommendations made and opened the second round of the Health Service Violence Prevention Fund. From this fund, health care providers can apply for funding to support projects to reduce and prevent violence. 

Any act of violence, whether physical or psychological, can result in injuries to workers, business interruption, compromised patient care, reputational damage and litigation. Underwriters of health care facilities need to be aware of the significant impact this can have on the insured facilities and work cooperatively with insureds to devise risk management strategies to minimise all forms of violence, given the potential impact on staff and patient safety. 

We would like to acknowledge the contribution of Kerri Thomas and Jehan Mata to this update.

Mater appoints Chief Nursing and Midwifery Officer

On 27 June 2016, Mater Health Services appointed Mr Callan Battley to the newly created position of Chief Nursing and Midwifery Officer. In this role, Mr Battley will be responsible for partnering with key leaders, staff and specialists across Mater to support the delivery of safe, high-quality, evidence-based health care.

Mr Battley has worked in the health care industry for almost 20 years, starting in clinical roles before transitioning to numerous senior management positions, including his most recent role as Director of Nursing at The Wesley Hospital. Mr Battley has a range of clinical experience from oncology and general medicine through to intensive care nursing, and holds postgraduate qualifications in nursing, business and leadership. Mater states that the new position will strengthen their clinical leadership and governance, supporting the aim of further improving health care through the strategic and consistent integration of health, education and research.

More broadly, international studies have demonstrated:

  • health services benefit from having established nurse executives through leadership structures
  • the benefits are realised directly through higher standards and quality of care with improved health consumer experience and positive health outcomes
  • the effectiveness of nurse executives within health services is demonstrated through their leadership in professional governance, quality improvement, service transformation and shared governance, and
  • high performing, high quality healthcare organisations have executive nurses partnering with chief executive and medical leaders.

The development of and recruitment to executive nursing roles is becoming increasingly common as the benefits to both the organisation and patient experience are better understood and demonstrated across a variety of countries, including Australia.

More power to hospitals to help manage abusive patients

Queensland Health recently announced its intention to empower hospitals against abusive patients by equipping hospitals with voice-activated duress alarms and body cameras. A new policy will also see repeat violent offenders, along with family and friends, banned from certain hospitals.

A dedicated Occupational Violence Implementation Oversight Committee will be established to oversee the new initiatives and undertake the following tasks:

  • review security arrangements across all Queensland Health hospitals including security staffing levels and training
  • investigate the effectiveness of personal duress alarms
  • develop strategies to reduce occupational violence in high risk areas, including emergency departments, mental health services and remote communities, and
  • develop strategies to ensure staff remain the focus of any post-incident review of occupational violence incidents.

We would like to acknowledge the contribution of Mark Sainsbury, Kevin Bartlett and Thomas Dalton to this update.

Is an apology an admission of guilt?

We can all appreciate the power of an early apology in alleviating the anger and resentment of a person who has experienced some harm. Doing so can restore relationships, prevent the escalation of an issue and even encourage early resolution of disputes, without recourse to litigation.

For an apology to be effective, it usually entails accepting responsibility or fault. This can be dangerous in the context of civil liability, as the apology might later be used against the person offering the apology as an admission of guilt.

Until recently in South Australia, apologies could be interpreted as admissions and taken into account by the Court in an assessment of liability. Unsurprisingly, employees and professionals were encouraged not to say anything when mistakes were made, to avoid their apology later being used against them. 

As the Attorney-General, John Rau, explained of his experience acting as counsel at the independent bar, there are many circumstances where parties would not have been inclined to commence proceedings at all, had an apology been offered.  

The Statutes Amendment (Attorney General's Portfolio) Bill 2015 was recently passed by the South Australian Parliament, amending the Civil Liability Act 1936 (SA) (the Act) to address the effect of an apology on liability.

South Australia now joins a number of other Australian states who have implemented similar protections.

An apology is defined by the Act as "an expression of sympathy or regret, or of a general sense of benevolence or compassion, in connection with any matter, whether or not the apology admits or implies an admission of fault in connection with the matter".

Section 75 of the Act now provides that an apology does not constitute an admission of fault or liability and is not relevant to the determination of fault or liability. Consequently, an apology won't be admissible in civil proceedings as evidence of fault or liability.

Defamation proceedings are excluded from the ambit of s 75 of the Act, along with any civil liability excluded by regulation.

In light of the changes to the Act, good practice would suggest the provision of an apology at an early stage (where appropriate). That said, and notwithstanding the protection provided by the Act, it is still advisable to keep proper and contemporaneous records of what has been conveyed in terms of an apology.

The amendment to the Act provides some comfort to insureds that they can offer an apology without the apology being used against them in any subsequent proceeding. Indeed, where the circumstances dictate a sincere apology is warranted to an aggrieved party, it may also have the welcome effect of avoiding litigation.

We would like to acknowledge the contribution of Julie Kinnear and Lani Carter to this update. 

Successful start for Undiagnosed Diseases Program 

The Western Australian Undiagnosed Diseases Program was launched in 2015 and accepted its first patient in April 2016. The program aims to find diagnoses for children who have chronic, longstanding and very complex undiagnosed disorders, which are often rare diseases. It is modelled on a successful program in the US and is connected to an international network of expert doctors. 

Rare diseases affect less than one in 2000 people, but the cost to the health care system is believed to be significantly higher by comparison. A diagnosis can provide certainty, which can lead to less invasive testing and hospitalisation, and more targeted and new treatments.  

The program engages a multidisciplinary team including clinicians, hospitals, researchers/institutes, communities and primary care givers. Initially, one child per month will be offered a place in the Program. Each case is assessed by an expert panel before the child undergoes assessment and investigation. This data is shared with the international network to assist in identifying a diagnosis.

The program has proved successful with the first child being diagnosed in just over a fortnight with an extremely rare genetic condition affecting one in a million. It is expected that families of children who are not diagnosed through the program will have closure and feel more connected through a community of undiagnosed individuals as well as receive improved medical care and engagement with the health system.

It seems other states may follow, with NSW holding a workshop in June 2016 to look at establishing a program locally.

It is anticipated that such a program will assist in addressing frustrations and potentially minimising complaints against providers for delayed, failed or misdiagnoses.  

We would like to acknowledge the contribution of Belinda Michalk and Lauren Bultitude-Paull to this update. 

A solicitor's duty not to mislead

The interlocutory decision of Kaye v Woods (No 2) [2016] ACTSC 87 serves as an important reminder that a solicitor's duty not to mislead, either the court or other parties to a claim, is a positive duty.

The decision involved allegedly negligent conduct by a surgeon, Dr Woods, who performed three operations on the Plaintiff, a 13 year-old girl, to repair a ligament injury. The Plaintiff contracted a streptococcal infection after the third surgery, which caused necrotising fasciitis (a flesh-eating disease). 

On 16 April 2016, the Friday before the hearing, the surgeon's solicitors served an expert report by Dr Hudson, dated 22 August 2014. The letter serving the report noted it had been "unfortunately overlooked until now". Following service, the Plaintiff issued a subpoena to the First Defendant's solicitors seeking documents relating to the decision to serve the report but, unsurprisingly, privilege was claimed by the Defendant over many of the requested documents. An application was subsequently filed seeking access to these documents and challenging the Defendant's claim for privilege.

The issue before Mossop AJ was whether or not privilege was lost because the documents were in furtherance of the commission of an act that renders the person liable to a civil penalty. The civil penalty provisions in question were in respect of conduct amounting to unsatisfactory professional conduct or professional misconduct. 

Mossop AJ found that both the letter serving the report of Dr Hudson and an affidavit relied on by the First Defendant were "at the least, knowingly misleading". Mossop AJ further held such conduct fell below the acceptable standard of conduct for a solicitor, resulting in lost privilege over the correspondence. The original letter and affidavit implied there was an intention to serve the report but that service had simply been "overlooked" and blamed the departure of a solicitor who had previously had conduct of the matter. However, the material produced in line with the subpoena showed there was a deliberate decision not to serve the report until at least December 2015.

This decision highlights that solicitors have a duty to behave ethically by not misleading the other side or causing them to be misled. It is also important to note the service of expert reports is not to be taken lightly. When a solicitor receives an expert report, they must make a decision about whether to rely on that report and, if so, serve it in a timely manner. If it is decided that the report won't be relied upon, solicitors must not mislead anyone about its existence.

Medical Cannabis Scheme

The ACT Government will put in place a Medicinal Cannabis Scheme by 2017. The Government plans to develop a framework to support the Scheme, including by developing clinical guidelines to support medical practitioners in how to best prescribe medicinal cannabis products.

This news comes shortly after the University of Canberra and Cann Pharmaceutical announced they would enter into a $1 million research project, which aims to produce a medical-grade cannabis therapy trial for the treatment of melanoma.

We would like to acknowledge the contribution of Jessica Bristol and Alice Bolt to this update.

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