The Court of Appeal has dismissed an appeal by a group of pharmacists seeking to challenge decisions by two district health boards (DHBs) to enter into contracts with Countdown pharmacies.1 The Court held that the decisions were of a public interest nature, and the scope of review was not limited to narrow grounds of fraud, corruption, bad faith or analogous circumstances. However, the DHBs complied with their statutory obligations in making the contracting decisions, including by ensuring that they were reasonably informed about the potential impacts on health equity for Māori.
Background
Prior to the establishment of Health New Zealand in 2022, DHBs provided and funded public health services under the New Zealand Public Health and Disability Act 2000 (NZPHDA). DHBs were required to act consistently with their statutory objectives, which included reducing health disparities for Māori. DHBs could contract third parties to provide pharmaceutical and other health services.
In 2020 and 2021, Hutt Valley DHB (HVDHB) and Hauora Tairāwhiti each decided to enter into contracts with a company in the Woolworths group (RX8) to enable pharmacies in Countdown (now Woolworths) supermarkets. Among other things, the pharmacies offered extended opening hours and to waive the $5 co-payment on most prescription medicines.
The DHBs followed their own processes in making those decisions:
- HVDHB established an evaluation panel, which assessed RX8's application in accordance with HVDHB's Pharmacy Contracting Policy and made a recommendation to the Director of Strategy Planning and Performance (Ms Haggerty). The majority of the panel considered that the application should be declined because the pro-equity aspects were outweighed by other concerns. However, Ms Haggerty agreed with the Acting Director of Māori Health (Ms Waldegrave) that the potential for the pharmacy to increase free access to medicines and improve health equity outweighed the concerns.
- Hauora Tairāwhiti followed its New and Existing Provider Policy, which meant the application was considered by a portfolio manager (who, among other things, used a 'Health Equity Assessment Tool'), three committees including Te Waiora o Nukutaimemeha (the Māori relationship committee), and the board, which made the decision. Each stage of the process identified that the pharmacy had a range of features which could increase access to medicines and improve health equity.
A group of independent community pharmacists (the ICPG) challenged the decisions.
The High Court declined the ICPG's applications for judicial review and declaratory judgments against Health New Zealand (which took the place of the DHBs).2 Buddle Findlay reported on the High Court judgment in this update.
The ICPG appealed aspects of the High Court decision. The Court of Appeal dismissed the appeal.
Scope of review
The High Court held that the DHBs' decisions were commercial contracting decisions, which (following the Privy Council's decision in Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd3 and subsequent judgments of the New Zealand courts) were reviewable only on narrow grounds of fraud, corruption, bad faith or analogous circumstances. A "critical contextual factor" was that the ICPG comprised business competitors of Countdown pharmacies, and it was not the function of judicial review to advance private interests in a competitive market.
The Court of Appeal disagreed. It considered that the Supreme Court in Moncrief-Spittle v Regional Facilities Auckland Ltd4 had rejected an approach of considering whether "compelling contextual factors" shifted the scope of review of a commercial contracting decision from narrow grounds. Instead, the scope of review will depend on the statutory and factual context, and the proper approach is to analyse that context. Here, the DHBs were making public health decisions. The fact that these were given effect by way of contract, and the health services would be provided in a competitive market, did not alter the public interest nature of the decisions. The legality of the DHBs' decisions would depend on whether they were consistent with the NZPHDA, including to the extent that this involved mandatory considerations.
Information as to risks to health equity
The ICPG argued that the DHBs failed to inform themselves properly of the risks to health equity that the Countdown pharmacy contracts would pose for Māori.
The Court considered that this ground of review was best framed as a failure to take into account mandatory considerations. It accepted that the DHBs were required to obtain adequate information to enable them to assess whether the proposed decision was likely to have the intended benefit (here improving health equities for Māori). But there was no requirement as to the type of information that the DHBs needed to obtain or how they should obtain it. The question is what was reasonable in the circumstances of the decision to be made.
The Court held that both HVDHB and Hauora Tairāwhiti were reasonably informed and acted within the scope of their powers. The DHBs were able to draw on their knowledge, experience and assessment models in assessing the potential equity impacts of the decisions.
The expert evidence on which the ICPG attempted to rely, which included evidence from an economic consultant about the potential impacts of waiving the $5 co-payment, and a Māori health expert, was held to be inadmissible. The NZPHDA did not require the DHBs to obtain "generic" expert evidence about potential risks and assessment models.
Treaty of Waitangi
The ICPG also argued that the HVDHB failed to act in accordance with the Treaty of Waitangi, by not being adequately informed about health equity risks for Māori.5
The Court noted that there was no standalone duty on the DHBs (which were Crown entities) to comply with the Treaty. The DHBs were required to comply with the NZPHDA, which provided mechanisms to recognise and respect the Treaty principles. These included the statutory objective of reducing health disparities by improving health outcomes for Māori, statutory functions to create processes that enable Māori participation, and Māori membership on DHB boards.
The Court considered that this ground of review was better framed as a failure to take into account the Treaty as a mandatory consideration. It failed because HVDHB was adequately informed and involved Māori in its decision, in particular through Ms Waldegrave's role and experience.
Conclusion
The NZPHDA has been repealed, DHBs have been disestablished and one of the Countdown pharmacies has closed. Nevertheless, this judgment is useful in confirming the following principles:
- Contracting decisions by public entities may be amenable to judicial review. The scope of review will depend on the context, including whether the decision was made in the public interest. The judgment demonstrates a shift from a starting position that commercial contracting decisions will generally be reviewable only on narrow grounds of fraud, corruption, bad faith or analogous circumstances, and potentially opens to the door to increased scrutiny on public law grounds.
- Public entities must act within the legal limits of their powers. Where a statute leaves discretion as to how a decision should be made, and the decision reached is reasonable, the Court will not impose its own requirements or remake the decision.
- Expert evidence that was not before the decision-maker or goes to the substance of the decision is rarely admissible in a judicial review action.
Buddle Findlay senior associate Jane Maltby acted for Health New Zealand in this case.
1New Zealand Independent Community Pharmacy Group Inc v Health New Zealand & Ors [2025] NZCA 433.
2New Zealand Independent Community Pharmacy Group v Te Whatu Ora [2023] NZHC 1486 (substantive judgment) and New Zealand Independent Community Pharmacy Group v Te Whatu Ora [2023] NZHC 3314 (costs judgment).
3Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 (PC) at 391.
4Moncrief-Spittle v Auckland Facilities Auckland Ltd [2022] NZSC 138, [2022] 1 NZLR 459.
5On appeal, the ICPG did not pursue this ground of review in respect of Hauora Taiāwhiti's decision.
