A health department administrative bungle that has already cost more than $5 million is about to get even more expensive.

An action by a visiting Queensland surgeon claiming conspiracy, injurious falsehood and defamation will proceed after the Supreme Court last week knocked back applications for the case to be declared out of time.

The action has its roots in the already settled matter of Professor John Knight.

In March this year the State Government paid Knight – an internationally renowned cardiothoracic surgeon – $4.3 million compensation for loss of income, defamation and injurious falsehood and costs.

At the time, it was thought that the settlement concluded a long-running saga which burst into the public arena in October 2009 when then health minister John Hill named Knight in parliament in connection with a patient’s death.

In March 2010, State Coroner Mark Johns found that neither Knight nor his surgical team was at fault in the death of Vera Allan, 81, who had died after complications from open heart surgery in November 2008.

The Coroner had heard evidence that two doctors from the Flinders Medical Centre Cardio-Thoracic Surgical Unit, Dr Hugh Cullen and Dr David Lance, had promoted an allegation that a visiting Queensland surgeon, Benjamin Bidstrup, had participated in Allan’s operation alongside Knight and had contributed to her death.

The Coroner declined to make any conclusions relating to Cullen and Lance’s involvement in the spreading of those allegations.

The claims, however, were also aired in a Government Investigations Unit process in 2009 and in submissions made by Knight in his claim against the State Government.

They are now the subject of a defamation action by Bidstrup, who is relying on “recently obtained voluminous documentation by way of third party discovery from the Knight action”.

Court documents show the State of South Australia has accepted that if the defamation is proved it will be vicariously liable for Cullen and Lance.

The State’s exposure now goes well beyond its payment of $4.3 million to Knight and its own legal costs.

At the time of the Knight settlement earlier this year, Knight’s lawyer Nick Iles said the matter had been “a bungle from beginning to end”.

“Since being stood down from FMC in August 2009, Professor Knight has twice been vindicated, not only by a thorough and wide ranging Coronial inquest, but by today’s settlement with the State of South Australia,” Iles said.

“Whilst the sum of $4.3m compensates Professor Knight for the damage done to his reputation, and meets his legal costs, the fact remains that his skills have been lost to the public hospital system.

“There needs to be a fundamental overhaul within SA Health of the way in which internal complaints are handled and allegations properly tested before people’s reputations are needlessly put at risk and highly qualified medical practitioners are denied to patients in the public system.”

The allegations are now expected to be central to the defamation action launched by Bidstrup.

The two doctors, Cullen and Lance, are represented by the same legal team that is representing the State of South Australia as the third defendant.

InDaily has asked Attorney-General John Rau what costs have been incurred to date by the State Government in dealing with the Bidstrup claim and what contingency it has made for any successful action.

To date, there has been no reply.

How the saga unfolded

Then health minister John Hill surprised state parliament in October 2009 when he revealed the suspension of the director of the Cardiac and Thoracic Surgical Unit at the Flinders Medical Centre, Associate Professor John Knight.

The action, he said, was taken on the advice of the Southern Adelaide Health Service chief executive officer Cathy Miller via his departmental head Tony Sherbon.

“The suspension relates to the circumstances surrounding cardiac surgery provided to an elderly patient on 25 November last year,” Hill told MPs in a ministerial statement.

“The patient died a day after extensive surgery.”

The minister said the Crown Solicitor’s Office had enlisted the help of the Government Investigations Unit to investigate the case.

“The information relates to the reporting of the surgery and the patient’s death and the appropriate supervision and credentialing of an interstate practitioner Mr Benjamin Bidstrup, who was involved in the surgery.”

Vera Allan, 81, died from complications from open heart surgery in November 2008.

Concerns about the operation had been raised in mid-2009 by another surgeon, Hugh Cullen.

But court documents show Cullen had been counselled by Knight earlier in 2009 over a string of complaints from FMC staff relating to “behavioural issues”.

Knight was head of the unit where Cullen worked.

After Cullen had been investigated and stood down over the behavioural matters – and almost a year after the death of Vera Allan – a letter sparked a set of events that ended in the $4.3 million settlement, a Coroner’s inquest estimated to have cost millions and several years of expensive legal negotiations between all the parties.

The September 2009 letter said additional information had come to hand regarding the death. The information had come from the aggrieved Cullen.

As the Coroner’s report observed: “Matters would have rested there were it not for a letter received by the State Coroner dated 2 September 2009 from Dr Tony Sherbon, Chief Executive, SA Health. That letter is a significant document.’

“Some additional information has recently become available during an investigation, and I believe that you may not have been fully apprised of the situation when the death was reported to you in November 2008,” Sherbon’s letter said.

“It is likely that any further enquiries you did make at the time would not have revealed what has subsequently come to light about the surgeons that were involved in Mrs Allan’s surgery.

“I have attached for your information the briefing note regarding Mrs Allan’s operation and subsequent death at Flinders Medical Centre that was recently provided to the South Australian Minister of Health.”

And so it was that an inquest was held.

It not only exonerated Knight and the credentialed doctors who took part in the operation, but it also raised concerns about the handling of allegations made against Knight.

The Coroner, after summarising the evidence and submissions made during the investigation and the hearings, made it clear he would not be relying on the Health Department’s Cathy Miller as a witness.

“I am critical of Ms Miller’s evidence. She exhibits extreme confusion about the credentialing arrangements at Flinders Medical Centre in the period as at November 2008.

“Furthermore, some 3 months after she gave evidence, she made a further affidavit. That affidavit exhibited a new policy on credentialing and scope of practice dated March 2010.”

He then listed 11 recommendations for changes to policies and procedures at Flinders Medical Centre.

Miller later left FMC and moved to a position as chief executive officer at Minda Incorporated.

Tony Sherbon also left his position as CEO of SA Health, returning to Canberra where he became deputy chief executive of the National Health and Hospital Transition Office in Canberra.

John Knight had been exonerated by the Coroner and inquiries by the Government Investigations Unit were wound up.

He asked to be reinstated to his position, for an apology and for compensation for loss of income and reputation.

The State refused.

But, in the face of overwhelming evidence it had a change of heart.

Compensation for defamation, loss of income and injurious falsehood was agreed in March this year.