Federal Court of Australia

Kitchen v Director of Professional Services Review [2023] FCAFC 160

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be refused.

2.    The applicant pay the first respondent’s costs of and incidental to the application for leave to appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Overview

1    This is an application by Dr David Norman Kitchen for leave to appeal from orders made by the primary judge on 12 July 2022: Kitchen v Director of Professional Services Review (No 4) [2022] FCA 780 (J).

2    In essence, Dr Kitchen contends that the primary judge erred in ordering that the first respondent (the Director) pay his costs of the proceeding below on a party and party basis, rather than on an indemnity basis. By the appeal which he seeks leave to bring, Dr Kitchen seeks orders including an order that the Director pay his costs of the proceeding below on the indemnity basis.

3    A suggestion was raised by senior counsel for Dr Kitchen at the hearing of the application that leave to appeal might not be required in this case. However, having regard to the recent decision in Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140 (Colvin, Stewart and Feutrill JJ) at [6]–[14] (which was delivered after the hearing before us), leave to appeal is required by Dr Kitchen under s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

4    For the reasons which follow, the application for leave to appeal will be refused, with costs.

Relevant background

5    The Health Insurance Act 1973 (Cth) establishes a professional services review scheme, under which a person’s conduct can be examined to ascertain whether they have engaged in “inappropriate practice” as defined in s 82 of that Act.

6    A review under the scheme is commenced by a request made by the Chief Executive Medicare to the Director. The Director then decides whether to conduct a review of the person’s provision of services (and, if so, will undertake that review) and, after the review, will decide whether to take certain steps, including to make a referral to a Professional Services Review Committee (such as the second respondent, which we will refer to as the Committee in these reasons).

7    Dr Kitchen is an ophthalmologist. On 11 December 2017, the Director received a request from a delegate of the Chief Executive Medicare that a review be undertaken of Dr Kitchen’s provision of specialist ophthalmic services.

8    The Director conducted a review into Dr Kitchen’s conduct, and on 16 August 2018, issued a report under s 89C of the Health Insurance Act and invited Dr Kitchen to make written submissions.

9    On 29 October 2018, Dr Kitchen made lengthy submissions concerning the report, which his solicitors emailed to a member of the professional services review scheme.

10    The Director received a copy of those submissions on 6 November 2018. Shortly after receiving the submissions and on the same date, the Director sent an internal email stating that she was “establishing a Committee” and was “inclined to refer everything” to that Committee.

11    On 14 November 2018, the Director formally determined to refer Dr Kitchen’s practices to the Committee (the Referral). In a letter to Dr Kitchen advising him of the same, the Director stated that she had taken his submissions into account in deciding to make the Referral (as she was required to do under s 89C(2) of the Health Insurance Act).

12    The Committee subsequently commenced its investigation into Dr Kitchen.

13    Almost a year later, on 13 November 2019, Dr Kitchen filed an originating application in this Court seeking judicial review of the conduct of the Committee and the decision to make the Referral, by which he also applied for an extension of time under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act). The extension of time required was 334 days.

14    Dr Kitchen chose to commence those proceedings relying solely on the ADJR Act despite previously being told of his ability to seek judicial review under both the ADJR Act and the Judiciary Act 1903 (Cth).

15    The originating application raised four proposed grounds of review, with the fourth being that the Director failed to take Dr Kitchen’s submissions into account in making the Referral. Dr Kitchen sought final orders to restrain the conduct of the Committee. Although he sought that the decision of the Director to make the Referral be reviewed, no relief was specifically sought against the Director.

16    Dr Kitchen also sought an interim injunction restraining the conduct of the Committee until the proceeding was finally determined. That injunction was refused by a Judge of this Court on 20 November 2019.

17    On 27 November 2019, Dr Kitchen filed an amended originating application.

18    The parties then took steps towards the hearing of the application for an extension of time, which was set down for 1 September 2020. In late July 2020, Dr Kitchen filed submissions and an affidavit relating to that application. On 17 August 2020, the Director filed written submissions in response to that application, which included a submission that she had in fact taken into account Dr Kitchen’s submissions.

19    On 21 August 2020, Dr Kitchen withdrew his application for an extension of time (being four days after receiving the submissions from the Director).

20    On 31 August 2020, Dr Kitchen sought leave to further amend his originating application to rely on s 39B of the Judiciary Act or alternatively s 21 of the FCA Act and to seek, amongst other things, declaratory relief in relation to the Referral and a writ of prohibition. On 8 September 2020, the solicitors for the Director advised the solicitors for Dr Kitchen that the Director was considering her position in light of the proposed amendments to the originating application.

21    On 14 September 2020, the Director consented to Dr Kitchen being granted leave to file the further amended originating application. Thereafter, the solicitors for the Director again advised the solicitors for Dr Kitchen on 6 October 2020 that the Director was considering her position having regard to the amendments.

22    On 4 December 2020, the solicitors for the Director wrote to the solicitors for Dr Kitchen, stating:

While the Director remains of the opinion that she properly exercised her power under s 93 of the [Health Insurance Act], to avoid further costs of litigating that point, the Director is prepared to concede a failure to take into account a relevant consideration, being the submissions made by the Applicant as required by s 89C(2) of the [Health Insurance Act].

23    This concession led to the resolution of the substantive proceeding before the primary judge with orders and declarations being made by consent on 2 February 2021. Relevantly, the Director’s decision to establish the Committee and the Referral were both quashed, and it was declared that, contrary to s 89C(2) of the Health Insurance Act, the Director did not take into account Dr Kitchen’s submissions before making the Referral.

24    By those orders, the primary judge reserved the question of costs.

25    On 14 April 2021, at the hearing as to costs, Dr Kitchen submitted that his costs of the proceeding should be assessed on an indemnity basis.

26    Following the hearing, the primary judge made orders requiring Dr Kitchen and the Director to provide further written submissions in relation to certain questions, and those submissions were filed by those parties.

27    On 12 July 2022, the primary judge handed down judgment and made the orders which are the subject of this application.

Relevant principles

28    To obtain leave to appeal, Dr Kitchen must demonstrate that the decision below is attended by sufficient doubt to warrant its reconsideration by an appellate court, and that substantial injustice would result if leave to appeal was refused, supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (Sheppard, Burchett and Heerey JJ) at 398–399.

29    The considerations are cumulative, such that each limb must ordinarily be made out in order for leave to appeal to be granted: Rawson Finances Pty Ltd v Deputy Commissioner of Taxation (2010) 81 ATR 36; [2010] FCAFC 139 (Ryan, Stone and Jagot JJ) at [5].

30    The award of costs is discretionary: s 43(2) of the FCA Act. Accordingly, the principles in House v The King (1936) 55 CLR 499 (Dixon, Evatt and McTiernan JJ) apply. That is, to succeed in his proposed appeal, Dr Kitchen would need to demonstrate that the primary judge acted upon a wrong principle, mistook the facts, failed to take into account a material consideration or was guided by extraneous or irrelevant matters. Error may also be inferred from the overall result: House at 505. Whether the judgment at first instance is attended with sufficient doubt is to be determined in that context.

31    In cases where, as here, the primary judgment concerns matters of practice and procedure, the Court should exercise particular caution in determining whether to grant leave: see Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (2017) 252 FCR 1; [2017] FCAFC 98 (Jagot, Yates and Murphy JJ) at [41]–[42] and the cases cited therein; Nationwide News Pty Limited v Rush [2018] FCAFC 70 (Lee J, with whom Allsop CJ and Rares JJ agreed) at [4]; Goodwin v HBCA Pty Ltd [2022] FCAFC 166 (Middleton and Lee JJ) at [14].

The proposed appeal

32    The proposed notice of appeal contains three grounds of appeal, each alleging a separate error by the primary judge. By his application for leave to appeal, Dr Kitchen advances four “grounds” in support of why the primary judgment is attended by sufficient doubt to warrant its reconsideration by this Court. Those grounds are drawn from the three proposed grounds of appeal.

33    Adopting the approach taken by the parties in their written submissions, the arguments advanced by Dr Kitchen can be more usefully dealt with by reference to the following overarching contentions:

(1)    That the primary judge’s reasons fail to analyse and explain why her Honour did not accept Dr Kitchen’s principal submissions. Further, given the delay in giving judgment, that her Honour failed to provide adequate reasons, such that the application was dismissed without a proper judicial evaluation of the merits of the principal arguments put by Dr Kitchen (being grounds 1(a)–(c) of the application for leave to appeal).

(2)    That the primary judge erred in concluding that the Director’s resistance of the application was not unarguable or hopeless (being ground 1(d) of the application for leave to appeal).

34    We deal with each of these contentions below.

Whether decision attended by sufficient doubt

Adequacy of reasons

35    It is well-recognised that there is a judicial duty to provide reasons for most decisions, including for final decisions and “important interlocutory rulings”: Wainohu v New South Wales (2011) 243 CLR 181; [2011] HCA 24 (French CJ and Kiefel J, as her Honour then was) at [54], see also [104]–[109] (Gummow, Hayne, Crennan and Bell JJ). It is also accepted that where reasons are provided, they must be adequate: DL v The Queen (2018) 266 CLR 1; [2018] HCA 26 (Kiefel CJ, Keane and Edelman JJ) at [32].

36    A failure to provide adequate reasons may amount to an error of law: see TechnologyOne Ltd v Roohizadegan (2021) 309 IR 202; [2021] FCAFC 137 (Rangiah, O’Callaghan and White JJ) at [108]; Carlisle Homes Pty Ltd v Barrett Property Group Pty Ltd [2009] FCAFC 31 (Tamberlin, Sundberg and Besanko JJ) at [45]–[46]; Police Federation of Australia v Nixon (2011) 198 FCR 267; [2011] FCAFC 161 (Lander, Gilmour and Gordon JJ) at [70]. However, the absence of reasons does not in itself indicate that a judge has erroneously exercised the discretion to award costs: Penfold v Penfold (1980) 144 CLR 311 (Stephen, Mason, Aickin and Wilson JJ) at 315–16. An appellate court will generally only intervene when “it is left with no choice” because the statement of reasons, looked at as a whole, betrays a miscarriage of justice: see Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 (Meagher JA) at 444.

37    Further, adequacy is assessed in the context of the nature of the decision: see Wainohu at [56], cited with approval in DL v The Queen at [32]. Indeed, the extent to which a court must go in giving reasons is incapable of precise definition and is context specific: Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 (Hutley JA, with whom Samuels JA agreed) at 381; see also Mifsud v Campbell (1991) 21 NSWLR 725 (Samuels JA, with whom Clarke JA and Hope A-JA agreed) at 728. Whilst the basis of a decision should be apparent, this does not mean that the reasons given must be elaborate: IFTC Broking Services Limited v Commissioner of Taxation (2010) 268 ALR 1; [2010] FCAFC 22 (Stone, Edmonds and Jagot JJ) at [4]; Beale at 443. Reasons need only be given so far as is necessary to indicate to the parties why the decision was made and to allow them to exercise such rights as may be available to them in respect of it: Propell National Valuers (WA) Pty Ltd v Australian Executor Trustees Ltd (2012) 202 FCR 158; [2012] FCAFC 31 (Collier J, with whom Stone J agreed) at [146].

38    Dr Kitchen submits that where the dispute involves a form of “intellectual exchange, with reasons and analysis advanced on either side”, the judge “must enter into the issues canvassed before him [or her] and explain why he [or she] prefers one case over the other”. To the extent that this submission suggests that the primary judge was required to analyse each of the individual principal arguments put by Dr Kitchen, and to explain in her reasons why she did not accept each of them, this argument goes too far. A judge is permitted to decide the matter before them in a way which does not require the determination of each submission made by the parties: see Housing Commission of New South Wales (Mahoney JA) at 385. Indeed, the Full Court of this Court has accepted that an elaborate argument may not require elaborate reasons: IFTC at [4]. We consider that this is particularly the case in the context of a determination as to the appropriate costs order to be made.

39    Further, reasons can be adequate by a combination of what is expressly stated and the inferences that necessarily arise from what is expressly stated: ACN 005 565 926 Pty Ltd v Snibson [2012] VSCA 31 (Kyrou AJA, with whom Mandie and Hansen JJA agreed) at [81]. The reasons must, at the very least, “disclose the ‘path’ or ‘route’ by which the trial judge reached the ultimate conclusion in the judgment”: Vicforests v Environment East Gippsland Inc [2023] VSCA 159 (Emerson P, Macaulay and Kaye JJA) at [277] citing Beale at 443–4.

40    We turn then to the issue of delay in the delivery of the judgment, which was more than 13 months after the date of final submissions. Dr Kitchen accepts that a delay in delivering judgment does not generally, of itself, give rise to appellable error, which is the correct approach: Sullivan v Trilogy Funds Management Ltd (2017) 255 FCR 503; [2017] FCAFC 153 (Allsop CJ, Farrell and Gleeson JJ) at [271]; NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 (Flick, Murphy and Griffiths JJ) at [132]–[134]. However, Dr Kitchen submits that the primary judge’s delay in delivering judgment may explain the “deficiencies” in her Honour’s reasons. He further submits that delay, at least where it is substantial, adds another dimension in considering the adequacy, or otherwise, of reasons. A judge’s delay in giving judgment, it was said, could give rise to a reasonable apprehension by the losing party that the judge delayed giving judgment because he or she was unable to grapple adequately with the issues, and, in the end, had become attracted to the decision which was the easiest to make.

41    As to this submission, we accept that where there has been delay, the appellate court should take a more stringent approach in determining whether the primary judge’s reasons are adequate: see Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17; [2004] FCAFC 189 (Carr, Emmett and Gyles JJ) at [68]–[73], cited with approval in Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97 (Besanko, Perram and Yates JJ) at [377].

42    We turn then to consider the adequacy of the reasons of the primary judge.

43    At [9]–[15] J, the primary judge explained the principles applicable to an order for costs on an indemnity basis (about which no complaint is made). Her Honour then set out the submissions of Dr Kitchen and the Director at [20]–[21] J, before considering whether it was appropriate in the circumstances to make an order for indemnity costs at [22]–[29] J. These reasons included specific reasons for rejecting certain arguments advanced by Dr Kitchen, and they identified four reasons for her Honour’s decision.

44    Read as a whole, the reasons contain the “path” or “route” by which the primary judge reached the ultimate conclusion in the judgment, being to decide to award costs on a party-party basis instead of on an indemnity basis as sought by Dr Kitchen. Further, they contained an express and implicit rejection of the arguments in Dr Kitchen’s submissions as recited at [20] J, notwithstanding that the reasons did not analyse each submission expressly.

45    We can see no indication in the reasons that the primary judge became “attracted to the decision which was the easiest to make” or that her Honour was unable to grapple with the submissions made by Dr Kitchen (which were not in themselves especially complex). Further, the delay was not operative in the sense that there were no factual findings for her Honour to make, and no need to consider the demeanour or credibility of any witnesses (these being matters which are well-recognised as likely to be impacted by delay).

46    For these reasons, we consider that the primary judge’s reasons are adequate, such that the decision below is not attended by sufficient doubt to warrant its reconsideration by an appellate court.

The not unarguable or hopeless finding

47    Before the primary judge, Dr Kitchen submitted that indemnity costs should be awarded for the following reason (among others):

The Director persisted with her resistance of the applicant’s application to set aside the referral for in excess of 12 months, notwithstanding that she knew facts which, on a proper consideration, revealed her resistance of the application to be hopeless. …

48    By ground 1(d) of his application for leave, Dr Kitchen now seeks to challenge the primary judge’s finding that the Director’s resistance of the claim was not unarguable or hopeless. Ground 3 of the proposed notice of appeal is in the same terms.

49    Dr Kitchen submits that the primary judge failed to give adequate reasons for her conclusion that the Director’s resistance of the application was not unarguable or hopeless. That submission must be rejected for the same reasons provided in relation to grounds 1(a)–(c).

50    Dr Kitchen otherwise submits that her Honour erred in reaching that conclusion, in that a careful consideration of the facts should have led to the opposite conclusion. Dr Kitchen’s particular focus was not only upon the purportedly unmeritorious position taken by the Director in the proceeding below, but her knowledge of that lack of merit. Dr Kitchen submitted that:

…The Director did not file evidence explaining her conduct in making the concession on 4 December 2020. There was no evidence that the person holding the office of Director had changed between November 2018 and December 2020. And that person was uniquely placed at all times to know whether she had or had not taken Dr Kitchen’s submissions into account in making the Referral. No evidence was filed on behalf of the Director as to any material change in circumstances that would explain the change of position on 4 December 2020. The Director chose to remain silent.

The inference should be drawn, from the failure to give evidence explaining her conduct, that there was nothing the Director could say that would have assisted her case (to resist indemnity costs). An inference should be drawn that the Director must have known at all times that she had not taken Dr Kitchen’s submissions into account. That being so, the Director must have known at all times that she had no reasonable basis for resisting the orders sought by Dr Kitchen setting aside the Referral. In the circumstances, it was unreasonable for the Director to have resisted the proceedings for more than a year and, only after enormous costs were incurred, to have then belatedly made the concession in December 2020 that should have been made on day one.

(footnotes omitted; emphasis added.)

51    As to the lack of affidavit evidence, it was properly conceded by senior counsel who appeared for Dr Kitchen that the question of whether the Director took into account the submissions was a question of fact and law. The Director is not a lawyer and had legal representation throughout the course of the proceedings below. Therefore, any affidavit by the Director explaining why she had decided to make the concession in December 2020 might have needed to expose legal advice which she had received, and any change in that legal advice. That the Director decided not to provide such an affidavit, and to not waive legal professional privilege, is just as likely an explanation as one which requires an inference to be drawn that she knew at all times during the proceedings below that she had no reasonable basis to resist the orders sought by Dr Kitchen. This provides one strong reason not to draw the inference which is pressed upon us.

52    Indeed, the content of the Director’s offer to compromise dated 4 December 2020 (set out above), tends to indicate that the Director’s position (even at the point of offering a compromise) was that she believed that her resistance of the application was not unarguable or hopeless as a matter of law. This is especially as the letter stated that, while the Director “remains of the opinion that she properly exercised her power under s 93 of the [Health Insurance Act], to avoid further costs of litigating that point, the Director is prepared to concede a failure to take into account … the submissions made by the Applicant as required by s 89C(2) of the [Health Insurance Act]”. Dr Kitchen is therefore seeking that an inference be drawn which is contradicted by the evidence which is before the Court. This provides another reason not to draw the inference sought.

53    A further problem with the submission advanced by Dr Kitchen is that, for most of the time that the proceedings were on foot below, Dr Kitchen needed to obtain an extension of time to seek review of the Referral under the ADJR Act, the extension of time he needed was significant (nearly a year) and no relief was proposed to be sought by him as against the Director (assuming that the extension of time was granted). Although Dr Kitchen may well have always been entitled to relief under the Judiciary Act or the FCA Act as a matter of jurisdiction, such relief was not in fact sought by him until August 2020. Further, Dr Kitchen abandoned the application for the extension of time after receipt of the Director’s submissions on that issue. In those circumstances, we do not agree that it was “unreasonable” or “hopeless” for the Director to defend the extension of time application, which tells against an inference that she knew her resistance to the relief sought by Dr Kitchen was unarguable. Notably, her offer of compromise did not include any concession about the merits of the extension of time application (which application was never determined). This provides yet another reason not to draw the inference sought.

54    In his written submissions in reply, Dr Kitchen submitted that, because the primary judge ultimately made a declaration by consent that, contrary to s 89C(2) of the Health Insurance Act, the Director had failed to take into account Dr Kitchen’s submissions before making the Referral:

[t]hat forecloses all arguments to the effect that it was open to the Director to defend [the application for indemnity costs] on the basis that she did in fact (in some way) take the submissions into account.

55    At the hearing of the application, senior counsel for Dr Kitchen revealed that this amounts, more precisely, to a contention that the issue of whether the Director considered Dr Kitchen’s submissions is res judicata as between the parties.

56    We accept that the primary judge’s orders (including the declarations) dated 2 February 2021 constitute a res judicata as between the parties. It does not matter that the relevant declaration was entered by consent without any prior judicial determination of the issues on the merits: see Webuildem Pty Ltd (ACN 102 786 621) v Arab Bank Australia Ltd (ABN 37 002 950 745) (2013) 300 ALR 99; [2013] FCA 37 (Foster J) at [62]–[63] citing Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 (Deane, Toohey and Gaudron JJ) at 508.

57    However, there must be an inquiry as to the issues that were determined by the consent judgment and any issue estoppel only arises to the extent that the consent determined a particular issue: Robinson v Deep Investments Pty Ltd (2018) 364 ALR 305; [2018] FCAFC 232 (Jagot and Colvin JJ) at [137] citing Chamberlain at 508.

58    In this case, while the issue of the merits of the application brought by Dr Kitchen was determined by the consent orders made by the primary judge, the fact, nature and extent of the Director’s knowledge of those merits was not so determined. It follows that the Director is not prevented by res judicata from advancing submissions against the premise of Dr Kitchen’s claim for indemnity costs, being her knowledge of those merits and her knowledge from the commencement of the proceedings that she had no reasonable basis for resisting the orders sought by Dr Kitchen. In any event, whether the Director had erred in the exercise of her powers was not determinative of the question of whether Dr Kitchen should be granted the considerable extension of time to commence an application for review under the ADJR Act. The Director had an arguable basis for defending that application given the length of the delay and the requirement that Dr Kitchen provide an adequate explanation for it.

59    Further, the issue of the merits of the extension of time application, and of the Director’s resistance to that extension of time, was also not so determined. That application was withdrawn by Dr Kitchen at a late stage in the proceedings in August 2020, and he was ordered by the primary judge to pay the Director’s costs of and incidental to that withdrawal. The concession of the Director was made promptly after Dr Kitchen recast his case as one invoking the Court’s jurisdiction under the Judiciary Act, for which no extension of time was required. The reasons of the primary judge are to be understood as referring to the Director’s defence of a proceeding which for much of its life took the form of an extension of time application.

60    For these reasons, we do not consider that the primary judge erred in the manner identified in ground 1(d) with the consequence that the decision below is not attended by sufficient doubt to warrant its reconsideration by an appellate court.

Disposition

61    For the above reasons, Dr Kitchen has failed to establish that the primary judgment is attended by sufficient doubt to warrant its reconsideration by an appellate court.

62    In those circumstances, there is no utility in considering what effect a refusal of leave would have on Dr Kitchen supposing that the primary judge’s decision was incorrect.

63    Leave to appeal must therefore be refused, with costs to follow the event.

Associate:

Dated:    3 October 2023