FEDERAL COURT OF AUSTRALIA

South Coast X-Ray Pty Limited v Chief Executive Officer of Medicare Australia [2007] FCA 277

ADMINISTRATIVE LAW – separate question of law – scope of regulation making power – validity of regulations – meaning of words ‘rules for interpretation’ – statutory interpretation.

Held: Separate question answered in the affirmative. Application dismissed.

Acts Interpretation Act 1901 (Cth), s 15AA

Health Insurance Act 1973 (Cth), ss 4, 4A, 4AA, 4BAA

Health Insurance (Diagnostic Imaging Services Table) Regulations 2006, Rule 31

Human Service and Health Legislation Amendment Act (No. 2) 1994 (Cth)

Legislative Instruments Act 2003 (Cth), ss 4, 5, 13

Anthony Hamilton Woodyatt v Minister for Corrective Services [1995] QICmr 1; (1995) 2 QAR 383.

Baxter Healthcare Pty Limited v Comptroller-General of Customs (1997) 72 FCR 467

Collector of Customs v Pozzolanic Enterprises Pty Ltd, Collector of Customs v Pressure Tankers Pty Ltd (1993) 43 FCR 280

Harding and Another v The Commissioners of Stamps for Queensland [1898] AC 769

Mills v Meeking and Another (1990) 169 CLR 214

Morton v The Union Steamship Company of New Zealand Limited (1951) 83 CLR 402

NAQF v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 781

Shanahan v Scott (1957) 96 CLR 245

State Chamber of Commerce and Industry and Others v The Commonwealth of Australia, Attorney-General for the State of Queensland (at the relation of the Brisbane Chamber of Commerce) v The Commonwealth of Australia (1987) 163 CLR 329

The Amalgamated Society of Engineers v Adelaide Steamship Company Limited and Others (1920) 28 CLR 129

The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60

The Queen v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170

Utah Constructions & Engineering Pty Ltd and Another v Janos Pataky [1966] AC 629

Willocks v Anderson (1971) 124 CLR 293

SOUTH COAST X-RAY PTY LIMITED AND ARTHUR STANTON v CHIEF EXECUTIVE OFFICER OF MEDICARE AUSTRALIA

NSD 1521 OF 2006

COWDROY J

7 MARCH 2007

SYDNEY

THE COURT ORDERS THAT:

1.                  The question of law raised in these proceedings pursuant to Order 29 Rule 2(a) of the Federal Court Rules, namely: is Rule 31 (insofar as it incorporates Rule 35) of the Health Insurance (Diagnostic Imaging Services Table) Regulations 2006 valid, is answered in the affirmative.

2.                  The Applicants’ Application for an Order of Review and Application for Extension of Time be dismissed.

3.                  The Applicants pay the costs of the Respondent of and incidental to the proceedings (including of the respondent’s Notice of Motion filed in Court on 4 October 2006).

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The issue in these proceedings concerns the validity of Rule 31 insofar as it incorporates Rule 35 of Health Insurance (Diagnostic Imaging Services Table) Regulations 2006 (‘the 2006 Regulations’) made pursuant to s 4AA(1) of the Health Insurance Act 1973 (Cth) (‘the Act’).

2                     The 2006 Regulations prescribe a table of diagnostic imaging services and rules for interpretation of the table. Such rules state the criteria to be fulfilled to entitle a provider of medical services to fees payable by the respondent (‘Medicare’) for each item of service.

3                     The first named applicant is the owner of magnetic resonance imaging equipment located at 341-349 Crown Street, Wollongong (‘the MRI equipment’), which is used in its radiology practice known as South Coast X-Ray Radiology Practice. The second named applicant is the principal of such practice. For convenience, the applicants are collectively referred to hereunder as ‘the applicant’.

4                     The applicant has made an Application for an Order of Review pursuant to ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘the ADJR Act’) and s 39B of the Judiciary Act 1903 (Cth) (‘the Application’) challenging the decision of Medicare made on or about 20 September 1999 to refuse the status of the MRI equipment as ‘eligible equipment’ within the meaning of Rule 20(3) of the Health Insurance (1998-1999 Diagnostic Imaging Services Table) Regulations 1998 (Cth) (‘the 1998 Regulations’). As a consequence of the decision, diagnostic imaging services performed using the applicant’s MRI equipment do not qualify for payment of Medicare benefits.

5                     The 2006 Regulations supersede the 1988 Regulations. The parties agree that if Rule 31 of the 2006 Regulations is valid, it requires, by virtue of the incorporation of Rule 35, the MRI equipment to have been in use on or before 18 October 1999. The applicant acknowledges that the equipment was not operative by that date. Accordingly, if Rule 31 of the 2006 Regulations is valid, the proceedings are futile, and the application would be dismissed.

6                     The parties request the Court to determine a separate question of law pursuant to Order 29 Rule 2(a) of the Federal Court Rules, as follows:

‘Is Rule 31 (insofar as it incorporates Rule 35) of the Health Insurance (Diagnostic Imaging Services Table) Regulations 2006 valid?’

The Health Insurance (Diagnostic Imaging Services Table) Regulations 2006

7                     The 2006 Regulationswere made pursuant to the Act. Rule 5 of the 2006 Regulations provides:

‘The table of diagnostic imagining services set out in Schedule 1 is prescribed for the purposes of s 4AA(1) of the Act.’

8                     Rule 31 of the 2006 Regulations relates specifically to the provision of diagnostic imaging services as enumerated in the table and relevantly provides:

 ‘(1)  Subject to subrules (2) and (2A), items 63001 to 63482 apply only to an MRI or MRA service performed:

         (a)   on request, in accordance with rule 32, by a specialist or consultant physician; and

         (b)   in a permissible circumstance, in accordance with rule 33; and

         (c)   with eligible equipment, in accordance with rule 35 or 36.

9                     Rule 35 of the 2006 Regulations relates to MRI equipment and provides:

‘For rule 31, equipment is eligible equipment if the equipment is eligible equipment within the meaning of rule 31 of Part 2 of Schedule 1 to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2000, as in force on 31 October 2001.’

10                  The Health Insurance (Diagnostic Imaging Service Table) Regulations 2000 (‘the 2000 Regulations’) contained provisions specifying dates by which the purchase and installation of MRI equipment was to be effected to permit services to be perforemed using that equipmentn to be eligible for payment of Medicare benefits. As a consequence of the incorporation of the definition of ‘eligible equipment’ in Rule 31 of Part 2 of Schedule 1 to the 2000 Regulations, the relevant date by which the applicant’s MRI equipment was required to be in use was 18 October 1999.

11                  The 2006 Regulations commenced operation on 1 November 2006 and were made pursuant to s 4AA(1) of the Act  which provides:

‘(1)   The regulations may prescribe a table of diagnostic imaging services that sets out the following:

         (a)   items of R‑type diagnostic imaging services;

         (b)   items of NR‑type diagnostic imaging services;

         (c)   the amount of fees applicable in respect of each item;

         (d)   rules for interpretation of the table.’

Section 4BAA of the Act is also relevant and provides:

‘(1)   The specification of a service in an item in a table prescribed under section 4, 4AA or 4A may be:

         (a)   unconditional; or

         (b)   subject to such conditions, limitations or restrictions as are specified in:

       (i)      the item; or

                (ii)   the rules for interpretation of the table.

 (2)    If there is such a condition, limitation or restriction, a service will be regarded as a service specified in the item, or as a service to which the item relates, only if the service falls within the condition, limitation or restriction.

 (3)    This section applies to a table prescribed before or after the commencement of this section.

 (4)    This section is enacted for the avoidance of doubt.’

Applicant’s Submissions

12                  The applicant challenges the validity of Rule 31 insofar as it incorporates Rule 35 of the 2006 Regulations on the ground that s 4AA(1) of the Act only authorises rules for interpretation of the table but does not extend to the making of rules prescribing conditions for the payment of Medicare benefits. It submits that Rule 31 of the 2006 Regulations operates to restrict access to Medicare fees by reference to matters extrinsic to the regulation making power contained in s 4AA(1) of the Act. Accordingly the applicant submits that s 4AA(1) does not authorise such rule.

13                  The applicant submits the fact that s 4BAA was ‘enacted for the avoidance of doubt’ shows that s 4BAA was intended to explain s 4AA but not to augment or expand its operation. It submits the ‘conditions, restrictions or limitations’ referred to in s 4BAA of the Act refers only to limitations on the type of equipment used, the situations in which clinical services might be rendered, or qualifications required of practitioners administering the services. The applicant submits that as s 4BAA of the Act can be read consistently with such an intention, it should be so read, and the words used by the legislature given effect: see NAQF v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 781 per Lindgren J at [53]. Accordingly the applicant submits that s 4BAA of the Act does not authorise regulations which have an operation extending beyond the regulations authorised by s 4AA of the Act. The applicant submits that the 2006 Regulations ‘go outside the field of operation which the Act marks out for itself’ see: Morton v The Union Steamship Company of New Zealand Limited (1951) 83 CLR 402 at 410.

FINDINGS

14                  The Long Title of the Act describes the object of the Act as follows:

‘An Act providing for Payments by way of Medical Benefits and Payments for Hospital Services and for other purposes.’

15                  Section 4 of the Act, as originally enacted, made provision for the making of regulations enabling variations and alterations to the Table of Medical Services contained in a Schedule to the Act. That section was repealed by the Human Service and Health Legislation Amendment Act (No. 2) 1994 (Cth) (Act No. 116 of 1994). The amendment substituted a new section which authorised the making of regulations prescribing a table of medical services other than diagnostic imaging services and pathology services. Section 4(2) provides that such regulations would cease to be in force after 12 months. Such Act also introduced s 4A which authorised regulations prescribing a table of pathology services, and provided for such regulations to expire annually.

16                  Amendments were made to s 4A of the Act by the Health Insurance Amendment Act 1977 (Cth) (Act No. 75 of 1977). Such amendments are not significant for present purposes.

17                  Section 4AA of the Act was inserted by the Community Services and Health Legislation Amendment Act (No. 2) 1990 (Act No. 141 of 1990) and authorised regulations prescribing a table specifying diagnostic imaging services and the fee payable for such services. This section is in virtually the same terms as ss 4 and 4A except that it relates to different types of services. The Explanatory Memorandum to this Act refers to Parliament’s decision to place restrictions upon eligibility for payment of Medicare benefits in respect of diagnostic imagining services.

18                  The Health Legislation Amendment Act 2005 (Cth)(Act No. 155, 2005) came into operation on 19 December 2005 and introduced s 4BAA into the Act. The outline of the Explanatory Memorandum relevantly states in relation to Schedule 3 to this amending Act:

‘Items 1-4 clarify the regulation making power in the Health Insurance Act 1973 (the HIA), to make it clear that, in the Medicare Tables, it is permissible to specify the circumstances in which items of medical, pathology and diagnostic imaging services apply, and thereby specify the circumstances in which Medicare benefits are payable for those services.’

19                  Rule 5 of the 2006 Regulations states:

‘The table of diagnostic imaging service set out in Schedule 1 is prescribed for the purposes of subsection 4AA(1) of the Act.’

20                  Part 2 of Schedule 1 of the 2006 Regulations is entitled Rules of Interpretation and is applicable to the table prescribed by Part 1 of Schedule 1. Part 2 of Schedule 1 defines the type of services and specifies the criteria necessary to be fulfilled in order to qualify as ‘eligible services’. Rule 31 identifies the MRI and MRA (Magnetic Resonance Angiography) services which are eligible for the payment of Medicare benefits. The eligibility of the equipment for the purposes of Rule 31 is defined by Rule 35 which incorporates the definition contained in Rule 31 of Part 2 of Schedule 1 to the 2000 Regulations. Such rule requires, inter alia, the equipment to be installed and operative by 18 October 1999.

Does Rule 31 interpret the table?

21                  The Court has been referred by the applicant to authorities which have determined the limit of regulation making power: see for example The Queen v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 per Gibbs CJ at 187; Morton (1951) 83 CLR at 410; Willocks v Anderson (1971) 124 CLR 293 at 298-299, each of which adopted the observations of the High Court in Shanahan v Scott (1957) 96 CLR 245 at 250 wherein the majority said of the scope of statutory power:

‘The result is to show that such a power does not enable the authority by regulations to extend the scope or general operation of the enactment but is strictly ancillary. It will authorise the provision of subsidiary means of carrying into effect what is enacted in the statute itself and will cover what is incidental to the execution of its specific provisions. But such a power will not support attempts to widen the purposes of the Act, to add new and different means of carrying them out or to depart from or vary the plan which the legislature has adopted to attain its ends.’

The above passage was approved by the Judicial Committee of the Privy Council in Utah Construction & Engineering Pty Ltd and Another v Janos Pataky [1966] AC 629 at 640.

22                  To determine whether Rule 31 interprets the table as authorised by the Act or exceeds the regulation making power, it is necessary to consider the meaning of the word ‘interpretation’ in s 4AA(1)(d) of the Act. This subsection authorises regulations to provide ‘rules for interpretation of the table’ referred to in s 4AA(1) of the Act.

23                  Two approaches have often been adopted to statutory interpretation, namely the literal approach and the purposive approach. The literal approach was defined and explained by Higgins J in The Amalgamated Society of Engineers v Adelaide Steamship Company Limited and Others (1920) 28 CLR 129 at 161-2 as follows:

‘The fundamental rule of interpretation, to which all others are subordinate, is that a statute is to be expounded according to the intent of the Parliament that made it; and that intention has to be found by an examination of the language used in the statue as a whole. The question is, what does the language mean; and when we find what the language means, in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient or impolitic or improbable.’  

24                  The Acts Interpretation Act 1901 (Cth) authorises a court to adopt a construction which would promote the purpose or object underlying the Act (s 15AA). The application of the purposive approach to statutory interpretation was referred to in Mills v Meeking and Another (1990) 169 CLR 214 by Dawson J wherein his Honour considered a provision contained in a Victorian statute equivalent to s 15AA of the Acts Interpretation Act. His Honour observed (at 235) that a purposive approach is to be preferred over a literal approach. His Honour said:

‘Section 35 of the Interpretation of Legislation Act must, I think, mean that the purposes stated in Pt 5 of the Road Safety Act are to be taken into account in construing the provisions of that Part, not only where those provisions on their face offer more than one construction, but also in determining whether more than one construction is open.’

25                  Similar provisions to s 15AA of the Acts Interpretation Act apply in relation to the interpretation of a ‘legislative instrument’: see s 13 of the Legislative Instruments Act 2003 (Cth). A legislative instrument is defined in ss 4 and 5 of such Act and includes, inter alia, an instrument in writing ‘that is or was made in the exercise of a power delegated by the Parliament’ (see s 5(1)(b)). The provisions of Part 2 of Schedule 1 to the 2006 Regulations have adopted the nomenclature ‘Rules of Interpretation’. Since such rules were made prima facie in the exercise of the power delegated by Parliament under the Act, they constitute ‘legislative instruments’ for the purposes of the Legislative Instruments Act.

26                  Whether a word contained in a statute is to be given its ordinary meaning is a question of law: see Collector of Customs v Pozzolanic Enterprises Pty Ltd; Collector of Customs v Pressure Tankers Pty Ltd (1993) 43 FCR 280 at 287, as is the meaning of a statutory expression which has several ordinary interpretations: see Baxter Healthcare Pty Limited v Comptroller-General of Customs (1997) 72 FCR 467 at 473-4. However, the meaning of the ordinary word is a question of fact (see Pozzolanic (1993) 43 FCR at 287). Courts have often referred to dictionary definitions in the course of statutory interpretation: see State Chamber of Commerce and Industry and Others v The Commonwealth of Australia, Attorney-General for the State of Queensland (at the relation of the Brisbane Chamber of Commerce) v The Commonwealth of Australia (1987) 163 CLR 329.

27                   ‘Rule’ is defined in the Macquarie Dictionary Third Edition as a ‘principle or regulation governing conduct, action, procedure, arrangement, etc’. The Macquarie Dictionary Third Edition defines ‘interpretation’ as inter alia ‘an explanation given… a construction placed upon something… a way of interpreting’. The verb ‘interpret’ is defined as inter alia, ‘to set forth the meaning of; explain or elucidate… to explain, construe or understand in a particular way’. The definition contained in the New Edition of the Oxford English Dictionary defines ‘interpret’ as ‘the way in which a thing ought to be interpreted, proper explanation; hence, signification, meaning’. The definition of ‘interpretation’ was considered by Issacs J in The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60at [78]. Issacs J distinguished between ‘construction’ and ‘interpretation’ with the latter referring to the ‘meaning of the words’ as opposed to their legal effect.

28                  Applying the purposive principle to the interpretation of s 4AA(1) of the Act and assisted by the dictionary definitions of ‘interpretation’, it is apparent that Parliament intended that the eligibility for payment of fees in respect, inter alia, of diagnostic imaging services, is to be determined by rules of the type envisaged in Part 2 of Schedule 1 to the Act.

29                  Rule 31 of the 2006 Regulations refers to items 63001 to 63482 of the table prescribed by Rule 5 of such Regulations. The table identifies the service by reference number, but contains no explanation of the requirements to be satisfied to entitle the provider of the services to the prescribed fee. Those requirements are contained wholly within Rule 31 and only by reference to Rule 31 can eligibility be determined. In this way, Rule 31 explains or elucidates the table.

30                  The Court is satisfied that the 2006 Regulations do not go beyond their legitimate purpose, namely of providing an explanation of items in the table as was envisaged by s 4AA, and in this respect Rule 31 is a rule for the interpretation of the table.  

The effect of s 4BAA

31                  Section 4BAA(1) authorises the ‘specification of a service in an item’ in the table as being unconditional or subject to limitations therein referred to, as described in ‘the rules for interpretation of the table’ (s 4BAA(1)(b)(ii)). The applicant’s alternative submission suggested that s 4BAA of the Act could not be relied upon in determining the validity of Rule 31 for two reasons. Firstly it was submitted that s 4BAA was solely declaratory and did not supplement the effect of s 4AA. Secondly, it was submitted that s 4BAA did not have retrospective effect so as to render previous invalid regulations valid. The latter submission is not relevant in view of the parties seeking the Court’s determination of the separate question, since s 4BAA was enacted prior to the making of the 2006 Regulations.

32                  In support of its first submission, the applicant submitted that s 4BAA was solely for the purpose of ‘the avoidance of doubt’, was only declaratory and did not expand the operation of s 4AA. The applicant referred the Court to a decision of the Office of the Information Commissioner (Qld) in the matter of Anthony Hamilton Woodyatt v Minister for Corrective Services [1995] QICmr 1; (1995) 2 QAR 383, in which the Commissioner considered the words ‘to remove any doubt’ and observed that such phrases ‘sometimes appear in true declaratory Acts, generally in conjunction with words which make it clear that the legislature intends to declare the law (on a specific topic) as it is and has always been’.  However, in determining the question of whether s 4BAA is merely declaratory the Court must look to the substance of the provisions of the Act and not merely their form: see Harding and Another v The Commissioners of Stamps for Queensland [1898] AC 769 at 775.

33                  Section 4BAA of the Act clarifies the power to make regulations provided by s 4AA of the Act by expressly providing that ‘conditions, limitations or restrictions’ may be imposed by rules for interpretation of the table. It does not follow that absent s 4BAA, s 4AA did not authorise the making of rules for interpretation containing ‘conditions, limitations or restrictions’. Section 4BAA places that question beyond doubt.

34                  In view of these findings, Rule 31 is intra vires the power provided by s 4AA and s 4BAA of the Act. It follows that the question of law asked of the Court is to be answered in the affirmative.

35                  Since it is common ground that the MRI equipment was not operative by 18 October 1999, it does not comply with the requirements of Rule 31. Accordingly this application cannot succeed, and will be dismissed, together with the application for an extension of time to institute such proceedings.

Associate:

Dated:         7 March 2007