FEDERAL COURT OF AUSTRALIA

Rich v Ingram [2013] FCA 800

THE COURT ORDERS THAT:

1.    The applicant’s Further Amended Application is dismissed.

2.    The applicant pay the costs of the first to third respondents.

3.    The applicant pay the costs of the fifth respondent incurred on and from 7 July 2012.

4.    The fifth respondent pay so much of the applicant’s costs as relate to the proceedings against the fourth and fifth respondents which were incurred in the period 14 January 2011 to 6 July 2012.

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

REASONS FOR JUDGMENT

1    Part VAA of the Health Insurance Act 1973 (“the Act”) provides for the Professional Services Review Scheme. As Rares and Katzmann JJ said in Kutlu v Director of Professional Services Review (2011) 197 FCR 177 at [7]-[8]:

The object of Part VAA is to protect the integrity of the Commonwealth medical and pharmaceutical benefits programs and in doing so to protect, first, patients and the community from risks associated with inappropriate practice (as defined in s 82) and secondly, the Commonwealth from having to meet the cost of services provided as a result of “inappropriate practice” (s 79A). The Part applies to a range of practitioners in professions including medicine, dentistry, chiropracty, physiotherapy and osteopathy (s 81).

A general practitioner engages in inappropriate practice if his or her conduct in connection with rendering or initiating services is such that a Committee could reasonably conclude that the conduct would be unacceptable to the general body of general practitioners (s 82(1)(a)). Similar definitions of “inappropriate practice” apply to practitioners of the other professions regulated by the Professional Services Review Scheme (s 82).

2    Section 84 of the Act establishes the Professional Services Review Panel (“the PSR Panel”) and empowers the responsible Minister to appoint its members. Panel members may be appointed by the Minister as Deputy Directors pursuant to s 85 of the Act. The first to third respondents were each purportedly appointed by the Minister to be members of the PSR Panel. The first respondent (“Dr Ingram”) was also purportedly appointed as a Deputy Director.

3    The fourth respondent (“the Director”) is empowered by s 93 of the Act to set up a Professional Services Review Committee (“PSR Committee”) and make a referral to the Committee to investigate whether a person under review by the Director engaged in inappropriate practice. PSR Committees consist of a Chairperson who is a Deputy Director and, ordinarily, two other PSR Panel members: s 95(1) of the Act.

4    The applicant (“Dr Rich”) is a medical practitioner who was the subject of a review by the Director in relation to his rendering or initiating of services for which Medicare benefits were payable by the fifth respondent (“the Commonwealth”).

5    A referral was made by the Director to a PSR Committee purportedly constituted by the first to third respondents (“the Committee”) with Dr Ingram as its Chairperson. The Committee was charged with investigating whether Dr Rich had engaged in inappropriate practice as defined by s 82 of the Act.

6    By a Final Report in which various findings were made, the Committee determined that Dr Rich, a vocationally registered general practitioner, had engaged in inappropriate practice by providing medical services that would be “unacceptable to the general body of general practitioners”.

7    By his application to this Court, Dr Rich sought judicial review of the Committee’s determination. The application was brought under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the ADJR Act”) and also under the Judiciary Act 1903 (Cth). There was no issue as to the Court’s jurisdiction to entertain Dr Rich’s application.

8    The application as originally framed, was heard on 14 October 2010. On that day, I reserved my judgment. Whilst judgment was reserved, a number of developments occurred which bear upon the disposition of Dr Rich’s application.

9    An issue arose in another proceeding then pending before the Court as to the validity of statutory appointments to the PSR Panel made by the Minister. It became apparent that the issue of the validity of the appointments made by the Minister had the capacity to affect a number of applications then pending before the Court seeking the judicial review of decisions made by various PSR Committees established by the Director.

10    In early 2011, the Commonwealth held discussions with a number of applicants seeking judicial review including Dr Rich regarding the preparation of a special case to be referred to a Full Court, concerning the validity of appointments of various PSR Panel members including identified Deputy Directors.

11    By orders made on 1 February 2011, Dr Rich was granted leave to file an Amended Application raising new grounds which now appear as grounds 3 and 4 in Dr Rich’s Further Amended Application. By those grounds, Dr Rich sought to challenge decisions of the Director to establish the Committee and make the referral relating to him which led to the Committee’s determination that he had engaged in inappropriate practice. Also on that day, orders were made adding the Director and the Commonwealth as respondents to the proceeding and granting leave to Dr Rich to reopen his case for the purpose of adducing evidence in furtherance of the foreshadowed claims to be raised by and on the filing of the Amended Application.

12    On 8 April 2011, Flick J made orders in five proceedings (not including this proceeding) referring a special case to a Full Court. On 28 July 2011, a Full Court constituted by Rares, Flick and Katzmann JJ gave judgment in the special case: Kutlu. The special case dealt with six questions on the basis of agreed facts. The agreed facts established that before the then Minister signed instruments of appointment of various Deputy Directors and Panel members in 2005 and 2009, the then Minister had not undertaken any consultation with the Australian Medical Association (“the AMA”) about the intended appointments, contrary to the requirement for such consultation in ss 84(3) and 85(3) of the Act. The agreed facts included the fact that prior to the appointment of Dr Ingram as a Deputy Director, the Minister had not consulted with the AMA as required by s 85(3) of the Act.

13    Relevantly to the issue now raised in this proceeding, the Full Court in Kutlu determined that the purported appointment of Dr Ingram as a Deputy Director was invalid and of no effect with the consequence that those PSR Committees to which Dr Ingram was appointed (and which were the subject of the special case) were invalidly constituted and that any referral by the Director to such a Committee and any purported draft and final report of such a Committee were also invalid and of no effect.

14    Following the decision in Kutlu, the Federal Parliament enacted Schedule 1 to the Health Insurance (Professional Services Review) Act 2012 (“Schedule 1”). Broadly speaking, Schedule 1 is remedial legislation designed to validate the actions of PSR Committees that had not been validly constituted. The Schedule contemplates some exceptions to the scope of its remedial effect.

15    On the reopening of Dr Rich’s case in October of 2012, Dr Rich sought leave to file a Further Amended Application in which an additional ground 3A was raised. Ground 3A sought to raise the issue of the validity of the appointment of Dr Ingram as a Deputy Director and as a consequence, the validity of the establishment of the Committee. I granted Dr Rich leave to amend his application to include ground 3A. Upon the reopening, Dr Rich did not press ground 3 and relied solely on ground 3A to submit that the purported appointment of Dr Ingram as a Deputy Director was invalid and of no effect with the consequence that the establishment of the Committee by the Director and the referral made by the Director to the Committee was invalid and of no effect. Dr Rich contended that the Committee had no statutory authority to conduct the review that it conducted and that it had no statutory authority to make the findings that it made, including the finding that Dr Rich had engaged in inappropriate practice in the provision of medical services. The actions of the Director in purporting to constitute the Committee and making the referral were said to therefore involve jurisdictional error. Orders were sought setting aside the decision and findings of the Committee in respect of Dr Rich.

16    The Commonwealth and each of the first to fourth respondents accepted that, but for the operation of Schedule 1, the appointment of Dr Ingram as a Deputy Director would be invalid within the meaning of Item 1(1) of Schedule 1. The Commonwealth and the first to fourth respondents also accepted that, but for the operation of Schedule 1, things purportedly done under Part VAA, VB or VII of the Act in respect of the referral involving Dr Rich would be invalid because of the invalidity of Dr Ingram’s appointment.

17    Those concessions left two primary issues for determination. The first is whether the remedial effect of Schedule 1 applied in relation to the rights and liabilities of the parties to this proceeding (as the respondents contended), or whether that was not so because Dr Rich’s circumstances were encompassed by the exceptions contemplated by Item 1(4) and (5)(b) of Schedule 1 (as Dr Rich contended). Secondly, if the remedial legislation applied to this proceeding, whether the decision and findings of the Committee that Dr Rich had engaged in inappropriate practice should nevertheless be set aside because:

(i)    the Committee failed to take into account submissions made by Dr Rich;

(ii)    the Committee failed to give those submissions proper, genuine and realistic consideration; or

(iii)    if the Committee did take the submissions into account, it failed to give adequate reasons as to why those submissions were not accepted.

Does the remedial effect of Schedule 1 extend to Dr Rich’s circumstances?

18    To explain my consideration of this issue, it is necessary to set out Item 1 of Schedule  1. Schedule 1 is headed “Validation of Certain Acts”. The Schedule commenced operation on 27 June 2012. The terms of Item 1 of Schedule 1 are as follows:

Schedule 1—Validation of certain acts

1 Validation of acts done under Part VAA, VB or VII of the Health Insurance Act 1973

(1)    This item applies to a thing purportedly done under Part VAA, VB or VII of the Health Insurance Act 1973 at any time before the day this item commences, to the extent that the thing purportedly done would, apart from this item, be invalid because a person was not appointed or validly appointed as a Panel member or Deputy Director under Part VAA of that Act.

(2)    The thing purportedly done is as valid and effective, and is taken always to have been as valid and effective, as it would have been had the person been validly appointed as a Panel member or Deputy Director under that Part.

(3)    All persons are, by force of this subitem, declared to be, and always to have been, entitled to act on the basis that the thing purportedly done is valid and effective.

(4)    This item does not affect rights or liabilities of parties to proceedings for which leave to appeal to the High Court of Australia has been given on or before the day this item commences, if the fact that a person was not appointed or validly appointed as a Panel member or Deputy Director under that Part is in issue in the proceedings.

(5)    Subject to subitem (4), subitems (1), (2) and (3) have effect in relation to:

(a)    proceedings (whether original or appellate) that begin on or after the day this item commences; and

(b)    proceedings (whether original or appellate) that began before the day this item commences, being proceedings that had not been finally determined as at that day.

19    There is no issue that if the remedial effect of Schedule 1 applies to the rights or liabilities of Dr Rich raised in this proceeding, the invalid appointment of Dr Ingram as a Deputy Director does not result in any invalidity in relation to the things done by the Committee including its decision and findings made in relation to Dr Rich’s conduct. However, Dr Rich contended that his circumstances fell within the exceptions contemplated by Item 1(4) and (5)(b) of Schedule 1.

20    Dealing first with Item 1(5)(b), Dr Rich contended that a proceeding in which the validity of an appointment as a Panel member or Deputy Director had been finally determined as at the date that Schedule 1 commenced, was not a proceeding to which the remedial effect of Item 1 extended. He contended that this proceeding was such a proceeding and that therefore the remedial effect of Schedule 1 did not cure the invalidities consequent upon Dr Ingram’s invalid appointment as a Deputy Director. Whilst Dr Rich accepted that there had been no formal order or determination made in this proceeding in relation to the issue of the validity of Dr Ingram’s appointment, he contended that there had been a substantive determination of that issue which was applicable to this proceeding so as to render that issue “finally determined”. The substantive determination relied upon by Dr Rich was the Full Court’s determination in Kutlu that Dr Ingram had not been validly appointed as a Deputy Director.

21    The fact that the Full Court’s determination had not been made in relation to this proceeding was said by Dr Rich not to deny the existence of a substantive determination of that question in this proceeding. That was so, on Dr Rich’s argument, because Dr Rich and the Commonwealth had agreed to be bound by the outcome in Kutlu in relation to the validity issues raised in this proceeding. Dr Rich contended that the determination made in Kutlu as to the validity of Dr Ingram’s appointment was a judicial determination which, by their agreement, bound the parties to this proceeding or at least, by estoppel, bound Dr Rich. Accordingly, so Dr Rich contended, the Kutlu determination was a final determination sufficient to render the validity issue in this proceeding an issue which had been “finally determined” within the meaning of Item 1(5)(b).

22    Dr Rich’s argument faces a number of difficulties most of which are insurmountable. There is one difficulty which, without finally deciding, I am prepared to assume in Dr Rich’s favour.

23    The construction of Item 1(5)(b) contended for by Dr Rich construes “proceeding” to mean that part of the proceeding in which a validity issue identified in Item 1(1) is raised, rather than the proceeding as a whole. Such a construction sits ill with the plain words of Item 1(5)(b). However, the construction of the term “proceeding” contended for is supported by a purposive approach which takes into account the evident purpose of Schedule 1 not to retrospectively affect rights or liabilities which, at the commencement date, had already been the subject of a final judicial determination.

24    As at the commencement date (27 June 2012), the issue as to the validity of Dr Ingram’s appointment as a Deputy Director had not been formally raised in the proceeding. Ground 3A, which raised that issue, was first included in Dr Rich’s Further Amended Application on 30 October 2012. On 1 April 2012, Dr Rich had foreshadowed to the Commonwealth a desire to raise the issue and on 4 April 2013 obtained the Commonwealth’s agreement that whilst it would not consent, it would not oppose Dr Rich’s foreshadowed application for leave to further amend his application to include ground 3A. Despite that foreshadowing, it is difficult to see how an issue which had not been formally raised in the proceeding as at the commencement date, could be capable of being regarded as having been “finally determined” as at that date.

25    I should add that even if ground 3 is capable of being construed as sufficiently raising the issue of Dr Ingram’s appointment as a Deputy Director (by its terms ground 3 only raises the issue of Dr Ingram’s appointment as a Panel member), that ground was also not formally raised as at the commencement date of Schedule 1 and only came into Dr Rich’s pleading on 5 September 2012.

26    Even if Dr Rich had formally raised the issue of the validity of Dr Ingram’s appointment as at the commencement date, I would nevertheless not have concluded that the issue had been “finally determined” in this proceeding as at that date. Dr Rich was not a party to the Kutlu proceeding. The validity issue raised in this proceeding was not referred for determination by the Full Court in that proceeding. Nor was Kutlu in any sense a representative proceeding and the analogy sought to be made by Dr Rich with the binding force of the determinations made in representative proceedings on group members is without any substance.

27    I reject Dr Rich’s contention that the Commonwealth had agreed with Dr Rich that in relation to the validity issue, the parties to this proceeding would be bound by the outcome in Kutlu. The correspondence upon which Dr Rich relies to evidence such an agreement does not substantiate the position for which Dr Rich contended. That correspondence shows Dr Rich agreed to abide by the outcome in Kutlu and that the Commonwealth agreed in return, that it would not object (although it would not consent) to Dr Rich’s foreshadowed application for leave to further amend his application to include ground 3A.

28    The most that can be said is that either by agreement or estoppel, Dr Rich was bound not to contend for a different outcome in this proceeding on the validity issue than the outcome determined in Kutlu. That circumstance, however, would not have precluded the Commonwealth or the first to third respondents from contending for an outcome on the validity issue inconsistent with that reached in Kutlu.

29    There can be no doubt that the outcome in Kutlu had implications for the final determination that the Court in this proceeding may have made on the question of the validity of Dr Ingram’s appointment. The precedential impact of the Kutlu decision would have made an inconsistent determination in this proceeding highly unlikely. However, whilst the Kutlu decision will likely have impacted upon the final determination made in this proceeding on the validity issue, it was in no respect a final determination made in this proceeding of the kind contemplated by Item 1(5)(b) of Schedule 1.

30    The fact that the validity issue raised in this proceeding was likely to be determined in a particular way because of the precedential impact of Kutlu and any agreement or estoppel binding upon Dr Rich is not to the point. Item 1(5)(b) is not dealing with proceedings which are likely to be determined in a particular way. Its exclusionary effect is confined to proceedings where a final determination has been made.

31    The evident purpose of Item 1(5)(b) is to avoid retrospectively affecting rights or liabilities which, at the commencement date, had already been the subject of a final judicial determination. The construction which I prefer readily achieves that purpose and is consonant with the plain words of the provision. Dr Rich did not, as at the commencement date, have any judicial determination binding upon him which dealt with his rights or liabilities concerning the validity of Dr Ingram’s appointment. There was no such judicial determination liable to be interfered with by the remedial impact of Item 1 and no basis for extending to Dr Rich (and others who may have been in a similar position) the benefit of the exception contemplated by Item 1(5)(b).

32    The second basis upon which Dr Rich contended that the remedial effect of Schedule 1 did not apply was based on the exception provided for by Item 1(4), which deals with the rights or liabilities of parties to proceedings for which leave to appeal to the High Court of Australia had been given on or before the commencement date. The uncontentious background to that provision is that on 24 August 2011 the Commonwealth made applications for special leave to appeal the Kutlu decision. The High Court granted special leave on 10 February 2012 and Notices of Appeal were filed on 23 February 2012 in respect of the five applications that were the subject of the judgment in Kutlu. Both the Explanatory Memorandum and also the Second Reading Speech to the proposed legislation which was enacted as Schedule 1, show that Parliament was conscious of the judgment in Kutlu and that leave to appeal to the High Court had been granted in relation thereto.

33    The submission made by Dr Rich that the benefit of Item 1(4) extends to him is based on a contention that he is a person encompassed by the word “parties” in Item 1(4). The term “parties” is not defined in Schedule 1. Dr Rich accepted that the ordinary meaning of “parties” in relation to a legal proceeding are those persons on the record in the proceeding. Dr Rich was not a party on the record in the High Court proceeding. However, Dr Rich contended that in this instance, a broader construction of “parties” was appropriate and that the term should be construed so as to include those persons who had agreed to be bound by the result of the High Court proceeding.

34    In my view, there is no warrant for adopting such a construction. There is nothing in Schedule 1 that displaces the ordinary meaning of ‘parties’ when used in the context of litigious proceedings.

35    The evident intent of Item 1(4) was to include within the carve out provided for, those persons who had succeeded in Kutlu and had a legal right to the benefit of that judgment. Dr Rich was not such a person. The undertaking he gave to the Commonwealth that he would abide by the decision in Kutlu did not confer upon Dr Rich any right to the benefit of that judgment nor transform, in any sense, Dr Rich’s position to that of being a party to the Kutlu proceedings.

36    In rejecting Dr Rich’s contentions I have been mindful that the remedial legislation has retrospective effect and ought not to be understood as having an intended application upon the rights and liabilities of particular persons unless that intention appears with reasonable certainty.

37    For the reasons given, I am satisfied that the remedial effect of Schedule 1 extended to Dr Rich’s circumstances and that, as a result, ground 3A of Dr Rich’s Further Amended Application must be rejected.

should the committee’s finding of inappropriate conduct be set aside?

38    The two grounds of review relied upon by Dr Rich are that the decision of the Committee involved a breach of procedural fairness and that the Committee failed to observe procedures required to be observed in the making of its decision. So far as Dr Rich relies upon the ADJR Act, he relies upon s 5(1)(a) in relation to the first ground and s 5(1)(b) in respect of the second.

39    As pressed at trial, Dr Rich’s case was two-fold. First he contended that there was a failure by the Committee to take into account a submission made by Dr Rich which the Committee was required to take into account by s 106L of the Act. In relation to that alleged failure, Dr Rich contended that it was incumbent upon the Committee to give proper and genuine consideration to the submissions he made. Secondly and in the alternative, Dr Rich contended that if the requisite consideration of his submissions occurred, the Committee failed to give its reasons as to why it did not accept the submissions he made. That alternative contention, as pressed at trial, was narrower than the way in which it was expressed in Dr Rich’s application where the alleged failure to give adequate reasons was put more generally.

40    In order to explain my consideration of these issues, it is necessary to briefly outline the main features of the Professional Services Review Scheme provided for in Part VAA of the Act. Thereafter I will detail particular aspects of the Scheme central to the issues raised. The main features of the Scheme are described by s 80 of the Act as follows:

(1)    ...

(2)    The Professional Services Review Scheme is a scheme for reviewing and investigating the provision of services by a person to determine whether the person has engaged in inappropriate practice.

(3)    The Chief Executive Medicare can request the Director to review the provision of services by a person and the Director must decide whether to undertake a review.

(4)    Following a review, the Director must:

    (a)    decide to take no further action in relation to the review; or

    (b)    enter into an agreement with the person under review; or

    (c)    make a referral to a Committee.

(5)    If the Director enters into an agreement with the person under review, the agreement must be ratified by the Determining Authority before it takes effect. Having an agreement ratified avoids a Committee investigation.

(6)    A referral to a Committee initiates an investigation by the Committee into the provision of the services specified in the referral. The Committee can investigate any aspect of the provision of the referred services and its investigation is not limited by any reasons given in a request for review or a Director’s report following a review.

    (7)    Committee members must belong to professions or specialities relevant to the investigation.

(8)    Committees can hold hearings and require the person under review to attend and give evidence. Committees also have the power to require the production of documents (including clinical records).

(9)    Committees can base findings on investigations of samples of services.

(10)    If a Committee finds that the person under review has engaged in inappropriate practice, the finding will be reported to the Determining Authority. The Determining Authority decides what action to take.

(11)    Provision is made throughout the scheme for the person under review to make submissions before key decisions are made or final reports are given.

(12)    A Committee cannot make a finding of inappropriate practice unless it has given the person under review:

    (a)        notice of its intention to do so; and

    (b)    the reasons for the finding; and

    (c)    an opportunity to respond.

41    By reason of the definition of “inappropriate practice” provided by s 82 of the Act, a general practitioner such as Dr Rich, engages in inappropriate practice if the practitioner’s conduct in connection with rendering or initiating services is such that a PSR Committee could reasonably conclude that the conduct would be unacceptable to the general body of general practitioners. A PSR Committee may hold a hearing when investigating whether a practitioner has engaged in inappropriate practice. A PSR Committee must hold a hearing if it appears to the Committee that the person under review may have engaged in inappropriate practice in providing the services referred for investigation (s 101(2)).

42    In Dr Rich’s case, the Committee determined that a hearing was warranted and issued to Dr Rich a notice of hearing requiring Dr Rich to attend and give evidence at the hearing. The capacity for a PSR Committee to issue such a notice is dealt with by s 102 of the Act. Notices requiring Dr Rich to produce documents were also issued under s 105A. The rights of persons under review at hearings is dealt with by s 103. Those rights include the right to attend hearings; to be accompanied by a lawyer or another advisor; to call witnesses to give evidence; to produce written statements as to the person’s character; to question a person giving evidence at the hearing; to address the Committee on questions of law arising during the hearing; and after the conclusion of the taking of evidence, to make a final address to the Committee on questions of law, the conduct of the hearing and the merits of the matters to which the hearing relates.

43    In the Final Report of the Committee, the provenance of which I will shortly explain, the Committee set out a brief description of the hearing conducted and identified the material it relied on. A hearing was held on 10, 11, 17 and 18 July 2008 and 19 and 20 November 2008. During the hearing, the Committee questioned and heard evidence from Dr Rich and examined the medical records produced. Dr Rich was accompanied by a lawyer. He was invited to address the Committee at any time and to request an adjournment, if required, to seek legal and/or other advice. Dr Rich and his legal representative were invited to make submissions at the close of the hearing. Dr Rich did not make submissions. His legal representative made oral submissions at the close of the hearing. After the hearing, written submissions dated 17 December 2008 were also made by Dr Rich and received by the Committee.

44    Section 106KD of the Act requires the Committee to prepare a written draft report of its “preliminary findings”. Section 106KD(1A) provides that the draft report must set out the reasons for the preliminary findings. Section 106KD(3) then provides:

Unless section 106KE applies, the Committee must give to the person under review a copy of the draft report together with a notice inviting the person to make to the Committee, within 1 month after the day on which the copy of the draft report is given to the person, written submissions suggesting changes to the draft report.

45    In this case, s 106KE did not apply. Accordingly, the Committee prepared a draft report which was forwarded to Dr Rich on 30 July 2009 (“the Draft Report”). Attached to the Draft Report was a notice inviting Dr Rich to make written submissions to the Committee suggesting changes to the Draft Report.

46    In response, the Committee received from Dr Rich written submissions dated 28 September 2009 together with a report from a Dr Stanton dated 21 September 2009 (“the September submissions”).

47    It is the September submissions that Dr Rich contended were not taken into account by the Committee. Dr Rich’s alternative argument also relates to those submissions and the alleged failure by the Committee to explain by the provision of reasons why it did not adjust its findings by reference to the September submissions.

48    There is no issue that the Committee was required by s 106L(1) to take into account “written submissions suggesting changes to the draft report” as stated by s 106KD(3) and referred to in s 106L(1) of the Act.

49    Section 106L deals with the requirement for a PSR Committee to prepare and deliver a final report. The following sub sections of s 106L are relevant and need to be set out in full:

Final report of Committee

(1A)     This section applies if the person under review has been given a notice under subsection 106KD(3) inviting submissions on changes to the draft report.

(1)     After the period of 1 month referred to in subsection 106KD(3), the Committee must, after taking into account any submissions made to the Committee by the person under review within that period, prepare a final report setting out:

(a)     if the Committee members are unanimous in their findings - those findings; or

(b)     if a majority of the Committee members are agreed on findings - those findings and the findings of the other Committee member or Committee members; or

(c)     if there are not a majority of the Committee members who are agreed on findings - the respective findings of the Committee members.

(1B)     The final report must not include a finding of inappropriate practice unless the finding and the reasons for the finding were included in the draft report under section 106KD.

50    No issue was taken by the Committee (or in this proceeding) that the September submissions were lodged outside of the 1 month period provided for.

51    On 17 November 2009, the Committee made its Final Report.

Should the Committee have given reasons exposing why it did not accept the September submissions?

52    It is convenient to deal first with Dr Rich’s alternative argument that the Committee was required to expose by the provision of reasons why it did not accept the September submissions. That is because, for reasons I will later explain, whether or not reasons were required to have been provided may have some bearing upon Dr Rich’s first argument. I will proceed for the moment on the basis that the Committee did not accept the September submissions at all, although as will later become apparent, that was not in fact the case.

53    There is no duty to give reasons in the absence of a statutory requirement to do so: Mathews v Health Insurance Commission (2006) 90 ALD 49 at [15] (Edmonds J); Dimian v Health Insurance Commission [2004] FCA 1615 at [78]-[80] (Jacobson J). That principle was not in contest.

54    The legislative scheme here in question relevantly provided that:

    a draft report be prepared (s 106KD);

    the draft report “set out the reasons for the preliminary findings” (s 106KD(1A));

    the PSR Committee provide notice “inviting the person [under review] to make to the Committee…written submissions suggesting changes to the draft report” (s 106KD(3));

    the PSR Committee “must, after taking into account any submissions made to the Committee by the person under review…prepare a final report setting out…[the Committee’s] findings…” (s 106L(1)); and

    the PSR Committee provide copies of its final report to the person under review, to the Director and to the Determining Authority (s 106L(3)).

55    The Act does not require a PSR Committee to provide with its final report, its reasons for not accepting any changes to its draft report suggested by the person under review. That conclusion is consistent with the conclusion reached by Jacobson, Flick and Reeves JJ in Reece v Webber (2011) 192 FCR 254 when considering the same issue as that which arises in this case. In Reece, the Full Court was called upon to determine whether a PSR Committee had failed to take into account expert medical opinions provided to a PSR Committee in submissions made by the person under review in response to a draft report of a PSR Committee. In dealing with that ground of appeal, the Full Court made a number of observations about the requirement imposed upon a PSR Committee to provide reasons. In particular the Full Court held that there was no requirement for a PSR Committee to set out in a final report why specific evidence or submissions had not led the Committee to make findings different to those which it in fact made. At [78]-[79] the Full Court said:

Section 106L does not require the Committee to refer to the evidence or “specific evidence” upon which its “findings” were based or to refer to “submissions” that may have been made. Nor does s 106L impose any requirement to make “findings” in respect to “specific evidence” or “submissions” which may have been advanced on behalf of a practitioner. No contrary construction of s 106L was advanced on behalf of the Applicant.

Such a conclusion, it is considered, is consistent with the statutory scheme set forth in Division 4 of Part VAA of the Health Insurance Act. Any different conclusion would impose upon the Committee a requirement “to refer” in its Final Report to the evidence upon which its findings of fact are based and possibly “to refer” to submissions made and a requirement to expressly state why specific evidence or submissions have not led it to make “findings” different to those in fact made. Any different conclusion or construction of Division 4 of Part VAA would only encourage a course whereby medical practitioners may seek to scour the “evidence” or “submissions” advanced before a Committee with a view to discerning some “evidence” or “submissions” that have not been expressly referred to. However desirable it may be for a Committee to do so, such requirements have not been imposed upon the Committee by the legislature. A failure to refer to the “expert medical opinions” advanced on behalf of Dr Reece, and to make “findings” in respect to those opinions, may well place the Determining Authority in a position where it is not as informed as it otherwise may have been. But such difficulties are of no immediate significance.

56    Dr Rich’s case that the Committee was obliged to give reasons explaining its rejection of the September submissions must therefore be rejected.

Did the Committee fail to take into account the September submissions?

57    The Final Report of the Committee contains the Committee’s findings that Dr Rich engaged in inappropriate practice. The findings were expressed as follows:

The Committee’s findings are that Dr Jacob Rich, vocationally registered general practitioner … engaged in inappropriate practice in connection with providing the referred services. In particular, the Committee finds that the conduct of Dr Rich in connection with providing:

•    100% of the MBS item 36 services

•    100% of the MBS item 702 services

•    88% of the MBS item 5023 services

•    5 of the 5 PBS item 02124T and 01647Q

would be unacceptable to the general body of general practitioners as defined in section 82(1)(a) of the Act.

58    The Final Report states that the Committee’s reasons are set out in Appendices 1, 2, 3 and 4. Each of those appendices deals with one of the four categories of services referred to in the findings. Reasons are therein given in relation to each of the services provided by Dr Rich to a particular patient which were sampled by the Committee.

59    Dr Rich contended that a comparison between the contents of the Draft and Final Reports shows that there are only cosmetic differences between them. In particular, Dr Rich contended that there is no reference in the Final Report to responses contained in the September submissions which Dr Rich had made by reference to the services provided to particular individual patients which were sampled by the Committee. Dr Rich also contended that the content of the report provided by Dr Stanton was not addressed. Dr Rich made the point that references to transcript, shown in a box titled “Evidence” which appeared in the reasons for each service investigated, were unchanged in the Final Report.

60    The September submissions included an eight page introductory submission. This part of the submission sought to clarify what Dr Rich regarded as misunderstandings generated by language difficulties and the stress and nervousness experienced by Dr Rich at the hearing. It also included a wide range of general criticisms of the Draft Report and included references to particular conclusions reached about the provision of services to particular patients dealt with in the Draft Report. Measures which Dr Rich had taken or which he intended to take to improve his practice were also specified. The initial eight page submission was followed by some 35 separate responses, each specifically dealing with the provision by Dr Rich of services to a particular patient the subject of consideration in the Draft Report. These responses varied in length between a paragraph and a whole page. Lastly, the submissions also included six letters of support from various medical practitioners which made observations about Dr Rich’s work as a general practitioner. The report from Dr Stanton made various recommendations directed to improving the manner in which Dr Rich practiced.

61    The Final Report noted that the September submissions had been received and considered. The Final Report stated:

27.    On 28 September 2009, the Committee received from Dr Rich written submissions in response to the Draft Report (see Attachment 3 to this Final Report).

28.    The Committee fully considered Dr Rich’s submissions.

29.    The Committee, in drafting its report, took into consideration Dr Rich’s non-English speaking background and speech difficulties. The Committee was mindful of the stress suffered by Dr Rich, and during the hearing allowed him to seek and take adjournments to consult with his legal representative and to compose himself. The Committee also allowed time for Dr Rich to consult his medical records and cross reference information relating to patients contained in his laptop.

30.    The Committee’s findings on individual cases are based on the merits of each individual service. The Committee applied its clinical experience in assessing each service.

31.    As detailed in the response, the submission did not change the Committee’s finding that Dr Rich’s conduct in connection with the referred services constituted engaging in inappropriate practice.

62    What the Committee meant by “the response” in paragraph 31 (set out above) is a little unclear but I take it to have meant the response constituted by the Final Report itself. Paragraph 31 makes the point that the September submissions did not lead the Committee to alter the preliminary findings of inappropriate conduct made in the Draft Report.

63    There is a further reference in the Final Report to the September submissions at paragraph 13, but only by the listing of those submissions as one of the matters to which the Committee “had regard”.

64    Beyond those references to the September submissions, the first to third respondents have correctly identified by way of a comparison between the Draft and Final Reports some four further changes to the reasons given. Each of the changes identified is directly referable to a matter raised by the September submissions. A fifth change referable to the September submissions relates to corrections made to Dr Rich’s medical background.

65    Whilst it can be said that a number of changes to the Final Report are referrable to the September submissions, it is also true to say that the vast majority of the content of the September submissions is not expressly referred to in the Final Report and that the content of those submissions is not able to be identified as resulting in any change to the content of the Final Report of any real significance. Largely for that reason, Dr Rich contended that the Final Report failed to deal with the specific matters raised in his submissions and that the references in the Final Report to the September submissions were perfunctory. Alternatively, Dr Rich contended that the Committee was required to give his submissions proper, genuine and realistic consideration and failed to do so.

66    With the reservation that the phrase “proper, genuine and realistic” does not operate as an invitation for a court to enter on the merits of administrative decision making, it may be accepted that an obligation upon the decision-maker to take account of particular submissions made, imposes a requirement upon a PSR Committee to give “proper, genuine and realistic” consideration to those submissions, at least insofar as the submissions address matters of central relevance and importance to the ultimate conclusions reached: Reece [68]-[70] (the Court).

67    The members of the Committee were not called to give evidence. There is no direct evidence before the Court as to whether or not the September submissions were taken into account and if so whether proper, genuine and realistic consideration was given to those submissions. I am left therefore to evaluate whether those factual contentions contended for by Dr Rich may be inferred from the circumstantial evidence before me. Dr Rich bears the onus of convincing the Court that an inference should be drawn that no proper, genuine and realistic consideration was given to the September submissions. For the reasons that follow, I am not persuaded that Dr Rich has discharged that onus.

68    Dr Rich’s contention is founded upon the lack of reference in the Final Report to much of the content raised by the September submissions. There is ample authority in support of the proposition that a failure to refer to a matter in a statement of reasons may justify inferring as a fact, that the matter has not been taken into account: see Alexander v Australian Community Pharmacy Authority (2010) 265 ALR 424 at [56] and the cases there referred to.

69    However, as the Full Court said in Reece at [65]:

Equally, a failure to expressly mention particular material is not conclusive that it has not been taken into account. A decision-maker is not normally required in its reasons for decision to refer to “every item of evidence that was before it” and an “omission to refer to a piece of evidence does not necessarily require a conclusion that it has been overlooked”: cf. SZEHN v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1389 at [58] per Lindgren J. See also: SZHPI v Minister for Immigration and Citizenship [2008] FCA 306 at [15] per Branson J; Australian Postal Corporation v Sellick [2008] FCA 236 at [64], 101 ALD 245 at 259 per Bennett J.

70    As Burchett J said in ARM Constructions v Commissioner of Taxation (1986) 10 FCR 197 at 205, whether the inference will be drawn in a particular case will depend upon all the circumstances. That caution was emphasised by Wilcox J in the following passage from Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 485:

The principle referred to in Sullivan and Collins relates only to the inference which may, in appropriate circumstances, be drawn. It is not suggested - and it could not logically be suggested - that the omission of a matter from reasons necessarily means that the tribunal failed to consider that matter. The question must be determined in the light of the whole of the circumstances.

71    In my view, the proper identification of the circumstances relevant to whether the inference contended for should be drawn in this case, requires a consideration of the following matters:

    whether there was a legal duty upon the Committee to provide reasons;

    whether and to what extent the Committee was legally obliged to take into account the content of the September submissions;

    the extent to which matters raised in those submissions were of central relevance and importance to the ultimate conclusions reached (Reece at [70]); and

    the content of the reasons given by the Committee.

Was there a duty to provide reasons in the Final Report?

72    An inference that the failure of a decision-maker to refer to a consideration in reasons given reflects the decision-maker’s failure to take that consideration into account, may more readily be drawn in a case where the decision-maker was duty bound to give reasons and to refer to the consideration, than in a case where the decision-maker was not so bound: Kentucky Fried Chicken Pty Ltd v Gantidis (1979) 140 CLR 675 at 682 and at 685 (Stephen  J, with whom Gibbs, Mason and Aickin JJ agreed); Alexander at [61] (Bromberg  J).

73    If the Committee had been statutorily obliged to provide reasons for rejecting the content of the September submissions, the failure of the Committee to provide those reasons would be a persuasive basis upon which the Court could draw an inference that the September submissions were not taken into account: see Alexander at [84] and the cases there cited. The absence of any such requirement tends against the inference for which Dr Rich contends.

74    There remains a question as to whether the Act requires the final report of a PSR Committee to include reasons for its findings of inappropriate conduct. The existence of a more general obligation of that kind may support the inference that Dr Rich contends for and for that reason I need to further consider the extent of any duty on a PSR Committee to provide reasons with its final report.

75    As earlier identified, s 106L requires that the findings of the PSR Committee be set out in its final report but says nothing about the reasons upon which those findings are based. It seems to me however that despite no express mention of a requirement for reasons in s  106L, the scheme of which s 106L forms a part, does envisage that a PSR Committee must include the reasons for its findings of inappropriate conduct in its final report.

76    Section 106KD requires that the draft report be constituted by both preliminary findings and the reasons for those findings. The scheme then contemplates the provision by the person under review of written submissions suggesting changes to the draft report (s  106KD(3)) and the Committee taking into account any such submissions made (s  106L(1A) and (1)). It would be odd if the opportunity afforded to make suggestions for changes to the draft report was intended to be limited to the preliminary findings of the PSR Committee and not also to its reasons. That circumstance would be inconsistent with the clear intent found in s 106H(4) that the person under review be afforded an opportunity to respond to “the reasons upon which the Committee intends to base its findings”. The basis for any finding of inappropriate conduct is likely to be a matter of some importance including because the reasons are likely to be important to the Determining Authority charged with imposing the sanctions provided for by s 106U. It is unlikely that it was intended that the final report which a PSR Committee is required to provide to the Determining Authority would be limited to the PSR Committee’s final findings and exclude its final reasons for those findings. In my view, what the scheme contemplates is that the draft reasons and findings be the subject of submissions suggesting changes so that the final report may incorporate any changes that the PSR Committee has been persuaded to make to both its preliminary findings and the reasons given in the draft report.

77    That construction is a construction consistent with that contended for by all of the parties who made submissions on this aspect of the case. It was not contended before me, that a PSR Committee is not required to include reasons in its final report for the findings therein contained.

78    However, my own view seems to be at odds with that of the Full Court in Reece. At [71] the Full Court noted that s 106KD(1A) (dealing with a draft report) does incorporate a requirement to provide reasons, but said:

Section 106L, directed as it is to the contents of a Final Report, does not impose any requirement to provide “reasons” as opposed to “findings”.

79    A general requirement upon a PSR Committee to provide reasons for its findings of inappropriate conduct may have assisted Dr Rich’s case. Given the position taken on that issue by the Full Court in Reece (and despite my own view), I have not proceeded on the basis that any such requirement existed. I should add however, that even if I had applied the construction I prefer, my ultimate conclusion would have remained the same.

The extent to which the Committee was required to take account of the September submissions

80    The extent to which the submissions made by Dr Rich were properly responsive to the opportunity provided by the Act to suggest changes to the Draft Report is questionable. Much of what was contained in Dr Rich’s submissions took the form of what would ordinarily be regarded as evidence and not submissions. The Full Court in Reece noted at [30] the use of the term “evidence” in s 106A(1) in relation to a hearing and the use of the term “submissions” in s 106KD(3). At [74], the Full Court said in passing that the forum in which the person under review is afforded an opportunity to “give evidence” is at the hearing conducted by the Committee prior to the preparation of a draft report (s 103). Some distinction between “evidence” and “submissions” must have been intended, although a clear distinction is not apparent. The inquisitorial rather than adversarial nature of the investigations and hearings conducted by a PSR Committee, together with the fact that the Committee is an expert panel entitled to draw upon its own general expertise (see the observations of Tamberlin J in Tisdall v Health Insurance Commission [2002] FCA 97 at [91]-[93] and [101]-[103]), makes it likely that some evidentiary response may well be appropriate at the submissions stage, if a person under review is to be given the full opportunity to respond that s 106H(4) requires. However, in my view, the opportunity to present evidence at the submissions stage contemplated by s 106KD(3) is an opportunity to respond and suggest changes to the draft report. It is not an opportunity to raise for the first time evidence which could and should have been raised at the hearing. Material in a submission of that kind is not material that, in my view, a PSR Committee is bound to take into account.

81    Much of the September submissions appear to contain fresh accounts of evidence given for the first time which are not responsive to the findings and reasons set out in the Draft Report. An affidavit made by Dr Rich in support of his application refers to the September submissions “as submissions…in greater detail and more accurate than the evidence I gave at the hearing”. The extent to which Dr Rich’s submissions were responsive in the sense I have identified, as distinct from being fresh accounts of evidence which the Committee was entitled to ignore, was not the subject of any detailed submissions. Dr Rich’s failure to address that issue makes it difficult to separate that which the Committee should have taken into account from that which it was entitled to have no regard to at all. The drawing of the inference which Dr Rich contended for depends at its foundation on Dr Rich establishing that the Committee was required to take into account the material which he alleges was ignored. Dr Rich’s failure to establish the extent to which the September submissions should have been taken into account is a significant hurdle in the path of the inference contended for.

The centrality and importance of the matters raised

82    Dr Rich made no real attempt to establish the relevance and importance to the ultimate conclusions reached by the Committee of the submissions which he made. On its face, much of the content of the September submissions addressed mitigating factors, provided character references or otherwise raised matters which do not appear to be germane to the issue of whether particular services provided by Dr Rich constituted inappropriate conduct within the meaning of s 82(1) of the Act. It would be entirely unsurprising that matters of little or no relevance raised in Dr Rich’s submissions were given no attention in the Final Report. The extent of any attention that may have been expected to be given to a matter in the Final Report has an obvious connection to the extent of relevance and importance of the matter raised to the issues for determination.

83    The failure of Dr Rich to properly identify the relevance and importance of the various matters raised in the September submissions that were not referred to in the Final Report also makes it more difficult to draw the inference which Dr Rich has asked the Court to draw.

The content of the Final Report

84    Lastly, there are a number of statements and other indicators found in the Final Report which tend against the drawing of the inference for which Dr Rich contends.

85    I accept that as a matter of general principle, the mere fact that a decision-maker states that he or she has taken a particular matter into account is not necessarily conclusive: Reece at [63] (the Court). However, a statement that a particular matter has been taken into account is a consideration which at the very least tends to support a conclusion that such a consideration was in fact taken into account: Kentucky Fried Chicken at 686 (Stephen J, with whom Gibbs, Mason and Aickin JJ agreed); Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex Parte Palme (2003) 216 CLR 212 at 224 (Gleeson CJ, Gummow and Heydon JJ); and Traill v McRae (2002) 122 FCR 349 at [181] (Sackville, Kenny and Allsop JJ).

86    In Traill, Sackville, Kenny and Allsop JJ were called upon to deal with an argument that submissions made by a doctor had not been taken into account in investigations conducted by a PSR Committee under a legislative scheme in the Act which preceded the current Professional Services Review Scheme. At [181], the Full Court said:

We would not conclude from an absence of reference in its reasons to the detailed submissions of the applicant’s counsel that the Tribunal did not, in carrying out its review, give consideration to the material before it and the submissions put to it on behalf of Dr Traill therein. The Tribunal said it gave careful consideration to that material and the addresses made to it. It is not correct to say that the absence of a detailed express ‘working through’ of counsel’s submissions reveals a failure to consider the matters put to it.

87    In this case, as I have earlier set out, the Committee stated that it had regard to the September submissions. It stated that those submissions had been fully considered. It further stated that in drafting its report it took into consideration Dr Rich’s non-English speaking background, speech difficulties and that it was mindful of the stress suffered by Dr Rich during the hearing. Those comments are directly referrable to the matters raised in the September submissions. The Committee further stated specifically that the September submissions did not change the Committee’s findings as to Dr Rich’s conduct. Additionally, five further changes to the Draft Report are evident that can be sourced to the September submissions.

88    In my view, all of those matters strongly tend against the Court drawing the inference contended for by Dr Rich and accordingly Dr Rich’s primary ground for review must be rejected.

Conclusion

89    In light of the conclusions already expressed, it follows that Dr Rich’s application for review must be dismissed. It also follows that Dr Rich should pay the costs incurred by the first to third respondents. I will make orders to that effect.

90    No costs are sought by the Director. As to the question of costs as between Dr Rich and the Commonwealth, the Commonwealth has conceded that it should pay so much of Dr Rich’s party/party costs as relate to the proceedings against the Director and the Commonwealth for the period 14 January 2011 to 6 July 2012. The Commonwealth sought an order that Dr Rich pay the Commonwealth’s legal costs on an indemnity basis on and from 7 July 2012.

91    By correspondence dated 6 July 2012, the Commonwealth informed Dr Rich that the commencement of Schedule 1 rendered his proceeding against the Commonwealth futile. Consent orders were proposed which provided that (i) the Commonwealth pay Dr Rich’s legal costs as agreed or taxed for the period 14 January 2011 to the date of the making of consent orders; and (ii) Dr Rich discontinue the proceeding against the Commonwealth.

92    Dr Rich rejected the Commonwealth’s offer. The Commonwealth contended that the offer it made was a Calderbank offer which was imprudently or unreasonably refused.

93    There is a long line of Federal Court authority for the proposition that a mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs and that the offeror needs to show that the conduct of the offeree was unreasonable: Black v Lipovac (1998) 217 ALR 386 at [217] (Miles, Heerey and Madgwick JJ). It is not the case however that the conduct of the offeree has to be plainly unreasonable, the underlying policy being to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to serious offers of settlement: Black at [218].

94    The position of the Commonwealth is that it was unreasonable for Dr Rich to pursue grounds 3, 3A and 4 of his application in light of the enactment of Schedule 1. Although Dr Rich has failed in his contention that the remedial effect of Schedule 1 did not extend to his circumstances, the Commonwealth has not persuaded me that the rejection by him of the Commonwealth’s offer was unreasonable. I will not order indemnity costs against Dr Rich. I will however make an order that Dr Rich pay the legal costs of the Commonwealth on and from 7 July 2012 on a party/party basis. I will also order in accordance with the concession made by the Commonwealth that the Commonwealth pay so much of Dr Rich’s costs as relate to the proceedings against the Director and the Commonwealth which were incurred in the period 14 January 2011 to 6 July 2012.

Associate:

Dated:    12 August 2013