FEDERAL COURT OF AUSTRALIA

Applied Medical Australia Pty Ltd v Minister for Health [2016] FCA 35

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the respondents’ costs as agreed or taxed.

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

REASONS FOR JUDGMENT

ROBERTSON J:

Introduction

1    By these proceedings, Applied Medical Australia Pty Ltd (Applied Medical), a manufacturer and supplier of medical devices for surgical procedures, seeks judicial review of what it identifies as one decision and one failure to decide.

2    The decision, said by Applied Medical to have been made on or about 19 or 20 February 2015, is described by Applied Medical as a decision to reject its “Benefit Amount Application”, namely, an application to lower the minimum group benefit amount applying to the Prostheses List subgroup “3. General and Miscellaneous 3.8 – Closure Devices, 3.8.3 – Ligating Devices – 3.8.3.3 – Clips with Disposable Applier – Laparoscopic” (the Relevant Subgroup) in the Private Health Insurance (Prostheses) Rules 2015 (No 1) (Cth) from $412 to $99. This decision was made by the second respondent, the Acting First Assistant Secretary, Medical Benefits Division, Department of Health, Ms Kirsty Faichney, as delegate of the first respondent, the Minister for Health (the delegate). This decision was the primary focus of Applied Medical’s application for judicial review. It should go without saying that the Court is not concerned with the merits of the decision.

3    The claimed failure to decide is described by Applied Medical as the failure of the Minister for Health to make a decision in relation to its “Delisting Applications”, said by Applied Medical to have been made on various occasions between 23 July 2014 and 19 February 2015, namely whether all listings in the Relevant Subgroup should be revoked, and whether the listings of sponsors in the Relevant Subgroup who continued to advocate for a minimum group benefit amount greater than $99 should be revoked.

4    Applied Medical is one of five sponsors of laparoscopic clip appliers listed in the Relevant Subgroup in the Private Health Insurance (Prostheses) Rules. More specifically, the parties agreed that Applied Medical sponsors two laparoscopic clip appliers which are in the Prostheses List contained in the Private Health Insurance (Prostheses) Rules: (a) “DIRECT DRIVE” 10 mm laparoscopic clip applier, with billing code MH014; and (b) “EPIX” 5 mm laparoscopic clip applier, with billing code MH015. These products perform the same clinical function as the prostheses identified in paragraph 72 of the Statement of Claim, which are included in the Relevant Subgroup.

5    There is in evidence a minute dated 17 February 2015 and approved on 19 February 2015 by the second respondent. The minute asked the delegate to sign Private Health Insurance (Prostheses) Rules 2015 (No 1). The 17 February 2015 minute also referred to and attached a separate minute (the Minute) seeking the decision of the delegate on a submission from Applied Medical, received on 21 October 2014, to Professor John Horvath, Chair, Prostheses List Advisory Committee and Mr Shane Porter, Assistant Secretary, Private Health Insurance Branch, Department of Health.

6    Since the Minute became the focus of the parties’ submissions, it is convenient to set it out in full. It appears to have been misdated 20 February 2015, rather than 17 February 2015.

SUBMISSION FROM APPLIED MEDICAL AUSTRALIA PTY LTD

Purpose

1.    To ask that you to (sic) NOTE the submission from Applied Medical (Applied Medical) to change the group benefit for a group of prostheses on the February 2015 Prostheses List; and

2.    To ask that you AGREE not to make the change submitted by Applied Medical in the February 2015 Prostheses List.

Issue

Applied Medical made a submission to the Assistant Secretary, Private Health Insurance Branch and the Prostheses List Advisory Committee (PLAC) Chair dated 21 October 2014, requesting consideration of a reduction in the group minimum benefit for all products listed in subgroup 03.08.03.03 – Closure Devices, Ligating Devices, Clips with Disposable Applier, with the suffix “Laparoscopic” for the February 2015 Prostheses List. This sub-group on the Prostheses List contains products supplied by Applied Medical and a number of other suppliers. The original submission is at Attachment 1.

Subsequent to the submission dated 21 October 2014, Jones Day (acting on behalf of Applied Medical) has made a number of submissions to various Committees involved with Medical Devices, Departmental staff and the Minister requesting implementation of their submission as part of making of the February 2015 Prostheses List. A complete list of correspondence sent by Jones Day is at Attachment 2. A number of letters have also been received from other interested parties, such as private health insurers, supporting the implementation of this submission. Copies of these letters are at Attachment 3.

Background

The benefits for prostheses on the Prostheses List have evolved since the first Prostheses List was made in 1985. In 2001, benefits were deregulated and subject to negotiation between the medical device sponsors and the private health insurers. In 2004, the then government responded to concerns about unacceptably high increases in prostheses benefits expenditure since deregulation by announcing reforms to the prostheses listing arrangements. As part of the reforms, benefits applying to all private health insurers were negotiated centrally and set by the minister.

Most of the prostheses on the Prostheses List, particularly those accounting for the highest prostheses benefits expenditure, were reviewed and grouped according to their relative clinical effectiveness. Benefits for these prostheses were then negotiated between the sponsors and the Prostheses and Devices Negotiating Group (PDNG) (on behalf of the Prostheses and Devices Committee – the predecessor of the PLAC).

Following the HTA Review in 2009, the negotiation of benefits was discontinued and the PLAC developed a methodology for recommending group minimum benefits. The methodology is to set a minimum benefit price for comparable products performing a similar clinical role at the lowest price for a product which has a market utilisation rate of at least 25%.

In 2013, the PLAC implemented a new sub-committee, the Health Economists Sub- Committee (HESC) to assist with minimum benefit validation for new products applying for listing. This committee has experts in both health economics and clinical care to support recommendations on minimum benefits to the PLAC and ultimately the minister.

Product sponsors who submit applications for new groups and/or new or increased minimum benefit prices are expected to provide financial evidence to support their request. Product sponsors are able to request for the minimum benefit for their product be reduced.

History of the “laparoscopic” subgroup

The listing and benefits of ligating clips with disposable applier has undergone extensive review over the past couple of years. Firstly, this group of products was reviewed as part of a wider review of listing and benefits for all prostheses resulting from recommendations from the HTA review, and most recently this group was reviewed following stakeholder concerns regarding this group.

At the outset of the HTA review in 2009, all ligating clips which had the “endoscopic” suffix were reviewed together. The benefits for these products varied, ranging from $145 to $435. Assuming that the prostheses were grouped together correctly, the PLAC made recommendation (sic) to the minister to list the minimum benefit for these products at $412.

Concerns were raised by stakeholders about this increase in benefit for this group. The PLAC undertook to review that group of products and the benefits. The clinicians again reviewed the group and product sponsors were asked to provide submissions regarding these products including information regarding appropriate minimum benefit for these products.

It became apparent that products within this group were not clinically equivalent. Sponsors were asked to provide additional information about their prostheses to enable clinicians with appropriate expertise on the Panel of Clinical Experts (“the PoCE”) to provide advice on the comparative clinical effectiveness of the prostheses. This analysis revealed that there were two distinct types of prostheses within the group – devices used in endoscopic surgery and devices used in laparoscopic surgery.

When the methodology for determining group benefits was applied to the two subgroups, it was recommended that the minimum benefits for the “endoscopic” subgroup was $142 and the minimum benefit for the “laparoscopic” subgroup was $412.

Before amending the groupings and benefits for the two subgroups on the Prostheses List, the Prostheses Secretariat consulted with all of the sponsors affected. Applied Medical expressed concern at the time that the benefit of $412 for the “laparoscopic” group was too high, and they would be satisfied with the benefit of $99. The Prostheses Secretariat advised Applied Medical that they could request that their prostheses be listed with a lower benefit of $99. To date, Applied Medical has not made such a request and their product remains at the group minimum benefit price of $412.

Discussion

The original submission from Applied Medical raises concerns about the pricing of prostheses and how, in some cases, the benefits on the Prostheses List do not reflect the net prices paid for prostheses. In essence, the Submission calls for a change in policy with respect to the setting of minimum benefits for Laparoscopic clip appliers.

While Applied Medical is only arguing for a change to the minimum benefit for a single sub-group, from a policy perspective, the same methodology needs to be implemented across the entire list. This means that any change in the methodology to calculate minimum benefits will need to be applied to the more than 10,000 items that are currently listed. Implementation of this type of change would require extensive industry wide consultation. Sponsors of other products would need to be given an opportunity to comment on the proposed change to policy. There is no evidence that this proposed change advocated by Applied Medical would be supported by the vast majority of other product sponsors.

The Medibank Private Sale prospectus (paragraph 2.3.13) which is at Attachment 4, identifies Government policy priorities for PHI and states that:

“Consideration may be given to…… and to proposals developed from within Government and industry. Any significant reforms will be the subject of industry, consumer and stakeholder consultation. If reforms are supported, implementation will not occur before 1 July 2015. …”

There are currently a number of reviews being undertaken by Government regarding reduction of red tape and regulation which may have implications for the prostheses listing arrangements. Any changes to the listing arrangements should be considered together, to ensure that the evaluation, assessment and listing of medical devices uses a solid evidence based policy platform which is not considered detrimental to any stakeholders and ensures that high-quality cost-effective prostheses devices which provide good patient outcomes are available for patients in the private healthcare sector.

Recommendation

It is recommended that the minimum benefits for all prostheses for subgroup 03 General Miscellaneous – 03.08.03 Ligating Devices – 03.08.03.03 Clips with Disposable Applier – Laparoscopic are not altered in accordance with Applied Medical’s submission.

Attachments:

1.    Original Submission from Jones Day (OBO Applied Medical Resources Corporation) dated 21 October 2014.

2.    List of Submissions sent by Jones Day (obo Applied Medical)

3.    Letters supporting the submission.

4.    Medibank Private Share Offer (2014) Section 2 – Industry Overview, page 36 paragraph 2.3.13

(Original italics.)

The delegate did two things: she noted the submission by Applied Medical; and, she agreed with the recommendation not to make the change submitted by Applied Medical in the February 2015 Prostheses List, as shown by her signing and dating the Minute on 19 February 2015 in relation to both recommendations, and by circling the word “AGREED”.

The issues

7    In broad terms, Applied Medical contended that the rejection of its “Benefit Amount Application” in relation to the minimum benefit amount for the Relevant Subgroup was invalid by reason of: (1) not being authorised by the Private Health Insurance Act 2007 (Cth), having been made on the basis of a “policy” which was also not authorised by the Private Health Insurance Act; (2) being an improper exercise of the power by reason of failing to take into account certain relevant considerations and taking into account certain irrelevant considerations or because the decision was made in accordance with the rule or policy; (3) the decision being so unreasonable that no reasonable decision-maker could have so exercised the power; and (4) the decision being made without any, or any adequate, evidence.

8    Applied Medical submitted that the central challenge was that the rejection of its “Benefit Amount Application” was made by the application of a purported “methodology”, the 25% Utilisation Policy, which was extraneous to, found no warrant or justification in, and was contrary to, the statutory and regulatory regime. As stated in the Minute, this methodology was to set a minimum benefit price for comparable products performing a similar clinical role at the lowest price for a product which had a market utilisation rate of at least 25%. Applied Medical submitted that the 25% Utilisation Policy operated arbitrarily to prevent the minimum benefit amounts for prostheses being set below a certain level, in a manner that was inconsistent with the purpose, objects and policy of the Private Health Insurance Act generally and Pt 3-3 in particular.

9    As to Applied Medical’s claims concerning the failure to decide its “Delisting Applications”, Applied Medical contended that the Minister or her delegate were bound to consider those applications and had not done so. Applied Medical sought an order requiring the respondents to consider the “Delisting Applications” according to law.

10    Another issue is the relevant basis of the Court’s judicial review jurisdiction. Applied Medical sought review under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (AD(JR) Act) and s 39B of the Judiciary Act 1903 (Cth). The underlying issue is whether either or both of the claimed decision or failure to decide were administrative decisions made under legislation. The answer to that question affects the scope of judicial review.

The statutory provisions

11    The Private Health Insurance Act relevantly provided as follows:

Division 72—Benefit requirements for policies that cover hospital treatment

72-1  Benefit requirements

(1)    An insurance policy that *covers *hospital treatment meets the benefit requirements in this Division if:

(a)    the policy meets the requirements in the table in subsection (2); …

…

(2)    These are the requirements that a policy must meet for the purposes of paragraph (1)(a):

…

…

Note:    If a private health insurer provides an insured person with, or arranges for an insured person to be provided with, treatment, it is treated as a benefit for the purposes of this Division (see subsection 69-5(3)).

72-5  Rules requirement in relation to provision of benefits

(1)    For the purposes of paragraph 72-1(1)(d), the *rules of the private health insurer that issues the policy meet the rules requirement in this section if the rules have the effect required by subsection (2).

(2)    The effect required is that if, under an agreement or arrangement with a private health insurer, a particular *health care provider (other than a *medical practitioner) provides particular *hospital treatment or *hospital-substitute treatment to people insured under the same *complying health insurance product of the insurer, any charge for the treatment:

(a)     that is payable by an insured person; and

(b)     which is not recoverable by a benefit under the product;

must be the same for all of the people insured under the product, irrespective of:

(c)    the frequency with which that provider provides that particular treatment to people insured under that product; or

(d)     any other matter.

(3)    The Private Health Insurance (Complying Product) Rules may modify the effect required by subsection (2) in relation to all or particular kinds of *complying health insurance products, benefits, treatments or *health care providers. To the extent the Rules do so, the rules requirement is taken to be met if the conditions in the Rules are met.

72-10  Minimum benefits for prostheses

(1)    Private Health Insurance (Prostheses) Rules made for the purposes of item 4 of the table in subsection 72-1(2) must only list a kind of prosthesis if:

(a)    an application has been made under subsection (2) in relation to that kind of prosthesis; and

(b)    the Minister has granted the application.

(2)    A person may apply to the Minister to have the Private Health Insurance (Prostheses) Rules list a prosthesis of the kind to which the application relates.

(3)    The application must be:

(a)    in the *approved form; and

(b)    accompanied by any application fee imposed under the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007.

(4)    The Minister must inform the applicant in writing of the Minister’s decision whether or not to grant the application. If the Minister decides not to grant the application, the Minister must also inform the applicant of the reason for that decision.

(5)    If:

(a)    the Minister grants the application; and

(b)    the applicant pays to the Commonwealth any initial listing fee imposed under the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007 within 14 days of being informed of the Minister’s decision to grant the application;

the Minister must, on the next occasion when the Minister makes or varies the Private Health Insurance (Prostheses) Rules:

(c)    list the kind of prosthesis to which the application relates in those Rules; and

(d)    set out in those Rules a minimum benefit for the prosthesis; and

(e)    if the Minister considers it appropriate—set out in those Rules a maximum benefit for the prosthesis.

(6)    The Private Health Insurance (Prostheses) Rules may set out criteria (listing criteria) to be satisfied in order for an application (a listing application) made under subsection (2) to be granted. The Rules may provide for different listing criteria to apply in different circumstances.

(7)    The Minister must not grant a listing application if any applicable listing criteria are not satisfied in relation to the application.

Note:    The Minister may refuse to grant a listing application even if the applicable listing criteria are satisfied.

72-15  Ongoing listing fee for prostheses

(1)    This section applies if the Minister lists a kind of prosthesis in the Private Health Insurance (Prostheses) Rules as a result of an application under subsection 72-10(2).

(2)    The applicant must pay to the Commonwealth the ongoing listing fee for which the applicant is liable under the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007, within 28 days of each day specified under that Act as an ongoing listing fee imposition day.

(3)    If the applicant fails to pay an ongoing listing fee in accordance with subsection (2), the Minister may remove the kind of prosthesis from the list in the Private Health Insurance (Prostheses) Rules.

72-20  Other matters

The Private Health Insurance (Prostheses) Rules may, in relation to application fees, initial listing fees or ongoing listing fees imposed under the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007, provide for, or for matters relating to, any or all of the following:

(a)    methods for payment;

(b)    extending the time for payment;

(c)    refunding or otherwise applying overpayments.

12    By the Dictionary:

approved form is a form that meets the requirements in section 333-10.

13    Section 333 provided:

333-10  Approved forms

(1)    A statement, notice, application or other document is in the approved form if:

(a)    it is in the form approved in writing by the person specified in the table as the approver of that form; and

(b)    it contains a declaration signed by a person or persons as the form requires (see section 333-15); and

(c)    it contains the information that the form requires, and any further information, statement or document required by the approver, whether in the form or otherwise; and

(d)    it is given in the manner (if any) required by the approver.

(2)    Despite subsection (1), a document that satisfies paragraphs (1)(a), (b) and (d) but not paragraph (1)(c) is also in the *approved form if it contains the information required by the approver. The approver must specify the requirement in writing.

(3)    The approver may combine in the same *approved form more than one notice, statement, application or other document.

(4)    The approver may approve a different *approved form for different kinds of private health insurers.

(5)    The Chief Executive Medicare must not approve a form that requires a person to provide:

(a)    the *tax file number of any person; or

(b)    information about the physical, psychological or emotional health of any person.

333-15  Signing approved forms

A person who is required to do something in an *approved form must, if the form requires it, sign a declaration, or (if allowed by the form) have a declaration signed on the person’s behalf.

333-20  Private Health Insurance Rules made by the Minister

(1)    The Minister may, by legislative instrument, make Private Health Insurance Rules, specified in the second column of the table, providing for matters:

(a)    required or permitted by the corresponding Chapter, Part or section specified in the third column of the table to be provided; or

(b)    necessary or convenient to be provided in order to carry out or give effect to that Chapter, Part or section.

(2)    If, under this Act, Private Health Insurance Rules made by the Minister may modify a provision of this Act or another Act (including by modifying the effect, or the requirements, of such a provision), the Rules may do so by adding, omitting or substituting provisions (including effects or requirements of provisions).

14    The Private Health Insurance (Prostheses Application and Listing Fees) Act 2007 (Cth) relevantly, by s 3 imposed as a tax an application fee for applications made under s 72-10, and by s 4 imposed as a tax an initial listing fee for the purposes of s 72-10(5). Section 4 also authorised the Private Health Insurance (Prostheses Application and Listing Fee) Rules to specify an ongoing listing fee for the purposes of s 72-15 of the Private Health Insurance Act and imposed that fee as a tax. By ss 7 and 8:

7    Person liable for fee

(1)    A person who makes an application under section 72-10 of the Private Health Insurance Act 2007 is liable to pay the application fee for the application, at the time the application is made.

(2)    A person who makes an application under section 72-10 of the Private Health Insurance Act 2007 is, if the Minister grants the application, liable to pay:

(a)    the initial listing fee for the application, at the time the person is informed of the Minister’s decision to grant the application; and

(b)    the ongoing listing fee, on each subsequent ongoing listing fee imposition day.

(3)    If there is no applicant in relation to a kind of prosthesis because the prosthesis was listed in the Private Health Insurance (Prostheses) Rules in accordance with section 12 of the Private Health Insurance (Transitional Provisions and Consequential Amendments) Act 2007, then the person who was, immediately before the commencement of the Private Health Insurance Act 2007, the sponsor of that prosthesis for the purposes of the National Health Act 1953 is liable to pay the ongoing listing fee on each ongoing listing fee imposition day.

8    Private Health Insurance (Prostheses Application and Listing Fee) Rules

The Minister may, by legislative instrument, make Private Health Insurance (Prostheses Application and Listing Fee) Rules, providing for matters:

(a)    required or permitted by this Act to be provided; or

(b)    necessary or convenient to be provided in order to carry out or give effect to this Act.

15    The Private Health Insurance (Prostheses Application and Listing Fee) Rules 2008 (No 1) (Cth) relevantly provided:

4.    Definitions

In these Rules:

Act means the Private Health Insurance (Prostheses Application and Listing Fees) Act 2007.

…

Private Health Insurance Act means the Private Health Insurance Act 2007.

revocation and relisting has the meaning given by subrule 5(4).

Part 2    Fees

5.    Application fees

(1)    For subsection 3(1) of the Act, the application fee for an application made under subsection 72-10(2) of the Private Health Insurance Act is:

(a)    in relation to a human tissue prosthesis – nil; and

(b)    in relation to any other prosthesis, except where subrule (2) applies – $600.

(2)    If an application under subsection 72-10(2) of the Private Health Insurance Act to list a prosthesis would result in, if granted:

(a)    a revocation and relisting; or

(b)    a duplicate listing,

the application fee is, and is taken always to have been, nil.

(3)    If the approved form for an application permits more than one application for listing of a kind of prosthesis to be made on the same form, the application for each kind of prosthesis is a separate application and each listing, if granted, is a separate listing.

(4)    An application will result in a revocation and relisting only in the following circumstances:

(a)    where the application:

(i)    if granted, would involve revocation of an existing listing of a prosthesis; and

(ii)    is for the listing of:

(A)    exactly the same prosthesis for the new applicant; or

(B)    the same kind of prostheses which are different only in size or materials, or both, but have the same action, function and clinical outcomes;

…

16    The Private Health Insurance (Prostheses) Rules 2015 (No 1), made 19 February 2015, relevantly provide as follows:

Part 1    Preliminary

1.    Name of Rules

These Rules are the Private Health Insurance (Prostheses) Rules 2015 (No. 1).

2.    Commencement and authority

(1)    These Rules commence on 18 March 2015.

(2)    These Rules are made under item 4 of the table in section 333-20 of the Private Health Insurance Act 2007.

3.    Revocation

These Rules revoke the Private Health Insurance (Prostheses) Rules 2014 (No. 2).

4.    Definitions

In these Rules:

…

Act means the Private Health Insurance Act 2007.

…

gap permitted prosthesis means a prosthesis of a kind listed in the Schedule where an amount is set out for that kind of prosthesis in the column under the heading ‘Minimum Benefit’ and a different amount is set out in the column under the heading ‘Maximum Benefit’.

…

listed prosthesis means a kind of prosthesis listed in the Schedule to these Rules.

listing application has the same meaning as in subsection 72-10(6) of the Act.

listing criteria has the same meaning as in subsection 72-10(6) of the Act.

…

no gap prosthesis means a prosthesis of a kind listed in the Schedule where an amount is set out for that kind of prosthesis in the column under the heading ‘Minimum Benefit’ and no amount is set out in the column under the heading ‘Maximum Benefit’.

…

Schedule means the Schedule in these Rules.

Note:    Terms used in these Rules have the same meaning as in the Act―see section 13 of the Legislative Instruments Act 2003. These terms include:

complying health insurance policy

hospital-substitute treatment

hospital treatment

medicare benefit

Part 2     Benefit requirements

5.    Listing of, and benefits for, prostheses

For item 4 of the table in subsection 72-1(2) of the Act:

(a)    the Schedule lists the kinds of prostheses:

(i)    in relation to which the Minister has granted an application for listing under subsection 72-10(5) of the Act; or

(ii)    which are listed in accordance with section 12 of the Private Health Insurance (Transitional Provisions and Consequential Amendments) Act 2007; and

Note:    Section 12 of the Private Health Insurance (Transitional Provisions and Consequential Amendments) Act 2007 deals with the listing of a prosthesis that was a no gap prosthesis or a gap permitted prosthesis for the purposes of the National Health Act 1953 immediately before the commencement of the Act.

(aa)    circumstances in which a listed prosthesis is provided for the purposes of paragraph (d) of item 4 of the table in subsection 72-1(2) are set out in rule 5A; and

(ab)    conditions that must be satisfied in relation to the provision of a listed prosthesis for the purposes of paragraphs (c) and (d) of item 4 of the table in subsection 72-1(2) are set out in rule 5B; and

(b)    rule 6 sets out the method for working out the minimum benefit and maximum benefit for hospital treatment, covered under a complying private health insurance policy, that is the provision of a listed prosthesis; and

(c)    rule 7 sets out the method for working out the minimum benefit and maximum benefit for hospital-substitute treatment, covered under a complying private health insurance policy, that is the provision of a listed prosthesis.

5B.    Conditions in relation to the provision of listed prostheses

For the purposes of paragraphs (c) and (d) of item 4 of the table in subsection 72-1(2) of the Act, conditions that must be satisfied in relation to the provision of a listed prosthesis in the circumstances covered by paragraph (c) or (d) of that item, as the case may be, are:

(a)    in relation to any kind of prosthesis where there is a statement of a requirement under the heading ‘Condition’ in the Schedule under the listing for that kind of prosthesis, that requirement; and

(b)    …

Note:    Item 4 of the table in subsection 72-1(2) of the Act states other requirements in relation to benefits for the provision of prostheses that a policy that covers hospital treatment must meet.  These requirements relate to benefits for hospital treatment and, if the policy covers hospital-substitute treatment, to the benefits of that coverage as well.

6.    Benefits for prostheses provided as part of hospital treatment

(1)    For a no gap prosthesis provided as part of an episode of hospital treatment in a private hospital, the minimum benefit and the maximum benefit are each the amount for that prosthesis listed in the column in the Schedule under the heading ‘Minimum Benefit’.

(2)    …

(3)    For a no gap prosthesis provided as part of an episode of hospital treatment in a public hospital:

(a)    the minimum benefit is the lesser of the following amounts:

(i)    the amount for that prosthesis listed in the column under the heading ‘Minimum Benefit’ in the Schedule; or

(ii)    the amount of the insured person’s liability to the public hospital for that prosthesis; and

(b)    the maximum benefit is the amount for that prosthesis listed in the column under the heading ‘Minimum Benefit’ in the Schedule.

(4)    …

Note:    Paragraphs (d) and (e) of subsection 72-10(5) of the Act deal with the fixing of minimum and maximum benefits when the Minister is making or varying the Private Health Insurance (Prostheses) Rules.

    …

Part 3     Other

8.    Timing of applications to have a prosthesis listed

As a matter of normal administrative practice, applications made under subsection 72-10(2) of the Act will be considered after they have been received and, if the Minister decides to grant the application, the kind of prosthesis will be listed in the Schedule the next time the Minister makes or varies the Rules.

Note 1:    Under subsection 72-10 (5) of the Act the Minister must list the kind of prosthesis, set out the minimum benefit and, if the Minister considers it appropriate, the maximum benefit for the prosthesis in these Rules on the next occasion that the Minister makes or varies the Rules after he or she grants an application and the applicant has paid to the Commonwealth any initial listing fee within 14 days of being informed of the Minister's decision to grant the application.

Note 2:    Under subsection 72-15(3) of the Act, the Minister may remove a kind of prosthesis from the list in the Rules if the applicant fails to pay an ongoing listing fee.

9.    Minister may have regard to recommendations and advice

In making the decision under subsection 72-10 of the Act, the Minister may have regard to a recommendation from the Prostheses List Advisory Committee.

…

Part A-Prostheses List

…

03 - GENERAL MISCELLANEOUS

…

03.08.03.03 - Clips with Disposable Applier

…

…

17    The list of prostheses covers over 1000 pages. Part A deals with prostheses, Part B contains the human tissue list; and Part C is entitled “Other Prostheses”. As at February 2015, over 10,000 products were on the list.

18    It is also convenient to set out the relevant provisions of the Acts Interpretation Act 1901 (Cth), as follows: 

33    Exercise of powers and performance of functions or duties

Powers, functions and duties may be exercised or must be performed as the occasion requires

(1)    Where an Act confers a power or function or imposes a duty, then the power may be exercised and the function or duty must be performed from time to time as occasion requires.

…

Power to make instrument includes power to vary or revoke etc. instrument

(3)    Where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws) the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

…

Submissions and consideration

The “Benefit Amount Application”

The Minute

19    The Minute (mis)dated 20 February 2015 should not be considered as a formal statement of reasons. It is clear that the decision-maker, the delegate, was not purporting to “inform the applicant of the reason for that decision” within s 72-10(4).

20    In Plaintiff M64/2015 v Minister for Immigration and Border Protection [2015] HCA 50, French CJ, Bell, Keane and Gordon JJ said, at [25]:

It is well settled that in the context of administrative decision-making, the court is not astute to discern error in a statement by an administrative officer which was not, and was not intended to be, a statement of reasons for a decision that is a broad administrative evaluation rather than a judicial decision. It is possible that error of law on the part of the Delegate might be demonstrated by inference from what the Delegate said by way of explanation of his decision; but it must be borne in mind that the Delegate was not duty-bound to give reasons for his decision, and so it is difficult to draw an inference that the decision has been attended by an error of law from what has not been said by the Delegate. Further, “jurisdictional error may include ignoring relevant material in a way that affects the exercise of a power”; but here the plaintiff does not show that relevant material was ignored simply by pointing out that it was not mentioned by the Delegate, who was not obliged to give comprehensive reasons for his decision. Further, the Delegate’s letter is “not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed”.

(Original emphasis. Citations omitted.)

Gageler J said, at [72]:

… The letter was not a formal statement of the reasons for the decision: it was not a document devoted to setting out, exclusively and exhaustively, the findings of fact made by the delegate and the process of reasoning which the delegate adopted to reach the conclusion that there were no compelling reasons for giving special consideration to granting the visas. It was somewhat informally expressed.

The source and character of the power to decide

21    One important issue which divided the parties was the source and character of the power to decide.

22    Each party also referred to authority. The respondents referred particularly to Roche Products Pty Ltd v National Drugs and Poisons Schedule Committee [2007] FCA 1352; 163 FCR 451 and Applied Medical referred particularly to Orthotech Pty Ltd v Minister for Health [2013] FCA 230; 211 FCR 241.

23    Roche concerned judicial review proceedings to challenge the decision or conduct of the National Drugs and Poisons Schedule Committee to reconsider the inclusion of orlistat in Appendix H of the Poisons Standard and the decision or conduct of the Committee of 22 February 2007 deciding to remove orlistat from Appendix H. Section 52D(2) of the Therapeutic Goods Act 1989 (Cth) as it stood in 2007 gave the Committee power to amend the current Poisons Standard or to prepare a new document in substitution for it. The relevant provisions were:

52D    Poisons Standard

(1)    On the commencement of this Part, the first Poisons Standard is taken to have been prepared and made available by the Committee.

(2)    Subject to this Act and the regulations, the Committee has power:

(a)    to amend the current Poisons Standard; or

(b)    to prepare a document (a new Poisons Standard) that includes schedules containing the names or descriptions of substances, in substitution for the current Poisons Standard.

(3)    As soon as practicable after a new Poisons Standard is prepared, the Committee must cause a notice to be published in the Gazette stating:

(a)    that a new Poisons Standard has been prepared; and

(b)    the date on which the new Poisons Standard comes into effect; and

(c)    a place from which copies of the new Poisons Standard can be purchased.

(4)    As soon as practicable after an amendment is made to the current Poisons Standard, the Committee must cause a notice to be published in the Gazette stating:

(a)    that an amendment has been made to the Poisons Standard; and

(b)    the date on which the amendment comes into effect; and

(c)    a place from which copies of the amendment can be purchased.

(5)    In this section:

amend, in relation to the current Poisons Standard, means:

(a)    alter any provision (including a reference to a substance) in the current Poisons Standard; or

(b)    omit any provision (including a reference to a substance) from the current Poisons Standard; or

(c)    insert any provision (including a reference to a substance) in the current Poisons Standard.

52E    Matters to be taken into account in exercising powers

(1)    In exercising its powers under subsection 52D(2), the Committee must take the following matters into account (where relevant):

(a)    the toxicity and safety of a substance;

(b)    the risks and benefits associated with the use of a substance;

(c)    the potential hazards associated with the use of a substance;

(d)    the extent and patterns of use of a substance;

(e)    the dosage and formulation of a substance;

(f)    the need for access to a substance, taking into account its toxicity compared with other substances available for a similar purpose;

(g)    the potential for abuse of a substance;

(h)    the purposes for which a substance is to be used;

(i)    any other matters that the Committee considers necessary to protect public health, including the risks (whether imminent or long-term) of death, illness or injury resulting from its use;

and may take into account the labelling, packaging and presentation of a substance.

(2)    In taking into account the matters referred to in subsection (1), the Committee must comply with any guidelines of the Australian Health Ministers’ Advisory Council or the subcommittee of the Council known as the National Co-ordinating Committee on Therapeutic Goods, notified to the Committee for the purposes of this section.

24    Branson J concluded that an exercise of power under s 52D(2) of the Therapeutic Goods Act was legislative, rather than administrative in character.

25    Although certain considerations are traditionally regarded as relevant for the purpose of characterisation, as Branson J noted at [28], the task ultimately is an evaluative one; a judgment must be made taking into account all relevant considerations, but no single consideration is likely to be decisive. If there were a close similarity between s 52D(2) of the Therapeutic Goods Act and s 72-10 of the Private Health Insurance Act, my approach might be different. As it is, Roche can be no more than an example. I note her Honour’s summary at [27] and [29], as follows:

As the Full Court observed in RG Capital Radio Ltd v Australian Broadcasting Authority (2001) 113 FCR 185 at [40] (RG Capital), there is no simple rule for determining whether a decision is of an administrative or legislative character. At [44] the Court cited the following passage from the judgment of the Full Court in Minister for Industry and Commerce v Tooheys Ltd (1982) 60 FLR 325 at 331; 42 ALR 260 at 265:

The distinction is essentially between the creation or formulation of new rules of law having general application and the application of those general rules to particular cases: Commonwealth v Grunseit [(1943) 67 CLR 58]; Hamblin v Duffy No 2 [(1981) 50 FLR 308; 34 ALR 333] and de Smith’s Judicial Review of Administrative Action 4th ed, p 71. In Commonwealth v Grunseit, Latham CJ expressed … the distinction in these terms: “The general distinction between legislation and the execution of legislation is that legislation determines the content of a law as a rule of conduct or a declaration as to power, right or duty, whereas executive authority applies the law in particular cases”.

…

In Visa International Service Association v Reserve Bank of Australia (2003) 131 FCR 300 at [592] Tamberlin J summarised the matters which were regarded as relevant in RG Capital as follows:

•    Whether the decisions determined rules of general application or whether there was an application of rules to particular cases.

•    Whether there was Parliamentary control of the decision.

•    Whether there was public notification of the making of the regulation.

•    Whether there has been public consultation and the extent of any such consultation.

•    Whether there were broad policy considerations imposed.

•    Whether the regulations could be varied.

•    Whether there was power of executive variation or control.

•    Whether provision exists for merits review.

•    Binding effect.

26    Orthotech did concern the Private Health Insurance Act and the Private Health Insurance (Prostheses) Rules 2012 (No 2) (Cth). Orthotech sought judicial review of a decision to revoke the listing of the components of a certain device “in the Prostheses List forming part of the Private Health Insurance (Prostheses) Rules 2012 (No 2)”.

27    The decision was expressed to be: “To revoke, in accordance with section 330-20 of the Private Health Insurance Act 2007 (the Act) … the listings in the Private Health Insurance (Prostheses) Rules 2012 (No 2) of the prostheses specified below by revoking, under subsection 72-10 of the Act … the grants of the listings for those prostheses on 5 January 2011.”

28    Orthotech claimed that the delegate was not empowered by the Private Health Insurance Act (with or without reading relevant provisions of that Act with the Acts Interpretation Act) to make the decision revoking the listing of the device in the Prostheses Rules in the absence of a change in the facts upon which the original decision to list was made. See [40] of the judgment.

29    That contention failed and Collier J held that the delegate was empowered to revoke the listing. Collier J, at [49], gave as her first and primary reason that s 72-10 is subordinate to s 333-20 for the purposes of construing the relevant legislative scheme in the Private Health Insurance Act. Section 333-20 empowered the Minister to make relevant legislative instruments, including the Prostheses Rules. It was not s 72-10 which so empowered the Minister. Her Honour held, at [50], that the work of s 72-10 was to provide a supportive structure for the Minister to make the relevant legislative instrument, with other sections in Div 72 of the Private Health Insurance Act (for example, s 72-1). Her Honour gave as an example s 72-10 permitting the Minister, on application of an applicant, to either grant or not grant the application for listing of the relevant prosthesis. It was clear, her Honour said, that the sole purpose of the Minister in assessing the application, as required by s 72-10, was to determine whether the relevant prosthesis should be included in the Prostheses List made by the Minister pursuant to s 333-20. It was not in dispute in Orthotech that when the Minister approved applications for new prostheses for listing on the Prostheses List, a new legislative instrument was required to be made by the Minister pursuant to s 333-20 (namely a “new” version of the Prostheses Rules), and that generally this occurred twice every year in February and August. Collier J rejected, at [58], the submission on behalf of Orthotech that there was a contrary intention to the application of s 33(3) for the purposes of s 2(2) of the Acts Interpretation Act or, it seems, s 13 of the Legislative Instruments Act 2003 (Cth). Part of her Honour’s reasoning in this respect was as follows, holding that it was:

… a clear intention of the Private Health Insurance Act in relation to the power of the Minister to make rules listing prostheses which are within the scope of operation of that Act — namely to ensure that prostheses which are approved by the Minister are clinically effective and safe. To the extent that Orthotech submits that this is not a purpose of the Private Health Insurance Act, I reject that submission. The purpose of Pt 3-3 of the Private Health Insurance Act is to set out the requirements that a private health insurance policy must meet in order to be a complying health insurance policy (s 60-1). More fundamentally, it is clear from s 3-1 that the intention of Parliament is that the Act regulate private health insurance in Australia and provide incentives to members of the public to contribute to private health (s 3-1). While the statute deals specifically with the machinery of the private health insurance system, there is an important balance to be struck between premiums, benefits payable to insureds, and the quality of products provided under private health insurance. Public policy and the health concerns of patients are entwined with the exercise of the Minister’s power under s 333-20 to make rules relating to the listing of prostheses (including the approval of the Minister to prostheses to be listed in the Prostheses Rules). In this respect, there is a strong policy dynamic in ensuring that the Minister has power to revoke or rescind decisions concerning prostheses on the Prostheses List. In my view any proposition to the contrary poses a risk that the Minister would be forced to continue to list outdated prostheses, resulting in potential harm to both patients and insurers, and ineffective administration of the private health insurance system under the legislation. I do not consider such a proposition is supported by the structure of the Private Health Insurance Act.

(Original emphasis.)

30    In my opinion, while the Private Health Insurance Act provides incentives to encourage people to have private health insurance, Ch 3 sets out rules governing private health insurance products and requires insurers who make private health insurance available to people to offer products that comply with the Act. As s 50-1 notes, health insurance made available to the public must meet the requirements in Ch 3, including that the insurance must be in the form of a complying health insurance product. Part 3-3 provides that health insurance that is made available to the public must be in the form of a complying health insurance product (which is made up of complying health insurance policies). As s 60-1 explains, complying health insurance products (complying health insurance policies) are the only kind of insurance that private health insurers are allowed to make available as part of their health insurance business. A complying health insurance product is a product made up of complying health insurance policies: see s 63-5. By s 63-10, a complying health insurance policy is an insurance policy that, if the policy covers hospital treatment, meets the benefit requirements in Div 72. Such an insurance policy meets the benefit requirements in Div 72 if the policy meets the requirements in the table in s 72-1(2), the relevant provision being item 4. The requirements that a policy that covers hospital treatment must meet are, relevantly, that there must be a benefit for hospital treatment covered under the policy that is the provision of a prosthesis of a kind listed in the Private Health Insurance (Prostheses) Rules, and if the prosthesis is provided in circumstances in which a Medicare benefit is payable and the Rules set out conditions must be satisfied, those conditions are satisfied. A further requirement is that the amount of the benefit must be at least the amount set out in the Private Health Insurance (Prostheses) Rules as the minimum benefit for the prosthesis. (The present case does not involve the Rules setting out an amount as the maximum benefit.)

31    By s 333-20, the Minister may, by legislative instrument, make Private Health Insurance Rules providing for matters required or permitted by, relevantly, Pt 3-3, or necessary or convenient to be provided in order to carry out or give effect to Pt 3-3.

32    This is the immediate context for s 72-10. The Rules made for the purposes of item 4 of the table in s 72-1(2) must only list a kind of prosthesis if an application has been made by a person to the Minister to have the Rules list a prosthesis of the kind to which the application relates and the Minister has granted the application.

33    It is significant, in my opinion, that the list referred to is the listing which is done by, and contained in, the Private Health Insurance (Prostheses) Rules. The application to the Minister is to have those Rules list a prosthesis of the kind applied for.

34    Plainly, as s 72-10(4) makes express, the Minister may either grant the application to have the Rules list a prosthesis or the Minister may decide not to grant the application.

35    It seems to me that while the making of the Private Health Insurance (Prostheses) Rules is to be characterised as legislative, as also would be varying or revoking those Rules in whole or in part, deciding to grant or deciding not to grant an application under s 72-10(2) is of an administrative character. It is a decision to grant such an application which, by s 72-10(1), is the gateway to a kind of prosthesis being listed in the Private Health Insurance (Prostheses) Rules, but this suggests that the Minister’s decision to grant the application or not to grant the application is sufficiently distinct from the making of the Rules as to have its own character as administrative.

36    This conclusion is supported by observations in Minister for Industry and Commerce v Tooheys Ltd (1982) 60 FLR 325, Queensland Medical Laboratory v Blewett [1988] FCA 423; 84 ALR 615 and Anderson v Minister for Environment, Heritage and the Arts [2010] FCA 57; 182 FCR 462.

37    In Tooheys, the Full Court considered the statutory power granted to the Minister by s 273 of the Customs Act 1901 (Cth) to make determinations, by instrument in writing, whereby an item of a Customs Tariff that was expressed to apply to goods as prescribed by by-law shall apply to the particular goods specified in the determination. That power was separate to the powers conferred on the Minister by ss 271 and 272 to make by-laws. The Full Court observed, at 264, that in the case before the Court, the Minister’s decision not to make a determination under s 273 meant that no by-law was made for the purposes of item 19; so that duty was payable on the relevant goods at the rate of 30%. At 265, the Full Court described as unsound the proposition that by-laws were essentially legislative in character and agreed with the conclusion of the primary judge that determinations under s 273 were administrative in character. Their Honours noted, at 267, that it was important to bear in mind that the decision the subject of the proceedings was not a decision to make a determination under s 273; rather it was a refusal to make such a determination. Their Honours left open the possibility of cases where a refusal to make such a determination under s 273 would not assume the same character as a decision to make such determination.

38    In Queensland Medical Laboratory, the Court was concerned with the power vested in the Minister by s 4A of the Health Insurance Act 1973 (Cth) to make a determination varying the pathology services table set out in Sch 1A of the Act. Gummow J observed, at 634, that the primary characteristic of the activities of administrators in relation to enactments of the legislature was to maintain and execute those laws, as was indicated by the terms of s 61 of the Constitution itself. It was in this context that Gummow J said at 635-636:

The Schedules to the Act plainly are parts of that statute (the Interpretation Act, s 13) and upon the coming into effect of a determination made under s 4a(8) of the Act (as was purportedly the case here) the result is that the old table in Sch 1a ceases to have effect and the new table has effect as if it were set out in Sch 1a in place of the old table. Medicare benefits will thenceforth be calculated by reference to the fees set out in the new table (s 9) and the quantum of the entitlement to payment to Medicare benefits will be modified accordingly: ss 10, 20, 20a. The result is the same as if the Schedule had been changed by an amending statute (see Air Caledonie International v Commonwealth (1988) 82 ALR 385 at 392), but subject to the procedures for parliamentary disallowance of the determination, as provided for in s 4bc (1) of the Act.

In this setting, it may be true to say that if the Minister decides not to make a determination, he is executing or administering a law of the Commonwealth. His consideration of the subject is one which he would not have entertained but for the presence of s 4a(8) of the Act. If he decides not to make a determination, then the matter stops there and it may be accurate to say that his decision was of an administrative character; cf Minister for Industry and Commerce v Tooheys Ltd, supra. And it has to be borne in mind that there may be review under s 6 of the ADJR Act in respect of conduct for the purpose of making a decision to which the Act applies: Gunaleela v Minister for Immigration and Ethnic Affairs (1987) 74 ALR 263 at 276–7.

Nevertheless, in my view, when the Minister makes a determination that the table specified in the determination be substituted for the pathology services table then set out in Sch 1a of the Act, he is making a decision of a legislative rather than an administrative character. This is because, to adapt the expression of Dixon J, s 4a(8) has reposed in him an authority of an essentially legislative character: Dignan’s case supra, at 100-1. The Minister is in a sense executing a law of the Commonwealth because were it not for s 4a(8), he would lack competence to make the determination. But that law was a permitted delegation by the Parliament of legislative authority and to decide to exercise the power conferred by the law is to act as delegate of the Parliament and thus to act legislatively.

(As explained in Sea Shepherd Australia Ltd v State of Western Australia [2014] WASC 66; 313 ALR 184 at [76] per Edelman J, what Gummow J said as to the Minister acting in a manner which had “the immediate effect of changing the content of a law as a rule of conduct or declaration of power, right or duty” should not be treated as a test for “legislative effect”.)

39    In Anderson, the applicants sought judicial review of two decisions made by the Minister. By the first decision, the Minister declined to make an emergency declaration pursuant to s 9 of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth). By the second decision, the Minister declined to make a declaration pursuant to s 10 of that Act. Section 9 provided that in certain circumstances the Minister “may, by legislative instrument, make a declaration”. Section 10 made similar provision. The Minister’s primary submission to the Court was that both decisions were legislative in character. Foster J agreed that the making of a declaration under s 9 or s 10 was legislative in character but held, at [52], that the s 9 and the s 10 decisions were both administrative in character. Having referred to Tooheys and to Queensland Medical Laboratory, his Honour said as follows, at [51]:

A decision to refuse to make a declaration under s 9 or s 10 of the Act leaves the declaration applicant without a result and the citizenry without any rule of law of general application. Furthermore, a refusal is not required to be made the subject of a legislative instrument. All that has to be done is that that Minister must take reasonable steps to notify the applicant of the Minister’s refusal to make the declaration.

40    The first issue in the present case, however, is whether altering what it is that the Private Health Insurance (Prostheses) Rules list is within s 72-10. This is because by its correspondence seeking to lower the minimum group benefit amount applicable to all items in the Relevant Subgroup, Applied Medical was not applying to have the Rules list a prosthesis of the kind to which its “application” related.

41    In my opinion, such an application to vary the Rules list or to revoke it in whole or in part but not so as to list a kind of prosthesis stands outside s 72-10, which is directed to putting a kind of prosthesis on the Rules list. The Minister may of course make the Private Health Insurance (Prostheses) Rules and may vary them, as referred to in s 72-10(5), but the source of the power to do so is s 333-20, that power including a power to repeal, rescind, revoke, amend or vary the Rules by virtue of s 33(3) of the Acts Interpretation Act. In my opinion, this construction is consistent with the conclusion of Collier J in Orthotech. I do not accept that s 72-10, when read with s 33(3) of the Acts Interpretation Act is the source of the power to make a decision to revoke, vary or amend an existing listing.

42    The second issue, however, is whether deciding not to act under s 333-20 to vary the list in the Private Health Insurance (Prostheses) Rules is of an administrative character or of a legislative character, accepting as I do that there is an overlap between the two characters.

43    In my opinion, deciding not to act under s 333-20 is of an administrative character, for the following reasons.

44    First, a decision not to make or a refusal to make Private Health Insurance (Prostheses) Rules does not involve making a legislative instrument.

45    Secondly, if the Minister decides not to make a legislative instrument, the Minister is executing or administering a law of the Commonwealth. If the Minister decides not to make a Rule, then the matter stops there.

46    Thirdly, it is a decision not to act in relation to a specific number or class of goods: see Tooheys at 331-332.

47    Fourthly, I also take into account the following indicators of a legislative decision, that is, whether the challenged matter:

(i)    creates new rules of general application, rather than applying existing rules to particular cases;

(ii)    must be publicly notified in the Gazette or similar publication;

(iii)    cannot be made until there has first been wide public consultation;

(iv)    incorporates or has regard to wide policy considerations;

(v)    can be varied or amended unilaterally by its maker, the analogy being to primary legislation;

(vi)    cannot be varied or amended by the executive;

(vii)    is not subject to merits review in a tribunal;

(viii)    can be reviewed in Parliament (for example, as a disallowable instrument);

(ix)    triggers the operation of other legislative provisions; and

(x)    has binding effect.

See Schwennesen v Minister for Environment and Resource Management [2010] QCA 340 at [8] setting out these indicators of legislative decision in the form expressed in Braemar Power Project Pty Ltd v Chief Executive, Department of Mines and Energy in his Capacity as the Regulator Under the Electricity Act 1994 (Qld) [2008] QSC 241 at [21] per Philip McMurdo J, derived from the analysis in Aronson, Dyer and Groves, Judicial Review of Administrative Action (Lawbook Co, 4th ed, 2009) at pp 75-76 of SAT FM Pty Ltd v Australian Broadcasting Authority (1997) 75 FCR 604; RG Capital Radio Ltd v Australian Broadcasting Authority [2001] FCA 855; 113 FCR 185; Visa International Service Association v Reserve Bank of Australia (2003) 131 FCR 300 at 424; and Roche. Braemar Power was affirmed on appeal: Braemar Power Project Pty Ltd v Chief Executive, Department of Mines and Energy in his Capacity as Regulator under the Electricity Act 1994 (Qld) [2009] QCA 162; [2010] 1 Qd R 403. Aronson and Groves, Judicial Review of Administrative Action (Lawbook Co, 5th ed, 2013) repeat the analysis at pp 86-87, adding a reference to Harbour Radio Pty Ltd v Australian Communications and Media Authority [2012] FCA 614 at [127]-[140]; 202 FCR 525 at 561-563.

48    In my opinion, deciding not to make or vary the Private Health Insurance (Prostheses) Rules does not create new rules of general application. The decision need not be publicly notified in the Gazette or similar publication. It is not the case that the decision cannot be made until there has first been wide public consultation. It may be that the decision incorporates or has regard to wide policy considerations. Because the present decision is a decision not to make or vary, the decision can be varied or amended unilaterally by its maker; it can be varied or amended by the executive. The decision cannot be reviewed in Parliament as a disallowable instrument. The decision does not trigger the operation of other legislative provisions. The decision does not have binding effect.

49    It does not follow that the Minister is under an obligation to consider an application. Where a decision is not made, the refusal or failure to make a decision is only reviewable if there was a duty to make the decision. That is unnecessary to decide in the present case in relation to the application to reduce the minimum benefit applicable to all items in the Relevant Subgroup since the Minister’s delegate did consider Applied Medical’s application.

50    As explained in Yasmin v Attorney-General of the Commonwealth of Australia [2015] FCAFC 145 at [124], the AD(JR) Act contemplates that a decision which was made is reviewable whether or not there was a duty to make the decision and that a decision which was not made is only reviewable if there was a duty to make the decision.

51    In summary, while I accept the respondents’ submissions as to the source of the relevant power, I conclude that the decision to reject Applied Medical’s application to lower the minimum group benefit amount applicable to all items in the Relevant Subgroup was of an administrative character. If my conclusion is incorrect in this respect, and the character of the decision was legislative, then Applied Medical’s application for judicial review of this decision fails for substantially the reasons which follow. Put differently, if, as I find, the application fails on the basis that the decision was of an administrative character, it fails a fortiori if in truth the decision was of a legislative character, since the scope of judicial review would then be narrower.

52    While it could be said, as the respondents submitted, that the only relevant exercise of power took place pursuant to s 333-20, that, in my view, fails to distinguish between the decision not to amend the Rules in a particular respect and the making of the Rules without the amendment.

History of Applied Medical’s application to lower the minimum group benefit amount

53    The history of the correspondence on behalf of Applied Medical, including references to the so-called methodology or policy, is as follows.

54    Although it does not appear that this letter was before the decision-maker in February 2014 as it is not on the list which is Attachment 2 to the Minute to the delegate, by letter dated 10 June 2014, Jones Day, acting for Applied Medical, wrote to Professor Ian Harper, Competition Policy Review Secretariat. The letter contended that giving significant focus to reforming the private health insurance rebate Prostheses List arrangements, in particular, could lead to significant advances in Australia’s economic performance and patient health outcomes. The letter submitted that as a result of regulatory policy settings which restricted optimal competitive outcomes, products listed on the Prostheses List were being sold at prices that were in some cases multiple times more expensive than the prices at which they were sold in the public health system and in other jurisdictions. There was scope for very substantial efficiencies to be created through the introduction and extension of principles of competition to the regulatory structure that underpinned the Prostheses List. The letter said that in response to specific recommendations from the Review of Health Technology Assessment in Australia conducted by the Department of Health and Ageing in conjunction with the Department of Finance in 2009 (HTA Review), the Prostheses List Advisory Committee (PLAC) had sought to establish and maintain a single price for groups of products on the Prostheses List with similar clinical effectiveness. The letter also attached the preliminary views of Deloitte Access Economics on the potential competition issues in the market.

55    By letter dated 23 July 2014, Jones Day wrote to Professor Horvath, PLAC, with a copy to Mr Porter, Assistant Secretary, Private Health Insurance Branch and to Ms Lyndall Moore, Director, Prostheses Section in the Department of Health. That letter began by referring to a previous submission dated 10 July 2014, which is not in evidence. Having described as appropriate Applied Medical’s two laparoscopic clip applier models being in a sub-classification together with those of Johnson & Johnson and Covidien, Jones Day said the following:

We also understand from discussions with your officers that the August 2014 Prostheses List will set a minimum benefit of $412 for these items unless submissions are received from the suppliers of the relevant products that the minimum benefit limit should be lower. We understand that the figure of $412 has been selected in the same way that the limits are generally set for the Prostheses List – that being a consideration of the lowest price at which 25% of prostheses in any given sub-group are being supplied under the Prostheses List framework.

Having expressed Applied Medical’s “serious reservations regarding the PLAC process to date”, which appear to have centred on the Private Health Insurance (Prostheses) Rules 2013 (No 1) (Cth) and what was described as the February 2014 Prostheses List, the letter contained what was described as a submission on behalf of Applied Medical. It appears that at that time, Applied Medical’s benefit limit had been set at $145. The letter concluded as follows:

Therefore it is Applied Medical’s submission that:

1.    All the products in the sub-group should have the same minimum benefit. This is more important than any of the points below.

2.    Based on the evidence supplied, the most equitable and affordable way to deliver access to the cost-effective health technologies needed to manage the health of Australians is to set that minimum benefit at $99 for all laparoscopic clip appliers. At that price Applied Medical would be willing and able to supply as many clip appliers as are needed across the private health system.

3.    An international comparison exercise would reveal that the minimum benefit of $99 is in much better alignment with international prices for clip appliers than $412.

4.    If any other supplier in the sub-group has provided submissions to the PLAC that a $412 benefit is justified, Applied Medical should be given an opportunity to respond to the substance of those submissions before they are accorded any weight in decision making because the effect of setting the limit at such an inflated level is preventing Applied Medical from selling significant volumes of clip appliers at more affordable, efficient prices and is thus adverse to its interests.

In summary, Applied Medical considers the benefit for the whole group should be set at $99 but if that submission is not accepted, the most important interim principle (until a full review is conducted) is for all suppliers to have the same minimum benefit whatever it may be.

56    On 21 October 2014, Jones Day sent a letter, referred to above, attaching a submission to the Minister for Health and to the PLAC on behalf of Applied Medical. The body of the letter was as follows, so far as relevant:

Applied Medical seeks the implementation, in the next iteration of the Prostheses List in February 2015, of a significant decrease to the benefit applicable to all items on the Prostheses List sub-group 03 General Miscellaneous – 03.08.03 Ligating Devices – 03.08.03.03 Clips with Disposable Applier – Laparoscopic. That contains laparoscopic clip appliers supplied by:

•    Applied Medical (Billing Codes MH014 and MH015);

•    Johnson & Johnson (Billing Codes JJ482 and JJ186); and

•    Covidien (Billing Codes AS073, AS074 and AS137).

Applied Medical’s submission advances information on the basis of which the Department can immediately remedy the demonstrable over-charging that occurs in respect of laparoscopic clip appliers. It also supports a broader reform agenda that Applied Medical contends ought apply to the entire List in the longer term.

It is clear from the provisions of the Private Health Insurance Act 2007 that the primary concern of Parliament in introducing measures such as the Prostheses List is to encourage people to take out, and continue to hold, private health insurance. Indeed an entire Chapter is dedicated to measures to provide incentives to address these concerns such as the Premiums Reduction Scheme and Lifetime Health Cover protections. The Prostheses List, as it currently operates, is clearly anomalous to the objectives of the legislation and it is incumbent upon the Minister and the Department to bring about reforms to remedy the situation.

…

Applied Medical will separately write to the Department indicating the manner in which the current system is open to abuse by incumbent device suppliers and ways in which this situation could be ameliorated or remedied on a List-wide basis.

Applied Medical supports the maintenance of the current grouping for laparoscopic clip appliers. In the event of any proposal to alter the structure of the group (by addition, deletion, group splitting or amalgamation or otherwise), the Department will be required to accord procedural fairness to Applied Medical and enable it to comment upon the proposal and any material put by the party advancing the alteration.

Applied Medical has commissioned Deloitte Access Economics to provide an independent economic review of the prostheses listing process. The report is provided alongside the submission, to assist the Minister in understanding the economic issues germane to listing decisions.

…

(Footnotes omitted.)

57    Attached to the letter was a submission to the Minister for Health and the PLAC of some 15 pages. Attached to that submissions was: first, a document “The legal framework within which the Minister makes his decision”; secondly, consultation term sheets setting out Johnson & Johnson’s standard terms with a number of hospital groups, Covidien contract terms with major private hospital groups, and typical private hospital supplier template provisions; and thirdly, a document of some 45 pages by Deloitte Access Economics “Economic review of the prostheses listing process”.

58    The submission stated that the current allocation of benefits on the Prostheses List was affected by various distorting factors. They were summarised as follows:

i.    the benefits set do not reflect net prices paid for prostheses;

ii.    the method of determining group benefits restricts competitive and innovative prostheses suppliers from constraining incumbent suppliers through pricing behaviour; and

iii.    the benefits set, and net prices paid by hospitals for prostheses, are substantially higher than those found in comparable international markets and the Australian public healthcare system.

59    At paragraphs 24-26 and 30-31, the following was said, relevant to the 25% utilisation rate issue and to the “no evidence” ground of review:

The current framework significantly impedes the ability of a supplier reluctant to engage in hidden rebating, such as Applied Medical, to reach a utilisation rate of 25% which is currently used to set the minimum benefit limit for the sub-group as a whole. As observed by Deloitte Access Economics, in markets for prostheses regulated by the Prostheses List, “[m]anufacturers may find it difficult to attract market share based on price leadership alone”.

The effect of this is that those suppliers who are able to more efficiently provide prostheses vis-a-vis existing suppliers are not able to benefit from an increase in market share as a result of normal competitive market forces, which would otherwise have generally produced such an increase. As a result, the 25% utilisation rate threshold actually acts to prevent innovation amongst suppliers to supply prostheses at lower costs to Australian patients, as the minimum benefit framework restricts the normal competitive market forces which would otherwise reward those suppliers with increased sales and market share.

This also severely restricts the ability of an innovative competitor, willing to supply at a much lower benefit level, to influence the group benefit level. Instead, the framework, particularly the use of a 25% utilisation rate drawn from sales under the same regulatory framework, serves to protect incumbents.

…

… the 25% utilisation rate threshold was implemented. Applied Medical understands from discussions with a number of market participants and the Department that the rationale for the utilisation rate threshold was to ensure that prostheses supplied at the benefit level were:

i.    broadly clinically accepted in Australia; and

ii.    supplied in quantities that would indicate the ability of the supplier to credibly supply a substantial percentage of the market.

These concerns primarily arise in a ‘worst case scenario’ where other existing suppliers in a group chose to not supply at a new reduced benefit level.

(Footnotes omitted.)

60    At paragraph 34, the submission stated that Applied Medical’s market share in the private health care market was less than 25% at the last date that utilisation was considered by the PLAC. The conclusion of the submission, so far as presently relevant, at paragraphs 65-67, was as follows:

It is imperative that all items in the laparoscopic clip applier sub-group have the same benefit and this is of paramount importance to Applied Medical.

Applied Medical is a supplier of substance willing to sell clip appliers at a substantially reduced minimum benefit limit. Implementing properly the recommendations of the HTA Review for grouped benefits, and the following relevant considerations, the Minister should set the benefit for the whole group at $99 per unit.

…

Applied Medical’s prices should not be excluded when selecting the appropriate benefit for the relevant sub-group. However, if the 25% threshold is applied (noting that we consider it should not), the benefit should be the bolded figure in the following table. This table is provided in Attachment E in formats which can be consulted on.

(Original emphasis.)

The bolded figure in the table was $102.92, described as the lowest average selling price in a comparable OECD country.

61    The first attachment to the submission (“The legal framework within which the Minister makes his decision”) identified s 333.20 of the Private Health Insurance Act as providing the Minister with the power to make decisions on whether to make Private Health Insurance (Prostheses) Rules and what form those Rules should take, including a decision as to the benefits payable. The submission said the Minister’s discretion in making a listing decision was broad and set out a list of eight considerations which the submission said the Minister must have regard to. Those considerations were:

i.    whether the decision provides incentives to encourage people to have private health insurance by making it competitive and attractive;

ii.    whether the decision encourages the private health sector to deliver health services efficiently and promotes the long-term sustainability of the health insurance industry;

iii.    whether the effect of the decision is to reduce or increase the growth in prostheses benefits over time and its subsequent effect on the pressure on the level of private health insurance premiums;

iv.    whether the decision tends to provide contributors with more choice in the provision of prostheses;

v.    whether the decision restricts competition;

vi.    whether there are any alternatives to regulation and whether regulation is the best solution;

vii.    whether there is any information asymmetry which needs to be corrected; and

viii.    whether the decision tends to restrict entry by new businesses into the regulated market.

62    The submission concluded, at paragraphs 25-26, as follows:

It is incumbent upon the Government to implement reforms to the Prostheses List, which after the regulation of health insurance premiums, is the most significant price regulatory framework in the private health insurance market, if it intends to abide by the promises made by the Finance Minister when he set out the Government’s response to the NCOA [National Commission of Audit] Report.

It is also important that the methodology used to determine the appropriate listing decision should be consistent across sub-groups to the extent possible. Therefore any reforms to the methodology utilised to determine the appropriate benefit for the laparoscopic clip applier sub-group should be applied more broadly throughout the Prostheses List.

63    The last of the attachments, the Deloitte Access Economics report, reviewed “the efficiency of the prostheses listing process in Australia, for the purpose of use in submissions by Applied Medical and/or Jones Day to inform regulatory and policy decisions”. The terms of reference covered three pages and are too long to set out here. They covered the general framework for analysis; the identification of the relevant markets; describing the nature of the existing and potential competition one would expect to arise in these industries; identifying the most significant economic effects of the current regulatory decisions, being the February 2014 Rules, with respect to the prostheses traded in the relevant markets; a series of questions as to whether the February Rules restricted competition, encouraged people to have private health insurance, made private insurance competitive and attractive to consumers, were conducive to an efficient and competitive private health insurance industry, were an efficient regulatory framework, encouraged the private health sector to deliver services efficiently, promoted the long-term sustainability of the health insurance industry, assisted Australians to participate further in private health insurance, whether the February Rules reduced or increased the pressure on the level of private health insurance premiums, whether the February Rules were likely to reduce growth in prostheses benefits over time, and whether the February Rules were likely to provide contributors with more choice in the provision of prostheses; and alternatives under the current regulatory framework.

64    On 31 October 2014, Jones Day sent an email to Mr Porter and to Ms Moore. It concerned the terms of reference of the Review to be conducted by Professor Sansom, Professor Horvath and Mr Delaat.

65    By letter dated 11 November 2014, Jones Day wrote to the Secretary, Department of Health and the Secretary, Department of Finance. This submission proposed a number of reforms “through reform of the administrative processes undertaken by the Department in advising the Minister for Health on the exercise of his or her discretion to issue the Prostheses List”. The submission, in four attachments:

1.    Identifies the legal framework under which the Minister for Health makes his or her decision;

2.    Outlines the systemic issues associated with the methodology currently used to determine the benefits payable, which insurers, private health subscribers and government must ultimately pay, for prostheses on the Prostheses List; and

3.    Sets out the reforms, which have broad agreement amongst a number of industry participants, necessary to resolve these issues and bring about the benefits identified above.

66    In the first attachment, at paragraph 21, Applied Medical submitted that the 25% utilisation rate threshold had a number of important perverse effects. Applied Medical submitted that revisiting the 25% utilisation threshold was one way to address the issues identified. In summary, as supplemented by the second attachment, Applied Medical submitted:

It is important to revisit the 25% utilisation threshold in addressing the issues outlined in the submission. In summary, reforms should involve the following elements:

•    The PLAC currently looks to a utilisation rate test of 25% to determine the minimum benefit for each group. The test is intended to determine whether a supplier can credibly supply the private hospital system.

•    The utilisation rate is set by reference to existing market shares in the private hospital system, effectively preventing newer, large and credible innovators from influencing the minimum benefit.

•    The minimum benefit should instead be set at the price at which the lowest cost supplier is willing to supply the products, provided that supplier can demonstrate that they could credibly supply a substantial part of the market and that their products are clinically accepted as demonstrated by sales in either a private hospital market or a public hospital market.

67    The first attachment concluded as follows, at paragraphs 44-46:

It is incumbent on the Minister, and the PLAC, as an appointed advisory body responsible for providing recommendations to the Minister regarding the relevant decision, to take into account the issues outlined above in making a listing decision. The issues are not able to be addressed in isolation and it is necessary to implement each of the reform elements above to achieve a listing decision in line with the expectations of Parliament and that furthers the goals of the regulatory framework.

For example, an analysis of net pricing to private hospitals in Australia would not reveal the competitive price that the product would be supplied at had the benefits not been divvied up between the private hospital and the medical device supplier. Further, it is recognised that there are some incremental additional costs of doing business in Australia which may lead to slightly higher prices here than in the US, so international pricing cannot solely be relied on as an indication of competitive pricing in Australia.

Instead, each of the reform elements informs the others and contributes to a more efficient competitive prostheses market for private hospitals that furthers the Government’s stated and ideological goal of increasing the uptake of private health insurance in Australia.

68    The second attachment submitted that the current 25% utilisation rate threshold was not achieving the purpose for which it was introduced. It was a reasonable policy objective to ensure that suppliers’ products were broadly clinically accepted and capable of being supplied in sufficient quantities, if there was the potential for that supplier to be the only one willing to supply at a certain benefit level. However, it was submitted, the criteria used to assess products against this policy objective must be considered further. Applied Medical submitted that it was inappropriate to use this kind of measure to distinguish between products which are and are not clinically accepted. Applied Medical further submitted that a sponsor should be able to demonstrate an ability to supply the market through a range of methodologies. The ability of a sponsor to supply the market should be able to be demonstrated through evidence of: existing manufacturing volumes; existing manufacturing capacity; and/or demonstrated ability to readily increase manufacturing capacity. Such evidence, it was submitted, could be provided in the form of a statutory declaration or affidavit from a senior manager responsible for production in the relevant sponsor.

69    By letter dated 12 November 2014, Jones Day wrote again to Mr Porter and to Ms Moore. It appears that that letter was sent as an attachment to an email dated 13 November 2014. The email explained that the attached letter recorded and explained the authors’ concerns as to the timing of any decision and why, in their view, it was most important that the benefit amount for clip appliers was reformed by the next iteration of the Prostheses List. The letter expressed deep concern at the suggestion raised in a discussion on 31 October 2014 that the substance of the Jones Day submissions concerning the minimum benefit amount for the Relevant Subgroup of the Prostheses List may not be addressed in the next publication of that List expected in February 2015.

70    On 14 November 2014, Mr Porter responded to this email stating that there were a number of Government implemented reviews which were looking at the types of issues Jones Day had identified, including the Review of Devices and Medicines and the Ian Harper Competition Policy Review and a significant deregulation agenda. Mr Porter said that the concerns raised by Jones Day were currently being reviewed in that context.

71    On 17 November 2014, Jones Day wrote again to Professor Harper, at the Competition Policy Review Secretariat. The submission indicated as a possible reform removal of the 25% utilisation threshold.

72    On 17 November 2014, Jones Day sent a further email to Mr Porter, making the statement that there should be no impediment to addressing the reduction in the benefit amount for clip appliers from $412 to $99 in the February list.

73    On 21 November 2014, Jones Day sent a further email to Mr Porter and to Ms Moore. The email contended that it seemed, from the difficulty in finding older paper material recording the rationale for the HTA Consultative Committee recommending the use of a 25% utilisation rate, that there was no ongoing awareness by the current Minister or his relevant advisers as to why 25% was chosen as the utilisation rate and, therefore, whether or not such a rate remained a suitable measure nor whether other measures now proposed may be superior to the original 25% utilisation rate concept.

74    On 5 December 2014, Jones Day sent a letter to the Minister for Health and to Professor Lloyd Sansom, Chair, Review of Medicines and Medical Devices. The letter concerned whether the “Panel” (the Review of Medicines and Medical Devices Regulation) was addressing the issue of reforms to the Prostheses List arrangements. The Minister responded by letter dated 19 December 2014, which included the following:

Your submission and interest in the reform of the Prostheses List is welcomed. …

While I appreciate that your clients, Applied Medical, are seeking rapid reform, the recent sale of Medibank Private limits the Commonwealth’s flexibility at this time. In addition, the issues around the use of medical devices/products are much broader than just the issues you have noted regarding the current Prostheses List arrangements.

The Medibank share offer prospectus clearly identifies that both short and long-term policy options regarding private health insurance may be considered, but any significant reforms must be subject to wide stakeholder consultation, and reforms which are supported, are not to be implemented prior to 1 July 2015.

75    On 9 December 2014, Jones Day sent a further letter to Mr Porter and to Ms Moore. In this letter, Jones Day submitted that Applied Medical’s submission seeking that the benefit amount for the Relevant Subgroup be lowered from $412 to $99 did not require regulatory reform or even a change in Departmental policy. Reference was made to the HTA Review Report for the proposition that the policy had been to create subgroups of products within the Prostheses List and to apply a single benefit amount to those subgroups and that, quoting from page 94 of the Report: “Consistent with current policy to control costs, generally the single benefit will reflect the lowest benefit accepted for a product in a group.” The letter referred to whether or not the Department proposed to organise an appropriately structured hearing at which each supplier of products in the Relevant Subgroup could put its views to the Department, and that Jones Day could obtain instructions on whether that was of interest to their client. The letter concluded by saying:

We are disappointed that even when a sponsor has provided data and evidence of substantially inflated benefit amounts, it appears the Department is not willing to be proactive in pursuing a process by which all parties are afforded an appropriate opportunity to provide input within a framework that leads to fair and efficient benefit amounts being set for listed prostheses.

It is Applied Medical’s position that a proper statutory decision-making process requires that the material submitted by it be considered on its merits by the time the next list is published. …

76    On 28 January 2015, Jones Day sent a letter to the new Minister for Health. I consider this letter more fully at [126] below insofar as it relates to the proposal that the Minister revoke the product listings for the Relevant Subgroup.

77    These submissions were before the delegate on 19 February 2015: see the reference to Attachment 2 in the Minute to the delegate as being a complete list of correspondence sent by Jones Day, and Attachment 2 itself which lists the 12 items of correspondence from Jones Day in a document entitled Attachment 2.

Consideration

78    As I have said, in my view, the decision was a decision not to make a change to the minimum benefit for the Relevant Subgroup by the next making of Private Health Insurance (Prostheses) Rules under s 333-20 and that decision was of an administrative character. It is to be recalled that s 333-20 refers expressly, so far as relevant, to matters required or permitted by Pt 3-3 to be provided, or necessary or convenient to be provided, in order to carry out or give effect to Pt 3-3.

79    One challenge made by Applied Medical to the decision was that it “was made without any, or any adequate, evidence in two senses: first, arising from a misapprehension as to the nature of the application before it; and secondly, for want of evidence to substantiate findings of fact made”.

80    As to the first, Applied Medical submitted the decision-maker made the decision on the basis of an assumption that the application was a request to change departmental policy generally, or the 25% Utilisation Policy in particular, in circumstances in which that assumption was wrong. Applied Medical submitted the no evidence ground in s 5(1)(h) and s 5(3) of the AD(JR) Act required that there must be no evidence or other material to justify the making of the decision, which would include a circumstance in which the decision-maker based the decision on the existence of a particular fact and that fact did not exist. Applied Medical submitted this was such a case. I reject that submission. In my opinion, it is directed to the reasoning process of the decision-maker and involves a misreading of that reasoning process. What the decision-maker is to be taken as recognising, by agreeing to the Minute, was that Applied Medical was only arguing for a change to the minimum benefit for a single sub-group. The decision-maker is to be taken as reasoning that the same methodology needed to be implemented across the entire list in the Private Health Insurance (Prostheses) Rules. This did not involve a misunderstanding of Applied Medical’s application. Neither did it involve the decision-maker basing her decision on the existence of a particular fact where that fact did not exist.

81    As to the second, Applied Medical submitted there was no evidence or other material before the decision-maker to justify the making of the findings of fact, that: (a) Applied Medical’s sales of laparoscopic clip appliers were less than 25% of the total sales of such products in private hospitals; and (b) there was another party whose sales were greater than 25%. I reject that submission. In my opinion, it was an assumption by Applied Medical that its product or products did not have a market utilisation rate of at least 25%. Otherwise, there would have been no reason to state, at paragraph 24 of the first attachment to its submission dated 21 October 2014, that the current framework significantly impeded the ability of a supplier, such as Applied Medical, to reach a utilisation rate of 25%. Additionally, no attempt was made in evidence to establish that Applied Medical’s sales of laparoscopic clip appliers were not less than 25% or that there was not another party whose sales were greater than 25%. As to this last proposition, I am assuming that the methodology or policy involved a single other supplier having such sales.

82    Another challenge to the decision was that it was so unreasonable that no reasonable decision-maker could have so exercised the power conferred by the Public Health Insurance Act. The basis for this submission was as follows:

(a)    aside from the Briefing Note, all of the material before the second respondent supported the change requested in the Benefit Amount Application and there was no material to the contrary;

(b)    the Briefing Note did not respond meaningfully to any of the material supporting the Benefit Amount Application, or criticise that material in any way;

(c)    there was no logical connection between the request contained in the Benefit Amount Application and the considerations taken into account by the second respondent, including that:

i.    any change to the benefit setting policy would require extensive, industry-wide consultation and sponsors of other products would need to be given an opportunity to comment on the proposed policy change;

ii.    there was no evidence that the proposed change advocated by the applicant would be supported by the vast majority of other product sponsors;

according to statements made in the Medibank Private Sale prospectus, no reforms to private health insurance would be implemented before 1 July 2015; and

iii.    there were a number of ongoing reviews undertaken by the Government that might have implications for the Prostheses List arrangements; and

(d)    other than the matters alleged in subparagraph (c) above, the only remaining basis for the Rejection Decision was the 25% Utilisation Policy, which was itself arbitrary, beyond the power conferred on the Minister by the PHI Act and devoid of any valid, reasoned basis.

83    In my opinion, there was nothing legally unreasonable in either the conclusion or in the reasoning of the decision-maker. I have already referred to the breadth of the power conferred by s 333-20. It was open to Applied Medical to request that their prostheses be listed with a lower benefit of $99: it had not done so. Applied Medical wanted the minimum benefit for the Relevant Subgroup set at $99, the price at which it proposed as the minimum price, to apply for all laparoscopic clip appliers. It did not establish that its products had a market utilisation rate of 25%. Its application could not succeed without departing from, or a change in, policy that a minimum benefit price for comparable products performing a similar clinical role be set at the lowest price for a product which had a market utilisation rate of at least 25%. It is for the repository of the power to consider whether or not that same methodology needs to be implemented across the entire list in the Private Health Insurance (Prostheses) Rules. In my opinion, there is nothing legally unreasonable in the decision-maker taking that view and, having taken it, reasoning as she did. In the result, this ground is an attack directed to the merits of the decision. This may be seen in sub-grounds (a), (b) and (c). Insofar as this ground involves the methodology or policy of a market utilisation rate of 25%, sub-ground (d), I shall consider that at [102]-[116] below when addressing the ground of review directed to an unlawful policy or an inflexible application of that policy.

84    A third ground of review brought by Applied Medical was that the decision was an improper exercise of the power conferred by the Public Health Insurance Act on grounds of relevancy. Applied Medical submitted that the decision miscarried on this ground as follows:

(a)    the second respondent took into account whether the Benefit Amount Application would be supported by the majority of sponsors, which was an irrelevant consideration because:

i.    the group benefit amount for a particular List subgroup is not determined by consensus of the sponsors of products in that subgroup; and

ii.    the group benefit amounts for particular List subgroups are not determined by consensus of all the sponsors of products listed on the List;

(b)    if there were a policy to this effect, it would be plainly inconsistent with the legislative purpose behind prescribing benefit amounts for items listed on the List;

(c)    the second respondent took into account when making the Rejection Decision that the Benefit Amount Application was a request to change departmental policy generally, or the 25% Utilisation Policy in particular, which was an irrelevant consideration because the Benefit Amount Application contained no such request;

(d)    the second respondent took into account when making the Rejection Decision that:

i.    any change to the benefit setting policy would require extensive, industry-wide consultation and sponsors of other products would need to be given an opportunity to comment on the proposed policy change;

ii.    according to statements made in the Medibank Private Sale prospectus, no reforms to private health insurance would be implemented before 1 July 2015; and

iii.    there were a number of ongoing reviews undertaken by the Federal Government that might have implications for the Prostheses List arrangements;

which were irrelevant considerations, because the Benefit Amount Application was not an application to change departmental policy;

(e)    the second respondent failed to take into account various relevant considerations emerging from implied statutory constraints when making the Rejection Decision, being the:

i.    legislative purpose behind the establishment of the Prostheses List;

ii.    the legislative purpose behind the insertion of minimum benefit amounts in the Prostheses List;

iii.    the objects of Part 3-3 of the PHI Act; and

iv.    the objects of the PHI Act as a whole;

(f)    having regard to the ex facie disconformity between the benefit Amount Application and the Minute, the second respondent gave no genuine consideration to the Benefit Amount Application; and

(g)    the second respondent made the Rejection Decision in accordance with a rule or policy, being the 25% Utilisation Policy, without regard to the merits of the particular case.

85    In my opinion, since Applied Medical was seeking a reduced minimum benefit in respect of the products of other suppliers in the Relevant Subgroup, it was not a prohibited consideration to take into account whether or not those, or most of those, other product sponsors would support the application. Sub-ground (a)(i) therefore fails. Similarly, since Applied Medical was seeking a departure from the position that the same methodology was implemented across the entire list, the support of those, or most of those, other products sponsors was not a prohibited consideration. Sub-ground (a)(ii) also fails. Indeed, in relation to the entirety of sub-ground (a), in my opinion, the Minute was stating the obvious, which was that sponsors of other products would need to be given an opportunity to comment on the proposed change, absent material showing that they, or most of them, supported the proposed change advocated by Applied Medical. Sub-ground (b) fails for the same reason. Sub-ground (c) fails for the same reason as the first “no evidence” ground which I have considered at [80] above. In my opinion, it involves a misreading of the Minute. Sub-ground (d) similarly fails: although Applied Medical’s application was not in terms an application to change policy, the decision-maker must be taken to have considered that to accede to the application either a departure from policy or a change of policy was required. Sub-ground (e) has no specificity and therefore involves an attack on the merits of the decision. Sub-ground (f), claimed the second respondent gave no genuine consideration to the application, having regard to an ex facie disconformity between the application and the Minute. This is not strictly a failure to have regard to a mandatory relevant consideration as generally understood. Be that as it may, the decision-maker plainly took into account the application but, on the view she took, did not need to analyse what Applied Medical submitted were the economic merits of its case. In her view, Applied Medical’s application failed before it became necessary for the decision-maker to consider the further detail. Insofar as this ground involves the methodology or policy of a market utilisation rate of 25%, sub-ground (g), I shall consider that at [102]-[116] below when addressing the ground of review directed to unlawful policy or an inflexible application of that policy.

86    The fourth challenge, the challenge at the forefront of Applied Medical’s case, was to the lawfulness and application of the methodology or policy which set a minimum benefit price for comparable products performing a similar clinical role at the lowest price for a product which has a market utilisation rate of at least 25%.

87    The challenge to the lawfulness of the methodology or policy was put as follows. Applied Medical submitted there was no reference to the 25% utilisation policy in the Private Health Insurance Act, the Prostheses Rules, the document having non-statutory force entitled Prostheses List – Guide to Listing and Setting Benefits for Prostheses which was last updated in October 2010 and was referred to in Orthotech at [32], or on the Department of Health website, or any other publicly available source of information. It found no statutory warrant. In Orthotech at [32] Collier J said:

It is clear — and, indeed, not in dispute — that the Guide does not in any way mandate the manner in which the Minister or her delegate should reach a decision. It does not have the force of statute or legislative instrument. However it is relevant for the purposes of this proceeding because it provides a “guide” to the Minister and community stakeholders as to processes engaged in, relevant advisory bodies, and factors likely to be taken into consideration by the Minister, prior to the approval of a prosthesis for inclusion on the Prostheses List.

88    In my opinion, none of these matters individually or cumulatively tend to establish that the methodology or policy was itself outside the statute. That a methodology or policy is not referred to in primary legislation, or in a legislative instrument or in a non-statutory guide or on a website provides no basis for concluding that it is unlawful. Further, in my view, to have as a benchmark the lowest benefit per subgroup with reasonable market utilisation and for that market utilisation to be at least 25% has a rational connection to the power to make the Private Health Insurance (Prostheses) Rules under s 333-20.

89    I accept the respondents’ submission that the adoption of the methodology or policy:

… is a permissible means of achieving a balance between a number of potentially competing interests, most particularly cost and the promotion of choice for clinicians and consumers, which choice may, in turn, reflect views about relative product safety and efficacy. That involves the weighing of incommensurables and an evaluative exercise that is not susceptible of any particular correct answer. It achieves the balance by selecting:

(a)     the lowest price or benefit within the relevant group, reflecting a concern to reduce premium cost;

(b)     for a product within that group with at least 25% market utilisation, thereby avoiding the possibility that the setting of an unduly low minimum benefit would result in the “monopoly” position identified at the Consultative Committee meeting held on 6 December 2010 …

(Original emphasis.)

However, in my view, the methodology or policy itself is not unlawful as precluding the person on whom the power is conferred from departing from it or from taking into account circumstances which are relevant to the particular case: NEAT Domestic Trading Pty Ltd v AWB Ltd [2003] HCA 35; 216 CLR 277 at [17] per Gleeson CJ citing R v Secretary of State for the Home Department; Ex parte Venables [1998] AC 407 at 496-497.

90    The history of the methodology or policy, in my view, bears this out. The methodology was adopted in implementing recommendations made by the HTA Review. Recommendation 12 was:

That the arrangements for the Prostheses List be changed by 2011, with appropriate consultation, to:

a.    accept applications on a continuous basis, but still make the Prostheses List every six months;

b.    establish and maintain groups of products with similar clinical effectiveness;

c.    abolish the negotiation of benefits for individual listed products, and instead establish and maintain a single (benchmark) benefit for the products included in each group, with sponsors being required to accept this benefit in order to be listed;

d.    abolish the negotiation, setting or publication of maximum benefits, to eliminate the potential for gap payments for patients who have PHI (Private Health Insurance); and

e.    permit the establishment of new product groups (or sub-groups) where a sponsor establishes clear superiority of their product compared to those in an existing group.

91    In November 2010, it appears that the Minister was briefed on issues “around the implementation of HTA Review recommendation 12 b-e and to seek your endorsement of a draft implementation plan for this recommendation”. The Minister signed and approved the November 2010 minute. This minute stated that some key stakeholders had petitioned strongly to modify or delay the implementation which involved, in particular, the abolition of benefit negotiation for individual prostheses and legislated gap payments for patients. In the implementation plan for recommendation 12 b-e, the following was said in relation to “Grouping”:

ACTION

Review existing groups and establish benchmark benefits

…

Where the draft groups contain products at different benefits, a unique benchmark benefit will be established. The benchmark benefit would be established in accordance with existing principles, that is, products need to be accurately grouped together in a sufficiently detailed scheme of groups/subgroups/suffixes, and then the lowest benefit per subgroup/suffix with reasonable utilisation is identified and applied as the benchmark benefit.

ACTION

Write to stakeholders and respond to stakeholder comments

Stakeholders will be asked to comment on the draft groupings and benchmark benefits for the products on the basis that all products grouped together would receive the nominated benchmark benefit, with no ‘maximum benefit’ to be included on the Prostheses List in the future.

If there are concerns to be addressed, further discussions will be held with stakeholders and clinical assessment of these concerns may be required. If a sponsor is unwilling to accept a benchmark benefit, then clinicians would be consulted about whether there is any clinical concern about the removal of that product from the Prostheses List. If there was a clinical concern, for instance, because there were no other listed alternatives, then this would need to be reflected through grouping refinements or changes to benchmark benefits.

Under the HTA recommendations, it would still be possible for a sponsor to seek a lower benefit than the benchmark. If a sponsor requests a lower benefit, this could be included on the list, with the group then monitored by the PLAC. After the committee was able to determine whether the new product was developing utilisation/market share, a review of the benchmark benefit would be triggered to examine whether the benchmark should move to the new lower price. This would provide transparency and promote competition, while protecting sponsors from unfair, unsustainable or premature reductions in benefits.

(Emphasis added.)

92    A HTA Review – Rec 12 b-e consultative committee was established by the Minister. At a meeting on 6 December 2010, chaired by Mr Richard Bartlett, then Acting First Assistant Secretary, Medical Benefits Division, Department of Health and Ageing the committee raised a number of concerns regarding the implementation of recommendation 12 b-e. One issue was that the “meaning of ‘reasonable utilisation’ for which the single benefit is based on is unclear”. The Chair said: “The lowest utilisation used to determine a proposed group benefit to date is approximately 25% utilisation within that group.”

93    At a meeting of the PLAC on 14 December 2010, the secretariat provided members with an update on the HTA Review and members were advised, amongst other things, that benefits were set based on the lower benefit with reasonable utilisation and sponsors could choose to list a lower benefit than the group benefit. The HTA Review – Rec 12 b-e consultative committee had a further meeting on 31 July 2012. A paper for “Agenda Item 5 – Prostheses Listing Arrangements – Consultation Framework” described the group benefits review methodology as follows:

…

Prostheses within each group were reviewed taking account of product information contained on files or available on the Internet, with specific attention paid to identifying “outlier” prostheses or prostheses with the benefit which suggested an inappropriate grouping. Clinicians and sponsors were consulted during this process.

Once the correct grouping was agreed, the utilisation of prostheses within the group was reviewed to determine the most appropriate group benefit. This was based on the benefits paid for prostheses with “reasonable utilisation” (being defined as a market share of 25% or more) within the group. If no single prosthesis had a 25% market share, a “‘constructivist” approach was used where lower usage rates were added together to reach the 25% threshold (or as close to that mark as possible without being under) and the benefit for these prostheses was averaged to derive a prospective benefit for negotiation with sponsors.

94    It is I think fair to say that this limb of the argument did not form a major part of the oral submissions on behalf of Applied Medical. The thrust of Applied Medical’s case related to the application of the methodology or policy. To this I now turn.

95    Applied Medical also submitted that the application of the purported methodology involved in the 25% Utilisation Policy was: (a) contrary to the legislative purposes underpinning the establishment of the Prostheses List, being to make private hospital treatment more attractive and affordable to contributors by controlling the costs payable in respect of prostheses; (b) contrary to the legislative purposes of the insertion of minimum benefit amounts in the Prostheses List, being to reduce the pressure on the level of private health insurance premiums by limiting the growth in benefits for prostheses; reduce the administrative burden on industry; and provide contributors with more choice in the provision of prostheses; (c) inconsistent with the objects of Pt 3-3, being to require private health insurers who make private health insurance available to do so in a non-discriminatory way; to offer products that comply with the Private Health Insurance Act; and to meet certain other obligations imposed by the Private Health Insurance Act in relation to those products; and (d) inconsistent with the objects of the Private Health Insurance Act as a whole, being to provide incentives to encourage people to have private health insurance; set out the rules governing private health insurance products; and impose requirements about how insurers conduct health insurance businesses. Applied Medical submitted that the decision was ex facie defective. The Minute did not identify: (a) why a Utilisation Policy existed at all; (b) what the Utilisation Policy was designed to (or did in fact) achieve; or (c) why a 25% utilisation rate applied, as opposed to any other utilisation rate. Further, neither the author(s) of the Minute nor the second respondent had evidenced any knowledge as to these matters.

96    The starting point must be a consideration of the purpose of fixing a minimum benefit. I accept the respondents’ submission that having regard to the matters that appear from the scope and object of the relevant provisions, it cannot be the case that the Minister or the delegate was bound to adopt the lowest existing benefit within the group, or the lowest price at which a particular group member was willing to sell their product. Broader matters such as consumer choice and safety and efficacy are matters to which the Minister may have regard, and therefore the decision ceases to be one necessarily dictated solely by cost or by price. But that submission, as it was put, goes more to the lawfulness of the methodology or policy, which I have accepted.

97    The respondents also submitted that in making a single instrument of a legislative character, it can hardly be a ground for invalidity that the decision-maker seeks to achieve a measure of consistency across that instrument by applying a consistent methodology. Again, this goes to the point of whether or not a policy may be adopted and not directly to the present question.

98    Another of the respondents’ submission on this point was that all that would be required is that the delegate not “shut their ears” to those “applications”: British Oxygen Co Ltd v Minister of Technology [1971] AC 610 at 624-625 (per Lord Reid); NEAT Domestic Trading at [26] per Gleeson CJ. The respondents submitted that the delegate did not do so. Her attention was specifically drawn to them.

99    It is necessary again to consider what the reasoning of the delegate was, bearing in mind that the Minute does not constitute a formal statement of reasons (see [19] – [20] above). The essence of the reasoning was that while Applied Medical was arguing for a change to the minimum benefit for the Relevant Subgroup, a single subgroup, such that the minimum benefit reflected the net prices paid for those prostheses, that was not how minimum prices were set and therefore the submission called for a change in policy (for the setting of minimum benefits for laparoscopic clip appliers). How minimum prices were set had been earlier described in the Minute by reference to the methodology being to set a minimum benefit price for comparable products performing a similar clinical role at the lowest price for a product having a market utilisation rate of at least 25%. The next step in the reasoning was that the same methodology (whatever it was) needed to be implemented across the entire list. Implicitly, the reasoning was that whatever the worth of setting the minimum benefit for the Relevant Subgroup to reflect the net prices paid for those prostheses, that could not be done except across the entire list. Therefore, as the Minute said, any change in the methodology to calculate minimum benefits would need to be applied to the more than 10,000 items that were then listed. To do this would require extensive industry wide consultation and sponsors of other products would need to be given an opportunity to comment on the proposed change to policy. (I assume that it is implicit in this reasoning that the sponsors of other products within the Relevant Subgroup would also need to be given an opportunity to comment on the proposed change.) There was no evidence that the proposed change would be supported by the vast majority of other product sponsors, and if reforms were supported, implementation would not occur before 1 July 2015. It is to be recalled that what the delegate agreed to was not to make the change submitted by Applied Medical in the February 2015 Prostheses List.

100    Essentially, in my view, the reasoning had two elements. Whatever the worth of setting the minimum benefit for the Relevant Subgroup to reflect the net prices paid for those prostheses (as contended for by Applied Medical), this could not be done as a matter of good administration (“from a policy perspective”) because, first, the same methodology needed to be implemented across the entire list and, secondly and consequently, there would need to be extensive consultations, including providing procedural fairness to sponsors of other products. The delegate concluded, therefore that the change should not be made to the Private Health Insurance (Prostheses) Rules 2015 (No 1).

101    In my opinion, this does not constitute a refusal or failure to consider the exercise of the discretion conferred by s 333-20 of the Private Health Insurance Act according to its terms.

102    Applied Medical submitted that what was being sought was not a change to the methodology or policy but its non-application on the facts of the instant case. That, it was submitted, would leave the methodology/policy otherwise intact. Further, to say that the same methodology/policy needed to be implemented across the entire list was tantamount to saying that it could never be departed from. This was illegitimate rigidity. I do not accept this submission.

103    The first point, in my opinion, in the present circumstances is a distinction without a difference. Applied Medical was asking for a departure from the policy or methodology so far as it applied to the Relevant Subgroup: it does not matter whether the departure is called a “non-application” or not. Applied Medical submitted that there was a crucial distinction between arguments as to why a policy should not have application in any given case and the type of arguments contemplated in British Oxygen which were arguments attacking the policy. In my opinion, this is not always so. In some cases, of which this is one, an individual application is not required to be considered in isolation. While the HTA Review contemplated, at page 94, that a sponsor requesting a lower benefit would trigger a review of the group benefit by the then Prostheses and Devices Committee, this said nothing about differential methodology or policy in setting minimum benefits across the groups or subgroups of prostheses.

104    As to the second point, I do not accept Applied Medical’s submission that the delegate’s reasoning, that the same methodology/policy had to be implemented across the entire list, is the same as saying that the methodology/policy can never be departed from. What the delegate was saying was that the same policy needed to be applied, and the present methodology/policy could not be changed without consultation and procedural fairness. This is made clear in the submission which the delegate is to be taken to have accepted that: “[a]ny changes to the listing arrangements should be considered together, to ensure that the evaluation, assessment and listing of medical devices uses a solid evidence-based policy platform which is not considered detrimental to any stakeholders and ensures that high-quality cost-effective prostheses devices which provide good patient outcomes are available for patients in the private healthcare sector.” The temporal element (“never”) central to this point is not made out and the claim “illegitimate rigidity” fails.

105    As explained in Plaintiff M64/2015 at [58] per French CJ, Bell, Keane and Gordon JJ, while the policy could not lawfully be applied rigidly so as to preclude the consideration by the delegate of the circumstances of the applicant, Applied Medical, the reasoning does not demonstrate that the policy was applied rigidly without regard to the particular circumstances of the case. The reasoning recognised what it was that Applied Medical wanted and the effect of the reasoning was that, whatever the merits of the approach for which Applied Medical contended, the merits of its application could not adequately be considered by reference to the circumstances of Applied Medical alone: see Plaintiff M64/2015 at [68] per Gageler J. The reasoning was that the circumstances of Applied Medical did not warrant departure from the application of the policy or methodology.

106    In my opinion, the relevant law has at its centre a failure, actual or constructive, to exercise a discretion. Here the discretion is to make the Rules. The relevant part of the Rules is to give effect to Pt 3-3 and specify as one of the requirements that an insurance policy that covers hospital treatment must meet, being the minimum benefit for the provision of a prosthesis: item 4 of s 72-1.

107    Gleeson CJ said in NEAT Domestic Trading at [24]:

There is nothing inherently wrong in an administrative decision-maker pursuing a policy, provided the policy is consistent with the statute under which the relevant power is conferred, and provided also that the policy is not, either in its nature or in its application, such as to preclude the decision-maker from taking into account relevant considerations, or such as to involve the decision-maker in taking into account irrelevant considerations. The policy, and its application, must be measured against those requirements, having regard to the matter presented for decision, and the information and arguments, if any, advanced for or against a particular outcome.

At first instance, NEAT Domestic Trading Pty Ltd v Wheat Export Authority [2000] FCA 1866; 64 ALD 29, Mathews J reviewed the authorities, including British Oxygen; R v Port of London Authority, Ex parte Kynoch Ltd [1919] 1 KB 176; Ex parte Venables; Chumbairux v Minister for Immigration and Ethnic Affairs (1986) 74 ALR 480; and Howells v Nagrad Nominees Pty Ltd (1982) 66 FLR 169, and said at [50]:

It is clear from these authorities that adherence to policy is permissible, and in some cases desirable, provided the policy is not too inflexibly applied. What is too inflexible will depend on the circumstances of each case, including the nature of the decision, the nature of the policy, the rationale for the policy, and the extent to which a consideration of individual circumstances might justify a departure from the policy.

108    In Howells, Fox and Franki JJ said, at 194-195:

The interface between policy and discretion in the exercise of statutory powers is a difficult one. Leading statements on the subject are found in R. v Port of London Authority; Ex parte Kynoch Ltd. [1919] 1 KB 176, at p. 184 per Bankes L.J.; British Oxygen Co. Ltd. v. Minister of Technology [1971] AC 610; R. v. Anderson; Ex parte Ipec-Air Pty. Ltd. (1965) 113 CLR 177, at pp. 188-190; Ansett Transport Industries (Operations) Pty. Ltd. v. Commonwealth (1977) 139 CLR 54, at pp. 82-83; Bread Manufacturers of New South Wales v. Evans (1981) 56 ALJR 89 and in the setting of administrative review, see Drake v. Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409. No one test can be articulated for all cases.

Where the power given relates to the consideration of individual cases, it is not to be denied that the predominant aspect must be the consideration of the particular case. The merits of that case must be considered genuinely and realistically; there must always be a readiness to depart from policy. The policy does a disservice to those who have to measure it against the individual situation if it is expressed in dogmatic or mandatory terms.

109    In Skoljarev v Australian Fisheries Management Authority (1995) 133 ALR 690 (appeal dismissed (1996) 41 ALD 481), Davies J said, at 696:

… It should no longer be necessary for a decision-maker to indicate at any length the considerations which support the application of policy. Rules and standards are important, both as a means of giving effect to lawful policy which a government or an authority has determined and wishes to be implemented and as a means of ensuring that decisions, because they have been taken by reference to rules or settled standards, are fair, consistent and not arbitrary.

Policy does not constitute a binding rule, unless a statute so provides, as does s 17(1) of the [Fisheries Management Act 1991 (Cth)]. Absent a statutory provision requiring compliance with policy, a decision-maker may depart from policy and, in an appropriate case, should do so. It is impossible to define or delineate the circumstances in which departure from policy is justified. Much depends upon the nature and context of the decision to be made, the nature of the policy to which regard is to be had and the nature of the individual circumstances to which attention is directed. …

110    Here, the nature and context of the decision to be made was whether, in light of the matters put by Applied Medical, there should be a differential treatment for the minimum benefit for the Relevant Subgroup (involving either/or non-application of the methodology/policy or a departure from that methodology/policy) in the making of a Rule covering all of the prostheses in the list. The nature of the policy was that it applied uniformly and applied to setting the minimum benefit for each group or subgroup assessed against a market utilisation rate. The nature of the individual circumstances was that Applied Medical submitted that it was willing to supply prostheses listed in the Relevant Subgroup at a much lower price ($99) than the prescribed minimum benefit and that the Rule for that subgroup should be set so that the suppliers of the other prostheses in the Relevant Subgroup should also be subject to the same much lower minimum benefit.

111    Applied Medical submitted that s 5(2)(f) of the AD(JR) Act, making improper an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case, was not a surrogate for British Oxygen; it was the language of the statute that was to be applied. Applied Medical emphasised the statutory language requiring attention to be paid to the merits of the particular case and submitted that this required a consideration as to whether a departure from the policy was justified in the particular circumstances of the case. I accept that the words of the statute are to be applied, although I am not convinced that those words mean anything different from what Lord Reid said in British Oxygen at 624-625. More importantly, the application of the expression “without regard to the merits of the particular case” is to be read in the context of it being an improper exercise of the power to exercise a discretionary power in accordance with a rule or policy without regard to the merits of the particular case. It is the inflexibility of the application of the rule or policy which has the result that the discretion has either not been exercised at all or the width of the discretion has been misunderstood by the decision-maker. But this does not mean that there needs to be a detailed analysis of the particular circumstances of the application either in a formal statement of reasons or, as here, in a less formally expressed Minute. As I have explained, at [99]-[100] above, the decision-maker is to be taken to have reasoned that the change in the amount of the minimum benefit for the Relevant Subgroup should not be made for the February 2015 Private Health Insurance (Prostheses) Rules because the Relevant Subgroup could not be considered by itself and wide consultation and procedural fairness would be required. The delegate was aware of what it was that Applied Medical wanted and why, but concluded that it could not be achieved, whatever its worth.

112    In my opinion, this does not constitute the exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case. Applied Medical knew what the methodology/policy was. It contended that the methodology/policy should not apply to the Relevant Subgroup. The decision-maker did not refuse to consider the application or “shut her ears” to the application but, as I have said, decided that the methodology/policy should not be departed from for a single subgroup out of the many dozens to which the Rules would apply. Once the repository of a discretionary power has considered an application for the non-application of the policy or a change in policy and has given a reason, other than the bare restatement of the policy, for rejecting that application, it is difficult to conclude that the discretionary power has been exercised inflexibly in the relevant sense.

113    At the risk of repetition, I find that the decision-maker, the delegate, did consider the submission made by Applied Medical. The letter dated 30 March 2015 said so. More importantly, the delegate was requested to note the submission attached to the (misdated) 20 February 2015 Minute. I do not conclude otherwise: there is no basis for doing so. See Plaintiff M64/2015 at [55] per French CJ, Bell, Keane and Gordon JJ. It is trite to observe that the fact that the submission was not accepted does not mean that it was not considered on its terms. I reject the submission made on behalf of Applied Medical that the Minute, and therefore I assume the delegate, gave “no consideration, let alone genuine consideration, of the arguments advanced in favour of the application”.

114    To the extent that Applied Medical submitted that the Minister may not permissibly adopt a policy, I reject that submission. Whether or not the Minister needs to have a policy to assist in the exercise of a statutory power is not to the point. And there is no basis for concluding that a policy may only be adopted where there are competing applications or where the decision-maker proposed to discriminate between applicants, as was in fact the case in Plaintiff M64/2015. To the extent that a policy promotes equality of treatment between or among those affected, the nature of the power does not matter, it seems to me, unless the statutory duty were to be construed as not permitting a policy: Re Findlay [1985] AC 318 at 335.

115    In the present case, the terms of the policy or methodology did not preclude the delegate from departing from it, nor prevent the delegate from taking into account particular circumstances. Neither, in my view, was it inconsistent with the Private Health Insurance Act or with its purpose. I do not construe that Act as requiring that the minimum benefit for the Relevant Subgroup must be the lowest price at which a supplier in the Relevant Subgroup is willing to supply the prostheses such that a policy which did not have that result was impermissible.

116    If, contrary to my opinion at [103] above, there is a relevant distinction between an application that the policy not be applied in a particular case and an application that the policy should be changed, and if the present case involved the former, an application that the policy not be applied, I reject Applied Medical’s submission that the delegate failed or refused to consider it.

The failure to decide the “Delisting Applications”

117    Applied Medical submitted that it requested that all listings in the Relevant Subgroup be revoked or, alternatively, that the listings of sponsors in the Relevant Subgroup who continued to advocate for a minimum group benefit amount in excess of $99 be revoked. Applied Medical submitted that the Minister was required to consider the “Delisting Applications” under, or incidental to, s 72-10(4) (sic) of the Private Health Insurance Act. Applied Medical submitted that the briefing note recorded no consideration by the respondents of the “Delisting Applications”. Neither respondent had informed Applied Medical in writing of any decision in respect of the “Delisting Applications” or of the reasons for any such decision as required by s 72-10(4). Further, Applied Medical submitted, each respondent had engaged in unreasonable delay in failing to do so. Applied Medical sought an order, pursuant to s 16(3)(a) of the AD(JR) Act, directing that the Minister, or a delegate, to make a decision in relation to the “Delisting Applications”, or, alternatively, mandamus, pursuant to s 39B of the Judiciary Act, directing the Minister, or a delegate, to decide the matter to which the “Delisting Applications” related, according to law.

118    The respondents submitted that Applied Medical made no “Delisting Application” and there was no duty in any event for the delegate to consider such applications. What Applied Medical referred to as “applications” involved no more than lobbying for a change to policy in relation to the group minimum benefit amount. The respondents submitted there was and is no duty to consider any such applications, and the relief sought in paragraph 120 of the statement of claim was not available in those circumstances. Even if there were such a duty, there was in fact nothing that would constitute an “application” submitted by Applied Medical; any such requirement extended no further than a requirement that the material be considered by the persons to whom it was addressed and Applied Medical had not alleged that those persons failed to do so; and, to the extent that one of the “applications” was directed to the revocation of the listing of certain of Applied Medical’s competitors, Applied Medical lacked standing to seek relief in respect of any failure to make such a decision. In that respect the respondents submitted that, unlike Argos Pty Ltd v Minister for the Environment and Sustainable Development [2014] HCA 50; 254 CLR 394, there was no evidence before the Court sufficient to establish that Applied Medical would be affected by such a decision to the requisite degree. Applied Medical was, rather, in the same position as the first appellant in Argos: see at [36] and [57]-[58].

119    At a factual level, the relevant particulars to the statement of claim at paragraph 78(b) identified, first, a letter from Jones Day dated 21 October 2014 to Professor Horvath, Chair, Prostheses List Advisory Committee, and to Mr Porter, Assistant Secretary, Private Health Insurance Branch, Department of Health, attaching a report from Dr Ric Simes of Deloitte Access Economics; secondly, a letter from Jones Day to the Minister dated 28 January 2015; and thirdly, an email from Mr Greg Maloney of Applied Medical to Mr Porter dated 5 February 2015. Applied Medical also pleaded at paragraph 79 of the statement of claim that it had separately proposed to the Secretaries of the Departments of Health and Finance a broader reconsideration of the prostheses list arrangements in the long term and identified, first, a meeting on 25 September 2014, secondly, a meeting on 7 October 2014; and, thirdly, a letter from Jones Day to the Secretary, Department of Health and the Secretary, Department of Finance.

120    The respondents submitted that the material said to comprise the “Delisting Application” was a passing observation in the submission dated 21 October 2014; an email dated 5 February 2015 addressed to Mr Porter which was not in the agreed tender bundle; and a letter to the Minister dated 28 January 2015. The respondents submitted that those items of correspondence contained nothing that could be meaningfully said to constitute an “application” of the nature alleged. The respondents submitted that the October 2014 submission was not such an application, and the letter to the Minister appeared to envisage action against the competitors of Applied Medical if they engaged in some form of “advocacy”. In any event, the respondents submitted, that “application” may be taken to have been considered by the Minister.

121    It was common ground that a refusal or failure to make a decision was reviewable only if the person concerned was under a duty to make a decision: see, for example, s 7 of the AD(JR) Act. Applied Medical identified the source of the duty as under, or incidental to, s 72-10(4) of the Private Health Insurance Act. Applied Medical submitted that the Minister was required to inform Applied Medical whether or not she had granted the application, and, if deciding not to grant it, the reasons for that decision. Applied Medical submitted that the mandatory character of the obligation to notify a decision predicated an anterior duty to decide. Applied Medical submitted the duty in question was suitably public in character. Further, the making of the decision under s 72-10(2) was distinct from, and occurred prior to, the making of the Private Health Insurance Rules under s 333-20.

Consideration

122    In my opinion, the respondents were not under a duty to consider Applied Medical’s so-called “Delisting Applications”. In so concluding, I first assume that the Minister had power to repeal, rescind, revoke, amend, or vary the list or Rules referred to in s 72-10. However, any duty to consider may attach only to an application contemplated by that provision. There is no suggestion that the correspondence on which Applied Medical relied on this part of its case answered the description of an application within s 72-10(3) in that the application was neither in the approved form nor accompanied by any application fee imposed under the Private Health Insurance (Prostheses Application and Listing Fees) Act. I construe those requirements as prerequisites to the making of an application for the purposes of s 72-10. It was not for those considering the correspondence to waive that requirement. Indeed, as I read the correspondence, those to whom it was addressed did not consider that they were dealing with an application under s 72-10 so no question of waiver on their part arose. As to “any application fee”, if the correspondence did constitute an application under s 72-10(2) to list a prosthesis, in my opinion it would not result in a revocation and relisting, within the meaning of subrule 5(4) of the Private Health Insurance Prostheses Application and Listing Fee) Rules 2008 (No 1). That subrule exhaustively lists the circumstances in which an application will result in a revocation and relisting. In my opinion, any application, if granted, would not be for the listing of exactly the same prosthesis for the new applicant or the same kinds of prostheses which are different only in size or materials, or both, but have the same action, function and clinical outcomes: see subrule 5(4)(a).

123    In my opinion, the proper characterisation of Applied Medical’s correspondence is as follows.

124    The 21 October 2014 letter contained no reference to s 72-10 of the Private Health Insurance Act.

125    Page one of the letter refers to Applied Medical “also support[ing] a broader reform agenda that Applied Medical contends ought to apply to the entire List in the longer term”. This is what is referred to at paragraph 68 of the submission as follows:

Applied Medical understands that there is a work stream under way to reduce the number of items covered by the Prostheses List and supports the removal of relatively low value consumables from the List. That would include clip appliers provided the whole group was removed and that the products for which they can be substituted are also not on the list.

126    A letter to the Minister dated 28 January 2015 made reference to the same issue. It referred back to the 21 October 2014 letter and described it as a detailed submission to the Department “under the existing legislation and policy framework in relation to products in the … relevant subgroup” and further described the submission as being that the benefit amount for products in the group should be reduced from $412 to $99. The 28 January 2015 letter continued as follows:

Although this decision will save millions of dollars, this is but a small fraction of the items on the current Prostheses List. To the extent that any of the four other suppliers in the relevant subgroup continue to advocate for an unreasonable benefit amount, which is not justifiable in view of international and public sector prices, we submit that you exercise your power as Minister to revoke those product listings.

(Original underlining.)

In my opinion, it is clear that this does not constitute an application under s 72-10: it has the character of a submission to the Minister as to what she should do in certain events and argues that, in those events, the Minister should act. Although s 333-20 is not mentioned, in my opinion it was the relevant power.

127    For completeness and although not necessary to decide, in my opinion, leaving aside an application made under s 72-10 to which s 72-10(5) would apply, that power does not sufficiently concern the peculiar interests of a particular person but the vindication of a public right having regard to government policy (see Yasmin at [69]) and, therefore, there was no duty to consider Applied Medical’s request to amend the Private Health Insurance (Prostheses) Rules.

128    Although I admit into evidence, as having sufficient relevance, MFI 1 as Exhibit B, I place no weight on the correspondence of 28 July 2015 and 12 August 2015 from Jones Day to Mr Porter and to the “Prostheses Section” respectively, written after the commencement of these proceedings, and, in my view, purporting to give a new character to Applied Medical’s earlier submission for the revocation of the listings. (The third paragraph of that letter contains a reference to an application made by Applied Medical on 19 February 2015 but no such correspondence is particularised and it is probably an error for the letter of 28 January 2015 which I have considered above. In my opinion, there was no duty on the part of the Minister to consider it.)

Rulings on evidence

129    As indicated at [128] above, I admit into evidence MFI 1 as Exhibit B. The respondents’ objection was on the basis of relevance but in my view the material has sufficient relevance within s 55 of the Evidence Act 1995 (Cth).

Orders

130    The application should be dismissed, with costs.

Associate:

Dated:    5 February 2016