FEDERAL COURT OF AUSTRALIA

Rehabilitation Medicine Australia Pty Ltd v N I B Health Funds Ltd [2020] FCA 932

ORDERS

THE COURT ORDERS THAT:

1.    The application is allowed.

2.    The parties are to submit short Minutes of Order in accordance with these reasons.

3.    Costs reserved.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The interlocutory application before the Court is for discovery of certain documents pursuant to r 20.13 of the Federal Court Rules 2011 (Cth) (the FCR). The applicant in the proceedings and for discovery is Rehabilitation Medicine Australia Pty Ltd (RMA) and the respondent to the action and to the interlocutory application is N I B Health Funds Ltd (NIB). The former is the owner of a small private hospital through which it provides health services. NIB is an insurer which offers, amongst other things, health insurance.

2    On occasion, RMA provides health services to persons who hold health insurance with NIB. There is no agreement between RMA and NIB for the reimbursement of costs incurred by NIB’s insureds and it is uncontroversial that NIB’s obligation to pay RMA in respect of the services it provides is governed by the provisions of the Private Health Insurance (Benefit Requirements) Rules 2011 (Cth) (the Rules) issued pursuant to s 333-20 of the Private Health Insurance Act 2007 (Cth) (the Act).

3    The substantive dispute before the Court is generally concerned with the construction of the Rules and the manner in which payments are to be calculated. A cursory perusal of those Rules discloses both that their interpretation and any understanding of their application in particular circumstances, involves not insignificant complexity.

The proceedings

4    The relief sought in the originating application is, relevantly, as follows:

1.    A declaration pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth) that the minimum benefit payable by the Respondent to the Applicant for an episode of hospital treatment (being medical private room overnight accommodation) pursuant to clause 3(8) of Schedule 5 of the Private Health Insurance (Benefits Requirements) Rules 2011 (Cth) is to be calculated only using negotiated agreements which include a rate for medical private room overnight accommodation but not other negotiated agreements which do not include such rates.

2.    In the alternative to the order sought in (1), a declaration pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth) that the minimum benefit payable by the Respondent to the Applicant for an episode of hospital treatment (being medical private room overnight accommodation) pursuant to clause 3(8) of Schedule 5 of the Private Health Insurance (Benefits Requirements) Rules 2011 (Cth) is to be calculated using a majority of the Respondent’s negotiated agreements with all private hospitals in Queensland that provide a rate for the equivalent episode of hospital treatment.

3.    An order that the respondent pay to the applicant an amount for the episodes of hospital treatment that the applicant has provided to patients holding a policy of insurance issued by the respondent calculated in accordance with the Correct Interpretation.

5    By orders of this Court on 9 March 2020, the hearing of this matter was listed for one day on 27 July 2020. Directions were given as to the exchange of material and submissions. Although the timetable has been varied twice since then to account for minor delays, there was no reason to doubt that absent the ordering of discovery, the hearing would occur as per the original order.

Interlocutory application for discovery

6    On 25 June 2020, the applicant filed an application for discovery pursuant to r 20.13 of the FCR. The orders proposed for the production of documents are as follows:

1.    Pursuant to rule 20 of the Federal Court Rules 2011, the Respondent give discovery to the Applicant of the following documents:

(a)    Each of the Respondent’s negotiated agreements (otherwise known as Hospital Purchaser Provider Agreements) with all private hospitals in Queensland, including all rates/charges for each episode of hospital treatment, as in force on 1 August 2018.

(b)    Each of the Respondent’s negotiated agreements (otherwise known as Hospital Purchaser Provider Agreements) with all private hospitals in Queensland, including all rates/charges for each episode of hospital treatment, as in force on 1 August 2019.

7    RMA’s primary submission was that the agreements with other private hospitals are required to enable it to quantify the amount said to be owing as a result of the operation of the Rules.

Law

8    Part 20 of the FCR governs discovery in the Federal Court. Further guidance is provided by Central Practice Note 1, which states the Court will generally only consider approving a request for discovery where, for instance, the applicant has adequately justified the need for the request, including demonstrating:

(a)    the utility of the request and the appropriateness of discovery occurring at that time;

(b)    the relevance and importance of the documentation or information sought;

(c)    the limited and targeted nature of the request; and

(d)    that the documents sought are, or are very likely to be, significantly probative in nature.

Consideration

The relevance of the documents sought to the issues in the proceedings

9    The relief sought in paragraph 3 of the originating application is somewhat opaque. It does not identify an amount of money which is said to be owing and nor does it expressly make any claim in the nature of a debt. On its face all that is sought is an order that NIB pay to RMA an amount calculated in accordance with the correct interpretation of the Rules. On one view it could be said that, upon the Court identifying the correct construction of the Rules, an order might be made requiring NIB to comply with them and to pay an amount to RMA accordingly. If that were so there would be no need to specify the sum in the making of such an order and it was not suggested to the Court that such an order could not be made.

10    RMA submitted that it has made it clear since the action’s commencement that discovery of the agreements of NIB with other health providers would be required. It said that this was apparent by paragraphs 21 and 24 of its concise statement which read:

Spendelove cannot calculate that rate, and the amount owing, without discovery of NIB’s negotiated agreements with hospitals in Queensland. Spendelove will seek interlocutory orders that NIB provide discovery of those agreements.

…

The applicant has suffered loss in an amount that is capable of calculation but the [Applicant] requires discovery from the respondent before that calculation can be performed.

11    With respect to RMA’s submissions, although it did indicate that it would require discovery of the agreements, such assertions are irrelevant unless the discovery is required for the purposes of resolving the dispute. As has been indicated, whilst it might have been argued that, on the face of the originating application, no calculation is required by the Court for the purposes of giving the relief sought, that was not a proposition embraced by NIB and it was probably correct not to do so. As the hearing progressed and the issues in the forthcoming hearing were identified, it was apparent that there is more to the action than might appear from the Concise Statements filed by the parties. It may well be that the present difficulty has arisen because the applicant chose to adopt the use of a concise statement with its concomitant hidden vagueness, rather than the more appropriate and more precise articulation of the claim and relief which would be found in a statement of claim.

12    In the circumstances it does not seem appropriate to refuse to order discovery on the ground that it would not advance the resolution of the issues at the hearing based merely upon a consideration of the Prayer for Relief in the originating proceedings. Ultimately, it appears that both parties anticipated that, if RMA’s proffered construction were correct, the Court would be required to assess the amount owing by NIB at some point in the litigation.

The lateness of the application

13    Mr O’Brien for NIB submitted that the court should exercise its discretion against making any order for disclosure on the basis that this application has been made late and near to the hearing date. There is force in that submission although the additional submission that making an order for discovery would “unduly interfere” with the preparation for trial is possibly a step too far. In that latter respect, the scope of the hearing will be very limited and, in reality, it resembles the erstwhile construction summons procedure in which questions of the interpretation of documents were dealt with in the course of final, but very brief, hearings.

14    It can be accepted that this application has occurred very late in the proceedings. As mentioned, the hearing is set down for one day on 27 July 2020, being just over 3 weeks’ time. On the other hand, it is set down for one day only. Mr Campbell QC for RMA submitted that the prospect of discovery was always known, that there had been attempts to resolve the matter and that the present COVID-19 pandemic had interfered with the preparation of the application for disclosure. The inevitable delays arising from the current pandemic have affected many matters before the Court and it can readily be accepted that it has also impacted the present proceedings. To that it can be added that the proceedings were only commenced in February of this year and, despite the lockdown caused by the pandemic, it has progressed relatively quickly.

15    Although the quantum of the documents which might be produced is relatively small; being at worst just over 100 and, at best, around 50, the limited number of the documents does not necessarily render the discovery process an easy or limited task. On the basis of the submissions which were made on the application it would appear that the following issues would have to be considered by NIB in making disclosure:

(a)    A legal practitioner would be required to ascertain whether the contracts in question were within the description of the documents ordered to be produced. It is apparent that not all of the contracts between NIB and other hospitals will necessarily be relevant, but determining that may require the application of some legal expertise.

(b)    A question exists as to whether any purported contract of which NIB has the benefit is within the description of an “agreement with all private hospitals”. This is because a question has been raised as to whether the agreement is with NIB or some predecessor in title.

(c)    A further question arises as to whether the hospitals with whom NIB has agreements are “comparable hospitals” within the meaning of that term as it is used in the Rules. Apparently there is some dispute about that question albeit well hidden in the amorphously drafted concise statements. Necessarily, that issue will involve a consideration of whether any particular agreement is relevant to the issues to be determined on the hearing.

(d)    A legal practitioner will be required to assess whether the documents produced are complete in that they include any amendments to them which might exist.

(e)    It is also pellucid that the documents in question are commercially sensitive. Whilst that, of itself might be overcome, necessarily NIB would require the agreements to be vetted for the purposes of making appropriate submissions to the Court as to either their redaction in certain respects or for the limited disclosure of the documents to specific persons.

16    It was submitted by Mr Campbell QC that no expert report will be required for the purposes of extracting the relevant evidence for the purposes of the hearing and that the question is one of merely using the relevant figures in the agreements for the purposes of applying to the calculations required by the Rules. Whilst there is a possibility that submission is correct, it is more likely that the material to be extracted from the agreements is more complex. In particular, it would include information as to the “patient classification and payment structure” in the agreements which is relevant for the purposes of identifying the criterion of “episode of hospital treatment”; these being concepts used in the Rules. It is not possible to be satisfied on the material before the Court that the agreements will speak for themselves. That said, it also cannot be concluded that significant expert explication of them will be necessary.

17    Although, on an initial view, it might have been thought that no discovery was required for the purposes of the hearing, after hearing both parties it is apparent that an order for discovery should be made on the basis that it is necessary to resolve all of the issues which will arise before the Court.

18    During the course of the hearing it became apparent that, on RMA’s case, all of the agreements between NIB and all classes of private hospitals would be relevant to the determination of the amount owing, if any. That is because cl 3(8) of schedule 5 of the Rules provides:

(8)    Subject to subclause (2), if an insurer has less than 5 negotiated agreements in force on 1 August of the first year with a particular category of comparable private hospitals in a State, then all of that insurer’s negotiated agreements with all classes of private hospitals in that State are to be used to calculate the minimum benefit.

(Emphasis added).

19    On the other hand it seems that only those agreements which reveal the amount of charge for an “equivalent episode of hospital treatment” can be relevant to the question to be decided. That is because cl 3(4) provides:

(4)    Subject to subclauses (2) and (8) the minimum benefit payable by an insurer for an episode of hospital treatment between 1 September of a particular year (the first year) and 31 August of the next year is an amount no less than 85% of the average charge for the equivalent episode of hospital treatment, under that insurer’s negotiated agreements in force on 1 August of the first year with all such comparable private hospitals in the State in which the facility is located.

(Emphasis added).

20    It is difficult at this stage of the proceedings to refine the documents which are relevant to the calculation of the minimum benefit payable other than by identifying that if the agreements in question do not contain any material relating to the relevant “episode of hospital treatment”, which is the subject of disputation between the parties, they would not appear to be related to an issue in the proceeding. Mr Campbell QC for RMA submitted that day hospitals which did not have provision for overnight accommodation of patients would not be relevant as the issue between the parties concerns those particular services. On that basis, agreements with hospitals which do not provide overnight accommodation for patients; i.e. day hospitals, would not be relevant and are not required to be discovered.

21    Mr O’Brien for NIB submitted that a practical solution was to bifurcate the proceedings such that the Court should deal with the construction questions first and, if necessary, the third issue relating to quantum might be dealt with at a later time. There is much force in that submission and it would have the benefit of preserving the hearing date. However, it is well known that the benefits of bifurcating a hearing are often more chimerical than real and it is equally well known that elongating the hearing in such a manner leads to greater costs. That latter factor is especially relevant in the present case where it would appear that the amount in dispute is relatively modest for litigation in this Court.

22    In the circumstances the appropriate course is that NIB ought to discover those agreements which are relevant to the issues in dispute. It is likely that the hearing date will have to be postponed for a short period which, happily, is something that can be accommodated in the court calendar.

Confidentiality

23    It was not in dispute between the parties that NIB’s agreements with other hospitals are commercially sensitive and that NIB has an interest in maintaining their confidentiality. Mr Campbell QC did not cavil with the suggestion that if an order for discovery were made it would be appropriate if not necessary to impose confidentiality terms in the nature of a Fielder Gillespie order: Ex parte Fielder Gillespie Ltd [1984] 2 Qd R 339; Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 5) [2012] FCA 233. Such orders are useful in restricting the dissemination of information in confidential documents above and beyond the deterrent effect of the implied obligation on parties who receive documents under compulsion of law not to use them for any other purpose: Harman v Secretary of State for the Home Department [1983] 1 AC 280; Hearne v Street (2008) 235 CLR 125.

24    In the present case, the only persons who should be entitled to view the documents are Counsel engaged on behalf of RMA and the solicitors for RMA. If RMA ultimately determines that it is necessary to obtain expert opinion in relation to a matter in respect of which the agreements are relevant, a further application to court will be required.

Conclusion on discovery

25    It follows that the application for discovery ought to be allowed. The documents which are to be discovered ought to be only those which actually relate to the issues before the Court as identified above. The making of an order for discovery should be subject to confidentiality provisions in the nature of a Fielder Gillespie order.

26    The question of the costs of this application are reserved until the hearing of the action.

27    The parties are directed to submit short minutes of order in accordance with these reasons.

Associate:    

Dated:    6 July 2020