Federal Court of Australia

Tonakie v Director of Professional Services Review [2023] FCA 1365

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be dismissed with costs.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    This case demands an answer to the metaphysical question whether conduct that is a legal nullity can nevertheless have legal consequences (see Forsyth C, “‘The metaphysics of nullity’ – Invalidity, conceptual reasoning and the rule of law” in Forsyth C and Hare I, The Golden Metwand and the Crooked Cord (OUP, 1998) p 141). More specifically, it asks whether a referral to a committee to investigate whether there was inappropriate practice by a medical practitioner in providing a service in respect of which a medicare benefit was payable, but which referral was subsequently set aside by the Court, is nevertheless a referral in fact sufficient to stop time running under s 94(1) of the Health Insurance Act 1973 (Cth).

The statutory scheme

2    The statutory scheme is well traversed in prior authorities, so it can be dealt with here quite briefly.

3    Part VAA of the Act sets out the professional services review scheme. The object of the Part is stated to be to protect the integrity of the Commonwealth medicare benefits, dental benefits and pharmaceutical benefits programs (s 79A). In doing so, its object is to protect patients and the community in general from the risks associated with “inappropriate practice”, and to protect the Commonwealth from having to meet the cost of services provided as a result of “inappropriate practice”. Inappropriate practice is defined (in s 82) to include various forms of conduct that, in short, might for present purposes be characterised as conduct by a specialist practitioner that would cause an unjustified burden on the medicare, dental and pharmaceutical benefits programs by reason of actions that would be unacceptable to the general body of specialists practising in that specialty.

4    The relevant Minister may appoint a medical practitioner to be the Director of Professional Services Review (s 83). The Chief Executive Medicare may request the Director to review the provision of services by a person during a specified period if it appears to the Chief Executive Medicare that there is a possibility that the person may have provided services during that period and engaged in inappropriate practice in the provision of the services (s 86). The person concerned must be given notice of the request (s 87).

5    Within one month of receiving the request to review the provision of services by a person, the Director must decide whether or not to undertake the review (s 88A(1)). If the Director fails to make a decision within one month, they are taken to have decided, at the end of that period, to undertake the review (s 88A(3)). The Director must give written notice of their decision to the person concerned (s 88A(4)(a)).

6    There are a number of provisions dealing with the process of the Director’s review that are not immediately relevant. Following a review, the Director must either make a decision under s 91 to take no further action in relation to the review (s 89C(1)(a)), or they must give the person under review a written report setting out the reasons why a decision under s 91 has not been made and inviting the person to make written submissions, within one month, about the action the Director should take in relation to the review (s 89C(1)(b)). If the latter course is taken, ie the person is given a report and an invitation, the Director must, “as soon as practicable after taking into account any submissions made” by the person, do one of three things, namely:

(1)    decide to take no further action in relation to the review in accordance with s 91 (s 89C(2)(a)); or

(2)    enter into an agreement with the person under review under s 92 (s 89C(2)(b)); or

(3)    make a referral to a Committee under s 93 (s 89C(2)(c)).

7    Section 93 deals with the third of those options, referral to a Committee. The Director may set up a Committee in accordance with Div 4, and make a referral to the Committee to investigate whether the person under review engaged in inappropriate practice in providing the services specified in the referral (s 93(1)).

8    The provisions at the heart of this case should be set out in full:

94     Director taken to have made a decision after 12 months

(1)     If:

(a)     the Director decides to review the provision of services by a person; and

(b)     before the end of the period of 12 months after making the decision, the Director has not:

(i)     made a decision under section 91 to take no further action in relation to the review; or

(ii)     entered into an agreement with the person under section 92 (whether or not the agreement has been ratified by the Determining Authority); or

(iii)     referred the provision of one or more of the services to a Committee;

then, the Director is taken to have made a decision at the end of that period to take no further action in relation to the review.

Note:     Sections 92A and 106R set out time limits for the ratification of agreements made under section 92.

(2)     If the review is suspended:

(a)     under paragraph 89A(2)(b); or

(b)     because of an injunction or other court order;

the Director may determine, in writing, that the period of 12 months referred to in subsection (1) is extended by a specified period that is not longer than the period of the suspension.

(3)     If a notice is given under subsection 89B(2) to the person under review, or to another person, and the person concerned fails to comply with a requirement of the notice, the Director may determine, in writing, that the period of 12 months referred to in subsection (1) is extended by a specified period that is not longer than the period during which the person fails to comply with the requirement.

(4)     This section does not apply in relation to a review undertaken because of section 89.

9    Section 95 governs the constitution of Committees. A Committee set up under s 93 in connection with a referral consists of the following members appointed by the Director: a chairperson who is a deputy director, and two other panel members (ie members of the Professional Services Review Panel appointed under s 84) and not more than two additional panel members in certain circumstances (s 95(1)). Relevantly, the two panel members must be members of professions or specialties relevant to the field or fields of practice of the relevant practitioner (s 95(2)-(3)). Also, if the practitioner was at the relevant time a specialist in relation to a particular specialty, the other panel members must also be specialists in relation to that specialty (s 95(4)).

10    Subdivision B deals with proceedings of Committees, including conducting hearings and powers to require the production of documents and to summons people to give evidence. Subdivision C then deals with action to be taken by Committees.

The facts

11    The applicant is a medical practitioner. He is a specialist in the specialties of diagnostic radiology and nuclear medicine.

12    On 22 June 2021, a delegate of the Chief Executive Medicare wrote to the Director requesting that she review the applicant’s provision of computed tomography (CT) and positron emission tomography (PET) services for the purpose of considering whether he may have engaged in inappropriate practice. The request was one envisaged by s 86.

13    On 2 July 2021, the Director wrote to the applicant to inform him that she had decided to undertake a review of the provision of CT and PET services by him because it appeared to her that there was a possibility that he had engaged in inappropriate practice. The notification to the applicant was that envisaged by s 88A(4)(a). The Director’s decision was apparently made on that day, with the result that the 12 month period referred to in s 94(1) commenced then.

14    On 24 December 2021, the Director wrote to the applicant to inform him that she had completed her review and did not make a decision to take no further action in relation to the review. The Director enclosed her report and invited the applicant to make written submissions about the action that she should take in relation to the review. That action by the Director was the action envisaged by s 89C(1)(b).

15    The applicant provided written submissions to the Director on 18 March 2022.

16    On 30 June 2022, the Acting Director wrote to the applicant to inform him that he had that day decided to set up a Committee comprising Dr Leon Shapero (as Chairperson) and Dr Tom Snow and Dr Stuart Grieve as Panel Members and to make a referral to that Committee to investigate whether the applicant had engaged in inappropriate practice in providing the CT and PET services specified in the referral. Those actions by the Acting Director were purportedly taken under s 93(1). They were taken within two days of the expiry of the 12 month period referred to in s 94(1).

17    On 29 July 2022, the applicant commenced a proceeding challenging the decisions made on 30 June 2022 to set up the Committee and make a referral to it to investigate whether he had engaged in inappropriate practice in providing the referred services. The applicant alleged that the decisions were invalid because, although two of the panel members were specialists in diagnostic radiology, none was a specialist in nuclear medicine. That had the consequence, it was alleged, that the Committee was not established in accordance with s 95(4) of the Act.

18    For reasons that will become apparent shortly, it is to be noted that in his originating application the applicant sought a declaration that, by reason of s 94(1), the Director was taken to have made a decision to take no further action in relation to the review of his provision of services. That was on that basis that the 30 June 2022 referral was invalid and therefore did not interrupt the running of time, and that more than 12 months had passed since the Director made the decision to review the provision of the referred services.

19    On 10 February 2023, Rares J made orders, by consent, setting aside the decisions made by the Director on 30 June 2022 to set up the Committee and refer to it the referred services and the referral purportedly made under s 93(1) of the Act. In a notation to those orders it was recorded that the Commonwealth accepted that the Director did not set up the Committee in accordance with s 95(4) and that that decision, and the purported referral under s 93, were invalid for that reason.

20    The day before those orders were made, the Commonwealth’s solicitors wrote to the applicant’s solicitors to inform them that the Commonwealth would be conceding the matter on the basis outlined in the preceding paragraph. It was noted, however, that the Commonwealth would not consent to a declaration sought by the applicant that the Director was taken to have made a decision under s 94(1) of the Act to take no further action because the Commonwealth considered that that provision “d[id] not apply to this matter because a decision was in fact made to refer the provision of services” by the applicant to the committee. It was also said that the declaration that the applicant sought would be inconsistent with the judgments of this Court in National Home Doctor Service Pty Ltd v Director of Professional Services Review [2020] FCA 386; 276 FCR 338 (NHDS #1) and National Home Doctor Service Pty Ltd v Director of Professional Services Review [2020] FCA 1016; 276 FCR 382 (NHDS #2).

21    While they initially disagreed with the Commonwealth’s position and sought declaratory relief, the applicant’s representatives ultimately agreed not to seek such relief in the proceeding. I will return to conversations that took place between the respective solicitors before that position was reached.

22    On 17 February 2023, ie within a week of the orders setting aside the previous referral, the Acting Director wrote to the applicant to inform him that he had decided to make a referral to a Committee in accordance with s 93 of the Act as outlined in an instrument establishing the Committee dated 16 February 2023. The instrument set up Professional Services Review Committee No. 1528 and made a referral to it to investigate whether the applicant engaged in inappropriate practice in providing the referred services.

23    By originating application for judicial review filed on 10 March 2023, the applicant seeks orders pursuant to ss 5(1)(c) and/or (d) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B(1) and (1A) of the Judiciary Act 1903 (Cth) to review the decisions of the Acting Director on 16 February 2023 to set up a Professional Services Review Committee and to make a referral to that Committee to investigate whether or not the applicant had engaged in inappropriate practice in providing the services specified in the referral. The originating application seeks, amongst other things, the following relief:

(1)    an order quashing each of the Acting Director’s purported decisions to set up the Committee and make the referral to the Committee; and

(2)    a declaration that by the operation of s 94(1), the Director is taken to have made a decision to take no further action in relation to the review of the provision of services by the applicant.

24    The Director is the first respondent to the application. The second respondent is the Professional Services Review Committee No. 1528. Submitting notices, save as to costs, have been filed on behalf of those respondents. The third respondent is the Commonwealth of Australia.

The parties’ principal contentions

25    The applicant’s case is deceptively simple. It asserts that because the first referral to the Committee was set aside under the orders of Rares J, and/or because it was a referral to something that was not a Committee as required by s 93(1) and was also set aside, the referral is a nullity and can have no effect in interrupting the 12 month period provided for in s 94(1)(b). It is then said that since the second referral occurred after the expiry of that 12 month period, that was too late as the Director is taken at the end of the period to have made a decision to take no further action in relation to the review.

26    The Commonwealth’s response is to say that the outcome in this case is governed by NHDS #2, to which the applicant says that that case should not be followed, either because it is distinguishable or, failing that, because it is clearly wrong. In the alternative, the Commonwealth says that the applicant is barred from asserting the claim that the first referral did not interrupt time because it is a claim that could and should have been pursued to finality in the first proceeding, ie that it was unreasonable of the applicant not to have done so.

Nullity and the NHDS cases

27    There are circumstances in which a decision that is jurisdictionally flawed is regarded, in law, as no decision at all. Examples famously include Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; 209 CLR 597 at [51] per Gaudron and Gummow JJ, [63] per McHugh J, [152] per Hayne J, and Plaintiff S157/2002 v Commonwealth [2003] HCA 2; 211 CLR 476 at [76] per Gaudron, McHugh, Gummow, Kirby, and Hayne JJ.

28    However, there are other circumstances where a jurisdictionally flawed decision is regarded as nevertheless a decision in fact such as to amount to a “decision” referred to in legislation and as such giving rise to legal consequences. Examples famously include Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; 24 ALR 307 at 313-316 per Bowen CJ and 331-339 per Smithers J and Plaintiff M174/2016 v Minister for Immigration and Border Protection [2018] HCA 16; 264 CLR 217 at [3]-[4] and [52] per Gageler, Keane and Nettle JJ, Gordon and Edelman JJ agreeing at [78]-[82] and [100] respectively.

29    Whether a reference to a decision, or other action, is only to a valid such decision or other action or whether it is such a decision or action in fact that need not be legally valid is a question of construction of the provision in question: see Brian Lawlor at 313, Bhardwaj at [3], [54], [70], [147] and [154], and Plaintiff M174/2016 at [1].

30    In NHDS #1, Griffiths J set aside a referral by the Director to a Committee under s 89C(2)(c) of the Act on the ground that there was a denial of procedural fairness (see [156], [160] and [185]). Orders were made setting aside the decision to set up and refer the particular matters to the Committee, and setting aside the referral. Although not deciding the question, his Honour expressed the view that notwithstanding that he was setting aside the referral, the referral was nevertheless a decision for the purposes of s 94(1) with the consequence that the deeming provision in that section would not apply (at [189]).

31    In NHDS #2, the applicant sought a declaration that the Director must be taken under s 94(1) to have decided to take no further action because more than 12 months had passed since the Director decided to review the provision of services by the applicant. That was because the earlier referral had been set aside. Justice Griffiths engaged in a detailed analysis of the statutory provisions with reference to their text, context and purpose, and concluded that the reference to the director not having “referred the provision of one or more of the services to a Committee” in s 94(1)(b)(iii) is to a referral in fact which need not be legally valid. That is to say, even if the referral was subsequently set aside, as had occurred in NHDS #1, the fact of the referral was sufficient to interrupt time under s 94(1) with the result that the Director was not taken to have made a decision at the end of the 12 month period to take no further action in relation to the review. See the judgment at [39]-[64].

Is NHDS #2 distinguishable?

32    Dr Lucy, counsel for the applicant, submits that NHDS #2 does not govern the outcome in the present case because it is distinguishable. That is said to be because in the present case, unlike in NHDS #2, the first referral was invalid because it was not a referral to “a Committee”, ie it was not a referral to a Committee constituted as required by s 93 but rather merely to a group of people who purportedly constituted such a Committee. Dr Lucy submits that the decision to set up a Committee is logically anterior to and separate from the decision to make a referral to a Committee. Dr Lucy places much emphasis on the requirements for the constitution of a Committee, and their importance in the statutory scheme, citing Kutlu v Director of Professional Services Review [2011] FCAFC 94; 197 FCR 177 at [82], where Flick J said that “the need for Committees to be properly constituted is itself fundamental to the very administration of Pt VAA.” On that basis, Dr Lucy submits that a referral to a “non-committee” cannot amount to a referral for the purposes of s 94(1)(b)(iii).

33    I am not persuaded that that is a relevant distinction. In NHDS #1, both the decision to set up the Committee and the decision to refer the review of the provision of services to the Committee were set aside. As noted by Mr Kaplan on behalf of the Commonwealth, the orders of Rares J in the present case were relevantly identical. Moreover, in NHDS #2 Griffiths J identified that NHDS submitted that without the existence of a valid referral which establishes a Committee, there can be no “referral” as defined by s 81 (“referral” is defined as “a referral to a Committee under s 93”). That is in essence the same submission as the one being made in the present case. His Honour rejected that submission (at [42]). His Honour also reasoned (at [43]) that merely because a referral must be “to” a Committee, as specified in both ss 93(1) and 94(1)(b)(iii), that does not assist the submission – it simply indicates that there must actually be a decision in fact to refer the review of the provision of services to a Committee.

34    That reasoning applies in the present case. There was a decision in fact to refer the review of the provision of services to a Committee, even though there was an error in the constitution of the Committee with the effect that it was not a Committee established under s 93. The incorrect constitution of the Committee does not change the fact of there having been a decision to refer the matter to a correctly constituted Committee – it would be absurd to suggest that the Director intended to refer the matter to an incorrectly constituted Committee.

35    In the circumstances, I reject the submission that NHDS #2 is relevantly distinguishable.

Is NHDS #2 clearly wrong?

36    It is common ground that notwithstanding the authority that NHDS #2 constitutes, I must independently consider and decide the arguments that have been presented and I must not follow NHDS #2 if I am persuaded that it is clearly or plainly wrong: Hicks v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 757 at [75]-[76] per French J; BVT20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCAFC 222; 283 FCR 97 at [62] per Allsop CJ, Moshinsky and O’Callaghan JJ.

37    Three arguments are advanced by Dr Lucy as to why NHDS #2 is clearly wrong.

38    First, it is said that the text of the Act requires that the referral to a Committee be one made in accordance with the Act. Various submissions are made in support of this argument, but they amount to the same argument previously made that NHDS #2 is distinguishable. In short, it does not assist to emphasise that the Committee that is established under s 93 must meet the requirements of that section, because that has little bearing on Griffiths J’s reasoning that an invalid referral is still a referral as contemplated by s 94(1)(b)(iii).

39    Secondly, it is said that on the construction adopted by Griffiths J, if the Director makes an invalid referral, the Director then has an unspecified timeframe in which to make a subsequent referral, albeit that it must be within a reasonable time (NHDS #2 at [53]). It is said that it could not have been intended by the Parliament, in light of the strict timeframes in Pt VAA of the Act, that a referral made by the Director after a reasonable time would be valid, or that the Director could have an unspecified amount of time to make a referral.

40    Whilst that unsatisfactory consequence of Griffiths J’s construction should be acknowledged, the reverse must also be acknowledged. That is, on the applicant’s construction a highly technical and innocent error which leads to the invalidity of the referral, such as in the present case, can readily have the result that possible “inappropriate practice” is not investigated and acted against. Such a consequence would be contrary to the objects stated in s 79A – a construction that has that consequence would not protect patients and the community in general from the risks associated with inappropriate practice, and it would not protect the Commonwealth from having to meet the cost of services provided as a result of inappropriate practice.

41    As Mr Kaplan submits, although disciplinary powers are conferred under the legislative scheme in Pt VAA, the purpose or object of that scheme is to protect both patients and the Commonwealth against abuse of the system. Such “public protective” legislation should not be narrowly interpreted – a holding of nullification of the process for purely formal reasons would occasion public inconvenience, a consequence which the Parliament would be unlikely to intend. See Health Insurance Commission v Grey [2002] FCAFC 130; 120 FCR 470 at [173] and [179] per Beaumont, Sundberg and Allsop JJ.

42    Dr Lucy submits that the time limits provided for in the processes in Pt VAA should be understood as providing protection to practitioners whose conduct is under consideration, and that that protection, specific as it is, should override the objects of the Part as set out in s 79A. There are at least two obstacles to the acceptance of that submission. The first is that it is not clear that the time limits are included specifically for the protection of practitioners; the efficiency that they are doubtless aimed at promoting is best seen as supportive of the overall process and protective of the interests of all stakeholders, including patients, the community in general and the Commonwealth.

43    The second obstacle is that the provisions concerning time limits should be given their ordinary meaning, and where that protects practitioners such protection should obviously apply. That is because the objects provision does not control clear statutory language: Australian Building and Construction Commissioner v Powell [2017] FCAFC 89; 251 FCR 470 at [48] per Allsop CJ, White and O’Callaghan JJ. However, the present question is not about the ordinary meaning of an express provision; it is a more subtle question about whether the meaning of the Director not having “referred the provision of one or more of the services to a Committee” is a reference only to a legally valid referral or whether it includes also a referral in fact which is not legally valid. The objects in s 79A support the construction adopted in NHDS #2, and there is no justification for elevating an implied object that might be said to arise from particular provisions to override those overarching express objects.

44    The third submission on behalf of the applicant is that the construction adopted in NHDS #2 does not advance the statutory purpose of ensuring that the Director acts promptly, or the correlative statutory purpose of minimising the prejudice to a person under review caused by delays or errors on the part of the Director. That is in substance the same as the second submission, and it is unpersuasive for the same reasons.

45    In the result I am not persuaded that Griffiths J is wrong in NHDS #2. To the contrary, I am in respectful agreement with Griffiths J – a legally invalid referral to a Committee, including an invalidly constituted Committee which is thus no Committee under the Act, is a referral under s 94(1)(b)(iii) such as to interrupt the period of 12 months for such a referral, with the consequence that the deeming provision in the tailpiece to s 94(1) is not enlivened.

The Commonwealth’s alternate defences

46    As mentioned, the Commonwealth submits in the alternative that the proceeding should be dismissed or permanently stayed on the basis of Anshun estoppel or abuse of process. In short, that is on the basis that in the previous proceeding the applicant had in his originating application sought a declaration that, by reason of s 94(1), the Director was taken to have made a decision to take no further action in relation to the review of his provision of services, but had then accepted a settlement of that proceeding on the basis that the first referral was set aside and had not pursued the declaration. The Commonwealth submits that that case could and should have been pursued in that proceeding, and that it cannot now be pursued in the present proceeding.

47    In view of my conclusion that the applicant’s case fails on its merits, this point can be dealt with briefly.

48    The relevant evidence is as follows.

49    Aaron Taverniti is the solicitor for the Commonwealth, and Stephen Moss is the applicant’s solicitor. On the day after the correspondence between the parties’ solicitors referred to at [20]-[21] above, ie on 10 February 2023, there were three telephone conversations between the solicitors. From Mr Taverniti’s file note of the first two conversations the following is apparent:

(1)    Mr Moss called Mr Taverniti and asked what they were going to do about the case. In the short conversation that followed, each expressed the position as previously recorded in the correspondence, ie the Commonwealth conceded that the referral and the establishment of the Committee fell to be set aside as being affected by jurisdictional error but maintained that there was no basis for a declaration that the Director is taken to have decided to take no further action, and the applicant said that there was. The conversation ended on the basis that Mr Moss would need to get instructions but would likely need an extension of time for submissions to deal with the declaration point.

(2)    Ten minutes later, Mr Moss called again. He said that in retrospect, maybe they could agree to settle as proposed by the Commonwealth and that any further action taken by the Director could be the subject of separate litigation if necessary.

(3)    Mr Taverniti replied, saying “that was sensible, particularly given we wouldn’t want to pre-empt what may or may not be done”. The reference to what might or might not be done must be understood as a reference to whether the Director would or would not establish a new Committee and make a new referral following the setting aside of the first establishment of a Committee and the first referral.

50    In his affidavit, Mr Taverniti gave further evidence about the second call. He stated that he believed that he would have said to Mr Moss words to the effect of “ultimately, it is a matter for the applicant whether he agrees to the terms proposed by the Commonwealth”. Mr Taverniti said that he believed that he would have said those words as he would not have wished to be taken to be offering any advice as to the wisdom of the course Mr Moss had foreshadowed that the applicant would take.

51    Mr Taverniti’s file note of the third call records that Mr Moss stated that the applicant would settle on the basis of the orders proposed by the Commonwealth.

52    It was on the above basis that the orders of Rares J were made by consent later that day.

53    In my view, it cannot be concluded that the applicant was unreasonable to have settled on the basis that he did and not to have pursued the declaration in the first proceeding. The second conversation between the solicitors, and in particular Mr Taverniti’s indication that he regarded the proposed course as “sensible”, suggests that it was less than certain what the Director would do following the Commonwealth’s concession in the first proceeding. The implication of that position is that the Commonwealth may have contended, in opposition to the declaration being made, that it was premature because the Director had not yet made the second referral and set up the Committee for the second time, and it was not certain that those steps would be taken in the future.

54    Even accepting that Mr Taverniti then explained that what course the applicant took was a matter for him – a proposition that might be thought to be self-evident – does not detract from the substance of the conversation between the solicitors. That substance, in effect, anticipated the s 94(1) question being dealt with in a subsequent proceeding in the event that the Director made a new referral. That is indeed what occurred, and there was nothing unreasonable in that course being adopted by the applicant. That is especially so in circumstances where the declaration that it is said should have been sought by the applicant before Rares J was a discretionary remedy and there was no way for the applicant to know with certainty what course the Director would take given that a number of possibilities were open. The Commonwealth’s alternative grounds to resist the application therefore fail.

Conclusion

55    In the circumstances, the proceeding should be dismissed on its merits. There is no apparent reason why the costs should not follow the result.

Associate:

Dated:    9 November 2023