Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc - [2003] FCA 686

FEDERAL COURT OF AUSTRALIA
ACCC v The Australian Medical Association Western Australia Branch Inc
[2003] FCA 686
TRADE PRACTICES – State sold public hospital and surrounding grounds to corporation pursuant to re-development contract – corporation agreed to operate public hospital during and after re-development under lease and sub-lease arrangement – corporation undertook to provide all medical services required by public patients and not to charge them fees – corporation agreed to employ or engage services of doctors currently employed at public hospital – State agreed to pay corporation for its services to public patients – State was party to an award and enterprise bargaining agreement governing terms and conditions of doctors providing medical services in public hospitals – corporation always willing to engage or employ on those terms and contracted with State on that basis – corporation negotiated with AMA (WA) in relation to terms and conditions of engagement of employment of doctors to provide medical services to public patients during and after re-development – whether arrangement made or understandings reached containing price fixing provision – whether any medical practitioners assumed obligation not to charge below State agreement rates – whether corporation undertook obligation to employ or engage doctors on that basis – whether any relevant provisions of arrangement or understandings had purpose effect or likely effect of substantially lessening competition in a relevant market – market definition – whether corporation entitled to derivative Crown immunity.
CROWN IMMUNITY - whether application of Trade Practices Act to arrangement or understandings entered into by corporation in relation to employment or engagement of doctors (including their remuneration) attracted liability under Trade Practices Act - whether in providing medical services free of charge to public patients in public hospitals State carrying on business – whether Trade Practices Act applied to those activities of the State – whether corporation providing those services under contract to the State entitled to derivative Crown immunity.
Trade Practices Act 1974 (Cth), ss 2B, 4, 4E, 4F, 4G, 45(2)(a)(ii), (b)(ii), 45A
Hospitals & Health Services Act 1927 (WA), ss 5A, 34
Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 referred to
Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 applied
Briginshaw v Briginshaw (1938) 60 CLR 336 applied
Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) ATPR 40-157 applied
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 applied
Australian Competition and Consumer Commission v Pauls Ltd [2002] FCA 1586 referred to
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 44 ALR 557 applied
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 referred to
Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299 referred to
Stirling Harbour Services Pty Ltd v Port of Bunbury Authority (2000) ATPR 41-783 referred to
Australian Competition and Consumer Commission v Pauls Ltd [2002] FCA 1586 referred to
Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 referred to
Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 referred to
Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177 applied
Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) HCA 5 referred to
Saitta Pty Ltd v Commonwealth of Australia (2001) 162 FLR 35 referred to
Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia (2000) 104 FCR 448 referred to
JS McMillan Pty Ltd v Commonwealth of Australia (1997) 77 FCR 337 referred to
Bradken Consolidated Ltd v The Broken Hill Proprietary Co Ltd (1979) 145 CLR 107 applied
Sharkey v Fisher (No 2) (1980) 33 ALR 184 applied
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 9) [2000] FCA 23 referred to
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 referred to
NT Power Generation v Power & Water Authority [2002] FCAFC 302 referred to
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 384 referred to
Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 distinguished
Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10 distinguished
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC,
MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA, PAUL CONSTANTINE BOYATZIS, DOCTOR DAVID EVAN ROBERTS, MARTIN DAY
and IAN GEOFFREY MACDONALD
W121 OF 2000
CARR J
9 JULY 2003
PERTH

I N D E X

Page

INTRODUCTION  1 1

SETTLEMENT OF THE APPLICANT’S CLAIMS

AGAINST SOME OF THE RESPONDENTS   2 2

THE STATEMENT OF CLAIM  3 3

THE DEFENCES  13 13

SOME FACTUAL BACKGROUND  14 14

FINDINGS OF FACT  17 17

THE STATUTORY FRAMEWORK  45 45

THE CONTRAVENTIONS AS EXPLAINED IN SUBMISSIONS

AT THE HEARING  46 46

WAS THERE AN UNDERSTANDING WHICH CONTAINED

A PRICE FIXING PROVISION?   49 49

WERE THE PARTICIPATING PRACTITIONERS (OR AT LEAST

TWO OF THEM) PARTIES TO EITHER OF THE ALLEGED

UNDERSTANDINGS?  52 52

DID THE PROVISIONS HAVE A PURPOSE EFFECT OR LIKELY

EFFECT OF SUBSTANTIALLY LESSENING COMPETITION IN A

RELEVANT MARKET?  75 75

PURPOSE  75 75

THE RELEVANT MARKET OR MARKETS  76 76

EFFECT OR LIKELY EFFECT  82 82

SHIELD OF THE CROWN  93 93

CONCLUSION   100 100

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W121 OF 2000

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC (Incorporated Association Registration No AO110006P)
First Respondent

MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA (ACN 004 073 410)
Second Respondent

PAUL CONSTANTINE BOYATZIS
Third Respondent

DOCTOR DAVID EVAN ROBERTS
Fourth Respondent

MARTIN DAY
Fifth Respondent

IAN GEOFFREY MACDONALD
Sixth Respondent

JUDGE:

CARR J

DATE OF ORDER:

9 JULY 2003

WHERE MADE:

PERTH

THE COURT ORDERS THAT:
1.        The application against the second, fifth and sixth respondents be dismissed.
2.        The applicant pay the costs of the second, fifth and sixth respondents.
3.The first, third and fourth respondents have liberty to apply to discharge the interim injunctions granted pursuant to the orders made on 19 October 2001.

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

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W121 OF 2000

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC (Incorporated Association Registration No AO110006P)
First Respondent

MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA (ACN 004 073 410)
Second Respondent

PAUL CONSTANTINE BOYATZIS
Third Respondent

DOCTOR DAVID EVAN ROBERTS
Fourth Respondent

MARTIN DAY
Fifth Respondent

IAN GEOFFREY MACDONALD
Sixth Respondent

JUDGE:

CARR J

DATE:

9 JULY 2003

PLACE:

PERTH

REASONS FOR JUDGMENT
INTRODUCTION

The applicant, Australian Competition and Consumer Commission, alleges that the corporate respondents made an arrangement, or entered into two understandings containing anti-competitive provisions and gave effect to those provisions. By doing so they are said to have contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) (“the Act”) being contraventions in which the individual respondents are alleged to have been knowingly concerned, and thus involved.
The applicant alleges that the contraventions are either “per se” price-fixing contraventions when s 45(2)(a)(ii) and s 45(2)(b)(ii) are read with s 45A of the Act, or arise because the same provisions of the arrangement or the understandings had the purpose, effect, or likely effect of substantially lessening competition in one or other of the relevant markets.
SETTLEMENT OF THE APPLICANT’S CLAIMS AGAINST SOME OF THE RESPONDENTS
In mid 2001 the applicant on the one side and the first, third and fourth respondents on the other (“the AMA (WA) Respondents”) agreed, subject to Court approval, to resolve the issues between them. In essence, the AMA (WA) Respondents admitted the allegations against them. The parties concerned filed joint submissions and a statement of agreed facts, together with two bundles of agreed documents and a minute of proposed orders which they asked me to make with their consent.
On 7 August 2001, I heard all of the parties on the question whether I should make orders in terms of that minute. Senior counsel for the second, fifth and sixth respondents (“the MNL Respondents”) made submissions about the use of the statement of agreed facts, the appropriateness of the Court granting declaratory and injunctive relief at that stage of the proceedings (i.e. a stage at which his clients continued to defend the application) and the terms in which the proposed injunctions were expressed.
For reasons which I published on 19 October 2001 I decided to make some, but not all, of the orders sought. They included an order that the first respondent pay to the Commonwealth a pecuniary penalty in the sum of $240,000 in three instalments, that each of the third and fourth respondents pay to the Commonwealth a pecuniary penalty in the sum of $10,000, that the first respondent institute and maintain a Trade Practices Compliance Program and pay the sum of $25,000 by way of contribution to the applicant’s costs in the proceedings. I granted interlocutory injunctions against those respondents, but declined, at that stage of the proceedings, to make either final injunctions or declarations in the terms proposed.
The matter thus proceeded to trial essentially as litigation between the applicant on the one hand and the MNL Respondents on the other. But the outcome of the trial will inevitably have some effect on what final relief may be granted in respect of the contraventions admitted by the AMA (WA) Respondents.
THE STATEMENT OF CLAIM
The document which is now known as the “Third Further Amended Statement of Claim” is a long, intricate and convoluted document. It runs to 33 pages and contains 70 paragraphs plus many sub-paragraphs. It is hard to summarise, but I shall attempt to do so. At times I shall interpose some uncontroversial factual background to make the going a bit easier. At other times the summary, in the interests of accuracy, will have to descend into some detail.
In summary, the applicant alleges that in December 1996 the first respondent, the Australian Medical Association Western Australia Branch Inc (“AMA (WA)”), represented by the third and fourth respondents, Mr Boyatzis and Dr Roberts, arrived at an understanding with the second respondent, Mayne Nickless Limited, trading as Health Care of Australia (“MNL”), to fix the prices for the supply of certain medical services to public patients at the Joondalup Health Campus.
The Joondalup Health Campus includes a re-development of Wanneroo Hospital, a hospital previously owned and operated by the State of Western Australia (“the State”) i.e. a public hospital, and also a newly-built private hospital. MNL acquired the property from the State and leased the former public hospital now known as “the Wanneroo Community Hospital” to the State from whom it took a sub-lease of that area of land. Under the relevant State legislation both hospitals are together the subject of a private hospital licence. MNL operates and manages the Wanneroo Community Hospital and is paid by the State for doing so. The other hospital is known as “the Joondalup Private Hospital”.
The first understanding is referred to in the statement of claim as the “VMP Understanding” (VMP stands for visiting medical practitioners). A list of some of the visiting medical practitioners providing services to public patients at the Wanneroo Hospital at that time is annexed to the statement of claim. Those doctors (“the Participating Practitioners”) are said to have been parties to the VMP Understanding through the negotiations and agreements entered into on their behalf by AMA (WA) or which they allowed AMA (WA) to enter into. The Participating Practitioners, so it is alleged, were or were likely to be in competition with each other.
The VMP Understanding is alleged to have been recorded in a document (“the Memorandum of Understanding”) signed by the fourth respondent on behalf of AMA (WA) and the fifth respondent, Mr Martin Day, on behalf of MNL on 9 December 1996. Mr Day was at all material times general manager for Western Australia and Asia of a division of MNL known as “Health Care of Australia”. The sixth respondent, Mr Ian Geoffrey MacDonald, was at all material times either a project officer (designated to be chief executive officer of Joondalup Health Campus) or was chief executive officer of that campus.
Again in summary, the applicant alleges that there was a provision of the VMP Understanding to the effect that each of the Participating Practitioners, if they chose to agree to supply medical services to MNL for public patients at the Joondalup Campus on a fee for service basis, would do so as independent contractors on the terms and at the rates specified in a schedule annexed to an enterprise bargaining agreement made between AMA (WA) and the State, known as the State VMP Agreement. I will refer to that annexure as “the Annexure”. The expression “a fee for service basis” means a basis whereby a doctor charges for a particular service rendered to a public patient. It is to be contrasted to a “sessional basis”, that being a situation in which doctors charge by the session, usually of four hours duration.
It is alleged that between December 1996 and February 1997 AMA (WA) and MNL gave effect to the relevant provisions of the VMP Understanding by negotiating and making an arrangement or entering into an understanding upon the terms of an agreement dated 19 February 1997 (“the Joondalup VMP Agreement”) governing the supply of medical services to public patients by certain doctors to MNL at the Joondalup Health Campus and the fees to be paid by MNL to those doctors. Each of the Participating Practitioners is said to have been a party to the understanding embodied in the Joondalup VMP Agreement. (The expression “public patients” is defined in the statement of claim as meaning patients who receive medical services in hospitals without charge). The Joondalup VMP Agreement was part of a composite document which included a set of by-laws specifically drafted for the conduct of what became known as the Joondalup Health Campus, and some schedules. One of the schedules was a schedule of fees. It was the same schedule as had been annexed to the State VMP Agreement, i.e. the Annexure.
The State VMP Agreement had always applied at the Wanneroo Hospital in relation to such management matters as the constitution, powers and duties of the Medical Advisory Committee, the Credentialling Committee, the Clinical Appointments Committee and the like. It did not apply to the terms of engagement or remuneration of the visiting medical practitioners at that hospital. Those doctors were employees; employed under what I describe in these reasons as “the Award” on a sessional basis.
The applicant alleges that AMA (WA) and MNL contravened ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act, when read with s 45A, by arriving at the VMP Understanding and giving effect to provisions in that understanding, and (further and in the alternative) entering into an arrangement or understanding, namely, the Joondalup VMP Agreement and giving effect to provisions in it, and that the other respondents (i.e. the individuals) were involved in those contraventions by being knowingly concerned in them. I shall refer to those alleged contraventions as the per se contraventions or the price-fixing contraventions.
As an alternative to the plea of price-fixing contraventions referred to above, the applicant alleges that AMA (WA) and MNL contravened s 45(2)(a)(ii) by entering into an understanding (the VMP Understanding) and, further or alternatively, an arrangement or understanding (the Joondalup VMP Agreement) and also contravened s 45(2)(b)(ii) by giving effect to the provisions of that arrangement or those understandings. The basis of the contraventions is said to be that those provisions had the purpose, effect and/or likely effect of substantially lessening competition in the four alternative relevant markets pleaded in the statement of claim.
The plea (in paragraph 43 of the statement of claim) that some or all of the Participating Practitioners were or were likely to be in competition with each other is based upon all of the matters pleaded in paragraphs 9 to 25 of the statement of claim. It is necessary to describe those matters. They were as follows. It should be understood that what follows is a description of parts of the statement of claim, not findings of fact.
There are and were at all material times in Western Australia public patients who sought medical services from hospitals which did not charge them for such services. Certain medical services which could only be provided by qualified medical practitioners were provided to patients, including public patients in hospitals. There were operators of hospitals who acquired those services and there were medical practitioners who were, or were available to be, engaged by such operators to provide such services on a sessional or fee for service basis. Those doctors are described as “Visiting Practitioners”.
On 24 April 1996, the State and MNL executed an agreement for the re-development and operation of the Joondalup Health Campus. It was described as the “Development and Health Services Agreement” (“the DHSA”). The Joondalup Health Campus is described in the statement of claim as being the first hospital in Western Australia to provide significant medical services to public patients that was not operated by or on behalf of the State.
The State was bound by the terms of the State VMP Agreement of 4 September 1995 to remunerate all visiting medical practitioners supplying “In-Hospital Medical Services” on a fee for service basis to hospital operators in the State on the terms set out in Annexure 2 of that document. Annexure 2 is the document which I have referred to above as “the Annexure”. It provided for remuneration according to prescribed fees based on a schedule of fees commonly known as the “Western Australian Public Hospitals Fee Schedule”.
The terms of the DHSA, so it is pleaded, did not oblige MNL to remunerate visiting practitioners caring for public patients at the Joondalup Health Campus on the terms and conditions of the VMP Agreement i.e. including the fees in the Annexure.
The next plea is concerned with what might be described as the demand side of the markets. It is to the effect that at all material times, in acquiring the relevant services from visiting practitioners, “Hospital Operators” in Western Australia or the Perth metropolitan area competed closely with each other. [The term “Hospital Operators” is defined in the statement of claim as operators of hospitals who acquired “In-Hospital Medical Services”. The term “In-Hospital Medical Services” is defined as medical services provided to patients, including public patients, in hospitals which could only be provided by qualified medical practitioners. On the face of it, that definition of Hospital Operators might include owners of private hospitals who acquired such services. However, it was common ground at the hearing that only public hospitals acquired In-Hospital Medical Services]. Particulars of such competition focus on the acquisition of medical services from visiting practitioners. Those particulars can be summarised as follows:
(a)to operate efficiently Hospital Operators needed to acquire the services of visiting practitioners;
(b)visiting practitioners could and did readily supply those services at more than one of the hospitals;
(c)visiting practitioners could readily switch from supplying those services at one hospital to doing so at another;
(d)if there was insufficient demand at a particular hospital for particular services to justify engagement of a full-time medical practitioner, most Hospital Operators engaged visiting practitioners to provide those services;
(e)there were significant costs for visiting practitioners in relocating from outside Western Australia to within Western Australia, or from outside the Perth metropolitan area to within the Perth metropolitan area, to provide services to a particular Hospital Operator;
(f)most visiting practitioners were only willing to provide services at hospitals that were within a reasonable driving distance of other places where they provided medical services; and
(g)Hospital Operators had an incentive to engage visiting practitioners at their hospitals so as to encourage them to admit their private patients to those hospitals.

Then there is reference to the supply side of the markets. There were recognised groups of In-Hospital Medical Services provided by doctors who specialised in various fields, namely general practice, anaesthetics, paediatrics, general surgery, obstetrics and orthopaedics. Those were the “Craft Groups”.
The applicant alleges that visiting practitioners or visiting practitioners in each of the Craft Groups competed closely with each other in supplying their services to hospital operators in either Western Australia or the Perth metropolitan area. That is said to have been because:
(a)the particular services that could be supplied by individual doctors or doctors in each of the Craft Groups could be supplied by many other visiting practitioners or visiting practitioners in the same Craft Group;
(b)there was an overlap in the supply of specialist services whereby other visiting practitioners or other visiting practitioners in the same Craft Group specialised in supplying the same services as provided by individual visiting practitioners who specialised or who specialised in a Craft Group;
(c)individual visiting practitioners sought to obtain convenient times, known as “lists”, to use facilities at the hospitals and in doing so competed with other visiting practitioners;
(d)most hospitals who acquired In-Hospital Medical Services did so in order to care for public patients and required the services of visiting practitioners or visiting practitioners from a particular Craft Group;
(e)visiting practitioners or visiting practitioners in the same Craft Group could supply the same services;
(f)those services could not be supplied without obtaining the necessary qualifications and experience to be entitled to practice as a medical practitioner, gaining admission to the relevant medical or surgical college for a particular Craft Group and being accredited to practice by the relevant Hospital Operator;
(g)obtaining and maintaining the necessary qualifications required many years of education, training and experience; and
(h)visiting practitioners valued the opportunity to supply services to Hospital Operators for public patients in order to be able to increase their opportunity to supply those services at higher prices to private patients, and they competed for that opportunity.
There are four alternative markets pleaded. They are as follows:
(a)a market in Western Australia in which In-Hospital Medical Services were supplied by visiting practitioners and acquired by Hospital Operators;
(b) the same service market, but in the Perth Metropolitan Area;
(c)the same geographical market as in (a) save that the services were In-Hospital Medical Services supplied by visiting practitioners in each of the Craft Groups and acquired by Hospital Operators; and
(d)the same service market as in (c) but with the geographical area being the Perth metropolitan area.
At all material times before the execution of the DHSA, most In-Hospital Medical Services supplied by visiting practitioners to public patients were acquired by the State on a fee for service basis on the terms of the State VMP Agreement. For that reason, so it is pleaded, there was little or no price competition in the relevant markets. Potential price competition was constrained by the terms of the State VMP Agreement, and non-price competition was also constrained by the terms of that agreement.
In 1995 there were sixty-two visiting practitioners at Wanneroo Hospital who were remunerated on a sessional basis and there was the potential for many of them to increase their income by being remunerated on a fee for service basis in accordance with the Annexure to the State VMP Agreement.
The applicant alleges that the DHSA created the potential for significant competition in the relevant markets in that:
(a)MNL was not bound by the terms of the VMP Agreement in determining the remuneration terms and conditions to apply to the engagement of visiting practitioners to care for public patients at the Joondalup Health Campus;
(b)the terms upon which MNL agreed to acquire those services at the Joondalup Health Campus would be likely to affect the terms to be offered by the State upon the expiry of the VMP Agreement on 4 September 1998;
(c)visiting practitioners valued the opportunity to supply services to public hospitals in order to be able to increase their opportunity to supply such services at higher prices to insured private patients and such doctors would be likely to compete for that opportunity;
(d)visiting practitioners valued the opportunity to supply their services to MNL at Joondalup Health Campus on a fee for service basis and would be likely to compete for that opportunity;
(e)the Joondalup Health Campus was to provide an increased range in the types of medical services available to public patients, thereby providing the doctors, including those at the Wanneroo Hospital, with an opportunity to compete for the supply of their services at the Joondalup Health Campus, being the principal hospital in the northern suburbs of the Perth metropolitan area; and
(f)the services to be supplied to MNL by visiting practitioners had different values to MNL with MNL being unwilling to remunerate some visiting practitioners on a fee for service basis.
Next the applicant pleads the negotiations, referred to as the “Collective Negotiations” after December 1995 between the AMA (WA), MNL and the State concerning the terms upon which all visiting practitioners would supply services to MNL at the Joondalup Health Campus for the care of public patients.
The applicant says that in the Collective Negotiations the AMA (WA) purported to act and acted on behalf of the Participating Practitioners in its dealings with each of MNL and the State. It pleads that at all material times after December 1995 each of those Participating Practitioners knew that:
·     AMA (WA) was engaging in the Collective Negotiations;
·     AMA (WA) was purporting to act on behalf of the Participating Practitioners in the Collective Negotiations;
·     it was the intention of AMA (WA) that the Collective Negotiations would result in an agreement which would establish the prices, alternatively prices at or no less than, the rates for remuneration specified in the Annexure and the terms upon which In-Hospital Medical Services would be supplied by all visiting medical practitioners (including the Participating Practitioners) for the care for public patients at the Joondalup Health Campus; and
·     all, or alternatively most, other visiting practitioners providing In-Hospital Medical Services at Wanneroo Hospital had decided to allow the AMA (WA) to act on their behalf in the Collective Negotiations.
With such knowledge, they decided to allow and allowed AMA (WA) to act on his or her behalf in the Collective Negotiations, or decided to allow and allowed to establish by agreement with MNL the prices and terms upon which they would agree to supply their services to MNL in order to care for public patients at the Joondalup Health Campus.
Next the applicant pleads that the AMA (WA), acting or purporting to act on behalf of each of the Participating Practitioners, or alternatively allowed by them to establish by agreement with MNL relevant prices and terms upon which they would supply their services, negotiated and agreed with MNL the Memorandum of Understanding dated 9 December 1996. The applicant then pleads certain of the terms and conditions of the Memorandum of Understanding. The Memorandum of Understanding as containing those particular terms and conditions is identified in paragraph 30 as the VMP Understanding. Accordingly, it is, in my opinion, important and useful to focus on the matters said to be provided for in the Memorandum of Understanding. They were that:
· each of the visiting practitioners, including all the Participating Practitioners would be offered by MNL the option of engagement as an independent contractor to supply their services to MNL at Joondalup and be remunerated by fee for service on the same terms and rates as the VMP Agreement on the basis that each of the Participating Practitioners would, if they chose to agree to supply In-Hospital Medical Services to MNL at the Joondalup Health Campus on a fee for service basis, agree to do so on the terms and rates specified in the VMP Agreement; and
· all other new visiting practitioners supplying such services would also be remunerated by MNL on the terms of the VMP Agreement.
The applicant pleads certain express written terms of the Memorandum of Understanding relating to its period, the offers to be made to visiting practitioners, the review of the State VMP Agreement and the by-laws for the Joondalup Health Campus to resolve any areas of conflict between those two documents by 31 January 1997, and that until that time the State VMP Agreement would apply to visiting practitioners at the Joondalup Health Campus.
I shall refer to those provisions as the “MOU Provisions”. The MOU Provisions are the first of three groups of provisions which together comprise what the applicant later describes as “the Provisions”.
At all material times after 9 December 1996, AMA (WA), MNL and each of the Participating Practitioners acted on the basis that the terms of the VMP Understanding were binding upon them in respect of their dealings concerning engagement of visiting practitioners at Joondalup.
The applicant then pleads that in order to give effect to the VMP Understanding the AMA (WA), acting on behalf of the Participating Practitioners in the same way as previously pleaded, negotiated and agreed with MNL the terms of the Joondalup VMP Agreement.
There are then pleaded the following express terms of the Joondalup VMP Agreement. It is necessary to refer to them because they form the second important part of what are pleaded to be “the Provisions”. They are as follows.
·     the Joondalup VMP Agreement would govern the supply of the relevant services to care for public patients at Joondalup until 31 May 2001;
·     representatives of MNL and AMA (WA) would meet no later than 1 January 2001 to commence negotiations in relation to an agreement to apply to the supply of such services after 31 May 2001;
·     appointment as a visiting practitioner at Joondalup had to be made in accordance with the terms of the Joondalup VMP Agreement and on the conditions set out in Annexure 2 to that agreement which reflected the terms of the State VMP Agreement and which provided for rates of remuneration equivalent to those in the Annexure;
·     visiting practitioners would be able to admit private patients to the Joondalup Health Campus and charge fees for those patients if appointed and credentialled appropriately; and
·     there would be an annual review and adjustment of the rates of remuneration having regard to the movements in Medical Fees Indices as provided by the Australian Medical Association Ltd (Canberra).
I shall refer to those express provisions as the “Joondalup VMP Agreement Provisions”.
In negotiating and agreeing the VMP Understanding and the Joondalup VMP Agreement, the applicant alleges that MNL knew and understood that AMA (WA) was acting or purporting to act on behalf of each of the Participating Practitioners, was acting in their collective interests and on the basis that each of them would, if they chose to agree to supply their service on a fee for service basis, agree to do so on the terms and rates specified in the VMP Agreement and MNL’s representatives (Mr MacDonald and Mr Day) acted on that basis.
In March, April and May 1997 AMA (WA) and MNL gave effect to the VMP Understanding and in particular one of its pleaded provisions by agreeing upon the manner in which visiting practitioners (including the Participating Practitioners), would be offered engagement by MNL to supply their services at Joondalup to care for public patients so as to provide those doctors with the option of engagement by MNL as independent contractors on a fee for service basis on the terms of the Joondalup VMP Agreement.
MNL and the Participating Practitioners are said to have given further effect to the VMP Understanding by MNL making offers of engagement to the doctors and, in the period May to December 1997, by each of those doctors, through a company controlled by him or her, accepting engagement by MNL as an independent contractor on the terms of the Joondalup VMP Agreement on a fee for service basis and by MNL so remunerating them.
The third of the Provisions so defined [see paragraph 40A(c)] was said to be a provision to the effect that each of the Participating Practitioners, if they chose to supply their services at Joondalup to public patients on a fee for service basis, would agree to do so on the terms and at the rates specified in the State VMP Agreement.
There then follow the allegations of the contraventions which I have described at paragraph [2] above.
THE DEFENCES
The MNL respondents, in their defences, challenge the factual basis of the applicant’s case. They say that neither the State VMP Agreement nor the Joondalup VMP Agreement set inflexible rates for services provided by visiting medical practitioners on a fee for service basis. They contend that in both agreements there was scope for negotiating different rates and bases of remuneration, particularly in the Joondalup VMP Agreement.
The MNL respondents deny that there was any relevant understanding between the Participating Practitioners concerning rates of remuneration for services rendered to public patients. There was no communication between them to that effect and no acceptance of any relevant obligation. MNL asserts that before July 1996 it had decided to match or mirror the government rates and conditions for fee for service engagement and sessional employment of doctors who would provide medical services to public patients at Joondalup. MNL denies that the Participating Practitioners became party to any understanding through the actions of AMA (WA). If AMA (WA) acted on behalf of those Participating Practitioners, that was something less than an agency relationship. If the Participating Practitioners knew what AMA (WA) was doing and allowed it to continue, that was insufficient to constitute the Participating Practitioners as parties to any arrangement arrived at by the AMA (WA).
Further, the MNL respondents deny that any provision of relevant arrangement or understanding had the purpose, effect or likely effect of fixing, controlling or maintaining the fees for services to be provided by doctors to public patients at Joondalup, either as a matter of construction of the Memorandum of Understanding or the Joondalup VMP Agreement, or as a matter of fact. The relevant fees would have applied in any event.
As to the alternative bases (i.e. non price-fixing) of the contraventions pleaded, the MNL respondents deny that, if there was an understanding, any provision of the understanding had the purpose or effect of substantially lessening competition.
Mr Day and Mr MacDonald deny accessorial liability. They adopt MNL’s defence and deny knowledge of the matters which the applicant claims gave rise to contraventions of the Act by MNL.
Finally, the MNL respondents (hereafter I shall on occasion refer to them as “the respondents”) claim the shield of the Crown in right of the State of Western Australia. They contend that Part IV of the Act does not, in the circumstances of this case, apply to the Crown in right of the State of Western Australia, because providing hospital services to public patients was not the carrying on of a business, and that everything done by MNL was in the course of providing public patient hospital services on behalf of the State. In effect, the State was delivering public patient hospital services at the Wanneroo Community Hospital through MNL. The MNL respondents contend that they were entitled to derivative Crown immunity because otherwise the granting of the relief sought against them would prejudice the interests of the State.
SOME FACTUAL BACKGROUND
Until the occurrence of the events with which this case is concerned, the only hospitals in Western Australia providing services to public patients were those which were owned and operated by the State. However, by 1995 the State had decided to involve the private sector, at least to some extent, in providing hospital medical services to public patients.
On 2 February 1995 the Health Department of Western Australia (“the Health Department”, an expression which I shall use interchangeably with “the State”) advertised for expressions of interest in private sector participation in the re-development of the Wanneroo Hospital, which later became the public hospital part of the Joondalup Health Campus. MNL expressed interest and by 30 June 1995 was on the short list of developers. On 29 August 1995 MNL submitted its Joondalup Health Campus Development Proposal to the Health Department. On or about 6 November 1995 the Health Department announced that MNL was the preferred tenderer for the operation of the proposed Joondalup Health Campus.
In the meantime, on 4 September 1995, the State Minister for Health entered into an agreement with AMA (WA) regarding the terms, conditions and remuneration of doctors providing medical services (“In-Hospital Medical Services”) in non-teaching hospitals operated by the State for the care of public patients. This was “the State VMP Agreement”.
The State Minister for Health and the AMA (WA) had entered into a similar agreement on 30 April 1992 covering the period between 1992 and 1995. The State VMP Agreement obliged the State to remunerate all visiting medical practitioners on a fee for service basis on the terms set out in the Annexure.
It is useful, for the purposes of this case, to understand the two different bases upon which, in general, visiting medical practitioners could at this time be engaged by the State to provide their services to public patients. They could be employees on the terms of an industrial agreement made between the State and the AMA (WA), known as the WA Government Health Industry Medical Officers and Medical Practitioners’ Agreement 1996. That agreement was generally referred to, perhaps somewhat inaccurately, as “the Award”. I shall also in these reasons refer to that industrial agreement as “the Award”. Such employment could be either on a full-time or a sessional basis. Alternatively, they could be engaged as independent contractors on the terms of the State VMP Agreement and be paid on a fee-for-service basis. I say “in general” because Wanneroo Hospital was a special case. Due to an election made by the Wanneroo doctors in 1992 they were employed or engaged by the State on the terms and conditions of the State VMP Agreement, the terms of which were accepted as applying to the operation of the Wanneroo Hospital, but they were remunerated on a salaried sessional basis in accordance with the Award.
On 24 April 1996 the State Minister for Health and MNL entered into the DHSA. That agreement provided for a major redevelopment of the Wanneroo Hospital and for its future as a privately operated hospital for public patients as part of the proposed Joondalup Health Campus. As mentioned previously, the Joondalup Health Campus was to be developed as including both a public hospital and a private hospital. That situation is known in medical circles as “co-location”.
The obligations of the parties to the DHSA were subject to several conditions precedent. One of those conditions was to the effect that all medical practitioners required to deliver medical services to public patients at the Joondalup Health Campus would be engaged via a contract of employment with a Board, as defined under the Hospitals and Health Services Act (WA) 1927 (“the Hospitals Act”), at remuneration levels, benefits, terms and conditions not exceeding those set out in sessional or fee for service contracts then applying at other Perth metropolitan hospitals, and otherwise pursuant to arrangements in form and substance satisfactory to MNL. Another condition precedent was that MNL be appointed to manage those visiting medical practitioners on behalf of the relevant Board on terms and conditions in form and substance satisfactory to MNL.

On 9 December 1996, representatives of the AMA (WA) and MNL signed the Memorandum of Understanding. Although the State Minister for Health was also named as a party to that document, he refused to sign it. The Memorandum of Understanding dealt with a range of matters relevant to the co-location of the private and public hospitals at the Joondalup Health Campus. I consider those provisions in more detail later in these reasons. It also contained provisions relating to the employment or engagement of doctors by the State or, (at their individual election), by MNL to provide services to public patients. The four options were that a doctor could:
(a)continue in employment with the State under the terms of the Award;
(b) be engaged by the State as an independent contractor on a fee for service basis under the State VMP Agreement; or
(c) be engaged as an independent contractor by MNL on a “grossed-up” fee arrangement which approximated the salary and other benefits which he or she would have received as an employee under alternative (a); or
(d) be engaged as an independent contractor by MNL on what was intended to be a fee for services basis under the terms and conditions of the proposed Joondalup Health Campus By-Laws and Visiting Medical Practitioners Agreement.
On 19 February 1997 a composite document comprising the Joondalup Health Campus By-Laws and the Joondalup VMP Agreement was signed on behalf of AMA (WA) and MNL. It contained an agreed fee schedule in annexure form which comprised a direct copy of the Annexure (i.e. the annexure to the State VMP Agreement).
Between May 1997 and late October 1997 the Health Department and MNL each advised the Wanneroo visiting medical practitioners of the four options upon which they could elect to be employed or engaged at the Joondalup Health Campus. Each made offers of engagement and the State made offers of continuing employment.
The foregoing facts were common ground between the parties. Although there was much common ground about what transpired between the 1995 announcement by the State of its intention to re-develop the Wanneroo Hospital and the acceptance of the offers of engagement referred to immediately above, I intend to make findings of fact about what transpired. I now turn to that task.
FINDINGS OF FACT
I accept the evidence of Dr Roberts that the AMA (WA) was concerned from the outset about the proposal that a private hospital operator be contracted to provide medical services to public patients at Wanneroo in particular, but was also concerned about the general concept of private management of public hospitals. The evidence of Dr Roberts, and the evidence of other doctors called by the applicant, was that the AMA (WA) and those other doctors took the view that if there was to be a co-location of private and public patient hospital services on the Joondalup Campus then there were certain public interests which had to be protected.
First, it was important that there be a physical distinction between the premises at which private patients were treated and those at which public patients were treated. That is, a patient going into the proposed Joondalup Hospital should be well aware whether he or she was being treated as a private patient or as a public patient. I accept that a major factor in this concern was that unless such a distinction was maintained, there was a very real risk that demand for private health insurance in the Joondalup area would fall substantially. This was because patients would have a perception that they could obtain, as public patients, the same medical services in the Joondalup Hospital as they would receive as privately-insured patients. The result would be increased pressure on an already heavily-burdened public hospital health system.
I accept also the evidence both documentary and oral to the effect that the AMA (WA) in particular, and probably many of the visiting medical practitioners at Wanneroo Hospital, were concerned about the perceived problem of “managed care”. The expression “managed care” refers to the degree to which a hospital operator can control or influence the extent and quality of medical treatment provided by doctors to public patients at a hospital which is privately operated. The perceived conflict is between the best medical interests of the patient and the net profit of the private operator.
It would appear from the evidence, and I so infer, that at the relevant times there was a body known as the Medical Advisory Committee at each public hospital in Western Australia. The role of the respective Medical Advisory Committees at each public hospital was spelled out in the State VMP Agreement and its 1992 predecessor. There was a Medical Advisory Committee at the Wanneroo Hospital. There was no suggestion that its role was basically different to that of a Medical Advisory Committee at any other public hospital in Western Australia. The Medical Advisory Committee was a body elected by doctors practising at the Hospital. From examination of the minutes of the Wanneroo Medical Advisory Committee and from the evidence given by Dr Roberts and other doctors who were from time to time members of that Committee, I infer that it carried out numerous important functions in the public interest which generally transcended the private interests of the doctors who elected its members. The Committee worked in conjunction with a committee known as the Accreditation Committee which assessed applications by doctors who sought to be accredited as visiting medical practitioners to the Wanneroo Hospital. I infer that there was a considerable degree of liaison between the Accreditation Committee and the Medical Advisory Committee. I accept the evidence of Mr George Kubacz, a long-serving surgeon at Wanneroo Hospital since its inception in 1980, that a responsibility of the Medical Advisory Committee at Wanneroo was to advise the public servants who ran the hospital about such medical matters as whether to accredit particular doctors to practise at the hospital and whether to use new or experimental medical procedures. There were also recognised groups of doctors with special skills, whether general practitioners or otherwise, known as “Craft Groups” who were also concerned with the proper running of the hospital and care of its patients.
My general impression from the evidence was that the Medical Advisory Committee, the Accreditation Committee and the various Craft Groups of doctors (reflecting their respective skills) took their responsibilities to the Hospital and to the patients very seriously.
There were several meetings of Wanneroo doctors during 1995 and 1996 at which concerns were raised about what was being proposed in relation to the Wanneroo Hospital. Some of those meetings were arranged by the AMA (WA), others were meetings of the Medical Advisory Committee and at least one was organised by Dr M J Oehlers, the Head of the Department of General Practice at Wanneroo Hospital. Part of those concerns reflected the financial interest that some visiting medical practitioners had in the basis upon which they would be engaged to treat public patients at the new Joondalup Hospital. But I did not gain the impression from the documentary or oral evidence that maximisation of remuneration was a major concern of the doctors at Wanneroo in 1995-1996. Nearly all of the Wanneroo doctors (by which I mean visiting medical practitioners at Wanneroo Hospital) called by the applicant as witnesses gave evidence to that effect and I believe them. Dr M J Oehlers was an exception. He ranked remuneration somewhat higher. I also believed his evidence.
Perhaps not unsurprisingly, the question of remuneration for visiting medical practitioners at the Wanneroo Hospital was raised from time to time. For example, the 1995 annual general meeting of the Wanneroo Medical Advisory Committee (held on 28 September 1995) was addressed by Mr Peter Mott, Director, Health Services, at the AMA (WA), on the subject of proposed changes to remuneration, including the matter of remuneration on a fee for service basis, and the possible change from that basis to competitive tendering. On the other hand, reflecting public interest concerns, a resolution was passed unanimously at the same meeting strongly opposing co-location of the public and private hospital services at Wanneroo.
The expression “co-location” was, so I infer, also understood as meaning the location on a single site or on adjacent sites of public and private hospitals in a manner which would allow shared use of some of the services and facilities. That was symbolized by having a common public entrance to both hospitals, a matter which the AMA (WA) took up with MNL at the very early stages of the re-development of the Wanneroo Hospital. Nevertheless, there is evidence (see for example Mr Mott’s Branch Council Paper of 26 March 1996, p 3) that the AMA (WA) recognised the economic advantages of scale and hence the need for the sharing of some services and equipment.
The evidence also shows that throughout the second half of 1995 AMA (WA) made representations to the Health Department to the effect that, in relation to the supply of medical services to public patients at Wanneroo by visiting medical practitioners, those practitioners should be employed by the State and not by MNL. AMA (WA)’s position on that had been made clear to MNL and other tenderers even before the announcement of MNL as the successful tenderer in early November 1995.
As early as 2 August 1995 the then President of AMA (WA), Professor C A Michael, wrote to Ms Mary Foley, a senior executive at MNL who was involved with the tender for the Joondalup development, expressing AMA (WA)’s concerns, some of which I have summarised above. Fees and remuneration were mentioned in that letter, but not as central matters. The central theme of the letter was that if private operators were to be involved in providing medical services to public patients then this should be done in a way which would not lead to a decline in private health insurance with patients getting into a private hospital through the public system. The AMA (WA) said that it regarded as a fundamental element that the arrangements for the provision of medical services to public patients should be made between it [i.e. AMA (WA)] and the Health Department. It was important that the State, and not the private hospital operator, should engage the doctors required for that purpose. Professor Michael sought MNL’s support for that position to be reflected in any bid submitted by MNL for the Joondalup Development.
In its Joondalup Health Campus Development Proposal, submitted to the State on 29 August 1995, MNL stated its policy concerning the employment of existing staff. Relevant to this matter, was this statement:
‘Visiting Medical Officers will be paid according to the rates agreed between the Government and the AMA for the treatment of public patients by Visiting Medical Officers.’
On 21 September 1995, Ms Foley, on behalf of MNL, sent a letter to Messrs Arthur Andersen who were advising the Health Department in evaluating the various tenders for the Joondalup Development. This was in response to a request for information from a committee, known as the Evaluation Committee, in relation to numerous matters, including the engagement of visiting medical officers. A relevant paragraph of an enclosure in that letter was in the following terms:
‘VMOs would be engaged under the terms agreed from time to time between the WA Branch of the AMA and the Western Australian Department of Health. VMOs attending public patients would be compensated in the same manner as in public hospitals, even though the facility would be licensed as a private hospital.’
I accept Mr Mott’s evidence that as early as September 1995 some of the visiting medical practitioners at the Wanneroo Hospital had told him that they supported the AMA (WA)’s position in relation to the proposed co-location of the public and private hospital services at Wanneroo, that they wished the AMA to negotiate on their behalf for the continuing supply of their services to public patients and that such negotiations be between the AMA (WA), themselves (i.e. the doctors) and the State, to the exclusion of the private operator.
AMA (WA)’s view that the Government, rather than MNL, should be the employer of the visiting medical practitioners at Wanneroo was also made clear to the Commissioner of Health (Mr Alan Bansemer), for example by a letter dated 10 November 1995 signed by the third respondent, Mr Paul Boyatzis, who was the Executive Director of the AMA (WA).
Mr Bansemer’s reply dated 20 November 1995 suggests (and I so infer) that from the outset the State was not particularly receptive to the proposal that it should continue to employ visiting medical practitioners at Wanneroo. In that letter, Mr Bansemer said this:
‘HCoA have however indicated in their proposal that for the purposes of the public component, they would continue to employ medical practitioners under the same arrangements that exist within the public sector.’
The minutes of a meeting on 29 November 1995 between Mr Day and Mr MacDonald of MNL and Mr Brad Sebbes (Mr Sebbes was a senior officer of the Health Department concerned with the re-development of Wanneroo Hospital), together with the Health Department’s solicitor and one of its consultants, on behalf of the State, record the respective positions of the State and MNL on various contractual matters. Under the heading “Payment of VMPs”, MNL’s position was stated as being “AMA/HDWA contracts for VMPs are to be mirrored”. The Health Department’s position was stated as being “Contract terms are to be HCOA’s responsibility. All doctors at Wanneroo are to transfer under Award”.
It is apparent from Mr Mott’s evidence that AMA (WA)’s insistence that any agreement relating to medical services for public patients at Wanneroo/Joondalup should involve the State rather than MNL was based on what it perceived to be a potentially adverse effect if MNL were to be the contracting party. One adverse perceived effect was a potential to erode existing conditions and rates of remuneration for visiting medical practitioners. Another was that the conditions and remuneration relativities between the various methods of employment and engagement would be thrown out of kilter. But Mr Mott’s evidence also shows that AMA (WA) was seriously concerned about management issues at the proposed new hospital including, in particular, matters relating to the accreditation of doctors and other questions of clinical governance.
On 12 December 1995, AMA (WA), by letters addressed to the doctors practising at Wanneroo Hospital, convened a meeting which took place on 20 December 1995. About twenty of the Wanneroo visiting medical practitioners attended that meeting which was addressed by Mr Mott. One of the resolutions passed at the meeting reaffirmed the position of those present that any contract for the provision of medical services to public patients had to be between the State, the AMA (WA) and the medical profession. Copies of this resolution were sent shortly thereafter to both MNL and the Health Department.
In early January 1996, AMA (WA) continued to press the Health Department to agree that the provision of medical services to public patients at Joondalup would be through the State i.e. the Board of Management of the hospital.
I infer from MNL’s internal documentation, including minutes of meetings held between representatives of MNL on the one hand and, first, the Health Department and, secondly, AMA (WA) on the other hand, that at this stage (i.e. early 1996) MNL remained willing to employ or engage the visiting medical practitioners at Joondalup on the same basis (MNL used the word “mirror”) as undertaken by the State. For example, Mr Day’s detailed notes (in the form of handwritten minutes) of what took place at a meeting on 9 January 1996 between Dr Catchlove and Mr Sebbes record MNL’s position in these terms:
‘HCoA will “mirror” AMA agreements with State and pass through the benefits to doctors [therefore] no difference to working for State.’
I infer also that this would include payment on a fee for service basis in accordance with the State VMP Agreement.
In January 1996, AMA (WA) arranged to establish a “Contact Group” of doctors working at the Wanneroo Hospital to represent the views of accredited practitioners about the possible reduction in the quality of medical and hospital services consequent upon the proposed re-development of the hospital. This group was kept separate from the Medical Advisory Committee to avoid a perceived possible conflict of interest with the Health Minister’s position, i.e. the traditional role of a Medical Advisory Council was to advise the Health Department in relation to the running of the hospital. The initiative appears to have originated with Dr Roberts. The Contact Group comprised representatives of the various medical disciplines providing services to public patients at the Wanneroo Hospital. Mr Kubacz was one of those representatives. The AMA (WA) from time to time kept the Contact Group informed about the progress of its negotiations with the Health Department and MNL. An example of this was a circular letter dated 14 February 1996 from Mr Mott to the fourteen members of the Contact Group enclosing copies of recent correspondence between the AMA (WA) and the Health Department. In that letter Mr Mott referred to what he described as “three key areas of concern”, namely:
·     the need for clear and functional separation between public and private hospital facilities;
·     that the contract for the provision of medical services by doctors to public patients be between the AMA/medical profession and the Government and not through the private operator; and
·     the importance of the public hospital component of the Campus being recognised as such under the Hospitals Act.
The Wanneroo doctors were also kept informed by Mr Mott [on behalf of AMA (WA)] organising meetings at the Wanneroo Hospital with the visiting medical practitioners.
On 4 April 1996, Mr Mott sent to Mr Sebbes a fax setting out a preliminary list of items which he proposed be included in an agreement to be signed by the Minister for Health and the President of AMA (WA). The parties to this application appear to accept that this was the genesis of the Memorandum of Understanding. I accept that too. I think that it is fair to note that there is no reference, in the list of proposed items, to rates of remuneration for doctors. Apparently a similar document had previously been negotiated between the State, AMA (WA) and the private operator of the Hollywood Hospital. The fifth item in Mr Mott’s list of issues to be covered was the engagement or employment of doctors by the State. On 11 April 1996, Mr Mott sent a draft deed of agreement to Mr Sebbes. On 12 April 1996, Mr Sebbes sent another draft of the agreement to Mr Mott. One clause in that draft reflected what appeared to be the State’s then intention to continue employing medical practitioners for the provision of public patient services at the Joondalup Hospital. This was later re-confirmed in Mr Sebbes’ letter dated 9 July 1996 to Mr Mott.
I think that it is useful to note that as early as this stage (April 1996) the proposed clause in relation to employment and engagement of medical practitioners at Joondalup Hospital read as follows:
· Employment/Engagement of Medical Practitioners
The Board or the Minister on behalf of the Board will continue to employ/engage medical practitioners for the purposes of providing public patient services at the Joondalup Hospital. Medical Practitioners currently employed at the Wanneroo Hospital may elect on a discipline by discipline basis to transfer to fee for service independent contractor arrangements in accordance with the “Terms of Agreement concerning the provision of medical services by Visiting Medical Practitioners in State Government non-teaching hospitals of Western Australia” [i.e. the State VMP Agreement].

There were other clauses in what became a developing draft concerned with such matters as co-location and evaluation of the effect of the project on private health insurance levels.
In early May 1996 a significant development occurred. On 3 May 1996, Dr J LaValette, then chairman of the Medical Advisory Committee at Wanneroo, sent a letter to the Wanneroo doctors which was headed “Issues Paper”. I shall also refer to that letter as the “Issues Paper”. I accept Dr LaValette’s evidence that he provided a draft of the Issues Paper to Mr MacDonald, who approved its terms. I find, on the basis of Mr Sebbes’ evidence and the documentary evidence to the same effect that, perhaps unbeknown to Dr LaValette, Mr MacDonald sent a copy of the draft Issues Paper to Mr Sebbes for comment and that Mr Sebbes suggested some changes to the text, most of which were accepted.
Dr LaValette confirmed that the Issues Paper was typed at MNL’s office. He acknowledged that the word processing reference on it was Mr MacDonald’s reference. Mr Sebbes’ evidence was that Mr MacDonald faxed him the draft of that document and he had made some slight handwritten amendments to it. The document can thus be seen to have been generated, and I so find, through the joint efforts of Dr LaValette, Mr MacDonald and Mr Sebbes. It was sent ostensibly by Dr LaValette but with the approval of Mr MacDonald and Mr Sebbes.
The significance of the Issues Paper was that it proposed an alternative position to the employment or engagement by the State of the doctors who would treat public patients at the Joondalup Health Campus. The suggestion, put forward ostensibly by Dr LaValette but in reality also by MNL as an alternative to the AMA position, was as follows:
‘.   Medical staff decide whether to be employed/engaged by HCoA [MNL] at the Joondalup Health Campus or directly by the government
.     Conditions of employment if employed by HCoA will be per the Awards agreed from time to time between the AMA and Minister for Health for Sessional and Fee for Service payments
.     Medical Practitioners employed/engaged directly at the Joondalup Health Campus by HCoA may elect either by discipline or individually as agreed with Joondalup Health Campus to be paid under the Sessional or Fee for Service Awards.’
In this manner, a further significance of the Issues Paper emerges, namely, that by 3 May 1996, MNL was taking active steps to achieve its previously expressed intention of employing the Wanneroo visiting medical practitioners in accordance with the relevant award or to give them the election by discipline or individually (admittedly subject to agreement with MNL) to be engaged as independent contractors on a fee for service basis. I infer that the references to the “Awards agreed … for Sessional and Fee for Service payments” referred to in the second and third dot points immediately above were references, respectively, to the Award (in relation to sessional employment) and to the State VMP Agreement (including the rates for fee for service set out in the Annexure). The Issues Paper would otherwise make no sense. MNL can thus be seen to have been prepared almost from the outset, and at least by 3 May 1996, to employ or engage the doctors at Wanneroo on essentially the same alternative bases upon which MNL is alleged to have reached an understanding in the Memorandum of Understanding, some seven months later, on 9 December 1996. This is consistent with part of the contents of a letter dated 15 May 1996 from Dr B Catchlove, Managing Director of Health Care of Australia, to Dr Roberts confirming that doctors “contracting” with MNL would have identical terms and conditions to the public arrangements, whether they continued to work for the State or chose to work directly for MNL.
Mr Kubacz understood that this was MNL’s position and continued to be its position at all material times. His evidence (T175), which I accept, was as follows:
‘You became aware, however, from that letter that Health Care of Australia was prepared to offer rates which matched the government rates on a fee for service or sessional basis? --- Yes.
At that time, and that understanding didn’t change throughout the period, did it? --- No.
Health Care of Australia had made it clear that they would match the government rates on a sessional or fee for service basis? --- That was my understanding, yes.
Yes. You had that understanding from soon after 3 May 1996? --- Yes.’
The inference I make in that regard is also consistent with Mr MacDonald’s evidence, given to the applicant at an interview on 11 August 1999. Speaking of the period around May 1996 Mr MacDonald said:
‘I was keen on having fee for service as an option for some of the doctors because it’s the only way I could get particular new doctors to come in. But I don’t think we spent a lot of time. I don’t think it was the single critical issue up front …’
Later during the same interview he said:
‘We said we would reflect either the award that existed for sessionals and junior staff or the VMP agreement for the fee for service payment per piece of work done. So that was a given that was fixed over there. Nobody ever discussed about us or we never discussed about us changing those rates.’
I accept the evidence of Dr LaValette (as reflected in the Issues Paper) that a substantial factor in the attractiveness of this proposal was the entitlement of those doctors who transferred from employment by the State to employment or engagement by MNL, to be paid what was termed a “transition payment” equivalent to two weeks salary for every year of service, with a maximum of 12 weeks of such payments. The transition payment was intended to acknowledge the accrued entitlements of the Wanneroo doctors as employees of the State.
Dr LaValette’s proposal was initially not well received by the AMA (WA) and, in particular, Dr Roberts. Dr Roberts persuaded some leading members of the medical profession to put pressure on Dr LaValette not to pursue the option of Wanneroo doctors being employed or engaged directly by MNL. But Dr LaValette persisted.
By letter dated 15 May 1996, Dr Catchlove wrote to Dr Roberts on behalf of MNL in terms which included the following:
‘HCoA lent its support to the AMA in their bid to change the Government’s position on the “employment” of Wanneroo Medical Practitioners. We remain committed to this position. However, at no stage did we indicate support for a closed shop whereby doctors could not choose with whom they wished to “contract” for the care of public patients. In fact, from the beginning we said that doctors “contracting” with HCoA would have identical terms and conditions to the public arrangements. This would apply whether doctors continued to work for the Government or chose to work directly for HCoA. To suggest otherwise is misleading and deceptive.’
Dr LaValette and Dr M Oehlers convened a meeting of the Wanneroo Hospital general practitioners which was held on 24 May 1996. About ten doctors attended the meeting which discussed the matter of having a choice about whether to continue engagement or employment by the State or to be engaged or employed by MNL. No resolutions were passed.
At about that time, so I infer from an undated fax from the Legal Administration Branch of the Health Department to AMA (WA), Mr Sebbes’ evidence and Mr Bansemer’s evidence, the State’s position was that it would offer to employ or engage those medical practitioners who were currently employed or otherwise engaged at the Wanneroo Hospital. Those doctors would provide medical services for public patients either as employees or (if it could be lawfully and practically achieved) by engagement on a fee for service appointment. In the latter case such engagement would be on the same terms and conditions, so far as relevant in the circumstances, to those set out in the State VMP Agreement.
On 24 May 1996, a person described as R Hanson, Manager Corporate Services, at the Wanneroo Hospital sent a circular to the Wanneroo doctors responding to what were said to be numerous inquiries regarding transition arrangements for visiting medical officers. The letter dealt with such matters as transition payments, sick leave, annual leave and long service leave.
It also included the following paragraph:
‘5.Health Care of Australia have agreed to pay Visiting Medical Officers according to the rates of pay as agreed between the Minister for Health and the AMA, which covers fee for service, sessional and salaried arrangements.’
I note that this is consistent with the paragraph, which I have set out above, of the letter dated 15 May 1996 from Dr Catchlove to Dr Roberts. The relevance of the time at which MNL accepted such a commitment emerges below when I discuss whether MNL, as alleged by the applicant, reached an understanding in December 1996 which contravened the Act.
With effect from 1 June 1996, Wanneroo Hospital ceased to be a public hospital for the purposes of the Hospitals Act and was thereafter managed as a private hospital pursuant to a licence which had been issued under that Act on 30 April 1996. On 7 June 1996 the Minister for Health and MNL executed a short letter of agreement evidencing their arrangements concerning the appointment of medical practitioners (both employed and sessional) to provide medical services at the Joondalup Health Campus from 1 June 1996. The Minister agreed to arrange with the Lower North Metropolitan Health Service (“the Board”) to make offers of employment to the doctors then currently employed by him at the Wanneroo Hospital. Such employment was to commence from 1 June 1996 until the termination dates specified in their various current contracts. The services of those doctors, so employed, were to be made available to MNL on an exclusive basis to provide medical services to public patients at Joondalup. They would be paid by the Board in accordance with relevant awards, the enterprise agreement and other agreements. There were provisions for reimbursement of the State by MNL and for a very limited degree of indemnity by the State for any acts or omissions of the doctors.
I infer from the documentary evidence that during the months of May and June 1996 the AMA (WA) remained committed to the principle that doctors providing medical services to public patients at Wanneroo Hospital should be engaged or employed by the Government. However, the evidence shows that some of the doctors, possibly a growing number of them, wished to have the option of being engaged or employed by MNL.
By 11 June 1996, MNL was developing a draft circular to be sent to each of the Wanneroo doctors offering an appointment. I mention that document because it referred to the DHSA and also, in my view, reflected MNL’s then present intention. The relevant paragraphs read as follows:
‘The DHSA also provides for medical services to public patients to be delivered either by Medical Practitioners employed by Government, or Medical Practitioners employed by HCoA. In either case, the terms of payment for services will be identical as HCoA will simply match existing agreements or awards between the Australian Medical Association and the Government.
. . .
If you elect to be remunerated on a Fee for Service basis then it would be in accordance with the current benefits of the “Visiting Medical Practitioners Agreement”.’
In July and August 1996, the AMA (WA) gradually changed its position to the extent that it was prepared to support the idea that the doctors at Wanneroo should have the choice of being employed or engaged by the State or being employed or engaged by MNL. I accept Mr Mott’s evidence to that effect. I refer also to Dr Roberts’ letter of 5 July 1996 to Dr Oehlers and his circular letter of 10 July 1996 to the Wanneroo doctors.
I infer from the evidence that a major factor in that change was pressure from doctors who wanted to have choice in that respect, including in particular Dr LaValette and Dr Oehlers. There was a fairly heated exchange of correspondence between AMA (WA) on the one hand and Drs LaValette and Oehlers on the other.
I consider that these developments in May to July 1996 provide some insight of the extent to which the Wanneroo doctors were prepared to think and act independently of the AMA (WA) in relation to the terms and conditions of their employment or engagement (including how they were to be paid), at the public hospital.
I accept Dr Roberts’ evidence that by 9 July 1996, if there ever had been a remuneration issue so far as MNL was concerned, that issue had been resolved. There remained, so Dr Roberts stated, arguments about legalities concerning the hospital licence, entry points and separation of wards.
On 18 July 1996, Dr Roberts wrote to the Wanneroo doctors referring to the fact that an offer of employment was being made to them by MNL to provide medical services to public patients at the Wanneroo Community Hospital. He urged them to consider carefully the choice between remaining engaged by the Minister for Health or to accept an offer from MNL. I think that a fair assessment of his letter, and I so infer, is that it was intended to encourage the Wanneroo doctors to remain in the employment or engagement of the State. Dr Roberts’ evidence confirmed that that was his purpose in July 1996. The letter also emphasised the importance of separate public and private hospitals with separate management structures.
On the same date (18 July 1996), Dr Catchlove on behalf of MNL wrote to all the doctors at Wanneroo Hospital referring to its previous support for the AMA’s position that the doctors could contract directly with the State for the care of public patients at the hospital. Dr Catchlove then continued in these terms:
‘Unlike the AMA, we do believe, however, that doctors should have a choice. HCoA has given a firm undertaking to provide the equivalent of rates and conditions which apply in the public sector and have been negotiated by the AMA. There is no benefit to HCoA should doctors choose to contract for public patients with us but I believe strongly that they should have the choice.’
That position appears to have been recognised, and I so infer, at the meeting of the Wanneroo Hospital Medical Advisory Committee, attended by eight of the Wanneroo doctors (three of whom are Participating Practitioners), on 24 July 1996. The minutes of that meeting suggest that, at that time, the relevant negotiations on the subject of the employment of the Wanneroo doctors were taking place between MNL and the State rather than between MNL and AMA (WA).
The relevant passages in the minutes of that meeting read as follows:
‘HCoA had agreed to match the awards and conditions that were available to medical practitioners employed by the government.
HCoA had further stated that the medical practitioners would have a choice between remaining employed by the government or electing to transfer to HCoA under a Sessional Payment arrangement.
Discussions were to be held today with Solicitors representing the HDWA [Health Department of Western Australia] and HCoA [MNL], to discuss appropriate mechanisms for the employment of medical practitioners. Those practitioners who elected to remain employed by the government, would be paid through, and employed by, Bentley Hospital. Further, the Chief Executive Officer [Mr MacDonald] advised that he expected advice on the arrangements in the near future and as soon as this was received, it is expected that letters of offer would be sent out to all practitioners.
The AMA has a preference that medical practitioners were employed by the Government, however, they accept that a choice of employer will be provided and it is the medical practitioners’ choice.’
It would seem that as at 21 August 1996, MNL had not completely accepted the proposition that visiting medical practitioners currently engaged on a sessional basis might, at their unconditional option, switch to a fee for service arrangement. At a meeting of the Medical Advisory Committee on that date Mr MacDonald informed the Committee that MNL had developed a “modified sessional” arrangement whereby medical practitioners would be engaged as contractors. He stated that if medical practitioners wished to change to a fee for service arrangement, then it would need to be shown that such arrangements would be beneficial to both the medical practitioners and the Campus.
By 26 August 1996 it would appear, and I so infer from Mr MacDonald’s fax to Mr Sebbes on that date, that MNL’s position was that it recognised that the Wanneroo doctors should have a choice of being employed or engaged by the State or by MNL itself and in the latter case engagement would be through a contracting company nominated by the individual doctor. Payment to the contracting company was at that stage proposed to be by service charges on a “Modified Sessional” basis.
The fact that MNL had accepted the State VMP Agreement as the basis for remuneration is, in my view, once again reflected in the second last paragraph of Mr MacDonald’s memorandum of the same date (26 August 1996) to Mr Day:
‘As we advised the AMA, we would only recognise the employment/industrial aspects of the VMP Agreement.’ [The other aspects included matters of hospital governance and accreditation which took the form of by-laws.]
I accept Dr Roberts’ evidence that in August/September 1996 the differences between the AMA (WA) and MNL involved the independence of the Medical Advisory Committee which was protected by the provisions of the VMP Agreement, rather than any disagreement over the basis or quantum of remuneration.
In my opinion, this is corroborated by Mr Mott’s evidence. For example, at par [171] of his witness statement Mr Mott said that he recalled that at a meeting on 13 September 1996 Mr MacDonald had agreed to adopt the fee schedule to the State VMP Agreement, although Mr Day had expressed the view that doctors engaged by MNL should not be covered by the State VMP Agreement (presumably, and I so infer, a reference to the managerial and clinical matters in that document, which were somewhat different to MNL’s own standard hospital by-laws).
By September 1996 the Wanneroo Hospital had for some months been operating as a licensed private hospital with MNL being obliged by the terms of the DHSA to provide services to public patients. The building works, i.e. those which would lead to the opening of two separate hospitals, namely, the Joondalup Private Hospital for private patients and the Wanneroo Community Hospital for public patients, were (so I assume) still in progress. I so assume from the evidence that about two months later the Minister for Health conducted a tour of the site accompanied by Dr Roberts.
Nevertheless, so far as MNL was concerned, it then operated under its standard set of by-laws which applied at some 30 hospitals operated by it throughout Australia but which had been adapted by MNL to suit what it described as “the special requirements” of the Joondalup Health Campus (see Mr MacDonald’s letter dated 16 September 1996 to Dr Glaser, which was a circular letter to all the Wanneroo doctors). Mr MacDonald called the modified version of MNL’s model by-laws “the JHC By-Laws”. It covered such matters as appointment and credentialling of medical practitioners, separate medical advisory committees, credentials committees and clinical review committees for the respective private and public facilities, but with only one set operating until the developmental building work was completed.
Although by that time it had become clear that offers of employment or engagement would be made by both the State and MNL to the doctors at Wanneroo, the drafts of the proposed Deed of Agreement which were passing between the AMA (WA) and the Health Department still, at this stage, made provision only for employment by the State. It is apparent from Mr Mott’s letter dated 16 August 1996 that he took the view that there was no need to make any amendment in order to refer to offers of employment or engagement by MNL.

Dr McCarthy conceded that, although he negotiated individually with the surgeons, in each Craft Group, he offered a common rate.
Dr McCarthy’s evidence was that initially (this was in late 1998) he offered most surgeons a slightly higher rate of remuneration under the CMBS rates than they would have received under the State VMP Agreement.
In relation to ophthalmologists, he offered them rates which were significantly below those in the State VMP Agreement. This was because ophthalmology procedures, such as cataract removal, had become far simpler and shorter than as budgeted for in the State VMP Agreement. But even then, due to the increased number of procedures which could be performed in a session, they were not disadvantaged by being offered those rates and “… they financially came out well ahead” compared to working at the nearest public hospital.
Dr McCarthy applied indexation in the contracts at Peel either by adjusting the rates in accordance with the indexation applied in each particular year in the CMBS or by a provision in the individual contract for a guaranteed 3% increase. He thought that the indexing provided by the CMBS was at a lower rate than applied to the State VMP Agreement.
As at December 1998 the Peel Health Campus rates were higher than the rates in the State VMP Agreement. The State VMP Agreement came to an end in September 1998. After December 1998 there was no indexation of the State VMP Agreement rates. When he gave evidence Dr McCarthy knew that.
The State VMP rates remained unchanged between December 1998 and December 2000 when they were replaced by fees calculated by reference to the CMBS plus a premium of 9% except in the case of certain specialities. This new schedule of rates was known as the WA Government Medical Services Schedule (“WAGMSS”).
The evidence shows that the premium of 9% established under the WAGMSS from 1 December 2000 in the case of surgeons was less than the 10% premium paid by Health Solutions at the Peel Health Campus. Similarly, the premium of 30% for anaesthetists paid at the Peel Health Campus was higher than the WAGMSS 25% premium. The premium payable under the WAGMSS for obstetricians/gynaecologists was 50%. It is not possible to work out whether that is higher than Dr McCarthy’s “significantly higher” percentage, because he did not quantify the percentage.
On that basis I am not prepared to conclude that after 1 December 2000 the Peel Hospital rates were generally lower than those in the WAGMSS. To the extent that the evidence is clear, it indicates that the Peel rates were likely to have been generally higher. Dr McCarthy was not aware that some of the rates in the State VMP Agreement went down in December 2000 when the WAGMSS was introduced. As he wryly agreed, his doctors did not draw his attention to that.
Nor was he aware that the average increase in rates in the State VMP Agreement and its successor between 1 November 1996 and 1 December 2001 was approximately 3.5% per annum. If he had had that knowledge, he said that his statement would not have read as it did.
My finding on the evidence is that Dr McCarthy did not obtain during the relevant period or for a reasonable period thereafter, lower rates for the services of visiting medical practitioners at Peel Health Campus than those either in the State VMP Agreement or in its replacement, the WAGMSS. I also find that this result was not caused, or contributed to, by what had transpired at Joondalup.
Mr Myers also sought to rely on other evidence relevant to the question of the understandings having the effect of substantially lessening competition which he described as being “rather important”. This took the form of a draft review in August 1998 of medical and diagnostic costs at the Joondalup Health Campus. This showed MNL’s visiting medical practitioner costs at Joondalup as comprising 24% of its revenue which was said, by the author of the report, to be significantly higher than visiting medical practitioner costs in New South Wales.
I did not find this particular piece of evidence at all helpful on the question of whether the relevant rates paid at Joondalup might have been lower if the State VMP rates had not been applied. The report shows that the differential between MNL’s Joondalup visiting medical practitioner costs per relevant unit and its Port Macquarie Base Hospital visiting medical practitioner costs ($574-$430) equated in dollar terms to a figure of $1.3 million. Joondalup’s budget had been based on a unit figure of $430. A total shortfall to budget of $1 million was shown to be attributed to the employment of two emergency specialists, one psychiatrist and two anaesthetic staff specialists over budget. There is no reference, in that part of the report to which I was taken, to the cause of this differential being to the payment of excessive fee rates.
The computation in that report of visiting medical practitioner costs comprising 24% of revenue compared to the applicant’s assertion that Dr McCarthy’s evidence was that he had a figure of 20% at Peel, falls away for that same reason. In any event, I did not read Dr McCarthy’s evidence as accepting that his figure for visiting medical practitioner costs compared to total expenses at Peel was 20%.
I do not think that these pieces of evidence show, or even have a tendency to show, that rates stayed higher at Joondalup (which of course is not the relevant market) under the State VMP regime or were any lower at the Peel Health Campus under the regime adopted by Dr McCarthy.
In my opinion, the evidence strongly suggests that even in the absence of the Provisions much the same terms and conditions, including rates of remuneration, would have been offered by MNL to the Participating Practitioners.
On consideration of all the relevant evidence, I am not satisfied that the effect or likely effect of the Provisions was to lessen competition substantially in any of the relevant markets.
In those circumstances it is unnecessary to consider the further contraventions alleged by the applicant, that is, those based on giving effect to the Provisions.
SHIELD OF THE CROWN
Section 2B(1) of the Act relevantly provides as follows:
‘The following provisions of this Act bind the Crown in right of each of the States, … so far as the Crown carries on a business, either directly or by an authority of the State …:
(a)Part IV;
(aa) …;
(b) …;
(c) the other provisions of this Act so far as they relate to the above provisions.’
In their second further amended defences, the MNL Respondents pleaded that the Trade Practices Act did not apply to the provision of hospital services to public patients in Western Australia and that they were entitled to rely upon derivative Crown immunity.
In view of my conclusions that the contraventions pleaded by the applicant have not been established on the evidence, it is unnecessary for me to consider this defence. I do so only because if the matter goes on appeal and those conclusions are found to be wrong, my consideration of the facts and the law on this issue will have the potential to shorten the time which it might otherwise take finally to determine the matter. That is, the Full Court will be in a position to rule on this aspect of the defence.
However, I do not propose to recite the whole of the submissions on either side. I shall proceed straight to my findings of fact and conclusions of law.
The evidence shows that in Western Australia public patient hospital services were at all material times provided free of charge. In particular Mr Alex Kirkwood’s evidence and the first attachment to his witness statement establishes that. Mr Kirkwood held various senior executive positions on the financial side of the Health Department. The evidence also shows that the State raised charges for the treatment of some categories of patients, such as those who elected to be treated as private patients or were entitled to be reimbursed the cost of their medical treatment by workers’ compensation or third party motor vehicle accident insurers, or the like. But the activities of the State in providing medical services in public hospitals should be looked at as a whole. The latest figures in evidence are for the financial year ended 30 June 1995. They show patient charges of $64.8 million out of a total “income” from Commonwealth or State Grants and Appropriations and other revenue of $1,110.5 million, or 5.8%. I am inclined to the view that the relevant activity is the supply free of charge of medical services to public patients in public hospitals. But even if the relevant activity extends to the conduct of public hospitals generally, I do not consider the raising of such a small percentage of charges to certain types of patients changes the essential character of those activities into the carrying on of a business.
An examination of the governing statute, the Hospitals Act, does not suggest that the Minister for Health, when providing medical services in public hospitals is carrying on a business. The governing statute is a most useful reference point for the present purpose – see NT Power Generation v Power & Water Authority [2002] FCAFC 302 at [129] per Finkelstein J. I do not propose to summarise the statutory framework of the Hospitals Act or its provisions.
Section 34 of the Hospitals Act establishes the Medicare Principles and Commitments as guidelines for the delivery of public hospital services to eligible persons in Western Australia. The first of those principles is that eligible persons must be given the choice to receive public hospital services free of charge as public patients.
The State operated the Wanneroo Hospital on that basis until MNL took over operation of the Wanneroo Hospital on 1 June 1996. Under the terms of the DHSA, MNL was precluded from charging fees to public patients.
In my view, whatever the involvement of the State might have been in operating or overseeing the operation of the Wanneroo Hospital either before the Effective Date (1 June 1996) or after that date, the State was not carrying on a business within the meaning of s 2B of the Act. In my opinion, its activities are properly to be characterised as fulfilling a governmental or welfare function by providing or causing (through the DHSA) to be provided free medical services to patients at a public hospital until the Effective Date and on the same basis at a private hospital thereafter: Saitta Pty Ltd v Commonwealth of Australia (2001) 162 FLR 35 at [29]; Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia (2000) 104 FCR 448 at 451-452; JS McMillan Pty Ltd v Commonwealth of Australia (1997) 77 FCR 337 at 355-356. Those activities did not, in my opinion, have the requisite “commercial flavour” to amount to the carrying on of a business – see NT Power at [128].
The applicant submitted [T854 and 856] that MNL was quite clearly carrying on a business and if, contrary to the applicant’s submissions, MNL was acting as the agent of the State then, by the operation of s 2B(1)(a) the Act applied.
In my view, that submission misconstrues the terms of s 2B(1). That subsection relevantly provides that certain provisions of the Act bind the Crown in right of each of the States “… so far as the Crown carries on a business, either directly or by an authority of the State…”. The expression “authority” in relation to a State is defined in s 4 of the Act as meaning a body corporate established for a purpose of the State by or under a law of the State or an incorporated company in which the State or such body corporate has a controlling interest. In my view, the fact that MNL’s arrangement of its affairs and its dealings as a whole had the result that it was carrying on a business at Joondalup in the course of which it rendered specific medical services to the State pursuant to the DHSA, does not mean that the State was carrying on a business within the meaning of s 2B.
Accordingly, I hold that in its carrying out of the above activities the Act does not bind the State. The next question is whether MNL is entitled to rely upon derivative Crown immunity.
It will be recalled that as late as 9 December 1996 there were two conditions precedent to the DHSA which were still outstanding. One of those conditions related to the engagement of medical practitioners. If either of them had not been satisfied by 24 January 1997 MNL had the right to terminate the DHSA. If that occurred, clause 3.7(a) of the DHSA provided that it (the DHSA) would be void ab initio. I am satisfied from the documentary and other evidence which emanated from the Health Department that the State was anxious to avoid such a situation. For example, on 9 October 1996 Mr Bansemer, as Commissioner of Health wrote a letter to the AMA (WA) (with a copy to MNL) which, omitting formal parts, read as follows:
‘I understand that agreement has been reached that the AMA and HCoA will review the current VMP agreement and the HCoA by-laws in order to resolve all areas of conflict. This is to be completed by 31 January 1997.
Until the above is resolved, it is appropriate that the current VMP Agreement applies but any unresolved issues should be referred to the group identified in the deed of agreement, plus a member nominated by HCoA. Any unresolved issues by this group should be referred to the Minister for resolution.’
In his letter of 9 December 1996, Mr Bansemer said this:
‘… I am advised that HCoA have now signed a Memorandum of Understanding with the AMA that identifies the appropriate contractual arrangements. This is a matter between the AMA and HCoA. I would however point out to you the critical importance of ensuring that any agreement in this regard be consistent with the Visiting Medical Practitioners Agreement between the Government and the AMA and the Joondalup Health Campus: Development and Health Services Agreement.’
Section 5A(1) of the Hospitals Act imposes duties on the Minister for Health to provide hospital accommodation, hospital services, health services and other services to such extent as he considers necessary to meet all reasonable requirements. Section 5A(3) provides that he may discharge those duties by “making arrangements” on such terms, including the payment of charges, as he thinks fit.
The respondents rely upon what they describe as “an overarching arrangement”, initially between the State and MNL, the purpose of which was to bring the Joondalup project to fruition in fulfilment of the State’s social and welfare responsibilities to the public at Wanneroo, through the engagement of MNL to develop and operate the Joondalup Health Campus. The respondents first rely on that part of MNL’s tender proposal (accepted by the State) which included the provision that MNL would offer employment to all permanent staff at Wanneroo Hospital, including visiting medical practitioners, and that those practitioners would be paid according to the rates agreed between the State and AMA (WA) for the treatment of public patients.
Then, so the respondents submit, upon the State accepting that tender proposal and MNL becoming the preferred proponent, the State and MNL reached an agreement that MNL would be the preferred proponent. That agreement included the provision that MNL would engage visiting medical practitioners at rates mirroring the appropriate governmental rates. I accept the foregoing characterisation of what took place as being consistent with the evidence.
The respondents submitted that the arrangement developed over time to include the DHSA, signed on 24 April 1996, and the agreements reached from time to time to satisfy the condition precedent contained in clause 3.4(i)(i) of the DHSA relating to engagement of visiting medical practitioners. As the respondents submit, and as I have found, by about 3 May 1996 the arrangement in relation to such engagement had grown to include the State remaining as an employer or engager of “existing” Wanneroo doctors and both MNL and the State offering alternate bases of engagement i.e. fee for service and sessional.
It will also be recalled that on 7 June 1996 the State and MNL signed a short letter of agreement formalising arrangements concerning the appointment of medical practitioners (employed and sessional) to provide medical services at the Joondalup Health Campus. This was, so I infer, a consequence of the transfer of operational responsibility for that hospital to MNL. That letter confirmed that the Minister for Health would arrange for the Board to employ the Wanneroo doctors from the Effective Date until the termination date specified in their current contracts, but for MNL to have their direction and control.
The respondents submit that during the first half of 1996 the AMA (WA) became a party to the arrangement as a result of discussions with the State and MNL concerning the engagement of visiting medical practitioners at Joondalup and other matters related to the proposed Joondalup Health Campus. I do not think that it is necessary for me to decide whether AMA (WA) can be characterised as becoming a party to that arrangement.
However, I accept the respondents’ submissions that the arrangement expanded to include the State’s involvement in the resolution of disputes about how clinical government structures were to be provided for the Joondalup Health Campus and the basis upon which the doctors at Wanneroo were to be engaged both in the short term and in the long term. I infer that that was one of the reasons the State nominated Dr Stokes to the Wanneroo Medical Advisory Council.
I further accept that the State, through the Health Department, took an active part in ensuring that the development of the Joondalup Health Campus was brought to fruition and not derailed by opposition from the doctors at Wanneroo or the AMA (WA).
I accept also that the respondents’ submission that everything relevant to this matter which was done by it in relation to making offers of employment, harmonising the Joondalup Health Campus By-Laws and the Joondalup VMP Agreement with the State VMP Agreement was the result of that expanded arrangement which included satisfaction of the condition precedent in the DHSA which I have just mentioned.
The whole point of the DHSA and the expanded arrangement, as identified by the respondents in their submissions and to the extent that I have accepted such expansion, was that MNL would provide public patient hospital services free of charge to the public patients on behalf of the State and that thereby the Minister would honour his obligations in that regard under the Hospitals Act and Medicare Principles and Commitments.
At the core of the arrangements which MNL made with the State was the engagement of the medical practitioners then employed by the State at Wanneroo, the engagement of further doctors to provide medical services to public patients free of charge to such patients and the terms and conditions of employment or engagement (including remuneration) of those doctors. Obviously, without the medical practitioners, the free medical services could not have been rendered to the public patients. There was already in place the State VMP Agreement. The State had made it clear, including in the Commissioner of Health’s letter dated 9 October 1996, that it wanted these employment or engagement arrangements to be consistent with the State VMP Agreement.
I take into account what was said, almost in passing, by the High Court of Australia in Bass v Permanent Trustee Co Ltd [1999] HCA 9 at [42] about what was decided in Bradken. But in my view, the Bradken principle applies to the factual circumstances of this case. That is, to apply the Act to the arrangements made between MNL and the Participating Practitioners (all of whom were employees of the State at the time) would have prejudiced the interests of the State: see Bradken at 124 and 129 and the cases there cited which stretch back to Roberts v Ahern (1904) 1 CLR 406.

I accept the evidence, principally of Dr Roberts, that if MNL had not agreed, on 9 December 1996 to sign the Memorandum of Understanding, a substantial number of the Wanneroo doctors would have withdrawn their services from public patients at Joondalup. Furthermore, I infer that that situation would have deteriorated if the resolution process which took place over the following two months or so had not taken place. I think that there would have been a substantial risk that the conditions precedent to the DHSA would not have been satisfied. There was a significant risk that MNL would, in those circumstances, exercise its right to bring the DHSA to an end – or more accurately to cause it to become void ab initio. If that had transpired the State would not have achieved what, since 1995, it had set out to achieve at Wanneroo. The degree of risk would have been sufficient, in my view, to have prejudiced the State.
I think that one test proposed by the respondents in their written and oral submissions is of considerable assistance in reaching that conclusion. The test, in summary, was that if in late 1996 or early 1997 the applicant or a third party had sought to prevent MNL from:
· making the proposed offers of engagement to the Wanneroo doctors on terms which mirrored the terms and conditions negotiated between the State and the AMA (WA) in respect of sessional and fee for service engagement; or
· negotiating the harmonisation of their by-laws with the State VMP Agreement and subsequently adopting the Joondalup Health Campus By-Laws and the Joondalup Health Campus VMP Agreement;
would the court have granted such relief? In my view, a court would not have granted relief because to do so would have prejudiced the State in relation to establishing the Joondalup Health Campus for the treatment of public patients. The mere passage of time since then cannot change the legal characterisation of what took place.
In all of the circumstances, and in particular the extent of the State’s involvement throughout the process, I consider that MNL would have been entitled to derivative Crown immunity. That is, if the facts in this case had been found against it, it would have been shielded from the consequences which might otherwise have been attracted by the operation of the Act to what is pleaded as having taken place in late 1996 and in 1997.
CONCLUSION
For the foregoing reasons the application against the second, fifth and sixth respondents will be dismissed with costs.
A Postscript
As I have indicated earlier in these reasons, certain orders were made by consent against the first, third and fourth respondents, whom I have termed “the AMA (WA) respondents”.
Those orders were made on the basis of a statement of facts agreed upon as between the applicant and those respondents. That statement did not, and could not, in any manner bind the MNL Respondents.
After fourteen days of hearing and the consideration of some thousands of documents, it transpires that, had the matter gone to trial as against the AMA (WA) respondents, they would not have been found liable in respect of the alleged arrangement and understandings which were in common with those the subject of these reasons. With hindsight, the course which they took some two years ago might seem to them to have been an unfortunate one. But they were at all times legally represented and made a duly considered decision not to contest the proceedings any further. The prospect of incurring legal costs, possibly amounting to as much as a million dollars, may have weighed heavily in that decision. I am not in any manner critical of the advice given to them or the decision made. There could be no basis for such criticism from me. On the facts agreed between those parties two years ago and the withdrawal of the relevant defences, I was satisfied, for reasons which I then gave, that it was appropriate to give the Court’s sanction to the agreed settlement by way of imposing the agreed pecuniary penalties and costs orders.
Again with hindsight, it might well be said that an injustice has been done to those respondents. But there are sound policy reasons for allowing respondents to civil proceedings such as these, to do the equivalent of entering a plea of “guilty” in a criminal proceeding.
It is not the first time that something like this has happened. In Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 9) [2000] FCA 23 certain respondents withdrew their defences, made admissions of fact and admitted all the contraventions pleaded. Two of the respondents persisted in their defences and the matter went to trial. The result was that only one of the alleged contraventions was found to have been established. See Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954.
For reasons which I gave on 19 October 2001, I declined to make declarations or permanent injunctions against the AMA (WA) respondents. One of my main reasons, see par [47], for taking that course was the possibility of the MNL respondents being successful in their defence. But I did grant interim injunctions. Subject to hearing from the parties interested in those interim injunctions, I think that they should be discharged.

I certify that the preceding four hundred and twenty (420) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justice Carr J.

Associate:
Dated: 9 July 2003

Counsel for the Applicant:

Mr A J Myers QC with Mr N W McKerracher QC

Solicitor for the Applicant:

Australian Government Solicitor

Counsel for the First, Third and Fourth Respondents:

Mr J R J Lockhart

Solicitor for the First, Third and Fourth Respondents:

Messrs Blake Dawson Waldron (Sydney)

Counsel for the Second, Fifth and Sixth Respondents:

Mr T F Bathurst QC with Mr R J Wright SC

Solicitors for the Second, Fifth and Sixth Respondents:

Messrs Blake Dawson Waldron (Perth)

Date of Hearing:

3 April 2003

Date of Judgment:

9 July 2003

I N D E X
*Page*
INTRODUCTION 1	1
SETTLEMENT OF THE APPLICANT’S CLAIMS
AGAINST SOME OF THE RESPONDENTS 2	2
THE STATEMENT OF CLAIM 3	3
THE DEFENCES 13	13
SOME FACTUAL BACKGROUND 14	14
FINDINGS OF FACT 17	17
THE STATUTORY FRAMEWORK 45	45
THE CONTRAVENTIONS AS EXPLAINED IN SUBMISSIONS
AT THE HEARING 46	46
WAS THERE AN UNDERSTANDING WHICH CONTAINED
A PRICE FIXING PROVISION? 49	49
WERE THE PARTICIPATING PRACTITIONERS (OR AT LEAST
TWO OF THEM) PARTIES TO EITHER OF THE ALLEGED
UNDERSTANDINGS? 52	52
DID THE PROVISIONS HAVE A PURPOSE EFFECT OR LIKELY
EFFECT OF SUBSTANTIALLY LESSENING COMPETITION IN A
RELEVANT MARKET? 75	75
PURPOSE 75	75
THE RELEVANT MARKET OR MARKETS 76	76
EFFECT OR LIKELY EFFECT 82	82
SHIELD OF THE CROWN 93	93
CONCLUSION 100	100

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W121 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC (Incorporated Association Registration No AO110006P) First Respondent MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA (ACN 004 073 410) Second Respondent PAUL CONSTANTINE BOYATZIS Third Respondent DOCTOR DAVID EVAN ROBERTS Fourth Respondent MARTIN DAY Fifth Respondent IAN GEOFFREY MACDONALD Sixth Respondent
JUDGE:	CARR J
DATE OF ORDER:	9 JULY 2003
WHERE MADE:	PERTH

Counsel for the Applicant:	Mr A J Myers QC with Mr N W McKerracher QC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First, Third and Fourth Respondents:	Mr J R J Lockhart
Solicitor for the First, Third and Fourth Respondents:	Messrs Blake Dawson Waldron (Sydney)
Counsel for the Second, Fifth and Sixth Respondents:	Mr T F Bathurst QC with Mr R J Wright SC
Solicitors for the Second, Fifth and Sixth Respondents:	Messrs Blake Dawson Waldron (Perth)
Date of Hearing:	3 April 2003
Date of Judgment:	9 July 2003