Dibo Pty Ltd v Minister for Community Services & Health

Re: DIBO PTY LIMITED
And: MINISTER FOR COMMUNITY SERVICES AND HEALTH
No. G83 of 1988
FED No. 131
Administrative Law - Jurisdiction
(1992) 27 ALD 421 (extract)

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Administrative Law - judicial review - private nursing home - scale of fees - whether Minister had regard for necessary costs in the form of actual rental as a fundamental element in his redetermination - whether the extent of the Minister's allowance of profit was unreasonable - whether the Minister's consideration of rental and profit took into account irrelevant factors, or failed to take into account relevant factors - discussion of judicial review, in particular, Wednesbury unreasonableness

Jurisdiction - liberty to apply - whether claim could properly be brought that Minister failed to comply with consent orders ordering a redetermination on the basis that the redetermination contained errors of law - whether a claim that a redetermination failed to comply with consent orders formed part of the "matter" of the original proceeding - extent of court's powers under section 22 of Federal Court of Australia Act 1976

Words and Phrases - "fundamental", "matter"

Administrative Decisions (Judicial Review) Act 1977 - sections 5(2)(a), (b), (g), 8, 11

Federal Court of Australia Act 1976 - sections 22, 51A

Federal Court Rules - order 19 rules 1, 2, 3, order 35 rule 7(2), order 54 rules 2, 4, 5

National Health Act 1953 - part V, VI - sections 4(1), 40AA, 40AA(1), 40AA(2), 40AA(3), 40AA(6), 40AA(7), 40AA(7B), 40AD, 40AD(1)(b), 40AE(1), 40AE(2), 40AE(3), 40AE(4), 56(1), 57A(3), 57B(1), 57B(2), 73C

Trade Practices Act 1974 - section 86(1)

R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389

Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337

Taylor v Johnson (1983) 151 CLR 422

Fencott v Muller (1983) 152 CLR 570

Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24

Attorney-General for the State of New South Wales v Quin (1990) 170 CLR 1

Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344

Jackson v Sterling Industries Ltd (1986) 12 FCR 267

Australian Conservation Foundation v Forestry Commission (1989) 19 FCR 127

Darwin Broadcasters Pty Limited v Australian Broadcasting Tribunal (1990) 21 FCR 524

State of Western Australia v Wardley Australia Limited (1991) 30 FCR 245

R v Hunt Ex parte Sean Investments Pty Ltd (1979) 25 ALR 497

Sean Investments Pty Ltd v MacKellar (1981) 38 ALR 363; (1982) 42 ALR 676

Howells v Nagrad Nominees Pty Ltd (1982) 43 ALR 283

Croft v Minister for Health (1983) 45 ALR 449

Smith v Minister for Immigration and Ethnic Affairs (1984) 53 ALR 551

Kioa v Minister of Immigration and Ethnic Affairs (1985) 62 ALR 321

Alexandra Private Geriatric Hospital Pty Ltd v Blewett (1984) 56 ALR 265; (1985) 68 ALR 222

NCA (Brisbane) Pty Ltd v Simpson (1986) 70 ALR 10

Darling Downs Investments Pty Ltd v Ellwood (1988) 80 ALR 203

Taveli v Minister for Immigration, Local Government and Ethnic Affairs (1989) 86 ALR 435

ICI Australia Operations Pty Limited v Anti-Dumping Authority (1991) 104 ALR 474

Bryant v Keith Harris and Co Ltd (1980) 49 FLR 137

Nagrad Nominees Pty Limited v Howells (1981) 54 FLR 170

Insurance Commissioner v Australian Associated Motor Insurers Ltd (1982) 65 FLR 172

ARM Constructions Pty Ltd v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4610

ARM Constructions Pty Ltd v Commissioner of Taxation (1986) 10 FCR 197

Politis v Federal Commissioner of Taxation (1988) 88 ATC 5029

Detsongjarus v Minister for Immigration, Local Government and Ethnic Affairs (1990) 21 ALD 139

Independent FM Radio Pty Ltd v Australian Broadcasting Tribunal (1989) 3 Broadcasting Reports 458

Dowdle v Hillier, (1949) 66 WN (NSW) 155

Re Scott (1964) 82 WN (Pt 1) (NSW) 313

Nicholson v Nicholson (1974) 2 NSWLR 59

F N Eckold Pty Limited v Auburn Municipal Council (1975) 34 LGRA 144

In re Porteous (1949) VLR 383

Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd (1956) VLR 555

In re Edgar (1962) Tas SR 145

Roberts v Hopwood (1925) AC 578

Connelly v D.P.P. (1964) AC 1280

Associated Provincial Picture Houses Ltd v Wednesbury Corporation (1948)1 KB 223

Cristel v Cristel (1951) 2 KB 725

Narish Holdings Pty Ltd v Commonwealth of Australia (30 June 1989, unreported)

Allars, M: Introduction to Australian Administrative Law (1990)

Chayes, A: The Role of the Judge in Public Law Litigation (1976) 89 Harvard Law Review 1281

Diver, C: Policymaking Paradigms in Administrative Law (1981) 95 Harvard Law Review 393

Galligan, D: Discretionary Powers: A Legal Study of Official Discretion (1986)

Jacob, The Inherent Jurisdiction of the Court (1970) Current Legal Problems 23

The Hon. Justice M.H. McHugh: The Law-making Function of the Judicial Process (1988) 62 ALJ 15

HEARING

SYDNEY

#DATE 18:3:1992

Counsel and solicitor
for the applicant: Mr R.J. Bainton QC, and

Mr W S Johnson and Mr P H Blackburn-Hart instructed by Fred A. and John F. Newnham Solicitors

Counsel and solicitor
for the respondents: Ms M.J. Beazley QC and

Ms R.M. Henderson instructed by the Australian Government Solicitor

ORDER

1. The determination of the respondent of 5 December 1989 fixing the maximum allowable fees for the patients of the applicant's nursing home at Pittwater is set aside.

2. The fixing of the fees is referred to the respondent for reconsideration and redetermination in accordance with the reasons for judgment herein.

3. The respondent is to pay three fifths of the applicant's costs on:

(a) the applicant's notice of motion of 22 June 1990

(b) the respondent's notice of motion of 27 July 1990 seeking summary dismissal of the applicant's motion

Otherwise, there is no order as to costs.
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Introduction

The applicant Dibo Pty Limited (Dibo) operates several nursing homes, including the Pittwater Nursing Home (the home) conducted in premises situated at Avalon, a northern Sydney suburb. The home cares for a maximum of 63 patients. Dibo leases the premises from CCFM (Avalon) Pty Limited (the lessor) from which it is at arm's length.

This dispute arises out of the exercise in December 1989 by the Minister for Community Services and Health (the Minister), as the portfolio was then known, of powers given to him under the National Health Act 1953 (the Act) in relation to the fixing of the fees that nursing homes may charge their patients for nursing home care. It has a long history going back almost 20 years and has been dogged by the most extraordinary delays. It is necessary to refer at some length to the background of the matter and to consider parts of the Act and some of its extensive amendments over the intervening years.
THE FACTUAL BACKGROUND
On 16 October 1980, a delegate of the permanent head of the Department of Community Services and Health (the department) approved gross fees for the home with effect from 1 October 1980 but dating back to 1 January 1973 when fees control was first introduced (the department's decision). On 23 April 1981, Dibo requested a review of the department's decision on the ground of "profitability". With respect to this first grievance, Dibo sought the inclusion in the fees of a fair and reasonable profit on the basis of a calculation of not less than 17 per cent per annum on an agreed valuation of the home. It also added three other grievances. One was that when establishing the fees, the delegate did not take into account the full rental paid by Dibo to the lessor, for which Dibo sought reimbursement of $155,783. Next, Dibo sought compound interest in respect of rental costs and profit not previously built into the fee structures for the period commencing 1 January 1973 to the current date. Finally, damages of not less than $5,000,000 were sought to compensate for the lack of profits earned in running the home since the inception of fees control in 1973.
On 12 May 1981 a delegate of the Minister referred Dibo's request for review to a body called the Nursing Homes Fees Review Committee of Inquiry for the State of New South Wales (the Committee). Negotiations later occurred between the department and Dibo concerning the appropriate level of fees. A formal appeal submission by Dibo was forwarded to the Committee on 5 July 1985. This was addressed by the department and a calculation was made on the basis of fair market rental as determined by the Taxation Office. An adjustment of $88,460, to bring rental allowed in line with what was said to be a fair market rental, was included in the fees of the home on 1 January 1986. This was clearly a concession that the department had not up to then allowed even a fair market rental, although the department's decisions on what increases in rental should be allowed, since 1976 in the case of the Pittwater home, had been made on the basis of what it termed a fair market rental.
In a report dated 13 August 1987 following a hearing of the matter half a year earlier, the Committee recommended that no adjustment be made to the approved scale of fees of the home, other than to allow a loading of $1,971 in respect of Dibo's rental expenses for the 1976/77 period. In his decision of 18 November 1987 (the original determination), the Minister followed the Committee's recommendations.
The present proceeding was commenced by Dibo filing in this Court on 15 January 1988 an application for an order of review of the original determination under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act). The grievances corresponded to the four matters submitted for review of the department's decision of 1980. The application was filed out of time but on 26 May 1988, Justice Gummow ordered by consent that the time for the lodging of the application be extended to the date on which the application was filed. On 1 May 1989 consent orders were made by Justice Hill and were entered on 15 December 1989 (the consent orders). These orders, central to this case, related to three of Dibo's four grievances. The fourth, damages, was not dealt with. They were:

1. Order that the decision of the Minister of 18th November, 1987 reviewing the scale of fees determined by the Delegate of the Permanent Head on 1st October, 1980 for the Pittwater Nursing Home be quashed.

2. Order that the matter be referred back to the Minister for redetermination with the following directions:

(a) that he have regard to rental increases incurred by the Applicant for the financial years ending 30 June 1973 and including 30 June, 1980 and for the further period from 1 July 1980 to 1 October 1980;

(b) that he take into account a nursing home profit factor for the financial years ending 30 June 1973 up to and including 30 June 1980 and for the further period from 1 July 1980 to 1 October 1980;

(c) that he have regard to the interest which the applicant had to pay out for the financial years ending 30 June 1973 up to and including 30 June 1980 and for the further period from 1 July 1980 to 1 October 1980 on funds borrowed to supplement the working capital requirements as a result of actual rental paid and a Nursing Home profit factor not being included in the fees.

3. Order that the respondent pay the applicant's costs as agreed or taxed.

4. Liberty to apply.

On 27 October 1989, relying upon the liberty to apply, Dibo sought an order that the Minister comply with the consent orders by a certain date. Justice Gummow ordered that "(t)he redetermination by the Minister ordered by Order 2 of the Short Minutes of Order made 1 May 1989 be completed and notified to the solicitors for the applicant on or before 8 December 1989". In compliance with his Honour's order, the redetermination was conveyed to Dibo by letter dated 5 December 1989 (the redetermination).
On 22 June 1990, again relying upon the liberty to apply, Dibo filed a notice of motion seeking, in summary, the quashing of the redetermination and a direction that the Minister reconsider his decision within 21 days. It also sought declaratory relief in respect of the determination of the profit component of the gross fees, the payment of moneys that it claimed should have been paid by the Minister, and interest in accordance with section 51A of the Federal Court of Australia Act 1976 (the Federal Court Act).
The Minister filed a notice of motion on 27 July 1990 seeking, inter alia, the dismissal of Dibo's motion. In this summary dismissal motion, heard on 3 August 1990, the Minister argued that Dibo's notice of motion should be struck out because it could not be argued to be an exercise of the liberty to apply reserved by Justice Hill.
In an ex tempore judgment delivered on that day, I held that because Dibo's motion could not be described as entirely without arguable merit, as the authorities in substance require, it should not be summarily dismissed. Noting that Dibo not only relied upon the liberty to apply but also upon section 22 of the Federal Court Act, I also said at that time:

... it seems to me to be quite inappropriate to raise matters of this substance on a notice of motion. In the way the procedures of the Court operate, notices of motion are not subjected to ordinary directions hearings or the usual range of interlocutory opportunities to permit the parties to be fully aware of what is being alleged, and to have access to discovery and all the various other procedures which enable matters to be brought before the Court in an orderly and fully prepared fashion.

In fact, this particular notice of motion was presented to the Court on 22 June 1990 and, as is the usual practice, was given a date for hearing, when it is quite clear that the Minister could not reasonably be on notice even of the basis of some of the claims that are being made, let alone the evidence which is intended to be led in support of them. Indeed today, senior counsel for Dibo fairly and frankly stated that the evidence which his client intends to bring before the Court on this notice of motion has certainly not all yet been revealed.

... it seems to me that it would be appropriate to make orders and give directions which will bring the matter clearly before the Court in a more appropriate fashion and that there then be orders and directions given in the usual way for timetables for the presentation of evidence and the other interlocutory steps of which the parties desire to avail themselves.

After the filing of points of claim and defence, and several directions hearings, the matter was heard on 21 January 1991.
THE LEGISLATION
Substantial amendments were made to the Act by Act No. 114 of 1972 (the amending Act). Other substantial amendments have since been made to the Act but most of them are not relevant for present purposes. The amending Act effected an increase in Commonwealth funding of private nursing homes, but also imposed ceilings upon the fees that nursing homes may charge their patients. While the dispute now before the Court relates to the ceiling on fees and not strictly the funding arrangements as between the state and the proprietors of nursing homes, it is necessary to examine these arrangements because they form a component of "the state standard fee", a statutory concept which is relevant to the fee fixing at the heart of this dispute.
The 1972 increase in Commonwealth funding took the form of a new benefit which was paid in addition to existing benefits. The existing benefit was $3.50 per day per patient: s 56(1) as amended by Act No. 85 of 1971, with an additional $3 for patients requiring intensive nursing home care: s 57A(5). The new benefit was uniform within each state but not throughout the nation (in N.S.W. it was $1.50), and was provided to pensioners holding Pensioner Medical Service entitlement cards and to members of registered hospital benefit funds: ss 57B(1), 73C and Eighth Schedule. These payments are here together called the Commonwealth benefits.
The gross fees which patients were charged had three components. One was the Commonwealth benefits. A second was the minimum patient contribution. This was the minimum daily amount that a patient had to contribute to his or her own care. As at January 1973 this was $2.55: s 57B(2), or 75 per cent of the single rate of pension per day. There are two difficulties with the formulation of this component as revealed by the evidence. The parties' submissions both spoke of 87.5 per cent of the pension. This was not $2.55 at the relevant time. Perhaps it increased later. Further, the second reading speech on the introduction of the amending Act said that the minimum patient contribution was 75 per cent of the pension plus "supplementary social services". I do not understand what this "supplement" was.
The third component was the extra contribution required of patients to cover the gap between the gross fees charged by the nursing homes and the aggregate of the first two components. A feature of the scheme was that to the extent to which the total of the Commonwealth benefits plus the minimum patient contribution ($2.55) exceeded the amount of gross fees charged or rendered to patients, the new benefit was reduced: s 57B(2). The amounts involved were, of course, increased from time to time.
An apparent policy objective of the government (which was not enshrined in the legislation) was that for 70 per cent of patients, especially persons receiving social security pensions, the third component would be nil. The 30 per cent of patients who were to pay higher gross fees were presumably to be more affluent people. An administrative mechanism used in achieving this result was the so-called "state standard fee" which was the aggregate of the first two components. Thus, in the case of an ordinary care patient in New South Wales, the state standard fee at the beginning of 1973 was $3.50 plus $1.50 plus $2.55 which equalled $7.55.
This information appears from the affidavits of Mr Smith and Mr Bemrose, witnesses for the applicant and respondent respectively. Mr Smith had worked for the Nursing Homes Fees Control Section of the Health Benefits and Service Branch of the department. At the time of swearing his affidavit, Mr Bemrose was an Assistant Area Manager of the Aged and Community Care Branch of the department.
Compliance with the fees ceiling was achieved by making Commonwealth funding dependent upon the nursing home being "an approved nursing home" within the meaning of section 40AA of the Act. Sub-sections (1) and (2) of section 40AA, inserted by the amending Act, provided:

(1) The proprietor of premises, being a nursing home, may apply, in the authorized form, for approval of the premises as an approved nursing home.

(2) Subject to this section, where the Director-General is satisfied that the premises in respect of which an application is made are a nursing home, the Director-General shall approve the premises as an approved nursing home for the purposes of this Part.

The status quo at the time of the amending Act was preserved by its section 40(2). This provided that places which, immediately before the commencement of the section, were approved nursing homes, shall be deemed to have been approved as nursing homes under section 40AA(2). Although Dibo's Pittwater home fell within this category, it is necessary to have regard to the content and structure of the approval scheme.
Approval may inter alia be withheld on the ground that the particular locality is adequately serviced by existing nursing homes. Sub-section (3) of section 40AA provided:

(3) Where -

(a) application is made for approval of premises (not being a State nursing home) as an approved nursing home, not being an application made before the commencement of this section by virtue of sub-section (2) of section thirty-nine of the National Health Act 1972; and

(b) the Director-General is of the opinion that approved nursing homes (including premises proposed to be approved as nursing homes) in the locality in which the premises to which the application relates are situated make adequate provision for nursing home care in that locality, being an opinion that, where the premises are in a State, is formed by the Director-General after consulting with the authority in that State responsible for the administration of nursing homes in that State, he may refuse the application unless the applicant has, within the period of twelve months, or within such longer period as the Director-General allows, before the application is made, informed the Director General, in writing, that the applicant proposes to make the application and the Director-General has informed the applicant, in writing, that the application will not be refused under this sub-section.

There are certain mandatory conditions to approval, and continuing approval, especially as to compliance with the fee ceiling imposed by the Director General of the department. In this connection, sub-section (6) of section 40AA provided:

(6) The approval of premises as an approved nursing home is, except in the case of a State nursing home, subject to the following conditions:- ...

(c) a condition that-

(i) the gross fees in respect of the nursing home care of a qualified nursing home patient in the nursing home will not exceed such fees as are from time to time applicable in respect of the nursing home care of the patient in accordance with such scale of fees as is determined by the Director-General in relation to the nursing home; and

(ii) no extra charges will be payable by or on behalf of a qualified nursing home patient in the nursing home except in respect of matters not related to the nursing home care provided for the patient; and

(d) any other conditions detailed by the Director-General for the purpose of ensuring that the needs of the qualified nursing home patients in the nursing home are satisfactorily provided for.

Section 4(1) of the Act, as amended by the amending Act, contained some relevant definitions. Gross fees were defined relevantly as the amount of fees that would be payable by or on behalf of the patient to the proprietor of the home in respect of nursing home care without deduction of the amount of Commonwealth benefit under Part V of the Act or of any nursing home fund benefit. A nursing home fund benefit is "the amount payable under the rules of a registered hospital benefits organisation in respect of a person who is a qualified nursing home patient". Dibo was the proprietor of the home because it owned the business carried on at the home.
In respect of the fixing of the gross fees permitted to be charged by the proprietor of an approved nursing home, sub-section (7) of section 40AA provided:

(7) The Director-General shall, in determining the scale of fees in relation to a nursing home for the purposes of sub-paragraph (i) of paragraph (c) of the last preceding sub-section, have regard to costs necessarily incurred in providing nursing home care in the nursing home.

It is fundamental to Dibo's present application to the Court that this sub-section was not complied with.
The fees ceiling for each home was fixed on 1 January 1973 at the level of the normal fees each home was charging on 30 June 1972. These fees were subject to variation. Section 40AD relevantly provided:

(1) The Director-General may at any time, on application by the proprietor of a nursing home or otherwise, alter the conditions applicable to the nursing home- ...

(b) by substituting for the scale of fees determined in relation to the nursing home for the purposes of sub-paragraph (i) of paragraph (c) of sub-section

(6) of section forty AA of this Act such other scale of fees as is determined by the Director-General; ...

The means of achieving a fee increase were provided for in the first four sub-sections of section 40AE:

(1) Where the proprietor of an approved nursing home makes application, in writing, to the Director-General for the Director-General to alter the conditions applicable to the nursing home, the Director-General shall, within two months after receipt of the application, either alter the conditions, whether in accordance with the application or otherwise, or refuse the application, and notify the applicant, in writing, accordingly.

(2) Where the Director-General does not alter the conditions in accordance with the application, the proprietor may, by writing under his hand, request the Minister to review the decision of the Director-General.

(3) Upon receipt of a request under the last preceding sub-section, the Minister shall, after such investigation of the matter as he considers necessary, either confirm or vary the decision of the Director-General, and advise the proprietor accordingly.

(4) Where a request under sub-section (2) of this section relates to the fees applicable to a nursing home, the Minister shall, as part of his investigation of the matter, refer the matter to the appropriate Nursing Homes Fees Review Committee of Inquiry established under Division 3A of Part VIII of this Act for examination and report to the Minister and shall not take any further action in the matter until he has received the report of the Committee.

These steps were taken in this case, resulting in the original determination, although it appears that the time limitation stipulated in sub-section (1) was not adhered to. Subject to prescribed time limitations, it is not disputed that a redetermination under sub-section (3) is susceptible to review in this Court under the ADJR Act.
THE ISSUES
The disposal of the application for the summary dismissal of Dibo's motion did not determine the threshold issue as to whether the court has jurisdiction to hear the dispute in its present form. The Minister argues that Dibo should have sought leave to initiate its case by a fresh application under the ADJR Act. Leave would have been necessary because the motion was several months out of time: s 11 of the ADJR Act. This argument is that the present relief cannot be granted under section 22 of the Federal Court Act or the liberty to apply reserved by Justice Hill in the consent orders. If there is jurisdiction, the central issue is whether, in the redetermination, the Minister complied with order 2 of the consent orders as required or mandated by sub-sections (6) and (7) of section 40AA of the Act.
Because it is necessary to define the matter now before the Court in order to determine jurisdiction, it is appropriate to address the central issue first.
THE CONSENT ORDERS - DID THE REDETERMINATION COMPLY?
Dibo seeks, inter alia, a declaration that the Minister did not comply with consent order 2 and an order that within 28 days he make such a determination by reference to the three factors mentioned in there, viz. rent, profit and interest. A consideration of the appropriateness of the relief sought in these regards requires a consideration of how the redetermination was made, as well as the context and content of the original determination.
The original determination (18 November 1987)
The original determination consisted of a letter of one page from the Minister with the report of the Fees Review Committee attached. In his letter, the Minister indicated that he accepted the recommendation of the Committee not to make any adjustment to the approved scale of fees of the home other than to allow a loading of $1,971 in respect of rental for the 1976/77 period.
Paragraph 8 of the report was a statement of reasons for this recommendation and it consists of a number of sub-paragraphs. Paragraph 8.2(a)(i) indicated that the Committee made no allowance for rentals before 1 June 1976 because it believed that Dibo had not applied for an increase in fees based on rent before 19 April 1976 and had expressed no dissatisfaction with the amount the department had earlier allowed. Paragraph 8.2(a)(ii) dealt with the period 1976-1982 as follows:

A formal appeal submission was forwarded to the Committee on 6 July 1985. This was addressed by the Department and a calculation based on fair market rental as determined by the Australian Taxation Office discounted back to 1 July 1976 from 30 June 1984 was used. The Department arrived at an adjustment of $88,460 which was accepted by the proprietor on the basis of a further negotiation with the Taxation Office on a fair market rental. No evidence was presented that the Tax (Office) assessment was not a fair assessment but a request was made to include fixtures and fittings which was not included in the first instance. The Tax Department valuers subsequently stated that in their opinion the Fair Market Rental would not vary. We believe therefore that the determination made and adjusted back to 1 July 1976 (with the exception of the negative adjustment of $1,971 in the first year) was properly considered and reasonable. It is suggested that the Department should consider refunding the amount of $1,971 as has been proposed in its report. The Committee does not consider that there are any exceptional circumstances which warrant departing from the above approach in this instance.

With respect to profit, the Committee stated in paragraph 8.2(b) that:

...there is no basis to accept either rate of profit (i.e. the 15% or not less than 17% return which the proprietor had argued for) when it would appear that the income accruing to the owners of the building is approximately 9% per annum. ...

In relation to profitability the Principles state that rental forms part of the return on investment (sic) and is not treated as an expense. The Committee noted that the proprietor is receiving the bulk of the rent through the fees.

(The "Principles" appear to have been some official or departmental guidelines but they did not have statutory force and were not placed in evidence or litigated in this case.)

The consent orders manifested the Minister's concession that the original determination contained errors of law, including the failure to consider necessary costs in the form of rental. The Minister did not consider actual rental from 1973 to 1976 because he accepted the Committee's view that Dibo had not applied for an increase in fees based on rent before 19 April 1976 and had expressed no dissatisfaction with the amount the department allowed. Dibo disputed this viewpoint, saying that it had listed actual rental paid on a particular form from the first year of the scheme. With respect to the period 1976 to 1982, the department took into account a fair market rental, but failed to consider necessary costs in the form of actual rental. The peculiar treatment of profit appears to indicate that a reasonable level of profit was not taken into account. The redetermination ordered by the consent orders was aimed at addressing these errors of law.
The redetermination (5 December 1989)
The matter was not sent back to the Committee for a further report. The Minister's letter of communication of the redetermination (the letter) consisted of five pages with two attachments. After setting out the consent orders, he said:

I wish to advise you that I have taken into account the following in the redetermination.

(a) RENT

Bearing in mind the Court Order the full rent paid by you for each year has been included in the recalculation of the fees.

In approving rent I have proceeded on the basis that the lease agreements were at arms length.

(b) PROFIT

For the purposes of assessing a profit factor I have accepted the L. J. Hooker valuation of the Pittwater Nursing Home, as a going concern, in 1982. I have adopted this valuation as you did not provide a valuation of the nursing home in 1973 at the commencement of fees control and I was unable to obtain one. In addition the improved capital value of the land in the relevant period was not available. I have negatively adjusted the L. J. Hooker valuation by Consumer Price Indices (All Ordinaries Index Sydney) supplied by the Australian Valuation Office... (The CPI figures and the value of the home based upon them are shown. The values range from $371,558 to $813,103.)

I have determined that a return factor of 12 1/2% per annum is a reasonable return to apply in each of the years. In approving this return factor I have had regard to the following:

1. Policy - Policy files held by the Department show that a return of 12 1/2% on proprietors invested funds was considered appropriate in 1973.

2. Interest rates paid on Aussie Bonds and before their commencement Special Bonds. These are listed at attachment 1.

I have noted that in your appeal submission dated 16 October 1986 you requested that a return of 17% per annum should apply to the home.

In my view the risks involved in the nursing home industry compared to most other private enterprise ventures are minimised if not eliminated by the controls and safeguards provided under (the Act). The approval of nursing homes under the Act entails eligibility for receipt of Commonwealth Benefit payments, protection from competition through growth control restrictions and ensures that homes have almost 100 per cent occupancy rates. There are no market forces which would balance demand and supply in the nursing home industry as supply is controlled via the Commonwealth's growth control measures. Therefore I consider that the rate of return which should apply in the nursing home industry should, given the distinct lack of risk, be below the rates of return which could be expected on most other private enterprise investments which have higher elements of risk associated with them.

I have considered the return on the deemed value in each year and compared it with rent paid in each year...

(Calculations for each financial year and the further period from July to October 1980 are shown. One column shows profit based on valuation per annum. The next shows rent paid per annum. The third column shows approved profit per annum, which is the difference between the first two columns. The third column totals $151,335.)

(c) INTEREST

...

OTHER CONSIDERATIONS

In making my redetermination of the final fee to be set, after taking into account the above factors, I have had regard to R v Hunt, Ex Parte Sean Investments Pty Ltd 1979 25 ALR 497. This case demonstrated that matters to be considered by the Minister are not confined to costs necessarily incurred and a profit factor but that the Minister may have regard to other considerations which may show that a scale of fees, arrived at by reference to costs necessarily incurred (including a profit factor), is excessive or unreasonable in respect of the particular nursing home under review.

A schedule of the redetermined fees together with supporting calculations, is contained at attachment 2. You will observe from this schedule that the fees previously determined were, in some periods, below the state standard fee and in respect of other periods above the state standard fee.

In respect of the periods where the fees of the home were below the state standard fee I am of the opinion that the rental paid was above market level and that the patients in the nursing home were mostly pensioners. Accordingly I determine that the appropriate fee for these periods to be no higher than the state standard fee. In respect of those periods where the fee determined was above the state standard fee but less than the fee which would have been obtained if full effect had been given to the costs necessarily incurred including rent and a profit factor I am of the opinion that had I been determining the fees at a time close to the periods in question, I may well have determined the appropriate fee to be the state standard fee. However, having regard to the date of my determination I am of the view that it would be inappropriate to now redetermine the fee downward. I therefore determine that they should remain as set by the delegate. During the years where the state standard fee or a fee slightly below this level has been determined the maximum Commonwealth liability has been met.

Having regard to the above I have redetermined the fees for Pittwater Nursing Home for the period of the Court Order. You will see from the schedule of fees that in making my redetermination I have had regard to the changing occupancy rates of the nursing home. Based on the redetermined fees and the Commonwealth's maximum liability I have calculated an additional fee of $31,993.74 was payable to the nursing home. I have however, noted that an amount of $35,162 was approved in the fees to cover rent for the nursing home by way of loadings on 1 January 1986 and 1 June 1988. I am therefore of the opinion that no further monies are payable to the nursing home.

Attachment 2 contains a schedule of the redetermined fees together with supporting calculations. The schedule is in the form of a table. It shows the Minister's calculations from 1 January 1973 to 2 October 1980. This is divided into several periods for each year. Each period forms a row of the table with calculations of fees for four and three bed wards, two bed wards and one bed wards. These different categories are also shown in rows.
The schedule consists of seven columns. The first column shows the "Existing Daily Ordinary Care Fee" per bed per day. These are the current approved fees. The second column is the "Calculated Increase per bed day". This column contains the Minister's calculations with respect to the "rental increases" and "profit factor" referred to in the consent orders. The third column is the "Daily Ordinary Care Fee Calculated", representing the addition of the figures in the first two columns. The fourth column is headed "State Standard Fee", which I have earlier explained. The fifth column shows the daily ordinary care fee proposed by the Minister. The sixth column appears to provide a reason for any discrepancy between the Minister's proposed figures in column 5 and the calculated figures shown in three. The final column shows aggregate increases allowed for the named time period.
After the table are several pages headed "Calculation of Rental Component" and then several pages headed "Profit Calculation". The result of the redetermination was that as the number of beds in the ward decreases, the approved fees increase.
Rent
The consent orders directed the Minister to "have regard to" rental increases incurred by the Applicant for the financial years ending 30 June 1973 up to and including 30 June 1980 and from 1 July 1980 to 1 October 1980. Dibo does not dispute the Minister's calculation of $71,077 as the rental increases but complains of the minimal extent to which they were allowed in the fixing of the home's maximum allowable fees.
The procedure followed is stated by the Minister in the third and fourth paragraphs of the section "Other Considerations" in the letter. Despite the statement at the beginning of the letter that "the full rent paid by you each year has been included in the recalculation of the fees", in almost all periods, the Minister in fact made no allowance for rental increases which had been calculated. However, in respect of the periods 1 to 30 June 1978, 1 July to 31 August 1978, and 1 September to 8 November 1978, rent was allowed as a component of increases to a limited extent. As to the second of these periods, the words used in the sixth column of the table were: "Adjustment to 4, 3 and 2 bed wards allowed. Otherwise fees calculated considered to be excessive." The calculated rental increase of 41 cents per bed per day was fully allowed in respect of four and three bed wards. A maximum of 25 cents may have been allowed for two bed wards (this is not entirely clear) but no allowance was made for one bed wards. With four and three bed wards, the full allowance produced a fee which was still below the state standard fee. With two bed wards, an increase was allowed only up to the state standard fee. The 'no increase' for one bed wards is explained by the fact that the existing fee was already above the state standard fee.
Profit
The consent orders directed the Minister to "take into account" a nursing home profit factor for the stated years 1973-80 and the further three months from 1 July to 1 October 1980.
The redetermination show that in calculating profit, the Minister began with L.J. Hooker's valuation of Dibo's Pittwater home as a going concern in 1982 and negatively adjusted this valuation by the Consumer Price Indices for the previous years back to 1973 to produce the valuation for each of the preceding years. A profit figure of 12.5 per cent of each valuation was then calculated and taken as a reasonable rate of return for the ownership and operation of the home. Rent paid for that year was then deducted and the difference was treated as a reasonable profit for the lessee operating the home. The calculations produced an aggregate profit of $151,335.
Some criticism can be levelled both at the method of valuation and at the omission of any consideration of the actual profits earned by comparable nursing homes. This means of calculating profit seems to lead to the odd result that as actual rent increases, increased investment by a lessee operator leads to a lower rate of return on its investment. However, Dibo agreed to this method of calculation and the Minister's figures, challenging only the use of the 12.5 per cent profit factor. The method of calculation was in fact approved by the accounting firm, KPMG Peat Marwick.
In a similar fashion to the treatment of rental increases, most of the calculated profit was not allowed. For example, for the period 1 January to 30 June 1973, the profit increase was only allowed for four and three bed wards and it did not push the total fee calculated over the state standard fee. However, for two bed and one bed wards, there was no allowance for profit because the existing rate was already over the state standard fee. Similar treatment was accorded to profit in the other years with the state standard fee again the benchmark used in limiting fee increases. The basic reason given for this attitude was the absence of risk to nursing home proprietors in a financially regulated environment.
Interest and Damages
The applicant did not direct submissions to the question of interest or the damages claim. Interest was said to be a small amount not worthy of time; damages were not part of the consent orders and not mentioned in the points of claim. It is therefore not necessary to make findings in relation to them. Perhaps interest at least can be agreed between the parties.
Summary
The addition of the total rental increases calculated ($71,077) and total profit calculated ($151,335) is $222,412. Of this sum, the Minister allowed only $31,993.74, although in fact not even this sum was paid because of the allowance of other (later) payments as set out in the letter. Dibo's claim is that the amount allowed of $31,993.74 and the payment of no money manifest or are a result of legal errors under sub-sections (1) and (2) of section 5 of the ADJR Act in that relevant matters were omitted, that irrelevant matters were considered, and that it was unreasonable.
CONSTRUING THE CONSENT ORDERS
Because the orders in issue here were made by consent, Dibo argued that the task of the Court is to construe the orders so as to give effect to the parties' intentions. This cannot mean their actual intentions, first because there is no evidence of what they were, and second because, as Lord Wilberforce said in Prenn v Simmonds (1971) 1 WLR 1381 at 1385, the parties' actual intentions may never meet:

The words used (in the contract) may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get "agreement" and in the hope that disputes will not arise.

Presumed intention is concerned with the outward manifestations of actual intentions: Taylor v Johnson (1983) 151 CLR 422 at 428. In the present case, the parties agree that the phrases "have regard to" and "take into account" in the consent orders require a consideration of the particular factors mentioned and giving each of those factors its due weight. It is also common ground that the dispute about the appropriate weight to be given cannot be determined merely "on internal linguistic considerations" isolated from the matrix of facts, to use the language of Lord Wilberforce in Prenn v Simmonds at 1383-4. Instead, both parties have argued case law on section 40AA as being relevant to the proper construction to be given to the consent orders.
Dibo contended that the original determination and the claims made prior to the consent orders formed part of the surrounding circumstances which should be considered in construing the consent orders. In its written submissions in the current proceedings Dibo said:

In the light of the absence of any reference in the consent order relating to any special circumstance which might justify not allowing rental increases, a profit factor and interest, it should be taken that the Minister was not contending that his redetermination should have regard to or take into account any such special circumstances. That view is especially fortified by the terms of (the original determination.) None of the (Fees Review Committee's recommendations) suggest in any way that there are any special circumstances justifying not allowing rental increases and a profit factor, and interest, which would otherwise be taken into account in accordance with the principles laid down in the authorities. If no such circumstances were suggested to the Minister by the Committee it is reasonable to infer that he did not think that there were any.

Evidence of surrounding circumstances is admissible in interpreting contractual terms which are otherwise ambiguous: Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. This also applies to consent orders: General Accident, Fire and Life Assurance Corporation Ltd v Inland Revenue Commissioners (1963) 1 WLR 1207.
However, although argument was put by both parties to support competing interpretations of the effect of consent order 2 on the facts of this case, this dispute is not truly a product of ambiguity in the words of that order. What is at issue here is a discretionary decision of a Minister. As Sir Anthony Mason said in Attorney-General for the State of New South Wales v Quin (1990) 170 CLR 1 at 17:

The Executive cannot by representation or promise disable itself from, or hinder itself in, performing a statutory duty or exercising a statutory discretion to be performed or exercised in the public interest, by binding itself not to perform the duty or exercise the discretion in a particular way in advance of the actual performance of the duty or exercise of the power... (his Honour then referred to supporting authority.)

It is of course possible that a permitted Ministerial discretion may be restricted by statements or actions. However, the Court will be slow to find an implied representation that the Minister would fetter his discretion in a particular way as such conclusions can involve the difficult process of balancing competing public interest considerations. Chief Justice Mason also observed in Quin at 18:

...one cannot exclude the possibility that the courts might in some situations grant relief on the basis that a refusal to hold the Executive to a representation by means of estoppel will occasion greater harm to the public interest by causing grave injustice to the individual who acted on the representation than any detriment to that interest that will arise from holding the Executive to its representation and thus narrowing the exercise of the discretion...

F N Eckold Pty Limited v Auburn Municipal Council (1975) 34 LGRA 144 is an example of this reluctance.
In this case, I see no reason for construing the consent orders as involving anything more than an agreement to make a redetermination according to law. My task in attempting to resolve the central issue in this case is therefore the same as it would have been if this proceeding had been initiated by a fresh application under the ADJR Act.
POLICY AND INTENT OF THE AMENDING ACT
The cases most directly in point here are those dealing with sub-sections (6) and (7) of section 40AA of the Act. Sub-section (7) is particularly relevant: as has been seen, it directs the Director-General, when fixing fees payable to the operator of a nursing home, "to have regard to costs necessarily incurred in providing nursing home care in the nursing home".
The authoritative decision on this sub-section is that of the High Court in R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 25 ALR 497 which was mentioned by the Minister in the letter of 5 December 1989 to Dibo. It was given by three judges, with Gibbs J agreeing with the judgment of Mason J, and Murphy J dissenting. Mason J held at page 503-4 that:

The words "costs necessarily incurred in providing nursing home care in the nursing home" mean costs which the proprietor incurs, and is obliged to incur, in the provision of the nursing home care which he is providing in his nursing home. "Necessarily" indicates a distinction between costs which are incurred voluntarily and those which are incurred compulsively (sic - presumably an editor's misprint for 'compulsorily') because one is obliged to incur them in order to carry on the activity in question. The payment of rent at a level higher than the prevailing rate does not of itself indicate that it is a cost unnecessarily incurred. A lessor may insist on a rent higher than the prevailing rate and, unless the lessee is willing to pay it, he will not secure possession of the premises for use as a nursing home. The liability to pay the rent is then a cost necessarily incurred, notwithstanding that it may be described as excessive. But if the lessee voluntarily agrees to pay rent at a level higher than the prevailing rate because he wishes to benefit the lessor, the lessor being a relation of the lessee or a company in which he has an interest, the whole of the rent is not a cost necessarily incurred. This is because the expenditure has been incurred voluntarily and, in consequence, it lacks the required connection with the provision of nursing home care in the nursing home. When sub-s (7) directs the Permanent Head to "have regard to" the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination. There are two reasons for saying that the costs are a fundamental element in making his determination. First, they are the only matter explicitly mentioned as a matter to be taken into account. Secondly, the scheme of the provisions is that, once the premises of the proprietor are approved as a nursing home, he is bound by the conditions of approval not to exceed the scale of fees fixed by the Permanent Head in relation to the nursing home. In many cases it is to be expected that the scale of fees will be fixed by ascertaining the costs necessarily incurred and adding to them a profit factor. In the very nature of things, the costs necessarily incurred by the proprietor in providing nursing home care in the nursing home are a fundamental matter for consideration. However, the sub-section does not direct the Permanent Head to fix the scale of fees exclusively by reference to costs necessarily incurred and profit. The sub-section is so generally expressed that it is not possible to say that he is confined to these two considerations. The Permanent Head is entitled to have regard to other considerations which show, or tend to show that a scale of fees arrived at by reference to costs necessarily incurred, with or without a profit factor, is excessive or unreasonable. It may be that the rent paid by the proprietor of a nursing home, though a cost necessarily incurred, exceeds the prevailing rental which is paid for comparable premises and that the determination of a scale of fees by reference to that rent would result in a scale of fees which is unreasonably high. The Permanent Head would be entitled to take this factor into account in making his determination. It has to be kept steadily in mind that the function is that of determining a scale of fees in relation to the particular nursing home. It is not a matter of determining a scale of fees for all nursing homes in the State and making that a scale applicable to each and every nursing home. That is why s 40AA(7) directs that regard shall be had to the costs incurred in providing the care in the particular nursing home. No doubt there is a variation in the services which nursing homes provide and that variation will be reflected in a variation in costs. Likewise, costs, notably the cost of rent, will vary according to the location of the premises.

Since the Minister has always accepted that the parties to Dibo's lease were at all times at arm's length, there is no issue here of unnecessary cost.
His Honour held at 503 that the ambit of the statutory discretion reposed in the Minister on a review of the permanent head's decision is co-extensive with that enjoyed by the permanent head. This means that the Minister must consider the same factors on review as are bound to be part of the original fee-fixing exercise. Mason J also held at 502 that section 40AA(7) applies not only to the permanent head's decision relating to the original setting of conditions of approval, but also to any variation in those conditions pursuant to section 40AD(1)(b).
Murphy J said at 508-9:

The requirement that the Permanent Head (and on review, the Minister) shall have regard to the costs necessarily incurred, tends in itself to show that his duty in respect of those costs is limited to having regard to them. He must take them into account and consider them and give due weight to them, but he has an ultimate discretion. He is not bound to increase the scale of fees on a basis which incorporates the whole or any part of the increased costs.... On fixing a scale of fees for the home, the Minister is not restricted to having regard to costs necessarily incurred but may have regard to other facts and circumstances. The purpose of providing a government subsidy is to lower costs to the public. This legislative purpose might be defeated if the Minister were to fix scales of fees by automatically including any costs necessarily incurred, even if this resulted in unreasonably high scales. It was suggested during argument that if the fees are high, persons seeking nursing care are free to go elsewhere. In truth, however, there is not a free market because there is a quasi-monopoly in that the existence of approved nursing homes in a locality may ground a refusal of an application for approval of another nursing home (see s 40AA(3)). The Minister may adopt a general policy in regard to scales of fees, and deal with a review of fees for a nursing home in the light of that policy, but his determination or review must be in order to arrive at an appropriate scale of fees for the particular nursing home. If the costs necessarily incurred are excessive for any reason whether inside or outside the control of the proprietor, it may be that the scale of fees the Minister determines is such that if those costs continue, the home can be conducted only at little profit or at a loss. If that result follows it is because the Minister is not engaged in determining a scale of fees according to a cost plus system; he is carrying out a statutory duty to determine what, in his opinion, is an appropriate scale of fees in relation to the approved nursing home.

While expressly agreeing with the second half of this statement by Murphy J from "The Minister may adopt...", Justice Deane, when a Judge of this Court, has said, in a decision to which I shall come, that there is no real conflict between these two judgments on the interpretation of section 40AA(7). While that may be so, there are certainly differences in tone, emphasis and philosophy bordering on one or more differences of principle. Mason J stressed that "necessary costs" are a "fundamental element" in the making of the determination. Murphy J said that they must be given "due weight" and the permanent head's duty in respect of necessary costs "is limited to having regard to them". Mason J said that the permanent head "is entitled to have regard to other considerations" but as the example chosen by his Honour appears unlikely to occur in practice, the clear inference is that actual rent should in the preponderance of cases be allowed. Murphy J said that the legislative purpose is to lower costs to the public, presumably both in the sense of the patients and the public at large, and it might be defeated if the Minister failed to take other considerations into account. This approach must mean that if rent and profit are allowed, other matters must be considered on the downside to permit a discounting of what might otherwise cause costs to blow out unacceptably.

In the context of actual or potential public costs, it seems to me that consideration must also be given to those that might result if, due to unprofitability, a private nursing home has to reduce the quality or quantity of its services, or even close altogether, with patients being deprived of adequate care or having to become reliant on other facilities, whether public or private. Another might be the need for homes to move to other localities with the incurring of possible additional "necessary costs" or the accretion of new factors which might legitimately increase the profit component.
There will also be a different result in many cases from an application of the respective theses of their Honours, as occurred in the particular case under consideration by the High Court. The applicant applied for mandamus to compel the Minister to determine according to law its application for an increase in its fees scale to cover the increases in rent which had become payable. The Minister's letter of refusal to do so referred to the Fees Review Committee's report which dealt with what a reasonable rental was.
Mason J said at 506:

In terms this letter makes no reference to s 40AA(7) or to costs necessarily incurred in providing nursing home care in the nursing home. All that the letter does is to mention considerations which indicate that a reasonable rental for a nursing home with 63 beds would be $37,800 per annum. The terms of the letter therefore suggest that the Minister has not had regard to the one matter which the statute explicitly directs shall be taken into account. The impression which the letter creates in the mind of the reader is that the Minister proceeded on the footing that the only question for his attention was: What is a reasonable rental for the premises?

This impression is strengthened by a reading of the report of the Review Committee and of an advice... from the Deputy Crown Solicitor to the Committee on which its report was based. The advice stated: "For my part, I would take the view that rental of nursing home premises is a cost necessarily incurred provided that it is paid bona fide as rental and is, in all the circumstances, a reasonable rental" ... (t)he Committee's report...stated: "...The Committee decided to consider the appeal on the basis as to whether or not the rent increase was reasonable."

Murphy J's conclusion on the letter was quite different. He stated at 508:

What the Minister did is presumed to be rightly and duly performed until the contrary is shown. In my opinion, the letter does not even begin to displace the presumption of regularity which must be accorded to the Minister's decision... The prosecutor claims that the Minister has had regard to the increased rent, but because he considered it unreasonably high, has not had regard to it as a cost necessarily incurred, and, therefore, refused to increase the scale of fees. The natural inference, which I draw, is that the Minister, in accordance with the Committee's report, regarded the rent as a cost necessarily incurred. The letter did not express this, but it did not express or imply that he did not.

Mason J is thus more interventionist than Murphy J. He specified what weight the necessary cost factor must have, and showed a signal willingness to impugn the Minister's decision in contrast to Murphy J's presumption of regularity.
After the High Court granted mandamus, the Minister considered the matter further. His subsequent determination in the matter was considered by this Court in Sean Investments Pty Ltd v MacKellar (1981) 38 ALR 363. This decision concerned the taking into account of rental increases. It was the judgment of Justice Deane at first instance to which I referred earlier when, as a Federal Court Judge, his Honour considered the views of Mason and Murphy JJ. on section 40AA(7) in the earlier phase of the case. His Honour also said at 373-4 that "(t)he particular considerations which are to be taken into account and the respective weight to be given to them is ... to no small extent, a matter for the Permanent Head and on review, the Minister".
An appeal from Justice Deane's judgment was dismissed: (1982) 42 ALR 676. There was a joint judgment by Bowen C.J. and Fox J and a separate judgment by Franki J, although Franki J agreed with the reasons of the other two judges. In what was with respect a somewhat careful attempt to address the competing questions involved, the two judges said at 680-1:

We do not think it is doubted that the rental increase was treated as a cost necessarily incurred within the meaning of s 40AA(7) and that the Committee and the Minister "had regard" to it within the meaning of that sub-section. Rather it is said that having had regard to the rental increase, the Minister nevertheless decided against its full acceptance. The increased rental was not wholly reflected in the new scale of fees; only $1343 of $5344 was allowed. The reasons given by the Committee were considered by the permanent head and commented upon in a memorandum to the Minister, which the latter endorsed "agreed"...The permanent head expressed reservations about one ground of the Committee's decision, namely, that which showed that a full increase would take fees for all but the four bed wards outside what is departmentally known as the "standard fee". This is no doubt one measure against which fee scales can be tested, but is a crude one which can operate unfairly in particular cases. The next ground mentioned by the permanent head was related to fees for comparable homes in the locality. This again, as it seems to us, is one way of testing a contemplated scale, although doubtless a crude one in many cases. How apt it is in a particular case is a matter for the appointed authorities. The next matter commented upon by the permanent head is that the surplus cash left out of an age pension would be very small if the increase was applied to two and three bed wards, and the pension would be insufficient in the case of one bed wards. The correctness in law of this approach is to be determined by reference to the purpose of the legislature, as determined from the language used in the legislation. When considering the purposes of the Act, it is almost always easier to decide, negatively, and in relation to concrete cases what is inconsistent with those purposes than to propound them positively. While wise administration would probably suggest that each nursing home be kept viable, we are unable to construct a purpose of the Act to the effect that adequate profit must be allowed in every case...Also, we are unable to conclude that the ability of patients, that is to say, uninsured patients, to pay cannot be a relevant factor...A major purpose of the whole scheme must be to provide nursing home care for indigent patients, and one would expect that fees, and subsidies, will be determined with this in mind.

Franki J agreed, "but not without some hesitation, that the appeal should be dismissed with costs". He said at 683 that the position of pensioners appeared to him to have been the determining factor which caused the Minister to reach his conclusion. He also said at 683-4, somewhat more definitively:

A difficulty arises in considering from whose point of view the reasonableness of the fees may be examined. Must the fees be looked at in relation only to the costs of the particular nursing home? Murphy J, in the minority judgment (in R v Hunt at 508) said that "The purpose of providing a government subsidy is to lower costs to the public". I think there is much to be said for the view that, although some account may be taken of factors relating to the position of occupants, the income of pensioners, who were not specifically referred to in the sections of (the Act) dealing with nursing homes, should not be the determining factor in fixing maximum fees which, after due regard is paid to costs necessarily incurred in providing nursing care in the nursing home under consideration, are not otherwise thought to be unreasonable.

However, the Minister has a wide discretion ... I do not consider that it is sufficient for an applicant to show that the Minister gave undue weight to a particular consideration if that consideration was one relevant for him to take into account at all. It would be different if this resulted in the power being exercised in a way which fell within s 5(2)(g) or (h) or was otherwise an improper exercise of the power within the words of s 5(1)(e) (of the ADJR Act).

Thus Franki J's personal view appears to be that to the extent that this legislation is about the funding of nursing homes - and it is about many other matters as well - it ought not to be construed as a vehicle for protecting the interests of social security recipients or pensioners. Presumably this was thought to be, or should be, the purpose of other enactments or policy prescriptions perhaps because it is simply not possible to mesh these two areas of policy effectively. But he nevertheless upheld the decision of Justice Deane on the basis of the width of the Minister's discretion.
Another case to consider these matters was Howells v Nagrad Nominees Pty Ltd (1982) 43 ALR 283, an appeal from Justice Northrop (Nagrad Nominees Pty Ltd v Howells (1981) 54 FLR 170), where the policy objectives of the Act were articulated at length both at first instance and on appeal. The applicant became the owner of a nursing home business, and the lessee of the premises on which it was carried on, in January 1980. The lessor of the premises was the previous proprietor of the nursing home business. The applicant applied for a variation of fees. Justice Northrop said at 190:

In my opinion, the relevant essential policy of the Act is to ensure that the proprietors of private nursing homes do not make excessive profits in providing nursing home care, particularly since the Commonwealth to some extent does subsidize patients admitted to those homes. The Act presupposes the existence and the continuation of private nursing homes...The Commonwealth does not provide all nursing home care, but because it subsidizes patients in private nursing homes it is concerned to ensure that the proprietors do not make excessive profits. This policy is made clear by a consideration of s 40AA, especially the power to impose conditions relating to fees to be charged and the express provisions of s 40AA(7).

In elaboration of the reasons for reading this policy into the Act, I draw particular attention to section 40AA(3). As Murphy J commented in R v Hunt, this imposes a barrier to entry into the nursing home business thereby reducing the competitiveness of the sector and increasing the opportunity for excessive profits to be made. The lack of competitiveness of the market and the attendant lack of risk in operating a home was actually relied upon by the Minister in determining what rate of profit should apply.
The appeal from Justice Northrop's decision was dismissed in a joint judgment of Fox and Franki JJ. and a separate judgment of Smithers J. The joint judgment stated at 303-5:

The Delegate took as a starting point the ingredients upon which the fees were fixed for the previous owner...one such ingredient was an amount...called "return on land and buildings" which was calculated as 12.5 per cent of the cost of building the nursing home. The view of the Delegate, consistently with departmental policy, was that this amount should be carried forward, notwithstanding the change in ownership of the business and fresh financial arrangements which were made, the fact that the new owner was a lessee, and other changes in circumstances ... (two reasons were given for the departmental policy including administrative problems.) ... reassessment on every change of ownership would, it is said, make the statutory scheme (in its broad sense) unworkable. There would be an intolerable administrative burden when the total number of approved nursing homes in Australia is considered. The other reason given is to control an upward creep in fees consequent upon profit-taking by successive owners.

...it is clear that the requirements of the Act, express or implied, must govern what is to be done. Manifest administrative problems, if major, might perhaps provide a guide in the interpretation of legislation of doubtful or ambiguous intent, but in our view the meaning and intended operation of the present Act is reasonably clear. What it requires is that the scale of fees be determined by reference to the business as conducted by the proprietor for the time being...

The discretion given to the Permanent Head (and Delegate) is a wide one, in the sense that, save for one matter, it is not subject to any express qualifications or limitations as to the matters he might take into account, the manner of its exercise, or the scales of fees he may decide upon... The exercise of the discretion now in question is subject to the express requirements in s 40AA(7). This sub-section was considered by the High Court in Re Hunt; Ex parte Sean Investments Pty Ltd...

The ascertainment of "costs necessarily incurred" is an appropriate starting point in a determination...We do not think we can usefully suggest an order in which other relevant matters might be considered. Whether an allowance should be made for profit, and what fees are necessary to make the hospital business economically viable are factors for consideration, but a question can properly arise as to whether, all these elements having been calculated, the result is a scale of fees which is excessive or unreasonable. In the end, necessary and proper considerations being taken into account, the Permanent Head has a wide discretion.

...

(at 306) As was pointed out by Mason J...to "have regard to" in the context of s 40AA(7) means to have regard to as a "fundamental" element. We do not wish to attempt to find a synonym for what, with respect, is such an apt term, but it is obvious that costs necessarily incurred...are to be given due weight, as matters of basic importance.

Smithers J said at 290-1:

It is manifest that Parliament's intention is that there will be as many nursing homes as are considered reasonably desirable for providing the nursing home needs of the qualified patients needing such care. People have to be encouraged to provide the services. It is an important objective and depends upon people of the right kind being willing to undertake the work and risk involved in providing that care. It is a private enterprise approach to the problem. Obviously, from every point of view the success of the scheme is dependent upon there being available to the proprietors of homes providing nursing care financial returns which will constitute reasonable financial income to them taking into account the use of capital and the exertion involved in running the home as manager and worker. It is manifest that for the achievement of its objectives in relation to nursing homes Parliament would intend the Act to be implemented so that each home would be a viability. To realize the importance to the proprietor of an authorized nursing home having access to funds required to meet the costs of giving the basic care in a nursing home it is only necessary to visualize for a moment the lamentable plight of old, sick and largely helpless inmates should they not receive sufficient food and physical attention. And of course it is not only important to the proprietor of the home but basic to the whole scheme visualized by Parliament. It is clear from the judgment of the full court of this court in Sean Investments Pty Ltd v Mackellar that an allowance in respect of an item in the nature of a necessary cost may be appropriate although it does not provide for the whole of such a cost if there are reasons for regarding an allowance of the whole thereof as more than is reasonable in the circumstances. I do not read that decision as establishing that the viability of the nursing home is not a critical consideration.

The same Judge spoke in similar terms in Croft v Minister for Health (1983) 45 ALR 449 at 465-6.
Two subsequent Full Courts of this Court dealt with an amended version of section 40AA introduced into the Act by Act No. 35 of 1983 which received Royal Assent in June 1983. Instead of requiring regard to necessary costs, provision was made for the Minister to formulate principles in determining a scale of fees. Section 40AA(7B) prescribed certain guidelines for the principles but at the time of the cases, the Minister had not yet formulated any principles. Thus the new sub-section (6) had to be relied on which provided no explicit guidance as to the exercise of the discretion. Relevantly for an understanding of the cases in the context of the present matter, it was only to the effect that the maximum permissible charges for an approved nursing home are to be "determined, subject to any principles that have been formulated under sub-section (7) and that are in force, by the Permanent Head in relation to the nursing home".
The first of the decisions, Alexandra Private Geriatric Hospital Pty Ltd v Blewett (1985) 68 ALR 222, appears to have marked a departure, at least in emphasis, from previous formulations of the statutory policy. It was an appeal from Woodward J whose judgment is reported at (1984) 56 ALR 265. The delegate did not take the current values of the applicant's lands and buildings into account when considering the element of profit, regarding himself as bound by a departmental policy to base his calculation on historic costs. Woodward J held at 293 that the departmental policy was quite unfair but not sufficiently unreasonable that the delegate's decision ought to be quashed by the Court.
On appeal, this view was overturned. Separate judgments were delivered by Smithers, Sheppard and Jenkinson JJ. At 231 Smithers J once again expressed the view that commercial viability is of importance because "the standard of care in a home not financially viable is likely to deteriorate, perhaps seriously". For a private enterprise project, the level of "profit is inevitably a relevant matter." Failing to take into account the amount of capital then involved in the project was to fail to take into account a relevant consideration.
Justice Sheppard held at 237 that the delegate was obliged to take costs into account and to provide for a profit margin. His Honour gave this expression to the policy of the Act:

That policy is that approved nursing home care is to be provided, a least in part, by privately owned nursing homes. The premise is that each of these homes will be carried on, not by a government agency, but by a person carrying on business on his own account. The object underlying business activity is profit making...(reference was made to the remarks of Smithers J in Nagrad Nominees) ... the delegate was obliged, as a matter of law, to take into account costs and to provide for a profit margin when he came to consider what fees should be approved.

Much of the case law on inherent or implied powers of the courts displays concern that their use in this so-called summary process must not do an injustice to the party opposing the summary process by denying that party the right to an ordinary trial. This is evident, for example, in the rules of the Courts of Chancery relating to the summary enforcement of compromises. As a member of a Full Court of the Victorian Supreme Court in Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd (1956) VLR 555 at 562, Smith J reminded us, in a judgment commended by the majority in that case, and approved in Darling Downs, that the broad principle upon which Chancery acted in determining whether an agreement should be enforced summarily or whether the applicant should proceed by separate bill was that the summary procedure should be confined within such limits as justice required. Thus, if there was a substantial question to be determined as to what were the terms of the agreement, or as to whether it was valid or specifically enforceable, a party would ordinarily be left to proceed by separate bill.
A question arises as to the relationship between such procedural rules and liberty to apply, which I have said merely confers a right upon parties to convene and invoke the previous or existing jurisdiction of the Court, in determining what right has actually been conferred upon the parties. In this regard, Justice Davies said in Narish Holdings Pty Ltd v Commonwealth of Australia (30 June 1989, unreported):

...a reservation of leave must be construed having regard to the context in which it is made and the purpose of the reservation. There is no rule of law as to what a particular reservation of leave means or encompasses.

It appears that this relationship is that, in some situations, there is a procedural rule that a matter is not properly brought forward unless it is pursuant to liberty to apply. Thus, in Porteous, Herring C.J. regarded it as a pre-condition for bringing subsequent proceedings dealing with the working out of final orders, that liberty to apply had been reserved. However, in Stephen, the Court appeared to take a different approach. Lawrence L.J. said at 203:

Where a party has a right to apply to the Court that right is not lost or diminished by the failure to add the words "liberty to apply" which only refers to procedure.

And in Cristel, Somervell L.J. said that when orders require working out, liberty to apply is implied.
The Minister argued that the liberty to apply reserved by Justice Hill was exhausted on 27 October 1989 when Dibo applied for and obtained from Justice Gummow an order that the Minister comply with the consent orders within a certain time. Because the liberty to apply was not again reserved on 27 October, so the submission went, it was consequently lost.
However, the reservation of liberty to apply by Justice Hill was not confined to a particular problem, for example, as to when the Minister should comply with the consent orders, or to one use or occasion, and no good reason has been suggested for reading a limitation to this effect into it. It was a general reservation, and the only restriction it bears is that it must involve the working out of the consent orders.
What in effect Dibo is seeking here is a declaration that the redetermination did not represent compliance with the consent orders. This might give rise to a number of categories of legal description or avenues for challenge including even contempt of court, but it does not seem to me to accord with the traditional limits contemplated by the reservation of liberty to apply. I agree with the broader approach of Stephen and Cristel to the implications of liberty to apply, although I doubt that even those doctrines would permit the present litigation were it not for section 22 of the Federal Court Act. The matter is by no means without doubt but my view is that the liberty to apply reserved by Justice Hill in the consent orders did not provide a means or procedure for Dibo to challenge the redetermination by way of judicial review.
Federal Court Act section 22
The rules of Chancery, as Smith J said in Roberts at 564, were "rules of mere practice and procedure which operated in the old Courts". In other words, they were concerned not with defining the summary jurisdiction of Chancery but with what principles should govern the exercise of that jurisdiction, i.e. the conditions precedent to the exercise of the court's undoubted summary jurisdiction. The fact that they were rules of mere practice and procedure was, according to Smith J, a relevant consideration in giving a liberal construction to the Judicature Act and the Victorian equivalent of section 22 of the Federal Court Act:

The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appear to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.

Such sections have been construed in different ways, depending on which phrases are emphasised. A narrow interpretation places particular stress upon the words "claim properly brought forward...in the matter", emphasising earlier practice limiting "extra" relief to the narrow confines of the pleaded dispute. A broader interpretation has focussed more upon the purpose of the section which is stated to be the complete and final determination of all matters in controversy and the avoidance of multiplicity of proceedings. This approach takes a more flexible view of existing procedural practices.
It appears that the broader approach has won acceptance. Smith J pointed out that it appears to have been accepted that the section has expanded the types of matters with which courts will deal summarily, by removing some of the old limitations while still following the broad principle of Chancery that summary procedure should be confined within the limits required by the interests of justice.
These liberalising tendencies expounded in Roberts were accepted by Justice Pincus and me in Darling Downs. We also went a step further by holding that section 22 not only liberalised the procedural requirements for the exercise of summary jurisdiction, but also conferred jurisdiction upon the Court to deal with a matter which would otherwise fall outside its jurisdiction because it did not involve federal law. Such daring is now probably rendered unnecessary because of the effect of the cross vesting laws. However, it is not necessary to go so far here where it is conceded that the substance of the matter involves federal law.
It is clear, then, that there is a distinction between the existence of jurisdiction and the rules that courts apply in determining in what situations and to what extent that jurisdiction ought to or may be exercised. In relation to section 22 of the Federal Court Act, it appears that there are two main conditions imposed upon the availability of remedies. Firstly, the Court must have jurisdiction with respect to the claim. By reason of section 76(ii) in combination with section 71 of the Constitution, the Federal Court only has jurisdiction over "matters". Thus the claim in question must be part of "the matter" before the Court. Secondly, because rules had to be developed to prevent the summary jurisdiction of Chancery being exercised in unjust situations, that claim must be properly brought in the sense that the mode of procedure used makes it just for the Court to exercise its jurisdiction.
"The matter"
The Minister argued that since the consent orders quashed the Minister's determination, there remained no "matter" before the Court upon which section 22 can operate, and nothing remaining which can "properly be brought forward in the matter". The Minister further argued that there is nothing "in controversy between the parties" which remains to be "completely and finally determined".
The Court's jurisdiction with respect to applications for an order of review of decisions by the executive government is found in section 8 of the ADJR Act:

The Court has jurisdiction to hear and determine applications made to the Court under this Act.

The critical question, then, is whether the present cause of action, viz. the unlawfulness of the redetermination, is part of the "matter" initiated by the application for an order of review lodged in 1988.
What is and what is not a "matter" was considered in the context of the limits of the jurisdiction of this Court in Fencott v Muller (1983) 152 CLR 570 where Mason, Murphy, Brennan and Deane JJ. said at 607:

Perhaps it is not possible to devise so precise a formula that its application to the facts of any controversy would determine accurately what claims are disparate and what claims are not. Whatever formula be adopted as a guide - and the formula of "common transactions and facts" is a sound guide for the purpose - it must result in leaving outside the ambit of a matter a "completely disparate claim constituting in substance a separate proceeding"...

A recent discussion of "matter" occurred in State of Western Australia v Wardley Australia Limited (1991) 30 FCR 245, a judgment of a Full Court of this Court (Spender, Gummow and Lee JJ.). Section 86(1) of the Trade Practices Act 1974 confers jurisdiction on the Federal Court "in any matter arising under this Act in respect of which a civil proceeding" has been instituted under Part VI of the Act. Western Australia claimed reliance upon representations referred to in the pleadings as "the Wardley Saturday representations" in executing an indemnity agreement. However, outside the limitation period, the State sought to amend the pleadings to include representations made one day later, on the Sunday. The Full Court held that the Sunday representations formed part of the factual basis upon which the original application was brought. As the Court said at 258, "matters" should be understood in the constitutional context as embracing "entire controversies identifiable as justiciable subject matters involving rights and obligations formulated in the law in question". The Court said at 267:

The question of whether a proceeding which is on foot in this Court has been commenced in respect of a matter which encompasses a particular claim for the recovery under s 82 of the amount of loss or damage suffered by conduct done in contravention of s 52 of the Act is to be answered by consideration of the factual basis sought to be established in that proceeding. Here, the proceeding commenced by the State makes a claim against Wardley and Wardley Securities for such loss or damage, and the nature of the controversy giving rise to that claim involves conduct of the parties, including Wardley and Wardley Securities, leading up to the execution of the deed of indemnity for the State on 26 October 1987.

In the present case, the redetermination could certainly have been challenged in fresh proceedings. However, it is part of the controversy over the allowance of necessary costs and a reasonable profit. The department failed to make this allowance in 1980 and this was not remedied by the Minister's original determination in 1987 nor his redetermination in 1989. The cause or causes of action which initiated the proceeding were the errors of law contained in the original determination. However, this cause of action was only a part of the "matter", which consists of the controversy over the fees and how they were fixed. This was the same controversy as preceded the original determination, not some separate matter, such as, for example, the numbers of beds the home was allowed to operate.
The procedure - whether the case was properly brought
As was the approach taken by Chancery in determining whether the summary enforcement of compromises or a separate bill would more adequately meet the needs of justice, the propriety of the procedural steps taken should be considered in the context of alternative modes of procedure. In this case, this means comparing the mode of procedure adopted here with the procedure on a fresh application under the ADJR Act.
As I pointed out at the outset of these reasons for judgment, the procedure adopted by Dibo to bring this matter before the Court was by way of a notice of motion supported by an affidavit: Order 19 rule 1 of the Federal Court Rules. A notice of motion only states the nature of each order which is sought but not the grounds on which it is sought: Order 19 rule 2(3)(c). The affidavit sets out the facts relied upon: Order 19 rule 1.
On the other hand, an original application involves the filing of an application for an order of review which must set out not only the orders sought, but also the grievances and grounds of the application: Order 54 rule 2. Before the matter is heard, directions are given as to the conduct of the matter and the contents of the application come under close judicial scrutiny. The application must be lodged with the Registry within 28 days of the decision sought to be reviewed: section 11 of the ADJR Act. If it is lodged outside this period, an extension of time must be sought by notice of motion: Darwin Broadcasters Pty Limited v Australian Broadcasting Tribunal (1990) 21 FCR 524 at 527. If a respondent to an application objects to the competency of the application, he has 14 days after the service of the application to file and serve a notice of objection to competency stating briefly the grounds of his objection: Order 54 rule 4. Under Order 54 rule 5, the court has the power to give directions:

(a) that a party serve a copy of the application upon the Attorney-General of the Commonwealth;

(b) that a party give notice of the application to such persons or classes of persons in such manner as the Court directs; and

(c) where a notice of objection to competency has been filed by a party, that the objection be heard and determined before the hearing of the application to which the objection to competency relates.

There are thus substantial differences between these modes of procedure. Firstly, the 28 day limitation period for applications is very short. There is a clear and strong public interest for this: general delays in challenging administrative decisions would cause considerable inconvenience and difficulties, in the context of the vast number of decisions that administrators and the executive government are called upon to make. Secondly, Parliament has clearly decided, when administrative decisions are being challenged, that it is appropriate for decision-makers to be informed not only of the relief being sought, but also of the grounds for the relief. Thirdly, the Court has power, for obvious policy reasons, to order that the application be served upon other interested parties. Fourthly, the regime of directions and interlocutory procedures available for an ordinary trial are clearly crucial for ensuring the most efficient and least costly disposition of disputes.
The importance of these procedural requirements appears to have been accepted by Justice Pincus in ARM Constructions Pty Ltd v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4610. This decision is significant to the present case, although it escaped the researches of counsel. In ARM Constructions Pty Ltd v Commissioner of Taxation (1986) 10 FCR 197, Justice Burchett ordered that certain decisions of the Commissioner be set aside and the applications the subject of those decisions be remitted for further consideration according to law. His Honour decided that the impact of the respondent's refusal to extend the time for payment of tax on the applicants' business income was a relevant consideration, and that this consideration was not taken into account by the respondent. Justice Burchett did not reserve liberty to apply.
The Commissioner purported to act in accordance with Justice Burchett's orders and made new decisions. The applicants issued notices of motion within the original proceedings seeking a declaration that the Commissioner had failed to act in accordance with the orders of the Court and an order setting aside the new decisions. When the motions came before Justice Pincus, the Commissioner claimed that this procedure was not open to the applicant and contended that fresh proceedings pursuant to section 11 of the ADJR Act had to be brought to review the later decisions. The applicants argued that this was unnecessary because the notices of motion were ancillary to the decision of Justice Burchett. Justice Pincus said at 4611:

I have not discovered any authority dealing with the question. It seems to me to depend primarily upon the terms of the Administrative Decisions (Judicial Review) Act 1977. That creates a right, by sec. 5, in persons aggrieved by decisions to which the Act applies, to apply for orders of review...Section 11(1)...says that an application to the Court for an order of review is to be made in the manner prescribed by the Rules of Court and is to set out the grounds of the application. Rules of Court have been made and are to be found in O. 53.

It is clear that sec. 11 has not been complied with and the non-compliance is not merely that no application has been made under the (ADJR Act), but the grounds of the applications are nowhere set out; only the relief sought is to be found in the notice of motion.

His Honour ordered that the notices of motion be struck out and gave leave to the applicants to bring proceedings under the ADJR Act out of time.
Dibo's notice of motion merely listed the orders and declarations sought. There was no accompanying affidavit. So little did this documentation reveal about the matter in dispute that I was compelled to make orders and give directions so that the nature of the case could be exposed. The points of claim, filed on 17 August 1990, contained the information normally supplied in an application for an order of review. The hearing thus had the benefit of the preliminary steps available on an application for an order of review.
The time factor - delay
The significant difference between the two modes of procedure was that leave to proceed was not required under the procedure adopted, despite the limitation period having been exceeded by more than five months in the case of the notice of motion and by more than seven months in the case of the points of claim. The time question was by-passed as a preliminary issue, but delay can be a relevant factor in the exercise of the remedial discretion of the Court. Although a reasonably generous view is ordinarily taken on ADJR applications, partly because the 28 day period is quite short, delay has been held to be a relevant consideration in relation to prerogative relief: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389 at 400 where the High Court said that the writ of mandamus may not be granted if the applying party has been guilty of unwarrantable delay.
In his notice of motion for summary dismissal, the Minister said that he had an interest in challenging whether leave should be granted if a fresh application was lodged with the Registry. Some of the principles relevant to the exercise of the Court's discretion to grant leave are set out by Justice Wilcox in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-50.

There are a number of considerations which would weigh heavily in favour of leave being granted in this case. Firstly, not granting leave would cause substantial prejudice to the applicant. A significant sum of money is potentially involved, as is clear from the grievances submitted to the department after the delegate's determination in 1980. Secondly, Dibo has been locked into a dispute over the fees it can charge for over ten years; the fees go back to 1 January 1973, almost 20 years ago. This dispute must have been costly for Dibo.
Thirdly, the delay has caused little prejudice to the respondent. The history of the matter indicates that this dispute has not been conducted with a sense of urgency, to put it mildly. The evidence shows that there have been delays on both sides. One example of dual delays is set out in the department's submission of 27 January 1987 to the Fees Review Committee, which I referred to earlier. As mentioned early in this judgment, Dibo had appealed an earlier decision on fees to the Committee on 5 July 1985. On 19 September 1985, a senior departmental officer advised that as far as he was concerned, the appeal should be postponed indefinitely until he could forward further advice in writing. No advice was received, and on 16 October 1986, Dibo lodged a further appeal on the same grounds as the appeal of 5 July 1985, with an amendment to the claimed loss figure. On 17 October 1986 Dibo lodged its final submission with the committee that had presumably been due since 5 July 1985. Although there had been negotiations in the interim, their ultimate futility was typical of the history of the dispute and contributed to the unacceptable delays that have beset it.
As far as I can see, most of the delays have been caused by the department which has not conducted the matter with efficiency and expedition (except, of course, when there was a need to comply with Justice Gummow's orders of October 1989). It would seem to me most unjust to penalise Dibo for its delay in challenging the redetermination.
In terms of the public interest, this case involves the determination of fees under a legal regime which no longer exists, due to the subsequent amendments to the Act. It contrasts sharply with day to day matters of public administration such as personnel management where the public interest may well dictate refusal of an extension even after only a short delay, to use the example of Justice Wilcox in Hunter Valley at 350. It is difficult to see any prejudice which would be caused to the public by an extension of time here.
A disadvantage of the procedure used was that the issue of delay has had to be dealt with on the question of whether a remedy should be granted, rather than as a preliminary matter. However, the Court has power to prevent abuse of process, and could strike out a notice of motion where the reason for adopting the procedure was to circumvent the necessity for leave because it was unlikely or uncertain to be granted. This is not such a case. The policy of the ADJR Act indicates that this issue should be dealt with as a preliminary issue, no doubt because it removes the uncertainty and expense of litigation at least in those cases where leave would be refused. The issue of delay is and would in this case have been more appropriately dealt with on this basis.
However, no injustice and no harm to policy interests has been caused by the procedure adopted here. This procedure was in substance the same as it would have been on an application for an order of review, and I am not prepared to reject the case on the ground that the procedure adopted was not appropriate and satisfactory. As the Courts of Chancery decided some centuries ago, the underlying rationale behind rules of procedure must be justice. To refuse to decide the substance of the matter on the basis that an admitted and unmistakable jurisdiction of the Court was not but could have been properly invoked would cause great harm to the interests of the applicant, and would allow an invalid executive decision to be preserved. If the proceeding had been initiated by a fresh application, I would have granted leave to proceed out of time. There are for similar reasons no discretionary grounds for refusing relief in this case.
SUMMARY OF CONCLUSIONS 1. The Court has jurisdiction under section 22 of the Federal Court

Act to entertain the applicant's notice of motion dated 22 June 1990 and has the power to grant the relief sought.

2. By determining the allowable rental component, when fixing

the fee

ceiling for the home in the relevant periods, by reference solely or decisively to the discretionary spending power of pensioner patients, the Minister failed to comply with section 40AA(7) of the Act and the consent orders.

3. By determining the rental to be allowed, with a bona fide lease,

only up to the state standard fee, the Minister acted unreasonably.

4. By disallowing actual rental as a "necessary cost", the Minister

failed to comply with section 40AA(7) of the Act.

5. Because the Minister's decision on allowance in the fees of a

component for rental was not accompanied by a consideration of available alternative accommodation for the patients of the home, a relevant consideration was omitted.

6. The Minister's failure to take account of the home's commercial

viability meant that a relevant consideration was omitted in the redetermination.

7. The Minister's disallowance of a reasonable profit factor in

fixing the fee ceiling for the home in the relevant periods was contrary to the requirement of the Act and the consent orders that he take account of this factor.

8. There are no discretionary reasons why relief should not be

granted.

ORDERS

The redetermination

The redetermination will be set aside and the matter remitted to the Minister for reconsideration. In the interests of bringing this dispute to an end, I think it appropriate that any further submissions by Dibo should be provided to the Minister within 15 days and that the Minister make a new determination within 35 days, both times commencing today. The reconsideration will be limited to the points in dispute. That is, the Minister should not revise the figure of actual rental which was used in the redetermination of December 1989, but should merely reconsider the extent to which it was allowed. The Minister should use the same method of calculating profit - that is, the base upon which profit was calculated should not be reconsidered. Given Dibo's submission to me that the use of 12.5 per cent was unreasonable, the Minister may wish to reconsider this figure in the light of any submissions from Dibo.
Costs
With respect to the question of costs, it is clear from my reasons that to proceed with this matter on the basis that it could be adequately dealt with by way of a summary procedure was entirely inappropriate. If Dibo had proceeded by way of fresh application, it would have been necessary to obtain leave, and Dibo would have been liable to pay the Minister's costs on the motion. The principle behind this was explained by Justice Wilcox in Hunter Valley at 353:

There is a long line of authority to support the general rule that a successful applicant should pay the costs of the respondent of an application to set aside a default judgment...Those authorities are based upon the fact that the default of the applicant has occasioned the necessity for the making of the application and that a respondent, other than in exceptional circumstances, should not be prejudiced in costs because of the applicant's default.

It would seem odd that Dibo obtain an advantage in its costs position by proceeding in the unorthodox manner used. On the other hand, costs on the failed motion for the summary dismissal of Dibo's proceedings would ordinarily be paid by the Minister.
There is then a question of the appropriate costs award with respect to the jurisdiction issue at trial. An insignificant amount of time was spent during the trial on the jurisdiction issue. This issue was largely dealt with by way of written submissions which I received a week after the trial. Dibo was successful on the jurisdiction issue and in the normal course, costs should follow the event. Nevertheless, this issue would not have had to be argued if Dibo had proceeded by way of a fresh application. If it had been dealt with as a separate matter, it would have been appropriate that Dibo pay the Minister's costs in arguing the jurisdiction issue even though it was successful. On the other hand, Dibo was successful on the judicial review issue, and costs would ordinarily follow this event.
Having regard to the time and money spent on these various matters, the appropriate order for costs should be that the Minister pay three fifths of Dibo's costs. In coming to this conclusion, I have taken into consideration that, in a matter of the most complex and painstaking kind, the parties unfortunately offered surprisingly little assistance in its resolution.
Dibo also sought the reservation of liberty to apply. I do not believe that there is anything left to be worked out in relation to the orders I am making. I am mindful of the views expressed in the cases referred to in these reasons for judgment concerning the parties' rights to approach the Court in any event. But these proceedings must be brought to an end and no encouragement should be given for their prolongation when nothing in particular is cited to suggest that this would or might be necessary. I refuse the application.

[1992] FCA 131

18 MARCH 1992