Fernandez v State of New South Wales

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Fernandez v State of New South Wales [2019] NSWSC 1736
Hearing dates: 28, 29 October 2019
Date of orders: 06 December 2019
Decision date: 06 December 2019
Jurisdiction: Common Law
Before: Wright J
Decision:
The Separate Questions are to be answered as follows:

(1)   Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? No.

(2) To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)? No

(3)   If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? The question does not arise.

(4)   If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that:
a.   all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or
b.   the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or
c.   the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee?
The question does not arise.
(5) Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons? On the current definition of “Impecunious Ineligible Person”, it is inappropriate to answer the question, but, to the extent than an answer can be given on the alternate bases set out in the reasons for judgment, the answer is: No.
Catchwords: HEALTH – Public hospitals — Local Health Districts – Health services provided in public hospitals to persons ineligible under Medicare arrangements – Liability of ineligible persons to pay for health services provided at public hospitals — Guarantees procured by Local Health Districts from third parties in respect of health services provided to ineligible persons — Whether policy directives required guarantees to be procured — Whether procuring guarantees inconsistent with, or repugnant to, Health Services Act 1997 (NSW), sections 70 and 71 – Whether guarantees otherwise void or unenforceable
Legislation Cited: Administrative Arrangements Order 2014 (NSW)
Civil Procedure Act 2005 (NSW)
Constitution Act 1902 (NSW)
Crown Proceedings Act 1988 (NSW)
Health Insurance Act 1973 (Cth)
Health Services Act 1995 (NSW)
Health Services Amendment (Local Health Districts and Boards) Act 2011 (NSW)
Health Services Amendment (Local Health Networks) Act 2010 (NSW)
Health Services Regulations 2008 (NSW)
Health Services Regulations 2013 (NSW)
Health Services Regulations 2018 (NSW)
Interpretation Act 1987 (NSW)
Public Hospitals Act 1929 (NSW)
Cases Cited: Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1; [2013] HCA 3
Bell Group NV (in Liq) v Western Australia (2016) 260 CLR 500; [2016] HCA 21
Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270
Health Services Regulations 2018 (NSW)
M47/2012 v Director-General of Security (2010) 215 CLR 1; [2012] HCA 46
R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170
Searle v Commonwealth of Australia [2019] NSWCA 127
State of New South Wales v Commonwealth of Australia (1983) 151 CLR 302
The Queen v A2 [2019] HCA 35
Texts Cited: New South Wales Legislative Council, Parliamentary Debates (Hansard) 13 March 1929
Oxford English Dictionary, Online Ed
Category: Principal judgment
Parties: Garfield Mario Fernandez (first plaintiff)
Apikali Fotu (second plaintiff)
State of New South Wales (first defendant)
Western Sydney Local Health District (second defendant)
South Western Sydney Local Health District (third defendant)
Sydney Local Health District (fourth defendant)
Northern Sydney Local Health District (fifth defendant)
Nepean Blue Mountains Local Health District trading as Nepean Hospital (sixth defendant)
lllawarra Shoalhaven Local Health District (seventh defendant)
Central Coast Local Health District (eighth defendant)
Far West Local Health District (ninth defendant)
Hunter New England Local Health District (tenth defendant)
Mid North Coast Local Health District (eleventh defendant)
Murrumbidgee Local Health District (twelfth defendant)
Northern NSW Local Health District (thirteenth defendant)
Southern NSW Local Health District trading as Queanbeyan District Hospital (fourteenth defendant)
Western NSW Local Health District trading as Parkes Hospital (fifteenth defendant)
South Eastern Sydney Local Health District (sixteenth defendant)
Representation:
Counsel:
G Blake SC and P Batley (plaintiffs)
K Stern SC and T Phillips (defendants)
Solicitors:
Legal Aid NSW (plaintiffs)
Ashurst (defendants)

File Number(s): 2018/263134

Judgment

Background

The first plaintiff, Garfield Mario Fernandez, and the second plaintiff, Apikali Fotu, commenced the present proceedings as representative proceedings under Pt 10 of the Civil Procedure Act 2005 (NSW) on their own behalf and on behalf of the group members. In par 2 of the amended statement of claim filed on 17 October 2019, the group members were identified as follows:

“… persons who have guaranteed to one of the Second to Sixteenth Defendants the payment of all monies payable or owing by patients who:
(a) received the provision of hospital services and other health services (the Applicable Health Services) from a public hospital controlled by that Defendant; and
(b) were not an eligible person for Medicare benefits within the meaning of the Health Insurance Act 1973 (Cth) (HIA);
(Ineligible Persons).”

The first defendant is the State of New South Wales. The second to sixteenth defendants are each Local Health Districts (LHDs) established under the Health Services Act 1995 (NSW) (the HS Act). Each LHD provided hospital services and other health services at one or more public hospitals under its control.
The principal issues raised in these representative proceedings included, but were not limited to:

whether the LHDs lacked authority to procure guarantees from third parties, including the first and second plaintiffs, in respect of fees for Applicable Health Services (other than “non-chargeable hospital services” as defined in the HS Act) provided to Ineligible Persons; and

whether, as a result, the guarantees were void ab initio or invalid.

On 31 May 2019, Garling J ordered, under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW), that certain questions be decided separately before any trial in the proceedings. During the hearing in relation to the separate questions, it became apparent that it would be useful if the questions to be answered were slightly reworded. On 29 October 2019, I made an order, by consent, amending the form of the separate questions.

Separate Questions

For the purposes of the separate questions, the definitions set out below were adopted.

“Directive” includes the following directions:

(a) PD2010_044 made by the Director-General of Health, published on 28 June 2010 and rescinded by PD2013_018;

(b) PD2013_018 made by the Director-General of Health, published on 15 July 2013 and rescinded by PD2014_009;

(d) PD2014_020 made by the Director-General of Health, published on 30 June 2014 and rescinded by PD2015_022;

(e) PD2015_022 made by the Director-General of Health, published on 13 July 2015 and rescinded by PD2016_024;

(f) PD2016_024 made by the Secretary, NSW Health, published on 17 June 2016 and rescinded by PD2017_018;

(g) PD2017_018 made by the Secretary, NSW Health, published on 27 July 2017 and rescinded by PD2018_024 on 3 July 2018;

(h) PD2016_031 made by the Director-General of Health, published on 28 July 2016 and rescinded by PD2016_055;

(i) PD2016_055 made by the Director-General of Health, published on 1 December 2016.

“Health service” has the meaning given to that term in the Health Services Act 1997 (NSW):

“Ineligible Person” means a person provided with a health service from a public hospital controlled by one of the LHDs and who, at that time, was not an eligible person for Medicare benefits within the meaning of the Health Insurance Act 1973 (Cth) (HI Act).

“Impecunious Ineligible Person” means an Ineligible Person without means to pay for the health service received by that person at the time of the service.

“non-chargeable hospital service” has the meaning given to that term in the Health Services Act 1997 (NSW).

“LHD” refers to the second to sixteenth defendants, or any of them.

“Relevant Guarantee” means a third party guarantee of fees in respect of any health service (other than a non-chargeable hospital service) received by an Ineligible Person from a public hospital controlled by the relevant LHD entered into during the period within which an applicable Directive was in force.

The Separate Questions to be answered are:

1. Did any or all of the Directives require the LHDs to procure a Relevant Guarantee?

2. To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)?

3. If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent?

4. If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that:

a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or

b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or

c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee?

5. Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons?

Agreed facts and evidence

In accordance with a direction made by Garling J on 31 May 2019, the two plaintiffs and the defendants prepared a statement of agreed facts for the purpose of the determination of the separate questions. In addition, at the hearing, an affidavit of Ms Robynne Cooke sworn 9 July 2019 was read without objection and the documents exhibited to that affidavit were admitted in evidence along with copies of the directives and policies referred to in the agreed facts, copies of the Fernandez Guarantee and the Fotu Guarantees, the NSW Health Annual Report 2017-18 and information on the services provided at Liverpool, Blacktown and Campbelltown Hospitals.
The matters that were agreed and not in contention are set out in the paragraphs which follow.

The defendants and the Policy Directives

The first defendant may be sued in accordance with s 5 of the Crown Proceedings Act 1988 (NSW).
Each of the second to sixteenth defendants, the LHDs:

is a local health district within the meaning of the HS Act;

is constituted as a body corporate pursuant to s 17 and Sch 1 of the HS Act;

is capable of being sued pursuant to s 22(1)(c) of the HS Act;

has provided health services within the meaning of the HS Act at a public hospital or public hospitals under its control in the relevant local government area, city or other area identified in Sch 1 to the HS Act and:

in cl 25 of the Health Services Regulations 2018 (NSW), for the period from 24 August 2018;

in cl 24 of the Health Services Regulations 2013 (NSW), in the period 1 September 2013 to 23 August 2018; and

in cl 12 of the Health Services Regulations 2008 (NSW), in the period 1 July 2011 to 31 August 2013.

had, at all material times, the statutory functions referred to in s 10 of the HS Act, having regard to the reason in s 8 and the primary purposes in s 9 of the HS Act.

Section 127(4) of the HS Act provides that the Minister for Health may attach to the payment of any subsidy (or part of any subsidy) such conditions as the Minister determines from time to time. By a series of instruments of delegation, the Minister delegated the exercise of that power to, relevantly, the Director-General and Deputy Directors-General of the NSW Department of Health (and this delegation also applied to the Secretary and Deputy Secretaries of that department pursuant to the Administrative Arrangements Order 2014 (NSW), s 7(3)(b)).
The following Policy Directives (the Fees Directives) were made by the Minister's delegate as follows:

PD2010_044, published on 28 June 2010 and rescinded by PD2013_018;

PD2013_018, published on 15 July 2013 and rescinded by PD2014_009;

PD2014_009, published on 31 March 2014 and rescinded by PD2014_020;

PD2014_020, published on 30 June 2014 and rescinded by PD2015_022;

PD2015_022, published on 13 July 2015 and rescinded by PD2016_024;

PD2016_024, published on 17 June 2016 and rescinded by PD2017_018; and

PD2017_018, published on 27 June 2017 and rescinded by PD2018_024 on 3 July 2018.

PD2010_044 applied to the second to sixteenth defendants from 1 July 2011 pursuant to the Health Services Amendment (Local Health Networks) Act 2010 (NSW) and the Health Services Amendment (Local Health Districts and Boards) Act 2011 (NSW).
The following Policy Directives (the Charging Directives) were made by the Minister's delegate as follows:

PD2016_031, published on 28 July 2016 and rescinded by PD2016_055; and

PD2016_055, published on 1 December 2016.

Compliance with each Fees Directive and Charging Directive was a condition of subsidy for each of the LHDs during the period within which the relevant Directive was in force.

Services provided at public hospitals

Collectively, the hospitals controlled by the second to sixteenth defendants provide services including, but not limited to, the following:

emergency medical;

intensive care;

surgery;

aged care services including geriatric medicine and support for persons struggling with their current living situation;

rehabilitation;

screening and testing, such as gene testing and tuberculosis screening;

diagnostic and investigatory procedures, such as colonoscopies;

education, such as childbirth and parenting education or education for various conditions such as tuberculosis or diabetes;

birthing;

cancer treatment, such as radiation therapy and chemotherapy;

nuclear medicine;

radiology and diagnostic imaging;

physiotherapy;

fertility and assisted reproductive therapy;

counselling services;

dietary and nutrition assessments, education and support;

paediatric;

audiology;

speech pathology;

drug health services such as treatments and interventions;

school and educational services to children in the children's ward;

mental health;

plastic surgery;

sexual health services, such as testing;

social work;

occupational therapy;

pastoral care;

respiratory and sleep medicine for problems with sleeping such as snoring and sleepiness;

gynaecology;

accommodation (patient and family); and

food.

Not every hospital provides every service.

Admission to a NSW public hospital

Since 15 June 2017, the admission of patients to NSW public hospitals has been governed by Policy Directive PD2017_015 issued by the Secretary, NSW Ministry of Health, on 15 June 2017 (the NSW Health Admission Policy). Compliance with the NSW Health Admission Policy was a condition of subsidy for each LHD.
Before 15 June 2017, there was no state wide policy directive governing the admission of patients to NSW public hospitals.

Elective surgery

At all material times, elective surgery and waiting lists in NSW public hospitals were governed by the Waiting Time and Elective Surgery Policy directives issued as follows:

PD2009_018, issued by the Director-General in April 2009;

PD2012_011, issued by the Director-General on 1 February 2012.

Compliance with each Waiting Time and Elective Surgery Policy directive was a condition of subsidy for LHDs during the period within which the relevant directive was in force.

Medicare ineligible patients

Persons not defined as an "eligible person" within the meaning of s 3 of the HI Act or treated as an eligible person pursuant to s 6 or s 6A of the HI Act are not eligible for Medicare benefits within the meaning of Part II of the HI Act (Medicare ineligible patients). Medicare ineligible patients include tourists or persons from overseas who are visiting family members living in New South Wales. Ineligible Persons, as defined above, were Medicare ineligible patients.
Medicare ineligible patients have sought access to services at a New South Wales public hospital in at least one or both of the following ways:

by presenting to the emergency department of the hospital and, where they are treated in the emergency department, they may be discharged directly from the emergency department or may be admitted to the hospital as an in-patient; and

by being referred to the hospital for elective surgery/procedure by a doctor with admitting rights to the hospital.

Relevant Guarantees

From about 1 July 2011, LHDs procured Relevant Guarantees from Group Members in respect of health services provided to Ineligible Persons by the relevant LHD.
On or about 31 March 2017 at Bankstown Hospital the first plaintiff signed a document headed "Overseas Visitor Guarantor's Statement", the Fernandez Guarantee, and gave it to the second defendant.
The Fernandez Guarantee was in respect of health services to be provided by the second defendant to the first plaintiff's brother, Wayne Fernandez, in a public hospital under the control of the second defendant.
At all relevant times, Wayne Fernandez was an Ineligible Person.
On or about 17 August 2017 at Liverpool Hospital the second plaintiff signed a document headed "Deed of Guarantee", the 17 August Fotu Guarantee, and gave it to the third defendant.
On or about 3 October 2017 at Campbelltown Hospital the second plaintiff signed a document headed "Deed of Guarantee", the 3 October Fotu Guarantee, and gave it to the third defendant.
The 17 August Fotu Guarantee and the 3 October Fotu Guarantee were each in respect of health services to be provided by the third defendant to the second plaintiff's mother, Seruwaiya Camaiyavala, in a public hospital under the control of the third defendant.
At all relevant times, Seruwaiya Camaiyavala was an Ineligible Person.
The Fernandez Guarantee, the 17 August Fotu Guarantee and the 3 October Fotu Guarantee are Relevant Guarantees.

LHDs’ decision making processes concerning care and treatment of patients in public hospitals

It was not in dispute that, when deciding how to treat and whether to admit a patient who presents at a public hospital operated by an LHD, a multiplicity of factors are taken into account and the decision is not made simply on the basis of whether the patient has means to pay for the health services which may be provided.
In her affidavit of 9 July 2019, Ms Cooke explained that patients (including Ineligible Persons) referred to a public hospital operated by an LHD by a clinician with admitting rights to that hospital (elective patients), are kept on a waiting list for that hospital. When determining whether to admit elective patients from the waiting list, considerations taken into account include the patient’s clinical priority, the length of time the patient has been on the waiting list, and resource availability, including theatre time, staffing, equipment, and hospital capacity. Where the elective patient is an Ineligible Person, ability and willingness to pay for the cost of the required treatment are also taken into account. Where the treatment of an Ineligible Person would potentially involve significant expenditure or impact the treatment available for eligible persons there would be consideration of available clinical options for treating the Ineligible Persons in a way that minimised the hospital’s expenditure but that was still clinically appropriate in light of the person’s medical condition. In Ms Cooke’s experience the approval for treatment of Ineligible Persons was always given where the clinician considered that the relevant treatment was clinically appropriate in the circumstances.

Ms Cooke’s experience as to the multiplicity of factors taken into account when determining whether to admit elective patients is confirmed by the Waiting Time and Elective Surgery Policy and the NSW Health Admission Policy which list the various criteria that may be taken into account when determining priority of access for admission for elective surgery, or admission generally, as including: clinical priority; wait time relative to similar category patients; previous delays; the availability of appropriate clinical resources; social factors pertinent to the patient; and resource availability.
Patients, including Ineligible Persons, who present at the Emergency Department (ED) are not initially admitted. If they can be treated in the ED, that occurs and they are thereafter discharged without being admitted. If a clinician is of the view that the patient requires admission, then the patient is admitted and transferred to an in-patient area of the hospital. Alternatively and depending on the patient’s condition, the patient may be advised to return home and seek admission as an elective patient.

Relevant statutory framework

In order to address the Separate Questions, it is also necessary to understand the statutory framework within which the LHDs operate public hospitals and provide hospital and other health services to persons in New South Wales.
The public health system of New South Wales, which includes the LHDs and the public hospitals they each operate, is regulated by the HS Act. Relevant provisions of the HS Act include those referred to in the paragraphs which follow.

Objects of the Health Services Act

The objects of the HS Act include:

to establish a system of local health districts, or LHDs, for the whole of the State to deliver health services: s 4(a);

to re-affirm the adoption of the Medicare Principles and Commitments as guidelines for the delivery of public hospital services: s 4(d);

to facilitate the collection of fees from patients of public health organisations (which include LHDs) in respect of services received by them that are not required to be provided free of charge under the Medicare Agreement: s 4(d). The patients to whom this applies include Ineligible Persons (as defined in the Separate Questions); and

to make provision for the funding of public health organisations: s 4(i).

Local Health Districts

LHDs are constituted under s 17 of the HS Act in respect of the local government areas or cities specified in Sch 1 to that Act for each LHD from time to time: ss 8(1), 17, 18 and 19.
Section 8(2) expressly provides that the principal reason for constituting LHDs is to facilitate the conduct of public hospitals and health institutions and the provision of health services “for residents of the areas of the State in respect of which the districts are constituted”: s 8(2). Ineligible Persons, who are often tourists or persons from overseas who are visiting family members living in New South Wales, are not Australian residents or otherwise entitled to be treated as an “eligible person” (for the purposes of the HI Act). Consequently, Ineligible Persons are unlikely to be “residents” of any relevant LHD area.
The primary purposes of an LHD “in its area” is to provide relief to sick and injured persons through the provision of care and treatment and to promote, protect and maintain the health of the community: s 9.
The functions of an LHD specified in s 10 relevantly include the following:

“generally to promote, protect and maintain the health of the residents of its area”: s 10(a);

to conduct and manage public hospitals under its control: s 10(b);

to give “residents outside its area access to such of the health services it provides as may be necessary or desirable”: s 10(c);

to achieve and maintain adequate standards of patient care and services: s 10(d);

to ensure the efficient and economic operation of its health services (which includes hospital services) and use of its resources: s 10(e).

Once again, it can be seen that s 10 differentiates between the functions of an LHD in relation to residents of the LHD’s area and residents outside its area.
Public hospitals include hospitals controlled by an LHD: s 15(a).
Section 22 of the HS Act establishes the separate corporate identity and general powers of each LHD as follows:

“(1) A local health district:
(a) has perpetual succession, and
(b) is to have an official seal, and
(c) may take proceedings, and be proceeded against, in its corporate name, and
(d) may do and suffer all other things that a body corporate may, by law, do and suffer and that are necessary for or incidental to the purposes for which the local health district is constituted, and
(e) does not represent the Crown.

(2) However, a local health district cannot employ any staff.”

The power to enter into contracts is included in the powers specified in s 22(1)(d) and, as that paragraph provides, may be exercised where necessary for or incidental to the purposes for which the LHD is constituted.
Since, under s 22(2), an LHD cannot employ staff, the staff of each LHD are employed by the Government of New South Wales in accordance with Ch 9, ss 115 to 121K, of the HS Act.
Each LHD is to have a Chief Executive to manage and control the LHD and be accountable to the LHD Board: ss 23, 24 and 25. The functions of the LHD Board relevantly include:

to approve systems to support the efficient and economic operation of the LHD and to ensure that district resources are applied equitably to meet the needs of the community served by the LHD: s 28(1)(b)(i) and (iii); and

to interact with “providers and consumers of health services, and of other members of the community served by the [LHD]” as to the LHD’s policies, plans and initiatives for the provision of health services: s 28(1)(h) and (i).

The use of the expression “community served by the [LHD]” reinforces the approach that the principal function of an LHD is to provide services for the residents of the LHD’s area.
An LHD is permitted, among other things and subject to any direction given under the HS Act, to restrict the range of health care or treatment provided by any public hospital under its control: s 31(2)(b).

Miscellaneous provisions

It can be noted here that s 37(3) of the HS Act provides that some particular contracts, described in s 37(1) and (2), are to be taken to be “a contract or agreement for or on account of the Public Service of New South Wales” for the purposes of the Constitution Act 1902 (NSW). [1] This section has no direct relevance in the present case.
1. The significance of such a contract is that under s 13(1) of the Constitution Act 1902, and subject to the other provisions of that section, “[a]ny person who directly, or indirectly, himself, or by any person whatsoever in trust for him or for his use or benefit or on his account, undertakes, executes, holds, or enjoys in the whole or in part any contract or agreement for or on account of the Public Service of New South Wales shall be incapable of being elected or of sitting or voting as a Member of the Legislative Council or Legislative Assembly during the time he executes, holds or enjoys any such contract or any part or share thereof or any benefit or emolument arising from the same.”
In s 68 of the HS Act, the Medicare Principles and Commitments are set out and adopted as guidelines for the provision of public hospital services to “eligible persons” in New South Wales. These, however, do not apply in respect of Ineligible Persons and, in any event, s 68(4) provides:

“Nothing in this section gives rise to, or can be taken into account in, any civil cause of action, and, without limiting the generality of the foregoing, nothing in this section operates to create in any person legal rights not in existence before the enactment of this section.” (emphasis added)

Chapter 7 - Charges for health services

Chapter 7, ss 69 to 75, of HS Act makes provision for the charging and collection of fees from persons who receive health services from LHDs, among other health service providers. This chapter is central to the issues to be resolved in these proceedings and will be considered in detail later in these reasons. It is sufficient to note, at this point, what is set out in the following paragraphs.
Section 69 provides the mechanism for determining the quantum of fees that may be charged for hospital and other services.
Where a fee is fixed under s 69, s 70 establishes who is liable to pay the fee for the provision of the health service and how the amount of the fee may be recovered.
Section 71 deals with the situation of persons who are unable to pay for hospital and other health services and provides that such persons must not be refused care and treatment at a public hospital by reason only of their inability to pay.
Section 72 concerns the recovery of fees when an injured person has a right to recover damages against any other person.
Section 73 establishes limitations on the orders that can be made by a court when determining a matter under Ch 7.
Section 74 relates to medical practitioners’ lack of any entitlement to charge for “non-chargeable hospital services”.
Section 75 relates to public hospitals controlled by the Crown and is not relevant to the present proceedings.

Administration of the public health system

Administration of the public health system in New South Wales is dealt with in Ch 10 of the HS Act. For present purposes it is sufficient to note that many of the administrative functions in relation to the public health system are carried out by the “Health Secretary” (which is defined as the Secretary of the Ministry of Health) and his or her delegates.

The Health Secretary relevant functions

The functions of the Health Secretary, previously known as the Director-General, under the HS Act are set out in s 122(1) and relevantly include:

“(a) to facilitate the achievement and maintenance of adequate standards of patient care within public hospitals and in relation to other services provided by the public health system,
(b) to facilitate the efficient and economic operation of the public health system consistent with the standards referred to in paragraph (a),
…
(c1) to provide governance, oversight and control of the public health system and the statutory health organisations within it,
…
(e) to recommend to the Minister what sums of money (if any) should be paid from money appropriated from the Consolidated Fund in any financial year to any public health organisation,
…
(f1) to give directions to statutory health organisations [including LHDs] …”.

Section 122(2) provides that, without limiting subs (1)(f1), the Health Secretary may, in exercising any power delegated by the Minister to attach conditions under s 127(4) to the payment of a subsidy, attach conditions relating to the employment of NSW Health Service senior executives who are employed to enable the statutory health organisation to exercise its functions.
It was not in dispute in these proceedings that the Fee Directives and the Charging Directives (in addition to the NSW Health Admission Policy and Waiting Time and Elective Surgery Policy) were made by the Director-General or Health Secretary, as appropriate, in the exercise of the functions and powers conferred by s 122.

Determination of subsidies for LHDs and conditions on subsidies

A significant source of funding for an LHD, in addition to health funding arrangements under the National Health Reform Agreement, is the subsidy provided to it out of money appropriated by the Parliament from the Consolidated Fund for this purpose. In this regard, s 127 of the HS Act relevantly provides:

“(1) In determining what amount of money (if any) is to be paid to each local health district out of money appropriated from the Consolidated Fund, the Minister is to have regard to the following matters:
(a) the size and health needs of the population resident within the area of the local health district concerned,
(b) the health services provided to patients from outside the area of the local health district concerned,
(c) the net receipts and expenditures of the local health district for the financial year,
(d) probable requirements for capital maintenance and expenditure of the local health district for the financial year,
(e) such other matters as are prescribed by the regulations or as the Minister thinks fit.

…
(3) The Minister may, after considering any recommendation made under section 122 (e) for the purpose, determine what amounts of money (if any) should be paid out of money appropriated from the Consolidated Fund in any financial year to any such local health district …. Any such amount is payable in accordance with that determination.
(3A) The Minister may vary a determination under subsection (3) in such circumstances as the Minister considers appropriate.
(4) The Minister may attach to the payment of any subsidy (or part of any subsidy) such conditions as the Minister determines from time to time.
(5) If any such condition is breached, the Health Secretary may make such recommendations to the Minister as the Health Secretary thinks fit concerning any action to be taken against the public health organisation concerned or any officer or employee of the organisation.
(6) This section does not affect the operation of the provisions relating to health funding arrangements under the National Health Reform Agreement set out in Schedule 6A.”

The considerations to which the Minister must have regard under s 127(1)(a), (b) and (c) emphasise the important role of LHDs in providing hospital and other health services to the “population resident within the area of the [LHD] concerned” while at the same time acknowledging that an LHD may provide health services to patients from outside that area and that the LHD has receipts in addition to the subsidy.
Under s 127(4), the Minister has the discretionary power to attach to the payment of a subsidy to an LHD such conditions as the Minister determines from time to time. It was agreed in the present proceedings that it was pursuant to this power that the Director-General or the Health Secretary, as appropriate, acting as the Minister’s delegate, made compliance with the Fees Directives and the Charging Directives a condition of subsidy for each LHD.
The consequences of a breach of such a condition are spelt out in s 127(5). It is not provided that breach of a condition of subsidy may, or does, render the subsidy void or repayable. On breach of a subsidy condition, the Health Secretary simply has the discretion to make recommendations to the Minister concerning action that may be taken against the LHD or any officer of the LHD concerned.

The Directives

In the Agreed Facts, there are identified:

2 Charging Directives, applicable during the period from 28 July 2016 to date; and

7 Fees Directives, applicable during the period from 28 June 2010 to 3 July 2018.

The Charging Directives

As to the two Charging Directives, issued under s 122(1)(f1) of the HS Act, while there are some variations between them, these variations are extremely minor and do not have any role to play in the present proceedings. It is sufficient to consider the relevant wording of only the latest Charging Directive PD2016_055 published on 1 December 2016.
Charging Directive PD2016_055 is described as a “Policy Directive”. It is said to be issued by “Director-General”. On the front page:

the summary states:

“This Policy Directive provides key policy aspects and rates in relation to specific fees and charges for Medicare Ineligible and Reciprocal Health Care Agreement patients”;

it is expressly stated to apply to LHDs, among other health organisations;

the “[a]udience” is specified as “Administrative, Finance, Clinical”;

the footer makes clear that the Directive is imposed as a condition under s 127(4) of each LHD’s subsidy since it is stated that:

“This Policy Directive may be varied, withdrawn or replaced at any time. Compliance with this directive is mandatory for NSW Health and is a condition of subsidy for public health organisations [which included LHDs]”.

The Directive consisted of two parts:

a short “Policy Statement”; and

an attachment of 57 pages – “Medicare Ineligible and Reciprocal Health Care Agreement services – Classification and Charging for NSW Public Health Services: Procedures” – referred to as the “Procedures”.

The Policy Statement contains a statement of its purpose being to provide:

“the key policy information about the classification and charging of overseas visitors, temporary Australian residents and other Medicare ineligible persons for services provided by NSW public hospitals and facilities.”

Under the heading “MANDATORY REQUIREMENTS”, relevantly the Policy Statement says:

“Charges are to be raised for all services where a patient is not eligible for free or subsidised treatment as detailed in this Policy Directive and attached Procedures.
Hospitals are to:
Ensure all persons presenting to an emergency department with an urgent clinical condition be assessed and provided with treatment clinically required at that time
Identify and classify patients accurately
Inform patients of all applicable charges
Verify insurance status of patients
Ensure payment or guarantee arrangements are made prior to service provision, except in emergency situations when arrangements should be made at the appropriate time
Ensure the ability of NSW Health to fund the treatment of overseas patients does not interfere with the physical, clinical and/or financial capacity of any health service to meet clinical priorities for Australian residents.”

The other substantive part of the Policy Statement occurs under the heading “IMPLEMENTATION” and states:

“Local Health District … Chief Executives are to ensure that the requirements of this Policy Directive are communicated to all appropriate staff.
Directors of Finance, Revenue Managers, Hospital Admission Staff, Patient Liaison Officers and Patient Billing Staff are responsible for the operational compliance of this Policy Directive and Procedures.
…”

In the Procedures part of the directive, at section 1.1, it is stated that the document has been created to:

“• Provide a consolidated reference document of policy determinations and other information relevant to charging overseas visitors, temporary residents and Medicare Ineligible persons the services provided by NSW Health public hospitals and facilities
• Enable staff to easily establish the correct classification of overseas visitors, temporary residents and Medicare Ineligible persons when accessing services provided by NSW Health public hospitals and facilities.”

The “[k]ey principles” of the Procedures are identified in section 2.1 as including the following:

“1. All persons presenting to an emergency department with an urgent clinical condition should be assessed and provided with treatment clinically required at that time.
2. Ensure the ability of NSW Health to fund the treatment of overseas patients does not interfere with the physical, clinical and/or financial capacity of any health service to meet clinical priorities for Australian residents.
…
4. All persons not in one of the above categories [set out in 3] are Medicare Ineligible. In accordance with this policy directive they must be:
a. Assessed for eligibility for medically necessary treatment at no charge or
b. Charged at the appropriate rate.
…”

Part 3 of the directive deals with patient classification at some length. Where an overseas visitor does not come from one of the countries with whom Australia has a Reciprocal Health Care Agreement, hold one of the types of visas specified in the directive or fall within one of the other categories dealt with in Part 3, section 3.14 applies. That section is headed “Overseas visitors other than those covered in previous sections” and provides that these patients must be classified Medicare Ineligible and fees must be charged to the individual where there is no insurer or no confirmation of payment from an insurer and there is no other responsible party.

Part 4 is headed “PATIENT ADMINISTRATION AND REVENUE MANAGEMENT” and specifies in section 4.1, among other things, the details that must be obtained when persons present for treatment at public hospitals. In respect of “overseas visitors” the details that must be obtained include, in the last dot point in section 4.1.1:

“Credit card details or details of other payment methods/agreements (including waivers or reduction of charges by CE [Chief Executive] or similar delegation level) if treatment is not paid for in advance.”

Section 4.2 is headed “Charging and collection procedure” and provides:

“Medicare Ineligible patients who are not eligible for free or compensable treatment under section 3 of this document must be charged according to section 5: Fees and Charges
…
4.2.3 For non-insured, non-guaranteed admitted patients and non-admitted patients:
Complete ineligible patient declaration
Copy passport including Visa type and class
If Visa class should be insured but is not, follow procedure to notify to Department of Immigration and Border Protection (DIBP) Section 6
Ensure patient is fully informed of the costs likely to be incurred, the estimate of cost forms may be used to assist with this
Raise accounts at the time of booking/admission or prior to discharge with as much detail as possible to allow patients to claim from travel or overseas insurers with no guarantee.
Receive payment in the following priority order:
1. In advance of booked procedure or services with a written understanding that further accounts may be raised following the procedure
2. Prior to or at the time of service in cash or by EFTPOS
3. Prior to discharge of inpatients in cash or by EFTPOS
4. In instalments by direct debit agreement
5. In instalments with a written agreement with patient or family.

…”

Sections 4.4 to 4.7 deal with methods of ensuring that fees due from Medicare Ineligible patients are not inappropriately lost to the LHD or other health service provider. Those sections state:

“4.4 Guarantor agreements
if it is likely that a Medicare Ineligible patient, or prospective patient, may be unable to pay for some or all of the costs of the medical and other services that are expected to be provided to that patient, it will be necessary for the relevant financial officer to consider whether it would be appropriate to request a supporting patient guarantee from a suitable person. A suitable person would be a person who is willing to provide a guarantee to support the future financial obligations of the patient to the Hospital in respect of the required medical services. A suitable guarantor may be a family member of the patient, or another third-party associate of the patient.
Before deciding to seek or accept a guarantee from a prospective guarantor, it will be appropriate to consider whether that person is a suitable person to provide such a guarantee. Matters such as their country of residence or financial capacity may be relevant.
The factors to be considered, and recommended processes to be followed, when seeking a guarantee of the patient’s liabilities from a suitable supporting person are outlined in the Medicare Ineligible Financial Guarantees - Guide for Revenue or Finance officers.
The processes and procedures set out in this Information Guide should be followed whenever a supporting patient guarantee is sought from a third person.
When taking a supporting guarantee, it is recommended that the standard template Guarantee document be used, together with the template Information Statement for Guarantors.
4.5 Payment by Instalment
Where it is necessary to set up a payment plan, health services must follow a delegation and approval process to set up and manage instalment plans in a fair and reasonable manner with realistic timeframes.
4.6 Debt recovery
Normal debt recovery action should be undertaken and a debt not written off until every avenue has been exhausted and it is clear that payment is not achievable.
4.7 Waving or reducing charges
Except in the circumstances indicated in section 3 of this document, fees should not be waived or reduced unless a financial hardship or other appropriate review has been undertaken and approval obtained from the Chief Executive or similar delegation.
Where fees are waived it is with the understanding that the costs of treatment are the responsibility of the LHD.”

Part 5 of the Procedures is headed “FEES AND CHARGES” and states:

“Ineligible patients who have not been determined eligible for treatment at no charge under section 3 of this document must be charged for all services as scheduled, or if not scheduled on a full cost recovery basis.
Scheduled fees charged by the health services are set out in the appropriate schedules and advised by the NSW Ministry of Health at least annually, these include:
Health Services Act 1997 – Scale of Fees for Hospital and other Health Services – NSW policy
…
…
Policy documents and guidelines can be found on the NSW Health policy page.”

The policy referred to in the first dot point in the passage quoted above, is the Fees Directive applicable at the relevant time. This indicates that the Charging Directive and the Fees Directive are intended to be read together.
The attachments to Part 5 include, among other things, examples of forms that may be used for estimates of costs and agreements to pay as well as three sample documents relating to guarantees:

“a. Medicare Ineligible Financial Guarantees – Guide for Revenue or Finance officers
b. Information Statement for Guarantor – Guarantees
c. Deed of Guarantee”

Document a. provides guidance for revenue or finance officers at an LHD concerning: when a guarantee might be required; how to go about requesting a guarantee; consulting with a prospective guarantor; and using translators where necessary. The document also contains suggested scripts for explaining why a guarantee is being asked for, the documentation, the cooling off period and execution of a guarantee. The introductory section of document a. includes the following:

“Overseas visitors or temporary Australian residents who are not Australian citizens or permanent residents are not eligible for Medicare and are required to pay for medical services.
If a Medicare ineligible patient indicates that they may have difficulty or be unable to pay for some or all of the costs of the services that are expected to be provided you may request a Guarantee from a supporting person.
This guide provides information about:
how are you should engage and consult with a supporting person who may be willing to provide a Guarantee; and
what you should and should not do or say in arranging for a supporting person to grant a Guarantee in favour of the Hospital.
…
If you form the view that a Guarantee would provide additional protection for the health services, you may ask the patient or the person providing apparent support to the patient, such as the spouse or accompanying adult whether they or someone else would consider providing a supporting Guarantee to assist in securing amounts that will become payable.
You should not suggest:
that the patient will not receive required services if a Guarantee is not provided;
that the services provided to the patient will be conditional on a Guarantee being provided.
You may say that if a Guarantee can be provided, this is likely to avoid or reduce the need for the hospital to cover or monitor the extent of services that it is able to provide to the patient over and above those that are immediately necessary to stabilise or maintain the current state of health of the patient.
… ”

Document b. is a two-page information statement that is to be provided to the prospective guarantor which consists largely of a series of questions and answers dealing with: What is a guarantee?; Can I withdraw from my guarantee in a cooling off period?; If the patient defaults, do I get any warning that the provider wants to take action against the patient?; If the patient cannot be found and/or the provider intends to take legal action against me do I get any warning?; Can the provider take action against me without first taking action against the patient?; How much do I have to pay the provider if the patient defaults?; What can I do if I am asked to pay out the guaranteed money and I cannot pay it all at once?; If I pay out money for the patient, is there any way I can get it back?; And do I have any other rights and obligations?
Document c. is a template form of deed of guarantee.

The Fee Directives

As to the 7 Fees Directives issued under s 122(1)(f1) of the HS Act, while there are some variations between them, none of the parties submitted that the variations had any role to play in the present proceedings. Consequently, I shall consider in detail the relevant wording of only the latest Fee Directive PD2017_018 published on 27 June 2017. Nonetheless, the comments are generally applicable to all the Fee Directives, as the substance of what is conveyed in each is not submitted to be different.
Fee Directive PD2017_018 was described as a “Policy Directive”. It was said to be issued by “Secretary, NSW Health”. This appears to be another way to refer to the Health Secretary. On the front page:

the summary stated:

“This Policy Directive provides key policy aspects and rates in relation to specific public hospital accommodation for chargeable patients to apply on and from 1 July 2017”;

it was expressly stated to apply to LHDs, among other health organisations;

the “[a]udience” was specified as “Administrative, Directors of Finance, Revenue Managers, Billing Staff Administration”;

the footer made clear that the Directive was imposed, under s 127(4) of the HS Act, as a condition of each LHD’s subsidy since it stated:

“This Policy Directive may be varied, withdrawn or replaced at any time. Compliance with this directive is mandatory for NSW Health and is a condition of subsidy for public health organisations [which included LHDs]”.

The Directive consisted of two parts:

a short “Policy Statement”; and

an attachment of 16 pages – “Health Services Act 1997 – Scale of Fees for Hospital and Other Health Services: Procedures” – referred to as the “Procedures”.

The Policy Statement repeated, in effect, the summary on the front page. It also contained, under the heading “MANDATORY REQUIREMENTS”, material relevantly including the following:

“Hospital accommodation charges are to be raised for all chargeable patients as detailed in this Policy Directive and attached Procedures. Hospital accommodation rates from 1 July 2017 are advised in the attached Procedures.
Hospitals are to:
Inform patients of all applicable accommodation charges
Verify private health insurance status of patients
Ensure prepayment arrangements are made on admission for ineligible patients and for eligible patients who will incur a co-payment/excess.
…”

It can be noted that the Procedures covered more than “accommodation charges”, but nothing was said to turn on this wording of the Policy Statement.
The other substantive part of the Policy Statement was under the heading “IMPLEMENTATION” and stated:

“Local Health District … Chief Executives are to ensure that the requirements of this Policy Directive are communicated to all appropriate staff.
Directors of Finance, Revenue Managers, Hospital Admission Staff, Patient Liaison Officers and Patient Billing Staff are responsible for the operational compliance of this Policy Directive and Procedures.
…”.

In the Procedures part of the directive, Part 1 provided background information. Each of the other Parts 2 to 14 dealt with different types of patients. Part 4 covered “Ineligible Patients”. In the introductory paragraphs of that part there was the explanation that:

“Ineligible patients (e.g. overseas patients) are not eligible for free hospital treatment. Reciprocal Health Care Agreement arrangements are to apply where appropriate.”

There were two types of ineligible patients dealt with in Part 4:

holders of certain types of visas specified in Section 4.1; and

other ineligible persons covered by Section 4.2.

Section 4.7 was headed “Ineligible Patients – Policy Aspects”. After specifying matters such as what the items for which ineligible patients were to be billed, that section continued:

“• In relation to Section 4.2 (other than Worker Visa holders 457 and 485 and Student Visa holders 570 and 576) hospitals are to obtain an assurance of payment from this category of ineligible patients before treatment is provided. This assurance may take the form of:
Credit card imprint (credit limits to be verified)
Cash to cover estimated cost
Bank cheque to cover estimated cost
Personal guarantee from Australian citizen whose bona fides are verified
Other initiatives to ensure that payment for the services is not lost to the hospital
Where such an assurance of payment is not forthcoming, the ineligible patient is to be informed that they will receive only the minimum and necessary medical care to stabilise their condition. This provision is not intended to impinge on the medical or legal obligations of medical officers in the treatment of ineligible patients.”

The plaintiffs focused on this wording, which occurred in each Fee Directive, and submitted that it imposed a mandatory requirement to obtain a guarantee from a third party where an ineligible patient could not pay and such a requirement was outside the scope and purpose of the HS Act and was repugnant to ss 70 and 71 of that Act.

Question 1.

Did any or all of the Directives require the LHDs to procure a Relevant Guarantee?

As noted above, for the purposes of this and the other Questions:

“Directive” refers to each of the Charging and Fees Directives;

“Relevant Guarantee” means “a third party guarantee of fees in respect of any health service (other than a non-chargeable hospital service) received by an Ineligible Person from a public hospital controlled by the relevant LHD entered into during the period within which an applicable Directive was in force”;

“health service” has the meaning given to that term in the HS Act, which includes a hospital service;

“Ineligible Person” means “a person provided with a health service from a public hospital controlled by one of the LHDs and who, at that time, was not an eligible person for Medicare benefits within the meaning of the Health Insurance Act 1973 (Cth)”.

During the hearing, Mr Blake of Senior Counsel, who appeared with Mr Batley, for the plaintiffs, conceded that the Fees Directives did not require the LHDs to procure a Relevant Guarantee (T117.3-.5).
This concession was correct. Even assuming for the sake of argument, as the plaintiffs contended, that:

the Fees Directives were mandatory, in the sense that they established not merely policy objectives but a binding, legal obligation to achieve the objectives; and

the paragraph commencing “[w]here such an assurance of payment is not forthcoming …” did not negate or qualify the operation of that obligation,

the Fees Directives did not “require” an LHD to procure a Relevant Guarantee. All that the Fees Directives required, on those assumptions, was that an LHD “obtain an assurance of payment from this category of ineligible patients before treatment [was] provided”.

Such an assurance could take a number of forms, including a credit card payment, cash, a bank cheque, a guarantee or “[o]ther initiatives to ensure that payment for the services is not lost to the hospital”. Since a guarantee was only one of the forms that an assurance could take, it was not the case that any of the Fees Directives required the LHDs to procure a Relevant Guarantee. Thus, even on the assumptions stated above, the answer to Question 1 in relation to the Fees Directions would be: No.
Notwithstanding the plaintiffs’ concession and the answer that followed from it, it is also useful to address the assumptions referred to above. In my view, the assumptions are not correct and the reasons for this provide further bases for answering Question 1 in the negative.
Each of the Fees Directives was expressed to be a “Policy Directive”, comprising a “Policy Statement” and “Procedures”. They were issued under s 122(1)(f1) of the HS Act, which empowers the Health Secretary to issue directions. As s 122(2) expressly permits, compliance with the Fees Directives was also attached, under s 127(4), as conditions to the payment of a subsidy to an LHD.
The Fee Directives did not purport to establish quasi-legislative rules mandating the achievement of particular outcomes. Nor were they expressed with the precision, clarity and definitions that are typical of such rules. Their expression was more informal and consistent with the statement of policy objectives and procedures for achieving such objectives, where possible.
In the circumstances, I do not accept that the Fees Directives created a legislative or quasi-legislative obligation to achieve outcomes such as obtaining a credit card payment, cash payment, a bank cheque, a guarantee or other initiative to ensure that payment for the services was not lost to the LHD in the case of every person falling within the category of ineligible patients, as defined in section 4.2 of the Fees Directive PD2017_018 or other relevant directives.
It is true that:

the footer of the front page of each directive stated that “[c]ompliance with this directive is mandatory for NSW Health and is a condition of subsidy for public health organisations” and

the Policy Statement in each directive stated, under the heading “MANDATORY REQUIREMENTS”, that “Hospitals are to … [e]nsure prepayment arrangements are made on admission for ineligible patients …”.

Nonetheless, this must be considered against the purpose of the directive which was stated to be to provide “key policy aspects and rates in relation to public hospital accommodation for chargeable patients” and the other content of the directive.

The mandatory nature of the Fees Directives is more naturally understood as relating to taking steps and following procedures to achieve policy objectives rather than to mandating the outcomes themselves. This follows from the fact that they are directions as to policies, issued under s 122(1)(f1) of the HS Act, and from the text of the directives, read as a whole.
Thus, when the Fee Directives used the language of obligation: “compliance”; “mandatory”; and “are to … ensure”, what was being said was that steps designed to achieve the policy objectives stated in the directives must be taken and any specified, mandatory procedures designed to implement those policy objectives must be followed. As a consequence, any person, including LHDs and staff at their hospitals, to whom the directive applied would be in breach if no such steps were taken or if such procedures were not followed. Understood in this way, the Fee Directives did not operate so that any person to whom they applied would be in breach if, having taken appropriate steps and followed the procedures laid down, the policy objectives were, nonetheless, not achieved. Thus, for example, if admission staff at an LHD’s hospital took appropriate steps to obtain an assurance of payment from an Ineligible Person and followed the required procedures but neither a credit card payment, a cash payment, a bank cheque, a personal guarantee nor any other initiative to ensure payment was not lost to the hospital was forthcoming, neither the staff nor the LHD would be in breach of the relevant Fee Directive.
That this is the correct understanding of each Fee Directive is confirmed by the wording of the directives themselves. The Procedures part of each directive contains the instruction that:

“[w]here such an assurance of payment is not forthcoming, the ineligible patient is to be informed that they will receive only the minimum and necessary medical care to stabilise their condition. This provision is not intended to impinge on the medical or legal obligations of medical officers in the treatment of ineligible patients”.

This wording indicates that, while the policy objective is to obtain an assurance of payment in every case, it may not be possible to achieve this objective even if the directive and the relevant procedures are complied with. This paragraph sets out the procedure to be followed in those circumstances. The Fees Directives themselves are inconsistent with the proposition that they required a guarantee or other assurance of payment to be obtained in every case by expressly acknowledging that an assurance of payment may not be forthcoming.
After the issue of the Charging Directives, and possibly under the previous version of the Charging Directives applicable from October 2009 to July 2016 (which was not in evidence before the Court), those Directives were also inconsistent with there being an obligation to obtain a guarantee or other “assurance of payment” in every case. The procedures that were required to be complied with, under the Charging Directives, when staff were charging Ineligible Persons for hospital and other health services provided by public hospitals operated by LHDs in accordance with the Fee Directives, included the following:

the option of obtaining “waivers or reductions of charges”, which were treated as “other payment methods/agreements”: section 4.1.1;

a relevant financial officer considering “whether it would be appropriate to request a supporting patient guarantee from a suitable person” in certain circumstances and following recommended processes and procedures outlined in the “Medicare Ineligible Financial Guarantees - Guide for Revenue or Finance Officers” attached to the Charging Directive when seeking, or deciding whether to accept, a guarantee: section 4.4. Nowhere in the Charging Directives was there a stipulation that such a guarantee must be obtained whenever there was no other form of “assurance of payment” obtained or obtainable;

fee waivers or reductions being available where “a financial hardship or other appropriate review has been undertaken and approval obtained from the Chief Executive or similar delegation”: section 4.7.

Even accepting that following the procedures in the Charging Directives was mandatory, there was no obligation on any relevant staff of a public hospital operated by an LHD to obtain a guarantee, or another form of assurance of payment, in every case. The Charging Directives, like the Fees Directives, merely imposed an obligation to take appropriate steps and to follow the specified procedures with a view to meeting the policy objective of obtaining a suitable form of assurance of payment, where possible.
The absence of any stipulation in the Charging Directives that required staff to obtain, as opposed to considering whether to request, a guarantee of the charges for hospital and other health services received by an Ineligible Person, leads to the conclusion that the Charging Directives, as well as the Fees Directives, did not require the LHDs or their staff to procure a Relevant Guarantee. Thus, the answer to Question 1 in respect of the Charging Directives should also be: No.
In summary, to the extent that they were mandatory, the Fee Directives and the Charging Directives imposed an obligation to take steps, and to follow the specified procedures, with a view to achieving the policy objective of obtaining an assurance of payment from Ineligible Persons for any charges for which they were liable, but nothing more.
For all of these reasons, Question 1 should be answered as follows:

Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? No.

Question 2.

To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)?

As explained above, the Fees Directives and the Charging Directives establish, among other things, the policy objective of obtaining an assurance of payment in respect of fees for hospital and other services received by Ineligible Persons from a public hospital operated by an LHD. The Directives also provide steps to be taken and procedures to be followed in order to achieve that objective.
The forms of assurance of payment that may be obtained include a personal guarantee from a third party. The type of person who could provide such a guarantee is described in the Fees Directives as “an Australian citizen whose bona fides are verified”. In the Charging Directives, a suitable guarantor is identified as “a person who is willing to provide a guarantee to support the future financial obligations of the patient to the Hospital in respect of the required medical services … [and] may be a family member of the patient, or another third-party associate of the patient.” In addition, the Charging Directives set out in some detail the “factors to be considered and the recommended processes to be followed, when seeking a guarantee of the patients’ liabilities from a suitable supporting person” in “the Medicare Ineligible Financial Guarantees - Guide for Revenue or Finance Officers” attached to the Directive.
In this sense and to this extent, the Fees Directives and the Charging Directives “provide for” the procurement of a Relevant Guarantee where appropriate in certain circumstances.
This being so, Question 2 then directs attention to whether the Fees Directives and the Charging Directives are invalid, in whole or in part, because providing for the procurement of a third party guarantee of fees in respect of any health service (other than a non-chargeable hospital service) received by an Ineligible Person from a public hospital controlled by LHD is repugnant to ss 70 and 71 of the HS Act.

Submissions

Mr Blake SC made detailed submissions and correctly contended that the power to impose conditions on subsidy given by s 127(4) of the HS Act, utilised in making the Fees Directives and Charging Directives, must be exercised having regard to the scope, object and subject matter of the Act by which the power is conferred. It was accepted that the subject matter of recovery of fees from “liable patients” was within the power conferred by s 127(4). The plaintiffs’ case was that the power did not authorise the making of conditions of subsidy that were inconsistent with or repugnant to the HS Act.
While the plaintiffs accepted that the better characterisation of the imposition of a condition under s 127(4) was as the exercise of a power rather than making delegated legislation, they submitted that the principles derived from cases such as M47/2012 v Director-General of Security (2010) 215 CLR 1; [2012] HCA 46 and Bell Group NV (in Liq) v Western Australia (2016) 260 CLR 500; [2016] HCA 21, which dealt with delegated legislation, were analogously applicable in the present case.
The plaintiffs contended that on the true construction of s 70 of the HS Act, the persons who were “liable” to pay health service fees to an LHD were those who received health services from an LHD and who had the means to pay the fees in relation to those services fixed under s 69 of the HS Act. This was said to flow from the use in s 70(1) of the words “according to the persons means” to qualify the liability established by that subsection. Thus, it was said that s 70 makes a person liable to pay for chargeable health services only to the extent that the person has personal financial resources to do so. It was effectively submitted that persons without means were not, therefore, “liable patients”.
This construction of s 70 was said to be reinforced by the terms of s 71, because that latter section established a patient’s entitlement to receive health services in the form of care or treatment for illness or injury, notwithstanding incapacity to pay for the health services.
It was then submitted for the plaintiffs that:

the Fees Directives provided for the obtaining of an assurance of payment, including a third party guarantee, from Ineligible Persons without consideration of the person’s means to pay; and

the Charging Directives provided for LHD’s to obtain a guarantee when it was likely that a patient did not have the means to pay.

Thus, it was said that, as a matter of practical application, the Directives required or provided for the procuring of a guarantee when a patient lacked the means to give an assurance of payment based on his or her own resources.

This was said to be inconsistent with the effect of ss 70 and 71, because the taking of a guarantee had the potential to create a liability in the guarantor when the patient, because of the lack of means, was not liable to contribute towards the funds of the LHD. Accordingly, it was submitted the Directives were inconsistent with the HS Act and the requirement in the Directives that LHDs procure assurances of payment, including guarantees, in respect of patients without means was a significant impairment of the rights given under ss 70 and 91 of the HS Act to persons without means to receive health services without incurring any liability.
It was also put, in effect, by the plaintiffs that the subject matter of recovery of fees from “liable patients” was within the power conferred by s 127(4) but that power did not extend to imposing conditions relating to the recovery of fees from persons who, because they lacked means to pay for the services, were not “liable patients”, on the plaintiffs’ construction of s 70(1). Thus, it was said that providing for the procuring of guarantees in respect of the liability of persons who were not “liable patients” was beyond power.
The plaintiffs summarised their position in their written submissions as follows:

“The Directives are beyond the power of the Minister (or delegate) to attach conditions to a subsidy pursuant to section 127(4) of the Act because they are inconsistent with s 70 of the Act. Accordingly, the Directives are of no effect and are void.”

In relation to Question 2, Ms Stern of Senior Counsel, who appeared with Ms Phillips for the defendants, made comprehensive and helpful submissions on the proper construction of ss 70 and 71 of the HS Act, as well as Ch 7 read as a whole. It is sufficient to note here that the defendants submitted in effect that, properly understood, ss 70(1) and 71 did not confer “rights” on persons without means nor did they preclude any liability in respect of fees for health services provided to such persons from arising either under s 70(1) or as a result of other contractual arrangements.
It was contended that s 70 imposed a statutory liability to contribute to the funds of an LHD or other organisation providing health services to patients. The amount of the liability was determined by reference to the fees fixed under s 69 of the HS Act. The words “according to the person’s means” in s 70(1) were said to limit the amount that might be recovered not the liability itself. In this regard attention was directed to the operation of s 70(2) and (4), 72 and s 73, which were said in effect to embody or reflect how a person’s “means” could be taken into account when recovery of the sum specified in s 70(1) was sought.
In addition, it was contended that “means” is not to be understood narrowly as limited to a person’s personal property and income but extends to the various sources of financial support upon which the person might reasonably be expected to draw for payment of health services received by them at a public hospital. This may include, in appropriate cases, a guarantee from a family member or other supporting person or some other form of contractual arrangement.
In relation to s 71, the defendants submitted that nothing in the Fees Directives or the Charging Directives required care or treatment for sickness and injury to be refused and thus the directives were not inconsistent with that provision. In addition, it was noted that, even where the Directives applied, the decision making processes required to be followed in relation to treating Ineligible Persons were multifactorial and thus there would not be circumstances where a refusal to treat a person would be by reason only of the person’s inability to pay for the care or treatment.
On those bases, it was submitted that the HS Act operated such that:

Ineligible Persons who received hospital or other health services from an LHD may be liable either pursuant to s 70(1), or pursuant to other arrangements, and the charges may be recovered save to the extent that, if the liability is under s 70(1), the amount recovered would be according to the person’s means;

there is no general duty on an LHD to provide care or treatment to a person without means and the obligation under s 71 only arises where care or treatment for sickness or injury would otherwise be provided at a public hospital but is refused only on the basis of the patient’s inability to pay.

The defendant also relied on the contention that the directives were each an "instrument … made under an Act" within the definition in s 3(1) of the Interpretation Act 1987 (NSW) and thus were to be construed as operating to the full extent of, but so as not to exceed, the power conferred by the Act under which they were made, in accordance with s 32 of that Act. Having regard to this provision and the wording of the Fee Directives or the Charging Directives, it was said that nothing in those Directives was repugnant to, or inconsistent with, ss 70 or 71, understood in the manner set out above. It was further contended that nothing in those sections prevented LHDs from entering into contracts, including guarantees, which the LHDs otherwise had power to do under s 22(1)(d) of the HS Act. A person’s lack of means did not have the effect of limiting their liability under s 70(1) or conferring a right under s 71 so that a guarantee could not be obtained in respect of the liability to pay for the hospital and other services provided by an LHD to that person.
Accordingly, it was submitted that there was no inconsistency or repugnancy between the Fees Directives or the Charging Directives and s 70 or 71 of the HS Act. The Directives were within power and were not invalid or void.

Consideration

The Health Secretary’s (or previously the Director-General’s) power to issue the Fees Directives and the Charging Directives is found in s 122(1)(f1) of the HS Act. In addition, s 127(4) confers on the Minister, or his or her delegate, the power to make compliance with those directives a condition of a subsidy for an LHD. In the present proceedings, it was accepted that the power under s 127(4) had been validly delegated in respect of each Directive to the Health Secretary (or Director-General).
The underlying principles in relation to the exercise of statutory powers were not in dispute and it is not necessary to do more than to make the following brief comments. It was accepted that statutory powers, such as those in ss 122(1)(f1) and 127(4), must be exercised for the purpose for which they were conferred, having regard to the scope, object and subject matter of the HS Act: Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1; [2013] HCA 3 at [38] (French CJ), State of New South Wales v Commonwealth of Australia (1983) 151 CLR 302 at 321-322; and R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 at 204 (Stephen J). If the Fees Directives and Charging Directives were inconsistent with or repugnant to one or more provisions of the HS Act, the powers to issue the Directives and make them a condition of subsidy, would not have been exercised for a proper purpose and, in these circumstances, the Directives would be beyond power and invalid.
The plaintiffs identified ss 70 and 71 as the provisions that were said to be inconsistent with, or repugnant to, the Fees Directives and the Charging Directives. Thus, the principal issue in relation to Question 2 is whether there is an inconsistency or a repugnancy between the Fees Directives and the Charing Directives and ss 70 or 71 of the HS Act so that issuing the Directives falls outside the powers in s 122(1)(f1) and s 127(4) of the HS Act and, as a result, the Directives are invalid.
The central planks of the plaintiffs’ argument in this regard were that:

by operation of ss 70(1) and 71, an Ineligible Person without means who receives hospital and other health services at a public hospital operated by an LHD is not liable to pay for those services;

a guarantee provided by a third party to meet the charges for those services is not part of the person’s means;

it is inconsistent with, and repugnant to, ss 70(1) and 71 to seek and obtain, in compliance with the applicable Fees Directive and the applicable Charging Directive, if any, a guarantee from a third party in respect of charges which the Ineligible Person was not liable to pay.

The plaintiffs’ argument turns on the proper construction of ss 70 and 71. The principles to be applied in the construction of these provisions were also not the subject of any significant dispute. The process of construing these sections should commence with consideration of the words of the provisions themselves but does not end there; at the first stage of the process, it is necessary also to consider the context of the provisions: The Queen v A2 [2019] HCA 35 at [32] and [33] (Kiefel CJ and Keane J, Nettle and Gordon JJ agreeing) and see also [124] (Bell and Gageler JJ) and [163] (Edelman J). In The Queen v A2, Kiefel CJ and Keane J explained, at [33]:

“Context is to be understood in its widest sense. It includes surrounding statutory provisions, what may be drawn from other aspects of the statute and the statute as a whole. It extends to the mischief which it may be seen that the statute is intended to remedy. "Mischief" is an old expression. It may be understood to refer to a state of affairs which to date the law has not addressed. It is in that sense a defect in the law which is now sought to be remedied. The mischief may point most clearly to what it is that the statute seeks to achieve.” (footnotes omitted)

Construction of ss 70 and 71 and, in particular, “according to the person’s means”

As observed above, ss 70(1) and 71 occur in Ch 7 of the HS Act, which consists of ss 69 to 75. Chapter 7 is headed “Charges for health services”. This heading forms part of the HS Act, by virtue of s 35(1)(a) of the Interpretation Act, and indicates that the focus of the chapter is generally charging for health services not providing them free of charge or at reduced charges.
Section 69 establishes the mechanism for determining the amount which public health organisations, including LHDs operating public hospitals, are to charge for services they provide. The section does not affect an LHD’s right to charge a fee for those services if the amount is not so determined. Section 69 relevantly provides:

“(1) The Minister may, from time to time, by order published in the Gazette:
(a) fix a scale of fees for hospital services or other health services received from any public health organisation [which includes an LHD], and
(b) amend or revoke any scale of fees so fixed.

…
(3) Except where a scale of fees has been fixed under this section, nothing in this section affects any right that a public health organisation may have to charge a fee for the provision of a hospital service or other health service.”

“Health service” is defined in the Dictionary of the HS Act as meaning any of the following:

“(a) any hospital service,
(b) any medical service,
(c) any paramedical service,
(d) any community health service,
(e) any environmental health service,
(e1) the supply or fitting of any prosthesis or therapeutic device,
(f) any other service (including any service of a class or description prescribed by the regulations) relating to the maintenance or improvement of the health, or the restoration to health, of persons or the prevention of disease in or injury to persons.”

In summary, Ch 7 as a whole provides in effect that:

any person who receives any health services (other than a non-chargeable hospital service) from an LHD is liable, because of s 70(1), to pay the sum calculated in accordance with the fees fixed under s 69 for those services;

that sum may be recovered under s 70(2), except to the extent that it is reduced or eliminated under s 70(4) or 73(1) on account of the person’s limited means;

the person’s means include any damages or right to recover damages in personal injury proceedings as a result of which the services were required, as provided in s 72; and

if the person is truly without any means and thus is unable to pay anything towards the sum for which the person is liable under s 70(1), the person is not to be refused treatment only on that account, by virtue of s 71.

On these bases, it can be seen that the words “according to the person’s means” in s 70(1) reflect the operation and effect of the other relevant provisions of Ch 7 on the recoverability of the sum identified in that subsection.
Put another way, the words “according to the person’s means” are to be construed, not as limiting the liability established under s 70(1), but rather as recognising the fact that, by operation of other provisions of Ch 7, recovery of the sum for which the person is liable may be reduced or eliminated, “according to the person’s means”. This construction has the attraction that it avoids the three problems, identified above, that arise if the words “according to the person’s means” are construed as limiting the liability established under s 70(1), as the plaintiffs contend.
The legislative history of Ch 7 supports the construction that the words “according to the person’s means” were not intended to limit the liability of persons to pay for hospital and other health services but rather to ensure that persons did pay for those services, subject to the operation of the provisions of the chapter limiting recoverability by reference to persons’ means.
As has been noted above, the predecessor of Ch 7 was introduced in 1929. Indeed, Ch 7 of the HS Act appears to be, in substance, a re-enactment of Pt VI, ss 30-33, [3] of the Public Hospitals Act 1929 (NSW) (the 1929 Act) with some, but not all, of the language updated and without other changes relevant for present purposes. The only changes of substance worth noting are: those relating to Medicare “non-chargeable hospital services” in s 70(1); the insertion of s 72 relating to damages for personal injuries; and, charges being fixed by the Minister under s 69 rather than by hospital by-laws. None of these bears on the issues in the present proceedings.
3. Sections 30-33 of the Public Hospitals Act 1929 (NSW) are reproduced in the appendix at the end of these reasons for judgment.
Section 30(1) of the 1929 Act, which is the predecessor of s 70(1) of the HS Act, provided:

“Subject to this Act, every patient who receives relief from any hospital shall be liable to contribute towards the funds of the hospital according to his means such sum in respect of such relief as the board demands, in accordance with the by-laws, or where there is no by-law fixing such amount, a sum not exceeding the cost to the hospital of such relief calculated in a manner prescribed by the regulations.”

As the defendants’ submissions noted, the Second Reading Speech [4] by The Hon F S Boyce on the Bill for the 1929 Act compared the system operating in Victoria with that in New South Wales. The speech included the following: [5]
4. New South Wales Legislative Council, Parliamentary Debates (Hansard), 13 March 1929, commencing at p 3648
5. At p 3651

“The fifth point is in connection with the liability to pay. At the present time we find that people who may be quite well to-do go into hospitals which you and I support, and although they are quite as well off as we are, they pay nothing, and expect the charitably-minded people of the community to pay for their sickness. Of course there are cases where people. cannot pay, and the bill specially provides that if a man cannot pay he is not to be asked to pay. But each man ought to pay according to his means.
…
I do not imagine that a scale will be fixed, but an effort will be made to see that each man pays according to his ability. One man with a wife and four children may be receiving £6 a week wages, whereas another man receiving the same wage may have no children and therefore could afford to pay more.
…
in Victoria people who can afford to pay for their medical treatment do not enter the public hospitals. In that State the system in vogue is one of payment according to one's means. People who are able to pay for their own treatment do not enter its public hospitals for the purpose of obtaining the best attention for nothing. But here persons who are well able to pay their own medical expenses frequently become patients in our public hospitals, where they obtain the best possible treatment for nothing.
…
When hospitals do not insist on payment for treatment there are more patients, and when there are more patients the staff have to be increased, the food costs go up, and generally the expense of maintaining the hospitals becomes greater.
[Interjection]: And more good is done!
Yes, I agree with the hon. member that more good is done, but what does the word ‘good’ mean? Does it mean providing good at the hon. member's expense and at my expense for patients who can afford to pay for their treatment? I do not propose to go further into that matter except to point out the difference in the cost of the management of hospitals in Victoria and in New South Wales.”

From this material, it can be seen that the mischief that s 30(1) of the 1929 Act, the predecessor of s 70(1) in the HS Act, was designed to address was not that persons with limited or no means were not receiving free treatment in public hospitals but that persons with means were. The purpose of the words “according to his means” in s 30(1) was to ensure that persons who could pay, did pay and were not treated without charge, as had occurred previously.
The express aim of ensuring that “each man ought to pay according to his means” was achieved, not by fixing “a scale” as noted in the speech, but by “efforts”, which appears to include the steps that could be taken under the following sections:

s 30(4) of the 1929 Act, which corresponds with s 70(4) of the HS Act;

s 30(6) of the 1929 Act, which corresponds with s 71 of the HS Act; and

s 32 of the 1929 Act, which corresponds with s 73 of the HS Act.

Thus, the purpose and structure of Ch 7, closely based as it is on Pt VI of the 1929 Act, can be seen as being to impose, by s 70(1), a general liability to pay for hospital and other health services (except for non-chargeable hospital services covered by the Medicare arrangement) but to make efforts to ensure that recovery of fees from liable persons remains “according to the person’s means” by operation of sections 70(4), 71 and 73.
This construction of s 70(1), and Ch 7 as a whole, is supported by consideration of other, more general provisions of the HS Act referred to above including, without attempting to be exhaustive:

the objects of the HS Act which include to facilitate collection of fees from patients of public hospitals operated by LHDs and to make provision for the funding of public health organisations: s 4(d) and (i);

a principal reason under s 8(2) for constituting LHDs being to provide health services for residents of their areas and their function under s 10(a) being generally to promote, protect and maintain the health of the residents of their areas, whereas for residents outside their areas, which will naturally include Ineligible Persons especially those who are tourists or visiting family from overseas, the function of an LHD is to provide such health services “as may be necessary or desirable”: s 10(c);

the function of LHDs of ensuring the efficient and economic operation of their public hospitals: s 10(e);

the amount of the subsidy received by an LHD being determined by reference to, among other things, the size and health needs of the population resident within the area of the LHD as well as the health services provided to patients from outside the area and the net receipts of the LHD: s 127(1).

My attention was not drawn to, nor did I identify, any provision of the HS Act which was inconsistent with construing the words “according to the person’s means” in s 70(1) as not qualifying the liability established by that subsection but reflecting the operation of other provisions of Ch 7 on the recoverability of the full sum for which a person would otherwise be liable under s 70(1).
Accordingly, in the light of the text and context of s 70(1) and the other provisions of Ch 7, the practical difficulties with the construction contended by the plaintiffs, the legislative history of Ch 7 and the scope and purpose of the HS Act as a whole, I do not accept the plaintiffs’ contention that on the proper construction of Ch 7 of the HS Act an Ineligible Person without means who receives hospital and other health services at a public hospital operated by an LHD is not liable to pay for those services, by operation of ss 70(1) and 71. The preferable construction is that all persons, including Ineligible Persons with or without means, are liable to pay the sum calculated in accordance with the fees fixed under s 69 for health services received from a public hospital but recovery of that sum may be limited or eliminated, in accordance with the person’s means, by operation of the various provisions of Ch 7 identified above.

Construction of “means”

At this point, it is necessary also to consider the proper construction of the noun “means” as it appears in Ch 7. The word occurs by itself in various provisions as well as in the expression “means, estate, or property” in s 73(1). The context provided by Ch 7 indicates unequivocally that “means”, in ss 70(1), 71 and 73, is used with the somewhat old-fashioned meaning of “disposable resources, especially pecuniary resources” [6] and “resources available for … achieving some objective … [specifically] financial resources, esp in relation to requirements or expenditure”. [7]
6. Macquarie Dictionary, Online Ed, meaning 2.
7. Oxford English Dictionary, Online Ed “mean, n.3” meaning 6.
There is nothing in the text or context to suggest that “means” (as a noun) is not used consistently throughout Ch 7 or that the words “estate, or property” restrict or expand the meaning of “means” in the collocation in s 73(1).
The plaintiffs initially contended that “means” should be construed narrowly as encompassing only a person's own resources, which might include a right of action or a right of recovery against an insurer or a right to damages (as in s 72), but it would not include a gift or a guarantee from another person. Putting the matter another way, the plaintiffs submitted that “means” was limited to something which the person either owned or to which the person had a legal right or entitlement. In oral submissions, [8] however, the plaintiffs accepted that “means” had a wider denotation including a guarantee that was already in existence or a gift that was promised. What, according to the plaintiffs, did not fall within a person's “means” was any financial resource that the person had no expectation of receiving or right to require. Consequently, at one point it was said that where a guarantee was not already in place that would not be included in a person's “means” but where a guarantee had been given or promised it would be included.
8. T113.31-38
This latter distinction between a guarantee that was already in existence or a gift that was promised and a resource that the person had no expectation of receiving or right to require is problematic in the context of construing “means”. If, before seeking treatment at a public hospital, an Ineligible Person asked a supporter for a guarantee or gift and the supporter agreed to provide it, on the plaintiffs’ approach, this guarantee or gift would be taken into account as part of the Ineligible Person’s “means”. By way of contrast, if the supporter was only asked for the guarantee by the admission staff or for the gift at the hospital and even if the supporter was prepared to provide it, it would not form part of the Ineligible Person’s “means”. This is an illogical and unworkable distinction.
In my view, “means” in Ch 7 refers not only to the property of a person, in a technical, legal sense, as the words “estate or property” do. [9] It also includes all the resources available at the relevant time including future income, in relation to which there is an expectation but not an entitlement, amounts that may be borrowed by the person and any other financial support or resources, including loans, gifts and guarantees that third parties are prepared to provide at the relevant time. This approach is consistent with the use of the collocation of “means, estate, and property” in s 73(1), with the purpose of Ch 7 which is to ensure that fees for chargeable hospital and other services provided at public hospital are recovered to the extent that recipients are able to pay, with the legislative history of Ch 7, and with the scope and purpose of the HS Act as a whole, all of which have been referred to above. None of those considerations supports a narrow or logically difficult reading of “means”.

Are the Directives inconsistent with or repugnant to ss 70(1) and 71

9. See the definitions of “estate” and “property” in s 21 of the Interpretation Act 1987 (NSW).

As explained above, the Fees Directives and the Charging Directives establish, among other things, a policy objective of obtaining a guarantee from a third party in respect of an Ineligible Person’s liability to pay for hospital and other health services provided by an LHD at a public hospital, if no other form of assurance of payment is forthcoming. In addition, the Fees Directives and, especially, the Charging Directives provide procedures to be followed with a view to achieving that policy objective. Compliance with these Directives is mandatory for LHDs and the staff at their public hospitals.
It is, however, obvious that such mandatory compliance does not involve the obtaining of such a guarantee in every case where an Ineligible Person is not able to provide another form of assurance of payment (other than a waiver or remittal of fees), in light of:

the instruction in the Fees Directives as to what is to be done “[w]here such an assurance of payment is not forthcoming”;

the requirement in the Charging Directives only to consider whether to seek a guarantee and the procedures to be followed including those set out in the “Guide for Revenue or Finance officers Medicare Ineligible Financial Guarantee” document attached to the Directive;

the practical reality that, if an Ineligible Person without means presented at a public hospital alone or without any person prepared to give a guarantee, no guarantee could be obtained.

Nonetheless, the Directives each “provide for” the procuring of third party guarantees, where available, in the case of Ineligible Persons receiving treatment at public hospitals, if there is no other assurance of payment, in the sense explained above.
As to s 70(1), complying with the Directives and obtaining such a guarantee is not, however, inconsistent with that subsection for at least two reasons.
First, on its proper construction, s 70(1) establishes that an Ineligible Person is liable to contribute towards the funds of the organisation such sum in respect of the health services received as is calculated in accordance with the fees fixed under s 69. The words “according to the person’s means” do not limit that liability but rather reflect the fact that recovery of that sum may be limited, having regard to the person’s means, under other provisions of Ch 7. As a result, obtaining a guarantee of that liability, even where the Ineligible Person is entirely without other means, is not inconsistent with s 70(1). A third-party guarantee, procured in compliance with the Directives, is a guarantee of an existing liability. It is not the case that the liability disappears when the recipient of the hospital and other services is an Ineligible Person without means. Only the ability to recover the full amount of the liability is potentially affected by an Ineligible Person’s lack of means. The guarantee provides an LHD with an additional means of recovery, which is preserved without derogation by s 73(2). Thus, there is no repugnancy between procuring a guarantee, in compliance with the Directives, and s 70(1), read in the context of Ch 7 as a whole.
Secondly, even if (contrary to what has been held above) the words “according to the person’s means” do limit an Ineligible Person’s liability to pay for hospital and other services received from a public hospital operated by an LHD and not just recoverability, an Ineligible Person’s “means” include any guarantee that a third party agrees to give. When such a guarantee is forthcoming, the Ineligible Person’s means will thereby necessarily be sufficient to meet the liability under s 70(1). In those circumstances, the Ineligible Person’s liability to contribute will not be reduced. Consequently, it would not be inconsistent with s 70(1) to procure such a guarantee in the circumstances.
As to s 71, similar reasoning applies. If an Ineligible Person has the benefit of a third-party guarantee of their liability for hospital and other health services received by them at a public hospital, this is to be included in assessing their means. When such a guarantee is available, the Ineligible Person will not be “a person without means” and s 71 will have no application in that case. Thus, obtaining such a third party guarantee is not inconsistent with or repugnant to s 71.
In addition, in relation to s 71, it should be noted that both the Fees Directives and the Charging Directives explicitly refer to the obligation of LHDs operating public hospitals to provide necessary services even to those who cannot demonstrate an ability to pay for those services. The relevant passages from the Directives have been quoted earlier. There is no inconsistency between the Directives and s 71, having regard to those express provisions of the Directives.
More generally, I accept that each of the Directives is “an instrument … made under an Act” within s 3(1) of the Interpretation Act and, by operation of s 32(1) of that Act, should be construed as operating to the full extent of, but so as not to exceed, the power conferred by the Act under which it is made. In so far as there is any doubt as to the construction of the Directives, and in particular the statements in the Directives which I have referred to in these reasons, they should be construed so as to operate without exceeding the powers conferred by ss 122(1)(f1) and 127(4) of the HS Act. The approach I have taken in relation to the Directives is open on their wording and gives them an operation that does not go beyond the powers under which they are made because of inconsistency with other provisions of the HS Act, including ss 70(1) and 71.
As a matter of substance, enquiring whether a third party guarantee in respect of an Ineligible Person’s liability to pay fees for hospital and other services received at a public hospital is available should be seen as part of determining what an Ineligible Person’s “means” actually are. It is no different from asking whether the Ineligible Person has sufficient funds in a bank account, or a credit card with a sufficient credit limit or some other ability to pay for the services to be provided. Similarly, obtaining such a guarantee is not materially different from obtaining funds by electronic transfer from the Ineligible Person’s bank account or taking a credit card payment.

The Fees Directives and the Charging Directives in effect require those bound to comply with them to enquire as to the Ineligible Person’s means, including whether a third party guarantee is potentially available. The Directives also require taking steps which may lead to obtaining such a guarantee, if another form of assurance of payment is not available or more appropriate and there is a person willing to act as guarantor. Nothing in these requirements is inconsistent with or repugnant to ss 70 and 71 of the HS Act, especially understood in the context of Ch 7 and the HS Act as a whole. None of the Directives is invalid because it is inconsistent with or repugnant to s 70(1) or s 71 of the HS Act.

Answer to Question 2

Consequently, Question 2 should be answered as follows:

Question 3.

If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent?

Question 3 is predicated upon there being some repugnance between the Directives and ss 70(1) and 71 and thus upon an affirmative answer to Question 2. Since there is no such repugnance and Question 2 has been answered in the negative, Question 3 does not arise.
Nonetheless, it can be observed that LHDs have authority to procure Relevant Guarantees since they may do all other things that a body corporate may, by law, do and that are necessary for or incidental to the purposes for which the LHD is constituted, under s 22(1)(d) of the HS Act. The purposes and functions of LHDs have been referred to above. Entering into contracts to assist in recovery of fees for hospital and other health services received by Ineligible Persons falls squarely within matters that are necessary for or incidental to the purposes for which LHDs are constituted.
For the reason already given, however, Question 3 should be answered as follows:

If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? The question does not arise.

Question 4.

If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that:

a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or

b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or

c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee?

Question 4 is predicated upon the Directives being invalid and the LHDs lacking authority to procure a Relevant Guarantee. I have already held that none of the Directives was invalid and neither did any LHD lack authority to procure a Relevant Guarantee. In these circumstances, Question 4 does not arise.
Further, it is useful to observe that, in light of my conclusions above and the circumstances of the present proceedings:

none of the Relevant Guarantees entered into during the period during which any of the Directives was in force is void ab initio;

the LHDs are not precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which any of the Directive was in force; and

the LHDs are not required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee.

Nonetheless, strictly speaking, Question 4 should be answered as follows:

If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that:

a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or

b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or

c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee?

The question does not arise.

Question 5.

Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons?

With the proper understanding of “means”, the question becomes internally inconsistent

There is a difficulty with this question. The persons who are referred to in the question are Impecunious Ineligible Persons who also have the benefit of a Relevant Guarantee. The definition of “Impecunious Ineligible Person”, for the purposes of this question, is “an Ineligible Person without means to pay for the health service received by that person at the time of the service”. For the reasons given above, a Relevant Guarantee is to be taken into account when assessing, and forms part of, the Ineligible Person’s “means”. As a result, every Impecunious Ineligible Person who has the benefit of a Relevant Guarantee will not be a “person without means” within s 71. Nor will they be an “Impecunious Ineligible Person” as defined for the purposes of the separate questions. There is, as a result, an internal inconsistency in the question and it is inappropriate to answer the question, on the current definition of Impecunious Ineligible Person.

Alternative consideration

If the internal inconsistency is sought to be avoided by treating the definition of Impecunious Ineligible Person as referring to a person without means other than a Relevant Guarantee, this does not lead to an affirmative answer to the question. Such persons will nonetheless have means to pay for health services received from an LHD at a public hospital because of the Relevant Guarantee. Thus, s 71 will not apply in relation to that person. Consequently, s 71 could not have the consequence that the LHD provided no consideration for the Relevant Guarantee given in relation to the provision of health services to the Impecunious Ineligible Person. Certainly, s 71 does not “necessarily” have this consequence.
Accordingly, if the definition of Impecunious Ineligible Person were (contrary to the definition to be used under the terms of the Separate Questions) taken to refer to a person without means other than a Relevant Guarantee, the appropriate answer to Question 5 would be: No.
In addition to what has been said above, even if the availability of a Relevant Guarantee should not be treated as part of an Impecunious Ineligible Person’s means and the principles concerning absence of consideration are applicable because the Relevant Guarantee is not in the form of a Deed, Question 5 should still be answered: No. Once again, the applicable principles were not substantially in dispute. The defendants accepted that a promise to perform a pre-existing public duty may not constitute good consideration to support a contract but noted that where a party promised to do more than the public duty sufficient consideration would be furnished: Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 at 277-278; 281; Searle v Commonwealth of Australia [2019] NSWCA 127 at [6] (Bathurst CJ).
Section 71, as has been noted above at [158] to [168], relevantly involves a negative stipulation that a person without means must not be refused “care or treatment for sickness or injury” in the limited situation where a refusal would be “by reason only of the person’s inability to pay for the care or treatment”.
Having regard to s 71, the uncontested evidence of Ms Cooke and the terms of the relevant Directives, Impecunious Ineligible Persons may be refused particular treatment or care for many reasons other than, or in addition to, their inability to pay. These might include the reasons identified above at [164]. In addition, an Impecunious Ineligible Persons may be provided with health services in addition to the minimum required under s 71. In all these cases, the hospital or other health services to be provided will include services that an LHD operating a public hospital was not duty bound to provide under s 71. To that extent, an LHD will have, in effect, promised to do something other than their public duty and this will amount to adequate consideration to support a contract, including a Relevant Guarantee. This conclusion is sufficient to establish that s 71 does not “necessarily” have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons. Consequently, the appropriate answer to Question 5, even on the basis that the availability of a Relevant Guarantee should not be treated as part of an Impecunious Ineligible Person’s means, is: No.
It does not follow from the immediately preceding paragraphs, however, that if (contrary to my view expressed above) a Relevant Guarantee should not be included in a person’s “means”, there will always be consideration to support a Relevant Guarantee where an Impecunious Ineligible Person receives treatment in a public hospital operated by an LHD. If treatment is provided where the only reason for refusal is the inability of the Impecunious Ineligible Person to pay and the treatment is limited to the minimum required to discharge the negative duty under s 71, then it may be that there is no consideration to support any contract in relation to the provision of that treatment. This, however, does not lead to an affirmative answer to Question 5, which concerns whether that consequence “necessarily” follows in the circumstances specified in that question. Assuming that a Relevant Guarantee should not be included in a person’s “means”, whether or not there is consideration to support a Relevant Guarantee will depend upon the facts of each particular case.
For these reasons, the answer to Question 5 is as follows:

Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons? On the current definition of “Impecunious Ineligible Person”, it is inappropriate to answer the question, but to the extent that an answer can be given on the bases set out in the reasons for judgment, the answer is: No.

Orders

Accordingly, the Court orders that the Separate Questions are to be answered as follows:

Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? No.

To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)? No

If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? The question does not arise.

If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that:

a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or

b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or

c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee?

The question does not arise.

Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons? On the current definition of “Impecunious Ineligible Person”, it is inappropriate to answer the question, but, to the extent than an answer can be given on the alternate bases set out in the reasons for judgment, the answer is: No.

**********

Appendix – Part VI of the Public Hospitals Act 1929 (NSW)

PART VI.

LIABILITY OF PATIENTS.

30. (1) Subject to this Act, every patient who receives relief from any hospital shall be liable to contribute towards the funds of the hospital according to his means such sum in respect of such relief as the board demands, in accordance with the by-laws, or where there is no by-law fixing such amount, a sum not exceeding the cost to the hospital of such relief calculated in a manner prescribed by the regulations.

(2) Such sum shall be a debt due by such person and may be recovered in any court of competent jurisdiction.

(3) A written statement of the amount due, in the prescribed form, purporting to be signed by the secretary of a hospital, shall be prima facie evidence of such amount being due.

(4) The board of any hospital may remit or postpone payment of all or any sums of money due to the hospital under the provisions of this section or the corresponding section of any Act hereby repealed.

(5) In addition to the amount so due such person shall, if he receives any remission or postponement upon any false statement made by him, or with his authority, regarding his circumstances, be liable to pay to the hospital a sum of not more than twenty pounds recoverable as a debt summarily.

(6) No destitute person shall be refused relief at any hospital by reason only of his inability to pay therefor.

(7) In determining the amount due by a subscriber in respect of relief afforded to himself, his spouse, or any of his children under the age of fourteen years, credit shall be given for the amount subscribed by him during the financial year in which the relief is afforded.

31. (1) A court in which judgment has been recovered by a hospital against a patient may at any time order that a specified portion of the pay, half-pay, salary, wages, annuity, emolument, pension (not being an old-age, invalid, widows', or war-service pension), superannuation, or other income of any such patient be paid to the secretary of the hospital to be applied by him in payment of the judgment debt.

(2) The court may at any time revoke or vary the order on due cause being shown.

32. (1) No order shall be made in pursuance of this Part in any case in which the court is satisfied that (having regard to the means, estate, or property of the patient in respect of whom the order is sought or to the circumstances of the case) such an order would be unreasonable.

(2) Nothing in this Part contained shall derogate from any rights which may exist for the recovery of money due.

33. (1) In the application of this Part to a separate institution a reference to the "board" or to the " secretary" shall be construed as a reference to the governing body and to the person prescribed by the regulations in that behalf.

(2) The provisions of this Part shall in the manner and to the extent prescribed by the regulations apply to patients in respect of relief received at a hospital or institution in the nature of a hospital conducted by or on behalf of the State.

Endnotes

Amendments

06 December 2019 - Coversheet - legal representatives corrected

Decision last updated: 06 December 2019

[2019] NSWSC 1736

06 December 2019

Key Legal Topics

Areas of Law

Health Law

Legal Concepts

Public Hospitals

Medicare

Unconscionable Conduct

Medium Neutral Citation:	Fernandez v State of New South Wales [2019] NSWSC 1736
Hearing dates:	28, 29 October 2019
Date of orders:	06 December 2019
Decision date:	06 December 2019
Jurisdiction:	Common Law
Before:	Wright J
Decision:	The Separate Questions are to be answered as follows: (1) Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? No. (2) To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)? No (3) If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? The question does not arise. (4) If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that: a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee? The question does not arise. (5) Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons? On the current definition of “Impecunious Ineligible Person”, it is inappropriate to answer the question, but, to the extent than an answer can be given on the alternate bases set out in the reasons for judgment, the answer is: No.
Catchwords:	HEALTH – Public hospitals — Local Health Districts – Health services provided in public hospitals to persons ineligible under Medicare arrangements – Liability of ineligible persons to pay for health services provided at public hospitals — Guarantees procured by Local Health Districts from third parties in respect of health services provided to ineligible persons — Whether policy directives required guarantees to be procured — Whether procuring guarantees inconsistent with, or repugnant to, Health Services Act 1997 (NSW), sections 70 and 71 – Whether guarantees otherwise void or unenforceable
Legislation Cited:	Administrative Arrangements Order 2014 (NSW) Civil Procedure Act 2005 (NSW) Constitution Act 1902 (NSW) Crown Proceedings Act 1988 (NSW) Health Insurance Act 1973 (Cth) Health Services Act 1995 (NSW) Health Services Amendment (Local Health Districts and Boards) Act 2011 (NSW) Health Services Amendment (Local Health Networks) Act 2010 (NSW) Health Services Regulations 2008 (NSW) Health Services Regulations 2013 (NSW) Health Services Regulations 2018 (NSW) Interpretation Act 1987 (NSW) Public Hospitals Act 1929 (NSW)
Cases Cited:	Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1; [2013] HCA 3 Bell Group NV (in Liq) v Western Australia (2016) 260 CLR 500; [2016] HCA 21 Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 Health Services Regulations 2018 (NSW) M47/2012 v Director-General of Security (2010) 215 CLR 1; [2012] HCA 46 R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 Searle v Commonwealth of Australia [2019] NSWCA 127 State of New South Wales v Commonwealth of Australia (1983) 151 CLR 302 The Queen v A2 [2019] HCA 35
Texts Cited:	New South Wales Legislative Council, Parliamentary Debates (Hansard) 13 March 1929 Oxford English Dictionary, Online Ed
Category:	Principal judgment
Parties:	Garfield Mario Fernandez (first plaintiff) Apikali Fotu (second plaintiff) State of New South Wales (first defendant) Western Sydney Local Health District (second defendant) South Western Sydney Local Health District (third defendant) Sydney Local Health District (fourth defendant) Northern Sydney Local Health District (fifth defendant) Nepean Blue Mountains Local Health District trading as Nepean Hospital (sixth defendant) lllawarra Shoalhaven Local Health District (seventh defendant) Central Coast Local Health District (eighth defendant) Far West Local Health District (ninth defendant) Hunter New England Local Health District (tenth defendant) Mid North Coast Local Health District (eleventh defendant) Murrumbidgee Local Health District (twelfth defendant) Northern NSW Local Health District (thirteenth defendant) Southern NSW Local Health District trading as Queanbeyan District Hospital (fourteenth defendant) Western NSW Local Health District trading as Parkes Hospital (fifteenth defendant) South Eastern Sydney Local Health District (sixteenth defendant)
Representation:	Counsel: G Blake SC and P Batley (plaintiffs) K Stern SC and T Phillips (defendants) Solicitors: Legal Aid NSW (plaintiffs) Ashurst (defendants)
File Number(s):	2018/263134