Moran Hospitals Pty Ltd v King
[1997] FCA 1045
•3 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
Administrative law - judicial review - nursing homes - government contracts - whether or not an officer of the Department of Health entered into an agreement with a health care group concerning a compromise of an amount to be recovered by reason of an overpayment of Commonwealth benefit payable in respect of nursing home patients in nursing homes - the effect of such compromise, if any - the status in administrative law of the law regarding compromise - whether there had been a change of ownership in nursing homes - existence of an alternative remedy in the form of an avenue for statutory merits review.
Estoppel - whether the Secretary of the Department of Health can be estopped from exercising a statutory discretion.
Practice and procedure - whether appropriate for a question to be set aside for separate determination - form of the question to be set.
Trade practices - whether the administration of the system for the payment to nursing home proprietors is a business carried on by the Commonwealth for the purposes of s 2A of the Trade Practices Act 1974.
National Health Act 1953 - Parts VA and VD
Administrative Decisions (Judicial Review) Act 1977 - s 10
Trade Practices Act 1974 - s 2A
Federal Court Rules - O 20 r 2
Attorney-General (NSW) v Quin (1990) 170 CLR 1 - cit.
Minister for Immigration v Petrovski Burchett, O'Loughlin and Tamberlin JJ, 12 March 1997, unreported - cit.
Yango Pastoral Co Pty Limited v First Chicago Australia Limited (1978) 139 CLR 410 - cons.
Federal Airports Corporation v Aerolineas Argentinas Beaumont, Whitlam and Lehane JJ, 1 August 1997, unreported - cit.
Commissioner of State Revenue (Victoria) v Royal Insurance Australia Limited (1994) 182 CLR 51 -cons.
R v Home Secretary; Ex parte Pierson [1997] 3 WLR 492 - cons.
General Newspapers Pty Limited v Telstra Corporation (1993) 117 ALR 629 -app.
Commonwealth of Australia v Mewett (1997) 146 ALR 299 - cited
Pullen v Ready (1743) 2 Atk 587 - cons.
F J Hospital Enterprises Pty Limited v Grimes & Rose (1987) 12 ALD 224 - dist.
MORAN HOSPITALS PTY LIMITED v CONOR KING and PAUL HUNTLEY
NG 412 OF 1997
JUDGE: BEAUMONT J
PLACE: SYDNEY
DATE: 3 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 412 of 1997
BETWEEN:
MORAN HOSPITALS PTY LIMITED
APPLICANTAND:
CONOR KING
FIRST RESPONDENTPAUL HUNTLEY
SECOND RESPONDENTJUDGE:
BEAUMONT J.
DATE OF ORDER:
3 SEPTEMBER 1997
WHERE MADE:
SYDNEY
ORDERS:
The applicant’s claim for relief under the Trade Practices Act 1974 is dismissed pursuant to O 20 r 2(1)(a) and (c).
The applicant’s claim for relief in relation to the alleged transfer in ownership of the businesses or undertakings carried out at the subject nursing homes is dismissed pursuant to O 20 r 2(1)(a) and (c).
The relief sought in pars 1 and 4 of the notice of motion is refused.
Order that the applicant pay one-half of the respondents’ costs of the notice of motion.
Direct that the applicant file and serve a statement of claim within 28 days.
Matter adjourned for directions on a date to be fixed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 412 of 1997
BETWEEN:
MORAN HOSPITALS PTY LIMITED
APPLICANTAND:
CONOR KING
RESPONDENTPAUL HUNTLEY
SECOND RESPONDENT
JUDGE:
BEAUMONT J.
DATE:
3 SEPTEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(On the respondents’ application for summary dismissal and on the separate question)
INTRODUCTION
Before the Court is an application by the respondents for summary dismissal of part of the principal proceedings. In those proceedings the applicant, Moran Hospitals Pty Limited, (“Moran”) seeks relief, by way of judicial review, of several decisions of the Minister for Health made under Part VA of the National Health Act 1953 (“the Act”). Part VA makes provision for the payment of Commonwealth benefits in respect of nursing home care. The respondents, Conor King and Paul Huntley, are the Minister's delegates. Also before the Court is a separate question, to be described below.
THE LEGISLATIVE SCHEME
In order to understand the issues that now arise for determination, it is necessary to describe the relevant legislative scheme of Part VA of the Act as follows:
Division 1 of Part VA deals with certain “preliminary” matters.
An “approved nursing home patient” on a particular day is defined (s 46A). Relevantly, such a patient is a “qualified nursing home patient” on that day and was admitted to a nursing home which has been approved under the Act, or under the Nursing Homes Assistance Act 1974, and where no determination under s 40AC of the Act has been made in respect of that patient. By s 40AC, the Minister may declare that a patient is no longer in need of nursing home care.
“Overpayment” in relation to a Commonwealth benefit is defined as follows:
“46B. (1) ...
(2)If the proprietor of an approved nursing home has received, by way of advance on account of Commonwealth benefit that may become payable in respect of an approved nursing home patient in the nursing home on a day, an amount that exceeds the amount payable to the proprietor in respect of the nursing home patient on that day, the amount of that excess is an overpayment.
(3)If:
(a)the proprietor of an approved nursing home has received an amount by way of advance on account of Commonwealth benefit that may become payable in respect of an approved nursing home patient in the nursing home on a day; and
(b)that benefit does not become payable;
the amount so received by the proprietor is an overpayment.
(4)If:
(a)an amount purporting to be Commonwealth benefit is paid to the proprietor of an approved nursing home in respect of an approved nursing home patient in the home; and
(b)Commonwealth benefit is not payable to the proprietor;
that amount is an overpayment.”
The Secretary must, in relation to an approved nursing home, determine a period to be the accounting period in respect of that home (see s 46C(2)). Upon sale of a nursing home the Secretary is to vary the accounting period (see s 46C(7) and (8)).
The Secretary must, within three years after the end of an accounting period in respect of an approved nursing home, determine a notional scale of fees in respect of the nursing home (see s 46D(1)). Section 46E, which is important for present purposes, is in these terms:
“46E. (1) If:
(a)during an accounting period in respect of an approved nursing home; or
(b)after the end of an accounting period in respect of an approved nursing home and before the Secretary has determined a notional scale of fees in respect of the accounting period;
the Secretary reasonably believes that the proprietor of the nursing home will be found (on general care benefit becoming payable) to have, in respect of the accounting period:
(c)received an overpayment of general care benefit; or
(d)been underpaid general care benefit;
the Secretary may determine, in writing, the amount that the Secretary believes to be the amount of the likely overpayment or underpayment. (Emphasis added).
(2)If the Secretary determines an amount, the Secretary may, on the Commonwealth’s behalf, recover the amount from, or pay the amount to, the proprietor of the nursing home (as the case requires) in the manner specified in the principles formulated under subsection 40AA(7).
(3)If the Secretary decides to recover the amount from, or pay the amount to, the proprietor of the nursing home under subsection (2), the Secretary must notify the proprietor, in writing, accordingly.
(4)If steps have been taken to recover (by the manner specified in the principles) an amount determined under subsection (1) to be a likely overpayment then, for the purpose of establishing whether or not the proprietor of the nursing home has received an overpayment in respect of the accounting period, that amount is to be deducted from the total amount of advances in respect of general care benefit paid in relation to the nursing home during the accounting period.
(5)If steps have been taken to pay (by the manner specified in the principles) an amount determined under subsection (1) to be a likely underpayment then, for the purpose of establishing whether or not the proprietor of the nursing home has been underpaid in respect of the accounting period, the amount is to be added to the total amount of advances in respect of general care benefit paid in relation to the nursing home during the accounting period.
(6)For the purpose of this section, the proprietor of an approved nursing home is underpaid general care benefit if the proprietor has received, by way of advance on account of general care benefit that may become payable in respect of an approved nursing home patient in the nursing home on a day in the accounting period, an amount that is less than the amount payable to the proprietor in respect of the nursing home patient on that day.”
Division 2 of Part VA (ss 47-49AA) deals with the types of benefit payable. It is not necessary for present purposes to describe the detail of those provisions.
Division 3 of Part VA (ss 49A-51C) deals with miscellaneous matters. Provision is made by s 49B for the payment of a Commonwealth benefit to a patient in these terms:
“49B. (1) If:
(a)the proprietor of an approved nursing home charges fees in respect of the nursing home care provided to an approved nursing home patient during a period; and
(b)the proprietor does not deduct from the fees Commonwealth benefit that is payable, or may become payable, to the proprietor in respect of the patient for the period;
the Secretary may direct that the Commonwealth benefit so payable, or the amount so paid in advance, be paid to the person to whom the fees were charged and not to the proprietor.
(2) If:
(a)the proprietor of the nursing home has been paid, whether by way of advance on account of Commonwealth benefit or otherwise, an amount of Commonwealth benefit in respect of the patient for the period; and
(b)the proprietor charges fees in respect of nursing home care provided to the patient during the period without deducting the amount of benefit so paid in respect of the patient;
the proprietor must, as the Secretary demands, repay to the Commonwealth that amount.
(3)If the proprietor of the nursing home has not complied with the Secretary’s demand within 3 months, the amount to which the demand relates may be recovered by the Commonwealth as a debt.
(4)The Commonwealth must pay an amount equal to the amount received under subsection (2) or (3) to the person to whom the fees concerned were charged.”
Where a payment of a Commonwealth benefit and a nursing home fund benefit has been made in respect of the same patient for the same period, provision is made by s 50(1) that the proprietor notify the Secretary in writing accordingly. Such a proprietor shall, on demand by the Secretary, repay to the Commonwealth the amount of Commonwealth benefit (see s 50(2)).
Claims for benefit are dealt with by s 51(1). For the purposes of obtaining payment of a Commonwealth benefit, the proprietor of an approved nursing home shall, so soon as practicable after the end of each month, or such other period as the Secretary approves, submit: (a) a claim in the authorised form for Commonwealth benefit that is, or may become, payable in respect of that month or that period; and (b) such information relating to the claim as is shown in the authorised form to be required or as the Secretary requires (see s 51(1)). Subject to s 51A, to be mentioned shortly, payment of Commonwealth benefit shall not be made except in respect of amounts included in a claim submitted in accordance with s 51 (see s 51(2)).
Section 51A is significant for present purposes. It deals with advances of benefit in these terms:
“51A. The Secretary may, in his or her discretion, authorise the payment to the proprietor of an approved nursing home (other than a Government nursing home) of an advance or advances in respect of Commonwealth benefit that is or may become payable to the proprietor.”
Reference should also be made, in this connection, to the provisions of s 40AE. If the Secretary makes a decision under s 51A: (a) authorising the payment to the proprietor of a nursing home of an advance or advances in respect of a Commonwealth benefit that is, or may become, payable to the proprietor; or (b) refusing to authorise such a payment, the proprietor of the nursing home may request the Minister to review the Secretary's decision (see s 40AE(1)).
Subject to s 40AEH, where a request under s 40AE(1) or (2) by the proprietor of a nursing home has not been withdrawn under s 40AEA, the Minister shall, not earlier than the end of the period of forty two days commencing on the expiration of the last day on which such a request could have been made, refer the matter to a Nursing Homes Fees Review Committee of Inquiry for examination and report to the Minister (see s 40AEC(1)). Where the Minister has referred a matter to the Committee, the Committee shall examine the matter and report in writing to the Minister (see s 40AED(1)).
The Minister shall, after such investigation of the matter as the Minister considers necessary, either confirm or vary the decision of the Secretary and advise the proprietor accordingly (see s 40AEF(1)). The Minister shall, in undertaking such investigation of the matter, apply any relevant principle that was in force under s 40AA(7) or s 40AD(1BE), as the case requires, at the time the decision was made.
Section 51C, dealing with recovery of overpayments, is also important for present purposes. It is in these terms:
“51C. (1) An overpayment of Commonwealth benefit made to the proprietor of an approved nursing home may, in whole or in part, be:
(a)deducted from an amount (including an advance) payable, or to be paid, to that proprietor of the nursing home under this Part; or
(b)recovered by the Commonwealth from that proprietor as a debt due to the Commonwealth; or
(c)recovered from that proprietor, or a later proprietor of the nursing home, in a manner determined in accordance with the principles formulated under subsection 40AA(7).
(2)If:
(a)the proprietor of a nursing home receives an overpayment of Commonwealth benefit in respect of the nursing home; and
(b)that proprietor (“previous proprietor”) sells the nursing home; and
(c)part or all of the amount of that overpayment is recovered after the sale from the current proprietor of the nursing home under paragraph (1)(c); and
(d)part or all of the overpayment is later recovered from the previous proprietor;
so much of the amount that has been recovered from the current proprietor as is equal to the amount recovered from the previous proprietor is to be paid to the current proprietor.
(3) If the current proprietor of the nursing home elects, in writing, that the amount to which he or she is entitled under subsection (2) be paid to him or her in a manner specified in the principles formulated under subsection 40AA(7), the amount is payable to that proprietor in that manner.
(4) Paragraphs (1)(a) and (b) do not affect the recovery or set-off of amounts that have not been paid under this Part.”
THE CLAIMS MADE BY MORAN IN THE PRINCIPAL PROCEEDINGS
By its amended application for an order of judicial review, filed on 13 June 1997, Moran applied to review eight decisions made by Mr King under Part VA of the Act and eight decisions made by Mr Huntley under that Part.
By way of a typical illustration of the kind of relief sought by Moran, application is made to review, judicially, decisions that:
“1.An amount of $140,569.99 be determined as the likely overpayment of benefit to Annandale Nursing Home for the 1986-1987 financial year.
2.The said amount of $140,569.99 be recovered through adjustments to advances under s 51A of the National Health Act 1953 (Cth) to Annandale Nursing Home over each of 6 months commencing with the June 1997 advance.”
The grounds for judicial review relied on in the amended application are as follows:
“1.That the making of the decisions was an improper exercise of the power conferred by the National Health Act 1953 (Cth), as provided by paragraph 5(1)(e) of the Administrative Decisions (Judicial Review) Act 1977 (Cth).
2.That the decisions involved an error of law, as provided by paragraph 5(1)(f) of the Administrative Decisions (Judicial Review) Act 1977 (Cth).
3....
4.That the decisions were otherwise contrary to law, as provided by paragraph 5(1)(j) of the Administrative Decisions (Judicial Review) Act 1977 (Cth).”
Relevantly, the relief claimed by Moran is in these terms:
“1.An order setting aside the Respondents’ decisions with effect from 17 March 1977.
2.An order referring the matters to which the decisions relate to the Respondents for further consideration, subject to such directions as the Court thinks fit.”
Although no pleadings have been ordered, Moran has filed something equivalent, namely a notice of facts and contentions, dated 18 July 1997. It will be convenient to refer to that document at this stage.
THE FACTS CONTENDED FOR BY MORAN
By its notice of facts and contentions, Moran alleges the following as the material facts:
On about 17 September 1987, Moran Operations Pty Limited, a company in the Moran Health Care Group, purchased and acquired the shares in FAI Hospitals Limited, which owned and controlled eight nursing homes in the Sydney metropolitan area (Annandale Nursing Home, Armon Nursing Home, Belgrave Nursing Home, Belmore Nursing Home, Canterbury Nursing Home, Crest Nursing Home, Fernleigh Nursing Home and Stanmore Nursing Home). The then directors of FAl Hospitals Limited resigned, and FAI Hospitals Limited was subsequently re‑named Moran Hospitals Pty Limited (the applicant).
Prior to that purchase and acquisition, the Moran Health Care Group had no involvement in the management or operation of the nursing homes.
The Commonwealth Department of Human Services and Health wrote the proprietor of the eight nursing homes on about 10 December 1993 seeking to validate the nursing homes' records for the financial year 1986‑1987.
On 4 February 1994 Moran Health Care Group Pty Limited wrote the Department requesting cancellation of the intended validation, given the change of ownership of the nursing homes and the lapse of more than 12 months since that change.
The Department wrote the proprietor of each of the eight nursing homes on 27 April 1994 rejecting the proposition that there had been a sale of each nursing home in September 1987, stating that the validation of each nursing home for 1986‑1987 would proceed, and seeking the production of 30 itemised sets of records and documents for each of the eight nursing homes. The applicant provided the documents as and when they were located after searches, inquiries and correspondence with various persons, including suppliers of goods and services and government departments, but experienced difficulty in tracing all relevant documents, particularly invoices and primary accounting records.
After the validation was concluded, an exit interview was held in about mid-1995, attended by Messrs Moran, Farrugia and Brotherhood for the applicant, and Messrs Carbery and Ellul and other departmental officers for the Department. The Department furnished worksheets showing the sum of $1,195,115 as proposed recoveries from the applicant. Missing invoices and allegedly unsubstantiated costs subject to a coalescence factor accounted for a significant proportion (76%) of that sum. The applicant's representatives objected to the sample of nursing homes used by the Department as a basis for comparison, and offered to continue their efforts to locate the missing invoices and costs.
The applicant continued to search for missing invoices, and kept the Department informed of its searches and related difficulties throughout 1995.
About the end of 1995, the Department applied another methodology to the validation after discussions with Mr David Farrugia.
On about 22 February 1996, the results of the second validation exercise were presented to Messrs Moran, Hartigan, Farrugia and Brotherhood for the applicant at an exit interview with Messrs Carbery and Ellul for the Department. At this interview, a summary of the validation and statement of reasons were tabled for each of the eight nursing homes, and a sum of $540,000 was sought to be recovered from the applicant.
On 29 February 1996 Moran Health Care Group Pty Limited wrote the Department on the applicant’s behalf taking issue with a number of items raised in this validation at the exit interview of about 22 February 1996.
On 2 October 1996 Messrs Bowman and Carbery on behalf of the Department orally informed Messrs Brotherhood and Farrugia on behalf of the applicant that the Department proposed to seek recovery of $1.19 million. The applicant's representatives protested, saying that the applicant would not accept that determination and would appeal against that decision.
On about 16 or 17 December 1996 Ms Halton of the Department telephoned Mr Brotherhood with a proposal that the Commonwealth would consider lowering the amount for recovery if the Moran group agreed not to appeal the matter. Mr Brotherhood informed Mr Farrugia of this, mentioning the figure of $540,000 as the amount acceptable to the Department, and Mr Farrugia telephoned Ms Halton on about 17 December 1996 to discuss the proposal. Ms Halton told Mr Farrugia that the Department wanted to wrap up the validations and would apply a loading of $540,000 if the Moran Health Care Group could provide a written undertaking not to appeal the decision.
On about 23 December 1996 Mr Farrugia telephoned Ms Halton and informed Ms Halton that the Department offer of $540,000 was accepted.
The applicant then discontinued its efforts to trace missing invoices and build up primary accounting records.
Shortly after 7 February 1997 Mr Brotherhood told Mr Farrugia that the Department had advised Mr Brotherhood that the offer of $540,000 was off.
On 10 February 1997 the third validation report was delivered to the head office of the Moran Health Care Group, showing proposed recoveries totalling $1,118,145.72, payable over periods of five to nine months by deductions from the advances due to each of the eight nursing homes.
On 12 February 1997 the Executive Director of the Moran Health Care Group wrote to Ms Halton confirming the applicant's acceptance of the offer of $540,000, with the appropriate recovery period to be finalised.
Despite letters from the applicant's solicitors, the Department subsequently asserted that it proposed to recover the total amount of $1,118,145.72 over a uniform five month period, but subsequently reverted to a variable period of five to nine months.
In respect of these facts, Moran relies on the affidavit evidence of several witnesses including Messrs Farrugia and Brotherhood. Mr Farrugia also gave oral evidence when cross-examined in the present application. Mr Farrugia’s affidavit and oral evidence will be described below.
MORAN'S LEGAL CONTENTIONS
By its notice of contentions, Moran contended for the following:
The respondents should not have decided in December 1993 or April 1994 to validate the applicant’s eight nursing homes for the period 1 July 1986‑30 June 1987, regard being had to the change of beneficial ownership of the nursing homes on about 17 September 1987.
Such decisions were beyond the power under s 46D(4) of the Act as Part VD of the Act came into force only on 21 December 1992 and 1 July 1993; or were not in accordance with the Department's policy which had given rise to a legitimate expectation that the Department would not validate proprietors of nursing homes in respect of those nursing homes sold or purchased 12 months previously.
The second respondent’s decisions allegedly determining the amounts to be recovered under s 46E(1) of the Act in respect of each of the applicant’s eight nursing homes were an improper exercise of the power and lacked any justifying evidence or material because the second respondent: failed to take into account the change of beneficial ownership of the nursing homes in about 17 September 1987; failed properly to take into account ledger entries and other evidence for expenditure where invoices were missing; failed properly to consider the reasons given by the applicant for ledger variations from amounts claimed; failed to use nursing homes comparable to those of the applicant as a basis for comparison; failed properly to apply Principle 41 to claims for repairs and maintenance; exercised the power arbitrarily in that the infrastructure costs of nursing homes subjected to earlier validations for 1986-1987 were treated more leniently than those of nursing homes subjected to later validations for the same period; was inconsistent in the treatment of missing invoices; and in two prior validation decisions for the period 1986-1987 made in 1995 and 1996 in respect of the applicant’s eight nursing homes, fixed different amounts determined to be an overpayment and used apparently different methodologies in doing so.
The second respondent’s decisions referred to in contention 3 above involved an error of law for the reasons stated in contentions 1 and 2.
The second respondent’s decisions referred to in contention 3 above were otherwise contrary to law in that:
(a)for the second respondent to proceed to make the determinations preparatory to the first respondent seeking to recover the amounts so determined was a breach of contract;
(b)the second respondent was estopped from making the determinations preparatory to the first respondent seeking to recover any amounts so determined; and
(c)for the representative of the Commonwealth Department of Health and Family Services to make the representations which she did amounted to misleading or deceptive conduct in the circumstances by the Commonwealth in contravention of s 52 of the Trade Practices Act 1974.
The first respondent’s decisions allegedly fixing recovery of the determined amount of an alleged overpayment under s 46E(2) were an improper exercise of the power because the first respondent failed to consider that the second respondent’s determinations in respect of the applicant’s eight nursing homes were incorrect; failed to have regard to the impact of his decisions on each of the applicant’s nursing homes; arbitrarily fixed a variable schedule for recovery of the alleged overpayment ranging from five to nine months, then changed to a uniform five-month period for the recovery, before reverting to the variable schedule ranging from five to nine months.
The first respondent’s decisions referred to in contention 6 above involved an error of law in that the respondents were not entitled to determine against and recover any likely overpayment of benefit from the applicant in 1997 in respect of matters occurring before 17 September 1987 for the reasons stated in contentions 1 and 2, above.
The first respondent’s decisions referred to in contention 6 above were otherwise contrary to law in that:
(a)for the first respondent to proceed to seek recovery of the amounts allegedly determined by the second respondent to be an overpayment was a breach of contract;
(b)the first respondent was estopped from seeking to recover any amounts so determined by the second respondent; and
(c)for the representative of the Department to make the representations which she did amounted to misleading or deceptive conduct in the circumstances by the Commonwealth in contravention of s 52 of the Trade Practices Act 1974.
THE RESPONDENTS’ POINTS OF CONTENTION
By their points of “claim” (sc. contention), dated 23 July 1997, the respondents contend for the following:
(a) As to the estoppel/compromise alleged by Moran
(i) As to the facts.
The respondents first contend that, on the face of Mr Farrugia’s affidavit and oral evidence, it is "absolutely clear" that "there was never a concluded arrangement between the parties".
In order to understand the issues raised by this argument, it will be necessary next to refer to the evidence relied upon by Moran in this connection, principally in the affidavit of Mr Farrugia sworn 30 May 1997.
In his affidavit (pars 1-25), Mr Farrugia described the events depicted in pars 1-8 in Moran's notice of facts contended for, set out above. Mr Farrugia’s affidavit then proceeded:
“26.On or about 22 February 1996 an exit interview was conducted at which Mr Carbery and Tony Ellul of the Respondent were present and myself, Arthur Brotherhood, Shane Moran and John Hartigan were present on behalf of the Applicant. At the interview a summary of validation and statement of reasons were tabled for each of the eight facilities. Annexed hereto and marked with the letter “N” is a copy of the summary and statements of reasons.
27.The validation summary and statement of reasons for each nursing home also included determinations to disallow certain expenses of replacements and repair and maintenance invoices.
28.At the interview I recall the officers of the Respondent tendering a spreadsheet which indicated that a total sum for recovery following the review was to be $540,000.00. No specific time was set to respond to the findings. I recall that either myself or one of the other parties present on behalf of the Applicant said words to the following effect:
‘We will look into the matter promptly in order to resolve the matter’.”
In his affidavit, Mr Farrugia went on (pars 29-31) to refer to the events described in pars 9-11 of Moran's notice of facts. Mr Farrugia’s affidavit continued:
“33.I am informed by Mr Arthur Brotherhood that Ms Jane Halton, the First Assistant Secretary, Aged and Community Care Branch of the Department of Health and Family Services, contacted him and advised him that the Respondent could consider the lower amount for recovery provided that the Applicant waived its appeal rights under the National Health Act.
34.On or about 17 December 1996 I recall that Arthur Brotherhood called me and we had a conversation in which words to the following effect were said:
‘Jane Halton for the Department is [sic] Central Office has called me in relation to seeking a solution to the FAI loading situation. The department is willing to allow the $540,000.00 to stand if the Group is willing to provide an undertaking not to appeal the issue’.
I then recall Arthur giving me Jane Halton's telephone number.
35.On or about 17 December 1996 I contacted Jane Halton by telephone and I recall having a conversation in which words to the following effect were said:
‘I wish to speak to you regarding the negative loading calculated for FAI Hospitals Limited of $540,000.00’.
I do not recall her response at this stage. I recall that I was concerned that she had spoken to Mr Arthur Brotherhood who was the Chief Executive Officer of the National Association of Nursing Homes and Private Hospitals Inc. and that she had not spoken to me about a matter concerning the Applicant. I therefore recall words being used to the following effect:
‘Whilst the Moran Group is closely affiliated with the National Association of Nursing Homes and Private Hospitals Inc., the Moran Group is not the National Association. I would appreciate it if you could call me in the future in respect to matters affecting the Moran Group’.
I then recall saying:
‘Because of the change of ownership between FAI and the Group we do not accept that we should be paying anything at all especially not $1.19 million. Arthur Brotherhood tells me that the department is now willing to agree to the sum of $540,000.00.’
I recall Jane Halton saying words to the following effect:
‘The department will accept the finding of the revised method of validation although the methodology is different.’
I said:
‘The matter has been discussed with members of the Sydney Office and the fact that they accepted methodology was due to the unique circumstances of the matter’.
Jane Halton then said:
‘The department is trying to wrap up the outstanding issue of the FAI matter. The loading of $540,000.00 would be applied as calculated if the Moran Health Care Group can provide a written undertaking not to appeal the decision’.
I cannot recall a loading period being mentioned as the emphasis was on the sum mentioned and the undertaking. I then said:
‘I will contact you once I have discussed the matter with the director. I am on annual leave from Friday 20 December 1996 but could be available on 23 December 1996’.
37.On or about 23 December 1996 I contacted Jane Halton and recall having a conversation with her in which words to the following effect were said:
‘Can you tell me what progress has been made in respect of the matter’.
She said:‘We will have to be comfortable with the methodology but the offer still stands’
I said:‘We will accept the offer on the basis that a reasonable loading period could be provided.’
She said:‘What length of period would be acceptable?’
I said:‘A minimum of 4 years would be acceptable’.
She said:‘2 years is the norm prior to seeking financial statements’
I said:‘We were given indications by the department that the loading period for this matter would be quite flexible.’
She said:‘I will have to clarify this issue and I will contact you.’
I then said:‘The need to resolve the matter is urgent as I am going on annual leave and will not be available until 13 January 1997’
She said:‘I want the matter finalised before I go on annual leave which commences on 15 January 1997’.
38.I recall contacting Jane Halton's office twice on separate days between 13 to 15 January 1997 leaving my name and number on both occasions. I recall saying to the person who took my call:
‘Has any further thought been given to the determination of the loading period?’
I was advised:
‘Miss Halton is at a meeting and is going on annual leave on 15 January 1997. I have not heard from her on the issues of the loading periods.’
39.I took annual leave between 27 January 1997 and 7 February 1997. Upon my return I was advised by Mr Arthur Brotherhood that the Respondent had advised him that the offer of $540,000.00 was off.”
Mr Farrugia then said (par 40) that, on 10 February 1997, the Department delivered to Moran revised validation reports for a total amount of $1,118,145.72. Mr Farrugia next (par 41) referred to the letter dated 12 February 1997 written by Moran to Ms Halton. The letter stated this:
“VALIDATIONS 1986-87 MORAN HOSPITALS PTY LIMITED NURSING HOMES
We refer to a telephone conversation between yourself and Mr Arthur Brotherhood of the National Association of Nursing Homes and Private Hospitals Inc prior to Christmas 1996 concerning the above matter.
We are advised that in that conversation you made an offer to Mr Brotherhood, acting on behalf of Moran Hospitals Pty Limited, in respect of the finalisation of the above validations. That offer, subsequently confirmed in discussions between you and David Farrugia of our company, was that an amount of $540,000.00 was acceptable to your Department for the finalisation of the above validations on the basis that our company agree not to appeal such an amount. We note that this offer followed lengthy negotiations between your Department and our company over the last two years. These negotiations included acceptance by senior officers of your Department of the method applied to the assessment of the NH 19’s for 1986/7.
We confirm our company’s acceptance of the offer of $540,000.00 as discussed between by you and Mr Brotherhood and again with Mr Farrugia and as accepted by Mr Farrugia prior to Christmas 1996.
We still await your response to discussions between yourself and Mr Farrugia in relation to the finalisation of the appropriate recovery period.”
Reference should also be made to the following evidence given by Mr Farrugia in cross-examination:
“QYes, well, I am talking now about paragraph 33 of your affidavit, Mr Farrugia, at this point in time?
A.Well, that’s what was relayed to me through Arthur Brotherhood.
QWell, what you have recorded as being relayed to you was that the respondent could consider the lower amount provided a condition was fulfilled about the applicant waiving its appeal rights. Now, that is correct, is it?
AThat’s correct.
QAll right. If one then goes to paragraph 34 you will see there that you record Mr Brotherhood telling you what Ms Halton has told him, do you see that?
AYes.
QYou will see the second sentence:
The department is willing to allow the $540,000 to stand if a condition is fulfilled.
See that?
AThat’s correct, yes.
QIs that true?
AYes.
QSo there was a condition attached to the offer?
AThat’s correct.
QThen in paragraph 35 you relate the details of a conversation between you and Ms Halton in December 1996, see that?
AYes.
QCould I take you over to page 13 [i.e. par 36] of your affidavit? At the top of the page you record Ms Halton as saying that the loading of $540,000 would be applied as calculated if the Moran Health Care Group can provide a written undertaking, see that?
AYes.
QSo that word ‘if’ indicated to you that the offer was subject to agreement by the applicant company of the condition that attached to it?
AThat’s correct.
QYou never accepted that offer subject to that condition, did you, Mr Farrugia?
AThe acceptance of the $540,000 was accepted.”
On behalf of the respondents, the following submissions are made with respect to the effect of Mr Farrugia’s evidence:
· With respect to par 33, the alleged offer is to "consider" the amount of $540,000, subject to a stipulated qualification regarding waiver of appeal rights.
· With respect to par 34, the alleged offer was to “allow the $540,000 to stand if the group was willing to provide an undertaking not to appeal the issue”. No evidence was given that this undertaking was extended.
· As to par 35, the alleged offer was never the subject of acceptance.
· As to par 37, the applicant made a counter-offer which was not accepted at that time, nor since.
· As to par 39, the applicant knew that the Department had not accepted its counter-offer.
· As to par 40, the Department indicated that it proposed to recover the sum of approximately $1.2 million, and advised the applicant to this effect; and
· As to par 41, the applicant purported to accept an offer which it knew had been withdrawn two days earlier.
(ii)As to the legal position
On behalf of the respondents, it is contended that there is no scope in Australian public law for any doctrine of estoppel against a statute or so as to control the performance of a statutory discretion. Reliance is placed upon the reasoning of the High Court in Attorney-General (NSW) v Quin (1990) 170 CLR 1 and upon the decision of the Full Federal Court in Minister for Immigration v Petrovski, Burchett, O'Loughlin and Tamberlin JJ, 12 March 1997, unreported. It is said, on behalf of the respondents, that for similar reasons, there can be no possibility of the respondents having the legal capacity to enter into a compromise agreement in a field of statutory responsibilities such as is found in the present context.
It is further submitted that, in any event, even if an estoppel/compromise could arise in some limited statutory contexts, the regime surrounding the subject decisions under the Act allows no room for estoppel/compromise. The system is that advances of likely benefits are made; these advances can be the subject of determinations as to likely overpayment pursuant to s 46E(1), which likely overpayments can be recovered pursuant to s 46E(2); the final amount of an entitlement is not determined until the setting of notional fees pursuant to s 46D, which can only be set following an investigation to find out the actual expenditure incurred by a proprietor pursuant to s 46D(4). Pursuant to s 40AE, the applicant can request the Minister to review a decision under s 51A which indirectly permits review of decisions under s 46E. The Minister must then refer the matter for examination and report to a Nursing Homes Fees Review Committee of Inquiry (“the Committee”) pursuant to s 40AEC. The Minister is then empowered, pursuant to s 40AEF, to review decisions under s 46E. The statutory scheme makes it clear, the argument runs, that the question of entitlements must be determined in accordance with the Act, rather than in accordance with any alleged promise. Moreover, the Court is here dealing with decisions at an interim phase in the statutory process, namely, decisions with respect to the likely overpayment.
(b)As to Moran's claim of a contravention by officers of the Department of Health of s 52 of the Trade Practices Act
On behalf of the respondents, it is submitted that the Commonwealth is not bound by the Trade Practices Act except to the extent that it carries on business (see s 2A(1)), and that no business was carried on by the Commonwealth here. The function and responsibilities of administering the system of payment to nursing home proprietors did not amount to the carrying on of a business by the Commonwealth.
(c)As to Moran's claim of change of ownership of its nursing homes for the purposes of Part VD of the Act
Part VD of the Act (ss 63-65U) deals with "requirements in respect of the sale of approved nursing homes". The objects of the Part include "the recovery of any overpayment of Commonwealth benefit paid in respect of approved nursing home patients in the nursing home" (see s 63(d)). The interpretation provision, s 65, defines the sale and purchase of a nursing home as follows:
“65 (2) A purchase of an approved nursing home occurs when the ownership of the business or undertaking carried out at the nursing home is transferred from one person to another person whether or not that transfer results from the payment of an amount of money.
(3) A sale of an approved nursing home is the transfer of the ownership of the business or undertaking carried out at the nursing home from one person to another person whether or not that transfer occurs as the result of the payment of an amount of money.”
The applicant, in its notice of facts and contentions, had raised an issue in relation to s 65(2) of the Act. Moran contended that there was a purchase/sale by way of transfer of the ownership of the businesses or undertakings carried out at the nursing home from one person to another person. (The evidence is that a cash for shares transaction was finalised between FAI Hospitals Limited and Moran on 17 September 1987, whereby the ownership of FAI Hospitals Limited changed.)
The respondents submit in response that it is elementary that the acquisition by Moran of the shares in FAI Hospitals Limited did not constitute a sale or purchase of business assets. The respondents say that the legal effect of the share transaction was simply to change the ownership of shares in the company, FAI Hospitals Limited; and that this company remained the owner of the nursing homes following the share transaction, although it changed its name to Moran subsequently. It is contended on behalf of the respondents that the legal ownership of the business of the company has not changed, even though all or some of the shares in it as capital may change hands.
THE RESPONDENTS’ NOTICE OF MOTION
By their notice of motion, dated 23 July 1997, now before the Court, the respondents seek the following relief :
“1.the Applicant’s claim for relief in relation to alleged estoppel and/or compromise be dismissed pursuant to Order 20 Rules 2(1)(a) and (c);
2.the Applicant’s claim for relief under the Trade Practices Act 1974 be dismissed pursuant to Order 20 Rules 2(1)(a) and (c);
3.the Applicant’s claim for relief in relation to alleged transfer in ownership of the businesses or undertakings carried out at the subject nursing homes be dismissed pursuant to Order 20 Rules 2(1)(a) and (c); and
4.the Court in its discretion refuse to grant the application for review of the subject decisions pursuant to paragraphs 10(2)(a) and 10(2)(b)(ii) of the Administrative Decisions (Judicial Review) Act 1975 [sic].”
By O 20 r 2(1)(a) and (c) of the Federal Court Rules, it is provided:
“2(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding -
(a) no reasonable cause of action is disclosed;
...
(c) the proceeding is an abuse of the process of the Court,
the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim or relief in the proceeding.”
By s 10(1) of the Administrative Decisions (Judicial Review) Act 1977 (“ADJR Act”) it is relevantly provided:
“10(1) The rights conferred by sections 5, 6 and 7 on a person to make an application to the Court in respect of a decision, in respect of conduct engaged in for the purpose of making a decision or in respect of a failure to make a decision:
(a)are in addition to, and not in derogation of, any other rights that the person has to seek a review, whether by the Court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure; and...
By s 10(2)(a) and s 10(2)(b)(ii) of the ADJR Act it is materially provided:
“10(2) [Court’s powers] Notwithstanding subsection (1):
(a)the Court, or any other court, may, in a proceeding instituted otherwise than under this Act, in its discretion, refuse to grant an application for a review of a decision, conduct engaged in for the purpose of making a decision, or a failure to make a decision, for the reason that an application has been made to the Court under section 5, 6 or 7 in respect of that decision, conduct or failure; and
(b)the Court may, in its discretion, refuse to grant an application under section 5, 6 or 7 that was made to the Court in respect of a decision, in respect of conduct engaged in for the purpose of making a decision, or in respect of a failure to make a decision, for the reason -
...
(ii)that adequate provision is made by any law other than this Act under which the applicant is entitled to seek a review by the Court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure.”
By s 10(3) of the ADJR Act the following is provided:
“10(3) [Interpretation of review] In this section, ‘review’ includes a review by way of reconsideration, re-hearing, appeal, the grant of an injunction or of a prerogative or statutory writ or the making of a declaratory or other order.”
In relying upon s 10(2) of the ADJR Act, the respondents refer to the circumstance that, on 3 July 1997, Moran applied to the Minister, pursuant to s 40AE of the Act, for review of the foregoing decisions with respect to likely overpayment and recovery. In support of their notice of motion, the respondents also call in aid the foregoing contentions. They also rely upon the circumstance that the applicant has elected to resort to the system of statutory merits review of the subject decisions set out in the Act.
The outcome of the statutory processes will be, the respondents’ contention runs, the making of a wholly fresh statutory decision by the Minister or his delegate. The decisions of the Minister or his delegate are then reviewable on their merits in the Administrative Appeals Tribunal. In these circumstances, the respondents say, the maintenance of the present proceedings amounts to an abuse of process and is completely unwarranted. Accordingly, the Court should either dismiss the application, or decline to entertain the application made in the principal proceedings, or decline to entertain it pursuant to the above provisions.
I should say at once, as I have already indicated in the course of argument, that there is, in my view, simply no answer to the respondents’ contentions in respect of both the Trade Practices Act questions and the ownership/transfer issue arising under s 65(2) of the Act. Accordingly, I propose to make appropriate orders in that regard.
SHOULD THE DETERMINATION OF A SEPARATE QUESTION BE ORDERED ON THE ESTOPPEL/COMPROMISE ISSUE?
In the course of argument I raised with counsel for the parties whether, in the interests of justice and of good case management, a separate question should be determined, in effect, to resolve finally the estoppel/compromise aspect of the litigation. I had in mind the general desirability of isolating separate questions where practicable, especially where a distinct legal issue presents itself and it is in the interests of expedition that it be determined separately. (See the observations of Lord Woolf MR in his “Access to Justice - Final Report”, July 1996 at 231-2; cf. Yango Pastoral Co Pty Limited v First Chicago Australia Limited (1978) 139 CLR 410 per Mason J at 419). I had not, at that stage, decided whether I should accede to the respondents’ motion for summary dismissal on the estoppel/compromise issue.
Since the drafting of any appropriate separate question would itself be a task of some complexity and difficulty, counsel for each of the parties were invited to submit a draft of what, in their respective contentions, would have been an appropriate separate question. Counsel for Moran submitted the following as possible separate questions:
“1)Whether the Commonwealth Department of Health and Family Services is bound by agreement that the Department would accept $540,000 in full and final settlement of a claim by the Department to recover any likely overpayments applicable to the eight (8) nursing homes referred to in the proceedings for the period 1986/7.
2)Further and, in the alternative, whether the Commonwealth Department of Health & Family Services is estopped from denying an agreement that the Department would accept $540,000 in full and final settlement of a claim by the Department to recover any likely overpayments applicable to the eight (8) nursing homes referred to in the proceedings for the period 1986/7.”
Counsel for the respondents, on the other hand, has proposed a different question as follows:
“Whether or not the Secretary of the Department of Health and Family Services can be estopped from making a determination under s.46E of the National Health Act 1953 (i.e. as to likely overpayment) on the basis of an alleged antecedent agreement entered into between an officer of the Secretary’s Department (not being a delegate of the Secretary) and a nursing home proprietor as to a particular amount.”
It should be said, in the light of the complexities that have arisen in this adjectival aspect of the matter, that circumstances can arise where, even if it is not appropriate to make a formal order for the determination of a separate question, nonetheless, the parties’ arguments deserve a full consideration at the interlocutory stage. A recent illustration of such a situation may be found in the reasoning of the Full Federal Court in Federal Airports Corporation v Aerolineas Argentinas, Beaumont, Whitlam and Lehane JJ, 1 August 1997, unreported, and, in particular, see the judgment of Lehane J (at 15). That was a case of a claim by way of a collateral challenge which, perhaps, has similarity, in some procedural respects, with the present case.
As the respective attempts of the parties to frame an appropriate question would indicate, the identification, in advance of the final hearing of this matter, of the precise legal question to be set for separate determination is, indeed, a complex and difficult undertaking. A further complication in attempting an ultimate resolution of the substantive issue that appears to arise in this connection is that some of the facts, at least, remain in contention. Specifically, whilst the respondents have not yet sought to adduce their evidence on the facts, the respondents have, nonetheless, foreshadowed that they hope, and expect, to lead evidence that will, at least in some respects, contradict Mr Farrugia’s version of the events leading up to the alleged compromise.
Accordingly, as can sometimes happen, for instance, as in the case of Yango Pastoral, above, the parties request the Court, for the purposes of the argument on the legal questions that have emerged, to assume particular facts in favour of a party, in the present case that party being the applicant. This can, it must be acknowledged, in some circumstances, substantially limit the utility of isolating a separate legal question. In all of the circumstances, it is, I think, preferable to defer consideration of the application for the determination of a separate legal question.
Accordingly, I propose now to consider the estoppel/compromise issue in the context of par 1 of the respondents’ notice of motion now before the Court.
THE "ESTOPPEL/COMPROMISE" ISSUE
(a) The substantive aspect
The complications that arose in the attempt to frame the separate question and the complex character of the parties’ contentions on the point of substance, spring, to some extent, from the dual character of Moran's claims in the principal proceedings as having both a public and a private law aspect. On the one hand, in invoking the Court's jurisdiction under the ADJR Act, Moran seeks to rely upon the public character of the responsibilities of the Commonwealth and its officers in the discharge of their statutory functions under the National Health Act 1953. On the other hand, Moran also claims that, in the discharging of those functions, contractual and other private law causes of action, perhaps of a restitutionary kind, arose.
In my opinion, it was reasonably arguable that Moran could rely upon both the public and private law aspects of its relationship with the Commonwealth's officers. It is true that a claim that an agreement and compromise has been reached, or that a party should be held to be estopped from denying the existence of such an agreement, are more readily recognised as private, rather than public law, remedies. Nonetheless, it is possible, in my opinion, in appropriate circumstances, that these public and private causes of action and remedies may not only be able to co-exist under the general law, but also may intermingle.
A recent illustration of this may be found in the decision of the High Court in Commissioner of State Revenue (Victoria) v Royal Insurance Australia Limited (1994) 182 CLR 51. By s 111(1) of the Stamps Act 1958 (Vic.) it was provided:
“Where the Comptroller finds in any case that duty has been overpaid... he may refund to the company, person or firm of persons which or who paid the duty the amount of duty found to be overpaid.”
An appeal against an order by the Supreme Court of Victoria (Appeal Division), by way of mandamus, directing the Commissioner to refund the subject amount, was dismissed by the High Court.
On behalf of the Commissioner, it was argued, amongst other things (see at 56), that mandamus would not be granted where there is another remedy available, and specifically where the taxpayer could have proceeded for money had and received against the Commissioner. It was contended, for the Commissioner, that if the taxpayer were entitled to mandamus, the effect would be to circumvent the statutory framework and that the constraints of the objection and appeal provisions could be subverted.
But the argument was rejected. It was held by Brennan, Toohey and McHugh JJ that the Comptroller had no residual discretion to refrain from making a refund under s 111(1), once a finding of overpayment had been made; there was then a legal liability to refund. Mason CJ held that the discretion under s 111 was to be exercised in accordance with the principles of the law of restitution.
In dealing with the topic, "Recovery according to restitutionary principles", Mason CJ said (at 66):
“[T]he grant of the discretionary power to refund an overpayment should not be regarded as authority to refuse a refund which a taxpayer is entitled to recover according to the principles of the general law. It is necessary then to ascertain how Royal’s claim to recover stands under the law of restitution.”
Brennan J, with the agreement of Toohey and McHugh JJ, said (at 88):
“The Commissioner is a public officer vested with a power to be exercised for the purpose, inter alia, of discharging her liabilities. When the power exists and the circumstances call for the fulfilment of a purpose for which the power is conferred, but the repository of the power declines to exercise the power, mandamus is the appropriate remedy even though the repository has an unfettered discretion in other circumstances to exercise or to refrain from exercising the power. Mandamus will go where there is a duty to pay money. In this case, there is no residual discretion in the Commissioner to refrain from making a refund in exercise of her powers under s. 111(1) once she finds that there has been an overpayment and there is a legal liability to refund the amount found to have been overpaid.“
In my view, these principles of statutory construction, looked at against the background of general law principles, are capable of general application. It must follow that it is no answer to a claim for judicial review to assert that the relevant function involves the exercise of a statutory discretion to make, or not make, a refund.
There is also a wider principle involved here, as Lord Steyn has recently noted in R v Home Secretary; Ex parte Pierson [1997] 3 WLR 492 (at 521):
“The correct analysis of this case is in terms of the rule of law. The rule of law in its wider sense has procedural and substantive effect. While Dicey’s description of the rule of law (Law of the Constitution, p. 203) is nowadays regarded as neither exhaustive nor entirely accurate even for his own time, there is much of enduring value in the work of this great lawyer. Dicey’s famous third meaning of the rule of law is apposite. He said, at p. 203:
‘The ‘rule of law,’ lastly, may be used as a formula for expressing the fact that with us the law of constitution, the rules which in foreign countries naturally form part of a constitutional code, are not the source but the consequence of the rights of individuals, as defined and enforced by the courts; that, in short, the principles of private law have with us been by the action of the courts and Parliament so extended as to determine the position of the Crown and its servants; thus the constitution is the result of the ordinary law of the land.’
This was the pivot of Dicey’s discussion of rights to personal freedom, and to freedom of association and of public meeting, at pp. 206-283. It is clear therefore that in the relevant sense Dicey regarded the rule of law as having both procedural and substantive effect.”
Lord Steyn went on to say (at 522):
“Unless there is the clearest provision to the contrary, Parliament must be presumed not to legislate contrary to the rule of law. And the rule of law enforces minimum standards of fairness, both substantive and procedural.”
I respectfully agree. See also, on the related theme of the equity of the statute, Reinhard Zimmermann [1997] 56 CLJ 315 (at 321-322); Nelson v Nelson (1995) 184 CLR 538 per Deane and Gummow JJ (at 552-4) and McManus v Scott-Charlton (1996) 140 ALR 625 per Finn J (at 635).
Has Parliament clearly legislated to contradict the presumed application of the rule of law in the present case? In my opinion, it has not.
The central provision for immediate purposes is s 46E of the Act. On any construction, literal or purposive, this provision can have no more than procedural significance. It is framed in terms of what the Secretary "reasonably believes". Clearly, the formation of that belief could not have substantive effect as an uncontestable decision, for constitutional and other reasons (see, e.g. MacCormick v Commissioner of Taxation (1984) 158 CLR 622). Section 46E is no more than a machinery provision. However, whilst initially facultative in its expression, the exercise of the discretion provided for by the provision may be controlled by judicial review, if appropriate, as happened in Royal Insurance.
In my opinion, the authorities relied upon by the respondents, in this connection, specifically, Quin and Petrovski, are distinguishable by their special contexts, which are far removed from the present case. Rather, in my view, the present case is governed by the principles discussed in the Royal Insurance case. But whilst the relevant restitutionary principles of the general law considered in Royal Insurance are applicable, it is, nonetheless, not apparent how, even on Moran's version of the facts, a cause of action of account and satisfaction, or of an account stated, or of settled accounts, or of any binding estoppel, could be made out here.
So far as the alleged agreement and compromise is concerned, I accept, as the governing principle that enunciated by Davies and Einfeld JJ, with the concurrence of Gummow J, in General Newspapers Pty Limited v Telstra Corporation (1993) 117 ALR 629 (at 636-7):
“A contract entered into by a corporation under a general power to enter into contracts is not given force and effect by the empowering statute. The empowering statute merely confers capacity to contract, whilst the validity and effect of the contract is determined by the ordinary laws of contract.”
See also Seddon, “Government Contracts” (at 275).
The source of Commonwealth liability in tort and contract is now settled. In Commonwealth of Australia v Mewett (1997) 146 ALR 299, the High Court has held that although the right to proceed against the Commonwealth in tort and contract stemmed from the Judiciary Act 1903, which removed Crown immunity from suit, yet the liability of the Commonwealth, in tort or contract, derived from the common law which was preserved by the Constitution; that is, the Judiciary Act did not, itself, create any causes of action.
It is true that, in the present case, Moran has invoked the public remedies provided by the ADJR Act as its primary cause of action; yet, secondarily, Moran makes other claims, which are perhaps more readily recognised as possessing a private law nature. I accept that it may be open to Moran to invoke the provisions of the ADJR Act against the background of the general law principles of contract or estoppel, or such other private causes of action or remedies as may be appropriate. However, I have difficulty in understanding how, on any view of the facts deposed to by Mr Farrugia in his affidavit and oral evidence, any such claim could be made out in this area.
I am also prepared to accept that, in some circumstances, a conditional compromise may be binding (see, e.g. Foskett, “The Law and Practice of Compromise”, 3rd ed., at 32-3); and it may further be accepted that it is possible to compromise part of a dispute (see Foskett at 34). I am also prepared to accept that the notion of compromise is judicially favoured. As Lord Hardwicke said in the old case of Pullen v Ready (1743) 2 Atk 587 (at 592):
“[T]he Court will rather rejoice at the agreement because it has absolutely tied up the hands of the Court from meddling in the question.”
In Dixon v Evans (1872) LR 5 HL 606 (at 618), Lord Westbury spoke to similar effect when he said that supposing a compromise has been bona fide made:
“[T]hen, unless manifestly ultra vires the parties, a Court of justice ought to respect it, and not allow it to be questioned.”
See generally, the discussion in Edwards and Watmough, “The Law Relating to Compromises” (at 18-19).
Nonetheless, in my opinion, there are overwhelming difficulties standing in Moran's path on the compromise claim.
In the first place, no authority of the Secretary to authorise Ms Halton to make the compromise alleged has been demonstrated, or even suggested, in the evidence. Secondly, even if one is prepared to accept Mr Farrugia's version of his conversation with Ms Halton in the critical discussion on 23 December 1996, it is clear from that version that no definite commitment was given by either side on that occasion. Thirdly, I think that it is inherently unlikely that the present parties would wish to commit themselves on such an important matter, in any definitive legal sense, without some measure of formality, at least by way of exchange of correspondence, or possibly by way of a deed. None of this occurred in the present case, nor is it suggested that it occurred. These are all indications, in my view, that Moran has no prospect of establishing the compromise agreement it alleges.
The estoppel claim encounters, in my view, similar difficulties. In order to ground an estoppel of the kind now asserted, there needs to be clear evidence of a representation to the appropriate effect. There is not even a suggestion of evidence that would measure up to that yardstick, even if one were to accept Mr Farrugia's evidence entirely.
(b) The adjectival aspects
Although it follows that, substantively speaking, Moran's claims in this area cannot be arguably sustained, some adjectival questions remain.
As has been noted, in dealing with "frivolous" claims, O 20 empowers the Court in a proper case, to order that the proceedings be stayed or dismissed either generally or in relation to any particular claim for relief. By par 1 of the respondent's notice of motion, as has been seen, an order is sought that:
“The Applicant's claim for relief in relation to alleged estoppel and/or compromise be dismissed pursuant to O 20 Rules 2(1)(a) and (c).”
It will further be recalled that in its notice of facts and contentions, Moran did not, at least in terms, purport to sue upon the alleged estoppel or compromise as independent causes of action. Rather, Moran sought to rely upon the respondents’ failure to observe the compromise or the estoppel in that connection as, in effect, an error of law. Then, Moran contended that such an error vitiated the statutory decision-making process.
It follows, I think, that the allegation of estoppel/compromise is not, at least in any freestanding sense, itself a claim for relief, as distinct from an ingredient in a claim for judicial review. It must further follow, in my view, that this aspect falls outside the scope of O 20.
I would add that, if there had been a formal pleading here, it may have been appropriate to strike out such parts of it as sought to rely upon the alleged estoppel or compromise, but this aspect does not now arise. I refuse to make the order sought in par 1 of the respondents’ notice of motion.
THE AVAILABILITY OF THE ALTERNATIVE REMEDY ISSUE
This is the issue raised in par 4 of the respondents’ notice of motion. It will be recalled that a similar argument was rejected in Royal Insurance.
In the present case, the existence of a statutory right to seek a review by the Minister of some aspects of the dispute is not, in my opinion, a reason for the exercise of summary strike-out powers. (See generally, as to the nature of that power, Webster v Lampard (1993) 177 CLR 598 at 611, 618 and 625). Nothing can be conclusively determined in such an administrative review.
Furthermore, given the apparent complexities of this litigation, it is difficult to state in advance of the final hearing what ultimate substantive relief, if any were to be granted, would be the appropriate relief. Until the likely form of that relief is known, it is premature to speculate about the possible existence of discretionary reasons why the Court might, notwithstanding a prima facie entitlement to relief, nonetheless, decline to order judicial review. This is particularly so when the true nature and scope of the administrative review now relied upon is not yet fully known.
Although the respondent sought to rely upon the reasoning of Jenkinson J in F J Hospital Enterprises Pty Limited v Grimes & Rose (1987) 12 ALD 224, that case is clearly distinguishable. His Honour there granted a temporary stay of proceedings pending the carrying out of an administrative review. Jenkinson J made it clear that his order was interlocutory only. It does not, therefore, at all follow that I should now exercise a summary power of permanently staying or dismissing the present proceedings.
I refuse to make the order sought in par 4 of the respondents’ notice of motion.
ORDERS
Accordingly, I make the following orders:
The applicant’s claim for relief under the Trade Practices Act 1974 is dismissed pursuant to O 20 r 2(1)(a) and (c).
The applicant’s claim for relief in relation to the alleged transfer in ownership of the businesses or undertakings carried out at the subject nursing homes is dismissed pursuant to O 20 r 2(1)(a) and (c).
The relief sought in pars 1 and 4 of the notice of motion is refused.
Order that the applicant pay one-half of the respondents’ costs of the notice of motion.
Direct that the applicant file and serve a statement of claim within 28 days.
Matter adjourned for directions on a date to be fixed.
As to 4, the order for costs fairly reflects, in my view, the degree of success enjoyed by the respondents overall and, in particular, their success on the major question argued, being the substantive aspects of the estoppel/compromise issue.
As to 5, it is desirable that the principal proceedings now be regularised by directing that Moran formally state the claims now open to it in a proper pleading. I will give further direction for the filing of a defence by the respondents when this is done.
Finally, I stand the matter over, for directions, to a date to be fixed.
I certify that this and the preceding thirty-four (34) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont
Associate:
Dated: 3 September 1997
Counsel for the Applicant: W G Hodgekiss Solicitor for the Applicant: S Moran & Co Counsel for the First and Second Respondents: T Howe Solicitor for the First and Second Respondents: Australian Government Solicitor Date of Hearing: 18 July 1997; 23 July 1997;
25 August 1997Date of Judgment: 3 September 1997
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