Queensland Medical Laboratory v Blewett, N

[1988] FCA 708

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CATCHWORDS

JUDICIAL REVIEW - Health Insurance Act 1973 - determination by the Minister that new pathology services table be substituted in Schedule 1A of the Act - whether statutory preconditions to such determlnation had been complied with - whether determlnatlon void - s s . 4A, 4BC, 78C of the Act.

JUDICIAL REVIEW - Administrative Decisions (Judlcial Review) Act 1977 - deci'sions to which the Act applies - whether above mermination of the I4inister was of administrative or legislative character.

I	CONSTITUTIONAL LAW - separation of powers - distinction between exercise of legislatlve and executive powers - delegatron of legislative power.
JUDICIAL REVIEW - rules of natural justice or procedural fairness - whether applicable to decisions of a legislative not administrative character.
FEDERAL JURISDICTION - Judiciary Act 1903, S. 39B - whether declaratory relief available under S. 21 of Federal Court of Australia Act 1976 in matters where ~urisdiction attracted by
S. 398 but no relief appropriate thereunder.
WORDS AND PHRASES - statutory requirement that decision maker "shall have regard to" certain matters.
Acts Interpretation Act 1901
Judiciary Act 1903
Health Insurance Act 1973
Federal Court of Australia Act 1976
Administrative Decisions (Judicial Review) Act 1977
Health Legislation Amendment Act 1986
R v Hunt; Ex parte Sean Investments Pty. Ltd. (1979) 53 ALJR
35 2
Turner v Minister for Immigration and Ethnic Affairs (1981) 35 m 8 Minister for Aboriginal Affairs v Peko-Wallsend Ltd. (1986) 162
CLR 24

! Evans v Friemann (1981) 53 FLR 229 4.

Victorlan Stevedoring and General Contracting Co. Pty. Ltd. v

S i T a n (1931) 46 CLR 73

Davls v The Commonwealth (Hlgh Court of Australia, 6 December

T X K unreu.)

Golden-Br0iin.v Hunt (1972) 19 FLR 438

EalthCarkazis (1978) 23 ACTR 5

The Queen v Ludeke; Ex parte The Australian Buildin

Construction Employees' And Builders Labourers' Federatioz

(1985) 159 CLR 636

The Australian Building Constructlon Employees' And Builders

Labourers' Federation v The Commonwealth (1986) 161 CLR 88

Air Caledonie International v The Commonwealth (High Court of
Australia, 24 November 1988, unrep.)

Gunaleela v Minister for Immigration And Ethnic Affairs (1987)

3 4 ALR 263 . . ~ ~.

Bread Manufacturers of New South Wales v Evans (1981) 56 ALJR

9

Calvin v Carr [l9791 1 NSWLR 1 (P.C.)

T h e n q n c k m a n ; Ex parte Fox and Clinton (1945) 70 CLR 598

Kioa v westT3T5-r 1 -

I n r e G m n q (1943) 43 SR (NSW) 312

Mahon v Air New Zealand Ltd. 119841 AC 808

m A u s t . 1 Pty. Ltd. v Brown (1986) 14 FCR 3	,09
QUEENSLAND MEDICAL LABORATORY & ORS. V NEAL BLEWETT & ORS.
NO. G1333 Of 1988

CORAM:	GUMMOW J .
PLACE	: SYDNEY.

I	DATE :	15 DECEMBER 1988.
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i	IN THE FEDERAL COURT OF AUSTRALIA	1
NEW SOUTH WALES DISTRICT REGISTRY	1 No. G1333 of 1988
GENERAL DIVISION	1

BETWEEN:	QUEENSLAND MEDICAL LABORATORY First Applicant
SYDNEY DIAGNOSTIC SERVICES (N.S.W.) PTY. LTD. Second Applicant
IHC PATHOLOGY PTY. LTD. Third Applicant
HAl4PSON SCHWIETZER BARKER ROBERTS PTY. LTD. Fourth Applicant

I	DIAGNOSTIC SERVICES PTY. LTD. Fifth Applicant
PATHOLOGY SERVICES (GEELONG) Sixth Applicant
PENRITH LABORATORY Seventh Applicant
RMA STOCK PTY. LTD. AND RR. STEWART PTY. LTD. TRADING AS CAIRNS PATHOLOGY LABORATORY Eighth Applicant
WESTERN PATHOLOGY SERVICES Ninth Applicant
DR. ABRAHAM PHILLIP DOREVITCH TRADING AS DR. DOREVITCH & ASSOCIATES

Tenth Applicant
HANLY MOIR FEAIN & ROCHE PTY. LTD.
Eleventh Applicant
DR. LEWIS DAVIS, DR. ERIC
CAMPBELL, DR. RICHARD de LAMBERT Twelfth Applicant
I4ELBOURNE PATHOLOGY PTY. LTD. Thirteenth Applicant
S. KOLBER PTY. LTD.
Fourteenth Applicant
SOUTHERN PATHOLOGY SERVICES PTY. LTD. Fifteenth Applicant
S. H. P. PATHOLOGY ( I~IELBOURNE )
Sixteenth Applicant
DRS. SULLIVAN, N.J. NICOLAIDES
& PARTNERS
Seventeenth Applicant
SUGARMAN'S PATHOLOGY PTY. LTD. Eighteenth Applicant
AND :	NEAL BLEWETT First Respondent
HIS HONOUR MR. JUSTICE MUNRO Second Respondent
DR. NORRIS CARTER
Third Respondent
DR. PAUL NISSELLE Fourth Respondent
DR. DAVID WHITE Fifth Respondent
DR. S. BELL Sixth Respondent
PETER REID Seventh Respondent
MARY SEESSANG Eighth Respondent

CORAM:  GUMMOW J .

PLACE: SYDNEY.

DATE :  15 DECEMBER 1988.

MINUTE OF ORDER

1

THE COURT:

1. Orders that the tlme wlthln which the Amended

Appllcation for an Order of Review In respect to the

First and Second Decisions therein sought to be

reviewed be extended up to an including	1 November
1988.

2.         Declares that the Pathology Services Advlsory Committee ("the Committee"), being the Second to

Eighth Respondents, in making its recommendation to

the Minister of 31 July 1988, had not performed its

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functions in accordance with the Principles determined for it by the Minister within the meaning of S. 78C ( 2 ) of the Health Insurance Act 1973 ("the

Act" ) .

3.	Declares that the First Respondent in making hls determination of 8 September 1988 did not have before him a recommendation by the Committee within the meaning of S. 4A ( 8 ) of the Act.
4.	Declares that the purported determination of the First Respondent o f 8 September 1988 is void and did not come into effect on 1 November 1988 within the meaning
of S. 4A ( 8 ) of the Act.
5.	Orders that the Respondents pay the costs of the
Applicants, including reserved costs.
-	Note:	Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

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IN THE FEDERAL COURT OF AUSTRALIA 1

NEW SOUTH WALES DISTRICT	REGISTRY	)	No. G1333 of 1988
GENERAL DIVISION	)

BETWEEN:	QUEENSLAND MEDICAL LABORATORY First Applicant
SYDNEY DIAGNOSTIC  SERVICES
(N.S.W.) PTY. LTD. Second Applicant
IHC PATHOLOGY PTY. LTD. Third Applicant
HAMPSON SCHWIETZER BARKER ROBERTS PTY. LTD. Fourth Applicant
DIAGNOSTIC SERVICES PTY. LTD. Fifth Applicant
PATHOLOGY SERVICES (GEELONG) Sixth Applrcant
PENRITH LABORATORY Seventh Applicant

I	RMA STOCK PTY. LTD. AND MR. STEWART PTY. LTD. TRADING AS CAIRNS PATHOLOGY LABORATORY Eighth Applicant
WESTERN PATHOLOGY SERVICES Ninth Applicant
DR. ABRAHAM PHILLIP DOREVITCH TRADING AS DR. DOREVITCH & ASSOCIATES

Tenth Applicant

HANLY MOIR FEAIN & ROCHE PTY. LTD.

Eleventh Applicant

DR. LEWIS DAVIS, DR. ERIC

CAMPBELL, DR. RICHARD de LAMBERT
Twelfth Applicant

MELBOURNE PATHOLOGY PTY. LTD.
Thirteenth Applicant

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S . KOLBER PTY. LTD.

Fourteenth Applicant

SOUTHERN PATHOLOGY SERVICES
PTY. LTD.

Fifteenth Applicant

S.H.P. PATHOLOGY (MELBOURNE)

Sixteenth Applicant

DRS. SULLIVAN, N.J. NICOLAIDES

& PARTNERS

Seventeenth Applicant

I SUGARI4AN'S PATHOLOGY PTY. LTD.
Eighteenth Applicant

AND :	NEAL BLEWETT First Respondent
HIS HONOUR MR. JUSTICE MUNRO Second Respondent
DR. NORRIS CARTER Third Respondent
DR. PAUL NISSELLE Fourth Respondent
DR. DAVID WHITE Fifth Respondent
DR. S. BELL Sixth Respondent
PETER REID Seventh Respondent
MARY SEESSANG Eighth Respondent

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CORAFI:	GUMMOW J .
PLACE:	SYDNEY.
DATE :	15 DECEMBER 1988.

MINUTE OF ORDER

THE COURT ORDERS AS FOLLOWS:

That the proceedings stand over for the appllcants to

brlng in short minutes of orders and declarations to

glve effect to the reasons for judgment dellvered	15
December 1988.

Note: Settlement and entry of orders is dealt wlth by Order

36 of the Federal Court Rules.

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IN THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY	1	NO.	~ 1 3 3 3	o f 1988
GENERAL DIVISION	)

i BETWEEN: QUEENSLAND MEDICAL LABORATORY

Flrst Applicant

DIAGNOSTIC	SYDNEY	SERVICES
(N.S.W.) PTY. LTD. Second Applicant

I	IHC PATHOLOGY PTY. LTD. Third Applicant
HAMPSON SCHWIETZER BARKER ROBERTS PTY. LTD. Fourth Applicant
DIAGNOSTIC SERVICES PTY. LTD. Fifth Applicant
PATHOLOGY SERVICES (GEELONG) Sixth Applicant
PENRITH LABORATORY Seventh Applicant
RMA STOCK PTY. LTD. AND MR. STEWART PTY. LTD. TRADING AS CAIRNS PATHOLOGY LABORATORY Eighth Applicant
WESTERN PATHOLOGY SERVICES Ninth Applicant
DR. ABRAHAM PHILLIP DOREVITCH TRADING AS DR. DOREVITCH & ASSOCIATES Tenth Applicant

HANLY MOIR FEAIN & ROCHE PTY. LTD.

Eleventh Applicant

DR. LEWIS DAVIS, DR. ERIC
CAMPBELL, DR. RICHARD de LAMBERT
Twelfth Applicant

MELBOURNE PATHOLOGY PTY. LTD.
Thirteenth Applicant

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S. KOLBER PTY. LTD.

Fourteenth Applicant

SOUTHERN PATHOLOGY SERVICES
PTY. LTD.

Fifteenth Applicant

S.H.P. PATHOLOGY (MELBOURNE)

Sixteenth Applicant

DRS. SULLIVAN, N.J. NICOLAIDES
& PARTNERS

Seventeenth Appllcant

SUGARMAN'S PATHOLOGY PTY. LTD.

Eighteenth Applicant

AND :	NEAL BLEWETT First Respondent
HIS HONOUR MR. JUSTICE MUNRO Second Respondent
DR. NORRIS CARTER Third Respondent
DR. PAUL NISSELLE Fourth Respondent
DR. DAVID WHITE Fifth Respondent
DR. S. BELL Sixth Respondent
PETER REID Seventh Respondent
MARY SEESSANG Eighth Respondent

CORAM:	GUMMOW J .
PLACE:	SYDNEY.
DATE :	15 DECEMBER 1988.

REASONS FOR JUDGMENT

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i	Introductlon
The applicants are members of an unincorporated body, the Australian Assoclation of Pathology Practices ("AAPP"), which was formed in March 1988. The first respondent ("the
l	Minister") is Mlnister for Communlty Services and Health and as such is the Minister wlth the responsibility for the Health Insurance Act 1973 ("the Act"). The other respondents are members of a committee established by S. 78B of the Act, under the name of the Pathology Services Advisory Committee ("the
Committee"), often abbreviated in correspondence and other
documents to "PSAC" . The second respondent is a Deputy
President of the Australian Conciliation and Arbitration Commission, and is the Chairperson of the Committee (as the Act
l	describes him) appornted pursuant to S. 78D of the Act. The Chairperson (who may be referred to as Chairman or Chairwoman as the case requires - see sub-s. 78D ( 9 ) ) must be a Deputy President of that Commlssion.
The third and fifth respondents (Dr. Carter and Dr. White) were appointed to the Committee by the Minister from a panel nomlnated by the Royal College of Pathologists of
Australasia, as provided for in sub-s. 78D ( 4 ) . Dr. Carter
gave evidence and was cross-examined in some detall. Both Dr.
Carter and Dr. White are in private practice as pathologlsts, the former in one of the larger practices and the latter rn a small to medium sized practice. The fourth respondent, Dr. Nisselle, was appointed to the Committee by the Minister from a
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panel nominated by the Australian Medical Associatlon, as

provided for in sub-s. 78D ( 3 ) . The remaining three

respondents were nominated to the Committee by the Minister; one of them, Professor Bell, is Professor of Microbiology at the University of New South Wales.

These proceedings were commenced on 1 November 1988 and proceeded to an early final hearing. AAPP seeks to challenge what it identifies as a determination of the Minister dated 8 September 1988 and two decisions of the Committee, one of 31 July 1988 and the other taken on 17 October 1988. AAPP describes the Committee's decision of 17 October 1988 as one to adhere to the earlier decision of 31 July 1988. AAPP invokes the jurisdiction of this Court pursuant to the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act"), and S. 39B of the Judiciary Act 1903 ("the Judiciary Act"), together with the accrued jurisdiction.

As will be apparent from the dates of the first and

second decisions drawn into question, the proceedings, insofar

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as reliance is placed upon the	ADJR Act, were instituted
outside the prescribed period speclfied in S. 11 of the ADJR

Act. Accordingly, by Motion filed 1 November 1988, AAPP

sought from the Court what has been described as an extension of the time within whlch it might lodge the application for review insofar as it relates to the first and second decisions I have mentioned. The respondents initially opposed the

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granting of thls application, but on the third day of the

hearing withdrew that opposltion. Plainly, the general public importance of the issues sought to be raised make thls a proper case for the grant of an extension of tlme. I granted leave on the fourth day of the hearing to the applicants to flle In Court an Amended Application. Pursuant to the power given the Court by sub-s. 11 (1) of the ADJR Act, the time within which

the application for review might have been lodged is to be

treated as having been extended up to and Including 1 November 1988, when the Application in its origlnal form was presented to the Court.

Insofar as reliance was placed by AAPP upon S . 39B of the Judiciary Act, counsel for the respondents initially made the surprising submission that the Minister was not an officer of the ,Commonwealth for the purposes of that sectlon and thus not a person reached by S . 7 5 ( v ) of the Constitution.

Accordingly, it	was said jurisdiction under S . 39B was not
attracted in relation to the Minister's	determination of 8
September 1988.	The Court gave directions for the giving of
the appropriate notices under S . 78B of the Judiciary Act.	But
on the fourth day of the hearing, counsel for the respondents

indicated that he did not press the submission on the

constitutional point. That submission had been a surprising

one because it appeared to fly in the face of the express terms of ss. 4 4 , 6 4 and 6 5 of the Constitution which place the Ministers of State in the first rank of the officers of the

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Commonwealth.

However, by Notice of Objection to Competency filed 9 November 1988, the respondents took and pressed a further point as to the competency of the proceedings under the ADJR Act In respect of the decision of the Minister dated 8 September 1988. It was submitted that the decision was of a leglslative not an administrative character; this meant it was not a decision to which the ADJR Act applied, within the meaning of that expression in sub-s. 3 (1) of the ADJR Act.

The hearing was conducted on the footing that the

Court shouId have before it the totality of the evidence and submissions going both to any remaining preliminary issue and

to the substantive questions that would remain for declsion if

the respondents failed on any remalning preliminary issue.

The Statutory Provisions

It is appropriate now to turn to relevant provisions

of the Act. Section 10 establishes what may be described as

entitlements to medicare benefits. Medicare benefits are

calculated by reference to the fees for medical services set

out in the general medical services table and the pathology

services table (S. 9); the pathology services table is set out in Schedule 1A of the Act. In the reprint of the Act as at 1 January 1988, there are set out thirteen "Rules for Interpretation" and various pathology services are identified

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by item number, description and fee. The items are numbered

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from 1006 to 2392, and the fees vary between the States, by reference to the State in which the servlce is rendered, an internal Territory being treated as part of the State of New South Wales ( s s . 8 and 10). Medlcare benefits are payable by the Health Insurance Commlssion ("the Health Commlssion") on behalf of the Commonwealth (S. 2 0 ) . In November 1988, the Health Commission dealt with 117,000 payments for pathology services per day and the amount dlsbursed in such payments averaged S1.88m. each day.

The Minister has special powers in relation to health services not specified in an item in the general medical services table or the pathology services table (S. 3C) but they are not presently material. Regulations made under the Act by the Governor-General in Council may vary, alter or supersede

! the general medical services table ( s s . 4 , 133). Different provisions govern changes in the pathology services table and it is with these that this litigation is concerned.

Section 4A provides as follows:

4A. (1) The Minister may refer to the Pathology Services Advisory Committee, for its consideration and recommendation, the question whether the pathology services table (including a table that has effect by virtue of paragraph (9) (a)) should be varied, in accordance with sub-section ( 2 ) , in a manner specified in the reference.

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( 2 ) The pathology services table (including a table that has effect by vlrtuc of paragraph ( 9 ) (a)) may be varied under thls section - '

(a)	by varying or inserting an item in
the table or by omittlng an item

from the table;

(b)	by omitting, varying or inserting
a rule of interpretation relatlng

to the table; or

(c)	by substituting another amount for
an amount set out in an item In

the table.

( 3 ) If, after consideration of a question

referred to it under sub-section (l), the Committee recommends to the Minister a variation of the pathology services table, whether or not in the manner specified in the reference by the Minister, the Minister may make a determination varying the table in

accordance with the recommendation.

( 4 ) If the Pathology Services Advisory Committee, otherwise than pursuant to a reference to it under sub-section (l), recommends to the Minister a variation of the pathology services table, the Minister may make a determination varying the table in accordance with the recommendation,

(5) On the coming into effect of a

determination made under sub-section ( 3 ) or ( 4 ) , the pathology servlces

table has effect,	subject	to this
section, as if	it	were varied in

accordance with the determination.

(6) The Minister may refer to the Pathology Services Advisory Committee, for its consideration and recommendation, the question whether the table specified in the reference should be substituted for the pathology services table.

( 7 ) If, after consideration of a question
referred to it under sub-section (6),

the Committee recommends to the

Minister that a table, whether or not the table specified in the reference by the Minister, be substltuted for the

pathology services table, the Minlster may make a determination, in accordance with the recommendation, that the table specifled in the determination be substituted for the pathology services table.

( 8 )	If the Pathology Services Advisory Committee, otherwise than pursuant to a
reference to it under sub-sectlon ( 6 1 ,
recommends to the Minister that a table

I be substituted for the pathology services table, the Mlnister may make a determination, In accordance with the recommendation, that the table specified in the determination be substituted for the pathology services table.

(9) Upon the coming into effect of a determlnation made under sub-section

or ( 8 ) -

the table specified in the determination has effect as if it were set out in Schedule 1A in place of the table ( I n this sub-section referred to as the "superseded table") in that Schedule; and

the superseded table or, if another table has effect, by vlrtue of this section, in place

of the superseded table, that other table ceases to have effect.

The references to "the	Minister" include references to Acting
Act" - S. 19). The Minister may delegate any of his powers	Ministers (Acts Interpretatlon Act 1901 - "the Interpretation
under the Act to, inter alia, an officer of his Department or an officer of the Health Commissron, in the manner provided in
S. 131 of the Act; no such delegation was involved in the
present proceedings. It was accepted by the parties before me that the determinatlon of the 14inlster In questlon here, that dated 8 September 1988, was made in reliance upon sub-s. 4A (8). A determination under S. 4A attracts the operation of sub-s. 4BC ( 2 ) , which states:

4BC. ( 2 )	Sections 4 8 , 4 9 , 49A and 50 of the Acts Interpretation Act 1901 apply to relevant determinations as if in those
provislons references to regulations
we re references to relevant
determinations, references a to
regulation were references a to
provision of a relevant determrnation
references and repeal to were
references to revocation.

AS I have indicated, the Committee is established by

force of S. 78B. The functions of the Committee appear from

S. 7812. This provides as follows:

78C. (1) The functions of the Committee are -

(a)	pursuant to a	reference to it by
the	Minister	or on its own

initiative, to consider -

(i) in what manner, and	to what
extent, a particular	service
or	combination of services

should be specified in an

item or items of the

pathology services table and the appropriate fee or fees that should be specified in that item or those items; or

(ii)whether the scope of, or the amount of the fee set out in,

an item of the pathology

services table is anomalous, having regard to the other

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items of that table,

and to make recommendatlons, ~n writing, to the Minister arislng

i out of that conslderation;

(b) pursuant to a reference to it by

the Minister or on its own

initiative, to consider whether

!	medicare benefits should contlnue to be payable In respect of pathology services rendered in particular circumstances, and to make recommendations, in writlng,
to the Minister arising out of
that consideration;

(c) pursuant to a reference to it by

the Minister under sub-section 4A (1) o r on its own initiative, to consider whether the pathology services table should be varied in accordance with section 4A and, if so, the manner In whlch it should be so varled, and to make recommendations, in writing, to the Minister arising out of that consideration;

(d)	pursuant to a reference to it by the Minister under sub-section 4A ( 6 ) or on Its own initiative, to consider whether a table should be substituted for the pathology services table in accordance with section 4A and, if so, to make recommendations, in writing, to the Minister arising out of that consideration;
(e)	pursuant to a reference to it by the Commission under section 11, to determine whether a fee with

respect to a pathology service

should be increased for the

purposes of a particular claim and, if it is to be so increased, to formulate the principles to be followed in fixing the increased fee, and to make recommendations, in writing, to the Commission accordingly; and

(f) pursuant to a reference to it by the Mlnister under section 12, to ' determine whether an appeal under

I	that section should be allowed or dismissed and, if the appeal is to be allowed, to determine the
amount of increased fee to be
fixed with respect to the service concerned and, ~f the Committee thinks fit, to formulate the
prlnciples followed the by
Committee in fixing that increased fee.

( 2 )	The Minister may, in writing, determine
prlnciples to be applled by the
Committee in the performance of its
functions and the Committee shall perform its functions in accordance with the principles so determined.
(3) Sections 48, 49, 49A and 50 of the Acts Interpretation Act 1901 apply to determinations under sub-section ( 2 ) as lf in those provisions references to regulations were references to determinations, references to a regulation were references to a provision of a determination and references to repeal were references to revocation.	-

(4) Determinations under sub-section ( 2 )

shall not be taken to be statutory rules within the meaning of the Statutory Rules Publication Act 1903,

but sub-sections 5 ( 3 ) to (3C)

(inclusive) of that Act apply in relation to determinations as they apply to statutory rules.

( 5 ) For the purposes of the applicatlon of sub-section 5 (3B) of the Statutor

Rules Publication Act 1 d

accordance with sub-section ( 4 ) of this

section, the reference in the first-mentioned sub-section to the Minister of State for Sport, Recreation and Tourism shall be read as a

i reference to the Minister administering
this Act.

(6) Section 5 of the Evidence Act 1905

applies to determinations as that section applies to an order made by the 1-linister.

Sections 4A, 4BC, 78B and 78C were introduced into the Act by the Health Legislation Amendment Act 1986, wlth effect from 26

September 1986. The Committee for which provlsion was made by

this legislation was established In October 1987. Sections 48 and 5 0 of the Interpretation Act provlde for the disallowance of regulations by either House of the Parliament, the disallowance to have prospective effect only. Sub-section 4BC

(2) and sub-s. 78C (3) of the Act are to be understood

accordingly.

The Committee and the Working Party

On 1 August 1986, the ex :is ,tin9 patho logy serv 'ices

table had been changed by reductions of 25% in the fees allowable on some eighteen major items in the table. In 1987

(and apparently without any immediate statutory basis) a

working party was formed, with representatives of the Royal College of Pathologists of Australasia, the Health Commission and the Department of Community Services and Health. The working party was strongly influenced by the Health Commission to the view that urgent revision of the pathology services table was necessary and that many of the descriptions of

services therein were unacceptable. In particular, there had

been indications of abuse of the existing table by some pathologists and, in any event, contents of the table had been shown in practice to contain various anomalies and ambiguities.

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In these proceedings, AAPP has not challenged the need' for revision but has complained of the manner in which it was conducted.

In December 1987, the Committee assumed control and direction of the working party. The Committee charged the

working party to identify deficiencies in the descriptions used in the pathology services table and associated administrative arrangements, to advise the Committee of the possible changes that might be made to the pathology services table, and to complete its report by the fourth meeting of the Committee.

The working party comprised Dr. Carter and Dr. White, Director of Pathology at a sizeable hospital in Victoria, and an adviser to the Health Commission, Dr. John Neerhos, an adviser to the Health Commission, Mr. Alan Mackay, the Secretary to the Committee, Mr. D.J. Gaunt, an officer of the Minister's Department, and other representatives of the Health Commission.

who were members of the Committee, Dr. Vernon Plueckhahn,

Earlier, on 21 July 1987, the Minister, expressing

himself as acting pursuant to sub-s. 78C ( 2 ) of the Act, had

issued what was described as a determination "that the principles specified in the Schedule shall be the prlnciples to be applied by [the Committee] in the performance o f Its

functions". The principles to be applied were those specified

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in the Schedule to the determlnation ("the Prlnclples"). Before me It was accepted by both sides that the terms of sub-s. 78C ( 2 ) that "the Committee shall perform its functlons in accordance with the principles so determined" imposed a mandatory obligation on the Committee. The dispute was as to whether, in the circumstances of the present case, the obligation had been discharged.

The Schedule setting out the Principles is a document

of some ten pages.	In it the term "table" means the pathology
services table specified in Schedule 1A to the Act.	Part 3 is
headed "Reviews of the table" and states:

3.1 The Committee may conduct reviews of the

table in the following manner -

(a) by the conduct of a periodic review,

b e m g a review of all or the majority

of fees in the table to consider the

effect of general movements in the prices and the costs of rendering pathology services; or

(b) by the conduct of a general review,

being a review of the structure and content of the table other than a review identified in paragraph (a) above.

Part 4 provides for the conduct of what are called periodlc	reviews and Part 5 for the conduct of general reviews, being
reviews other than periodic reviews. In the present
proceedings, there was debate as to the nature of the review on which the Committee had embarked and, indeed, as to whether it was acting within any of the terms of Parts 3 , 4 and 5 of the

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Schedule.

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Part 6 of the Schedule is headed "Fees for pathology

services" and is as follows:

6.1 Where the Commlttee proposes to review fees

for pathology servlces In any clrcumstances,

or is required to consider a fee for a

pathology service which the Committee

recommends should be included in the table, the Committee shall maintain consistency, as

far as is practicable, with fees	for
pathology services	in the table which have

similar utilisation rates cost and

components, but shall have regard to -

the direct labour cost of each service,
being the proportion of wages and

salaries of a laboratory which can be

identified	with	and	charged to that
service;

the direct materials cost of each

service, being the cost of materials

I	which are able to be identified with the rendering of that service and which are necessarily consumed in the rendering of that service; and
other costs incurred in the provislon
of the service, including reasonable
depreciation of equipment, reasonable return on capital expended on facilities and collection, storage and distribution costs.

6.2	Where the Committee proposes to act pursuant
to sub-clause 6.1, it shall also have regard
to generally accepted accounting practices,
ensuring where possible that costings are based on efficient throughput and an appropriate sharing of costs and overheads between relevant all services and activities.

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Before the Court, AAPP strongly contended the Committee had not

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complied with Part 6 . The expression "shall have regard to" In

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Part 6 requlres the CommiLtee to take the matters so identlfled into account and give weight to them as fundamental elements In the conduct of Its activities under Part 6 : - R v Hunt; Ex parte

Sean Investments Pty. Ltd. ( 1 9 7 9 ) 5 3 ALJR 5 5 2 at 5 5 4 per Mason

J., with whom Glbbs J . agreed. The mere assertion by the Committee that it has so acted will not be conclusive, if it is demonstrated that regard has not been had to these matters in any real sense: Turner v Minister for Immigration and Ethnic

l	Affairs ( 1 9 8 1 ) 3 5 ALR 3 8 8 at 3 9 2 per Toohey J . But, of course, in proceedings of this klnd the limited role of the Court must be borne in mind (Minister for Aborlginal Affairs v Peko-
Wallsend Ltd. ( 1 9 8 6 ) 1 6 2 CLR 2 4 at 4 0 - 4 1 per Mason J.).

Part 8 is headed "Making of recommendation" and is in

the following terms:

8 .l Unless the Committee is satisfied that exceptional and compelling circumstances exist, the Committee shall not make a recommendation to the Minister in relation to section 4A of the Act for the making of a determination which takes effect from a date earlier than the date of that determination.

8.2 The Committee shall not make a recommend-	ation in relation to section 4A of the Act
where -
(a) any rights of a person (other than the

Commonwealth or an authority of the

Commonwealth) existing at the date of effect of the determination would be

affected in a manner prejudical [sic] to that person; or -

(b) liabillties would be imposed on any

commonwealth or an authority of the -	per son (other that [sic] the
Commonwealth) in respect of anything done or omltted to be done before the date of effect of the determination; and

I 8.3 Where the Committee makes a recommendation to the Minister, the Committee shall provlde the Minister with a statement of the reasons for its recommendation, and shall also provide its assessment of the financial and other implications arislng from the recommendation, including any alteration which is expected to occur in the costs borne by the Commonwealth and by the States and Territories, or in the costs borne between the Commonwealth and the States and Territories.

l

Before me, AAPP also alleged failure by the Committee to

observe the requirements of Part 8 of the Schedule.

l I should also note what is said in Parts 9.1, 9.2 and

9.3:

l

9.1 In the performance of its powers and

functions, the Committee is subject to
section 130 of the Act.

[This contains elaborate secrecy provisions.]

9.2 The Committee may inform itself on any matter relevant to the performance of its

functions in such manner as it thlnks fit.

9.3 The Committee may invite, shall receive and shall have regard to a submission from any party having a significant interest in any matter being considered by the Committee.

I

AARAPP also submitted it had been denied natural justice and Part

I

9 was debated in that context.

l

On 8 Iqarch 1988, the Minister wrote to the second respondent a letter includlng the following:

I have been advised that a Worklng Party of

[the Committee] has been established to undertake a substantlal restructuring of the Pathology Services Table.

Accordingly, I am asking the Committee to consider, and provlde me wlth its views on whether a specific reference on the 1 August 1986 fees and benefits variations would be appropriate, or whether it would be preferable for the review of those items to

be subsumed within the more general review

of the pathology servlces table which [the Committee] is undertaklng. I note that about 4 2 % of Medicare benefits payments for pathology in fact relate to the items for which the Government varied the fees on 1 August 1986.

In introducing the 1 August 1986 reductions in fees and benefits the Government had the following objectives:-

to reduce fees for a small number of commonly performed tests which met specified criteria;

to have the greatest impact on laboratories that concentrate on such tests to the posslble detriment of

laboratories providing more

comprehensive services including after

hours emergency services;

to remove a signlficant financial

incentive to excessive servicing and
other abuses; and

to simplify the Schedule by reduclng
the number of rates for those tests

from 3 to 2 .

i The specified criteria used to select the
items were:

high volume	and	mainly	automated
services;

highly profitable because fees have not been adlusted downwards because of more productive technology;

services that generally involve minimum

specialist input;

services usually provided in

conjunction with other tests;

fee levels in excess of those for the

same services overseas.

In any reference on a specific review of the

sub~ect items which I might make to the

Committee I would have to ask the Committee to have regard to the objectives of the 1986

changes. Indeed, the Committee should also take account of these ob~ectives in a general view which extends more broadly than those items.

Because of these considerations, I would appreciate having the views of your

Committee before me, to enable me to decide whether it is appropriate to provide [the committee] with a specific reference on this matter.

working party prepared a draft revised Schedule, including fees, a copy of which was enclosed with a letter

The

written on 17 March 1988 by Mr. Allan Mackay, for the

Committee, to the Secretary-General of the	Australian Medical
Association.

The letter stated that the working party had been capable of implementation as "an interim Schedule" pending the completion of a "general review" by the Committee; the revlsion was to "form the basis of such a general review". The letter stated that the enclosed draft was supplied on a confidentlal basis for comment by the Associatlon. The letter

directed to prepare a draft revised Schedule which would be

j continued:

1. In view of the interim nature of the revision your comments on matters of principles [sic] regarding fee setting are not sought i n i i s Instance. The fees shown

are prelimlnary, having been calculated by a

member of the Working Party on a weighted

average basis. They are subject to

modelling currently being undertaken by the
Department and PSAC Secretariat.

I would appreciate if your Associations

[sic] - comments could be provided to the PSAC

Secretariat by c.0.b. 6 April 1988 for

consideration by the [working party] prior

to the next meetlng of [the Committee:.

The evidence does not indicate the making of any

response to this letter by the Australian Medical Association. Copies of the draft Schedule were circulated on a confidential basis to other professional bodies, the Royal College of

Pathologists of Australasia, the Australian Institute of

Medical Laboratory Scientists, the Medical Scientists Association of Victoria, the Australian Society for Microbiology and the Australian Association of Clinical Biochemists. However, the document circulated to these bodies

was not the same as that sent to the Australian Medical

Association, in that it did not include the proposed fee levels

i

for each pathology item.

On 18 April 1988, Dr. Kelland, who was Chairman of the AAPP and who gave evidence in these proceedings, wrote to the

Deputy Secretary of the Minister's Department advlsing him 'that

AAPP had been established on 2 4 March 1988 and expressing the

I

hope that it would have a good worklng relationship with the

I Department. On 19 May 1988, a Deputy Secretary of the

Minister's Department responded that AAPP should feel free to make submissions to the Department and to respond to the Committee when it called for submissions from time to time. A

letter in the same tenor to that of 18 Aprll 1988 was written by AAPP to the Committee on 29 April 1988. The letter also asked that the Committee make available a copy of the draft proposed schedule "for urgent comment" and that no finai decision be made "until we have had an opportunity to make

input".

On 6 May 1988, the Australian Association of Clinical Biochemists responded to the draft document with whlch it had been supplied stating, inter alia, that the absence of costing had precluded any judgment of relativity between items in the Schedule.

On 10 May 1988, the Committee held its fifth meeting.

It was decided that the "interim Schedule" would be "advanced"

with the intention that the Committee make a recommendation to	the Minister at its next meeting on 7 July 1988, and that the
Schedule come into effect from 1 October 1988. At the time of
the recommendation of the Schedule to the Minister, the
proposal was that the Committee announce "the commencement of a

I General/Periodic review with submissions to be lodged by 17

October 1988". The draft Schedule was before the frfth meeting

of the Committee. Dr. Carter suggested that the Commlttee ignore the fee levels shown on the draft Schedule as they would need a minor modificatlon once statistical information whlch had been received from the Department had been applled to the

draft. The minutes for the meetlng contained the followlng:

! 9.3 The Chairperson stated the Commlttee will require hard data on financial costing of the draft Schedule and responses from the Department and [Health Commission] as to their support or otherwise.

The Committee decided that the working party should meet again to finalise the necessary papers for consideration by the Committee.

On 10 May 1988, there was also discussion by the

Committee concerning letters received from the Royal Australian College of General Practitioners and from the AAPP (the letter of 29 April 1988) requesting an opportunity to comment on the draft Schedule. The manner in which the matter was dealt with

appears in para. 9.6 of the minutes; after stating that

consultation with the College was inappropriate, it is said: It was decided that the AMA is the major

representing body (for medical practitioners other than pathologists) contemplated by the legislation establishing [the Committee's] membership and is the appropriate body to consult on the confidential exposure of a

I

draft proposal. A similar situation applies to the AAPP application with the additional factor that AAPP is recently established and

apparently constituted	on the basis of	a
select membership. It	was	also noted that

further delays would occur in	any wldenlng
of the consultative process.	In view of

[the Committee‘s] deslre to see the changes implemented as quickly as posslble, it was decided not to consult with these bodies on this occasion. However, [the Committee]

would expect that both of these bodies would

make submissions in the future.

On 17 May 1988 Mr. Mackay wrote to the Secretary of A APP

stating that the Committee had decided on this occasion to

conduct its consultations only with the principal

representative groups recognised in the legislation in terms of the Committee‘s membership, namely the Royal College of Pathologists of Australasia and the Australian Medical Association. The importance of speed also was emphasised.

I

On 27 May 1988, the working party held a meeting at

which Dr. Carter presided as Chairman. The proposed Schedule was again discussed and the followlng appears as item 13 in the minutes under the heading “Costing of the Schedule“:

A detailed commentry [sic] on the fees which

m
have been calculated glvlng ~ustification	in

the method of calculation using true national weighted averages will be prepared.

This commentry [sic] will also give a

comparison of thedraft schedule with the present pathology schedule. This will be presented by an item by item description of costing and the impact on indivldual items. Reasons why detailed cost modelling cannot be done will be given.

There is no evidence that a commentary answering the

description was ever prepared by the working party.

On 23 June 1988, Dr. Kelland wrote to the second

respondent concerning the draft Schedule. He polnted out that the members of the Association performed over 30% of private practice pathology In Australia. Dr. Kelland observed that the Association had been told that the new Schedule was "Intended to be revenue neutral" and that "all it will do 1s cut some abuses". He questioned the need for "a rushed Interim Schedule" and also said that the Association had been told that

the average routine referral laboratory could expect a

reductlon of revenue of approximately 5%. With the letter

there was enclosed a detailed submission on the draft Schedule,

running to some ten pages. On 29 June 1988, the Secretary of

AAPP wrote to the second respondent to convey a request for

leave for the AAPP to appear at the meeting of the Committee set down for l July 1988. He said that the detailed comments sent in the previous week had been delayed as a result of the inability of the AAPP until recently to have access to the draft Schedule. He also pointed out that there had been only limited access to draft costings for items in the draft

Schedule and that AAPP was concerned as to the likely Impact of

the interim schedule on the viability of private practice

pathology.

Dr. Kelland gave evidence that before this letter of

29 June 1988 was written, AAPP had received (by what means is not clear) the draft costlngs for the haematology ltems in the

proposed schedule. Beyond what was sald in the letter of 29

June, AAPP did not at thls stage substantiate to the Committee

any concern with the adverse impact upon its members of the

proposed costings for the haematology items. Dr. Kelland sald in evidence that "the fact that we drew attention to 1t is

enough in itself". I should add that in 1986-1987, ltems

dealing with basic haematology procedures were 26% of the incidence of all services rendered under the existing pathology services table and that 13% of medicare benefits payments for services In that table were in respect of these haematology

i tems.

The working party prepared a lengthy report for the

Committee meeting of 7 July 1988. It dealt with comments

received on the draft Schedule from a number of sources,

including the Health Commission. Under the heading for para.

8 , "Costlng of draft Schedule", the following appeared:

It is important to note that the Working Party does not endorse the new schedule's level of fees as being accurate across the

board. A detailed cost study has not been

performed. The Working Party is confident that the recommended fee levels are closer to "correct" levels than the existing schedule. The Working Party has prepared a

Schedule of the same type as the existing

one, as its terms of reference did not include a review of all benefit levels, or consideration of alternatives to present remuneration methods. The Schedule is presented only as an interim to "hold the fort" while [the Commltteel conducts a General Revlew.

The working party also reported that it had not been possible definltely to evaluate the cost impact of the draft Schedule, and referred to a number of approaches which had been tried without success. One of them, dealt with in para. 8.3, was

i

"reassessment of test groupings from some practices". As to

I

this, the working party said:

8.3 Difficulties exist with this approach, as the statistical sample was not large enough, and somewhat variable results were obtained due to differing test combinations. Overall, a 5-8% reduction was found.

At the sixth meeting of the Committee on 7 July 1988,

the Committee decided not	to accept the request of AAPP	to
present its case	to the meeting.	I deal further with this

later in these reasons. On the subject of costing, Professor

Bell said that the only way to cost the draft Schedule was "to

run it", and that the Committee might learn some very valuable

points by doing so.

The Decisions Called Into Question

July 1988, the Committee held its seventh meeting. It decided to forward to the Minister a recommendation for determination of a new Pathology Services Table. This was done under cover of a letter from the second

On 31

respondent to the Mlnlster dated 1 August 1988.	The letter,
omlttrng formal parts, was ln the following terms:

i

In my recent letter to you, I foreshadowed the planned future work of the Pathology Services Advisory Committee whlch Included

an urgent restructurlng of the pathology

servlces table followed by a full and

thorough revlew.

At the meeting of [the Committee] on 31 July 1988, the Commlttee agreed to forward to you a recommendation for determination of a new pathology services table. The recommended table 1s attached as 1 s the statement

setting out the Commlttee's reasons for

making this recommendation. The

recommended date of effect 1s 1 November 1988 allowlng administrative lead times for your Department, the Health Insurance Commission and pathology provlders.

This interim revislon of the pathology services table has arlsen out of problems and deficiencies identified in the existing table. Although the fee levels have been adjusted on a regular basis, the structure of the existing table is substantially derived from a major review undertaken in

1977. The unrevised structure of the table that the Commlttee recognised an interim revision of the table was necessary prior to undertaking a full review. had given rise to a number of problems.

Having recognised the need for a full and

thorough review of pathology services, the Committee intends to proceed with that review immediately. The Committee will be

seeking input from a wide variety of sources

and advertlsements wlll be placed mid-August inviting submissions from interested parties

by 31 October 1988. A recommendation

arising out of this review 1s not expected before late 1989 recognising that such a

review is a major task and will take some

considerable time to complete. The review

is to be conducted in accordance with the relevant parts of the Health Insurance Act 1973 and the Principles you determined on 21

I

l

I n

2 9 .

July 1987 which are to be applied by

[the

committee] in

the

performance of its

functions.

I have included the terms of

reference the Commlttee has set to carry out

thls review.

1 i

i The terms of reference referred to In the last

sentence of thls letter included the following as paragraph 2 .

i	2 .	In carrying out this Revlew, the Commlttee will have regard to:
(a) such recommendations, principles or other matters which the Commlttee conslders relevant which may have been made or adopted by the Committee or previous enquiries on medical fees for Medicare benefit purposes;
(b) the nature, extent and effect of

changes in economic circumstances which have occurred slnce 31 March 1987 and which affect the community in general or the rendering of pathology services, Including -

(i)     changes in indicators of prices

i and earnings;

(ii)  decisions of the Australian Conciliation and Arbitration Commission or of any other body which the Committee considers relevant;

(iii) the policy of the Commonwealth

Government in relation to prices

and earnings;

(iv) any decision of the government

of a State or a Territory affecting costs which the Committee considers relevant;

(V) changes in the organisation and patterns of provision of pathology services;

(vi) cost structures in relation to

I

the	rendpring	of pathology
services;

(vil) productlvity in relatlon to

organisational structures and economics of scale, both actual and potential, in the rendering of pathology services; and

(vlil) the need to maintsln the cost

effective rendering of pathology

services;

(c) the adequacy of the structure and

content including descriptions of

services in the	pathology	services
table;

(d) whether any services at present in the

pathology services table	should	be
removed from that table;

. . .

The Statement of Reasons referred to in the second paragraph of the letter of 1 August 1988 is a document of 14 pages, with detailed appendices. All told, the enclosures with the letter

of 1 August 1988 comprised some 125 pages. In these

proceedings, AAPP seeks review of this recommendation for

determination of a new pathology services table.

Paragraph 6 of the Statement of Reasons is headed sentence, of which AAPP made much in its submissions before the	"Assessment of Financial Impact". Para.	6.2	opens with the
Court:

6 .2 An effect of the recommended changes to both items and fees has been that it has not been possible to calculate the cost impact of the recommended Table.

i
I

i	'
I

31.

i i

It 1 s then said that a number of approaches were tried and

i	there is a discusslon of	four	of	them.	Flrst, it	proved
I
!

i	lmposslble to prepare a statistical model of the incidence of
I	items and benefit payments. Secondly, although It was proposed
I
I	to calculate benefits using the existing benefits and to
!
recalculate them using the recommended table, an examination of
I	the requests and tests done only showed that the present system
I
i	was in a chaotic state with the result that cost comparisons
i
~	would have been unable to produce worthwhile data. Then it was
I I
said that the Committee did not feel unduly bound to the existing level of benefit payments, there being ample evrdence that further development of new technologies had reduced costs in some areas.
A further method attempted was that of cost comparison within private practices. Sub-para. 6.2 (iii) states:

(iii)when a similar exercise was attempted within some private practices variable results were obtained due to differing test combinations. An overall reduction of 5 8 % was found but the statlstical sampling was not large or wldespread enough to glve clear indications in respect to the true financlal Impact.

To state that the overall reduction of 5-8% was found by a

process of statistical sampling, albeit not large or

widespread, is markedly to overstate what had taken place. The evidence shows that the 5-8% estimate was made by two members of the worklng party, Dr. Carter and Dr. White. Dr. Whlte

acted upon what he described in his oral evidence as	some small
sets of live data from his own experience in his practice.	It
is not clear from where Dr. White got hls information but it	1 s
a reasonable inference that he acted	in a slmilar fashion to
Dr. Carter.	In his oral evldence, Dr. Carter agreed with the

descrlption of "guestimate" to describe the process Involved.

Dr. Carter emphasised to the Court that both he and Dr. Whlte

had been at pains to point out that they did not consider 5-8% as an accurate estimate, but Dr. Carter also accepted that this was not an estimate which was discussed and debated for the

purposes of substantiatlon by the Committee. It will be

recalled that in para. 8 . 3 of the working party's report

prepared for the Committee 'meeting of 7 July 1988, it had been stated that whilst difficulties existed with the reassessment of the test groupings from some practices "as the statistical sample was not large enough, and somewhat variable results were obtained due to differing test combinations, nevertheless, overall a 5-8% reduction was found".

I

Paragraphs 6.3 and 6.4 of the Statement of Reasons for the Committee's recommendation conveyed in its letter of 1

August 1988 included the following: 

6.3	It is important to note that the Committee can not endorse the level of fees as being accurate across the board, as a detailed cost study has not been able to be performed for reasons explained above. The Committee is confident that the recommended fee levels more closely reflect current costs than does the existlng [pathology services table]. The recommended [pathology services table]
1 s based upon the existing model and is not
the outcome of a review of all benefit levels, or consideration of alternatives to
present remuneration methods. The
recommended [pathology services table] is presented only as an interim measure until
issues, including issues as to the
adjustment of fees for economic changes since the December 1987 Perlodic Review, can be further addressed in a full Revlew.
6 . 4	. . . The Committee's assessment is that the
costs to the Commonwealth will not be increased. The Committee does not have access to information which provides a basis for an informed assessment of any effect arising from the recommendation upon the allocatlon of costs of pathology services between the Commonwealth and the States and Territories.

On 8 September 1988, the Minister made what was

described as a determination for the purposes of the pathology services table. The text of the determination was as follows:

I, NEAL BLEWETT, Mlnister of	State for
Community Services and Health, for	the

purposes of the power contained in section 4A of the Health Insurance Act 1973 HEREBY REVOKE with pffect from 1 November 1988 the Determination for the purposes of the pathology services table dated 2 June 1988 and HEREBY DETERMINE that with effect from 1 November 1988 the pathology services table

specified in the Schedule to this

Determination belng the pathology services table recommended by the Pathology Services Advisory Committee in its recommendation to me of 31 July 1988 be substituted for the

pathology services table specified in the Schedule to the above revoked Determination.

AAPP, In these proceedlngs, also challenges this determlnation.

On 12 October 1988, the then Acting Mlnister wrote to

the second respondent in the following terms (omitting formal

I

parts and with emphasis supplied):

In accordance with Section 4A ( 2 ) (c) of the Health Insurance Act 1973, I refer to the Pathology Services Advisory Committee (PSAC) for its urgent consideration and recommendation, the questlon of a reconsideration of the Schedule fees in the pathology services table to apply from 1 November 1988.

The pathology services table to apply from 1 November 1988 follows from your recommendation for determlnation of a new pathology services table dated 31 July 1988.

In the statement reasons of for

recommendation, inter alia, it is stated

that the Schedule fees have been fixed

consistent with the objective that total

Medicare outlays should not be increased. Further, notwithstanding that it has not been possible to calculate the cost impact exactly, an overall reduction of five to eight per cent in outlays was indlcated

based on the	experience	in	some	private
laboratories.

I am aware of the work that has gone into

the restructuring of the table and the benefits which that restructuring will bring in terms of good pathology practice and the appropriate ordering of tests. My concern at this time is with the level of fees in

the new table, particularly In those Divisions where the financial impact on

practice revenue is llkely to be the

greatest - Chemical Pathology, Immunology, Microbiology and Haematology. To assist

you in this urgent task, I will make

available to you resources in my portfolio

assist to with necessary financlal

modelling.

I would expect that questions regarding the

structure of the table would more

appropriately be a matter for consideration in the context of the full and thorough

review of pathology services whlch PSAC is

presently carrying out and for which

submissions have been Invited.

I reiterate the urgency of this matter and

will be glad to receive your recommendation

as soon as posslble.	I note	that
approximately two weeks is	required	for

details of any change in Schedule fees to be printed and distributed before they come into effect. I would hope that any revised Schedule fees would apply from 1 November 1988 or as soon as practical after that date.

i	Also attached for your information are copies of representations received from the
l	RAPP and the Royal College of Pathologists of Australasia requesting deferral of the table.

A t the hearing, there was no challenge to the statement that

the impact of the new table would be to reduce incomes of

pathologists' practices by at least 15% and as high as 2 0 % .

Thus, on 12 October 1988, the Acting Minister had made

the further and urgent reference to the Committee under sub-ss.
4A (1) and 4A ( 2 ) (c) of the Act, which provide for the
referral to the Committee for its consideration and

recommendation the question of whether the table should be

l

varled	by	substitution of any amounts for those set	out	In
items in the table. The table	In	question	was	that to apply

from 1 November 1988, pursuant to the	determination by the
Ninister of 8 September 1988.	No variatlon might be made by

the Minister without the recommendation of the Committee and

!

I then only in accordance with that recommendation (sub-s. 4A

, l l ( 3 ) ) .

The Committee recommended against any change in the

fees "at this stage". On 20 October 1988, the second respondent responded to the Actlng Minister, on behalf of the

Committee. This response to the reference contained in the

letter from the Acting Minister of 12 October 1988 was in much shorter form than that of 31 July 1988. The second respondent

I said in the letter of 20 October 1988:

I refer to your letter of 12 October 1988

which referred to the Pa .tho logy Services Advisory Committee (PSAC) the question of a reconsideration of the Schedule fees in the

l	pathology services table to apply from 1 November 1988.
As you requested, the reference was
considered as a matter of urgency by the

PSAC at a meeting held on 17 October 1988.

PSAC considered written and oral

reference and on the basis of the -	representation [sic] in relation to the
information before it, does not propose to recommend to you, at this stage, a change in the Schedule fees. The Committee has, however, invited written submissions from relevant professional bodies on those items they consider to be anomalous seeking full

support and details including the cost and appropriate technology of providlng such services.

The Committee also decided to conduct a periodic review of the pathology servlces table to apply from 1 November 1988 with any recommendatlon to take effect from 1 December 1988. Your Department, the Health Insurance Commlssion, the Royal College of Pathologists of Australasia, the Australian Association of Pathology Practices and the Australian Medical Association have all been

invited to make submlssions to this revlew

by 31 October 1988.

I wlll write to you again once the PSAC has

completed its periodic revlew.

The draft minutes of the eighth meeting of the Committee, on 17

October 1988, are in evidence. Their accuracy, with regard to

what follows, was not	challenged. Paras.	3.4 and 3.5 are as
follows:

3.4	The Chairperson [the second respondent] said his first indications after the table had been published was an organisatlon wanting
justification of the reasons made public.
Since then, the handling of the matter had gone from bad to worse. He has a sense of resentment at being placed in a position of defending himself (and the Committee) against an RAPP agenda. The comments in the (Committee's) recommendation concerning the

! qualified 5-8% reduction have been taken out of context. what is seen as the two

dominant parties have been thrashing the

situation out with no allowance for the

voice of the consumers to put therr point of view. It may be as in arbitration where a declsion is plainly wrong, it 1s necessary to produce incremental amendments to the original change.

3.5	From the material produced, the Chairperson is not convinced there is any need to change what is already there. There are several
questions to be asked about the latest’
costing exercise eg were the samples handpicked? He was not convinced the Impact is disastrous. Having glven a rationale in the recommendation on modelling exercises undertaken, he was querulous as to why that assumption is wrong. If the Committee is seen to respond too rapidly in the direction of the premise of the impact to accommodate any agrleved [&l parties, then the position of the Committee may be queried by many including the Senate.

The result was that with effect from 1 November 1988, the Table specified in the Minister’s determination of 8 September 1988

came into operation. In these proceedings, AAPP challenges

what it describes as the decision of the Commlttee on 17

October 1988 to adhere to its recommendation dated 31 July 1988 which had preceded the Minister’s determination of 8 September 1988; this, as appears from what I have said above, is not an

accurate description of the nature of the decislon of 17

!

October 1988. The Committee relevantly decided not to recommend a change in the fees in the new Schedule “at this stage“ and without a recommendation no variation mlght be made by the Minister under sub-s. 4A ( 3 ) of the Act.

Jurisdiction

The respondents, by thelr notice as to competency,

deny the jurisdiction of the Court so far as concerns the

Minister’s determination of 8 September 1988.

The decisions to which the ADJR Act applies are

limited, inter alia, by the requirements of .the definition in sub-s. 3 (1) that they be made "under" an "enactment" (Itself a defined term) and that they be "of an admlnistrative

character". That expression is not further deflned. But as

Fox J. explalned In Evans v Friemann (1981) 53 FLR 229 at

234-237, (i) the use of the term "admlnistrative character"

indlcates that the ADJR Act recognises and maintalns the

constitutional trichotomy (found	in Chapters I, I1 and I11 of
the Constitution) between the	legislative, the adminlstrative

and the judicial as an exhaustive description of decision

making, and (ii) in each of these spheres there will be many

! incidental functions which display some of the characteristics of principal activlties in other fields, so that the ludqes may make rules of court, the Parliament may punish for contempt of the Parliament, and administrators may make some findings of fact conclusively.

Nevertheless, the primary characteristic of the

activities of administrators in relation to enactments of the

legislature is to maintain and execute those laws, as is

indicated by the terms of S. 61 of the Constitution itself.	As
a result of the holding in Victorian Stevedorinq and	General
Contracting Co. Pty. Ltd. v Dignan (1931) 4 6 CLR 73, and the

accepted constitutional doctrine flowing from that case, the Constitution does not forbid the statutory authorization of the Executive to make laws: see Zines, "The High Court And The Constitution", 2nd Ed., pp. 146-153. In doing so, the

Executive 1s not exe rclsing the power contalned in S. 61 of the

Constitution. The prerogative power to make law without

statutory mandate is limited (Davis v The Commonwealth, High Court of Australia, 6 December 1988, unrep., p. 32 of the print, per Brennan J.). Rather, the federal legislative powers

I	of the Parliament (found principally in Chapter I of the
Constitution) authorise the Parliament to repose in the
Executive an authority of an essentially legislative character, at least where the exercise of the authority is subject to a measure of Parliamentary control. The same is true - a fortior1 of the plenary and non-federal legislative power of the Parliament under S. 122 of the Constitution to "make laws for
, I	the government of any territory": Golden-Brown v - Hunt (1972)
I
I	19 FLR 438 at 441-442, per Fox J; The Commonwealth v Carkazis
(1978) 23 ACTR 5 at 10-11 per Blackburn CJ. The expression "enactment" in the ADJR Act includes certain territorial laws (sub-s. 3 (1)).

The delegation of legislative authority has most

frequently been effected by reposing a regulation-making power in the Governor-General in Council. Decisions under an

enactment by the Governor-General in Council (whether the

decisions are legislative or administrative in character) are

excluded from the definition of decisions to which the ADJR Act applies: A-G (N.T.) v Minister for Aboriginal Affairs (1987)

16 FCR 267 at 271-214.

I

41.

I	However, delegation by the Parliament may also be made
l	l

to other personae desiqnstne (for example particular Ministers of State for the Commonwealth) subject to Parliamentary control by procedures for disallowance by either House such as those found in ss. 4 8 , 49 , 49A and 50 of the Interpretation Act

So it is that a decision made under an enactment of the Parliament by a Minister or his delegate under statutory power may be essentially legislative in character in a direct and immediate rather than in any incidental sense. And such a decision will be excluded from review under the ADJR Act as much as if it had fallen within the direct terms of exclusion

I

of decisions, under an enactment, by the Governor-General in

Council.	Hence, the necessity for some crlterion to mark the
legislative f rom the administrative or judicial.	In seeking

those criteria, one bears in mind the remarks of Professor

i	Freund, repeated by Dixon J. in Dignan's Case (supra at 93). as to finding in loose terms and unascertainable standards, refuge from thought and expression. In The Commonwealth v Grunseit
j	i	(1943) 67 CLR 50 at 0 2 , Latham CJ said:
~

The general distinction between legislation and the execution of legislation 1s that

;	legislation determines the content of a law
I	as a rule of conduct or a declaration as to power, right or duty, whereas executive
authority applies the law in particular
case.

See also Arnold v Hunt (1943) 67 CLR 429. However, to accept

that proposition is not necessarily to accept the fuither

proposition that to qualify as a law, a norm must formulaLe a rule of general applicatlon. The concept of law as a general

command was a feature of Austinian positivism:	s?e 1-lorison,
"John Austin", p p . 65, 67, 77;	Stone, "Legal Systems and

Lawyers Reasonrngs", p. 77. But, as Professor Raz has pointed out (in "The Concept of a Legal System", 1980, pp. 220-221), "individual norms" which apply only to the action of a single

person on a slngle occasion may still be classed as laws, and this is so although the operation of such laws must necessarily be upon particular cases.

Thus, it is difficult to see how a sufficient

distinction between legislative and administrative acts is that between the creation or formulation of new rules of law having general application and the application of those general rules to particular cases: - cf. Minister for Industry and Commerce v Tooheys Ltd. (1982) 60 FLR 325 at 331, In Australia, such difficulty as has been encountered with statutes of particular application has arisen not because they lacked the character or content of laws with respect to a subject of federal legislative power, but because It was alleged (without success)

Queen v Ludeke; Ex parte The Australian Building Construction	that they trespassed into the field of judicial power (e.g. The
Employees' And Builders Labourers' Federatlon (1985) 159 CLR
636; The Australian Building Construction Employees' And
Builders Labourers' Federation v The Commonwealth (1986) 161

I CLR 88).

Nor, if one accepts Latham CJ's propositlon in

Grunseit's Case (supra) does one thereby deny the proposltion

that to take the step which has the immediate effect of

changing the content of a law as a rule of conduct or declaration of power, right or duty, is to act legislatively.

It is this concern which is of central importance in the

present case.

The Schedules to the Act plainly are parts of that statute (the Interpretation Act, S . 13) and upon the coming into effect of a determination made under sub-s. 4A (8) of the Act (as was purportedly the case here) the result is that the

old table in Schedule 1A ceases to have effect and the new table has effect as if it were set out in Schedule 1A in place of the old table. Medicare benefits will thenceforth be

calculated by reference to the fees set out in the new table

( S . 9) and the quantum of the entitlement to payment to

medicare benefits will be modified accordingly (ss. 10, 20, 20A). The result is the same as if the Schedule had been changed by an amending statute (see Air Caledonie International

v The Commonwealth, High Court of Australia, 2 4 November 1988,

unrep., p. 11 of the print), but subject to the procedures for Parliamentary disallowance. of the determination, as provided for in sub-s. 4BC (1) of the Act.

In this setting, it may be true to say that if' the

Minister decides not to make a determination, he is executing or administerlng a law of the Commonwealth. His consideration of the subject 1 s one which he would not have entertained but for the presence of sub-s. 4A ( 8 ) of the Act. If he decides not to make a determination, then the matter stops there and it may be accurate to say that his decision was of an

I administratrve character; - cf. Rinister for Industry and

Commerce v Tooheys Ltd. (supra). And it	has to be borne in
mind that there	may be review under 5 . 6 of the ADJR Act in

I

respect of conduct for the purpose of making a decision to which the Act applies: Gunaleela v Minister for Immigration And Ethnic Affairs (1987) 74 ALR 263 at 276-271.

Nevertheless, in my view, when the Minlster makes a determination that the table specified in the determination be substituted for the pathology services table then set out in Schedule 1A of the Act, he is making a decision of a legislative rather than an administrative character. This is because, to adapt the expression of Dixon J, sub-s. 4A ( 8 ) has reposed in him an authority of an essentially legislative

l

character (Dignan's Case, supra at 100-101). The Minister is

in a sense executing a law of the Commonwealth because were it

not for sub-s. 4A ( S ) , he would lack competence to make the

determination; but that law was a permitted delegation by the Parliament of legislative authority and to decide to exercise the power conferred by the law is to act as delegate of the

l	4 5 .
I
!	Parliament and thus to act legislatively.
For these reasons, I uphold the objectlon to competency to these proceedings insofar as they concern the applicatlon of the ADJR Act to the determlnation of the Minlster dated 8 September 1988. That being so, there would, as a matter of discretion, be lnsufficient utility in embarking on a separate review of the Committee's decisions of 31 July 1988 and 17 October 1988, assuming there was jurisdictlon under the ADJR Act to do so. This was, I think, accepted by senior
counsel for =PP in the course of his submissions.

That, however, is not the end of the matter. If the

Committee had failed to make to the Minister what satisfied the requirement of a recommendation within the meaning of the applicable provisions of the Act because it failed to perform its functions in accordance with the principles determined by the Minister (as it was obliged to do by sub-s. 78C ( 2 ) ) , then

the Minister had no power to make the determination of 8

September 1988. A condition precedent to the making of a

determination not having been satisfied, the determinatlon

would be invalid: Bread Manufacturers of New South Wales v

Evans (1981) 56 ALJR 89 at 93 per Gibbs CJ.

I

I put to one side the somewhat different consequences of failure by the Committee to observe requirements of natural justice or procedural fairness. There the result would be to make the Committee's recommendation voldable rather than vold

(Calvin v Carr [l9791 1 NSWLR 1 (P.C.)) unless the Minlster had

laid down among the principles in accordance with which the

Committee was obliged by sub-s. 78C ( 2 ) to perform its

functions what in effect was a statement of the procedural fairness required of the Committee; the appllcants submitted, in my view correctly, that Part 9 of the Princlples constituted such a statement of the requirements of procedural fairness. Failure to observe them, if established, would, as with any other failure to comply with sub-s. 78C (21, lead to invalidity of the Minister's determination. It would not merely be a question of avoidance by subsequent decision.

The AAPP relied on the failure by the Committee to

perform its functions in accordance with the principles determined by the Minister as ground for attacking the validity of the Minister's determination under sub-s. 4A (8) of the Act, and sought prohibition against him as the means of vindicating their claim. Jurisdiction in this respect was attracted by S. 398 of the Judiciary Act. The respondents replied that even

I	given the expansive interpretation of the availability of that remedy in cases based (as is S. 39B) upon S. 75 (v) of the
Constitution (as illustrated by The King v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 at 619-620 per Dixon J.) the
applicants were too late because nothing remained to be done by the Minister under his determination. The Health Commission
was acting upon the new table in paying medicare benefits under
i

the Act, but no applicatlon to enloin it had been made.	It was
not a party to the proceedings.

However, the respondents, very properly, did not

dlspute that ~urisdiction having been attracted by the clalm for prohibition under S. 39B of the Judlclary Act, it was open

to the Court if it otherwise was appropriate to do so , to g l v e

declaratory relief under S. 21 of the Federal Court of

Australia Act 1976. Accordingly, I proceed on this basis.

Procedural Fairness to AAPP

AAPP complained of a lack of procedural fairness, or

as it was put, a denial of natural justice. Particulars of

this allegation were given in the following terms:

(i) Non-disclosure to the Applicant [sic] of P

any material setting forth calculatlons or proposed calculation of direct labour

costs, direct material costs or	other
costs

(ii) The making of a finding having no logical

or probative force, namely the finding

that there could be "an overall reduction

Of 5-8%"

The making of the determination by the Minister, under existing pathology services table in accordance with the recommendation of the Committee, affected the interests of the Australian public at large and certain classes or groups of the

sub-s. 4A ( 8 ) of the Act that a table be substituted for the

' I

public. It affected the interests of those providlng ‘the pathology services, of the patients and their medical advisers for whom the services are provlded and of government (that is

to say of the Australian community as a whole) In efficient

administration of the law and proper disbursement of publlc

moneys. I believe there is much to be said for the view that the making of a recommendation by the Committee and the decision of the Minister to make a determination in accordance with the recommendation of the Commlttee, did not affect the rlghts, interests and expectations of pathologists, other medical practitioners and patients in a sufficiently individual direct and immediate way as to attract wlth regard to persons

in these groups the duty to act fairly: see - Kioa v - West (1985)

159 CLR 550 at 584 per Mason J.

It also has to be borne in mind that the rules of

natural justice may not be applicable to the exercise of a delegated legislative power: In re Gosling (1943) 43 SR (NSW) 312 at 318 per Jordan CJ. Thls may be so particularly where, as in the present case, the delegated legislative power in question is concerned with the content of the law as a rule of conduct or as a declaration concerning power, right or

authority as a matter of general application, rather than with

a law applying to the action of particular persons on

particular occasions. The subject was discussed by Gibbs CJ in Bread Manufacturers of New South Wales v Evans (1981) 56 ALJR 89 at 94. In Australia, the matter awaits further examlnation

i

at the appellate level, but it should be noted that In Kioa v - West (supra at 609, 620) Brennan J. said that the legislature was unlikely to intend that a statutory power of a strlctly leglslatlve nature be conditioned on the observance of the principles of natural justice; the interests of all members of the public are affected in the same way by such a power.

For reasons which will shortly appear, it is not

necessary to resolve these questions In order to determlne the
outcome of the present proceedings.

Where decision or determination in question is one made under a statute and the duty to act fairly applies to the decision or determination, the content of the duty depends to a large extent on the construction of the statute itself. Thus, the legislation with which the Judicial Committee dealt in Mahon v Air New Zealand Ltd. [l9841 AC 808 (a decision relied on by AAPP) was quite different in scope and character from

that of the legislation with which I am concerned here. AS

Mason J. explained in Kioa v West (supra at 5851, the statutory power must be exercised fairly, that is to say in accordance with the procedures that are fair to the individual considered

the individual and the interests and purposes, whether public	in the light of the statutory requirements, the lnterests of
or private, which the statute seeks to advance or protect, or permits to be taken into account as legitimate considerations.

!

i

In the present case, provision for procedural falrness

in the conduct by the Committee of Its affalrs was mad ,e by Part

9 of the Principles laid down under sub-s. 78C ( 2 ) of the Act.

I have set out the terms of the relevant portions of Part 9 ,

earlier in these reasons; the Committee may inform itself on any matter relevant to the performance of its functions In such manner as it thinks fit; the Committee also may invite submisslons from any party having a slgniflcant Interest in any

matter being considered by the Committee. Further, Part 9 . 3

obliges the Committee to receive and to have regard to a submission from any party having a significant lnterest In any matter being considered by the Committee.

In my view, the terms of Part 9 are sufficlent

recognition of the necessity for procedural falrness In the sense explained in the passage in - Kioa v - West to which I have

referred above. This is not a case where the terms of the

statute, and the procedures established under the statute, displace or abrogate what would otherwise be the duty to act fairly. Rather, the terms of Part 9 recognise and give content to that duty.

Although the submissions of the parties on this issue fluctuated somewhat, they were, in the end, in agreement that the content of the Committee's duty to act fairly was to be

found in the terms of Part 9 . It is for this reason that it is

not necessary to determine the more general and fundamental

matters which I mentloned earlier in dealing with this topic. Another consequence is, as I have earller polnted out, that failure to comply with Part 9 will brlng wlth It the same consequence of Invalidity as failure to observe any of the

other requirements for an effective recommendation by the Committee and thus for a valid determinatlon by the Minister; that is to say, there is no questlon of the failure producing a decision that was merely voidable.

It was not suggested that the 1-Iinister was subjected

to a duty of procedural fairness which operated upon his power to make a determination under sub-s. 4A (8) of the Act and did

so in addition to that duty which applied to the Committee in

making the recommendation to him. The Minister may decline to

act, but if he does decide to act, the scope of his

determination is limited by the necessity that it be "In

accordance with the recommendation". Hence the concentration, correctly in my view, by counsel upon the posltlon of the Commlttee under the Principles laid down for it by the Minister.

Did the Committee observe the requirements of Part 9

of those Principles?

The Committee did receive and have regard to the

submissions put to it by AAPP. At its meeting on 10 May 1988,

the Committee dealt with the requests in AAPP's letter of 29
April 1988; the manner in whlch It did so appears earlier in .

these reasons. Secondly, regard was pald to the detalled

submission by AAPP enclosed wlth the letter of 23 June 1988. That submisslon, and the request made on 29 June 1988 for AAPP to be given leave to appear before the Committee on 7 July 1988, were dealt with in the manner appearing from para. 4.1 of the minutes for that meeting. In part, para. 4.1 reads as follows:

The submlssion received from the AAPP was in line with other submissions received from organisations considered by the Committee to be major interest groups and therefore those submissions had been taken into account at other [working party] meetings and since been distributed to other Members. These submissions were able be to given consideration by PSAC in the course of revlewing material for this meeting. The Committee decided not to accept the AAPP request to present its case at the meeting.

The minutes of the meeting of 7 July 1988 also make it plain

I

that in dealing with AAPP the Committee was aware of the terms of Part 9.3 of the Principles and that, indeed, legal advice had been received by the Committee on this subject.

Complaint also was made by AAPP, particularly in the letter of 19 June 1988, as to the limited access to the draft costings. The Committee's view on this subject had been expressed in para. 9.6 of the minutes of the meeting of 10 May 1988, which I have set out earlier in these reasons. In my

- -- - -

53.

view, the reasoning set out In the minutes 1 s such as to

counter successfully any allegation of want of procedural fairness in supplying to AAPP details of the draft costing for the proposed Schedule: in saying this, I am not unmindful of

the fact that it was only after the meetlng of 10 May 1988,

that is to say with the arrival of Dr. Kelland's letter of 23 June 1988, was it apparent to the Committee that the members of AAPP, albeit a select group, in fact performed over 30% of prlvate practice pathology in Australia.

The applicants' submission, in essence, was that the Committee was obliged by the considerations of natural fairness evinced by the terms of Part 9 of the Principles and by the

expectations aroused by the Deputy Secretary's letter of 19 Nay 1988, to disclose to AAPP any materlal setting forth calculations or proposed calculations of direct labour costs, direct material costs or other costs for the draft Schedule.

I	In my view, in the circumstances of the case as appearing from the materials I have set out, there was no such obligation imposed by Part 9 nor, if it be applicable, by any obligation to observe procedural fairness which might be super-added to
the express terms of Part 9.
The applicants also complain of a denial of procedural fairness in the making of what they say is a finding in sub-para. 6 . 2 (iii) of the Statement of Reasons that there would be "an overall reduction of 5-8%". AAPP had pointed out,
I
particularly in the letter of 29 June 1988, that It was I
concerned as to the likely impact of the proposed Schedule on
the viability of private practice pathology. Further, Part 9.2
of the Principles provides that the Committee may inform itself on any matter relevant to the performance of its functions in such a manner as It thinks fit. However, in my view, that did not, in all the circumstances of this case, oblige the Committee to Inform itself on this particular topic by seeking information from AAPP. I have earlier referred to the evldence
of Dr. Kelland concerning the draft costings for the
haematology items. There was, in my view, no denral of procedural fairness of the description alleged on this ground by the applicants.

however, is not to deny the force of the observation by the second respondent at the meeting of the Committee on 10 May 1988, set out in para. 9.3 of the minutes, which I have set out earlier in these reasons. The second respondent had stated that the Committee would require "hard data on financial costing of the draft Schedule". This was a

That,

reflection of an awareness of the importance of the

requirements of Parts 6 and 8 of the Principles.	The complaint
of AAPP with regard to the "overall reduction of 5-8%" is more	appropriately considered as made on the other principal ground
on which the applicants seek to impugn the recommendation of the Committee and thus the determinatlon of the Minister, namely failure on the part of the Committee to have regard, in
the proper sense, to the Principles.	TO this I now turn, but

it is necessary first to deal with the issue raised by the

applicants as to whether the Committee, within the meaning of

the Principles, had embarked on a general or periodic review.

General or Perlodic Review?

Part 3 of the Principles provides for reviews of the pathology services table which are periodic or general. A periodic review is a review of all or the majority of fees in the table to consider the effect of general movements in the prices and the costs of rendering pathology services. Whilst the objective of the Committee was described in the evidence as the production of an "interim Schedule "to hold the fort" until the conduct of what was called a general review, it is apparent that the "interim" Schedule was a response to more than a consideration of general movements in the prices and costs of rendering pathology services. Further, the immediate objective was a determination under sub-s. 4A ( 8 ) of the Act, with the coming into effect of the draft Schedule. In that sense, the new Schedule was not "provisional" or "interim". Therefore, it would follow that, applying the dichotomy imposed by Part 3 , the Schedule, interim in character though it might be, would be

the principles. classified as the product of general review wlthin the sense of

!

The respondents sought to escape this conclusion by

pointing to the width of the functions of the Committee under

I

S. 78C (1) of the Act, and by submitting that the determinaklon of princlples by the Minister dated 21 July 1987 did not cover the field, so that the Committee had been free to operate outside the Prlnciples In performing the functlons In question in these proceedings. I do not accept this submission. The determination by the Minister of 21 July 1987 was, in general terms, apparently covering the field. Further, as is apparent from the minutes of the meetings of the Committee, from the

,

Statement of Reasons for its recommendation dated

31 July 1988,

and from the correspondence with the Minister, the Committee

regarded its activities as the	performance	of	functions
controlled by the principles.

!

Accordingly, in the conduct of the review which led to
the recommendation to the Minister, and his determination of 8

September 1988, the applicable principles included those for

general reviews set	out	in	Part	5 of the Principles, as
follows:

PART 5 - Conduct of a general review

5.1 In conducting a general review, the Committee shall have regard to the following

matters -

(a) the need to maintaln the cost effective rendering of pathology services;

(b) the most appropriate costing

methodology to be applied to pathology

services in the table;

(c) the adequacy of the structure and content of the table, including descriptions of pathology services in

the table;

(d)	the need to ensure that the application of any costing methodology would result
In fees which reflect appropriate

relativities between services; and

(e)	the need to maintaln conslstency, as
far as is practicable, with any

recommendations made or prlnclples adopted by the Committee In the conduct of a periodic review.

5 . 2 Where the Commlttee makes a recommendatlon

following the conduct of a general review,

the Committee shall provide the Minister

with all relevant financial and other information relating to the recommendation.

The failures which the applicants say occurred in

observance of Part 6 and Part 8 of the Principles in substance

restate the failures alleged in observance of Part 5.1.

However, I should refer specifically to Part 5.2. I have

referred to the statement in sub-para. 6 . 2 (iii) of the Committee's Statement of Reasons that an overall reduction of

5-8% was found but the statistical sampling was not large or

widespread enough to give clear indications in respect of the

true financial impact. I am conscious of the dangers of

extracting particular passages from a fairly lengthy document. Nevertheless, I am of the view that even In its qualified form,

sub-para. 6 .2 (iii) fell short of provision to the Minister of

all relevant financial and other information relating to the
recommendation, as required by Part 5 . 2 of the Principles. I
do not repeat what I have earlier said as to the evidence
showing how this "overall reduction" was "found". The Minister

I

. l >

I

was not told of	the slender foundation for the so cailed
finding: -	cf. GTE (Aust.) Pty. Ltd. v Brown (1986) 14 FCR 309 at
326 per Burchett J. That was	a serious omlssion. That

seriousness is confirmed by what took place after gazettal of the Minlster's determination of 8 September 1988, as evinced by

the third paragraph of the Acting Ninister's letter to the

second respondent of 12 October 1988, the terms of which I have
earlier set out.

Failure by the Committee to Perform its Functions as Required by sub-s. 78C ( 2 ) of the Act

The primary submission of AAPP was that in the

circumstances of the present case, the Committee had not

I

performed its functions accordrng to the mandatory obligation imposed by sub-s. 78C ( 2 ) of the Act that it do so in accordance with the Principles.

The evidence shows that the Committee (and the working party) were much influenced by two factors in taking the course that was followed in the preparation of the recommendation to the Minister. The first factor was a perceived urgency in carrying the review, particularly having regard to the concern

expressed by the Health Commission as to the existing table.	It was entirely proper to take that view; the presence of
serious abuses and anomalies in the operation of that table has not been denied. The Committee (and the working party) also were influenced by the notion that less effort and inquiry was

I

,

required as to some of the Committee's tasks than would

otherwise have been the case by the "interim" nature of the

revislon. I have already referred to the difficulty in

adjusting that concept to the requirements in the	Principles as
to general and periodic reviews.

The tone was set by the letter dated 17 March 1988

from the Committee to the Australian Medical Association, the substance of whlch I have earlier set out. It continued up to

and	including	the letter from the second respondent to the
Minister dated	31 August 1988, with which the	Committee's

recommendation was forwarded to the Minister. The letter

refers to "urgent restructuring", an "interim revision" to be followed by a "full and thorough review". In his oral evidence, Dr. Carter emphasised what he saw as the provisional or interim nature of the revised table and the significance he had attached to time constraints. Certainly, at the fifth meeting of the Committee on 10 Ray 1988, the second respondent (as is apparent from para. 9.3 of the minutes) was aware of the necessity for "hard data" on financial costing of the draft

schedule. But in the same meeting, reference was also made to

the Committee's desire to see the changes implemented as

quickly as possible and this was accepted as a reason not to

AAPP 9.6 2 1 May 1988 showed that a detailed commentary was to be prepared dealing with the calculation of fees, this never came

consult with bodies such as (para. of the minutes). on

to pass.

The point is that the urgency attendlng the matter, as

perceived by the Committee, dld not relleve It of the

obligation to comply with the principles. The principles were contained in a document drawn with some detall and precision such as not readily to admit of “shortcuts” in dealing with financial matters. This no doubt reflects the concern by the

minister when preparing the principles that he should have

before him an assessment by the Committee of the financial implications arising from its recommendation before he decided whether or not to make a determination which, if made, would bring about slgnificant changes in the terms and operation of the Act Insofar as it concerned pathology services.

A revised table once put into effect will remain in effect until varied or replaced in accordance with the

procedures laid down in the Act. Given the deep significance of a determination made by the Minister under sub-s. 4A ( 8 ) of the Act, and thus in accordance with the recommendation of the Committee, it is not to be expected that the legislative scheme

should permit any qualification to the necessity to observe the

Principles, merely because the Committee regards its review as

having as its object the production	of a revised table to
operate on an	“interim“ basis.

The Statement of Reasons by the Committee for the

recommendation it made to the Mlnister 1s a document of some fourteen pages. In para. 2.11 it is said that the processes of the working party involved examination of various documentary material on interpretation and revision of the table, and that this material had also been made available to the Commlttee.

The oral evidence of Dr. Carter gives a more accurate picture of what In fact occurred. The existing Schedule was

the anchor for a very large number of the new fees. The new Schedule was the culmination of a number of drafts before the

working party and there was discussion also before the

Committee, as the minutes show. Many items were adopted directly from the existing Schedule with no change and thus no reference to what in the evidence was called "the 1988 cost experience". In a number of cases, a fee was calculated by

averaging a number	of fees taken from the existing Schedule and
referable to a number of items which	had been combined into the
one item in the draft of the new Schedule;	this averaglng

process thus had as its integers fees fixed without

consideration of the 1988 cost experience.

There was not before the working party or the

purported in para. 8.3 of the minutes of the working party of 7	Committee any calculation which supported the 5-8% reduction
July 1988, which then found its way into sub-para. 6 . 2 (iii) of

i the Committee's Statement of Reasons for its recommendation to the Minister. This figure was arrived at before Dr. Carter and

Dr. White as a "guestimate" in the manner I have already c

described. There was no discussion or debate I n the Committee to substantiate it, and, indeed, it 1 s apparent from the terms of sub-para. 6.2 (iii) that the Committee may well not have

been aware of how little was involved in	the "statistical
sampling" that yielded the figure of 5-8%.

The only source materials in objective form dealing
with labour costs and materials costs of any service (see Part

6.1 (a) and (b) of the Principles) were in notes of very

limited inquiries made by Dr. Carter, coupled with his own

observations and timing drawn from his own experience. He was the primary source of such information as the working party and the Committee had placed before them on these topics. There was some discussion, in terms of the statement of final views by Drs. Carter, White and Plueckhahn; Dr. White and Dr. Carter, but not Dr. Plueckhahn, were members of both bodies.

It is in this setting that one turns to the terms of

the Committee's Statement of Reasons for its recommendation to

the Minister. It is stated in para. 4.1:

I 4.1 Most importantly, this review is predicated
upon the current principles and fees
structure of billing for pathology benefits.

It is then said (in paras. 4 . 6 and 4 . 7 ) that the recommended table represents an attempt to deal with all the identified

'!

l

!	problems in a way which reverses what is described as the
i	"implicit incentlve" of the current table f o r a constant
;
,	increase in numbers of tests done; It is sald that the recommended table 1s designed to eliminate the necesslty for repetition of Item numbers within "single patient encounters" thus greatly simplifying the preparation and assessment of accounts.

I have already set out the crucial provisrons of para.

6 which deals with "assessment of financial impact" and is the

concluding paragraph of the Statement of Reasons. When para. 6

i	is considered on its face, it is apparent that the Committee
I
I	was telling the Minister that it had not been possible to calculate the cost impact of the recommended table, and that
i
the Committee could not endorse the level of fees as being accurate across the board, because an adequate cost study had not been performed. The "statistical sampling" was said not to be large or widespread enough to give clear indications in respect of the true financial impact.
When these matters are consldered together with the circumstances which I have earlier described as revealed by the
evidence of Dr. Carter, it is clear that, within the meaning of
the authorities I have already mentioned, the Committee had not had regard in any real sense to that to which they were obliged to have regard by Part 6.1 and 6 . 2 of the Principles; nor had the Committee discharged its obligation under Part 8 . 3 of the
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p:

Principles to provide the Minlster	with a Statement of its ~
Reasons which provlded its	assessment of financial and o t h e r

implications arising from the recommendation. The result is

i

.,	that there has been failure in compllance with sub-s. 78C ( 2 ) and sub-s. 4A ( 8 ) of the Act, and that there was in law no
determination by the Minister which came into effect on 1
November 1988.
i
Conclusions

i Pursuant to sub-s. 11 (1) of the ADJR Act, the time

within which the application for review under that Act might have been lodged is to be treated as having been extended up to and including 1 November 1988. The respondents have succeeded in their objection to the competency of the proceedings under the ADJR Act, insofar as t6ey seek review of the determination of the Minister. The applicants made out their claim for declaratory relief to the effect that:

(a) in making its recommendation to the Minister of

31 July 1988, the Committee had not performed

its functions in accordance with the principles determined for it by the Minister, within the

meaning of sub-s. 78C ( 2 ) of the Act, and

(b) in making his determination on 8 September 1988, the Minister did not have before him a recommendation by the Committee within the meaning of sub-s. 4A (8) of the Act and

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, -

i	L	(C)	the purported determinatlon of the Hinlster of
8 September 1988 was vold and had not come lnto effect on 1 November 1988, wlthln the meanlng Of sub-s. 4A (9) of the Act.
!

The respondents should pay the costs of the

applicants.

I will stand the matter over for a short tlme for the

applicants to bring in short minutes of the orders that will be
made to give effect to these reasons.

I certify that this and the sixty four ( 6 4 )

preceding -pages are a true copy of the

Reasons for Judgment of his Honour Mr.

Justice Gummow.

Associate:

Date:  December 1988.

Counsel and Solicitors for	W.H. Nicholas Q.C. and
Applicants:	G.A. Flick instructed by

Messrs. Horris Fletcher &

Cross (Sydney Agents: Messrs.

Preehill Hollingdale h Page).

Counsel and Solicitors for C.J. Stevens and R.B. Wilson

Respondents:	instructed by Australian Government Solicitor.
Dates of Hearing:	8. 9 . 10, 22.  23 and 24
November 1988.
Date of Judgment:	15 December 1988.

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