Saitta Pty Ltd v Commonwealth of Australia
[2003] VSC 346
•12 September 2003
*16/7/03
f`
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6876 of 1999
| SAITTA PTY LTD | Plaintiff |
| v | |
| THE COMMONWEALTH OF AUSTRALIA | Defendant |
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JUDGE: | WILLIAMS J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 6, 7, 10 – 14, 17 – 21, 24 – 28 February, 3-7, 12 –14, 17 – 20 March, 3 April 2003 | |
DATE OF JUDGMENT: | 12 September 2003 | |
CASE MAY BE CITED AS: | Saitta Pty Ltd v Commonwealth of Australia | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 346 | |
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Breach of statutory duty – Entitlement to damages - Tort – Negligence – Exercise of discretion – National Health Act 1953 (Cth) – Parts VA and VAB.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B.F. Monotti with Mr G.J. Parncutt | Colwyn R Lloyd |
| For the Defendant | Mr C. Gunst Q.C. with Mr P. Gray | Clayton Utz |
HER HONOUR:
By its Further Further Amended Statement of Claim filed on 17 March 2003 (“the statement of claim”) the plaintiff (“Saitta”) claimed damages in relation to alleged breaches of statutory duty, negligence and estoppel, as well as restitution of money had and received by the defendant (“the Commonwealth“).
Saitta alleged that the Commonwealth had breached statutory duties under the National Health Act 1953 (Cth) (“the Act”) and duties of care at common law by:
(a) delaying payment of Additional Recurrent Funding (“ARF”) under Part VAB of the Act in relation to its newly built Belvedere Park Private Nursing Home (“the ARF claim”) ; and
(b) imposing negative loadings and deductions of the amount of overpayments of benefits made to it as the proprietor of the Moonee Ponds Nursing Home from benefits allegedly payable to it as the proprietor of the Belvedere Park Private Nursing Home under Part VA of the Act (“the negative loadings claim”).
Saitta claimed damages in respect of losses said to have resulted from the allegedly delayed payment of ARF and from its deprivation of benefits. It alleged that the Commonwealth had wrongfully delayed payment of ARF from 24 November 1993. It claimed that the Commonwealth should not have imposed negative loadings or made deductions relating to its operation of the Moonee Ponds Nursing Home upon it as proprietor of its Belvedere Park Private Nursing Home (“Belvedere Park”).
The Commonwealth denied that it had breached any statutory or other legal duty to Saitta by not paying the amount of the grant of ARF before April 1996, after approval of a final grant had been given on 29 May 1996. It also alleged that it was acting in accordance with its statutory duty when imposing the negative loadings and making the deductions.
Saitta also made claims in relation to the delayed payment of ARF on the basis of estoppel. It further claimed from the Commonwealth, as money had and received, the amount by which benefits were reduced by the negative loadings and the deductions.
During the course of the hearing Saitta abandoned a claim for damages for breach of an alleged funding contract made as part of the ARF claim. In the negative loadings claim it also abandoned an estoppel claim and its challenge to the validation process which identified the overpayments recovered.
The Act
The long title of the Act was “An Act relating to the provision of pharmaceutical, sickness and hospital benefits, and of medical and dental services”.
Under the Act the Commonwealth Department of Health under its various titles (“the Department”) funded nursing home care at all relevant times by way of benefits paid generally to the proprietors of approved nursing homes in respect of approved nursing home patients in those approved nursing homes. The “proprietor” of a non-Government nursing home was defined in s 4 of the Act as “the owner of the business or undertaking carried on at the nursing home”.
The Act provided for a scheme involving grants of “Approval-In-Principle” (“AIP”) in relation to subsequent grants or approvals for various purposes. Such grants of AIPs were to the effect that, subject to further application being made within a specified time frame and any conditions being met, the grant or approval in question would not be refused.
Payment of benefits
Benefits were paid after a claim by a proprietor under s 50. However benefits could be paid in advance under s51A.
SS 42, 60B, 61 and 61A of the Act permitted the Department to conduct a validation process to verify the claims for benefits. The validation process identified any underpayments or overpayments of benefits.
“Overpayment” was defined in s 46B to mean, essentially, the amount by which the benefit paid exceeded that payable.
Overpayments of benefits were recoverable under s 51C which provided at all relevant times:
51C(1)An overpayment of Commonwealth benefit made to the proprietor of an approved nursing home may, in whole or in part, be:
(a)deducted from an amount (including an advance) payable, or to be paid, to that proprietor of the nursing home under this Part [VA]; or
(b)recovered by the Commonwealth from that proprietor as a debt due to the Commonwealth; or
(c)recovered from that proprietor, or a later proprietor of the nursing home, in a manner determined in accordance with the principles formulated under subsection 40AA(7).
The Minister formulated principles under s 40AA(7) from time to time which, by 1989 and at all relevant times, were entitled the “Nursing Homes Financial Arrangements Principles 1989” (“the 1989 Principles”).
From 30 June 1993 to 30 June 1995, Principle 39 of the 1989 Principles provided a discretion to the Secretary of the Department to recover an overpayment to the proprietor of a nursing home under s 51C(1) by way of a deduction from the amount of an advance or by the imposition of a loading. Loadings were imposed in the fixing of scales of fees for a nursing home.
At all relevant times until its repeal on 16 December 1995 s 40AD(1B) provided the Secretary of the Department with the power to alter the conditions applicable to a nursing home by substituting another scale of fees for those determined previously in relation to the nursing home under s 40AA(c)(i).
Between 1 July 1989 and 30 June 1995, Principle 32(17B) provided as follows for the carrying over of loadings when patients cared for in a nursing home had ceased to be cared for at that nursing home and had been transferred to another nursing home prior to its approval under s 40AA(1):
(17B) Where –
(a)an application for approval of premises occupied by a nursing home as an approved nursing home is approved under subsection 40AA(1) of the Act, and the number of beds determined at the time of the approval for the purposes of paragraph 40AA(6)(a) of the Act as the approved number of beds in relation to the nursing home include beds transferred from a second nursing home;
(b)the second nursing home ceased to care for approved patients prior to the approval of the first nursing home; and
(c)at the time the second nursing home ceased to care for approved patients –
(i)a loading was reflected in its scale of fees; or
(ii)a loading would have been reflected in its scale of fees had a scale of fees been determined on the day before it ceased to care for approved patients and that scale of fees had taken into account all costs incurred or saved and all income from fees foregone or gained due to these costs being incurred or saved, before the day on which it ceased to care for approved patients;
the Secretary shall, in determining a scale of fees for the first home, take into account as a loading –
(d)where the number of beds transferred from the second nursing home to the first nursing home is equal to the number of beds determined for the purposes of paragraph 40AA(6)(a) of the Act as the approved number of beds in relation to the second nursing home on the day before it ceased to care for approved patients, the sum of the loadings, if any, referred to in subparagraphs (c)(i) and (c)(ii);
Between 24 February 1993 and 29 June 1994 Principle 32(18) also dealt with the imposition of loadings in relation to a nursing home which had been transferred to a new site by providing:
32(18) Where a nursing home is transferred to a new site, or wholly or substantially demolished and rebuilt, the Secretary shall in determining a scale of fees in relation to the home take into account as a loading the same loading which applied to the home prior to that event.
ARF
Grants of ARF became available under Part VAB of the Act, in respect of new and completely rebuilt nursing homes, as a result of a recommendation made after a review of nursing home funding adopted in the 1991/2 Commonwealth Government Budget. The 1992/3 Budget extended the scheme by providing for the grant of an AIP in relation to a grant of ARF to an applicant who was building or proposing to build a nursing home. Part VAB of the Act was amended accordingly.
At all relevant times after 21 December 1992 Part VAB of the Act was in the following terms:
PART VAB – COMMONWEALTH BENEFIT IN RESPECT OF NEWLY BUILT NURSING HOMES
Division 1 – Preliminary
Interpretation
52.In this Part:
“AIP” means an approval-in-principle granted by the Minister under section 52C;
“eligible premises” means newly built premises approved as an approved nursing home on or after 1 November 1991.
Division 2 – Approval-in-principle of an approval of a grant in respect of a newly built nursing home
Application for approval-in-principle
52A.(1) If:
(a)a person is building, or proposes to build, a nursing home; and
(b)the person proposes to become the proprietor of the proposed nursing home;
the person may apply, in writing, to the Minister for an AIP of a grant of Commonwealth benefit under section 55 in respect of the proposed nursing home.
(2) An application must:
(a) be in a form approved by the Minister; and
(b)be accompanied by such further information and documents (if any) as the Minister, in writing, requests the person to provide.
…
52C. (1) Upon receiving an application under section 52A, the Minister may, in writing, in accordance with principles set out under section 52B, approve the grant of an AIP to the applicant.
(2) The Minister's approval must:
(a)set out the conditions to which the grant of the AIP is subject; and
(b) state that if:
(i)within the application period, the applicant becomes eligible to apply under section 53 for a grant of Commonwealth benefit in respect of a newly built nursing home; and
(ii) the applicant so applies; and
(iii)the applicant has complied with the conditions (if any) set out in the AIP.
the application for a grant of Commonwealth benefit will not be refused.
…
(6) In this section:
“application period”, in relation to an AIP means:
(a)the period of 12 months beginning immediately after the grant of the AIP; or
(b)if the Minister has varied the approval of the grant of the AIP under subsection (3) by extending the period referred to in subparagraph (2)(b)(I) – the extended period.
…
Division 3 – Approval of grant of Commonwealth benefit in respect of a newly built nursing home
Application for Commonwealth benefit
53.The proprietor of eligible premises may apply, in writing, to the Minister for the grant of a Commonwealth benefit in respect of the premises.
Principles applicable for grant of Commonwealth benefit
54.(1) The Minister must formulate in writing:
(a)principles in accordance with which the grant of a Commonwealth benefit under this Pay may be approved; and
(b) principles for determining the amount of the benefit.
(2)Without limiting the matters to which the principles may refer, the principles must require the Minister to take into account in deciding whether to approve the grant of a Commonwealth benefit to the proprietor of the nursing home:
(a) the honesty to the applicant; and
(b)the likely efficiency of the applicant as proprietor of the nursing home; and
(c)if the applicant has, at any time, been the proprietor or co-proprietor of a nursing home or has, at any time, had a substantial role in the control of a nursing home:
(i)the extent to which the standards determined under section 45D for the provision of nursing home care were then met in the nursing home; and
(ii)the extent to which patients in the nursing home were then properly classified; and
(iii)the extent to which agreements, substantially complying with the form of agreement formulated by the Minister under section 40ABB, were then entered into between the proprietor of the nursing home and approved nursing home patients in the nursing home; and
(iv)the extent to which the applicant complied with requests for information under paragraph 40AA(6)
(d)whether any grant for capital works costs in respect of the nursing home has been made by the Commonwealth under any other Act.
Approval of grant
55.(1) On receiving an application under section 53 for the grant of a Commonwealth benefit in respect of eligible premises, the Minister may, in accordance with the principles, approve the grant of a Commonwealth benefit to the applicant.
(1A) The Minister may refuse to approve a grant of Commonwealth benefit to an applicant unless:
(a) the applicant holds a current AIP; and
(b)the Minister is satisfied that the conditions to which the AIP is subject have been complied with.
(2) The approval of the Minister must be in writing and set out:
(a) the total amount of the benefit; and
(b) the rate at which the benefit will be paid; and
(c) the period over which the benefit will be paid; and
(d) any conditions subject to which the benefit is payable.
Entitlement to benefit
56.Where the grant of a Commonwealth benefit to the proprietor of eligible premises has been approved by the Minister, the Commonwealth benefit is payable to the proprietor in accordance with the approval of the Minister.
Previously, on 15 May 1992 the Minister had formulated the New Nursing Homes Principles 1992 under s 54(1) (“the May 1992 Principles”). Principles 5 and 6 were in the following form:
5. If an application for Commonwealth benefit under Part VAB of the Act is approved the proprietor of an approved nursing home is eligible for the payment of a monthly Commonwealth Benefit in Respect of Newly Built Nursing Homes for 10 years.
6. In determining the amount of the monthly Commonwealth benefit in respect of newly built nursing homes for the purposes of principle 5 the Minister shall –
(a)calculate, for the day the application for Commonwealth benefit was approved, 65% of the Commonwealth Bond 10 year Indicator Rate – Index; then
(b)multiply the percentage determined in paragraph (a) by $27,000 or such larger amount as the Minister may determine from time to time; then
(c)divide the amount calculated in paragraph (b) by 12.
After the AIP provisions relating to the grant of ARF had come into operation on 21 December 1992, the Minister formulated further Principles on 21 January 1993 under s 52B(1) in accordance with which an AIP might be granted (“the 1993 Principles”). The 1993 Principles did not deal with the calculation of the amount of the grant for which approval in principle was to relate.
On the same day the Minister also approved a written application as the proposed format for applications for an AIP, approved a proposed certificate of approval for an AIP and an Instrument of Approval under s 55 for use by his delegates and signed an Instrument of Delegation in relation to his powers under sections of the Act, including ss 52C and 55.
The credibility of witnesses
At the outset I note that I did not find the evidence of Saitta's principal witness, Mr Graeme Menere (“Mr Menere”), to be persuasive. He gave me the impression of being evasive and of attempting to tailor his evidence to support Saitta's claims. His responses under cross-examination relating to his credit were unconvincing. Generally, I did not accept his evidence unless it was independently corroborated.
Counsel for Saitta sought to explain inconsistencies in Mr Menere’s evidence on the basis that he had been subjected to attack under cross-examination. In my view, the cross-examination by senior counsel for the Commonwealth, although robust, properly and fairly gave Mr Menere the opportunity to respond to the Commonwealth’s allegations that he was not telling the truth and that he should not be believed because of his discreditable behaviour on other occasions. He was represented by experienced counsel at the trial. I was not persuaded that he had been disturbed by the cross-examination to an extent which might have explained his inconsistent evidence.
At one point counsel for Saitta submitted that the evidence of the Commonwealth’s witness, Mr Ribchester, should be disbelieved, although he subsequently disavowed any criticism of Mr Ribchester. I accept that counsel for Saitta intended no criticism of Mr Ribchester whom I found to be a credible witness, prepared to make concessions which might have been thought prejudicial to the Commonwealth’s case.
Findings of fact
Having taken into account all the evidence and submissions of counsel, I make the findings of fact in the following paragraphs.
Background
The plaintiff (“Saitta”) was registered under the Corporations Law on 30 September 1977. Mr Menere was Saitta’s managing director and chief executive officer and its other directors were his family members and associates. Mr Menere held one of the issued shares in Saitta and the other was held upon trust for him.
As trustee of the Saitta Unit Trust, Saitta was the proprietor of an approved nursing home business carried on as the Moonee Ponds Nursing Home at 103 Holmes Road Moonee Ponds, Victoria until on or about 25 November 1993, and, subsequently, of Belvedere Park at 1 Profitta Avenue Sydenham, Victoria. The trustees of Mr Menere’s family trust and that of his brother, Mr Russell Menere held the units in the Saitta Unit Trust.
Mr Menere had extensive experience of the nursing home industry. Through his firm, GPM Management Services (subsequently incorporated in February 1992) (“GPM”), he had operated a consulting service providing management of human resources and financial services for nursing homes. By 1988 Mr Menere was managing 11 nursing homes, as well as a commercial laundry and a petrol station. As a founding member of an association which he described as the Aged Services Peak Council, Mr Menere had also been involved in negotiations with the Commonwealth leading up to its first offer of ARF in January 1992. The association had proposed the provision of ARF grants to assist existing or potential nursing home proprietors to finance the building of nursing home facilities.
The proposed extension of Moonee Ponds Nursing Homes
From about November 1977 Saitta had operated the Moonee Ponds Nursing Home with approval under the Act for 15 beds for geriatric patients. On 23 September 1985, it obtained an AIP for 15 additional beds. Saitta intended to purchase the adjoining property in order to extend its existing premises to accommodate the 15 extra patients. Mr Menere advised the Department accordingly and, subsequently, continued to inform it of Saitta’s efforts to obtain necessary approvals relating to the proposed extension. However, by 5 June 1990, negotiations with the adjoining landowner had broken down and the proposal had been abandoned.
In July 1990 Mr Bruce Craike, a management consultant and past employee, was re-employed by GPM and thereafter also worked as an assistant manager for Saitta. Mr Menere asked him to “explore options” with a view to obtaining new premises at which Saitta could utilise the AIP in relation to the 15 extra beds. Mr Menere directed Mr Craike to find a developer who would build the nursing home. It was not proposed that the home would be constructed on behalf of Saitta.
Saitta obtained from the Department the necessary extensions to the period for the establishment of a nursing home premises suitable for the care of 30 patients and, on 12 September 1991, approval under s 39B(5)(a) of the Act for the redevelopment of the Moonee Ponds Nursing Home by the transfer of the existing 15 beds and the AIP for a further 15 beds to a property in Keilor North. However a contract which was entered into in relation to the purchase of a Keilor North property did not proceed.
The Harry Lucy & Associates proposal
In or about December 1991 Harry Lucy & Associates, design consultants, made a proposal for the relocation of the Moonee Ponds Nursing Home involving the purchase by Altostruct Pty Ltd and the development and ultimate lease to Saitta of land in the Keilor municipality.
Mr Craike advised Mr Menere to enter into an agreement for lease with Altostruct in accordance with the proposal because, in his view:
(a) the existing Moonee Ponds Nursing Home business was no longer financially viable under then recently introduced funding arrangements;
(b) Saitta’s failed attempts to purchase the neighbouring property had meant that the existing premises of the Moonee Ponds Nursing Home could not be extended;
(c) Saitta could not afford to build the necessary new premises;
(d) in the circumstances, Saitta stood to lose the benefit of the AIP in relation to the 15 additional beds, each of which then had a market value of between $20,000 and $25,000;
(e) there were taxation benefits for Saitta as a result of making deductible rental payments, rather than depreciating the cost of construction of new premises; and
(f) more favourable terms of lease had been negotiated than were then generally available to nursing home proprietors.
By a letter dated 12 December 1991 Mr Menere informed the Department of Saitta’s failed attempt to purchase a suitable site within the Keilor area and of its engagement of H. Lucy & Associates to pursue a development proposal in conjunction with Altostruct. Saitta applied for an extension to the period of its AIP for the relocation of the Moonee Ponds Nursing Home. The letter referred to a proposed “construction/lease agreement”. The Department responded by a letter dated 30 March 1992, extending the AIP to 30 June 1992 and enclosing a letter of certification under s 39B(5)(a) and s 39A(4) of the Act in relation to the transfer of the nursing home beds.
Circular 92001
In the meantime, the Department had issued Circular No CNH(NG) 92001 dated January 1992, entitled “Additional Recurrent Funding for New and Rebuilt Nursing Homes”, announcing the provision of ARF for new and completely rebuilt non-Government nursing homes approved for operation on or after 1 November 1991, to assist proprietors in either building new nursing homes or replacing old homes, with resulting improvement in the quality of care offered to patients. Significantly the circular stated:
“However, the initiative is cash limited which means that not all applications will be successful.”
Circular 92001 noted the matters which s 54(2) of the Act required the Minister to take into account when considering an application and it set out the criteria by which nursing homes would be classified for the purpose of determining the priority to be given to applicants. 31 March 1992 was set as the last day for the acceptance of applications for the additional funding. A further circular relating to submissions for funding in the 92/93 year was foreshadowed.
From 1992, Saitta intended to pursue an application for ARF. However it had not become the proprietor of any eligible premises before 31 March 1992.
I note that it had been alleged in a previous version of the statement of claim that, shortly after the publication of Circular 92001, Mr Menere had received an assurance from an officer of the Melbourne office of the Department to the effect that Saitta had priority for a grant of ARF in the 1992/3 rounds of grants in respect of its proposed relocation to new premises in the Keilor region and that an application by it would be approved. Under cross-examination in relation to the previous allegations in his statement of claim, Mr Menere initially gave evidence to the effect that he believed that the alleged conversation had taken place with a Mr Andrew Warren of the Department. Subsequently, he said that his conversation had been with another officer of the Department, from its Canberra office, and not with Mr Warren. In the absence of any corroborating evidence, I was not persuaded by Mr Menere’s evidence that the alleged conversation took place. I note, for completeness, that the alleged assurance was pleaded in the final version of the statement of claim as having been made on 28 April 1993, apparently illogically in light of the dates of the conduct said to have been induced by it.
The agreement for lease
Saitta was advised by its solicitor, Mr Lloyd, and by Mr Craike in relation to its dealings with Altostruct. It executed a written agreement for lease dated 3 April 1992 (“the agreement for lease”) under which Altostruct agreed to lease to Saitta, for a ten year term, any premises built as a 30-bed nursing home on land which might be purchased by Altostruct. The agreement for lease was conditional upon Altostruct purchasing land in the Shire of Keilor, obtaining the necessary permits and approvals and constructing the premises. No reference was made in the agreement for lease to any condition relating to any application for ARF.
Whilst I am satisfied that, at the time of the agreement for lease, Saitta intended to pursue a grant of ARF, I am not satisfied that Saitta was induced to enter the agreement for lease by any representation or warranties made by the Department in Circular 92001 or otherwise, in the expectation that, upon its proposed relocation, it would receive amounts of ARF calculated in accordance with that Circular, as alleged.
A suitable site in Keilor had been purchased by Altostruct, subject to planning approval. Mr Craike informed the Department accordingly on 3 April 1992, enclosing a copy of the agreement for lease. The Keilor purchase did not proceed, because of difficulties encountered in relation to the obtaining necessary planning permission. On 14 August 1992 Mr Craike wrote advising the Department of events, but went on to state that an alternative site in Sydenham had been purchased, subject to planning permission. He said that he anticipated a “realistic” completion date of mid January 1993. Saitta obtained an extension of its AIP in relation to the relocation of the Moonee Ponds Nursing Home to 31 March 1993.
Circular 92018
In September 1992 the Department issued Circular No CNH(NG) 92018 advising of the proposed extension of the 1991/92 ARF initiative to allow for AIPs of grants of ARF and seeking expressions of interest from eligible proprietors who proposed either to build a new nursing home or completely rebuild an existing one. Like its predecessor, Circular 92018 noted the limited availability of funds and stated that not all applications would be successful.
Saitta’s 29 October 1992 application
Even though Circular 92018 had called for expressions of interest and had only foreshadowed the amendment of the Act to allow for AIPs of grants of ARF, Mr Craike drafted a letter to the Department signed by Mr Menere dated 29 October 1992 applying for an AIP of a grant of ARF to Saitta.
The first validation
Between 11 June 1992 and 2 March 1993 the Department had conducted a validation procedure to verify reports of Saitta’s actual expenditure in relation to the Moonee Ponds Nursing Home for the financial years 1986-91. At the “exit interview” following the validation process officers of the Department advised Mr Menere of their recommendations relating to adjustments and allowed him a period of 14 days to provide additional relevant information. Saitta provided no further information to the Department within the time allowed. (It was this validation process which ultimately gave rise to the negative loadings challenged under the negative loadings claim.)
On about 6 April 1993 the Department extended, to 30 September 1993, Saitta’s AIPs in relation to the transfer of the Moonee Ponds Home nursing home beds.
By a letter dated 28 April 1993 the Department advised Mr Menere that Saitta's application for ARF for the Moonee Ponds Nursing Home had been unsuccessful. The letter suggested that Mr Menere discuss any queries in relation to the application with Mr Andrew Warren of the Department.
The alleged 28 April 1993 representation
It was alleged by Saitta that one of the representations founding the ARF claim based on estoppel was made by Mr Warren to Mr Menere, on or about 28 April 1993, during an alleged telephone conversation in which Mr Warren had informed Mr Menere that Saitta had “narrowly missed out” and should apply again and had assured him that Saitta would be “first in line” for a grant of funding in the 1993/4 round of ARF allocations.
In his witness statement Mr Warren said that he could not recall having made the alleged statement and that he would not have used the alleged form of words. He said that he was in the practice of making file notes of his conversations. The relevant tendered Departmental file did not contain an note of such a conversation. Mr Warren’s unchallenged evidence was that he was a junior officer and did not have authority to give assurances as to future funding. He said that his task was to assess whether applications had satisfied the relevant criteria, but that he did not think that it was part of the function of his office to accord priority to applications for ARF. Mr Warren said that he thought that the Minister’s office gave priority to applications, but that he had not known which applications had been given such priority.
The pro-forma Assessment Summary Sheet contained in the 1994 Departmental Guidelines relating to grants of AIP for ARF would however appear to indicate that the Department’s Victorian office was involved in some way in according priority to applications for ARF. Further, Mr Warren had poor recollection of events during relevant times and gave inaccurate evidence as to the periods of his engagement by the Department in various roles. Nevertheless, taking into account all the evidence, and in light of my strong reservations about the accuracy of Mr Menere’s evidence, I am not satisfied that the alleged April 1993 representation was made by Mr Warren, or at all.
Later in 1993, and before 1 August 1993 when Saitta executed the lease the subject of the agreement for lease, a dispute described by Mr Menere in his evidence as “contractual” broke out between him and Mr Don Martuccio, the principal of Altostruct. It concerned Saitta's entry into the lease. The evidence did not satisfy me as to the details of the subject matter or duration of the dispute.
The lease
In any event, the lease between Altostruct and Saitta in relation to the Sydenham premises for the relocated nursing home (“the lease”) was executed by Saitta and dated 1 August 1993. The lease provided for the commencement of a 10-year term on 8 August 1993.
After having been notified of the proposed relocation and increased capacity of Moonee Ponds Nursing Home, on 30 August 1993 Mr Whitehead, then Executive Officer Nursing Home Operations Area West of the Department, wrote to Saitta requiring, before approval would be given by the Department, copies of a certificate of occupancy, a Fire Clearance certificate and the written approval of the Victorian Department of Health and Community Services as well as information as to the date of relocation of the first patient of the nursing home.
The first validation advice
Meanwhile, the validation process continued. On 16 September 1993 the Department provided a validation advice resulting from the first validation for the financial years 1986/87 to 1990/91. The amounts of $45,588.44 and $58,273.32 were to be recovered, in accordance with Principle 32 of the 1989 Principles by application of negative loadings by way of a substitution of a new scale of fees under s 40AD(1B) of the Act for the period from 1 November 1993 to 31 October 1995. The letter indicated that Saitta might apply to the Minister for review of the fee determination under s 40AE.
Circular 93015
The Department then issued Circular CNH(NG) 93015 dated 13 September 1993, advising nursing home proprietors of the 1993/94 round of ARF, only available by way of AIP in respect of new or rebuilt homes which had not already been completed. Applications were to be made by 29 October 1993.
Circular 93015 stated inter alia that:
“[The grant] is a provisional sum which is subject to recalculation based on the final costs and the prevailing bond rate at the date of completion. ...
The bond rate for grants for nursing homes which apply for an Approval in Principle for new and rebuilt additional recurrent funding will be that which is current on the date the home is approved for operation, and payment will commence in the next month. ...
In the case where the actual project cost is less than the grant as determined above, the grant will be based on the actual project cost and calculated in the same way.”
The certificate of occupancy
A certificate of occupancy in relation to the Sydenham premises was issued on 21 September 1993 by the City of Keilor.
The 28 October 1993 application
Saitta made an application, in accordance with Circular 93015, by a letter dated 28 October 1993 from Mr Menere to the Department. Mr Craike, Saitta’s former employee, drafted the letter which stated that the application was for an AIP “as the nursing home [was] still under construction”. A supporting document was attached, relating the history of the decision to relocate the facility to Sydenham, describing the Sydenham premises and addressing matters referred to in the 1993 Principles.
The move to Belvedere Park
On 24 November 1993 the first patient took up residence at Belevedere Park.
The Victorian Department of Health and Community Services certified the registration of Belvedere Park on 25 November 1993.
The 30 November 1993 fee determination
On 30 November 1993 the Department wrote to the proprietor of Moonee Ponds Nursing Home, at its Moonee Ponds address, advising of a determination under s 40AA(6)(i) of a variation to its scale of fees from 1 December 1993 by way of a negative loading to reflect the first validation adjustments (“the negative loading”).
On or about 3 December 1993 the Department received by facsimile transmission a letter from Mr Menere advising of the Victorian registration of Belvedere Park on 25 November 1993 together with a copy of the certificate of occupancy dated 21 September 1993. An application for approval of Belvedere Park as an Approved Nursing Home was enclosed. The letter also referred to the documents required by the Department’s 30 August 1993 letter as enclosures. However the balance of the listed documents were not produced to the Department by Mr Menere until 9 December 1993.
On 6 December 1993 Moonee Ponds Nursing Home made a claim for benefits in respect of nursing home patients for the month ending 30 November 1993.
The 8 December 1993 Minute
By a Minute dated 8 December 1993 Ms Lisa Paul recommended to the then Minister, Mr Brian Howe, that he approve ARF for “up to $3302 per month” (a total sum of $396,240) to Saitta and different amounts to each of Minkara Retirement Village Pty Ltd in New South Wales and another Victorian nursing home proprietor, Ellfam Nominees Pty Ltd. The Minute noted that the projects were all “able to proceed immediately” and that, accordingly, the funds committed to the initiative might be able to be spent within the financial year to 30 June 1994. The Minute recommended that the Minister sign an attached Instrument of certification of approval in principle under s 52C relating to all three, as well as attached letters to each applicant and to the Minister’s parliamentary colleagues, advising of the funding.
An explanatory memorandum from Ms Paul noted that a number of homes in Victoria and New South Wales had been considered eligible, but were not able to be recommended because of a lack of available funds. It went on to state that the three recommended applicants “ha[d] been prioritised according to all essential criteria and would have been recommended in the previous round but for lack of available funds”.
On 9 December 1993 Mr Menere provided the Department’s Victorian office with the balance of the documents, referred to as enclosures in his 3 December 1993 letter to Mr Whitehead and required in relation to Saitta’s application for the approval of Belvedere Park as an approved nursing home under the Act.
The 17 December 1993 Instrument
The Instrument forwarded under cover of Ms Paul’s 8 December Minute was signed by the Minister on 17 December 1993 in relation to three applicants, including Saitta which was described in its schedule with reference to the Moonee Ponds Nursing Home at its former Moonee Ponds address. The certificate did not set out any of the matters referred to in s 52C(2). Because there was an issue as to the characterisation of any grant made on 17 December 1993 I will set out the terms of the Instrument signed by the Minister that day (omitting formal parts):
“I, BRIAN LESLIE HOWE, Minister of State for Housing, Local Government and Community Services, hereby grant certificates of approval in principle under subsection 52C(1) for a grant of Commonwealth benefit under section 55 of the National Health Act 1953, to the applicants set out in the attached Schedule.
SCHEDULE
Applicant
Beds
Location
Grant
Minkara Retirement Village Pty Ltd
Narrabeen Lakes Nursing Home
C/- PO Box 297
GORDON 207241 Gordon $541 440 Ellfam Nominees Pty Ltd
C/- 144 McGowans Rd
DONVALE 311130 Coburg $396 240 Saitta Pty Ltd
Moonee Ponds Nursing Home
103 Holmes Rd
MOONEE PONDS 301330 Moonee Ponds $396 240 The 20 December 1993 approval of Belvedere Park and revocation of approval of Moonee Ponds Nursing Home
On 20 December 1993 the Department approved Belvedere Park under s 40 AD(1) and s 40AA(6) (A) of the Act and gave it the approval number, 4113E, formerly held by Moonee Ponds Nursing Home. The approval of Moonee Ponds Nursing Home was revoked under s 44, with effect from 25 November 1993.
The 22 December 1993 letters
The Minister sent letters in virtually identical terms to each of the three proprietors and to parliamentarians all dated 22 December 1993. The copy letters to parliamentarians were in very similar terms to the letters to the individual applicants and almost identical to each other. He wrote to the Manager, Saitta Pty Ltd, Moonee Ponds Nursing home at its Moonee Ponds address.
In light of the submissions made in relation to the nature of the grant made in December 1993 by the Minister, I will set out the letter to Saitta in full (omitting formal parts):
“Dear Proprietor
I am pleased to advise that I have approved New and Rebuilt funding of up to $ 3 302 per month for ten years for the Moonee Ponds Nursing Home. You will shortly receive a letter from the Department of Health, Housing, Local Government and Community Services confirming details of the approval.
This funding represents a total commitment of up to $ 396 240 with payment to commence when the project has been completed.
The 1993-94 Budget extended the initiative announced in the 1991-92 Budget, which made additional recurrent funding available to new and rebuilt nursing homes.
This funding is designed to assist proprietors in either building new homes or rebuilding existing homes. The extension of this important initiative was one of a number of measures in the Budged aimed at supporting nursing homes in their efforts to provide the best possible quality of care to residents.
I look forward to the successful completion of your project and trust that this grant will assist your nursing home in its future operation. If you require more information please contact Darren Treanor, telephone 03 285 8634, of the Victorian Office of the Department of Health, Housing, Local Government and Community Services.
Mr Menere said that he could not recall receiving the Minister’s 22 December 1993 letter. He believed that mail was forwarded from the Moonee Ponds address of the nursing home, but could not recall any arrangements made in that regard.
The alleged December 1993 representation
Mr Menere gave evidence that, “shortly before Christmas” in 1993, Mr Warren verbally advised him that Saitta had been approved for a grant of ARF. I am not satisfied that any such conversation took place. I accept Mr Warren’s evidence as to the manner in which proprietors of nursing homes were usually advised of the success of their applications by their local members of Parliament, so as to maximise the political impact of the making of the grants, as well as his evidence that he did not learn of a grant until after it had been announced by the local member. Indeed the Department’s procedures set out in its 1994 Guidelines provided for successful applicants to be notified by the Minister and for details of the Minister’s approval of a funding package to be “embargoed” for approximately seven days, after which State and Territory offices of the Department were to supplement the Minister’s advice to successful applicants and advise the unsuccessful. Since it was common ground that the letters from the Minister were sent on Wednesday 22 December 1993 there was little time for the State office to have been notified of Saitta’s success before Christmas, in order for Mr Menere to have been advised of the outcome “shortly before Christmas” by Mr Warren, as he maintained. I also note in this regard that the facsimile transmission from the office of Mr Alan Griffiths MP, the Federal Member for Maribyrnong, to Mr Darren Treanor of the Department which forwarded a copy of the Minister’s 22 December 1993 letter advising him of the approval was dated 7 January 1994. Further Mr Warren gave unchallenged evidence that he did not have access to a computer or to email and that his only resource was the Department’s paper file. Mr Warren’s employment records show him to have been employed at relevant times on short contracts. His last 1993 contract expired on 24 December 1993 and his next recorded period of employment began on 10 January 1994, as a validations officer, not dealing with applications for ARF. Additionally, on subsequent occasions when it might have appeared likely that Mr Menere would have referred to the alleged conversation with Mr Warren, there is no evidence that he did so. In all the circumstances I am not satisfied that the alleged conversation took place.
The 1994 Departmental Guidelines
The Department, which had changed its name to “Department of Human Services and Health” on 23 December 1993, issued Guidelines under the new name and dated 1994 (“the 1994 Guidelines”), setting out procedures for grants of AIP by the Minister of a “provisional sum” and grants of ARF under s 55 or “final” grants by the Minister’s state office delegate.
There was an issue as to the date at which the 1994 Guidelines were issued. I note that the 1994 Guidelines contained a pro forma letter to a successful applicant for AIP which referred to the amount of $27,513, set by the Minister on 27 October 1993 as the amount to be used for the calculation of ARF under Principle 6 of the New Nursing Homes Principles 1992 for the financial year 1993-4. It would seem likely that the 1994 Guidelines were issued after the Department changed its name on 23 December 1993 and before 1 July 1994 when that amount was increased to $28,100 for the financial year 1994/5.
The 1994 Guidelines stated that it was unlikely that the subsidy calculated on a “per bed” basis would exceed the project costs of a new or rebuilt nursing home and noted that “indeed, all approvals to date have been for grants based on the maximum cost per bed for subsidy purposes formula”. They referred to the documentation required to be produced by the proprietor who was also required to make a written request for grant approval including: “the architect’s certificate of practical completion; certificates of occupancy; and Auditors (sic) certification of the costs and that all costs have been met.” The 1994 Guidelines stated that the Minister’s state office delegate would approve the final grant under s 55 and was required that in all cases be satisfied that the work for which the grant was approved had been completed and that all costs had been met.
Mr Chris Whitehead by a letter dated 4 January 1994, addressed to Mr Menere at Belvedere Park advised that approval had been granted for the additional beds and relocation of the nursing home premises, effective from 25 November 1993.
As previously stated, the office of the Hon. Mr Alan Griffiths, the Federal Member for Maribyrnong, forwarded to the Department's Victorian office a copy of the 22 December 1993 letter to him from the Minister, on 7 January 1994, without comment, apart from a reference to a previous discussion between the sender and Mr Darren Treanor. A copy of this facsimile transmission was present upon the exhibited Departmental file.
Mr Menere gave evidence that he had responded to the Department's 16 September 1993 letter in relation to the validations by a letter dated 30 June 1994, explaining that he had been unable to attend to the matter for “personal reasons”. The letter sought suspension of all negative loadings pending review, or their distribution over a longer period, in order to alleviate the pressure on his cash reserves. I note that there was no reference in the letter to any grant of ARF having been approved in December 1993 or to the alleged conversation with Mr Warren. However, I am not satisfied that the 30 June 1994 letter was ever sent. Under cross-examination, Mr Menere conceded that he could not recall whether his letter had been sent. Further, Mr Tony Moore, the Departmental officer who eventually reviewed the first validation, gave evidence that there was no record on the Department’s validation file that there had been any objection to the validation process outcome before a letter was received from Saitta dated 25 March 1995. I accept the evidence of Mr Moore who struck me as an impressive witness. There was no evidence from Mr Menere that he had followed up the alleged letter with any enquiry. The letter was not mentioned in his subsequent 27 March 1995 letter, a letter of 23 June 1995 referring to the 27 March letter or in a later letter of 5 September 1995 in which he referred both to his 27 March and 23 June 1995 letters.
Mr Menere also said under cross-examination that he had not contacted the Department before July 1994 to enquire about the letter in relation to ARF, which he maintained he had expected to receive after his alleged telephone conversation with Mr Warren in late 1993, because “the Department, I think, had just moved offices and we were aware that they were a bit behind in their work”. It was his unchallenged evidence and I accept that he telephoned a Mr Ray Beveridge of the Department on 20 July and Ms Daphne Miloshis on 26 July 1994 enquiring in relation to the progress of the application for the grant and that he had made a note of the conversations on his copy of Saitta’s 28 October 1993 application letter to Mr Treanor. However he did not give detailed evidence as to the substance of any conversations. Further I note that Mr Menere did not state in his witness statement that he told the officers in late July 1994 of the alleged December 1993 advice that a grant had been obtained.
The 27 July 1994 letter
Mr Chris Whitehead of the Department wrote to Mr Menere on 27 July 1994 following the form of the pro-forma letter to a successful applicant for a grant of AIP in the 1994 Guidelines as follows:
“Dear Mr Menere
I am writing to provide you with details of the additional recurrent new and rebuilt funding recently approved for the Belvedere Park Nursing Home by the then Minister for Housing, Local Government and Community Services, the Hon Brian Howe MP.
The provisional grant is $396,240 for the relocation of 30 beds from Moonee Ponds to Sydenham.
The grant is subject to review when the project has been completed. At that stage, your grant will be recalculated on the final costs of your project and the long term bond rate for the first day of the month in which the project is completed to the Department's satisfaction.
Payment will be made as a monthly benefit which will commence upon completion of the project. You will need to provide evidence that the project has been completed, and in your case, this should be
(1)A statement from the Architect detailing the final total cost of all of the project.
(2) Architect's Certificate of Practical Completion.
(3)Evidence that the cost has been paid or an Auditor's Certificate of Completion stating:
a)that the project has been completed, and
b)the final cost of the project (this amount should agree with the total works cost as declared by the architect),
c)the cost has been paid by you/your company.
The provisional and final grants are determined by applying 65% of the long term bond rate to either the capital cost of your project or the costs per bed for subsidy purposes. The maximum cost per bed for subsidy purposes is indexed annually, and for the 1993/94 financial year is $27,513 per bed.
Your provisional grant was calculated as follows:
65 x 7.38% (long term bond rate @ 1 July 1993)
------------------------------------------------------------------------ = 4.8006%
100
4.8006% x ($27,513 x 30) = $39,624 (annual funding)
$39,624 x 10 = $396,240.00 (maximum possible grant)
$39,624 (annual funding) = $3,302.00 (monthly payments)
--------------------------------
12
Your final grants will be calculated in accordance with the above method, using the relevant bond rate and the cost per bed for subsidy purposed or, where appropriate, the actual capital cost of the project.
You should now read and sign the attached letter of acknowledgment of the offer of funding and return it to Daphne Miloshis, …
Please contact Daphne Miloshis on (03) 285 8634 if you have any queries.”
A form of Acceptance of Grant following the pro-forma document in the 1994 Guidelines was enclosed. Its terms were:
ACCEPTANCE OF GRANT
I accept the provisional grant of $396,240 for the purpose of relocating 30 beds from Moonee Ponds to Sydenham.
I understand and accept that:
·The provisional grant is subject to review when the project has been completed;
·payment, based on the final grant, will commence after the above project has been completed and I have provided satisfactory evidence of completion to the Department of Human Services and Health; and
·that payments will be made as a monthly benefit over a ten year period.”
Under cross-examination, Mr Menere gave evidence that he had hand-delivered an executed form of Acceptance of Grant to the Department at its Melbourne office late in July 1994. He had previously given evidence in chief by his witness statement to the effect that he was not certain whether he had signed the document in 1994. Mr Menere had stated that he had been reluctant to do so at the outset because of his concern about the “very onerous” nature of the conditions imposed, which he said could not have been readily complied with by Saitta, and, because of his belief that Saitta had provided the Department with evidence of completion and was entitled to payment of the grant immediately. Under re-examination, he responded that he had always known that he had signed the document in December 1995, but had become confused about the dates being put to him. The only relevant document in evidence was a copy of an undated form of Acceptance of Grant with a hand written endorsement apparently referring to its hand delivery by “GPM” to the Department. The copy document had been produced by Saitta by way of discovery and senior counsel for the Commonwealth told the Court that his client had never had a copy of the document. In all the circumstances, and given my reservations about the reliability of Mr Menere’s uncorroborated evidence, I am not satisfied that he signed and delivered a copy of the form of Acceptance of Grant to the Commonwealth later doing so on before 13 December 1995.
I am also unpersuaded by Mr Menere’s evidence as to his belief in about July or August of 1994 that Saitta was then entitled to immediate payment of the grant of ARF. I found his evidence generally in relation to this matter most unconvincing and indeed it militated against the likelihood that he did hold the alleged belief. Although he did not specify the date at which he held such an opinion, Mr Menere told the Court that he understood that the sum referred to in the Minister’s 22 December 1993 letter was “some sort of notional amount until the proper calculations were made”. He also acknowledged that the application was made in response to Circular 93015, but maintained that, nevertheless, the application was one for a grant of ARF as well as for an AIP of a grant of ARF. He was aware at all relevant times of the terms of Circular 93015 which provided for the recalculation of the final amount of the grant “based on the final costs and the prevailing bond rate at the date of completion”. Further, under cross-examination about his belief at the relevant time, Mr Menere relied upon the Department’s “guidelines” in support of its correctness. He referred only to the “guidelines” in relation to the fact that final grants were generally based on the maximum costs for subsidy purposes. If Mr Menere was referring to and did have knowledge of the contents of the 1994 Guidelines when he received the Department’s 27 July 1994 letter, he would more probably than not, in my view, also have been aware of their requirement that the Minister's and state delegate be satisfied in all cases, before payment would be made, that the work for which the grant was approved had been completed and that all costs had been met.
Mr Menere gave unchallenged evidence that he had contacted Mr Martuccio of Altostruct after receipt of the Department’s 27 July 1994 letter, seeking the required information, but had been met with an uncooperative response. He also gave unchallenged evidence that, in August 1994, he had seen an officer of the Department, whom he believed to have been Ms Miloshis, enquiring as to whether the report of a quantity surveyor would satisfy the Department’s requirements for evidence of payment of the costs of construction, because no architect had been employed. Mr Menere said that the officer had told him that the Department wished to see evidence of the costs of the project in order to use the amount of the costs in the final calculation of the benefit, but had indicated that she would seek advice from Canberra as to what could be done. In his witness statement Mr Menere said that he did not ever receive any further information about the acceptability of his proposal. There was no evidence that Mr Menere made any further enquiries about the matter.
There was no evidence of any further requests to Mr Martuccio from Mr Menere or from Saitta’s legal representatives or of any written request before late 1995, when Federal Court proceedings were commenced against Mr Martuccio and Altostruct by the administrators who had by then been appointed to Saitta under s 569 of the Corporations Law.
Review of the first validation
In relation to the negative loadings claim, Mr Menere also stated that he wrote to the Department on 1 September 1994 seeking an urgent review of the negative loadings related to the 1986/7 financial year, citing the severe effect of loadings imposed from 1993 upon Saitta. Once again, I do not accept his evidence that he did so. The exhibited copy letter was unsigned. It did not appear on the Departmental file and, under cross-examination, Mr Menere conceded that he could not recall the letter being sent.
Mr Menere did eventually contact the Department by his letter to Mr Whitehead dated 27 March 1995 (in very similar terms to those of the alleged 1 September 1994 letter). He sought a review of the validation advice of 16 September 1993 but made no reference to the alleged 1 September 1994 letter. He attached Saitta’s response to the validation advice and supporting documents. He later supplied further material under cover of a letter dated 23 June 1995.
Mr Moore did conduct a review of the first validation between August and December 1995, despite the application for review of the validation for the 1986/7 –1990/1 financial years having been made out of time. He was persuaded to do so by Mr Menere’s explanation that he had failed to apply for a review because of personal problems.
The written response to the 27 July 1994 letter
Mr Menere wrote to Mr Whitehead of the Department in relation to the ARF grant on 5 September 1995, more than 13 months after 27 July 1994. The letter requested the suspension of all negative loadings and referred to the failure to pay the grant and the “desperate financial difficulties” of the nursing home. It made no reference to any enquiries relating to the possible production of a quantity surveyor’s report to satisfy the Department’s requirements.
On 5 October 1995 Mr Whitehead responded to Mr Menere’s letter of 5 September 1995. He referred to validation matters and also to Mr Menere’s failure to return the Acceptance of Grant document supplied with the 27 July 1994 letter as the reason for the failure to pay the new and rebuilt funding. A copy of the Acceptance document was enclosed. Mr Whitehead directed Mr Menere to contact Ms Miloshis with any queries relating to ARF. There is no evidence that Mr Menere contacted Ms Miloshis to tell her that he had already signed the Acceptance Of Grant document late in July 1994 or to ask her about the proposed use of a quantity surveyor’s report.
The appointment of the Administrators
After pressure from the National Australia Bank which held a debenture charge over the assets and undertaking of Saitta as security for funds advanced, Mr Menere discussed the appointment of administrators with Mr Simon Wallace Smith of Deloitte Touche Tohmatsu (“Deloitte”).
On 13 December 1995 Mr Menere attended a meeting with Mr Whitehead, Mr Moore and Ms Barbara Haddon of the Department, in the company of Mr Simon Wallace-Smith and Mr Jonathan Shakes of Deloitte. When Mr Whitehead pointed out that the Acceptance of Grant document which had accompanied the Department's letter of 27 July 1994 had not been returned, Mr Menere signed the document. Although Mr Menere stated under cross-examination that he had said at that meeting that he had signed the document some 18 months beforehand, I was not persuaded by his evidence in this regard. As noted above, I did not accept his evidence that he had returned the signed Acceptance of Grant document before 13 December 1995.
Subsequently, on 18 December 1995, at a general meeting, which the minutes record was attended by Mr Menere and Mr Russell Menere, the directors of Saitta resolved that in their opinion the company was likely to become insolvent at some time in the future and that the company appoint an administrator. Mr Simon Wallace Smith and Mr Andrew Home (“the administrators”) were appointed administrators on that date. They were retained at a meeting of Saitta’s creditors on 22 December 1995 and a Deed Of Company Arrangement was made on 9 February 1996.
The administrators commenced proceeding No VG3782 of 1995 in the Federal Court of Australia against Altostruct and Mr Martuccio, Altostruct's Managing Director. On 8 January 1996 Mr Martuccio was summoned to attend for examination under s 596B of the Corporations Law in relation to the construction costs in respect of Belvedere Park.
By a letter dated 17 January 1996 Mr Moore advised Saitta that the sum of $31,965.60 would be repaid to Saitta as a result of his review of the first validation on the basis of further material supplied by Mr Menere. Repayment was made by a lump sum.
The second validation
Between 6 February and 30 April 1996 a further validation in relation to the financial years from 1 July 1990 to 30 June 1995 (“the second validation”) was conducted at Belvedere Park.
The provision of the ARF information
The administrators wrote to Mr Ribchester of the Department on 28 March 1996 referring to the 27 July 1994 letter and to Saitta’s application for a grant. They sought an early response to Saitta’s application and provided supporting documentation. They subsequently provided affidavits containing costs details sworn by Mr Martuccio on 15 and 22 April 1996, respectively, under cover of their later letter dated 22 April 1996.
The Department then undertook a preliminary validation of the documents supplied to substantiate Saitta's claim. By his letter dated 2 May 1996, Mr Ribchester advised the administrators that the process would be completed by in or about early May 1996. He calculated the grant of additional recurrent funding to Saitta at $474,805.60, being an annual amount of $47,480.56 payable by an initial payment of $126,615.11 followed by monthly payments of $3,956.71 until August 2003. On about 13 May 1996 the Department received a copy of a further affidavit providing more relevant information, sworn by Mr Martuccio on 10 May 1996.
The approval of the ARF grant
On 24 May 1996 Mr Ribchester recommended the commencement of payment of ARF calculated from a commencement date of 23 September 1993. Mr Ribchester’s recommendation was approved by Ms Katrina Currie as the Minister’s Delegate under s 55 of the Act on 29 May 1996 and she wrote informing Deloitte of the approval and of the determination of the amount of the “final grant”. She noted that the bond rate applied was that as at 21 September 1993, the date of the certificate of occupancy, and that an initial back-payment for the period from 21 September 1993 to 30 April 1996 would be followed by monthly payments of $3,956.71 from May 1996 to August 2003.
The sum of $126,615.11 was paid to Saitta on 3 June 1996. Thereafter Saitta received payments of ARF of $3,956.71 per month. The payments ceased after Saitta agreed on 30 June 1999 to accept the Department’s offer of tapering payments known as “Capital Transition Payments”.
Saitta was advised of the outcome of the second validation by a letter dated 6 August 1996 which identified overpayments to Saitta totalling $18,010.00 in the financial years from 1 July 1990 to 30 June 1993. The letter noted that “it was contemplated” that the overpayments would be recovered by way of adjustments in the calculation of advances under s 51A.
The recovery of overpayments from Saitta’s s 51A advance
By a letter dated 29, but apparently date-stamped 31, October 1996 the Department advised Saitta that recovery of the overpayments identified as a result of the second validation would commence in December 1996 by way of an adjustment to the advance under s 51A. The letter noted the availability of review under s 40AE of the Act.
Recovery started on 1 December 1996 (“the deductions”). No review of the decision was sought, although Mr Menere later wrote to the Department on 14 March 1997 seeking the suspension of recovery of overpayments until July 1997 and the extension of the recovery period for 18 months from July 1997.
On 4 August 1997 the external administration of Saitta ceased.
On 15 February 2001 the Belvedere Park premises was certified under the Aged Care Act 1997 and Saitta became entitled to receive payments from new incoming patients, whilst receiving Capital Transition Payments in respect of its existing clientele.
The ARF claim
Saitta claimed damages related to loss said to have been sustained as a result of the Commonwealth’s delay in payment of the ARF grant in breach of its statutory duty and in negligence. To succeed, Saitta would have to establish a statutory breach entitling it to a private right of action and, or a breach of a common law duty of care giving rise to liability in negligence.
The alleged breach of statutory duty
Saitta put its claim for breach of statutory duty in a number of ways, arguing that it had suffered loss through the Department’s delay in payment of the ARF.
Was there an unconditional approval under s 55 in December 1993?
Saitta’s primary submission was that the Department had breached s 56 of the Act by failing until 3 June 1996 to make payment in accordance with an alleged unconditional approval under s 55 of a grant made between 20 and 22 December 1993. Alternatively, by delaying payment, it had breached its implied statutory duty to make the payment with due diligence and within a reasonable time thereafter.
Was a s 53 application a precondition to the Minister’s power under s 55?
The Commonwealth argued that the Minister’s power to approve a grant under s 55 was only enlivened upon receipt of an application under s 53 and that the requirement of a written application could not be waived. Accordingly, it urged the Court that there could have been no valid exercise of the Minister’s power under s 55 in December 1993, as asserted by Saitta. Saitta’s submissions did not appear to challenge the view that a s 53 application enlivened the Minister’s power under s 55.
In my view the legislature intended the making of the s 53 application to be an essential preliminary to the exercise of the power under s 55[1]. The language of the relevant provision and the scope and object of the whole statute should be taken into account when determining whether it was a purpose of the Act that a purported exercise of the Minister’s discretion, in breach of the provision in s 55 as to exercise of his discretion “upon receiving an application under s 53”, would be invalid[2]. It is appropriate at this point to address the issue of the purpose of the Act which was the subject of contention between the parties.
The purpose of the Act
[1]Project Blue Sky v ABA [1998] 194 CLR 355 at 389-91 per McHugh, Gummow, Kirby and Hayne JJ
[2]ibid. at 390-1
Counsel for Saitta submitted that the purpose of the Act should be regarded as the provision of benefits to nursing home proprietors in order to ensure that nursing home patients would receive the necessary care in appropriate premises. He relied upon references to the provision of a benefit to the proprietor of a nursing home in Alexandra Private Geriatric Hospital Pty Ltd v the Cth[3] and Zayen Nominees Pty Ltd v Minister of Health[4].
[3](1986-7)162 CLR 271
[4](1982-3) 47 ALR 158
In Alexandra Private Geriatric Hospital Pty Ltd the High Court held that, by the Act, the Commonwealth had set up a scheme which was incidental to the “provision of sickness and hospital benefits” to nursing home patients within the meaning of s 51(xxxix) of the Constitution and therefore within its power. The “benefit” to the nursing home patient was either to be found in the money payment to the proprietor in respect of the nursing home patient or in the nursing home care provided by the proprietor in consideration of the money payment to it. The majority said :
“In any case it is apparent that the intended ultimate beneficiary of any benefit paid is the patient in the nursing home to the proprietor of which the payment will ordinarily be made.”[5]
The Commonwealth’s regulation of nursing homes was justifiable in the context of its having taken “a private enterprise approach to the problem” of providing the necessary services. The Court went on to say:
“In that approach to the problem it is to be expected that the Parliament should be concerned to see that the intended real beneficiary, the patient, receives care of a quality appropriate to the cost of the programme”[6]
[5](1986-7) 162 CLR271 at 280
[6]ibid at 282
In Saitta Pty Ltd v Commonwealth[7] Gray J dealt with applications for the dismissal of claims brought by Saitta and Neviskia Pty Ltd (another company with which Mr Menere was associated) alleging their respective entitlements to damages for breaches of statutory duties said to have arisen under the Aged Care Act 1997, the successor to the Act. His Honour said of the purpose of that Act:
“The argument put on behalf of the applicants seemed to assume that the object of the Aged Care Act is to confer on approved providers of aged care the right to conduct profitable businesses. An examination of the Aged Care Act dispels such a notion very quickly. The objects set out in 2-1 mention providers only in relation to their accountability. It is plain that the Aged Care Act is directed to the benefit of those receiving and requiring care. The use of private businesses to provide care is incidental to the purpose of the legislation and subordinate to it.”
[7][2001] FCA 817 (29 June 2001) at [35] – [36]
I take a similar view of the purpose of the Act. Further, the legislative purpose of the particular scheme in Part VAB would appear to be that of benefitting nursing home patients through the provision of better nursing home care in premises newly built in areas of need. That benefit was to be provided by way of payments of ARF to the owners of the businesses carried on at such newly built premises.
It would seem consistent with the promotion of the legislative purpose that the Minister’s discretion under s 55 not be at large and that a written application by a proprietor of eligible premises qualified to apply under s 53 would be an essential precondition to the exercise of the discretion. Otherwise, funding would not be limited to the support of those persons who had obtained the necessary approvals to be in the position to provide nursing home care in newly built premises.
Accordingly, in my view, any purported exercise of the Minister’s power under s 55 would have been invalid in the absence of a written application under s 53 by a proprietor of “eligible premises”, being newly built premises approved as a nursing home after 1 November 1991.
I am not dissuaded from my view by the fact that certain of the Act’s provisions, such as that part of s 40AA(3) referred to by Northrop J in Zayen[8], might also benefit the nursing home proprietor.
[8](1982-3) 47 ALR 158 at 186
Was Saitta’s 28 October 1993 letter an application under s 53 ?
Saitta’s argument that there was a grant under s 55 between 20 and 22 December 1993 was put in part on the basis that its letter to the Department, dated 28 October 1993, should be characterised as an application under each of s 52A and s 53 of the Act. Its “dual character” was said to be indicated by the supporting material supplied under its cover relating to matters referred to in s 54(2) as those to be taken into account by the Minister in assessing an application for a grant under s 55. Once Saitta became the proprietor of eligible premises after Belvedere Park’s approval on 20 December 1993, (and therefore qualified to make an application under s 53), it was argued that its application under s 52A was transformed into one under s 53.
I am not persuaded by these submissions. Saitta’s letter of 28 October 1993 was expressed as an application for a grant of an AIP under s 52A. Despite the issue of the certificate of occupancy on 21 September 1993, the letter even explained that the application was being made for a grant of an AIP because the nursing home was said to be still under construction. Further Saitta was not qualified to make an application under s 53 as at 28 October 1993.
The argument based upon the nature of the supporting material enclosed with the 28 October 1993 letter is not persuasive because s 52B(2)(a), in effect, required the Minister to take such matters into account when deciding whether to grant an AIP under s 52C.
Saitta’s arguments in favour of a s 55 approval premised upon the alternative view
Despite my conclusion that the 28 October 1993 letter should not be characterised as an application under s 53, I will consider Saitta’s arguments that a grant under s 55 had been made between 20 and 22 December 1993 premised upon the alternative view.
The form of the Minister’s 22 December 1993 letter
Saitta argued in favour of a s 55 approval on the basis that the Minister’s letter dated 22 December 1993 neither followed the approved format of the document for use by his delegate nor complied with the requirements under s 52C(2) in relation to the content of the written approval of an AIP.
There was no evidence that the Minister had approved of any form of letter from himself to a successful applicant for an AIP nor of any form of advice to any parliamentary representative of that applicant. Whilst I have taken into account Saitta’s submission that the Minister was essentially to be regarded as being in the same position as his delegate for the purposes of the argument, I do not find his adoption of a different form of letter from that approved for the delegate’s use to be conclusive one way or another.
Further, the Departmental Minute of 8 December 1993 and the Minister’s letter of 22 December 1993 each used expressions which indicated that the final amount of any grant of ARF to Saitta had yet to be ascertained and approved. Section 55(2), on the other hand, required the Minister’s approval of a grant under s 55 to be in writing and to set out inter alia the total amount of the benefit. The reference in the Minute and in the 22 December letters to the project’s completion also militated against the Minister’s letter to Saitta being interpreted as an advice of a grant under s 55. Such a grant was available upon application under s 53 only by a proprietor of “eligible premises” which, under the definition in s 52, must already have been completed in order to have been approved.
The evidence of Saitta’s former employee, Mr Craike, to the effect that a successful applicant for an AIP in his experience received a letter from the Minister as well as a letter of the type of the 27 July 1994 letter subsequently received by Saitta from the Department was also significant.
No AIP after completion
I am not persuaded by counsel for Saitta’s submission that it would not be reasonable to construe the December 1993 approval as an approval of an AIP because Belvedere Park had already been approved. I am not persuaded by this argument and do not regard such an outcome as unreasonable, in the context of the application having been made for an AIP before any application could have been made under s 53. The power to grant an AIP under s 52C was not expressly conditioned other than upon the receipt of an application under s 52A.
The treatment of the grant by the Department
Saitta went on to submit that the Court should conclude that a s 55 grant had been made because it appeared from internal documents that Departmental officers had treated the approval as approval of such a grant.
The references to a “grant” in the Departmental memoranda are not persuasive one way or another, in my opinion. Neither were Saitta’s submissions that the Departmental officers had a “fair bit of face-saving to do” and that the purpose of Ms Currie’s decision was to “give some sort of credence to the Department’s acts and omissions to that point”. Indeed counsel for Saitta acknowledged that this suggestion had not been put to Mr Ribchester, the officer who had made the recommendation to Ms Currie that a grant under s 55 be made to Saitta.
Mr Ribchester’s witness statement did state his conclusion, based upon the chronology of events and the sending of the 27 July 1994 letter, that the Department appeared to have treated Saitta’s application for AIP as an application for a grant under s55. However Mr Ribchester also said, under cross-examination, that the 27 July 1994 letter contained conditions derived from the 1994 Guidelines and that he believed that the letter “would more or less mirror” those sent to other successful applicants for AIPs. His oral evidence was at one point to the effect that the letter to the successful applicant for ARF would be similar to the Minister’s 22 December 1993 letter. However, he also said that he took the Minister’s letter of 22 December 1993 to be an advice in respect of the grant of an AIP. Taking into account all the evidence, I was not satisfied, on the basis of Mr Ribchester’s evidence or that relating to Departmental documents, that the Minister had made a s 55 grant between 20 and 22 December 1993.
The 27 July 1994 letter
Saitta also submitted that, by the 24 July 1994 letter’s reference to a “provisional grant” and imposition of conditions, the Department acknowledged that a s 55 grant had been made, although that payment was not to be made until evidence had been produced relating to the payment of the cost of construction.
However the 27 July 1994 letter followed the 1994 Guidelines pro-forma letter to the successful applicant for a grant of an AIP. The 1994 Guidelines also foreshadowed the inclusion of very similar conditions subject to which payment would be made. The 1994 Guidelines required the Minister’s delegate to be satisfied that the work had been completed and all costs met.
Further, Saitta’s former employee, Mr Craike, like Mr Ribchester, gave evidence to the effect that he had seen similar letters in respect of two other nursing homes which had obtained AIPs and with which he had been involved in January or February of 1994. Mr Craike said that, in each case, the letter was the first notification received from the Department seeking information about costs.
I do not find Saitta’s argument in favour of a s 55 grant in December 1993 based on the 27 July 1994 letter to be persuasive. The letter would rather appear to be one notifying Saitta of the grant of an AIP and of the conditions subject to which payment of the final grant would be made under s 55(2)(d).
The Commonwealth’s alleged failure to give discovery and to call witnesses
Saitta also argued that the Court should infer that a grant under s 55 had been made between 20 and 22 December 1994 as a result of what it alleged were the Commonwealth’s failures to make discovery and to call certain witnesses.
Counsel for Saitta alleged that the Commonwealth had failed to provide discovery of documents relating to the grant of the AIP and the alleged grant of ARF between 20 and 22 December 1993. He referred to the absence of Departmental file notes which Mr Warren and Mr Ribchester had said they each would have expected to have been kept on the file in relation to the application for ARF, had they existed.
Senior counsel for the Commonwealth responded that Saitta’s allegation that there had been approval of a grant under s 55 on or about 20 December 1993 had first been put during the trial and that the pleadings had only been amended thereafter. He said that requests for further discovery, including a request for “central office” files, had been complied with by a further affidavit of documents and the production of files, including two from the central Canberra office of the Department. He submitted that there had been no further reference to failure to make relevant discovery until counsel for Saitta’s final address, when it had been suggested that there may not have been proper discovery of Departmental files. He urged the Court not to draw any adverse inference against his client in all the circumstances.
In my view, Saitta’s complaint lacked force in the circumstances. It did make amendments to its statement of claim after the closing address on behalf of the Commonwealth, alleging that a final grant under s 55 had been made between 20 and 22 December 1993. There had been a significant gap between various complaints about discovery on the part of the Commonwealth and no application for discovery had been formally pursued. I am not persuaded to infer that a grant was made under s 55 on or after 20 December 1993 as a result of any alleged failure to make discovery on the part of the Commonwealth.
Alleged reliance upon representations
Even if, contrary to my findings, there were representations made to the effect that Saitta would obtain or had obtained a grant of ARF under s 55 in December 1993, I would not have been satisfied that Saitta had acted in reliance upon them as alleged by proceeding with the relocation to Belvedere Park.
As senior counsel for the Commonwealth pointed out, the developer had been “given the go–ahead” in December 1991. The Department had been told of the engagement of H. Lucy & Associates by Mr Menere’s letter of 12 December 1991. The agreement for lease was dated 3 April 1992. The lease relating to Belvedere Park was dated 1 August 1993. Neither the agreement for lease nor the lease was expressed to be conditional upon such funding being obtained. Indeed Mr Craike’s evidence was that Mr Menere had never told him that any expectation of a grant of ARF was a reason for Saitta’s entry into the agreement for lease. Further, Belvedere Park was approved on 20 December 1993, with effect from 25 November 1993. Patients had begun moving into Belvedere Park from 24 November 1993. Belvedere Park had been operating before even the Department’s 22 December 1993 letter (which Mr Menere denied was received, in any event) and well before the 27 July 1994 letter.
Further I am not satisfied that Mr Menere contacted the Department asserting any entitlement to payment of ARF (as opposed to enquiring about the acceptability of a quantity surveyor’s assessment of costs) before he wrote to Mr Whitehead on 5 September 1995 referring to the failure to pay “Approved New and Rebuilt Nursing Home Grants”. Even in his letter dated 1 September 1994 to Mr Whitehead relating to the negative loadings and referring to their severe effect (which I am not satisfied was sent), there was no claim for payment of a final grant.
Insofar as counsel for Saitta argued that Saitta acted to its detriment in reliance upon any alleged representation that a s 53 application and, or a s 55 grant had been made, by attempting to satisfy the conditions of the 27 July 1994 letter, I note that I am not persuaded as to the logic of this submission. Once Saitta had complied with the conditions which had been set out in the 27 July 1994 letter, it did indeed receive payment of the grant of ARF.
Conclusion
I am not satisfied that the Commonwealth represented to Saitta either that an application under s 53 or approval of a grant under s 55 had been made. I would not have been satisfied that Saitta had acted to its detriment or at all in reliance upon any such alleged representation, in any event.
Did the estoppel operate so as to fetter the Minister’s discretion?
There are, in my view, additional obstacles which would prevent the operation of estoppel principles urged by Saitta. Principles of estoppel are inapplicable if they operate to fetter the exercise of a discretion involving considerations of policy rather than operational matters. Gummow J stated the relevant principle in Minister for Immigration and Ethnic Affairs v Kurtovic[14] at p 210:
“… in a case of a discretion, there is a duty under the statute to exercise a free and unhindered discretion and an estoppel cannot be raised (any more than a contract might be relied upon) to prevent or hinder the exercise of the discretion; the point is that the legislature intends the discretion to be exercised on the basis of a proper understanding of what is required by the statute, and that the repository of the discretion is not to be held to a decision which mistakes or forecloses that understanding”.
[14](1990) 21 FCR 193 at 208
Gummow J distinguished between decisions which involved the exercise of a statutory discretion at the “policy” level, to which principles of estoppel would not apply, and those involving merely operational decisions in the execution of policy decisions, to which they would. He held equally applicable to doctrines of promissory estoppel the words of Lord Wilberforce in Anns v Merton London Borough Council [15] in relation to the different question as to the existence of a duty of care:
“Many statutes also prescribe or at least presuppose the practical execution of policy decisions: a convenient description of this is to say that in addition to the area of policy or discretion, there is an operational area. Although the distinction between the policy area and the operational area is convenient, and illuminating, it is probably a question of degree; many ‘operational’ powers or duties have in them some element of ‘discretion’. It can safely be said that the more ‘operational’ a power or duty may be the easier it is to superimpose upon it a common law duty of care.”
[15][1978] AC 728
Mason J in Sutherland Shire Council v Heyman[16] explained the relevant distinction in the context of the existence of a duty of care:
“The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care.”
[16](1985) 157 CLR 424 at 469
The decisions made by the Commonwealth in the exercise of its discretionary powers under each of ss 52C and 55 in my view involved or were dictated by policy factors in light of assessment criteria relating to “financial, economic and social factors”.
The Minister was constrained in each case by the fact that the amount of funding available for distribution was limited and, accordingly, the exercise of his discretion involved decisions “… setting priorities in the allocation of public funds between competing claims on scarce resources” [17].
[17]Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54 at [6] per Gleeson CJ.
Under s 52B(2), the 1992 Principles and the 1993 Principles the Minister was required to take into account matters such as whether the nursing home had received any grant for capital works costs and the applicant’s compliance with the Act in relation to the quality of nursing home care previously provided, as well as whether previous failures to meet care standards had been attributable to the condition of the premises from which the nursing home had previously operated. Comparative consideration of local needs for nursing home facilities in respect of proposed sites for new nursing homes was also required. In my view, the situation differed from one involving only the assessment of the application in terms of defined criteria which might have resulted in the exercise of discretion being characterised as operational.
Counsel for Saitta acknowledged the validity of the principles enunciated in Kurtovic. However he relied upon the High Court decision in Commonwealth v Verwayen [18] in support of Saitta’s estoppel claims. Senior counsel for the Commonwealth responded that Verwayen had no application because it dealt with what was merely an operational decision rather than the making of a decision by a person vested with a statutory power.
[18](1990) 170 CLR394
In Verwayen in the Victorian Supreme Court Marks and Kaye JJ had noted the Crown was not performing any “function peculiar to Government but rather was operating under s 64 of the Judiciary Act 1903 which provided for the Commonwealth and the other party to have rights “as nearly as possible the same … as in a suit between subject and subject”[19]. Further Gummow J in Kurtovic distinguished the case of Verwayen on the basis that the promise by the Commonwealth not to rely upon the limitation defence did not require the exercise of a statutory discretion and it was appropriate for private law principles to be applied[20]. In my view the private law principles relating to estoppel applicable in Verwayen would be inapplicable in this case.
[19][1989] V R 712 at 725
[20](1990) 21 FCR 193 at 216
Mason CJ in Attorney-General (NSW) v Quin [21] considered the passage from Kurtovic and explained:
“No doubt the principle gains some of its force from the circumstance that the discretion has a legislative foundation and it is not readily to be supposed that the legislature intended that a proper exercise of the discretion in the public interest was to be frustrated, hindered or circumvented by executive action.”
His Honour however went on, in a passage relied upon by Saitta, to state:
“What I have said does not deny the availability of estoppel against the Executive, arising from conduct amounting to representation, when holding the Executive to its representation does not significantly hinder the exercise of the discretion in the public interest. And, as the public interest necessarily comprehends an element of justice to the individual, one cannot exclude the possibility that the courts might in some situations grant relief on the basis that a refusal to hold the Executive to a representation by means of estoppel will occasion greater harm to the public interest by causing grave injustice to the individual who has acted on the representation than any detriment to that interest that will arise by holding the Executive to its representation and narrowing the exercise of the discretion: see the observations of Lord Denning M R in Laker Airways v Dept of Trade [1977] QB 634 at 707; but see also the criticism of this approach by Gummow J in Kurtovic (1990) 92 ALR at pp 121-2.”
[21](1990) 170 CLR 1 at 17-8
Whilst counsel for Saitta argued that the public interest would be served by the avoidance of injustice to Saitta, senior counsel for the Commonwealth responded to the effect that the public interest was rather better served by the observance of appropriate practice in the dispensing of grant moneys. In my view, even if Saitta had established the necessary representations and reliance to ground its claim in estoppel, there would not have been such a grave injustice to it as a result of any loss of additional recurrent funding, that the public interest would have been better served by holding the Executive to its representation.
Conclusion
The principles of estoppel relied upon by Saitta were inapplicable. The Commonwealth was not estopped from denying the making of an application under s 53 or a s 55 grant by the Minister between 20 and 22 December 1993.
The Negative Loadings Claim
Saitta claimed that the negative loadings were imposed and the deductions were made in breach of the statutory duty owed to it by the Commonwealth.
Ultimately, the sole remaining basis of the challenge to the negative loadings and the deductions was that the Act did not authorise the recovery from Saitta, as the proprietor of Belvedere Park, of alleged overpayments made to it as the proprietor of Moonee Ponds Nursing Home.
Did the Commonwealth act ultra vires?
Senior counsel for the Commonwealth relied upon the literal meaning of s 51C as authority for the Department’s recovery of the amount of the overpayments by way of the negative loadings and the deductions. He submitted in effect that the section referred to recovery from the overpaid proprietor of an approved nursing home whether or not that proprietor was receiving benefits in relation to the same premises.
The negative loadings
At the relevant times s 51C(1)(c) of the Act permitted recovery of overpayments of Commonwealth benefits from a proprietor in accordance with the 1989 Principles. “Overpayments” were defined in s 46B which was also in operation by the time the negative loadings were imposed and the deductions were made.
Counsel for Saitta submitted that s 46B should not be construed as applying to overpayments made before the section came into operation on 1 July 1993. I am not persuaded by the argument. In my opinion s 46B operated so as to include within the definition of an “overpayment” an unjustified payment which had been previously made. Accordingly, payments made to Saitta before 1 July 1993 which exceeded the amount then payable were “overpayments” under s 42B(2).
At the date of the imposition of the negative loadings upon Saitta as the proprietor of Belvedere Park s 51C(1)(c) provided for the recovery of overpayments in a manner determined under the 1989 Principles. Principle 39(b) and each of Principle 32(17B) and Principle 32(18) of the 1989 Principles authorised the recovery of overpayments by way of negative loadings from Saitta as the proprietor of Belvedere Park, after the transfer of the Moonee Ponds Nursing Home to its new premises.
Principle 32(17B)
Principle 32(17B) permitted the imposition of the negative loadings in respect of Belvedere Park, insofar as patients of Moonee Ponds Nursing Home had ceased to be cared for at its Moonee Ponds premises before the approval of the Belvedere Park on either of the relevant dates of either 25 November or 20 December 1993 and the negative loadings had already been imposed or would have been imposed had the fees been set before the Moonee Ponds Nursing Home ceased to care for the patients. The first patient had taken up occupation at Belvedere Park on 24 November 1993. Further it was pleaded by Saitta and admitted by the Commonwealth that before 24 November 1993 Saitta conducted its nursing home business at the Moonee Ponds Nursing Home and provided nursing home care to patients there, whereas, after that date, Saitta conducted a nursing home at Belvedere Park and provided nursing home care for patients at Belvedere Park.
As Belvedere Park was not approved until 20 December 1993 or at the earliest, on any view, 25 November 1993, the first validation had previously been completed and the Department had advised Saitta of the negative loadings to be imposed by its letter of 16 September 1993, I consider that the imposition of the negative loadings was justified by the operation of Principle 17B.
Principle 32(18)
Counsel for Saitta argued that Principle 32(18) did not authorise the negative loadings. He submitted that the Department’s 30 November 1993 letter did not “apply” the negative loadings to Moonee Ponds Nursing Home before the transfer to Belvedere Park because its 20 December 1993 approval and the revocation of approval in relation to Moonee Ponds Nursing Home operated retrospectively as from 25 November 1993.
I am not persuaded that the 30 November 1993 fee determination in relation to Moonee Ponds Nursing Home, which at that date was an approved nursing home, should be rendered ineffective because the home’s approval was subsequently revoked with retrospective effect. In my view, the negative loadings had already been “applied” to Saitta as the proprietor of Moonee Ponds Nursing Home by the 30 November 1993 letter varying the determination of fees under s 40AA(6)(i) to reflect the validation adjustments detailed in the Department’s 16 September 1993 letter.
The deductions
The deductions were argued by senior counsel for the Commonwealth to have been authorised by s 51C(1)(a) of the Act. Counsel for Saitta submitted that the Department could only recover overpayments by deduction from an advance to Saitta in respect of the Moonee Ponds Nursing Home and not one relating to its proprietorship of Belvedere Park.
The words of s 51C(1)(a) should be given their literal sense unless some absurdity or repugnancy or inconsistency with the rest of the statute would arise[22]. In my view it is consistent with the statute and, in particular, with the balance of s 51C, for the liability in relation to overpayments to be attached to the proprietor of the nursing home after its transfer to a new site and change of name, where otherwise the proprietor would have been so liable. The absurdity, repugnance and inconsistency of the contrary interpretation is shown by reference to the position of a later proprietor of the nursing home, from whom an overpayment to a predecessor could and (from 29 June 1994) was required to be recovered, under the combined operation of s 51C(1)(c) and Principle 39[23].
[22]Grey v Pearson (1857) 6 HLC 61 at 106 per Lord Wensleydale
[23]See: Neviskia Pty Ltd v Minister for Community Services (1987) 17 FCR 407 at 414-6 per Gray J
The argument of counsel for Saitta to the effect that unfairness to a subsequent group of patients at the new premises might follow deductions which might adversely impact upon the standard of their care does not persuade me to interpret the subsection so as to limit its operation. The patient group which might be arguably affected by deductions in advances might well be a different one under the statutory scheme, in any event, whether deductions were made from a continuing or new proprietor, because the adjustment would be for recovery of monies paid before any reconciliation had taken place.
As far as the deductions were concerned, I am of the view that they were validly recovered from Saitta under s 51C(1)(a).
Conclusion
In my view the negative loadings were validly imposed in accordance with the principles formulated under sub-s 40AA(7) by virtue of the provisions of s 51C(1)(c) and the deductions were authorised by s 51C(1)(a).
I am not satisfied that the Department breached any statutory duty by imposing the negative loadings or by making the deductions.
The claim for damages for breach of statutory duty
Despite my findings that there had been no breach of statutory duty or none productive of loss and damage, I will address the question as to whether any loss or damage resulting from any breach of duty under the Act would have given rise to an entitlement to damages, in any event.
The Crown and its servants are not liable for actions causing damage, simply because they are unauthorised[24]. Lack of statutory authority removes a shield but it does not provide a sword[25]. The tort of misfeasance in public office might be committed by the deliberate infliction of harm. If damage is caused negligently in breach of a duty of care, the tort may be negligence.
[24]Northern Territory v Mengel (1985)185 CLR 307 at 343-4
[25]James v Commonwealth (1939) 62 CLR 339 at 362 per Dixon J
However liability in damages may arise as a result of a breach of statutory duty causing injury, regardless of intention or negligence, if the legislation creating the duty confers a right upon the injured person to have the duty performed[26].
[26]Northern Territory v Mengel at 344 [and cases cited therein].
The existence of a private right of action for breach of statutory duty depends upon construction of the statute alleged to have been breached. In Sovar v Henry Lane Pty Ltd[27] Kitto J stated:
“The intention that such a private right shall exist is not … conjured up by judges to give effect to their own ideas of policy and then “imputed” to the legislature. The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and generally, the whole range of circumstances relevant upon a question of statutory interpretation … It is not a question of the actual intention of the legislators, but of the proper inference to be perceived upon a consideration of the document in the light of all its surrounding circumstances. As reported cases illustrate again and again, decisions given upon enactments which seem fairly comparable will not always be easy to reconcile with one another, for upon questions of inference some lack of uniformity is to be expected.”
[27]116 CLR 397 at 405.
Saitta argued that a proper construction of the Act revealed a legislative intent to confer upon it, as proprietor of a nursing home, a private right of action for damages for breach of the Commonwealth’s statutory duties to pay benefits to it.
Counsel for Saitta submitted that the legislative intent was indicated by “the involvement of the proprietor in the provision of nursing home care and the payment of monetary benefits to the proprietor” which he said were “matters central to the provision of nursing home care for the ultimate beneficiaries”.
Senior counsel for the Commonwealth argued that no such private right to damages was intended by the legislature. He also submitted that the Act emphasised the provision of benefits to the patient rather than the nursing home proprietor.
Did the legislature intend that a nursing home proprietor should have a private right of action for breach of statutory duty under the Act?
In Sovar v Henry Lane Pty Ltd[28] Kitto J considered whether a duty imposed upon the occupier of a factory to fence dangerous machinery under s 27(1) of the Factories, Shops and Industries Act 1962 (NSW) gave rise to civil liability at the suit of a person injured by a breach of the statutory duty. His Honour held that a person whose individual interests were protected by a statutory prescription of conduct had a prima facie right to due performance of that conduct and a right to sue for damages, if injured by a contravention, if the peril was personal injury and the relationship between the parties was one giving rise to a duty to take precautions for the safety of that person[29].
[28][1967] 116 CLR at 397.
[29]At 404.
In X (Minors) v Bedfordshire C.C. Lord Browne-Wilkinson said, in a passage applied by Gillard J in Stockwell v State of Victoria[30]:
“The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty. There is no general rule by reference to which can be decided whether a statute does create such a right of action but there are a number of indicators. If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer. If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforced only by those means and not by private right of actions. ... However the mere existence of some other statutory remedy is not necessarily decisive. It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy. Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition and by the statutes or criminal penalties for any breach.” [31]
[30][2001] VSC 497 at [257].
[31][1995] 2 AC 633 at 731.
Jordan CJ in Martin v Western District of the Australasian Coal and Shale Employees’ Federation Workers’ Industrial Union of Australia (Mining Department)[32] gave guidance as to the factors which might indicate legislative intent to confer a private right of action for damages for breach of statutory duty. His Honour stated that regard must be had to considerations of policy and convenience and the probability of the legislature having intended the liabilities which would follow from the exercise of such a remedy. The existence of a statutory remedy for the beneficiary of the duty militated strongly against the private right of action, but did not exclude it, particularly when a duty was directed at protecting a particular class of persons from injury of a particular kind. Jordan CJ concluded that “the question is in every case to be resolved by consideration of the Act as a whole.”[33]
[32](1934) 34 SR (NSW) 593
[33]ibid at 596-8
Sir Gerard Brennan considered the question as to whether economic loss would give rise to a private right to damages in “Liability in Negligence of Public Authorities: the Divergent Views”, a conference paper delivered in 1991, stating:
“Typically, an action for breach of statutory duty protects person or property from carelessness of some kind, although carelessness is not an element of the tort. So there could be a cause of action for breach of a duty to protect individuals from economic loss of a given kind. Instances of such a cause of action are few and usually arise only when the statute expressly creates the right to sue.”[34]
[34]Brennan, “Liability in Negligence of Public Authorities: the Divergent Views”, (1991) 7 Australian Bar Review183 at 186.]
In Saitta Pty Ltd v Commonwealth[35] Gray J dealt with applications for the dismissal of claims brought by Saitta and Neviskia alleging their respective entitlements to damages in relation to the imposition of sanctions and, in Saitta’s case, the refusal to certify its residential care service, said to have arisen under the Aged Care Act 1997, the successor to the Act. His Honour considered whether Saitta and Neviskia might have had a private right of action for damages for breach of statutory duty, and after holding in a passage quoted above, that the Aged Care Act 1997 was directed to the benefit of those receiving and requiring care, went on to say:
“The use of private businesses to provide care is incidental to the purpose of the legislation and subordinate to it. The applicants could not succeed in claims for breach of statutory duty.”
[35][2001] FCA 817 (29 June 2001) at [35] – [36]
I have previously found that the purpose of the Act was to provide benefits to nursing home patients and the statutory scheme for the provision of ARF was introduced to better achieve that purpose by the provision of care in newly built premises to meet the needs of patients in particular areas.
The Act does not expressly create a right to sue for damages on the part of a provider to whom payment was to be made for the ultimate benefit of the intended beneficiaries. Further the availability of public law remedies, such as mandamus and declaration, to enforce payment of ARF in accordance with an approval would in my view provide adequate protection for the proprietor, without the need for a private law remedy for breach of statutory duty not expressly provided for by the legislature[36].
[36]See: Bourgoin SA v Minister of Agriculture [1986] 1 QB 716 at 785 per Parker LJ and at 789 per Nourse LJ
In the case of the process for the recovery of alleged overpayments of benefits the Act provided a process of review both of determinations of fees under s 40AA(6)(i) and the fixing of advances under s 51A.
I also note that the Court was not referred to any authority in which such a remedy had been recognised in relation to analogous legislation.
I am not persuaded that, even if there had been any breach of statutory duty as alleged, the legislature intended that a proprietor in the position of Saitta would have had a resulting private right of action for damages.
The claim in negligence
The ARF claim
Paragraph 45 of the further amended statement of claim alleged that the defendant breached its duties of care set out in paragraph 7 of the pleading “by refusing or neglecting to pay the capital grant to the plaintiff”. The alleged duties and breaches were expressed in a variety of ways, and might have been taken to have related to compliance with the Act and the exercise of the discretionary powers under ss 52C and 55.
However counsel for Saitta told the Court during his closing submissions that Saitta did not challenge the exercise of discretion by the Minister. Rather, he argued, Saitta alleged that, by imposing the conditions in the 27 July 1994 letter and by subsequently insisting that they be complied with, the Department had negligently breached its duties of care in relation to the payment of the ARF.
Insofar as they allege duties to comply with provisions of the Act or not to be careless in performance of statutory duty per se, the allegations fail because the law does not recognise such duties of care[37]. The Act would not however sanction the exercise of a statutory power or the performance of a statutory duty in a manner which would breach a common law duty of care owed independently.
[37]X (Minors) v Bedfordshire C.C. [1995] 2AC 718 at 734-5 per Lord Browne- Wilkinson
I have concluded that no grant was made under s 55 in December 1993. In my opinion the 27 July 1994 letter formed part of the Minister’s written approval of the unconditional grant of an AIP of a grant of an unascertained amount of ARF. I am not persuaded by the argument that the 27 July 1994 letter imposed conditions upon Saitta’s entitlement to a grant under s 55 or in relation to its unconditional AIP. In my view, the 27 July 1994 letter set out the conditions which the Minister would impose in the exercise of his discretion under s 55, subject to which payment of the grant of ARF would be made.
If Saitta’s claim in negligence challenged the Minister’s indication that he would take into account the actual cost of construction in calculating a final grant of ARF or impose those conditions of payment, it would, in my view, constitute a challenge to the reasonableness of the manner in which the Minister’s discretion under s 55 was to be exercised. Alternatively, the claim might be regarded as a challenge to the reasonableness of the exercise of his discretion under s 52C as to the grant of approval in principle of a grant under s 55.
As s 52C set no time limit in relation to the provision of a written approval of an AIP, a challenge to the reasonableness of the delay between the 17 December 1993 approval of the grant of the AIP and the 27 July 1994 letter completing the written approval would also amount to a challenge to the reasonableness of the exercise of the discretion under that section.
As stated above, my view is that the exercise of the Minister’s discretions under each of s 52C and 55 involved the application of policy factors[38] which should not be the subject of a common law duty of care. Gleeson CJ explained in Graham Barclay Oysters Pty Ltd v Ryan [39] that:
“One of the reasons why [policy factors] are inappropriate as subjects of curial judgment about reasonableness is that they involve competing public interests in circumstances where, as Lord Diplock put it “there is no criterion by which a court can assess where the balance lies between the weight to be given to one interest and that to be given to another”(Dorset Yacht Co v Home Office [1970] AC 1004 at 1067).”
[38]supra [184]-[186]
[39](2002) 194 ALR 337
Accordingly, I will not go on to consider whether in all the circumstances a duty of care to avoid economic loss to Saitta would have arisen.
In the case of the 7 month delay between December 1993 and July 1994, I have already indicated[40] in any event that I am not satisfied that the delay was productive of any loss because the evidence did not establish that Saitta would have been in any better position to provide the necessary proof of the cost of construction of the Belvedere Park premises had it been advised earlier of the conditions subject to which payment of a grant of ARF would be made. Accordingly, even if the Minister had negligently breached a duty of care at common law by his delay, I would not have been satisfied that Saitta had made out its claim in negligence.
[40]supra at [165]-[167]
Negligent misstatement
Saitta also claimed that officers of the Department made negligent misstatements to it by referring to the conditions in the 27 July 1994 letter and by subsequent oral and written insistence upon Saitta’s compliance with those conditions. As I have found that the 27 July 1994 letter properly informed Saitta of the conditions subject to which payment would be made, it follows that, in my opinion, no misstatement was made.
The negative loadings claim
I am satisfied that the Department acted within its powers by imposing the negative loadings and making the deductions in respect of Saitta’s entitlement to benefits as the proprietor of Belvedere Park to recover overpayments made to it as the proprietor of the Moonee Ponds Nursing Home.
Saitta abandoned its allegations that the negative loadings or the deductions were negligently made, apart from an allegation that the Department acted negligently in not obtaining legal advice to the effect that it was not authorised to make the loadings or the deductions. In light of my conclusion that it was so authorised, I will not further address this submission.
Causation and loss and damage
Having concluded that there was no breach of statutory or common law duty and no private right of action for breach of statutory duty, in any event, I will not address the questions of either causation or the quantum of the alleged loss and damage.
The claim is dismissed.
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