Strong v The Hospitals Contribution Fund of Australia Ltd

[2004] NSWADT 176

Pending Appeal:

CITATION:	Strong v The Hospitals Contribution Fund of Australia Limited [2004] NSWADT 176
DIVISION:	Equal Opportunity Division
PARTIES:	APPLICANT Pauline Strong RESPONDENT The Hospitals Contribution Fund of Australia Limited
FILE NUMBER:	031094
HEARING DATES:	17/12/2003
SUBMISSIONS CLOSED:	02/27/2004
DATE OF DECISION:	08/23/2004
BEFORE:	Rice S - Judicial Member; Bolt M - Non Judicial Member; Houlahan L - Non Judicial Member
APPLICATION:	Dismissal of complaint - frivolous, vexatious, misconceived or lacking in substance
MATTER FOR DECISION:	Preliminary matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Age Discrimination Act 2004 (Cth) Anti-Discrimination (Amendment) Act 1981 Anti-Discrimination (Amendment) Act 1982 Anti-Discrimination Act 1977 Anti-Discrimination Amendment Act 1997 Associations Incorporation Act 1984 Associations Incorporation Regulation 1999 Co-operative Housing and Starr-Bowkett Societies Act 1998 Corporations Act 2001 (Cth) Discrimination Act 1991 (ACT) Equal Opportunity Act 1984 (WA) Friendly Societies (New South Wales) Act 1997 Health Legislation Amendment (Private Health Insurance Reform) Act 2004 (Cth) Health Legislation Amendment Act (No 2) 1999 (Cth) Income Tax Act 1973 (Cth) Income Tax Assessment Act 1997 (Cth) Interpretation Act 1987 National Assistance Act 1948 (UK) National Health Act 1953 (Cth) Sex Discrimination Act 1984 (Cth) Social Security Act 1991 (Cth) Supreme Court (Fees) Regulations 2002 (WA) Value Added Tax Act 1983 (UK)
CASES CITED:	A and R v East Sussex County Council [2002] EWHC 2771 (Admin) ASIC v Matthews [2001] NSWSC 735 Australian Health Insurance Association Limited v. Esso Australia Limited (1993) 41 FCR 450 CIC Insurance Limited v Bankstown Football Club Limited [1997] 187 CLR 384 Collector of Customs v Pozzolanic (1993) FCR 280 Commissioner of Taxation v Cappid Pty Limited (1971) 127 CLR 140 Cronulla Sutherland Leagues Club Limited v Commissioner of Taxation (1990) 23 FCR 82 Customs and Excise Commissioners v Bell Concord Educational Trust Limited [1989] 2 WLR 679 Fasold v Roberts [1997] 439 FCA French -v- Sydney Turf Club Ltd [2003] NSWADTAP 10 Gardener v AAMA Limited (2003) EOC 93-277 Government Employees' Health Fund Ltd v Private Health Insurance Administration [2001] FCA 322 Guide Dog Owners' & Friends' Assoc Inc v Guide Dog Assoc of New South Wales & ACT & Anor [1998] 736 FCA Higginson -v- Cargill Australia Limited [2001] NSWADT 152; (EOD) [2002] NSWADTAP 20 Hope v NIB Health Funds Ltd (1995) EOC 92-716 Hospital Benefit Fund of Western Australia Inc v Australian Competition & Consumer Commission [1997] 655 FCA IW v City of Perth [1996-1997]191 CLR 1 Kalgoorlie Taxi Car Owners Association Inc & Ors V Frank Regan & Ors [1998] WASCA 9 Kitt v Tourism Commission of NSW (1987) EOC 92-196 Margan v University of Technology, Sydney (EOD) [2003] NSWADTAP 65 National Deposit Friendly Society Trustees v Skegness Urban District Council [1959] AC 293 Perlidis -v- Brambles Security Services Limited Trading as Brambles Armoured [2003] NSWADT 11 Plimer v Roberts [1997] 1361 FCA Secretary , Department of Foreign Affairs v Styles (1989) 88 ALR 621 State Personal/Carer's Leave Case [1998] NSWIRComm 652 Tullamore Bowling and Citizens Club Limited v Lander [1984] 2 NSWLR 32 Umina Beach Bowling Club Limited v Ryan [1984] 2 NSWLR 61 Waters v Public Transport Corporation (1991) 173 CLR 349 Wilde v Day [2002] NSWADT 114
REPRESENTATION:	APPLICANT In person RESPONDENT B Cross, barrister
ORDERS:	1.The application is dismissed; 2.The matter is to be listed for a case conference for directions on 2 September 2004 at 2p.m.; 3.No order as to costs

Decision

1 For the reasons given below, the application by the respondent, HCF, under s111 of the Anti-Discrimination Act 1979 is dismissed.

2 In summary, the Tribunal has decided that it is appropriate on this occasion to hear and decide, at this early stage of the inquiry, an application under s111 of the AD Act that:

· the complaint is misconceived in law because the respondent is a body the activities of which are carried on otherwise than for profit, so that by virtue of s57 of the AD Act the conduct complained of is not covered by the AD Act

· the complaint is misconceived in fact because the conduct complained of could not amount to a breach of the AD Act

· the complaint is misconceived in law because the conduct complained of, even if discriminatory, was done in order to comply with a requirement prescribed by s54 AD Act and so is not rendered unlawful by the AD Act.

3 The Tribunal has decided that:

· HCF is not, for purposes of s57 of the AD Act, a body the activities of which are carried on otherwise than for profit within the meaning of that provision

· the material filed to date indicates that the conduct complained of could amount to a breach of the AD Act

· the material filed to date does not indicate that the conduct complained of, if discriminatory, was done in order to comply with a requirement prescribed by s54 of the AD Act.

Complaint

4 In August 2000 Ms Pauline Strong complained to the Anti-Discrimination Board (ADB) that the Hospitals Contribution Fund of Australia Ltd (HCF) had discriminated against her on the ground of her marital status. In October 2001 she provided further information in support of her complaint.

5 As this is a preliminary decision that does not address the merits of the complaint, we set out the allegations only briefly.

6 Ms Strong says that her membership of HCF had included health insurance coverage for herself, her husband and their son. She says that after her separation from her husband she removed him from the membership, and that the membership was then only for herself and her son. She says that in July 2001 the amount of the monthly contribution rate for the membership did not change: it had been $176.40 to cover her, her husband and her son, and it remained at $176.40 to cover only her and her son. In these circumstances Ms Strong claims that was discriminated against on the ground of her marital status.

7 The ADB brought Ms Strong’s complaint to the attention of HCF, and HCF responded, denying the allegation.

8 The then Acting President of the ADB declined Ms Strong’s complaint as “lacking in substance” and “misconceived” under s90(1) of the Anti-Discrimination Act 1979 (‘the AD Act’). In August 2003 the then Acting President, on a request from Ms Strong under s91(2) of the AD Act, referred the complaint to this Tribunal for inquiry.

Respondent

9 Ms Strong did not dispute, and the Tribunal accepts, that HCF was incorporated under the Companies Act 1899 on 15 August 1933, under the name of “The Metropolitan Hospitals Contribution Fund of New South Wales Limited”, as a company limited by guarantee. It subsequently changed its name to “The Hospitals Contribution Fund of New South Wales Limited” and, on 5 October 1965, to “The Hospitals Contribution Fund of Australia”. Finally, its name was changed on 20 December 1984 to “The Hospitals Contribution Fund of Australia Limited”. That is the entity we refer to as HCF.

10 HCF is a “registered health benefits organisation” under the National Health Act 1953.

Section 111 application

11 Section 111 (1) provides that

Where, at any stage of an inquiry, the Tribunal is satisfied that a complaint is frivolous, vexatious, misconceived or lacking in substance, or that for any other reason the complaint should not be entertained, it may dismiss the complaint.

12 HCF filed submissions and documents in support of its application under s111, and Ms Strong filed submissions and documents in reply. The application was heard on 17 December 2003 at which time the Tribunal heard submissions from HCF and Ms Strong. On every occasion that the Tribunal convened Ms Strong was present by telephone from Coffs Harbour while HCF was represented before the Tribunal by Counsel. HCF and Ms Strong subsequently filed written submissions by 28 January 2004.

HCF arguments under s111

13 HCF rely on three alternative arguments for its application to have Ms Strong’s case dismissed at this stage:

· the respondent is a body the activities of which are carried on otherwise than for profit, and so the conduct complained of is excepted from the AD Act by s57 of that Act, or alternatively

· the complaint does not disclose conduct of HCF that could constitute a breach of the AD Act, or alternatively

· if any conduct of HCF did constitute a breach of the AD Act, the conduct was necessary in order to comply with the National Health Act, and so it is excepted from the AD Act by s54 of that Act.

14 Expressed in the terms used in s111 (1), HCF’s argument is that the complaint is “misconceived”, both in law: the arguments under ss57 and s54, and in fact: the argument that the complaint discloses no contravening conduct (see Wilde v Day [2002] NSWADT 114 at [20] regarding terms such a “misconceived” as used in s111)

Sections 54 and 57 as ‘defences’

15 An argument under s54 under is commonly referred to as a ‘defence’, as long ago as in Kitt v Tourism Commission of NSW (1987) EOC 92-196 and as recently as Higginson -v- Cargill Australia Limited [2001] NSWADT 152; (EOD) [2002] NSWADTAP 20.

16 This Tribunal is reluctant to entertain applications under s111 to dismiss a complaint before any part of the complainant’s evidence has been heard, and even then would be reluctant if the nature of the complaint was such that the inquiry should extend to hearing evidence from the respondent before being able to determine the allegations (Margan v University of Technology, Sydney (EOD) [2003] NSWADTAP 65 at [11]).

17 If the application under s111 in this case had been made only in relation to s54 we are unlikely to have considered it at this stage of the inquiry. However, the case is unusual in that there is little dispute as to what was said or done, and the evidence is largely documentary, although there is argument as to how that evidence is to be read and understood. Because the s54 argument is an extension of, or an alternative way of looking at, the argument that the complaint is misconceived in fact, it seemed to be both quick and practicable to allow the arguments to be made at this stage (see s73 Administrative Decisions Tribunal Act 1997.

18 As it happens, our examination below of the s54 argument and of the argument that the complaint is misconceived in fact has led us to the view that we will need to receive and consider evidence beyond the material available to us at this stage. The “facts fully found” must fall within the provision of a statutory provision such as s54, (Collector of Customs v Pozzolanic (1993) FCR 280 at 289, cited in French -v- Sydney Turf Club Ltd [2003] NSWADTAP 10 at [22]). Having considered the arguments we are of the view, for the reasons given below, that the facts in this matter will not be “fully found” for purposes of s54, or to decide whether the complaint is misconceived in fact, until we receive evidence in a full inquiry.

19 Section 57 appears with s54 in Part 6 of the AD Act as an ‘exception’ to that Act. The two exceptions are expressed in slightly different terms – “Nothing in this Act renders unlawful . . .” (s54), and “Nothing in this Act affects . . .” (s57). Section 57 could be treated, like s54, as a ‘defence’ to a complaint. But, unlike the situation with an argument under s54, an argument under s57 is not likely to rely on the same evidence that goes to the conduct complained of. An inquiry into the formal structure and manner of operation of a respondent organisation can be undertaken quite separately from any inquiry into impugned conduct of that organisation.

20 It seemed therefore appropriate, for expediency and expense, to decide the argument under s57 before conducting an inquiry into the merits of the complaint. If HCF can discharge its onus (s109 AD Act) and show that it is a body referred to in s57, then the inquiry need proceed no further and the complaint will be dismissed. We turn to that argument first.

Section 57

21 Section 57(2) excepts from the operation of the AD Act

(a) any rule or practice of a body which restricts admission to membership of that body, or

(b) the provision of benefits, facilities or services to members of that body.

22 A “body” for purposes of s57 is a body that is “carried on otherwise than for profit and which is not established by an Act”.

23 But s57(1) provides that a body is not excepted from the AD Act by s57(2) if, although carried on otherwise than for profit and not established by an Act, it is nevertheless:

(a) a co-operative registered under the Co-operatives Act 1992 or a society under the Friendly Societies Act 1989 , or

(b) a friendly society registered under the Friendly Societies Act 1989, or

(c) a building society or credit union registered under the Financial Institutions Code, or

(d) a co-operative housing society registered under the Co-operative Housing and Starr-Bowkett Societies Act 1998, or

(e) a registered club.

24 Changes to s57(1) over the years have been to the list of bodies in (a)-(e). The Anti-Discrimination (Amendment) Act 1981 at Schedule 4 clause 8 omitted the previous s57(1) and inserted instead the provisions that form the basis of the current terms of s54(1). The Anti-Discrimination (Amendment) Act 1982 at Schedule 4 clause (6)(c) added “a registered club” to the list.

25 Section 57(1) was further refined by Anti-Discrimination Amendment Act 1997 at Schedule 1 [21], the Friendly Societies (New South Wales) Act 1997 at Schedule 1.1[2], and the Co-operative Housing and Starr-Bowkett Societies Act 1998 at Schedule 6.1 [2].

26 Section 57 is in the same terms now as it was at the time of the conduct Ms Strong complains of.

Argument under s57

27 HCF submitted that it is a body covered by s57 because it is a body “carried on otherwise than for profit”, it is “not established by an Act”, and it is not a body of the type specified as not covered by the exception.

28 Ms Strong does not dispute, and the Tribunal accepts, that HCF is not established by an Act, and is not one of the bodies of the type specified as not covered by the exception. The issue is whether the activities of HCF are “carried on otherwise than for profit”.

Who are ‘members’ of HCF?

29 If HCF is a body covered by s57, then it would be excepted from the AD Act in relation to any of its rules or practices which restrict admission to membership of HCF. The particular ‘rule or practice’ that is challenged by Ms Strong is one that requires payment of a monthly membership contribution at a particular rate.

30 A threshold question is whether the monthly contribution is truly one that relates to ‘membership’ of HCF. Even if HCF is a body operating otherwise than for profit for purposes of s57 of the AD Act, the exception provided for in s57 will not be relevant to this matter if the conduct complained of is not conduct in relation to any of HCF’s rules or practices which restrict admission to “membership”.

31 In a formal sense the “Members” of HCF are the signatories to the Memorandum and Articles of Association of HCF, the Directors of HCF, and others admitted to membership in accordance with the Article of Association (article 8). The Memorandum of Association implicitly distinguishes between “contributors” on the one hand (clause 4(a)) and “Members” on the other (clauses 5-8). The thousands of people who pay a monthly contribution to HCF and receive health care coverage, such as Ms Strong, are “contributors”; they are not “members” of the incorporated entity.

32 But publications such as HCF’s brochures and annual reports refers to the people who pay the monthly contributions, and are covered by HCF, as ‘members’. The application form through which a person gains access to the services provided by HCF is an application to ‘join’ HCF as a ‘member’.

33 It is apparent that the term ‘member’ is used by HCF to refer to contributors. They could as readily be referred to as ‘participants’ or ‘beneficiaries’ or some like term. Are they in fact ‘members’ of HCF such that the exception from the AD Act would, if available to HCF, apply to the their payments of monthly contributions?

34 There is no requirement that a body operating otherwise than for profit within the meaning of s57 should be incorporated. If the body is not incorporated then ‘membership’ would refer to a person’s being allowed to take part in the regular activities of the body, usually to the exclusion of, or on more favourable terms than, people who are not ‘members’.

35 If a body is incorporated, as HCF is, it will have ‘members’ in the formal sense of their being subscribers to an incorporated entity. But that formal sense of membership is different from a broader sense, where a body has as ‘members’ people who are allowed, on an exclusive or privileged basis, to take part in the regular activities of the association. This broader sense of ‘members’ will arise whether or not the body is incorporated, and whether or not there are ‘members’ in a formal sense for purposes of meeting incorporation requirements. In our view it is this broader sense of ‘membership’ that is intended in s57 of the AD Act.

36 Although it is possible to point to the formal ‘members’ of the incorporated entity HCF who are not affected by the rules or practices of which Ms Strong complains, it is possible as well to characterise as ‘members,’ in a broader sense, all those people who pay the monthly contribution fee and receive health insurance coverage from HCF. Those people are properly described as ‘members’ for purposes of s57, and are affected by the rules or practices of which Ms Strong complains. The exception in s57, if HCF is a body operating otherwise than for profit for purposes of s57 of the AD Act, would therefore be available to HCF for the membership rules and practices of which Ms Strong complains.

“carried on otherwise than for profit”

37 This is the term on which the applicability, or not, of s57 to HCF turns. If HCF is carried on otherwise than for profit within the meaning of s57, then HCF’s membership rules and practices of which Ms Strong complains would be excepted from the AD Act.

38 As a means of identifying some bodies, and distinguishing them from others, the meaning of term is not clear. For example, what is ‘profit’? In what circumstances, or according to what criteria, are activities ‘carried on otherwise than for profit’? The AD Act does not define the term ‘carried on otherwise than for profit’, but its meaning is of critical importance. Its meaning will determine whether certain conduct of a body, and in this case of HCF, is excepted from the AD Act.

‘Bell Concord’

39 Counsel for HCF relied on British authority cited in Strouds Traditional Dictionary of Words and Phrases: Customs and Excise Commissioners v Bell Concord Educational Trust Limited [1989] 2 WLR 679 (“Bell Concord”). This case appears to be the only reported case in which the meaning of term ‘otherwise than for profit’ has been considered and decided.

40 The reference in Strouds is as follows:

“otherwise than for profit” ( Value Added Tax Act 1983 (c.55), Sched.6, group 6, item 2). A company which carried on, as its only activity, and educational establishment [sic] was held to provide education “otherwise than for profit”, notwithstanding that it budgeted for and achieved a surplus over expenditure, the surplus being applied for educational or charitable purposes only ( Customs and Excise Commissioners v Bell Concord Educational Trust [1989] 2 WLR 679).

41 What was Schedule 6 to the Value Added Tax Act 1983 (UK) appears now to be Schedule 9 to the Value Added Tax Act 1994 (UK).

42 In Bell Concord the question for the court was (at page 681H):

Whether the fact that the company was budgeting to make a surplus each year with a view to applying such accumulated surpluses in the future for its charitable purposes means that at the relevant time it was not providing its educational services “otherwise than for profit” within the meaning of schedule 6.

43 In an observation with which we respectfully agree, Browne-Wilkinson VC said at page 682:

In my judgment the phrase “otherwise than for profit” is ambiguous and is capable of bearing either of the meanings contended for.

44 He set out the two possible meanings at 682B-D as:

(a) That, notwithstanding that the surplus will never be applied otherwise than for the educational or charitable purposes of the company, so long as the company is pursuing a policy of making a surplus on the provision of educational services, those services are being provided for profit. This is the commissioners’ contention and focuses on the policy for the time being pursued by the organisation, irrespective of the objects for which it is established.

(b)That, since the surplus can never be redound to the profit of any individual but must be applied for the educational or charitable purposes of the company, the services are being provided otherwise than for profit. This is the company’s contention, which focuses on the objects for which the organisation is established, irrespective of its budgeting policy from time to time.

45 Putting aside the effect on his interpretation of a directive of the then European Economic Community, Browne-Wilkinson VC said (at 681E-H):

I would construe the phrase in the sense contented for by the company. There is nothing in the context which throws any light on the meaning of the words and my reasons for favouring the company’s contentions are primarily practical. If the phrase “otherwise than for profit” requires one to look at the Constitution of the organisation to discover the purposes for which it is established, there is a clear and unambiguous test as to whether the supply is made for profit. If the commissioners’ test is correct the consequential difficulties are formidable.

If the phrase “otherwise than for profit” implies that a charitable organisation can carry on a business for “profit” the question at once arises as to what is meant by “profit”. In relation to what period does one assess the profit? How often does one have to ask the question, “is the organisation providing its services otherwise than for profit?” . . . I find it inconceivable that Parliament could have intended the question of exemption to depend on ascertaining the subjective state of mind of an educational body at [quarterly] intervals. Commonsense suggests the exemption should depend on some long-lasting and objective yardstick rather than on this frequent review of the state of mind of those running the organisation.

46 Browne-Wilkinson VC considered the impracticality of assessing profit on a quarterly basis, or even an annual basis, noting that on that approach organisations will come in and out of profit, and therefore in and out of registerability for value-added tax, on a periodic basis. He said “I find it difficult to believe that Parliament intended this exemption to be such a transitory matter.” He went on to say (at 683D):

In my judgment, Parliament is far more likely to have considered that the phrase ‘otherwise than for profit’ meant bodies which were non-profit-making bodies in the ordinary sense of the word rather than bodies which, from time to time, aimed to make a surplus on revenue account. The administration of the tax for educational charities would become so complex on any other view that, apart from any guidance from the directive, I would reject the commissioners’ construction.

47 Brown-Williamson VC cited (at 683E) Lord Denning in National Deposit Friendly Society Trustees v Skegness Urban District Council [1959] AC 293, who said at page 319:

The fact that the society has made profits does not mean that it is “conducted for profit”, which I take to mean “conducted for the purpose of making profit”. Many charitable bodies, such as colleges and religious foundations, have large funds which they invest in interest in stocks and shares, or purchase land which they let at a profit. Yet they are not established or conducted for profit. The reason is that because their objects are to advance education or religion, as the case may be. The investing of funds is not one of their objects properly so called, but only a means of achieving those objects. So it here seems to me that if the making of profit is not one of the main objects of an organisation, but is only a subsidiary object - that is to say if it is only a means whereby its main objects can be furthered or achieved - then it is not established or conducted for profit”.

48 Browne-Wilkinson VC said (at 684B) that

the question is whether the supply is “for profit”. The answer, in my judgment is “No: the making of a surplus is incidental to, and not an object of, the company and it is therefore not supplying its educational services for profit”.

49 He then went on (at 686G) to consider the effect of the EEC directive, which

to the extent to which [it] assists in the construction of the Act . . . points in favour of the view that I would in any event prefer, namely that the words “otherwise than for profit” refer to the objects for which an organisation is established and not to the budgeting policy being pursued for the time being by the organisation in question.

50 Counsel for HCF submitted that Bell Concord is directly on point in this matter. He agreed that HCF, like the company Bell Concord, operated with substantial annual surpluses. He pointed out that those surpluses vary over different periods, and that HCF in fact had an operating deficit in the immediate past financial year. He made the point that if one was to look at surplus as an indicator of whether an organisation was operating for profit, and therefore had access to the exception in s57, it would be possible for an organisation to budget accordingly so as to avoid a surplus and therefore bring itself within that exception.

51 Counsel for HCF submitted that the term ‘carried on otherwise than for profit’ refers to the objects for which an organisation is established, and not to the budgeting policy being pursued for the time being by the organisation in question. He said that it can be said of HCF, as it was said of Bell Concord, that “the making of a surplus is incidental to, and not an object of, the company and it is therefore not supplying its ... services for profit”.

52 We agree that Bell Concord indicates that whether a body’s activities are ‘carried on otherwise than for profit’ may depend on whether the making of a surplus is incidental to, and not an object of, the body. It could fairly be said of HCF that the making of profit is not one of its main objects, but is only a means whereby its main objects can be furthered or achieved.

53 The court in Bell Concord arrived at that view in a particular context. Brown-Wilkinson VC was explicit that his resolution of the ambiguity in the term “otherwise than for profit” was “primarily practical”. He saw that one of the two available interpretations would give rise to “consequential difficulties [that] are formidable” (at 682F). Brown-Wilkinson VC’s interpretation of the ambiguous provision was guided by what would give sensible effect to the legislation that was under consideration. That legislation was British tax legislation. The same phrase occurring in Australian anti-discrimination legislation must be given effect in its own context, guided by what would sensibly give effect to the legislation under consideration, in this case the NSW Anti-Discrimination Act. It may be that the result of that exercise is consistent with the view in Bell Concord, and it may not.

Interpretation of an ambiguous or obscure provision

54 Bell Concord is useful in setting out two competing interpretations of the phrase ‘carried on otherwise than for profit’. Which of those interpretations, or whether another interpretation, is the appropriate meaning to give to the phrase is an exercise we must undertake for the Anti-Discrimination Act and its purposes, as the UK Court of Appeal did for the Value Added Tax Act 1983.

55 The court there, as we discuss further below, had the same difficulty we do with the meaning of the term. In our view, the term is, for purposes of the Interpretation Act 1987, ambiguous or obscure.

Decisions in NSW

56 There has been very little reference to s57 in this jurisdiction, and what there is gives us no assistance in understanding what ‘carried on otherwise than for profit’ means.

57 In the case of Hope v NIB Health Funds Ltd (1995) EOC 92-716 it appears that the respondent health fund, on the facts as reported, could have relied on the defence in s57. But there is no reference to s57 in the published report of the inquiry, and we must assume that the point was not taken in the case.

58 Section 57 has been referred to in two Supreme Court decisions, on appeal from the then Equal Opportunity Tribunal: Tullamore Bowling and Citizens Club Limited v Lander [1984] 2 NSWLR 32, and Umina Beach Bowling Club Limited v Ryan [1984] 2 NSWLR 61.

59 In Umina Beach Bowling Club it appears that the judges relied on different versions of s57. Mahoney J referred to the AD Act as it was at the time of his decision (page 67E), when the provision relating to registered clubs had been inserted, while Priestley J referred to the AD Act as it was at the time of the conduct complained of, before the registered clubs amendment (page 72E). In any event both judges refer to what is, in this matter, the relevant part of s57: the phrase “the activities of which are carried on otherwise than for profit”. Neither Tullamore Bowling and Citizens Club nor Umina Beach Bowling Club considered the meaning to be given to that term.

60 The only assistance we get from those decisions is that Priestley J considered it “probable that such material as [the relevant second reading speech] may properly be considered by a court in relation to the mischief the legislation intends to remedy” (at 58). Counsel for HCF relied on Priestley J’s quoting the following part of the second reading speech:

It would also appear undesirable that the [Anti-Discrimination] Bill should extend to service organisations, or to charities or other voluntary bodies working within the community.

61 That begs the question of whether HCF is such an organisation. We return later to the second reading speech in our analysis of the scope of the exception in s57(1).

62 Without assistance from other decisions in this jurisdiction, we consider the meaning given to the same term in other areas of law.

Tax law and decisions

63 HCF is “exempt from income tax under the provisions of Section 50-30 of the Australian Income Tax Assessment Act 1997” (HCF Annual report, p54, Note 1 to the Financial Statements for the year ended 30 June 2000– Exhibit 2).

64 Section 50-30 of the Income Tax Assessment Act 1997 (Cth) (‘the 1997 Tax Act’) replaced s23(2eb)(ii) of the Income Tax Assessment Act 1936 (Cth) (‘the 1936 Tax Act’). Under s23(eb) of the 1936 Tax Act HCF was a body that was ‘carried on otherwise than for profit’ for tax purposes.

65 Most bodies registered as a health benefit organisation under the National Health Act 1953 are carried on on this basis (Table 1, 2002-03 Annual Report, Private Health Insurance Administration Council – Exhibit 5), although they need not be (s68 National Health Act).

66 The criteria for income tax exemption in s23(eb) of the 1936 Tax Act used a term which includes the phrase we are considering in this matter: “carried on otherwise than for profit or gain to the individual members of the organisation”. Section 50-30 of the 1997 Tax Act says instead: “not carried on for the profit or gain of its individual members”.

67 Counsel for HCF submits that although the term ‘carried on otherwise than for profit’ in s23(eb) is not used in s50-30 under which HCF now receives its tax exempt status, there has been no change in meaning. The 1997 Tax Act “contains provisions of the [1936 Tax Act] in a rewritten form” (s1-3(1) 1997 Tax Act). When a provision in the 1997 Tax Act “appears to have expressed the same idea [as the 1936 Tax Act] in a different from of words in order to use a clearer or simpler style”, then the “idea” of one and the “idea” of the other are not to be taken as different (s1-3(2) 1997 Tax Act).

68 We agree that s23(eb) in the 1936 Act expresses the same idea as is expressed in s50-30 in the 1997 Tax Act in a different from of words, in order to use a clearer or simpler style. Accordingly, the “idea” of s23(eb) and the “idea” of s50-30 are not to be taken as different.

69 We therefore agree that HCF is a body that is ‘carried on otherwise than for profit’ for purposes of the income tax assessment legislation. If that phrase is to be given the same meaning for purposes of an exception from the AD Act as it is given for income tax exemption purpose, then HCF is a body referred to in s57 of the AD Act.

70 Nothing in the income tax exemption regime of which we are aware tells us in what circumstances, or according to what criteria, a body is carried on otherwise than for profit.

71 In Cronulla Sutherland Leagues Club Limited v Commissioner of Taxation (1990) 23 FCR 82. The Leagues Club, claiming exemption for all of its assessable income under the 1936 Tax Act said that the Club was not “carried on for the purposes of profit or gain to its individual members”. The Commissioner of Taxation did not contest this (page 88) and so the Court did not need to consider the meaning to be given to the phrase.

Non-profit

72 It can be said, and in our experience it is often said, that a body that is ‘carried on otherwise than for profit’ is a ‘non-profit’ body. Section 3(a) Income Tax Act 1973 (Cth) defines a non-profit company, relevantly, as:

a company that is not carried on for the purposes of profit or gain to its individual members and is, by the terms of the company's constituent document, prohibited from making any distribution, whether in money, property or otherwise, to its members . . .

73 Consistently with the decision in Bell Concord, this definition would characterise HCF as a non-profit company for tax purposes.

74 The Social Security Act 1991 (Cth) in s23 defines ‘non-profit organisation’, relevantly, as:

(a) an organisation that is not carried on for the purposes of profit or gain to its individual members and is:
(i) a religious organisation; or

(ii) an organisation the principle objects or purposes of which are charitable or benevolent; or

(iii) an organisation of former members of the Defence Force established in every State or a State branch of such an organisation; or

(iv) an organisation approved by the Minister for the purposes of this Part; and

75 It appears that this definition does not characterise HCF as a non-profit organisation for purposes of the Social Security Act, unless its principle objects or purposes are “charitable or benevolent”.

76 Regulation 3 of the Supreme Court (Fees) Regulations 2002 (WA) defines a non profit association as a “society, club, institution, or body that is not for the purpose of trading or securing pecuniary profit for its members from its transactions”. It appears that this definition does not characterise HCF as a non-profit organisation for purposes of fee waiver, as HCF is likely to be engaged in “trading”.

Other discrimination legislation

77 Exceptions of similar effect to that in s57 of the AD Act are found, for example, in s39 Sex Discrimination Act (Cth) 1984, s36 Age Discrimination Act 2004 (Cth), s31 Discrimination Act 1991 (ACT) and s71 Equal Opportunity Act 1984 (WA).

78 In each case the exception is for ‘voluntary bodies’, but in each case a ‘voluntary body’ is “an association or other body (whether incorporated or unincorporated) the activities of which are not engaged in for the purpose of making a profit”. While this begs the same question we are dealing with in this matter – the meaning of ‘profit’ – the fact that it is consistently used in anti-discrimination legislation as identifying a “voluntary body” does give an indication of the type of body that s57 is directed to.

79 There has been no detailed consideration of the scope of these exceptions. In Kalgoorlie Taxi Car Owners Association Inc & Ors V Frank Regan & Ors [1998] WASCA 9 the Court of Appeal decided noted that as the exception had not been argued before the Equal Opportunity Tribunal, the Tribunal had not erred in not considering whether the respondent was in fact a ‘voluntary body.

80 In Gardner v AANA Limited (2003) EOC 93-277 the court was considering a claim of discrimination, on the ground of pregnancy, against the All Australian Netball Association Limited. The Court noted s39 of the Sex Discrimination Act 1984 (Cth) (SDA) and said at paragraph 12:

It is accepted by all parties that the respondent is a voluntary organisation. It is accepted that its member [the SA Netball Association] is also a voluntary organisation. All parties agree that the purpose of the inclusion into the AD Act of s39 was to protect the right of freedom of assembly so that a voluntary organisation could chose those persons it wished to be members and deal with those members in any manner that the members agreed, whether or not those activities might appear to persons who are not members of the association to be discriminatory.

81 The Court accepted, without inquiring into whether the SA Netball Association’s activities were not engaged in for the purpose of making a profit, that the Association was a voluntary body for purposes of the SDA.

82 Similarly to the definitions in Australian discrimination laws, the definition of ‘voluntary organisation’ in s64(1) of the National Assistance Act 1948 (UK) is “a body the activities of which are carried on otherwise than for profit”. The British High Court case of A and R v East Sussex County Council [2002] EWHC 2771 (Admin) considered whether a company was a ‘voluntary organisation’ by reference to this definition and, as happened in Gardner, the Court had no difficulty in saying, on the facts, that the company was a ‘voluntary organisation’.

Purpose of the Anti-Discrimination Act

83 Among the material that is capable of assisting in ascertaining the meaning of the provision which is ambiguous or obscure is the purpose of the provision. Section 33 of the Interpretation Act 1987 provides that “a construction that would promote the purpose or object underlying the AD Act . . . shall be preferred to a construction that would not promote that purpose or object”. (see also CIC Insurance Limited v Bankstown Football Club Limited [1997] 187 CLR 384 per Brennan CJ, Dawson Toohey and Gummow JJ at 408; IW v City of Perth [1996-1997]191 CLR 1, per Brennan CJ and McHugh J at 12; Waters v Public Transport Corporation (1991) 173 CLR 349 per Mason CJ and Gaudron J at 359).

84 The purpose of the AD Act is set out in its Long Title: “to render unlawful . . . discrimination in certain circumstances and to promote equality of opportunity between all persons”. Its purpose was described in Parliament as being “as far as legislation can, to end intolerance, prejudice and discrimination in our community” (NSW Parliamentary Debates (Hansard), Legislative Assembly, 23 November 1976 at 3337).

85 We note that the purpose of removing registered clubs from the exception provided for in s57 was described in the parliamentary debates concerning that amendment (NSW Parliamentary Debates (Hansard), Legislative Assembly, 24 March 1981 at 5008):

The role clubs play in the social life of this State exert significant influence on community life. Their membership has long exceeded 1 million people. A large number of clubs count their memberships in tens of thousands of members. The club industry is a huge commercial entity in itself. Dozens of service industries rely upon the financial viability to clubs to maintain their own stability. In this context the Government does not consider it reasonable that registered clubs should be exempted from an Act designed to remove discrimination from all areas of the community.

Clubs cannot be dealt with in the legislation as being small private concerns when, in reality, most of them are nothing of the sort.

86 From this we infer that a purpose of the exception in s57 is to relieve from compliance with the AD Act clubs that are small private concerns, that have small memberships and on which other businesses are not dependant for their viability. Consistently with this, in Tullamore Bowling &Citizens Priestley JA limited the extent to which clubs were exposed to the requirements of the AD Act as he was concerned, in part, not “to place upon them a weight which . . . they cannot bear”.

87 We note that the bodies that are explicitly removed from the excepted bodies are, despite their status as membership bodies or bodies operating otherwise than for profit, large enterprises conducting substantial businesses: registered co-operatives, friendly societies, building societies, credit unions, co-operative housing and Starr-Bowkett societies, and clubs.

Heading to the provision

88 Also among the material that is capable of assisting in ascertaining the meaning of a provision is its heading. Although not part of the provision (s35(2) Interpretation Act), it can be considered as part of the material not forming part of the AD Act (s35(4) Interpretation Act).

89 The heading to section 57 is “Voluntary bodies”. As we noted above, in other Australian discrimination legislation a voluntary body is defined as one that that is carried on otherwise than for profit. There is an implication, made stronger by the definitions in other anti-discrimination legislation, that parliament intended by referring to a body whose activities are carried on otherwise than for profit, to refer to a voluntary body. In our experience it is distinctive of voluntary organisations, though not exclusive to them, that a substantial amount of their activities are carried out by people who are unremunerated, and that they operate to meet the special interests of a defined group of people.

Nature and scale of operations

90 Consistently with the view in Bell Concord, a body’s being engaged in a business is not inconsistent with its being carried on otherwise than for profit (s18 Corporations Act 2001 (Cth); ASIC v Matthews [2001] NSWSC 735 at [43]; Fasold v Roberts [1997] 439 FCA). Similarly a body that is engaged in ‘trade’ can be carried on otherwise than for profit (Plimer v Roberts [1997] 1361 FCA). Bodies carried on otherwise than for profit “can and sometimes do generate substantial, albeit non-distributable, surpluses” (Guide Dog Owners' & Friends' Assoc Inc v Guide Dog Assoc of New South Wales & ACT & Anor [1998] 736 FCA).

91 In Fasold v Roberts [1997] 439 FCA Sackville J equated an organisation “carrying on a business otherwise than for profit” with a “non-profit enterprise”, as did the Court had done in A and R. Sackville J said that such bodies

can vary from those which are essentially commercial in character (compare Re Ku-Ring-Gai Co-Operative Building Society (No.12) Ltd (1978) 22 ALR 621 (FCA/FC), at 648-649, per Deane J) to those which exist entirely for charitable or altruistic purposes. In my view, the less commercial the character and objectives of an organisation, the greater the degree of system and regularity required for the organisations activities to be characterised as a "business".

92 Thus for purposes of protecting consumers from certain business practices, a body engaged in trade or business can at the same time be carried on otherwise than for profit. Sackville J was concerned not to define too widely the scope of the activities that might be a “business”. He said that

This approach, in my view, is consistent with the purposes underlying the Fair Trading Acts , namely to establish standards of conduct applicable to commercial and consumer transactions . . . If the net is cast too widely, the legislation will apply to transactions that are not truly commercial in character and confer protection on persons who cannot fairly be described as consumers.

93 Similarly, when giving meaning to the term ‘otherwise than for profit’ we are concerned to be consistent with the purposes underlying the Anti-Discrimination Act, namely to render discrimination unlawful, to promote equality of opportunity and to end intolerance, prejudice and discrimination in our community. To that end, if the net is cast too widely, the exception will apply to organisations outside the scope intended by Parliament, and will deny protection to a great many people who could reasonably expect to be covered by the AD Act. We are guided by this consideration in deciding the meaning to be given to the phrase for purposes of the AD Act.

94 We will thus “give appropriate effect to the exemption provisions of the [AD Act]” (State Personal/Carer's Leave Case [1998] NSWIRComm 652), having regard to “the general principle . . . that exceptions should be construed narrowly:” (State Personal/Carer's Leave Case, citing Waters -v- Public Transport Commission (1991-1992) 173 CLR 349).

95 Building societies, co-operatives, friendly societies and registered clubs are ‘carried on otherwise than for profit’ while nevertheless trading on a substantial commercial scale. They have been excluded from the protection of s57. Similarly, the equivalent provisions in other Australian anti-discrimination legislation, that refer to ‘voluntary bodies’, exclude from the exception “an association that provides grants, loans, credit or finance to its members”.

96 HCF submits that it is “somewhat of a misnomer” to say that it is in the ‘Insurance” industry. We find it difficult to characterise the industry in which HCF is involved as other than just that, perhaps with the refinement that it is the health insurance industry. It may be that HCF does not provide “grants, loans, credit or finance to its members”, although the payment of an insurance benefit may be a grant. Within the spirit of the intended exclusions from the exceptions, HCF is however operating on a very significant commercial scale. It is by no account a ‘voluntary’ body.

97 The bodies explicitly excluded from the coverage of the exception in s57 are carried on for profit in the sense that they are carried on so as to earn more than they spend, and to show a surplus in their financial statements in each year. They may not achieve that profit – they may record a loss rather than a profit – but the making of profit is a means whereby its main objects can be furthered or achieved. For purposes of tax laws in Britain this objective of realising surplus was said in Bell Concord to be a secondary object that did not alter a body’s character as operating otherwise than for profit.

98 In the case of HCF its financial statements, prepared in accordance with the Corporations Law, include a ‘profit and loss statement’ that records ‘operating revenue’ and ‘operating profit’. HCF records ‘operating profit’, as retained earnings in each year. On its balance sheet HCF shows those retained earnings as ‘retained profits’, which are credited to the ‘Guarantors’ equity’. In the year to 30 June 2000 HCF’s ‘operating profit’ was $30,490,000. It had begun the year with ‘retained earnings’ of $100,257,000, and so ended the year with ‘retained earnings’ of $130,747,000. As at 30 June 2000 HCF’s net assets, the value of which equates with the Guarantors’ equity, was $159,165,000.

99 This overall financial position, and in particular the ‘operating profit’, was arrived at, as it is in every year, after provision had been made for employees’ entitlements, directors’ entitlements and for outstanding claims on health insurance policies (note 2(b) to the Financial Statements).

100 Looking at the ‘statement of cashflows’ for that year, receipts from members and customers were $436,145,000. At the same time benefits and levies paid were $349,872,000. The surplus of cash receipts over cash payments was therefore $86,273,000. Overall in the year, after all operating and investing cashflows, the net increase in cash held by HCF was $771,000 for the year, bringing to $8,387,000 the amount of cash on the balance sheet.

101 HCF retains its profits. It does not distribute them to owners, members or shareholders. No person profits, in that sense, from the operations of HCF. The retained profits are available to HCF, presumably to use in its budgeting for the future conduct of its affairs so as to ensure that it can continue to make appropriate provision for employees’ entitlements, directors’ entitlements and, most relevantly to the members, for claims on health insurance policies. Note 23 to the Financial Statements describes contingent liabilities then faced by HCF of $4,500,000 for re-insurance, depending on the outcome of certain litigation within the health insurance industry. In light of such contingent liabilities, and the obviously uncertain nature of risk in an insurance enterprise, it is clearly prudent to retain earnings on the balance sheet.

102 Counsel for HCF submitted that the term ‘carried on otherwise than for profit’ refers to the objects for which an organisation is established, and not to the budgeting policy being pursued for the time being by the organisation in question. These are not the only possible ways the term can be read. There is as well, the ‘character’ of the organisation, as Sackville J recognised in Fasold v Roberts. In our view, based on the various considerations we have set out above, the character of a body that is ‘carried on otherwise than for profit’ is far removed from a body that trades, and maintains retained earnings, on the scale that HCF does. Operating on the scale that it does, HCF is not, in our view, the type of body Parliament intended to identify when it used the term ‘operating otherwise than for profit’ as a short-hand means of describing bodies that are excepted from the AD Act to some extent by s57.

103 The intention of an exception such as that in s57 is as was said in Gardner at paragraph 12

to protect the right of freedom of assembly so that a voluntary organisation could chose those persons it wished to be members and deal with those members in any manner that the members agreed, whether or not those activities might appear to persons who are not members of the association to be discriminatory.

104 HCF is not in need of that protection. HCF is not a voluntary body. The original purpose of its structure as a membership organisation is a historical footnote. There is no suggestion that the ‘members’ of HCF have any say in how other members might be dealt with, or that HCF expels members as it wishes. HCF is a body that engages in commerce throughout Australia, and on a very large scale. Its membership was over 770,000 in 2000.

105 HCF operates so as to provide a health insurance service to its members. To do so it necessarily tries to generate an operating surplus. Even though it is carried on otherwise than for profit for purposes of income tax exemption, and does not distribute its profits, it operates ‘for profit’ in this sense.

106 In our view the term ‘carried on otherwise than for profit’ was not intended to encompass a body such as HCF. If it did, then all people in NSW, when applying for membership, and many thousands of people who are members, would be largely unprotected by the Anti-Discrimination Act.

107 Counsel for HCF submitted, invoking the reasoning in Bell Concord, that there must be certainty in the coverage of the exception in s57, and that it should not be possible for a body to duck in and out of coverage of the AD Act according to circumstances from time to time.

108 That might be true if the coverage of s57 were dependent, through the meaning given to ‘operating otherwise than for profit’, on whether a body actually realised a profit each year. But in our view the term ‘carried on otherwise than for profit’ does not identify a body by reference to its actual financial results each year. It identifies a body by reference to its character. Whether it has a profit or a loss, and whether it calls a profit and surplus and a loss and deficit, the question is “what is it its character? Does it have the character of a relatively small voluntary body, the activities of which could be carried on by an unincorporated association of people for purposes of pursing a common interest? The exception provided for in s57 is, in our view, directed towards such bodies, and that it is bodies with that character that are identified by the term ‘carried on otherwise than for profit’.

109 We are of the view that HCF is not, for purposes of s57 of the AD Act, ‘carried on otherwise than for profit’ in this sense. That being so, HCF is not excepted from the operation of s57 of the AD Act. Accordingly, its rules or practices which restrict admission to membership, and its provision of benefits, facilities and services to its members, are subject to the provisions of the AD Act. Unless the complaint ought be dismissed on other grounds at this stage, the inquiry should proceed.

Misconceived

110 HCF argues that Ms Strong’s complaint is misconceived, in that the facts alleged could not support a complaint of discrimination.

111 The factual circumstances of Ms Strong’s membership of HCF are clear from the material available to us. Most of that material has been provided by Ms Strong, principally to the Acting President of the Anti-Discrimination Board who has included it in his report to this Tribunal.

Factual background

112 The material filed in the matter to date indicates that Ms Strong’s evidence would be that she took first out coverage for herself in about 1986. In 1991 she extended her membership to include her husband. In 1992 she extended her membership to include her husband and their child. Ms Strong’s evidence would be that she and her husband separated in 1992. In early 1994 she asked HCF to remove her former husband from coverage. Ms Strong says that in early 1994, under the membership including her former husband, the contribution was $176.40 a month. She says that after her former husband was removed from her membership, and her membership was maintained for only her and her child, the contribution remained at $176.40. This phenomenon – the maintenance of the contribution rate payable by Ms Strong, despite the change in her marital status – is the factual basis of her complaint.

113 Schedule 1 of the National Health Act 1953 (Cth), titled ‘Conditions of registration of an organization’, sets out four categories of membership:

(q) The organization will, for each applicable benefits arrangement, and for each table of ancillary health benefits, offered by the organization:
(i) if the arrangement or table covers memberships consisting of a contributor and also 2 or more other persons of whom at least one is not a dependent child of the contributor—charge the same contribution in respect of each such membership; and

(ii) if the arrangement or table covers memberships consisting of a contributor and one or more dependent children of the contributor—charge the same contribution in respect of each such membership; and

(iii) if the arrangement or table covers memberships consisting solely of a contributor—charge the same contribution in respect of each such membership; and

(iv) if the arrangement or table covers memberships consisting of a contributor and one other person who is not a dependent child of the contributor—charge the same contribution in respect of each such membership;

except to the extent (if any) that either or both of the following apply:
(v) under the rules of the organization, a discounted rate of contribution is payable by or in respect of such a contributor;

(vi) the amount of contributions payable by the contributor is increased under Schedule 2.

114 In the health insurance industry, the membership categories in (i) to (iv) are known as ‘family’, ‘single parent’, ‘single’ and ‘couple’ respectively. membership (Glossary at p.97, 2002-03 Annual Report, Private Health Insurance Administration Council – Exhibit 5). HCF at the relevant time chose to admit members to only single and family membership categories. (Letter 26 July 2000 HCF to Ms Strong).

Nature of complaint

115 In her complaint Ms Strong expressed her complaint in terms of s39(1)(a) of the Act (‘direct discrimination’) in this way:

as a divorced person with a dependent child, I am being treated less favourably than a married couple with a dependent child, [because I am charged] an adult contribution rate to obtain cover for my child.

116 In her complaint Ms Strong expressed her complaint in terms of s39(1)(b) of the Act (‘indirect discrimination’) in this way:

to gain equitable cover I am required to have a spouse, being a condition or requirement with which a substantially higher proportion of people who are married or [cohabit] could comply.

117 By ‘equitable cover’ we understand Ms Strong to mean ‘cover on, effectively, the same terms’.

118 In her complaint and in submissions Ms Strong has at times expressed her complaint in terms that highlight a benefit she says accrues to HCF flowing from her separation from her husband. She, her husband and her child – three people – were covered for $176.40 a month. After their separation it was only she and her child who were covered for the same amount and, if her former spouse took out his own single membership cover with HCF at $58.20 a month, HCF would still be covering three people but receiving 50% more in contributions. Assuming this to be so, it is not a circumstance that is covered by the provisions of the Act. The Act is concerned with less favourable treatment of Ms Strong, not with a benefit that accrues to another person in circumstances that might described as unfair or inequitable. Whether and to what extent HCF’s receipt of an amount in contributions is affected by its policies is not directly relevant to this inquiry. We are concerned with whether Ms Strong was subjected by HCF to less favourable treatment or to a discriminatory requirement or condition, regardless of the consequences for HCF.

Complaint of direct discrimination

119 Is there material on which an argument could be made that Ms Strong was treated by HCF, in the setting of the contribution, less favourably than a person not of her marital status was or would have been treated in the same circumstances?

120 Ms Strong’s marital status was single. A material circumstance was that she had a dependent child. Does the material filed indicate how HCF would have treated a person who was not single who had a dependent child?

121 Material that has been filed indicates that membership of HCF at the relevant time was restricted to people who paid a monthly contribution rate in accordance with HCF’s rules and practices. Those rules and practices restricted membership in this way. A person wanting membership that provided cover for themselves alone (single cover) had to pay a monthly contribution of a specified amount; the scope of the cover could be selected, and the monthly contribution at the relevant time for the scope of cover selected by Ms Strong was $83.20. A person wanting membership that provided cover for themselves and for any or all of a “partner” and dependents (family rate) had to pay a monthly contribution of twice the amount specified for single cover, which was $176.40 at the relevant time for the scope of cover selected by Ms Strong. The contribution Ms Strong paid was not set according to her own circumstances, rather she paid a contribution that was set according to which of two membership categories her circumstances placed her.

122 In answer to the question we posed above, the material that has been filed indicates that a person who was not single who had a dependent child would have been treated in the same way that Ms Strong was treated. They would not have been treated more or less favourably. They, like Ms Strong, would have been ineligible for ‘single cover’, and would have had to contribute under the family cover.

123 There does not, therefore, in the material in the President’s report and provided by Ms Strong, appear to be a basis in fact for an argument that Ms Strong was subject to direct discrimination.

Complaint of indirect discrimination

124 In the alternative, Ms Strong claims that she is required to have a spouse if she is to receive ‘equitable cover’.

125 At this stage of the inquiry it is enough that we are able to identify a reasonably arguable case that can be made out on the material filed. In doing so we are aware of the considerations in the Tribunal’s formulating the requirement, realistically assessing whether in fact there was a requirement (Secretary , Department of Foreign Affairs v Styles (1989) 88 ALR 621). Whether there was in fact such a requirement will be a matter for evidence and decision in a full inquiry.

126 On the material filed, we are able to identify what is arguably a requirement or condition to which Ms Strong was subject in relation to her admission to membership of HCF. It appears to us that the requirement could be expressed in this way:

For a person with a dependent child to be included in one membership at a cost that is less per person than the cost of two single memberships, the person must nominate another (third) person to be covered by the membership.

127 This expresses the essence of Ms Strong’s submissions. She repeatedly analyses the contributions, and their effect on her, by reference to the number of people covered. She says that the rates, although set without regard to the number of people covered by a membership, have a differential impact on single parents when assessed according to the cost per person covered by a membership. In her case, Ms Strong says that, as a single parent of one dependent child, the cost per person covered by her membership is 50% higher than for a married or de-facto couple with a dependent child.

128 HCF says that this argument is misconceived, as the contributions are not set by reference to the number of people covered, but by reference to industry practice, legislative and Ministerial requirements, and the principle of ‘community rating’. The material filed indicates that the contribution rates are indeed set by reference to a number of provisions that combine to this effect

129 The contribution rate that any health fund sets for its ‘single category’ is a called a “single equivalent unit”, or SEU, and the contribution rate that any health fund sets for any other category is twice the SEU (Glossary at p.98, 2002-03 Annual Report, Private health Insurance Administration Council – Exhibit 5). . This is the ‘community rating’ principle that keeps the ratio of contribution rates across the four categories at 1:2:2:2.

130 In section 4 of The Australian Health Care System: An Outline ( the Australian Department of Health and Ageing says that:

The Commonwealth regulates insurance offered by registered health insurance organisations to ensure that the principle of community rating is maintained. Community rating means that health funds must charge everyone the same premium regardless of the health status or claims history.

131 In Australian Health Insurance Association Limited v. Esso Australia Limited (1993) 41 FCR 450 Black CJ said, at para 33:

The community rating principle involves, in essence, that those engaged in health insurance business should accept for insurance the whole range of risks: the healthy, the sick, the young and the old. The policy is that it should not be open to an insurer to accept only those who constitute a good risk and so to charge lower premiums, leaving others to insure, at higher premiums, those who are likely to make larger or more frequent claims.

132 In Government Employees' Health Fund Ltd v Private Health Insurance Administration [2001] FCA 322 at [3] the Court said:

This policy, of community rating, is associated with the requirement that the organisations charge the same contribution rate to all members regardless of risk.

133 The 2002-03 Annual Report of the Private health Insurance Administration Council (Exhibit 5) says (p 35) that

[t]he core of community rating is that persons should not be discriminated against in obtaining or retaining health insurance. Under the [National Health] Act, in setting premiums or paying benefits, funds cannot discriminate (in relation to a contributor or his/her dependants) on the basis of health status, age, race, sex, sexuality, use of hospital, medical or ancillary services or general claiming history (the [National Health] Act, section 73ABA and Schedule 1, paragraph m).

134 Section 73ABA had read: “It is a condition of registration of a registered organization that it must expressly undertake not to discriminate against an eligible contributor on the grounds of race, sex or sexuality”.

135 Section 73ABA and paragraph (m) of Schedule 1 have since been repealed (Schedule 1of the Health Legislation Amendment (Private Health Insurance Reform) Act 2004) and provisions to similar but more extensive effect are now in s73AAH and s66(1). That is, however, irrelevant. Ms Strong’s complaint must be considered under the law as it was at the time of the conduct complained of, July 2001.

136 To put Ms Strong’s claim of indirect discrimination in terms of the National Health Act regime under which HCF is registered, Ms Strong alleges that HCF’s rules relating to membership have a disproportionate impact on her because of her marital status, in breach of the AD Act. That claim could be made out even if, at the relevant time, HCF complied with the s73ABA Schedule 1 paragraph (m) of the National Health Act, and did not discriminate on the basis of health status, age, race, sex, sexuality, use of hospital, medical or ancillary services or general claiming history.

137 Ms Strong’s complaint does not, in our view at this stage, misconceive the actual way which the contribution rates are set. Rather, it looks at the setting of the rates from a different perspective, having regard not to the intention behind the rate setting exercise, but to the effect of the rates on a ‘per person covered’ basis

138 If the requirement can properly be formulated as we have suggested, or in some other way, then a real issue for inquiry and decision is whether it is a requirement with which a higher proportion of people who are not single – eg who are married or in a de facto relationship – comply or are able to comply.

139 HCF argues that the statutory provisions relating to the family membership category do not specify a type of relationship necessary between the contributor and the other non-dependent person. This would allow, it is argued, a single person to secure family cover at a lower cost per person by joining with another person. If so, there is perhaps a proportion, and possibly a significant proportion, of single people able to reduce the cost per person covered by their membership.

140 It appears that Ms Strong’s evidence, on the other hand, would be that whatever the permissive terms of the statutory provisions, she has been told by HCF that its rules and practice require a marriage-like relationship between the contributor and the other non-dependent person for the family membership. If the evidence establishes that that is in fact the case, there is perhaps little or no prospect of single people being able to reduce the cost per person covered by their membership.

141 There does, therefore, in the material in the President’s report and provided by Ms Strong, appear therefore to be a basis in fact for an argument that Ms Strong was subject to indirect discrimination.

142 In our view Ms Strong’s complaint of discrimination ought not be dismissed at this stage. The material filed to date indicates that there is an arguable case that the terms on which Ms Strong was provided with health cover were discriminatory on the ground of marital status.

Section 54: Necessary to comply with a requirement

143 Section 54(1) excepts from the operation of the AD Act

anything done by a person if it was necessary for the person to do it in order to comply with a requirement of:
(a) any other Act, whether passed before or after this Act,

(b) any regulation, ordinance, by-law, rule or other instrument made under any such other Act,

(c) an order of the Tribunal,

(d) an order of any court, not including an order or award of a court or tribunal having power to fix minimum wages and other terms and conditions of employment ...

144 Counsel for HCF submitted that it was necessary for HCF, in order to comply with a requirement of the National Health Act, to set the contribution categories and rates in the way that it did. Specifically, HCF says that it set its contribution categories and rates so as to comply with s73BA of the National Health Act. Accordingly, HCF submits, no aspect of its setting of contribution categories and rates can be unlawful under the AD Act, by virtue of s54(1) AD Act.

145 HCF’s submission relies on its compliance with not only the National Health Act but also with determinations by the Minister. We assume for purposes of this application that the determinations relied on by HCF are instruments made under an Act within the meaning of s54.

146 As was acknowledged by counsel for HCF, the submission under s54 is closely related to its previous submission, that Ms Strong’s complaint is misconceived. Both submissions are premised on HCF’s having set contribution categories and rates in accordance with statutory and Ministerial requirements. The ‘misconceived’ argument said that the contribution categories and rates comply with the statutory and Ministerial requirements which, properly understood, cannot lead to contribution categories and rates that are discriminatory in their effect. The ‘s54’ argument says that even if the categories and rates are discriminatory in their effect, they have been set that way in order to comply with the statutory and Ministerial requirements.

147 It is the case that “[a] respondent cannot convert otherwise unlawful conduct into lawful conduct by merely asserting that it acted in compliance with a requirement of any other Act” (Perlidis -v- Brambles Security Services Limited Trading as Brambles Armoured [2003] NSWADT 11 at [40]; emphasis in the original). The Tribunal in Perlides cited Dawson and Toohey JJ in Waters v Public Transport Corporation (1991) 173 CLR 393 at 173:

If it were necessary for the respondent to commit acts of discrimination in order to carry out the specific directions of the Minister for Transport or the Director-General of Transport then, by virtue of [the equivalent of s54 AD Act], those acts would not be unlawful, but if there were a discretion as to the manner in which the specific directions might be carried out which offered a choice between discrimination and no discrimination, the adoption of discriminatory means would be afforded no protection by [the equivalent of s54].

148 Thus the defence under s54(1) is available only when the discriminatory conduct was necessary to comply with requirements, not when there was a discretion as to how to comply with requirements. On the material available to us, we are not satisfied at this stage that HCF would be able to make out a defence under s54(1). HCF complied with statutory requirements, but it appears to have had, and to have exercised, a discretion as to how it would do so.

149 Section 73BA(1) has since been repealed (Schedule 1of the Health Legislation Amendment (Private Health Insurance Reform) Act 2004) and provisions to similar effect are now in s73AAG. At the time of the conduct complained of – July 2001 – s73BA provided that:

The registration of an organization as a registered health benefits organization shall, with effect from the date of its registration, be deemed to be subject to the conditions set out in Schedule 1.

150 The relevant provisions of Schedule 1 are in (q), set out above at paragraph 114.

151 In Hospital Benefit Fund of Western Australia Inc v Australian Competition & Consumer Commission [1997] 655 FCA it was argued that a health care plan offered by an employer to its employees did not give effect to the community rating principle and so was in breach of the National Health Act. The Court, in reviewing a decision by the Australian Competition & Consumer Commission to not take action under the Trade Practices Act relation to the plan, said that whether the plan was in breach was a question for the Commission, not the Court. The Court did however say that there was a “reasonable possibility” that the plan was in breach of the National Health Act. It is unclear the extent to which this observation by the Court turned on the facts of the particular plan, but of apparent significance is that the Court characterised non-compliance with the community rating principle as a breach of the National Health Act.

152 But the Court in Hospital Benefit Fund of Western Australia was not dealing with clause (q) of Schedule 1, which was not inserted in the form relevant to this matter until 1999 (Schedule 1, Health Legislation Amendment Act (No2) 1999 (Cth)). Most significantly, the obligation, as it apparently was, to give effect to the community rating principle, had been removed by a determination of the Minister with effect from 1 October 1996 (Exhibit 1).

153 Thus while HCF appears to be obliged by clause (q) of Schedule 1 to charge the same contribution rate (called ‘premium’ by the Commonwealth Department of Health and Family Services) to all members of a table of benefits within a category: “eg all single memberships of a table pay the same, it is not required to maintain a relativity between the “premiums” charged to each membership category” (HBF Circular 463, Commonwealth Department of Health and Family Services, 19 September 1996).

154 While it does seem that, in setting its categories of membership, HCF complied with a requirement of the Health Act and Determinations by the Minister, the particular way it complied was not made necessary by those requirements. HCF appears to have had a choice as to how it complied with the requirements. For example, the effect of s73BA(1) and clause (q) of Schedule 1 was that HCF could offer membership in four categories. That that was a permissive and not a mandatory provision is illustrated by HCF’s choosing, in fact, to offer membership in only two of those four categories.

155 Section 73BA(1) and clause (q) of Schedule 1 imposed no requirement as to how the contribution rates had to be set for each category, nor any requirement that there had to be any particular relativity between each category. In fact, the absence of such a requirement appears to have been a feature of the measures introduced by clause (q).

156 HCF chose how it would set the contribution rates, and in doing chose to conform with an industry standard, the community rating. It is not clear that the only way that HCF could comply with the community rating standard was to set the rates in the manner that is complained of by Ms Strong.

157 In choosing how it would set the contribution rates HCF was on notice (HBF Circular 463) of “the Minister’s concern that these changes do not result in increased premiums for families with children”. The material filed does not indicate that this concern of the Minister resulted in HCF’s needing to set the contribution rates as it did.

158 Accordingly Ms Strong’s complaint ought not be dismissed at this stage on the as lacking in substance, or “for any other reason” because HCF will be able make out a defence under s54. Whether such a defence can be made out will be a matter for evidence and further argument

ORDERS

1. The application is dismissed.

2. The matter is to be listed for a case conference for directions on 2 September 2004 at 2p.m.

3. No order as to costs.