Ultrarad Pty Ltd v Health Insurance Commission

[2005] FCA 816

FEDERAL COURT OF AUSTRALIA

Ultrarad Pty Ltd v Health Insurance Commission [2005] FCA 816

ADMINISTRATIVE LAW – judicial review – Health Insurance Act  - diagnostic imaging services – eligible equipment – equipment purchased under a ‘contract in writing’ prior to a cut-off date – written quotation – oral acceptance – whether contract in writing – varied form of contract – varied form submitted with statutory declaration – non-compliance with mandatory requirements of the relevant Regulations

WORDS AND PHRASES  - ‘contract in writing’

Administrative Decisions (Judicial Review) Act 1977 (Cth)
Health Insurance Act 1973 (Cth)

Cooper & Sons v Neilson & Maxwell Ltd [1919] VLR 66 cited
Pooley v Driver (1877) 5 Ch D 458 cited
TA Ruf & Company Limited v Pauwels [1919] 1 KB 660 cited
RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] 1 WLR 2344 cited
Georgiou v Sindel [1982] 1 NSWLR 435 cited
GFT Australia Pty Ltd v Collector of Customs (1995) 56 FCR 30 cited
Metway Leasing Limited v Commissioner of State Revenue [2004] 2 Qd R 409 cited
MacRobertson-Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 cited

Jowitt’s Dictionary of English Law (2^nd Edition Sweet & Maxwell 1977)

Corbin on Contracts (Revised Edition) Vol 1

ULTRARAD PTY LTD and QUEENSLAND X-RAY PTY LTD v HEALTH INSURANCE COMMISSION
Q204 OF 2004

FRENCH J
20 JUNE 2005
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q204 OF 2004

BETWEEN:

ULTRARAD PTY LTD
FIRST APPLICANT

QUEENSLAND X-RAY PTY LTD
SECOND APPLICANT

AND:

HEALTH INSURANCE COMMISSION
RESPONDENT

JUDGE:

FRENCH J

DATE OF ORDER:

20 JUNE 2005

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The application is dismissed.

2.        The applicants are to pay the respondent’s costs of the application.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q204 OF 2004

BETWEEN:

ULTRARAD PTY LTD
FIRST APPLICANT

QUEENSLAND X-RAY PTY LTD
SECOND APPLICANT

AND:

HEALTH INSURANCE COMMISSION
RESPONDENT

JUDGE:	FRENCH J
DATE:	20 JUNE 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

Introduction

1. Queensland X-Ray Pty Ltd (QXRPL) conducts a radiology practice at Mater Private Hospital at Pimlico, Townsville in Queensland.  It has conducted that practice since 1 November 2000 under the name Queensland X-Ray (QXR).  For contractual reasons the radiology services provided by the practice to some hospitals are provided by a partnership of radiologists known as Queensland X-Ray Hospital Partnership No 23 (No 23 Partnership).  There is a Doctors’ Service Agreement between the No 23 Partnership and QXRPL under which the partnership provides the radiology services of its partners to the company to enable the company to carry on its radiology business.  QXRPL provides administrative services to the No 23 Partnership to enable it to perform its obligations under the relevant hospital service agreements which include providing radiology services to the Mater Private Hospital.

2. In 1998 an agreement was made whereby QXR agreed to purchase a Picker Edge Eclipse PowerDrive MRI unit (the Eclipse MRI) from Picker Australia Pty Ltd (Picker).  The precise timing and nature of that agreement is at the heart of this litigation and will be referred to in more detail below.

3. On 1 November 1999, Ultrarad Holdings Pty Ltd (Ultrarad Holdings), which is a wholly owned subsidiary of Ultrarad Pty Ltd (Ultrarad), entered into a finance lease with the Commonwealth Bank of Australia to finance the purchase of the Eclipse MRI.  On 1 November 2004, the Eclipse MRI was refinanced with the Commonwealth Bank of Australia under a lease in favour of QXRPL.  Ultrarad Holdings, and subsequently QXRPL, made the Eclipse MRI available to the practice. 

4. The question whether MRI services provided with the use of the Eclipse MRI would be eligible for Medicare benefits depended upon whether the unit was ‘eligible equipment’ within the meaning of the Health Insurance (Diagnostic Imaging Services Table) Regulations from time to time.If it were ‘eligible equipment’ the provision of services using it would ordinarily attract a Medicare benefit. 

5. On 13 December 2004, the Health Insurance Commission (HIC) advised Ultrarad, through its solicitors, that the Eclipse MRI did not meet the requirements of rule 31 of Part 2 of Schedule 1 to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2001 as in force on 31 October 2001 and therefore did not qualify as ‘eligible equipment’ for the purposes of rule 35 of the Heath Insurance (Diagnostic Imaging Services Table) Regulations 2003.  The basis upon which that decision was made was that the Eclipse MRI had not been ‘purchased or leased under a contract, in writing, that did not contain an option to cancel …’ before 7.30pm on 12 May 1998 Eastern Standard Time (EST). 

6. The applicants apply under the Administrative Decisions (Judicial Review) Act 1977 (Cth) for judicial review of the decision of the HIC.  The question upon which their application turns is whether or not arrangements that were in place between the practice and the vendor of the Eclipse MRI at 7.30pm EST on 12 May 1998 constituted a purchase ‘… under a contract, in writing, …’.  The resolution of that question requires consideration of the proper construction of the rule and its application to the facts of the case as they were before the decision-maker in the HIC.     

7. For the reasons set out below I am satisfied that the document relied upon by the applicants as a ‘contract in writing’ for the purpose of the relevant Rules was in truth a written offer to sell the machine on certain terms and conditions there set out.  It was expressed to be subject to acceptance within seven days.  It did not amount to a contract in writing and the decision-maker was correct so to find even though in doing so he took a more restrictive approach to the requirements of the relevant subrule than its proper construction warranted.  In any event, the document submitted to the HIC by the applicants in support of their claim was a record of an agreement made on 3 June 1998 whose terms varied in certain respects from that concluded before the cut-off time at 7.30pm on 12 May 1998.  In this respect the requirement of the Rules that the contract made before the cut-off time be provided was not met.  For these reasons the application should be dismissed.

   Factual Background

8. The facts relevant to the question to be decided in this case were set out in an Agreed Statement of Facts and a non-contentious affidavit sworn by Dr Phillip Dubois, a director of Ultrarad and Chief Executive Officer of the Queensland X-Ray Group which includes QXRPL.  The precise composition of the Group did not emerge with clarity from the materials before the Court.  It appears that it includes QXRPL and the No 23 Partnership and possibly Ultrarad.  However its precise membership is not in issue.  The standing of the corporate applicants is not disputed.  Nor is any issue taken about the identity of the entity or entities who comprise the Queensland X-Ray Group, or those who operate QXR.  The initial purchase of the Eclipse MRI was done in the name of Queensland X-Ray Services.

9. It is common ground that on 21 August 1997 the Chief Executive Officer of Picker, Mr Peter Condon, issued a quotation to Dr P Dubois of QXR for the Eclipse MRI for a price of A$1.5 million subject to the exchange rate at the time of settlement.  The price was expressed thus:

   ‘Total price: $1,500,000.00
   (Exchange rate variable A$1.00 = US0.77)’

   The quotation attached a finance proposal for an operating lease over five years and conditions of sale which included a clause (cl 12) which stated that:

   ‘This offer is valid for 7 days from date of issue.’

   Clause 3 of the conditions of sale was in the following terms:

   ‘Exchange Rates

   Unless stated otherwise this offer is based on the published Westpac exchange rate shown below and has been used for all calculation:

   A$1.00 = US$0.7700 as of 22 May, 1997.

   Variations in this rate in either direction will be reflected in the final invoice amount.’

10. On 2 April 1998, Mr Condon issued a further quotation dated 1 April 1998 under cover of a letter addressed to Drs Dubois and O’Rourke of QXR.  The letter stated, inter alia:

    ‘Attached is a full proposal for the supply of a 1.5 Tesla Edge ECLIPSEPowerDrive MRI.’

    The attached quotation was substantially the same as the quotation of 12 June 1997.  However because of exchange rate variations the price specified in Australian dollars was A$1.71 million.  The offer was again expressed as being valid for seven days from the date of issue.  Detailed standard terms and conditions of sale were attached but their content is not relevant for present purposes.  On the same day as the quotation for the Eclipse MRI unit Mr Condon issued a quotation for a Picker Outlook 0.23 Tesla MRI Unit for a price of $950,000. 

11. No agreement had been reached between Picker and QXR for the purchase of the Eclipse MRI or the Outlook when Mr Condon departed for a business trip to the United States on 28 April 1998.  On 8 May 1998 when he arrived in Chicago he received a facsimile from Picker’s Sydney office indicating that Dr Dubois wanted him to telephone.  On the evening of that day, Mr Condon telephoned Dr Dubois to discuss the possible purchase of the Eclipse and the Outlook as set out in the quotations dated 1 April 1998.  The discussion largely concerned the effect of changes in the currency exchange rate on the purchase price of the equipment.

12. On 9 May 1998, Mr Condon sent a facsimile to Dr Dubois comprising:

    (a)a Proposal Summary dated 9 May 1998 relating to the Eclipse MRI and the Outlook with the prices of the MRI unit being expressed as fixed in Australian dollars subject to acceptance by 11 May 1998;

    (b)a draft Confirmation Letter dated 8 May 1998 which purported to confirm QXR’s acceptance of Picker’s ‘final offer’ dated 2 April 1998 for the Eclipse MRI and the Outlook.  At that time there had been no acceptance.

    The facsimile cover sheet read as follows in the relevant parts:

    ‘SUBJECT: 1.5 Tesla  Edge ECLIPSE MRI system Quotation

    Dear Dr Dubois,

    Attached 3 pages regarding the MRI, Nuclear and CT proposals.

    The confirmation letter is a draft for your comment.

    I will ring you during your evening time Sunday 10.  Our AM (USA Sunday).

    My contact numbers are listed below.’

13. The terms of the Proposal Summary set out a number of items of equipment including the Eclipse MRI quoted for a total price of $1,500,000 after allowing for the trade in of a current Picker 1.0 Tesla MRI at $210,000.  It also quoted for a Picker 0.23 Tesla Outlook MRI system at $650,000. 

14. The text of the draft letter was as follows:

    ‘Dear Dr Dubois:

    Re: Picker MRI Order

    We are confirming your advice today to accept our final offer dated 2 April 1998 (ref 224/98 MRI) for;

    Item 1. Picker 1.5 Tesla Edge ECLIPSE Powerdrive MRI System
    Item 2. Picker 0.23 Tesla Outlook MRI System

    The configuration of the above systems is as agreed at our meeting in the Picker MRI factory on the 14 May 1997.

    Based on the current production schedule the above equipment is available in June 1998.

    Thank you for this order and we look forward to installing the equipment in the near future.’

15. A further telephone conversation occurred on the evening of either 10 May 1998 or 11 May 1998 Chicago time which would have been the morning of either 11 May 1998 or 12 May 1998 in Brisbane between Mr Condon and Dr Dubois.  In the course of that conversation Dr Dubois confirmed QXR’s acceptance of the final price fixed in Australian dollars as set out in the Proposal Summary dated 9 May 1998.  There was no written communication between Mr Condon and Dr Dubois prior to 7.30pm on 12 May 1998 which confirmed the substance of the telephone conversation described above.

16. On 3 June 1998, Mr Condon wrote to Dr Dubois in the following terms:

    ‘Attached is a copy of the documentation for the Picker 1.5 Tesla PowerDrive 250 MRI system.

    Further to our confirmation of your order on the 8 May, 1998, we have fixed the price in Australia dollars at A$1,710,000.00 (less optional trade of $210,000.00) and secured production at the factory.

    We look forward to participation in this project.’

    The document attached to the letter was set out in the same terms as the earlier quotations and indeed was headed up ‘Quotation – P 1.5T PowerDrive MRI ’.  However it showed the price fixed ‘in Australian dollars’ as $1,710,000.00.  The conditions of sale had changed so that under the heading ‘Exchange Rates’ the following appeared:

    ‘The exchange rate has been fixed in Australian Dollars.’

    The warranty provision which was incorporated in the conditions of sale of the quotation of 1 April 1998 was varied.  In the quotation of 1 April 1998 the conditions of sale had included a warranty provision in the following terms:

    ‘6.  Warranty

    The equipment supplied under the system upgrade is not warranted against defects.’

    In the document enclosed with the letter of 3 June 1998 the warranty provision was in the following terms:

    ‘The equipment supplied is warranted against manufacturing defects for eighteen (18) months from date of commissioning, first patient scanned.’

17. Dr Dubois submitted a statutory declaration to the HIC on 23 September 1999 attaching two documents namely:

    (a)the letter from Mr Condon to Dr Dubois dated 8 May 1998;

    (b)an agreement bearing date 12 June 1997 signed by Mr Condon and Dr Dubois.  That was the further version of the agreement for the purchase of the Eclipse MRI which had been sent by Mr Condon to Dr Dubois on 3 June 1998.

18. Following the installation of the Eclipse MRI and its use to provide medical imaging services a number of claims submitted by QXR for Medicare benefits were rejected by the HIC.  The basis upon which the benefits were rejected appears to have been, from the outset, that the Eclipse MRI was not ‘eligible equipment’ within the meaning of the relevant regulations under the Health Insurance Act 1973 (Cth). 

19. The matter was brought to a head to enable a formal decision with written reasons to be given and tested in Court in June 2004.  On 23 June 2004 the HIC wrote to the solicitors for QXR indicating that, in order for it to make a new decision in relation to the Medicare eligibility of the Eclipse MRI, QXR would need to submit to the Commission a new claim for the payment of a Medicare benefit in relation to a service rendered using the equipment.  Such a claim was submitted to the HIC on 30 June 2004.  It related to the provision of an imaging service on 28 June 2004.  On 13 September 2004 Mr John Trabinger, the Manager, Standards and Research of the Program Review Division of the HIC wrote to the solicitors for QXR rejecting the claim on the basis that the Eclipse MRI did not meet the requirements of the relevant Regulations and therefore did not qualify as ‘eligible equipment’ for the purposes of the Regulations.  Before turning to the reasons for that decision it is convenient to set out the relevant statutory framework.

    Statutory Framework

20. The Health Insurance Act 1973 (Cth) is described in its long title as:

    ‘An Act providing for Payments by way of Medical Benefits and Payments for Hospital Services and for other purposes’

21. The definition provision of the Act, s 3, contains a number of definitions relevant to the provision of diagnostic imaging services.  They include:

    ‘diagnostic imaging equipment means equipment that is primarily used in the carrying out of a diagnostic imaging procedure.

    diagnostic imaging procedure means a procedure for the production of images (for example, X-rays, computerised tomography scans, ultrasound scans, magnetic resonance imaging scans and nuclear scans) for use in the rendering of diagnostic imaging services.

    diagnostic imaging service  means:

    (a)an R-type diagnostic imaging service; or

    (b)an NR-type diagnostic imaging service;

    to which an item of the diagnostic imaging services table relates.

    diagnostic imaging services table means the table prescribed under section 4AA.’

22. The NR-type diagnostic imaging services and R-type imaging services are  respectively defined by reference to the classifications of services as NR-type services or R-type services in the diagnostic imaging services table.  That classification is not material for present purposes.

23. Section 4AA of the Act provides:

    ‘Diagnostic imaging services table

    (1)The regulations may prescribe a table of diagnostic imaging services that sets out the following:

    (a)items of R-type diagnostic imaging services;

    (b)items of NR-type diagnostic imaging services;

    (c)the amount of fees applicable in respect of each item;

    (d)rules for interpretation of the table.

    (2)The regulations made under this section, unless sooner repealed:

    (a)cease to be in force on the day next following the 15^th sitting day of the House of Representatives after the expiration of a period of 12 months commencing on the day on which the regulations are notified in the Gazette; and

    (b)are taken to have been repealed on the first-mentioned day.’

24. By reason of the provisions of s 4AA(2) the Regulations must be remade each year. The rules applied by the decision-maker in the present case were set out in the Diagnostic Imaging Services Table which is scheduled to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2003. They incorporated by reference part of the rules in the like Table scheduled to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2000 as they stood at October 2001.  These were referred to by the decision-maker as the October 2001 Regulations for that reason.

25. The Table scheduled to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2003 provides in Rule 31:

    ‘MRI and MRA services – eligible services

    Items 6300 to 63946 apply only to an MRI or MRA service performed:

    (a)on request, in accordance with rule 32, by a specialist or consultant physician; and

    (b)in a permissible circumstance, in accordance with rule 33; and

    (c)with eligible equipment, in accordance with rule 35 or 36.’

    The relevant definition of ‘eligible equipment’ is that set out in Rule 35 which is as follows:

    ‘MRI and MRA services – eligible equipment

    For rule 31, equipment is eligible equipment within the meaning of rule 31 of Part 2 of Schedule 1 to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2000, as in force on 31 October 2001.’

26. Rule 31 of the Table scheduled to the Health Insurance (Diagnostic Imaging Services Table) Regulations 2000 provides, inter alia:

    ‘MRI and MRA services – eligible equipment

    (1)For rule 27, eligible equipment is equipment that complies with this rule.

    …

    (3)For a medical practice or hospital located in a non-metropolitan area:

    (a)the equipment must have been installed in a medical practice, or hospital, in Australia before 7.30pm on 12 May 1998, Eastern Standard Time; or   

    (b)if the equipment was uninstalled at the time and on the day mentioned in paragraph (1), it must:

    (i)have been purchased or leased (under a contract, in writing, that did not contain an option to cancel) before that time on that day; and

    (ii)on or before 18 October 1999, be in use for services for which a medicare benefit is claimed; or

    (c)be replacement equipment for equipment mentioned in paragraph (a) or (b).

    …

    (6)The Commission must have been given, before 11 October 1999;

    (a)the statutory declaration, under subrule 30(2), in relation to the equipment; and

    (b)if paragraph (3) (b) or (4) (b) applies, the copy contract mentioned in subrule 30(3).’

    It is not in contention that the Mater Private Hospital was located in a non-metropolitan area.

1. The copy contract mentioned in subrule 30(3) of the Table scheduled to the October 2001 Regulations is:

   ‘… a copy of the contract for the purchase or lease of the equipment.’

   The Decision-maker’s reasons for decision

2. The decision-maker’s findings of fact were substantially as set out in the factual background above.  He referred to inconsistency in what he was told about the telephone conversation between Dr Dubois and Mr Condon in which it is said that QXR accepted the Picker offer.  He referred to different versions of the conversation given by the solicitors for QXR and the solicitors for Picker.  In the event, he said:

   ‘While noting that the above accounts raise some uncertainty about the timing, I am, for present purposes, prepared to accept that on the morning of either 11 May 1998 or 12 May 1998 Brisbane time, a telephone conversation did take place between Mr Condon and Dr Dubois in which Dr Dubois advised Mr Condon that the proposal as set out in Mr Condon’s facsimile of 9 May 1998 was acceptable to QXR.’

   The decision-maker observed that there was no evidence of any written communication prior to 7.30pm 12 May 1998 confirming the substance of the telephone conversation between Mr Condon and Dr Dubois.

3. The decision-maker then referred to Mr Condon’s letter of 3 June 1998 in which he advised Dr Dubois that Picker had fixed the price in Australian dollars at $1,710,000 less the optional trade of $210,000 and had secured production at the factory.  That letter, he found, attached ‘a final version of the agreement for the purchase of the Eclipse’.  The decision-maker described the agreement attached to the letter of 3 June 1998 as ‘an amended version of the quotation dated 1 April 1998 although it bore the date of the original quotation, namely 12 June 1997’.  The major differences he identified between the quotation of 1 April 1998 and the final version were that:

   ‘1.References to variable exchange rates in the 1 April 1998 quotation had been replaced by references to the price being fixed in Australian dollars in the final agreement; and

   2.The warranty clause had been amended in the final agreement to provide for a warranty against manufacturing defects for a period of 18 months (as opposed to no warranty being given in the 1 April 1998 quotation).’

4. The decision-maker said that it was not clear from the material before him precisely when the final agreement was drafted or when Mr Condon or Dr Dubois actually signed the document.  He inferred however that it was created after Mr Condon’s return from the United States and was signed by him between that time and 3 June 1998 and by Dr Dubois sometime thereafter.  He found that the final agreement was signed by both parties after 12 May 1998. 

5. The documentation attached to Dr Dubois’ statutory declaration consisted of:

   1.The draft confirmation letter from Mr Condon to Dr Dubois dated 8 May 1998 (which was contained in Mr Condon’s facsimile dated 9 May 1998); and

   2.The signed final version of the agreement (bearing the date 12 June 1997) which was sent by Mr Condon to Dr Dubois on or around 3 June 1998.

6. The decision-maker considered whether there was a contract in writing for the purpose of the applicable Regulations at the relevant time.  He observed that the term ‘contract, in writing’ was not defined in the Regulations.  In the absence of a definition he considered it appropriate to interpret the term in a manner which promoted the purposes and objects underlying the Health Insurance Act and the Regulations made under that Act.  One of the primary purposes of r 35 of the current Regulations, he held, is to limit (through the application of Rule 31 of the October 2001 Regulations) the number of MRI units which can be used to render services which are eligible for the payment of Medicare benefits.  That purpose is made clear by the requirement in Rule 31 of the October 2001 Regulations that to qualify as ‘eligible equipment’ the equipment must have been installed, or have been purchased or leased under an irrevocable written contract before specified points in time.  The provisions in Rule 31 which relate to the eligibility of MRI equipment purchased or leased under contract ‘… emphasise the need for any such contract to be “in writing”’. 

7. The decision-maker held that the provisions of the Regulations require that, at specified points in time, there must be in existence a contractual instrument ‘… which is the final and complete agreement between the parties (as opposed, for example, to a document which records or evidences the terms of a prior and already existing agreement).’  He held that the instrument alone must be sufficient to establish that the purchase or lease of the equipment occurred before the specified time and date without recourse to other evidence such as oral representations made by the contracting parties. 

8. The decision-maker went on to say:

   ‘60.Where a person seeks to establish the eligibility of MRI equipment on the basis of a contract, subrule 31(6) of the October 2001 Regulations requires that they provide to HIC a statutory declaration relating to the equipment and attach a copy of the relevant contract.  The latter requirement lends very strong support to the view that a “contract in writing” means a final and complete contractual instrument (ie documentation which contains all the terms and conditions of the contract and evidences the time of its making).’

9. On the evidence before him the decision-maker accepted that Mr Condon and Dr Dubois had a number of telephone conversations concerning the purchase of the Eclipse in the days immediately preceding 12 May 1998.  Those conversations involved negotiations of the terms and conditions of the purchase of both the Eclipse and the Outlook.  Some of those terms and conditions were referred to in the documents faxed by Mr Condon on 9 May 1998. 

10. The decision-maker accepted that on the morning of either 11 May 1998 or 12 May 1998 Brisbane time, Dr Dubois advised Mr Condon by telephone that QXR wished to proceed with the purchase of the Eclipse and the Outlook on the basis of the prices being fixed in Australian dollars.  The decision-maker then said:

    ‘64.In light of the above, I accept that there may well have been a commercially binding agreement between QXR and Picker for the purchase of both the Eclipse and the Outlook at the conclusion of the telephone conversation referred to above.’

    He held however that the matter at issue was not whether there was a commercially binding agreement in place for the purchase of the Eclipse before 7.30pm on 12 May 1998.  It was whether or not there was, before that time, a ‘contract in writing’ within the meaning of par (b) of subrule 31(3) of the October 2001 Regulations for the purchase of the Eclipse.  He regarded the agreement reached between QXR and Picker prior to 7.30pm on 12 May 1998 as ‘partly written and partly oral’.  In his view such an agreement did not constitute a ‘contract, in writing, within the meaning of the relevant subrule’.  The documents that were the subject of the telephone conversations did not in themselves constitute a complete and final contractual instrument containing the entire agreement between the parties and evidencing the time of its making.  At most, they constituted ‘… a memorandum of certain terms and conditions which were, subject to some modifications, later agreed by the parties’. 

11. The decision-maker considered that the Proposal Summary dated 9 May 1998 was in all probability a variation to Picker’s offer dated 2 April 1998 and detailed in the quotation dated 1 April 1998.  The evidence suggested that Dr Dubois on behalf of QXR had provided an ‘oral acceptance of that varied offer’ on the morning of either 11 May 1998 or 12 May 1998.  There was no evidence of any written confirmation or reduction to writing of the agreement reached on either 11 or 12 May 1998.  Nor was there any evidence that the parties by their subsequent conduct adopted the 2 April 1998 offer document as varied by the 9 May 1998 Proposal Summary as the written record of their agreement.  Their subsequent conduct indicated that neither had any intention of relying on those documents as the written record of their agreement.

12. That QXR did not consider the 2 April 1998 offer document as varied by the 9 May 1998 Proposal Summary as the written record of their agreement was, in the decision-maker’s opinion, supported by the copy of the contract attached to Dr Dubois’ statutory declaration.  The first document attached to that declaration was the draft confirmation letter of 8 May 1998.  It however was of no practical relevance to any contractual arrangement subsequently entered into between QXR and Picker.  Events overtook the draft confirmation letter.  The second document attached to the statutory declaration was the final signed version of the agreement sent on or around 3 June 1998.  That could be seen to represent the completed final record of the agreement.  It did, in the decision-maker’s view, constitute a ‘contract, in writing,’ within the meaning of the relevant subrule of the Regulations.  However it was not made before 7.30pm on 12 May 1998.   The decision-maker then set out his conclusions which reiterated the essential findings referred to earlier.  On the basis of his findings he concluded that the Eclipse MRI did not meet the requirements of r 31 of the October 2001 Regulations and therefore did not qualify as ‘eligible equipment’ for the purposes of r 35 of the current Regulations.  There was therefore no legal basis on which the Commonwealth could pay a Medicare benefit in relation to the service rendered using the Eclipse MRI and the claim submitted was rejected.

    The Application for Review

13. On 11 October 2004, the applicants filed an application to review the decision made on 13 September 2004 rejecting the Medicare benefit claim.  The grounds upon which that application was brought are set out as follows:

    ‘1.The decision involved an error of law.

    PARTICULARS

    (a)the decision maker erred in failing to find that the parties (sic) intention for the purposes of determining whether there was a contract in writing was to be ascertained objectively from their communications;

    (b)the decision maker erred in failing to find there was a legally binding contract made on the mornings of 11 or 12 May 1998;

    (c)the decision maker erred in failing to find that the terms of the contract were contained in a:

    (i)written offer dated 2 April 1998 Ref 224/1998 MRI; and

    (ii)facsimile from Peter Condon to Dr Phillip Dubois dated 9 May 1998 (“the documents”);

    (d)the decision maker erred in failing to find that at 12 May 1998, there were no terms orally agreed between the parties not contained as set out in those documents;

    (e)the decision maker erred in failing to find that paragraph (b) of subrule 31(3) of the October 2001 Regulations did not require that the written contract be contained in a single document where the documents on their face contained expressed cross reference;

    (f)the decision maker erred in finding that at the specified point in time, paragraph (b) required there to be in existence a contractual instrument which was not a document recording the terms of a prior and already existing agreement and that the instrument alone must be sufficient to establish that the purchase or lease of the equipment occurred before the specified time and date without recourse to other evidence;

    (g)the decision maker erred in finding that the conduct of the parties after 12 May 1998 in executing a further document containing an additional warranty clause which was not the subject of any discussions prior to 12 May 1998, had the consequence that there was no contract in writing at 12 May 1998;

    (h)the decision maker erred in finding that there was no contract in writing before 7.30pm on 12 May 1998.’

14. The relief claimed includes an order that the decision be set aside and a declaration that the Eclipse MRI was purchased or leased under the contract in writing made before 7.30pm on 12 May 1998 Eastern Standard Time.  In the alternative an order was sought referring the matter back to the decision-maker for further consideration.

15. The error of law asserted against the decision-maker reduced to alleged misconstruction of the term ‘contract, in writing’ appearing in Rule 31 of the October 2001 Regulations.  The question agitated is whether that term requires that, at or before the relevant time, there was in existence a ‘complete and final contractual instrument containing the entire agreement between the parties and evidencing the time of its making’.   That is how the decision-maker read the requirement for a contract in writing.

16. Before turning to the question of construction thrown up by the application it is helpful to refer to the legislative history of the regulatory scheme.

    Legislative History

17. The use of MRI technology as a diagnostic tool in Australia dates back to the 1980s. Its introduction was assessed and reviewed by the National Health Technology Advisory Panel (NHTAP) from 1986 to 1990.  That assessment and review found that as at 1990 MRI had become established as a useful diagnostic technique in connection with an examination of the head and the spine.  A grants program was established by the Commonwealth and State governments under which 18 public hospital MRI units were funded to serve both public and private patients. 

18. In October 1995 the Australian Health Technology Advisory Committee (AHTAC) undertook a ministerial review of MRI in Australia.  Its stated aim was to ensure that the Commonwealth government policy for the provision of MRI services responded to developments in the technology of MRI and its clinical use.  Its report, delivered in October 1997, was entitled ‘Review of Magnetic Resonance Imaging’.  At the time of the AHTAC report there were 54 units in the public and private sectors in Australia.  The demand for MRI services had grown considerably since the 1990 review along with an expansion of its clinical roles. 

19. The existing funding arrangements for MRI services had led to their concentration in tertiary hospitals where the specialists most likely to request and best use them were generally to be found.  AHTAC expressed the view that MRI units should continue to be located in settings where key specialities were clustered and where a comprehensive range of alternative imaging was available.  However it also considered that there was a need to improve rural and remote access to MRI services and patient transportation schemes across the States and Territories.

20. AHTAC recommended, inter alia, that there be a variation of publicly funded MRI services as follows:

    .To meet existing demand an increase within the range of 40,000-48,000 publicly funded MRI scans per year, which is equivalent to 10-12 units working at full capacity; and

    .To cover population growth and expected future increased use of specialist services over the next five years, a further increase of between 20 to 30 per cent or 16,000-24,000 publicly funded MRI scans per year, equivalent to 4-6 units working at full capacity.

    AHTAC added that in assessing additional provision to meet existing and expected future demand consideration needed to be given, inter alia, to access to MRI services in rural and remote areas.

21. On 12 May 1998 there was a public announcement by the Commonwealth Government that Medicare rebates would apply to MRI services in Australia.  Existing regulations relating to the provision of imaging services (not including MRI services) were amended with effect from 1 September 1998.  Existing Regulations, made under the Health Insurance Act, which related to imaging services were the Health Insurance (1997-1998 Diagnostic Imaging Services Table) Regulations.  The amending Regulations entitled the Health Insurance (1997-1998 Diagnostic Imaging Services) Amendment Regulations 1998 (No 1) which were made on 25 August 1998 came into effect on 1 September 1998.  They amended the existing Regulations by inserting new Rules 16-23 in the Diagnostic Imaging Services Table Schedule to the Regulations.  Those Rules set out criteria for the eligibility of eligible providers of Medicare benefit MRI services.  Rule 20 defined ‘eligible equipment’ as equipment which complied with that Rule.  A requirement of the Rule, set out in subrule 20(3) was that the equipment if ‘uninstalled in a medical practice or hospital before 7.30pm on 12 May 1998 Eastern Standard Time’, must have been ‘purchased or leased before that time on that day under a contract, in writing, and did not contain an option to cancel the contract …’.  This is the same eligibility requirement that was inserted in the Diagnostic Imaging Services Table Scheduled to the 2000 Regulations and incorporated by reference in the 2003 Regulations.  The distinction between metropolitan and non-metropolitan hospitals which is reflected in the Rules scheduled to the October 2001 Regulations did not appear in Rule 20 of the 1998 Regulations.  In relation to mode of proof of purchase under a written contract, subrule 19(3) required that the relevant specialist ‘… must give the Commission, with the statutory declaration, a copy of the contract for the purchase or lease of the equipment’.

22. An Explanatory Statement issued by the authority of the Minister for Health and Family Services relating to the amendment Regulations of 1998 said:

    ‘The purpose of the Regulations is to amend the current table of diagnostic imaging services by introducing new Diagnostic Imaging Services, magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA) services, which are broadly described as MRI services.’

    These changes to the Diagnostic Imaging Services Table, and consequent amendments to the General Medical Services Table and the Health Insurance Regulations, give effect to MRI arrangements as announced by the Government in the 1998-1999 Budget.  The changes followed recommendations by the Australian Health Technology Advisory Committee (AHTAC) in its “Review of Magnetic Resonance Imaging”.

    The Regulations, in giving effect to the Budget measure, expand the provision of MRI services by extending public funding via the Medicare benefits arrangements to include services provided by both publicly and privately owned MRI units within Australia.  Previously, funding was provided to 18 public hospital units through Health Program Grants.’

    The statement continued:

    ‘The rules of interpretation describe the eligibility requirements for medical practitioners, practices and hospitals, seeking to provide MRI services under the Medicare Benefits Scheme (MBS).  These eligibility requirements reflect AHTAC’s recommendations, and the need for the  cost-effective provision of MRI services in Australia.  The eligibility requirements for MRI services will be reviewed within eighteen months from coming into effect.’

    According to the Explanatory Statement the definition of ‘eligible equipment’ in Rule 20 addressed ‘… the overcapacity of MRI services in Australia identified by AHTAC in its report’. 

23. A Ministerial Statement made on 18 October 1999, which was relied upon by the HIC, referred to a sudden increase in the number of MRI units allegedly purchased within Australia prior to the cut-off date.  In that statement the Minister said that Government had decided to require operators of machines to notify the HIC of any machines that continued to be eligible by no later than 11 October 1999.  A minute from the HIC had advised the Minister that 111 machines had been notified to HIC.  59 of these had been in place on 12 May 1998 and 52 had been claimed to be on order on that day.  The Minister stated:

    ‘No fewer than 13 of the machines claimed to be on order last May were advised to the Health Insurance Commission in the fortnight before the cut-off on 11 October this year – that is, in the last week or so, 13 radiologists have just remembered that they spent $3 million 18 months ago on an MRI machine.’ – Parl Deb H of R 18 October 1999 at 8793

    It is not clear what, if any, relevance the Ministerial Statement has to the construction of the 2000 and 2003 Regulations given that the relevant criterion followed the language of the 1998 Regulations which were already in place at the time that the statement was made.  It did however have relevance to the cut-off date in October 1999 by which the relevant contract in writing, supported by a statutory declaration, had to be submitted to the HIC.

    The Construction of ‘Contract in Writing’

1. The ordinary dictionary meaning of ‘contract’ in the primary sense relevant to these proceedings is ‘a mutual agreement between 2 or more parties that something shall be done or foreborne by one or both’ – Oxford English Dictionary (2^nd Edition).  The essential element of that primary definition is the fact of ‘agreement’, an act done by the parties.  There is a secondary sense in which the word is used to refer to ‘a writing in which the terms of a bargain are included’ – Oxford English Dictionary.  The latter sense also appears in the Macquarie Dictionary (Revised 3^rd Edition 2001) which speaks of ‘the writing containing such an agreement’.

2. When lawyers speak of contracts in the sense of legally enforceable agreements, the emphasis tends to be on the act of agreement and the rights and obligations which by law it respectively confers and imposes upon the parties.  So Jowitt’s Dictionary of English Law (2^nd Edition Sweet & Maxwell 1977) speaks of ‘an agreement to do or abstain from doing some act which is intended to give rise to legal relations’.  Contracts are ‘put into writing’ either voluntarily or in pursuance of a rule of law and then attract the so called parol evidence rule (at 448):

   ‘In either case the writing is the only admissible evidence of the contract, although extrinsic evidence is admissible for various purposes, eg, to identify the parties and the subject-matter of the contract, or to show that it was made subject to usages of trade…’

3. The concept of ‘contract in writing’ may be thought, as a matter of ordinary logic, to distinguish between the agreement which constitutes the contract and the writing that evidences it.  The inclusion of the words ‘in writing’ suggest that the word ‘contract’ is being used, in that collocation, in the primary sense of an agreement and not in the secondary sense of the writing itself.  On that basis also it could be concluded that the term ‘contract in writing’ appearing in subrule 31(3) of the Schedule to the October 2001 Regulations refers to a legally enforceable agreement evidenced in writing.  If that construction be correct, there are two remaining questions.  The first is whether the writing must have come into existence prior to the cut-off time and date.  The second is whether, assuming the writing contains all the terms of the agreed purchase, it has to evidence on its face the making of the agreement by way of the signature of both parties or whether that making can be established by reference to an oral acceptance of the terms so recorded.

4. The HIC submitted that, whatever the documentary requirements for a contract in writing, they had to be met before 7.30pm on 12 May 1998.  I consider that to be a correct construction of the rule.  The equipment had to have been ‘… purchased … (under a contract in writing that did not contain an option to cancel) before that time on that day’.  The natural reading of those words requires that the ‘writing’ whatever it may mean had to have been in existence at the cut-off time.  The reference to the non-inclusion of any option to cancel supports that view.  It is a consequence of that construction that the contract in writing to be lodged with the statutory declaration as required under subrule 30(3) of the October 2001 Regulations must be that which was in existence as at 7.30pm on 12 May 1998.  This leaves for determination the construction of the requirement for a ‘contract in writing’.  More than one construction of that term may be open. 

5. In the Revised Edition of Corbin on Contracts Vol 1 at 2.10 it is said that the term ‘written contract’ has no single and uniform meaning.  The meaning intended to be conveyed by that term, whether used by a party to a transaction or in legislation ‘… must be determined by the usual processes of interpretation in the light of all the relevant surrounding circumstances’.  The term or its variant ‘contract in writing’ may appear in different settings such as statutes of limitations, statutory provisions requiring a contract to be in writing, the parol evidence rule and even in the terms of a preliminary agreement that parties will not be bound until a written contract is prepared and signed.  The text states (at 165):

   ‘If a written draft of an agreement is prepared, submitted to both parties, and each of them express unconditional assent thereto, there is a written contract.  So far as the common law is concerned, the making of a valid contract requires no writing whatever, and even if there is a writing, there need be no signatures unless the parties have made them necessary at the time they express their assent and as a condition modifying that assent.’

   And further (at 168):

   ‘An unsigned agreement, all the terms of which are embodied in a writing, unconditionally assented to by both parties, is a written contract.  It is true that the fact they have expressed unconditional assent must be proved by testimony of their unwritten expressions; it is not evidenced by the writing itself.  But the same is true of a writing that has been signed by both parties.  Writing does not make a contract, not even if the writing bears both signatures.  The fact that someone has signed an apparently complete expression of the terms of a contract is indeed strong evidence of that party’s expression of unconditional assent.’ 

6. These propositions, relying as they do upon the act of agreement as the essential elements of contract are, in my opinion, of general application and relevant to the constructional issue in the present case.  They are consistent with the observation of Cussen J in Cooper & Sons v Neilson & Maxwell Ltd [1919] VLR 66 at 77:

   ‘A document is a written contract when the parties agree – at the conclusion of their contract or afterwards – that it is to be an authentic and conclusive record of their bargain “the final and complete repository of their written intentions”.’

7. The term ‘contract, in writing’ appearing in particular statutory contexts has sometimes been construed as requiring one party or all parties to sign it, see eg Pooley v Driver (1877) 5 Ch D 458 per Jessell MR and  TA Ruf & Company Limited  v Pauwels [1919] 1 KB 660 at 670 per Duke LJ. A recent example of a purposive approach to the construction of a similar term in a statutory context appeared in the judgments of the Court of Appeal in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] 1 WLR 2344. The Court of Appeal held that the requirement for an agreement in writing as a condition of access to the adjudication process under the Housing Grants Construction and Regeneration Act 1996 required that the whole contract had to be evidenced in writing.  Robert Walker LJ, speaking of the purpose of the adjudication provisions of the Act, said (at 2353):

   ‘Parliament evidently decided …that it was inappropriate for an adjudicator to have to deal with the disputes which often arise as to the terms of an oral contract.’

8. Other authorities were referred to by the parties including Georgiou v Sindel [1982] 1 NSWLR 435, GFT Australia Pty Ltd v Collector of Customs (1995) 56 FCR 30 and Metway Leasing Limited v Commissioner of State Revenue [2004] 2 Qd R 409. These referred to the construction of the term ‘written contract’ or ‘contract in writing’ or analogous terms in particular statutory contexts. In my opinion the appropriate constructional choice in this case turns upon the purpose and context of the subrule in which the words appear. In that connection it is not apposite to have regard to a statutory purpose of limiting over-capacity. The prescription of a cut-off date and time itself serves that purpose. The evidentiary requirement of a ‘contract in writing’ is imposed to facilitate ready verification that equipment said to have been eligible was in truth purchased within the time limit. It is not to be construed restrictively as a way of limiting the number of such units. Its purpose is to facilitate proof of compliance with the time limit and it is against that purpose that it is to be judged.

9. In my opinion the evidentiary purpose of the subrule does not mandate the production of a single contractual document.  The existence of a written contract may be demonstrated by a number of documents which together contain all the terms and conditions of the contract.  Nor does the legislative purpose require a document signed or executed by both vendor and purchaser.  Oral acceptance of a document which sets out all of the terms and conditions of the proposed contract does not detract from its characterisation as a contract in writing.  The construction of the ‘contract in writing’ requirement to allow the inclusion of these cases does not undercut the purpose which the subrule seeks to serve.  In my opinion however, it does not extend to a mere written offer.  I should add that the fact that a contract in writing, which is in existence at the cut-off date, is later varied does not mean that the eligibility criterion has not been complied with as at the cut-off date.

10. The HIC appears to accept that there was an agreement in existence at the cut-off date and time but that it comprised a written offer and an oral acceptance and therefore was not a contract in writing.  The question whether a document has the character of a written offer rather than a record of contractual terms is a matter of fact.  In this case the document relied upon took the form of a ‘quotation’ which was expressed, in cl 12 of the attached conditions of sale, to be an ‘offer … valid for seven days from date of issue’.  An offer expressed to be subject to acceptance, oral or otherwise, is not in my opinion a ‘contract in writing’ even if subsequently orally accepted.  In that respect, albeit in a different statutory context, it is worth noting what Jacobs J said in MacRobertson-Miller Airline Services v Commissioner of State Commissioner (WA) (1975) 133 CLR 125 at 144:

    ‘It has been established by a long line of authority that an offer in writing which is accepted orally or by conduct does not thereupon become an agreement or memorandum of agreement within the meaning of the Stamp Act.’

    See also Metaway Leasing at 415-418 per McPherson JA.   

11. In the end however, the question of characterisation of the document in existence as at 12 May 1998 appears to be academic.  It is a mandatory requirement of the Rules that the contract submitted with the statutory declaration made on behalf of the applicant be the contract in writing which was in existence at the cut-off time on 12 May 1998.  Rule 31 of the October 2001 Regulations defines ‘eligible equipment’ as ‘equipment that complies with this Rule’.  One of the requirements of the Rule is that set out in subrule (6) that the HIC must have been given, before 11 October 1999, the statutory declaration under subrule 30(2) in relation to the equipment and the copy contract mentioned in subrule 30(3).  The writing submitted in this case was the document of 3 June 1998 which incorporated variations to the contract which had been agreed on 12 May.  The mandatory requirement that the applicant submit a copy of the contract which was in existence at 12 May 1998 was not met on any view of the construction of the Rules.  The decision-maker was correct to come to the conclusion that he did albeit some of his reasoning involved too restrictive a construction of the subrule.  For this reason, in my opinion, the application cannot succeed.

    Conclusion

12. For the preceding reasons the application will be dismissed with costs.

I certify that the preceding sixty one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Associate:

Dated:            20 June 2005

Counsel for the Applicants:	Mr D Jackson QC with Mr M Bland
Solicitor for the Applicants:	McCullough Robertson
Counsel for the Respondent:	Mr F Kunc
Solicitor for the Respondent:	Clayton Utz
Date of Hearing:	14 June 2005
Date of Judgment:	20 June 2005