ACCC v The Australian Medical Association Western Australia Branch Inc

THE STATEMENT OF CLAIM 3 3

THE DEFENCES 13 13

SOME FACTUAL BACKGROUND 14 14

FINDINGS OF FACT 17 17

THE STATUTORY FRAMEWORK 45 45

THE CONTRAVENTIONS AS EXPLAINED IN SUBMISSIONS AT THE HEARING 46 46

WAS THERE AN UNDERSTANDING WHICH CONTAINED A PRICE FIXING PROVISION? 49 49

WERE THE PARTICIPATING PRACTITIONERS (OR AT LEAST TWO OF THEM) PARTIES TO EITHER OF THE ALLEGED UNDERSTANDINGS? 52 52

DID THE PROVISIONS HAVE A PURPOSE EFFECT OR LIKELY EFFECT OF SUBSTANTIALLY LESSENING COMPETITION IN A RELEVANT MARKET? 75 75

PURPOSE 75 75

THE RELEVANT MARKET OR MARKETS 76 76

EFFECT OR LIKELY EFFECT 82 82

SHIELD OF THE CROWN 93 93

CONCLUSION 100 100

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC (Incorporated Association Registration No AO110006P)

MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA (ACN 004 073 410)

THE COURT ORDERS THAT:

1. The application against the second, fifth and sixth respondents be dismissed.
2. The applicant pay the costs of the second, fifth and sixth respondents. 3. The first, third and fourth respondents have liberty to apply to discharge the interim injunctions granted pursuant to the orders made on 19 October 2001.

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

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: THE AUSTRALIAN MEDICAL ASSOCIATION WESTERN AUSTRALIA BRANCH INC (Incorporated Association Registration No AO110006P)

MAYNE NICKLESS LTD TRADING AS HEALTH CARE OF AUSTRALIA (ACN 004 073 410)

introduction 1 The applicant, Australian Competition and Consumer Commission, alleges that the corporate respondents made an arrangement, or entered into two understandings containing anti-competitive provisions and gave effect to those provisions. By doing so they are said to have contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) ("the Act") being contraventions in which the individual respondents are alleged to have been knowingly concerned, and thus involved. 2 The applicant alleges that the contraventions are either "per se" price-fixing contraventions when s 45(2)(a)(ii) and s 45(2)(b)(ii) are read with s 45A of the Act, or arise because the same provisions of the arrangement or the understandings had the purpose, effect, or likely effect of substantially lessening competition in one or other of the relevant markets.

settlement of the applicant's claims against some of the respondents 3 In mid 2001 the applicant on the one side and the first, third and fourth respondents on the other ("the AMA (WA) Respondents") agreed, subject to Court approval, to resolve the issues between them. In essence, the AMA (WA) Respondents admitted the allegations against them. The parties concerned filed joint submissions and a statement of agreed facts, together with two bundles of agreed documents and a minute of proposed orders which they asked me to make with their consent. 4 On 7 August 2001, I heard all of the parties on the question whether I should make orders in terms of that minute. Senior counsel for the second, fifth and sixth respondents ("the MNL Respondents") made submissions about the use of the statement of agreed facts, the appropriateness of the Court granting declaratory and injunctive relief at that stage of the proceedings (i.e. a stage at which his clients continued to defend the application) and the terms in which the proposed injunctions were expressed. 5 For reasons which I published on 19 October 2001 I decided to make some, but not all, of the orders sought. They included an order that the first respondent pay to the Commonwealth a pecuniary penalty in the sum of $240,000 in three instalments, that each of the third and fourth respondents pay to the Commonwealth a pecuniary penalty in the sum of $10,000, that the first respondent institute and maintain a Trade Practices Compliance Program and pay the sum of $25,000 by way of contribution to the applicant's costs in the proceedings. I granted interlocutory injunctions against those respondents, but declined, at that stage of the proceedings, to make either final injunctions or declarations in the terms proposed. 6 The matter thus proceeded to trial essentially as litigation between the applicant on the one hand and the MNL Respondents on the other. But the outcome of the trial will inevitably have some effect on what final relief may be granted in respect of the contraventions admitted by the AMA (WA) Respondents.

The Statement of Claim 7 The document which is now known as the "Third Further Amended Statement of Claim" is a long, intricate and convoluted document. It runs to 33 pages and contains 70 paragraphs plus many sub-paragraphs. It is hard to summarise, but I shall attempt to do so. At times I shall interpose some uncontroversial factual background to make the going a bit easier. At other times the summary, in the interests of accuracy, will have to descend into some detail. 8 In summary, the applicant alleges that in December 1996 the first respondent, the Australian Medical Association Western Australia Branch Inc ("AMA (WA)"), represented by the third and fourth respondents, Mr Boyatzis and Dr Roberts, arrived at an understanding with the second respondent, Mayne Nickless Limited, trading as Health Care of Australia ("MNL"), to fix the prices for the supply of certain medical services to public patients at the Joondalup Health Campus. 9 The Joondalup Health Campus includes a re-development of Wanneroo Hospital, a hospital previously owned and operated by the State of Western Australia ("the State") i.e. a public hospital, and also a newly-built private hospital. MNL acquired the property from the State and leased the former public hospital now known as "the Wanneroo Community Hospital" to the State from whom it took a sub-lease of that area of land. Under the relevant State legislation both hospitals are together the subject of a private hospital licence. MNL operates and manages the Wanneroo Community Hospital and is paid by the State for doing so. The other hospital is known as "the Joondalup Private Hospital". 10 The first understanding is referred to in the statement of claim as the "VMP Understanding" (VMP stands for visiting medical practitioners). A list of some of the visiting medical practitioners providing services to public patients at the Wanneroo Hospital at that time is annexed to the statement of claim. Those doctors ("the Participating Practitioners") are said to have been parties to the VMP Understanding through the negotiations and agreements entered into on their behalf by AMA (WA) or which they allowed AMA (WA) to enter into. The Participating Practitioners, so it is alleged, were or were likely to be in competition with each other. 11 The VMP Understanding is alleged to have been recorded in a document ("the Memorandum of Understanding") signed by the fourth respondent on behalf of AMA (WA) and the fifth respondent, Mr Martin Day, on behalf of MNL on 9 December 1996. Mr Day was at all material times general manager for Western Australia and Asia of a division of MNL known as "Health Care of Australia". The sixth respondent, Mr Ian Geoffrey MacDonald, was at all material times either a project officer (designated to be chief executive officer of Joondalup Health Campus) or was chief executive officer of that campus. 12 Again in summary, the applicant alleges that there was a provision of the VMP Understanding to the effect that each of the Participating Practitioners, if they chose to agree to supply medical services to MNL for public patients at the Joondalup Campus on a fee for service basis, would do so as independent contractors on the terms and at the rates specified in a schedule annexed to an enterprise bargaining agreement made between AMA (WA) and the State, known as the State VMP Agreement. I will refer to that annexure as "the Annexure". The expression "a fee for service basis" means a basis whereby a doctor charges for a particular service rendered to a public patient. It is to be contrasted to a "sessional basis", that being a situation in which doctors charge by the session, usually of four hours duration. 13 It is alleged that between December 1996 and February 1997 AMA (WA) and MNL gave effect to the relevant provisions of the VMP Understanding by negotiating and making an arrangement or entering into an understanding upon the terms of an agreement dated 19 February 1997 ("the Joondalup VMP Agreement") governing the supply of medical services to public patients by certain doctors to MNL at the Joondalup Health Campus and the fees to be paid by MNL to those doctors. Each of the Participating Practitioners is said to have been a party to the understanding embodied in the Joondalup VMP Agreement. (The expression "public patients" is defined in the statement of claim as meaning patients who receive medical services in hospitals without charge). The Joondalup VMP Agreement was part of a composite document which included a set of by-laws specifically drafted for the conduct of what became known as the Joondalup Health Campus, and some schedules. One of the schedules was a schedule of fees. It was the same schedule as had been annexed to the State VMP Agreement, i.e. the Annexure. 14 The State VMP Agreement had always applied at the Wanneroo Hospital in relation to such management matters as the constitution, powers and duties of the Medical Advisory Committee, the Credentialling Committee, the Clinical Appointments Committee and the like. It did not apply to the terms of engagement or remuneration of the visiting medical practitioners at that hospital. Those doctors were employees; employed under what I describe in these reasons as "the Award" on a sessional basis. 15 The applicant alleges that AMA (WA) and MNL contravened ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act, when read with s 45A, by arriving at the VMP Understanding and giving effect to provisions in that understanding, and (further and in the alternative) entering into an arrangement or understanding, namely, the Joondalup VMP Agreement and giving effect to provisions in it, and that the other respondents (i.e. the individuals) were involved in those contraventions by being knowingly concerned in them. I shall refer to those alleged contraventions as the per se contraventions or the price-fixing contraventions. 16 As an alternative to the plea of price-fixing contraventions referred to above, the applicant alleges that AMA (WA) and MNL contravened s 45(2)(a)(ii) by entering into an understanding (the VMP Understanding) and, further or alternatively, an arrangement or understanding (the Joondalup VMP Agreement) and also contravened s 45(2)(b)(ii) by giving effect to the provisions of that arrangement or those understandings. The basis of the contraventions is said to be that those provisions had the purpose, effect and/or likely effect of substantially lessening competition in the four alternative relevant markets pleaded in the statement of claim. 17 The plea (in paragraph 43 of the statement of claim) that some or all of the Participating Practitioners were or were likely to be in competition with each other is based upon all of the matters pleaded in paragraphs 9 to 25 of the statement of claim. It is necessary to describe those matters. They were as follows. It should be understood that what follows is a description of parts of the statement of claim, not findings of fact. 18 There are and were at all material times in Western Australia public patients who sought medical services from hospitals which did not charge them for such services. Certain medical services which could only be provided by qualified medical practitioners were provided to patients, including public patients in hospitals. There were operators of hospitals who acquired those services and there were medical practitioners who were, or were available to be, engaged by such operators to provide such services on a sessional or fee for service basis. Those doctors are described as "Visiting Practitioners". 19 On 24 April 1996, the State and MNL executed an agreement for the re-development and operation of the Joondalup Health Campus. It was described as the "Development and Health Services Agreement" ("the DHSA"). The Joondalup Health Campus is described in the statement of claim as being the first hospital in Western Australia to provide significant medical services to public patients that was not operated by or on behalf of the State. 20 The State was bound by the terms of the State VMP Agreement of 4 September 1995 to remunerate all visiting medical practitioners supplying "In-Hospital Medical Services" on a fee for service basis to hospital operators in the State on the terms set out in Annexure 2 of that document. Annexure 2 is the document which I have referred to above as "the Annexure". It provided for remuneration according to prescribed fees based on a schedule of fees commonly known as the "Western Australian Public Hospitals Fee Schedule". 21 The terms of the DHSA, so it is pleaded, did not oblige MNL to remunerate visiting practitioners caring for public patients at the Joondalup Health Campus on the terms and conditions of the VMP Agreement i.e. including the fees in the Annexure. 22 The next plea is concerned with what might be described as the demand side of the markets. It is to the effect that at all material times, in acquiring the relevant services from visiting practitioners, "Hospital Operators" in Western Australia or the Perth metropolitan area competed closely with each other. [The term "Hospital Operators" is defined in the statement of claim as operators of hospitals who acquired "In-Hospital Medical Services". The term "In-Hospital Medical Services" is defined as medical services provided to patients, including public patients, in hospitals which could only be provided by qualified medical practitioners. On the face of it, that definition of Hospital Operators might include owners of private hospitals who acquired such services. However, it was common ground at the hearing that only public hospitals acquired In-Hospital Medical Services]. Particulars of such competition focus on the acquisition of medical services from visiting practitioners. Those particulars can be summarised as follows: (a) to operate efficiently Hospital Operators needed to acquire the services of visiting practitioners; (b) visiting practitioners could and did readily supply those services at more than one of the hospitals; (c) visiting practitioners could readily switch from supplying those services at one hospital to doing so at another; (d) if there was insufficient demand at a particular hospital for particular services to justify engagement of a full-time medical practitioner, most Hospital Operators engaged visiting practitioners to provide those services; (e) there were significant costs for visiting practitioners in relocating from outside Western Australia to within Western Australia, or from outside the Perth metropolitan area to within the Perth metropolitan area, to provide services to a particular Hospital Operator; (f) most visiting practitioners were only willing to provide services at hospitals that were within a reasonable driving distance of other places where they provided medical services; and (g) Hospital Operators had an incentive to engage visiting practitioners at their hospitals so as to encourage them to admit their private patients to those hospitals. 23 Then there is reference to the supply side of the markets. There were recognised groups of In-Hospital Medical Services provided by doctors who specialised in various fields, namely general practice, anaesthetics, paediatrics, general surgery, obstetrics and orthopaedics. Those were the "Craft Groups". 24 The applicant alleges that visiting practitioners or visiting practitioners in each of the Craft Groups competed closely with each other in supplying their services to hospital operators in either Western Australia or the Perth metropolitan area. That is said to have been because: (a) the particular services that could be supplied by individual doctors or doctors in each of the Craft Groups could be supplied by many other visiting practitioners or visiting practitioners in the same Craft Group; (b) there was an overlap in the supply of specialist services whereby other visiting practitioners or other visiting practitioners in the same Craft Group specialised in supplying the same services as provided by individual visiting practitioners who specialised or who specialised in a Craft Group; (c) individual visiting practitioners sought to obtain convenient times, known as "lists", to use facilities at the hospitals and in doing so competed with other visiting practitioners; (d) most hospitals who acquired In-Hospital Medical Services did so in order to care for public patients and required the services of visiting practitioners or visiting practitioners from a particular Craft Group; (e) visiting practitioners or visiting practitioners in the same Craft Group could supply the same services; (f) those services could not be supplied without obtaining the necessary qualifications and experience to be entitled to practice as a medical practitioner, gaining admission to the relevant medical or surgical college for a particular Craft Group and being accredited to practice by the relevant Hospital Operator; (g) obtaining and maintaining the necessary qualifications required many years of education, training and experience; and (h) visiting practitioners valued the opportunity to supply services to Hospital Operators for public patients in order to be able to increase their opportunity to supply those services at higher prices to private patients, and they competed for that opportunity. 25 There are four alternative markets pleaded. They are as follows: (a) a market in Western Australia in which In-Hospital Medical Services were supplied by visiting practitioners and acquired by Hospital Operators; (b) the same service market, but in the Perth Metropolitan Area; (c) the same geographical market as in (a) save that the services were In-Hospital Medical Services supplied by visiting practitioners in each of the Craft Groups and acquired by Hospital Operators; and (d) the same service market as in (c) but with the geographical area being the Perth metropolitan area. 26 At all material times before the execution of the DHSA, most In-Hospital Medical Services supplied by visiting practitioners to public patients were acquired by the State on a fee for service basis on the terms of the State VMP Agreement. For that reason, so it is pleaded, there was little or no price competition in the relevant markets. Potential price competition was constrained by the terms of the State VMP Agreement, and non-price competition was also constrained by the terms of that agreement. 27 In 1995 there were sixty-two visiting practitioners at Wanneroo Hospital who were remunerated on a sessional basis and there was the potential for many of them to increase their income by being remunerated on a fee for service basis in accordance with the Annexure to the State VMP Agreement. 28 The applicant alleges that the DHSA created the potential for significant competition in the relevant markets in that: (a) MNL was not bound by the terms of the VMP Agreement in determining the remuneration terms and conditions to apply to the engagement of visiting practitioners to care for public patients at the Joondalup Health Campus; (b) the terms upon which MNL agreed to acquire those services at the Joondalup Health Campus would be likely to affect the terms to be offered by the State upon the expiry of the VMP Agreement on 4 September 1998; (c) visiting practitioners valued the opportunity to supply services to public hospitals in order to be able to increase their opportunity to supply such services at higher prices to insured private patients and such doctors would be likely to compete for that opportunity; (d) visiting practitioners valued the opportunity to supply their services to MNL at Joondalup Health Campus on a fee for service basis and would be likely to compete for that opportunity; (e) the Joondalup Health Campus was to provide an increased range in the types of medical services available to public patients, thereby providing the doctors, including those at the Wanneroo Hospital, with an opportunity to compete for the supply of their services at the Joondalup Health Campus, being the principal hospital in the northern suburbs of the Perth metropolitan area; and (f) the services to be supplied to MNL by visiting practitioners had different values to MNL with MNL being unwilling to remunerate some visiting practitioners on a fee for service basis. 29 Next the applicant pleads the negotiations, referred to as the "Collective Negotiations" after December 1995 between the AMA (WA), MNL and the State concerning the terms upon which all visiting practitioners would supply services to MNL at the Joondalup Health Campus for the care of public patients. 30 The applicant says that in the Collective Negotiations the AMA (WA) purported to act and acted on behalf of the Participating Practitioners in its dealings with each of MNL and the State. It pleads that at all material times after December 1995 each of those Participating Practitioners knew that: · AMA (WA) was engaging in the Collective Negotiations; · AMA (WA) was purporting to act on behalf of the Participating Practitioners in the Collective Negotiations; · it was the intention of AMA (WA) that the Collective Negotiations would result in an agreement which would establish the prices, alternatively prices at or no less than, the rates for remuneration specified in the Annexure and the terms upon which In-Hospital Medical Services would be supplied by all visiting medical practitioners (including the Participating Practitioners) for the care for public patients at the Joondalup Health Campus; and · all, or alternatively most, other visiting practitioners providing In-Hospital Medical Services at Wanneroo Hospital had decided to allow the AMA (WA) to act on their behalf in the Collective Negotiations. 31 With such knowledge, they decided to allow and allowed AMA (WA) to act on his or her behalf in the Collective Negotiations, or decided to allow and allowed to establish by agreement with MNL the prices and terms upon which they would agree to supply their services to MNL in order to care for public patients at the Joondalup Health Campus. 32 Next the applicant pleads that the AMA (WA), acting or purporting to act on behalf of each of the Participating Practitioners, or alternatively allowed by them to establish by agreement with MNL relevant prices and terms upon which they would supply their services, negotiated and agreed with MNL the Memorandum of Understanding dated 9 December 1996. The applicant then pleads certain of the terms and conditions of the Memorandum of Understanding. The Memorandum of Understanding as containing those particular terms and conditions is identified in paragraph 30 as the VMP Understanding. Accordingly, it is, in my opinion, important and useful to focus on the matters said to be provided for in the Memorandum of Understanding. They were that: · each of the visiting practitioners, including all the Participating Practitioners would be offered by MNL the option of engagement as an independent contractor to supply their services to MNL at Joondalup and be remunerated by fee for service on the same terms and rates as the VMP Agreement on the basis that each of the Participating Practitioners would, if they chose to agree to supply In-Hospital Medical Services to MNL at the Joondalup Health Campus on a fee for service basis, agree to do so on the terms and rates specified in the VMP Agreement; and · all other new visiting practitioners supplying such services would also be remunerated by MNL on the terms of the VMP Agreement. 33 The applicant pleads certain express written terms of the Memorandum of Understanding relating to its period, the offers to be made to visiting practitioners, the review of the State VMP Agreement and the by-laws for the Joondalup Health Campus to resolve any areas of conflict between those two documents by 31 January 1997, and that until that time the State VMP Agreement would apply to visiting practitioners at the Joondalup Health Campus. 34 I shall refer to those provisions as the "MOU Provisions". The MOU Provisions are the first of three groups of provisions which together comprise what the applicant later describes as "the Provisions". 35 At all material times after 9 December 1996, AMA (WA), MNL and each of the Participating Practitioners acted on the basis that the terms of the VMP Understanding were binding upon them in respect of their dealings concerning engagement of visiting practitioners at Joondalup. 36 The applicant then pleads that in order to give effect to the VMP Understanding the AMA (WA), acting on behalf of the Participating Practitioners in the same way as previously pleaded, negotiated and agreed with MNL the terms of the Joondalup VMP Agreement. 37 There are then pleaded the following express terms of the Joondalup VMP Agreement. It is necessary to refer to them because they form the second important part of what are pleaded to be "the Provisions". They are as follows. · the Joondalup VMP Agreement would govern the supply of the relevant services to care for public patients at Joondalup until 31 May 2001; · representatives of MNL and AMA (WA) would meet no later than 1 January 2001 to commence negotiations in relation to an agreement to apply to the supply of such services after 31 May 2001; · appointment as a visiting practitioner at Joondalup had to be made in accordance with the terms of the Joondalup VMP Agreement and on the conditions set out in Annexure 2 to that agreement which reflected the terms of the State VMP Agreement and which provided for rates of remuneration equivalent to those in the Annexure; · visiting practitioners would be able to admit private patients to the Joondalup Health Campus and charge fees for those patients if appointed and credentialled appropriately; and · there would be an annual review and adjustment of the rates of remuneration having regard to the movements in Medical Fees Indices as provided by the Australian Medical Association Ltd (Canberra). 38 I shall refer to those express provisions as the "Joondalup VMP Agreement Provisions". 39 In negotiating and agreeing the VMP Understanding and the Joondalup VMP Agreement, the applicant alleges that MNL knew and understood that AMA (WA) was acting or purporting to act on behalf of each of the Participating Practitioners, was acting in their collective interests and on the basis that each of them would, if they chose to agree to supply their service on a fee for service basis, agree to do so on the terms and rates specified in the VMP Agreement and MNL's representatives (Mr MacDonald and Mr Day) acted on that basis. 40 In March, April and May 1997 AMA (WA) and MNL gave effect to the VMP Understanding and in particular one of its pleaded provisions by agreeing upon the manner in which visiting practitioners (including the Participating Practitioners), would be offered engagement by MNL to supply their services at Joondalup to care for public patients so as to provide those doctors with the option of engagement by MNL as independent contractors on a fee for service basis on the terms of the Joondalup VMP Agreement. 41 MNL and the Participating Practitioners are said to have given further effect to the VMP Understanding by MNL making offers of engagement to the doctors and, in the period May to December 1997, by each of those doctors, through a company controlled by him or her, accepting engagement by MNL as an independent contractor on the terms of the Joondalup VMP Agreement on a fee for service basis and by MNL so remunerating them. 42 The third of the Provisions so defined [see paragraph 40A(c)] was said to be a provision to the effect that each of the Participating Practitioners, if they chose to supply their services at Joondalup to public patients on a fee for service basis, would agree to do so on the terms and at the rates specified in the State VMP Agreement. 43 There then follow the allegations of the contraventions which I have described at paragraph [2] above.

the defences 44 The MNL respondents, in their defences, challenge the factual basis of the applicant's case. They say that neither the State VMP Agreement nor the Joondalup VMP Agreement set inflexible rates for services provided by visiting medical practitioners on a fee for service basis. They contend that in both agreements there was scope for negotiating different rates and bases of remuneration, particularly in the Joondalup VMP Agreement. 45 The MNL respondents deny that there was any relevant understanding between the Participating Practitioners concerning rates of remuneration for services rendered to public patients. There was no communication between them to that effect and no acceptance of any relevant obligation. MNL asserts that before July 1996 it had decided to match or mirror the government rates and conditions for fee for service engagement and sessional employment of doctors who would provide medical services to public patients at Joondalup. MNL denies that the Participating Practitioners became party to any understanding through the actions of AMA (WA). If AMA (WA) acted on behalf of those Participating Practitioners, that was something less than an agency relationship. If the Participating Practitioners knew what AMA (WA) was doing and allowed it to continue, that was insufficient to constitute the Participating Practitioners as parties to any arrangement arrived at by the AMA (WA). 46 Further, the MNL respondents deny that any provision of relevant arrangement or understanding had the purpose, effect or likely effect of fixing, controlling or maintaining the fees for services to be provided by doctors to public patients at Joondalup, either as a matter of construction of the Memorandum of Understanding or the Joondalup VMP Agreement, or as a matter of fact. The relevant fees would have applied in any event. 47 As to the alternative bases (i.e. non price-fixing) of the contraventions pleaded, the MNL respondents deny that, if there was an understanding, any provision of the understanding had the purpose or effect of substantially lessening competition. 48 Mr Day and Mr MacDonald deny accessorial liability. They adopt MNL's defence and deny knowledge of the matters which the applicant claims gave rise to contraventions of the Act by MNL. 49 Finally, the MNL respondents (hereafter I shall on occasion refer to them as "the respondents") claim the shield of the Crown in right of the State of Western Australia. They contend that Part IV of the Act does not, in the circumstances of this case, apply to the Crown in right of the State of Western Australia, because providing hospital services to public patients was not the carrying on of a business, and that everything done by MNL was in the course of providing public patient hospital services on behalf of the State. In effect, the State was delivering public patient hospital services at the Wanneroo Community Hospital through MNL. The MNL respondents contend that they were entitled to derivative Crown immunity because otherwise the granting of the relief sought against them would prejudice the interests of the State.

some factual background 50 Until the occurrence of the events with which this case is concerned, the only hospitals in Western Australia providing services to public patients were those which were owned and operated by the State. However, by 1995 the State had decided to involve the private sector, at least to some extent, in providing hospital medical services to public patients. 51 On 2 February 1995 the Health Department of Western Australia ("the Health Department", an expression which I shall use interchangeably with "the State") advertised for expressions of interest in private sector participation in the re-development of the Wanneroo Hospital, which later became the public hospital part of the Joondalup Health Campus. MNL expressed interest and by 30 June 1995 was on the short list of developers. On 29 August 1995 MNL submitted its Joondalup Health Campus Development Proposal to the Health Department. On or about 6 November 1995 the Health Department announced that MNL was the preferred tenderer for the operation of the proposed Joondalup Health Campus. 52 In the meantime, on 4 September 1995, the State Minister for Health entered into an agreement with AMA (WA) regarding the terms, conditions and remuneration of doctors providing medical services ("In-Hospital Medical Services") in non-teaching hospitals operated by the State for the care of public patients. This was "the State VMP Agreement". 53 The State Minister for Health and the AMA (WA) had entered into a similar agreement on 30 April 1992 covering the period between 1992 and 1995. The State VMP Agreement obliged the State to remunerate all visiting medical practitioners on a fee for service basis on the terms set out in the Annexure. 54 It is useful, for the purposes of this case, to understand the two different bases upon which, in general, visiting medical practitioners could at this time be engaged by the State to provide their services to public patients. They could be employees on the terms of an industrial agreement made between the State and the AMA (WA), known as the WA Government Health Industry Medical Officers and Medical Practitioners' Agreement 1996. That agreement was generally referred to, perhaps somewhat inaccurately, as "the Award". I shall also in these reasons refer to that industrial agreement as "the Award". Such employment could be either on a full-time or a sessional basis. Alternatively, they could be engaged as independent contractors on the terms of the State VMP Agreement and be paid on a fee-for-service basis. I say "in general" because Wanneroo Hospital was a special case. Due to an election made by the Wanneroo doctors in 1992 they were employed or engaged by the State on the terms and conditions of the State VMP Agreement, the terms of which were accepted as applying to the operation of the Wanneroo Hospital, but they were remunerated on a salaried sessional basis in accordance with the Award. 55 On 24 April 1996 the State Minister for Health and MNL entered into the DHSA. That agreement provided for a major redevelopment of the Wanneroo Hospital and for its future as a privately operated hospital for public patients as part of the proposed Joondalup Health Campus. As mentioned previously, the Joondalup Health Campus was to be developed as including both a public hospital and a private hospital. That situation is known in medical circles as "co-location". 56 The obligations of the parties to the DHSA were subject to several conditions precedent. One of those conditions was to the effect that all medical practitioners required to deliver medical services to public patients at the Joondalup Health Campus would be engaged via a contract of employment with a Board, as defined under the Hospitals and Health Services Act (WA) 1927 ("the Hospitals Act"),at remuneration levels, benefits, terms and conditions not exceeding those set out in sessional or fee for service contracts then applying at other Perth metropolitan hospitals, and otherwise pursuant to arrangements in form and substance satisfactory to MNL. Another condition precedent was that MNL be appointed to manage those visiting medical practitioners on behalf of the relevant Board on terms and conditions in form and substance satisfactory to MNL. 57 On 9 December 1996, representatives of the AMA (WA) and MNL signed the Memorandum of Understanding. Although the State Minister for Health was also named as a party to that document, he refused to sign it. The Memorandum of Understanding dealt with a range of matters relevant to the co-location of the private and public hospitals at the Joondalup Health Campus. I consider those provisions in more detail later in these reasons. It also contained provisions relating to the employment or engagement of doctors by the State or, (at their individual election), by MNL to provide services to public patients. The four options were that a doctor could: (a) continue in employment with the State under the terms of the Award; (b) be engaged by the State as an independent contractor on a fee for service basis under the State VMP Agreement; or (c) be engaged as an independent contractor by MNL on a "grossed-up" fee arrangement which approximated the salary and other benefits which he or she would have received as an employee under alternative (a); or (d) be engaged as an independent contractor by MNL on what was intended to be a fee for services basis under the terms and conditions of the proposed Joondalup Health Campus By-Laws and Visiting Medical Practitioners Agreement. 58 On 19 February 1997 a composite document comprising the Joondalup Health Campus By-Laws and the Joondalup VMP Agreement was signed on behalf of AMA (WA) and MNL. It contained an agreed fee schedule in annexure form which comprised a direct copy of the Annexure (i.e. the annexure to the State VMP Agreement). 59 Between May 1997 and late October 1997 the Health Department and MNL each advised the Wanneroo visiting medical practitioners of the four options upon which they could elect to be employed or engaged at the Joondalup Health Campus. Each made offers of engagement and the State made offers of continuing employment. 60 The foregoing facts were common ground between the parties. Although there was much common ground about what transpired between the 1995 announcement by the State of its intention to re-develop the Wanneroo Hospital and the acceptance of the offers of engagement referred to immediately above, I intend to make findings of fact about what transpired. I now turn to that task.

findings of fact 61 I accept the evidence of Dr Roberts that the AMA (WA) was concerned from the outset about the proposal that a private hospital operator be contracted to provide medical services to public patients at Wanneroo in particular, but was also concerned about the general concept of private management of public hospitals. The evidence of Dr Roberts, and the evidence of other doctors called by the applicant, was that the AMA (WA) and those other doctors took the view that if there was to be a co-location of private and public patient hospital services on the Joondalup Campus then there were certain public interests which had to be protected. 62 First, it was important that there be a physical distinction between the premises at which private patients were treated and those at which public patients were treated. That is, a patient going into the proposed Joondalup Hospital should be well aware whether he or she was being treated as a private patient or as a public patient. I accept that a major factor in this concern was that unless such a distinction was maintained, there was a very real risk that demand for private health insurance in the Joondalup area would fall substantially. This was because patients would have a perception that they could obtain, as public patients, the same medical services in the Joondalup Hospital as they would receive as privately-insured patients. The result would be increased pressure on an already heavily-burdened public hospital health system. 63 I accept also the evidence both documentary and oral to the effect that the AMA (WA) in particular, and probably many of the visiting medical practitioners at Wanneroo Hospital, were concerned about the perceived problem of "managed care". The expression "managed care" refers to the degree to which a hospital operator can control or influence the extent and quality of medical treatment provided by doctors to public patients at a hospital which is privately operated. The perceived conflict is between the best medical interests of the patient and the net profit of the private operator. 64 It would appear from the evidence, and I so infer, that at the relevant times there was a body known as the Medical Advisory Committee at each public hospital in Western Australia. The role of the respective Medical Advisory Committees at each public hospital was spelled out in the State VMP Agreement and its 1992 predecessor. There was a Medical Advisory Committee at the Wanneroo Hospital. There was no suggestion that its role was basically different to that of a Medical Advisory Committee at any other public hospital in Western Australia. The Medical Advisory Committee was a body elected by doctors practising at the Hospital. From examination of the minutes of the Wanneroo Medical Advisory Committee and from the evidence given by Dr Roberts and other doctors who were from time to time members of that Committee, I infer that it carried out numerous important functions in the public interest which generally transcended the private interests of the doctors who elected its members. The Committee worked in conjunction with a committee known as the Accreditation Committee which assessed applications by doctors who sought to be accredited as visiting medical practitioners to the Wanneroo Hospital. I infer that there was a considerable degree of liaison between the Accreditation Committee and the Medical Advisory Committee. I accept the evidence of Mr George Kubacz, a long-serving surgeon at Wanneroo Hospital since its inception in 1980, that a responsibility of the Medical Advisory Committee at Wanneroo was to advise the public servants who ran the hospital about such medical matters as whether to accredit particular doctors to practise at the hospital and whether to use new or experimental medical procedures. There were also recognised groups of doctors with special skills, whether general practitioners or otherwise, known as "Craft Groups" who were also concerned with the proper running of the hospital and care of its patients. 65 My general impression from the evidence was that the Medical Advisory Committee, the Accreditation Committee and the various Craft Groups of doctors (reflecting their respective skills) took their responsibilities to the Hospital and to the patients very seriously. 66 There were several meetings of Wanneroo doctors during 1995 and 1996 at which concerns were raised about what was being proposed in relation to the Wanneroo Hospital. Some of those meetings were arranged by the AMA (WA), others were meetings of the Medical Advisory Committee and at least one was organised by Dr M J Oehlers, the Head of the Department of General Practice at Wanneroo Hospital. Part of those concerns reflected the financial interest that some visiting medical practitioners had in the basis upon which they would be engaged to treat public patients at the new Joondalup Hospital. But I did not gain the impression from the documentary or oral evidence that maximisation of remuneration was a major concern of the doctors at Wanneroo in 1995-1996. Nearly all of the Wanneroo doctors (by which I mean visiting medical practitioners at Wanneroo Hospital) called by the applicant as witnesses gave evidence to that effect and I believe them. Dr M J Oehlers was an exception. He ranked remuneration somewhat higher. I also believed his evidence. 67 Perhaps not unsurprisingly, the question of remuneration for visiting medical practitioners at the Wanneroo Hospital was raised from time to time. For example, the 1995 annual general meeting of the Wanneroo Medical Advisory Committee (held on 28 September 1995) was addressed by Mr Peter Mott, Director, Health Services, at the AMA (WA), on the subject of proposed changes to remuneration, including the matter of remuneration on a fee for service basis, and the possible change from that basis to competitive tendering. On the other hand, reflecting public interest concerns, a resolution was passed unanimously at the same meeting strongly opposing co-location of the public and private hospital services at Wanneroo. 68 The expression "co-location" was, so I infer, also understood as meaning the location on a single site or on adjacent sites of public and private hospitals in a manner which would allow shared use of some of the services and facilities. That was symbolized by having a common public entrance to both hospitals, a matter which the AMA (WA) took up with MNL at the very early stages of the re-development of the Wanneroo Hospital. Nevertheless, there is evidence (see for example Mr Mott's Branch Council Paper of 26 March 1996, p 3) that the AMA (WA) recognised the economic advantages of scale and hence the need for the sharing of some services and equipment. 69 The evidence also shows that throughout the second half of 1995 AMA (WA) made representations to the Health Department to the effect that, in relation to the supply of medical services to public patients at Wanneroo by visiting medical practitioners, those practitioners should be employed by the State and not by MNL. AMA (WA)'s position on that had been made clear to MNL and other tenderers even before the announcement of MNL as the successful tenderer in early November 1995. 70 As early as 2 August 1995 the then President of AMA (WA), Professor C A Michael, wrote to Ms Mary Foley, a senior executive at MNL who was involved with the tender for the Joondalup development, expressing AMA (WA)'s concerns, some of which I have summarised above. Fees and remuneration were mentioned in that letter, but not as central matters. The central theme of the letter was that if private operators were to be involved in providing medical services to public patients then this should be done in a way which would not lead to a decline in private health insurance with patients getting into a private hospital through the public system. The AMA (WA) said that it regarded as a fundamental element that the arrangements for the provision of medical services to public patients should be made between it [i.e. AMA (WA)] and the Health Department. It was important that the State, and not the private hospital operator, should engage the doctors required for that purpose. Professor Michael sought MNL's support for that position to be reflected in any bid submitted by MNL for the Joondalup Development. 71 In its Joondalup Health Campus Development Proposal, submitted to the State on 29 August 1995, MNL stated its policy concerning the employment of existing staff. Relevant to this matter, was this statement: 'Visiting Medical Officers will be paid according to the rates agreed between the Government and the AMA for the treatment of public patients by Visiting Medical Officers.' 72 On 21 September 1995, Ms Foley, on behalf of MNL, sent a letter to Messrs Arthur Andersen who were advising the Health Department in evaluating the various tenders for the Joondalup Development. This was in response to a request for information from a committee, known as the Evaluation Committee, in relation to numerous matters, including the engagement of visiting medical officers. A relevant paragraph of an enclosure in that letter was in the following terms: 'VMOs would be engaged under the terms agreed from time to time between the WA Branch of the AMA and the Western Australian Department of Health. VMOs attending public patients would be compensated in the same manner as in public hospitals, even though the facility would be licensed as a private hospital.' 73 I accept Mr Mott's evidence that as early as September 1995 some of the visiting medical practitioners at the Wanneroo Hospital had told him that they supported the AMA (WA)'s position in relation to the proposed co-location of the public and private hospital services at Wanneroo, that they wished the AMA to negotiate on their behalf for the continuing supply of their services to public patients and that such negotiations be between the AMA (WA), themselves (i.e. the doctors) and the State, to the exclusion of the private operator. 74 AMA (WA)'s view that the Government, rather than MNL, should be the employer of the visiting medical practitioners at Wanneroo was also made clear to the Commissioner of Health (Mr Alan Bansemer), for example by a letter dated 10 November 1995 signed by the third respondent, Mr Paul Boyatzis, who was the Executive Director of the AMA (WA). 75 Mr Bansemer's reply dated 20 November 1995 suggests (and I so infer) that from the outset the State was not particularly receptive to the proposal that it should continue to employ visiting medical practitioners at Wanneroo. In that letter, Mr Bansemer said this: 'HCoA have however indicated in their proposal that for the purposes of the public component, they would continue to employ medical practitioners under the same arrangements that exist within the public sector.' 76 The minutes of a meeting on 29 November 1995 between Mr Day and Mr MacDonald of MNL and Mr Brad Sebbes (Mr Sebbes was a senior officer of the Health Department concerned with the re-development of Wanneroo Hospital), together with the Health Department's solicitor and one of its consultants, on behalf of the State, record the respective positions of the State and MNL on various contractual matters. Under the heading "Payment of VMPs", MNL's position was stated as being "AMA/HDWA contracts for VMPs are to be mirrored". The Health Department's position was stated as being "Contract terms are to be HCOA's responsibility. All doctors at Wanneroo are to transfer under Award". 77 It is apparent from Mr Mott's evidence that AMA (WA)'s insistence that any agreement relating to medical services for public patients at Wanneroo/Joondalup should involve the State rather than MNL was based on what it perceived to be a potentially adverse effect if MNL were to be the contracting party. One adverse perceived effect was a potential to erode existing conditions and rates of remuneration for visiting medical practitioners. Another was that the conditions and remuneration relativities between the various methods of employment and engagement would be thrown out of kilter. But Mr Mott's evidence also shows that AMA (WA) was seriously concerned about management issues at the proposed new hospital including, in particular, matters relating to the accreditation of doctors and other questions of clinical governance. 78 On 12 December 1995, AMA (WA), by letters addressed to the doctors practising at Wanneroo Hospital, convened a meeting which took place on 20 December 1995. About twenty of the Wanneroo visiting medical practitioners attended that meeting which was addressed by Mr Mott. One of the resolutions passed at the meeting reaffirmed the position of those present that any contract for the provision of medical services to public patients had to be between the State, the AMA (WA) and the medical profession. Copies of this resolution were sent shortly thereafter to both MNL and the Health Department. 79 In early January 1996, AMA (WA) continued to press the Health Department to agree that the provision of medical services to public patients at Joondalup would be through the State i.e. the Board of Management of the hospital. 80 I infer from MNL's internal documentation, including minutes of meetings held between representatives of MNL on the one hand and, first, the Health Department and, secondly, AMA (WA) on the other hand, that at this stage (i.e. early 1996) MNL remained willing to employ or engage the visiting medical practitioners at Joondalup on the same basis (MNL used the word "mirror") as undertaken by the State. For example, Mr Day's detailed notes (in the form of handwritten minutes) of what took place at a meeting on 9 January 1996 between Dr Catchlove and Mr Sebbes record MNL's position in these terms: 'HCoA will "mirror" AMA agreements with State and pass through the benefits to doctors [therefore] no difference to working for State.' 81 I infer also that this would include payment on a fee for service basis in accordance with the State VMP Agreement. 82 In January 1996, AMA (WA) arranged to establish a "Contact Group" of doctors working at the Wanneroo Hospital to represent the views of accredited practitioners about the possible reduction in the quality of medical and hospital services consequent upon the proposed re-development of the hospital. This group was kept separate from the Medical Advisory Committee to avoid a perceived possible conflict of interest with the Health Minister's position, i.e. the traditional role of a Medical Advisory Council was to advise the Health Department in relation to the running of the hospital. The initiative appears to have originated with Dr Roberts. The Contact Group comprised representatives of the various medical disciplines providing services to public patients at the Wanneroo Hospital. Mr Kubacz was one of those representatives. The AMA (WA) from time to time kept the Contact Group informed about the progress of its negotiations with the Health Department and MNL. An example of this was a circular letter dated 14 February 1996 from Mr Mott to the fourteen members of the Contact Group enclosing copies of recent correspondence between the AMA (WA) and the Health Department. In that letter Mr Mott referred to what he described as "three key areas of concern", namely: · the need for clear and functional separation between public and private hospital facilities; · that the contract for the provision of medical services by doctors to public patients be between the AMA/medical profession and the Government and not through the private operator; and · the importance of the public hospital component of the Campus being recognised as such under the Hospitals Act. 83 The Wanneroo doctors were also kept informed by Mr Mott [on behalf of AMA (WA)] organising meetings at the Wanneroo Hospital with the visiting medical practitioners. 84 On 4 April 1996, Mr Mott sent to Mr Sebbes a fax setting out a preliminary list of items which he proposed be included in an agreement to be signed by the Minister for Health and the President of AMA (WA). The parties to this application appear to accept that this was the genesis of the Memorandum of Understanding. I accept that too. I think that it is fair to note that there is no reference, in the list of proposed items, to rates of remuneration for doctors. Apparently a similar document had previously been negotiated between the State, AMA (WA) and the private operator of the Hollywood Hospital. The fifth item in Mr Mott's list of issues to be covered was the engagement or employment of doctors by the State. On 11 April 1996, Mr Mott sent a draft deed of agreement to Mr Sebbes. On 12 April 1996, Mr Sebbes sent another draft of the agreement to Mr Mott. One clause in that draft reflected what appeared to be the State's then intention to continue employing medical practitioners for the provision of public patient services at the Joondalup Hospital. This was later re-confirmed in Mr Sebbes' letter dated 9 July 1996 to Mr Mott. 85 I think that it is useful to note that as early as this stage (April 1996) the proposed clause in relation to employment and engagement of medical practitioners at Joondalup Hospital read as follows: · Employment/Engagement of Medical Practitioners The Board or the Minister on behalf of the Board will continue to employ/engage medical practitioners for the purposes of providing public patient services at the Joondalup Hospital. Medical Practitioners currently employed at the Wanneroo Hospital may elect on a discipline by discipline basis to transfer to fee for service independent contractor arrangements in accordance with the "Terms of Agreement concerning the provision of medical services by Visiting Medical Practitioners in State Government non-teaching hospitals of Western Australia" [i.e. the State VMP Agreement]. 86 There were other clauses in what became a developing draft concerned with such matters as co-location and evaluation of the effect of the project on private health insurance levels. 87 In early May 1996 a significant development occurred. On 3 May 1996, Dr J LaValette, then chairman of the Medical Advisory Committee at Wanneroo, sent a letter to the Wanneroo doctors which was headed "Issues Paper". I shall also refer to that letter as the "Issues Paper". I accept Dr LaValette's evidence that he provided a draft of the Issues Paper to Mr MacDonald, who approved its terms. I find, on the basis of Mr Sebbes' evidence and the documentary evidence to the same effect that, perhaps unbeknown to Dr LaValette, Mr MacDonald sent a copy of the draft Issues Paper to Mr Sebbes for comment and that Mr Sebbes suggested some changes to the text, most of which were accepted. 88 Dr LaValette confirmed that the Issues Paper was typed at MNL's office. He acknowledged that the word processing reference on it was Mr MacDonald's reference. Mr Sebbes' evidence was that Mr MacDonald faxed him the draft of that document and he had made some slight handwritten amendments to it. The document can thus be seen to have been generated, and I so find, through the joint efforts of Dr LaValette, Mr MacDonald and Mr Sebbes. It was sent ostensibly by Dr LaValette but with the approval of Mr MacDonald and Mr Sebbes. 89 The significance of the Issues Paper was that it proposed an alternative position to the employment or engagement by the State of the doctors who would treat public patients at the Joondalup Health Campus. The suggestion, put forward ostensibly by Dr LaValette but in reality also by MNL as an alternative to the AMA position, was as follows: '. Medical staff decide whether to be employed/engaged by HCoA [MNL] at the Joondalup Health Campus or directly by the government . Conditions of employment if employed by HCoA will be per the Awards agreed from time to time between the AMA and Minister for Health for Sessional and Fee for Service payments . Medical Practitioners employed/engaged directly at the Joondalup Health Campus by HCoA may elect either by discipline or individually as agreed with Joondalup Health Campus to be paid under the Sessional or Fee for Service Awards.' 90 In this manner, a further significance of the Issues Paper emerges, namely, that by 3 May 1996, MNL was taking active steps to achieve its previously expressed intention of employing the Wanneroo visiting medical practitioners in accordance with the relevant award or to give them the election by discipline or individually (admittedly subject to agreement with MNL) to be engaged as independent contractors on a fee for service basis. I infer that the references to the "Awards agreed … for Sessional and Fee for Service payments" referred to in the second and third dot points immediately above were references, respectively, to the Award (in relation to sessional employment) and to the State VMP Agreement (including the rates for fee for service set out in the Annexure). The Issues Paper would otherwise make no sense. MNL can thus be seen to have been prepared almost from the outset, and at least by 3 May 1996, to employ or engage the doctors at Wanneroo on essentially the same alternative bases upon which MNL is alleged to have reached an understanding in the Memorandum of Understanding, some seven months later, on 9 December 1996. This is consistent with part of the contents of a letter dated 15 May 1996 from Dr B Catchlove, Managing Director of Health Care of Australia, to Dr Roberts confirming that doctors "contracting" with MNL would have identical terms and conditions to the public arrangements, whether they continued to work for the State or chose to work directly for MNL. 91 Mr Kubacz understood that this was MNL's position and continued to be its position at all material times. His evidence (T175), which I accept, was as follows: 'You became aware, however, from that letter that Health Care of Australia was prepared to offer rates which matched the government rates on a fee for service or sessional basis? --- Yes. At that time, and that understanding didn't change throughout the period, did it? --- No. Health Care of Australia had made it clear that they would match the government rates on a sessional or fee for service basis? --- That was my understanding, yes. Yes. You had that understanding from soon after 3 May 1996? --- Yes.' 92 The inference I make in that regard is also consistent with Mr MacDonald's evidence, given to the applicant at an interview on 11 August 1999. Speaking of the period around May 1996 Mr MacDonald said: 'I was keen on having fee for service as an option for some of the doctors because it's the only way I could get particular new doctors to come in. But I don't think we spent a lot of time. I don't think it was the single critical issue up front …' 93 Later during the same interview he said: 'We said we would reflect either the award that existed for sessionals and junior staff or the VMP agreement for the fee for service payment per piece of work done. So that was a given that was fixed over there. Nobody ever discussed about us or we never discussed about us changing those rates.' 94 I accept the evidence of Dr LaValette (as reflected in the Issues Paper) that a substantial factor in the attractiveness of this proposal was the entitlement of those doctors who transferred from employment by the State to employment or engagement by MNL, to be paid what was termed a "transition payment" equivalent to two weeks salary for every year of service, with a maximum of 12 weeks of such payments. The transition payment was intended to acknowledge the accrued entitlements of the Wanneroo doctors as employees of the State. 95 Dr LaValette's proposal was initially not well received by the AMA (WA) and, in particular, Dr Roberts. Dr Roberts persuaded some leading members of the medical profession to put pressure on Dr LaValette not to pursue the option of Wanneroo doctors being employed or engaged directly by MNL. But Dr LaValette persisted. 96 By letter dated 15 May 1996, Dr Catchlove wrote to Dr Roberts on behalf of MNL in terms which included the following: 'HCoA lent its support to the AMA in their bid to change the Government's position on the "employment" of Wanneroo Medical Practitioners. We remain committed to this position. However, at no stage did we indicate support for a closed shop whereby doctors could not choose with whom they wished to "contract" for the care of public patients. In fact, from the beginning we said that doctors "contracting" with HCoA would have identical terms and conditions to the public arrangements. This would apply whether doctors continued to work for the Government or chose to work directly for HCoA. To suggest otherwise is misleading and deceptive.' 97 Dr LaValette and Dr M Oehlers convened a meeting of the Wanneroo Hospital general practitioners which was held on 24 May 1996. About ten doctors attended the meeting which discussed the matter of having a choice about whether to continue engagement or employment by the State or to be engaged or employed by MNL. No resolutions were passed. 98 At about that time, so I infer from an undated fax from the Legal Administration Branch of the Health Department to AMA (WA), Mr Sebbes' evidence and Mr Bansemer's evidence, the State's position was that it would offer to employ or engage those medical practitioners who were currently employed or otherwise engaged at the Wanneroo Hospital. Those doctors would provide medical services for public patients either as employees or (if it could be lawfully and practically achieved) by engagement on a fee for service appointment. In the latter case such engagement would be on the same terms and conditions, so far as relevant in the circumstances, to those set out in the State VMP Agreement. 99 On 24 May 1996, a person described as R Hanson, Manager Corporate Services, at the Wanneroo Hospital sent a circular to the Wanneroo doctors responding to what were said to be numerous inquiries regarding transition arrangements for visiting medical officers. The letter dealt with such matters as transition payments, sick leave, annual leave and long service leave. 100 It also included the following paragraph: '5. Health Care of Australia have agreed to pay Visiting Medical Officers according to the rates of pay as agreed between the Minister for Health and the AMA, which covers fee for service, sessional and salaried arrangements.' 101 I note that this is consistent with the paragraph, which I have set out above, of the letter dated 15 May 1996 from Dr Catchlove to Dr Roberts. The relevance of the time at which MNL accepted such a commitment emerges below when I discuss whether MNL, as alleged by the applicant, reached an understanding in December 1996 which contravened the Act. 102 With effect from 1 June 1996, Wanneroo Hospital ceased to be a public hospital for the purposes of the Hospitals Act and was thereafter managed as a private hospital pursuant to a licence which had been issued under that Act on 30 April 1996. On 7 June 1996 the Minister for Health and MNL executed a short letter of agreement evidencing their arrangements concerning the appointment of medical practitioners (both employed and sessional) to provide medical services at the Joondalup Health Campus from 1 June 1996. The Minister agreed to arrange with the Lower North Metropolitan Health Service ("the Board") to make offers of employment to the doctors then currently employed by him at the Wanneroo Hospital. Such employment was to commence from 1 June 1996 until the termination dates specified in their various current contracts. The services of those doctors, so employed, were to be made available to MNL on an exclusive basis to provide medical services to public patients at Joondalup. They would be paid by the Board in accordance with relevant awards, the enterprise agreement and other agreements. There were provisions for reimbursement of the State by MNL and for a very limited degree of indemnity by the State for any acts or omissions of the doctors. 103 I infer from the documentary evidence that during the months of May and June 1996 the AMA (WA) remained committed to the principle that doctors providing medical services to public patients at Wanneroo Hospital should be engaged or employed by the Government. However, the evidence shows that some of the doctors, possibly a growing number of them, wished to have the option of being engaged or employed by MNL. 104 By 11 June 1996, MNL was developing a draft circular to be sent to each of the Wanneroo doctors offering an appointment. I mention that document because it referred to the DHSA and also, in my view, reflected MNL's then present intention. The relevant paragraphs read as follows: 'The DHSA also provides for medical services to public patients to be delivered either by Medical Practitioners employed by Government, or Medical Practitioners employed by HCoA. In either case, the terms of payment for services will be identical as HCoA will simply match existing agreements or awards between the Australian Medical Association and the Government. . . . If you elect to be remunerated on a Fee for Service basis then it would be in accordance with the current benefits of the "Visiting Medical Practitioners Agreement".' 105 In July and August 1996, the AMA (WA) gradually changed its position to the extent that it was prepared to support the idea that the doctors at Wanneroo should have the choice of being employed or engaged by the State or being employed or engaged by MNL. I accept Mr Mott's evidence to that effect. I refer also to Dr Roberts' letter of 5 July 1996 to Dr Oehlers and his circular letter of 10 July 1996 to the Wanneroo doctors. 106 I infer from the evidence that a major factor in that change was pressure from doctors who wanted to have choice in that respect, including in particular Dr LaValette and Dr Oehlers. There was a fairly heated exchange of correspondence between AMA (WA) on the one hand and Drs LaValette and Oehlers on the other. 107 I consider that these developments in May to July 1996 provide some insight of the extent to which the Wanneroo doctors were prepared to think and act independently of the AMA (WA) in relation to the terms and conditions of their employment or engagement (including how they were to be paid), at the public hospital. 108 I accept Dr Roberts' evidence that by 9 July 1996, if there ever had been a remuneration issue so far as MNL was concerned, that issue had been resolved. There remained, so Dr Roberts stated, arguments about legalities concerning the hospital licence, entry points and separation of wards. 109 On 18 July 1996, Dr Roberts wrote to the Wanneroo doctors referring to the fact that an offer of employment was being made to them by MNL to provide medical services to public patients at the Wanneroo Community Hospital. He urged them to consider carefully the choice between remaining engaged by the Minister for Health or to accept an offer from MNL. I think that a fair assessment of his letter, and I so infer, is that it was intended to encourage the Wanneroo doctors to remain in the employment or engagement of the State. Dr Roberts' evidence confirmed that that was his purpose in July 1996. The letter also emphasised the importance of separate public and private hospitals with separate management structures. 110 On the same date (18 July 1996), Dr Catchlove on behalf of MNL wrote to all the doctors at Wanneroo Hospital referring to its previous support for the AMA's position that the doctors could contract directly with the State for the care of public patients at the hospital. Dr Catchlove then continued in these terms: 'Unlike the AMA, we do believe, however, that doctors should have a choice. HCoA has given a firm undertaking to provide the equivalent of rates and conditions which apply in the public sector and have been negotiated by the AMA. There is no benefit to HCoA should doctors choose to contract for public patients with us but I believe strongly that they should have the choice.' 111 That position appears to have been recognised, and I so infer, at the meeting of the Wanneroo Hospital Medical Advisory Committee, attended by eight of the Wanneroo doctors (three of whom are Participating Practitioners), on 24 July 1996. The minutes of that meeting suggest that, at that time, the relevant negotiations on the subject of the employment of the Wanneroo doctors were taking place between MNL and the State rather than between MNL and AMA (WA). 112 The relevant passages in the minutes of that meeting read as follows: 'HCoA had agreed to match the awards and conditions that were available to medical practitioners employed by the government. HCoA had further stated that the medical practitioners would have a choice between remaining employed by the government or electing to transfer to HCoA under a Sessional Payment arrangement. Discussions were to be held today with Solicitors representing the HDWA [Health Department of Western Australia] and HCoA [MNL], to discuss appropriate mechanisms for the employment of medical practitioners. Those practitioners who elected to remain employed by the government, would be paid through, and employed by, Bentley Hospital. Further, the Chief Executive Officer [Mr MacDonald] advised that he expected advice on the arrangements in the near future and as soon as this was received, it is expected that letters of offer would be sent out to all practitioners. The AMA has a preference that medical practitioners were employed by the Government, however, they accept that a choice of employer will be provided and it is the medical practitioners' choice.' 113 It would seem that as at 21 August 1996, MNL had not completely accepted the proposition that visiting medical practitioners currently engaged on a sessional basis might, at their unconditional option, switch to a fee for service arrangement. At a meeting of the Medical Advisory Committee on that date Mr MacDonald informed the Committee that MNL had developed a "modified sessional" arrangement whereby medical practitioners would be engaged as contractors. He stated that if medical practitioners wished to change to a fee for service arrangement, then it would need to be shown that such arrangements would be beneficial to both the medical practitioners and the Campus. 114 By 26 August 1996 it would appear, and I so infer from Mr MacDonald's fax to Mr Sebbes on that date, that MNL's position was that it recognised that the Wanneroo doctors should have a choice of being employed or engaged by the State or by MNL itself and in the latter case engagement would be through a contracting company nominated by the individual doctor. Payment to the contracting company was at that stage proposed to be by service charges on a "Modified Sessional" basis. 115 The fact that MNL had accepted the State VMP Agreement as the basis for remuneration is, in my view, once again reflected in the second last paragraph of Mr MacDonald's memorandum of the same date (26 August 1996) to Mr Day: 'As we advised the AMA, we would only recognise the employment/industrial aspects of the VMP Agreement.' [The other aspects included matters of hospital governance and accreditation which took the form of by-laws.] 116 I accept Dr Roberts' evidence that in August/September 1996 the differences between the AMA (WA) and MNL involved the independence of the Medical Advisory Committee which was protected by the provisions of the VMP Agreement, rather than any disagreement over the basis or quantum of remuneration. 117 In my opinion, this is corroborated by Mr Mott's evidence. For example, at par [171] of his witness statement Mr Mott said that he recalled that at a meeting on 13 September 1996 Mr MacDonald had agreed to adopt the fee schedule to the State VMP Agreement, although Mr Day had expressed the view that doctors engaged by MNL should not be covered by the State VMP Agreement (presumably, and I so infer, a reference to the managerial and clinical matters in that document, which were somewhat different to MNL's own standard hospital by-laws). 118 By September 1996 the Wanneroo Hospital had for some months been operating as a licensed private hospital with MNL being obliged by the terms of the DHSA to provide services to public patients. The building works, i.e. those which would lead to the opening of two separate hospitals, namely, the Joondalup Private Hospital for private patients and the Wanneroo Community Hospital for public patients, were (so I assume) still in progress. I so assume from the evidence that about two months later the Minister for Health conducted a tour of the site accompanied by Dr Roberts. 119 Nevertheless, so far as MNL was concerned, it then operated under its standard set of by-laws which applied at some 30 hospitals operated by it throughout Australia but which had been adapted by MNL to suit what it described as "the special requirements" of the Joondalup Health Campus (see Mr MacDonald's letter dated 16 September 1996 to Dr Glaser, which was a circular letter to all the Wanneroo doctors). Mr MacDonald called the modified version of MNL's model by-laws "the JHC By-Laws". It covered such matters as appointment and credentialling of medical practitioners, separate medical advisory committees, credentials committees and clinical review committees for the respective private and public facilities, but with only one set operating until the developmental building work was completed. 120 Although by that time it had become clear that offers of employment or engagement would be made by both the State and MNL to the doctors at Wanneroo, the drafts of the proposed Deed of Agreement which were passing between the AMA (WA) and the Health Department still, at this stage, made provision only for employment by the State. It is apparent from Mr Mott's letter dated 16 August 1996 that he took the view that there was no need to make any amendment in order to refer to offers of employment or engagement by MNL. 121 I infer from a document which Mr MacDonald, in a memorandum dated 18 September 1996, described as "near final versions" of a proposed letter of engagement, that by that time MNL had decided to offer to visiting medical practitioners engagement (through a service contract with each doctor's own company) on a modified sessional basis. The modifications would reimburse the doctor's company with the full cost to an employer of engaging a sessional medical practitioner under the current sessional arrangements provided for by the then current 1996 Award. As to the matter of fee for service, there was the following paragraph in that letter: 'If you would prefer to change to a "Fee for Service" appointment, then JHC [MNL] will reasonably consider such requests if this is beneficial to all concerned, particularly if specific disciplines wish to collectively switch from their current sessional arrangements. If you elect to be remunerated on a Fee for Service basis, then rates of payment would be in accordance with the current benefits provided under the Visiting Medical Practitioners Agreement [a reference to the State VMP Agreement].' 122 I note at this point, once again, the assumption on MNL's part that the fee for service basis carried with it the rates in the Annexure. 123 It is apparent from the AMA (WA)'s circular letter of 23 September 1996 to all accredited medical practitioners at the Joondalup Health Campus, that it was under the impression that, at that point, MNL had not sufficiently committed itself fully to accept the application of the State VMP Agreement to the employment or engagement by it of doctors to provide services to public patients at the Joondalup Campus. 124 The detail of what was taking place at this time is important because part of the MNL respondents' defence is that MNL had reached agreement on the alternative bases of employment or engagement of visiting medical practitioners including the bases for remuneration at least by October 1996 and not, as the applicant contends, as part of the VMP Understanding reached on 9 December 1996. 125 As at 26 September 1996, one sticking point was that MNL would not agree to doctors who were currently employed by the State at Joondalup automatically having the unconditional option to switch to fee for service - see Mr Day's letter of that date. 126 The evidence shows a gradual shift on MNL's part towards giving the doctors the option to switch to fee for service. For example, on 9 October 1996, Mr MacDonald chaired the annual general meeting of the Wanneroo Medical Advisory Council. The Council was a body which comprised all accredited medical practitioners working at the Wanneroo Hospital. It was separate from the Medical Advisory Committee. An update on Joondalup Health Campus developments was presented. There was exhibited a slide headed "Employment/Transition Status" which contained the following: '. Joondalup Health Campus has developed a "Modified Sessional Arrangement" to allow a contractor arrangement for the engagement of medical practitioners. . Fee for service arrangements for individuals/departments can be organised if practitioners wished to go that way. . Health Department of Western Australia is still resolving transitional details - the Department will send a letter to you outlining the details and your options.' 127 I infer from the tone and contents of the minutes that the "presenter" was Mr MacDonald. Item 5 of those minutes indicates that work was progressing on the document which became the composite document comprising the Joondalup Health Campus By-Laws and the Joondalup VMP Agreement, but that due to the size and number of services of the future Campus it was necessary to create a Clinical Department Structure. That Clinical Department Structure was required to facilitate the change from a non-teaching hospital to a teaching hospital scheduled to occur in March 1998. 128 By 15 October 1996 the AMA (WA) had prepared two drafts of the proposed Deed of Agreement. Each was relevantly identical save that one of the drafts included MNL as a party. There was a significant change in this draft to Cl 9 which provided for employment and engagement of medical practitioners. The new draft provided four options for such employment or engagement, namely: (a) a contract of employment with the State under the terms of the Award as replaced from time to time; (b) engagement by the State as an independent contractor under the terms and conditions of the State VMP Agreement; (c) engagement by MNL as an independent contractor under a grossed up fee arrangement based upon the rates and conditions in the Award; or (d) engagement by MNL as an independent contractor under the terms and conditions of the State VMP Agreement. 129 The new draft Cl 9 provided that offers of employment would be sent by 28 February 1997 to the doctors currently employed at Joondalup and that those who wished to secure the transitional payment had to elect to take out option (c) or (d) by 31 May 1997. 130 The minutes of the Joondalup Health Campus Medical Advisory Committee meeting of 16 October 1996, which I accept as accurately recording what was taking place at the relevant time and what took place at the meeting, show that the committee and MNL (represented by Mr MacDonald) agreed to a proposal for modifying the JHC By-Laws and blending them into one document with a modified version of the State VMP Agreement as an attachment. By this method it was envisaged that the State VMP Agreement would apply to the new situation at the Joondalup Health Campus. A sub-committee was established to do the drafting. It was noted that letters of offer from both the State and MNL would be sent to the Wanneroo doctors by 28 February 1997. The minutes show that the AMA (WA) and the State had agreed that Dr Bryant Stokes (Chief Medical Officer at the Health Department) would be asked to sit on the Medical Advisory Committee at Joondalup to represent the Commissioner of Health. 131 It is, in my view, clear from Mr Day's fax dated 24 October 1996 to Mr Sebbes that at that stage MNL was not prepared to accept unconditionally the cost consequences of offering the Wanneroo doctors an option of being engaged on a fee for service basis as a blanket individual choice. Its attitude was that this would have to be the subject of negotiation on a discipline by discipline basis if service was to be maintained via adequate availability rosters. It was also to be subject to the arrangement being mutually beneficial for the doctors and MNL. 132 I find that by about 31 October 1996 a compromise was reached between the AMA (WA) and MNL in relation to doctors who wished to switch to fee for service as independent contractors engaged by MNL. That compromise related to theatre arrangements and rosters. It was first reflected in a hand-written substituted paragraph at the end of Cl 9 which was sent by Mr Boyatzis on behalf of the AMA (WA) to Mr Day on 28 October 1996. The covering fax strongly suggests that the amendments were as discussed and agreed between them. Mr Mott's evidence in cross-examination also corroborates this. The amending paragraph read as follows: 'Offers of employment/engagement will be conveyed to Medical Practitioners currently employed/engaged by 28 February 1997 based upon options a) or c) above. Discussions regarding the introduction of fee for service arrangements under b) and d) above in terms of the efficient use of operating theatres and other facilities, and the role delineation of the hospital, shall be concluded by 31 May 1997 between the AMA, HCoA and accredited Medical Practitioners. Medical Practitioners will then be eligible on a discipline by discipline basis (unless otherwise agreed) to elect to be engaged under arrangements b) or d) above. Medical Practitioners wishing to secure the transitional payment must elect to take up option c) or d) by 31 July 1997. Medical Practitioners electing fee for service arrangements will be required to actively participate on an availability roster. When rostered to provide such availability, Medical Practitioners will be expected, under normal circumstances, to attend the hospital when requested, to provide medical services.' [The last five lines above were probably inserted between 28 October 1996, the date of Mr Boyatzis' fax, and 7 November 1996 when Mr Mott faxed a complete typed up version of Clause 9 to Mr Sebbes]. 133 When Mr Day was examined by the applicant in the course of an interview on 8 July 1999 he said: 'Our insistence was that for the size of the hospital we had to have a formal on-call roster. The doctors had to commit and be willing to do it, and if they weren't willing to do that we weren't willing to offer fee for service.' 134 Senior counsel for the applicant submitted that it appeared from the second paragraph of a fax dated 3 December 1996 from Mr Mott to Dr Stokes, Chief Medical Officer at the Health Department, that as at that date the matter of "fee for service" was still an issue between the AMA (WA) and MNL. If by that submission I was invited to infer that there was still disagreement between those parties about whether the Joondalup doctors would be offered the fee for service option by MNL, I do not make such inference. The evidence, in my view, shows that this matter had been resolved by late October or the first week in November 1996. I find that there was some remaining disagreement about precisely when the election to switch to fee for service could be made (that is what Mr Mott said in his fax). The precise timing, so I infer, involved a certain funding decision on the part of the Health Department. MNL was prepared to let the switch occur on the date of the commissioning of the new Joondalup Health Campus facilities. AMA (WA) wanted an immediate right to switch (see Mr Mott's file note of 28 November 1996). The last paragraph of Mr Mott's fax of 3 December 1996 suggests that Mr Day was going to contact the Health Department in an effort to sort out that issue. 135 In my view, this is confirmed by the subsequent addition to Cl 9 (as amended) of the following wording: 'Provided that, if during the period leading up to commissioning, an agreement is reached with the Health Department of W.A. to fund in-patient activity at the average D.R.G. benchmark rate applicable in other non-teaching public hospitals in Western Australia, Medical Practitioners will be eligible to elect to be engaged under arrangements b) or d) above, from that date. Medical Practitioners wishing to secure the transitional payment must elect to take up option c) or d) by 1 April 1998.' 136 In my opinion, these inferences are clearly consistent with and corroborated by a paragraph in Mr Day's monthly report dated 18 December 1996: 'Memorandum of Understanding signed with the AMA, which was within hours of implementing a shut down of medical services at Joondalup. We extracted numerous last minute concessions from the AMA, including deferring Fee for Service payment options until commissioning of the new project in April 1998. We are now clear to align HCoA By-Laws and the VMP Agreement and to offer independent contracts to appointed doctors.' 137 In the meantime, as the minutes of the Medical Advisory Committee meeting of 20 November 1996 show, work was progressing with the drafting of the document designed to harmonise the MNL model by-laws with the provisions of the State VMP Agreement i.e. the document which became a composite document comprising the Joondalup Health Campus By-Laws and the Joondalup Visiting Medical Practitioners Agreement. 138 There was evidence, for example that of Mr Geddes (orthopaedic surgeon) which I accept, that there was frustration among the doctors, not so much about the fact that offers of employment or engagement had not been forthcoming but that the whole process, including the harmonisation of both documents, was stalling. 139 This takes me to the events which led up to the signing of the Memorandum of Understanding. 140 The evidence shows that during the weeks (possibly months) leading up to the signing of the Memorandum of Understanding (or Deed of Agreement as it was referred to in exchanges between the AMA (WA) and the Health Department), the Health Department misled the AMA (WA). It was content to leave the AMA (WA) under the impression that it would sign a Deed of Agreement once the various matters of detail were settled, and that there was broad agreement in principle with its contents. The Health Department continued to engage in an exchange of letters, telephone calls and other contacts as a result of which further drafts and re-drafts of the document were created. Dr Roberts' later assessment of this was that the Health Department had "negotiated in bad faith for quite a number of months". 141 Matters came to a head, so far as AMA (WA) was concerned, at the very end of November and the beginning of December 1996. On 26 November 1996, the Minister for Health told Dr Roberts, during the course of an inspection of the building works at Joondalup, that he would not sign the proposed agreement. I accept Dr Roberts' evidence that the concern of the AMA (WA) was that it and the doctors at Wanneroo would thereafter be wholly dependent upon the good offices of MNL in respect of maintaining clinical independence. I accept that Dr Roberts was not concerned then about the matter of any employment offers being made by the State. 142 On 29 November 1996, Dr Roberts wrote to the Wanneroo doctors about the delays by both the State and MNL in signing the Deed of Agreement. By that letter he convened a meeting at "AMA House" in Nedlands on the evening of 5 December 1996. 143 In the meantime, on 4 December 1996, the AMA (WA) Branch Council unanimously carried a resolution in the following terms: 'Branch Council views with serious concern the lack of progress over the Joondalup Health Campus Deed of Agreement and authorises the President to take whatever action is needed to conclude the matter.' 144 At the meeting on 5 December 1996 the nineteen Wanneroo doctors present (about eight of whom appear to be among the Participating Practitioners - the handwriting on the attendance sheet is not completely legible) unanimously passed a resolution in the following terms: 'This meeting of accredited Medical Practitioners of the Joondalup Health Campus views with serious concern the lack of progress over the Joondalup Health Campus Memorandum of Understanding and authorises the President to take whatever action is needed to conclude the matter.' 145 At about this time it appears that the AMA (WA) gave up any hope that the State would sign the Memorandum of Understanding. It focused its attention on MNL. Dr Roberts informed Mr MacDonald that unless MNL signed the Memorandum of Understanding, the Wanneroo doctors would withdraw their services with effect from Monday 9 December 1996. On that date MNL agreed to sign the document and did so that evening. 146 My firm impression from the evidence, and I so find, is that the execution of the Memorandum of Understanding by MNL instead of the State had by this time become important to the AMA (WA) not only for the public interest reasons which I have described above, but also as a face-saving symbol. As Dr Roberts put it in his witness statement, the AMA (WA) at that point (early December 1996) suddenly realised that the State had not negotiated in good faith and had left it (the AMA (WA) "high and dry". After months of negotiations, the progress of which was regularly reported to the Wanneroo doctors, the Minister for Health had flatly refused to sign the document. The Minister's excuse was that the Government was in caretaker mode with a State election pending. But the documents show that this was just an excuse and that he would not have signed in any event. 147 If the Minister had been prepared to sign the memorandum I am sure that the AMA (WA) would not have asked MNL to sign the document otherwise than as a "witness" (AMA (WA)'s expression) to acknowledge the situation reached by the negotiations between the AMA (WA) and the State. Until that time, that had always been AMA (WA)'s plan for MNL's very limited involvement with that document if the Minister was to sign it. Most of the matters dealt with in the document primarily involved the State. 148 I accept Dr Roberts' evidence that so far as the AMA (WA) was concerned, the Memorandum of Understanding was always intended to be one between the Minister for Health (representing the State) and it. 149 This explains why the document which on its face might look like a memorandum of understanding between the AMA (WA) and MNL, turns out on closer examination to be something rather different - a peculiar document with many provisions which have almost nothing to do with MNL. The explanation for that peculiarity is that the Memorandum of Understanding was the culmination of many months of negotiations between the AMA (WA) and the State, with the latter pulling out of the negotiations at the last moment. (I discuss later in these reasons the particular terms of the Memorandum of Understanding.) 150 One of the applicant's lawyers, in the course of interrogating Mr MacDonald before these proceedings were issued, described the State's behaviour over this period (aptly in my view) as "duplicitous". 151 In my opinion, this description applies most appropriately to the Commissioner of Health's letter dated 9 December 1996 to Mr Boyatzis in his capacity as Executive Officer of the AMA (WA). This, so I infer, was intended to be what might be termed a "comfort letter" from the State to the AMA (WA) in relation to the Memorandum of Understanding. Mr Boyatzis had asked Mr Bansemer on 9 December 1996, for a letter confirming that the Health Department agreed with the principles contained within the Memorandum of Understanding. I accept Dr Roberts' evidence that, although the much longer letter which was sent to AMA (WA) was dated 9 December 1996, it did not reach him until some weeks later. The factual assertions, made in that letter, that AMA (WA) had misrepresented the nature of the negotiations with the State and had threatened industrial action to achieve "industrial" rather than "predominantly professional and ethical matters", conflict with the impression which I gained from an examination of the documentation passing between the AMA (WA) and the Health Department during the previous eight months. I have summarised some of that above. 152 I accept Dr Roberts' evidence that he had never indicated to Mr Bansemer or any else at the Health Department that so far as the AMA (WA) was concerned the reason for the proposed agreement was to guarantee issues related to the remuneration of doctors. In fact, when Mr Bansemer later came to give evidence, he conceded that the part of his letter where he made this allegation was wrong. 153 At the start of the letter reference is made to the impossibility of the Minister or the Government being committed by signing any agreement or other document. This observation sits most uncomfortably with Mr Bansemer's earlier minute dated 30 April 1996 to the Minister in which he advised: 'The agreement with the AMA over the employment arrangements for the doctors is yet to be finally resolved. Negotiations with the AMA are currently under way and it is hoped that this can be completed within one week.' Mr Sebbes, who drafted that minute, agreed that this was a reference to the Deed of Agreement being negotiated between him and Mr Mott. Mr Sebbes had stated in a briefing note dated 9 September 1996 to the Minister for Health that general agreement had been reached at officer level in negotiations in regard to the Joondalup Deed of Agreement, but that some issues still remained and were also of interest to MNL. 154 In the body of the letter dated 9 December 1996 there is reference to the critical importance of ensuring that any agreement reached between the AMA and MNL be consistent with the State VMP agreement and the DHSA. The letter concludes by suggesting, contrary to the assertions made at the start of the letter, that steps be taken to develop a further document of formal commitment. Implicitly the commitment would be by the State as why else would the State indicate a willingness to recommend to the Minister a resumption in negotiations? But the letter is almost a masterpiece of ambiguity. I refer to it because I think that its existence and its content (erroneous as some of it was) throws some light on the events surrounding the signature of the Memorandum of Understanding. The Memorandum of Understanding and its contents can only be properly characterised, in my view, when it is set in the context of all those events. The key aspect of such characterisation is whether that document records an understanding, made between the Participating Practitioners and MNL on or about its date, which contains a price-fixing provision or a provision which substantially lessens competition (in purpose, effect, or likely effect) in a relevant market. 155 During January and February 1997, negotiations continued, in the form of meetings and exchange of correspondence, between the AMA (WA) and MNL for the preparation of a composite document which was to contain the Joondalup By-Laws and the Joondalup VMP Agreement. The by-laws comprised a comprehensive set of by-laws for the running of the Joondalup Health Campus. They provided for the Joondalup Health Campus to have two separate hospitals. The hospital for treatment of public patients became known as the Wanneroo Community Hospital. The private hospital was called the Joondalup Private Hospital. The by-laws governed the operation of both of those hospitals, though some provisions applied exclusively to Joondalup Private Hospital. They covered a wide range of matters including appointment of visiting medical practitioners, the constitution of various committees including two medical advisory committees (one for each hospital), clinical matters and the like. The by-laws were based upon MNL's model by-laws in operation in over thirty hospitals around Australia, as mentioned above. However, they were amended in a number of key areas after persuasion from the AMA (WA). It is not necessary to give the details of such amendments. 156 Annexed to the Joondalup By-Laws was the Joondalup VMP Agreement document (described in full as the "Joondalup Health Campus Visiting Medical Practitioner Agreement") which stated that it was to govern the provision of medical services by visiting medical practitioners at Joondalup Health Campus for the treatment of public patients, i.e. at the Wanneroo Community Hospital component of that campus. It was expressed as having to be read in conjunction with the Joondalup Health Campus By-Laws. 157 The Joondalup VMP Agreement was modelled on the State VMP Agreement, with amendments to reflect the particular circumstances at Joondalup. Those circumstances included the fact that the Wanneroo Community Hospital was not run by the State, but by MNL. 158 On 5 February 1997 there was a special meeting of the Medical Advisory Committee which had been convened to consider the Joondalup Health Campus By-laws and Visiting Medical Practitioner Agreement. It was attended by eight doctors (five of them are Participating Practitioners) plus Mr MacDonald and a minute taker. After some discussion of the then current draft (and I note that very little of the discussion concerned remuneration) a motion was unanimously passed in the following terms: 'That the Medical Advisory Committee, subject to the amendments raised at this meeting, accept the rearranged document which contains the Joondalup Health Campus By-Laws and Joondalup Health Campus Visiting Medical Practitioner Agreement, and present (sic) for acceptance and ratification by active practitioners of the Medical Council.' 159 There were in fact two Medical Councils provided for in the by-laws - one for each hospital. All visiting medical practitioners appointed to either hospital were, by the terms of the by-laws, members of the respective Medical Council. There were also, as I have mentioned, two Medical Advisory Committees. On 19 February 1997, there was a special meeting of what was described as "the Medical Council". It was convened to consider the Joondalup By-Laws and the Joondalup Health Campus Visiting Medical Practitioner Agreement. (I shall continue to refer to the latter document as the Joondalup VMP Agreement). The applicant pleads and relies upon what took part at this meeting as an important part of what it says was the making of the arrangement or understanding (the Joondalup VMP Agreement) containing what are said to be the offending provisions. The meeting was attended by twenty-nine doctors, two representatives of AMA (WA), Mr MacDonald and a minute taker. Thirty-three apologies were recorded, although at least one of the names in the apologies list appeared under the heading "Present". Thirteen of the twenty-eight Participating Practitioners were in attendance, i.e. slightly less than half the number of doctors who are said to be parties to the alleged arrangement or understanding. 160 After some discussion, the following resolution was passed unanimously: 'That the Medical Council adopted the JHC By Laws and the JHC modified VMP Agreement and that the Council recommend the adoption of the above documents to the Management Committee of HCoA.' 161 I think that it is quite useful to note not just the terms of the recommendation, but the fact of the recommendation. The Medical Council can be seen to have started to take up the same advisory role vis-a-vis MNL as the former Medical Advisory Committee had performed at Wanneroo Hospital for the Health Department. This was not a meeting where any part (let alone any substantial part) of the focus could be said to have been on fixing fees. 162 On 20 February 1997, Mr MacDonald wrote to the General Manager, Corporate Services of MNL forwarding copies of the Joondalup By-Laws and the Joondalup VMP Agreement. He referred to the fact that these documents had been accepted by the Medical Advisory Committee and the Medical Council of Joondalup Health Campus and the AMA and stated that they were "put forward for formal adoption by the Management Committee" (impliedly of MNL). It does not appear from the evidence whether there was any such formal adoption by MNL, but it is common ground that those two documents were adopted and acted upon by MNL in its conduct of the Joondalup Health Campus. 163 By mid May 1997 negotiations between the State, AMA (WA) and MNL had reached the stage where the State and MNL could each make offers of engagement to the Wanneroo doctors. The alternatives were engagement by the State as an independent contractor under the terms and conditions of the Joondalup By-Laws and the Joondalup VMP Agreement as if that agreement were an agreement between the State and the doctor, or engagement by MNL as an independent contractor under the terms and conditions of the Joondalup By-Laws and the Joondalup VMP Agreement. 164 On 15 May 1997, under cover of a memo of that date, Mr MacDonald, on behalf of MNL, forwarded to each of the visiting medical practitioners at Joondalup (i.e. the Wanneroo doctors) a set of documents designed to enable them to choose which of the two alternative forms of engagement then available they preferred. Mr MacDonald's covering memo required such an election and the return of the duly completed documentation to be done by 4 June 1997. But the memo made it clear to each recipient that if he or she were considering remaining as a sessional employee of the State or engagement by MNL on a grossed up fee basis, he or she was not required to make an election at that stage. Included in the documents forwarded were copies of the Joondalup By-Laws and the Joondalup VMP Agreement. 165 On 16 May 1997, Mr Bansemer on behalf of the Health Department sent to each of the Wanneroo doctors documentation offering them the comparable alternative then available of engagement by the State on the basis described in paragraph [163] above. In his letter Mr Bansemer said that it was important for the recipient doctor to note that he or she could choose to continue with current arrangements until such time as the other options were offered. 166 As a result of these two offers, twenty-seven doctors chose to accept engagement as independent contractors with MNL on a fee for service basis and three chose the comparable engagement by the State. All of those arrangements took effect on 1 July 1997. 167 It is apparent from the terms of both Mr MacDonald's letter and Mr Bansemer's letter that in mid May 1997 negotiations were still continuing between the State, AMA (WA) and MNL on several legal issues surrounding the two additional options for engagement or employment i.e. a contract of employment with the State under the terms of the State VMP Agreement or engagement by MNL as an independent contractor under a grossed up fee arrangement. 168 By early October 1997 it would seem, and I so infer, that the State, AMA (WA) and MNL had reached agreement in relation to the outstanding issues which had to be resolved before the further two options could be offered to the Wanneroo doctors. 169 On 7 October 1997, Mr Bansemer wrote to the Wanneroo doctors offering to those who had not made their election in May 1997 the four options of employment and engagement referred to above. Mr Bansemer enclosed in his letter a letter from MNL. The doctors were requested to make their decisions by 20 October 1997 and the new arrangements were to take effect from 21 October 1997. 170 The evidence shows that far from all of the visiting medical practitioners at Wanneroo Hospital opting for engagement on a fee for service basis, many did not do so. This is reflected in the expenditure figures discussed later in these reasons. Fee for service payments amounted to about 54% of expenditure on visiting medical practitioners.

the statutory framework 171 Section 45(2) of the Act relevantly provides: '(2) A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: (i) … (ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or (b) give effect to a provision of a contract, arrangement or understanding … if that provision: (i) … (ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition. (3) For the purposes of this section and section 45A, "competition", in relation to a provision of a contract, arrangement or understanding … means competition in any market in which a corporation that is a party to the contract, arrangement or understanding … supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services. (4) For the purposes of the application of this section in relation to a particular corporation, a provision of a contract, arrangement or understanding … shall be deemed to have or to be likely to have the effect of substantially lessening competition if that provision and any one or more of the following provisions, namely: (a) the other provisions of that contract, arrangement or understanding … and (b) the provisions of any other contract, arrangement or understanding … to which the corporation or a body corporate related to the corporation is or would be a party; together have or are likely to have that effect.' 172 Section 45A of the Act relevantly provides as follows: '(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding … shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding … or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.' 173 Section 4E of the Act provides: 'For the purposes of this Act, unless the contrary intention appears, "market"means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services.' 174 Section 4F of the Act relevantly provides: '(1) For the purposes of this Act: (a) a provision of a contract, arrangement or understanding … shall be deemed to have had, or to have, a particular purpose if: (i) the provision was included in the contract, arrangement or understanding … for that purpose or for purposes that included or include that purpose; and (ii) that purpose was or is a substantial purpose …' 175 Section 4G of the Act provides: 'For the purposes of this Act, references to the lessening of competition shall be read as including references to preventing or hindering competition.'

the contraventions as explained in submissions at the hearing 176 In his closing address Mr A J Myers QC who (with Mr N W McKerracher QC) appeared for the applicant, said: '… the understandings that we rely upon are based respectively on the memorandum of understanding of 9 December 1996 and the Joondalup VMP agreement of 19 February 1997. We don't contend that the understandings respectively based upon those documents are materially different. What we contend in general terms is this, … the understanding was that Mayne Nickless Ltd would employ doctors at fee-for-service rates as prescribed by the state VMP agreement if the doctors so chose, subject to the qualification that the doctors could contract at higher rates if they chose. We put the understanding in an alternative way, that Mayne Nickless would employ doctors at fee-for-service rates if the doctors so chose, and that the doctors, if they so chose, could contract at any rate they chose. On either alternative formulation it is an understanding that controls the prices to be paid for VMP services and tends to fix those prices at the pre-existing VMP rates - or, I should say, at not less than the pre-existing VMP rates. Mayne was obliged to employ any VMP whom it chose to employ in accordance with the understanding. Mayne did not have any liberty to employ, if it chose to employ, other than in accordance with the understanding. . . . The way in which we put the case the doctors are party to the understanding is that the AMA acted on behalf of the doctors in negotiating and entering into the memorandum of understanding and the Joondalup VMP agreement, thus the doctors became party to the understanding because with their knowledge and acquiescence the AMA acted on their behalf in the way in which a union does in a collective bargaining context. In the case of the Joondalup VMP agreement, … there is an added way in which doctors became a party to the understanding by adopting it at their meeting on 19 February 1997. That is the way the case is pleaded and we don't depart from it.' 177 After I reserved judgment, I referred the above passages of the transcript to the parties for clarification. That was because, when I listened to the tape, I thought it was possible that a word or two might not have been recorded. That turned out not to be the case. The solicitor for the applicant responded by stating that the alternative ways of expressing the understanding which was the subject of its case were as follows: '1. MNL would employ the doctors who chose to be engaged at the JHC on a fee-for-service basis, at the fee-for-service rates as prescribed by the State VMP Agreement, and those doctors would accept those rates, subject to the qualification that the doctors could choose to exercise their opt-out rights and seek to contract with MNL at higher rates (and could choose to opt back to the VMP Agreement rates if they could not agree higher rates with MNL or for any other reason). 2. MNL would employ the doctors who chose to be engaged at the JHC on a fee-for-service basis, at the fee-for-service rates as prescribed by the State VMP Agreement, and those doctors would accept those rates, subject to the qualification that the doctors could choose to exercise their opt-out rights and seek to contract with MNL at any rate they chose (and could choose to opt back to the VMP Agreement rates if they could not agree other rates with MNL or for any other reason).' 178 Mr Myers accepted that it was not enough for parties jointly to agree upon a negotiator to get the best result; there must also have been an arrangement to accept or abide by what has been or is negotiated. He said that that is what happened in the creation of the understanding and in giving effect to it. Mr Myers also said this: '… our primary submission … is that the contravening understanding has the purpose or has or is likely to have the effect of controlling a price alternatively, of maintaining a price. Our primary submission though is based upon the conception of controlling.' 179 Mr Myers explained the alternative basis upon which the applicant's case was put, i.e. without reliance upon s 45A, in these terms: 'We contend that even without reliance upon section 45A there has been a contravention of section 45 in that first Mayne Nickless was a party to an understanding - I refer again to the MOU and the VMP Joondalup agreement which contains a provision having the purpose of substantially lessening competition and secondly, that Mayne Nickless was a party to an understanding which contains a provision which would have or would be likely to have the effect of substantially lessening competition. The difference in relation to this submission is that it's not necessary to show that the doctors who were in competition with each other were parties to the understanding.' 180 Mr Myers explained that the applicant relied upon the provisions of s 4G (set out above) because the offending provisions had the purpose or effect or likely effect of preventing or hindering competition. 181 The subjective purpose of the AMA was, so it was submitted, to lessen competition by ensuring that no doctor could or would contract for less than the VMP rate, so that competition between doctors was controlled. The effect of the understanding was that it actually eliminated potential competition in the relevant market or markets. In that regard Mr Myers made the following submission in relation to the effect of the offending provisions upon the market: 'It didn't just reduce it; it eliminated it, because instead of there being individual negotiations with visiting medical practitioners for the supply of services at the Wanneroo Hospital there was a continuation of the position that had obtained where the government had an agreement with the AMA as to the terms upon which these services would be provided. So that in fact instead of there being some competition there was none. With the understanding given effect to there was no competition. Without the understanding there would have been competition. There would have been competition between the visiting medical practitioners for the supply by them and the acquisition by Joondalup of their services. The issue … whether the effect upon competition was substantial is essentially an issue of fact to be judged in the circumstances.'

was there an understanding which contained a price fixing provision? 182 I use the expression "a price fixing provision" as a shorthand description of provisions of the type described in s 45A. That is, the expression is to be taken as including a provision which may be concerned with controlling or maintaining a relevant price. There are two other matters of language. 183 First, although there is at least a linguistic difference between the language used in relation to an arrangement and an understanding in s 45 i.e. one makes an arrangement or arrives at an understanding (the contravention arises if the arrangement or understanding contains an offending provision), I propose in these reasons mostly to refer to making an understanding as including, save where expressly mentioned, making an arrangement or arriving at an understanding. 184 Secondly, the contravention provided for in s 45(2)(b) is not, as pleaded and as referred to generally in the submissions, to give effect to an understanding. The contravention is to give effect to a provision of an understanding which has the purpose, effect or likely effect of substantially lessening competition or is deemed (by s 45A) to have that purpose, effect or likely effect. The two contraventions are thus, first, to arrive at an understanding which contains such an offending provision and, secondly, to give effect to that offending provision. 185 In my view, the distinction is important because I think that it is possible for a person to give effect to an understanding without necessarily giving effect to an offending provision of it i.e. by giving effect to its other provisions. 186 The authorities to date do not explain what difference (if any) there is between an understanding or an arrangement. It may be that the evidence required to establish an understanding is somewhat less than that required to prove an arrangement. Perhaps an understanding is a less formal, looser concept than an arrangement. Franki J thought so when, in Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 he said at 25: '… I would not necessarily reject a proposition that the requirements for entering into an understanding may be somewhat different and more easily satisfied than the requirements for making an arrangement.' 187 This case was conducted on the basis that there was no relevant difference between an understanding and an arrangement. For the purposes of these reasons, I will work on that assumption. Accordingly, the task is to find whether or not there was a relevant understanding. If so, who were the parties and did it contain any offending provision? Was effect given to that provision? In carrying out that task it must be borne in mind that the effect of a provision must be assessed cumulatively with the other provisions of the relevant understanding or any other understanding - s 45(4). 188 A convenient summary of the relevant authorities on the requirements of an understanding is contained in the reasons for judgment of Sackville J in Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at para [75] where his Honour said this: 'An arrangement or understanding for the purposes of s 45(2) of the TP Act is apt to describe something less than a binding contract or agreement: Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 5 ALR 465; 24 FLR 286 at 290-1 (Aust Ind Ct, FC) per Smithers J. However, in order for there to be an arrangement or understanding for the purposes of s 45(2), there must be a meeting of the minds of those said to be parties to the arrangement or understanding. There must be a consensus as to what is to be done and not merely a hope as to what might be done or happen: Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 385 (Lockhart J); Ira Berk at FLR 291 per Smithers J. Ordinarily, an arrangement or understanding involves communication between the parties arousing expectations in each that the other will act in a particular way: Email at 395. There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation: Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-1; 116 ALR 643 per Lockhart J.' 189 See also Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213 at par [79]. 190 To establish the "per se" contraventions alleged by the applicant requires proof that at least two Participating Practitioners, who were in competition with each other, were parties to the respective understandings, namely the VMP Understanding and the subsequent VMP Agreement. Section 45A so provides and the applicant acknowledged this in the extracts from the transcript reproduced above at paragraphs [176] and [179]. 191 In Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 44 ALR 557 at 566-567, Lockhart J said: 'Section 45A can have no application unless there is some form of arrangement between people. There can be no arrangement without each of the parties communicating with each other and raising an expectation in the mind of the other. Otherwise there is no requisite meeting of the minds. There must be a consensus as to what is to be done and not just a mere hope as to what might be done or happen. Independently held beliefs are not enough … In my view "maintain", where used in s 45A, has a similar connotation to the word "fix" in that it involves some element of continuity, not merely being momentary or transitory. Generally, to maintain a price assumes that it has been fixed beforehand.' 192 On appeal, (1983) 48 ALR 361 at 363 the Full Court expressed the following views: 'In our view the word "fixing" in s 45A takes colour from its general context and from the words used with it - "controlling or maintaining" - and not every determination of a price, following discussion between competitors, will amount to a price "fixing". There must, we believe, be an element of intention or likelihood to affect price competition before price "fixing" can be established. This will often be a matter of inference, requiring no direct evidence for it to be established.' 193 A most useful observation on the meaning of "controlling" a price is to be found in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 where, at 168, Lindgren J said: 'An arrangement or understanding has the effect of "controlling price" if it restrains a freedom that would otherwise exist as to a price to be charged.' 194 At paragraph [178] in that case Lindgren J expressed the view that, putting to one side de minimis cases, the degree of control, although relevant to penalty, was not relevant to the issue of contravention. 195 With due respect to his Honour I disagree with that proposition. As Mr T F Bathurst QC (who with Mr R J Wright QC appeared for the MNL respondents) submitted, the word "control" must be read in context with the words "fixing or maintaining". I accept, of course, that there are degrees of control. But, in my view, it is more consistent with the other authorities which I have quoted above, to regard the word "control" in s 45A as indicating a degree of control towards the higher end of the scale. 196 Subject to that reservation I agree, respectfully, with all of the observations from the cases which I have set out above and I propose to apply them in deciding this case.

were the Participating Practitioners (or at least two of them) parties to either of the alleged understandings? 197 The applicant's case is that the Participating Practitioners became parties to the VMP Understanding and the further arrangement or understanding said to be evidenced in the Joondalup VMP Agreement through the AMA (WA), by the "Collective Negotiations" defined in paragraph 26 of the statement of claim. In relation to the VMP Agreement the applicant contends that the Participating Practitioners became parties to that alleged understanding in an additional way, by adopting it at the meeting on 19 February 1997. 198 As to the per se allegations I think that it is very important to note this lynchpin of the applicant's pleading in respect of the VMP Understanding and, to a substantial extent, the Joondalup VMP Agreement [see paragraphs 27 (the last ten lines), 30 (again the last ten lines), 36(b) and 40A(c) of the statement of claim]. The essence of those pleas is that the Participating Practitioners became parties to those understandings by deciding to allow and allowing the AMA (WA) to establish by agreement with MNL the prices upon which they would supply their services at the Joondalup Health Campus. 199 My assessment of the evidence is that the AMA (WA) became involved on its own initiative with the re-development at Joondalup because the proposed re-development gave rise to what it perceived as important matters of medical policy. I accept Dr Roberts' evidence that the AMA (WA) became involved, not at the initiative of the Medical Advisory Council at Wanneroo Hospital, but because the State had announced a policy which involved the privatisation of that hospital, a subject in which the AMA (WA) was interested. Dr Roberts explained that the doctors at Wanneroo Hospital had not commissioned AMA (WA) to represent their interests in negotiations with the Health Department or MNL. The AMA (WA) assumed and took it upon itself to adopt that role. 200 The inferences which I make from the evidence of the AMA (WA)'s involvement are as follows. First, it had a far broader interest than simply what was happening at Joondalup. I accept as genuine its concern for the future care of public patients in hospitals throughout Western Australia. The AMA (WA) was, as I have mentioned, concerned that if private enterprise took over the running of public hospitals, the treatment and care of those patients might well be detrimentally affected by the profit motives of the private operators. This could occur if doctors were deprived of their independence in choosing how public patients were to be cared for. Where there was co-location of a private hospital and a public hospital on the one site, the AMA (WA) was concerned that a blurring of the distinctions between them would result in a reduction in the levels of private medical insurance with consequential increased pressures on the public health system. 201 There were several references, in the AMA (WA)'s minutes of meetings, to proposals for the re-development of public hospitals at Mandurah (the Peel hospital) and Bunbury along lines similar to Joondalup. I am satisfied that the AMA (WA) saw Joondalup as a test case requiring their intervention to secure not just the interests of their members, but the interests of the public generally. I take judicial notice of the fact that bodies such as the British Medical Association and the Australian Medical Association have traditionally concerned themselves with the public interest in the highest possible standards of health services and medical ethics. The evidence shows that the AMA (WA) also looks after the interests of its members. 202 I accept as genuinely reflecting the aims of the AMA (WA) and what it thought it had achieved through the execution of the Memorandum of Understanding, its circular letter dated 13 December 1996 to all accredited medical practitioners at the Joondalup Health Campus. That document read as follows: 'Dear Doctor RE: JOONDALUP HEALTH CAMPUS (JHC) MEMORANDUM OF UNDERSTANDING (MOU) Following last week's meeting of local doctors expressing concern over delays in finalising the MOU governing the future management of the JHC, I am pleased to advise that the document was signed this week by HCoA's W.A. General Manager, Mr Martin Day and I. The Government is unable to sign the MOU at present given the impending election, however the matter will be pursued following the election, provided the Government is returned to office. The signing of the MOU marks a significant milestone in the transitional arrangements currently taking place at the JHC. Whilst negotiations over the document have been long, protracted and at times frustrating, the outcome is a first under any such arrangement operating across Australia. A full copy of the MOU will be mailed to you over the next few days. The success achieved to date in influencing the physical layout of the Health Campus and the management arrangements to prevail, have only been achieved through the very strong support of all medical practitioners at Joondalup. I thank you for that support and look forward to continuing to work closely with you to ensure that the arrangements implemented at Joondalup protect the interests of the medical profession and our patients.' 203 On the face of the Memorandum of Understanding it evidences an understanding between the Minister for Health, the AMA (WA) and MNL. But were the Participating Practitioners (or at least two of them in competition with each other) in reality also parties to whatever understanding is to be found by reference to that document? Does the evidence justify a conclusion that by their conduct or their omissions they became, for the purposes of the Act, parties first to the VMP Understanding and then to the Joondalup VMP Agreement? 204 It may not be necessary, in order for two persons to become parties to an understanding through the actions of a third party, for there to be much in the way of a formal grant of authority to the third party. An understanding need not, of course, be a legally binding contract. But a finding that a person is a party to an understanding of the type pleaded is a finding that that person has the legal status of a contravenor of the Act. To support that finding the evidence must show, in my view, that the third party was sufficiently authorised by the alleged contravenor to the extent that the third party's conduct (in this case reaching an understanding containing a price fixing provision) makes that conduct the conduct of that person. The Court needs to be reasonably satisfied that such authority was granted. In my opinion, to justify that required degree of satisfaction, clear evidence is required that in the course of granting whatever authority is said to have been conferred on the AMA (WA), either by action or inaction, at least two competing Participating Practitioners authorised the AMA (WA) to make them parties to an understanding containing a provision whereby they agreed (to the limited extent that agreement may be necessary for an understanding) vis-a-vis each other to charge for their services according to the rates in the Annexure and at no less than those rates. These proceedings involve very serious complaints with potentially very serious consequences, including large pecuniary penalties. They are not criminal proceedings. But reasonable satisfaction of this allegation and for that matter, each of the key allegations in this case, is not to be produced by "… inexact proofs, indefinite testimony, or indirect inferences" - Briginshaw v Briginshaw (1938) 60 CLR 336 at 362. 205 The questions of (a) whether the Participating Practitioners sufficiently authorised or enabled the AMA (WA) to act on their behalf so as also to become parties to either or both of the understandings, and (b) whether fixing the price for their services was part of the relevant understanding, can conveniently and logically be considered together. The thrust of the statement of claim is directed primarily at what are said to be the price fixing provisions, not other provisions which are irrelevant to the state of competition in the market. 206 In that regard, I accept the evidence of Dr Roberts. Dr Roberts was not only the President of the AMA (WA), but he was also in practice as a visiting medical practitioner at Wanneroo Hospital. His evidence was that at the meeting at the AMA (WA) offices on 5 December 1996 the central focus of the doctors there present was securing the independence of the Medical Advisory Committee and the clinical independence of doctors providing services to public patients, not just at Joondalup but elsewhere in the future. This was reflected in Dr Roberts' letter to the Premier of the same date. This focus of concern is reflected in Dr Roberts' evidence (which I also accept) about his discussions with Mr MacDonald and the two directors of nursing at Joondalup on 6 December 1996. 207 I was asked to treat Dr Roberts' evidence with some circumspection. I took into account his interest in the matter, and the withdrawal of defences by him and the other AMA (WA) respondents. But I believe that he gave truthful evidence. In particular I accept the following evidence: 'There was never, in the period 1996 through to the time of the signing of the memorandum of understanding any negotiations or discussions with Health Care of Australia or representatives of Mayne concerning the fees to be paid to doctors? --- No, there wasn't. Because the position was, was it not, that that was always at least - either since this letter - from the time of this letter (Mr Bansemer's letter dated 20 November 1995 [236] to Dr Boyatzis) or from the time that Dr Catchlove told you of HCoA's position in January, taken as a given? --- That's correct, yes. That being the case may we take it that so far as you're aware, AMA never sought authority from the Wanneroo doctors to negotiate with Mayne in relation to the fees to be paid by Mayne for the supply of the doctors' services? --- That's correct. There were, in fairness, some discussions regarding changes to fee - the potential to change from sessional arrangements to fee for service arrangements? --- That's right. And there were some discussions about whether people would get long service leave and transitional payments? --- Yes. But apart from that, it was simply a matter that was never the subject of negotiations? --- That's right. And something that the AMA was never, as far as you are concerned, asked by the doctors to negotiate? --- That's correct.' 208 I also accept the evidence of Mr Anthony Geddes, an orthopaedic surgeon at Wanneroo Hospital since late 1994. Mr Geddes was an elected member of the Medical Advisory Council at Wanneroo Hospital at the relevant time. His memory of matters of detail was not strong. I did not find that surprising, given that about five years had elapsed between the relevant events and the signing of his witness statement, with his oral evidence being given some two years later. But I accept the truth of what he did remember about remuneration. 209 Mr Geddes is alleged by the applicant to be one of the Participating Practitioners. He was taken in cross-examination to the circular letter dated 3 May 1996 sent by Dr LaValette to all the Wanneroo Hospital doctors. There was then the following exchange: 'You were aware at about this time that if employment or engagement was to be offered by HCoA, it would be as set out in the second dot point; namely, "conditions of employment, if employed, will be per the awards agreed from time to time between the AMA and the minister for health for sessional and fee for service payments? --- Yes.' 210 Next Mr Geddes was referred to the circular letter dated 24 May 1996 sent by the Wanneroo Hospital to its doctors. He gave the following evidence: 'You understood that Health Care of Australia had agreed to pay visiting medical officers according to the rates of pay as agreed between the minister for health and the AMA which covers fee for service, sessional and salaried arrangements? --- Yes. So in that sense, your concerns about what might happen to you if HCoA came in were allayed, were they, at that stage? --- My understanding was that the scale of pay was going to be the same. As to what other ramifications there were involved with being paid by HCoA or being paid by the government, I wasn't completely sure of whether there were any other ramifications at the time.' 211 Mr Geddes was then taken to Dr Catchlove's letter of 18 July 1996. Part of his evidence in cross-examination was as follows: 'So in a sense remuneration as far as you were concerned was really from 24 May and from this letter of 18 July not an issue for you. It was the other issues of clinical independence which troubled you? --- Yes. . . . So the commitments made by the parties that are referred to in paragraph 17 [a reference to Mr Geddes' witness statement] aren't commitments made by signing the MOU --- No.' 212 Later in cross-examination Mr Geddes confirmed this in the following exchange: 'By about May 1996 you knew that Health Care of Australia would make offers of engagements with rates that matched the rates of remuneration agreed between the government and the AMA for sessional and fee for service? --- Yes. You understood that at about May 1996. That's right, isn't it? --- Yes. Around that time, yes, yes. … And you understood from at the latest July 1996 that the government was going to offer employment on a fee-for-service or sessional basis to doctors at the Joondalup Health Campus? --- Yes. Once again, that would be around that time. I can't remember the specific dates for those.' 213 The applicant does not allege that Mr Kubacz was one of the Participating Practitioners, probably because when offers of employment or engagement were eventually made, he did not opt for a fee for service arrangement. But he had been a surgeon at Wanneroo Hospital since 1980, had been a member of the Medical Advisory Council for many years, and was elected as its chairman in October 1996. He was also a member of the Wanneroo Contact Group. My impression of him, and I so infer, was that he was well aware of what was happening in the affairs of the Wanneroo Hospital in late 1996. I observed also that he was not a man who was prepared to allow counsel to put words into his mouth which did not reflect his own views. There were several instances when he resisted what he perceived to be such an attempt. I accept his evidence as being truthful. 214 In cross-examination Mr Kubacz was asked how he viewed the Memorandum of Understanding. The evidence was as follows: 'Did you understand at the time [11 December 1996] what the reference to the memorandum of understanding was? --- The memorandum of understanding basically was an understanding between the government, the AMA and HCoA as to how the public sector at Joondalup Hospital ought to function basically. Particularly in relation to the clinical governance issues? --- Yes, the running of the place. The running of the hospital? --- Yes.' 215 I accept Mr Kubacz's evidence that he had been aware since May 1996 that MNL would meet the same conditions and the same pay rates as those that had been negotiated between the State and the AMA (WA) and his further evidence that at the meeting of the Medical Council on 19 February 1997 there was no discussion of remuneration on a fee for service basis. 216 Four of the Participating Practitioners gave evidence. They were Mr Bose, Dr Ismail, Mr Geddes and Dr Mitra. I have referred above to Mr Geddes' evidence. Neither Mr Bose or Dr Mitra were cross-examined. Neither of them gave evidence-in-chief to the effect they reached a horizontal understanding or arrangement with any other Participating Practitioner to accept and only accept the fees negotiated on their behalf by the AMA (WA). 217 Dr Ismail did not give such evidence either. Her evidence was to the contrary. I accept unreservedly the truthfulness of her evidence. In cross-examination she was referred to the Wanneroo Hospital letter of 24 May 1996 and gave the following evidence: 'Do you recollect actually noticing what is recorded in point 5 there, that Health Care of Australia have agreed to pay visiting medical officers according to the rates of pay as agreed between the Minister for Health and the AMA, which covers fees for service, sessional and salary arrangements? --- Yes. So is it true that, or is it likely that by about 24 May 1996 you understood what Health Care of Australia's position was in relation to the engagement of the medical practitioners at Wanneroo? --- Yes.' 218 Dr Ismail gave evidence that she recalled that in early December 1996 the Wanneroo doctors had agreed that they should make a stand, that things had gone on long enough and offers of employment or engagement had not been forthcoming. She was asked about her attendance at the meeting on 5 December 1996. The following exchange took place: 'So the essential purpose in the sense of your being at that meeting and voting as you did was to get some formal direction on whether the government was going to continue as an employer and to get the clinical governance issues out in the open so that you knew whether it was going to be preserved as a community hospital with clinical practitioner independence? --- Yes yes.' 219 Later, in re-examination, she gave the following evidence: 'Do you recall any departmental arrangements in which you participated or of which you were aware concerning fee for service? --- No I don't. Did you have any discussions with other members of your department concerning fee for service? --- There was a lot of casual discussion throughout this period but I don't - we certainly had no meeting of any sort to discuss these things. Did you come to some sort of agreement or arrangement with your fellow practitioners in the Department of Anaesthetics? --- No. Concerning fee for service --- No.' 220 So far as the Wanneroo doctors as a whole were concerned I infer, principally from the minutes of the various meetings of the Medical Advisory Committee at Wanneroo and eventually the Medical Advisory Council and the evidence given by some of those doctors, that generally speaking, they were content for the AMA (WA) to conduct negotiations with the State and MNL. I use the expression "generally speaking" because there were some Wanneroo doctors who dissented. They included Dr LaValette and Dr Oehlers. Mr Kubacz, in his evidence, confirmed that in May/June 1996 there were some Wanneroo doctors who chose to deal with MNL individually rather than through the AMA (WA). He drew the AMA (WA)'s attention to this in his letter dated 4 June 1996. 221 I infer that it was only as a result of such dissent that the AMA (WA) was prepared to accept a situation in which MNL directly engaged visiting medical practitioners. The AMA (WA) sought to create the impression of unanimity among the Wanneroo doctors in their support for it. From the evidence as a whole, I infer that this was not in fact the case. The divergence of views was not confined to Doctors LaValette and Oehlers. At one stage of his evidence Dr Roberts referred to representing doctors as being "like herding cats". This was in the context of the meeting of 6 December 1995. 222 I accept that those of the Participating Practitioners who, by attending the various meetings took an interest in various matters to do with the re-development of Wanneroo Hospital including the matter of remuneration, were aware of and content to allow the AMA (WA) to negotiate with the State and MNL on their behalf in relation to the offers of (respectively) continued employment or engagement as independent contractors. The fixing of rates of remuneration was a different matter. 223 I accept the submissions on behalf of the MNL respondents that there had to be proof of a horizontal understanding or arrangement between the competitor doctors that they would accept and only accept in effect the fees negotiated by AMA (WA). Mr Bathurst submitted that it would not be enough for the applicant to establish that the Participating Practitioners had, for example, instructed the AMA (WA) to get them as much money as it could, because if the Participating Practitioners had not so constrained themselves, there could be no relevant arrangement or understanding. Mr Myers agreed that it was not enough to establish that the Participating Practitioners agreed jointly upon a negotiation to get the best results; there must also have been an arrangement to accept or abide by what "has been or is negotiated". 224 I accept also that in an appropriate case a horizontal price-fixing agreement of the type pleaded may be inferred from the objective circumstances without direct evidence of communication and commitment. But the circumstantial evidence did not point to any such agreement. 225 After consideration of the oral and documentary evidence I find that the extent of authority granted to the AMA (WA) by those of the Participating Practitioners who took part in the various meetings and correspondence, was limited to matters of good governance and clinical independence and also to bring about the offers by the State and MNL respectively of two choices from each of those bodies of terms and conditions for their future employment or engagement. Once those choices had been offered to them, they were free to proceed as each of them saw fit. There was not to be any commitment or obligation, whether mutual or otherwise, about what level of fees they might charge. The authority did not extend, in my assessment, to entering into any further understanding on their behalf with either the State or MNL, let alone an understanding containing a price fixing provision which would have denied them (had they so wished) flexibility in their rates of charges. 226 My firm impression from the evidence was not one of the Participating Practitioners retaining, engaging or authorising (whether formally or informally) the AMA (WA) to act on their behalf in negotiating a set of fees, whether the fees set out in the Annexure or otherwise, which were to be either the minimum fees or fees controlled or maintained at the levels in the Annexure. 227 There was no evidence, for example, of meetings at which the Wanneroo doctors arrived at an understanding among themselves to be employed or engaged on any particular basis, or that if they were engaged on a fee for service basis, they would not charge rates lower than those provided for in the Annexure. 228 I do not think that the evidence establishes that two or more of the Participating Practitioners became parties to a price fixing provision, in the sense of becoming parties to an understanding containing such a price fixing provision, through the actions of AMA (WA) in negotiating either the VMP Understanding or the VMP Agreement. 229 Strictly speaking in those circumstances, it is unnecessary to consider whether there was sufficient proof that two or more of the Participating Practitioners were in competition with each other in one or other of the markets pleaded. 230 In their written submissions the respondents observed that there was little if any evidence directed to the issue of whether the Participating Practitioners could properly be said to be in competition with each other when supplying services at the Wanneroo Hospital. There was, so it was put, a lack of evidence to establish which if any practitioners were actually parties to the alleged arrangement and whether any were in the same speciality so that it might be argued that they were in competition with each other. It could not, so it was submitted, be accepted without some substantial evidentiary foundation that an orthopaedic surgeon supplies services in competition with a gastroenterologist or an anaesthetist. 231 Nevertheless, in oral submissions Mr Bathurst said this: '… we accept there is more than one GP and more than one anaesthetist so it probably overcomes that hurdle …' 232 This was in the context of an assumption that the diverse group of Participating Practitioners listed in schedule 1 to the statement of claim included persons who were in competition with each other. I think that it is fair to say that when it came to final submissions the respondents' case was fought on the basis of that assumption. 233 On the other hand, I was not taken by the applicant to any parts of the evidence which were said to establish that at least two of the Participating Practitioners were in competition with each other. Perhaps this was a consequence of Mr Bathurst's apparent concession above. 234 Mr Bathurst accepted the accuracy of a document headed "Participating Practitioners" which was passed up by the applicant towards the end of the hearing. That document listed the Craft Group for each of the Participating Practitioners. The only other information conveyed in the document was whether any particular doctor had been a witness at the trial or had been present at the meeting of 19 February 1997. As Mr Bathurst pointed out, attendance at that meeting is not pleaded as the basis upon which the Participating Practitioners are said to be parties to the relevant understanding. What is pleaded in relation to that meeting is the alleged adoption of the Joondalup VMP Agreement by the doctors present at the meeting. 235 If the question were still in issue, in my view, the evidence did not descend to sufficient particularity to identify any two Participating Practitioners who were in competition with each other. Nor did the evidence descend into particularity to identify which, if any, of the Participating Practitioners became parties to either of the understandings through the conduct of the AMA (WA). 236 Given the sort of evidence which cases such as Briginshaw v Briginshaw explain is required in matters as serious as this, I am not reasonably satisfied that the applicant has proved that any two of the Participating Practitioners were in competition with each other. 237 If I am wrong in my assessment that two or more competing Participating Practitioners were not parties to either the VMP Understanding or the subsequent VMP Agreement through the actions of the AMA (WA), then it is necessary to consider whether any of the provisions of those understandings relied upon by the applicant had the purpose, effect or likely effect of price fixing. I shall deal first with the VMP Understanding. 238 The provisions in the Memorandum of Understanding upon which the applicant relies are Cl 9 which provided that visiting medical practitioners at Joondalup would be offered the option of engagement by MNL on a fee for service basis under the terms and conditions of what the applicant contends (and the respondents dispute) is the State VMP agreement, and Cl 12 which, after providing for negotiations to remove conflicts between the State VMP Agreement and MNL's by-laws, stated that in the meantime the State VMP Agreement would apply. Those clauses were in the following terms: '9. EMPLOYMENT/ENGAGEMENT OF MEDICAL PRACTITIONERS The Board or the Minister on behalf of the Board will make offers of employment/engagement to existing and future medical practitioners for the purposes of providing public patient services at the Wanneroo Hospital. Such offers will be conveyed to Medical Practitioners accredited to the Wanneroo Hospital as one of the following options of employment/engagement: (a) a contract of employment with the Government under the terms and conditions of the WA Government Health Industry Medical Officers and Medical Practitioners Agreement 1996 or as replaced from time to time. (b) Engagement by Government as an Independent Contractor under the terms and conditions of the Visiting Medical Practitioners Agreement. (c) Engagement by HCoA as an Independent Contractor under a grossed up arrangement. (d) Engagement by HCoA as an Independent Contractor under the terms and conditions of the Joondalup Health Campus By-laws and Visiting Medical Practitioners Agreement. Offers of employment/engagement will be conveyed to Medical Practitioners currently employed/engaged by 28 February 1997 based upon options a) or c) above. Discussions regarding the introduction of fee for service arrangements under b) and d) above in terms of the efficient use of operating theatres and other facilities, and the role delineation of the hospital, shall be concluded by 31 May 1997 between the AMA, HCoA and accredited Medical Practitioners. Medical Practitioners will then be eligible on a discipline by discipline basis (unless otherwise agreed) to elect to be engaged under arrangements b) or d) above, effective from the date of commissioning of the new health campus facilities. Provided that, if during the period leading up to commissioning, an agreement is reached with the Health Department of W.A. to fund in-patient activity at the average D.R.G. benchmark rate applicable in other non-teaching public hospitals in Western Australia, Medical Practitioners will be eligible to elect to be engaged under the arrangements b) or d) above, from that date. Medical Practitioners wishing to secure the transitional payment must elect to take up option c) or d) by 1 April 1998. Medical Practitioners electing fee for service arrangements will be required to actively participate on an availability roster. When rostered to provide such availability, Medical Practitioners will be expected, under normal circumstances, to attend the hospital when requested, to provide medical services. …

12. APPLICATION OF THE VISITING MEDICAL PRACTITIONERS AGREEMENT The AMA and HCoA will review the current Visiting Medical Practitioners Agreement and HCoA Bylaws in order to resolve any areas of conflict by 31 January 1997. Until such time as the above review is completed to the satisfaction of the parties, the Visiting Medical Practitioners Agreement applies. Any unresolved issues will be referred to the review group identified under the section "Monitoring of Memorandum" in this Memorandum and shall include a nominee of HCoA. Any unresolved issues by this group shall be referred to the Minister for resolution.' 239 In my view, the only relevant understanding reflected (I think that "evidenced" would be inaccurate and too legalistic a term) by the Memorandum of Understanding was that MNL would make the two offers of engagement referred to in Cl 9, and would work with the AMA (WA) to harmonise its by-laws with the State VMP Agreement (Cl 12). But these commitments (whether moral or legal) had been made by MNL some considerable time previously. 240 Mr Myers submitted that the reference in Cl 9(d) to the "Joondalup Health Campus By-Laws and Visiting Medical Practitioners Agreement" was (as the applicant pleads in paragraphs 30 and 40A(c) of the statement of claim) a reference to the State VMP Agreement. He relied on this definition in Cl 1 of the Memorandum of Understanding: ' "Visiting Medical Practitioners Agreement" means the document titled "Terms and Agreement concerning the provision of Medical Services by Visiting Medical Practitioners in State Government Non Teaching Hospitals of Western Australia", between the Minister and AMA.' 241 I reject that construction. The Memorandum of Understanding is not a contract, it is put forward as an understanding. In my view, Cl 9(d) refers to the terms and conditions of the composite document, which was by then well into the course of being drafted, whereby that composite document, the Joondalup Health Campus By-Laws and the Joondalup Visiting Medical Practitioners Agreement, was harmonised with the State VMP Agreement. In other words, the reference is to one document, not two. That is, in my view, confirmed by the absence of the word "the" immediately before the word "Visiting" in the sub-clause. I see no problem, when construing an understanding, in attributing an intention to the parties to reach consensus in respect of a document that was still being developed i.e. what might otherwise be described as an agreement to agree. That was the evolutionary process which was going on (and had been going on for some months) as at 9 December 1996. 242 If the Memorandum of Understanding had been a contract there would have been no basis, in my opinion, upon which to found an action for breach of contract if one of the Participating Doctors had sued one of his or her colleagues for agreeing to lower their rates in the Annexure. Nor was any such moral commitment expressed. 243 There is a question whether the purpose of a provision is to be assessed subjectively or objectively. In ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 477, a Full Court of this Court held that the references in s 45(2) to the purpose of provisions of a contract, arrangement or understanding are to the subjective purpose of those engaging in the relevant conduct. In doing so, their Honours upheld Toohey J's views that the test was subjective but that the application of a subjective test did not exclude a consideration of the circumstances surrounding the reaching of the understanding. Their Honours were not considering s 45A. 244 In Australian Competition and Consumer Commission v Pauls Ltd [2002] FCA 1586, O'Loughlin J had to consider whether the question of the purpose of a provision referred to in s 45A should be approached subjectively or objectively. At par [104] his Honour said: 'The very nature of s 45A and its deeming effect contradicts the presence of a subjective state of mind. The language of the section requires a dispassionate onlooker to stand back and make an objective assessment of all relevant facts and circumstances. If that assessment reveals a purpose or an effect, or a likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of prices then the provision shall be deemed to have the proscribed purpose, effect or likely effect. The words "likely to have the effect" can only mean, in my opinion, that one has regard, objectively, to what has happened or is likely to happen, ignoring the subjective state of mind of the relevant parties.' 245 His Honour's attention was not drawn to the Full Court's decision in ASX Operations Pty Ltd. The applicant made a formal submission that the Full Court had erred in that case. 246 In my view, there is no basis upon which a different test should be applied to assess the purpose of a provision referred to in s 45A to that which the Full Court in ASX Operations Pty Ltd has explained should be applied in relation to s 45. 247 I consider that I am bound to apply the subjective test explained by the Full Court in ASX Operations Pty Ltd and at the same time give due consideration to the circumstances surrounding the reaching of the two understandings. 248 The applicant submitted that, in those circumstances, the purpose of the AMA (WA) was the relevant purpose. But, in my view, the purpose of the AMA (WA) cannot, on the applicant's case, be a separate purpose to the purpose of the Participating Practitioners. If it can, then I accept Dr Roberts' evidence that the AMA (WA) did not have the pleaded purpose when it entered into either the Memorandum of Understanding or the VMP Agreement. 249 On the basis of the factual findings which I have made above and the reasons which I have set out above, I find that it was not the purpose, or a substantial purpose [s 4F(1)(a) of the Act], of the Participating Practitioners if (contrary to my earlier finding) they became parties to either or both of the pleaded understandings, to assume any obligation or give any undertaking as between each other, whether mutually or otherwise, to set their fees at not less than those contained in the Annexure. That is, there was no subjective purpose to fix prices. 250 If, despite ASX Operations Pty Ltd, or to the extent that is consistent with that decision, the purpose of a provision may be judged objectively, I find that the objective purpose of the relevant provisions in the VMP Understanding and the VMP Agreement was not to "fix" prices in the sense used in s 45A. There was no commitment as between the doctors not to charge fees below those in the Annexure. The relevant provisions simply reflect that MNL was willing to stand in the market place for their services, offering the fees in the Annexure. This was in the context of other provisions which provided flexibility on both sides in respect of terms and conditions of engagement, including remuneration. MNL was a purchaser of services. In the absence of any minimum price fixing by the vendors, the relevant provisions did not bring it into contravention of s 45 when read with s 45A. This case is to be distinguished from cases like Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 and Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10. Not only was MNL a mere purchaser, but the vendors had not fixed their prices. 251 Nor, in my opinion, did the provisions of the Memorandum of Understanding have the effect or likely effect of fixing prices. I have found that both the State and MNL had decided to offer employment or engagement to all of the currently accredited Wanneroo medical practitioners at the rates contained in the Annexure some considerable time, probably as early as May 1996, before the Memorandum of Understanding was entered into. Interim agreement had been reached on 7 June 1996 between the State and MNL for the Wanneroo doctors to be remunerated in accordance with the relevant awards and the enterprise agreement (i.e. the State VMP Agreement) from 1 June 1996 until the expiry of their various current contracts. Agreement was also reached by 9 October 1996 for the State VMP Agreement (and hence the Annexure rates) to apply pending the harmonisation of that Agreement and the Joondalup by-laws. 252 The evidence establishes, in my view quite clearly, that by no later than 18 September 1996 (see Mr MacDonald's memorandum of that date) MNL had re-confirmed its earlier position that if the visiting medical practitioners were to be engaged on a fee for service basis, they would be offered the rates of payment in the Annexure. This was not, in my opinion, a matter which had its source or effective manifestation in the Memorandum of Understanding. The die had been cast long before. If it had not been cast before the State's decision to make the offers (as I think it was), it was locked in thereafter. 253 I now turn to the question whether the relevant clauses of the Joondalup VMP Agreement had the effect of fixing prices in the manner pleaded. 254 As a preliminary comment, it should be stressed that the Joondalup VMP Agreement is to be read with the Joondalup Health Campus By-Laws as a whole. Recital D to the Joondalup VMP Agreement so provides. Both documents deal with many matters other than remuneration. It is also, in my view, useful to bear in mind that the composite document applied to all visiting medical practitioners, whether they were employed or engaged by the State or MNL and irrespective of the basis of remuneration. 255 As a further preliminary matter, I find that the Joondalup VMP Agreement again reflects an agreement or understanding in the terms in which it is expressed. That part which can be described as the product of the process of harmonising MNL's by-laws with the State VMP Agreement may be regarded as new, although the process had been going on for some months. But the provisions relating to the alternative offers of engagement were not new; they had been arrived at or entered into many months previously. For the reasons which I set out below, in my opinion, none of the provisions of the Joondalup VMP Agreement had the effect or likely effect of fixing the relevant prices. Nor, for that matter, did they have the purpose effect or likely effect of substantially lessening competition in any relevant market. 256 I shall not set out the text of the relevant clauses of the Joondalup Health Campus By-Laws, but I shall refer to some of them. Clauses 2 to 14E deal with such matters as the power of the Management Committee (an MNL body) to make by-laws, rules and policies for the operation of its hospitals, the appointment and responsibilities of the Chief Executive Officer, the Director of Nursing, the Executive Staff and the establishment and functions of various other committees. Clauses 15 to 30 concern visiting practitioner appointments. Clauses 31 to 38 relate to the composition and functions of the Medical Council. Clauses 39A to 44 are concerned with the Medical Advisory Committees, clauses 45A and 45B with Credentials Committees. As I have earlier mentioned, there are separate such committees for the private hospital and the public hospital. Clause 46 establishes a Clinical Review Committee. 257 This brings me to the relevant provisions of the (annexed) Joondalup VMP Agreement. Clause 2.5 of that document provides that individual medical practitioners, who are otherwise qualified for appointment as visiting medical practitioners under that agreement, may enter into individual or collective agreements in accordance with it, which are consistent with the principles set out in clauses 2.1 to 2.4 of the Agreement. Clause 2.1 provides that patients should have access to their medical practitioner at the Joondalup Health Campus for the provision by their chosen medical practitioner, or specialist to whom their medical practitioner has referred them, for all services appropriate to and available at that Campus. Clause 2.4 provides that the Governing Body (defined as MNL's Management Committee) has ultimate responsibility for and control of all aspects of the management and operation of the Joondalup Health Campus but, subject to the provisions contained in the agreement, will not have control of or responsibility for the clinical decisions of visiting medical practitioners. 258 Clause 4.1 provides that the Governing Body may, from time to time, appoint medical practitioners to provide medical services on a fee for service basis "or other agreed arrangements" to public patients within the hospital as a visiting medical practitioner. 259 Mr Bathurst submitted that clause 4.1 made it clear that there was no obligation on the Governing Body to employ doctors on a fee for service basis. If MNL came to the view that it was better to employ doctors in a particular area on a salaried basis, on a sessional basis or at some other rate of remuneration it was entitled to seek to do so. That is, the phrase "or other agreed arrangements" meant as agreed between MNL and the doctors. Mr Myers contended that this meant as agreed between MNL and AMA (WA) because they were the two parties to the Joondalup VMP Agreement. To construe the clause otherwise would be to render "inutile" the twelve months of negotiation. 260 I accept the respondents' submissions. It is true that the parties to the Joondalup VMP Agreement were the AMA (WA) and MNL. But I think that clause 4.1 is talking about the subsequent agreements which may be made between MNL and medical practitioners seeking appointment at Joondalup. My assessment of the documentary and oral evidence is that the Wanneroo doctors would have expected individually to have flexibility to make alternative arrangements with MNL. There was evidence of some such approaches during 1996. 261 It needs to be remembered that these are not alleged to be contractual arrangements, but things of a lesser degree of commitment. I reject the applicant's contention that the construction proposed by the respondent would render all the previous negotiations useless. 262 I do not think that such a construction would do that. The negotiations can be seen as aimed at achieving a framework for the operation of the hospitals and the appointment of medical practitioners, not as a meticulous set of conditions to govern each and every such appointment. 263 Nor do I think that such a construction is inconsistent with recital C of the Joondalup VMP Agreement. Recital C relevantly provides that the AMA and MNL entered into the Agreement to record the terms and conditions on which medical practitioners would be engaged at the Joondalup Health Campus. I do not think that that recital is inconsistent with the provision of a framework for the doctors to negotiate individually, from time to time, on their own behalf. 264 In my view, such a construction is a logical construction of clause 4.1 itself and is consistent with the opt-out provisions found elsewhere in the same document. I now turn to those opt-out provisions. 265 Clause 9.1 provides that medical practitioners providing medical services on a fee for service basis to public patients at the Joondalup Health Campus shall be remunerated in accordance with the [Annexure] "or on a Modified Fee for Service basis, as agreed between the parties from time to time to ensure, among other things, that appropriate "on-call" arrangements are in place to meet the level and nature of services delivered." 266 Once again, I would construe that clause as referring to agreements made between MNL and the doctor or doctors rather than the AMA (WA). I think the reference to "on-call" arrangements confirms this. Those sorts of arrangements are peculiarly matters for negotiation between the hospital and the doctor as and when the occasion arises. 267 Clause 4.17 provides that every proposal to enter into an individual or collective agreement shall be referred to the Medical Advisory Committee, which is to consider the proposed agreement as rapidly as practicable and advise the Governing Body in relation to it. The clause further provides that the Committee shall not be provided with and shall not take into consideration any information relating to or advise upon the fee/remuneration arrangements of the proposed individual or collective agreement. As Mr Bathurst submitted, a proposition that the Joondalup VMP Agreement contains a price fix does not sit easily with a clause like clause 4.17. 268 Clause 4.18 provides that in considering whether to enter into an individual or collective agreement, the Governing Body (i.e. MNL's Management Committee) may not require or consent to terms which are anti-competitive, shall take into account, but not be bound by, the advice of the Medical Advisory Committee and must ensure (subject to not requiring or consenting to terms which are anti-competitive) that no "eligible person" (a reference to a person entitled to Medicare benefits) and no Visiting Medical Practitioner is adversely affected by the individual or collective agreement (emphasis added). 269 Mr Myers submitted that the words which I have emphasised mean that MNL may not enter into a contract with a medical practitioner unless the terms of the contract are at least as favourable as contained in the State VMP Agreement. 270 There is no definition of the expression "adversely affected". In my view, in the absence of such definition, those words simply mean what they say, i.e. that in the mutual trade off in negotiations between MNL and the doctor over such matters as the basis for charging, access to convenient theatre times, on-call and the like obligations, the doctor is not to be worse off. The clause should be construed in the context which includes the provisions of clause 4.16 which give a medical practitioner who has entered into an individual or collective agreement the right to revert to the terms of the Joondalup VMP Agreement upon giving one month's notice. 271 Given that right, I find it difficult to give such specific content to the expression "adversely affected" in the manner suggested by Mr Myers. In my opinion, the relevant clauses of the understanding evidenced by the Joondalup VMP Agreement give the visiting medical practitioners the right to negotiate an individual or collective contract plus the right to opt back to a contract governed by the terms of that document. 272 The clauses are obviously intended to provide a considerable degree of flexibility for negotiating fee for service rates. 273 In my view, on their proper construction, the provisions of the Joondalup VMP Agreement pleaded by the applicant do not have the effect or likely effect of price fixing. In particular, I do not think that those provisions or any other evidence establishes that as part of that understanding or the VMP Understanding MNL accepted any commitment to acquire the relevant medical services at not less than the rates in the Annexure. 274 As I have mentioned above, the prices which MNL agreed to offer had been established as being in accordance with the Annexure at least by as early as July 1996 and possibly even earlier in May 1996. With the State being prepared at all relevant times before the making of either the VMP Understanding or the Joondalup VMP Agreement to offer visiting medical practitioners the option of engagement at the fee for service rates listed in the Annexure, MNL had no choice but to do the same. If there was any price rigidity, that was the real cause. It was not the terms of either of those alleged understandings which had the effect of fixing the relevant prices (if there was such a fixing), but the market circumstances. 275 In my view, nothing in the provisions of either the VMP Understanding or the VMP Agreement had the effect or likely effect of fixing prices in the manner pleaded. 276 Accordingly, I conclude that the deeming provisions of s 45A do not operate in relation to any of the provisions of the VMP Understanding or the VMP Agreement which are said to have come into force through the conduct of AMA (WA) on behalf of the Participating Practitioners. 277 In case I am wrong in that assessment, there remains the question (in the context of the application of s 45A) whether the evidence establishes that the Participating Practitioners became parties to an arrangement or understanding in the form of the Joondalup VMP Agreement, by adopting it at the meeting of 19 February 1997. That was the special meeting of the Joondalup Medical Council. 278 There were very detailed minutes of what took place at that meeting. As I have mentioned, there were twenty-nine medical practitioners present (thirteen of whom are Participating Practitioners) and thirty-three sent their apologies. Dr Roberts' recollection (which I accept) was to the effect that, as best he could recall, there was no other matter of significance discussed at the meeting which was omitted from these minutes. 279 In my view, the minutes show that the key provisions of the proposed new Joondalup Health Campus By-Laws and the other part of that composite document, the Joondalup Health Campus Visiting Medical Practitioner Agreement, were explained to the meeting. There was also reference to the four alternative offers of employment which were to be sent to the doctors. But in my opinion, there is nothing in those minutes to suggest that if there were Participating Practitioners in competition with each other present at the meeting, any two of them reached an understanding containing a price fixing provision. That is, to the effect that if he or she chose engagement by MNL on a fee for service basis, it would be at the rates specified in the Annexure and at not less than those rates. 280 My firm impression from those minutes, and from the evidence given by the Wanneroo doctors called by the applicant, is that the doctors present were giving their approval to the over-arching document which would govern a whole host of matters relating to the management and operation of the public and private hospitals which constituted the Joondalup Health Campus. I am not prepared to infer that, even as a part of that endorsement, the doctors present made themselves parties to a price fixing provision of the type pleaded by the applicant. In fact the whole tenor of the oral evidence given by those doctors who gave evidence was inconsistent with that understanding having been reached at the meeting of the Medical Advisory Council on 19 February 1997. That evidence was consistently to the effect that the terms of their remuneration i.e. the offers which would be made to them had been settled by July 1996. 281 As the respondents submitted, the minutes of that meeting show no discussion or even mention of rates of remuneration. Nor is there any other evidentiary basis to suggest that there was any communication between any of the Participating Practitioners whereby they assumed an obligation or undertaking or raised an expectation that they would act in any particular way concerning the offers to be received by them from the State and MNL. 282 It was submitted on behalf of the applicant that even if there was no relevant obligation between the Participating Practitioners not to charge less than the rates contained in the Annexure, there could still be a requisite understanding which controlled those prices if the party to the understanding, who is the acquirer, (i.e. MNL) was bound by that understanding to acquire at not less than a price unless released from that obligation by the provider. That was because, from a practical point of view, so it was contended, the price would tend to be fixed, that is to say controlled, at the level at which the acquirer has bound itself to acquire. 283 I doubt whether that submission conforms with the case as pleaded by the applicant. But if it does, I reject the submission on the facts and on the construction of the relevant provisions of both the State VMP Agreement and the Joondalup VMP Agreement. The latter substantially mirrored the relevant terms of the former. 284 In that regard it is useful to see how the AMA (WA) regarded the identical opt-out provisions in the State VMP Agreement. As the task in hand is not to construe a contract but to assess the content of an understanding, I think it is permissible for that purpose to have regard to this piece of evidence. It appeared in a letter dated 21 February 1996 from Mr Mott to Mr Sebbes, and was in these terms: 'Notwithstanding the choice offered by either the fee for service or rolled up rate arrangement, further flexibility is available through the opting out provisions of the Visiting Medical Practitioners' Agreement which essentially enables the medical practitioner to opt out of either of those options by entering into an individual or collective agreement with the hospital concerned.' 285 Given the date of this letter (i.e. long before the development of the combined Joondalup Health Campus By-Laws and Joondalup Visiting Medical Practitioners Agreement) and its content, the above passage was clearly a reference to the State VMP Agreement. 286 I reject the applicant's additional submission for the reasons which I have earlier given. That is, in my view, the relevant provisions of the Joondalup VMP Agreement gave a considerable degree of flexibility to MNL and were intended to do so. MNL did not, as the applicant's alternative case was put in oral submissions (not in my view the way in which the case was pleaded), bind itself to employ visiting medical practitioners if it chose to do so on terms no less favourable than the State VMP Agreement. Furthermore, to the extent that my construction of those provisions is wrong, their effect was not to fix the relevant prices. In practical terms, once it became apparent from about May to July 1996 that the State was going to offer to the Wanneroo doctors, including in particular the Participating Practitioners, the option of employment on a fee for service basis at the rates contained in the Annexure, MNL thereafter had no choice. It was not the terms of the Joondalup VMP Agreement which may have constrained (contrary to my view) MNL to offer those rates, but the realities of the market place. If MNL wanted to attract the doctors it needed for the new Joondalup Health Campus, it had to pay the going rate and the going rate had been established by the State. 287 It was submitted on behalf of the applicant that MNL's purpose in relation to the alleged price fixing provisions was not relevant. The respondents agreed with that proposition. 288 For the foregoing reasons I have concluded that none of the provisions of the VMP Understanding or the VMP Agreement had the purpose, effect or likely effect of fixing controlling or maintaining prices in the manner pleaded in the statement of claim. That part of the applicant's case which is based on the deeming provisions of s 45A of the Act must fail.

did the relevant provisions have the purpose effect or likely effect of substantially lessening competition in a relevant market?

PURPOSE 289 Mr Myers accepted that, consistent with the Full Court's explanation in ASX Operations Pty Ltd, the purpose referred to in s 45 had to be assessed subjectively. He contended that the subjective purpose was that of the AMA (WA), not MNL. 290 In my view, for the reasons given above in relation to the purpose of the relevant provisions in the VMP Understanding and the VMP Agreement, the applicant has not established on the evidence that the subjective purpose or a substantial purpose [s 4F(1)(a) of the Act] of either AMA (WA) or the Participating Practitioners was to lessen competition substantially in any of the relevant markets. 291 The next question is whether those provisions, as the applicant claimed, had or were likely to have the effect of substantially lessening competition in one or more of the four relevant markets pleaded. 292 The applicant's claim was that the Provisions (as defined in the statement of claim) did this by entrenching at the Joondalup Health Campus the terms and conditions, including fees, provided by the State VMP Agreement, and reinforcing those fees as the industry standard in other hospitals providing public patient services. Actual and potential competition in the relevant markets was thereby said to have been "snuffed out" - a reference to Rural Press Ltd at [129]. 293 Part of the applicant's case on this point was that the provisions of the VMP Understanding and the Joondalup VMP Agreement (the applicant did not distinguish between the two) prevented or hindered competition. They relied on s 4G of the Act, which is reproduced above. 294 As to the market, the applicant's primary case was that the relevant market for services was for the services of visiting medical practitioners rendered to public patients in non-teaching hospitals. Those services were purchased by the operators of public hospitals. The alternatively pleaded services market was for services rendered by visiting medical practitioners in each of the Craft Groups to public patients in non-teaching hospitals. Those services were also purchased by the operators of public hospitals. 295 The applicant contended that the geographic market was Perth. It advanced an alternative geographic market as being Western Australia, but Mr Myers said that it was "pretty difficult" to see close competition between the relevant medical practitioners throughout the whole of Western Australia. 296 The respondents submitted that the services market would at least extend to the supply of in-patient medical services to patients in teaching and non-teaching public hospitals and also in private hospitals, because the evidence showed that the doctors provided those services in all three types of hospitals. In the particulars to their defences, they asserted that this would extend further to doctors who were employees of hospital operators and doctors who contracted directly with patients. 297 The respondents contended that the geographic market was the national market, and they tendered expert evidence from Mr Henry Ergas to that effect.

my reasoning about the relevant market or markets 298 Section 4E of the Act provides that market means a market in Australia and in relation to any services, includes a market for those services and any other services that are substitutable for, or otherwise competitive with, those services. 299 I set out below, and respectfully adopt, the very well-known statement of the Trade Practice Tribunal in Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 25 FLR 169 at 190 which has not only stood the test of time, but has been specifically approved by the High Court of Australia in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177 at 188 and 210 and, more recently, in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) HCA 5 at [133]. The Tribunal's statement was as follows: 'A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them … Within the bounds of a market there is substitution - substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive.' 300 I think it is useful to supplement this citation with the following observation of Wilcox J (which I also respectfully adopt) in Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299 at 317, where his Honour adopted a submission which was put in the following terms: 'A market is the field of activity in which buyers and sellers interact, and the identification of market boundaries requires consideration of both the demand and supply side. The ideal definition of a market must take into account substitution possibilities in both consumption and production. The existence of price differentials between different products, reflecting differences in quality or other characteristics of the products, does not by itself place the products in different markets. The test of whether or not there are different markets is based on what happens (or would happen) on either the demand or the supply side in response to a change in relative price.' 301 Substitutability is a matter of degree - see Rural Press at [112] and the cases there cited. 302 It is traditional to approach the definition of market by considering at least two dimensions. First, what is the relevant product or service? Secondly, in which geographic area is that product or service bought and sold? In some cases it is necessary to consider the functional level of a market, for example, is it wholesale or retail? Sometimes it is also useful to consider the time it takes for transactions to take place or come to fruition, or for adjustments to be made to the structure of the market. 303 It also helps to bear in mind that market boundaries, whether separating one service from another or one geographical area from another, are not precisely drawn. They may be blurred by a degree of overlapping which is insignificant enough to enable the integrity of the market, as defined by the substitutability principles referred to in s 4E, to be maintained. 304 In my view, a service market definition which included all visiting medical practitioners would be too wide. I acknowledge that the evidence, and human experience, shows, for example, that general practitioners provide a wide range of medical services, including on occasion surgery. Some specialists are able to provide some of the services rendered by general practitioners. Furthermore, I would accept as a theoretical proposition that if there were a spectacular rise in the fee rates payable to doctors practising in one particular branch of medicine, there might well be a substantial shift over time from one branch of practice to another. Doctors in one branch might even undertake retraining in order to reap the rewards in that area of practice where the fees had become spectacularly higher than in their own. 305 But I accept as reflecting the principles of substitutability laid down by s 4E, the expert economic evidence of Ms Rhonda Smith (an economist called by the applicant) that economists use a price elevation test (known as the "SSNIP" test). SSNIP stands for a small but significant and non-transitory increase in price. Ms Smith used 5%, initially as an example. Later in her statement of evidence Ms Smith accepted that either 5% or 10% could be used in the SSNIP test. I also accept that part of her evidence. The relevant part of the SSNIP test would include doctors not currently practising in a particular branch of medicine in that branch for market definition purposes if they could and would switch their services into that branch in response to a 5% or 10% price increase. 306 My impression from the professional histories of the doctors who gave evidence is that it would take much more than a 10% change in comparative remuneration rates for them to switch from their chosen specialty to another. There was no evidence that any had done so. Furthermore my impression from their evidence is that they based their career choices on professional preferences, made perhaps many years before, which were unlikely to be changed by small but significant remuneration imbalances. 307 My impression, from the evidence on this aspect, is that the time and the size of the fee increment (that is, more than 10%) which would be required for this process, of switching from one branch of medical practice to another, to take place means that in this matter the relevant service market is not one in which the whole range of services provided by visiting medical practitioners is lumped in together. In terms of s 4E I do not think that all of their respective services are sufficiently substitutable for or otherwise competitive, one with another, for them to be included in the one market. 308 Despite the degree of overlapping of procedural and clinical practice to which I have referred above, I find that general practitioners form a Craft Group of their own. The same applies to the other Craft Groups. In this case the other Craft Groups pleaded are anaesthetists, general surgeons, obstetricians/gynaecologists, orthopaedic surgeons, paediatricians, and ear, nose and throat surgeons. Again applying substitutability principles, I am satisfied that within the Craft Groups the services provided by the doctors are close substitutes and hence the Craft Groups comprise several relevant service markets. 309 Accordingly I accept the applicant's alternative service market definition of Craft Groups of the types which I have just described. 310 The next question is the appropriate geographic market. There was some evidence to suggest the possibility of a national market for the services of the medical practitioners within each Craft Group. For example the doctor who replaced Dr Ismail as Head of the Department of Anaesthetics at Joondalup was, eventually, recruited from interstate. Dr Neale Fong said that the search for resident doctors involved advertising on a nationwide basis. But his evidence was that most vacancies tended to be filled by doctors from within Western Australia. There were other examples of positions being filled from interstate. As I have mentioned, Mr Ergas suggested the national market was appropriate. 311 However, the present case is not concerned simply with the recruitment and payment of a particular doctor. It is concerned with the acquisition by the State of medical services for the purposes of discharging the State's obligations to provide free medical services to public patients in Western Australia. While that acquisition process may comprise individual transactions whereby in total, hundreds of medical practitioners are retained, I think that the focus needs to be broader than on those individual transactions or even groups of such transactions. 312 I acknowledge that there is a danger, in the course of searching for the appropriate market, of tailoring the market too closely to the conduct in question. But the task is essentially a practical one. 313 I take into account the time which it would take to recruit and engage from interstate a doctor or doctors practising in a particular Craft Group. 314 So far as the State-wide market is concerned, I accept that there would be a greater degree of supply substitutability within Western Australia for medical services within a particular Craft Group. Doctors in the country and in regional centres would, so I infer, keep themselves informed about opportunities in other parts of the State including in particular Perth, with a view to re-locating there. 315 There was evidence that, as might be expected, special arrangements were made, and special incentives were provided by the State, to ensure the supply of the services of medical practitioners in rural Western Australia including regional towns. 316 I take into account the evidence that visiting medical practitioners tend to provide their services within a reasonable driving distance of where they either live, or have their rooms or clinics. In some Craft Groups the need for such proximity is particularly apparent, see for example, Dr McCarthy's evidence in relation to obstetricians/gynaecologists. 317 I accept Ms Smith's assessment that visiting medical practitioners supplying medical services to public hospitals would be unlikely to relocate from hospitals in Perth to other parts of Western Australia (or other parts of Australia), and vice-versa, in response to a 5% change in the level of fees. I also accept her assessment that there is a separate relevant market which roughly corresponds with Perth and surrounding areas. 318 Accordingly, for the foregoing reasons I find that the relevant geographic market is not precisely the Perth metropolitan area (an area which has well-defined boundaries), but a geographic area broadly encompassing the Perth metropolitan area. By using the word "broadly" I would not, for example, exclude towns on the fringe of the metropolitan area such as Mandurah or Pinjarra. 319 I now turn to the demand side of the market definition process. Doctors in each of the individual Craft Groups provide services for reward to private patients both in their rooms or clinics and in hospitals. Is it appropriate to add that demand to the demand represented by the requirements of the State for medical services to be rendered to public patients? 320 In my view, the answer to that question is no. I have two reasons for this view. The first relates to a factor akin to functional market analysis. The supply by the doctors of their services to private patients can, appropriately in my opinion, be regarded as being in the nature of retail supply. The State can be seen as acquiring medical services on a wholesale basis and resupplying those services, free of charge, to public patients. Secondly, the evidence shows that there are price differentials between the fees which the doctors obtain from their private patients compared to the fees which they generate by being engaged by the State to provide services to public patients in hospitals. This price differential and the fundamental difference in the doctor-patient relationship provides, in my view, a sufficient break in substitutability to warrant recognition of a separate market in which medical services are provided by the doctors in each of the Craft Groups and acquired by the State for on-supply to public patients. As part of that conclusion the market can be seen to be located physically in public hospitals, public psychiatric centres and similar facilities from which the State either supplies or causes to be supplied medical services to public patients without charge. 321 I do not think that the evidence justifies narrowing the market to services supplied to public patients in the non-teaching hospitals to the exclusion of those services supplied in the teaching hospitals. There was some evidence of the differences between the two types of hospitals. To some extent greater prestige was attributed to doctors accredited to the teaching hospitals. The range of services and the seriousness of the injuries treated at the teaching hospitals, again to some extent, differentiated them from the non-teaching hospitals. 322 But there was evidence that doctors were accredited at teaching hospitals and non-teaching hospitals alike to a degree that this was not simply inconsequential overlapping. There was also evidence that as newer non-teaching hospitals such as Joondalup were constructed, the new facilities and technology made them more attractive to the doctors. The plan was, but I was not told whether it came to fruition, for the former Wanneroo Community Hospital to convert to a teaching hospital in 1998. The purchaser of the relevant medical services (i.e the State) is the same at the teaching hospitals and virtually all of the non-teaching public hospitals. 323 Ms Smith's opinion was that it would be reasonable to assume that the services provided by specialists at teaching hospitals would be a very close substitute for the services provided by doctors as visiting medical practitioners to non-teaching hospitals, if the fees at the latter increased by 5%. I accept that evidence. 324 On the basis of the evidence before me I find that the supply of medical services to public patients in teaching hospitals should be included with those provided to public patients in non-teaching hospitals, for the purposes of defining the relevant market. 325 I do not think that the evidence establishes that the service markets should be further limited to the services provided by doctors within the various Craft Groups who provide their services on any particular remuneration basis, viz employment on a sessional basis, on a fee for service basis, under sub-contract or under some hybrid arrangement. My impression is that the doctors who choose one or other of the alternative bases (for example, Mr Geddes at the relevant time worked on a sessional basis at Wanneroo Hospital and on a fee for service basis at Osborne Park Hospital) compete in the same service market. 326 By that process of focussing and adjusting the focus, I have defined the relevant markets as being the market for the supply of medical services by visiting medical practitioners within each of the Craft Groups to public patients in public hospitals, and the acquisition of those services by the State, within a geographic area broadly defined as Perth and its environs.

EFFECT OR LIKELY EFFECT 327 The parties were agreed that to determine whether there has been a lessening of competition it is necessary to consider the future state of competition in the market with and without the challenged provisions: Stirling Harbour Services Pty Ltd v Bunbury Port Authority (2000) ATPR 41-783 at [12] and [86]. 328 Stirling Harbour Services Pty Ltd is also authority for the proposition that conduct (which translates into this case as the Provisions) only has the effect of lessening competition if it involves a reduction in the level of competition which would otherwise have existed in the market but for the conduct in question. It is not sufficient that there might be other less restrictive alternatives by which a commercial objective might be achieved. That is not sufficient of itself to lead to a conclusion that the conduct has the effect of lessening competition - see pars [66] and [86]. Once that conclusion is reached, the next question is whether the lessening of competition was substantial. 329 The authorities show that "substantially lessening competition" is an evaluative concept. The effect on competition must be meaningful or relevant to the competitive process. The phrase sets out a standard which is to be satisfied before judicial intervention can be invoked, although there is some circularity involved in such a standard - see the reasoning of French J at first instance approved by the Full Court in Stirling Harbour Services Pty Ltd. 330 So far as quantitative and relative substantiality is concerned, Mr Myers took me to some figures which he said showed that expenditure on the services of visiting medical practitioners for public patients at Joondalup ($6.114 million) amounted to 23% of the amount so expended in all Perth metropolitan public hospitals excluding teaching hospitals, and 19% of such expenditure if the teaching hospitals were included. At the trial, I was surprised by these percentages (i.e. I thought they were on the high side), given my own impression of the number and size of the other public hospitals in the Perth metropolitan area in comparison to the description of what was involved in the Joondalup re-development. But I was even more surprised when later I examined the figures in the evidence. I think Mr Myers understated the percentages which result from the figures which he used. Retracing the transcript of his oral address and the documentary evidence, it seems to me that for the year ended 30 June 1998 total expenditure on visiting medical officers in public hospitals was $58.319 million of which $32.269 million was in respect of country hospitals, leaving a figure for all metropolitan public hospitals of $26.050 million. MNL's budget for visiting medical practitioner services for that year was $6.114 million. Expressed as a percentage of what was said to be the relevant expenditure at all metropolitan public hospitals ($26.050 million), the figure is 23.47%. The State spent $5.578 million in providing visiting medical practitioner services to the metropolitan teaching hospitals. When that figure is deducted from $26.050 million, the result is $20.472 million of which $6.1 million represents 29.86%. As I have mentioned, I was even more surprised by this percentage. 331 The explanation is that the figures do not compare like with like. I accept the respondents' submission to that effect. 332 The $6.114 million Joondalup figure includes $2.514 million payable to sessional and other staff specialists, not only the fee for service payments. The figures in the State accounts are only the fee for service payments. 333 To compare like with like it is necessary to go to other accounts which were in evidence. The total of salaries and wages paid to medical officers at public hospitals, (which admittedly includes nursing homes and nursing posts) by the State for the same year was $127.431 million plus payments to visiting medical officers (fee for service) of $25.769 million. The total of those two figures is $153.200 million of which the expenditure at Joondalup of $6.114 million represents a proportion of only 3.99%. 334 Ms Smith was asked by the applicant's solicitors to assume that the number of doctors engaged by MNL to provide in-hospital services as visiting medical practitioners at Joondalup was about 10% of all doctors engaged on that basis in Western Australia. I acknowledge that there may be a difference in relativities between the number of such doctors and the total figures in dollars. Ms Smith said that this figure "… seems to suggest that the loss of competition as a result of the alleged conduct between the AMA and MNL in relation to the JHC was small and possibly insignificant". She went on to explain that that was not the case, for reasons which I shall come to in due course. 335 I reached the conclusion that a figure of about 3.99% in terms of comparative total expenditure involved was too low a percentage of the expenditure in the market to suggest that foreclosure of competition (if established by the evidence) in that small segment of the market would be likely to have the effect of a substantial lessening of competition. I do that independently of how Ms Smith initially regarded the 10% figure based on a head count for the whole of Western Australia, but the extract which I have quoted immediately above from her evidence gives me a degree of comfort in the conclusion which I have reached. 336 All of this is on the basis that the relevant service market is all of the services in all the Craft Groups lumped in together - a service market definition which I have rejected for the reasons given above. I was not taken to any evidence which compared expenditure on the services of the various Craft Groups to public patients at Joondalup with the totals of such expenditure in public hospitals in the Perth metropolitan area. On the state of the evidence I am not prepared to infer that they were any different to the composite figures. 337 I acknowledge that the figure of $127.431 million paid by the State to medical officers will include payments made to doctors who are employed by the State to provide services to public patients either on a full time or a part-time basis and who are paid either a salary or by the session. The figure will probably also include doctors outside the Craft Groups. But precisely comparable figures were not to be found in the evidence. 338 An alternative approach might have been to deduct the $2.514 million paid at Joondalup to sessional and other staff specialists and compare the resulting figure, $3.6 million, with the two State expenditure figures put forward by the applicant. That calculation would result in percentages of 13.81% and 17.58% respectively. But once again that would not be comparing like with like because the visiting medical practitioners at Joondalup who were being paid on a staff or sessional basis would not be counted. 339 But the applicant's case on this issue was not confined to numerical assessments. The authorities show that other matters are relevant. Qualitative judgments have to be made about the impact of conduct (here the Provisions) on the market in general - see for example Wilcox J's endorsement of comments to that effect by Donald and Heydon in Trade Practices Law", Vol 1 p 42, in Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 384at 421. 340 The central part of Ms Smith's evidence on this issue is her thesis concerning the potential effect on competition. That is, if MNL had done something different i.e. negotiated individually on fees with the visiting medical practitioners, Ms Smith's opinion was that this would have signalled a change to other operators in the market and to the AMA (WA). Ms Smith said that: '… this would have signalled a change and been the first step in the development of competition across the system. Even if that were not the case, in a market where there is little or no competition, the loss of any actual or potential competition would be viewed by an economist as a substantial loss.' 341 I interpolate here to suggest that the view expressed in the second sentence does not, in my opinion, reflect the law. Any loss of competition will not, as a matter of law, equate necessarily to a substantial lessening of competition. Even if there is little or no competition in a market, any loss of competition must be evaluated by the process of comparing that loss to the level of competition which would otherwise have existed in the market but for the conduct (in this case the Provisions) in question. 342 I have already indicated earlier in these reasons that I have, in large part, accepted Ms Smith's evidence as to the relevant market. Ms Smith characterised the market in which the State VMP Agreement was negotiated between the AMA (WA) and the State as being a "bilateral monopoly". I have some reservations about this conclusion, but only because some of the assumptions upon which it is based are not, in my opinion, supported by the evidence. 343 Ms Smith's evidence was that, as a consequence of the State VMP Agreement, the terms of remuneration of all doctors (currently or in the future) providing services as visiting medical practitioners to non-teaching hospitals in Western Australia were fixed. She expressed the view that, on the assumptions which she stipulated, the State VMP Agreement would result in fees payable to visiting medical practitioners that were different from those which would have resulted from a perfectly competitive market. 344 One of Ms Smith's assumptions was that the operators of public non-teaching hospitals were required by the State to conform with the terms of the State VMP Agreement. 345 In those circumstances Ms Smith assumed that individual visiting medical practitioners had little opportunity to depart from the agreed remuneration package. In my view, the terms of the Joondalup VMP Agreement to which I have referred above (which are relevantly the same as the counterpart clauses of the State VMP Agreement) suggest that that assumption was not correct. 346 Moreover, there was no evidence that either before that time, or subsequently, any visiting medical practitioners had agreed as between themselves not to charge fees at rates lower than those provided in the Annexure. 347 Implicit in Ms Smith's opinion about signalling a change to other operators in the market is the proposition that that change would have been likely to lead to lower prices for the relevant services. That is, that there was a capacity for negotiating those prices downwards. 348 In my view, this would depend upon the likely bargaining power of the visiting medical practitioners, acting individually. I accept Mr Ergas' evidence that their individual bargaining power would be higher if the market situation was one of persistent excess demand for doctors. I also accept his evidence that the information concerning general employment conditions facing medical practitioners in Australia suggests that at or about the relevant times they had a strong bargaining position in dealings with acquirers and that there were specific features of the market in Western Australia which further bolstered that strong bargaining position. Attachment 3 to Mr Ergas' witness statement and the sources from which the information in Attachment 3 is contained provide, in my opinion, a very telling picture in that regard. Mr Ergas reviewed the Australian market situation in paragraphs 1-16 and the specific conditions in the Western Australian market in paragraphs 17-28. In relation to the Australia-wide data I accept his conclusion which was in these terms: '16. It is my opinion that the combination of excess demand for the services of medical specialists and restrictions on entry into providing medical services on the supply side, have created an environment conducive to medical practitioners wielding strong bargaining power with purchasers. As this opinion has been reached solely from Australian wide data, I would expect the bargaining power to be greater where these conditions are exacerbated.' 349 Mr Ergas then reviewed the available statistics which included information from the Australian Medical Workforce Advisory Committee discussion paper "Medical Workforce Supply and Demand in Australia" (1998), information from the Department of Health and Aged Care and the report of an inquiry conducted by the Western Australia Legislative Assembly Public Accounts Committee. 350 In my view, the information summarised in the second part of Attachment 3 to Mr Ergas' report well justifies his conclusion, which I accept, which was expressed in the following terms: 'In my opinion this material is consistent with the excess demand for medical practitioners in WA being significantly higher than for Australia as a whole. This supports my opinion that medical practitioners in WA will have greater bargaining power than the national picture suggests.' 351 On the last day of the trial Mr Myers asserted that the figures relied upon by Mr Ergas did not show the same excess demand or equilibrium when regard was had to individual specialties or Craft Groups among doctors. He took me to the figures relating to orthopaedic surgery, urology, dermatology, obstetrics and gynaecology, at which point it became apparent that he had the figures completely the wrong way around. He conceded that and immediately apologised. But he still maintained the submission, on the basis of Australia-wide figures, that the particular table upon which he relied showed "… that by no means is there an imbalance in the number of doctors available in every field of speciality. In some cases there appear to be more than the desirable number of doctors available." 352 In my view, the focus should at least be on the Western Australian market situation, but preferably the market broadly encompassing the Perth metropolitan area. As I have mentioned, Mr Ergas drew heavily on official sources of information. Mr Bathurst referred me to some of those sources, which were in evidence. A convenient reference point in the transcript is at pp 760-763. 353 The picture which emerges from those source materials is one which clearly supports Mr Ergas' conclusion that at the relevant time there was excess demand in Western Australia for general practitioners and also across the range of specialist Craft Groups. The evidence of Dr Ismail, Dr Geddes and Mr Kubacz was also consistent with that picture. 354 Mr John Kirwan, a former director of human resources in the Health Department with extensive relevant experience, initially expressed the view in his witness statement that the Wanneroo re-development presented a good opportunity to introduce competition in the public health system. He concluded that the adoption of the Joondalup VMP Agreement would make it difficult to engage doctors on other terms and conditions. 355 In cross-examination he readily conceded that when he made that statement he was unaware that the State was offering medical practitioners at Joondalup identical terms to those contained in the State VMP Agreement. 356 Dr Fong, who has very extensive experience in both the public and private hospital sector in Western Australia, was called by the applicant to give evidence. In his witness statement he outlined what he would have done if he had been appointed as Chief Executive Officer of the Joondalup Health Campus. This included attempting to negotiate terms with individual doctors. 357 In cross-examination it emerged that Dr Fong had not taken into account the fact that the State was standing in the market offering public sector rates. There was the following exchange: 'You would agree with me, would you not, that if the government was offering those rates for whatever reason, the only way Health Care of Australia could successfully negotiate with individual doctors would be to either offer more or offer compensating benefits? --- Yes, I agree with that.' 358 In cross-examination Ms Smith gave the following evidence: 'If it be correct that the situation was that there was a shortage of doctors in Western Australia, that was a factor which was relevant and necessary to take into account in determining the likely effect on competition, was it not? --- If there [word missing] a shortage of doctors then of course what you would expect to have happened is that the market mechanism would work to send signals to correct imbalance, and of course what happens if you've got a regulated environment or agreement that doesn't happen. The position as far as Mayne Nickless was concerned coming into the market would have been the shortage of doctors would have given it a strong incentive to actually bid up the rates in the absence of the VMP agreement.' 359 Later Ms Smith was asked about her expectation that public hospitals would move towards paying doctors with the same qualifications differently, based on the hospital's subjective assessment of their skill and experience. She conceded that she knew of no such hospital and that she had no specific factual basis for that expectation. 360 Ms Smith acknowledged that the assumptions which she was asked to make in giving her opinion did not include an assumption that the Joondalup VMP Agreement left it open to the doctors and MNL to negotiate reduced fees. 361 Mr Ergas' evidence, which I accept, was encapsulated in the following exchange: 'So that individual negotiation between Mayne Nickless and individual doctors in your opinion would probably have led to higher rates than was the outcome of collective negotiation between the AMA on behalf of the doctors and Mayne Nickless? --- I certainly believe that on average the rates would have been higher and my suspicion is that they would have [word missing] higher in each individual case, or no lower to be quite accurate. No lower in each individual case and higher on average.' 362 This conclusion is supported by some other evidence upon which the applicant sought to rely. Mr Myers took me to the experience of Dr Douglas McCarthy, Executive Director of Medical Services at Peel Health Campus. The Peel Health Campus was developed in 1997 and 1998 by a company called Health Solutions WA Pty Ltd ("Health Solutions") to replace the old Mandurah Hospital in much the same way as the Wanneroo Hospital was developed, but on a smaller scale. Mandurah Hospital was a small public hospital with 28 beds. It was developed into an expanded facility treating both public and private patients with 130 beds, owned by the State, but leased to Health Solutions on a 20 year lease. 363 Dr McCarthy was in charge of negotiations to secure the services of visiting medical practitioners at the Peel Health Campus. This was immediately after MNL had engaged in the same exercise. The potential relevance of his evidence is thus readily apparent. His evidence was that he negotiated contracts with those doctors on an individual basis and refused to negotiate with the AMA (WA) on their behalf. 364 My impression from his evidence is that he would have taken that course in any event because he formed the view that to do otherwise would contravene the Trade Practices Act, and because of his aversion to the State VMP Agreement. 365 Mr Myers took me to evidence which he said showed that, by this process, Dr McCarthy had achieved lower rates than if he had stuck to the State VMP rates. 366 It emerges from Dr McCarthy's evidence that in his individual negotiations with the doctors he departed from the rates set out in the State VMP Agreement because he did not want to be subject to the complexities of that agreement, or to the re-negotiation of rates in that agreement which would be beyond the control of Health Solutions. Dr McCarthy negotiated on the basis of the rates provided by the Commonwealth Medical Benefits Schedule ("CMBS"). The CMBS rates are those published by Medicare in relation to the treatment of private patients in private hospitals. Generally speaking, Medicare reimburses a percentage, say 75%, of the fee charged by a surgeon if he or she charges at the CMBS rates. Dr McCarthy used the Medicare CMBS rates, but with a loading. 367 He started by offering anaesthetists CMBS rates plus 30%, ear nose and throat surgeons CMBS plus 10%, general surgeons CMBS plus 10% and a "significantly higher" (Dr McCarthy's words) percentage rate over and above CMBS for obstetricans and gynaecologists. 368 Dr McCarthy conceded that, although he negotiated individually with the surgeons, in each Craft Group, he offered a common rate. 369 Dr McCarthy's evidence was that initially (this was in late 1998) he offered most surgeons a slightly higher rate of remuneration under the CMBS rates than they would have received under the State VMP Agreement. 370 In relation to ophthalmologists, he offered them rates which were significantly below those in the State VMP Agreement. This was because ophthalmology procedures, such as cataract removal, had become far simpler and shorter than as budgeted for in the State VMP Agreement. But even then, due to the increased number of procedures which could be performed in a session, they were not disadvantaged by being offered those rates and "… they financially came out well ahead" compared to working at the nearest public hospital. 371 Dr McCarthy applied indexation in the contracts at Peel either by adjusting the rates in accordance with the indexation applied in each particular year in the CMBS or by a provision in the individual contract for a guaranteed 3% increase. He thought that the indexing provided by the CMBS was at a lower rate than applied to the State VMP Agreement. 372 As at December 1998 the Peel Health Campus rates were higher than the rates in the State VMP Agreement. The State VMP Agreement came to an end in September 1998. After December 1998 there was no indexation of the State VMP Agreement rates. When he gave evidence Dr McCarthy knew that. 373 The State VMP rates remained unchanged between December 1998 and December 2000 when they were replaced by fees calculated by reference to the CMBS plus a premium of 9% except in the case of certain specialities. This new schedule of rates was known as the WA Government Medical Services Schedule ("WAGMSS"). 374 The evidence shows that the premium of 9% established under the WAGMSS from 1 December 2000 in the case of surgeons was less than the 10% premium paid by Health Solutions at the Peel Health Campus. Similarly, the premium of 30% for anaesthetists paid at the Peel Health Campus was higher than the WAGMSS 25% premium. The premium payable under the WAGMSS for obstetricians/gynaecologists was 50%. It is not possible to work out whether that is higher than Dr McCarthy's "significantly higher" percentage, because he did not quantify the percentage. 375 On that basis I am not prepared to conclude that after 1 December 2000 the Peel Hospital rates were generally lower than those in the WAGMSS. To the extent that the evidence is clear, it indicates that the Peel rates were likely to have been generally higher. Dr McCarthy was not aware that some of the rates in the State VMP Agreement went down in December 2000 when the WAGMSS was introduced. As he wryly agreed, his doctors did not draw his attention to that. 376 Nor was he aware that the average increase in rates in the State VMP Agreement and its successor between 1 November 1996 and 1 December 2001 was approximately 3.5% per annum. If he had had that knowledge, he said that his statement would not have read as it did. 377 My finding on the evidence is that Dr McCarthy did not obtain during the relevant period or for a reasonable period thereafter, lower rates for the services of visiting medical practitioners at Peel Health Campus than those either in the State VMP Agreement or in its replacement, the WAGMSS. I also find that this result was not caused, or contributed to, by what had transpired at Joondalup. 378 Mr Myers also sought to rely on other evidence relevant to the question of the understandings having the effect of substantially lessening competition which he described as being "rather important". This took the form of a draft review in August 1998 of medical and diagnostic costs at the Joondalup Health Campus. This showed MNL's visiting medical practitioner costs at Joondalup as comprising 24% of its revenue which was said, by the author of the report, to be significantly higher than visiting medical practitioner costs in New South Wales. 379 I did not find this particular piece of evidence at all helpful on the question of whether the relevant rates paid at Joondalup might have been lower if the State VMP rates had not been applied. The report shows that the differential between MNL's Joondalup visiting medical practitioner costs per relevant unit and its Port Macquarie Base Hospital visiting medical practitioner costs ($574-$430) equated in dollar terms to a figure of $1.3 million. Joondalup's budget had been based on a unit figure of $430. A total shortfall to budget of $1 million was shown to be attributed to the employment of two emergency specialists, one psychiatrist and two anaesthetic staff specialists over budget. There is no reference, in that part of the report to which I was taken, to the cause of this differential being to the payment of excessive fee rates. 380 The computation in that report of visiting medical practitioner costs comprising 24% of revenue compared to the applicant's assertion that Dr McCarthy's evidence was that he had a figure of 20% at Peel, falls away for that same reason. In any event, I did not read Dr McCarthy's evidence as accepting that his figure for visiting medical practitioner costs compared to total expenses at Peel was 20%. 381 I do not think that these pieces of evidence show, or even have a tendency to show, that rates stayed higher at Joondalup (which of course is not the relevant market) under the State VMP regime or were any lower at the Peel Health Campus under the regime adopted by Dr McCarthy. 382 In my opinion, the evidence strongly suggests that even in the absence of the Provisions much the same terms and conditions, including rates of remuneration, would have been offered by MNL to the Participating Practitioners. 383 On consideration of all the relevant evidence, I am not satisfied that the effect or likely effect of the Provisions was to lessen competition substantially in any of the relevant markets. 384 In those circumstances it is unnecessary to consider the further contraventions alleged by the applicant, that is, those based on giving effect to the Provisions.

shield of the crown 385 Section 2B(1) of the Act relevantly provides as follows: 'The following provisions of this Act bind the Crown in right of each of the States, … so far as the Crown carries on a business, either directly or by an authority of the State …: (a) Part IV; (aa) …; (b) …; (c) the other provisions of this Act so far as they relate to the above provisions.' 386 In their second further amended defences, the MNL Respondents pleaded that the Trade Practices Act did not apply to the provision of hospital services to public patients in Western Australia and that they were entitled to rely upon derivative Crown immunity. 387 In view of my conclusions that the contraventions pleaded by the applicant have not been established on the evidence, it is unnecessary for me to consider this defence. I do so only because if the matter goes on appeal and those conclusions are found to be wrong, my consideration of the facts and the law on this issue will have the potential to shorten the time which it might otherwise take finally to determine the matter. That is, the Full Court will be in a position to rule on this aspect of the defence. 388 However, I do not propose to recite the whole of the submissions on either side. I shall proceed straight to my findings of fact and conclusions of law. 389 The evidence shows that in Western Australia public patient hospital services were at all material times provided free of charge. In particular Mr Alex Kirkwood's evidence and the first attachment to his witness statement establishes that. Mr Kirkwood held various senior executive positions on the financial side of the Health Department. The evidence also shows that the State raised charges for the treatment of some categories of patients, such as those who elected to be treated as private patients or were entitled to be reimbursed the cost of their medical treatment by workers' compensation or third party motor vehicle accident insurers, or the like. But the activities of the State in providing medical services in public hospitals should be looked at as a whole. The latest figures in evidence are for the financial year ended 30 June 1995. They show patient charges of $64.8 million out of a total "income" from Commonwealth or State Grants and Appropriations and other revenue of $1,110.5 million, or 5.8%. I am inclined to the view that the relevant activity is the supply free of charge of medical services to public patients in public hospitals. But even if the relevant activity extends to the conduct of public hospitals generally, I do not consider the raising of such a small percentage of charges to certain types of patients changes the essential character of those activities into the carrying on of a business. 390 An examination of the governing statute, the Hospitals Act, does not suggest that the Minister for Health, when providing medical services in public hospitals is carrying on a business. The governing statute is a most useful reference point for the present purpose - see NT Power Generation v Power & Water Authority [2002] FCAFC 302 at [129] per Finkelstein J. I do not propose to summarise the statutory framework of the Hospitals Act or its provisions. 391 Section 34 of the Hospitals Act establishes the Medicare Principles and Commitments as guidelines for the delivery of public hospital services to eligible persons in Western Australia. The first of those principles is that eligible persons must be given the choice to receive public hospital services free of charge as public patients. 392 The State operated the Wanneroo Hospital on that basis until MNL took over operation of the Wanneroo Hospital on 1 June 1996. Under the terms of the DHSA, MNL was precluded from charging fees to public patients.

393 In my view, whatever the involvement of the State might have been in operating or overseeing the operation of the Wanneroo Hospital either before the Effective Date (1 June 1996) or after that date, the State was not carrying on a business within the meaning of s 2B of the Act. In my opinion, its activities are properly to be characterised as fulfilling a governmental or welfare function by providing or causing (through the DHSA) to be provided free medical services to patients at a public hospital until the Effective Date and on the same basis at a private hospital thereafter: Saitta Pty Ltd v Commonwealth of Australia (2001) 162 FLR 35 at [29]; Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia (2000) 104 FCR 448 at 451-452; JS McMillan Pty Ltd v Commonwealth of Australia (1997) 77 FCR 337 at 355-356. Those activities did not, in my opinion, have the requisite "commercial flavour" to amount to the carrying on of a business - see NT Power at [128].

394 The applicant submitted [T854 and 856] that MNL was quite clearly carrying on a business and if, contrary to the applicant's submissions, MNL was acting as the agent of the State then, by the operation of s 2B(1)(a) the Act applied.

395 In my view, that submission misconstrues the terms of s 2B(1). That subsection relevantly provides that certain provisions of the Act bind the Crown in right of each of the States "… so far as the Crown carries on a business, either directly or by an authority of the State…". The expression "authority" in relation to a State is defined in s 4 of the Act as meaning a body corporate established for a purpose of the State by or under a law of the State or an incorporated company in which the State or such body corporate has a controlling interest. In my view, the fact that MNL's arrangement of its affairs and its dealings as a whole had the result that it was carrying on a business at Joondalup in the course of which it rendered specific medical services to the State pursuant to the DHSA, does not mean that the State was carrying on a business within the meaning of s 2B.

396 Accordingly, I hold that in its carrying out of the above activities the Act does not bind the State. The next question is whether MNL is entitled to rely upon derivative Crown immunity.

397 It will be recalled that as late as 9 December 1996 there were two conditions precedent to the DHSA which were still outstanding. One of those conditions related to the engagement of medical practitioners. If either of them had not been satisfied by 24 January 1997 MNL had the right to terminate the DHSA. If that occurred, clause 3.7(a) of the DHSA provided that it (the DHSA) would be void ab initio. I am satisfied from the documentary and other evidence which emanated from the Health Department that the State was anxious to avoid such a situation. For example, on 9 October 1996 Mr Bansemer, as Commissioner of Health wrote a letter to the AMA (WA) (with a copy to MNL) which, omitting formal parts, read as follows:

'I understand that agreement has been reached that the AMA and HCoA will review the current VMP agreement and the HCoA by-laws in order to resolve all areas of conflict. This is to be completed by 31 January 1997. Until the above is resolved, it is appropriate that the current VMP Agreement applies but any unresolved issues should be referred to the group identified in the deed of agreement, plus a member nominated by HCoA. Any unresolved issues by this group should be referred to the Minister for resolution.'

398 In his letter of 9 December 1996, Mr Bansemer said this:

'… I am advised that HCoA have now signed a Memorandum of Understanding with the AMA that identifies the appropriate contractual arrangements. This is a matter between the AMA and HCoA. I would however point out to you the critical importance of ensuring that any agreement in this regard be consistent with the Visiting Medical Practitioners Agreement between the Government and the AMA and the Joondalup Health Campus: Development and Health Services Agreement.'

399 Section 5A(1) of the Hospitals Act imposes duties on the Minister for Health to provide hospital accommodation, hospital services, health services and other services to such extent as he considers necessary to meet all reasonable requirements. Section 5A(3) provides that he may discharge those duties by "making arrangements" on such terms, including the payment of charges, as he thinks fit.

400 The respondents rely upon what they describe as "an overarching arrangement", initially between the State and MNL, the purpose of which was to bring the Joondalup project to fruition in fulfilment of the State's social and welfare responsibilities to the public at Wanneroo, through the engagement of MNL to develop and operate the Joondalup Health Campus. The respondents first rely on that part of MNL's tender proposal (accepted by the State) which included the provision that MNL would offer employment to all permanent staff at Wanneroo Hospital, including visiting medical practitioners, and that those practitioners would be paid according to the rates agreed between the State and AMA (WA) for the treatment of public patients.

401 Then, so the respondents submit, upon the State accepting that tender proposal and MNL becoming the preferred proponent, the State and MNL reached an agreement that MNL would be the preferred proponent. That agreement included the provision that MNL would engage visiting medical practitioners at rates mirroring the appropriate governmental rates. I accept the foregoing characterisation of what took place as being consistent with the evidence.

402 The respondents submitted that the arrangement developed over time to include the DHSA, signed on 24 April 1996, and the agreements reached from time to time to satisfy the condition precedent contained in clause 3.4(i)(i) of the DHSA relating to engagement of visiting medical practitioners. As the respondents submit, and as I have found, by about 3 May 1996 the arrangement in relation to such engagement had grown to include the State remaining as an employer or engager of "existing" Wanneroo doctors and both MNL and the State offering alternate bases of engagement i.e. fee for service and sessional.

403 It will also be recalled that on 7 June 1996 the State and MNL signed a short letter of agreement formalising arrangements concerning the appointment of medical practitioners (employed and sessional) to provide medical services at the Joondalup Health Campus. This was, so I infer, a consequence of the transfer of operational responsibility for that hospital to MNL. That letter confirmed that the Minister for Health would arrange for the Board to employ the Wanneroo doctors from the Effective Date until the termination date specified in their current contracts, but for MNL to have their direction and control.

404 The respondents submit that during the first half of 1996 the AMA (WA) became a party to the arrangement as a result of discussions with the State and MNL concerning the engagement of visiting medical practitioners at Joondalup and other matters related to the proposed Joondalup Health Campus. I do not think that it is necessary for me to decide whether AMA (WA) can be characterised as becoming a party to that arrangement.

405 However, I accept the respondents' submissions that the arrangement expanded to include the State's involvement in the resolution of disputes about how clinical government structures were to be provided for the Joondalup Health Campus and the basis upon which the doctors at Wanneroo were to be engaged both in the short term and in the long term. I infer that that was one of the reasons the State nominated Dr Stokes to the Wanneroo Medical Advisory Council.

406 I further accept that the State, through the Health Department, took an active part in ensuring that the development of the Joondalup Health Campus was brought to fruition and not derailed by opposition from the doctors at Wanneroo or the AMA (WA).

407 I accept also that the respondents' submission that everything relevant to this matter which was done by it in relation to making offers of employment, harmonising the Joondalup Health Campus By-Laws and the Joondalup VMP Agreement with the State VMP Agreement was the result of that expanded arrangement which included satisfaction of the condition precedent in the DHSA which I have just mentioned.

408 The whole point of the DHSA and the expanded arrangement, as identified by the respondents in their submissions and to the extent that I have accepted such expansion, was that MNL would provide public patient hospital services free of charge to the public patients on behalf of the State and that thereby the Minister would honour his obligations in that regard under the Hospitals Act and Medicare Principles and Commitments.

409 At the core of the arrangements which MNL made with the State was the engagement of the medical practitioners then employed by the State at Wanneroo, the engagement of further doctors to provide medical services to public patients free of charge to such patients and the terms and conditions of employment or engagement (including remuneration) of those doctors. Obviously, without the medical practitioners, the free medical services could not have been rendered to the public patients. There was already in place the State VMP Agreement. The State had made it clear, including in the Commissioner of Health's letter dated 9 October 1996, that it wanted these employment or engagement arrangements to be consistent with the State VMP Agreement.

410 I take into account what was said, almost in passing, by the High Court of Australia in Bass v Permanent Trustee Co Ltd [1999] HCA 9 at [42] about what was decided in Bradken. But in my view, the Bradken principle applies to the factual circumstances of this case. That is, to apply the Act to the arrangements made between MNL and the Participating Practitioners (all of whom were employees of the State at the time) would have prejudiced the interests of the State: see Bradken at 124 and 129 and the cases there cited which stretch back to Roberts v Ahern (1904) 1 CLR 406.

411 I accept the evidence, principally of Dr Roberts, that if MNL had not agreed, on 9 December 1996 to sign the Memorandum of Understanding, a substantial number of the Wanneroo doctors would have withdrawn their services from public patients at Joondalup. Furthermore, I infer that that situation would have deteriorated if the resolution process which took place over the following two months or so had not taken place. I think that there would have been a substantial risk that the conditions precedent to the DHSA would not have been satisfied. There was a significant risk that MNL would, in those circumstances, exercise its right to bring the DHSA to an end - or more accurately to cause it to become void ab initio. If that had transpired the State would not have achieved what, since 1995, it had set out to achieve at Wanneroo. The degree of risk would have been sufficient, in my view, to have prejudiced the State.

412 I think that one test proposed by the respondents in their written and oral submissions is of considerable assistance in reaching that conclusion. The test, in summary, was that if in late 1996 or early 1997 the applicant or a third party had sought to prevent MNL from:

· making the proposed offers of engagement to the Wanneroo doctors on terms which mirrored the terms and conditions negotiated between the State and the AMA (WA) in respect of sessional and fee for service engagement; or · negotiating the harmonisation of their by-laws with the State VMP Agreement and subsequently adopting the Joondalup Health Campus By-Laws and the Joondalup Health Campus VMP Agreement; would the court have granted such relief? In my view, a court would not have granted relief because to do so would have prejudiced the State in relation to establishing the Joondalup Health Campus for the treatment of public patients. The mere passage of time since then cannot change the legal characterisation of what took place.

413 In all of the circumstances, and in particular the extent of the State's involvement throughout the process, I consider that MNL would have been entitled to derivative Crown immunity. That is, if the facts in this case had been found against it, it would have been shielded from the consequences which might otherwise have been attracted by the operation of the Act to what is pleaded as having taken place in late 1996 and in 1997.

Conclusion 414 For the foregoing reasons the application against the second, fifth and sixth respondents will be dismissed with costs.

A Postscript 415 As I have indicated earlier in these reasons, certain orders were made by consent against the first, third and fourth respondents, whom I have termed "the AMA (WA) respondents". 416 Those orders were made on the basis of a statement of facts agreed upon as between the applicant and those respondents. That statement did not, and could not, in any manner bind the MNL Respondents. 417 After fourteen days of hearing and the consideration of some thousands of documents, it transpires that, had the matter gone to trial as against the AMA (WA) respondents, they would not have been found liable in respect of the alleged arrangement and understandings which were in common with those the subject of these reasons. With hindsight, the course which they took some two years ago might seem to them to have been an unfortunate one. But they were at all times legally represented and made a duly considered decision not to contest the proceedings any further. The prospect of incurring legal costs, possibly amounting to as much as a million dollars, may have weighed heavily in that decision. I am not in any manner critical of the advice given to them or the decision made. There could be no basis for such criticism from me. On the facts agreed between those parties two years ago and the withdrawal of the relevant defences, I was satisfied, for reasons which I then gave, that it was appropriate to give the Court's sanction to the agreed settlement by way of imposing the agreed pecuniary penalties and costs orders. 418 Again with hindsight, it might well be said that an injustice has been done to those respondents. But there are sound policy reasons for allowing respondents to civil proceedings such as these, to do the equivalent of entering a plea of "guilty" in a criminal proceeding. 419 It is not the first time that something like this has happened. In Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 9) [2000] FCA 23 certain respondents withdrew their defences, made admissions of fact and admitted all the contraventions pleaded. Two of the respondents persisted in their defences and the matter went to trial. The result was that only one of the alleged contraventions was found to have been established. See Australian Competition and Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954. 420 For reasons which I gave on 19 October 2001, I declined to make declarations or permanent injunctions against the AMA (WA) respondents. One of my main reasons, see par [47], for taking that course was the possibility of the MNL respondents being successful in their defence. But I did grant interim injunctions. Subject to hearing from the parties interested in those interim injunctions, I think that they should be discharged. I certify that the preceding four hundred and twenty (420) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justice Carr J.

Associate: Dated: 9 July 2003 Counsel for the Applicant: Mr A J Myers QC with Mr N W McKerracher QC

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First, Third and Fourth Respondents: Mr J R J Lockhart

Solicitor for the First, Third and Fourth Respondents: Messrs Blake Dawson Waldron (Sydney)

Counsel for the Second, Fifth and Sixth Respondents: Mr T F Bathurst QC with Mr R J Wright SC

Solicitors for the Second, Fifth and Sixth Respondents: Messrs Blake Dawson Waldron (Perth)

Date of Hearing: 3 April 2003

Date of Judgment: 9 July 2003