Bupa HI Pty Ltd v Andrew Chang Services Pty Ltd

What is meant by "requiring?" 62 Turning then to the issue of what is meant by the word "requiring" in the context of the Higher Item, Bupa contends that "requiring" ordinarily connotes something that is needed to achieve some purpose, in the sense that that purpose cannot be achieved without it. In the present context, the word refers to a situation where, without the anaesthetic services, the intravitreal injection could not be performed. At best, it was said, that Xanax was desirable to reduce a patient's anxiety and the dosage was so low that its clinical effect is likely to have been negligible. In effect, the submission about the content to be given to the word "required", is the same as the submission that the administration of low dosage Xanax could not be regarded as being medically "necessary". 63 In this regard, Bupa placed emphasis on four matters. First, the dosage being very low or trivial, such that it would not have produced a reliable clinical effect in the relevant timeframe; secondly, the effect of Dr Chang's detailed evidence as to the clinical justification for Xanax was that it was intended for patient comfort and to reduce patients' stress and anxiety about the procedure but this evidence did not go so far as saying that a patient was unable to tolerate the intravitreal injection unless the patient received Xanax; and thirdly, ophthalmologists who gave evidence, Associate Professor Lee and Dr Bourke, do not use Xanax at all, hence undermining any suggestion it was "required". 64 Finally, Bupa relied upon what it asserted were inexplicable dramatic changes over time in the proportion of patients receiving 0.25 mg of Xanax as reflected in Annexure A, and in circumstances where Dr Chang accepted in cross-examination that there was no significant change in the characteristics of the patient cohort, it defies credulity to believe that no patient required anaesthetic services on 12 September 2012, but 80% of them required it from the next day onwards for the same procedure (until further scrutiny was applied to the practice).

Consideration 65 As noted by the discussion under Issue 1, the answer to these issues represents an inquiry into the meaning of the Higher Item, applying accepted principles of statutory construction. It is not the subjective views of the witnesses that are determinative of the objective analysis required, but this evidence does assist in understanding the context of the technical terms, or to show that a potential construction of those terms may produce unreasonable or absurd results. 66 Before coming to the experts in some detail, I should commence by noting that I do not accept that there is substance in Bupa's contention that only an anaesthetist (or a second practitioner) can ever administer an anaesthetic service. Leaving aside the fact that the text does not require such a construction, I reach this conclusion for a number of reasons. First, the reliance on s 16 of the Health Insurance Act 1973 (Cth) is not persuasive as this merely prevents double charging by practitioners where they themselves administer the anaesthetic (that is, by reference to a separate anaesthetic service MBS item number). Secondly, Bupa's position (resting, as it does, on the contention the contrary position is absurd) does not accord with the expert evidence of Associate Professor Lee and Dr Koumoukelis, which I discuss further below: (see T206.33-38). Thirdly, if, as Bupa accepts, an ophthalmologist is permitted to bill by reference to the Higher Item where the anaesthetic service is administered by an anaesthetist, there is no compelling logic that requires the conclusion that an ophthalmologist cannot bill by reference to that item number if the ophthalmologist administers the anaesthetic service. Fourthly, it was inconsistent with the evidence of Dr Bourke, a highly experienced ophthalmologist and ophthalmic surgeon who has been operating in Australia for over 30 years, who gave evidence that he considered the Oral Sedation Procedure used in conjunction with "intravitreal injections to be an anaesthetic service when performed in a theatre setting", as it was analogous to the type of anaesthetic services he deployed in his practice without an anaesthetist rendering a separate bill. Fifthly, as noted above, the evidence as to the four other private hospitals charging (albeit very occasionally and nowhere near as often as the Clinic) the Higher Item without an anaesthetist's bill, is consistent with the views of Associate Professor Lee, Dr Koumoukelis and Dr Bourke and inconsistent with the notion that such a practice must necessarily constitute an absurd result. 67 Nextly, it is convenient to deal with the respondents' submission that "there is no basis on the pleadings or on the evidence before the Court to proceed on the basis that Dr Chang administered a uniform 0.25 mg dose of alprazolam to all patients who received alprazolam". Although this is literally true, the submission does not go very far. As I have already noted above, notwithstanding Dr Chang's evidence that he administered an individualised titrated dose to those of his patients requiring sedation, deviating from the standard dosage appears to have been exceptional. 68 I have already remarked upon the fact that I have, on the present evidence, some prima facie misgivings as to whether the administering of a mostly uniform 0.25 mg dose by Dr Chang to a very large percentage of patients was always medically necessary. Despite the evidence as to the initial development of the Oral Sedation Procedure, the submission made by Bupa that it defies credulity to believe that no patient required anaesthetic services on 12 September 2012, but 80% of them required it from the next day onwards for the same procedure has some prima facie attraction. I stress prima facie because, as I have explained, in the absence of a pleading alleging that he engaged in a practice of administering Xanax for other than medical reasons, evidence was understandably not adduced by Dr Chang as to: (a) individual clinical decisions; or (b) explaining, in greater detail than at present, the decline in the frequency of the Higher Item billing in subsequent years. 69 The central problem for Bupa's "all or nothing" case (that is, that the Oral Sedation Procedure could never attract the Higher Item because it involved Xanax being administered) is that I do not accept that 0.25 mg of Xanax or a larger titrated dose could never be medically necessary. The evidence of Dr Chang, which I accept, was that an intravitreal injection involves the entry of a small needle into the interior of the eye and in order for the intravitreal injection to be performed effectively and safely it is necessary for the patient's head and eye to remain still. If the patient moves unexpectedly, haemorrhaging may occur within the layers of the interior of the eye damaging the lens or retina due to incorrect placement of the needle. Perhaps not surprisingly, some patients are stressed in confronting the prospect of an eye injection and this vexation may cause them to move their eye or head unexpectedly, while other patients have ocular movement disorders or tremors or conditions such as dementia where movement is involuntary. 70 In the light of this evidence, I do not understand how I could conclude that the Oral Sedation Procedure (be it a dosage of 0.25 mg or some bespoke titrated dosage), must never have been medically necessary for such persons. For all I know, this may have been a small number of patients. Indeed, it may amount to a percentage which roughly coincides with the 15% of the patient cohort who continue to receive the Oral Sedation Procedure. Alternatively, it may be a percentage consistent with the very small number of Higher Item charges made without an accompanying anaesthetist's bill charged by the four other private hospitals referred to in the evidence of Mr Anfinsen. I simply do not know, and this is not enough to make out Bupa's "all or nothing" case. 71 Moreover, the conclusion that the Oral Sedation Procedure was an anaesthetic service and could attract the Higher Item provided it was medically necessary for it to be administered is one that is not unreasonable and accords with the opinion evidence. 72 Although not called as an expert, Dr John Robert Elder, an ophthalmologist specialising in cataract and refractive surgery since 1983, gave evidence that in about 1988, he began using low dose oral sedation (albeit in cataract outpatient surgery) and that he was at the forefront of developments in Australia in ophthalmic surgery under outpatient conditions, including in respect of the use of anaesthetic services incorporating low dose oral Alprazolam (T168.45). During 2010, Dr Chang invited Dr Elder to consult and operate independently at the Clinic as a Visiting Medical Officer and, at that time, he discussed with Dr Chang the efficacy of treating patients with low dose Xanax. Without objection, Dr Elder also gave evidence that after 2010, he formed the impression that Dr Chang sought to modify his management of anxious patients receiving intravitreal injections to include the use of low dose Alprazolam "in place of other anaesthetic services". Dr Elder also gave evidence that, for approximately the past 15 years, laser refractive corneal surgery has been performed worldwide employing alprazolam or a related sedative orally, together with topical eye drops, in the absence of an anaesthetist. 73 Reference has already been made to the evidence of Dr Bourke, who did not use low dose Xanax "as an anaesthetic service as part of my practice because I have no experience with that anaesthetic" but that he considered "the use of low dose Alprazolam in conjunction with intravitreal injections to be an anaesthetic service when performed in a theatre setting" as it was analogous to the type of anaesthetic services he deployed. Again this view jars with the argument that there is something unreasonable or absurd with the notion that Oral Sedation Procedure (if medically necessary), amounted to an anaesthetic service. None of this evidence of Dr Elder or Dr Bourke was directly challenged in cross-examination, nor was it inherently improbable, and I accept it: see Precision Plastics Pty Limited v Demir (1975) 132 CLR 362 at 370-371 (per Gibbs J, Stephen J agreeing and Murphy J generally agreeing). 74 It is this aspect of individual medical necessity that seemed (and seems) to me to be centrally important. The requirement of necessity accords with the view expressed by the Royal Australian and New Zealand College of Ophthalmologists (RANZCO). On or about 27 February 2012 (the time of the introduction of the relevant MBS item changes), the RANZCO communicated to its fellows that in its view, the Higher Item (CB 3105): …will be applicable where [the Lower Item] would usually apply, but where it is medically necessary to use anaesthetic services. This medical indication should be documented in the patient's medical record in the event of an audit… (emphasis in original) 75 Professor Lee gave evidence that a practical and skilled ophthalmologist would place considerable weight on such advice from the RANZCO in considering the meaning of the Lower Item and the Higher Item, while Associate Professor Forrest agreed that the "College's recommendation should be adhered to". All of the experts also accepted, unsurprisingly, that the 0.25 mg of Xanax had to be medically necessary to permit claims under the Higher Item. 76 Having regard to the principle that the MBS provisions are to be construed in light of practical considerations to achieve the most reasonably practicable result, it does not seem to me the least bit strange that the Higher Item would be expressed relatively broadly (so as to encompass all forms of anaesthetic services) and yet be tempered or restricted in its application by reference to the fact that the Higher Item would only be attracted if the relevant anaesthetic service was medically necessary in an individual case. 77 Part of Bupa's construction argument was that if the Higher Item was attracted when an ophthalmologist administered Xanax, then a perverse incentive would result, encouraging the potential for widespread abuse of the MBS billing system. This doomster argument is unpersuasive. The spectre of ophthalmologists pursuing the Higher Item like they were Augustus Gloop in a chocolate factory seems to me to be both unrealistic and cynical. As I have explained, ophthalmologists must only claim pursuant to the Higher Item when the anaesthetic service performed is medically necessary. 78 The proper construction of the Higher Item becomes clear when one reviews the expert evidence in more detail. 79 Associate Professor Forrest was called by Bupa. For reasons that are not entirely clear, he was mistakenly instructed that during the Oral Sedation Procedure the Xanax was "administered by a Registered Nurse". He stated in his first report that "(n)o anaesthetist (or any reasonable medical practitioner) would understand the use of oral alprazolam to constitute an anaesthetic service". Importantly, he later accepted that this statement was wrong (T204.43-44; T205.31-32). In this regard, Associate Professor Forrest accepted that Associate Professor Lee and Dr Koumoukelis who were called by the respondents (and who held a different view in accepting that the use of oral Xanax could constitute an anaesthetic service) were well-respected, competent medical practitioners (T204.31-35; T206.35; T207.5-6) and that their interpretation of the Higher Item is one which a reasonably competent practitioner could hold (T206.33-38). 80 The respondents understandably put emphasis upon the fact that the unanimous opinion held by all experts (in turn consistent with the views of Dr Chang and the unchallenged views of Dr Bourke and Dr Elder) was that the provision of a 0.25 mg dose of Xanax constitutes low-dose oral sedation. They point to the fact that neither Associate Professor Lee nor Dr Koumoukelis was challenged on that opinion and that, despite some initial reluctance, Associate Professor Forrest confirmed that that was also his opinion (T202.30-34). Given that the experts also agreed that conscious sedation is a type of anaesthetic and that the administration of Xanax is a medical service (T203.11-13; T203.45-T204.13), it is said that the administration of Xanax is an anaesthetic service (despite Associate Professor Forrest's personal view to the contrary (T204.15-22)). 81 I do not doubt that Associate Professor Forrest (and I presume other anaesthetists or reasonable medical practitioners) hold the view that the use of Xanax by the Oral Sedation Procedure does not and cannot constitute an anaesthetic service. Having said that, as noted above, the evidence does not establish a professional consensus among well-respected, competent medical practitioners. It is a matter upon which minds can (and apparently do) legitimately differ. I consider that the administration of low dose Xanax by the Oral Sedation Procedure can constitute an anaesthetic service and can attract the Higher Item when it is required or, in other words, when it is medically necessary in an individual case. The fact that this may well be a small number of cases or restricted only to those cases referred to in the evidence of Dr Chang summarised at [69] above, is not to the point.

Issue 4: What were the circumstances in which Dr Chang came to administer alprazolam to patients on a regular basis during the Relevant Period? 82 Bupa's submission is that the Court should not accept Dr Chang's explanation that he only came to administer 0.25 mg of Xanax from 13 September 2012 following years of research and development. Rather, it is said, that Dr Chang's explanation is a "confection" to explain away the true position that Dr Chang considered 0.25 mg of Xanax to be a merely desirable means of reducing patients' anxiety and that, from 13 September 2012, Dr Chang was aware that there were financial considerations in favour of the Company making claims under the Higher Item. 83 The respondents make the point that the circumstances in which Dr Chang came to administer Xanax, and Dr Chang's motivation in doing so, are irrelevant to the proper construction and application of the Higher Item. For reasons I have already explained, I agree. Given the way issues were framed on the pleadings, the question as to whether there was any motive to charge in a certain manner has no bearing on whether Dr Chang was entitled to submit the Higher Item. Moreover, as I have made clear above, it would be unfair and inappropriate for the Court to make any such findings as to Dr Chang's motivation, at least at this liability stage.

Issue 5: In submitting the 4,453 claims to BUPA (Claims), did [the Company] represent to BUPA in trade and commerce that Dr Chang:

a. had performed a procedure identified by the Higher Item (Representations)?; or

b. genuinely considered, on reasonable grounds, as an ophthalmologist, that he had performed a procedure falling within the Higher Item? (see RS [7])

Issue 7: If the answer to 5(a) is yes, did the conduct in making the Representations amount to contravening conduct (in all cases where the Representations were made) because:

a. administering alprazolam is not an anaesthetic service; or

b. in the answer to 6 is yes, in the alternative, even if administering alprazolam (in the form of 0.25 mg dose of Xanax) is an anaesthetic service, it was not for a patient requiring an anaesthetic service because, at best, it was desirable to reduce anxiety and the dosage was so low that its clinical effect is likely to be negligible? (see T 264.19 - 265.23) 84 Again, it is convenient to deal with these issues together, which deal with the question of characterisation of the conduct (being the making of the Representations) as being either representations of fact or of opinion, and also the distinct question of whether the conduct, after being properly characterised, amounts to contravening conduct. 85 Between 13 September 2012 and 10 August 2015, the Company made the claims for payment to Bupa which are the subject of Bupa's Statement of Claim. Each claim for payment comprised a completed claim form and a tax invoice from the Company addressed to Bupa. 86 The respondents accepted, not surprisingly, that the Company submitted the claims for payment in trade or commerce and that Dr Chang was "involved in" the conduct of the Company submitting claims for payment to Bupa. 87 The first point of departure between the parties was whether, on Bupa's case, the Representations were as to the existence of a fact, to be determined objectively; or, on the respondents' case, the Representations were as to an opinion honestly held by Dr Chang on reasonable grounds, to be determined subjectively. 88 More particularly, the respondents' case was that the Representations were statements of opinion that Dr Chang genuinely considered, on reasonable grounds as an ophthalmologist, that he had performed a procedure which could legitimately be classified as falling within the Higher Item. The case of Bupa is that the Company represented, as a matter of objective fact, that Dr Chang had performed such a procedure. This exercise of characterisation falls to be considered in circumstances where the documents in which the Representations were conveyed, the claim form and tax invoice, recorded objective details about a procedure performed in the past. Those objective details included, among other things, the patient's name, the date of the procedure, the admission and discharge times, and the name of the medical practitioner performing the procedure. It also included, within these details, the relevant MBS item number. The claim form recorded what the person completing the form said happened and contained no qualified statements or disclosures of subjective reasons. 89 What is clear is that the principled approach to characterisation involves examining what the impugned statements conveyed to their intended audience: Forrest v ASIC [2012] HCA 39; (2012) 247 CLR 486 at 505 [33] (per French CJ, Gummow, Hayne and Kiefel JJ). In this case, the intended audience was Bupa's hospital claims assessors who received the claims for payment and were responsible for processing and assessing those claims. 90 Both parties made reference to Middleton v AON Risk Services Australia Ltd [2008] WASCA 239; (2009) 15 ANZ Insurance Cases 61-788 at 77,195 [22], where McLure JA (Murray AJA agreeing) drew attention to the difference between statements of fact and opinion and noted: Whether or not a statement is one of fact or opinion depends upon all the relevant circumstances known to the representee, including the form in which the statement is made and the personal knowledge or likely personal knowledge of the person making the statement. The subject matter of the statement may also be relevant but is not necessarily determinative. 91 The respondents contend that determining whether a procedure falls within the Higher Item required Dr Chang to exercise his professional judgment, genuinely and reasonably, in his capacity as an ophthalmologist both as to whether the description is applicable and as to what the description in the item number means. This calls for judgment and a claim made under the Higher Item expresses an opinion that the item is applicable and involves at least the following steps: (a) determining whether any of the medication used in the conduct of the procedure falls within the clinical definition of an anaesthetic, which calls for the application of specialised knowledge and training; and (b) if so, determining as a matter of textual interpretation whether the word "(Anaes)" requires the anaesthetic to be administered by an anaesthetist (or other medical practitioner) rather than the proceduralist, when the language used makes no reference to a separate anaesthetist being involved. 92 Given the need to have regard to all of the context, on balance, I consider that viewed from the perspective of what the Representations conveyed to their intended audience (being Bupa) and the relevant circumstances known to Bupa, the Representations were ones of fact and not opinion. What was being conveyed was that a task had been performed of a certain character thus allowing a claim of a certain type to be made. Like the other statements of relevant details made in the Claim Form, what was conveyed was either true, or it was not true. Those receiving the material within Bupa would not have perceived it as the expression of an opinion, but rather a statement of fact as to an entitlement of a certain type. Hence, whether the Representations were misleading or deceptive, or likely to mislead or deceive, is to be determined objectively as a question of what in truth occurred. 93 Turning to the question of whether the conduct amounted to contravening conduct, consistent with its "all or nothing" approach, Bupa was content to submit that the Representations contravened s 18 of the Australian Consumer Law, because, in each and every case, Dr Chang had not, in fact, performed a procedure answering the description of the Higher Item, being an intravitreal injection for a patient requiring anaesthetic services and the only professional service performed was the one described by Lower Item. Consistently with this, in closing oral submissions, Bupa accepted that it must lose if the Court accepted that it was clinically necessary for even only a small percentage of Dr Chang's patients to receive oral sedation: (T299.46-T300.15). 94 The difficulty for Bupa is that, as explained above, there is no factual basis for a finding that the only anaesthetic administered in all cases was 0.25 mg of Xanax; the evidence was that, at least in exceptional cases, a titrated dose was administered. Additionally, there is no evidence supporting a finding that in every case the patient did not require an anaesthetic service; Dr Chang gave unchallenged evidence, which I accept, that at least some patients required an anaesthetic service to address underlying movement disorders such as Parkinson's disease: T127.22-28; and see also [69] above. Any evidence as to necessity from Associate Professor Forrest (based on a review of only 12 patient files) does not address the fact that in some, even if only in a small number of cases, it cannot be said it has been proven that it was not necessary for the Oral Sedation Procedure, which I accept was an anaesthetic service, to be administered (in a 0.25 mg or greater dosage). 95 Bupa's closing written submissions suggested that Dr Chang's evidence did not affirmatively establish that patients "required" low-dose oral Xanax, but this is not to the point. Bupa had the evidentiary and persuasive burden of proving its misleading and deceptive conduct case, which was presented on an "all or nothing" basis as explained above. It follows, it cannot succeed as framed.

Issue 6: Is BUPA entitled to advance the alternative claim identified at 7(b) below? 96 I have dealt with Issue 6 in Section B above. The answer is "yes".

Issue 8: If the answer to 7 is yes, did the contravening conduct materially contribute to BUPA suffering loss and damage during the Relevant Period and, if so, is BUPA entitled to statutory compensation against ACS and/or Dr Chang in an amount of $521,703? 97 Given the answer to Issue 7 is no, this issue does not arise; but it is appropriate to make some relevant factual findings and deal with the issue of causation in the event I am incorrect as to my conclusions as to characterisation in the misleading and deceptive conduct case. 98 In its statement of claim, Bupa pleaded that the conduct was contravening until 10 August 2015, when Dr Chang first disclosed to Bupa that he was using the Oral Sedation Procedure, in an unspecified dosage, as an alleged anaesthetic service. In closing submissions, Bupa submitted that the misleading conduct continued after 10 August 2015 (although it did not seek to amend its claim to reflect this change). 99 Section 236 of the Australian Consumer Law permits recovery by a claimant of loss or damage suffered "because of the conduct". The relevant conduct in this case involved the submitting of claims for payment by the Company to Bupa. Assuming proven contravening conduct, the essential issue as to causation can be stated as follows: whether any contravening conduct in making the Representations played some part, even if only a minor part (Gould v Vaggelas (1985) 157 CLR 215 at 236 per Wilson J) in materially contributing (I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41; (2002) 210 CLR 109 at 130 [62] per Gaudron, Gummow and Hayne JJ) to the course of action taken by Bupa, being the payments of the relevant claims made under the Higher Item? 100 The whole purpose of the Company making the claims for payment was for them to be relied upon by Bupa. Ms Plunkett's unchallenged evidence was to the effect that Bupa's hospital claims assessors (many of whom were trained or supervised by Ms Plunkett) took the claims for payment at face value, entered the MBS item recorded on the Claim Form, and presumed that the procedure described by that item had in fact been performed, unless there was something in the claims documents that caused the assessors to believe otherwise. That is, Bupa's reaction (by its claims assessors) to receipt of the claims for payment was that Bupa believed what the respondents intended the claims for payment to convey, and made payments accordingly. 101 The respondents relied upon the fact that notwithstanding Bupa's knowledge from 10 August 2015 of the way in which Dr Chang billed against the Higher Item, Bupa continued to pay claims submitted under the Higher Item (indeed, it continued to pay such claims even after the commencement of this proceeding on 24 October 2016 until as recently as mid-July 2018: Exhibit H; T93.40-42). According to Ms Street, the reason was that an instruction she had given to cease paying such claims from 14 June 2018 was not followed by Bupa: T94:7; T95:37. 102 As Bupa correctly submitted, however, it is no answer to say the respondents were somehow careless or at fault for making the payment. As Gleeson CJ explained in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 468-469 [13]-[14]: It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. The respondents knew the purpose for which their representations were being relied upon by the appellants ... 103 It follows that if contravening conduct had been established, then there is a sufficient causal link between the conduct and the loss.

Issue 9: If Dr Chang had not in fact performed a procedure identified by the Higher Item (for a reason identified in 7 above able to be advanced by BUPA), were amounts paid to settle the Claims during the Relevant Period:

b. if the answer to (a) is yes, did the mistake cause the payments of the Claims (in which case, the amounts paid to settle the Claims caused by the mistake would be monies had and received by [the Company] to the use of BUPA)? 104 Further, or in the alternative to the misleading or deceptive conduct claim, Bupa contends that the Company is required to make restitution of the excess benefits paid out by Bupa up until 10 August 2015. Given I am not satisfied that all the payments were paid under a mistake (in that Bupa has not proven that the claims were not payable pursuant to the Higher Item) and I have dealt with the statutory claim, is unnecessary to reach any conclusions as to Issue 9 other than to make the finding that I accept Ms Plunkett's evidence that the usual practice of Bupa's hospital claims assessors was, when assessing claims, for the assessors to review the claims and only process them for payment if there was nothing in the claims that led the assessors to believe that the procedure described in the claim had not in fact been performed. I also accept that it was following standard checks performed on the claims, that Bupa formed the belief that Dr Chang had performed a procedure answering the description of the Higher Item.

D.1 Introduction: The Gap Scheme and the Contract 105 As noted above, the respondents filed a cross-claim alleging a breach by Bupa of the Contract between Bupa and Dr Chang relating to the Gap Scheme. Some explanation of the Gap Scheme is necessary. 106 Medical practitioners often charge patients a higher amount than the rebate specified in the MBS for a particular procedure. The difference between the amount charged and the MBS rebate is typically referred to as a "gap". Bupa provides its Gap Scheme for the purpose of reducing or eliminating the gap payable by its members to medical practitioners who participate in the Gap Scheme. 107 It is common ground that Bupa has no legislative obligation to provide the Gap Scheme and that it is provided at Bupa's instigation for the apparent benefit of Bupa's members. Medical practitioners can choose to participate in the Gap Scheme by applying to become a "Registered Medical Gap Scheme practitioner" and agreeing to be bound by the Contract. It is also common ground that the Contract regulates, as matter of contract, the dealings between Bupa and participating practitioners. 108 Bupa provides details of participating practitioners to its members. In this way, medical practitioners who participate in the Gap Scheme are held out by Bupa to its members as being Bupa's trusted and preferred "providers". 109 The Contract expressly allows Bupa to deregister a practitioner in certain circumstances. Certain aspects of the deregistration procedure are agreed to have no direct applicability in the present circumstances so, set out below in emphasis, are those parts of the Contract which governed the procedure to be followed in the present case: Bupa's Medical Gap Scheme deregistration procedure Bupa may deregister a Registered Medical Gap Scheme practitioner from the Bupa Medical Gap Scheme by giving the practitioner written notice of deregistration if: 1. The practitioner breaches any provision of these Terms and Conditions on three separate occasions as notified in writing; 2. If (sic) in Bupa's reasonable opinion, the practitioner's conduct may adversely impact the goodwill, reputation or business of Bupa at any time; or 3. The practitioner is convicted of a criminal offence relating to their practice including, without limitation, a fraud offence. Before Bupa exercises its rights under Bupa's deregistration procedures in relation to particular conduct, Bupa will: 1. Give the Registered Medical Gap Scheme practitioner a written notice setting out reasons for deregistration; and 2. Except where, in Bupa's opinion, deregistration is urgently required to protect the interest of Bupa or Bupa members, provide the Registered Medical Gap Scheme practitioner with an opportunity to make submissions in relation to the matters set out in the notice referred to in 1. Deregistration is for a minimum period of 6 months but Bupa may, in its absolute discretion, elect to re-register a practitioner prior to the expiry of 6 months. (Emphasis added reflecting that part of the Contract agreed by the parties to be relevant) 110 From about November 2011 until his purported deregistration on 15 August 2016, Dr Chang was a "Registered Medical Gap Scheme practitioner" participating in the Gap Scheme. The primary liability issue on the cross-claim can be simply stated: whether the purported deregistration was performed in accordance with the deregistration procedure (Deregistration Procedure) provided for in the Contract? 111 The obvious starting point is specifying the conditions necessary for a valid deregistration to occur in conformance with the Deregistration Procedure, which requires Bupa to take the following steps: (a) form a "reasonable" opinion that Dr Chang's conduct may adversely impact the goodwill, reputation or business of Bupa at any time (Step 1); (b) prior to the exercise of "its rights" under the Deregistration Procedure, Bupa is required to: (i) give Dr Chang a written notice setting out the reasons for deregistration (Notice) (Step 2); and (ii) provide Dr Chang with an opportunity to make submissions in relation to the matters set out in the Notice (Step 3); and (c) make a deregistration determination which is for a minimum period of 6 months (Step 4). 112 Issue 10 relates to the applicability of an express term of the Contract, being the Patient Relationship Term. This term provided that Bupa expressly acknowledged that Dr Chang was to exercise his independent clinical judgment at all times and that Bupa undertook to preserve his "professional freedom", hence ensuring that Dr Chang had the ability to make such clinical decisions in relation to his patients as he saw fit, consistent with his duties as a practitioner. I will return to this term briefly below, but I can pass over further discussion of it now because its applicability is not in issue. This leaves Issues 11 to 15, but rather than immediately turning to them, it is convenient to commence the detailed consideration of the cross-claim by: (a) stating my approach to determining the liability issue on the cross-claim; and (b) ascertaining whether Bupa complied with the Deregistration Procedure by reference to the various steps identified.

D.2 The Approach to Liability on the Cross-Claim 113 It is worthwhile stressing that this aspect of the case involves consideration of whether what occurred, leading up to and including the purported Step 4 deregistration determination on 15 August 2016, was in accordance with the Deregistration Procedure. It does not involve consideration of whether, if different opinions had been formed, they would have been reasonable or if different steps had been taken, Dr Chang could licitly have been deregistered from participating in the Gap Scheme in 2016. Nor does it involve me expressing views, one way or another, as to whether it is open for Bupa to take steps in accordance with the Deregistration Procedure in the future. 114 Before turning to the events of 2016, it is necessary to deal with a legal issue not addressed in the submissions of the parties.

D.3 Reasonableness and the Deregistration Procedure 115 As can be seen from the above, the Deregistration Procedure provides that a "reasonable opinion" is to be formed at Step 1 and that any final exercise of rights to deregister is to be made at Step 4 (after consideration of the material provided to Bupa pursuant to the process mandated by the Contract). 116 With respect, the submissions of both parties elided two matters which should be kept separate: the formation of a reasonable opinion (Step 1) and the subsequent final decision to deregister (Step 4). Step 1 expressly provides for the opinion to be formed reasonably, but no such express contractual control is specified in Step 4. This raises two questions: first, is there an obligation to act reasonably in making the final deregistration decision and; secondly, if so, how is the question of reasonableness (or, more particularly, unreasonableness) to be assessed? 117 Given the express contractual obligation to form the Step 1 opinion "reasonably", in this case, the question as to whether it is necessary to imply a term of reasonableness that restricts the exercise of contractual powers, only directly arises in relation to Step 4. I think there is little doubt given the text, context and purpose of the Deregistration Procedure that a reasonableness "control" on the Step 4 exercise of the contractual "right" is to be implied (like the express obligation of reasonableness at Step 1). 118 The fact that reasonableness obligations arise at different stages might be important as the opinion as to the final decision to deregister (at Step 4) is likely to be a contractual discretion exercised by reference to different material (being the material provided to Bupa pursuant to Step 3) than that known to Bupa at the time the Step 1 opinion is formed. Moreover, the opinion formed and decision later made were formed and made by an artificial person (Bupa) and so each step may involve different human actors and one step may be taken reasonably and one may not. Although this does not matter for present purposes, it is not correct to focus on the "reasonableness" of the Deregistration Procedure globally or to elide the first and last steps of the process. 119 As I noted in Avenia v Railway & Transport Health Fund Ltd [2017] FCA 859; (2017) 272 IR 151 at 205 [215], having identified that a reasonableness "control" exists in relation to the exercise of a contractual power, the far from straightforward question that then arises is the standard of reasonableness to be observed in the exercise of a discretionary contractual power and in the assessment of the reasonableness of the exercise of contractual discretions by a Court. 120 In Avenia at 204 [213], I referred to the consideration of this general topic in Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661 (in the different context of an implication of a term of reasonableness into an employment contract) where Lady Hale explained at 1669 [18]: Contractual terms in which one party to the contract is given the power to exercise a discretion, or to form an opinion as to relevant facts, are extremely common. It is not for the courts to re-write the parties' bargain for them, still less to substitute themselves for the contractually agreed decision-maker. Nevertheless, the party who is charged with making decisions which affect the rights of both parties to the contract has a clear conflict of interest. That conflict is heightened where there is a significant imbalance of power between the contracting parties as there often will be in an employment contract. The courts have therefore sought to ensure that such contractual powers are not abused. They have done so by implying a term as to the manner in which such powers may be exercised, a term which may vary according to the terms of the contract and the context in which the decision-making power is given. 121 As Edelman J noted in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825; (2015) 329 ALR 1 at 162 [1012], this concept of "reasonableness" was one which was "drawing closer and closer to the principles applicable in judicial review" (quoting Lady Hale in Braganza at 1672 [28]), and, after noting a strong argument that a general approach to contractual discretions which recognises such restrictions should also be applied to the contractual discretion to terminate, his Honour observed at 162-163 [1014]-[1015]: In Australia, it might also be said that a unitary approach to "reasonableness" implications concerning contractual discretions should also mirror the reasonableness requirement in judicial review which arises as a matter of statutory implication: Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332, 363-364 [67] (Hayne, Kiefel and Bell JJ). In Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253, 283 [98], Heydon and Crennan JJ said that the approach taken to statutory construction is "matched" by that which is taken to contractual construction. Although there are good reasons why this English approach should be applied to permit an Australian implication of reasonableness in the exercise of a discretionary statutory or contractual power, I doubt whether there should be a general limitation upon an implied qualification of "reasonableness" so that the obligation applies only to circumstances of irrationality or where the outcome of the exercise of the power is so unreasonable that no reasonable power holder could ever have acted in that way. Once again, the existence and content of the implication in any case will depend on the context. It may also be that any "reasonableness" implication would not be confined by adjectives such as "outrageous" or "so unreasonable that no reasonable decision maker would make it": compare Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332, 364 [68] (Hayne, Kiefel and Bell JJ). (Emphasis in original) 122 More recently, albeit in the different context of the exercise of discretions arising under a policy of insurance, in Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233; (2017) ANZ Insurance Cases 62-149, Gleeson JA (Macfarlan JA agreeing) discussed the concept of how to approach a "review" of a contractual discretion and concluded the relevant inquiry for the Court is neither a "merits review" based on entirely objective criteria, nor is it an inquiry into whether the decision is unreasonable in the Wednesbury sense, that is, so unreasonable that no reasonable decision maker could have so decided: see Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. Rather, Gleeson JA identified the relevant inquiry as being whether the opinion formed was not open to the decision maker acting reasonably and fairly in considering and determining the matter the subject of the decision and, in doing so, relied upon Braganza. 123 It may be in many cases that this issue does not matter very much. As Macfarlan JA explained in Hannover Life at 75, 812 [3], quoting Allsop CJ in Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; (2016) 237 FCR 1 at 5 [10], the "concept of legal reasonableness is not amenable to minute and rigidly-defined categorisation", and application of the two different formulations referred to above, would lead to different results in few cases. One might pause to remark on the similarity between the approach evident in the private law context in Hannover Life to that evident from the recent observations of Gageler J in Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 92 ALJR 713 at 729 [59] where his Honour (quoting Allsop CJ in Stretton at 5-6 [11]; The Law as an Expression of the Whole Personality [2017] (Summer) Bar News 25 at 31) said: References in Stretton to a conclusion that a decision is legally unreasonable being "evaluative" and to the task being "not definitional, but one of characterisation" were usefully directed to emphasising that determination of whether a purported exercise of a statutory power is so unreasonable that no reasonable repository of the power could have so exercised the power is informed not only by "the terms, scope and policy of the statute" but also by "fundamental values" anchored in the common law tradition. Reasonableness is itself a traditional conception of the common law - a translation of "the human into the legal". Reasonableness is not exhausted by rationality; it is inherently sensitive to context; it cannot be reduced to a formulary. In the discernment of unreasonableness, "[t]here are no talismanic words that can avoid the process of judgment. 124 It does not seem to me to be necessary that I wade further into this complex and developing area of discourse, particularly when I have not received the benefit of submissions on the point but, irrespective as to the standard of reasonableness to apply, I do not consider it matters in the present case for three reasons. 125 First, and most importantly, as will be seen, the problems with Bupa's disregard of the Deregistration Procedure transcended the formation of the opinion at Step 1 and the final decision made at Step 4. 126 Secondly, for reasons I will explain, the question of the content of any express (Step 1) or implied (Step 4) obligation of reasonableness in the present case is essentially the same as an inquiry as to whether, on the facts, Bupa exercised its contractual rights for the purpose for which they were given and not for an extraneous purpose: see Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 368; Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190 at [175]. 127 Thirdly, although it does not seem to me that I must reach the view that the deregistration decision was one that was "so unreasonable that no reasonable decision maker would make it", here the Step 4 decision was one which lacked a rational basis and was not open to the decision maker acting reasonably and fairly in considering and determining the issue. In reaching this last conclusion, I do so conscious of the finding I have already made at [81] that anaesthetists or reasonable medical practitioners could reasonably hold the view that the use of Xanax in the Oral Sedation Procedure does not constitute an anaesthetic service. I expand on the flaws in the decision-making process below.

Step 1 128 Bupa contends that Ms Margaret Street, the Manager of Bupa's Hospital and Medical Utilisation Review team, was the relevant employee who held the reasonable opinion that Dr Chang's conduct in directing, or authorising, the Company to submit the claims may adversely impact upon the goodwill, reputation or business of Bupa. 129 Bupa contends that following an investigation and audit of the Higher Item claims, which included consultation with Dr Tony Webber, the former director of Medicare's Professional Services Review (a medical practitioner with experience of the MBS), Bupa, through Ms Street, formed the relevant opinion. As to the reasonableness of that opinion, Bupa points to the following matters which, as I understand it, were said to be taken into account by Ms Street: (a) Dr Chang's conduct in causing the Company to make the claims for payment in respect of procedures which did not answer the description of the Higher Item (and thereby making an unjustifiable profit); (b) The disproportionate number of claims made under the Higher Item without related anaesthetic billing compared to other ophthalmologists; (c) Dr Chang, once notified of Bupa's concerns, repeatedly refusing to repay the amounts overpaid; and (d) Dr Chang's stated intention to continue to engage in the conduct despite Bupa's concerns. 130 In cross-examination, Ms Street said that her opinion was based upon: conversations with Dr Webber and Mr Anfinsen (who, it will be recalled, was a member of Ms Street's "team" at Bupa); correspondence between Bupa and Dr Chang's solicitors, TressCox Lawyers; an "on-site" audit conducted at the Clinic's administration offices in January 2016; and an email from Dr Webber to Mr Anfinsen dated 6 June 2016. In addition, Ms Street referred to her "[l]oss of confidence in the correct item numbers being submitted": T43.14-17. 131 It is unnecessary to consider each of these bases for the formation of her opinion in any detail because I consider her reasoning process and the nature of opinion she formed to be tolerably clear. 132 Following conversations, primarily with Dr Webber and Mr Anfinsen and an "on-site" audit of a small number of files, the critical factor in Ms Street forming her opinion that Dr Chang's conduct may adversely affect Bupa was her view: … that Dr Chang and the Clinic were using the incorrect MBS item number when making hospital claims to Bupa in respect of procedures involving paracentesis of anterior chamber or vitreous cavity where the patient undergoing the procedures received sedation in the form of 0.25 mg of alprazolam and where no anaesthetist made any claims under the MBS or to Bupa in respect of the procedures. 133 It is plain that the opinion of Ms Street was informed by the same "all or nothing" process of reasoning which was later mirrored in this proceeding by Bupa. In closing submissions, Bupa submitted, in terms, that "Ms Street was qualified to form the opinion that 0.25 mg Xanax was not an anaesthetic service" and this is what she did. That is, she reasoned that because of its nature, a 0.25 mg dose of Xanax administered pursuant to the Oral Sedation Procedure could never be an anaesthetic service. For reasons I have explained, this view (upon which the opinion that Dr Chang's conduct may adversely impact Bupa was based) was not only misconceived, but was also held so strongly that it involved the opinion that no person acting reasonably could hold a contrary view in relation to any patient (including those described in the evidence of Dr Chang summarised at [69] above). 134 Consistently with having a fixed view, Ms Street accepted that during the audit (which only lasted three hours, despite such audits usually taking three days: T61.11-21; T89.30) she did not ask Dr Chang for his clinical justification for the use of Xanax (T63.3-5; T90.14-18) and was not interested in asking Dr Chang about those reasons (T90.14-18). Indeed, the audit seems to have not really been designed for any useful purpose because, as the respondents submit, "all that appears to have been established during the audit were the common facts which are not in dispute in this case (and which were already known to Bupa before the audit…, namely that Dr Chang billed under [the Higher Item] in circumstances where the patient was administered low-dose [Xanax] by Dr Chang and not by an anaesthetist". 135 This fixed view was odd in circumstances where, as Ms Street accepted, by June 2016, she was aware of the fact, as noted above, that half of the ten highest claiming facilities for intravitreal injections in the years 2013 to 2015 made claims to Bupa under the Higher Item without any corresponding bill from an anaesthetist: T47.30-32. Given the view communicated by Bupa that the Oral Sedation Procedure could never ground a claim to the Higher Item because there was no anaesthetist involved, the fact was that in at least a few cases such claims were being made by others. This fact was not irrelevant. It might have been thought with some real justification that Dr Chang's Higher Item claims were, as Ms Street considered, wholly disproportionate compared to other ophthalmologists, but the reality underlying this comparative analysis (that some other ophthalmologists were indeed making a small number of claims in similar circumstances) seems to have been essentially ignored in any consideration by her (and through her, Bupa) as to whether an "all or nothing" view was appropriate. 136 It seems Ms Street's mind was closed to any interpretation of the Higher Item in which the Oral Sedation Procedure could be characterised as an anaesthetic service. Yet, as I have explained, in circumstances where it was medically necessary to provide an anaesthetic, as I have found, the evidence does not support her view that the Oral Sedation Procedure could never attract the Higher Item properly construed. Ms Street's "[l]oss of confidence" was based on her mistaken, but adamantly held view: T69.29; T75.4-11; T90.29-32; T92.32-40. 137 I have little difficulty in accepting that Ms Street believed that the relevant claims incrementally increased Bupa's operating costs and, more importantly, these operating costs would increase even more significantly if others started claiming in the same manner as the Company. 138 I am not persuaded, however, despite her affidavit evidence, that Ms Street went further than forming a view that Dr Chang's billing practices must change. Specifically, that she consciously turned her mind to the further topic that unless the amounts overpaid by Bupa could be recovered, the resultant increase to Bupa's operating costs would contribute to an increase in health insurance premiums charged to Bupa's members which could lead Bupa's members to think less favourably of Bupa or consider cancelling their memberships. 139 Based on the fixed view I have described, it seems to me that Ms Street's (and hence Bupa's) real motivation for forming the Step 1 opinion (and then communicating it) was not to elicit submissions as to why it should not proceed to make a Step 4 deregistration, but rather to communicate with Dr Chang in a minatory way in order to place commercial pressure on him to repay all sums claimed to which Bupa asserted he was not entitled and to change his billing practices. I accept the submission made by the respondents that Bupa's approach to Dr Chang was driven out of financial self-interest. The threat of deregistration was explicitly used for that purpose in the final paragraph of a letter from Bupa to Dr Chang's solicitor, Ms Keogh of TressCox, dated 17 June 2016 (17 June Letter) (in conjunction with a threat to report Dr Chang to the relevant ethics committee if he did not pay up). 140 As I have noted, this approach came against the background that Bupa had paid claims without complaint or investigation of any of the other billing practices that had issued similar bills to Bupa: T36:2-T37.33; T47.30-32. The only conclusion is that it did not do so because such claims were of a lower total cost to Bupa. 141 In the circumstances, I do not consider the opinion formed by reference to the mistaken premise, that the Oral Sedation Procedure could never be considered an anaesthetic service, to be a reasonable one. Nor do I consider it was reasonably formed for the purpose of engaging in the further steps mandated by the Deregistration Procedure. It was formed and then communicated in such a way as to further the real purpose I have described at [139] above. The approach adopted by Bupa meant that Dr Chang would inevitably be deregistered unless he abandoned billing the Oral Sedation Procedure pursuant to the Higher Item in all cases, even when he considered an anaesthetic service was required. This could not be reasonable. The practical effect of requiring an undertaking (to the extent Dr Chang wished to be paid for the provision of the anaesthetic service) would impact upon Dr Chang's ability to make future clinical decisions in relation to his patients as he saw fit. It is unnecessary for me to decide whether this amounted to a breach of the Patient Relationship Term (see [112] above). It could be argued that Bupa was not preventing a clinical practice, rather it was seeking an undertaking to change a billing practice; but, even if it was not a breach of this term, it is a further pointer towards unreasonableness because at least in cases where an anaesthetic service was required, Dr Chang thought the Oral Sedation Procedure was appropriate and it could be justified as failing within the Higher Item. 142 As I foreshadowed at [126] above, another way of saying why the formation and later communication of the opinion was unreasonable, was because it was formed and communicated for an extraneous purpose, that is, making it clear to Dr Chang that unless he paid the amount claimed by Bupa and fell into line, then there would be contractual and possibly professional consequences. Before leaving Step 1, I should make three other points. 143 First, although Ms Street gave evidence that it was her decision in August 2016 to deregister Dr Chang from the Gap Scheme (T42.22-23), that is, the Step 4 decision, she clarified that other persons participated in the making of the decision, being members of Bupa's legal team, Mr Calum Cook and "maybe" Ms Anna Johnson (see T42.27; T43.12); in this sense, it was "a business decision" or "a group decision". Notwithstanding this evidence, I consider, when it came to forming the opinion at Step 1 of the Deregistration Process in June 2016, the opinion was formed by Ms Street on behalf of Bupa, albeit with input from the solicitors. 144 Secondly, there was an apparent assumption on the part of Ms Street that 0.25 mg of Xanax was always administered. Although that may have been the case in all files examined during the on-site audit, this assumption was not soundly based in respect of all patients on the material she had before her at the time her Step 1 opinion was formed. This is a further factor pointing to its unreasonableness. 145 Thirdly, and importantly, one thing that is pellucid is that Ms Street did not come to her opinion in 2016 because she considered Dr Chang to be making claims pursuant to the Higher Item for a financial rather than a proper clinical purpose. Although it might be thought that this is intuitively surprising, there is no ambiguity in the evidence. After cross-examination and re-examination was completed, I asked (at T105) the following about the 17 June Letter which communicated the deregistration decision: I would just like you to go to the letter of 17 June 2016 that you wrote to TressCox?--Yes, your Honour. Do you see the third paragraph there commencing with MBS item?---Yes. Yes. If you drop down to the last sentence: It's difficult to see how this sudden overnight change is not related primarily to financial considerations for this facility. You see that?---I do, yes. I wonder if you could assist me by just indicating whether or not that view that it was difficult to see how this sudden overnight change is not related primarily to financial consideration played any part in the decision that was made in relation to Dr Chang and his position as a preferred supplier?---No. 146 As noted above, it is inappropriate for me to express any view one way or another as to whether a counterfactual opinion informed by this (or other considerations) would have been reasonable in the circumstances.

Step 2 147 As can be seen by my consideration of Step 1, the formation of the opinion and its communication to Dr Chang in some ways overlap, because part of the unreasonable formation of the opinion was that it was to be used for the unreasonable and extraneous purpose of making a threat to Dr Chang to pay up and change or face the consequence of deregistration. This message was communicated by the 17 June Letter which is relied upon by Bupa as constituting its compliance with the Step 2 process. However, even if I was wrong about my conclusion as to the formation of Ms Street's Step 1 opinion, the contention that Bupa complied with Step 2 of the Deregistration Procedure must be rejected. 148 The case of Bupa was that it was by the 17 June Letter that Dr Chang was given a written notice setting out reasons for deregistration such as to provide Dr Chang with an opportunity to make submissions in accordance with Step 3 of the Deregistration Procedure. 149 As is evident from the text extracted below, the 17 June Letter was sent after (and referred to) a lengthy communication from TressCox to Ms Street on 15 March 2016 which had set out, in considerable detail, Dr Chang's clinical practice, the asserted clinical justification for that practice and the basis for his billing practice. Given its importance, the 17 June Letter should be set out in full: Dear Ms Keogh, Andrew Chang Services Pty Ltd ABN 32 087 878 537 (Sydney Retina Clinic and Day Surgery) We refer to your letter dated 15 March 2016. Bupa maintains the view that it is inappropriate and unsustainable to bill MBS item 42739 for a patient receiving only a low-dose oral sedative or anxiolytic. This phenomenon is only identified at Dr Chang's practice. When MBS item 42740 was expanded to three items in 2012, the National Procedure Banding Committee initially set all three items at Procedure Band 3 for the purposes of hospital theatre billing. Dr Chang billed item 42738 consistently until 13 September 2012, when this item was reclassified to Procedure Band 1. On the same date item 42739 was reclassified to Procedure Band 2, which attracts a higher rate of theatre benefits. Dr Chang's billing history shows that the inappropriate billing of item 42739 commenced on this date. As the owner-operator of the day facility, Dr Chang benefits directly from this change of billing behaviour. It is difficult to see how this sudden overnight change is not related primarily to financial considerations for his facility. Bupa has worked with the Presidents and Ethics Committees of several professional organisations and colleges in the past in relation to billing behaviour concerns, and will do so in this instance unless it can be resolved directly. We have independent external advice that a Professional Service Review committee of Dr Chang's peers would be very unlikely to find it appropriate to define low-dose Alprazolam as an 'anaesthetic service'. We note Dr Chang's identification of inconsistencies in the claim list. We have reviewed and revised the list in light of Dr Chang's feedback, and updated our request for recovery of day surgery theatre fees to reflect services provided up until 31 May 2016. We have also included the Medical Record Number and the invoice reference for each patient and episode. The list is attached to this letter. The updated sum of $569,079 must be forwarded to Bupa by 18 July 2016. If we do not receive this amount by the due date we will take such further action as we consider necessary to recover the debt from Dr Chang. Please contact me for EFT details, or if payment is via cheque it can be forwarded via registered mail to: Private and Confidential Attention: Martin Anfinsen Hospital and Medical Utilisation Review Bupa HI Pty Ltd 179 Turbot Street - Level 17 Brisbane 4000 QLD Along with full repayment from Sydney Retina Clinic and Day Surgery, we require an undertaking from Dr Chang that this billing practice will cease immediately. If we do not resolve this issue by 18 July 2016, Bupa is with this letter giving notice that we will deregister Dr Chang from our Medical Gap Scheme. The terms and conditions of the scheme allows us to deregister a practitioner whose "conduct may adversely impact the goodwill, reputation or business of Bupa at any time". The deregistration period is for a minimum of six months. Yours sincerely, Margaret Street 150 The contention of BUPA was that the highlighted parts of the attached letter were sufficient to apprise Dr Chang of Bupa's reasons for deregistration (particularly, when one takes into account that Dr Chang, by his solicitors, later responded in detail seeking to address these matters in a letter of 5 July 2016). It is further said that Dr Chang was given ample opportunity to make submissions in relation to the matters set out in the 17 June Letter as Bupa continued to engage in correspondence over a period of two months and did not take steps to make the final (Step 4) deregistration determination until 15 August 2016. As such, it is submitted that "Dr Chang can point to no prejudice arising from any alleged deficiency in the notice". 151 As I understand the submission, it is said that this no prejudice point arises because the 17 June Letter must be viewed in the context of surrounding communications, including: (a) a 17 July 2015 letter from Bupa, in which Bupa sought supporting evidence to validate the respondents' claims under the Higher Item, by showing that appropriate anaesthetic services were required and performed; (b) a 10 August 2015 letter from TressCox, which gave some generalised details of the use of alprazolam by Dr Chang; (c) correspondence from 28 October 2015 to 16 November 2015, in which arrangements were made for Ms Street and Dr Dalton from Bupa to conduct an on-site audit at the Clinic on 15 January 2016; (d) a 15 February 2016 letter from Bupa, in which Bupa reported on findings from its audit and set out Bupa's view that 0.25 mg of Xanax is not an "anaesthetic service" required by patients within the meaning of the Higher Item; and (e) the 15 March 2016 letter from Dr Chang's lawyers, which was expressly referred to in both the 17 June Letter and the 5 July 2016 response from TressCox. 152 By this course, it is said that Bupa provided Dr Chang with an opportunity, before exercising Bupa's rights under the Deregistration Procedure in relation to particular conduct, to make submissions in conformity with the Contract. 153 It is also said that it is important to bear in mind that the Contract was not a detailed and prescriptive formal contractual regime for the provision of notices. In general, a Court should avoid construing a contractual notice in such a way as would deprive it of validity; the issue is whether the notice makes the matter clear to a reasonable recipient: Krupace Holdings Pty Limited v China Hotel Investments Pty Limited [2018] NSWSC 862 at [21]-[22] per Rein J; Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd [2006] NSWSC 902; (2006) 202 FLR 435 at 444 [34] and 445-446 [40]-[41] per Brereton J. Viewed in this light, Bupa submits that the 17 June Letter was effective in explaining the reasons for deregistration to Dr Chang and providing him with an opportunity to make submissions in relation to those matters, so as to satisfy the requirements of the Contract. 154 I reject these submissions. The process required more than a statement of a conclusion. It required notification of the process of reasoning by which the conclusion was reached, expressed in sufficient detail to allow for the provision of submissions in response. The 17 June Letter fell well short of this in stating a definitive conclusion. The 17 June Letter does not set out the reasons for the formation of the Step 1 opinion as revealed by Ms Street in her evidence. More fundamentally it did not invite submissions from Dr Chang, but rather, it constituted a demand for payment, failing which Bupa would deregister Dr Chang. 155 The Deregistration Procedure sets out a process designed to provide procedural fairness to a practitioner who may be the subject of a deregistration decision. The submission that the 17 June Letter is compliant with the notice mandated by the Contract is one which is without merit.

Step 3 156 It follows from the conclusion that I reached in relation to Step 2, that the Step 3 process miscarried. As I noted at [111(b)(ii)] above, Step 3 was the opportunity "to make submissions in relation to the matters set out in the Notice", that is the 17 June Letter. Although there was a series of exchanges between the solicitors for the respondents and Bupa, the process set out at Step 3 could only operate following the anterior steps being taken in conformity with the Deregistration Procedure. For reasons I have already explained, this did not occur.

Step 4 157 Although I have already made reference to the fact that the Step 1 process and the Step 4 process as a matter of contractual construction are to be regarded separately and the obligation of reasonableness that is expressed in relation to Step 1 applies by implication in relation to Step 4, the conclusions I have reached concerning Step 1 as to reasonableness apply to Step 4 with equal force. The whole point of the Step 4 analysis was for Bupa to make a decision based, among other things, on material that had been supplied to it following the service of a proper notice in accordance with Step 2 and after reviewing any material provided by a practitioner pursuant to Step 3. This did not occur as Bupa merely proceeded to implement (as foreshadowed in June) its intention to determine Dr Chang's registration given he had not repaid the money demanded nor indicated that he was prepared to change his approach to billing in the future. 158 Having dealt with the various steps of the Deregistration Procedure I can now state shortly my conclusions as to the remaining Agreed Issues.

Issue 11: As at 17 June and 11 August 2016, did the relevant employee or employees of BUPA who made the decision on behalf of BUPA, hold the reasonable opinion that Dr Chang's conduct in directing or authorising ACS to submit the Claims adversely impacted upon the goodwill, reputation or business of BUPA? 159 The answer to this question is "no" and I have already explained why I consider the opinion to have been formed unreasonably.

Issue 12: By the 17 June 2016 Letter (CB 1089), did BUPA give to Dr Chang a written notice setting out reasons for deregistration such as to provide Dr Chang with an opportunity to make submissions in relation to the notice in accordance with the Contract? 160 For reasons explained above, the answer to this question is "no". 161 In its written closing submissions, Bupa suggested that this breach was ameliorated in some way by a purported lack of prejudice to Dr Chang. This contention, made in answer to the breach of the express term, was not developed (other than as noted above) nor was it supported by authority. No estoppels or waivers are pleaded, and it can be put to one side for the purposes of the liability hearing.

Issue 13: Was the alleged deregistration of Dr Chang with effect from 15 August 2016 in breach of a pleaded express term the Contract? 162 The cross-claim, at [13], accurately pleads out the Deregistration Procedure and that Dr Chang could only be deregistered from the Gap Scheme if: (a) one of the "Deregistration Grounds" specified in the Contract were present; and (b) Bupa had given Dr Chang written notice of its reasons for deregistration and provided Dr Chang with an opportunity to make submissions in relation to that notice. That paragraph is admitted by Bupa and, as I have explained, Bupa breached both of those express requirements in that none of the specific grounds for deregistration existed nor did it give proper written notice of its reasons. 163 Accordingly, the alleged deregistration of Dr Chang in August 2016 was in breach of an express term of the Contract.

Issue 14: What is the legal or equitable basis for the relief sought in terms of prayers 1 to 3 in the notice of cross-claim (non-monetary relief) and what, if any, discretionary matters are to be taken into account in determining whether such non-monetary relief ought to be granted?

Issue 15: If the answer to 13 is yes, is the remaining cross-claimant, Dr Chang, entitled to:

b. damages for breach of contract in an amount to be assessed. 164 Again, it is convenient to deal with these issues together. 165 As noted above, both respondents brought the cross-claim and sought monetary and non-monetary relief. During the hearing, in response to a query raised by the Court concerning how it was that the Company could obtain relief, including recovering damages for a breach of a contract to which it was a stranger, it was conceded that the claim brought by the Company should be dismissed and an order was made accordingly. 166 As to the relief sought by Dr Chang, this relevantly included a declaration that Bupa breached the Contract by deregistering Dr Chang (Prayer 1), an "order setting aside the Cross-Respondent's deregistration" (Prayer 2) and an "order reinstating the First Cross-Claimant" under the Contract (Prayer 3). 167 As the respondents conceded in closing submissions, the second and third prayers for relief, were inapt. The Court is not engaged in a review of the deregistration of Dr Chang according to administrative law principles. It is dealing with whether or not there has been a breach of contract in 2016. The "more appropriate" relief, the respondents submitted, would be a declaration based on the common law of contract that Dr Chang's registration under the Contract remains on foot. 168 The contention of Bupa is that relief in terms of Prayer 1: …would amount to a declaration with no practical effect, as effectively conceded. It would produce no foreseeable consequences for the parties. It does nothing more than identify that a breach of contract occurred. It does not say what the consequence of that breach might be. It would not preclude either party from disputing whether the contract in question remains on foot, or whether Dr Chang's registration has been affected, or what damages flow from any such breach. A declaration which is futile and which has no utility should not be made: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582. That is not something which goes merely to the Court's discretion; rather, it may mean that this is not a matter upon which this Court can adjudicate: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591; [2000] HCA 11 at [52]. 169 I reject the notion that a declaration that Bupa breached the Contract by deregistering Dr Chang from the Gap Scheme with effect from 15 August 2016 has no utility. It plainly does. Apart from anything else, it is a declaration which has a legal consequence in quelling on a final basis a justiciable issue between the parties and gives rise to, at least, an entitlement to nominal damages. With respect, I do not understand the submission as to a lack of utility. 170 As developed in oral closing submissions, Dr Chang now presses the following additional non­monetary relief: (a) a declaration that Bupa's deregistration of Dr Chang from the Bupa Medical Gap Scheme with effect from 15 August 2016 was invalid; and (b) a declaration that Dr Chang remains a "Registered Medical Gap Scheme Practitioner" within the meaning of the Bupa Medical Gap Scheme and has been continuously since before and after 15 August 2016. 171 In response, Bupa contends that these declarations should not be made as no application to amend the Notice of Cross-Claim has been made, formally or informally and Dr Chang should not, at this late stage, be permitted to amend his prayers for relief. 172 It is asserted that if Dr Chang had sought a declaration that the Contract has always remained on foot in his Notice of Cross-Claim, then Bupa would have conducted its case differently. It is said that this would have included pleading, on the assumption that his deregistration was invalid, that the Contract between the parties has been abandoned, or, alternatively, any ineffective deregistration would have constituted a repudiation which Dr Chang has clearly accepted, such that it could not be said that the contract between them somehow remains on foot. 173 It is unnecessary for me to form a final view as to these matters as I consider the appropriate relief should be confined to that which is necessary to determine the issue pleaded on the cross-claim. That is, a declaration should be made that Bupa breached the Contract by purporting to deregister Dr Chang from the Gap Scheme with effect from 15 August 2016 when it failed to comply with the Deregistration Procedure. 174 Before leaving this aspect of the case, I should note that Bupa contended that if the Court finds breach, it could only ever give rise to nominal damages. It was also said that in considering the quantum of loss, the Court must take account of future contingencies, including the likelihood that Dr Chang's registration would have been terminated validly: TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 150 per Hope JA; Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30; (2016) 92 NSWLR 639 at 659-660 [83]-[89]. 175 Whatever the underlying merits of this argument, which has not been developed nor has been the subject of a detailed response, I reject the notion that it is unnecessary to proceed to a separate hearing to assess damages. The whole point of the order made at the commencement of the hearing was to bifurcate all issues of liability and damages, including any argument as to the entitlement to compensatory damages.

E Conclusions and orders 176 It follows from the above that the originating application filed by Bupa on 24 October 2016 should be dismissed and the declaration I have identified be made. It is accordingly necessary to stand the matter over for further hearing as to whether Dr Chang is entitled to relief by way of damages and, if so, the quantification of such damages. 177 I raised at the conclusion of the oral hearing that prior to any further hearing it seemed to me that there may be some utility in the parties attending a further mediation to ascertain whether, in the light of the findings as to liability, there can be some non-curial resolution of the issues that divide them. In the circumstances, I propose to make an order pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) requiring the parties to attend a mediation before a Registrar of the Court with such mediation to occur prior to 1 March 2019. 178 This leaves the issue of costs of the liability hearing. I am conscious of the fact that there may well have been communications between the parties prior to or during the hearing which may be relevant to an assessment of costs and may be admissible pursuant to the exception to the exclusion of evidence of settlement negotiations contained in s 131(2)(h) of the EA. My preliminary view is to defer all questions relating to costs until the conclusion of any further hearing on damages (if it is necessary to conduct a hearing following the mediation). It follows that subject to hearing any application for the Court to order otherwise, all issues of costs associated with the liability hearing are reserved. I certify that the preceding one hundred and seventy-eight (178) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.