Fernandez v State of New South Wales

Judgment

1. MACFARLAN JA: I agree with the judgment of Meagher JA but add the following observations by way of emphasis.
2. The applicants' submission that the italicised passages of the Fee Directive and Charging Directive quoted in [30]-[31] below are inconsistent with s 71 of the Health Services Act 1997 (NSW) is at least strongly arguable. Its correctness however turns on whether the level to which those passages contemplate that medical services might be reduced or kept is lower than that to which s 71 of the Act refers. That is a matter that would be difficult, if not impossible, for the Court to determine on a final basis without the benefit of relevant expert evidence. The primary judge did not attempt to make that determination on the basis of such evidence as was before him because the submission was not put to his Honour in the form in which it was put to this Court. These considerations are sufficient to warrant the refusal of leave to appeal to enable the submission to be pressed in this Court at this stage of the proceedings.
3. I add that in any event acceptance of the submission might only be of limited assistance to the applicants in resisting claims against them on their guarantees. In seeking to make good their misrepresentation and unconscionability assertions, they would have to prove what was said to them or the patient that resulted in them providing the guarantees. This would require an examination of each individual transaction and the words said might or might not be found to accord precisely (or at all) with the relevant portions of the Directives. Other issues such as reliance and inducement would also arise.
4. MEAGHER JA: The applicants seek to appeal from the determination of separate questions under Uniform Civil Procedure Rules, r 28.2 in a representative proceeding brought against the State and 15 local health districts (Fernandez v State of New South Wales [2019] NSWSC 1736). They require leave to do so (Supreme Court Act 1970 (NSW), s 103).

Overview

1. The second to sixteenth respondents are health districts which control the conduct of public hospitals and provision of health services in their areas. The applicants and group members guaranteed monies owing or payable to a health district for public hospital care and treatment provided to a patient who was ineligible for Medicare benefits (for the most part overseas visitors or temporary Australian residents who are not Australian citizens or permanent residents).
2. The applicants challenge the legality and enforceability of those guarantees. They do so by reference to the undoubted practice within the NSW public hospital system of requesting a "patient guarantee" from a "suitable person" where there is a risk that a Medicare ineligible patient, or prospective patient, may be unable to pay for some or all of the medical and other services "expected to be provided" to the patient.
3. That practice is the subject of policy directives - specifically, a Fee Directive dated 27 June 2017 and a Charging Directive dated 1 December 2016. Compliance with those directions is mandatory for senior executives within the NSW Health Service (Health Services Act 1997 (NSW) (HSA), ss 115(1), 116(1), 122(1)(f1), (2)) and a condition of the subsidy payments made by Government to the local health districts (HSA, ss 127(4), 122(2)).
4. Leave is sought to appeal only from the answer to question 2 of the six questions answered by the primary judge. However, an affirmative answer to that question would mean, as the orders sought on appeal confirm, that questions 3 and 4 would arise for determination. In that event, the applicants seek that those questions be remitted and determined in the Court below. As will become apparent, the lack of authority or power argument informing the terms of those questions, claimed to render the guarantees of no effect, is not assisted by success on the repugnancy argument which the applicants rely on in this Court.
5. Two grounds of appeal are proposed. The second contends that there was a denial of procedural fairness in the primary judge not addressing the repugnancy argument sought to be made by the first ground. That argument is different from and narrower than the argument made to the primary judge. As the respondents do not suggest it cannot be made by ground 1, the question for this Court is whether there is any or any sufficient utility in addressing that argument at this stage of the proceedings, and if so whether it should be upheld.
6. In Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 at [168], [170], Kirby and Callinan JJ (dissenting in the outcome of the substantive appeal) observed (with the agreement of Gaudron J at [52]) in relation to the question of practice and procedure with which this appeal is concerned, albeit in a hearing of separate questions directed to the existence and breach of a specific duty of care: The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and factual matters relevant to one issue are relevant to others, and they all overlap. ... Single-issue trials should, in our opinion, only be embarked upon when their utility, economy and fairness to the parties are beyond question.
7. The argument sought to be made by ground 1 is that each of the Fee and Charging Directives contains a sentence which is inconsistent with or repugnant to s 71 of the HSA, and that neither of those sentences can be severed with the consequence that the whole of each directive is void and of no effect. If that latter proposition cannot be made good, the fact of any inconsistency of those sentences with s 71 could have no significance for the applicants' claim that the health districts lacked authority to procure the guarantees in issue. It is not pleaded or contended that the question whether the directives are void must be determined in disposing of any of the applicants' other claims asserting that those guarantees are invalid or unenforceable.

Health Services Act, ss 69, 70 and 71

1. HSA, ss 69, 70 and 71 relevantly provide: 69 Scale of fees (1) The Minister may, from time to time, by order published in the Gazette - (a) fix a scale of fees for hospital services and other health services received from any public health organisation, and (b) amend or revoke any scale of fees so fixed. .. 70 Liability of persons for health service fees (1) Any person who receives any health service (other than a non-chargeable hospital service) from a public health organisation is liable to contribute towards the funds of the organisation, according to the person's means, such sum in respect of the health service as is calculated in accordance with the scale of fees fixed under section 69. (2) That sum (if unpaid) may be recovered in any court of competent jurisdiction as a debt. ... 71 Care and treatment to be provided to persons without means A person without means must not be refused care or treatment for sickness or injury at any public hospital by reason only of the person's inability to pay for the care or treatment.

The applicants' claims

1. By their amended statement of claim the applicants allege that the Fee and Charging Directives (or at least the parts of them which provided for steps to be taken and procedures to be followed towards obtaining an assurance of payment by securing a personal guarantee from a third party) were inconsistent with and repugnant to HSA, ss 69, 70 and 71. Parts of those directives are extracted at [30] and [31] below.
2. The following seven bases for actual or potential invalidity of the guarantees were alleged to arise: 1. That the health districts lacked the authority (or power) to procure guarantees because each of the Fee and Charging Directives were invalid as repugnant to the HSA to the extent they "required" the provision of a guarantee (ASOC, para 10). 2. That the health districts provided no consideration for guarantees of the liability of impecunious ineligible persons, and accordingly that the guarantees which were not executed as deeds were of no effect (para 12). 3. That the health districts failed to comply with a general law duty to disclose to guarantors of impecunious ineligible persons the existence of their "duty" under HSA, s 71, with the result that those guarantors are entitled to rescind (paras 14 to 17). 4. That the procuring of the guarantees of liability of impecunious ineligible persons without disclosing the existence of the s 71 "duty" involved unconscionable conduct contrary to Australian Consumer Law (ACL), s 20 (paras 18 and 19). 5. That the guarantors of impecunious ineligible persons were in positions of vulnerability, being concerned for the welfare of ill persons in need of treatment, of which the health districts took improper advantage contrary to the prohibition on unconscionable conduct in ACL, s 21 (paras 27 to 30). 6. That the guarantees were entered into because of misleading and deceptive conduct, being oral representations made by officers of the health districts consistent with the impugned parts of the Fee and Charging Directives, contrary to ACL, s 18 (paras 20 to 26). 7. That in the circumstances relevant to claims (3) to (6), the guarantees were unjust within the meaning of Contracts Review Act 1980 (NSW), s 7(1) (paras 31 and 32).

The separate questions

1. The separate questions initially set down for determination concerned the first and second bases of alleged invalidity only. They were as follows: 1. Did any or all of the Directives require the LHDs to procure a Relevant Guarantee? 2. If so, are any or all of the Directives invalid in whole or part as being repugnant to s 70 of the Health Services Act 1997 (NSW)? 3. If so, did that repugnance preclude the LHDs from having authority to procure a Relevant Guarantee and if so, to what extent? 4. If and to the extent that the LHDs lacked authority to procure a Relevant Guarantee by reason of the invalidity of any of the Directives, does that have the consequence that: a. all or any Relevant Guarantees entered into during the period during which the applicable Directive was in force are void ab initio? and/or b. the LHDs are precluded from enforcing all or any of the Relevant Guarantees entered into during the period during which the applicable Directive was in force? and/or c. the LHDs are required to refund any monies recovered to date paid by a guarantor of a Relevant Guarantee? 5. Does s 71 of the Health Services Act 1997 (NSW) necessarily have the consequence that the LHDs provided no consideration for Relevant Guarantees that were given in relation to the provision of health services to Impecunious Ineligible Persons?
2. At the hearing of the separate questions it was conceded by the applicants that the directives did not "require" the health districts to procure a guarantee, and question 2 was amended to read: 2. To the extent that any or all of the Directives provide for the procurement of a Relevant Guarantee, are any or all of the Directives invalid in whole or in part as being repugnant to ss 70 or 71 of the Health Services Act 1997 (NSW)?
3. The primary judge answered the amended questions as follows: 1. No. 2. No. 3. The question does not arise. 4. The question does not arise. 5. No.

The repugnancy argument made before the primary judge and its relevance to the claims made

1. Before the primary judge, it was contended that on the proper construction of Ch 7 of the HSA, persons who were without "means" were not liable for fees established pursuant to s 69. That was said to follow from the use in s 70(1) of the words "according to the person's means" as qualifying the liability established by that subsection (see Judgment [123]). It was then said that the directives were repugnant to s 70 because a guarantee procured pursuant to them "has the potential to create a liability in the guarantor" even though the effect of s 70(1), read in context, was that the impecunious patient had no underlying liability (Judgment [125]-[127]).
2. Pausing here, supposing the applicants' construction of ss 69 and 70 to be correct (they do not challenge its rejection by the primary judge), the framing of the problem as one of "repugnancy" was misconceived. The guarantees involved promises to pay "all monies... owing or payable by the patient". If the impecunious patients were truly not liable to pay fees for their treatment, there was no liability to be guaranteed, and any monies paid under the guarantees could be recovered in an action for money had and received, as having been paid under a mistake. The enforceability of the guarantees would be irrelevant to that analysis, save perhaps in respect of patients whose liability was diminished, but not extinguished, by reason of their limited means.
3. The primary judge dealt with the repugnancy argument at Judgment [117] to [214]. He rejected the applicants' principal submission that a person "without means" would not be liable for health services received (esp. at Judgment [178], [179], [185], [188]); and in doing so, also rejected their argument that a person's "means" did not include a guarantee which a third party was prepared to provide, at least where there was no previous expectation of receiving it, or right to receive it (Judgment [191], [193]).
4. His Honour then addressed whether "complying with the Directives and obtaining... a guarantee was inconsistent with either of s 70 or s 71" (Judgment [120], [197], [200]). In doing so he had regard to the reformulated question 2, which additionally required consideration of s 71.
5. With respect to s 70(1), he rejected the applicants' repugnancy argument for two reasons. First, procuring a third party guarantee in relation to an ineligible person who is "without other means" involved taking a guarantee of an existing liability (Judgment [198]). Secondly, even if the words "according to the person's means" limit such a person's liability, when such a guarantee is forthcoming that person's "means" are necessarily sufficient to meet the whole of the liability and accordingly his or her liability to contribute is not to be reduced. In those circumstances it would not be inconsistent with s 70(1) to procure such a guarantee (Judgment [199]).
6. The primary judge also considered whether the fact of procuring a third party guarantee would be inconsistent with s 71. He concluded that it would not. If the ineligible person had a third party guarantee, that person was not "without means", and accordingly s 71 had no application. He also considered whether the directives were inconsistent with s 71 in describing the care or treatment which from the health districts' perspective "must not be refused", concluding that the directives were to be understood as providing that "necessary health services will be provided in accordance with medical officers' medical and legal obligations" (Judgment [201], referring in turn to [167]). That holding responded to a suggestion made by the applicants' senior counsel in the course of oral argument that it was possible to read the second last and last sentences of cl 4.7 of the Fee Directive as requiring, when "an assurance of payment is not forthcoming", that the patient receive care or treatment which was less than that required by s 71. In rejecting that suggestion, the primary judge focused on the care or treatment which the directive proposes be provided rather than what it proposed the ineligible patient be informed of as to that treatment.
7. As is apparent, it was not argued before the primary judge, and his Honour did not address as a basis of repugnancy, that the directives in two respects require or condone the making of statements to the ineligible patient which misdescribe the scope of the care and treatment that in accordance with s 71 the public hospital must not refuse to provide.
8. The rejected repugnancy argument was said to be relevant to the claim that the health districts "lacked authority" to enter into guarantees to the extent that they were procured in purported compliance with the (ex hypothesi invalid) directives. Section 22(1)(d), which provides that a local health district "may do and suffer all other things that a body corporate may, by law, do and suffer and that are necessary for or incidental to the purposes for which the local health district is constituted", undoubtedly gave each health district power to enter contracts of guarantee. However, that power did not extend "to obtaining a guarantee as a secondary liability for a primary liability which does not arise because of the patient's lack of means". It was said to follow that such a guarantee was "not authorised by the legislation and, accordingly, invalid".
9. If an argument to this effect were correct, it is not the invalidity of the directives but rather the fettering of the power in s 22(1)(d) by ss 69, 70 and 71, as a matter of their construction, which would have the result contended for. And the directives are also irrelevant to any alternative argument that the guarantees are unenforceable as contrary to public policy by reason of their inconsistency with those provisions.
10. Thus, the invalidity of the impugned parts of the directives may be a legal consequence of the arguments made in support of the applicants' claims as to the invalidity or unenforceability of the guarantees. However, as appears in the analysis below, in respect of none of those claims is the conclusion that all or part of either directive is void a matter which must be established for the claim to be made out.
11. The bases on which the guarantees are said to be invalid or unenforceable are summarised in [14] above. Basis (1) - lack of power or authority of the health districts - is dealt with above. Basis (2) - no consideration - depends on the construction of s 71, and whether a promise by the hospital to provide services in return for the guarantee cannot be good consideration because the hospital is under a public duty to provide the promised treatment and care. That argument depends on the operation of s 71, and does not turn on the validity of the directives. Basis (3) - a failure to disclose - calls in aid the limited duty of disclosure of a creditor to a surety with respect to unusual features of the transaction the subject of the guarantee. The validity of the directives is wholly irrelevant to that question. Bases (4) to (7) depend on the particular circumstances in which the guarantee was procured, specifically the conduct of the officers or employees of the public hospital or health district in procuring the guarantee and statements made by them which are said, in the context of s 71, to have involved unconscionable conduct or misleading or deceptive conduct, or conduct which is "unjust". The existence of the impugned aspects of the directives, as a factual matter, may be relevant to an assessment of the likelihood of particular statements or representations having been made. However, whether the directives or those parts of them were invalid is not in any sense dispositive of these claims.

The repugnancy argument made on appeal and its relevance to the claims made

1. There remains to be considered the utility in this Court addressing the narrow repugnancy argument sought to be made in support of an affirmative answer to question 2. The relevance of that argument, and the invalidity of two sentences in the directives, to the authority or power of the health districts to enter into the guarantees is not readily apparent.
2. The sentence in the Fee Directive to which that argument is directed, and its immediate context, is set out below. That sentence is italicised. The primary judge extracted the relevant provisions of this directive at Judgment [90]-[97]. Fee Directive ... 4.2 Other than Worker and Student Visa holders stipulated in 4.1 (above) 4.2.1 Acute Admitted Patient Services - All Hospitals [Dollar per day rates for critical care and other inpatient care] ... 4.7 Ineligible Patients - Policy aspects ... • In relation to Section 4.2 (other than Worker Visa holders 457 and 485 and Student Visa holders 570 to 576) hospitals are to obtain an assurance of payment from this category of ineligible patients before treatment is provided. This assurance may take the form of: • Credit card imprint (credit limits to be verified) • Cash to cover estimated cost • Bank cheque to cover estimated cost • Personal guarantee from Australian citizen whose bona fides are verified • Other initiatives to ensure that payment for the services is not lost to the hospital Where such an assurance of payment is not forthcoming, the ineligible patient is to be informed that they will receive only the minimum and necessary medical care to stabilise their condition. This provision is not intended to impinge on the medical or legal obligations of medical officers in the treatment of ineligible patients. [italics added]
3. The relevant sentence in the Charging Directive, also italicised, to which the narrower argument is directed, and the context in which it appears, are set out below. The other relevant provisions are extracted at Judgment [72]-[86]. Charging Directive ... 4.4 Guarantor agreements If it is likely that a Medicare Ineligible patient, or prospective patient, may be unable to pay for some or all of the costs of the medical and other services that are expected to be provided to that patient, it will be necessary for the relevant financial officer to consider whether it would be appropriate to request a supporting patient guarantee from a suitable person. A suitable person would be a person who is willing to provide a guarantee to support the future financial obligations of the patient to the Hospital in respect of the required medical services. A suitable guarantor may be a family member of the patient, or another third party associate of the patient. ... The factors to be considered, and recommended processes to be followed, when seeking a guarantee of the patients liabilities from a suitable supporting person are outlined [below]. ... Attachment B - Guarantee Guide for Revenue or Financial officers - Medicare Ineligible Financial Guarantee ... If a Medicare ineligible patient indicates they may have difficulty or be unable to pay for some or all of the costs of the services that are expected to be provided you may request a Guarantee from a supporting person. ... You may request a Guarantee from a supporting person if there is doubt about whether the patient can or will make payment of the expected costs for the services to be provided. If you form the view that a Guarantee would provide additional protection for the health services, you may ask the patient or the person providing apparent support to the patient, such as the spouse or accompanying adult whether they or someone else would consider providing a supporting Guarantee to assist in securing amounts that will become payable. You should not suggest: • that the patient will not receive required services if a Guarantee is not provided; • that the services provided to the patient will be conditional on a Guarantee being provided. You may say that if a Guarantee can be provided, this is likely to avoid or reduce the need for the hospital to consider or monitor the extent of services that it is able to provide to the patient over and above those that are immediately necessary to stabilise or maintain the current state of health of the patient. [italics added]
4. The argument proceeds as follows: First, the "care or treatment for sickness or injury" referred to in s 71 is the care and treatment necessary or clinically required at the time it is sought from the public hospital. What is "clinically required" is what a physician exercising prudent clinical judgment would provide at the relevant time. Secondly, the directives (each of which the respondents accept must be complied with) provide that the hospital officers and staff responsible for the provision of treatment to ineligible patients shall inform the patient that they will receive "only the minimum and necessary medical care to stabilise their condition" (Fee Directive) and may say that if a guarantee could be provided it will likely avoid or reduce the need for the hospital to consider or monitor the extent of services that it is able to provide "over and above those that are immediately necessary to stabilise or maintain the current state of health of the patient" (Charging Directive). Finally, each of these statements, if made, would suggest or imply that in the face of the patient's inability to pay, and in the absence of a guarantee or some other third party financial assistance, the patient will or may receive care or treatment which is less than that which must not be refused in accordance with s 71. To that extent, the directives are said to require or condone conduct which misstates the effect of s 71 as to the extent of the care and treatment which must not be refused.
5. This argument for the most part turns on whether the italicised sentences describe care or treatment which is, or at least may be, less extensive or different from that which must not be refused. The primary judge did not address this question. At Judgment [165], he suggested that s 71 may describe varying levels of treatment, depending on what is "necessary or desirable". He accepted at Judgment [168] that s 71 operates to ensure that an ineligible person truly without means is not refused "at least necessary care or treatment". That accords with the position contended for by the applicants, provided "necessary" is understood in the sense of "clinically necessary in the judgment of a prudent physician". There remains a question as to whether, as the primary judge appears to acknowledge, "differing levels of service" may answer that description, depending on the extent and purpose of the treatment to be provided. Whether the care and treatment described in the two challenged sentences (as distinct from the treatment which the primary judge found "will be provided") answers that general description is not addressed. The resolution of that question and the issues remaining as to what s 71 may require are likely to be assisted by expert evidence, and beyond that provided by Ms Cooke, an experienced hospital and health district administrator whose affidavit was before the primary judge.
6. It is not controversial that whilst ss 122(1)(f1) and 127(4) confer power to make directions and impose conditions, they do not do so where the direction or condition requires or condones conduct which expressly or implicitly misstates the scope of the hospital care and treatment which must not be refused. It is also not controversial that except for those challenged sentences, the directives were otherwise made or given in the proper exercise of the functions and powers conferred by s 122 of the HSA. If the two sentences complained of have that effect, they would be inconsistent with the statute which confers the power to give directions and impose conditions, and at least to that extent void. The asserted repugnancy is limited to those sentences, the remaining provisions of the two directives are authorised, and their meaning is not affected by the absence of the two challenged sentences. Accordingly, there is no difficulty in severing them. The directives, after severance, would undoubtedly continue to provide for the entry by the health districts into contracts of guarantee. That being the position is wholly consistent with the primary judge's unchallenged rejection of the applicants' broader repugnancy argument.

Disposition of the application for leave

1. Turning then to the question of utility, an affirmative answer to question 2 on the basis of the argument sought to be made has no consequential significance for the validity or enforceability of the guarantees, and is wholly irrelevant to the first three bases of the applicants' claims. If any guarantees were procured as a result of representations or conduct having the same effect as the uttering of the impugned sentences, this Court's conclusions as to whether the challenged sentences misstated the effect of s 71 may be persuasive but not determinative, particularly where evidence of the kind referred to above may be led at the final hearing. In that circumstance, the limited utility in the determination of that question is plainly not "beyond question". And there is good reason for not proceeding to deal with an issue which does not arise, by reference to evidentiary material which may be different from that which is led at the final hearing in relation to issues which do arise.

Conclusion

1. For these reasons the applicants' summons seeking leave to appeal from the orders answering separate questions made by the primary judge on 6 December 2019 should be dismissed with costs.
2. McCALLUM JA: I agree with Meagher JA and with the additional reasons stated by Macfarlan JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 October 2020