Freeman v Health Insurance Commission

(as a Member of Professional Services Review Committee No 224)

REASONS FOR JUDGMENT 1 The applicant, Dr Jack Freeman, is a doctor who practised as a general practitioner in Melbourne. 2 Part VAA of the Health Insurance Act 1973 (Cth) (the Act), established a Professional Services Review Scheme (the Scheme) which provides for the examination of the professional conduct of medical practitioners. The process is commenced when the Health Insurance Commission (the Commission) makes an investigative referral to the Director of Professional Services Review (the Director). The Director is a medical practitioner appointed to the position under s 83(1) of the Act. An investigative referral from the Commission requires the Director to conduct an investigation into the conduct of the person (s 89(1)). As a result of the investigation the Director may decide to establish a Professional Services Review Committee (s 93(1)) (the Committee), and make an adjudicative referral of the conduct to the Committee. The Committee must produce a report which sets out its findings (s 106L(1)), and must forward the report to the Determining Authority (s 106L(4)). The Determining Authority must then make a Determination containing directions which range from a direction that the person be reprimanded to a direction that the person be disqualified for up to three years (s 106U). 3 The applicant's conduct was the subject of examination under the Scheme. Each of the respondents is sued as a result of the role each played in the course of their examination. On 20 February 2001, the Commission, the first respondent, made investigative referral No 224 requiring the Director to conduct an examination into the applicant's conduct. The Director, the second respondent, conducted an investigation and decided to establish a Committee. That Committee was set up on 26 April 2001 and Dr Michael Rice, Dr Bob Brown and Dr Bruce Ingram, the third, fourth and fifth respondents respectively, were appointed as members of the Committee. On 7 November 2001, the Committee made a report which found that the applicant had engaged in inappropriate practice, and which made recommendations to the Determining Authority. The members of the Determining Authority were Dr Nicholas Radford, Dr Morris Williams, and Ms Jane Phelan, the sixth, seventh and eighth respondents respectively. On 4 October 2002, the Determining Authority directed that the applicant be reprimanded, that he be counselled, that he repay benefits amounting to $225,377.50, and that he be fully disqualified for two years and nine months. 4 On 7 November 2002, the applicant filed this application in the Court seeking a review of the decision of the Committee by which it found that the applicant had engaged in inappropriate conduct, and a review of the decision of the Determining Authority to adopt the report of the Committee. The applicant relied on ss 39B(1A)(c), 39B(1)(b) of the Judiciary Act 1903 (Cth), and the provisions of the Administrative Decisions (Judicial Review) Act 1977 (Cth) to ground the jurisdiction of the Court. The arguments concerning each of these decisions will be considered in turn.

The Decision of the Committee 5 The applicant argued that the decision of the Committee could not stand because the investigative referral on which it depended was invalid. This issue requires reference to certain statutory provisions. 6 Section 86(1)(a) defines the scope of the investigation to be undertaken by the Director by reference to the concept of engaging in inappropriate practice, as follows: '(1) The Commission may, in writing, refer to the Director the conduct of a person relating to one or both of the following: (a) whether the person has engaged in inappropriate practice in connection with rendering of services;' Section 82(1)(a) relevantly, defines the concept of inappropriate practice as follows: '(1) A practitioner engages in inappropriate practice if the practitioner's conduct in connection with rendering or initiating services is such that a Committee could reasonably conclude that: (a) if the practitioner rendered or initiated the referred services as a general practitioner - the conduct would be unacceptable to the general body of general practitioners;' Section 106KA(1) is a deeming provision. It relevantly provides as follows: '… if, during a particular period (the relevant period), the circumstances in which some or all of the referred services were rendered or initiated constituted a prescribed pattern of services, the conduct of the person under review in connection with rendering or initiating services during that period in those circumstances is taken, for the purposes of this Part, to have constituted engaging in inappropriate practice.' What constitutes a prescribed pattern of services is set out in Part 3 reg 10 of the Health Insurance (Professional Services Review) Regulations 1999 (Cth)(the Regulations), which came into effect on 1 January 2000 as follows: 'The circumstance in which services that are professional attendances constitute a prescribed pattern of services is that 80 or more such services are rendered on each of 20 or more days in a 12 month period.' 7 Section 86(4) stipulates certain relevant requirements of an investigative referral as follows: 'An investigative referral must: (a) contain particulars of all services rendered or initiated during the referral period by: (i) the person under review; or … (b) set out the reasons why the Commission considers the person under review may have engaged in inappropriate practice.' 8 Section 87(1) specifies further necessary contents and form of an investigative referral, relevantly, as follows: 'An investigative referral must specify whether it relates to one or both of the following: (a) specified services; (b) services rendered or initiated by a practitioner that are one or more of the following: (i) services of a specified class; (ii) services provided to a specified class of persons; (iii) services provided within a specified location; (iv) services provided within a specified period.' 9 Section 106KA provides for the following defences: '(2) If the person under review satisfies the Committee that, on a particular day or particular days during the relevant period, exceptional circumstances existed that affected the rendering or initiating of services by the person, the person's conduct in connection with rendering or initiating services on that day or those days is not taken by subsection (1) to have constituted engaging in inappropriate practice. (2A) However, subsection (2) does not affect the operation of subsection (1) in respect of the remaining day or days during the relevant period on which the person rendered or initiated referred services even if the circumstances in which the referred services were rendered or initiated on that day or those days would not, if considered alone, have constituted a prescribed pattern of services. … (5) The circumstances that constitute exceptional circumstances for the purposes of subsection (2) include, but are not limited to, circumstances that are declared by the regulations to be exceptional circumstances.' 10 Regulation 11 states: 'For subsection 106KA(5) of the Act, the following circumstances are declared as constituting exceptional circumstances: (a) an unusual occurrence causing an unusual level of need for professional attendances; (b) an absence of other medical services, for patients of the person under review during the relevant period, having regard to: (i) the location of the practice of the person under review; and (ii) characteristics of the patients of the person under review.' 11 It is now necessary to consider the investigative referral concerning Dr Freeman's conduct, which was in the following form: 'Investigative Referral Pursuant to section 86(1) of the Health Insurance Act 1973 ("the Act"), I Janet Wendy Mould, Professional Services Branch, Professional Review Division, Health Insurance Commission ("the Commission"), a delegate of the Commission for the purposes of s86(1) of the Act, hereby refer to the Director of Professional Services Review the conduct of Dr Jack Freeman relating to · whether he has engaged in inappropriate practice in connection with the rendering of services constituting a prescribed pattern of services within the meaning of section 106KA(1) of the Act and Part 3 of the Health Insurance (Professional Services Review) Regulations 1999 ("the Regulations"). Referred services Pursuant to section 87(1) of the Act, this investigative referral relates to all services rendered by Dr Jack Freeman which were rendered: i. within specific locations, namely: a) 340A Abbotsford Street, NORTH MELBOURNE VICTORIA 3051; b) Flemington Medical Centre, 9 Princes Street, FLEMINGTON VICTORIA 3031; and c) 69 Lansell Road, TOORAK VICTORIA 3142; and ii. within a specified period, namely on and from 1 January 2000 to and including 19 June 2000 ("the referral period"). The referred services were all rendered within the two year period immediately preceding the date of this referral in accordance with section 86(2) of the Act. Further, the referred services were all rendered on or after 1 January 2000, being the first date on which s106KA of the Act and Part 3 of the Regulations were both in force. The attached material is provided to assist the Director of Professional Services Review, but is not intended to limit in any way the conduct referred.' (emphasis added) 12 Over 200 pages of material were attached to the investigative referral. An index of the material gives an idea of its contents. The index was as follows:

'INDEX Book 1 Page Investigative Referral 2 Attached Material A Legislative background 3 B Reasons for the Investigative Referral 3 C Chronological record of this referral 4 D Background of Dr Freeman 4 E Further information in relation to Dr Freeman's servicing profile 5-13 Reports: 1 Number of verified professional attendances rendered by Dr Freeman and the Medicare benefits paid for each of the days referred. 2 Number of professional attendances rendered by all general practitioners practising in the same locality as Dr Freeman during the referral period. 3 Medicare services rendered by Dr Freeman during the referral period. 4 Number of services rendered by Dr Freeman during the referral period by calendar month 5 Distribution by age and sex of patients in Dr Freeman's practice during the referral period. Book 2 Report: 15-239 6 Verified professional attendances rendered by Dr Freeman for each of the days referred'

13 The material attached to the investigative referral and contained in sections A and B were as follows: 'A. LEGISLATIVE BACKGROUND Part VAA of the Act provides a disciplinary scheme ("the Professional Services Review Scheme") in relation to practitioners who engage in inappropriate practice as defined in section 82. Section 106KA of the Act (which section commenced on 1 August 1999) provides that, if, during a particular period, the circumstances in which some or all of the referred services were rendered or initiated constituted a prescribed pattern of services, the conduct of the person under review in connection with rendering or initiating services during that period in those circumstances is taken to have constituted engaging in inappropriate practice. Dr Freeman is a general practitioner (as defined in the Act) and, for present purposes, Part 3 of the Regulations (which part commenced on 1 January 2000) applies. Part 3 provides that, in relation to general practitioners, the circumstance in which services that are professional attendances constitute a prescribed pattern of services is that 80 or more such services are rendered on each of 20 or more days in a 12 month period, where 'professional attendance' means a service of a kind mentioned in group A1, A2, A5, A6, A7, A13, A14 or A15 of Part 2 of the general medical services table (as defined in the Act). B. REASONS FOR THE INVESTIGATIVE REFERRAL In accordance with s 86(4)(b) of the Act the Commission considers Dr Freeman may have engaged in inappropriate practice because there is evidence that some of Dr Freeman's professional attendances constitute a prescribed pattern of services as defined in s 106KA of the Act and Part 3 of the Regulations. Specifically, the Commission's records for professional attendances rendered by Dr Freeman during the referral period show that Dr Freeman: · rendered 80 or more professional attendances per day on 92 occasions on and from 1 January 2000 to and including 19 June 2000. The Commission has documentary evidence verifying the accuracy of this information. For further information in relation to professional attendances and services rendered by Dr Freeman during the referral period refer to Book 1, Section E, Reports 1 to 5 and Book 2, Report 6.' 14 Dr Griffith QC, who appeared with Mr Aizin of counsel, for the applicant, contended that the investigative referral was invalid as a result of the inclusion of the concluding sentence (set out at [11] of these reasons), and which stated: 'The attached material is provided to assist the Director of Professional Services Review, but is not intended to limit in any way the conduct referred.' 15 This submission relied upon the judgment of Finn J in Pradhan v Holmes [2001] FCA 1560; (2001) 125 FCR 280 (Pradhan). His Honour held that an investigative referral, which was in the following form, (at [62] of his Honour's reasons), did not comply with s 86(1) of the Act: 'Investigative Referral Pursuant to subsection 86(1) of the Health Insurance Act 1973 (the Act), I, Janet Wendy Mould, Acting Manager, Professional Services Branch, of the Health Insurance Commission (the Commission) and a delegate of the Commission, hereby refer to the Director of Professional Services Review the conduct of Dr Jagjit Singh Pradhan relating to whether he has engaged in inappropriate practice within the meaning of section 82 of the Act in connection with rendering and initiation of services.

Pursuant to subsection 87(1) of the Act, this investigative referral relates to services rendered and initiated by Dr Jagjit Singh Pradhan that were rendered and initiated during the 2 year period immediately preceding the date of this investigative referral and are:

(i) all services provided within a specified location, namely

7th Floor 55 Gawler Place Adelaide South Australia 5000

(ii) all services provided within a specified period, namely on and from 1 January 1998 to and including 31 December 1998.

The attached material is provided for information only and is not intended in any way to limit the conduct referred." (Emphasis added.)'

16 His Honour described part of the attached material, at [63], as follows: 'The attached material ran to over 170 pages. Attachment A (three pages) provided background to the referral including reference to prior counselling of Dr Pradhan and indicated in bold type the Commission's two concerns with Dr Pradhan's practice profile. The first related to Dr Pradhan's high volume of rendered services with high daily servicing - his total services rendered were above the 99th percentile of all active ophthalmologists in Australia - and was expressed as "The Health Insurance Commission is concerned that Dr Pradhan may not be able to provide an appropriate level of clinical input when consistently rendering a high volume of services on a regular and continuing basis." The second concern was that "The Health Insurance Commission believes that some of the services rendered by Dr Pradhan may not be reasonably medically necessary for the care of his patients".' 17 His Honour considered, then, whether the investigative referral addressed specific conduct of Dr Pradhan. He said at [80], [82] and [83]: '80 The attachments, as I noted above, did specify two particular concerns relating to Dr Pradhan's conduct. But the first page, in referring to the attachments, stated as follows: "The attached material is provided for information only and is not intended in any way to limit the conduct referred." (Emphasis added.) … 82 … Full force, in my view, should be given to the statement I have quoted above. The Commission, while specifying conduct in the attachments, stated that it did not in any way intend to limit the conduct referred. … the statement is an unqualified one indicating both the significance to be attributed to the attached material - it was provided for information only (notwithstanding that parts of what was provided were required by s 86(4) to be provided) - and the effect to be given it insofar as it specified conduct that might be inquired into. There is no ambiguity in what is stated. Nor is it contradicted by other parts of the document. Rather it is consistent with the description of the "Investigative Referral" in the first paragraph of the same document which was "of the conduct of" Dr Pradhan etcetera. 83 I find, then, that while the Commission has specified two species of conduct that (a) have provided the stimulus to the referral and (b) are the subject of the s 86(4) reasons why the Commission considers Dr Pradhan may have engaged in inappropriate practice, the conduct referred is unspecified and unlimited.' (emphasis added) 18 Finally, his Honour turned to the legal question, namely whether the investigative (and adjudicative) referral had to specify the conduct referred. The alternative construction was that the conduct referred was conduct in relation to services, and that the statute required only that the services be specified. This latter construction was rejected by his Honour. After a lengthy discussion, his Honour summarised his conclusion at [126]-[128]: '126 Put shortly, in effectuating the legislative purpose enshrined in s 80(1) of the Act, the legislative scheme is one that refers, first, to the Director for investigation and, then, to the Committee for adjudication, identified conduct that the Commission and the Director respectively consider may have constituted engaging in inappropriate practice in connection with the rendering of the services the subject of the referral in question (that is, investigative or adjudicative). 127 If Parliament had intended to mandate a roving commission into past service provision by medical and other practitioners (where those services attract Medicare benefits) circumscribed only by time limitations (2 years) and by the capacity of the Director to whittle down the services worthy of examination, it would - and should - have done so in language having far greater clarity and aptness for that purpose than that of the 1999 amendments. The respondents' submission requires in effect the deletion of references to the referral of "conduct" in ss 86(1) and 93(1) and the recasting of those provisions so as to stipulate that the referral is of services for the purpose of investigating or considering whether the person under review engaged in inappropriate practice in rendering initiating those services. Parliament could have done this. It did not. 128 Having regard to the conduct I have found was referred in the cases both of the investigative referral and of the adjudicative referral, and the requirement of the statute that referred conduct be specified, I conclude that, in the case of each referral, there has been a non-compliance with the requirements of ss 86(1) and 93(1) respectively. Given that both referrals are framework documents for the respective processes they initiate, and given the disciplinary setting and purpose of the referrals, that non-compliance must necessarily entail the invalidity of the references made: cf Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 388ff. The referrals were incapable of enlivening the respective jurisdictions of the Director and of the Committee to embark upon the inquiries envisaged by the HI Act.' 19 For the purposes of the argument in this case, I will assume in the applicant's favour that his Honour was correct in the construction which he adopted. However, even on this assumption, the applicant cannot succeed because the terms of the investigative referral in the present case are relevantly distinguishable from the terms of the investigative referral in Pradhan. 20 The central vice in the Pradhan investigative referral lay in the failure to specify the conduct referred to the Director. In the first paragraph of the investigative referral, where the operative referral was made, the conduct referred is described as the conduct of Dr Pradhan 'relating to whether he has engaged in inappropriate practice within the meaning of section 82 of the Act in connection with rendering and initiation of services'. In contrast, the operative referral in the present case describes the conduct which is referred to the Director as the conduct of Dr Freeman relating to: 'whether he has engaged in inappropriate practice in connection with the rendering of services constituting a prescribed pattern of services within the meaning of section 106KA(1) of the Act and Part 3 of the Health Insurance (Professional Services Review) Regulations 1999 ("the Regulations").' 21 That is further explained in the material in sections A and B set out at [13] of these reasons. They explain that the referral relied upon the statutory deeming of 80 or more services provided on 20 or more days in a twelve month period as inappropriate practice under s 82, and on the allegation that Dr Freeman 'rendered 80 or more professional attendances per day on 92 occasions on and from the 1 January 2000 to 19 June 2000'. Reports 1 and 6 in section E detailed the dates on which the particular services were provided. Thus, to this point, the conduct referred in this case is precisely specified. 22 The question then arises as to the impact of the concluding sentence: 'The attached material is provided to assist the Director of Professional Services Review, but is not intended to limit in any way the conduct referred.' In Pradhan, Finn J read similar words in the context of the referral as a whole. He said at [82]: 'There is no ambiguity in what is stated. Nor is it contradicted by other parts of the document. Rather it is consistent with the description of the "Investigative Referral" in the first paragraph of the same document which was "of the conduct of" Dr Pradhan etcetera.' 23 His Honour regarded the sentence in question as failing to provide the required specification because the operative paragraph had failed to do so. Hence, the two were consistent. Read together they provided no limit to the conduct which the Director was to investigate. By contrast, in the present case, the operative paragraph of the referral describes the conduct referred in specific terms, namely, the provision of a specified number of services over a specified number of days within a defined limited period. The attached material, then, identifies the nature of each of the services on each of the days. Because the reference focuses on conduct amounting to the provision of a prescribed pattern of services, there is no lack of specification of the conduct as occurred in Pradhan. What then is the purpose of the concluding sentence? 24 In the context of this referral, the concluding sentence ensures that full scope is given to the terms of the operative referral. In other words, if there is any omission in the attached material of the details of any service constituting the prescribed pattern of services, the omission is not to cut down the extent of the conduct referred. The concluding sentence, in the context of this referral, is used to guarantee that the operative paragraph has a paramount effect. 25 The alternative meaning of the concluding sentence is that it expands the scope of the conduct referred so that the conduct is not limited in any way. To so read the sentence would be to give it a meaning inconsistent with the context of the referral as a whole. That context shows that the focus of concern of the referral was conduct amounting to the provision of a prescribed pattern of services - a concept which has an inbuilt specificity deriving from the definition of the concept. Consequently, the applicant's challenge to the investigative referral based on Pradhan is not made out.

The Decision of the Determining Authority 26 On 4 October 2002, the Determining Authority made a final determination as required by s 106TA of the Act. The Determining Authority directed that: '(i) Dr Freeman be reprimanded by the Director, Professional Services Review, or the Director's nominee (paragraph 106U(1)(a) of the Act); (ii) Dr Freeman be counselled by the Director, Professional Services Review, or the Director's nominee (paragraph 106U(1)(b) of the Act); (iii) Dr Freeman repay to the Commonwealth, Medicare benefits in the amount of $225,377.50 (sub-paragraph 106U(1)(ca) of the Act). This amount represents the entire amount of benefits paid for the rendered services found by the Committee to be a "prescribed pattern of services"; and (iv) Dr Freeman be fully disqualified for a period of 2 years and 9 months from the time when the final determination takes effect (paragraph 106U(1)(h) of the Act).' 27 The applicant submitted that the Determining Authority failed to take into account a relevant matter when making the Determination. As a result, he contended, the Determination should be set aside. The matter which the Determining Authority allegedly failed to take into account arose from the fact that the applicant said he had mistakenly believed that the matter before the Committee had been resolved on an agreed basis when in fact it had not. At the hearing, Dr Griffith added to the formulation of the submission by contending that the Determining Authority should have, but failed to, consider, whether to allow the applicant to rectify this mistake. The Determining Authority should have considered whether to allow the applicant to return to a differently constituted committee so that it could reconsider what recommendations to make to the Determining Authority. 28 The matter arose in the following way. Prior to the hearing by the Committee, an agreement was reached with the applicant concerning the proposed hearing before it. It is recorded in the Committee report as follows: · 'Dr Freeman would not contest the evidence of the HIC as to the numbers of professional attendances which he rendered to patients on days as set out in the Investigative Referral (and restated in the Adjudicative Referral); · Dr Freeman would forego his right to lead evidence and argue that exceptional circumstances existed on any of those days; · the Committee would accordingly report to the Determining Authority that Dr Freeman's conduct on those days constituted inappropriate practice; · Dr Freeman would undertake to avoid inappropriate practice of the kind alleged in the Adjudicative Referral in future; · the Committee would acknowledge that Dr Freeman's concessions and remedial proposals merited some reduction in the disqualification period; and · the Committee would recommend that Dr Freeman be disqualified for a period of 2 years and 9 months.' As a result of the agreement, the Committee recommended that the applicant be disqualified, but for a period less than the maximum permitted. The Committee explained the basis of this recommendation as follows: '34. Whilst directions under section 106U(1) in a determination are properly a matter for the Determining Authority, section 106KD(2) provides that a draft report may, with the written consent of the person, make recommendations concerning disqualification of the person under review. It was part of the Committee's agreement with Dr Freeman that the Committee should do so (see paragraph 32). 35. The Committee considers that the high number of days on which Dr Freeman substantially exceeded 80 or more professional attendances would ordinarily warrant the maximum period of 3 years disqualification allowable under subsections 106U(3) and (4) of the Act. 36. However, in the light of Dr Freeman's decisions not to contest the evidence of the HIC of a prescribed pattern of conduct and not to adduce evidence of exceptional circumstance on any of the relevant days, and his undertaking to avoid inappropriate practice of this kind in the future, the Committee also considers that these concessions merit some reduction in the disqualification period. 37. Accordingly, with Dr Freeman's written consent pursuant to subsection 106KD(2) of the Act, the Committee recommends his full disqualification from Medicare arrangements for a period of two years and nine months.' 29 Section 106T prescribed the steps to be taken following the making of the report by the Committee. It relevantly provided: '106T Draft determination relating to person under review if Committee makes a finding of inappropriate practice (1) If a final report of a Committee that is given to the Determining Authority contains a finding by all, or by a majority, of the Committee members that the person under review has engaged in inappropriate practice in connection with rendering or initiating some or all of the referred services, the Authority must, within one month after the day on which the final report is given to it: (a) make a draft determination in accordance with section 106U relating to the person under review; and (b) give copies of the draft determination to the person under review and to the Director. (2) The copy of the draft determination given to the person under review must be accompanied by a statement inviting the person to make written submissions, within 14 days after the day on which the copy of the draft determination is given to the person, suggesting changes to any directions contained in the draft determination in accordance with section 106U. (3) The person under review may, within the 14 day period referred to in subsection (2), make written submissions to the Authority suggesting changes to the direction contained in the draft determination.' 30 The Determining Authority sent a draft Determination dated 14 February 2002 to the applicant, and offered him the opportunity to make submissions on the draft as is required by s 106T(1) and (2). The draft Determination contained a direction for repayment of Medicare benefits in the same form as the direction which was ultimately made (see par (iii) set out at [26] of these reasons). 31 The solicitors for the applicant, responded to the draft Determination as is provided for by s 106T(3) of the Act. 32 At this juncture it is necessary to draw attention to the different functions of the Committee and the Determining Authority. The Committee must consider and report on whether the conduct under review constituted engaging in inappropriate practice (s 93(1)). The only recommendation which the Committee is entitled to make is provided for in s 106KD(2) as follows: 'If the person under review is a practitioner, the draft report may, with the person's written consent, include recommendations: (a) for the practitioner to be fully or partly disqualified; and (b) about the nature and period of the disqualification.' 33 The Determining Authority, on the other hand, is bound to make a Determination containing one or more of the directions stipulated in s 106U. The direction in contention in this case was made under s 106U(1)(ca) which provides: '(1) A draft determination or a final determination must contain one or more of the following directions: … (ca) if any medicare benefit for a service: (i) that was rendered or initiated by the person under review, by an employee of the person under review, or by an employee of a body corporate of which the person under review is an officer; and (ii) in connection with the rendering or initiation of which the person under review or such an employee is stated in a report under section 106L (other than a report based on a finding made under subsection 106K(2) or 106KB(3)) to have engaged in inappropriate practice; has been paid (whether or not to the person under review) - that the person under review repay to the Commonwealth the whole or a part of the medicare benefit that was paid for that service;' 34 Thus, the scheme of the Act does not allow the Committee to make a recommendation that medicare benefits be repaid. Notwithstanding the limited role of the Committee in this regard, the Determining Authority may deal with that subject by making a direction that the medicare benefits be repaid. 35 In a letter, dated 7 September 2001, from the solicitors for the Committee to the solicitors for the applicant, the relative roles of the Committee and the Determining Authority were referred to as follows: 'although section 106KD(2) of the Health Insurance Act 1973 provides for a Committee recommendation as to a period of disqualification, it makes no provision for any recommendation in relation to other sanctions envisaged under section 106U(1) of the Health Insurance Act 1973. Nor does the Determining Authority appear to be bound by such a recommendation.' 36 In their initial responses (22 February 2002 and 4 March 2002), the solicitors for the applicant apparently laboured under the mistaken view that the draft Determination was to be made by the Committee. With that misunderstanding, the solicitors complained that: 'The only matter which was discussed and mooted to in the discussions which have been referred to above was the power of the Professional Services Review Committee No 224 under 106U(1)(h). The Committee, in providing draft documents, did not refer to, nor request, any other penalty other than "Dr Freeman be fully disqualified for a period of two years and nine months". It did not invite, nor was any submission made as to the application of Section 106U(1)(c) as to whether the whole or part of the medical benefits the subject of referral to the Committee were to be the subject of an order or recommendation by the Committee or at all. The behaviour of the Professional Services Review Committee No 224 is trial by ambush. Our client was given no opportunity to argue whether the whole or part of the akin to note of the claim to Medicare benefits [sic] be refunded or paid to the Commonwealth. The Committee No 224 is now incurably tainted as it has been made aware that our client will not contest these matters despite the fact that matters have now been changed because of the above incident. Our client has been treated very shabbily as he entered into the proposal to settle because of his then circumstances. He thought, erroneously, that the matter was resolved on agreed terms when, in fact, it was not. He now desires to strenuously contest the allegations made against him and requires the matter to be determined by a new and untainted tribunal which is totally ignorant of the fact that he did, at one stage, intend not to contest the allegations of the H.I.C.' 37 On 7 March 2002, the solicitors for the Determining Authority replied to the letter from the applicant's solicitor dated 4 March 2002, and sought to explain the misapprehension. The letter concluded: '6. Having formulated its report, including the recommendation set out above, the Committee had completed its function. It is then solely for the Determining Authority to determine sanction (as the Committee notes). In doing so, the Determining Authority takes into account, among other things, the Committee's recommendations (if any). Having done so, the Determining Authority's draft determination in this case contains a requirement pursuant to section 106U(1)(c)(a) of the Act that your client repay to the Commonwealth Medicare benefits to the amount of $225,377.50. 7. Subject to your contrary advice by return, your letter of 22 February 2002 addressed to the Committee, and your letter of 4 March 2002, will be taken into account by the Determining Authority. The Authority will reconvene to make a decision as to whether, in light of your letters, it should proceed to make a final determination under section 106TA of the Act, and if so, the content of that final determination.' 38 On 15 March 2002, the applicant's solicitors responded. The letter relied solely on the Pradhan point. It made no reference to the terms of the agreement made with the Committee. 39 By a letter dated 15 August 2002, the solicitors for the Determining Authority wrote to the solicitors for the applicant stating that the Determining Authority was proceeding to make a final Determination, and indicated that it would receive any further submissions by 22 August 2002. In response, the solicitors for the applicant forwarded a written submission dated 22 August 2002 which included: 'You will recall that the matter was not contested by our client for a number of reasons, including, but not limited to, the fact that he has been charged by the Australian Federal Police with offences which are also the subject of the "determination" of Professional Services Review Committee No. 224 ("the committee") (purported) you will no doubt appreciate that our client would have had great difficulty in answering or contesting the allegations because of the existence simultaneously of the charges which had been laid against him to which we earlier refer. You are also aware that our client had previously given an undertaking not to practise[sic] medicine for a certain period. … Dr Bell, as the then advisor to Professional Services Review Committee No. 224 negotiated, and concluded, an agreement whereby the only recommendation of the committee was that our client be suspended from the scheme pursuant to the Health Insurance Act 1973 for a period of two years and nine months being some small period less than the maximum allowed. If there was to be any sum payable by our clients it should have been raised then. It was not. It follows therefore that any real agreement was reached between the committee and our client as to the disposition of matters against him was only as to the duration of disqualification from the scheme. … It is our submission as to what should occur is because of the principles set out in Pradhan v Holmes(2001) SCA 1560 the complaint against our client should be dismissed (or struck out without a adjudication) and there should be no consequential Orders made. Alternatively, if that does not take place our client submits that the referral, on the same material, should be made to an [sic] further Professional Services Review Committee so that the letter and previous correspondence can be agitated before the committee and the report of the Professional Services Review Committee No. 224 be rejected and not acted upon all matters are to be review by a current further Review Committee.' 40 With commendable patience, on 29 August 2002 the solicitors for the Determining Authority wrote to the solicitors for the applicant. The reason is explained in the letter as follows: 'There appears to be repeated confusion in your letters between the role of the Determining Authority and the role of the Professional Services Review Committee. The Determining Authority is not the Committee and has different functions to the Committee (see Division 5, 5A and 6 of Part VAA of the Health Insurance Act 1973). It is the Determining Authority and not the Committee who is making a final determination. As a result, you must ensure that any matters you want the Determining Authority to take into account when making the final determination are provided to the Determining Authority.' 41 The letter sought to draw the attention of the applicant to a number of the issues which seemed relevant to the consideration by the Determining Authority, including: '5. The agreement set out in your letter of 22 February 2002 is an agreement between Dr Freeman and the Committee. It is not an agreement with the Determining Authority. However, the agreement: (a) will be considered by the Determining Authority when making the final determination. For example, Dr Freeman's undertaking to the Committee to avoid inappropriate practice in the future; (b) contains a recommendation by the Committee under s.106KD(2) of the Act that Dr Freeman be disqualified for 2 years and 9 months. 6. We note that your letters indicate that Dr Freeman considered that disqualification was the only sanction that would be applied by the Determining Authority. If any other sanctions are included, such as repayment of Medicare benefits, then Dr Freeman does not support the Committee's recommendation that Dr Freeman be disqualified for 2 years and 9 months. 7. The Determining Authority has the power to apply other sanctions in addition to disqualification. 8. On the current information, the Determining Authority is likely, in the final determination, to decide to apply sanctions in addition to disqualification, including the repayment of Medicare benefits. 9. Your letters repeatedly suggest that you have not been given the opportunity to make submissions that you would like to make. This is your opportunity to make those submissions if you wish the Determining Authority to consider any matter in the making of the final determination. The Determining Authority will take the matters in your letter of 22 August 2002 into account but emphasises that this is your final opportunity to provide any further submissions you wish the Determining Authority to take into account in making the final determination.' 42 In a final submission, dated 9 September 2002, the solicitors for the applicant acknowledged the confusion in the past correspondence and responded to pars 6 and 7 of the letter dated 29 August 2002, as follows: 'Your statement of our client's position in paragraph 6 of the above letter is correct. We agree that the position referred to in paragraph 7 is correct and the Determining Committee does have the power to apply sanctions other than disqualification but say that it should do no more than reflect the agreement made with our client which is referred to above.' 43 The submission continued: 'What our client says is as follows firstly, both the adjudicative referral and the investigative referral are flawed because of the principles laid down in Pradhan v Holmes. Our client was induced by the behaviour of the committee, (and its Counsel), not to argue that point before the committee and further, in the event that the committee was against him, to argue that before the Administrative Appeals Tribunal and any court determining appeals from that body. He also, in consequence of the agreement which was reached, do [sic] not seek to give evidence, and then avail himself of the matters referred to in Section 105 (subsection 6) of the Act on the understanding, and belief, and in reliance upon, the representations made by him by [sic] the committee as constituted by the agreement referred to above that he adopted that course with the only penalty which he would have to suffer, or endure, was that as [sic] embodied in the agreement which was reached and recorded in correspondence. The committee by its actions has now resiled from its agreement. The determining authority has virtually resolved to perpetuate that situation by making a penalty to accord with the decision of the committee. This has been done in circumstances where our client has, because of the agreement, been deprived the opportunity to argue the validity of the investigative and, consequently, the adjudicative referral. He now wishes to be placed in the position where he can do so. In other words what he now submits to the determining authority is that the determining authority should have no regard at all to the decision of the committee and the matter should now be resolved by a further determination before a freshly constituted committee so that he now has the opportunity to argue Pradhan's case. The fact is that that Committee 224 is now tainted and cannot hear the complaints made against our client by H.I.C.' 44 As previously noted, the final Determination was made on 4 October 2002. In a separate document, the Determining Authority gave reasons for making the Determination. The reasons were divided into sections headed "The Decision", "Material Relied upon", "Legislation", "Background and Findings of Fact", and "Reasons". In the section headed "Background and Findings of Fact" the Determining Authority outlined the relevant history of the matter to the time of the agreement made with the applicant which led the Committee to call off the proposed hearing. The reasons, relevantly, continued: '21. The agreement reached with Dr Freeman was that: (a) Dr Freeman would not contest the HIC's data as to the numbers of professional attendances which he (Dr Freeman) rendered to patients on the 92 days specified in both the Investigative Referral and the Adjudicative Referral); (b) Dr Freeman would forgo [sic] his right to lead evidence and argue before the Committee that exceptional circumstances existed on any of those 92 days; (c) Dr Freeman accepted that the Committee would find and report to the Authority that his (Dr Freeman's) conduct on those 92 days constituted inappropriate practice; (d) Dr Freeman undertook to avoid inappropriate practice in the future; (e) the Committee would acknowledge that Dr Freeman's concessions merited some reduction in the disqualification period; and (f) the Committee would, with Dr Freeman's consent, recommend to the Authority that Dr Freeman be disqualified for a period of two years and nine months. 22. The Committee then proceeded to reach its findings having regard to the information before it. The Committee's findings are summarised at paragraph 33 of its report: "Dr Freeman had engaged in inappropriate practice by rendering 80 or more professional attendances on 92 days during the referral period, …"; and "for the purpose of section 106KA(2), there was no evidence of exceptional circumstances on any of the 92 days in question." 23. In accordance with section 106L(2) of the Act and the agreement with Dr Freeman, the Committee recommended that Dr Freeman be disqualified for a period of two years and nine months. 24. On 14 February 2002, the Authority made a draft determination under section 106T of the Act. As required by section 106T(3) of the Act, Dr Freeman was provided with the draft determination and invited to make written submissions. 25. Five submissions were received from Dr Freeman: (a) letter dated 22 February 2002 addressed to the Chairman, Professional Services Review Committee; (b) letter dated 4 March 2002 addressed to Professional Services Review Authority; (c) letter dated 15 March 2002 addressed to Professional Services Review Authority; (d) letter dated 22 August 2002 addressed to Clayton Utz; and (e) letter dated 9 September 2002 addressed to Clayton Utz. 26. The major matters dealt with in Dr Freeman's submissions were: (a) there has been a breach of the agreement with the Committee. The recommendations made by the Committee to the Authority did not accord with the agreement reached between Dr Freeman and the Committee; (b) no mention was made in the agreement with the Committee, or by the Committee, about the repayment of Medicare benefits. The first indication of the repayment of Medicare benefits was in the draft determination; (c) in effect, no agreement was ever reached with the Committee. Dr Freeman entered into the proposal to settle because of his then circumstances. He thought, erroneously, that the matter was resolved on agreed terms when, in fact, it was not; … 27. In relation to the directions in the draft determination, the effect of Dr Freeman's submissions is that no determination should be made at all or that the determination should only include disqualification for a period of 2 years and 9 months and no other directions. In particular, there should be no direction in relation to the repayment of Medicare benefits. 28. The agreement between Dr Freeman and the Committee contains a recommendation by the Committee under s.106KD(2) of the Act that Dr Freeman be disqualified for 2 years and 9 months. The agreement also contains a number of additional matters. 29. Dr Freeman appeared to have mistakenly considered that the agreement binds the Authority and that disqualification is the only sanction that could be applied by the Determining Authority. He submitted that if any other sanctions are included, such as repayment of Medicare benefits, then he does not support the Committee's recommendation that he be disqualified for 2 years and 9 months.' 45 Then, the Reasons section of the decision, relevantly, stated: '35.This is a case under legislation which, unless there are exceptional circumstances, deems Dr Freeman's conduct to be inappropriate practice when the facts show that there has been a "prescribed pattern of services". 36. Under the legislation the threshold established by the Parliament above which the number of professional attendances rendered constitutes a "prescribed pattern of services" is where 80 or more attendances are rendered on 20 or more days in a 12 month period. 37. The facts of this case are that Dr Freeman rendered 80 or more professional attendances on 92 days in a period of just under 6 months. 38. 92 days is massively in excess of the threshold in the legislation set by the Parliament of 20 days in 12 months. 39. In addition, the actual number of professional attendances rendering [sic] on some of those 92 days by Dr Freeman is well in excess of the threshold in the legislation of 80 professional attendances per day. 40. On a high proportion of the 92 days in the 6 month period, Dr Freeman rendered over 100 professional attendances per day and on some occasions he rendered significantly more. 41. A significant purpose of sanctions in this scheme is to protect patients and the general community from the risks associated with inappropriate practice. In addition, the scheme protects the Commonwealth's expenditure under Medicare. 42. The Authority considers this to be as serious an example of a "prescribed pattern of services" as the Authority may ever encounter. The number of services and number of days are so extremely high that they are close to as high as any practitioner could go. The pattern of services is clearly and enormously in excess of the threshold in the legislation. … 46. The Authority considers that this is clearly a case where a reprimand and counselling are necessary and appropriate. However, the Authority also considers that the facts of this case clearly require more than just a reprimand and counselling. 47. The repayment of Medicare benefits is appropriate in view of the objects of the scheme and the Authority's view of the "prescribed pattern of services" in this case. 48. The Authority notes that the amount of $225,377.50 was paid in relation to "professional attendances" by Dr Freeman which are the "prescribed pattern of services". The Authority considers that, because of the matters set out in these reasons, it is appropriate that Dr Freeman repay the entire amount of benefits paid for the rendered services found by the Committee to be a "prescribed pattern of services". That is, Dr Freeman repay to the Commonwealth Medicare benefits in the amount of $225,377.50. The Authority understands that this means that Dr Freeman will not be paid any Medicare benefits for any of the services rendered in the "prescribed pattern of services". 49. In addition to the directions set out above, the Authority also considers that a substantial period of disqualification should be imposed. 50. The Authority accepts Dr Freeman's submission that he consented to the recommendation in the Committee's report that he be disqualified for two years and nine months because he understood that no other direction would be made. The Authority notes Dr Freeman does not now support the Committee's recommendation that he be disqualified for two years and nine months because other directions are being made. 51. Except for the matters below, the Authority considers that the "prescribed pattern of services" in this case warrants the maximum period of three years disqualification, in addition to other directions. 52. The Authority has taken account of Dr Freeman's undertaking to the Committee to avoid inappropriate practice in the future. The Authority notes Dr Freeman's decision to co-operate with the Committee and not to contest the evidence of the "prescribed pattern of services". These matters have led to a reduction in the sanctions applied by the Authority.' 46 It is clear from the Determining Authority's reasons that it understood that the applicant contended that he had agreed not to contest the Committee's findings on the mistaken view that no penalties other than those recommended by the Committee would be imposed. The Determining Authority also understood that the applicant argued that if any other penalties were under consideration by the Determining Authority, the applicant would not support the Committee's recommendation, and the only penalties which should be imposed were those recommended by the Committee. The Determining Authority understood that it was the applicant's position that no Determination should be made which included the provision for the repayment of medicare benefits. These arguments were all set out in the decision (see pars 27, 29 and 50 of the decision, which are reproduced at [44]-[45] of these reasons). So much was accepted by counsel for the applicant at the hearing before the Court. The vice, it was contended, was that, although the arguments of the applicant were set out in the reasons for decision, they played no part in the process of reasoning of the Determining Authority. The arguments were, it was said, set out, but not taken into account. 47 The applicant's argument should not be accepted. The Determining Authority examined the prescribed pattern of services admitted by the applicant, and concluded that it was as serious an example of inappropriate practice as the Determining Authority may ever encounter. It said that the seriousness of the conduct called for more than a reprimand and counselling, and justified a direction that the applicant repay the medicare benefits. It was not necessary for the Determining Authority to expressly reject the applicant's submission that no Determination should be made because of his mistake. Having explained how seriously the Determining Authority viewed the applicant's conduct, and the inadequacy of lesser penalties, it was clear that the Determining Authority rejected the applicant's submission that no Determination should be made requiring repayment of medicare benefits. It was also clear from the fact that the Determining Authority set out the applicant's contentions, and the process of reasoning adopted by the Determining Authority, that it had regard to those contentions when coming to its conclusion. The treatment given to these arguments does not indicate that the matters were ignored in the reasoning process. On the approach taken by the Determining Authority, the arguments were bound to be of limited significance. The relative weight given by the Determining Authority to the various arguments submitted by the applicant was a matter for the judgment of the Determining Authority. 48 Although the applicant raised an argument that the Determining Authority's Determination was tainted by Wednesbury unreasonableness, counsel frankly acknowledged that the applicant was unlikely to succeed on that argument if he failed on the argument just considered. In view of the reasoning of the Determining Authority it cannot be accepted that the decision was so unreasonable that a reasonable body could not arrive at the conclusion.

Further Challenge to the Investigative and Adjudicative Referrals 49 On 26 August 2003, following the reservation of judgment, the solicitors for the respondents drew the Court's attention to two recent decisions, including the judgment of Ryan J given on 28 July 2003 in Daniel v Health Insurance Commission [2003] FCA 772 (Daniel v HIC), and indicated their possible application to this matter. In September 2003, the parties were asked to make submissions regarding the relevance of these decisions to the present case. 50 A Notice of Appeal was filed on 18 August 2003 with respect to Daniel v HIC. When it became clear that the applicant sought to rely on the judgment in Daniel v HIC, the Court decided on 10 October 2003, to postpone judgment in this matter pending the decision of the Appeal Court in Daniel v HIC. The Full Court delivered its decision in Kelly v Daniel [2004] FCAFC 14 (Daniel) on 6 February 2004. The parties were once again asked to file written submissions on the relevance of the Full Court decision to the present case. The last of those submissions was received on 5 March 2004. Those submissions will now be addressed. 51 The terms of the investigative referral in Daniel appear to be relevantly the same as in the present case. 52 In both cases, the Commission referred to the Director the question whether the doctor had engaged in conduct constituting a prescribed pattern of services within the meaning of s 106KA(1) and Part 3 of the Regulations. In Daniel, the decision to make the investigative referral was set aside. The applicant submitted that the same result should follow in this case. 53 The reason that the decision to make the investigative referral in Daniel was set aside was explained by the Full Court at [81] as follows: 'We consider that the primary judge correctly held that the Commission is not entitled to make an investigative referral decision by reference to s 106KA(1) alone. That subsection is directed to the Committee, and not to the Commission. To the extent that the Commission may have regard to patterns of services in determining whether to make an investigative referral, that is but one of a number of matters that it may take into account. In our opinion the fact that Dr Daniel's conduct had already been the subject of counselling and review by the Commission, and that no action had been taken to refer his case to the Director as a consequence, was plainly relevant to the exercise of the Commission's discretion under s 86 to make an investigative referral. The Commission obviously did not take that matter into account. It instead proceeded upon the erroneous assumption that merely because there appeared to have been a breach of the 80/20 rule, it was required to make an investigative referral.' (Emphasis added) 54 The issue fatal to validity in Daniel was the failure of the Commission to take into account a relevant consideration, namely the fact that, apparently unknown to officers of the Commission responsible for making the referral, Dr Daniel's conduct had already been considered and the issues resolved between other officers of the Commission and Dr Daniel. 55 In order to rely on Daniel in this case, the applicant must point to some error of law in the decision to make the investigative referral. It is not enough that the Commission had regard only to the conduct falling within the 80/20 rule, unless, in so doing, the Commission failed to have regard to some other relevant matter, or made some other identified error of law. The applicant has not referred to any such relevant matter or error of law. Consequently, the decision in Daniel is of no assistance to the applicant in this case. 56 In the result, the application must be dismissed with costs.

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.

Associate: Dated: 16 April 2004 Counsel for the Appellant: G Griffith QC and H.A. Aizen

Solicitor for the Appellant: Valos Black & Associates

Counsel for the Respondents: Felicity Hampel SC and Damien Murphy

(as Chairperson of Professional Services Review Committee No 224)

(as a Member of Professional Services Review Committee No 224)

(as a Member of Professional Services Review Committee No 224)