Government Employees' Health Fund Ltd v Private Health Insurance Administration

Federal Court of Australia|2001-03-29|Before: Merkel JJ

THE COURT ORDERS THAT:

The appeals be allowed.
The orders of the primary judge made on 8 June 2000 be set aside and in lieu thereof it be ordered that the decisions of the Private Health Insurance Administration Council under review be set aside.
Each matter be remitted to the Private Health Insurance Administration Council to be determined in accordance with law. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

On appeal from a single judge of the Federal Court of Australia

BETWEEN: GOVERNMENT EMPLOYEES' HEALTH FUND LIMITED ACN 003 683 298

APPELLANT AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

On appeal from a single judge of the Federal Court of Australia

BETWEEN: QUEENSLAND TEACHERS UNION HEALTH FUND LIMITED

AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

On appeal from a single judge of the Federal Court of Australia

AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

On appeal form a single judge of the Federal Court of Australia

BETWEEN: MANCHESTER UNITY FRIENDLY SOCIETY IN NSW LIMITED

AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

THE COURT: 1 There are before the Court four appeals, each of which concerns a decision of the Private Health Insurance Administration Council ("the Council") not to allow an adjustment, in favour of a registered health insurer, of the amount paid to it, with respect to the 1996/97 financial year, out of the Health Benefits Reinsurance Trust Fund ("the Fund") established under the National Health Act 1953 ("the Act"). At issue are, first, the construction of principles determined by the relevant Minister under s 73BC(5B) of the Act, relating to the operation of the Fund, and in particular as to the power there given to the Council to make adjustments to payments to be made into or out of the Fund, second, the validity of a gazetted rule concerning adjustments and, third, the ability of the Council to circumscribe any power of adjustment by reference to policy. 2 The four decisions were challenged, in proceedings brought pursuant to the Administrative Decisions (Judicial Review) Act 1977, but each proceeding was dismissed. Each health insurer filed an appeal naming the Council as respondent. The four appeals were argued together, and by reference to the facts of one of them, the appeal of Australian Unity Health Limited ("Australian Unity"). The parties agree that the outcome of the Australian Unity appeal also determines the other appeals.

(i) The Act 3 Section 73BC of the Act establishes the Fund and provides for payments into the Fund by registered health insurance organisations. (We will refer to such entities simply as organisations). Australian Unity is such an organisation. The purpose of the Fund is to share the cost of benefits paid to the elderly or chronically ill in the community amongst the organisations. This policy, of community rating, is associated with the requirement that the organisations charge the same contribution rate to all members regardless of risk. 4 The Council is to administer the Fund: s 82G(1)(a). It is to exercise its powers and functions in accordance with the principles determined by the Minister: s 73BC(5E). In general terms, the Council re-distributes monies received in accordance with the formula referred to in the principles. It carries no substantial accumulation of funds. It is a condition of registration of an organisation that it makes payments into the Fund, such as are determined by the Council from time to time. Subsections 73BC(6) and (8) provide: "(6) It is a condition of registration of a registered health benefits organization that, on and after the date of its registration, it shall participate with other registered health benefits organiations in the operation of the Fund by making such payments into the Fund as the Council determines from time to time to be appropriate payments in relation to that organization. … (8) Where the Council determines an amount to be paid into the Fund by a registered health benefits organization, it shall notify the organizaton accordingly and shall specify in the notification the date on or before which the payment is to be made." 5 Payments out of the Fund to an organisation are those decided by the Council under subs (12): subs (5A). Subsection (12) provides: "(12) The Council may decide that an amount is to be paid out of the Fund to a registered health benefits organization." 6 By s 82G, the functions and powers of the Council are listed. In par (r) it is provided that it has the power: "To make rules, not inconsistent with this Act, for the purpose of the performance of its functions and the exercise of its powers". 7 The Council's functions include obtaining regular reports from registered organisations about their financial affairs and inspecting and analysing the record books and accounts of organisations: s 82G(1)(b) and (d). The Council may authorise the last mentioned examination and require that information be given to it: s 82K. Registered organisations are to give the Council financial accounts and statements and other information on an annual basis: s 82L. They are to comply with the Council's reporting requirements: s 82M. Some of these requirements are contained in the principles, to which we turn.

(ii) The Ministerial Principles 8 On 21 September 1995, and pursuant to s 73BC(5B) of the Act, the then Minister made an instrument entitled "Determination of Principles for the Purposes of Subsection 73BC(5B)". That determination, which we shall refer to as "the Principles", has been superseded by a later determination; but it is agreed the 1995 determination applies to this case. It is not suggested that the terms of the later determination affect the questions arising in this case. 9 The Principles require the keeping of a reinsurance account by an organisation and the maintenance of accurate membership records (pars 2 and 4). As the primary Judge observed, the word "reinsurance" in this context has a meaning different from its usual commercial meaning. By par 1 organisations are empowered to debit, in their reinsurance accounts, benefits paid with respect to patient days for each member who has reached 65 years of age; and for those under 65, each day in hospital accommodation in excess of 35 days in the preceding twelve month period. Under the heading "Membership Records", the following appears: "4. Organisations are required to maintain accurate membership records in a format which allows the Council to arrange for the audit of the records and reconcile the membership details on the quarterly returns. It is important that membership records contain dates of birth of contributors and dependents. 5. The Council reserves the right to make adjustments to membership figures or amounts payable into or out of the Trust Fund where it becomes aware of discrepancies in membership figures notified or amounts debited or credited by organisations to their Reinsurance Accounts." 10 Paragraph 6 of the Principles deals with the procedures to be followed by each organisation. Within one month after the end of the quarter each organisation is to forward statements, certified as correct by the public officer, to the Council setting out: "(a) fund benefits paid during the quarter in respect of Reinsurance Account contributors (including number of patient days). Separate details for ABA payments and supplementary benefits and persons under the age of 65 years and 65 years and over are required; (b) adjustments to membership, benefits and patient days relating to previous periods; and (c) details of the number of single and family contributors enrolled in an ABA at the end of the quarter." 11 As soon as possible after the end of each settlement period, the Council is obliged to determine "the net amounts payable by or to each organisation in respect of that period and notify them accordingly" (par 9). The amounts are to be determined according to the steps and calculations required under par 11. 12 In view of the reliance placed by the appellant upon the requirements of par 11, we set the paragraph out in full: "11. Subject to paragraph 10 above, the amounts will be determined on the following basis: (a) ascertain the Reinsurance Account Deficit for each organisation's health benefits accounts(s); (b) subject to paragraph (c) below, calculate 79% of the Reinsurance Account Deficit for each organisation's health benefits accounts(s) and attribute it to the reinsurance pool; (c) in respect of benefits for professional services rendered in hospital, payments eligible for reinsurance are: (i) the difference between the Medicare rebate and the fee charged up to the Medicare Benefit Schedule (MBS) fee; plus, (ii) where a medical purchaser provider agreement is in place, any amount paid in excess of the MBS up to a maximum of 16%; (d) calculate the average number of contributors enrolled in an ABA for each organisation's account(s). For this purpose, contributors at the family rate will count as two and those at the single rate as one; (e) calculate a total number of average contributors in each pool by aggregating (d) in respect of each State; (f) determine totals of the amounts calculated under (b), for all health benefits accounts; (g) determine the average amounts paid per contributor in respect of each account [i.e. the amounts calculated in (f) divided by the total number of average contributors calculated in (e)]; (h) determine the amount that would have applied to each health benefits account if it had average experience in respect of each State [i.e. the average number of contributors calculated in (d) multiplied by the amounts calculated in (g)]; (i) calculate the difference between the amounts calculated in (b) and (h) for each health benefits account. Where the total amount calculated in (h) exceeds the total amount calculated in (b) the organisation is to be notified that an amount equal to the difference is payable to the Trust Fund. Where the total amount calculated in (b) exceeds the total amount calculated in (h) the organisation is to be notified that an amount equal to the difference is payable from the Trust Fund." 13 As the primary Judge observed, the effect of this apparently complex calculation is that an organisation will receive a payment from the Fund if the amount of its claims, that are subject to reinsurance, is greater than the State average. If its reinsurance claims are less than the State average, it will be required to make a payment to the Fund. 14 It will be observed that par 6 envisages adjustments to the information which will affect an outcome for an organisation with respect to a Fund; in particular, adjustments to benefits and patient days relating to "previous periods". Paragraph 14 states that the determination of benefit payments is to be based upon the date on which the treatment or services were actually provided, but recognises that, because of late claims, a different commencement date of the twelve month eligibility period might have been determined. In that event it recognises that "it may be necessary for the organisation to adjust the amount of benefits debited to its Reinsurance Account".

(iii) The Rules 15 The Council, on 16 June 1993, made the Private Health Insurance Administration Council Rules (No 4) ("the Rules"). They included two rules relevant to this case: "Determination of adjustment payments 4. If, following a determination by the Council under subsection 73BC(6) or (12) of the Act, the Council learns from any source that the amount so determined is not appropriate, the Council may determine: (a) under subsection 73BC(6) - that an adjusting amount is an appropriate payment in relation to a registered organisation; or (b) under subsection 73BC(12) - that an adjusting amount be paid to a registered organisation. Limitation on determination 5.(1) A determination described in rule 4 must not be made, except in exceptional circumstances, in respect of a determination under subsection 73BC(6) or (12) of the Act that was made in respect of a period that precedes the most recent financial year for which the registered organisation was required to provide an auditor's report to the Council. (2) If the determination is an adjusting amount under subsection 73BC(6), "exceptional circumstances" includes evidence, to the satisfaction of the Council, that the registered organisation did not exercise proper care in giving the Council information to which the Council is entitled under section 82G of the Act."

THE council's DECISION 16 In the period 1995 to 1996 each of the appellants installed a new computer system which contained a program, specifically for use in the health insurance business, which enabled them to calculate the amount of reinsurance they were eligible to claim from the Fund. Each of them tested the program and some of them conducted an audit. No errors were detected. It was not until June or July 1998 that the appellants became aware of a problem with the system which required correction. They discovered their reinsurance claims had been understated, as a result of erroneous calculations performed by the system between 1 October 1996 and 30 June 1998. In June and July 1998 they submitted reinsurance adjustment claims to the Council and sought payment of their correct entitlements. 17 The Council decided to make an adjustment, in each case, for the period 1 July 1997 to 30 June 1998, this period coming within the time frame permitted by rule 5. However, the Council declined to make any adjustment in respect of the 1996/97 financial year. It advised each organisation: "I refer to your submission to Council requesting that an adjustment be paid to your organisation for the 1996/97 financial year. Council has considered the submission for an adjustment of $1,193,365.00 for the 1996/97 year, and has decided not to make a determination under the Private Health Insurance Administration Council Rule No 4 that an adjusting amount be paid to your organisation. Having regard to your submission, Council did not consider that exceptional circumstances as required under Council Rule No 4 existed." 18 In that part of its statement of reasons provided in response to a request under s 13 Administrative Decisions (Judicial Review) Act which is entitled "FINDINGS ON MATERIAL QUESTIONS OF FACT", the Council stated: "1.1.4 Several organisations have discovered an error caused by incorrect computer programming during the 1996/97 and 1997/98 financial years. PHIAC has determined to adjust errors in respect of the 1997/98 financial year, however, in accordance with Rule 4, an adjustment in relation to the 1996/97 financial year will only be made in exceptional circumstances." 19 The section of the statement of reasons headed "REASONS FOR THE DECISION" contained the following: "3.1.1 Clause 5 of Rule 4 limits the period for processing an adjustment to reinsurance to 'the most recent financial year for which a registered organisation was required to provide an auditor's report to Council'. 3.1.2 When the financial year ends, an obligation to provide an auditor's report arises. The fact that the legislation does not require the provision of such a report until 30 September, or such further time as determined, does not affect the fact that the obligation to provide an auditor's report arises on the completion of the financial year. 3.1.3 As indicated in Circular No 40 ('the Circular'), at the time Rule 4 was drafted the Council was concerned about the extent of adjustments occurring retrospectively and the financial impact of those adjustments on other funds. 3.1.4 It was PHIAC's aim to limit the extent of adjustments for the benefit of the industry as a whole while retaining the right to adjust in cases where organisations had deliberately manipulated information contained in returns resulting in overpayments or where inadvertent errors resulted in underpayments. In the latter case, however, individual organisations would usually carry any loss that it had incurred. In PHIAC's view, responsibility for processing returns accurately rests with the particular organisation and therefore an adjustment would not be automatically made in cases of underpayment. 3.1.5 Accordingly, it was PHIAC's purpose in drafting Rule 4 to ensure that, except in exceptional circumstances, health funds could plan their affairs with certainty and that they would not be required to contribute to a pool as a result of mistakes made by other funds some years before. 3.1.6 The purpose and literal wording of the legislation indicates that the expression 'the most recent financial year' relevantly refers to the financial year ended 30 June 1998 in the matter under consideration." 20 In relation to what was meant by exceptional circumstances, the statement said: "3.2 Exceptional Circumstances … 3.2.1 PHIAC has adopted as its approach to the ascertainment of 'exceptional circumstances' that a fund must demonstrate that its circumstances were different to those that apply to other organisations and that they were beyond the control of the organisation." 21 It seems that, in its application to the Council for a re-calculation of the amounts payable from the Fund to it with respect to both periods, Australian Unity explained the tests which had been conducted of the system and the audits undertaken, in accordance with the Council's guidelines, and stated that other organisations had the same systems error. 22 In relation to the four points the Council considered to be made by Australian Unity, the Council said: "3.2.3 The first submission essentially claims that as other funds used the same system some reliance may have been placed on the accuracy of the system by Australian Unity. However, it was incumbent on each individual fund to ensure the accuracy of the system used to process returns. Accordingly, exceptional circumstances are not shown in respect of the first submission. 3.2.4 The Second submission states that the testing program adopted by the steering committee was guided by documentation supplied by Sanderson Wacher. Notably, it is not claimed that the documentation was incorrect or incomplete. While it may have been reasonable to have relied upon the advice of Sanderson Wacher, each organisation must nonetheless take responsibility for the final outcome of testing procedures. Exceptional circumstances have therefore not been demonstrated. 3.2.5 The third submission is based upon the fact that test data run through the WHICS open system and the previous Bull system by Australian Unity's internal auditors did not highlight the error. We note that the Government Employees' Health Fund's internal auditors identified one of the major problems when they ran tests in May 1998. Similarly, St Luke's Health Fund identified the problems whilst testing the system. It therefore appears that it was in fact possible to detect the error through certain testing processes. In any case, the degree of system testing undertaken was entirely a matter for each individual fund to determine. 3.2.6 The fourth statement claims that Australian Unity's internal and external auditors reviewed the system in accordance with the PHIAC Audit Program. Notably, it is not claimed that the PHIAC Program was flawed in any respect. It cannot therefore be said that the errors were caused by reliance on the Program. The selection of the systems to be used to conduct the audit in accordance with the PHIAC Program was the responsibility of the individual organisation. Furthermore, PHIAC did not endorse the relevant systems used by Australian Unity at any stage. Again, this statement does not in itself demonstrate exceptional circumstances." 23 The Council concluded: "3.2.7 In conclusion, Australian Unity Health Limited has not proved that their circumstances were different from those of other organisations, nor that those circumstances were beyond its control. 3.2.8 The purpose of the Rule 4 is to ensure that, except in exceptional circumstances, health funds can plan their affairs with certainty and that they will not be required to contribute to the reinsurance pool as a result of mistakes made by other funds some years before. In accordance with the terms and policy of the legislation, it is not appropriate for PHIAC to make the adjustment sought."

the primary judge's reasons 24 The principal argument for the appellants at first instance was that an organisation in their position had a legal entitlement to a re-calculation of payments in respect of the periods in question. They accepted this would involve not merely a further payment to them, but also a re-calculation, under par 11 of the Principles, involving all the other organisations participating at the time. The appellants placed reliance upon the statutory object of health insurers sharing the burden of high risk or high cost members and contended par 11 was predicated upon the receipt of correct information. 25 The primary Judge accepted that the Principles assumed the supply of correct information. However, he thought it did not follow that the consequence of the supply of incorrect information was to render a determination invalid, or to give rise to a right to re-determination of any amount due to an organisation from the Fund. Whilst the Act entitled an organisation to be paid an amount that the Council decided, pursuant to s 73BC(12) of the Act, should be paid to it, the Council's decision was intended to be based upon the information supplied by the organisation. The entitlement to receive a determined payment does not imply a right to adjustment or alteration of that payment if the information is later shown to be incorrect. 26 In his Honour's view, the Principles provided an opportunity for the Council to make adjustments or corrections. However, that opportunity was limited to the period during which the quarterly return was processed. In arriving at this conclusion, his Honour observed that para 5 of the Principles spoke of adjustments to amounts "payable", into or out of the Fund, and not those already "paid". His Honour considered that view to be supported by the fact that any adjustment would result from discrepancies in "amounts debited and credited by organisations to their Reinsurance Accounts", which discrepancies would occur when quarterly returns were submitted. 27 The primary Judge considered the Rules covered a situation different from adjustment under the Principles: a situation where errors or discrepancies were discovered after the Council had made its determination and amounts had been paid by or to an organisation. He thought it followed that the Rules could not be said to impinge upon, or be inconsistent with, the area of operation of par 5 of the Principles. 28 In relation to the submission that the requirement of rule 5, that there be "exceptional circumstances", imposed an arbitrary restriction upon the Council's discretion to make adjustments with respect to earlier periods, his Honour noted the distinction between a policy or guideline which limits a discretion conferred by statute, and a policy which allows for the discretion to be exercised whilst providing guidance as to how it might be exercised: Re Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 641. An administrative body is entitled to lay down a general policy, and apply it to individual cases which come before it, so long as it does not apply the policy rigidly and without affording a particular applicant an opportunity to say why the policy should not have application. In his Honour's view, the Rules were not an arbitrary restriction on the Council's power. Importantly, rule 5 did not preclude an organisation from putting its case: British Oxygen Co Ltd v Minister of Technology (1977) AC 610 at 625 and Surinakova v Minister for Immigration and Local Government and Ethnic Affairs (1991) 33 FCR 89 at 98. The primary judge thought it was not inappropriate for the Council to formulate, through its Rules, a requirement that exceptional circumstances be shown in an application for adjustment relating to a period more than one financial year prior to the last completed year. Such a requirement takes into account the desirability of ensuring that, save for exceptional circumstances, health organisations may plan their affairs free from any disruption caused by the need later to repay monies arising from another organisation's mistake. In the circumstances the Council was entitled to apply the Rules.

(i) The Principles 29 The primary Judge was, in our respectful view, correct in concluding that neither the Act nor the Principles creates a legal entitlement, on the part of an organisation, to a re-calculation of the organisation's payment into or out of the Fund. Whilst the object of some sharing or re-allocation of risk or burden is apparent, that does not itself imply a need for each determination in a settlement period to be rendered accurate if further information comes to hand. 30 Both the Act and the Principles require the Council to be concerned with the accuracy of records kept by organisations and with reporting of information to it. However, despite the Council's powers, it cannot be said that the Council must necessarily assume an investigative role, with a view to ensuring the outcome for all organisations will be correct, or will be corrected. Whether it will assume that role may depend upon the circumstances, including especially the Council's resources and priorities. 31 Paragraph 11 of the Principles prescribes a number of steps towards a determination. Each of them is, no doubt, intended to be undertaken accurately. As the primary Judge observed, the paragraph proceeds upon the expectation that the information supplied, and upon which calculations are made, will be accurate. Paragraph 6 of the Principles seems to underscore this. These factors do not, however, require the Council to correct any error later found. As the primary Judge observed, characterising the relationship between an organisation and the Council as a fiduciary one adds little to the issue; and in any event is largely inaccurate. This aspect of the submissions was not further developed on the appeal. 32 Paragraph 5 of the Principles reserves to the Council the right to adjust amounts payable into or out of the Fund. However, it confers on the Council a discretion or power to adjust; it does not impose a duty, even read with par 11. If there is no legal duty, there is nothing to confer upon an organisation a corresponding legal entitlement to an adjustment. 33 The more difficult question is whether par 5 permits an adjustment only during the period immediately following the subject settlement period, as the Council contends, or whether it implies a continuous right on the part of the Council to make adjustments whenever discrepancies or errors are disclosed. 34 The scheme established by the Principles requires a determination as to the net amounts "payable" by or to an organisation. This is to occur following the end of each quarter. That determination is based upon information provided in the statements forwarded to the Council, which detail benefits paid and current membership and identify particular payments. In addition, the organisations are required to keep accounts (the Reinsurance Accounts) showing the payments made under applicable benefits arrangements, supplementary benefits paid and other declared classes of benefits paid on the basis set out in par 1; and the organisations are required to keep membership records. 35 Paragraph 5 of the Principles clearly applies to a determination made by the Council under par 11 in the period immediately following the settlement period. At that time the Council may adjust membership figures and the amounts that otherwise would be payable into or out of the Fund, where it becomes aware of discrepancies in the membership records or amounts debited or credited to the Reinsurance Accounts. On the appeal no point was made about the use of the word "discrepancies". The parties accepted it was apt to refer to errors which affected the outcome under par 11. The only limiting factor contended for was the time at which the adjustment was to be made. 36 Paragraph 5 seems to envisage adjustments to the amounts yet to be paid to or out of the Fund. The use of the word "payable" in the phrase "the right to make adjustments to…amounts payable into or out of the Trust Fund" suggests this. The chosen words do not naturally refer to adjustments to amounts already paid to or out of the Fund. This argument found favour with the primary Judge. However, even accepting that approach, it does not follow that the Council is disentitled to make an adjustment later than the period immediately following the settlement period. The power to make such an adjustment is contained within the Act itself. Subsection (12) of s 73BC provides that the Council may decide that an amount is to be paid out of the Fund to an organisation. Subsection (6) provides that the Council may determine payments to be made by an organisation into the fund. These powers are not limited by reference to the time at which they may be exercised, nor the circumstances in which they might be exercised. It does not appear that reliance was placed upon these provisions in the argument before the primary Judge. 37 It was pointed out during argument on the appeal that pars 6 and 14 of the Principles themselves suggest the prospect of later adjustments with respect to earlier periods. Moreover, denial of that prospect creates the risk that the Council would be unable to correct even deliberate errors, if discovery was delayed. 38 The Council submitted that a limitation on the adjustment period was desirable, in the interests of obtaining certainty of determinations. The Council also pointed to the practical difficulties it might face were it to revisit calculations of amounts payable with respect to earlier periods. The example given was where some organisations had ceased to exist by the time the error was found and a re-calculation undertaken. However, these concerns are unfounded, since the subsections provide a discretion, not an obligation, on the part of the Council to act where errors are later found. In a particular case, the Council might properly consider that a re-calculation is not now possible or is inappropriate, given changed circumstances and the burden that might now be placed upon the remaining organisations.

(ii) The Rules 39 The power given to the Council by the Act, to require payments to be made into and out of the Fund from time to time, is not circumscribed by the Act itself. However, rule 5 of the Rules purports to impose a limitation; only in "exceptional circumstances" may a determination be made in respect of a period preceding the most recent financial year. The validity of that rule was not questioned before the primary judge. However, when the matter was raised during the hearing of the appeal, counsel for the appellant submitted the rule was inconsistent with the Act and, so, ultra vires. 40 In our opinion rule 5 of the Rules is not invalid. With respect to the contrary view, we do not think the rule conflicts with the Act. The Act does not specify the criteria to be applied by the Council in determining whether to make an adjustment outside the period contemplated by the Principles. If nothing more appeared, it would be open to the Council to apply such criteria as it saw fit, provided they were not inconsistent with the scope and purpose of the Act. However, s 82G(1)(r) of the Act authorises the Council to make rules, not inconsistent with the Act, "for the purpose of the performance of its functions and the exercise of its powers". Any such rules must be laid before Parliament and are disallowable by either House: see 82G(2). 41 In enacting a statute, it is common for Parliament to authorise the making of delegated legislation. The purpose is to enable the delegate to make more specific provision for the operation of the statute than is thought appropriate to be made in the statute itself; in other words, to close gaps that are otherwise left open. The delegated legislation must not conflict with the statute or be inconsistent with its scope or purpose, but it is not a legitimate objection that it makes a specific provision in respect of a matter that Parliament has left open; that is the very idea. The rules authorised by s 82G(1)(r) of the Act may relate to "the performance of the Council's function and the exercise of its powers". So it seems to us unobjectionable that rule 5 specifies the circumstances in which the Council may exercise its powers to make an adjustment outside the period addressed by the Principles. In our view the rule is valid.

(iii) The policy 42 The final question is whether the Council was entitled to adopt and apply a policy that, in order to bring its case within rule 5, as being a case of "exceptional circumstances", an organisation "must demonstrate that its circumstances were different to those that apply to other organisations and that they were beyond the control of the organisation": see para 3.2.1 of the s 13 statement quoted at par 20 above. It will be recalled that the Council rejected Australian Unity's claim for adjustment because it could not comply with these requirements. We understand the position was similar in relation to the other appellants. 43 It may be accepted that the Council was entitled to adopt a policy that reflects the concerns apparently underlying rules 4 and 5. It was reasonable for the Council to take account of difficulties that might be caused to other organisations with respect to delayed adjustments, and to weigh the part the organisation requesting the re-calculation played in contributing to the error. A policy which reflected those concerns, and was informative of the standards and values which ought usually be applied in deciding whether to permit further adjustments, would not be unlawful since it would not seek to control the decision-making: see Drake at 641. It is, however, another matter for a statutory decision-maker to adopt a policy which excludes from consideration, as "exceptional circumstances", all circumstances that do not reflect these concerns. The process undertaken by the Council in this case involved substitution of different and narrower criteria for the criterion specified in rule 5. 44 The effect of the Council's error is apparent from par 3.2.7 of its statement of reasons. The Council dismissed the claim for adjustment made by Australian Unity, not because - upon a consideration of all relevant factors - the Council concluded the relevant circumstances were not exceptional, but because Australian Unity "has not proved that their circumstances were different from those of other organisations, nor that those circumstances were beyond its control". In effect, the Council required Australian Unity - and, we understand, each other applicant for an adjustment - to be in a unique position vis a vis the other organisations and be blameless in connexion with the occurrence of the error.

CONCLUSION AND ORDERS 45 In our view, by applying a rigid policy the Council caused its discretion to miscarry. The ground referred to in ss 5(1)(e) and 5(2)(f) of the Administrative Decisions (Judicial Review) Act is made out. The appeals should be allowed, his Honour's orders set aside and, in lieu, there should be orders in each case that the decision of the Council be set aside and the applications for adjustment remitted to it to determine according to law. In making its determination, the Council will need to consider whether the circumstances surrounding the applications for adjustment are exceptional, giving to that word its usual meaning and not requiring uniqueness of situation or blamelessness. If the Council decides, in relation to any particular application, that the circumstances are exceptional, it will be required to consider whether, as a matter of discretion and taking into account all relevant matters, including the effect of an adjustment on other organisations, it ought to accede to the application. 46 Having regard to the fact that the appellants have failed on their primary point, and that the point about policy was not expressed in this form either at first instance or on the appeal (except after comment by the Court), we think there ought to be no order as to costs, either at first instance or on the appeal. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Kiefel and Merkel JJ.

Associate to Justice Merkel: Dated: 29 March 2001 Counsel for the Appellants: Mr JWK Burnside QC and Mr S Senathirajah

Solicitor for the Appellants: Corrs Chambers Westgarth

Counsel for the Respondent: Mr RRS Tracey QC and Mr TJ Ginnane

National Health Act 1953(Cth)ss 73BC, 73BC(5B)

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