Gribbles Pathology (Victoria) Pty Ltd v The Minister for Health

REASONS FOR JUDGMENT 1 This application raises a short but by no means straight-forward question as to the proper construction of s 23DND of the Health Insurance Act 1973 (Cth) ("the HI Act"). That question is the not uncommon one of whether in its setting the word "may" should be construed to mean "must". Factual Background 2 This can be stated briefly. 3 (1) The applicant, Gribbles Pathology (Victoria) Pty Ltd ("Gribbles") is an "approved pathology authority" (a defined term: see below) under the HI Act. It holds 115 units of entitlement allocated by the first respondent, the Minister for Health and Aged Care ("the Minister") under s 23DNB(1)(b) of the Act to operate licensed collection centres of specimens for the rendering of pathology services. 4 (2) Gribbles has used its units of entitlement as the basis for operating 127 such licensed centres. One of these was located in Rowville, Victoria, in leasehold premises. Most recently Gribbles was granted a licence under s 23DND of the HI Act in respect of that premises on 6 July 2000. In August 2000, Gribbles agreed to terminate its lease of that premises and to take a lease of new premises, also in Rowville, from a new lessor, Folkstone Nominees Pty Ltd. 5 (3) On 11 September 2000, Gribbles applied to the Minister both to have cancelled the license to conduct a specimen collection centre at the old leasehold premises and to have approved a licence to conduct a collection centre at the new leasehold premises. 6 (4) On 15 September 2000 a delegate of the Minister wrote to Gribbles in response to the application for the new licence in (inter alia) the following terms: "The copy of the lease that you have provided in respect of the premises provides for a rent payable by Gribbles Pathology (Vic) Pty Ltd of $13,500.00 per month. It would appear the area of the proposed LCC site is approximately 32 square meters so that the rent payable amounts to some $5,062.00 per square meter per annum. Based on information currently before me, the charges do not appear to be fixed at normal commercial rates. In this regard I draw your attention to Section 129AAA(4) and (4A) of the Act which states: (4) Where: (a) there is in force between an approved pathology practitioner and a practitioner or medical entrepreneur an arrangement under which: (i) the parties to the agreement share a particular space in a building; or (ii) one party provides space in a building for the use or occupation of the other party or permits the other party to use or occupy space in a building; and (b) the charges payable under the arrangement are not charges fixed at normal commercial rates; the approved pathology practitioner shall not, during the period when that arrangement is in force, accede to a request from the practitioner or any practitioner who has entered into any contract, agreement or arrangement with that medical entrepreneur (as the case may be) to provide pathology services to a patient. (4A) For the purposes of paragraph (4)(b), the normal commercial rate for sharing, or using or occupying, space in a building is the rate that would be the normal commercial rate for sharing, or using or occupying, that space in that building, being the rate: (a) that has not been adjusted to reflect any additional value that any party to the arrangement might attribute to this space because of its proximity or convenience to any source of pathology requests; and (b) that is not determined, or subject to variation, in a way that takes into account the volume of any pathology requests made between the parties to the arrangement. Would you please provide clarification of the rental amounts provided in your application and any comments you have to support these amounts. As the delegate will need the above matters clarified before a decision can be made on your application, I would like to remind you that the LCC must not be operational until approval is granted." 7 (5) Gribbles responded by letter that stated (inter alia) that: "2. On the issue of whether or not the charges are fixed at commercial rates, we advise: (a) that this is not relevant to the Licensed Collection Centre application as the lessor is neither a medical practitioner nor a medical entrepreneur - please see letter enclosed. (b) that the lessor received at least 2 other rental offers from Pathology Companies in Victoria for a higher monthly rental than that in the lease agreement with Gribbles. For the reasons stated above, we do not believe that there are any grounds for the Health Insurance Commission to further delay approval of the Licensed Collection Centre application and request urgent approval, effective from 18 September 2000." 8 (6) That response prompted a further request for information from the delegate on 22 September 2000. "As to the first point, (2)(a) the lessor is identified as Folkstone Nominees Pty Ltd (Folkstone). For the purpose of considering your assertion that " … the lessor is neither a medical practitioner nor a medical entrepreneur … " I would appreciate advice from your office identifying all beneficial interests in Folkstone. This information should identify beneficial interests back to natural persons and will be cross-referenced with data established within this office." That letter went on to note that: "Finally, as to your last paragraph, both my original request and the new request outlined in this letter must be provided to this office before the Delegate can consider your application further." 9 (7) The requested information apparently not having been provided to the delegate's satisfaction, the application has not been considered. The Application 10 Brought under s 39B(1) and (1A) of the Judiciary Act 1903 (Cth), the application seeks various declarations and an order by way of mandamus directing the Minister to determine Gribbles application for a licence according to law. The declarations seek, in essence, a construction of s 23DND of the HI Act (the licensing provision) that would render it impermissible for the Minister to take into account - hence to seek to elicit - any of the information sought relating either to the rent to be paid under the new lease or to who held the beneficial interests in the lessor company. The Statutory Setting 11 As it will be necessary to refer to the HI Act in some detail, I will consider separately those particular parts of it that have some bearing on the resolution of this matter. In so doing I draw heavily on the applicant's written contentions of fact and law. (i) Medicare benefits for pathology services 12 Sections 20 and 20A of the HI Act provide for the payment of medicare benefit in respect of professional services to the person who incurs the medical expenses for that service and for the assignment of the benefit to the practitioner who rendered the service. A pathology service rendered by or on behalf of an approved pathology practitioner pursuant to a request by a treating practitioner under s 16A(4) of the Act, is a "professional service" for the purposes of the HI Act: see s 3(1). 13 Section 16A prescribes the conditions to be satisfied before medicare benefit is payable in respect of a pathology service. All that need be noted for present purposes is that where a pathology specimen is collected by an employee of an approved pathology authority (such as Gribbles), medicare benefit is payable only if the specimen is collected as at one of the places designated in s 16A(5AA)(d) of the Act. These include "a licensed collection centre". (ii) Approved Pathology Authorities ("APAs") 14 Section 3(1) of the HI Act defines an APA to mean a person in respect of whom there is in force an undertaking given by the person, and accepted by the Minister, under s 23DF. The latter section prescribes the manner of giving, and applying for acceptance of, an undertaking. Subject to statutory provisos, the Minister is given the express power to accept or to refuse to accept the undertaking. Illustrative of the form taken by the provisos is that contained in s 23DF(6): "The Minister shall not accept an undertaking given by a person for the purposes of this section unless the Minister is satisfied that the person is a fit and proper person to be an approved pathology authority." Sub-section (7) of the same section prescribes the matters to which the Minister "shall have regard" in making a determination under sub-section (6). These include "(h) such other matters as the Minister considers relevant". 15 I would note in passing that the undertaking given by Gribbles was accepted by the Minister on 8 July 1995 and remains in force. Insofar as presently relevant it includes an undertaking that Gribbles would not take any action that would constitute a "relevant offence" - a term defined by s 124B(1) of the HI Act to include (inter alia) an offence against s 129AAA of the Act. The presently relevant provisions of that section (ie sub-sections (4) and (4A)) have been set out in the factual background above. 16 The HI Act provides a procedure for the revocation of an APA's undertaking. That procedure, which can be invoked where the Minister has reasonable grounds for believing that an APA has breached an undertaking given under s 23DF: see s 23DL(1); can lead to the establishment of a committee - a Medicare Participation Review Committee: see Part VB of the HI Act - that can conduct public hearings, summons witnesses, require the production of documents, etc: s 124J-s 124P; and which is empowered to make a range of determinations including the revocation of an undertaking: s 124FC. (iii) Licensing specimen collection centres 17 Division 4A of the HI Act provides a two stage process that can lead to the licensing of a collection centre. The first stage, which is specified in s 23DNB, requires an APA to make annual application to the Minister for an allocation of units of entitlement to operate licensed collection centres. The Minister is then obliged to determine whether the applicant is, or is not, to be allocated units. Section 23DNB goes on to provide: "(3) The Minister must determine in writing principles with which the Minister must comply in performing duties under this section. (4) The principles that the Minister is to determine must include: (a) the formula or other method for working out whether any units of entitlement to operate licensed collection centres should be allocated to an approved pathology authority under subsection (1) or (2) and, if any units are to be allocated, the number of units to be so allocated; and (b) the circumstances in which an allocation (including a nil allocation) of units of entitlement to an approved pathology authority may be varied during the period during which licensed collection centres may be operated under the allocation, and the formula or other method for working out such a variation; and (c) the number and locations of licensed collection centres that an approved pathology authority may operate under a unit of entitlement. (5) When performing a duty under this section, the Minister: (a) must comply with any relevant principles in force under subsection (3) (b) may take into account any other matters not inconsistent with those principles, that he or she thinks relevant. … " 18 A copy of "the principles" (which is a disallowable instrument under s 46A of the Acts Interpretation Act 1901 (Cth)) was provided to me at the hearing. I understand it to contain the presently operative principles, though stated to have been made in November 1995: cf Gribbles Pathology (Vic) Pty Ltd v Minister for Human Services and Health (1996) 67 FCR 327. The principles are essentially formulary in character. All that I would note of them in explanation of the relationship between units of entitlement and licensed collection centres is that they contain the following clause and Table: "Number of LCCs permitted by a unit of entitlement 9(1) The number of LCCs that an APA may operate: (a) in a statistical local area referred to in column 2 of an item in the following Table; and (b) for each unit of entitlement allocated to the APA under paragraph 23DNB(1)(b) or (2)(b) of the Act is the number set out in column 3 of the item. TABLE Column 1 Column 2 Column 3 Item no Statistical local area in whichNumber of LCCs each LCC is to be located per unit of entitlement 1 Capital City 1 2 Other Major Urban 1 3 Rural Major 1 4 Rural Other 3 5 Remote Major 1 6 Remote Other 3 7 Other Offshore Areas 1 19 The second stage in the licensing process is the application for the grant of a licence. Section 23DND provides: "Application for grant of licence (1) An approved pathology authority may apply in writing to the Minister for the grant of a licence in respect of a specimen collection centre operated or to be operated by the authority. (3) The approved pathology authority must: (a) give to the Minister any information (whether oral or in writing in a form specified by the Minister) asked by the Minister; and (b) allow the Minister to see and copy any document asked by the Minister; that is reasonably necessary to enable the Minister to decide whether or not to approve the grant of the licence. (4) The Minister may approve the grant of the licence only if: (a) the grant of the licence will not result in the approved pathology authority operating licensed collection centres that it is not authorised to operate under its allocation of units of entitlement; and (b) the approved pathology authority is the owner, lessee or sublessee of the premises (in this subsection called the Premises) occupied, or to be occupied, by the specimen collection centre; and (c) the Premises are not used, or intended to be used, at the same time as a surgery by a medical practitioner; and (d) there is on the Premises the necessary equipment for the collection and preparation of specimens for pathology procedures; and (e) the staff at the specimen collection centre: (i) are persons employed by the authority; and (ii) include persons properly trained in procedures for the collection and preparation of pathology specimens. (6) The Minister may refuse to approve the grant of the licence in respect of the specimen collection centre if a licence previously granted to the approved pathology authority (whether in respect of the specimen collection centre or another specimen collection centre) was revoked. (7) The Minister must inform the approved pathology authority in writing of his or her decision to approve or not to approve the grant of the licence." 20 The actual grant of the licence is provided for in s 23DNE. Sub-section (1) of that section provides: "If: (a) the Minister approves the grant of a licence in respect of a specimen collection centre; and (b) the approved pathology authority pays the licence fee; the Minister must grant a licence authorising the authority to operate the specimen collection centre." 21 Finally a licence so given may be revoked. Section 23 DNG(1) provides: "(1) The Minister may revoke a licence if the Minister is satisfied that: (a) a condition referred to in paragraph 23DND(4)(b), (c), (d) or (e); or (b) subsection 23DNF(3) or section 23DNK; has not been complied with." I would note that the two sections referred to in sub-paragraph (b) relate to the use by a licensed centre of prescribed identification numbers and notices. (iv) Secondary parliamentary material 22 The present licensing provisions and the related criminal offences contained in (inter alia) s 129AAA were introduced into the HI Act by an amendment in 1991. The Second Reading Speech on the amending bill: See Hansard, House of Representatives, 7 November 1991, 2690ff; identified one of the ills at which the amending legislation was directed (at 2691): "In an attempt to increase their share of pathology service delivery, there are indications that some pathology practices compete with each other by providing significant inducements for treating practitioners to request pathology services from their practice. Some pathologists may place their trained staff within a doctor's surgery, and this action may not only reduce the doctor's ability to choose between pathologists on a service-by-service basis, but may have the undesirable effect of significantly increasing the amount of pathology ordered. From 1 February, in order to be licensed, a collection centre must be an independent facility, owned or leased by an approved pathology authority, which is set up with appropriate equipment and supplies for the collection of pathology specimens. The centre must be staffed by employees of that approved pathology authority and include staff trained in specimen collection procedures." The Minister further stated (at 2692): "The Bill provides for specific circumstances under which a Medicare benefit for a pathology service will not be payable. A Medicare benefit for a pathology service will not be payable where the pathology specimen is collected in an unlicensed collection centre. Any person who operates an unlicensed centre will be required to take all reasonable steps to inform both the person from whom the specimen is to be taken and the pathologist who may perform the pathology service that Medicare benefits will not be payable for the service. A Medicare benefit for a pathology service will not be payable where inappropriate agreement, arrangement or incentive for ordering the service exists between the approved pathology practitioner rendering the service, the treating practitioner requesting the service or a medical entrepreneur. The reform of collection centre arrangements is being undertaken to negate the potential for this nexus. There must be no functional, direct or indirect, pecuniary or other beneficial contractual arrangement or understanding in relation to the ordering of pathology between the approved pathology authority, a pathologist, the treating practitioner, employer or employee of the practitioner, or any other party. The reforms I have outlined are supported by strengthening sections 129AA and 129AAA of the Health Insurance Act 1973. These sections relate to bribery and prohibited practices in relation to the rendering of pathology services. The categories of persons which can commit an offence against these sections has been broadened, and in particular it will include bodies corporate which in some instances have been used to avoid the restrictions placed on individuals. Penalties for breach of the conditions of these sections have also been increased significantly." The Explanatory Memorandum said of s 23DND(4): "New subsection 23DND(4) sets out the "threshold" conditions which an approved pathology authority must meet before the Minister may be able to grant a licence. These conditions include requirements that the authority must own or lease the premises to be occupied as a specimen collection centre, that the centre is not to be used also as a medical practitioner's surgery, and that the centre has the necessary equipment and qualified staff." Submissions and Conclusions 23 There is not, as I understand it, any significant difference between the parties as to the appropriate principles to be applied in the construction of s 23DND(4). I would merely note the following. 24 Section 33(2A) of the Acts Interpretation Act 1901 provides: "Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing, and the word "may" is used, the act or thing may be done at the discretion of the person, court or body." That rule of construction applies to all Commonwealth Acts, "[e]xcept so far as the contrary intention appears": Acts Interpretation Act 1901, s 2; see also Ward v Williams (1955) 92 CLR 496 at 505-506. 25 As has been reiterated on many occasions "the particular context of words and circumstances [can] make [the word "may"] not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the "may" becomes a "must"": Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 at 134. 26 Gribbles' contention is, first, that the words "may approve" and those which follow in s 23DND(4) are used in a particular context and for a particular purpose - to define the limits of the Minister's authority or power to approve the grant of a licence. The subsection authorises the Minister to approve the grant of a licence only if five specified conditions are satisfied. The five specified matters condition the exercise of the power itself and in so doing "specify the circumstances in which the power must be exercised": Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 85. 27 Secondly, it is noted that s 23DND(4) is accompanied by s 23DND(6) which specifies only one circumstance which could justify the Minister's refusal to approve the grant of a licence. That particular specification points strongly against a power to have regard to other (unspecified) considerations as bases for refusing to approve the grant of a licence. 28 Thirdly, unlike under s 23DNB(5)(b) for example, the Minister is not expressly empowered to have regard to any matters "he or she thinks relevant" when exercising the power. 29 Fourthly, the revocation provisions of s 23DNG(1) in their close mirroring of s 23DND(4) provide further reinforcement for a construction of subsection (4) that limits the matters which the Minister is to consider when deciding whether to approve a licence. 30 Fifthly, the licensing part of the Act is essentially mechanical in character. It does not provide the occasion for examining the probity or integrity of an APA. That examination occurs at the time an undertaking is accepted. And it can be made the subject of inquiry where the Minister initiates the procedure to revoke an undertaking. In the present case the licensing power is being used for a collateral purpose. 31 The respondent Minister's submissions can be put shortly. It is contended that the language of subsection (4) is not amenable to the construction for which the applicant contends. The words "only if" in the formula "The Minister may approve the grant of the licence only if", have the meaning "but not otherwise": cf Macquarie Bank Ltd v Fociri Pty Ltd (1992) 7 ACSR 553 at 572. Read thus, the section has the plain meaning that the Minister has no power to approve the grant of a licence if certain circumstances obtain. That proposition does not have as a corollary that the Minister has no power to refuse a licence where those conditions do obtain. The conditions are liminal, not exclusive, in function. They act as a fetter on the power to approve a grant rather than as a condition prerequisite to approving a grant. 32 This construction, it is said, is consistent with the clear purposes of the HI Act. The Act has obvious concerns with the protection both of the public and of the revenue. It prohibits a number of arrangements between APAs and medical practitioners and medical entrepreneurs, these having sharp reflection in the offences contained in s 129AA and s 129AAA of the HI Act. The regulatory scheme involving the giving of undertakings and of licensing centres are emblematic of an oversight aimed at avoiding "inappropriate arrangements" to use the language of the Second Reading Speech. 33 For my own part, I "begin with the prima facie presumption that permissive or facultative expressions [such as "may"] operate according to their ordinary natural meaning": Ward v Williams, above, at 505. In the end, while accepting that there are some indications in the Act that are consistent with the word "may" in s 23DND(4) having a compulsory meaning, I am not satisfied that, as a matter of construction of that sub-section in its setting in the HI Act, it was intended to have such a meaning. The prima facie presumption has not been displaced. My reasons for this conclusion are as follows. 34 A very notable feature of Part IIA of the Act is the pervasive use of the terms "shall" and "shall not" and "may" and "must": see eg s 23DC, s 23DF, s 23DL, s 23DN, s 23DNA, s 23DNB and s 23DND. That usage would appear to be designed, with the respective word parings being used in counterpoint fashion. The patterns of language used in the Part are themselves strongly suggestive of the word "may" being used in its ordinary, permissive sense. Notwithstanding the apparent infelicity in form of s 23DND - and most notably its omission of a separate, express power to grant or refuse an approval - the drafting method employed in the Act with its corresponding indication of intended meaning, would probably be sufficient to justify rejection of the applicant's case. 35 When that method is coupled with contextual considerations, it is in my view reasonable to conclude that Parliament would not have intended to limit the Minister to consideration of the five conditions specified in s 23DND(4) and the one ground of refusal specified in s 23DND(6) when deciding whether to approve or to refuse the grant of a licence. Considered under the shadow of the clear policy objectives stated in the Second Reading Speech and evidenced in the procedures for undertakings and licensing, it seems to me unlikely that the Legislature would have intended to preclude inquiry by the Minister into the possible relationship between an APA and its lessor at the very point in the legislative scheme where the licensing of a collection centre is to occur. It is at that point in the legislative scheme that such actual relationships as the APA may have first become evident. 36 In saying this I do not suggest that the licensing process may not often be routine. But it is a point at which vigilance is able to be exercised and I am not satisfied that Parliament has intended that it cannot be so exercised. 37 I do not consider that the revocation provisions (s 23DNG(1)) assist in the construction of s 23DND(4). They merely carry forward in an intelligible way what is inherent in the "only if" formula of s 23DND(4). If a condition is not complied with the licence is to be revoked. If a condition had not been complied with at the time of application for approval, the licence would not have been granted. 38 Likewise I am not satisfied that the express refusal provision contained in s 23DND(6) carries with it the implication that no other ground of refusal exists (excepting the considerations listed in s 23DND(4)). The subsection can, I consider, properly be said to identify a specific instance where refusal can occur and for which Parliament has considered it appropriate to make express provision because of its obvious significance to the policies being pursued in the legislative scheme. Subsection (6) exemplifies a reason for refusal. It does not exhaust those reasons. 39 Having concluded that the language of sub-section (4) is permissive, not obligatory, I should go on to indicate that I am not thereby concluding that the scope of the power given is unlimited. Quite clearly, an APA that has had its undertaking accepted and that has secured an allocation of units of entitlement, is reasonably entitled to expect that licences will ordinarily be granted to it if it satisfies the s 23DND(4) conditions. The case with which I am concerned is one where, on the basis of information supplied to it by an APA, the Minister considers it reasonably necessary to inquire further. Whether, in light of that inquiry, approval is or is not given and whether such decision whatever it may be would be immune from challenge are not issues before me. 40 My having agreed with the construction of s 23DND(4) for which the respondent Minister contends does not end the matter. The question remains whether the information sought by the delegate relates to subject matter of which account properly could be taken by the Minister in deciding whether or not to approve the grant of a licence. 41 In oral submissions the applicant conceded that if the section was to be construed as the respondent Minister contended, then the inquiry as to whether the rental payable under Gribbles' new lease was at "normal commercial rates" (s 129AAA(4)(b)) would be permissible. But not so the inquiry as to "beneficial interests" in the lessor. The reason the latter inquiry is said to be impermissible is that it is not relevant to the commission of any possible or prospective offence under s 129AAA. 42 It should be borne in mind that the information is being sought at an inquiry stage before a decision is made and that while it may reasonably appear to have relevance at that stage, it may prove to be quite irrelevant in fact to the decision to be taken. For this reason some latitude should be given to the inquirer and to what properly could be considered as "reasonably necessary" (s 23DND(3)(b)) information for which the Minister may ask to enable a decision to be taken whether or not to approve the grant of a licence. It is noteworthy, though, that the request for the beneficial interests information was prompted by the response made by Gribbles to the delegate by letter of 22 September 2000 (set out above). 43 Because I am not satisfied that the beneficial ownership inquiry could not conceivably relate to an ingredient of what could constitute an offence under s 129AAA(4), I do not consider the inquiry to be an impermissible one. The factual possibilities the section could seemingly countenance are quite diverse and the language of the subsection itself is not altogether free from difficulty. Having said that, there is of course the question whether the information sought is within the knowledge and power of Gribbles. But that question does not presently arise. 44 I will order that the application be dismissed with costs. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.