JADWAN PTY LTD v MINISTER FOR HEALTH AND FAMILY SERVICES

REASONS FOR JUDGMENT The applicant Jadwan Pty Ltd ("Jadwan") seeks an order for review of the decision of the Minister for Health and Family Services ("the Minister") to revoke the approval of the Derwent Court Nursing Home ("Derwent Court") as an approved nursing home under s 40AA of the National Health Act 1953 (Cth) ("the Act"). Legislative background Commonwealth funding is available for nursing homes approved under the Act: s 40AA. By s 45D of the Act the Minister may, by written notice, determine standards ("Standards") to be observed in the provision of nursing home care in approved nursing homes. Section 40AA(6)(ck) of the Act provides that the approval of premises as an approved nursing home is subject to, among other things, a condition that the care provided in the home satisfies the Standards determined under s 45D of the Act. If the Minister considers that a condition applicable to an approved nursing home has not been complied with, he or she may revoke that approval: s 44(2)(b). Part 4 of the National Health Regulations ("the Regulations") provides for a system of Standards Review Panels ("Panels") in relation to approved nursing homes. By reg 8, the Minister may establish a Panel or Panels for each State and Territory in which nursing homes are situated. By reg 9 the functions of a Panel are to: "(a) review the nursing home care provided in nursing homes; and (b) compare the provision of that care with standards determined under section 45D of the Act; and (c) inquire into matters for the purposes of a function referred to in paragraph (a) or (b); and (d) report the findings of the Panel, and the reasons for those findings, to the Minister; and (e) make recommendations to the Minister resulting from its reports; and (f) perform these functions: (i) at the direction of the Minister; or (ii) on a referral by a proprietor." Reg 11 provides for the appointment by the Minister of potential Panel members for a State or Territory, each such appointment being for a term of three years. Persons appointed must come from one of three categories: · persons with at least 3 years' experience in senior positions in the management of nursing homes, aged persons' hostels or other establishments of that kind (reg 11(1)(a)); · persons who are members of not less than three years' standing in professional or industrial organisations of persons who practise, or are employed in, nursing homes etc (reg 11(1)(b)); or · persons who have knowledge of, and experience in, consumer protection in a health or social welfare field (reg 11(1)(c)). Reg 12(1) provides that a Panel is to consist of: (a) a Chairperson appointed by the Minister; (b) a person appointed under reg 11(1)(a) (i.e. experienced in management); (c) a person appointed under reg 11(1)(b) (i.e. member of professional or industrial organisation); (d) a person appointed under reg 11(1)(c) (i.e. experienced in consumer protection); and (e) an officer of the Department nominated by the Secretary. The Minister must be satisfied that a Chairperson has "experience at a professional or senior management level in, or broad knowledge of, health care administration or the provision of nursing home care or care in aged persons' hostels or other establishments of that kind": reg 12(3). Regulation 12(11) deals with vacancies. It provides: "The exercise of a power or the performance of a function of a Panel is not affected by a vacancy in its membership." Regulation 19 provides as to quorums: "At a meeting, the number of members constituting a quorum is the number of members constituting a majority of the members of the Panel." The Regulations also make provisions for termination of appointment (reg 13), remuneration and allowances (reg 14), leave of absence (reg 15), and disclosure of interests (reg 16). Division 3 of Part 4 (regs 17-23) makes provision for the conduct of meetings of Panels. Division 4 (regs 24-32) deals with the performance of functions by Panels, including a direction that they are to act informally and with all possible expedition, and may inform themselves as they think fit and consult such persons as they think fit (reg 24). To return to the Act, s 44(1) provides that the Minister may at any time review the approval of a nursing home. If the Minister considers that the nature of an approved nursing home has changed since approval was given, or a condition applicable to the approved nursing home has not been complied with, he or she may vary, revoke or suspend the approval "as the Minister considers justified in the circumstances of the case": s 44(2). Section 44(2A) provides that the Minister may give the proprietor of an approved nursing home written notice of his or her intention to vary the nature of the approval or revoke or suspend the approval. Section 44 does not otherwise specify any procedure by which the Minister should exercise the powers granted by the section. It does not expressly mention reference to a Panel. By contrast, under s 45E(1) of the Act the Minister may declare that a nursing home does not satisfy the Standards determined under s 45D. The consequence of such a declaration is that the Minister may determine that a Commonwealth benefit is not payable to the proprietor in respect of a patient. This only applies prospectively, that is in respect of patients admitted after the determination: s 45E(2). It is thus a less serious sanction than revocation of approval. By s 45E(10) the Minister cannot make a s 45E(1) declaration unless a Panel has been established in the State in which the nursing home is situated and the requirements of any regulations made for the purposes of the subsection have been satisfied. The Regulations by reg 26 make provision for the Panel to act on direction by the Minister to perform the functions specified in reg 9(a) to (d) and by reg 27 on a reference from a nursing home proprietor who has been served under s 45E of the Act with a notice of non-compliance with the Standards. The Chairperson and Panel must then follow the steps prescribed by reg 28: "28 (1) On receipt by a Panel of: (a) a direction under regulation 26; or (b) a reference under regulation 27; in respect of a nursing home, the Chairperson must, as soon as practicable, inform the proprietor by notice in writing that the Panel will perform its functions in relation to the direction or reference. (2) A notice given under subregulation (1) must include statements to the following effect: (a) that the proprietor may, within 21 days of being given the notice, give the Panel documents or other material to which it must have regard in the performance of its functions in respect of the nursing home; and (b) that the proprietor will have the opportunity: (i) to inspect any other document or material to which the Panel proposes to have regard in reaching a decision; and (ii) to make submissions in relation to the other document or material. (3) If, at the end of the period referred to in paragraph (2)(a), a proprietor has not given a Panel a document or other material referred to in that paragraph, the Panel may proceed in respect of the nursing home in accordance with this Part." Revocation of Derwent Court's approval Jadwan is the proprietor of Derwent Court which is situated in Dynnyrne, a suburb of Hobart. On 2 December 1996 a Panel ("the first Panel") chaired by Ms Susan Parr reported to the Minister in respect of Derwent Court. The first Panel found various deficiencies in relation to the standard of care being provided. On 3 February 1997 Derwent Court was declared under s 45E of the Act as not satisfying the Standards. By a letter dated 1 April 1997, a delegate of the Minister advised Jadwan of her intention to ask "the Standards Review Panel of Tasmania" to again review the care provided at Derwent Court, compare that care with the Standards, inquire specifically into the policies, processes and practices at the home, inquire as to whether the actions set out in submissions made by Jadwan will result in sustained improvements, and report to the Minister on its findings. The Minister appointed Dr Penelope Flett as Chairperson of a Panel ("the second Panel"). After inspecting Derwent Court and conducting interviews the second Panel reported to the Minister on 26 May 1997. By letter dated 20 July 1997 the Minister (by her delegate) notified Jadwan of her intention to revoke the approval of Derwent Court under s 44(2)(b) of the Act. On 6 August 1997 Jadwan was notified of the actual revocation. Accompanying the Minister's letter of 20 July was a detailed Statement of Reasons ("the Statement"). The Statement includes findings that "very serious deficiencies in care measured against the Gazetted Standards" existed at Derwent Court and that "appropriate substantial action to remedy these deficiencies has not been, and is not in prospect of being, taken". Among the "Evidence on which the findings are based" are said to be the reports of the first Panel and the second Panel. The Statement then details a number of "Descriptive Standards". In respect of some of these, the Statement records a finding that urgent action was required, but had not been taken and that the second Panel confirmed that finding. In some instances the Statement records an observation of the second Panel, e.g. that it noted "a lack of understanding about the role of allied health professionals such as occupational therapists and speech pathologists in caring for the frail aged". On 1 September 1997 Jadwan's solicitors requested pursuant to s 105AAB(2) a review of the decision to revoke the approval. By letter dated 13 October 1997 a delegate of the Minister notified Jadwan of his decision to affirm the decision to revoke Jadwan's approval. Jadwan then appealed those decisions to the Administrative Appeals Tribunal and sought review in this Court under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the AD(JR) Act"). The Tribunal proceeding has been adjourned pending the outcome of this application. It is accepted that nothing turns on the question whether the appropriate decision to review is the revocation on 6 August 1997 or the affirmation on 13 October 1997. Discretion under s 10(2)(a)(ii) AD(JR) Act Counsel for the Minister submitted that the Court should exercise its discretion under s 10(2)(a)(ii) of the AD(JR) Act and allow the legal issues to be determined in the AAT proceedings. I do not accept this submission. The AAT proceeding involves substantial factual disputes. Any legal issues arising therein could of course be appealed to this Court, thus involving further delay and expense. The legal issues arising in the present case are substantial and important. They have been fully and competently argued. It is better that the Court deal with them now. Grounds of Application Jadwan bases its application for review on two grounds. First, it claims that the procedures that were required by law to be observed in connection with the making of the decision to revoke approval were not observed (AD(JR) Act s 5(1)(b)), in that the Panel was not properly constituted and the Chairperson of the Panel failed to give Jadwan the notice required under the Regulations. Secondly, it claims that the decision involved an error of law (AD((JR) Act s 5(1)(f)) in relation to the Minister's interpretation and application of the Standards. Failure to observe procedures required by law (a) Panel not properly constituted As mentioned above, a Panel consists of five members. However, the second Panel which reported on Derwent Court only consisted of three members, who were said by the Minister to come within the following respective categories: (a) Dr Penelope Flett (Chairperson - reg 12(1)(a)); (b) Ms Janet Cooper (member of a professional or industrial organisation - regs 11(1)(b) and 12(1)(c)); and (c) Mrs Ethel Guy (a person having knowledge or experience in consumer protection - regs 11(1)(c) and 12(1)(d)). Thus the Panel lacked a person with management experience as required by regs 11(1)(a) and 12(1)(b). An affidavit filed on behalf of the Minister stated that the Minister did not appoint such a person because the "only person available from the pool of potential members about whom there would have been no perception of conflict of interest was not available due to ill health". Further, the Panel lacked an officer of the Department nominated by the Secretary as required by reg 12(1)(e). According to the same affidavit, the Secretary did not nominate a Department representative because "there was a concern that Jadwan maintained an apprehension that the Department was biased against it". However counsel for the Minister did not argue that any non-compliance with the Regulations was to be excused by reason of necessity. Of the three members who were appointed, Jadwan claims that Ms Cooper was ineligible for appointment. Counsel for the Minister submitted any deficiency arising from the absence of two members from the Panel was cured by reg 12(11). He also referred to s 23(b) of the Acts Interpretation Act 1901 (Cth), which provides that in any Act or regulation words in the singular number include the plural, unless a contrary intention is indicated. He relied on that provision to counter Jadwan's argument that reg 12(11) only refers to "a vacancy" rather than multiple vacancies. Counsel for Jadwan in turn argued that the Regulations have manifested a contrary intention. I do not need to resolve these arguments. In my opinion, there was not in the circumstances of this case any "vacancy" or "vacancies". The term "vacancy" in this context implies that a position was once filled, and has then subsequently become vacant, as for example upon death or the expiry of a fixed term. That was not the case here. Only three members were appointed to the Panel in the first place. In any case, I agree with Jadwan that Ms Cooper was ineligible for appointment to the Panel. Ms Cooper was purportedly appointed as a member of at least three years' standing in a professional or industrial organisation of nursing home employees pursuant to regs 11(1)(b) and 12(1)(c) of the Regulations. It is not suggested that at any material time Ms Cooper was a member of a union or similar organisation which represented employees of nursing homes, aged persons' hostels or other establishments of that kind. Nor was she a member of any professional organisation of persons who practise in, or are employed in, such institutions. In fact Ms Cooper, after obtaining nursing qualifications, studied law and became a legal practitioner. At the time with which this case is concerned she was the Tasmanian District Registrar of the Federal Court. Counsel for the Minister argued that Ms Cooper's registration as a nurse since 1976 with the Nursing Board of Tasmania was equivalent to being a member of a professional or industrial organisation. I do not agree. As a matter of ordinary language, registration as a nurse does not of itself involve membership of any organisation; it merely entitles the person registered to carry on that profession: see generally Nursing Act 1995 (Tas). The clear intention of regs 11 and 12 is to ensure that Panel members represent a variety of categories of persons involved in aged persons' care. The reference in reg 11(1)(b) to membership of professional or industrial organisations indicates a statutory criterion not confined to professional or vocational qualifications. The person sought by reg 11(1)(b) is not merely one who has particular expertise or experience as an individual. Rather, the person is also to be a member of a specified kind of organisation and thus one who might be expected to contribute to a Panel's work the values and collective experience of such an organisation. Mere registration as a nurse does not meet that criterion. A registered nurse could be involved in, for example, nursing home management or proprietorship, or even, as in fact was the case here, an occupation quite unrelated to aged persons' care. Counsel for the Minister concedes that if I were to find, as I have, that the second Panel only consisted of two properly appointed members, it was not properly constituted. It is therefore not necessary to reach any conclusion on the argument that the combined effect of regs 12(11) and 19 (quorum) is that a Panel can be lawfully constituted where only three members have been appointed. (b) Inadequate notice Jadwan also relies upon the failure of the Chairperson of the second Panel to give it notice as required by reg 28 (see above). While counsel for the Minister appeared to concede that such notice was not given, he contended that the 1 April 1997 letter from the Minister's delegate stating her intention to ask the second Panel to review the care at the Nursing Home, together with a letter from the second Panel Chairperson dated 6 May 1997 inviting a director of Jadwan to meet with the Panel, were tantamount to notice under reg 28. I do not agree. Whether Jadwan was in fact given an opportunity to put its case to the second Panel is not to the point. Regulation 28 sets out a clear procedure for the Panel Chairperson to follow upon being directed to review nursing home care, and that procedure was not followed. Consequence of failure to observe procedures required by law I now need to determine the consequence of the failures to follow the procedures in relation to the appointment of the second Panel and giving of notice pursuant to reg 28. As mentioned above, the revocation power contained in s 44 of the Act does not expressly require the Minister to seek a report or recommendation from a Panel. The Minister argues that s 44 confers a "free standing" power which is not affected by defective procedures in relation to the operation of a Panel. However in this case the Minister did seek a report from the second Panel, and clearly relied upon that report in making her decision. The Minister relied not only on what the second Panel said but on the fact that a Panel said it. There was no legal inhibition on the Minister seeking the advice of a Panel and in the circumstances it was, administratively speaking, an appropriate and sensible course. However the second Panel was not constituted as the law requires and did not follow the procedures required by law for Panels. As a consequence, the Minister's decision to revoke was in my opinion infected by legal error. Section 5(1)(b) of the AD(JR) Act provides for judicial review of administrative decisions on the ground that: "procedures that were required by law to be observed in connection with the making of the decision were not observed." It can properly be said in my opinion that the procedures required to be followed in relation to the constitution and functioning of a Panel are procedures "in connection with" the Minister's decision to revoke approval for Derwent Court. While a Panel report is not a necessary precondition to the Minister's decision to revoke, once that route was selected it became something which related to, or had a "connection with" the Minister's decision to revoke approval. When the Minister chose to use the Panel procedure she was "required by law" to use a Panel constituted in accordance with the Regulations and to follow the procedure therein prescribed. The Panel is a mechanism carefully designed to provide a contribution not only of differing expertise but differing values. For example, a Panel composed of five nursing home proprietors or five nursing union members would lack the legitimacy the law intends. However a failure to observe a procedure required by law will not necessarily invalidate a decision. The failure must have been sufficiently serious. This point is sometimes made by reference to the distinction between "mandatory" and "directory" procedures. However, the question is really one of statutory construction: can the object of the statute be achieved if the procedure is not followed? (see MA Allars, Introduction to Australian Administrative Law (1990) at 173-174). In my view, the object of the Act and its Regulations cannot be achieved if the procedure specified in regs 11 and 12 in relation to the appointment of five members to the Panel is not observed. The clear intention of regs 11 and 12 is to ensure that Panel members represent a variety of categories of persons involved in aged persons' care. In the present case the law required a Panel to consist of five persons with specifically defined qualifications. Only two such persons were appointed to the second Panel. Further, a person without the relevant qualifications was appointed and participated in the second Panel's deliberations and report. The failure to give Jadwan notice in accordance with reg 28 adds weight to the conclusion that the Minister's decision should not stand. Error of law Jadwan also claims that the Minister erred in law in relation to her interpretation and application of the Standards. First, Jadwan claims that the Minister determined whether or not Derwent Court satisfied the requirements of the standards to be observed in the provision of nursing home care otherwise than by reference to the Standards. As mentioned above, the Minister has power to set standards under s 45D of the Act, and compliance with those Standards is a condition of the approval of a nursing home under s 45AA(6)(ck) of the Act. Jadwan says that rather than relying on the Standards, the Minister referred to a booklet entitled "Living in a Nursing Home". That booklet was developed by government in consultation with industry to facilitate the administration of the statutory scheme relating to regulation of nursing homes. I do not believe that the Minister erred in law in referring to the booklet "Living in a Nursing Home". While the notice of intention to revoke and the Statement for revocation make reference to the standards specified in the booklet, it is clear that the delegate had the Standards in mind when making the decision to revoke. The Statement explicitly refers to the Standards. The decision maker has done no more than use the booklet as a guide in fulfilling her statutory role, in much the same way as a judge might refer to text books or journal articles in construing a statute. Finally, Jadwan argues that, if the Minister was entitled to have regard to the standards specified in the booklet, she erred in law in that she misdirected herself as to their correct meaning and/or requirements. I do not see how such an inquiry could be anything other than a review of the factual basis of the decision. It is not an error of law. Orders There will be a declaration that the decision of the Minister to revoke the approval of the Nursing Home is void and an order that the Minister pay Jadwan's costs, including reserved costs.