Minister for Health & Aged Care v Harrington Associates Ltd

The Proceedings 1 On 21 March 1999, a two page advertisement appeared in the mass circulation newspaper in Sydney, the Sunday Telegraph, advertising "Silver Cross™ Serious Illness & Crisis Cover". Silver Cross was described in the advertisement as "a totally new and more affordable insurance that pays you first so that you can pay the bills". The advertisement stated as follows: "Silver Cross totally and comprehensively covers ALL serious illnesses and accidents. No ifs. No buts. And most importantly, NO GAPS." Readers were invited to seek further information from Silver Cross at a Locked Bag address or by fax. The advertisement also recorded that Silver Cross was "Underwritten by certain syndicates at LLOYD'S". Similar advertisements were placed in other Sunday newspapers in New South Wales and Victoria. 2 A news item in the Sunday Telegraph of 21 March 1999, perhaps not altogether unconnected with the advertisement in that newspaper, reported that a "revolutionary health scheme" promised to cut the cost of private health insurance. According to the item, the new product was to be launched in Sydney the following day, 22 March 1999. The report quoted "Silver Cross director Peter Woodcock" as saying that the scheme came under the "Insurance Act" and not the "Health Act". 3 In consequence of this publicity, the Department of Health and Aged Care ("the Department") and, later, the Australian Government Solicitor ("AGS") requested the first respondent to provide copies of the policy documents relating to the Silver Cross product. The correspondence suggested that the first respondent may have infringed s 67(1) of the National Health Act 1953 (Cth) ("National Health Act"), which prohibits a person, other than a registered organisation, from carrying on "health insurance business". 4 Responses to the various requests were made on the letterheads of both the first and second respondents, but neither provided the documents sought by or on behalf of the Department. 5 The Minister thereupon commenced proceedings against the respondents, pursuant to Federal Court Rules ("FCR") O 15A, r 6, seeking preliminary discovery of "the following documents relating to the Silver Cross product ('the product'): (a) any policy or policies of insurance; (b) any contract or contracts of insurance; and (c) any document in its possession custody or control relating to the product marketed by the first and/or second Respondent which defines, describes and/or records: (i) an insured event (ii) the terms upon which the product or the first and/or second Respondent have been underwritten by any person." 6 The Minister's application was filed on 19 April 1999. On that date, the Minister was given leave to abridge the time for service, on the basis that the matter was urgent, having regard to the possible effect of any breach of the National Health Act upon customers who had taken out, or might be considering taking out, the Silver Cross insurance. The hearing of the application took place on 22 and 28 April 1999. The Respondents 7 The evidence indicates that the first respondent is an unlisted public company, subject to strike-off action. Mr Woodcock is recorded as a director of the first respondent. The second respondent is registered as a proprietary company. Mr Woodcock is also a director of this company. In correspondence signed by Mr Woodcock on behalf of the first respondent, the second respondent was described as a subsidiary of the first respondent responsible for marketing the Silver Cross product. The evidence did not explore the nature or status of the action apparently instituted to strike off the first respondent. FCR O 15A, r 6 8 FCR O 15A, r 6 provides as follows: "(6) Where - (a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained; (b) after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and (c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision- the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c)." National Health Act and Regulations 9 Section 67(1) of the National Health Act provides that: "[a] person (other than a registered organization) shall not carry on health insurance business." A person contravening s 67(1) is guilty of an offence: s 67(2). 10 Section 67A(1) of the National Health Act provides as follows: "(1) Where, on the application of the Minister...the Federal Court of Australia is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of subsection 67(1), the Court may grant an injunction in such terms as the Court determines to be appropriate." Section 67A(2) empowers the Court to grant an interim injunction, pending determination of an application under s 67A(1). Section 67A has been construed as conferring jurisdiction on the Court to hear and determine an application for an injunction to restrain conduct in breach of s 67(1): Australian Health Insurance Association Ltd v Esso Australia Ltd (1993) 41 FCR 450 (FC), at 460, per Black CJ. 11 The expression "health insurance business" is defined in s 67(4) of the National Health Act to mean "the business of undertaking liability, by way of insurance: (a) with respect to loss arising out of a liability to pay fees or charges in relation to the provision in Australia of hospital treatment or an ancillary health benefit; or (ab) with respect to the happening of an occurrence that ordinarily requires the provision of hospital treatment or relevant health services, whether or not payment of benefits to the insured is dependent upon one or more of the following: (i) such treatment or services being provided to the insured; (ii) the insured requiring such treatment or services; (iii) fees or charges being payable by the insured in relation to the provision of such treatment or services; or (b) with respect to, or with respect to the happening of an occurrence connected with, the provision in Australia of hospital treatment or an ancillary health benefit; but does not include (c) accident and sickness insurance business; (d) liability insurance business; or (e) business of a kind prescribed for the purposes of this paragraph." (Emphasis added.) "Relevant health services" is defined in s 67(4) to include medical, surgical, diagnostic, nursing and similar services or treatment. 12 The definition of "health insurance business" excludes "accident and sickness insurance business" (par (c)). The latter expression is defined in s 67(4) of the National Health Act to mean "the business of undertaking liability, by way of insurance, to pay a lump sum, or to make periodic payments, on the happening of a personal accident, disease or sickness, but does not include: (a) ...; or (b) business of a kind prescribed for the purposes of this paragraph." 13 Regulation 47(1) of the National Health Regulations 1953 (Cth) ("National Health Regulations") prescribes certain kinds of businesses which are excluded from the definition of "accident and sickness insurance business". The businesses prescribed include the following: "(b) the business of undertaking liability, by way of insurance, to pay a lump sum, or to make periodic payments, on the happening of a personal accident, disease or sickness, where the business includes the offer, promotion or offer and promotion of a policy (or a group of policies) in which: (i) the amount of benefit varies according to the kind of insured event that occurs; and (ii) the insured event is defined in terms that involve the provision of hospital treatment or relevant health services; whether or not the insurer's liability is in any way contingent on any treatment or services being provided to the insured, or on the payment of fees or charges for any treatment or services." 14 Regulation 48(2A) of the National Health Regulations provides that, for the purposes of par (e) of the definition of "health insurance business" in s 67(4) of the National Health Act: "health insurance business does not include the business of undertaking liability by way of insurance for: ... (f) benefits payable: (i) because of an event defined in the policy; and (ii) in a lump sum or in parts; and (iii) if the total benefit payable for each event defined in the policy is at least $10,000." 15 One of the principles underlying this regulatory framework is that of community rating, whereby all members of an insured group must be charged the same premiums regardless of personal characteristics such as age, sex, or health status: see Explanatory Statement accompanying Statutory Rules 1997, No 133; Australian Health Insurance Association Ltd v Esso Australia Ltd (1993) 41 FCR 450 (FC), at 457, per Black CJ. Another principle is that those offering health insurance should have the financial resources to meet any claims: AHIA v Esso, at 458. Background to the Application 16 The publicity accorded to Silver Cross on 21 March 1996 prompted the Department to write to the first respondent on 23 March 1999, asking for a "copy of the proposed Silver Cross product" to be supplied by the close of business on that day. The letter noted that only organisations registered under the National Health Act could carry on health insurance business in Australia. The Department repeated its request on 24 March 1999, in letters directed both to "Silver Cross" and to the first respondent. 17 On 31 March 1999, the Department received a written response to its letter of 23 March 1999 from the first respondent, signed by Mr Woodcock. The response, which was dated 23 March 1999, asserted that Silver Cross was a general insurance cover and did "not engage in 'health insurance business'". It also expressed the view, without clear explanation, that the issues raised under the National Health Act were "not relevant". No documents were provided. 18 In the meantime, an officer of the Department filled in a coupon contained in the Sunday Telegraph advertisement and forwarded it to the address provided. On 30 March 1999, the officer received a brochure under cover of a letter from a person described as the General Manager of Silver Cross. The brochure included this passage: "Once the medical specialist diagnoses and confirms that your condition needs to be treated you receive an upfront lump sum payment that covers you completely - no gaps. Also, if your condition turns out to be more serious than the medical specialist originally diagnosed then you will receive a higher benefit." The brochure also stated that Silver Cross was "marketed by" the second respondent and was "underwritten by certain Syndicates at LLOYD'S". 19 The brochure included a form that the customer was invited to complete and return to Silver Cross. The form contained a declaration by the customer that the answers given to the questions were true and correct and that no information had been withheld "likely to affect the decision of the Company" as to "My/Our eligibility for insurance". The form stated that the declaration was to be the "basis of the contract between the Company and Myself/Ourselves". The customer also agreed "to accept the Company's policy subject to terms and conditions therein". The form did not identify "the Company". 20 Notwithstanding that the Department had already obtained a copy of the brochure, the AGS, on 6 April 1999, wrote to the first respondent requesting the information made available to people returning the coupon in the Sunday Telegraph. The AGS's letter stated that consideration was being given to an application for an injunction under the National Health Act. 21 The first respondent replied to this letter on 8 April 1999. The reply gave no substantive information, but requested that the AGS identify the provisions of the National Health Act that it claimed had been breached. The letter concluded with this unhelpful, if not disingenuous, statement: "Meanwhile, we regret that due to the need for a further print run on material, which has just been ordered, we are unable, at this juncture, to provide you with a sample." 22 In a further letter of 12 April 1999 addressed to the first respondent, the AGS set out the relevant provisions of the National Health Act and the National Health Regulations. The letter requested a copy of the "policy documents that relate to the Silver Cross product, and any other documentation that defines the 'insured event'". The letter advised that, in the event of non-compliance, proceedings might be taken under FCR, O 15A, r 6 for preliminary discovery. 23 The first respondent replied by letter, signed by Mr Woodcock, on 13 April 1999. The letter referred to "the Silver Cross product being marketed by our subsidiary company" and enclosed a copy of the brochure already in the possession of the Department. It did not provide any policy documents. As already noted, the proceedings were commenced on 19 April 1999. 24 In the course of the first day of the hearing (22 April 1999), the solicitor for the respondents handed three documents to a solicitor from the AGS. The documents were not accompanied by any covering letter. The respondents did not authenticate the documents or indicate whether or not they comprised all those sought by the Minister in his application. The three documents (which were subsequently put into evidence by the Minister) are as follows: · a document described as "Lloyd's certificate of insurance effected through Global Underwriting Services Pty Ltd"; · a document entitled "Silver Cross Certificate Wording"; and · a document entitled "Silver Cross Schedule of Benefits". Each document is in a printed form, but has not been completed. General Observations 25 Two general observations should be made at the outset. 26 First, it is doubtless correct, as Lindgren J observed in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd, unreported, 24 May 1996, that the questions posed by FCR, O 15A, r 6 are to be answered in the context of an adversary system, in which a proposed respondent is ordinarily entitled to withhold its evidence prior to the commencement of proceedings. Nonetheless, a party asked to produce documents for the purpose of enabling another party to consider whether it has a cause of action is not necessarily acting in an appropriate or even responsible manner if it refuses or ignores the request. In this case, having regard to the obvious public interest in resolving swiftly the question of the possible application of the National Health Act to the Silver Cross cover, it is difficult to understand why the respondents were so coy about making available the documents requested. Except for very limited documentary evidence, the respondents led no evidence and accordingly gave no explanation for their unwillingness to produce the Silver Cross policy documents prior to the hearing. 27 Of course, the comment in the previous paragraph in no way diminishes the need for the Minister in these proceedings to satisfy each of the conditions specified in O 15A, r 6 before an order for preliminary discovery can be made in his favour. It is relevant to bear in mind, however, that O 15A, r 6 is to be construed beneficially. In Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728, Burchett J said this (at 733): "It is no answer to the applicant's application under r 6 to say that the proceeding is in the nature of a fishing expedition.... Rule 6 is designed to enable the applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent - that is, to 'fish' in the old sense.... It would be unfortunate if a rule designed to amplify the court's power to penetrate obscurities and uncertainties in the interests of justice were to be weakened by restrictive and unnecessary glosses. I think the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow. The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case." (Citations omitted.) This approach has received general acceptance in the Court: see Glowatzky v Insultech Group Pty Ltd, unreported, 2 October 1997, Branson J, at 8-9, and authorities cited there.