(a) No adequate notice of significant matters in s 93 referral and report
129 NHDS's complaint under the first limb is that it was not provided with the following information prior to the Director's decision to make the s 93 referral:
(a) how any of the 15 practitioners mentioned in the s 89C report or any of the 56 practitioners mentioned in the s 93 report may have engaged in conduct that constituted inappropriate practice during the review period;
(b) how any of those practitioners may have been employed by NHDS; and
(c) how NHDS may have knowingly, recklessly or negligently caused or permitted any inappropriate conduct of each of those practitioners.
130 NHDS complains that it was only provided with generalised information without it having any way of knowing how that information related to any of the particular practitioners mentioned in either of those reports or the services rendered. It submitted that it was procedurally unfair for the Director to lead NHDS to believe that the 15 unidentified practitioners in the s 89C report would be the subject of the potential referral, but then identify 56 different practitioners in both the s 93 referral and related report. It complains that it was denied an opportunity to make submissions to the Director as to whether or not it was appropriate for the Director to make a referral with specific reference to those 56 practitioners and the services they had rendered as MBS item 597.
131 Unsurprisingly, there was no serious contest as to the relevant legal principles concerning procedural fairness. The Director accepted that the statutory scheme imposed various procedural fairness obligations on her and that the content of those obligations had to be determined in the context of the statutory scheme. The Director submitted, however, that, in determining the content of procedural fairness obligations, it was relevant to take into account that a s 93 referral occurs at a relatively early stage of the review process and prior to an investigation of whether inappropriate practice has in fact occurred, not to mention well before the imposition of any sanction. It was submitted that a s 93 referral "lacks any quality of finality" and "is not a substantive determination".
132 While it is relevant to take into account the different tiers of decision-making under the PSR Scheme, I consider that the Director has overstated the relevance of that matter in determining the content of procedural fairness requirements in tier 2. Different considerations may arise with a multi-staged decision making process which, unlike the legislative regime here, does not contain its own rich supply of procedural fairness requirements. It is also relevant to take into account the essentially investigative nature of tier 2 and that the person under review will have a right to be heard before the Committee if a referral is made under s 93. Of particular relevance and significance, however, is the Director's obligation under s 89C to make a decision under s 91(1) to take no further action in relation to the review, rather than enter into a s 92 agreement (which was not an option in the case of NHDS) or make a referral under s 93.
133 The point is well illustrated by a decision of the Victorian Court of Appeal in Byrne v Marles [2008] VSCA 78; 27 VR 612, which the Court drew to the parties' attention. There, Nettle JA (with whom Dodds-Streeton JA and Coghlan AJA agreed) highlighted the difference between the circumstances in Cornall v AB (A Solicitor) [1995] 1 VR 372 and the circumstances in 2004 after amendments were made to the State legislation regulating the legal profession in Victoria. His Honour made the following observations at [85] to [87], which are apposite to the position under the PSR Scheme (footnotes omitted and emphasis added):
85. Now, however, because the Commissioner is compelled by s 4.2.8 of the 2004 Act to give notice of the complaint to the solicitor as soon as practicable after receipt, and to make a preliminary decision whether to dismiss the complaint summarily before going further with the investigation, it appears to me that the statute evinces an intention that the Commissioner should give notice of a complaint to the solicitor more or less immediately after receipt, and then take into account anything about the complaint which the solicitor may wish to submit, before determining whether to dismiss the complaint summarily or to go on to investigate it further or to refer it to the Institute for investigation. Otherwise, why provide, as s 4.2.8 so clearly does provide, that the Commissioner must notify the solicitor of the complaint as soon as practicable after receipt?
86. As has been seen, the essence of the reasoning of the court in Cornall v AB was that, because the function of the Secretary under the 1958 legislation did not involve any more than satisfaction as to facts sufficient to form a prima facie case, there was little practical merit in providing the solicitor with an opportunity to make submissions or adduce facts. The solicitor's right to natural justice was said to be adequately protected by his right to be heard before the tribunal which would decide the charge. Now, however, the position under the 2004 Act appears to be such that the Commissioner has an independent obligation under s 4.2.10 to determine whether a complaint is to be dismissed summarily or not proceeded with further. If so, there is practical merit in providing the solicitor with an opportunity to make a submission or adduce facts to the Commissioner before the Commissioner determines that the complaint is a disciplinary complaint which needs be investigated. The right to be heard at that stage affords the solicitor an opportunity to head off the complaint in limine, by persuading the Commissioner not to treat it as a disciplinary complaint or to dismiss it or not proceed with it under s 4.2.10. And such a right to be heard is essentially different to any which the solicitor may later be accorded by the Institute or the Board.
87. In the result, it appears to me as a matter of statutory construction that the structure and operation of Part 4.2 imply an expectation that the Commissioner will give the solicitor a right to be heard at the outset before making the preliminary decision for which s 4.2.10 provides. The position is analogous to Ainsworth and Johns.
134 These observations are directly pertinent to the proceeding here having regard to the terms and effect of s 89C(1) and with its particular reference to s 91. A right to be heard by the person under review affords that person an opportunity to persuade the Director to terminate the complaint at a relatively early stage. That right is different from the rights which the person under the review who is the subject of a subsequent referral has before the Committee.
135 I shall now explain why I consider that NHDS was denied procedural fairness in respect of the s 93 referral and the related report.
136 As has been emphasised above, a not insignificant part of the s 89C report refers to findings made by the Director in respect of 15 NHDS practitioners. Their conduct provided an important basis (even if it was not the only basis) for the Director's decision that she would not make a decision under s 91 to take no further action in relation to the review and that, instead, she would proceed to determine which of the available courses of action specified in s 89C(2) she might take in respect of NHDS, having regard to any written submissions made by NHDS within the prescribed timetable about those matters.
137 It is plain that NHDS understood that the Director's continuing review related, at least in part, to the conduct of those 15 practitioners. This is reflected in the contents of NHDS's written submissions dated 30 May 2019 (see [102] ff above).
138 Given the wording of the s 89C report, I accept NHDS's submission that it did not, and could not, reasonably have contemplated the possibility that the Director would make a referral in respect of the 56 NHDS practitioners identified in Item 2 to the referral, who were entirely separate to those 15 practitioners, and whose conduct as reflected in the Medicare data was also taken into account by the Director. The Director did not dispute NHDS's contention in the proceeding that the data provided by Medicare relating to total services billed as MBS items 597, 598, 599 and 600 by NHDS practitioners included the 56 practitioners identified in Item 2 of the referral. The Director gave NHDS no prior notice that she intended to rely upon the conduct of those 56 practitioners in determining that their conduct should be the focus of the s 93 referral.
139 Thus NHDS was denied a prior opportunity to seek to persuade the Director that she could not reasonably be satisfied that the conduct of these 56 practitioners involved inappropriate practice in respect of MBS item 597 and that the review should be terminated.
140 I also accept NHDS's contention that the submissions it made, and was entitled to make, in accordance with s 89C(1)(b)(ii) would not necessarily have been the same if it had been given proper notice of the Director's intention to rely upon the conduct of the 56 NHDS practitioners specified in Item 2 of the s 93 referral.
141 It is important to bear in mind that there were three elements of "inappropriate practice" which the Director relied upon in making the s 93 referral, namely:
(a) knowingly, recklessly, negligently causing or permitting certain conduct;
(b) which included the conduct of one or more practitioners employed by NHDS; and
(c) the conduct constituted "inappropriate practice" as defined in s 82.
142 Procedural fairness obliged the Director to provide NHDS with a reasonable opportunity to address those three elements, which required the Director to provide NHDS with appropriate particulars and/or information in respect of those three matters with reference to the 56 identified NHDS practitioners. There is an obvious connection between the provision of a s 89C report and the obligation of the Director to invite submissions as to the future course of action, as required by s 89C(1)(b)(ii). Having regard to the contents of the s 89C report, NHDS reasonably believed that the conduct of the other 15 NHDS practitioners formed an important part of the Director's decision not to terminate the review at that point and that their conduct would also be relevant in determining what future course of action the Director might take. That this was NHDS's belief is abundantly clear by the terms of its 30 May 2019 submissions (see [102] ff above).
143 There is also a plain connection between the making of those submissions and the effect they may have on the Director's decision under s 93, as is emphasised by the explicit obligation on the Director under s 89C(2) to take into account those submissions in deciding whether or not to make a referral to a Committee.
144 The Director effectively shifted the goal posts after receiving NHDS's submissions so as to bring to the forefront of the Director's further deliberations the conduct of 56 other NHDS practitioners. The Director took their conduct into account (as well as other matters, including the conduct of the other 15 NHDS practitioners), in referring the matter to the Committee. NHDS was given no notice of this significant change in the focal point of the review. The statutory requirements of procedural fairness under the PSR Scheme would be seriously compromised if the Director proceeded as she has done without giving NHDS proper notice and relevant information about the significant change in direction she had taken.
145 As NHDS pointed out at [28] of its written submissions in the proceeding, disclosing that it is alleged, for example, that "the person knowingly permitted their employee Dr A to engage in such-and-such inappropriate practice says nothing as to whether Dr B engaged in that or some other inappropriate practice, whether this was knowingly permitted by the person, or whether Dr B was employed by them". This proposition is patently correct.
146 As noted, the Director did not submit that the PSR Scheme in the HI Act constituted an exhaustive procedural code which precluded the implication of any additional requirements of procedural fairness. Nor would I have accepted any such submission. The richness of the statutory procedural requirements in the multi-stage process under the PSR Scheme are not exhaustive. In particular, the procedural fairness rights and obligations under tier three do not deny the need for procedural fairness at the tier two level. The Director has a statutory power under s 91 at that stage to terminate a review and not make a referral under s 93.
147 The regime in force in 1989 (i.e. well before the PSR Scheme was first inserted in 1994), and which was the subject of the Full Court's decision in Edelsten v Health Insurance Commission (1990) 27 FCR 56; 96 ALR 673, was notably different from that which was introduced in 1994 and later by the 2002 Amendment Act. It is that regime which was in force at the relevant time for the purpose of the current proceeding. One of the significant changes was the introduction of the four tiers and the enhancement of the Director's powers under tier 2, including the power to terminate a review in accordance with s 91. In particular, there was no provision such as s 91 under that previous regime. The significance of such a provision in a multi-stage decision-making process is highlighted by what was said analogously in Byrne, as referred to at [133] above.
148 I also accept NHDS's submission that the Director may have reached a different decision on the matter had NHDS been afforded the opportunity to respond to particulars or information concerning the 56 practitioners, including as to whether a Committee might reasonably find that those 56 practitioners had engaged in conduct that constituted inappropriate practice (with particular reference to the three matters identified in [10(a)] of the s 93 report).
149 I reject the Director's submission that the procedural unfairness was not material, relying upon cases such as Minister for Immigration and Border Protection v SZMTA [2019] HCA 3; 264 CLR 421 at [4], [41] and [93] and Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1 at [37] per Gleeson CJ regarding the concern of the law of procedural fairness being "to avoid practical injustice".
150 In SZMTA, the plurality (Bell, Gageler and Keane JJ) said the following in respect of the requirement of materiality in the case of an undisclosed notification (at [45] and [46]):
45. Materiality, whether of a breach of procedural fairness in the case of an undisclosed notification or of a breach of an inviolable limitation governing the conduct of the review in the case of an incorrect and invalid notification, is thus in each case essential to the existence of jurisdictional error. A breach is material to a decision only if compliance could realistically have resulted in a different decision.
46. Where materiality is in issue in an application for judicial review, and except in a case where the decision made was the only decision legally available to be made, the question of the materiality of the breach is an ordinary question of fact in respect of which the applicant bears the onus of proof. Like any ordinary question of fact, it is to be determined by inferences drawn from evidence adduced on the application.
151 The plurality's further observations at [49] of SZMTA are also apposite (footnotes omitted):
49. Where non-disclosure of a notification has resulted in a denial of procedural fairness, the similar question that remains for the court on judicial review of a decision of the Tribunal is whether there is a realistic possibility that the Tribunal's decision could have been different if the notification had been disclosed so as to allow the applicant a full opportunity to make submissions. Whilst "[i]t is no easy task for a court ... to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome", the task is not impossible and can be done in these appeals.
152 I accept that NHDS carried the burden of establishing that the procedural unfairness was material, but I do not accept the Director's contention that this burden was not discharged. First, it is no answer to say, as the Director did, that any submission that NHDS says it was prevented from making to the Director prior to her s 93 referral decision will be able to be made to the Committee. This ignores the importance of the opportunity afforded to NHDS under the PSR Scheme to seek to persuade the Director as to what future course she should take in circumstances where, having reviewed the s 86 request, she determined on 3 April 2019 that, at that stage of her review, the review process should proceed and not be terminated at that point.
153 Secondly, nor is it an answer to contend, as the Director did, that some significance should attach to the fact that NHDS was in no different position viz a viz its lack of information concerning the services rendered by the 56 practitioners than was the case in relation to the 15 practitioners. This ignores the explicit complaints raised by NHDS in its 30 May 2019 submissions regarding the lack of more detailed information concerning the conduct of those 15 practitioners and that its submissions were thus necessarily confined to those practitioners alone. Moreover, as will shortly emerge, the second limb of NHDS's procedural fairness complaint, which is directed to the lack of detailed information provided to it concerning those 15 practitioners, will be upheld.
154 Thirdly, contrary to the Director's contention, I do not consider that it was incumbent on NHDS to adduce evidence in the proceeding that it was misled or did not contemplate a referral extending beyond the 15 practitioners, or that it would have made different submissions if it had been provided with information regarding the 56 practitioners. There is nothing in SZMTA which casts doubt on the correctness of what Gageler and Gordon JJ said on this subject in Minister for Immigration and Border Protection v WZARH [2015] HCA 40; 256 CLR 326 at [60]. Their Honours said there that if the procedure adopted by the relevant decision-maker can be shown itself to have failed to afford a fair opportunity to be heard, "a denial of procedural fairness is established by nothing more than that failure, and the granting of curial relief is justified unless it can be shown that the failure did not deprive the person of the possibility of a successful outcome". As their Honours explained, the practical injustice in such a case "lies in the denial of an opportunity which in fairness ought to have been given".
155 Finally, I should add that I reject the Director's contention, made in oral address, that if she had appreciated that a focus of the first limb of NHDS's procedural fairness case related to the non-provision to NHDS of details of the 300 plus particular services which the Director had sampled, she would have wished to put on some evidence which explained the reasons why that information had not been provided. That this matter figured in NHDS's procedural fairness case was made sufficiently clear in [18] and [19] of its FAOA. Indeed, the Director was aware as early as 30 May 2019 that this was NHDS's position, having regard to the explicit complaint it made in its written submissions of that date.
156 The procedural unfairness has the effect of vitiating the s 93 referral.