New South Wales v Commonwealth

New South Wales v Commonwealth - [1983] HCA 8 - HCA 1983 case summary — Zoe

[15]

The National Health Act 1953 Cth, as amended, ("the Act" or "the Commonwealth Act") provides, inter alia, for a contributory health insurance scheme in which the insurance business in relation to hospital care is carried on by hospital benefits organizations formed pursuant to State or Territory law and registered for the purposes of the scheme under the Act. The Act controls in some detail the basic hospital care in respect of which a person may insure by contributing to a fund conducted by an organization and the management of the fund itself is also subjected to detailed regulation. By legislation enacted during 1982 the States of Victoria and New South Wales each provided for the introduction of a scheme whereby the cost of out-patient services supplied at a hospital to persons who were contributors to a hospital benefits fund managed by organizations carrying on a hospital benefits insurance business within the State would be borne by resources provided by the respective States and consequently with no fee being payable by the recipient of the service and no necessity for any refund to be provided by the organization from the fund. The New South Wales proposal included the provision of free ambulance services to contributors. Such services are not covered in the Commonwealth scheme. Each of the State Acts imposed a monthly levy calculated by reference to a prescribed formula upon any organization which carries on the business within the State of providing hospital benefits to contributors. In December 1982 the Minister administering the Commonwealth Act imposed upon each of the registered organizations operating in Victoria and New South Wales a condition that the organization not pay the levy. Both Victoria and New South Wales then instituted proceedings in this Court seeking declarations as to the invalidity of the condition while the Commonwealth in defending those proceedings has averred that each of the State Acts is inconsistent with the Commonwealth Act and therefore invalid by reason of s. 109 of the Constitution. Proceedings have also been instituted on behalf of two groups of registered organizations in New South Wales, each contending for a view as to the validity of the levy which is opposed to that contended for by the other. It is in this flurry of litigious activity that the proceedings were ordered to be consolidated and a case was stated for the consideration of the Full Court pursuant to s. 18 of the Judiciary Act 1903 Cth, as amended.

[58]

The learned Solicitor-General of the Commonwealth was more specific. He submitted that the Commonwealth had legislated so as to define the relationship between the contributor and the benefit and to ensure that the contributor is protected, in the obtaining of his benefit, by preserving the financial stability of the fund. By way of illustration he referred to the registration committee's scrutiny of the rules of an organization applying for registration (s. 72A) and to the provisions of s. 78 of the Act outlining the procedure to be followed if a registered organization changes its constitution or rules. With respect, the Solicitor-General's point is well made. The Act provides, in the provisions to which he referred, clear evidence of a legislative concern that the Minister supervise closely the rules of a registered organization and its conduct of the fund in order to protect the contributor and to safeguard the financial stability of the fund. But the subject with which the Act reveals an intention to deal exclusively or exhaustively is the relationship between the organization and the contributor, particularly the nature and amount of the benefits to be provided to contributors and the purposes for which moneys in the fund may be applied. Not only does the Act not evince any intention to exclude all operation of State laws on registered organizations but it expressly recognizes the continued operation of such laws and their capacity to make an impact on the fund. Section 68(2)(c)(ii) authorizes a registered organization to debit to the fund costs incurred by it wholly and exclusively in carrying on business in the State as a registered hospital benefits organization. It is conceded that such costs would include outgoings required by State law such as land tax, rates, payroll tax and so on. In our opinion the concession had to be made. Confirmation of such a view is to be found in s. 39 of the Health Insurance Commission Act. The policy of that Act is clearly to assimilate the operations of the Commission in the exercise of its function as a hospital benefits organization to the position in all respects of any other registered organization. As we have already noted, that section affirms the liability of the Commission to pay all rates, taxes and charges under any law of a State.

[62]

From what we have said it follows that the State Acts do not deal with a subject matter which the Commonwealth Act intends to regulate completely and exclusively. If the State Acts did deal with the question of the benefits registered organizations should or might provide to their contributors, they would enter upon a field from which the Commonwealth Act displaces State law. But they do not either require or authorize an organization to pay any benefit, or affect the basis on which benefits are payable. If a contributor is required to pay charges for out-patient hospital treatment, he will still be entitled to benefits in exactly the same amount as if the State Acts had not been passed. It is true that the State Acts may have the effect that a contributor will not be charged for out-patient treatment, and thus he will not be entitled to any benefit in respect of that treatment. However, the Commonwealth Act does not deal with the question whether charges for such treatment should be made by the hospital which provided it, but only with the question what benefits should be paid to a contributor who is required to pay charges incurred in respect of the treatment. Similarly, the New South Wales Act does not require that an organization should pay out of its fund a benefit for ambulance services. The effect of that Act may be that a contributor becomes entitled to such services free of charge, but that is not a question with which the Commonwealth Act is concerned. Moreover, the State Acts do not deal with the question what amounts are to be debited to a fund. The State Acts impose a tax, and since, for the reasons given, the amount of the tax is a cost within s. 68(2)(c)(ii), it may be debited to the fund. The authority for the debit is however the Commonwealth Act. For these reasons we reject the contentions that the State Acts are legislation on a subject which is dealt with exhaustively and exclusively by the Commonwealth Act, and that there is a direct inconsistency between the provisions of the State Acts on the one hand and the Commonwealth Act on the other. From a practical point of view the State Acts may affect the finances of registered organizations, but so would any other cost incurred in carrying on their business.

[64]

It will be seen that the grounds I have given for deciding the present case concede that if a State tax discriminated against pensions, salaries, or other payments made by the Commonwealth, it could not be supported. If the right to the payment were conferred by a law of the Commonwealth, prima facie the scope and intention of that law would be enough to make inoperative any attempt by the States to impose upon the payee a special burden because of his occupying that character. The State tax would be inconsistent with the law of the Commonwealth in making enjoyment of the right or benefit conferred by the latter the special occasion of a burden. The invalidity of the State law would then be a result of s. 109 of the Constitution. It will be noted that Dixon J. was speaking in the context of a discriminatory State tax on pensions, salaries or other payments made by the Commonwealth. He said that "prima facie the scope and intention" of the Commonwealth law would be enough to invalidate the imposition of a special burden on that payment by the State. No one could disagree with such a statement. It does not follow, however, that a consideration of the scope and intention of the Commonwealth law in question here leads to a similar conclusion. As we have already observed, the Commonwealth Act does not create the organizations. They are not statutory emanations of the Commonwealth such as were discussed by this Court in Australian Coastal Shipping Commission v. O'Reilly [2] . In the case of incorporated organizations, they owe their existence and their general powers to State law. The Commonwealth clearly marks out the extent of its intrusion in that regard: see, for example, s. 74A, which prevents a registered organization, so long as it continues to be a registered organization, from being wound up. It is clear, of course, that upon registration an organization must operate the fund consistently with the prescriptions carrying the authority of the Commonwealth law and no State law could countermand that authority either directly or indirectly. But we are unable to discern any intention in the Commonwealth Act in its present form to protect registered organizations from the imposition of State charges on the conduct of their business, even if the occasion for the charge is the conduct of a hospital benefits business. We emphasize that it is not a question at this stage of the legislative power of the Commonwealth. It may be that if the State Acts represent a modification of the operation of the national health scheme as embodied in the Commonwealth Act which is unacceptable to the Commonwealth Government then the matter will require the attention of the Parliament. Construing the Commonwealth Act as it now stands, we are bound to reject the argument that the State Acts are invalid by reason of inconsistency within the meaning of s. 109. 1. (1937) 56 C.L.R. 657, at p. 681. 2. (1962) 107 C.L.R. 46.

[67]

When a provision of this kind is made, it is incumbent upon the public authority in whom the discretion is vested not only to enter upon the consideration of applications for its exercise but to decide them bona fide and not with a view of achieving ends or objects outside the purpose for which the discretion is conferred. But courts of law have no source whence they may ascertain what is the purpose of the discretion except the terms and subject matter of the statutory instrument. They must, therefore, concede to the authority a discretion unlimited by anything but the scope and object of the instrument conferring it. Cf., also, Water Conservation and Irrigation Commission (N.S.W.) v. Browning [4] . The answer to the question must be found in a consideration of the statutory purpose for which the discretion was conferred. It is clear from what we have already said that the Act is concerned to regulate the relationship between the contributor and the registered organization with a view no doubt to protecting both the contributor and the fund. It does not define that relationship exhaustively but ensures that certain essential requirements are met. In our opinion, this provides the central object of the Act, by reference to which the scope of the discretion conferred by s. 73B(1)(b) is to be determined. We would not attempt to define the scope of the discretion exhaustively. As Dixon J. remarked following the passage which we have cited from Swan Hill Corporation v. Bradbury [5] : It may be possible to say that this or that consideration is extraneous to the power, but it must always be impracticable in such cases to make more than the most general positive statement of the permissible limits within which the discretion is exercisable and is beyond legal control. In the present case one must ask whether the imposition of a condition regulating the relationship of the organization to the State is within the statutory purpose for which the discretion was conferred. In our opinion, the answer is clearly No. Apart from s. 74A, which expressly affects the application in some circumstances of the winding-up laws of the States, there is no indication of such a purpose. On the contrary, there is positive recognition in s. 68(2)(c)(ii) that the registered organizations will continue to conduct at least a hospital benefits business within a State and suffer some State governmental regulation in that regard. Save for s. 74A, no protection from such regulation is provided by the Act. There is nothing in the Act to support the view that the general words of s. 73B(1)(b) authorize the Minister to impose a condition which would require an organization to contravene State law. In relation to the Health Insurance Commission, there is the express recognition, without limitation, in s. 39 of the Health Insurance Commission Act that the governmental regulation to which we have referred will include taxes. That section requires us to answer question 5 in the affirmative. 1. (1937) 56 C.L.R. 746, at pp. 757-758. 2. (1947) 74 C.L.R. 492, at pp. 504-505. 3. (1937) 56 C.L.R., at p. 758.

[107]

Both the New South Wales and Victorian Acts provide for a monthly "levy" on "any organization" which carries on the business of providing hospital benefits to contributors within the relevant State: "organization" is defined by each State Act as having a meaning in effect identical to "hospital benefits organization" under the Commonwealth Act, namely, "a society, body or group of persons, whether corporate or unincorporate, which conducts a hospital benefits fund". The amount of the levy is determined by a formula and varies conformably with the factor A/B where A represents the total of contributions received during a particular period for insurance under the organization's basic table from contributors who do not permanently reside out of the relevant State (subject to special provisions, in the New South Wales Act, for Australian Capital Territory and Northern Territory contributors) and B represents the weekly contribution to be paid by a single person for cover under that basic table. Each State Act provides that the ordinary fee for out-patient hospital services under the provisions of the appropriate legislation (i.e. the Public Hospitals Act 1929 N.S.W. (s. 30) in the case of the New South Wales Act and the Hospitals and Charities Act 1958 Vict. (s. 70) in the case of the Victorian Act) shall not be payable in respect of out-patient services provided to a person who was, at the time the service was provided, a "contributor" (which includes persons on whose behalf contributions are made) to a fund conducted by an organization which is liable to pay the levy imposed by the Act and who makes a declaration "in the prescribed form". The New South Wales Act also contains provisions to free such a "contributor" from the ordinary obligation to pay for ambulance services under the Ambulance Services Act 1976 N.S.W.. The State Acts contain no definition of "basic table". It is, however, common ground that the reference to a "basic table" in the State Acts is, in the case of a registered organization, a reference to the basic table which the organization is obliged, under the Commonwealth Act, to offer to its contributors.

[108]

Examination of the Commonwealth Act discloses that it deals exhaustively and preclusively with a variety of particular subject matters. Examples relevant to registered hospital benefits fund organizations are registration itself, cancellation of registration and judicial management and winding up of a registered organization. The Act also deals, in a manner which is plainly intended to be exhaustive and preclusive, with a number of matters relating to hospital benefits funds conducted by a registered organization. In particular, the Act so deals, in the provisions to which reference has been made, with the subject of what hospital benefits may or may not be provided by a registered organization to its contributors under the basic table which it is under a statutory duty to offer to them and to which they all must subscribe: it exhaustively states what benefits may be included in a basic table and expressly provides that a basic table may incorporate "no other benefits" without losing its character as such. As has been seen, provisions such as s. 68(2)(c)(iii) and s. 73D make clear that the hospital benefits which the Act is concerned to regulate and control are not limited to the ordinary payment of money to a contributor but extend to the provision of relevant treatment and services. A table would not comply with the requirements of the definition of a basic table if it incorporated all the expressly secified benefits and any benefits which had been prescribed for the purposes of the definition and also incorporated the provision of superior hospital accommodation or the supply of additional professional services and treatment at the direct or indirect cost of the registered organization. The provision or supply of such superior accommodation or additional services or treatment at the direct or indirect cost of the registered organization would constitute "other benefits" with the consequence that the table was not a "basic table" of the type which the organization was under a statutory duty to offer to its contributors. A law of a State which provided that such additional accommodation, treatment or services to contributors must be provided by or at the direct or indirect cost of a hospital benefits organization to contributors under its basic table would, to the extent that it purported to apply to registered organizations, intrude into a field which the Commonwealth Act had exhaustively and preclusively covered and, within that field, be directly inconsistent with the provision of the Commonwealth Act that a registered organization must offer to contributors a basic table incorporating no benefits other than those specified in the Act or prescribed under it.

[109]

If the two State Acts had merely purported to give to each hospital benefits organization carrying on hospital benefits business within the relevant State a choice as to whether it would undertake to pay the levy and, by so undertaking, obtain for its contributors freedom from the ordinary obligation to pay for out-patient services (and, in the case of the New South Wales Act, ambulance services), the State Acts would, to the extent that they purported to authorize a registered organization to pay the levy to obtain that advantage (or those advantages) for contributors under its basic table, be inconsistent with the provisions of the Commonwealth Act to which reference has been made. The reason is that a registered organization would, by electing to pay the levy, be making provision for benefits which are not of the kind which may be incorporated in the basic table which it is under a statutory duty to offer to contributors. In so far as any benefits to contributors in relation to out-patient services are concerned, they would neither take the required form of a payment to contributors nor be necessarily confined within the express monetary limits contained in par. (d) of the definition of "basic table". In so far as any benefits to contributors in relation to ambulance services were concerned, they would be "other benefits" which are expressly excluded by the definition from benefits which may be offered under the basic table. The purported provision in the laws of the two States that a registered organization was entitled to pay the levy and thereby procure free outpatient services (and in the case of the New South Wales Act, free ambulance services) for contributors under its basic table would not only impinge upon a subject matter upon which the Commonwealth Act made exhaustive and preclusive provision but would be directly inconsistent with the requirement of the Commonwealth Act that a registered organization should offer to all contributors a table in which the specified and prescribed benefits "and no other benefits" were incorporated. The question arises whether such inconsistency is absent when the relevant hospital benefits organizations are given no choice as to whether or not they should pay the levy.

[110]

The absence of any element of choice as to payment of the State levy weakens any link between the payment of the levy and the freeing of contributors from the obligation to make the relevant payments in that, if an organization had a choice as to whether to pay the levy, it would be apparent that a registered organization which elected to pay it did so to provide benefits, in the form of free out-patient (and ambulance) services, for its contributors. The connection between the levy and the provision of the free services is, however, clear enough under both the New South Wales and Victorian Acts. Thus, the provision in each State Act that no fee is to be payable in respect of the relevant services is expressly limited to services provided to a person who was, at the time the service was provided, a contributor to a fund conducted by an organization which is bound to pay the levy. The amount of the levy which an organization is required to pay is, under each State Act, determined by a formula which, subject to a discounting in the case of dependants, will reflect the number of persons who will be entitled to receive free services by reason of contribution to a fund conducted by that organization. The inferences are plain that the entitlement of contributors to a fund conducted by a hospital benefits organization to receive free out-patient (and ambulance) services is a benefit which is related to the obligation imposed upon the relevant organization to pay the levy and that, as a matter of substance, that entitlement must be seen as, at least to some extent, provided at the indirect cost of that organization. In the case of the Victorian Act, the making of those inferences is assisted by the express requirement (s. 9(2)) that an amount equivalent to the amount received by way of levy under the Act shall be paid into the Hospital and Charities Fund being the fund established under the Hospitals and Charities Act 1958 Vict.. In the case of both State Acts, the calculation of the levy which a particular organization must pay by reference to a formula which reflects the number of contributors under that organization's basic table accords with the underlying position that, in the case of a registered organization, all contributors to a hospital benefits fund must contribute under the organization's basic table and will derive, as contributors under that basic table and regardless of whether they also contribute for benefits under a supplementary table, all the benefits which the Act confers.

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