Secretary, Department of Health and Ageing v Marnotta Pty Ltd [2005] FCA 1395 | Case summary

Consideration 22 Section 10-2 of the Act was considered by a Full Court in Jadwan Pty Ltd v Secretary, Department of Health & Aged Care [2003] FCAFC 288; (2003) 204 ALR 55 (Jadwan). Jadwan Pty Ltd (the company) operated a nursing home called Derwent Court. The premises were approved under the National Health Act 1953 (Cth). On 6 August 1997, a delegate of the Minister for Health and Aged Care revoked the approval in relation to Derwent Court on the basis that the company had not complied with standards required for the operation of a nursing home. Almost immediately after the revocation decision the company ceased operating Derwent Court and did not re-open it. The company took proceedings to have the revocation decision set aside under the Administrative Decisions (Judicial Review) Act 1975 (Cth). These proceedings were successful at first instance and on appeal. On 4 December 1998, a Full Court (the first Full Court) made orders on the appeal setting aside the revocation order from the date of the Full Court's judgment. 23 Between the date of the revocation decision and the determination of the appeal, the National Health Act 1953 (Cth) was repealed and replaced by the Act. The Act came into operation on 1 October 1997. Under the Act the providers of aged care had to be approved. Under the previous legislation the approval related to the premises on which the operation was conducted. The transition from the previous legislation to the Act was dealt with by the Aged Care (Consequential Provisions) Act 1997 (Cth) (the CPA). The CPA provided that operators of nursing homes under the previous legislation became approved providers under the Act and were allotted the number of places equal to the number of beds which had been approved under the previous legislation as at 1 October 1997. 24 After the first Full Court set aside the revocation decision the company claimed that it became an approved provider under the Act by operation of the transitional provisions of the CPA. The Department of Health and Aged Care (the Department) disputed this claim. Thus, on 9 March 2001, the company filed a further application in this Court seeking a declaration that it was an approved provider under the Act, and an order that it be allocated the 51 places corresponding to the 51 beds operated at Derwent Court. 25 This claim was rejected at trial and on appeal. In order to qualify for the operation of the transitional provisions under the CPA, the company had to show that it was an approved operator or proprietor under the previous legislation immediately before 1 October 1997. As the order of the first Full Court set aside the revocation decision as from 4 December 1998, the company was not an approved operator or proprietor immediately before 1 October 1997. This was sufficient to dispose of the company's claim. However, some members of the second Full Court considered the operation of s 10-2. Gray and Downes JJ said: [57] If Jadwan had succeeded in availing itself of s 7 of the Consequential Provisions Act, it would then have to overcome s 10-2 of the Aged Care Act. Again, that provision is directed to a factual, and not a theoretical, situation. Approval under the Aged Care Act lapses if an approved provider does not provide aged care during a continuous period of six months. It could hardly be contended that this provision is intended to refer to anything other than the actual provision of aged care. Its strictness is underlined by the specific provisions relating to waiver, found in s 10-2(3) and (4). Those provisions require application in writing, at least 28 days prior to the end of the six-month period. There was no application for waiver of the period in the present case.Jadwan's argument that s 10-2 was intended to apply only when a provider was in a position to provide aged care cannot be sustained. [58] Jadwan provided no aged care for well over six months from 1 October 1997, when the Aged Care Act commenced operation, until 9 March 2001, when it filed its proceeding that led to the judgment of the primary judge, and thereafter. To attribute its failure to provide such care to the revocation decision, so as to require that the Court act on the assumption that aged care would have been provided if there had been no revocation of approval is to ask too much of the principles of causation. It is to ignore the actual proceedings that Jadwan took, and the opportunities it had to take other proceedings. It is to ignore the possibility that, if it had been appreciated that the revocation decision was a nullity, the Minister might have taken steps to have a new determination made as to whether the approval of Derwent Court should be revoked under the National Health Act, or whether some steps should be taken pursuant to the Aged Care Act to revoke any approval of Jadwan as a provider of aged care, pursuant to s 10-3 of the Aged Care Act. Another event that might have broken the chain of causation could have been the sale by Jadwan of its entitlements to receive Commonwealth benefit in respect of a number of patients, a sale it was apparently desirous of effecting in September 1997. [59] It follows that, even if Jadwan had been entitled to declarations of the kinds sought in pars 1 - 4 of its amended application before the primary judge (set out at [14]), it would not have been entitled to the order sought in par 5 of that amended application, directing the allocation of the places. Section 10-2 would have caused any approval inherited from the previous system to have lapsed well before Jadwan began the proceeding at first instance. It was also appropriate for the primary judge to treat as a discretionary ground for refusing to grant the declaratory relief sought the fact that approval had lapsed under s 10-2 of the Aged Care Act. 26 The Secretary submitted that the reasoning of Gray and Downes JJ in Jadwan in relation to s 10-2 of the Act applied in the present case. On the assumption that the company was an approved provider when the Act commenced on 1 October 1997, its approval lapsed because it did not provide aged care at any time after that date. Similarly, in the present case when the Tribunal set aside the revocation decision Marnotta was an approved provider. The revocation decision was set aside from the day it was made. Hence, Marnotta was an approved provider from that day. It had not provided aged care since then. As that period exceeded six months, its approval lapsed by operation of s 10-2. 27 The Tribunal constituted by Deputy President Forgie considered the operation of s 10-2 of the Act when determining the Secretary's application to dismiss the application for review under s 42B(1)(a) of the AAT Act. She concluded that s 10-2 of the Act in present case would operate from the date of the decision of the Tribunal to set aside the revocation decision. Marnotta was still in a position to provide aged care after the decision of the Tribunal, and hence the proceeding at that time still had utility. She reasoned thus: 92 What is clear from the judgement of Gray and Downes JJ is that regard is to be had to "... a factual, and not a theoretical, situation." (paragraph 57). If Marnotta were to succeed on the substantive hearing of its application, the Tribunal's decision would be to set aside the reviewable decisions. The consequence of that would be that Marnotta would be regarded as not having had its approval as an approved provider or its allocation of places revoked in the first place. That, however, would be the theoretical situation. The fact, though, would be something different. The situation in fact, and the situation in which Marnotta has had to conduct its affairs since 5 June, 2003, would be that the Marnotta would not have been an approved provider since that date. That would have followed from the fact that its approval as an approved provider had been revoked. Even though it lodged an application for review of that reviewable decision, the effect of s. 41(1) of the AAT Act is that the decision continues to operate and the Secretary is not prevented from implementing it. Marnotta did not make an application to the Tribunal to ask for an order under s. 41(2) staying or otherwise affecting the operation of either of the reviewable decisions. Consequently, Marnotta was not an approved provider. Therefore, even though it did not provide any aged care after 5 June, 2003, s. 10-2(1) would not apply to it because it was not in fact an approved provider. 93 Once the Tribunal set aside the reviewable decisions, Marnotta would then in fact as well as in theory be an approved provider from the date of the Tribunal's decision as well as an approved provider in theory from 5 June, 2003. If Marnotta did not provide any aged care during the six months following the Tribunal's decision and did not apply for waiver under ss.10-2(3) and (4), the effect of s.10-2(1) would be that its approval would lapse on the day after the end of a six month period from the date of the Tribunal's decision. 28 This reasoning misunderstands the judgment of Gray and Downes JJ. Their Honours did not say, as the Deputy President suggests they did, that regard must be had to the factual not the theoretical situation of the approval status of the company. They said at [57] that: … that provision [s 10-2] is directed to a factual and not a theoretical situation … It could hardly be contended that this provision is intended to refer to anything other than the actual provision of aged care. (emphasis added) Their Honours were responding to an argument by the company that it would have provided aged care if it had been recognised as an approved provider by the Department. This was the theoretical position. Their Honours set out the company's argument at [22] as follows: The third issue raised related to the refusal of declaratory relief. Jadwan argued that the assumption on which the learned primary judge proceeded, that the lapse provision in s 10-2 was applicable, was incorrect. It contended that the object of that provision is to ensure that a person who holds an approval actually provides aged care and that the object of the Aged Care Act, to ensure that care is provided, is not frustrated by a provider's inactivity. It contended that the provision can have meaningful application only where a provider is in a position to provide aged care, but does not. Because, at all times after 6 August 1997, the Department did not recognise Jadwan as having approved provider status, Jadwan was not in a position to provide aged care. The lapse provision should be construed as having no application to Jadwan. The Department argued that the section was concerned only with the fact, namely, was aged care provided in the six-month period. Their Honours recited the Department's argument at [26] as follows: As to s 10-2, the respondents submitted that the construction of s 10-2(1) advanced by Jadwan was incorrect. They said that the section can apply where the provider is not in a position to provide aged care. This is one of the points of the waiver provision in s 10-2(3). The third issue could only arise if Jadwan succeeded on the other two issues and if the Court assumed, contrary to the facts, that Commonwealth benefit was payable to Jadwan on 30 September 1997 because it had at least one approved nursing home patient receiving care on that date. All that the Consequential Provisions Act would have achieved in those circumstances was a translation from the old regime to the new regime. The new regime included s 10-2. In the absence of a waiver under that section, continued entitlement to retain an allocation of places is linked to continued status as an approved provider. Relying on s 15-1, the respondents argued that the Aged Care Act's fundamental premise for an allocation of places is the actual provision of aged care. 29 Deputy President Forgie regarded Marnotta's position as an approved provider prior to the decision of the Tribunal to set aside the revocation as theoretical. As a result she concluded that s 10-2 of the Act did not apply to it because it was not in fact an approved provider. This is the very argument which the company relied upon before Gray and Downes JJ - "the lapse provision should be construed as having no application to Jadwan" - and which was rejected by Gray and Downes JJ. The distinction between the factual and the theoretical position related to the provision of aged care, not to the status of Marnotta as an approved provider. Consequently, the judgment of Gray and Downes JJ supports the Secretary's argument in this case. 30 Marnotta relied on the judgment of the Full Court in Lesi v Minister for Immigration and Multicultural [2003] FCAFC 285; (2003) 134 FCR 27 (Lesi). In that case the appellant held a permanent residence visa. However, a deportation order was made against him as a result of certain crimes committed by him, and he was deported in reliance on that order. Section 82(4) of the Migration Act1958 (Cth) (the Migration Act) provided that a visa ceased to have effect when a person left Australia because of a deportation order. After the appellant was deported, the Tribunal set aside the deportation order. The appellant brought proceedings seeking a declaration that his permanent residence visa was in force. The Full Court addressed the operation of s 43(6) of the AAT Act, and observed that the section created obvious difficulties if read according to its terms. The Court said at [39]: It would be surprising if the Parliament intended that decisions of the Tribunal should have retrospective effect in circumstances where the initial decision was valid when made where to do so might prejudice vested rights or the interests of third parties. 31 The Court cited authority to the effect that where a statute provides that something shall be deemed to have been done which was not in fact done, the Court must determine for what purpose the statutory fiction is to be resorted to. The Court then referred to some cases in which s 43(6) of the AAT Act had been applied so as to render acts unlawful which had been lawful when done, and the Court also cited some cases to the contrary. Then the Court said at [47]: Ultimately, the proper interpretation of s 43(6) of the AAT Act must be a question of determining the intention of the legislature. On the one hand, there are obviously strong reasons of principle why the legislature would not intend to visit upon the appellant the consequence of losing his entitlement to remain permanently in Australia based upon the implementation of a deportation order which, now, has been set aside. Nor could it readily be taken to intend that, by reason of the implementation of a deportation order which has been set aside, the appellant is now ineligible to be granted a visa by reason of his deportation. On the other hand it cannot have been intended to render invalid or unlawful a deportation order that was validly and lawfully made and implemented prior to it being set aside primarily for reasons that arose post-implementation. 32 The Court agreed with the approach of the parties that "whatever s 43(6) of the AAT Act may mean it does not have the effect of rendering the deportation of the appellant invalid or unlawful" (at [49]). 33 Then, the Court said at [50]: Given the approach that the parties have taken it may be unnecessary for this Court to resolve the difficult questions as to the meaning and effect of s 43(6) of the AAT Act, other than to confirm the approach of the primary Judge that the deportation of the appellant was, and remains, valid and lawful. This is because, in this case, there is a preliminary issue as to the meaning and operation of s 82(4) of the Migration Act in these circumstances. 34 The Minister argued that once the visa ceased to have effect under s 82(4), it could not revive. The appellant argued that the visa became operative when the Tribunal set aside the deportation decision. The Court relied on the distinction drawn in the Migration Act between a visa being cancelled and a visa ceasing to have effect. The latter expression allowed the appellant's visa to resume operation once the deportation order was set aside. 35 Marnotta relied on Lesi to support the contention that the delegate's decision to revoke the approval as a provider remained operative until the decision was set aside by the Tribunal in the same way that the deportation order in Lesi remained operative until the decision of the Tribunal to set it aside. 36 However, there are a number of reasons why Lesi is of no assistance to Marnotta. 37 First, the operation of s 43(6) of the AAT Act was not determinative in the case of Lesi. The central issue before the Court was the application of s 82(4) of the Migration Act, namely, whether the permanent residence visa revived when the deportation order was set aside. The resolution of this matter depended on a construction of s 82(4). In order to test the meaning of s 82(4), the Court was prepared to assume against the appellant that the deportation order remained in effect until the date of the decision to set aside the deportation order. On the approach taken by the Court it was, thus, not necessary to determine finally whether the deportation order did or did not have effect in the period between the making of the deportation order and the date on which the Tribunal determined to set it aside. The Court put the matter thus: 48 In this matter, the initial decision has been put into effect. It is not argued on behalf of the appellant that s 43(6) of the AAT Act should deem the Tribunal's decision to have effect so that the deportation decision itself should be taken not to have occurred or that the deportation of the appellant was itself unauthorised. 49 It seems to us that the approach of the parties to this issue is correct. Whatever s 43(6) of the AAT Act may mean, it does not have the effect of rendering the deportation of the appellant invalid or unlawful. 50 Given the approach that the parties have taken it may be unnecessary for this Court to resolve the difficult questions as to the meaning and effect of s 43(6) of the AAT Act, other than to confirm the approach of the primary Judge that the deportation of the appellant was, and remains, valid and lawful. This is because, in this case, there is a preliminary issue as to the meaning and operation of s 82(4) of the Migration Act in these circumstances. 38 Next, the Court referred to the limited circumstances in which s 43(6) of the AAT Act might not operate according to its terms, namely; where the initial decision had been put into effect; where it was valid when made in the sense that the decision was set aside by reason of matters which occurred after the initial decision was made; and where to give retrospective effect to the decision to set aside would prejudice vested rights or the interests of third parties. Although there is obvious good sense in providing for such limitations, particularly in the circumstances which arose in Lesi, it is difficult to reconcile the limitations with the express stipulation in s 43(6) of the AAT Act that the decision of the Tribunal shall be regarded "for all purposes" as the original decision. However, putting aside these doubts for the moment, Lesi does not assist Marnotta because the circumstances which the Court indicated limit the operation of s 43(6) did not exist in the present case. 39 Further, in Lesi the construction of s 43(6) of the AAT Act was based on an analysis of the intention of the legislature in passing the provision. The Court said at [47]: Ultimately, the proper interpretation of s 43(6) of the AAT Act must be a question of determining the intention of the legislature. Again, the way in which the Court characterised the intention of the legislation is open to doubt. It analysed the terms of s 43(6), which apply to all decisions made by the Tribunal, by reference to the effect of a particular decision made under a specific section of one Act. The legislative intention is thereby seen as directed to the particular operation of s 43(6). This is to approach the legislative intention as if s 43(6) of the AAT Act appeared in the Migration Act for the purposes of deportation decisions alone. But the inclusion of the section in the AAT Act indicates that the legislature was concerned with a general provision designed to regulate the effect of all decisions of the Tribunal. To seek to determine the intention of the legislature in passing the general provision by an analysis of its operation in the single context seems to be too narrow. Nonetheless, even if that exercise is undertaken in this case, Marnotta's case is not advanced. 40 To undertake the exercise one must ask whether the legislature intended that s 10-2(1) of the Act would apply so that where the revocation decision was made but was set aside more than six months afterwards, and where the provider did not provide aged care for the six month period between the revocation and the decision to set aside, the approval as a provider would lapse at the end of the period of six months in which the care was not provided. Section 10-2(1) of the Act establishes a general rule which forfeits approval as a provider when the provider does not provide aged care for a continuous period of six months. The purpose of the provision is to ensure a continuity in the provision of aged care. This rationale for the provision applies equally whether the gap in providing aged care service arises from the desire of a provider to take a break from the industry or arises from involvement in long, drawn-out legal proceedings concerning the merits or validity of a revocation decision. The rule implements one of the objects of the Act, namely, to promote a high quality of care and accommodation for the recipients of aged care services that meets the needs of individuals (s 2-1(1)(b)). There is no indication that the legislature intended that this rule would not apply when the reason for the break in continuity related to a delay in the finalisation of a legal challenge to a revocation decision. The rule is designed for the benefit of people receiving aged care. Their interests are placed ahead of the interests of the providers of care. 41 But the statutory scheme, which manifests the intention of the legislature, does not leave the providers of care without means for protecting their interests in this type of situation. For instance, once the application for review is commenced in the Tribunal, the provider may seek an order from the Tribunal to stay the revocation decision under s 41(2) of the AAT Act. Further, in some circumstances the provider may apply to a court for an injunction to prevent the operation of the initial decision until all legal challenges have been completed. Then again, it is always open to the provider to reapply for approval under s 8-2 of the Act. This may be a practical option particularly where the provider wants to demonstrate the error in the decision, but where the events which gave rise to the revocation have passed and would not be a barrier to the grant of approval in the future. Finally, the provider has the option of continuing to provide aged care without the approval as a provider. The immediate consequence for the provider would be that it would not receive Commonwealth subsidies for the care provided. Whilst this may impact on the cash flow of the provider, if the revocation decision is set aside, the provider will be deemed to have been an approved provider from the date of the initial decision, and, subject to the other requirements of the Act, would be entitled to claim payment of subsidies for the past period when aged care was provided. This option was recognised in Jadwan as available under the previous legislation. The reasoning applies to the present Act equally. Gray and Downes JJ said at [49]: There was no statutory bar to Jadwan continuing to provide the care it had provided to the people to whom it had provided it, even after the decision was made. The effect of the decision was only that Commonwealth benefit was no longer payable in respect of persons for whom care was provided. Of course, a decision revoking approval of a nursing home inevitably had the effect of stopping the cash flow of the proprietor. It was probably inevitable that this would require that arrangements be made for the provision of care for the patients by the proprietor of another approved nursing home. Nothing in the National Health Act required that this be done, however. It would have been open to Jadwan to continue to care for the patients in Derwent Court, whilst taking whatever steps were appropriate to have the decision set aside from the date on which it was made. If it had succeeded in doing so, it would have had an entitlement to receive arrears of Commonwealth benefit in respect of each patient for whom it had provided care in Derwent Court in the meantime. 42 Marnotta referred to the effect of the appeal provisions in the Act in relation to the likely intention of legislature. Under s 85-5 of the Act a person subject to a sanctions decision may apply to the Secretary for reconsideration. The Secretary has up to 90 days in which to reconsider the decision. Under s 85-8 of the Act an application may be made to the Tribunal for a review of a decision which has been confirmed on a reconsideration. Under s 29(2) of the AAT Act an application for review must be made within 28 days of the furnishing of reasons for a decision. Then the Secretary has a further 28 days after receiving notice of the application in order to lodge documents relevant to the application. This part of the process can therefore take up to six months without any allowance for the time for a hearing, and for the preparation and delivery of a decision by the Tribunal. If the requirement for the provision of aged care without a break of more than six months applied during the period of the review process, then, in practical terms, a provider would be prevented from using the process without running the risk of losing its approval. Thus, so it was argued, the time limits provided for the review process suggest that the continuous service requirement was not intended to operate until the Tribunal determined the review application. However, this approach does not take into account the ability of the provider to apply to the Tribunal under s 41(2) of the AAT Act for a stay of the operation of the decision under review. That section is the mechanism used by the legislature to govern the operation of the revocation decision pending the determination of the review. 43 Finally, Marnotta submitted that, by providing that the approval ceases to have effect, the legislature contemplated that the approval could end when the revocation decision was made, but revive when the revocation decision was set aside. Marnotta relied on the construction of the phrase "ceases to be in effect" adopted in Lesi. However, the statutory context was entirely different in that case. By the terms of s 10-1 of the Act an approval ceases to have effect if it lapses or is revoked. So the section, in effect, has an internal definition which the statute in Lesi did not have. Further, s 10-1(2) of the Act refers to an approval which ceases to have effect by reason of a suspension of the approval. Thus, is a contrast in the section between an approval which ends permanently, namely, an approval which ceases to have effect as a result of lapse or revocation, and an approval which ends temporarily, namely an approval which ceases to have effect as a result of suspension. Accordingly, there is no scope in s 10-1 of the Act for the construction adopted in Lesi. 44 In summary, by operation of s 43(6) of the AAT Act, the decision of the Tribunal to set aside the revocation of Marnotta's approval as a provider was deemed to have been made on 5 June 2003 when the original decision of the delegate was made. Marnotta was thus an approved provider from 5 June 2003. It did not provide aged care after 6 June 2003. Consequently, as a result of the operation of s 10-2 of the Act, its approval as an approved provider lapsed. As the only purpose for the review by the Tribunal instituted by Marnotta was to restore its approval as a provider and the allocation of places, and these could not be achieved by the review, the review proceeding was without utility, and should have been dismissed under s 42B(1)(a) of the AAT Act. 45 Marnotta then argued that the first ground of appeal which is presently under consideration was misconceived. Although not obvious from that description, it seems that Marnotta intended to say that the Secretary was precluded from raising that ground on appeal. In essence, Marnotta asserted that the Secretary was estopped. Marnotta contended that:

The decision under appeal was made by Senior Member Dwyer and Associate Professor Maynard. This was a separate decision from the decision made by Deputy President Forgie which refused to dismiss the application for review. No appeal has been brought against the decision of Deputy President Forgie.
There can be no error of law made by Senior Member Dwyer and Associate Professor Maynard because they were not asked to rule on a s 42B(1)(a) application.
The Secretary took no steps to mount a challenge to the s 42B(1)(a) decision, nor did they seek to raise the matter before Senior Member Dwyer and Associate Professor Maynard.
The s 42B(1)(a) decision formed no part of the final decision of Senior Member Dwyer and Associate Professor Maynard, and did not infect the final decision. 46 In response, the Secretary submitted that the s 42B(1)(a) decision was a decision of the Tribunal, and it was not material that the membership of the Tribunal was different for the final hearing. The Secretary also argued that there was no avenue of challenge open in respect of the s 42B(1)(a) decision until the final determination of the matter. Further, the Secretary argued that the s 42B(1)(a) point was known to both the Tribunal members and the parties and was mentioned in the course of the final hearing. 47 But, in the end I accept the argument of the Secretary that none of these contentions overcome the principle that there can be no estoppel against the operation of s 10-2 of the Act: Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 208, 210 per Gummow J; and Minister for Immigration and Ethnic Affairs v Petrovski (1997) 73 FCR 303 per Burchett, O'Loughlin and Tamberlin JJ; L'Huillier v State of Victoria [1996] 2 VR 465 at 479; Attorney-General (NSW) v Quin (1990) 170 CLR 1 at 17. 48 The final question concerns the proper disposition of the appeal. For the reasons expressed, the appeal should be allowed and the decision of the Tribunal should be set aside. The Tribunal, as a matter of law, should have dismissed the application for review under s 42B(1)(a) of the AAT Act. The application could be remitted to the Tribunal with a direction that it dismiss the application for review. However, as there is only one decision open to the Tribunal, it is appropriate that the Court resolve the matter without remitting it for further consideration by the Tribunal: Harradine v Secretary, Department of Social Security (1989) 25 FCR 35 per French J and Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550 per Sackville J. There will be an order that the application for review before the Tribunal is dismissed under s 42B(1)(a) of the AAT Act. 49 There will also be an order that Marnotta pay the Secretary's costs of the appeal. However, as there has been no argument on the question of costs, there will be liberty to Marnotta to apply to vary that order within a limited time. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.

Secretary, Department of Health and Ageing v Marnotta Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (10)

Cited By (2)